Some Chicago Boyz know each other from student days at the University of Chicago. Others are Chicago boys in spirit. The blog name is also intended as a good-humored gesture of admiration for distinguished Chicago School economists and fellow travelers.
Recently I went to the dog show at McCormick place in Chicago. I highly recommend it – a lot of fun, especially if you bring kids. The fun isn’t the judging or the agility contests (which are cool) but involves walking around looking at all the breeds as they are being groomed.
Many of the dogs were in curlers of some sort as they prepared for the show but this one seemed particularly sad.
These two cracked me up – it was the “before and after” as the dogs prepared for the show. You wouldn’t believe the attention and effort that the owners lavished on these animals.
Here is a movie I made with all of my photos. If you can’t see the movie a link is here.
Have retroactive predictability imposed on them through the foresight of 20/20 hindsight.
Taleb frequently points to the outbreak of World War I as an example of a black swan. He scoffs at historical accounts that present the outbreak as the result of trends that built up over the preceding decades, dismissing them as manifestations of the narrative fallacy:
Narrative fallacy: our need to fit a story or pattern to a series of connected or disconnected facts.
…historians arrive on the scene. They are the scholars who specialize in the study of “fat tail” events—the low-frequency, high-impact moments that inhabit the tails of probability distributions, such as wars, revolutions, financial crashes, and imperial collapses. But historians often misunderstand complexity in decoding these events. They are trained to explain calamity in terms of long-term causes, often dating back decades. This is what Nassim Taleb rightly condemned in The Black Swan as “the narrative fallacy”: the construction of psychologically satisfying stories on the principle of post hoc, ergo propter hoc.
Drawing casual inferences about causation is an age-old habit. Take World War I. A huge war breaks out in the summer of 1914, to the great surprise of nearly everyone. Before long, historians have devised a story line commensurate with the disaster: a treaty governing the neutrality of Belgium that was signed in 1839, the waning of Ottoman power in the Balkans dating back to the 1870s, and malevolent Germans and the navy they began building in 1897. A contemporary version of this fallacy traces the 9/11 attacks back to the Egyptian government’s 1966 execution of Sayyid Qutb, the Islamist writer who inspired the Muslim Brotherhood. Most recently, the financial crisis that began in 2007 has been attributed to measures of financial deregulation taken in the United States in the 1980s.
Ferguson proclaims that the real truth is found in the opposite direction:
In reality, the proximate triggers of a crisis are often sufficient to explain the sudden shift from a good equilibrium to a bad mess. Thus, World War I was actually caused by a series of diplomatic miscalculations in the summer of 1914, the real origins of 9/11 lie in the politics of Saudi Arabia in the 1990s, and the financial crisis was principally due to errors in monetary policy by the U.S. Federal Reserve and to China’s rapid accumulation of dollar reserves after 2001. Most of the fat-tail phenomena that historians study are not the climaxes of prolonged and deterministic story lines; instead, they represent perturbations, and sometimes the complete breakdowns, of complex systems.
I’m going to quibble with the Laurence A. Tisch Professor of History here.
Whoo hoo! We are definitely the Second City, or maybe I should say, the second state, according to this Bloomberg article:
ILLINOIS, the second-lowest-rated U.S. state after California, will take bids on March 11 from banks seeking to underwrite $300 million of Build America Bonds and $56 million of non-subsidized taxable notes. The deal will finance school construction, according to John Sinsheimer, director of capital markets for Illinois. The state, which last sold Build America Bonds in a $1 billion deal on Jan. 28, is rated A2 by Moody’s, A+ by S&P and A by Fitch. A statutory requirement calls for 25 percent of all state debt to be bid competitively, Sinsheimer said. Banks led by William Blair & Co. will negotiate the sale of an additional $700 million in Build America securities in mid-March, he said. (Added March 2)
Not only is Illinois poorly rated from a credit perspective, we often don’t do a good job of selling the debt. This post described how a Chicago government entity issued bonds and sold them for an uncompetitive price, generating instant profits from the purchasers of that debt. You’d think that since the state of Illinois issues so much debt, at least we’d be good at it, but perhaps not.
1. It’s worth reiterating something Rich and Jeff Anderson have pointed out: The focus on reconciliation in the past few days confuses things a bit. The question in the health-care debate at the moment is whether Nancy Pelosi can get enough of her members to vote for the version of Obamacare that passed the Senate late last year. If the House passes that bill, it will have passed both houses, will go to the president, and will become law. – Yuval Levin, NRO
2. So if, in the end, this process works as the White House wants it to work, it will do so because of core Democratic and liberal beliefs. Republicans and conservatives need to understand that; the political horror faced by every Democrat who does not have an entirely safe seat can be mitigated in part by the belief that there may be enough Democrats who can live their lives proud to have brought this measure to fruition. – John Podhoretz, Commentary
The second principle outlined in James Burnham’s 1943 political science classic The Machiavellians is the fundamental truth about politics:
2. The primary subject-matter of political science is the struggle for social power in its diverse open and concealed forms.
(Contrary views hold that political thought deals with the general welfare, the common good, and other such entities that are from time to time invented by the theorists.)
[Politics] is nothing but a duel on a large scale. Countless duels go to make up [politics], but a picture of the whole can be formed by imagining a pair of wrestlers. Each tries…to compel the other to do his will; his immediate aim is to throw his opponent in order to make him incapable of further resistance.
on the failure of bond investors to price the possibility of war into their trades right before the war broke out. Ferguson now returns the favor in 