Month: May 2009

Betting markets in everything

A Buckinghamshire man diagnosed with terminal
cancer is to collect a second winning payout of £5,000 after betting he
would stay alive.

Jon Matthews, 59, from Milton Keynes, was
diagnosed with mesothelioma, a cancer linked to asbestos, in 2006 and
told he had months to live.

He placed two bets, each with a £100 stake at odds of 50/1, that he would be alive in June 2008 and in June 2009.

A third wager will earn him a further £10,000 if he lives until 1 June 2010.

The widower will collect his second lot of £5,000 winnings on Monday.

The full story is here and I thank Leonard Monasterio for the pointer.  Of course you are implicitly betting on your life each time you make an investment or a long-range plan.

Ask Marilyn: IQ vs. the economists

Marilyn vos Savant has (supposedly, read the link) the world's highest recorded IQ at 228.  She is now fielding questions on economics.  Here is one example:

Question: Why has the income disparity
grown so much in developed countries? – Matthew Cencich, Victoria,
British Columbia, Canada

Answer: I think the disparity is
a normal result of overall economic growth. The bottom incomes (zero)
can’t go lower, but the top incomes can go up and up. And so they do,
of course.

Here is another:

Question: Do you think that government
actively encouraging people to borrow money (and spend it) is the right
way to resolve the recession? – Caroline Kelly, Hendon, London

No. I think that more consumer activity could be modestly helpful to
the economy in the short term. And in better times, it would even
masquerade as growth. But in the current climate, increasing the family
debt would cause added personal financial problems. So I doubt that
it’s useful for government to advocate shopping as a form of national
service unless elected officials are perhaps a tad more interested in
shifting a little of the burden away from themselves than they are in a
lasting solution.

She also explains the financial crisis. ("First, an economy based on growth is bound to falter now and then. A
whole sector could collapse. It’s a house of cards. Eventually, it must
morph into a system that functions on stability, or it will fail –
meaning a fall large enough to cause an unstoppable breakdown and
widespread hardship.")

Question: on these problems, does she do better or worse than leading economists?

Addendum: Here is Marilyn on YouTube.  Oddly (look just past the 4:00 mark), she can't define IQ properly. 

How to learn about everything?

Eric Drexler offers some tips:

  1. Read and skim journals and textbooks that (at the moment) you only half understand. . Include Science and Nature.
  2. Seldom stop to study a single subject with a student’s intensity, as if you had to pass a test on it.
  3. Don’t drop a subject because you know you’d fail a test – instead,
    read other half-understandable journals and textbooks to accumulate
    vocabulary, perspective, and context.
  4. Notice that concepts make more sense when you revisit a topic, and note which topics provide keys to many others.
  5. Continue until almost everything you encounter in Science and Nature makes sense as a contribution to a field you know something about.

The three-word version of that is "Get context first."

Vernon Smith’s autobiography

It's called Discovery — A Memoir and I enjoyed it very much.  If you, like me, wish that more books were just a bit wilder, weirder (I mean that in the good sense), and real, you will like this one.  Here's one brief bit:

…I will grow up to be a loner, protecting myself from distractions, but thereby projecting an image of aloofness that was never part of what I felt inside.

It's a hard book to summarize.  It offers a discussion of whether soda tastes different from the can as opposed to the bottle, a detailed recipe for perfect hamburger, an even more detailed recipe for perfect chili, how and why Vernon used to refer to himself in the third person ("Dingy"), the economic history of Kansas before WWII, Vernon and his mother working for CORE in the 1940s, what it was like to get an economics Ph.d. at Harvard back then, Vernon's lifelong pacifist and anti-war stance, how he almost gave up professional economics and ended up setting rail rates in 1957, a splendid history of thought of economics at Purdue University, an excellent memorial to Jonathan Hughes (and a discussion of Hughes as an ex-Mormon), why experimental economics is important, talk of Vernon's abilities and disabilities when it comes to focus and "attention-shifting," why it is rational to believe in God, and a thought on Kahlil Gibran.

The style eschews silky narration and expects that you can keep up with the flow of information.  Not everyone can.

If you think you might be interested, you probably are,  One Amazon reviewer writes:

'Discovery' is an unfiltered, entertaining read. There is no spin, no
self-serving revisionism here. A most original and influential
economist tells the reader what happened, what he thought, and how he

Yummy yum yum at Krispy Kreme doughnuts

Since I live in a county dedicated to the rule of law, I was not surprised to read this:

You know Krispy Kreme doughnuts are bad for your arteries. But the
delectable sugar-bombs are apparently lousy for sewer pipes as well,
according to Fairfax County.

In a lawsuit filed this month against the company, the county says
that doughnut grease and other waste from a plant in Lorton have
clogged up the county's sewage system, causing $2 million in damage.
The county is seeking to recoup the cost of the repairs and another $17
million in civil penalties.

The problems began in 2004, shortly after the plant opened, when the
county's public works inspectors began noticing "deposits of doughnut
grease and slime emanating from Krispy Kreme's doughnut production
plant," according to the suit, which was first reported by the

The muck got so bad that a nearby pumping station began reeking of
doughnuts, and a camera inserted into one of the pipes "got stuck in
the grease, preventing inspection of the remainder of the line,"
according to the suit.

