Archive for February, 2008

Markets Fail

Friday, February 29th, 2008


 Adjunct professor Arnold Kling offered a terser précis of the GMU way. “My simple way of describing it is that at Chicago they say, ‘Markets work; let’s use markets.’ At Harvard and MIT they say, ‘Markets fail; let’s use government.’ And at George Mason, we say, ‘Markets fail; let’s use markets.’” This seeming paradox means, that GMU sees plenty of deviations from the “perfect neoclassical paradigm,” which requires “perfect information, perfect competition,” but that unlike Harvard or MIT, they do not automatically “ring a bell and say, ‘We need more government.’ Markets come up with solutions to problems of information.”

Kelly Criterion

Monday, February 25th, 2008

After a few days of dreaming that the Kelly Criterion got rid of axiomatic risk adversity, it’s back. Tried some simple, small cases with Eric Zimanyi today, and couldn’t convert optimality of the expectation value into anything resembling risk adversity for individual time slices. ARGH.

Asset Allocation

Monday, February 25th, 2008

I have put up my Asset Allocation scheme for the Facebook Fantasy Stock Exchange up here.

The sheet named “Tally” shows daily changes, while the sheet “Allocation” shows the allocation targets and howoff the portfolio is. TOGO shows the amount that needs to be changed to bring the portfolio back into balance.

Fortune’s Formula

Saturday, February 23rd, 2008

On days with snow, activity to clear it continues through the night. It’s 2am, and I just finished reading Fortune’s Formula, I’m pretty excited by the ideas in the book, especially this dilemna over the acceptance of the Kelly Criterion that it has presented. I think I know how to resolve it – using something about ensembles, about the non-axiomaticity of risk adversity. It’s exciting to have something difficult but tractable to chew on, especially when the reform of personal values is potentially at stake – I’ve always never been satisfied with the idea that risk adversity was something innate – and in-born risk adversity must have evolved, and I think that I can prove that risk adversity of that nature could only have emerged via the Kelly Criterion.

The book as a whole was an inspiring story showcasing the power of ideas, I think. That’s its strongest appeal to me, at least.