The Conscience of a Liberal at Google

You Tube Interview for the Day

An interview with anthropologist Clifford Geertz

Health Information

An interesting old informational video from the US Military;

The War on VD

A very bloody Democracy

A model of African democratization?

Election Rules Complicate Kenya Race

The Idea That is America

More than half the 380 students at this unusual school outside Atlanta are refugees from some 40 countries, many torn by war. The other students come from low-income families in the community, and from middle- and upper-middle-class families in the surrounding area who want to expose their children to other cultures. Together they form an eclectic community of Buddhists, Christians, Hindus, Jews and Muslims, well-off and poor, of established local families and new arrivals who collectively speak about 50 languages.

“The fact that we don’t have anything in common is what we all have in common,” said Shell Ramirez, an American parent with two children at the school....

Linda Dorage, who teaches English as a second language at the school, said she has even had to introduce children to “just the concept of a two-dimensional image meaning something.”

One early student, a goat herder from Mauritania, did not know how to use a door knob. A Sudanese girl was so traumatized from war and relocation that she insisted on sitting on the floor beneath her desk each day.

“The teacher decided she would go under the desk with her and do lessons under there,” Ms. Thompson said. “She lured her out in her own good time.”

-Georgia School Melds a World of Differences

Saving the World with Potatoes

Did you know that next year is the International Year of the Potato designated by UN.

Potato Production

The Most Important Lesson of the Year

The power of humanity to love and care is truly amazing. The following story about an incident from the brutal Bosnian war, is the most moving passage I have read in years. If you read one more thing this year, let it be the following story.

For Muslim readers I have the following message: Know your teachers- this illiterate Bosnian Muslim might teach you more than a 100 years of contemplation.

A happy new year.

Five months after Zoran’s disappearance, his wife gave birth to a girl. The mother was unable to nurse the child. The city was being shelled continuously. There were severe food shortages. Infants, like infirm and the elderly, were dying in droves. The family gave the baby tea for five days, but she began to fade.

“She was dying,” Rosa Sorak said. “It was breaking our hearts.”

Fejzic, meanwhile, was keeping his cow in a field on the eastern edge of Gorazde, milking it at night to avoid being hit by Serbian snipers.

“On the fifth day, just before dawn, we heard someone at the door,” said Rosa Sorak. “It was Fadil Fejzic in his black rubber boots. He handed up half a liter of milk. He came the next morning, and the morning after that, and after that. Other families on the street began to insult him. They told him to give his milk to Muslims, to let the Chetnik children die. He never said a word. He refused our money. He came for 442 days, until my daughter-in-law and granddaughter left Gorazde for Serbia.”

The Soraks eventually left and took over a house that once belonged to a Muslim family in the Serbian-held town of Kopaci, two miles to the east. They could no longer communicate with Fejzic.

The couple said they grieved daily for their sons. They missed their home. They said they could never forgive those who took Zoran from them. But they also said that despite their anger and loss, they could not listen to other Serbs talking about Muslim, or even recite their own sufferings, without telling of Fejzic and his cow. Here was the power of love. What this illiterate farmer did would color the life of another human being, who might never meet him, long after he was gone. In his act lay an ocean of hope.

“It is our duty to always tell this story,” Drago Sorak said. “Salt, in those days, cost $80 a kilo. The milk he had was precious, all the more because it was hard to keep animals. He gave us 221 liters. And every year at this time, when it is cold and dark, when we close our eyes, we can hear the boom of the heavy guns and the sound of Fadil Fejzic’s footsteps on the stairs.”

Fejzic fell on hard times after the war. I found him selling small piles of worm-eaten apples picked from abandoned orchards outside the shattered remains of an apartment block. His apartment block had been destroyed by artillery shells, leaving him to share the floor of an unheated room with several other men. His great brown-and-white milk cow, the one Soraks told me about, did not survive the war. It was slaughtered for the meat more than a year before as the Serbian forces tightened the siege. He had only a thin, worn coat to protect him from the winter cold. When we spoke he sat huddled in the corner of a dank, concrete-walled room rubbing his pathetic collection of small apples, many with brown holes in them, against his sleeve.

