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An economically sound, morally just and free fix to the subprime crisis
Submitted by Arthur B. on Sun, 2008-09-21 12:46.While the subprime crisis should have best been avoided than solved, there is a simple way which could have solved it.
All the efforts of the government, no matter how you look at it, were targeted at pumping money into the financial system to inflate prices. Not only is this approach unsustainable - it tends to produce other similar crisis - it is also morally dubious.
Yet, I contend that there is a moral, simple, fast, effective, free, and economically sound way which would have solved the crisis.
Overall, the economic damage was the construction of too many houses. The fact that people with bad credit got to have mortgage is not a cost in itself. Instead of increasing the supply of money to match the supply of houses, it would have been far better to increase the demand for houses.
At the beginning of the crisis, in August 2007, the US government should have simply auctioned 20,000,000 green cards, and use the proceeds to fund the tax stimulus. Problem solved. Not only would this have stopped the crisis, it would have erased the cost... the error of building too many houses would have become, by chance, the correct economical choice for the increased demand.
It's a bit of a one shot, and doesn't address the systemic problems that lead to the crisis, but it's certainly much better than trillion of dollars of bailouts.
Why doing this is politically infeasible while using trillion of tax payer money is, frankly is beyond my comprehension.
Left skewed financial bets
Submitted by Arthur B. on Sat, 2008-09-13 15:01.
Most of the money invested can be traced back to people who want good return and little risk. Be it through hedge funds, pension funds, funds of funds, bank deposits, ultimately there's someone out there who wants his capital to grow, and there's a money manager with a different incentive.
Most money management involves asymmetric risk for the manager and symmetric risk for the client. This is a classical principal agent problem. The manager has an incentive to increase the risk taken to make the most money. Heads we both win, tails we both lose, but I don't really lose that much while you get the full hit. This can be mitigated by various tricks, risk management, watermarks, and countless other, but overall the asymmetry persists.
But "risk" is a crude measure of what really matters, the probabilistic distribution for the payoff of the bet. One can use for example historical standard deviation, but it vastly underestimates the risk of fat tail distribution.
The most beneficial distribution for a money manager is really a negatively skewed or left-skewed distribution. A left skewed bet will turn in a profit with high probability and a loss with low probability. However, the loss will be larger than the profit. Its historical mean is also very likely to overestimate its true mean, implying that analysis of past performance is likely to overestimate future performance. A typical left-skewed bet would be to bet that Hillary Clinton will not be elected in 2008. You can lay this on Intrade and I think you are pretty sure to make $3 dollar on this, but then you might lose $100 if it happens (most likely scenario, Obama is killed by a crazy white supremacist sniper)
Not only are left-skewed distribution good for a money manager, right-skewed distribution are really bad. You lose money most of the time, and the evaluation of your performance from your track record underestimate your true expected performance. Imagine a betting strategy that loses a dollar every month, and wins 36 every two year. It's actually a great strategy, but unless a money manager can prove it works, he's likely to lose his customer or get fired before he can even turn in a profit.
On financial markets, every product can be thought of as a bet, and every bet has its own implied distribution. Overall the price of the bets move so that supply and demand are matched. If most of the trading is done by money manager, then there should be good demand for left-skewed bets and good supply of right-skewed bits, as a result, the price of left-skewed bets fall, and the price of right-skewed bets (which are by the way just laying a left-skewed bet). This also mean that the price of financial assets does not reflect the market risk-adjusted expected return, but some other, skew-dependent value.
There are ways for a money manager to extract this value. One way to do it is to package as much negatively skewed bets as possible. The distributions should average out and produce a nice normal distribution with no skew... Well that's the central limit theorem, but in practice, if you're dealing with fat tails, it could take a lot of bets to average this out, if it's even possible. It could be infeasible for a money manager to extract this value.
However, a simple investor with symmetrical incentives can profit from this situation by making right-skewed bets. He will not "beat the market", he will be helping money managers get rid of unwanted risk profiles and get paid for that.
So what are the right-skewed bets?
Out of the money options are the obvious... a put struck very low bets that a stock will fall a lot, a call struck very high bets that a stock will rise a lot. Most of the time, the option will expire worthless, sometimes it will make money.
