Thursday, October 27, 2011

Brain Teaser 3

Another puzzle from Brain Bashers.
This one is pretty easy but is nice if you only have a little bit of time and want to sneak in a few minutes of problem solving.

The International Women's Speed Skating championship was recently completed, however, the computer storing the results suffered from a power cut. Using the following information, can you determine who finished where, their ages (18, 21, 24 and 28) and the colour they wore? The youngest, who didn't wear blue, won the championship. Jessica was three years younger than the person who wore red. Katy performed well to finish in second place. Lauren wore green and Mary was the oldest competitor. The person who wore yellow was younger than Katy, whereas the person who came last was 21.

Lauren Green 18 - first
Katy Red 24 - second
Mary Blue 28 - third
Jessica Yellow 21 - last

Monday, October 24, 2011

Hip to like Mao?

The other day I was watching a TED Talk featuring Bunker Roy, an Indian social activist. I wanted to find out more about him so I did a google search and read a few articles. The one thing that struck a nerve in me was his acknowledgement of being influenced by the philosophy of Mao Zedong. This is not the first time I have read about an intellectual being influenced by Mao but I find it odd that it is largely acceptable to publicly acknowledge it.

To make my point, lets take a look at some of the atrocities committed under the rulership of Mao.

1949 - The People's Republic of China was established on October 1 under Mao Zedong.

1951- "Inside China the policies of moderation are replaced by a campaign against 'enemies of the state' that will affect millions. Foreigners and Christian missionaries are branded as spies. Landlords and wealthy peasants are stripped of their land. Intellectuals, scientists, professionals, artists and writers are forced into 'self-criticism' and public confessions of their failings in relation to communist ideals."

"Incompetent and politically unreliable public officials are purged. Corrupt businessmen and industrialists are removed from the system. The bourgeoisie are held in suspicion. Reports suggest that from one to three million are executed during the campaign." (1)

1958 - "Mao launches the 'Great Leap Forward' to accelerate the development of all sectors of the economy at once...It soon becomes apparent that the Great Leap Forward is an ill-considered failure. Rather than boosting production, the Great Leap Forward brings shortages of food and raw materials and the demoralisation and exhaustion of the workforce...Widespread famine results, especially in rural areas.

It is estimated that from 1958 to 1961, 14 to 20 million more people die of starvation than in similar years of poor harvests. The number of reported births is about 23 million less than under normal circumstances.

Other estimates place the number who die because of the famine at between 23 and 45 million

Mao refuses to recognise or deal with the reality of the situation, saying "When there is not enough to eat, people starve to death. It is better to let half of the people die so that the other half can eat their fill." (1)

1959 - "In April the fallout of the Great Leap Forward sees Mao resign as chairman of the People's Republic, although he remains chairman of the CCP." (1)

1962 - "Mao returns from the 'second line' of decision-making and begins a campaign to purify the party of 'capitalists' and 'counter-revolutionaries', using his enormous status to hold sway. His 'Socialist Education Movement' seeks to restore ideological purity and intensify the class struggle, calling on the population to to learn from the People's Liberation Army', which in turn is asked to promote 'Mao Tse-Tung Thought' as the guiding principle for a renewal of the revolution.

The school system is reorganised to accommodate the work schedule of communes and factories. Intellectuals and scholars are 'reeducated' to accept that their participation in manual labour is needed to remove 'bourgeois' influences. The education movement will become increasingly militant" (1)

1966 - (Cultural Revolution) "Schools, colleges and universities are closed. Virtually all engineers, managers, scientists, technicians, and other professionals are 'criticised,' demoted or 'sent down' to the countryside to 'participate in labour.' Many are jailed. Management of factories is placed in the hands of ill-equipped revolutionary committees. As a result, the country experiences a 14% decline in industrial production in 1967.

China's traditional respect for learning and the experience of age is turned on its head. Many cultural artefact's are damaged or destroyed. Cultural expression is severely curtailed. Religious practices are suppressed."(1)

The cultural revolution continues for ten years during which time millions are persecuted and suffered abuses such as torture, imprisonment, rape and seizure of property.(2)

This is by no means a complete summary, I'm just highlighting major events.

