Blue dots are the optimal locations of High Speed Trading infrastructure for a particular combination of trading exchange locations (red dots).
Review of *The Road to Wigan Pier*
When I read this quote in the economist, I was reminded of how much George Orwell ‘gets’ today’s problems:
The basis of their diet is white bread and margarine, corned beef, sugared tea, and potatoes—an appalling diet. Would it not be better if they spent more money on wholesome things like oranges and wholemeal bread, or if they … ate their carrots raw? Yes it would, but the point is, no ordinary human being is ever going to do such a thing…
That’s from *The Road to Wigan Pier*, which I proceeded to download onto the K-dog.
Forthwith, my review:
Regulatin’
Regulation: is there a more terrible word in the English language?
Michael Mandel:
[A]t a time when President Obama is calling for more innovation, the wireless industry has produced more genuine new products and services than anyone else. So given the great performance of the industry during this tough period, why the heck does the Federal Communications Commission keep imposing additional regulations on wireless providers?
He presents an incredibly convincing picture for how well the unregulated telecoms industry is doing, from a consumer perspective. Continue reading Regulatin’
A Hard Market
I feel like a bit of a pretentious ass-clown for blogging so little about the business I work in. As much as I often go on about loving my job, you’d think I’d have something more to offer than cheap theororizing. Continue reading A Hard Market
Boomers Love Divorce, I Guess
The divorce rate for those 50+ is increasing, while that for younger folks is decreasing.
The article at the link suggests that what boomers actually love is marriage, particularly second and third marriages, which are much more likely to end in divorce.
I suppose divorce statistics are going to overrepresent serial divorcers. I’d probably rather track % of those who have been ever divorced. I looked for this, actually, and never found it. The publicly available stats are pretty hard to find/inadequate.
The point of the inquiry, as I see it, is to measure the change in societal norms, independent of things like income, age and number of children. The ‘average’ makeup of society has changed drastically in each of these areas over the last hundred years.
And it’s way too easy to just publish a provocative headline finding with no credible theory of causation to back it up. In my mind, sociologists have been pretty weak on the question of why. Isn’t this supposed to be science?
Why does society change? Why are we nicer to our kids? Why do crime rates fluctuate? Et Cetera.
Bueller?
From the Department of Unintended Consequences
Mandatory Workers’ Compensation insurance in the US was part of the legislative avalanche during the Progressive Era. It started in New York, probably following the Tringle Shirtwaist fire, but other states quickly started following suit.
Well, the Supreme Court didn’t like this much. In a 1917 judgment the court ruled that Workers’ Comp didn’t apply to maritime workers because the seas weren’t technically part of the States’ jurisdictions.
Sound logical enough? Sure, but get a load of this:
The remedy of the New York Workmen’s Compensation Act is inconsistent with the policy of Congress to encourage investment in ships, manifested by the Acts of 1851 and 1884 (Rev.Stats., §§ 4283-4285; c. 121, 23 Stat. 57), which declare a limitation upon the liability of their owners
It’s going to hurt investments in ships! Incredible.
And it gets better.
So a few years later, presumably when progressives got some hand in Washington, the feds went ahead and enacted a federal Workers’ Comp statute that covered waterways, creating the US Longshore and Harbor Workers’ Compensation industry.
And today US L&H Comp premiums are today more than 1.5x normal Workers’ Comp premiums.
The reason? Claims are way more expensive in the federal legal environment.
From the Longshore Blog:
- The Longshore Act is liberally administered to favor the injured worker;
- The Longshore Act has not been significantly amended since 1984, and so does not reflect cost control measures adopted in many states, such as provisions relating to medical management and causation;
- The section 920 presumptions favor the injured worker;
- The Longshore Act still contains an important provision giving the injured worker his choice of treating physician;
- There is no lifetime maximum applicable to Longshore Act benefits.
Oops!
Bitcoins
Here’s Russ and Gavin Andresen, the technical leader on the Bitcoin project.
The Bitcoin project is a supranational currency. There are precedents for this kind of thing in, for instance, the Sims Online game. Trick is, though, the entire Sims Online economy was wiped out because of a bug in the software. It was literally years before they could engineer a replacement system and hard reset of the economy. Bitter remedy, indeed.
I’m also reminded of this book about startup founders. In it, Max Levchin (Paypal) talks about how commercial bankers told him he was “going to get killed by fraud”. He brushed it off at first, but sure enough:
2000 was basically the year of fraud, where we were just losing more and more money every month. At one point we were losing over $10 million per month in fraud. It was crazy.
