Diversion: Valentine's Day

From Valentine's Day by Randall Munroe, August 24, 2011 at XKCD.com.

Economics: When Income Grows, Who Gains?

Wow! Between 1980 and 2008 the bottom 90% of U.S. earners received 2% of income growth and the top 1% got more than half, says When Income Grows, Who Gains? by Economic Policy Institute, August, 2011 at The State Of Working America.

Climate: El Niños May Inflame Civil Unrest

One in five major civil conflicts since 1950 may be linked to climate extremes associated with El Niños — periods of warming lasting a year or longer in surface waters of the central equatorial Pacific, a new study finds.

I'm one of those people who would be generally skeptical about correlating things to climate, says statistician Andrew Solow of the Woods Hole Oceanographic Institution in Massachusetts. But the new report's finding makes sense, he says: In poor countries where the economy is closely linked to agriculture — and therefore the weather — poor harvests and diminishing food supplies can leave large numbers of people available to engage in civil uprisings.

Hsiang and his colleagues analyzed 234 civil conflicts that broke out within 175 nations between 1950 and 2004. In any given year, the probability that a new conflict would erupt among the 90 or so nations whose climates can be heavily affected by El Niño events was 4.1%. That's twice the conflict rate in countries largely immune to El Niño effects, Hsiang's group reports in the Aug. 25 Nature.

This disparity in violence rates is huge, Hsiang says: It's comparable to differences that others have reported between populations where annual incomes were $1,000 per capita versus $10,000.

For more, see EL NIñOS May Inflame Civil Unrest by Janet Raloff, August 24, 2011 at ScienceNews.

Economics: Why Amazon Can't Make a Kindle in the USA

The following suggests that intellectual property assests are not accounted for properly ...

Take the story of Dell Computer [DELL] and its Taiwanese electronics manufacturer. The story is told in the brilliant book by Clayton Christensen, Jerome Grossman and Jason Hwang, The Innovator's Prescription :

ASUSTeK started out making the simple circuit boards within a Dell computer. Then ASUSTeK came to Dell with an interesting value proposition: We've been doing a good job making these little boards. Why don't you let us make the motherboard for you? Circuit manufacturing isn't your core competence anyway and we could do it for 20% less.

Dell accepted the proposal because from a perspective of making money, it made sense: Dell's revenues were unaffected and its profits improved significantly. On successive occasions, ASUSTeK came back and took over the motherboard, the assembly of the computer, the management of the supply chain and the design of the computer. In each case Dell accepted the proposal because from a perspective of making money, it made sense: Dell's revenues were unaffected and its profits improved significantly. However, the next time ASUSTeK came back, it wasn't to talk to Dell. It was to talk to Best Buy and other retailers to tell them that they could offer them their own brand or any brand PC for 20% lower cost. As The Innovator's Prescription concludes:

Bingo. One company gone, another has taken its place. There's no stupidity in the story. The managers in both companies did exactly what business school professors and the best management consultants would tell them to do—improve profitability by focus on on those activities that are profitable and by getting out of activities that are less profitable.

For more, see Why Amazon Can't Make a Kindle in the USA by Steve Denning, August 17, 2011 at Forbes.com.

Politics: Perry's College Transcript Is Brought to You by the Letters 'C' And 'D'

Presidential candidate Rick Perry got a "D" in his only economic course.

Page 1 ...

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For more, see Perry's College Transcript Is Brought to You by the Letters 'C' And 'D' by Tristan Hallman, August 5, 2011 at dallas news com.

Crime: It's Easy to Cause False Confessions

In an as-yet-unpublished study, members of Dr Horselenberg's group told 83 people that they were taking part in a taste test for a supermarket chain. The top taster would win a prize such as an iPad or a set of DVDs. The volunteers were asked to try ten cans of fizzy drink and guess which was which. The labels were obscured by socks pulled up to the rim of each can, so to cheat a volunteer had only to lower the sock.

During the test, which was filmed by a hidden camera, ten participants actually did cheat. Bafflingly, though, another eight falsely confessed when accused by the experimenter, despite participants having been told cheats would be fined €50 ($72).

To read about several more simple experiments, see Silence Is Golden, August 13, 2011 at The Economist.

Mind: Nice Guys Finish Second, Women Finish Last

Nice guys don't get ahead in salary negotiations, but they don't finish last either, a new study finds. That position is left for women, whether or not they're nice.

