How To End Judicial Activism

If there's one thing that raises conservative ire, it's activist judges striking down [conservative] democratically elected laws based on expansive readings of constitutions. You thought you'd passed a law allowing the death penalty for the rape of a child under 12? Wrong, the Supreme Court says that's cruel and unusual!  Thought you'd passed a law to prohibit the abortion of  fetuses? Wrong, you hadn't counted on Justice Blackmun reading into the penumbras and emanations of the constitution a right to privacy, which somehow transformed into a right to abortion! Thought that you'd passed a law regulating political advertising in the leadup to an election in Australia? Wrong, you hadn't counted on the Australian High Court finding an "implied freedom of political speech" in the constitution. Etc etc etc.

Judicial conservatives tend to interpret the constitution narrowly, based on what the words meant at the time they were written. They also tend to be reluctant to overturn precedent, based on respect for the court's earlier opinions. Judicial activists tend to believe in the importance of modern social values in interpreting the constitution - in practice, they're happy to take very expansive interpretations of the words if it produces a social result they're happy with. They also don't tend to care as much about precedent, being willing to overturn settled doctrines if they don't like the result.

At the moment, political conservatives are screwed by judicial activism, because it acts as a ratchet towards ever more left-wing laws. The reason is as follows. Nearly all judicial activists tend to have left-wing political leanings. By that, I mean that the activist rulings they pass tend to be supportive of leftist political issues. Once an activist decision gets passed, judicial conservatives are split - some of them will want to overturn the earlier ruling because they think it misreads the constitution. Others will reluctantly let the ruling stand, because they also don't like overturning precedent. This means that the judicial conservatives will always be somewhat split in overturning these precedents, while judicial activists will be united in upholding them. Hence the bad judgments stand, and you end up with a ratchet.

There is, however, one possible way around this problem. Historically, political conservatives have tended to be judicial conservatives. A respect for political tradition tends to correlate with a respect for the vision of the founding fathers, and distrust of concentrating power in the hands of unelected judges.

But there's no reason this has to be the case. And I confidently predict the following - if you wanted to rapidly end liberals love affair with judicial activism, all you would need to do is appoint a bunch of politically conservative, judicially activist judges.

A rough model for this kind of thing would be the Institute for Legal Justice, which files lawsuits on behalf of private property rights, economic liberty, the first amendment, and other such matters. It's basically like the libertarian version of the ACLU.

And something similar could work in the courts too. For instance, suppose that a politically conservative activist court decided that government licensing of commercial transactions was illegal. There's lots of crap bases for doing this! It could be some oddball combination of freedom to assemble (under the first amendment), and something to do with monetary transactions being a form of speech. Sound ridiculous? It is, but an implied freedom of commerce is not really more ridiculous than an implied right to privacy.

This kind of ruling would drive liberals batty. Suddenly you'd have grounds to overturn all sorts of commerce-killing health, safety, and environmental regulations, all protected with the force of the constitution. And in no time flat, liberals would suddenly rediscover the joys of sticking to the original interpretations. How dare those judges start overturning the popular will with their social engineering! And the new judges would solemnly utter that the constitution was a living, breathing document, and the current political climate was increasingly intolerant of interference in commercial transactions. And liberals would be forced to reply "but... but... but..."

As well as being hilarious and full of schadenfreude, this would force liberals to ask themselves whether they really liked activist courts after all. The danger of expanding government power is that eventually it gets wielded by the party you don't like. If courts played by the same rules, we might ironically (at least in the long run) end up with less appetite for judicial activism. The cost is the politically conservative judges would have to prostitute their views on constitutional theory, which, for better or worse, they don't seem to want to do.

A pity, really. It would kill off judicial activism, or it would at least level the political playing field that activism takes place on. Frankly, either one would be an improvement on the status quo.

Hobbes was right

Apparently a fungus infects carpenter ants, feeding on them and turning them into zombies that walk around erratically. The fungus makes the ant walk towards the understory of the forest, where the fungus grows better, then finally spores grow out of the dead ant's head. (Via Radley Balko.)

The universe is not your friend. All of us are mere grist to the mill of evolution - if there is a niche for some creature (virus/fungus/insect/tiger) to use you successfully as a food source, and they happen to be adapted enough for the purpose, they will do so. If you want to know why I celebrate the triumph of man's economic development and its ability to shape the natural environment, this is why. It's easy to think of nature as some gentle and cute-looking endangered species, like the Iberian Lynx. But you would do just as well to also think of the fungus in Thailand slowly devouring carpenter ants. This, my friends, is the world we live in.

The great Robert Frost observed all this a long time ago.

I found a dimpled spider, fat and white,
On a white heal-all, holding up a moth
Like a white piece of rigid satin cloth --
Assorted characters of death and blight
Mixed ready to begin the morning right,
Like the ingredients of a witches' broth --
A snow-drop spider, a flower like a froth,
And dead wings carried like a paper kite.  

What had that flower to do with being white,
The wayside blue and innocent heal-all?
What brought the kindred spider to that height,
Then steered the white moth thither in the night?
What but design of darkness to appall?--
If design govern in a thing so small. 

Or as Thomas Hobbes put it in Leviathan - the life of man in the natural state is "solitary, poor, nasty, brutish, and short."

Markets Will Clear...

...whether you like it or not.

Tickets to the Coachella music festival went on sale today at 10am. Last year, I figured I had a while to dither about the decision as to whether to go, and after a week, they were sold out. Bam! Your $300-odd ticket is now a $500-odd ticket.

Okay, so this year I'd learned my lesson - I was going to buy it straight away. They went on sale at 10, by 10:15 I was online trying to buy tickets to the first weekend.

Nope, couldn't get them. They were gone. Apparently friends who tried even earlier, even at a few minutes past ten, weren't able to get them. The website would still list them as being available, but you'd try to buy without success. There were some still available for the second weekend, but I couldn't make it then.

It makes you wonder why the promoters don't set the price higher. I have some sympathy - this year, they increased the length from one weekend to two weekends, thus doubling supply. Didn't help - at the face value of  $330 or whatever, there was still a shortage.

It's always surprising how promoters end up leaving money on the table for scalpers. If the market-clearing price is $400, you're just giving free money to scalpers by setting the price at less than this. Granted, firms only get a small number of guesses at the market-clearing price. But surely it wouldn't have been hard to look at the secondary market prices from last year, hire some whizz-bang economist specialising in estimating demand curves, and figure out the correct price.

Nope, that would be too hard.

I did however make one very stupid error, which I now regret.

Once I saw that weekend 1 was effectively sold out, my instinct was 'Oh well, guess I'm buying on the secondary market. Let's read some other websites'. What I should have been doing is trying like crazy to buy tickets to the second weekend. It's a pretty damn good bet that if the first weekend is sold out in 20 minutes, the second weekend will be sold out pretty quickly as well. What you've got is a very strong signal that the tickets are underpriced. As a result, you ought to be buying weekend 2 tickets with the plan of re-selling them, doing this as a hedge against the likely price you're going to have to pay in the secondary market for your weekend 1 tickets.

Sure enough, on Stub-Hub,  weekend 1 passes start at $550, and weekend 2 passes start at $500. It would have been a pretty good hedge indeed.

Which just goes to show - mispricing doesn't hang around long. It's not enough to recognise it, you have to recognise it quickly and act on it. The race goes not always to the swift, but the arbitrage usually does.

Eugene Fama - So Full of Win

Check out but a mere handful of Eugene Fama's quality quotes in his mini autobiography of his life in finance:

My grandparents emigrated to the U.S. from Sicily in the early 1900s, so I am a third generation Italian-American. I was the first in the lineage to go to university.

Fans of linear extrapolation confidently predict that his children and grandchildren will soon be solving friendly AI and proving the Reimann Hypothesis.

I went on to Tufts University in 1956, intending to become a high school teacher and sports coach.

