Dogs are animals of integrity. We have much to learn from them.
Category: Education
Not content with ‘inventing’ the world wide web, Sir Tim is still at it.
This Post doesn’t really require any introduction.
If you see Sir Tim as the hero that he is then you will want to watch this presentation given to a TED audience in 2009.
Enough said!
By Paul Handover
Welcome Elliot Engstrom
Learning from Dogs has been publishing on a daily basis since July 15th, 2009. That’s over 460 posts and is a great tribute to the commitment of all the authors of this Blog. We are grateful that our regular readership is also measured in the hundreds and is growing steadily.
It seemed time to make a small change. We have decided to include articles from Guest Authors on a regular basis. Our first guest is Elliot Engstrom.
Elliot Engstrom is a senior French major at Wake Forest University, and aside from his schoolwork blogs for Young Americans for Liberty and writes at his own Web site, Rethinking the State
Elliot first post for Learning from Dogs is about the US Federal Government and Poverty. This also appeared in The Daily Caller.
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The federal government, which claims to be the greatest supporter of those in need, is anything but a friend of the impoverished.
Often times when conservatives speak of the government treating the rich differently than the poor, the discussion is framed around taxes and welfare, with the argument being made that the government forces the highest earners to pay a massive percentage of all taxes, both punishing success and stifling overall economic productivity and making it all the more difficult for anyone not in the upper echelons to accumulate wealth for themselves. I sincerely hope that I have not constructed a straw man version of this common conservative argument, as I certainly think it has a great deal of credibility. However, I also would like to draw attention to the fact that while government loots the rich through the direct means of taxation, it likewise loots the poor, albeit through a different set of means that is much more difficult to recognize, and thus much more difficult to counteract.
While looting the wealthy can often be construed as some kind of humanitarian effort to aid the poor, looting the impoverished is a much more difficult enterprise to disguise as a moral good. Thus we will find that the government’s means of taking money from the poor are much more difficult to detect, comprehend, and eliminate than the means of direct taxation that is used to extract money from the wealthier members of society.
The dollar in which the majority of Americans receive their wages or salary has no absolute, set value. We see this in the fact that the value of the dollar is constantly fluctuating when compared to gold, silver, or the currencies of other nations (which are all constantly fluctuating in value themselves). “Value” is determined by a wide range of factors, but is based in the fact that human beings are all rational maximizers who are all trying to get what they want while expending the least amount of resources possible to do so. The occurrence of this phenomenon in the mind of every single individual economic actor coordinates the price system in a free market economy.
A given worker making $10.50/hour may see himself as bringing home a constant source of income. However, this is not the case at all due to the constantly shifting value of the dollar. Even in a free and unhindered market, the value of the dollars that this worker takes home each day would fluctuate based on factors like how much liquid currency was actually in existence in the market, how many resources had been invested in banks or stocks, and what amount of resources had been converted into physical capital or products. In the end, the dollar itself has all the value of a flimsy piece of cotton paper – it derives its true value from the productive activities of economic actors who use it as a medium of exchange. In other words, the dollar is a widely accepted “I.O.U.” This would be the case even in the freest of economies. Values of commodities and currencies are always changing based on the effectual demand and effectual supply of the moment.
But, as we all know, we live in anything but a free and unhindered economy. Our supposed “free market” is criss-crossed with a Federal Reserve System that manipulates the value of the dollar at will, a corporate welfare system that socializes the losses of corporations at the expense of the rest of society, and law enforcement policies that weigh the heaviest on those who do not have the time or resources to easily deal with court and lawyer fees, jury duty, and detainments prior to trial, not to mention the fact that the War on Drugs does substantially greater damage to the lower classes of American society than it does good, particularly when speaking of poor African-Americans.
