Saturday, February 26, 2011

A change in view

I saw the sunrise this morning. Well, not really. There was cloud cover over the Atlantic and that blocked the sun. But I did see the sky lighten as I drove eastward on I-595, from Davie where my cousin lives to the Fort Lauderdale Airport. I'm headed home after a brief trip to see my mom in Boca and do her taxes, then dinner and an overnight stay with my cousin before arising early to get to the airport.

The last time I did this trip I missed the flight. Ninety minutes should be enough. But it wasn't if you check a bag. There was a line for that and another one, seemingly longer, through security. This time around I had my boarding pass already and I traveled light - an old WebCT Conference backpack for the few clothes I packed and my computer bag. It was a half hour through security, but I got here early, waking well before my alarm went off. The Fort Lauderdale airport has free wireless, so I'm taking advantage.

When I got to Florida Thursday evening my mind was on my behavioral econ class. Driving north on I-95 there was the HOV lane. The day before we had done Sam Peltzman's famous paper on auto safety, which showed that safety regulation didn't reduce fatalities due to car accidents. I retold a story Peltzman had told at a workshop on Campus I attended sometime back in the 1980s. When those HOV lanes first opened up on I-95 it created a market for inflatable dummies, so people could bypass the requirement of having multiple passengers in the car. Thursday evening I didn't get into the HOV lane, it was only me, though it was a little after 6 PM and the regulated time ended at 6. There was still a fair amount of traffic, and the HOV lane wasn't moving faster than the other lanes.

I no longer have a dial up connection and my mom's condo doesn't have Internet, so my plan was to go over to her place, see her for just a bit, pick up her various tax documents, and then head back to the hotel so I could do her taxes at the hotel the following morning before visiting with her. I did that. I didn't plan this trip too far in advance. Flying out of Champaign would have been quite pricey. So I traveled out of Indy and with that had to connect in Atlanta. The total trip was a bit over 10 hours. So I was very tired when I arrived and went to bed before 10 PM.

But the trip itself, especially after getting through security at the Indy airport, proved a way for me to unwind and refocus my thinking. I brought along a couple of older New Yorker issues for my reading in flight and on the way down went through most of the January 10th issue. It was delightful and a complete diversion from the thoughts that occupy my current routine. There was a piece about the banana blight in Australia and Asia and what is being done via cross breeding to prevent it from eventually ruining the banana crops in Latin America. There was another piece about the toppling of the Sadam statue in Iraq in 2003 and how the media created an event that wasn't. The Iraqis had not embraced the U.S invasion but TV made it seem otherwise. And there was a piece about psychoanalysis in China, much of it conducted by American psychiatrists online via Skype. None of these were things I had been thinking about before. Each was fascinating. And I found myself relaxing mentally, getting more enjoyment although I'm invariably physically cramped on a plane trip and don't like flying for that reason. As an escape to encourage reading, however, flying is ideal. What else is there to do?

I began to reflect on how much anger there seems to be in society today and start to wonder if that is because people don't get out of their own mental routines. Before taking this trip I had much anger about my teaching, some of which I articulated here. Adding to the list of issues there, much of the communications I'm having with students these days is their wanting extensions on deadlines, which they missed for xyz reasons. I had hoped my novel approach in each class would produce an environment where these traditional issues would melt away and the kids would engage and open up as learners. For example, I had hoped that students would comment on the blog posts of students on other teams. So far, that is not happening at all. It's the system that has been winning, not my method.

But if I cared to face facts, much of my anger is toward myself, a self-loathing that belies a lack of heartiness about the teaching. Last fall when I had no work obligations whatsoever, except for preparing for this spring, I could have done a lot more than I actually did. I pursued this preparation at a leisurely pace, lacking intensity in my efforts, waiting for the spirit to move me. So a lot of the construction of content is still undone and I'm making a substantial amount of content while I teach, something the pros warn shouldn't be done because the instructor will get overwhelmed. That's where I am now, somewhat overwhelmed by the task ahead, motivated more by guilt that I must complete things than a sense that what I'm doing will produce a bang in the learning. So I'm angry at my idealism based on an ignorant conception of what is happening with the students and with the fallacy of thinking that constructing the content can happen quickly and with little effort. I'm also angry that much of what I'm creating is too flat, lacking the depth and subtlety that I value. The rationalization is, who has time for that? But if you end up spending the bulk of your time on things you don't highly value, what do you have left but anger?

