Romania and powerlessness

I'm in Bucharest for a few weeks because of the Tuck Global Consultancy. I was really excited for the trip mostly because I've never been to a former communist country before and I'm fascinated by the cultural battle that is waged between the old centrally planned and largely bland architecture/television/movies and the newer market types. Preparing for the trip I watched a few Romanian films to try to see what kind of art the country creates.

The most overwhelming feeling I got from the films was a profound sense of powerlessness and frustration. The Death of Mr. Lazarescu brings this powerless home in the overburdened and overwhelmed health care provided by the state. Watching the plot unfold, you realize there is no quick fix to the devastation done to this country over during their 44 years under communist rule. I felt the same thing when I was watching 12:08 East of Bucharest, a film which discusses whether or not citizens of a small city on the outskirts of the capital participated in the 1989 revolution. It seems that the film's characters are desperate to have participated because it will mark some sense of control in the matter. We are given the overwhelming indication that no such revolution took place in the town. Lastly, Childern Undergroud is a profound movie detailing the absolute hopelessness of the homeless child population in the city. Often blissfully unaware of the absurdity of their existence, the children in the film are as young as eight. The culprit is once again found to be the devastation left by the communists.

All of the films were wonderful, and the artistic quality gave shape to the sense of Romania's uniqueness as an island of Latin in a sea of Slavic. I wonder if Romania will be able to channel this uniqueness into the sort of energy we've seen out of the other recent admits into the EU. I'm confident that something along these lines will happen, and I think it will be fun to watch over the next decade.

Diversity Confernce

Coming up this weekend.

As a signaling mechanism, I think the conferences is efficient and adequate. Tuck has done a great job in this area and it isn't always captured in in a single visit. Putting out significant resources to show dedication to diversity sends a signal that not every MBA program can or will follow.

I'm excited for the Around the World Party.

As Time Goes By is the best song in a film of all time. Listening to it again, it captures the whole mood of the film so well, that I'm not sure another song compares in this regard.

I think the Entertainment, Sports and Media club should host a panel on song and film. The business model of having a hit song to go with a hit film is a winner and I wonder if studios really put the full effort into the music side of the equation. In my experience, the soundtrack has been a mere afterthought.

RIP

Top 10 Patrick Swayze Movies

1. Road House
2. The Outsiders
3. Red Dawn
4. Point Break
5. Next of Kin
6. Donnie Darko
7. Ghost
8. Dirty Dancing
9. Three Wishes
10. Too Wong Foo

Pass on Post Grad

Predictable, and unintertaining fare. I found my self checking my watch at the one-hour mark, which is early even for me. Not a good look for Fox Searchlight.

Recruiting early

I'm out in LA right now meeting with a few firms for recruiting. If there is one thing that I would definitely stress to business school students, it is the value of early recruiting.

In terms of signaling, it shows that you are interested early, that you are willing to give up some marginal leisure time, and that you are knowledgable about the industry and firms before they do their company briefings, which can add quite a bit of difference at the margin.

Over at Austrian Economists, Dave Prychitko says:

I don't want to know what my students believe or think. I have neither the time nor the interest. Instead, I want to know how they think. Are they using the economic way of thinking? And, if so, are they merely using the same words and terms that I use in the classroom, or are they absorbing and understanding economic analysis? I feel that my goal as an educator is to offer them a way of learning how to think about complex social phenomena. "What do you think about minimum wages?" -- forget it. "How do you think about minimum wages?" Now we have something to discuss.

This has basically been my approach to business school. I have consciously selected classes that are going to teach me how to approach a problem, such as "Managerial Decision Making", and have avoided classes that will enhance my knowledge of facts, such as "Doing Business in the Middle East". The latter type may be helpful, but are easier to make up for after business school than the former.

The question of "fit"

Over at the Tuck Admissions Blog, a prospective askes Suds:

All B-schools speak highly of diversity and fit. To my mind, these are really divergent values and each school has its own answer on how these values converge. As a Tuck student, what would you say is common to all Tuck students that gets them to bond despite the diversity and differences in background, actions and goals?

