welcome to 2008, the year of free....

The recent article of note in The Economist by Chris Anderson explains the merits of giving it away...

...What is getting too cheap to meter is processing power, storage, bandwidth and all the other enabling technologies of the digital revolution. Thanks to the exponential doublings of Moore’s Law and its equivalents for hard drives and communications, the cost of a given unit of computation, storage or transmission is inexorably dropping towards zero.
...a Caltech professor named Carver Mead.... the late 1970s,... was reflecting on the amazing learning curve that the combination of quantum mechanics and information science had started on the surface of silicon wafers. Like Moore before him, he could see that the 18-month doublings in performance would continue to stretch out as far as anyone could see. But he went one step further to consider what that implied about computers. He realised that we should start “wasting” them.
Waste is a dirty word, and no more so than in the 1970s and 1980s. An entire generation of computer professionals had come to power doing just the opposite. In the glass-walled computer facilities of the mainframe era, they exercised their power in deciding whose programs should be allowed to run on the expensive computing machines.
Among Mead’s disciples was Alan Kay, working at Xerox’s Palo Alto Research Centre. Rather than conserve transistors for core processing functions, he developed a computer that would frivolously throw them at such silly things as drawing icons, windows, pointers and even animations on the screen. The point of this profligate eye candy? It was ease of use for regular folks, a previously neglected market. Kay’s work became the inspiration for the Apple Macintosh, which changed the world by opening computing to the rest of us.
Today the same is happening in everything from bandwidth to storage. The learning curves of technology cut prices at a rate never before seen. The cost of storing or transmitting a kilobyte of data really is now too cheap to meter. Soon the same will be true for a megabyte, and then soon after that a terabyte. And the internet touches nearly as much of our economy as electricity did when Lewis Strauss issued his prediction.

visualising words

visuwords, a very useful dictionary or thesaurus

making forecast when you don't know everything?

It’s tough to make predictions, especially about future. Yogi Berra
Th recent issue of The Economist reviews the book by Mr Frydman (Here is the first chapter of the book).

“THE forecaster is like an entrepreneur,.. he uses quantitative methods, but he also studies history, and relies on intuition and judgment. He is not a scientist.” ...this fact has been lost on contemporary economists, who continue to pursue the perfect economic forecast despite abundant evidence that it does not, and cannot, exist. They dismiss their repeated failures in much the same way that self-styled reformers in ...Poland once insisted that socialism was great, but just needed to be carried out better.
In the economics profession the leading inheritors of this communistic mindset... are the proponents of rational-expectations theory, which assumes that the economy and the individuals within it act with perfect foresight. Yet.. equally critical of the more fashionable school of behavioural economics, or at least those of its practitioners who claim that although people are irrational, their irrationality can be modelled so precisely that the future can be forecast with great precision.
In a new book, “Imperfect Knowledge Economics”....Mr Frydman sets out an alternative approach to prediction, in which the forecaster recognises that his model will inevitably be less than perfect. ..

There is nothing new in economics about the idea that people must make decisions based on imperfect knowledge. Frank Knight...,“Knightian uncertainty”..., ... noted that most business decisions involve a step into an unknown that is to some degree unmeasurable. ...Keynes observed that “human decisions affecting the future, whether personal or political or economic, cannot depend on strict mathematical expectation, since the basis for making such calculations does not exist.”
While reflecting these insights, imperfect-knowledge economics still sees a role for economic theory in forecasting. ....argue that, to be useful, economic forecasting models should be based on qualitative regularities in the way that market participants respond to new information—that is, patterns of behaviour that are observable and somewhat predictable. Though not perfect, these will often give a better clue to the future than no model at all, or models based on rational expectations or behavioural economics.
....bulls and bears, for example. Their analysis of the fundamentals leads them to opposite conclusions about where prices are going. But there is evidence that the way they revise their forecasts in the light of price movements may share common features, such as a tendency to become more risk averse the further the price of an asset moves away from what is generally believed to be its long-term fundamental value. This may work eventually to return the asset price to its fundamental value, though it may also cause it to deviate significantly from this value for long periods of time. This approach will not generate the “sharp predictions” beloved of most contemporary economists—which are doomed by imperfect knowledge to be wrong. But it will provide a broad sense of the state of play, which an enterprising forecaster can usefully combine with experience, intuition and so forth when making a decision.
...Frydman... examine the persistent failure of economists to predict movements in the currency markets. According to Kenneth Rogoff, ..., “it is stunning how hard it is to explain movements in exchange rates.” All the models based on rational expectations now say that, on fundamentals, the euro is overvalued against the dollar, he reckons. But does that mean the dollar will soon rise? Mr Rogoff says he has no idea.
In rational-expectations theory, a range of variables including inflation, interest rates and growth should have a predictable impact on currency movements, but in practice this theory has proved less useful for forecasting than tossing a coin. Among rational economists, the debate is over “whether the glass is 5% full or 95% empty,” he says. Only over longer periods—say two to four years—is there any evidence of exchange-rate predictability, which is far too long to be useful to traders or policymakers.
By contrast, the model developed by Messrs Frydman and Goldman, which assumes imperfect knowledge and learning, does significantly better than tossing a coin, although it is by no means right all the time. Mr Rogoff describes this work as innovative. Now, ... it must demonstrate that it can consistently maintain explanatory power in the future and over a range of markets, he believes.
Maths lesson

Messrs Frydman and Goldberg are now turning their attention to the troubled subprime-mortgage markets, and the performance of the rating agencies. The rating agencies,...have generally been better at rating corporate bonds than rating asset-backed collateralised-debt obligations. Why? One reason is that the rating agencies used both a mathematical model and the judgment of their in-house specialists when forecasting the default probabilities of corporate bonds; on subprime-related securities, they could only use mathematical models, not least because the instruments were so new. “They had no experience, no intuition, no entrepreneur,” he says. That is “empirical proof that relying on models alone is not wise.”

the oil map

Moebius Transformations Explained

A short film depicting the beauty of Moebius Transformations in mathematics. The movie shows how moving to a higher dimension can make the transformations easier to understand.The full version is available at http://www.ima.umn.edu/~arnold/moebius/

lies economists told...

Foreign Policy looks at five ways in which the world economy is pushing economists to think outside the box.

High productivity and low unemployment make us all better off
The orthodoxy: Economic theory does not guarantee that wages will reflect productivity in absolute terms, but most economists think that productivity-spurred growth will eventually increase everyone’s pie. Northwestern University economics professor Robert J. Gordon characterizes this view as, “productivity is the seed that creates the flower of a nation’s standard of living.”
Heretical facts: Despite six years of sustained growth, with unemployment averaging around 5 percent, the median U.S. worker is not faring well. Since 2001, middle-class Americans have seen their pay drop by 4 percent, although labor productivity went up by 15 percent during the same period.
Moral: Economists are still scratching their heads. Some labor economists point an accusatory finger at immigration. More of the foreign newcomers now hold advanced degrees, these economists argue, and native white-collar workers are no longer safe from cheap competition. Other economists point out that since China, India, and Russia joined the free market, the global supply of labor, including engineers and scientists, has quadrupled, pushing down wages. On the other side of the argument, the Peterson Institute for International Economics points out that globalization yields the United States around $1 trillion annually—or roughly $9,000 per year for every American household. Globalization skeptics, however, say that money is not making it into people’s pockets.

