Notes on Bertrand Russell's Autobiography

I've been reading Bertand Russell's autobiography these past few weeks.

I've yet to read most of Russell's work, but I'm familiar with what he stood for and produced during his lifetime. 

I remember that what first hit me as terribly interesting, so much so that I had to read the book in only a couple of sittings, was having read his essay "Why I am not a Christian". 

The essay's tone is witty in all the right parts - which was something that made it easy to digest. Instead of the work being sermon-like, or worse, an insulting exposé by an Atheist, it was a calmly well-argumented take by someone who simply, for reasons very aptly laid out, did not agree with Christianity.  

This written work made me feel like I'd been part of a profound conversation with an open mind. One that made it O.K. for me, at that time a teenager, to agree (at least partly) with someone else's relaxed and contrary opinion on a very serious issue. 

Since that first encounter with Russell, I've perused with relative frequency, his page on the Stanford Encyclopedia of Philosophy. There's a great big summary of his work and doings throughout his life, much that I've become interested in.

I've highlighted some interesting passages and key sentences I consider relevant from Russell's autobiography.

Here's some.

From "Prologue - What I have Lived for":

"Three passions, simple but overwhelmingly strong, have governed my life: the longing for live, the search for knowledge, and unbearable pity for the suffering of mankind."

From "Chapter 1 - Childhood":

"I think periods of browsing during which no occupation is imposed from without are important in youth because they give time for the formation of these apparently fugitive but really vital impressions."

Regarding his grandmother's death:

"...As I have grown older, I have realised more and more the importance she had in moulding my outlook on life. Hear fearlessness, her public spirit, her contempt for convention, and indifference to the opinion of the majority have always seemed good to me and have impressed themselves upon me as worthy of imitation. 

She gave me a Bible with her favourite texts written on the fly-leaf. Among these was 'Thou shalt not follow a multitude to do evil'. Her emphasis upon this text led me in later life to be not afraid of belonging to small minorities."

On a memory of his Uncle William:

"I have a very painful recollection: he came to Pembroke Lodge one June evening at the end of day of continual sunshine, every moment of which I had enjoyed. When it became time for me to say good-night, he gravely informed me that the human capacity for enjoyment decreases with the years and that I should never again enjoy a summer's day as much as the one that was now ending. I burst into floods of tears and continued to weep long after I was in bed. Subsequent experience has shown me that his remark was as untrue as it was cruel."

"Nature and books and (later) mathematics saved me from complete despondency."

"...the art of concealing her emotions..."

"...as she had a caustic tongue..."

"As I have grown older, however, my feelings have changed. I owe to the Russells shyness, sensitiveness, and metaphysics; to the Stanleys vigour, good health, and good spirits. On the whole. the latter seems a better inheritance than the former."

"As soon as I realised I was intelligent, I determined to achieve something of intellectual importance if it should be at all possible, and throughout my youth I let nothing whatever stand in the way of this ambition."

From "Chapter 2 - Adolescence"

"It became second nature to me to think that whatever I was doing had better be kept to myself, and I have never quite overcome the impulse to concealment which was thus generated.

I still have an impulse to hide what I am reading when anybody comes into the room, and to hold my tongue generally as to where I have been, and what I have done. It is only by a certain effort of will that I can overcome this impulse, which was generated by the years during which I had to find my way among a set of foolish prohibitions."

"I was told that all introspection is morbid, so that I regarded this interest in my own thoughts and feelings as another proof of mental aberration.

After two or three years of introspection, however, I suddenly realised that, as it is the only method of obtaining a great deal of important knowledge, it ought not to be condemned as morbid. This relieved my feelings on this point."

On repudiating arguments in favour of religion:

"For I took the view then, which I have taken ever since, that a theological proposition should not be accepted unless there is the same kind of evidence for it that would be required for a proposition in science."

"It appeared to me obvious that the happiness of mankind should be the aim of all action, and I discovered to my surprise that there were those who thought otherwise."

2015 Requiem - On to 2016

I've ceremoniously replaced the Pseudoeconomics.com website with it's brother page on Facebook. It seemed only fair to add an end-of-the-year post on the site before beginning 2016.

Here goes.

