Archive for November, 2008

Jim argues for an inflation target

November 25, 2008

Jim Hamilton argues that the Fed should adopt an inflation target to get to grips with the current economic situation in the US. This is interesting. Norway’s central bank officially adopted an inflation target of 2.5%  in, I think, 1999. Jim has earlier made it clear that the standard measures the Fed usually use to govern the economy is failing; I reported on this earlier. Jim describes inflation targeting as ‘Plan C,’ and discusses why previous plans have failed. The reason why he sees it necessary to dig deep is the latest report on the Consumer Price Index. The report is dramatic; it shows that prices fell by 1% in October. It may sound innocent, but it amounts to 12% over a year. And it may get worse before it gets better. Jim admits that the Fed is running out of options, but he also thinks targeting inflation is a powerful measure that will work;

Targeting inflation is not just another arrow in the quiver; it’s a bazooka, at least for purposes of preventing deflation. Time to take aim and fire.

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A Smilansky paradox: Beneficial Retirement

November 23, 2008

This is my second post on Saul Smilansky’s ’10 Moral Paradoxes.’ My first post addressed the paradox of Fortunate Misfortune. Now, I would like to address the second paradox Smilansky discusses in his book; the paradox of Beneficial Retirement.

 Smilansky claims that a large share of those in a particular job/position should consider retirement because of the likeliness of someone better than them replacing them; a better replacement would be beneficial. Particularly, this applies to typical ‘offical’ jobs (e.g., doctors, researchers) that often are less exposed to competition than many jobs in the private sector (at least once you are in the job). I don’t like this idea. This implicitly demands that everyone (because the argument really applies to everyone) put everyone else above themselves, and I think that is to demand (and hope) for too much from people. And, the situation does not exactly support a stable society, where half the workforce (at any given time, the way I read Smilansky) gave up their job and went searching for other jobs or did not contribute at all. It hardly sounds like a beneficial situation. I guess that since Smilansky writes books on philosophy (instead of applying vacant jobs), he considers himself at least in the top half among philosophers. I am alarmed; me, an amateur philosopher, easily finds holes and problems in much of his thinking. On p. 28, Smilansky claims that the difficulty can be seen when he claims that a doctor cannot ‘sensibly and consistently’ make the following statements:
1. I am a doctor because I want people to be healthier; and
2. I will continue to work as a doctor.
(Smilansky presents the statements for three different examples, but that does not make any difference and is unecessary, I think.) Well, I conjure that many doctors are not doctors because they want people to be healthier, but rather because of a range of reasons, possibly, but not necessarily including wanting people to be healthier. Also, I disargee with Smilansky’s claim that the replacement is probably better than those employed for half the workforce. (Half is very much; where do all those people come from; is there enough buss drivers in Norway to replace half of them currently employed with those unemployed?) Of course, half is just a number and could have been whatever, the point is that it is relatively large. This particular issue requires some refinement, and I am surprised that Smilansky does not discuss this. The betterness of a replacement employee depends on the time scale the skills are measured; I am certain that seniority and experience is very important in many jobs, and when a replacement has gained that seniority and experience he might turn out to be better than the first employee. Ironically, he would never get the chance, because all these recently retired competitors with a lot of experience is knocking on the door and the newcommer is morally required to give up his job, according to Smilansky. Secondly, the benefit of the better replacement has a large time lag compared to the inital retirement of the previous emploee; the benefit is less worth when we have to wait for it.

Following my arguements above, I think there are two big problems with the paradox of Beneficial Retirment. First, it would not be beneficial if people were to consider retirement all the time. Second, it doubt the benefits to be reaped. Paradoxically, Smilansky may be aware of these problems, because he imposes a set of ‘underlying conditions’ for the paradox which avoids the problems I raise (p. 24). I find no reason to excuse Smilansky, however, for imposing unrealistic conditions. The conditions turns the paradox into a hypothetical paradox which may find its best use as entertainment.