Then en route and later in the evening I get a couple of emails. One is from a student in the intermediate micro class, making an observation that tied into something we talked about regarding intellectual property. It was the type of extension on our discussion that I had hoped to see in their blogging. Here he was doing it not for credit but for the hell of it and because he saw something and he wanted me to share in his observation. It gave me a warm feeling reading it. The other was from a student in one of the former Soviet Republics who had seen one of my Excel videos on YouTube and wanted to get access to the Excel file. He too was just doing it for the learning and I appreciated his making the connection though he obviously wasn't one of my students.

And I came to think that out of angry and ignorant motivations one looks for the big bang in outcomes, setting ourselves up for an emotional fall, but out of a more gentle and patient touch we might begin to see some consequences from our own efforts as teachers, though what we will see will come in drips and drabs.

I'm writing the last bit of this post the next day, back at home. I don't know whether I can maintain intensity in my own effort coupled with a patient and gentle view of how the students learn. But it does seem the right sort of ideal to encourage from ourselves, even as we will fall short of it most of the time. And it is obvious to me, though again whether I follow through remains an issue, that leisurely diversions need to be rich enough to sustain us and not let us fall into ruts of our own making. Balance can be restored that way. We need balance, not big bangs.

Tuesday, February 15, 2011

A boon for U.S. agriculture?

We used to teach about "cobweb dynamics." I wonder if that is at root here, where the price jumps will trigger a substantial increase in supply, which will lower price, and then another demand spike, etc. Or will commodity prices trend upwards over the next several years? I'm not one to forecast these things, but if we are a net exporter in many of these areas should it be a trend we should be happy about that.

Monday, February 14, 2011

I found this quite surprising

That Seattle is experiencing a housing slump seems to imply that no place is immune.

Sunday, February 13, 2011

Frank Rich says The Fix is still in

I hadn't been following the lawsuits to recover some of the funds Madoff appropriated, so I found this piece interesting.

When We Are Not Entitled Part 2

Sometimes an idea gets lodged in your head and try as you might you can't dislodge it. For the last day or two I've been toying with the thought that the Republicans in Congress are like the Romans at Masada, marching ever forward with certitude, unaware of the tragedy that awaits them, one of their own making. Cutting all the good government in the belief we can't afford it only to find the budget is still way out of wack, forcing the baby boomers who are certainly not known for their noble deeds to take the only desperate action available, a mass suicide that obliterates an enormous chunk of health care spending and in one fell swoop restores fiscal balance.

Isn't there a less dramatic way out of this mess?

Economists know that GDP is a very imperfect measure of welfare. It only measures market transactions and has nothing to say about work done where no money changes hands. Hire somebody to mow your lawn and (in theory at least) that activity becomes part of GDP. Mow your lawn yourself and it does not. And the same goes for childcare, housekeeping, and a host of other activities. There is also the issue that some market transactions are there not to improve welfare but rather to make sure bad things don't happen. If there was no such thing as a computer virus, we wouldn't need anti-virus software. GDP would be lower then, but we would be no worse off.

Where does health care spending on the elderly fit in?

If only that question had a ready answer. Atul Gawande is thoughtful on these issues. This piece about when the end is near serves as an example. But what about before that? Thinking that through is much harder.

Last night I watched Harry and Tonto, a movie from 1974 where Art Carney won the Academy Award for Best Actor. I had started watching it a couple of weeks earlier, but I realized it would get to me so I shut it off before getting too far into the story. Last night I was ready for the rest of the film. Carney was my age when he made that movie, but he is very convincing as somebody 20 years older, a widower who has lost his apartment because they tore down the building. He is having a second coming of age doing a drive trip cross country, rediscovering his memories, visiting his adult children whom he loves but can't tolerate for too long a period of time, unsure what's in store afterward. He has his marbles and is in reasonably good health. But he is outliving his friends and in a poignant scene dances with a girlfriend from before he was married, who is now in an old age home. She is on the way out with signs of dementia. He will not see her again. Tonto is his pet cat and constant companion. Near the end of the film Tonto dies. Can Harry start a new life a this point? The film doesn't tell us.

You feel the system should be for Harry. Several times in the film he asks about his checks, which must refer to his pension as a NYC teacher and Social Security. So that part works. But what of when his health starts to fail? On an emotional level, it is much harder to understand that obligation.

