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Conference Expansion

It just occurred to me that we've passed our 7th Blogiversary. Back in those early days, one of the issues we covered was ACC football conference expansion. The founders of this blog are VT graduates and football fans, and for a while it appeared as if VT would be left in the wilderness, but the sun shined down on the Hokies as VT was invited to the ACC.

At the time, I thought VT was finally home. But now, 7 years later, the college football world is about to feel an earthquake. The Big 10 started it all as they want Notre Dame to join and started making noises to the effect of filling its roster with a couple of Big 12 schools instead. The Pac-10, not to be outdone, countered with talks of poaching the Big 12 also.

To me, the scenario that makes most sense is for the Big 10 to add Notre Dame, the Pac 10 to add a couple of western schools like Boise State and Utah, and everyone else staying put. That would create six 12-team conferences.

The problem, however, is every conference is afraid some other conference will reject the 12-team model and poach a few schools to go to 16. Obviously, there's a first mover advantage here. So there's instability in the system. Because of that instability, I can see the final outcome being four 16-team superconferences.

Those four conferences would then dominate college football and set the stage for a playoff with the conference championship games essentially serving as a playoff quarterfinal.

More than that though, they could say a big fuck you to the NCAA, break away, and keep the dollars to themselves. Of course, every other school will sue and politicians will get involved, but it would probably be all for naught.

The best article so far on the topic is by Chip Brown.

Open Source Economic Statistics

The government has every incentive to misstate and exaggerate economic statistics, if not lie outright. The CPI excludes food and energy.

One of the websites coming to prominence in this volatile era is John Williams' Shadowstats. While some tasty appetizers of data are available freely on the front page, you have to pay money to eat the entrees.

Has anyone ever tried to create an open-source website for economic statistics? I'm picturing a page where anyone can log their observations. For example, enter Date of 6/2/10 and Loaf of Bread for $2. Or Date of 12/4/10 and Gallon of Gas for $3.03. Some algorithm would process the data points into a coherent result.

Would something like this even work? Would it be useful?

These Kids These Days

via Insty

I steal comments

In the comments to Steve Sailer's post "Long Spans":

Two of Pres. John Tyler's grandsons are still alive. Tyler was born in 1790 and served as the 10th president (1841-45).


My father, b. 1921, remembered well his great-grandmother, b. 1826. She lived to be 103 years old. Both her grandfathers served in the American revolution; her paternal grandfather witnessed the surrender of Cornwallis at Yorktown, and lived until 1841.

These two comments, especially the first, simply blew me away. A grandparent is close enough in terms of family relations to be "near" in sentiment, whereas John Tyler is "far".

The men on my father's side of the family tend to have children relatively late in life. I doubt there are many 34 year olds like me whose grandfather was born in 1885. Since I have yet to spawn, there's a decent chance my offspring will be alive in the 22nd century. The lifespans of the family from my grandfather through my children would then encompass parts of four centuries.

Hugh Hendry channels his anti-Douglas Adams...

...and calls out Jeffrey Sachs at the same time (about time somebody did).

"When you bring on a professor, and when you bring on a politician, they are unaccountable. If Jeffrey's wrong, you know what, he will survive in tenure. If I'm wrong, I'll go bankrupt, right? Who do want to bet with?"

That statement, in all its simplicity, is a succinct, powerful argument at the heart of prediction markets, and more generally, for using all different types of markets as a discovery mechanism.

Apple vs Microsoft

Back in the late 1990s, a made-for-TV movie came out depicting the rise of tech industry titans from their early days into their successful years. It was called Pirates of Silicon Valley. For anyone with an interest in technology, the movie was interesting, and at times unintentionally hilarious, such as one scene in which young Steve Jobs and young Bill Gates are discussing their respective companies. One says to the other with a steely gaze, "You're weak in databases. We can give you databases." The other pauses, then replies, "I don't think so."

The conclusion reached by the movie is that Gates had "won". He had beaten Jobs. One scene depicted an Apple conference in which Bill Gates appeared on the big screen on the stage to give a short speech announcing some plans for the two companies to work together. "He had become Big Brother" said the narrator, alluding to the famous Apple Super Bowl ad from a decade earlier.

