peter's shared items in Google Reader

SMH breaks silly law and risks $55,000 fine

2009-11-11T23:28:19Z

The Sydney Morning Herald has risked being slapped with a $55,000 fine by today publishing and comparing test results of three schools.

It has published numeracy and literacy results for Sydney Girls High, Hornsby Girls High and Macarthur Girls High.

But NSW law states that publishing exam results of just two schools could result in a fine. This is in spite of the federal Education Minister Julia Gillard announcing that it plans to publish test results from around the country on a new website to be launched in January.

SMH editor Peter Fray has backed the paper’s decision to publish the results saying it is in the interests of parents to know what schools they are enrolling their children in.

He adds: “I do not believe it is in the interests of a functioning democracy to fine a newspaper for publishing such information.

“We wanted to point out the absurdity of the law – having the same information published on the internet and for that same information to be published by a newspaper and risk a fine, could someone please explain the logic in that if there is any? It’s a repressive and stupid law.”

Fray said he had not received any complaints about the story at the time Mumbrella contacted him this morning.

SMH breaks “repressive” law and risks $55,000 fine

2009-11-11T22:29:42Z

The Sydney Morning Herald has risked being slapped with a $55,000 fine by today publishing and comparing test results of three schools.

It has published numeracy and literacy results for Sydney Girls High, Hornsby Girls High and Macarthur Girls High.

SMH editor Peter Fray has backed the paper’s decision to publish the results saying it is in the interests of parents to know what schools they are enrolling their children in.

He adds: “I do not believe it is in the interests of a functioning democracy to fine a newspaper for publishing such information.

Fray said he had not received any complaints about the story at the time Mumbrella contacted him this morning.

Donate to cut the debt - people do

2009-11-11T11:15:33Z

A little-known program allows Americans to make tax-deductible contributions to pay down what the country owes. It's raised tens of millions of dollars over the years but that hasn't really made a dent in the debt.

Books to remain expensive

2009-11-11T07:19:06Z

My guess that the Government would buckle under local interest group pressure to reject the parallel import of books has proven correct. Mark at LP is pleased to learn that the moves to allow free trade in books suggested by the Productivity Commission have been stopped by the Rudd Government. In fact he asks why have a Productivity Commission at all? It is difficult to argue with this level of prejudiced ignorance – particularly as it was backed by that much-lauded ANU-trained economic guru Craig Emerson. I make two comments:

1. That part of the reason for retaining the law on parallel importing was that local book providers already face competition from imported books. If this is the case there must indeed be significant cost savings in buying books in global markets rather than purchasing them locally. This runs counter to claims that the price savings in allowing parallel imports are low. If they were low local publishers would have little to fear anyway.

2. If Australia seeks to support local authors – I don’t reject this – then give them a subsidy not penalise all consumers with higher prices. Local authors don’t like this because their dependence on goverrnment handouts becomes explicit but such subsidies are less restrictive than partial prohibitive tariffs on trade and provide comprehensive protection for Australian authors even in the face of online purchases.

It is just so important for people to learn some basic economics. Governments can get away with this interest group-driven stupidity that inflicts net costs on society as a whole only because not enough people understand some basic logic about markets.

Update: Useful comments by Joshua Gans and a critique by Sinclair Davidson.

An Extreme Take on The Ten Commandments Experiment

2009-11-10T10:19:04Z

Remember our Ten Commandments cheating study? The one where we asked students to recall the commandments before an exam, and found that this moral reminder deterred them from cheating? Well, a professor at Middle Tennessee State University recently made practical use of the study – but in an extreme way.

Fed up with the low ethical standards in his MBA class, Professor Michael Tang passed out an honor pledge that not only listed the Ten Commandments, but also included the concluding flourish that those who cheated would “be sorry for the rest of [their] life and go to Hell.” In response, several students called the department chair to complain and a good deal of controversy ensued.

But what the article doesn’t address (perhaps because no one at the school had) are the merits of this extreme pledge. Is this an effective way of curbing dishonesty? I think yes, very much so. I also suspect that even those who don’t believe in God would take this pledge seriously.

Still, though I don’t doubt its effectiveness, the question remains whether we want to invoke such stringent punishments (stringent for those who believe, that is) on an MBA exam. Judging from the reactions in this case, I’m guessing that for most people, the answer is “no.” But it also makes me wonder about the people who don’t want to sign this pledge….

