BUSTED! National Association of Realtors

In the earlier post (now updated), we reported on the court decision granting $1.8B to Missouri home sellers, which may be trebled (attorney talk for "tripled"). From what I can understand, the collusion is supported by a rule mandating an "offer of compensation to a buyer’s broker."  This requirement creates an incentive for the buyer's broker to "steer" the buyer to only properties listed on the high-commission-fee multiple-listing service (MLS).

From WSJ:

Missouri home sellers challenged a Realtor rule requiring seller agents to provide a blanket offer of compensation to a buyer’s broker to list a home on the association’s affiliated MLS. These databases of homes for sale are similar to stock exchanges in that they match brokers and sellers. They are also de facto monopolies.

The plaintiffs provided compelling evidence that overall commissions have stayed at roughly 5% or 6% for decades, split evenly between the buyer and seller brokers. 

HT:  Michael H. 

[REPOST from 2011]: Economics ignorance in Tennessee

in 2008, Hurricanes Gustav and Ike reduced gasoline production in the Gulf of Mexico which reduced gasoline supply to the state of Tennessee. As would occur in any well functioning market, price went up (by about $0.85/gallon). These higher prices encouraged conservation, and ensured the availability of gasoline to those who really needed it (like someone who has to get to a hospital). In the long run, higher prices during emergencies give incentives to suppliers to alleviate future shortages.

Unfortunately, in Tennessee and 30 other states, such higher prices are also illegal: the state prosecuted 17 firms for raising price.

 It is not clear whether the suits were caused by overzealous enforcement or by the vague statute which prohibits increases “grossly in excess of a price generally charged." Any economist could build an argument that such enforcement is immoral using a consequentialist ethic, but it also seems to fail on simple deontological grounds:

It is the special claim of the virtue argument that it intends to promote a civic virtue of shared sacrifice for the common good, yet price gouging laws are destructive on both points. Because price gouging laws interfere with price signals, resources from outside of the disaster-affected area are not so readily mobilized. Rather than promoting a shared sacrifice in response to a disaster, economic damage tends to be more localized. A further result of interfering with price signals is that fewer resources get to where they are most needed, and therefore the common good is harmed rather than promoted.

The naive reaction to higher prices following an obvious supply decrease seems to represent an embarrassing failure of economics education in the state of Tennessee. Perhaps we need a "competition" day, as they have in Europe, so that we can spread the good news of markets to state legislators and those who enforce the law.

What Nashville can Learn from NYC: Affordable Housing mandates reduce the supply of affordable housing

The Nashville City Council is considering requiring that a certain percentage of units in new residential developments be priced as affordable. The mandates would apply to multi-unit developments bigger than five units.

While this may sound good, lets think clearly about its effects: mandates reduce the profitability of new development.  This will lead to less new development, or developers will substitute towards smaller developments, not subject to the mandate.  In the former case, fewer new developments would be built; in the latter, lower-density development would take place.  Either way, this represents a decrease in supply.  A decrease in supply would increase price, exacerbating the very problem--expensive housing--that it was designed to ameliorate.   (And don't forget that density is green.)

Housing markets are also subject to what is known as "filtering," apartment rents tend to go down as the apartment building ages.  So today's expensive housing is tomorrow's affordable housing.  This implies that a reduction in the supply of expensive housing today, will reduce the supply of affordable housing tomorrow.

These kinds of zoning restrictions are popular because they drive the price of existing housing above replacement cost, benefiting Nashville's homeowners. But they come at the expense of renters and new residents. As the Financial Times put it:

They are the ransom that renters and recent buyers must pay to existing homeowners – whose homes the rules protect – for use of an artificially limited stock of housing. So severe have those restrictions become that the value of the ransom runs into the trillions. 

Wealth of this kind is far more destructive than the alleged sins of the top 1 per cent. It is wealth created not by improving our living standards but by making them worse; by building too few houses in London and San Francisco, not too many. It is not earned by skill or effort. It is taken directly from the pockets of some – the young, especially those who were born poor – and transferred to others via political regulations on building. This is not wealth, this is plunder. 

The effects of affordable housing are similar to price gouging laws that in Mississippi prevented generators from reaching the Gulf Coast after Katrina. Similarly, affordable housing mandates will prevent new housing from reaching Nashville.  The market wants to help, so let it.

