Friday, 31 December 2010

Wishes For A Happy New Year

I'm currently in my office trying to wrap up a paper to send off to a conference (the American Accounting Association Annual Meeting, with a deadline coming up next Wednesday). I'm one of only 3 faculty in thebuilding, so it's quiet.

I'll probably knock off about 3 today and spend the rest of the day with the Unknown Family. After all, it is New Year's Eve Tonight.

On that note, here's hoping you all a safe, happy, and prosperous New Year.

Monday, 27 December 2010

Let It Snow, Let It Snow, Let It Snow.

It Looks like the Unknown Family is pretty much shoveled out - I just got finished up removing about 15 inches of global warming from my driveway.

We did the family visit thing as usual this year, with Christmas Eve at my sister's house and Christmas Day at The Unknown Wife's family. They live in an adjoining state, but it's only about 2 hours away, so we did the day trip thing (and slept in our own beds).

Luckily, we got back before the snow started. Given my aging back (a legacy from my father, apparently), I prefer to shovel lighter amounts of snow multiple times rather than do one large one after it's over. So, I was in and out all day yesterday (about 3 times all together). Then I finished it off today. I love being in New England, but it has its costs.

Tomorrow I get back to the gym. For whatever reason, this semester has turned me into a morning person. In September, I found myself waking up at 4 a.m.. The Unknown Wife works out every day from 6-7 at the Y, so I thought I'd got from 5-6 (that way I can be back in time to watch the kids. So, I've been rising at 4:30 every day and putting in about a hour workout. I'm planning on doing a lot of cycling this summer - at least one century (my first) and a handful of 50-60 milers. The first 50 miler takes place on Memorial Day weekend, so I want to be ready to roll once the roads clear up and the weather warms. I've been putting in about 45 minutes to an hour each morning at the YMCA on the stationary bike, along with some light weightlifting several times a week. Except for a few extra holiday pounds, I'm probably at the same fitness level now that I usually am in June. So, I'm optimistic.

As for now, the driveway's clear, and it's time to get back to my office to get some work done - data to crunch, papers to edit, syllabi to write, and graduate students to torture.

Saturday, 25 December 2010

Experimentation

When I give presentations about teaching, I always urge the audience members to experiment as much as possible. It is hard to make improvements if you are not willing to try new things. I am always reminded of Albert Einstein’s definition of insanity: doing the same thing over and over again and expecting different results.

Some experiments work and some experiments don’t work. That is just the nature of the game. However, you will never find the winners if you are not willing to risk some losers. Playing it safe is no fun (and provides no benefit).

I tried an experiment with my final exam about two weeks ago. Even now, I am still not sure whether it was a winner or a loser but I found it interesting. I like the fact that I am still thinking about it.

What is the purpose of a final exam? I can think of two reasons. First, it gives the students one last opportunity to influence their grades. There is something about having hope for improvement that keeps students working until the end. Second, the final exam forces the students to review the material and, hopefully, get it better set in their understanding. In other words, they learn more.

I like giving my students an opportunity to improve their grades but my main reason for believing in final exams is that I really want them to leave the semester with all of the knowledge fresh in their minds. The final exam should encourage them to tie all of the material from the semester into a cohesive whole.

Unfortunately, I have often been disappointed in the results of final exams. Students seem overwhelmed by the huge amount of material and flit back and forth during their studies over the various topics without really getting a strong grip on any of it. They just don’t always learn as much as I want from their preparation.

So, at the end of my Intermediate Accounting II test this past semester, I wrote out 49 multiple-choice questions that covered everything that we had discussed that I thought was essential. I tried to gear each question to take about 4 minutes to solve. Although they were designed to be multiple-choice questions, I did not include any answers—just the questions.

Ten days before the final exam, I distributed these questions to my students along with the following speech: “Here is your final exam. These are the 49 questions that I would really love for you to be able to answer on the final exam. When you arrive for the final exam, you will have three hours to answer these questions. I will only make three changes from what you see here:

“1 – I will change the order of the questions.

“2 – I will add four multiple-choice answers to each question along with a “none of the above” answer.

“3 – Most importantly, for each question, I will change one or more of the variables in the question. For example, if the cost is $400,000, I might change that to $500,000. If the life is 5 years, I might change that to 10 years. If the interest rate is 8 percent, I might change that to 10 percent. If the blue method is used, I might change that to the red method. But the question will be fundamentally the same. If you can answer these questions, you should be able to answer all questions on the test.

