Tuesday assorted links

1. The Western elite from a Chinese perspective.

2. Podcast with NPR Planet Money.

3. Bershidsky on Bitcoin futures.

4. “The timing of the agreement also coincides with speculation that India, Japan, the US and Australia will soon formally reconvene the dormant Quadrilateral grouping first initiated in 2007 as a counterbalance to China’s rising dominance in Asia.”  Link here.

5. What causes the anti-Flynn effect?

6. Why does India lack state capacity?

7. The real story behind South Korean industrial policy.


#5 - I remember seeing this study about a month ago and realizing then that its main finding – that immigration is the main factor behind the IQ decline in high-IQ countries –was at once too unspeakable and too self-evident to make the mainstream news.

Further evidence that IQ tests are racist. (Not that evidence was needed.)

Can someone explain "g-ness" to me, though? What sort of variables are high g saturation, and why?

Bonus link: lesacreduprintemps19.files.wordpress.com/2012/11/the-bell-curve.pdf

Look, I never said Cowan doesn't like twerking. And we all know he's down.

IQ tests involve giving you lots of questions, and usually several different kinds of questions together. In general, the "smarter" you are, the more likely you are to get these questions right. There's a whole well-developed area of study (psychometrics) in constructing these tests, and part of this is deriving an IQ score from how many of each kind of problem you got right.

IQ scores have a lot of predictive validity--if I want to know how you'll do in school or at work, even for not-very-intellectual jobs like being a janitor, your IQ is one of the best ways anyone knows to make a good prediction. But it's not entirely clear what the IQ scores mean.

One way to interpret an IQ score (the one I think was the basis of the original guys who invented IQ tests) is that there's some real variable called g that measures each person's actual intellectual ability, and then the IQ test is trying to estimate g. You can imagine g being some real thing about a person, like height but a lot harder to measure. Maybe you can think of this as something like a doctor using an EKG to see how your heart is beating--there's really an electrical system keeping your heart in synch, and he's getting a limited but still useful picture of what's going on with it by looking at your EKG.

Another way to interpret IQ scores is like some kind of index score that's useful for decisions but not a real thing. Scott at Slate Star Codex once made an analogy with the Glasgow Coma index, a quick score a doctor can calculate that says how deeply unconscious/out of it you are, and helps him figure out your prognosis. You don't have to believe that this index refers to any real thing about you to believe that it is useful to predict whether you'll ever be waking up from that botched operation or crushing blow to the head.


A good read indeed.

I liked this sentence. He said he would be candid and he is: "Stanford was for me a distant second to Costco in terms of the American capitalist experience."

Also excellent in its entirety.

His summation of Rubin reminds me of what little I know of Epictetus.

Why did people recently start using "summation" in place of "summary?" Is this an effect of TV procedurals?

"And when the professor said to me in class “Puzhong, I can see that story brought up some emotions in you,” I rolled up my sleeve and checked my heart rate. It was about 77. And so I said, “nope, no emotion.”"

Simply masterful.

I agree. He is quite smart. He takes his shots at the left, but does it in a couched manner. Simultaneously, he signals vigorously so that the left will not destroy him.

I think his interpersonal skills are fast better than he lets on. He understand the west.

#2 was very good in its entirety.

Tyler touched on Bitcoin in that podcast. On that subject Vitalik, a co-founder of Etherium, is interesting.


The South Korean example shows that it is possible for a country to change its comparative advantage. This should create major problems for standard international trade theory.

It shows that it was possible for that one country at a very specific time in history to do it. It doesn't sound like it is an easy or even recommendable route for most countries.

I would guess that it is really only possible for nations with high state capacity to change their comparative advantage, and when you think about it a bit more, not even really given what manufacturing entails.

I don't think the article really showed a change in comparative advantage, simply that if you subsidise an industry that industry will grow. The author specially says he didn't examine the impact on other sections of society, or the longer term impact of these subsidies.

Look at it this way, if you subsidised farming in the Sahara Desert you are going improve the productivity and size of that industry. It doesn't mean though that this was a good economic decision.

Wtf is g-ness, g-saturation and g-loading? Anyone understood it?