Huh! Given the guy is likely to win a Nobel Prize in Economics, I would not have guessed that.

Vindicating Mandelbrot, my thesis (Fama 1965a) shows (in nauseating detail) that distributions of stock returns are fat-tailed: there are far more outliers than would be expected from normal distributions – a fact reconfirmed in subsequent market episodes, including the most recent. Given the accusations of ignorance on this score recently thrown our way in the popular media, it is worth emphasizing that academics in finance have been aware of the fat tails phenomenon in asset returns for about 50 years.

Two points:

1. Spot on with the last part. When people start telling you that all of finance is disproved because returns aren't in fact normally distributed, this should be taken as fairly strong evidence that they are a) a moron, or b) a crank.

2. I love the self-deprecation in the 'nauseating detail'. The unstated implication is 'I have so much kick-@$$ work that I can disparage half of it and nobody will think any less of me.' This assumption has the virtue of being both hilarious and completely true.

The simple idea about forecasting regressions in Fama (1975) has served me well, many times. (When I have an idea, I beat it to death.)...In a blatant example of intellectual arbitrage, I apply the technique to study forward foreign exchange rates as predictors of future spot rates, in a paper (Fama 1984a) highly cited in that literature.

Again, Eugene Fama can say this about Eugene Fama without detracting in any meaningful way from Eugene Fama.

In 1976 Michael Jensen and William Meckling published their groundbreaking paper on agency problems in investment and financing decisions (Jensen and Meckling 1976). According to Kim, Morse, and Zingales (2006), this is the second most highly cited theory paper in economics published in the 1970-2005 period. It fathered an enormous literature. When Mike came to present the paper at Chicago, he began by claiming it would destroy the corporate finance material in what he called the “white bible” (Fama and Miller, The Theory of Finance 1972). Mert and I replied that his analysis is deeper and more insightful, but in fact there is a discussion of stockholder-bondholder agency problems in chapter 4 of our book. Another example that new ideas are almost never completely new!

Translation - Michael Jensen's ideas are almost never completely new [you thieving @#$%].

Though not about risk and expected return, any history of the excitement in finance in the 1960s and 1970s must mention the options pricing work of Black and Scholes (1973) and Merton (1973b). These are the most successful papers in economics – ever – in terms of academic and applied impact. Every Ph.D. student in economics is exposed to this work, and the papers are the foundation of a massive industry in financial derivatives.

I guess some papers are completely new after all! Unlucky, Jensen. (Actually he's generous to Jensen later, but it's still funny.)

What are the state variables that drive the size and value premiums, and why do they lead to variation in expected returns missed by market β? There is a literature that proposes answers to this question, but in my view the evidence so far is unconvincing.

To what extent is the value premium in expected stock returns due to ICAPM state variable risks, investor overreaction, or tastes for assets as consumption goods? We may never know. Moreover, given the blatant empirical motivation of the three-factor model (and the fourfactor offspring of Carhart 1997), perhaps we should just view the model as an attempt to find a set of portfolios that span the mean-variance-efficient set and so can be used to describe expected returns on all assets and portfolios (Huberman and Kandel 1987).

Make sure you point out this passage next time you're forced to sit next to some boring mediocrity droning on about how everyone at Chicago naively and dogmatically assumes that markets are always efficient.

Gold, gold, gold.

(Via Marginal Revolution).

Walking Past Cemetries

One of the things I always enjoy in small towns (in Costa Rica, as elsewhere) is the presence of small town cemeteries. Cities for some reason always max out the economies of scale, and you end up with entire suburbs of massive grandiose graves that nobody but the mourners ever walk into, and few people walk past. But in small old towns, people tended to be buried near where they died. The cemeteries you see tend to be more modest, but more everyday. They're as likely to be in the middle of town, and you pass them by on any given day.

I think that there is a definite value in having people being exposed in a common, everyday fashion to the resting place of their ancestors. Reflecting on mortality tends to make people less petty, and focus more on what's important. Steve Jobs said as much. Mozart said that he thought about death every day, and it helped him write music.

But the average person in modern society is enormously insulated from death. A lot of adults have never seen a corpse. Two centuries ago, this would have been unthinkable - death was just part of the landscape. And if you think that a close-up acquaintance with a corpse is too grisly, graves represent a civilised middle ground - one can contemplate mortality at a more abstract level, and reflect on how one ought to live a life.

Let pride be taught by this rebuke,
How very mean a thing's a Duke;
From all his ill-got honours flung,
Turn'd to that dirt from whence he sprung.

-Jonathan Swift. 

You've Gotta Be Kidding Me

This photo was taken in a random bathroom in a diner.

To paraphrase Mark Steyn - if the assumptions that this sign makes about the average person are true, then America has become too stupid to survive.

Against Internet Pile-ons

One of the things I missed while I was away was the chance to comment in a timely fashion on this interesting piece by Ken at Popehat on the ethics of making people 'internet famous', as he puts it. I generally agree with a lot of what Ken writes about, so it's interesting when I find myself disagreeing on something.

Let me start with the opening part of Ken's post, and then jump around a bit:

For some time, I've been thinking and writing about this question: is it "fair," and "right," that if I act like a sufficiently notable choad on the internet, I may become instantly famous for it, and the consequences of that fame may follow me and have profound social implications?
I keep coming back to two answers: (1) yes, and (2) to quote Clint,deserve's got nothing to do with it.

Obviously the answer is going to depend on exactly what you did in the first place. But usually, what sort of things make somebody become 'internet famous'? Usually it's something like the following:
-Making a racist remark or video
-Saying something particularly mean or off-colour
-Writing an obtuse and inadvertantly funny email
etc.

In general, does that deserve having a lot of nasty web posts come up whenever someone googles your name?

Punishments can be fair in one of two ways.

The first is that the punishment is fair to that individual. Given John Smith did XYZ, is it fair to John Smith personally that he suffers the consequences?

The second is that the punishment is fair given the overall scale of the bad behavior that society is trying to deter and the overall costs of punishment.

To see the difference, think about medieval punishments for theft and highway robbery. The punishment for these was incredibly severe, and harsher than for a lot of other more gruesome crimes. But why? Getting robbed isn't that bad in the scheme of things.

The reason is the lack of enforcement. It was very difficult to catch highway robbers. Hence, when the King did catch one, he had to do horrible things to make an example out of them. This was the only way he could hope to deter crime, without a police force to do it for him. The individual punishment for that robber was surely not fair, but the overall social aim may have been worth it (or not. But it's not an indefensible proposition).

In the case of the generic 'guy acting like an @$$hole' and getting a whole ton of nasty internet posts, I think it's very rare that the actions are fair to him personally.

Ken disagrees:

Some people worry that the result is unduly harsh or unfair — that anyone can become a pariah because of "one mistake." I'm all for the concept of mercy, but I think that concern is misguided for a number of reasons. First and most importantly, the internet is manic and has a short attention span. You have to do something truly epic to go viral. One angry email won't do it unless it is so extreme that it reflects a disturbed mind. If you "just have a bad day," you'll slip into obscurity quickly. It takes talent, or sustained effort, to become internet famous. Consider the case of XXX of Brandlink Communications. Like Christoforo, he acted like an ass, and won a day or two, tops, of internet fame — but now he's slipping inexorably into deserved oblivion. And he's still employed. And it's only been six months, but if you say YYY, people will say "who?"

It's true that the internet has a short attention span. In terms of the number of people who will remember your name offhand, your internet fame will be short-lived. But the internet has an incredibly long memory. When people actually search for you, for whatever reason, they'll still find all the same stuff.  If you want to see the example of the YYY name above, see what searching for her name produces. You may not remember her name off the top of your head, but someone who searches for her is going to find that stuff for a long time to come. And that is what makes it unfair. The woman in question acted rudely on a train, and was caught on video. I confidently predict that the nasty web coverage will still be found by people searching for her name for a longer period of time than a person would serve a prison sentence for manslaughter.

