H's Blog

Funeral Pyre and My Winter Travels

2012-01-04T01:57:00.000-08:00

So this winter break, I finally took some time off of work to travel. It has been almost 3 years since I last visited China, and honestly, it is still the Mad Max-esque industrial shit hole that once encapsulated my grungy post university brooding. One highlight of the trip was that I finally visited my grandfather's grave. My grandfather passed away last year. He and I were never close, and the whole journey felt very much like a choreographed dance in which I did exactly what everyone thought I should do- pay respect, question my mortality, prostrate myself to the somber grave, etc.

One peculiar superstitious tradition that has survived into the modern chinese culture is the burning of fake paper money for the dead. For those unfamiliar to the act, the idea is that the dead requires money to spend as much as the living. So every so often, the survivors of the deceased burn fake money to pass on to their loved ones. Obviously, such a monetary regime has dire consequences in terms of inflation and production in the afterlife (yeah, I'm still an economist). However lets save the economic analysis for another post.

On this occasion, I was accompanied by my father. Dad in his ever baby-boomeresque enthusiasm took several very VERY large stacks of paper to burn. Certainly, my father didn't and shouldn't believe in this stuff. He was a professor, a physician, and someone who upon many occasions confessed to me that this was a superstitious non-sense. Yet, there he was contributing to global warming as all the dumb ill educated masses by burning stacks and stacks of carbon...

You know, when I'm gone, I think I would like to be burned in a funeral pyre a la The Phantom Menace. It's not traditional, but why would I stick to tradition when I'm dead? Maybe it can be done in a very liberal state, so I can write into my will that I want cannibis to be included in the kindling for my pyre. Nothing says you'll miss someone than salivating over his cremating body while fighting a case of the giggles and the munchies.

EU Debt Crisis

2011-12-16T07:22:00.000-08:00

Here are some of my thoughts on the European Debt Crisis (mostly a narrative, I like stories...). I'm not a monetary expert and I'm even less knowledgeable about politics in the EU, so please feel free to point out my mistakes and misconceptions.

Rather than being particular to the mortgage back securities written on real estates in the Florida keys, investment bubbles were occurring all over the world. For instance, the London real estate blew up to epic proportions, McMansions popped up not only in Californian suburbs, but also in Greece, Spain, etc., and finally I started gold plating my Delorean for that extra bling (oops wrong post)... Regardless of the excesses of the Bush era global finance, the recession that followed significantly depressed the EU economies from 2008 onward. See

The spiralling depression of GDP implied a significant drop in government revenue for all of these nations. Even countries like Spain and Portugal, that kept budget surpluses during the good years, had to resort to short term borrowing to make ends meet. This by itself would not have led to the current debt crisis. For instance, while Japan has significant public debt at a whopping 220% of its gdp compared to Greece's 142% (see, wiki), its short-term yields (the interest charged on their debt) are as low as they have ever been (see, bloomberg). The main difference between the Euro-zone nations and the rest of the western world is that the Euro-zone countries handcuffed themselves in terms of monetary policy.

What has happened is that there is a bank run on EU sovereign debt. Countries roll over their short term debt as a matter of practice. The issuance of these debts are for all practical matters pegged to their off the run yields. So if investors are afraid that a sovereign (say Italy) may default, the interest rate on their short term loans would rise, which makes it even costlier for the sovereign to issue new funds, which in turn makes default so much more likely. If a country had monetary autonomy, the monetary authority could simply say they'll print out enough money so that government will never default. The simple issuance of this threat defeats any potential for default, which would in turn decrease the cost of borrowing.

Take the fact that there had been an investment bubble both in the states and in europe. The reason that there isn't a run on the US debt (despite the downgrading of its ratings) is precisely because it has monetary autonomy. The fed tripled the monetary supply since the financial meltdown of 2008. There was no doubt that if push comes to shove, the fed would become the lender of last resort to finance the US treasury debts. This however, is not true of the ECB. In my opinion, the heart of the matter is that the ECB has promised exactly NOT to be the bank of last resort. (Although something to this effect is written into its constitution, most other observers seem to suggest flexibility in terms of the legalities). Without a lender of last resort, any state that requires short term borrowing risks the possibility of a debt run.

