Wednesday, September 26, 2007


Every American should at some point in their lives go to China, participate in an African safari, and visit ancient Egypt.
--Arthur Frommer, founder of Frommer's Travel Guides, on high-priority trips

Tuesday, September 25, 2007

The wrong message

[Michael] Douglas says he's still stunned by the number of people who tell him that his Oscar-winning role [as Gordon Gekko in Wall Street] was the reason they went to work on Wall Street. "It's so depressing and sad," Douglas says.
--Jessica Winter, Slate, on the wrong reason to work on Wall Street

Friday, September 21, 2007

"No" is the new "yes"

I've recently noticed a pernicious linguistic trend of saying "no" when you really mean "yes." A common usage: "No, I agree with you," in order to say, "Yes, I agree with you."

I've caught myself doing this from time to time. And it's definitely not something isolated to Connecticut residents.

How the heck did this trend get started?

Thursday, September 20, 2007

Square peg in round hole

The spectacle of Alan Greenspan on Comedy Central trying to explain monetary economics is pretty discombobulating. Jon Stewart asks great questions, but Greenspan's answers are incomprehensible to anybody but an economist. I understand what he's trying to say, but there's just not enough time in a 7-minute interview to do any of the questions justice.

Wednesday, September 19, 2007

The Laffer curve of home improvement

It is not true that remodeling a house is an investment that pays for itself financially. You only recover about 80% of the cost upon resale. See the 2006 national average rate of return on various remodeling projects here.

Monday, September 17, 2007

Fighting terrorists everywhere

Nalini Ghuman, an up-and-coming musicologist and expert on the British composer Edward Elgar, was stopped at the San Francisco airport in August last year and, without explanation, told that she was no longer allowed to enter the United States.

Her case has become a cause célèbre among musicologists and the subject of a protest campaign by the American Musicological Society and by academic leaders like Leon Botstein, the president of Bard College at Annandale-on-Hudson, N.Y., where Ms. Ghuman was to have participated last month in the Bard Music Festival, showcasing Elgar’s music.

But the door has remained closed to Ms. Ghuman, an assistant professor at Mills College in Oakland, Calif., who is British and who had lived, studied and worked in this country for 10 years before her abrupt exclusion.

The mystery of her case shows how difficult, if not impossible, it is to defend against such a decision once the secretive government process has been set in motion.

After a year of letters and inquiries, Ms. Ghuman and her Mills College lawyer have been unable to find out why her residency visa was suddenly revoked, or whether she was on some security watch list. ...

In a tearful telephone interview from her parents’ home in western Wales, Ms. Ghuman, 34, an Oxford graduate who earned her Ph.D. from the University of California, Berkeley, said she felt like a character in Kafka.
--Nina Bernstein, NYT, on more immigration idiocy

Saturday, September 15, 2007

The student loan racket

Here's how the program works: Banks and other private companies lend money to students. The federal government pays part or all of the interest—currently 7 percent or 8 percent. The government also guarantees the loans.

What is wrong with this picture? Well, the government itself borrows the odd nickel to finance the national debt. This borrowing, obviously, is also guaranteed by the government. For that reason, it carries an interest rate of only 3 percent or 4 percent. If the government can borrow money at 3 percent or 4 percent, why should it be paying 7 percent or 8 percent for the privilege of guaranteeing loans to someone else? Wouldn't it make more sense for the government to loan out the money itself?

That is the $4 billion question (the approximate annual cost of the interest subsidy). ...

It seems that kickbacks were being paid to university financial aid officers who delivered customers. Some of them even got stock in some of the more specialized, and dubious, student loan companies. When the government is giving away free money—which is what the program amounts to (and I mean giving it away to the banks, not to the students)—it's worth a good deal to get cut in on such a good deal.
--Michael Kinsley, Slate, on no-arbitrage violations in government borrowing

Friday, September 14, 2007

In search of a noble cause

In many ways and for many months, the protest outside Memorial Stadium at the University of California has been business, and Berkeley, as usual.

On one side are the protesting tree lovers who have been living Tarzan-like since December in a stand of coastal oaks and other trees. On the other is the university, which wants to cut down the trees to build a $125 million athletic center, part of a larger plan to upgrade its aging, seismically challenged football stadium. ... Zachary Running Wolf, an American Indian activist... has been living in the grove for nearly 300 days.
--Jesse McKinley, NYT, on a protest that could only happen at Berkeley

Do you really want this job?

“Being the chief investment officer of an endowment is one of the hardest jobs in the investment business because there are so many constituencies involved,” said Verne O. Sedlacek, president and chief executive of Commonfund and a former chief financial officer at Harvard Management Company. “In my job, I have 1,800 clients with one objective — investment performance. An endowment has one client with 1,800 objectives

Consider the constituencies: students who may want you to shed your holdings in companies that do business in Sudan because of the genocide in Darfur, or professors who do not make a lot of money and happen to have very specific expertise in just about everything. It is a clash of civilizations; liberal academia meets cold, crass capitalism.

“I’ve never been called names worse than those I was called by professors and others on campus,” one former endowment head said. “It gets personal very quickly.”

And don’t forget the endowment boards, often packed with passionate and well-heeled alumni who did not make their fortunes by simply rubber-stamping investment decisions.

Nationally, more than 40 percent of the top investment executives within universities and endowments left in 2005 and 2006, according to a 2007 compensation survey by Mercer Human Resource Consulting (now Mercer) that excluded Harvard and Yale. The number is high even for Wall Street, which tends to chew people up at impressive rates.
--Jenny Anderson, NYT, on another reason why Yale endowment manager David Swensen is amazing

Wednesday, September 12, 2007

Star Wars anti-gravity

Levitation has been elevated from being pure science fiction to science fact, according to a study reported today by physicists.

