What I've Been Reading

- Fooled by Randomness by Nassim Nicholas Taleb. An enjoyable read and an interesting perspective on players within financial markets. I think he's a bit strong in his assertions but, for example, the general point of noise vs. market signal is a salient one. I also like the line (paraphrasing) that small wealth is a function of skill but large wealth is a function of luck. The Black Swan is the subsequent read; has anyone read both? Is the second a significant departure from the first or more of the same?

- Honeybee Democracy by Thomas D. Seeley. It's a bit heavy on the specifics of all experiments-- not that the information is without merit, but the marginal value to a biologist is far grater than to me. Nonetheless, the general idea of how bees make group decisions is an interesting one. I'm on the fence as to whether bees are actually practicing democracy-- to me, a realization of the larger framework of "we need to make a decision and voting is how we're going to do it" is necessary to realize a functioning democracy. Maybe it's a semantic issue between democracy and a democratic process...I could be convinced either way.

- Alexander Hamilton by Ron Chernow. This has been on the to-read list for a few years now, I finally just got it on the Kindle and now I'm looking forward to getting through it. I didn't realize Hamilton was so prolific as a writer-- a complete set of his writings assembled a little while back by a group at Columbia (I believe) came to 32 volumes.

- Moby Dick. Somehow missed this throughout my education; I am likely missing the larger picture issues that make this a classic but it's a surprisingly enjoyable read.

- The Lodger Shakespeare by Charles Nicholl. Not sure how far I'll go with this, but I read the first few chapters and have a feeling that I've secured all likely surplus. In short: We know Shakespeare's stories but have little glimpse of his voice outside of his works. This is the story of a court case in which Shakespeare provided recorded testimony-- thus, the only believed instance of Shakespeare speaking in real life.

- How the Beatles Destroyed Rock n Roll by Elijah Wald. Just started this as well; every time I read music history I realize how much of the world of music I'm completely and utterly ignorant. Nonetheless, it may provide quality fodder to support my assertion that the Beatles are the most overrated rock band in history.

Assorted thoughts

1. I noticed this yesterday on ESPN: "NBA gets an 'A' for diversity"

Sounds kinda like Justin's favorite practice-- measuring income inequality! And how do we measure diversity? The underlying idea behind grading diversity comes from The Institute for Diversity and Ethics in Sport's grading scale for all sports (see page 15):

"Grades for race are determined in relation to overall American demographics. Federal affirmative action policies state that a workplace should reflect the percentages of people in different racial groups, as found in the general population. Approximately 24 percent of the U.S. population are people of color; therefore, if 24 percent of an organization’s employees are people of color, the group received an employment grade of “A” for race, and so on..."

If you feel measuring diversity is important, that seems like a decent way of doing so. I suppose perfect diversity would be equal percentages of all groups, but normalizing it the underlying demographics seems reasonable. But here's their comment on the NBA's player pool (see page 4):

"In the NBA, 82 percent of the players were people of color, the same as last year, tied for the highest percentage of players of color since the 1994‐95 season. The percentage of African‐American players remained at 77 percent since last year’s Racial and Gender Report Card. This was the highest percentage of African‐American players since the 2001‐02 season.

In the NBA’s 2009‐10 season, 18 percent were white and three percent were Latino. This was again the lowest percentage of white players since the 1994‐95 season. Asians comprised one percent of NBA rosters, and an additional one percent of players are people of color categorized as “other.” The percentage of Latino players remained the same as the last three seasons (three percent) while the percentage of white players decreased from 20 percent in the 2007‐08 season.

Eighteen percent of the players were international, which was the same as the 2008‐09 season.

NBA Grade for Players:
Race: A+"

So in sum: The goal is to provide the best grades for those leagues that best match the underlying demographics of the United States. 82 percent of the NBA's players are of color; rough estimates put the underlying U.S. percentage at ten to fifteen percent. Eighteen percent of the NBA's players were white; rough estimates put the underlying U.S. percentage at 65 to 75 percent. Asians are one percent of the NBA and roughly 5% of the U.S. population. Latinos are 3% of the NBA and roughly 15% of the U.S. population.

I wonder which part of that produces an A+ grade.

