Monday, September 30, 2013

The spirit of liberty is the spirit which is not too sure that it is right

From his Spirit of Liberty Speech, Judge Learned Hand.
The spirit of liberty is the spirit which is not too sure that it is right; the spirit of liberty is the spirit which seeks to understand the minds of other men and women; the spirit of liberty is the spirit which weighs their interest alongside its own without bias; the spirit of liberty remembers that not even a sparrow falls to earth unheeded; the spirit of liberty is the spirit of him who, near two thousand years ago, taught mankind that lesson it has never learned, but has never quite forgotten - that there may be a kingdom where the least shall be heard and considered side-by-side with the greatest. And now in that spirit, that spirit of an American which has never been, and which may never be - nay, which never will be except as the conscience and courage of Americans create it - yet in the spirit of America which lies hidden in some form in the aspirations of us all; in the spirit of that America for which our young men are at this moment fighting and dying; in that spirit of liberty and of America so prosperous, and safe, and contented, we shall have failed to grasp its meaning, and shall have been truant to its promise, except as we strive to make it a signal, a beacon, a standard to which the best hopes of mankind will ever turn; In confidence that you share that belief, I now ask you to raise you hand and repeat with me this pledge:

I pledge allegiance to the flag and to the United States of America and to the republic for which it stands--One nation, Indivisible, with liberty and justice for all.

Sunday, September 29, 2013

The Greeks made sacrifice and thanked the gods for their safe passage

From Xenophon's March by John Prevas, page 147.

The works and classics of the ancient world are filled with cameo appearances of individuals who play a role and then disappear from the narrative leaving you to wonder, what happened next, what became of them? And with virtually no prospect of ever knowing.

In their march to the sea, Xenophon and the 10,000 were hampered by being in mapless foreign lands of which they had no knowledge. Progress was dependent on good guessing or accommodating guides.
From these villages the Greeks marched four more days and several more miles to a large a prosperous city called Gymnias. The ruler of the city sent ambassadors who extended friendship to the Greeks and offered provisions and a guide.
The nameless guide appears in the historical record, his role to lead the Greeks to the mountain pass that will take them to the Black Sea. At the crest of the pass, with the Black Sea in sight, the Greeks rejoiced.
The Greeks made sacrifice and thanked the gods for their safe passage. They released the guide to return to his home.

He was given a Persian horse to make his journey swifter, a silver cup, and ten darics as a reward. The Greeks surrounded the guide as he prepared to leave, wished him a safe journey and thanked him for his service. When they inquired what else he might want from them, he asked for one thing more - some rings from their fingers. He received hundreds, and placed them in a sack which he tied to his horse. Before he left, the guide showed the Greek scouts the road to the country of the Macronians and the sea beyond. Then he took his leave from their camp, anxious to begin his journey home. He would have to return alone through the land that the Greeks had just looted and burned. Burdened with his rewards, he set out on his long journey home through the land of his enemies.
Did he make it? We don't know and are likely to never know. Nameless, he played his bit part in one of the greatest military adventures and then disappears forever from the record. I would like to imagine him returning home, perhaps now with a dowry that allows him to marry and establish himself in his community, to prosper in the shadows of history.

Conservatives want to judge but not act, Liberals want to act but not judge.

This is the second time in ten days where I have come across a researcher whose work I admire and respect, making a claim that is on the face of it either nonsensical or just flat out wrong. It is one of those cases where you have such confidence in their work that you are sure the error must be in your reading and yet the words seem to be clear.

The current case is the article The Parenting Gap by Richard V. Reeves, Isabel Sawhill, and Kimberly Howard, all from the Brookings Institution, and all reputable researchers.

I broadly agree with their thesis, that the role of parents in influencing life outcomes is woefully underestimated and that schools cannot deliver what is expected of them until parents deliver what is needed from them. The crux of inequality lies in the home and the challenge is to determine what can be done and what should be done. It is much easier to beat up schools about results than grasp the thorns of parental performance.

There are some great lines in the article.
Currently, however, parenting policies are the Cinderella of early childhood initiatives, eclipsed by the focus on pre-K education. In part, this is because interventions in parenting are politically unpalatable. Conservatives are comfortable with the notion that parents and families matter, but too often simply blame the parents for whatever goes wrong. They resist the notion that government has a role in promoting good parenting. Judging is fine. Acting is not. Liberals have exactly the opposite problem. They have no qualms about deploying expensive public policies, but are wary of any suggestion that parents—especially poor and/or black parents—are in some way responsible for the constrained life chances of their children. Many liberals instinctively believe that reducing financial poverty is the only worthy social policy goal—and the principal route to reducing other social problems. Poverty reduction is, in and of itself, a vitally important ambition. But raising the abilities of parents is not just about raising their incomes.

Neither the standard conservative nor liberal position will do. Public education, no matter how lavishly funded, can never substitute for good parents. But it is absurd to cast the idea of taking broader responsibility for helping parents as closet communism, as some on the right do. What is needed is a policy agenda and political platform that recognizes the contribution of parenting to mobility and opportunity, and tackles the parenting gap.
They kind of gloss over it, but I think that is a great observation: Conservatives want to judge but not act, Liberals want to act but not judge. That's a Venn diagram with a lot of white space.

But here's the passage that gives me heartburn. They are discussing Home Instruction for Parents of Preschool Youngsters (HIPPY), a program intended to close the parenting gap.
HIPPY has also shown positive results. In our new paper, we estimate the effects of HIPPY on longer-term outcomes of participants. The goal of the program, offered when children are age three to five, is to effectively train parents to be their child’s first teacher. Families receive biweekly home visits from a paraprofessional for 30 weeks out of the year, along with biweekly group meetings. Parents are also given books and toys. A high-quality evaluation of the program found significant improvements in reading and school readiness in first grade. Using a microsimulation model—the Social Genome Model—we predict that HIPPY participants are 3 percent more likely to graduate high school, and 6 percent less likely to become teen parents. These are modest effects, but positive ones, given the importance of the outcomes. High-school graduates make $260,000 more in their working lives. For a program that costs around $3,500 per participant, it’s close to a gold-plated investment.
Set aside the discomfort of using a model to predict outcomes rather than empirically measuring the outcomes. That's a big stone in the path, particularly given the past inability of other similar programs to deliver predicted results, but let's ignore it. What they describe as "significant improvements" yields a 3% increase in the graduation rate. OK, let's stipulate that a 3% improvement constitutes "significant". To be fair, they do change the description to "modest"; I'd still argue that the better words might be negligible and uncertain.

What is arresting is the description of the financial returns on this project as "a gold-plated investment." I would like HIPPY to be successful as well, but there is no financially literate way to describe this as "a gold-plated investment."

Let's assume there are 100 participants in the program. We also have to make assumptions about the graduation rate. The national average is somewhere around 70%. Most at risk urban systems have a graduation rate around 50-60%. I'll assume 60%. 3% more likely to graduate means, I assume, that the graduation rate goes from 60% to 63%.

So what does this mean financially. Taxpayers spent $350,000 (100 X $3,500 per student) in order to improve the graduation rate by 3% or by three individuals. The three individuals are likely to earn $260,000 more each as HS graduates than without a degree. So there is a gross increase in productivity of $780,000.

Who are the winners and losers?

Well, the three individuals are clear winners. They invested nothing and each receive $260,000 in additional income over a lifetime that they would not otherwise have had. That's $5,200 a year - not life changing but not chump change either.

What about the taxpayers and the government? $350,000 was removed from the pockets of taxpayers. If they had kept that money and socked it away in a simple bond paying 5% for fifty years (the working life of a high school graduate, they would at the end of that period have $4,000,000 in the bank instead of the extra $780,000 that the three graduates produced. So from a GDP perspective, we would have been five times better off leaving the money with the taxpayers than investing in this program.

Forget the taxpayers, let's look at it from the Government's perspective. How did they make out? Well, the government spent $350,000 up front. Did the government clear enough extra tax revenues to cover the cost of the program? Let's assume that the HS graduates paid 30% in taxes on the extra $780,000 income they earned (a very generous assumption not taking into account NPV, etc.). So the government spent $350,000 in order to generate $234,000 in extra tax revenue (30% X $780,000). In other words, the government lost $116,000 on this investment.

Is any of this amounting to a "gold-plated investment". I have heard of bad financial planners but don't let Reeves, Sawhill and Howard anywhere near my retirement savings. Bernie Madoffs one and all, it would appear.

The most cynical description of these results would be that a lot of money was spent to achieve very little, and that that little was concentrated among a tiny percentage of the program participants. How do you make a small fortune in government programs intended to make people better off? You start with a big fortune.

If the government had invested $70,000 in a 5% bond and simply given the money to three randomly selected HS graduates, everyone would have been better off from a financial perspective. Taxpayers would have saved $280,000 which would have grown to $3.2 million. Government would have been better off by taking in more tax revenues than the cost of the original bond. The three individuals would have been financially equal (which does not take into account the reduced value that arises from achievement).