That one went so far over my head it didn't leave a vapor trail.

7. Can you really get into Korea's industrial growth without once mentioning the chaebols?

#1 is hilarious. If I can give an extended quote:

On the communication and leadership front, I came to the [Stanford Graduate School of Business] knowing I was not good and hoped to get better. My favorite class was called “Interpersonal Dynamics” or, as students referred to it, “Touchy Feely.” In “Touchy Feely,” students get very candid feedback on how their words and actions affect others in a small group that meets several hours per week for a whole quarter.

We talked about microaggressions and feelings and empathy and listening. Sometimes in class the professor would say things to me like “Puzhong, when Mary said that, I could see you were really feeling something,” or “Puzhong, I could see in your eyes that Peter’s story affected you.” And I would tell them I didn’t feel anything. I was quite confused.

As a (half) Chinese person myself, I was always way more annoyed by the "empathy" of people worrying about 'micro-aggressions' than the 'micro-aggressions' themselves. It always seemed to me that they were trying to cast me in the role of a weak person who needed their help, so they could feel good about themselves. Worse, they were encouraging me to take offense at tiny, stupid things, and to adopt "complain to relevant do-gooder authority figure" as a response to these tiny, stupid things -- an attitude which would have been miserable for me and everyone who knew me.

It was hilarious. Half British humor and half Seinfeld. I actually think that this guy must be a lot of fun, I would gladly meet him.

I met him a few years ago when he was in business school (not through business school). I got halfway through reading the piece before thinking this sounds a lot like Puzhong, checked the byline and it was. He's a cool guy. The article is excellent as well.

I found his section on corporate mottos to be my favorite. MBAs always seem to come up with bullshit like "all people deserve to live healthy lives" without realizing how transparent such bullshit looks to anyone who has yet to stick their head up their ass.

I wonder why he didn't aimed at Stanford's motto: "the wind of freedom blows". Perhaps he's politically correct ;)

What a wonderful description of farting.

I agree It is bs bit i dont find it to b transparent

I heard a black man once say he preferred the hatred of some blue collar whites who saw him as a blacks as possible rivals and therefore a threat, to the patronizing attitude of educated white who seemed to think all blacks needed their help.

Imagine a world where "blue color whites" did not uniformly see "blacks as possible rivals and therefore a threat," and "educated whites" did not all have a "patronizing attitude of [and] seemed to think all blacks needed their help."

Too hard?

Then your generalisation to all kinds of stereotypes might be your problem.

Too hard for Flocinna? Those stereotypes were those of the black guy.

And it didn't read 'all' but 'some'.

#1 again.

A paragraph: "Warren Buffett has said that the moment one was born in the United States or another Western country, that person has essentially won a lottery. If someone is born a U.S. citizen, he or she enjoys a huge advantage in almost every aspect of life, including expected wealth, education, health care, environment, safety, etc., when compared to someone born in developing countries. For someone foreign to “purchase” these privileges, the price tag at the moment is $1 million dollars (the rough value of the EB-5 investment visa)."

Or you can sneak in and work in restaurant kitchens or in child care or garden maintenance. And your children will have won that Buffett lottery, although to be sure, perhaps not in the $1,000,000 class, but rather in the ~$100,000 class.

I expected (hoped for?) a few more comments about the sheer insanity of American arts faculty political correctness, as seen by an outside observer. After all, China has had its own Derangement Syndromes (aka cultural revolutions).

#1 There was a time when an Englishman would refuse to kowtow before the Chinese Emperor,i now the English-speaking world ask the blessings of the red Fascists. If Churchill or Washington or The Earl of Elgin were alive today, the shame would have killed them.

6. Most Indians pride themselves on their weak state.

In India, the state has been weak for the past 3000 years. This is a society where you cannot have a dictatorship. Where the BIg Brother cannot tell you what to do and what not to.

Society as represented by the family and your neighborhood is supreme in India. Rule of law is not necessary to keep crime low, as the internal religious constitution within each individual ensures low crime. That's how Indian crime rates are so very low, despite v v few policemen.

