economics
Organizing and decoding problems
My favorite sort of problem involves the interactions between individuals, groups of people, and mechanical rules generated by individuals and groups. Speculating on how the rules were shaped by the experiences of the individuals and groups is a fun game to play when presented with a curious set of circumstances. Conversely, my least favorite problems are those generated by the institutional brain damage of certain kinds of groups. Software and systems shaped by regulations and the particulars of monetary exchange are tedious at best.
I find it quite amusing when answers aren’t “clean” and technological systems aren’t the best solution. Often, no amount of analysis and brilliant coding can make an improvement. What is needed is to understand what people do, why they do it, and persuade them to do otherwise.
This brings me to economics, specifically behavioral economics. If you take away all the math, economics is largely about how people behave in aggregate. It’s a useful tool in understanding how to work with systems that involve people. But there’s more to economics than explaining how people interact in markets.
Russ Roberts, in the process of explaining how economics is not useful as a mechanism for answering questions like “did the stimulus work?” or “when will the housing market recover?”, gets to what really interests me about economics and finance:
"Is economics a science because it is like Darwinian biology? Darwinian biology is very different from the physical sciences. Like economics it is a very useful way to organize your thinking about complex phenomena. But it is not a predictive or very precise science or whatever you want to call it."
The crux of the biscuit, for me, is right in the middle. Economics is a useful way to organize an intricate and interconnected problem and figure out how to reason about it. In casually studying economics and finance over the couple years, I’ve come to form a better mental model about how the world works.
Its possible that this mental modeling is what I do when I’m coding. I’m poking how some code works, looking at its inner workings, trying to understand how it interacts with the code around it. I sift through revision logs to see how it got to where it is today, talk to others on the team about the code and why it ended up one way and not another. I’m organizing and modeling the code in my head, building up a model that describes .
Lately, I’ve been describing my work as tinkering with lines of code until numbers appear on the screen in the right order. This is invariably greeted with a comforting-to-me response like “I could never do that”. But I really enjoy this. I’m not just debugging my code; I’m sharpening the way the program is organized in my head. Once I’ve got my head around it, I decode that organization into words, code, drawings, etc.
With programs, there is some system of rules, forces, and interactions which describe how the code works or doesn’t. Economics, too, describes a system of rules, forces, and interactions that predicts how a puzzle of human beings operate. Organizing and decoding these technical and social puzzles is great fun.
The economic dashboard
What’s the state of the economy? - a stunningly brilliant visualization of where the economy has been (lagging indicators) and where it’s going (leading indicators). The explanations are excellent too. (Via Flowing Data).
Congruous capitalism
Here’s some idealism for you: I would like to think that the future of human endeavors is congruity. There is a lot of emotional writing about rational topics. That emotion often colors the writing to the point of irrationality. It seems to me that this is because many of the prominent systems of our lives are incongrous. These inconsistent and seemingly irrational systems drive us to emotion and our logic suffers for it.
I’ve been reading Failed States by Noam Chomsky. I think you could summarize it as “the U.S. government says it is doing something for reason A, but is in fact doing it for reason B”. People really dislike Ticketmaster, who would defend themselves by saying “we’re trying to make access to live music easier” but everyone knows “we’re trying to maintain a monopoly and squeeze the margin as tightly as possible”. You can play this game at home for any institution that is widely reviled.
Some other incongruous systems:
- Politics: ostensibly about the will of the people, but really about the short-term interests of those with the clever lobbyists
- Telecommunications: ostensibly about helping people communicate, but really about maintaining monopolies and minimizing the maintenance cost of those monopolies
- Insurance: ostensibly about helping people put money away for a bad day, but really about minimizing pay-outs to maximize profit
It is my hope that the businesses that emerge from this economic conflagaration are those that connect more directly with their customers. In doing so, they are more transparent. It is harder for their internal and external goals to conflict. In this way, they can profit from aligning their objectives with those of their customers. Sure, they may not make obscene profits, but that’s fine.
Here’s a tag-line for this congrous capitalism: “May greedy capitalism die by a thousand cuts of moderately-profitable honesty.”
What I'm Thinking
Last night at Cohabitat, we did some lightning talks. The prompt was “What I’m Thinking”. I decided to take a cross-section of topics I’ve been immersing myself in lately. And of course, every good talk needs a gimmick, so I went with some of the fantastic shows on television right now. Here’s a map of the topic:
And here’s a video of my talk:
It’s a whirlwind tour through software, abstractions, economics, finance, Mad Men, business, the messiness of life, Gossip Girl, indie developers, 30 Rock, sweating the details, product development, LOST, life’s interconnectedness and how awesome it is to try to understand all of this.
I hope you enjoy it. I forgot to take questions after the talk, so please feel free to correct me or inquire in the comments.
Freakonomics
Freakonomics. Its not about economics in the dry, dismal sense that I remember from college. This is more about counterintuitive turns of logic, data showing causations that no one really supposed made sense. In the end, its about economics in the sense that real estate agents, sumo wrestlers and criminals respond to financial, social and lifestyle incentives.
Oh, and the book features twenty misspellings of the name “Jasmine”, a bit on two brothers named Winner and Loser, and a person named Shithead. Predictably, the last was my favorite.
Why is oil so damn expensive?
Great article in The Economist on oil prices and what’s causing their painful rise. Double, double, oil and trouble | Economist.com:
In the short run, neither demand for nor supply of oil is very elastic. It takes time for people to replace their old guzzlers with more fuel-efficient cars, or to switch to jobs with shorter commutes, or to move closer to public transport. By the same token, it can take ten years or more to develop an oilfield after its discovery—and that does not include the time firms need to bolster their exploration units.
In short, nothing related to oil consumption changes quickly. It takes a decade for consumers to fully adjust to prices and the same amount of time for producers to field new technology and start mining new discoveries.
In the mean time, this little scooter is looking better and better!