There's only one way that I am able to make sense of this assertion on the part of the authors. I think what they might be saying is that for every participant, it costs $3,500 to be enrolled and there is a 3% chance that they will achieve an extra $260,000 in lifetime earnings by graduating. If that is the case then the numbers look like this.

Participant - No cost to be involved but an increase of 3% in graduation rate and the attendant extra income of a graduate of lifetime earnings of $260,000. 3% of that is $7,800 over a lifetime, or 156 dollars a year. Cost of investment zero, return of $7,800, then that is definitely a good return. But only for the participant who makes no investment.

Taxpayer - Lost income of $3,500 which could otherwise have been invested and yielded $40,100. Definitely a losing proposition.

Government - Investment of $3,500 of taxpayer funds. Extra future tax revenues is $2,300 (30% X $7,800) or a program loss of $1,200 per participant. The government would have been better off simply investing $650 at the beginning and paying out the interest proceeds.

Anyway you look at, as far as I can tell, this project has a terrible, negative ROI. In any sort of normal accounting where you take into account compound interest, time value of money, etc. there is just no way that this a responsible investment of scarce societal resources. What am I missing?

Why do the authors claim it is a gold plated investment? I don't know. A gold plated investment is one that returns a net increase in revenues over the cost of the investment while taking into account the time value of money and the risk adjusted value of that return and alternate investments. Perhaps it is tunnel vision. They focused exclusively on the participant and never took into account the costs to the taxpayer and the government. Its the only thing I can come up with.

Saturday, September 28, 2013

Count what is countable, measure what is measurable

Attributed to Galileo Galilei, quoted in Wilfred J. Kaydos, Operational Performance Measurement
Count what is countable, measure what is measurable, and what is not measurable, make measurable.

Friday, September 27, 2013

Encamped by a deserted city named Larisa

From Xenophon's March by John Prevas, page 125.
The Greeks continued their march all the rest of that day without seeing any Persians. By nightfall they had reached the banks of the Tigris River again and encamped by a deserted city named Larisa. Larisa had once been a great city of the Assyrians. Even deserted it was still an imposing structure with walls twenty-five feet in width and a hundred feet high. The walls were built of clay bricks and rested upon a stone foundation. Cyrus the Great, it was said, had laid siege to this city but the walls were so thick and high he was never able to take it. The next day the Greeks marched about twenty miles and came to another deserted city, Mespila, the famous capital of the Assyrian Empire. From there the Greeks marched forward about another twenty miles.
I am fascinated to think of those Greeks twenty-five hundred years ago, marching through landscapes filled with abandoned cities already ancient in those ancient times. If I picture it in my mind's eye it almost feels like science fiction or fantasy than history.

The prince’s challenge is to ride the wave of fortuna, using virtu

From Machiavelli: Still Shocking after Five Centuries book review by Stewart Patrick.
At the dark heart of The Prince is an unsparing and unsentimental view of human nature. Most men, Machiavelli writes, are “ungrateful, fickle, dissembling, anxious to fear danger, and covetous of gain.” In such a world, the ruler who conducts himself according to Christian morality will fast come to grief. “The way men live is so far removed from the way they ought to live that anyone who abandons what is for what should be pursues his downfall rather than his preservation.” He explains “Hence it is necessary that a prince who is interested in his survival learn to be other than good.”
There's an uncomfortable truth that lies at the center of many of our social debates.
“The way men live is so far removed from the way they ought to live that anyone who abandons what is for what should be pursues his downfall rather than his preservation.”
Another Machiavelli quote.
“In all men’s acts, and in those of princes especially, it is the result that renders the verdict when there is no court of appeal”.
That bears chewing on. I would read that to mean that if there is no agreed standard by which to gauge the behavior and the process, in that absence, then one can only judge the results and not the process.

Machiavelli explores the interplay between material forces and human agency through the concepts of fortuna and virtu. All princes (and indeed, all people) are subject to societal and natural factors larger than themselves. Still, “free will cannot be denied,” Machiavelli insists. “Even if fortune is the arbiter of half our actions, she still allows us to control the other half, or thereabouts.” Though fortune be capricious and history contingent, the able leader may shape his fate and that of his state through the exercise of virtu. This is not to be mistaken for “virtue”, as defined by Christian moral teaching (implying integrity, charity, humility, and the like). Rather, it denotes the human qualities prized in classical antiquity, including knowledge, courage, cunning, pride, and strength.

Machiavelli describes the relationship between fortuna and virtu in the The Discourses:

“For where men have but little virtu, fortune makes a great display of its power; and, since fortune changes, republics and governments frequently change; and will go on changing till someone comes along, so imbued with the love of antiquity that he regulates things in such a fashion that fortune does not every time the sun turns around get a chance of showing what it can do.”

The prince’s challenge is to ride the wave of fortuna, using virtu to direct it in the interest of the state, as necessity (necessita) dictates.
500 years later we are still arguing about this. Are an individual's life outcomes substantially the result of their knowledge, experiences, skills, behaviors and values (their virtu) or are the outcomes simply the result of luck, history and random circumstance (fortuna). I think Machiavelli's formulation is right, that both forces are in play and that the results arise from how well one's virtu allow one to ride the wave of fortuna.

It’s the time frame of the last 300 years that doesn’t look so good

A blog post, *The Tragedy of Liberation* by Tyler Cowen

He makes the comment
And as I am wont to say, China’s prospects and fundamentals look pretty good if you scrutinize the country’s history over the last 30 or also the last 3000 years. It’s the time frame of the last 300 years that doesn’t look so good.
I agree with him based on historical facts.

I think the comment is interesting though in that it emphasizes the importance of perspective in argument making. We seek patterns in information which will allow us to make useful predictions of what is likely to happen. All three time frames, 30 years, 300 years and 3,000 years are perfectly legitimate but you get different answers depending on which you choose. For purposes of making predictions, can you select only one perspective, and if so, how do you justify that particular perspective. If you acknowledge all three to be legitimate, then you loose your pattern for prediction purposes.

There will be no corruption gender gap

Often, simple propositions are beguiling but mask deep complexity and causal density as exemplified in Are Women Really Less Corrupt Than Men? by Joshua Keating. The argument advanced by the World Bank and others is that the more female politicians there are, the lower is the incidence of corruption.

Great outcome but is it true? That is the question raised by Keating. He indicates the original research that led to the proposition but then links to new research that provides a more nuanced explanation of what is going on. In the original proposition, the popular summary might be - Goal: reduced corruption in government, Premise: women are more principled than men therefore, Conclusion: Elect more women.

What the new research suggests is that
In a political culture “where corruption is stigmatized, women will be less tolerant of corruption and less likely to engage in it compared to men,” they write. “But if corrupt behaviors are an ordinary part of governance supported by political institutions, there will be no corruption gender gap.”


Esarey and Chirillo describe an experiment conducted “in the United States and Burkina Faso where they found that, compared to men, women are equally likely to accept bribes in the absence of monitoring but are substantially less likely to accept bribes when being monitored.”
Another way to consider this is the old trope of men being greater risk takers. They are more willing to risk pursuing illicit rewards than women where there is a negative consequence to that pursuit. In contrast, women are less willing to take that risk. However, where there is little risk of negative consequence, both are equally likely to be corrupt.

So we start out with the nobility of women and end up validating gender stereotypes.

Tropes, stereotypes, weak data, complex processes and thin evidence. Causal density and process complexity takes us in perculiar directions as we seek the truth.

Thursday, September 26, 2013

He was a gentleman from sole to crown

The poem behind the Simon and Garfunkel song of the same name. See Wikipedia
Richard Cory
by Edwin Arlington Robinson (1897)

Whenever Richard Cory went down town,
We people on the pavement looked at him:
He was a gentleman from sole to crown,
Clean favored, and imperially slim.

And he was always quietly arrayed,
And he was always human when he talked;
But still he fluttered pulses when he said,
'Good-morning,' and he glittered when he walked.

And he was rich - yes, richer than a king -
And admirably schooled in every grace:
In fine, we thought that he was everything
To make us wish that we were in his place.

So on we worked, and waited for the light,
And went without the meat, and cursed the bread;
And Richard Cory, one calm summer night,
Went home and put a bullet through his head.

Wednesday, September 25, 2013

The Vs of the decision-making apocalypse

An excellent graphic from IBM, The four V's: Volume, Variety, Velocity and Veracity. That's it in a nutshell. When making decisions today, the position of any executive, entrepreneur, policy advocate or citizen is dramatically more complicated and complex than a decade ago. Information volume is growing at 40% a year, variety is ever greater, as is velocity and veracity - where to start?

Here is their graphic of this informational and decision-making maelstrom.

