Technocracy

When I was a teenager trying to read all the books in the Nashville Public Library, I encountered some real doozies. One was an almost certainly self-published item called Behold! The Circle Squared Beyond Refutation by Heisel and Faber, 1934. As you might guess, I had to look it up, and I was mighty surprised to see that it’s been facsimile reprinted by something called the “Sacred Science Institute” that seems to publish all sorts of weird arcana.

Another real gem was The ABC of Technocracy, by Frank Arkright. The word “technocracy” means “rule by experts” and a lot of people were talking about it near the beginning of the 20th Century, people like H. G. Wells and Thorstein Veblen. But by the time the Great Depression rolled around, it had turned into a crank economic theory, holding that the problem was that the value of money fluctuated (which is mostly true), so it should be instead based on something whose value didn’t fluctuate (which is probably impossible). The Technocracists decided that money should be based on energy, with the basic unit being the erg.

I think I recall a mention of Technocracy in Martin Gardner’s Fads and Fallacies in the Name of Science but there’s no substitute for the pure uncut stuff. What I mostly recall from The ABC of Technocracy is just how tired I got of the endless repetition of the slogan, “an erg is always an erg.” (And you thought you got tired of the phrase “Guns, Germs, and Steel,” in the PBS series). Yes, from a physics standpoint it’s sorta kinda true that the erg is invariant, but from an economics standpoint, context still matters. An erg of electricity in my toaster is still more valuable to me than an erg of heat on my roof.

I’m guessing that the notion of a unit of energy as money came from the labor theory of value, the notion of Ricardo (and Marx) that all economic value is derived from human labor. Confuse “labor” with “work” and confuse the latter’s meaning in economics with it’s meaning in physics and bob’s your uncle.

Of course, even in physics, “work” isn’t the same as “energy,” since thermodynamics limits the amount of work that can be extracted from any given source of energy, but that’s hardly the most egregious error in the mix, is it?

And jeez, why the erg? I mean, that’s a tenth of a microjoule, and a joule is much closer to human scale, one watt-second, enough to lift a kilogram about tenth of a meter. An erg will lift one microgram one centimeter. What good is that? It would be like trying to base your money on micrograms of gold. That’s too small to even see.

Gold, at least, has some advantages as a commodity basis of money. It’s not a consumable, for example. It lasts more or less forever. It’s nice and compact, so it’s easy to store. It’s pretty, so you can always make a necklace out of it.

Of course any commodity-based money puts your money supply at the mercy of changes in relative commodity values. Gold in California resulted in a huge local inflation (e.g. the legendary ten dollar eggs), followed by a national inflation, which was then followed by the inevitable compensatory deflation. It was such a joy to be a commodity producer in the 19th Century, though I admit, it did beat being an inhabitant of Central America in the 16th Century.

The essential error here is confusing what are called “institutional facts” and “brute facts.” The former depend upon human institutions, like the value of money, the location of a state line, the name of the President of the United States, or, indeed, the existence of the Office of President, or even the United States itself.

By contrast, water freezing is a brute fact, as is the weight of a certain volume of gold, or the conversion of one form of energy to another. All proceed untouched by human hands.

There’s a related error here, however, and that is the notion that brute facts are somehow superior to institutional facts. One can make all sorts of conjectures and claims about “objectivity” vs “subjectivity” and the nature of human institutions and the physical world, but I rather suspect that a big part of the attraction of Technocracy and its erg-based money was the idea that scientists and engineers would run things better than politicians, bankers, or even economists. After all, energy is better understood than money, right? So why not use energy as money?

And there lies the error in the idea of technocracy in its more general meaning, “rule by experts.” It has at its center certain prejudices about what constitutes valid expertise. But a politician is an expert in his own field; if you don’t believe me, watch what happens if you try to get any given physicist elected to Congress. Everyone believes that their own job (or class, or race, or political philosophy) is more difficult and more important than the next guy’s, so why not try to gimmick the system to make sure that the “right” people run things?

And there’s no idea that is so loopy that someone won’t re-invent it:

Quoted in The Economist’s View:

A new kind of money, by Julian Darley, Alternet: The decline in the availability of cheap energy is likely to be accompanied by an equally ominous possibility of world financial meltdown. That we are facing both of these threats now is not an accident: energy and financial stability are intimately linked. I believe the solutions for dealing with these twinned threats are equally linked. To build an environmentally sustainable, monetarily stable world, we need to create an economy in which locally produced energy provides the backing for local currencies. ...

Without Delay

In reel-to-reel tape decks, there is a record head and a play head and they are separated by a small gap. The play head comes after the record head, and the record and playback circuitry are separate, so it's possible to monitor a tape recording more or less as its being recorded, albeit with a small delay.

The small delay was often used to produce an "echo effect" on recordings and in the studio. For the echo effect, the tape output was mixed with the line in and patched back into the tape input. Depending on the tape speed, the echo delay could be controlled, and the gain between output and input controlled the echo strength. A gain of greater than 1 produced the "infinite echo" that rapidly became a sound pulsation with its frequency centered at the maximum frequency response of the system.

One practical joke that was often played at radio stations was to hook up a tape deck to generate a delay, then feed the announcer's voice back to him with a fraction of a second delay. I was once trying to get an echo effect on my voice and I found that I'd practical joked myself; I had to remove my headphones in order to continue. The delay makes it almost impossible to speak. It's hard to explain why, but the experience is compelling.

In a course, Voice and Image Processing, that I took at RPI there was a similar demonstration with video. A ball was placed behind a small barrier, and a video camera showed the ball on a TV screen. Normally, you could just watch the monitor and reach behind the wall to pick up the ball. But with a half-second time delay, such a seemingly ordinary task became almost impossible. You soon found yourself reaching for the ball, overshooting, then overcorrecting, then overshooting, etc.

Such a thing is called a 'limit cycle' in systems control theory, but it's pretty eerie to be a part of a limit cycle and unable to break out of it. Eventually, you just stop moving entirely, then veeeeerrrrrrrryyyyyy slowly move your hand to get the ball. It could literally take 30 seconds or more to do that simple task.

There's a bunch of mathematics in systems theory that deals with time delay and "controllability." The upshot is that if you add enough time delay into a control system, it becomes uncontrollable. Your ability to affect events is slower than those events. Imagine trying to pick up the ball behind the wall if it is moving erratically.

One of my favorite jokes is about the economics professor walking through the Quad with his students. One of his students says, 'Look, there's a ten dollar bill on the ground.' The professor replies, 'Can't be. If it were, someone would have picked it up already.'

For a long time, economics was dominated by what are called "equilibrium calculations," models of an economy under steady state conditions, no shortages, prices in equilibrium, all the usual assumptions. Those are the simplest conditions to model and to easy calculate, so they were the first results. Evolutionary biology tended toward the same simplifications, for the same reasons. The advent of the computer, and the growing access to massive amounts of computing power changed the landscape, but it took a while for theoretical models to catch up to the improved tools. In fact, the catch-up is still going on.

I had lunch with a colleague a while ago, and he asked my opinion about global warming/climate change/greenhouse gases. I told him that it was pretty obvious that the signal was out of the noise, the whole process was clearly underway, and was he surprised at this answer? He noted my well-known contrarian streak. I observed that James Hansen hadn't made a wrong prediction since 1988, and I wasn't going to challenge that sort of success.

In truth, I was a little late to the global warming party, partly because of that contrarian streak, but also because I was focusing on the science and not the policy. I was also perhaps yielding too much to my own libertarian leanings. So let's review why I should have been convinced sooner than I was, at least on the policy issues.

From the standpoint of political philosophy, one fact should be paramount: if we do not have a right to the air we breathe, then human rights, including property rights, are meaningless. And that should include the right to have that air remain unaltered. You shouldn't have to prove that harm is being done to you, any more than you should have to prove that people are harming you in order to not want a stream of trespassers walking across your lawn.

Now any given individual has no real impact on the contents of the entire atmosphere, although it's certainly possible for an individual to affect your current breathable air, and you generally have recourse. If someone smokes in your house and you don't like it, you can throw them out. If the neighbor's barbecue is noxious, you can usually complain to some agency, and I, for one, do not consider that to be an infringement on your neighbor's rights, though your neighbor may disagree.

But group behavior can, and does, affect urban, regional, and global resources. The industrial world's propensity for fossil fuels has had an undeniable effect on the concentration of some important trace gases in the atmosphere. Regulating group behavior is not the same as regulating individual behavior. Regulating corporations or national economies is not the same as regulating individuals, and giving free license to groups and organizations reduces individual freedom.

In the case of global climate change, regulating group behavior is essential. Actually, of course, group behavior is regulated. It just happens that it is regulated by those who rule, manage, control, and lead those organizations, the corporate boards, the CEOs, the congresses, presidents, agency heads, judges, and lawyers whose fingers are entwined with the strings of authority.

But authority and control are meaningless if the system is uncontrollable. The global climate system takes decades, if not centuries to equilibrate to any given greenhouse gas level. Glaciers take even longer to melt or rebuild. And the human political process likewise has major delays built into it.

