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The two economists that have most informed my view of the current macroeconomy are Arnold Kling and Scott Sumner. In both cases, their models and explanations make sense to me.  They use solid reasoning and evidence; I don’t feel I’m getting a lot of hand waving. Unfortunately, at first glance, their views seem mutually exclusive.  Kling believes business cycles are the result of many planning errors by individual agents (for example, this recent post and this follow up).  Sumner believes business cycles are the result of contractionary monetary policy by the central bank (for example, this recent post and this one).

How can they both be right? I think they are operating at different levels. Yes, individual agents make their particular planning decisions.  In aggregate, these decisions drive monetary variables like interest rates, exchange rates, liquidity demand, etc.  However, these variables then feed back into the next round of planning decisions.  Moreover, at least some of these plans take into account the effect of the agent’s actions on the monetary variables.  So you get classic chaotic/complex behavior with temporarily stable attractors, perturbations, and establishing new regimes. There may even be aspects of synchronized chaos. I think the monetary variables are the key emergent phenomena here.  They are like “meta prices” that provide a shared signal across just about every modern economic endeavor.

Food for thought.  I’m going to keep this in mind when processing future articles on the economy and see if it helps my thinking.

Here is a fascinating discussion on NPR’s Forum from earlier this year on the subject of mercury and fish:

If you’ve listened to this the whole way through (which you should), I’m curious as to how it will affect your habits, if at all.  And why?

Barbara Ehrenreich had an excellent article in yesterday’s New York Times on the many ways that being poor can land you in trouble with the law. One striking example:

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Some of you may recall my post Organic Farming Harms the Environment. As I wrote, one of the things that bugs me about organic proponents is that they act as if there are no tradeoffs.  I don’t understand much about farming, but I do understand something about how economic activity works.  I presume that modern farming has responded to market pressure and evolved to optimize along many different dimensions.  I’m pretty sure you can’t magically improve along one dimension without sacrificing along another dimension.

Thus, I was not surprised to read this article (hat tip to Tyler Cowen at Marginal Revolution) on modern farming by an honest to goodness family farmer.   It is full of good examples of the tradeoffs I suspected were lurking.  For instance, by using herbicides, farmers reduce the need to till, which is a major source of soil erosion.  Hog crates and turkey cages may seem inhumane, but they prevent sows from killing piglets and turkeys dying from drowning. Crop rotations that decrease the need for synthetic fertilizer increase the amount of water needed to produce the desired crop.

Read the whole thing.  It reinforced my confidence in the general rule of trying to avoid legislating solutions.  Send pricing signals by allocating resource rights and taxing negative externalities.  Then let the market do its optimization.

The following quotes are from a book describing a real set of events:

[The incident] is an extraordinary example of what happens when you get… a dozen people with an average IQ of 160… working in a field in which they collectively have 250 years of experience… employing a ton of leverage.

It’s hard to overstate the significance of a [government-led] rescues of a private [corporation].  If a [company], however large was too big to fail, then what large [company] would ever be allowed to collapse?  The government risked becoming the margin of safety.  No serious consequences had come about in the end from the… near-meltdown.

Was the incident:

a) The savings and loan scandal

b) The collapse of Enron

c) The sub-prime mortgage meltdown

d) none of the above

First correct answer gets to invest in an exciting new bridge project I’m involved with in New York!

It is by now common wisdom that our current financial crisis is due in large part to misplaced incentives in our financial system. Analysts and fund managers were rewarded for short-term thinking and risk-taking. If we can rework our financial system to reward long-term, careful planning, it is often argued, we can avoid collapses like this in the future.

While I agree that misplaced incentives were a fundamental problem, the question of how to change this is rather more deep and complex than I think many people realize.

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I apologize for the non-existent blogging the past few weeks.  I’ve been really busy with my new company.  I’m going to try blogging more short items rather than my trademark essays in the hope that reduced barrier to entry will result in more supply.

First up is a provocative post by the ever-interesting Scott Sumner.  Rafe in particular should read it because Sumner starts from one of Rafe’s favorite premisse that “laws” of nature are purely cognitive constructs.  We should measure them by their usefulness and not ascribe to them any independent existence. So Newton’s laws of motion are useful in certain contexts.  Einstein’s are useful in others.  But neither are ground truth.  Moreover, we will never find ground truth.  Just successively more accurate models.

Sumner uses this bit of philosophy to justify abolishing inflation, not, “…the phenomenon of inflation, but rather the concept of inflation.”  More specifically, price inflation. He explains why this concept is ill-defined and not only unnecessary, but confusing, for understanding the macroeconomy.  He asserts that we should expunge it from our models.  It doesn’t really exist anyway, so if models do better without it, we won’t miss it in the least.

Derek Abbott says Australia alone could solve the world’s current and future energy needs using solar thermal and liquid hydrogen.  Saul Griffith says, practically speaking this is not feasible and we need to use all available clean energy technology and reduce and conserve substantially or we are doomed.  Who is “less wrong”, Derek or Saul?

I just tweeted on a subject that I suspected would cause a stir, and so it has, I’m moving it here:

RafeFurst: I strongly support a soda tax! RT @mobilediner: check it out:  a Soda Tax? http://amplify.com/u/dvl

coelhobruno: @RafeFurst what about diet soda? Would it be exempt?

RafeFurst: @coelhobruno no diet soda would not b exempt from tax.  Tax should be inversely proportional to total nutritional content.  Spinach = no tax

Lauren Baldwin: I do as well … and while they are at it they should tax fake fruit juice too.

Kevin Dick: I think this would be an interesting experiment. I predict a tax does not cause any measurable decrease in BMI.

Kim Scheinberg: New York has had this under consideration for a year.  Perhaps surprisingly, I’m against it. In theory, people will drink less soda. In reality, it will just be another tax on people who can afford it the least.

Leaving aside the “rights” issues and just focusing on effectiveness, I guess we can look towards cigarette taxes and gasoline taxes and see what the lessons are.  What do these forebears suggest?

As an FYI, there is supposedly a new total nutritional score (zero to 100) that is to be mandated on all food in the U.S. by the FDA.  Can anyone corroborate this and its current status?  Presumably this would be the number to base a tax on.

From Monday’s Washington Post:

The District, New York and Los Angeles are on track for fewer killings this year than in any other year in at least four decades. Boston, San Francisco, Minneapolis and other cities are also seeing notable reductions in homicides.

Full article is here, in which more sensible police approaches are given credit for the decline.

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Shadows and Strings

Shadows live in a simple world. They glide effortlessly across any sort of surface, oblivious to the higher dimension of space in which 3-D bodies move, collide and sometimes block the paths of rays of light.

Shadows have no idea how important that third dimension is, and how objects in it endow those very shadows with their quasi-physical existence. Indeed, the laws of shadow physics all depend on the third dimension’s presence. And just as the clueless inhabitants of the shadow world require an extra dimension to explain how they exist and interact, reality for humans may also depend on an invisible dimension or dimensions unknown.

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This is not my meditation, it was created by Cellucidate:

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Heng, et al recently published a review paper that brings together and touches on many different aspects of cancer complexity.  I thought this an opportunity to selectively quote the paper and organize the quotes loosely around various complex systems concepts they relate to.  I’m curious whether this makes sense to readers of this blog, or whether there’s too much unexplained jargon and too many large conceptual leaps.  Please ask questions or make comments freely below.

One preface I think will help is to understand that genome, karyotype and chromosome refer roughly to the same thing.  Here are several schematics that I will present without explanation that together illustrate how genes relate to genome/karyotype/chromosome structure, and how that in turn relates to the so-called genetic network (loosely equivalent to the “proteome”).  Of course “gene” is an outdated and inaccurate concept, so don’t get too hung up looking for genes here, just understand that they are sub-structural elements of the genome.

