Xbox Lesbian

So, uh, an Xbox live user was banned for disclaiming her w4w sexuality in her profile. JIC u r from outer space, Xbox live is an online gaming community that integrates users of the Microsoft Xbox 360 video game console and w4w is craigslist speak for gay females. 

Here are some articles:
Gaming Blog Kotaku- here.
Tech Blog ARS- here.
Consumer Blog, Consumerist- here. 

Firstly, being gay and out is still not socially acceptable (it should be but it is not), even in California (see Prop 8.) It should be, but there are still way too many people with head in their ass syndrome. 

Secondly, sexuality should not be discussed in mainstream video gaming communities. Way too many kids play video games and there are way too many (one is too many) child predators. Sexuality has nothing to do with gaming so just STFU and play bee-otch.

Anyways, this story is indicative of where we are at as far as social progressiveness is concerned. Although (in my HUMBLE opinion) there is ABSOLUTELY nothing wrong with ANY sexual preference (amongst consenting adults, of course), and although this is 2009, our society still acts towards gays like pre-MLK towards race. Some insecure douche complained that girly had her sexual preference in her profile and dumbass MicroSoft banned her. Like I said, they made a socially acceptable decision but still backwards. And, seriously, MS? Funk MS.

The point is: fuck all the haters!

Talk to your kids about sexuality and sexual preference. Stop living like bigots. And grow some F-ing balls.

Yes we are at a point of social development in which sexuality is an unacceptable topic to breach. 

But that is no excuse.

Gaussian Copula f(n) Article + Economists = Irony

I subscribe to quite a few econ blogs and, recently, multiple economists with advanced degrees and university tenure posted about this article from the magazine Wired. Basically, the article talks about how most investment professionals trusted this BS stat function made up by some quant because they did not understand the mathematics behind it or else they did and knew there was money to be made anyways. The major point is that the investment industry relies on a blend of stats and hype which is a recipe for disaster. My point is that no matter how much credibility or money somebody in the investment industry has, they are pretty much just a greedy, hack who contributes nothing to society.

Ironically, the field of economics is in the exact same state. This is not some minor little instance of irony. This is THE full blown ironic twist like Wolfgang Puck’s scrapple and grits or saving the environment with corn based ethanol. 

Economists base their own arguments on statistical models. Statistical models are great for determining correlation within a closed system with given metrics. However, correlation in real world open systems based on statistical models is BS. 

Here is why:

1. Behavioral unknown. Often statisticians account for this with margin of error. However, as more variables are added to the model, the margin of error goes up exponentially. In real world situations the behavioral element makes most economic modeling meaningless. Behavioral trends are exactly that, trends. They are time and place specific. 
2. Parameters. Have you ever done a project using multiple regression analysis? I have. Quite a few, in fact. No matter how big the sample set and accurate the data there are still parameters that the modeling is based on. The parameters always have an arbitrary element. For a model to work there must be givens. Unfortunately, these givens (aka assumption parameters) are subject to change. A model is only really useful in the particular instance it is created from.
3. Hedonic valuation. This technique is used to indirectly quantify something that is abstract. Economists love quantifying stuff because then they can write up a statistical analysis paper that backs up their favored theories.

Anyways, the point is that there are lots of economists with tons of popular credibility and tenure that are full of shit. There are even economists who write academic text books or win Nobel prizes who are hacks. In fact, the discipline, as a generalization, is pretty off base regarding approach. In fact, that is why I majored in it. My father is a PhD Physicist who worked for Intel for the majority of his career and my grandfather a PhD Aeronautical Engineer (rocket scientist) who worked Nasa for the majority of his career. I have an exceptional comprehension of the mathematical (I had better be a math person, you see how I write, lulz) and was starting down the path towards a physics major when I got enthralled with Economics. I switched majors because I noticed that there is something fundamentally wrong with the discipline. I thought that the entire basis of the study of economics is flawed. I wanted to understand economics at a root level and see what the problem is and what I can do to fix it. 

In Anathem, by Neal Stephenson, there are tons of really cool intellectual concepts; it is a great work of fiction. The one that pertains to my point is the book. The book is used as punishment for the academic monks who break the rules. Basically, the book is either exhaustively pointless busy work, like memorizing pi to a thousand places, or flawed conceptual work, like learning material that 98% true with just enough wrong with it to infuriate the student. The driving concept of the book is that exhaustive busy work or slightly flawed theoretics is equivalent to intellectual torture. I hope you get where I am going with this.

