Posts Tagged ‘capitalism’

July 17, 2012

Early in his academic career, [Paul] Schervish was a committed Democratic Socialist. But around 1990, he began interviewing wealthy people and decided that his Marxist instinct to criticize the rich was misguided.

“I realized good and evil are equally distributed across the economic spectrum and not particular to the wealthy or the poor,” he says. “A lot of wealth holders were very sincerely concerned about others and were doing something about it.”

Graeme Wood


Department of Happiness Studies

June 14, 2012

I chose to go to university at the age of 18 because I thought heaps of useful knowledge was stored there. I thought to myself: Old people know a lot of stuff. I want to learn what they know. Because I will probably face challenges similar to the ones they have faced and I would rather learn from their mistakes than have to make them myself.

So I was surprised, after spending a number of years there and graduating, that I didn’t really learn a lot of practical life advice. I learned a lot of interesting scholarly things like the propositional calculus, fuzzy logic, decision trees, quantum mechanics, slack vectors, regressions; learned about other cultures, writing, constitutions,—and read and pretended to understand Ulysses. (update: check this outAnd I still admire and appreciate the people who taught me those super-interesting things.

But to me, the most basic question: How can I think about life in order to be happy? was not answered. Actually it was barely even broached.


Why not?

My sense is that people think: “Well, happiness, that’s not really a scientific subject is it?” Here’s my response: It’s only not scientific because we don’t apply science to it.

We live in a time of unprecedented respect for science.

Let’s not underestimate the power of 1,000 scientists, given resources + time, to answer questions about human happiness and its causes. We have statistics, we have double-blind experiments; we have causal graph models, topological machine learning, functional data analysis, robust algorithms; we have item response theory, sampling theory, supercomputers in our pockets, and worldwide communication networks. We have tens of billions of dollars every year already funding science research. We have machines that can look inside of people’s brains, for Chrissakes. I think we can do this.

Yup, that is a brain.

Yep, that is a brain.


In economics, happiness research is treated like a subfield of behavioural economics, which is itself a subfield. But the utilitarian philosophy that justifies cost-benefit analysis, the Lagrangian model of microeconomics, and ultimately the entire financial system is undergirded by this very weak understanding of “utility”, the pursuit of which is supposed to be the whole point of capitalism.

No wonder people outside the econ/finance intelligentsia keep saying “We need a [financial system | economic theory] for humans.” Other than the vague idea that health, wealth, and freedom are worth attaining (except maybe not always), our scientists really don’t know many specific consejos about the pursuit of happiness.

Out of all the broad-topic, cross-category departments in universities:

  • business (= how to do stuff),
  • history (= what happened),
  • archaeology (= stuff we dig up),
  • physics (= things that occur)

— why isn’t there room for one called How to make decisions and think about life?

Behavioural economists and psychologists who do study this kind of thing have indeed come up with practical advice:

How about we quantify the benefits of

  • meditation
  • volunteering
  • feeling like you have a high social status
  • making other people laugh
  • diminishment of ego
  • thinking about people who are worse off than you
  • (or conversely, the dis-benefits of envy / jealousy of people who are better off than you)
  • playing music
  • sex (my only evidence that people care about this is that it seems to appear on covers of Cosmopolitan)
  • listening to comedians
  • TV
  • gardening
  • number and kind of friendships
  • sport
  • prayer
  • chanting Hare Krisna
  • programming (obviously many of these would require casewise time series to quantify; not just one number)
  • marrying the wrong person
  • infidelity
  • polygamy
  • charitable donations (lump-sum or many chunks?)
  • knowledge of category theory
  • time spent philosophising or … blogging
  • eating according to a moral regimen (vegetarian, kosher, halal)
  • working hard now for enjoyment later vs. living in the present (some kind of Ramsey-respecting tradeoff, of course)
  • drawing & painting
  • fishing
  • careers outside an office
  • actually obtaining your ideal career (e.g., quant) versus learning humility and accepting what you can actually get paid to do (e.g., wash dishes)
  • getting sun on your bare skin
  • frolicking
  • having children
  • staying out late vs not being tired at work the next day
  • eating pizza
  • smoking cigarettes
  • hiking
  • eating bland food every X days to fight the hedonic treadmill
  • or—I’m sure there are a jillion hypotheses about strategies to be happy from self-help books?

and how about we spend money funding people who are going to come up with or test ways of thinking and acting in life that are going to make people happier? I mean we fund research on quantum communication. Isn’t happiness research possibly more important?

Forget the research money that goes to the engineers extending the battery life on my Handy. People complain about sitting on the runway and I’ve become so accustomed to 2 billion clicks per second on my computer that I get angry and throw it out the window whenever my YouTube videos won’t load.

Forget a trillion dollars wasted on development efforts that ends up going to fund despotic regimes instead. Rather than guessing whether it’s mosquito nets, dams, or pure cash that poor people need most, maybe we should be investigating how to be happy with what you have—just in case, you know, the direction the rich world has gone is not the best direction to go.

