Half Sigma

More on Social Security

Social Security is a welfare program for the elderly.

This ought to be an obvious statement, except Social Security is cleverly set up to trick people into thinking it's like a private retirement plan, where people pay in, their money is invested, and it's paid back later with interest. Whenever people talk about a "trust fund," I feel like swatting them. The "trust fund" is a silly accounting gimmick. The government as a whole is in debt, and the debt is increasing every year.

Even a lot of otherwise smart libertarians have been tricked. They will say things like "I could do a lot better if I invested the money myself." I have no doubt. They'd also do a lot better if they invested the rest of their tax dollars themselves instead of it being wasted on stuff like education and the armed forces. They are talking about Social Security as if it's a retirement plan with a relatively low rate of return when in fact it's a welfare program.

There have been some comments left to the previous post about Social Security "going bankrupt," which is a nonsense statement because Social Security can't go bankrupt any more than the air force can go bankrupt or the State Department can go bankrupt. Of course the whole government could renege on its debts, but that's extremely unlikely to happen. I'm pretty sure that future Congresses will either lower spending or increase taxes rather than commit financial suicide.

Long before the imaginary "trust fund" runs out, it will become obvious that goverment expenditures have gotten too far ahead of government income, and Congress will be forced to enact one or more of the following options: (1) reduce Social Security benefits for some or all recipients; (2) increase the retirement age; (3) raise taxes.

Social Security is not a program I'm especially happy about. My income is being taxed, but given the demographic realities of the future, it's unlikely that I will enjoy the benefits of Social Security in the way the the current generation of recipients do. It seems unfair to me that old people with lots of money are collecting their Social Security checks while young people making the minimum wage have to pay FICA taxes in order to fund it.

If I had my way, I would change the name to Welfare for the Elderly and I'd eliminate the separate system of FICA taxation and combine it with the regular taxes. This would create a much more transparent tax code. The current tax code is set up to trick people into thinking they are paying less taxes than they really are. This is a sneaky way to overtax the American people. I'm surprised the anti-tax people aren't all over such an idea.

However, I'm against the various proposals to "privatize" Social Security, such as Tyler Cowen's 401(k) proposal. The only genuine privatization is to lower taxes and lower benefits. Then people can choose to spend their extra income, or they can choose to save it for their retirment. That's a true private choice and not one of those nonsense proposals in which "privatization" somehow requires a massive new government program, as if we already don't have enough massive government programs. And most of the specific proposals seem like a welfare program for the financial services industry.

Of course under a genuine privatization scheme, some people won't do the right thing, and they will become homeless seniors and starve to death. Some of the more right-wing people will say "ha ha, serves them right." The problem is, the liberals will say "look at all the homeless old people starving to death. We must spend government money to save them from their lack of retirement planning." That's how we wound up with this system in the first place, and the national mood has shifted a lot more to the socialist side since then. You are never going to convince more than a tiny minority of the people that we should let old people starve to death, even if they deserve to. It just isn't going to happen.

The funny thing about liberals is that, on the one hand, they get really mad if you point out to them that poor people are stupid and lacking in future time orientation. But on the other hand, they enact policies based on that very true fact. I'm afraid that conservative plans to somehow teach the poor people lessons in responsibility and wise financial planning just aren't going to work. These are the same poor people who take their checks to check cashing places and pay an unnecessary 5% transaction fee because they lack even the foresight to open a bank account. How do you expect people who can't even save money for the next week to save money for twenty years in the future?

Middle school girls gone wild

I don't have much to say about this op-ed, but it's similar in theme to the post about high school dances, except it's about middle school:

The scene is a middle school auditorium, where girls in teams of three or four are bopping to pop songs at a student talent show. Not bopping, actually, but doing elaborately choreographed re-creations of music videos, in tiny skirts or tight shorts, with bare bellies, rouged cheeks and glittery eyes.

I guess I went to middle school in the wrong decade.

A dumb proposal: 401(k) plans for poor people

Tyler Cowen, of the blog Marginal Revolution, has a really dumb proposal in the New York Times. 401(k) accounts for poor people:

The core idea is simple. The federal government creates tax-free retirement accounts for lower-income Americans, supplementing private accounts where they already exist, and matching personal contributions to those accounts. The amount of the match would depend on the income of the family and how much they save.

Poor people already have a government funded retirement plan. It's called Social Security.

If poor people are going to be forbidden from withdrawing from the 401(k), then there's no effective difference from Social Security.

If they are allowed to withdraw their funds, which I think is the very basic requirement if we are going to say they "own" the funds, then they will withdraw them right away and spend the money. It's the poor's lack of future time orientation that contributes to their poverty in the first place.