To sum up the year, at least in a post, it's tempting to take a sentimental tone, leaning into mawkish territory with anecdotes of what certain life moments meant during 2015, adorned by special hallmark memories that evoke feelings of joy and contentment. While this sort of synthesis effectively does emotionally charge its author (and readers) at least in terms of finding virtual peace with whatever station in life is being described, it's possible that in doing so therein lies a subtle difference between deriving satisfaction from the little joys in life versus extracting knowledge and maybe a little bit of wisdom from deeper sources that echo higher-impact thoughts. 

Quick pop-culture reference:  the Ferris Bueller quote "Life moves pretty fast, if you don't stop and look around once in a while, you might miss it" makes a valid point in this regard. 

What does "stop and look around once in a while mean" to each person? Philosophically speaking, this statement could mean severe contemplation, decisive introspection and a strong focus in answering self-doubt by addressing general/specific unanswered questions. Banal and mundane approaches could interpret the suggestion to take a pause and think as a way of not letting the rudimentary day-to-day habits drag us into old age without ever having experienced the different joys and thereby personal growth every human being aspires to. The latter definition is what Matthew Broderick referred to in the movie. 

The former explanation, though, demands more. However, there is little time to play the deep thinker when making a living or raising a family. 2015 was a trial in that regard. 

Man, in general terms, is content with what is. Ignorance is bliss. Psychologists, as is their wont, have referenced family, work and friendships as all contributing to a person's wellbeing. Social Scientists and Economists vie to address the current allocation of resources, optimization of different systems, study of human processes and interpretation of behaviors that determine growth, and reach for, crudely speaking, a closer way to achieve utopia. 

Note: Pseudoeconomics looks to address just that - the different players and their attempts towards optimization (i.e. Utopia, or augmented reality in its current terms). Economics is an art in that regard. And a very amusing past time for whomever takes on its study as a serious amateur.

The worldly professions and the learned men (and women) behind them that move us and shift our existence in this world -  politicians, doctors, lawyers, scientists, activists, writers, artists, religious folks, businessmen, yoga instructors - in their origin, provide a service, donning a win-win to society. Until they deviate and don't.

2015 was the year when victims, and here I reference self-imposed victimhood, not the truly afflicted, were not victims, but potential champions that fizzed out. In my personal experience, this was a year in which life re-affirmed itself, upheld by shared experiences with a loyal family, friends and enriched by experiences at work and outside of it. 

Octavio Paz said: "Deserve your dream." I think, in plain-speak that means, "get your ass to work". The trick therein is to work for a dream, not for it's own sake. 

As a segue to this post's ending, and on to a richer and much better written text, an opportunity to contemplate the year's successes and great opportunities  through an eloquent explanation of the risk represented by excessive pride (always a danger to take note of!), by Paz himself (from the chapter on "Rhythm" in his book "The Bow and the Lyre),

A favor: pay close attention to the "magic" and "magician" concepts mentioned. The reference might seem archaic. Far from it.

"Magic is a dangerous and sacrilegious enterprise, an affirmation of human power vis-a-vis the supernatural. Separated from the human herd, facing the gods, the magician is alone. His greatness and almost always, his final sterility is rooted in that aloneness. On the one hand, it is a testimony of his tragic decision. On the other, of his pride. Indeed, every magic that is not transcended - that is, not transformed into a gift, into philanthropy - consumes itself and ends by consuming its creator. 

The magician sees men as instruments, forces, nuclei of latent energy. One form of magic consists in the dominion over self for ultimate dominion over others. Princes, kings and leaders surround themselves with magicians and astrologers, the precursors of political advisors. The formulas for magic power are fatally bound up with tyranny and the domination of men. The magician's is a solitary rebellion, because the essence of magical activity is the quest for power. The similarities between magic and technology have frequently been pointed out, and some think that the former is the remote source of the latter. Whether or not this hypothesis is valid, it is obvious that the characteristic mark of modern technology - like that of ancient magic - is the cult of power. 

Standing opposite the magician is Prometheus, the loftiest figure created by Western imagination. Neither magician, nor philosopher, nor sage: hero, stealer of fire, philanthropist. The Promethean revolt embodies the revolt of mankind. Implicit in the chained hero's aloneness throbs the return to the world of men. The magician's solitude is a solitude with no return. His revolt is sterile because magic - that is to say, the quest for power by power - ends by annihilating itself. And this, precisely, is the drama of modern society."

Happy new year.

