Each Sunday I compose a list of the most worthwhile content I’ve consumed during the past week. Primarily as a way to keep inventory of material that influenced me and my way of thinking.
The Illusion of Skill (2018) by Wayne Himelsein & David Taylor. Re-visit. The pitfalls of assuming a normal distribution and the cost to Sharpe Ratio when skew is present.
Economics in Nouns and Verbs (2021) by W. Brian Arthur. On the fetishization of mathematics within economics. Some would argue that a prerequisite to economic models are explicit falsehoods (Rational Agent, static v dynamic and so on). Any paper that includes a shout-out to Iain McGilchrist is bound to be filled with nuggets of wisdom.
”Nouns become idealized conceptual objects. If we build economic theory on nouns we want them to be general so they can be used across the field. So they become conceptual objects, idealized generalities, not things that are real and specific and tangible. Thus “the Firm” is an ideal object, which brings an artificial homogeneity that doesn’t belong, and an applicability that is shaky. What exactly is a firm in this day of platform services and cross-national conglomerates? And so the exactness of nouns becomes an illusion. In much the same way, industries are treated as a conceptual ideal, and to a large extent alike. This uniformity may seem to be a small price for logical precision, but in reality the lack of specificity is a source of imprecision. For instance it makes structural change hard to talk about for theory. Structural change happens when new industries or new technologies change the character of the economy or its parts, as happened when the agrarian economy gave way to the manufacturing one. Theory can’t pick up a change in character if its objects of interest don’t change in character.”
”Equations bias economics toward equilibrium thinking. The reason here is simple. Nounbased economics links nouns to other nouns via systems of relation and balance—equations. It is easier to analyze these if they hold still, so to speak, much as it is easier to study the workings of a butterfly if we nail it to a board. And so we purchase understanding by assuming stasis—equilibrium. But the results are at best mixed; all too often the system hangs lifeless, unchanging in time.”
The Use of Knowledge in Society (1945) by Friedrich von Hayek.
The Ghost of Classics Yet to Come by Stephen Fry.
”This isn’t the time or place to go into the reasons for the incredible speed with which that central pillar cracked, causing the whole edifice to crumble and collapse like the Philistine temple at Gaza. No single Samson pulled it down, but perhaps we can look for causes in a combination of Universal Education, the First World War and the general disintegration of Empire, hierarchy and certainty in the world. Classics very quickly became associated with the Old Guard, the ancien régime, Them, the chinless, gutless, clueless ones who got us bogged down in Flanders, who supervised mass unemployment, who callously broke strikes and stomped on rights and who, when they thought of warfare, pictured Horatio defending Rome or hoplites chasing Persians to the sea, and who were cheap, snobbish and shallow enough to think that an idea quoted in Latin had more value and authority than one spoken in English or any other living language.”
Quarterly Review and Outlook: First Quarter 2021 by Hoisington Investment Management Company.
”In 2020, measured by the ratio of total debt to GDP, the Euro Area was 124.3% of GDP higher than in the U.S. while Japan exceeded it by 292.3%. The debt to GDP ratio in the Euro Area and Japan has consistently outpaced that of the U.S. This explains why U.S. GDP growth has consistently registered superior economic performance. In 1995, the U.S. economy was 4% greater than the Euro Area, but 98% larger than Japan. In 2020, the U.S. economy was 34% and 200% larger, respectively, than the Euro Area and Japan. The comparatively worse debt overhang in the Euro Area and Japan indicates the U.S. should continue to be the growth leader.”
“The Marshmallow Test” by Harley Bassman. ”I use long-dated options not because I know I’m right, but rather because it costs so little to be wrong.”
The Susquehanna Six by Hide Not Slide.
You’re Fooling Yourself, Which Is Great for Your Endurance by David Epstein.
2021: The Year of the Black Swans? by Tuomas Malinen.
Pierre-Simon Laplace, In Our Time.
Emiliana Simon-Thomas on Happiness, EconTalk.
Can We Talk About Scary Ideas? (w/ Peter Singer, Francesca Minerva & Jeff McMahan), Making Sense.
Signs of Trouble in the Bank Earnings ”Blowout”? (w/ Chris Whalen), Real Vision.
Zach Carter on the Story of Weimar Hyperinflation, Odd Lots.