Men with disagreeable personalities outearn men with agreeable personalities by about 18%, according to research to be published this fall in the Journal of Personality and Social Psychology. Disagreeable women, on the other hand, earn only about 5% more than their sweet and gentle counterparts.

For more, see Nice Guys Finish Second, Women Finish Last by Stephanie Pappas, August 15, 2011 at LiveScience.

Economics: How Far Should Consumers Unwind Debt?

More deleveraging to come ...

According to an analysis from Moody's Analytics, total household debt peaked in August 2008 at $12.41 trillion and has come down by about $1.2 trillion.

As a proportion of gross domestic product, household debt peaked at 99.5% in the first quarter of 2009, and has come down to just under 90%.

Economists, who talk about the deleveraging process, say that debt still has a way to come down before the economy will return to full health. Just how far it needs to come down, though, is difficult to say.

As recently as 2000, household debt was less than 70% of G.D.P., and in 1990 it was around 60%.

For more, see How Far Should Consumers Unwind Debt? by Motoko Rich, August 15, 2011 at Economix.

Security: Getting Bin Laden

For God and country—Geronimo, Geronimo, Geronimo.

For a long, good article Martha contributed see Getting Bin Laden by Nicholas Schmidle, August 8, 2011 at The New Yorker.

Diversion: Password Strength

From Password Strength by Randall Munroe, August 11, 2011 at XKCD.com.

Economics: An Unbalanced Budget Amendment

The unbalanced budget amendment is a requirement that in good times the government must run a budget surplus. The virtues of such a rule are that it allows for counter-cylical fiscal policy during a recession. Indeed, it reduces the cost of counter-cyclical fiscal policy because it guarantees a reserve fund for just such emergencies. The unBBA is thus a type of automatic stabilizer of the kind I have argued for before ....

A simple version of the unBBA requires surpluses but more generally the rule would be a surplus or a similarly sized reduction from the previous year's deficit. The size of the required surplus/deficit reduction would be tied to a function of current and recent GDP growth rates.

For more, see An Unbalanced Budget Amendment by Alex Tabarrok, July 25, 2011 at Marginal Revolution.

Mind: Strong Social Bonds Promote Health, Belonging — And Torture

It was no surprise when a recent meta-study found people with strong social support networks tend to live longer, healthier lives. As the Mayo Clinic notes on its website, having close, lasting relationships strengthens one's feelings of security, self-worth and sense of belonging.

But there appears to be a dark side to those life-enhancing bonds. Newly published research suggests they may make it more likely you'll view those outside your social group as less than human —and treat them accordingly.

The most tightly knit groups — from military units to athletic teams — may also be the most likely to treat their adversaries as subhuman animals.

Being socially connected not only diminishes the motivation to connect with others, but may also diminish the perceived similarity with more distant others, they add, because social connections delineate those within one's social circle and those outside of it.

In other words, people tend to identify with their fellow group members, meaning they're more likely to perceive outsiders as different. And as earlier research has shown, when people are viewed as dissimilar to ourselves, they are evaluated as less humanlike as well.

For the experiments and more, see Strong Social Bonds Promote Health, Belonging — And Torture by Tom Jacobs, August 9, 2011 at Miller-McCune.

Economics: Faltering Rhode Island City Tests Vows to Pensioners

When the small, beleaguered city of Central Falls, R.I., filed for bankruptcy this month, it sought to cut the pension checks it has been sending its retired police officers, firefighters and other workers by as much as half. All the city promises now is that its retirees, many of whom do not get Social Security, will not have their benefits cut to less than $10,000 a year.

But investors who bought the city's bonds could do much better: Rhode Island recently passed a law intended to make sure that they would be paid in full, even in bankruptcy.

Millions of teachers, police officers, firefighters and other government workers have long believed that their pensions were untouchable, thanks to provisions in state laws and constitutions. But some of those promises are unclear or untested, said Amy B. Monahan, an associate professor at the University of Minnesota law school who has studied the myriad laws protecting public pensions in different states.

In Central Falls, the pension plan for the police and firefighters is projected to run out of money in October. But officials there say short-changing the bondholders will not bring relief. The next time the city needs to borrow money, investors will simply demand more in interest, and they might decide all Rhode Islanders were a bad risk and charge all cities more.

