Monday, September 29, 2008

Oil, Speculators, and Inventories

Whenever the price of something changes in a way some people don't like—up or down—someone blames it on speculators. Recent rises in the price of oil are no exception.

In some cases it is true; speculators can affect prices. They raise prices by buying goods and storing them, thus reducing the total amount available to be sold. They lower them by selling goods from their inventory.

As best I can tell by a little casual googling, world storage capacity for petroleum comes to less than two months output. At any given time, much of that is already in use. If, say, 80% of storage capacity is already being used, which I gather is a not particularly high figure, then the most speculators can do is to take off the market something less than two weeks worth of output—once. It is hard to see how that could have much effect on price for more than a short time.

There is, however, a cheaper way of storing oil. The reason to buy and hold oil is the expectation that you will be able to sell it in the future at a higher price. That is also a reason why a producer with limited supplies might choose to pump next year instead of this year. Storage capacity in that form is essentially unlimited; producers could choose to pump no oil at all and leave all of it in the ground. That suggests that, insofar as speculation is responsible for current high prices, it is speculation not by speculators buying oil and putting it in tanks but by oil producers leaving it in the ground today so as to pump and sell it tomorrow, or next year, or next decade. I do not know enough about the evidence on actual and potential output to guess how likely that is.

One of the odd features of the current political fuss over all of this is the widespread assumption that high prices due to speculation are a bad thing. That assumption seems to be shared by, among others, most of the people who argue that we are running out of oil and so should use less of it. If we are running out of oil that is a good reason to shift consumption from the present to the future, when it will be scarcer. Which is exactly what speculation, by producers or speculators, does.

Sunday, September 28, 2008

The Bailout, the Election, and Strategic Politics

I gather from news reports that:

1. Most of the U.S. political leadership, including both condidates, supports the bailout.

2. A sizable majority of the electorate is at least suspicious of the bailout. One congressman reported that his mail and email was running 50/50—50% "no" and 50% "hell no."

3. Obama appears to be opening up a substantial lead over McCain in the polls.

This suggests an obvious opportunity for McCain: Come out against the bailout, with some plausible sounding explanation of why he was initially for it. It's risky, but if he is going to lose anyway it might be worth taking the risk.

McCain has not done it, and surely knows more about how to win elections than I do, which raises some interesting possibilities.

Suppose McCain, and those around him, are interested not only in winning this election but in longer term consequences for McCain and the Republican party. It may make sense for themto support the bailout, not because it is a good idea but because future events are more likely to look like evidence for the bailout than like evidence against it. Consider the possibilities:

1. No bailout, the economy does terribly. Opponents of the bailout look terrible—whether or not the bailout would have worked.

2. No bailout, lots of investors lose a lot of money, the current recession continues for a while. Opponents of the bailout don't look terrible but neither do supporters, who will argue that things would have gone much better with the bailout.

3. Bailout, the economy does terribly. Supporters of the bailout will argue that this is evidence of how much worse things would have been without a bailout—and who can prove them wrong?

4. Bailout, the current recession continues for a while. Supporters of the bailout will claim to have saved us from a depression.

Looking at these alternatives, it seems plausible that if the bailout has no effect either way on the condition of the economy, a politician is better off supporting it. Only if the bailout makes worse outcomes substantially more likely or if some bad outcome directly associated with the bailout occurs, such as spending 700 billion and then having lots of firms fail anyway six months later, does opposition look like an attractive long run gamble.

I have a feeling that this argument could be generalized. One ought to be able to predict at least some patterns of political outcomes by asking what policies are more likely to be followed by outcomes that look like clear evidence for or against them. The point is related to the familiar observation that one would expect politicians to design programs whose benefits are easy to see and whose costs are hard to see.

Prediction vs Explanation: A Puzzle

Just for a change from politics and geekishness, an interesting puzzle:

We do ten experiments. A scientist observes the results, constructs a theory consistent with them, and uses it to predict the results of the next ten. We do them and the results fit his predictions. A second scientist now constructs a theory consistent with the results of all twenty experiments.

The two theories give different predictions for the next experiment. Which do we believe? Why?

In case the puzzle isn't obvious, let me offer the straightforward argument for what I believe is the wrong answer:

Imagine a large room filled with barrels, each of which contains a lot of boxes, each of which contains several pieces of paper; each piece of paper has a scientific theory written on it. The first ten experiments let us eliminate all but one barrel, the one containing the theories consistent with the first ten experiments. The first scientist has reached into that barrel, pulled out a box, opened it, pulled out a piece of paper, and offered its theory as his.

The second ten experiments narrow the possibilities down to one box in the barrel--the one containing theories consistent with the results of the second set of experiments. The second scientist, having the results of both sets of experiments, knows which box to go to; he opens it and pulls out a piece of paper. Both pieces of paper, both theories, were selected from the same box, the one that we know contains the correct theory, since the correct theory must be consistent with all the experiments. Having been pulled from the same box, both theories should have the same probability of being the right one.

What is wrong with this argument?

(Hint: I find the concept of "false contagion" in statistics useful in making sense of the puzzle)

Saturday, September 27, 2008

Wanted: Virtual Smartphones

High end cell phones such as the iPhone, the recently announced Android G1, and the about to be released Xperia X1, sell themselves in part on their software, in particular their differing user interfaces. But for most customers, the only practical way of evaluating the software is to actually get their hands on the phone—a little difficult for the two of the three that have not yet been released—and spend a fair amount of time playing with it.

There is a simple solution to this problem. A smartphone is, among other things, a computer, and most of us own computers much more powerful than any smartphone. One of the things a more powerful computer can do is to emulate a less powerful computer. I gather that (at least) Google and Sony-Ericsson have provided, as part of their software developer kits, emulators for Android and the Xperia.

My suggestion is that they should provide emulators, on the web or downloadable, targeted not at developers but at customers. I want an Android G1 on my desktop. Ideally it would not only emulate all of the software, it would also make at least a reasonable effort to emulate connectivity, not for phone calls but for the internet. And, ideally, it would make a reasonable effort to emulate the performance of the actual phone.

