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Rules Of Thumb — Marginal Revolution: Rationality is a Property of Equilibrium

I have a post on rules of thumb written in one of my notebooks (The problems of only being able to write in using pen and paper, is you have to type it later, argh).
One of my points is that Rules Of Thumbs are incomplete if they are not accompanied with the bounds that they are effective.

Rationality is a Property of Equilibrium
Some thoughts on rationality and economics, perhaps for a future paper, motivated by the financial panic:
Rationality is a property of equilibrium. By this I mean that rationality is habitual and experience-based and it becomes effective as it becomes embedded in the rules of thumb and collective wisdom of market participants. Rules of thumb approximate rational decision rules as market participants become familiar with an economic environment. Individuals per se are not very rational; shift the equilibrium enough so that the old rules of thumb no longer apply and we are likely to see bubbles, manias, panics and crashes. Significant innovation is thus almost always going to come accompanied with a wave of irrationality. When we shift to a significant, new equilibrium rationality itself is not strong enough to tie down behavior and unmoored by either reason or experience individuals flail about liked naked apes – this is the realm of behavioral economics. Given time, however, new rules of thumb evolve and rationality once again rules but only until the next big innovation arrives.
Posted by Alex Tabarrok on January 13, 2009 at 07:20 AM | Permalink
Marginal Revolution: Rationality is a Property of Equilibrium.

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I Am A Producer!

I believe I am and I will do everything I can to be right1

While it’s true you’re likely a mixture of both types and will experience fluctuation in your ratio of production vs. consumption from one month to the next, unless your name is Robert Scoble you have to choose one or the other.
To recap:
* Consuming for the pure love of learning is absolutely ok.
* Producing purely because you have a fire that won’t die until you do is fine, too.
* But don’t kid yourself about who you are.
If you’ve been reading startup blogs for years and never started anything, it’s time to accept that you’re a consumer.
If you have 50 software product ideas and your hard drive is littered with folders containing 30 lines of code from each, you’re a consumer (or at least a producer who has trouble finishing things).
And if you figure out that you are a producer, stop daydreaming about the day you’ll make things happen. Start making it happen in the next 30 days, or forever hold your peace.
The Single Most Important Career Question You Can Ask Yourself | Software by Rob.

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Why I Never Got Into Guitar Hero-Rough Type: Nicholas Carr's Blog: Complete control

Guitar Hero is in that sweet spot where it is hard enough to get the competitive juices flowing , but not hard enough to turn of a mass of people that would require playing it to recoupe all the expenses in licensing /creating /all production and marketing expenses.
If I was to waste as much time in doing something, I’d probably just learn the damn instrument (Guitar) and try to create music. I saw the ted talk of the Guitar Hero creator, and I admire his desire to bring music to everyone. I hope this funded his research, because it is far from successful if that is his goal.
I hate it when I have strong feelings on something, I tend to be incoherent, too many thoughts wanting to express themselves simultaneously and  when you get around to it the thought is lost.

“I’ve been puzzled by the popularity of the game Guitar Hero,” writes Rob Horning at PopMatters. “If you want a more interactive way to enjoy music, why not dance, or play air guitar? Or better yet, if holding a guitar appeals to you, why not try actually learning how to play? For the cost of an Xbox and the Guitar Hero game, you can get yourself a pretty good guitar.” Horning, apparently, doesn’t quite get the point of prosumerism; its joys are lost on him. He continues: “I can’t help but feel that Guitar Hero (much like Twitter) would have been utterly incomprehensible to earlier generations, that it is a symptom of some larger social refusal to embrace difficulty.”
Rough Type: Nicholas Carr’s Blog: Complete control.

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Goog;e' Carbon Dioxide Impact–Rough Type: Nicholas Carr's Blog: Strip mine media

Why is it that when companies (even google) respond to these kinds of accusations I jut automatically cringe?

UPDATE: Google responds, claiming the Wissner-Gross estimate “is *many* times too high”: “Queries vary in degree of difficulty, but for the average query, the servers it touches each work on it for just a few thousandths of a second. Together with other work performed before your search even starts (such as building the search index) this amounts to 0.0003 kWh of energy per search, or 1 kJ … In terms of greenhouse gases, one Google search is equivalent to about 0.2 grams of CO2.”
Still, the numbers add up. Google says “the average car driven for one kilometer … produces as many greenhouse gases as a thousand Google searches.” That means that the billion searches Google is estimated to do a day are equivalent to driving a car about a million kilometers. And that doesn’t include the energy used to power the PCs of the people doing the searches, which Google says is greater than the power it uses.
Rough Type: Nicholas Carr’s Blog: Strip mine media.

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Advice For The PE–This Is Your Brain on Prosperity: Andrew Lo on Fear, Greed, and Crisis Management – Freakonomics Blog – NYTimes.com

Excellent Advice for the PE Obama.

In the long run, more transparency into the “shadow banking” system; more education for investors, policymakers, and business leaders; and more behaviorally oriented regulation will allow us to weather any type of financial crisis. Regulation enables us to restrain our behavior during periods when we know we will misbehave; it is most useful during periods of collective fear or greed and should be designed accordingly. Corporate governance should also be revisited from this perspective; if we truly value naysayers during periods of corporate excess, then we should institute management changes to protect and reward their independence.

If “crisis is a terrible thing to waste,” as some have argued, then we have a short window of opportunity — before economic recovery begins to weaken our resolve — to reform our regulatory infrastructure for the better. The fact that time heals all wounds may be good for our mental health, but it may not help maintain our economic wealth.

