Thursday, March 5, 2015

It's every damn thing, all at once, all the time

From page 14 of Old Man's War by John Scalzi.
The problem with aging is not that it's one damn thing after another - it's every damn thing, all at once, all the time.

There really aren't that many big problems that government can solve without massive tradeoffs

From Big Problems, Little Ideas by Megan McArdle. An interesting list of major problems facing virtually all nations in the OECD today. I'll add some of my own.
Loss of worker power
Declining productivity
Demographic aging
Familial collapse
Societal fragmentation
Education expense and ineffectiveness
As McArdle points out, these are large, systemic, complex, dynamic and self-adjusting issues which do not lend themselves to comprehensive solutions. You can do things, with hope in your heart, that might affect the outcomes in a positive way, but that is based on hope and not confidence.

Political Economist makes the comment:
The issue, at this point in the evolution of government and society, is that there really aren't that many big problems that government can solve without massive tradeoffs.

Take the disruption in the labor markets. Yes, it's disruptive but the reality is that the only viable solutions are solutions with massive tradeoffs. Your choices more or less boil down to trade barriers or massive wage subsidies (regulatory or financial). Neither of these is without substantial tradeoffs and neither is likely to happen.

So the reality is that government has done much of what it can, that we have gotten to the point where we are truly working on the margins, where the cost of marginal improvement is far higher than at any point in the past.

Neither side is willing to admit this because both have a large stake in the myth that government can make things better (if only you let me control it). Shattering that myth should be one of our highest goals but nobody in the process, politicians, opinion writers or journalists, has any issue in doing that.
I see S-curves everywhere and am sure they apply to government policies as well, and more broadly to government effectiveness. I am not sure that we have quite reached the top of the S-curve yet, but I suspect that Political Economist is right, "there really aren't that many big problems that government can solve without massive tradeoffs" and Lord knows we hate trade-offs.

In the absence of broadly useful societal policies, I think it forces us back to the stage where we are reliant on a lot of distributed decision-making to tackle these endemic issues. Our policies choices are not about how much to spend or how to make schools more effective, etc. Our choices are about what actions can be taken so that more people become more effective at solving local problems.

Mean time of implementation is greater than the mean time of social change

From The Changing Geography Of Education, Income Growth And Poverty In America by Joel Kotkin.

Several interesting points.
In this column, we often rate metropolitan areas for their performance over one year, five or at most 10. But measuring economic and social progress often requires a longer lens, spanning decades.
I think our policy discussions are especially susceptible to this hidden assumption that the human system is usefully stable over long periods of time.

What put me on to this line of thought is the issue with climate change and the underlying models forecasting climate armageddon. Set aside the issue of whether the models are usefully accurate (they appear not to be).

There is a larger issue that is determinative of your assessment of the peril, and that is the temporal framing. Has the climate become warmer (as model forecasts suggested) over the past ten years? No. What about the past 100 years? There is debate but it appears the answer is Yes. What about the past 1,000 years? Pretty certainly, yes.

What about the past 10,000 years? Yes definitely.

100,000 years? No not really.

With the example of climate change, the answer to the question whether the world is warmer now than in the past depends on the time frame chosen.

Which is marginally analogous to the the issue to which Kotkin is alluding.

When we are trying to disentangle multiple interrelated systems (education, investment, growth, regulation,etc.), it becomes very sensitive to time frames and very difficult to link complex interrelated systems over time. We can look at Detroit in 1950 and in 2010 and make all sorts of speculative causal links, but clearly the Detroit of 1950 is not the Detroit of today. We can guess that investments in education might have been a cause of the decline but then we have to account for countervailing issues such as union dynamics over time, the effect of unionization of the public sector, the decline in the competitive political system in the urban context, the increase in globalization, the changing demographic structure (age, race, and class at least), etc. Trying to identify that an investment in education had X outcome becomes almost impossible to determine.

As I observed years ago to a client, the mean time of implementation (of a change) is greater than the mean time of exogenous change. Things are changing faster than you can plan for.

In stable environments you can do a lot of planning and the outcome is substantially determinable by the quality of your planning and the quality of your execution. But in complex dynamic systems that constantly self-adjust and which are sensitive to exogenous changes, the outcome is perhaps incapable of being forecast. The best planning and the best execution will not delivered the expected outcome because the system is evolving faster than your capability to implement.