OK, if mandates won't do it, how do we increase the supply of affordable housing in Nashville?  Here I think Nashville could learn something from New York.  In New York, the affordable mandates are triggered only by a relaxation of zoning.  For example, a developer buys up a block of houses and asks the planning commission to re-zone it for a multi-unit apartment complex.  In exchange for the zoning change, the developer agrees to set aside some of the units for lower income tenants.

The crucial difference is that in NY, affordable mandates are triggered only by development that increases supply.  In contrast, the proposed change in Nashville would reduce supply.

[REPOST from 2015] 

[REPOST from 2017] Anti-Price Gouging Laws: Keeping Assets in Low Valued Uses

The gulf coast of Texas needs critical supplies. It is wonderful that many are contributing out of the goodness of their hearts. But the Attorney General seems to not want to marshal the power of the profit motive.

“During declared disasters, state law prohibits businesses from charging exorbitant prices for necessities such as gas, food, drinking water, clothing and lodging,” Attorney General Paxton said. “Texans affected by Hurricane Harvey should take steps to protect themselves and report any alleged price gouging or scam contractors to the Office of the Attorney General.”

Keeping prices artificially low: 1) means critical goods flow to those who 'know a guy' rather than those who have the greatest need (as expressed by their willingness-to-pay), 2) creates an inefficient black market, and, most importantly, 3) blunts incentives for entrepreneurs to supply these goods.

[REPOST from 2020] Dying from Protection from Gouging

David DiSalvo has a write up at Forbes on his experience trying to obtain N95 masks during this pandemic. Federal and state officials say they are "scouring the globe" for PPE while some medical professionals are going without. Here is his summary.

• Millions of N95 masks have been available throughout the U.S., Canada and the UK during the pandemic, according to brokers trying to sell them.
• The high price point per mask, driven by extreme demand, has contributed to an overwhelmed reaction among potential buyers, especially in the U.S.
• Scrutiny surrounding these deals is high because of ongoing scams and claims of price-gouging, both of which are triggering emotionally charged reactions and fear of making deals.
• Millions of masks are being purchased by foreign buyers and are leaving the country, according to the brokers, while the domestic need remains alarmingly high.

The entire article is fascinating. Buyers have to be on their guard against scams as there are ample opportunities for fraudsters. Prices for masks, which had been close to $4 a week before, ranged from anywhere between $6 - $7 per mask (at the time of his writing) which has raised concerns about price gouging. Sales to foreigners do not face such scrutiny.

By the end of the day, roughly 280 million masks from warehouses around the U.S. had been purchased by foreign buyers and were earmarked to leave the country, according to the broker — and that was in one day.
(emphasis in the original)

BOTTOM LINE:  Fear of price gouging laws is causing US suppliers to sell overseas.  Price gouging laws are keeping medical professionals from protection against COVID-19, and presumably killing the very people who are trying to help.  

Hat tip: Marginal Revolution

Why are US house prices rising again?

From CalculatedRiskBlog.com: Two forces are pushing house prices in opposite directions: a decrease in supply raises price and reduces quantity, whereas a decrease in demand reduces both price and quantity.  

In the graph above, we see the supply measured as months of inventory (#months it would take to sell off the #listings), plotted against the annual change in prices.  In August 2023, the black triangle indicates about 3 months of inventory (measured on an inverted vertical axis), and an annual price change of about 5%.  The graph above indicates a negative relationship between supply and price, as the months of inventory goes down, the price change goes up.  

Below we see the reason why demand is declining:  the high price of a mortgage loan (7.62%) is deterring homebuyers from borrowing money needed to buy a house.  

Amazon Ads

From Podean

Early on [2012], Amazon executives realized that they were sitting on incredibly valuable online real estate (in the form of data collection and customer accessibility) that they knew they could monetize, but they had to be careful not to negatively impact the customer experience in the process.

We can think of this ads as a complementary product to Amazon's electronic marketplace or a demand-side economy of scope: once Amazon had the online marketplace, targeted ads were a logical add-on.

[REPOST from 2017]: Reduce Prices When you Acquire a Complementary Good: Amazon/Whole Foods

The WSJ is reporting that Amazon will begin steep price cuts at its newly acquired Whole Foods affiliate. One way to think of the merger is that it couples Whole Foods's retailing niche with Amazon's logistics expertise. These are complementary assets. Lowering the margin on one increases the demand for the other. This is likely to be profitable for Amazon. Some evidence that this will benefit consumers can be gleaned from the effect of the announcement on traditional retailers.

The announcement Thursday, which sent stocks of traditional grocers into a fresh tailspin, said price changes for both staples and more high-end foods would go into effect as soon as Amazon closes the Whole Foods deal on Monday. 