Generally you can bet that the distribution of return of assets will have fatter tails that assumed by the market. Nassim Taleb makes nice epistemological arguments for fat tails and how they are underestimated. This is not really the point I am making here. I am simply saying that money manager will bet that distributions have no fat tails because it's a left skewed bet. Therefore, taking the opposite side should bring profits. One of the most common skewed trade is the yen carry trade. From a trader's perspective it's a great trade: borrow yen at low low rates, invest it in New Zealand at high rates, pocket the differential as long as the yen doesn't appreciate to much. You get money every day, it's fantastic. Of course, if yen rates start to rise, the yen will appreciate, many traders will get squeezed, try to get out by buying yen, producing further appreciation and pushing more people out of the trade. If a money manager wants to bet on that scenario, he stands to make a lot of money, but how will he explain to his boss or his customers losing money every day on the trade? Even options involved regular money loss... every day that passes without the event that you're expecting happening is a day where the market value of the option diminished, out of the money option have negative carry. A call option on the yen/new Zealand dollar is a massively right-skewed trade that does not appeal to money managers.
Betting that debtors will default is also a typical right-skewed trade, which can be made by buying protection with a CDS... again it involves shedding money regularly. This works if things go wrong, if things go well a winning right-skewed trade is betting on the recovery of distressed companies.
So right-skewed trade are nice, and if economics are right they can make lot of money, what's not to like ? A good reason to hate right-skewed bets is the income tax, which really makes your incentive asymmetrical. Two month ago, I wanted to bet that oil would quickly go to $200 or $100. The way to make that bet are option on oil futures (keyword is quickly). The problem is, if by chance you actually win your bet, enjoy a 50% tax on your profit. If you lose, well you can sort of carry your losses over fiscal years, but it is very limited. You might get by if you make a lot of trades but it pretty much kills every edge you could possibly have. One (legal) way to do it is through an offshore company which does not pay corporate tax. You still get taxed when you get the money out, but it can be after a long time, after many trades, when hopefully your return isn't skewed.
Disclaimer : whatever you do don't ever blame me, this does not necessarily represent anyone's view, including my employer or even mine.
Gastronomic lessons from a two-armed bandit
Submitted by Arthur B. on Tue, 2008-06-17 19:40.
The two-armed bandit is a nice theoretical framework for a large class of problems we encounter in everyday life. You face a strange slot machine with two (or more) arms. You can play for free by pulling a lever... you know each lever will pay you a random amount following a fixed - but unknown - distribution. You start pulling levers, but you realize that unfortunately, you only have an hour to squeeze the most money out of this machine... how should you play?
The exact answer depends on your prior on the payoff distribution of each arm, on your risk aversion, and on your time preference. Finding the optimal solution is rarely doable, however, most solutions follow the same pattern... you start by pulling both arms alternatively - to gather information about the distribution of each arm - then you start pulling mostly the arm that provides you with the best risk/reward return.
Unfortunately, your time is scarce... you have to allocate your hour between two tasks: information gathering and money making, it's called the exploration / exploitation trade-off.
This trade-off is very common.
- Should patients be given new experimental treatments or more mature treatments?
- What should you study in college?
- Should you stay with your girlfriend?
- Should you quit your job?
All of these involve the decision to forgo a known payoff to discover a potentially greater unknown payoff.
I was recently surprised to realize I was playing this game very poorly when it comes to picking a restaurants or picking a dish on a menu. There are easily more than 10,000 restaurants in Manhattan, yet I found myself going to the same places over and over to order the same dishes over and over. I am not the only one. I observed many people displaying this behavior. The way people pick restaurants is generally reminiscent of a meta-heuristic called stochastic diffusion search. Everyone picks a few restaurants at random and from there discover new restaurants when they are invited by friends who made a different initial pick. This method doesn't work so well since people tend to have lunch/dinner with the same other people.
Generally speaking, the dish-picking or restaurant-picking behavior of most people seem to imply a ridiculously high risk aversion (I want a guaranteed lunch experience) or time preference (the benefits or discovering a better restaurant will mostly extend in the future where I will make more informed choices).
