By creating a mathematical model of the way overconfident individuals compete against ordinary individuals, they show that there is a clear advantage in overconfidence.
In fact, if the potential reward is at least twice as great as the cost of competing, then overconfidence is the best strategy. In fact, overconfidence is actually advantageous on average, because it boosts ambition, resolve, morale, and persistence. In other words, overconfidence is the best way to maximize benefits over costs when risks are uncertain.
But it is Johnson and Fowler's predictions that are most worrying. Their model implies that optimal overconfidence increases with the magnitude of uncertainty. So the greater the risk, the more overconfident individuals should become.
Wednesday, September 30, 2009
Tuesday, September 29, 2009
Monday, September 28, 2009
Elsewhere, Jonah Lehrer profiles Clay in Outside magazine, discussing the advantages Asperger's gives Clay, including the ability to focus on surfing for 8-9 hours at a time.
Saturday, September 26, 2009
Friday, September 25, 2009
the assumptions that underpin these theories are largely inscrutable to those without a Ph.D. in economics. Indeed, the debate is full of terms that mean one thing to the uninitiated and quite another to economists.
Consider “rationality.” Webster’s Dictionary defines it as “reasonableness.” By contrast, for economists, a “rational individual” is not merely reasonable; he or she is someone who behaves in accordance with a mathematical model of individual decision-making that economists have agreed to call “rational.”
The centrepiece of this standard of rationality, the so-called “Rational Expectations Hypothesis”, presumes that economists can model exactly how rational individuals comprehend the future. In a bit of magical thinking, it supposes that each of the many models devised by economists provides the “true” account of how market outcomes, such as asset prices, will unfold over time.
The economics literature is full of different models, each one assuming that it adequately captures how all rational market participants make decisions. Although the free-market Chicago school, neo-Keynesianism, and behavioural finance are quite different in other respects, each assumes the same REH-based standard of rationality.
In other words, REH-based models ignore markets’ very raison d’etre: no one, as Friedrich Hayek pointed out, can have access to the “totality” of knowledge and information dispersed throughout the economy. Similarly, as John Maynard Keynes and Karl Popper showed, we cannot rationally predict the future course of our knowledge. Today’s models of rational decision-making ignore these well-known arguments.
Thursday, September 24, 2009
Wednesday, September 23, 2009
People who succumb to short-term impulses often do awful things, such as driving drunk or beating up their children. They would better off if their long-term selves had control, and could block and distract these short-term choices. But often the situation is flipped, and it’s the long-term self that’s misguided. It can become committed to belief systems that have immoral consequences. Terrorism and genocide, for instance, are typically deliberate choices, not acts of passion; it’s the long-term self that’s the guilty one. Indeed, people often have to force themselves to commit terrible acts; they have to work to defy the natural and legitimate moral impulses of their short-term selves.
Tuesday, September 22, 2009
Monday, September 21, 2009
Sunday, September 20, 2009
Friday, September 18, 2009
animals share functional parallels with human conscious metacognition -- that is, they may share humans' ability to reflect upon, monitor or regulate their states of mind.
Smith explains that metacognition is a sophisticated human capacity linked to hierarchical structure in the mind (because the metacognitive executive control processes oversee lower-level cognition), to self-awareness (because uncertainty and doubt feel so personal and subjective) and to declarative consciousness (because humans are conscious of their states of knowing and can declare them to others).
Therefore, Smith says, "it is a crucial goal of comparative psychology to establish firmly whether animals share humans' metacognitive capacity. If they do, it could bear on their consciousness and self-awareness, too."
In fact, he concludes, "Metacognition rivals language and tool use in its potential to establish important continuities or discontinuities between human and animal minds."
Related: Temple Grandin on similarities between animals and austistic savants with regard to "priviledged" access to low level sensory information.