What can you responsibly do in such an environment? Fall back on shared values and shared heuristics. But what happens when there is not a homogenous culture with shared values and shared heuristics? Ay, there's the rub.

Kotkin's article contains some interesting educational observations. It is a common assumption that higher investments in human capital (via education) are causative of higher future productivity. Kotkin's data indicates that it is more complicated than that and that the evidence is more supportive of a model where growth comes first and thereby makes it more worthwhile to invest in education. The implication is that if you want a more educated population, you should first focus on generating high economic growth first and the human capital upgrade will follow. If, instead, you invest in education first and don't attend to growth, you get little return on your investment.

The whisper wakes, the shudder plays, Across the reeds at Runnymede

In just over three months, we will be celebrating one of the great turning points in personal liberty, the signing of the Magna Carta at Runnymede in England. Like all such steps, it did not solve all problems at once, there were ebbs and flows on adherence to the principles articulated in the Magna Carta, there was both individual and institutional backsliding, but things were never the same after June 15, 1215.

Kipling wrote a poem commemorating that event just four years before its 700th anniversary, The Reeds at Runnymede. I visited Runnymede some years ago. It is a beautiful English pastoral place imbued with importance by that long ago event.

The Reeds at Runnymede?
Rudyard Kipling (1865-1936)

At Runnymede, at Runnymede,
What say the reeds at Runnymede?
The lissom reeds that give and take,
That bend so far, but never break,
They keep the sleepy Thames awake
With tales of John at Runnymede.
At Runnymede, at Runnymede,
Oh, hear the reeds at Runnymede:
'You musn't sell, delay, deny,
A freeman's right or liberty.
It wakes the stubborn Englishry,
We saw 'em roused at Runnymede!

When through our ranks the Barons came,
With little thought of praise or blame,
But resolute to play the game,
They lumbered up to Runnymede;
And there they launched in solid line
The first attack on Right Divine,
The curt uncompromising "Sign!'
They settled John at Runnymede.

At Runnymede, at Runnymede,
Your rights were won at Runnymede!
No freeman shall be fined or bound,
Or dispossessed of freehold ground,
Except by lawful judgment found
And passed upon him by his peers.
Forget not, after all these years,
The Charter signed at Runnymede.'

And still when mob or Monarch lays
Too rude a hand on English ways,
The whisper wakes, the shudder plays,
Across the reeds at Runnymede.
And Thames, that knows the moods of kings,
And crowds and priests and suchlike things,
Rolls deep and dreadful as he brings
Their warning down from Runnymede!
If you were in the middle back then, the threats to your liberty and well-being were the Mob or the Monarch. Today, it seems that it come from both. The government is always an institutional force that is both necessary and requires active vigilance and restraint. At one time, Government existed to constrain the Mob. Nowadays, it is more complicated. NGOs and SJW advocacy and Big Business and Big Labor and Big Academia, etc. they all want a whack at constraining the liberties of the average man, often working together to achieve their respective ends which are almost always detrimental to the average man. But,
And still when mob or Monarch lays
Too rude a hand on English ways,
The whisper wakes, the shudder plays,
Across the reeds at Runnymede.
It is a dynamic self-adjusting system, never quite in balance and never static.

But what about my goats?

A post, “But what about my goats?”: The Roman poet Martial on lawyers by Eugene Volokh. Some things never change.
I was recently reminded of one of the Epigrams of the Roman poet Martial (Marcus Valerius Martialis). It is about the lawyers of his day, but it reflects — in an exaggerated way, of course — something that some lawyers, and many law students, tend to do today in their briefs, especially briefs that deal with glamorous subjects such as constitutional law. Here is a translation I much liked, by Roger Dickinson-Brown, reprinted with permission:
There is no poison here, no rape or force –
a simple case: my neighbor stole my goats.
But my expensive lawyer will discourse
on the whole history of law. He quotes
book, precedent and chapter ‘til he’s hoarse.
Fine, noble words! But what about my goats?
There is an important balance between the pragmatic and the theoretical, between the idealist and the realist, between the abstract and the concrete. This is an ancient trope of the muddling through, pragmatic British versus the abstract, theoretical French. Between the masters of abstraction, the ancient Greeks and the builders or roads and viaducts, the ancient Romans. The Romans, as exemplified by Martial, could be very practical.

Wednesday, March 4, 2015

Housing costs are signalling costs.

