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Driverless Cars and Systemic Vulnerabilities

December 29, 2012 2 comments

drivlscarSometimes it seems that the uncontrolled and non-systemic is more stable than the systemically controlled environments deliberately aimed at stability.

While the systemic model, with its top-down, consequentialist policies put in place specifically to produce stability, often produces stability over the short run, it at least as often produces unimaginably wild instability over the long run.

This is a problem that crosses platforms. A common analogy is the fires in managed forests. While top-down policies designed to systematically control and extinguish small fires prevent problems in the short run, the lack of fires to clean out the dried brush ultimately leads to uncontrollable infernos.

I am more likely to write about an almost identical problem on this blog: the Federal Reserve. While top-down policies designed to systematically control and extinguish market phenomena like inflation and unemployment often allow for stability in the short run, the lack of market responsiveness ultimately leads to catastrophic crashes, runaway inflation, and heavy unemployment.

This is something that I have been thinking on quite a bit recently, and I have come to the conclusion that we have to embrace the chaos. Ultimately, we’re in for a wild ride no matter what, so why delay the reckoning? Let’s deal with the problems in incremental and manageable ways, preferably at the level of the individual. The only alternative seems to be waiting for intractable problems later.

The reason I bring this up now is because Motor Trend magazine recently published an article called “The Beginning of the End of Driving.” Read the following excerpt and try to tell me you remain unworried about the systemic vulnerabilities.

Continental plans to have autonomous assistance available for limited freeway driving and for construction areas by 2015, says senior vice president Ralf Lenninger. It will add low-speed city capability in 2017, followed by two-lane highway and country road driverless car technology about the end of the decade. The company calls this “the car you can’t crash,” and it will meet the company’s goal for a zero-percent accident rate.
 
Zero percent accident rate? Kind of like the Titanic was unsinkable? The potential for systemic vulnerability to me seems greater than the individual vulnerabilities. If we go to a top-down system of driverless cars, what is to stop a rogue programmer from redirecting all of our vehicles into each other at once?
 
This is not to say that the technology is not potentially useful, or that it can never work. But when the impulse in government is emphatically interference, I doubt the likelihood of independent, individual driverless cars. Far more likely, we will be shunted into a system of “rational regulation,” which may very well end up shunting all of our cars into a ditch one day.
 
By all means, let’s let technology surge forward, but let’s ensure that we avoid the impulse toward systematic regulatory systems to go with it. I would hate to see driverless cars with the same track record as the Fed.

Complexity, the “Do Something” Instinct, and the Sandy Hook Shooting

December 27, 2012 1 comment

I have as yet avoided writing about the Sandy Hook shooting, partly because I dislike rushing to rash decisions, and partly because I believe the narrative has focused on unimportant ideology as opposed to the important ideas underlying the situation and the reaction to it. Now, however, with the benefit of some distance, I will weigh in.

What happened was horrible. There is simply no way around that. On the other hand, frantic reactions, calls to political action, and statements claiming that what happened was “obvious” do nothing but exacerbate the problem.

In reality, while it is easy to deconstruct the event with the benefit of hindsight, it is simply impossible to claim some sort of valid foresight. It is not enough to say “I knew that something like this would happen,” because that is a statement without verifiability until the proof is at hand. And when the proof is at hand, such a statement is already useless. If you had any real knowledge, you would have stopped it from happening. If you had no ability to stop it, you had had no real knowledge – simply baseless speculation masquerading as knowledge.

One can analogize this “foresight problem” to other occurrences. For example, if someone gets in a car accident, he might say later on “if only I hadn’t slept in and left 20 minutes later than I usually do, I would never have been in this mess.” This is the functional equivalent of claiming foresight about Sandy Hook. If either were valid, the problematic situation would never have obtained.

Nor is it possible to claim that, despite the lack of specific foresight, there was enough knowledge to have stopped the tragedy via preventive action. This kind of claim usually follows the “if only we had this law…” form, and it is the functional equivalent of the above. This also fails to account for the foresight problem, and it suffers from a debilitating case of confirmation bias.

