27 April 2008

TransEconomics mentioned in León newspapers

I was checking something on Google when I stumbled across two León, Guanajuato newspaper articles from last 29 February 2008 that mention TransEconomics. One appeared in Periódico A.M. The other in Correo.

I had participated the day before as the globalist in a forum on the outlook for the León economy beautifully organized by the Guanajuato Chapter of the Mexican Institute of Financial Executives (IMEF).


Estaba verificando algo en Google cuando me encontré con dos artículos publicados en periódicos de León, Guanajuato el pasado 29 de febrero de 2008 donde se menciona TransEconomics. Uno salió en Periódico A.M. El otro en Correo.

Había participado el día anterior como la globalista en un foro sobre perspectivas para la economía leonense impecablemente organizado por el Grupo Guanajuato del Instituto Mexicano de Ejecutivos en Finanzas (IMEF).

NBER Ice Cream Flavor of the Day

When I was a kid, the younger four of us nine kids would pile with our parents into my dad's Buick and ride from Southeast Minneapolis an eternal two hours and forty-five minutes to visit our aunt and uncle and cousins in Hayward, Wisconsin.

Upon arrival, we would jump out of the car, rush through an obligatory greeting of our aunt, then race to the corner and just around it to "The Dairy"---our name for West’s Hayward Dairy. Our uncle owned it.

I’d blast in the glass door, be boosted by some older sibling up onto a swivel chair at the soda fountain, and begin to scan the ice cream flavors from which I could command of my cousin my first ice cream cone of the weekend. This ice cream sitting in round manila buckets was not that low-fat rubbery muck. It was thick high-cholesterol creamy freshly made Hayward Dairy ice cream. I disinctly remember saliva rushing into my mouth as I sat in ecstatic agony choosing.

Why do I recall this scene today, 40 years later? Because this morning, my weekly free subscription e-mail The Latest NBER Research” arrived. And, upon scanning 33 new National Bureau of Economic Research working paper abstracts, I drooled.

Now you're asking urgently, Jenny, which flavor did you choose! Miguel, Edward, Sebastián M. Saiegh, and Shanker Satyanath (2008), "National Cultures and Soccer Violence.

This study reports findings of "a strong relationship between the history of civil conflict in a [soccer] player's home country and his propensity to behave violently on the soccer field, as measured by yellow and red cards."

The researchers measured player home country histories of civil conflict by the number of years that country were stricken with civil war between 1980 and 2005. They justify using civil war experience as a proxy for cultural attitudes to violence by citing findings from ethnographic studies that national tolerance for violence goes up after a civil war. I did not read the cited ethnographic studies, so don't know how the sociologists who conducted them measured the change in norms. I wonder why Miguel et al didn't use the same metrics as the sociologists. (Why measure norms by proxy if we know how to measure them directly?)

According to the authors, how does war act to change norms? And translate into violent soccer habits? They explain that the data "tentatively suggest that childhood and adolescent exposure to national violence may be the causal channel", given that "the proportion of years before a player reached age 18 that his home country experienced civil war strongly predicts violence on the soccer field."

Sadly, the results also suggest that violent norms acquired through childhood exposure to war tend to persist:

If individuals can be socialized into a violent culture, then they could also potentially unlearn their national culture over time if they moved to a different society, yet our data do not offer strong support for this hypothesis. In a variety of specifications not reported above, we tested whether the impact of a player’s home country civil war history diminishes over time for older players, or for those with more experience in the European professional leagues, but in no case are these interaction terms statistically significant at traditional confidence levels (not shown). Violent national cultures appear quite persistent, at least over the time frame of the typical soccer playing career. (Page 14.)

My first reaction is that this reinforces my long-term bleak outlook for the size of the risk premium in global oil prices. I believe that, long after the civil war in Iraq officially ends, violence (including sabotage to oil installations) will persist for decades, rendering Iraqi oil supplies persistently chancy. As they are today in Nigeria.

My second reaction is more academic. I have some ideas for follow-up studies. The authors might consider testing whether alternative norms or clusters of norms--distinct from but related to or underlying social tolerance for violence--are what truly drive the correlation between a player's home country and his propensity to collect yellow cards in soccer.

One candidate alternative norm to study is social tolerance for breaking formal rules generally, not just rules prohibiting violence. Dependent variables in the follow-up study would include soccer fouls that are not violent, such as the illegal use of hands.

A second alternative norm is empathy, or solidarity, especially among elites toward those not in power. I suspect that the two things, empathy and adherence to rules, are connected. And believe that they might underlie a social propensity to violence.

As a proxy for empathy, I would consider formal institutional checks against dictatorship, which, for democracies, could be checks against dictatorship by the majority. I suspect that higher empathy among the powerful toward the weak raises the likelihood that minority rights protection will be written into law. I also suspect that such societies with the highest empathy levels are the most most rule abiding.

Digging more deeply into causality, my hunch is that empathy is driven in the first place by people's experience with authority. Over history, have those in power generally been fair? Have they voluntarily subjected themselves to controls that limit their conduct? Or have they behaved capriciously and illegally?