When I told him I had seen the Soraks, his eyes brightened.

“And the baby?” he said. “How is she?”

The small acts of decency by people such as Slavica, a Serb, or Fejzic, a Muslim, in wartime ripple outwards like concentric circles. These acts, unrecognized at the time, make it impossible to condemn, legally or morally, an entire people. They serve as reminders that we all have a will of our own, a will that is independent of the state or the nationalist cause. Most important, once the war is over, these people make it hard to brand an entire nation or an entire people as guilty.

“I do not undertand,” wrote Primo Levi. “I cannot tolerate the fact that a man should be judged not what he is but because of the group to which he happens to belong.”

Source: War Is a Force That Gives Us Meaning, Chris Hedges, p. 51-3

A Merry Christmas

From The Royal Channel on You Tube

Global Warming and Disease

As Earth Warms Up, Tropical Virus Moves to Italy

I thought it was due to Globalization.

Explainers for the Day

The Economics of Currency Crises and Contagion: An Introduction

Explaining the RAND Experiment

Sovereign Wealth Funds: Stumbling Blocks or Stepping Stones to Financial Globalization?

Honduras: Hosed by Sock Tariffs

Data Mining the Ed Biz

Podcast of the Day

William R. Duggan on Strategic Intuition (from Econ Talk)

Related Book;
Strategic Intuition: The Creative Spark in Human Achievement

Lecture of the Day- Extremism

Extremism -

Cass R. Sunstein, professor of law at the University of Chicago Law School, will deliver the first Distinguished Lecture of the new AEI Center for Regulatory and Market Studies. His subject will be the sources of extremism. He uses recent studies of juries, federal judges, and ordinary citizens to show that groups of like-minded people often move to extreme positions on many questions, including climate change, labor policy, same-sex relations, and affirmative action. This general phenomenon – ideological amplification – helps to explain many things, including punitive damage awards, excessive and insufficient regulation, oppositional movements, political correctness, ethnic conflict, and even terrorism. He will also discuss how cost-benefit analysis, for example, can be used to solve such behavior.

Pakistan Aid Waste

U.S. Officials See Waste in Pakistan Aid

Related;
Durrani told FP that Pakistan views most of this money as payment for services rendered as part of Operation Enduring Freedom. As he colorfully put it, "If we take that money and go and buy bananas, how does it bother you?"

Medical Fact of the Day

In most businesses, customers don’t pay for a vendor’s mistakes. But when hospitals make errors, they charge patients additional money to fix the problem.

The perverse economics of hospital charges were outlined yesterday in a fascinating article in the Journal of the American Medical Association. The story focused on one common but largely preventable medical error: urinary tract infections associated with the use of a catheter. It showed how in some ways, the medical system has built-in financial incentives for bad care.

Hospitals use urinary catheters more than almost any other medical device, and they account for 40 percent of all hospital-acquired infections — about one million annually. A urinary tract infection can add a day to a hospital stay; sometimes it can lead to a more serious infection, even death.

-Making Hospitals Pay for Their Mistakes

Assisted Arranged Marriages

An Unsuitable Boy


Should romance be a prerequisite for marriage? Not in some cultures.

Whither Development Economics

A recent working paper from World Bank- Early development economics debates revisited

Summary: Development economics in its early years created the image of a fierce fight between advocates of contrasting theories or approaches- "balanced growth" vs. "unbalanced growth" or "program loans" vs. "project loans." This view has the merit to highlight such conflicts in great detail; yet it fails to take into account the reality of development economics as it was practiced in the field. This paper reassesses these old conflicts by complementing the traditional focus on theoretical debates with an emphasis on the practice of development economics.A particularly interesting example is the debate between Albert Hirschman, one of the fathers of the "unbalanced growth" approach, and Lauchlin Currie, among the advocates of "balanced growth" on how to foster iron production in Colombia in the 1950s. An analysis of the positions held by these two economists shows that they were in fact much less antithetical than is usually held and, indeed, were in some fundamental aspects surprisingly similar. Debates among development economists during the 1950s thus must be explained-at least partially-as the natural dynamics of an emerging discipline that took shape when different groups tried to achieve supremacy-or at least legitimacy-through the creation of mutually delegitimizing systemic theories.

