Monday assorted links

1. Diane Coyle: which books should the well-educated student read?

2. MIE:

3. There is no great stagnation what would Macbeth say levitating bonsai trees.


5. Blanchard and Gagnon: “…in terms of their expected value, stocks are not overpriced today.”  The second link, however, is mine.


Maybe it's just me, but I don't get the tacos thing.

Tyler probably meant to link to this:

Yeah, I had to google the phrase. is also sort of interesting.

But what I found most interesting was his actual link to the Harvard Crimson article about Ec 10 with its "large" enrollment of 558. It was typically at or close to 1,000 students in the mid1980s.

Now I understand why there are no Spanish language bookstores. Everyone is reading Tacos.

recently supplanted by CS50, sign of the times

1. Starts off well, then ...

2. Bodyweight exercises are great but in my experience require a minimum level of fitness to get established. (See 2012 book "Convict Conditioning".) But anything that gets people away from workout machines is progress.

4. I think the link is supposed to be about the University of Kentucky Taco Literacy course.


Rather than bodyweight exercises MIE, my read is Tyler is actually directing this at venture capitalists, with the MIE being "founders":

While serving a sentence in his 9’x6′ prison cell, Coss lost 70+ lbs. in just six months. From that experience, Coss refined a unique fitness program combining fun cardiovascular, aerobic, and running exercises and now he has brought this exercise program back to New York City.

Read Darwin's Dangerous Idea instead of The Origin.

The Origin of Species struck me as a really long slog through a lot of animal breeding. My oddball alternative might be David Quammen's Song of the Dodo. It covers the Darwin/Wallace story nicely. And if I ever found myself having to convince a creationist, I'd probably start with island biogeography -- the apparently odd distribution of animal species on islands is a puzzle that has a perfectly simple solution given an ancient earth and the evolution of species but no sense at all otherwise.

What do you think of Neo-Lamarckism? It's an idea at least a decade old. I had a good Usenet debate, back when the internet was ungated, with somebody who did not know this term. Now even Google has a definition on it. Example: African colored lake (cichlids) fish pick their own mates and "like blond with blue eyes" fishes, which creates genetic change for no particular reason. Put another way: if gentlemen prefer blondes, and they largely do, and blondes die younger than non-blondes, as they do, is the human species collectively headed for a shorter lifespan (but arguably more fun in their salad days)? Or substitute males vs females re infanticide for a less colorful example. Or monogamy for polygamy. Etc etc etc. And let's not get into the parent can use environmental factors to change the sex of their offspring (crocodiles can do this by varying the nest temperature to get more females than males).

In your 'blond and blue eyes' examples, it sounds like you're talking about sexual selection -- Darwin described that in The Origin of Species. Sexually selected characteristics often are a detriment to survival (in fact that is probably the point -- see Zahavi's 'Handicap Principle'). I haven't paid a lot of attention to potential Lamarckian inheritence mechanisms, but from what I've seen they appear to be real but limited (no DNA changes). So interesting but probably not all that important.

Sexual selection is from Darwin's The Descent of Man, and Selection in Relation to Sex, which appeared in 1871, twelve years after On the Origin of Species.

The suggestion of Darwin's "Origin of Species" is .....interesting. Seems more like someone knows it is an important work from the past rather than an important book to read today. That book is an incredible snoozer compared to more modern books which cover much more about evolution. Terrible choice if evolution is what you want people to learn about. Heck, it would likely teach a young person that they don't like science.

The value of equities will be overwhelmingly determined by yet unknown real shocks to earnings. Whether equities in hindsight will have been a good investment will have little to do with today's price, which is in the normal range. Somewhere in the multiverse, Irving fisher is a hero.

"Somewhere in the multiverse, Irving Fisher is a hero"

I would like that on a t-shirt.

Not true at all. If you read the article you'd see that stock prices today are reasonable only if you assume the low bond yields are reasonable. Nobody believes that, except the article authors. Not even Nobel Prize winner Schiller believes that. You're smarter than the multi-millionaire Schiller?