Friday, February 11, 2011

When We Are Not Entitled

David Brooks had what I regarded as a thoughtful column today. He writes convincingly about the Federal budget cutting where the Republicans in the House seem to be going after everything but Social Security and Medicare (and Defense too, though that is a different animal). This approach simply won't do the job of bringing the budget into balance as a long term proposition.

I did a Google search on "Third Rail of Politics" and found this piece from NPR. Apart from the remark that thinking FDR was a good President makes you left of center (it seems to me it makes you smack in the middle but that is not my point here) I thought it a good piece. People who have paid into the Social Security trust fund their entire lives feel they completely deserve the benefits that have been promised them, regardless of the fact that Social Security is a pay as you go system and the capacity of the system to deliver on those promises is diminishing rapidly as baby boomers near retirement, where overall there will be many more retires and many fewer workers paying into the system on a relative basis. There was a good West Wing Episode about this where it created the impression that if there were just a few Democratic and Republican members of Congress who were willing to fall on their collective swords, the issue could be resolved and afterward they'd become heroes for having done so. That episode aired well before the financial crisis. Now the situation is more dire, but it doesn't appear that the there will be anyone riding a white horse to come to the rescue.

I've been thinking about these issues a lot, as a new retiree with main source of income from the State University Retirement System, which is fiscally a lot sicker than Social Security. By law I'm entitled to my annuity. But by anybody's reckoning the system is bankrupt. Something's got to give.

And I've been doing some soul searching on what that is or should be. There is a fundamental national problem that is still not getting nearly enough discussion - the personal savings rate is way to low. We need as a society to be saving more. People who are envisioning alternatives need to think through how a system with a reasonable personal savings rate would work. Would people save mainly through where they work - via company pension plans? In the 1980s and 1990s, there were many examples of hostile takeovers where the raiders would gut these pension plans and then drive the company into bankruptcy. If you look at the the system as a whole rather than the individual opportunism of some players, that system doesn't work. More recently we've seen people lose as much as 50% of the value in their 401K plans, after the stock market tumbled, another huge disincentive. If people are going to save for their retirement they need assurance that the value will be there when they do retire. What type of arrangement can really provide this? The Republicans remind us fairly regularly that if the government bails out failure that creates a huge moral hazard for the investors. That is certainly true. But if you send people to the market for their savings and they get wiped out through no fault of their own, what then?

I am in a defined benefit pension plan where the benefits are tied to the salaries from the last four years of employment and where there was gaming of the system due in large part to a pratice that in my opinion should have ended a long time ago. Faculty are paid on a 9 month salary, which is the number that is quoted, but where they can earn up to two ninths more (and sometimes three ninths more) via getting paid in the summer from a research grant, summer teaching, or an administrative stipend. Some faculty do this sort of thing throughout their careers, but others only do it near retirement to boost their annuity. Though its all part of the State of Illinois, the University and Retirement System are separate entities. So that one would burden the other in a way that might not be healthy overall doesn't seem to have ever come to the fore to inhibit the gaming. Instead, they've phased out the defined benefit form of pensions, which given my comments in the previous paragraph doesn't seem optimal to me either.

My view is that there needs to be a two piece system - defined benefit up to a cap, what that should be I don't know but it probably needs to be reasonably modest, and defined contribution beyond that for those who choose to save more than required. Then money that is in pension funds needs to be immune from corporate raiding.

There is another aspect of this entirely, which is that more and more seniors were probably knowledge workers and are likely in reasonably good health even after they are retired. These people are potentially quite productive but the system doesn't know how to utilize them and hasn't found a way they can contribute. At present, with so much slack in the labor market, nobody really wants to think about finding interesting ways to employ seniors. But as a long term proposition simply having the human resource go idle is incredibly wasteful. So a way to tie pension payment to some form of useful service provision make sense to me. I don't see anyone talking about things this way, which means it probably is politically impossible. But that doesn't mean it isn't right. There is a tendency when talking about government programs to just focus on the program. We'll never get to a reasonable solution that way. We've got to see the whole picture and try to address the issues that way.

Wednesday, February 09, 2011

Star-Centric Topology and Black Holes

We are now sufficiently far into the spring semester that the administrative setup details are "almost" behind me so I can begin to see where the classes are going and what the main issues are. I had thought that one of the main things I would be comparing is use of an LMS (Moodle) versus use of Blog for the course Web site. I'm doing the former in the intermediate microeconomics site and the latter in the behavioral economics site. It turns out that is less of a big deal than I thought, though there are some issues that I will comment about near the end.