Thursday, September 17, 2009
"The politically charged Texas Board of Education has kicked off hearings today
on whether school textbooks should have a more conservative slant. Things began
auspiciously when one member of the public got up to announce that she is a
--David Kurtz , Talking Points Memo
Wednesday, September 16, 2009
From the NYT:
“It is the nuclear reactor for all his works,” Shamdasani said, noting that Jung’s more well-known concepts — including his belief that humanity shares a pool of ancient wisdom that he called the collective unconscious and the thought that personalities have both male and female components (animus and anima) — have their roots in the Red Book. Creating the book also led Jung to reformulate how he worked with clients, as evidenced by an entry Shamdasani found in a self-published book written by a former client, in which she recalls Jung’s advice for processing what went on in the deeper and sometimes frightening parts of her mind.Read the rest of the article. It is fascinating reading all the way through.
“I should advise you to put it all down as beautifully as you can — in some beautifully bound book,” Jung instructed. “It will seem as if you were making the visions banal — but then you need to do that — then you are freed from the power of them. . . . Then when these things are in some precious book you can go to the book & turn over the pages & for you it will be your church — your cathedral — the silent places of your spirit where you will find renewal. If anyone tells you that it is morbid or neurotic and you listen to them — then you will lose your soul — for in that book is your soul.”
The book itself looks absolutely gorgeous.
Tuesday, September 15, 2009
In the case of time-space synaesthesia, a very visual experience can be triggered by thinking about time.
"I thought everyone thought like I did, says Holly Branigan, also a scientist at Edinburgh University, and someone with time-space synaesthesia.
"I found out when I attended a talk in the department that Julia was giving. She said that some synaesthetes can see time. And I thought, 'Oh my god, that means I've got synaesthesia'."
So what exactly does she see?
"For me it's a bit like a running track," she says.
"The track is organised around the academic year. The short ends are the summer and Christmas holidays - the summer holiday is slightly longer.
"It's as if I'm in the centre and I'm turning around slowly as the year goes by. If I think ahead to the future, my perspective will shift."
Monday, September 14, 2009
Friday, September 11, 2009
I'm reading several books simultaneously these days, including prep work for the CFA exam this December, rereading Neal Stephenson's Baroque Cycle for fun, working my way through everything Don Norman has published on design theory, and now, Tyler Cowen's book, Create Your Own Economy, which contains more about autism and Web 2.0 material than one might expect from the title. Nonetheless, it's packed with engaging tidbits: I'd love to have a collapsible Caravaggio to carry around to parties, for instance.
He also points the reader toward a really good 2007 blog post by Media Lab professor and Technology Review blogger Ed Boyden, who heavily annotates and organizes his life. Boyden's post details 10+2 recommendations for effectively organizing your life:
- Synthesize new ideas constantly
- Learn how to learn (rapidly)
- Work backward from your goal. Or else you may never get there
- Always have a long-term plan. Even if you change it every day
- Make contingency maps
- Make your mistakes quickly
- As you develop skills, write up best-practices protocols
- Document everything obsessively
- Keep it simple
- Use logarithmic time planning. Use greater detail for the near future
- Compose conversation summaries. Photograph and store for easy retrieval
Wednesday, September 09, 2009
Listen carefully, my son: bombs were falling
over Mexico City
but no one even noticed.
The air carried poison through
the streets and open windows.
You'd just finished eating and were watching
cartoons on TV.
I was reading in the bedroom next door
when I realized we were going to die.
Despite the dizziness and nausea I dragged myself
to the kitchen and found you on the floor.
We hugged. You asked what was happening
and I didn’t tell you we were on death’s program
but instead that we were going on a journey,
one more, together, and that you shouldn’t be afraid.
When it left, death didn’t even
close our eyes.
What are we? you asked a week or year later,
ants, bees, wrong numbers
in the big rotten soup of chance?
We’re human beings, my son, almost birds,
public heroes and secrets.
Tuesday, September 08, 2009
Eric Heller at Harvard University and various pals have studied rogue waves for some time. Today they show how microwaves propagating through a forest of scatterers which the team call a "quasi-two-dimensional resonator with randomly distributed scatterers, each mimicking an r^−2 repulsive potential".
The results are fascinating because they clearly show the rogue waves (or hot spots in microwave terms) appearing more often than conventional thinking (Rayleigh's law for the wave height distribution) allows. In fact the team says the probability in their set up of a rogue wave appearing is 15 orders of magnitude greater than Rayleigh statistics predict. They attribute the difference to ray refraction rather than to resonance effects as conventional thinking might suppose.
