g m g D e s i g n . c o m

I finally got around to reading Superfreakonomics, the economics book for people who never took an econ class in college (the book is equally useful for econ majors, btw). I finished it last night and it was well worth the read; better than the first book, I’d say.

In Freakonomics, the central theme was that people are motivated by incentives. In Superfreakonomics, they also introduced us to the idea that most innovative ideas—ones that actually work well—are relatively simple and cheap. Their examples include hand-washing (in a hospital in the 1800s, before germ theory), seat belts, and, of course, innovative ideas to reverse global warming and actually cause global cooling.

That last point intrigued me. They pointed out that scientists converge their results in order to procure additional funding (they’re capitalists, it seems, and they’re giving their “customers” the results they want). They also compare climate change zealots to religious fanatics, a comparison I’ve made myself (not for moderates, but for people who are truly obsessed and blinded by ideological zeal).

More importantly though, they pointed to some solutions to global warming. On the assumption that (man-made) global warming is indeed as dire as is projected (and I don’t think it is, but who knows?), there are solutions that are… simple and cheap! They cost in the millions rather than the trillions that are often proposed by editorialists when discussing this topic (note that much of that cost is due to externalities of regulation rather than direct).

It seems that, perhaps, human ingenuity and innovation—namely by private individuals—might be the cure for human waste and over-consumption. In fact, that fits neatly with the historical record.

List of econ fallacies by members of both political extremes (from a very good blog site that I’m going to frequent from now on).

Outline here (but click the link to read the paras corresponding to each bullet point).

Fallacies on the Left are:

• Forgetting that things were even worse in the past
• Assuming that Dickensian conditions implies a country must be capitalist
• Assuming that economic reforms failed because real GDP growth didn’t increase after 1980
• Assuming the Soviet Union went into a depression after economic reforms began
• Assuming neoliberal reforms are associated with authoritarian governments
• Capitalism is based on greed
• Assuming increased income inequality negates the gains from freer markets
• European countries have more progressive tax systems than the US

Fallacies on the Right are:

• Countries with big government tend to be poorer
• Denmark and Sweden are socialist countries
• Singapore and Hong Kong are not really capitalist
• Europe/Canada/Australia, etc, are much more socialist than the US
• Capitalism is based on individualism

The French go on massive strikes due to president Sarkozy’s suggestion that the retirement age be raised from 60 to–61 or 62.

This is the kind of spoiled brat mentality that I don’t want to happen to the US. While some believe that capitalism eventually degrades into socialism (to some degree), perhaps Fabian socialism degrades into something like the diseased French economy (or eventually, something far worse).

And what are the negative externalities of a faltering economy? In the case of the French, an inability to absorb millions of immigrants and the car burnings and other crime that results from millions of idle hands.

I’m sure most people know this already, but our happiness is in part based on our professional success (among many other factors), and that success is determined relative to the success of others. More interesting is that who we compare ourselves to is significant. If we compare our position/compensation to our work peers (with whom we have limited emotional attachment), we might feel that our lower salary is “unfair.” However, importantly, if we compare ourselves to our good friends from college, then we’re likely to feel saddened if we are under-performing them.

I’m not convinced feeling bad is always bad. Maybe we should feel bad sometimes. Maybe feeling bad will propel us to a more interesting (and possibly higher paying) position? Or feeling bad might cause us to do something truly great, like pursue a simple solution for problems that lead to significant human suffering (and most innovative solutions are simple and relatively cheap – mosquito nets and seat belts, for eg).

Brilliant Nobel prize winner and NY Times columnist Paul Krugman writes about how libertarianism simply doesn’t work (a multi-part series, it seems).

I often refer to myself as a libertarian, though I’m not extreme on that point. My standpoint is that the spirit of libertarianism—limited government and “freedom by default”—is something worth preserving. On that point, I think Krugman misses the point big time.

He’s not alone though. I think even many libertarians miss that point as well (or perhaps I grossly misunderstand my own convictions). They seem to believe that libertarianism is about federalism; i.e., that to be libertarian, we need only believe in limited central government, meaning that individual states govern themselves w/ limited federal over-sight.

That seems odd to me. Not that there’s not wisdom in some level of self-governance going to individual states. But it seems odd that libertarianism is all about states’ rights. After all, it doesn’t take a federal government to strip us of our personal freedoms. A state can do that as well. So why define libertarianism such that individual states can rule over us rather than the central government?