From MSU website

I’ve been having a serious discussion with two colleagues of mine about closing the gap that exists between two groups:

  1. People of my generation (40 and older) who have capital they want to invest in innovation but only know the VC for-profit-only value model and don’t have any true view into or understanding of social entrepreneurship business models;
  2. People coming out of college today (27 and younger) who are actually creating untold value for the world without taking on investors because they don’t (a) know how to attract them, and (b) have heard too many horror stories

Jay and I fall into category 1 and Michael falls into category 2.  All three of us agree that the gap above exists — due in part to rapidly declining startup costs — and represents a very real (and lucrative) investment opportunity if it can be closed properly. Continue Reading »

Mike Ritchey of mountain bike fame is helping Rwandan coffee farmers cut the transport time (increasing their selling price) from the field to the washing stations by providing them with custom “Coffee Bikes” on a micro loan basis. These bikes replace the wooden bikes (including wheels) that they have been using. You can now own one of only 200 limited edition coffee bikes coming to the U.S. Be uber-cool when you ride down to the local java hole.

The Diamond Rule

We all know the Golden Rule: do unto others as you would have them do unto you.  TED Prize Wish winner, Karen Armstrong, even laudably proposed that a Charter for Compassion based on the observation that all three Abrahamic traditions (Christianity, Judaism and Islam) have the Golden Rule at their core.

I do believe that if we all followed the Golden Rule as the basis for how we treat one another the world would be a better place.  But I also think there is a a more fundamental rule, call it the Diamond Rule, which is even better:

Treat others as you believe they would want you to treat them, if they knew everything that you did.

The difference is subtle, and may not practically speaking yield different action that often.  But when it does, the difference can be significant.

Homo Evolutis

In Juan Enriquez’ TED talk earlier this year, he made the point that humans have entered a new phase of evolution, one that has not been seen on before modern humans and their technology.  This, of course, is one of the main theses of Ray Kurzweil’s book, The Singularity is Near, and the main justification for the creation of The Singularity Institute (plus related Singularity Summit), and now just recently, Singularity University.

Lest you think the concept of Homo Evolutis — a species that can control its own evolutionary path by radically extend healthy human lifespan and ultimately merging with its technology — is a fringe concept share by sci-fi dreamers who don’t have a handle on reality, check out the list of people in charge of Singularity University (link above), the Board members of the Lifeboat Foundation, and throw in Stephen Hawking for good measure, who says, “Humans Have Entered a New Phase of Evolution“.  These people not only have a handle on reality, they have the combined power, resources and influence to shape reality.

For those who are still skeptical of the premise of Homo Evolutis, I present the strongest piece of evidence yet: it’s been featured on The Oprah Show.  QED?

On Tuesday, my Erdos number dropped from infinity to four. That’s right: after four years of grad school, I am now officially published!

The article, “A New Phylogenetic Diversity Measure Generlizing the Shannon Index and Its Application to Phyllostomid Bats,” by Ben Allen, Mark Kon, Yaneer Bar-Yam, can be found on the American Naturalist website or, more accessibly, on my professional site.

So what is it about? Glad you asked!

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Last night, I was lucky enough to get a personal tour of the California Academy of Sciences from Dr. Brian Fisher, a taxonomist specializing in ants.  He’s doing some amazing work trying to help Madagascar prioritize and save the 10% of native rainforest they have left.  It’s reminiscent of Willie Smits‘ work in Borneo, though focused on preservation rather than revitalization.  But it has the same feel of getting the local people committed to managing their own ecological resources.

You can donate here (I gave them $500), but make sure to write “For the Fisher Madagascar Project” in the “Comments” field.  Otherwise, you’ll be paying for the building lights.  Go ahead and leave the “Allocation” field at the default, “Campaign for a New Academy”. Update: Forgot to mention that if you donate $2,000 they’ll name a new species after you or whomever you designate.

It’s hard to do justice to what I saw last night in a blog post, but here goes…

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Specifying a Climate Bet

As I mentioned in the comments on this post, I am currently in the process of negotiating a bet on Anthropogenic Global Warming (AGW) with another blogger. The challenges are interesting, so I thought I’d give you a peek inside the sausage factory.

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Rafe Furst and I were discussing my predisposition for staying in the cheapest hotel within walking distance of the hotel I actually play poker in despite having the resources to pay for the more expensive properties. The money I save just stays in a fungible heap of other money and isn’t really earmarked for anything. Continue Reading »

Who wants to pay for email? You just might. Many people have suggested that adding a nominal cost to e-mail would serve to fight spam by rendering it largely unprofitable. With Centmail, some Yahoo researchers propose adding a penny postage stamp to each e-mail, representing a penny donation to charity. Since most people already donate to charity, it is not believed that this idea will actually cost anything.

In an effort to make Centmail a reality, a formal protocol and API has already been developed. While I am somewhat worried that a large-scale adoption of the protocol will incentivize significant non-profit and charitable fraud, the economic burden due to spam should be greatly reduced. It’s a cool idea by good people and I urge you to check it out.

Pursuant to my earlier post, it turns out there already is such a group:

Foreclosure Angel Foundation

Thanks to Marissa Chien who found it and pointed me to it.  She also suggests that people who are having trouble with their mortgage should seek advise from HUD.  Information is power and many people (I’ve learned) are irrationally scared of approaching their lender and negotiating.  More and more lenders are willing to cut deals to avoid foreclosures.

Given everything I hear about obesity stats in the U.S. and malnutrition in the developing world, the last thing I was expecting to find in my inbox this morning was a plea to join a Facebook cause to help end hunger in America.  Really?

I’m usually not skeptical in this way, and I’m loath to focus on the negative when it comes to philanthropy, but I can’t get these thoughts out of my head and I’d like some perspective from those who are better informed about the alleged U.S. hunger crisis.  In the mean time, here’s my food for thought:

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Stephen Salter wants to build a fleet of ships that will churn up seawater to create whiter, fluffier clouds that will reflect more sunlight away from the sea surface. The cost for the first 300 ships that should turn the clock back: $600 million.

Other ideas include spraying sulfur dioxide 65,000 feet up through a fleet of Zeppelins and firing 840 billion ceramic frisbees into orbit to block the sun’s rays. But this article also suggests that a rich “Greenfinger” could unilaterally do some Geo-Engineering without world consent and with disasterous consequences.

Cool Solar Power

On a recent trip to the CalExpo site I was impressed to see rows and rows of solar panels supported over the parking lot. Instead of taking up valuable real estate it shades your car and generates 540kW.

Check out this even more interesting way of generating solar power at Cool Earth Solar. It is massively scalable and can compete on price with traditional sources.

Here’s a nice post on how little old Amherst Holdings of Austin, TX got the best of J.P. Morgan Chase, Royal Bank of Scotland, and Bank of America.  Amherst sold them all Credit Default Swaps (CDSs) against mortgages that were already under water.  CDSs pay out if the underlying mortgages default.  Everyone knew these mortgages were in bad trouble.  Sure thing for the big guys, right?  Wrong.

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A new school is opening in New York for grades 6-12 that completely blows my mind. The Quest to Learn school combines games and complex systems in a way that pretty much would have made my life as a teenager. Hell, I wouldn’t mind going back to high school now if I got to go here. I’ll let them describe it:

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What’s fascinating to me about this is not that it works so well and or that there might actually be support in the Obama administration for doing it on a national scale, but rather that there has not been a backlash against it yet.  What are the odds that something like this will actually get implemented?  Is it actually a good thing?

hat tip: Annie Duke’s mom

Thanks to a pointer from Sandeep Baliga over at Cheap Talk, I recently Kindled Matthew Alexander’s How to Break a Terrorist. If this were a novel, it would be in the top 10% of thrillers I’ve read in the last 5 years.  But it’s a true story.

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IIASA

This is just a brief note to let everyone know I’m spending the summer at IIASA, a scientific policy research institute located just outside of Vienna. IIASA focus on systems analysis of global problems such as climate change, land use, demographic changes, public health, ecology, and energy. They don’t seem to use the phrase “complex systems” much, but they’re clearly talking about the same thing.