From Why You May Not Be as Ready for Retirement as You Think interview with Richard Marston. The article is about saving for retirement and financial planning in general.
Knowledge@Wharton: Attitudes about housing have changed a lot, too. The conventional wisdom used to be to buy as much as you can because it is an investment. Now, after house prices have fallen, people are no longer so sanguine about the housing market. But does that mean you are really better off buying a house that is less than you might be able to afford and putting that other money into savings, rather than thinking of the house as a savings vehicle?

Marston: You’re right, but I can even show that. I have a chapter on this…. It’s true even in California, where there are glorious rising housing prices. If you sold your house in 2006, having held it since the late 1970s, you would have been better off buying half the house and putting [the balance] it in a portfolio. You would have earned a higher return. Housing is a terrible investment in the long run for Americans. You should not buy more house than you really need for your comfort and your enjoyment.
It's those last couple of sentences that caught my eye "Housing is a terrible investment in the long run for Americans. You should not buy more house than you really need for your comfort and your enjoyment." From an empirical and academic perspective, this has been known to be empirically true for many years but it has not seeped out into the general population. I believe that the lifetime annual rate of return on residential real estate for all home owners was something on the order of 0.7%. Residential real estate is subject to confirmation bias and asymmetrical information. Those who do well, who bought low and can sell high, trumpet their good fortune whereas those who barely get out of it what they put in or who lose money are pretty quiet.

But the larger point is one that Megan McArdle has brought up a number of times. We have to be careful about cost of living allowances and inflation adjustors because residential real estate is in many ways a signalling function not a residential function. The amount of house that "you really need for your comfort and your enjoyment" is likely quite a bit smaller and cheaper than what you have elected to spend. If you want to live on Manhattan, in downtown San Francisco, Boston, Atlanta, Chicago, etc. you are not spending money on shelter, or even much on convenience. You are mostly spending money on a social signal - I am at this place in the societal hierarchy.

Wet roofs, beneath the lamp-light

I have been rereading some old Rupert Brooke poems and came across this one that reminded of that old Sound of Music song, My Favorite Things, though a long precursor to it.

I go weeks at a time without having to look up a word with which I am unfamiliar and was struck that there should be two in one poem, inenarrable and benison.

I am not wild about the preamble but what a great list of quotidian loves. It is indeed the small things that make up a great day.
The Great Lover
by Rupert Brooke

I HAVE been so great a lover: filled my days
So proudly with the splendour of Love's praise,
The pain, the calm, and the astonishment,
Desire illimitable, and still content,
And all dear names men use, to cheat despair,
For the perplexed and viewless streams that bear
Our hearts at random down the dark of life.
Now, ere the unthinking silence on that strife
Steals down, I would cheat drowsy Death so far,
My night shall be remembered for a star
That outshone all the suns of all men's days.
Shall I not crown them with immortal praise
Whom I have loved, who have given me, dared with me
High secrets, and in darkness knelt to see
The inenarrable godhead of delight?
Love is a flame;—we have beaconed the world's night.
A city:—and we have built it, these and I.
An emperor:—we have taught the world to die.
So, for their sakes I loved, ere I go hence,
And the high cause of Love's magnificence,
And to keep loyalties young, I'll write those names
Golden for ever, eagles, crying flames,
And set them as a banner, that men may know,
To dare the generations, burn, and blow
Out on the wind of Time, shining and streaming....
These I have loved:
White plates and cups, clean-gleaming,
Ringed with blue lines; and feathery, faery dust;
Wet roofs, beneath the lamp-light; the strong crust
Of friendly bread; and many-tasting food;
Rainbows; and the blue bitter smoke of wood;
And radiant raindrops couching in cool flowers;
And flowers themselves, that sway through sunny hours,
Dreaming of moths that drink them under the moon;
Then, the cool kindliness of sheets, that soon
Smooth away trouble; and the rough male kiss
Of blankets; grainy wood; live hair that is
Shining and free; blue-massing clouds; the keen
Unpassioned beauty of a great machine;
The benison of hot water; furs to touch;
The good smell of old clothes; and other such—
The comfortable smell of friendly fingers,
Hair's fragrance, and the musty reek that lingers
About dead leaves and last year's ferns....
Dear names,
And thousand others throng to me! Royal flames;
Sweet water's dimpling laugh from tap or spring;
Holes in the ground; and voices that do sing:
Voices in laughter, too; and body's pain,
Soon turned to peace; and the deep-panting train;
Firm sands; the little dulling edge of foam
That browns and dwindles as the wave goes home;
And washen stones, gay for an hour; the cold
Graveness of iron; moist black earthen mould;
Sleep; and high places; footprints in the dew;
And oaks; and brown horse-chestnuts, glossy-new;
And new-peeled sticks; and shining pools on grass;—
All these have been my loves. And these shall pass.
Whatever passes not, in the great hour,
Nor all my passion, all my prayers, have power
To hold them with me through the gate of Death.
They'll play deserter, turn with the traitor breath,
Break the high bond we made, and sell Love's trust
And sacramented covenant to the dust.
—Oh, never a doubt but, somewhere, I shall wake,
And give what's left of love again, and make
New friends, now strangers....
But the best I've known,
Stays here, and changes, breaks, grows old, is blown
About the winds of the world, and fades from brains
Of living men, and dies.
Nothing remains.

