Inequality, dinosaurs, trains, and gold

I’m not sure what more I can say about monetary policy.  The 3rd quarter was another huge disappointment.  NGDP grew at a 4.2% pace.  Not only was it too slow to return us to trend, but we fell even further behind.  So AD continues to fall relative to trend, despite a monetary policy that many continue to wrongly call “expansionary,” not to mention a fiscal stimulus that doesn’t seem to even be able to get NGDP up to its normal rate of growth.  Yes, we got some real growth for a change, but only because wage cuts are shifting SRAS to the right.  You econ teachers out there might want to think about this fact:  You know when you teach the options for recovering from a recession?  One option is for the government to do nothing, just wait for SRAS to shift right.  The self-correcting mechanism.  Well that is what is happening now (and probably in the 4th quarter as well.)  So today let’s take a break from the dreary subject of demand stimulus, or the lack thereof.

Part 1  Inequality:  Et tu Denmark?

I grew up in one of the most egalitarian societies on Earth.  In the 1960s Madison had few poor people and even fewer rich people.  Almost everyone was white.  All classes would mix together in leisure time activities.  After I grew up I traveled a lot and noticed that almost everywhere else seemed much less egalitarian.  The only places that reminded me of home were Australia and New Zealand.  (I’ve never visited the Nordic countries—perhaps they are similar.)

I recall when I first heard about how the Europeans would separate kids at a young age, with the smart ones going to one kind of high school, and the dumber ones going to another.  It seemed hardly conceivable—like something out of a dystopian novel. 

I had that feeling again when I read this piece from The Economist:

TO UNDERSTAND one of the gulfs separating the Anglo-Saxon world from continental Europe, consider Warren Buffett’s children. Omaha’s sage investor long ago said he would leave most of his fortune to charity, with more modest sums to his offspring. For Mr Buffett, leaving vast wealth to his children would be “anti-social” in a society that “aspires to be a meritocracy.”

In 26 out of 27 European Union countries, Mr Buffett’s plans would not just be shocking, but illegal. The exception is Britain, or rather England and Wales (Scotland has its own, centuries-old legal system, with a strong continental flavour). In continental Europe a big part of an estate (often around half) is reserved for the surviving children of the deceased and must be equally divided between them. This “forced heirship” makes it impossible to disinherit feckless children (though several countries exclude bequests to “unworthy” children, who have for example murdered a parent or two). Such rules also make it hard to reward the deserving by, say, leaving more to a daughter who gave up a career to care for her ailing parents. Finally, “clawback” laws in many countries stop parents from dodging forced heirship by giving assets away while they are still alive. This applies to gifts made in the last years of life (two years in Austria, ten in Germany), or much longer: in some countries, no time limit applies.

So let me get this straight.  Suppose there’s some rich old guy in Europe with $10 billion, say a Wallenburg or a Rothschild.  He’s got one son who spends all his time on a yacht in the Mediterranean Sea, snorting coke and romping around with gorgeous babes.  The old guy hates his son.  He is inspired by people like Gates and Buffett and decides to give 90% of his fortune to a foundation that is dedicated to reducing childhood diseases in developing counties.  Only 10% will go to his son.  And that is illegal?  A billion isn’t enough for his son?  Even in those supposed egalitarian northern European countries?  Even in Denmark?  Say it ain’t so.

I always wondered why Europeans gave so little to charity.  I thought perhaps they are just selfish.  Or maybe they figure there’s a welfare state to handle charity.  Now we have an answer.  They are not selfish at all; it is illegal to give too much to charity.  Indeed in some cases even when still alive one is not allowed to give it all to charity.  By the way, what if a rich German went to Africa and handed a 10 euro note to every single person on the continent.  And suppose he died 9 years later.  Does the German government go to Africa and try to “clawback” all that money?  Something tells me I misunderstood what I read, and I will be making a fool of myself like with the multiplier post.  But you only live once, so I thought I’d take a shot.  I hope my European readers can set me straight.

BTW;  On utilitarian grounds even a zero bequest is much too large for the spoiled children of the rich.  They have already won life’s lottery merely by growing up in a rich household, with all the advantages that entails.  I’d favor a 100% inheritance tax except for one thing.  People have a sentimental attachment to their undeserving offspring, and thus an inheritance tax would discourage people from accumulating great fortunes.  And remember that great fortunes are accumulated by doing great deeds (at least in market economies.)

Part 2.  Those Poor Dinosaurs

Here’s how I think about the EMH.  The theory is consistent with basic economic principles.  Then, after it was developed, economists went out and did all the obvious tests:

1.  Asset prices tend to follow a random walk

2.  News is incorporated into asset prices almost immediately.

3.  Experts (managed funds) underperform the dartboard (indexed funds.)

Of course it gets boring to keep confirming what we already know.  In addition, the EMH goes against our (arrogant) intuition.  So lots of young hotshot finance types started going out and finding “anomalies.”  There is only one problem, their tests are basically worthless.  This is because they used the same data sets to develop the theories as they used to test them.  By itself, that makes the test of statistical significance worthless.  I’ve harped on that before, so today I’ll focus on another problem; they set the bar for significance way too low.  The anomalies were found to be statistically significant if there was less than 1 chance in 20 that the results were random.  In some cases the bar was set even lower. 

I recall a study in the ultra-prestigious American Economic Review that argued stocks did poorly on rainy days.  I seem to recall that the results weren’t even quite significant at the 95% level, so they had to use a one- tail test.  What is the a priori reason one would expect lower stock returns on rainy days?  I have no idea. 

Perhaps my memory is off; I hope a commenter will correct me if I am being unfair to the authors.  But here is my point, 95% is a meaningless number.  As I argued in earlier posts, people (including economists) grossly underestimate how many extremely improbable events occur.  Open your eyes and you will notice them all the time.  For instance, I won all of the first 12 games of blackjack that I played (in a casino), despite the fact that the odds were against me in every game. 

While reading The Economist last week I came across an even better example, a million in one shot.  Many of you know about the massive 10 km diameter asteroid that smashed into the Yucatan Peninsula 65 million years ago, the sort of asteroid that occurs only about one in every 100 million years.  It is believed to have led to a long dark winter lasting many years that destroyed most plant life and wiped out the dinosaurs.  Except that there is just one problem:

Extensive dating research at Chicxulub, however, now suggests that the object which created that crater actually struck 300,000 years earlier than the dinosaur extinction

But no need to worry, because soon after this discrepancy was discovered scientists found an even bigger once-in-a-100-million-year asteroid hit the earth 300,000 years later.  How convenient.  This one was 40 km in diameter, and packed 100 times as much energy as the pebble that hit Mexico.  And you can’t blame scientists for only recently noticing this 500 km. diameter crater, as it is located in a remote and thinly populated area—India.  Just to be clear, I don’t mean to ”claim” that there was some sort of “scientific consensus” for the Yucatan asteroid wiping out the dinosaurs:

In truth, agreement on the cause of the mass extinction at the end of the Cretaceous (when not only the dinosaurs, but also a host of other species died) has never been as cut and dried among palaeontologists as it may have appeared to the public. One confounding factor is that the late Cretaceous was also a period of great volcanic activity.

That’s right; not only were there two asteroids but there was also “great volcanic activity.”  How great?  They don’t say exactly.  You’ve probably read about the big eruption in Indonesia during 1815, which put so much material into the atmosphere that New England missed a summer and there were famines on several different continents.  Or the far bigger eruption about 60,000 years ago (also in Indonesia) that wiped out 60% of all humans, and nearly killed us all off.  Notice how as you look at longer periods of time the eruptions keep getting bigger.  How big was the eruption 65 million years ago?  I’m not sure, but The Economist says it was “one of the largest periods of vulcanicity in the past billion years.”  Unless The Economist is abusing the English language, I’ll take that as more like a one in 100 million year eruption, rather than a one in a million year eruption.  In other words, something that would make Yellowstone blowing its top seem like child’s play.  And this has also been put forward as a cause of the dinosaur extinction:

Before the discovery of Chicxulub, the climate-changing effects of these eruptions had been put forward as an explanation for the death of the dinosaurs. After its discovery, some argued that even if the eruptions did not cause the extinction, they weakened the biosphere and made it particularly vulnerable to the Chicxulub hammer-blow.

This is starting to sound like The Murder on the Orient Express.  So the volcanic activity doesn’t seem to have finished off the dinosaurs, but it softened them up for the Chicxulub hammer blow.  But there’s just one problem; as we’ve already seen, the Chicxulub asteroid didn’t finish them off either.  Perhaps like the parrot in that Monty Python sketch, they were merely “stunned” and stumbled around for 300,000 years until the 40 km asteroid finished them off.  Are you starting to notice something interesting?  Three 1 in 100 million year events, each capable of wiping out the dinosaurs, all occurring within a million years of each other, indeed within 300,000 years.  What are the odds of that?  Of course the first one could have occurred at any time, but if the others are 1/100 events, then we are talking about a 1/10,000 coincidence.  Even The Economist took notice:

The picture that is emerging, then, is of a strange set of coincidences. First, two of the biggest impacts in history happened within 300,000 years of each other—a geological eyeblink. Second, they coincided with one of the largest periods of vulcanicity in the past billion years.

But there’s more.  That last asteriod; the big one that probably finished off the dinosaurs, hit in a place called the Deccan Traps.  And guess what, the Deccan Traps are precisely where the mega-volcanic eruptions occurred:

Third, one of them just happened to strike where these volcanoes were active. Or, to put it another way, what really killed the dinosaurs was a string of the most atrocious bad luck.

Yeah, I’d say that’s bad luck.  Those poor dinosaurs.  I’m not geologist, but couldn’t a 40 km asteroid hitting a soft spot in the Earth’s crust make the volcanic activity even worse?  (The Economist says the Deccan eruptions started well before the dinosaurs became extinct, and hence before the second asteroid hit.)   What are the odds of the big one hitting the Deccan Traps?  I looked on a map and the Deccan looked about 500,000 square miles to me.  And the earth is about 200,000,000 square miles.  So maybe 400 to 1?  Even if my math is a bit off, I have to agree with The Economist, this is a “strange set of coincidences.”  It’s almost like God was favoring the mammals over the dinosaurs just as he favored the Israelites over the Egyptians.

I have a question for you science geeks.  (Here I’ll play TV detective Columbo; “there’s just one thing I don’t understand.”)   I don’t get how any of this could have made the dinosaurs extinct.  If they were filling a useful role in the environment, why wouldn’t they have bounced back after a few thousand years, once the ash was flushed out of the atmosphere and the climate had return to normal?  After all, reptiles like crocodiles survived.  So why wouldn’t the gators crawl out of those slimy swamps onto the land, and start evolving longer legs so they could run around like raptors? 

Note to Krugman, DeLong, and Romm:  Please don’t take me for some sort of right-wing dinosaur disaster denier.  Someone trying to mock the constantly shifting scientific story about how climate change killed off the dinosaurs.  I am certainly not trying to argue that asteriod impact would be a “good thing.”  Or to paraphrase General Turgidson in Dr. Strangelove; “I’m not saying that we wouldn’t get our hair mussed” if a 40 km asteroid hit a highly populated area.  I’m just trying to figure out why the dinosaurs didn’t rapidly evolve to fill their old niches.  If they couldn’t compete with the mammals, doesn’t that mean they were on their way out, asteroid or no asteroid?  Just asking.

So my basic point is that we tend to be overly impressed by statistical significance.  Long shots happen all the time.  But I’m not a Luddite who thinks t-stats mean nothing.  If you are testing a hypothesis that is part of a broader research agenda, then a high t-stat may suggest a correlation that is supportive of your hypothesis.  But if you have no theory, if you’re just casting about for coincidences, then you are abusing statistical significance.  As far as I am concerned the world would be no worse off if every anomaly study ever done was tossed in the trash.  We have no objective way of interpreting their findings.

BTW, the only modern equivalent I can think of for the bad luck hitting the dinosaurs would be if just as a once-in-100-year subprime mortgage fiasco was dragging down our financial system, supercharged growth in Asia tripled oil prices, and the Fed got so frightened of inflation that they let NGDP slip to a growth path more than 8% below target.  That would be a “strange set of coincidences” indeed.

Part 3:  Trains set us free

Imagine hopping on a train in Chicago, arriving in New York less than 4 hours later to have lunch and do some shopping, and then returning to Chicago the same day.  The equivalent trip in China will be possible by 2013.  Indeed the 4 hour trip from Beijing to Shanghai will actually cover 1300 km (800 miles) which is considerably further than NYC to Chicago.  (This summer I rode one of their bullet trains at 203mph on a part of the new track.)  And as this article from Newsweek points out, the revolution in Chinese transportation may shake up Chinese society far more than the government expects:

China’s effort to develop medium-size cities across the country, in order to reduce the pressure of massive internal migration on big coastal cities, will also get a boost. The fast-rail links include rapidly expanding light-rail connections around major cities, encouraging moves from central cities to smaller satellite towns, or even commutes from one city to another. Retired people seeking a better environment are beginning to do the same.

