Saturday, March 27, 2010

God, Law, and Loopholes

"The Perfect One Who made the Law also made the loopholes."

(A Usenet poster defending Jewish law; I do not know if the line was original with him)

I'm currently covering Jewish law in my seminar on Legal Systems Very Different from Ours. One of the puzzling things about it is the willingness of legal scholars who believed that the legal rules in the Torah were dictated by God to find ways around them, implausible interpretations of the text or excuses for additional rules inconsistent with the original ones. This raises the question of whether the legal scholars who made and interpreted the law actually believed in it.

The quote above provides one possible answer. Not even God could construct a system of rules that would work for all times and places. The best He could manage was a system of rules that would mostly work, provided with a few loopholes that would permit believers to alter those rules in response to circumstances under which they became clearly unworkable.

That still leaves the puzzle of why God would include in his system a rule, such as the one providing that a disobedient son was to be stoned to death, that was never to be enforced—a result the scholars managed by reading into it a set of conditions which could never be met. Somewhere, I think, Maimonides has an explanation for the existence of such rules, but at this point I have forgotten what it was.

The Iraq Election Puzzle

Recent news stories have reported that the political coalition that was expected to win the election lost it, and a rival coalition made a (narrow) surprise win. I do not understand why this is supposed to be important; perhaps one of my readers can explain.

In a winner-take-all system such as the election of an American president, a small difference can be crucial, as demonstrated in the 2000 election. But Iraq has a multi-party parliamentary system, and neither coalition has close to a majority of the seats. In order to form a government, either one of them needs a coalition with one or more smaller parties. The fact that one party has two more seats than another has almost no effect on its ability to do so. So far as I can tell, the only effect is that the rules let the largest party make the first try at forming a coalition—but there is nothing that prevents its rival from trying to reach agreement with enough other parties to make that first try fail

Is the excitement over a purely symbolic issue—which coalition can claim to represent the Iraqi people? Is the right to try to assemble a majority coalition first that valuable? Or am I missing something?

Tuesday, March 23, 2010

Is There a Health Insurance Bailout in our Future?

Governments have short time horizons. Faced with a long-term problem such as the actuarial bankruptcy of Social Security, it almost always makes political sense to stall, to find some way of putting off the political costs of dealing with it. With luck, the problem may go away. If not, the costs will fall on some other politicians in the future.

Now that Obama's health care plan has passed, he will be under pressure to produce results that look to most voters better than the past, or at least no worse. In the short run that should not be a problem, since most of the provisions of the plan are set well in the future. Most of the taxes to pay for it come into effect in 2013, the requirement that health insurance companies take anyone who applies, including those with pre-existing issues, in 2014, the tax on high end health plans in 2018. The fine for not having health insurance starts in 2014 at $95 or 1% of income, and reaches its full value in 2016. For the next few years, at least through the end of Obama's current term of office, the controversy over the plan will be mostly a war of words, without much evidence on its real consequences.

Eventually that will change. If, when most of the provisions of the plan are in effect, it appears to be working very badly, if health insurance is more expensive than it used to be, if many younger workers find they are being required to spend a lot of money for insurance they don't want, there will be two political consequences. One is that the Democratic party, strongly identified with the changes, will suffer a decline in its reputation. The other is that whatever politicians are in office will look bad, since voters will blame current problems on those currently in charge.

The obvious solution is to find ways of pushing the costs of the program into the future. Insurance companies take in money now in exchange for the promise of future payments. Under political pressure to charge less and promise more, they may adopt the policy followed by General Motors when it solved its labor problems by paying striking auto workers with the promise of future pensions: Make promises they cannot fulfill, in the belief that when the crunch comes the U.S. treasury will come to their rescue.

Monday, March 22, 2010

Prediction vs Explanation

A commenter on an earlier post raised the question of whether predicting something in advance is different in some important way from explaining it after the fact. I think it is, I think the reason is interesting, hence this post.

Suppose someone does ten experiments and comes up with a theory that is consistent with the results of those ten and predicts the outcome of ten more experiments, none of which has been done yet. The experiments are done and the predictions are correct.

Someone else looks at the results of the experiments and creates a theory consistent with all twenty.

We now do one more experiment, for which the two theories give different predictions. Are they equally likely to be correct, and if not why?