In earlier work the same team of theoretical physicists showed that invisibility cloaks are feasible.

Now, in another report that sounds like it comes out of the pages of a Harry Potter book, the University of St Andrews team has created an 'incredible levitation effects’ by engineering the force of nature which normally causes objects to stick together.

Professor Ulf Leonhardt and Dr Thomas Philbin, from the University of St Andrews in Scotland, have worked out a way of reversing this pheneomenon, known as the Casimir force, so that it repels instead of attracts.

Their discovery could ultimately lead to frictionless micro-machines with moving parts that levitate. But they say that, in principle at least, the same effect could be used to levitate bigger objects too, even a person.
--Roger Highfield, Telegraph, on anti-gravity

Star Wars laser guns

Now, a US team has created thousands of the molecules by merging electrons with their antimatter equivalent: positrons.

The discovery, reported in the journal Nature, is a key step in the creation of ultrapowerful lasers known as gamma-ray annihilation lasers.

"The difference in the power available from a gamma-ray laser compared to a normal laser is the same as the difference between a nuclear explosion and a chemical explosion," said Dr David Cassidy of the University of California, Riverside, and one of the authors of the paper.

"It would have an incredibly high power density."

As a result, there is a huge interest in the technology from the military as well as energy researchers who believe the lasers could be used to kick-start nuclear fusion in a reactor.
--Jonathan Fildes, BBC, on first steps towards Star Wars laser guns

Optimistic headline of the day

Earth Might Survive Sun's Explosion
--Dennis Overbye, NYT, on happy thoughts for 5 billion years in the future

Tuesday, September 11, 2007

Another one bites the dust

The president of Harvard Management Co., which manages the world's largest university endowment, plans to leave the job at the end of the year, the university said today.

Mohamed El-Erian, who came to Harvard Management in 2006, plans to return to the firm where he had worked previously, Pacific Investment Management Co., or PIMCO.

El-Erian arrived at Harvard to succeed Jack Meyer, the longtime Harvard Management president who had resigned along with many of his top investment managers to launch a new hedge fund. He spent much of his tenure hiring a new team of senior managers.

Meyer and his managers had become controversial in some Harvard circles because a compensation system designed to reward superior performance was paying a few people as much as $18 million a year.

When he arrived, El-Erian said he would not abolish Harvard Management's performance-oriented compensation plan, but top salaries for the 2006 fiscal year paled in comparison to earlier periods.
--Steve Syre, Boston Globe, on swift departures that accompany being paid a below-market salary

Monday, September 10, 2007

Don't check your bags on BA

This spring, [British Airways] lost one bag for every 36 passengers -- the worst rate for any European carrier, according to the Association of European Airlines.
--Andrea James, Seattle Post-Intelligencer, on astoundingly high baggage loss rates

Thursday, September 6, 2007

Natural selection in singing

The vocal folds start to weaken eventually because of age, and sopranos suffer the most. During a tenor's high C, his vocal folds close 500 times a second; for a soprano's high C, the rate is about 1,300 times each second. When menopause hits, the loss of estrogen lowers women's voices and they lose their highest notes. Since fat cells produce estrogen, though, obese opera sopranos tend to be more resilient. They can keep on singing.
--Michelle Tsai, Slate, on why we see the fat lady singing

Wednesday, September 5, 2007

Faking it in Korea

Shin Jeong-ah was the youngest professor at the esteemed Dongguk University in Seoul. Boasting a doctorate from the History of Art department at Yale, she was a rising star, the curator of a celebrated South Korean art museum and the newly-appointed director of one of Southeast Asia’s largest art exhibitions.

But Shin, it turns out, never attended Yale. In Korea, prestigious diplomas are currency for landing top jobs, and Shin has been shunned after the University confirmed this summer that her purported credentials were actually fiction.

The scandal did not stop with Shin. Her downfall spurred a wave of resume-checking across the country, with leading artists, scholars and celebrities falling from grace almost daily as the authorities discovered fabricated credentials.
--Thomas Kaplan, Yale Daily News, on social climbing in a credential-obsessed country

Tuesday, September 4, 2007

Carry more cash

For example, suppose that the GMU economist spends $10 per day in cash, takes 10 minutes to go get cash out of his ATM, has a value of time equal to $60 an hour, and earns 5 percent annual interest on balances held at his bank. From this information, the Baumol-Tobin model yields a very specific prediction: The prof should take out $1200 from his bank three times a year and hold an average of $600 in his wallet. (See the textbook for the equations that back up this inference.)

Most people hold much less money on average and go to the ATM much more often than the model predicts for their parameter values. This is a puzzle. It is also a great example to work through in an intermediate macro class. You can generate a good classroom discussion about why the model fails to match behavior.

One possible answer is that people are worried about losing the money. A probability p of loss or theft would affect the opportunity cost of holding cash and thus effectively raise the interest rate that enters the model to r+p. But plugging in numbers makes this a hard case to make. To match behavior, such as a biweekly trip to the ATM, you would need people to lose their wallets far more often than they do.

Many students will then say that they don't hold as much cash as the model predicts because they are afraid they will spend it. This response raises an intriguing behavioral theory: Money burns a hole in your pocket, but the temptation is somehow removed if the money is left at the bank. I don't find this very compelling as a description of my own behavior, but my experience is that many students are more attracted to it.
--Greg Mankiw on why you might want to withdraw more from the ATM next time