EU vs. US: which will discourage innovation more?

EU: (Thibault Schrepel):

If you read the #AIAct carefully and read between the lines, you quickly realize that it greatly expands the investigative powers of antitrust agencies.

Here is an example: the EU regulates high and low risk activities similarly, but...

Only those AI systems that are used in high-risk sectors (seethe list in Article 2 and Annex III of the European Commission’s AI Act) and that are nondeterministic should be burdened to the highest compliance requirements. The systems that are used in high-risk sectors but whose output is highly predictable (e.g., AI systems that rely on expert systems) should be subject to lower compliancerequirements because they present a lower degree of actual risk.

US (Politico):

The White House is poised to make an all-hands effort to impose national rules on a fast-moving technology, according to a draft executive order.

...

At the same time, the Oct. 23 draft order calls for extensive new checks on the technology, directing agencies to set standards to ensure data privacy and cybersecurity, prevent discrimination, enforce fairness and also closely monitor the competitive landscape of a fast-growing industry. The draft order was verified by multiple people who have seen or been consulted on draft copies of the document.

Based on history (see previous blog posts here), i.e., the EU doesn't seem to care as much about mistakenly deterring innovation, though that may be changing under the Biden Administration.

Environmental Benefits of Learning curves in Fracking

... total drilling speed increases by 5%-15% for every doubling of experience.

Not only can these economies bring down the price of natural gas, but they also bring down the price of geothermal wells to to the point where they can produce electricity at comparable cost to natural gas.  Here's why:

Why Might Drilling Have a High Learning Rate?

Improvements in “fracking” have come from two primary sources - faster drilling and higher completion intensity. The pure drilling side (not including running casing and other non-drilling tasks) has a learning rate that could be as rapid as technologies like solar, wind, and batteries. It seems to keep progressing while fracturing productivity improves more slowly. Drilling speed increases see diminishing returns in shale wells as non-drilling activities dominate total construction time. Total rig productivity has increased ~50x-100x from drilling and completions since the earliest days in plays like the Marcellus Shale.

Few studies evaluate drilling speed learning curves, but they suggest that total drilling speed increases by 5%-15% for every doubling of experience. These numbers include running casing, cementing, and nippling up blow-out preventers, which are activities that improve slower than on bottom drilling. The drilling portion could have up to a 20% learning rate, though the uncertainty is high.

There are several reasons to think the learning rate is aggressive:

1. Feedback is constant, inexpensive, high signal, and instantaneous. You are making hole, or you aren’t. 
2. The supply chain is geared to rapidly iterate on bit, motor, and directional tool design

The manufacture of these items is surprisingly labor intensive, but that allows rapid iteration. Bit designs can have lot sizes as small as fifty units. Lot size can be even smaller for motors and directional tools. Bits, motors, and tools for drilling granite might improve speed and longevity several times in the most demanding applications.

3. Drilling is far away from physical limits.

HT:  MarginalRevolution.com

When this movie starts, Google is already popular

Google has been accused by the DOJ of illegally monopolizing the "General Search" market. Interestingly, the government's economic witness was asked by the Justice Dept to begin his investigation in 2014, by which time Google had already become dominant, e.g., US shares of general search as of 2023 are:

• Google 88.48% 
• Bing       6.35% 
• Yahoo!   2.69%

This trial tactic prevents the witness from answering questions like "what should have Google have done differently, to avoid violating the antitrust laws?" But it leaves him open to the criticism that he is condemning Google for simply being better and more innovative than everyone else.  

Of course, the trial is bifurcated (liability+remedy), which leaves open the very difficult question of what Justice will ask for if they win.  And we all know that "if there is no solution, there is no problem" (#3 on the Coffee Mug below).  Why repeat the mistakes of the earlier monopolization cases, i.e., IBM and MSFT?

Why do Looks Matter for an Academic Career in Economics?

 Do Looks Matter for an Academic Career in Economics?

Galina Hale

University of California, Santa Cruz

Tali Regev

IDC

Yona Rubinstein

London School of Economics & Political Science (LSE) - Department of Management

Date Written: March 2021

Abstract

We document appearance effects in the economics profession. Using unique data on PhD graduates from ten of the top economics departments in the United States we test whether more attractive individuals are more likely to succeed. We find robust evidence that appearance has predictive power for job outcomes and research productivity. Attractive individuals are more likely to study at higher ranked PhD institutions and are more likely to be placed at higher-ranking academic institutions not only for their first job, but also for jobs as many as 15 years after their graduation, even when we control for the ranking of PhD institution and first job. Appearance also predicts the success of research output: while it does not predict the number of papers an individual writes, it predicts the number of citations for a given number of papers, again even when we control for the ranking of the PhD institution and first job. All these effects are robust, statistically significant, and substantial in magnitude.

