Several posts on EconLog recently have assumed that human capital will be sufficient for their children to prosper in a Kurzweilian future.
That is a very risky assumption. Human capital has historically been a good investment largely because there have been few innovations that made it easier to produce more humans. Kurzweil’s forecasts imply that around 2040 or 2050 the cost of duplicating a human-equivalent intelligence will plunge. Which means that for most kinds of jobs, the supply of labor should be expected to become nearly unlimited, and in the absence of substantial monopoly, we should expect the price of labor under a Kurzweil scenario to approach zero. Maybe something will guarantee everyone a luxurious lifestyle in a world where there’s little reason for salaries, but I’d rather hedge my bets and accumulate financial assets.
See Robin Hanson’s analysis for a more detailed argument.
I’ve found most of the “debates” on gay marriage annoying because most of the debaters seem eager to show off their ignorance of what their opponents believe. But Maggie Gallagher recently attempted to change this, and managed to provoke an excellent response from Reason’s Julian Sanchez which directly targets the marriage-for-procreation ideal, showing that in addition to lacking strong arguments in its favor, that traditionalists are wrong to claim that was once the sole motive for having such an institution.
Book Review: The God Gene : How Faith Is Hardwired into Our Genes by Dean H. Hamer
This book is entertaining but erratic. To start with, the title is misleading. The important parts of the book are about spirituality (as in what Buddhists seek), which has little connection with God or churches. He does a moderately good job of describing evidence that he has identified a gene that influences spirituality. He makes plausible claims that spirituality makes people happy (that part of the book resembles the works of Csikszentmihalyi and Seligman). He makes a half-hearted attempt to argue that spirituality has evolutionary advantages which isn’t very convincing by itself, but in combination with the sexual selection arguments in Miller’s book The Mating Mind it becomes moderately plausible.
About halfway through the book, he runs out of things to say on those subjects and proceeds to wander through a bunch of marginally related subjects.
His descriptions of psilocybin, prozac, and ecstasy were interesting enough to make me want to learn more about those and similar drugs.
His claims that placebos are effective seem very exaggerated (see this abstract).
The CFTC has reacted to Tradesports‘ futures-like contracts that many U.S. residents have been trading without CFTC regulation.
It is surprising how closely the contracts that they objected to coincide with contracts traded under CFTC regulation – they apparently have prohibited Tradesports from offering to U.S. residents contracts on the results of the next Fed meeting (which Hedgestreet trades under CFTC regulation; Tradesports stopped offering these in May, possibly due to negotiations with the CFTC) but as far as I can tell Tradesports is still able to offer contracts on where the Fed Funds rate will be at the end of the year.
I am also surprised that the CFTC classified the contracts as futures options rather than futures. They do have something resembling as strike price, but otherwise resemble a futures contract more than they resemble an option.
Book Review: Unconventional Success : A Fundamental Approach to Personal Investment by David F. Swensen
This book provides some good advice on how an amateur investor can avoid sub-par results with a modest amount of work. It starts by describing why good asset allocation rules should be the primary concern of the typical person.
I found this quote especially wise: “While hot stocks and brilliant timing make wonderful cocktail party chatter, the conversation-stopping policy portfolio proves far more important to investment success.” Fortunately for those of us who make a living exploiting the mispricing of fad-chasing investors, the most valuable points of this book aren’t in the kind of sound bite that will make them popular at cocktail parties.
But even if you choose investment ideas for cocktail party conversation rather than for building wealth, you should be able to find some value in his explanations of how to avoid being ripped off by fund salesmen and why ETFs are better than most mutual funds.
His attacks on the mutual fund industry are filled with redundant vitriol that may cause some readers to quit in the middle. If you do so, don’t miss table 11.3, which gives an excellent list of ETFs that most investors should use. I was surprised at how much I learned about the differences between good and bad ETFs from this book.
His arguments against investing in foreign bond funds are weak. I suspect he overestimates the degree to which foreign equities diversify exposure to currency risks.
He advises investing more in U.S. equities than in equities of the rest of the world combined, even though his reasoning implies more diversification would be better. But I’ve been slow enough to diversify my own investments this way that I guess I can’t fault him too severely.
He has a plausible claim that not-for-profit organizations that provide investment vehicles on average treat customers more fairly than for-profit funds do, he goes overboard when he claims not-for-profits have no conflict of interest. The desires for job security and large salaries create incentives that would cause many investors to be fleeced if they switched to not-for-profits without becoming more vigilant than they have been.
His faith in the U.S. government is even more naive. He says “U.S. Treasury Inflation-Protected Securities, which provide ironclad assurance against inflation-induced asset erosion”, “Treasury … bondholders face no risk of default”, and “The interests of Treasury bond investors and the U.S. government prove to be better aligned than the interests of corporate bond investors and corporate issuers. The government sees little reason to disfavor bondholders.” But a close look at the CPI shows that indexing to it provides very imperfect inflation protection (e.g. its focus on rents hides the effects of rising home prices), and the current reckless spending policies combined with large foreign holdings of U.S. bonds can hardly avoid creating a motive for future politicians to inflate wildly or default.
More evidence that people strongly overestimate the need for government.
The latest issue of Reason magazine has a nice report (based on this report in Motoring) that Ukraine fired all of the country’s traffic cops, and preliminary evidence indicates that the predictions of increased traffic accidents were false.
The reports I’d been reading about this movie led me to expect it would be a must-see movie. I was somewhat disappointed. It was probably worth seeing. It’s more intelligent but more violent than a Star Trek movie. And the rationalizations for the violence aren’t as contrived as in a typical violent movie. But being more intelligent than most big-budget movies is hardly enough to make a movie great. Maybe this is close to the best that we can expect from a movie aimed at a large audience, but if so that just makes me impatient for the day when animation becomes sufficiently realistic and affordable that the artists who produce science fiction movies can afford to target smaller (more sophisticated) markets and can afford as much variety and experimentation as the book market currently can.