Marginal Revolution University
Published on 6 Sep 2016We mentioned before that it’s hard to beat the market. And you shouldn’t try. But what about market anomalies?
One anomaly is the Momentum Effect — where past stock performance predicts future performance, at least a bit. As an example, portfolios with past winners tend to outperform the market in the medium term. Why is that? The market sometimes under-responds to changes in information. Thus, some stocks can lag, even if rationally, they shouldn’t. This is why picking past winners can generate some profit, though the profit’s usually small.
There are also other anomalies, like the Monday Effect, where stocks fall more on Mondays. Or, there’s the January Effect, which says that stocks surge higher in that month. There’s been some evidence for these effects, but these anomalies don’t last.
Despite its flaws, the market is still more rational than you. Don’t forget, you’re probably like most individual traders. You may become overconfident. You may not calculate probabilities that well. And if the market crashes, you’re likely to act more emotionally than you should — just like everyone else.
But don’t just take our word for it — even Warren Buffett agrees! Don’t try to beat the market.
January 4, 2018
Who Is More Rational? You or the Market?
The Truth About The Tesla Semi-Truck
Real Engineering
Published on 15 Dec 2017Thank you for your amazing support this year! Help this channel get better by supporting at Patreon:
https://www.patreon.com/realengineeringWebsite: https://battery.real.engineering/
QotD: “[G]reedy corporations sacrifice human lives to increase their profits”
The charge that sways juries and offends public sensitivities, and helps explain the large awards, is that greedy corporations sacrifice human lives to increase their profits.
Is this charge true? Of course it is. But this isn’t a criticism of corporations; rather it is a reflection of the proper functioning of a market economy. Corporations routinely sacrifice the lives of some of their customers to increase profits, and we are all better off because they do. That’s right, we are lucky to live in an economy that allows corporations to increase profits by intentionally selling products less safe than could be produced. The desirability of sacrificing lives for profits may not be as comforting as milk, cookies, and a bedtime story, but it follows directly from a reality we cannot wish away.
The reality is scarcity. There are limits to the desirable things that can be produced. If we want more of one thing, we have to do with less of other things. Those expressing outrage that safety is sacrificed for profit ignore this obvious point. For example, traffic fatalities could be reduced if cars were built like Sherman tanks. But the extra safety would come at the sacrifice of gas mileage, comfort, speed, and parking convenience, not to mention all the things you couldn’t buy after paying the extraordinarily high price of a Tankmobile. Long before we increased automotive safety to that of a Tankmobile, the marginal value of the additional life expectancy would be far less than the marginal value of what would be given up. It simply makes no sense to reduce traffic deaths as much as possible by making automobiles as safe as possible.
Dwight R. Lee, “Sacrificing Lives for Profits”, The Freeman, 2000-11.
January 3, 2018
Oregon reacts in horror to the idea of pumping their own gas
Full-service gas stations have been on the endangered list for a long time … I can’t remember the last time I saw one in my travels. Apparently, if I’d been to Oregon, that’s all I’d have encountered because it’s one of two states that forbid drivers to pump their own gas. At least, that was until the start of 2018, when Oregon allowed certain rural gas stations to allow self-service, and you’d think the world was about to end, based on these Facebook comments:
Click to see Facebook comments.
Sandy Franklin I don’t even know HOW to pump gas and I am 62, native Oregonian…..I say NO THANKS! I don’t want to smell like gasoline!
Cathy Dahl No! Disabled, seniors, people with young children in the car need help. Not to mention getting out of your car with transients around and not feeling safe too. This is a very bad idea. Grrr
Tina Good Not a good idea, there are lots of reason to have an attendant helping, one is they need a job too. Many people are not capable of knowing how to pump gas and the hazards of not doing it correctly. Besides I don’t want to go to work smelling of gas when I get it on my hands or clothes. I agree Very bad idea.
