Overcoming Bias

BSG is Detached Detail

Battlestar Galactica is the most celebrated science fiction of film or TV over the last few years.  And it does indeed have unprecedented quality in acting, characters, and character interactions.  The setting and plot mostly do a good job of setting off these characters and their interactions. However: this setting and plot make very little sense.  Nowhere was this clearer than in tonight's series finale. - it doesn't even make sense in a "God works in mysterious ways" sort of way.  It might be true to the emotional core of many characters and their interactions, but that hardly makes it a plausible overall outcome for a civilization. 

Even though science fiction as a genre pays an unusual degree of attention to the larger settings of its stories, I in fact expect most BSG fans hardly noticed this key fact, and if they noticed hardly cared.  You could hardly ask for clearer evidence that the near "detached detail" fiction uses to fill in its far setting does not much discipline that setting.  You can tell pretty much any crazy far story and still fill it in with emotionally compelling near detail.  

Added: I was recently flown to LA to personally advise a director of several famous (and good) SF movies, and his scriptwriter, on a new movie based on a famous SF book.  Even I was surprised by how little understood the story's basic technical premises, and how little they cared about its basic emotional core. 

What Changed?

It is becoming increasingly clear that Obama's proposed policies go well beyond what we might need just to respond to the economic crisis; he's making a bid for great changes in national policy.  The Democrats do now control the U.S. presidency and both houses of Congress, but usually that wouldn't be enough to think they could get away with this; they would fear a public backlash at the next election.  So they must think the public is now more receptive to Democrat-style large policy changes.  I don't know that they are wrong, but this does raise the question: if so, what does the public think has changed?

Economists don't think this crisis has added that much to our total dataset; Obama's economists may think his new proposals are good ideas, but they almost all thought so a year ago as well.  So is it that the public learned something that experts already knew?  Or does the public just want to affiliate with the impressive unusually high-status elites pushing these proposals? 

Bryan Caplan asks:

If the government had followed a laissez-faire policy for the last six months, and output, employment, housing, and financial markets stood exactly where they stand today, what fraction of people would conclude that "Events decisively prove that laissez-faire is a disaster"?  Can you honestly give any answer less than 90%?

My best guess is that we are seeing the "ratchet effect"; voters expect more government to be a better response to most any big crisis than less government.  Let me pose the question differently:  can you imagine any crisis where voters would expect a substantial reduction in government to be the best response?  If you can't, that says there is almost no prospect for a crisis-induced libertarian revolution.

Near-Far Like Drunk Darts?

From a recent book review:

Jonah Lehrer's mission in The Decisive Moment is to help us determine when to override our instincts and when to let them run. ... One of Lehrer's interesting recommendations [is]: trust your emotions in situations where you have had a lot of experience, since this is when [your brain is] ... best equipped to warn you of any deviations from their established patterns. In novel situations, on the other hand, such as when playing a new game or considering a risk to your health, it is a good idea to take a step back and do the maths, even though your emotional brain will tell you it knows better.

Macroeconomists have seen lots of precedents for this economic crisis; this isn't too far out of line from what they've seen before elsewhere. I've heard some macro folk complain that bigshot macroeconomist advice for us-now differs substantially from what they've written about there-then, i.e., about how others should have dealt with similar problems at other times.  Apparently they give different advice when a crisis is seen as "near" versus "far."  Which advice is better?

The quote above suggests this is like asking if you should drink before competing in a darts championship. If you've always practiced darts while drunk, you may be better at darts when drunk than sober; in which case you should compete drunk. Similarly, if macroeconomists have developed most of their expertise while considering events in far mode, they might give better advice when in far than near mode.  In which case we are getting bad advice.

Perhaps macroeconomists would give even better advice if they had trained in a near mode, just as you might compete better at darts if you'd trained sober.  (At least they might if my far-image near-decision speculation is correct.)  But once the training mode has been chosen, and it is time to act, that option may be no longer available.

Who Are Macro Experts?

I never learned much macro-econ; they didn't respect it at Caltech where I got my Ph.D.  So while my econ colleagues blog 24/7 about the macro crisis, I've mostly kept quiet.  But I can speak on this issue: who are the real "experts"?

During this crisis, politicians and reporters have been eager to cite "economists" in support of their causes.  For example, Obama:

What I've said is what other economists have said across the political spectrum, which is that, if you delay acting on an economy of this severity, then you potentially create a negative spiral that becomes much more difficult for us to get out of. 

