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http://www.economist.com/news/science-and-technology/21568704-geniuses-are-getting-brighter-and-genius-levels-iq-girls-are-not-far

Human intelligence

Cleverer still

Geniuses are getting brighter. And at genius levels of IQ, girls are not as far behind boys as they used to be

Dec 22nd 2012 | from the print edition

[1] SCIENCE has few more controversial topics than human intelligence—in particular, whether variations in it are a result of nature or nurture, and especially whether such variations differ between the sexes. The mines in this field can blow up an entire career, as Larry Summers found out in 2005 when he spoke of the hypothesis that the mathematical aptitude needed for physics and engineering, as well as for maths itself, is innately rarer in women than in men. He resigned as president of Harvard University shortly afterwards.

[2] It is bold, therefore, of Jonathan Wai, Martha Putallaz and Matthew Makel, of Duke University in North Carolina, to enter the fray with a paper that addresses both questions. In this paper, just published inCurrent Directions in Psychological Science, they describe how they sifted through nearly three decades of standardised tests administered to American high-school students to see what had been happening to the country’s brightest sparks.

[3] They draw two conclusions. One is that a phenomenon called the Flynn effect (which weighs on the “nurture” side of the scales because it describes how IQ scores in general have been rising over the decades) applies in particular to the brightest of the bright. The other is that part, but not all, of the historic difference between the brainiest men and women has vanished.

[4] The three researchers drew their data from Duke University’s Talent Identification Programme, TIP, which is designed to ferret out especially clever candidates early on: all the participants had scored in the top 5% of ability when confronted with exams designed for much older students. TIP, in turn, draws on three national exams: SAT, EXPLORE and ACT. Altogether, Dr Wai, Dr Putallaz and Dr Makel looked at data from 1.7m children. Those data spanned the years between 1981 and 2010.

[5] In the general population boys are well known to do a bit better than girls in maths. Girls, in turn, edge out boys on tests of verbal reasoning. The result is similar overall IQ scores. Among the best young mathematical brains, however, that equality does not pertain. Here, boys do a lot better at maths than girls—but less better than they used to, as the researchers discovered.

[6] In the early 1980s, the ratio of males to females in the top 0.01% of maths scores in SAT, the Scholastic Aptitude Test, was around 13 to 1. By the early 1990s it had fallen to four to one. After this, however, it remained obstinately unaltered (see chart). The other two tests, both of which post-date the period in which the SAT shows those huge changes, indicate less lopsided sex ratios of between two and three to one. But neither shows girls making much recent progress towards equality.

Nurturing talent

[7] This study is not perfect. Its most interesting result rests on data from just one of the three sets of exams it looked at and its sample sizes are, necessarily, small. But it chimes with the findings of a much older investigation, carried out in 1983 by a group of researchers at Johns Hopkins University, which also discovered a male-to-female sex ratio of 13:1 among the most able young mathematicians.

[8] Why a dramatic rise in the aptitude of America’s brightest young female mathematicians should then be followed by two decades of stagnation is not obvious, and, not being experts in mine-clearance, the researchers offer no hypothesis. It is clear that the rise itself must be “nurture” of some sort—possibly a change in teachers’ attitudes towards girls who are interested in maths—but the subsequent stasis could have either explanation. A line of reasoning in favour of “nature” is that put forward by Simon Baron-Cohen, a psychologist at Cambridge University. This connects the extreme systematising patterns of thought which make a good mathematician with the preponderance of men among those with Asperger’s syndrome, a form of autism that does not harm a person’s general intelligence. But the disparity could equally well be the result of some as-yet-unelucidated difference between the ways girls and boys are brought up.

The nature of the beast

[9] That such unelucidated environmental influences can have real effects on IQ is eloquently illustrated by the Flynn effect. This phenomenon, brought to the world’s attention in the 1980s by James Flynn of the University of Otago, in New Zealand, is that average IQs around the world have been rising at the rate of 0.3 points a year for the past eight decades. Using the TIP data, Dr Wai and his colleagues showed that this is as true of the brightest youngsters in American society as it is of lesser mortals, suggesting that even they can have their abilities boosted by whatever is causing the Flynn effect. Once again, the changes seem to be mainly in mathematics. Scores in the brightest children’s verbal-reasoning and reading abilities demonstrate no clear trend, but all three national tests show sustained improvements in their mathematical ability over the past three decades.

