Since I have been reading the Antifragile book by Taleb lately, I have been wondering what he would say about Keynes’ economic theory.

I found a 2010 CNN article Questioning Keynes.

“Keynes was too smart to make a mistake — the problem is we live in a different environment,” said Nassim Taleb, author of The Black Swan, which looks at the impacts of improbable events. Taleb added that with debt levels as high and problematic as they are in parts of Europe and the United States, accurate forecasting on indicators such as unemployment rates become more crucial.

One of the parts of the “different environment” may be that the economic collapse came after the Republican administrations had run a vicious anti-Keynesian policy of running up huge deficits at exactly the point in the economy when Keynesian theory said you should be paying down the debt.  Doesn’t anybody remember the mantra, “You know how to spend your money better than the government does”? This was used to justify giving the surplus back to the tax payers rather than using it to pay down the debt incurred by the taxpayers.  The policy of giving taxes back to the tax payer lasted long after the surplus became a deficit.  The economy had gotten so used to huge deficits during boom times, that the size of the deficit that was needed to make a difference during the recession became unbelievably huge.

Maybe Keynes’ prediction error was in not predicting that fools like Reagan, Bush, and Bush would come along to so perfectly mistime the policies that he was advocating.  Of course Taleb was not saying that Keynes mispredicted, but what Taleb said did trigger my thought in the previous sentence.

See, RichardH, I don’t always agree with Taleb either.

If you might ever need to show a video that demonstrates how a bully behaves, book mark this video.

You might also use this video as a visual definition of chutzpah. Blame one of the victims of your decisions for doing their job to carry out your decisions. Sounds like this will make its way into an upcoming Dilbert cartoon.

Alternet has the Consortium News story How GOP Extortion Is Rooted in Southern Slavery by Robert Parry.

The Federalists despised the concept of states’ rights (as enshrined in the Articles of Confederation) and believed in centralizing power in the federal government, albeit with a system of checks and balances to restrain ill-advised decision-making, but with few other limits on what elected representatives could do for the nation’s well-being.

That is why – in both the Preamble and in Article I, Section 8 (the so-called “enumerated powers”) – the Framers included language giving Congress the authority to “provide for the common Defense and general Welfare of the United States” and “to make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers.”

As historian Jada Thacker  has written, “The Constitution was never intended to ‘provide limited government,’ and furthermore it did not do so. … This is not a matter of opinion, but of literacy. If we want to discover the truth about the scope of power granted to the federal government by the Constitution, all we have to do is read what it says.”

Given the malleable phrase “general Welfare” and the so-called “elastic clause” for passing all “necessary and proper” laws, Thacker notes that “the type, breadth and scope of federal legislation became unchained. … Taken together, these clauses – restated in the vernacular – flatly announce that ‘Congress can make any law it feels is necessary to provide for whatever it considers the general welfare of the country.’

As further proof to the point, my fractured High School learning about the Constitution tells me that the Bill of Rights (the first 10 amendments) was insisted upon by the states in order for the Constitution to be accepted.  The states (or the people) insisted that their individual rights be explicitly protected from the powers given to the Federal government in the main part of the Constitution.

Of course the book Lies My Teacher Told Me: Everything Your American History Textbook Got Wrong by James W. Loewen puts some doubt in my mind about what I learned in school about history.

I notice a lot of viewership of the item posted by RichardH, Humor–Myron Scholes on the best way to reduce risk.

I thought I would add a different point of view, just in case anybody is wondering.  I was reading the Antifragile book by Nassim Nicholas Taleb, and he mentions Black, Scholes, and Merton several times.

Below is the citation of a technical paper Taleb coauthored.

Haug, Espen Gaarder and Taleb, Nassim Nicholas, Option Traders Use (very) Sophisticated Heuristics, Never the Black–Scholes–Merton Formula (February 26, 2009). Journal of Economic Behavior and Organization, Vol. 77, No. 2, 2011. Available at SSRN: http://ssrn.com/abstract=1012075

Here is the abstract that is available at the link just above.  The abstract gives a rather mild view of what Taleb thinks of Black, Scholes, and Merton.