Why is this? I think we have a strong conservative bias when it comes to food. Most food is marketed as "old-fashioned", using "traditional recipes". Menus from Chinese restaurants feature Pagodas, not the Shanghai skyline, and menus from pizzerias often come with Renaissance illustration. You don't see Intel marketing it's CPU's as made in the time tested tradition of silicon wafer artisans.
One possible reason is that food conservatism used to be required for survival. Maybe the red berries are slightly tastier than the black berries; maybe they'll kill me... I think I'll stick with the black berries. This form of conservatism is still alive today, when people favor organic food for example. That may or may not be a rational thing to do; however, when it extends to picking a specific dish on a menu, I'm pretty sure it's an undesirable bias.
Picking dish is always a difficult experience for me. I am tempted by many dishes, but I always fear I will make a wrong decision and forgo the opportunity to have the most delicious dish. Of course, I could always go back to the restaurant, and I often do, but every time feels like it is the last opportunity for me to have the most likely best dish on the menu.
In the multi-armed bandit setting, it means I am always favoring exploitation over exploration. I recently decided to strongly favor exploration. I decided to pick restaurants solely based on customer ratings, not on previous experience. Should I go back to a restaurant I knew, I committed to always try a dish I didn't try before. While I had a few disappointments, I did discover that many of my previous restaurant choices and dish choices were sub-optimal. I have experienced a lot of new restaurants, and very often have I had the feeling "this place is great, I should come back here!", only to realize this is the kind of thinking that led me to avoid the place in the first place. So whenever I like a place, I make a commitment not to come back there for some time.
Can you think of activities where you strongly favor exploitation vs. exploration or the opposite?
A hidden cost of moving to socialized healthcare
Submitted by Arthur B. on Sat, 2008-02-02 14:46.When I argue with Americans about socialized healthcare, I argue we shouldn't move towards it, when I argue with French people, I argue we should get out of it. On a moral level, the arguments are roughly the same and there is no need to go into details here : you shouldn't be forced to buy an insurance service, period.
When arguing for getting out of the system, there are legitimate practical problems that I need to deal with. Even if the moral case is rock solid, the practical issues, moving from here to there, are always relevant. There is one practical issue that I've never seen raised, and it's a tough one.
Imagine a socialized healthcare system where everyone is insured. Insurance is mandatory so there are no adverse selection problems. The state forecasts the costs and adapts the premium - it's actually not that hard to balance as long as it's fairly stable. Of course there are many other problems, moral hazards, the impossibility to decide what should or should not be covered, etc.
Imagine now that, one day, a better government decides to get rid of the system. They say for example, from next year you'll have to find yourself a private insurer, or, from next year you may opt out of the current system and get a private insurer if you wish. You have an expensive chronic illness, next year comes, you have no risk to insure so you try to stay with the state insurance. So does everyone with an existing condition, adverse bankrupts the system, at best your premium increases dramatically.
I was actually never opposed that argument... but I could. So I've come up with some patchy solutions. One is to decide on a cutoff date, people born after next year will not be insured. That solves the problem, but it takes a century to get out of the system. Another solution involves the state's insurance making packs of 1000 insured persons drawn at random and sell the pack (without revealing its content) to insurers committing to offer insurance for life. Your risk has become insurable again since you're just a random person. From there, you can always arrange with your insurance to move to another insurer and you're free again. It's a bit cumbersome but I think it works.
The blog title was about moving towards it, and so far I've been talking about how to get out of it... what's my point ? I've heard many people argue for socialized health care on the US om the ground that "it hasn't been tried", that it deserves to be tried etc. When you try something, that generally implies a free option to get out of it. Well, that option is not free, it comes at a huge cost. Getting out of socialized health care is a terrible mess.
Once it has been argued thoroughly that socialized health care is simply criminal, it might be helpful to point out that, if it's implemented and it fails, it might be almost impossible to get out of it. It cannot just be "tried", it's a very pricey commitment.
Good news everyone
Submitted by Arthur B. on Thu, 2008-01-17 23:14.In a sudden outbreak of common sense, the government is going to give back $800 to every taxpayer... or at least it seems likely.
Form Bloomberg :
The Bush administration is close to completing an economic-
stimulus proposal that will include $800 rebates for individuals
and $1,600 for households as well as tax breaks for businesses,
people familiar with the plan said today.
On to drink my 267 cups of coffee.