2. I got through most of Numbers Rule: The Vexing Mathematics of Democracy, from Plato to the Present on a couple of flights recently; it's very accessible and would make a great supplement (pick and choose what you like) for an undergraduate Public Economics class. It gets at the difficulties raised by what I believe to be the overarching issue of public economics: We live in societies and thus need to make some decisions as a group. How should we do that?

There's also a great chapter on the political economy of choosing the appropriate system to distribute seats in the House of Representatives.

Regulatory Capture in The Science of Success

I've been enjoying playoff hockey, the Smuttynose Brewing Company and The Science of Success this afternoon. Charles Koch presents his managerial ideas in a straight-forward manner, and it's a relaxing read. Though I was particularly intrigued by this (unintentional?) reference to the capture theory of regulation:

But, even when faced with laws we think are counter-productive, we must first comply. Only then, from a credible position, can we enter into a dialogue with regulatory agencies to demonstrate alternatives that are more beneficial.

Blockquoting X

X = Brennan and Buchanan, The Reason of Rules (p. 45):

The jury, as an institution, is an instrument designed to fascilitate the discovery process. If it is efficient, as an institution, it may be the best available means of ascertaining judgements of guilt or innocence in situations in which one or the other of these verdicts is socially required.

What I've Been Reading

So the recent trip to Vegas for APEE and tonight's Penguins playoff game have allowed me to get through most of Hirschman's The Passions and the Interests. I was debating using it as supplementary reading for my Micro Principles class in the fall but I think I'll pass, though it would be a solid book for a history/moral foundations of capitalism class.

The following is the epigraph (translated) and sums it up nicely:

And it is fortunate for men to be in a situation in which, though their passions may prompt them to be wicked, they have nevertheless an interest in not being so.

I'm drawn to the idea of the interplay between economic interests and political interests; oftentimes we think of the latter harming the former, but this book explores the interaction going the other direction. It's a hidden virtue of capitalism that seems to have been lost, as the author argues, around the time of Adam Smith.

The Pursuit of Justice: The Law and Economics of Legal Institutions

The editor is San Jose State economist and DOL blogger Ed Lopez. You can buy the book here. I haven't read it, but I had the pleasure of sitting in on a West Virginia University seminar with Ed several years ago when it was still in the editing phase and found it fascinating. I have never been able to take seriously the show CSI since that time. Here are the Table of Contents:

An Introduction to the Pursuit of Justice--Edward J. Lopez
The Rise of Government Law Enforcement in England--Nicholas Currott
Electoral Pressures and the Legal System: Friends or Foes?--Russell S. Sobel
Romancing Forensics: Legal Failure in Forensic Science Administration--Roger G. Koppl
Judicial Checks on Corruption--Adriana Cordis
Effects of Judicial Selection on Criminal Sentencing--Aleksandar Tomic
Economic Development Takings as Government Failure--Ilya Somin
On the Impossibility of “Just Compensation” When Property is Taken--John Brätland
The Lawyer-Judge Hypothesis--Benjamin H. Barton
Class Action Rent Extraction--Jeffrey Haymond
Cy Pres and its Predators--Charles N. W. Keckler
Licensing Lawyers: Failure in the Provision of Legal Services--Adam B. Summers

(And No Uncle Sam, I got nothing for this post.)

Best Morning Sentence

This comes from Will Wilkinson during his "most influential book" list, specifically with regard to Charles Murray's book on education:

And it helped me understand the difference between trying hard to honestly think through tough social problems because you care and mouthing comfortable pieties in an effort to get credit for caring.

The Art of Not Being Governed

"In one sense, the difficulty of moving grain long distances, compared with the relative ease of human pedestrian travel, captures the essential dilemma of Southeast Asian statecraft before the late nineteenth century.

...

Imagine a map constructed along these lines, designed to represent relative degrees of potential sovereignty and cultural influence. One way of visualizing how the friction of distance might work is to imagine yourself holding a rigid map on which altitudes were represented by the physical relief of the may itself. Further, let's imagine that the location of each rice-growing core is marked by a reservoir of red paint filled to the very brim. The size of the reservoir of paint would be proportional to the size of the wet-rice core and hence the population it might accommodate. Now visualize tilting this map...

