Wednesday, October 31, 2007

Happy All Hallows Eve

The short paper Halloween Is an Economist's Biggest Nightmare looks at the deadweight loss of Halloween:

Economists haven't adopted the vainglorious practice of physicists and applied numbers to their laws, but if they did, the first law of economics would be that lump-sum transfers are more economically efficient than in-kind transfers. If you are going to give a gift to somebody, you should just give them the money. They will be a better judge of the best way to spend it.

If instead, you give them a specific good, then you make them worse off, unless you somehow miraculously anticipate what the recipient would purchase if he received the money instead.

Now if you know someone well, perhaps you can anticipate the type of gift they might like. But Halloween is no time for thoughtful, targeted gift-giving. At Halloween, each house on a typical American block picks out one type of candy, and they give that exact same candy willy-nilly to everyone who shows up at the door. It's an economic nightmare.

Fear not, a solution:

So let's do something to reform Halloween. The first step would be for Halloween donors to give kids money instead of candy. Kids could then go to the supermarket the next day and binge on the candies they really like. That solution would get an A-plus in economics.

Such coordination is, unfortunately, unlikely. It would also distort the holiday's demographics: An in-kind transfer of candy ensures that (for the most part) only children trick-or-treat and the marginal value of candy guarantees that, eventually, the kids all stop and go home.

In conclusion, the article provides a more pragmatic step toward reducing the inefficiency:

I am not optimistic that Americans would be so enlightened. So other solutions should be sought. Many schools prohibit children from taking Halloween candy onto the premises. That is exactly the wrong policy. Schools should encourage all children to bring their entire haul to school, and allow them a lengthy period to trade candies among themselves. That way, the Take 5s and the 100 Grand bars will find their way to individuals who cherish them.

The efficiency of each transaction is likely much lower for Halloween than for Christmas, but the aggregate size of Christmas gifting assuredly makes that holiday's deadweight loss exponentially worse.

OS Statistics

OS Statistics for this Blog

And Google Analytics does operating system statistics, too:

In the noise are FreeBSD, Solaris, NetBSD, Wii, and Playstation 3, in descending order, each with a tenth of a percent or less. Two surprises, here. First, people actually use Solaris? As a desktop? And, second, folks browse the web with a Wii?

These results are obviously not representative of the overall web, but it is less skewed toward Linux than one might expect.

Browser-as-a-function-of-OS is interesting. Half of the Windows users sport Firefox over IE. Slightly more than half the Mac Heads opt for Firefox over Safari, which begs the question why? Nearly all Linux users go with Firefox.

In addition to the aforeposted bias, these statistics exhibit another effect: People browse the web during the day, at work, where they might be forced to use Windows. Analyzing operating system usage as a function of day and time could prove fruitful, but it would introduce another bias toward enthusiasts. Ultimately, however, what matters is what people use and not why they use it.

Browser Statistics

Browser Statistics for this Blog

Tip of the hat to Google Analytics, uncluttered in presentation, amazingly useful in result, for producing these browser statistics for my blog:

Interesting how technically-skewed my readership is, given that in these statistics Firefox holds a comfortable lead on IE when, in the aggregate, IE continues (sadly) to command a majority of the browser market. Also unexpected is that people use Mozilla SeaMonkey (via AOL, perhaps?).

Not surprising is the lack of niche browsers such as Epiphany, Konquerer, and Camino—the latter of which has a quarter of a percent, actually—given the relative low penetration of their operating systems and the strong allure of Firefox and Safari.

Note that the statistics are biased as they are generated only from page-views and not via the feed. This bias likely manifests as a tendency away from enthusiast platforms and their browsers and towards IE on Windows.

Monday, October 29, 2007

Leopard Review Notes

A couple of notes on the aforeposted Ars Technica review. Mr Siracusa writes:

Apple's focus is on system-level performance, not micro-benchmarks. The kernel team's job is to make the software at the higher levels look good. If improving the performance of some tiny aspect of the kernel tenfold does not provide a measurable performance increase for some user-visible feature or task, it's not an effective use of development time, benchmark bragging rights be damned.

I do not believe that this explains OS X's relative sluggishness compared to, say, Linux. To wit, it is great if Apple's kernel team's metrics are overall performance and not some microbenchmark. But at the end of the day, microbenchmarks can point to where the bottleneck lives—is just process creation a bear or do all system calls have awful overhead? Thus I just have to disagree with the following:

Apple's decision to measure kernel performance "from the top" by looking at the behavior of the real applications running on the full OS dictates which aspects of the kernel get the most attention.