On a more serious note,for once this is a policy that can actually have a positive effect and that is moral. Yipee.
Should I use consequentialist arguments ?
Submitted by Arthur B. on Thu, 2008-01-17 00:06.I've been arguing with many people about politics, and, over the time, my argumentation power has steadily decreased. This may seem paradoxical, as I should be gaining experience but here is what happened.
As David Friedman says, people are generally more convinced by consequentialist arguments. Not all people are though. I was exposed to many consequentialist arguments, stemming from economics for a long time. I even wasconfronted with libertarians arguing this way but I never really espoused their views. And why should I have, there were also convincing arguments from other economists. When I was exposed to libertarianism as a moral theory of right, I became an ancap in a matter of days.
When I first started to argue with people on this topic, I was relying extensively on consequentialist arguments. I would generally start with a moral argument and then end up pointing out the "good" consequences brought by this position. I had some moderate success with that approach, but the more I was using it, the more I grew disatisfied with it. I realized that all I was achieving - when I was successful- was to convince people that certain policies should be or should not be followed. While a very practical goal, I felt it was not what I was looking for. I wanted to convince people to be moral, to recognize the immorality of agression in all its forms. When presenting a moral argument tied to a consequentialist argument, I felt I was cheating by providing the consequentialist argument as a carrot. Fiat justitia ruat caelum, but I will only reassure you about the sky once you accept justice.
I don't want people to accept moral ideas because there are good consequences, I want them to recognize that they ought to be respected. Sadly, the only way to do that is to refrain from using any consequentialist argument, which I started doing. This is when my argumentation started becoming less and less effective. To be sure, if someone claims that anarchy couldn't work, I feel answering the question is not cheating as one cannot claim that morality requires the impossible. The basic requirement of morality is that we can live moraly. I do, however, refrain to try and convince people anarchy would be a merry happy place. This should be reserved for dessert : they have to eat the ethical meal first... only once they're done accepting justice can I tell them the sky will not fall.
While my approach may seem a bit quixotic, I believe it is not. One of my goal for example is to encounter someone similar enough to myself so that, when exposed to the same argument, he will become an anarcho-libertarian on the spot. I am really following a very skewed strategy : low success-rate, but total success once in a while. Although these types of strategy may be depressing during long losing streaks, they are useful. There's also an argument, from Rand, to which I agree ... to a certain extent. She somewhat famously opposed Milton Friedman's tract on rent control as it did not rely on property right but on altruistic considerations to attack the policy. While I do believe the net effect of teaching people about the economic problem of rent control was positive, I agree with Rand that it is a dangerous path. (More powerful ? No, quicker, easier, more seductive)
Consequentialists arguments are very efficient because people are generally willing to change their mind easily on those matters... but what make them successful also makes them weak : they can be replaced with other consequentialist arguments. Moral arguments are much tougher to make because people are more reluctant to accept a new moral philosophy, but they are also much more stable, and will likely be successfully passed onto children. Every consequentialist argument however is a step away from freedom as an end instead of freedom as a mean. On the long term, the fate of the new belief is unknown... it may be replaced with an economic fallacy. It's negative effect on morality will always be damaging though.
To go back to my initial problem, my rate of success has indeed considerably dropped, but I believe I am doing the right thing. While consequentialist arguments may be useful for short term political goals, as long as conquering the noosphere is concerned, I believe they should seriously be avoided.
Why I won't get a 23andMe account for Christmas
Submitted by Arthur B. on Mon, 2007-12-03 13:28.23andMe.com is a website launched by Sergey Brin's wife Anne Wojcicki. For $999 your whole genome can be sequenced. They then claim to offer datamining tools, find characteristics about you, your genetic history, predispositions to possible illness, whom you get that allergy from, etc etc.
I won't buy that for christmas. Why?
Am I put of by the stiff $999? Well a bit but it still seems reasonable. Am I, like many libertarians concerned with the disclosure of my personal information? After all, is my DNA is on the internet, it means omg-gattaca-totalitarian-society. Nope, I don't give a damn.
A quick tour will give you the answer:
Genetic Nondiscrimination.
Various state laws exist to protect individuals from genetic discrimination. On a national level, we support passage of the Genetic Information Nondiscrimination Act (GINA), currently under consideration by the U.S. Congress.
