Thursday, November 30, 2006

whoa

Things that have happened to me recently:
  • I had a discussion with someone who had neither seen nor heard of Point Break. Even when I declared " I AM AN F-B-I AGENT!" it didn't ring a bell.
  • I finished stopped working on and turned in my last turbo microeconomics problem set. This was the hardest problem set and the most work I did for the class since the midterm. I easily put in over 15 hours on it. Our solution to problem 1 took seven pages to write up.
  • I disagreed with a bona fide genius over whether or not there is diminishing marginal utility on income. He gave me two counterexamples, but I don't find either directly applicable to the question. This has big implications. Diminishing marginal utility on income has always been the way I've thought about justifying a progressive tax structure. If they exist, than a progressive tax structure more accurately taxes an equal amount of utility on each taxpayer. This would be equitable. A flat tax only does so if we can measure utility in dollar amount, which I have a strong inclination to not want to do. If nothing else, I believe the proportion of goods that we consume that are necessities implies diminishing marginal returns on income. I'm not giving this one up easily.
  • I watched two Catherine Mary Stewart movies in one day, shattering my previous personal record of one.
  • I recorded a version of me playing guitar and singing "Hurt" by NIN. It's like a cross between the NIN version and the Johnny Cash versions with no production value and bad vocals.
  • I discovered there is a Medeival Times in Schaumberg!
  • I spent about twenty minutes constructing a logo that is essentially an economics joke. I have spent more time showing it to people and watching them give me horrific looks for my nerditude.
  • I caught a bit of Metallica's Some Kind of Monster and still think they suck and sold out.
  • I may or may not be going to Northern California in 2 weeks.
  • I discovered that "Lebonese" food is actually the same as "Middle Eastern" food. Kabobs, Schwarma, grape leaves, and baklava included.
  • I got my classes for next quarter...although I still need to pick one up and recently put in a bid for *gasp* a Friday 8:30 AM course. On Investments no less.
  • I have lost faith in the G-Men.
  • I took a stroll throught the Lincoln Park Zoo, seeing lions, tigers, monkeys, llamas, and a rhinoceros. Awesome.
  • I was told it's snowing 6-10 inches today starting at 3 PM. damn.

Friday, November 24, 2006

Amazing Guitar!!



This is Dragonforce. They like to play.

Wednesday, November 22, 2006

Peaches


November 25, 1988 - November 22, 2006
R.I.P.

Monday, November 20, 2006

The Tax Cut's Role in Changing the Surplus to a Deficit

Here is a National Review article that tries its best to belittle the degree to which the Bush tax cuts helped erode the government surplus and drive deficits up.

Greg Mankiw writes that "Reasonable people can disagree about whether the Bush tax cuts were advisable, but don't let anyone tell you that the tax cuts were the main reason the surplus of 2001 disappeared."

But Mankiw glazes over the fact that in swinging from a projected $5.6T surplus to a $2.9T deficit (an $8.5T swing), around (and the number is likely slightly overblown due to not accounting for the degree to which tax cuts pay for themselves) $1.8T of that is directly attributable to the tax cuts.

So what is undeniable is that the tax cuts represent about 10-20% of the overall swing, having a larger impact than increased defense spending. Moreover, the current deficit projections would be about a third of what they are now, if the tax cuts weren't in place.

We could also look at the part of the swing from surplus to deficit that was independent of changes in economic assumptions by taking out the $2.5T increase in "technical adjustments and revised economic assumptions." Doing this, we can see that the tax cut is on the order of 20% of the now $6.5T swing.

In other fun economic news, Ross Perot's company is opening a plant in old Mexico. Giant sucking sound anyone?

Saturday, November 18, 2006

Derivation of the rule of 72 (or 70 or 69)

The rule of 72 states that to find the number of years that it will take your investment to double, you divide 72 by the interest rate.

The formula for compound interest is:

A = P(1+r)^t

where A is the size of your account
P is the amount of the principle invested
r is the interest rate
t is the number of time periods (we'll assume years and that r is given as an APR)

the account has doubled when A = 2P, so...

2P = P(1+r)^t

dividing both sides by P...

2 = (1+r)^t

taking the natural logarithm of both sides (the "ln" function on a calculator)

ln(2) = ln((1+r)^t)

there's a property of logarithms where log (a^b) = b*log(a), so we can reduce the above to:

ln(2) = t*ln(1+r)

Two things to note at this point:

1. ln(2) = 0.69314718055994530941723212145818

2. ln(1+r) is roughly equal to r. For r<10%, ln(1+r) is within 5% of r (that is using such an approximation introduces a 5% error). For r<20%, ln(1+r) is within 10% of r

so approximating...

