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Archive for March, 2009

Even as I read The Black Swan for the first time, I’ve already read it. I’ve listened to several in-depth interviews with Nicholas Nassim Taleb since the book came out in 2007, and he’s had a recent resurgence in attention as the credit crisis fits his titular metaphor aptly.  Despite my familiarity with the main thesis I’m still enjoying the book, just as one might still enjoy slurping down the spiced milk after finishing his Cinnamon Toast Crunch. Indeed, I’ve not come across another book that so completely elucidates (in a far more sophisticated and erudite manner, granted), how I’ve come to think about things generally.

I’m 2/3 of the way through the book and have come across many passages tempting me to blog, but the following will probably be the only one I excerpt (you, yes YOU, should really just read the book).  In it, Taleb describes the limitation of making predictions in a complex system by using an example computed by a mathematician named Michael Berry:

If you know a set of basic parameters concerning [a billiard] ball at rest, can compute the resistance of the table (quite elementary), and can gauge the strength of the impact, then it is rather easy to predict what would happen at the first hit. The second impact becomes more complicated, but possible; you need to be more careful about your knowledge of the initial states, and more precision is called for. The problem is that to correctly compute the ninth impact, you need to take into account the gravitational pull of someone standing next to the table (modestly, Berry’s computations use a weight of less than 150 pounds). And to compute the fifty-sixth impact, every single elementary particle in the universe needs to be present in your assumptions! An electron at the edge of the universe, separated from us by 10 billion light-years, must figure in the calculations, since it exerts a meaningful effect on the outcome. Now, consider the additional burden of having to incorporate predictions about where these variables will be in the future. Forecasting the motion of a billiard ball on a pool table requires knowledge of the dynamics of the entire universe, down to every single atom!

(…)

In a dynamical system, where you are considering more than a ball on its own, where trajectories in a way depend on one another, the ability to project into the future is not just reduced, but is subjected to fundamental limitation. (p. 178)

Austrian economists like Hayek used similar reasoning in the early 20th century to critique Soviet-style central planning. One oft-forgotten miracle of prices is that they provide a basis of comparison for completely different things. If I decide to use my $100 for golf lessons, I know exactly what I’m giving up for them: $100 worth of Braeburn apples, Suzie’s babysitting, Tide laundry detergent, Clive Owen’s acting, the neighbor’s stash of dope, the additional interest I would earn in my Citibank savings account, a lecture by Al Gore, Hamburger Kunsthalle tickets, the copyright on Beatles sound recordings, taxi rides from JFK to Manhattan, common stock in a Mumbai start-up, etc. In other words, prices tell me about relative values. In the absence of a price system, the Austrians argued, it would be impossible to ration resources effectively, and even if prices were used, no central planner could ever hope to set them correctly because prices reflect an incomprehensible amount of dispersed knowledge particular to time and place.  Just think about the task Mr. Planner would have to face:

  1. Set the price of every resource (including, for example, the time of every person in the economy)
  2. Make sure each price is correct relative to every other price both now and in the future.
  3. Repeat steps 1-2 every second as conditions change.

Could we, like Camus, imagine Mr. Planner happy in his Sisyphean task? And to extend it to Taleb’s point, do we really think anyone could make a certain and accurate forecast of where prices will be in a decade? A year? A day? For that matter, are my powers of clairvoyance to be trusted?

Happily I can report they are, for after reading the above passage and forming this post in my head I turned the page to find a brief section discussing Hayek;  Roma Downey has my undying gratitude.

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Nelson Mandela is an icon of statesmanship, a principled activist who spent decades in jail for his efforts to bring an end to apartheid and the start of multi-racial democracy in South Africa.  In addition, he can also help me with the ladies!

A similar survey carried out in December for the National Year of Reading Campaign found half of men and one third of woman have lied about what they have read to try and impress friends. The men polled said they would be most impressed by women who read news websites, Shakespeare or song lyrics. Women said men should have read Nelson Mandela’s biography or Shakespeare.

I also learn from reading the article that my own reading habits are feminine and rare:

A study of reading habits showed almost half of women are ‘page turners’ who finish a book soon after starting it compared to only 26 per cent of men.

I’m a page turner. Check.

The survey 2,000 adults [sic] also found those who take a long time to read books and only managed one or two a year were twice as likely to be male than female.

I manage much more. Check.

Men are also more likely to have shelves full of books that have never been opened.

Dog-eared pages and cracked spines greet any browser of my bookshelf. Check, although I tend not to collect books anymore.