Tuesday, September 24, 2013

Xenophon, Syrian Resistance fighters and cultural continuity

I am reading Xenophon's March by John Prevas. All historical reconstructions are subject to the criticism that they do not hue closely enough to the historical record, or that they do so too closely. How much context to provide, how much to assume the reader already holds. How many words to spend providing nuance to points held in contention by historians or how often to simply provide a readable narrative. These are not insignificant challenges and I think Prevas has done a good job of reaching a balance that yields a reasonably factual story that captures one of the classical world's greatest adventures, the march of the 10,000 mercenary Greek soldiers from Asia Minor into the heart of the Persian Empire and back out again. One of the most famous lines from The Anabasis by Xenophon is when the Greeks, after some 2,000 miles of marching through the mountains and plains of the Persian Empire, finally crest a pass in eastern Anatolia and cry out to those at the rear of the march, "The Sea, The Sea!" The promise of home and the prospect of survival.

What was very striking to me though was something having almost nothing to do with Prevas as an author. In the past week or so there have been horrifying videos coming out of Syria (a land through which Xenophon and the Greeks marched on their way to Babylon). These videos show the Syrian resistance fighters beheading captured Assad paramilitary soldiers. One element that caught my eye and made me wonder, was that the Syrian resistance fighters appeared to have not only beheaded their captives but to have cut off one of their hands as well. In none of the written accounts was this addressed and so I was left to wonder what might have been the significance.

Then I came across this passage in Xenophon's March, page 97. Cyrus, the renegade seeking to unseat his brother King Artaxerxes from his throne, has led his own army and the Greek army of mercenaries to the gates of Babylon where his armies and those of Artaxerxes clash. The Greeks fare well and defeat the Persians in their part of the battlefield but Cyrus is less successful. Charging deep into the ranks of the Persians, in an attempt to reach his brother, Cyrus became separated from his guard and fell to a javelin.
So strong had the hatred between the royal brothers grown, that even with Cyrus dead and the battle raging all about him, Artaxerxes took time to participate in the mutilation of his brother's body. Cyrus's head and right hand were cut off by the king's men. The "offending hand" that had dared to strike a blow against the royal personage of the king, and the head that had dared to plot against him, were placed in a basket. Artaxerxes ordered them sent to Babylon so that after the battle, he might preserve them as trophies and display them in celebration of his victory.
Is what the Syrian resistance fighters are doing some preserved cultural artifact from those distant times 2,500 years ago? It seems improbable but it was striking to read that passage and to see blurred videos seeming to illustrate that there are all sorts of legacies that live on.

Monday, September 23, 2013

Cognitive pollution galore

Two recent articles which when juxtaposed have a couple of different interpretations.

First up, Obama Promises Syria Strike Will Have No Objective by Andy Borowitz
“Let me be clear,” he said in an interview on CNN. “Our goal will not be to effect régime change, or alter the balance of power in Syria, or bring the civil war there to an end. We will simply do something random there for one or two days and then leave.”

“I want to reassure our allies and the people of Syria that what we are about to undertake, if we undertake it at all, will have no purpose or goal,” he said. “This is consistent with U.S. foreign policy of the past.”
Then there is Why 'Drink More Water'? by James Hamblin
Why? That is the question.

“40 percent of Americans drink less than half of the recommended amount of water daily,” said Sam Kass, White House senior policy advisor for nutrition policy [sic?], yesterday. Kass and Mrs. Obama’s press secretary Hannah August attributed that statistic to a CDC study.

The problem is, though, that there is no recommended daily amount of water. If we knew how much we should be drinking, and it turned out we weren’t drinking enough, then yes, tell us to drink more. If they were telling us to replace soda in our diets with water, that would also be reasonable and potentially productive. They're explicitly not doing that, though.
If you are keen on politics and view everything through that prism, particularly if you are a Democrat, then there is some cause for alarm when otherwise stalwarts such as the New Yorker are satirizing your foreign policy and The Atlantic is questioning either your intelligence or your motives with regard to health.

If you are more interested in public discourse and reasoned argument, then these articles serve, hopefully, perhaps, as canaries in the coal mine. In the first instance with Borowitz's satire, it is so pitch perfect and consonant with the daily announcements from the State Department and White House, that there is almost no sliver of light between the satire and the press releases. On this particular foreign policy argument, which is consequential from an economic, humanitarian, and national perspective, there is virtually no factual or logical coherence and therefore we are bombarded with what can only be described as cognitive pollution - information intended to delay or obfuscate and not to convince or clarify.

Similarly, with Hamblin's plaintive article. He concludes
I know we're just trying to "keep things positive," but missing the opportunity to use this campaign's massive platform to clearly talk down soda or do something otherwise more productive is lamentable. Public health campaigns of this magnitude don't come around every day. This one squanders both money and precious celebrity Twitter endorsements. Keeping things positive and making an important point are not mutually exclusive, you fools.
His argument is brutal in its simplicity. There is no established water consumption norm by which we can measure whether people are performing well or not. There are no known benefits to indiscriminately consuming more water. There are no arguments, cogent or otherwise, underpinning this campaign.

This is an initiative that will consume time and money and public discourse bandwidth with no anticipated benefits. So why undertake such a campaign? Just more cognitive pollution to dim the waters.

It's that they're extremely hard to help

From The two most important numbers in American health care by Ezra Klein.
The two most important numbers in American health care are 5 and 50. Five percent of people account for about 50 percent of the health system's spending.


What was amazing about the conference is that though these groups serve the sickest people in the country, the discussion had almost nothing to do with treating actual health problems. It was about treating everything else.

All of these organizations have learned the same lesson: The problem with the 5 percent is not simply that they're extremely sick. It's that they're extremely hard to help.

These people aren't just ill. They're poor. They have mental health problems. They're dependent on wheelchairs. They have dementia or brain damage. They live in unsafe homes. They don't have cars. They're agoraphobic. They're worn down by chronic pain. They're stubborn. They're flaky. They're angry and they're fearful. They're bad at talking to authority and working through bureaucracies. They're wary of the medical system and cowed by doctors who don't seem to have time for them. They're locked into bad habits and used to bad environments.

Our health-care system can deal with very sick. Our health-care system is arguably the best in the world at dealing with the very sick. What we're bad at is dealing with everything that happens outside the hospital -- all the things that keep making these people very sick. And so long as all those other things go unfixed, these people keep getting sick, and they keep racking up huge bills -- not to mention facing enormous suffering.
Very analogous to the causal density and causal complexity which plague education outcomes. It is not so much what happens within schools that determines outcomes as what is happening outside of school. And when you venture into those wilds, things get very complex very quickly.

We want simple answers to complex issues and those are very rare. Well, simple answers aren't rare per se. Simple answers that work are rare.

Sunday, September 22, 2013

Jobless recoveries and rising income inequality

On one of the listservs to which I belong, one of the members, a professor with a doctorate in literature, threw out the observation that we were entering a post-capitalist era. This claim elicited some interest from other non-econ, non-analytic members. I was mildly exasperated at this example of cognitive pollution. It is a miniscule incident in itself but aggregated over time, you end up with much nonsense and confusion. Its not the camel's nose under the tent that is the issue but rather the eventuality of the camel itself.

There is always something to be harvested though. In trying to imagine the circumstances of what the professor might even think what she might mean by such a claim and how one might address that argument, it forced me to formulate an answer. In doing so, it led me to the hypothesis that there is a causative linkage between capital vs. labor income, TQM/Six Sigma production methods, global competition and income inequality. Let me parse it out.

On the surface, if the claim is to be taken at face value (post-capitalism implying that the importance of capital is reduced or disappears), the claim is refuted by simply looking at the national income accounts. Margaret Jacobson and Filippo Occhino's Labor's Declining Share of Income and Rising Inequality, is a reasonable synopsis. The labor incomes trends are captured in stark simplicity in one graph. Labor's share of national income has declined 3-8% since the eighties. This trend is evident in other OECD countries as well.

The obverse is of course true, capital income is playing an increasing role in national (and personal income). So much for post-capitalism. Growing capitalism is the better description. This is caveated by the acknowledgement that these are trend numbers and they fluctuate with the economic cycle. It is conceivable that the trend might reverse itself, just as it is conceivable that it might accelerate. My money is on the latter for the reasons outlined below.

What are the critical trends in market performance since the 1980s which might have caused a decrease in labor income as a share of national income? Two are obvious and much discussed, 1) globalization and 2) capital labor substitution arising from technology costs. Globalization is reasonably straightforward as an explanatory variable. As the economies of the world have become more integrated (facilitated by improved logistics and supply chains in addition to the more obvious trade treaties), it has allowed for specialization and comparative advantage. Labor intensive activities have moved to low labor cost locations, reducing the amount of labor income in the home country (while also reducing the cost of living). At the same time, Moore's Law has dramatically reduced the cost of technology, accelerating the rate of capital substitution. Simplistically, at some point the cost of a human employee on the assembly line exceeds the cost of a robot.

But that's not all that was happening in the 1980s. Moore's Law was not only about reduced computing costs. It was about miniaturization and digitization as well. Chip technology and digital signals have been displacing electromechanical devices and analog signals. This massive replacement is seen everywhere from the phones we use, the watches we wear and the cars we drive. What we consume in terms of consumer products and services incorporate more complicated (more parts and linear processes) and complex (more parts interacting in non-linear fashions) technologies than ever. We are moving from lower causal density and complexity to higher causal density and complexity.