Economics uses flawed theory and exhaustively pointless proofing. The flaws take place at the individual level, so are compounded by several orders of magnitude when applied at the aggregate level. In the end, decisions that effect everybody are made based on pseudo-mathematical concepts that are misunderstood or misrepresented. The end result grossly detracts from humanity. However, since it comes from people that write textbooks or win Nobel prizes everybody just shuts up and goes with it. Just like the investment industry and the Gaussian Copula Function. 

Ironically, these same hacks are posting about the flaws in the investment industry and linking to are article that condemns the industry for using pseudo-math and partaking in follow the leader. 

Hello? 

Earth to economists?

This is some Alanis Morissette shit.

Update:

Here is a white paper that talks about the point that I am trying to make in this post about the study of Economics being significantly flawed. Unsurprisingly, the paper is a helluva lot more articulate (though a bit pompously verbose) than my clumsy words.

 The Financial Crisis and the Systematic Failure of Academic Economists

There are a ton of good points about the failures within the Economics discipline. However, I must disagree with the bits about needing a deeper basis in empiricism regarding modeling. It is naive to even begin to allude that Economics can be based on empirics. The empirical process calls for controlling variables, which is impossible in open systems with infinite variables. Yes, IMPOSSIBLE. Economics cannot be approached empirically in any manner that is meaningful. Open systems with infinite variables require the technique that I refer to as open system analysis.

Recession… Depression

Not to get too deep into pedantic minutiae, lol, but this is not a recession, it is an Economic depression by definition.

It has been building up for a while. Nothing really changed last November or so besides the d-bag politico/ investor crowd calling a spade a spade. The fundamentals were exactly the same one day to the next. Our nation employed millions of people doing useless bureaucratic tasks and transferring paper gains back and forth. That did not change suddenly last November when politicians, the media and investors finally agreed that the economy is going to stall out. It has been on that path for at least a decade. We have been paying more and more for less and less. Healthcare, education, administration, energy, infrastructure have all gone up in price and down in actual output for years and years. But since national income is a function of price and does not disaggregate useless behavior from useful behavior, our economy still continued to grow on paper.

If a man is paid to dig a ditch, then fill it in and dig it again that raises GDP by 3* the amount of just digging a ditch. 

In Naked Economics, University of Chicago economist Charles Wheelan writes:

The French policy (of lowering the maximum work week to “conserve” jobs and fight unemployment) is based on the fallacy that there are a fixed number of jobs in the economy, which must therefore be rationed. It’s utter nonsense. The American economy has created millions of new jobs over the last decade- all without the government trying to divvy up work hours. (p. xvii)

I am going to stick my neck out for a second and talk about the members of the prevailing schools of economic thought for second. To both the Chicago school and Austrian school; both neo-Keynesian and Laissez-faire neo-classicals: STFU n00bz. This message also goes out to Dems and Republicans; capitalists and socialists. Just STFU. I have covered this sort of ideological polarization in prior posts. If you belong to any “school” of thought then go read my older posts and then go jump in a lake if you still cannot form independent thoughts. No offense or anything but if you cannot form independent thought then you really ought to do society a favor and F-0ff.

Anyways, my point is that the Laissez-faire invisible hand model is garbage; so is the socialist, command economy model. Economic policy is a mechanism for allocation. Optimal economic policy maximizes efficiency and equitability. In some cases it requires market functionality and in some cases direct allocation mechanisms. Determination of the optimal methodology for allocation requires the arcane art of *gasp* thinking. I know, shocking. Who does that anyway? Soooooo passe.

Sorry about the frustration and sarcasm and all that. Sometimes you just need to blog a proper diatribe cuz you get so fed up with the rhetoricians.

In summary, remember: Economics for efficient and equitable allocation = optimal good.

Stamp Pricing

The price of stamps will be raised by $0.02 this coming May. Here is an AP article hosted on Yahoo finance.

This 2 cent raise illustrates just how sad the state of business administration is in this country. I remember being 7 or 8 years old and asking, “Mommy, why doesn’t the post office just raised the price to $0.30 instead of $0.29?”  and getting the typical response, “That is just not how bureaucrats operate dear.”

In fact the discussion on inconvenient postage stamp pricing acts is a perfect wanker test. Meaning, the people that can rationalize it and defend it are invariably complete wankers. 

The transaction cost of changing the price cannot be cheap. Yet, the post office does this every year or two and still ends up with massive shortfalls. Just raise it a bit extra less often, to an increment of 5 or 10, thereby cutting administrative costs and saving the windfall for the next time your operating expenses outweigh your income (an inevitability). That seems like a pretty simple, basic kindergarten-level lesson. 