Still, there is also the possibility that the unifying aim of the high-speed-rail project could create unexpected challenges for Beijing. Some of the fast-train routes are so popular that many passengers can be forced to stand throughout their journey. Outrage over this has led some media outlets to demand that the state-controlled railway system be opened to competition. “Only when monopoly is replaced by free competition,” said an article in the Chengdu Business Daily, “can we expect real quality train services.” What’s more, improvements in mobility could begin to undermine the Chinese government’s highly restrictive residency regulations, which even today tie people’s right to welfare, health care, and education to the place where they were born or have worked during their adult life. Now, according to Mingzheng Shi, head of New York University’s teaching center in Shanghai and a specialist in China’s urban development, more and more people are moving across old administrative boundaries. “Their concepts of cities and distance are changing,” he says. “People from Shanghai see no problem now in living in cities in southern Jiangsu province, where apartments are cheaper, and then taking the fast train to Shanghai in 20 to 40 minutes.” Large numbers of urban residents moving away from the cities where their welfare entitlements have traditionally been located may prove too much for the household registration system, and could lead to its “eventual complete collapse,” says Shi, removing a vital plank of the state’s traditional mechanism of social control.

Over the longer term, easier travel could be the driving force behind a new understanding of what China can one day become. Chinese officials have long argued that the nation’s vast area and population make it too unwieldy to be suited to multiparty democracy—and this idea has been deeply lodged in the Chinese psyche for generations. This may have been unsurprising in a country where a couple of decades ago it would often take half a day to get to the next town, and where it could easily take four hours to make a phone call from one city to another. Yet once people begin to sense that their country is getting smaller, those obstacles are likely to seem smaller, too. In fact, the effect of the high-speed trains could be that they do bring China together—just not in the way Beijing might have planned.

As Kerry Howley pointed out, transportation can be more than convenient, it can be liberating:

“It was amazing to me how quickly she overturned the power structure within her family,” Leslie Chang writes in Factory Girls, her 2008 book on internal migration within China. Chang is marveling at Min, a 17-year-old who left her family farm to find work in a succession of factories in the rapidly urbanizing city of Dongguan. Had Min never left home, she would have been expected to marry a man from a nearby village, to bear his children, and to accept her place in a tradition that privileges husbands over wives. But months after Min found work in Dongguan, she was already advising her father on financial planning, directing her younger siblings to stay in school, and changing jobs without bothering to ask her parents’ permission.

Chang’s book is full of such women: once-obedient daughters who make a few yuan, then hijack the social hierarchy. Even tiny incomes cash out in revolutionary ways. With little more than 1,000 yuan (about $150) in Min’s pocket, it becomes possible to plan a life independent of her family’s expectations, to conceive of a world where she decides where to live, how to spend her time, and with whom.

Expect very big changes in China over the next 50 years, changes in every aspect of society, and don’t believe anyone who says otherwise.

Part 4:  Ghana gold, all gone

On a lighter note, I found this in my local newspaper, the Newton Tab:

On Oct. 20, Newton police met with a victim of an Internet scam, in which the victim reported a person recently died in Ghana and left the victim “two trunks full of gold.”

The victim’s e-mail contact in Ghana, who gave her name as “Vivian Catom,” advised the victim to wire money via Western Union to an account there.

And the victim did so, according to police. The money was needed to cover the cost of the trucks needed to haul two trunks of gold and some “delivery fees.”

The log leaves out how much the victim paid, but does include  the advice of police: “ignore these e-mails in the future and to err on the side of caution when dealing with cash transactions with people you have never met and from countries that you have never had any business with in the first place.”

There’s nothing I hate more than taking a day off from work to wait for two trunks of gold, only to have the deliveryman not show up. 

Seriously, it doesn’t surprise me that very young or very old people are occasionally scammed by these emails (although doesn’t ‘trunks of gold’ sound like something out of Treasure Island?  If I was a scammer I’d at least say something more modern sounding like “strongboxes filled will 24 carat Kruggerrands.”)  But I also recall reading a couple years ago about a local attorney who fell for one of these email scams.  That’s one lawyer I would not want to have representing me.


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100 Responses to “Inequality, dinosaurs, trains, and gold”

  1. Gravatar of Current Current
    30. October 2009 at 06:15

    The mystery over the dinosaurs is an old one. It is not inconceivable that in large natural disasters every single animal or plant of a particular species could be wiped out. Due to closely linked eco-systems many other species are then affected.

    If the eco-systems of the world after a disaster is different from that before then highly-specialised creatures will die-off. Even if they survive the original disaster.

    In economic terms, it doesn’t matter how many buggy whip manufacturers they are. Once the demand disappears, so do they.

    The largest mass extinction was the Permian-Triassic event, in many ways that is the most interesting.

  2. Gravatar of Current Current
    30. October 2009 at 06:31

    The way to dodge strange continental inheritance laws is to register property in England. Or to move there or to somewhere like the Channel Islands, if that is necessary.

  3. Gravatar of woupiestek woupiestek
    30. October 2009 at 07:03

    You’re example is flawed: although it is true that the son of a man of 10 billion would have a legal right to 5 billion, it is not allowed to own that much money in the first place, so that is never a problem. ;-)

  4. Gravatar of Thorfinn Thorfinn
    30. October 2009 at 07:37

    Sweden has no inheritance tax, btw.

    It’s amazing that people still fall for Nigerian internet scams. They make up one of Nigeria’s larger industries, if I remember correctly.

  5. Gravatar of Scott Sumner Scott Sumner
    30. October 2009 at 07:39

    Current, So is your explanation that the dinosaurs only liked to eat certain plants, and that those plants were totally wiped out after the second asteriod hit, and that the new plants that populated the earth were things the dinosaurs could not properly digest? I suppose that is plausible, but it seems more plausible to me that the big mammals were simply superior to the big reptiles, and stole their niche because they were superior.

    And thanks for the info on tax dodges, but I really would like an explanation from a European as to why they have these bizarre laws. Do Europeans believe that children somehow “deserve” a share of their parents’ estate? What sort of moral reasoning would lead to that conclusion?

    woupiestek, I know you are half joking, but I’ll address it anyway. I think there’s a guy in Sweden with about 10 billion (the Ikea owner?), but I also vaguely recall that he might have moved to Switzerland, which would sort of support your point.

  6. Gravatar of Scott Sumner Scott Sumner
    30. October 2009 at 07:44

    Thorfinn, Yes, I also find it amazing. I hope this wasn’t in bad taste, because I know some of the victims are senile older people, so it is a real problem. But it does sound pretty funny.

    Yes, I’d heard the Nordic countries have fairly low taxes on capital, so the inheritance laws fit that pattern. Maybe someone should propose to Pelosi and Reid that the US tie its inheritance tax rate to the Swedish rate. That sounds progressive! Maybe they’d fall for it just like people fall for those Nigerian scams.

  7. Gravatar of jean jean
    30. October 2009 at 08:04

    http://en.wikipedia.org/wiki/Shiva_crater
    I also remember have read that an asteroid impact could have triggered volcano eruptions at the antipodes.

    Concerning the dinosaurs’ recovery, the truth is that there is a kind of dinosaur which has been quite successful after the CT (Cretace-Tertiary) crisis: they are called birds and some of them have become quite gigantic in Tertiary era. Besides, just after dinosaur extinction, there has been race to gigantism among mammals.
    The basic answer to the no-dinosaur recovery is that life is path-dependent. Once a specie has died, there is no resurrection. But conversely, if a taxon has gained momentum, it is much more difficult for other taxons to take its place (except if they had not been in contact before).

    Second, you have used the word purpose. There is no purpose in evolution and dinosaurs did not fill any purpose, they were just survivors, like any other living entity. What people mean when they speak of “ecological niche” is that the same causes usually implies similar effects and that if several species do more or less the same thing, it is likely that only one will survive.

  8. Gravatar of StatsGuy StatsGuy
    30. October 2009 at 08:15

    “3. Experts (managed funds) underperform the dartboard (indexed funds.)”

    Actually, this has lately been qualified. I read some recent research (having trouble tracking it down) which says that fund manager’s top picks (at the point they choose them) outperform the market by (on average) 1%-4%, and some are better than others.

    The problem is the sheer amount of liquidity that fund managers have to manage. Unlike small investors, their decisions actually impact the price of the security they are investing in. Thus, they tend to bid up the price as they buy major stakes, but because they limit investments to researched portfolios, they overcommit to stocks. Likewise, they have difficulty extracting themselves from large positions.

    Also, there’s research which does track heterogeneity among people…

    http://rhsmith.umd.edu/finance/pdfs_docs/SeminarFall2009/MarkGrinblatt1.pdf

    The “Dartboard” result is almost tautological so long as the amount of liquidity under managed investments is high relative to “dartboard” investments (in relationship to the differential costs of management vs indexing). That’s not a slam on the EMH… It’s just a more nuanced view of why it’s mostly true for large market players.

  9. Gravatar of StatsGuy StatsGuy
    30. October 2009 at 08:21

    “If they couldn’t compete with the mammals, doesn’t that mean they were on their way out, asteroid or no asteroid? Just asking.”

    Because they were overspecialized to a specific market condition – in other words, Evolution put too much faith in the Efficient Species Hypothesis, and too little faith in systemic robustness.

  10. Gravatar of Current Current
    30. October 2009 at 08:26

    Scott: “So is your explanation that the dinosaurs only liked to eat certain plants, and that those plants were totally wiped out after the second asteriod hit, and that the new plants that populated the earth were things the dinosaurs could not properly digest? I suppose that is plausible, but it seems more plausible to me that the big mammals were simply superior to the big reptiles, and stole their niche because they were superior.”

    That’s certainly a possible explanation. However it is by no means certain that mammals were generally superior.

    Firstly, large animals are quite rare. It’s quite possible that some species were entirely wiped out by disasters.

    It’s likely that many more were harmed indirectly. I’m not just saying that “the new plants that populated the earth were things the dinosaurs could not properly digest”. It’s more complicated than that what I’m saying is that the balances changed. All that’s needed is a marginal change for there to be big effects. You can often see this in forests, for example. A forest of a certain type of trees will have certain plants and animals living alongside the trees. This isn’t always because of very great specialization, but rather because of small changes in population that can accumulate over time. If one species is only slightly better adapted to an environment then over a reasonably short length of time (i.e. not an evolutionary one) it will outbreed others.

    Another possible explanation is the gene pool effects. If a great number of a species die out then the gene pool shrinks. This makes the species much more susceptible to pandemic diseases.

    (Neither of these are my ideas, they’re things I’ve read in books about evolution).

  11. Gravatar of JimP JimP
    30. October 2009 at 08:50

    To get back to your first paragraph – indeed – the 3rd qtr was a gigantic disappointment – unless a person is a real deflationist – like the WSJ or Volcker. I really do think these people love the idea of falling prices and smashed lives. Never enough rich people and never enough poor people – as they say.That is certainly where Alan Meltzer lives.

    It is simply stunning to me. Obama is supposed to be a liberal – a left wing kind of guy – and liberals are supposed to care about something besides the banking system and a strong dollar. Roosevelt knew this – inflation is better than deflation. Obama and Bernanke just do not give one damn. It is sickening. We are giving ourselves Japan – we don’t have to but we are – just for the fun of it.

  12. Gravatar of JimP JimP
    30. October 2009 at 08:58

    And its not as if there is nothing Obama could do – there is plenty he could do.

    It may well be than Bernanke does not have the votes for a more aggressive policy – but there are two empty posts on the Fed board. Obama could fill them with inflationists and at the same time make a speech explaining the kind of monetary policy he would like to see. We he? Well he sure could.

  13. Gravatar of 123 123
    30. October 2009 at 09:12

    “right-wing dinosaur disaster denier…” – funniest phrase of the week.

    The parallel between dinosaurs and macro is not that close, because dinosaurs had no TARP and stress-test, so more efficient species filled their niche.

    Every decade there is a mortgage bubble in some country, but the market is not efficient enough for this information to be reflected in other countries (unless five years is “almost immediately”).

  14. Gravatar of Bob Murphy Bob Murphy
    30. October 2009 at 09:14

    If I was a scammer I’d at least say something more modern sounding like “strongboxes filled will 24 carat Kruggerrands.”

    If I were a scammer I’d say, “Let the Fed add some zeroes to certain bank accounts and everyone will find a job.”

  15. Gravatar of Mike Mike
    30. October 2009 at 11:08

    800 miles is about right for Chicago to NYC. Sorry to go trivial on you.