And here’s the scary part – this was all the case before the bailouts and stimulus package that George Bush began and Barack Obama continued and amplified. Not only do these bailouts threaten to massively inflate our currency, spelling disaster for those whose livelihood is based in hourly wages paid in dollars, but it also directly took from all of society, not just the rich or the poor, and gave to a few select corporate entities such as Goldman-Sachs and Wells Fargo. We know this because every new dollar created by the government in the stimulus plan detracted from the value of every dollar already existing in the pre-stimulus economy (or will do so when released into the economy).
Does this sound confusing? It should, because it is, and that’s exactly how the federal government likes it.
While the federal government would tell us that they protect the poor from the exploitation of the rich, economics would tell us that it is in fact the federal government itself that is the greatest exploiter of our nation’s impoverished, and it is this institution that in fact facilitates much of the disparity in wealth between wealthy national corporations and impoverished local communities.
Those of the small government mindset who wish to rally more people to their cause should not go about proclaiming that we should be immediately getting rid of affirmative action and welfare for the poor, but instead should be putting forth a rallying cry against corporate welfare, an inflation-minded Federal Reserve System, and a law enforcement system whose economic penalties weigh heaviest on those with the least money in their savings accounts. It does not have to be out of selfishness that we advocate for a reduction of the federal nanny-state. It can, and should, instead be out of a concern for the poverty and destruction of wealth that is directly generated by this institution’s misguided policies.
By Elliot Engstrom
How many remember this?
Very early on in the life of this Blog, indeed on the second day, I wrote a short article about the NASA mission to the moon, some 40 years after the event. You see, for me that has been the historic event of my lifetime.
I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the Earth. No single space project in this period will be more impressive to mankind, or more important in the long-range exploration of space; and none will be so difficult or expensive to accomplish.
That speech before Congress by President Kennedy was on the 25th May, 1961. I was 16 and was enthralled by the idea of being alive when man first set foot on another planetary body. That came about on July 20th, 1969 at which time I was living and working in Sydney, Australia. I took three days off work, rented a TV and watched every minute of the event.
Exploration is a core need of man. By pushing out the boundaries of our knowledge we continue to offer hope to mankind.
So it is with great disappointment that it has been announced by President Obama that the manned mission programs to the moon are to be severely curtailed – that sounds terribly like political speak for cancelled!
As Eugene Cernan (last astronaut to set foot on the moon) said:
I’m quite disappointed that I’m still the last man on the Moon. I thought we’d have gone back long before now.
I think America has a responsibility to maintain its leadership in technology and its moral leadership… to seek knowledge. Curiosity’s the essence of human existence.
Curiosity is indeed the essence of human existence.
That curiosity and the investment in space exploration by NASA on behalf of the whole world has shown us some remarkable findings about Saturn and it’s majestic rings. Just watch the video segments in this piece from the BBC.
The one-time cost of Cassini-Huygens mission was $3.26 billion. Just 0.3% of the cost of one year’s expenditure on U.S. defense spending.
Science missions like Cassini enhance cooperation between nations, and greatly contribute to scientific progress which benefits everyone.
Perhaps the big Banks would like to pick up the cost of further manned missions to the Moon?
By Paul Handover
What is it about wood?
When I was a very young boy at Grammar School (aka High School) in Wembley, North West London, one of the subjects taught was wood-working. I loved the feel of wood, still do, and the smell of a wood shaving fresh off the wood plane is still remembered. But, for whatever reason, wood and I never got on.
Later on, my first yacht was a pretty little East Coast gaff cutter, built in 1898, with a hull of pitch pine laid on grown oak frames. Her original name was Mimms but this had been changed to Esterel by the time she was purchased by me. Despite needing a lot of remedial work, the over-riding memory was how the hull ‘spoke’ when she was being sailed.
It’s almost as though wood doesn’t die when the tree is felled, it just passes into another phase depending on the use made of it.
So where’s this all leading?
In the issue of The Economist dated November 7th, 2009, there was an obituary about Alan Peters, furniture maker, who died on October 11th, 2009, aged 76. Like all obits. that appear in The Economist this was well published but something about this particular obituary really stuck in my mind. I tore out the page so it could be re-read over the coming weeks.