Think about how detailed a knowledge we have about a scientific topic like materials. There are, like, many 1000-page manuals with detailed measurements like the optical properties of tungsten-rubidium alloy at 13,000 kPa and 2700°C. Imagine if we had that kind of detail about, like, life choices. Picture this: Career Engineering Handbook. Tables of days spent in a depression doing psets by INTJ realist mechanical engineer, contrasted with payoffs and path dependence of the later-life happiness.  I’m sure any kinds of conclusions would be disputatious — that’s how science moves forward, isn’t it? — but if Happiness Studies were acting like science, those disagreements would be based on lots of measurement, data, facts, observations—rather than “A girl my brother knows said she regrets being a lawyer, so I guess I shouldn’t do that and start an organic egg farm instead.” Which is pretty much how it works now.

According to my logic, this should be a top research priority. Not that medical technologies or knowledge of asteroids that might hit us aren’t good, but seriously—3 centuries since the Enlightenment and we still haven’t figured out some good advice to tell 18-year-olds?

You can take a personal finance class in school, but you can’t get the very most basic kind of advice about life. That seems messed-up to me.

May 20, 2012

I am often amused by the progressive bias [in favour of] smaller [investment banking] firms [and against] megabanks.

It was the good old boys at the smaller firms that JP Morgan and other banks used to gain access to local officials in [the Jefferson County, LA, billion-dollar municipal bond fraud] and other frauds, and the people at those smaller firms had already been deeply entrenched in corrupt schemes with public officials for decades.

In their first experiment with Jefferson County, [Charles] LeCroy and Douglas MacFaddin, managing director of JP Morgan’s municipal derivatives unit, focussed their efforts on two commissioners, and mostly on Commissioner Jeff Germany. These commissioners had not been reelected and wanted to execute a $1.8 billion debt refinancing before they left office in November in order to direct payments to people who had supported their campaigns – specifically through Gardnyr Michael and ABI Capital, two local broker-dealers.

In fact, … these smaller firms played the megabanks off of each other, which only increased the cost of the schemes to taxpayers.

Bond Girl (@munilass)

April 18, 2012

On 10 September 2008, Lehman reported 11% “tier one” capital and very conservative “net leverage“. On 15 September 2008, Lehman declared bankruptcy.

Despite reported shareholder’s equity of $28.4B just prior to the bankruptcy, the net worth of the holding company in liquidation is estimated to be anywhere from negative $20B to $130B, implying a swing in value of between $50B and $160B. That is shocking. … The orderly liquidation of a well-capitalized financial holding company ought to yield something close to tangible net worth, which for Lehman would have been about $24B.

So Lehman misreported its net worth, right? Not according to the law. From the Valukas Report, Section III.A.2: Valuation — Executive Summary:

“The Examiner did not find sufficient evidence to support a colorable claim for breach of fiduciary duty in connection with any of Lehman’s valuations.”

Steve Randy Waldman

Stability of Currency Markets to HFT

March 28, 2012

Last week @gappy3000 shared the Bank of International Settlements’ autumn 2011 assessment of the impact of high-frequency trading on foreign exchange (currency) markets.

For the lazy, here’s a summary of the executive summary:

HFT in FX operates on high volume but small order sizes, low margins, low latency (… milliseconds) and short risk holding periods (… well under five seconds). …[I]t occurs mainly in the most liquid currencies.

Market functioning: HFT[’s] impact on … FX market[s] … could be seen as beneficial in normal times. HFT helps to distribute liquidity across the decentralised market, improving efficiency, and has narrowed spreads…. Questions remain about HFT[s’] … willingness to provide liquidity … under [stressed] market conditions. … That said, recent experience  suggests that HFT participants are not … flightier than traditional participants in times of market stress….

Systemic risks: The 6 May 2010 “flash crash” in equities suggests that systemic risk is … more likely to be triggered by a “rogue” algorithmic trade than by pure HFT, which tends to involve small-size trades, short horizons and diverse strategies. Nonetheless, HFT may … propagate shocks initiated elsewhere….
Market integrity and competition: Many of the “predatory” or “unfair” practices attributed to HFT participants … are in fact not new. HFT is but the latest high-tech, high-speed manifestation of them.

March 11, 2012
  • Airplane passenger: It was the worst day of my life!

    First, we had to wait for twenty minutes! before they would let us board. And then, we had to sit on the runway for forty minutes! before they would let us take off!

  • Louis CK: Oh, really? And then what happened next? Did you partake in the miracle of human flight?

    … You are sitting in a chair, 20,000 feet above the ground! … New York to California in five hours. It used to take thirty years and you’d die on the way there.

  • Airplane passenger: This seat doesn’t lean back very far.

This stuff is funny. But it does make me wonder, seriously. If nobody appreciates this stuff, what is the point of raising GDP?