It’s hard to grow without good banks and private property
The orthodoxy: Economic growth requires a functioning banking system, solid property rights, and minimal state interference in the economy.
Heretical facts: One word: China. The gross domestic product of this Asian giant has increased sixfold between 1984 and 2004, with a stunning average growth of roughly 9 percent since 2005. Yet only in 2007 did the protection of private property acquire equal footing in Chinese property law. Moreover, experts still deem China’s banking system to be shaky despite a major overhaul that started in 2002. Harvard political economist Regina Abrami observes that the state has played a key role in the economic takeoff of the Chinese dragon. China’s township and village-owned enterprises—a curious mix of private initiative and government incentives—were for years at the heart of the country’s economic renaissance. And despite limited access to bank credit, China’s private sector has also thrived.
Moral: Growth happens—even when the market institutions that economists deem essential are not fully in place. Will China’s growth last? Nobody knows for sure, but many analysts have been arguing for some time that—as World Bank economic advisor Harry Broadman puts it—“the chickens could come home to roost, especially in the unreformed large, backbone, state-owned enterprises and banks,” precisely because of weaknesses in China’s underlying market institutions. For Broadman, the large scale of China’s internal market has been a key factor that has allowed the economy to prosper despite “fuzzy property rights.”

Capital must always be let free to flow
The orthodoxy: It keeps changing. Under the global financial architecture put in place soon after World War II, governments and multilateral institutions were to put some checks on where the money was going. But by the late 1950s, advocates of unfettered capital mobility were winning the argument, and under the so-called “Washington Consensus,” the U.S. Treasury Department and the International Monetary Fund recommended that developing countries lift restrictions over international movements of money.
Heretical facts: The Asian financial crisis. Starting in 1996, overvalued real estate prices collapsed in Thailand, spurring a devaluation of the Thai currency. Soon enough, the contagion spread to nearby Malaysia, Indonesia, and South Korea. Capital flight triggered painful recessions in most of East Asia. Only China and Taiwan, which had maintained tight capital controls, weathered the crisis unscathed. Malaysia split the difference by introducing capital controls in 1998, a last-minute attempt to avoid the worst.
Moral: Even though the jury is still out over the success of the Malaysian experiment, the Asian financial crisis was like a cold shower for enthusiasts of free capital mobility. Most economists now agree that letting the money flow is good, but only when the proper institutions and regulations are in place.

The euro will never work
The orthodoxy: When, in 1992, 12 European heads of state gathered in Maastricht, the Netherlands, to announce the coming of a unified European currency, more than a few economists scorned them. History, wrote Nobel Prize winner Milton Friedman in the Wall Street Journal in 1995, had repeatedly shown that fixed exchange rates are simply a bad idea for “a group of large countries with independent political systems and independent national politics.”
Heretical facts: In January 2002, the euro made its entrance on the world stage and into the wallets of the citizens of 13 European countries. Five years later, it is still alive and healthy—stronger than the U.S. dollar, in fact. And despite grumbling from countries like Italy, where policymakers wish they could still boost exports by devaluing the old lira, nobody is seriously considering going back to single national currencies.
Moral: In a sense, the critics were right. One size does not fit all, and Europeans keep quarreling about where their centralized monetary policy should go. But the critics also missed the point. As Harvard political economist Rawi Abdelal explains, “The euro was not an economically motivated enterprise; its reasons to be were and are mostly political.”

Japan—no wait, China—is going to take over the world economy
The orthodoxy: Japan’s rise heralded the United States’ decline. In the mid-1980s, many economists looked at the Japanese economy—with its current account surplus, rising exports led by heavy car sales, and strong currency—and predicted dire consequences for Uncle Sam. Western analysts fretted over the United States’ ever-widening current account imbalance, decried the laziness of the U.S. worker, and lauded the efficient work ethic of the Japanese.
Heretical facts: As of 2007, the United States is still the greatest capitalist economy in the world, with a gross domestic product roughly three times as big as that of Japan, the world’s second largest economy. True, Japan’s car industry is still a rising star: Toyota briefly overtook General Motors a few months ago as the world’s largest automaker. Yet, as Newsweek columnist Fareed Zakaria put it, the Japanese “ran into a brick wall.” After more than 15 years of economic stagnation, repeated currency deflations, and record-high unemployment, the Japanese economy is just now coming out of the doldrums.
Moral: A rising tide lifts all boats. If Japan didn’t put Uncle Sam out of business, maybe China won’t, either. Martin Baily, a senior fellow at the Peterson Institute for International Economics, notes that for every Chinese worker, there is also a Chinese consumer joining the international market. What’s more, as Chinese salaries inevitably rise, it will become harder for Chinese companies to undercut the competition.

laws of software development

Here is the link:
Amdahl’s Law Gene Amdahl

The speedup gained from running a program on a parallel computer is greatly limited by the fraction of that program that can’t be parallelized.
Augustine’s Second Law of Socioscience Norman Augustine
For every scientific (or engineering) action, there is an equal and opposite social reaction.
Brooks’ Law Fred Brooks
Adding manpower to a late software project makes it later.
Clarke’s First Law Arthur C. Clarke
When a distinguished but elderly scientist states that something is possible he is almost certainly right. When he states that something is impossible, he is very probably wrong.
Clarke’s Second Law Arthur C. Clarke
The only way of discovering the limits of the possible is to venture a little way past them into the impossible.
Clarke’s Third Law Arthur C. Clarke
Any sufficiently advanced technology is indistinguishable from magic.
Conway’s Law Melvin Conway
Any piece of software reflects the organizational structure that produced it.
Cope’s Rule Edward Drinker Cope
There is a general tendency toward size increase in evolution.
Dilbert Principle Scott Adams
The most ineffective workers are systematically moved to the place where they can do the least damage: management.

