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January 2011

If you teach with lots of PowerPoint or other slides . . .

. . . here's a paragraph worth considering:

The research, from the University of New South Wales, suggests that we process information best in verbal or written form, but not in both simultaneously. As so often, it has taken the best efforts of brainy academics to prove what most of us instinctively knew. Trying to follow what someone is saying while watching the same words on a screen is the equivalent of riding a bicycle along a crowded train. It offers the appearance of making extra progress but is actually rather impractical.

Interview with Richard Epstein

Reason editor Nick Gillespie interviews Professor Epstein. As usual, Epstein is concise , smart, and blunt. He thinks President Obama is completely unwilling to change his mind. That'd be fine, of course, if he were right to begin with. If not . . .

Epstein ends beautifully--almost all you need to know about political economy in 132 words:

reason: In shifting from a rule by fiat, where you come and plead your case and get your special single deal, to a government of rules, you shift from a kind of feudal mentality to a republican one. What do you do to spread that and make that more persuasive to people?

Epstein: You show people that all of the ingenuity of gimmicks fails. We have more debt, more unemployment, and less happiness in this country now because hope and change turn out to be discord and confusion. And there’s no way that you can stop that. You cannot stop the blunders of one government program by putting another one on top of it.

That’s what I learned in Yale Law School. You don’t like what the minimum wage does, you create a welfare program. You don’t like what a welfare program does, you have a back-to-work program. If you just got rid of the minimum wage, you’d get rid of three programs and you’d free up lots of economies. Mies van der Rohe was essentially a political theorist when he said “less is more.”

"Wall Street’s New Lie To Main Street: Asset Allocation"

Billionaire Mark Cuban advises people to be careful buying into Wall Street's latest great idea:

Today, your investment advisors want you invest in things you have absolutely no fricking clue about and have pretty much absolutely no fricking ability to learn about.

They want you to diversify into Emerging Markets, Commodities, International Bonds, Munis, Real Estate Investment Trusts, ….and.. well, a lot of different “stuff”. . . .

Let me translate this all for you. “I want you to invest 5pct in cash and the rest in 10 different funds about which you know absolutely nothing. I want you to make this investment knowing that even if there were 128 hours in a day and you had a year long vacation, you could not possibly begin to understand all of these products. In fact, I don’t understand them either, but because I know it sounds good and everyone is making the same kind of recommendations, we all can pretend we are smart and going to make a lot of money. Until we don't."

The efficient-markets-hypothesis-didn't-predict-this meme

I've seen--several times recently--the odd claim that the "market efficiency hypothesis" predicted that a severe drop in stock market prices was all but impossible. (Sometimes this claim is extended: the market efficiency hypothesis thereby induced market participants to be overconfident, which, in turn, helped create the recession.) The most recent instance is this, from distinguished Yale economist Robert J. Shiller:

In the decades prior to the current financial crisis, economists gradually came to view themselves and their profession in the same way, encouraged by research trends. For example, after 1960, when the University of Chicago started creating a Univac computer tape that contained systematic information about millions of stock prices, a great deal of scientific research on the properties of stock prices was taken as confirming the "efficient markets hypothesis." The competitive forces that underlie stock exchanges were seen to force all securities prices to their true fundamental values. All trading schemes not based on this hypothesis were labeled as either misguided or fraudulent. Science had triumphed over stock-market punditry—or so it seemed.

The financial crisis delivered a fatal blow to that overconfidence in scientific economics. It is not just that the profession didn't forecast the crisis. Its models, taken literally, sometimes suggested that a crisis of this magnitude couldn't happen.

While I almost always hesitate to criticize my betters, I'll overcome the hesitation this time. This is not the market efficiency hypothesis I was taught. All that hypothesis posited was that stock market prices were the best available forecasts of firm values. It doesn't now, nor did it ever, posit that the stock market was always right.

Maybe if I had gotten an Ivy League degree I would know better.

Funny, if you're an academic

"Journal of Universal Rejection".

The founding principle of the Journal of Universal Rejection (JofUR) is rejection. Universal rejection. That is to say, all submissions, regardless of quality, will be rejected. Despite that apparent drawback, here are a number of reasons you may choose to submit to the JofUR. . . .

After submitting your work, the decision process varies. Often the Editor-in-Chief will reject your work out-of-hand, without even reading it! However, he might read it. Probably he'll skim. At other times your manuscript may be sent to anonymous referees. Unless they are the Editor-in-Chief's wife or graduate school buddies, it is unlikely that the referees will even understand what is going on.

Link via Alex at Marginal Revolution.