PPP in Cointegrated Panels

A recent paper from the Fund;

Testing for Purchasing Power Parity in Cointegrated Panels

Summary: This paper applies the maximum likelihood panel cointegration method of Larsson and Lyhagen (2007) to test the strong PPP hypothesis using data for the G7 countries. This method is robust in several important dimensions relative to previous methods, including the well-known issue of cross-sectional dependence of error terms. The findings using this new method are contrasted to those from the Pedroni (1995) cointegration tests and fully modified OLS and dynamic OLS esimators of the cointegrating vectors. Our overall results are the same across all approaches: The strong PPP hypothesis is rejected in favour of weak PPP with heterogenenous cointegrating vectors.

Related;
Testing for PPP: Should we use panel methods?

Abstract. A common finding in the empirical literature on the validity of purchasing power parity (PPP) is that it holds when tested for in panel data, but not in univariate (i.e. country-specific) analysis. The usual explanation for this mismatch is that panel tests for unit roots are more powerful than their univariate counterparts. In this paper we suggest an alternative explanation. Existing panel methods assume that cross-unit cointegrating relationships, that would tie the units of the panel together, are not present. Using simulations, we show that if this important underlying assumption of panel unit root tests is violated, the empirical size of the tests is substantially higher than the nominal level, and the null hypothesis of a unit root is rejected too often even when it is true. More generally, this finding warns against the ‘‘automatic’’ use of panel methods for testing for unit roots in macroeconomic time series.

A Panic Attack on Unit Roots and Cointegration

The Purchasing Power Parity Puzzle, Kenneth Rogoff

An iTunes Index for Exchange Rates

The Ghost Writers

Good economists, bad fact-checking?- I don't think Rodrik should be surprised. Read the following;

In September 2004, Charles Ogletree, a professor at Harvard Law School, found himself having to admit that his latest book, All Deliberate Speed, contained six paragraphs lifted verbatim from a book by Yale professor Jack Balkin, What “Brown v. Board of Education” Should Have Said. Equally surprising was the fact that Ogletree hadn’t known about the plagiarism, which occurred in a passage about the history of desegregation efforts, until he was told of it by Balkin himself.

“I accept full responsibility for this error,” Ogletree said in a statement. But some readers of that statement might have gotten a different impression: Ogletree attributed the plagiarism to two research assistants: “Material from Professor Jack Balkin’s book … was inserted … by one of my assistants for the purpose of being reviewed, researched, and summarized by another research assistant with proper attribution … Unfortunately, the second assistant, under the pressure of meeting a deadline, inadvertently deleted this attribution and edited the text as though it had been written by me. The second assistant then sent a revised draft to the publisher.”

It was a curious admission. In other words, at least some of Ogletree’s manuscript was sent to his publisher without having been read by the person supposed to have written it. Yet to Ogletree, the crime was not that someone else had written the material, just that it wasn’t the person Ogletree expected to write it.

But check the title page of All Deliberate Speed and the Library of Congress catalog information, and Ogletree’s name stands alone. An impressive total of nine students are listed in the acknowledgements as a “deeply committed group of researchers,” but there’s not a hint that their words appear verbatim in the book—or, at least, there wasn’t until something went wrong.

Derek Bok, one of the two professors appointed by the law school to review the episode, barely raised an eyebrow over the apparent use of uncredited ghostwriters. As he told the Boston Globe at the time, “There was no deliberate wrongdoing at all … He marshaled his assistants and parcelled out the work and in the process some quotation marks got lost”—a description that probably sounded flip to any author who has ever been plagiarized. Ogletree was “reprimanded,” but suffered no tangible consequences.

Parenting Advice for Economists!

Steven Levitt and Bryan Caplan needs to see the following TED lecture;

Gever Tulley, founder of the Tinkering School, talks about our new wave of overprotected kids -- and spells out 5 (and really, he's got 6) dangerous things you should let your kids do. Allowing kids the freedom to explore, he says, will make them stronger and smarter and actually safer.