Let me start with the obvious argument to show that the two theories are equally good. There are lots of possible theories to deal with the subject of the experiments. All we know about the two candidates theories is that each is consistent with the first twenty experiments. Hence they are equally likely to be correct.

Imagine that each possible theory is written on a piece of paper, and pieces of paper are sorted into barrels according to the results they predict for the various experiments. The first theorist restricted himself to the barrels containing theories consistent with the first ten experiments, drew one theory from one of those barrels, and it happened to be from the barrel containing theories also consistent with the next ten experiments. The second experimenter went straight to that barrel and drew a theory from it.

What is wrong with this model is the implicit assumption that experimenters are drawing theories at random. Suppose we assume instead, as I think much more plausible, that some people are better at coming up with correct theories, at least on this subject, than others. Only a small fraction of the barrels contained theories consistent with the second ten experiments, so it would be very unlikely for the first experimenter to have chosen one of those barrels by chance. It's much more likely if he is someone good at coming up with correct theories. Hence his coming up with a theory in that barrel is evidence that he is such a person—increases the probability of it. We have no similar evidence for the second person, since he looked at the results of all twenty experiments before choosing a barrel.

Since we have more reason to believe that the first theorist is good at creating correct theories, or at least more nearly correct theories, than that the second one is, we have more reason to believe his theory and so more reason to trust his prediction for the next experiment.

Statisticians may recognize the argument as a version of spurious contagion. Picking the right barrel doesn't make the theorist any better, but the fact that he did pick the right barrel increases the probability that he was (even before picking it) a good theorist.

Saturday, March 20, 2010

The Health Care Bill: Some Tactical Thoughts

Suppose that, sometime this evening or tomorrow morning, Nancy Pelosi concludes that she is not going to have the 216 votes she needs to get the Senate health care bill through the House. Considered from a purely tactical standpoint, what should she do?

The obvious policy is to have a vote and lose it. But there is a problem. The reason she is having a hard time rounding up votes is that many representatives believe a vote for the bill will substantially reduce their chances of reelection this fall. Presumably the leadership either disagrees or considers it a price worth paying to get the bill passed.

If the bill ends up with 212 votes, they will have paid the price and gotten nothing for it. That suggests that, if the bill is not going to pass, it is better for the Democrats not to vote on it. Not being myself an expert on the rules and customs of the House, I have no clear idea of how easy that would be to arrange at the last minute. But it is still an intriguing possibility.

Which suggests a prediction. Either the bill will pass, or it will fail by only one or two votes--too few for the result to be predicted with confidence. Or it will, somehow, not get voted on.

Which is why I decided to put this post up now. Predicting things before they happen is more interesting than explaining them afterwards.

Saturday, March 13, 2010

Third Parties and Political Investments

"Don't buy a single vote more than necessary. I'll be damned if I'm going to pay for a landslide."
(Supposedly said by Joseph Kennedy to JFK during the West Virginia primary)

Judging by current polls and the views of political commentators, the upcoming British elections may well end up with a hung parliament—a majority for neither major party. If so, whichever one ends up trying to run things will need the cooperation of the Liberal Democrats. The situation suggests an interesting way of looking at third parties in systems such as Britain's.

Imagine that you are considering investing in the political marketplace, as candidate, party official or contributor. What party should you invest in?

The obvious choice is one of the two majors. Most of the time, one of them is running things and so in a position to provide benefits to its supporters—opportunities to influence policy and legislation, cash, status. There is, however, another option. The more supporters the party in power has, the more thinly the loot will have to be spread; seen from this standpoint, the ideal electoral victory produces a majority of one. Most of the time, one of the major parties is in power and someone who invests in the third party gets little or no return for his time or money. But once in a while ... .

In a hung parliament, any two parties can form a government. Think of parties—abstracting away from their internal politics—as players in a majority vote game. Each has one vote, and two votes out of three control. The third party is not merely an equal player in that game, it is a superior player, since each of the other two prefers alliance with the third party to alliance with its traditional opponent. Each major party has a chance of about .5 of being in the ruling coalition. The third party has a near certainty. Hence, on average, the third party should get more out of the situation than either of its larger rivals.

From the standpoint of the investor, the question is not what the party gets but what he gets. The third party has fewer contributors, fewer candidates, fewer workers. It is easier to be a big fish in a small pond. The fewer people the loot is divided among, the more for each. So, while investing in a third party should yield a lower probability of a payoff than investing in a major party, the payoff, if it comes, should be larger. Perhaps much larger.