The foresight problem can be extended through thought experiment. Consider a chess game.* The number of possible chess games that can be played is somewhere in the order of 10^120, or many multiples of the number of atoms in the universe. Once the chess game is, say, 50 moves in, and the chesspieces are arrayed just so, it is relatively easy to reconstruct what happened. Before the game began, however, there was an infinitesimal chance of predicting just such an arrangement. And remember, this is chess: as complicated as its game-tree complexity is, it pales in comparison to the complexity of an hour, even a minute, of human action.

We have no useful foresight, but neither does our hindsight yield much when faced with the multitude of competing and interacting causes and effects that a chessboard simplifies but real life makes manifest. After all, if the “obvious” solutions were actually obvious in hindsight, this would not be a recurring problem. We would have corrected it after the last time.

For example, getting rid of guns does not solve the problem, as countries such as Russia continue to see mass violence despite heavy gun control, while Switzerland’s rate of gun violence is comparatively miniscule despite enormous rates of gun ownership. Britain found that gun violence increased 40% after its gun ban in the late 1990s. Unlike poorly-informed pundits, I will not speculate as to why. And indeed, a majority of the mass shootings that have occurred in the United States have occurred in states, localities, and even schools that are “gun-free” or gun-restricted zones. Real life does not cooperate with our strictures. (QED.)

Nor is lack of guns an obvious problem, as the just-as-reactive NRA has suggested. What earthly purpose would stationing the equivalent of TSA agents (who, by the way, are not armed) at schools be, when the TSA has shown nothing but incompetence? Why would one expect an armed policeman to stop a shooter when armed policemen are already commonly at schools and haven’t helped? Why would a national guardsman or combat veteran be effective? Remember that one of the worst mass shootings in history took place on a military installation in Texas. No shortage of guns on a military base.

What are we to do with ourselves, then, if there are no solutions to the problem? (And, emphatically, there are none.) We do the best we can to defend ourselves, but we also accept that the real world is a dangerous, messy place and circumstances beyond our control may end our lives abruptly.

Callous? I call it realistic.

Indeed, the possibility of being the victim of a mass shooting is quite similar to the possibility of being in a fatal car accident, except for the fact that the latter occurs with startling regularity by comparison. We seem to have no problem processing the idea that, while our lives might end on the road at any moment, we have balanced the risk and accepted that, dangerous as driving may be, we will carry on. We seem to completely lack the capacity to accept the idea that, while our lives may end in a mass shooting at any moment, we are capable of balancing the risks here too. Apparently, when guns are present, rationality goes out the window. This despite the fact that cars can be at least as lethal as guns.

And capable we are of balancing the risks inherent in life. After all, we do it literally all the time. Short of locking down the entire citizenry in individual padded cells, there is simply no way to prevent the next mass shooting. That may be hard to hear. But think of the risks you take every day that are greater. Driving is a good example, but also note that you are about as likely to be killed by lightning than be killed by a mass shooter. Shall we live our lives entirely indoors?

Or can we accept the fact that there is no solution?

Once we have accepted that the risk is intractable, we can begin to accept that calls to action, proposed laws, gun controls, the “do something” instinct – all are useless in the face of a tragedy like this. We can avoid the rush to judgment. We can avoid the poison of baseless ideology. We can begin the healing process. We can resume our lives.

While the complexity of the world denies us the ability to see into the future, we can see that the fruits of the “do something” instinct, be they legal or otherwise, are poisonous to liberty. We are faced with a choice. We can keep our liberties and our dignity intact, and live with a future where mass shootings are possible. Or we could pass laws taking away fundamental individual liberties, making the people servile and impotent, and thereafter live with a future where mass shootings are possible anyway.

These are our only two choices. We should choose wisely.

 

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*I have previously used the chess example to illustrate complexity here.

What can be done about political hatred?

November 10, 2012 Leave a comment

Bob Kerrey, loser of a senate race in Nebraska, has pointed out the growing climate of political hatred in the country. He says:

Sitting in his midtown Omaha home a day after Tuesday’s election, Bob Kerrey said a shout from outside made him reflect on what he believes is political hatred that has grown increasingly intense.

… “Hatred is a dangerous thing,” he said.

