Breathtaking Photo of Space

Source: Copyright Nick Risinger.

The boyfriend of one of my oldest and dearest friends spent several years creating one of the largest sky-surveys ever created.

Nick Risinger, a 28-year-old native of Seattle, trekked more than 60,000 miles around the western United States and South Africa to create the largest-ever true-color image of the stellar sphere. The final result is an interactive, zoomable sky map showing the full Milky Way and the stars, planets, galaxies and nebulae around it.

Previous professional sky surveys (including the Digitized Sky Survey of the 1980s, which is the source for theWorld Wide Telescope and Google Sky) shot only in red and blue. Including a third color filter gives the new survey a more real feeling, Risinger said.

In all Nick took over 37,000 individual photos that were then stitched together to create his image. Last week he released an iPad App that includes many interactive features. If you are fascinated by space, or want to be, I suggest giving the app a try.

The State of the Chinese Interwebs

There is this video titled Behind the Great Firewall of China:

And this must-read post about eight popular internet memes in China. As a taste I present this photo and caption, which very much reminded me of a popular American Facebook meme:


For this highly popular meme, three photos are cobbled together — one representing the “ordinary youth,” another representing the “artistic youth” and finally the “idiotic youth.” The meme became so popular so quickly that gained a Chinese acronym, 普文二. [Ministry of Tofu].


Hope Solo’s very, very rocky road to the 2012 Olympics.

Matthew McConaughey’s journey from Dazed and Confused to Magic Mike.

How eight young economists see the future of the field. HT: Marginal Revolution.

I found the following idea the most provocative, though I’m not sure I completely follow or agree with the implication:

In his famous 1945 article, “The Use of Knowledge in Society,” F. A. Hayek argued that despite their inequity and inefficiency, free markets were necessary in order to allow the incorporation of information held by dispersed individuals into social decisions. No central planner could hope to collect and process all the information necessary for social decisions; only markets allowed and provided the incentives for disaggregated information processing. Yet, increasingly, information technology is leading individuals to delegate their most “private” decisions to automated processing systems.  Choices of movies, one of the last realms of taste one would have guessed could be delegated to centralized expertise, are increasingly shaped by services like Netflix’s recommender system. While these information systems are mostly nongovernmental, they are sufficiently centralized that it is increasingly hard to see how dispersed information poses the challenge it once did to centralized planning.

The story behind the NPR show people either love or hate: Radiolab. Caution: the article reads like radiolab sounds. There was also this surprisingly simply yet touching video included:

The Best Based-on-a-True-Story Movie Idea Ever

For nine months in 2011 the prime minister of Somalia was a New York State Department of Transportation worker living in Buffalo, NY with no political experience who hadn’t been to Somalia in over 20 years. Read the story here. Here is a little taste:

Less than two months ago, he was prime minister of Somalia. He battled terrorists, pirates and warlords. He addressed dignitaries from the United Nations.

Now, Mohamed A. Mohamed is back at his old job at the state Department of Transportation downtown, back to his little cubicle with a window overlooking Swan Street.

A few photos of him as premier were tacked to his wall by colleagues, the only visible reminder that these last nine months weren’t a dream.

“It’s a different feeling when you’re heading a whole nation and you come back to your normal life,” Mohamed said. “It’s a little awkward, to tell you the truth.”

Mohamed was as stunned as anyone when he was offered the prime minister’s position last October, after a trip to the U.N. in New York City to speak with Somalia’s president, Sheikh Sharif Sheikh Ahmed.

Why isn’t this a movie yet? I’ll write the first scene for you:

We open on Mohamed at the NY DOT. He’s just gotten back from his prime ministership in Somalia. Sitting back in his old cubicle he looks uncomfortable. A few people walk by and quickly welcome him back. He forces a smile. The sounds of the office overwhelms him. He turns his chair a quater-turn and starts to day dream. Slowly the sounds of the office fade as we zoom in to his face.

Jump Cut to a busy street in NY City. Mohamaed is making his way across, dodging traffic. We zoom out and pan up to see he has entered the UN building. He makes his way to the Somali president’s office. Once there he is confused and wants to know, “why me.”

From there it only turns into the biggest adventure anyone has ever had. There is also this contender: a movie about the most interesting man in the world.

Proprietary Trading and the Volker Rule

In response to this Econmix article by Simon Johnson, a professor of mine wrote a short post expressing surprise that more people are not concerned about proprietary trading, or, what he termed, “gambling.” Indeed, NPR Planet Money had a great podcast a couple of years back entitled Gambling With House Money, which discussed the issue of proprietary trading and its risks and benefits. One benefit is market liquidity. On the issue of “gambling” I agree with Adam Davidson: Banks are always gambling with our money. A loan to a small business is a gamble because the business might fail and the loan might not be paid back. The difference is that proprietary trading often deals with more obscure financial instruments and the risk profile, while modeled with sophisticated statistical techniques, in reality is unknown and therefore invites decisions that might lead to financial loss. Small business loans and mortgages, meanwhile, are well-known entities.