The other factor which contributes to poverty is low IQ, which means the poor people aren't smart enough to make wise investment decisions.

The end result will be a lot of poor people who don't have enough money for retirement because of their bad decisions. It's easy to predict that the liberals of the future will feel sympathy for their poverty and give them free money anyway. Which means that Tyler Cowen's proposal will wind up costing the government more money than the current system.

But I'm sure the already overpaid financial industry loves this proposal. More profits for mutual fund companies and their millionaire employees.

The case for unfettered immigration

According to the fifth most emailed NY Times article, we should allow unfettered immigration because of events which happened in the 1700s.

The article contains absolutely no analysis of whether current immigration patterns are good or bad for the nation's current citizens, but who cares about that? The current citizens have no moral right to place their own welfare above that of the current immigrants.

The evil cow

Not only are they killing us by clogging our arteries, they are also responsible for global warming.

Dictators are good for the third world

A NY Times article about the United States' declining influence in Africa speaks highly of dictators:

Chester A. Crocker, who was an assistant secretary of state for Africa under President Ronald Reagan, says the drop in American influence began when the cold war ended. He argues that despite all the complaints about fickle cold war Africa policy, which critics say propped up one corrupt dictator after another under the rationale of containing Communism, the United States was at least paying attention to Africa, and its efforts may have saved millions of lives.

It was the decade immediately after the cold war, Mr. Crocker said, when the United States disengaged from much of the continent, that Africa fell apart. Cataclysmic wars swept through Somalia, Rwanda, Algeria, Sierra Leone, Liberia and Congo. More Africans were slaughtered in the 1990s than in any other recent decade.

It seems that countries where the people aren't intelligent enough to handle democracy are better off with a U.S. backed dictator.

In fact, honestly looking at what's going on in Iraq right now, it seems the Iraqi people were much better off with Saddam Hussein and his brutal secret police than they are with what passes for democracy. Of course the United States has to do what's good for the United States, regardless of whether the Iraqi people benefit, but it's time to stop pretending that the average Iraqi is better off because of our invasion.

What the article fails to mention are two other important reasons for our declining influence in Africa: (1) the collapse of the white South African government which brought a measure of stability to the southern part of the continent; and (2) the Muslimization of Africa.

What's Wrong With Cinderella?

The second most popular article at the New York Times this morning is What's Wrong With Cinderella?.

The author, a feminist, is mad about the Disney princess themed toys marketed to young girls. And there's lot of whining about girls body images and stuff like that. She seems to think that boys have it better. The fact that boys are more likely to end up in prison, dead in Iraq, or a non-college graduate who dies from a heart attack at an early age, doesn't seem to enter into the discussion.

Extraterrestrial life, logic, and gender differences

The comments seem to have missed the point of my previous post on ufologists. Which is that ugly men are most at risk for rejecting the status quo because the status quo hasn't been kind to them.

But let's talk about UFOs and logic. Let's start with astrology. Astrology is clearly illogical, and its foundation is not based on scientific thinking. Astrologists think they can obtain insights into a person's personality by looking at the positions of the stars, a proposition which can be proven false by giving out a lot of personality tests and seeing if birth date predicts any sort of behavior. The General Social Survey includes the respondents' astrological signs, but so far no one has found any valid correlations.

On the other hand, the possiblity that intelligent life may exist on other planets is completely logical. Surely the same forces which caused intelligent life to evolve on Earth could cause the same thing to happen elsewhere. Emphatically stating that we are alone in the universe is as illogical as believing in astrology.

I'd like to see a survey ask the following question with the following answers:

Does intelligent life exist on planets other than Earth?

a. No
b. Possibly
c. Yes

The correct answer is b. I suspect that as IQ increases, the percentage of people answering b would increase. I suspect that a higher percentage of men would select the wrong answer c. Some would use this as ammunition to say "Ah ha! Men are also illogical!" But I also suspect that that a higher percentage of women would select the wrong answer a. The only way to judge which sex is more logical is to compare the percent of respondents answering correctly, which is b.

I consider curiousity about whether intelligent life might exist elsewhere a sign of intelligence. Because men are more curious about this subject than women, in my opinion this speaks favorably of men.

Ufologists

The History Channel has a UFO marathon (allegedly true stories of UFO incidents).

I notice that all of the "ufologists" are men, most ugly looking. You never see a hot babe who's a "ufologist."

Jews, Christmas, and guilt

There's an article in tomorrow's NY Times about a Jewish woman who feels left out during Christmas (as do all Jews, at least all of the secular ones).

