Tyler Cowen's Blog, page 114

September 22, 2014

Why should trading be the province of humans only?:


One project is Michael Marcovici’s Rat Trader. The book describes the training of laboratory rats to trade in foreign exchange and commodity futures markets. Marcovici says the rats “outperformed some of the world’s leading human fund managers.” The rats were trained to press a red or green button to give buy or sell signals, after listening to ticker tape movements represented as sounds. If they called the market right they were fed, if they called it wrong they got a small electric shock. Male and female rats performed equally well. The second generation of rattraders, cross-bred from the best performers in the first generation, appeared to have even better performance, although this is a preliminary result, according to the text. Marcovici’s plan, he writes, is to breed enough of them to set up a hedge fund.


I don’t myself like the electric shock idea, but there you go.  That is from Diane Coyle, and for the pointer I thank Michael Gibson.


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Published on September 22, 2014 23:00 • 71 views

Ruth Towse, Advanced Introduction to Cultural Economics.  She remains the definitive presenter of this material.


I very much enjoyed Ian Leslie’s Curious, a polyglot look at being…curious.


Richard Flanagan, The Narrow Road to the Deep North.  A moving and vibrant novel about an Australian in a prisoner of war camp in WWII and his escapades surrounding that time in his life.


Edward D. Kleinbard’s We are Better Than This: How Government Should Spend Our Money is a well-done progressive take on the expenditure side of fiscal  policy.


Andrea Louise Campbell, Trapped in America’s Safety Net: One Family’s Struggle.  A good anecdotal but also analytical study of how means-tested welfare programs can make life very difficult for the poor.  Recommended.


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Published on September 22, 2014 22:46 • 27 views

In 1960, 5 percent of Republicans and 4 percent of Democrats said that they would feel “displeased” if their son or daughter married outside their political party. By 2010, those numbers had reached 49 percent and 33 percent. Republicans have been found to like Democrats less than they like people on welfare or gays and lesbians. Democrats dislike Republicans more than they dislike big business.


And this:


To test for political prejudice, Shanto Iyengar and Sean Westwood, political scientists at Stanford University, conducted a large-scale implicit association test with 2,000 adults. They found people’s political bias to be much larger than their racial bias. When Democrats see “joy,” it’s much easier for them to click on a corner that says “Democratic” and “good” than on one that says “Republican” and “good.”


To find out whether such attitudes predict behavior, Iyengar and Westwood undertook a follow-up study. They asked more than 1,000 people to look at the resumes of several high-school seniors and say which ones should be awarded a scholarship. Some of these resumes contained racial cues (“president of the African American Student Association”) while others had political ones (“president of the Young Republicans”).


Race mattered. African-American participants preferred the African-American candidates 73 percent to 27 percent. Whites showed a modest preference for African-American candidates, as well, though by a significantly smaller margin. But partisanship made a much bigger difference. Both Democrats and Republicans selected their in-party candidate about 80 percent of the time.


That is from Cass Sunstein.


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Published on September 22, 2014 10:49 • 26 views

September 21, 2014

Edward Luce writes in The Financial Times:


According to William Lazonick, a scholar at the University of Massachusetts Lowell, seven of the top 10 largest share repurchasers spent more on buybacks and dividends than their entire net income between 2003 and 2012. In the case of Hewlett-Packard, which spent $73bn, it was almost double its profits. For ExxonMobil, which came top with $287bn in buybacks and dividends, it amounted to 83 per cent of net income. Others, such as Microsoft (125 per cent), Cisco (121 per cent) and Intel (109 per cent) were even more extravagant. In total, the top 449 companies in the S&P 500 spent $2.4tn – or more than half their profits – on buybacks in those years. They spent almost the same again in dividend payouts. Taken together, they came to 91 per cent of net income.


There is more here.  I would read the data this way: the rents earned by those companies stem from their preexisting intellectual property, rather than from their current managerial talents.


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Published on September 21, 2014 23:08 • 24 views

We again looked at those individuals moving into and out of the finance sector, but this time restricted the sample only to those doing a job with the same title in both the finance and non-finance sectors, focusing on generic job titles such as ‘function manager’, ‘ICT professional’, ‘secretarial’, ‘customer service’ etc. The results reveal that the same people doing the same job earn around 20% more when doing that job in the finance sector rather than the non-finance sector. This premium is observed to be remarkably similar whatever job title is considered – whether it is a typically high-paid or low-paid job. This suggests that the pay premium is ubiquitous across all individuals working in the finance sector. This idea is further supported by looking at the wage premium at various points of the wage distribution. Although the finance sector pay premium is observed to be the largest between high earners in the finance and non-finance sectors – at the top end of the wage distribution – it is certainly the case that it is also observed throughout the full distribution.