However, I would add that if a bank wants to be a going concern, it always has an incentive to stay in the black over the long-run. Though prop trading can use customer deposits, it often uses corporate profits. To the extent that FDIC insurance covers customer losses, it seems to me that a bank should be able to make whatever bets it wants. The Darwinian nature of capitalism should select for those banks that are prudent.

This, of course, assumes a profit and loss system. But a long history of US government bailouts has called into question how much banks should fear going under (i.e. moral hazard may be a non-trivial factor in risky bank behavior). This gets to the point of too big to fail; Simon Johnson has been the most boisterous voice on this front as the econmix article alluded. Moreover, FDIC insurance negates any incentive customers might have to hold banks accountable. Who cares if my bank fails, I still get my money (and FDIC is paid for with bank fees not taxpayer dollars, doubly nice for me as a consumer). Without such insurance customers would undoubtedly be much more scrupulous about where they put their money and banks would be forced to engage in more conservative investment strategies. The same way that without spell check I would be forced to memorize how to spell ‘scrupulous’.

As far as investment banks go, in his book Bailout Nation, Barry Ritholtz argues that the real problem is the high leverage that large financial institutions enjoyed (he claims levels up to 40-to-1 though the SEC has responded thoughtfully to similar claims). Ritholtz also cites the movement away from partnerships as a primary model for investment institutions.  In other words, banks weren’t just gambling, they were gambling with other people’s money. As Milton Friedman long ago advised, “Very few people spend other people’s money as carefully as the spend their own.”

As far as the Volker Rule, its design will likely lead to poor efficacy in practice. Banks clearly need to be able to hedge specifically so they can protect our money. But the line between a hedge and a speculative bet is fine. So fine that banks will always claim they are hedging even when they aren’t. As always, regulatory capture is a concern.

Some Thoughts on Poverty in Africa

A fellow student in one of my classes wondered about poverty in Africa and “our” responsibility:

Several potentially controversial questions weigh on my mind:

  • How much obligation do former empires have to continue to provide financial aid to Africa? What motivates them to intervene? Is it the idea of “You broke it, you bought it?” Is it the conspiratorial motive that they are merely exercising control under the guise of charity? Is it because a developed Africa provides indirect benefits to everyone? Or is it truly pure benevolence?
  • Does international intervention help or hinder African political/economic independence and self-sufficiency?
  • Much of North, East, and Central Africa is in a state of unrest, fragility, or outright anarchy.  What will it take for order to be restored?  Can local governments work from the bottom to top to establish stable communities that eventually lead to stable nations? Or have cities and centralized government structures usurped too many resources for this to be possible?

These are tough questions. At its heart, what my colleague is asking is why some nations are poorer than others and what should be done. Scholars have been trying to figure out the answer since at least the time of Adam Smith.

The first question presupposes that “we broke it” and is usually mentioned with the corollary that “our growth is a result of colonial exploitation.” This is more complex than it seems, at least if we are talking about economic growth. The counterfactual is somewhat elusive. Some things to consider:

Economic historian Deirdre McCloskey has argued that the slave trade and colonialism cannot account for the magnitude of Western growth since industrialization. This paper by Acemoglu, Johnson, and Robinson (AJR) has been very influential in development economics. It argues that settler mortality during colonization led to extractive institutions in cases where Europeans were more likely to die, and more robust and supportive institutions where they could settle down and live permanently. Indeed, some former colonies are doing quite well. The United States, Hong Kong, Singapore, and South Africa are a few examples. Some Africa countries are also doing well over the past decade. Again, AJR would argue that this is because of institutions as they did in the their paper on BotswanaEven during colonization wages in Africa were variant and in some cases relatively high. Jared Diamond argues Africa’s dire situation is largely geographic. This paper points to poor design of political boundaries by Western colonizers as a major source of violence. Ethnolinquistic fragmentation has also been suggested as a major disruption.

There is also the matter that the slave trade from Africa to the Middle East predated by several centuries colonization by the West and that many Africans were themselves complicit in exporting slaves during colonization and all too happy to accept Western help if it meant their tribe gained dominance. This is in no way meant to excuse the horrific acts of Western colonization, which are disgusting beyond measure. However, it’s very hard to know the growth path of African (and other) countries absent colonial experiences. Perhaps some would be worse off and others better. Again, I am speaking mainly from a political and economic point of view.