It’s still on my desk even 6 months later and it prompted me to write about Alan Peters on Learning from Dogs.
Here’s an extract of the obituary of Alan Peters as published in the The Times.
In contrast to many of today’s school-leavers, who look for instant success and celebrity, the furniture designer Alan Peters served seven years’ apprenticeship in the workshop of Edward Barnsley, which then operated without power tools. When interviewed last year Peters was still proud that he swept the workshop floor quicker and better than anyone else. His eagerness to share his passion and knowledge of furniture design and furniture making was a theme of his life.
And here’s another reflection from David Savage who studied under Alan Peters:
Damn, Damn, Damn, I am getting fed up writing obituries on dead furniture makers. Why can’t they just go on for ever.
I knew Alan quite well. He was a role model and a mentor when I really needed one. This would be way back in the late 1970s when there were very few people making modern furniture in a barn in Devon which is what I wanted to do. Even fewer making a living doing it. I had all the questions and Alan as far as I could see had all the answers. I spent a short time working with him. I was first in the workshop in the morning and last out in the evening. I’m sure he got fed up with my questions but he patiently answered. He gave and gave and gave. When I was set up he helped me get into the Devon Guild of Craftsmen and much later he would come to my workshop in Bideford to give Saturday seminars showing slides of his work and trips to Japan and Korea. He was an inspiration I know not just to me but to a generation of makers. I miss him.
Question: How many furniture makers does it take to change a light bulb?
Answer: Ten, one to change the bulb and nine to discuss at length how Alan would do it.
By Paul Handover
Here’s a novel idea – make markets be markets!
I apologise for the rather trite sub-heading but it was a bit of attention grabbing to promote the results of a recent conference called Let Markets Be Markets. It was published by the Roosevelt Institute and had one very impressive line of speakers.
One of the speakers was Simon Johnson of Baseline Scenario fame, a Blog that Learning from Dogs has followed since our inception.
Here’s 8 minutes of Simon pulling no punches.
If you want to read and watch other presentations, then Mike Konczal’s Blog Rortybomb is the place to go.
As this Blog has repeated from time to time, this present crisis is a long way from being over.
By Paul Handover
Sources and types of risk in U.S. and other bonds.
This is part 2 of a multipart [Part One is here, Ed.] series on the factors that drive U.S. and foreign bond prices and yields.
Recall that a bond’s price is the present value of its coupons (if any) and face value (or principal or par value). Let’s keep things simple for now and assume a zero-coupon or “discount” bond.
One thing of interest to note first: As we move forward in time from the issue date toward the maturity date, and the number of periods between now and the maturity date falls, the price of a discount bond rises toward the face value of the bond, even with no changes in the interest rate. At maturity, the price of the bond equals the face value. Only unexpected changes in the effective return on a bond can change the natural upward progression of its price toward face value between the issue and maturity dates.
This example makes clear that the (annual) yield on a bond, simply put, is driven by the difference between the price paid for the bond and the cash flows it generates, that is, the difference between “dollars out” today and “dollars in” later.
The “dollars out” are known because we pay a given price for the bond today. The “dollars in,” consisting of coupons (if any) and the face value of the bond, are also “known” in that they are specified in a contract at the time the bond is issued. The realized value of these dollar returns is, however, subject to many different sources of uncertainty or risk. A short list includes:
Interest rate risk: how sensitive the price of the bond is to changes in interest rates over the life of the bond. Interest rate risk is higher for bonds with a longer maturity (more time for the unexpected to happen), a lower coupon (more of the value of the bond is tied up in the principal), and a lower initial yield (a 1 percentage point change in interest rates represents a higher relative change in low yields). Floating-rate notes and bonds have much lower, though not zero, interest rate risk.