1. Play with Fire
2. Own a Pocket Knife
3. Throw a Spear
4. Deconstruct Appliances
5. Break the DMCA
6. Drive a Car

Related;
Toilet Training and Incentives: Child No.1
Parenting Vision Statements
How to Raise your Children to be the Type of Adults You Want Them to Be
The Selfish Reason to Have More Kids
What does society overcomplicate?

Tantrums as Status Symbols
An Economist's Son
Why don't American kids respect their parents more?

Why America should outlaw spanking
The economics of spanking.


What's the best way for kids to learn to swim?
Where Is Everybody? The Gang at a Glance
Why don't parents like to play with their kids?
Mission: Making a Love of Reading Happen

Paternomics: Levitt's Parenting vs. Mine
Greater Goods Science Centre

A robust critique of the so-called 'economics of happiness'

In Happiness, Economics and Public Policy, Helen Johns and Paul Ormerod analyse the economic research that underlies politicians’ growing preoccupation with measures of ‘wellbeing’.

The Math Magician

Arthur Benjami at TED

Who's going to pay the bill for IMF?

The income shortfall for FY 2008 is now projected at about SDR 90 million (US$140 million) compared to an initial projection of about SDR 146 million (US$228 million).
-IMF Executive Board Completes Midyear Review of Fund's FY 2008 Income Position

Explainer of the Day

The NYT doesn't get it on trade

Assorted

Teenage Risks, and How to Avoid Them;

For example, a study by researchers at the University of California, San Francisco, found that teenagers were more likely than adults to overestimate risks for every outcome studied, from low-probability events like contracting H.I.V. to higher-probability ones like acquiring more common sexually transmitted diseases or becoming pregnant from a single act of unprotected sex.

“We found that teenagers quite rationally weigh benefits and risks,” Dr. Reyna said in a recent interview. “But when they do that, the equation delivers the message to go ahead and do that, because to the teen the benefits outweigh the risks.”

For example, she said: “The risk of pregnancy from a single act of unprotected sex is quite small, perhaps one chance in 12, and the risk of contracting H.I.V., about one in 500, is very much smaller than that. We’re not thinking logically; they are.”

For that reason, Dr. Reyna and Frank Farley, a professor at Temple University and past president of the American Psychological Association, noted last June in an article in Scientific American Reports that traditional programs that appeal to teenagers’ rationality “are inherently flawed, not because teens fail to weigh risks against benefits,” but because “teens tend to weight benefits more heavily than risks when making decisions.”

How to Avoid Recession? Let the Fed Work- Mankiw

The truth is that the current Fed governors, together with their crack staff of Ph.D. economists and market analysts, are as close to an economic dream team as we are ever likely to see. They will make their share of mistakes, but it is too easy to find flaws when judging with the benefit of hindsight. The best Congress can do now is to let the Bernanke bunch do its job.

Where Boys Were Kings, a Shift Toward Baby Girls

“China and India are closely studying South Korea as a trendsetter in Asia,” said Chung Woo-jin, a professor at Yonsei University in Seoul. “They are curious whether the same social and economic changes can occur in their countries as fast as they did in South Korea’s relatively small and densely populated society.”

Leave It With the (Virtual) Doorman

How private equity revamped a London high street

Climate change: the (Groucho) Marxist approach

How to safeguard savers in a banking crisis

Mao and the art of management

Hunter-gatherers Noble or savage?

Counting people-Census sensitivity

The Bible v the Koran

Poker is getting younger, cleverer, duller and much, much richer

18th-century climate change

Evan Williams, the founder of Blogger and Twitter, epitomises Silicon Valley's right brain

The new (improved) Gilded Age

In Trade Ruling, Antigua Wins a Right to Piracy

In an unusual ruling on Friday at the World Trade Organization, the Caribbean nation of Antigua won the right to violate copyright protections on goods like films and music from the United States — an award worth up to $21 million — as part of a dispute between the countries over online gambling.