[10] No one knows what causes the Flynn effect. Theories range from better nutrition, via a more stimulating general environment (thanks to such things as television, radio, the internet and video games), to the phasing out of lead in petrol and paint. What is clear is that it cannot be a change in gene-given ability, which is what most people mean by “nature” in this debate, because too few generations have passed for natural selection to have had any meaningful impact.

http://www.economist.com/blogs/banyan/2012/12/south-koreas-presidential-election

South Korea's presidential election

A homecoming

Dec 19th 2012, 22:50 by D.T. | SEOUL

[1] SOUTH KOREA has elected Park Geun-hye, a 60-year-old conservative, as president for the coming five years. The candidate is from the same party, the Saenuri party, as the incumbent, Lee Myung-bak. She is the daughter of Park Chung-hee, the dictator who set South Korea on the path of break-neck development, seizing power in 1961 and assassinated by his security services in 1979. Ms Park thus becomes South Korea’s first woman president. Curiously, she also has the distinction of having once been the country’s first lady, following the assassination of her mother in 1974 by a North Korea sympathiser. Having grown up in the Blue House, South Korea's presidential mansion, she now returns there.

[2] Ms Park defeated the main liberal candidate, Moon Jae-in of the Democratic United Party (DUP), by 51.6% to 48%, following a tight contest that had everyone guessing until the end. Turnout was nearly 76%, despite bone-chilling weather. Such a high figure was expected to favour Mr Moon, since he had support among the young, who tend to drag their feet on the way to the polls.

[3] After her victory Ms Park spoke in Gwanghwamun, near the main royal palace in Seoul and in front of a statue of the 15th-century Confucian, King Sejong. She called her win a "victory brought by the people's hope". Mr Moon has congratulated Ms Park, and apologised to his supporters for not being able to "keep his promise".

[4] As much as anything, the election was a battle of the generations. Those in their 20s and 30s fell behind Mr Moon, while those in their 50s and older—a growing segment in a fast-aging country—overwhelmingly chose Ms Park. In Gwanghwamun, older voters were in party spirit, dancing and chanting her name. They are more likely to look back with nostalgia on the rule of her strongman father and his era of rapid growth and full employment. This worked in Ms Park's favour today. In the Hongdae student district, by contrast, 20-somethings had tears in their eyes. But they were outnumbered: for the first time in a presidential election, more voters were above 50 than under 40.

[5] For all that each candidate appealed to different groups, both campaigned chiefly on the issue of what came to be called, in regrettably clumsy parlance, "economic democratisation". It meant reining in the power of the influential families that control the handful of South Korea’s dominant conglomerates, known as chaebol. And it meant increasing the security, for instance, through welfare spending, of those left behind now that the era of development-at-all-costs is ending.

[6] The Saenuri Party has historically been firmly behind the chaebol, so Ms Park’s tack to the centre had alarmed the party’s core supporters. But the strategy first proved successful in elections for the National Assembly last April, and then again today. Her instincts will now be to tack back to the right. But she will be closely watched to see how she deals with such problems as overly cosy arrangements among conglomerate affiliates, as well South Korea's growing number of irregular workers, many of them youngsters, who were hired without full employment rights.

[7] As for foreign policy, South Korea’s alliance with America will be reaffirmed. Ms Park will have few warm and fuzzy feelings for China, but she will acknowledge its importance as South Korea's main trading partner. She will persist with the country’s pursuit of free-trade agreements after Mr Lee leaves the Blue House in February.

[8] The president-elect inherits troubled relations with Japan, given friction over the Dokdo islets (known in Japan as Takeshima) and the historical issue of wartime sexual enslavement of Korean women. The emphatic general-election victory in Japan on December 16th for the conservative Liberal Democratic Party and its leader, Shinzo Abe, who denies Japanese wartime atrocities, will not, on the face things, help. On the other hand, Ms Park’s father, like so many Koreans of the post-war order, had during the Japanese occupation been a collaborator, an officer in the Japanese imperial army. Ms Park would do the country a favour by pointing out that matters of history need to be faced honestly by all sides.

[9] As for the country’s relations with North Korea, these have been essentially frozen since Lee Myung-bak made clear that he was not going to be blackmailed by a dictatorship that set off nuclear devices, launched rockets and sank a South Korean naval vessel. Ms Park is in no danger of going so far as her liberal opponent, Mr Moon, who appeared to want a return to the “sunshine policy” of a decade ago; it served the North well in terms of oodles of aid with few strings. But she is certainly readier than Mr Lee to seek an opening. She will, she says with not much precision, “reach a balance between hard-line and overly dovish stances" towards the North. She appears unlikely to make many unconditional gestures.

[10] For the Democratic United Party, today's result is a blow. Mr Moon’s campaign had insufficient time to recover from the challenge of Ahn Cheol-soo, a centre-left political outsider who set the race on fire but who threatened to split the liberal vote and who stepped down in favour of Mr Moon only in November. He then took time to throw his support behind Mr Moon. The election was fought chiefly over issues of economic inequality. That ought to have been classic DUP ground. There will now be much soul-searching on the political left.