Which leads to the second major trend from the eighties onwards and which has not been much commented on. The pervasive implementation of Total Quality Management (TQM) and Six Sigma production philosophies and the attendant enabling computer systems, in particular Enterprise Resource Planning (ERP) such as Oracle and SAP.

Our production process are characterized by far greater degrees of causal density and complexity and they are producing goods and services that in themselves are also much more causally dense and complex. When your car won't start, you can't just check the battery, spark plugs and fuel line anymore and expect to solve the problem. You need a $10,000 diagnostic tool that will locate the fault with 99.999666% accuracy.

At six sigma levels of efficiency, production costs really have two components. There is the traditional straight forward direct and allocated costs of production which are reliable, predictable and comparatively low. On top of that, you have to take into account the cost of quality, the cost of not doing it right the first time. When there was low automation and low production tolerances, the cost of fixing something at the end of a production run was relatively low. In the 1950s it used to take 300 man hours to produce and assemble a car (hypothetical number). Today it takes 35 hours. Say you have the same error rate today as in 1950 (implausible) of 1%. For every 100 cars you produce, one needs end-of-assembly-line rectification that takes 3 hours. In 1950, making that repair causes your labor costs to rise by 1%. In 2013, your labor costs increase by 10%.

The consequence is that our production processes have in many respects outstripped human tolerances. Humans don't perform at 99.999666% levels of reliability. It is not so much that humans are more or less expensive than automated processes (though that is a factor) but rather that they are much less reliable. The cost of low reliability with causally dense and complex products with exceptionally high degrees of precision can be catastrophic. So people get engineered out of the production process. That would explain the jobless recoveries of the 2001 and 2008 recessions.

See U.S. Textile Plants Return, With Floors Largely Empty of People by Stephanie Clifford for an example of some of these issues.

How does this relate to the OECD rise in income inequality? As production processes and the products and services they produce become much more causally dense, complex, and precise, they require fewer and fewer employees owing to capital-labor substitution arising in part because of the lower reliability of humans in a Six Sigma environment. The Knowledge, Experience, Skills, Values and Behaviors (KESVB) necessary to succeed in a Six Sigma environment are scarce, very specific, and not easily created through training. See James J. Heckman for the rising importance of non-cognitive skills versus traditional cognitive skills.

We are headed towards a binary economy. One part of the economy is constituted of those local, non-process (i.e. batch manufacturing), non-predictable jobs. Within this part of the economy there are in turn two parts, one of which is high cognitive skills and high non-cognitive skills dependent (think plumbers, electricians, high end restaurant or retail servers) and the other is high non-cognitive skills but low on cognitive skills (hospital attendants, tellers, low end retail). Virtually gone are those jobs with low cognitive and low non-cognitive requirements.

The other part of the economy is high cognitive and high non-cognitive at the far right of the distribution curve: physicians, design engineers, software programming, high end sales, etc. The return to these individuals is exceptional as is characteristic in a highly differentiated, winner takes all economy.

So in a Six Sigma economy, the returns are disproportionate to the most sought after with the scarcest KESVB profiles (a small portion of the population), they are adequate but stagnant for those transitioning away from low cognitive low non-cognitive roles. The returns are worst or non-existent for those low cognitive and low non-cognitive roles partly because there are few if any such roles in a Six Sigma environment and those few that do exist are subject to intense competition.

The upshot is that in an environment of global competition, permeated by Six Sigma production precision, there are fewer and fewer positions owing to capital labor substitution and those roles that do remain are so demanding of very rare and precise combinations of KESVB that the consequence is jobless recoveries and rising income inequality.

Five beneficial cognitive biases

We usually, and correctly, regard cognitive biases as a problem that interferes with our correct perception of reality and are therefore potentially deleterious to good decision-making. Dearing makes the case that there are instances where cognitive biases are associated with good outcomes. From The Five Cognitive Distortions of People Who Get Stuff Done by Michael C. Dearing. Purely hypothetical but from an informed and experienced source so worth considering.

The five cognitive biases identified as associated with high productivity are:
Personal exceptionalism
Dichotomous thinking
Correct overgeneralization
Blank canvas thinking

Personal Exceptionalism - The confidence arising from such a cognitive bias increases resilience and stamina in the face of adversity.

Dichotomous Thinking - Dearing defines it as "being extremely judgmental of people, experiences, things; highly opinionated at the extremes; sees black and white, little grey." I would modify this to my long standing maxim. Success arises from nuanced thinking and binary decision-making. It is critical, particularly from a risk assessment perspective, to have an open and nuanced decision consideration process. Once the decision is made though, there is value in treating the decision as fixed. If you tinker with a decision, always seeking to refine it based on constantly emerging information, you risk getting stuck in the mud and not progressing. You can militate against that with the cognitive decision to view a refined and nuanced decision as binary, the only right decision. That orientation has to be a bias, i.e. a predisposition but a predisposition which can be abandoned when circumstances demand.

Correct Overgeneralization - Dearing: "Making universal judgments from limited observations and being right a lot of the time." See Gladwell in Blink and Outliers. I view this as being so expert, with corresponding reliance on implicit knowledge rather than explicit knowledge, that the success rate seems inexplicable.

Blank Canvas Thinking - Dearing: "Sees own life as a blank canvas, not a paint-by-numbers." Not sure exactly how to understand this. I am guessing that he is getting at people who are not constrained in their vision by current insoluble limits.

Schumpeterianism - Dearing: "Sees creative destruction as natural, necessary, and as their vocation." I would add, the capacity to compartmentalize the consequences of schumpeterianism so that the benefits can properly be set against the costs. My experience is that most individuals and organizations substantially overweight the benefits of the current state, even when it is problematic, because of a desire to avoid the negative consequences that will have to be incurred to achieve a better future state. When you can compartmentalize the costs as a necessary consequence, it becomes easier to look at the respective costs and benefits of the current and future state.

Saturday, September 21, 2013

It seemed unlikely that they would send the beer back

From The Sex Lives of Cannibals by J. Maarten Troost, page 75. The Minister of Health's attitude is a refreshing concern about the interests of the citizens that puts his OECD peers to shame.
Despite the excesses though, I found I quite liked the easygoing, anything goes, why-not-have-another-beer air of Tarawa. It was refreshingly different from the prissiness that characterizes life in the Northwest quadrant of Washington, D.C. Government leaders in Kiribati were of an entirely different disposition than the lifeless ogres of Washington. At one function, I asked the minister of health why cigarettes were so cheap in Kiribati. We both had a cigarette in one hand and a can of Victoria Bitter in the other. "Because otherwise the people can't afford them," he said, an answer I liked very much. At the same event, the secretary of health, a doctor by training and a politician by temperament, insisted that we take a few beers with us for the drive home. "I always like to have one for the road," he said, waving us off. Some might regard this as reprehensible, but I think this why-the-fuck-not attitude was reflective of a certain joie de vivre. The daily consumption of several cans of Victoria Bitter became an integral part of my well-being, possibly because I am of Dutch-Czech stock and thus warmly inclined toward beer, but also because it is immensely fun to quaff beers with your loved one while sitting at reef's edge watching the world's most spectacular sunsets. Plus, beer tends to be parasite-free and calorie-laden, two very useful attributes in Tarawa.

So imagine my despair when I walked into the Angirota Store to buy a six-pack only to be confronted by a glaringly empty refrigerator. "Bia?" I asked hopefully, using the I-Kiribati word for beer, which sounds very much like the Australian word for beer. "Akia," I was told. Akia is the most commonly used word in the Kiribati language, which can be roughly translated as "unavailable." The words akia te bia are the most painful words I have heard spoken. The owner of the shop, Bourere, a large man with the grooviest side-burns this side of the dateline, was as stunned as I was. As the only local capitalist on the island, he was no doubt aware of what the absence of beer would do to his profit margins.

"What happened?" I asked him.

"Kiritimati Island," he muttered darkly. "They sent the beer to Kirimati Island."

Kirimati Island was approximately two thousand miles east of Tarawa. It seemed unlikely that they would send the beer back.

Your lordship's mistress, or your lordship's principles

Wit can have a long half life. An exchange between Lord Sandwich and Samuel Foote in the late 1700s. Quoted by Percival Stockdale in The Memoirs of the Life and Writings of Percival Stockdale, 1809.
"Foote," (said lord Sandwich) "I have often wondered what catastrophe would bring you to your end; but I think, that you must either die of the pox, or the halter."
"My lord," (replied Foote instantaneously) "that will depend upon one of two contingencies; — whether I embrace your lordship's mistress, or your lordship's principles."