There is a thin straw to clutch at, called feedforward in control theory. Using feedforward, you attempt to compensate for feedback delays by anticipating the system response. But feedforward control is seriously limited by your understanding of the underlying system. Without that understanding, feedforward is useless.

In regulatory policy, science is the feedforward control signal. Science, however, is currently under political attack from numerous quarters. And big money is being spent to target climate research in one part of that attack.

We're going to lose south Florida, and, my colleague suggests, most of Louisiana and Mississippi. California will acquire a new inland sea. Much of Bangladesh will vanish, as will plenty of islands in the Pacific and Indian Oceans. The fact that these things are going to happen long after you and I are dead does not make the future more palatable. It makes it more inevitable.

Noted, with Previous Observations

Another example of neo-colonialism in America:

Like many immigrant families, he notes, his parents took education seriously. His brother, now a property developer in Britain, went to UCLA; he went to Oxford, where he earned a bachelor's degree in philosophy, politics and economics, going on to the London School of Economics for a master's degree and earning his doctorate from Cornell University's department of development sociology .

"At home, we had nutritious food, mostly Indian food," he says. But soon, long working hours and busy schedules made convenience foods appealing. "Sometimes we ate in the car," he admits.

"When I explain to people outside the U.S. that 20 percent of American fast-food meals are eaten in cars, they are absolutely gobsmacked," Patel says. "They ask me, 'Is it because Americans love their cars so much?'

"I explain that Americans are working so hard in order to access the things people in other industrialized nations take for granted - health care, education, a pension, a living wage," he says. "And increasingly, communities of working people can't afford to live where they work. They're holding down two jobs - we shouldn't be surprised that people are forced to eat fast food in their cars."
--Raj Patel, author of Stuffed & Starved: The Hidden Battle for the World Food System

A Joke, a Variation, then Aphorisms

Joke:

An economist and some students were walking on the campus and one of the students says, “There’s a twenty dollar bill on the ground.” The economist replies, “That’s impossible. If there were, someone would have picked it up already.”

Variation on joke:

Person #1: You know, they get health care in Canada that's just as good for less money.

Dr. Pangloss, the Doctrinaire Believer in Economics as Revealed by Someone or Another: That's impossible. If that were true, I'd have already moved to Canada.


Some Aphorisms

"The problem with people who have no vices is that they tend to have some pretty annoying virtues." -- [paraphrased] Elizabeth Taylor

“What if this weren’t a hypothetical question?” -- Unknown

"It is difficult to get a man to understand something when his salary depends upon his not understanding it." - Upton Sinclair

A man goes to a psychiatrist. The doctor says "You're crazy" The man says "I want a second opinion!" "Okay, you're ugly too!" – Henny Youngman

There is nothing as permanent as a temporary fix.

A hostage to fate -- the first time I heard that phrase, I had no idea what it meant. Now I do. Fate could call me on the phone anytime and say, "I have your granddaughter," and I'd say, "I know you do," and Fate would say, "What would you do to get her back?" and I'd say, "Anything," and Fate would say, "It doesn't work that way." – Jon Carroll

[W]hat exactly is postmodernism, except modernism without the anxiety? – Jonathan Lethem

“Someone stole my identity and I feel sorry for him.” – T-Bone Burnett

“If you’re so poor, how come you’re not dumb?” – Merle Kessler

There are no atheists in foxholes; even atheists pray to the bombs overhead, that they may fall upon their fellows and not upon them.

I cried because I had no shoes, 'till I met a man who had no feet. So I said, 'You got any shoes you're not using'? – Steven Wright.

"I cut my finger. That's tragedy. A man walks into an open sewer and dies. That's comedy." Mel Brooks

Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally – J. M. Keynes

The plural of anecdote is conjecture. – B. Sano

A man’s reach must exceed his grasp, else what is “meta” for?

Two psychiatrists meet in a hall. One psychiatrist say to the other, “Hello.” The second psychiatrist thinks to himself, “Hmm. I wonder what he meant by that?” – old joke

"'Either way is fine with me' gets me though a lot of situations." Randee of the Redwoods (Jim Turner)

"Build a man a fire, and he'll be warm for a day. Set a man on fire, and he'll be warm for the rest of his life." from Jingo by Terry Pratchett

“Versatility is a curse; one-dimensional people make all the money.” – Jonathan Winters

Half empty or half full depends on whether you’re drinking or pouring.

Tough love is always about the tough, never about the love.

A coward dies a thousand deaths, but the first nine hundred and ninety nine aren’t that big a deal.

If a lizard lays an egg that hatches a chicken, is it a lizard egg or a chicken egg?

It is unfair to ask someone to save the world before they have learned to save themselves.

Hot as the Sun

A few weeks ago, digging around in a storage box that had mysteriously surfaced, I found one of my old notebooks, and when I say old, I mean old, dating back to high school. Amid the random detritus, (and no, I'm not going to get very specific; the lad that was I deserves some privacy of his flailings) there appears a sketch of a parabolic trough, with a heat absorbing pipe at the focus, and little explanatory notes about "salt water" in the pipe, etc.

At the time, I was interested in desalinization, thus the salt water part. I don't know if I swiped the parabolic trough idea from somewhere, or if I came up with it on my own. If it was the latter, I'll note that it's both a fairly obvious idea, but also pretty clever for a teenager.

Photovoltaic cells and panels get the really sexy press, and I'm cool with that, because direct light-to-electricity is very sexy. We're getting very close to the point where photovoltaics are competitive with other methods of electric power generation, and I've already mentioned that covering a hybrid automobile with them could reduce average fuel consumption by as much as 25%. The "pluggable hybrid" is clearly the technological path of least resistance, albeit one that has a lot of political resistance because of its very virtues. I'm not sure how U.S. automakers became captive to the oil industry, but the evidence for it is pretty stark.

Still, photovoltaics are not yet competitive with oil/gas/coal generated electricity. Wind power essentially is competitive, but there is the old tradeoff between capital costs and operating costs (including fuel costs, which are basically zero for wind and solar). More on that in a bit.

It so happens, however, that the use of mirror-concentrated solar energy to generate electricity from standard steam-type turbines is competitive with fossil fuel generated power. Moreover, this isn't some back-of-the-envelope or even "demonstration plant" calculation. This is based on solar thermal electricity (STE) plants that have been generating power for decades. There is a 354-MW Solar Energy Generating Station (SEGS) in California’s Mojave Desert, which is still the world’s largest solar power plant, and it's been around for over 20 years. It uses parabolic troughs that focus heat onto tubes containing synthetic oil, which is then used to superheat steam for turbines.

The Nevada Solar One plant, for example, went on-line in June, 2007 near Boulder City, Nevada, covering a 350-acre site with 760 parabolic concentrators. Solar One is a 64-W plant, built and owned by Solargenix Energy, a subsidiary of Spain’s Acciona Group, will sell electricity to Nevada Power Company and Sierra Pacific Power Company under a 20-year power purchase agreement. It has enough thermal storage power such that it's expected to be able to meet 98% of it's baseload requirements, meaning that it will use gas turbines for backup for only about 2% of its power generating needs. The SEGS plant needs backup power for as much as 25% of its operation.

Notice the origin of the Solar One plant, however: Spain. Spain is currently the World Leader in STE, despite being at the same latitude as New England. But Europe has made high level policy commitments to renewable power generation, while the U.S. has made high level policy commitments to using military power to "secure" oil resources, and denying that atmospheric CO2 buildup has climate change implications.

Hi Ho.

Another method of STE collection is the "solar tower" design, which puts a bunch of mirrors that focus the light onto a tower containing a molten salt. The large thermal inertia of such a system also allows near continuous power generation.

Nationally, the best places for "harvesting" solar thermal power (and solar power generally) are in the Southwestern states, California, Nevada, New Mexico, and Texas. California would be doing a better job of it were it not for the fact that the California State budget requires a 2/3 supermajority to pass each year, and so is perennially hostage to the California Republican Party, as deranged a crew as I have ever encountered. The CRP is basically for tax cuts and prisons, as nearly as I can tell. I'd quit the Party if I thought it would do any good, but all I'd get for my trouble would be that I wouldn't get their campaign literature any more, and really, someone needs to keep track of these folks.

Anyway, to return to the meat of the matter, the pure economic case for STE, as well as wind power, photovoltaics, and even nuclear power, is complicated by two factors. One is that "deregulation" of the power industry over the past several decades has put its organization and management into such turmoil that no one in authority is willing to take any chances on things like trying new power plant designs and such. All the risk-taking is centered on finance, trading, and how much those at the top can slip into their own pockets without being sent to jail.

The second complication is that the price of fuel over the past several decades has fluctuated wildly, as has the cost of investment capital. All of the renewables (plus nuclear) substitute high initial capital expenditures for lower operating costs, low to zero fuel costs. On the other hand, fossil fuels (and nuclear power) have fairly high "externalities," which is econospeak for "getting someone else to pay part of the price." In the case of fossil fuels, the externalities are such things as local pollution, global climate change, and foreign wars.

