Thursday, September 15, 2011

An Excerpt Worthy of Thought

From Jim Grant's review of "Grand Pursuit: The Story of Economic Genius" by Sylvia Nasar:

There isn't room for every economist in this book or any other, but I myself missed the voice of Jacques Rueff, the 20th-century theorist who was able to demonstrate the superiority of the classical gold standard over the faux gold standard devised by Keynes (incorporated in the Bretton Woods system of 1944-71) or the paper-money regime advocated by Fisher and Friedman.

I missed, as well, Murray Rothbard, who blamed the Great Depression on the Hoover administration. It didn't intervene too little, Rothbard unconventionally sought to show in his 1963 book, "America's Great Depression," but rather too much. The economics profession just smiled at this contention, but the unsolved case of the depression of 1920-21 counts heavily for Rothbard's thesis. It was a deep and painful slump (a young Army veteran, Harry S. Truman, lost his Kansas City haberdashery to bankruptcy), with the wholesale price index dropping by 37% and the measured rate of unemployment tripling to 12%.
But it ended. Why it ended will mystify anyone who has taken to heart the arguments of Keynesians for more fiscal and monetary stimulus to revive today's economy. To meet the crisis that spanned the administrations of Woodrow Wilson and Warren Harding, the Treasury ran a budget surplus and the Fed raised interest rates. Yet the slump did end, and the 1920s roared. 

Honestly, this seems to be an episode that everyone who is not in favor of government intervention, or who has some sympathy to Austrian economics, points out. This may be confirmation bias, but I look at it to and ask myself that if mainstream economics can not explain the Depression of 1920-21 and how it ended without intervention (and quickly too!), then enough is missing in their theory to doubt the contention that intervention will work here.

See also George Selgin's post on this, which I had previously mentioned. There have likely been plenty of other austere recoveries in world history. It is a shame that economists, for whom world history is supposed to be the dataset off which they derive their macroeconomic theories, might have failed to consider evidence that contradicts their views. Or is it confirmation bias?

Saturday, September 3, 2011

Blending Teas...

Editor's Note: I originally created this blog to cover the spectrum of my interests, other than investing, which I've decided is best not to blog about, thanks to regulators and the like. So much for free speech there, eh?

While this blog has evolved into a somewhat cynical view on the government while also commenting of certain biases, such as scarcity bias, both an economic and personal interaction bias (I swear, I need to blog about it at some point, but only if the person in question allows me to do so!), occasionally I like to inject some of the joie de vivre aspects that dominated this blog in its early life, and which was the intention to keep here.

Recently, thanks to a colleague, I've rediscovered my penchant for drinking tea. Usually I eschew tea and coffee because of the caffeine - five years ago I absolutely needed it (coffee) because of two hour daily commutes each way followed by dance practice until midnight (I was competing in open ballroom dancing at the time - and therefore needed all the time I could get for practice). After doing that for a year or so, I stopped and had a saner commute and dance practice schedule. And today, I have a pretty sane commute schedule and dance only for fun now.

At times I've picked up the coffee habit again - when one of my economist friends in the government introduced me to the Bialetti stove-top espresso maker. Or when I briefly reconsidered competitive dancing again, and the household I stayed at in New York was one where french-press brewed coffee was a regular morning and afternoon ritual. I still use that Bialetti if I'm absolutely tired from the night before and have a long drive ahead of me, but that's maybe once every two weeks. Hardly much compared to once or twice a day as in the past.

As for tea, when I was in Hong Kong back in 2009 to visit a close friend from Georgetown and see the sights (and suffer hot weather and humidity that did not dissipate in the evening, mind you, making Hong Kong a place that I would probably not want to live in long term), we drank green tea with every meal. And my friend there introduced me to her tea habit, with a stunning variety of green and white teas. And some curious black tea blends, like a lychee black tea.

But like the coffee habit, I discovered I didn't care for the sleep disruption by drinking all the caffeine. Maybe five years ago I would not have noticed, but even in 2009 when I went to Hong Kong I had weaned myself off caffeine enough that it was quite a jolt. And I preferred, at the time, to keep it as a potential jolt for fatigued days.

So why the change now?

