Author: admin

The Lottery Mentality
Updated March 22, 2011, 05:24 PM
Chrystia Freeland is the global editor-at-large at Thomson Reuters.
Americans actually live in Russia, although they think they live in Sweden. And they would like to live on a kibbutz. This isn’t the set-up for some sort of politically incorrect Catskills stand-up joke circa 1960. It is the takeaway from a remarkable study by Michael Norton and Dan Ariely on how Americans think about income inequality.
Americans are mistaken about income inequality because of national self-confidence and the lottery effect.
The right likes to argue that income inequality as an issue doesn’t win elections because Americans don’t begrudge the rich so much as they want to join them. The Norton and Ariely study suggests otherwise. Given a choice, the authors find, Americans would prefer to live in a society more equal than even highly egalitarian Sweden.
Another popular view is that income inequality isn’t experienced as acutely by most Americans as the numbers suggest because of how much can be “consumed” by the lower rungs of the nation’s socioeconomic ladder. No less a figure than Alan Greenspan, the maestro himself, once made this case at the Federal Reserve’s annual Jackson Hole conference, presenting data on the consumption of dishwashers, microwaves and clothes dryers showing that if measured by the possession of these goods – as opposed to the huge and growing income divide — inequality was decreasing.
That interpretation is not without merit. But it turned out that allowing Americans to prosper by using their homes as A.T.M.’s and maxing out on their credit cards was maybe not such a great idea.
Personally, I lean toward two other theories. Americans are mistaken about income inequality because of national self-confidence and the lottery effect.
By national self-confidence, I mean the widespread conviction that the American way is probably right because all those other ways don’t seem to work out so well. This is a wonderful national quality and one of the reasons America has such resilience. But confidence in the American way can make it hard for the country as a whole to recognize when things aren’t working.
Take, for instance, the health care debate, when a politically effective criticism of what has come to be known as Obamacare was to argue that it would destroy the “best” health care system in the world. Mary Meeker, a Silicon Valley guru of impeccably capitalist and American credentials debunked that idea in her recent USA, Inc. presentation, in which she pointed out that “U.S.A. per capita health care spending is 3x OECD average, yet the average life expectancy and a variety of health indicators in the U.S. fall below average. But if you spend way more than everyone else, shouldn’t your results (a.k.a. performance) be better than everyone else’s, or at least near the top?”
Aside from faith in American national excellence, the other main reason Americans seem so unperturbed by the widening chasm between the rich and everyone else is what I like to call the lottery effect. Buying lottery tickets is clearly an irrational act — the odds are hugely stacked against us. But many millions of us do, because we see the powerful evidence that an ordinary person, someone just like us whose only qualifying act was to buy a ticket, wins our favorite lottery every week.
For many Americans, the nation’s rowdy form of capitalism is a lottery that has similarly bestowed fabulous rewards on the Everyman. The current leading exemplar of self-made billions is Facebook’s Mark Zuckerberg, and he may soon be outstripped by the even more instant cyber-star Andrew Mason, the founder of Groupon.
But the problem with lotteries is that there are only a few winners. That is the story the numbers tell us about American capitalism today — and unless that underlying reality changes, at some point all those folks who think they already live in Sweden will realize they live in a winner-take-all society, and that most of us aren’t winning.
via The Lottery Mentality – Room for Debate – NYTimes.com.

When someone claims causality for one thing it might be useful to look at something closely related to understand if they move the same way to make it clear which among the possible choices would explain it.
 

March 23, 2011, 10:21 AM
The (Nature of) Shock Doctrine
Just a thought on market movements: you often see news stories confidently asserting that factor X was responsible for any given market movement. Serious observers rightly make fun of such stories; after all, how do they know? And it goes beyond funny to downright harmful when the stories assert supposed facts that actually serve some policy agenda. Lately we’ve seen that with regard to interest rates: again and again, upticks in US interest rates are asserted to be the result of debt fears, as evidence that the bond vigilantes have arrived.
But how can you place an interpretation on market movements? What’s the nature of the shock? One way to answer this question would be to ask the traders — although my sense is that really good traders have intuitions that generally go beyond their ability to articulate reasons. Another approach, however, is to look at more than one asset price; if you have a story about what’s driving one price, that story should make sense for the other, too.
Many years ago, when the Fed still claimed to pay attention to targets for monetary aggregates, there was an observable pattern: whenever the money supply came in higher than expected, interest rates rose. But there were two interpretations. Some people said that rates went up because markets believed rising money supplies heralded future inflation; others, that rates rose because people expected the Fed to tighten to get the money supply back on target.
Jeff Frankel cut through this debate by pointing out that we could look at what happened to the exchange rate. In fact, high money numbers were associated with a rise, not a fall, in the dollar — and this meant that fears of Fed tightening, not fears of inflation, were the real story.
via The (Nature of) Shock Doctrine – NYTimes.com.

Kikita kaya ng malaki sa maynila ito (Will this make a killing in Manila )?
Read Market Manila’s take on the possible economics of these devices. This way of thinking is promising.
 

Turns out the ATMs were an abbreviation for “Automatic Tubig Machine” or Automatic Water Machines! I took these photos a year ago, but forgot to post them. For one peso (2.4 U.S. cents) put into the “ATM”, you get 250ml of chilled purified water straight into either your recyclable container, or on the dark side, a cheap plastic bag that inevitably ends up polluting the planet. I wonder who dreamt that up?! And whoever did, along with many other copycats, are making a KILLING with them.
via Market Manila – Pinoy “ATM” 🙂 – General.

 
The offending syllable is right in the titles of two of the songs, deployed as an imperative by Cee Lo Green and as an adverbial participle by Pink. Mr. Green’s song was nominated for a Grammy Award, where its televised listing was coyly phrased, “The Song Also Known as ‘Forget You.’ ” Pink’s song, a self-help power ballad assuring insecure people that they don’t have to be (emphatically) perfect, also has a cuss-free version. There’s an airplay-ready variant of Enrique Iglesias’s hardcore hit discreetly titled “Tonight (I’m Lovin’ You).” But it’s the bluntness of his original chorus — which is prefaced by Mr. Iglesias singing, “I don’t mean to be rude” — that got the song noticed in the first place.
Of course he means to be rude! Pop songs fight to be noticed in an arms race of sentiments, gimmicks, sonic manipulation and promotional strategies. For Mr. Iglesias, trading pop’s usual affectionate euphemism for the bluntly physical verb couldn’t be more calculated; as a pop lover-boy, Mr. Iglesias decided that the crudity would turn on more fans than it would drive away. It’s a cheap shot that worked. (He has also released a video clip set in a strip club, complete with topless women in a cage.)
via From Cee Lo Green to Pink, Speaking the Unspeakable – NYTimes.com.