Kyle Allen One time, my dad came to Oregon and pumped his own gas. The street immediately lit on fire and he caused massive recession countrywide because he took away 20 billion jobs by pumping his own gas. I was in the back seat when brother was nabbed through the locked door by a transient creeper who raised him to be his human ottoman. My dad then tried wiping his windshield but the stuff he used turned out to be sulfuric acid. The car exploded with me in it and I died. My dad lost 3 parenting points because he was 2 feet away fueling his car when he could have had someone else do this very simple task for him.
Joseph Kimrey It’s official.
Oregon is full of mentally defective, full grown children, incapable of the most mundane of adult tasks.Chris Donnelly Apparently most people in Oregon assume that in order to pump gas you must first remove all people from the vehicle and stand in the open while thugs attack from all angles, all while being sprayed with gas
Mike Perrone I’ve lived in this state all my life and I REFUSE to pump my own gas. I had to do it once in California while visiting my brother and almost died doing it. This a service only qualified people should perform. I will literally park at the pump and wait until someone pumps my gas. I can’t even
Shifty McQuick If your only marketable job skill is being able to pump gas, by god, move to Oregon and you will have reached the promised land.
Kelsa Freitas Yuck! Pumping my on fuel in freezing temperatures and handling a nasty ole fuel nozzle that 50 other people have touched that day (and who knows what cooties are on there), no thank you. It’s nice to not have to pump your own fuel.
H/T to M.A. Rothman for linking to the original post.
December 29, 2017
2017 wasn’t all doom and gloom and Trump tweet wars
Veronique de Rugy manages to find three things that 2017 produced that somehow didn’t kill millions of Americans (so far, as far as we know):
First, President Donald Trump just signed a historic reduction in the corporate income tax rate, from 35 percent — the highest of all industrialized nations — to 21 percent. And except for a one-time repatriation tax, the U.S. will no longer tax most profits made by businesses overseas.
Both changes should boost economic growth and American workers’ wages. Moreover, the reform removes many of the distortions that discourage companies from investing foreign-earned income in the United States and prompt them to use tax avoidance techniques.
Second, this was a very good year for deregulation. Cutting taxes isn’t the only way to boost growth and raise wages; innovation may matter even more. Getting rid of duplicative and outdated regulatory hurdles to innovation promises to have a real impact on our lives. That’s what the Trump administration, with the help of Congress, seems committed to doing.
When the president first got to the White House, for example, he froze many not-yet-implemented Obama-era regulations. These include the punishing overtime pay regulation, which would have increased the cost of employing workers and ultimately reduced their base compensation to offset the increase in overtime pay.
[…]
Last but not least are the sustained efforts by Sens. Pat Toomey, R-Pa., and Richard Shelby, R-Ala., to slow down the process that would restore the Export-Import Bank, a bastion of cronyism, to its full and former glory.
Appointing enough board members to give Ex-Im a full quorum would instantly restore the agency’s ability to sign off on deals above $10 million for the benefit of a handful of very large foreign and domestic corporations. By resisting, the two senators are fighting a lonely fight on behalf of the unseen victims of corporate welfare.
December 26, 2017
What makes a diamond priceless? – James May’s Q&A (Ep 7) – Head Squeeze
BBC Earth Lab
Published on 14 Feb 2013James May imparts his knowledge to let us know that diamonds aren’t that rare after all.
James May’s Q&A:
With his own unique spin, James May asks and answers the oddball questions we’ve all wondered about from ‘What Exactly Is One Second?’ to ‘Is Invisibility Possible?’
QotD: Most consumers say they want local-grown food, but won’t pay the costs to get it
Food grown locally, on small-lot farms without modern chemical assistance, is really expensive. The complex modern food-supply chain that ensures restaurants and food processors can get the same consistent mix of staple ingredients year-round also relentlessly beats down the price of food, sourcing wherever supply is cheapest, redistributing temporary local abundance to a steady global diet of everyday low prices. This is also not such a terrible way to eat; it is the foundation of much of our modern prosperity. But it is not local, artisanal, organic. It is global, industrial, indifferent. It has to be, both because organic inputs are much more expensive, and because trying to separate and track all the food so that restaurateurs can be sure of provenance and process would mean abandoning many of the efficiencies that make the stuff so cheap.