Why read On the Origin of Species when the science has progressed so much? As a historical document, sure. But for "Understanding how the world is"? Nonsense.

I completely disagree. On the Origin of Species remains a great book on the power of observation and gentle, persistent persuasion. The reader is invited to walk Darwin's own path of discovery.

And, unlike, say Newton (let alone Einstein), it's accessible to the educated layperson. A really remarkable book. Much different from what most people who haven't read it think, I suspect.

Darwins' theory is largely intact. He was such a good scientist, though, that he mostly recognized his more ambitious claims (some of which were incorrect) were just that...ambitious.

@BD- you do realize that Darwin later modified and even repudiated his earlier works since he could not figure out, since "genes" were not yet invented, how a single beneficial mutation could spread in a population, since Darwin wrongly assumed characteristics were 'blended' in subsequent generations (which actually they largely are, since 'single gene beneficial mutations' are extremely rare, but I digress)? What else don't you know BD?

Well, I think I have a pretty good bead on you, Ray. A sad aging dude living cheap in the third world in an effort to preserve the wealth he inherited from grandma, who then tries like hell to spin himself as a globe-trotter and playah and big man to young peasant women, and throws out little dilettantish quips from time to time about neo-Lamarackism etc.

Mostly harmless.

Have you read it recently? I can't imagine a 20 something person making it through Origins. My god it is boring and so many other books that are both written in a modern way with much more enlightenment from 150 years of study.

Origins was a great book in it's day. Read it as a piece of history, but please stop recommending it as a science book - you'll likely turn off a lot of would be young scientists.

Heh. OK, I'll read it again. It's been a while. You're making me feel old and curmudgeonly and despair of the gathering philistine darkness.

Silver lining: Bryan Caplan just wrote a piece about the ADHD society. Sometimes, it's benign or even salubrious.

By the way, I highly second the recommendation of Dennett's "Darwins Dangerous Idea" mentioned in these comments.

All of Dennett, really. And, on evolution, all of Dawkins and Ridley, at least.

I'm not a complete curmudgeon.

Now **this** I can get behind. :)

"Darwin's Dangerous Idea" is a great read. I can definitely imagine some young minds gobbling it up.

I agree and think that basic lesson applies to a lot of these older books. There's no doubt in my mind that Darwin, Hobbes, and Hume, for example, were brilliant minds, but I'm sufficiently "up to speed" that I don't need their ideas to be explained laboriously to me over several hundred pages as if it were my first time and they were shattering my worldview. And a lot of these guys were still grasping in the dark themselves when they wrote this stuff, so you're getting a relatively primitive formulation of the idea anyway.

Again, I disagree. Darwin's intuitions were top-notch. The mountain of facts available today in support of evolution were not there. It was really outstanding detective work -- a clinic on how to proceed in the "historical" or "contingent" sciences. I would argue that it's a model for how to conduct science in the face of massive uncertainty-- a lesson many climate 'scientists' might do well to emulate.

Let me just preface this by saying, I haven't actually read Darwin. Maybe I will someday, but there's a lot of stuff I haven't read and life is short so who knows.

In reply, it's entirely possible that Darwin is more readable than I'm treating him. And if you're making a claim that the prose has literary merit or is entertaining, that's one thing.

But having said that, who cares if the book is a case study in good science? It was certainly impressive for its time, but that doesn't mean that I, a non-specialist in the year 2016, need to pick it up and read all 500+ pages of it to understand "how the world is," when realistically a <10 page summary will get the job done just as well.

I'm just extremely skeptical that there's any deep wisdom in that book that 1) hasn't already been incorporated into modern science, 2) doesn't come across in a proper summary/explanation, and 3) is worth forcing myself to read 500 tedious boring pages to access the few nuggets of brilliance. I think people like the idea of reading it more than actually reading it.

Perhaps you're REALLY busy. Who doesn't like a good detective story? In large part, that's what historical science is, and what Darwin's book is.

It's accessible! Don't you find it exciting to be able to participate in scientific inquiry based on original texts? I do, but I don't have the physics chops for sure.