“If you make sure you can work these 49 questions over the next ten days, you should make 100. But you must understand the problem so well that my changing of the variables will not really slow you down. I realize these are very difficult questions, but they cover the essentials that I want you to be able to work. You’ve got ten days to get these 49 under control.”

I quite honestly was not sure what was going to happen. In the end, the A students missed about 6 of the questions and got 43 correct. The B students missed about 13 and got 36 correct. The C students missed about 20 and got 29 correct. (The D and F students missed more, as you might imagine).

If I had given this test without the pre-test, I am convinced that most would have missed 50 to 100 percent more than they did. Students had clearly gone over the pre-test and learned to work many of the questions. They knew where to focus their attention. However, the number of missed questions was still higher than I had anticipated. Okay, these were 49 extremely tough questions about leases, pensions, cash flows, bonds, deferred taxes, and the like. But I really expected someone to become obsessed and learn them all backwards and forwards and make 100. That didn’t happen. Even with ten days, they just didn’t have enough time for that.

What interested me the most was that this type test had little impact on overall grades. Of all my students, the final exam grade made by 68 percent was within five points of their overall average for the semester. Students with an 82 average made about 82 and students with a 95 average made about 95. Only 32 percent had more than a 5 point difference between this test from their final average. I really had expected a greater number of students to show a greater change.

But, the basic question is still the same-did the students learn more in their studying? That was what I was trying to accomplish. And, I think they did that. Or, at least, I am encouraged enough to try it again. Maybe, this time with 40 questions instead of 49. Maybe, you just can’t do 49 complex questions in three hours even with a ten-day head start.

That’s my most recent experiment and how it worked. What was yours?

Merry Christmas To All

A Merry Christmas to all. It was off to visit my family last night. Now, it's off to the Unknown Wife's Family for the day. Luckily, they're each only about 80 miles away - gotta love living close enough that I can plan on biking to each this summer.

Unknown Daughter liked her presents (some clothes, a rock polishing kit, some games for her DS, etc...). The Unknown Baby Boy (now upgraded to the Unknown Toddler) seemed to like his presents, but being 21 months old, he probably will get as much out of playing with the boxes and paper as he will out of the presents).

As for Unknown Wife and I, we'll buy a big screen TV after the new year as our present. Yeah, that's right - "our" present.

In any event, here's hoping you all enjoy the day, and be careful on the roads - it's a surprisingly dangerous day for driving.

Thursday, 23 December 2010

Thoughts from the Desk

Here is an email I just sent to my friend W (a former trading desk colleague who I still bounce ideas off every now and then). Not a particularly deep email or anything, but it may serve to give a flavor of the way I approach directional macro trading:
There seems to be a clear divergence in markets at the moment. On the one hand commodities especially ags are charging higher. JJS is up over 20% mtd. And soybeans are making their 2nd attempt at clearing resistance at 1350; if they break then the next target is around 1550. So that's bullish. On the other hand EM stocks are clearly weak. China, Brazil and India are all down 10% from their peaks in early Nov and the charts all look quite bearish to me (especially China). For whatever reason, commentators here are completely ignoring the EM swoon [1]. But it could be dangerous, especially if oil continues to rally (remember the rule: if oil use is above 6% of GDP, a recession is coming).

I am uncomfortably reminded of Jan 2008. Then too, oil was at 90ish. Then too, India and China had peaked a few weeks / months previously. Then too ags rallied phenomenally for a few more months before crashing. (This fits in well with my existing thesis that soybeans should rally till June 2011). Of course history never repeats itself exactly, but it does rhyme occasionally. At any rate, I am going to be watching very carefully for signs of a correction (possibly a major correction)...

[1] Everyone on TV is happy because US stocks are melting up into year end. My own theory is that people were convinced that QE2 was a "buy-the-rumor-sell-the-fact" trade and so they unwound their positions in Nov, happy to lock in their profits for the year. Without so many longs left in the game the market was free to rally, and so it did.

Tuesday, 21 December 2010

Stick a Fork In Me

I'm done with my grading. Not surprisingly, I handed in grades at 4:45 this afternoon, and got my first email at 7. But for a change, the first one wasn't of the "why didn't I get a higher grade" variety. The student wrote:
Dear Unknown Professor:

I just wanted to thank you again for a really great semester. You really helped me work hard in areas I didn't think I could and pushed me harder than I thought I could handle, but it overall seemed to pay off very well with my final grade. I learned a lot in your class this semester which I am hoping will help with my future finance classes since I am a Finance major.
He struggled all semester, and pulled off a B+ - proof that hard work pays off.

