Thursday, January 29, 2009
My Daughter's Impression of My Class
Several years ago I took my oldest daughter to school with me for Take Your Daughter to Word Day. She was 8 or 10 years old at the time. It was a very bad idea because she quickly became bored with what I do for a living. I took her to class with me for my lectures and gave her some paper and pens to occupy her in case she got too bored. She produced the following drawing.
Not Such a Good Deal
I've been seeing things like the above alot lately, especially in junk mail advertising for some reason. According to the Bureau of Labor Statistics, prices fell in each of the last three months of 2008. If this trend holds for 2009, the above deal would seem to be not so good.Monday, January 26, 2009
Fixing Ponzi Schemes
The problem with Ponzi schemes is that the number of people you can turn to for funds to pay off the current participants quickly goes to zero, leaving someone holding claims that cannot be paid.
But what if you could grow the base of potential participants fast enough? Well, then the scheme can run forever as long as the base grows fast enough relative to the promised payoffs.
Social insurance programs with pay-as-you-go funding, like Social Security, are very similar to Ponzi schemes with a growing base. However, things can go wrong if the system relys on a growing base that doesn't grow.
In Japan the base is not growing and the Japanese government is concerned. One way to help kick up the birth rate might be to reduce the number of hours spent at work. As this article from CNN shows, this is actually a policy the government is promoting.
So far the US government is not pursuing a similar policy, but that may be because the US can rely to some extent on immigration to swell the base. In Japan, immigration is much more heavily restricted. This means the Japanese have to produce their own domestic Ponzi participants rather than import them.
But what if you could grow the base of potential participants fast enough? Well, then the scheme can run forever as long as the base grows fast enough relative to the promised payoffs.
Social insurance programs with pay-as-you-go funding, like Social Security, are very similar to Ponzi schemes with a growing base. However, things can go wrong if the system relys on a growing base that doesn't grow.
In Japan the base is not growing and the Japanese government is concerned. One way to help kick up the birth rate might be to reduce the number of hours spent at work. As this article from CNN shows, this is actually a policy the government is promoting.
So far the US government is not pursuing a similar policy, but that may be because the US can rely to some extent on immigration to swell the base. In Japan, immigration is much more heavily restricted. This means the Japanese have to produce their own domestic Ponzi participants rather than import them.
Update (1/28) - Here is Rick Evan's take on the same article.
My Fortune
The whole family went out to the local Chinese buffet on Saturday and this was the fortune I found in my fortune cookie.
Short-run vs Long-run Effects of Fiscal Stimulus
I have come to the conclusion that economic policy in the US is made by people with a planning horizon of no longer than four years. The debate on the TARP funding last fall and Obama's proposed stimulus package this year are both good illustrations.
There may be a short-run benefit from either or both of these in terms of easing the severity of the recession. In the case of the TARP legislation, one could (and most explicity did) that without some sort of bailout economy would have go through a long drawn-out recession as banks to sort out the bad debt from the good and curtailed new lending in the process.
On the other hand, there are long-run negative effects, mostly in the area of moral hazard. I see two major types of moral hazard. First, the moral hazard associated with bailing out banks and firms that made bad decisions. If they get rescued when they screw up why should they worry so much about screwing up in the future. The second moral hazard problem is one related directly related to government control (or at least influence). This seems to have a much shorter fuse. As near as I can figure the long-run in this case is less than six months. Witness Barney Frank's bailout of an otherwise unqualified Massachusetts bank via the TARP legislation. Or the strings attached to the auto bailout bill.
As further evidence of the weight policy makers put on the short-run I offer an editorial from today's Wall Street Journal by Jphn Kerry and Kent Conrad entitled, "Congress Needs to Help the Economy Fast: Let's not debate another rescue bill in a few months."
This is all a little astounding given that fiscal stimulus effectiveness is based almost solely on theoretical underpinnings and there is not a much in the way of counterfactuals to give it much empirical support. Put more plainly, we have not had a recession in the past 70 years where the government did NOT engage in fiscal stimulus. (See Rick Evans' post here.) How do we know that not increasing government spending during a recession is really a bad idea?