Because poor performance "at the top" does not tell you anything about where to focus your attention; it suggests a problem and then you start drilling down, first by profiling the offending application and then likely followed by so-called microbenchmarks and other mechanisms for pinpointing the issue. Indeed, poor performance "at the top" may not even live at the kernel level—I would blame every component of the stack before I faulted the kernel for lackluster performance.

I enjoyed the discussion on OS X's equivalent of inotify:

Apple has chosen [to limit the number of filesystem events you can buffer, accepting that sometimes the buffer will fill up and you'll have to drop events]. The kernel buffers are a fixed size, and if they fill up because of a slow client, events get dropped. This means that one badly behaved client can ruin it for everyone.

Inotify suffers the same fate, as Nat's idea to make a queue overflow! t-shirt attests. At least inotify's queue size is run-time configurable. I am pleased to read here and elsewhere about Apple's fsevents and conclude that inotify is the same or superior.

I do think the idea of having an early-begot and long-running daemon arbitrate and manage filesystem events makes sense; the daemon can start earlier than, say, Beagle and continue running even after it consumes all of your available memory—joking, Shaw—asking the daemon "what did I miss?" when it starts up.

Also, Go Sox!

Erudite, as always, review of Mac OS X 10.5 over at Ars Technica—Latin-ish for the art of technology.

The Concise Encyclopedia of Economics is enlightening and worth your time.

Why? Explain why free trade works. If you are like most, you can't. If you are in the rare learned minority, you likely just described absolute advantage, which illustrates why America should never, ever make another car or piece of chocolate, but not why free trade is a net benefit for all states, not just ones that make the best wine or the cheapest pajamas. No, the theory you want is comparative advantage.

Tuesday, October 16, 2007

Foreign Affairs on Presidential Hopefuls Foreign Policy

Over the last three issues, Foreign Affairs, the influential journal on international relations, has featured articles by the top 2008 U.S. Presidential candidates on their foreign policy agendas. Anatomizing the differences is enlightening.

Democratic Candidates:

Republican Candidates:

Inter-party, divergences are minor, particularly on the Democratic side. If pressed, I'd give the winning Democratic essay award to Senator Clinton, who manages to sound essentially indistinguishable from her primary competitors but, to those looking closely, sends plenty of signals that she is more hawkish than Senators Edwards or Obama.

One nit from all of the essays, but the democrats in particular, is that they throw around all sorts of terms and unleash levels of rhetoric without defining the phrases or substantiating their prescriptions. For example, from Senator Clinton's piece, you have to ask, what vital interests?

As president, I will never hesitate to use force to protect Americans or to defend our territory and our vital interests. [...] The United States must be prepared to act on its own to defend its vital interests

Of course, these are the passages meant for mass consumption, and not for parsing by the intelligentsia, but natch the President reserves the use of force for vital interests—the campaign's foreign policy promises should be exactly about defining what those interests are.

Among GOP candidates, Mayor Giuliani and Governor Romney sound the most alike, hawkish and, particularly in the case of Giuliani's work, demagogic, appealing to populism and fear and not rationalism.

Senator McCain's article wins on the Republican side: pragmatic and realist.

Unlike domestic pledges, Presidential candidate's foreign policy promises tend to have only a weak correlation to practice once elected—partly, I think, because foreign policy is more subjective and discretionary than other facets of being the chief executive, but also because rhetoric and reality can be disjoint when the US populace understands the issues so poorly (probably second only to economics). You know, an enlightened citizenry is indispensable for the proper functioning of a republic and all that.

Let's not forget this line from the 2000 Presidential debates:

If we're an arrogant nation, they'll resent us; if we're a humble nation, but strong, they'll welcome us. And our nation stands alone right now in the world in terms of power, and that's why we've got to be humble, and yet project strength in a way that promotes freedom.

Or this paragraph, from Secretary Rice's foreign policy prescription in Foreign Affairs during the 2000 campaign:

The president must remember that the military is a special instrument. It is lethal, and it is meant to be. It is not a civilian police force. It is not a political referee. And it is most certainly not designed to build a civilian society. Military force is best used to support clear political goals, whether limited, such as expelling Saddam from Kuwait, or comprehensive, such as demanding the unconditional surrender of Japan and Germany during World War II. It is one thing to have a limited political goal and to fight decisively for it; it is quite another to apply military force incrementally, hoping to find a political solution somewhere along the way. A president entering these situations must ask whether decisive force is possible and is likely to be effective and must know how and when to get out.