I'll take it. Now back to research.

I have two papers I'm hoping to send to the AAA (American Accounting Association) meeting (the deadline's in 2 weeks), and a third I'm hoping to send to the FMA (Financial Management Association) meeting (the deadline's in about 3 1/2 weeks). So, I have three papers to work on (one's being sent to both conferences).

Of course, I still have to buy something shiny for the Unknown Wife.

Monday, 20 December 2010

Thanks!!!

I began writing this blog almost a year ago. At the time, I seriously wondered whether anyone would ever read it since I had no easy way to get the word out. I decided to write the blog, though, because I thought doing so would force me to think more deeply about my own teaching. In that way, it has been a huge success. I am a better teacher today, I firmly believe, than I was at this time last year because I have taken time to reflect on almost every aspect of my work.

However, I was still faced with the question: does anyone “out there” actually read these thoughts? So, yesterday, I finally broke down and looked at the statistics. Since I wrote the first blog entry last January, there have been 27,398 page views. Wow, that is roughly 27,000 more than I expected. It turns out to be 75 page views seven days per week for a solid year. That is a lot of teachers and a lot of education.

I just wanted to say THANKS!! This could not possibly have happened without a lot of great people helping to spread the word. I cannot fully express my appreciation to everyone who has taken the time to tell someone else about this blog.

I have long been convinced that virtually all teachers want to be better teachers. Often, unfortunately, it is hard to get practical advice. I sincerely hope that this blog has helped some folks become a tiny bit better in the classroom. If so, then my time has been well spent. If we all work to make tiny improvements in our teaching, the whole world will improve in an amazingly short period of time.
**

At the end of a semester, a few of my students will often write to talk about the goods and the bads of the semester. A student wrote me 3-4 days ago and made a comment that I found interesting. “I want to let you know that one of the greatest parts of the class is that you allowed us to fail initially, but then helped us to see our error(s) and eventually we learned to succeed on our own.”

Probably the essential question in teaching (at least to me) is “how do you get away from simply conveying information and requiring memorization so you can move to the more difficult task of creating understanding and critical thinking?” Can you think of a more important question for education as we enter 2011? It is not 1954—we cannot afford an education process that continues to resemble 1954.

I find that my students are hungry for the right answer so they can copy it down – ready for later memorization. They can get very frustrated at me when (during our conversations) I respond to them “Nope, that answer is wrong; try again and give me a better answer.” In fact, I like asking questions where I’m not sure what the right answer really is. I want them to convince me that they have figured out the right answer and can stand behind it.

Virtually every History student knows that the Emancipation Proclamation was issued by Abraham Lincoln on January 1, 1863. Why wasn’t it issued on the first day he took office? Why wasn’t it issued on the first day of the Civil War? Why wasn’t it issued on the day that Lee surrendered? To me, those are fascinating questions. Give me a good answer that makes sense. Don’t just tell me what is on the top of your head so I won’t fuss at you. That is not thinking—that is just guessing.

If you have read this blog for long, you know that I don’t believe in trying to surprise my students. I am not sure that anything is served by that. So, 48 hours in advance, I might have given my students the following “conversation starter:” “I believe that the Emancipation Proclamation was one of the key factors in US history. Why did President Lincoln issue the Emancipation Proclamation on January 1, 1863?”

After about a week in class, my students would come to understand that I wasn’t going to ask them that question – they would have already made a list of five bullet points to read to me as an answer. We would just be back to conveying information, this time from student to teacher rather than the other way around. Booorrrring.

I’d prefer to start off the conversation with a related question like “when do you think it first occurred to Abraham Lincoln that he should issue the Emancipation Proclamation? Do you think he woke up one morning in 1855 and said ‘you know, if I ever become president, I think I will free the slaves?’ Where do you think this idea came from?”

I don’t have a good answer for this question but I do think the conversation can help the students (and teacher) understand the man, the times, and the Emancipation Proclamation.

Education can be so much fun if you get away from the obsession of “knowing” a right answer. Let the students stumble around for awhile and you’ll be delighted to discover that, with a little guidance, they can develop enough understanding to think their way to their own reasonable answer.

And, after graduation, isn't that what they are going to have to do in the real world?