The angle at which you had to tilt the map to reach particular areas would represent, very roughly, the degree of difficulty the state would face in trying to extend its control that far."

That's from the terrific The Art of Not Being Governed by James C. Scott, I'm working my way through it.

The Passions and the Interests

If you are teaching an Honors section of Econ 101 at a liberal arts college, let me recommend the following book: The Passions and the Interests by A.O. Hirschman. I am roughly halfway through and find it very interesting. You might think of it as a crash course in the history of ideas from Augustine to Smith. The evolution of basic concepts in economics (self-interest, rationality, spontaneous order, etc) as presented by Hirschman is fascinating.

File this under: Quote of the day, ideas, bad

In the process of perusing as much literature as possible on global public goods, I came across this gem:

Capacity building in developing countries is critical to achieving the objective of financial stability and market efficiency. The seigniorage earned by the central banks of industrial countries could be an appropriate funding source.

Honestly-- that's exactly how it reads. As a section header, no less.

Just to clarify-- the policy suggestion is to generate seigniorage for the goal of promoting financial stability.

Wow.

It's from Global Public Goods: Taking the Concept Forward. And who, you ask, published this nugget of wisdom? The United Nations Development Programme, that's who. Let's hear it-- the international development community, everyone!

In-N-Out

Outside of consistently good Mexican food, there's nothing I miss more in the culinary realm by living in the eastern portion of the country than In-N-Out. Nothing compares. Five Guys is passable but a weak substitute.

Why do I bring this up? There's a new book about In-N-Out, and it's here.

Book Review

Claudia provides a book review of James Bennett's Stifling Political Competition: How Government Has Rigged the System to Benefit Demopublicans and Exclude Third Parties, which will appear in Public Choice but is available online.

Book Review: Evil Genes

If you watch Dexter and enjoy his inner monologue, then you would probably enjoy Evil Genes: Why Rome Fell, Hitler Rose, Enron Failed, and My Sister Stole My Mother's Boyfriend by Dr. Barbara Oakley. If Amazon rating terms, I would give it 4/5 stars.

The focus of EG is a very particular type of sociopath that Oakley terms "Machiavellian," after the famous author of The Prince. Despite representing a fantastically small portion of the population, these high functioning psychopaths are supremely successful at making their way to the most prestigious positions of society: Stalin, Mao, Milosevic, and Hitler. Machiavellians simply seem to derive pleasure from the success of manipulating others, and while they do not feel compassion or empathy for the emotions of others, they are supremely gifted at recognizing emotional ques. There is no ideological guide for them, the purpose is only to manipulate.

Oakley's book covers the genetic and environmental mechanisms that seem to be necessary for both the development and success of Machiavellians. For instance, neurologically the area of the brain that allows us to recognize the emotional ques of others is considerably larger than in a normal person. This allows them to recognize and quickly decipher ways to appeal to and manipulate our emotional responses. This allows them to move successfully through society, and likely is a contributing factor to just how successful they appear to be in politics.

The most brilliant aspect of this book from a story-telling standpoint is the way Oakley wraps the narrative in with her late sister, whom she identifies as being one of these individuals. At the beginning, she introduces her sister with a heart-wrenching story of how her sister stole her mother's (much older) boyfriend so that she could take her mother's place on a trip to France. Throughout the book, Oakley tries to unravel her sister's identity and make sense of her outlandish behavior, and it makes for an extremely interesting narrative.

Some other reviews I have read found the story of Oakley's sister to be the most troubling, since she is dead she can't defend herself, and I can see where that comes from after trolling through her diaries. However, I actually became more sympathetic to her sister as the book progressed, to see how truly miserable these people are, and while people have differing predispositions to Machiavellianism, the story of her sister seems to have a strong environmental component in her polio treatment as a child. By the end, I felt sorry for her sister, as most of us might once we learn the personal histories of individuals with psychopathy.

What Progressives will like about this book: Machiavellians have been particularly adept in communist systems. Classical liberals frequently argue that socialism fails not because they didn't get good leaders, but because socialist institutions have poor incentives and constraints. The historical popularity of communist Machiavellians provide a rejoinder, in part it was that there were really bad people running the system.

