Original Cin

If it sounds too good to be true… not that I would necessarily call something that creates unemployment “good”.

Obama sounds populist themes in Virginia bus tour - Yahoo News

By BETH FOUHY, Associated Press Writer 1 hour, 14 minutes ago

MARTINSVILLE, Va. - Democrat Barack Obama is sounding tough populist themes on the campaign trail, pledging to create union jobs to build energy-efficient cars and to end tax breaks for corporations that ship jobs overseas.

The Skeptical Optimist takes a humorous look at energy policy:

Q: But to encourage entrepreneurs, scientists, and companies to get moving a lot faster towards that superbattery breakthrough, the government will need to set up some kind of new incentive, won’t it?
A: Of course; I’ve been trying to tell you all along that government energy policy needs to change in a big way.

Q: How about something like an “X-prize” for a new superbattery? Maybe a few hundred million dollar prize for the first entrepreneur, or company, or group of scientists to come through with the new technology?
A: Uhhh… No, no, we couldn’t do that. Uhhh… that’s McCain’s idea… obviously just a “gimmick” (…according to these talking points they sent me…).

Arnold Kling writes on Econlog:

…like Charlie Brown getting ready to kick a football, we seem to have an infinite capacity to believe that it will be different this time. We think that the next top-down design introduced by government will work fine, it will never degrade, and we won’t find ourselves ten or twenty years down the road wondering how such a mess was created.

Robin Hanson points to an interesting case of underconfidence on my favorite blog, Overcoming Bias.

I was talking with my friend Jeff today, and we were discussing the economy. I mentioned that GMU Professor Bryan Caplan has pointed to the falling dollar at EconLog as a cause of rising gas prices. The article at US News pointed to by Caplan has a more detailed explanation, but, alas, no charts….

Someone out there believes that gas prices are going to fall, or at least not rise very much in the future, and Chrysler seems to believe them. The company is currently offering to pay the difference between $2.99 and whatever the current cost of gasoline is, if you get one of their vehicles.

This is interesting, and there’s been a fair amount of discussion about it online. But I haven’t seen anyone point out that this means that Pricelock/Chrysler are basically shorting gasoline over the next three years. Pricelock’s website focuses mainly on the volatility of gas prices, but this really doesn’t make sense for a three year timeframe. Pricelock could change the guaranteed price every year, or every six months, and still provide a huge buffer against changing gas prices at far less obvious risk to themselves. So, what’s going on here, given that I’ve even heard some people swearing that $10/gal gas is right around the corner?

First of all, an overview of shorting. Let’s say that I’m really sure that Nintendo and Sony are going to drive the XBox line into the ground, mini Linux-run PCs like the Asus EEE are the wave of the future, and Google’s support of the ODF format and its Google Docs platform means that Office will optional software for businesses in the future. Basically, suppose I think Microsoft is doomed. I can short MSFT today at about $29.99 - basically making a promise to buy shares at some point in the future and getting the market price per share today. Let’s say I do this for 1000 shares. Disregarding brokerage fees, if the stock becomes completely worthless, I’ve just made $29,990. If the price falls to $10 (maybe only two of my three predications came true) then I’ve made $19,990 after I spend $10,000 to keep my promise to buy shares.

But, suppose instead that Linux is proven to cause cancer, Nintendo and Sony both bow out of the console market, and Google pulls the plug on Docs, and the price of MSFT increases dramatically, to $200 a share. When I make good on my promise to buy 1000 shares, I’ll be out an uncool $170,010! People often say that shorting has “unlimited risk.” This is not literally true (it’s just plain silly to think that the market capitalization of any stock could exceed the U.S. GDP, and lots of barriers will be encountered well before that point), but shorting anything is risky.

Now, look at the $2.99 “Let’s Refuel America” deal from Pricelock. It’s short-selling, but the target is gasoline instead of the common stock of a company. Even (especially) if you consider the profit from selling the car itself, it’s still shorting, just at a higher effective price than $2.99 per gallon.

Someone is making a huge gamble here. Pricelock, the company, could hardly be more opaque. Their website seems to have been run by a domain-squatter until late last year. Here’s my guess: this company was specifically created just to make this gamble. But regardless of who’s inside Pricelock, Chrysler would not play along if it thought that they weren’t able to make good on their promise. This means either insanely deep pockets to the extent that Chrysler is sure everything will turn out O.K. no matter how high gas prices get, or Chrysler has determined that gas prices are not really going to rise that much, that fast.