Ellison’s Law of Cryptography and Usability Carl Ellison
The userbase for strong cryptography declines by half with every additional keystroke or mouseclick required to make it work.
Ellison’s Law of Data Larry Ellison
Once the business data have been centralized and integrated, the value of the database is greater than the sum of the preexisting parts.
The Law of False Alerts George Spafford
As the rate of erroneous alerts increases, operator reliance, or belief, in subsequent warnings decreases.
Fisher’s Fundamental Theorem R. A. Fisher
The more highly adapted an organism becomes, the less adaptable it is to any new change.
Fitts’ Law Paul Fitts
The time to acquire a target is a function of the distance to and the size of the target.
Flon’s Axiom Lawrence Flon
There does not now, nor will there ever, exist a programming language in which it is the least bit hard to write bad programs.
Gilder’s Law George Gilder
Bandwidth grows at least three times faster than computer power.
Godwin’s Law Mike Godwin
As an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches one.
Grosch’s Law Herb Grosch
The cost of computing systems increases as the square root of the computational power of the systems.
Hartree’s Law Douglas Hartree
Whatever the state of a project, the time a project-leader will estimate for completion is constant.
Heisenbug Uncertainty Principle Jim Gray
Most production software bugs are soft: they go away when you look at them.
Hick’s Law William Edmund Hick
The time to make a decision is a function of the possible choices he or she has.
Hoare’s Law of Large Programs C. A. R. Hoare
Inside every large problem is a small problem struggling to get out.
Hofstadter’s Law Douglas Hofstadter
A task always takes longer than you expect, even when you take into account Hofstadter’s Law.
Jakob’s Law of the Internet User Experience Jakob Nielsen
Users spend most of their time on other sites. This means that users prefer your site to work the same way as all the other sites they already know.
Joy’s Law Bill Joy
smart(employees) = log(employees), or “No matter who you are, most of the smartest people work for someone else.”
Kerckhoffs’ Principle Auguste Kerckhoffs
In cryptography, a system should be secure even if everything about the system, except for a small piece of information — the key — is public knowledge.
Linus’ Law Eric S. Raymond, who named it after Linus Torvalds
Given enough eyeballs, all bugs are shallow.
Lister’s Law Timothy Lister
People under time pressure don’t think faster.
Metcalfe’s Law Robert Metcalfe
In network theory, the value of a system grows as approximately the square of the number of users of the system.
Moore’s Law Gordon Moore
The number of transistors on an integrated circuit will double in about 18 months.
Murphy’s Law Captain Edward A. Murphy
If there are two or more ways to do something, and one of those ways can result in a catastrophe, then someone will do it.
Nathan’s First Law Nathan Myhrvold
Software is a gas; it expands to fill its container.
Ninety-ninety Law Tom Cargill
The first 90% of the code accounts for the first 90% of the development time. The remaining 10% of the code accounts for the other 90% of the development time.
Occam’s Razor William of Occam
The explanation requiring the fewest assumptions is most likely to be correct.
Osborn’s Law Don Osborn
Variables won’t; constants aren’t.
Postel’s Law (the second clause of the Robustness Principle) Jon Postel
Be conservative in what you send, liberal in what you accept.
Pareto Principle (a.k.a. “The 80-20 Rule”)
Suggested by Joseph Juran, named after Vilifredo Pareto
For many phenomena, 80% of consequences stem from 20% of the causes.
Parkinson’s Law C. Northcote Parkinson
Work expands so as to fill the time available for its completion.
Pesticide Paradox Bruce Beizer
Every method you use to prevent or find bugs leaves a residue of subtler bugs against which those methods are ineffectual.
The Peter Principle Laurence J. Peter
In a hierarchy, every employee tends to rise to his level of incompetence.
Reed’s Law David P. Reed
The utility of large networks, particularly social networks, scales exponentially with the size of the network.
Rock’s Law Arthur Rock
The cost of a semiconductor chip fabrication plant doubles every four years.
Sixty-sixty Rule Robert Glass
Sixty percent of software’s dollar is spent on maintenance, and sixty percent of that maintenance is enhancement.
Spector’s Law Lincoln Spector
The time it takes your favorite application to complete a given task doubles with each new revision.
Spafford’s Adoption Rule George Spafford
For just about any technology, be it an operating system, application or network, when a sufficient level of adoption is reached, that technology then becomes a threat vector.
Sturgeon’s Revelation Theodore Sturgeon
Ninety percent of everything is crud.
Tesler’s Law of Conservation as Complexity Larry Tesler
You cannot reduce the complexity of a given task beyond a certain point. Once you’ve reached that point, you can only shift the burden around.
Weibull’s Power Law Waloddi Weibull
The logarithm of failure rates increases linearly with the logarithm of age.
Wirth’s Law Niklaus Wirth
Software gets slower faster than hardware gets faster.
Zawinski’s Law Jamie Zawinski
Every program attempts to expand until it can read mail. Those programs which cannot so expand are replaced by ones which can.

10 politically incorrect truths about human nature

Why most suicide bombers are Muslim, beautiful people have more daughters, humans are naturally polygamous, sexual harassment isn't sexist, and blonds are more attractive. Alan S. Miller and Satoshi Kanazawa have the answer.

