Sunday, July 20, 2014

A non result news filler piece of rubbish

Not one of the numbers in this story shows anything at all compared with the last poll. The margin of error is + or minus 3%. There is no story here – the numbers show neither disappointment nor triumph for Labour or anyone else. It is a non-story – a dead parrot:

The latest political poll contains more disappointment for the Labour Party.

The 3News Reid Research Poll out on Sunday has National also slipping slightly, but it remains more than 20 percentage points ahead of Labour.

The poll has National on 49.4 percent, down 0.3 percentage points since the last 3News poll.

Labour drops back to 26.7 percent, down 0.6.

The Greens are also down slightly, to 12.4 percent, and New Zealand First is just shy of the threshold to get back into Parliament, on 4.3 percent.

The new Internet-Mana party alliance is up to 2.3 percent.

The 3News poll surveyed 1000 people with a margin of error of plus or minus 3.1 percent.

What is it that eludes the RNZ journalist and editor here? What is so difficult? Why is this so hard?

Saturday, July 19, 2014

The medical fraternity–ignorant bleating

Yet another call for income and GST tax concessions on fruit and vegetables and increases on “sugary foods”from a medic (with superb medical qualifications)  demonstrates yet again substantial ignorance of:

  • substitution effects
  • elasticity
  • cross elasticity amongst products
  • supply and demand effects
  • subsidy capitalisation
  • net present values
  • income transfer effects
  • capture and rent seeking effects
  • prospect and endowment theory
  • anchoring and confirmation bias
  • comparative advantage – do try to stick to things you know something about

In short they know as much about the micro economics of human behaviour and it’s wildly dangerous but seductive cousin economic policy making, as I know about medicine and interventionist surgery. Close to nothing.

The difference is I, and most other economists, indeed most other self respecting scientists of any kind,  don’t bleat and advocate gratuitously about matters of which we are profoundly ignorant.

Wednesday, July 2, 2014

The last six months… book list

Brain Rules - John Medino... understandable neuroscience of practical use and the bones of cognitive behavioural concepts. All people in all cultures have a graveyard shift 1:00pm - 3:00pm.... get over it.... and don't do my job at that time.

Thinking Fast and Slow - Daniel Kahneman. Compulsory. 20 years of thought and experiment nailed and explained. What's behind almost all behavioural economics. Scholar, writer, scientist, entertainer... and humanist.

China versus the West - Ivan Tselichtchev. Non west global economics. Written while the pot was still boiling hard but still sets the framework usefully. Knock you dead stats but with feeling and insights.

The House of Rothschild – Nial Fergusson. (Two volumes). Jewishness, family businesses and banking over several centuries. How to fund a Franco Prussian war. Impeccable research. No magic in banking, or being Jewish and families are just as scary everywhere.

How to Think Like a Freak - Levitt and Dubner's 3rd. Strong as ever. Entire "wine buff" rubbish crushed with evidence. How to annoy David Cameron. Great economics. David Lee Roth uses revealed preference theory.

Dice World - Brian Clegg. Excellent journey into randomness and quantum physics without the grief. As arguably “the” critical phenomenon I spend a lot of time studying randomness – and our ability to accept it, manage it, even exploit it. Clegg assembles the vital where and why and some of the how.

Hitler - A. N. Wilson - weak and rather bigoted. He is still annoyed about Hitler - but also Churchill, possibly Thatcher. Achievements by those he despises really cause bother. Stick to Victorians, even Elizabethans.

Paradox: The Nine Great Enigmas in Physics - Jim Al-Khalili. Kim Hill rather knocked him over. Just satisfactory but Kim and Callaghan are better. Strong on the speed of light and why no SUV will ever beat it. Origins of physics envy slightly apparent.

Being Prez - The Life of Lester Young... David Gell. Far from the first but strong musical analysis and no pseudo white man's status seeking through fake "apologies". Contrast between musical and sonic authority versus insecurity is staggering.

Staying On - Paul Scott - death of colonialism by 1,000 cuts seen from an Indian minion's perspective. The long march into oblivion with nowhere to go back to. Something of an OE from the British end that wound up in a stranding.

The Adventures of Sherlock Holmes - Conan Doyle.... repeat read of one volume per year (4 Akl - Dud returns by Air NZ). This year.... how Conan Doyle makes induction meet deduction. Unbeatable logic and yet the guy became a spiritualist in later life.

Bird: The Life and Music of Charlie Parker - Chuck Haddix. Strong on the context of American life in which Bird featured. What Kansas City was about during prohibition - instructive on what such regulation does. Mayor Prendergast etc. Territory bands - and other bygones.

Eminent Hipsters - Donald Fagan. My Old School and other real stories from the Steely master...terrifyingly easy to identify with. Suburbs growing up in 50s, 60s, 70s. Surprising parallels with (my / our I suppose) NZ child, teen aspirations. Less obscure than most SD lyrics.

Antifragile - Nassim N Taleb. Strong summary from "Fooled by Randomness” to now (via Black Swans). Powerful concepts. Some irritating condescension but never a problem. His unique mixture of psychology and statistics which falls just this side of smart ass but close enough to challenge and inspire.

The Success Equation – Michael Mauboussin. Knowing which outcomes are determined systematically versus randomly is a critical skill. It is not easy. The notion that there is “a reason for everything” is wrong and dangerous. Mauboussin is amongst the very best in this space (and other investment areas) Anything he writes pays dividends when read.

How to Think Like Sherlock Holmes - Maria Kornikova. Cognitive behavioural processes in "that" framework. Clever and not forced at all. Watson gets thumped - and he is us. Links strongly (and deliberately) to Kahneman (above) and the guys in the band.