Chemical Rules for Selected Products

Data About Zetia Risks Was Not Fully Revealed

Brian Levy on Corruption

Anti-Corruption at World Bank

Another little bit of US History

A newly declassified document shows that J. Edgar Hoover, the longtime director of the Federal Bureau of Investigation, had a plan to suspend habeas corpus and imprison some 12,000 Americans he suspected of disloyalty.

Hoover sent his plan to the White House on July 7, 1950, 12 days after the Korean War began. It envisioned putting suspect Americans in military prisons.

Hoover wanted President Harry S. Truman to proclaim the mass arrests necessary to “protect the country against treason, espionage and sabotage.” The F.B.I would “apprehend all individuals potentially dangerous” to national security, Hoover’s proposal said. The arrests would be carried out under “a master warrant attached to a list of names” provided by the bureau.

The names were part of an index that Hoover had been compiling for years. “The index now contains approximately twelve thousand individuals, of which approximately ninety-seven per cent are citizens of the United States,” he wrote.

“In order to make effective these apprehensions, the proclamation suspends the Writ of Habeas Corpus,” it said

-Hoover Planned Mass Jailing in 1950

Weird Science on your self

From the nose to the genitals and back again

A growing public

Another question from Delong;

What reasons are there to think that the role of the federal government will grow further in the next half century? What reasons are there to think that the growth of the federal government in the past 80 years has carried it beyond its sustainable size, and that its size will decline in the next half century?

A related recent paper from the Fund;
Government for the People: On the Determinants of the Size of U.S. Government

A Trade Question to think about?

From Delong's exams;

Why would an international trade economist like David Ricardo have thought that the United States would and should become a very large almost entirely agrarian civilization--a giant Canada? It was clear by 1900 that David Ricardo was wrong? Why was he wrong?

Blog of the Day

Mr. Magazine

Weather Insurance for the Apparel Industry

So the $200 billion American apparel industry, which is filled with esoteric job titles like visual merchandiser and fabric assistant, is adding a more familiar one: weather forecaster.

Liz Claiborne, the apparel company, has hired a climatologist from Columbia University to predict weather for its designers to better time the shipments of seasonal garments to retailers.

The discount retailer Target has established a “climate team” to provide advice on what kind of apparel to sell throughout the year. More and more, the answer is lighter weight, “seasonless” fabrics.

And the manufacturer Weatherproof, which supplies coats to major department stores, has bought what amounts to a $10 million insurance policy against unusually warm weather, apparently a first in the clothing business.

Fredric Stollmack, the president of Weatherproof, said that unseasonable weather, once a widely mocked excuse for poor performance in the industry, is the new norm, forcing companies to make sweeping changes in how they manufacture and sell clothing.

“I have been in this industry for 40 years, and during that time, we always knew it got cold in December and stayed that way through January and February — and that was that,” he said. “Now, it’s a crap shoot.”

-Meteorologists Shape Fashion Trends

From Marines to Rock Star - Shaggy

An Aljazeera interview;

The world has about 100 unmarried billionaires

and other interesting statistics through a grain of rice;



See also there blog Everyone Counts

Podcasts

THE FOUR HUMOURS

According to an 11th century Arabic book called the Almanac of Health, an old man went to the doctor complaining of a frigid complexion and stiffness in winter. The doctor, after examining his condition, prescribed a rooster. Being a hot and dry bird it was the perfect tonic for a cold and rheumatic old man.

This is medicine by the 4 humours – Black bile, Yellow bile, Blood and Phlegm. The idea that the body is a concoction of these four essential juices is one of the oldest on record. From the Ancient Greeks to the 19th century it explained disease, psychology, habit and personality. When we describe people as being choleric, sanguine or melancholic we are still using the language of the humours today. It also explains why, in the long and convoluted history of medical practice, pigeon livers were an aphrodisiac, blood letting was a form of heroism and why you really could be frightened to death.

Hail to the Chief
Rear Vision attempts to unravel the complex mysteries of the US presidential system. What are primaries and caucuses and what is the Electoral College that ultimately decides who'll have the top job?