1. Men like blond bombshells (and women want to look like them) Long before TV—in 15th- and 16th- century Italy, and possibly two millennia ago—women were dying their hair blond. A recent study shows that in Iran, where exposure to Western media and culture is limited, women are actually more concerned with their body image, and want to lose more weight, than their American counterparts. It is difficult to ascribe the preferences and desires of women in 15th-century Italy and 21st-century Iran to socialization by media.
   Women's desire to look like Barbie—young with small waist, large breasts, long blond hair, and blue eyes—is a direct, realistic, and sensible response to the desire of men to mate with women who look like her. There is evolutionary logic behind each of these features.
   Men prefer young women in part because they tend to be healthier than older women. One accurate indicator of health is physical attractiveness; another is hair. Healthy women have lustrous, shiny hair, whereas the hair of sickly people loses its luster. Because hair grows slowly, shoulder-length hair reveals several years of a woman's health status.
   Men also have a universal preference for women with a low waist-to-hip ratio. They are healthier and more fertile than other women; they have an easier time conceiving a child and do so at earlier ages because they have larger amounts of essential reproductive hormones. Thus men are unconsciously seeking healthier and more fertile women when they seek women with small waists.
   Until very recently, it was a mystery to evolutionary psychology why men prefer women with large breasts, since the size of a woman's breasts has no relationship to her ability to lactate. But Harvard anthropologist Frank Marlowe contends that larger, and hence heavier, breasts sag more conspicuously with age than do smaller breasts. Thus they make it easier for men to judge a woman's age (and her reproductive value) by sight—suggesting why men find women with large breasts more attractive.
   Alternatively, men may prefer women with large breasts for the same reason they prefer women with small waists. A new study of Polish women shows that women with large breasts and tight waists have the greatest fecundity, indicated by their levels of two reproductive hormones (estradiol and progesterone).
   Blond hair is unique in that it changes dramatically with age. Typically, young girls with light blond hair become women with brown hair. Thus, men who prefer to mate with blond women are unconsciously attempting to mate with younger (and hence, on average, healthier and more fecund) women. It is no coincidence that blond hair evolved in Scandinavia and northern Europe, probably as an alternative means for women to advertise their youth, as their bodies were concealed under heavy clothing.
   Women with blue eyes should not be any different from those with green or brown eyes. Yet preference for blue eyes seems both universal and undeniable—in males as well as females. One explanation is that the human pupil dilates when an individual is exposed to something that she likes. For instance, the pupils of women and infants (but not men) spontaneously dilate when they see babies. Pupil dilation is an honest indicator of interest and attraction. And the size of the pupil is easiest to determine in blue eyes. Blue-eyed people are considered attractive as potential mates because it is easiest to determine whether they are interested in us or not.
   The irony is that none of the above is true any longer. Through face-lifts, wigs, liposuction, surgical breast augmentation, hair dye, and color contact lenses, any woman, regardless of age, can have many of the key features that define ideal female beauty. And men fall for them. Men can cognitively understand that many blond women with firm, large breasts are not actually 15 years old, but they still find them attractive because their evolved psychological mechanisms are fooled by modern inventions that did not exist in the ancestral environment.
2. Humans are naturally polygamous The history of western civilization aside, humans are naturally polygamous. Polyandry (a marriage of one woman to many men) is very rare, but polygyny (the marriage of one man to many women) is widely practiced in human societies, even though Judeo-Christian traditions hold that monogamy is the only natural form of marriage. We know that humans have been polygynous throughout most of history because men are taller than women.
   Among primate and nonprimate species, the degree of polygyny highly correlates with the degree to which males of a species are larger than females. The more polygynous the species, the greater the size disparity between the sexes. Typically, human males are 10 percent taller and 20 percent heavier than females. This suggests that, throughout history, humans have been mildly polygynous.
   Relative to monogamy, polygyny creates greater fitness variance (the distance between the "winners" and the "losers" in the reproductive game) among males than among females because it allows a few males to monopolize all the females in the group. The greater fitness variance among males creates greater pressure for men to compete with each other for mates. Only big and tall males can win mating opportunities. Among pair-bonding species like humans, in which males and females stay together to raise their children, females also prefer to mate with big and tall males because they can provide better physical protection against predators and other males.
   In societies where rich men are much richer than poor men, women (and their children) are better off sharing the few wealthy men; one-half, one-quarter, or even one-tenth of a wealthy man is still better than an entire poor man. As George Bernard Shaw puts it, "The maternal instinct leads a woman to prefer a tenth share in a first-rate man to the exclusive possession of a third-rate one." Despite the fact that humans are naturally polygynous, most industrial societies are monogamous because men tend to be more or less equal in their resources compared with their ancestors in medieval times. (Inequality tends to increase as society advances in complexity from hunter-gatherer to advanced agrarian societies. Industrialization tends to decrease the level of inequality.)
3. Most women benefit from polygyny, while most men benefit from monogamy When there is resource inequality among men—the case in every human society—most women benefit from polygyny: women can share a wealthy man. Under monogamy, they are stuck with marrying a poorer man.
   The only exceptions are extremely desirable women. Under monogamy, they can monopolize the wealthiest men; under polygyny, they must share the men with other, less desirable women. However, the situation is exactly opposite for men. Monogamy guarantees that every man can find a wife. True, less desirable men can marry only less desirable women, but that's much better than not marrying anyone at all.
   Men in monogamous societies imagine they would be better off under polygyny. What they don't realize is that, for most men who are not extremely desirable, polygyny means no wife at all, or, if they are lucky, a wife who is much less desirable than one they could get under monogamy.
4. Most suicide bombers are Muslim Suicide missions are not always religiously motivated, but according to Oxford University sociologist Diego Gambetta, editor of Making Sense of Suicide Missions, when religion is involved, the attackers are always Muslim. Why? The surprising answer is that Muslim suicide bombing has nothing to do with Islam or the Quran (except for two lines). It has a lot to do with sex, or, in this case, the absence of sex.
   What distinguishes Islam from other major religions is that it tolerates polygyny. By allowing some men to monopolize all women and altogether excluding many men from reproductive opportunities, polygyny creates shortages of available women. If 50 percent of men have two wives each, then the other 50 percent don't get any wives at all.
   So polygyny increases competitive pressure on men, especially young men of low status. It therefore increases the likelihood that young men resort to violent means to gain access to mates. By doing so, they have little to lose and much to gain compared with men who already have wives. Across all societies, polygyny makes men violent, increasing crimes such as murder and rape, even after controlling for such obvious factors as economic development, economic inequality, population density, the level of democracy, and political factors in the region.
   However, polygyny itself is not a sufficient cause of suicide bombing. Societies in sub-Saharan Africa and the Caribbean are much more polygynous than the Muslim nations in the Middle East and North Africa. And they do have very high levels of violence. Sub-Saharan Africa suffers from a long history of continuous civil wars—but not suicide bombings.
   The other key ingredient is the promise of 72 virgins waiting in heaven for any martyr in Islam. The prospect of exclusive access to virgins may not be so appealing to anyone who has even one mate on earth, which strict monogamy virtually guarantees. However, the prospect is quite appealing to anyone who faces the bleak reality on earth of being a complete reproductive loser.
   It is the combination of polygyny and the promise of a large harem of virgins in heaven that motivates many young Muslim men to commit suicide bombings. Consistent with this explanation, all studies of suicide bombers indicate that they are significantly younger than not only the Muslim population in general but other (nonsuicidal) members of their own extreme political organizations like Hamas and Hezbollah. And nearly all suicide bombers are single.
5. Having sons reduces the likelihood of divorce Sociologists and demographers have discovered that couples who have at least one son face significantly less risk of divorce than couples who have only daughters. Why is this?
   Since a man's mate value is largely determined by his wealth, status, and power—whereas a woman's is largely determined by her youth and physical attractiveness—the father has to make sure that his son will inherit his wealth, status, and power, regardless of how much or how little of these resources he has. In contrast, there is relatively little that a father (or mother) can do to keep a daughter youthful or make her more physically attractive.
   The continued presence of (and investment by) the father is therefore important for the son, but not as crucial for the daughter. The presence of sons thus deters divorce and departure of the father from the family more than the presence of daughters, and this effect tends to be stronger among wealthy families.
6. Beautiful people have more daughters It is commonly believed that whether parents conceive a boy or a girl is up to random chance. Close, but not quite; it is largely up to chance. The normal sex ratio at birth is 105 boys for every 100 girls. But the sex ratio varies slightly in different circumstances and for different families. There are factors that subtly influence the sex of an offspring.
   One of the most celebrated principles in evolutionary biology, the Trivers-Willard hypothesis, states that wealthy parents of high status have more sons, while poor parents of low status have more daughters. This is because children generally inherit the wealth and social status of their parents. Throughout history, sons from wealthy families who would themselves become wealthy could expect to have a large number of wives, mistresses and concubines, and produce dozens or hundreds of children, whereas their equally wealthy sisters can have only so many children. So natural selection designs parents to have biased sex ratio at birth depending upon their economic circumstances—more boys if they are wealthy, more girls if they are poor. (The biological mechanism by which this occurs is not yet understood.)
   This hypothesis has been documented around the globe. American presidents, vice presidents, and cabinet secretaries have more sons than daughters. Poor Mukogodo herders in East Africa have more daughters than sons. Church parish records from the 17th and 18th centuries show that wealthy landowners in Leezen, Germany, had more sons than daughters, while farm laborers and tradesmen without property had more daughters than sons. In a survey of respondents from 46 nations, wealthy individuals are more likely to indicate a preference for sons if they could only have one child, whereas less wealthy individuals are more likely to indicate a preference for daughters.
   The generalized Trivers-Willard hypothesis goes beyond a family's wealth and status: If parents have any traits that they can pass on to their children and that are better for sons than for daughters, then they will have more boys. Conversely, if parents have any traits that they can pass on to their children and that are better for daughters, they will have more girls.
   Physical attractiveness, while a universally positive quality, contributes even more to women's reproductive success than to men's. The generalized hypothesis would therefore predict that physically attractive parents should have more daughters than sons. Once again, this is the case. Americans who are rated "very attractive" have a 56 percent chance of having a daughter for their first child, compared with 48 percent for everyone else.
7. What Bill Gates and Paul McCartney have in common with criminals For nearly a quarter of a century, criminologists have known about the "age-crime curve." In every society at all historical times, the tendency to commit crimes and other risk-taking behavior rapidly increases in early adolescence, peaks in late adolescence and early adulthood, rapidly decreases throughout the 20s and 30s, and levels off in middle age.
   This curve is not limited to crime. The same age profile characterizes every quantifiable human behavior that is public (i.e., perceived by many potential mates) and costly (i.e., not affordable by all sexual competitors). The relationship between age and productivity among male jazz musicians, male painters, male writers, and male scientists—which might be called the "age-genius curve"—is essentially the same as the age-crime curve. Their productivity—the expressions of their genius—quickly peaks in early adulthood, and then equally quickly declines throughout adulthood. The age-genius curve among their female counterparts is much less pronounced; it does not peak or vary as much as a function of age.
   Paul McCartney has not written a hit song in years, and now spends much of his time painting. Bill Gates is now a respectable businessman and philanthropist, and is no longer a computer whiz kid. J.D. Salinger now lives as a total recluse and has not published anything in more than three decades. Orson Welles was a mere 26 when he wrote, produced, directed, and starred in Citizen Kane.
   A single theory can explain the productivity of both creative geniuses and criminals over the life course: Both crime and genius are expressions of young men's competitive desires, whose ultimate function in the ancestral environment would have been to increase reproductive success.
   In the physical competition for mates, those who are competitive may act violently toward their male rivals. Men who are less inclined toward crime and violence may express their competitiveness through their creative activities.
   The cost of competition, however, rises dramatically when a man has children, when his energies and resources are put to better use protecting and investing in them. The birth of the first child usually occurs several years after puberty because men need some time to accumulate sufficient resources and attain sufficient status to attract their first mate. There is therefore a gap of several years between the rapid rise in the benefits of competition and similarly rapid rise in its costs. Productivity rapidly declines in late adulthood as the costs of competition rise and cancel its benefits.
   These calculations have been performed by natural and sexual selection, so to speak, which then equips male brains with a psychological mechanism to incline them to be increasingly competitive immediately after puberty and make them less competitive right after the birth of their first child. Men simply do not feel like acting violently, stealing, or conducting additional scientific experiments, or they just want to settle down after the birth of their child but they do not know exactly why.
   The similarity between Bill Gates, Paul McCartney, and criminals—in fact, among all men throughout evolutionary history—points to an important concept in evolutionary biology: female choice.
   Women often say no to men. Men have had to conquer foreign lands, win battles and wars, compose symphonies, author books, write sonnets, paint cathedral ceilings, make scientific discoveries, play in rock bands, and write new computer software in order to impress women so that they will agree to have sex with them. Men have built (and destroyed) civilization in order to impress women, so that they might say yes.
8. The midlife crisis is a myth—sort of Many believe that men go through a midlife crisis when they are in middle age. Not quite. Many middle-aged men do go through midlife crises, but it's not because they are middle-aged. It's because their wives are. From the evolutionary psychological perspective, a man's midlife crisis is precipitated by his wife's imminent menopause and end of her reproductive career, and thus his renewed need to attract younger women. Accordingly, a 50-year-old man married to a 25-year-old woman would not go through a midlife crisis, while a 25-year-old man married to a 50-year-old woman would, just like a more typical 50-year-old man married to a 50-year-old woman. It's not his midlife that matters; it's hers. When he buys a shiny-red sports car, he's not trying to regain his youth; he's trying to attract young women to replace his menopausal wife by trumpeting his flash and cash.
9. It's natural for politicians to risk everything for an affair (but only if they're male) On the morning of January 21, 1998, as Americans woke up to the stunning allegation that President Bill Clinton had had an affair with a 24-year-old White House intern, Darwinian historian Laura L. Betzig thought, "I told you so." Betzig points out that while powerful men throughout Western history have married monogamously (only one legal wife at a time), they have always mated polygynously (they had lovers, concubines, and female slaves). With their wives, they produced legitimate heirs; with the others, they produced bastards. Genes make no distinction between the two categories of children.
   As a result, powerful men of high status throughout human history attained very high reproductive success, leaving a large number of offspring (legitimate and otherwise), while countless poor men died mateless and childless. Moulay Ismail the Bloodthirsty, the last Sharifian emperor of Morocco, stands out quantitatively, having left more offspring—1,042—than anyone else on record, but he was by no means qualitatively different from other powerful men, like Bill Clinton.
   The question many asked in 1998—"Why on earth would the most powerful man in the world jeopardize his job for an affair with a young woman?"—is, from a Darwinian perspective, a silly one. Betzig's answer would be: "Why not?" Men strive to attain political power, consciously or unconsciously, in order to have reproductive access to a larger number of women. Reproductive access to women is the goal, political office but one means. To ask why the President of the United States would have a sexual encounter with a young woman is like asking why someone who worked very hard to earn a large sum of money would then spend it.
   What distinguishes Bill Clinton is not that he had extramarital affairs while in office—others have, more will; it would be a Darwinian puzzle if they did not—what distinguishes him is the fact that he got caught.
10. Men sexually harass women because they are not sexist An unfortunate consequence of the ever-growing number of women joining the labor force and working side by side with men is the increasing number of sexual harassment cases. Why must sexual harassment be a necessary consequence of the sexual integration of the workplace?
    Psychologist Kingsley R. Browne identifies two types of sexual harassment cases: the quid pro quo ("You must sleep with me if you want to keep your job or be promoted") and the "hostile environment" (the workplace is deemed too sexualized for workers to feel safe and comfortable). While feminists and social scientists tend to explain sexual harassment in terms of "patriarchy" and other ideologies, Browne locates the ultimate cause of both types of sexual harassment in sex differences in mating strategies.
    Studies demonstrate unequivocally that men are far more interested in short-term casual sex than women. In one now-classic study, 75 percent of undergraduate men approached by an attractive female stranger agreed to have sex with her; none of the women approached by an attractive male stranger did. Many men who would not date the stranger nonetheless agreed to have sex with her.
    The quid pro quo types of harassment are manifestations of men's greater desire for short-term casual sex and their willingness to use any available means to achieve that goal. Feminists often claim that sexual harassment is "not about sex but about power;" Browne contends it is both—men using power to get sex. "To say that it is only about power makes no more sense than saying that bank robbery is only about guns, not about money."
    Sexual harassment cases of the hostile-environment variety result from sex differences in what men and women perceive as "overly sexual" or "hostile" behavior. Many women legitimately complain that they have been subjected to abusive, intimidating, and degrading treatment by their male coworkers. Browne points out that long before women entered the labor force, men subjected each other to such abusive, intimidating, and degrading treatment.
    Abuse, intimidation, and degradation are all part of men's repertoire of tactics employed in competitive situations. In other words, men are not treating women differently from men—the definition of discrimination, under which sexual harassment legally falls—but the opposite: Men harass women precisely because they are not discriminating between men and women.It's natural for politicians to risk everything for an affair (but only if they're male)