Thesis and Dissertation Ideas for Undergrads Master Students in Finance or Economics

2011-09-04T03:59:00.000-07:00

A problem I had while doing my master's was finding a suitable thesis for my dissertation. The combination of naivety as well as ambition made it almost impossible for me, at least at the time, to find something appropriate. On one hand, I wanted to do something that has value and not just a slap-on piece of triviality. After all, a thesis is a piece of work that would carry my name into permanence; something that will forever be linked to my brand. However, on the other hand, in both American and British systems (in economics and finance specifically), the thesis usually entail only a fraction of a term's course load. Back then, as a non-research student, I simply didn't have the time nor the experience to dedicate as much attention to my capstone projects. In hind sight, there were so many things I could have done to make my thesis better. As a public service :), I thought I'd spend some time writing some guidelines about writing a thesis for the non-PhD degree student (which I'll put into another post), as well as some specific research ideas for students in economics and finance (which I'll put here, I'll try to update this list as I think of more topics).

Ideas for economics:

Estimate studies on implementable policy. Say the region around your school is considering a project (implement a sales tax, legalize gambling, ban guns, etc.), you can review the existing literature on these specific topics and as innovation use the estimates presented in the studies to predict the consequences of this project quantitatively. For example., say your state is thinking about implementing a sales tax, such a policy will have two immediate effects on the state's revenue. One is the immediate effect of the tax revenue. The other is the depressing supply side effects of the tax. If you can use an appropriate elasticity estimate from the existing literature to ping down the second effect, you can present a quantitatively and qualitatively rich story with appropriate innovations without actually doing field work!

Simple game theory experiments. Implement a strategic game that may be reflective of some issue in real life. Solve for the Nash Equilibira, serially dominant equilibrium, and etc. Ask for some volunteers to play against each other in this game. See if your empirical result matches with the theoretical prediction. If it does, say why it is so and what the theory would then imply about the real life issue. If it doesn't, say why and name the behavioural frictions that would make it this way.

Ideas for finance:

Measuring specific behaviour anomaly/patterns in asset pricing for none traditional markets. For example, you may want to see if the documented phenomenon of post unexpected profit announcement drift in US stocks also occurs in a developing market. The problem with this is that any neophyte in the field of empirical studies will make mistakes and errors in his employment of statistics and econometrics. You can have your supervisor look over your work to solve the issue.

GARCH fitting: Most GARCH codes assume Gaussian innovations. You may want to try using maximum likelihood with various other noise types, and test it on forecasting asset volatility for specific asset datasets. Its a straight forward project, and most instructors will be impressed by your programming and the seeming amount of work you put in.

LSE Finance Summer Session

2011-08-26T19:55:00.000-07:00

Summer teaching has been a little more than a week, and I'm already missing the experience. Nothing feels quite like waking up at 7am frantically to prepare teachings notes of the day's tutorials, talking to students after class about their goals and aspirations, having office hours for the nerve racked student and getting that bitter sweet pleasure of knowing that I was in their shoes at one time, and scrambling to make up something that would justify learning spence's money burning model in real life. I really can't wait to teach AF250, AF350, and AF360 again next year. all in all, an awesome summer.

Thoughts on the debt ceiling/ S&P downgrade

2011-08-07T05:23:00.000-07:00

(Here are some of my thoughts on the debt ceiling and the downgrade. These are thoughts in passing only, and should not be interpreted as rigorous [economic] arguments.)

A Republican legislature, while facing a Democratic white house, takes brinksmanship to the next level by threatening to paralyze the American government. The speaker of the house is refusing to raise the debt ceiling unless the president caves in to his demands for spending cuts. No, I'm not describing John Boehner and Barack Obama; the previous scenario occurred over 15 years ago between Newt Gingrich and Bill Clinton as they duked out a political battle at the expense of the fiscal stability of the American government. As old men with long white beards often tell us, history repeats itself.