0.693 = t*r

but r is given as a percentage, (15% = .15), so to do the math using whole numbers

69.3 = rt

so you can calculate how long it takes to double your money at a given interest rate using 69.3

72 is a nice number because it has many perfect divisors (2,3,4,6,8,9,12,18,24,36)

using 72 instead of 69.3 introduces about a 4% error, but that error goes in the same direction as the error introduced by using the approximation ln(1+r) = r, so they cancel each other out somewhat.

You can use the rule of 69 (=3*23), 70 (=5*14, =7*10), or 72 to do this. As we used to say when I worked in defense, "It's good enough for government work."

learn more here

Friday, November 17, 2006

Judge rules a burrito is not a sandwich

Tuesday, November 14, 2006

How to build a KFC logo visible from outer space

Sunday, November 12, 2006

The (anti) Conservative Manifesto

I would argue, and this is a bit much for a Sunday morning discussion for sure, that the GOP is a fundementally flawed majority party. The nature of their ideology makes them the ideal watchdog minority party. As critics of rampant Democratic spending and excess, the Republicans do very well. They are good at serving in that capacity.

However, when the Republicans become entrenched in power (as they had been for the past 12 years), we discover three things:

1) They eventually come to be seduced into just as much, if not more, spending than their Democratic counterparts. It seems there exists a force that makes it very difficult to avoid pork spending if you become an incumbent for some time. The GOP, like the Dems before them, start making rationalizations for the earmarks they approve ("I'll approve this bridge project now, because it will help me get re-elected, and ultimately having a small government guy like myself in office is what's best for the district.").

Furthermore, as the GOP doesn't support so many governmental programs like the Dems, the spending on pork might actually cut into the financing of "legitimate" (at least in the left's eyes) government programs. After all, to conservatives, the government has had that amount of spending already. It's just going elsewhere now. Social programs to corporare welfare. A big problem is that corporations demand more money for the same level of satisfaction as the poor. This, of course, ignores the fact that it's questionable as to whether these interests should get any money in the first place.

What clearly develops, however, is a party of empty rhetoric. A small-party in mae government that redistributes wealth just as much as the left, except for the makeup of the recipients of that redistribution.

2) They become obsessed with maintaining that power, whether it be by gerrymandering, disciplined adherence to the party line not observable amongst the Democrats, and failures to expose scandals within their own party for fear of the political repurcussions. i.e. Texas, Tom Delay's grip on the party for so many years, and Mark Foley. Then there are the libertarian-leaning Republicans, who swallow their pride and allow the party to be hijacked by the Christian Coalition. All of this for marginally lower taxes (or is it lower marginal taxes ;) )

3) The Republicans are fundementally poor governors (and I mean this not in the sense of each state's executive, but rather as "those that govern"). There's an easy reason for this. The GOP, allegedly, does not believe in government. Why should we expect them to be good at running the government?

The best example I could think of is this:

If a person did not believe that a child could be taught by anyone, but rather had to learn on her own through books and self-study, why would we expect that individual to be anythiong but a poor teacher?

A more real world example is GWB appointing Michael Brown as the head of FEMA. If you don't ideologically support the existence of FEMA, you likely won't lose sleep over deciding who is best to run the organization.

So that's my theory as to why the Republicans are not good at running the government, and are a much more admirable party when they are out of power. It's difficult to argue that the Democrats are some ideal party, but at least they govern as they say they will. At least they believe their spending helps those that need it. At least they are disorganized enough (and yes, this is a strength) to not fall lockstep with party objectives (at least not to the degree that the GOP was able to achieve). If you disagree with this last point, regardless of the events in CT this past election, I don't see any support nationally for the Democrats to excommunicate Joe Lieberman. In fact, many Democrats supported him all along (I was not one of them).

Saturday, November 11, 2006

Residential College vs. Cohort

In college we had residential colleges. In business school we have cohorts. See if you can tell the difference. Bonus points if you attended neither the Chicago GSB nor my undergrad institution.

Ezra Stiles
Nobels
Davis
Morse
Phoenix
Timothy Dwight
Rockefeller
Silliman
Jonathan Edwards
Pierson
Davenport
Maroons
Berkeley
Stewart
Gargoyles
Calhoun
Branford
Bond
Harper
Walker
Saybrook
Trumbull

The film project I was working on is complete. It's chock full of inside jokes that will likely make it unwatchable to anyone outside of the businesss school. I will likely post it online after the Golden Gargoyles Awards Show next Saturday. Hopefully we take home some hardware that night.

You know you've been in business school too long when...

You consider keeping track of your personal finances using the accrual method of accounting

You start reading the abbreviation "Dr." as "debit"

On a related note, please hit me if you ever catch me saying "At the end of the day." The phrase is out of control here. We're talking every-other-sentence proportions for some people.