I made a pitstop on the way to the library to Blaz!ng Bagels (that name will be left uncommented).  But here is their logo:

Best Bagels East of New York, huh?  Since when is Bellevue east of New York?

I thought perhaps that it’s just an expansion from a New England company that I was unaware of, so I googled them and came to find their site.   And nope.  Only other location listed is in Redmond.

I guess if you keep going east from NY, you’ll eventually get to this area…

In the midst of studying for a DiffEq midterm, I decided to distract myself with even more diffeq studying.  Perhaps you remember this lovely post from which I received some good discussion.  I guess I am developing a “history” of distracting myself from math with more math.

I presented myself with a more interesting problem: what is the level of caffeine in my bloodstream at any given point in time?

I’m having trouble modeling this, so perhaps my fellow diffeq nerds out there can come out of the woodwork for me.  This will be sitting in my head for a while so please, help me put myself out of my misery!

So here are the variables (I either googled them or knew them off hand):

Amount of caffeine in 1 30 mL shot of espresso: about 100 mg
Initial consumption of coffee: 16 oz drink with 2-30 mL shots of espresso
Time it takes to consume: 15 minutes (chug!)
Rate of caffeine absorption into bloodstream: 99% of caffeine is absorbed in 45 minutes (only rate I could find), although can reach a peak within 15 – 120 minutes
Rate of caffeine processed out of bloodstreem: half life of ~3 hours

Let C(t) = amount of caffeine in bloodstream at any period of time in hours
C(0) = C₀
dC/dt = rate in – rate out

rate in = 200mg/16 oz * 16oz/15 minutes = 40/3 mg/minute with a maximum of 15 minutes

Now I think this is where I’m tripping myself up:
rate out = C/2^t/3
concentration / half life of three hours

So then:
dC/dt = 40/3 – C/2^t/3
but then that leads me to
C(t) = 40/3*e^2t/3/ln(2) * ò(e^2-t/3/ln(2)dt) + c*e^2t/3/ln(2)

Ugh.  This is where I gave up.  Well I tried drawing it out, but I kept focusing on “ok, so I consume about an ounce a minute.  So that first ounce will be absorbed by the 46th minute, to which my body will start getting rid of it before the second ounce is absorbed.”  I guess I shouldn’t dwell on it.

One positive that’s coming out of – I can have fun applying diffeq to stuff that actually matters.  Come on, physics? really? There are much more interesting problems than when a ball will fall if tossed straight upward from the ground at an intial velocity of 96 ft/second… <cough>

The “Nobel” prize for economics was announced today – received by three economists for their research in labor economics and search theory (very poignant).

One of them is actually a behavioral economist, and I looked up his book Behavioral Economics and its Applications on Amazon.  Here is what I came across:

Do the math – How absurd! 25 cents for a $44 book.  When, if you look right next to this ad, people are selling the book used for significantly more:

Why would anyone use Amazon buyback?

The irony of this being on a behavioral economist’s book page…

While occupying my usual spot at the library, I came across a posted quote on an adjacent table attributed to Albert Einstein:

“The monotony and solitude of a quiet life stimulates the creative mind.”

I’m quite fond of it, and I think it encapsulates my current attitude.

While I am still adjusting to the horrific transit system in the Greater Seattle area, I’m trying to spin a positive on it.  I’ve been given the gift of time, woo…

So now I’m reading.  A lot.  But it’s great – I’m completely enthusiastic about enhancing the field of economics through borrowing from other science disciplines, i.e. psychology, decision sciences, physics and thermodynamics.  A while ago I came across complexity economics, which is based on complexity science and the notion that there is no sense of equilibrium within closed systems (the traditional view of economics) but rather open, dynamic, adaptive and complex system that evolves.

In an effort to educate myself on the foundations of complexity science (I am still trying to get a grasp on entropy), I picked up Deep Simplicity by John Gribbin.  With his digestible prose, I breezing through this, but fully involving myself with an eye for application with economics.  This sh*t is awesome!

More specifically, he draws up Lorenz and his discovery/development of the butterfly effect (coincidentally, or not, there’s a behavioral sciences/econ book called the Butterfly Effect that draws on complexity sciences.  I should pick that up again).  What was interesting with Lorenz is his discovery was that it is painfully difficult to forecast weather without the precise initial conditions.  Lorenz was playing on these new fangled devices called computers in the 50s when he made the realization that if he inputs numbers that aren’t precise, that is, that aren’t to the “correct” or appropriate amount of decimal places, the forecast/predictions will progressively be off of the more precise input in a nonlinear fashion.  If he couldn’t get the exact initial conditions (which would be decimal places off to infinity), he could not predict weather beyond a few days.