Anyway, back to Krugman. He’s a smart guy. So smart, in fact, that everyone else is stupid (he won a Nobel after all… that’s gotta count for something). So, I can only assume that my view is wrong and that his view is right. Then again, many a smart individual has been wrong in the past, esp when their own past success blinds them to the wisdom and viewpoints of others. That’s true of Tea Partiers and Nobel laureates alike.

Interesting article by Steven Hawking about how to build a time machine. It’s actually pretty easy, conceptually speaking. Hint: go near a black hole or, better yet, travel really, really fast.

Downside: it’s probably impossible to travel backward in time, only forward. That solves the mystery of why time travelers from the future haven’t visited us.

Unfortunately, hyperbole is getting the best of people (mostly conservatives/libertarians) who believe that Guaranteed Retirement Accounts (GRAs) are a form of asset seizure by the central government. GRAs—which may or may not ever come into fruition—are a bad idea in my view, but they do not represent an asset seizure (FactCheck.org has a decent write-up). I make this point because this is the type of frenetic hyperbole that makes conservatives/libertarians look like idiots (bad, since I tend to associate myself with conservative and libertarian ideals).

Having said that, I really don’t like GRAs. The “guaranteed” idea is misleading, the rate of return is awful, and greater reliance on the central government of the United States is disturbing to me. Generally, I believe the federal government should have fewer and more defined areas of focus rather than greater breadth of involvement in our daily lives.

GRAs would have a low rate of return (3%), which of course is zero percent after considering inflation. They would be subject to government whim, and I can see this sort of retirement savings program becoming highly politicized. My understanding is the government could invest that money as it saw fit, returning 3% and (I presume) keeping any profit above 3% for itself or for re-distribution to others.

If you’re an investor and you want a low (but stable) return, then invest in index funds covering cash equivalents, bonds, etc. Interestingly, you could essentially achieve the “GRA dream” by simply investing in a federal government bond fund in your existing retirement plan. Regardless, even a relatively stable (but low return) portfolio would still likely out-pace inflation (3%), meaning the GRA plan is still a bad bet.

Alternately, if you want to actually have money when you retire (and esp if you’re relatively young, like me), invest in a broad mix of stocks and bonds (via index funds or ETFs) and wait for the interest/dividends/cap gains to compound over time.

Some time ago, I began studying body/facial language (I distinguish the two for clarity). I started with an easy to read, “best-seller” book. Not long after, I delved into the more academic books, mostly written or co-written by Paul Ekman, an authority on the subject of body and facial language (and yes, the main character in Lie to Me is very loosely based on Ekman; Ekman is a scientific consultant for the show as well).

Anyway, back to the title of this post, which is on handshaking. Handshakes are interesting. You can learn quite a bit about a person from his handshake, namely the level of submissiveness or dominance of that person. But how?

We’re all taught to use a firm handshake. Not crushing, but firm. The firmness of the handshake is an important factor, but not as important as another one other factor I’ll mention in a moment. The reason that firmness is not quite as indicative is that we’re all taught to use a firm handshake, meaning that people who are not confident at all will sometimes (but not always) use a very firm handshake. Sometimes, more confident people will lighten up on their handshakes, perhaps to avoid coming across as “bullying.”

So what else aside from firmness can give away someone’s confidence level? The next time you shake someone’s hand, take note of the angle of that person’s hand, preferably by feel (don’t stare at the person’s hand). A confident person will angle his hand so that his palm is angled slightly down. As a consequence, the less confident person’s palm will be slightly tilted up in this case, meaning the dominant hand will be slightly atop the other person’s hand.

My strategy is to use a firm handshake and to use a neutral hand position. This allows the other person (the person whose hand I’m shaking) to angle his hand whichever way he wants. If the person isn’t very confident, the handshake will remain “neutral,” meaning my palm will be parallel to the floor (neither facing up nor down). If the person is more confident, he will slightly twist such that his palm is angled slightly down, meaning his hand is “on top” (a dominance gesture). He won’t even be aware that all this is going on, of course.

This is a fascinating test. I immediately discern the person’s level of confidence from the handshake alone, even if the person is not trying to come across as overly confident. Of course, there are many other “tells” of someone’s confidence, so I admit that this is more a curiosity than anything else. But it’s intriguing how incredibly consistent this is.