Some time back, I bought and then returned a high end smartphone, a Nokia E90. Part of the reason I returned it was the discovery that its word processor would only permit one document at a time to be loaded and took about ten minutes to load a book length document. Two of the things I do with my current smartphone are to read books and to go over my own manuscripts while noting on them things I want to change. That does not work very well if it takes ten minutes to change what book I am looking at. The E90 was supposed to be a much improved version of my current 9300, but in fact had strikingly inferior software, at least for my purposes. If I had had access to a reasonably realistic emulator of the E90 I could have saved myself and the seller the cost and trouble of my buying a phone and then returning it.

I am not sure if the companies producing the phones would want to make emulators available pre-release or not. On the one hand, it lets customers try for some time before they buy, and it might make possible useful feedback. On the other hand, it reduces the excitement of the release. But I can see no good reason why they would not want to make emulators available when the phone is released. Doing that should increase the excitement, since it lets customers get something close to a hands-on experience on the day of release.

Is there a technical problem I'm missing, some reason why it isn't practical to produce a reasonably accurate emulator for a smartphone?
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[Added 10/6/08]

It almost looks as though someone was listening. Not a full implementation, but a step in the right direction. Thank you T-Mobile.

Friday, September 26, 2008

Regulation: Too Much or Too Little

One comment frequently made about the present financial mess is that it is the fault of deregulation. As I argued recently, it ought rather to be seen as the fault of regulation—more precisely, of government interventions in the housing market designed to make it possible for more people to borrow money in order to buy houses.

There is, however, a germ of truth to the claim. While I am not an expert, I gather that one source of the present difficulties was a loosening of the requirements imposed on Fanny Mae for loans during the Clinton administration. That made it possible to offer loans to less well qualified borrowers than before, a policy which increased the amount of business Fanny Mae did, satisfied political demands to expand home ownership, and helped lead to the present mess.

This raises a general point worth making. The ideal arrangement in my view, for housing and many other things, would be an entirely free market with the government playing no role. But once the government does intervene, less regulation is not necessarily better than more. If, as in the current case and the earlier S&L case, government intervention makes the government ultimately liable for losses by the regulated firms, less regulation may mean more opportunities for firms to gamble on the basis of "heads we win, tails you lose," with "you" being the taxpayers. Once the government is liable for losses, it may be prudent for the government to make rules designed to limit risk.

The Education of Politicians

Biden's recent demonstration of striking ignorance of both political and technological history raises an interesting question: How well educated are successful politicians? People writing about them are likely to themselves be intellectuals of one sort or another, often academics, hence inclined to attribute to those they support the virtues that academics approve of. But is it true?

Suppose, for instance, that all four candidates were required, tomorrow, to take the SAT aptitude tests and a small selection of the SAT subject tests--say American history, math, literature, and one or two others. Any guess which if any of them would get scores that would earn admission to Stanford? University of Michigan? Podunk U.?

At various points during the past eight years, information on grades for Bush, Gore and Kerry, SAT scores for Bush and Gore, became public. Gore had a respectable score (730) on the math SAT, but his one D was in natural science, which is at least interesting. My guess is that if one did have such information, it would be a rare candidate for President or VP who met the standards that elite academics routinely apply to each other and their students.

Anybody know if any such data has been made public with regard to any of the current candidates?

Of course, as I commented in my earlier post on the Biden gaffe, it isn't clear that it matters very much.

Amazon Acts to Eliminate Shortage of New Books

The favorite time wasting activity of authors has long been checking on Amazon.com to see how their books are doing. It finally occurred to someone at Amazon that they were undercutting their own market; time spent watching your book go from 81,000 to 81,006 and back again is time not spent writing new books, and Amazon is in the business of selling books. So they pulled the plug. As of sometime today, Amazon book pages no longer show rankings. Just when I was waiting to see if the mention of Future Imperfect on Forbes.com was going to pull it up from 90,000 to 80,000.

Expect a literary renaissance real soon now.
-----
[Either I somehow misread the Amazon.com page or it was only a temporary change. Future Imperfect is now at 41,542, presumably due to the Forbes.com mention. Cancel renaissance.]

Thursday, September 25, 2008

Extended Democracy: Iran and Israel

Driving home, I heard an interesting interview with someone familiar with Iranian policy and politics. By his account, the Iranian position on Israel is not that it should be destroyed, merely that it should be democratic. As they interpret that, democracy for Israel means a vote in which all Palestinians—including Israelis, but also including Palestinians living anywhere in the world—get to vote. Since the total population of the Palestinian diaspora is larger than the total Jewish population of Israel, the result would be a Muslim state.

It occurred to me to wonder how consistently the Iranians were willing to apply their principle. If the Palestinian diaspora gets to vote, how about the Jewish diaspora? If someone counts as a Palestinian even if he lives somewhere else, on the grounds that his parents, grandparents, or great grandparents were Palestinian, then do I count as a Palestinian on the grounds that my distant ancestors left Palestine about two thousand years ago?

A different point raised in the interview was that although President Ahmadinejad gets quite a lot of attention, he isn't actually in charge of the Iranian government. The Supreme Leader, currently Grand Ayatollah Ali Khamenei, is head of the armed forces, makes foreign policy, has the ultimate authority. The president is merely the executive head of government, implementing the will of the Supreme Leader.

The President is elected. The Supreme Leader is appointed by the Committee of experts, a body of clergymen elected from a government screened list. If the Iranian support for democracy is to be applied consistently to both Israel and Iran, there seem two possibilities:

1. Let the Supreme Leader be elected by majority vote of all Iranians, including Iranian expatriates and their adult descendants.

or

2. Put the supreme authority over the Israeli government in the hands of a leader selected from a suitably screened body of the Israeli rabbinate.

So far as I know, neither of these options has yet been proposed by President Ahmadinejad.

How to Save Law Schools Money

I am not teaching this semester, so come into the office intermittently. When I collected my mail today, it included forty-three pieces of unsolicited mail from law schools, ranging from brief glossy brochures announcing a new hire, lecture, or institute to full scale glossy magazines describing the wonders of the school.

None of these schools is trying to hire me, so why do they bombard me with literature advertising themselves? The answer, almost certainly, is that every year U.S. News and World Report publishes its ratings of law schools. One way they decide how to rate schools is by asking randomly chosen law professors each fall what they think of the various schools. One way of trying to improve your rating, something all law school deans would like to do, is to bombard law professors with literature in the hope that some of it will catch their eye, resulting in a favorable mention for your school.