What Conservatives will like about this book: You get a sense of hopelessness about the possibility of reforming these people. Tough on crime conservatives that prefer the death penalty would probably find supporting material to justify their punishments in this book.

What Libertarians will like about this book: The fascinating inspection of the way Machiavellians move through politics, particularly in communist societies. It is all ready recognized that politics has a tendency to self select people with Machiavellian traits, but the review of the damage these people are capable of doing in a centrally planned system is incredible.

What can be skipped: Chapters 3 & 4, while interesting, are mostly a primer in neuroscience and reading brain scans. While the book discusses neurotransmitters and examines brain scans in every chapter, I suspect that the underlying motivation for these chapters is to nail home the point that this book does not serve as an argument for genetic screening or eugenics.

Random Fact I Learned: The language(s) you learn reorganizes your neurphsiology. Native speakers of Chinese literally see the world differently from native English speakers. Visually, an English speaker initially focuses on individual objects and the background fills in to support it. Chinese speakers see the big picture first, and eventually grasp sight of the individual objects.

Somewhat Related: Search the archives of the DOL blog for Ed Lopez's series of posts discussing The Prince. They were very interesting dives into select passages of Machiavelli's work.

What I've been reading

- Panicology is a statistician's (two, actually) take on the alarmist issues of today.  I like statistics, and I also dislike the alarmist take by the media, so I had high hopes, but the book seems weak in some areas and only stronger in others by relative comparison.  I did enjoy a few of the transportation sections, however-- one on the inherent safety of transportation, and another on cell phone usage while driving.  It is a decent jumping off point for a range off issues-- if I'm close by, borrow it from me when you need it or fire me an email about one of their topics, don't go buy your own.

- I'm just getting into Violence; if this is categorized as a sociology book, it's the best I've read in quite some time, if not ever.  It reads as a micro-foundations approach to all-things violent interaction, and the author explains it as such.  Making generalized statements about violence often mischaracterizes violent confrontations from the get go; as such, just about anything you've read making wide-ranging claims about violence (say, ethnic violence or racial violence) is probably wrong, and not by a little bit.  Here's the best one-liner I can give to sum it up (thus far, anyway):

"Most existing explanations of violence fall into the category of background explanations: factors outside the situation that lead up to and cause the observed violence...My objection across the board is that such explanations assume violence is easy once the motivation exists.  Micro-situational evidence, to the contrary, shows that violence is hard."

Frequency of violence tends to be a function not of the individuals but the overarching resolution framework to the situation; kids fight a lot because adults can provide resolution, prisoners fight frequently because guards can provide resolution, adults in society fight infrequently due to the lack of such a framework per the previous two examples.  That's a vast oversimplification (on my part); there's just a lot to go after in this book.  I highly recommend.

The Bloomington School of Public Choice

Paul Aligica and Pete Boetke have a new book on the Bloomington School of Public Choice, which I admit I was not aware of until I arrived in Bloomington and started sharing doctoral students with Elinor Ostrom. It is a real treat to learn from the presentations at the Ostrom workshop, so I encourage you to learn about it as well.

The subjects of the book are Bloomington scholars, the context is public choice, and Aligica and Boetke are authors...how can it be anything but excellent?

Human Action: Chapters 1-2

Summaries for chapter 1 and chapter 2 are available from the Mises Institute. If you were constantly looking up words (or trying to figure out what that latin phrase meant), check out Mises Made Easier.

Rather than summarizing these chapters yet again, I thought it would be more fruitful to discuss some of the questions I had while reading. Feel free to add your own questions and comments; hopefully we can get a good discussion going.

The biggest question I had while reading these two chapters concerned subjective probability. On page 23, Mises makes it clear that individuals are capable of acting in accordance with (objective) probabilities.

Sometimes we succeed in acquiring a partial knowledge so that we are able to say: in 70 per cent of all cases A results in B, in the remaining cases in C, or even in D, E, F, and so on. In order to substitute for this fragmentary information more precise information it would be necessary to break up A into its elements. As long as this is not achieved, we must acquiesce in what is called a statistical law. But this does not affect the praxeological meaning of causality. Total or partial ignorance in some areas does not demolish the category of causality.