On the Wealth of Nations

The marketing of Putin

Globalising Capital Markets: new actors, new flows, new partnerships


Karol Boudreaux on Property Rights and Incentives in Africa

A Shocking Headline

7 School Officials Fired After Shocking Students

New York vs London

Money Goes Far in New York, if You’re European

Related;
An Exercise in Sheer Conjecture

Assorted on Russia

Garry Kasparov Profile


Russian Police Guards in Action

Russia: A Winter of Discontent

Free Read

Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity, William J. Baumol, Robert E. Litan, and Carl J. Schramm


See also Rodrik's post, Good economists, bad fact-checking

Are We in a Recession?

You decide;

You Can Almost Hear It Pop, by Stephen S. Roach

The Facts Say No, by Marcelle Chauvet and Kevin Hassett

Bet the House on It, by Laura Tyson

Not if Exports Save Us, by Jason Furman

Nobody Knows, by James Grant

Wait Till Next Year, by Martin Feldstein

The New York you don't know

Without Heat in the Bronx, Making Do in the Cold

Residents at 1277 Morris Ave. in the Bronx talk about what it's been like living for months with no heat or hot water.

Oliver Sacks on Al Jazeera

Use MindManager to Teach Economics

An interesting paper; Effectiveness of concept maps in economics: Evidence from Australia and USA by John Marangos and Sean Alleya

Abstract: This paper evaluates the effectiveness of concept maps as a teaching and learning tool in university level Principles of Microeconomics courses in Australia and USA. Concept mapping was incorporated in the teaching material in both courses at different countries and, at the end of the semester, the students completed a survey regarding the use, effectiveness, and accessibility of concept maps. It was revealed that USA students valued concept maps relatively less than Australian students. We provide two explanations: First, there may be differences in prior training in economic and/or concept mapping between Australian and USA students. Second, there were significant differences in class structure, which caused the link between collaborative study-groups and the construction of concept maps to not be maintained in the case of USA students.

Here's conclusion;

The students studying Principles of Microeconomics in the Department of Economics at Monash University in second semester 2001, responded quite positively to the introduction of concept maps in lectures and tutorials. It appears, though, that only a small percentage of Monash students used concepts maps as a tool for exam preparation, and an even smaller percentage used concept mapping in other subjects. Thus, while Monash students found concept mapping as a tool for understanding concepts in economics, they did not extend the effectiveness of this tool in exam preparation and in other subjects. Strangely enough, the applicability of concept maps to other subjects was questioned by the Monash students studying economics.

The students studying Principles of Microeconomics in the Department of Economics at Colorado State University in spring semester 2004, also responded positively to the introduction of concept maps in lectures and tutorials. However, the CSU students valued the concept maps relatively less, compared with the Monash students. We posited two possible explanations for this, and feel that both are plausible. We are particularly intrigued with the second explanation, which was that the link between collaborative student study-groups and the construction of concept maps was broken for the CSU students because of class size. This would explain the differences for the student perception of the effectiveness of concept maps. More study is needed, using USA students in smaller classes to test this hypothesis.

This could have substantial consequences for the development of new teaching methodologies in economics. As shown in the literature, recent advances in teaching methodology revolve primarily around deep learning, active learning, and collaborative study. A major concern for the implementation of new teaching methodologies is the size of classes, as large classes do not allow a large degree of freedom. However, in an environment of strict budget constraint for higher education in Australia and the USA, the reduction of class size is not foreseeable in the near future. This is very likely to create obstacles in the implementation of new teaching methodologies that are not “cost efficient”, but have a high in return for student learning and performance.

I have met professors who have never heard of Aplia at US Ivy league universities, yet using textbooks on their system. Students need to be provided with all the avenues to study as different students have different intelligences in which they're strong.

My advice on concept mapping, use Mind Manager, the best such product in the market right now.

Related;
Operation Overload

Adopted and discarded

A diplomat accused of “dumping” his adopted daughter flew home yesterday after triggering a row about the ethics of Europeans adopting Asian children.

