Gotta get me some of those REAL assets

(via TCD)

Eid Ma Clack Shaw

Yoga Pop: Volume 13

Designed to play for the duration of a 75 minute self-directed vinyasa practice.

Song. Artist. Album. Year

1. Seagulls. PJ Harvey. Uh Huh Her. 2004
2. Love and Mathematics. Broken Social Scene. Feel Good Lost. 2001
3. Killed the Lord, Left for the New World. This Will Destroy You. Tunnel Blanket. 2011
4. Last Songs. Dntel. Life is Full of Possibilities. 2001
5. Open the Light. Boards of Canada. Music has the Right to Children. 1988
6. Ascendant. Motion Sickness of Time Travel. Luminaries and Synastry. 2011
7. Interlude (Telephone). John Roberts. Glass Eights. 2010
8. Explain. Oneohtrix Point Never. Replica. 2011
9. Ascension. Tycho. Dive. 2011
10. Ivy. Active Child. You Are All I See. 2011
11. Expect. Balam Acab. Wander / Wonder. 2011 
12. Stranger than Paradise. Mark McGuire. A Young Person's Guide to Mark McGuire. 2011
13. Wake Up and Go Berserk. Mogwai. Zidane: A 21st Centurey Portrait. 2006
14. Keep Up the Good Work. Julianna Barwick. The Magic Place. 2011
15. Domain. The Future Sound of London. Lifeforms. 1994
16. Treefingers. Radiohead. Kid A. 2000

Why we should require a license to borrow money

While having conversations about the political economy I often bring up the following scenario:

Actor #1: Mike Consumer, the head of a lower-middle class American household
Actor #2: Worst Buy, a big box electronics retailer
Actor #3: Skyhigh bank, a national credit card lender

Mike works 50 hours a week and earns enough money to pay his mortgage and support the basic needs of his two-child family.  His mortgage, student loans, and credit card debt overwhelm the combined value of his assets, mostly made up by the home he purchased seven years ago.  In an effort to keep up with Joneses Mike decides to replace their old, but still functional 24" CRT television with a new 42" plasma.  Mike has seen on TV and in the newspaper that Worst Buy is having a Black Friday sale on plasma TVs and decides that now is the time to make the switch.  Mike has been carrying a $5,000 balance on his Skyhigh bank credit card (15% APR) for quite some time but decides that another $700 is manageable.

Results:
* Worst Buy receives payment from Skyhigh's credit card division and earns a profit from the sale of the TV.
* Skyhigh bank extends an indefinite $700 loan to Mike for which it earns $105 per year in interest so long as Mike is solvent.

* Mike and his family upgrade their television at the cost of incurring $700 of additional debt.  The incremental interest on this debt is $105 per year.  This is on top of the $750 of yearly interest they are currently paying on their $5,000 balance.

First, two impossible-to-answer questions:
1.) Will Mike and his family be better off in the long run by making this purchase?
2.) As a society, will we be better off in the long run if purchase decisions like this are being made?

The answer to #1 will vary depending on a number of immeasurable factors relating to Mike's personal cost/utility function.  My own feeling is that the answer is "no," he won't be better off.  This is because many conditioned-to-consume Americans including Mike have a difficult time gauging opportunity costs and the long term mathematical implications of borrowing money at high interest rates.  There are certainly many cases where individuals would be better off with MORE debt, but that's a topic for another time.  Question #2, also impossible to definitively answer, has more to do with personal values, societal game theory, and one's political beliefs.  I would again answer "no."  As a society we are collectively worse off if too many of these decisions result in instant gratification at the cost of deferred hardship, whether sustained directly by the individual or indirectly by society at large.  This applies not only to financial decisions but also to issues regarding health and the environment. 

The value judgment one casts upon this scenario will depend on their politics. A staunch libertarian would surely be fine with this hypothetical transaction so long as the creditor, Skyhigh bank, were allowed to "fail" in the event that Mike was unable to make payment.  Caveat emptor and regulation be damned!  A stereotypical conservative would also likely approve.  Personal liberty is important and spending money is good for companies which is good jobs and the economy.  Someone with a strong liberal viewpoint might have some objections.  They could see Mike as being taken advantage of by both the credit card company charging usurious borrowing rates and by Worst Buy who is only out to maximize profits even if it means putting Mike's family in financial peril.  This person might feel that tighter regulations are appropriate in order maximize social good.

My opinion falls partly outside these three oversimplified creeds.  As mentioned before, I don't believe that transactions like this benefit society in the long run.  This is because the unintuitive optics of measuring opportunity costs relating to credit lead to a suboptimal distribution of societal wealth.  In transactions like these I believe corporations, and to a lesser extent banks, are disproportionately benefiting due to the difficulty of understanding the long term implications of borrowing. 

