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Read the rules in the OP before posting, please.In order to ensure that this thread continues to meet TL standards and follows the proper guidelines, we will be enforcing the rules in the OP more strictly. Be sure to give them a re-read to refresh your memory! The vast majority of you are contributing in a healthy way, keep it up! NOTE: When providing a source, explain why you feel it is relevant and what purpose it adds to the discussion if it's not obvious. Also take note that unsubstantiated tweets/posts meant only to rekindle old arguments can result in a mod action. |
On February 20 2013 03:41 sam!zdat wrote:Show nested quote +On February 20 2013 03:29 JonnyBNoHo wrote:
Well normal distributions do have tails, and thus tail risk, so there's an argument to be made that the tails just weren't thick enough.
No, the tails are of entirely the wrong structure. Show nested quote +There's also evidence that the tail risk show was simply ignored. AAA tranches seem to have been fairly priced (extremely low default rates) + Show Spoiler + but many of the lower grade tranches were clearly overpriced. If people ignore the risk then it really doesn't matter what distribution you use. Sure, we can't blame bad models for everything. The proximal causes of the crash were greed, lies, and corruption. The bad models just provided some accoutrements for the priesthood to wave in our faces. Show nested quote +
As far as hedging goes it was a mixed bag. Generic portfolio diversification didn't work (correlation problem) but other more direct hedges, like derivatives, worked as intended and only failed if the counter party was unable to meet his obligations (counter party risk).
Someday the financiers will discover poststructuralism, and this will be the only useful thing poststructuralism ever accomplished. Where is the structuring center? where is the counter party which is counter to all other parties? is it God? Freedom? Adam Smith's rotting corpse?
At some point there really is none. Everyone can't be the counter party to everyone. At that point it's just a wash and you are left with the underlying bag o' shit.
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Cayman Islands24199 Posts
adam smith is probably not rotting now.
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On February 20 2013 03:49 JonnyBNoHo wrote:Show nested quote +On February 20 2013 03:41 sam!zdat wrote:On February 20 2013 03:29 JonnyBNoHo wrote:
Well normal distributions do have tails, and thus tail risk, so there's an argument to be made that the tails just weren't thick enough.
No, the tails are of entirely the wrong structure. There's also evidence that the tail risk show was simply ignored. AAA tranches seem to have been fairly priced (extremely low default rates) + Show Spoiler + but many of the lower grade tranches were clearly overpriced. If people ignore the risk then it really doesn't matter what distribution you use. Sure, we can't blame bad models for everything. The proximal causes of the crash were greed, lies, and corruption. The bad models just provided some accoutrements for the priesthood to wave in our faces.
As far as hedging goes it was a mixed bag. Generic portfolio diversification didn't work (correlation problem) but other more direct hedges, like derivatives, worked as intended and only failed if the counter party was unable to meet his obligations (counter party risk).
Someday the financiers will discover poststructuralism, and this will be the only useful thing poststructuralism ever accomplished. Where is the structuring center? where is the counter party which is counter to all other parties? is it God? Freedom? Adam Smith's rotting corpse? At some point there really is none. Everyone can't be the counter party to everyone. At that point it's just a wash and you are left with the underlying bag o' shit.
you're more enlightened than the average suit, I'm afraid, dear jonny o
On February 20 2013 03:59 oneofthem wrote:
adam smith is probably not rotting now.
