…now get a load of the Efficient Majors Hypothesis, or EMH. A sample:
EUGENE: All right, it’s worth asking what those fees for active management have actually delivered to the investors. I ran a statistical analysis on the National League all the way back to 1876. Do you know that in every single season, when you rank the teams by their records, fully one-half of them fall below the median team? What the heck are these owners paying for?
It’s a satirical piece, of course, but by the end I had half-convinced myself.
There is a lot to say about Janet Yellen’s remarks today about the Fed’s latest meeting, but I wanted to highlight something that always bothers me in these affairs. From the Bloomberg article:
Yellen and her Fed colleagues are debating how much longer to keep interest rates near zero as they get closer to their goals for full employment and stable prices. Some officials have said dropping the “considerable time” pledge would give the Fed more flexibility to react to the latest economic data.
Even so, “Economic conditions may for some time may warrant” a federal funds rate that’s below normal levels, even when data are near the Fed’s objectives for maximum employment and low and stable inflation, Yellen said.
The personal consumption expenditures index (SPX), the central bank’s preferred price gauge, increased 1.6 percent in July from a year earlier and hasn’t exceeded the Fed’s 2 percent objective since March 2012. [Bold added.]
In the above excerpt, I’ve highlighted the annoying tendency for analysts to refer to a 2% annual rise in (some measure of) prices as “stable prices.” No, that’s a stable *rise* in prices.
This isn’t an isolated thing. I can’t find it now, but a couple of years ago I quoted some big gun economist (it may have been Christina Romer, but I’m not sure) complaining that price inflation below 2% threatened price stability.
Note: At a constant price inflation rate of 2% annually, the dollar would lose half of its purchasing power in 35 years. That’s not “stable prices.”
My latest article at LibertyChat. An excerpt:
There was another example of this pattern very soon afterwards in the movie. Jackie Robinson’s team (he was not yet with the Dodgers organization) was traveling on a bus and stopped for gas. He got off the bus and approached the bathroom at the station, but the white guy who had just started pumping the gas said, “Hey boy, you know you can’t go in there.” After a moment of deliberation, Robinson announced to his team, “C’mon fellas, we’re leaving. We’ll buy our 99 gallons of gas someplace else.” (These aren’t exact quotes, I’m just paraphrasing from memory.) Balancing his desire to make a big sale against his desire to uphold local customs of segregation, the white guy at the pump relents and tells Robinson he can use the bathroom, as he resumes filling up the bus with gas.
==> Tyler Cowen elicits outrage from his readers (in the comments) when he writes, “[T]his story will not end with a “no” vote from Scotland, unless it is strongly decisive. Regardless of the result, allowing this referendum to go forward likely will go down as one of the greatest unforced errors in recent times.”
==> I’ll almost certainly be writing something on this topic, but in the meantime, here is Bryan Caplan’s interview about “open borders” (make sure you see his point about Spanish-speaking immigrants), and here is Gene Callahan giving a good jab on Caplan’s opening rhetorical move, as well as a longer post using Hayekian dispersed knowledge to justify a “non-open border.” (I am putting these terms in quotation marks because the writers in question don’t really mean what the words might imply.)
==> Silas Barta was thinking about women killing their husbands before you even knew the village had a queen.
==> Scott Sumner has a good post on why ending slavery made the U.S. richer. I think Scott also missed a huge point: The (so-called) Civil War itself was very destructive, and so his empirical arguments are even stronger (I think?).
==> There’s something oh so special when Paul Krugman writes, “Nor are zombies and cockroaches the only kinds of bad faith; the worst, as far as I’m concerned, involves refusing to take responsibility for your actual statements.” I’ll just leave this here.
OK, I opened Pandora’s Box with this post, so I might as well close it. (You’ll have to read the post and skim the comments to get up to speed.)
In the below, I’ll walk through the analysis for the village having a total of one, two, and three couples. (Note that the couples have very convenient names.) You’ll see the pattern I hope, and then realize why the solution works for all 100 wives killing their husbands on Day 100 in the original version.
VILLAGE HAS 1 COUPLE ==> ALL MEN DIE ON DAY 1
Alice doesn’t know that Alan has been unfaithful to her. (Don’t ask me how he did it if she’s the only woman.) So clearly, Alice won’t kill Alan. But then the Queen says, “At least one husband has cheated in this village.” Alice realizes the Queen must be referring to Alan, so she kills him on Day 1.