There may be a short-run benefit from either or both of these in terms of easing the severity of the recession. In the case of the TARP legislation, one could (and most explicity did) that without some sort of bailout economy would have go through a long drawn-out recession as banks to sort out the bad debt from the good and curtailed new lending in the process.
On the other hand, there are long-run negative effects, mostly in the area of moral hazard. I see two major types of moral hazard. First, the moral hazard associated with bailing out banks and firms that made bad decisions. If they get rescued when they screw up why should they worry so much about screwing up in the future. The second moral hazard problem is one related directly related to government control (or at least influence). This seems to have a much shorter fuse. As near as I can figure the long-run in this case is less than six months. Witness Barney Frank's bailout of an otherwise unqualified Massachusetts bank via the TARP legislation. Or the strings attached to the auto bailout bill.
As further evidence of the weight policy makers put on the short-run I offer an editorial from today's Wall Street Journal by Jphn Kerry and Kent Conrad entitled, "Congress Needs to Help the Economy Fast: Let's not debate another rescue bill in a few months."
This is all a little astounding given that fiscal stimulus effectiveness is based almost solely on theoretical underpinnings and there is not a much in the way of counterfactuals to give it much empirical support. Put more plainly, we have not had a recession in the past 70 years where the government did NOT engage in fiscal stimulus. (See Rick Evans' post here.) How do we know that not increasing government spending during a recession is really a bad idea?
How Modern Law Makes Us Powerless
In Today's Wall Street Journal. An op-ed peice by Philip K. Howard.
"Here we stand, facing the worst economy since the Great Depression, and Americans no longer feel free to do anything about it. We have lost the idea, at every level of social life, that people can grab hold of a problem and fix it. Defensiveness has swept across the country like a cold wave. We have become a culture of rule followers, trained to frame every solution in terms of existing law or possible legal risk. The person of responsibility is replaced by the person of caution. When in doubt, don't."
http://online.wsj.com/article/SB123293018734014067.html
"Here we stand, facing the worst economy since the Great Depression, and Americans no longer feel free to do anything about it. We have lost the idea, at every level of social life, that people can grab hold of a problem and fix it. Defensiveness has swept across the country like a cold wave. We have become a culture of rule followers, trained to frame every solution in terms of existing law or possible legal risk. The person of responsibility is replaced by the person of caution. When in doubt, don't."
http://online.wsj.com/article/SB123293018734014067.html
Friday, January 9, 2009
Living through Atlas Shrugged
Spehen Moore at the Wall Street Journal argues there is no reason to turn Atlas Shrugged into a movie since we are living it right now.
Here's the link - http://online.wsj.com/article/SB123146363567166677.html
Galt: "You want me to be Economic Dictator?"
Mr. Thompson: "Yes!"
"And you'll obey any order I give?"
"Implicitly!"
"Then start by abolishing all income taxes."
"Oh no!" screamed Mr. Thompson, leaping to his feet. "We couldn't do that . . . How would we pay government employees?"
"Fire your government employees."
"Oh, no!"
Here's the link - http://online.wsj.com/article/SB123146363567166677.html
Galt: "You want me to be Economic Dictator?"
Mr. Thompson: "Yes!"
"And you'll obey any order I give?"
"Implicitly!"
"Then start by abolishing all income taxes."
"Oh no!" screamed Mr. Thompson, leaping to his feet. "We couldn't do that . . . How would we pay government employees?"
"Fire your government employees."
"Oh, no!"
Thursday, January 8, 2009
An Example of the Difference between the Male and Female Minds
This story has been circulating for years. I first heard it through Val Lambson, a colleague at BYU. It's really fun to read.