I happen to be one of 53 lucky graduate students to be selected for this year’s Young Scholars Summer Program, meaning I get to paid to live in Vienna and do research. Can’t really complain about that. Tomorrow I get to hear mini-presentations on everyone’s research proposals, which should be very interesting. My own project will be on the long term, gradual evolution of cooperation in spatially structured populations, using a mathematical framework known as adaptive dynamics.

I’m expecting to learn a lot here, and I’ll share as much as I can with you readers. Looking forward to it!

Everyone seems to have an opinion on the future prospects of Facebook and Twitter. Some of us even feel strongly enough to want to bet on it. Unfortunately, the companies are privately held, and unavailable to be bet on in the traditional way, via the stock market. It is not just household names like Facebook and Twitter that people might want to bet on, but also smaller companies like Weebly, or the Universal Record Database (URDB.)

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This was one of the most important and encouraging talks of this year’s TED conference:

Normally, I don’t debate random bloggers on Anthropogenic Global Warming (AGW).  However, I made an exception for Robin Hanson.  For those who don’t already know of him, he was both an early proponent of decision markets and has a reasonably well known journal article on why two Bayesian rationalists can’t agree to disagree. I’m a fan of his work and have been reading his blog for years.

Yesterday, he put up a post titled CO2 Warming Looks Real.  He’s not an expert. Like me, he has an economics background and did some detailed research.  Yet from the title and body of the post, I though he must have reached a very different conclusion than I did. So I thought I’d try to engage him to find out where we differ. The results were interesting.

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Everyone has heard about the Large Hadron Collider, arguably the most ambitious and complex engineering project ever undertaken, anywhere.  The purpose, no less ambitious, is to answer all sorts of burning questions about the nature of the universe, including whether the Standard Model of particle physics is valid.  Given such ambition and high stakes, it would surprise most people that the LHC is managed in a collaborative manner with very little hierarchy.  Essentially it’s a giant, crowdsourced science experiment.

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Short but brilliant TED talk by Joachim de Posada.  I love the economic point he makes at the end.

As an occasional reader of science blogs, I can’t help but notice the extraordinary amount of time and space devoted to the debunking of Creationist and Intelligent Design “science.” Certainly there are good reasons for this: the poor reasoning and scant evidence behind such pseudoscience makes it an easy target, and the surprising momentum of the Creationist political agenda represents a genuine threat to American science education.

Still, I can’t help but feel that the focus on Creationism’s pseudoscientific claims have obscured what is really a debate about beliefs and values, not science. Moreover, the discourse on blogs often reflects a view that religion (of all forms) is inherently opposed to evolution, and that no intelligent person could possibly believe in both.

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Have you ever heard of anyone selflessly helping out a stranger by buying their house at a bank foreclosure auction and just giving it back to them?  Well, now you have.

More likely, you’ve probably heard of private investors taking advantage of the banks’ unwillingness (or inability) to deal with all the bad loans on their books. Like the group of investors in Act 2 of this This American Life episode, you buy a house that’s in foreclosure for a significant discount on its true market value and then “you get the homeowner into either a mortgage they can afford, or they’re able to rent it, or you pay them a bit to move somewhere else.”

Well, what if there was a way to combine these two activities so that you are doing good for someone else while doing well for yourself financially?  There are many variants of how this could work, but here’s the basic concept:

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Here The 2009 map evokes nuclear strike graphics from 80’s films! Very clear that it is easier to destroy an economy than build one.

A number of people responded to my recent post on the California budget. So I thought I’d dig a little deeper into the issue. The three points I’d like to address at the moment are whether spending as a percentage of income is rising, where the extra spending is going, and whether the extra spending is beneficial.

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Foldit

Has anyone played Foldit, the protein-folding game that is designed to advance the science?  This Wired article makes it sound like Ender’s Game meets biochemistry!  Sounds like the Poehlman kid is the protein-folding equivalent of Stephen Wiltshire.  I love the crowdsourcing, the meta-evolutionary algorithm of it (to find the savants), and the implications for science.

Yesterday’s puzzler was to guess the species being talked about here:

One became super efficient at gobbling up its food, doing so at a rate that was about a hundred times faster than the other. The other was slower at acquiring food, but produced about three times more progeny per generation.

The answer is…

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1. Smile.

2. Spend time with friends, or even try and make a new one.

3. Help another person. Donate a small amount of money, that has nominal value to you, but significant value to someone else. (Kiva, Vittana Foundation.)

4. Quit Smoking. It might be even worse for you today.

5. Stop worrying about tomorrow.

Guess What Species?

Without doing a text search (that would be cheating), guess what species is being referred to in this quote about the evolution of competing strategies:

One became super efficient at gobbling up its food, doing so at a rate that was about a hundred times faster than the other. The other was slower at acquiring food, but produced about three times more progeny per generation.

Answer in tomorrow’s post.

A few short months ago, Hillary Clinton declared an end to the “war on terror.” Now, it appears as though the “war on drugs” is ending as well, or is it?

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First, let me apologize for the posting lull.  I’ve been busy with work and also struggling with a sinus issue that has sapped my discretionary intellectual energy.  But enough about me.

In honor of California’s special election on budget measures, I thought I’d shed a little light on the fundamental problem.  Contrary to what polticians are saying, the cause of the budget problem is not falling revenues in a recession. Rather, the cause is a dramatic increase in spending over the last 10 years.

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If, like Aubrey de Grey, you believe that immortality is achievable, or you are just intrigued by the possibility, you should check out this news story on The Methuselah Foundation.

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As part of President Barack Obama’s stimulus package, NIH is awarding $200 million in “Challenge Grants.” But, according to Science Magazine, these grants are far more competitive than initially intended:

A frantic grant-writing effort that has consumed biomedical research scientists this spring came to an end last week, resulting in a huge pile of new applications—more than 10 times larger than expected—to be reviewed by the National Institutes of Health (NIH). After this enthusiastic response, there will be many disappointed applicants: The rejection rate could run as high as 97%.

Increased time cost spent not just applying for money but also reviewing applications to allocate the funds. Additionally, many qualified researchers chose not to apply for funding after hearing how competitive the grants were. Is this a good thing? Does this competition result in better science? Could there be a better way to allocate scientific funding?

From time to time we hear about people with “photographic” memories who supposedly can remember every detail of something they experienced.  When you look into what’s really going on though, it becomes clear that this is not really the case, and their capabilities are actually limited to certain segments of their experience.

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The Freakonomics guys have been on this rant for years, and until recently, I agreed with their logic.  But the mounting evidence (in my mind) is starting to swing the other way.

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Tweeter, Claus Metzner (@cmetzner) alerted me to this cool area of study with this paper.

Suppose you meet a Wise being (W) who tells you it has put $1,000 in box A, and either $1 million or nothing in box B. This being tells you to either take the contents of box B only, or to take the contents of both A and B. Suppose further that the being had put the $1 million in box B only if a prediction algorithm designed by the being had said that you would take only B. If the algorithm had predicted you would take both boxes, then the being put nothing in box B.  Presume that due to determinism, there exists a perfectly accurate prediction algorithm. Assuming W uses that algorithm, what choice should you make?

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Yesterday, the attorney for my new company advised me that I should be careful about what I disclose to the public about the company’s activities.  The company operates in a highly regulated field.  Evidently, any open discussion of what the company does, especially of any offerings it may or may not hypothetically be considering, could be construed as a solicitation.

From an economics point of view, I think that such restrictions, however well meaning their original intent, tend to merely protect incumbents from competition.  Nevertheless, I obviously don’t want the company to get into any trouble.  Therefore, I have edited or redacted any potentially problematic revelations from these posts

If you have any questions, post a comment here and I will contact you privately.

I have been having a 140 character discussion with Ciarán Brewster (@macbruski) via twitter.  And while it’s kind of interesting to force complex subject matter into very few characters, it is limiting the discussion, so I will summarize it so far here and hopefully others can weigh in too.

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Nature Minus Humans?

From the “nothing is quite so simple” department, a Boston Globe article this week points out a hidden legacy of the conservation movement: The expulsion of native peoples from their land.