  16. Gravatar of John Thacker John Thacker
    30. October 2009 at 11:40

    “You’re example is flawed: although it is true that the son of a man of 10 billion would have a legal right to 5 billion, it is not allowed to own that much money in the first place, so that is never a problem.”

    I know you’re joking, but the two words that apply here with regards to Sweden are “Wallenberg Family.” I believe they’ve been estimated to control one-third of Sweden’s GDP.

  17. Gravatar of Scott Sumner Scott Sumner
    30. October 2009 at 12:16

    jean, Those are good arguments. Did Gould come up with apth dependence? In any case, I still have my doubts. Take New Zealand, too far from land for any mammals (until humans arrived.) So birds like emus took the top positions in the food change. Now suppose a land bridge opened between New Zealand and Asia. I think more sophsticated large mammals would have blown those “dinosaurs” away in no time at all. (And I agree that big birds are a sort of dinosaur.) I just have a hard time believing that reptiles wouldn’t have had any fortuitous opportunities to get big in the past 65 million years. The biggest land reptile is the komodo dragon, which isn’t very big. Why doesn’t it get bigger? Why don’t iguanas get bigger? Is it just because some big mammal is already there? Maybe, but my hunch is they aren’t as adaptive as large mammals. Mammals have gone through many ups and downs over the years. As recently as 20,000 years ago there were lots of big mammals in the Americas that have since gone extinct. Reptiles just stay small–everywhere.

    I had the same thought about asteroids triggering the volcanos, which would make it less of a coincidence. But the Economist science writer knows more than I do, and insists the Deccan volcanos came before the asteroid.

    Statsguy, Those are good points, but;

    1. Does the return on top 4% stocks include the depressing effect on prices of sales, or do they look at values while in the portfolio? (i.e having been bought but not yet sold?)

    2. Mutual funds weren’t quite so big in the 1970s, when the early studies were done.

    3. I think there are also studies that show mutual funds that do well one year, aren’t much more likely to do well the next, and that sort of study overcomes at least part of the size issue you mention

    4. When you say more “recent research” you are already discussing fishing expeditions, slicing and dicing the data in all sorts of ways. I.e. data mining.

    4. I’m not saying EMH is perfect, I could believe that there might be slight differences in stock picking ability. But are they big enough to have useful implications? I’m not sure.

    statsguy#2, Or maybe it’s just that free market “creative destruction” at work. Markets provide the optimal species, and mammal innovation means the best species will vary over time. And then there’s the anthropic principle. . . .

    Current, You said;

    “Firstly, large animals are quite rare. It’s quite possible that some species were entirely wiped out by disasters.”

    My point was slightly different. I agree that some dinosaurs may have been completely wiped out. But we know that some (like crocodiles) survived. I wonder why they didn’t evolve to fill other niches. Remember that dinosaurs were very successful. They lived all over the world, in all sorts of conditions. They evolved into many different varieties. Some even flew, and I think some lived in water (and breathed air), although I’m not certain.

    65 million years is a long time. Often multiple varieties of an animal will split off and evolve into new species in less than one million years.

    JimP, And of course Obama reappointed Bernanke. I share your frustration, but I need to just plow ahead with this blog on the assumption that those who disagree with me are well-intentioned but making a mistake. Otherwise there is no hope.

    123, Those are good points. I was thinking of linking this with the problem of events that are “overdetermined” but I couldn’t come up with anything that seemed very interesting. I try to avoid overdoing it.

    Bob, This crisis is like a reverse asteroid. The “dinosaurs” that were almost extinct, like Austrians and Post Keynesians, are coming back to life. It’s the Keynesian and monetarist mammals that are discredited.

    Mike, Thanks, but to get even more trivial, when I googled NYC/Chicago I got 711.47 miles. But perhaps by road its 800. (Recall that fast trains need to go really straight.) Anyway, its close either way.

    Thanks everyone for commenting, and putting up with an economist who is crazy enough to pontificate on paleontological issues that he knows little about.

  18. Gravatar of ssumner ssumner
    30. October 2009 at 12:39

    Statsguy, I just skimmed that paper, but a few comments. It was just Finland, which is a small market. High IQ people tend to occupy positions of authority, where they have access to inside information. The excess returns only lasted for one month, suggesting inside information, not superior skills at estimating the long run success of companies.

  19. Gravatar of Lee Kelly Lee Kelly
    30. October 2009 at 13:04

    Scott said,

    —–quote—–
    “You know when you teach the options for recovering from a recession? One option is for the government to do nothing, just wait for SRAS to shift right. The self-correcting mechanism. Well that is what is happening now (and probably in the 4th quarter as well.) So today let’s take a break from the dreary subject of demand stimulus, or the lack thereof.”
    —–quote—–

    It’s only the “self-correcting” mechanism when the government has a monopoly on the supply of money and holds that supply constant (or below trend). In a free market in money and banking — free banking — the self-correcting mechanism would look quite different, I think.

  20. Gravatar of Current Current
    30. October 2009 at 13:11

    Scott: “My point was slightly different. I agree that some dinosaurs may have been completely wiped out. But we know that some (like crocodiles) survived. I wonder why they didn’t evolve to fill other niches. Remember that dinosaurs were very successful. They lived all over the world, in all sorts of conditions. They evolved into many different varieties. Some even flew, and I think some lived in water (and breathed air), although I’m not certain.”

    After the disaster has occurred and a new ecosystem is coming into being there isn’t necessarily time for evolution.

    If you have a forest with a few hawthorn trees and many tall beech trees, then in time the beech trees with kill the hawthorn trees. But, that’s not a particularly long period of time, only decades. Not necessarily enough time for evolution to take place.

    That’s the point of the ecology theory I was describing. I think that it’s quite plausible.

    Also, it’s worth mentioning that around the “K-T boundary” it’s not only the dinosaurs that died. Many species of each of the great phyla went extinct. According to some estimates 90% of algae became extinct. The distinction of the dinosaurs is that they were a major family that was completely destroyed, except for their offshoot the birds.

  21. Gravatar of Doc Merlin Doc Merlin
    30. October 2009 at 14:16

    1) As a scientist type (but not a paleontologist) I will try to answer this question (to the best of my ability)
    2) I assume you are talking about the K-T extinction (the one that ended the dinosaurs)
    3) Massive super-volcanos and astroid impacts block light and cause huge amounts of cooling.
    4) This affected shelled creatures and plants the most
    5) Amphibians were relatively unscathed
    6) non-archosaur reptiles including turtles did perfectly fine.
    7) Fish did ok.
    8) Mammals began diversifying well before the extinction and the event temporarily stopped the diversification.
    9) Anything that relied on photosynthesis or was large herbivore or top predator did terribly.

    Ok, now looking all this over it seems that the atmosphere became less transparent to light which harmed all the plants. Plants died, plankton died, things that ate plants and plankton, and needed a lot of it, died. Creatures were able to eat detritus or eat creatures that could eat detritus survived. This is why we still have alligators but don’t have t-rex.

    But yes, it seems the main reason that mammals, non-dinosaur reptiles, birds, and amphibians survived mostly intact is they didn’t need large plants or large animals to survive.

  22. Gravatar of rob rob
    30. October 2009 at 14:47

    Scott:

    I take issue with your claim that 95% is a meaningless number. Statistical significance depends entirely on context. If you tell me there is a 5% chance that the earth’s movement around the sun has nothing to do with the sun, I will have trouble sleeping tonight. But if you tell me there is a 5% chance that right-handed hitters don’t really do any better against left-handed pitchers, that is still good enough odds for me to change pitchers in the 9th inning of the playoffs in a tie game with 2 outs and 2 on. Particularly if you consider that the null hypothesis is that they will still do no worse! I think Bill James would agree.

    I too have heard it said “95% is good enough to trade by…” Of course it isn’t good enough to reject the EMH, but the point of those looking for causation in the markets is to make money, not disprove a theory. And you are mis-characterizing how a good trader would use the data. A good trader woudn’t test her hypothesis over the dataset she used to form the hypothesis. For instance, say I observed that in 2008 whenever oil futures rose by more than 1% by noon in New York, the S&P had a 60% chance of rising between noon and 1. Ok, now I have my hypothesis: that this is non-random. But I need to test the hypothesis on different data, for instance the first 10 months of 2009. If from that test I determine there is less than a 5% chance that this is random — no I wouldn’t try to publish a paper arguing I have evidence the EMH is a total crock — but I would consider it “good enough to trade by”.

    Of course the above is no good if it took me 30 hypotheses to find something that is 95% likely to be non-random! You have to adjust the significance by the number of hypotheses you test. Not doing this is data-mining and is probably the biggest mistake people make.

    You said: “What is the a priori reason one would expect lower stock returns on rainy days?”

    I disagree with the idea there needs to be an initial reason for someone to expect causation. Agreed it raises suspicion of data-mining when one can’t fathom why someone should test a certain hypothesis, but it is nevertheless scientifically irrelevant. The statistical significance of the numbers don’t get stronger because I claim to have a good hunch for why something should work and vice-versa. If stock returns really were lower on rainy days that would simply be a fact we would have to accept and learn to live with, however inexplicable it might be.

  23. Gravatar of rob rob
    30. October 2009 at 15:10

    To clarify my last point: assume the data said the correlation between rain and stock down days had a 99.9999% significance. Would you buy the connection then? Agreed it wouldn’t prove which way the causation runs. Perhaps stock market down -> people see the market, abandon hope, leave work early, create pollution -> atmospheric disturbance -> rain. Statistics can say nothing for sure about a mechanism. They can only give you ideas. From these ideas we form stories about the universe, but the stories aren’t real, except that they are real stories. Newton had a good story about a mysterious force that controlled the universe, which of course it turned out not to be real. I suspect none of our stories, given long enough, ever turn out to be real.

  24. Gravatar of Ignacio Ignacio
    30. October 2009 at 15:47

    I am not sure if someone already answered this. I am from Chile and our inheritance laws are modeled after those of continental Europe so I am familiar with them.

    At the time these laws were passed (early XIX century), they were considered very progressive because they forced the decedent to divide leave his or her estate among his or her children and spouse instead of leaving everything to the first-born son (not daughter). Since at the time there were not that many people leaving fortunes to charity, this issue was not considered. And in any case, the rules generally provided for different rules for different parts of the estate: a part (normally 50%) was to be distributed pursuant to mandatory rules among spouse and children; another part (normally 25%) was part to be distributed freely among close relatives; and the rest could be distributed freely to anyone.

  25. Gravatar of rob rob
    30. October 2009 at 17:27

    RE dinosaur vs mammal. how long were the dinos around and how long have mammals had hegemony? u have convinced me the dinos will likely return. we are just going through a temporary readjustment phase. jared diamond says it is a fallacy that we associate more evolved with higher intelligence. perhaps rats are bettwer suited for longterm survival than humans. humans havent been around long and we likely wont last long. this is why we will likely never contact aliens. the universe is probably loaded w rats or t-rex like creatures.

  26. Gravatar of rob rob
    30. October 2009 at 19:03

    Scott, i think with this post u have proved yourself a natural blogger, despite the disclaimer.

    it is interesting how u cant stop talking about gold, despite the context. reminds of frank zappa claiming he was neither obsessed with poodles nor blowjobs, but he kept making references to them because they were themes that tied his work together, like picasso’s blue period.

  27. Gravatar of Jon Jon
    30. October 2009 at 21:11

    So lots of young hotshot finance types started going out and finding “anomalies.” There is only one problem, their tests are basically worthless. This is because they used the same data sets to develop the theories as they used to test them. By itself, that makes the test of statistical significance worthless.

    Sure does, but your brush is just too broad here. In-sample vs. out-of-sample error is the bread and butter of machine learning—and people in that field have a big hand in computational finance.

    One such person is my erstwhile colleague, Yaser Abu-Mostafa who has a published a few pieces of very careful work in this field.

    I used to whole believe as you do, but I’m not willing to dismiss what he has done. Some fairly accessible examples:
    http://www.work.caltech.edu/pub/Abu-Mostafa1996forcast.pdf
    http://home.caltech.edu/yaser/paper/98financial.pdf

  28. Gravatar of jean jean
    31. October 2009 at 05:34

    @ssumner:
    Well, path-dependency is not as popular in biology as it is in economy. But I think a lot of biology is about path dependency. They use different words such as “contingency of evolution”, “genetic drift” (btw, there is a similar concept in physics called hysteresis). But I think you might find the word in game theory papers.

    But there is a path-dependency who leads Darwin to reject Paley’s creation theory: he observed that isolated species often extinct when put in contact with their their mainland counterpart. This fact could not be explained by Paley’s work who saw each specie as “designed” for a certain purpose; so why would these isolated species disappear? The answer suggested by Darwin is these species arrived there by accident and also died by accident: When they were isolated, they weren’t less or more fit their environment. But the lack of external competition and genetic drift made them loose some abilities that were necessary face to external competitors.