The Post:

While economists remain divided on the role of government generally, an overwhelming number from both parties are saying that a government stimulus package -- even a flawed one -- is urgently needed to help prevent a steeper slide in the economy. 

So who are these "economists"?  While Bryan reports "almost none of the economic `experts' pontificating [in the media] on Obama's economic plan are actually [degreed] economists", Obama and the Post were probably talking about standard "prestigious" economists, i.e., those holding top positions in prestigious institutions.  But are these really the most accurate sources for macro policy advice?  What is the best way to identify "experts" on such topics anyway? 

Lying Stimuli

In economic downturns, most economic activity arguably has a positive externality; when A buys services from B, not only do A and B benefit but the downturn is reduced a bit as well.  (In an upturn, extra activity arguably exasperates the boom-bust cycle.)  This fact can justify subsidizing economic activity a bit more (or taxing it a bit less) during a downturn.  But it turns out this isn't the main rationale for "economic stimuli" now being debated; those plans are largely based on the idea that people can be fooled because they are biased.  Tyler Cowen: 

Let's say government can spend $100 billion today or spend the present expected value of $100 billion, stretched out over time so it is a commitment in perpetuity.  Both spending programs are financed by bonds. ... The Keynesian boost to aggregate demand arises because people consider the resulting bonds to be "net wealth" even when they are not. ...  People are tricked by the government's fiscal policy, but of course the extent, timing, and nature of the trickery is hard to predict.  Is it easier to trick people "a lot all at once" or "a little bit by bit over time"?  It depends.  If you try to trick them slowly over time, temporal learning and adaptive expectations may work against the policymaker.  But if you try to trick people a lot all at once, the trick may rise over their threshold of attention, perhaps because of media coverage.

Wise taxpayers who get stimuli tax rebate checks should mostly save them, realizing that future taxes must rise to pay for those checks.  For similar reasons, wise taxpayers should also spend less upon hearing about government spending increases.  So with wise taxpayers it is not obvious that tax rebates or government spending increases would help much with the downturn. 

The consensus among macro-economists seems to be that people can in fact be fooled by such stimuli, but as Tyler indicates, it is not clear which policies most fool us.  In particular, the more public attention we give to the stimuli, the less they might work.  We might make people realize that they need to compensate via saving, and the more we scare folks into thinking we need huge stimuli, the more we might scare them away from normal economic activity levels.

So should we stop explaining macro-economics during this crisis, and stop saying how desperately we need stimuli?  After all, similar rationales were offered against allowing financial market short-sales.

Investing for the Long Slump

I have no crystal ball with which to predict the Future, a confession that comes as a surprise to some journalists who interview me.  Still less do I think I have the ability to out-predict markets.  On every occasion when I've considered betting against a prediction market - most recently, betting against Barack Obama as President - I've been glad that I didn't.  I admit that I was concerned in advance about the recent complexity crash, but then I've been concerned about it since 1994, which isn't very good market timing.

I say all this so that no one panics when I ask:

Suppose that the whole global economy goes the way of Japan (which, by the Nikkei 225, has now lost two decades).

Suppose the global economy is still in the Long Slump in 2039.

Most market participants seem to think this scenario is extremely implausible.  Is there a simple way to bet on it at a very low price?

If most traders act as if this scenario has a probability of 1%, is there a simple bet, executable using an ordinary brokerage account, that pays off 100 to 1?

Why do I ask?  Well... in general, it seems to me that other people are not pessimistic enough; they prefer not to stare overlong or overhard into the dark; and they attach too little probability to things operating in a mode outside their past experience.

But in this particular case, the question is motivated by my thinking, "Conditioning on the proposition that the Earth as we know it is still here in 2040, what might have happened during the preceding thirty years?"

Set Obama's Bar

We've heard a lot of hyperbole about how Bush was the "Worst. President. Ever." and Obama's inauguration is the most exciting in a half century.  So to avoid future bias, this is a good time to ask yourself: where do you set Obama's bar?  That is, what does Obama have to do for you to consider him a "good" president, or even better than Bush?  It is enough for you that he is (part) black and a Democrat?  Or does he actually have to do something?  Or are those already insurmountable barriers to you?