The last thing we want to do is increase borrowing costs for all our cities and towns, and therefore cause tax rates to go up across the state, because one city has fiscal problems, said Robert G. Flanders Jr., the state-appointed receiver for Central Falls, explaining the new state law putting bondholders first in line.

For more, see Faltering Rhode Island City Tests Vows to Pensioners by Mary Williams Walsh and Michael Cooper, August 13, 2011 at NYTimes.com.

Technology: A Brainy New Chip Could Make Computers More like Humans

Researchers at IBM have developed a new cognitive computing microchip inspired by the brain's computational tricks.

IBM has made two prototypes of the new chip, which it calls a neurosynaptic core. Both are built on a standard semiconductor platform with 256 neurons, the chip's computational components. RAM units on the chip act as synapses; one of the chips has 262,144 synapses, while the other has 65,536. These networks take after the brain in two key ways, says Dharmendra Modha, the project leader at IBM. The hardware for memory and computation are quite close together (as they are in the brain, where neurons are responsible for both) and the connections between them form, strengthen, and weaken based on learning and experience, just like synapses between neurons.

For more, see A Brainy New Chip Could Make Computers More like Humans by Valerie Ross, August 19, 2011 at 80beats.

Taxes: Stop Coddling the Super-Rich

From a good article Martha contributed ...

My friends and I [Warren Buffett] have been coddled long enough by a billionaire-friendly Congress. It's time for our government to get serious about shared sacrifice.

See Stop Coddling the Super-Rich by Warren E. Buffett, August 14, 2011 at NYTimes.com.

Diversion: French Airport Tests 'Virtual' Hologram Boarding Agents

An airport in France is experimenting with "virtual" boarding agents in a bid to jazz up its terminals with 21st century avatars who always smile, don't need breaks and never go on strike.

The pilot project at Paris' Orly airport began last month, and has so far been met with a mix of amusement and surprise by travelers, who frequently try to touch and speak with the strikingly life-like video images that greet them and direct them to their boarding gate.

The images materialize seemingly out of thin air when a boarding agent -- a real live human -- presses a button to signal the start of boarding.

They are actually being rear-projected onto a human shaped silhouette made of plexiglass. Three actual airport boarding agents were filmed in a studio to create the illusion, which the airport hopes will be more eye-catching and easier for passengers to understand than traditional electronic display terminals.

For more, see French Airport Tests 'Virtual' Hologram Boarding Agents by Associated Press, August 18, 2011 at Fox News.

Politics: Anger and Deceit Has Led the Us into a Billionaires' Coup

From an article Sarah V. contributed ...

There are two ways of cutting a deficit: raising taxes or reducing spending. Raising taxes means taking money from the rich. Cutting spending means taking money from the poor. Not in all cases of course: some taxation is regressive; some state spending takes money from ordinary citizens and gives it to banks, arms companies, oil barons and farmers. But in most cases the state transfers wealth from rich to poor, while tax cuts shift it from poor to rich.

So the rich, in a nominal democracy, have a struggle on their hands. Somehow they must persuade the other 99% to vote against their own interests: to shrink the state, supporting spending cuts rather than tax rises. In the US they appear to be succeeding.

The Tea Party movement mostly consists of people who have been harmed by tax cuts for the rich and spending cuts for the poor and middle. Why would they mobilise against their own welfare? You can understand what is happening in Washington only if you remember what everyone seems to have forgotten: how this movement began.

a group called Americans for Prosperity (AFP) set up a Tea Party Facebook page and started organising Tea Party events. The movement, whose programme is still lavishly supported by AFP, took off from there.

So who or what is Americans for Prosperity? It was founded and is funded by Charles and David Koch. They run what they call "the biggest company you've never heard of", and between them they are worth $43bn. Koch Industries is a massive oil, gas, minerals, timber and chemicals company. In the past 15 years the brothers have poured at least $85m into lobby groups arguing for lower taxes for the rich and weaker regulations for industry. The groups and politicians the Kochs fund also lobby to destroy collective bargaining, to stop laws reducing carbon emissions, to stymie healthcare reform and to hobble attempts to control the banks. During the 2010 election cycle, AFP spent $45m supporting its favoured candidates.