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Portugal decriminalized all drugs in 2001 (yes that includes cocaine and heroin). And “ none of the nightmare scenarios touted by preenactment decriminalization opponents—from rampant increases in drug usage among the young to the transformation of Lisbon into a haven for “drug tourists”—has occurred.”

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In “Game Theory: Can a Round of Poker Solve Afghanistan’s Problems?” Major Richard J.H. Gash creates a simple two player game to show how game theory can be used to influence military planning. Gash’s game involves two villages in Afghanistan with the choice to either support the “Coalition” or support the “Taliban.” The scoring of the game generates a payoff matrix that is similar to that of the Prisoner’s Dilemma with a non Pareto-optimal Nash equilibrium. Unfortunately, Gash oversimplifies the game to just one round. In reality, Afghan villages participate in multiple rounds of decision making, with the actual number of rounds unknown, leading to differing strategies and outcomes than those proposed by Gash.

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In order for you to believe we should do something about anthropogenic global warming (AGW) such as impose a carbon tax, you really need to believe all of these things:

  1. CO2 causes a direct temperature increase
  2. Positive feedbacks amplify the direct temperature increase several fold
  3. The effects on humans of the total temperature increase are significantly bad
  4. The cost of reducing CO2 emissions is less than the bad effects we can avoid

Nearly all scientifically literate skeptics agree with (1). Most typically argue against points (2) and (4). Indur M. Golakny has a nice series of posts over at Watts Up With That that looks at (3).

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With flu the incubation period ranges from 24 hours to four days, meaning people often are infectious before they have symptoms. Unless already feeling ill, the majority of people assume they haven’t been infected and behave accordingly. Perhaps, instead, they should act as though they are infected until proven wrong. If a person knows they are infected they will certainly not shake hands or kiss. They will wear a mask (masks are more effective in preventing transmission than in preventing reception of the virus) when they need to go into public areas. They will be more fastidious with this mindset than by assuming they are not sick. (It is not suggested that people stay home from work as that cure might be more harmful than the disease.) This interruption behavior could drastically reduce the transmission rates.

Changing the mindset could change the outcome.

Dendreon has developed two interesting avenues in the fight against prostate cancer. The first is a therapeutic vaccine that in just released Phase 3 study results increased survival time by 4 months. The second is a small molecule that induces apoptosis in prostate cancer cells.

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Despite hundreds of billions of dollars appropriated for cancer research, as well as the efforts of thousands of the world’s best minds, progress in preventing or curing cancer has been almost non-existent. I find this unacceptable. We should be doing better. We need to be doing better. So what’s the problem? and more importantly, how can we fix it?

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[EDITED 05/08/2009: see here] The majority of people I’ve talked to like the idea of revolutionizing angel funding. Among the skeptical minority, there are several common objections. Perhaps the weakest is that individual angels can pick winners at the seed stage.

Now, those who make this objection usually don’t state it that bluntly. They might say that investors need technical expertise to evaluate the feasibility of a technology, or industry expertise to evaluate the likelihood of demand materializing, or business expertise to evaluate the evaluate the plausibility of the revenue model. But whatever the detailed form of the assertion, it is predicated upon angels possessing specialized knowledge that allows them to reliably predict the future success of seed-stage companies in which they invest.

It should be no surprise to readers that I find this assertion hard to defend. Given the difficulty in principle of predicting the future state of a complex system given its initial state, one should produce very strong evidence to make such a claim and I haven’t seen any from proponents of angels’ abilities. Moreover, the general evidence of human’s ability to predict these sorts of outcomes makes it unlikely for a person to have a significant degree of forecasting skill in this area.

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A friend pointed me to a doubly prescient talk given by George Soros in 1994 about his theory of reflexivity in the markets.  Essentially Soros notes that there’s feedback in terms of what agents believe about the market and how the market behaves.  Not groundbreaking, but he takes this thinking to some logical conclusions which are in contrast to standard economic theory:

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Ray Kurzweil’s prediction of the melding of the computational speed of computers with the awesome software of the human brain is one step closer. The Blue Brain Project is an attempt to reverse engineer the brain with the goal of “creating a physiological simulation for biomedical applications.”

At the European Future Technologies meeting in Prague they announced a “detailed simulation of a small region of a brain built molecule by molecule has been constructed and has recreated experimental results from real brains.”

I’m giving my “2009 Q1 award for most concise, lucid comment” to Paul Phillips for this gem:

Viewed from a thousand miles, the financial system has a incalculably large incentive to fail catastrophically as frequently as it can do so without killing the goose that lays the golden eggs.

As long as there is such a thing as “too big to fail” and trillions of dollars are available for siphoning, according to what logic can this cycle be dampened? Nobody has to explicitly pursue this outcome (although there are many who will) for it to be inevitable; the system obeys its own logic above all else.

[ commenting on Alfred Hubler on Stabilizing CAS ]

One problem facing financial institutions is not knowing what the Mortgage Backed Securities they hold are worth. One problem facing homeowners is that the abandoned and unmaintained house beside them is dragging down the value of their property. An anecdotal story from Modesto, Ca has two neighbors getting together, purchasing the abandoned house and renting it out. One less eyesore on their block, one less eyesore mortgage on some bank’s books.

What if all financial institutions accepting federal aid were forced to list on E-Bay, sorted by zip code, every house on their books that is abandoned or in foreclosure? Continue Reading »

Many users, and friends of users of marijuana report experiencing a “contact high.” That is, they purport to experience some of the effects of marijuana simply by being in contact with or around those using marijuana. Virtually all users wrongly attribute this experience to the inhalation of second hand smoke. This is unlikely for a number of reasons. Since exhaled smoke is virtually devoid of psychoactive substances and is widely dispersed in the surrounding air, it is not possible for one to inhale even a small fraction of a working dose. Additionally, many, including noted pharmacologist and psychedelic researcher Alexander Shulgin, report similar experiences involving drugs that are not inhaled, indicating that these effects are due to different biological processes.

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A few articles on the economy that were sent my way recently.

The Good: After Capitalism (Geoff Mulgan)

The era of transition that we are entering will be disruptive—but it may bring a world where markets are servants, not masters.”  I urge you to read this entire article, and leave your ideological biases at the door.  Despite the title, this is no polemic.  Here’s the punchline:

Contemporary biology and social science has confirmed just how much we are social animals—dependent on others for our happiness, our self-respect, our worth and even our life. There is no inherent contradiction between capitalism and community. But we have learned that these connections are not automatic: they have to be cultivated and rewarded, and societies that invest large proportions of their surpluses on advertising to persuade people that individual consumption is the best route to happiness end up paying a high price.

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Daniel and Ace just joined Emergent Fool as primary authors.  You may recognize them from their frequent and insightful comments and hat tips.

With his permission, I am posting an email thread between myself and Alfred Hubler.  I had contacted him on the recommendation of John Miller when Kevin and I were posting on the possibility of dampening boom-bust cycles in the financial markets through policy or other mechanisms.  Here’s what Hubler had to say:

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Physics.Cancer.GOV

Yesterday, from the Director of the National Cancer Institute, addressing one of the two largest cancer research conferences of the year:

NCI commenced a series of workshops that began to bring aspects of the physical sciences to the problem of cancer. We discussed how physical laws governing short-range and other forces, energy flows, gradients, mechanics, and thermodynamics affect cancer, and how the theories of Darwinian and somatic evolution can better help us understand and control cancer.

Read more on my Cancer Complexity Forum post.

In part 1 I advocated photographing your completed ballot before submitting it and posting your photograph online.  Turns out that if you followed this piece of advice in Missouri, you might be in jail right now.  Oops!  Sorry :-)

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[EDITED 05/08/2009: see here] We are finally ready to go semi-public with our revolutionary new angel funding concept!  For the last year, Dave Lambert (the Tiltboy also known as Diceboy) and I have been working on an alternative mechanism for delivering seed funding to technology companies. [REDACTED 05/08/2009: see here].