Friday, September 20, 2013

People's natural predisposition not to see anything they don't want to, weren't expecting, or can't explain

Saw this referenced but had to go investigate even though I had read the book. The SEP (Somebody Else's Problem ) effect. From Wikipedia:
Within the novel Life, the Universe and Everything of Douglas Adams's "The Hitchhiker's Guide to the Galaxy" his character Ford Prefect describes Somebody Else's Problem as:
An SEP is something we can't see, or don't see, or our brain doesn't let us see, because we think that it's somebody else's problem.... The brain just edits it out, it's like a blind spot. If you look at it directly you won't see it unless you know precisely what it is. Your only hope is to catch it by surprise out of the corner of your eye.
The narration then explains:
The technology involved in making something properly invisible is so mind-bogglingly complex that 999,999,999 times out of a billion it's simpler just to take the thing away and do without it....... The "Somebody Else's Problem field" is much simpler, more effective, and "can be run for over a hundred years on a single torch battery."
This is because it relies on people's natural predisposition not to see anything they don't want to, weren't expecting, or can't explain.blockquote>

Constrained by complexity

Various quotes from economist Edgar R. Fiedler
A cardinal principle of Total Quality escapes too many managers: you cannot continuously improve interdependent systems and processes until you progressively perfect interdependent, interpersonal relationships.
TQM, Continuous Improvement and Process Reengineering are all valuable tools; indispensable in the modern competitive economy in fact. But they are constrained by complexity. Mechanistic causal density is usually exacerbated by chaotic interdependent relationships.

Thursday, September 19, 2013

Spurious inspiration

In a world of infinite variety and contingencies, there are all sorts of outlandish outcomes which seem improbable. I came across an example in this book review, Who Was J. D. Salinger? by Adam Gopnik. Musician's work is used by a fan as an inspiration to commit murder and then the musician is in turn murdered by a different fan claiming to have been inspired by the work of another writer. Our instinct to find patterns tempts us to see something significant in what are essentially independent events with no connection.

The passage is below but the nub is that Charles Manson took inspiration for his murder spree from Helter Skelter by the Beatles. Later, one of the Beatles, John Lennon, is subsequently murdered by Mark Chapman who claimed to have been inspired by reading Catcher in the Rye. Not a perfect symmetry but simply an oddity arising from immense complexity.

Sometime in late 1968, Charles Manson was listening to “The Beatles,” to use the proper name of what’s most often called the White Album, and decided that “Helter Skelter,” an upbeat rocker about a roller coaster at an English amusement park, was a call to black insurrection in America, to be set off by the brutal murders of an actress, a hairdresser, a coffee heiress, and several other innocents. The question that this horrible incident has always provoked was not just: How could anyone have thought anything so murderously insane? It was also: Why was Charles Manson listening with such hallucinative intensity to an album whose other highlights were John Lennon’s delicate bossa-nova ballad to his mother Julia, Paul McCartney’s lyrical invocation of Noël Coward, and George Harrison’s mystical celebration of the varieties in a box of English chocolates—not to mention a nine-minute-long tribute to concrete music? Why did he pay such close attention to something so inherently unsympathetic to his, ahem, sensibility?

The simple, sad answer is: because everyone did. There are certain artists, and some art, that become so popular that everyone peers into them, finding whatever they will, however they will. All the usual tests of sympathy, natural feeling, and do-I-really-respond-to-this? are lost in the gravitational pull of ubiquity. Not surprisingly, the artists who are, briefly, the beneficiaries and thereafter the victims of this kind of attention get totally freaked out by the intensity of it all: not too long after, Bob Dylan, another of the tribe, recorded his notorious “Self Portrait,” just back out in a new version, trying to demonstrate to his admirers the simple truth that he was an American singer, with a broad taste for American songs, not some kind of guru or mystic or oracle, please go away. It didn’t help.

These questions come to mind in reading David Shields and Shane Salerno’s heavily hyped biography “Salinger” (Simon & Schuster), not least because, in one of the most bizarre sections of a bizarre book, they themselves raise the issue of murder-by-bad-reading, in connection with the murder (fearful symmetry!) of the Beatles’ John Lennon by Mark Chapman, who happened to have hallucinated a motive within “The Catcher in the Rye.” Shields and Salerno’s own peculiar view of Salinger forces them to insist that Chapman was not just a crazy hallucinant, but in his own misguided way an insightful reader, responding to the “huge amount of psychic violence in the book.”

Wednesday, September 18, 2013

Nobody ever drowned in his own sweat.

Ann Landers quotes from Brainy Quote
Maturity: Be able to stick with a job until it is finished. Be able to bear an injustice without having to get even. Be able to carry money without spending it. Do your duty without being supervised.

Opportunities are usually disguised as hard work, so most people don't recognize them.

The Lord gave us two ends - one to sit on and the other to think with. Success depends on which one we use the most.

If you marry a man who cheats on his wife, you'll be married to a man who cheats on his wife.

Keep in mind that the true measure of an individual is how he treats a person who can do him absolutely no good.

Class is the sure-footedness that comes with having proved you can meet life.

Don't accept your dog's admiration as conclusive evidence that you are wonderful.

Nobody ever drowned in his own sweat.

The trouble with talking too fast is you may say something you haven't thought of yet.

Too many people today know the price of everything and the value of nothing.

Know when to tune out, if you listen to too much advice you may wind up making other peoples mistakes.

Tuesday, September 17, 2013

A useful focus on potentially beneficial actions

The post just prior, The paradox of public discourse, was originally written a week or two ago and then put in the scheduled queue. It popped up today in an oddly serendipitous fashion.

Articles and research on three topics over the past few days led me to the train of thought that our ideology (in the sense of having a fixed vision) is crowding out from the public conversation what seem to be obvious alternate conclusions. Examples were forming in my mind when up popped the two week old The paradox of public discourse. My observation is not about the relative merits of a particular ideology (as I am using the term) but rather how a fixed view crowds out more empirical conclusions. I suspect that all parties hold their views with the very best of intentions, regardless of the relative benefit of the view.

Specifically, I am wondering if the fixation on gun control is obfuscating the issue of mental illness, whether the concern about disparate impact/diversity/discrimination is ignoring the consequences of individual choice and finally whether the fascination with income inequality is masking the real issue of low personal productivity.

I'll not dredge up the various reports and research that were the catalyst to the thought but simply try to summarize the case.

Gun Control versus Mental Health - The tragic mass shooting at the Washington Navy Yard occurred yesterday and the first background information is beginning to trickle in, Signs of Mental Illness Seen in Navy Gunman for Decade by Joseph Goldstein, Sarah Maslin Nir, and Timothy Williams. What have been the mass shootings of the past five years? I am recalling at least Newton, Connecticut; Aurora, Colorado; Seattle, Washington; Oakland, California (Oikos University); Tucson, Arizona (Rep. Gifford); Fort Hood, Texas; Huntsville, Alabama; Blacksburg, Virginia. While each and all of these have prompted calls for increased gun control (a logical argument independent of likely efficacy), there is another common thread that seems to be studiously unexamined. In all instances, the shooters had a documented history of mental illness and/or a pattern of unstable behavior. Mental health is far from my field of expertise but it seems logical to ask the question, how is it that so many unstable people are free to commit these acts? Is it that our mental health knowledge is so limited that we simply cannot predict who is at risk of uncontrolled violence? Is it that systemically we are so protective of mental health privacy that no one is in a position to connect the dots? Is it that the risk to a mental health practitioner of profiling someone as a danger is so high that we have precluded that action? I really don't know but I wonder if the chimera of gun control isn't masking a much larger and more serious issue of untreated mental health.

Disparate Impact/Diversity/Discrimination versus Individual Choice - This has shown up in a couple of articles. Again, I am willing to believe that at least some material portion of those concerned with the issue of disparate impact/diversity and discrimination are well intentioned seekers of greater fairness. I have no objection to the goal. It is the cognitive process that allows them to ignore alternate, more Ockhamesque explanations that might have a greater probability of being more accurate that concerns me. For example, today, I came across this effort to quantify diversity in children's literature, Diversity in ALA’s Best Fiction for Young Adults. They are looking at the degree of racial representation, LGBT representation and disabilities representation in children's books published 2011-2013. Fair enough. Depending on your particular focus of concern some are proportionately represented to the population and others are significantly underrepresented. But there is no logical reason that authors or characters should be proportionately representative of the population if, in a multicultural and diverse society, there are highly variable degrees of variance in book reading and book buying. There is actually a fair amount of evidence that representation distribution follows consumption distribution. In addition, it interesting to note that the common discrimination issue of gender is omitted here without comment despite the appearance that there is a very material underrepresentation of men as authors. In this example, the effort to focus on disparate impact tends to confuse the real issue. If different groups are consuming books at materially different rates, and if there is benefit to enthusiastic reading, then tackling the reading deficit is where you really want to focus your efforts, not so much on improving representation. Improve consumption and representation will likely follow.

The other example is that of the myth of unequal pay for identical work based on gender. There is a thicket of academic work in the US and the OECD that identifies that there is little gender compensation inequity, that macro averages are explained almost entirely by differences in hours worked, continuity of employment, and choice of profession/industry. A couple of recent articles from somewhat polemical pundits reference the academic studies; The Gender Wage Gap Lie by Hanna Rosin and Lessons from a feminist paradise on Equal Pay Day by Christina Hoff Sommers.