"Today we will experiment with a new form called the tandem story. The process is simple. Each person will pair off with the person sitting to his or her immediate right. One of you will then write the first paragraph of a short story. The partner will read the first paragraph and then add another paragraph to the story. The first person will then add a third paragraph, and so on back and forth. Remember to re-read what has been written each time in order to keep the story coherent. The story is over when both agree a conclusion has been reached."
"The following was actually turned in by two of my English students: Rebecca - last name deleted, and Gary - last name deleted."
---------------------------------------------------------------- STORY: (first paragraph by Rebecca)
At first, Laurie couldn't decide which kind of tea she wanted. The chamomile, which used to be her favorite for lazy evenings at home, now reminded her too much of Carl, who once said, in happier times, that he liked chamomile. But she felt she must now, at all costs, keep her mind off Carl. His possessiveness was suffocating, and if she thought about him too much her asthma started acting up again. So chamomile was out of the question.
(Gary) -----------------------------------------------------------
Meanwhile, Advance Sergeant Carl Harris, leader of the attack squadron now in orbit over Skylon 4, had more important things to think about than the neuroses of an air-headed asthmatic bimbo named Laurie with whom he had spent one sweaty night over a year ago. "A.S.Harris to Geostation 17," he said into his transgalactic communicator. "Polar orbit established. No sign of resistance so far..." But before he could sign off a bluish particle beam flashed out of nowhere and blasted a hole through his ship's cargo bay. The jolt from the direct hit sent him flying out of his seat and across the cockpit.
(Rebecca) ----------------------------------------------------------
He bumped his head and died almost immediately, but not before he felt one last pang of regret for psychically brutalizing the one woman who had ever had feelings for him. Soon afterwards, Earth stopped its pointless hostilities towards the peaceful farmers of Skylon 4. "Congress Passes Law Permanently Abolishing War and Space Travel," Laurie read in her newspaper one morning. The news simultaneously excited her and bored her. She stared out the window, dreaming of her youth -- when the days had passed unhurriedly and carefree, with no newspapers to read, no television to distract her from her sense of innocent wonder at all the beautiful things around her. "Why must one lose one's innocence to become a woman?" she pondered wistfully.
(Gary) ---------------------------------------------------------
Little did she know, but she had less than 10 seconds to live. Thousands of miles above the city, the Anu'udrian mothership launched the first of its lithium fusion missiles. The dim-witted wimpy peaceniks who pushed the Unilateral Aerospace Disarmament Treaty through Congress had left Earth a defenseless target for the hostile alien empires who were determined to destroy the human race. Within two hours after the passage of the treaty the Anu'udrian ships were on course for Earth, carrying enough firepower to pulverize the entire planet. With no one to stop them, they swiftly initiated their diabolical plan. The lithium fusion missile entered the atmosphere unimpeded. The President, in his top-secret mobile submarine headquarters on the ocean floor off the coast of Guam, felt the inconceivably massive explosion which vaporized Laurie and 85 million other Americans. The President slammed his fist on the conference table. "We can't allow this! I'm going to veto that treaty! Let's blow 'em out of the sky!"
(Rebecca) ----------------------------------------------------------
This is absurd. I refuse to continue this mockery of literature. My writing partner is a violent, chauvinistic, semi-literate adolescent.
(Gary) ----------------------------------------------------------
Yeah? Well, you're a self-centered tedious neurotic whose attempts at writing are the literary equivalent of Valium.
(Rebecca) ----------------------------------------------------------
A****** [Pejorative term for males. What you might call a well which a donkey falls into.]
(Gary) ----------------------------------------------------------
B****. [Pejorative term for females. Calling her a witch would have been kinder]
"Today we will experiment with a new form called the tandem story. The process is simple. Each person will pair off with the person sitting to his or her immediate right. One of you will then write the first paragraph of a short story. The partner will read the first paragraph and then add another paragraph to the story. The first person will then add a third paragraph, and so on back and forth. Remember to re-read what has been written each time in order to keep the story coherent. The story is over when both agree a conclusion has been reached."