Irrationally yours

Dan

The Post Office is going to take our fingerprints?

2009-11-10T06:00:12Z

Post Office

News Corp. Google-less?

2009-11-10T00:04:36Z

Rupert Murdoch made an interesting statement in a Sky News interview today, when asked about news content available through search engines such as Google, Murdoch says he would consider blocking Google from indexing News Corp.'s news websites such as the Wall Street Journal. Of course it would naturally follow that I would immediately chart the amount of traffic that Google drives to Murdoch's flagship news site.

Here's the same chart from Google News to WSJ.com

In fact, on a weekly basis Google and Google news are the top traffic providers for WSJ.com account for over 25% of WSJ.com's traffic. Even more telling. According to Experian Hitwise data, over 44% of WSJ.com visitors coming from Google are "new" users who haven't visited the domain in the last 30 days.

While Mr. Murdoch makes some strong points in his Sky News interview regarding the plight of the news industry and the perils of making all content free, as clickstream data demonstrates - blocking Google could isolate the Journal from potential new online subscribers.

Thanks to Cheyne Winterton for the data hat-tip.

Quiggin's open letter to Bernie Fraser on Qld privatisation

2009-11-09T21:12:12Z

Dear Bernie Fraser,

As you may be aware, I have been very critical of the “Myths vs Facts” booklet which is, as far as I know, the only document released by the Queensland government to present its case for sales of public assets. In a recent statement reported in the Courier-Mail, Treasurer Andrew Fraser said ” “The myth is that John Quiggin represents the view of mainstream economists.”

Since you are the only prominent economist who has been cited as supporting the asset sales, I would like to ask you a number of questions. I think these questions admit an unequivocal “Yes” or “No” answer, with supporting argument if desired.

1. Do you believe that the “Facts and Myths” booklet presents a fair statement of the arguments for and against privatisation, offering Queenslanders sufficient information on which to make an informed judgement

2. Do you endorse the statement that ‘Keeping these businesses would cost the Government $12 billion over the next five years. That’s $12 billion spent on new coal trains and new wharves that can«t be spent on roads, schools or hospitals.”

3. Do you regard the statement that “The total return from all five businesses in 2008-09 was approximately $320 million … When the sale process is completed, it is anticipated the Government will save $1.8 billion every year in interest payments” as providing a fair basis for assessing the fiscal costs and benefits of privatisation.

Yours sincerely
John Quiggin

At this stage, I haven’t been able to find any contact for Bernie Fraser. If anyone can point me in the right direction, I’d be very grateful.

News(poll) hits new lows

2009-11-09T14:45:46Z

At politicalowl, Richard Farmer quotes Gary Morgan on the Newspoll released today, which asked questions about the Prime Minister’s handling of asylum seekers but which also included questions about voting intention. But the results of those questions were not printed by its owners, News Limited:

The evidence was clear. Yet the publication of News Ltd’s poll (Newspoll) in the first place had already had a major impact. The evidence showing the ‘error’ of Newspoll was literally ignored by media discussion (e.g. the Insiders on ABC TV and the impact of the ‘rogue’ poll was allowed to run unabated).

Pollsters and those who publish the polls have a responsibility to report the facts and the truth.

Newspoll should have conducted another poll as soon as possible when they saw the dramatic change in their results — and if different, released the data to correct the misconceptions caused by their ‘rogue’ poll.

It is extremely worrying that today’s Newspoll on “boat people” clearly did include questions on ‘Political support,’ but the results from the ‘Political support’ question were not published.

A statistical analysis of the data reported on Australians’ attitudes to “boat people” issues — specifically the breakdown by ‘Political support’ — suggests the ALP vote in that poll was very strong. The percentage supporting each political party clearly should have been released.

Polls and their publishers should not seek to set the agenda by selectively releasing polling data.

Polls and their publishers are powerful but with that power comes responsibility.

Predictably tonight, the ABC and SBS news, and the 7 30 report ran with lines shaped by The Australian’s coverage of Newspoll, with no or just a bare mention of the Nielsen results. It may be that the voting intention results will be released tomorrow, but the delayed release and the lack of context to the results on questions about asylum seekers presents a picture which is deliberately distorted, stoking the claims about “crisis” and inflaming the issue further.

This really is getting to be a complete disgrace.

