Broken Symmetry

Macroeconomic Resilience Revealed

Welcome to the non-anonymous blogosphere, Ashwin!

It only took six months for my prediction to come true.

Looking forward to hearing more about the stealth project.

Improving on Mean Field Approximations of Consumer Behavior

From Coco Krumme, Manuel Cebrian, and Alex Pentland:

Much of economic theory is built on observations of aggregate, rather than individual, behavior. Here, we present novel findings on human shopping patterns at the resolution of a single purchase. Our results suggest that much of our seemingly elective activity is actually driven by simple routines. While the interleaving of shopping events creates randomness at the small scale, on the whole consumer behavior is largely predictable. We also examine income-dependent differences in how people shop, and find that wealthy individuals are more likely to bundle shopping trips. These results validate previous work on mobility from cell phone data, while describing the unpredictability of behavior at higher resolution.

Traditionally, economic data hasn't had the granularity to distinguish between different groups of consumers. Like the exact solutions to the Ising Model, rational expectations theory is a kind of mean field approximation. Now that we have digital trails for individual consumers, improvements are being made to economic models of consumer behavior.

Note that this kind of theory and data doesn't fit easily within the scope of behavioral economics and finance. This isn't a laboratory study. This isn't a theory of psychology. When it comes to consumer behavior at least, we can now say with some empirical support behind us, that indeed "more is different."

A Genetic Substrate for Shared Intentionality?

From Replicated Typo:

At 14 months of age for example, human children are able to successfully pass an object-choice task. In this task, children are presented with two upside-down buckets, one of which contains a toy, and the experimenter points toward the bucket where the toy is hidden. The child then turns to the right bucket and retrieves the toy. Although this task may appear simple, it is remarkable that chimpanzees fail it. In contrast to children, they fail to see the pointing gesture as a relevant cooperative signal within a shared attentional frame. Instead chimpanzees seem to think something along the lines of: “‘A bucket. So what? Now where’s the food?’ They do not understand that the pointing is intended to be ‘relevant’ to the searching as a shared activity (see Sperber & Wilson, 1986)” (Tomasello & Carpenter 2007: 122).

But this result is reversed in chimpanzees when instead of pointing cooperatively towards the bucket, the experimenter makes a prohibiting gesture by holding her arm out towards the correct container with her palm out, says something like “Don’t take this one” in a firm manner and then leaves the room. In this competitive context chimpanzees can successfully infer where the hidden reward. What is equally interesting is that 24 month old children do not retrieve the hidden toy possibly because they were better at cognitive control than 18 month old children and chimpanzees and were aware of the social and communicative conventions of the prohibiting action (Hermann & Tomasello 2006, see e.g. Miller et al. 2002, Tomasello 2008: 208ff. ).

Following up on American Real Estate and Inflation

From Negative Feedback in Money Supply, the Chinese Peg, and American Real Estate:

The Chinese government cannot accumulate dollars indefinitely. The peg must be removed at some point. American real estate looks like a great bet in view of that contingency, despite its ugly state at the moment.

And now CIC Seeks Harvard's U.S. Real-Estate Portfolio:

In a major push into the battered U.S. commercial real-estate market, China's $300 billion sovereign-wealth fund is in advanced talks with Harvard University's endowment to buy its stakes in half a dozen U.S.-focused real-estate funds for about $500 million, according to people familiar with the matter.

Similarly, whereas deflation seems more likely over the next few months due to swollen inventories, inflation should be the much larger concern:

Trouble down on the farm? Soaring wheat prices—September futures hit $7.11 a bushel Wednesday, up 58% from June's lows—are triggering fears of a repeat of 2008's food riots. But the real problems may lie further afield: in volatility and inflation.

Time to kick our job creation engine into high gear? Let's improve the middle management of R&D commercialization. There is plenty of room for improvement.

Feedback loops in your noodle

From the Oscillatory Thoughts blog:

So what’s really been twisting my noodle is that maybe this interpretation is wrong. Maybe across millions of years of divergent evolution, the axon of a giant squid has evolved to perform computations necessary for the survival of giant squids, and maybe mammalian neurons have evolved somewhat differently. Maybe individual action potentials are important in humans, but maybe they’re not the only things doing “computing” in the brain. Maybe these oscillations are also< playing an important computational role. Maybe they’re not just epiphenomena of action potentials. But maybe there’s a complex feedback system between action potentials and oscillations.