Honestly, I am disgusted that I even have to address this. It is so basic. So DUH!

In fact, how the hell is there even competition in the shipping industry? You have to be pretty freaking incompetent to be subsidized, receive tax breaks and not have to worry about profit and still not be able to capture market share. UPS, FedEx and ubiquitous shipping retailers should not even exist. And do not try and pull that public sector inefficiency garbage; incompetence, bureaucracy and greed transcend market structures.

There are a lot of other atrocious, menacing or bumble-headed business practices going down but most are not this obviously oblivious.

And if you are a postal grunt please do not take this personally, it is certainly not your fault. Your hard work delivering the mail consistently and fairly accurately is immensely appreciated. The beef here is with upper management and policy makers. 

Financial Crisis Causes

The common wisdom is that the financial crisis is due to a subprime mortgage meltdown and a proliferance of mortgage backed securities. I always thought that this explanation was shallow and that there was a lot more going on. I have been pondering the financial meltdown for quite a while and I finally think that I have a coherent idea of what the root causes are.

Investment is an important aspect of business. Investment at the enterprise level can allow business to expand production or increase efficiency. Likewise, investment at the public level can allow individuals to be more productive or efficient.

This is evident in developing economies that are devoid of investment. Investment can trigger huge growth in areas were there is great unfulfilled demand but did not previously have the capital inflow to meet the demand. In developed economies lack of capital is usually not the problem.

In the past decade the demand for investment goods in America has skyrocketed. This is mostly due to a huge demographic (baby boomers), who historically did not save well, starting to save at much higher rates due to three factors: imminent retirement, less household expenses as their kids move out or graduate college and greater average incomes. Remember savings are what drives the demand for investment goods or, conversely, savings supply investment.

The market for investment has huge diminishing marginal returns as it becomes increasingly leveraged. Basically, as more money flows in, the quality of investment declines because the market for capital becomes less and less competitive as the supply increases. 

The investment industry (financial sector) had overwhelming demand, so to keep up with supply the industry began offering investment goods of diminishing quality. Since the supply of capital (savings) is homogenous and investment goods are hetrogenous the law of diminishing marginal returns was amplified even more. 

The increasing demand for investment goods brought about overwhelming growth in the financial sector which led directly to inefficient capital usage. Whole new equity markets sprung up almost overnight to keep up with the skyrocketing demand. The inefficient capital usage led to investment bubbles in all manner of investment goods as the financial sector overcapitalized one equity market after another. However, the demand for investment was so strong and the industry mechanisms so increasingly convoluted that investment bubbles that should have popped a long time ago grew to outrageous unsustainable proportions. All investments were substantially overvalued. That is why the collapse was so dramatic. 

Compounding the problem is the reaction, a financial bailout. Instead of addressing the root cause, the US government threw money at the financial sector. Since the issue was too much money was being thrown at the financial sector: Why would throwing money at it be a solution? *sigh*

It is analogous to putting more oil in that 1970s Pontiac that leaks oil rather than fixing the engine block. In this analogy the financial sector is selling oil and the federal government is the lazy mechanic that tells you to buy more oil instead of fixing the car.

Anyways, next time you see some well dressed financial pundit on CNBC telling you how the subprime mortgage crisis is the cause and talking about the pressing need for more bailout money please remember that they are rationalizing and scapegoating and really either have no idea wtf they are talking about or are just greedy as hell. The financial sector and politicians bailing them out have no credibility, their shit is bonkers. A nice wardrobe does mean somebody knows what they are talking about.

Productivity of the Unemployed (Freakonomics)

“What Do People Do When they are Unemployed?” from the Freakonomics blog suggests that when there is a sudden rise in unemployment there is little or no productivity loss in those recently unemployed. This assertion is based on “Unemployment, Market Work and Household Production” from the NBER. It is a cute assertion that a spike in unemployment has no productivity loss. However, this can easily turn into an area with prolonged unemployment which does incur productivity loss.

This is why:

A sustained trend of higher unemployment increases the total cost (in terms of time spent seeking) of finding a job. Instead of working for pay people can substitute activities with relatively high marginal utility returns but those returns diminish as the unemployed start achieving these activities. Prolonged unemployment leaves people with diminishing marginal returns for their efforts in both household activities and job seeking. Those are the causes of productivity loss of unemployed individuals in a recession. 