How would one who agrees with my value judgment alter the framework in order to stop these transactions from happening so often?  Which of these three actors should be restrained and how?  A countless number of studies and books have been written on the topic of regulating corporations and banks so I'll just make a few brief comments. I am generally for tighter regulations on corporations, especially when it comes to their use of public goods and treatment of workers.  Without knowing more about Worst Buy's business practices I'd simply leave them alone in this case.  For Skyhigh bank I'll just make a simple point that's been echoed by many others in recent years: a banking system that lends to whomever, invests in whatever, and levers up to wherever, should be designed so that its banks can fail without challenging the integrity of the financial superstructure.  Even the SLIGHTEST amount of explicit or implicit government subsidy should be matched with comprehensive regulations. The "too big to fail" conundrum continues to be an enormous hurdle in the path towards a more sustainable financial system.

My main intent in writing this note is to focus on a proposed "regulation" of actor #1, Mike Consumer.  In America the choice form of regulation on individuals is education.  I am convinced that this is a key ingredient to the long term solution and remain puzzled to why the Obama administration hasn't done more on this front.  But when the safety of others is concerned we many times regulate individuals more explicitly, choosing to limit personal freedom for the sake of protecting the individual or public at large.  Seat belt laws are written to protect personal well-being.  The Patriot Act and other censorship devices are meant to serve national security interests (in theory).  We've limited the right to smoke in the interest of protecting those who are involuntarily exposed.  It's illegal to drive a motorized vehicle without a driver's license.  While typically of libertarian mind when it comes to paternalistic policy solutions I recognize that certain standards and rules are necessary when a person's actions might affect others involuntarily.  Along this line of thought I believe that every American who wishes to borrow money in any form should first be required to take a class, pass a written exam, and obtain a license to borrow.  Borrowing without full understanding of the mathematical implications, positive and negative, is detrimental for individuals, households, and our society at large.  More so than than any credit card pamphlet or consumer protection agency this law would help further the critically important cause of disclosure, and bring to light various deeply-rooted practices in our society that skew the distribution of wealth. We must force ourselves to learn more about the mechanics of money in order to make better informed financial and political decisions for ourselves, our families, and our society.

Related articles:
* The New Republic / Cass Sunstein: Show me the Money - Behavior Economics and Consumer Protection (added 28oct12)
* Daily Beast / Newsweek / Sharon Begley: The New Science Behind Your Spending Addiction
* The National Bureau of Economic Research / Livshits, MacGee, Tertilt: Costly Contracts and Consumer Credit
* New Yorker / James Surowiecki: Delayed Gratification
* Project Syndicate / Kenneth Rogoff: Coronary Capitalism
* The Guardian / Jeremy Leggett: Prosperity without Growth

Favorite Music of 2011

* In reverse alphabetical order

Albums
Wye Oak -- Civilian
Veronica Falls -- Veronica Falls
Sandro Perri - Impossible Spaces
Mark McGuire -- Young Person's Guide to Mark McGuire

Lykke Li -- Wounded Rhymes

Julianna Barwick -- The Magic Place
Holy Ghost! -- Holy Ghost!
Destroyer -- Kaputt

Clams Casino -- Instrumentals
Bill Callahan -- Apocalypse

Other albums
Tim Hecker, Teenburger, Roman Flugel, PJ Harvey, John Maus, Grails, Cut Copy, Com Truise, Colin Stetson, The Caretaker, Battles, Balam Acab

Song
The Righteous Wrath of an Honorable Man by Colin Stetson

Concert

Bill Callahan @ Bowery Ballroom, NYC -- July 12th

Fuck the Paradox of Thrift

Favorite Music of 2010

*In reverse alphabetical order

Albums
Tame Impala – Innerspeaker
The National – High Violet
Menomena – Mines
Mark McGuire – Living with Yourself
How to Dress Well – Love Remains
Grimes – Halfaxa
Four Tet – There is Love in You
Eluvium – Similes
Deerhunter – Halcyon Digest
Beach House – Teen Dream 

Other albums
Viernes, Tamaryn­­­, The Secret History, Sambassadeur, The Radio Dept., Max Richter, Magenta Skycode, Lali Puna, The Hundred in the Hands, Holly Miranda, Hidden Orchestra, Girl Talk, Forest Swords, Foals, Flying Lotus, Emeralds, Donna Regina, Darkstar, Com Truise, Chicago Underground Duo, Best Coast, Beach Fossils, Avey Tare, Ariel Pink's Haunted Graffiti, Arcade Fire

Album Art
Tame Impala – Innerspeaker
Oriol – Night and Day
High Places – High Places vs. Mankind
Gold Panda – Lucky Shiner
Four Tet – There is Love in You
Agalloch – Marrow of the Spirit

Yoga Pop: Volume 12

Designed to play for the duration of a 75 minute self-directed vinyasa practice.

