On "Scarcity" by Mullainathan and Shafir

Here’s the bottom line.  Not having enough is bad. It is not just the absence of material goods, but also the price is paid in cognition.  If you are worried about want, part of your mind is taken up by that need.  You are quantifiably less intelligent, and you make poorer decisions because your mind has no slack.

If possible, you can make yourself more efficient by planning for this scarcity in mental attention.  The authors use for an example of a busy hospital.  They were always off schedule and ended up paying more in overtime because they were so busy.  An outside consultant fixed that problem by setting aside one operating room for emergency surgeries.  Even though that room could be empty at times, having that slack helped the hospital operate more efficiently.  Your everyday life works the same way.  From what I see, the problem is now how to get to there from here. 

Can I opt out of this society? Reading Schiller's "Finance and the Good Society"

I had first taken notice of Shiller's new book back when it first came out in hardcover.  It was on my wishlist for a bit, but got deleted on one of my frequent reconsiderations of what to read and when to do it.  I don't read too horribly quickly, so every book I choose is an investment in reading time.  However, when the Swedish thing was announced, I thought I'd have  a look.

The layout of the book is rather rote.  He takes different roles that exist in finance capitalism, and explains why they exists and why they're important.  His basic outlook is that markets work, but they need to be more liquid and there need to be more of them.  It made me think of the Leninist lamenting Stalin and claiming that true Socialism has never existed ergo the social system has not been disproven despite the states that have flown the banner and have failed (basically my starting position).

So basically, the book was kind of boring until it started to make me angry, which is half the reason I read finance and economics books.  It started on a chapter on insurance.  He makes the claim that the BP oil spill was exaggerated in its effects by the media, and that everyone was actually fine because of insurance (64-5).  People got paid back, so the suffering was ,moot, and the cleanup was effective. I don't have counter evidence to being forth to show that he's wrong, but this is just evidence that shows the worldview that opens economics up to criticism.  Not everything is measured in economic costs, and not everything can be quantified.  There is a human element that is missing.

For example, he defends inequality as necessary for a vibrant economy (141) but doesn't go into how much, or even define what a vibrant economy is.  I feel that if you're going to say the Gini can't or shouldn't be zero, you should at least look at what an optimal measurement might be.  Otherwise, it feels like elite hand-waving, ignoring the problems of the lower classes.

So basically, for Schiller, there will be losers, and that's fine as long as people have full information and participate in these deep and wide markets in a finance capitalism utopia.  It just feels wrong.  I can't imagine looking back at 2005 and saying that the main problem that was developing was asymmetries of information, though that was an issue.  To me, there were larger structural issues that are part and parcel of the system that we live under. 

Finally I have to add this to close, because it didn't fit in with the main thread.  You may be aware of the negative feelings a lot of people have about Goldman Sachs.  One thing some of their people did was load up a crappy deal, loaded off on a company and then took positions where they would benefit when the thing they designed to fail failed.  Look up Goldman Sachs and ABACUS when you have time.  It was an incredible nefarious plot that illustrates what people can do when they have financial power and no sunlight.

I bring this up because in the book, Schiller defends the deal (220).   I don't want to be part of that world.  

How to tip: A lesson on how not to be an asshole

I know you’re bad at math.  You didn’t work hard enough at math when you were a kid. That’s fine.  I’m here to save you from an easy faux pas: not knowing how to tip.

First, look at the bill.  Say you just ate at a cheap sit-down establishment with someone special (but obviously at the point in the relationship where you don’t have to impress anyone).  The bill is $31.88, and you don’t know what to do.

Don’t just round up to the next five-dollar increment.

Do this instead.  Move the decimal point one point to the left.  Now hold the $3.188 in your head.

Double that number.  Here the new number is  $6.376.  That’s 20%. Add that to the bill and you pay $38.256.  

Addition too hard at any point?  Round. But remember, round up.  3.188 can become 3.50 or 4.00.  Double that to 7 or 8.  Then addition should be easier (ie, $38.88 or $39.88).  

Like round numbers?  Keep rounding up.  Boom.  Easy.

This is your baseline.  You don’t tip below this.  If you can afford to go out, you can tip the person who is your temporary servant.  It can be thankless degrading work, and the government says that all you have to pay these people is $2.13 or something horribly insulting.

I know, I’ve been there.  I’m not there anymore but people I love have to deal with it on a daily basis.

Don’t be an asshole.  Tip your waiters.      

A tacit endorsement of inequality? : Reading Tyler Cowen's "Average is Over"

Tyler Cowen really likes chess.

If there’s one key take-away from “Average is Over,” that’s what I know now that I did not know before.    

What I did know before reading is that he is on the opposite side from my own in most political matters.  In fact, in the book he describes himself as a conservative / libertarian somewhere.  I didn’t mark it, but I don’t think I’m making it up.  On the blog that he shares with Alex Tabarrok, they’re not overly partisans and often look at micro issues that don’t easily devolve into “sides” that I ever readily notice.

The thesis of the book is that the middle class is going to hollow out even more, and it will be the people who can use the raw power of computers with the inherent streamlined decision process humans have evolved who will capture most of the value created in the future from the efficiencies that computerization will create.  Basically, most people are in trouble. 

He looks at the future of work by looking at the current state of chess.  If you don’t know much about the chess scene, like me, you will learn a good bit about chess in this book.  Basically, the way chess has been approached by the top players has been radically transformed by the raw computing power available and the programmers who have put together chess playing software.  The top chess players can now simulate games with top players, and analyze moves made in past matches to determine what the highest probability move to make is.  These machines can be used as training tools to make the top players even stronger.  But in the event, they are left alone with just their wits, hand against hand. 