This Is Your Brain on Prosperity: Andrew Lo on Fear, Greed, and Crisis Management – Freakonomics Blog – NYTimes.com.

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Not Yet–All by ourselves alone – Roger Ebert's Journal

But let me stop place-dropping. These places do not involve only a visit, but a meditation: I have been here before, I am here now, I will be here again. Robert Altman told me he kept track of time not by the years, but by the films he was working on. “I’m always preparing the next film,” he said. That is living in a time outside time. Of course everyone’s time must run out. But not yet. Not until I’m finished touching a few more bases. I will sit in the corner by the fire in the Holly Bush again, and stand in the wind on top Parliament Hill, and I know exactly how to find that cafe in Venice, although I could never describe the way. Oh, yes I do.
All by ourselves alone – Roger Ebert’s Journal.

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Enormous Happiness– All by ourselves alone – Roger Ebert's Journal

This made me remember how i text myself whenever I am truly happy. I haven’t for a while. This made me realize how rare being truly happy is. What I mean is that the peaks, being enormously happy in the words of Roger Ebert, Is not something we have control over.
To complete the thought. It is entirely out of your control to be enormously happy but to be happy is totally within your power. Cherish the rare moments and work for the happiness.

Suddenly I was filled with an enormous happiness, such a feeling as comes only once or twice a year, and focused all my attention inward on the most momentous feeling of joy, on the sense that in this moment everything is in harmony. I sat very still. I was alone at a table in a square where no one I knew was likely to come, in a land where I did not speak the language, in a place where, for the moment, I could not be found. I was like a spirit returned from another world. All the people around me carried on their lives, sold their strawberries and called for their children, and my presence there made not the slightest difference to them. I was invisible. I would leave no track in this square, except for the few francs I would give to the cafe owner, who would throw them in a dish with hundreds of other coins.
All by ourselves alone – Roger Ebert’s Journal.

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At McDonald’s, the Happiest Meal Is Hot Profits – NYTimes.com

Photo of a 20-piece box of McDonald's Chicken ...
Image via Wikipedia

They still don’t do this here in the Philippines, except that we have lots of 24 hour McDonald’s store here. Maybe in a year or two. People mainly go to Starbucks to be seen, and moves like improving the interior design and making it a hip again would do wonders. In the Philippines McDonald’s is being squeezed at both ends. Local food Giant Jollibee has the lower end markets cornered whilst Starbucks has the middle to higher end markets for itself. McDonald’s here is finding it hard to find an image for itself. I think that their approach in the USA would also be a great fit for the Philippine market.

CHRIS WARD, 23, didn’t go to McDonald’s much because it wasn’t open late enough for after-hours snacks.
Casey Fillian, 32, and her friend Carol Milano, 33, gave up their teenage McDonald’s habit when they became more health-conscious adults.
And Russ Green, 47, wouldn’t go to McDonald’s because, among other things, he thought its food was unhealthy.
Yet here all four of them are, lined up at McDonald’s one recent morning, lured back by new menu items, longer hours and a sparkling new building that includes flat-screen televisions and video games for children.
Mr. Ward says he’s a regular again because his McDonald’s is open until 1 a.m. Ms. Fillian and Ms. Milano, now moms, say they often bring their children to the playroom and feel no guilt serving them apple slices and white-meat Chicken McNuggets. Mr. Green was drawn back in — grudgingly — because McDonald’s lattes are cheaper and more convenient than those at Starbucks.
At McDonald’s, the Happiest Meal Is Hot Profits – NYTimes.com.

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CSIS Reports – The War in Gaza – Center for Strategic and International Studies

Thanks To ForeignPolicy blog for the pointer here

This raises a question that every Israeli and its supporters now needs to ask. What is the strategic purpose behind the present fighting? After two weeks of combat Olmert, Livni, and Barak have still not said a word that indicates that Israel will gain strategic or grand strategic benefits, or tactical benefits much larger than the gains it made from selectively striking key Hamas facilities early in the war. In fact, their silence raises haunting questions about whether they will repeat the same massive failures made by Israel’s top political leadership during the Israeli-Hezbollah War in 2006. Has Israel somehow blundered into a steadily escalating war without a clear strategic goal or at least one it can credibly achieve? Will Israel end in empowering an enemy in political terms that it defeated in tactical terms? Will Israel’s actions seriously damage the US position in the region, any hope of peace, as well as moderate Arab regimes and voices in the process?
To blunt, the answer so far seems to be yes. To paraphrase a comment about the British government’s management of the British Army in World War I, lions seem to be led by donkeys. If Israel has a credible ceasefire plan that could really secure Gaza, it is not apparent. If Israel has a plan that could credibly destroy and replace Hamas, it is not apparent. If Israel has any plan to help the Gazans and move them back towards peace, it is not apparent. If Israel has any plan to use US or other friendly influence productively, it not apparent.
As we have seen all too clearly from US mistakes, any leader can take a tough stand and claim that tactical gains are a meaningful victory. If this is all that Olmert, Livni, and Barak have for an answer, then they have disgraced themselves and damaged their country and their friends. If there is more, it is time to make such goals public and demonstrate how they can be achieved. The question is not whether the IDF learned the tactical lessons of the fighting in 2006. It is whether Israel’s top political leadership has even minimal competence to lead them.
CSIS Reports – The War in Gaza – Center for Strategic and International Studies .