(Picture credit: AFP)

http://www.economist.com/news/finance-and-economics/21568741-hedge-funds-have-had-another-lousy-year-cap-disappointing-decade-going

Hedge funds

Going nowhere fast 

Hedge funds have had another lousy year, to cap a disappointing decade

Dec 22nd 2012 | from the print edition

[1] WHEN it comes to brainboxes, the name “Nobel” has a certain ring. But news that the Nobel Foundation plans to increase its investment in hedge funds, because years of low returns forced it to cut cash prizes in 2012, is one to leave laureates scratching their eggheads. The past year has been another mediocre one for hedge funds. The HFRX, a widely used measure of industry returns, is up by just 3%, compared with an 18% rise in the S&P 500 share index. Although it might be possible to shrug off one year’s underperformance, the hedgies’ problems run much deeper.

[2] The S&P 500 has now outperformed its hedge-fund rival for ten straight years, with the exception of 2008 when both fell sharply. A simple-minded investment portfolio—60% of it in shares and the rest in sovereign bonds—has delivered returns of more than 90% over the past decade, compared with a meagre 17% after fees for hedge funds (see chart). As a group, the supposed sorcerers of the financial world have returned less than inflation. Gallingly, the profits passed on to their investors are almost certainly lower than the fees creamed off by the managers themselves.

[3] There are, of course, market-beating superstars, as you would expect in an industry with nearly 8,000 participants (and rising). The top decile of managers has served up returns of over 30% in the past year, according to Hedge Fund Research, a data provider. But a third have lost money, including some of the stars of yesteryear: John Paulson, celebrated as an investment wizard in 2007 for having foreseen America’s housing bubble, reportedly saw his flagship fund lose 17% in the first ten months of 2012, after a 51% fall in 2011.

[4] Justifications for poor performance are as diverse as hedge funds themselves. Mr Paulson seems to be blaming his malaise on a bet that Europe would falter. Others, from algorithmic traders spotting pricing anomalies to “macro” funds hoping to surf long-term trends, attribute their woes to choppy markets that are moved more by politicians than by underlying economic forces. “Markets are watching governments, which are watching the markets,” says Jim Vos of Aksia, a consultancy. Even a talented stockpicker will struggle to make money if the entire market is sent into convulsions by central-bank announcements. Many hedgies admit to having no “edge” in this environment. A few have slimmed or shut up shop.

[5] For those that remain, the message to investors has changed dramatically. Whereas hedge funds used to sell themselves as the spicy, market-beating wedge of an investment portfolio, they now stress the long-term stability of their returns. Comparing their returns with a bubbling stockmarket misses the very point of “hedged” funds, say boosters.

[6] Protecting your money from the vagaries of the stockmarket is hardly the swashbuckling stuff delivered by George Soros or Julian Robertson, the hedge-fund titans of the 1980s. But as well as reflecting the reality of meagre profits, it makes sense for the industry to sell itself as offering low volatility because of a tectonic shift in its investor base. In recent years institutions have gatecrashed what used to be an asset class catering mainly to super-rich individuals. Nearly two-thirds of the industry’s assets are now drawn from pension funds, endowments like the Nobel Foundation and other institutional investors, up from just 20% a decade ago.

[7] These professional investors are much more risk-averse than the original billionaire backers of hedge funds. “Institutions are typically looking for more transparency and prioritise diversification over high returns,” says Omar Kodmani of Permal, a hedge-fund investor. Leverage, which once helped to juice up hedge-fund profits, is now at an all-time low.

[8] The box-ticking requirements that have accompanied massive institutional inflows have led to a reduction in hedge funds’ octane levels. These investors want their hedge-fund managers to stick to their narrow area of expertise rather than flit between different strategies, for example.

[9] The rigidity of the new model is one factor that has dampened returns over the years, thinks Simon Lack, an investment consultant and a vocal hedge-fund sceptic. Another reason is size. Hedge funds now manage $2.2 trillion in assets, up fourfold since 2000. Because individual trades can absorb only so much cash, the effect of all that new money is to push funds to take second-rate bets that would have been considered marginal in the past. “At $1 trillion of assets under management hedge funds delivered acceptable returns,” says Mr Lack. “Less so at $2 trillion.”

[10] Defenders of the industry maintain that even a small allocation to hedge funds can diversify a portfolio away from turbulent markets. Perhaps, but long-term institutional investors should be well-placed to ride out market turmoil. And there are other ways to diversify. Exchange-traded funds allow investors to gain exposure to anything from gold to property to Indonesian firms, and they charge investors just a few basis points (hundredths of a percentage point) on the money they put in. That compares with fees of 2% of assets and 20% of profits (above a certain level) typically charged by hedge funds. In a low-interest-rate environment, where returns are unlikely to hit double digits, a 2% annual management charge seems particularly steep. Institutions have put pressure on fees, but with only mixed success so far.

[11] The hedge-fund industry’s trump card is that a handful among them have delivered stellar returns over the long term. But the same is true of any sort of investment. The average hedge fund is a lousy bet, and predicting which will thrive and which will disappoint is a task that would tax even a Nobel prizewinner.

from the print edition | Finance and economics

[1227(목)_2012]Economist_Debate&Presentation.doc

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