Jade, a seven-year-old of South Korean origin, is the focus of an escalating dispute across two continents. At the age of four months she was adopted by a Dutch consular officer based in Hong Kong, Raymond Poeteray, and his wife Meta. But the couple have now surrendered Jade to the Hong Kong social welfare department for readoption, reportedly because the child could not adapt to Dutch culture.

-Diplomat 'dumped his adopted child because she did not fit in'

Mad about Dogs

More American households have pets than ever — 68.7 million of them in 2006, according to a new survey by the American Veterinary Medical Association, up 12.4 percent from 2001.

Among dog owners, 53.5 percent considered their pets to be members of the family, the survey found. For cats, the number was 49.2 percent.

And the term “family member” should not be used lightly. Ari Henry Barnes, who works in a New York law firm, is so devoted to his cat, Romeo, that he wipes the animal’s behind every time he does “a stinky boom boom.”

-Who Invited the Dog?

Related;
Putin to Bush: My dog is bigger than your dog

National Bingo Callers of the Year 2007 competition

A bit of British Bingo Culture (via Vice Squad)

Podcasts

The Sassanian Empire

Gregory Clark Calls Technology Key to Modern Economy

Allan Meltzer, Says U.S. Fed Is `Giving In' to Pressure

Ha-Joon Chang Says Poor Countries Hurt by Free Trade

Angus Maddison Sees Asia Producing Half of World's GDP by 2030

Yes! The surprising and often costless science of persuasion
Robert Cialdini, Professor of Psychology at Arizona State University

IMF to be rescued by World Bank!

Thought about it after seeing the following news item- may be it should lease out its buildings to World Bank;

New IMF chief plans job cuts of up to 15 pct

New IMF Managing Director Dominique Strauss-Kahn said in an interview with the Journal that he planned to cut 300 to 400 jobs out of the IMF's total staff of more than 2,600. Layoffs would likely be necessary, he told the paper.

Strauss-Kahn said the fund was facing a deficit of $400 million a year by 2010 if loan demand failed to pick up, but estimated the job cuts could reduce that deficit by about a quarter.

The report said the cuts were part of an effort by Strauss-Kahn to win U.S. and European backing for the Washington-based institution to sell its gold and invest the proceeds.

Related;
IMF Managing Director Names Diana Serrano as Human Resources Director

Is CAPM Dead?

From interview with Eugene Fama;

Region: With Kenneth French, you’ve said that the capital asset pricing model (CAPM) developed by John Lintner and William Sharpe has “fatal problems” in explaining stock market returns because of its reliance on beta [the volatility of an individual stock relative to overall market volatility]. And you’ve found that two other factors are crucial for determining prices. Can you tell us about these factors? Are they inefficiencies, or do they represent hidden risk? And is the CAPM truly dead?

Fama: Let me first tell you what the returns evidence says, and then we can talk about how to interpret it. The returns evidence basically says that if you look at the CAPM market beta, it’s not enough to describe the cross section of average returns.

The CAPM says that all you need to know are these market betas, market sensitivities, in order to fully describe the cross section of average returns. What you find is that other variables contribute to the explanation of average returns above and beyond what you get from beta. Indeed, over the last 50 years, you get very little at all from beta.

The two variables that we’ve focused on are market capitalization (the financial profession calls it size, a misnomer because it’s really market capitalization) and the book-to-market ratio, the ratio of the book value of a common equity to its market value. Now, there’s no magic in that ratio. The ratio of almost anything to price will work as well. These are the two variables.

So, small-cap stocks have higher average returns than large-cap stocks, and stocks with higher ratios of book value to market value have higher returns than low book-to-market stocks. Low book-to-market stocks tend to be growth stocks. High book-to-market stocks tend to be relatively more distressed; they’re what people call value stocks. That’s given rise to what the finance profession—academic as well as applied—calls the size premium and the value premium. The value premium tends to be bigger.