At the time the movie was made, Jobs had just come back to the company he had founded after being dismissed in the mid-80s. He would quickly lead its resurgence.

At today's market close, Apple's market capitalization exceeded that of Microsoft's. In this layman's eye, Apple makes innovative products that anyone can pick up and intuitively start using while Microsoft simply puts out new versions of bloated software, getting by on network effect inertia.

Granted, Gates has been gone from Microsoft for some time now. But I wonder what the fates of Microsoft and Apple would have been had Jobs not missed over a decade of the company's history.


While watching episode 4 of David Simon's new series Treme, I learned a new word: lagniappe. The scene involved the character Davis driving to give someone a piano lesson. His trip was abruptly cut short when his car fell into a large pothole rendering it immobile. A man from a nearby house came outside and called his cousin to give Davis a ride to his intended destination for a fee. But Davis's "shit", i.e., keyboard, was still in the car and would be ripe for theft.

Man: I'll watch it for you.
Davis: How much?
Man: Nah, consider it lagniappe.

Somewhere in the recesses of my mind, I knew I had heard the word before and knew the spelling, so I looked it up. Wikipedia quotes Mark Twain:

We picked up one excellent word — a word worth travelling to New Orleans to get; a nice limber, expressive, handy word — "lagniappe." They pronounce it lanny-yap. It is Spanish — so they said. We discovered it at the head of a column of odds and ends in the Picayune, the first day; heard twenty people use it the second; inquired what it meant the third; adopted it and got facility in swinging it the fourth. It has a restricted meaning, but I think the people spread it out a little when they choose. It is the equivalent of the thirteenth roll in a "baker's dozen." It is something thrown in, gratis, for good measure. The custom originated in the Spanish quarter of the city. When a child or a servant buys something in a shop — or even the mayor or the governor, for aught I know — he finishes the operation by saying — "Give me something for lagniappe." The shopman always responds; gives the child a bit of licorice-root, gives the servant a cheap cigar or a spool of thread, gives the governor — I don't know what he gives the governor; support, likely. When you are invited to drink, and this does occur now and then in New Orleans — and you say, "What, again? — no, I've had enough;" the other party says, "But just this one time more — this is for lagniappe." When the beau perceives that he is stacking his compliments a trifle too high, and sees by the young lady's countenance that the edifice would have been better with the top compliment left off, he puts his "I beg pardon — no harm intended," into the briefer form of "Oh, that's for lagniappe."

I've heard this phenomenon is common in parts of Asia. After much haggling, a customer and merchant will settle on a price for sale. After the money and goods have been exchanged, the customer will demand a small fee, say, tea. The merchant will then be obligated to serve the customer tea.

The awesome theme song to the opening credits is appropriately enough titled "Treme song" by John Boutte:

Strategic Default

One of my co-workers is contemplating a strategic default. He bought his house at the 2006 market peak at >$400,000 and it is currently worth $200,000. My guess at his household income is around $120,000. He says that they can pay the mortgage payments, but the question that comes to his mind is--why do it? They have lost >$200,000, a staggering amount even for someone with their income. Arizona has very lax rules on going after delinquents. So he's thinking about simply "walking away", i.e., stopping his mortgage payments, packing up, and moving his family into an apartment. He'll take the hit to his credit.

"Virtual Federalism"

Arnold Kling:

I want to take this out of the context of the Israeli-Palestinian dispute and suggest that it is a great idea in general. I live in teachers-occupied territory. That is, the teachers' union governs Montgomery County, Maryland. I would like to have a different sovereign, but without having to move. Under virtual federalism (as proposed in the widely-unread Unchecked and Unbalanced), we would unbundle the services that the County provides. I could then contract with another provider for trash collection, snow removal, fire protection, or other services.

Land-use regulation could primarily be handled at a neighborhood level. Roads could be privately owned and maintained, with electronic toll collection. (Not every trip need involve a toll. I might be able to buy a monthly pass at a flat rate that covers any trip other than during congested times.)