My current biggest issue is this. I have the students blogging in teams in each class. I read the posts and write a response. The posts are due a few days before the class session where the topic is discussed. We have class on Monday and Wednesday in both courses and I teach them back to back. In the behavioral class they are blogging before each session. In the intermediate class they are blogging before the Wednesday session only. They have different homework due before the Monday session. In the ideal, I can extract from the student posts enough interesting commentary that it becomes the substance of the class discussion or at the least a way to initiate the class discussion. Last week with the bad weather when we did an online optional session, I did that for the intermediate class. Pedagogically it seems to me the right thing to do. But, given what we are reading, I'm leaving the blog topic somewhat open ended for the students. Some who are just keeping their heads above water are posting mainly summary, which leaves me very little to extract. Others are giving some interesting flavor but I'm not sure whether that should become the basis of discussion with the entire class.

The related point is that I need some time to reflect on this and make a judgment about it but I don't have the time. This morning I was still making comments on posts in the behavioral class a couple of hours before the class session and I hadn't had my shower yet to get ready for class. So now what enters into the equation is a need to plan the session with little incremental effort. I can do that if I think through the issues and then spend most of the time talking in class. Ergo...

... the title of this post. Star Centric Topology is terminology I learned from Jack Wilson around the time Carol Twigg was getting the Pew Program on Course Redesign underway. It was a disparaging description of communication in a class - mainly student to instructor and much less student to student. The instructor as the central node would inevitably clog which would end up reducing communication overall. Efficient redesign would promote more student-student communication placing less burden on the instructor channel encouraging both more communication overall and better quality communication so that more of the student formative thinking comes to the fore. Not everyone holds to this view. Some really do prefer straight lecture with not that much in the way of student generated messaging. The Econ department here may be a place where the traditional view holds sway. More on that below. Before getting to that, I'd like to note the reason for the rest of my title, the Black Holes part. There are a variety of other factors which are pulling me to take a star-centric approach. Some of these I anticipated before the semester started. Others caught me by surprise. I will list these below with some annotation on each.

The Physical Setup Of The Classrooms - I'm teaching in rooms that have auditorium-style seating meaning the seats are bolted down and in rows. If there is a vacant seat in the middle of a row a late arriving student will probably need students sitting near the end to stand up in order to get through. This is ok for lecture but it really inhibits having group work done in the classroom. A setup with tables and chairs a la a coffee house is much more conducive for group work. But it probably means getting fewer seats overall into the classroom. I think this is a big deal issue. One that should have some policy discussion behind it. In new buildings we seem to go for the table and chairs version. Why do we cling to the old approach with the seating in older building after we have renovated the classrooms there?

In any event, to get group meetings, at least so far, they have to do that outside the class meeting time at a different location. That time is not scheduled so while some teams are doing it others are not. It is also the case that when I attempt Socratic dialog in ensemble mode, most of the students can't see and possibly can't hear the student who is responding to my question so I'm getting no cascade where one student says something that follows from what another student has said. They are all responding to me. This is one I knew coming in and though I feared it, I thought we'd be able to work around it. But so far, we really haven't.

The Building I'm Teaching In Is Under Construction - Often during the class sessions there is quite loud noise that is being generated by work done very close to these classrooms. This building is where the Econ department faculty have their offices. Generally faculty prefer to teach close to where there office is. I also suppose that the size of classroom (capacity about 65 students) is scarce on campus, particularly at the times I'm teaching. So somebody must have decided it is better to hold class during the construction than to schedule the classes in a different building or at times when the construction work is not happening. The consequence is that when class is in session it is very disconcerting to hear the noise and it becomes harder to concentrate. Further, by the time the second class is in swing I feel my voice being stretched. This one is non-recurrent, at least for this specific building, but conceivably could happen elsewhere on campus as those buildings get renovated. This one I didn't anticipate and all I can say about it is that it lessens my enthusiasm for the teaching. I can only imagine what it does for the students.