Next, Ken argues that this doesn't matter, because everyone can make up their mind:

Finally, some argue that internet infamy can be "out of proportion" to the offense. Perhaps. But isn't that the call of every person who reads about your actions? People don't win instant internet notoriety based on third-hard accounts of conduct. They win it because they do something on video, or in writing, that's notable. If what they did really isn't that bad — if it's truly been blown out of proportion — then can't future readers determine that for themselves? There's more than a whiff of paternalism to the "blown out of proportion" concern — it seems to suggest that we ought not write about someone's misdeeds because future readers can't be trusted to assess their significance themselves. I disagree. ZZZ's future employers, employees, associates, and friends are perfectly capable of reading up on the situation and making up their own minds.

Sure, but there's still a huge selectivity. Every day, hundreds of millions act like rude d***heads in some situation or other. How many of those are likely to have all their future employers focusing on one bad specific incident in their lives, even if they do 'make up their own mind'. The argument seems to be 'hey, maybe they won't all punish you for it!'. But that doesn't speak to the selectivity of it all. There's still a sizable negative cost, and it gets applied in a very arbitrary and capricious way.

Okay, so maybe it's not fair to the individuals, but is it worth it overall? Ken argues yes:

For the last hundred years, people who care about such things have been complaining about the anonymity of modern life. People who used to live in small towns live in big cities, and people are turned towards television and globalized, homogenized culture rather than towards their neighborhood. One consequence is the ability to treat people badly — even in serial fashion — with relative impunity. It used to be that you'd get the reputation as the town drunk or the town letch, or the village idiot, and that reputation would follow you until you move on to another town. But now many people don't even know their neighbors, let alone their whole "town."
With respect to certain bad behavior, the internet can change that — it can transform you into the resident of an insular town of 300 million people.

But here's the meat of my objection - very few of the major cases of internet fame involve people actually doing anything, as opposed to merely saying something.

And I take a strong stand that mean words on their own just aren't a big deal. Unless you're actively inciting criminal behaviour, words don't matter that much. Make a really mean comment about Trig Palin? Post a racist video on the internet? That makes you an @$$hole. Know what else makes you an @$$hole. Littering. Cutting people off in traffic. Peeing on the seat in a public toilet and not wiping it up. And a million other things that we don't get the vapours about, even though I don't want to associate with people who do them regularly. Rudeness is never going to be eliminated, and I suggest that you may well not actually enjoy living in a society where it had been. It would certainly be a lot more boring.

For the most part, the tendency towards internet pile-ons is associated with a more pernicious trend - sympathetic offense. That remark wasn't directed at me, but I'm going to be outraged on behalf of somebody else, even if that someone else isn't personally offended. This of course leads to what John Derbyshire memorably described as the 'evolution towards the ever thinner-skinned'. Here at Shylock Holmes HQ, we are proud to fight against this trend.

What I don't like about internet pile-ons is the sense of gleeful indignant rage they involve. The people piling on usually are really enjoying laying the boot into someone, assured of their own righteousness.

And that is always an ugly emotion to watch when spread across a mob, even if just an internet mob.

I respectfully dissent.

Costa Rica

At long last, back to the keyboard!

A few random thoughts from Costa Rica:

- I've never been in a place where the speed limits on highways change so frequently. The base will be 80 km/h, but at the first sign of any human activity, it will first change to 60 km/h, then to 40 km/h (!!!). Even when there's scarcely any sign of human activity, and the road is completely straight. Apparently this is all in accordance with the 'All Speed Limits Must Be In Multiples of Twenty Act of 2004'.

- Related to the above, I got pulled over by a traffic cop at one point, notwithstanding that I was going the same speed as everyone else. Sure enough, it was going to cost me a fine of US$600 to be paid at the bank if he wrote up the ticket formally, but if I paid the ticket in cash right now it would only cost me $100. After such a sum changed hands, he was quite friendly. Moral of the story - if you look like you're shake-down-able, carry cash.

- Apparently in Costa Rica, they abolished the military altogether in 1948! Bizarre. The whole country thus seems to be a strong violation of Ralph Waldo Emerson's observation that "nature has made up her mind that what cannot defend itself shall not be defended."

- A guidebook description like 'awesome volcano where you sometimes see lava flows, located right next to scenic cloud forest' has a tendency in reality to resemble 'base of a hill-like structure covered in impenetrable clouds which they won't let you approach'.

- I spent New Years Eve in a beach town called Montezuma. Apparently Costa Rica has a very relaxed approach to liquor licensing, viz in practice anyone can drink anything anywhere. The bar I was at had a lot of teenagers who looked about 15, and two girls walking around who were clearly no more than 12. It's kind of jarring to see them in a bar drinking, but sure enough the world didn't fall apart. The bouncers were only concerned if you were starting a fight or throwing up somewhere, and had zero interest in who was entering or leaving, whether you were taking your drink out to the beach. In other words, exactly the kinds of voluntary transactions that people engage in when free of government interference! The lady who ran my hotel was saying that on the Nicoya peninsula, there aren't any traffic cops, so most people don't have proper licenses, and she once saw an eight-year-old driving a pickup truck.

- The combination of warm water and good surf beaches is hard to beat. If Hawaii weren't so far away, I imagine it would be a massively populated area. I imagine in time it probably will be anyway.

"No Substitutions"

Are there any restaurant policies more obnoxious than the 'No Substitutions' written on a menu? It seems that every wannabe hipster place now decides that they care so much about their craft that they can't possibly let you ruin that burger by adding bacon or changing the cheese it comes with.

And that's usually what it is, too. It's not like these are Cordon Bleu trained chefs with such a passion for their food being served in the correct way that they'd rather lose you as a customer than alter the dish that took them 5 years to perfect. No, more likely it's a god damn panini, and they won't substitute cheddar cheese for Swiss. Would this breach the conventions of the Sacred International Brotherhood of Bread-Toasters?

There's only a couple of possible explanations for this, and they're all bad.

One is that everything is made in advance, and thus they can't change it. Unless it's pulled pork that's been cooked for hours or a sauce prepared in advance, I doubt it. And when that's the case, usually they'll just tell you for that one item, it won't be written on the menu.

Two is that they steadfastly refuse to spend more than 45 seconds preparing your particular panini, and it would be a huge hassle to fetch the other cheese. A variant of this is that the store is run by obsessively cheap @$$holes who are worried that customers are going to come in and request 'Would I be able to substitute the cheez whiz for some beluga caviar instead?', thereby blowing out the profit margin.

This is weak, because there's a much simpler solution - charge them for it. If it's a hassle? If the new ingredient costs more? Add a buck to the price, or whatever it takes for you to profitably do the thing they're asking. That will quickly determine which customers really want it. Hint, if I'm asking, that's me.

Three, and I imagine most likely, is just that they're giant hipster douchebags with a carrot up their @$$ about how good their food is. I once knew a trendy pub place where the only burger they served had blue cheese on it. And they would actually refuse people that asked for different cheese. Yeah, way to be a purist about a type of cheese that lots of people really don't like. What happened to 'the customer is always right', knob-jockeys?

Four, (and this is the most charitable explanation) is that the owners just got sick of dealing with annoying customers wanting twenty-thousand things done to their sandwich. Look, I hate being in line behind these folks too. But that's why it's called a customer service profession. Your job exists partly to kiss the butt of whichever clown comes in wanting to buy your stuff. At the point that you're unwilling to do that, you're in the wrong profession.

I broadly stopped going to these places. Frankly it's very rare that I want to change an item, but these notices just give me the scours. Clearly you turkeys are too good for my low-brow dollars! I'll just have to take them elsewhere.

Why Do Toilets Explode?

I remember GS used to complain to me about Yank toilets, and how when you flushed them, often they would have such a violent flushing mechanism that you'd end up with water on the seat. I never understood why they didn't design them so that they didn't explode everywhere. Surely this is something that toilet designers think about? I can't imagine there's an active demand from customers along the lines of 'No, unless it just goes KABOOM I can't be certain that it will never block'.