Dilbert on "Meeting Pirates"

I wonder if Scott Adams has been spying on our faculty meetings?
Dilbert.com

Sunday, 19 December 2010

The Manslator

Here are two facts :
  1. The Unknown Wife and I have somehow managed to stay married for over 20 years.
  2. I recently took an online test for empathy and scored just above folks with Aspergers and high-functioning autistics.
How can I explain these two facts? It's simply that I married well above my station to a person who's far, far nicer than me.

Having said that, I could have used one of these - I particularly like the caveman voice - kinda fits how I feel in the morning.

HT: The Ace of Spades

Thursday, 16 December 2010

Congratulations!!

Yesterday, I carried out my very favorite activity of every semester. I sent an individual email to each student who made an A in my class this semester just to congratulate them. As teachers, we push our students unmercifully to succeed. We are after them constantly to do the work necessary to make an A. We push and prod them to give us an excellent effort. We complain when they disappoint us.

Therefore, I think those students who take up our challenge and do the work we ask of them deserve our acknowledgement. I believe they should get more than an anonymous A on a grade report. So, before I turn my grades in to the school, I send each A student an email so they know that I did notice.

In my classes this semester, 14 percent of the students in my introductory class (a relatively low number for me) made an A and 35 percent of the students in my intermediate class (an all-time high) made an A. I sent each of these students an email something like the following:


Wednesday afternoon

To: Mr. X

From: JH

I am very pleased to let you know that I have finished grading the final exams in Accounting 201 (Financial Accounting) and you earned the grade of A for this semester. Only 14 percent of the students in this course managed to earn an A and you were one of those. Congratulations!!! Your work for the semester was outstanding. I am pleased for you and believe that you should be very proud of yourself. Although a lot of people have taken Financial Accounting with me over the past 40 years, very few of them have been able to say that they made an A. You now belong to a relatively exclusive club. To do this well in Financial Accounting requires a lot of hard work and (hopefully) some deep thought. Your work was excellent and it was, very much, a pleasure to have the opportunity to work with you. I really hope you will carry this success with you into the spring semester. Nothing pleases me more than to hear that my former students are knocking the top off of their subsequent courses. You can do it – you are very bright and hard working. So, make it happen.

As I am sure you know, for about the last 12-15 years, I have asked every student who has made an A in one of my courses to write a short essay (a paragraph or two will be sufficient) to explain how you managed to make that grade when so many (equally bright folks) failed to do consistently excellent work this semester. I hope you will write this up and forward that essay to me in the next few days. Think about it a little bit. What should those other students have done differently? As you know, I will share your thoughts with the students for next semester in the hopes that they can replicate your success. What can you tell a rising 201 student to explain to them what I want? I am always frustrated that some students simply never catch on to what I am looking for. I honestly believe that everyone can make an A in 201 if they will do the work in the proper fashion. I need for you to explain what that proper fashion is. All I ask is that you be totally honest. The grade is already in – so, tell them the truth.

Have a great holiday. Enjoy your vacation – you have earned it. If I can ever be of assistance, please just let me know.

Thursday, 9 December 2010

I need Some Advice From My Readers - Excel Topics For Class

I'm teaching the investments class this spring, and it's been a couple of years. I'm trying to add a few things to the class, and have pestered my colleagues at Unknown University (and other schools) for some advice. So, I thought I'd use y'all likewise to see what suggestions you might have.

Here's my goal: I want to embed more Excel assignments in my class, since Finance Majors can't have too much Excel exposure. So, I'm trying to add some assignments that expose them to the following concepts (note- those in bold type have been suggested by readers)
  • Data Tables
  • Pivot Tables & Pivot Charts
  • IF (and Nested IF) statements
  • Macros and basic VBA
  • Solver and Goal Seek
  • Regression Analysis
  • Conditional Formatting
  • Using some of the auditing tools
  • Keyboard shortcuts
  • VLOOKUP/INDEX/MATCH
My goal is to get them comfortable with at least some concepts that can be used to signal to potential employers that they're at least a cut above the typical student. This way, they can have samples of the output they've produced and (if they're smart) copies of the underlying spreadsheets on their flash drive and laptops in their back pockets for interviews. It's no magic bullet, but I figure it can;t hurt.

