Cuba's broken market socialist economy

Great for classroom discussion.

Levitt on Big Data

Cointegration and drunkards

A rather creative stylized description of cointegration:

Suppose you see two drunks (i.e., two random walks) wandering around. The drunks don't know each other (they're independent), so there's no meaningful relationship between their paths. 

But suppose instead you have a drunk walking with her dog. This time there isa connection. What's the nature of this connection? Notice that although each path individually is still an unpredictable random walk, given the location of one of the drunk or dog, we have a pretty good idea of where the other is; that is, the distance between the two is fairly predictable. (For example, if the dog wanders too far away from his owner, she'll tend to move in his direction to avoid losing him, so the two stay close together despite a tendency to wander around on their own.) We describe this relationship by saying that the drunk and her dog form a cointegrating pair.

Algorithms 101

Also a tribute to the pioneering and Nobel-winning work of Lloyd Shapley and Alvin Roth.