There Seems To Be Quite a Large Number Of Asian Students - As a general rule I want to teach any and all students who are interested in the subject and who are willing to do the work. I also understand and agree with the campus strategy to expand undergraduate enrollments with students from out of state who are willing to pay the rather large tuition differential. The world economy being what it is now and the reputation of the University of Illinois mattering for this purpose, a big chunk of these students will come from Asia. But with that there are two caveats, one obvious, the other less so. The obvious one is language. I have students in class either responding to my queries or asking their own questions where I can't make good sense of what they are saying. I don't really know how to address this so rather than solve the problem I avoid it by monopolizing the session. The other issue is that in what I have the students read, either stuff I've written or selections I've chosen from popular outlets, some of the content was chosen because at least part of the ideas should be intellectually accessible and therefore welcoming. For example we read Stephen Jay Gould's essay The Streak of Streaks in the behavioral class. But for it to be accessible the person should know something about baseball and have some fondness for it. Without that background knowledge it is a much less obvious candidate as a choice for a reading. The consequence is that the material actually is hard to penetrate by some of the students. This one I didn't anticipate as well. If it remains an ongoing issue, I will have to reselect at least some of the readings accordingly.

There Is A Wide Variation In Student Prior Preparation - This is always the case and so it really shouldn't be on this list. Teachers need to adjust to it. It is here, however, because I haven't taught these sort of classes for 10 years or more so don't have a good sense of where the median is and that makes it quite hard for me to get a sense of whether the level and degree of rigor is appropriate or not. As with the language and culture issues part of the Black Hole effect is not wanting to find out that these things need to be reset in some ways, being unsure how that might be done on the fly. Dominating the conversation is a way to maintain my ignorance. I've got some odd inner dynamic in me that if I know what is going on and if things are working less than well, then I need to try and fix them. But if I don't know, then I'm not so obligated. I'm not sure I can explain it better than that other than to say that if I felt a little less pressed for time, I might be more open in this other dimension.

Now let me turn to the technology. In the intermediate class I've got homework designed in Excel. The first two problem sets have macros and are in one of those formats that are PC only. I made a big deal of this the first day of class. But I had students add after the first day so they didn't get that message as strongly. I also have the message in my syllabus, but we know there's no guarantee students will read those. So this created some issue. Then a handful of students working on a PC also had problems with one particular macro. I have no clue why. The macros really make the functionality of these exercises better, but maybe I need to rewrite them to get rid of the macros. I will have to think that through later.

The first two problem sets if students did them right I made a worksheet that had all the students responses that I could eyeball to see if they had got all the questions right (which was the expectation, the grade being for participation that they had done the whole workbook). They would save the submission worksheet as a CSV file and submit it in Moodle. I thought this worked remarkably well. There was an unanticipated benefit. Some students inadvertently skipped a worksheet and submitted the homework before they should have. This was quite easy to track. I would then email the students and ask them to resubmit. I believe it conveyed an unspoken message that I care they do the work and I don't want to punish them for mistakes that are inadvertent. It was also quite easy to do this given how Moodle is set up. So this part I liked.

For the blogging part, I like to have each team blog as an rss feed in Google Reader so I can readily see when new posts come in and by which team. Moodle does have an rss feed but as far as I could tell the way I have it set up there is only one feed for the entire class, so I can't track which team is posting that way. Posterous for the students blogs is ok, but I hadn't kept up with changes at Posterous and now they have a listserv function in addition to a blogging function. This post describes the issue. The listserv function doesn't allow comments from non-members. So we needed some teams to abandon that and make a new site. It slowed us down a bit but otherwise wasn't that big a deal. One other thing, I use Google Calendar for the behavioral class and have the upcoming items in the sidebar of the main class blog. This would work remarkably well except that Google calendar doesn't allow linking to other Web pages from calendar items. The links I'd like to have there would be to the readings. I've tagged the readings in Delicious, but they are arrayed chronologically by when I tagged them, not by when we will read them, so the students said that it is a little hard to find the readings that way. I'm therefore making posts in the main blog with those links. It's ok for upcoming stuff, but if they every want to go back to find things, it won't be that easy.

On the big issue deal of open or closed blogging - does it affect the quality of the posts and the sense of community in the class, we're still too early in the semester to tell. The demographics in the classes are otherwise different (Econ majors in the behavioral class and mainly Business students in the Intermediate class where) where even if I observe differences on quality or community I would not be able to properly identify the cause. Nonetheless I am interested in seeing what emerges in this vein and will post something just on that topic when I've got enough information to make some early conclusions.

Tuesday, February 08, 2011

Monetary Tightening in China

It is an interesting question why this is done as a series of small steps to happen over the next years or so, with some steps already taken, rather than a larger initial increase in rates followed by some smaller recalibration afterward.

