Monthly Archives: January 2016

Why economists are so often wrong

BOOK REVIEW

Viral Spiral, Author: David Bollier.

By Jonathan Rowe – What is called “economics” is really psychology on steroids.

It starts with a model of human nature and extrapolates an entire scenario for how the world works from that. The model is homo economicus,the myopic protoganist of the economics texts. This hypothetical person has no social affinities, no lapses of judgment or hang-ups, no capacity even for thinking about anyone besides him or herself. He goes through life with an unfailing and relentless calculus of personal loss and gain.

As I explained in The Tragedy of Economics this portrayal of our basic nature did not arise from actual inquiry.

Homo economicus was from the beginning a polemical construct, devised to serve political ends. At first this was to help undermine the secular authority of the Roman Church, and then the divine right of kings.

More recently it has served to justify a fundamentalism of what is called “the market.” more> http://goo.gl/fw4bml

Updates from Chicago Booth

Digital ads are getting smarter. Are advertisers?
By Alina Dizik – Check out a pair of shoes online, and you may find them following you around: in a display advertisement parked in the margin of a news story, or in the otherwise minimalist corner of a search-engine results page, or perhaps in the subject line of an email.

That’s because digital advertising, and the technology that drives it, is evolving.

Paid search is internet advertising’s biggest stream of revenue, with nonmobile search alone generating $19 billion in 2014, according to the Interactive Advertising Bureau.

But Chris Nosko‘s research indicates that when eBay stopped paying for ads to appear during keyword searches that included its name—for instance, “eBay camera”—it nevertheless retained nearly 100 percent of the click traffic to its site. In the absence of paid ads, consumers could simply click on the nonsponsored search result linking to eBay instead.

.. the most accessible metrics are often also the most imperfect. When they paint a rosy picture of digital advertising’s impact, there could be a disincentive to chase more accurate measures.

“Most people would prefer not to be held accountable for business metrics over which they have limited control,” says Randall A. Lewis, a senior economic research scientist at Netflix who has worked for Yahoo and Google. “In digital advertising, we have a whole bunch of correlational metrics and a lot of them tell a positive story.” more> http://goo.gl/D8QaZO

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Updates from Siemens

Siemens tests Intercity train for Deutsche Bahn in the Climatic Wind Tunnel in Vienna
Siemens – Rail customers expect to be served by trains that function perfectly from the very first day of service.

This is particularly true for the new Intercity platform that will be operated by Deutsche Bahn (DB). Expected to account for around 70 percent of revenue, the ICE 4 will be the backbone of DB’s future long-distance service.

Two ICE 4 trains will enter passenger service in the fall of 2016 as part of a twelve-month period of trial operations. Until then, the trains will be subjected to rigorous testing.

Before the first passengers board the train, however, the ICE 4 has to prove that it can operate even under the most extreme weather conditions, in blazing heat as well as freezing cold.

The tests, conducted at the Climatic Wind Tunnel operated by Rail Tec Arsenal (RTA) in Vienna, subject the train to conditions far more stringent than required by European norms. Deutsche Bahn commissioned supplementary tests that are specifically designed to ensure that the train’s heating, ventilation and air conditioning (HVAC) operate faultlessly. more> http://goo.gl/Cymovl

The $29 Trillion Corporate Debt Hangover That Could Spark a Recession

By Sally Bakewell – There’s been endless speculation in recent weeks about whether the U.S., and the whole world for that matter, are about to sink into recession. Underpinning much of the angst is an unprecedented $29 trillion corporate bond binge that has left many companies more indebted than ever.

Much of the cheap credit accumulated by companies was spent on a $3.8 trillion M&A binge, and to fund share buybacks and dividend payments. While that tends to push up share prices in the short term, bond investors would rather see that money spent on strengthening the business in the long term.

The emerging cracks “are part of the same symptomatic problem — an economy that’s got stuck on stimulus,” said Luke Hickmore, an Edinburgh-based senior investment manager at Aberdeen Asset Management, with about 284 billion pounds ($406 billion) of funds under management, according to its website.

“It’s not sustainable.” more> http://goo.gl/UAABLa

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The human tendency toward discrimination and inequality

BOOK REVIEW

ECONOMIC INDETERMINACY: A personal encounter with the economists’ peculiar nemesis, Author: Yanis Varoufakis.
Treatise of Human Nature, Author: David Hume.

By Yanis Varoufakis – Given their evolutionary stability, the patterns of discrimination become institutionalized in human societies because people begin to believe that they deserve what they are getting or not getting (as part of the distribution that results from the evolved discriminatory conventions).