Then, on page 37, he explains that an individual's beliefs about reality matter.

A peasant eager to get a rich crop may—according to the content of his ideas—choose various methods. He may perform some magical rites, he may embark upon a pilgrimage, he may offer a candle to the image of his patron saint, or he may employ more and better fertilizer. But whatever he does, it is always action, i.e., the employment of means for the attainment of ends. Magic is in a broader sense a variety of technology. Exorcism is a deliberate purposeful action based on a world view which most of our contemporaries condemn as superstitious and therefore as inappropriate. But the concept of action does not imply that the action is guided by a correct theory and a technology promising success and that it attains the end aimed at. It only implies that the performer of the action believes that the means applied will produce the desired effect.

If individuals are capable of using probabilities and their perception of reality (which is not necessarily equivalent to reality) is the driving force behind purposeful action, why doesn't it follow that their perception of the probability of a given event is more important than the actual probability that the event occurs? Or, put differently, if individuals can be systematically biased about "theory" and "technology," why can't they be systematically biased with respect to the outcomes they anticipate?

Bryan Caplan makes a strong case for subjective probability. Walter Block counters; as does Jorg Guido Hulsmann. Caplan responds.

Next week, we will cover chapters 3-7 (again, roughly 70 pages). Happy reading!

What I'm finishing up...

- I'm finally finishing Slash, biography of the Guns N' Roses guitarist. It's an intriguing look into the life of an 80s rock band, from the lows of trying to make it to the excesses of mass popularity. I'm not sure how much was actually written by the guitarist himself, or dictated entirely to the biographer, but the book is full of great lines, such as:

"I had no remorse whatsoever about my overdose-- but I was pissed off at myself for having died."

"It was an amazing show, and all went off well...until the next night, when the country experienced a sudden military coup just after we left for Colombia."

"I can't say that I was surprised when the audience started rioting."

I've heard from interviews of other members of Guns N' Roses that due to their early popularity and waiting on signing with a label (which is consistent with the story that Slash tells), the band was in a position to sign a very favorable deal once they put the pen to the paper. I was hoping for a bit more of the business details of the deal, myself, but the book really doesn't get too far into the contracts. Slash does mention, however, that GN'R spent a goodly portion of their substantial earnings during their mammoth two-and-a-half-year, 192-show Use Your Illusions tour. Plenty on the relations between Slash and Axl Rose as well; all in all, it's an enjoyable, though surprisingly long, read.

- Pete Leeson's The Invisible Hook. You could poke around the internet for a few minutes and find more in depth reviews; nonetheless, it's a great book that will be assigned to my Micro Principles class in the fall. It's a great example of applying usually-tepid textbook concepts to an interesting subject, and bringing alive economics in the process. I'm hoping that my students read this book and are able to apply economic concepts to non-traditional areas. That's the goal, anyway.

TPS Book Club: Human Action

Over the next 12 weeks, I will be blogging my way through Human Action. If any of you are interested in reading along, we can discuss chapters in the comments section each week. I plan to post on Fridays and cover around 70 pages per week. The first post will be on May 22; it will cover chapters 1 and 2.

If you do not own the book already, the Mises Institute has a PDF of the 4th edition available for free. The Library of Economics and Liberty also offers an online version. Additionally, you can purchase a copy from FEE or Amazon.

I really hope some of you join me, especially if you've never read anything by Mises.

You know it's a good day when...

...your copy of The Invisible Hook was waiting for you when you got home. Just puts a nice kick in your step for the rest of the day. I'm getting through Slash (very good thus far-- will comment on when done) and will start Flights of the Mind here shortly, but I can't resist cracking Leeson's effort. The Penguins start the Stanley Cup playoffs tonight and I'll start it then.

Where's Garfield?

Funny site where they remove Garfield from the stip, leaving John to look insane.

Hat Tip: Alex Ross

When you think about it, the author's productivity is based on destroying Jim Davis' production. Garfield's marginal product to the Davis strip was enormous, yet someone else removing him adds a little bit more value-added.