I do not know the actual cost to the senders of those forty-three pieces of mail, but I would be surprised if the total was much under a hundred dollars. The quantity of mail was, I think, above average, but I would still be surprised if the annual total cost of sending me such mailings, all of which go into the recycle bin, was under a thousand dollars, and not surprised if it were several thousand. Multiplied by all of the law professors targeted by such mailings, the total cost must be well into the millions, perhaps tens of millions.

I have a simple solution, designed to save the law schools money and me time. Let the ABA or the AALS set up a "no write" list for law professors. By putting my name on the list, I put law schools on notice that I do not wish to receive any mailing from them not specifically written for me, including any mailing of which more than a hundred copies go out. I further put them on notice that if any school sends me such mailings, I will remember the fact when and if U.S. News and World Report calls me.

The Current Financial Mess

I have been a little reluctant to post on this subject, since I have no special expertise in mortgage markets or financial matters. But at this point I think the basics of what happened are fairly clear. The following is a brief and somewhat simplified account. Readers are welcome to correct any factual errors.

Fanny Mae was established during the New Deal by the federal government for the purpose of making mortgages more readily available and so encouraging home ownership. In 1968 it was "privatized." In the late 1990's, under Clinton, lending standards were relaxed in order to make it easier to obtain loans. The basic mechanism was fairly simple. Fanny Mae bought mortgages from the lenders who issued them and bundled them into mortgage backed securities to be resold to investors on the secondary mortgage market.

The problem with mortgages as investments is the risk that the borrower will default, a risk which depends on the detailed facts of that particular mortgage—the borrower's income, the state of the local housing market, and similar matters. That makes a single mortgage a very poor investment. Not only is it risky, the risk is hard for the investor to measure. A bundle of mortgages is less risky, but the problem still remains. To solve it and make the securities attractive to investors, Fanny Mae guaranteed them. If the borrower did not pay off on the mortgage, Fanny Mae would make good the investor's loss.

An insurance company can afford to insure houses against fire because the risk of my house burning down is unrelated to the risk of your house burning down, assuming we are not neighbors. If the probability is one in a thousand the and the insurance company insures a million houses, it can expect to have to pay off on about a thousand a year.

That does not work so well for mortgages. The chance that I will default on my mortgage depends, among other things, on the state of the economy and the state of the housing market. If house prices are going up, I can borrow more money against my house to make payments. If they are going down, I can't—and, for reasons discussed in my previous post, it may be in my interest to default on the mortgage, getting rid of a $95,000 debt at the cost of an $80,000 house. That means that the same circumstances that make me likely to default make you likely to default.

Which raises an obvious problem for Fanny Mae: If enough borrowers default, the amount it will owe to holders of its securities may be more than its total assets. If Fanny Mae were an ordinary private firm, buyers of its securities would take that risk—the possibility that the seller would go broke and be unable to make good its guarantees—into account in pricing them.

But Fanny Mae is not an ordinary private firm. It was established by the government and it has generally been assumed that, although the government has no legal obligation to pay its debts, the government will be unwilling to let it go bankrupt and default on its obligations. That fact gave it an advantage over ordinary private firms in the same business. The result was that it could sell its securities for a higher price than they could sell theirs, which explains why it held a dominant position in the mortgage market. It also explains why I put "privatize" in quotation marks.

Housing prices are now going down, quite a lot of mortgages are defaulting, and Fanny Mae is unable to make good on its guarantees. The proper outcome, in my view, is that firms that bought risky securities on the theory that if they went up the firm would make money and if they went too far down the government would step in to limit their losses should have to pay the price of a losing gamble. The alternative, a massive bailout, simply encourages firms in the future to take risks that are worth taking only because, if they lose, someone else will pay for it. That applies both to firms dealing with government established entities such as Fanny Mae, and to firms that may reasonably believe that they, like Fanny Mae (and Freddie Mac and ...) are "too big to fail."

One disturbing feature of the present situation is the widespread view that this collapse is a failure of unregulated capitalism. Fanny Mae was created by the Federal government for the explicit purpose of lending money to people who wanted to buy houses and could not borrow the money to do so on the private market. It has continued to pursue that purpose, first with explicit and later with implicit government support, throughout its term of existence, has repeatedly boasted of doing so, and has now gone broke as a result. That is indeed a failure, but not a failure of unregulated capitalism.

[I have simplified the story by focusing only on Fanny Mae, but I think have described the essential features of the situation]

Wednesday, September 24, 2008

Voluntary Mortgage Defaults: A Research Proposal

It is routinely assumed that when a homeowner defaults on a mortgage and the mortgage holder forecloses, the reason was that the homeowner didn't have the money to make mortgage payments. Certainly that's one possible reason, but it is not the only one.

Suppose you buy a $100,000 house with $5000 down and a mortgage for the rest. Further suppose the housing market slumps, as it has, and the value of your house drops to $80,000. You now have a $95,000 debt secured by an $80,000 asset, which means that defaulting on the debt and forfeiting the house gives you a $15,000 gain at the cost of the lender. So it may be in your interest to default even if you could continue to pay.

This only works if you either are in a state where the lender's claim against you is limited to the house or if you have no other assets that a lender would find worth going after. My understanding—readers are invited to correct me if I am wrong—is that in some states the lender has a claim against other assets if you default, in others he does not.

If that is correct, it suggests a simple research project, designed to provide a rough estimate of the fraction of defaults that are, in the sense I have described, voluntary. Compare default rates in states where the lender can go after other assets to default rates in states where he cannot. Of course, the researcher would want to try to control, by the usual statistical measures, for other differences among states that might affect the chance of default.

Has anyone done such an analysis? If not, I offer it as a project for an ambitious scholar interested in a currently hot topic.

Larry Lessig on Sarah Palin

Larry Lessig, a prominent legal academic and an Obama supporter (and an ex-colleague of mine), has an interesting post on Sarah Palin. To his great credit, he is willing to say positive, indeed admiring, things about a candidate he opposes. Having said them, he goes on to argue that her claim that her experience is comparable to that of many past vice presidents is not true and that while she is courageous and at least sufficiently intelligent for the job, she doesn't have enough experience to qualify her for it.

