The Economist: Essay on the history of finance in five crises

From The Economist:

“This week we publish an essay on the history of finance in five crises. They have a common theme: in each case the state increased the subsidies and guarantees it gave to finance—and helped set up the next crisis. Our cover leader points out that this is happening again. An American can now blindly put $250,000 in a bank, knowing his deposit is insured by the state. Finance, we say, should be treated more like other industries.”

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The ’77 Cents on the Dollar’ Myth About Women’s Pay

The ’77 Cents on the Dollar’ Myth About Women’s Pay

In The Wall Street Journal, Mark J. Perry and Andrew G. Biggs write that once education, marital status and occupations are considered, the ‘gender wage gap’ all but disappears.

An important problem with the “equal pay” canard is its simplistic comparison of female versus male wages; as if the sole determinant of compensation were gender. We live in a multivariate world where all sorts of factors jointly determine outcomes.  Economists June and David O’Neill understand this and find, after controlling for various wage determinants such as education, experience, industry, occupation, time spent as an active labor force participant, risk, and so forth (see “The Declining Importance of Race and Gender in the Labor Market: The Role of Employment Discrimination Policies“), that labor market discrimination is unlikely to account for more than 5% but may not be present at all.

But then the “equal pay” canard really has nothing to do with economics. It has everything to do with identity politics. Identity politics is a long-time, proven formula for political success. You divide people into groups based upon ethnicity, gender, sexual preference, income, and so forth and then promise to deliver group-specific benefits at the expense of the rest of society. Politicians get away with this because the public at large is innumerate and not able (or lack incentives) to grasp even the basic statistical concepts and principles (such as the idea that there are multiple determinants of wages other than gender differences).

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Economists reaching a conclusion…

There’s the famous saying (attributed to George Bernard Shaw) that if all the economists were laid end to end, they’d never reach a conclusion. However on the topic of pay for college athletes, a panel of 45 economists known as the “IGM Economic Experts Panel” (cf. http://www.igmchicago.org/igm-economic-experts-panel) have come very close to a consensus; the official statement reads as follows: “If the NCAA let colleges pay athletes with more than scholarships (which currently may cover tuition, books, room and board), then top colleges in men’s basketball and football would pay most athletes substantial sums beyond full scholarships.”

 

 

 

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High frequency Trading…

Although I should probably read the new “Flash boys” book by Michael Lewis, after watching the 60 minutes interview with Steve Kroft I am quite disappointed in Lewis (or perhaps more accurately, the “artful” editing of the interview by the CBS news “team”). University of Houston finance professor Craig Pirrong makes a rather compelling argument that high frequency trading (HFT) actually makes markets more informationally efficient. Professor Pirrong notes, among other things, that the “… bulk of informed trading is rent seeking, and a tax on the risk allocation functions of financial markets”; if this is true then one can argue that HFT may actually be welfare-improving. Also see Tyler Cowen’s blog posting entitled “*Flash Boys*, the new Michael Lewis book” from earlier today; Professor Cowen likes Lewis’s book but cautions not to “…confuse the emotional tenor of the stories with a final and well-reasoned attitude toward the phenomenon more generally”.

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Assorted Links (4/5/2014)

Here’s a list of articles that I have been reading and videos that I have been viewing lately:

Oppressed by the Ivy League

“The Wall Street Journal on what Dartmouth’s president should have told bullying students.”

Where Have All the Workers Gone?

“The U.S. unemployment rate is down, but rising numbers of Americans have dropped out of the labor force entirely. The problem is more than just cyclical, writes Glenn Hubbard.”

Is newspaper coverage of economic events politically biased?

“New research from Hassett & Lott says yes.”

A ‘Noah’ for Our Secular Times

“In The Wall Street Journal, Charlotte Allen writes that Hollywood’s latest story of the Ark is more Gnostic than Jewish, Muslim or Christian.”

A Catastrophe Like No Other

“The president tries to put a good face on ObamaCare, Peggy Noonan writes.”

Bono: Who Is Jesus?

“What does U2 frontman Bono pray for? Watch and find out!”

Climate Activists Uncaged

“A writer for Gawker has suggested that the government arrest anybody who doesn’t believe in climate change. Seriously?”

Big data: are we making a big mistake?