So what is GINA?
The Genetic Nondiscrimination Act of 2007 (GINA) was passed in the U.S. House of Representatives, by a vote of 420-3. The act will protect individuals against discrimination based on their genetic information when it comes to health insurance and employment. These protections are intended to encourage Americans to take advantage of genetic testing as part of their medical care.
Although I'm dying to use the service I'm not giving $999 to fund socialism >(
Liberty dollar seized ?
Submitted by Arthur B. on Thu, 2007-11-15 15:17.There is of piece of news that has been circulated since this morning on the Internet,
http://www.rabidquill.com/?p=17
(excerpt)
I sincerely regret to inform you that about 8:00 this morning a dozen FBI and Secret Service agents raided the Liberty Dollar office in Evansville.
For approximately six hours they took all the gold, all the silver, all the platinum and almost two tons of Ron Paul Dollars that where just delivered last Friday. They also took all the files, all the computers and froze our bank accounts.
We have no money. We have no products. We have no records to even know what was ordered or what you are owed. We have nothing but the will to push forward and overcome this massive assault on our liberty and our right to have real money as defined by the US Constitution. We should not to be defrauded by the fake government money.
But to make matters worse, all the gold and silver that backs up the paper certificates and digital currency held in the vault at Sunshine Mint has also been confiscated. Even the dies for mint the Gold and Silver Libertys have been taken
While I immediately thought of a hoax, I checked their yahoo group and it looks real, their order webpage is down and no one answers the phone. There is the possiblity that this is real, or it might be a huge scam from the founder trying to steal the backing metals.
To be sure, I think that the liberty dollar is crappy, it relies on shady multi-level marketing tricks and their idea to create an implicit parity with the greenback is just retarded.
However
- this is certainly no ground for confiscation
- the same thing might happen to other forms of asset storage, bullionvault for example has a vault in New-York. While there is no easy pretext to crack on it, it is certainly a possibility.
What happened looks like the realisation a cranky libertarian paranoid dream, but it may actually be real. Scary.
An experiment among the grassroot Ron Paul supporters
Submitted by Arthur B. on Wed, 2007-11-14 09:54.After a few days of experimentation, I have finally been permanently banned from ronpaulforum.com .
I participated in two threads over there, both on the subject of immigration:
http://www.ronpaulforum.com/showthread.php?t=156865
http://www.ronpaulforum.com/showthread.php?t=144320
Some interesting conclusions I reached are
- for the average debater, a reductio ad absurdum is too complicated, it will confuse him into thinking you embrace the absurd conclusion.
- people believe immigration to be a privilege granted by the government
- people have a hard time making a distinction between immigration and naturalization
- people generally have a hard time following a sequence of logically constructured arguments
- Ron Paul supporters are trained to answer to socialist arguments, they're completely off when faced with libertarian arguments, it's fun (in a sad way) to watch.
I conclude with Mises
If you have to convince a group of people who are not directly dependent on a solution of a problem, you will never succeed.
Second amendment erotica
Submitted by Arthur B. on Sat, 2007-11-10 15:14.The right of hot chicks in bikini to keep and bear arms. Apparently it's a real show, not a fake... So there's a reality sports (sure it's all about sports) TV show featuring, hum girls and guns.
Behold:
Girls and Guns BTSUploaded by girlsandguns
Girls and Guns BTS
Uploaded by girlsandguns
www.toughsportslive.com/?page=ggHome
See also,
http://www.urbandictionary.com/define.php?term=Rule+34
HHH On the Simpsons and forced cancellation
Submitted by Arthur B. on Thu, 2007-11-08 09:51.Yesterday, I wanted to watch the Simpsons on TV. The Simpsons is a very popular show and no doubt that in a free anarcho-capitalist society people would still watch the Simpsons. However, on that same day, the United States decided to execute 5,000 anti-war protestors. This act of barbarism was featured in the news all the evening, and the broadcast of the Simpsons was cancelled. In a free society, there is no government to execute people, thus it is unlikely that the news will spill over the evening cartoons. As long as government mandated killing of protestors continue, it equates to forced cancelling of the Simpsons and therefore the network channel should not be free to change its programming.