Update: William Bowe on Chris Mitchell’s explanation:

Queried by Andrew Crook of Crikey, The Australian’s editor Chris Mitchell explained that “even Crikey” should be able to understand that a non-fortnightly set of voting intention figures would cause a disturbance in the force. Mitchell further invoked a Beatles-and-the-Stones style arrangement between Newspoll and Nielsen in which they have agreed not to step on each other’s releases. Yet just one month ago, on the same day that Nielsen produced its regular monthly poll, The Australian published a “special Newspoll survey” on the Liberal leadership in between its regular fortnightly polls, and was not in the least bit shy about informing us that the sample produced the same 58-42 split in favour of Labor as recorded the previous week. In fairness, it should be noted that Crikey “understands that on Sunday morning, Newspoll chief Martin O’Shannessy contacted his Nielsen counterpart John Stirton and agreed not to release the two-party preferred vote to The Australian”.

Liberal Party self-destructs on climate change

2009-11-09T20:15:22Z

It is difficult to see anything defendable in the Liberal Party’s position on climate change as it was articulated on Four Corners last night. The Leader of the Liberal Party in the Senate, Nick Minchin made things clear. He questioned Malcolm Turnbull’s authority and declared man-made climate change a myth – a view he said ‘most’ of his Liberal colleagues shared. He said man-made climate change and pollution-reducing schemes were a left-wing conspiracy.

”For the extreme left it provides the opportunity to do what they’ve always wanted to do – to sort of de-industrialise the Western world,” he said. ”The collapse of communism was a disaster for the left and really they embraced environmentalism as their new religion. For years the left internationally have been very successful in exploiting people’s innate fears about global warming and climate change.”

The difficulty with the position of Minchin is that these lunatic views – which contradict all science and border on the paranoid – make it difficult to treat anything at all he says with credibility. He is both wrong and ignorant.

Tony Abbott and many others openly showed the same degree of ignorance. All the usual wrong denialist lies. Abbott also warns he is concerned the world is not ‘jumping on a bandwagon or being taken in by a fad’. ‘We embraced the policy then for good reasons which means that it’s uh not a crazy policy but that doesn’t mean we can’t modify the policy or change it or even abandon it should that be our current judgment’.

These clowns had the responsibility to inform themselves on climate science.

My assumption after last night’s show is that the CPRS legislation will be defeated in the Senate which will lead to a double dissolution of parliament, the probable end of the Turnbull leadership and a desperate fight for survival and distinctiveness among the Nationals.

Hopefully the Liberals and the Nationals face a decisive defeat in both houses with Labor being left to deal with an enhanced Green vote. The major concern is that these stupid views will infect the public with further skepticism regarding the issue of climate change. Labor can win the election decisively but at the expense of a more polarized electorate.

Unless Turnbull is able to engineer a major change of heart in his delusionist colleagues, I will be part of that polarization. For the first time in 30 years I will not be voting for the conservative side of politics at the next poll.

Food inflation and supermarket silliness

2009-11-09T10:38:37Z

You have to love the silliness that surrounds supermarkets in Australia. The current silliness relates to food price rises. According to Frank Zumbo the supermarket “duopoly” is responsible for Australia’s food price inflation rate being higher than the Britain over a ten year period (even though the Australian rate was less than the British rate over the last five years). Even the Minister, Dr Emerson (PhD in economics) seems to have jumped on the bandwagon although other reported comments are more measured. Graeme Samuel has noted that other factors may be relevant, but it is much easier to bash the duopolists.

So let’s ask if the argument makes sense even if there is a competitive problem with the supermarket sector.

Suppose that Coles and Woolworths are supermarket duopolists that dominate the Australian food market. Indeed, let’s suppose that they fully exploit their market power and have been charging monopoly prices to consumers for the last decade. Then this effective monopoly CANNOT be responsible for Australia’s higher rate of inflation in grocery prices. The reason is simple. A monopoly sets a higher price than a highly competitive industry. But the price the monopoly sets for consumers is less volatile as underlying costs change than the price charged by a highly competitive industry. Thus, if marginal costs double in a highly competitive industry, we would expect to see the consumer price to double. But the same doubling of marginal costs in a monopoly industry will lead to a lower price rise. As a rule of thumb (based on linear demand and constant marginal cost) the monopoly price rise will be about half the highly competitive industry price rise.