Anyways, I had reason recently to reflect on the hubris of this in the context of Chesterton's Fence. As Megan McArdle described it:

In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, "I don't see the use of this; let us clear it away." To which the more intelligent type of reformer will do well to answer: "If you don't see the use of it, I certainly won't let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it."

This paradox rests on the most elementary common sense. The gate or fence did not grow there. It was not set up by somnambulists who built it in their sleep. It is highly improbable that it was put there by escaped lunatics who were for some reason loose in the street. Some person had some reason for thinking it would be a good thing for somebody. And until we know what the reason was, we really cannot judge whether the reason was reasonable. It is extremely probable that we have overlooked some whole aspect of the question, if something set up by human beings like ourselves seems to be entirely meaningless and mysterious. There are reformers who get over this difficulty by assuming that all their fathers were fools; but if that be so, we can only say that folly appears to be a hereditary disease. But the truth is that nobody has any business to destroy a social institution until he has really seen it as an historical institution. If he knows how it arose, and what purposes it was supposed to serve, he may really be able to say that they were bad purposes, that they have since become bad purposes, or that they are purposes which are no longer served. But if he simply stares at the thing as a senseless monstrosity that has somehow sprung up in his path, it is he and not the traditionalist who is suffering from an illusion.

(Her article is about the so-called tax loophole for hedge fund managers that Democrats wanted to close, and is well worth reading, but that's another story).

Anyway, I wish I could tell you that I had reflected unprompted on possible reasons that toilets might be so violent and figured it out, but this is not the case.

Instead, I had observed a semi-exploding toilet on the fifth floor of a building one day. For some reason I had cause later in the day to be on the eighth floor of the same building, and the toilet was considerably more quiet. Same building, same toilet, different effect.

And suddenly it was obvious - water pressure! I imagine that it probably is quite an engineering challenge to have exactly the same water pressure at every floor of an eight-storey building, particularly if the pipe system is somewhat old. In order to get acceptable pressure everywhere, the simplest setup is just to have pressure that's slightly too high on the lower floors and slightly too low on the higher floors. Hence the fifth floor toilet explodes a bit, and the eighth is less powerful.

I made a mental note to check this - when there's a toilet with a violent flushing mechanism, I'm going to take note of what floor I'm on, and how many floors the building has. We'll see how well this hypothesis holds up.

But in the mean time, until you understand why toilets explode, you may want to hold off on demanding that they be fixed.

Paging Dunning and Kruger...

There are few things more irritating than popular journalists who try to take on an academic orthodoxy by pretending to be soooo much smarter than those ivory tower pinheads, and try to mask their poor understanding of the subject with bluster and scorn. Many academic ideas are wrong, but it's odd that a whole profession is comprised of morons.

Over at Forbes, Steve Denning has an article entitled "The Dumbest Idea In The World: Maximizing Shareholder Value". Right off the bat, you can tell from the title that it's going to be a howler. (I know titles are sometimes chosen by sub editors, but it's not unrepresentative). Maximizing shareholder value is the dumbest idea in the world? Dumber than witch burning, or the modern flat-earth movement, or communism, or astrology, or... okay, so nobody with half a brain can actually believe that, they're just being provocative.

The author is positing an underlying argument that's actually quite reasonable, namely that CEOs should focus on improving earnings, rather than focussing on exceeding market expectations. Personally, I tend to agree. But it's not enough to just make this point, Denning has to pretend that anyone who ever said anything to the contrary is a disingenuous fool.

Take this hilarious quote from the article:

Martin says that the trouble began in 1976 when finance professor Michael Jensen and Dean William Meckling of the Simon School of Business at the University of Rochester published a seemingly innocuous paper in the Journal of Financial Economics entitled “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.”

The article performed the old academic trick of creating a problem and then proposing a solution to the supposed problem that the article itself had created. The article identified the principal-agent problem as being that the shareholders are the principals of the firm—i.e., they own it and benefit from its prosperity, while the executives are agents who are hired by the principals to work on their behalf.

Yes, read that again. This imbecile is actually claiming that Jensen and Meckling (1976) created the principle/agent problem! Because until they pointed it out, no manager in history had ever thought to further their own interests instead of those of the shareholders. This article was like the poison apple in the Garden of Eden, and once managers were finally told 'hey, you know you can jack up your pay at the expense of shareholders?', then the age of the philosopher-king managers was over.

Honestly, I'm just baffled by this claim. The principal agent problem in J&M relies on the following assumptions:
1. Shareholders are the owners of the company, and they appoint the board, who hire managers on the shareholders behalf.
2. Shareholders will seek to maximise the value of their shares.
3. Managers, once appointed, will seek to act in their own self-interest.
4. The interests of shareholders and managers will sometimes be in conflict.

Seriously, which of these four assumptions wasn't true before 1976? It's just bizzarre. Denning wants to claim that managers never tried to maximise shareholder value before 1976. Well call me crazy, but I'm pretty sure that managers who weren't at least trying to do that got fired pretty quickly, and this had nothing to do with Michael Jensen. The author may not like the J&M solution of paying managers in equity, but that's completely different from smugly saying that J&M "created" the principal agent problem.

Let's just say that not only is maximizing shareholder value not the dumbest idea in the world, it's not even the dumbest idea in the article. And if Jack Welch and Roger Martin (Dean of the Rotman School of Management at the University of Toronto) feel differently, then so much the worse for them.

Steve Denning, you are an arrogant, pontificating fool.

Merry Christmas!

To all my loyal readers, wishing you a most merry Christmas and a happy new year. Thank you for joining me this past year, you all make the blogging experiment worthwhile. A year and a half, and still going strong!

As for me, I shall be holidaying around Costa Rica for a couple of weeks. Theodore Dalrymple recently described it thus:

In the late stage of British colonialism, for example, the British fondly imagined that they were bequeathing to various African countries institutions that would function in the same way without them as with them. In retrospect, this now seems an almost laughable belief. No better example of this could be had than Uganda, that land that Churchill called ‘the pearl of Africa.’ (Beware of pearls of continents, and above all Switzerlands of continents: for them, special horrors are usually reserved. The only exception to this rule known to me is Costa Rica, the Switzerland of Central America.)

I shall let you know how apt that description seems.

In the mean time, expect posting to be lighter than normal until about January 10 or so, when things will be back to full strength.

Oh, and one final request for you all over the future 12 months - if you think of something funny or interesting about a post, write a comment! I know I have lots of hilarious and awesome readers - the wit and wisdom that you would share with me if we were discussing these matters in a conversation would surely be appreciated by the other readers in blogland.  I imagine that few readers ever appreciate how valuable their comments are until they start a blog themselves. Until their blog hits the big time, at which point the sentiment reverses as the ratio of trolls and spam to real insight becomes unmanageable. But until such time, your comments are like Christmas presents to me, but every day of the year. :)

Yours faithfully,

Shylock

[Government] Money for nothing, and your cupcakes for free

TSA Agent steals passenger's cupcake, claiming the icing was 'too gel-like'. In contravention of TSA policy, of course. A minor inconvenience in the scheme of life, but yet one more example of bureaucratic stupidity and arbitrary theft.

I will bet $100 at 4 to 1 against, that the agent also ate the cupcake. Notwithstanding the official rationale that the gel on the cupcake might in fact be C4. Which, if the agent had the slightest suspicion that this might be the case, they certainly wouldn't have done.

This of course gives lie to the official rationale, exposing it as complete nonsense.

But don't worry, the TSA has sprung into action to investigate!

"In general, cakes and pies are allowed in carry-on luggage," said TSA spokesperson James Fotenos, adding they were looking into why this cupcake was confiscated.

I don't know about you, but I am just dying to find out the results of this investigation, and to hear about the agent in question being fired for stealing and eating a passenger's food. Yep, any day now...