The ideology of entitlements, in others words, follows on the coattails of arbitrary distributions of social roles and income.

The explanation of how real power evolves, and what makes it sustainable, is to be found in the mind, and the beliefs, of the majority of the disadvantaged who succumb to the ideological belief that they are entitled to less than the advantaged. more> http://goo.gl/gEKR9U

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The Curious Case Of Competition

BOOK REVIEW

Friend and Foe, Authors: Adam Galinsky and Maurice Schweitzer.
The Happiness Hypothesis, Author: Jonathan Haidt.

By Stephanie Denning – “Humans are inherently social beings. Some researchers believe humans evolved into an ultra-social species because cooperative groups enabled our ancestors to outcompete our evolutionary rivals.”

While cooperation kept a tribe intact, competition served to outcompete rival tribes. Tribes competed for scarce resources to survive.

“The unstable and dynamic nature of scarce resources can cause individuals and groups to pivot from cooperation to competition.” And, usually, it was the most competitive who won. As this cycle continued to perpetuate, it was the most competitive who continued to survive. And in turn, reproduced to create a species who are simultaneously competitive and cooperative.

Success today is so often solely attributed to an individual. And it can often appear to be true.

But there is another: the invisible force of cooperative group dynamics. It’s that unique team dynamic that often goes unnoticed. more> http://goo.gl/aNf6kG

Updates from GE

3 Keys To Building an Agile Society for the 4th Industrial Revolution

By Mike Gregoire – In 19th-century England, bus companies, dependent on horses to pull their carriages, were furious with the advent of new “horseless carriages.”

Travel was becoming mechanized — faster and more convenient. The government defended horse bus companies and introduced Red Flag Laws that set automobile speed limits to how fast a man could walk with a red flag in front of them.

Governance is not the only system being challenged by technological progress. Consider societal constructs, like education. The 4th Industrial Revolution means that the world is getting more automated — McKinsey estimates that 45 percent of paid activities have the potential to be fully automated using technology that exists in the world today.

There is a clear need to rethink the kinds of skills and ways of learning to create a world where work is still meaningful and profitable, both for the organization and the worker.

The common thread here is that to fully realize all of the benefits of the 4th Industrial Revolution, the foundational pillars of society need to catch up. That’s where “agile” comes in. more> http://goo.gl/Sa5Ya8

Free Trade With China Wasn’t Such a Great Idea for the U.S.

By Noah Smith – Economists are also stubbornly unwilling to question their benchmark theories, even when the evidence presents a challenge to these theories.

The fact that Autor et al. find total national employment declining in response to trade with China should be cause for concern.

Standard trade models, especially the simple ones taught in Econ 101, predict that this shouldn’t have happened. Autor et al. sternly rebuke the economics profession for relying too much on theory, and not enough on evidence, when it comes to the issue of trade:

We argue that having failed to anticipate how significant the dislocations from trade might be, it is incumbent on the economics literature to more convincingly estimate gains from trade, such that the case for free trade is not based on theory alone, but on a foundation of evidence.

The authors suggest that real-world economies may simply be much worse at adjusting to big changes than most economic models assume. more> http://goo.gl/nRrVhw

The World Has Discovered a $1 Trillion Ocean

By Eric Roston – There’s no doubting the melting of the Arctic ice cap, and the unveiling of resources below, presents mind-boggling opportunities for energy, shipping, fishing, science, and military exploitation.

Russia even planted its flag on the sea floor at the North Pole in 2007.

Melting ice means that in summer months, cargo can travel approximately 5,000 km from Korea to New York, rather than the 12,000 km it takes to pass through the Panama Canal. Warming waters also open up access to commercial fish stocks, making the Arctic a growing source of food.

How does anyone expect to protect the Arctic environment in such a gold rush?

The Arctic is warming faster than any other part of the globe, Jan-Gunnar Withner says: “These changes are like nothing we have seen. We don’t have anything to compare with in history.” more> http://goo.gl/WrMbbI

Training to Become a Better Manager? Here’s Why It Might Fail You

By Marla Gottschal – We may be hurting future managers/leaders — because they may feel completely prepared, when in fact, they are not.

One key failing may be the narrow contextual focus of managerial training, or in other words, if training can be readily applied to our own work. When we train for a specific situation or even a certain set of variables, training can fall short. The content may not translate to, or mirror, what we experience back in the real world. This limits the impact of training upon our future performance.

One opportunity is developing the elements that comprise psychological capital— a construct that emphasizes feelings of hope, self-efficacy, resiliency and optimism (The HERO variables). Developing resiliency is a perfect illustration. more> http://goo.gl/F98FvG