I have a number of reservations about the details of Larry's argument, but the one I thought worth mentioning is the question of what kind of experience counts. In the video—worth watching—he runs through all of the past VP's and concludes that only two, both Republicans, were arguably about as inexperienced as Palin. In two more cases, the experience he lists consists of being a founding father; it isn't clear to me that that counts as training for the job of being President.

More important, quite a large number of the VP's, I would guess about a third, had no executive experience that he mentions—they had been representatives and/or senators. It's true that being in Congress involves many of the same issues a President will have to deal with—and, of course, part of the job of Vice-President is presiding in the Senate. On the other hand, the real function of a vice-president is being President, if and when, and being a legislator is not the same sort of job as being an executive.

To take a slightly stretched analogy from my profession, being an academic, even a Nobel Prize winner, doesn't qualify one to run a university, and being a university president isn't, or at least ought not to be, adequate qualification for a position as a tenured faculty member in an academic department.

The "Obama is a Muslim" issue

There have been various attempts, I think mostly online, to argue that Obama is really a Muslim. The silliest version is probably the claim that when Obama referred to campaigning in 57 states he was referring to the number of Muslim states. That one only works if you don't read the text of what he said, in which he says he has one state to go and isn't going to campaign in Alaska and Hawaii, making it obvious that "fifty-seven" was a slip of the tongue for 47. It also depends on not noticing that he in fact has not campaigned in fifty-seven Muslim states.

I recently came across a more interesting version by Daniel Pipes. His argument is not that Obama is a Muslim but that, from the standpoint of Muslim law, he was a Muslim as a small child, at a point at which he had a Muslim step-father whom he occasionally accompanied to the Mosque. If so then, from the Muslim standpoint, Obama is now an apostate, a Muslim who converted to Christianity. Under Muslim law, it is permissable to be a Christian (or a Jew or a Sabean--along with Muslims the four "peoples of the book"), but for a Muslim to abandon Islam is a serious, indeed capital, offense. Hence, Pipes argues, Obama might have problems dealing with Muslim leaders.

So far as I can tell, the argument is at least plausible. I am not sure what the Sharia rules are on the age at which a religious choice counts, but I am pretty sure that repeating the formula "There is no God but God and Mohammed is his prophet" is supposed to make one a Muslim, legally speaking, and it seems likely enough that a child who attended services at a mosque would have repeated that formula at some point.

Which Vice Presidential Candidate Was it Who ...

"Also in the CBS interview, Biden said, “When the stock market crashed, Franklin D. Roosevelt got on the television and didn’t just talk about the, you know, the princes of greed. He said, ‘Look, here’s what happened.’""

When the stock market crashed in 1929, Herbert Hoover was President; FDR wouldn't get the job until 1933. Television as a mass medium was a decade or so in the future. The first president to appear on TV was (I think--corrections welcome) Truman in 1946. If Palin had said it, it would be taken as proof positive of her lack of education. It is hard to see any explanation for Biden's statement other than striking historical ignorance.

Does it matter? Probably not—any more than it matters how recently Palin got a passport. Neither the things one is supposed to learn about American history in high school nor the things a tourist learns wandering around Europe are all that important for doing the job they are applying for. But it will be interesting to see what form the story takes in the media, according to who wants to slant it how.

Monday, September 22, 2008

Yes, of course I'm waiting for the Google Android Dream

As regular readers of this blog may remember, I've long been looking for a cell phone that meets my requirements, a combination PDA, phone, and internet device. The latest candidate is due to be unveiled tomorrow.

Good things about the Dream, aka G1

Qwerty Keyboard

Screen probably about 3.1", which is smaller than I want but bigger than most of the competition (except the iPhone).

3G and GPS

Open source and anyone can produce applications, so it will almost certainly soon have what I want, including a decent word processor to read books and make notes on manuscripts and the ability to function as a wireless modem connecting WiFi equipped laptops to the 3G cell network via the phone.

Not so Good Things About the G1

The screen is still smaller than I like and its resolution is only 480x320, which is the same as the iPhone and less than some of the high end smartphones.

Initially available only on T-Mobile, which is not currently my carrier and does not have a very extensive 3G network, although they claim to be expanding rapidly.

About another sixteen hours to wait.

Also, for anyone in the Bay Area, I'm giving a talk tomorrow evening at San Jose State University: "Should We Abolish the Criminal Law?"

(Ir)religion and Irrationality

Religions serve at least two purposes, both important to humans. One is to help make sense of physical reality, explain (for instance) why living things appear to be brilliantly engineered creations. The other is to make sense of life, to answer questions about what we ought to be doing and why.

The development of science over the past few centuries provided a strong rival to religion for the first purpose, an explanation that not only covered the same territory but came with much stronger evidence for its truth. One might hear stories about occasional miracles at Lourdes or elsewhere, but one directly observed the miracles of science every time an electric light was turned on or an illness cured.

Science did not, however, provide an alternative for the second function. People responded, I think, in one of two ways. One was to retain a serious belief in the religion and reject those parts of modern science that they found inconsistent with it—in its more extreme form, the fundamentalist option. The other was to give up serious belief in the religion and adopt some substitute: Environmentalism, Liberal politics, Marxism (as in "liberation theology"), Objectivism, New Age superstitions.

Two recent events started me again thinking about this situation. One was a conversation with a college freshman very upset to discover that the church she was now attending blended environmentalism, which she does not believe in, with Christianity, which she does believe in. The other was a recent piece in the Wall Street Journal offering quite striking evidence, from polling data, that religious people are less superstitious, less given to a variety of what most of us would regard as irrational beliefs, than non-religious people.

The effect is not small.

The Gallup Organization, under contract to Baylor's Institute for Studies of Religion, asked American adults a series of questions to gauge credulity. Do dreams foretell the future? Did ancient advanced civilizations such as Atlantis exist? Can places be haunted? Is it possible to communicate with the dead? Will creatures like Bigfoot and the Loch Ness Monster someday be discovered by science?

The answers were added up to create an index of belief in occult and the paranormal. While 31% of people who never worship expressed strong belief in these things, only 8% of people who attend a house of worship more than once a week did.