For most any president today, odds are that we'd:

• be mostly out of our moderately deep recession in four years,
• add some symbolic financial rules that mostly lets old games continue,
• mostly watch as Israel, Russia, and China throw more weight around,
• mismanage another Katrina because governments are just bad at that,
• go deeper in debt "stimulating" and "bailing" because politicians love to spend,
• not much relax homeland security or immigration because we're still scared of terrorists,
• mildly pull out of Iraq since the war has been going well lately but we don't like to look weak,
• do little on carbon emissions or the coming Medicare train wreck as those are very expensive, and
• not reform medicine or education or welfare more than Bush's Medicare drug benefit and "no child left behind," or Clinton's welfare reform, as those were unusually big changes.

So will Obama be great (or terrible) if he just follows this least-resistence path and adds a few cheap symbolic moves on stem cell research funding, gay marriage, torture definitions, wiretap limitations, or foreign abortion funding?  And would that be enough for a non-black or non-Democrat? 

A New Day

Somewhere in the vastnesses of the Internet and the almost equally impenetrable thicket of my bookmark collection, there is a post by someone who was learning Zen meditation...

Someone who was surprised by how many of the thoughts that crossed his mind, as he tried to meditate, were old thoughts - thoughts he had thunk many times before.  He was successful in banishing these old thoughts, but did he succeed in meditating?  No; once the comfortable routine thoughts were banished, new and interesting and more distracting thoughts began to cross his mind instead.

I was struck, on reading this, how much of my life I had allowed to fall into routine patterns.  Once you actually see that, it takes on a nightmarish quality:  You can imagine your fraction of novelty diminishing and diminishing, so slowly you never take alarm, until finally you spend until the end of time watching the same videos over and over again, and thinking the same thoughts each time.

Sometime in the next week - January 1st if you have that available, or maybe January 3rd or 4th if the weekend is more convenient - I suggest you hold a New Day, where you don't do anything old.

Don't read any book you've read before.  Don't read any author you've read before.  Don't visit any website you've visited before.  Don't play any game you've played before.  Don't listen to familiar music that you already know you'll like.  If you go on a walk, walk along a new path even if you have to drive to a different part of the city for your walk.  Don't go to any restaurant you've been to before, order a dish that you haven't had before.  Talk to new people (even if you have to find them in an IRC channel) about something you don't spend much time discussing.

And most of all, if you become aware of yourself musing on any thought you've thunk before, then muse on something else.  Rehearse no old grievances, replay no old fantasies.

If it works, you could make it a holiday tradition, and do it every New Year.

Christmas Signaling

Why don't we give each other cash for Christmas?  Your employer pays you cash instead of grocery carts full of stuff because you know what you want better than they do; why doesn't that go for gifts as well?

The usual answer is your Christmas gift is a signal, not just of your willingness to sacrifice cash for them, but also of how well you know them, to know what they want.  But if so then why do we often make and distribute Christmas wish lists?   Doesn't handing our free answer sheets defeat the purpose of testing them on how well they know us?

One answer might be that the gift receiver is like a teacher leaking answers to students to raise her teacher rating - maybe the gift receiver cares more that third parties think her gift givers know her well, than that they actually know her well.  But in this case wouldn't she be trying to hide the fact that she passed around a wish list?  If everyone who sees her get a gift was shown the wish list, who could she be fooling?

Could it all be an elaborate show so that she can honestly tell other folks that she got things she wanted?  But if so wouldn't she be terribly embarrassed if they learned she gave out a wish list?  That just doesn't ring true to me; what else could be going on?

Added: Registering for wedding gifts is a clearer puzzle; all are fully aware of the list, the list is very specific, and recipients don't save on shopping time/trouble, as they had to pick out the gifts. 

Thanksgiving Prayer

At tonight's Thanksgiving, Erin remarked on how this was her first real Thanksgiving dinner away from her family, and that it was an odd feeling to just sit down and eat without any prayer beforehand.  (Yes, she's a solid atheist in no danger whatsoever, thank you for asking.)

And as she said this, it reminded me of how wrong it is to give gratitude to God for blessings that actually come from our fellow human beings putting in a great deal of work.

So I at once put my hands together and said,

"Dear Global Economy, we thank thee for thy economies of scale, thy professional specialization, and thy international networks of trade under Ricardo's Law of Comparative Advantage, without which we would all starve to death while trying to assemble the ingredients for such a dinner as this.  Amen."