To provide aid we also have to know what we are doing. William Easterly wrote an entire book arguing that the World Bank’s policies have mostly proved fruitless (i.e. we don’t know what we’re doing). (Jeffery Sachs responded). Recently, randomized controlled trials have become the evaluation method of choice. Todd Moss claims it is silly to talk about contingent loans from the IMF and World Bank since these institutions rarely held recipient countries liable for not following their recommendations (and in most cases countries did not). Nigerian-American Teju Cole rails against what he terms The White Savior Industrial Complex. And Kenyan Binyavanga Wainaina instructs us on how to write (and think) about Africa more generally.

I could say much more and many people have.

Why Should We Care About GDP?

Bruce Bartlett argues that there are perhaps better indicators than GDP to evaluate the state of a nation.

IMHO the real problem is not that GDP is relied upon too much, but rather that it is under appreciated. I think of it like a Honda Accord. It is pretty good at most things (but perhaps not best at any one thing). If you want to go off-road, it’s not the car for you. To stretch the analogy, it seems like too many people are wanting to go off-road these days. They say GDP is antiquated or it is too focused on “money” or comment on any number of other perceived shortcomings.

GDP is not the one and only measure we ever need in evaluation. But it is positively correlated with many, many things we care about. To mention only a few:

Self-reported well-being/happiness (here is a good report on well-being)
Infant mortality
Child death
Life expectancy
Education: 8th grade math achievementyears of schooling for femaleschildren attending primary school, to mention just three indicators we might care about.
Poverty reduction
Access to computers and cell phones
Paved roads for easy transportation
Available leisure time (here you have to hit “play” to see the gradual decline in working hours as GDP increases). Here is a US-specific report about increases in leisure time: “The main empirical finding in this paper is that leisure time – measured in a variety of ways – has increased significantly in the United States between 1965 and 2003.” This usually surprises people who assume we are working harder and have less free time.

Economists, of course, know about these correlations. I’m not sure most other people do. The direction of causation and policy implementation to get from “here” to “there” is another matter. There are also concerns about the quality of data coming out of many poorer nations, but are these shortcomings enough to greatly reduce the significance of the relationships? Probably not. Lastly, the relationship between GDP and the indicators above holds only generally — that is, the country with the highest GDP will not be ranked number one in every category. But as a first pass, aiming for increased GDP growth can’t be a bad goal (again, how to get there is another question).

The two most common issues that people want to append to discussions of GDP are inequality and the environment.

Sure, maybe we are concerned about inequality in addition to GDP. There are many kinds of inequality, but we most often hear about inequality of income. On this front there seems to be no relationship to GDP from a casual glance at the data. However, note that almost by definition the absolute standard of living increases for all citizens along with gains in GDP even if the relative gains are not evenly distributed. But it is the relative gains people seem to care about most.

There is also the question of which channel monetary inequality uses to create discontent. One argument is psychological (think: envy), but more often it is assumed inequality allows the wealthy to assert their will through the political system. Certainly, corporations and unions donate heavily during elections and have continued influence outside of them through regulatory capture (note, however, that just as often as they are lobbied by business, legislators seek out corporations to help write “smart” regulations). Income inequality might affect who gets elected, but I don’t see it having a direct channel to shaping policy once officials are in office (I could be wrong). But maybe the rich, through campaign donations, can assure that low-tax, pro-business politicians fill our government. This is often asserted as fact rather than demonstrated with evidence. Steven Levitt found in one of  his studies that campaign spending has an “extremely small” impact on election outcomes (at least at the level of the US House of Representatives). Joseph Stiglitz, meanwhile, argues that income inequality is indeed one of the most important political problems of our time in his new book.

The environment is another issue; but this too is complex. Gross tons of carbon tend to increase along with GDP. Emission rates might be a different story. US emission rates, for example, have been decreasing even before the financial crisis. But carbon isn’t all we care about. Since 1980, US GDP increased 128%, but emissions of the Six Common Pollutants have decreased 63% (you can see the EPA data here). This provides a little bit of hope. These less appreciated forms of pollution are especially important for the world’s poor. For instance, smoke inhalation is a deadly threat in developing countries, and more immediate than climate change. Development may also help protect against natural disasters. Since 1975 the number of people killed worldwide from natural disasters has decreased even as the reported number of disasters has increased drasticallyThis report talks about the complex relationship between growth and the environment. Overall, the relationship between growth and the environment depends very much on how we define “the environment” and over what time horizon we examine. If we are most concerned about “the environment” as meaning the area where women cook food in poor countries and our time horizon is the present, strong GDP growth starts to look like a pretty good solution. If we are more concerned about “the environment” as defined more broadly by the global effects of continued carbon emissions several decades from now, continued GDP growth may be a problem. If we are concerned about both, which we probably are, then we have ourselves a dilemma, which we probably do.