Reinvestment rate risk. Bondholders may reinvest their coupons at the then-prevailing rate of interest. As those market rates of interest change, the return on reinvested coupons becomes more uncertain. The higher the coupons, the more frequently they are paid, and the longer the maturity of the bond, the higher reinvestment rate risk.
Credit or default risk: the risk that the issuer will default on the payments of the bond, which reduces the amount and value of “dollars in” relative to price paid, lowering the earned yield on the bond. Credit risk is frequently measured as the credit spread over like Treasuries, which are assumed to have zero credit risk. Credit risk includes downgrade risk, where a credit rating agency lowers the rating on an issuer as their ability to repay the debt is brought into question.
Call risk: the risk that a callable bond will be called by the issuer. Since a bond is typically called only when it’s in the best interest of the issuer, the call feature is systematically harmful to the bondholder. Prepayment risk reverses these risks: prepayment is good for the bondholder, and bad for the issuer.
Exchange rate risk (that the value of the repaid currency will be lower), inflation risk (that the value of the repaid dollar will be lower), and event risk (natural disasters, corporate restructurings, regulatory changes, sovereign or political changes) round out the list of broad types of risks that drive bond yields.
Next time: why the types and level of risks are so difficult to measure and predict.
by Sherry Jarrell
When lending is motivated by politics, losses are not far behind.
Years ago, in the summer of 1980, I worked as an intern in the Federal Home Loan Bank Board at the Department of Agriculture. I was a senior in college majoring in business and had been accepted to the University of Chicago doctoral program. I didn’t want to take the internship because I wanted to take more courses over the summer to help prepare me for the rigors of grad school, but my college advisor had openly worried that I was far too serious for a young person. He strongly encouraged me to accept the internship and take a break from academics before I immersed myself in graduate school, and buried myself once again in all things economics!
I agreed, but only after I had arranged to take 6 credits of independent study in D.C. I chose to examine the Negative Income Tax program, one of the largest social experiments in U.S. history. More on that at another time. Today, I want to talk about what I learned from being an employee of the U.S. federal government.
The first thing I learned was that the “problem” with government work is not the people; well, not all the people. There was one man who spent his entire day going back and forth to feed quarters to the parking meter rather than pay for public transportation or do his work. He represented the worst in government employees. Most all of the others I met were hard-working and honest people, trying to do a good job and make a difference.
No, I learned that the real problem was the way the “work” was done in government. I worked for the Federal Home Loan Bank Board (FHLBB) that summer, which was one of the largest lenders in the world. The FHLBB was responsible for small business, rural, agricultural, and economic development lending. My job was to review loan applications from community groups, fairs, farmers’ markets, and various municipal organizations to make sure that they were complete.
We did not analyze the applicants for creditworthiness. Instead, if the application was correct and complete, and satisfied the application process, it was approved. The FHLBB, which was publicly trashed by the first President Bush as being largely responsible for the savings and loan crisis, was abolished and replaced by the Office of Thrift Supervision (OTS) under the Department of the Treasury in 1989.
The OTS eventually expanded its oversight to companies that were not banks, including Washington Mutual, American International Group (AIG), and IndyMac, all implicated in the current U.S. financial crisis.
Little did I know back in 1980 that I was witnessing, from the inside, a government lending process that would lead to the most significant financial crisis since the Great Depression. Looking back, the outcome was perfectly predictable: when politics replaces profits as the motivation of the lender, it should be no surprise that losses result.
By Sherry Jarrell
How safe is flying?
Wikipedia have an interesting, and well referenced, entry on Air Safety. Within that entry is a table showing comparing deaths by air to other forms of travel.
The table in Wikipedia is much easier to read, it’s here, but the data is shown below for those that do not want to click through.
