Tuesday, September 30, 2008
Tuesday, September 23, 2008
Clothes aren't about Comfort
Marriage isn't about Romance
Talk isn't about Info
Charity isn't about Helping
Church isn't about God
Medicine isn't about Health
Consulting isn't about Advice
School isn't about Learning
Research isn't about Progress
Politics isn't about Policy
High school students are easily engaged to elect class presidents, even though they have little idea what if any policies a class president might influence. Instead such elections are usually described as "popularity contests." That is, theses elections are about which school social factions are to have higher social status. If a jock wins, jocks have higher status. If your girlfriend's brother wins, you have higher status, etc. And the fact that you have a vote says that others should take you into account when forming coalitions - you are somebody.
Civics teachers talk as if politics is about policy, that politics is our system for choosing policies to deal with common problems. But as Tyler Cowen suggests, real politics seems to be more about who will be our leaders, and what coalitions will rise or fall in status as a result. Election media coverage focuses on characterizing the candidates themselves - their personalities, styles, friends, beliefs, etc. ...As with high school class presidents, we care about policies mainly as clues to candidate character and affiliations. And to the extend we consider policies not tied to particular candidates, we mainly care about how policies will effect which kinds of people will be respected how much.
For example, we want nationalized medicine so poor sick folks will feel cared for, military actions so foreigners will treat us with respect, business deregulation as a sign of respect for hardworking businessfolk, official gay marriage as a sign we accept gays, and so on. This perspective explains why voters tend to prefer proportional representation, why many refuse to vote for any candidate when none have earned their respect...
Also related: Cowen's relative status and ideology is here.
...and yes, perhaps this blog is not about "scholarly ideas" but about using whatever I think is interesting as a signal...
Monday, September 22, 2008
Sec. 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation: (1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties; (2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts; (3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them; (4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and (5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Sec. 3. Considerations.
In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--(1) providing stability or preventing disruption to the financial markets or banking system; and (2) protecting the taxpayer.
(Comparado con la detallada lista de "acciones necesarias", los "consideraciones" son breves y ambiguas: ¿cómo se mide la estabilidad financiera y/o la protección del contribuyente?)
Sec. 4. Reports to Congress.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.
(Nótese que, de ser aprobada esta iniciativa, el primer reporte de resultados se entregaría en diciembre--pasada la elección presidencial y antes de que Bush deje el poder.)
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.
(Nótese que el gobierno puede comprar o vender más de 700mil mdd, pero el "balance diario" nunca podrá exceder dicho monto.)
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
(Ojo, estamos hablando de poderes discrecionales sobre 700mil mdd.)
The complete proposal text is here.
Sunday, September 21, 2008
Some quotable quotes from Taleb's essay:
"Statistical and applied probabilistic knowledge is the core of knowledge; statistics is what tells you if something is true, false, or merely anecdotal; it is the "logic of science"; it is the instrument of risk-taking; it is the applied tools of epistemology; you can't be a modern intellectual and not think probabilistically—but... let's not be suckers. The problem is much more complicated than it seems to the casual, mechanistic user who picked it up in graduate school. Statistics can fool you. In fact it is fooling your government right now.
"By the "narrative fallacy" the turkey economics department will always manage to state, before thanksgivings that "we are in a new era of safety", and back-it up with thorough and "rigorous" analysis. And Professor Bernanke indeed found plenty of economic explanations—what I call the narrative fallacy—with graphs, jargon, curves, the kind of facade-of-knowledge that you find in economics textbooks. This is the find of glib, snake-oil facade of knowledge—even more dangerous because of the mathematics. (...) I have nothing against economists: you should let them entertain each others with their theories and elegant mathematics, and help keep college students inside buildings. But beware: they can be plain wrong, yet frame things in a way to make you feel stupid arguing with them.
What Is Wise To Do (Or Not Do) In The Fourth Quadrant
(NB: The 4th quadrant basically refers to heavy-tailed or unknown probability distributions with complex or nonlinear payoffs)
1) Avoid Optimization, Learn to Love Redundancy. Psychologists tell us that getting rich does not bring happiness—if you spend it. But if you hide it under the mattress, you are less vulnerable to a black swan. (...) Biological systems—those that survived millions of years—include huge redundancies. (...) Historically populations tended to produced around 4-12 children to get to the historical average of ~2 survivors to adulthood.
2) Avoid prediction of remote payoffs—though not necessarily ordinary ones. Payoffs from remote parts of the distribution are more difficult to predict than closer parts. A general principle is that, while in the first three quadrants you can use the best model you can find, this is dangerous in the fourth quadrant: no model should be better than just any model.