JEL Classification: I23, J16, J71, M51

Suggested Citation:

Hale, Galina and Regev, Tali and Rubinstein, Yona, Do Looks Matter for an Academic Career in Economics? (March 2021). CEPR Discussion Paper No. DP15893, Available at SSRN: https://ssrn.com/abstract=3805308

Prompt engineering, how to get the most out of AI

 Freakonomics podcast #556: Great pieces on Prompt Engineering and How to Use AI to come up with Entrepreneurial Ideas using "Constrained Ideation."

• “Master the Art of Prompt Writing: 6 Tips To Writing Better Prompts,” video by CopyAI (2023).
• “Using A.I. to Implement Effective Teaching Strategies in Classrooms: Five Strategies, Including Prompts,” by Ethan Mollick and Lilach Mollick (SSRN, 2023).
• How to use AI to do stuff: an Opinionated Guide

China is selling US Treasuries, increasing interest rates

When China sells US treasuries, it affects both the exchange rate and US interest rates.

• Exchange rate:  China receives dollars, buys yuan, which rises the price of yuan in dollars, an appreciation of the yuan or a depreciation of the dollar. 
• US Interest rate:  Selling treasuries represents a reduction in the supply of loans to the US, which increases the price of loans to the US, i.e. the US interest rate. 

Source ZeroHedge

TRUTH IN BLOGGING: I am a micro-economist, so I am wrong about small things.

Why has demand for MBA's fallen?

 From WSJ:  

...the three main sectors that hire M.B.A.s at top schools have hit turbulence. Tech giants made big job cuts, consulting firms put start dates on hold and deal making slowed in finance.

Why are payers (insurance companies) buying providers (clinics, pharmacies)?

Economist via MarginalRevolution: Because Vertical Integration circumvents regulation

With little room left to grow in their core businesses, and trustbusters blocking attempts to buy direct rivals, the [payer] oligopolists have been expanding into other bits of the health-care supply chain [by buying providers]. Besides adding to the top line, such vertical integration is juicing margins. The Affordable Care Act of 2010 limited the profits of health insurers to between 15% and 20% of collected premiums, depending on the size of the health plan. But it imposed no restrictions on what physicians or other intermediaries can earn. The law created an incentive for insurers to buy clinics, pharmacies and the like, and to steer customers to them rather than rival providers. The strategy channels revenue from the profit-capped insurance business to uncapped subsidiaries, which in theory could let insurers keep more of the premiums paid by patients.

The payers probably figured this out by reading Chapter 23 on "regulatory avoidance." 

Housing starts: Single-family vs. Multi-family

Nationally, 

• single family is facing two opposing forces: lack of inventory/supply (no one wants to give up their 3% mortgages) and a lack of demand (due to 8% 30-year mortgage rates). But if Fed is done raising rates and they come down, this could change.
• multi-family has a lot of under-construction supply is about to enter the market, which reduces new supply ("starts")

In Nashville (source: Axios)  

An influx of new apartment construction is helping to create a more hospitable market for Nashville renters.

Why it matters: Tenants have more options as the metro area's supply of apartments continues to grow while many residents struggle to buy a home.

• Many property owners have responded by tamping down rent hikes that had become commonplace in recent years.
• Meanwhile, luxury apartment complexes are rolling out new bargains.

Declining fertility rates

Overcoming Bias:

Fertility usually falls more rapidly from 4-7 down to ~2, then falls more slowly below 2. Rich nations now average ~1.4, with some as low as 0.8. If world fertility averaged 1.4 for 25-year generations after a peak of 10B, humanity would go extinct in 1660 years. If fertility instead averaged 1.0, that would take only 830 years. Most think extinction unlikely, and I agree with them, but such a risk shouldn’t be taken lightly.

...it seems that a shrinking world population would robustly lead to a shrinking world economy, and then innovation rapidly coming to a halt, which seems pretty scary. Given how naturally people resist change, it might be hard to restart a culture of innovation once it’s been long lost.

