Archive for January 29th, 2015

Adam Smith on the financial crisis..

January 29, 2015

Well, what will the great Scottish say on the recent financial crisis?

He will not be one bit happy:

Tired of lightweights bickering over the financial crisis and its aftermath? Of economic upheaval becoming merely fodder for intellectually dishonest political campaigns? Wonder what biggest thinkers might have to say? Our efforts to consult the giants of economics have been hampered by an unfortunate fact: many of the most important ones are not only dead, but they died long before governments and central banks began to concoct such unconventional policy tools such as quantitative easing. That explains their absence from the argument—so far.

In an attempt to cross this divide, notwithstanding the obstacles, your correspondent attended a lecture at the Harvard Club of New York on January 21st by James Otteson, a professor of political economy at Wake Forest University and the editor of a new book, “What Adam Smith Knew, Moral Lessons on Capitalism from its Greatest Champions and Fiercest Opponents”. And he asked what the great Scottish economist might have to say about the most recent crisis.

Mr Otteson was kind enough to channel Mr Smith in response by citing a string of illuminating passages. It is no surprise that the man who coined the term “invisible hand” would be no fan of overt government intervention. His dissent could be split into three intertwined categories: the temptation of governments to meddle at long-term cost to society; the dangers of paper money; and how the issues of debt and money shift wealth from the future to the present. That, he thought, constitutes a form of generational theft.

….All these points suggest that the financial crisis might better be thought of in two pieces, the initial tumult and the response, whose pernicious consequences lay ahead. Beyond the vast amount of public debt created during the crisis, the mere act of bailing out the institutions involved undermined the fear that Smith said was essential to prevent future fraud and negligence. What then is the alternative, if ever greater reliance on Mr Smith’s “man of system” and his flaws is to be avoided? In seeing what has unfolded, Smith would be forgiven if he were to ask an obvious question: how could his ideas and his name continue to be so widely circulated while their meaning is ignored? It is left to the reader to decide whether Smith can provide all the answers for the modern world.

Well to appreciate what Smith would have said, students have to be taught what he really wrote and thought about. As this is known by only a handful few, one cannot even debate these ideas..

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Is wikipedia more biased than encyclopædia Britannica?

January 29, 2015

Apparently yes it is.  Interesting research by Feng Zhu of HBS and Shane Greenstein of Kellogg School of Management.

To test this theory, Zhu and Greenstein took a database of terms developed by University of Chicago economists Matthew Gentzkow and Jesse Shapiro to examine newspaper bias. Gentzkow and Shapiro studied speeches in the 2005 Congressional Record to scientifically identify the top 500 unique phrases used by Democrats (e.g., tax breaks, minimum wage, fuel efficiency) and Republicans (e.g., death tax, border security, war on terror), rating each according to political slant.

Zhu and Greenstein then identified some 4,000 articles that appeared in both Encyclopædia Britannica and Wikipedia, and determined how many of each of these code words were included, in an effort to determine overall bias and direction.

They found that in general, Wikipedia articles were more biased—with 73 percent of them containing code words, compared to just 34 percent inBritannica.

In almost all cases, Wikipedia was more left-leaning than Britannica. Dividing articles into categories, the researchers found, for example, that stories on corporations were 11 percent more slanted toward Democrats, while observing similar leanings on topics such as government (9 percent), education (4 percent), immigration (4 percent), and civil rights (3 percent). Other categories did not have enough data to significantly identify bias.

Of course, those findings don’t say which of the two sources is correct in its viewpoint—only how they compare to one another. “We can only say [that]Wikipedia is more left,” says Zhu. “We can’t say which is reflecting true reality.”

What’s more, much of Wikipedia’s bias seems to be due to the longer article length of the online publication, where word count is less of an issue than the historically printed Britannica. When compared word to word, most (though not all) of Wikipedia’s left-leaning proclivities come out in the wash. In other words, for articles of the same length, Wikipedia is as middle-of-the-road as Britannica.

“If you read 100 words of a Wikipedia article, and 100 words of aBritannica [article], you will find no significant difference in bias,” says Zhu. “Longer articles are much more likely to include these code words.”

Hmm.

Further, they show that as an article is edited more in Wiki, it gets less biased:

Perhaps the most interesting finding of Zhu and Greenstein’s research is that the more times an article is revised on Wikipedia, the less bias it is likely to show—directly contradicting the theory that ideological groups might self-select over time into increasingly biased camps.

“The data suggests that people are engaging in conversation with each other online, even though they have different points of view,” says Zhu. “The crowd does exhibit some wisdom, so to speak, to self-correct bias.”

The number of revisions required to start showing this effect, however, is quite large—at least 2,000 edits—and the articles most read by users aren’t necessarily those most revised by editors. “To some extent, we are not seeing the scenario where too many cooks spoil the broth, we are mostly seeing an insufficient number of cooks,” says Zhu.

If Wikipedia would like to improve its objectivity, Zhu recommends that it encourage editors to revise the most-read stories first, as well as encouraging people with different political leanings to edit the same article.

“Wikipedia can easily do this,” he says. “It has all the information about how many times people are reading and editing articles. They could easily direct the attention of editors in order to have the most impact.”

So be careful while taking info from Wikipedia. This is difficult. Wikipedia has become to information as Google has become for search…

Financial inclusion experiences from some countries..

January 29, 2015

IMF econs have released a paper on the same.

Findings are summarised here:

(more…)


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