who captures values in the making of iPod?

Here is Hal Varian's take on this.

Who makes the Apple iPod? ... It is not Apple. The company outsources the entire manufacture of the device to a number of Asian enterprises, among them Asustek, Inventec Appliances and Foxconn..... They only do final assembly.
Three researchers....— Greg Linden, Kenneth L. Kraemer and Jason Dedrick — applied some investigative cost accounting to this question...
To answer this question, let us look at the production process as a sequence of steps... At each step, inputs like computer chips and a bare circuit board are converted into outputs like an assembled circuit board. The difference between the cost of the inputs and the value of the outputs is the “value added” at that step, which can then be attributed to the country where that value was added.
The profit margin on generic parts like nuts and bolts is very low, since these items are produced in intensely competitive industries and can be manufactured anywhere. Hence, they add little to the final value of the iPod. More specialized parts, like the hard drives and controller chips, have much higher value added.
..authors’ estimates, the $73 Toshiba hard drive in the iPod contains about $54 in parts and labor. So the value that Toshiba added to the hard drive was $19 plus its own direct labor costs. This $19 is attributed to Japan since Toshiba is a Japanese company.
Continuing in this way, the researchers ... tried to calculate the value added at different stages of the production process and then assigned that value added to the country where the value was created. This isn’t ... easy ..., but ... it is quite clear that the largest share ... goes to ... the United States, particularly for units sold here.
...researchers estimated that $163 of the iPod’s $299 retail value ... was captured by American companies and workers, breaking it down to $75 for distribution and retail costs, $80 to Apple, and $8 to various domestic component makers. Japan contributed about $26 to the value added (mostly via the Toshiba disk drive), while Korea contributed less than $1.
The unaccounted-for parts and labor costs involved in making the iPod came to about $110. The authors hope to assign those labor costs to the appropriate countries, but ... that’s not so easy to do.
This ... illustrates the futility of summarizing such a complex manufacturing process by using conventional trade statistics. Even though Chinese workers contribute only about 1 percent of the value of the iPod, the export of a finished iPod to the United States directly contributes about $150 to our bilateral trade deficit with the Chinese.
Ultimately, there is no simple answer to who makes the iPod or where it is made. ... The real value of the iPod doesn’t lie in its parts or even in putting those parts together. The bulk of the iPod’s value is in the conception and design of the iPod. That is why Apple gets $80 for each of these video iPods it sells, which is by far the largest piece of value added in the entire supply chain.
Those clever folks at Apple figured out how to combine 451 mostly generic parts into a valuable product. They may not make the iPod, but they created it. In the end, that’s what really matters.