My husband and I have been married a year and a half, and I am flipping through the Pottery Barn holiday catalog while he sorts the mail, and page after page is something beautiful and not for us, because we are Jews. In my humble opinion, Jews have yet to make Hanukkah decorations beautiful, unless you consider a blue-and-white paper dreidel beautiful, but what can you expect from a holiday whose spelling is constantly up for debate.

So they decide to actually celebrate Christmas, but this causes her a great deal of guilt:

It seemed so subversive. Christmas? Really? I thought about it for a moment. Or rather, I thought about what my parents would think. But my parents live 1,200 miles away. They weren’t visiting this season. They wouldn’t even need to know. (Unless, of course, they read about it in The Times. Merry Christmas, Mom and Dad!)

Still, even just considering the idea felt wrong and dirty ...

As I was reading this, I was thinking that she's going to get a lot of nasty letters from outraged Jews, but then I discovered that she had the same thought:

Before you answer that in a snappy letter to the editor, fellow Jews (including you, Dad), let me just say that I’m pretty sure that if we’re fortunate enough to have children, we will raise them with the same arbitrary rules we were raised with, trying our best to sell that old chestnut (roasting on an open fire) that “eight nights is better than one,” and putting this tradition behind us until the kids go off to college, if not forever.

And there you have it. They intend to pass on their guilt to the next generation and deny them the fun the other kids are having, even though they don't really believe in the Jewish religion. For them, it's just all about the guilt.

Hannah and Her Sisters

This movie accidentally got to the top of my Netflix queue.

"Hannah and Her Sisters" is about Hanna, played by Mia Farrow, and her two sisters, played by Barbara Hershey and Dianne Wiest. The three sisters, as well as all the men in their lives, are neurotic Manhattanites.

I was struck by the big age differences between the men and the women. Using the year of the movie (1986), and the birth dates listed in IMDB, below are the approximate ages of the main actors and actresses at the time the movie was filmed:

Max von Sydow 57
Michael Caine 53
Woody Allen 51
Mia Farrow 41
Barbara Hershey 38
Dianne Wiest 38

At the beginning of the movie, the Barbara Herhsey character is the live-in lover of the Max von Sydow character, a 19 year age difference. Hannah is married to the Michael Caine character, a 12 year age difference, but he has an affair with the Barbara Herhsey character, a 15 year age diffence. Woody Allen, who plays Hannah's ex-husband, eventually hooks up with the Dianne Wiest character, a 13 year age difference.

I sure hope that when I'm in my fifties, women 12 to 19 years my junior will be interested in me, but I don't see the attraction of any of the male characters. Woody Allen, of course, is a short whiny character who's the world's biggest pessimist, and in this movie he's also a hypochondriac who spends half his time on screen worrying that he's dying from cancer. Michael Caine is a taller and more portly version of Woody Allen, not very good looking and perhaps only slightly less neurotic. (He also wears these ridiculous looking oversized eyeglasses, but I think they were actually in style in the 1980s.)

The least understandable relationship is the one between Barbara Hershey and Max von Sydow. He plays an anti-social grumpy old man who never leaves his apartment and insults everyone who dares to enter. How did they even meet in the first place?

In Woody Allen's New York, everyone worth being a character in his movie has a cool job. Hannah is a retired actress as are her parents. Woody Allen's character is a television show producer and the Max von Sydow character is an artist. Hannah's younger sisters don't seem to work at all, even though they have no kids to take care of and aren't even married. Michael Caine's character has the only thing that resembles a real job, he's some kind of financial advisor for celebrities. No one in the movie has to sit in a cubicle all day and work for a big corporation, like everyone I know.

Al Stewart groupies

Al Stewart is my favorite musician.

I just read this interview and found his complaint about his groupies amusing:

Back then when I was in the Top 10, when I would play a show, the people who would come backstage would not be cute chicks in miniskirts. They would be, I don't know, 6-foot tall guys with glasses who wanted to talk about the Russian Revolution with me. Obviously, I had done something catastrophically wrong (laughing).

I have the same problem with this blog. I bet the Manolo doesn't have that problem. And he's a six figure blogger to boot (pun intended). Manolo is my idol.

If you don't know who the hell Al Stewart is, yet you enjoy this blog, you might like his music. I recommend this two CD set as his absolute best.

Vegetarianism and astrology

Dennis Mangan has a post at his blog where he insists that vegetarianism is a smart choice because vegetarians have higher IQs than non-vegetarians.

The reason for this correlation is because vegetarianism is trendy among people from higher social classes. You don't see many people in the ghetto being vegetarian. But just because people from a higher social class do something doesn't always mean it makes any sense.

There is no scientific evidence that changing your diet leads to health benefits. For example, I previously blogged about the low fat lie: "The largest study ever to ask whether a low-fat diet reduces the risk of getting cancer or heart disease has found that the diet has no effect."