are you sure? I can smell his disagreeable odor wafting about as we speak
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United States44123 Posts
On February 20 2013 00:03 paralleluniverse wrote:Show nested quote +On February 19 2013 17:03 JonnyBNoHo wrote:Interesting... The output effect of fiscal consolidations
August 2012
Abstract
This paper studies whether fiscal corrections cause large output losses. We find that it matters crucially how the fiscal correction occurs. Adjustments based upon spending cuts are much less costly in terms of output losses than tax-based ones. Spending-based adjustments have been associated with mild and short-lived recessions, in many cases with no recession at all. Tax-based adjustments have been associated with prolonged and deep recessions. The difference cannot be explained by different monetary policies during the two types of adjustments. Studying the effects of multi-year fiscal plans rather than individual shifts in fiscal variables we make progress on question of anticipated versus unanticipated policy shifts: we find that the correlation between unanticipated and anticipated shifts in taxes and spending is heterogenous across countries, suggesting that the degree of persistence of fiscal corrections varies..Estimating the effects of fiscal plans, rather than individual fiscal shocks, we obtain much more precise estimates of tax and spending multipliers. Link I've seen that paper before, it was mentioned on Mankiw's blog, although I haven't gone through it's details. Alberto Alesina strikes again. That name might sound slightly familiar. The reason is because Alesina is the father of "Expansionary Austerity", the man who convince Europe to go all in for austerity. This latest paper says that spending cuts reduces output more than tax increases. But it's worth noting that it's contradicted by the work of... Alesina, who shows that spending cuts doesn't reduce output, but rather increases it. Here's Alesina's paper, this is the intellectual foundation for expansionary austerity. It's possible that Alesina is correct, that tax cuts are less contractionary than spending cuts. But one reason to show some doubt is that if this were true, we should expect a good economic recovery in the UK. After all, their austerity program has focused on spending cuts, while cutting taxes. They've reduce the tax free threshold for income tax and reduced the corporate tax rate to amongst the lowest in the world.
Triple dip recessions, things worse than they were at the height of the crisis, borrowing actually going up because revenues are falling. Sorry.
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On February 20 2013 00:03 paralleluniverse wrote:Show nested quote +On February 19 2013 17:03 JonnyBNoHo wrote:Interesting... The output effect of fiscal consolidations
August 2012
Abstract
This paper studies whether fiscal corrections cause large output losses. We find that it matters crucially how the fiscal correction occurs. Adjustments based upon spending cuts are much less costly in terms of output losses than tax-based ones. Spending-based adjustments have been associated with mild and short-lived recessions, in many cases with no recession at all. Tax-based adjustments have been associated with prolonged and deep recessions. The difference cannot be explained by different monetary policies during the two types of adjustments. Studying the effects of multi-year fiscal plans rather than individual shifts in fiscal variables we make progress on question of anticipated versus unanticipated policy shifts: we find that the correlation between unanticipated and anticipated shifts in taxes and spending is heterogenous across countries, suggesting that the degree of persistence of fiscal corrections varies..Estimating the effects of fiscal plans, rather than individual fiscal shocks, we obtain much more precise estimates of tax and spending multipliers. Link I've seen that paper before, it was mentioned on Mankiw's blog, although I haven't gone through it's details. Alberto Alesina strikes again. That name might sound slightly familiar. The reason is because Alesina is the father of "Expansionary Austerity", the man who convince Europe to go all in for austerity. This latest paper says that spending cuts reduces output more than tax increases. But it's worth noting that it's contradicted by the work of... Alesina, who shows that spending cuts doesn't reduce output, but rather increases it. Here's Alesina's paper, this is the intellectual foundation for expansionary austerity. It's possible that Alesina is correct, that tax cuts are less contractionary than spending cuts. But one reason to show some doubt is that if this were true, we should expect a good economic recovery in the UK. After all, their austerity program has focused on spending cuts, while cutting taxes. They've reduce the tax free threshold for income tax and reduced the corporate tax rate to amongst the lowest in the world.
I knew that name sounded familiar. I haven't had time to read through it yet though.
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Blog warning.
On Thursday, New Hampshire’s House Criminal Justice and Public Safety committee heard roughly six hours of public testimony on three cannabis related bills that would either legalize, or decriminalize cannabis in the state. This comes just days after polling released from the University of New Hampshire found 56% of New Hampshire residents support legalizing cannabis like alcohol, and nearly 80% support its legalization for medical purposes.
Among these three was a measure filed by Republican State Rep. Mark Warden, in what he calls the “tomatoes bill”. This measure would remove all state criminal penalties associated with cannabis possession, and would allow people to grow cannabis freely as if it were tomatoes. In what he calls a “purist” approach, this is the measure most likely to garner intense praise from within the cannabis community for its bold approach.
