Month: July 2009
Jason Kottke reports:
The collective optimization of individual driving routes by drivers using realtime traffic maps slows everyone down.
That is, everyone picking the "fastest" route on the map results in
overall slowdowns. Interestingly, the solution to this problem may be
to remove some roads so that drivers have fewer options for route
Here is more. To how many other problems can this point be applied?
At birth, someone living in the Netherlands can expect to live 2.35
years longer than someone born in the US, but at age 65, the difference
is reversed, and someone living in the US can expect to live 0.4 years
longer than someone living in the Netherlands. This difference can be
explained by assuming that semi-socialized health care is better for
young and worse for old people, or, at least as likely, different
policies are not the main cause of the difference
Sources: CDC national vital statistics 2004,
www.cdc.gov/nchs/data/nvsr/nvsr56/nvsr56_09.pdf and RIVM 2007
levensverwachting, www.rivm.nl/vtv/object_document/o2309n18838.html (in
One interesting feature of this data is that it can be used to argue for a number of different points of view.
It is glorious in its 1100 pp. plus of text, analytical diatribes, love stories, monomaniacal rants, ecological analyses, and unevenly eloquent prose. I'm on p.206 and so far it's a first-rate book on the Mexican-American border (Imperial is a county in California), low lifes, the desperation of America's empty spaces, and this is from an author who issues books like others do blog posts.
Suddenly I turn the page and see a heading: Warning of Impending Aridity. Some text follows:
This book represents my attempt to become a better-informed citizen of North America. Our "American dream" is founded on the notion of the self-sufficient homestead. The "Mexican dream" may be a trifle different, but requires its kindred material basis. Understanding how these two hopes played out over time required me to cultivate statistical parables about farm size, waterscapes, lettuce prices, etcetera. I have harvested them (doubtless bruising overripe numbers on the way), and now present them to you. Some of them may be too desiccated for your taste. If you skip the chapters devoted to them, you will finish the book sooner, and never suspect the existence of my arithmetical errors. As for you devotees of Dismal Science, I hope you will be awestruck by my sincerity about Mexicali Valley cotton prices.
Jason Kottke has an excellent post on Vollmann's book, with links and excerpts. One description is: "Just write that it's like Robert Caro's The Power Broker," she said, "but with the attitude of Mike Davis's City of Quartz"…but even that turns out to be inadequate:
Imperial is like Robert Caro’s The Power Broker with the attitude of Mike Davis’s City of Quartz, if Robert Caro had been raised in an abandoned grain silo by a band of feral raccoons, and if Mike Davis were the communications director of a heavily armed libertarian survivalist cult, and if the two of them had somehow managed to stitch John McPhee’s cortex onto the brain of a Gila monster, which they then sent to the Mexican border to conduct ten years of immersive research, and also if they wrote the entire manuscript on dried banana leaves with a toucan beak dipped in hobo blood, and then the book was line-edited during a 36-hour peyote séance by the ghosts of John Steinbeck, Jack London, and Sinclair Lewis, with 200 pages of endnotes faxed over by Henry David Thoreau’s great-great-great-great grandson from a concrete bunker under a toxic pond behind a maquiladora, and if at the last minute Herman Melville threw up all over the manuscript, rendering it illegible, so it had to be re-created from memory by a community-theater actor doing his best impression of Jack Kerouac. With photographs by Dorothea Lange.
How's that for the best sentence I read last night (it's from Sam Anderson)? As Vollmann himself once said: 'I used to think the Imperial Valley was hot, flat and boring,'
In a bit of time I will be there for four days. Please tell me what I need to know, food of course included. I'll be able to do a day trip, but mostly I'll be in Palermo.
5. Surprising facts about best-selling authors; yes Sidney Sheldon is the same guy behind I Dream of Jeannie.
From a very good piece in the NYTimes on lobbying:
One of the largest sources of campaign contributions to Senate Democrats during this year’s health care debate is a physician-owned hospital in one of the country’s poorest regions that has sought to soften measures that could choke its rapid growth.
According to the Times, the hospital has been quite successful in its efforts. And where is this powerful hospital with all the lobbying money located? Why in the metropolitan area of McAllen, Texas. McAllen, Texas? Hmmm…now where I have heard that name before?
Keep this in mind when you hear promises of Medicare savings from Washington.
The subtitle is Food, Wine, and the End of France and the author is Michael Steinberger. This is a very readable and interesting book on France's decline as world culinary leader, building on an informal "economics of cuisine." Even in France I would usually rather eat outside of Paris and this book helps explain why.