Aliens against egalitarianism
Submitted by Arthur B. on Tue, 2007-11-06 13:53.A lot has been written on the evils of egalitarianism, my point is not to reaffirm it but rather to forge convincing anti-egalitarian bullet. Next time you are spoiling a friendly dinner party by arguing against any form of welfare system, opposing egalitarianism and its bastard child opportunity-egalitarianism, here's some ammo. I don't recall reading that argument elsewhere, it's not very original but the analogy is good as few will extend egalitarianism to it.
Assume we discover a peaceful planet populated by intelligent humanoid creatures. Through the marvels of convergent evolution, they are actually very similar to us, only they have 100 years of advance in almost everything (a ridiculous drop considering the length of evolution). They have much better machines, better education, quality of life, better health care and so on.
According to the defender of egalitarianism, the very day we discover this planet, every birth of human child suddenly become "unfair" as the unprivileged human child doesn't have the same chances in life as the alien child.
Had we not discovered the planet, we should not consider the birth unfair, but as soon as we barely know of the existence of that civilization, the whole meaning of fairness should be altered to reflect that any birth of a human baby is unfair.* After all, what did the alien babies do to deserve a better life? Nothing!
That alone undermines I think the whole idea behind egalitarianism. In order to finish (and definitely kill the mood of the party):
Since the alien are privileged it is only fair we force them to share their wealth, thus we should build a fleet, invade their planet and take their resources, machines and most valuable things back to earth.
On further thoughts, that argument is most efficient against someone defending equality of opportunities rather than pure egalitarianism. A pure egalitarian would claim the only "unfair" thing us the alien's attempt to prevent us from grabbing their ressources, the opportunity-egalitarian however must consider that being born human suddenly becomes unfair.
* Yes, that is the rothbardian view of egalitarianism as a revolt against nature, nothing new here but the framework.
Tobacco Vs Children
Submitted by Arthur B. on Thu, 2007-10-04 10:33.
http://news.bbc.co.uk/1/hi/world/americas/7026454.stm
US President George W Bush has vetoed a bill to expand a children's healthcare insurance scheme, after it was passed with a large majority in the Senate. Mr Bush argues it takes the programme beyond its original purpose of insuring children from low-income families. The vetoed bill proposed higher tobacco taxes to provide an extra $35bn (£17bn) to insure some 10 million children.
A small tax on the evil tobacco smoker against poor children in need of medical care... can't possibly make it more emotional. This is probably a bad political move so I tend to think it is principled. For once, kudoz to Bush, it takes lot of balls to veto such a bill.
Good faith execution of contracts
Submitted by Arthur B. on Fri, 2007-09-28 20:27.A lease contract for an apartment has a provision by which any late rent will trigger a $50 late fee, the rent is around $1500. On a given month, the tenant sends a check but he forgets to add the cents in the check, therefore 75 cents are missing to the monthly payment. The next month, the landlord asks for 75 cents and $50 of penalty.
Such a behavior can be rational from the landlord in the case of rent control, where his reputation does not negatively affect the price of the rent.
Assuming this silly (and purely hypothetical, honestly I swear) situation applied to you, would you feel justified in saying this is abusive or would you bow to the contractual rule?
The moral ambiguity of default
Submitted by Arthur B. on Fri, 2007-09-07 12:50.With the subprime crisis raging, there are many stories of people walking out of their mortgage. It also seems that it is not uncommon among young people to walk out of a mortgage before the first payment thus getting one year of free rent (credit re-building apparently not being an issue at a young age).
In a free and just society, there cannot be compulsory personal bankrupcy law. Maybe debtors buy as an insurance the right to default, maybe they don't and they go to debtor's work camp. In the U.S. the state allows anyone to declare personal bankrupcy.
According to two different analysis of the law I reach two opposite conclusions.
a) Defaulting on a debt is theft, the creditor should be able to sue and settle an agreement where the debtor repay some of all of the debt (through total liquidation of assets, work, etc). This is prevented by the governement, thus creditors charge a higher interest rate, covering default risk as a defence against this agression. The higher rate does not legitimate defaulting, much like the shop raising its prices to account for stolen goods does not justify shoplifting (this is Rothbard's position).
b) The State force creditors to bundle their service with a default insurance. When someone contracts a debt, he his buying the insurance as well through higher interest rates. Defaulting (or walking out of a mortgage) is merely exercising an option that was bought.