In the grand scheme of things, "capital investment" can be used to build things that actually create more goods and services, or it can be used to build things that siphon money from one set of pockets to another. A road, or example, provides a service, while a toll booth on the road pulls money from the pockets of motorists. My own dark suspicion about the current state of the U.S. economy is that it is concentrating on building toll booths rather than new roads.

Spending money on such things as STE power plants could reduce U.S. dependence on foreign energy sources, reduce the environmental damage of mining to land and water (at some cost to desert ecosystems, I'll stipulate that). It could, in short, create useful capital rather than mere "transfer payment" capital.

Which, again, may be one of the reasons why some people are against such things.

Capital vs. Money

I've just put Mark Thoma's Economist's View blog on my blogroll, which is long overdue, as I've linked to discussions there with some frequency. One interesting thing is that someone recently referred to the people there as “left wing”, despite the fact that a goodly number of them, including me, would have been called "conservative" before The Movement took over. I continute to comment on “right wing” folks, as so many of them are lost in libertarian utopianism, or else they feel constrained to follow some sort of party line, presumably because that’s who pays the bills. In matters of this nature, it's important to remember the quote from Upton Sinclair:

"It is difficult to get a man to understand something when his salary depends on not understanding it."

There's just been a little comment thread on Economist's View about the opacity of the econojargon use of the word "utility." I've also already quibbled with the economics jargon inherent in the phrase "rent-seeking behavior," and what I'm about to say is another part of the general critique of how words are used, or mis-used in economics.

Generally speaking, I find that economists don’t often distinguish between money and capital. For example, they write about flows of international capital, when they’re actually talking about money flowing from one country to the other. Sometimes this makes it hard to get at the actual real economics of a situation. For example, it is often said that the U.S. is importing a huge amount of capital from China. On the other hand, a financial instrument is also often called “capital.” Since what is actually happening is that the U.S. is importing a lot of consumer goods from China (though China is actually adding only marginally to their value, having itself imported most of the goods, with only the final assembly being done by Chinese labor), and paying for those consumer goods with U.S. Treasury bonds. Now consumer goods are rarely called “capital” while bonds often are, so it looks like the “capital flow” is going the other way. But actually, neither part of the flow looks much like what is often called “capital,” i.e. something used to assist in the production of other goods and services.

Then there is the matter of “transfer payments.” This is a phrase that seems to have been invented to describe certain sorts of governmental payments, ostensibly those without a corresponding exchange of goods and services. Often, Social Security or Veteran’s benefits are named as an example. Huh? Both of those, in fact, require an earlier service (paying Social Security taxes or serving in the military). On the other hand, paying interest on the Federal debt is not considered a transfer payment, despite the fact that on a cash flow basis, it removes money from taxpayers, and transfers it to bond holders. One can argue that there was a previous exchange for the bond, but that argument isn’t used for Social Security, is it?

If you look at the details, there is a pretty clear distinction that can be made between a sort of “capital investment” that pays returns by actually increasing the amount of wealth in the world (a factory, an apartment building, a road, someone’s education), and one that merely gives someone the right to a future transfer of money. Moreover, you’d think that libertarians would be sensitive to the notion that some of those monetary transfers absolutely require governmental power and some do not. A government bond is intrinsically based on the taxing power of government, for example, while a secured personal loan does not. (Obviously some loans require government as an enforcer of contracts, but that’s usually considered kosher in libertarian circles, and besides, something like pawning your watch doesn’t even need that).

Now it so happens that most intellectual property requires a pretty agressive government policy. IP is basically a government-mandated monopoly, and a the enforcement of IP can get pretty obtrusive, such as raiding warehouses, issuing subpoenas to third parties, etc. It’s not something we’d put up with without a pretty hefty social return (the idea is to pay for the effort of creating IP in the first place, yes?), but a lot of people seem to view copyrights especially as some sort of “natural” property, and some of those argue for copyright in perpetuity. This is not the sort of mistake that Ayn Rand would make (and indeed, she did not).

There are some very good reasons for wanting to have a lot of “store of value” items around in an economy. Personal savings are a good thing, and I do not want to be poor in my old age. I also think it’s a decent thing to have a certain amount of personal, family wealth passed down from generation to generation. Still, having such things is an invitation for the “accumulation of great wealth,” and I don’t think that the existence of truly massive multi-generational fortunes has much to recommend it. The history of it doesn’t look that good, frankly, and I’m included the effects on its supposed “beneficiaries.”

In other words, I’d like to see some more attempts by economists to separate “productive” investment from “transfer payments.” Currently, I don’t see much effort being made to even make the distinction. I understand that it’s a hard problem, but that’s no excuse for pretending that it doesn’t exist.

Rainmaker on the Flood Plain

Sometimes he's hitching a ride in a freezer or appears as a mist
He's also been known to introduce himself as a scientist
He could be the retarded son of an old woman with
Seven fingers on each hand
'cos I know I reckon, he will come when he's beckoned for

Rainmaker's coming
Rainmaker's coming
Rainmaker's coming to soak us with water
To soak us with water
--Rainmaker, Sparklehorse

Rainmakers were big after the Civil War. The “Great American Desert,” east of the Rockies was renamed the “Great Plains” and the states of Kansas, Okalahoma, Nebraska, etc. were filling rapidly. The slogan “rain follows the plow” seems to have originated amongst climatologists, but it was rapidly employed by the railroads, who owned vast tracts of land on the Plains and who also stood to benefit from any trade generated by farm communities that were established.

Of course rains doesn’t follow the plow, and the Plains region is subject to periodic droughts. Eventually farmers tapped into the Ogallala Aquifer, and that’ll do them for another few decades, until a geological age’s worth of water is used up. Then we’ll be back to the situation those first farmers found themselves in, though presumably with a lot more tech.

The late 19th Century rainmakers tended to use cannons a lot. That fed into the lingering belief that cannons caused rain; it certainly must have seemed like that to Union soldiers who’d never seen Deep South weather before. And if the rainmaker got lucky, some rain did come during his brief tenure in whatever small town had hired him. Then he looked like a hero, or maybe even a god.

But I started this dance and a storm kicked up
The sky went black from coast to coast
It was too late to stop - it was too late to pray
I had summoned down the Holy Ghost
Oh the searing wind and the clouds of dust
And hell came raining down
What came out of me and the powers that be
Was the last of that one horse town
--Rainmaker, Kansas

There were, of course, stories of rainmakers who’d been too successful, and sometimes floods do occur out on the Great Plains. But the term “Rainmaker” has come to mean the Guy With the Mojo, the one who brings business into the consultancy, the law firm, or the accountancy. In other words, the guy who does the Marketing.

The story goes that Orville Redenbacher’s first attempts to sell his new hybrid popcorn were not successful. It was called RedBow, after Redenbacher and his partner, Charlie Bowman, and it was more expensive than regular popcorn. An advertising/marketing consulting firm suggested that Orville Redenbacher’s Gourmet Popcorn was a much better name, and the rest is history.

Redenbacher supposedly once said, “My mother gave me the name 50 years ago, and she didn’t charge me $13,000 for it.” Yeah, but neither did she give him the wit to use it, either, though he apparently knew a good idea when he heard it. Or maybe Charlie Bowman did.

Rainmaker, rainmaker
The sky is gray just by the touch of your hand
Rainmaker, rainmaker
Make me some rain, make all my crops grow tall
--Rainmaker, Traffic (Winwood/Capaldi)

It does occur to me to wonder, though, what good is a rainmaker without farmers and a drought? In California, an unseasonable rain can ruin some crops. A rainmaker in the upper Amazon is just silly, worse than useless really.

There is that tendency to focus on the Star and not the surrounding planetary nebula. Well, sure, the Star is singular and there are so many lesser bodies surrounding it. But what happens if the town has two or three rainmakers? How about a dozen? At some point you hit diminishing returns. At some later point, it becomes actively dangerous.

When we listen to the Rainmaker story
Then we listen to a song that never ends
When we listen to the Rainmaker story
We're in the end only points on a scale for the Rainmaker
--Rainmaker, Vanden Plas, (Lill/Kuntz)

There’s a river named Stones River that runs near Donelson, where I grew up. Farther upstream, near Murfreesboro, it was site to one of the great battles of the Civil War (though I sometimes wonder if there were any minor battles to that war, at least to hear the locals hear about it). Between Stones River National Battlefield and Donelson sits Percy Priest Lake, created by Percy Priest Dam. The dam was one of the last hurrahs of the Army Corps of Engineers and the TVA, with an awful lot of the “benefit” in the cost/benefit ratio being “recreation.” Well, I do know guys who take their boats out on it a lot.

The flood plain for Stones River in Donelson is very obvious when you’re driving out Lebanon Rd. (Pike on the maps, but we always said “road”) toward Hermitage. A few years after the dam went up, construction began on a lot of houses, condos, and a country club in the flood plain. I imagine it’s safe enough; modern dams rarely break or overflow. Right?