"Where the BIg Brother cannot tell you what to do and what not to."
For example, he can not tell you where to dispose of the contents of your bowel (although I am told drones will solve the problem). Or punish well-conected criminals. Or build much needed infrastructure. And many other form mof oppression.

Works for Texas

Rule of law is not necessary to keep crime low

I beg to differ. Perhaps you are just referring to violent crime, which indeed is rather low for a country like India, but that's not the only type of crime that concern citizens. There's a lot of petty crime: thefts, swindles, frauds, etc. that are all too frequent and go unpunished (in most cases aided and abetted by the few arms of law enforcement that exist.) This makes daily life a grind for the average Indian, the kind of person who cannot afford to have an army of factotums.

Yet the fact remains that crime is low if one keeps in mind the per-capita income levels and the infirmities of law enforcement. Culture needs to be credited for that.

I don't think my fellow Indians on this blog appreciate the function that I am performing. I am here to offer a necessary corrective to the anti-India tirades that go on unabated. Sure, that means some amount of simplification and generalization. But bear with me on that. When your opponent is not nuanced, your exercise of nuance won't carry you far.

As Krishna says in Mahabharata, to destroy evil, you sometimes need to resort to evil means.

Please do not expect any consideration from any other nationality on this blog towards India. The world is against us. After all we don't share one of the three desert religions, so that naturally biases 80% of the rest of the world against us. And these guys will try hardest to malign our country, our ways of living and our culture.

Their goal is to destroy the Indian state and ofcourse convert it to Islam and Christianity. That's been the secret wish of most people to the west of the Hindukush for some 1500 years now. If we won't fight, we lose our identity (astitva in Indian lingo).

"As Krishna says in Mahabharata, to destroy evil, you sometimes need to resort to evil means."

Can one summarize better the spirit of demon-worshipping? "There is no good and no evil. Evil is good as long as it is expedient"

If the rest of the world wants to destroy India, they seem to be doing a rather poor job of it. Perhaps you should consider sticking up for positive aspects of India while also trying to be objective about it.

quite embarrassing to read this explanation/defense. shrikanthk, please continue to stay in US. You can keep your IIMK degree with you (consider it a gift from us).

You got the wrong person

1. Was this written by Forrest Gump? My Mama always said you’ve got to put the past behind you before you can move on.

#1: Costco employees stay for long in the company.......a few lines down: emotions? I can't believe the guy did not connect the dots in his own opinion piece.

#3. I'm not sure you can extrapolate anything or draw any conclusions from 2 days of trading (or anything else for that matter.)

Re 5, are the immigrants making natives dumber? Does the Flynn effect continue to hold for the immigrants, so they get smarter? If the former is no, and latter is yes, I don't see what the problem is, assuming a reasonable division of labor.


#1 has an enjoyable dry humor.

#1 When I was an intern, in one of the training presentations, a senior banker told us to distinguish between the process and the results. He said that we should focus on the process, which we can control, rather than the result, which is subject to luck. And here at Goldman, he said, we don’t punish people for losing money for the right reason. I have always loved asking questions, so I asked him, was anyone ever punished for making money for the wrong reason? After giving it some thought, he said that he had not heard of any such thing. And he was right. In fact, no one seemed to remember the reason I did the inflation trade at all. They only remembered that I did this trade and that it worked well.

John Wooden would bench and scold a player who took a bad shot that went in, I have never seen another coach do that. Considering Wooden success I wonder why no one else does that. I have seen coaches start to get upset about a shot a players is about to take and then sit down without saying or cheer if the shot goes in. Seems to me that Wooden was right and everyone else is wrong on that, including Goldman Sachs. I think Goldman Sachs attitude shows how random investing is and that they probably survive on political corruption rather than investing skill.

John Wooden had the luxury of great players bought by alumni.

My understanding is that actually many of his players weren't great and played above their expected ability level. He did have some amazing stars, but that's not a sufficient counterargument to his brilliance as a coach.

I think this point he brings up is an important one. At the same time, the question remains -- how do you know what is a "good shot." In basketball, I can see a way to answer this question. In finance, however, I'm not so sure. All you often know is that a plan made more money than another plan. In his case, it seems like you could at least know that his explanation for why it would work is wrong, but could you ever really know why it worked? And in such an uncertain world, is it optimal to just reward the plan that works rather than only the ones that worked for what you think were right the reasons?