Using data from the General Social Survey, I compared belief in astrology to vegetarianism:

NOMEAT And how often do you refuse to eat meat for moral or environmental reasons?

SCITEST3 Astrology - the study of star signs - has some scientific truth.

Frequency Distribution
Cells contain: -Column percent -N of cases		SCITEST3
		1 Definitely true	2 Probably True	3 Probably not true	4 Definitely not true	ROW TOTAL
NOMEAT	1: Always	4.4 11	3.1 34	1.9 12	2.3 13	2.7 70
	2: Often	10.7 27	8.2 89	6.4 41	4.5 26	7.2 183
	3: Sometimes	19.8 50	22.3 243	21.4 136	15.6 90	20.3 519
	4: Never	65.1 164	66.4 722	70.3 448	77.6 448	69.8 1,782
	COL TOTAL	100.0 252	100.0 1,088	100.0 637	100.0 577	100.0 2,554

As we see from the chart above, people who believe in astrology are more likely to have favorable attitudes towards not eating meat. This is evidence that vegetarianism is a new-agey religion-like movement which has nothing to do with science or logical thinking.

Jews hate Santa Claus

There's an article in today's NY Times about a Jewish family with a holiday lights display, including Santa Claus, candy canes, and even some angels.

The reactions of their Jewish neighbors underscores my previous point about how Jews fear Christianity.

“Some people are so offended, you have no idea,” said Mary Loomis-Shrier, who has long erected the giant display on a lovely street south of Hollywood.

. . .

A neighbor in a duplex across the street, Oren Atias, an Israeli, has been less than supportive, Ms. Loomis-Shrier said. He has come across the street and yelled at her, and said, “ ‘What kind of Jewish girl puts a Santa in the yard?’ ” said Ms. Loomis-Shrier and several neighbors who saw the arguments.

“I told him, ‘I don’t think candy canes have anything to do with religion,’ ” Ms. Loomis-Shrier said.

I have to agree with Ms. Loomis-Shrier. All the Christmas decorations have nothing to do with the birth of Jesus, even Santa Claus who's only tenuous connection with Christianity is that he was named after a bishop in Turkey who was was cannonized after he died (Saint Nicholas). But the Santa Claus we know, a guy who lives at the north pole, has a workshop of elves, and magically delivers toys to children, is pure pagan inspired myth.

So why do some Jews get so upset about it? Because they fear that giving into the joy of the holiday season means that they will lose their Jewish identity.

This is why it sucks growing up as a Jewish kid in the United States. All the other kids are having fun with their presents and their Christmas decorations, and you have to come home to a somber home and spend all Christmas weekend home alone in somber protest against the majority religion.

Hi IQ adolescents more likely to be virgins

Razib has posted a chart showing the percentage of adolescents who are virgins for different IQ ranges. Not surprisingly, above average IQ adolescents are more likely to be virgins. (Unfortunately, I can't read the article from which the data comes without paying a rip off fee of $30. No thanks.)

This is consistent with my own findings that smarter people have less premarital sex, even though smart people are less likely to think that premarital sex is wrong.

But there are still several possible explanations for the differences. Do high IQ adolsescents have lower sex drives? Are they less desirable sexual partners and therefore have fewer opportunities to lose their virginity? Or are high IQ adolescents better at internalizing and obeying the moral rules of society even if, on an intellectual level, they are less likely to agree with them?

For a summary of my previous thoughts on this topic, read my post on intelligence and evolutionary biology.

Diversonia

My post on the fictional nation of Diversonia received some interesting comments.

I should start by pointing out that the reasons for wealth differences in Diversonia have nothing to do with the reasons that either liberals or conservatives attribute to the wealth differences in the United States. Liberals will say that the poor are poor because they face huge barriers to advancement on account of being poor, thus they are kept down by the rich. The conservatives will say that the poor are simply lazy and they don't work hard enough, so it serves them right for being poor.

In Diversonia, the poor Bioids face a clear genetic disadvantage. They only have two arms, compared to the rich Octoids who have eight arms and are therefore four times as productive in the manufacturing based economy. There is nothing the Bioids can do to change the fact that they are born with only two arms.

But there is a way that Bioids can level the playing field. "loki on the run" suggested that that Biods cut off six of the arms of each of the Octoids. This would indeed level the playing field and bring equality to the nation of Diversonia, but at the cost of lowering the GDP by a substantial amount (as well as the pyschological harm suffered by the Octoids who forcibly have their appendages removed).