Pseudoeconomics on Facebook

Pseudoeconomics now has a facebook page!

https://www.facebook.com/pseudoeconomics

Please follow the link above and like the page.

The dynamic on facebook is such that a page for the website there lends itself nicely to a broader (and more participative) audience.

The website will still be active - albeit with a slight change in focus.

Stay tuned.

Gearty Grilling: The Noble Economist

2010 Nobel Prize in Economics winner Chris Pissarides explaining the difference between Scandinavia's and Italy's compromise between promoting free markets and keeping a social democracy afloat.

Reading list

Have been keeping busy reading the following:

Capital in the 21st Century - Thomas Piketty

Will be posting comments soon.

A quick summary:

How the euro caused the Greek crisis

The Greek crisis explained in under 3 minutes.

Posted by Ezra Klein on Thursday, July 2, 2015

On the never-ending journey that leads to sound personal convictions

Malcolm Gladwell is often remembered for one key idea: the 10,000 hour rule (as mentioned in his 2008 non-fiction book Outliers).

Gladwell insists on the validity behind the idea, that to become an expert, in basically anything, one must (taking into account some "x" level of aptitude) put in 10,000 hours of practice...which roughly equals 10 years time. The interesting premise here is that, to become an expert, one does not necessarily have to be a genius.

In reading up on Gunner Myrdal, and Friedrich von Hayek, the 1974 Nobel Prize in Economic winners I have yet to profile, I realized: these men obviously exceeded the ten year quota required to excel in their field. Their professional careers in academia, politics, and as part of their country's intelligentsia community translated into far more than 10,000 hours of dedication to the economic research, application and theory-building needed for the breakthroughs that led to their nobel prize wins. Their work was a product for a lifetime, having built on other economist's own 10,000 hours.

The common (yet very extraordinary) denominator between these Nobel Prize winners (and their equally gifted contemporaries) is the clarity in their ideas, convictions and beliefs. 

The winners' prize lectures archived in the nobelprize.org website denote an acute understanding of the world, as if these winners knew exactly what their place on earth meant, and what their work needed to reflect, so as to be valued as truly model citizens. It's baffling to read such clear ideas and strong feelings. It's overwhelming at times, and very exciting to know what their findings meant to them, before their ideas and applications began to mean so much more to the societies, institutions, governments, economies and businesses that benefited indirectly and directly from the work derived therefrom. 

I sometimes mention what this blog is supposed to do, and what it's supposed to mean, but the reality is that both those things are in a constant state of flux. What does persist, though, is the never-ending search for a deeper truth; one related towards making sense of the way the world functions, and how to strive that same functioning towards continual improvement. 

What's beautiful about concentrating on how economists came about it, is that, economists don't just limit themselves to the established ideas in their field: economists pick and take what works in other realms (psychology, philosophy, sociology, mathematics, politics, etc...) and apply it to the problems that we faced yesterday, face today and will face tomorrow.

All this makes for sound convictions. Naturally.

This man clearly had strong convictions.

From The Economist: Techs-Mex

Slowly, but surely, Mexico is catching up with the rest of the world's start-up scene.

I wish I could fast-forward my nobel prize in economics series to start learning about the origins of entrepreneurial economics, and the men/women that shaped this school of thought.

I've recently read up on Schumpeter, specifically about the term and concept he coined, that has become synonymous with innovation: creative destruction.

A quick and inspired Google search (keywords: entrepreneurism in Mexico) led to an interesting result: 

Read: "Mexico's growth will come from entrepreneurship..."

I believe Mexico's and other similar countries' growth will come from entrepreneurship.

Better yet, to have this growth be a product of the virtuous circle that results from inclusive political (checks on power from those that govern) and economic (freedom to compete in a fairer market) institutions would be most momentous.

Sustainable growth. 

Just as is the case with other countries, we have yet to catch up.

We (us) must do it right.

This is what this blog has been meant to pursue: the search for an interesting, objective formula that leads to sustainable economic growth.

The Economist - Mexico's new movers and shakers

Sound the trumpets, the activists are coming.

Source: The Economist

Blogs do make a difference! Brace yourself, Piketty.

The age of blogs and open communication has helped everyone have a potential voice. Barriers to entry are low. Amateur and not so amateur Journalists, filmmakers, entrepreneurs, and economists now abound. 

Case in point:

MIT PhD student (Matt Rognlie) takes on Piketty.

