'Lost Wages'

Nothing serves as a reminder of the fact that you have grown older quite like when things don't look the same as when you first saw them. Maybe I'm a little young to be talking like this, but it is something that enters my head every time I end up in Las Vegas.

The first time I remember going to Vegas, I was young and on a family vacation visiting relatives, staying at Circus Circus. Maybe it's more my young age at the time than anything else, but I remember how the building seemed to tower above everything else around it. From the hotel room, there was a view of Las Vegas in its entirety- I felt like I was on top of the world.

Ever since then, it seems like there's been a newer, bigger hotel/casino coming up every time I'm back. The old casinos that used to dominate the skyline are diminutive compared to the new ones that sprout up like mushrooms.

The last time I was in Vegas, it was for only a day and hardly to have fun. I looked out the window in the top floor of Treasure Island onto a vastly different sight from that of my childhood. First of all, the view was completely dominated by one building- a gigantic gold-plated behemoth with the word "TRUMP" written in block letters on top. It was like a symbol of Las Vegas excess.

So, here's a question for you: Short men go to the gym to bulk up. Those less endowed in certain areas are apt to buy nice cars. So what sort of secret could possibly be so severe that Donald Trump would require that much compensation?

Anyways, after getting over the daze brought on by the Trump tower, I started to look for other landmarks. And there it was- Circus Circus. It was tiny- like the casino that dwarfs would call 'shrimp'. It could have been your friendly neighborhood mom 'n pop hotel- in a "Drive down main street and take a right after the hardware store" kind of neighborhood. That's how pathetic the building looked compared to the new shiny hotels that litter the skyline.

...Kinda like watching an old, washed-up ballplayer (*cough* Brett Favre).

But Circus Circus was never that great, anyway (threw too many interceptions).

Anyway, back to Vegas- I've seen several articles online within the past few months with titles that go something like, "5 Recession-proof Industries". They talk about industries like health-care which tend to do just as well, or even better when the economy takes a downturn. I wonder if we should add the gambling industry to that list.

Why? Well, maybe the growth of Las Vegas is proof enough. Of course, all those new shiny casinos probably had their finances in order since long before this downturn, but I still don't see how they can continue to fill those rooms. Why would people be so keen on throwing their money away when its already hard to come by? Do they actually expect to MAKE money this way?

Or maybe the casinos are being supported by laid-off wall-street traders who need other avenues to fulfill their gambling fix now that they can't do it at work anymore?

...Just a thought

Risk/Reward

Much has been said of the mistakes that teenagers make. The prevailing idea is that teenagers generally don't think about the consequences of their actions before doing something stupid that gets them in trouble. Studies, however, have shown that not only are teenagers aware of the risks behind their actions, they actually spend a considerable amount of time weighing the risks vs. perceived rewards before finally making their (bad) decision. Here's an example of what might go through their heads:

Action: Going to a party, getting drunk, and driving home afterward.
Risk: Might be grounded/get arrested/kill somebody.
Reward: Social acceptance/pretty popular girl might actually talk to me.
Verdict: Party on!!!

I've observed that this sort of risky behavior may start much earlier than the teenage years. Here's an example from my observations of the three-year old twin boys I talked about in my last post:

During a holiday gathering, these twin boys found themselves standing around a bowl of peanuts and decided to have an extended snack before dinner was served. Not wanting the boys to spoil their appetites, several adults told them to stop eating, yet they still continued, saying, "but I have to eat it!". To get them to stop, their great-grandfather decided to make up a story. He told them that if they ate any more, the big scary dog who was staring in from beyond the sliding glass door would charge in and eat them up.

There was no doubt that the boys believed everything that was said to them. You could see fear in their faces every time they tentatively turned their heads to glance at the dog, assuring themselves that the glass door was securely fastened before turning back around and grabbing more peanuts to put in their mouths. So here's what probably went through their heads:

Action: Eating peanuts.
Risk: Dog might eat me.
Reward: I'd get to eat more peanuts.
Verdict: Eat more peanuts.

Perhaps this sort of risky behavior has a purpose. After all, early man would have had a hard time evolving without taking a few risks. Here's another example:

Action: Forsaking life in a tree and stepping around on the ground.
Risk: Bear might eat me.
Reward: I'd finally get to see what's beyond that bush over there.
Verdict: Walking on four legs is SO last millennium!

Of course, risky behavior will ruin us every now and then. Here's what probably went through the mind of more than one AIG employee:

Action: High-risk credit swap.
Risk: Might default- company loses millions/people lose jobs/economy pulled into downward spiral.
Reward: Company stock goes up by a cent/big bonus.
Verdict: What could possibly go wrong? The government will bail us out if this backfires, anyway.

"Political Economics"

There is something in the study of economics that's been bothering me for a bit. Now, I don't claim to really know ANYTHING when it comes to economics, nor have I stepped foot in an economics class or opened an economics textbook since high school. Nevertheless, the subject of today's economy has been too pervasive in the media to ignore, and I've been bothered by a few things I've found troubling- not relating to the economy itself, but by how people deal with it.