And Americans expect cheap. Cheap, after all, is what makes it possible for us to spend so much money at restaurants; if we had to pay all the workers $20 an hour and ensure that all our meat and produce had been farmed in the latest and most approved 19th-century methods, few of us could afford to have weekly dining out in our budget. Restaurants might be more authentic, delicious, moral places. They would also be much emptier ones.
Reading the Tampa Bay Times article, you get the sense that many of these restaurateurs tried to provide an authentic farm-to-table experience and found that customers were not willing to pay what it would cost — in money or variety — to have one. People are probably willing to pay some premium for that kind of food, but the premium is probably closer to 10 to 15 percent than it is to the sky-high sums that it would actually cost to rely on those sorts of farms, those sorts of methods. So the restaurateurs inevitably sold them what they were happily willing to pay for: food from an industrial supply chain, with a side of moral satisfaction.
It’s hard to be too angry at consumers. To be sure, they probably should have known that you couldn’t really buy organic, locally sourced food year-round at just a smidge more than you’d pay for a regular meal. After all, the average American spent half their income on food in 1900, while the modern American now spends a paltry 12 percent, even including a lavish helping of restaurant meals. That should give us some sign that local, artisanal food is not going to be cheap. But most Americans are not economic historians.
But it’s not even that easy to be mad at the restaurants. They’re in a viciously competitive business where most places don’t survive. In a competitive equilibrium where so many people want to be told they’re eating farm-fresh food — and so few people seem willing to pay for it — many of them probably feel that their choice is “lie or die.”
Megan McArdle, “Dining Out on Empty Virtue”, Bloomberg View, 2016-04-15.
December 23, 2017
Repost – “Merry Christmas” versus “Happy Holidays” versus “Happy Midwinter Break”
L. Neil Smith on the joy-sucking use of terms like “Happy Midwinter Break” to avoid antagonizing the non-religious among us at this time of year:
Conservatives have long whimpered about corporate and government policies forbidding employees who make contact with the public to wish said members “Merry Christmas!” at the appropriate time of the year, out of a moronic and purely irrational fear of offending members of the public who don’t happen to be Christian, but are Jewish, Muslim, Hindu, Buddhist, Sikh, Jain, Rastafarian, Ba’hai, Cthuluites, Wiccans, worshippers of the Flying Spaghetti Monster, or None of the Above. The politically correct benediction, these employees are instructed, is “Happy Holidays”.
Feh.
As a lifelong atheist, I never take “Merry Christmas” as anything but a cheerful and sincere desire to share the spirit of the happiest time of the year. I enjoy Christmas as the ultimate capitalist celebration. It’s a multiple-usage occasion and has been so since the dawn of history. I wish them “Merry Christmas” right back, and I mean it.
Unless I wish them a “Happy Zagmuk”, sharing the oldest midwinter festival in our culture I can find any trace of. It’s Babylonian, and celebrates the victory of the god-king Marduk over the forces of Chaos.
But as anybody with the merest understanding of history and human nature could have predicted, if you give the Political Correctness Zombies (Good King Marduk needs to get back to work again) an Angstrom unit, they’ll demand a parsec. It now appears that for the past couple of years, as soon as the Merry Christmases and Happy Holidayses start getting slung around, a certain professor (not of Liberal Arts, so he should know better) at a nearby university (to remain unnamed) sends out what he hopes are intimidating e-mails, scolding careless well-wishers, and asserting that these are not holidays (“holy days”) to everyone, and that the only politically acceptable greeting is “Happy Midwinter Break”. He signs this exercise in stupidity “A Jewish Faculty Member”.
Double feh.