He superbly points out 3 mistakes - read on. 

To Matt my fellow MIT alums, I say:

Paul Krugman and his appreciation for macroeconomic analysis

It seems that digging up previous economic theoretical/analytical breakthroughs via Nobel Prize in Economic profiles isn't all for naught:

My John Hicks/Kenneth Arrow executive summary profile was particularly instructional for me. Turns out that this is also the case for others. Their brilliant work was recently referenced by Mr. Paul Krugman.

Say that again?

As recently as two days ago, Paul Krugman made a macroeconomic analysis (John Hicks take ) reference in his New York Times blog.

Krugman cited Hick's take on the general equilibrium theory (specifically - discussing the way Hicks transformed the theory into a practical tool - and how his take on it plays into measuring an equilibrium between a national economy's commodity-based supply and demand...given, let's say - interest rate fluctuations and other dynamic variables that can be thrown into the mix...as neatly presented via Hicks' IS-LM model).

The more I learn about past influential economists like Hicks, the more I understand how valuable economists' take on how economies function really is. 

Economists have been shedding light on how the world works, in very different ways: financially, sociologically, behaviorally, even philosophically.

An economist isn't responsible for having things work out a certain way. There's always too much at stake, and the outcome tied to random, non-linear variables is not only difficult to measure, but also impossible to predict. 

Still, economists help us understand the economic ghost in the machine that makes this complex world function.

For now, macroeconomic analysis has turned out to be pretty spot on.

Hear, hear!

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1973

Source

1973 Nobel Prize in Economics winner Wassily Leontief - a brilliant mind who linked a profound cause-and-effect theory to a broader economic context, achieving practical value and extending useful economic research and theoretical work academics and public/private enterprise have greatly profited from, all the while keeping it simple. 

His development of the input-output method and analysis led to impactful economic theory applications throughout the the 20th century. His work provided a clearer way of determining the interrelationships between the theoretical "y" inputs required to provide a desired/required "x" output. Meaning, linking the interdependence between inputs required to oil the machinery behind industrial sectors to produce a particular output, which, itself is an input to another industry (ex: how commodities are used to produce other commodities, and so forth). In a broader context, this analysis also naturally applies to local/regional/national/international economies and their respective sectors.

So, what lies behind the economic machine or system?

This is what perplexed and fascinated Leontief. 

As explained and very aptly redacted by MIT professor and prominent input-output economics  Karen Polenske, in the collection of reflections and perspectives on input-output economics "Wassily Leontief and Input-Output Economics" (edited by Dietzenbacher and Lahr), Leontief gravitated towards combining empirical and theoretical analysis to address economic issues. 

Having identified the possible pitfalls with depending solely on theory (confirmation bias, or, zeroing in on the input-output model itself, maybe more profound issues with the mechanical approximations derived from depending on fixed coefficients) and empirical approaches, Leontief insisted on theory going through the required testing grounds of empirical observation, and having empirical observations themselves necessarily tied down to theory. It is important to remember that Leontief was part of a generation of economists where this back and forth between theory and empirical approaches was a contentious issue. Still, what issue isn't contentious in economics?

So, how does the real world work?

This question forces the researcher to understand that theorizing and waxing lyrical about the economic machine's cogs and sprockets, and focusing on what tinkering with these moving parts could or could not churn out, was not solely determined through advanced mathematical modeling (taking the second half of the 20th century's economics scene by storm) but by working on data interpretation techniques that emulated real-world functioning. Leontief himself had, in previous decades, been requiring his students to apply mathematical rigor to build better models, but was wary, nonetheless, of having that quantitative approach detach him from more meaningful applications. The input-output model took into account this theory/empirical balance Leontief touted about.

After Leontief's contributions to the input-output technique, questions regarding the economic impact now had answers: scrutiny via simple matrices (very elegantly explained in Leontief's nobel prize lecture) provided them.

Light research on this subject made me realize how Leontief's work was a distant cousin (or some incestuous form of it) to Arrow's own work. Both their work, was somehow fathered, or related to Leon Walras' theories. Walras's focus on reaching equilibrium through the supply-demand relationship, price, preference, and restricting excess demand to 0 (to achieve equilibrium - in theory having fulfilled the required prices levels to have done so) served as a useful backdrop to Leontief's own findings.