Which may help explain the existence of third parties.

Wednesday, March 10, 2010

My Quest for the Ultimate Cell Phone

In a number of previous posts, I have described what I am looking for—a pocket computer/pda/internet appliance/phone. For those who share my hobby of window shopping gadgets, with at least some possibility of eventually buying one, here are some recent notes:

1. Keyboards. There is now software which is supposed to make it possible to connect an ordinary (HID) bluetooth keyboard to an Android phone, although so far I have not been able to make it work on my phone. Assuming I can solve that problem, I'm tempted to give up on finding an Android phone with both a good keyboard and a good screen. Virtual (on-screen) keyboards seem to work better than I had expected, and the combination of a virtual keyboard for brief notes and a portable bluetooth keyboard for more substantial writing looks pretty good.

2. Android on Windows Mobile Phones. Some time back, I was interested in the Touch Pro 2, a windows mobile phone which has a relatively large screen and what is widely viewed as the best physical keyboard of any mobile phone. I played with one a little, but gave up on it in part because I found the software unintuitive. It's possible that, de nuovo, it would be as easy to work with as Android, although my guess is not, but in any case I am used to Android.

Yesterday one of my students showed me his Touch Pro 2. Running Android. The trick was done using a program run from Windows Mobile. The student commented that it worked as a phone, but still had some limitations, in particular did not yet enable bluetooth. An online description of what sounds like the same software lists a number of other limitations, including no gps. But with luck, such problems will be overcome in time, for the Touch Pro 2 and other high end Windows Mobile phones, considerably expanding the range of options available to me.

The HD2, for example, has an even bigger screen, no physical keyboard, and will shortly be available in the U.S. from T-Mobile. The project to put Android on it does not seem to have gotten nearly as far as with the Touch Pro 2, but there is some interest in it.

3. The Dell Mini-5. Dell has announced, but not yet released, a phone that seems to be closer to what I want than anything now on the market. The Mini 5 runs Android, has a 5" screen, and pretty clearly is designed as an internet device that happens to be a phone, not a phone that happens to be an internet device. That suits me, since I don't use a cell phone all that often to make or receive calls. As an extra bonus, it is rumored to come with a Kindle ap, making it an ebook reader that can fit in a pocket—a considerable improvement in convenience over the Kindle itself. And a much bigger screen than the Psion Revo on which I have, in the distant past, read books.

Nothing, however, is perfect. According to the rumors I have seen, the Mini-5 will be offered only on the AT&T network, which has the reputation of being among the worst of the U.S. cell phone systems. If they would only build one for Verizon as well ... .

A Suggestion for College Admissions Offices

One of the skills that colleges are looking for in their incoming students is the ability to write. Currently, they have two ways of judging it. One is the short essay that is part of the SAT writing exam, the other is the collection of essays that are required as part of a college application.

The SAT essay is written in pencil by students whose previous writing experience is probably on a word processor. It is graded by the sort of mechanical standards that you have to use if you want comparable measures for millions of essays graded by (I'm guessing) tens of thousands of graders. One result is that, so far as I can tell, colleges do not put much weight on that particular piece of evidence.

Application essays have another, and potentially more serious, problem—the college has no way of knowing who wrote them. They may represent the work of the student, they may represent the work of his parents, they may represent the work of an admissions adviser paid by the parents to help get their kid into a good school. Even if the student sending them in played some role in the writing, the college has no way of knowing how much what they are getting reflects his ability, how much editing by others.

There is a simple solution to this problem, one which no college I am aware of has used: Have the applicant write an essay that they know is his. Put him in a room with a word processor—also pen and paper for those who prefer to write that way—and a short list of possible topics. Give him an hour and see what he produces. That should sharply distinguish applicants who can write coherent and grammatical English prose from those who cannot and, less sharply, distinguish the minority who are actually good writers.

The mechanics of the proposal should be pretty straightforward. Many applicants visit the colleges they are applying to, take a campus tour, attend a presentation by the admissions office, perhaps have an interview. For those, all that are required are a few rooms in the admissions office provided with computers.

What about students who do not visit, perhaps because they live far away? Colleges have alumni, and use them in the admissions process, often to interview such students. Alumni have computers. Arrange, in each region of the country from which students apply, for at least one alumnus to invite applicants to demonstrate their writing ability.

