Dutch auction bleg
When and why was the first Dutch auction tried? This question seems surprisingly difficult to research. Please tell us what you know, thanks in advance.
Assorted links
1. Are we now in a pure credit economy?
2. Exploding markets in everything, law clerks edition.
3. www.timetravelfund.com. “Morlocks aside…”
4. One theory of cocktail prices.
5. Department of unintended consequences, Star Wars edition.
Self-constraint markets in everything the culture that is Japan
OKITE is a Japanese alarm clock app. It’s designed to help users wake up, but with a twist: it sends embarrassing messages to the user’s Twitter account every time they hit snooze.
“From today on I’m going to head to work via unicycle.”
“I want to buy a fast red Ferrari and a horse!”
“Just as I thought, I want to become a stewardess.”
Here are further examples, all in Japanese.
For the pointer I thank Jordan, a loyal MR reader.
Sentence of the Day
Larry Summers speaking at IMF/World Bank meeting:
The challenge is “finding the language that generates [the] alarm that drives action, but not the despair that proves self-fulfilling.”
The WSJ continues:
Attempting to sound reassuring, he said, “These are solvable problems.” His audience didn’t look reassured.
The wisdom of RG
From a loyal MR reader:
These higher equity correlations aren’t scary.
The unique volatility of stocks and sectors (the vol of the part orthogonal to SPX returns) is not lower; indeed slightly higher. [TC: try here on SPX]
The correlation increase is driven entirely by higher SPX vol.
In a time of higher SPX vol, to say that higher correlations are scary is the same as saying that it’s scary that unique vols aren’t rising along with the SPX vols. That’s not scary at all—indeed, I could argue that it’s reassuring. It’s the higher SPX vols that are scary.
Claims that “stock pickers can’t make money because everything moves together” are false for the same reason.
What are the sectoral shifts in today’s crisis?
I don’t think sectoral shifts are the main story (it’s weak AD much worsened by slow TFP and indeed partly caused by longer-term weak TFP), but I view them as underestimated nonetheless. This Karl Smith post looks for them and comes up with only a bit. He does find this:
In terms of employment the main restructuring has been from government to manufacturing.
I don’t think that standard classifications (Mining and Logging, Financial Services, etc.) are always the best way to look for sectoral shifts. I am struck by this paper (does anyone know of an ungated copy?), by Claessens, Tong, and Wei, which looks for sectoral shifts across credit-intensive firms, trade-intensive firms, and I would add to that firms which sell goods to the damaged segments of the middle class. It’s still not going to make sectoral shifts the main story, but it does make sectoral shifts a more important part of the transmission channels. It also shows how tightly connected are sectoral shifts and the AD shocks.
This paper also indicates that monetary policy is more effective than fiscal policy in the recent downturn, in particular for reversing some of the negative shocks to credit-intensive firms.
Addendum: Here is a relevant paper from Chris Reicher.
The wit of the Irish?
What’s unusual about the Irish [medieval] material is that it’s all spelled out so clearly. This is partly because Irish law codes were the work of a class of legal specialists who seem to have turned the whole thing almost into a form of entertainment, devoting endless hours to coming up with every possible abstract possibility. Some of the provisos are so whimsical (“if stung by another man’s bee, one must calculate the extent of the injury, but also, if one swatted it in the process, subtract the replacement value of the bee”) that one has to assume they were simply jokes.
That is from David Graeber’s Debt: The First 5,000 Years.
The polity that is Iran
IBNA reports that in Iran 419 works inspected for Holy Defense Book of the Year, as writing about the Iran-Iraq War continues to be the one kind that is enthusiastically fostered and fanned by the authorities. With 68 fiction titles — and 29 volumes of poetry — in the running there’s clearly … a lot to choose from.
From Literary Saloon, here is more.
Assorted links
1. Is rugby dying in rural New Zealand?
2. Is the Volcker rule basically gone?
3. Reverse HSAs for Medicaid? (is the state budget nearly gone?)
4. Skepticism about faster than light travel by neutrinos.
5. Denisovan DNA.
The past and future of music
Posterity may regard as the highlight of Michael Wadleigh’s 1970 documentary Woodstock not the health warning about the brown acid, but the spectacle of Sha Na Na doing “At the Hop.” This crew, at the preeminent ’60s event, surrounded by wobbly idols and dazed wielders of the zeitgeist, were shamanistically retro. Sha Na Na channeled the ’50s by overdoing them, performing cover versions—as George Leonard, the band’s brain, tells Reynolds—at “twice the speed of the originals: I insisted we do the music the way it was remembered instead of the way it was.” The singers wore gold lamé; they bopped and jived absurdly, like celebrants of a forgotten rite. They, not Jefferson Airplane, were the future, by which I mean, of course, the past. The irony that their early-morning set came right before Jimi Hendrix “immolating”—Reynolds’s word—“The Star-Spangled Banner” is almost too exquisite to bear.
From James Parker, here is much more.
My quick response on the Fed
I’ve been making my way to Toulouse and haven’t followed all of the details. Scott Sumner has many good posts on the topic, and I would put it thus: the Fed probably decided to do the best it could within political constraints and a framework of more or less stable prices. Which won’t do much good at all. Keep in mind:
1. The median voter hates price inflation. Don’t blame Bernanke.
2. Today price inflation will accelerate real wage erosion, or at least is perceived so, who wants to take credit for that?
3. Core CPI is already going up at a rate of two percent and 3.8 percent for the broader bundle, at least for the time being. Voters don’t know or care what is embedded in the TIPS spread, etc.
4. Some of the “inflationists” ignored supply-side factors and bottlenecks and didn’t see this price pressure coming. That has thrown their entire analysis into doubt, unjustly probably but nonetheless. In any case it is no longer the simple story where Q goes up first and only later does P rise.