A second measure discussed was legislation filed by Republican State Rep. Kyle Tasker, which would decriminalize possession of up to an ounce of cannabis, making it a civil infraction – similar to a jay walking – rather than an arresting offense.
The third measure, which was filed by Republican State Rep Steve Vaillancourt, would legalize the possession of up to an ounce of cannabis, while simultaneously allowing the state to license and tax it for sales to adults.
Source
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On February 20 2013 06:31 {CC}StealthBlue wrote:Blog warning. Show nested quote +On Thursday, New Hampshire’s House Criminal Justice and Public Safety committee heard roughly six hours of public testimony on three cannabis related bills that would either legalize, or decriminalize cannabis in the state. This comes just days after polling released from the University of New Hampshire found 56% of New Hampshire residents support legalizing cannabis like alcohol, and nearly 80% support its legalization for medical purposes.
Among these three was a measure filed by Republican State Rep. Mark Warden, in what he calls the “tomatoes bill”. This measure would remove all state criminal penalties associated with cannabis possession, and would allow people to grow cannabis freely as if it were tomatoes. In what he calls a “purist” approach, this is the measure most likely to garner intense praise from within the cannabis community for its bold approach.
A second measure discussed was legislation filed by Republican State Rep. Kyle Tasker, which would decriminalize possession of up to an ounce of cannabis, making it a civil infraction – similar to a jay walking – rather than an arresting offense.
The third measure, which was filed by Republican State Rep Steve Vaillancourt, would legalize the possession of up to an ounce of cannabis, while simultaneously allowing the state to license and tax it for sales to adults. Source
All filed by Republicans? WTF?
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This is the hail mary GOP strategy. Get the potheads to vote for them.
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Maybe some Republicans are testing the waters for social liberalism.
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Keep in mind these are state Republicans in the Northeast...
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On February 20 2013 02:47 sam!zdat wrote:Show nested quote +On February 19 2013 19:09 Danglars wrote:
I don't think you realize I only wanted to put in context the relevance of JonnyBNoHo's picture in a discussion that brought up the WWII and depression lessons topic. I made no societal comparisons, nor intended to. I made no broad reflections on capitalism as a whole, nor intended to. I say only that WWII might be believed to have done one thing but at a cost.
Cool, then we're on the same page. Show nested quote +On February 19 2013 20:33 Fwmeh wrote:On February 18 2013 12:08 sam!zdat wrote:
Yeah, I get it Jonny. the point is that you get these more complicated and more complicated models to try to express risk quantitatively using seriously flawed mathematical tools (the Gaussian) and the more complicated your air castles get, the more you are deluding yourself into thinking you understand what is going on. You should make a difference between the tool, and its (sometimes misapplied) usage. The normal distribution in itself is not flawed, and in fact incredibly beautiful. Er, ok, it's flawed when you want to use it for studying things which are in fact mandelbrotian and not gaussian. I'll leave any appreciation of the platonic form of the bell curve to others, it's fine for what it is. That's not really my point. Show nested quote +
To me the worrying part is the design of the whole economic framework rather than the interpretations thereof. You could use any non-parametric techniques to gain understanding of the current model, but if the model itself is not only incomplete (that is a given and not a serious objection) but actually a representation of a system that is toxic, the results will also be thus.