Having approached this turned out to be good fun. In all my pseudoeconomist splendor, I hold a strong interest in matrix-led interrelationships and their optimization. My 2012 Master's thesis used the design structure matrix model and tool to describe the linkages between the different phases of a real estate development process. While not exactly, an input-output model, it nonetheless links different factors that pares up inputs and outputs, with the possibility of optimizing results via changes in specific factors.

Simplicity is remarkable when it produces thoughtful results. 

The following video shows and example of the input-output model in action.

Follow-up on "Why nations fail"

So, halfway done with the book "Why nations fail". 

The premise is simple: extractive institutions limit a nation's growth and benefits a few at the expense of many, while inclusive institutions cause the opposite: they foster competition and level the playing field, promoting a meritocracy that results in more a more prosperous nation.

Guns, germs and steel author Jared Diamond and other scientists/economists/academics argue that while authors Acemoglu and Robinson have a point, they're being overtly simplistic and are thus excluding other important factors (like geography, culture, etc).

David Levine, an American economist, and two of his colleagues wrote an interesting review of the book, questioning Acemoglu and Robinson's theories directly: their review presents Germany as a special case - a country that fared both well and badly under extractive (National Socialism during the 30's and 40's) and inclusive (the Weimar Republic) institutions. It turns out that Germany fared particularly well under the Nazi regime, having almost conquered most of Europe during the Third Reich, dominating their neighbors easily via their military force and industrial/economics prowess. 

At the time, it turns out, Germany was also neck-and-neck with other countries in terms of advances in technology, something that contradicts one of Acemoglu and Robinson's hypotheses: that extractive institutions ultimately fail because they don't advance technologically. And no one can deny that Hitler's government was anything but extractive. 

Veering towards an inclusive institution - before Nazi Germany, and after Imperial Germany came the Weimar Republic. Germany's transition to a more democratic state during the early 20th century turned out to be a disaster. Hard to believe, but Germany went through hyperinflation during that time. 

Inclusive institutions, thus, do not automatically provoke its agents to summarily choose or decide to take on the best economic and political policies. 

Meaning: inclusive institutions do not guarantee prosperity.

Extractive institutions, it seems, can advance in the realm of technology, and not necessarily meet an unavoidable dead end. 

Meaning: extractive institutions are not necessarily doomed to fail.

Both inclusive and extractive institutions can thus be good and bad for their nations.

To be fair regarding the Germany Case Study as profiled by Levine et co: the review authors might do well to study Russia and their extractive institutions during the Cold War years. Acemoglu and Robinson do mention how the Russians were advancing at an accelerated rate, during the Soviet era, but point out how that came to an end because of technology. And how even economist Paul Samuelson predicted that the USSR would (or could) overtake the US in economic terms. 

Amidst such contradictions, doubt now pervades in my mind. 

While simplicity, they say, is the seal of truth - in attempting to prove and answer whether inclusive institutions are all a country need to prosper, I'd go with the stereotypical consultant's response: it depends.

But, like so many other theories and hypotheses, it does not necessarily matter, if in the end, the research that led up to the original premise provides thought-provoking theory that effectuates change. 

Change could come from mere consciousness. 

I have found Acemoglu and Robinson's hypotheses about institutions to be a useful base to start from, particularly when thinking about my current perception about what goes (and has gone) on in Mexico. 

James Robinson wrote an apt account about Mexico, under the "Why nations fail" guise. True or not, having described in detail how Mexico's current and past political institutions have shaped the country, and how specific perverse incentives, have led to certain consequences, resonated with me.  

The wise adage holds that those who do not learn from history are bound to repeat it. At the very least, I think that somehow the authors are asking us to do the same (regardless of whether their theories hold water, or hold 100% of the water, as it were).

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1972

After a longer-than-expected break, Pseudoeconomics' Nobel Prize in Economics series is back.

Article preparation for this series has been a difficult task. The straightforward predetermined path that leads to a proper series post could invariably involve a mix of copy-pasting, sloppy appropriation and smart paraphrasing. I'll do my best to avoid this easier path. I am not beyond falling prey to regurgitating online information, there is no academic authority revising my work after all, but following that path would be somewhat wasteful. And boring. Not to mention painstakingly unoriginal.

The series' purpose is to promote research and a general background about how the nobel prizes in question came to be. Attempting to understand the nuts and bolts behind major breakthrough theories and advances in the realm of economics, albeit conceptually, is of tremendous value to an amateur economist.