The issue here is not whether there aren't vestiges of individual discrimination here and there. Everyone is discriminated against in some fashion at some time by some people. The interesting issue, to me, is whether there is enough evidence of systemic discrimination with material consequences (it seems to me there is not) to warrant not examining whether there aren't some benefits to instead looking at why people make the choices they do.

Finally, there is Income Inequality versus personal productivity. Income inequality is rising in all OECD countries for reasons that are not fully comprehended. There is nothing in economic theory that indicates that income inequality within the ranges we are seeing have any systemic negative consequences. There is material disagreement as to what are even the best ways to measure income inequality, each measure having pros and cons. By focusing on the putative unfairness of income inequality (a subjective assessment based on values) we seem to be taking the focus away from what seems to me to be the real issue, what can we do to help those that are the least productive to become more productive and self-sustaining.

It seems to me that focusing on improving mental health care, improving breadth of personal career choices, and improving personal productivity are dramatically better issues to focus on and beneficial to both individuals and the community at large. Instead, we seem to reflexively fall into the jaded, reflexive ideological barking that prevents a useful focus on potentially beneficial actions.

The paradox of public discourse

An astute observation in The Paranoid Style in Economics by Raghuram Rajan.
All of this implies that economic policymakers require an enormous dose of humility, openness to various alternatives (including the possibility that they might be wrong), and a willingness to experiment. This does not mean that our economic knowledge cannot guide us, only that what works in theory – or worked in the past or elsewhere – should be prescribed with an appropriate degree of self-doubt.

But, for economists who actively engage the public, it is hard to influence hearts and minds by qualifying one’s analysis and hedging one’s prescriptions. Better to assert one’s knowledge unequivocally, especially if past academic honors certify one’s claims of expertise. This is not an entirely bad approach if it results in sharper public debate.

The dark side of such certitude, however, is the way it influences how these economists engage contrary opinions. How do you convince your passionate followers if other, equally credentialed, economists take the opposite view? All too often, the path to easy influence is to impugn the other side’s motives and methods, rather than recognizing and challenging an opposing argument’s points. Instead of fostering public dialogue and educating the public, the public is often left in the dark. And it discourages younger, less credentialed economists from entering the public discourse.
The paradox is this - You are a knowledgeable individual with experience and knowledge to contribute to the public discourse on some matter. To influence the public debate you have to break through the noise and distractions of public discourse. To break through you have to have a simple and stark claim. With simple and stark claims you lose nuance and accuracy. Without nuance and accuracy you can engage in the conversation but primarily by attacking and rebutting other similarly indefensible claims.

Monday, September 16, 2013

Those poor people want more money

Economics/Sociology Phrase Book by Jeffrey A. Smith and Kermit Daniel. Pretty funny.
To see how to use the phrase book, consider the sentence
Those poor people need more money.
Look up the word "need" in the Sociology column and replace it with the corresponding economics term, to form the translated sentence
Those poor people want more money.
Wasn't that easy? Next time you want to talk to a Sociologist, or - perish the thought - read an article in a Sociology journal, just keep the phrase book handy and you'll have no trouble at all.
The first few translations:
Sociological Term or Phrase translated to the Economics Term or Phrase
rational behavior - the use of decision rules based on explicit mathematical calculation, combined with a utility function in which monetary wealth is the only argument.
need - want
different value orientations - laziness
is correlated with - is correlated with
determines - is correlated with
is caused by - is correlated with

Love the capture of the confusion regarding correlation.

Xenophon and De Soto

Sunday was a quiet day allowing me to complete a book I purchased several years ago, Xenophon's March by John Prevas. It has been with me on numerous trips, probably been to half a dozen countries, but for one reason or another, I never got past the first few places before it was displaced by something of more immediate urgency or interest. I have now finished it and I very much enjoyed it.

Xenophon's March is the account of the 10,000 Greek mercenary army hired by Cyrus in his bid to unseat his brother Artaxerxes, King of Kings, ruler of the Persian Empire, in 401 B.C. The Greeks marched 1,500 mile from their homeland to Babylon, fought a battle with Artaxerxes in which they distinguished themselves and were victorious on their part of the field. Regrettably for them though, Cyrus was cut down and decapitated. 1,500 miles from home and in the midst of barbarian hordes, the Greeks found themselves in rather desperate straights. But they made it home.

One aspect which never gets much discussed in ancient accounts is the issue of logistics and supplies. How do you feed, water and maintain a mobile army of 10,000 in difficult terrain among hostile inhabitants? We often set great store on the near-miraculous destructive power of our modern weapons but often the real determinant in any engagement, particularly of any duration, is supplies and logistics.

Following the account in Xenophon's March it is easy to see how they did it. As they marched, days at a time, passing through villages and towns, sustaining themselves in between by whatever they are carrying in wagons, there is a pattern of stark simplicity. If they are in territory of Greeks or allies, they pass through with little disruption other than to trade for supplies. What did they have to trade, in an era dominated by barter? Loot and slaves.

Because if you weren't an ally or Greek, the other two patterns of interaction were brutally simple. Where there was no animosity, they simply took all the supplies they needed, loot of any value, and young women as concubines and young men as slaves for labor. They ate the supplies and sold the loot, concubines and slaves as they needed. And those were the relatively lucky villages. The old and young were left behind to fare as best they could.

If the Greeks were in a region where their progression was actively resisted, engagement with the inhabitants of local villages was simpler yet. They took what they needed and killed and destroyed everything else. Burned to the ground. The brutality was extensive and complete.

So basically, if there was an ancient army coming through, your prospects as a village were 1) trade, 2) pillage, 3) complete destruction.

In thinking about the supplies and logistics and the pattern of engagement, it seemed to me that this was a pattern I recognized from somewhere else. It then occurred to me that this is pretty much what is described in the account of Hernando De Soto's progress through the southeast in 1539-1542 when he and over 600 men, 200 horses and 300 pigs marched from Florida, through Georgia, South Carolina, North Carolina, Tennessee, Alabama, Mississippi, Arkansas, Louisiana to Texas, from whence they returned to Mexico City. Only some 300 men survived the three year expedition.

From 401 B.C. to 1542 AD you have virtually identical supply and logistics patterns for armies of exploration and conquest. Patterns that were devastatingly destructive to peoples and communities along the route of march. Interesting to see the same patterns in such different historical contexts.

Sunday, September 15, 2013

The genius of complicated stupid moves

I've come across this quote a couple of times in the past six months. Quoted by Miles Copeland in The Game of Nations, p. 216.
The genius of you Americans is that you never make clear-cut stupid moves, only complicated stupid moves which make us wonder at the possibility that there may be something to them we are missing.

Saturday, September 14, 2013

Those who have knowledge, don't predict. Those who predict, don't have knowledge.

Lao Tzu, 6th Century BC Chinese Poet
Those who have knowledge, don't predict. Those who predict, don't have knowledge.

Friday, September 13, 2013

If you have to forecast, forecast often.

Various quotes from economist Edgar R. Fiedler.
The herd instinct among forecasters makes sheep look like independent thinkers.

If you have to forecast, forecast often.

The things most people want to know about are usually none of their business.

A cardinal principle of Total Quality escapes too many managers: you cannot continuously improve interdependent systems and processes until you progressively perfect interdependent, interpersonal relationships.

If all the economists were laid end to end, they'd never reach a conclusion.

Thursday, September 12, 2013

Some of them would not be backward even about scheming to suppress and silence their adversaries

Dialogue Concerning the Two Chief World Systems (1632) by Galileo Galilei, p. 322
In the long run my observations have convinced me that some men, reasoning preposterously, first establish some conclusion in their minds which, either because of its being their own or because of their having received it from some person who has their entire confidence, impresses them so deeply that one finds it impossible ever to get it out of their heads. Such arguments in support of their fixed idea as they hit upon themselves or hear set forth by others, no matter how simple and stupid these may be, gain their instant acceptance and applause. On the other hand whatever is brought forward against it, however ingenious and conclusive, they receive with disdain or with hot rage — if indeed it does not make them ill. Beside themselves with passion, some of them would not be backward even about scheming to suppress and silence their adversaries.

Wednesday, September 11, 2013

Any headline which ends in a question mark can be answered by the word no

Came across a reference to Betteridge's law the other day. From Wikipedia, footnotes omitted:
Betteridge's law of headlines is an adage that states, "Any headline which ends in a question mark can be answered by the word no." It is named after Ian Betteridge, a British technology journalist, although the general concept is much older. The observation has also been called "Davis' law" or just the "journalistic principle."

Betteridge explained the concept in a February 2009 article, regarding a TechCrunch article with the headline "Did Just Hand Over User Listening Data To the RIAA?":
This story is a great demonstration of my maxim that any headline which ends in a question mark can be answered by the word "no." The reason why journalists use that style of headline is that they know the story is probably bullshit, and don’t actually have the sources and facts to back it up, but still want to run it.

The means of defence against foreign danger have been always the instruments of tyranny at home.