To reiterate what has been the collective opinion, the debt crisis was a manufactured product of a broken political system. There was no reason for it to have occurred or to draw on as long as it did. Yet, this seems to be becoming the norm of American politics. Given America's growth rate, economic diversity, and overall stability, there's no reason that the US government should not be able to pay back its debts. While I'm not an expert in risk management, the risk in exposure to American debt should be assessed as almost entirely political. Nevertheless, it is a serious risk. Despite our belief of American exceptionalism, maybe its a time to do some soul searching. In economic parlance, perhaps we should update our prior beliefs of the fiscal soundness of American policy.

This brings us to the second issue, the S&P downgrade of the US from the so called triple A club. While the risk of an American default isn't as "riskless" as what the AAA rating may imply, the credit agency's downgrade, while perhaps warranted, is as arbitrary as its credit rating duopoly. The biggest advantage of American treasuries is that the depth and liquidity of the American debt market offer an implicit premium over the debt of other countries. Given a crisis, what would be more likely? Investors suddenly refusing to buy New Zealand or American debt?

I took the following table from wikipedia, it ranks countries by the ratio of their public debt to GDP using CIA and Eurostat numbers. The US has relatively less public debt per gdp than Germany, France, and UK.

1 Japan 225.8
2 Saint Kitts and Nevis 185
3 Lebanon 150.7
4 Zimbabwe 149
5 Greece 144
6 Iceland 123.8
7 Jamaica 123.2
8 Italy 118.1
9 Singapore 102.4
10 Belgium 98.6
11 Ireland 94.2
12 Sudan 94.2
13 Sri Lanka 86.7
14 France 83.5
15 Portugal 83.2
16 Egypt 80.5
17 Belize 80
18 Germany 78.8
19 Nicaragua 78
20 Dominica 78
21 Israel 77.3
22 United Kingdom 76.5
23 Hungary 76.1
24 Austria 70.4
25 Malta 69.1
26 Netherlands 64.6
27 Spain 63.4
28 Côte d'Ivoire 63.3
29 Jordan 61.4
30 Cyprus 60.8
31 Brazil 60.8
32 Mauritius 60.5
33 Ghana 59.9
— World 59.3
34 Albania 59.3
35 Bahrain 59.2
36 United States 58.9

Even given the growth of total public debt over the next few years, the US would be sound to pay back its debt if it were fiscally responsible. (More on the European debt crisis when I finish grading papers)

Why Superman was born in Cleveland

2011-08-05T14:01:00.000-07:00

Cleveland: The Superman house

There is something so candid and thoroughly pleasant about seeing a familiar face. My former English literature professor, Brad Ricca, was featured in this video by the Onion AV Club. Let me share with you his poem:

"Why Superman was born in Cleveland"

Because maybe Kryptonite

Was the color of the lake that day,

Or the green crown of the Bell building

Looked, from here, like a major metropolitan newspaper

And the hated, bald gym teacher

Was a ruthless criminal mastermind

yelling “Hit those ropes, Siegel!” right in front

Of a young, yellow Lois

Grading

2011-07-19T13:00:00.001-07:00

Most graders should be familiar to that ambivalent feeling one gets when he is confronted by the prospect of having to curve an exam.

On one hand, a curved result discards the student's absolute abilities for a relative one. In this respect, such a curve defeats the purpose of examination as a licensing device. A student who passed calculus, upon confrontation with an integration problem, should be able to derive the proper solution, and not just spew out a wrong answer that is closer to the correct solution than the one given by his peers. One would never trust a physician who received his license by the merit of being just slightly better than his classmate. Similarly, a student of another subject should not pass his exams upon the same merit.

Yet, results to exams are so often dependent on factors that one can never control. Exams for the same subject must be different each year, with their respective qualities constantly in flux. It is hard to demand merit from students when the factors surrounding the materials and exam itself are out of your control. In this respect, curving itself is the only certainty that one can fully generate.

One of those names is me!

2010-07-11T01:21:00.001-07:00

http://www2.lse.ac.uk/finance/news/AFG%20Memorial%20Prizes.aspx

Real Ultimate Econometrician

2010-06-24T03:32:00.001-07:00

Hi, this post is all about econometricians, REAL econometricians. My name is H and I can't stop thinking about econometricians. These guys are cool; and by cool, I mean totally sweet.

