July 8, 2012
April 1, 2012
February 5, 2012
- Reformers should not count on an immediate return to growth; economic transformation takes time.
- The decline after the reform is not permanent, so do not worry: Capitalism really works.
- The decline in GDP has not lead to populism, but in sometimes lead to a new political elite. The lesson is that the reformer should fear the capture of politics by the new elite, not by populism
- Economist and reformers do not really know how to sequence a reform, and why one choice is better than other. The lesson is to no over-plan the move to market, and do not delay it in the hope of having a better reform.
- Economist overemphasize the importance of incentives, without taking into account that the people in the power might change. The lesson is " you cannot teach an old dog new tricks, even with incentives".
- Do not overestimate the long-run consequences of crisis: they do not last that long.
- Countries might move to a democracy, but not in the same direct way as they move toward capitalism - Politics evolution is harder to predict than Economics evolution.
February 3, 2012
January 10, 2012
December 2, 2011
Liu and Yang (2011) develop a measure, called parametricness index, to check if the model selected by a consistent procedure can be treated as the "true" model.
"While there are many different performance measures that we can use to assess if one model stands out, following our results on distinguishing between parametric and nonparametric scenarios, we focus on an estimation accuracy measure. We call it parametricness index (PI), which is relative to the list of candidate models and the sample size. Our theoretical results show that this index converges to infinity for a parametric scenario and converges to 1 for a typical nonparametric scenario. Our suggestion is that when the index is significantly larger than 1, we can treat the selected model as a stably standing out model from the estimation perspective. Otherwise, the selected model is just among a few or more equally well-performing candidates. We call the former case practically parametric and the latter practically nonparametric".
Obs: The criteria is developed under linear Gaussian models only, but the results seems promising.
November 9, 2011
October 24, 2011
Indeed, today it is diﬃcult to imagine what economists did in the dark ages before the calibration method gained widespread acceptance. A theory put forward by White and Noise (1999) is that some economists were estimating certain economic relationships using matrix algebra and other voodoo rituals instead of simply making them up. Econometricians, as White and Noise call this ancient tribe, also practiced a bizarre virility ritual of exposing their theories to the risk of “falsiﬁcation”. According to their belief system, econometricians could only avoid falsiﬁcation by attaching a number of “stars” indicating “signiﬁcance” to their dearest numbers, and by using 10 point fonts in overhead presentation slides; the latter technique was thought to eﬀectively shield the numbers against the “evil eye” of fellow tribesmen.
October 8, 2011
August 30, 2011
In July the Santa Cruz Police Department began developed by scientists at Santa Clara University. The researchers behind the software are like an intellectual “Oceans Eleven” team of specialists: two mathematicians, an anthropologist and a criminologist. They’ve combined their cerebral forces to that takes crime data from the past to forecast crimes in the future. The basic math is similar to that used by seismologists to predict aftershocks following an earthquake (also a handy bit of software in southern California).
Even more impressive, compared to July 2010 burglaries, the number of July 2011 burglaries are down 27 percent. Whether or not that trend holds remains to be seen, but so far it appears that being in the wrong place at the right time works.
August 10, 2011
An S&P ratings seeks to measure only the probability of default. Nothing else matters — not the time that the issuer is likely to remain in default, not the expected way in which the default will be resolved. Most importantly, S&P simply doesn’t care what the recovery value is — the amount of money that investors end up with after the issuer has defaulted.
Moody’s, by contrast, is interested not in default probability per se, but rather expected losses. Default probability is part of the total expected loss — but then you have to also take into account what’s likely to happen if and when a default occurs.
(...)country which has been downgraded to AA is a worse bet than a country that has been upgraded to AA: the former is much more likely to get another downgrade than it is an upgrade, while the latter is on an upgrade path and is more likely to get another upgrade than a downgrade.