Sadly, Secretary Rice's opus likely mirror the policies she, a realist, hoped that the administration would implement.

A Drive Up the Maine Coast

Perkins Cove, Ogunquit, Maine
Marginal Way, Ogunquit, Maine

Ogunquit, Maine
Perkins Cove, Ogunquit, Maine

Friday, October 12, 2007

Pay Off This Wolf Pelt

With a market capitalization of $47 billion, EMC Corp's valuation less their 90% stake in VMware Inc. is, with today's market cap of $39 billion, only $12 billion. With a trailing-twelve-month EPS of $0.61, EMC's current share price prices the non-VMware portion of their business at just 9.6 times earnings (and only 8.3 times earnings using an estimated 2007 EPS of $0.70 and 7.1 times earnings using an $0.82 2008 EPS estimate). Compare that to similar-growth companies in the same industries and it is, well, quite low.

Perhaps EMC is undervalued, incorporating too small a valuation of VMware into its stock price. Maybe VMware is overvalued, what with a trailing-twelve-month P/E of 281.45 and all. Possibly both. Whatever the case, the spread ought to converge.

Relative value play: Short VMW, long EMC.

Thursday, October 11, 2007

Labor-Capital and Robots

On Good Morning America on Monday, Mexican President Felipe Calderón, in a discussion on immigration, responded to complaints from US farmers over a lack of farm workers:

It's impossible to stop that by decree. It's impossible to try to stop that with a fence. Why? Because the capital in America needs Mexican workers. And Mexican workers needs opportunity of jobs. Capital and labor are like right shoe and left shoe, and one needs each, the other.

To be sure, capital and skilled labor are likely complementary. Foo and bar are complementary goods if an increase in demand for one increases the demand for the other—for example, left and right pairs of shoes are complements (perfect ones, for most of us, it turns out). With respect to capital and skilled labor, technological advances require more and more skilled labor (with greater and greater skills).

Conversely, substitute goods are those with inverted demands. Butter and margarine are classic substitutes; the demand for butter increases as the price of margarine increases. See also tea and coffee, buying and renting, hooks and prosthetic hands.

I do not, however, believe that capital and unskilled labor are compliments. Instead, like any substitute, as the cost of labor increases, the incentive increases to replace the labor with labor-saving capital. The substitution is bidirectional, too: Technology ushers in more automation and enhanced productivity, decreasing the need for unskilled labor. As labor costs increase, we will see greater demand for robots. In other words, capital and unskilled labor are not like right shoe and left shoe, but left shoe and other left shoe.

President Calderón certainly understands economics; he also knows Mexico's principal export is labor.

Monday, October 8, 2007

Mint.com

I first read about Mint.com on Techcrunch. The concept—centrally aggregating all of your financial accounts in a central place—is smart. And I know firsthand just how large a market need the site fills, griping at the void when I moved away from Bank of America a few years ago, losing access to their My Portfolio functionality. At the time, I thought filling this hole would make for a great startup. The task is not as hard as it sounds prima facie, because Yodlee already provides the backend technology for aggregating financial information. Shoulda, coulda, woulda, right?

Anyhow, when Mint.com was mentioned in the Sunday Times, I decided to give it a try. The site is very easy to use; I was registered and logged in within seconds, and a couple beats later I had entered a couple of accounts and was looking at my complete financial situation. Mint's site is fast, both in intra-site navigation and in downloading your financial data, which is done automatically but also conveniently on demand. Mint seems to take privacy seriously, with good security practices and retention of minimal information. They do not, for example, even ask for your name, although they could easily scrape that from most of the sites they aggregate. But probably the biggest plus is that they do more than aggregate; they analyze, graph, categorize, and compare your financial information. I know, for example, that whereas I pay $0 a month on gas, the average Mint user spends over one hundred.

My most significant issue in using Mint.com is that the site is clearly still in beta. Some functionality simply does not work (last night I was unable to remove one of my accounts from aggregation, for example). Other features are not yet implemented. And although I consider their dedication to privacy a plus, I would still prefer this service be offered by a provider I already had a trusted relationship with, such as Google or, probably ideal, my bank. Obviously, however, that hurdle was insufficient in stopping me, or Mint's many other users, from joining.