    There are also plenty of path-dependencies which can be observed:
    _Verterbrate’s eye: light has to cross blood vessels before reaching photo-sensitive cell (leading to a blind spot and possibly macula when individuals get older). Btw, cephalopods do not have this strange perticularity.
    _Girafe’s nerve connecting larynx and brain is several meters long.
    _Human inguinal canal makes a loop around our intestines. This perticularity often leads to hernias…
    _…

    The origin of these strange things can only be understood when studying evolution, just as QWERTY layout makes sense only when looking at history.

    Lastly, there are some claims that there is in fact no progress in life, in any sense: life is probably not fitter or less fit than it was at Permian.

  29. Gravatar of ssumner ssumner
    31. October 2009 at 06:04

    Lee Kelly, I have heard that argument, but it has never been demonstrated in my view. Rather it is generally asserted, and then discussed with examples. I agree that free banks would accommodate some shocks, and thus tend to stablize NGDP in some situations. But not all. There are some changes in the medium of account under free banking that could be quite destabiling.

    Current, You said;

    “Also, it’s worth mentioning that around the “K-T boundary” it’s not only the dinosaurs that died. Many species of each of the great phyla went extinct.”

    This seems to strengthen my point. There was an open field for many types of animals to fill. And the mammals were able to fill it, not the reptiles.

    Doc Merlin, I understand why dinosaurs didn’t do well in the environment produced by the asteroid and volcanos. But that passed relatively quickly (compared to 65 million years.) and doesn’t explain why dinosaurs didn’t return later, once the air had cleared and plants grew back.

    rob, You said;

    “I too have heard it said “95% is good enough to trade by…” Of course it isn’t good enough to reject the EMH, but the point of those looking for causation in the markets is to make money, not disprove a theory.”

    The problem with your argument is that it assumes some connection between confidence intervals in studies and the chance a theory is incorrect. But that’s not true. Suppose you walk into a casino and walk up to a roulette wheel. It turns up number 27. They spin again, and once again number 27 comes up. Would you conclude the wheel is biased toward 27? Would you trade on that basis? I wouldn’t, but 100s of professors of finance that teach at universities would conclude it is unfair, after all, there is less than 1 chance in 20 that a number will be repeated. So the wheel must be biased towards 27. At least that’s how lots of finance professors reason. They say “aha, it can’t be an efficient roulette wheel.” I think that sort of reasoning is just silly, and has nothing to do with classical statistical theory. Yes, there is only a 1/38 chance that a 27 would be followed by another 27. But there is also only a 1/38 chance ia 27 would be followed by a 23. So what? If you were a trader, would you put money on number 27 just because two 27s came up consecutively?

    By the way, I think if we were 95% sure that the EMH was wrong, it would be a good enough reason to reject the EMH. But of course none of these so-called anomaly studies are even set up to address the validity of the EMH.

    rob, you said;

    “I disagree with the idea there needs to be an initial reason for someone to expect causation. Agreed it raises suspicion of data-mining when one can’t fathom why someone should test a certain hypothesis, but it is nevertheless scientifically irrelevant. The statistical significance of the numbers don’t get stronger because I claim to have a good hunch for why something should work and vice-versa. If stock returns really were lower on rainy days that would simply be a fact we would have to accept and learn to live with, however inexplicable it might be.”

    I didn’t say you needed a reason to do a test, I said you needed a theory to do a one tailed test rather than a two tailed test. After all, isn’t it equally plausible, ex ante, that stocks do better on rainy days?

    And I have nothing against data mining.

    I think the statistical significance is stronger if one is constrained by theory. Theory radically reduces the number of possible combinations that could be tested. A correlation between the money supply and the price level is much more meaningful than a correlation between the supply of apples and the price level.

    I have absolutely no problem with someone claiming stock returns were lower on rainy days, if they were in fact lower. So I agree with you. I do have a big problem with someone claiming that stock returns are lower on rainy days, and people do make this sort of claim. Replacing ‘were’ with ‘are’ turns it from a observation about the historical data, into a scientific theory. And there is no justification for that scientific theory.

    Finally, I have no problem with using data mining to make money in the stock market, although I am skeptical about how well it works.

    rob, You said;

    “To clarify my last point: assume the data said the correlation between rain and stock down days had a 99.9999% significance. Would you buy the connection then?”

    Sure, I’d think it far more likely to be true. But the point of my dinosaur and blackjack examples was that in our real life we observe long shots far more often that people might think. But I would also note that if that correlation was meaningful, it should be confirmable very quickly with further data. You’d only need perhaps another 12 months to get a good out-of-sample test. So that would avoid the problem I mentioned.

    Of course it would also allow me to very quickly get rich if it was true. So that would be another good thing. However I don’t expect to get rich anytime soon, and hence I don’t expect to find gross violations of the EMH anytime soon. I hope I am wrong, as I’d rather get rich than defend the EMH.

    Ignacio,

    Thanks for the info. But that still doesn’t answer the question of why these laws are still on the books, because for many decades we have seen the rich give to charity. Indeed in American the rich often gave huge amounts to charity 100 years ago. The persistence of these laws is a puzzle.

  30. Gravatar of ssumner ssumner
    31. October 2009 at 06:13

    rob, You might be right about the dinosaurs, but I doubt they’ll return anytime in the next few 100 million years. My hunch is that if the reptiles were going to get bigger, they would have already done so over the past 65 million years. I think mammals are superior at larger sizes.

    rob, Maybe I have a deeply sublimated preference for gold. maybe I am a gold bug in denial. Does the Mises Institute offer therapy?

    jean, You might not want to bring up the “querty” argument, as one of my commenters is an expert on that, and will point out that the economics papers on querty have be debunked. I agree about path dependence in small isolated ecosystems, but at the global level I think things are highly competitive. And recall that we have had reptiles for 100s of millions of years. I am asking why we had large land reptiles between 250 and 65 million years ago, but nothing bigger than a komodo dragon ever since.

  31. Gravatar of ssumner ssumner
    31. October 2009 at 06:23

    Jon, I looked at the first paper you attached, but don’t follow their argument. It seems to be based on “hints” such as the fact that the dollar/mark exchange rate moves inversely to the mark/dollar exchange rate. But that is a tautology, and so I don’t see how it helps one forecast.

  32. Gravatar of jean jean
    31. October 2009 at 07:31

    Remember that other “reptiles” (Note: reptile is not monophyletic group: if you take last common ancestor of these animals, then the descent of this animal include mammals.) are not dinosaurs. So they don’t have key features of them. For example, a lot of dinosaurs had probably a bird-like respiratory system and hollows in bones (both items are linked).
    These two features may have helped them to become very large, because:
    _they could breathe air more efficiently (this is still true for birds: pipistrellas have much more fragile lungs than birds).
    _they were lighter (relative to their size of course !).
    _They may be able to cool more easily.

    http://people.eku.edu/ritchisong/birdrespiration.html
    http://www.evolutionpages.com/bird_lung.htm

    Lastly, remember that if thinking dinosaurs had existed, they may have asked themselves why synapsids (a group including mammals) were not able to recover after Pelycosaurs had ruled the world for 40 millions years. http://en.wikipedia.org/wiki/Pelycosaur

  33. Gravatar of ssumner ssumner
    31. October 2009 at 08:07

    jean, Thanks. That’s the most persuasive answer that I have seen so far. I wasn’t kidding when I said I didn’t know enough about this to be talking about it. But this blog is a great way for me to learn.

    BTW, Were dinosaurs cold blooded (as reptiles are?)

  34. Gravatar of rob rob
    31. October 2009 at 09:29

    I like the idea of thinking dinosaurs. Is it possible that a highly sophisticated civilization existed for a mere 10 thousand years about 100 million years ago? If one did, should we have evidence of it? I read something once that said a Hindu text claimed that thousands of civilizations had come and gone before us. It keeps me wondering if such a thing is possible, particularly if civilizations don’t last long. Perhaps highly intelligent species are unstable — because they keep changing the climate or something….

    RE data mining. Scott, you said:
    “And I have nothing against data mining.

    We need to define data mining. I have always taken it to mean looking for statistical anomalies but failing to follow through with an out-of-sample test.

    Then you said:
    “I think the statistical significance is stronger if one is constrained by theory. Theory radically reduces the number of possible combinations that could be tested.”

    I think I am saying the same thing you are but arriving at it from a different direction. Sure, theory radically reduces the number of possible combinations, but as I said above if you are testing many hypotheses then that number belongs in a denominator somewhere, so that you have accounted for all of these possible combinations.

    You said:
    “The problem with your argument is that it assumes some connection between confidence intervals in studies and the chance a theory is incorrect.”

    Ok. My statistics is very rusty. I used to be good at this stuff, but don’t use it in practice. I need to pull my statistics book off the shelf and regain my understanding of confidence intervals.

    But when you say: “Suppose you walk into a casino and walk up to a roulette wheel. It turns up number 27. They spin again, and once again number 27 comes up. Would you conclude the wheel is biased toward 27? Would you trade on that basis?”

    Even without my lost understanding of confidence intervals I can answer this one: No, because there was no test of the theory. All I have made is an observation at this point. What you have described isn’t even a coincidence yet. Let me at least see if the 3rd spin comes up 27. Then, yeah, if I were an alien and didn’t know anything about casinos or roulette, but were told the pay off was 35-1 if it comes up 27 again, I would risk a dollar on the next spin. In fact, without any data to suggest the the odds were fair, this would be a smart bet, because no data mining was involved.

    You said: “I said you needed a theory to do a one tailed test rather than a two tailed test. After all, isn’t it equally plausible, ex ante, that stocks do better on rainy days?”

    Ok. I misread you the first time. I thought you were making the argument i have heard others make that proving causation requires a theory. But it was sloppy reading on my part. I understand this point now.

  35. Gravatar of Jon Jon
    31. October 2009 at 11:29

    Scott:

    Let me try to clearly distinguish a few different things:
    1) One point in showing those papers was to challenge the claim that financial modeling (for Profit against the market) ignored concerns of spurious regression and overfit. Within the learning-systems community, I don’t think that your original claim on this point is fair.

    2) The EMH is statement that all known information is incorporated, not a statement that all possibly known information is incorporated. I like to think of these systems as ‘discovering’ things we did not know before and using that knowledge to out-perform other market participants. This does not contradict the EMH. On that note, I think a lot of hedge fund strategies reflect the cost of information. If you can marshal a computer infrastructure to do what other market participants must do by hand (at greater cost or more slowly) you earn a premium for doing so.

    3) On the topic of hints: the basic idea that there are certain things we already believe to be true. Yaser favored programing the learning-system with those facts a priori. e.g., the system should not need to discover newton’s laws of motion. So we program that ahead of time which enables the system to more readily ‘discover’ General Relativity rather then getting stuck discovering that Newton’s laws are approximately correct.

    Perhaps you can see where I am going with this. If we program the learning system a priori with what we (and the rest of the market already knows given present information) then we enable the system to better learn new rules that the market does not generally know.

    I don’t feel this contradicts the EMH.

  36. Gravatar of rob rob
    31. October 2009 at 11:35

    I said: “I thought you were making the argument i have heard others make that proving causation requires a theory.”

    Please ignore my language about “proving causation”. i realize that statistics can only reject not prove.

  37. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    31. October 2009 at 12:18

    ‘jean, You might not want to bring up the “querty” argument, as one of my commenters is an expert on that, and will point out that the economics papers on querty have be debunked.’

    It’s nice to be appreciated, but strictly speaking, Jean’s statement, ‘…just as QWERTY layout makes sense only when looking at history.’, isn’t disputable.

    Now, what is disputable is what Jean thinks is ‘the history’.

  38. Gravatar of Doc Merlin Doc Merlin
    31. October 2009 at 14:45

    I am reminded of the problem behaviorists have with statistics. In order for a historical statistic to be meaningful over historical data, the theory must have either a chain of causality and/or be stated before the data set is analyzed.

    Richard Feynman had an amusing story about this, a behaviorist was sending rats down mazes (as they do) and found them always going to down one way. The behaviorist calculated the chance of that and found it was something like 1 in a million. He went to the statistician to check with him to make sure he was doing everything correctly, convinced he had discovered something new. The statistician told him, no no, its meaningless any events that have already happened have a probability of 1/1 since they already happened. Its only useful to try to predict events and then see if they happen, /then/ to calculate your confidence interval.

    This is similar to what my graduate quantum mechanics professor once told me. “Everything observed in the past is a particle, everything not yet observed in the future is a wave.” For the non-physicists out there let me translate. Particles are classical objects, they behave classically and are somewhat sharply defined in whatever observables we just measured. Probability waves tell us statistical information about the particle.

    Ok, how does this apply to economics? If we have a theory we should write out the theory then test it against data and predictions. (This is separate from trying to categorize phenomena we don’t understand, which can be handled separately.) This methodology has two problems, one it introduces more observer bias and the other is that it has a circularity problem.