Once such arrangements become reasonably common, it should be possible to do the same thing in a more organized form, with someone in each major city in charge of supervising such essays on behalf of any college who wants them.

Merit Scholarships and Conspiracies in Restraint of Trade

We spent last week visiting colleges that my son is thinking of applying to. The experience reinforced the impression I had earlier gotten from web pages—that what Harvard (and, mutatis mutandis, Vassar and ...) wants are students who decided, at age fourteen, that their highest priority for the next four years was doing whatever it would take to get into Harvard. It also raised an interesting puzzle. A number of the schools we visited claim to have very generous financial aid programs based on need, but no merit based scholarships at all. How and why?

Why the schools, collectively, would want such a policy is pretty clear. Bidding against each other for the very best students—which is what merit based scholarships amount to—is costly. From a financial standpoint, they are better off if they all refrain. From an ideological standpoint, I expect most of those involved in the process would rather spend their money on smart poor students than on very smart rich ones.

But what is in the collective interest of all is not necessarily in the private interest of each. Schools benefit by having extraordinarily good students—and even the Harvards and Vassars of the world do not have an unlimited supply of such. Brilliant students are fun to teach, which makes the school more attractive to potential faculty. They create intellectual excitement, which makes it more attractive to applicants. And, with luck, they end up with fame and/or fortune, some of which may get shared with their alma mater. If all the elite schools refrain from bidding for such they save a good deal of money, and lose only to the extent that some brilliant students who can afford Harvard decide to go to some less elite but more generous school instead—which should not be too much of a risk if the lack of generosity applies only to students whose parents can afford Harvard without financial aid. But if an individual elite school breaks ranks, it has the opportunity to push itself higher in the select company of elite schools.

The logic is very much the same as in an ordinary cartel agreement. All firms in the industry benefit by keeping output down and prices up, but each firm benefits even more if the others follow that policy while it cuts prices a little and expands output a lot.

Which raises an obvious suspicion—that what I am observing is indeed cartel pricing, that some subset of elite schools, containing schools that believe they are competing mostly against each other, have made an implicit agreement to refrain from competing for potential students who are both extraordinarily able and financially well off.

About twenty years ago, eight Ivy League schools were accused by the Justice Department of just such an arrangement—sharing information on student applicants, agreeing not to offer merit based scholarships, avoiding competition for the best students. The controversy was settled by a consent agreement, in which the schools agreed to a variety of things, including ending the annual meetings at which they, along with 15 other schools in the Northeast, discussed the financial aid applications of students that had been accepted by more than one of the schools. My observation of current financial aid policy suggests that at least some of the schools involved may have continued, or resumed, the same practices, probably in a less visible form.

Assuming that is what is going on, what are the implications–aside from the possibility of future collisions with the Justice Department? The obvious one is that wealthy schools will be a little richer, and wealthy parents of very smart kids who want to go to those schools a little poorer; off hand I don't see anything particularly bad (or good) about that.

The less obvious one is that the position of elite schools, at least the ones refusing to compete for top students, will be a little less secure. A few years ago, when my daughter was looking at colleges, one of the ones she seriously considered was Saint Olaf. One thing that struck us in the process was an email from their admissions officer, informing us that by applying a little earlier our daughter could be considered for a merit scholarship. Saint Olaf was, and is, a school a little below the level of Harvard, Vassar, and the like—and trying to work its way up.

A second thing that struck us about that particular interaction is relevant to my earlier post about the desire of elite colleges for students whose academic records all fit the same pattern—the desire for a cookie-cutter elite. The reason the admission officer gave for sending the email was that our daughter was home schooled, and Saint Olaf had found that home schooled students were sometimes very well qualified, hence potential recipients of merit scholarships.

That was very nearly the opposite of the reaction we were getting from other schools, whose attitude was that they were willing to consider home schooled students but not at all sure how to handle their applications, and would much prefer that such applicants do their best to obtain conventional credentials by taking some graded courses somewhere, anywhere, before applying. It was the admission officer at Saint Olaf who told us that what blew them away was the list our daughter included in her application of books she had read—four hundred of them.

All of which suggests that the indirect effect of the policies of the elite schools may be to open up American collegiate education to a little more competition. Which might be a good thing.