Once, the new musical

November 23, 2008

OnceI saw this movie with my wife this summer, and I just loved it. I was kind of skeptical when I learned it was kind of a musical. Well, this is the new musical! The music is teriffic! (And there’s no inappropriate dancing!) Not that I put too much weight on it, but the movie won an Oscar for ‘Best song.’ In most musicals, you have actors singing or pretending to. In this one you have musicians singing and acting (or pretending, I don’t know). It works very well, I guess they are helped by the fact that the movie is sort of ‘lo-fi’ and certainly ‘lo-budget’. The main male character is played by Glen Hansard from the band ‘The Frames.’ Much of the music in the movie is by him and his band. Marketa Irglova plays his opposite; she is occationally a guest singer in ‘The Frames.’

One of the best songs in the movie (watch it, the scene with this song had such an impact on me) is ‘Say it to me now’ and is in the first scene if my memory serves me right. I can certainly envision that the song became somewhat iconic for the movie; it is used as ‘promotion’ in the clip below. You may don’t want to see it if you want to keep it pristine until you see the movie, put I cannot resist posting it here. It is such a great song.

Presentations and disaster avoidance

November 20, 2008

I was in a seminar today with a very good presenter. It is always pleasant to listen to good presenters. Many presentations I attend are not particularly good, however. Both going to presentations and giving presentations is inherent to my business. I will soon have to prepare for my presentation at the biannual Bergen PhD Seminar in Economics, for example. While I was in the U.S. someone adviced me to check out this list of tips on how to avoid disaster in presentations. The tips are aimed at grad-/PhD students in economics, but most of them apply to most academic presentations. Let me add a couple of tips myself:

  • Skip the outline/content slide; it’s boring, doesn’t bring the talk forward, and almost always the order of things is obvious, irrelevant, and does not carry a message. (Have you ever heard someone ask a question about the outline slide?)
  • Don’t show stuff you don’t intend to talk about, for example, don’t show a table with 500 numbers in it when you only intend to bring attention to a few of them. Pull out the necessary information for your talk. If you want to, you can put the table on a slide at the end of your presentation. Then you can flip to it (press ‘End’ for gods sake, don’t page through all your slides) if someone asks a question that requires more information/different numbers. This idea applies more generally to stuff that don’t necessary have to be on your slides; I once put all my equations in the back of a presentation and used only words and pictures instead, and everybody still understood my model (well, those who didn’t understood did not ask anyway). I think equations and symbols are overused in presentations by economists.
  • Don’t make too many jokes, but a few are okay if they work.
  • Stand up. I have made a few presentations sitting down because the presenters before me did, but it’s much better to stand up. Noone will wonder if you try to hide behind your computer or doubt who is in charge.
  • Know your presentation. A trick is to write out what you want to say on each slide, then read it out loud to yourself a couple of times while flipping through your slides. Then you can make adjustments underway, and you will probably be able to give the talk without the manuscript or notes. It is an idea to have the manuscript or some notes available at the presentation anyway, in case you panic, make disaster, forget what to say or whatever. The procedure takes time, of course, but is definatly worth it for important presentations, and as a student every presentation is important.

Picture of the day

November 19, 2008

Fomalhaut b

NASAs Hubble Space Telescope has taken a picture of a planet outside our solar system for the first time ever in visible light. The planet, Fomalhaut b, orbits the star Fomalhaut which is found in the constellation Piscis Australis, also knowns as the ‘Southern Fish.’ The star is located 25 light-years away from our solar system, all according to NASA. That is, it would take you 250 years to travel there at the ‘limit’ of Newtonian physics, not that we are able to travel at anything close to such speeds. I don’t know if you wanna go there anyway; a Fomalhaut b year is 872 Earth years. Of course depending on the seasons there, it would be nice to be born in the summer and never to worry about the winter. But I guess every new year party is quite fun as well! Boring, maybe, to never celebrate birthdays; everyone on Fomalhaut b is zero years! (That is, everyone with something close to a human life span.) NASA hopes that future technologies can check for water vapor, something that could indicate life. As far as I understand, the planet is quite big; it’s three Jupiter masses (which adds up to approximately 950 Earth masses), but of course the size depends on its composition (Jupiter is mostly hydrogen).