So the issue then is, Are these risk factors or market inefficiencies? One group of people says they’re market inefficiencies—particularly the value premium. The behaviorists tend to say the value premium is a market inefficiency. Their story is: The market overreacts to good and bad past times. It doesn’t understand that things tend to mean revert. So growth companies that have done very well tend to be overpriced, and value companies that have done poorly tend to be underpriced, and then the market realizes this and corrects it. And this story says, basically, that people are dumb; they never learn. So every generation of growth stocks and value stocks goes through the same sort of cycle.

That’s not too appealing to an economist—the idea that people never learn about these things—but that is the behavioral story. And initially they said these are arbitrage opportunities because if you go long value stocks and short growth stocks, you get something with a variance close to zero.

But French and I pointed out that if you do that, you get something with a variance very close to the market variance, not zero. It’s quite a risky strategy. And the premium is about the size of the market premium. So it looks and smells like a risk premium. And we developed a three-factor model with a size premium in addition, basically the difference between the returns on small stocks and big stocks.

So, our model has three factors. Every asset pricing model says you need the market in there. Then they differ on how many other things you need. The CAPM says you only need the market. We basically say a minimum of two other factors seem to be necessary. And these two do a pretty good job.

There’s still a third explanation, which is not based on overreaction. It says that people just don’t like small stocks and value stocks. There’s some amount of utility that people get from the nature of the stocks that they hold. So they like big stocks and they like growth stocks, and they’re willing to hold them even though they have lower average returns.

Now you can’t have an arbitrage opportunity there because then there’d be a sure profit. But the fact that they look like risk factors can sustain that story. You can’t tell the difference between that story and a risk story.

Related;
New book: Sharpe's 'Investors and Markets'
The Asset Pricing and Portfolio Choice Simulator

Perry Mehrling, Fischer Black, and Finance
Asset Prices and Portfolio Choice


Books:
Draft chapters of William Sharpe's Investors and Markets: Portfolio Choices, Asset Prices and Invetment Advice

Fama's two books are online; Foundations of Finance, 1976; The Theory of Finance, with Merton Miller, 1972

Assorted

Is the Fed the new FEMA?

Readings on Pakistan

Why Pregnant Women Don’t Tip Over

Steroids, Gains and Costs

Brainman, at Rest in His Oasis

Who Homeschools?

Honduras: Hosed by Sock Tariffs

Masters of Illusion

Keeping track of Subprime

Boobs Fitness

Why the climate change wolf is so hard to kill off

Do we know enough about terrorism?

Is trade war with China credible?

Introducing a Global Database on Migrant Stocks

Simple Giving

A Carbon Cap That Starts in Washington

It ain't half cold mum! Global warming in a long-run perspective

Kenneth Arrow: The Case for Cutting Emissions

From World Bank Research

World Bank Research E-Newsletter

-World Development Report 2009

Economic activity becomes increasingly concentrated with development. As this happens, substantial disparities in welfare can emerge between rural and urban areas, between leading and lagging regions within countries and, perhaps most dramatically, between countries in different parts of the world. The objective of the World Development Report (WDR) 2009 "Seeing Development in 3D" is to identify and understand the interactions between economic geography, growth, and living standards, and to draw the implications of these interactions for policy. WDR 2009 charts the changes in the three spatial dimensions of economic activity and household welfare: rising density, falling distance and persisting division. The WDR will highlight the dimensions and significance of spatial forces that shape economic development; and recommend policies to facilitate the spatial transformations necessary to sustain economic growth, reduce disparities in welfare, and reduce poverty. The report aims to reframe three important policy debates: on urbanization in developing countries; on territorial development policies; and on the pros and cons of regional integration.

Analyzing health equity using household survey data

Equity has long been considered an important goal in the health sector. Yet inequalities persist between poor people and those who are better off, with the poor tending to suffer higher rates of mortality. They also often tend to use health services less, despite having higher levels of need. A new book entitled “Analyzing Health Equity Using Household Survey Data” by O’Donnell, Doorslaer, Wagstaff, and Lindelow provides rigorous analytic techniques for both measurement and analysis of such inequalities, with a view to stimulating health equity research that can support the design and evaluation of health policies and programs. The book offers researchers and analysts a step-by-step practical guide to key analytic techniques in health equity analysis, with examples and computer code, mostly for the Stata program.