So if the OECD numbers quoted in the articles are correct and we assume that all else is equal, then the higher rate of food price inflation in Australia is evidence that our supermarket industry may be more competitive than Britain not less competitive. The problem is that the commentators confuse levels with changes. Monopolist’s charge higher prices but these prices change relatively less as costs change over time.

Now, I am not claiming that our supermarkets are more or less competitive than those in Britain. I have no idea. What I am pointing out is that the people arguing that a higher rate of price change reflects less competition are, at best, confused.

So, what could explain the differing rates of food price inflation. Well – lots of things, some of which Samuel points out. Of course, it could be the case that our supermarkets have become a lot less competitive in the last ten years – that would explain the higher rate of price rise relative to Britain. Of course, this interpretation would mean that our supermarkets had become a lot more competitive in the last five years, to explain the lower rate of price rise. Or it could be the case that our supermarkets have been uncompetitive for the past decade, but were just stupid ten years ago and set food prices too low. Prices rose because the supermarkets stopped being stupid.

Hmmmm. I think the argument that it is something else rather than the “evil duopoly” is more likely.

Updated (significantly): Warwick in the woods

2009-11-08T20:00:00Z

The irrepressible Professor Warwick McKibbin is, undoubtedly, Australia’s best macroeconomist. And he is also an extremely articulate and clear-headed policy leader as demonstrated throughout the Melbourne Institute conference last week. It was, therefore, sad to read this in The Australian:“Reserve Bank director Warwick McKibbin has publicly questioned whether the Rudd government dumped him from the Prime Minister's science council as payback for saying its fiscal stimulus package was "too big".”
The nation deserves better.

Warwick does have a history of breaking a few noses in the interests of speaking the truth. He was said to be very much opposed to the scorchingly high interest rates set by the RBA in the late 1980s, which, it has been mooted, was one reason for his resignation from the Bank.

And he had a public run-in with the previous Governor of the RBA over his ability to sit on my company, Rismark's, international advisory board. This was while Frank Lowy, Australia's largest property investor and the owner of a $1 billion plus hedge fund known as LFG Investments, also sat on the RBA Board. Different strokes for different folks, it would seem.

This touches on an interesting political science question raised by Professor Stephen Bell in his history of the RBA about the curious way in which secretive "elites" seem to control much decision-making in Australia in a decidedly non-democratic fashion.

While I am at it, I find it odd that one of the current members of the RBA Board, Graham Kraehe, is allowed to retain his financial services directorship of Djerriwarrh Investments Limited, which is a listed fund manager with large investments in the major banks. This runs against the previous practice of banning financial services participants from the Bank's Board in accordance with the intent of the Reserve Bank Act. For example, Jillian Broadbent had to resign from her many market-related directorships before assuming her present position on the Board.

The RBA should explain why it has deviated from nearly half a century’s worth of accepted protocols regarding Board appointments in the case of Mr Kraehe, who is the director of a listed fund manager with $224 million invested directly in CBA, NAB, Westpac and ANZ. Additional funds have been allocated to AMP and QBE. Some useful context here is provided by Stephen Bell, who comments:“The second point of contention regarding the [RBA] Board’s composition is the ban on finance sector representatives because they are thought to be subject to potential conflicts of interest. Board members routinely receive inside information about the price of money in the short-term market…They are also privy to other important information and may be tempted to push for rated decisions likely to benefit their own sectoral interests.

The framers of the original Reserve Bank Act banned financial sector representatives from sitting on the Board but, formally, the matter has proceeded no further…

Periodically, however, the Board is shaken by the issue…In mid 1997 the Bank’s apparent confidence in an ‘ethical fix’ was questioned when it was revealed that Western Mining Corporation had quadrupled its forward sales of gold at the same time as the RBA was secretly selling two-thirds of its gold reserves. Hugh Morgan, the CEO, was a member of the Bank’s Board at the time.”
The real issue is why I am even having to raise this matter. This is, after all, the most powerful economic agency in Australia. But it is notionally independent of the polity and the only protection taxpayers have with respect to the conduct of monetary policy is its Board. Appointments to the Board, and the management of their conflicts, should not be ‘secret men’s business’. This should be a more rigorous, transparent and governance rich process than that which one finds at any ASX-listed company (admittedly, there have been some incremental improvements made to these practices since the election of the Rudd Government). But for some reason we are still left with an ethical and democratic black-hole. Once again, taxpayers deserve better.

