Month: August 2012

Not From the Onion: Harvard Cheaters

by  Alex Tabarrok in

The NYTimes reports that Harvard is investigating “what could be its largest cheating scandal in memory.” Attention is focused on about 125 students in one course but Harvard would not say which course. The Harvard Crimson, however, has revealed that the course is “Introduction to Congress”!

I say give the cheaters an A and fail the rest.

Solve for the equilibrium

by  Tyler Cowen in

The job categories projected to grow over the next decade include nursing, home health care and child care. Of the 15 categories projected to grow the fastest by 2016 — among them sales, teaching, accounting, custodial services and customer service — 12 are dominated by women. These are not necessarily the most desirable or highest-paying jobs. But they do provide a reliable source of employment and a ladder up to the middle class. It used to be that in working-class America, men earned significantly more than women. Now in that segment of the population, the gap between men and women is shrinking faster than in any other, according to June Carbone, an author of “Red Families v. Blue Families.”

From Hanna Rosin, here is more.  And:

More important than the particular jobs available, which are always in flux, is a person’s willingness to adapt to a changing economy. These days that usually requires going to college or getting some job retraining, which women are generally more willing to do. Two-thirds of the students at the local community college are women, which is fairly typical of the gender breakdown in community colleges throughout the country.

Here is a description of one equilibrium:

The former Russell [a now-closed manufacturing firm] men are sometimes categorized by people in town as one of three types: the “transients,” who drive as far as three hours to Montgomery for work and never make it home for dinner; the “domestics,” who idle at the house during the day, looking for work; and the “gophers,” who drive their wives to and from work, spending the hours in between hunting or fishing.

The article is interesting throughout.  The new Hanna Rosin book is here.

Facts about India

by  Tyler Cowen in

Even after accounting for the wastage, only 41 percent of the food set aside for feeding the poor reached households nationwide in 2005, according to a World Bank study commissioned by the government and released last year.

In Uttar Pradesh, where the minister of food stands charged with attempted murder, kidnapping, armed robbery and electoral fraud, the diversion was more than 80 percent in 2005, the World Bank report said.

Fully 100 percent of the food meant for the poor in Kishen’s home district was stolen during a three-year period, according to India’s Central Bureau of Investigation, the country’s leading anti-corruption agency.

Here is more.  I thank several loyal MR readers for the pointer.

*The Federal Prison Guidebook*

by  Tyler Cowen in

Read about it here, buy it here.  Here is one excerpt from the summary:

  1. Advance agreement. “When you meet with the probation officer, find out his or her “dictation date.” This is the date by which he or she must dictate the first draft of the PSR. When possible, it is extremely helpful to have the probation officer and the assistant U.S. attorney buy into what you believe is your client’s offense behavior, role in the offense, and any grounds for downward departure before the dictation date. Remember that probation officers often have a psychological investment in their original draft PSR. Since getting them to change a PSR can be difficult, put your effort into trying to get a good initial draft. That way, you won’t have to file that many objections.” §4:10.2.

Interesting throughout!

For the pointer I thank Eapen Thampy.

The next transformational technology?

by  Tyler Cowen in

Noah Smith writes:

Addendum: I seem to be the only person talking about Desire Modification as a transformational technology. Greg Egan and Vernor Vinge have written books in which this technology plays a central role. In my “spare time” I’m writing a couple of sci-fi short stories based on the idea. It’s a really big deal, and I’ll write a post about it soon.

What are the social costs of high-frequency trading?

by  Tyler Cowen in

I’ve yet to see a good argument that they are high.  HFT is taken to mean many things, but let’s (for now) focus on high-speed arbitrage and near-arbitrage.

Let’s say the market for coconuts in Thailand reacts somewhat slowly, and the market for coconut derivatives in Singapore allows for quicker trading.  A storm comes to Thailand, the two coconut prices split, and a number of traders rush in to take advantage of the price discrepancy.  (Of course since the Thai market is slow and less liquid, this won’t be perfect arbitrage.)

If ten traders have more or less the same speed (and quality) of trading technology, the returns to rushing would appear to be pretty small.  At most, the $$ invested in speed will rise to equal the size of the available p x q discrepancy.  That’s basically the same result you get with slower trading technologies.  Call it waste, or not, but I don’t see that any new problem has arisen here.  There is some waste, bounded by the p x q discrepancy, whether people compete over speed at higher speeds or lower speeds.

If one trader has dominant speed, that seems to also limit the costs of running after the arbitrage profits.  Rent exhaustion will be far from complete.

Alternatively, imagine a leapfrog model.  The quickest firm gets to be clear leader for a year, but by the time that year is up they are leapfrogged by a new and speedier technology, and then there is a new leader.  It still seems to me that the investments in the new speed technologies are bounded by the p x q discrepancies, as they were in slower times.

Keep in mind, if HFT yields profits, there are also incentives to improve the trading technologies in the slower of the two coconut markets.  Those incentives will limit the profits from HFT and thus the resources invested in HFT.

I understand full well that this discussion considers only a few relevant factors.  Nonetheless I don’t see that the critics are imposing even this much structure on the problem.  I don’t see why “at higher speed” makes the rent exhaustion problem from price arbitrage more costly in social terms.  I don’t see a good theoretical or empirical argument on the table, much less a verified argument.

You also might think that more volatile intra-day asset prices are a cost of HFT.  Hold off on that for now, I’ll consider it in another post.

The rule of law? (talk about “money laundering”)

by  Tyler Cowen in

Wells Fargo Home Mortgage (WFC) has fired a Des Moines worker over a 1963 incident at a Laundromat involving a fake dime in the wake of new employment guidelines.

Richard Eggers, 68, was fired in July from his job as a customer service representative for putting a cardboard cutout of a dime in a washing machine nearly 50 years ago in Carlisle, the Des Moines Register reported Monday.

Warren County court records show Eggers was convicted of operating a coin-changing machine by false means. Eggers called it a “stupid stunt,” but questions his firing.

Big banks have been firing low-level employees like Eggers since new federal banking employment guidelines were enacted in May 2011 and new mortgage employment guidelines took hold in February, the newspaper said. The tougher standards are meant to clear out executives and mid-level bank employees guilty of transactional crimes — such as identity theft and money laundering — but are being applied across the board because of possible fines for noncompliance.

Here is more, courtesy of Tim Johnson.

Assorted links

by  Tyler Cowen

1. Summary of the new Robert Gordon paper on stagnation, with good charts and graphs, and further coverage by Annie Lowrey here.  Paul Krugman also comments.

2. Groupon coupon for “The Anger Room,” markets in everything.

3. Andrew Gelman on different ways of plotting income data.

4. Michael Blowhard seems to be blogging again, here, under “Paleo Retiree.”

5. Sumner on Balding, Sumner on Wang, and Caplan responds to Dickens.

6. The Medicaid wars come to dentistry.