I want to answer it slightly differently than Suds did.

Most of the commonality among Tuck students is created while at Tuck. The reality is that many students who go to top ten business schools all originate from a similar diverse pool. It is the social insitutions within the school's framwork that cause bonding.

If there is any ex ante commonality to Tuck students, I'd say it is more about latent characteristics which are activated in the group dynamic:

- Willingness to commit yourself completely to a compact and inescapable social environment.

- A desire for a smaller, more entrepreneurial setting.

- Openess to a (temporary) rural life.

I'd say that's pretty much it, but I also view this as an entirely positive. I'm big on diversity of all kinds, as I believe that social evolution depends upon it. If "fit" was really about bringing in students with pre-existing commonality, then I would be against a "fit" doctrine.

The Tuck Honor Code: a case study in a public good

For those that don’t know, Tuck utilizes an honor code for most of its academic administration. That means that most exams are unproctored. You can take them anywhere you like, and you self-time within a given window of usually a few days. The honor code has been strong asset for signaling future employers, as the Wall Street Journal survey has show that recruiters consistently rank us as the most ethical business school students out there.

You would think this would be a classic case for free rider problems. One might expect everyone to end up cheating, right? Well, I can say without a doubt, that is not the case. Cheating on these exams is definitely rare, to the point that you rarely hear even whispers or rumors of incidence. This does not mean that it doesn’t exist, and there have been exposed cases in the past, but overall, as a student here, I can unhesitatingly vouch for my classmates.

The question a standard economist might ask himself is why does this public good not suffer from massive free rider problems? After all, in Nash equilibrium, everyone in the school ends up cheating. One possibility is that the threat of the administration is so fearsome that the expected value is negative. But I’m pretty sure that isn’t it. The probabilities of getting caught by the administration are very low and the Judicial Board isn’t very likely to hand out the “death sentence” so to speak.

My take:

This is a Coasian story. The primary value gained from business school is the "property right" in the lifelong network you leave with. Adherance to the honor code is one of the costs of a property right in this network. The costs of self-regulation and self-policing are extremely low in a close-knit environment like Tuck, so it isn't hard to enforce rights related to this social capital. Feedback loops reinforce social costs of cheating (joking about it doesn't even seem permisable).

What I'm reading right now

The Real Estate Challenge by William Poorvu. HBS' real estate guru runs through a series of case studies dealing with various issues in real estate. The language is dry but the cases are somewhat useful. It still might get abandoned if it doesn't pull me in soon.

The Picture of Dorian Gray by Oscar Wilde. I never read it in college and high school but that is probably a good thing. I'm fairly certain I wouldn't have appreciated or understood it compeltely then.

The Adventures of Sherlock Holmes by Arthur Conan Doyle. I've always been a big fan of the original Gregory House, but my reading of his stories has been anything but cronological. First time reading The Adventures...

The 48 Laws of Power by Robert Greene. This book is on its last leg with me. Will probalby get abandoned this week. Some of the stuff is so obvious and some of it I think is downright useless. Don't bother.

Conceived in Liberty, Volume 2 by Murray N. Rothbard. Rothbard doesn't cite anything, and he has been proven to distort and mismanage source material in the past, but he is one of the few authors who is reanalyzing history in the libertarian light. Overall, I wish more economists did historical work because the analysis that you get from some historians is cringe worthy.

Misconceptions about Austrian Business Cycle Theory

I'm very happy that ABCT is being talked about and debated these days, however, those who are critical of it (Brad DeLong, Paul Krugman, et al), get one thing wrong. The length and depth of the recession need not be explained by sectoral reallocation alone. DeLong has been particularly willful on leaving out this point. The ensuing panic caused by such misallocations (what Hayek called the secondary downturn), may and sometimes does have a much larger impact. In terms of MV=PQ, when people rush to hold cash and less risky assets, V drops. If M is not increased to counterbalance, this deflation can lead to a decline in Q, as P will not adjust immediately. This part of the recession occurs completely independently of the sectoral shifts.