This is what came to be known as the Lorenz/butterfly effect.  I’m not sure how best to describe it…..so, I won’t.

My actual point is that I can see the Lorenz effect being applicable to the realm of economics.  First, it has to be impossible to model “the economy.”  Macro/micro economic models simply can not contain every agent, every being, every cent, every decision.  At best, models use probabilities and samples, and supposedly economists settle for this.  But as I read this book, models based on probability, samples and approximations are crude, so much so that it hardly gives a solution pointed in the right direction.  What if economists were to push the mathematical limits of the foundation of their science and rather than have the idea of economics be a social science, have a sense that it’s a hard science, like physics.

What if economics had the assumption of chaos, rather than equilibrium?

Oh.Em.Gee.  My mind is being blown and I <3 it.

The past year and a half, I’ve been engrossed in academic papers released by prominent (and some non-prominent) professors and Federal Reserve economists.  With all this reading, it’s gets me wondering about a few things.

1) Who else, other than other academics, reads this crap?

Yea I don’t think anyone.  The main reason being it’s difficult to understand without a rigorous economic education.  Who will understand econometric models or the method of choosing dynamic stochastic general equilibrium models versus Walrasian models?  Not many.

2) Why don’t writers care more about the “reachability” of their writing?

I say, status-quo, and to maintain a level of elitism.  If many people understood, then so goes their curtain of mystery.

3) Why are these papers so heavily bogged down by methodology of research?

Time after time, I read the abstract, intro and start getting into the nitty gritty of the paper, but I’m left with wanting more explanation, purpose and the question of “so what?”  What is the purpose of all this finely tuned research if it’s not being applied or used in some fashion?  If someone is researching the effectiveness of monetary policy, shouldn’t this research be actually _used_ in the Fed?  rather than published?

Here are my thoughts.  The research is very cerebral – economists can emulate mathematicians.  Often the reasoning, methodology, purpose, etc is obfuscated within esoteric language.  Therefore it’s not going to be easily understood within a greater arena, and then not utilized for the benefit of the field of economics.

I hope to break this cycle – produce research that is reasonably applicable _and_ understandable.  I hope to be an intelligible voice  for the field so as to make the education of developments in economics (i.e. monetary policy) clear to those who are interested but perhaps not have the background in the field.

I’ve been cultivating an interest in monetary policy, and yes, it can be a bit bland.  Why not spice it up with behavioral economics?

A year or so ago I came across Inflation Targeting by Bernanke et al.  What I found interesting was the look at the overall market/public response to the German Bundesbank’s press releases after policy meetings.  If the Bank was not on target with inflation, Bernanke et al found that people respond better if the Bank had given a pinpointed estimate and was subsequently off target, rather than an inflationary range target.  The belief is if the Bank can’t hit its intended range, then it does not know what it’s doing.  But if it does not hit a specific number, then people are more forgiving.

It’s as if the Bank was playing darts with a large dart board versus a dime.  What, you can’t hit that target?  What a lousy arm.

The interesting thing is, the Bank could give an inflation target range of 2 – 3%, or a pinpoint 2.5%, and people would still be more forgiving of missing the pinpoint if numbers turned out to be 4%, even though the middle point of the range is equal to the pinpoint.

Hop across the pond back to the US, and people/markets have lost faith in the Federal Reserve as seen by the ongoing debates in DC and Wall Street.  How can we restore trust in our powerful reserve system?  Perhaps it’s similar to the Bundesbank’s understanding of how information is presented to the public.

I came across an interesting article yesterday from AdAge that documented a conversation with Dan Ariely, author of the popular behavioral economics book Predictably Irrational.  I’d like to see some combination of behavioral economics & marketing introduced to the FRB’s public releases.  One of Dr. Ariely’s comments regarding the loss of trust for a company & revenge:

Revenge is a useful thing because revenge allows for trust. If your computer crashes, you might get upset but you wouldn’t feel the same need for revenge as when a human being betrays your trust. The anger that can be caused by bad customer service is really kind of incredible. That’s the first thing that companies just need to understand. Things can quickly deteriorate to a level to which there’s no return. You can really calm people very easily if you do it at the right moment.

Replace “customer service” to “economic leadership” and “companies” with “the federal reserve” and I think there might be something there.

Bare with me, a series of questions: If the public/markets react poorly to the Fed’s leadership in trying to get us out of a recession, how is that going to be taken out on the economy itself?  If people distrust the Fed’s efforts, people must have a poor outlook, which must be seen still in restricting spending, use of credit, banks’ not lending, etc.  How does people’s mistrust affect the economy?  Does it interrupt monetary policy’s effectiveness?  Is there anything recursive going on to affect the progression of monetary policy?  Can we instill trust like that from the people of Germany (might I remind you the strength of the German’s economy…)?  How will faith affect the progression & effectiveness of monetary policy?

