IKEA economics

I knew IKEA was a crazy place, but it gets crazier. Ironically, when it rains, IKEA reduces the price of umbrellas with half. I find it hard to believe that IKEA do not know basic economics. Rain presumably increases the willingness to pay for umbrellas, so a rational  reaction to rain would be to increase the price.  (What about efficiency?) Perhaps the stunt is meant to get people to smile while they’re waiting at the register. Or perhaps it is just the occasional diversion IKEA executives afford themselves on a boring day. Or, perhaps it is meant to attract gamblers? The rain may stop before you reach the counter.

Carbon Footprints

Hat-tip: Env-Econ, Treehugger

Interesting Troublesome Words

I’d like to think of myself as a writer. As an economist, I am one, it just does not feel like it all the time. As a writer, I decided it would be useful to read Bill Bryson’s Troublesome Words. (To just have it on the shelf is not a good alternative. It needs to be read and reread on occasions.) Troublesome Words is simply a list of words and phrases which writers need to show special care, at least according to Bill Bryson. (His alternative title: A Guide to Everything in English Usage That the Author Wasn’t Entirely Clear About Until Quite Recently. Humble guy, this Bryson. A great writer too, by the way, his A Short History of Nearly Everything is highly recommended.)

Reading a list of words, although commented, may sound boring. Admittedly, at times it is, but Bill Bryson’s approach and style is refreshing and amusing. A good example is put on the back cover:

Barbecue is the only acceptable spelling in serious writing. Any jounalist or other formal user of English who believes that the word is spelled barbeque or, worse still, bar-b-q is not ready for unsupervised employment.

If I should criticise anything, it would be that the book is more aimed at journalists and perhaps authors of novels and the like, rather than at technical and scientific writers like myself. But of course, there are more journalists than scientists in the world.

I’m astray. My intention here was to post a few noteworthy entries from the book (and probably more in later posts as I work my way through the book; right now I’m somewhere on ‘F’):

exception proves the rule, the. A widely misunderstood expression. As a moment’s thought should confirm, it isn’t possible for an exception to confirm a rule – but then that isn’t the sense that was originally intended. Prove here is a ‘fossil’ – that is, a word or phrase that is now meaningless except within the confines of certain sayings (‘hem and haw’, ‘rank and file’ and ‘to and fro’ are other fossil expressions). Originally prove meant ‘test’ (it comes from the Latin probo, ‘I test’), so the exception proves the rule meant – and really still ought to mean – that the exception tests the rule. The original meaning of prove is preserved more clearly in two other expressions: ‘proving ground’ and ‘the proof of the pudding is in the eating’.

Never liked that expression, now I have good reason too. I just noticed that Bryson’s punctuation is slightly at odds with what I’m used to (in particular, see his placement of commas relative to quotation marks). Perhaps it’s an English thing, perhaps it is contentious. (Bryson has an appendix on punctuation, by the way, I’ll get to it in a hundred years, perhaps, with my normal progression). Anyway, another interesting entry:

fact that. This phrase made Strunk ‘quiver with revulsion’ and he insisted that it be revised out of every sentence in which it appeared. That may be putting it a trifle strongly. [Perhaps, but Strunk wrote his book almost a hundred years ago.] There may be occasions where its use is unaviodable, or at least unexceptionable. But it is true that it does generally signal a sentence that could profitably be recast. ‘The court was told that he returned the following night despite the fact that he knew she would not be there’ (Independent). Try replacing ‘despite the fact that’ with ‘although’ or ‘even though’. ‘Our arrival was delayed for four hours due to the fact that the ferry failed to arrive’ (Sunday Telegraph). Make it ‘because’.

UPDATE: More entries worth checking out: abbreviations, allusion, anticipate, between, but, claim, compound, dangling modifiers, data, double meanings, double negatives, due to, and enormity. Long list, I know, better read the whole thing while you’re at it.

Economists and Statistical Methods

From an ancient (but readworthy) JPE article by Christopher Sims:

Economists must inevitably try to sort out systematic patterns from random variations in the past-if only because, unassisted, policymakers would do the same thing more naively. In doing so economists will need probabilistic models and statistical methods of inference. Like historians, though, they must accept that a single agreed view of the causal structure of the record they examine will never emerge [Sims, C. A., 1981, What Kind of a Science Is Economics? A Review Article on Causality in Economics by John R. Hicks, The Journal of Political Economy, 89 (3), pp. 582-582].