Two responses come immediately to mind, both of them derived from good, basic Anglo-Saxon, which is not originally a Christian language. As soon as the almost overwhelming temptation to use them has been successfully resisted, there are some other matters for profound consideration…
December 22, 2017
QotD: Economic lessons from Christmas toy shortages
Toy marketing on this elite level — Canada should be proud! — creates enraged parents. Hatchimals disappeared from stores altogether many weeks ago, and the high prices commanded in the resale market have created an industry of colorful social-media abuse. Hatchimal hoarders (who can now command C$120-$140 on eBay for one egg) are alleged to be greedy monsters, ruining Christmas for single moms — that is, by making the toy available at a premium at a time when toy stores and the makers of the product are no longer any help. (If the toy had never been invented, or were otherwise unavailable at any price, there would be no cause for complaint.)
What we have here is the familiar operation of a strong human superstition: the belief in an illusory “just price” for a product. It is the same superstition that makes some music and sports fans angry at scalpers. But it is exacerbated in the Christmas-shopping milieu by the innate predicament of the parent, always an emotional hostage to their offspring.
The complainers know perfectly well their kids will survive if they have to wait a couple of months for a Hatchimal. They know they could buy many equally good (and equally ephemeral) toys for half what they might pay a Hatchimal hoarder. They probably even know, if I can play the obtuse childless know-it-all for a second, that an authoritative, confident parent could explain the situation to a child, and make them live with the explanation.
Parents always want Christmas to be just so, but in the people who are castigating Hatchimal resellers, you can hear the hints of desperation, maybe even bad conscience. The problem, angry moms and dads, is not the hoarders. They just saw the real problem coming, and it is you.
Colby Cosh, “How the Hatchimals Christmas craze got me to own up to my irrational baseball complex”, National Post, 2016-12-16.
December 21, 2017
Manufacturing model trains in China
Jason Shron (who glories in living the “hoser” stereotype) runs a small Canadian company that manufactures 1:87 scale model trains, doing the majority of the actual manufacturing in China. Even there, rising standards of living mean that small companies like Rapido Trains need to be on the lookout for ways to economize, as illustrated in this short video:
December 19, 2017
The imminent threat of Neo-Victorianism
Megan McArdle on the moral panic currently gripping modern American public life:
The same logic applies to the burdens of proof. If unsubstantiated claims are accepted at face value, then eventually enough will turn out to be false that many future claims will be disregarded — whether they are plausible or not, whether they are substantiated or not. That was the harm done by cases like the Duke Lacrosse scandal, the UVA rape case, the Tawana Brawley accusations, and many others. But there’s another potential harm we also have to think about.
Let’s say that we do manage to establish a social norm that a single accusation of “inappropriate sexual behavior” toward a woman is enough to get you fired and drummed out of your industry. It’s the crux of the issue so eloquently explored recently by Claire Berlinski: What would a reasonable and innocent heterosexual man do to protect himself from the economic death penalty?
One thing he might do is avoid being alone with anyone of the opposite sex — not in the office and not even in social situations. You might, in other words, adopt something like the Pence Rule, so recently mocked for its Victorian overtones. (Or worse still, work hard not to hire any women who could become a liability.)
This would obviously be bad for women, who would lose countless opportunities for learning, advancement, friendship, even romance — the human connections that make us human workers superior to robots, for now.
On the radio recently, I pointed out that this might be a logical result of a “one strike and you’re out” policy. The host, aghast, remarked that this was obviously not what we wanted. And of course, that isn’t what anyone wants. It might nonetheless be the logical result of the rules we’re setting up.
It’s easy for me to think of all the things I would have lost out on under a strict Pence Rule. The creative writing professor who conducted my independent study in his house, for example. It was perhaps a more innocent time, but even then I was not unaware of the sexual overtones our culture would see in a young female student going to a much older male professor’s home while his wife was at work. He was a perfect gentleman who made me cabbage soup, taught me to insert little slivers of garlic into a beef roast, and savagely critiqued my prose. David Slavitt, wherever you are, thank you for making me a better writer. And my condolences to all the female students today who will never have similar opportunities — if I may judge by the bemusement/horror of male professors to whom I have told this story.