    To resolve the circularity problem I propose a service: A site/service you can submit theories and predictions to that will not release them until a specified date. This ensures that people believe you did make your prediction (and are not cheating) and also people believe that circularity wasn’t why the prediction worked.

  39. Gravatar of rob rob
    31. October 2009 at 15:13

    if humanity were destroyed tonight by an asteroid and 100 million years later another intelligent species evolved, would it be obvious to them we were here? i mean, would there be fossils of Buicks everywhere or would they be lucky to find a fossil of a Buick? i have no intuition as to the answer to this.

  40. Gravatar of Doc Merlin Doc Merlin
    31. October 2009 at 15:16

    @rob

    Yes many parts when buried would last a very very long time. Aluminum, once it forms a nice oxide layer for example, lasts for damn near ever. Good stainless steel is similar. Lots of things would last a very long time.

  41. Gravatar of Lorenzo (from downunder) Lorenzo (from downunder)
    31. October 2009 at 15:27

    One of the big differences in English law was only the holder of the title were noble, everyone else were (legally) commoners. Which gave the nobility an interest in how the law treated commoners (their wives, siblings, mothers and children).

    On the continent, all members of the family were noble, which gave the nobility an interest in preserving the privileges of the nobility. The much cited English sense of “fair play” plausibly comes from the difference.

    The difference in laws to do with wills may be connected to this historical difference.

  42. Gravatar of rob rob
    31. October 2009 at 15:47

    @doc,

    ok, but is it merely a question of things lasting? maybe it is, i dont know. but doesnt something that lasts also have to show up at the right place at the right time?

  43. Gravatar of jean jean
    1. November 2009 at 03:21

    @ssumner:
    The cool-bloodedness of dinosaurs is much a debatted issue. Some of them seem to have been able to regulate their temperature.

  44. Gravatar of Current Current
    1. November 2009 at 11:52

    Regarding Dinosaurs…

    Current: “Also, it’s worth mentioning that around the ‘K-T boundary’ it’s not only the dinosaurs that died. Many species of each of the great phyla went extinct.”
    Scott: “This seems to strengthen my point. There was an open field for many types of animals to fill. And the mammals were able to fill it, not the reptiles.”

    I don’t think you quite “get” evolution. It is not really about competition between the great phylla. The competition happens at a lower level between species that compete within specific ecosystems.

    As Gould said when examining evolution we shouldn’t just look at large animals like ourselves. Land only covers 30% of the earths surface. So, why shouldn’t we be interested in the Oceans too when considering the K-T event? The Ammonites, one of the oldest orders of sea creature died out at that time. But, why should we limit our view to large animals? Why not also consider plants and microscopic animals? There is no real reason not to. As I said, many types of algae were wiped out in the K-T event and their places in the ecosystems that took shape after were taken up by different sorts of algae.

    When we say that mammals became dominant after the K-T event what we really mean is that they became dominant in the ecosystems that are on the same scale as us humans and close to our perceptions and concerns. That’s something that’s quite sensible for us to study. But we mustn’t make any mistake about what we’re doing, we’re concerned with this because of our viewpoint.

    However, as Jean mentions there is lots of good controversy here. In the past it was thought that dinosaurs were out-evolved by mammals. That theory was challenged by the discovery of the K-T disasters.

    Many have claimed what you are saying here, that the mammals had a edge that allowed them to repopulate the world quickly. The most commonly reason given was thermo-regulation.

    As Jean says, the problem with this theory is that the evidence now seems to indicate that dinosaurs had thermo-regulation too. However, that still doesn’t change the fact that all the Dinosaurs are dead except for their relatives the birds. So, it could be that there is another reason.

    Also, it isn’t really clear that mammals were superior after the K-T event. The other possibility is that dinosaurs had some inferiority common to the whole order.

    As I said earlier, it’s quite possible that looking at it from the family perspective is the wrong point of view. It may simply be coincidence that all the dinosaurs died out. Each species could have died out because of it’s own particular weaknesses.

  45. Gravatar of Current Current
    1. November 2009 at 12:16

    Lorenzo (from Downunder): “One of the big differences in English law was only the holder of the title were noble, everyone else were (legally) commoners. Which gave the nobility an interest in how the law treated commoners (their wives, siblings, mothers and children).

    On the continent, all members of the family were noble, which gave the nobility an interest in preserving the privileges of the nobility. The much cited English sense of “fair play” plausibly comes from the difference.”

    Perhaps that was part of the reason. But, the law in England was the same as continental Europe until Henry VIII changed it to the present law.

    That may have been connected to difference in how titles work. You’re description of the difference above is fairly much correct, as far as I understand it.

    The situation in Ireland is interesting. One of the 18th century Penal laws stipulated that Catholics must split their estate between their sons equally. Protestants though were permitted to choose how their estates were divided. This is one of the ways Catholics were deprived of political power. The law was repealed in the 19th century but by that point it had already much reduced the amount of land owned by Catholics.

  46. Gravatar of jean jean
    1. November 2009 at 13:42

    @ssumner:
    I have made an error: Reptiles and birds have a common ancestor who is not shared with mammals. That does not change the fact that dinosaurs are much different from other reptiles.
    Their closest cousins (not counting birds, which can be considered as dinosaurs) are crocodiles. The latter ones may have survived because of their ability to survive without eating for one year.
    A factor which might also have played a role in dinosaur extinction is the development of flower plants to the detriment of gymnosperms (roughly conifers) during Cretaceous and it is not sure that dinosaurs were adapted to this new kind of food (NB: this does not explain their sudden extinction and there is no proof of dinosaur decline during the Cretaceous).

    Anyway, mass extinction events (five have been recorded in life history) are mysterious events.

  47. Gravatar of ssumner ssumner
    1. November 2009 at 14:59

    rob, Possible, but it would have had to be a strange life form. If it was like us (with buildings out of stone, etc) at least something would have shown up. Even if we all die of a plague or nuclear war, the pyramids will still be there for a very, very long time (if only in a ruined state.) Remember, we have even found dinosaur footprints after 65 million years–that sugggests something should have survived from earlier civilizations.

    I agree that ‘data mining’ is often used as a pejorative. But technically it is ok, if used to form hypotheses. As you say, the hypotheses then must be tested in other ways.

    rob, You said;

    “Even without my lost understanding of confidence intervals I can answer this one: No, because there was no test of the theory. All I have made is an observation at this point”

    I see your point, but my point was that anomaly stuudies “disproving” the EMH often do the same. They find “patterns” where the EMH predicts randomness.

    I also see your point about being impressed by three in a row. The problem with published research is that everyone knows the incentives are to get published, and it is easier to publish a study finding an anomaly, than one that doesn’t. That of course makes a mockery of our scientific pretensions, except that many of the harder sciences have the same problem with publication bias. Keep looking until you find patterns. It’s no different when scientists look for public health risks in the environment. The invention of the computer may have actually been a setback for economics. I am convinced it was a setback for macroeconomics.

    Jon, It’s possible I overlooked some value in those papers. But I would say this; they aren’t the best salesmen for their ideas. I spent about 15 minutes and could not get the intuition behind what they were doing. But that may be my bias. I don’t doubt people will continue this approach, and perhaps there will be some occasional successes. I’ll take a wait and see attitude.

    Patrick, Thanks for clarifying that. I find I can’t be an expert on everything, and would rather rely on commenters to fill in the gaps.

    Doc Merlin, That is a good idea. But I worry that anomaly researchers might flood them with 1000s of theories, hoping one pans out. So there should also be record keeping on how many theories were submitted by each researcher.

    Statistics gets into deep philosophical issues, which are over my head. But my intuition tells me that some types of “meta-studies” are more useful than ordinary studies. Take all the anomaly studies published in the 1970s and 1980s. And see how they’ve done since. That would be useful. One study that particularly impressed me was when I read that mutual funds that did well one period tended not to do better than average the next. I like those kinds of studies because they are exactly what I would think up if the EMH was brand new, and I was asked to test it. I would do something like that, not check to see whether January tended to be an above average month for stocks. There is no reason for testing returns in January. Whereas the mutual fund test gets at whether some people can pick stocks better than others. It is a very obvious test of the EMH. Now some have pointed to flaws with the test I just mentioned, but the point is that it is the sort of test I find persuasive.

    Lorenzo, Thanks for the info. I would just add that the Europeans have abolished serfdom, maybe it is time to abolish the medieval inheritance laws.

    Current, I think my problem is that I didn’t realize how different dinosaurs were from modern reptiles. I thought dinosaurs were just bigger versions of things like komodo dragons and crocodiles. One commenter said crocs aren’t even reptiles at all. So I probably don’t know enough to make this argument.

    Interestingly, as I find out that modern reptiles are more distant from dinosaurs than I had thought, I find birds are more similar to dinosaurs than I thought. That begs the question; why not really big birds? Here I think we can all agree that really big birds cannot compete with big mammals. There were some huge birds in New Zealand, but only before mammals arrived. So if birds are similar to dinosaurs, it seems interesting that big mammals can out-compete big birds. Or am I still off-base?

    jean, Thanks for that info. That raises the question of what do we know about the really big earlier mass extinctions. Were there examples of entire phylla wiped out, which then re-evolved somehow? Also, do you have any thoughts on my “bird” remarks in the previous reply to Current?

  48. Gravatar of 123 123
    1. November 2009 at 15:20

    Scott, you said:
    “There is no reason for testing returns in January.”

    January test makes sense as January returns might be affected by tax loss selling in December. BTW this inefficiency was arbitraged away and market is now a little bit more efficient than before.

  49. Gravatar of rob rob
    1. November 2009 at 15:38

    “Even if we all die of a plague or nuclear war, the pyramids will still be there for a very, very long time (if only in a ruined state.) Remember, we have even found dinosaur footprints after 65 million years–that sugggests something should have survived from earlier civilizations.”

    Of course I don’t really believe in the plausibility of previous civilizations, but I still want to tease this thought experiment out. The dinosaur footprints that have survived were astronomically unlikely to have survived (to touch back on the main theme here), but there were so many dinosaur footprints that some were likely to survive under whatever extraordinary circumstances were required. I doubt the pyramids would be discovered in 100 million years because they will likely be buried too deep. (This is really a question for a geologist.)I have trouble believing Buick fossils would be found frequently either, because they have only been roaming the earth about a century and seem unlikely to survive another. Would an anomalous stratigraphic slice of few thousand years viewed 100 million years later necessarily jump out at people? Would some future economist dismiss the anomalous discovery of a few Buick fossils as statistically insignificant?

  50. Gravatar of rob rob
    1. November 2009 at 16:53

    ok, let me make this sound slightly more plausible. imagine the great asteriod hit 3000 years ago, so after the pyramids but way before the industrial revolution. isnt possible all the human tools produced to that date could go unnoticed in the geological record 100 million years later. surely there are plenty of species which existed for a few thousand years which we have no record of, even plausibly the dominant ones.

  51. Gravatar of Current Current
    1. November 2009 at 17:17

    rob,

    The trouble with citing dinosaur footprints is that they were found after dinosaur’s were known about. We looked for the rare footprints after we knew the common dinosaurs existed. This sort of thing is quite common in palentology. People look through the evidence looking *for* stuff based on theory.

    In general I don’t know the answer to your question. I don’t know if an earlier race of intelligent beings would be visible or invisible to archeology and palentology.

    Scott: “I think my problem is that I didn’t realize how different dinosaurs were from modern reptiles. I thought dinosaurs were just bigger versions of things like komodo dragons and crocodiles. One commenter said crocs aren’t even reptiles at all. So I probably don’t know enough to make this argument.

    Interestingly, as I find out that modern reptiles are more distant from dinosaurs than I had thought, I find birds are more similar to dinosaurs than I thought.”

    Crocodiles are certainly reptiles, I don’t think Jean said otherwise. His point was that apart from birds they are the closest to dinosaurs. This is true, Crocodiles have four chambered hearts and other reptiles don’t. But neither Crocodiles or birds are that close to Dinosaurs.

    Also, we must remember that the other reptiles we have now aren’t the same as the one around when the dinosaurs were around. Crocodiles have evolved too. So have all the other phylla. Only a very few species have survived from that time. The species we see today are better adapted to the environment of today, and perhaps superior in general. The differences may only appear small to us, but may be important to survival. We must always remember that dinosaurs existed alongside the ancestors of rats, moles, crocodiles and lizards, not alongside the modern species.

    As Jean says there is lots of controversy about this. It’s not just a simple matter of saying “Did Dinosaur’s have thermo-regulation or not” because it’s not a binary question. They could have had *some* thermo-regulation but not as much as mammals. Also, some species of them could have had it and some not.