I'm worried about both, so yes I agree that we shouldn't just get preoccupied with the fact that we're modeling it badly, because yes, the thing we're trying to model is already a bad idea. Show nested quote +On February 19 2013 21:43 oneofthem wrote:On February 19 2013 15:22 sam!zdat wrote:The Black SwanHe will explain why you should Beware the Gaussian  i don't think you should treat taleb like a god. the gaussian-mandelbrot thing is just a choice way of representation, more generalized ways of representing the same basic problem have been made elsewhere. How could I treat like a God anybody who says nice things about Hayek? I just want people to read Taleb, because he's somebody who's going to convince people of this more than I, because he has background in finance and he's not also trying to convince them to become communists at the same time. If I can teach some suits some epistemic humility, I'll count that as a small blow against Empire. And Taleb seems like the man for the job. What else should I recommend to people? I might be guilty of deifying mandelbrot, but that is an entirely different topic  Show nested quote +
at the end of the day, it's simply this. big chunk of stuff controlled by a group of people whose behavior are interdependent.
hmm. I feel like that's what it is at the beginning of the day. Then you have to go theorize it. Show nested quote +On February 20 2013 00:37 paralleluniverse wrote:
But the point is taken that these models do not allow for tail events (unpredictably huge and rare events).
The point is that this is what we call History. These two are related. When you are using something like a normal distribution to measure something, you are assuming that the things you are measuring are uncorrelated. "the bell curve" is just short of a short hand for "models which assume that there will not be any tail events" Show nested quote +
To be fair, it clearly wasn't easy to model correlation or to understand that it could be a big deal. They also had intellectual cover as finance was enthralled to free market fundamentalism, the centerpiece being the Efficient Market Hypothesis (EMH). And it was argued by many people of influence, like Alan Greenspan and Larry Summers that financial innovation had dispersed risk and that because of the EMH and Chicago School of Economics that nothing could go wrong. Clearly, that didn't work out.
I don't think free market fundamentalism is an excuse for anyone to do anything at all. Nothing "intellectual" about free market fundamentalism. I think a five year old could have told them that correlation would be a big deal. Anybody tells you "oh, yeah, we solved History, don't worry, nothing can go wrong now because we have math that tells us everything" you punch them in the face. The fact that anybody ever took these people seriously does not exactly help my opinion of financiers and economists. Show nested quote +On February 20 2013 00:37 paralleluniverse wrote:
So what should you do about tail events? Hedge. Buy and sell derivatives to cover your ass. Do scenario analysis, i.e. what happens to your portfolio when some big bad and unpredictable event happens? No, I think this is missing the point. You should create a robust system which is multiply redundant and de-globalized, and use fewer financial tools in general. The derivates can't help you, because the derivates also don't know anything about what they don't know. YOU CANNOT DO ANALYSIS FOR SOMETHING BIG BAD AND UNPREDICTABLE. If you do analysis for it, it is just big bad and predictable. Then it becomes a "gray swan." You can do this, sure, that's part of the point. Try to turn black swans into gray swans. But never think that there aren't more black swans out there.
Most of what you said here just isn't true. History won't help you when trying to incorporate tail risk into models. You can't get much statistical information from 1 or 2 data points. The best you can do is acknowledge that there's a known-unknown risk.
It's also simply not true that you can't take correlation into account when using the normal distribution. You can: https://en.wikipedia.org/wiki/Multivariate_normal_distribution
In case you didn't know, the ideas of the Chicago School have pretty much taken over finance and economics. And based on a lot of very complicated math, it was generally believed that free markets are efficient. You can say that correlation is a big deal, but did you show, pre-2007, basically everything in the models were correlated, that in a crisis all correlations go to 1, and quantify the magnitude of this risk?
You can still do analysis for tail events. I mention scenario analysis, this is basically a "stress test", which banks were subjected to. Just assume adverse economic condition, and see what happens you do portfolio under this case. Sort of like, asking what the worst case scenario.
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On February 20 2013 07:48 paralleluniverse wrote:Show nested quote +On February 20 2013 02:47 sam!zdat wrote:On February 19 2013 19:09 Danglars wrote:
I don't think you realize I only wanted to put in context the relevance of JonnyBNoHo's picture in a discussion that brought up the WWII and depression lessons topic. I made no societal comparisons, nor intended to. I made no broad reflections on capitalism as a whole, nor intended to. I say only that WWII might be believed to have done one thing but at a cost.