James Madison in a Speech, Constitutional Convention (1787-06-29), from Max Farrand's Records of the Federal Convention of 1787, vol. I [1] (1911), p. 465
In time of actual war, great discretionary powers are constantly given to the Executive Magistrate. Constant apprehension of War, has the same tendency to render the head too large for the body. A standing military force, with an overgrown Executive will not long be safe companions to liberty. The means of defence against foreign danger have been always the instruments of tyranny at home. Among the Romans it was a standing maxim to excite a war, whenever a revolt was apprehended. Throughout all Europe, the armies kept up under the pretext of defending, have enslaved the people.

Tuesday, September 10, 2013

You’re a better writer than I am, so I figured I needed the extra hour

From Thanks, Mr. L: Elmore Leonard’s life-changing advice by Robert Ferrigno.

He leaned forward in his chair and gave me the advice that changed my life. I’ve passed it on a lot of times since, always giving credit to the master. It’s easy advice to give, but hard to put into practice.
What time you get up? he asked me.

Seven, I told him. I have to be at the office by nine.

It was the same way at the agency, he said. You want to write a novel, you have to get up at 5. That way you have two hours every day to write before your normal day begins.

Five a.m.? I’m a night person, I said.

Mr. L. smiled again. Gave a little shrug.

Okay. I’ll get up at five.
You get up at five and you start work, said Mr. L., no messing around making coffee or buttering toast. You sit down and start writing. At 7 you stop, if you’re in the middle of a sentence, you stop, and then you make coffee, take a shower, have breakfast, whatever you normally do. You’re done working on the novel for the day. You do that every day and at the end of a year, you’ll have a novel. Then you send it out to an agent and you start on the next one.

I thanked him and apologized for being such a lousy interviewer, and he didn’t contradict me.
A couple of years later I sent him the galley of The Horse Latitudes. He liked it. He blurbed it. My publisher levitated and put it on the jacket. The book made a splash. Time magazine called it “the fiction debut of the season,” although to be fair, it was only April. A few days after the major reviews, I got a call at home from Mr. L. He was genuinely happy for me. I thanked him, told him he had changed my life and the life of my family, and I would always be grateful. He said he gave that advice all the time and that most writers lasted about a week on the schedule before falling off the wagon. I told him I had lied to him when I said I would get up every day at five a.m. as he had suggested. Yeah? His voice on the line tense now. Yes sir, I told him, I got up at four a.m. every day for the last year and a half. You’re a better writer than I am, so I figured I needed the extra hour. It made him laugh, a dry cackle that kind of hung up at the back of his throat. A beautiful laugh.

Monday, September 9, 2013

Sunday, September 8, 2013

A greater share of happy serendipity

In the past month I had three "Oh, I didn't realize that" moments related to authors.

The first was in regard to The Closing of the American Mind by Bloom, the second was in regard to Elizabeth Peters and the third with regard to Melvin Konner.

I took my daughter up to her university orientation and while in town visited a used bookstore. I spotted The Closing of the American Mind and purchased it for a dollar. This came out in 1987 when I was a couple of years in to my management consulting career and working 80-100 hour weeks. I kept track of headlines and was aware of the splash that The Closing of the American Mind made but had no bandwidth to read it. Later, as I got time management under control and consolidated my career and began investing more time in elective reading again, I collected more volumes than I was ever able to read. I ran through a series of Harold Bloom books, impressed by his erudition but put off by his arrogance. It was only as I reached for The Closing of the American Mind in that dusty used bookstore that it suddenly registered for the first time - Aha, by Allan Bloom, not Harold Bloom. I think The Closing of the American Mind will likely still sit a long time before I get around to reading it, but now, a shorter time than if I still were under the impression that it was by Harold Bloom.

As a young boy, 10-15, I was enamored with archaeology in general and Egyptology in particular. I recall with clarity three books that were instrumental in kindling that enduring interest. Temples, Tombs, and Hieroglyphs by Barbara Mertz, Gods, Graves and Scholars by C.W. Ceram, and Introducing Archaeology by Magnus Magnusson. I think I purchased all three in the old Harrods department store on Brompton Road circa 1970 which at that time had a rather excellent children's bookstore. Loved all three books but Mertz's book was probably my gateway into Egyptology.

She passed away August 8th, 2013 and in reading her obituary, I was astounded to see that she had become a very prolific mystery and adventure writer from the 1970s onward under the pseudonyms Elizabeth Peters and Barbara Michaels. Really prolific. In recent years I have taken to reading mysteries at the beach and to leaven my otherwise fairly dense reading choices. In fact, I had at some point in the past purchased a couple of Elizabeth Peters mystery novels and just hadn't gotten to them. Now knowing that they were written by Mertz, I have pulled one out and begun reading it. A wonderful mix of both Egyptology and mystery adventure. Excellent.

The final discovery was more prosaic. Melvin Kotter is a professor of anthropology at Emory University. A couple of years ago I read several chapters of his The Tangled Wing: Biological Constraints on the Human Spirit, an ambitious synthesis of research in biology, psychology, anthropology, and philosophy. In the past year, I picked up a copy of Unsettled, An Anthropology of the Jews. It was only as I picked it out of a stack to begin reading a couple of weeks ago that I realized it was also by Melvin Konner.

I am afraid there is no particular pattern here. Just the observation that citizenship in bibliopolis ensures its denizens a greater share of happy serendipity than others might enjoy.

Saturday, September 7, 2013

The positive effect of eliminating statistical discrimination

From Perceived Criminality, Criminal Background Checks, and the Racial Hiring Practices of Employers by Harry J. Holzer and Steven Raphael.

I have long accepted as a working hypothesis that criminal background-checks were likely to have a disparate impact on African-Americans. At the same time, I have also believed that it was entirely within the right of the employer to perform such background checks. This research suggests that in fact, for both employers and employees, that criminal background checks are beneficial.
The findings of this study are several. To begin, the empirical estimates indicate that employers who perform criminal background checks are more likely to hire black applicants than employers that do not. This positive association remains even after adjusting for an establishment’s spatial proximity to black residential areas and for the proportion of applications that come from African Americans. In the context of the theoretical arguments discussed above, this positive net effect indicates that the adverse consequence of employer-initiated background checks on the likelihood of hiring African Americans is more than offset by the positive effect of eliminating statistical discrimination. To be sure, the group of workers who are excluded by a background check are surely different from the group of workers who are harmed by incorrect perceptions regarding their criminal histories. In other words, behind the net changes are two offsetting gross effects that impact the welfare of alternative groups of African American workers.

In addition, we find that the positive effect of criminal background checks on the likelihood that an employer hires a black applicant is larger among firms that are unwilling to hire ex-offenders. This pattern is consistent with the proposition that employers with a particularly strong aversion to exoffenders may be more likely to overestimate the relationship between criminality and race and hence hire too few African Americans as a result.
The logic of disparate impact is reasonable but the research suggests that greater transparency reduces the discount costs (in terms of risk) of hiring individuals with non-standard backgrounds thereby increasing opportunity. Specifically, when forced to function in an information vacuum, companies otherwise disposed to hiring non-standard employees substitute stereotypes and estimates in the place of hard numbers, to the detriment of all applicants.

There is always value in checking revealed behavior in empirical studies over relying on theoretical hypotheses.

Another example of good intentions (get rid of background checks) leading to negative outcomes.

Friday, September 6, 2013

Life is short, and Art long; the crisis fleeting; experience perilous, and decision difficult.

Aphorisms by Hippocrates. The opening line:
Life is short, and Art long; the crisis fleeting; experience perilous, and decision difficult. The physician must not only be prepared to do what is right himself, but also to make the patient, the attendants, and externals cooperate.

Thursday, September 5, 2013

The brittleness of tactical decision-making

From The Making of the Obesity Epidemic: How Food Activism Led Public Health Astray by Helen Lee.
It may be that the problems associated with obesity are impossible to disentangle­­ from the problems associated with simply being poor. Lifestyle factors, including differences in smoking, diet, and exercise, can’t fully explain the life expectancy gaps between the rich and poor, and neither can health care coverage­­, especially since most elderly Americans have the same health insurance payer source, Medicare. Education and income remain the most salient predictors­­ of higher risk of death, even after age, sex, race or ethnicity, health insur­­ance, smoking, and BMI are taken into account.50

This suggests that poor health outcomes associated with obesity among low-income Americans probably have more to do with being poor than being obese. One obesity prevention worker doing outreach in a poor African American neighborhood in Oklahoma recently told a New York Times reporter, “If you ask, ‘What would help your health the most?,’ people say, ‘More money.’”51 The answer is understandable. With limited resources and an uncertain future, poor Americans must make trade-off decisions frequently, at times creating a vicious spiral of self-fulfilling prophesies. “They say, ‘When my time is up, it’s up,’” a grocery store cashier in the same neighborhood told the Times. Poor youth, in particular, as classic ethnographies like Ain’t No Makin’ It and Learning to Labor have eloquently documented, are prone to believe that their paths to mobility are highly constrained, no matter how hard they work to prove otherwise.