My Erdös Number

A friend e-mailed me his Erdös number,* which was 7 but turned out to be 5 (given that discussion papers counts). My number is 7 without discussion papers (Erdös -> Davies -> Schuss -> Mangel -> Plant -> McKelvey -> Sandal -> Me) or 5 with discussion papers (Erdös -> Linial -> Katznelson -> Radner -> Groves -> Me). You can find your own number on The Erdös Number Project page.

* From The Erdös Number Project: Paul Erdös (1913–1996), the widely-traveled and incredibly prolific Hungarian mathematician of the highest caliber, wrote hundreds of mathematical research papers in many different areas, many in collaboration with others. [...] Erdös’s Erdös number is 0. Erdös’s coauthors have Erdös number 1. People other than Erdös who have written a joint paper with someone with Erdös number 1 but not with Erdös have Erdös number 2, and so on. If there is no chain of coauthorships connecting someone with Erdös, then that person’s Erdös number is said to be infinite.

Bizarro: Environmental tragedy

Don’t have much time for blogging these days, but I always have some time for comics!

Screen Dump

Sometimes even relatively mundane tasks can appear fancy:

Quote of the Day

“Congress is so strange,” a Russian immigrant once observed. “A man gets up and says nothing. Nobody listens. Then everybody stands up and disagrees.”

Amusing. The quote is from Buchholz’s New Ideas from Dead Economists, which I’m still(!) laboring away at.

The Early, British Hegemony in Economics

I’m still reading New Ideas from Dead Economists by Todd Buchholz (progressing slowly; see Living Among the Dead). Although I haven’t seen much to the promising new ideas yet, Buchholz give a great, historical account of the development of economics.

The father of Economics was, as every economist know, Adam Smith, at least if we are talking about economics as its own, scientific disipline (and we are!). Adam Smith was from Scotland. Given that and Brittain’s position as world leader (in politics, trade, military, you name it), it comes as no surprise that all the early, great economists were British. They were also all rather close; this is how Buchholz begins the chapter on John Stuart Mill:

Almost all renowed British economists since Adam Smith have been linked through close friendships. Remeber that Smith’s good friend David Hume was a “godfather” to Thoms Malthus, who was an intimate friend with David Ricardo, whose comrade James Mill encouraged his economics. James begot John Stuart Mill. A slight break occurs since Mill did not befriend his successor Alfred Marshall. But Marshall learned from Mill’s works (and from the economist F.Y. Edgeworth, nephew or Ricardo’s friend Maria Edgeworth) and then thaught Keynes, who dominated British economics until World War II and produced numerous prominent disciples [p. 91].*

No surprise, perhaps, that the early development of a new field has a geographical structure, so to speak; after all, they had to learn from each other and compete for the same, few positions. Anyway, that it was a hegemony is beyond doubt:

In 1848, Mill published his chief work on economics, Principles of Political Economy. For decades it dominated the book market like monopolies Mill discussed within its pages. Oxford relied on the Principles until 1919, probably because its successor was written by Marshall, a Cambridge man. Indeed, the works of all the great economists illuminate long paths. [Here it comes:] From 1776 to 1976, just five books regined over economics in nearly unbroken succession: Smith’s Wealth of Nations, Ricardo’s Principles, Mill’s Principles, Marshall’s Principles, and Samuelson’s Economics. What they lack in imaginative titles, they make up in endurance [p. 102].

Looks like I just got five new books on my ‘buy and read’ list. Perhaps a tall order, but 200 years of economics, almost 90% of its history, in just five books sounds rather cheap. (But how many volumes?)

* New Ideas from Dead Economists, Revised Edition, Todd G. Buchholz, 1999, Penguine Books.

Big, Unsolved Problems in Economics

Earlier this year, experts gathered at the hub of the universe (which is Harvard, it seems) to suggest and debate the big, unsolved problems in the social sciences, economics between them. From a press release:

Initiated and funded by the non-profit Indira Foundation, this effort was inspired by David Hilbert, who challenged the world to solve 23 fundamental mathematical problems in 1900. Since then, mathematicians have solved 10 of the now-famous ‘Hilbert Problems’, creating new fields of knowledge along the way.

“Hilbert made two powerful observations,” said Nicholas Nash, a member of the Indira Foundation. “First, having important, unsolved problems is essential to the vitality of a discipline. And, as important, by identifying those problems, we can inspire future generations to solve them.”