I wonder what it's like to be the Rainmaker
I wonder what it's like to know that I make the rain
I'd store it in boxes with little yellow tags on everyone
And you can come see them when I'm... done, when I'm done
--Rainmaker, Matchbox 20

As I said, these days the Rainmaker is the marketing guy, or the star with the reputation that brings in the business. I’ve seen that up close and personal in the consulting biz, and it’s rarely the Rainmaker who winds up doing the work. Usually, that falls to the new-kids-just-out-of-school, because they’re cheap, so you load the contract up with their hours in order to be low bid. So the Rainmaker turns into just the Front, the public face of the firm, while the twenty and early thirty-somethings put in the all-nighters. Sometimes it works, and you get some real talent just out of school. Sometimes it doesn’t. Most of the time it doesn’t matter, because the study is going to get buried anyway. Sometimes the study is meant to fail; and boy, do they get pissed if it comes out with some real results.

More generally, what does it say about an economy that depends on marketing, the way agriculture depends on rain? I never believed John Kenneth Galbraith when he claimed that “demand” in the American economy was mostly artifice, with advertising and marketing being able to create consumption where none would naturally exist. I mean, you know, New Coke.

But a few examples of spectacular failures don’t invalidate the hypothesis as such. When all the social pressures are to live in the right place, drive an impressive vehicle, give the gifts, buy the toys, chase after that inevitable brass ring, it’s worth re-examining the question every now and then. It’s always worth wondering when the aquifer is going to run dry.

Me, I seem to have a talent for cool titles; whether or not what follows lives up to the advance billing is always in doubt.

You tell me we can start the rain. You tell me that we all can change
You tell me we can find something to wash the tears away. You tell me we can start the rain
You tell me that we all can change. You tell me we can find something to wash the tears.
--Rainmaker, Iron Maiden

Good in Theory

Leon Martell, of Duck's Breath Mystery Theater, once told me a story about a meeting he and some other scriptwriters had with a Producer. The producer had read their script and pronounced it "not good enough."

"Wait a minute," somebody said. "This script is better than the last three movies you made."

"Yeah," said the Producer. "But it's not better than the scripts for those movies. Movie making is a tough business. Scripts get cut for length, actors mangle the lines, somebody decides that a different ending will test better, all kinds of crap happens. I don't need scripts that are merely good. Those I have plenty of. I need scripts that are so good that we'll still have a good movie no matter how much I screw with it."

Honesty is pretty refreshing, huh?

Metrics Management sounds like a good idea. After all, management is about controlling an organization, and having data about how the organization is functioning should help in managing what is going on. That's basic engineering control theory, and I suspect that you can trace a lot of metrics-based management theories back to General Electric and other companies where a lot of the managers began as engineers.

But people aren't servo motors and business metrics aren't really control signals, either. Focus on a single metric and you're going to optimize for that quantity—at least in the short run. Of course, what a company would really like to focus on is making money, but there is seldom a direct link between any given action taken by an employee and the profitability of the enterprise. If I were a management consultant I'd call that "too many transitional states between intermediate state variables," which is the same as saying "many a slip between cup and lip," and almost as informative.

Attempting to focus on money alone can lead to Joel Spolsky calls "The Econ 101 Management Method."

Spolsky notes two significant problems with this approach. The first is that it substitutes extrinsic motivation for intrinsic motivation, i.e., the natural desire that most people have for doing a good job is trumped by external financial motivation of incentives. This has always been a problem for salesmen on commission, who try to optimize their commissions even if the company loses money on the sales. Econ 101 Management spreads this problem to a larger group of people.

The external incentive problem doesn't apply only to financial motivations, of course. Yelling at people is a form of motivation, as is threatening their jobs. The point is that taking people who take pride in their work and undercutting that motivation with other, controlling, incentives can have pernicious effects.

The other problem Spolsky notes is even more generic: working to a metric encourages employees to "game the metric." They will alter their working methods to affect the metrics without necessarily improving the work. Software bug metrics therefore encourage either lumping several bugs into a single bug report (making them harder to fix) or simply failing to report the bug. Customer support personnel wind up either passing disgruntled customers off to someone else, or lying to them, or managing to avoid picking up the calls in the first place.

Many managers start off with an adversarial attitude between them and their employees, and there are few things that will kill pride of labor than having someone always trying to beat down your wages and motivate you through fear and intimidation. Add a little bit of ideological muzziness to the deal and you get the bizarre belief held by some managers that metrics + incentives will substitute for training and organizational support.

So the bottom line I seem to have gotten to is this: out in the working world I have often been amazed at the degree to which professional pride has overcome enormously poor managerial decisions, to let projects squeak through on the sheer competence of the people doing the work, as opposed to the incompetence of the people setting strategy and making decisions. The employees are generally better than the companies that employ them.

Just as Americans are currently so much better than their leaders. Someone should do something about that.

Laffering All the Way

[This is something of a distillation of some discussions from Mark Thoma's Economist's View Blog].

The Laffer Curve is one of the greatest scams of all time. Really. "Please send me your bank account number so I can transfer $50 million in gold to your account" isn't even in the running compared to the Laffer Scam, though the Ponzi scheme might give it a run for the money.

The idea that you can somehow increase tax revenues by cutting tax rates is as seductive as 25% at no risk, though, isn't it? And it's so simple you can explain it to a child, using just the famous bar napkin:



Let's let the Wikipedia supply the basic, simple explanation:

"The curve is most understandable at both extremes of income taxation—zero percent and one-hundred percent—where the government collects no revenue. At one extreme, a 0% tax rate means the government's revenue is, of course, zero. At the other extreme, where there is a 100% tax rate, the government collects zero revenue because (in a "rational" economic model) taxpayers presumably change their behavior in response to the tax rate: either they have no incentive to work or they avoid paying taxes, so the government collects 100% of nothing."

Martin Gardner, in a famous Scientific American article, gave a satirical "neo-Laffer Curve," supposedly to show how fatuous Laffer's arguments were (Gardner's graph is rotated, with tax rates being on the y axis, and revenues on the x axis; the Wikipedia has a redrawn version in the same orientation as Laffer's original):



When I read Gardner's original article I was really pissed, because Gardner's graph fails on basic mathematical terms. A squiggle like Gardner drew isn't a function! So Gardner, the epitome of the punctilious math-head, let himself slide into a basic math error, simply because he was so annoyed with Laffer.

Moreover, he missed the most important mistake in Laffer's analysis. It is simply not true that a 100% tax rate generates no revenue, even in "rational" economics models, because there is no such thing as 100% compliance, among other things.

Consider the illegal drug trade. The criminal and RICO proscriptions on illegal drugs amount to a tax rate that is actually greater than 100%; there have been RICO prosecutions where people's houses and all their financial assets have been seized for a fairly small quantity of drugs, far less than the sale value of the drugs themselves. That's a greater than 100% excise tax. Yet the drug trade continues. Furthermore, various law enforcement agencies obtain substantial funding from RICO seizures, and a number of venues actually have excise tax laws on illegal drugs.

Hey, wait, no fair! exclaim the supply-side enthusiasts. We're only talking about the effects of capital gains taxation on investment and economic growth here. Or they'll claim that it's the effects of high marginal income tax rates on incentives to work or labor specialization.

Well, let's take that last one, which one might think would have a germ of truth to it. I remember a story from the Reader's Digest "Life in these United States" feature from many years ago. How many years ago will become apparent.

A man saw his neighbor out cleaning the leaves from his gutters, The man asked his neighbor why he didn't hire someone to do it, as the neighbor was an affluent professional.

"Well," the neighbor replied, "It would cost at least $10 to hire someone to clean my gutters, and I'm in the 90% tax bracket. So that means I'd have to earn $100 to get that much money after taxes. For $100, I'll do it myself."

It's possible to argue that cleaning gutters was an inefficient use of this man's time. And certainly his forgoing the hiring of it deprived the economic statistics of at least the $10 wage exchange, and possibly the extra hour or of the high income fellow's labor that he'd have surely worked if his marginal tax rate were less (I'm being sarcastic here, in case anyone is in doubt). But there are worse ways of spending a bit of time on the weekend than getting some exercise and seeing the neighborhood from a different viewpoint, to say nothing of the incidental inspection of the roof.

The point here is that even at 90% marginal tax rates, tax revenue was collected, it was not negligible, and the behavioral changes created by the "distortion" weren't necessarily always bad. People do not only work for money; if that were the only motivation in the world, I wouldn't be writing this, would I?

Moreover, by concentrating exclusively on monetary incentives, people tend to devalue the other incentives to labor, such as pride of workmanship and simple civic responsibility. The idea that a 100% tax rate results in zero labor implies that there is no volunteer labor—ever. This is the fallacy of Econ 101 Management.