Among missing functionality, the biggest hole is the lack of support for non-bank, non-cash financial accounts. Stock accounts are not supported, even when held with a financial institution whose bank side of the house Mint supports. This means my trading account, IRA, and 401(k) were all absent from the aggregation, significantly distorting my financial summary. Since I still have to login to other accounts to see those figures, the utility of Mint is greatly diminished. In Mint's FAQ, they mention that non-cash accounts are a potential future feature. I hope so.

Mint's business model is suggesting financial optimizations—for example, credit cards with lower interest rates or savings accounts with higher ones. Since so many Americans are using a bag of crap like Bank of America, such recommendations are pretty valuable. They don't do it now, but Mint could also do fairly well targeted (read: useful) ads based on your transaction history. If they add support for investment and other account types, I might just be hooked.

Sunday, October 7, 2007

On Taxes.

Robert Frank in today's Economic View in the New York Times:

Given the political risk of proposing painful tax increases in an election year, many fear that the [fiscal] crisis will remain unresolved. Yet a simple remedy is at hand. By replacing federal income taxes with a steeply progressive consumption tax, the United States could erase the federal deficit, stimulate additional savings, pay for valuable public services and reduce overseas borrowing—all without requiring difficult sacrifices from taxpayers.

Under such a tax, people would report not only their income but also their annual savings, as many already do under 401(k) plans and other retirement accounts. A family’s annual consumption is simply the difference between its income and its annual savings. That amount, minus a standard deduction—say, $30,000 for a family of four—would be the family’s taxable consumption. Rates would start low, like 10 percent. A family that earned $50,000 and saved $5,000 would thus have taxable consumption of $15,000. It would pay only $1,500 in tax. Under the current system of federal income taxes, this family would pay about $3,000 a year.

As taxable consumption rises, the tax rate on additional consumption would also rise. With a progressive income tax, marginal tax rates cannot rise beyond a certain threshold without threatening incentives to save and invest. Under a progressive consumption tax, however, higher marginal tax rates actually strengthen those incentives.

Now more than ever a consumption tax such as the FairTax makes economic and fiscal sense. Senator John McCain, GOP presidential candidate, endorsed the FairTax last Thursday:

If the FairTax crossed my desk, I’d sign it. If a flat tax did, I’d sign it.

[The tax code] has to be made simpler and fairer.

Back home, in the Boston Globe, Edward Glaeser on fixing the AMT:

The AMT is terrible tax policy, both because it targets the wrong deductions and because its unpredictability gives lawmakers too much ability to misrepresent the future.

Indeed. But the professor continues:

I am also unenthusiastic about eliminating tax preferences for larger families. Most people seem to think that giving tax relief to bigger families is a matter of simple fairness. As an economist, I lack standing to make proclamations about fairness, but there is another reason to subsidize larger families. When parents decide to have kids, they are creating a massive benefit for their children. As much as parents may love their children, they are unlikely to reap all the benefits those children will offer during their lives. Economists often think that it makes sense to subsidize behavior that generates big "external" benefits for others: parenting seems like a particularly natural example of such behavior.

Whoa, slow down. Dr Glaeser is comparing the value of birth versus the value of not, but how are we to assess the value of the unobservable? Let's fix the AMT, but leave that particular policy prescription out of the mix.

Linux System Programming is devoid of discussion on taxes or economics of any sort, but full of treatment on system programming on Linux. And what does the book use for examples? Pirates.

Saturday, October 6, 2007

La Brique.

Mark Pilgrim, fellow Googler, swears that he has nothing to say about the iPhone that hasn’t been said before, but his comments on the iPhone are rare words that echo my own thoughts.

The iPhone is nice, but let's stop acting like Apple just invented the smart phone.

Wednesday, October 3, 2007

Intersection of Comm Ave and Sunset Blvd

Dane Cook and Kate Hudson filming Bachelor No. 2

Dane Cook and Kate Hudson are filming Bachelor No. 2, another Truman Capote myopic, next door to my home, as we speak.

I don't know what is worse, the klieg light blanketed our bedroom in the ambiance of arena football, or the crazy old guy teetering on fisticuffs with the police because Hollywood is ruining our proper neighborhood, just as they wrecked that Trasformers movie.