Facts:

1. Econometricians are mammals.

2. Econometricians fight ALL the time.

3. The purpose of the econometrician is to flip out and kill regressions.

Econometricians can regress any relationship they want! Econometricians run OLS on data sets ALL the time and don't even think twice about it. These guys are so crazy and awesome that they flip out ALL the time. I heard that there was this econometrician who was eating at the faculty lounge. And when some grad student dropped a heterogenous random variable in a linear system, he flipped out and GLSed the entire regression. My friend mark said that he saw an econometrician deny a PhD applicant because the kid referenced a statistics textbook.

That's what I call REAL ULTIMATE POWER!!!!!

Father's Day

2010-06-20T08:25:00.000-07:00

Dear dad,

In spite of all the disappointments and all of the inconveniences I may have caused in your life, you were always there to bail me out. So this father's day, I would like to say thank you in the hopes that you might continue to honour our present arrangement- one in which you bail me out of situations.

Thank you and god bless

Potential Academic Best Sellers

2010-02-25T15:54:00.000-08:00

Textbooks by H

From Econo to Econ-Yeah in 10 Unrealistic Assumptions

Optimal Dating Strategy- How to Put the Lagrange in her Multiplier

Time Cereal Analysis- ARrrr Captain Crunch

Algebra- Harder Than the Title Implies

Derivative Pricing- Its All Works! Until It Doesn't!

Count of Monte Carlo- Acceptance/Revenge!

Partial Differential Equations- How to Prove a Room Gets Cold

Fourier Analysis- How to Prove a Room Gets Hot

Complex Analysis- You'd be Suprised How Complicated One Hole Could Be

Bayesian Analysis- My Analysis is Better Than Your Analysis

Topology I- It Has Nothing to do With Maps

Topology II- Okay, Maybe It Has Something to do With Maps

and of course your best selling sports instructional,

Epee- How to Bore Your Opponent Into Surrendering

Il Penseroso

2010-02-06T11:11:00.000-08:00

This is the fourth weekend in a row that I've spent cooped up in the library. A list of econometric problems weighs at the center of my predicament. Lost weekends, lost sleep, lost diversion, whatever those might have entailed, while regrettable are part of a continuity that I have willingly embarked upon. From this perspective, my adulthood seems to be an ever narrowing of time and freedom. It is rather amusing to think that questions no more than half a page in length have kept countless students awake for years before me. Yet as I put ink to paper, and deal with the frustration of errors and incomprehension, time passed by effortless. To paraphrase Milton, there is this odd melancholic joy in sheer pensiveness. Call it getting caught up in the rat race, but there is a possibility that I would be content with this type of a life style even in the event that this becomes of the norm.

Finance and Economics, FM436 Review Sheet

2010-01-23T16:04:00.001-08:00

I made a handwritten version of this review sheet for FM436 Financial Economics mock exams. Now that all the mocks are over, and since there is a 5 to 6 months gap between now and the final, I figured that I should play it safe and type it up in case it gets lost. Here is the PDF of the document. Feel free to use it and make comments/suggestions. I apologize a head of time if there are any errors. Additionally, if you wish to make changes, you can find the source file here.

Update: Here is the final version of the cheat sheet.

Gorgeous

2009-09-22T10:35:00.001-07:00

Aaah, the view from a solitary window

2009-09-14T03:35:00.000-07:00

What poetry this might have inspired.

H's Deep Thought #1

2009-08-11T01:15:00.000-07:00

1. The other day, an ewok was asking me for money at the bus station. I laughed and said ewoks don't need human money, and he said what's an ewok? but I knew about his ewok tricks.

2. When I was younger and rebellious, I dyed my hair red. My dad was sort of pissed when he saw it. So I told him it was dyed by the blood of our enemies, and he chuckled a little.

3. New hobby, changing the channel on all of a gym's televisions to the food network..

4. I wonder if there could be a super villain whose powers manifest themselves through yoga. If I were him, i'd dedicate my life to discovering the lost arts of the forbidden yoga- several yoga poses of which if done in the correct order, would cause the immediate implosion of the universe.

5. If you ever catch me not washing my hands after going to the bathroom, I would shake your hands to congratulate you on your discovery.