Better Late Than Never

Fancy that, another 200-odd people drowned off the cost of Indonesia while trying to reach Australia. *Yawn*. What's on TV?

And finally, at long last, a couple of the more intellectually honest among Australia's left are starting to admit the obvious truth: having more lenient policies towards asylum-seekers encourages more asylum seekers to journey to Australia in leaky boats, which leads to more deaths.

Tim Blair points out that lefty Australian academic Robert Manne has finally woken up and smelt the coffee:

For its part, the left has been unwilling to concede that the Pacific Solution succeeded in deterring the boats. Between 1999 and late 2001, 12,176 asylum seekers arrived by boat. In the years of the Pacific Solution - 2002 to 2008 - 449 arrived. Since its abandonment, 14,008 asylum seekers have reached Australian shores.

The left's unwillingness to acknowledge the obvious has been of great political significance. Following Kevin Rudd's election in 2007 a wise asylum seeker policy would have involved leaving the Pacific Solution intact but humanising policy by increasing the annual quota of refugees and ending mandatory detention. The internment camps on Nauru were virtually empty. The undeniable cruelty of the policy had reached its natural end.

No one on the left with an interest in asylum seeker policy - and I include myself - was far-sighted or independent or courageous enough to offer the incoming Rudd government such advice.

Well, I'm certainly not of the political left, but I've pointed this out on multiple occasions. Good to have you on board, Robert (no pun intended).

There is only one way to solve this problem. Let's take as given the number of asylum-seekers we're willing to accept. The problem is that the current system incentivises people to attempt risky crossings because once they reach Australia, their application has a vastly higher chance of success.

And that's what you have to end. The only way the boats, and the senseless deaths, will stop is if you actually disincentivise attempting the crossing. Here's the Shylock policy - absolutely no applications for asylum will be accepted from anyone making a ocean crossing and arriving in Australia illegally. Every such person will be summarily deported. Applications for asylum will only be accepted at Australian embassies in foreign countries.

And that is literally all you'd have to do. Visibly enforce that a few times, and you don't need to worry about the cruel detention centres that Robert Manne dislikes as a matter of compassion (and not unjustifiably).

But even past this point, there are two large objections to the whole enterprise.

The first is this - Indonesia is a pretty tolerant place. If you've made it that far, it's highly unlikely you're still at risk of any kind of political repression. So why should Australia accept you as a refugee on the basis that you were persecuted in Afghanistan, notwithstanding that you've already escaped such persecution?

And the second even less politically discussed point is made quite convincingly by Tim Blair

Survivors of the latest doomed voyage claim that everyone aboard each paid between $2500 and $5000. Individually, those amounts would easily cover air fares to Australia. Collective amounts – Saturday’s vessel carried around 250 passengers – would be sufficient to purchase several vessels of greater seaworthiness than that which sank.

Refugee advocates don’t like to discuss why these safer options are not explored. The reasons are to do with identity and culpability. Those arriving in Australia by air require passports, which makes easier the task of disproving the legitimacy of asylum claims. Those arriving from Indonesia on boats commonly carry no identification at all, allowing certain freedoms with their stories.:

In other words, it is quite reasonable to have a presumption that a lot of the people arriving by boat probably have bogus stories.

This doesn't mean that we shouldn't care about their drowning deaths or them being locked up in detention. But for the people who really are economic migrants, there is a quite justified revulsion at rewarding their desire to bypass the normal (long) queues to get into Australia. And if the policy of detaining illegal economic migrants on Nauru has deterrent effects but is harsh on the illegal economic migrant themselves, I can't get too saddened by that.

Gravity and the Curse of Knowledge

The problem with knowing something is that it makes it very hard to accurately put yourself in the shoes of someone who doesn't know it. Try as you might, it's very difficult to properly imagine the thought processes of someone who lacks knowledge. Things you know always seem obvious, even though they're not obvious at all when you don't know them. Psychologists call this the curse of knowledge.

When you suffer from the curse of knowledge, previous generations tend to look remarkably stupid. How can anyone believe the earth was flat? What morons they must have been!

But think about it - do you believe that humans now are genetically much smarter than people 500 years ago? Or are you just taking for granted the obviousness of the things that someone else told you, but you didn't have to figure out for yourself. I'd say you're safer to bet on the latter.

One case that always struck me was gravity. The earliest theories of gravity were from Aristotle's Physics. If you fired a cannonball, that cannonball would proceed in rectilinear motion, then fall straight back down to the earth. This was because it was made of the earth element, which wanted to be close to the earth.

So this predicts that if you fire a cannonball, it should look like this:

So here's the problem - clearly cannonballs don't actually fly like this! Now, admittedly it's hard to trace out the path of a rock in the air. But there's one very easy way for (male) physicists to check - just look at the path of your urine when you take a pee! Does it look like a triangle shape? No, not even close. It looks like a parabola. And that should immediately suggest a relationship of y = x^2 . 

It took until Newton, almost two millenia after Aristotle, to formalise a better theory of gravity. This theory actually predicted that the cannonball should follow a parabolic shape:

So why did people take so long to figure this out? Couldn't they see that the relationship was a parabolic  y = x^2, and figure out the rest from there?

Oh, you fools, cursed by knowledge! The first step is the known knowns - the curses you know you have. You know that you know about gravity, and thus your ancestors not knowing seems particularly idiotic.

But what about the unknown knowns - the curses that you don't even know you have?

Let's step back a second - when exactly in human history did people even have a clear idea of what a parabola was, and what y = x^2 meant?

When you draw a graph of y versus x for some function, the area you draw it on is known as a Cartesian Plane. This is named after Rene Descartes, who lived from 1596 until 1650.

In other words, even the idea of graphing y versus x (for anything, let alone being able to spot a parabola) dates all the way back to ... the 17th Century. 

Are you starting to see how much you're taking for granted when you look at modern science and think of how dumb people in the past were.

Rene Descartes was a muthaf***ing genius. And that's how smart you had to be to even come up with the idea of drawing a parabola on a graph, let alone understanding what that might have implied about a theory of gravity.

Understanding the curse of knowledge leads to a much greater humility about previous generations. The vast majority of your knowledge is unearned by you, and if you hadn't had it gifted to you by the accumulated wisdom of generations of men much smarter than you, it's highly doubtful that you would have figured it out on your own.

Just like your ancestors didn't.

The False Consensus Effect, Geography, and Going to University

Apologies for the lack of updates - I've been hanging in Miami for a few days.

And this got me thinking about the false consensus effect. After the sunk cost fallacy, the false consensus effect is probably one of the biases that tends to lead you astray the most. As wikipedia describes it:

[T]he false consensus effect is a cognitive bias whereby a person tends to overestimate how much other people agree with him or her. There is a tendency for people to assume that their own opinions, beliefs, preferences, values and habits are 'normal' and that others also think the same way that they do. This cognitive bias tends to lead to the perception of a consensus that does not exist, a 'false consensus'.

The false consensus effect seems to show up the most when you're not explicitly thinking about 'what do other people want, as evidenced by the things they do and say?', and instead just think 'what is desirable?'. Because implicitly the second question is really asking 'what do I think is desirable', and then extrapolating this to everybody.

People seem to do this a lot with preference for places to live. I tend to be in the category of people who prefer large coastal cities, ideally with warm weather. And it's easy to think that everyone wants these things. But at least according to revealed preference, they don't. Lots of people want to live in Toronto and Chicago and other cold weather cities. Lots of people really dislike temperatures above 80F (~27C). Lots of people want to live in middle-of-nowhere small towns, and can't stand the thought of having to drive half an hour to get to work.

Now, none of these are strong preferences for me. But the mistake is thinking that people who live elsewhere have the same preferences as you, but just have different constraints. He lives in that tiny town because his family is there. She lives in Chicago because it's the only place she can get a job. But if you took those things away, then surely everyone wants to live in Miami.