The only similarities between the sexes came among those who have two books on the bedside table at once and who start one book on the middle of reading another, switching easily. Twelve per cent of women were in this category – exactly the same number as men.

As I’ve written before, having a reading pool with multiple titles is an old–and evidently unique–habit of mine. Check.

On a related note, blogger Steven Berlin Johnson makes one novel point about the Kindle that makes it even more appealing:

When he was on John Stewart, Jeff Bezos mentioned that the Kindle was great for one-handed reading, which got a salacious chuckle from the audience (and Stewart), but I think it’s best for no-handed reading: i.e., when you’re reading while eating a meal, one of life’s great pleasures. It’s almost impossible to read a paperback while eating, and you really have to snap the spine of a hardcover to get it to lie flat, but the Kindle just sits there on the table helpfully while you cut up your teriyaki.

As a kid, my family ate out often. My parents tended to talk about work the whole time, so to stave off silent boredom I began bringing books to the booths and got pretty good at eating while reading (One wonders whether my love of chicken fingers had as much to do with their ability to be eaten blindly with one hand as it did with taste.).  I wholeheartedly agree that the practice is one of life’s great pleasures, but I almost never do it anymore because of the difficulties outlined above. Johnson’s observation, however, gives me hope that one day I will again experience the sublimity of restaurant reading. I can see it now, some time hence: sitting at a fancy restaurant and shushing my date as I read Mandela’s biography.

HT: MR

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Readers who follow politics probably heard about the minor gift exchange kerfuffle betwixt British PM Gordon Brown and Barack Obama.  Now, as some feared, Brown has discovered he can’t view his gift of 25 American movie classics because the DVDs are encoded only to play in North America.

Readers who follow me probably recognized this regional encoding as another form of price discrimination, as it allows firms to charge different prices for the same product by separating markets geographically.

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Dipotism

The visit to the CEO uncle has now yielded sweet and salty dividends:

Sorry for the lack of posting recently, but I’ve got one in the pipeline that I’m sure to finish while munching on some chocolate peanut butter pretzel dips.

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Two members of the GMU mafia who have done much to shape my worldview in the past few years, Robin Hanson and Tyler Cowen, did a Bloggingheads “diavlog” together (quite the portmanteau, diavlog, no?). Here’s a taste of the topics:

Tyler vs. Robin on the merits of cryonics (12:23)
Does fiction weaken your grasp of reality? (06:52)
Are economists evil? (12:10)
How to estimate the value of a person’s life (06:04)
Will prediction markets ever really take off? (08:06)
Has fame made Tyler boring? (02:27)

Vodpod videos no longer available.

They both have PhD’s in economics and are tremendously intelligent, but whereas Robin has more of the cold analytic attitude consistent with his background in physics and computer science, Tyler, the bearded one, is a self-described “cultural omnivore” who reads and travels voraciously and has written a popular ethnic dining guide to Washington DC.

For most the video will probably be esoteric and dry, but I watched it straight through with a dumb grin on my face as soon as I discovered it. This is partly because they talk about things I have an interest in, but mainly because I’ve read and interacted with these guys on their blogs and Facebook for several years now and so I feel I know them in a way seemingly belied by the fact I’ve never met them personally; there’s something wonderfully 21st-century about reading the acknowledgments section to a book and being as familiar with the names and relationships described therein as one of the author’s academic colleagues might be.

But generally, the video also reminds me of how much value from internet access I get above what I pay. I’ve often tried to guesstimate what my consumer surplus for internet is, and it’s easily in triple figures.  Friends may consider me a pretty miserly guy overall , but I would gladly let an ISP gouge me out the wazoo as long as the connection was fast and always on.


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Same nieces, same week, same state:

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This week’s Economist has a series of articles about drug prohibition. Here’s the main point from the leader:

Next week ministers from around the world gather in Vienna to set international drug policy for the next decade. Like first-world-war generals, many will claim that all that is needed is more of the same. In fact the war on drugs has been a disaster, creating failed states in the developing world even as addiction has flourished in the rich world. By any sensible measure, this 100-year struggle has been illiberal, murderous and pointless.

I’d like to think I’m a reasonable guy with empathy percolating out of every pore, but in this case I just don’t see how someone concerned with the effects of drug policy could not help but favor liberalization.  There will always be disagreement about how far liberalization should go, but virtually any step in that direction would seem to bring more benefit than cost. Insofar as one is not concerned with outcomes, however, but rather with good intentions or what legal drug use “says” about a society, then I am certainly able to understand one’s seeing liberalization as a solution administered through a dark and dirty needle.

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