The other purpose of this post is to basically talk isht about the Freakonomics blog. The Freakonomics book was wonderful because it isolated cute economic phenomenas and thoroughly analysed the whys and hows and how it fits into a larger system of behavior. The blog, however, is completely half hearted and just cherry picks the phenomenas.

So I have decided to do a Freakonomics style post on the Freakonomics blog:

Why Do People Do Half Azz Work When Blogging for the NY Times?

You would think that professional pride would kick in and quality of work would rise when a writer scores a high profile gig with a big time media outlet but you would be mistaken. 

Large media outlet have no motivation to write in depth articles because they want to sustain advertising revenue by increasing and sustaining circulation. Therefore, editors at large media outlet want a higher frequency of relatively shorter posts with attention grabbing headlines. This increases overall site visits because consumers can expect new material and caters to a larger demographic because the articles are less specialized. 

In turn, writers are motivated by a steady pay check to comply and will rationalize the dumbing down of their work by hoping that it will motivate people that normally were not interested in a subject to become more interested and seek out the in-depth material on their own thereby acting as a gateway to a subject of study. However, this phenomena often has the effect of marginalizing the subject of study along with the author’s work.

Broadband Stimulus Package

There is a purposal for the federal government to invest $6B in broadband infrastructure. Read about it here @ ars technica. However, it has also been reported that two-thirds of Americans without broadband do not want it. Read here @ ars technica.

The real deal with all this malarky is there will be very little benefit to the American people and the American economy with the investment.

The idea behind the bill is the investment will help consumers to spend less money but get more. Public investment in physical infrastructure decreases the marginal cost per capita thus effectively allowing each user to pay less for more of a good. This allows people to spend their money elsewhere. For example, say we spend on average 20% of our income on transportation before an infrastructure investment and only 5% afterwards for the same quality of transportation. Does that mean the the economy lags by 15%? Of course not, it simply means that 15% is in your pocket and can be spent elsewhere. Now if the aggregate public investment cost is less than the aggregate of all the 15%s then it is a justifiable investment. 

Having cheaper and more accessible broadband would help the economy due to productivity gains but this bill will not do that for the reasons explained above. However, this bill will not accomplish this because the savings will not be passed on to consumers and broadband service will only be marginally improved. What the bill will do is subsidize telecom providers. How would that help the economy? (it wouldn’t) There will be a temporary gain in employment but that will come via public money which could be used elsewhere on projects that have the investment effect I mentioned above. Other than that short term gain there will long term profitability gains for telecom providers which will basically translate into more money for executives and shareholders. That will income and wealth inequality which is pretty much the biggest determining factor of national economic well being (and income inequality is harmful to economic well being). 

All that being said there is a very simple way to accomplish huge economic gains with a relatively small investment in the physical infrastructure regarding broadband. Instead of subsidizing telecom, subsidize consumers of telecom with investment in broadband capacity and accessibility. How do you invest in end user broadband without subsidizing the industry? Well, here is the unpopular part: socialize the internet. Read my post on free market vs command economics before you have a hissy fit about the idea. In the case of broadband (and telecom in general: cellular, wifi and telephonics as well) there are huge gains in efficiency and cost reduction to be made by making it a public good. The long term economic effects of this will be HUGE. Firstly, people will pay less for more because there are huge economies of scale happening in the sector, earlier I explained why paying less for more is good for the economy. Secondly, there will be huge production gains based on greater accessibility of telecom because communication is a huge driving force in business. Thirdly, universal access to information will help the populace be better educated and more informed which has the benefit of increasing ability to function economically and democratically. And finally, an incredibly marginalized segment of the population (poor people) will be much less marginalized. Besides the obvious gain in social equality the increase in competition will have significant positive economic returns. In the long run we all win. 

There are obviously a ton of practical issues in shifting the market structure so drastically. Equity issues can and will get incredibly complicated. Also, there are administrative issues to solve and issues inherent with public goods: like the relationship between the free rider problem and efficient usage. Still, these are incredibly easy compared to the paradigm shift required in public perception. People would first have to get over loaded terms that lead to polar dichotomization like capitalism vs socialism or Keynesian vs Chicago and actually think about the issues independently of ideological affiliation. In the end, public telecom would benefit us all in the long term and have an overwhelming positive aggregate effect in the short term. It will be a gigantic competitive advantage for American business and have an enormous positive educational and social effect. 

Innovation in physical infrastructure has always driven the American economy. From public utilities to railroads to the interstate highways, public investment in physical infrastructure has helped build our nation’s prosperity and competitive ability. Public telecom infrastructure investment can drive our economic success well into the 21st century.