Daily Archives: February 23, 2017

The Greatest Living Economist Has Passed Away: Notes on Kenneth Arrow Part I

A Fine Theorem

It is amazing how quickly the titans of the middle of the century have passed. Paul Samuelson and his mathematization, Ronald Coase and his connection of law to economics, Gary Becker and his incorporation of choice into the full sphere of human behavior, John Nash and his formalization of strategic interaction, Milton Friedman and his defense of the market in the precarious post-war period, Robert Fogel and his cliometric revolution: the remaining titan was Kenneth Arrow, the only living economist who could have won a second Nobel Prize without a whit of complaint from the gallery. These figures ruled as economics grew from a minor branch of moral philosophy into the most influential, most prominent, and most advanced of the social sciences. It is hard to imagine our field will ever again have such a collection of scholars rise in one generation, and with the tragic news that Ken has…

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47% of Jobs Not at Immediate Risk of Being Taken by Robots or Automation


Robotenomics Merlins skills.png

In 1812 the British government created an Act of Parliament which made the destruction of mechanized looms – or knitting machines – a capital felony and hence a crime punishable by death. The Act was implemented as a result of so called Luddite attacks on machines.[1]

It should be noted that in many cases the so called Luddites were not raging against the machines taking jobs, but against the employers who failed to provide them with a ‘living wage.’

According to the esteemed historian Eric Hobsbawm, the Luddites had: “no special hostility to machines as such,” their actions were in fact, “a normal means of putting pressure on employers.” Hobsbawm wrote: “Such misconceptions are, I think, due to the persistence of views about the introduction of machinery elaborated in the early nineteenth century.”[2] Adding:

This sort of wrecking was a traditional and established part of industrial conflict in the…

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Assessing the claims that the Google-AdMob merger will "leverage Google's dominance" and also kill kittens

I thought leveraging of market power into another market was dead and buried but resurfaced today in New Zealand in a merger between SkyTV and Vodafone.

Its exclusive deal over rugby was apparently to allow it to leverage that power into other markets once it had merged with Vodafone.

Truth on the Market

News items continue to pile up suggesting that the FTC is likely to challenge Google’s acquisition of mobile application and website advertising provider, AdMob.  See this recent article from the Wall Street Journal.  News reports today contain this quote from an anonymous source:

“The staff (at the U.S. Federal Trade Commission) believes there is a significant competitive problem and they are prepared to make a recommendation to sue,” the person said, speaking on condition of anonymity.

Senator Herb Kohl also opined on the deal this week (having conducted his own thorough economic analysis, of course) and offered his assessment in a letter to the FTC:

Critics of this transaction worry that this deal will allow Google to merge with one of its biggest rival mobile advertising competitors, and leverage its dominance of PC-based search advertising market into the emerging mobile advertising market, particularly with respect to advertising embedded…

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Robots and job fears: Destruction of large numbers of jobs unlikely, says new OECD Study


There is so much doom and gloom associated with robots and jobs it is time to add some common sense to the misunderstandings created by so called experts opinions about robots and jobs – thankfully authors from the OECD may have added some clarity to the debate — ‘finding that on average, across the 21 OECD countries, ‘9% of jobs rather than 47%, as proposed by Frey and Osborne face a high automatibility.’

Capitalism, the term for our global ‘free’ markets, is a uniquely future-oriented economic system in which people invest, make innovations, apply for patents, and in other ways bet on the future. Behind all of this we find the hallmark of humanity, which is our creative intelligence.

It is intelligence that drives these investments and innovations, and intelligence that forges within many of us an intense curiosity of what the future may hold.

It is also…

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I once saw a lady in the burqa holding hands with her husband

When some Malaysian and Indonesian Muslim classmates were living in Japan, they just got used to the fact they had to shake people’s hands including men and women shaking each other’s hands. They realise that Westerners would find it unfriendly not to do so.

When I was holidaying in Malaysia, I did not go around trying to shake people’s hands because that is just not their way of interacting.

I never bowed to anyone in Japan either. Japanese accepted handshaking because they knew bowing was just not something that Westerners could live with given their liberated upbringings.

Malaysian holiday resorts are interesting because you can see women in bikinis standing next to women in those burkas that the apologists for Muslim social backwardness say liberate women even more.

Burkas were made of the finest materials. The Malaysia ladies did not wear something as conservative but they were highly colourful as well.

All the latest fashion accessories and jewellery was worn by those in burqas.

I even saw a woman in a burqa holding her husband’s hand while queueing. I did take any photos of this because I thought that was rude. You must remember the manners mother taught you including not making other people feel awkward.

Alpha, Beta and the Sharpe Ratio

Often when looking at a fund managers performance you’ll see three stats, the Alpha, the Beta and the Sharpe Ratio. Here’s the short definition of each:

Alpha – is the measurement of a fund’s actual return and its expected return given its beta. Alpha  is the excess return given the risk taken.

Beta – the beta (β) of a stock or portfolio is a number describing the relation of its returns with that of the financial market as a whole.

Sharpe Ratio – is a measure of the excess return (or Risk Premium) per unit of risk in an investment asset or a trading strategy.

When selecting an investment adviser, hedge fund or some other form of money manager, take the time analyze their track record to ensure they are actually giving you an edge.

The most important indicator of the three is the Sharpe Ratio, the higher the better…

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