Who has the best information on the demand for gas in America for the next three years? Who has “inside information”? You can make good guesses based on trends and demographics and do fairly well, but only automakers can take this and also consider inside information on the availability of super-fuel efficient cars and cars that run on alternative fuels.

So, here’s Chrysler, signaling something about what it thinks fuel prices will be. I wouldn’t necessarily bet with them — the auto industry has made plenty of boneheaded decisions in its time. But, you’d be a fool to bet against them.

The famous David D. Friedman writes on his blog about the decision against homeschooling in California:

The term “fascist” has been overused, and in any case I know nothing about Croskey’s views on economics. But I find it extraordinary that he would be willing to explicitly argue that public schools exist largely to indoctrinate children in views the government approves of, with or without the consent of their parents.

Indeed…

Pirate ships had checks and balances on power.

It’s often been said that doing the same thing over and over and expecting a different result is insanity. Here’s a fascinating thought:

If there are recurring outcomes of this kind in your life or relationships, perhaps you are being chosen, whether you know it or not.
- Tyler Cowen, Marginal Revolution, What if you always get the same outcome?

I just received an email from eBay about this:

[Soon] Buyers will only be able to receive positive Feedback.

It’s about damn time. Too many rotten sellers were abusing the system, and getting away with retaliatory feedback. At one point, I had considered creating an automated feedback program for buyers, but I’m now glad I didn’t, since the point is now moot.

I was thinking about recent posts on various blogs about the aging population in the American work force, and what it means for our economy. The very short version: things will be slightly difficult because the number of workers relative to the number of retirees will decline.

Way back when I was 15, I wanted a job. Alas, labor laws make it extremely difficult for a 15 year old to get a real job, even for the summer. The DOL of labor notes “During the school months of 1996-98, the CPS found that only 9 percent of 15-year olds were employed in an average month” and backs me up on the cause.

Let’s not pretend that teens benefit from being kept out of the labor force. Such restricts are the thinly-veiled economics of a bygone era, an attempt to increase wages by decreasing the size of the labor force, without any regard to the real activity taking placing under the surface.

There are roughly 20 million people in the United States between 5 and 9 years old. In five years, they’ll be between 10 and 14. If even 10% of them were involved in the labor force, with real jobs, we’d have another 2 million workers, easily. If they worked only for 5 hours a week at the 2009 minimum wage - slightly more than an hour after school during the school week and less than a single day a week during the summer - they’d still generate 3.7 billion dollars of additional gross wages (5 X 52 X 2000000 X 7.25). No, it’s not nearly enough — a mere drop in the bucket compared to the 18 trillion dollar projected medicare shortfall. But it’s no a small amount either.

Unfortunately, I’m not willing to make a prediction that it’ll be easier for teens in this country to get jobs. We do not have a history of well-thought-out labor law — it’s even possible that any coming crisis may actually lead to an outright ban on all teen labor.

A long time ago, I saw an ad for a website on Fark. The site was in a blog format, well before Wordpress and Blogger were hits, and offered daily stock picks. I was intrigued, but skeptical (no, the site was not Fool.com, which has never advertised on Fark to the best of my knowledge). After a week or so, the previous entries were updated to show the change in price. The performance of the past picks seemed impressive, but I easily smelled a scam, so I kept on eye on the site.

Were the picks actually chosen after the fact? Nope, a few days of watching the site confirmed that picks were made in advance.

Was this a pump-and-dump? It seemed unlikely to me that a few hundred Fark readers had enough money to significantly change the prices of the stocks being highlighted, even if all of them had decided to bet their retirement funds on it — these stocks were cheap, but didn’t have market caps that were that small.

After about a week of watching and wondering just what was going on (and independently checking things on Yahoo and in a spreadsheet), I got my answer, as one or two entries that didn’t perform so well were silently dropped from the site. The picks were simply stocks that had a great deal of volatility in a generally bull market — and only the winners (or at least not-so-bad losers) were reported. I’m fairly sure the entire site was a poorly thought-out setup for a pump-and-dump to come, which probably failed miserably due to a poor choice of target (Fark readers? Come on…) The entire site went dead some time later.

Which brings me to the Motley Fool. My father loves the Motley Fool. I’m not so sure. It hasn’t really been that long since they were pushing their Foolish Four agenda. Basically, I can’t help but wonder if perhaps the Fool is a more sophisticated scam, and if they’re basically a portfolio of portfolios for publication and sale. The losing portfolios and strategies are killed, much like the Foolish Four. There are currently 7 products, all with positive performance, listed on Fool.com, along with four others with no performance given. Call me suspicious, I know of at least one loser not listed. Who knows what else has been tried and never seen the light of day. With the massive number of recommendations made on the site, who knows what the real performance of the investment brains behind the Motley Fool really is?