December 18, 2017
Repost – Induced aversion to a particular Christmas song
Earlier this year, I had occasion to run a Google search for “Mr Gameway’s Ark” (it’s still almost unknown: the Googles, they do nothing). However, I did find a very early post on the old site that I thought deserved to be pulled out of the dusty archives, because it explains why I can — to this day — barely stand to listen to “Little Drummer Boy”:
Seasonal Melodies
James Lileks has a concern about Christmas music:
This isn’t to say all the classics are great, no matter who sings them. I can do without “The Little Drummer Boy,” for example.
It’s the “Bolero” of Christmas songs. It just goes on, and on, and on. Bara-pa-pa-pum, already. Plus, I understand it’s a sweet little story — all the kid had was a drum to play for the newborn infant — but for anyone who remembers what it was like when they had a baby, some kid showing up unannounced to stand around and beat on the skins would not exactly complete your mood. Happily, the song has not spawned a sequel like “The Somewhat Larger Cymbal Adolescent.”
This reminds me about my aversion to this particular song. It was so bad that I could not hear even three notes before starting to wince and/or growl.
Back in the early 1980’s, I was working in Toronto’s largest toy and game store, Mr Gameway’s Ark. It was a very odd store, and the owners were (to be polite) highly idiosyncratic types. They had a razor-thin profit margin, so any expenses that could be avoided, reduced, or eliminated were so treated. One thing that they didn’t want to pay for was Muzak (or the local equivalent), so one of the owners brought in his home stereo and another one put together a tape of Christmas music.
Note that singular. “Tape”.
Christmas season started somewhat later in those distant days, so that it was really only in December that we had to decorate the store and cope with the sudden influx of Christmas merchandise. Well, also, they couldn’t pay for the Christmas merchandise until sales started to pick up, so that kinda accounted for the delay in stocking-up the shelves as well …
So, Christmas season was officially open, and we decorated the store with the left-over krep from the owners’ various homes. It was, at best, kinda sad. But — we had Christmas music! And the tape was pretty eclectic: some typical 50’s stuff (White Christmas and the like), some medieval stuff, some Victorian stuff and that damned Drummer Boy song.
We were working ten- to twelve-hour shifts over the holidays (extra staff? you want Extra Staff, Mr. Cratchitt???), and the music played on. And on. And freaking on. Eternally. There was no way to escape it.
To top it all off, we were the exclusive distributor for a brand new game that suddenly was in high demand: Trivial Pursuit. We could not even get the truck unloaded safely without a cordon of employees to keep the random passers-by from snatching boxes of the damned game. When we tried to unpack the boxes on the sales floor, we had customers snatching them out of our hands and running (running!) to the cashier. Stress? It was like combat, except we couldn’t shoot back at the buggers.
Oh, and those were also the days that Ontario had a Sunday closing law, so we were violating all sorts of labour laws on top of the Sunday closing laws, so the Police were regular visitors. Given that some of our staff spent their spare time hiding from the Police, it just added immeasurably to the tension levels on the shop floor.
And all of this to the background soundtrack of Christmas music. One tape of Christmas music. Over and over and over and over and over and over and over again.
It’s been over 20 years, and I still feel the hackles rise on the back of my neck with this song … but I’m over the worst of it now: I can actually listen to it without feeling that all-consuming desire to rip out the sound system and dance on the speakers. After two decades.
December 16, 2017
When righteous fury slides into moral panic
Megan McArdle on the dangers of believing all accusations of sexual impropriety and eliding mere crass behaviour with violent sexual assault:
Unfortunately, when we accept no limits on what constitutes a crime, and when we lower the standards of evidence for believing a crime has occurred, we aren’t necessarily furthering the cause of crime-reduction.
Of course, some people might say that that’s just too bad, but we’re going to have to expect some casualties in the war on the patriarchy. Women have left jobs for years because they couldn’t stand the harassment; have found their careers stalled because they wouldn’t play along; have spent far too many hours desperately trying to dodge creeping hands. Why should we weep because a few innocent men are now victims?