A sick system

November 19, 2008

Talking of paradox, it may seem paradoxical that when I comment on economic issues here on the blog, I mostly comment macroeconomic issues; I am a resource and environmental economist, or more generally a microeconomist. Anyway, the Fed funds rate in the US has shown anomalous behaviour the last few weeks. Jim explains: The Fed funds rate is the interest rate at which institutions lend their deposits held in accounts with the Federal Reserve to one another overnight. Currently, the Fed is offering a 1% interest rate on such deposits, but the effective market rate is hoovering around 0.35%. This seems paradoxical (both ironic and illogical):

If you’re a bank and there’s a GSE out there willing to lend fed funds at 0.35%, how much do you want to borrow? Let’s look at the math. If you borrow $1 billion, you pay 0.35% interest and earn 1.0% from the Fed for just holding those funds overnight, from which you’d net $6.5 million over the course of a year. If you borrow $10 billion, you’ll earn $65 million. Totally risk-free, $65 million for your bank as pure profits. Here’s the question– How much would you like to borrow?

Me, I’d like to borrow a few gazillion.

The market does not work. A possible explanation is that carrying out the necessary transactions to take advantage of the situation, banks would see their leverage ratio decrease. Leverage has become (more) painful to banks after the financial breakdown in September. Jim comments:

I have to say that if this is the explanation, it is profoundly disturbing to me. If banks indeed are finding themselves hamstrung to the point that they are unwilling to pick up millions of dollars that are just lying around on the sidewalk, absolutely risk-free, then how can they possibly be expected to function in their traditional role of funneling capital to legitimate investments that all necessarily entail some risk? If this is indeed what is going on, we should be looking at the spread between the effective fed funds rate and the interest rate paid on excess reserves as another indicator of a profoundly sick financial system […]

Fortunate Misfortune, a philosophical paradox?

November 18, 2008

Saul Smilansky's 10 Moral ParadoxesI’m reading Saul Smilansky’s ’10 Moral Paradoxes’. It is a very small book, and according to Smilansky it addresses a neglected field in ethics (p. 2). I enjoy philosophy (or at least I think I do; I’m afraid I’m don’t really know what philosophy is; what I’m familiar with is mainly philosophy of science), and I find paradoxes entertaining, so ’10 Moral Paradoxes’ caught my attention at some point.

I have many problems with this book (more than I remember actually; I have to start to keep notes) and I want to discuss some of them here on my blog. Before I get to ‘Fortunate Misfortune’, however, I should make (somewhat) clear what Smilansky thinks of as a paradox. There’s two extreme and oposite ideas of a paradox; a paradox is a logical contradiction, or merely something unexpected or ironic. Smilansky deliberatly places himself somewhere inbetween these extremes, and does not require a strict logical contradiction but still wants to be ‘quite rigorous’ in what he considers a paradox (p. 3). The way I see things, what he discusses is often merely hypothetical paradoxes, and I ask: Is a hypothetical paradox a paradox, and, more important, is it interesting? I could give you an example of what I mean, but I won’t; I trust you are able to conjure a hypothetical paradox yourself. Is it interesting?

So, the first chapter in ’10 Moral Paradoxes’ concerns Fortunate Misfortune (capitalized to be safe). Smilansky claims that sometimes, misfortune can be fortunate and that such fortunate misfortune is paradoxical. Well, I do not disagree to the paradoxical figure of speech (fortunate misfortune), but I do only agree to it in the ironic sense of paradox; if one should be more strict in what one regards as a paradox, Fortunate Misfortune is not a paradox.