I would suspect that over the long haul attempting to reward the process would bring better returns that just simply rewarding results. However, that would be difficult to do, and I doubt that a company the size of a large bank is capable of doing so.

#6 Right diagnosis, wrong solution.

Cutting fraud, waste and abuse can't fix a basic problem which is a failure to hire enough government employees to implement the state's responsibilities in a workmanlike manner. The solution is pretty simple: raise taxes and spend more on government bureaucrats with that money.

Employees are subject to marginal utility. The first cop that a community hires is probably going to be pretty important. The 400th one is nowhere near as valuable and isn't worth as much as the first.

So, how exactly is your proposed tax increase going to be enforced and collected if you don't already have "enough government employees to implement the state’s responsibilities in a workmanlike manner"? Auditors to discover tax cheats are government employees. Prosecutors to go after tax cheats are government employees. Police to arrest tax cheats are government employees. Judges to hear tax cheat cases are government employees. Your "solution" to making the Indian state adequate is impossible to implement until India already has an adequate state.

The absolute first step has to be taking the current budget and re-prioritizing it to support a functional night-watchman state. Get that working, and then you can have all the exciting discussions about what else government should do. Until then, it's all a bad joke.

It would seem trivially simple to hire more auditors, prosecutors, lawyers, etc. to focus on tax compliance, and if you don't have the tax money to pay for it, just borrow it.

Ah, yes, of course, simply hire more people with borrowed money. How stupid the Indian government must be, to have failed to already have applied that "trivially simple" solution to deal with its massive tax evasion problem. Maybe some bright Westerner should email the Indians to tell them about this easy solution they've all been unaccountably overlooking, and then India will just tap the vast available pools of easy credit and qualified would-be bureaucrats to solve the problem by hiring people.

Or, you know, India could actually be limited in the money it can collect, and in what it can borrow, and in the number of qualified persons in the labor pool, and accordingly actually would have to reallocate those resources away from other things it's trying to do in order to be effective at the remainder. That would explain the dysfunction in terms of something as hard to fix as competing political interests each trying to stop their own ox from being gored, rather than everybody in the Indian government being too stupid to come up with the solution of "hire more bureaucrats".

I said simple, not easy. Greece has similar problems, and Switzerland wouldn’t have much of a banking industry if tax evasion weren’t common the world over. As you suggest, the main problem in most of the world is political economy, that is to say the government doesn’t actually want to collect the taxes it is legally entitled to. For an example of this, just look at the US, which has consistently been shrinking the budget and headcount of the IRS.

Robert Rubin was Goldman Sachs’s senior partner and subsequently secretary of the Treasury. Only later did I learn that certain people in the United States revere him as something of a god.

Also BTW are there really a significant percent of people who think highly of Robert Rubin!

People at Goldman Sachs? The DLC?

The piece written by Puzhong is a hoot! I would love to have been in the classroom with him when he measured his heart rate in response to the comment by the professor. This is priceless stuff!

I was wearing a heart rate monitor when I got robbed by an armed freelance socialist in Rio de Janeiro. My heart rate increased by 10 or 20. I did not panic as the robber did not actually aim at me, but made it obvious that he had a pistol in his hand by glancing at it briefly. The loot was some music player and one more item I have forgotten.

"My heart rate increased by 10 or 20. I did not panic as the robber did not actually aim at me, but made it obvious that he had a pistol in his hand by glancing at it briefly."

Otherwise you would haven't noticed...

Right here:


To be frank, I have never noticed that Av. Borgesde Medeiros was so near the Lagoa. Conaidering hia contributions to the country, one would suppose the path named after him would be much more central.