Here’s the summary.  The market for seed capital is clearly broken. Most individual angels will only do about 1 deal per year, which means their portfolios lose money 40% of the time due to insufficient diversification. Even premier angel groups like the Band of Angels say they only do about 8 deals per year. Our math says you need to do 125 to achieve good diversification. On the other side of the table, only 14% of entrepreneurs who want angel funding will find it.  Those that do will spend about 6 months looking for money instead of building their businesses.

This is a sorry state of affairs for a market where the overall annual return is 25%+. Here’s a straightforward application of portfolio theory that can fix it.  Have a large enough pool of money so one entity can do 125-200 deals per year. Then use an online screening process to give founders a yes or no in two weeks. Obviously, there are a ton of details beyond this, but those are what we’ve spent the last year figuring out.  If you’re curious, let me know in a comment here and I will contact you privately.[Links to files REDACTED 05/08/2009: see here].

First, let me say how honored I am to be contributing to this blog and to the complex systems web community in general.

A New York Times Magazine article raises an issue I’ve been thinking a lot about lately.

If you are, as I am, a scientist concerned about global climate change, you may find yourself asking, “What kind of research could I be doing to best contribute to a solution?”

According to some, it may not be to study the climate itself. We may not know enough to predict exactly what will happen when, but we do know that drastic changes are coming whose magnitude will be determined by the actions we take now. It may not even be to study technologies such as alternative energy or policies such as cap-and-trade that can help combat global warming. Because while these policies and technologies are surely necessary, global warming is a problem created by human behavior, and our behavior will need to change if we are to make the individual and group decisions necessary to mitigate it, including the implementation of these policies and technologies. It may therefore be that the most important scientific questions in the fight against global warming are questions about humans, human behavior, and what we can do to change it.

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Welcome, Ben Allen

Ben Allen runs the Plektix blog and we’re trying an experiment to see if we can move towards a critical mass of like-minded complexity bloggers.  To that end, Ben will be cross-posting his blog entries from Plektix for a while to this blog.  If it works out to everyone’s satisfaction we may merge the blogs into one.

Any existing complexity bloggers out there who would like to engage in the same experiment, please let us know.

Cold Fusion

I remember reading this Wired article in 1998 suggesting that the “debunking” of cold fusion may have been way premature.  Last night, 60 Minutes did a pretty convincing piece claiming that more than 20 labs around the world have reported “excess heat” from cold fusion experiments:

Vodpod videos no longer available.

Click here for the full story.

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The Corporate Average Fuel Economy (CAFE) standards will rise from 27.5 mpg to 35 mpg from now until 2020. That should decrease any pollutant associated with burning fossils fuels.  All good, right?  Wrong.

There is a trade off in safety.  You are much more likely to die in a small car. The WSJ Online reports on a recent Insurance Insititute for Highway Safety (IIHS) study that shows  small cars like the Honda Fit and Toyota Yaris fair very poorly in two-car frontal offset crash tests against the Honda Accord and Toyota Camry. This is against mid-sized cars from the same manufacturer, so a reasonable comparison.

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When I was 16, I dislocated my elbow.  The ensuing re-injuries and calcification of the ligaments ended my competitive wrestling career.  Last year, I separated my shoulder and while it’s pretty well healed, it’s going to have some annoying weaknesses the rest of my life.

I’m not the only one.  Most of the people I know who have been reasonably active through age 40 have some sort of permanent impairment from a ligament, cartilage, or tendon injury.  Today, I was wondering if extracellular matrix (ECM) might be the answer.

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I’ve been taking quercetin for a few months now and thought I’d report on my experience. As you can see from the Wikipedia link, quercetin is believed to have anti-inflammatory and anti-tumor properties.  This is not why I’m taking it.

Rather, I had a record number of colds this season.  4 major ones from Thanksgiving to mid-Feb.  I have been training unusually hard for the last year and an increased incidence of upper respiratory infections (URIs) is a known problem for endurance athletes. A little research turned up this article where quercetin reduced the incidence of URIs in marathoners.

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Kevin started an interesting discussion that included a thoughtful proposal for the problem of major medical care costs risk mitigation.  You should read that here before reading my proposal below.

Part 1: Major Medical Annuities. Federally mandated/funded (similar to SSI/Medicare), with a specific initial lifetime value that is the same for everyone. The concept is that you pick a number slightly bigger than the average expected lifetime major medical bill and set aside that pot of money for everyone individually. At some point (e.g. 65) you can choose to start drawing down from your pot as taxable income. Prior to then, the only way the fund can be used is for major medical expenses not covered by other insurance you may have. Such payments go directly to providers and are tax-exempt. When you die, any leftover amount gets transferred to the MMA accounts of your heirs (per your desired breakdown, or according to probate law in the absence of a will).

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This is a precursor to Singularity sort of argument:

Dan Ariely had an interesting idea on NPR’s Marketplace today.  Here’s the audio of the segment.  The idea is to get tax payers thinking about how their tax dollars should be spent, thus getting them more civilly engaged.  His research and that of others suggests that such activity would reduce the propensity to cheat on one’s taxes, and may even get people to pay more than they would otherwise.

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I have no desire to be in charge. I’d have to suffer too many fools and forego too much sleep. But I take comfort from knowing that, if I were in charge, I could confidently propose solutions to many of the common problems politicians hem and haw about.  It’s not just that I’m smarter and better trained than most of them, I simply wouldn’t care about getting re-elected.  So the obvious solutions that piss people off would be fine with me.

Unfortunately, health care is not one of these problems.  The solution really isn’t obvious. So I’ve been thinking about it lately.  I’ve got some preliminary ideas that I’d like to share. But be nice. I’m not saying these are the answers. They are just the best out-of-the-box thinking I’ve been able to come up with so far.

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Is the Party Over?

I don’t like the Republican or Libertarian parties. But I’m also no fan of the Democratic party. In fact, I dislike all political parties and think they should be done away with.  And while I’m not naive enough to think that this will happen, it makes me glad to see that the “post partisan” utopia is closer today than it was a year ago.

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As I’ve made clear before, I remain skeptical that carbon emissions pose a significant marginal threat of climate change. The likely climate sensitivity to CO2 is substantially less than the natural variability over human timescales.  Seeing as how temperature trends over geologic time scales are currently downward, I don’t think it’s worth wasting much effort on CO2 reductions.

However, let’s assume for a moment that I’m wrong.  What should we do? I don’t think we can actually decrease our energy usage very much and support our civilization. So we have to find non-petroleum energy sources.  Biofuel technology doesn’t look very good at the moment.  Scaling will require major land use changes that I contend are probably a net negative environmental impact. The cost-benefit for solar does look better, especially in certain geographic areas. But it seems to me the only massively scalable solution at our current level of technology is nuclear fission.

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Microcosmos

There’s a cool little coffee table book called Microcosmos that features super magnified images of (mostly) living creatures.  Here’s a sample:

Macrophage (yellow) chomping on e. coli (red) [3000x magnification]

micro2

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It’s not hard these days to find vignettes like this one (starting at minute 1:45) that describe a microeconomic chain of events that give you a glimpse into the recessionary dynamic.  I think it’s a good starting point to explain my personal theory of why asymmetry is the root of all value (economic and otherwise).

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The import of this talk goes way beyond the specific and stunning work that Bassler and her team have done on quorum sensing.  In my mind, this is the prototype for good biological science:

I happened to come across two interesting posts with Singularity implications that I thought you might be interested in.  First, the Singularity Hub reports that Osiris has a promising phase II trial underway for a treatment that uses foreign stem cells to repair the muscle damage from heart attacks.  If you’re about 40 like Rafe and I, this means your chances of dying from heart disease could go way down.  Now if we can just make some progress on cancer, we’ll be centenarians.

Second, via Prometheus, Wired reports on a robot-software combination that was able to generate, test, and refine it’s own hypotheses to identify coding for orphan enzymes in yeast. Obviously, this is a very special purpose kind of science.  But the fact they got a closed loop is very impressive.  I also like the fact that it’s in the biological sciences. Hey, maybe some descendant of this program can solve the aformentioned cancer problem.