Leverage = Credit = GDP

March 4, 2012

I’ve been reading a lot of The Epicurean Dealmaker and Synthetic Assets blogs this weekend, as well as this article that says Wall Street’s compensation is never coming back (due to Dodd-Frank).

Two summary thoughts:

  • Leverage creates credit. Maybe the way to look at The Thing That Happened In 2008 And Its Aftermath is like this:
    1. Leverage creates credit. Credit is money. Leverage thus creates wealth.
    2. Imagine ∃ three counterparties each lending secured debt to each other (A lends to B, B lends to C, C lends to A). Each of them inflates its book value by marking levered assets at fair market value. They could (under this imagined theory) create more and more credit ad infinitum, as long as B is blind to A’s worth, C is blind to B’s worth, and A is blind to C’s worth.
    3. This could be called “manufactured” or falsidical credit.
    4. Since part of the naughties’ expansion of credit facilitated the extension of credit to American consumers—turning their promise to “getcha back later” for that plasma TV into an asset — bets on which could also be levered and even more money created out of belief (credere).
    5. (Bankers benefited from this because they were minting money.)
    6. Perhaps this is the way to see what’s happened: now all of the credit (money) that was falsidically minted is gone—gone from the bankers’ paychecks, gone from the dentists’ retirement accounts, not-gone from the hands of those who bought durable goods, not-gone from the memories of those who bought expensive meals, not-gone from the cash accounts of those who liquidated their stock holdings (for example maybe some people who converted stocks into bonds upon retiring in 2007), gone from the restaurateurs’ sales numbers, gone from the servers’ tip plates. The plasma TV’s are still inside the McMansions and the houses are still there, but credit—belief—has dried up.

    Credit/money is in a sense merely an idea—shared belief. As Carolyn Sissoko remarks, since it’s hard to say in hard terms what the total value of all equity markets in the world actually represents, perhaps it’s not surprising when this meaningless aggregate falls by 40% in a year.

  • All of the New Yorkers who sustained themselves by serving über-high-class clientèle — working in a high-class bar, escorting, personal assistants, postmodern chefs — are going to feel the pinch, if they haven’t already. It should become harder to pay rent in NYC working a food or hospitality job.

    Over some period of time in the future that will have to mean people either moving even further outside Manhattan or moving back to where they came from. And that should eventually put downward price pressure on every aspect of NYC—rent, food, availability of fine cuisine, and so on.


February 27, 2012

February 12, 2012


  • same hopes & desires
  • same choice of stores
  • the same houses and the same decorations in those houses
  • fruit from the other side of the world

part II

  • Do our sexual norms derive from the invention of chimneys in the 14th century?
  • the invention of table manners
  • furniture, music, buttons, wainscoting, and intellectual pursuits — all due to the Little Ice Age?
  • lower and upper classes slept in the same hall, with the animals, around a fire, in the manor-house days. And had sex right in front of each other! omg! Economics begetting morals (I mean seeing thru to the 19th century)
  • So the Little Ice Age was the beginning of privacy. Speaking of not having sex in front of each other, maybe it contains as well the roots of abortion as well as the roots of Victorianism. Privacy norms were made law in 1979 in the United States, to the chagrin of anti-abortionists. Since then and before, appeals to privacy as a fundamental human right have been made to justify any victimless crime (homosexuality, libertinism, drug use … some of which are no longer criminal). What if our conception of this “natural human right” is just a function of the history of global temperature?

part III

  • Jamestown, VA versus charcoal
  • Economics before capitalism. Sounds like the ruler had the economy’s interest at heart — a growing economy means more to tax.

part IV

  • before trains, each village was more-or-less a genetic island. Not that no-one swam the waters to marry someone from the next town over, but genetic interchange among geographically dispersed humans was slow. As transport became cheaper and faster, procreation between Poles and Germans, Lyonnaise and Bretagnes, Spanish and Portuguese became more common.

January 11, 2012

market makers are normally paranoid that the other side of the trade “knows” what is going on and that it is a pickoff.

as a market maker, you think “what can i do against this that makes sense?” so you look for a vertical or 1×2, for example. or if there is nothing, then “how much i am going to bleed out of you in order to make [this] worth the risk?”


Most people think that day-traders don’t add economic value. The NuclearPhynance traders’ phorum might change their minds. Those [economists] whose idea of finance = prices converging efficiently upon a “true” value due to a kind of value-investor who also sells short—might see in apine’s words a different story. Financial markets can be more like a discussion between people who don’t necessarily know what’s going on, but try to figure that out based on what everyone else is saying.

For those who don’t understand what “liquidity” means to a trader: it means a market maker who is willing to get scraped up in a scary environment. Liquidity sometimes means a market maker (sometimes: a high-frequency trader) who is willing to play on a muddy pitch and not even charge much for the trouble.

A boxer expends much energy avoiding punches, even if they’re only feints.