One answer is that “truth and justice matters.” That’s a good answer. But if it doesn’t satisfy you, here’s another: Moral panics aren’t good for anyone, including the victims they’re trying to protect.
In the early days of the University of Virginia rape scandal, when questions were first raised about Rolling Stone’s story, battle lines developed between those who wondered about the rather cinematic details, and those who asserted “#IBelieveWomen.” In truth, even many of the people asking the questions confessed how uncomfortable it made them to do so (and you can add my confession to the list). How can we risk adding insult to the already-grievous injuries of a woman who has been raped, by also demanding that she prove she’s not a liar? And yet, if we don’t, we risk convicting people who are innocent, and damaging our own cause.
Ultimately the norm of reflexively believing every accusation, and meting out harsh treatment to every man who is accused, does grave harm to the cause of fighting rape and harassment. #BelieveAllWomen elides the messy reality that women, like the rest of humanity, aren’t always telling the truth — and that even when they are, their interpretations of events is not always the most reasonable one. If we reify too many weak or false claims, the norm will quickly slide toward “believe no women.”
QotD: Ending the risk of sexual assault in the workplace
As an economist I always try to find the simplest, cheapest, and most effective solutions to society’s problems. However, whereas mere mediocre economists talk about multi-factor productivity, education, etc., the reason I’m one of the best economists is because I do something most others don’t.
I think outside the box.
And so, just like I was (in theory) able to prevent the Dotcom Bubble, the Asian Currency Crisis, the Housing Bubble, Education Bubble, and Retirement Bubble, I have found a way to bring the epidemic of sexual harassment and sexual assault to a screeching halt, and at practically no expense to America.
Force men to work from home.
It seems to me that “boys are just going to be boys” and while I know feminists, academians, HR departments, CSR departments, and non-profits are doing their best to eliminate toxic masculinity and bring out the more feminine side of men, until that noble goal is achieved, it may be best to avail ourselves of already available technology and require that men only work from home.
This will bring about a lot of benefits to society that go well beyond ending work place sexual harassment and assault. Women won’t be bothered by men at the office or in the downtown eateries come lunch time. They will not be harassed, allowing for much safer work place environments. An all-women workplace environment will FINALLY come to fruition allowing them the chance to excel that was traditionally the preserve of men. Plus, the highways won’t be as crowded come the morning and evening commutes. One might even say this would force men to be the house husbands, forcing them to see what it was like to be oppressed as a stay at home mom.
Captain Capitalism, “End Sexual Assault by Forcing Men to Work from Home”, Captain Capitalism, 2017-11-13.
December 13, 2017
QotD: Licensing and entrepreneurship
Much as I love Silicon Valley, its cultural dominance has disastrously corrupted our sense of what entrepreneurship is. Talking about starting your own business, and too many people think the measure of success is whether you can sell the thing for at least a couple of hundred million dollars. Most entrepreneurship is considerably more humble than that; it is individuals with some talent, or a willingness to work hard, who want to sell their services to the public. They may never employ another person; they may not even work full time themselves. And these people never buy gracious mansions, or endow scholarships, or get buildings named after them. They just make their own lives a little bit better, hopefully, in the process of doing the same for their customers. We are artificially stopping that process, in order to protect insiders who already have the job.
That’s great for the insiders, who get above-average job stability and wages. But it’s terrible for the folks who are outside. And the more industries we put under the control of such regimes, the more the outsiders will show up in our economic data as people permanently stuck at the bottom.
We can do better than that. The problem is that such regimes are politically very stable, because the benefits are highly concentrated, while the costs are diffuse. Every licensed interior designer is passionately interested in shutting out unlicensed competitors, but their potential customers probably have better things to do than phone up their senators to demand to know why they can’t hire this chap they just met who has absolutely splendid taste in early Chippendale.
Megan McArdle, “You’re Gonna Need a License for That”, Bloomberg View, 2016-05-17.