Which gets us back to a recent blog post and associated discussion—on whether the fact that people were religious was a reason to expect them to behave in irrational ways, hence a reason not to want a religious person as President. Judging by at least the evidence in the article, it's the other way round. It is the non-religious President we should be worried about—because who knows what he believes instead. He might convert a two foot rise in sea level to a hundred foot rise out of pure faith in an avenging Gaea.

Fortunately, he isn't running this time.

Sunday, September 21, 2008

Concerning the Present Difficulties

Some commenters have asked for my views. I'm reluctant to go into much detail, since financial institutions aren't something I have any expertise in. But I did come across a comment on the present situation that I wrote, and posted, almost a year and a half ago:

Someone had asked another Usenet poster:

"How do you feel about the line, "I want you to vote for me, because I support smaller government"?

I replied:

1. It gives me very little information about what he will do if elected.

2. But it does mean that, since he is pretending to be one of us, we will get blamed for what he does, even if it has nothing to do with the views we support.

That's why, on the whole, I thought it would be better if Bush had lost the most recent election--not that his opponent would have been any better but that at least we wouldn't have gotten blamed for what he did.

Saturday, September 20, 2008

Blogs vs Books

According to the s17.sitemeter.com report, in the history of this blog there have been a total of 389,670 visits, with an average length 1:48 each. That adds up to about ten thousand hours.

Writing books is an alternative way of spreading ideas. If we assume that, on average, each copy sold represents two hours of time reading--allowing for some buyers who stop at the first page, others who spend much more than two hours reading and perhaps rereading--that corresponds to sales of about five thousand copies. A book that sells a total of five thousand copies isn't a flop, but it isn't doing terribly well. While I don't have figures readily available, my guess is that all of my nonfiction books, with the probable exception of my one textbook (Price Theory), have done substantially better than that.

On the other hand, time I spend making blog posts mostly is not time I would be spending writing books instead.

Thursday, September 18, 2008

Benefit, Blame, Causation and Other Irrelevancies

Driving home, I caught a bit of a McCain speech on the radio. He was asserting, for all I know correctly, that Obama's advisors had told him that he would benefit politically from the current financial problems. The clear implication was that that made Obama a bad person and so was a reason to vote for McCain.

The underlying theory has its own latin tag--Cui Bono. When something goes wrong, see who benefits by it and blame him. As a rule of thumb, a first place to look, it makes some sense. But it makes no logical sense here, since McCain is not arguing—could not plausibly argue—that Obama caused the crisis in order to benefit by it. Yet, however illogical, it works as rhetoric. Bad things are happening, Obama is benefitting by them, Obama must be a bad person.

An older and bigger example of the same error was the attack on "malefactors of great wealth," war profiteers, after WWI. There was no real evidence linking firms that manufactured munitions to the war happening. But terrible things had happened, people wanted someone to blame, and those—actual or imaginary—who had benefitted by those terrible things were the obvious targets.

The illogic in both of these cases is in some ways similar to one of the oddities in arguments about global warming. Both sides of that debate seem to take it for granted that if the cause of global warming is human activity, that's an argument for our doing something about it, while if it is something else, such as changes in the behavior of the sun, that is an argument against.

There is a crumb of logic to the argument. If global warming is caused by human activities, then by stopping those activities we could presumably stop it. The behavior of the sun is not something we have any control over.

But it is only a crumb. To begin with, "human" is a species, not a person. "We" don't make decisions. Whether or not humans are causing global warming, my contribution to it, which is what I control, is close to zero. I have little more control over other people living on the other side of the globe than I do over the sun. So even if is true that humans are causing the problem, it does not follow that there is a human solution to it in any useful sense.

Seen from the other side, even if humans are not responsible, even if the cause is the sun, if global warming is a bad thing it might be worth doing something to stop it. Humans are not responsible for the existence of polio, but that is no argument against developing polio vaccines. Various suggestions have been made for things humans could do that would reduce global tempratures. Whether they are worth doing does not depend on whether whatever increase is happening is our fault.

Which gets us, I think, to the emotional core of the argument. It isn't that whether we caused it determines whether we can cure it. It is that if we caused it then it is our fault, and if it is our fault we should cure it. "Clean up your own mess."

That makes no sense that I can see in such a context, since it is extending to the human species an argument applicable only to individual humans. Yet it is emotionally powerful, which is why one side of the argument wants to argue that global warming is caused by humans, the other that it is not.

[Interested readers may want to look at some of my past posts for a more detailed discussion of the global warming controversy.]

[A commenter points out that I was mistaken in associating the term "malefactors of great wealth" with the post WWI attempt to assign blame for the war. The term was used by Teddy Roosevelt at least as early as 1907.]

Wednesday, September 17, 2008

Making a Mistake and Not Admitting it

"The mismatch theory may be mistaken. But suppose it were found to be valid? That wouldn't necessarily lead to the abolition of racial preferences. Another result might be the strengthening of mentorship and other programs to help less-well-prepared students achieve at higher levels."

The quote is from a recent LA Times editorial attacking the refusal of the state bar of California to allow Richard Sander, a UCLA professor, access to data that he wants to use to test his thesis that affirmative action actually hurts minority law students.

Sanders' argument, which he has supported with such data as he could get, is that affirmative actions puts minority students into the wrong schools. A student who would have done fine at a second tier school, grouped with other students of his own ability, is accepted by Stanford instead, takes classes aimed at and populated by students abler and/or better prepared than he is, fails to learn, fails the bar exam, and ends up having wasted three years and a good deal of money. It is the same argument that Thomas Sowell made long ago in the context of college admissions, pointing out that black students at MIT were much better at the relevant subjects than the average student, black or white, but much worse than the average MIT student.

What struck me about the passage I quoted above was the implicit assumption that if the result of learning that Sanders was right was the abolition of affirmative action in law schools, that would be a bad thing--that in that case the refusal to provide Sanders the data he needs might be justified. If Sanders is right, affirmative action in law schools is a mistake, hurting the very people it is supposed to help, and abolishing it would be a net gain.

Perhaps there are better solutions, as the editorial suggests. But whether or not there are better solutions, it is worth discovering the truth and acting on it. The only serious argument against doing so is that discovering the truth might mean discovering that a lot of people have done a lot of damage while claiming to do good. That would make those people, some of whom no doubt have influence in the California bar, unhappy.