Some of the projects they might be doing could include (note: I might not get to all of this, but it's good to have aspirations):
  • Building pro-forma statement-driven cash flow valuation models
  • Profiling industry ratios (taken from Compustat) using Pivot Tables
  • Calculating "justified" price multiples using regressions of multiples on industry fundamentals
  • Estimating betas
  • Calculating a variance-covariance matrix
  • Calculating portfolio weights that yield efficient frontiers using solver (and possibly, some basic VBA)
  • Calculating tracking error
  • Performance attribution
  • Technical analysis/indicators (i.e. moving averages, etc...)
  • Describing statistical properties (skewness, kurtosis, etc...) of return distributions
  • An event study
I've lifted some ideas from Benninga's Financial Modeling book, and also read Craig Holden's text.

So, here's what I'm looking for - can you suggest any additions to the list as far as Excel topics they should cover or projects I can assign? We cover only the equity side of things (no derivatives or fixed income, since they get those in other classes).

Please sound off in the comments.

Tuesday, 7 December 2010

My Students Are a Mixed Bag

It's that time of year again - the end of the semester. This time around, I'm teaching at both ends of the spectrum - the required undergraduate core class and the student-managed portfolio class.

And it looks like my students performed at both ends of the spectrum, too.

Running the student-managed fund class is always a great gig - it's small (about 10-12) and invariably composed of the best students in the college. They just gave their end-of-the semester presentation to a group of about 30 attendees (including a number of portfolio managers, analysts, and assorted other finance professionals). They probably did as good a job as any group I've seen to date. They were relaxed, professional, very competent, and they looked good in their suits and ties. They did a great job of explaining how they managed the fund and more importantly, why. There were a couple of attendees that made them peel back the curtain on what assumptions they used in their discounted cash flow analyses, and they acquitted themselves very well. In fact, there's a good possibility that one of them may landed an interview with a mutual fund company as a result of his performance (he got pushed pretty hard by a couple of the attendees, and did a great job defending himself). So, all in all, it was an excellent showing.

On the other hand (and after all, I've had a lot of econ training, so there's always another hand), my core finance class didn't do nearly as well on this last exam as they did on the second one. Some of it is probably the material (their math skills are more than a bit lacking, and this section requires more mathematical reasoning), but a lot of it seems like they simply hadn't done the necessary work solving problems. Still, there were some pretty good performances. Overall, it's a bit depressing, but it's given me some food for thought as to how I can approach the material in this section differently the next time I teach it.

Ah well - you win some and you lose some.

Teh Doggehs Rule

So far, I've resisted posting pictures of cute kittens on the blog (mostly because the things I'm likely to post will get me a call from PETA). But I do like dogs - in fact, we had a Boykin Spaniel for years named Merlin (a.k.a. "Butthead"). So, in honor of him, here's a video

HT: Ace of Spades

Saturday, 4 December 2010

Dax Locke And an Early Christmas

I was listening to the radio on the way home from my office the other day and heard the story of Dax Locke, a 13 month-old child diagnosed with terminal Leukemia. Since it was unlikely he'd make it to Christmas (it was in early autumn), his family started putting up the tree and the lights. Then the neighbors followed suit, and then the whole town.

For obvious reasons, it stuck with me. So, I tracked it down and found this YouTube video by Matthew West. Caution - it will most likely bring tears to your eyes, so be warned.



And if you're looking for a place to contribute to, this would be a good one. So open your checkbooks and spread a little cheer.

Thursday, 2 December 2010

Europa Endlos

One exercise that I used to do quite often, back in the days when I was a "professional" trader (that is to say, a trader with other people's money), was to make up improbable scenarios and justify / explain them.

Part of my motivation for this exercise was to be intentionally and deliberately contrarian. Saying No when the market says Yes is a long-term profitable strategy in itself, irrespective of the underlying fundamentals. (Some day I will write a longer post on why this should be the case).

Another part of my motivation was to have fun. There's nothing like donning a tin-foil hat to enliven a drab afternoon trading session.

But the most important part of my motivation was a serious one: to avoid confirmation bias. Quoting Wikipedia: "Confirmation bias is the tendency for people to favor information that confirms their preconceptions or hypotheses, regardless of whether the information is true."

This was something I had to constantly guard against in my career as a trader. Given the sheer volume of market data that I was constantly barraged by, and the necessity of somehow filtering that data, it was essential to make sure that my filters were unbiased. Considering alternative points of view not tainted by a priori estimates of "probability" was an excellent way of maintaining filter neutrality. Hence the contrarian game.