As for capital gains taxes, well, the effective tax rate on investment in the old Soviet Union was 100%, as the Soviet government owned everything. It's quite true that the USSR did not have a particularly vibrant economy, but it did still have an economy. The government's effective "tax revenues" on invested capital were not zero. It was just that the government was the primary source of investment capital. And please don't anyone try to tell me that we don't have government capital investment in this country. Even ignoring basic infrastructure investment, we have a lot of government investment, from tax credits to outright subsidy and demonstration projects. It's just that most of these investments eventually wind up turning into private wealth, which, as it happens, is what happened eventually to a lot of the wealth that was created in the old USSR, once communism fell and "privatization" began. Then there is the case of the city that built a big baseball stadium so a certain future President could make some money on his investment in a baseball franchise. That was public investment in a private enterprise, no?

But let's say that we're still on the question of would a 100% capital gains tax yield no return. The answer is still yes. If someone wanted to sell their house in order to move to another house, and they had a capital gain on the sale of their house, would they refuse to sell, staying forever in the same house? Some would, but many would not. Many moves are not a matter of choice. They might try to balance the sale vs purchase to render a zero capital gain, but they would not always be successful, and there would be some revenue collected.

The fact is that it is very difficult to come up with realistic scenarios where a 100% tax rate generates zero revenue. The most basic assumption of the Laffer Curve is simply wrong.

Now you may think that I'm spending more time than I should attacking the basic premises and logic of the Laffer Curve and Supply Side Economics. Perhaps I am. Certainly SSE has failed every reasonable empirical test. In every case since the Reagan Administration, tax cuts have caused reductions in tax revenues, and the tax increases that have occurred since then never created the economic contractions that Supply Siders predicted.

Empiricism is tricky stuff, however, and the snake oil salesmen have been peddling the idea that when taxes are cut, all that need happen is for tax revenues to eventually reach what they had been before the cuts—which will generally happen in any economy that is growing over time. Eventually absolute revenues manage to increase, so long as the Supply-Siders don't actually wreck the entire economy, which they haven't managed to do—yet. In any case, such perversions of empiricism damand that a more fundamental attack be made.

The effect of squeezing revenues and increasing "defense" spending (which is to say, paying for wars and military contractor profiteering) over the past 6 years has been to deprive the nation of the investments that governments need to make, on infrastructure, regulatory oversight, education, and all the things that Movement Conservatives hate, because they don't fit into the basically feudal worldview that drives their actions.

And scams like the Laffer Curve need to be attacked at their roots, otherwise they grow back, like a thorny bush of carrion flowers, smelling like rotting meat to attract the flies that it needs to pollinate. And I'm no longer in the mood to cede these twits a single point. I'm no longer willing to give them even an inch.

Knock Knock

Theodore Sturgeon was very taken with his own four word description of the four stroke internal combustion engine: Suck, Squeeze, Pop, Fooey. I do admit, it was pretty clever. He then went and spoiled it by asking why a heat engine would need a cooling system, as if that were some sort of profound insight. Actually, automobile engines need both a cooling system to keep the engine block from overheating, and also a heat sink (which, in the case of automobiles, is the outside air), just like every other heat engine. “Heat engine” is, in that sense, a misnomer, since they are actually “heat flow engines,” and need for heat to flow from a higher temperature to a lower one in order to do work.

Still, Suck, Squeeze, Pop, Fooey. In the Suck (intake) stroke, the piston moves out from the cylinder head, pulling in external air in the case of diesel engines, or an air fuel mixture, in the case of gasoline engines. Both diesels and modern gasoline engines use fuel injection, but the diesel engine doesn’t do the injection until the top of the compression stroke.

For the Squeeze (compression) stroke, the intake valve closes and the piston rams the column of air/fuel toward the cylinder head. That compresses the air and heats it up. Compression ratios for gasoline engines go from about 10:1 as high maybe 18:1; for diesels, it’s more like 25:1, and diesels have to be much more ruggedly constructed to avoid being damaged by the higher pressures and temperatures.

At about the top of the stroke a spark plug triggers the ignition of the air fuel mix in a gasoline engine; in a diesel, the fuel is injected at high pressure, and ignition occurs because the air is already hot enough to ignite the fuel. The increase in temperature and pressure in both engines then pushes the piston away from the head. That’s Pop, or the power stroke.

Once the piston has reached its limit, the exhaust valve opens, and the final stroke (Fooey or exhaust stroke), clears the combusted gases from the system, which is now ready to start all over again.

All well and good. But it turns out that things don’t always work so well on the compression/ignition side of things for the gasoline engine. Because gasoline is easier to ignite than diesel fuel, sometimes the heat of compression alone will ignite the air/fuel mixture on the compression stroke, before full compression is achieved. That’s bad, because then some of the engine power winds up fighting itself, which reduces efficiency. Moreover, it puts more strain on the engine parts, and can damage the engine.

You could just back off on the compression when this sort of thing occurs, but then you’re also reducing efficiency, because lower compression ratios mean lower peak temperatures for your heat engine, and thermodynamics always wins in the end. So typically, you tune an engine to as close as you can get to the pre-ignition point.

Pre-ignition is also called “knock,” and it’s why we have “octane ratings” for gasoline. The name derives from an isomer of octane, 2,2,4 tri-methylpentane, and it’s defined as the ability to resist knocking of a fractional mixture of this octane isomer and n-heptane, heptane having a defined octane number of zero. The octane isomer has a good ability to resist premature detonation of an air fuel mix.

Real fuel mixtures are much more complex, of course, and the octane rating isn’t just a summation of all the individual components of the fuel. Instead, each component of gasoline has a “blending number” that better describes how it changes the octane rating.

Then there are “octane boosters,” things that are added to gasoline specifically to bring up the octane rating, despite your having put a lot of other low-octane trash into the fuel.

As higher compression IC engines began to really move in the 1920s, the need for octane boosters became apparent. Previously, when high compression engines were primarily for motor racing and aviation, specially blended fuels were used, but mass markets meant mass solutions.

There were two hydrocarbon octane boosters that were first suggested for fuels, alcohol and benzene. Alcohol was the better of the two. Benzene required almost 40% in fuel to really allow for high compression engines; ethyl alcohol only 20%. For a while, it looked like the fuel of the future was “Ethyl” meaning ethyl alcohol.

But then research showed that a number of inorganic elements could reduce engine knock. Iodine and selenium were too corrosive, but lead did the trick. Eventually, tetra ethyl lead (TEL) was developed, and it had the additional advantage that it was patentable, and thereby under corporate control for corporate profit. At first, TEL was blended in with gasoline at garages, or by the motorists themselves, but that wound up with a few too many cases of lead poisoning. After that, it was done at refineries, where it also produced lead poisonings, but those could be hushed up better. It also helped that the public health services helped to suppress the idea that there was a danger.

In other countries, particularly European countries, TEL had something of an uphill battle, because ethanol production was tied to farm policy. But with the weight of the U.S. Government behind it (and then, as now, U.S. foreign policy was at the disposal of those making money), TEL became the octane booster of choice.

Time passed and a lot of airborne lead got emitted into the environment. Fact is, tailpipe lead was in the form of very fine particles that stayed suspended for very long periods, under the right circumstances. Those circumstances were common enough so that detectable amounts of lead wound up in the Arctic even.

Then, in the 1970s, California passed some very tough clean air laws, and suddenly, automobile manufacturers were having trouble meeting them. In fact, the only way to meet them seemed to be to install catalytic converters on automobiles. (Actually, there was a while when lean burn engines such as the Honda CVCC could still meet the California regs, but, I mean really, you couldn’t hold Detroit to standards that the Japanese could meet, could you?).

Lead is toxic to people, but that’s nothing to the way it poisons catalysts. A single tankfull of leaded gasoline would reduce a catalyst’s efficiency by more than 50%. So unleaded fuel was born (fun fact: in Mexico, unleaded fuel is called Magna Sin).

The oil industry fought it, but maybe not as much as you’d think. I suspect that what they were doing was to manage the changeover, and to profit from it as much as possible. And they did profit, largely because the elimination of lead created a squeeze on refining capacity, and any time there is a capacity squeeze in the industry, profits increase, owing to the magic of inelastic demand. Sell less, make more money. Such a deal. They also get so squeeze out some independent refiners and distributors when expensive regulations take effect.

But the industry was also working on alternative octane boosters, again ones that weren’t ethanol, because, well, ethanol is evil, isn’t it? I mean, after all, demon rum.

Anyway, in the nick of time, they began producing MTBE, another oxygenated hydrocarbon, an ether instead of an alcohol, and it had all the good aspects of ethanol, with the added benefit (from an oil industry perspective) that it was made from natural gas.

Oxygenated fuels like ethanol and MTBE also have some interesting combustion characteristics in that they reduce the amount of carbon monoxide (CO) and nitrogen oxides that come from automobiles before the catalysts warm up (after they warm up you don’t even get enough CO to kill yourself in a closed garage). So some localities, like Denver, had been mandating oxygenated fuels in winter, in order to reduce their CO problem.

Then MTBE began to leak into the water supplies of some cities.

