Practice Good Theory

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What do socialite Lois Pope and lawyer Tim Broas have in common? Someone is paying for Google-searches of their names. "Reputation" firms offer a few cents for each search. Some paid-search is legit (e.g. keeping tabs on where one ranks), but most is an attempt to "game" widely-used search-engines.. Fake everything: Other than search, "workers" will post fake reviews for books, and even for photo-portfolios put up by models. They will plagiarize articles and post them to a site that is pretending to be informative. Recently, a businessman was convicted for posting negative Yelp reviews about his competitor's business.  Another businessman  claims that Yelp offered to bury negative reviews for a fee. The New York attorney recently went after people posting fake reviews to Yelp, and other such sites. Even the Israeli government is paying  students for positive reviews. Wikipedia just cancelled 250 sock-puppet user accounts used by a paid PR firm....

In " The Great Degeneration ", Niall Ferguson argues that the west is stagnating because of broken "institutions". The cause of Ascendancy: Ferguson rejects Max Weber's "cultural" explanation of a Protestant-driven industrial revolution. After all, the same root "culture" ended up in a very different East and West Germany or North and South Korea. While Jared Diamond's "geography" might explain why Eurasia was wealthier than the Americas, it does not quite explain the ascendancy of Western Europe. Finally, iIf genes are crucial, how to account for the gap between East and West German IQ scores, and how to explain why Eastern genes did relatively well until the last few centuries? The crucial factor, says Ferguson, is the socio-political institutions adopted in some countries: property rights, rule of law, and private voluntary organizations. The role of Philosophy:  He is right, but this explanation is incomplete: why d...

If you follow economic news, you know that the "participation rate" (the % of people who say they are actually looking for a job) has been falling in the U.S. [See the blue line in the chart.] [Source: the great Calculated Risk blog .] The overall participation rate was expected to drop as the "baby boom" generation retires. That's not the cause though. As this chart shows, the participation rate within the 25-54 year group began to fall after the dot.com bust, flattened out, and then began to fall again after the housing bust. This age group does not go back to college in huge numbers. Some of them were probably part of the huge increase in "disability" rolls . Others probably stay home with a spouse to support them, having decided to wait things out until the economy improves. Changes, by Age and Sex: How has the housing bust impacted participation rates across age and sex? For example, people around 65 years old have a lower participation r...

The first two measures compare prices to rents and to median income. Doing so, factors out the "nominal" aspect of price-change. Price-to-Rent ratio:   Over a year ago  this measure was almost down to the 1990 average. Since then, it has almost flattened out, falling only slightly. Source: As always the best source for such charts is the Calculated Risk blog . Price-to-Income ratio: A very similar pattern here. (Caveat: Chart only up to 2011) By both these measures, we can see that prices are slightly above their historical average, but only slightly (and way below their boom-time prices). They also seem to be flattening out. Seems a decent enough time to buy a home. Debt Obligation Ratio:  Instead of price, this measure looks at the monthly payments. Since interest rates are low (they've risen in the last month though), by this measure people are spending a historically low percentage of their incomes on mortgages. Other consumer debt is not hig...

Will social security be there for you? It is almost cliche to say "it will be gone by the time I retire".  Yet, almost everyone is relying on it. Are you relying on social-security to be there for you? If you're preparing for the worst, good for you; but, what's the most likely way in which this will unfold? How are "benefits" calculated?   This a very rough calculation:  First, estimate your average annual salary over your lifetime (up to the max. of about $100K, after which payroll taxes are not deducted).  You are promised $90 for each $100 of average earning, but only for the first $9000. Then, for the next "slab" you are promised 30%. Finally, for anything over $55K, it is 15%. ( Benefits are indexed to CPI. These numbers assume 2010-equivalent dollars.) Sample calculation: Suppose you just retired, having started working in the late 1960s. Your peak earning years were probably around 1990. Let's say you earned an average ...

Is the stock market booming? Few people agree that we're in the middle of a terrific boom. Objectively, an average holder of stock (see SPY chart below) is in a position quite similar to the peak of the dot.net boom or the housing boom. Yet, even people with their 401(k) fully in stock funds don't feel it emotionally -- we have the same number, but none of the excitement and enthusiasm. Leading up to the dot.com top, a lot of people were wondering if the ride would end. Yet, the feeling was different from now. Today, it feels like there really has not been that much of a ride. Is the economy booming? I think the main reason for the lack of enthusiasm is that the economy -- in real terms -- has lagged behind the stock-market. This chart overlays Real per-capita GDP on top of the SPY chart. Notice the year 2000. You see a pause, and then GDP started to rise far past the previous peak. Meanwhile, today per-capita real-GDP is not yet back to the last (housing-boom) peak....