Now, let me explain something I've learned about physics research. Physicists always know what to expect from an experiment. That isn't to say that they always know the outcome, since that would make the experiment useless. Physicists use the accepted laws of physics to predict the outcome, and when the outcome does not agree with the laws, they know that something is wrong with the theory. Predicting outcomes is no easy task in today's large-scale experiments, but the standards are just as high. Doing so usually requires the use of sophisticated modeling algorithms and lots of computing power.

Let me give you an example: One professor I talked to at Berkeley gave me a sneak peak at some of the software that was developed for one of the projects in development at the LHC called ATLAS. The ATLAS detector is about the size of a mansion, and the laws that govern the interactions between particles are in no way simple. Nevertheless, software that incorporates all these parameters have been developed since long before the actual detector began construction. Through the computer simulations given from this program, my professor was able to show me exactly what we would see from the detectors, with charts, graphs, and everything you might expect from a large scale experiment. She even showed me the bump on a particular graph that would prove the existence of the Higgs boson. These graphs and charts were made a long time ago, and yet to this day they haven't even started colliding particles at the LHC.

No matter how much a certain experiment costs- from a few thousand to several billion- researchers are held to the same rigorous standards. They must show exactly why the experiment will work, and exactly what the experiment will establish (or no funding!).

Now, to see why I'm a little peeved, let me ask this question: What did Obama do to show that his $3/4 trillion stimulus package would work? All I've heard is a few political sound bites- from both sides of the aisle.

I'm not saying I'm against the package. I'd say I'm cautiously optimistic about it (I voted for Obama, after all). I, however, am concerned with the fact that I've never seen a shred of evidence relating to economic policies. I've heard arguments, but evidence is apparently hard to come by.

I'm aware that economics are quite a bit different from physics. It's definitely harder (maybe impossible) to simulate an economy inside a computer; the variables are uncountable, and people as a whole are unpredictable- even in a statistical sense (that's probably what separates us from animals).

However, economics is a real area of study. People get PhDs in the subject. Papers are published on a regular basis. A Nobel Prize is awarded in economics EVERY YEAR for crying out loud!!! I can't imagine that there isn't a shred of evidence out there that supports the conclusions they make. Why don't they let us see it?

The reason why, I think, is that the people who talk to us about the economy aren't economists- They're politicians. The burden of proof no longer exists when good salesmanship will achieve the same end.

This, coincidentaly, is the other thing I don't like about economics: It's impossible to separate it from the politics that drive it. I can't help but draw a parallel between today's economic theories and the phrase "Christian science". No scientific theory is viable if it is influenced by ideas taken from religious beliefs. In the same way, I won't believe in an economic theory if its purpose is to back up someone's politics.

In other words, I won't believe anyone when they say that tax cuts are the key to fixing the economy. It could be true, but I can't shake the feeling that the theory behind it was just drummed up to get a few more votes. I'm sure there are a lot of smart people with PhDs that can show me exactly why tax cuts will fix the economy, but then again, there are probably smart people with PhDs that will show me exactly why they won't.

And here's another thing: If Nobel prizes are awarded in economics every year, why is it that I haven't heard any new economic ideas in the last decade? I'd use a longer time frame, but I don't think I was politically aware enough more than ten years ago to formulate a comparison.

Maybe my views on economics are merely a result of my ignorance. I'm sure there are those who can prove all of the statements in this post wrong, but you know what? I'd rather hear it from Washington. Then maybe I'd think that those losers actually know something.

Story

Here's a story.

Once upon a time, there was an 'organization'. This 'organization' was doing very 'well'. 'Investors' of the organization were happy. The organization was making 'lots' of 'money'.

There came a time, however, when 'members' of the organization started 'implementing' 'practices' that would one day threaten the organization. For a time, these 'practices' made the organization do even better. 'Investors' were happy. The organization was making 'lots' of 'money'.

There were several people, other 'members' of the organization, who became aware of these 'practices'. These people took it upon themselves to warn the 'higher-ups' in the organization of these adverse 'practices'. These 'practices', they said, would one day threaten the organization. 'Investors' would be angry. The senate would have hearings. 60 Minutes would do stories.

But the 'higher-ups' of the organization said that there is nothing wrong. After all, the organization is doing 'well'. 'Investors' are happy. The organization is making 'lots' of 'money'.

But there came a time when the 'practices' did, indeed come to threaten the organization. 'Investors' got angry. The senate had hearings. 60 Minutes did stories.

And everyone wondered why the 'higher-ups' did not heed the warnings they had been given. The 'higher-ups' claimed that they were not at fault. They had no reason to do anything about the 'practices' that eventually threatened the organization. After all, at the time, the organization was doing 'well'. 'Investors' were happy, and they were making 'lots' of 'money'.

THE END

So, my astute readers- what is the story about?

The mortgage crisis....
or Major League Baseball?