VILLAGE HAS 2 COUPLES ==> ALL MEN DIE ON DAY 2
Alice knows that Bill cheated on Betty, and Betty knows that Alan cheated on Alice. However, nobody kills anybody, because neither wife is sure that her own husband has cheated. Then the Queen says, “At least one husband has cheated in this village.” Now at first, the wives are still uncertain. For example, Alice can’t kill Alan, because for all she knows, Bill is the cheater to whom the Queen refers. However, if Day 1 comes and goes, now Alice *can* be sure. She reasons, “If Betty never saw Alan cheating on me, then the Queen’s announcement would make Betty sure that Bill had been the cheater. So Betty would have killed Bill on Day 1. However, since Betty did *not* kill Bill on Day 1, I can conclude that Betty saw Alan cheat on me.” Therefore, on Day 2, Alice kills Alan. By similar logic, Betty kills Bill.
VILLAGE HAS 3 COUPLES ==> ALL MEN DIE ON DAY 3
Alice knows that Bill and Charlie cheated, Betty knows that Alan and Charlie cheated, and Cindy knows that Alan and Bill cheated. Further, Alice knows that Betty knows that Charlie cheated. However, Alice does NOT know that Betty knows that Cindy knows that Bill OR Alan cheated. In other words, Alice cannot be sure that Betty knows that Cindy knows “at least one husband in this village has cheated.” In still other words, Alice realizes it is possible that Betty believes that Cindy has observed 0 instances of adultery.
Clearly, without the Queen, nobody has any reason to kill anyone.
However, things change once the Queen says, “At least one man in this village has cheated.” If there a woman who started out having observed 0 instances of adultery, then that woman would kill her husband during Day 1. Thus, when Day 1 comes and goes with no murder–AFTER the Queen’s announcement–it changes Alice’s knowledge. In addition to everything she had directly observed, and then deduced, at the outset, Alice can now conclude, “Betty knows that Cindy has observed at least one instance of adultery.” To reiterate, this is new knowledge, and shows that the Queen’s announcement, plus the subsequent actions, adds new knowledge.
However, after Day 1 has passed, there is still not enough for any woman to kill her husband. For example, Alice still can’t be sure that her own husband, Alan, has cheated on her. Alice knows that Betty and Cindy have each observed at least one act of adultery (otherwise they would have killed their husbands on Day 1), but perhaps Betty merely saw Charlie, and Cindy merely saw Bill. Notice, though, that if Betty ONLY saw Charlie, then Betty would kill Bill during Day 2 (not Day 1). That’s because Betty would know by Day 2 that Cindy had observed at least one act of cheating, and so–if Betty had never witnessed Alan cheating–then she would deduce that Cindy must have seen Bill cheating.
But if Day 2 comes and goes as well, then Alice realizes that Betty must have observed Alan cheating; this is why Betty couldn’t be confident in killing Bill on Day 2. Thus by Day 3, Alice realizes Alan cheated and kills him. The other wives go through similar reasoning, and kill Bill and Charlie on Day 3 as well.
By similar reasoning, if there are 100 couples, nobody makes a move until Day 100, at which time all 100 husbands see the end.
I’m not making this up, somebody is writing up a post on my contributions to economic education. He even asked me for some of my favorite quotations on economics in general, and energy economics in particular. So, uh, if any of you have any candidates of “great Murphy quotes,” let me know. I’m arrogant, but this is making me feel funny.
I also manage to contradict Tyler Cowen in this one. There’s a lot going on, it’s a jumbled mess. Just click through if you’re interested.
==> I point out Krugman’s extremely misleading commentary on the fast food strike.
==> You guys all forgot about Human Action’s 65th birthday, didn’t you?
==> This is a neat puzzle about the implications of common knowledge etc.
==> I’m not going to write on it anymore, but a comparable perspective on plea bargains that someone shared in the comments here (sorry I forgot who did).
==> Hey did you realize that deflation-ridden Japan has had faster per capita real GDP growth than the US or UK since 2008? David Andolfatto has some interesting remarks in this post, which Scott Sumner linked from EconLog. (Yes yes, I remember Andolfatto said unkind things about Ron Paul. I have a good memory kids.)