Cool, then we're on the same page. On February 19 2013 20:33 Fwmeh wrote:On February 18 2013 12:08 sam!zdat wrote:
Yeah, I get it Jonny. the point is that you get these more complicated and more complicated models to try to express risk quantitatively using seriously flawed mathematical tools (the Gaussian) and the more complicated your air castles get, the more you are deluding yourself into thinking you understand what is going on. You should make a difference between the tool, and its (sometimes misapplied) usage. The normal distribution in itself is not flawed, and in fact incredibly beautiful. Er, ok, it's flawed when you want to use it for studying things which are in fact mandelbrotian and not gaussian. I'll leave any appreciation of the platonic form of the bell curve to others, it's fine for what it is. That's not really my point.
To me the worrying part is the design of the whole economic framework rather than the interpretations thereof. You could use any non-parametric techniques to gain understanding of the current model, but if the model itself is not only incomplete (that is a given and not a serious objection) but actually a representation of a system that is toxic, the results will also be thus.
I'm worried about both, so yes I agree that we shouldn't just get preoccupied with the fact that we're modeling it badly, because yes, the thing we're trying to model is already a bad idea. On February 19 2013 21:43 oneofthem wrote:On February 19 2013 15:22 sam!zdat wrote:The Black SwanHe will explain why you should Beware the Gaussian i don't think you should treat taleb like a god. the gaussian-mandelbrot thing is just a choice way of representation, more generalized ways of representing the same basic problem have been made elsewhere. How could I treat like a God anybody who says nice things about Hayek? I just want people to read Taleb, because he's somebody who's going to convince people of this more than I, because he has background in finance and he's not also trying to convince them to become communists at the same time. If I can teach some suits some epistemic humility, I'll count that as a small blow against Empire. And Taleb seems like the man for the job. What else should I recommend to people? I might be guilty of deifying mandelbrot, but that is an entirely different topic
at the end of the day, it's simply this. big chunk of stuff controlled by a group of people whose behavior are interdependent.
hmm. I feel like that's what it is at the beginning of the day. Then you have to go theorize it. On February 20 2013 00:37 paralleluniverse wrote:
But the point is taken that these models do not allow for tail events (unpredictably huge and rare events).
The point is that this is what we call History.
The problem wasn't the normal distribution. It was correlation.
These two are related. When you are using something like a normal distribution to measure something, you are assuming that the things you are measuring are uncorrelated. "the bell curve" is just short of a short hand for "models which assume that there will not be any tail events"
To be fair, it clearly wasn't easy to model correlation or to understand that it could be a big deal. They also had intellectual cover as finance was enthralled to free market fundamentalism, the centerpiece being the Efficient Market Hypothesis (EMH). And it was argued by many people of influence, like Alan Greenspan and Larry Summers that financial innovation had dispersed risk and that because of the EMH and Chicago School of Economics that nothing could go wrong. Clearly, that didn't work out.
I don't think free market fundamentalism is an excuse for anyone to do anything at all. Nothing "intellectual" about free market fundamentalism. I think a five year old could have told them that correlation would be a big deal. Anybody tells you "oh, yeah, we solved History, don't worry, nothing can go wrong now because we have math that tells us everything" you punch them in the face. The fact that anybody ever took these people seriously does not exactly help my opinion of financiers and economists. On February 20 2013 00:37 paralleluniverse wrote:
So what should you do about tail events? Hedge. Buy and sell derivatives to cover your ass. Do scenario analysis, i.e. what happens to your portfolio when some big bad and unpredictable event happens? No, I think this is missing the point. You should create a robust system which is multiply redundant and de-globalized, and use fewer financial tools in general. The derivates can't help you, because the derivates also don't know anything about what they don't know. YOU CANNOT DO ANALYSIS FOR SOMETHING BIG BAD AND UNPREDICTABLE. If you do analysis for it, it is just big bad and predictable. Then it becomes a "gray swan." You can do this, sure, that's part of the point. Try to turn black swans into gray swans. But never think that there aren't more black swans out there. Most of what you said here just isn't true. History won't help you when trying to incorporate tail risk into models.
That's MY point!