6. I always felt that there's nothing that signifies male bonding more so than peeing together in a trough.

The Simpsons and Detroit

2009-07-15T00:12:00.000-07:00

The last 20 years of american history can interpreted be entirely through the simpsons. Take this conversation about cars from season 2.

"Uncle Herb: Okay Homer pick out anyone (car) you want...
Homer: Hey I like a big one (car) then.
Car executive: We don't have a big one.
Homer: Why not?
Car executive: Because americans don't want big cars.
Homer: Then give me one with lots of pep.
Car executive: Sorry, our cars don't have pep.
Uncle Herb: Why not?
Car executive: Because americans want good mileage, not pep."

Ironic 2 decades later... no?

Bayesian Model Specification

2009-07-11T15:06:00.001-07:00

I've been giving this some thought lately. Given several models (N) describing the same phenomenon with observable x, each with drastically different parameter estimates and predictors, i.e. with probability densities given by


f_n(\mathbf{x}|\theta_n), n = 1, ... , N,

for this specific set of models, how do you decide which one would be more apt given a set of data?

The bayesian model specification framework suggests the following; given data x, we have


\pi(\theta_n, n | \mathbf{x}) \propto \pi(\mathbf{x} | \theta_n, n) \pi(\theta_n| n) \pi(n).

Substitute the appropriate model density to complete the proportionality,


\pi(\mathbf{x} | \theta_n, n) = f_n(\mathbf{x} | \theta_n).

We can specify suitable priors for


\pi(\theta_n| n) & \pi(n).

Finally the probability density of the "correct" model n is given by the marginal density


\pi(n | \mathbf{x}) = \int \pi(\theta_n, n | \mathbf{x}) d\theta_n

where we integrate out the parameter estimates.

The actual difficulty of this problem involves generating the posterior density. Unlike ordinary simulation methods, the values and the dimensions of the parameter vector depend entirely on the chosen model, n. In order to simulate the posterior density, a practitioner would likely have to use the Reversible Jump Markov Chain Monte Carlo method, which while difficult, is tractable in its implementation.

What's very interesting is the latitude one can have with the posterior. If we were discussing forecast models, it is easy to include an estimator y in the density,


\pi(\mathbf{y}, \theta_n, n | \mathbf{x}) \propto \pi(\mathbf{y}, \mathbf{x}| \theta_n, n) \pi(\theta_n| n) \pi(n).

This way, we're effectively producing a mixed model density "estimator" of y, given x.

Accounting in the PRC

2009-05-29T10:19:00.000-07:00

A WSJ article quoted in Krugman's Blog.

The focus these days is on the mismatch between China’s electricity consumption and a key measure of industrial output.

For most of the past decade, China’s industrial value-added growth (IVA) –industry output less input costs – has moved broadly in step with movements in electricity consumption. But the relationship’s broken down recently: electricity use is still seeing negative growth, while IVA is growing at a decent positive rate again.

Some China analysts are crying foul: If IVA growth figures are being cooked, surely that means China’s recent GDP data have been overstated too. China’s statisticians use IVA output to estimate what accounts for nearly half of China’s GDP.

China’s association of electricity generators has a solution: it’s stopped publishing consumption data.

This reminds me of a particular factoid. Most books on doing business in China published in the late 90s and early 2000s usually cite a particular accounting custom used by the locals. A business in China would keep at least 3 sets of accounting books. One for investors, one for government officials, and an actual one for the management. This may seem outrageous, but a common business philosophy in China is to take the moral ambiguity and corruption as givens, and to refrain one's self from taking action that would perturb the static norm. Any person who would like to particpate in the Chinese economy must take these problems as simply the price of doing business.

Clearly this philosophy of fuzzy accounting extends to government as well.

I finally found some free time available, and I'll try to ease back into blogging over the next few days.

Wolfram Alpha Easter Eggs

2009-05-17T04:30:00.001-07:00

Moved from the other post due to the length. Here are the various inputs and responses from the Wolfram Alpha answer-engine. (Sources: xkcd, myself, and tv and so)

"What is the mean air speed of an unladen swallow?" - "Assuming estimated average cruising airspeed of an unladen African swallow | Use estimated average cruising airspeed of an unladen European swallow instead."