Here's an example of how to play. Right now the newspapers are full of the Irish bailout and the fear of contagion in other Eurozone economies ("PIIGS-hooey"). You might think that this somewhat fraught state of affairs would lead to a decline in the Euro, and indeed that is the consensus opinion. So your task is to be contrarian and invent a rationale for going long the Euro, despite (or perhaps because of) these macro currents.

And here's such a rationale. Assume the crisis gets worse. Assume contagion in the form of inexorably rising bond yields spreads to Portugal, then Spain, then Italy. The worse the crisis gets, the less possible it is for the centre to bail out the periphery. The only option left is default, and possibly exit. But what happens after that? As successive dominoes fall, the common currency zone shrinks until only healthy core countries (read: Germany) remain. The Euro ends up looking a lot like the old Deutsche Mark. Freed of all its baggage, it begins to rally. Voila!

Note that I don't actually believe this scenario will eventuate, at least not with a high probability and not in the near term. But at the very least, thinking through a scenario like this (replete with path-dependency and feedback effects) makes it difficult to simple say "Europe in crisis, Euro goes down" and use that as a guide to trading. Life is more complicated than that.

Month-End Recap, Nov 2010

The second installment of a new feature: a very quick summary of my investment positions, to be published monthly. This is not investment advice and should not be construed as such.

I am currently 90% invested, as follows:

57% Agricultural commodities
10% Other commodities
16% Emerging market equities
07% Miscellaneous equities
10% Cash

My largest position continues to be in soybeans, followed by sugar.

A rather boring month for my portfolio, to be honest. PL-wise I was down a very small amount, small enough to be considered mere noise in the context of my YTD returns. (Many a trader has said these words and lived to regret them, ha ha).

I usually try to be between 85% and 105% invested, so I am below my average exposure here. Indeed, as planned and previously advertised, I reduced my net exposure in November, from 93% last month to 90% today, by selling some commodities and some Indian stocks. It's not that I'm particularly bearish or anything; it's just that I have no strong convictions at the moment and so would like to wait and see what develops while keeping some powder dry.

Wednesday, 1 December 2010

Paragraphs Worth Reading

Why write long blog posts explicating your point of view, when others have done your work for you (and much more eloquently I might add)?

Here's the always-excellent Interfluidity on "hangover theory":

Proponents do claim that poverty in the sense of diminished consumption, painful financial losses, and “creative destruction” of cherished institutions usually attend the adjustment process, and they recognize all this is usually associated with unemployment. But hangover theorists argue that adjustment is worth doing despite the cost in employment, consumption, and disruption, not because those costs are good things. When they do argue that “pain is good”, it is along very conventional lines of moral hazard. It is not that the macroeconomy “deserves” to suffer, but that foolish lenders and borrowers, specific misallocators of capital and overconsumers, ought to suffer disproportionately pour encourager les autres. Hangover theorists, like smart Keynesians, promote policies intended to shorten depressions when they occur. Austrians ask that bad claims quickly be recognized and devalued, so that economic activity can go forward without a debt overhang. Keynesians urge government action that conjures financial income from thin air, risking devaluation of old claims by inflation. There are different tradeoffs between moral hazard, sharp incentives, and political feasibility among the two approaches, but both seek to repair balance sheets and create a clean slate going forward.

And here's commenter sardonic_sob on the same topic:

I understand completely, and furthermore agree completely, with the idea that if we wiped out all the bad debt etc tomorrow but everybody just got up and went to work and nobody panicked we would have no problem making enough food and housing and cars and big-screen TV’s and so forth for everybody. The problem is that we will not DO that. We will continue to issue massive amounts of real or implied debt to try to keep anybody from losing and the net result is that the malinvestments will not be purged until they grow so large that they just can’t keep the plates spinning anymore. Then everybody WILL panic and nobody will get up and go to work because that’s just how human beings are.

And lurking ahead is the spectre of Peak Commodities, which nobody is worried about because we can just tweak our economy like a big machine, and if prices get too high we can just pull on the pullem and push on the pushem and fix it, right? However, our system requires massive amounts of low-cost energy and materials to fuel growth. (Without growth debt service becomes impossible and see prior paragraph.) You can’t print oil, coal, rare earths, or potassium. Don’t get me wrong: while I find the Olduvai Theory eerily compelling I firmly believe that we have the technical capability to get ourselves out of this mess. But we aren’t using it because we are devoting so much energy to keeping everything the way it is. This will work until it doesn’t, and we don’t have a Plan B. (That last sentence is pretty much my entire objection to economic manipulation in a nutshell.)

Both posts are well worth reading in entirety.