O dear my loves, O faithless, once again
This one last gift I give: that after men
Shall know, and later lovers, far-removed
Praise you, "All these were lovely"; say, "He loved."

Tuesday, March 3, 2015

Preferences are signals

From It's Not About 'The Dress' by Megan McArdle.
If you believe Duncan Watts, a sociologist who works for Microsoft Research, that’s no accident. In his terrific book "Everything Is Obvious (Once You Know The Answer)," he argues that popularity really does have a significantly random component. For example, he constructed an experiment, which I describe in my own book, to determine how songs become popular in different social networks. If you randomly assigned people to groups that could listen to music and display their preferences, would groups converge upon the same songs as most popular, or would they each pick their own sets of “best” and “worst”?

The answer is that there was no clear “best” song; instead, each group picked their own best. It doesn’t seem to be completely random -- the highest-ranked song in one group was never the absolute bottom choice of another -- but high-ranked songs in one group could certainly end up near the bottom of another’s list. We can theorize that there is some quality threshold, but beyond that, social effects take over: Knowing that someone else likes something makes you more interested in it, and so some combination of early rankings and random variation among the groups creates a unique outcome in each social network. It’s our old friend path dependence in viral form.

Post-hoc, of course, we construct all sorts of reasons that popular things are popular. But as Watts points out, what we’re often doing is not so much explaining the popularity as describing the attributes of the popular thing: The Mona Lisa is popular because it’s so, well, Mona Lisa-esque. And those explanations tend to leave out the more random elements -- like the fact that the Mona Lisa wasn’t that popular until it was stolen in a famous museum robbery.
There are many issues which rest, not on empirical and objective data but upon subjective, normative judgments. What's the best movie, book, song, painting, moment in football history, etc.? The answers depend not on objective criteria but on personal opinions which are in turn subject to all sorts of outside influences and contextual circumstances.

In the case of books, there are objective things we can report. The most number of editions, the most copies sold, the most checked out from libraries, most popular with readers, the longest in print, the most frequently cited, etc. But none of this information tells us which is best because best has no meaning outside of the personally subjective opinion.

In many ways, I think the subjective judgments are one of the ways that communities begin to create their own boundaries between Us and Them. We listen to this type of music, read these types of books, sing these types of books. We may still like you even if you do not share those tastes, but regrettably, you are not one of Us.

These arguments regarding best (and worst) are an elaborate form of social signalling and have no sustainable connection with reality no matter how much we might wish they did.

He conceives a mortal hatred against that truth which blames him and convinces him of his faults

From Pensees by Blaise Pascal
Man would fain be great and sees that he is little; would fain be happy and sees that he is miserable; would fain be perfect and sees that he is full of imperfections; would fain be the object of the love and esteem of men, and sees that his faults merit only their aversion and contempt. The embarrassment wherein he finds himself produces in him the most unjust and criminal passions imaginable, for he conceives a mortal hatred against that truth which blames him and convinces him of his faults.

A lived example of cognitive dissonance

I am running an early morning errand and it is raining fairly hard. Lights on, windshield wipers going strong. I am listening to the radio and on comes the forecast, "There's a 60% chance of rain today."

Three hours later I am out again running different errands. It is still raining hard. I am still listening to the radio. Again, on comes the weather forecaster "There's a 60% chance of rain today."

Thinking it through, it is quite tangled web. How can there be a 60% chance of rain when it is actually raining?