That is from Joanne Lindley and Steven McIntosh, there is more here.  As you will grasp from basic microeconomics, this is evidence of rents and rent-sharing in the financial sector, a conclusion which the authors second.


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Published on September 21, 2014 22:02 • 16 views

If you want to know what Japan is up against consider that Japanese RGDP has grown by 0.00% per year over the past 6 1/2 years.  In contrast, Germany, the shining star of the European economy, has grown at 0.5% per year over the past 6 1/2 years.  Then consider the fact that the Japanese workforce is falling at an accelerating rate, and unemployment is already at the lowest level in decades.  How fast do you expect Japan to grow?  Negative growth will be the norm; zero growth is the new “economic miracle.”


The post is here.


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Published on September 21, 2014 21:20 • 18 views

There is a symposium in The Guardian on that question, here is my short contribution:


Thomas Piketty’s Capital in the Twenty-First Century has been a hit for several reasons, most notably the quality of the work. But I’d like to focus on a neglected reason why the book has found so much support, namely it appears to strengthen the case for redistribution.


Most previous commentators focused on income inequality. Bill Gates or JK Rowling have earned more than CEOs or authors in the past, while incomes in the middle class or lower middle classes are often stagnating below what previous generations could expect. That’s a labor market issue – namely that some individuals are not very much demanded by employers.


The obvious questions are then a) how can we make low-earners more productive, and also b) how can we improve education?


Perhaps most importantly, as these issues get processed by the public there is a common attitude – whether justified or not – that many of the lower earners are partially or fully responsible for their own plight. The egalitarians don’t tend to win these policy debates.


In the simplest version of the Piketty model, wealth grows more quickly than does the economy as a whole and thus the picture changes. The relative losers are no longer low earners but rather anyone who is not a capitalist. Any disparity is due not to their shortcomings in labor markets but rather to their lack of a high initial endowment.


Furthermore redistribution will work like a charm, at least provided the redistribution is enough to give the poorer individuals some capital to invest.


If you are an activist who favors lots of redistribution, the Piketty story is a lot easier to tell yourself and to tell your audiences – and that is yet another reason for its popularity.


The other contributions are by Brad DeLong, Stephanie Kelton, and Emanuel Derman, who cannot bring himself to read the book.


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Published on September 21, 2014 12:24 • 13 views

Susan Dynarski writes:


Public colleges are collecting about the same revenue per student today as they were 25 years ago. In 1988, educational revenue per full-time-equivalent student at public colleges was $11,300; in 2013, it was $11,500. (These amounts are adjusted for inflation and are expressed in 2013 dollars.)


Then why is tuition up?  The answer is pretty simple:



In 1988, state legislatures gave their public colleges an average of $8,600 a student. Students contributed an additional $2,700 in tuition, which gets us to a total of $11,300. By 2013, states were kicking in just $6,100, while students were contributing $5,400; this gets us to a total of $11,500.


As far as students are concerned, public tuition has doubled. As far as public colleges are concerned, funding is flat.



The full column is here.


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Published on September 21, 2014 10:36 • 22 views

This is the new and fantastic book by Arthur M. Melzer and the subtitle is The Lost History of Esoteric Writing.  It is the best book I know on esoteric writing and its history and furthermore it is clear and to the point!  (I think)


Melzer starts his chapter eight with this quotation from John Toland’s eighteenth century Pantheisticon:


[Esotericism is] practiced not by the Ancients alone; for to declare the Truth, it is more in Use among the Moderns.


Here is another bit from the book:


To begin with, we need an author who, in his interpretations, is willing to follow the very un-Straussian injunction — often found on mathematics exams — “show all work.”  We need to see, once or twice, how the sausage is made.  The best writing for this purpose that I am familiar with comes from an appropriately un-Straussian source: Stanley Fish.  His “Georgics of the Mind: The Experience of Bacon’s Essays” is a brilliant and nuanced exercise in textual analysis that openly displays, at every stage of Fish’s encounter with the text, what he thinks and why he thinks it.


…Another excellent and highly communicative reader…is Robert Connor.  His Thucydides is a very sensitive reading of Thucydides’s great history, a reading openly arrived at and clearly conveyed.  In conjunction with this, one should also read Clifford Orwin’s superb The Humanity of Thucydides.


Recommended.


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Published on September 21, 2014 04:31 • 23 views

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