Lucas critique

I liked this idea by Robert Lucas that historical data cannot be the basis for policy making since the parameter estimates from such data is not policy-invariant and hence not structural. In simple words, past records cannot be overvalued for its direction to future.
I would like this concept to be linked to Taleb's thoughts.

Intuition .. a non entity?

Intuition - " thoughts and preferences that come to mind quickly and without much reflection " - Quoted from the nobel prize lecture of Daniel Kahneman in 2002.

I doubt anyone would be having problem with the above definition for intuition. Even I dont have. It is a fact that I have experienced such rush of preferences and thoughts in the face of any stimuli ( the stimuli could be a purchase decision, asked to make opinion on someone, school selection for kids etc). And I also assume that all human beings have experienced such a rush of thoughts and preferences, albeit with differences in content of such thoughts. It can thus be considered as a universal entity. If it is so, then what is the relevance of the title which suggests intuition tto be a non entity. I will try to explain it here.

The problem as I see is the effeorts at distinguishing between intuition and reasoning as exemplified by Stanovich and West (2000) who labelled the distinction as labeled System 1 and System 2. The operations of System 1 are characterised as fast, automatic, effortless, associative, and difficult to control or modify while the operations of System 2 are slower, serial, effortful, and deliberately controlled. Now this is accepted in the ider academic world in some form or other. I question this distinction. My proposition here is that intuition is reasoning by all means, that is sound, calculated and controlled. Only that intuition presents itself as effortless and less controlled.
The reasoning for my proposition is based on the understanding of hierarchy of assumptions built into each one of us, human beings. Labelled differently as implicit and explicit assumptions, cultural assumptions, prejudices, ideology, aesthetics and finally philosophy. Philosophy, according to me is a property of human beings, present in all either in implicit or explicit terms, discovered by the individual or injected in by environment. It is the final layer for all practical purposes at least as of now an at least according to current academic knowledge. ( No wonder philosophy was considered to be mother of all subjects ). Given this fact, which can be verified ( I am not attempting now how to do it), intuition is just a reflection of his or her philosophy.

what is the implication of this ? What is the relevance for this ? How can I use it for predictive purposes ? How can I substantiate intuition as sound reasoning. Well, I have a rough sketch now. People can be tested to thier response for a stimulus (questions, problems, choice preference etc) in intuitive format and more exacting reasoning format. The different formats can be designed in terms of 1. the time given for responding 2. the reasoning for the choice of response etc. Compare the responses for the same stimulus. My guess is it would be the same. I dare to say, even with additional irrelevant information, the responses would be the same. The reasoning for the choice may differ as I expect more politically correct reasoning given for the latter.
My conclusion in pure theoretical grounds. There is nothing called as intuition in opposition to reasoning. There is only fast response and slower response.

Supporting a monster to kill a demon

Supporting a monster to kill a demon

is this one major argument sold well with the common masses and hence exploited to justify (and legitimize) any action by the powers-that -be. Go through some of the recent examples

1. Bailing out corporations to avoid systemic failing

2. Soft approach to terrorism to avoid offending particular communities

Two Ideas

Two Ideas

1. Why not stop collecting taxes when we can print.

One basic axiom that majority share is the need for some form of government for organised living. Given that, the next corollary statement would be that it pays to run any form of government to support the bereaucracy and the military and to built empire. Now where does the revenue for running governments come from. The straight forward answer is that it is taxes collected from the population that forms the revenue for government. It was that simple in those good old days when printing technology was still an unknown and the world ran on gold as the currency. With the advent of fiat currency, there exists the possibility of an additional source of revenue. This is the very simple act of printing money. Now that we have these two forms, the natural question that follows is which one is better of superior. We can understand superiority as cost and ease (efficiency and effectiveness) with which one can collect or receive the revenue. why is this question relevant. Once we can fix one between the two to be clearly dominant over the other, we can go in for the decision of moving completely to that provided we can assume absense of trade off in their relationship.

