Tyler Cowen's Blog, page 578

Marketing costs and tent poles

…The top seven highest-grossing movies of 2011 were all sequels…

The link is here.

Assorted links

1. Cause and effect, by Jonah Lehrer.

2. eBook of Paul Ryan vs. David Brooks debate.

3. European Union proposes to fund largest cultural program, ever.

4. Maria Popova, infovore, and here, and some of her favorite history books here.

5. Can central banks still raise rates when they wish?, important questions in this piece.

6. The year's most striking scientific images, and quantum levitation video, recommended.

Books of import

Jonathan Israel, Democratic Enlightenment: Philosophy, Revolution, and Human Rights, 1750-1790.  With 1152 pages, a major author, and a clear writing style, this is a major work.  I've only browsed it.

Zara Steiner, The Triumph of the Dark: European International History, 1933-1939.  Repeat the above description but up the number of pp. to 1248.

David Weinberger, Too Big to Know: Rethinking Knowledge Now That the Facts Aren't the Facts, Experts Are Everywhere, and the Smartest Person in the Room Is the Room.  Not out yet; will this be one of the big books of 2012?  Probably.

They have transcribed my TEDx talk on stories

The link and pointer come from Ben Casnocha, here is one excerpt (emphasis is from Ben):

…as a general rule, we're too inclined to tell the good vs. evil story. As a simple rule of thumb, just imagine every time you're telling a good vs. evil story, you're basically lowering your IQ by ten points or more. If you just adopt that as a kind of inner mental habit, it's, in my view, one way to get a lot smarter pretty quickly. You don't have to read any books. Just imagine yourself pressing a button every time you tell the good vs. evil story, and by pressing that button you're lowering your IQ by ten points or more.

One interesting thing about cognitive biases – they're the subject of so many books these days. There's the Nudge book, the Sway book, the Blink book, like the one-title book, all about the ways in which we screw up. And there are so many ways, but what I find interesting is that none of these books identify what, to me, is the single, central, most important way we screw up, and that is, we tell ourselves too many stories, or we are too easily seduced by stories. And why don't these books tell us that? It's because the books themselves are all about stories. The more of these books you read, you're learning about some of your biases, but you're making some of your other biases essentially worse. So the books themselves are part of your cognitive bias. Often, people buy them as a kind of talisman, like "I bought this book. I won't be Predictably Irrational." It's like people want to hear the worst, so psychologically, they can prepare for it or defend against it. It's why there's such a market for pessimism. But to think that buying the book gets you somewhere, that's maybe the bigger fallacy. It's just like the evidence that shows the most dangerous people are those that have been taught some financial literacy. They're the ones who go out and make the worst mistakes. It's the people that realize, "I don't know anything at all," that end up doing pretty well.

The talk itself is here on video.

More on the euro carry trade

From George Magnus in the FT:

Markets may derive some comfort from this initiative in the short-term as default risks are reduced, but like all financing measures, it only buys time in which economic depression will undermine it. And by effectively binding banks and sovereigns even more closely together, it is a roundabout route to nationalisation of sovereign finance, which ironically, makes fragmentation of the euro more likely.

And here is John Cochrane, in what is generally a provocative essay:

Indebted governments have been pressuring banks to buy more debt, not less. As banks have been increasing capital, they have loaded up even more on "risk-free" sovereign debt, which they can use as collateral for ECB loans. The big ECB "liquidity operation" that took place yesterday will give banks hundreds of billions of euros to increase their sovereign bets. Bank depositors and creditors have figured this out, and are running for the exits.

By stuffing the banks with sovereign debt, European politicians and regulators are making the inevitable default much more financially dangerous. So much for the faith that regulation will keep banks safe.

Economists explain the last year in terms of charts

Here is the lot, much to ponder, there is one from me too but flip through the whole series.

Explaining the economics of the Bowl system

Over at www.grantland.com, here is my piece with Kevin Grier, on the question of bowls vs. playoffs. Here is an excerpt:

In 2007, Mark Schlabach chronicled the Chick-fil-a Bowl's selection process. He explained that Boston College was not invited to the game in Atlanta because organizers worried that BC's fan base wouldn't buy enough tickets and spend enough money.

"The BC thing ate me up for a week," Stokan (the Bowl President) said. "The factors on the field were very favorable to Boston College. But when you look at this thing, you have to take into account the players, the administrators, the relationships with the leagues and the financial commitments. The city really depends on us because we're one of the top 10 conventions. We have an obligation to hotels, restaurants and retailers."

Are you surprised that this bowl is run by the local Chamber of Commerce?

…Did you know that there is a "Sugar Bowl CEO"? Circa 2009, he was paid more than $600,000 a year. Is it surprising that the Sugar Bowl and Fiesta Bowl each have more than $30 million in net assets? Did you know that many of these bowls also receive government subsidies?

The piece ends thus:

In sum, we have a system where the games are not designed to produce the best on-field matchups, the competitors often lose money but fight fiercely to participate, outsiders and observers complain vehemently, and the organizers amass and waste a great deal of money with little oversight.

Welcome to capitalism, American style. Get back to us when you've found a better system.

Here is Art Carden on the same topic.

Assorted links

1. How airplanes fly.

2. "…he knows if you've been bad or good…"

3. The modern holy shroud.

4. The political economy of shale gas in Poland, very good short essay.

5. Politics isn't about policy, installment #1237.

6. Efficient gift-giving.

Steven Landsburg Reviews Launching

I am a big fan of Steven Landsburg's books such as The Armchair Economist, More Sex is Safer Sex, and The Big Questions so Landsburg's review of Launching the Innovation Renaissance was a personal thrill:

…This is a great book. It's fast-paced, fun to read, informative as hell, and it gets everything right. At first I wished I'd written it— until I realized I could never have written it half so well.

…I wish everyone in the world would read this book. It only takes a couple of hours, and it is by far the best introduction I know of to the topic that towers above all others in its importance for the happiness of human beings everywhere, now and in the future, namely how to foster and accelerate the kinds of innovation that lead to economic growth. It will, I hope and expect, make you an enlightened advocate for enlightened policies. And it will arm you with a bundle of fun facts and anecdotes to share with your friends. This book might turn you into a proselytizer, but it will surely not turn you into a bore.

Buy Launching the Innovation Renaissance (Amzn, Nook, iTunes) and read it over the holidays!

Martin Wolf reviews TGS

In today's FT, here is his final paragraph:

I like this book: it starts from provocative theses and ends with a plea for investment in science. I do not agree with all of it, far from it. But it is good to remember that there are far bigger economic stories than the failure of finance or the appeal of austerity. In the long run, our future depends on good ideas. These may not be ours to determine. But they remain ours to influence.

Here is the earlier FT review by James Crabtree.