Luckily for Paypal (and us!), the scale of this disaster, relative to the scale of the dollar economy, is tiny. A disaster to Bitcoin could permanently destroy the trust people have in it. From the interview, it appears that Gavin is underestimating the one-way nature of such an economic disaster. Not to say people won’t be intrigued at first; after all, there was a time before monetary authorities had monopolies on issuing currency.
But our collective memories of free banking are gone and modern societies are very intolerant of risk. Ultimately, there’s only one final insurer of risk: the government. Only it can inflate away economic problems and nuke away physical ones.
The Bitcoin economy, of course, will never have the protection of the monopolist it threatens.
Does Inflation Make Any Sense?
(I’m not going to attribute all of the ideas below to the places I learned them, mostly because I don’t have time to find all the links)
Inflation is a theme for me at the moment. I’m writing this to think through how it works.
So there’s money out there. In terms of the stock of money, I’m not sure it’s possible for there to be ‘too much’ at any point in time, but there can be too little. Krugman’s retelling of the babysitting co-op explains this very well. Do read it.
Ok, if some critical mass of people worries about having too little money, that’s bad.
But that’s not very satisfying. What is ‘critical mass’ and what is ‘too little’?
And honestly? I don’t think anybody can answer those questions rigorously.
There are two candidates for instances when we’ve passed that threshold: the Great Depression and the Great Recession.
The orthodox view today is that policy makers collectively* missed the first one and so literally caused the Great Depression. I quote Ben Bernanke (to Milton Friedman):
Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.
The irony is astonishing. Obviously it’s harder than it looks.
And I think that’s because the Fed isn’t run by an economist, it’s run by a committee. It’s probably a committee the largely reflects the consensus view of economists, but what if that consensus is non-existent? Inaction. And that spells disaster when the money supply is too tight.
And here’s a real head-spinner, google “deflation trade” and you get this:
The deflation trade is a rising US dollar, rising gold prices, rising treasuries, and falling equity markets.
Anyway, when people think of inflation problems, they don’t think of the Great Depression, they think of the hyper-inflation experienced in some places and the far less scary 70s and 80s in the US.
So what the hell is persistently high inflation? Well, you get from having less money to having more by adding some.
So what happens if everyone suddenly has twice as much money? They’ll probably spend it prices will be bid up.
Ok, so now drop the ‘suddenly’ part. How does the government actually pull this off?
um…
I’m going to take a break here and go read some Nick Rowe.
*By collectively, I mean what their actions did, as opposed to their mouths (or pens) said.
ProGRESS Already!
This week’s economist has two articles updating us on some windmills technofiles have been tilting at for a decade or so.
First is the health care industry. The article itself is a typically bland offering but, in fairness, the subject is tough to spice up. Health care, like insurance, is a human interaction business and innovation here is glacial.
My mother’s an occupational therapist in a rural area and she spends a lot of time traveling to peoples’ homes delivering care. I’ve learned from her that, in health care, mobile technology is a red herring. This is a solution in search of a problem.
Now, she’s on board in principle. It’s extremely hard to attribute the economic benefits of positive health care outcomes. Costs, however, are very easy to measure, so any countervailing force there is extremely welcome. But does it work?
Automating administrative records only really matters when you need to retrieve those records, usually fairly far into the future. A heavily discounted benefit.
The costs of implementation, however, are significant. To implement an ipad into my mother’s visits to her patients would require replacing pen and paper (with, I kid you not, carbon copies beneath it) with an ipad, a portable printer and keyboard. All while touring this heavily debilitated senior’s house and educating him/her and family. Not any time soon.
It’s always possible that some bonehead will legislate a technological revolution and massively inflate the relative price of health care but, barring that, we’re decades away.
Second is the media industry.
This problem is so strange, isn’t it? We all know where the business is going: on-demand media consumption packages across multiple channels. The problem is that we think of content companies in the wrong way. Much like insurance, the people who control everything the distributors, not the creators. These new online-related distribution models are direct competition for them.
Of course they’re resisting!
Until Netflix and Apple build enough scale to genuinely compete for original content, the model won’t change.
Porno leads the MSM: fewer distribution channels, smaller pie and less spend on overt promotion. In 50 years, viral distribution networks will be king (and free!).
Striking Even Bullshitters Dumb
I’ve tried and failed to find an old favourite article of mine; it listed occupations in descending order of BS intensity. There were the usual politicians, lawyers, etc, but the top spot when to sportwriters.
Drew a chuckle from me, at least.
Anyway, this morning I was reading up on the Final Four games and found a “Breakdown of the Matchups” and the writer was actually at a loss of how to rate the VCU/Butler game. The downside of each team was “their luck has to end somewhere”. It was literally almost the same analysis for both teams.
In Cinderella v Cinderella, midnight is not a factor.
Not Unreasonable 