The household savings rate in South Korea
will have plummeted from a world-beating 25.2 percent in 1988 to a
projected world low of 3.2 percent in 2010, according to the OECD.
Here is much more. In fact:
South Koreans work more, sleep less and kill themselves at a higher
rate than citizens of any other developed country, according to the
OECD. They rank first in time spent online and second to last in
spending on recreation, and the per capita birthrate scrapes the bottom
of world rankings. By 2050, South Korea will be the most aged society
in the world, narrowly edging out Japan, according to the OECD.
And here's one problem with aggregate savings rates:
…South Korea ranks first in per capita spending on
private education, which includes home tutors, cram sessions and
English-language courses at home and abroad.
An obsessive pursuit of educational achievement, it seems, is one of
the driving forces behind the low savings rate. About 80 percent of all
students from elementary age to high school attend after-school cram
courses. About 6 percent of the country's gross domestic product is
spent on education, more than double the percentage of spending in the
United States, Japan or Britain.
This one is from Jacqueline:
"Tap water?" said Alison Szeli, 26, picking up the clear plastic bottle
with orange letters: "Tap'd NY. Purified New York City tap water."
She studied the description: "No glaciers were harmed in making this
water." She compared prices: Smartwater cost $1.85. Tap'd NY was 35
I suspect this will seem odder to you, the older you are.
The evolutionary status of attention deficit/hyperactivity disorder (ADHD) is central to assessments of whether modern society has created it, either physically or socially; and is potentially useful in understanding its neurobiological basis and treatment. The high prevalence of ADHD (5–10%) and its association with the seven-repeat allele of DRD4, which is positively selected in evolution, raise the possibility that ADHD increases the reproductive fitness of the individual, and/or the group. However, previous suggestions of evolutionary roles for ADHD have not accounted for its confinement to a substantial minority. Because one of the key features of ADHD is its diversity, and many benefits of population diversity are well recognized (as in immunity), we study the impact of groups’ behavioural diversity on their fitness. Diversity occurs along many dimensions, and for simplicity we choose unpredictability (or variability), excess of which is a well-established characteristic of ADHD. Simulations of the Changing Food group task show that unpredictable behaviour by a minority optimizes results for the group. Characteristics of such group exploration tasks are risk-taking, in which costs are borne mainly by the individual; and information-sharing, in which benefits accrue to the entire group. Hence, this work is closely linked to previous studies of evolved altruism.
We conclude that even individually impairing combinations of genes, such as ADHD, can carry specific benefits for society, which can be selected for at that level, rather than being merely genetic coincidences with effects confined to the individual. The social benefits conferred by diversity occur both inside and outside the ‘normal’ range, and these may be distinct. This view has the additional merit of offering explanations for the prevalence, sex and age distribution, severity distribution and heterogeneity of ADHD.
Overall the argument is weak because it relies too much on group selection. An alternative tack is to admit that ADHD, and correlated traits, can have cognitive advantages and thus survival and mating advantages. One simple story is that many people with ADHD can use their "jumpiness" to propel themselves to sample and learn extra new pieces of information. The current distribution of identified cases from the ADHD population likely suffers from selection bias, namely that it identifies ADHD cases associated with greater life problems.
1. Me on Reason.TV.
4. An intellectual journey with many stops (one of Brad DeLong's best posts).
5. Extending the "all you can eat" concept, and yet the law intervenes. Or, "the culture that is Germany."
6. The Women's Leadership Fund, a new investment strategy.
7. More patently false claims about China.
8. Via Kottke, cats play Arnold Schoenberg's Op.11; I loved this one.
I presented the following theory to two notable health care commentators a few nights ago. Congressmen are looking to sell their voters for the highest "price" possible and they know Obama really wants, and indeed needs, to win a health care victory. As health care reform "falls apart," these Congressmen face the risk that they will get nothing for those votes. Suddenly their cartel falls apart and they lower the price for those votes. A deal is then possible and Obama buys the votes at the lower price.
What appears to be pessimistic news for health care reform can in fact be optimistic news. Another implication of this theory is that a lot of the "news" along the way, concerning the fate of reform, is simply noise.
I don't know what is the "p" of an extended coverage bill passing, but I believe that p has stayed fairly constant so far.
There are plenty of games in which the equilibrium and the true offer curves are not revealed until the final period. When it comes to health care, we're not yet at the end.