No, no they don't. You want to live in Miami, but maybe they just want different things than you do.

Now, if people are pressed, they can imagine that such alternative preferences might conceivably exist. But the perniciousness of the fallacy is that it's easy to get slack and just extrapolate your own preferences without thinking explicitly about whether they are going to be shared in this particular case. It's easy to overestimate how much your preferences are common to everyone.

Preference for geography is a very mild example of this bias. But it's a bias that's easy to slip into on all matters. And it gets even worse when the preferences are crazily different from your own.

I remember Mark Steyn had a very sharp observation about this a few years ago, when discussing Condoleezza Rice's views on the preferences of the Palestinian people:

"The great majority of Palestinian people," Condi Rice, the secretary of state, said to commentator Cal Thomas a couple of years back in a report that first appeared on JWR, "they just want a better life. This is an educated population. I mean, they have a kind of culture of education and a culture of civil society. I just don't believe mothers want their children to grow up to be suicide bombers. I think the mothers want their children to grow up to go to university. And if you can create the right conditions, that's what people are going to do."

Thomas asked a sharp follow-up: "Do you think this or do you know this?"

"Well, I think I know it," said Secretary Rice.

"You think you know it?"

"I think I know it."

I think she knows she doesn't know it. But in the modern world there is no diplomatic vocabulary for the kind of cultural fault line represented by the Israeli/Palestinian dispute, so even a smart thinker like Dr. Rice can only frame it as an issue of economic and educational opportunity. Of course, there are plenty of Palestinians like the ones the secretary of state described: You meet them living as doctors and lawyers in Los Angeles and Montreal and Geneva but not, on the whole, in Gaza.

Let us put aside for the moment the contentious questions of Palestine and Islam specifically, and consider purely as a matter of demographic estimation exactly how many mothers in the world would prefer their children to die in some military action than to go to university. Assuredly such people exist. Their preferences may seem bizarre to you and me. But the point is that it will always be tempting to assume that people with preferences so different from your own must necessarily be in the tiny minority. In fact, these are the types of issues that the false consensus effect is likely to impact the most.

In other words, when you are forced to estimate the prevalence of opinions widely different from your own, you would do far better to begin by examining specific data that bear on the question - survey responses, election outcomes, whatever, - rather than just assume that deep down, everyone must want the same thing as you.

Forget the Palestinians, and consider this instead. Back in 1994, thousands of Rwandan Hutus woke up each morning, and rather than 'just wanting a better life' as Condi Rice understands the term, what they actually wanted was to hack lots of Tutsi civilians to death with machetes. And they did so. For 100 days in a row.

Sometimes a group of people can have entirely consistent, widely shared preferences that are radically different from your own. What you do with that knowledge is up to you, but you do yourself no favours by pretending to the contrary.

Why American Flight Attendants are so Rotten

My guess? Age discrimination laws. Once upon a time, the de facto rule was 'we keep you employed as long as you're young, hot and friendly. When these change, hit the bricks'.

This meant that being a flight attendant was one of those jobs that women (and at the time, it was just women) planned to do for a while then quit, like modeling.

Now, if you start firing people over 40, you get a massive lawsuit under the Age Discrimination in Employment Act of 1967. I would have thought that airlines would have implemented a 'when you're 35 you're out the door' policy, but they haven't. My guess is that unions make the rest of it hard.

But the net result is that flight attendants are less attractive. In addition, it seems that dealing with the flying public tends to grate in you over time. So you end up with a lot of older flight attendants who (in my anecdotal experience) are nasty and grumpy all the time. But since it's hard to write people up for that, it just persists.

The only major exception to this trend seems to be Singapore Airlines. The Singapore government decided that since it is in charge of the airline, messy things like discrimination and labor laws weren't going to stand in the way of providing young, hot, and impeccably trained flight attendants. Until they're 30, then they're never seen again. It's ruthless, but competitive markets that maximise consumer surplus usually are.

A Proxy for The Quality of a Sushi Restaurant

If they bring you a spoon with your miso soup, it's probably not good.

If they offer you a spoon, it's probably okay.

If a spoon is neither brought nor offered, it's probably good.

I've seen exceptions to all three, but this tells you the type of clientele they're used to serving, and how much they know (roughly speaking) about Japanese food. Foodie wankers may be obnoxious in their own way, but I still want to free ride on their restaurant choices.

Gingrich lead develops some lebensraum over other candidates...

Hitler has a thing or two to say about the Republican nomination:



Seems pretty accurate to me.

Had this been real, it could have been added to 'Hitler was a vegetarian' and 'Hitler really lowered German unemployment!' in the category of 'trivial facts frequently claimed by people to partially offset the enormous evil of World War 2 and the Holocaust'.

(Via Ace of Spades)

PC Non-Sequiturs About Terrorism

Apparently a gunman in Belgium named Nordine Amrani shot and killed three people in Liege, Belgium, and wounded 75.

Here's the BBC with some helpful context:

Officials said the attacker acted alone, ruling out terrorism.

Uhhh, this rules out terrorism... how, exactly? Surely nobody acting alone could ever be involved in a politically-motivated act designed to inspire civilian terror!

Any bets as to whether you think they'd apply the same logic to Timothy McVeigh or that nutcase in Norway? Anyone at all? I'm offering highly competitive odds.

Woolly Mammoth Update

Via SMH, apparently there are now betting odds on when the Woolly Mammoth will be cloned, and they are the following:

2014 or earlier: 8 to1.
2015 or 2016: 2 to 1.
2017 or 2018: 5 to 2.
2019 or 2020: 11 to 4.

It's easy to miss the enormous picture that these odds are conveying. To bring it into focus, let's convert those odds to probabilities and work out the market's estimate of the cumulative probability that a Woolly Mammoth will be cloned by the end of year X:

2014:     11.11%
2016:     44.44%
2018:     73.02%
2020:     99.68%!!!!


Hoo-ah! According to the market, the dream is looking good!

Harry Reid - Imbecile

Listen to this choice quote from the Senate Majority Leader:

'Millionaire job creators are like unicorns - they're impossible to find, and don't exist.'

Hand that socialist fool control of the economy!

Okay, okay, surely a quote this stupid has some additional context that somehow makes it coherent, right?

See the whole clip and decide for yourself.

If you (quite sensibly) don't want to spend 3 minutes of your life watching Harry Reid, let me summarise the context, : apparently nearly everyone with over a million dollars 'is lawyer or a hedge fund manager', and we know that there aren't any millionaire job creators, because NPR went around looking to try to interview one and said they couldn't find any. So them someone (at this point in his ramble, it's unclear whether it's still NPR doing the searching) started looking through Facebook (no, really), and found some guy who claimed to be a millionaire who was hiring, and he supported the Reid tax on millionaires.

Yes, that is the larger context in which this is meant to make sense.

Apparently according to this buffoon, individuals and small business owners create jobs, but only when their net worth is less than $1 million.

Because $1m is that lucky number where people just decide to coast, and develop a hatred of hiring anybody. Aggressive hiring expansions only take place by those with less net worth to pay their new employees, don'tcha know? No wait, the boss is paying for hundreds of jobs only out of the massive company earnings instead, even though these earnings somehow aren't translating into him having a net worth above six figures.

Next comes the second great plank in this Jenga Tower of Stupid, the claim that you can only be a job creator if you're a small business owner. Because it's not like a corporation ever hired anybody! Small business may be important, but it employs around half of private employees. Were you hired by Microsoft? Bad luck, because we couldn't get Steve Ballmer on the phone to claim to be a 'millionaire job creator', your job just came out of the ether!

Maybe it's because senior executives in large corporations don't have the hubris to claim that 'I created jobs'. Doesn't mean that they're not contributing. And maybe, just maybe, when your net worth starts to get higher, you're running a sufficiently large and complicated company that you're no longer arrogant enough to claim that every job there is created by you, and you alone.