3 famous psychology studies that would have been illegal today:

Here is the link

1. Stanley Milgram's Obedience Studies
2. Stanford Prison Experiments
3. Little Albert Experiments

history map of europe: circa 1000 AD

Here is the link.

gender wage differential: politically (in)correct paper

In a recent paper, M Daniele Paserman citing the evidence from the professional tennis, concludes that female tennis players play more conservatively and commit more unforced errors when playing critical points. Does this explain the upper-echelons wage gap?

...have seen a dramatic increase in female labour force participation rates, and a considerable narrowing of the gender gap in wages....the gender gap persists – much of it due to gender disparities at the very high end of the wage distribution where women have made only limited inroads – the famous ‘glass ceiling’ of the upper echelons of academia, management, and prestigious professions.
...under-representation is not easily explained....hypotheses, ranging from discrimination to differences in preferences, have been offered. One particularly intriguing hypothesis ...women may be less effective than men in highly competitive environments – even if they are able to perform similarly in non-competitive environments. ...study the role of gender in responses to competitive pressure, using data from the world’s most prestigious tennis tournaments. This column discusses the results and suggests some implications for future research.
Why tennis?

....well-suited for statistical analysis. The outcomes are well-defined - the last shot of a point can only be one of three things: a winner, a forced error, or an unforced error. The competitive environment is also relatively easy to judge objectively – using things such as the tournament round, the two players’ rankings, and the number of points played. Moreover, the sport’s non-linear scoring structure introduces significant variation in the importance of individual points. It is often a small number of individual points at critical junctures that determine a match’s result. A break point in the latter stages of an evenly fought early set can be more decisive than a point in the early stages of the final set. It is exactly this substantial variation in the importance of points across and within matches that allows identification of a link between performance and the degree of competitive pressure.
...Technically, it is the probability that the player wins the match conditional on him or her winning the current point minus the probability that he or she wins the match conditional on him or her losing the current point. For example, consider the 2006 Wimbledon men’s final, Federer versus Nadal. At the outset of the match, the estimated probability of Federer winning the match was about 65.1%. Winning the first point (on Federer’s serve) would have raised his probability of winning the match to 65.7%; losing the point would have lowered his probability of winning the match to 63.6%. In my measure, the importance of that first point was 2.1%. For the sixth point of the second game where Nadal (serving) faced break-point at 30-40, winning the point would have raised Federer’s probability of winning to 75.8%, losing it would have lowered the probability to 67.1%. Hence, the importance was 8.8%. ..this was the ninth most important point of the entire 2006 Wimbledon final, despite coming so early in the match.
With this measure in hand,...the influence of a point’s importance on the frequency with which players commit unforced errors and on their style of play. Using data for nearly 42,000 points in 238 matches played in four recent Grand Slam tournaments,...find important gender difference. While men’s performance does not vary much depending on the importance of the point, women’s performance deteriorates significantly as points become more important.
Multinomial logit regressions that control for the abilities of each player, the round of the tournament, the duration of the match prior to playing the point, the tournament location, and whether the match was played on the tournament’s main court show that gender matters in players’ response to competitive pressure. Women are significantly more likely to hit unforced errors at the most crucial stages of the match, while men exhibit no significant variation in performance. Specifically, about 30% of men’s points end in unforced errors, regardless of their placement in the distribution of the importance variable. For women, about 36% of points in the bottom quartile of the importance distribution end in unforced errors, but unforced errors rise to nearly 40% for points in the top quartile of the importance distribution. What is remarkable is not the difference in the levels (men are more powerful and therefore more likely to hit winners at any stage). The interest lies in the differences in the way men and women respond to increases in competitive pressure.
....contextualise the difference in the probability of making an unforced error due to greater pressure, the magnitude of the multinomial regression result is around one-fourth of the impact of changing from the fast grass courts of Wimbledon to the slow clay courts of the French Open. Given the importance that playing surface has in determining tennis outcomes, this is a fairly large effect. It is also robust to alternative measures of importance.
Is it physical?One potential explanation for the gender gap in propensity to err during crucial points is that men and women adopt different levels of aggressiveness as points become more important. For example, if players adopt a conservative playing strategy and just lob the ball from one side to the other without ever trying to hit a winner, the point will inevitably end with an unforced error. Indeed, there are substantial gender differences in the style of play as the stakes become higher.
Men hit faster first serves as importance of the point rises, while women hit significantly slower first and second serves as the stakes mount. Amongst females, serves for points in the top importance quartile are nearly three and a half miles per hour slower on average than serves in the lowest importance quartile. Adopting this less aggressive strategy increases the likelihood that the first serve will be in play, but it does not significantly improve the server’s chances of winning the point (in fact, it slightly lowers it). Moreover, women’s first serves in the fourth quartile of the importance distribution are both less powerful and less accurate than their first serves in the third quartile of importance. This result echoes previous work finding that performance anxiety elicits cautious, protective strategies that are associated with poor performance, i.e., decreases in speed without an associated improvement in accuracy.1

...the possibility that these asymmetric responses to high stakes might be due to differences in style of play resulting from physical differences between males and females, ...Though some of the results indicate that low-power players are less aggressive and make more unforced errors on important points irrespective of gender, the evidence does not contradict the basic finding that there are substantial differences in the way men and women approach important points in the match.This finding complements existing literature on performance under pressure by examining an atypical sample – extremely competitive athletes who are amongst the very best in the world in their profession. Perhaps surprisingly, even these highly competitive women exhibit a decline in performance in high-pressure situations. Moreover, this effect is present in women-only competitions, contradicting the narrower hypothesis that females perform worse under pressure only when facing male opponents.
Tennis to the labour market

Of course, it would be inappropriate to extrapolate from a single study of a very select group of individuals to the broader labour market. Professional tennis and its competitive pressures are substantially different from the activities and stresses in business and academia. First, different selection patterns may be operating between elite male and female professional tennis players. It may be that this selection pattern, rather than gender differences, accounts for my finding that top male players are better able to cope with high-pressure situations. Tennis may also involve motor skills – as opposed to cognitive skills – that may generate different responses to increases in competitive pressure. Finally, the nature of high-pressure situations in tennis – which necessitate accurate decision-making and execution in a matter of split seconds – are probably shared in only a limited number of professions.
Nevertheless, the finding of such a robust gender difference in performance under pressure, even in the extreme right tail of the talent distribution, is sufficiently interesting that it should stimulate further research into this possible explanation for the persistence of the gender gap.--------------------------------------------------------------------------------

Footnote1

Jennifer Butler, and Roy Baumeister. “The Trouble with Friendly Faces: Skilled Performance with a Supportive Audience.” Journal of Personality and Social Psychology, 1998.