You can't get much statistical information from 1 or 2 data points. The best you can do is acknowledge that there's a known-unknown risk.
No. There are also unknown-unknowns. You must always acknowledge that there are unknown-unknowns, and that is what your derivatives can never do.
And don't even get me started on the unknown-knowns.
You can use the normal distribution and then add in correlation, fine. But here you should just go read Taleb's book, he knows far more about it than I.
In case you didn't know, the ideas of the Chicago School have pretty much taken over finance and economics. And based on a lot of very complicated math, it was generally believed that free markets are efficient. You can say that correlation is a big deal, but did you show, pre-2007, basically everything in the models were correlated, that in a crisis all correlations go to 1, and quantify the magnitude of this risk?
Oh, I'm well aware of this. They've taken over because they give shallow normative grounding based on flimsy mathematics to an ideologically predetermined conclusion. Of course I didn't show anything pre-2007, it isn't my job. don't be ridiculous. I don't have to be a cassandra in order to be angry at the incompetence of the people who rule my world.
My point is that what they claimed to have accomplished was prima facie absurd and everybody should have known that. you can hand out as many bullshit "Nobel Prize in Economics" as you want, that doesn't make it a real academic discipline
You can still do analysis for tail events. I mention scenario analysis, this is basically a "stress test", which banks were subjected to. Just assume adverse economic condition, and see what happens you do portfolio under this case. Sort of like, asking what the worst case scenario.
You never know what the worst case scenario is. The worst case scenario is when your worst case scenario analysis turns out to be wrong, and you can never, never, never, never rule out that possibility.
edit: and the so-called "stress test" just took the numbers from the last crisis and tried them again. talk about "trying to model long-tail events from history", as you so blithely accused me of above. This stress test was useless because it just took the number from the last crisis as the number to test. This same stress test would not have revealed the flaws in any of the preceding crises, because they were all bigger than the ones that came before them. So the stress test would have revealed nothing.
I think should should take a stats or finance class, it's more informative than reading Taleb's book.
bullshit. anyway, i've been following the finance class on yale open courses - I'm not totally ignorant of the subject. I get the idea.
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On February 20 2013 03:29 JonnyBNoHo wrote:Show nested quote +On February 20 2013 00:37 paralleluniverse wrote:
This whole debate about using normal distributions in finance seems completely misplaced.
Firstly, the main model, Black-Scholes, doesn't assume normality. It assumes that changes in stock prices are lognormally distributed, i.e. stock prices follow a geometric Brownian motion (not a Brownian motion).
But the point is taken that these models do not allow for tail events (unpredictably huge and rare events). One above poster suggests using nonparametric methods. But using a nonparametric method means not assuming a distribution by having the distribution being dictated by the data. It doesn't mean the model is robust under any distribution. Because nonparametric methods rely on data, and there is by definition, virtually no data on tail events, nonparametric methods won't solve your problem. You can't create information ex nihilo.
So what should you do about tail events? Hedge. Buy and sell derivatives to cover your ass. Do scenario analysis, i.e. what happens to your portfolio when some big bad and unpredictable event happens?
But weren't derivatives and financial instruments that no one really understood one of the main causes of the financial crisis? Yes, but the problem wasn't that people didn't price risk properly because they used the normal distribution, it was that people didn't see the correlation and interconnectedness of the whole system. You hedge to reduce risk, but when everything goes wrong at once and the assets you have become worthless and those who owe you because of your hedge also have worthless assets, then they can't pay you and you go broke (or get a bail out).
For example, the rationale behind subprime loans (which were individually worthless because they're likely to default) was that they can be all packaged up into one entity called a MBS. The MBS was highly rated by rating agencies, because what's the chance that they'll all default? This is basically risk pooling, the idea behind insurance. But it doesn't work when things are correlated.
The problem wasn't the normal distribution. It was correlation.