I completely agree, both about the growth of hatred in politics and about its danger to individuals and the polity itself. In the wake of a presidential election that split the country as never before, we have seen the emergence of class warfare and identity politics writ large.

Instead of changing the almost-universally unpopular status quo, Americans cast their votes as blocs, with blacks almost completely separating from whites, women and men a chasm apart, the wealthy and those of limited means at loggerheads like we haven’t seen in decades. So much for Obama being the great uniter.

However, I get the feeling that Mr. Kerrey and I would not agree about the causes or cure.

I believe it is a simple problem, and it can analogized as follows. If you are infested with mosquitoes, you can kill them one by one. You can curse the gods for plauging you with insects. You can suffer in silence. On the other hand, if you want an end to the problem, you can drain the swamp.

Political hatred is always and everywhere a product of political overreach. When people peacefully and voluntarily exchange without government interference, there is no political hatred. However, when politics reaches into our wallets, our bedrooms, our private lives – that is where hatred begins.

A vote for an intrusive public policy is akin to a personal attack, because although the state is used as proxy, the result is the same. If we do not want people picking our pockets one-on-one, how can it be legitimate just because enough people voted on it? If the natural response to theft is anger, why would we respond the opposite way just because the government is the middleman?

You want less political hatred, Mr. Kerrey? Try less political force.

The incredible vanishing multiplier, and economics as a science

November 9, 2012 2 comments

Here is a blast from the past. In this .pdf file, economist Robert Barro talks about the Keynesian multiplier in 2009. 2009, as we recall, was the edge of the precipice. This article was published in February of that year, concurrently with the passage of the “American Recovery and Reinvestment Act,” commonly known as the first stimulus, which granted roughly $800 billion of taxpayer money to political cronies.

Here is an excerpt:

If the multiplier is greater than 1.0, as apparently assumed by Team Obama, the process is even more wonderful. In this case, real GDP rises by more than the increase in government purchases. Thus, in addition to the free airplane or bridge, we also have more goods and services left over to raise private consumption or investment. In this scenario, the government spending is a good idea even if the bridge goes to nowhere or if government employees are just uselessly filling holes. This free lunch would make Charles Ponzi proud. If the deal is genuine, why stop with only $1 trillion or so of added government purchases?

It seems as though the best way to judge macroeconomic predictions is with the benefit of hindsight. Indeed, when economists using the same data set come up with estimates that vary by the trillions, one must wonder whether foresight per se exists at all.

With the benefit of hindsight, it is clear that the stimulus did not stimulate. Many excuses have been made for the poor performance of ARRA, but the fact remains that it has failed.

In my view this is not surprising. Most economists, whether classical, monetarist, Keynesian, or whatever else, have been consistently missing the point for decades. They have become so caught up with making their math look legitimate that somewhere along the line they forgot that it should have some connection to the real world.

Perhaps when applied to mainstream macro, “voodoo economics” is a tautology.

Why Government Debt Blows Up

November 8, 2012 Leave a comment

Here is a link from the Daily Reckoning of Australia, showing why government debt blows up. It has a liberal dose of Bastiat (pun intended), and it draws some interesting parallels between Japan and the United States.

I suggest that you read the whole thing. (It’s not that long, you whiners!) But here’s an interesting excerpt to pique your interest:

What really happens is this: the private sector gets too deeply in debt (thanks largely to the Fed’s artificially low rates and EZ money policies). Then, it panics. It cuts spending. Lenders – who over-extended credit – should go broke.

Instead, the feds bail them out, shifting the public’s real resources to failed businesses and incompetent managers. The bad debt is transferred to the public. Then, the private sector… attempting to build up savings and improve its financial health… puts its money in the safest possible place – government bonds! Still more debt, in other words.

The government takes the money and gives it to its favourite sectors… its clients… its pets… its campaign contributors and vote-getters. The public would be appalled if it realised how its savings were being thrown around. But it wants safety above all. And it believes the feds will be good for the money; they always have been. After all, if you can’t trust the government, who can you trust?

Who can you trust indeed? I’m not in the business of giving investment advice, but I’d suggest tangible assets. Check out the article to see what the stock market has done relative to tangible assets over the last 15 years or so. It will either shock you or depress you, or possibly both.