I believe the inflation in certain metals and food will continue for the time being and I expect oil prices to rise, but do note I'm not paid to make predictions which is an indicator of what those predictions are worth.

Friday, February 04, 2011


"What, never?"
"No, never!
"What, never?
"Well, hardly ever!
From Pinafore by Gilbert and Sullivan

This semester I'm teaching a Behavioral Economics course for undergrads. Last week we were to read one of my all time favorite essays, The Streak of Streaks, by Stephen Jay Gould. When I started to blog back in 2005, I used Gould as a role model for my writing, with this particular essay the pièce de résistance. It seemed a great mixture of the personal narrative with themes of scientific importance. In this case the latter are about rare and not so rare events and how we humans (mis)interpret the cause. The underlying science questions are these: Do players on occasion get on a "hot streak" in sports or do we fans attribute that to the players with no scientific basis to back up the attribution?

Given the average performance of players, it turns out the length of the streak matters a great deal in making this determination. Shorter streaks are perfectly well explained by pure chance. With flips of a coin, getting 10 heads in a row is certainly possible. The probability of it is a little less than one in a thousand or, turned around, with a 1000 flips it's not unreasonable to get a streak of 10 heads in a row. Now here's the thing about longer streaks. The probability of getting 20 heads in a row with coin flipping is not one in 2000, as some might believe based on the previous observation. It's more like one in a million (since a million is 1000 x 1000). Then 30 heads in a row happens one in a billion, 4o heads in a row one in a trillion, 50 heads in a row one in a quadrillion, and on and on way past our abilities to conceptualize the size of these numbers. Gorillas with typewriters might eventually reproduce Shakespeare, but in the time it is likely to take all intelligent life in the universe will have vanished.

On the science then, Gould's piece is about how for short streaks we seem to misperceive the cause and attribute the outcome not to chance but to the player getting hot while on long streaks, well most of us haven't observed them. So time and again we go back to the great DiMaggio and the summer of 1941, when America was not yet at war and baseball was sublime. (Ted Williams hit over .400 the same year, the last time it's been done.) DiMaggio's was a very long streak indeed. The odds are that he was hot.

In my teaching these days I'm trying something new - having the students write about what they read before we discuss it in class. Part of that is to give me a sense what they are thinking about the subject. In this class the students are mainly econ majors. Surely the vast majority of the students in the class have had at least one course in probability and another in statistics. But its not clear whether that training has penetrated their thinking when the subject isn't obviously about economics. Many of these kids are big baseball fans, as evidenced by their writing. Does knowing the one affect their views about the other?

One of Gould's salient points, borrowing from the research of Kahneman and Tversky, is that we humans tend to put things in categories and then reason about the categories rather than about the things themselves. With that, not never and hardly ever end up in the same box. Most of the time that's ok because for all intents and purposes it doesn't matter. Once in a while, however, it does matter and for this topic in particular an economist would view it an egregious error to combine the two. By way of their writing, some of the students are showing they are still more human than economist.

With rare events must come irony. We had a rare event here last Wednesday. The University canceled classes because of the severe weather. That was the day I was to teach the Gould paper. More afraid of the weather than most others on Campus because of a bad fall I took a few years ago, I had already decided not to hold a face to face class and made arrangements to teach the class online. By the time the Campus made its announcement I had already informed the students of my intentions. So I decided to go through with that, though make the session optional. It seemed a tactically sensible decision at the time, but what does an instructor do after the fact given that turnout for the optional session was low? Since I have high regard for the ideas in that essay, it didn't seem appropriate to just move on. But I also didn't want to simply redo what we had already done online. That wouldn't be fair to the students who did show up there.

Not being able to let go of this conundrum, I built this simulation in Excel which is explained in the video below. (It has macros which must be enabled and opened with Excel 2007 or 2010.) Several years ago I built a random walk simulation, to convince students that its very hard in looking at stock prices to parse out any deterministic pattern in the time series. This new simulation is more general than the old one in that it allows for a first order Markov process to determine the time path. The simple random walk is one case but there can be drift and there can be serial correlation. The other part which is new is that I built a way to count the length of the longest streaks in the series that results from a given simulation. So it is possible to consider the underlying Markov model and the streak it produced as a pair, which is pretty far down the path of doing the inference going from the streak to determine which model is likely to have generated it.

Some of this I will show in class on Monday. I hope also to get back on track with our original schedule. We'll see.

Thursday, February 03, 2011