    It isn’t the first time this sort of problem has arisen. Most dinosaurs couldn’t chew, just as birds and crocodiles can’t. However, Iguanadon evolved chewing. Just because something has evolved in one line doesn’t mean that other creatures with that development came from the same line. Eyes have evolved independently at least six times.

    The problem we have here is the limitations of what the fossil record shows. Certainly the bones are visible, but estimating what the rest looked like is difficult. Sometimes fossils occur which show other flesh, but it’s rare.

    Scott: “That begs the question; why not really big birds? Here I think we can all agree that really big birds cannot compete with big mammals. There were some huge birds in New Zealand, but only before mammals arrived. So if birds are similar to dinosaurs, it seems interesting that big mammals can out-compete big birds. Or am I still off-base?”

    But, those birds evolved in the limited habitats. In those places there was less competition so many species there didn’t come under as much pressure as they did elsewhere. When rodents from Eurasia were introduced to Australia and New Zealand they often out competed the native rodents.

    The reason large birds are not very well adapted may simply be that large specimens of them didn’t arise on a large continent that provided great evolutionary competition. The counterargument to this is that the only reason large birds arose in New Zealand is because of the lack of such competition. It’s a difficult question and depends on how important path-dependency is in evolution, which is an ongoing question.

    It’s not really known if entire phyla have been wiped out. However, there are some existing phyla with only very few members. See: http://en.wikipedia.org/wiki/Phylum

  52. Gravatar of Current Current
    1. November 2009 at 17:29

    rob: “ok, let me make this sound slightly more plausible. imagine the great asteriod hit 3000 years ago, so after the pyramids but way before the industrial revolution. isnt possible all the human tools produced to that date could go unnoticed in the geological record 100 million years later. surely there are plenty of species which existed for a few thousand years which we have no record of, even plausibly the dominant ones.”

    This doesn’t seem impossible to me. It’s not likely that something complex like an intelligent species would evolve so fast. But, remember although humans existed for a long time they didn’t start showing signs of intelligence and civilisation until quite recently.

    Something similar could have happened to this species rob is hypothesising. It could have evolved over a long period of time, but the evidence of civilisation could still have been wiped out.

    It’s a bit of a whacky idea, but not beyond the realms of possibility.

  53. Gravatar of rob rob
    1. November 2009 at 17:44

    side note about birds and dinos. im pretty sure it was when jurrassic park, the movie, came out (92?) that most people were educated that birds are dinosaurs (Scott, im guessing you missed that movie.) at the time my roommate had a parrot and the parrot would sometimes be set loose to walk around the house (wings clipped) so when this flightless parrot walked it was so obvious that it looked like a dinosaur (terrifying if you were stoned) that it seems incredible it took so long for the bird-dino connection to catch on. it is particularly the “backward” jointed knee that makes a walking bird look exactly like a walking t-rex in the movies. does anyone know what year it was that the dino-bird theory was accepted in the scientific community?

  54. Gravatar of rob rob
    1. November 2009 at 18:26

    the question i am really trying to get at is whether evolution really has a directional arrow, in the sense that we expect future species to be superior to prior ones. i dont think they are. everything is the best fit, so to speak, for the present circumstances. are humans more evolved than rats? in what sense? i think we are too anthrocentric when we put so much emphasis on our big brains. our big brains may be nothing special. i read recently someone arguing that if an alien were to visit earth they might think ants are the dominant creature. if you think about it, whereas our brains are biggest, other animals may be more efficient at parallel computing, so to speak. i.e., im pretty sure im smarter than a single bee, but am i smarter than a hive? not in my encounters with one, anyway.

    so many science geeks seem to want to believe in a star trek future. i’d be willing to bet the rats are more likely to inherit the universe than the Borg.

  55. Gravatar of rob rob
    1. November 2009 at 18:45

    I agree with jean and i think the significance of path dependency cannot be overstated. i took one course in chaos theory and the main thing i remember is the importance of initial conditions to path dependency in non-linear systems. evolution is a nonlinear system. it probably isnt a question of dinos vs mammals but dinos vs myriad possibilities of things we dont have the imagination to conceive of. when i question the theories of climate scientists, it is on the basis that they are dealing with nonlinear systems and that the whole concept of a simplification or approximation is a fallacy. same thing with econometrics.

  56. Gravatar of rob rob
    1. November 2009 at 19:02

    path dependency basically means if i drop two bottles in the ocean six inches apart, they could easily end up on opposite sides of the earth six months later. on the other hand, according to my chaos prof, the so-called butterfly effect is a miscaracturization of chaos theory. but the point is that there are systems in which scientific approximations dont work. you are either completely exact or nothing.

  57. Gravatar of ssumner ssumner
    3. November 2009 at 05:47

    123, You said;

    “January test makes sense as January returns might be affected by tax loss selling in December. BTW this inefficiency was arbitraged away and market is now a little bit more efficient than before.”

    I would put it differently. There never was any “inefficiency.” The correlation was a product of data mining. It went away because stock returns are random, and have always been random.

    Remember that for a theory of market inefficiency to be USEFUL, it must persist after being discovered. Otherwise it is USELESS. Or to put it differently, it would be observationally equivalent to the EMH plus data mining.

    rob, The odds of a civilization dying out after it builds pyramids but before Buicks is very remote, as the time gap is infintesimal in geological terms. Although I agree it is possible.

    Current, You said;

    “Crocodiles are certainly reptiles, I don’t think Jean said otherwise.”

    No, but he linked to this scientific paper that said otherwise:

    http://www.evolutionpages.com/bird_lung.htm

    You said:

    “Eyes have evolved independently at least six times.”

    Doesn’t this argue against path dependence?

    You said;

    “But, those birds evolved in the limited habitats. In those places there was less competition so many species there didn’t come under as much pressure as they did elsewhere. When rodents from Eurasia were introduced to Australia and New Zealand they often out competed the native rodents.”

    That is exactly my point. Really big birds can only survive in uncompetitive environments. In a competitive environment the ostrich seems to be the upper limit.

    You said;

    “The reason large birds are not very well adapted may simply be that large specimens of them didn’t arise on a large continent that provided great evolutionary competition.”

    The question is why didn’t ostriches the get bigger, as horses got bigger. They have had plenty of opportunity but were unable to. I think there is a reason, and I think the reason is that really big birds (aka dinosaurs) wouldn’t be able to compete with mammals.

    rob You said;

    “side note about birds and dinos. im pretty sure it was when jurrassic park, the movie, came out (92?) that most people were educated that birds are dinosaurs”

    No. I saw the movie, but like many things in movies it made so sense. Because if birds are dinosaurs, then dinosaurs never went extinct, and hence there is no mystery to be explained. So I didn’t believe it.

    Eveeyone, Thanks for the info. I feel that I know more about dinosaurs than mosr adults, and less than most 8 year old boys. And I’d like to keep it that way.

  58. Gravatar of Graeme Bird Graeme Bird
    3. November 2009 at 19:18

    With respect to the dinosaurs; There is nothing coincidental about it. The shockwave from the Supernova exploded the planet that Mars was a moon of. Setting up the two asteroid crashes

    That same supernova that exploded that planet lead to mass-volcanoes in India killing most of the dinosaurs. And then later the asteroids hit. A little bit after the volcanoes started up the earth would have been hit with a massive gamma ray burst as well. So it wasn’t a good time for life on earth. Here is further evidence for my thesis. You will see that the probability of me being wrong about this just isn’t there.

    http://graemebird.wordpress.com/2009/10/30/the-shockwave-goes-faster-than-the-gamma-rays/

    So its not 3 miraculously eevents. Its simply all consequences of the one event.

  59. Gravatar of ssumner ssumner
    3. November 2009 at 19:38

    Graeme, I don’t even know what a supernova shockwave is, but I doubt it could trigger volcanos in India.

  60. Gravatar of Graeme Bird Graeme Bird
    3. November 2009 at 22:18

    Well thats because you don’t know what a Supernova is. Nor what gravity is. Consider the implications. You don’t know something yet you make a conclusion about it. In fact EVERY supernova has triggered massive volcanoes. As I’ve shown in my link. And they will trigger volcanoes again just as surely as night follows day. We haven’t had the effects of a supernova anywhere in the Milky Way, reach earth for over 400 years. But we can be very confident that the next time we have one it will trigger earthquakes and volcanoes.

    To find the reason WHY supernovas trigger volcanic reactions you have to have a theory of gravity. Once you have a theory of gravity then perhaps you’ll see the logic of it.

    We would expect shock-waves from the galactic centre to cause supernovas and a string of disasters throughout the galaxy. Without exception supernovas will trigger volcanoes or worse. All that they need to do to allow this is to weaken gravity in certain areas by the tiniest amount for the smallest time.

    Forces always come in pairs. Each force is matched by an equal and opposite force. The gargantuan forces of downward gravity are matched by an equal upward force of compression. It follows that all the shock-wave needs to do is hamper gravity in some areas by the tiniest amount for the shortest time and we will have supernovas, exploded planets, and volcanic activity all over the place.

    http://www.etheric.com/GalacticCenter/GRB.html

  61. Gravatar of Current Current
    4. November 2009 at 03:56

    Current: “Crocodiles are certainly reptiles, I don’t think Jean said otherwise.”
    Scott: “No, but he linked to this scientific paper that said otherwise:

    http://www.evolutionpages.com/bird_lung.htm

    What that paper says is that the breathing organs of birds are similar to those of some dinosaurs.

    The breathing organs of crocodiles are different again. They are neither entirely like mammals or like reptiles.

    But, Crocodiles are closer to dinosaurs than other reptiles are.

    Current: “Eyes have evolved independently at least six times.”
    Scott: “Doesn’t this argue against path dependence?”

    To some extent yes, it does. However, there are differences between the various eyes. Organs for simpler optical sensing have evolved more than 50 times.

    Scott: “That is exactly my point. Really big birds can only survive in uncompetitive environments. In a competitive environment the ostrich seems to be the upper limit.”

    Though that’s a possibility, as I said earlier it isn’t certain. The opposite explanation could also be correct that the reason we see more evolved mammals is because they won the early part of the race, not because of any general superiority.

    Scott: “The question is why didn’t ostriches the get bigger, as horses got bigger. They have had plenty of opportunity but were unable to. I think there is a reason, and I think the reason is that really big birds (aka dinosaurs) wouldn’t be able to compete with mammals.”

    The didn’t necessarily get the opportunity because they were limited to quite a small area.

    It’s wrong to conflate birds with dinosaurs. Although the two are known to be related. The question of the inferiority of the bird’s body plan for land based living is a different question to that of the dinosaurs. Because, some of the dinosaurs were very different from the birds. Birds evolved from one particular group of dinosaurs.

  62. Gravatar of Current Current
    4. November 2009 at 04:05

    There is controversy about Crocodiles though. But, the current ones are certainly cold-blooded.

    See: http://en.wikipedia.org/wiki/Physiology_of_dinosaurs#Evidence_for_behavioral_thermoregulation

  63. Gravatar of ssumner ssumner
    4. November 2009 at 05:51

    Graeme, I’ll let others address your hypothesis, as this blog isn’t really set up to evaluate new supernova theories that seem to rely on novel interpretations of the basic forces of nature. Not saying you’re wrong, but I can’t give you any useful input either way. I’m over my head with even dinosaurs.

    Curent you said;

    “It’s wrong to conflate birds with dinosaurs.”

    Another commenter suggested I was one of the few people who hadn’t heard that birds ARE dinosaurs. The fact is that all biological classifications are arbitrary. In the other comment I referred to a scientific article that jean linked to that listed the following groups:

    mammals, reptiles, amphibians, crocdilians.

    So that guy also seems to disagree with your view that crocs are reptiles. Not saying you’re wrong, just saying these categories are all arbitrary.

    How can you say birds were limited to a small area; birds live in more places than mammals. They live on all continents (even Antartica) and many islands. What’s stopping penguins from getting as big at walruses?

  64. Gravatar of Current Current
    4. November 2009 at 07:02

    Current: “It’s wrong to conflate birds with dinosaurs.”
    Scott: “Another commenter suggested I was one of the few people who hadn’t heard that birds ARE dinosaurs. The fact is that all biological classifications are arbitrary. In the other comment I referred to a scientific article that jean linked to that listed the following groups:

    mammals, reptiles, amphibians, crocdilians.

    So that guy also seems to disagree with your view that crocs are reptiles. Not saying you’re wrong, just saying these categories are all arbitrary. “

    It’s important for the point he is making in that article to distinguish crocodilians from other reptiles because they have a different respiritory system.

    Certainly biological classifications are arbitrary. But, they aren’t that arbitrary. Crocodiles have most of the salient features of reptiles, such as being cold-blooded and descended from other reptiles.

    My point about dinosaurs vs birds is that birds don’t contain all of the features of dinosaurs. Birds evolved only from a small subset of dinosaurs. Many features that other dinosaurs had birds do not have.