On the question of the demonstrably inadequate technical competencies of the RBA’s independent members, its otherwise sympathetic historian Stephen Bell ends up concurring with Professor Adrian Pagan’s recommendation after his own time on the Board that it needs two or three outside monetary policy experts that serve on a full-time basis in line with the practice overseas:“We should aim for a slightly larger and more diverse Board. The suggestion is not radical…The debate at the technical level would be widened by the addition of, say, two extra monetary experts to the Board. This would help keep the Bank’s professionals on their toes and counter tendencies towards ‘Bank think’.”

Discarded mobiles, wire-taps and Mr Bigs. Welcome to Wall Street | Will Hutton

2009-11-08T00:19:16Z

Imagine The Sopranos, The Wire and Gordon Gekko all rolled into one. You don't have to: the FBI has just broken one of the largest-ever insider dealing rings in Wall Street

Imagine The Sopranos, The Wire and Gordon Gekko's Wall Street all rolled into one. You don't have to: the FBI has just broken one of the largest-ever insider dealing rings in Wall Street. It wire-tapped its way into a seedy world of secret tips, kickbacks and disposable, pre-paid mobile phones. A network including staff of New York law firms, hedge funds and share-trading companies, with links extending to top Plcs, investment banks and consultancies has been revealed. Five people have pleaded guilty, while others maintain their innocence.

The reputation of the financial markets is already at rock bottom. The crash, the bailouts and the extravagant bonuses have convinced ordinary Americans as much as us ordinary Brits that morality and fair play are not values much found in the financial markets. And now there is this.

The alleged ringleader is a thirtysomething called Zvi Goffer – or "Octopussy" – a nickname earned because his tentacles gathering scraps of illicit but profitable information seemed to extend everywhere. But if he had not spent eight months working at the $6bn Galleon hedge fund, whose founder and CEO, billionaire Raj Rajaratnam, happened to be under a wire-tap (and has been subsequently charged for being central to a $20m trading ring), the FBI would never have picked up his network. In good police work, one lead tends to generate another.

The wire-taps suggest Goffer as the spider at the centre of the web. In one exchange, a lawyer called Jason Goldfarb tells him that the "boys" – the other members of the syndicate – were "nervous nellies", but were "hungry" because their cash was running out: "They needed to replenish" and: "That's what we are going to do." It is straight from a script from The Sopranos, except that these are white-collar professionals at the heart of Wall Street.

There were at least five big takeovers between March and November 2007 about which information was supplied in advance by what they called the "bat phone". They bought shares before the news was released and sold afterwards. Then they disposed of the bat phone with its incriminating call history. Once "Octopussy" apparently theatrically tore out the Sim card and broke it with his teeth. He warned the boys: "Somebody is going to jail, going directly to jail. Make sure it is not you. OK?"

Goffer and Rajaratnam toppled over the edge, but they come from the same culture that informs today's markets. It is no less true of London. Indeed, while the news broke of the FBI's fresh arrests and the SEC's charges, in London the Swiss investment bank UBS received a fine of £8m and also had to pay back £26m to 39 clients defrauded by a group of its traders. This is the ugly face of the investment world. The people you trust to act on your behalf turn out to be defrauding you. Where is the trust?

How much should we care? Insider trading is as old as the stock market because information is what drives prices up and down. Anybody who can get access to information about to become public before the rest of the market will make a killing. Thus it was in the world of the South Sea Bubble in 1720. Thus it is today with the world's investment banks, asset management companies and hedge funds. They vie with each other for the tiniest edge. The way prices move before information officially arrives suggests insider trading is widespread in both London and New York.

Yet this abuse matters more than ever. In 1720, the London stock exchange was a minor casino that represented a fraction of Britain's GDP. Now, the value of the assets traded outstrips world GDP many, many times. The financial markets and their values have become the most dominant economic force on the planet. They give capitalism its culture. If London and New York financiers are part of a casino that is crooked, only fools and the naive continue to play by the rules.

The "boys" knew that legally what they were doing was wrong, but they did not feel it in their bones. Hedge funds battle with each other for information and Galleon was famous for pressing analysts, industry and banking sources for anything that might give "colour" to the information it received – just that extra investment edge. For a long time, the returns were startling – 22 per cent.

It could not have felt like a hanging offence when the quest for colour turned into a quest for, and receipt of, inside information. In the Guinness scandal in the 1980s, the defendants famously called it a victimless crime.