This same ambiguity can be applied to many different laws, such as zoning laws. If I bought a house close to a school, is building a peep-show ok because zoning laws are coercive, or is not okay because the State prevented me to buy the right-to-build-a-peep-show from the original owner (who died with no heir thus destroying that right)
So, is walking out of a mortgage a rational arbitrage or a fraudulous theft?
Political trends among the tech crowd
Submitted by Arthur B. on Tue, 2007-08-21 11:30.Slashdot currently has a poll on political affiliation. Most people are either liberal or libertarian. Anarchists (which in the current context probably implies leftist) communists and socialists outnumber conservatives and moderates.
There's a somewhat famous article from 1992 I came across in the past highlithing a few reasons why programmers can make good consequentialist libertarians, it's very worth reading.
This coin has two sides though. I think the left part (except the anarchists whom I suspect to be merely being anti-conformist) are mostly people who believe in central planning, it may be the dark side of a computer science mentality, people can be organized as data and with the right "program" society can be organized. They are the typical positive constructivists described by Hayek in "The counter revolution of science".
Some interesting posts in the discussion following the poll, healthcare seems to be a huge issue.
Cultural gender imbalance
Submitted by Arthur B. on Mon, 2007-08-13 12:22.Dave comments on "liberal eugenics" about the issues of being able to chose the sex of one's children.
Currently we use "biological planning", but what would market production of babies be? Assume everyone could chose the sex of their children.
As a marxist would put it, it is men's "gender interest" to produce women and women's interest to produce men... indeed theoretically more women than men benefits men whose value increase and vice versa. Not quite true. First of all, it seems that wanting to produce men is a general bias... if cultures are patriarchal (gosh now I sound marxist AND feminist), it is indeed an evolutionnary advantage to breed boys that will spread your culture. Second, it seems that in societies with a deficit of women, rather than women's value increasing women tend to be treated more like commodity... if the women are no self-owners their scarcity is more of a curse. It is possible that with increased gender imbalance these tendencies invert, but it is also possible to imagine that the majoritarian gender gets power and control thus creating an incentive to increase the imbalance.
These arguments ignore the multiplicity of cultures, and surely different culture would have different gender ratios. Which culture would be at a reproductive - hence cultural - advantage thereby spreading this ratio? My guess is that it would be a polygynous society. There are two reasons for this.
- Biologicaly eggs are the limiting reagent not sperm, it is currently a waste to raise so many males
- Less men and more women means less deadly competition among males. Since males are naturally more violent is is more efficient than the opposite.
Why didn't such a ratio evolve biologically? Well it may give a specie an advtange over another specie but it does not give a reproductive advantage to an individual within a given specie. If I live in a 50/50 society, having more daughters will not guarantee me more grandchildren therefore the mutation is lost.
In the distant futures, with biotechs, we might live in such a society (but let's not be utopians).
Mafia loans
Submitted by Arthur B. on Tue, 2007-07-24 12:44.And by mafia I mean the Hollywood version mafia... I don't know the mafia, but I've seen movies where it was featured prominently. From what I gathered watching movies and TV I noticed a few things
- The mafia makes cash loans
- The rates are insanely high
- The default probability is high
- The recovery rate is close to 100%
This strikes me as odd... the default risk is essentially 0 to the mafia because even if the guy wants to default, they always manage to get the money back, by using kneecaps as collateral. In this case, why the high rates? There are a few possible explanations all of which are linked
- There are costs incurred in recovering the money, paying goons, bullets, renting huge empty warehouses with a single chair, fixing the chainsaw once in a while... True, but one would assume the mafia has so much dissuasive power no one dares to default *, keeping the costs fairly low. ( *which contradict the high default observation from movies).
- The mafia maintains a coercive monopoly on underground lending. The bank won't lend you money to bet on a fixed boxing match but the mafia will and there's only one boss in the area.
- There is a huge demand for mafia loans but the mafia only has so much money. This means the mafia cannot really borrow from the bank to meet the adequate supply.