5. If Ron Suskind is to be believed, our President seems not to know the difference between TFP and per hour labor productivity; in his defense a lot of economists don’t quite get that either.
6. The GOPers now send Bernanke epistolary romances.
7. Some people on Twitter were taking about “striking down Old Ben and having him come back stronger,” but a) Obi-Wan plain, flat out died, b) Obi-Wan’s younger prodigy, Luke, was a failure who relied on his dad and wouldn’t at the key moment listen to Old Ben and stay on the Dagobah system to invest in additional human capital (instead he read Caplan on the signaling model), and c) they never even made the final three movies of the planned nine, so we don’t know how it turned out with the unwinding of the fiscal stimulus on the Ewok world. People, next time get your facts straight!
Every now and then, you ought to conclude that what you see is what you get and that is because of the rules of the game. When it comes to further monetary stimulus, I’m not sure there’s so much more to say.
Assorted links
1. Lecture by David Stockman, the end of sound money and the triumph of crony capitalism. I disagree with much of it, but a bracing perspective.
2. Facing death, Philip Gould looks back.
3. What Karl Smith is optimistic about.
4. Printed weapons.
5. New law and economics blog for hedge funds, credit risk etc.
Irish recovery from “austerity” update, not exactly the Keynesian story
The economy expanded at a faster rate than expected in the second quarter of the year, putting in its strongest quarterly growth performance since the recession began, according to new data published today.
The seasonally adjusted figures estimated that gross domestic product – the widest measure of economic activity – rose by 1.6 per cent between the first and second quarters of 2011. Gross national product, which excludes the profits of multinational firms, increased by 1.1 per cent compared with the first quarter of the year.
Domestic demand, which excludes exports and imports, expanded too, growing by 0.8 per cent.
It is the first time since the recession began that GDP, GNP and domestic demand all grew in the same quarter.
And all that in some very bad times for the U.S. and Europe, two main buyers of Irish goods and services. The link is here, sadly this progress probably will be swept away by the forthcoming European implosion, we will see.
Addendum: Megan McArdle hits the nail on the head.
Did life come to the universe quite rapidly? (speculative)
Hydrogravitional-dynamics (HGD) cosmology of Gibson/Schild 1996 predicts that the primordial H-He4 gas of big bang nucleosynthesis became proto-globular-star-cluster clumps of Earth-mass planets at 300 Kyr. The first stars formed from mergers of these 3000 K gas planets. Chemicals C, N, O, Fe etc. created by stars and supernovae then seeded many of the reducing hydrogen gas planets with oxides to give them hot water oceans with metallic iron-nickel cores. Water oceans at critical temperature 647 K then hosted the first organic chemistry and the first life, distributed to the 1080 planets of the cosmological big bang by comets produced by the new (HGD) planet-merger star formation mechanism. The biological big bang scenario occurs between 2 Myr when liquid oceans condensed and 8 Myr when they froze. HGD cosmology explains, very naturally, the Hoyle/Wickramasinghe concept of cometary panspermia by giving a vast, hot, nourishing, cosmological primordial soup for abiogenesis, and the means for transmitting the resulting life forms and their evolving chemical mechanisms widely throughout the universe. A primordial astrophysical basis is provided for astrobiology by HGD cosmology. Concordance ΛCDMHC
cosmology is rendered obsolete by the observation of complex life on Earth.
That’s quick (two million years after the Big Bang)! Here is much more (pdf), hat tip goes to Christian Bok on Twitter.
Be Safe, Break the Law
The 55 mph speed limit was a vain attempt by the Federal government to reduce gasoline consumption; initially passed in the 1974 Emergency Highway Energy Conservation Act the law was relaxed in 1987 and finally repealed in 1995 allowing states to choose their speed limits. Highways and cars are safer today than in the 1970s and on many highways speed limits were increased to 65 mph. Higher speed limits are often safer because what is worse than speed is variable speed, some people driving fast and some driving slow. When the speed limit is set too low you get lots of people who safely break the law and a few law-abiders who make the roads more dangerous.
Unfortunately vestiges of the 55mph limit remain, in part because police like the 55mph limit which lets them write tickets at will whenever they need an increase in revenues. John Carr at the National Motorists blog gives a particularly egregious example from Massachusetts:
The speed limit on Route 3 is 55. The speed limit used to be 60….It was reduced by executive order in 1973 to comply with the national speed limit. When the national speed limit was repealed in 1995 the highway commissioner ordered the low limit retained…
It gets better. Route 3 was completely rebuilt a decade ago. The design speed for the project was 110 km/h (68 mph). The design speed is like a warranty: nothing in the road design requires a driver to go slower than 68 mph, not even on a wet road at night (the design conditions).
The average speed is not far from the design speed. The 85th percentile speed, which is supposed to be used for setting speed limits, is around 75 mph. A little over by my measurement, which found 1% compliance with the speed limit.
Eventually the absurdity of the 55 mph speed limit sunk in and in 2006 MassHighway traffic engineers recommended a speed limit increase. State Police vetoed the change, preferring the 99% violation rate that let them write tickets at will. Police have no legal role in setting speed limits. Somebody in the Romney administration weighed the risk of losing ticket revenue against the risk of being blamed for accidents. Police won.
After engineers lost that fight people began to worry about the high accident rate on Route 3. The state hired a consultant to do a Road Safety Audit. The consultant’s report blamed the low speed limit, among other factors, for the high crash rate. The report explicitly recommended raising the speed limit.
Three years later, state officials have not followed the advice of their engineers, their consultant, or 100,000 drivers per day. State police are still out there running speed traps and helping keep the road as dangerous and profitable as they can.
Hat tip: Radley Balko.