I'd be curious to hear from anyone who has actually read On The Origin of Species and felt that the effort wasn't repaid.

Your attitude is almost like: "I don't need to read anything from Shakespeare beyond what I can cull from wikiquote",

Or maybe they'll make it a movie. Like Thornton Melon said: "Read? Who has time? I see the movie. I’m in and out in two hours."

"I’d be curious to hear from anyone who has actually read On The Origin of Species and felt that the effort wasn’t repaid"

I read it for my uni Evolution course, and again twenty years back. imo, its importance on Diane Coyle's list is entirely appropriate, as well as being well written & easy to read.

The reader will also come away with an appreciation of natural history in the 19thC, and how little Darwin had to go on, i.e., the magnitude of his achievement.

I'm not that busy, I'm just a slow reader with a bad case of get-to-the-point-itis. What you describe could be interesting in small doses, but also sounds like it would get old fast. Especially since I already know what the conclusion of the book is, I already know that I agree with it and why, and I already know mostly how it goes. If there's additional aesthetic merit on top of that, that's certainly something about which reasonable people can disagree, but I don't think that warrants its inclusion on Coyle's list as a must-read for an educated person to understand the world.

For the record I'm playing devil's advocate just a wee bit here. I'll probably pick it up one day and give it a try, but I suspect that at best I'd have to force myself to keep plowing through it rather than legitimately, honest-to-God enjoying it.

BTW I'm about 450 pages into War and Peace at the moment. I'll let you guess how that is interacting with my illness :)

I’d be curious to hear from anyone who has actually read On The Origin of Species and felt that the effort wasn’t repaid.

I thought my time was repaid but I'm an unusual person. The book is long, it is filled with technical terms (articulata, balanus, cirripedes, etc.), and the prose style is just not congenial to most moderns. Darwin is not a bad writer, but this is pre-Hemingway time; the sentences are long and involved.

Contingent science = not science.

It's only partially about the ideas; the other part is about the process of discovery conveyed in the books. And regarding philosophy, where it really is about the ideas, if you haven't read them, then you probably only know the second-hand, sanitized versions of the arguments, which are never as interesting or nuanced as the originals.

#5 - I hope they're not overvalued.

As debt and other "safer" investments' market yields decline, equities' expected yields likely follow.

"And what matters for the valuation of stocks is the relation between future growth and future interest rates."

I'm not sure that is totally correct. Does it miss the risk premium? Interest rates are based on debt, which have specified maturity and are senior to equity in insolvency liquidation. Stocks have no maturity/repayment and are residual, i.e., last (generally not) paid in an insolvency.

Interestingly, in the recent asset bubble, commercial real estate (appraisal NOI, gross rents, etc.) direct and overall capitalization rates dropped approaching risk-free levels resulting in higher values that could be over-leveraged. That was (it proved wrongly) explained by the widespread belief that low cap rates were justified by perennially, rapidly rising RE values. It wasn't so as many regretfully learned.

The risk premium is the equity premium in his table. He makes the point that it is higher now than in 2005 (a period when no one said stocks were overvalued) ;therefore the denominator in E/P has to increase to get in back in line. Ergo, his thesis: stocks are undervalued

1. On Power Bertrand de Juvenel

2.The Law Frederic Bastiat

3.The Decline of the West Oswald Spengler

4.A Study of History Arnold J. Toynbee

5.Human Action Ludwig von Mises

6.The Discovery and Conquest of Mexico Bernal Diaz del Castillo

7.The Histories Herodotus

8.The Gypsy's Curse Harry Crews

9.The Confidence Man Herman Melville

10.Vanity Fair William Makepeace Thackeray

#5. It seems you are increasingly drawn to make cryptic predictions about the stock market. At least that's how I interpret your snarky Irving Fisher link.

But even in 1929, someone who bought US stocks would have earned an 8% CAGR over the following 30 years- much better than bonds.

The math is simple. The S&P 500 is currently at 1940; 2015 earnings per share are about $106. So, based on current earnings, that's an earnings yield of about 5.5%.