The critics should acknowledge this, or at least acknowledge that Austrians acknowledge that magnitudes between boom and bust need not be symmetrical. Friedman dismissed the link between the bust and the preceding boom. Austrians link the two, but there need not be a 1-to-1 ratio in magnitudes.

I would use stronger language than Professor French

From Professor French:

After the fact it is easy to identify periods in which stocks did well and periods in which they did poorly. But if you want to use these "seasons" to build an investment strategy, you have to identify them before they occur - and that is not so easy.

I say that it is impossible to indentify such seasons. But then again, I take radical uncertainty seriously, unlike most mainstream economists.

Exotic Internships

Over at the Tuck Admissions blog they have a post up highlighting T'09 Alex Figueroa's crazy summer internship in Nicaragua.

Alex's weekly blog is worth a visit.

Professor French's Nobel Prize odds

Many have suggested (including Dean Slaughter just this past spring) that professor French may someday end up with The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (the economic Nobel Prize). This is more than just Tuck marketing. Each time a short list of possibilities comes out before the award, Professor French is listed. This is due to his work on asset pricing that he has done with Eugene Fama. Last year, the two were running first and second odds-wise by the British betting firm Labrokes

However, I think there is now a snag. The current backlash against financial economics is not trivial and it is very clear to me that the award is often presented in a "faddish" way. Econ blogosphere is awash with financial economics critics. Felix Salmon, Dani Rodrik, Seeking Alpha, and most vocally Nassim Taleb are all critics of the innovations in financial theory and instruments from the past...lets call it 50 years.

Given the politicization of the award (why would you give the award to Hayek and Myrdal in he same year unless it was for political reasons?), I predict that we will have some non-finance awards for several years. Growth, Trade, Behavioral, and (boringly) Labor economics are probably all that will be on the table for legitimate consideration.

Preparing yourself for Tuck: Things that are New Hampshire and Vermont

The best things New Hampshire and Vermont:

Film: In many ways State and Main is the best film to prepare for small town life. The setting is only an hour away from Hanover. Lolita, aside from being Kubrick's first real masterpiece, was set in New Hampshire. Also Super Troopers and Dead Poet's Society.

Books: A Prayer for Own Meany is a must read.

Poetry: I read Robert Frost's New Hampshire off and on before I arrived. I plan on reading much more of it this year.

More later...

IRS agents tail UBS bankers, fake mustaches unconfirmed

This is getting a bit silly

US tax agents are tailing UBS bankers in an attempt to identify who their clients are to determine who may be evading taxes, a Swiss newspaper reported yesterday.US tax agents are tailing UBS bankers in an attempt to identify who their clients are to determine who may be evading taxes, a Swiss newspaper reported yesterday.

There is no doubt in my mind that the IRS would spend $200 million to recover $100 million in missing taxes. Given the costs of recovery, strained international relations, and revealed ineptitute, they might let this go. The optimal amount uncollected taxes is definitely non-zero.

Like being the film critic who gives bad movies good reviews

Deans Slaughter and Hansen, and Professors French, Bernard and La Porta have signed the petition to re-establish the Fed's independence.

I sympathize with the sentiment. I'm certain that don't want Nancy Pelosi making monetary policy, but I think I fall closer in line with Allan Meltzer on the subject when I say "what independence"? The Fed has had a long history of being politicized.

Why this blog exists

Tyler Cowen once suggested to Alex Tabbarok that writing too much vis-a-vis reading may be sub-optimal. The idea that there is a balance between the amount one should read and write struck a chord with me and so I've started this little blog. As this is about my time at Tuck, which will only persist for another year, this is a finite life blog. However, if anyone should stochastically stumble upon it, they may find tid bits of information about Tuck seen through the eyes of a Tuckie.

Yes, the name is cheesy. It's on purpose. You grok?