Steven Gjerstad and Vernon Smith have published a really nice article that starts out with bubbles in general and goes on to explain why the bursting of this particular bubble hurt the economy so much.  It echoes a lot of themes that I’ve covered before, but is obviously much more soundly though out.

The short version is that the effect of a bubble on the economy is determined by its effect on consumer spending.  The Dot Com Bubble didn’t have much of an effect because it primarily affected institutions and already relatively wealthy consumers. However, the Fed’s attempt to shorten the resulting recession created a loose monetary policy which forced dollars into the most attractive asset class: homes.  This attractiveness stemmed from relaxed lending standards and tax-free capital gains on homes, which created more buyers. But asset appreciation in this class is fundamentally limited by the ability of consumers to repay loans from income, which was not growing fast enough. As the institutions insuring mortgages reached their limits, they slowed the issuing of policies, which dried up the market for new mortgages, which dried up the ability of people to buy, which decreased prices, which sent home equity under water, which further decreased the flow of insurance policies.

Because home equity and home ownership help drive consumer spending, this burst bubble then affected the real economy.  Cool.  Fortuitously, Vernon Smith’s Rationality in Economics is the next book in my pile.

I asked this question on twitter/facebook and got a lot of variants of “I agree” and only one person who stated disagreement (but provided inadequate reason, IMO).  Jay Greenspan put it this way:

Interesting question this morning, and something I’ve been wondering about. I’ve yet to see anyone really argue that state of non-regulation we’ve been in for the last years has been a good idea.  I’ve heard some thoughtful conservatives talk about how their views have changed radically — coming to understand that forceful regulation is absolutely necessary.

The super-conservatives I’ve seen are talking more about taxes, avoiding the subject. I’d be very interested to see a credible argument for a hands-off approach.

So how about it, anyone game to take up a considered argument for not mandating that companies who get big enough to affect the global economy should be broken up or otherwise handicapped?

The main problem with executive pay is not that they are compensated too highly, but that there’s not enough pain for them personally when they do a bad job.  I propose that the top three executives in all public companies be required to invest 100% of their salary in their own stock each year, with a decaying lockup period before they can sell.

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1) The Quiet Coup

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

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Rafe, you are not the last person on Facebook to do 25 Random Things.  After your post, Jane browbeat me into finally putting my list together.

1) I can force my eyes into a disconjugate gaze–looking in slightly different directions.

2) My wife can also force her eyes into a disconjugate gaze.  This gives a whole new meaning to, “Love at first sight.” Our daughter inherited this superpower (among others).

3) I have large hands but can nevertheless fit my entire fist in my mouth. In fact, I held a record at my oral surgeon for largest mouth opening.

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25 Random Things

1) I might be the last person on Facebook to do 25 Random Things, but I promised some people I would, and I take my promises seriously.

2) The more I learn, the less I feel that I know. But I am okay with that. Still it’s unsettling because I don’t think I’ll ever stop learning.

3) I care more about what people think of themselves than what they think of me.
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Via my buddy Matt Watson, here is a really well done infographic explaining the credit crisis.  Merely entertaining for regular readers who’ve been following the crisis.  But quite informative for any of your friends who haven’t felt the need to wade through all the commentary.

On Saturday I attended a fundraiser poker tournament for non-profit organization called DEF (Decision Education Foundation).  As it’s name implies, they are dedicated to helping individuals become better decision makers via the education system.  Their strategy is multifaceted, but their core goal at the moment is to introduce decision making explicitly into the curricula of primary and secondary schools around the country.  To do this, they first educate the educators on the components and process of making good decisions.
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For those of who understand the power of self-fulfilling prophecy, there’s some good news on the foreign policy front.  The Obama administration (thanks to Hillary Clinton) will not be using the phrase “war on terror” anymore, as it is widely deemed to be “overly militaristic and perhaps counterproductive.”  Amen!

hat tip: Daniel Horowitz

Betting on Recovery

I have a bet with a friend that Dow will exceed 14,000 at least once by October 12, 2012 (he says it won’t).

Click here to make your prediction on what year that will take place.

Comment below on why you think what you think.

One of things I object to about mainstream environmentalists is that they act as if there are no tradeoffs.  For example, they simultaneously promote organic farming, argue for biodiversity , and lobby for more open space. Personally, I think the second and third are very important.  In my value system, they are are very close to terminal goals. Which is why I avoid organic foods.

Reason has a short interview with Norman Borlaug that nicely sums up the tradeoffs required by organic farming.  There is literally nobody who understands modern agriculture better. The bottom line is that if the US tried to produce today’s agriculture output with 1960s era technology, we would need on the order of 1 million square miles of additional farmland (assuming that the marginal productivity of the land decreases somewhat as you bring less productive ares into play).  That’s a swath 1000 miles by 1000 miles.  That’s about 1/3 the land area of the contiguous 48 states.

Replicate this calculation all over the world and you’d have massive deforestation and habitat destruction.  Remember the unintended slashing and burning rainforests to plant oil palms for subsidized biodiesel?  Now multiply that by 10.  No thanks.

One of my favorite talks of all time is Ken Robinson’s on how children are born naturally innovative and the process of schooling and growing up in our society beats it out of them by the time they are adults.  More recently, Elizabeth Gilbert (of Eat Pray Love fame) opened some eyes with this talk on how we think of individual creativity and where it comes from.

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This is not news, health professionals of all sorts have been saying this for a long time.  ABC News features a recent study supporting this.

A relevant footnote near the end of the article though:

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Tribes

Tribes are hot.

Kevin has referred more than once to the famous Dunbar number for limits on optimal human tribe size.

One of my favorite books recently is Seth Godin’s book on leadership, called — you guessed it — Tribes.

Yesterday I heard a great talk by David Logan, co-author of Tribal Leadership.

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In the comments on this post, Rafe and I started a dialog on how well microeconomics will hold up as the world becomes more extreme.  We got a little off track and privately decided it was worthwhile taking the discussion up a level. So we are trying a little experiment.  We’re going to jointly write a Q&A post over time, bumping it to the top once one of us adds something.  The current state, which we shall try to reset as we update is:

Q.2: Microeconomics holds that people do more than simply respond to incentives.  Most animals do.  But people maintain sets of “likes” and “dislikes”. They form “plans” for increasing the amount of “likes” and decreasing the amount of “dislikes” they experience. Part of these “plans” includes engaging in “transactions” with other people (or groups of people) whereby an exchange instrumentally furthers a plan or terminally completes a plan.  So does a more extreme world change this?

The history is below the fold.

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Willie Smits Is a Genius

Rafe posted this TED talk by Willie Smits without much commentary. I would like to add some.  When I first started watching, I thought, “Wow, you can make a lot of hay out of simply applying Econ 101.”  This was in response to the fact that they bought the former rainforest land in question, making it private property.  This is one of the classic solutions to a Tragedy of the Commons problem.  But then my appreciation made an exponential run upward.

Somehow, he managed to perfectly balance the economic and ecological package into a rapidly growing and self-sustaining system.  You see, he had to figure out how much economic benefit the land could generate at each point in time and never have more than the corresponding number of people working the land.  He had to figure out how to mesh psychological factors with incentive structures to get the locals to adopt the land both socially and economically. He also had to plot the path for an ecosystem in time and space.

Each of these three prongs represents an effort to control a dynamic system and he had to mesh all of them at once.  He makes it sound obvious in retrospect, but make no mistake, this is a feat of sheer brilliance.  I think there are some good general lessons to learn from this, but the real ongoing value is in the human capital he has built for managing this process.  He should cycle through groups of apprentices that then go forth and attempt to replicate this miracle.  I really hope this lasts and expands in the long term.

Good Karma?

So I just put down a (refundable) deposit on a Fisker Karma plug-in hybrid car.

What do you think of this decision?

If you liked this talk (as I do), check out Ariely’s 3 irrational lessons from the Bernie Madoff scandal.