Less than 2.1 births/woman leads to a shrinking population.  As a result, pay-as-you-go pensions (like Social Security and Medicare), will run out of money

Networking tips for introverts

 From the Economist:

..more infrequent and distant relationships (or “weak ties”) are more useful than close contacts. ... [The Research] showed that weaker ties (where a pair of users had only one mutual friend, say) were more likely to lead to job applications and job moves than those where people had 25 mutual friends or more. 

BUT

Even weak ties need tending. ... The real secret is to save your energy for the people who are most likely to be interesting to you. In the online realm, ... the sweet spot in networking on LinkedIn is someone with moderately weak ties to you: connecting with a person with ten mutual friends markedly increases the probability of changing jobs compared with someone with just one shared friend. 

In other words, networking pays off if you can identify people who can bring you new information but are close enough to your world that this information is useful. In the offline world, a tool like Chatgpt should make it easier to find useful prospects in a list of event attendees. But you still need to overcome all your instincts and approach them 

Claudia Golden wins Nobel Prize in Economics

For her work explaining Gender Gaps in wages and employment.  From the Economist:

Since around 2005 the wage gap has hardly budged. Here Ms Goldin’s work questions popular narratives that continue to blame wage discrimination. Instead, in a book published in 2021, Ms Goldin blames “greedy” jobs, such as being a consultant or lawyer, which offer increasing returns to long (and uncertain) hours.

She explains how such work interacts with the so-called parenthood penalty. “Let’s say there are two lawyers, equally brilliant,” explains Ms Goldin. Once children arrive, “they realise that they both can’t work these gruelling hours.” Women spend more time raising children, which is why the gender pay gap tends to open up after a first child.

Risk premia: how big is the return necessary to compensate investors in these countries?

 

From: ZeroHedge:  about 25% to invest in Belarus, Lebanon, Venezuela, Sudan, and Syria.

No post-MBA gender gap, but after ten years...

 WSJ on why Claudia Golden deserves the Econ Nobel prize:

For M.B.A. students who graduated from the University of Chicago’s business school between 1990 and 2006, the authors found almost no gender gap in employment or wages just after graduation. But 10 years later, women had taken an average of one year off from work, while men had taken off only 1½ months.  ...

...In a 2010 study, Ms. Goldin and Mr. Katz pointed out that women often receive a wage penalty for demanding a job that’s flexible enough for the woman to be the “on-call” parent. Men are more apt to receive a wage premium for being willing to be the “on-call” employee.

Why is no one going into accounting?

 

From WSJ:  

Higher starting salaries with other majors was the top reason why non-accounting majors who had considered the field decided against it, according to a survey of nearly 500 students this spring by the Center for Audit Quality, an industry group.

The opportunity cost of being an accounting is going up because the increase in demand for other majors is raising the returns to substitute majors.  This is part of the long run adjustment of Chapter 9, where prices serve as signals to undergrads about the benefits and (opportunity) costs of their majors.  

US leads the world in single-parent households...

... and the results are statistically disastrous.  

Summary of three pieces on Economist Melissa Kearney's Research

• Freakonomics Radio: When did marriage become a luxury good?
• Related: Why Did You Marry That Person? (Replay)
• Related: Why Does the Richest Country in the World Have So Many Poor Kids? (Update)
• Related: The Fracking Boom, a Baby Boom, and the Retreat From Marriage
• NYTimes: The Explosive Rise of Single-Parent Families Is Not a Good Thing
• Children from single-parent homes have more behavioral problems, are more likely to get in trouble in school or with the law, achieve lower levels of education and tend to earn lower incomes in adulthood. Boys from homes without dads present are particularly prone to getting in trouble in school or with the law.
• Income differences are not the only driver of differences in outcomes. A second committed adult in the home can contribute considerable time and energy to taking care of children.
• We can and should do more as a society to try to compensate for these gaps in parental investments. But again, it is highly unlikely that government or community programs could ever provide children from one-parent homes with a comparable amount of the supervision, nurturing, guidance or help that children from healthy two-parent homes receive.
• That means a generation of children will grow up more likely to get in trouble and less likely to reach their potential than if they had the benefits of two parents in their homes.
• NYTimes: The One Privilege Liberals Ignore
• Families headed by single mothers are five times as likely to live in poverty as married-couple families.
• Children in single-mother homes are less likely to graduate from high school or earn a college degree. They are more likely to become single parents themselves, perpetuating the cycle.
• Almost 30 percent of American children now live with a single parent or with no parent at all. One reason for the sensitivities is large racial disparities: Single parenting is less common in white and Asian households, but only 38 percent of Black children live with married parents.