Which seems the most likely explanation of the refusal to release the information.

When I was little, one of my father's pieces of advice was that making a mistake and not admitting it is only hurting yourself twice.

McCain, Obama, Kiddie sex-ed, and Lies

There has been a considerable flap over a McCain ad accusing Obama of supporting comprehensive sex education for kindergarten students. Obama's people say the ad is a lie, and are supported by, so far as I can tell, most of the media other than McCain partisans. As I read the evidence, it reflects poorly on both candidates, but worst on the media.

The controversy centers on an Illinois senate bill that Obama voted for, although he neither wrote it nor sponsored it. Googling around, one finds lots of stories criticizing McCain and explaining that the bill was merely intended to warn children against sexual predators. Obama is quoted, from an earlier round of the controversy, as saying that it was aimed at inappropriate touching.

Most of the reporters who repeated Obama's version as gospel do not seem to have actually bothered to read the bill, although it is readily available online. It contains, along with much else, the following language:

"Each class or course in comprehensive sex education offered in any of grades K 6 through 12 shall include instruction on the prevention of sexually transmitted infections, including the prevention, transmission and spread of HIV AIDS."
(I believe the underlining and strikeouts show changes from the pre-existing law.)

If Obama thinks that AIDS is transmitted by touching, he has problems more serious than his views on sex education.

It's true that the bill also says all instruction is to be age appropriate. Precisely how one provides age appropriate instruction in the prevention, transmission and spread of HIV to kindergartners has not, so far as I know, been explained by either the Obama campaign or anyone else.

As I read the bill, the authors were trying to please everyone from the pro-abstinence right through the AIDS activists. They--and, to a lesser degree, state senators who voted for the bill, including Obama--are responsible for the result. It's entirely possible that Obama's description of what he thought the bill was about is true, but it is not an accurate description of what the bill actually said. I doubt Obama is in favor of explicit sex-ed for small children, which is what the McCain ad implies. But he did vote for the bill, and so is in a poor position to label a truthful description of what was in it as a lie.

We can expect each campaign to slant such material in the way that favors their candidate. But it would be nice if reporters actually bothered to check the facts before accepting one side of the argument and labelling the other a lie.

Sunday, September 14, 2008

Worrying About Religion

"I afraid she'll listen to voices in her head, thinking they are divine inspiration, when confronted with national security issues. What if God tells her to launch the missiles?"
(recent Usenet post about Palin)

The argument--someone offered a version of it not long ago in a comment here--sounds right, but I don't think it is.

When you get on an airplane, do you worry about whether the pilot is a fundamentalist? What if God tells him to fly into a mountain? The mechanic who checked it? What if God told him not to bother—everything was fine? If you go in for an operation, is the question of whether the surgeon believes in evolution one of your main concerns? What if God tells him to cut out your heart and put it on an altar? When driving down the highway, do you worry that perhaps one car in ten coming the other direction is driven by a religious believer who might decide that this is his moment to go to heaven?

There is evidence all around us that people can hold apparently weird religious beliefs and still do a competent job of dealing with the real world. Perhaps that means that they don't really believe in the weird beliefs--that they are a story they enjoy telling themselves, not a real part of their picture of the world. Perhaps it merely means that knowing how to fly an airplane or use a scalpel doesn't depend on your view of religion, so pilots and surgeons who happen to have odd religious beliefs nonetheless learn and practice their professional skills the same way other pilots and surgeons do.

Whatever the explanation, I think it's clear by ordinary observation that holding weird religious, or for that matter political, beliefs rarely makes one unable to live one's life with an ordinary degree of competence.

And, of course, so far as Palin is concerned, the evidence most often cited—her supposed belief that the Iraq war is divinely inspired—is bogus, as I have already pointed out. Her actual remarks implied that she didn't know if it was God's plan or not, which suggests that she does not have voices in her head to answer such questions but must make up her own mind. Just like the rest of us.

Friday, September 12, 2008

Minor Irritations

"Residents of the Texan coastal city of Galveston face 'certain death' if they do not evacuate, the National Weather Service has warned."

Assuming the quote is accurate, the Weather Service is lying. Weather prediction is not that accurate and even a catastrophic flood does not kill everyone. But it is hard to point out that people are lying when they are lying in a good cause without being accused of minimizing dangers or wanting people to die.

[Postscript, after the storm: "Ike killed at least two people in Texas and Louisiana." A lot more than two people chose to stay in Galveston.]

Meanwhile ... the Lancet reports that, worldwide, the child death rate has fallen by 28% since 1990. Breaking it down by region, "deaths in western and central Africa have fallen by just 18%; in sub-Saharan Africa the figure was 21%, while in eastern and southern Africa it was 26%."

How does BBC headline the story?

Huge split in child death rates

Beneath the headline, in boldface type:

"Progress in cutting the number of deaths among children under five is still 'grossly insufficient' in some parts of the world, Unicef has warned." The picture that accompanies it is of two black children, one crying and one looking grim.

The actual news is that things are getting better. But that is not the impression that the headline, the introduction or the picture is designed to give.

I switched from CNN to BBC as a source of online news in response to CNN's extraordinarily biased reporting of the FLDS case in Texas. BBC is not as bad—you only have to read to the bottom of the article to get the relevant information. To find out from CNN that not only was the phone call that set off the Texas raid a hoax, but the identity of the hoaxer had been known since a few weeks after the call was made, you had to follow links into the depths of their web site.

But BBC could be a lot better.

Thursday, September 11, 2008

Judging Politicians

Listening to the back and forth on earmarks, ideology, and much else, it occurs to me that there are really two different ways in which voters try to evaluate politicians: the record and the person. Judging a politician by his past voting record seems the obvious policy—what he does, not what he says. But it isn't all that clear that it is the right policy.

The voting record, after all, reflects not only, perhaps not mainly, the policy preferences the politician actually holds. Politicians have to get elected and reelected, and that means that, to a considerable extent, they have to take the positions that will get people to vote for them, and donate money to their campaigns, and work for their campaigns. I suspect the result is that two politicians who are, say, governors of Alaska, will in many respects have similar policies, even if they are from different parties and different ideological backgrounds. So will two politicians who are state senators from the south side of Chicago.