Of course, earnings could go down, but over the last 55 years, S&P 500 earnings per share have increased on average by more than 6% per year.

Blanchard and Gagnon astutely look to alternative investments such as bonds, whose yields are much less unknown and pretty abysmal-looking.

The best assurance that there is no bubble is the cottage industry that has grown up around bubble-spotting.

tl;dr. Short version, we live in a world of very expensive guarantees right now. Act accordingly.

"The best assurance that there is no bubble is the cottage industry that has grown up around bubble-spotting."

Unfortunately, it seems to be a self-fulfilling prophecy. If we beat it with a monetary stick until it collapses, then we can all pat ourselves on the back about how we all knew the end of the bubble was coming.

I reckon to the extent "the Fed is just propping up asset prices for the 1%" is a commonly-held view, I reckon this is a problem.

But it seems that policymakers really are getting a better understanding of how monetary policy interacts with markets and the economy. I reckon I'm just optimistic by nature.

5. "We note that anyone who bought stocks in 2005 and held them to 2015 would have earned an average annual return more than 3 percentage points higher than that on holding a 10-year nominal bond."...Put another way, stock prices were more undervalued in 2015 than they were in 2005, and after the decline of the past few weeks, even more so.

Hussman's valuation method says the expected return in stocks over the next 10 years will be one of the worst in history. But yes, 10-years from now you might be very happy having earned a real return of slightly more than zero.

He's always bearish though.

I expect better of Blanchard

Can't kill some bad ideas:

Not as bad as I first thought but still only relative value,

Have to be honest and stress to people "stocks look ok vs bonds but way worse vs inflation than for most of their own history."

Cliff, I skimmed your paper so I probably didn't do it justice.

I agree that stock returns in the future are likely to be lower than in the past. Hell, the S&P 500 has delivered a REAL annual CAGR north of 7% for the past 65 years. Does anybody expect this going forward?

And I agree that inflation is a threat for any investor. But this is especially true of bonds right now, which offer meager yields and LESS inflation protection than stocks.

So, what's an investor to do? It seems to me that investing in stocks and finding an inflation hedge (gold, real estate) is a much better strategy than investing in bonds.

With the rise of the TIPs market, we now have some ability to distinguish inflation expectations from real yields. And inflation expectations are very low. Now perhaps actual inflation will exceed expectations (like in the 1970s) and investors will be in for a rough ride, but it is bond investors who would be clobbered worse. Unlike bonds, stocks contain a "real" element.

I personally think we are in for decades of low real interest rates: this is the New Normal, produced by aging rich countries and developing countries saving like mad. In such an environment, a 4-5% real return on stocks doesn't look too shabby.

Donohue crushes it here.

5. Back when markets were considered rational, to the "price is right" extreme, it was important to explain an "equity premium" that must be rational .. because everything was.

If you are a little more "animal spirits" it makes less sense that there is some steady premium to be explained. Instead, there are twists and turns in markets, as there always have been.

How can you be well educated and not read Julian Simon?

Re 1, I think you'd want to go full on world-lit: Illiad, Republic, Bible, Koran, Mahabharata, Confucius, the Pāli Canon (Buddhism), Divine Comedy, about 10 Shakespeare plays (is that cheating?), and uh either Middlemarch or Dickinson's poems.

Of course, by this standard, I'm only about half educated... this is kind of a reading list.

Actually, take out Divine Comedy, and put on On the Origin of Species... Something in that list has to tell you about the scientific method. Also: Very tempted to replace the Koran with Rumi or 1001 Nights or something more fun.

Not really, no:

"1. Diane Coyle: which books should the well-educated student read?"

Which books should the student have read in order to be considered well educated perhaps?

Diane Coyle: which books should the well-educated student read?

Wow talk about clueless self-absorption. Total lack of temporal or viewpoint diversity.

As if Hume and Darwin are the lawgivers and then the entirety of human experience has been mastered by a bunch of small-minded 20th century liberal academics.

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