The morality of markets - and a response to hunger

There is no Good in markets Krugman writes. It's short and good, and it should be read in every high school as an antidote to Marketarianism. Markets are not divine, theys are simply satisficing mechanisms for seeking local minima.

Krugman is responding to accusations that he favors war as a solution to the Great Waste (sequelae to the Great Recession).  He gives a smart response to dumb questions, but reading how major wars do Keynes better than politicians made me think about What Would the Market Do?

What do I mean? Well, consider this. Charlie Stross, one of my mind expanding writers included "Finance Economics 2.0" in the novel Accelerando. Economics 2.0 was what emerged when trading/Finance AIs remade the solar system in their own image. It wasn't a pleasant place. [1]

The story captured a sense I often have that the large, complex adaptive systems we live in are, seen from a certain angle in a certain world as real and unreal as our own, alive. Not smart like we are, but alive in a landscape dominated by very powerful amoebae.

In this worldslice Markets are entities with their own agenda -- mostly to eat and grow. Sometimes, though, the growing is slow. The Market has to find new food. It moves along a chemotropic gradient to a new source of nutrition.

War.

[1] I updated this paragraph thanks to a helpful comment.

The cultural impact of the Pill - neuroendocrinology

Modern imaging methods show hormonal contraceptive use changes brain structures.

That's interesting. It means it's now probably safe to mention one of the most interesting papers I ever wrote. For obvious reasons it was quickly buried.

I was an itinerant Watson Fellow in early 1982, staying with a very generous USAID worker and his wife in Dakka, Bangladesh. I was basically a parasite, but somehow I got it into my head to write a paper on the sociocultural implications of widespread OCP use in Thailand.

The premise of my paper was simple. Different OCPs, and progesterone implants, where known to have different effects on mood. Testosterone biased OCPs had one set of effects, estrogen biased another set, progesterone yet another. It seemed obvious that if you gave these medicines to millions of women the sum of the individual mood changes might have social implications.

If you wanted to change a society in a certain direction, you might favor one OCP over another. I was keen on social engineering in those days. That was before I was drummed out of the Trilateral Commission [1], and before a subsequent social engineering paper almost ended my first year of medical school.

Needless to say, I never got any comments about my pill paper. I was remarkably obtuse at that age, but even I had a sense this was not a wise topic choice. If anyone read my paper, they would have torched it immediately.

I suspect, however, that I was right.

[1] Joke. Sort of.

The smartest president in decades

Obama comments on Murdoch's empire ...

'Destructive' Fox News And The 'Darker' Parts Of The Tea Party: Obama's Rolling Stone Interview | TPMDC 

... The golden age of an objective press was a pretty narrow span of time in our history. Before that, you had folks like Hearst who used their newspapers very intentionally to promote their viewpoints. I think Fox is part of that tradition -- it is part of the tradition that has a very clear, undeniable point of view. It's a point of view that I disagree with. It's a point of view that I think is ultimately destructive for the long-term growth of a country that has a vibrant middle class and is competitive in the world...

I am grateful he's willing to be president.

Murdoch is anti-civilization. Maybe he's trying to avert the singularity by collapsing America. Hey, it explains a lot.

The $80 ultra-portable - in unexpected form

Jean-Louis Gassée, once CEO of Apple head of Mac development, drops a stunner in mid-column ...

The Carriers’ Rebellion | Monday Note

... Google wants to see smartphones priced at $79, without subsidy, thus taking away the carriers’ opportunity to dictate features. At $79 and no contract, consumers can change handsets and carriers at will. This frees Google to have a direct relationship with the consumer, allowing their money machine—advertising today, entertainment and business services tomorrow—to run unimpeded.

That's quite a precise number. Not "below $100", $79.

Think about that. Take your time. I'll be back.

We're talking about a computer that outclasses the desktop G3 iMac of 2001. There's no reason it couldn't work with an external monitor as well as an external keyboard. Incidentally, it's a phone too.

Yeah, they're thinking big. Forget the "Chromebook" I was so excited about a year ago (though I still hope we see it). This is so much bigger.

Can they do it? Today's smartphones cost about $500-$800 without a (carrier) subsidy. This seems like a big price drop -- unless you're about 50 years old.

If you're old enough, you remember the calculator price drop. In a few years they went from about $500 to cereal box prizes.