I think the wage is more or less equal to the marginal revenue product, the basic microeconomic theory. In the past, fewer viewers watched womens' tennis, thus they got paid less. This is not true now, and the wage gap is shrinking or disappearing.
Also at the Grand Slam level, men get paid more because they work more (5 sets versus 3). So, in accordance with the paper in question, men provide both a better quality and larger quantity of tennis to the viewer.

the time-line of the "End of the World"

india rising

If the Indian economy has been growing at such a robust pace, why has government debt risen so much? World Bank economists Marina Wes, Brian Pinto and Gaobo Pang answer the question in latest World Bank Policy Research Paper 4241. Here is the astract of the paper:

Over the past 25 years, India's economy grew at an average real rate of close to 6 percent, withgrowth rates in recent years accelerating to 9 percent. Yet, by 2005/06, the general governmentdebt-to-GDP ratio was 34 percentage points higher than in the 1980s. We examine the linksbetween the public finances and growth in the post-1991 period. We argue that the main factor inthe deterioration of government debt dynamics after the mid-1990s was a reform-induced loss intrade, customs and financial repression taxes; over time, these very factors plus lower entrybarriers have contributed to stronger microfoundations for growth by increasing competition andhardening budget constraints for firms and financial sector institutions. We suggest that theimpressive growth acceleration of the past few years, which is now lowering governmentindebtedness, can be attributed to the lagged effects of these factors, which have taken time toattain a critical mass in view of India's gradual reforms. Similarly, the worsening of the publicfinances during the late 1990s can be attributed to the cumulative effects of the tax losses, thenegative growth effects of cuts in capital expenditure that were made to offset the tax losses and apullback in private investment (hence growth and taxes), a situation which is now turning around.Insufficient capital expenditures have contributed to the infrastructure gap, which is seen as aconstraint, especially for rapid growth in manufacturing. We discuss the ongoing reforms inrevenue mobilization and fiscal adjustment at the state level, which if successfully implemented,will result in a better alignment of public finances with growth by generating further fiscal spacefor infrastructure and other development spending.

YouNotSneaky: Commandments of (Political) Economics

YouNotSneaky! suggests a 12 principles (some counting problem, I guess!!):

1. The answer to most questions in economics is usually “It depends”.
2. People respond to incentives, but incentives are determined in their own head and who knows what goes on in there.
3. But on average, masses of people respond in fairly predictable ways and these predictable ways, embodied in the so-called “Econ 101” thinking, are pretty useful guides. They are not absolutes however.
4. “On one hand … on the other hand” is about as good as you can do in a complicated world.
5. All economic models boil down to two (occasionally three) curves on a blackboard that cross. If it’s more than that or if you can't draw it that way, then your model stinks.
6. First Fundamental Theorem of Economics: Where the two curves cross, it’s important.
7. Game theory accidentally teaches us that outcomes are very sensitive to the structure of interaction. Small changes in the rules of the game can produce vastly different outcomes.
8. A logical, aesthetically compelling, story is important, even if the assumptions are crazy. Check it with math.
9. Anyone who makes exaggerated claims about their pet theories, ideas, or solutions, be they mainstream or heterodox, either doesn’t know what they’re talking about, hasn’t done their homework or is trying to sell you something. “Our results SUGGEST…” is a good indicator that a person has thought hard about their subject. At least as far as these things go. A thorough method combined with some humility should invite more attention than extraordinary claims of genius. Scientific progress takes place at the margin.
10. When an economic idea about how things work pops into your head, your very next question should be “why is that wrong?”. It’s useful to simulate competition among ideas in your brains so that only the truly good ones survive. Success, however, is not guaranteed.
13. “I don’t know” is often the best answer that can be given.

Doni Rodrik added few to have better count:

12. People everywhere are pretty much the same. It is the incentives and constraints they face that differ.
13. Everything that an economist says today has been said before, typically in more elegant fashion, by an economist of an older generation. That makes them neither true nor false. It just suggests that what is new in our profession is the technique, not the insight.
14. Beware when economists start to talk using metaphors ("shock therapy," "diagnostics," "big push" to use some recent ones from this blog). It is a good sign that they do not quite know what they are talking about.
15. When economists disagree about policy, it is most often because of implicit moral and political judgments, rather than economics per se.

random packing

In a new research published in the PRL (subscription required), computer simulations reveal an underlying structure for the disordered state of a large number of spheres dumped into a box. Thanks to Don Monroe for the pointer.

lakes and islands and combinations thereof: interesting facts

"Largest island"
"Largest lake"
"Largest lake on an island"
"Largest island in a lake"
"Largest island in a lake on an island"
"Largest lake on an island in a lake"
"Largest lake on an island in a lake on an island"
"Largest island in a lake on an island in a lake"
"Largest island in a lake on an island in a lake on an island"

Largest Island
Greenland (DEN)

(map source: www.expediamaps.com)

Largest lake
Caspian Sea (RUS/KAZ/AZE/TKM/IRN)

(map source: www.expediamaps.com)

Largest lake on an island

Nettilling Lake on Baffin Island (CAN)
(map source: www.expediamaps.com)

Largest island in a lake
Manitoulin Island in Lake Huron (CAN)
(map source: www.expediamaps.com)

Largest island in a lake on an island
Pulau Samosir in Danau Toba on Sumatera (INA)

(map source: www.expediamaps.com)

Largest lake on an island in a lake
Lake Manitou on Manitoulin Island in Lake Huron (CAN)

(map source: www.cycnorth.com)

Largest lake on an island in a lake on an island
Crater Lake on Vulcano Island in Lake Taal on Luzon (PHI)

(photo source: www.jpl.nasa)

Largest island in a lake on an island in a lake
Island in Mindemoya Lake on Manitoulin Island in Lake Huron (CAN)
(see map above)
Largest island in a lake on an island in a lake on an island
Vulcan point in Crater Lake on Vulcano Island in Lake Taal on Luzon (PHI)

(photo source: www.adventure.simplenet.com)

US States Renamed For Countries With Similar GDPs

Thanks to Carl for the pointer. More link here. The notable absence is India,

economists' agreement?????

Economists develop general statements on relationships between certain events, magnitudes, and changes of magnitudes, and on the basis of these general statements they offer explanations, predictions and prescriptions. As long as the discourse is quite abstract, confined to purely deductive inferences from the definitions, postulates, and their implications no one else care much about whether economists agree or disagree with one another. When they begin, however, to apply their theoretical system to concrete situations and arrive at conspicuously different explanations, glaringly different predictions, the audience cannot help wondering whether economist really know enough to be taken seriously.

Mark Thoma of the economist view has posted a very good discussion of Bryan Caplan' take on economists agreement.

primer on Amartya Sen

Tyler Cown of Marginal Revolution has answered some important and relevant questions in the language of Amartya Sen.

the new multinationals are remaking the old?

The recent issue of the Economist discusses the Globalisation's offspring.

....Indian and Chinese firms are now starting to give their rich-world rivals a run for their money. So far this year, Indian firms, led by Hindalco and Tata Steel, have bought some 34 foreign companies for a combined $10.7 billion. Indian IT-services companies such as Infosys, Tata Consultancy Services and Wipro are putting the fear of God into the old guard, including Accenture and even mighty IBM. Big Blue sold its personal-computer business to a Chinese multinational, Lenovo, which is now starting to get its act together. PetroChina has become a force in Africa, including, controversially, Sudan. Brazilian and Russian multinationals are also starting to make their mark. The Russians have outdone the Indians this year, splashing $11.4 billion abroad, and are now in the running to buy Alitalia, Italy's state airline.
These are very early days, of course. India's Ranbaxy is still minute compared with a branded-drugs maker like Pfizer; China's Haier, a maker of white goods, is a minnow next to Whirlpool's whale. But the new multinationals are bent on the course taken by their counterparts in Japan in the 1980s and South Korea in the 1990s. Just as Toyota and Samsung eventually obliged western multinationals to rethink how to make cars and consumer electronics, so today's young thrusters threaten the veterans wherever they are complacent.
...newcomers have some big advantages over the old firms. They are unencumbered by the accumulated legacies of their rivals. Infosys rightly sees itself as more agile than IBM, because when it makes a decision it does not have to weigh the opinions of thousands of highly paid careerists in Armonk, New York. That, in turn, can make a difference in the scramble for talent. Western multinationals often find that the best local people leave for a local rival as soon as they have been trained, because the prospects of rising to the top can seem better at the local firm.