Nor can it have seemed a hanging offence in terms of the mores, practices and culture of today's investment business, a world brilliantly dismantled by Satyajit Das, former trader and banker, in his book Traders, Guns and Money. Bankers manipulate risk management devices, deviously structure investment products and charge fees that they know are outrageous. Conflicts of interest are endemic; analysts recommend buys very much more than they recommend sells because sells offend companies who might give them business.

John Bogle, a prominent investment manager, argues that managers routinely churn portfolios to earn commission. Lavish hospitality is routine to buy business. Financial derivatives are invented to encourage speculation and anonymity. The race is to be a nanosecond faster than the next person. Bonuses are paid even when firms go bust. Distrust is pervasive. Nobody turns a hair at any of this. So what is the real offence in allowing the search for "colour" to morph into trading on inside information?

Financial services now constitute a kind of tax on the real economy as well as distorting its priorities; short-termism and the search for impossibly high returns are rife. The culture, of which systematic insider trading is part, is having a growing impact on business ethics.

One of the striking aspects of this case is that among those charged is a director from McKinsey along with a vice president of IBM and a senior executive from Intel. Everybody else is making money in the casino, the attitude seems to be, so why not me?

One of the lessons of behavioural economics is that when people think that everybody else is honest, they are honest too. When the Australian tax authorities, for example, declared that honesty was the common social practice on tax returns, the average deduction claim nearly halved. The converse is true.

When people believe that sharp practice, double-dealing and the pursuit of greed are the norms they follow.

Most people in the financial markets start with a working moral compass, but retaining it becomes ever harder. Capitalism had its origins in a Protestant commitment to saving and investment, along with the Enlightenment commitment to truth. Great companies still have a strain of moral purpose; they seek to do something great from which they make profits. Today's financial markets mock such sentiments. Their destructiveness and awesome power goes well beyond the credit crunch. This culture of amorality reaches everywhere, as the case in New York eloquently proves.

Banking

Will Hutton

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds

How Would Los Angeles Look with No Cars?

2009-11-06T22:01:40Z

Apparently, it would look just like this. Tom Baker (via NotCot) has produced a stunning set of photographs of a car-free Los Angeles. It’s a tough concept to imagine, but it sure is a beautiful one to behold. Photoshopped or not, these images fill me with a bizarrely wonderful feeling. Though they do make me realize just how much asphalt there is in this city.

Thanks, Amrit.

Wow! IQ and stock market participation

2009-11-06T07:39:50Z

The Finnish army, compulsory service, tests all males' intelligence at age 19 or 20.

Grinblatt, Keloharju and Linnainmaa somehow got the individual test results from all exams from 1982 through 2001 inclusive. And tied it to Finnish tax administration data, an address data set, the Finnish Central Securities Depository Registry (which has records on all Finnish households' portfolios and trades), and census data to measure the effect of IQ on stock market participation, controlling for education and income.

They find a nice monotonic relationship between IQ and stock market participation. The effect of being in the lowest ten percent of the IQ distribution is fifty percent larger than the effect of being in the lowest income decile. Running some decompositions of the independent effect of IQ as compared to wealth (because IQ can operate directly on participation and indirectly by influencing wealth creation which then also prompts participation), they find that IQ also works substantially through wealth, income and education; consequently, prior studies that included these as independent variables without including IQ overestimate the effect of those variables.

And, low IQ correlates with a more poorly diversified portfolio.

Finally, they then run some IV using a sibling's IQ as instrument, which then lets them also say something about female stock market participation.

I'm amazed they were able to get this dataset together. Individual level data combining IQ, income tax records and all stock market activity...fodder for a dozen more papers in there at least. They conclude:

Paradoxically, our finding that cognitive impairment leads to behavior that violates the principles of neoclassical economics helps justify recent neoclassical approaches to asset pricing theory. Neoclassically-inspired models that explain the equity risk premium puzzle from the consumption of stock market participants have been criticized for failing to explain what drives participation. For example, limited participation stemming from the costs of entering the stock market is either inconsistent with the pricing kernels of these models or represents a negligible fraction of wealth. Our finding that cognitive impairment prevents many of the wealthy from participating in the stock market renders these comments moot. Moreover, it suggests that the consumption of smarter individuals, rather than the wealthy, may be what drives the pricing kernel. This latter conclusion is not currently featured in formal neoclassical models of asset pricing. However, it is consistent with neoclassical folk wisdom—that economic behavior, divorced from utility optimization, is irrelevant for market efficiency because savvy investors determine asset prices.