To be fair, it clearly wasn't easy to model correlation or to understand that it could be a big deal. They also had intellectual cover as finance was enthralled to free market fundamentalism, the centerpiece being the Efficient Market Hypothesis (EMH). And it was argued by many people of influence, like Alan Greenspan and Larry Summers that financial innovation had dispersed risk and that because of the EMH and Chicago School of Economics that nothing could go wrong. Clearly, that didn't work out. Well normal distributions do have tails, and thus tail risk, so there's an argument to be made that the tails just weren't thick enough. There's also evidence that the tail risk show was simply ignored. AAA tranches seem to have been fairly priced (extremely low default rates) + Show Spoiler + but many of the lower grade tranches were clearly overpriced. If people ignore the risk then it really doesn't matter what distribution you use. As far as hedging goes it was a mixed bag. Generic portfolio diversification didn't work (correlation problem) but other more direct hedges, like derivatives, worked as intended and only failed if the counter party was unable to meet his obligations (counter party risk).
Well, you can't get fat tails in the normal distribution. I agree with the point on derivatives. They are helpful in risk management and have a legitimate role, at least in normal non-crisis times. However, they were used as a way of betting of basically anything for profit. So for the firm, at a micro level, they were fine and mostly profitable. At a macro level, the problems they posed to the entire financial system wasn't well understood.
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On February 20 2013 07:58 paralleluniverse wrote:
So for the firm, at a micro level, they were fine and mostly profitable. At a macro level, the problems they posed to the entire financial system wasn't well understood.
And here is the crisis of 21st century civilization, in one nice package.
But who am I kidding?
We're just some islanders trading coconuts.
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On February 20 2013 07:10 {CC}StealthBlue wrote:
Keep in mind these are state Republicans in the Northeast...
I don't trust Republicans that come from a region that isn't republican at all. Any of the pot supporting "republicans" tend to be libertarians or worse.
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Cayman Islands24199 Posts
On February 20 2013 06:44 aksfjh wrote:Show nested quote +On February 20 2013 06:31 {CC}StealthBlue wrote:Blog warning. On Thursday, New Hampshire’s House Criminal Justice and Public Safety committee heard roughly six hours of public testimony on three cannabis related bills that would either legalize, or decriminalize cannabis in the state. This comes just days after polling released from the University of New Hampshire found 56% of New Hampshire residents support legalizing cannabis like alcohol, and nearly 80% support its legalization for medical purposes.
Among these three was a measure filed by Republican State Rep. Mark Warden, in what he calls the “tomatoes bill”. This measure would remove all state criminal penalties associated with cannabis possession, and would allow people to grow cannabis freely as if it were tomatoes. In what he calls a “purist” approach, this is the measure most likely to garner intense praise from within the cannabis community for its bold approach.
A second measure discussed was legislation filed by Republican State Rep. Kyle Tasker, which would decriminalize possession of up to an ounce of cannabis, making it a civil infraction – similar to a jay walking – rather than an arresting offense.
The third measure, which was filed by Republican State Rep Steve Vaillancourt, would legalize the possession of up to an ounce of cannabis, while simultaneously allowing the state to license and tax it for sales to adults. Source All filed by Republicans? WTF?
NH republicans are pretty much libertarians
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2nd Worst City in CA8938 Posts
Thought this was interesting. From Nate Silver:
![[image loading]](http://graphics8.nytimes.com/images/2013/02/19/us/politics/conserv-chart/conserv-chart-blog480.png)
And the accompanying article:
Marco Rubio: The Electable Conservative? Some commentators have expressed surprise upon learning about the very conservative voting record of Senator Marco Rubio of Florida, who delivered the Republican response to the State of the Union address last week. Since winning his Senate seat, Mr. Rubio has generally sided with other Republicans as part of a party that has steadily grown more conservative over the last three decades. (Mr. Rubio’s recent support for immigration reform is more of an exception than his usual rule of sticking to the party line.) Being reliably conservative, however, is hardly a liability for someone who might hope to win the Republican presidential nomination in 2016. Indeed, one reason to watch Mr. Rubio carefully is that, among the candidates who will be deemed reliably conservative by Republican voters and insiders, he may stand the best chance of maintaining a reasonably good image with general election voters. How does Mr. Rubio’s conservatism compare to the other men and women who might seek the Republican nomination in 2016 — and to other candidates, like Mitt Romney, that the G.O.P. has nominated recently? Read more here: http://fivethirtyeight.blogs.nytimes.com/2013/02/19/marco-rubio-the-electable-conservative/#more-38648
Edit:
LOL this is hilarious. Tea Party jumping on Rove.