Let me be more specific. To illustrate what he means by Fortunate Misfortune, Smilansky provides examples (p. 12) (I observe that philosophers more than anyone argues through examples and I find it highly dissatisfying; I touched upon my dissatisfaction with examples as ‘definitions’ earlier). His main example is that of Abigail who were born with breathing difficulty and a muscle disease that made it hard for her to use her legs. Her doctor told her to swim alot. Later, her breathing and legs became normal, but she continued to swim and became a world champion swimmer. The point is that Abigail had misfortune early in life, but in the end it turned out to be a fortune for her because it introduced her to swimming. (Smilansky provides deails to ensure that she would probably not swim much if she was normal as a child.) First of all, for there to be a paradox, the misfortune has to be the deterministic cause of her later fortune. Such determinism is impossible in practice (to become a world champion swimmer you need the right genes; with those genes she might have become sucessfull in some other sport or something else for that matter; only getting those genes is fortunate as beeing conceived is a lottery; fortunate circumstances made it possible for her to start swimming at an early age, and I can go on listing necessary fortunes in her life for her to become a world champion swimmer) and Smilansky’s Fortunate Misfortune paradox is at best hypothetical, and not a very interesting one. Second, Smilansky points out that he only considers cases where the misfortune has been severe or serious to qualify for his sense of paradox (p. 13). The later fortune has to be equally ‘severe’ as it is supposed to compensate Abigail for her sufferings in her childhood. Can later fortune compensate one for earlier misfortune? (A technical argument here is discounting, and makes the paradox dependent on whether Abigail is forward or backward looking (I just realized that I don’t really know how to treat backward looking discounting!), or whether it is an independent philosopher who observes and assesses the paradox. Abilgail, by the way, is most probably backward looking as anything else would remove the example so far away from reality that it might not be interesting anymore; the Fortunate Misfortune paradox looses interest value as it removes itself from reality in my eyes. And then I haven’t mentioned risk aversion.) And is seriousness truly necessary? I think it would be much less problematic to conjure examples of small misfortunes that were compensated by later fortunes that is conditional on the first misoftunes. The causal issue would also be much easy to establish with smaller events. I am disappointed that Smilansky does not realize this. Another problem is that we cannot observe Abigail’s alternative lives; maybe her illness was only a mild case of what was most probable given whatever conditions that lead to her illness; maybe she could have had an even better life had she never been ill (she could have been an even better swimmer; or been good at something more rewarding altogehther).

I think what Smilansky struggles with in chapter 1 of his ’10 Moral Paradoxes’ is merely a hypothetical paradox. I also wonders what he (and others) put into the words ‘fortune’ and ‘misfortune’. In a lottery where each draw is independent of each other, one can only talk about fortune and misfortune per draw; later fortunes are not dependent on neiter earlier fortunes nor misfortunes. In life, however, things are more complicated. Things depend on each other in ways we don’t understand, and on things we don’t realize matter at all. ‘Fortune’ or ‘misfortune’ then has to apply to a specific set of events. It is misfortunate to become sick. It is fortunate to have a great talent. But when one combines events, like ‘become sick, start training, get well, be stronger than before’, one may call that chain fortunate since one ends up stronger than before (here I go, arguing in examples myself, jeez), and still consider it unfortunate to become sick. I don’t see a paradox here; the fortune and misfortune applies to different sets of events; they operate on different scales.

Even though (or maybe because) I have several problems with ’10 Moral Paradoxes’, I still find it an interesting and rewarding read. Particularly, I enjoy its brevity. If there’s one thing many academics (myself included (ok, semi-academic), see above for example; not exactly brief) need to pay more attention to, it is the art of brevity. Many of the paradoxes under scrutiny spur ideas and new thoughts, and I plan to discuss some of these later. So stay tuned for more Smilansky!

Dungen – my new favourite

November 17, 2008

I got a new favourite band: Dungen from Sweden. Dungen plays psychedelic rock with influences from jazz, indie, prog, and folk music. Dungen has been around for quite a while, I don’t understand why I haven’t discovered them earlier. They released the album ‘4’ last month, here is a small taste of it. ‘4’ is maybe less aggressive than earlier efforts, with more piano and less guitar, something that suits Dungen very well. Dungen’s music varies a lot, both between albums, but also within each album there is a great varitey of themes and styles; the variation is one thing a like about Dungen. Favourite tracks so far is ‘Samtidig 1,’ Samtidig 2,’ and ‘Ingenting Är Sig Likt’ from ‘4,’ and ‘Ta Det Lungt,’ ‘Sluta Följa Efter,’ and ‘Festival’ from the ‘Ta Det Lungt’ album. The ‘Samtidig’ tracks (‘Samtidig’ translates to ‘at the same time’) are seemingly cuts from instrumental jams. A remarkable thing with Dungen is that even though they sing in Swedish, they have gained some sort of popularity in both the UK and US; they’ve been touring and are releasing records there.

Here is more Dungen, where music from ‘4’ is presented in a stripped down setting with only piano and drums. It’s something else!

UPDATE: Forgot to mention their homepage, with news, movies, and all the usual stuff. Check it out!

Hat tip: It’s a Trap.