Mouse retinas contain cells that detect approaching objects, possibly providing an advance warning system.
While investigating mouse eye cells, Botond Roska at the Friedrich Miescher Institute for Biomedical Research in Basel, Switzerland, and colleagues noticed that one type behaved unusually in response to movement. Further analysis of this one kind of retinal cell revealed that it fired only when an object approached.
The researchers suspect that people have similar cells, which alert us to approaching objects faster than our brain cells can. "It's an alarm system that's as close to the front end of the organism as possible," says Roska. "If you left it to the brain to respond, it might be too late."
It could also be that these cells form part of the signal processing apparatus that enhances visual acuity.
Monday, September 07, 2009
Sharing the top floor with Oliver and his sister were two different lunatics: a rotund, elderly German, Edward Lindner – "Helen and I were convinced he was a Nazi in hiding," reveals Oliver who never went to the bathroom – and in the back room was Freddie Feldman, midget cabalist.
"Freddie tried to kill us on a daily basis, He would steal our empty wine bottles from the trash – of which there were many as we liked to entertain – and he would plant them one by one, lying on their sides on various steps, hoping that Helen and I on our many trips to the bathroom would step on an empty bottle and it would roll out from under our feet, causing us to plunge down the stairs and break our necks," Oliver explains. "It was quite amazing that Freddie was able to plant his booby traps without making a sound, because the stairs creaked horribly."
So how did he do it? "First, he would remove his clothes. Then he would walk up the stairs very carefully on tiptoe, balancing on the very outer edge of each step with his whole body pressed against the wall, then he'd walk up the wall like a fly would. To see Freddie – naked, walking up the wall – was truly to witness the most dread and awe-inspiring of acts," replies Oliver.
I wonder what it would take to bring this show to Chicago. I'd buy box seats.
Saturday, September 05, 2009
Friday, September 04, 2009
Thursday, September 03, 2009
This is the second time America has been up against the zero lower bound, the previous occasion being the Great Depression. And it was precisely the observation that there’s a lower bound to interest rates that led Keynes to advocate higher government spending: when monetary policy is ineffective and the private sector can’t be persuaded to spend more, the public sector must take its place in supporting the economy. Fiscal stimulus is the Keynesian answer to the kind of depression-type economic situation we’re currently in.Brad Delong comments:
Such Keynesian thinking underlies the Obama administration’s economic policies — and the freshwater economists are furious. For 25 or so years they tolerated the Fed’s efforts to manage the economy, but a full-blown Keynesian resurgence was something entirely different. Back in 1980, Lucas, of the University of Chicago, wrote that Keynesian economics was so ludicrous that “at research seminars, people don’t take Keynesian theorizing seriously anymore; the audience starts to whisper and giggle to one another.” Admitting that Keynes was largely right, after all, would be too humiliating a comedown. And so Chicago’s Cochrane, outraged at the idea that government spending could mitigate the latest recession, declared: “It’s not part of what anybody has taught graduate students since the 1960s. They [Keynesian ideas] are fairy tales that have been proved false. It is very comforting in times of stress to go back to the fairy tales we heard as children, but it doesn’t make them less false.” (It’s a mark of how deep the division between saltwater and freshwater runs that Cochrane doesn’t believe that “anybody” teaches ideas that are, in fact, taught in places like Princeton, M.I.T. and Harvard.)
Meanwhile, saltwater economists... were shocked to realize that freshwater economists hadn’t been listening.... Freshwater economists [like Lucas, Prescott, Fama, Cochrane, Mulligan, Zingales, Boldrin, etc.] who inveighed against the stimulus didn’t sound like scholars who had weighed Keynesian arguments and found them wanting. Rather, they sounded like people who... were resurrecting pre-1930 fallacies in the belief that they were saying something new and profound. And it wasn’t just Keynes whose ideas seemed to have been forgotten. As Brad DeLong of the University of California, Berkeley, has pointed out in his laments about the Chicago school’s “intellectual collapse,” the school’s current stance amounts to a wholesale rejection of Milton Friedman’s ideas as well. Friedman believed that Fed policy rather than changes in government spending should be used to stabilize the economy, but he never asserted that an increase in government spending cannot, under any circumstances, increase employment. In fact, rereading Friedman’s 1970 summary of his ideas, “A Theoretical Framework for Monetary Analysis,” what’s striking is how Keynesian it seems.