First, count your blessings

But the newcomers' advantages are not overwhelming. Take the difference in company ethics, for instance, which worries plenty of rich-world managers. They fear that they will engage in a race to the bottom with rivals unencumbered by the fine feelings of shareholders and domestic customers, and so are bound to lose. Yet the evidence is that companies harmonise up, not down. In developing countries (never mind what the NGOs say) multinationals tend to spread better working practices and environmental conditions; but when emerging-country multinationals operate in rich countries they tend to adopt local mores. So as those companies globalise, the differences are likely to narrow.
Nor is cost as big an advantage to emerging-country multinationals as it might seem. They compete against the old guard on value for money, which depends on both price and quality. A firm like Tata Steel, from low-cost India, would never have bought expensive, Anglo-Dutch Corus were it not for its expertise in making fancy steel.
This points to an enduring source of advantage for the wealthy companies under attack. A world that is not governed by cost alone suits them, because they already possess a formidable array of skills, such as managing relations with customers, polishing brands, building up know-how and fostering innovation.

The world is bumpy

The question is how to make these count. Sam Palmisano, IBM's boss, foresees nothing less than the redesign of the multinational company. In his scheme, multinationals began when 19th-century firms set up sales offices abroad for goods shipped from factories at home. Firms later created smaller “Mini Me” versions of the parent company across the world. Now Mr Palmisano wants to piece together worldwide operations, putting different activities wherever they are done best, paying no heed to arbitrary geographical boundaries. That is why, for example, IBM now has over 50,000 employees in India and ambitious plans for further expansion there. Even as India has become the company's second-biggest operation outside America, it has moved the head of procurement from New York to Shenzen in China.
As Mr Palmisano readily concedes, this will be the work of at least a generation. Furthermore, rich-country multinationals may struggle to shed nationalistic cultures. IBM is even now trying to wash the starch out of its white-shirted management style. But today, General Electric alone seems able to train enough of its recruits to think as GE people first and Indians, Chinese or Americans second. Lenovo's decision to appoint an American, William Amelio, as its Singapore-based chief executive, under a Chinese chairman, is a hint that some newcomers already understand the way things are going.
IBM's approach is possible only because globalisation is flourishing. Many of the barriers that stopped cross-border commerce have fallen....Increasingly, success for a multinational will depend on correctly spotting which places best suit which of the firm's activities. Make the wrong bets and the world's bumps will work against you. And now that judgment, rather than tariff barriers, determines location, picking the right place to invest becomes both harder and more important.
....And consumers, wherever they are, will gain from the contest.

marginal utility measured?

We can measure the marginal utility of wealth by observing people's responses to risk. Incidentally, since utility is only an ordering of preferences, it doesn't really make sense to talk about the 'marginal utility' of money; more money is simply always preferred to less. So we can only talk about the marginal utility of money in the context of a trade-off involving money and risk; the shape of the U(w) function measures the risk-reward trade-offs that people find worthwhile.

Poor people seem to do much better to maximise their profits than their wealthier counterparts at finding optimal strategies when small sum of money is on the line, revealed in the recent issue of Scientific American.

... law of diminishing marginal utility states that while accumulating a good—pretzels, pencils, nickels, whatever—each successive unit of that good will be less satisfying to acquire than the one before it. ...[R]esearchers at the University of Cambridge in England ... designed a study to see if the haves catch on more slowly than the have-nots when it comes to reward-based learning.... that when a small sum of money is on the line, poorer people learn quickly how to maximize their profits, leaving their wealthier counterparts in the dust.
In a Pavlovian paradigm, a number of abstract shapes flashed in front of 14 participants. After each shape appeared for three seconds, a picture of either a 20-pence coin (roughly 40 cents) or a scrambled image followed. A card of one particular shape was always followed by the coin, and subjects were told that they could take a 20-pence piece home if they could accurately predict when the money card was the next one up.
The participants had in personal assets an average of about $1,700 in their bank accounts, which ranged from zero to nearly $6,000. The group's average income was just over $20,000, spanning from no income for students to the equivalent of about $60,000 for the most well-off of the bunch.
By measuring response time, the researchers got a sense of how quickly people learned which one of the abstract pictures indicated money would follow. They noticed an inverse correlation between how much money a person had (assets and income) and the swiftness with which they were conditioned. The poorer people tended to figure out which card signaled money ahead within about 12 trials, says neurobiologist Philippe Tobler, the study's lead author, whereas the richer people took about 35 trials.
The team next repeated the experiment while the subject's brains were scanned by an fMRI (functional magnetic resonance imaging) machine. Researchers focused their scans on the midbrain (which contains neurons or nerve cells that produce dopamine, a neurotransmitter central to reward-based learning), and the striatum, another reward-based center located under the cerebral cortex. ...
Once again, an inverse association between wealth and learning appeared, with poor people displaying more increased activity in the midbrain and striatum when compared with the more affluent subjects.
Tobler says the study, which is one of the first to try to measure marginal utility in a laboratory setting, challenges the notion held by many economists that utility comparisons cannot be made between people, because they likely value objects differently. He says, however, "It is possible that these kinds of comparisons are more easily done with money, because money is on an absolute scale." A $20 bill is worth the same no matter who had it, but one person might value it more.

I found some more here.

productivity gains to Indian economy, thanks to Sri Lanka!

The exit of Indian team from the World Cup has drawn huge criticisms from the millions of fans across the country and across the globe, however, there is brighter side of it also. Mukul Kesvan has presented an insightful story.

The Economic Times too has carried the following important piece regarding the India's exit from the recent World Cup.

...a brighter side to India’s exit from the World Cup....that can cheer up disappointed fans and angry advertisers. Sri Lanka has done a great favour to Indian economy by ousting the cricket team from the World Cup. There are about 80 million cable and satellite viewing homes in India. According to TAM ratings, the average viewership of all World Cup matches held till now stands at about 3%, with India vs Bangladesh touching a high of 7.25%. To reach the finals, India would have played at least seven more matches.

Considering a TV Rating of 7.25%, at least 5.8 million people would have watched the match. This would have resulted in a productivity loss of 371.2 million man hours (5.8 million x 8 hours x 8 matches), apart from stress faced by mothers during exams. About 3% of 81 million TV viewers (2.4 million) were ardent cricket fans and would have sat through all eight hours in the remaining 28 matches. Thus overall, Indian team’s ouster would result in a productivity gain of 481 million man hours of work (28x2.4x8 man hours), if put to use. The Sri Lankans have given a boost to the Indian economy by saving 54,902 man years of work (one year = 8,761 hours). Indians can build seven phases of the Golden Quadrilateral connecting Delhi, Mumbai, Kolkata and Chennai spread over 5,846 kilometres all over again, with this time saved. A daily wage skilled labourer in Delhi earns Rs 17 per hour. If put to productive use, the 481 million man hours can produce Rs 817 crore of GDP, which is 63% more than BCCI’s annual revenues of Rs 500 crore, last year. It’s 401% more than the Rs 163 crore losses, corporate India has predicted to incur due India’s ouster. The state electricity boards are also thanking Sri Lanka for the great favour. A TV consumes 45 watts per hour. Assuming a viewer will now switch off his TV by 12 midnight, it will save Rs 135 watts at least per viewer (not considering the electricity consumed by other appliances running simultaneously.) This will save the electricity boards 324 million watts of electricity ( 3.24 lakh kilowatts) in just 28 days. According to estimates, SEB losses in India will touch Rs 1 lakh crore by 2008. If disappointed viewers completely switch off their TVs for eight hours, it will save the government at least 8,64,000 kilowatts, along with many more lives — at least three Indian citizens have been reported to die due to cardiac arrest or suicide after India’s defeat at the hands of Sri Lanka.