3) Beware the "atypicality" of remote events. There is a sucker's method called "scenario analysis" and "stress testing"—usually based on the past (or some "make sense" theory).
4) Time. It takes much, much longer for a times series in the Fourth Quadrant to reveal its property. At the worst, we don't know how long. Things that have worked for a long time are preferable—they are more likely to have reached their ergodic states.
5) Beware Moral Hazard. Is optimal to make series of bonuses betting on hidden risks in the Fourth Quadrant, then blow up and write a thank you letter.
6) Metrics. Conventional metrics based on type 1 randomness don't work. Words like "standard deviation" are not stable and does not measure anything in the Fourth Quadrant. 70-90% of the Kurtosis in Oil, SP500, Silver, UK interest rates, Nikkei, US deposit rates, sugar, and the dollar/yet currency rate come from 1 day in the past 40 years.
This is Obama's contract (more details here):
This is McCain's contract (more details here):
This is what the latest polls say
And this is how the red/blue/purple state map looks like
Wednesday, September 10, 2008
What makes people vote Republican? Why in particular do working class and rural Americans usually vote for pro-business Republicans when their economic interests would seem better served by Democratic policies? We psychologists have been examining the origins of ideology ever since Hitler sent us Germany's best psychologists, and we long ago reported that strict parenting and a variety of personal insecurities work together to turn people against liberalism, diversity, and progress. But now that we can map the brains, genes, and unconscious attitudes of conservatives, we have refined our diagnosis: conservatism is a partially heritable personality trait that predisposes some people to be cognitively inflexible, fond of hierarchy, and inordinately afraid of uncertainty, change, and death. People vote Republican because Republicans offer "moral clarity"—a simple vision of good and evil that activates deep seated fears in much of the electorate. Democrats, in contrast, appeal to reason with their long-winded explorations of policy options for a complex world.
Unity is not the great need of the hour, it is the eternal struggle of our immigrant nation. The three Durkheimian foundations of ingroup, authority, and purity are powerful tools in that struggle. Until Democrats understand this point, they will be vulnerable to the seductive but false belief that Americans vote for Republicans primarily because they have been duped into doing so.
Saturday, September 06, 2008
"Tonight, I say to the American people, to Democrats and Republicans and Independents across this great land - enough! This moment - this election - is our chance to keep, in the 21st century, the American promise alive. Because next week, in Minnesota, the same party that brought you two terms of George Bush and Dick Cheney will ask this country for a third. And we are here because we love this country too much to let the next four years look like the last eight. On November 4th, we must stand up and say: "Eight is enough."
Now let there be no doubt. The Republican nominee, John McCain, has worn the uniform of our country with bravery and distinction, and for that we owe him our gratitude and respect. And next week, we'll also hear about those occasions when he's broken with his party as evidence that he can deliver the change that we need. But the record's clear: John McCain has voted with George Bush ninety percent of the time. Senator McCain likes to talk about judgment, but really, what does it say about your judgment when you think George Bush has been right more than ninety percent of the time? I don't know about you, but I'm not ready to take a ten percent chance on change.
The truth is, on issue after issue that would make a difference in your lives - on health care and education and the economy - Senator McCain has been anything but independent. He said that our economy has made "great progress" under this President. He said that the fundamentals of the economy are strong. And when one of his chief advisors - the man who wrote his economic plan - was talking about the anxiety Americans are feeling, he said that we were just suffering from a "mental recession," and that we've become, and I quote, "a nation of whiners."
Now, I don't believe that Senator McCain doesn't care what's going on in the lives of Americans. I just think he doesn't know. Why else would he define middle-class as someone making under five million dollars a year? How else could he propose hundreds of billions in tax breaks for big corporations and oil companies but not one penny of tax relief to more than one hundred million Americans? How else could he offer a health care plan that would actually tax people's benefits, or an education plan that would do nothing to help families pay for college, or a plan that would privatize Social Security and gamble your retirement? It's not because John McCain doesn't care. It's because John McCain doesn't get it.
For over two decades, he's subscribed to that old, discredited Republican philosophy - give more and more to those with the most and hope that prosperity trickles down to everyone else. In Washington, they call this the Ownership Society, but what it really means is - you're on your own. Out of work? Tough luck. No health care? The market will fix it. Born into poverty? Pull yourself up by your own bootstraps - even if you don't have boots. You're on your own.Well it's time for them to own their failure. It's time for us to change America."