If an ex-state senator from the south side is running against a governor of Alaska, they will have very different records in terms of what they supported and what they voted for. Gun control is a lot more popular in Chicago than in Alaska, hunting a lot more popular in Alaska than in Chicago. But whichever one wins the election—I am ignoring the minor distinction between a presidential and vice-presidential candidate—will have the same job, depend on the same electorate to get reelected. The differences that in large part explain their past record will have mostly disappeared.

So perhaps there really is something to be said for judging character rather than voting record. Doing so makes both candidates look better, at least to me. Obama's voting record is that of a very liberal Democrat. But what I can judge of his actual views, in part from the people around him, in part from his own statements, suggests that he is much less of an ideologue than that record suggests, that he might, for instance, make a serious effort to pull libertarians out of the Republican party, which has not given them much in recent years, and into the Democratic, something I suggested several years ago. He might even try to rebuild the Democratic party around something a little more up to date and relevant than the New Deal.

Similarly for Sarah Palin. As critics have pointed out, her much publicized opposition to earmarks and government spending stopped well short of declining federal money for Alaska when she, as governor, had a chance to get it. But then, that is what one would expect of a governor. Her actions with regard to Alaskan money are perhaps a better measure of how she would act with regard to federal spending if she got promoted out of her present job. And her general style suggests the sort of politician who would be willing to fight, perhaps able to win, against a variety of entrenched interest groups.

Now if I could just forget about those other two... .

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Wednesday, September 10, 2008

More on Obama's Tax Plan

After looking more carefully at the details of Obama's proposal, I observe a certain ambiguity in the claim that he is on net cutting taxes, for a reason pointed out by one commenter on my previous post. The plan includes a bunch of "refundable tax credits." It is not at all clear to what extent they ought to be counted as reductions in taxes, and to what extent as increases in expenditure.

Suppose you, like about a third of all tax filers, are currently paying no federal income taxes. You decide to send your child to college, thus qualifying for "A Refundable $4,000 American Opportunity Tax Credit." You are now getting $4000 a year from the government. Labeling it a scholarship or a subsidy, which is what it is, instead of a tax credit, increases both total taxes and total expenditures by $4000. Similarly for the $1000 "making work pay" tax credit, the 10% mortgage interest tax credit, and the health care tax credits.

Current college enrollment is over 10 million full time students, about 5 million part time. If we assume that the credit only applies to full time students, that comes to a total of over forty billion dollars a year. A majority of it will go to reduce taxes paid--more than two-thirds, since higher income people are more likely to send their children to college--and so conventionally goes on the tax side of the calculation, although people have been arguing for a long time that such "tax expenditures" ought to go on the expenditure side. But quite a lot will be money paid to people who were paying no taxes.

This part of Obama's plan is represented as a way of helping people afford college, which it is. But it is also a massive subsidy to low end colleges. The credit only applies to tuition expenses, so if you send your child to a community college that only charges $2000/year, you only get a $2000/year trax credit. But once the proposal is implemented, there won't be any colleges charging $2000/year, or at least very few. Raising tuition to $4000/year increases the income of the college at no cost to the students, so any sensible college now charging less than that will do so. I expect a lot of college professors will be voting Democratic this year, but that is nothing new.

The "Making Work Pay" tax credit, if I correctly read the numbers, costs about another $75 billion dollars. Again, most of that will go to reduce taxes, some of it as payments to people not now paying taxes. The Child Care tax credit looks to come to ten or twenty billion. The Health Care tax credit is not explained in any detail, at least in what I found, so I cannot estimate its size.

If we count all of the refundable tax credits as expenditures, I suspect that Obama's claimed reductions in total taxes and expenditure turn into an increase, although I do not have the data to be sure. I don't know what happens if we count only refunds that are actually paid out, rather than used to reduce the amount the taxpayer pays in.

The general problem, the ambiguity between cutting taxes as a way of subsidizing activies one wants to subsidize and paying out the money directly, is not a new one, so one can hardly blame Obama and his campaign for it. But it is an important one. Transfer payments make up a very large share of the federal budget. With sufficient ingenuity, one could eliminate essentially all of them from the expenditure side by relabelling them refundable tax credits, thus producing, on the books, an enormous reduction in both expenditures and taxes, while actually changing nothing at all. Obama seems to be moving things at least a little farther in that direction.

Tuesday, September 09, 2008

Alia Iacta Est

Yesterday, the inventory of 120 GB Acer Aspire One's at the local Microcenter went from zero, where it had been for quite a while, to 85. Today I drove over and bought one. I have now downloaded and installed Firefox and Open Office, am in the process of installing Ubuntu using wubi while downloading to my desktop an image of the Linpus restore DVD. My plan is to install Linpus Lite on a flash disk, giving me three operating systems to play with--XP, Ubuntu, which is a full fledged Linux but may have some problems with the hardware, and Linpus, which is a toy Linux but designed to run on this machine--or at least the flash disk variant of it.

My only real problem so far was with Ubuntu. The first time I installed it I didn't keep careful track of the user name and password I put in at the beginning, didn't remember that the former was lower case, and couldn't figure out why the password seemed to not be working. I'm now reinstalling, having discovered the error in the process of doing so.

A few comments on my choices, for anyone else currently considering a subnote. I went with the Acer because it is about as small as the 9" eee and has a much better keyboard. I went with the XP version in part because 120GB>>8GB, in part because Linpus Lite, unlike the Linux on the eee, doesn't give you the option of using it as a normal desktop OS. You boot in a beginner's version and you stay there, unless you are willing to do some detailed tweaking of the system with no help from Acer. Also, it looks as though Ubuntu with wubi will give me a real Linux with relatively little hassle installing it. I went with the 3-cell battery, instead of waiting for the 6-cell version to become available for an extra $50, on the theory that most of the time I prefer light weight to longer battery life, and if the latter is going to be an issue--as it will be on a trip to Europe--I can always buy an extra battery.

And finally, of course, XP will let me play WoW without worrying about Wine's foible's. At least, it should; I haven't yet tried installing it.
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Postscript, a little before midnight.

Ubuntu is successfully installed; after a little work, I even got a wireless connection. The instructions I was trying to follow included editing some files, such as /etc/modules. When I tried to do so, I was unable to save the altered version. I assume this is some issue of permissions, but I haven't yet figured out how to get around it. My guess is that it means I will have to put a command in at the terminal each time I reboot, if I want WiFi.

