Month: June 2007

Marc Andreessen is a genius

Let’s start with a bang: don’t keep a schedule.

He’s crazy, you say!

I’m totally serious. If you pull it off — and in many structured jobs, you simply can’t — this simple tip alone can make a huge difference in productivity.

By not keeping a schedule, I mean: refuse to commit to meetings, appointments, or activities at any set time in any future day.

As a result, you can always work on whatever is most important or most interesting, at any time.

Want to spend all day writing a research report? Do it!

Want to spend all day coding? Do it!

Want to spend all day at the cafe down the street reading a book on personal productivity? Do it!

When someone emails or calls to say, "Let’s meet on Tuesday at 3", the appropriate response is: "I’m not keeping a schedule for 2007, so I can’t commit to that, but give me a call on Tuesday at 2:45 and if I’m available, I’ll meet with you."

Or, if it’s important, say, "You know what, let’s meet right now."

Clearly this only works if you can get away with it. If you have a structured job, a structured job environment, or you’re a CEO, it will be hard to pull off.

But if you can do it, it’s really liberating, and will lead to far higher productivity than almost any other tactic you can try.

Here is more, all valuable, the pointer is from Michael Blowhard.  Here is Marc’s new blog.

Why are there no profits in economic theory?

Shouldn’t CrookedTimber be the site that covers the heterodoxy?  Daniel Davies picks up the slack:

The anomaly I’m talking about is that neoclassical economics, in
both macro and micro forms, nearly invariably works on the basis of
models in which there are no profits.

Since in general, companies do earn profits, I think this is a pretty big problem.

Do read his caveats. 

I usually answer such questions by referring to the ordinary humdrum of my suburban life.  It took my three days to buy the new Paul McCartney CD, and yes I do love his solo work, or at least some of it.  And can you guess why it took me so long?  The CD is available only in Starbucks, but until today each Starbucks was situated so that my exit would have necessitated a left turn across four lanes of crowded traffic (and, most importantly, without a traffic light).  I love "Maybe I’m Amazed" as much as the next guy, but this boy just ain’t up for those sorts of indignities.

The higher the value of time, the more likely these competitive barriers will arise.  So the standard monopoly model explains much more of the economy than most market-oriented economists like to admit.  That said, I am less sold on Davies’s worry that this has nihilistic consequences for mainstream economics.  Tariffs are still usually bad; let’s not forget that behavioral imperfections plague politics as well.

Markets in everything

Dutch students have developed powdered alcohol which they say can be sold legally to minors.  The latest innovation in inebriation, called Booz2Go, is available in 20-gramme packets that cost 1-1.5 euros ($1.35-$2).  Top it up with water and you have a bubbly, lime-colored and -flavored drink with just 3 percent alcohol content.

It also avoids the taxes, here is more information.

The private provision of public goods

Here is a bizarre story, especially for traditional public finance economists.  Public.Resource.Org takes non-copyrighted documents that the federal government charges the public for and puts them into the public domain.  Not much is available now but the service wants to make available for free all of the millions of documents, videos and other material from National Technical Information Service.  To build their library Public.Resource.Org are asking people who want a government document to buy it through their service.  They will then make the document available to everyone else for free.

Public goods that the government charges for brought to you at P=MC by a private firm.  We live in a great world.

Addendum: I was pleased to see that Hal Varian is on the board of directors.

Hedge funds

I’ve found at least one good piece on them, by Rene Stulz, in the Spring 2007 Journal of Economic Perspectives.  I learned or reaffirmed the following:

1. Hedge funds have existed since at least 1949.

2. Hedge funds exist because mutual funds do not deliver "complex investment strategies."  In part this is because mutual funds are regulated.

3. The largest mutual fund is about six times larger than the largest hedge fund.  Marketing constraints also encourage very large funds to adopt simpler and easier-to-explain strategies.

4. Investment advisors with fewer than 15 clients do not have to register with the SEC.

5. Regulations restrict the compensation of mutual fund advisors in various ways, typically requiring symmetric treatment of gains and losses (if a dollar of profit leads to a bonus, a dollar of loss must lead to a penalty).  That is why mutual fund managers are compensated in proportion to the size of their funds, not their performance.  This is not obviously efficient, and of course hedge funds pay for performance.

6. Hedge funds don’t have to disclose information to investors, other than by contractual agreement.

7. Diversification and redemption requirements make it harder for mutual funds to exploit some profit opportunities, or to hedge in particular manners.

8. The number of mutual funds that try to replicate hedge fund strategies is growing rapidly.

9. Available data on hedge fund returns are nearly worthless.

Overall I was struck by how much hedge fund activity is an artifact of regulations, and not necessarily beneficial regulations.  Deregulating some aspects of mutual funds may be an alternative to regulation of hedge funds.

Here is one version of the paper (click through to working papers), definitely recommended.  Here is Stulz’s paper on hedge fund contagion.