It’s also interesting to observe two dominant people shaking hands. You’ll notice one trying to “one up” the other following the initial contact; he’ll place his other, free hand atop the pair’s already-clasped hands, or even on the other person’s arm or shoulder. Sometimes the other party will then respond by placing his hand over the shoulder as well. It looks very affectionate, but all of this one-upping is a dominance game, not affection or friendship.

Above – Obama/McCain shake hands. Notice both former candidates doing an elbow grab, attempting to (probably unknowingly) “one up” the other. Obama’s expression is curious. Maybe he is about to say something, while exerting some effort to maintain a fake smile. McCain is clearly showing us what Ekman calls a “miserable smile” (aka, a grin-and-bear-it smile); he also looks away while doing this, whereas Obama maintains his gaze toward McCain. McCain might be looking away out of avoidance—a desire to not be in his current situation, hence, casting his gaze away.

Sue people who disagree with you. Libel law has certainly degraded the quaint concept of free speech in Great Britain, so why shouldn’t Canadians get sued as well for expressing their view points?

Climate change (formerly known as Global Warming) may in fact be very real. Or perhaps it’s real, but subject to natural factors far more than man-made ones. Or perhaps it’s real, but marginal in its impact. Or perhaps it’s complete BS. We may never know. Scientists who study this sort of thing and who want to keep their jobs are biased towards conclusions that get them more funding (and no one who downplays or “puts it in perspective” is going to be getting those multi-million dollar grants).

(HT to MR again…)

Maybe b/c we have too many regulatory hurdles for green power.

If it takes nearly a decade to maybe get the green light for an offshore wind farm, then don’t expect to replace fossil fuels anytime this century.

People want to be “green,” provided that they don’t have to make any sacrifice at all. Residents likely have the usual not-in-my-back-yard mindset. We all want to limit our carbon footprint, provided we still get to live in big houses & get to drive SUVs (“gunning” them when the light turns green in that stop and go traffic, of course).

Was the financial crisis (past ones & recent one) due to moral hazard, encouraged by our central government? Yes, in part, per this fascinating blog entry on a well-known econ site. Moral hazard due to previous bail-outs (which encourage excessive risk) as well as expansion of Fannie/Freddie led to the mortgage-backed meltdown, it seems.

Good summary (from link above):

The increased demand for housing resulting from Fanne and Freddie’s expansion pushed up the price of housing and helped make subprime attractive to banks. But the ultimate driver of destruction was leverage. Either lenders were irrationally exuberant or were lulled into that exuberance by the persistent rescues of the previous three decades.

On the subject of central government-backed screw-ups, I was intrigued to Tom Friedman’s quasi-recent editorial:  Startups, Not Bailouts. The title by itself is pithy enough that you don’t actually have to read the whole editorial. But if you do read the whole thing, you’ll see he also espouses immigration as a growth policy. Check it out:

But you cannot say this often enough: Good-paying jobs don’t come from bailouts. They come from start-ups. And where do start-ups come from? They come from smart, creative, inspired risk-takers. How do we get more of those? There are only two ways: grow more by improving our schools or import more by recruiting talented immigrants. Surely, we need to do both, and we need to start by breaking the deadlock in Congress over immigration, so we can develop a much more strategic approach to attracting more of the world’s creative risk-takers. “Roughly 25 percent of successful high-tech start-ups over the last decade were founded or co-founded by immigrants,” said Litan. Think Sergey Brin, the Russian-born co-founder of Google, or Vinod Khosla, the India-born co-founder of Sun Microsystems.

Immigration isn’t his main point, of course, but amidst the controversy over Arizona’s law, I thought I’d digress.

Implicitly, Friedman’s talking legal immigration, if for no other reason than for the fact that illegal immigrants typically “lay low,” and that means not starting the next Google.

From a purely economic standpoint, our entitlement/welfare programs necessitate bringing in immigrants (esp relatively young/healthy ones). If we’re not going to switch to, like, capitalism with our retirement/medical programs (referring to Social Security and Medicare/Medicaid), then we should be more receptive to a more liberal immigration policy, legal or otherwise.

Politically, it’s neither possible to truly reform the aforementioned Nanny State programs nor is it politically acceptable to legalize millions of people who didn’t wait their turn in the highly bureaucratic line. We’re stuck in between a rock and a hard place, not due to absence of feasible solutions, but in the fact that real long-term solutions aren’t politically feasible.