That never happened with computers. Instead the capabilities skyrocketed -- but the price never truly fell. A 1988 Commodore 64 and a 2010 bottom-of-the-heap netbook cost about the same. The difference was partly moving parts, calculators were almost pure silicon -- computers had drives and big power supplies and keyboards and so on. A lot of the difference though was IP protection and patent licensing.

I think this would have happened to the original Palm III if it had survived, but they didn't have a business model supporting a $10 PalmOS device. Google has the business model.

I don't doubt that it will be possible in 2012 to produce a somewhat junky version of a 2009 iPhone for a marginal manufacturing cost of less than $80 -- if you can manage the IP costs and if the payor has a separate (subsidizing) revenue stream. To do it Google will have to buy some IP, and cut deals that appeal to IP holders only when you start to talk a billion devices.

In the meanwhile, China will be doing the same thing internally -- and they don't really worry about IP costs.

Interesting times.

In Our Time - the number series

This IOT season starts with bang. In the first 3 minutes of Imaginary Numbers our guest professor runs through thousands of years of the develop of number, from positive integer to zero (ok, I think he skipped zero) to fraction to irrational to negative to imaginary to infinity.

As he spoke I realized IOT has done a programme on all of these save fractions. Taken together, it is a wonderful introduction to mathematics and some of the better sides of human history.

Nice way to start the year.

PS. Love the archives Melvyn, but you do realize they could be vastly improved, right? Also, how about selling episodes on iTunes for $1 apiece? I understand the BBC needs new revenue. Time to rethink the fruit aversion.

Progress

We glass-half-empty-but-that's-good-because-it's-poisoned sorts need to say something positive once in a while.

WiFi is much better than it was. 802.11g is commonplace now, and it is so much better than 802.11b.

We now return to our usual programming ...

A Google-Apple detente - why?

It's not just the return of GV Mobile. It's also changes in Apple's advertising revenue model, a general quieting of Apple-Google rhetoric, and hints from well connected bloggers.

There are hints of a truce in the Apple-Google wars.

If a truce is coming, it's fair to ask why now. My guesses ...

1. Google has realized how evil Verizon is -- and Brin/Page are pushing back against Schmidt. The carriers are the great enemy.
2. Apple and Google believe the Windows Phone will not suck, and that Nokia will use it.
3. Facebook shafted Apple at the Ping product launch, and the Apple/Facebook affair is over.
4. Google has realized they can't do end user software.
5. Apple has realized it can't do the Cloud.
6. Apple and Google see big money in a joint approach to credential and identity management.
7. The iPad.
8. Schmidt is on the way out (ok, that's a bit farfetched).
9. China.

Update 9/28/2010: Detente is real.

Why the Pope is crazed -- the infographic

I Google-Reader-Shared a blog post on this British Religion in Numbers graph ...

I moved on to the next post, but the more I thought about it the more I understood how dire things look for the Pope, and why he was so crazed during a recent UK visit.

The chart shows the generational flow between birth and adult religion in Britain. There's a huge influx into the "No Religion" category, and very little flow out of that category. If the trend continues (big if) then within 20 years the British Catholic church will be completely irrelevant. The other Christian churches will be very close behind.

I suspect the Canadian picture would be similar, but things are more complex in the US. Even though the "no particular faith" group has almost doubled in a generation, it's clear that US Christian belief has miles to go.

Not so in Britain, and presumably not so in most of Western Europe. Papal revenues in particular must be screaming downwards. Growth in Africa can't possibly compensate.

The Catholic church has lasted a very long time. Has it ever looked so feeble?

The Great Waste: Cyclical, Structural, or Both?

Structural unemployment occurs when the skills and culture of the workforce are a bad match for the demands of the market. For Marketarians there can only be two kinds of unemployment - structural and voluntary [1]. This follows because the Market is all wise, and the Market saith "Thou Shalt not Waste Inputs".

Since we obviously have substantial involuntary unemployment and underemployment, a Marketarian must believe this Great Waste is structural. If it is structural, there is nothing to do [2].

Despite some childhood flirtations I an not a Marketarian. Still, I'm sympathetic to the notion of structural unemployment. I've been expecting it for over 10 years. Between globalization, the rise of the machine and the whitewater world I find it easy to imagine that we are facing a structural employment problem. Krugman seemed to agree 3 years ago. Robert Reich is a structuralist today.