The solution proposed by "loki on the run" reminds me of how the liberals want to reform our educational system. Black children underperform whites in school. Liberals want to have all the best teachers teach the underperforming black kids in enriched programs with small class sizes, while the middle class white kids go to crappy schools with large classes and typically bad public school teachers. Yes, I am never impressed when liberals demonstrate that black kids can do as well as the average white kid when they put the black kids in a special school with only a hundred students and a bunch of highly motivated exceptional teachers. How much better would the middle class white kids do if they had a school environment like that?

"michael v" correctly points out that the slums in Diversonia wouldn't be bad like the slums in the United States, because as I stated the problem, the only difference between the two races is the number of arms. We assume that the races are equally intelligent and conscientious. This is not like the slums in the United States which contain society's least intelligent and most socially disfunctional citizens. Maybe the Bioids wouldn't have much to complain about.

But human nature, or oid nature as is the case here, is such that the have nots will always resent the haves. The have not Bioids are, in my opinion, legitimately angry that the Octoids, merely because they were lucky enough to be born with eight arms, get four times as much wealth. The Octoids didn't to anything to morally deserve that wealth, did they? They don't work any harder than the Bioids.

The nation of Diversonia

In the nation of Diversonia, there are two races: the Octoids and the Bioids. The Octoids have eight arms and the Bioids have only two arms.

Because the economy of Diversonia is manufacturing based, the Octoids have a huge productivity advantage. Their six extra arms allow them to be four times as productive as the Bioids who have only two arms. Consequently the Octoids get paid for times as much money as the Bioids. Although the Octoids are only one third of the population, each year they earn two thirds of the country's income. The Octoids get to live in the nice neighborhoods with the big houses while the Bioids are stuck living in the slums.

Because the Octoids pretty much ran the country, there was nothing the Bioids could do about their situation. But then the United Nations stepped in and demanded free and fair elections. In the U.N monitored elections, the Bioid candidates naturally won by a landslide. They have a mandate from the Bioid voters to address what they see as the economic unfairness of Diversonia society.

What laws should the new Bioid controlled government enact?

Richard Posner supports trans fats ban

Richard Posner explains why the NYC trans fats law provides a net economic benefit, correcting an inefficiency of the free market.

The free market types will exclaim, "but if trans-fats are so bad, the free market would already have corrected the problem!" The free market types ignore the costs of obtaining the information necessary to make informed decisions, as well as the effort and cost of acting on that information.

Posner estimates that the trans fats ban will cost restaurants $60 million per year, and will provide a health benefit to New Yorkers of between $100 million and $3.5 billion per year. Yes, that's a huge range, but lets focus on the $100 million number. That's about $12 per year per New Yorker. Now what are the costs of figuring out which restaurants have trans fats and which don't? If I have to spend a minute per day figuring out what restaurants have trans fat and avoiding them, that's 365 minutes or more than six hours per year. If my time is worth $40/hr (my approximate after tax income), that's a cost of $240. So it's not worth my effort to avoid trans fats in the laissez faire environment even though I obtain a net benefit from the regulated environment.

This reminds my of the benefit I obtained from the NYC smoking ban.

The gift card scam

Tyler Cowen has a blog post about the gift card scam. Six percent of gift cards go unused, which is pure profit for the retailer. "Consumer Reports put the figure even higher, estimating that 19 percent of those who received cards last year had not used them because the cards were lost or expired" (AP article).

The more sensible gift is cash. Unlike gift cards, cash can be used anywhere and it never expires. Imagine what happens if person A gives $50 to person B, and person B gives $50 to person A. The gift giving in this case is a complete wash. You may as well not have exchanged gifts at all. I guess that's why the gift of cash isn't that popular (except at Jewish weddings).

Gift cards are a bridge between cash and a gift which requires actual thought. The cash gift has absolutely no frictional loss. The gift card has a 20% loss. A physical gift may have a greater than 100% loss, because not only is it useless to the receiver, the receiver feels guilty about just throwing it out so he stores it in his closet for several years using up valuable storage space.

State Department to middle class: go away

The Foreign Service is changing its hiring procedures. Since 1932, the only thing separating an applicant from an oral interview was a high grade on the Foreign Service Exam.

But now, the State Department will combine the exam score with the applicant's resume to determing who gets an oral interview:

As applicants register for the exam, they will submit an online “structured résumé” describing their work experience, foreign residence, leadership experience and language abilities, among other things. Then, on the basis of the test results and résumé, combined in some undisclosed metric, a screening committee will decide who goes on to the oral assessment.

The new part of the assessment seems biased in favor of upper middle class applicants. Young adults from middle class famlies don't have "foreign residence" and "leadership experience."

High school in the 21st century

The NY Times:

Before Sophie Friedman, 15, went to her first high school dance last year, her friends warned her: This would not be like those in middle school with shy, awkward dance moves.

