As I’ve mentioned previously, This American Life has been presenting an ongoing series about the financial crisis and the economy. Below is a list of the relevant entries so far. I recommend you listen to them all.
David Zetland teaches Environmental Economics and Policy 100 at UC Berkeley. In this YouTube clip from one of his lectures, he demonstrates how political lobbying is like an all-pay auction (an auction where you pay your bid regardless of whether or not you actually bid the final, highest bid).
A sleazy online auction site, named Swoopo, uses a similar style auction to dupe suckers into creating a “sunk cost” and then extending the time, giving the competition time to recap their own sunk costs. Everyone is a loser in this game, do not play it.—see Metafilter’s writeup.
Malcolm Gladwell’s new article, Cocksure, is about the psychology of overconfidence. In it he postulates that the brashness of experts caused the current financial crisis.
Since the beginning of the financial crisis, there have been two principal explanations for why so many banks made such disastrous decisions. The first is structural. Regulators did not regulate. Institutions failed to function as they should. Rules and guidelines were either inadequate or ignored. The second explanation is that Wall Street was incompetent, that the traders and investors didn’t know enough, that they made extravagant bets without understanding the consequences. But the first wave of postmortems on the crash suggests a third possibility: that the roots of Wall Street’s crisis were not structural or cognitive so much as they were psychological.
If you’re confused about what caused the greatest financial crisis since the depression, let This American Life teach you in words you can understand, how the mortgage lending crisis started, with their episode The Giant Pool of Money and follow-up with their episode Another Frightening Show About the Economy in which we learn:
- How and why the credit markets froze?
- What are “credit default swaps” and how do they propagate hardship to every sector of the economy?
- Why aren’t “credit default swaps” regulated?
- What will the bailout do and is it a good thing?
If this interests you, you might also want to check out the NPR: Planet Money Podcast.
Scott Adams, creator of Dilbert, wondered why someone wasn’t doing something that would give American voters useful and unbiased information about which candidate has the best plans for the economy.
Then he realized that he was someone.
He commissioned a survey of over 500 economists, drawn from members of the American Economic Association, a nonpolitical group, that had previously agreed to be surveyed on economic questions.
The economists were asked to rank the most important economic issues and pick which candidate they thought would do the best job on those issues.
Here are the results:
|6||Wars and homeland security||58%||30%||11%|
|10||Reducing the deficit||37%||29%||33%|
|12||Increasing taxes on wealthy||79%||14%||7%|
|13||Reducing waste in government||16%||38%||46%|
Adams is quick to point out that even though economists favour Obama in 11 of 13 of the most important issues (as decided by the survey) 48% of economists are Democrats and only 17% are Republicans.
It makes you wonder, are liberals more likely to go into economics, or are economists more likely to become liberals? Or is it just the simple fact that educated folks tend to be more progressive?
You can check out the full report (in Power Point format).
Steven Levitt, of Freakonomics fame, at a 2005 TED Talk speaks about the economics of car seats. His data lead him to ask the morally difficult question, are children’s car seats worth the time and expense it takes to use them?
Hit play or watch Steven Levitt on child car seats at TED.com.
Today, for the first time in my lifetime (and since 1976 if you want to get specific) the Canadian dollar was worth slightly more than the US’s famous greenback. If this trend sticks, I’m tempted to hit up Disneyland for a Christmas vacation, or maybe a pre-Christmas vacation.
Over on the Freakonomics blog, Steven D. Levitt asks the thought provoking question, what would you do to maximize terror if you were a terrorist with limited resources. Readers’ responses to the post were a mixed bag of terror suggestions and hate mail. In a follow-up post, Levitt says that, “The people e-mailing me can’t decide whether I am a moron, a traitor, or both.”
Personally I think it’s an interesting topic, and not one that will give “the terrorists” any ideas they never had before. Hopefully it will provide those in charge of terrorist prevention and response to be better prepared in the event of domestic terror attacks.
In Canada, I think the biggest vulnerability to terrorism would be if they took out a couple of train bridges and brought Canadian commerce to a stand-still.
Because of the layout of the country (something like 80% of our population lives within a couple hours of the border) the transportation networks run basically east to west. I”ve been told there are only two main lines that run parallel across the country. A huge percentage of our goods arrive via sea in Vancouver and are shipped across the country by train. Disabling the tracks in the middle of the country would cripple this process, and doing so probably isn”t much more complicated than a couple of properly placed explosives.
Removing just two very vulnerable bridges, one in Medicine Hat and another in Edmonton, would be enough that virtually no goods could travel across Canada. I have no idea how long it would take to rebuild a train bridge, but it would definitely be the worst terror attack in our country’s history.
So what could be done to prevent such an attack? Building bomb proof bridges is not exactly an option. Putting up security guards around the bridges probably would work, but who wants to pay for that — not to mention the fact that because on any given day the chances of a terrorist strike against the bridges is so slim, it might be ineffective anyway unless the guards are always particularly vigilant.
I guess the best I can do for peace of mind is try not to think about it.
The Gapminder World 2006, beta is pretty cool. It also makes me a little more aware (maybe even uncomfortably so) of the world around me.
Within any collaborative effort, participants do their part giving so that there might be some kind of benefit reaped out of the collective work of the project. Derek Powazek proposes that perhaps the participants need not even be aware of their contributions in order for a system to form benefitting the perverbial greater good. Read about it in his post, Design for Selfishness.
As I read it, I started to think that as powerful search engines like Google and Yahoo continue to pull the web into one easily accessible medium, a dissection at different levels of the internet can be very revealing. For example, on any given community driven web page the creator may have big plans for the users input of finely crafted content but may or may not be actually offering anything for it. As Powazek points out there has to be a reason for the user to contribute, “If you’re making a product that’s asking users to do something—anything—that is going to add value to your company, ask yourself why anyone would bother.” There are plenty of not so good reasons that get passed off all the time: “Because it’s cool!”, “Because they contribute to Wikipedia/Slashdot/Whatever, and we’re just like that!”, or “Because we enable them to use their voice.”
But he goes on to explain that there are some good answers too:
Because we solve a problem they have. Because we give them something they can’t get anywhere else. Because we enable a kind of communication that’s unlike anything else. Because we make their lives more convenient. Because we give them, or save them, money. Because we enable them to do more with less. Because they told us they wanted to.
The whole scenario reminds me of the concept presented in Richard Dawkins famous book, “The Selfish Gene”. The book’s thesis is that in any living creature the genes that get passed on are the ones whose mutations serve their own implicit interests, not necessarily those of the organism, much less any larger level.
Let me use tagging photos as an example (I know this is the same one Powazek used, but it’s the best one). Within Flickr.com users have the ability to put tags on their photos. This helps them to find their own photos quickly and easily when they search by tag, but it also benefits the flickr community at large because they are able to search everyone’s photos by their tags.
The same is true within the context of the blogosphere as a whole. Here individuals write about specific topics and whatever their motivation the result is we are provided with a vast expanse of searchable content.
Thinking about all the posts and topics I’ve written about, I hope you, the good readers of this site, find something useful here.