Here’s one thing that’s certain: money that you spend on investment advice cannot actually be invested itself. Yes, for a large amount of money to invest, it’s a relatively minor cost. But is the benefit received really worth it? How can you tell?

Well, I did it. I went to the business center and had a look around 3:00 in the afternoon today. I was terrified that at any second, someone would recognize me. They had put in a new (but cheap block-letter) sign with the company’s name on the outside of the building near the office. I entered, turned the corner, and…

…the call center is gone. Vanished. There wasn’t a sound. I could see inside through the glass door and windows. There was a small paper on the floor that had presumably been stuck to the door earlier — I couldn’t read what it said. The chairs, plastic desks, and Durabrand phones had been removed — even the connections for the phones were completely gone. Nothing remains but a large, empty office, waiting to be rented out to someone new.

Earlier this year, I had a job interview at a calling center. The job was cold-calling, straight commission, for mortgages. They were even nice enough to let me to sit in for a day and see how I did. I noticed a variety of things while I was there:

• The people there were generally young. Most were recent graduates from high school. At least one was a drop-out. Everyone was talking about how they were making big money, but…
• The desks were plastic
• The phones were $10 Durabrand things from Wal-Mart, which is fine for home use, but really did stick out as inadequate in that environment.
• The best salesperson admitted to having “tons of debt” and worried aloud about his car payments.
• I was a bit uncomfortable around people who, quite frankly, were a touch sociopathic.

I had read a bit, just a bit about signaling on Overcoming Bias, and I realized that while you can’t depend on people pulling in six figures to advertise this fact to the world, the extremely wealthy don’t generally sit behind plastic desks punching numbers on generic home phones. Combined with the idea that a good work environment was something to shoot for, I politely said that I wasn’t interested any more, and walked away. At the time, I thought was giving up a smaller than promised but still real income to do the right thing and be able to live comfortably with myself. Now, looking at the way the housing market in the U.S. has changed, it’s obvious I didn’t give up so much at all. In retrospect, I suspect that the shoddy, unprofessional environment actually signaled something else — that the call center was temporary, not a permanent investment.

It’s not aways that I get a chance to go and see if I’m right about my intuition. On my next day off from my current job, I’m going to discreetly go to the business center that housed this mortgage company, and see if I notice anything.

I was going through my bookmarks, and found this via Collision Detection, an article which has had quite an impact on my thinking on some matters:

While yielding to temptation can certainly be harmful, this article argues that overcontrol and excessive farsightedness (hyperopia) can also have negative long-term consequences. In particular, we propose that, with the passage of time, choices of virtue over vice (e.g., work over pleasure) evoke increasing regret.

- “Repenting Hyperopia“, Ran Kivetz and Anat Keinan

I probably would not have gone to ACEN 2007 if I hadn’t read this. On the other hand, there are some things in the past that I wish I had worked harder at, as well as past tasks that I wish I had just completely neglected (case in point: I spent a lot of time, money, and effort deciding which college to attend. My friend Scott picked UIC mostly on the basis of its location, and partly at random. I think he made a better choice by far; I also probably would have gotten more out of the experience if I had done less homework and gone to some parties from time to time).

Grander in scope and more humble in its implication than Keynes’ famous quote about defunct economists, seen on the homepage of the economics department at Loyola:

 “Economics is the study of mankind in the ordinary business of life.” - Alfred Marshall

I regret going to college. This is for a lot of reasons, most of all because I failed to recognize that college is primarily social signaling and networking* rather than merely “taking classes.” There is probably no better way to waste time and destroy financial resources than to go to a private college (Ripon College**) without recognizing this. Over and over again, I was told that “classes come first” — in fact, I now think that classes should come “last” for the typical college student — making sure you “get into” your field and develop a portfolio of accomplishments (not “experience” as it is typically understood) is far more important.

As far as classes go, however, I wish I had audited more classes that were “difficult but interesting.” Just auditing rather than taking for credit 2 or 3 classes would have significantly boosted my GPA, which is an issue now that I’m considering grad school, and also when applying to federal jobs. The potential cost for a typical student if they follow my advice? Possibly being required to retake the classes for credit if they decide to continue in the field; if they paid attention the first time around, it should be an easy “A.”