Bottom line, Mao was a bad guy. If Bunker Roy said that he was influenced by the philosophies of Hitler no one would give him the time of day. How strange it is that Mao doesn't seem to produce the same illicit response.

(1)More or Less:Heroes and Killers
(2)Wikipedia: Mao Zedong

Thursday, October 20, 2011

The Wonder of it all: Pilobolus

And all I can do is make that dog head with my hand.

Begging the Question/Circular Reasoning

Begging the question is a fallacy in which the proposition or conclusion to an argument is found in one of its premises. Stated another way, it "begs" or assumes a conclusion in ones "question" or premise. Though technically different, I am going to lump circular reasoning in with begging the question.

The form of the argument can simply be: A is true because A is true. An example of this would be "Opium induces sleep because it has a soporific quality". Soporific means causing or tending to cause sleep. Restated this is like saying "Opium induces sleep because it tends to make one sleepy.

It may also take the form of: A is true because of B. B is true because of A (circular reasoning). An example would be: "I once overheard three brothers dividing two candy bars. The oldest one gave each of the two younger ones half of a candy bar, and kept a whole bar for himelf. When asked why he got more candy, he said he was the smartest. A few minutes later, one of the younger ones asked why he was the smartest, and in reply the oldest said 'Because I have more candy.'" Ernest J. Chave, Personality Development in Children (Univ. of Chicago, 1937), 151.

The most common example of circular reasoning is: Tom - "Do you believe in God"? Steve - "I do". Tom - "Why do you believe in God"? Steve - "Because it is written in the Bible that God exists". Tom - "Why do you believe what the bible says"? Steve -"Because it is the word of God".

Friday, October 14, 2011

The Cost Of Financial Ignorance

I just read here an article by Hernando de Soto in The Washington Post. De Soto is a Peruvian economist known for his work on the informal economy and the importance of a formal property rights system. I read his book The Mystery of Capital a number of years ago in which he argues that the reason capitalism thrives in developed countries is due to a well established, efficient system of property rights. It is this system of deeds, titles, incorporation, etc., which provides reliable information as to who owns what, how much was paid for it, a reliable estimate of how much it is worth and how to transfer ownership. Though developed countries take these formal property laws for granted, many poorer countries are completely lacking in an efficient, working system. For instance, in Peru De Soto estimated that to legally build a house takes 6 years and 11 months and requires 207 administrative steps in 52 government offices. To acquire title to the land requires an additional 728 administrative steps. He gives similar examples for countries such as Egypt, Philippines and Haiti. It is this lack of a working, accessible system which forces a large portion of population of these countries to form informal, extralegal systems.

In the Washington Post article, De Soto applies this same argument to the financial crisis we have been muddling through. He argues that complex modern financial instruments such as derivatives and non-traditional practices including off-balance sheet accounting, have undermined the system which has served us so well for so long. "To understand why there is no credit without truth, you need only walk down certain streets — the businesses that cannot get significant credit are those in the informal economy, where assets and transactions are not legally recorded and are therefore unknowable.

When property is poorly documented, markets don’t get the information needed to connect assets to finance, and governments don’t obtain the data required to detect which connections have gone awry and how to fix them. This became obvious in 2008, when a relatively small number of sub prime homeowners’ inability to meet their mortgage payments ultimately triggered a global financial crisis. The world was surprised, and terrified, because no one seemed to see the connection."

Anyway, I thought it was a good article and worth reading.

Thursday, October 13, 2011

Another Brain Teaser

Got this from Brain Bashers

There are 5 houses in 5 different colours. In each house lives a person of a different nationality. The 5 owners drink a certain type of beverage, smoke a certain brand of cigar, and keep a certain pet. Using the clues below can you determine who owns the fish?

