Some of Brian Yam's wonderful art works. Check out his blog here
Monday, January 9, 2012
Wednesday, January 4, 2012
A cool sketch from artist Andrew Paul. It is a concept design for an illustrated story he is working on. Besides being a great artist, Andrew is a childhood friend of mine. You can catch his blog here for updates.
Sunday, January 1, 2012
How The Federal Reserve Screws You
I went to the bank yesterday to make a deposit and out of curiosity I asked what the interest rate was on a basic savings account. The teller told me that it was 0.2%. Pretty pathetic right. Of course savers who have money parked in savings/money market accounts aren't too happy about the puny returns but the situation is actually much worse than many people understand. To illustrate what I mean, lets look at a simple example. Say we have an emergency fund of $10,000 in a savings account which earns 0.2% annually (we'll compound annually for the sake of simplicity). At the end of the year we end up with a scrawny return of $20. But hey, its better than nothing. At least we are now ahead by $20, right? Unfortunately no, that isn't the case. We forgot that the income is taxable interest (at ordinary interest rates). So lets say were in the 25% bracket. With this in mind we have to subtract $5 from our $20 leaving us with a return of $15. Now that is a pathetic return on investment. But hey, at least we got something and are ahead by $15, right? Well, no, because we still need to calculate the effect of inflation on our investment. As of the end of November, the average inflation rate for 2011 was about 3.2%. So if we take our original investment of $10,000 plus our return of $15 and multiply that by 3.2% we see that we have actually lost purchasing power of about $320. Yep, our money is now worth about $9695 in real dollar terms.
Of course part of the reason interest rates are so low is because of the federal reserves attempts to get the economy moving again. The hope is that with such low rates, people will start borrowing and spending money again. But the flip side of this sort of policy is that it punishes savers.
So to sum it up, the government promotes a policy that punishes the responsible savers through inflation and taxes in hopes that it will get the irresponsible spenders to start borrowing and spending again. Hmm, does this sound like a solid plan to you?
Of course part of the reason interest rates are so low is because of the federal reserves attempts to get the economy moving again. The hope is that with such low rates, people will start borrowing and spending money again. But the flip side of this sort of policy is that it punishes savers.
So to sum it up, the government promotes a policy that punishes the responsible savers through inflation and taxes in hopes that it will get the irresponsible spenders to start borrowing and spending again. Hmm, does this sound like a solid plan to you?
Monday, December 26, 2011
Irrelevant Reason (Non-Sequitur)
A cogent argument fulfills the three criteria of having acceptable premises which are relevant to the conclusion and sufficiently support it. The irrelevant reason fallacy violates the relevancy criteria.
Also referred to in formal logic as a non-sequitur the irrelevant reason is a fallacy in which the conclusion does not follow from the premises. The two conditions for identifying the fallacy are:
1. The arguer has put forth a premise as a reason for the conclusion.
2. The premise, considered in conjunction with the other premises, fails to satisfy the relevance requirement.
For example, Marc Lalonde, the one time Canadian Minister of Health, responded to the charge of permitting the sale of Kellogg's Corn Flakes which had little or no nutritional value by saying:
"As for the nutritional value of Corn Flakes, the milk you have with your Corn Flakes has great nutritional value."
The implication is that since (1) the milk you have with your cereal has great nutritional value, therefore (2) Kellogg's Corn Flakes has great nutritional value. Of course the two are separate food items and to determine the nutrient value of any food, one needs to measure the value of the food itself and not include the value of a companion food which may be consumed with it. As such,
Also referred to in formal logic as a non-sequitur the irrelevant reason is a fallacy in which the conclusion does not follow from the premises. The two conditions for identifying the fallacy are:
1. The arguer has put forth a premise as a reason for the conclusion.
2. The premise, considered in conjunction with the other premises, fails to satisfy the relevance requirement.
For example, Marc Lalonde, the one time Canadian Minister of Health, responded to the charge of permitting the sale of Kellogg's Corn Flakes which had little or no nutritional value by saying:
"As for the nutritional value of Corn Flakes, the milk you have with your Corn Flakes has great nutritional value."
The implication is that since (1) the milk you have with your cereal has great nutritional value, therefore (2) Kellogg's Corn Flakes has great nutritional value. Of course the two are separate food items and to determine the nutrient value of any food, one needs to measure the value of the food itself and not include the value of a companion food which may be consumed with it. As such,
Thursday, December 22, 2011
Tuesday, December 20, 2011
Framing Effect
Framing effect is a cognitive bias that describes how people tend to draw different conclusions from the same information, depending on how it is presented. One useful way to look at framing effect is to break it down into three different categories: Risky Choice Framing, Attribute Framing, and Goal Framing (1).
Risky Choice Framing
In risky choice framing, subjects are presented with a situation where they must choose between one of two options. The first option has a sure thing outcome and the second option is a gamble(the risky choice). When confronted with these sort of scenarios, research shows that subjects tend to be risk averse (choose the sure thing) when the problem is framed in terms of gains and are risk seeking (choose the gamble) when the problem is framed in terms of losses.
The The most famous example of framing effect was demonstrated by Tversky and Kahneman (1981)through a set of experiments known as the 'Asian disease problem'. The participants in the study were given the following situation:
Imagine that the US is preparing for the outbreak of an unusual Asian disease,which is expected to kill 600 people. Two alternative programmes to combat the disease have been proposed. Assume that the exact scientific estimates of the consequences of the programmes are as follows.
The first half of the participants were given the following options:
If Programme A is adopted, 200 people will be saved. If Programme B is adopted, there is one-third probability that 600 people will be saved and two-thirds probability that no people will be saved. 72% of the participants chose option A, whereas only 28% of participants chose option B
The second group of participants were given the following variation:
If Programme A is adopted, 400 people will die. If Programme B is adopted, there is a one-third probability that nobody will die and a two-thirds probability that 600 people will die. In this variation only 22% chose option A, and 78% chose option B.