The opportunity cost of being an artist reaches 30%

Via MarginalRevolution:

This paper estimates the "compensating differentials" of Chapter 9 for artists.

I define artists as: (a) art directors, craft artists, fine artists, special effects artists, and related (SOC 27-101), (b) actors, producers, directors (SOC 27-201), (c) dancers and choreographers (SOC 27-203), (d) musicians, singers, and related (SOC 27-204), and (e) entertainers, performers, and related (SOC 27-209).

The compensating differentials are negative (you earn less if you work as an artist) 

1. First, I find a large decline in the relative earnings of artists to non-artists ... from a 15% earnings disadvantage to 30%. ...
2. Second, these differences decline to 4.4%, but remain statistically significant, even after comparing artists with media, entertainment, and sports workers in the same industry and year. [In other words, it is not just that artists choose to work in industries with less pay, they also earn less than non-artists in the same industry.]
3. Third, workers with an arts degree, but who do not work as artists, incur an additional earnings penalty.  [Even if you don't work as an artists, getting an arts degree is associated with lower earnings.  This is NOT causal, i.e., getting an arts degree does not make you poorer.  Rather it is an somehow correlated with lower income.]

Stripe Press

Stripe is a tech firm that allows just about anyone to collect payments digitally. It has been very successful, valued at $50 billion and on track to process $1 trillion in payments. It has also launched a book publishing arm, Stripe Press, in a space where the big five publishing houses collectively have 80% market share and independent publishers have regularly entered and regularly folded. Tyler Lasicki has asked, and answered, why an online payments company would think it could do better than real book nerds?

Stripe Press isn't publishing just any books.

Publishing content about technological and economic advancement is one way, albeit probably not the most capital efficient way, of helping entrepreneurs build and start businesses (which eventually may help grow the GDP of the internet).

They also publish physical rather than digital books aimed at potential entrepreneurs who may be eCommerce shy. Many of these new small scale internet entrepreneurs will end up using Stripe's payment services. Stripe Press in the publishing business with razor-thin margins is a complement to Stripe services in the hugely profitable online payments business. So Stripe Press doesn't have to do better than real book nerds. Heck, it can even sustain losses, so long as the books create enough Stripe using entrepreneurs. 

Stripe Press is not much different than the bar offering free peanuts to sell more beer.

HT: Marginal Revolution

[Repost from 2009?] Stossel on price-gouging

Another video story as only Stossel can tell it, from his time at ABC's 20/20. 

See previous, and funny and tragic posts on price gouging laws that 

1. make it easy for low value buyers to outbid higher value buyers for the scarce goods; and
2. eliminate the incentive for suppliers to: (i) prepare for the next emergency; or (ii) enter the market in this one.

NOTE: Stossel left ABC for Fox in 2009, and this original story ran on ABC.

Should the FTC go after Financial Advisors who fool their clients by randomness?

In the past, we have talked about the effectiveness of testimonial ads that mention a number, e.g., "I lost 74 pounds wearing slimming insoles" and the ineffectiveness of the "results not typical" disclaimer required by the FTC.  

In Nicholas Taleb's, Fooled by Randomness, he exposes the Finance Industry's exploitation of clients' ignorance of statistics principles like "regression to the mean," and "survivorship bias" to take advantage of them.  

For example, Taleb shows how financial advisors can invest in a large number of portfolios, then show clients only the ones that have beaten the market, to fool them into attributing the outcome to skill, rather than selection bias.

I have never seen the old FTC disclaimer on Financial Advice, nor the 2009 updated requirements that testimonial ads give consumers information about their expected results.

Taleb on how to avoid being duped:  never go with a financial advisor who approaches you; instead approach one yourself and anticipate selection bias.  

NOTE: Vanderbilt uses testimonials that mention a number to advertise my managerial economics class--but without the required FTC disclaimer and info:

In the initial immersion week of classes, a Luke Froeb-led lecture and discussion touched on a project at work and changed his decision making process. When he returned to the office, he changed course on how he was putting a bid proposal together. The revised bid added $400,000 to the bottom line, far more than the investment Vulcan was making in his Executive MBA degree. ... After just one class, Vulcan’s MBA investment was in the black,” he recalls with a chuckle.

To avoid getting into trouble with my former employer, here is the old FTC dislaimer and newer explanation of what you can expect.

=====RESULTS NOT TYPICAL=====

In other words, if you take my class, some of you will not earn $400,000 for your companies after just one class. Rather, education is like everything else: the more you put into it, the more you get out of it.