Oh, and re-grow the rainforrest, strengthen the social, political and economic climate, save endangered species and increase biodiversity and resilliance all at the same time without any budget.

I had a thought today when I was reading Arnold Kling’s post on always trying to fight the last war with financial regulations.  We seem to reliably have financial crises.  They don’t follow a schedule, but they do happen somewhat frequently.  What if the financial system is gripped by the same pehonomenon of synchronized chaos that I described in this post? A brief survey of Google and Google Scholar doesn’t turn up much.  Anybody know of work in this area?  In other words, “Is there a mathematical economist in the house?”

Just read an interesting essay* which changed my thinking about the role of sleep.  While nobody can claim to understand exactly why sleep is necessary for mammals, most of the explanations focus on some positive, regenerative benefits that we can’t do without (e.g. maintaining the neuronal circuitry).  Martin Kinsbourne puts forth another benefit, which I’d never thought of: Continue Reading »

As I mentioned in this post, one of the three primary planks of my worldview is that, “…the human brain is a woefully inadequate decision making substrate.” I started adopting this posture in graduate school and have refined it with constant input from the cognitive psychology and neurobiology literature over the years.  Luckily, you don’t have to put in that kind of time. Simply go out and read Rational Choice in an Uncertain Worlds by Hastie and Dawes and The Accidental Mind by Linden.

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Via a post at the always terrific Watts Up with That, a pre publication version of this paper examines the non-linear coupling dynamics of the climate. Its hypothesis is based on the mathematics of synchronized chaos (sorry, no good introductory link available).

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Scott Sumner has a great post at his blog TheMoneyIllusion (highly recommended in general if you’re into monetary economics).  In it, he explores the difference between values and worldview.  In particular, he explains how academic economists tend to have liberal values but an economic, rather than liberal or conservative, worldview.  This leads to interesting effects when you try to measure academic economists on the left-right spectrum.

What I loved was the list of seven differences between the “common sense” and “economic” worldviews.  They are concrete examples of how economists differ in their causal reasoning from even very highly intelligent and educated non-economists.  If you want to understand where I’m coming from, read the post.  It’s pretty much one of the three primary planks of my own worldview.  [In case your curious, the other two are that (2) the human brain is a woefully inadequate decision making substrate and (3) many of the outcomes we care about are produced by complex dynamic systems that are very difficult to characterize]

This is one of the most important medical “breakthroughs” in recent memory.  You should read the entire article, because it makes some subtle points, but the upshot is that placebo has (at least) two components, one that is triggered by conscious belief in a putative cure, and another that is triggered by unconscious, Pavlovian association.

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Radical Transparency

In a March 2009 Wired article, Daniel Roth calls for radical transparency in financial reporting as the path to recovery and a more secure financial system.  He argues that the reporting requirements today allow companies to obscure what’s going on and that the way to fix things is as follows.   Embrace a markup language with which bite-sized chunks of standardly defined pieces of financial data are thrown out to the world so that users can crowdsource the true picture of a company’s financial health.

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TED Talk: Linked Data

One of my favorite talks of TED 2009 was from Tim Berners-Lee, the man often credited with (actually) inventing the Web.  He’s been going on for quite a while about the coming of the “semantic web” and how it will be even bigger than the current web in terms of impact.  But until his TED talk on linked data, I didn’t really get it.  Now I do.  And I think he’s right:

As you’ve probably figured out by now, I prefer to base decisions on statistically significant evidence.  However, in order to gather such evidence, you must have hypotheses in the form of testable models.  If the models you try to test are divorced from reality on the ground, your results will be useless no matter how statistically significant.

Therefore, if you’re interested in issues of poverty and race in the US, here are two ethnographies you should read.  Gang Leader for a Day by Sudhir Venkatesh and Cop in the Hood by Peter Moskos.  As sociology PhD candidates, both went out and actually became actors in poor black neighborhoods.  Venkatesh hung out with a crack gang in a Chicago housing project and Moskos became a police officer in Baltimore’s roughest neighborhood.

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On the Cancer Complexity forum, I pose a question: if we could somehow replace all the damaged DNA in each of the cells of your body with an undamaged copy on a continuous basis, would that prevent you from getting cancer?

What do you think?

Apropos of Rafe’s last post on Complexity Economics, I ran across an economic stability proposal that is either brilliant or crazy. I both haven’t thought it over enough and am probably not qualified to determine which.

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Complexity Economics

In Chasing the Dragon, I wondered aloud whether we could dampen boom-bust cycles in the financial system with an economic equivalent of a controlled burn.  Kevin suggested that “generic countercyclical policies” might work.  Underlying both mine and Kevin’s thinking is the idea that you can possibly do better (for the world as a whole) by (a) understanding the entire economic system better and (b) enacting policies which are in line with that understanding.  In contrast to these assumptions are a point of view articulated by one of the readers on a different thread:

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Crohn’s Disease

Debbie Maier asks us on the Upcoming Topics page to address Crohn’s Disease.

I don’t know too much about it except that it’s an autoimmune disease and has a complex, multi-causal etiology and pathology.  In my reading on autoimmune diseases in general there seems to be a direct link between latitude an incidence.   Specifically, the farther from the equator you live the more likely you are to get Crohn’s, Type 1 diabetes, rheumatoid arthritis, and so on.

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George Lakoff wrote an interesting piece on FiveThirtyEight.com yesterday called The Obama Code.  I will focus on one of the sections in particular because it articulates something I’ve suspected for a while, but I’ve never heard anyone else give credence to the notion.  Which is that one of the fundamental differences between liberals and conservatives in the U.S. is that conservatives give more weight to individual, autonomous actors and actions in their view of how the world works, and liberals tend to give more weight to systemic causation and interdependency:

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Chasing the Dragon

Kevin just posted about a great article by Felix Salmon in Wired.  I underlined three quotes in my reading of it:

  1. “Correlation trading has spread through the psyche of the financial markets like a highly infectious thought virus.” (Tavakoli)
  2. “…the real danger was created not because any given trader adopted it but because every trader did. In financial markets, everybody doing the same thing is the classic recipe for a bubble and inevitable bust.” (Salmon)
  3. “Co-association between securities is not measurable using correlation…. Anything that relies on correlation is charlatanism.” (Taleb)

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Twitter vs. Psychoanalysis

In this Times Online article, two psychologists and an author weigh in with their view of Twitter users as narcissistic and infantile:

The clinical psychologist Oliver James has his reservations. “Twittering stems from a lack of identity. It’s a constant update of who you are, what you are, where you are. Nobody would Twitter if they had a strong sense of identity.”

“We are the most narcissistic age ever,” agrees Dr David Lewis, a cognitive neuropsychologist and director of research based at the University of Sussex. “Using Twitter suggests a level of insecurity whereby, unless people recognise you, you cease to exist. It may stave off insecurity in the short term, but it won’t cure it.”

For Alain de Botton, author of Status Anxiety and the forthcoming The Pleasures and Sorrows of Work, Twitter represents “a way of making sure you are permanently connected to somebody and somebody is permanently connected to you, proving that you are alive. It’s like when a parent goes into a child’s room to check the child is still breathing. It is a giant baby monitor.”

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Via Tyler Cowen at Marginal Revolution, an excellent article in Wired about how one formula, embodying one assumption, catalyzed the meltdown.  I recommend you read it and ponder it.  There are many useful lessons for modeling complex systems in general.

However, I will summarize for those of you short on time.  A fundamental problem in securitization is figuring out how different components of a security are related.  Think of it as measuring how well the components are diversified.  The more independent the components, the less risk embodied in the security.  Thus AAA rated tranches of mortgage-backed securities are supposed to be very safe because the components are supposed to be highly independent.

A Chinese mathematician named David X. Li had an insight.  You don’t have to analyze the dependencies directly, you just have to observe the correlations in the market prices of the components.  Then you can compute these really tight sounding confidence intervals on the correlations of various components because you have all this market data.  Of course, the market can’t take into account what it doesn’t understand.  So you see a bunch of 25-sigma events.  At least, your model says they are 25-sigma.  Oops!