    As I mentioned earlier chewing is a very important evolutionary development. Birds don’t have it because they evolved from a group of dinosaurs that didn’t have it. Evidence of the inferiority of birds in particular situations doesn’t provide evidence of the inferiority of all dinosaurs.

    Scott: “How can you say birds were limited to a small area; birds live in more places than mammals. They live on all continents (even Antartica) and many islands. What’s stopping penguins from getting as big at walruses?”

    Well, there already are walruses, that is the problem. I don’t think you understand the path-dependency problem.

    Consider the situation after an extinction when an ecological niche is left unfilled. That of walruses for example. Now, another group, a relative of seals for example, evolves to fill the gap. Once the gap is filled it is very difficult for another species to evolve to fill that same gap.

    So, what matter is the situation when the first extinction occurs. Let’s say there are three different groups competing for the gap each coming from different existing species. What many think is that “who wins” is decided by who gets there first, not overall superiority. It doesn’t matter if manetes if they evolved for a million years would produce a better adapted replacement for the Walrus if Seals can evolve into the niche in less time.

    This sort of path-dependency argument is controversial in economics. But, it makes much more sense in evolution where there are no conscious beings around to make decisions in abstract ways.

  65. Gravatar of Graeme Bird Graeme Bird
    4. November 2009 at 07:28

    “Graeme, I’ll let others address your hypothesis…”

    What would be good is some comment based on your statistics background. As you said, you have three events happening in the space of 300 000 years, each which would appear to be of the sort that would make them a one in one hundred million year event. Then when you go to the supernovas, they come around infrequently, always associated with totally disproportionate volcanic activity. That is to say disproportionate when compared with the normal years volcanic activity. Now even what I’ve listed on my link, that gamma ray burst which occurred two days after the boxing day Tsunami. Well these things defy conventional notions of probability. Some people may not realize the extent of it. Its important because we can get another of these supernovas anytime soon. And we may have to deal with millions of refugees. Especially here in Australia what with the neighbours to our North.

    When it comes to dinosaur physiology, most of the confusion stems from the assumption that these big creatures were dealing with the gravity we have to deal with now. Of course this is utterly impossible. If the bigger dinosaurs had to deal with our gravity they would black out when they lifted their head, supposing they could stand up in the first place. We would be throwing cold water over them, feeding the poor buggers intravenously, and be having to help them breath with pure oxygen.

    This is where all the controversy stems from. The scientists cannot bring themselves to believe that the planet has changed and the gravity changed with it. So they argue that one dinosaur couldn’t raise its neck above the horizontal. Which is ridiculous since if that were the case there is no chance of them evolving such a neck in the first place. They will argue back and forwards on these matters until either the end of time, or until such time as they break the taboo of admitting that gravity was easier on the dinosaurs then it is on us.

  66. Gravatar of Current Current
    4. November 2009 at 14:17

    On matters relating economics and evolution….

    http://www.thedailymash.co.uk/news/environment/most-mammals-now-bloated-and-inefficient%2c-say-experts-200911042199/

    Of course, these things are far more related that the writer of the article realizes.

  67. Gravatar of Graeme Bird Graeme Bird
    4. November 2009 at 14:30

    “Even if we all die of a plague or nuclear war, the pyramids will still be there for a very, very long time (if only in a ruined state.) Remember, we have even found dinosaur footprints after 65 million years–that sugggests something should have survived from earlier civilizations.”

    The evidence will be ignored if it is thin on the ground. That appears to be what is happening. Only the big rock evidence would be left other than bits and pieces. And the big rock evidence implies high technology. There are big blocks that we couldn’t even move today. There are rocks organized on the basis of their polarity. When you hear about these items the tendency is to brush them aside. Because of their thinness. But some of the implications are pretty unmistakable.

    Its not surprising that we’ve found dinosaur footprints. Since dinosaurs were migratory like their bird descendants. So you have whole dinosaur tracks in the record. But if humans had at one time gotten to a situation of high technology only small anomalies and big rocks would be left. And that is what we see. The small anomalies being ignored and the big rocks not necessarily upsetting the academics pre-conceived notions, in their hubristic methodology, known as the serial monogamy of paradigms.

  68. Gravatar of 123 123
    4. November 2009 at 15:38

    Scott, you said:
    “I would put it differently. There never was any “inefficiency.” The correlation was a product of data mining. It went away because stock returns are random, and have always been random.

    Remember that for a theory of market inefficiency to be USEFUL, it must persist after being discovered. Otherwise it is USELESS. Or to put it differently, it would be observationally equivalent to the EMH plus data mining.”

    Some anomalies are just a result of data mining, some are real. There is a big difference – perfect correlation between S&P 500 and Bangladeshi butter production (http://investingcaffeine.com/2009/08/11/stock-market-nirvana-butter-in-bangladesh/) disappeared without any change in the practices of stock traders and butter producers. January anomaly disappeared only when traders started to exploit it, and as a result tax loss selling in December does not move markets anymore.

  69. Gravatar of Peter Peter
    4. November 2009 at 21:58

    Scott, I’m sorry for telling Graeme about your post.

  70. Gravatar of Graeme Bird Graeme Bird
    4. November 2009 at 22:40

    You don’t want to judge people by your own moronic standards Peter. Your opposition to what I’m saying is based on an antithesis to evidence and basic probability. You are not smart Peter. You are a dumb lawyer. Be aware of your limitations. You are not very bright.

  71. Gravatar of John H. John H.
    4. November 2009 at 23:33

    Of course this is utterly impossible. If the bigger dinosaurs had to deal with our gravity they would black out when they lifted their head, supposing they could stand up in the first place. We would be throwing cold water over them, feeding the poor buggers intravenously, and be having to help them breath with pure oxygen.

    Giraffes.

  72. Gravatar of ssumner ssumner
    5. November 2009 at 06:55

    Current, I do understand the path dependency argument. But the world is a very big place, and we know from New Zealand that 12 foot bids can easily evolve if protected. My point is that in all the nooks and crannies of the world, no bird or reptile is now taller than me. Even the komodo dragons are fairly small, despite being the top of the food chain on their island. I realize i can’t prove it, but I still have a hunch that if you cleared out a country in Africa, and filled it up with dinosaurs, and the plants they ate, they would be extinct within a few thousand years. Mammals would kill them off.

    Graeme, Isn’t it more likely that our theory of animal necks is wrong, not our theory of gravity?

    The point of my post is that improbable things happen much more often than we think. So I am not surprised by the coincidence.

    123, There is no observation one could make that would show the anomaly was there and disappeared because of the behavior of traders. Trades don’t move stock prices. Every trade is both a purchase and a sale.

  73. Gravatar of Current Current
    5. November 2009 at 07:34

    Scott: “I do understand the path dependency argument. But the world is a very big place, and we know from New Zealand that 12 foot bids can easily evolve if protected. My point is that in all the nooks and crannies of the world, no bird or reptile is now taller than me. Even the komodo dragons are fairly small, despite being the top of the food chain on their island. I realize i can’t prove it, but I still have a hunch that if you cleared out a country in Africa, and filled it up with dinosaurs, and the plants they ate, they would be extinct within a few thousand years. Mammals would kill them off.”

    I agree that it’s possible, but it’s very hard to know. My hunch would be that you are wrong. Remember size isn’t related in any simple way to success.

    Note also that despite the mammals being the dominant form of large land animal they are smaller than dinosaurs were. No land animal is close to the size of the large herbivorous dinosaurs. The form of animals is closely linked to the habitats that they live in. It may be that this is why modern mammals and birds are small, because there are few niches for large animals today.

  74. Gravatar of Current Current
    5. November 2009 at 07:36

    This business about lower gravity in the past is silly and ignorant of the basic principles of physics.

  75. Gravatar of Frank Schaeffer Frank Schaeffer
    5. November 2009 at 20:24

    If I recall, the reason the dinosaurs couldn’t live, if they did resurface eventually, after the extinction event is because most of the plant life was destroyed, leaving smaller amounts. These are huge creatures that spent 95% of their waking hours foraging/hunting to gain the energy necessary to power there huge bodies. There is also some physiological component related to body temperature that food consumption did because they were cold blooded. So they could probably digest the plant life, there was just not enough to support the dinos (who would then continue to reproduce making food more scarce and eventually they would all die again).

  76. Gravatar of Graeme Bird Graeme Bird
    5. November 2009 at 23:34

    No its not. You are silly and ignorant. The fact is that the planet is growing. The continents fit both ways. So its arbitrary to assume that the Pacific was there but the Atlantic wasn’t, on the basis that the continents fit together one way, when you eliminate the Atlantic.

    Look all around you. What do you see? Matter. If matter is here then it must be capable of production. Explosive acts are acts of destruction and not creation. I see that you must be a Keynesian. Because you think that things can be produced out of nothing. Rather all acts of production require time. It would be nice if it were otherwise in the factory. We could just blow everything up and all our work would be done.

    Philosophically speaking the idea of instant creation of all matter is irrational. If matter is capable of being created once it is capable of creation always. But it does not follow that it will be created all at once. Rather it is rational to assume, that since it is here, it must be subject to continuing creation. What we have found out is that this creation goes on in planets and in stars.

  77. Gravatar of Graeme Bird Graeme Bird
    5. November 2009 at 23:55

    “Graeme, Isn’t it more likely that our theory of animal necks is wrong, not our theory of gravity?”

    The answer is no. Pretty simple really. We know what animal necks are like. And the large dinosaur necks would have snapped off were they to look around quickly like any bipedal animal would do. The only other thing that can explain this sort of size is oxygen content. So if you have oxygen content as high as you can get it without being toxic, then you would see the animals get larger again, supposing they had the plant food to support it.

    But its pretty simple. All evidence points to a lesser gravity in those times, and a progressively growing planet. Nothing points against it. Unless you are going to understand basic physics through the anti-cognitive methodology of stomach-crawling worship of the cult of personality. That didn’t get us very far these last 73 years in economics. Nor is it the right way to go in physics.

    “The point of my post is that improbable things happen much more often than we think. So I am not surprised by the coincidence.”

    That might have been the point of your post. But how far can you push that point? The geological digging has got to be a pretty damn strong evidential record. And the probabilities you were talking about are wildly out of whack with the explanations given. It gets to sound like the story of Rasputin. Did he eat poison food, drink poisoned whine, was he stabbed, shot, clubbed to death, or was he drowned? All of the above apparently.

    But that was because he had corrupted all the babes of the royal family and some of the guys had to act like fellas and put him a way with real intention. So these various measures were not independent but were a matter of real intention.

    But its not really credible that someone had it in for the dinosaurs with such persistence if the one cause didn’t explain all or most of the others.

    Back when people used to refer to the brontasaurus (they have revised their view of the animal and call the fossils something else) they had this view of the animal being almost as big as a blue whale and with the brain the size of a walnut. This is back in the 70′s. And they had this idea that it had a little 2nd brain down lower somewhere. Every last bit of this was rubbish. It was interpolated simply because they could not explain how the animal could supply blood to a properly sized brain. The whole thing was moronic. Now they know that the actual animal has a larger head and an OK-sized brain. They still cannot explain its extraordinary circulation, how it defended itself, how it managed to stay cool, and how it could possibly have fed itself.

    Its not just about necks. Its about people holding onto superstition like the Keynesian multiplier, the big bang, and the idea that the planet stays constant and doesn’t grow.

  78. Gravatar of Graeme Bird Graeme Bird
    5. November 2009 at 23:59

    We don’t have a theory of gravity Scott? Did you know that? Newton described gravity. But he could not say what caused it. He defaulted on that story. And Einsteins theory is merely ridiculous. So we don’t have a proper mainstream theory of gravity.

    The bigshots in physics are very much like the people getting nobels in economics today. Not what they are cracked up to be. I thought it was just the humanities too. But the dysfunction is everywhere.

  79. Gravatar of Graeme Bird Graeme Bird
    6. November 2009 at 00:37

    “Giraffes.”

    My point exactly Humphreys. But what was your point? Compare a Giraffe with an Apatosaurus to get some idea of the gravity difference 150 million years ago.

    “One measurement places the total length of Apatosaurus at 26 meters (85 ft) and its weight at 24-32 tons, roughly the weight of four elephants.[2]”

    “The average mass for an adult male giraffe is 1,191 kilograms (2,630 lb) while the average mass for an adult female is 828 kilograms (1,830 lb).[3][4] It is approximately 4.3 metres (14 ft) to 5.2 metres (17 ft) tall, although the tallest male recorded stood almost 6 metres (20 ft).[3][4]”

    Rounding down we see we have a one tonne animals versus a 24 tonne animal. Both animals essentially taking up the same niche. That niche being the grounded fellow who can outreach every other for the higher leaves such that he can have an unrestricted food access and defend himself largely through sheer size.