But what about all those evil lawyers and hedge fund managers? They're not hiring anybody?

Well how do you think corporations fund themselves? The lawyers don't just bathe in a vault of money like Scrooge McDuck. They tend to invest it in ... bonds and stocks! Which are issued by the corporations, and the capital from which is used to expand.

The clip itself was posted by the Democrats, who liked this speech so much that they advertise it.

As Ace of Spades said about this incident:

I am actually moving away from the question of "Can America survive?" to "Should America survive?" 

Indeed.

Update: I also forgot to mention the other distinct possibility for explaining why NPR can't find any millionaire job creators - people who have a million dollars may find it in poor taste to publicly boast about that fact, and the only exceptions are people who are doing so as a way of ostentatiously flouting their socialist bona fides. I can just imagine the phone call now - "Hi, this Jim Jones from NPR, and we were wondering whether you, John Smith, would like to be the public face of 'millionaires who oppose tax hikes'." Yeah, who could possibly refuse that interview?

Charging By The Hour

I'm always amazed by the number of jobs and services that are paid or charged by the hour.

Charging by the hour makes the most sense for jobs where the main requirement is actually just to be there for a given amount of time - working at a front desk, or some sort of customer service position that doesn't have a big up-selling component. If you're serving ice cream, the store really needs you to be there for those eight hours, and it makes sense to pay accordingly.

But the most mysterious are those when the job is complicated and based around a particular outcome, not a length of work. Take something like legal work. At least in Australia, the vast majority of it is charged by the hour, with different lawyers having different hourly rates.

This creates exactly one good incentive effect - it means that your lawyer does not have incentives to scrimp and save on the level of work they're putting in. Incentivising your lawyer to spend a few more hours at the office to look up other possible defenses to your embezzlement charge is probably something you actually want to do. This becomes particularly important when the amount of work required is not clear up-front, which may well be true in legal cases. 

But balance this against all the other bad incentives this creates. First, the moral incentives - it punishes honesty. Their inputs are typically unobserved, and thus you create huge incentives to overbill. The honest ones won't, but they're going to be hurt for it. And  I never, never want to incentivise dishonesty. It's not as clear as outright fraud either - since lawyer time is billed out in six-minute increments, there's always a question of exactly how much to deduct. If you do 30 minutes of work, have a 2 minute toilet break, do another 30 minutes of work, grab a coffee and check your work email  for 4 minutes somewhere in the interim, is that 10 units or 11? What if you don't remember exactly when you started? Do you just round it up to some other number? I don't imagine the average lawyer worries about these questions much, but they've come to some accommodation on this, and are getting rewarded or punished accordingly.

The second is that charging by the hour actively punishes anybody who finds a more efficient way to solve a problem. If you find a way to solve a client's legal problems in a tenth as much time, you're going to earn less than the guy who just chugs through hours of sort-of-relevant research. A lawyer who can demonstrate an ability to solve problems quickly in several situations might eventually be able to charge a higher rate. But clients who don't know their reputation might shy away from someone who charges a lot. And what if the client has very little idea how long the task should take? Then they won't even appreciate the fact that you've been efficient.

The law isn't even the worst example of hourly contracting - having web designers being charged out by the hour is even more barmy. Surely you can have a rough fixed-price estimate of how much to charge for a basic web page?

Generally speaking, wherever I have a choice I'd rather pay people a flat fee for whatever the service is, and then build in explicit incentives where necessary ($50K upfront, another $50K if I'm found innocent, another $25K if my sentence is less than 3 years, etc.). Of course, it's hard to negotiate this with your lawyer, but when I'm writing the contract I'd rather do it this way.

More practically, I do have one choice available to me, and it is this - I don't want to work in any industry where people are charged out by the hour. And I especially don't want to be someone else's employee in that industry where I'm being paid a fixed salary but being charged out by the hour. It means that it's going to be very hard to have any sort of work-life balance and be successful, because the incentives of the firm are just to have you spend more time at the office.I also don't want to worry if I'm doing work too quickly from the perspective of the firm. Having to do a worse and slower job because the firm effectively demands it would be soul-destroying.

The Conversations of Doomed Men

I read this last night, and have found myself strangely moved and preoccupied with it ever since.

Popular Mechanics has a transcription of the black-box record aboard Air France Flight 447, the plane which crashed into the Atlantic Ocean on June 1st, 2009, killing everyone on board.

What's very interesting is that they recount the conversation between the two co-pilots who were flying at the time, and intersperse it with descriptions of what was actually going on with the plane as the discussion took place.

Let me quote the part of the article that is most puzzling:

The Airbus's stall alarm is designed to be impossible to ignore. Yet for the duration of the flight, none of the pilots will mention it, or acknowledge the possibility that the plane has indeed stalled—even though the word "Stall!" will blare through the cockpit 75 times. Throughout, Bonin will keep pulling back on the stick, the exact opposite of what he must do to recover from the stall.

I quote that much merely to encourage you to read it all- if I quote more, I am going to do injustice to just how strange it is to read the whole transcription. So you should definitely read the whole thing. And when you're done (and only then), come back and read the rest of my thoughts below the jump:

Comedy Gold

Ace of Spades knocks it out of the park discussing the hilarious angsty email doing the rounds, from a guy who got rejected after one date to his romantic interest.

Funniest thing I've read in ages. Go, read.

Going Gentle Into That Good Night

There's an article that has been getting a lot of press recently, written by a doctor called Ken Murray. The subject of the article is how doctors themselves often don't wish to undergo lots of invasive procedures when they approach the end of their own lives. It's a fascinating article, and well worth reading the whole thing.

The question is, why not? The author suggests that it comes from a greater understanding of how many treatments may cause a lot of suffering, but only prolong life but a short amount (if at all), and usually under miserable conditions. Coming in for particular scrutiny is the practice of administering CPR to the very elderly and terminally ill, characterised as "experienc[ing], during their last moments on earth, someone breaking their ribs in an attempt to resuscitate them with CPR (that’s what happens if CPR is done right)." And in terms of the result, it is described thus: "If a patient suffers from severe illness, old age, or a terminal disease, the odds of a good outcome from CPR are infinitesimal, while the odds of suffering are overwhelming."

But I wonder how much another factor may come into play - namely, a greater familiarity with, and acceptance of, death. Doctors, especially those who interact with emergency rooms, are forced to confront death in a way that few other people are. Beyond a certain level of exposure, it is just viewed a fact of life, and an inevitable one at that.

To state that, of course, is to state the bleeding obvious. And indeed, once upon a time, the average person did indeed come into contact with dying and dead people, and was thus forced, however fleetingly, to reflect on their own mortality.

Modern man, by contrast, is enormously shielded from death. It occurs out of sight in hospitals, and we spend the rest of our time avoiding contemplating it or, if we do, thinking about it in abstract terms reserved for other people. ("20 dead in Russian bridge collapse").

A doctor, of course, does not have the luxury of avoiding the concept of death. It haunts the halls of every hospital. But I suspect that a large number of people making end-of-life decisions for themselves or a loved one have not yet come to grips with the inevitability of death. Because once you accept the fact that, one way or another, you will die, you start asking much more seriously whether it's worth going in for that long shot last round of chemotherapy. The first step is to realise that it won't stop you dying. It will only delay it, and at best you'll die of something else. And the second step is to ask the hard questions about how you want to die, and how much life you are willing to trade in order to live out your last days the way you want to.

I would be interested to see what the decisions are for people outside the medical profession who deal in death - funeral directors, priests, that kind of thing. I suspect they may be more like doctors than like the average person.

But maybe not. Maybe everybody clings to life in the same way, mortal familiarity be damned. It may be as Ken Murray suggests- the only difference is that doctors understand from grim experience the futility of the odds and the consequences of their actions better than everybody else.

Gift Card Arbitrage

GiftRocket has this interesting post examining what the average secondary resale value of a $100 gift card is.