Are these questions viable…

VoxEU wrote an article regarding elevating the FHLB, refining and adjusting its purpose, and discussed a little bit about its importance.  I am so happy to see it getting some light shed on it.  The FHLB is a silent but powerful support system to our banks.

Mark Thoma, an econ professor of The University of Oregon, picked up on the article.  He had no comment or much knowledge on the FHLB system, which proves the lack of understanding even in the academic, “in-the-loop” circles.

Here was my comment to his post, for education purposes:

I’m happy to see that this article is starting to get around. It had been surprising that there hasn’t been any publicity in regards to the FHLB’s importance to the banking system.

The way that the FHLB is set up is, in the best of terms, “all-encompassing.” In order for a bank to borrow term advances/loans from the FHLB, it has to pledge it’s mortgage portfolio. The amount you can borrow depends on the type of loan (conforming, jumbo, “subprime”, 2nd home, etc) that is pledged, and there are separate haircuts for each.

The FHLB can impose adjustments to haircuts to different loans. During the height of the crisis, this became a concern because the majority of many banks’ wholesale funding is from the FHLB. An increase in haircuts equal a decrease in borrowing capacity. Also, an increase in defaults or slips in status of loans equal decreases in borrowing capacity.

It’s troubling when borrowing is limited further because the FHLB is the cheapest wholesale funding out there compared to brokered deposits, term repo agreements and other wholesale options. Banks can borrow overnight often below the fed funds effective rate, as well as cheap longer term funding up to 20 years. Constricting this sources forces banks to use brokered deposits to fund loans or investments, which is expensive both in terms of rates paid as well as FDIC assessments.

On top of this, the FHLB requires banks to buy stock in order to be a member. How much stock a bank has also limits the amount it can borrow. If banks want to borrow more against the loans you pledged, they will have to buy a % in stock. I know some (maybe all) banks have stopped paying dividends on stock.

The FHLB also issues debt, which is very common for a bank’s investment portfolio to hold, and is viewed the same way as other GSEs.

Essentially, banks are often shareholders, borrowers and lenders to the FHLB. When regional home loan banks have issues, i.e. Seattle or Atlanta, it’s a cause for great concern to the longevity of the banks which are supported by the HLBs.

There.  I said it.

There’s a level of complexity in returning to the Seattle area that is a bit difficult to understand.  I don’t quite understand it myself.  The time I spent in Boston was very valuable and pivotal to growing into my “shoes” per se.  And now, in rough terms, I feel my growth is stunted.

In Boston, I cultivated a taste for the development and pursuance of knowledge.  With that came a resentment towards settling, stale thinking and the weak-willed.  That said, I dislike Seattle for not being a “powerhouse.”  While there certainly is large technology and healthcare industries here, compared to the government powerhouse of DC, the everything-powerhouse of NYC, the fashion/entertainment powerhouse of LA, or the academic/healthcare/biopharma/technology/banking/historic powerhouse of Boston, it’s not much to keep me interested.  I resent Seattle for having grown up in a tractable atmosphere.

To return to an environment that I feel does not push me to be better, smarter, stronger, it feels I’m in this latent state of mind that only creates anxiety but kills all motivation.  I feel almost beaten into being taciturn and obsequious.  I’m struggling to have it not define who I am, merely just the location of where I am.  I’m struggling to fend off its oppressiveness; it consumes me, takes away what I made myself to become.  A step back, a step down.  A step I don’t want to retake since I’ve made so much effort to get to where I fell.  It’s a constant reminder of where I come from, a reminder that leads to all this resentment.

Awesomeness!

Via http://fashionablygeek.com/

FYI This is my 100th post on this site.  Woo!

I’m sitting in the Seattle Public Library.  I’ve been wanting to come here since it was built in 2004.  It’s designed by Dutchman Rem Koolhaus (awesome name) and Seattleite Joshua Ramus, but it looks like a Swede had his hand in it.  I thought I walked into Ikea, to be honest.

The building has a beautiful atrium, allowing you to look down on Seattle.  But there’s some interesting aspects to this library.  The ceiling literally looks like an insane asylum.  Which might be pertinent if you stay here studying long enough.

(look at the top/ceiling)

And well the whole decor of this place, neon escalators, in-your-face labeling, all reminds me of Ikea.

It’s quite a stunning library.  But, I think I prefer the historic Boston Public Library.