Archive for the ‘Uncategorized’ Category

She Doesn’t Age

You might have seen something about this before, but it’s a bit haunting, isn’t it?

The beauty of e

Better Explained does an interesting piece on Euler’s number.

e is the base rate of growth shared by all continually growing processes. e lets you take a simple growth rate (where all change happens at the end of the year) and find the impact of compound, continuous growth, where every nanosecond (or faster) you are growing just a little bit.

e shows up whenever systems grow exponentially and continuously: population, radioactive decay, interest calculations, and more. Even jagged systems that don’t grow smoothly can be approximated by e.

Just like every number can be considered a “scaled” version of 1 (the base unit), every circle can be considered a “scaled” version of the unit circle (radius 1), and every rate of growth can be considered a “scaled” version of e (the “unit” rate of growth).

So e is not an obscure, seemingly random number. e represents the idea that all continually growing systems are scaled versions of a common rate.

e is really cool.  Pi seems to get all the love from mathematicians for being this mystical irrational number. But e is the mystical irrational number of everyday life!

The economics of war bonds

So I just finished a draft of my paper on the Treasury Department’s campaign to sell war bonds in the Second World War.  The subject interests me because to this day  the campaign is grossly misunderstood.  Most everyone, then and now, believes war bonds were how the government paid for the war.  This reflects the fact that most folk believe the government’s finances work like personal finances.  However when the Federal Reserve has monetary creation powers, the intuitive understanding of war finance breaks down.

From a macroeconomic standpoint, the war bond campaign was anti-inflationary policy.  With the government pumping billions of military expenditures into the pockets of consumers, the Treasury wanted to encourage folk to save this money, rather than spend it on scarce consumer goods.  Basically the Treasury was trying to increase the marginal propensity to save, by issuing savings bonds. Simple right?

Wrong.  The war bond campaign gets interesting on the micro scale.  First off, there is little evidence that consumers actually saved more because of the bond campaign.  The decision to spend or save is tied up in a myriad of of everyday decisions, and it is unlikely that an advertising campaign, however massive, would eliminate the demand to buy.  But the bond campaign plays a bigger role in another market: ie the market for efficacy.  To the vast majority of Americans on the home-front, the second world war was a war of imagination.  Millions of enthused Americans had only a tenuous connection to the war.  The war bond campaign allowed these citizens to feel like they were directly contributing to the war effort. In effect buying and selling war bonds fulifulled consumer demand for feeling useful.

This sounds trite, but considering the bond campaign became the largest selling campaign in history, a market for efficacy became a powerful cultural force.  Throughout the war the bond campaign mobilized 7 million volunteers, just shy of the 8.5 million men in the US army at the time.  The Treasury distributed $300 million ($3.5 billion in 2009 dollars)  in donated war bond ads.  Americans jumped onto the war bond band wagon because the idea of helping to pay for the war made a lot of sense to a consumerist America.  Indeed there truly are markets in everything.

Microinsurance

Sorry about Seguin’s long absence.  Thesis writing takes up a big chunk of my time now.  Anywho.

The Economist writes about micro insurance.  Via mobile phones, Kenyan farmers are able to insure the value of seeds and fertilizers in case of drought. In a world of CDS gone wild financial innovation can be a 4 letter word. It is good to see that financial innovation can still add value.  The idea of micro insurance is so simple it is amazing that no one has thought of it before.  Extending risk management strategies to the poor just makes so much sense, especially when it can be the difference between starvation and survival.

-Seguin

We Need More Paul Krugmans

By this, I don’t mean that we need more liberal economists.  We need more versions of the 1990 era Paul Krugman, someone with expertise who can be an ambassador of economic ideas to the general public.  Much of Krugman’s writing in the  nineties was so great because he not only wrote about current events, but really tried to pass on lessons about economics in the process.

Instead, one of the most influential economic writers today is Robert Samuelson, who has featured economic columns in both The Washington Post and Newsweek.  The problem with Samuelson is that he’s never received formal training in economics and has never taken the time to learn the basics.  He graduated with a BA in government from Harvard in 1967, and then began his career as a journalist writing about economic issues.  Since then, he has survived by trying to be the “reasonable moderate” on issues while working in his own pet theories.  Economists who read his stuff often complain about how ill-informed it is (and really, it isn’t hard to find economists complaining about Robert Samuelson), but he has a much bigger forum than all of them, save Krugman.

Samuelson’s lack of familiarity with empirical economic research has led to some very weird pet theories.  For instance, he believes that tax cuts are more effective as stimulus when given to the rich, because the rich will use the money to buy things like houses.  Once they buy a house, they will have to buy things such as new furniture and end up spending way more than the original tax cut.  The poor, on the other hand only spend on necessities, and in the best case will only spend the full tax cut.  He also believes that it was LBJ’s economic policy which caused the stagflation of the 1970’s (he even wrote a whole book on it), apparently unaware that most research points to artificially low interest rates, adverse oil shocks, and a productivity slow down as the (probable) culprits.

I realize that a post where I’m just complaining about Robert Samuelson is not that interesting, so here’s the main point: why is this the case?  Are there simply no economists who have the desire to write on a weekly basis about these topics?  Do they lack the ability to write lucidly about them?  Or is there simply a greater demand for Samuelson’s style of writing?  Perhaps macroeconomics is in such turmoil right now that it’s just difficult to find an economist who can write what looks objective to an audience of uninformed readers, he will always appear to be favoring one side or the other.  In any case, we’re facing a host of complex economic problems, and an informed public seems crucial for making good choices to deal with them.  Unfortunately, it seems like Robert Samuelson will be doing a lot of that informing.

Apple Tablet!

Steve Jobs has delivered again

-Seguin

Keynes v Hayek

If only all disputes could be settled via rap battle

Citizen’s United decided

The Supreme court decided 5-4 in favor of the Citizen’s United today.  The gist of the decision is that corporations and labor unions may now spend treasury  fund to finance public elections.  This a complete game changer and flies in the face of 100 of election law.  More to come on this later. For now here is Ambinder

-Seguin

Palin-Perry 2012?

Paul Burka reports that Sarah Palin will appear at a Rick Perry rally on February 7, Suberbowl Sunday.  Really the two are quite a pair, both are unqualified to govern a state, yet both harbor higher ambitions.  I just wanted to mull over what a nightmare ticket this would be for the state I love so much.  The sad truth is though, that as weak and desperate the RNC are today, a Palin/Perry or Perry/Palin ticket is not outside the realm of possibility.  Both can claim the outsider prospective and both believe that “common sense” qualifies them to govern. Gulp.

-Seguin

Realservativism

The American Scene echoes some of my own thoughts.  Clever, but effectively Realservatism is a snarky repackaging of Oliver Wendell Holmes style pragmatism.  Of course no one argues against pragmatism in principle, but the ugly truth is that pragmatism is a difficult principle to govern with.  It is difficult enough to take each issue, analyze it empirically, then work out good policy without leaning on ideology, but it is nearly impossible to communicate this to the public.