No way this paper lands outside the top tier.

HT: Wayne Marr's Twitter feed.

Watch Steve Keen speak on debt

2009-11-06T07:30:51Z

Wireless Electricity Is Near

2009-11-05T15:00:22Z

Imagine a world where cords do not exist. Where surge protectors and extension cords are obsolete and multiple wall sockets are unnecessary.

What if your electronic devices could be powered by air?

Sounds like something out of a Sci-Fi movie, but that world of ultra-convenience is right around the corner, according to WiTricity, a Massachusetts-based company that says it will have wireless electricity on the market within the next two years. It’s a bold statement and the first time a company has publicly announced plans to make the technology commercially available.

Based on the theory and methods developed at the Massachusetts Institute of Technology, enterprising professor and MacArthur Genius Grant-winner Marin Soljačić and his team of scientists have developed a way to harness and concentrate electric power, then project it several meters. The invisible currents then power computers, TVs, stereos, and just about anything electronic. In other words, this thing is bound to put the extension cord industry out of business.

So how will it work, and more importantly, how do we know it’s safe?

The idea is that WiTricity coils plugged into an electrical source will be embedded into the wall of your home or hidden behind a bookcase or couch. These coils then send radiant electricity to electronic devices throughout a specified area via magnetic fields (no not that kind. This kind).

This is non-radiative, magnetic energy, meaning it won’t cook you like a microwave or burn you like a laser. The world-renowned physicist Sir John Pendry of Imperial College London explains on the group’s site: “The body really responds strongly to electric fields, which is why you can cook a chicken in a microwave. But it doesn’t respond to magnetic fields. As far as we know the body has almost zero response to magnetic fields in terms of the amount of power it absorbs.”

Hmm, sounds ok, except for that whole “as far as we know” part.

It’s hard to process just exactly how this will work, since we can’t actually see the power flying through the air (and since WiTricity’s Web site is dense with MIT scientist-lingo). But the group has already been able to power a light bulb from two feet away and is well on its way to taking it to the next level.

It’s worth mentioning that this isn’t new technology. The Austrian scientist Nikola Tesla was the first to develop the idea and the technology to transfer electricity through the air in the late 1800s. But for anyone who has seen a Tesla Coil in action knows, he definitely stopped short of making it consumer-friendly.

As with any out-with-the-old, in-with-the-new invention, important questions need to be answered: Will this new way to power our devices increase our already soaring energy use? Are there side effects to the transfer of electricity through the air? What’s going to happen to all the electricians of the world?

There’s no way anyone can know right now. But in a world where everything seems like it’s been done before, isn’t it fun to be on the cusp of something revolutionary?

Guest blogger Michelle Lanz is a writer living in Los Angeles. Photo (cc) by Flickr user j / f/ photos.

Caroline Overington Gives Some Hints on Rupert’s Plans (and tangles with Annabel Crabb)

2009-11-05T05:09:03Z

UPDATE. Is this what Overington meant? Thanks to @MikeDobbie for the hint.

A session at the Media 140 conference just concluded in which The Australian’s Caroline Overington not only defended what she referred to as “her” media organisation, not only took some shots at the ABC boss Mark Scott, but also just possibly gave a hint about what News Limited is planning in its efforts to put content behind pay walls. In the process there was an entertaining tangle with the Sydney Morning Herald’s Annabel Crabb.

But first to the news, or the hints of news. Overington said that News Limited had many wonderful plans of which they were very proud, and they could not be unveiled yet, but she believed they would lead people to pay for content.

Then in the closing stages of the session, she referred to i-tunes, and how people had turned to paying for music that they could get elsewhere for free because of the entry of a “cool new toy” in the i-phone.

She added: “That’s kind of what we are thinking about.”

So what is it, I wonder? Some kind of deal with Apple, soon to release its new electronic reader? A competing product? Very intriguing.

As for the shots at Mark Scott (who was once, many years ago, Overington’s boss at Fairfax) Overington said she was frightened by what she described as the ABC’s pitch for domination in new media.

The position of of The Australian was secure, she said, because it relied on a benevolent proprietor in Rupert. It was not dependent on the “rivers of gold” of classified advertising. The Daily Telegraph was not vulnerable because of its robust circulation. But the Sydney Morning Herald and Fairfax – they were in real trouble. “Believe it,” said Overington.