"The following was actually turned in by two of my English students: Rebecca - last name deleted, and Gary - last name deleted."
---------------------------------------------------------------- STORY: (first paragraph by Rebecca)
At first, Laurie couldn't decide which kind of tea she wanted. The chamomile, which used to be her favorite for lazy evenings at home, now reminded her too much of Carl, who once said, in happier times, that he liked chamomile. But she felt she must now, at all costs, keep her mind off Carl. His possessiveness was suffocating, and if she thought about him too much her asthma started acting up again. So chamomile was out of the question.
(Gary) -----------------------------------------------------------
Meanwhile, Advance Sergeant Carl Harris, leader of the attack squadron now in orbit over Skylon 4, had more important things to think about than the neuroses of an air-headed asthmatic bimbo named Laurie with whom he had spent one sweaty night over a year ago. "A.S.Harris to Geostation 17," he said into his transgalactic communicator. "Polar orbit established. No sign of resistance so far..." But before he could sign off a bluish particle beam flashed out of nowhere and blasted a hole through his ship's cargo bay. The jolt from the direct hit sent him flying out of his seat and across the cockpit.
(Rebecca) ----------------------------------------------------------
He bumped his head and died almost immediately, but not before he felt one last pang of regret for psychically brutalizing the one woman who had ever had feelings for him. Soon afterwards, Earth stopped its pointless hostilities towards the peaceful farmers of Skylon 4. "Congress Passes Law Permanently Abolishing War and Space Travel," Laurie read in her newspaper one morning. The news simultaneously excited her and bored her. She stared out the window, dreaming of her youth -- when the days had passed unhurriedly and carefree, with no newspapers to read, no television to distract her from her sense of innocent wonder at all the beautiful things around her. "Why must one lose one's innocence to become a woman?" she pondered wistfully.
(Gary) ---------------------------------------------------------
Little did she know, but she had less than 10 seconds to live. Thousands of miles above the city, the Anu'udrian mothership launched the first of its lithium fusion missiles. The dim-witted wimpy peaceniks who pushed the Unilateral Aerospace Disarmament Treaty through Congress had left Earth a defenseless target for the hostile alien empires who were determined to destroy the human race. Within two hours after the passage of the treaty the Anu'udrian ships were on course for Earth, carrying enough firepower to pulverize the entire planet. With no one to stop them, they swiftly initiated their diabolical plan. The lithium fusion missile entered the atmosphere unimpeded. The President, in his top-secret mobile submarine headquarters on the ocean floor off the coast of Guam, felt the inconceivably massive explosion which vaporized Laurie and 85 million other Americans. The President slammed his fist on the conference table. "We can't allow this! I'm going to veto that treaty! Let's blow 'em out of the sky!"
(Rebecca) ----------------------------------------------------------
This is absurd. I refuse to continue this mockery of literature. My writing partner is a violent, chauvinistic, semi-literate adolescent.
(Gary) ----------------------------------------------------------
Yeah? Well, you're a self-centered tedious neurotic whose attempts at writing are the literary equivalent of Valium.
(Rebecca) ----------------------------------------------------------
A****** [Pejorative term for males. What you might call a well which a donkey falls into.]
(Gary) ----------------------------------------------------------
B****. [Pejorative term for females. Calling her a witch would have been kinder]
Science Fiction Recommendations
I like reading science fiction. I have since I first learned to read. One of the reading programs I had at Sahuaro School in Phoenix, Arizona, as a kid included a set of short chapters from a variety of different books. I remember getting a chapter from Robert Heinlein's Farmer in the Sky; one near the begining of the book that described the rocket ship taking off and I've been hooked ever since.
I have been reading and rereading some good scifi books over the holidays and have some recommendations.
I just finished three books by John Scalzi. Two of them, Old Man's War and The Ghost Brigades, I've read previously. Both of these are set in the same universe where humans are fighting desperately to remain alive in a universe filled with hostile aliens. The unique twist in these books is that the defense forces consist almost entirely of old people from earth who have joined in order to avoid dying and are given brand new superhero bodies which are designed specifically for fighting aliens. The writing is very brisk and there's lots of action and plot twists. Both of these books are a lot of fun. I would read them in order, Old Man's War first and then, The Ghost Brigades.