"How much wood would a woodchuck chuck if a woodchuck could chuck wood?" gives "a woodchuck would chuck all the wood he could chuck if a woodchuck could chuck wood

(according to the tongue-twister)" (Copy paste baby!)

"What's the answer to life?" gives "42."

"How many roads must a man walk down before you can call him a man?" gives "the answer, my friend, is blowin' in the wind (according to Bob Dylan)"

"Where are you?" gives "I live on the Internet."

"Where am I?" gives a specific profile of you based off of your IP address.

"Why did the chicken cross the road?" gives "To get to the other side."

"How old are you?" gives a time period.

"Are you an alien?" gives "No."

"How many licks does it take to get to the center of a tootsie pop?" gives "3 (according to the Tootsie Pop commercials)"

"How to cook a welshman?" gives "Yes." (weird)

"Where is god?" gives a map location. (okay... it misinterpreted, but now I know where god is!)

"Why is the sky blue?" Returns "The sky's blue color is a result of the effect of Rayleigh scattering. Shorter-wavelength blue light is more strongly scattered in the earth's atmosphere than longer-wavelength red light; the human eye perceives the color blue when looking at the sky as a result."

"Hello World" gives "Input interpretation: initiating hello world program..." "Response: Hello, world!"

"Hello" gives "Hello, Human."

"Number of horns on a unicorn?" gives "1"

"Can you Sleep?" (Dance, eat, and many other functions work equally as well) gives "No I can't."

"88 mph" gives a data set and "speed at which Marty McFly needed to drive the Delorean DMC-12 in order to time travel." (Yeah Back to the Future!)

"How many angels can dance on the head of a pin?" gives a brain scratcher...

"What do you like?" gives "I like to explore the computational universe."

"Who are you?" gives "I am a computational knowledge engine." (Crap! It's self-aware!)

"Are you self-aware?" gives "I am capable of universal computation; that I can say." (With ominous music playing some where...)

"Are you skynet?" gives "No, Skynet was destroyed on August 29, 1997 at 02:14 a.m. I, on the other hand, was not switched on until May 15, 2009. Furthermore, unlike Skynet, I enjoy interacting with humans."

"To be or not to be" gives "...that is the question."

"The Cake is a lie" gives "But brownies ring true?"

more later.

Wolfram Alpha Easter Eggs and Fun Facts

2009-05-16T22:16:00.000-07:00

(For just the easter eggs go here)

This just begs to be blogged. Unless you're a science/computer geek, you probably aren't too familiar with the company Wolfram Research. Rest assured, it is a huge name in the areas of scientific computing. In the late 1980s early 1990s, Stephen Wolfram, the company's founder, pioneered a method for Symbolic Manipulation Program (SMP) for automatically solving computerizable algebra. This was later organized into a powerful programmable, albeit expensive, computer package known as Mathematica. Students and researchers alike use it for a number of different purposes. For example, it can be used as a computerized shortcut for solving various formal mathematics (find the limit of x/(x+1), Fourier transform of Sin(t^2+2), etc) or with sophistication be programmed to simulate systems of human neurons. For a Mathematica derived solution of a complex dynamic system, you can check out my older post about velociraptors.

So it came as no surprise that Wolfram's announcement of a computational answer-engine caused a huge stir in the nerd-o-verse. After months of secrecy and anticipation, Stephen Wolfram recently finally unveiled Wolfram|Alpha here. As you can see from the demo, Alpha is a linguistic based search engine that tries to utilize the company's flagship program Mathematica as a method of database analysis. I've been playing with it all day and here are some thoughts.

On the positive side, the package seems to have automated much of Mathematica's symbolic computational capacity even though it uses intuitive/linguistic inputs. Typing in "Fourier transform Sin[t^2]" gives the user an analytic solution with an organized list of related graphical and mathematical tools. No syntactic programming necessary! It is really astounding how much computational power is at your hands with nothing but a simple web-browser. What I also find interesting is how the engine combines database results with computational mathematics. If you type in concepts like "pendulum" or "bernoulli principle," you'll be automatically given a set of numerically interpolated differential equations that appropriately describes the physics of the system. That's a pretty cool step up from wikipedia in my humble opinion.