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There are three main statistics which may be used to compare the safety of various forms of travel:
| Deaths per billion journeys | |
|---|---|
| Bus | 4.3 |
| Rail | 20 |
| Van | 20 |
| Car | 40 |
| Foot | 40 |
| Water | 90 |
| Air | 117 |
| Bicycle | 170 |
| Motorcycle | 1640 |
| Deaths per billion hours | |
|---|---|
| Bus | 11.1 |
| Rail | 30 |
| Air | 30.8 |
| Water | 50 |
| Van | 60 |
| Car | 130 |
| Foot | 220 |
| Bicycle | 550 |
| Motorcycle | 4840 |
| Deaths per billion kilometres | |
|---|---|
| Air | 0.05 |
| Bus | 0.4 |
| Rail | 0.6 |
| Van | 1.2 |
| Water | 2.6 |
| Car | 3.1 |
| Bicycle | 44.6 |
| Foot | 54.2 |
| Motorcycle | 108.9 |
It is worth noting that the air industry’s insurers base their calculations on the number of deaths per journey statistic while the industry itself generally uses the number of deaths per kilometre statistic in press releases.
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Interesting to see how air travel varies in terms of comparative safety depending on how it is measured. But also interesting to see that however it is measured, riding a motorbike doesn’t come out so well.
Finally, that word’ billion’ is too easy to throw away, as it were. A billion hours ago was over a 114,000 years ago – when mankind was living in the Stone Age. A billion kilometres would represent 114,285 trips between London and Los Angeles.
If you are interested!
By Paul Handover
Learning from Dogs muses the new book from Yves Smith
In Econned, Yves Smith, founder of Naked Capitalism, argues that the economy was doing just fine in the regulated environment up to the 1970s. Then began the work of the Chicago economists who challenged Keynesian economics and touted the benefits of deregulation which eventually led to the financial crisis we have today.
Yves argument is internally consistent and well researched, but ignores some factors that I think would change the conclusions drawn from her work.
First, Yves notes that the primary reason that economists are not useful to the real world is that economic research presumes equilibrium. Smith misses the point here, but it is understandable. It took me years of study and contemplation to fully appreciate that an equilibrium simply gives economists a point of reference, a common base, from which to study shocks and movements. In and of itself, equilibrium is not interesting or important. But movements to and from equilibrium are of real interest because they enable us to study and try to predict how individuals will react to incentives and changes in market conditions.
Second, we have to put the contributions of the Chicago economists of the 1970s into context. Up until that time, the only real school of thought in macroeconomics was based on Keynes, who presumed that markets fail and that the government must play an active and large role – primarily through government spending and taxes — for the economy to perform well. Keynes’ work was a reaction to the Great Depression.
Friedman’s monetarism also sought to explain the Great Depression, but focused on the role of monetary policy on the economy. This work showed that the missteps of the Federal Reserve was the primary cause of the depth and length of the Great Depression, and that long-term accommodative monetary policy causes inflation. This body of work did not stress deregulation, although it did lean more heavily on enabling private market solutions than on replacing them with government solutions. Neither theory is complete; Keynes focused on the short run (“In the long run, we are all dead” is a rather famous Keynes quip) and Monetarism focused on the long run.
There was a second large body of work that came out of the University of Chicago during the late 1960s and 1970s. This research documented the tremendous costs of regulation. I know this literature personally and believe that its conclusions are very sound: it shows that any effective regulation limits either the quantity or price of a good or service away from what it would have been without the regulation. In fact, in my view, it was the passage of regulations requiring certain lending behavior that set off the series of events that led to the crisis, which is the exact opposite argument from what Ms. Smith makes.
By Sherry Jarrell
A lesson for all of us
An economics professor at a local college made a statement that he had never failed a single student before, but had once failed an entire class.
That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.
The professor then said, “OK, we will have an experiment in this class on Obama’s plan“. All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A…
After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little. The second test average was a D! No one was happy.
When the 3rd test rolled around, the average was an F. The scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.
All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great but when government takes all the reward away, no one will try or want to succeed.
Could not be any simpler than that.
By Bob Derham
Learning from Dogs 