Whenever I have a question about health matters that is too complex for an MD or academic researcher to get right, I ask Kevin.  Nobody I know has a better combination of broad-based current knowledge of the primary literature, plus a whole-system view and understanding of compex dynamics, plus the practical will and experience in living by (and updating) his conclusions.

Here are some questions I had for Kevin recently and his answers.

Rafe: Do the BPA results (such as they are) cause you concern?  Do you still use your Nalgene bottle?  Would you let your infant or child drink from a plastic bottle or sippy-cup?

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Has anyone read the entire text of the stimulus package?

The ambiguity of this question is intentional.

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My other favorites were these:

  • Tim Berners-Lee
  • Bonnie Bassler
  • Rosamund Zander
  • Willie Smits
  • Dan Ariely
  • Liz Coleman

I’ll post their talks when they come out, but you can check them out from the program guide in the mean time.

What were your favorites?

Daniel Dennett and others have called Darwin’s theory of evolution the best idea anyone has ever had.  That means that all the ideas that Socrates, Da Vinci, Newton and Einstein ever had, plus all the ideas that everyone else has ever had are also rans.  It would be impossible to really justify such a claim objectively, but I will give my guess as to why it might be considered so, at least by luminaries in Western society.

My suggestion is that evolution is the first theory — in the scientific tradition — based on the principle of emergence.  That is, it looks at a system from the bottom up, starting with behavior at the micro level and yielding behavior at the macro level.

Regardless of the above, what gets your vote for the best idea ever?

Thought of the Day

We talk about how we are all one, more similar than we are different.  And of course it’s true, but…

Our lives are so different.  And the gap is widening all the time.  The diversity of experience increases, as the world becomes more complex, as we create new ways of existing, physically, mentally, socially, virtually.

This is part of the paradox of “progress” and the global network effect; the possibility for common understanding increases, yet the difficulty of such a feat does too, as we branch farther and wider from our common experience.

Gary Marcus says he’d like for there to be a course on metacognition for kids:

Call it “The Human Mind: A User’s Guide,” aimed at, say, seventh-graders.  Instead of emphasizing facts, I’d expose students to the architecture of the mind, what it does well, and what it doesn’t.  And most important, how to cope with its limitations, to consider evidence in a more balanced way, to be sensitive to biases in our reasoning, to make choices in ways that better suit our long-term goals.

What a brilliant and practical idea.

Anyone want to take a stab at a syllabus?

Kevin has a few threads regarding the effect that micro behaviors have when aggregated to macro behaviors:

It occurred to me as I was reading this Huffington Post article that there is a reverse-emergent dynamic that occurs when countries (often through their leaders) send signals to other countries through word and action. Continue Reading »

I try not to practice false modesty (those of you who know me well probably just did a spit take at that understatement).  So while I try to stand up and admit when I’m wrong, I also like to stand up and point out where I’m right.

It shouldn’t be a surprise to any of you that I came to the conclusion that climate models are pretty much total bullshit. My problem with them is that they are incomplete, overfitted, and unproven.  It turns out that one of the foremost experts on forecasting in general also thinks that these models have no predictive value. In fact, items (6) and (7) of their statement shows that you can predict the future temperature really well simply by saying it will be the same as the current temperature.

You can read their more formal indictment of climate forecasting methods here.

Oh snap!

When I was an undergraduate studying macroeconomics, I came to the conclusion that it was pretty much total bullshit.  Because I was in a co-terminal masters program, I was also studying graduate level decision theory, game theory, microeconomics, behavioral economics, and dynamic systems. In comparison, it seemed clear to me that macroeconomics was not a coherent study of a complex system.

Lately, Arnold Kling’s blog posts have been reinforcing this belief. However, we may both be wrong.  Arnold studied and practiced macroeconomics in the late 1970s.   Given the delay in propagating knowledge to the undergraduate level, that’s probably also what was taught in my late 1980s undergraduate textbook. However, Will Ambrosini observes that Arnold’s views are outdated and this is a problem with non-macro economists in general. He points to this essay and I find myself convinced that modern macroeconomics is a coherent study of a complex system.

I thought this might provide you some measure of comfort.  If anyone wants me to summarize the particulars of why I changed my mind, let me know.

Symposium Proposal

There is a proposed symposium on “Complex Adaptive Systems and the Threshold Effect: Views from the Natural and Social Sciences” on Nov. 5 – 7, 2009 in Arlington, VA.  According to the details, “A final determination for scheduling this event will depend partially on the amount of interest from the community…”  If you want to learn more or express your interest, email tedsaid@gmail.com.

Powerful Images

Click here to see the whole set.

hat tip: mom

Focusing Sound

Okay, this is cool.  Be sure to watch to the end:

The NY Times reports.

Here’s my theory:  someone who drinks more than three cups of coffee a day can’t possibly sit still and actually gets their ass off the couch and does shit, thereby stimulating the body and brain, a known and powerful way to reduce dementia risk.

hat tip: Daniel Horowitz

Designing for Generosity

Clay Shirky is always a great speaker.  Here’s his Pop!Tech from last year:

Vodpod videos no longer available.

The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true.  (James Branch Cabell)

I am currently reading What Are You Optimistic About?, a collection of short essays by thought leaders in many different disciplines on the eponymous subject.  I’m also reading True Enough, a compelling argument by Farhad Manjoo for how despite — nay, because of — the fire hose of information that permeates modern society and is available for the asking, the schism between what’s true and what we believe is widening; a polemic on polemics if you will.  Taken together, these two books suggest to me that there is a case, not for being optimistic per se, but for why you should consciously, actively try hard to become an optimist if you aren’t already.

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Particle Physics Follow Up

In the comments to this post, Rafe and Daniel asked me to tell them the punch line of Lightness of Being.  I’ll do my best.  Spoilers ahead.

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How Our Moral Compasses Fail Us

From the comments on my Introduction to this series, it appears I have discovered a controversial topic. Good. My first objective will be to illustrate why we cannot rely on  moral compasses to guide society. After some thought, I have decided to break the topic of moral compasses into two posts: how they fail and why they fail.

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The Challenge

Here’s a contest model for spurring innovation that I’d like to explore:

  1. 50 participatns ante a pre-determined amount of money
  2. Each participant submits original work (of a pre-determined type)
  3. Each participant votes for one winner (other than themselves)
  4. Winner gets the money

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Good Particle Physics Book

I apologize for the posting lull.  I’ve had a bad cold and been struggling to add Monte Carlo simulation to my discrete stochastic model of the startup lifecycle (if anyone is planning on using Oracle’s Crystal Ball, I can tell you the good and bad). But I’m almost finished with my next substantial post.

In the meantime, I finished a really good physics book: Lightness of Being by Nobel prize winner Frank Wilczek. It requires a basic knowledge of quantum mechanics (I suggest Al-Khalili’s Quantum) and particle physics (any recent popular book that spends more than one chapter on the Standard Model).

Given that, it does an awesome job of explaining three things that have always bothered me. First, how the strong force can possibly get more powerful the farther away you get. Second, why we can’t break protons and neutrons into their component quarks.  Third, where the heck a proton’s mass really comes from. It turns out all three things are related and the explanation is quite elegant.  I don’t know why the dozen other physics books I’ve read in the last five years ommitted an explanation (or at least an explanation that stuck with me).

Vodpod videos no longer available.

Red Pill or Blue Pill?

As we approach the inauguration of a new leader who trying to be truly post-partisan, I think Jonathan Haidt’s TED brilliant talk is apropos:

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The Emergent Fool

We changed the name/URL of the blog to better reflect that it’s a group blog now and not just Rafe.  Same kind of content though, and we didn’t remove any existing content.

Here is the scariest image in all of cancer:

cancermortality

Graph from Fortune Magazine article.

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Third-Hand Smoke

Thanks to Daniel Horowitz for alerting me to third-hand smoke.  I guess then if you pass on epigentic mutations to your children from third-hand smoke exposure it’s called fourth-hand smoke?