I’m still a Luddite in many ways

It’s called Ortho-K, or Orthokeratology, and involves wearing special contact lenses while you sleep, to correct the curvature of the eye.  When you wake up the next morning and take out the lenses, you have perfect vision throughout the day.

Here is more.  When I ponder the possibility of laser eye surgery, I start calculating the probability of a sudden Virginia earthquake.  I’m now at the point where I need glasses for more than half of my reading material.  I don’t mind the look but it slows me down ever so slightly…

What would Muhammad say about put-call parity?

Mahalanobis explains how Islamic mortgages are being created using put-call parity.  Islamic finance expert Mahmoud El Gamal sums up the situation nicely:

…I have shown in detail how to synthesize a forward from salam and a credit facility characterized as murabaha or tawarruq, depending on preference and cost. From forwards, we can then synthesize everything. That is a theorem.

Feminist economics

I view feminist economics as one of the more useful parts of the heterodoxy, perhaps because of its empirical component.  I see a few contributions:

1. Repeated insistence that household production is important and that it is lacking in gdp figures.  This isn’t new anymore but someone has to bang the drum.

2. Criticizing the "dominant patriarchal" assumptions behind standard models of the family, such as Gary Becker’s.  The Rotten Kid Theorem is interesting as pure theory but it has received too much attention as an actual model of the family.  The father is not always a benevolent manipulator, concerned most of all with collective welfare.

3. Insisting that economics is so often done "in a male way."  Now I happen to like the "male way of doing economics" — abstract, analytically cutting, and debate-intense.   But I’m happy to see someone linking the method to some general traits of men; put all the feminist excess aside, at some level the point is well-taken.

4. In the history of economic thought, Hazel Kyrk and Margaret Reid are worth reading, there are probably others as well.  "Home Economics" should never have been so cut off from regular economics.

5. Gender differences in analyzing the effects of policy.  Sweden, no matter what you think of it in absolute terms, is a better deal for women than for men.  Overall women are more risk-averse and less interested in accumulating large sums of wealth.  The Soviet Union was less bad for women than for men.  Many governmental health care systems are better geared toward the needs of women (e.g., easy access to pre-natal care) than for men, who require massive medical innovation to fix their heart attacks.  And so on.  These points don’t receive enough attention.

Feminist economics even has its own journal.

The down side?  I’ve never had much real world exposure to movement advocates (here is one interview).  I fear I would be turned off by their posturing, their sympathy for comparable worth, and their lack of a hardheaded willingness to recognize politically incorrect truths about gender or for that matter capitalism.  They are too skeptical about what is good in the Chicago-based economic way of thinking.  No way is feminist economics a viable alternative to the mainstream, but again improvement is possible through critique at the margins.

Is China driving up the price of oil?

Not as much as you think:

China’s oil imports have increased dramatically during the past five
years; the country now imports 3.5 million barrels a day, compared with
U.S. daily imports of 12.2 million barrels. But it’s far less obvious
that Americans are really paying a price for this.

If you’ve been
to the mall lately, you’ve probably noticed that China is making scads
of plastic. As the world’s second-largest plastic producer, it is
furiously turning oil and petrochemicals into everything from lobster
souvenirs to sneaker soles. By embedding oil in products, China is, in
effect, importing oil on behalf of U.S. consumers — as much as 1
million barrels per day.

While China’s demand for energy is
driving up oil prices worldwide, its cheap goods are having the
opposite effect on the cost of living in the United States. A recent
analysis by the U.N. World Economic and Social Survey suggests that
Chinese pressure on oil imports may have raised U.S. inflation by 0.23
percent from 2001 to 2005, but cheap imports of Chinese goods decreased U.S. inflation over that same period by 0.28 percent. For the moment, the net winners are U.S. consumers.

I wouldn’t put too much stock in those exact numbers but the general point still holds.  Here is my earlier post on this topic.

LeBron vs. San Antonio: the numbers

The series isn’t over yet:

First of all, the Cavaliers won both games [against San Antonio].  It was 88-81 back in November, and 82-78 in January.

that’s only the beginning of the story.  The main point is that when
LeBron James got the ball against San Antonio’s defense, the Cavaliers
managed to get a good shot an alarming percentage of the time.  There
were a smattering of offensive fouls, certainly. And a couple of times
James forced a pass that was picked off.

I watched 50
possessions, between the two games.  Eight times (nine if you count a
pretty amazing Tim Duncan block of Anderson Varejao) the Spurs forced
the Cavaliers into a turnover, an offensive foul, or a truly difficult
shot.  Trusting my observations, that means the Cavaliers had
good looks 84% of the time.  Seems like a high number against any team,
but especially San Antonio.   

Of course the Lucas critique is relevant; the numbers don’t mean that Cleveland can replicate those shots at will.  The betting markets are giving Cleveland about twenty percent.  Matt Yglesias offers numbers on offensive and defensive efficiency, and writes of the coming blowout.  I’m picking San Antonio in six.