Robert F. Byrne, 15, said his school was failing to keep up with the times.

But their advice did not prepare Sophie for what she saw when she showed up. “It was a pretty big shock,” she said. “I didn’t expect it to be that crazy.”

Her classmates were bumping, grinding, shaking, arching, teasing and flaunting in a way that made the chaperons gape.

Guess I want to high school during the wrong century. According to Emily Bragdon, 16:

For our generation, sex is more casual. It sounds bad to say it, but it’s true.

UPDATE

"agnostic" has written at post on this topic at his blog.

U.S. Census vs. Arnold Kling

According to the U.S. Census 2007 Statistical Abstract, 74.5% of college students report that "being very well off financially" is "very important or essential." This is up from 62.5% in 1980 and 36.2% in 1970.

More evidence that Arnold Kling's assertion that people today don't care about making money is completely bogus.

Conflict diamonds in the NY Times

The NY Times tells us that some women are troubled by where their diamonds are coming from:

Monica Gibson says she is not particularly political, but when she heard about conflict diamonds on an episode of “The Oprah Winfrey Show” last week featuring the cast and director of the new movie “Blood Diamond,” she looked down at her engagement ring and thought not of love but of wars and violence.

Her fiancé gave her the ring last summer, she said, and she may never find out where its 24 diamonds came from. But as the couple now shops for diamond wedding bands, Ms. Gibson said she won’t buy unless the jeweler can vouch not just for the stone’s cut, clarity and color, but also for its origin.

It looks like it hasn't occurred to Monica that maybe she should forsake diamonds altogether. God forbid!

Bridal experts say the preference for diamonds will surely endure because of aesthetic and cultural factors.

99% of people can't tell the difference between a diamond and cubic zirconia, and the cultural factor was invented by the De Beers diamond cartel's marketing wing. Hardly anyone wore diamond jewelry a hundred years ago and there was never a tradition of diamond engagement rings until De Beers invented it.

See my previous post on the diamond scam.

Investment banking vs. stucco

On the front page of yesterday's Wall Street Journal, there is an article about how a once successful black entrepreneur saw his stucco business ruined because of competition from Mexican immigrants.

It seems to me more a tale of business strategy and microeconomics than it does about immigration.

China vs. U.S.

In the United States, we worry that computer games have too much sex and violence. In China, the government worries that games have "forbidden religious or political material."

Also, check out the picture in the linked article. It's an "internet cafe" which seems to house endless rows of young Chinese males (and one lone female) intently staring at their computer games. There's nothing like that in the United States, at least not that I know of. Is this because Chinese people can't afford their own private computers and internet connections, or is it because they enjoy being in a room full of nerds?

Review of The Cheesecake Factory

Because there has been a discussion of the Cheesecake Factory going on in the comment section of one of my posts, I figure this is a good time to write a review of this restaurant chain.

On Thanksgiving weekend, I ate at a Cheesecake Factory for the first time in my life, and I was not impressed. The Cheesecake Factory serves mediocre mall food dressed up fancy so that the people eating there can imagine they are eating sophisticated city fare.

I looked around, and what I saw was a lot of fat people eating massively huge portions of food. It isn't sophisticated when everyone is taking a doggie bag home from the restaurant. One young woman walked by, and she was so big I worried that the floor might cave in. I've written before that I am doubtful that there exists an "obesity epidemic," but if there were such an animal, I could easily imagine that huge portions at surburban shopping mall restuarants are contributing to it.

The soft drinks also come in massively huge glasses, so you never have to worry about getting thirsty. I imagine that the refills are free too, but I wasn't able to finish off one of those huge glasses in order to find out. This, at least, is a pleasant switch from the city restaurants where they give you a tiny little glass of iced tea and then charge you for a second glass.

I have to confess that I liked our waitress, a pretty young light skinned black woman who seemed absolutely delighted that she was serving our party. This was a very pleasant change from the sophisticated city restaurants where the wait staff (which is 50% gay men) sneers at you and acts like they are doing you a great favor by serving you. I wish that more restaurants in Manhattan would hire some of those suburban mall waitresses.

Why investment bankers make lots of money

Goldman Sachs is giving out $16 billion in bonuses this year. Why do investment bankers and other Wall Street workers make such massive amounts of money? Well Arnold Kling, who sometimes teaches economics at GMU, has the most stupid explanation ever proposed for this phenomenon:

One would expect more people to go into investment banking and compete away those rents.

The market solution to income inequality would be more investment bankers. Why aren't there more investment bankers?

I am pretty sure that all of my daughters could master finance if they wanted to. Both economic theory and my wife are telling them that they should major in accounting, but none of them will do so. I may be naive, but I suspect that there are a lot of people who could raise their incomes by going into investment banking. They are not prevented from doing so, but they choose other careers as a matter of taste.