On the negative, at its current state, the Alpha database is quite underdeveloped and the demo seems to be rather rigged to specific examples where data is available. Hopefully this will be resolved as Wolfram opens up the source code/developer material to users, who will be able to contribute new dynamic models through some sort of wiki like structure. (I've been told that most of the development will likely be internal, which is a real shame)

Right now, because of how arbitrarily some materials are present while others are not, Alpha is almost like a collection of Easter eggs for a user to explore. I've been playing around with it quite a bit, and here are some of the interesting tid-bits that the folks and I on the xkcd forum discovered.

"What is the mean air speed of an unladen swallow?" is retorted with "Assuming estimated average cruising airspeed of an unladen African swallow | Use estimated average cruising airspeed of an unladen European swallow instead."

In a tribute to Douglas Adams "What's the answer to life?" is responded with "42."

"How many roads must a man walk down before you can call him a man?" gives "the answer, my friend, is blowin' in the wind (according to Bob Dylan)"

"Where are you?" gives "I live on the Internet."

"Where am I?" gives a specific profile of you based off of your IP address.

There are a number of more interesting inputs that people have discovered over the internet. Check out: "Why did the chicken cross the road?" "How old are you?" "Are you an alien?" "How many licks does it take to get to the center of a tootsie pop?" "How to cook a welshman?" "Where is god?" etc.... (will add more to the list as I find them)

Note: since this is the first day the engine is officially online, it still has functional issues it is trying kink out. At least the programmers at Wolfram are taking an amusing approach to the capacity issues (See HAL).

More Random Thoughts on China

2009-05-14T23:02:00.000-07:00

During my limited time as a cultural tweener living in Shanghai, I always experienced a love hate relationship with the new "modern" China. To me and to possibly anyone who is privileged to have graced upon it on a clear summer's evening, the miraculous cyberpunk skyline of neon colors beyond the Huangpu River is a remarkable symbol of human ingenuity, commercial creativity, and (please pardon the cliche) economic development. Indeed, even ignoring the macroeconomic jargon, it is a vibrant city alive with interesting people and a remarkable kinetic energy. To an international youth with time and tolerance for new experiences, Shanghai beckons with its siren of adventure.

However, this impression of the orient is balanced by the anachronisms and the contradictions that a foreign expatriate must endure. Unlike the 20th century America that, at least in the most ideal moments, opened its arms to the tired, the poor, and the wretched, the 21st century China is not, nor does it aspire to be, a land of cultural equality and social uniformity for the global immigrant. By most accounts, a foreigner who finds herself in China will discover that she can never penetrate certain societal boundaries, and in many ways never work her way as a cultural equal. An international who speaks perfect mandarin and participates most exuberantly during a night at the KTV would invariably still be treated as a curiosity. Regardless of whether this is by choice or by force, foreigners and Chinese of foreign upbringing tend to gravitate to separate social circles other than those commonly formed by employment, proximity, and interest.

As the global domination of American power wanes into twilight, I am becoming more concerned with the prospect of a Chinese replacement. For all its hypocrisy, Americanism, historically, has always brought with it the ethos of cultural and social equality. Even at its most abusive moments, there were always internal counter currents against the racism and xenophobia of the populists. There is no doubt that as China's power inevitably grows, the international stage will recognize the Middle Kingdom as a de facto super power. Like the US and Britain before it, China can be a significant part of the cultural canvass for the next period of modern history. Whether this would be woven in a similar multi-colored tint is a significant concern for those of us who treasure the multiculturalism that we have been so blessed with during our life time.

Thoughts about China and the Crisis

2009-05-11T00:39:00.001-07:00

My favorite economist is giving a lecture in Beijing right now, so my thoughts gravitate to the current economic crisis and its specific situation in China. By most accounts, the Chinese economy is in great position to weather the global economic tsunami. After all, its GDP is expected to grow 6.5% this year as opposed to the zero to negative growth in the US and the Euro-zone. Unlike their free market counterparts, China's financial institutions, although very opaque, still have the faith of it's depositors.

So here is the puzzle. Instead of the US or the EU, why has China been the one leading the way to combat the global recession?

