Month: October 2010

Let’s play a game. We’ll each name three consecutive outcomes of a coin toss (for example, tails-heads-heads, or THH). Then we’ll flip a coin repeatedly until one of our chosen runs appears. That player wins.

Is there any strategy you can take to improve your chance of beating me? Strangely, there is. When I’ve named my triplet (say, HTH), take the complement of the center symbol and add it to the beginning, and then discard the last symbol (here yielding HHT). This new triplet will be more likely to appear than mine.

The remarkable thing is that this always works. No matter what triplet I pick, this method will always produce a triplet that is more likely to appear than mine. It was discovered by Barry Wolk of the University of Manitoba, building on a discovery by Walter Penney.

Run Toppers, from Futility Closet

What makes this recovery different is that it follows a recession brought on by a financial crisis. A growing body of research has found that such recoveries tend to be slower than those after “normal” recessions. Prakash Kannan, an economist at the IMF, examined 83 recessions in 21 rich countries since 1970. In the first two years after normal recessions growth averaged 3.7%. After the 13 caused by crises, growth averaged 2.4%. America has been doing slightly better than this (see chart 1).

The Federal Reserve brought on most post-war recessions by raising interest rates to squeeze out inflation. When the Fed cut rates, demand revived. Financial crises interfere with the transmission of lower rates to private borrowers. People can’t or won’t borrow because the value of their collateral—in particular, houses—has fallen. Banks are less able to lend because their capital has been depleted by bad loans, or less willing because customers can’t meet tighter underwriting standards.

The great debt drag, The Economist

The constitution is a thing of wonder, all the more miraculous for having been written when the rest of the world’s peoples were still under the boot of kings and emperors (with the magnificent exception of Britain’s constitutional monarchy, of course). But many of the tea-partiers have invented a strangely ahistorical version of it. For example, they say that the framers’ aim was to check the central government and protect the rights of the states. In fact the constitution of 1787 set out to do the opposite: to bolster the centre and weaken the power the states had briefly enjoyed under the new republic’s Articles of Confederation of 1777.

The perils of constitution-worship, The Economist