And as such, posts like these belong in a website dedicated to an opinion-based take on economics and related subjects.

Having cleared that up, let us begin:

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1972 was awarded jointly to John R. Hicks and Kenneth J. Arrow "for their pioneering contributions to general economic equilibrium theory and welfare theory"

To appreciate what John Hicks and Kenneth Arrow were celebrated for, it became fundamental to first brush up on the general economic equilibrium theory. A first glance at the theory quickly leads to Leon Walras, who first pioneered the concept. A pattern emerges amongst those who came to pioneer (Walras) and then revolutionize (Hicks and Arrow) the theory: they were all mathematicians first, economists second. 

Walras was influenced by his father, Auguste Walras, who pushed him to apply mathematics to economic theories. Leon Walras' subsequent findings, were a product of beauty, as complemented by Antoine Augustin Cournot, French mathematician and Auguste Walras' teacher (possibly mentor) who laid the early foundations for econometrics and published influential work on monopolies and duopolies. 

John Hicks touched on what the general equilibrium theory had not built on, mainly additional assumptions regarding consumers (demand) and producers (supply) behavior. More than complementing the theory, what Hicks did was to fortify it. He nurtured it by "spreading the word" via his book Value and Capital, with fellow contemporary economists, giving the theory a new audience, who, by then (1930's - 1940's) were developing alternate theories that would fit in nicely with his. Hicks also formalized comparative statics in the book, which has become second nature to any Economics student. Ceteris paribus notwithstanding, comparative statics is a nifty tool that helps understand how endogenous or exogenous factors affect an equilibrium. 

On that same line, it comes as no surprise that most of Hicks' work opened up the possibility for others to take what had previously been put forth (by, for example, school-of-thought defining economists like Keynes) and tinker with the different formulas, provoking thought and new questions. Application became primordial. It was as if a non-digestible ultra-nutritional food was suddenly synthesized to an easy to eat meal. Not only that, as time went by, good taste would become part of the deal too.

The general economic equilibrium theory can get complex, in terms of the dynamism it takes on when taking into account how a supply-and-demand equilibrium can be affected by price (most notably), time, consumer choices, the production function, facing simultaneously the complications that arise from marginalism, and other factors. Hick's nobel prize lecture sheds light on what he had been thinking when he approached the general equilibrium theory, and the factors that distort it. The production function, he says, is affected by invention. Of course! Isn't that obvious? 

Not in the least. But, going back to the most primary part of the general equilibrium theory - it is widely understood that good's prices, above all, affect other good's prices, and so forth, until an equilibrium, via normal economic activity, is produced. 

Part of what has not been mentioned regarding Hicks' and Arrow's prize is the advancement in welfare theory, which itself was shapen by a Walras and Cournot colleague, Vilifredo Pareto. Much like his peers, Pareto was passionate about veering towards economics as a more scientific discipline, gently leaning away from the more moral philosophical side of things. Still, every Economist mentioned in this post was a philosopher, except for Hicks and Arrow. 

That fact is understandable: as Economics progressed, so did the interests of those that advanced it. Mathematical and scientific inquiry was now a must - and if anything, other disciplines would now have to be such that these would comfortably take on issues like behavior. Psychology in economic theory has now become important, and behavioral economics has been given equal footing as well. 

Continuing the report on what Hicks prepared for others - If we throw in wages, savings, investment, (Hicks was also responsible for the IS-LM model) growth, and business cycles in the mix, the concocted potion becomes more potent. Hicks references John Stuart Mill and also shakes Adam Smith's invisible hand all throughout his research. It's great to see how giants rest on the shoulders of other giants. Continually.

While Hicks did much for general equilibrium theory, it was Arrow, through the Arrow-Debreu model who rigorously developed a model that proved the existence of general equilibria in any given economy. Per his additional work, Arrow's endogenous growth theory caused an interesting conversation to get going, given that not long before Arrow's time, it was generally believed that mostly exogenous factors caused technological change (and thus advancement). Still, what Arrow did, in my opinion, was not only to theorize, but to focus on the positive aspects a first world country, that invests in research and development, education and forward-thinking social programs might produce in terms of growth. In a similar way, Arrow sets forth an interesting take on political theory through his impossibility theorem. 