Refinery operations are a lot more sophisticated now than they were in the 1920s, and can generally turn almost anything into almost anything else – for a price. The oil industry has also become pretty good at using whatever comes their way, be it hurricanes, environmental regulations, or war to their advantage. I knew that the cheap oil prices in the late 1990s were transient and that there would be a big windfall coming, though I had no idea it would be built on so much blood. Even so, I didn’t put any money into oil stocks, because it just seemed like bad karma, and I can be such a prig sometimes.

Inelastic Demand and the Extinction of Species

I thought I might describe an economic mechanism that works specifically toward species endangerment and extinction. That has to do with commodity price inelasticity.

Everyone remembers about price elasticity, right? Well, let’s review anyway.

The demand curve for a commodity is considered elastic if a certain differential percentage increase in supply results in a less than that differential decrease in price. Conversely, if a differential percentage increase in supply results in a greater than differential percentage decrease in price, the commodity is considered inelastic. These relationships also apply on the way down on the supply curve..

This relationship means that, for inelastic demand commodities, increases in total supply result in actual decreases in total income for all aggregated suppliers. For example, if a 1% increase in supply results in a 2% drop in price, all suppliers will receive only 1.01*0.98 income, i.e. slightly less than 99% of their original income. One frequently cited example is farm commodities. As food supplies grow, farmers as a whole receive less and less money. While this may be seen as bad by farmers, it positively benefits the nation as a whole, since less and less must be spent on food, which frees up resources for other things.

Now consider the converse case, where the supply of the commodity is decreasing. Under decreasing supply conditions, the share of gross national income that goes to the suppliers of that commodity increases, in both relative and absolute terms. Thus, it would pay suppliers as a whole to reduce the available supply.

This is the usual argument made against commodity monopoly: if a single (or small number) of suppliers can restrict supply sufficiently, it is possible to increase total income by producing fewer goods. Similarly, even if there are a large number of suppliers, a restriction in supply will actually benefit suppliers as a group. So, for example, minimum wage laws benefit low wage workers as a group, though it may penalize some low wage workers by reducing the number of jobs. The monetary loss from reduced jobs, however, will be less than the monetary increase due to increased wages. Similarly, farmers as a group are benefited by crop restrictions, such as tobacco and peanut allotments.

A naturally restricted commodity does not need a regulatory restriction to achieve monopolistic effects. In the case of a plant or animal species, especially one that is not domesticated, over-harvesting can reduce the future availability of that commodity to all suppliers. Thus, individual suppliers do not need to have price-setting power; all they need to do is to harvest as much as they are able. This results in a restriction of future supply, which leads to higher prices, which increases their own total income.

Presumably, at some point one reaches diminishing returns, where the commodity becomes a luxury good with a more elastic demand curve. However, by that time the species may be endangered, and any “fellow-traveler species” (think dolphins/tuna), may be extinct.

I am reasonably certain that this mechanism is at least as much responsible for the decline in world fish catches as the conventional “tragedy of the commons” phenomenon. In a “tragedy of the commons” scenario, privatizing the commons might have a useful effect. In an inelastic demand scenario, it would not help at all, unless there were a single private entity monopolizing all fisheries.

This, of course, is identical to the case of governments producing a regulatory agency, except that the benefits to private ownership accrue only to the owners of the resource.

Detcord

So I just got back from Loscon, and boy, are my arms tired. Seriously, we drove, and that always tires my arms.

One of the things about gatherings of all sorts, of course, is that you meet interesting people with interesting stories. One of the folks I shared a panel with (Future Horror, I think it was) is a special effects pyrotechnician. That's part of the deal with Loscon, the connection to the movie biz, especially the technonerdy parts, which I find fascinating because, well, because.

After the panel, he told me a story about going through airport security. The name of this company was on his briefcase, bags, etc., and it included the word "pyrotechnics" and possibly, "explosives." Never mind. He was "randomly selected" for a bag check, and the guy swabbed his briefcase, then fed it into the sniffer. He scratched his head, then took another swab sample and fed it in again. Then he looked at the guy and asked, "What's PETN?"

That would be pentaerythritol tetranitrate, official IUPAC name: 1,3-Dinitrato-2,2-bis (nitratomethyl) propane. It's the principle ingredient in detcord, detonating cord that's used as a superfast fuse for triggering simultaneous explosions.

Okay, so the name "Department of Homeland Security" gives me the Orwellian creeps to start with. I noticed several weeks ago that on the TV show Smallville, they concocted a fictional name for the same organization and called it the "Department of Domestic Security." Smallville is based on Superman, a comic book character. What does it say when a comic book story has a less hokey name than the real thing?

Many people have noted the ongoing dynamic of "terrorism," where real or imagined threats are taken as license not to make policy changes that might actually address security, but rather as excuses to erode legal rights, expand police authority, and generally harass segments of the populace. Part of the wink, wink, nudge, nudge is that the Authoritarian Right assumes that these powers will never be used on them, but rather on other ethnic groups and the Right's political—and social—enemies. They are wrong, of course, but they never figure that part out. There are Russians who still yearn for the good old days of Stalin. For that matter, some still yearn for the Czar.

A recent trilogy of episodes on South Park had the nice conceit of terrorists invading "Imaginationland," literally attacking, not reality, but our imaginations. Last June, after Amy had her toothpaste confiscated by airline security, I realized that the policy of confiscating gels and liquids was to protect us from the terrorists in "Die Hard with a Vengence," i.e., from a type of explosive that does not actually exist, but has appeared in a movie.

Then there is the phenomenon of various pundits just salivating at the prospect of another 9/11 type event, often fantasizing it taking out some "left wing type" who have transgressed, who "don't love America," at least certainly not enough to fantasize about having famous landmarks blown up because they didn't like some election result.

Okay, so none of this is new, and, frankly, there are plenty of people who have been commenting on the politics of it for longer and at greater length than I have, and many of them are better at it. So why am I adding my oar to the water? Because of the other little thing that slips by in this story.

The airport security guard who asks "What is PETN?" is not to blame in this story. He's underpaid and undertrained and he knows full well that his job is basically harassing people, not actually improving their security. Besides, the sheer boredom of swabbing people's shoes and briefcases day after day would turn almost anyone's brain to mush.

But this stuff is supposed to be important, right? Shouldn't they at least try for the appearance of competence? Well, that would violate Conservative Movement Ideology, wouldn't it? I mean, government is supposed to be incompetent.

But wait. These are not government employees. They are employees of companies that have been contracted to provide these services. These companies are supposed to be "more efficient" than government.

Ah, but more efficient at what? Well, the purpose of it all has come to be "provide shareholder value," which is to say, "to make money." And there is some efficiency there, after all. But paying your workers well, training them, well, that just gets in the way of efficiency.

I once saw a documentary on John L. Lewis, who ran the United Mineworkers of America for 40 years. It was mostly coal mining, and coal mining is dirty, dangerous, and brutal. Lewis pushed not only for more money, but also higher safety standards. And he made what amounted to a long term bargain with the coal industry: they would not oppose mechanization if the miners got their fair share of the wealth that derived from enhanced productivity. It made sense; mechanized jobs required higher skills, more experience, and were safer. But there would be fewer of them. So Lewis got more money for fewer workers, undercutting his own political power for the good of those that remained.

The same thing happened with longshoremen when containerization came in. Nowadays, "stevedore" is essentially an archaicism; the men in the longshoremens union run those giant cranes and are paid very well. Ben tells me that Eric Hoffer wrote about the phenomenon in one of his books.

That was the deal as everyone understood it after WWII: rising productivity meant better pay in fewer jobs, but the economy as a whole would create jobs, especially "knowledge based" jobs that required college degrees, etc., so overall wages would increase and productivity would rise. They hadn't coined the phrase "win/win" yet, but there it was.

Somewhere along the line, that pact was broken. Somewhere between 1950 and now, the new business model became that of a South American banana republic: beat down the wages for the masses of workers so that those at the top could skim more cream. This is sometimes called the "Walmart model."

It pains me to think that both the engineering profession and science fiction were enablers to breaking the pact, but there that is as well. Engineers have always been their own worst enemies, partly because we love the work so much, and partly because so many engineers wind up in management. But I do not get the part about slowly undercutting the value of expertise and training. It took me forever to realize that new technologies were being accepted or rejected on the basis of whether or not they allowed the substitution of unskilled labor for skilled labor. And once that process begins, you get more and more highly capable people shoved into lower and lower scale jobs. I've lost count of the number of people I know who have to "dumb down" their resumes to find employment. Then, because the workforce is, in fact, overqualified, really, really, stupid managerial decisions sometimes can be made to work—simply because of the sheer competence of the labor force.

As for science fiction, Analog magazine has been the SF equivalent of Fox News for at least a couple of decades now. When was the last time you read an SF story that portrayed a union or government bureaucrat in a favorable light?

At the top, of course, the push for this new business model is the same as it always was: more booty for those who divvy up the spoils. There has been a huge effort to rationalize the vast sums paid to these folks as "the superstar effect," as if a CEO who gets a $50 million pay packet when his company has lost $2 billion in the quarter is somehow comparable to Barry Bonds. Or some hold that "people skills" have become the most important thing in the economy. Which is true, provided "people skills" is shorthand for "kiss up, kick down," treachery, mendacity, and the ability to pass off criminal behavior as standard business practice.