What it Takes - Charles Ellis..... what makes successful consulting, law, investment, healthcare enterprises fly by the guy who wrote "Winning The Losers Game". Not another business war story - Ellis is healthily cynical.... mixes the madness with the achievement. Vital for anyone with work life balance... lose it and succeed.

Hornet’s Sting – Derek Robinson. Class war through aerial war and Etonian madness with boys toys in WW 1. Very strong writing over a credibly spun anti-hero theme that spins into broader points beyond war. Also humorous in an Adderian fashion.

Sunday, June 29, 2014

What the Lucan Case can Teach us about Rule Making

While much of the debate about school boy hair length has made for lazy TV stories, emotion and re-visiting personal convictions of various “commentators” there are some useful lessons here – highlighted by the judgment.

These largely boil down to trying make useful rules if we choose rules to achieve our goals. We might well note the following:

Making efficient rules involves giving thought to both content and process. In turn:


  1. Rules should be certain and to the greatest extent possible they should avoid ambiguity. Since we don't necessarily want rules to be utterly unchanging forever, clear specified processes for changing them (amongst which parental grandstanding is unlikely to be a good candidate) are helpful;
  2. It is preferable that the content of rules does not involve requirements which can be seen to be hypocritical (rule makers disobeying or near disobeying their own rules) or grossly inconsistent;
  3. Rules which seek to impose subjective judgments are typically troublesome. Seeking to justify such impositions by reference to committees, boards or other small collectives does not overcome the basic flaw; 
  4. Content even remotely approaching “fashion” is subjective. There are no logical constructs which allow its objective evaluation; and,
  5. Remedies and sanctions ought to be spelt out. Those should be proportionate (transportation to the colonies or capital punishment for theft of a loaf of bread is not proportionate by most measures), enforceable and easily understood.


  1. The granting of unfettered discretion to single individuals to interpret, enforce and apply remedies is typically troublesome.  The weaker the content of rules (see above) the worse this problem becomes;
  2. Enforcement and remedial measures should be spelt out before the fact – i.e. when the rule is introduced. Wildly swinging about grabbing for any action which might annoy the rule breaker does not qualify as considered, reasonable practice;
  3. Proportionate application of flexibility in administering rules is useful. It adds to the credibility of the rule, the rule maker and the rule enforcer. Unwarranted entrenched behaviour tends to beget entrenched behaviour.
  4. The abuse of any aspect of the process – from rule design to enforcement – for the purposes of asserting authority for its own sake is both unacceptable and likely to lead to ridicule.

Rule making can be a process which is then “simple” but not “easy”. Less is typically more especially when objectives are unclear, motivations are suspect and the love of good “copy” overwhelms considered thought.

Friday, June 27, 2014

Do not confuse attitude with randomness…

Kevin Roberts – ever a source of original ideas and their applications reports here…..

The message is not that people are “lucky” or “unlucky”…. the message is that truly random processes are very different indeed from systematic behaviour:

Apparently you can. Richard Wiseman, a psychologist at the University of Hertfordshire, has spent the past decade studying what makes people luckier than others. We know these people: The ones who win random spot prizes, have golden opportunities land in their laps, nail their dream job, and their soulmate.

I’ve never believed that luck is random. Lotto is, sure. But not happiness, and that’s ultimately what people equate lucky people with. Wiseman understands this too and set out to rationalize it. As you might guess, thoughts and behavior play a major role in the situations we find ourselves in, and the opportunities we see and embrace.

One of Wiseman’s tests was to give both lucky and unlucky people, as they had deemed themselves to be, a newspaper. The task? Search through the sheets counting the number of photographs inside. The unlucky took about two minutes, while the lucky wrapped it up in just seconds. On the second page of the paper, Wiseman had planted a half-page message: "Stop counting.

There are 43 photographs in this newspaper." For fun he placed a second large message at the mid-point saying: "Stop counting. Tell the experimenter you have seen this and win £250." The unlucky missed that too.
Wiseman’s conclusion is that unlucky people are generally much more tense and anxious than lucky people.

They’re creatures of habit and don’t often listen to their gut instincts or act impulsively. They’re overly analytical, and as a result, don’t notice the unexpected. But it’s behavior that can be changed. Through Wiseman’s ‘luck school’ he got his volunteers to carry out exercises to make them behave like a lucky person. And it worked. As they say, you make your own luck.

Wednesday, May 28, 2014

Impact of Regulation

In a classic case of the left being at war with itself, the very parties who called for the RBNZ to impose regulation on mortgage lending now suddenly find themselves asking for restrictions of rates to be lifted. The impact of regulation was nothing if not consistent with its centuries old reputation – it hurt the very people it was designed to help – but it made a few people “pulling the levers” “feel good” and feel as if they were “doing something”.  And they were. So now people such as the Mayor of Auckland want the ability of Pasifika communities to be able to take on a bit more risk to be restored. Some financial education, lowering of local body rates and a commitment not to intervene again would reduce that risk – at least at the margin but there is no sign of that.

I suppose the best one can say is that the learning turnaround has been reasonably swift.

See the Radio New Zealand article Here (browser back button to return to Eye2theLongRun)

Tuesday, May 27, 2014

Not so fast champ–one single doesn’t make an album even in rock econ

People have been quick to dub Thomas Piketty a “rockstar economist” – the latest in NZ being (predictably) The Listener – though even they have a healthy dose of “balance” in their recent review.

The Financial Times is less forgiving with a heavily researched demolition job….. and not just on the advocacy but on the argument and evidence.

The following though – from socialist HQ France is even more damaging given that France starts well down the track in his favour.