A downloaded an image of the Linpus Light restore disk, copied its contents to my flash disk, but have not yet figured out how to get the computer to boot off it, or if I can.

Fun.

Sunday, September 07, 2008

Obama's Tax Proposals

There is an interesting Wall Street Journal piece by two of Obama's people available on the web, giving their account of his tax proposals. The central claim is that Obama would raise taxes somewhat on taxpayers with incomes above $250,000, lower taxes somewhat on everyone else, and that the net effect would be a reduction, not an increase, in tax revenues. That is not the impression one gets from the campaign oratory or news stories. The interesting question is whether it is true.

That, I think, depends on two different questions. One is how complete the description in the article is. The article refers to "reforming" corporate taxes but does not go into details. Taxing rich and soulless corporations sounds unobjectionable, but corporations have no consumption of their own to reduce, so corporation taxes ultimately fall on stockholders, employees, customers, and suppliers--human beings all. The more detailed account of Obama's plans that I got by following links from the article proposes to "Broaden the corporate tax base and eliminate special preferences," which might imply an increase in the total.

The second question is whether Obama is actually going to reduce total federal spending, as the article claims. I hope it is true, but I have my doubts. It is easy enough to campaign against waste, earmarks, and the like, as many politicians have done in the past, but hard to do much about them. And the Obama campaign has proposed some pretty expensive new programs, in particular something that sounds like a near universal service version of a domestic peace corps, with college age students paid generously to do good under government auspices. That could cost a lot of money.

On the other hand ... . Despite Republican oratorical support for low spending and balanced budgets, the Bush administration has done a strikingly bad job in both respects. Perhaps Obama really does plan to satisfy his more enthusiastic supporters with lots of symbolic fluff but only moderate amounts of money. A democratic administration that succeeded in doing the things Republican administrations claim and don't do would be in a very strong position in the next election.

Which leads to an obvious question. Can any reader point me at a competent and critical analysis of Obama's tax and budget plans?

Saturday, September 06, 2008

A Different View of Sarah Palin

Since I have been defending Sarah Palin against some attacks that I think are clearly wrong, I thought it only fair to provide a link to one that may well be true. It's an open letter which purports to be from a long time resident of Wasilla, the city she was mayor of. The author gives her name, and my guess, judging entirely by internal evidence, is that the letter is genuine--that although the account is in some ways biased against Palin, whom the author pretty clearly doesn't like, she is telling the truth as she sees it. It's an interesting account.

It may, of course, turn out to be entirely bogus--in which case I'm not as good at judging sources of information on internal evidence as I think I am.

Quoting Palin Out of Context

On lots of places on the web and Usenet, I am finding versions of the following:

"Alaska Gov. Sarah Palin told ministry students at her former church that the United States sent troops to fight in the Iraq war on a "task that is from God.""

It is, to be blunt, a lie. The full sentence, which can be checked from the original video or any of lots of web pages, was:

"Pray for our military men and women who are striving to do what is right. Also, for this country, that our leaders, our national leaders, are sending them[U.S. soldiers] out on a task that is from God, that is what we have to be praying for"

By snipping the rest of the sentence, the AP (which is what I linked to above) and lots of other sources are converting "I hope this is true," which is what "pray that it be true" implies, into "this is true." It's a striking example of how a partial quote can be used to attribute to someone something she didn't say--indeed, in this case, something inconsistent with what she did say.

Friday, September 05, 2008

My Talk at Google

A few days ago I gave a talk at Google on Future Imperfect; the video is now up.

Thursday, September 04, 2008

The Subnotebook Saga

For any readers who share my interest in two pound laptops, here is how the situation now looks:

1. The Acer Aspire One is still, so far as I can tell, the best option, with the size of the eee 901 and the keyboard quality of the eee1000 and the MSI Wind. I don't have much use for a subnotebook until my next trip, which is about a month and a half off, so will try to resist the temptation to get one now, on the theory that there might be an improvement in price or features over the next month.

2. Assuming that nothing changes, I will get the version with XP, 120GB hard drive, and a three cell battery. The much longer running time of the six cell battery which will be available "real soon now" (and is apparently already available on at least one Canadian model) doesn't make up for the increased weight and size. Eventually I'll probably get a spare 3 cell battery; so far they do not seem to be available.

3. Having gotten it, I will set it up to dual boot with some version of Linux. Ubuntu has software called wubi that is supposed to let you install Ubuntu on the same partition as Windows, set to dual boot, which sounds like the simplest solution. It's claimed that the latest version of Ubuntu works almost perfectly with the Aspire One.

4. On the other hand ... . As best I can tell, a full install of Ubuntu won't boot much faster than XP does. I'm playing with the idea of downloading a disk image of the install disk for the Linux version of the Aspire and installing it on a flash card, to go into the computer. It seems to me that it ought to then be possible to have a triple booting machine--Linpus for fast boot, Ubuntu for a full Linux OS, XP for anything that requires XP to run. Anyone who knows more about this than I do is welcome to correct any errors I'm making.

5. The current availability situation is interesting. The Linux/flash disk version of the machine is available at its list price of about $330 from a variety of sellers. The XP/hd version lists for about $350. Microcenter and Best Buy sell it for that price--or would if they were not perpetually out of stock. Sellers who actually have them to sell set the price anywhere from about $380 to $500 or so. Given that I'm in no hurry, I expect I will wait and see if I can get it at list sometime in the next month or so.

6. Today Dell released its subnotebook. Amazingly enough, they managed to copy the single worst feature of the Asus eee subnotes--a keyboard with a small right shift key next to the up arrow key. Try to use the right shift and you are two lines above where you thought you were. They also provide fewer features at a higher price than the Acer. Presumably they are counting on the advantage of a very familiar brand name--although I gather Acer is pretty well known as well.

The one advantage of the Dell Inspiron 9 over the Acer Aspire One is that the bits one wants to get at for upgrades--memory slots, hd, and the like--are all readily getatable. With the Aspire, you have to practically disassemble the whole computer to simply expand the memory.

Web shopping as a recreational activity. And I haven't even mentioned the Google Android Dream.