Song. Artist. Album

1. Witches. Fur. Witches. 2010
2. Hidden Lake. Solar Bears. She Was Coloured In. 2010
3. Illumination. Broadcast. Future Crayon. 2006
4. My Plants Are Dead. Blonde Redhead. Penny Sparkle. 2010
5. Bite Marks. Atlas Sound. Let the Blind Lead Those Who Can See But Cannot Feel. 2008
6. Leaves Eclipse the Light. Eluvium. Similes. 2010
7. Cloudhopper. Matmos. Supreme Balloon. 2008
8. Neon Lights (Kraftwerk Cover). U2. Vertigo Pt.2. 2004
9. L'Objectif. Soviet. We are Eyes, We are Builders. 2001
10. Panacea. Fragile State. The Facts and the Dreams. 2002
11. Rafting Starlit Everglades. Baths. Cerulean. 2010
12. Elegia. New Order. Low Life. 1985
13. Enhance Pendulum Channel. Viernes. Sinister Devices. 2010
14. Green Jacket. Deerhunter. Microcastle. 2008
15. Disappear. Mazzy Star. Among My Swan. 1996
16. Weird Door. Benoit Pioulard. Lasted. 2010
17. Landscape on a Hill. Chihei Hatakeyama. Saunter. 2009

The Five Social Currencies

The more society has progressed the easier it has become to take its basic necessities for granted. The developed world spends more time debating accessibility to higher education, the cost of healthcare, and funding for the arts rather than availability of basic sustenance, shelter, or day-to-day assurances of safety. Generational increases in worker productivity have helped fuel this economic and societal progression, making the factors that drove career choices fifty years ago less of a concern today. This broad increase in material wealth has brought with it an equally broad shift in how we define our own life's purpose. Current generations might pass up a higher wage in order to teach or help others who are less fortunate. We are now more apt to pursue paths that serve to affirm of our creative and intellectual self-worth and find value in furthering the knowledge set of humanity rather than make our own lives more comfortable.

This multi-generational climb up Maslow's Hierarchy of Needs is not immune to temporary reversals. 2008's sudden rise in worldwide commodity prices unsettled our notions on the right to basic staples, September 11th pricked our complacent feelings of invulnerability, and the recent implosion of credit is forcing us to question the sustainability of America's deeply ingrained habits of consumption.

I've always been fascinated with how the tiering of values associated with this hierarchy translates into an individual's choice of occupation. While career paths that require some sort of education vary greatly in their expected monetary wage I posit that the all-in differences in compensation, which include intangible and psychological acknowledgment factors, are not nearly so gaping. In an attempt to quantify this idea I've created a simple framework that equalizes total compensation across all careers. I do this by first broadening the definition of compensation factors then assigning each of these five factors with a unitary value that sum to 100.

Post-collegiate career decisions are motivated by and compensated with five Social Currencies:

1.) Monetary: The most obvious, superficial, and sought after reward is many times the primary motivator for those who pursue skills that are highly valued in capitalist economies.

2.) Academic: The societal seal of approval paid to those who serve to maintain and further humanity's knowledge set. Research scientists, engineers, and historians sacrifice more superficial rewards for this honorable, psychological nod.

3.) Altruistic: Similarly, altruistic currency is the character approval given to those who put the well being of others ahead of their own. This motivating element makes up a disproportionate part of the reward given to elementary school teachers, firefighters, EMT paramedics, and social defenders.

4.) Celebrity: Recipients of this currency are either directly or indirectly involved with industries or individuals who are highly exposed to the mass public. Politicians, professional athletes, and entertainers are the main benefactors of the perks (and ills) of this payment.

5.) Cultural: Reserved for individuals who pursue more abstract and intellectual aspects of the arts, entertainment, and literature. Contrary to celebrity currency this form of acknowledgment isn't necessarily correlated to the level of public exposure. Rather, these individuals seek praise for their aesthetic perspective, creativity, and intellect in pursuits that are not necessarily tied to monetary gain. With celebrity and cultural currency comes the corollary currency of influence. The idea value or acknowledgment given to those who have the power to change the way people think and behave.

A few examples are included in the table below.












A few obvious limitations:

* There are surely more than five factors that motivate one’s career choice. This idea becomes more unwieldy when you include those without an elementary or advanced education.
* I believe that there are a small handful of superoptimal pursuits that sum to greater than 100 and a larger set of suboptimal paths that sum to less than 100. An example of a superoptimal path might be a famous documentarian who earns an abundance of all five currencies. A suboptimal example would be a white collar office worker who earns a menial monetary wage and little else.
* Even if you give credence to this framework the values associated to each category are highly subjective and exposed to the biases of the assigner (an interesting perceptional test in itself).