Significant

Hmm. I may have a bit of a block on this. Let's just try to bull ahead then, and see what happens.

Over on Mark Thoma's Economist's View blog, there were a couple of discussions about a, well, let's call it a "raging debate," albeit one in fairly slow motion. The backstory papers are here:

McCloskey and Ziliak, "The Standard Error of Regressions," Journal of Economic Literature 1996.

Ziliak and McCloskey, "Size Matters: The Standard Error of Regressions in the American Economic Review," Journal of Socio-Economics 2004.

Hoover and Siegler, "Sound and Fury: McCloskey and Significance Testing in Economics," Journal of Economic Methodology, 2008.

McCloskey and Ziliak, "Signifying Nothing: Reply to Hoover and Siegler."

These papers were pulled from an entry on "Significance Testing in Economics" by Andrew Gelman, and there followed two discussions at Economist's View:

"Tests of Statistical Significance in Economics" and later, a response by one of the main players (McCloskey), followed by my arguing with a poster named notsneaky. That led to my essay, "The Authority of Science."

Okay, you are allowed to say, "Yeesh."

So let me boil down some of this. McCloskey published a book in 1985, entitled, The Rhetoric of Economics, in which she argued that the term "Statistical Significance" occupied a pernicious position in economics, and some other sciences. The 1996 paper by McCloskey and Ziliak (M&Z) continued this argument, and the 2004 paper documented a quantitative method for illustrating the misuse of statistics that derived from what was, basically, an error in rhetoric, the connecting the word "significant" to certain sorts of statistical tests. The forthcoming (to be published in 2008, the link is to a draft) paper by Hoover and Siegler (H&S) finally rises to the bait, and presents a no-holds-barred critique of M&Z. Then M&Z reply, etc.

Any of my readers who managed to slog through my criticisms of the use of the word "rent" (See "Playing the Rent" and subsequent essays) in economics (as in "rent-seeking behavior"), will understand that I start off on the side of the rhetoriticians. When a technical subject uses a word in a special, technical sense that is substantially different from its common language use, there is trouble to be had. "Significant" carries the meaning of "important," or "substantial" around with it, but something that is "statistically significant" is simply something that is statistically different from the "null hypothesis" at some level of probability. Often, that level of probability is arbitrarily set to a value like 95%, or two standard deviations, two sigma, which is about 98% for a normal distribution.

(I'll note here that in statistical sampling, one usually uses something like the t-distribution, which only turns into the normal distribution when the number of samples is infinite, so it adds additional uncertainty for the size of the sample. The t-distribution also assumes that the underlying distribution being sampled is normal, which is rarely a good assumption at the levels of reliability that are being demanded, so the assumption train has run off the rails pretty early on).

But some differences make no difference. Given precise enough measurements, one can certain establish that one purchased pound of ground beef is actually one and one thousandths of a pound, but no one who purchased it would feel that they were getting a better deal than if they'd gotten a package that was one thousandth of a pound light. We just don't care about that small a difference; some of the beef is going to stick to the package.

I saw something written recently that referred to something as "statistically reliable," and on the face of it, that would be a much better phrase than "statistically significant," and I will use it hereafter, except when writing about the misused phrase, which I will put in quotes.

So, okay, "statistically significant" is not necessarily "significant." Furthermore, everyone agrees that this is so. But one disagreement is whether or not everyone acts as if this were so. And that is where M&Z's second criticism comes in: that many economics journals (plus some other sciences) simply reject any paper that does not show results at greater than 95% reliability, i.e. the results must be "statistically significant." M&Z say outright that the level of reliability should adapt to the actual importance of the question at hand.

The flip side of this is that, in presenting their work, authors sometimes use "statistically significant" as if it really mean "significant" or "important," rather than just reliable.

Alternately, one can simply report the reliability statistic, the so-called "p value," which is a measure of how likely the result is to have come about simply because of sampling error. I have, for example, published results with p values of 10%, meaning that there was one chance in 10 of the result being just coincidence. I've seen some other p values that were much lower, and those are usually given in the spirit of "there might be something here worth knowing, so maybe someone should do some further work."

In fact, this giving lower p values, or using error bars at the single sigma level, is fairly standard practice is some sciences, like physics, chemistry, geology, and so forth. Engineers usually present things that way as well. On the other hand, the vague use of "significant" that M&Z criticize is often used in social sciences other than economics, e.g. psychology and sociology, as well as some of the biological sciences, including especially, medicine.

It's in medicine where all this begins to get a tad creepy. In one of their papers, M&Z refer to a study (of small doses of aspirin on cardiovascular diseases like heart attack and stroke) as having been cancelled, for ethical reasons, before the results reached "statistical significance." "Ha!" exclaim H&S (I am paraphrasing for dramatic effect). "You didn't read the study, merely a comment on it from elsewhere! In fact, when the study was terminated, the aspirin was found to be beneficial to myocardial infarction (both lethal and non-lethal) at the level of p=0.00001, well past the level of statistical significance! It was only stroke deaths and total mortality that had not reached the level of p=0.05!"

Well, that would surely score points in a high school debate, but let's unpack that argument a bit. M&Z say that the phrase "statistically significant" is used as a filter for results, and what do H&S do? They concentrate on the results that were found to be statistically reliable at a high level. How about the stroke deaths? What was the p value? H&S do not even mention it.

(As an aside, I will note that the very concept of a p value of 0.00001 is pretty ridiculous. Here we have an example of the concept of statistical reliability swamping actual reliability. The probability of any distribution perfectly meeting the underlying statistical assumptions of the t-distrubution is indistinguishable from zero, and the likelihood of some other confounding factor intervening at a level of more than once per hundred thousand is nigh onto one).

Furthermore, H&S use a little example involving an accidental coincidence of jellybeans seeming to cure migraines to show why one must use "statistical significance." Then, when discussing the aspirin study, they invoke the jellybean example. On the face of it, this looks like they are equating migraines with heart attacks and strokes, again, completely ignoring the context in which samples are taken, in order to focus on the statistics. In many ways, it looks like H&S provide more in the way of confirming examples of M&Z's hypothesis than good arguments against it.

Also consider what H&S are saying about the aspirin study, that there was a period of time when members of the control group were dying, when the statistical reliability of the medication had been demonstrated, but the study had yet to be terminated. Possibly the study did not have an ongoing analysis, and depended upon certain predetermined analysis and decision points. But how would such points be selected? By estimating how long it would take for the numbers to be "statistically significant?"

Some studies definitely do use ongoing statistical analyses. Are there really studies where a medication has be been shown to be life-saving, to a statistical reliability of 90%, where patients are still dying while the analysts are waiting for the numbers to exceed 95%? How about cases where medications are found to have lethal side effects, but remain on the market until the evidence exceeds "statistical significance?"

The blood runs a little cold at that, doesn't it?

Metropolis

[Cross-posted from WAAGNFNP]

I know a lot of amateur scholars, including myself (ask me about New York City circa 1911 sometime). Many of them concentrate a fair amount of their scholarly impulses on science fiction, and that includes my friend Douglas. He’s taken advantage of the fact that U.C. Berkeley has a collection of the papers of A.E. van Vogt, for example. He also tells me of a movie review of Metropolis written by H. G. Wells.

Wells was highly critical of the movie, on science fiction and futurist terms. Specifically, Wells noted that the economics of Metropolis was simply non-functional. In the city, there is a small, wealthy class that owns everything, while there is a much larger class (literally an underclass, because they live in the city’s depths) of workers who produce all the goods. Nonsense, says Wells. This makes no sense. The number of workers, plus modern manufacturing, would produce vastly more goods than the small wealthy class can consume. Who buys the rest of it?

There are a couple of points worth noting here. One is that the society in Metropolis is very similar to Wells’ own book When the Sleeper Wakes, written 25 years before Metropolis. The second is that Wells belonged to the Bloomsbury Group, a collection of artists, writers, and other intellectuals, that included John Maynard Keynes. I suspect that Keynes once made the same economic critique to Wells, about Sleeper. Wells then passed it on.

It’s a relevant point, and quite true. Yet the image of the elite in the clouds while the toilers work in darkness nevertheless is the one that sticks in the mind. It’s way too easy to make the leap to Freudian symbolism here, even down to the parsing the phrases “bowels of the city” or “out of sight, out of mind.”

Can one even find a dystopian future story that doesn’t contain the extremes in wealth and power trope? Harrison Bergeron by Vonnegut comes to mind, since it, at least on the surface, was about forcing everyone to the same level. But scratch the surface and there’s the Handicapper General wielding power over everyone. Maybe that Twilight Zone where everyone has plastic surgery to look the same manages it.

For that matter, the highly unequal version of society isn’t confined to obviously dystopian works. Often it seems like the standard view of what’s to come, as if no one can really come up with a credible alternative.