The Brit lives in a red house.
The Swede keeps dogs as pets.
The Dane drinks tea.
The green house is on the immediate left of the white house.
The green house owner drinks coffee.
The person who smokes Pall Mall rears birds.
The owner of the yellow house smokes Dunhill.
The man living in the house right in the middle drinks milk.
The Norwegian lives in the first house.
The man who smokes Blend lives next door to the one who keeps cats.
The man who keeps horses lives next door to the man who smokes Dunhill.
The owner who smokes Blue Master drinks beer.
The German smokes Prince.
The Norwegian lives next to the blue house.
The man who smokes Blend has a neighbour who drinks water.

Took my about two hours to get it, so don't start it unless you are willing to put some time into it (or maybe I am just slow).
Answer: This puzzle is usually attributed to Einstein, who may or may not have written it. The German owns the fish and the table below details the full answer:

Nationality: Norweg Dane Brit German Swede
Colour : Yellow Blue Red Green White
Beverage : water tea milk coffee beer
Smokes : Dunhill Blend Pall Mall Prince Blue Master
Pet : cats horses birds fish dogs

Monday, October 10, 2011

Riddle Me This

I was reading a psychology paper this past weekend and came across this fun little brain teaser.

Jack is looking at Anne, but Anne is looking at George. Jack is married, but George is not. Is a married person looking at an unmarried person?

A) Yes

B) No

C) Cannot be determined

Hope you were able to make a selection first without your eyes floating down to the answer. Most people choose C. But the correct answer is A. Here is how to think it through logically: Anne is the only person whose marital status is unknown. You need to consider both possibilities, either married or unmarried, to determine whether you have enough information to draw a conclusion. If Anne is married, the answer is A: she would be the married person who is looking at an unmarried person (George). If Anne is not married, the answer is still A: in this case, Jack is the married person, and he is looking at Anne, the unmarried person. This thought process is called fully disjunctive reasoning—reasoning that considers all possibilities. The fact that the problem does not reveal whether Anne is or is not married suggests to people that they do not have enough information, and they make the easiest inference (C) without thinking through all the possibilities

Thursday, October 6, 2011

Capital Gains, Capital Losses

I was listening to a debate on the radio today regarding the need to raise the capital gains rates. Of course it was pointed out that Warren Buffet ones suggested the need to do this since his secretary ends up paying a higher rate than he does. Anyway, I started thinking, why is it that there is so much discussion regarding capital gains but capital losses are never brought into the debate? Just to summarize the issue, capital gains are the tax paid on investment appreciation when it is sold. So for instance you buy a stock or mutual fund for $10,000 and three years from now you sell it when it is worth $15,000, you would pay capital gains tax on the $5,000 gain. For most people this gain would be taxed at 15% by the federal government. Many argue that this is not fair since ordinary income rates, the rates on your wages and self employment income, are progressively more (for 2011 they are 10%, 15%, 25%, 28%, 33%, 35%). The argument is that wealthier people have much more income from capital gains than middle class and poor families.

There has been a lot of debate for and against the lower capital gains rates but I don't see anything mentioned regarding capital losses. As can be inferred, capital losses would be the recognized losses on investment depreciation. So using our example above, if you buy the stock for $10,000 and three years from now you sell it when it is only worth $5,000, you have a capital loss of $5,000. Now this is where it gets interesting (or not). Capital losses offset (lower) any capital gains you have for the year but if you end up with more losses than gains, only $3,000 of the capital loss can offset ordinary income per year. Any amount over $3,000 has to be carried forward to future years. So going back to our example, only $3,000 of the $5,000 loss would be used this year to lower, say, our employment income. The remaining $2,000 is carried forward to next year where it will first lower any capital gains we may have, and then our ordinary income.

So how is this relevant to the discussion on capital gain rates? Well, lets say you invest heavily in the stock market but make some really bad decisions. Your investments go south and you end up losing $150,000. You sell everything, take your loses and vow never to participate in the stock market again. Since you can only take $3,000 a year in capital losses against your other income, it will take you 50 years to use up the losses on your tax returns. So if your in your 50's and 60's, chances are you would never use them up. I know an individual who went through this sort of thing but his losses were actually quite a bit more.

My point is simple, though capital gains rates are lower than ordinary income rates, there are major restrictions on using capital losses. Any debate on raising the capital gains rates need to take this into consideration.