Quotes of the day

Even the high unemployment rate may be less important politically than you’d think. Seth Masket, a political scientist at the University of Denver, has found that, in midterm elections since 1950, there’s been no correlation between the unemployment rate and election outcomes. The key economic variable for voters, other studies show, has been income growth, or, more specifically, how fast per-capita G.D.P. is rising.--James Surowiecki

Napoleon had lost not only most of the men he had led to Russia but 175,000 horses as well. The men could be replaced, as indeed they largely were before the next year’s fighting, but the horses could not. In 1813, despite scouring the French Empire, only 29,000 could be procured, and most of them were not of top quality. This would cripple the French in the campaign of 1813 and be a considerable factor in Napoleon’s reverses of the summer and autumn of that year.--John Steele Gordon

But most experts are overlooking America's true competitive advantages. The tale of the economy's remarkable turnaround is largely the story of swift reaction, a willingness to write off bad debts and restructure, and an embrace of efficiency—disciplines largely invented in the U.S. and at which it still excels. America still leads the world at processing failure, at latching on to new innovations and building them to scale quickly and profitably. ... Of course, the declinists were often wrong—Rockefeller Center and Pebble Beach returned to U.S. ownership within a decade. Just as exuberant projections are generally made precisely at the top (remember Dow 36,000?), prophecies of long-term decline usually gain traction after we've suffered a catastrophic fall. ... In August 2009, not even the most cockeyed optimists could have projected that within four months, Bank of America, Citi, and Wells Fargo would return $100 billion in borrowed funds to the taxpayers. But they did. --Daniel Gross

The burden of entitlements and other government spending depends very much on the growth of GDP since it is the ratio of government spending to GDP that determine the real tax burden. If GDP could grow by ½ percent per year faster than it would otherwise, the effects on GDP and the tax burden of given government spending in twenty and thirty years would be enormous. To achieve such a higher growth rate would require lower, not higher, taxes on both physical and human capital, more, not less, encouragement to entrepreneurial activities, and greater emphasis on competition in labor and product markets instead of bailouts of companies like GM, Chrysler, and Citibank that were badly managed. All of my suggestions would be met by strong political opposition from entrenched interest groups, such as the elderly, government unions, and poorly managed companies. Yet without these changes, or something comparable, the entitlement and debt burden at all levels of government will grow during the next couple of decades to levels that will become a serious drag on the performance of the American economy. And as I indicated at the beginning, similar, if not larger, problems are confronting Western Europe and Japan.--Gary Becker

... the research also shows how we might become better market timers. The key is to do the opposite of what the average mutual fund investor is doing — in other words, to become a contrarian.--Mark Hulbert

Three Hasids and 120 cyclists walk into a bar.--Michael Idov

What would happen if the greatest athlete alive put as much effort into his training as he does his video games?--Luke Dittrich

So, if there is no extra return, why take risk? Roy Baumeister makes an interesting argument. He notes that historically 80% of females have reproduced, while only 40% of males passed on their genes. The rest of the males, historically, have been genetic dead ends. Historically a female could play it safe because there were always men willing to impregnate them, whereas a male who remained meek was elbowed out of sexual trysts. Males have to beat out other men to get access to females. Thus, men built ships and traveled to far-off lands because those were the guys who had more children, whereas a bunch of women could bear children just as easily staying put. Everyone's male ancestors have been disproportionately bold risk takers; not taking risk, over generations, is certain doom. We take risk, therefore, because not taking risk is genetic suicide, at least for the gender that generally takes such risks. ... Risk takers dominate our lives via their disproportionate effect on our genes, and their influence on our technology and culture. They did not become successful, however, merely by taking some abstract 'risk' that is the same for everyone, and then enjoy the higher rewards that come with it. They instead took the right risks, those consistent with their unique strengths, and reaped rewards consistent with mastery of something important. Like a golfer with a long drive, you can shoot at the green as opposed to laying up, and that risk is a good one for you, but only because you can hit the ball farther than average. Modern finance is profoundly misleading when it suggests that reward is merely a function of our ability to withstand some abstruse risk (ie, the covariance with the as-yet-unidentified stochastic discount factor), and chance. Skill, effort, and learning play no part in this sterile world. In contrast, people should see risk taking as a process of self-discovery, of becoming the best you can be, and that playing it safe is, for males at least, a path of oblivion. The payoffs to risk-taking are partially chance, but if you want to take risks intelligently you will gravitate towards risks consistent with your skills, and get better and better at them.--Eric Falkenstein