I was at the grocery store today…

September 16, 2012 Leave a comment

…and I saw something that made my jaw drop. I couldn’t help but laugh at the time, but ultimately, it’s not that funny.

It is about 11:20 as I write this, and I was at the store some 10 minutes ago. It is too late to cook, and the nearest grocery store to me that doesn’t charge an arm and a leg has a deli. I went to grab some chicken for a late dinner.

The young men in line in front of me were buying three kinds of soda, Oatmeal Cream Pies, Swiss Rolls, Ho Hos, and Mini Donuts. Before they paid, they waited a few moments for another of their group to come back from the candy aisle. Apparently they forgot Gummi Bears.

Their purchases lined up on the conveyor belt, the clerk checks them out. When the provisions are totaled, what should the young man reach for as payment but a Minnesota EBT card. For the uninitiated, that means he was paying with food stamps.

I feel like I should add the disclaimer that this is real. It sounds so silly, you might think I am embellishing or making the whole thing up. But I assure you, I was just there. And that really happened.

Taking the longer view, it is frankly amazing to me how many people discount the fact that these types of programs are rife with fraud and abuse. Under the guise of helping the poor, we are creating a permanent underclass with no skills save the ability to game the system.

People often accuse those of us who would like to see the end of these types of programs of taking food out of the mouths of poor families. That is simply untrue. Having people take care of themselves and, more importantly, allowing them to do so makes everyone better off, including the very poor. The evidence is clear, and the social welfare state is a failure.

But beyond that, I wouldn’t consider taking the Ho Hos away from a group of twentysomething boys who are clearly about to go smoke weed because none of them has a job to go to tomorrow a violation. That’s not taking food from poor people. That’s preventing the theft of the productive by the useless.

Peak China?

August 16, 2012 Leave a comment

Walter Russell Mead, writing at the American Interest, posits “peak China,” a concept much like peak oil. According to Mead:

It may be hard to believe, but it’s been a full four years since China hosted the Olympics. At the time, Beijing 2008 appeared to herald China’s return, after a 500 year hiatus, to great power status. Commentators were falling over themselves to pronounce the inevitability of China’s rise and its implications for American influence in Asia.

But is it possible we will look back on those Olympic Games as the peak of Chinese power, rather than the beginning of its rise?

Yes. There are many reasons why, including demographics, which Mead elaborates upon. I prefer the monetary-governmental explanation.

China will have to confront a series of structural challenges if it is to continue to achieve the kind of dynamic growth that lifted the country from economic backwater to emerging great power in just three decades.

The most obvious challenge is demographics. A RAND study observed that the proportion of the Chinese population of working age peaked in 2011 and began slowing this year. The share of the elderly population is rising. Healthcare and pension costs will soar as a result. So will labor costs. Investment and savings will diminish. In short, China may face the prospect, unknown in human history, of growing old before it gets rich.

I think this is probable, mainly because the growth that China has shown has been a classic case of credit-fueled bubble inflation. (I have written about this before; search “China” on the homepage.)

Of course, my interest in this is theoretical as well as practical. On the practical side, the coming China cataclysm is going to toss the world economy into a crisis of similar proportions to Europe’s coming crackup. And the American government, without any changes, is utterly ill-equipped to deal with it, meaning that it may be the final straw. But that may just be me being a pessimist.

On the more theoretical side, I am at the very least worried that we will draw the wrong lessons from China’s coming massacre. The narrative will undoubtedly read: 1) China “adopted capitalism,” 2) China saw some growth, 3) China collapsed, and therefore 4) capitalism is to blame.

This is 180 degrees from the proper interpretation, and I hope to write more about this in the future. A state-controlled economy with capitalist-leaning reforms magnified by cheap credit absolutely does not make a free market.

But I feel like I’m a voice in the wilderness. Some still look to China as a beacon, while others, acknowledging China’s foundation made of sand, offer up the same tired Keynesian platitudes that put America $5 trillion more in debt over the last 4 years, while accomplishing nothing by way of recovery or sustainability.

Perhaps it’s time people starting acknowledging instead that money has consequences. Those consequences are wonderful when the money is sound; they are terrible when the money is ginned up by the state.

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