Quotes of the day

Orville Wright did not have a pilot’s license.--Gordon MacKenzie

I ran the numbers and was surprised to learn that the S&P 500 hasn't shown any net capital gain whenever the 10-year/30-year spread is wider than 43 basis points. ... [previously] The spread is now at 114 basis points. We just took out the previous high of 111 points from October 6, 1992.--Eddy Elfenbein

In my mind, a positive spread ought to have a positive impact on equity prices. I found that if I take out the period from October 2007 to March 9, 2009—yeah, I know, that’s a very big if—then numbers start to make more sense. Suddenly, a positive 10/30 spread is good for stocks.--Eddy Elfenbein

Former employees who had left Goldman were rarely mentioned. The unanimous phrase for it was ‘no longer with the firm,’ said in the same tone used to describe the passing of a family member. This tendency reached the height of comedy inside the strategies division, where some of the quants published academic papers on the more theoretical aspects of their work. If an author quit Goldman though, his name would be removed from the official version of the publication. It got to the point that some papers had no authors, and had apparently written themselves. ... If Wall Street investment bankers were dogs, they would flaunt their expensive collars and leashes as marks of status, not realizing their true purpose.--Antonio

If you're a politician, admitting you're wrong is a weakness, but if you're an engineer, you essentially want to be wrong half the time. If you do experiments and you're always right, then you aren't getting enough information out of those experiments. You want your experiment to be like the flip of a coin: You have no idea if it is going to come up heads or tails. You want to not know what the results are going to be.--Peter Norvig

A mathematical understanding of infinity was a conundrum for rationalists, who believed it could be mastered by using only the methods of scientific logic, unsullied by eschatology or religion. But as Jean-Michel Kantor and Loren Graham show, they were wrong. Centuries after Bacon and Descartes, and the birth of the scientific method of the moderns, mysticism came to the rescue of one of the most intractable problems posed by abstract human thought. It was mysticism, not rationalism, that helped to crack infinity.--Oren Harman

The belief in rationality may seem the most quixotic of all, but many elements of the [financial] crisis were provoked not by irrational behavior but by rational responses to perverse incentives. Too many people were able to take the following bet: “Heads I win, tails the financial system loses.” The countervailing view comes from behavioural economics, the intersection between economics and psychology. Like the young man who at the age of 14 thought his father was an idiot, and was then astonished at how much the old fellow had learnt in just a few years, I take behavioral economics much more seriously now than I used to.--Tim Harford

David Mamet, America’s most famous and successful playwright, caused widespread consternation two years ago when he published an essay in the Village Voice called “Why I Am No Longer a ‘Brain-Dead Liberal’” in which he announced that he had “changed my mind” about the ideology to which he had previously subscribed. Having studied the works of “a host of conservative writers,” among them Milton Friedman, Paul Johnson, Thomas Sowell (whom he called “our greatest contemporary philosopher”), and Shelby Steele, Mamet came to the conclusion that “a free-market understanding of the world meshes more perfectly with my experience than that idealistic vision I called liberalism.” For the most part, members of the American theater community responded to the publication of “Why I Am No Longer a ‘Brain-Dead Liberal’” in one of two ways. Some declared that Mamet’s shift in allegiance was irrelevant to the meaning of the plays on which his reputation is based. Others claimed to have suspected him of being a crypto-conservative all along, arguing that the essay merely proved their point.--Terry Teachout

According to Thomas Sowell, many of our modern policy debates boil down to a question of one's view of the capacity of the human mind and the institutions it develops to solve problems. [FN59] It is a debate about experts versus markets. [FN60] In one camp, we find those who believe that optimal social policy is something that can be discovered by experts based on an analysis of data and argument. ... In the other camp, we find those who believe that social problems are not comprehensible by the human mind and that no amount of conferences, policy papers, or deep thinking will find solutions for them. [FN63] There are no solutions, just tradeoffs. Sowell describes the “constrained vision” as seeing “the evils of the world as deriving from the limited and unhappy choices available, given the inherent moral and intellectual limitations of human beings.”--Todd Henderson