But the Kochs' greatest political triumph is the creation of the Tea Party movement. Taki Oldham's film (Astro)Turf Wars shows Tea Party organisers reporting back to David Koch at their 2009 Defending the Dream summit, explaining the events and protests they've started with AFP help. "Five years ago," he tells them, "my brother Charles and I provided the funds to start Americans for Prosperity. It's beyond my wildest dreams how AFP has grown into this enormous organisation."

Are [Tea Party campaigners] stupid? No. They have been misled by another instrument of corporate power: the media. The movement has been relentlessly promoted by Fox News, which belongs to a more familiar billionaire. Like the Kochs, Rupert Murdoch aims to misrepresent the democratic choices we face, in order to persuade us to vote against our own interests and in favour of his.

For more, see Debt Deal: Anger and Deceit Has Led the Us into a Billionaires' Coup by George Monbiot, August 1, 2011 at guardian.co.uk.

Healthcare: Medical Debt Cited More Often in Bankruptcies

Roughly 20% of those seeking financial counseling this year and last cited medical debt as the primary cause of their decision to seek bankruptcy protection, according to CredAbility, an Atlanta-based nonprofit credit counseling agency that serves clients nationally. That's up from about 12 to 13% in the prior two years.

With unemployment persistently high, more people have lost health coverage along with their jobs ....

For more, see Medical Debt Cited More Often in Bankruptcies by Ann Carrns, August 18, 2011 at Bucks.

Economics: It's the Aggregate Demand, Stupid

Nonfinancial businesses are now sitting on close to $2 trillion in liquid assets that could be invested immediately if there was an increase in sales, and banks have $1.5 trillion of excess reserves that could be lent as well.

Fiscal policy could raise velocity and growth by getting money moving throughout the economy. But since that is not feasible, the Fed is the only game in town. Joseph Gagnon, a former Fed economist, says that it should immediately increase the money supply by $2 trillion and promise to keep increasing it until the economy has turned around.

But the Fed is already under pressure to tighten monetary policy from its regional bank presidents, three of whom dissented from last week's Fed decision to keep policy steady. They fear that inflation is right around the corner. But as the Harvard economist Kenneth Rogoff has argued, a short burst of inflation would do more to fix the economy's problems than any other thing. One reason is that inflation raises spending by encouraging consumers and businesses to buy things they need immediately because prices will be higher in the future.

The right policy can be debated, but the important thing is for policy makers to stop obsessing about debt and focus instead on raising aggregate demand. As Bill Gross of the investment firm Pimco put it recently: While our debt crisis is real and promises to grow to Frankenstein proportions in future years, debt is not the disease — it is a symptom. Lack of aggregate demand or, to put it simply, insufficient consumption and investment is the disease.

For more, see It's the Aggregate Demand, Stupid by Bruce Bartlett, August 16, 2011 at Economix.

Mind: Do You Suffer from Decision Fatigue?

From an article which Martha contributed which weaves togther several concepts from previous Mind posts, including ...

In their eagerness to chart the human equivalent of the computer's chips and circuits, most psychologists neglected one mundane but essential part of the machine: the power supply. The brain, like the rest of the body, derived energy from glucose, the simple sugar manufactured from all kinds of foods. To establish cause and effect, researchers at Baumeister's lab tried refueling the brain in a series of experiments involving lemonade mixed either with sugar or with a diet sweetener. The sugary lemonade provided a burst of glucose, the effects of which could be observed right away in the lab; the sugarless variety tasted quite similar without providing the same burst of glucose. Again and again, the sugar restored willpower, but the artificial sweetener had no effect. The glucose would at least mitigate the ego depletion and sometimes completely reverse it. The restored willpower improved people's self-control as well as the quality of their decisions: they resisted irrational bias when making choices, and when asked to make financial decisions, they were more likely to choose the better long-term strategy instead of going for a quick payoff.

The discoveries about glucose help explain why dieting is a uniquely difficult test of self-control — and why even people with phenomenally strong willpower in the rest of their lives can have such a hard time losing weight. They start out the day with virtuous intentions, resisting croissants at breakfast and dessert at lunch, but each act of resistance further lowers their willpower. As their willpower weakens late in the day, they need to replenish it. But to resupply that energy, they need to give the body glucose.

For much more, see Do You Suffer from Decision Fatigue? by John Tierney, August 17, 2011 at NYTimes.com.