For one thing, I've recently been enjoying taking my afternoon Sunday tea at Leopold's in Georgetown, but using the rooibos chai blend from Harney and Sons for my tea while also enjoying the gruyère cheese and caramelized onion tea sandwich. And for another, my colleague introduced me to his portable tea steeper. So, for the past week, I've been on a kick, brewing loose leaf rooibos chai tea and enjoying it.

Incidentally, when it comes to tea, while I prefer loose leaf, I am not as much of a snob as some literary characters I know, such as Frank Randall in the Outlander series:

Frank made a face; an Englishman to the bone, he would rather lap water out of the toilet than drink tea made with teabags. The Lipton's had been left by Mrs. Grossman, the weekly cleaning woman, who thought tea made from loose leaves messy and disgusting.

And two other points in favour of loose leaf, in my opinion, are that 1) I can steep it two to four times, depending on the leaf, and still have good flavour; and 2) I seem to have more variety, and exotic ones at that, including exotic blends, than with tea bags.

Recently though, I've reintroduced green and white tea back into my tea mix, but in small quantities. I've decided that I want to acclimate myself to small quantities of caffeine (useful for whenever I am at friend's house, where we cap off the night's dinner with espresso), and I also want to experiment with blending different tea varieties.

Thus far, I've only mixed the rooibos chai with a green tea, and with a green tea and King Peony tea leaves. I prefer the latter blend. I think I may next try blending King Peony tea leaves with cinnamon and cardamom. Ditto the green tea leaves. And with all the mint and basil growing in my garden, I think an herbal tisane and green tea blend is on the list too.

Anyway, it's a fun little thing for me to do while I am bogged down in studying for the CFA and pursuing other one year goals.

Thursday, September 1, 2011

Lindy Hop and the Heisenberg Uncertainty Principle

"Five minutes of embarrassment rather than an hour of wondering," I said to my friend in response to her invitation to join her in the intermediate/advanced lindy hop class yesterday evening. And found to my surprise that instead of five minutes and then skedaddling into the main dance room, I ended up in the class for the full hour.

So, what happened? If I recall, the class I am referring to was supposed to be a class for non-beginners. And before last night, there were maybe one or two other times in my life that I had ever done lindy hop, and one of those times was a long time ago, as a sophomore at Georgetown. Hell, I've danced Argentine Tango more than I've danced lindy hop, and I definitely consider myself to be a beginner there. And I received confirmation after the class that I was a beginner still, by virtue of the voting apparatus known as dancing with a different partner to live music.

If I had to guess, I would invoke the Heisenberg Uncertainty Principle, which basically says that for a pair of variables, if you attempt to measure one with more certainty, the other is less measurable with certainty. At least, that's how I remember it from high school chemistry.

However, what was the pair here? There is class difficulty as stated, and my ability to handle the class. I am not certain that is a pair.

Regardless, here's what I think happened:

At the beginning of the class, we were asked to dance for a little bit, which allowed the instructors to see how we danced. Of course, you slap you your head, that's going to alert them to the presence of a rank beginner in their class and perhaps cause them to go slower. Which I feel they did.

So if I had not been present (nor any of the other beginners, which I am certain there were there), would the class truly have been more skewed towards advanced and gone faster through the basic movement they wanted to teach before moving onto variations on it? My suspicion is yes.

So maybe there was a pair there after all. And while my suspicion is yes, I can not be certain. If I was in the class, I know I could handle it because I did. But if I was not, I do not know if they would have taught it the same way, or it would have been more advanced. Hence, the uncertainty principle in life.

Or you could just say its a misapplication of quantum physics to real life...

But you would be missing the larger point - the class was bloody fun!

N.B. If only I had pictures, but maybe from another night at Jam Cellar I will.

Some links...

It's been a while since I posted, and while I am irked about the NLRB's strike against free, voluntary trade between employees and Boeing for the common worker against evil, corporate America, I'm not irked enough to blog in full.

Or rather, since I like to talk about comparative advantage and free trade, to utilize a Ricardian model, my current comparative advantage lies in improving my financial skills via the CFA curricula, whereas others comparative advantages are in economics blogging, such as Don Boudeaux of Cafe Hayek, or George Selgin of Free Banking. Clearly, if we traded, both parties would be better off:

1) I would gain free time to pursue CFA studies (and to also work on one of my weaknesses that I view as essential to correct, Spanish), while getting to post top-notch content that is often wittier than mine; and

2) Any site I link to will likely have a gain in traffic. A very small gain, mind you, but the marginal cost of these blogs trading with me is nil, so the cost/benefit analysis for them is also in favour of them trading with me.