Taleb was there, not surprisingly, and suggested the ‘Black Swan problem’:

How can we be robust against “Black Swans”; that is, how can we (1) identify domains where these consequential rare events play a large role (these are too rare for any statistical models track them properly), and (2) instead of predicting Black Swans, build systems and societies that can resist their shocks.

King suggested the problem of international institutions:

What is the relationship between strong international institutions and international cooperation? Do strong international institutions lead to or result from international cooperation?

King also suggested a methodological problem:

A major methodological problem is how to avoid (or ameliorate) post-treatment bias in big social science questions. Post-treatment bias occurs when the causal ordering among predictors is ambiguous or wrong or when, in an attempt to control for confounding variables, one controls away a consequential variable.

Dealing with Referees

It is hard and frustrating to work on a revision and a letter to the referee, in general, but particularly when the editorial board finds it hard to decide whether to ask for a revision or that the paper is not suited for their journal.

In weak moments, I see the value and purpose of the peer-review process the way it currently works in economics and most other scientific disiplines today. They are, however, weak moments. What comes out of the peer-review process? Usually a long list of minor issues which, for the general finding, has no real importance. Sometimes, of course, major flaws are pointed out. Ultimately, peer-review (is supposed to) guarantee quality and relevance.

How would the world be like without the process? Crazy, perhaps? Would it be a world where one could not trust the written word, and where quality, relevance, and importance were without meaning? Of course not. Instead, every journal would have an open-source, continually ongoing review process, where the responsibility for quality and relevance was placed solely with the author and the editorial board; where poor work would be openly critisized in responses and comments; where authors could focus more on developing ideas and writing skills (instead of excuses, irrelevant details, and cover-up operations); and where authors would be forced to think harder about problems before submission (and not during the revision). Scientists would perhaps write more monographs and fewer articles as the main difference (the peer-review process) ceased to exist, and as the monograph are better suited to report on many scientific findings. Citations would be a better measure of importance and influence; today, a good deal of the references are included on the whim of referees. Finally, perhaps it would dawn on us that knowledge evolve, and that to be knowledgable on a given subject requires familiarity with a whole literature, not only a handful of articles from the leading journals.

Keynes on the Master Economist

Keynes once wrote that the ‘master economist’ must fulfill an extraordinary set of attributes:

He must be a mathematician, historian, statesman, [and] philosopher [...] He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician.*

* The quote is from an essay on Alfred Marshall.

Living Among the Dead

A colleague recommended New Ideas from Dead Economists by Todd G. Buchholz. I just started it, and progress is as always rather slow, but I think I’m in for a fun read; the following paragraph from the Acknowledgements holds promise of the kind of dry humor probably characteristic of academics, but which I like nonetheless:

I want to apologize to those economists mentioned in this book who are living today. The title, New Ideas from Dead Economists, is not meant to refer to them, their personalities, or their public speaking abilities   although I cannot be held responsible for resemblances. They should take comfort in the honor of being mentioned alongside Smith, Ricardo, Keynes, and others.

Quote of the Day

It is just as foolish to complain that people are selfish and treacherous as it is to complain that the magnetic field does not increase unless the electric field has a curl.
- John von Neumann (1903-1957)

The Ensemble Kalman Filter

The standard Kalman filter and even the Extended Kalman filter (for nonlinear problems) proved inadequate. I’ve now placed my hope in what’s known as the Ensemble Kalman Filter:

Another sequential data assimilation method which has received a lot of attention is named the Ensemble Kalman Filter (EnKF). The method was originally proposed as a stochastic or Monte Carlo alternative to the deterministic [Extended Kalman filter] by Evensen (1994a).  The EnKF was designed to resolve the two major problems related to the use of the [Extended Kalman filter] with nonlinear dynamics in large state spaces, i.e. the use of an approximate closure scheme and the huge computational requirements associated with the storage and forward integration of the error covariance matrix.

The EnKF gained popularity because of its simple conceptual formulation and relative ease of implementation, e.g. it requires no derivation of a tangent linear operator or adjoint equations and no integrations backward in time. Furthermore, the computational requirements are affordable and comparable to other popular sophisticated assimilation methods [...].*

* Excerpt from Geir Evensen’s Data Assimilation: The Ensemble Kalman Filter, 2007, p. 38.