To me, the theme of faith in experts wielding models vs. skepticism of experts and respect for decentralized markets keeps showing up. Again, I ask, did the Soviet experiment fail just because they used the wrong experts? Or does it reflect a deeper problem, that centralized expertise is not the answer? And if the latter is the case, does the Soviet experiment not tell us something about less drastic attempts to correct market failure?--Arnold Kling

For people like me, the national debate mostly revolves around a liberal-moderate-conservative axis, and more hard-left or even traditional liberal views are fairly marginal. Journolist brought people like me into contact with a lot of those sort of liberals, and my main response was to realize that I'm a lot less liberal than I had thought.--Jonathan Chait

Yet it makes a big difference what a government worker actually does, as while many add value most do not, and they get paid either way. I know someone who works for a small bank of about 10 people, and he was telling me about once a year, about 6 people from the FDIC come in for a week and go over their books. He says they work always with an eye on the clock, and if you are talking to them at 11:30, you can expect them to leave mid-sentence because they take breaks, show up and leave like union regulars. Of course, they don't highlight anything useful to the bankers, or society, in their annual exercise (remember, pre 2007 regulators were mainly critical that banks lent too little to historically underserved homeowners).--Eric Falkenstein

The government is less worried about protecting itself from default than protecting itself from voters who want to buy a home at cheap rates.--Megan McArdle

But the point is, being embarrassed in the least of our problems. I'm sorry I have to run around in my underwear trying to extinguish my burning house, but my house is on fire. ... If somebody has become or is an embarrassment to good, old cause, then that's a problem. Embarrassment is your good sense and taste trying to tell you something. Yet it needs to be remembered that embarrassment is also a weapon that the enemies of liberty and our best traditions have used with great effect.--Tom Smith

One thing we are seeing is an enormous expansion of the intellectual engagement of ordinary people, many of whom turn out to be not so ordinary, in national politics. I'm reluctant to be specific but I will just say a lot of time, right wing radio talkers just seem to be selling schtick, using conservatism the way some insincere televangelists use religion. And that's to be expected. If people were angels, we should indeed support progressive government. It's only in the real world that we need such strict limits on power. Or take Sarah Palin, who graduated from the University of Idaho, whose alma mater was sung at my father's funeral, so don't neg the U of I around me. She's not as well educated as Michelle Obama. She's not as well educated as a President or Vice President should be. But had she gone to Harvard Law her ideas about the constitution would be a lot less sound than they happen to be. That is what we have come to. The prestige of such ancient institutions as we have are now used as weapons against the most fundamental principles of our frame of government and really our way of life. This means we are in a bad way. It's as if we have to defend ourselves against invaders and for the last 50 years West Point had been teaching that war is wrong and love is all you need. We have just put a former dean of the Harvard Law School on the Supreme Court in the certain knowledge that at the first opportunity she will rule that absolutely nothing in the Constitution prevents the federal government from requiring a person to buy insurance from some private company. Nothing. And it was probably the right thing to do because there were many far worse people our president would have been happy to nominate, all of them with resumes to die for. --Tom Smith

If politics were literature, Bill Clinton would be Tom Buchanan in "The Great Gatsby," casually smashing lives around him while remaining untouched by the chaos he creates. Barack Obama is more like Macon Leary in "The Accidental Tourist," the author of tour guides who hates travel. ... Events leave him apparently untouched. He doesn't need the crowd. Americans have always loved Obama more than he seems to care for us. ... Obama's challenge is not a lack of theatrics. It is a lack of range. The most effective modern presidents -- a Franklin Roosevelt or a Ronald Reagan -- were able to adopt a number of tones and roles. They could express grand national ambition, withering partisan contempt, humorous self-deprecation, tear-jerking sentimentality, patriotic passion -- sometimes all in the same speech. ... To switch metaphors, Obama is a pitcher with one pitch. He excels only at explanation. Initially this conveyed a chilly competence. But as the impression of competence has faded, we are left only with coldness. ... Obama's limited rhetorical range raises questions about the content of his deepest beliefs. For this reason among others, the man who doesn't need the love of crowds is gradually losing it. --Michael Gerson