There is a form of chess that Cowen describes that breaks down these boundaries.  Where using a computer in normal chess matches would be cheating, this new kind of chess allows collaboration with teams of players using computers to find the best move, move-by-move.  These are the ultimate players and who will figure in the future of the workplace.  You have to be able to be and create a tech –mediated team like this to be successful in the future.  Otherwise, you will be eating cat food.

I may be over-reading the book, but I have to make an admission.  Cowen lost me very early on.  The problem with the structure of the future is that there is no seeming consideration of the state until the last third of the book.  Immigration, trade, and taxation finally come up as policy decisions that have to be made.  Instead, the projection of the future Cowen draws makes it seem like it happens in the vacuum of the free market.  It feels like he is making a massive hand wave and accepting grossly divided future as fact.  The problem is that in accepting it as fact is almost the same as validating it.  Whole books have recently been written by former Nobelist in economics lamenting this very hollowing out of the middle class, and the author seems to shrug his shoulders.  Inequality is the issue, and he seems to give it a tacit endorsement.  Once I gained that feeling about the book and its author, I wasn’t able to be objective about the argument.   

A skeptical look at Bitcoin.

So, as an inhabitant of econ twitter, I have seen the conversation around bitcoin. 

I am intrigued, naturally, because it is so polarizing.  Either it is the future of trade, or it is something to be mocked.  I legitimately don’t know what he future will be, on this or any other topic.  I am pretty sure that I will have a beer soon, but that is just a highly probabilistic way of looking at it.  I digress.

I’m thinking about the new electronic currency as a currency, and I keep going back to the very textbook definition of what money is.  You have store of value, unit of account, or medium of exchange.  Here the bitcoin people seem like hard money people,  where the idea of the currency is most prominent in the people who want to hold onto it.  That is, they place higher value on the store of value aspect of the currency.  I believe that is what is driving the exchanges right now, people trading to buy into it and to hold on to it.  For me though, if that is your only liquidity, and you’re handing over dollars for bitcoin to sit on, then all you’re waiting on is the greater fool, somewhere along to buy it.  The price will keep going up until it doesn’t. 

An appreciating price of the currency precludes it, for me, from being s something you’d buy things with.  I see money not for a lump of something sitting there, but in terms of what it can buy for me (as well as the labor I performed in earning that money, what was bought from me).  I’m saving up money not to have money, but to buy a new guitar.  With bitcoin appreciating and depreciating, that complicates any purchasing decision, and if you see it going up, like these calls I’ve seen calling for five hundred dollars per bitcoin or more, then you don’t spend it.  You hoard it. 

And you hoard it, it doesn’t get spent.  This only seems to work if they exist as a supplement national currencies.  It has the problems of fiat currency that the gold people point out, that there’s nothing “backing” neither my federal reserve notes nor bitcoin.  The problem is that my taxes are paid in electronic equivalents of that federal reserve note, and that entity has an army and various civil criminal penalties to ensure that I pay that way.    

Basically then the question comes back to “Why bitcoin?”.  If I ask that, and I be honest with myself, it seems that there are two reasons you want it for exchange.  If there are more, let me know.  Either you are doing something you don’t want the state to see, or you think the state is going to fail.  (Though the state will fail, somehow the electronics infrastructure will remain in place.)  I really don’t get it.  Can someone show me the appeal?

Over-Simplifying: Adam Grant's "Give and Take"

Adam Grant is apparently one of the best business school’s best professors (and so young too!) so I have to bet that the framework in this book is an over-simplificati0on of research that I am not privy to because I didn’t hunt down the notes.  

The framework is this: there are three kinds of people in this world.  You have givers, matchers, and takers.  You see that the matchers are more transactional in their work environment, takers will just walk all over you, and givers are free with their time and expertise.  The counter-intuitive turn here is looking at the amount of success each group attains.  Matchers and takers populate the middle, but you find givers at the least successful end being walked all over.  You also find the giver at the successful end, where they have gathered so much goodwill and a vast social network because they give so much.  It’s like a secular prosperity gospel.

The rest of the book is padded out with anecdotes about some of these successful givers.  We see their paths and then want to emulate them.  I think I had higher expectations, because the thing feels padded to me, and the book is only 250 pages with average spacing.  The evidence of the successful giver is anecdotal, and I felt that there was never a systematic look at how to be the right kind of giver, who falls on the positive end of the distribution.  There’s some advice, but it feels general to me be adaptable (195); don’t fall into a pattern of selfless giving (172); volunteer for unpopular tasks and offer feedback (75).  

I didn’t mark it, but I got the sense in one passage that you had to give because you wanted to give and thus create this positive karma that would come back to you like some of the people he highlights in the book.  If you gave because you wanted to create that karma, you become a matcher and thus not available to the karma.  It struck me as a paradox, because a natural giver wouldn’t even be reading this book to try to be a giver.  This book seems to be for matchers or takers in Grant’s paradigm, who want to be better by being proactive about being  a giver.  It reinforces the potential giver into a functional matcher.  Maybe I’m wrong.

One final thing that I felt was unaddressed was a person’s ability to change.  In the book, I felt that once you are identified by one of the three categories, you are there forever.  Oddly, there is a website set up that seemed to imply that change across categories was possible, something I wanted to see in the book.  The site had  a quiz to identify what group you belonged in.  I had read the book, and each question had only three possible answers so the “right” answer was obvious.  I answered as truthfully as possible, and was labeled a matcher.  I think I knew this by the first chapter.  Perhaps that’s why I was hostile to the title.  What I liked though was that the quiz allowed nuance.  I am a majority matcher with taker tendencies.  I also have giver elements.  For example, I often write uncompensated reviews for books.