By my (surely unoriginal) theory, well-founded trust in authority bumps societies up a spiritual step from adherence to jungle-like norms (screw others, lest they screw you) to adherence to empathetic norms (do unto others as you would have them do unto you).

Conversely, a sense of vulnerability derived from governance by capricious and rapacious rulers leads people to watch out for themselves only. This becomes manifest in a calculating approach to following rules (apply selfish cost-benefit analysis when deciding whether to adhere to rules), versus an empathetic approach (treat opponents fairly, even at the risk of temporarily losing power to them--do this because you trust that you won't be burned).

Because norms depend on a nation’s historical experience of authority, social norms are path dependent.

Finally, the rise to power of individual leaders can be path-switching events. A particular leader—often a charismatic one—can reshape norms and thus change a nation's cultural tracks for decades or centuries. Gandhi, Hitler, King, Chávez, Lincoln, Hussein, Bush, Bin Laden all have shaped societal norms.

Norms that later become manifest on soccer fields.

(The Spanish translation of this post is still pending.)

07 April 2008

Greenspan: It was the conundrum

In my review of favorite blogs for watching the financial crisis, I omitted one of the best: Economists' Forum on the Financial Times (subscription) site. On it, Big Shot Bears and Bulls react to a Wolf.

Yesterday's edition featured Alan Greenspan: A response to my critics. The former Fed chairman defends himself against charges that Fed policy under his watch earlier in this century was overly loose, and that it engendered the house price bubble the bursting of which landed us in the crisis that we're dealing with today.

His argument works like this:
  1. Claim: "Remarkably similar housing bubbles ... emerged in more than two dozen countries between 2001 and 2006." In fact, "the US bubble was close to median world experience."
  2. Implication: So Fed policy cannot explain the U.S. bubble.
  3. Counter-theory: "The dramatic fall in real long term interest rates statistically explains, and is the most likely major cause of, real estate capitalization rates that declined and converged across the globe."
This fall in long-term rates that Greenspan mentions occurred between 29 June 2004 and 2 February 2005, during which time the federal funds rate rose by 150 basis points, while the long-term bond yields fell by 70 bps. Normally, long- and short-term rates move together.

In his now famous 2005 testimony before Congress, Greenspan pondered the enigma out loud:
For the moment, the broadly unanticipated behavior of world bond markets remains a conundrum.


En mi reseña de blogs preferidos para observar la actual crisis financiera, omití uno de los mejores: Economists' Forum en Financial Times (suscripción).

En la edición de ayer de este foro, se publicó Alan Greenspan: A response to my critics. El ex presidente de la Fed se defiende de cargos de que la política de la Fed bajo su conducta a inicios de este siglo era excesivamente expansiva, y que engendró la burbuja en vivienda cuya ruptura causó la crisis actual.

Su argumento se estructura así:
  1. Afirmación: "Burbujas de vivienda asombrosamente similares ... surgieron en m[as de dos docenas de países entre 2001 y 2006." Y de hecho "la burbuja en EE.UU. coincide con la experiencia mediana."
  2. Implicación: Así que la política monetaria en EE.UU. no puede ser la explicación de la burbuja en EE.UU.
  3. Teoría alternativa: "La caída dramática en las tasas de interés reales explica estadísticamente, y probablemente es la principal causa de, el declive de y convergencia en las tasas de capitalización para bienes raíces a través del globo."
La caída en las tasas de largo plazo que menciona ocurrió entre 29 junio 2004 y 2 febrero 2005, cuando la tasa de fondos federales escaló en 150 puntos base, mientras los rendimientos para bonos de largo plazo bajaron en 70 pb. Normalmente las tasas de corto y largo plazo suben y bajan juntos.

En su ahora famoso testimonio ante el Congreso de febrero 2005, Greenspan ponderó el enigma en voz alta:
Por el momento, el comportamiento generalmente inesperado de los mercados de bonos globales permanece un acertijo.

03 April 2008

Mike McGlone's commodity report

Michael McGlone's Commodity Perspective is out. Mike is the commodity director at Standard & Poors.

I'm hooked on this concise monthly report, because it:
  • Illustrates changes in subindices and individual assets that are driving (or deviating from) changes in the headline index;
  • Connects fundamentals to total returns;
  • Explains asset interconnections;
  • Reviews theories as to what's going on and why.
You need to read it right away when it comes out though. It's perishable.


Ya se publicó el informe de Michael McGlone, Commodity Perspective. Mike es el director de commodities en Standard & Poors.

Estoy adicta a este informe mensual conciso, ya que:
  • Ilustra cambios en subíndices y activos individuales que marcan la pauta (o se desvían) de los movimientos en el índice general;
  • Conecta los fundamentales con los movimientos en los índices;
  • Explica conexiones entre clases de activos;
  • Repasa teorías acerca de qué sucede y por qué.
Recomiendo leer el informe cada mes tan pronto como salga. Es perecedero.