One of these days, maybe when the economic crisis is over, I will spend a week blogging Fairfax County rather than the nation at large.

*Up* (no spoilers)

I enjoyed the homages to Howl's Moving Castle and Sky Captain and the World of Tomorrow.  The soundtrack was excellent.  The protagonist, as a young man, resembles Bryan Caplan.  As an old man he resembles Gordon Tullock.  It's some of the most beautiful filmmaking I've seen and probably my favorite Pixar movie to date.

The patronage of Carlos Slim

This Carlos Slim profile (so far the link is subscriber only), from the June 1 issue of The New Yorker, is fascinating throughout.  Here was my favorite bit:

Slim had already founded several charitable organizations, although he admitted to me: "I don't believe in charities too much…They can make you popular…but you don't solve any problems."  Aside from his art museum, he has created the Telmex Foundation and the Carlos Slim Foundation, which have rather diffuse mandates.  Through the Telmex Foundation, he has provided a hundred thousand computers to public schools, nearly two hundred thousands scholarships, seventy-eight thousand pairs of eyeglasses, and two hundred thousand bicycles, and has paid for nearly four hundred thousand surgeries; he also supports more than a hundred thousand soccer teams.

And people wonder why he wishes to finance The New York Times.  He says he does read the paper, but only when he's in the USA.

“Why Steve Sailer is wrong”

That's a request I received and probably the reader is referring to IQ and race. 

Let me first say that I am not the Steve Sailer oracle.  On such a sensitive matter I don't wish to misrepresent anyone, so I'll simply tell you what I think of the issues, without suggesting that he or anyone else necessarily disagrees. 

There is a belief that progress in genetics will resurrect old, now-unpopular claims about race and IQ, namely that some races are intrinsically inferior in terms of IQ.  I very much expect that we will instead learn more about the importance of the individual genome and that variations within "groups" (whether defined in terms of race or not) are where the traction lies.  So I don't expect "old style eugenics views" to make a comeback as applied to race, quite the contrary.  On that point, here is more

I also think that IQ will be shown to be more multi-dimensional than we now think.  If you wish to understand the role
of IQ in human affairs, you would do better to study autism and ADHD than race (by the way, I discuss the importance of neurodiversity in much greater detail in my forthcoming book Create Your Own Economy.)

You may know that some nations — basically the wealthy ones — have higher IQs than the poor nations.  But IQ is endogenous to environment, as evidenced by the Flynn Effect, namely the general rise in IQ scores with each generation.  It is sometimes noted that some racial IQ gaps are not closing but I find it more significant that scores can continue to rise.  For instance it is quite possible that groups with higher measured IQs simply have been on an "improvement track" for a longer period of time.  More generally I think we should consider the Flynn Effect a bit of a mystery and that suggests an overall tone of caution on these issues rather than polemicism. 

Most importantly, there is a critical distinction between hypocritical discourse on race and racism itself.  Hypocritical discourse on race is harmful and often Sailer does a very good job skewering it.  But racism itself is far, far more harmful, whether in the course of previous history or still today.  It is fine if a given individual, for reasons of division of labor, spends his or her time attacking hypocritical discourse about race rather than attacking racism itself.  (For instance we shouldn't all focus on condemning Hitler and Stalin, simply because they were among the most evil men; there are other battles to fight.)  But I still wish that specified individual to ardently believe that racism is the far greater problem.  Insofar as that individual holds such a belief about racism, I am much happier than if not.

The comments section is for discussion of the issues in a mature way; if you want to attack any particular individual, that is for elsewhere.   

Addendum: If you are looking for another perspective, here is William Saletan on Steve Sailer.

*Chief Culture Officer*

That's the new Grant McCracken book and do check out the subtitle at this link.  It is very exciting, very worthwhile.  I need to send Tim Sullivan a blurb and I can't find his current email.  How about this?

"Grant McCracken is a leading guru of ideas who combines a mastery of marketing, culture, anthropology, and modern business practice.  I love his work and this will prove one of the most stimulating books of the year."

Is the Geithner plan dying a natural death?

Via Ezra Klein, we learn from the WSJ:

A government program designed to rid banks of bad loans, part of a broader effort once viewed as central to tackling the financial crisis, is stalling and may soon be put on hold, according to people familiar with the matter.

Ezra comments:

…the reasons appear to be twofold. First, few investors or banks want to work with the government. And second — and maybe more importantly — few investors and banks now think they'll have to. The banks, in particular, are apparently enthused by their ability to raise private capital, and now think they can wait out the market turmoil and sell their toxic assets in a few years, when they'll be worth more money.

And then:

Recently, I asked an administration official which government program we'd remember as making the most difference in averting catastrophe. Where will the history books place the credit?

"It'll be the Federal Reserve," he replied. "It'll be their decision to increase the size of their balance sheet from whatever it was before the crisis to whatever it is now."

Sentences to ponder

Simon Johnson writes:

If you want to the Fed ever to be able to tighten, you need a healthy enough financial sector – i.e., given what we now know about policymakers’ preferences, banks in the “too big to fail” category better not be close to failing.

Do read the whole thing.  Don't be fooled into thinking that we can escape our current mess very easily — we can't.