I remember October of 1987. We--that is me, Andrei Shleifer, Larry Summers, and Robert Waldmann--had what we regarded as a very nice paper about the instability of irrational agents' beliefs as itself a powerful barrier to arbitrage. We then watched the stock market crash by 25% in one day. And we thought that we had won the argument: that the efficient market hypothesis couldn't come back from a 25% market collapse on a day when absolutely nothing fundamental happened.
But then we were told that something fundamental had happened: there had been a sudden shock to the required expected rate of return on equities and the market had reacted efficiently to that shock. However, when I tried to process this, I could not understand it other than as an assertion that the market had gone down for no reason and would eventually recover--but that this was not a problem because it was consistent with the efficient market hypothesis...
When we could endure no more upon the water; we to a little ale-house on the Bankside, over against the ‘Three Cranes, and there staid till it was dark almost, and saw the fire grow; and, as it grew darker, appeared more and more, and in corners and upon steeples, and between churches and houses, as far as we could see up the hill of the City, in a most horrid malicious bloody flame, not like the fine flame of an ordinary fire. Barbary and her husband away before us. We staid till, it being darkish, we saw the fire as only one entire arch of fire from this to the other side the bridge, and in a bow up the hill for an arch of above a mile long: it made me weep to see it. The churches, houses, and all on fire and flaming at once; and a horrid noise the flames made, and the cracking of houses at their ruins.
Here's what the area looks like now, as viewed from the Fire Monument, which was built by Christopher Wren and Robert Hooke, as part of their reconstruction of London after the fire.
Tuesday, September 01, 2009
To bed at 2 or 3 in the morning and up again at 6 to go by appointment to my Lord Bellasses, but he out of town, which vexed me. So back and got Mr. Poynter to enter into, my book while I read from my last night’s notes the letter, and that being done to writing it fair. At noon home to dinner, and then the boy and I to the office, and there he read while I writ it fair, which done I sent it to Sir W. Coventry to peruse and send to the fleete by the first opportunity; and so pretty betimes to bed. Much pleased to-day with thoughts of gilding the backs of all my books alike in my new presses.
By Mary-Louise Parker
To you, whom it may concern:
Manly creature, who smells good even when you don't, you wake up too slowly, with fuzzy, vertical hair and a slightly lost look on your face as though you are seven or seventy-five; you can fix my front door, my sink, and open most jars; you, who lose a cuff link and have to settle for a safety pin, you have promised to slay unfortunate interlopers and dragons with your Phillips head or Montblanc; to you, because you will notice a woman with a healthy chunk of years or pounds on her and let out a wolf whistle under your breath and mean it; because you think either rug will be fine, really it will; you seem to walk down the street a little taller than me, a little more aware but with a purpose still; to you who codifies, conjugates, slams a puck, baits a hook, builds a decent cabinet or the perfect sandwich; you who gives a twenty to the kids selling Hershey bars and waits at baggage claim for three hours in your flannel shirt; you, sir, you take my order, my pulse, my bullshit; you who soaps me in the shower, soaks with me in the tub; to you, boy grown-up, the gentleman, soldier, professor, or caveman, the fancy man with initials on your towels and salt on your chocolates, to you and to that guy at the concession stand; thank you for the tour of the vineyard, the fire station, the sound booth, thank you for the kaleidoscope, the Horsehead Nebula, the painting, the truth; to you who carries me across the parking lot, up the stairs, to the ER, to roll-away or rice mat; to you who shows up every so often only to confuse and torment, and you who stays in orbit, always, to my left and steady, you stood up for me, I won't forget that; to you, the one who can't figure it out and never will, and you who lost the remote, the dog, or your way altogether; to you, wizard, you sang in my ear and brought me back from the dead, you tell me things, make me shiver; to the ones who destroyed me, even if for a minute, and to the ones who grew me, consumed me, gave me my heart back times ten; to most everything that deserves to call itself a man: How I do love thee, with your skill to light fires that keep me warm, light me up.
(in Esquire magazine via Jonathan Carroll)