Overington had previously noted that she was the only representative of News Limited speaking at the conference, even though “we” owned seventy per cent of the nation’s newspapers. This provoked the response from conference organiser Julie Posetti that senior News Limited people had been invited, but had either declined or failed to reply.

Overington described the potential dominance of the ABC as “scary” because if commercial media fell over, then that would leave the ABC as the only news source. Countries that had only one government funded news source were generally not the kind of places she would want to live in.

Then came the fightback from Fairfax’s Crabb, who shot off with “at least we are still profitable. We are not in as much trouble as you will be once your great leader drops off the twig.”

And later Crabb added: “I think it is wonderful that your survival strategy depends on the robust genes of a 78 year old.”

General laughter.

But the truth, of course, is that they are both right. Both News Limited’s The Australian and the Fairfax broadsheets are in long term, or even short term, trouble. And the ABC is looking increasingly important and dominant – as well as being the main threat to any pay wall news media models.

And it is also true that there is something worrying about this. I like the ABC and believe in an increased role for public broadcasting. But there is a legitimate point behind the several speakers at Media 140 today who have asked how the profession of journalism will survive if so many outlets, not least the ABC, increasingly solicit content from the audience, gathered for free.

The point I made in my session this morning is that while journalism will become more of a practice and less of a profession, and something that many more people will do, there are some kinds of journalistic dirty work that we will have to find ways of supporting if they are to be done consistently and with experience and expertise.

While Overington’s apparently uncritical intense identification with her employer took me by surprise, there is no doubt she is entitled to talk about the difficulties and expense of professional journalism, having done many of the hard yards behind the breaking and pursuit of the Australian Wheat Board story at a time when that brought a heavy cost in antagonism from the Government. Could any organisation other than a large, powerful journalism factory have pursued and broken and backed that yarn in the teeth of attacks from the most powerful in the land? I doubt it.

And let’s not forget that it is a long while since the ABC broke a story that big. Let’s not pretend that all is well with the ABC’s journalistic culture, even as its boss emerges as an impressive industry leader.

So I’m walking to Kosciusko - Keen

2009-11-05T02:17:45Z

CCTV cameras don't reassure, they frighten

2009-11-04T09:48:00Z

People are no more fearful of crossing a street with a young male skinhead in it than they are a street with a smartly dressed woman present, unless, that is, a CCTV camera is overhead. The new finding appears to undermine one of the key justifications for Britain's network of 4.2 million surveillance cameras: that they provide reassurance to the public. It seems that the sight of a CCTV camera can have the opposite effect, cueing the perception of a threat.

Dave Williams and Jobuda Ahmed presented 120 participants - shoppers in Hatfield - with pictures of a fictional town centre street scene. When the scene contained both a skinhead and a CCTV camera, the participants, aged between 18 to 70 years, reported raised concern about walking in the scene, compared with when the same scene was either empty, contained a woman with or without a CCTV camera, or a skinhead without a camera. In other words, it was specifically the combination of a skinhead and CCTV that provoked fear - neither had any effect on their own.

The presence of a CCTV camera seemed to cue participants' prejudices about skinheads, thus inducing fear. This supposition was supported when participants were asked to write a paragraph on a "day in the life of" either the male skinhead or the smartly dressed woman. When a CCTV camera was present in the scene, but not otherwise, participants wrote an account of the skinhead's day that betrayed their prejudices, for example one account stated that he had "outstayed his welcome in the cafe".

"Defending the modern urban landscape from a sense of undulating moral crisis and corresponding crime with visible technological crime deterrence measures may not always reduce fear of crime," the researchers said. "[CCTV] is partly designed to reduce fear of crime ... this study demonstrates that in certain contexts it can have the opposite effect."

CCTV cameras may not be the only form of crime-fighting paraphernalia that can backfire by cueing a sense of threat. In a North American study conducted in the late 90's John Schweitzer and colleagues found that a plethora of "Neighbourhood Watch" signs increased people's fear of crime.
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Williams, D., & Ahmed, J. (2009). The relationship between antisocial stereotypes and public CCTV systems: exploring fear of crime in the modern surveillance society. Psychology, Crime & Law, 15 (8), 743-758 DOI: 10.1080/10683160802612882

[Note: Psychology Press will be making this article temporarily free-to-access from around 6 Nov]