Technological change, much like politics are practically impossible to observe closely and measure, but are aspects of Economics that merit academia's attention nonetheless. Other economist's growth & social models and theories have benefited and followed suit.

Both Economists were visionaries in their own right - Arrow still is. He is the youngest Economics Nobel Prize Winner to date, which makes it no surprise that he is still amongst the living.

To conclude, something Arrow wrote, that encapsulates the past and future of the general equilibrium theory. Very well put:

'“From the time of Adam Smith’s Wealth of Nations in 1776, one recurrent theme of economic analysis has been the remarkable degree of coherence among the vast numbers of individual and seemingly separate decisions about the buying and selling of commodities. In everyday, normal experience, there is something of a balance between the amounts of goods and services that some individuals want to supply and the amounts that other, different individuals want to sell. Would-be buyers ordinarily count correctly on being able to carry out their intentions, and would-be sellers do not ordinarily find themselves producing great amounts of goods that they cannot sell. This experience of balance indeed so widespread that it raises no intellectual disquiet among laymen; they take it so much for granted that they are not supposed to understand the mechanism by which it occurs.”'

For an excellent and technical take on the general equilibrium theory, read Stanford Economist's Jonathan Levin's 2006 paper "General equilibrium". 

What good are Economists?

As redirected by Greg Mankiw - via his blog.

Robert shiller explains. 

An interesting excerpt:

We do not blame physicians for failing to predict all of our illnesses. Our maladies are largely random, and even if our doctors cannot tell us which ones we will have in the next year, or eliminate all of our suffering when we have them, we are happy for the help that they can provide. Likewise, most economists devote their efforts to issues far removed from establishing a consensus outlook for the stock market or the unemployment rate. And we should be grateful that they do. 

In his new book Trillion Dollar Economists, Robert Litan of the Brookings Institution argues that the economics profession has “created trillions of dollars of income and wealth for the United States and the rest of the world.” That sounds like a nice contribution for a relatively small profession, especially if we do some simple arithmetic. There are, for example, only 20,000 members of the American Economic Association (of which I am President-Elect); if they have created, say, $2 trillion of income and wealth, that is about $100 million per economist. 

A cynic might ask, “If economists are so smart, why aren’t they the richest people around?” The answer is simple: Most economic ideas are public goods that cannot be patented or otherwise owned by their inventors. Just because most economists are not rich does not mean that they have not made many people richer.

Social science problems.

Quick Notes - Online portals to great Economic/Financial/Political knowledge

Currently reading Daron Acemoglu's and James Robinson's book: Why Nations Fail.

The book takes on a tricky subject (comparing first world countries and their political/economic institutions to those in second and third world countries) and constructs a powerful premise: what makes a country fail is not necessarily its geography and/or culture as others have pointed out - maybe "fortunate accidents" that led countries to adopt more inclusive economic and political institutions are the main reason some nations are better off than others.

Heard about this book when Denisse Dresser, a Mexican political analyst, pointed out its relevance in a recent conference I attended, where this year's Mexican political scandals and current economic woes were the main focus of her discussion.

"Why Nations Fail" serves as an alternative world history tour guide, linking major world events and their outcomes to their ensuing consequences, its effect on countries (as well as regions and whole continents) and their political/socio-economic status, leading up to the present. 

A great online book review by Economist David Levine can serve as an excellent executive summary for anyone looking to get a quick rundown. 

More on this and reactions to Acemoglu's and Robinson's theories soon...

Also regularly checking out NYU's Stern School of Business' Prof. Aswath Damodaran's website, a haven for any finance autodidact out there who wants to know more about valuation (check out Damodaran taking on Uber), corporate finance and portfolio management (Damodaran says finance can be "divided into these three main areas").

Finally...taking a few moments a week to read some literature. Finally got my hands on an english translation of a Patrick Modiano book (Suspended Sentences: Three Novellas). A powerful and very melancholic literary journey to the darkest part of people's memories, in post world war two France.

Growth through knowledge, into itself and growing.

How to be a prolific writer

Perfectionism. The bane of my existence.

In comes my favorite hobby: Writing. 

These two things clash constantly - thus producing writer's block.

A distressing joke.

As expected, the internet had some answers. I found a couple of articles, posts, and even a video that shares great tips - and great examples of how prolific writers became just that: prolific.