This leads to the hypothesis that wealth is becoming more concentrated because fewer people are focused on achieving enormous wealth. My daughters, by not competing, enable the people with investment banking jobs to earn high rents.

In short, the distribution of wealth represents differences in taste. Many people prefer jobs with less income and more of other characteristics.

How the hell can this guy manage to get a PhD in Economics from M.I.T., write a book about economics, and not have even the slightest clue about why there aren't more investment bankers?

No, it's not because people find finance boring. For every millionaire investment banker, there are dozens of finance/accounting/business major wannabes whos biggest wet dream is to join the ranks of the millionaire set. That's why, according to Princeton Review, "business" is the number one most popular college major.

The Wall Street industry makes huge amounts of money because they engage in cartel-like behavior to limit competition and limit the number of people coming into the industry. It's impossible to get a job in the best Wall Street career tracks unless you have stellar grades from a top graduate business school like Harvard (Wharton and Columbia are also good) and/or you have some sort of inside connections. And without a job in the right career track, you can never acquire the knowledge capital necessary to compete in the industry.

Why do investment bankers have to work 90 hour weeks? I suspect that one reason is to limit the number of investment bankers. Hiring twice as many people to work 45 hours per week would create twice as many people with the knowledge capital needed to compete in the industry. Also, perhaps the hazing approach creates a camraderie within the industry that bonds everyone together and prevents firms from engaging in competitive behaviors which, in the long run, would hurt everyone's profits.

Wall Street is a heavily regulated industry, and Wall Street executives donate millions of dollars to campaign funds of politicians. I'm sure if you look deeply into things, one would find that many of the government regulations exist not to protect the public but to protect the profits of the industry insiders. For example, the whole way that new offerings are sold to the public is an anachronism. Why not just list all the new offering on the internet, and let people bid on them via an automated market? Why do investment bankers need to extract a 7% shakedown fee for what technology could easily do for free? Why don't some firms compete on price and offer a lower fee? Because there's obviously an anti-competitive gentleman's agreement not to do that.

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Read my followup long essay: Investment banking vs. stucco.

Increase demand by raising the price

How do you increase demand for your product? If your product is a college education, you can increase demand by raising the price (from the NY Times):

John Strassburger, the president of Ursinus College, a small liberal arts institution here in the eastern Pennsylvania countryside, vividly remembers the day that the chairman of the board of trustees told him the college was losing applicants because of its tuition.

It was too low.

So early in 2000 the board voted to raise tuition and fees 17.6 percent, to $23,460 (and to include a laptop for every incoming student to help soften the blow). Then it waited to see what would happen.

Ursinus received nearly 200 more applications than the year before. Within four years the size of the freshman class had risen 35 percent, to 454 students. Applicants had apparently concluded that if the college cost more, it must be better.

“It’s bizarre and it’s embarrassing, but it’s probably true,” Dr. Strassburger said.

Yet another example of irrational consumer behavior.

Gladwell vs. Sailer

Malcolm Gladwell and Steve Sailer have been engaged in some blog vs. blog fighting. Let's look at the following quote from Gladwell's blog:

In Blink, I tell the story of a study done by the law professor Ian Ayres. Ayres put togother of group of young men and women--half white and half black--and sent them to 242 car dealerships all around Chicago. All were attractive, well dressed, and well-educated. All had the same cover story: that they were professionals from a wealthy part of Chicago. All pointed to the lowest-priced car on the floor and said--"I'm interested in buying this car." Ayres's question was--all other things being equal, how does skin color and gender affect the initial price quoted by a car salesman? His results: white men, on average, got quoted a price $725 above invoice, white women got quoted a price $935 above invoice, black women $1195 above invoice, and black men $1687 above invoice.

This was, I concluded, a powerful example of discrimination--of how unconscious feelings and prejudices have the effect of dramatically influencing the fairness with which we treat different groups. Hardly a controverial statement, right? Well, in criticizing my book, one reviewer defended the car salesman, and called their discrimination entirely rational. He wrote:

"Black men for whatever complicated reasons, enjoy being seen as big spenders. And car salesmen are all too willing to help them spend big."

Let's analyze this statement according to the criteria from my racism post. First, content. Does the statement propagate false belief about a targetted group? I think it does. Since when do black men--collectively--desire to overpay for cars? The restaurant Per Se in Manhattan, where the prix fix is $250, is an example of a place where diners enjoy being seen as big spenders, and waiters are all too willing to help them spend big. Does that mean that Per Se is full of black men? Actually, it's full of white people. Although it could as easily be full of purple people, since the willingness to pay three times more for a meal than it would cost down the street has nothing to do with the color of your skin.