Taxation as a process require an elaborate bureaucracy to administer the whole system of assessing, collecting the taxes. I would also require support of legislations to provide incentives and disincentives for paying up and underreporting of income by the population. It would require the people paying taxes to go through the elaborate and most often complex process of filing, paying tax and getting the tax returns. Leave alone the ingenuity wasted in time and efffort in finding loopholes in the tax laws to reduce ones tax to be paid. (I am remined of the keynesian digging holes and covering it for generating employment here. What is wealth forms the basis of this rememberance). Printing money is much easier compared to that.

My question at this stage is why not we move completely into printing money for government spending and stopping the taxation process completely.

I know a lot many questions would be asked at this point. some at the top of my mind for which I have adequate explanation as well are as follows.

1. Wouldn't there be a huge inflation issue in printing money in such large numbers. - go full free banking or at least full reserve system in banks

2. Wont' governments spend more and hence print more compared to the current figures. This given the fact that now we dont have a revenue standard to fix spending and hence fix the deficit. - Inflation beyond a point repels votes and at least in democracies it may not be a big issue

3. What about the other information that comes with taxation system - Have a better census system.

2. The risk-return paradox at the top

The commonsense notion as well as the sophisticated notion in the financial as well as the larger social world regarding the risk-return relationship is that one can expect biggger returns only when one undertakes big risks. This notion may not be a law and could just be a principle in the sense that all high return bets may not involve high risks. As a principle, given fair and open process (kind of like perfect market assumption), high return would entail high risks. My guess is it was this principle which ensured that only the deserving gets through to the top in any hierarchy. The reasoning is this. High risk bets would require 1) very cautious approach 2) would require collecting or aggregating information, often real time 3) would require advanced technical as well as economic ( for want of a better term) knowledge 4) need patience as a quality since returns will take time and effort as opposed to instant gratification as a quality 4) Would require elaborate risk management efforts including a supportive family, supportive society at large . To have all these and more, one needs to be not only knowledgeable, but also sensitive to others etc or in short one needs to be high in IQ, EQ and SQ (spiritual quotient) and hence truly deserving.

My concern or rather observation is that this principle is not working as of now. Rather the one which is working is something like this. The game at the top is an entirely different game played by a few. The entry barrier to play this game is kept very high by the existing players. But one an entry is made possible, the game as such is very easy to the point of being dumb. It is a low risk high return game at the top, once we consider money and hence cash flow as the returns. (In fact the consideration of money as the criteria for assessing worth of people is given ground by the intellectuals in the system). An example would be the political and business system as accepted today. and the mechanisms through which this is achieved are Fiat money and Corporate form of privatisation.

Now what is the implication of such a lopsided principle? The ones at the top in any hierarchy would be ones with low intelligence, high in ignorance, high in brawn and very high in short sightedness. What would be result of such people at the top for any hierarchy, be it be family, business or society at large is just second guess.

Keynesian unreason

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist - Keynes

Keynes was a master crook. That is my understanding. For he not only knew what he was proposing as sound economic theory is just unreason with huge propoganda value for governments, he also knew that mankind will accept it unquestioningly as an axiom and allow themselves to be subjugated. Look at his own statement quoted above from his ' classic' The General Theory of Employment, Interest, and Money. But then what is the state of mind to create such theories. My guess is that it is the result of a combination of laziness, greed, pessimism, nihilism and a thrist for certainty.

True or False

http://economictimes.indiatimes.com/Markets/Analysis/Money_lying_in_Swiss_banks_may_hit_markets_via_P-notes/rssarticleshow/3580223.cms

Is there something called swiss banking association as the article mentions though I know that something like swiss bankers association report exists.

If indeed what this report is saying is true and the figures are correct, I feel vindicated.

Idiot Savants

Our education system seems to create more Idiot savants than intelligent people. By this I mean people who are ' taught' to think inside a frame. Ideology is another one such idiot savant creating mechanism. Look at how leaders and followers of some of the ' successful' ideologies live ' comfortably' dumb with a series of ' in frame' assertions, its external validity notwithstanding. More worrying is the fact that even mainstream subjets like economics, management etc is falling it into the trap where mathematics as the mechanism.