South Korea got a big boost from the export of Christmas tree ornaments and human hair wigs.
Before 1988 there were no cars on the streets of Seoul, only US military vehicles, taxis,and dilapidated buses. They started making cheesy cars to sell domestically in order to get up to scale where they could sell them (or try) in America at low enough prices to compensate for the lack of quality. At least that's what I heard in a bar in Itaewon. *
Taekwondo was a contributor to S. Korea too, image-wise. It's a 2,000 year old indigenous Korean martial art, you know? Nothing to do with Shotokan karate, not at all. *
The fact that Jesus was Korean and Korea was first to the moon also helped. At least, that's what some Koreans told me.
More countries should follow their example. *
The world would be a better place. *
Korea rocks.

Certainly the modern Western elite has a bizarre sense that it somehow can't just get rich and enjoy the ride. It has to somehow be transcendent - and self-righteous - by telling itself that it isn't trying to get rich and powerful, but somehow altruistic and profound at the same time.

This guy is seeing through the dishonesty of it.

I don’t think it is all that bizarre. If the Western elite didn’t believe itself transcendent it would have to face up to its own failings. Also, the whole transcendent thing is good PR, which I assume is helpful in maintaining the status quo.

I think the Stanford GSB stuff is much more utilitarian than it comes across. While a Goldman Sachs trader can aspire to make a lot of money and actually succeed at doing so, a middle manager at Pfizer is pretty constrained at making more money. They make a good living, but apart from trying to get promoted faster, a process which takes years to have meaningful results, they're stuck in a narrow compensation range. So it makes sense to focus on mission and whatnot rather than making money, even if the mission could be considered semi-bogus. It's a filter to keep out people who should be traders rather than pharmaceutical product managers. Too much focus on compensation can also lead to cutting corners, which can be disastrous at a pharma company.

Companies are also trying to motivate their employees to work marginally harder. Since they can't use the promise of bigger earnings, they have to appeal to the idea that the job actually means something. Often those mission statements are fairly ludicrous, but that's generally just a bad implementation of a reasonable idea.

I wanted to know how long it would take to start getting junk mail after using a BRAND NEW e-mail address (never before used). The result of my experiment today:*** I commented above as Sterling_Beckwith (my real name actually), and my new e-mail, which I have NEVER used before this test.**
The next time I checked my other e-mail about 5 hours later that same day (which I have never used on MR or any other public place), I received this message:

"Hi my name is Neil, i am one who invest BITCOIN. In the past 90 days, 3 people saw their lives change dramaticaly after investing BITCOIN. Over $13,837.45 cleared their checking account just in 24 hours after they signed up for my beta test online.

Because I'm opening up that same beta test for you RIGHT NOW.

Note, it went to my other e-mail, which I did NOT use.
I suppose this is how Tyler and Alex monetize the blog. Their GMU salaries aren't enough, they need to sell e-mail addresses to junk spam mailers. ***
Is this why Tyler posted about BITCOIN?
Actually, I am extremely interested in the BITCOIN opportunity. I am also interested in receiving inheritances from Nigerians. Please send info asap. I don't want to miss the chance of a lifetime.

#2 - Very good, but way too short. I could listen to two hours of that and not know where the time went when it was over.

In the US so many petit bourgeois people r tricked out of comfortable lives by this tendency, and often even tricked into downward social mobility.

Living in spain i meet so many people who seem to feel so much less guilt. Problems r attributed to corrupt politicians / industrialists or dumb populacho, with less grief about what 'we' r going to do about it and less humiliating admission that we dont know what to do about it because we r not super smart, or because the universe of problems includes some doozies, or because we r the problem. In this way the Spanish petit bourgeois does not need to oppose God, nature, or her culture, as such, and is much more at peace with herself and her setting than is a US equivalent trying hard to rip isms from her own head and the heads of her friends

#7 and #1

US, Japan, France, Germany seem to have high productivity-per-worker. All others seem more dirigiste than US (which buys medicine for soldiers, old and low-income and disabled people, subsidizes agriculture, buys massive chunks of manufactured output vía DoD, provides electricity and invented internet thru gov)

American Affairs makes strong cases for industrial policy, praising Japan and corporate laboratories. I become less liberal in all senses as i read it, except in the sense in which i feel freer for the reassurance that better minds and systems r already on the case

#1, terrific article. The Rubin book is worth reading. Rubin comes across as a very thoughtful guy. As does Yao.

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