Jimi Hendrix Experience extinct

November 13, 2008

Jimi and Mitch

The last member of the Jimi Hendrix Experience; Mitch Mitchell, died yesterday. The band is then extinct. It feels ironic that I’ve listened a lot to Jimi lately, although not Experience stuff. My father have always been a great Hendrix fan and I learned to like Jimi early. On my 10th birthday, I got a cassette player and a cassette with Jimi Hendrix. I don’t think I understood it back then, but then; I’ve always been slow. I’ll put on a Jimi Hendrix Experience record tonight.

PS: I may seem that I have extinction week on the blog this week. I don’t, but maybe I should.

Thoughts on a recession

November 12, 2008

Over on Econbrowser, Jim (Hamilton) keeps us updated on the economic situation in the US. He has earlier established that the US economy is in a recession; the question remains how deep the recession will be.

Now, it is not hard to imagine that the consumption level in the US is unsustainable, both in terms of the environment (that is, pollution and climate change) and scarcity of resources. The US consumption level is particularly problematic if the ideal is a more or less global common level of consumption. One may argue that some of the problems with sustainability can be solved by changing the composition of the consumption, but I think such possibilities are limited. The consumption level in the US (and in much of western Europe for that matter) may have to come down to secure a sustainable environment and global development. Would the US be forced to bear on an extensive and long lasting recession for this to happen?

I admit that the argumentation above is speculative and, even worse, vague. If one is optimistic on behalf of science and technology, for example, one may argue that in the future we can consume much more with the same resources as today, and at least some pollution problems will be solved without necessarily changing neither the level of consumption nor its composition. Also, global development will hopefully reduce the population numbers naturally, making a future global high level of consumption less severe on the resources. However, (again) ideally, each country needs to be self-sufficient in the long run, meaning that they produce at least as much as they consume; they cannot have a trade deficit. Currently, the US is running a large deficit. This is a sign that their consumption level is usustainable. It would also be interesting to see who they traded with; if a large share of their trade originates in less developed countries (and I’m afraid that it is), the situation may change when their trading partners develop.

Finally, if it turns out that the US consumption level has to fall and this treatens to put the country and its economy into a deep recession, how far will the US government be willing to go to lessen the stress?

Last.fm: Fancy stuff

November 11, 2008

Since I am the most interesting person on this planet, you can now see what music I’m listening to right here on the blog! I’ve used the last.fm software to log what music I play on my computer for more than a year now. Last.fm provides an RSS feed of my most recent playlist. I have to admit that I often think that what I’m listening to is now public, so I get picky in a weird way (obscurities are always ok; go figure). Right now, for example, I’m listening to one of my favorite artists; Neil Young.

Neil Young

Caribbean monk seal extinct

November 11, 2008

I recently wrote about endangered species. It was then a small surprise to read that the Caribbean monk seal is officially extinct. (What a stupid term; officially extinct. Either it is, or it is not. We don’t know, all we know is that it is quite sure that the seal is extinct. Oh well.) NOAA Fishnews reports that the Caribbean monk seal is removed from the endangered species list; it has not been seen since 1952. I choose to accompany this post with a drawing of the Caribbean monk seal:

Caribbean monk seal

Hattip: Env-econ

Stromatolites

November 10, 2008

It may surprise someone that Stromatolites are the most important organisms on earth; Stromatolites were the first organisms to produce oxygen. Before the Stromatolites came along, the atmosphere on the Earth was a poisonous fog which consisted of carbon dioxide, carbon monoxide, sulphur dioxide, chlorine gas, ammonia, methane, hydro dioxide (water), and other vulcanic gases (more here). The oceans were full of dissolved iron. The Stromatolites began emitting oxygen as a by-product from their energy production (photosyntesis). First, the oxygen reacted with the dissolved iron, which fell out as layers of iron oxide (rust) on the sea floor. These layers became iron ore and is where we get all our iron from today; parts of the earlier sea floor is now found on land and iron can be obtained from the iron ore through smelting. Second, when the iron in the sea was more or less depleted, oxygen started to accumulate in the atmosphere and allowed life on land. Oxygen high in the atmosphere formed the ozon layer which protected the Earth’s surface from radiation from the Sun. The Stromatolites had quite an impact, in other words. Incredible as it may seem, forms of Stromatolites are still alive today. The picture below shows colonies of living Stromatolites in Shark’s Bay, Australia.