Concerning Tyler's point about dispute resolution, I think there would have to be courts that would resolve jurisdictional issues. Thus, there would have to be a court or similar body to handle land-use issues that cut across neighborhoods. Taxes would only be used to support such courts. Otherwise, public goods and services would be supported by user fees, membership fees, and donations.

I remember when Arnold couldn't discuss market anarchism without using the word "warlord". Our little economist is all grown up!

Over the last year or so, Arnold has become my favorite econblogger.

Dr. Paul Wins!

Rand Paul wins the Republican primary in Kentucky. It doesn't look like it was close.

This might be the only time I get to use that post title.

Purple Teardrops I Cry

Truism: Lady Gaga brings people together.

The Barbarous Relic

Last week, I finally bought some physical gold. I hate buying anything at all time highs, but I think there's a small chance that a mania in gold, much like the mania in internet stocks at the end of the 90s and the one in real estate in the mid-00s, is about begin, and I couldn't wait any longer. I went to a local dealer and bought some coins, paying about 5% over spot.

I'm actually hoping (and believe it's likely) that we're seeing both a blowoff top in the stock market developing, and a similar top in gold developing. I'd like to buy more at much cheaper prices. The mania will come eventually but the next cyclical bear in equities will take gold with it.

While holding in the palm of my hand five digits worth of dollars, I finally "got" it. I finally understood the skepticism about gold being a "barbarous relic". I wondered how something rather bland in its properties could hold so much value. Sure it's shiny, but so what? It's just little bits of metal. Surely the world is mad.

Of course, the counter arguments are easy to make:

1) If valuing shiny bits are metal is barbarism, then what should be make of valuing little pieces of paper deemed to have value by fools and knaves?

2) Gold stands up to the challenge of empiricism. It has been used as money for 4,000 years. The last 40 years are the exception, not the rule.

Inflation vs Deflation

In a free economy, the course of events in an economic downturn is somewhat predictable. Deflation would bring about the end of many institutions resulting in the freeing of capital. A necessary deleveraging would occur. Wise institutions with cash on hand would buy capital at bargain prices. New institutions would be the "green shoots" of smarter economic growth from a lower starting point.

In our hyper-regulated economy, things are much more difficult to predict. Deflation is a bad word today. Every hint of this necessary rearranging of relationships and institutions is met with bailouts, easy monetary police, money from helicopters, etc. So what does the future hold?


Deflationist: The fundamental problem with the world is too much debt, and the governments of the world are trying to pay off that debt with even more debt. The final result, however long it takes, has to be default, even if that default is a world-wide default. That is, by definition, deflation. The super-duper final end-all resolution will be a massive deflation.

Inflationist: Deflation? Have you seen the last 70 years of history? The dollar has devalued by 97%. When exactly do you expect this deflation to happen and how? In the fiat currency era, governments can simply print money. It has never shown much control in how much it prints, so hyperinflation is our future.

Deflationist: Sure, inflation has been the norm for the last 70 years. But the ultimate contrarian is the one who believes that even the longest of trends fail eventually. That 70 years of inflation is a property of the current worldwide banking/fiat currency system, and that system is what will fail eventually.


So what is the prudent investor to do? Invest in gold for the coming hyperinflation, or raise cash for the coming deflation? Heck if I know.

I see inflation as a monetary phenomenon but hyperinflation as a psychological phenomenon when people lose faith in the currency. Can deflation co-exist with hyperinflation? Will one follow the other? Which will happen first? Can one part of the world undergo hyperinflation while another undergoes deflation?

The way I will play this is as at time like the present, i.e., at what I believe to be the end of cyclical bulls, prepare for deflation. Raise cash, sell commodities. When panic sets in at what I believe to be the end of cyclical bears, lower cash, buy commodities. Either cycle could amplify into massive deflation or hyperinflation.

Small Business Ideas

If you had some money set aside and wanted to start a small business, what kind of business would you start, and why?


I recently came across this video:

Like Atlanta, other cities such as Charlotte and Phoenix that have no natural boundaries like rivers or oceans tend to grow horizontally. Manhattan, an island, grew vertically.