Five years ago, a team of researchers from Google announced a remarkable achievement in one of the world’s top scientific journals, Nature. Without needing the results of a single medical check-up, they were nevertheless able to track the spread of influenza across the US. What’s more, they could do it more quickly than the Centers for Disease Control and Prevention (CDC). Google’s tracking had only a day’s delay, compared with the week or more it took for the CDC to assemble a picture based on reports from doctors’ surgeries. Google was faster because it was tracking the outbreak by finding a correlation between what people searched for online and whether they had flu symptoms.

Sympathy For The Devil

“In Darren Aronofsky’s new star-gilt silver screen epic, Noah, Adam and Eve are luminescent and fleshless, right up until the moment they eat the forbidden fruit. Such a notion isn’t found in the Bible, of course… Aronofsky hasn’t “taken liberties” with anything. The Bible is not his text.”

The Beauty of Mathematics

“Michael Atiyah talks about what beauty means in mathematics and its importance in proof.”

 

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Assorted Links (3/31/2014)

“Tax-and-spend politics has driven Paris to the brink.”

Administration is making up good news about Obamacare

“The administration’s upbeat numbers about Obamacare don’t add up.”

“Leftists have their dearest Das Kapital fantasies confirmed by the theories of a Parisian economist.”

How to Cheat on a Test Using Electronics

This week I am giving midterm exams in my classes at Baylor University. I sincerely hope that nobody tries any of the cheating “strategies” outlined in this wikihow.com posting. Gotta love the “tagline” for this article: “Cheating on a test is never a good idea. You cheat both yourself and your future. However, if you must, at least try to do it right.”

EconTalk: Christy and Emanuel

This episode of EconTalk was one of the best yet. I highly recommend this hourlong podcast for anyone who is interested in getting beyond soundbites pertaining to climate change and actually understanding some of the science, methodological, and policy-relate issues…

“Is religion good for American society? It depends.”

Mr. Putin’s Revealing Speech

“At the Kremlin, he makes the case for an increasingly aggressive Russia, Peggy Noonan writes.”

The President’s Foreign Policy Paradox

“In The Wall Street Journal, Walter Russell Mead writes that Obama’s global wish list can’t be achieved while decreasing commitments overseas.”

Advice for a Happy Life by Charles Murray

“Consider marrying young. Be wary of grand passions. Watch ‘Groundhog Day’ (again). Charles Murray offers some tips on how to live to the fullest, adapted from his new book, ‘The Curmudgeon’s Guide to Getting Ahead.’”

Twenty Feet from Stardom (2013)

This is a an awesome documentary I highly recommend it!  “Directed by Morgan Neville. With Darlene Love, Merry Clayton, Lisa Fischer, Judith Hill. Backup singers live in a world that lies just beyond the spotlight. Their voices bring harmony to the biggest bands in popular music, but we’ve had no idea who these singers are or what lives they lead, until now…”

Minimum wage hike comes with costs

“As income rises, government aid program payments are either reduced or cut off entirely, leaving those with wage hikes at a disadvantage.”

Companies Find Autism Can Be a Job Skill

“Some employers are viewing autism as an asset and not a deficiency in the workplace. Software company SAP, for instance, believes features of autism may make some individuals better at certain jobs.”

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Art meets chemistry meets physics meets finance

This Wired Magazine article provides a layman’s explanation of reaction-diffusion processes, which are characterized by reactive molecules that can diffuse between cells. A special case of a reaction-diffusion process is a “pure” diffusion process, where substances aren’t transformed into each other but nevertheless randomly spread out over a surface. While the reaction-diffusion process makes for much more aesthetically pleasing art, other so-called diffusion processes (e.g., diffusion of thermal energy as characterized by heat equations or movements of speculative asset prices as characterized by Itō diffusions) similarly generate (what appear to the naked eye to be) “patterns” from randomness…

Hypnotic Art

Hypnotic Art Shows How Patterns Emerge From Randomness in Nature

www.wired.com

These digital canvases represent British mathematician Alan Turing’s theory of morphogenesis.

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Assorted Links (3/29/2014)

Here’s a list of articles that I have been reading and videos that I have been viewing lately:

Holy Men

After reading this review of the new blockbuster film “Noah”, I think I’ll pass…

Mr. Putin’s Revealing Speech

“At the Kremlin, he makes the case for an increasingly aggressive Russia, Peggy Noonan writes.”