Stromatolites in Shark's Bay, Australia

Painting of the day

November 5, 2008

Aftur av gravarferd

In desparate efforts to avoid working on my thesis, I found the above painting on my computer today. The painting is called ‘Aftur av gravferð’ (Something like ‘Return from a funeral,’ I think), painted by the Faroese Samuel Joensen-Mikines (1906-1979). He painted ‘Aftur av gravferð’ rather early in his life (1935); death was a central theme in his works (and his live) in this period. (More biographic details here, in Danish.)

I learned of this painting in a novel called ‘Buzz Aldrin’ of the young Norwegian Johan Harstad. In the novel, one of the characters suffer a psychological breakdown of some sort after seeing the painting in a museum (my recollection may be a bit off here; go read the book yourself). This stirred my curiosity, of course. I have to admit that the painting in full scale (237cm x 176 cm) probably would have an impact on me too (but then, I am easily moved). If you like to read, the book is commendable (I even think it is available in English). Harstad writes in long, winding sentences, sometimes streching over an entire page, which is demanding but rewarding. I have a tendency to adopt the writing style of however I’m reading at the moment, so outstanding writing styles like Harstad’s is potentially a double challenge to me. I start experimenting more with styles, however, which is positive. Anyway, much of ‘Buzz Aldrin’ is set on the Faroe Islands, and the landscape and environment is described in the book in high detail; it almost felt like I had been there after I had finished the book (Harstad has stayed there for long periods, as far as I understand). The funny thing is that soon after finishing the book I actually met someone from the Faroe Islands, and he could confirm that most of my impressions of Faroe Island nature was indeed correct. He even showed me pictures of some of the places that are central in the book. The pictures made the book come even more alive.

Back to Mikines, I find many of his paintings interesting (with my naive sense and knowledge of art). Particularly, I like his whale killing paintings, red and bloody. Whale killing (‘Grindadràp’, litterary ‘killing Grindwhale’) has long traditions on the Faroe Islands and is still done today according to my Faroese friend. (Interestingly, ‘grindadràp’ also features in Harstad’s novel.) I should go and view some of Mikines paintings in real life once. I would probably have to go to the Faroe Islands, though. Hm. Maybe grab a drink at Café Natur.

How to improve the music reviews in daily newspapers

November 1, 2008

Earlier, I’ve written on my frustration with incompetent and uninterested reviewers writing uninteresting reviews in daily newspapers. Today, I, out of nowhere, came up with an idea how to fix this. First, however, it may not be necessary to fix it; who pays attention to music reviews in daily newspapers, particularly with the level they’re at right now?

What newspapers should do is to kick out all their lousy music journalists (which has a very positive side effect; the volum of drunk and self-important ‘journalists’ that demand free access to concerts and festivals would go down dramatically) and instead hire a few truly interested and devoted music lovers to track down quality online reviews written by blogging music lovers (a good review is written by a devoted music lover, and not a ‘critical’ name-dropping wanna-be). I’m quite sure many bloggers would be delighted to see their review on print, and they would get a small compensation and increased traffic on their blog. Now, a lot of great reviews lay around unattended (or potentially great reviews are never written; with the system I suggest more people would set up blogs and write reviews; I know I would).

A newspaper person would probably react to this idea by pointing out that journalists have access to new records before the release, such that the review can appear on the day of release, or maybe even before. But why does it have to be this way? I’m sure musicians, and other artists for that matter, actually would prefer the review of their work to appear at least after it is available, and if it appears, say, a week after the release date the artist would possibly get media over a longer time span; both at the release and in the later review. On the other hand, I don’t think music buyers care all that much if the review is published after the review. Particularly, if the quality of the reviews were improved, most people would be happy to wait. Also, with better reviews, more people would care and start buying newspapers.

Another tendency I detect when it comes to daily newspapers is the following. They refrain from reviewing a release if a competing newspaper reviews the release before them. This is absurd, particularly when the reviews are so bad that noone cares anyway. If the reviews got better, however, and papers had a much wider selection of reviewers, people would care more and buy more papers. And music lovers are willing to read more than one review of the same record, trust me. Those who are not interested anyway wouldn’t, but why care about them; they don’t buy newspapers because of the music pages anyway. Finally, the system would probably be cheaper for the papers, at least in net, taken higher sales into account.