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On February 20 2013 00:37 paralleluniverse wrote:
This whole debate about using normal distributions in finance seems completely misplaced.
Firstly, the main model, Black-Scholes, doesn't assume normality. It assumes that changes in stock prices are lognormally distributed, i.e. stock prices follow a geometric Brownian motion (not a Brownian motion).
But the point is taken that these models do not allow for tail events (unpredictably huge and rare events). One above poster suggests using nonparametric methods. But using a nonparametric method means not assuming a distribution by having the distribution being dictated by the data. It doesn't mean the model is robust under any distribution. Because nonparametric methods rely on data, and there is by definition, virtually no data on tail events, nonparametric methods won't solve your problem. You can't create information ex nihilo.
So what should you do about tail events? Hedge. Buy and sell derivatives to cover your ass. Do scenario analysis, i.e. what happens to your portfolio when some big bad and unpredictable event happens?
But weren't derivatives and financial instruments that no one really understood one of the main causes of the financial crisis? Yes, but the problem wasn't that people didn't price risk properly because they used the normal distribution, it was that people didn't see the correlation and interconnectedness of the whole system. You hedge to reduce risk, but when everything goes wrong at once and the assets you have become worthless and those who owe you because of your hedge also have worthless assets, then they can't pay you and you go broke (or get a bail out).
For example, the rationale behind subprime loans (which were individually worthless because they're likely to default) was that they can be all packaged up into one entity called a MBS. The MBS was highly rated by rating agencies, because what's the chance that they'll all default? This is basically risk pooling, the idea behind insurance. But it doesn't work when things are correlated.
The problem wasn't the normal distribution. It was correlation.
To be fair, it clearly wasn't easy to model correlation or to understand that it could be a big deal. They also had intellectual cover as finance was enthralled to free market fundamentalism, the centerpiece being the Efficient Market Hypothesis (EMH). And it was argued by many people of influence, like Alan Greenspan and Larry Summers that financial innovation had dispersed risk and that because of the EMH and Chicago School of Economics that nothing could go wrong. Clearly, that didn't work out.
Thx, interesting post and i have to agree.
The underestimating of the force of correlation seems a verry good explanation of why risk managers ended up in such a bad spot.
Its indeed a bit off topic, i just responded to the 3 charts shown and if have to choose between the mandlebrot and the bellcurve,then i go with the bellcurve and i still think that thats the most accurare respresentation (though of course not as accurate as the bellcurve of tossing head or tails 100 times gives)
It was merely a remark on the side.
Had one question about the post you made before this:
"It's possible that Alesina is correct, that tax cuts are less contractionary than spending cuts. But one reason to show some doubt is that if this were true"
I asume you mean tax increases (or the ending of tax cuts) since tax cuts are not contractionary at all, tax increases are.
Or am i now missing something realy simply or misreading you?
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ugh, the mandelbrot set was not supposed to be a "representation" of the financial data. The point is just that markets have fractal structure, not gaussian structure. you can use a gaussian model as a tool, but you have to understand that it's fundamentally different than the thing you're trying to model, and the more complex your models get based on this fundamental difference, the more you iterate the error until everything falls apart. So we should use gaussian models, but we should not build such complex things out of them, because we do not understand what we are doing when we do that.
If bankers were the people who suffered from their mistakes, I wouldn't care as much.
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EPT![[image loading]](http://www.standardandpoors.com/spf/fgr_articles/950068/6750010.gif)
![[image loading]](http://images.politico.com/global/2013/02/19/130219_rove_teapartyemail_274.jpg)