Unsurprisingly, The Economist, the modern bible of Marketarians [3], thinks US unemployment is structural too. They point to IT changes...

... In the 1970s and 1980s employment in quintessentially middle-skilled, middle-income occupations—salespeople, bank clerks, secretaries, machine operators and factory supervisors—grew faster than that in lower-skilled jobs. But around the early 1990s, something changed. Labour markets across the rich countries shifted from a world where people’s job and wage prospects were directly related to their skill levels. Instead, with only a few exceptions, employment in middle-class jobs began to decline as a share of the total while the share of both low- and high-skilled jobs rose (see chart)...

The development of information technology (IT) is the leading candidate. Computers do not directly compete with the abstract, analytical tasks that many high-skilled workers do, but aid their productivity by speeding up the more routine bits of their jobs. But they do directly affect the need for people like assembly-line workers or those doing certain clerical tasks..

... the economists find that industries that adopted IT at faster rates (as measured by their IT spending, as well as their spending on research and development) also saw the fastest growth in demand for the most educated workers, and the sharpest declines in demand for people with intermediate levels of education...

In recent writings, however, DeLong and Krugman tell us today's unemployment is not primarily structural (see also). The patterns of widespread unemployment (no labor mismatch) and concomitant deflation don't fit the structural story.

I am largely persuaded by their arguments, but I wonder if we might have both. Perhaps  demand driven unemployment might mask a structural problem?

That occurred to me yesterday. Fortunately Krugman monitors my thoughts so he's already responded ...

... Is it possible that there has been some rise in structural unemployment that’s swamped by a much larger rise in cyclical unemployment? Yes, conceivably...

Aha! Trust me on this -- I run Krugman in an internal simulation. I know what he's thinking. Krugman secretly believes that we do have a serious structural unemployment problem, but atop that we also have a cyclical unemployment problem. (FWIW, My DeLong simulation holds the same secret suspicion.)

Rationally, we should tackle both the cyclical and structural causes of the Great Waste.

Alas, we're not so good at rational these days.

[1] They would further claim that significant structural unemployment is primarily a result of government distorting the (perfect) market.
[2] I can imagine quite a few ways to approach structural unemployment, but that's a cardinal sin for a Marketarian -- akin to planning the overthrow of heaven.
[3] It wasn't always so bad. In the late 80s to early 90s The Economist was a great newspaper.

See also (mostly mine):

• Mass disability and Great Depression 2.0 - 3/2008
• Employment in the Great Stagnation - 8/2010
• Post-industrial employment: adjusting to a new world - 5/2010
• Economics focus: Automatic reaction | The Economist (9/10 - IT spending has hollowed out labor markets)
• Causes of the Great Recession: China, GPSII and RCIIIT. Now for Act III 4/2010
• Neo-Feudalism: Return of the Trades - 2/2004
• Jared Bernstein & Brad DeLong on "Outsourcing": a dialog with interesting discussions 3/2004
• Krugman on globalization: how to manage the losers 12/2007
• Robert Reich's Reason : A Terse Review 5/2004
• Andy Grove on the Need for US Job Creation and Industrial Policy « naked capitalism 7/2010
• The Speculist: What if the Jobs Are Never Coming Back? 4/2010
• Robotic Nation, by Marshall Brain 7/2003

Update 9/29/10: My Krugman simulation is robust. Just as I suspected.

Why it hurts to read the right

This is not painful to read ...

John Gordon is not of my tribe. My God says all who are not of my tribe should be enslaved. John Gordon must serve me.

It's not painful because it's all consistent. Fact (not of my tribe), Value (follow my religious doctrine) and Goals (enslave John). I appreciate the logic, even if I don't like the implications.

So why are Limbaugh and Beck so hard for me to listen to?

Of course I don't agree with their goals, but that's not what causes me pain. It's the disconnect between their Facts, Values and Goals that makes for nails on the blackboard [1]. Their "Facts" are often trivially disprovable and their stated Values are often inconsistent with their Goals and Facts.

Beck and right wing bloggers like "level_head" would be easier to read if they simply said "Crush the weak, save those I love, because they are weak and I care only for the strong". I would not agree with them, but at least they'd be logical.

[1] Of course blackboards are gone, aren't they? We need a new simile.

Race and ethnicity: Minneapolis and St. Paul

Race and ethnicity: Minneapolis and St. Paul.