The third book by Scalzi that I just finished is The Android's Dream, which I picked up on Tuesday and finished in about 24 hours. This one is much more humorous and I laughed a lot. It starts off with a US trade representative deliberately insulting his alien counterpart in a special language of scent that only the alien understands. After repeated messages like, "Your mother mates with algae," being anonymously sprayed into the atmosphere the alien finally discovers who is sending the messages and becomes so enraged that he dies of a stroke. The human diplomat laughs so hard he also dies of a heart attack. The rest of the book is very similar with lots of quirky plot twists and wacky scenes. This book is a real romp.
I am now rereading a pair of books by Dan Simmons, Ilium and Olympos, which I first read a couple of years ago. Simmons is a very good writer. These two books, which are really one story, are set in the far distant future where some humans have advanced so far scientifically that they are both virtually and literally gods. They have recreated the Trojan War and are watching over their simulation waiting for it to play out. Of course, things go wildly wrong, and there are several storylines to follow. I liked these two books a lot.
I have been reading and rereading some good scifi books over the holidays and have some recommendations.
I just finished three books by John Scalzi. Two of them, Old Man's War and The Ghost Brigades, I've read previously. Both of these are set in the same universe where humans are fighting desperately to remain alive in a universe filled with hostile aliens. The unique twist in these books is that the defense forces consist almost entirely of old people from earth who have joined in order to avoid dying and are given brand new superhero bodies which are designed specifically for fighting aliens. The writing is very brisk and there's lots of action and plot twists. Both of these books are a lot of fun. I would read them in order, Old Man's War first and then, The Ghost Brigades.
The third book by Scalzi that I just finished is The Android's Dream, which I picked up on Tuesday and finished in about 24 hours. This one is much more humorous and I laughed a lot. It starts off with a US trade representative deliberately insulting his alien counterpart in a special language of scent that only the alien understands. After repeated messages like, "Your mother mates with algae," being anonymously sprayed into the atmosphere the alien finally discovers who is sending the messages and becomes so enraged that he dies of a stroke. The human diplomat laughs so hard he also dies of a heart attack. The rest of the book is very similar with lots of quirky plot twists and wacky scenes. This book is a real romp.
I am now rereading a pair of books by Dan Simmons, Ilium and Olympos, which I first read a couple of years ago. Simmons is a very good writer. These two books, which are really one story, are set in the far distant future where some humans have advanced so far scientifically that they are both virtually and literally gods. They have recreated the Trojan War and are watching over their simulation waiting for it to play out. Of course, things go wildly wrong, and there are several storylines to follow. I liked these two books a lot.
Vintage Film Footage from China
I've been a bit under the weather for the past week or so and haven't posted anything here, but I am feeling better now and am back at it.
I ran across a fascinating post at a blog called "QuirkyBeijing" which links to old film footage at the Travel Film Archive on YouTube. The footage would be very interesting to anyone who has visited these places and wants to see how much things have changed since the early 1900's.
Listening to the narration is a real treat too. The English language has evolved a lot since these clips were made. Attitudes toward the rest of the world seem to have changed also, as these come across as pretty patronizing.
This is worth at least a little of your time.
Here's the link - http://www.quirkybeijing.com/?p=62
I ran across a fascinating post at a blog called "QuirkyBeijing" which links to old film footage at the Travel Film Archive on YouTube. The footage would be very interesting to anyone who has visited these places and wants to see how much things have changed since the early 1900's.
Listening to the narration is a real treat too. The English language has evolved a lot since these clips were made. Attitudes toward the rest of the world seem to have changed also, as these come across as pretty patronizing.
This is worth at least a little of your time.
Here's the link - http://www.quirkybeijing.com/?p=62
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