How to be a Prolific Writer from: Goins, Writer

7 Habits from: Write to Done

15 Productivity Secrets from: Mental Floss

Advice on Writing and Productivity from: Nathalie Lussier

Seven Secrets of Prolific Writers by Hillary Rettig - video:

Milton Friedman popularizing Economics.

Milton Friedman is awesome. 

There's loads of videos of him schooling people on economics (the Chicago school of economics mind you) - the world needs more economists speaking to laypeople like this: reaching out through talk shows, "town hall" type meetings and other public/popular venues. 

Sure - economists do that in universities and in conferences...but, in my opinion, they don't do enough to popularize Economics.

People need to understand what's going on in economic terms to really understand the ghost in the economic machine.

Here's Friedman talking about how there's no free lunch (ever):

Pseudoeconomics reading list: What's been read and what's next

I will be sporadically listing my economics/finance/business book recommendations on this website.

I recommend the e-book version.

The last book I read and posted about was Robert J. Shiller's and George Akerlof's book "Animal Spirits: How Human Psychology Drives the Economy and Why it Matters for Global Capitalism".

The authors make a an excellent case for the irrationality that deeply affects the world economy at large, and how this cognitive deviation and its effects leads to the following conclusion: in economics, and all that it touches (markets, banking, finance, trade, etc.), psychology matters.

And while the term "animal spirits" was originally used by John Maynard Keynes in his 1936 book "The General Theory of Employment, Interest and Money", it took more than half a century for these two economists to come along and write this book. Why was there more rational actor based economic theory in the past 50 years, and less behavioral economics related subject matter to countenance the former?

To be fair, decision theory and the psychological basis for decision-making has been taken into account since Adam Smith's time (note his book "The Theory of Moral Sentiments"). Common sense and experience can quickly make anyone discover how the economy, in its essence, is truly human. While the Invisible Hand has been purported to be the self-regulating magister behind every economy, there should be no doubt that this hand is anything but all-knowing.

What's always fun about these reads is how they lead to other interesting sources, and how the same questions posed by the authors become questions that engulf the reader. For example, how is it that some economists stand by their theories, the ones devoid of or that negate the human psychology behind them?

Shiller and Akerlof are great at laying out evidence to prod holes in their fellow economist's arguments, or to bring attention to the exception to the rule in popular and well-accepted economic theories. Sometimes, depending on one's own inclinations, reading about different economic takes on subjects starts to feel like being in a great restaurant the offers a vast number of dishes. There is no perfect way to choose, but some choices are healthier than others.

Some say economist's opinions should come from one-handed economists...that way the person looking for advice can avoid having two choices (on the one hand, and on the other...) for every problem. In other words, opinions and the theories behind most economic and social phenomena abound. There is no economic theory panacea.

Nonetheless, the authors provide sound advice for today's economic problems.

The following LSE (London School of Economics) video was recorded in 2009 and shows Robert J. Shiller discussing his book:

Confidence. Fairness. Corruption. Money Illusion. The persistence of poverty amongst minorities. Tradeoffs. People and how they misunderstand market realities, and their irrational choices about the financial challenges they face.

Fascinating to read about. Pursuing an investigation on the subject and digging deeper leads to further information for a more balanced opinion.

In comes my small discovery: Caltech's Colin F. Camerer and Carnegie Mellon's George Loewenstein, publication "Behavioral Economics: Past, Present, Future". The article starts off with a few headings that contribute to a general overview:

• What Behavioral Economics Tries to Do
• Evaluating Behavioral Economics
• The Historical Context of Behavioral Economics
• The Methods of Behavioral Economics

The references listed at the end of the article take up a total of 13 pages. The degrees of separation from the authors to their contemporaries are two degrees away or less. The opportunity to further investigate and find out more about the subject is practically infinite.There's even a reading guide from a Harvard.edu website that's pretty useful to follow.These sources explain the subject fully and put everything neatly into context. 

Camerer and Loewenstein are leaders in the behavioral economics field. Their work structures the experimented underpinnings that make the case for the psychology behind economics at large. And much like Shiller and Akerlof in their own work, they do so with the utmost conviction.

A video where George Loewenstein talks about behavioral economics, and the role emotions play in decision-making:

What's next on the reading list?

Martin Wolf's "The Shifts and the Shocks: What We've Learned - and Have Still to Learn - from the Financial Crisis."

This choice was based other's recommendations, in this case leaders in the field.

Commentary on the book will soon follow.