*I was also completely shocked my freshman year to find out what most college students were actually like. I somehow expected a bit more sophistication and/or INTPness.

**Excellent professors, terrible location, administration, and support. I would NOT recommend it to anyone. And the way they call asking for money makes me feel less like a member of a community and more like I’ve been put on sucker list.

It occurred to me today that there’s a unique opportunity, right now, for technologists to provide for a more robust environment for distributing content works, which embraces and extends the DMCA’s anti-circumvention provisions, rather than attempting to get around them or fight them head-on. This opportunity involves setting up a licensing non-profit to act as a weak “gateway to publisher distributors.” Although careful implementation and attention to new legislation is required to insure that currently dominant content providers do not successfully sabotage this effort, nonetheless this plan would not require any legislative cooperation.

No amount of cajoling is likely to make the oligopoly of the music industry change their ways. Rather, the market must be fundamentally restructured. But given that current copyright law gives monopoly power over information for a very long time, how can this be done? I suspect that some clever contracts, marketing, and technology can combine to effectively force the information monopolists to submit to the public good.

To begin, we require a technological platform for delivering content. The platform must have strong incentives for consumers and content providers to use it. Content providers will use it iff it is popular with consumers, greatly simplifying the matter. The technological platform must use the anti-circumvention provisions of the DMCA, which effectively means that content given to the consumers does have at least some minor restrictions (at a minimum, some weak encryption and a counter that keeps track of when copies are made).

Now, the fun part: the keys to the technological platform are owned by a not for profit organization, a “gatekeeper”, which has the explicit goal of making information as widely available as possible for as long as possible. The organization may maintain its own archive and library of materials, but does not presume that it has a good awareness of what consumers want to know, hear, experience, or see over the long run. Rather, it licenses access to its consumer platform and content that it itself has recently licensed to distributors and publishers on a non-exclusive basis. The effect, after some time, would be that our “gatekeeper” organization has monopsony powers to wield against content creators in negotiating licensing fees, while publishers and distributors would compete against each other on more or less equal footing. Distributors and publishers cannot legally access the technological platform without agreeing to the competitive “rules of the game” set down by the gatekeeper. This is the whipsaw alluded to in the title, in which the law that content distributors lobbied for is wielded against them.

But, what draws consumers to a platform? There are a lot of arguments, but the amount of content available on the platform is a good start. There is more free content available today than ever before, due to the Internet and the rise of copyleft philosophy. Software, art, and prose can all be thought of as being pre-licensed to our gatekeeper at a cost of nearly free. Thus, our content platform gets a running head start on any other in history.

This ties in perfectly with that post a little while back:

Eighty percent of American men think they are in the top half of social skills; the majority of workers rate their job performance above average; and the majority of motorists (even those who have been involved in accidents) rate their driving as safer than average.

- Seligman, Martin E.P., Authentic Happiness, 2002, 37. Citing Headey B. and Wearing A. (1989) “Personality, life events, and subjective well-being: Toward a dynamic equilibrium model.” Journal of Personality and Social Psychology, 57, 731-739.

Someone left a direct-mail “subscribe now” pamphlet for Ladies’ Home Journal lying around, and one of the stories mentioned in it caught my attention.

It has often been remarked that people consider themselves above average regardless of actual standing. Yet, in a normally distributed population, half the people have to be above the average, and half must be below. So, I was somewhat surprised by this “survey says” factoid:

26% [of women surveyed] said their sex life was above average and 22% said it was great!

In other words, as we would expect from a realistic evaluation of the quality of women’s sex lives, half said that they were above average. In fact, the total that said they were above average was actually slightly less than half (48%).

Now, mind you, there are all sorts of things this doesn’t tell us.

• This doesn’t tell us what men think of their sex lives, so no comparison is possible just from this.
• We don’t know anything about the sample size or how the survey was conducted. Given the publication, it probably wasn’t all that formal. Also, surveys about sex are famously prone to all sorts of biases.
• The survey included only Ladies’ Home Journal readers. They might be atypical in some way that would allow them to better compare their sex lives to those of other women (maybe they’re using LHJ itself as a reference to judge their own relationships - the back of the same mailing has “spice it up now” hints and tips).
• We don’t know (and probably can’t reasonably measure) how womens’ sex lives really compare to one another - that is, if Alice really has a better thing going for her with her husband Alfred than her friend Barbra has with her boyfriend Barry, or if Alice just thinks her relationship is better.