- Mafias have humongous returns on their ventures and therefore will only lend at very high rate. (This also means the mafia cannot borrow from the bank)
Any thoughts ? What about the actual mafia ? Could they fix the subprime loan crisis the medieval way ?
Perverting isonomy
Submitted by Arthur B. on Tue, 2007-07-10 13:10....or as I call it, the fallacy of isodomy (in poetic fashion)
Isonomy is a great thing, it says everyone should have the same rights. If everyone has the same rights, and since rights can't infringe on one another then isonomy roughly boils down to natural rights (there are degenerate solutions, for example it's possible to have isonomy where no one has any right at all). Well isonomy is more about law than rights, everyone should face the same rules, but if we apply isonomy to the law making process itself, we land back on our feet with isonomy as equal rights.
One may or may not agree with the possible equivalence between natural right and isonomy... that's not really what I want to discuss. There is a tendency among many people, including libertarian, to justify coercition based on a false view of isonomy.
It generally goes like this. A group of people X is being agressed with the exception of individual x. Isodomy claims that x should be facing the same laws as X and therefore should be agressed. There is a long list of example of the isodomy fallacy :
- Calling for the end of "subsidies" to a given industry / sector, even though these subsidies are really tax-cuts, immigration visas, etc. Only taxation should be opposed. Any "distorsion" created in the market is the fault of the State alone, it is not a legitimate motive to tax a company.
- Saying that "all immigrants should face the same waiting periods" (implying the end of "privileged" immigrants who face shorter waiting period) (Ron Paul)
- Claiming that a flat-tax is a "fair-tax" because everyone faces the same rate.
- Historically, allowing women in a government :o) (ok, extreme case here, but really no one should)
I coined the world isodomy from a parable I once wrote on the subject, explaining how being spared by a rapist was hardly a privilege. It's definitely not subtle but I think it conveys the message pretty well, please spread the word :)
From nomadic community to dynamic nation, hurting the state
Submitted by Arthur B. on Mon, 2007-06-25 10:11.What is the most effective way to hurt the state? Various people have various answers to this question, it can be direct action, politics, grey market economy, education, lobbying etc. In my opinion, one of the most effective way to hurst the state is to use competition, to migrate from one place to the other. Not only can you enjoy more freedom this way, you are also pulling out your skills, your capital, your tax money out of the system you wish to attack. It is very effective. I live by my standards and emigrated from France to the US. Ok, New-York city can be as socialist as France is, but I still get better wages and enjoy comparatively more freedom. In the recent years, France has known an exodus similar to the losses of World War I. Highly skilled people (who enjoyed free education) are leaving, wealthy people are leaving... they export masters and phds and import welfare receivers... when you export assets and import liabilities, bankcrupcy is near. OK, I made my point, moving is beneficial for you and hurts the State. Well it's not necesseraly beneficial for you, otherwise everybody would move... so what's keeping people from moving? There are many reasons, work permit is one: it can be very hard to obtain permission to work and live in a foreign country... few things can be done about that. There is also family and friends. People spend time during their lives to build networks of friendship, and they are not ready to live that behind so easily. Social recognition is also valuable and can be lost when emigrating. Last but not least, it can be hard to leave your job.
I think there is a way to attenuate this difficulties and make moving less painful, less costly. The key idea is to create a mobile community. A community of people enter into a covenant to agree to move from one place to another when decided through a standard procedure (say voting for example). They befriend each other, create ventures together, even families. The fewer the people, the more difficult it is to have an autonomous community (in term of social links), the more the people, the more difficult it is to enter into a covenant and make everyone move. I believe however that mobile communities of a few thousand people are possible. They can even incorporate which makes it easier to work in foreign countries. Since they are incorporated, wages inside the community can be paid indirectly with dividends which might be a way around income tax in many countries. There is also a possibility of influencing local politics. Think of it as a kind as a movable "free-state-project"... Of course, the purpose is not to move 10 times a year, and since politics can be slow, it may not even be necessary to move within a 20 years or so, but creating a strong community sense may enable the community to move costlessly over the generations to te freest places available. As the community evolves it can grow bigger and stronger (imagine a million people) it then becomes more and more influent : it could negociate taxes directly with governments before settling somewhere, it could even overpower a small state and decide to ignore it.