Option traders use a heuristically derived pricing formula which they adapt by fudging and changing the tails and skewness by varying one parameter, the standard deviation of a Gaussian. Such formula is popularly called “Black–Scholes–Merton” owing to an attributed eponymous discovery (though changing the standard deviation parameter is in contradiction with it). However, we have historical evidence that: (1) the said Black, Scholes and Merton did not invent any formula, just found an argument to make a well known (and used) formula compatible with the economics establishment, by removing the “risk” parameter through “dynamic hedging”, (2) option traders use (and evidently have used since 1902) sophisticated heuristics and tricks more compatible with the previous versions of the formula of Louis Bachelier and Edward O. Thorp (that allow a broad choice of probability distributions) and removed the risk parameter using put-call parity, (3) option traders did not use the Black–Scholes–Merton formula or similar formulas after 1973 but continued their bottom-up heuristics more robust to the high impact rare event. The paper draws on historical trading methods and 19th and early 20th century references ignored by the finance literature. It is time to stop using the wrong designation for option pricing.

The headline Are YOU Using NSA Spying To Its Full Potential? comes from The Real News Network.  Here is the video.

See, if you just use a little ingenuity, you can turn almost everything to your advantage.

Esquire has the item The Reign Of Morons Is Here.  About the mildest quote I could find to excerpt here is the following:

We have elected an ungovernable collection of snake-handlers, Bible-bangers, ignorami, bagmen and outright frauds, a collection so ungovernable that it insists the nation be ungovernable, too. We have elected people to govern us who do not believe in government.

Well, I don’t “believe in the government” either, but I do have an understanding of what we might need to do by banding together, forming a government, and having it perform certain necessary functions.

The point that I keep on insisting on is the following:

The first and most important thing is to recognize how we came to this pass. Both sides did not do this. Both sides are not to blame.

And to think it all started with Ronald Reagan.

Thanks to RogerS and JoãoG for posting this on their Facebook pages.

In the spirit of this blog being unfair and unbalanced and deviating a little from the motto Extremism is the Enemy of Rationality^™, I bring you the Truth Out article Half the Republicans You Know Are Insane.

When asked if Muslims are working to implement Sharia Law in America – the harshly medieval seventh-century Islamic code best represented by the Taliban in Afghanistan, the Wahabists in the ranks of al Qaeda and (shhhh) a significant portion of the rebels in Syria – 44% of Republicans said it was true. If you know five Republicans, once again, two of them believe this, and a third is halfway convinced. Um…how? Where? In what way? Because women can now get free contraception and gay people have the same rights as you do? You think the Taliban is down with that?

The other examples in the article are just as entertaining as the one above.

The Daily Show has the segment Jon Stewart’s Rockin’ Shutdown Eve.

If President Obama can make a deal with the most intransigent mullahs in the world but not with House Republicans, maybe he is not the problem.  (07:20)

I don’t necessarily agree with the disparagement of the mullahs, but I do agree with the assessment of the Republicans.

I also agree with Jon Stewart’s stand on firing all the people in the Congress because one side is being intransigent.

If we refuse to determine which side we think is right and which side we think is wrong, then we are failing to do our job as citizens just as badly as the side we think is wrong is failing to do their job.

I had a situation in my career where I was managing a group where the young technical lead of a project wanted to take the project in one direction and a very senior technical member of the project wanted to go in another direction.

There was no compromise between the two sides and the project would have ground to a halt if no decision was made. I don’t claim to even be a good manager, but I chose the technical lead’s position as the one I thought was right. The other engineer would just not let it go. He would not stop his campaign to make the project go in the direction he wanted. He went up and down the chain of command trying to get the decision changed, all to no avail. He became pretty marginalized in the project even though the very foundations of the project used many key techniques he had developed, just not the one that he was so adamant about.

I would have been shirking my duty and harming the project and the company if I had just decided to fire both of them because they couldn’t agree. We were not going to find out which path was right and which wrong by standing still and arguing over it. We had to move in some direction. If it turned out to be the wrong direction, it would become more obvious as the project proceeded. We could always change direction, although it would have been very painful, had we made the wrong decision.