If science fiction is a reflection of everyone’s hopes and fears about the future (and that’s surely one feature of our genre), what does it say that everyone has in the back of their mind a view of an undemocratic, faux feudal society, with the masses falling prey to a few predatory rulers? And if this vision of the future is the default, it certainly makes sense for people to engage in class warfare as a sort of full contact musical chairs, with the expectation that the winners and their progeny will have the rest of time to enjoy the spoils of the Social Darwinian State.

Minimum Wage

There's a concept in economics called "elasticity," more specifically, the “price elasticity of demand.” This is a concept in microeconomics, though experience tells me that it is often mistaken for macroeconomics. I have several theories about why that is, but simple ignorance is probably the real reason.

Most commodities have a relatively inelastic demand response to price changes, which is one of the reasons why firms try so hard to remove themselves from the task of supplying mere commodities by branding, or otherwise differentiating what they sell from the products of other firms, with copyright or patent protections, or some sort of barrier-to-entry strategy. One can also take advantage of commodity pricing on the upside, when there are supply crunches. The money Exxon makes from a supply scarcity of oil and gasoline (oil production or oil refining) is one such upside; oil firms literally make more money by supplying less gasoline. The electricity shortages in California a while back are another example.

But economics is a social science, and in social sciences, the “science” is often subverted by the “social.” That was the main sermon that the late John Kenneth Galbraith preached during his lifetime, and it took me longer to get it than it should have, partly (I will alibi) because he often used arguments that weren’t particularly strong. He argued, for example, that advertising does nothing but create artificial demand, and worse, that it made firms immune to consumer choices. I’d have loved to see his analysis of the “New Coke” but I don’t think he ever made one.

Still, agendas matter, and that is nowhere more obvious than in economics, and especially economists and their fellow travelers. There is a political philosophy afoot that holds “the market” (or “the free market”) to be some sort of moral fairy dust that can be sprinkled onto any policy to turn it into a just and moral action. This does, however, require some interesting mental gyrations on the part of the true believers.

Consider this analysis of the Minimum Wage, a tried and true policy of the advocates of labor. The basic argument in favor of the minimum wage should not be controversial: demand for the lowest economic value labor (sometimes called “unskilled” by those having never worked a minimum wage job) is inelastic, as befits a commodity. This means that a minimum wage above the “market clearing price” will result in some marginally lesser employment rate, but the margin will be proportionally less than the marginal increase in wages mandated by the minimum wage. In other words, the winners get more money than the losers have lost. This additional money must come from somewhere, of course, and traditional theory suggests that it comes from the business owners (and possibly managers) that have to pony up the additional wages.

Now there is a debate within the economic community as to whether or not there is any loss of employment in the minimum wage class (or in the overall labor force), at least for small enough increases. This might simply mean that the loss is too small to measure, given the other noise in the system, or it might actually mean that the increase in demand caused by a higher minimum wage (more money in the pockets of those who spend it), has a stimulative effect on the macroeconomics of the situation. In effect, minimum wage workers have more money to spend at Walmart, so Walmart has to hire more minimum wage employees. This is sometimes called the “Ford effect” because Henry Ford supposedly paid high wages to his workers so they could afford to buy automobiles.

But there isn’t really any way to make the case that the minimum wage hurts workers in general, because it simply isn’t true, and there is no intellectually honest way to make the economic argument that it does.

Nevertheless, I have seen quite a few articles, by economists, saying exactly that, in so many words. I remember one in particular, from an economist at Pepperdine University (the economics department at PU being essentially another right wing think tank, as is the one at George Mason University), that decried the terrible result that raising the minimum wage would have on the unemployment rate of black teenaged males. What are the odds that said economist has ever been concerned about the employment prospects of black teenagers in anything other than a context of arguing against policies that would actually result in monetary loss to large corporations?

But here’s where this all goes very meta. I once wrote more or less the same thing as the above in a posting to a Compuserve Forum. The result was that several other participants (who would all, I suspect, classify themselves as libertarians), simply refused to even acknowledge the argument, and castigated me for being so callous toward the unemployment that would surely result from a minimum wage hike. They were prepared to argue the does-it-or-doesn’t-it-cause-unemployment question, but the more general case of quo bono simply did not register.

Yet every one of them believed that he understood economics.

Further Black Swan Bashing

I previously vented some annoyance on The Black Swan (The Impact of the Highly Improbable), by Nassim Nicholas Taleb, but that was primarily an excuse to engage in a little pedantry on the Central Limit Theorem and statistical distributions in general. This one’s going to be a little more directly critical of Taleb and his status as a self-described “maverick” and “empiricist.” Actually, I think I’m going to have some fun.

Consider this passage:

If you want to see what I mean by the arbitrariness of categories, check the situation in polarized politics. The next time a Martian visits earth, try to explain to him why those who favor allowing the elimination of a fetus in the mother’s womb also oppose capital punishment. Or try to explain to him why those who accept abortion are supposd to be favorable to high taxation but against a strong military. Why do those who prefer sexual freedom need to be against individual economic liberty?

The first thing that leaps out, of course, is that the viewpoint taken is that sort of Movement Conservative Libertarianism that so pisses me off. Is there any doubt, for example, that Taleb is anti-abortion, anti-income tax, pro-military, and a “free marketeer?” I mean, could someone who wasn’t these things make such ridiculous arguments?

Take the first one, about how explaining a Pro-Choice, Anti-Death Penalty stance to a Martian. Is there any sentient creature, imaginary or otherwise, who could not tell that there are some pretty serious differences between a fetus and an adult human being? I mean, this isn’t a matter of ideology even; it’s a matter of basic perception. Adult human: quite large. Fetus: very small, at times even microscopic.

Moreover, it’s actually very hard to find even an anti-abortion proponent who behaves as if fetuses are equivalent to even newborn infants (to say nothing of adult humans). No one who believes the fetus=infant equation can possibly be in favor of rape/incest exemptions, given that no one claims that it’s okay to kill an infant who was the product of either. And of the people who are against such exemptions, the overlap with being against all forms of birth control is very large—again not supporting the fetus=infant argument very well, but doing a good job of supporting the keeping-women-in-their-place argument.

Part of what Taleb is doing here is “inverting” a liberal argument about the hypocrisy of being “Pro-Life” and in favor of the Death Penalty. But that’s always been a pretty weak pro-Choice argument. The real issue at stake is whether or not the state, through its agent of government, should have the power of life and death. The classic Liberal position is “No,” and holds that the state should not demand that a woman give birth against her wishes (making the granting of life a matter of state power), nor should it have the power to execute (putting death on the state’s control panel as well).

So although Taleb’s first example is both weird and silly, at least his logical inversion, can, with a lot of effort, be justified (although I seriously doubt that any anti-choice crusader would admit that they were actually after the Power of Life and Death, by projection, onto religion and subsequent devolution of religious authority to the state). But the next inversion is just stupid.

Even begging the question of whether liberals are for “high taxes” or, rather, for highly progressive taxes (Taleb, being wealthy, may have some difficulty understanding the difference), to believe that there is some contradiction or even “arbitrariness” between advocating high taxes and a weak military is to believe that you can think of nothing to spend taxes on except the military. Would Taleb’s hypothetical Martian have trouble comprehending say, Sweden? Not a very bright Martian, I think.

Again, this is an inversion problem. While one can, without logical contradiction, be in favor of high taxation without a strong military, one cannot really be in favor of a strong military without advocating high taxation. (I’m ignoring the case where the military is self-financing via tribute, since, first, the tribute is still a form of taxation, and second, no one has been able to make that work since the British Empire, as nearly as I can tell, and I’ve heard arguments against that one).

True, there are some people now who do, in fact, advocate a strong military and low income tax rates, but they are advocates of Supply-Side Economics. You know, morons.

But the last one is the real tell. Isn’t “individual economic liberty” a great phrase? I wonder what Taleb thinks it means.

I’d be willing to guess that he doesn’t mean the liberty to can your own produce, spin your own thread, make your own clothing, or even grow your own marijuana for personal use. Just a guess there. But usually, “economics” carries this notion of “trade” along with it, and it takes two to tango, as it were. And it takes a lot more than two to create a market. So why this “individual” modifier?

One possibility is that Taleb put the word “individual” in the phrase, because if he’d left it at “economic liberty” then it would have occurred to someone (maybe Taleb) that he was actually talking about the “liberty” of large organizations to exert massive economic advantages over individuals.

Of course it’s also possible, even likely, that by “individual economic liberty” he was talking about the “liberty” of single individuals to go into the Big Casino and place their bets. Come to think of it though, that’s rather the same thing, isn’t it? The gamblers always think of themselves as individualists, when actually they’re just appendages of The Game.

Taleb seems to have made a nice chunk of change in the trading of derivatives in the 1980s, and one might consider the possibility that his views reflect both his experiences and the general mind-set of those around him at the time, the trader as “rugged individual.” Taleb also says that he hates narratives (though his book is primarily a string of anecdotes) and dislikes being stereotyped. He seems to believe that he has escaped from his upbringing and the narratives of his own experience to achieve clear insight and a contrarian and skeptical worldview.

To quote Karl Hess: Spare me.