The President’s Foreign Policy Paradox

“In The Wall Street Journal, Walter Russell Mead writes that Obama’s global wish list can’t be achieved while decreasing commitments overseas.”

Advice for a Happy Life by Charles Murray

“Consider marrying young. Be wary of grand passions. Watch ‘Groundhog Day’ (again). Charles Murray offers some tips on how to live to the fullest, adapted from his new book, ‘The Curmudgeon’s Guide to Getting Ahead.’

Twenty Feet from Stardom

“Directed by Morgan Neville. With Darlene Love, Merry Clayton, Lisa Fischer, Judith Hill. Backup singers live in a world that lies just beyond the spotlight. Their voices bring harmony to the biggest bands in popular music, but we’ve had no idea who these singers are or what lives they lead, until now…”  This is an awesome documentary – I highly recommend it!

College sports unions: ‘Careful what you wish for’

“Assuming the ruling on Wednesday that allows Northwestern University football players to unionize stands all challenges, it may not be so easy to do.”

Minimum wage hike’s unexpected drawback for the poor

“As income rises, government aid program payments are either reduced or cut off entirely, leaving those with wage hikes at a disadvantage.”

How Autism Can Help You Land a Job

“Some employers are viewing autism as an asset and not a deficiency in the workplace. Software company SAP, for instance, believes features of autism may make some individuals better at certain jobs.”

Religious Groups Split on ‘Noah’ Judgment

“Hollywood’s first big-budget Bible movie in almost 50 years draws mixed reactions for straying from the original text.”

Obamacare’s Year of Delayed Deadlines

Bloomberg Businessweek looks at the law’s recent track record…

Want a Raise? Quit Your Job

A particularly interesting takeaway from this article is that quit rates tend to be higher when the labor market recovers since already employed workers quit jobs in order to take advantage of better opportunities (I.e., a better match and often a bump in pay). Of course when this occurs it also creates opportunities for unemployed workers to find gainful employment. Unfortunately the labor market remains weak; thus quit rates remain somewhat suppressed and with limited labor market mobility this limits wage growth…

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“Unknown” Callers and the upcoming Texas Primary Election

All I can say is, thank God for Google Voice. The Texas Primary Election is scheduled for March 4, 2014, and since the automated robo-calls that the political candidates are spamming “we the taxpayers” with are typically configured to generate “Unknown” caller ID’s, all I had to do in Google Voice was to set it up to automatically reject all such callers. The voicemail then automatically gets routed to an appropriate location (AKA my email Spam folder J)…

From: Google Voice [mailto:voice-noreply@google.com]
Sent: Monday, February 24, 2014 3:28 PM
To: Jim Garven
Subject: New voicemail from Unknown Caller at 3:25 PM

Voicemail from: Unknown Caller at 3:25 PM voice_logo_sm2.png
Hello James, This is U. S. Senator John morning and I’m reaching out to you IN your neighbors in Austin to let you know that 4 too long, total spending is gone nearly on checked by in reducing about was budget amendment to the Constitution. I’m fighting possibility to Washington, the taxes families and small businesses practice every day. The president is liberal allies in Congress think they can taxes spend their way into prosperity in Texas. We know that won’t work. I won’t stand Ford and I hope you won’t either your votes important so please vote early for me, John, Corning, so I can protect taxpayers. While taxes to keep more money in our walls, instead of sitting at the Washington this Call’s been paid for but my campaign Texas for Senator John Corning, 85124948535.
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Should the Minimum Wage Be Raised? Economists Weigh In

The Wall Street Journal’s Real Time Economics blog recently posted an article entitled “Should the Minimum Wage Be Raised? Economists Weigh In” @ http://on.wsj.com/1kYgJj6.

I am most convinced by the recent (July 2013) survey article entitled “Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater?” (available from http://bit.ly/1dNSMao) which documents that minimum wages pose a tradeoff of higher wages for some against job losses for others.   I am particularly fond of the following quote from that article: “We revisit the minimum wage-employment debate, which is as old as the Department of Labor” (historical note: the US Department of Labor was founded March 4, 1913 :-))
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