I don’t claim to any genius for having made the right to decision. It turns out that the technical lead was ahead of the industry by many years. His way has been universally adopted by all the modern day purveyors of that type of software.

In a dynamic industry and in a dynamic world, you just cannot afford to keep arguing. You have to pick a direction, and move forward.

The Chicago Tribune has the story Government shutdown: White House rejects latest Republican offer. What I found particularly interesting was the part that said:

Before the huddle, Republican Representative Peter King, a New York moderate, estimated that more than 100 of the chamber’s 232 Republicans would back Obama’s demand to restore all government funding without conditions. That would be enough to easily pass the House with the support of the chamber’s 200 Democrats.

Asked why the moderates don’t demand a vote, King said: “I guess that they are waiting for the right time.”

This kind of arithmetic is what led to my previous post How The Government Shutdown Ends. If Nancy Pelosi could convey to the moderate Republicans that she and the Democratic caucus would support the efforts of the moderate Republicans, we might be able to get a solution.  Perhaps the moderates are really waiting for some assurance from Nancy Pelosi.

Why doesn’t some enterprising reporter ask Nancy Pelosi how she feels about the idea?

There is another possibility that explains what the moderate Republicans are waiting for.  The damage this shutdown is doing to the Republican party might be considered to be similar to chemo therapy for cancer.  It makes you sick as hell for a while, but it may kill the cancer before it kills you.  In this case the cancer that needs to be killed off is the Tea Party wing of the party.  (Kill off in stopping them from getting re-elected, not in any other sense.)

Talking Points Memo has the article Ted Cruz’s Dad Suggests Obama Is A Muslim (AUDIO).

The father of Sen. Ted Cruz (R-TX) suggested Friday that President Barack Obama is a practicing Muslim and slammed “RINOs” for not backing his son’s efforts to defund the Affordable Care Act.

I know that posting this audio is so akin to shooting fish in a barrel that I almost feel bad for posting this.

Apparently this guy never saw the movie “As Good As It Gets“.

The audience cheered when Helen Hunt railed against her HMO for deciding that her child could not get the medical care it needed because of cost/benefit analysis. The HMO was a private company that controlled her health care long before President Obama came upon the political scene.

How can the people against Obamacare be so ignorant of what private health insurance is like?

In discussions with my SO, we came up with an answer to what many might have considered a rhetorical question as posed above.

Since the majority of Americans have private health insurance, they cannot be so ignorant of what it is like to have private health insurance.

However, most people do not get sick enough to experience the worst parts of the private health insurance system.

I have received a good deal of expensive medical care through my private health insurance, and for the most part, I have not experienced the worst effects of the system. I have experienced minor difficulties, but I stood up to the issues and got them resolved.

In order to know about the worst of the worst, most people will have to hear about other people’s experiences. So why are the Republicans so good at making people fear things that never happened, and yet the Democrats cannot engender the same fear over events that actually did happen?

There is another section of the audio that is particularly telling.

He also said that the Affordable Care Act denies and rations coverage for elderly patients while claiming that the law includes “suicide counseling.”

“As a matter of fact, one of the things in Obamacare is that for the elderly, every five years you must have end-of-life counseling,” Cruz said. “Translation: suicide counseling.”

The end-of-life-planning is about what are your options, hospice, in-home hospice, legal issues, as you near the end of life. There is no discussion of suicide which is illegal in most states.

Now it is conceivable that at some time in the future, a government (as well as private) health care plan end-of-life planning could devolve into a discussion of suicide as a means of saving the system money. Under what type of administration is this most likely to occur? Obviously a Republican administration. This Republican just told you what comes to his mind when he thinks about saving money for the system.

The Democrats talk about being more efficient, negotiating prices harder, researching cost containment methods, promoting best practices from health care around the world. Many Republicans think about counseling suicide as a possible method. What does this tell you about the Republican mind?

Also note that if you are elderly and using Medicare, the ACA has nothing to do with your health care. (Except for the elimination of the unfair subsidy the insurance company gets when you use Medicare Advantage. I use Medicare Advantage. Supposedly, the ACA negotiation included the insurance companies’ promise to still do Medicare Advantage without the subsidy.)