It's part of a Flickr set by Eric Fisher inspired by Bill Rankin's Chicago map. (Via Fast Company).

Where I live is very red dot (white), though my household is 40% sunburn resistant. The Chicago map is much more dramatic and interesting.

Emergent fraud: Anthem and automatic payment denials

Anthem, so someone wrote, puts the Hell in Health Care. Today's particular slice of Hades is a lovely example of how fraud evolves when natural selection meets entropy. Nobody has to plan this kind of scam, it just happens when you add incentives to markets.

I uncovered this example when I phoned to double/triple/quadruple check that a costly (age sucks) preventive medicine procedure was covered by my consumer driven health care plan.

Indeed, I was told, it is. I didn't hang up though. I'm too paranoid experienced. I pressed a bit more. The pleasant representative let slip that there was one catch.

When she said this, I swear I heard her pray that the call recording would go unheard, lest her children go unfed. Imagination, I'm sure.

The catch is that the claim will always be initially denied. It will, however, be promptly paid after a customer calls to "Appeal". If a customer doesn't appeal, however, they will have to pay the claim themselves.

I am pretty sure I know how this scam came to be.

The plan I'm in was, I believe, once part of a small consumer-driven healthcare plan startup that was acquired by a larger company. The two companies would have had different IT systems. The larger company probably outsourced IT integration, but, as often happens, I expect that didn't go well.

If I'm right then Anthem still doesn't have the right software to manage our kind of plan. When Anthem receives a claim, the software must choose between paying for claims that should be denied, or denying claims that should be paid.

You can imagine how long it took to make that decision, and how different the outcome would be with different incentives.

Since they really aren't crooks, just regular people in a hard job, they wrote Appeals process documentation so their agents would pay on Appeal. Probably 95% of their customers do appeal.

Five percent or so, however, probably don't appeal. They pay, or go bankrupt, or whatever. That five percent is pure margin. That margin probably made someone a VP.

Fixing the problem would unmake a VP. There's no money for IT anyway.

And so it goes.

It's a scam, but there's no intelligent designer. Just evolution in action. Health insurance companies can't help but be evil. It's in their incentives.

related stuff from me:

• Emergence: how entropy and incentives create scams
• Anthem - Putting the Hell in Health Insurance - emergent fraud and the Anthem web site
• Mobile phone fraud - The accidental data charge and other scams
• Memphis mortgages, complexity attacks and long term consequences
• How to use Amazon reviews (and how the system encourages fraud)
• Health insurance: we're defeated by a complexity attack
• Causes of the crash of '08 - how much fraud?
• 21st century deception and the evolution of the emergent mind

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Visiting hotels in the bedbug era

I've been wondering what bedbug experts do when they travel. This NYT article gave some hints ....

Step Right Up for Pest Control at Bedbug Meeting - NYTimes.com

.... Nearly everyone said they had done as much when they arrived at the host hotel, and the maids may find more than a few headboards askew from their search. Many people said they started out by putting luggage on the bathroom floor, the better to see any scurrying, before investigating hiding spots in the rest of the room. One man put his luggage inside a bedbug-proof bag and kept all his clothes on a non-fabric chair throughout his stay, though his initial survey found nothing...

Sounds like the process is:

1. Put luggage in a relatively safe place -- the bathroom (because it's easy to search).
2. Carry a bedbug luggage bag?
3. Search room esp. behind the headboard. If you see bedbugs, leave for the front desk and request a new room? (And if they have none? Sleep in the street? Do you want to know?)
4. If you don't see bedbugs avoid fabric and drawers (hang in bathroom rail?)

Maybe furniture and car seats will return to being wood, vinyl and plastic?

How I know Google's Blogger is dying

Nobody but me screams about how bad the new text editor is.

Try this experiment with Safari/Mac and the editor:

1. Write a post in the rich text editor with paragraphs.
2. Copy from the HTML view.
3. Paste into a different post HTML view.
4. View in Compose (rich text). Note the absence of paragraphs.

That's just the tip of the iceberg.

So what do I do with this blog?

If I were rational, I'd vote GOP

I consider myself relatively rational.

I believe the GOP is the anti-civilization party. A vote for the GOP is a vote for the collapse of our technocentric science-dependent society.

I also believe the greatest threat to human survival is artificial sentience, and I think it will happen with 100 years. It might happen within the lifespan of my children.

Unless civilization collapses.

How rational am I?