Of course, there is no difference between either of the A options or either of the B options. The only difference is in how they are presented.
Attribute Framing
In attribute framing a single attribute of an object or event is described in either equally positive or negative terms. The subjects are then required to provide some sort of evaluation. The findings in these cases was that an object or an event was evaluated more favorably when presented in a positive frame as opposed to being presented in a negative frame.
One study of attribute framing "was conducted by Levin and Gaeth (1988). They showed that perceptions of the quality of ground beef depend on whether the beef is labeled as “75% lean” or “25% fat.” They found that a sample of ground beef was rated as better tasting and less greasy when it was labeled in a positive light (75% lean) rather than in a negative light (25% fat). Notice that the information framed here is not the outcome of a risky choice but an attribute or characteristic of the ground beef that affects its evaluation."(1)
This of course is very familiar to us all via advertising and political media (whether we realize it or not).
Goal Framing
In goal framing, a subject is encouraged to engage in some activity using either a message which stresses the positive consequences of performing an action or the negative consequences of not performing an action. Findings suggest that typically subjects are more likely to engage in the activity when the consequences of not performing the action are used.
One famous example involved evaluating the effects of positive vs negative messages in trying to encourage woman to perform breast self examinations (Meyerowitz and Chaiken (1987)). "They showed that women were more apt to engage in breast self-examination (BSE) when presented with information stressing the negative consequences of not engaging in BSE than when presented with information stressing the positive consequences of engaging indo BSE have an increased chance of finding a tumor in the early, more treatable stages of the disease.” The negative complement is, “Research shows that women who do not do BSE have a decreased chance of finding a tumor in the early, more treatable stages of the disease.”(1)
(1) All Frames Are Not Created Equal: A Typology and Critical Analysis of Framing EffectsIrwin P. Levin, Sandra L. Schneider, Gary J. Gaethhttp://bcs.siuc.edu/facultypages/young/JDMStuff/LevinFraming.pdf
(2) The Framing of Decisions and the Psychology of Choice, Amos Tversky; Daniel Kahnemanhttp://psych.hanover.edu/classes/cognition/papers/tversky81.pdf
Risky Choice Framing
In risky choice framing, subjects are presented with a situation where they must choose between one of two options. The first option has a sure thing outcome and the second option is a gamble(the risky choice). When confronted with these sort of scenarios, research shows that subjects tend to be risk averse (choose the sure thing) when the problem is framed in terms of gains and are risk seeking (choose the gamble) when the problem is framed in terms of losses.
The The most famous example of framing effect was demonstrated by Tversky and Kahneman (1981)through a set of experiments known as the 'Asian disease problem'. The participants in the study were given the following situation:
Imagine that the US is preparing for the outbreak of an unusual Asian disease,which is expected to kill 600 people. Two alternative programmes to combat the disease have been proposed. Assume that the exact scientific estimates of the consequences of the programmes are as follows.
The first half of the participants were given the following options:
If Programme A is adopted, 200 people will be saved. If Programme B is adopted, there is one-third probability that 600 people will be saved and two-thirds probability that no people will be saved. 72% of the participants chose option A, whereas only 28% of participants chose option B
The second group of participants were given the following variation:
If Programme A is adopted, 400 people will die. If Programme B is adopted, there is a one-third probability that nobody will die and a two-thirds probability that 600 people will die. In this variation only 22% chose option A, and 78% chose option B.
Of course, there is no difference between either of the A options or either of the B options. The only difference is in how they are presented.
Attribute Framing
In attribute framing a single attribute of an object or event is described in either equally positive or negative terms. The subjects are then required to provide some sort of evaluation. The findings in these cases was that an object or an event was evaluated more favorably when presented in a positive frame as opposed to being presented in a negative frame.
One study of attribute framing "was conducted by Levin and Gaeth (1988). They showed that perceptions of the quality of ground beef depend on whether the beef is labeled as “75% lean” or “25% fat.” They found that a sample of ground beef was rated as better tasting and less greasy when it was labeled in a positive light (75% lean) rather than in a negative light (25% fat). Notice that the information framed here is not the outcome of a risky choice but an attribute or characteristic of the ground beef that affects its evaluation."(1)
This of course is very familiar to us all via advertising and political media (whether we realize it or not).
Goal Framing
In goal framing, a subject is encouraged to engage in some activity using either a message which stresses the positive consequences of performing an action or the negative consequences of not performing an action. Findings suggest that typically subjects are more likely to engage in the activity when the consequences of not performing the action are used.
One famous example involved evaluating the effects of positive vs negative messages in trying to encourage woman to perform breast self examinations (Meyerowitz and Chaiken (1987)). "They showed that women were more apt to engage in breast self-examination (BSE) when presented with information stressing the negative consequences of not engaging in BSE than when presented with information stressing the positive consequences of engaging indo BSE have an increased chance of finding a tumor in the early, more treatable stages of the disease.” The negative complement is, “Research shows that women who do not do BSE have a decreased chance of finding a tumor in the early, more treatable stages of the disease.”(1)
(1) All Frames Are Not Created Equal: A Typology and Critical Analysis of Framing EffectsIrwin P. Levin, Sandra L. Schneider, Gary J. Gaethhttp://bcs.siuc.edu/facultypages/young/JDMStuff/LevinFraming.pdf
(2) The Framing of Decisions and the Psychology of Choice, Amos Tversky; Daniel Kahnemanhttp://psych.hanover.edu/classes/cognition/papers/tversky81.pdf
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