Just to be clear, is the Unfogged consensus to roll our collective eyes at everyone hyperventilating about inflation? Are we chalking this up to a bunch of economists gleefully saying FINALLY WE KNEW IT WOULD HAPPEN 40 YEARS LATER!
Serious question: Is this go-round of inflation a problem? We evaluate problems (here, on this one website) by looking at things like: Are more people descending into economic precariousness or going without medical care? Is it making life harder for poor people or for schools or vulnerable people? I can see how inflation in the 70s could make life harder for vulnerable people. If this inflation is due to scarcity because the ports are full and the world had covid and the microchips went away, is it reasonable to worry that it will end up longterm hurting vulnerable people?
Other serious question: did I recently post this exact question and just forget the answer?
I found this article fascinating and infuriating:
The concept many medical experts can't seem to loosen their grip on is known as "risk compensation." It's an idea that comes from the study of road safety and posits that people adjust their behavior in response to perceived risk: the safer you feel, the more risks you'll take. Risk compensation makes intuitive sense and can be true to an extent. If you're driving on a precarious cliff-side road without guardrails, you'd probably drive more cautiously. But some proponents of the idea make a stronger claim: that guardrails cause so much reckless driving that any potential safety benefits of guardrails are offset or even reversed. Under this reasoning, a road with guardrails would cause more accidents than a road without guardrails. Guardrails aren't helpful; they're counterproductive.
This paradoxical idea has been trotted out by health experts to caution against not just pandemic safety measures such as masks, but everything from child-safety caps on medication (which, the worry goes, could lead parents to leave pill bottles lying around carelessly) to diet soda (what if people chug the stuff and it makes the obesity epidemic worse?).
But whenever risk compensation has been subjected to empirical scrutiny, the results are usually ambiguous, or the hypothesis fails spectacularly.
There are a ton of links in the article backing up all the assertions above, but I couldn't be bothered to click through, grab the link, and put it in this post. Also I have to go teach in a minute.
Also this explanation of why this risk compensation belief is so persistent is just so on the nose:
So why does this concept stick around? It may be because it aligns with an extremely effective bit of political rhetoric. In his 1991 book, The Rhetoric of Reaction, political economist Albert O. Hirschman analyzed common rhetorical tropes used throughout history to defend the status quo. Hirschman dubbed one of these common tropes "the perversity thesis." The perversity thesis states that well-intentioned rules and regulations ultimately exacerbate the problems they were designed to solve. We hear this sort of argument most prominently in arguments against the welfare state. ("We tried to remove the barriers of escape from poverty and inadvertently built a trap," wrote Charles Murray in Losing Ground.) As a political tactic, such rhetoric makes for an effective appeal to the status quo, because why change anything if everything backfires? Give poor people money, the argument goes, and they'll simply spend it on useless goods, making their predicament worse.
In American economics departments like Peltzman's, perversity arguments dovetailed nicely with laissez-faire economics, and it became nearly axiomatic that any effort to restrain the invisible hand, no matter how worthy, was prone to achieving the precise opposite of its intention. The risk compensation hypothesis fits neatly into this worldview.
via firefox pocket, like all good things in this fallen world
A long time ago, we had a conversation about investments in the stock market, and the general consensus was to just put your money in an index fund that tracks one of the big markets and leave it alone. (This has obviously proved to be extra good advice if you chose the Nasdaq over the past decade.)
I have talked to our tax guy, and an advisor that comes to our work to talk about your retirement money, and one additional person who was interested in investing our money on our behalf. They're all pitching the same spiel: their strategy keeps you safe on the inevitable corrections and downturns by not turning down as far and losing all your money, so you're not in the hole when things take off again. The implication is that they may not ride the peaks as high, but they let you keep the money that you do get instead of losing it all.
There are two ways that I think about the major fallacy here: one kahneman-style and one mathematical. The Kahneman one is just loss aversion, and I'm really just assigning it to him because he has those studies where the expected value of the participant's earning is identical in either scenario, but participants behave very differently if you give them $100 and they can risk losing or gaining, versus if you start them at $0 and they only stand to gain. (I forget the details.) The stock market is the one place that basically acts just like an econ simulation for whether or not you're actually a rational actor. These financial salespeople seem to be trying to sell me on a loss-aversive strategy that's not actually rational.
The second fallacy is one I think about sometimes when I'm teaching Calculus, which is how their models implicitly pick the lower end of integration to be the beginning of the economic downturn. You can pick the lower end of integration in many different places to bolster your argument of which strategy is best. If they started their integration at the moment when the market turns positive, they come off looking much worse.
Either way, the key is whether they are hedging the losses more effectively than they're missing the peaks, or if they're missing too much of the peaks. From my school TIAA-KREF account and the bit that we put aside in a 529 with our tax guy, it seems like they miss too much of the peaks.
You all have been thoroughly validated. Just put your money in an index fund and forget about it. If the market dips, for the love of god don't take your money out at the bottom, because all you need to do is ride it back up to recoup your losses and keep going. Send your commissions to me instead. Also thank you for your excellent advice a decade ago.
This is intended to be our system for checking in on imaginary friends, so that we know whether or not to be concerned if you go offline for a while. There is no way it could function as that sentence implies, but it's still nice to have a thread.
Episode Kobe three.
If you didn't know, how old would you guess you were, based on your aches and pains? (My grandmother used to pose this question and then say she felt 20-30 years younger, and also that it was surprising to be old.)
Lately I saw a few random internet people singing the praises of compression socks on flights, and it made me wonder if I have the types of aches and pains that benefit from compression socks. I teach from 8-12 on T/Th, and by the end, I'm cranky about being continuously on my feet for that long. Also I have a persistent ENT symptom that is both annoying and grosses me out a little.
I think I'd guess right around 43.
Moby writes: That's why I poop on the company time.
It's not new information that fast food restaurants don't pay their staff, but I hadn't realized they weren't paying the managers either until I read this. When the revolution comes, if they are stupid enough not to pay the subalterns for the $2/hour over the rate of the lowest paid employee, I guess I don't need to wonder who will win.
(My apologies for the long article. I usually try to avoid reading them, but this was about Bradford so I had to read until they mentioned the Zippo factory and that was about 1/2 down.)
Heebie's take: It's kind of an uplifting article, if nothing else than to see exploited workers realize the power they actually have if they band together.