Yes the guy who dared to "defend" the car salesmen is none other than Steve Sailer. Gladwell just doesn't seem to get Sailer's point, nor does he seem to have any sort of understanding of human behavior.

First of all, I doubt that the discrimination cited is in any way "unconscious." The salesmen are intentionally quoting different prices based on sex and race. In the six weeks I worked as a stockbroker, the sales manager told us "don't bother to try to sell to women, it's a waste of time." If stockbrokers are taught to treat people differently based on sex, then I'm sure that car salesmen are also taught the same thing.

Steve Sailer is not "defending" the salesmen, but rather he is claiming that they are opportunistic scumbags whose goal is to rip off every customer for the biggest amount possible without losing the sale. Through trial and error, car salesmen have learned that they maximize their commissions by quoting different prices based on race and sex. This explanation of the behavior makes more sense to me than Gladwell's explanation that car salesmen quote higher prices to blacks because of "prejudices" which are implied to be untrue.

Gladwell expresses surprise that anyone would want to "overpay" for anything. Well in the real world, sales are based on emotion, not logic. That's what the sales manager at the stock broker job told me. And of course it's true. If people bought stocks logically, all full service brokers would be out of business. I definitely sensed that one of the reasons why some clients use full service brokers is because it makes them feel like a bigshot. Why to people want to overpay in order to feel like a bigshot? That's one of the mysteries of human behavior, isn't it?

I am reminded of the "suggested admission" of $14 at the Museum of Natural History in New York City. The sign says it's "suggested," and in fact you can tour the museum for free if you want, so why doesn't everybody just ask for a free ticket? Why do they want to overpay? While some people probably feel that they have a moral obligation to make a proper donation to a charitable institution, I suspect the majority of people paying full price do so because they don't want to appear to be a cheapskate. Why do they care if the person at the admissions counter thinks they're a cheapskate?

If black men like overpaying for stuff, why aren't there more black men eating at Per Se where the "prix fix" is $250? Well this one is easy to answer. Not that many black people can afford $250 for a meal. Furthermore, it may not be an environment where black people feel comfortable.

I'm not saying that I agree that Steve Sailer's overpaying explanation is correct, only that it's a reasonable explanation for rational discrimination. Maybe there are other explanations. Maybe black men just don't do as much research into prices before they walk into the car dealerships, so the salesmen know they can get away with quoting higher prices. Maybe the salesmen quote the higher price so they can then throw in a "free" upgrade such as the Enhanced Bling Package. One really needs an a car salesmen who's honest enough to talk about the issue to tell us the real motivations for the discrimination.

Sailer wins this exchange. Not only does Gladwell look pretty stupid here, but he has has also given Steve Sailer's blog a lot of free publicity.

Male and female brains

The NY Times has an interview with Louann Brizendine, author of a book called The Female Brain.

In the interview she explains how women are biologically programmed to enjoy gossip more than men. Yay, the New York Times acknowledges that there are biologically based behavioral differences between men and women.

But this explanation seems pretty suspect:

How big is the average male brain?

It’s about the size of a cantaloupe. It’s 9 to 10 percent larger than the female brain.

But the size of one’s brain is unrelated to one’s level of intelligence, right?

Yes. Remember, the female brain has more connections between the two hemispheres, and we have 11 percent more brain cells in the area of the brain called the planum temporale, which has to do with perceiving and processing language.

If women have superior verbal skills, why have they been subservient to men in almost all societies?

[The Man been keeping the woman down]

So it's politically correct to say that women have superior verbal skills, but dare say that men have better mathematical skills and you get fired from your job at Harvard University. This is a double standard.

It seems to me that men are, on average, smarter than women, especially in the upper half of the intelligence distribution. But the higher male intelligence is masked by man's inferior verbal skills. So in a conversation with a man and a woman of equal intelligence, the woman will appear to be more intelligent because of her greater conversational skills.

SAT statistics over the years show that men have a very slight advantage over women on the verbal section of the SAT (despite the 11 percent more brain cells in the planum temporale region of the female brain) but a much bigger advantage on the mathematical section (the more logic oriented section) of the SAT. The male advantage on the verbal section is even harder to explain considering that high school aged girls are more conscientious than boys and we presume they spend more time studying for the SAT. Girls get better grades in high school than boys.

The logical conclusion is that score on the verbal section of the SAT (SATV) is a function of both g, the general factor of intelligence, and v, verbal ability which is uncorrelated with g.

Men have higher g and women have higher v, but because SATV is a measure of both these variables, men and women score approximately the same.

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You may also want to read my previous post, Are men more logical than women?