    Its not credible to think that the gravity was more than about half of that which we have today. Scaling up, a giraffe in one half of our gravity, would be happy with being 8 times as heavy and twice as tall. We can see I’m being conservative with the gravity change, as the giraffe would still fall far short of his earlier facsimile. And that it is more probable that the gravity then could have been a third what it is today.

  80. Gravatar of ssumner ssumner
    6. November 2009 at 06:08

    Current, I agree with you about gravity.

    Frank, But I would find it even more surprising that plant life didn’t grow back. Surely there are large areas of the world (before mankind) with quite lush plant life. Is it really that different from 65 million years ago? Don’t plants evolve quite rapidly to fill their old niches once the air clear of debris from the asteroids?

    Graeme, You are pretty ambitious trying to re-write much of physics, paleontology and economics in one set of posts. None of your arguments shake my belief that our knowledge is physics is much more solid than out knowledge of dinosaur physiology.

    I do agree with you about Keyneisan economics however.

  81. Gravatar of Graeme Bird Graeme Bird
    6. November 2009 at 12:44

    “Current, I agree with you about gravity.”

    But why Scott? You don’t even know what gravity is? How can you make judgements on gravity, AGAINST THE EVIDENCE, when you have no idea what it is and cannot find someone who does.

    All I do is judge and rank paradigms. I don’t make them up anew. The academy goes on the basis of the serial monogamy of paradigms. And it is hubristic of them to think that they can come to sensible conclusions on that basis.

  82. Gravatar of Doc Merlin Doc Merlin
    8. November 2009 at 01:07

    What is all this nonsense about gravity?

    Neutrinos have an effect on weak force nuclear reactions. Hence why some nuclear decay rates have a seasonal variation. The earth is primarily heated by nuclear decay of various types inside the earth. So yes, volcanic rates would vary with neutrino flux.

    As to gravity changes being why dinosaurs died? This seems rather silly.

  83. Gravatar of 123 123
    8. November 2009 at 05:35

    Scott, you said:
    “123, There is no observation one could make that would show the anomaly was there and disappeared because of the behavior of traders. Trades don’t move stock prices. Every trade is both a purchase and a sale.”

    I agree that every trade is a purchase and a sale. December tax loss selling is stil there, but December prices are higher because we can observe that buyers have changed their models to exploit the January effect, and are more willing to hold stocks with a high tax loss selling pressure for a month – this is how the anomaly has disappeared.

  84. Gravatar of ssumner ssumner
    8. November 2009 at 08:45

    Graeme, I think my dinosaur peice lulled you into thinking I am competent in science. It was a fun piece to use as an analogy to some economic issues. Look at my other posts, I have no expertise in physics. My default position is to agree with the mainstream scientific experts over someone I don’t know, until proven otherwise. I’m not trying to be rude. I also have some contrarian positions on economics that almost all other economists diagree with. You should expect a lot of skepticism, just as I expect a lot of skepticism from my contrarian views. You need to change the views of other physicists, not me.

    123, I agree it’s possible, but still say it’s observationally equivalent to my view.

  85. Gravatar of 123 123
    8. November 2009 at 10:59

    If observation includes the behaviour of market participants, it is not equivalent.

  86. Gravatar of Graeme Bird Graeme Bird
    8. November 2009 at 16:30

    “I’m not trying to be rude.’

    Hell I know that Scott. But I’m a ranker and auditor of paradigms. I go for epistemological excellence. Not detailed specialist knowledge. On that basis I can tell you that your default position is mistaken. I can also tell you that an obscure Professor-Emeritus from Pepperdine is the greatest living theoretician in economic science. And that you will achieve yet greater prominence, or at least cult hero status, if you can bring quantitative skills in support of his apriori inductive/deductive genius.

  87. Gravatar of Graeme Bird Graeme Bird
    8. November 2009 at 16:39

    Gravity wasn’t why the dinosaurs died. Any species can adapt to a very slow increase in gravity by simply downsizing over tens of millions of years. Rather the dinosaurs were killed off MOSTLY by 300 000 years of rolling thunder of catastrophe, all coming from a single galactic event. Hence there was no coincidence to it.

    Doc Merlin. You do not have a working theory of gravity to gainsay me on this matter. You know not what light or gravity is. People contest these matters bitterly and they bluff. But there is no serious well-worked-out mainstream theory of either light or gravity. Scott says he will defer to the mainstream theory when in doubt. Unfortunately there is no mainstream theory to run to on this matter. And so we are forced to take seriously “hyper-coincidental” events to guide us as to our default position.

    Likewise with the dinosaur physiology. These matters simply cannot be resolved. They must argue it back and forwards until they accept that gravity is slowly increasing. Because of that there is no default position of the mainstream we can run to.

  88. Gravatar of ssumner ssumner
    9. November 2009 at 15:26

    123, It is very hard to link up market behavior with the theoretical concepts that are of interest to economists. I certainly can’t imagine any such test, and I have to think that if others could they would have already done it.

    Graeme, I agree that people don’t know what gravity and light are at the deepest level of reality (whatever that is) but science is good at prediction and control. To beat a model that is dominant, you need another model that does better at prediction and control. Only then will people pay attention.

    Do you have any links to papers by the Pepperdine professor.

  89. Gravatar of 123 123
    9. November 2009 at 15:42

    There are plenty of non-EMH market models with noise traders that fit actual market observations quite well.

  90. Gravatar of Graeme Bird Graeme Bird
    9. November 2009 at 17:45

    “To beat a model that is dominant, you need another model that does better at prediction and control. Only then will people pay attention.”

    Well there are other models out there. I don’t make them up myself in any proper sense. I just try and have a dummy model. A working model. And of course people who do make them up are treated like lepers. Its worse then in economics. But we don’t need a new model to tell us that there is no such unicorn as space time. And that the idea of space compressing or stretching is reification. And stealing one concept from one place to use it inappropriately in another.

  91. Gravatar of Graeme Bird Graeme Bird
    9. November 2009 at 18:07

    http://mises.org/media/1503

    Here is George Reisman glancing on some of his most revolutionary work. His entire treatise is available for free on the net. It takes a while for the mind to shift. I’m still on the net not comprehending the implications of 100% backing in banking for example. This is after thinking about monetary policy for maybe a quarter of a century. And its embarrassing because I once worked in a bank.

    I read his treatise it was like the scales kept falling from my eyes but it was no easy thing. Dragged the big book around on the train and at work for months.

    Its not that any of it is intrinsically hard. Rather it all seems blindingly easy now. Its just that people who are educated in economics have their mind going one way like some sort of planetary magnetic field. And it takes a lot to get that polar shift happening.

  92. Gravatar of Scott Sumner Scott Sumner
    11. November 2009 at 09:06

    123, We should probably wait to revive this discussion when a new topic appears, as I don’t know the literature well enough to address broad statements about non-EMH literature.

    Graeme, I agree that physics reifies concepts, and that these models are provisional, not final descriptions of reality. I also agree that new theories will come around and be accepted that are as revolutionary as what you propose, I just have no way of evaluating those proposals, as I am not trained in evaluating scientific evidence outside economics.

    Thanks for the Reisman link. I generally look for written material, as I am extremely far behind everything due to the blog.

  93. Gravatar of Graeme Bird Graeme Bird
    15. November 2009 at 18:17

    “I just have no way of evaluating those proposals, as I am not trained in evaluating scientific evidence outside economics.”

    You are trained in the use of certain tools. You do have a way.

    1. Being highly skilled in statistics and quantitative measures you can test in a semi-formal way, better than myself, the implausibility of events being entirely independent.

    2. Having first hand experience of academic life you ought to know that we can never favour incumbent paradigms. that ought to be the lesson of Hans Kuhns sociologically accurate study of the progress of science. Unfortunately everyone else, and perhaps Hans himself, appeared to have missed the point.

    3. It is not necessary to have the final word or even a working hypothesis on physics to know that reification is unacceptable in science. And that Newton did not find the cause of gravity. Hence we at least know what we don’t know. I say this consciously copying the great philosophical statement of your former secretary of defense. That should be on the walls of many business and philosophy departments. He may have made mistakes but he was a genius in some ways.

    4. One observation of Newtons that has never been found to be suspect is that forces come in equal and opposite pairs. Hence if gravity is altered in any way it will be the force of inertia-under-acceleration that will replace gravity in the depths of a planet should gravity be reduced even a tiny amount for the smallest fraction of a second.

    5. Supposing we take a non-occult view of gravity. No occult action at a distance. No occult reification. To take a non-occult view is to reject the mainstream. Gravity is balanced by the upward equal force of compression. And obviously this is a massive force. If we find anything out there in the universe that is correlated with coronal mass ejections and Supervolcanic reactions we ought to put two and two together. There is no sensible theory of gravity that could possibly go against this contention.

    6. Since we do not have the proven theory we scramble around looking for the right scientific tools to be able to make some confident statements about this matter. Surely some tools are useful to make a judgement here.

    7. Turns out Scott, that the best tools we have to assess this dinosaur asteroid business, once the rock polishers have given us their findings, is precisely the tools you were trained in. I am confident that a straight application of statistics, probability and quant. methods would tell us of the implausibility, of the terrible punishments to the dinosaurs, being not based on a single root cause.

  94. Gravatar of Scott Sumner Scott Sumner
    17. November 2009 at 09:23

    Sorry, but I don’t see it that way. I think stat is almost useless unless you know a lot about the fields in question. Otherwise you don’t know which statistics are important.

    I see lots of non-economists trying to give the Fed policy advice, and it is not a pretty sight. One has to have really studied a field before venturing an opinion (unless just for fun, like my dinosaur post.) That doesn’t mean one needs to be a professional economist, there are some very good amateurs. But intensive study is needed.

  95. Gravatar of Graeme Bird Graeme Bird
    17. November 2009 at 19:42

    But you must be wrong. Since in this case we don’t have a mainstream theory of gravity that can do the job. Hence we have to look at the implausibility of these events being independent. We are forced to pick up any tools that are to hand.

  96. Gravatar of Graeme Bird Graeme Bird
    17. November 2009 at 21:26

    “I see lots of non-economists trying to give the Fed policy advice, and it is not a pretty sight.”

    The economists are just as bad. There is no demarcation and no gongs can let anyone off the hook. The Nobel prize itself doesn’t seem to help. I understand that you are a Professor and you want to extend some professional courtesy to other professors no matter what Chuckleheads they are. But no-one has the right to escape logic and evidence, all must be subject to conceptual audit, and most wind up with a conceptual audit fail.

  97. Gravatar of steve steve
    19. November 2009 at 12:39

    My understanding is that at one time insects used to be much bigger. Think foot long Dragon flys. My understanding is that isn’t true anymore because the oxygen levels are lower which in turn limits the size of insects. Perhaps something similiar happened to dinosaurs. i.e. not inferior in every enviornment just inferior in this enviornment.

  98. Gravatar of Scott Sumner Scott Sumner
    26. November 2009 at 06:56

    steve, that makes sense. I would be a gradual change, and would not be likely to correlate with asteroid impact.

    graeme, I am also very critical of my fellow economists. But non-economists are worse. I often have to explain to non-economists that if China stops buying our bonds, then they have to stop running a surplus with us (assuming no one else picks up the slack.) Most non-economists do not understand that there is any connection between the capital and current accounts. They think these things happen in a vacuum. That’s why it is important to study economics.

  99. Gravatar of Graeme Bird Graeme Bird
    7. December 2009 at 00:26

    Well I agree. But you can study economics without getting a job as an economist. Are the non-economists really worse though? Its hard to think that you can get worse then believing that if the private sector is in trouble greater parasitism is the answer? Thats what the Obama team came up with right? Bernanke didn’t stop Paulson in his idiocy.

    I don’t see you’ve got an argument here Sumner. Sounds like you are running for cover. If there is no mainstream theory of gravity to work with we have no choice but to pick up the tools that there are to hand. I don’t know how socialist funding can bestow knowledge on any of these dummies. Sounds pretty self-serving to me.

  100. Gravatar of ssumner ssumner
    11. December 2009 at 17:58

    Graeme, I’ve studied enough science to know one thing. To the extent scientists can’t address the basic questions, it is because those questions are really hard. So I see no purpose in being more than a spectator to their deliberations. I can’t even understand a lot of cutting edge science like Q.M. and relativity. So how am I going to critique it?

    Economics I do understand, and I agree with you that big government isn’t the answer. But that doesn’t mean those who disagree with me are fools. Obviously if two Nobel prize winners disagree over an issue like fiscal stimulus, only one can be right. If it is a yes/no issue, then a monkey throwing darts has a 50% chance of being more correct than one of the Nobel Prize winners. But that doesn’t mean the monkey has an informed opinion. I might guess that the “many worlds” version of Q.M. is right, but even if I was correct I would not have had an informed opinion.

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