The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets in the United States and around the world. If people do not see any risk, and see only the prospect of outsized investment returns, they will pursue those returns with disregard for the risks.

Were all these people stupid? It can’t be. We have to consider the possibility that perfectly rational people can get caught up in a bubble. In this connection, it is helpful to refer to an important bit of economic theory about herd behavior.

Three economists, Sushil Bikhchandani, David Hirshleifer and Ivo Welch, in a classic 1992 article, defined what they call “information cascades” that can lead people into serious error. They found that these cascades can affect even perfectly rational people and cause bubblelike phenomena. Why? Ultimately, people sometimes need to rely on the judgment of others, and therein lies the problem. The theory provides a framework for understanding the real estate turbulence we are now observing.

How a Bubble Stayed Under the Radar - New York Times

Someone hacked an ATT billboard in SF.

NSA_1 on Flickr - Photo Sharing!

A Neanderthal-eat-Neanderthal world may have spread a mad cow-like disease that weakened and reduced populations of the large Eurasian human, thereby contributing to its extinction, according to a new theory based on cannibalism that took place in more recent history.

Discovery News : Discovery Channel

But two critical errors allowed Pakistan’s action to echo around the globe for at least a brief period on Sunday afternoon, according to Martin A. Brown, a data engineer at the Renesys Corporation, an Internet monitoring company, which posted a timeline of the incident on its Web site.

As part of its effort to block YouTube within the country, Pakistan Telecom created a dummy route that essentially discarded YouTube traffic, sending it into what Internet experts call a black hole.

Pakistan Telecom then made an error by announcing that dummy route to its own telecommunications partner, PCCW, based in Hong Kong, shortly before noon New York time on Sunday, according to Renesys.

PCCW then made a second error, accepting that dummy route for YouTube and relaying it to other Internet providers around the world.

Pakistan Cuts Access to YouTube Worldwide - New York Times

Dandy’s Western Wear, the local cowboy attire shop, cannot keep enough python skin and cowhide boots in stock because of all the Danes and Germans who have come to town to invest and work in the wind fields, then take home Texas souvenirs.

“Wind has invigorated our business like you wouldn’t believe,” said Marty Foust, Dandy’s owner, who recently put in new carpeting and air-conditioning. “When you watch the news you can get depressed about the economy, but we don’t get depressed. We’re now in our own bubble.”

Move Over, Oil, There’s Money in Texas Wind - New York Times

This highly recommended article is now freely available.

The dot-com crash of the early 2000s should have been followed by decades of soul-searching; instead, even before the old bubble had fully deflated, a new mania began to take hold on the foundation of our long-standing American faith that the wide expansion of home ownership can produce social harmony and national economic well-being. Spurred by the actions of the Federal Reserve, financed by exotic credit derivatives and debt securitiztion, an already massive real estate sales-and-marketing program expanded to include the desperate issuance of mortgages to the poor and feckless, compounding their troubles and ours.

That the Internet and housing hyperinflations transpired within a period of ten years, each creating trillions of dollars in fake wealth, is, I believe, only the beginning. There will and must be many more such booms, for without them the economy of the United States can no longer function. The bubble cycle has replaced the business cycle.

The Next Bubble, by Eric Janszen | Harper's, February 2008

Stanford Law School Professor and former Wired magazine columnist Larry Lessig said Tuesday that he's considering a bid to take over the late Rep. Tom Lantos' D-Calif.'s congressional seat.

He's given himself a March 1 deadline to make the decision.

Stanford Law Professor Larry Lessig Explores A Bid for Congress | Threat Level from Wired.com

Just hours after a Navy missile interceptor struck a dying spy satellite orbiting 130 miles over the Pacific Ocean, a senior military officer expressed high confidence early Thursday that a tank filled with toxic rocket fuel had been breached.

Pentagon Is Confident Missile Hit Satellite Tank - New York Times

Today, the Electronic Frontier Foundation and Asian Law Caucus, two civil liberties groups in San Francisco, plan to file a lawsuit to force the government to disclose its policies on border searches, including which rules govern the seizing and copying of the contents of electronic devices. They also want to know the boundaries for asking travelers about their political views, religious practices and other activities potentially protected by the First Amendment. The question of whether border agents have a right to search electronic devices at all without suspicion of a crime is already under review in the federal courts.

The lawsuit was inspired by two dozen cases, 15 of which involved searches of cellphones, laptops, MP3 players and other electronics. Almost all involved travelers of Muslim, Middle Eastern or South Asian background, many of whom, including Mango and the tech engineer, said they are concerned they were singled out because of racial or religious profiling.

Clarity Sought on Electronics Searches - washingtonpost.com

Many people say that allowing illegal aliens to obtain state driver's licenses helps them and encourages them to remain illegally in this country. Michigan Attorney General Mike Cox late last year issued an opinion that licenses could be issued only to legal state residents, calling it "one more tool in our initiative to bolster Michigan's border and document security."

In reality, we are a much more secure nation if we do issue driver's licenses and/or state IDs to every resident who applies, regardless of immigration status. Issuing them doesn't make us any less secure, and refusing puts us at risk.

Schneier on Security: Giving Drivers Licenses to Illegal Immigrants