On the way up, bubbles encourage excessive investment in the bubble sector. On the way down a bursting bubble can create wealth shocks, liquidity shortages, and balance-sheet death-spirals. For both of these reasons, it would be good to be able to identify and pop bubbles. Identifying bubbles isn't easy, however, because, especially when interest rates are low, prices can increase rapidly with small, rational changes in investor expectations. But the difficulty of identifying bubbles is reasonably well known. What I think may be less appreciated is that bubbles are hard to pop even when you know that they exist.
In the lab we can create artificial assets with known dividend streams and thus known fundamental values. Since Vernon Smith's classic experiments (JSTOR), we know that even in these cases efficient markets fail and bubbles are common. Bubbles occur even as uncertainty about the fundamental value diminishes (JSTOR). We also know that once a bubble starts it's difficult to stop. Circuit breakers and brokerage fees (transaction taxes), for example, don't do much to stop bubbles (see King, Smith, Williams, and Van Boening 1993, not online.) Investor education doesn't help (for example telling participants about previous bubbles doesn't help). Even increasing interest rates doesn't do much to stop a bubble already in progress and may increase volatility on net.
Bubbles are also less common with more experienced traders – this is one of the strongest findings. Don't get too excited about this, however, it's experience with bubbles that counts not just trading experience. I once asked Vernon, for example, how the lab evidence generalized to the larger economy. In particular, I asked whether 3 bubble experiences in the lab–the number which seems to be necessary to dampen bubbles–might translate to 3 big bubbles in the real world such as the dot com, commodity and housing bubbles (rather than to experience with your run of the mill bubble in an individual stock). He thought that this was a reasonable inference from the evidence. Thus we may not see too many big bubbles during the trading lifetime of current market participants but experience is a very costly teacher. Can we do better?
The last factor that does seem to make a difference is that bubbles liftoff and reach higher peaks when there's a lot of cash floating around. In theory, this shouldn't matter, fundamental value is fundamental value. If an asset is worth $10 in expected value then it's worth $10 whether you have $20 in your pocket or $200. But in practice bubbles are bigger when cash relative to asset value is high.
Note that the latter experiments are consistent with the Fed having a significant role in bubble inflation (a theory I have not pushed). In other words, rather than identifying and popping bubbles already on the rise, not blowing bubbles in the first place may be easier and more productive.
A few MR readers ask about high-frequency trading. Senators are calling it unfair because some traders have access to more powerful computers,and better quants, than do others. The traders with the most powerful aids get there first and make more money. Here is a typical critique. Felix Salmon is also skeptical.
I do not worry about high-frequency trading. Telegraphs and telephones also brought their own, earlier versions of high-frequency trading. As did stock index futures. There are second-best arguments relating to hockey helmets and the like but that is the case with most forms of progress and greater economic speed. You don't have to think that the current profits measure the current social value of high-frequency trading to argue that the overall trend should be allowed. The correct judgment of efficiency occurs at the system-wide level, not at the level of the individual trading strategy. The short-run story is that private profits exceed social returns but in the longer run the trading activity and liquidity brings increasing social returns and better communication of information.
I'm not a believer in the strong versions of efficient markets hypotheses, so I do admit that high-frequency trading, like just about every other trading strategy, can bring short-run "whiplash" effects on market prices. But if you don't like it, you can trade yourself at much lower frequencies, which is probably what you should be doing anyway. At the same time high-frequency trading smooths out or shortens many other cases of price whiplash. High-frequency trading brings more liquidity into the market. Call it "low quality liquidity" if you wish, but it still looks like net liquidity to me.
The complaint is that this liquidity sometimes vanishes. Maybe high-frequency trading can scare other traders out of the market;
that charge has been leveled against every method of informed
trading. In the short run it is sometimes true but markets respond by
upping the general requirements for quality trading and many market
participants rise to meet the new standard or else switch to longer
On the critical side there is lots of talk of "unfairness" and "manipulation," combined with snide references to the financial crisis. I'd like to see a serious efficiency argument against high-frequency outlined and defended, without the polemics. That would include a case that regulation will prove workable and catch only the "bad liquidity," while at the same time avoiding capture by envious and inferior competitors.
If high-frequency trading is used to trick other traders into revealing their demand schedules, and then canceling orders, I can see a case for regulating that particular practice. On that issue, here is background, from a critic, but note that these charges seem to be unverified.
The philosophical question is why it might possibly be beneficial to have market prices adjust within five seconds rather than within fifteen. One second rather than five? 0.25 rather than one? If you had been writing in the year 1800, what comparisons would you have chosen?
Remember that old comic book where they had Superman race against The Flash? The Flash won. Someone had to, just keep that in mind.