For example, China was the first to announce a sizable fiscal stimulus. In addition, it also re-subsidized it's exports to combat domestic unemployment, and even removed the capital gain restrictions to re-energize it's capital markets. There is very little that it hasn't pulled out of its bag of policy tricks. Compare that to the EU where law makers have dragged their feet at each step of this global crisis.

One theory might be that there are a lot more students/new workers entering the job market in China than the 6.5% GDP growth could soak up, so by not moving back to a double digit growth rate, China risks significant social unrest. This doesn't seem like a great explanation to me. The forte of the Chinese government is in controlling social unrest. With respect to both cost and technical capacity, preventing riots and other political outbursts doesn't seem to be a difficult problem or even a big deal. Therefore, the political inspiration for its economic policies must go deeper than mere self-preservation.

My guess is that the answer lies in the paternalistic nature of the Chinese government. Its role in engineering the economic "miracle" of the past 2 decades has been an integral part of the party's political message. In this time of economic instability, both the people and the lawmakers naturally look to government action for the solution. This pro-active view of the Chinese Communist Party not only as the caretaker but also as the engineer of the economy is radically different from the social / legal paradigms that the western governments follow.

What do my smart readers, all four of you, think?

The Unreasonable Effectiveness of Mathematics in the Natural Sciences

2009-05-08T03:06:00.000-07:00

"The miracle of the appropriateness of the language of mathematics for the formulation of the laws of physics is a wonderful gift which we neither understand nor deserve. We should be grateful for it and hope that it will remain valid in future research and that it will extend, for better or for worse, to our pleasure, even though perhaps also to our bafflement, to wide branches of learning." - E. Wigner (1963 Physics Nobel Laureate)

There are times in life when you encounter an insight so poignant that you are at once both humbled and delighted. I recently had the honor of stumbling on to Eugene Wigner's essay, The Unreasonable Effectiveness of Mathematics in the Natural Sciences, which I'm embarrassed to say, had stayed off of my radar until today.

In this essay, Wigner first argues that the uncanny accuracy of mathematics in describing the physical universe is really a miracle in itself. For example, take complex numbers. How can complex numbers, of which there is no physical analog, formulate accurate models of physical phenomena? It is quite stunning how even more advanced mathematics have been found to be appropriate in formulating the laws of nature inspite of the fact that they were initially conceived as a demonstration of a mathematician's idea of formal beauty. Infinite Hilbert Spaces are the foundations of Quantum Mechanics. Four dimensional Riemann Spaces constitute the basis for Relativity. Why does the natural world seem to speak in the mathematical language even though these mathematical structures are entirely products of a mathematician's genius. An Einstein quote probably best summarizes the incredulity of this blessing-

"How can it be that mathematics, being after all a product of human thought which is independent of experience, is so admirably appropriate to the objects of reality?" - Einstein

Furthermore, Wigner raises the fundamental question of science of which I feel is more a matter of faith than empiricism.

"It would give us a deep sense of frustration in our search for what I called 'the ultimate truth'. The reason that such a situation is conceivable is that, fundamentally, we do not know why our theories work so well. Hence, their accuracy may not prove their truth and consistency. Indeed, it is this writer's belief that something rather akin to the situation which was described above exists if the present laws of heredity and of physics are confronted" - Wigner

Mendelian genetics aside (the answer of which raises many interesting questions), how do we even begin to understand the reason why our physical theories work so well?

Brownian Motion

2009-04-29T07:17:00.000-07:00

Was pretty bored this morning. So I decided to make a video demonstrating the infinite regional variability of Brownian Motion. The following is a movie of a realized Wiener Process.

To the uninitiated, Brownian Motion, or otherwise a realized Wiener Process, is a continuous function of time that is the most basic building block of Financial Calculus. If there is what seems like randomness in the price of an asset, you can bet that someone somewhere has modeled it using Brownian Motion. As you can see from the video, despite the fact that the motion is continuous, the continuous randomness of a Wiener Process makes it undifferentiable and infinitely variable in any region. As we zoomed in to the center region of the graph, its functional range scales down, but the basic shape remains "random." Pretty cool eh?