Hence, why I am engaging in free trade today with these blogs. Known to some as outsourcing. Known to the NLRB as something to be discouraged because of hurting the American worker. But nevertheless, free trade that should be unfettered.

Without further ado, the links:

A) What I thought, at Age 16, Academia was Supposed to be

David Henderson posts the excerpts from Heather MacDonald's piece on the Great Courses product in the City Journal (published by the Manhattan Institute). Yet another article from an economist I admire pointing to the potential savings that can be accrued by letting market forces actually dictate how consumers (parents and students) get their product and what they learn (to a degree). How? 1) Content Delivery, allowing economies of scale through spreading of costs over a larger customer base than a university; and 2) tailoring the course to the desires of the audience (if they want to learn about the American Revolution, that's what they'll get).

Is online content delivery bad? Well, I met a person recently who teaches physiology at Georgetown's School of Nursing, but as an online course. She loves it, her students love it, and so far it works. And then there's the next step, which is the content of a superstar professor becoming more available to a broader audience (what Greater Courses seems to do), such as Aswath Damodaran. So, it can work. Reason enough that experimentation here should occur, and would be more likely to occur if all college costs per paid by the consumers, and not via subsidies.

Also, as an Indian, I quite frankly do not mind those "dead whites men of the Western world." Philosophy is universal, but I am a classical liberal, and therefore could care less about the race of a person compared to the person's actual ideas! Give me John Locke and "Life, Liberty and Property" any day!

B) An Austere Recovery

Besides being a superb site for a crash course in free banking, a la Scotland before 1845 or so, I find it worth visiting for George Selgin's regular posts. One of his more recent ones takes a look at actual history, and recounts an episode of U.S. history where austerity was the solution - the Depression of 1920-21, during which unemployment went from 1.4% to 11.7% on the high end of calculations (Lebergott) and 3.0% to 8.7% (Romer) on the lower end.
 Did the U.S. government hasten the recovery by means of deficit spending and other "stimulus" programs? Not in the least. instead, it stuck to conducting business as usual which, in those naive days before Keynes revealed that prudence and thrift were shopworn Victorian shibboleths, meant reverting to its prewar budget and retiring its wartime debt.[...] Instead of spending more than it had been, the Harding administration steadily cut expenditures, exclusive of debt retirement, from just over $6.4 billion in fiscal 1920 to just under $3.3 billion in fiscal 1923--a whopping 45 percent! [Emphasis added] As a percentage of GNP, Randy Holcombe shows, Federal outlays fell from just over 7 percent to well under 4 percent.* 

Selgin has some other statistics in there - industrial production fell by 30 percent during that depression, and so on. The point being that the 1920s is remembered for the Roaring Twenties (and Prohibition). Who remembers being taught about the Depression of 1920? I believe the first I read of it was in Security Analysis by Graham and Dodd. And yet, we should be taught it, because it is a clear case that the Keynesian macro model of Aggregate Demand and Aggregate Supply and the need to stimulate to get the economy on track may well be false.

When history provides such a clear example of austerity and positive results - another being 1946 when government expenditures were drastically cut despite Keynesian cries that it would lead to another depression, but instead it hallmarked the start of a prosperous era in U.S. history (and why when we say "postwar", we mean post World War II) - I begin to doubt the intellect of people who would have us believe austerity is a bad idea.

Yes, I'm talking to you, Economist editors and Henry Blodget (I never trusted you during the dot com bubble, why the hell should I trust you now?). If you thought the Republicans were reckless during the debt ceiling negotiations, then I suppose you think that Harding was what? Beyond reckless? Never mind the inconvenience of actual historical facts that belie your assertions.

N.B. The CFA curricula include Keynesian economics in its subject matter. Needless to say, you all know what I'll say when asked about it.

C) Incentives Matter

From Cafe Hayek's Quotation of the Day, the note that the sons of merchants were the most eager to learn foreign languages.

That's it! I love free trade! Even if the NLRB doesn't. Thank goodness they don't regulate bloggers like me.