At the same time, a growing body of sociological research finds that the poor have multiple sources of social capital and are active subjects shaping the world around them, albeit in ways that are sometimes self-defeating.52 But instead of embracing the agency of the poor, focusing on policy interventions that reinforce behaviors associated with better life outcomes, public health officials and philanthropies have too often done the opposite, embracing obesity strategies that reinforce the notion that the poor are victims of an environment that is rigged against them.

During the latter half of the 20th century, the public health community came to see our overall health as irreducible to single factors. Seven years after he raised the alarm bell at the APHA about obesity, Dr. Lester Breslow began what would become a landmark study in Alameda County, California. He found that a 45-year-old with healthy practices in at least six of seven areas — drinking moderately or not at all, not smoking, managing one’s weight, getting regular sleep, exercising, eating regular meals, and eating breakfast — could expect to live 11 years longer than someone of the same age who followed good habits in just three or fewer. “In the long run, housing may be more important than hospitals­­ to health,” Breslow said. In early 2012, Breslow, who had gained the moniker “Mr. Public Health,” died at the age of 97.53
Two thoughts.

From this passage and others, the author leans towards ascribing outcomes to poverty. At the same time she identifies education attainment and income as the variables most predictive of outcomes. It appears to me that the evidence she has mustered indicates that the underlying root causes are at least in part behavioral. Specifically both income and education attainment are highly graduated towards increasing levels of planning and self-control. In other words, it looks like she stopped short in the root cause analysis.

In addition, over the years there have been a number of individuals who undertake a real-life experiment where they start the year with an entirely new identity, some nominal seed capital ($100, and suitcase of clothes for example), and then see how far they can get in the year with no other resources to call upon (and without leveraging their education certifications). Typically they end up the year just fine and with a modest nest egg. What these experiments all have in common is that the person undertaking it has four resources which cannot readily be monetized but are real none-the-less: 1) they have very high levels of self-discipline, 2) they have well-established confidence from prior attainment, 3) they have the certainty that should the experiment go pear-shaped, they have social and familial capital which they can fall back on, and 4) all the ones I have read of are typically recent college graduates, i.e. they are relatively advantaged in terms of time; the older you get, the less chance of recovery from bad decisions and therefore the more cautious you often become. There is no way for them to expunge these advantages but I suspect that they are very beneficial advantages which might influence them arriving at different tactical decisions than someone without those advantages. Which relates to the second thought.

The second thought is related to a telling sentence:
With limited resources and an uncertain future, poor Americans must make trade-off decisions frequently, at times creating a vicious spiral of self-fulfilling prophesies.
True as far as that goes but I think there is more to it than the sentence reveals. It is not only that you have to make more frequent tactical decisions. With no or limited resources, all your trade-off decisions have to be tactical and short term in nature. One cost of this circumstance is that you lose the compounding opportunity to take selected strategic risks. Your biggest payoffs tend to be from longer term decisions but if you are precluded from making those decisions, then you have to squeeze out the benefits strictly from your tactical decisions.

A second opportunity cost in shifting the portfolio of decisions from a mix of tactical and strategic to strictly tactical is that sequential tactical decision-making is more brittle and error prone. A strategic decision, once made, can still be revisited under the right circumstances - there is some modicum of flexibility and opportunity to mitigate if circumstances change. With tactical decisions, by their nature, consequences are near immediate - there is little opportunity to mitigate a poor decision arrived at in haste. Hence tactical decisions are more brittle.

This sheds light on the observation that the bottom quintile of Americans by income have the same income as middle quintile Europeans. How can they be in poverty then?

It would seem that the answer is possibly in part that the challenge for those in the bottom quintile is not so much an issue of resources as behaviors. They lack the self-discipline which enables such accomplishments as education attainment and long-term employment. But another portion might be that if they are stuck in tactical decision-making (regardless of income), they are always going to be exponentially prone to negative outcomes because tactical decision-making is simply more error prone.

Creeping like snail

Intending to link to William Shakespeare's All the World's a Stage monolgue, I find to my astonishment, that I don't have it posted here. Rectifying that omission.

From William Shakespeare, As You Like It, Act II, Scene VII.
All the world's a stage,
And all the men and women merely players:
They have their exits and their entrances;
And one man in his time plays many parts,
His acts being seven ages. At first, the infant,
Mewling and puking in the nurse's arms.
And then the whining school-boy, with his satchel
And shining morning face, creeping like snail
Unwillingly to school. And then the lover,
Sighing like furnace, with a woeful ballad
Made to his mistress' eyebrow. Then a soldier,
Full of strange oaths and bearded like the pard,
Jealous in honour, sudden and quick in quarrel,
Seeking the bubble reputation
Even in the cannon's mouth. And then the justice,
In fair round belly with good capon lined,
With eyes severe and beard of formal cut,
Full of wise saws and modern instances;
And so he plays his part. The sixth age shifts
Into the lean and slipper'd pantaloon,
With spectacles on nose and pouch on side,
His youthful hose, well saved, a world too wide
For his shrunk shank; and his big manly voice,
Turning again toward childish treble, pipes
And whistles in his sound. Last scene of all,
That ends this strange eventful history,
Is second childishness and mere oblivion,
Sans teeth, sans eyes, sans taste, sans everything.

Don't better your own lot unless you are willing to share your wealth with others

From Not Very Giving by Rob Reich. A great opinion piece for dissecting to unpack the logical fallacies, the unintended consequences, the factual errors and in general the structure of a poor argument.
Wanting to support your own children’s education is understandable, but it also has unintended, pernicious effects. The school foundations are legally registered as public charities. When donors give to their own child’s school or district, they are making a charitable contribution that the federal government treats in the same way as a donation to a food bank or disaster relief.

But charity like this is not relief for the poor. It is, in fact, the opposite. Private giving to public schools widens the gap between rich and poor. It exacerbates inequalities in financing. It is philanthropy in the service of conferring advantage on the already well-off.
The unexamined assumptions, the willful aversion to contemplating unintended outcomes, and the instances of blindness to the implications of his unstated assumptions are numerous and consequential.

Robert Reich was the Secretary of Labor under Clinton and is currently a Chancellor at University of California, Berkley. He writes op-ed pieces for the New York Times with some frequency. I enjoy reading him occasionally. In general I find that I can agree with some but not all of his goals, I often disagree with his prioritization of issues, and very frequently regard his proposed solutions to be as problematic if not more so than the problem he is trying to solve. That said, I read him because his positions are usually well argued.

So I was somewhat surprised to read this opinion piece which is of such inferior caliber. Step two was the realization that I had read a couple of other similarly anemic pieces by him in the past few months. Step three was the realization that Rob Reich of Stanford University is not the Robert Reich of Berkley. Both on the left in terms of political orientation and both energized by real societal issues but chalk and cheese in terms of being able to present a credible argument for their respective positions.

Wednesday, September 4, 2013

Sapere aude - Dare to be wise: begin!

Sapere aude - Dare to know, or dare to be wise, from Horace, The Epistles, Book 1, Epistle II.

Sapere aude: dare to be wise

Brigands rise in the depths of night to cut men’s throats:
Won’t you wake, to save yourself? Just as, you’ll have to
Run with dropsy, if you won’t start now when you’re sound,
So, if you don’t summon a book and a light before dawn,
If you don’t set your mind on honest aims and pursuits,
On waking, you’ll be tortured by envy or lust.
Why so quick to remove a speck from your eye, when
If it’s your mind, you put off the cure till next year?
Who’s started has half finished: dare to be wise: begin!
He who postpones the time for right-living resembles
The rustic who’s waiting until the river’s passed by:
Yet it glides on, and will roll on, gliding forever.
Wealth you want, and a fertile wife to bear children,
And uncultivated woods to be tamed by the plough:
But he who’s handed enough, shouldn’t long for more.
Houses and land, piles of bronze and gold, have never
Freed their owner’s sick body from fever, or his spirit
From care: if he wants to enjoy the goods he’s gathered
Their possessor must be well. House and fortune grant
As much pleasure to one who’s full of fear and craving
As painting to sore eyes, poultice to gouty joint,
Or lute to ears that ache from accumulated wax.
Unless the jar is clean whatever you pour in sours.

Tuesday, September 3, 2013

Gin a body meet a body Flyin’ through the air,

I never knew that one of the greatest scientist to ever live, James Clerk Maxwell, also wrote poetry. All the Poems of James Clerk Maxwell.

In the manner of Robert Burns' Comin' Thro' the Rye
In Memory of Edward Wilson, Who Repented of What Was in His Mind to Write after Section

Rigid Body (sings).

Gin a body meet a body
Flyin’ through the air,
Gin a body hit a body,
Will it fly? and where?
Ilka impact has its measure,
Ne’er a ane hae I,
Yet a’ the lads they measure me,
Or, at least, they try.

Gin a body meet a body
Altogether free,
How they travel afterwards
We do not always see.
Ilka problem has its method
By analytics high;
For me, I ken na ane o’ them,
But what the waur am I?