Apparently there's quite a spread. At whole foods, the value is $91. At 1-800-Flowers, it's as low as $50. The average resale value is $72.

So here's the question - what should they be trading at?

Well obviously the upper bound is $100, as cash weakly dominates a gift card for all consumers. (The logic is that if I gave you $100 and you would like to spend it all at Starbucks, you would be indifferent between the cash and a Starbucks Gift Card. If you were going to spend even some of it elsewhere, you'd prefer the cash).

The standard explanation for a discount is shipping/hassle costs. If it costs me $2 to get it sent to me, and $5 of time to hassle around on E*Bay, I'm only going to pay $93. But this doesn't explain why there's such a big spread across retailers. The shipping costs are the same for all cards. And even the estimated cost of people's time doesn't make sense - people who shop at Whole Foods (value = $91) will probably have a higher cost of their time than people who shop at Baja Fresh (value = $70), in which case the price patterns should be reversed.

Another potential reason for the existence of a discount is the estimated probability that the card is fraudulent. But unless some stores are easier to scam than others, it's not clear how you end up with a cross-section of prices.

GiftRocket notes that the discount is related to how popular the merchant is - popular stores trade at a lower discount.

So what's the profitable trade here? The real question is why people who aren't planning a big purchase at one of these stores anyway don't stock up on gift cards. Doing so is getting you a 50% discount on flowers! I guess most people don't think to do this trade.

My guess is that it's also related to the length of time it will take you to spend the money. The two highest are a supermarket (Whole Foods) and a giant retailer (Walmart), where people might conceivably spend the money in one or two weeks. Next is Starbucks, which is also likely to be bought fairly frequently. But it will probably take most people quite a while to buy $100 worth of burritos. And as for flowers, if you weren't buying $100 of them at once, it could be a long time before you spend the rest.

Either way, I may look into this next time I'm thinking of buying at one of these places.

Global Warming FTW

Apparently scientists have found well-preserved bone marrow from a woolly mammoth.

Why is this a big deal? Because it means that they now might be able to clone one, by implanting the mammoth DNA inside an elephant. The claimed time frame is five years. I'm guessing there's a margin of error there, but it sure is cool.

And how did they get access to this pristine specimen?

Warmer temperatures tied to global warming have thawed ground in eastern Russia that is almost always permanently frozen. As a result, researchers have found a fair number of well-preserved frozen mammoths there, including the one that yielded the bone marrow.

That's right, when you're riding around town on your pet woolly mammoth in 10 years time, be sure to thank the guy driving around in the Hummer. Glorious consumption AND prehistoric animals brought back from the dead!

The article also ends with one of the most hilariously lame warning notes I've read in ages:

Is it such a good idea, however, to clone animals that have long been extinct? For a while there's been some discussion of a real life Jurassic Park setup containing such animals. Introducing these beasts into existing ecosystems could be like bringing in a potentially invasive species that would try to fill some space presently held by other animal(s). Even if the cloned animals were contained in special parks, there could still be a risk of spreading.

Yes, because when I think 'invasive species', my mind immediately turns to ... woolly mammoths. You know, if one gets loose in Oklahoma, it'll just start reproducing like crazy, and we'll never be able to track them all down. Because Lord knows it's not easy to spot an elephant-sized prehistoric creature walking around - people may confuse it with, say, a minibus or a carnival ride. And it might end up filling the niche in the ecosystem currently occupied by the Bald Eagle, the Atlantic Salmon or the Prairie Dog.

Here's my red hot prediction - everybody's concerns about 'Jurassic Park'-style scenarios are going to evaporate within two seconds of the birth of the woolly mammoth, as they realise how awesome it is to have crazy prehistoric animals walking around again.

Good News, Bad News

The good news:

Vladimir Putin's ruling party suffered a big drop in support in a parliamentary election on Sunday and was not certain even of holding on to a majority of seats, an exit poll showed.

The bad news:

The communist party emerged in second place in both polls with considerable gains over 2007.

Really?? It's kind of amazing that a Communist Party in Russia is a credible electoral force, after everything Communism did for Russia. Dislike Putin as much as you want, but only bad things can come from a more powerful Communist Party in Russia. I guess the virtue of democracy is that people eventually get the government they deserve.

But the bigger picture good news is this: Russia apparently still has some semblance of a democracy! I know, I was as shocked as you. I was starting to lump Putin in with the category of 'strongarm leaders that miraculously never lose elections'. Sure, he hadn't gotten to the point of Saddam Hussein winning 100% of the vote as the only candidate on the ballot, but one assumed this was merely a matter of time. Apparently the process is still uncertain enough that popular will can actually shift results by a meaningful amount, even if not (in this case) necessarily enough to change the government.

Why Smart People Are Getting Worse At Spelling

This is not a post about why dumb people are getting worse at spelling. There's lots of obvious culprits - the spreading of teenage text message LOLspeak, declining educational quality, feelgood 'everybody wins a prize!' teaching methods that decline to correct too many mistakes, lunatic academics who argue that insisting on correct spelling and grammar is horribly racist and elitist, etc. etc.etc.

No, what's less remarked on is the hidden decline in spelling knowledge among educated people. But you'll only see this in a very particular context - if you ask them to hand-write something that requires big words. Their typewritten work is getting better and better.

Once upon a time, people used to need to know how words were spelled. To write something wrong in a letter was embarrassing, and every correction you made was obvious too. The benefits in knowing the correct spelling the first time were significant.

Now, we instead train people to know that they have to use spell-check. This requires them to know how to have a good stab at the word, and to diligently check that their document doesn't have any red squiggly lines under any words. But this doesn't actually drill spelling.

The reality is that bad spelling in a document these days is a sign only of laziness or complete illiteracy. Grammar is still more of a filter, as grammar checkers are less sophisticated. But the test of 'does this document contain typos?' is now only a very weak signal of actual spelling ability.

Five minutes ago, I had to type the word 'accelerate', and I couldn't remember if it had one or two "c"s, and whether it had one or two "l"s. No worries! Just have a stab, and keep going through the combinations until you hit it.

But here's the problem - within 5 seconds, I'd forgotten what the answer was. And next time, I'm going to do the same thing. It's like using a GPS instead of a map - in theory, the more efficient system could be used as a tool to improve the learning process. In practice, it gets used as a substitute for the learning process.

Don't believe me? Try writing a hand-written letter to someone, and see how many times you find yourself stumbling over the correct spelling of a word. And this is only the mistakes you know you're making, let along the ones you don't! It's a sure-fire way to cure yourself of any hints of snobbery about how eloquent and precise your writing is.

Overall, I'm okay with this process - it's not like men are about to be thrust into the wilds of nature where no spell-checkers are available. This is certainly less problematic than the decline in mental arithmetic skills with the ubiquitiousness of calculators. There are a lot more situations where it's valuable to be able to do fast mental mathematics than to always have correct spelling.

Since nobody writes handwritten letters any more, there is only one case where you really see how bad people's spelling has gotten - handwritten signs. Very few people who are going to write a protest sign tend to type it in Word first. But they should:



(image credit)




(when it's on 'know your meme', the time for image credits is pretty much over)

Everyone looks at these signs and thinks these people are unspeakable idiots. But this is the wrong lesson. I'm sure if either one had to send an email, it would be spelled just fine.

Technology giveth, and technology taketh away.

Miscellaneous Joy

-San Francisco tries to ban Happy Meals at McDonalds. McDonalds lawyers easily circumvent ban. Meddling bureaucrats' tears ensue.

-Some interesting thoughts on self-defence:

If you find yourself in a situation where a predator is trying to control you, the time for listening to instructions and attempting to remain calm has passed. It will get no easier to resist and escape after these first moments. The presence of weapons, the size or number of your attackers—these details are irrelevant. However bad the situation looks, it will only get worse. To hesitate is to put yourself at the mercy of a sociopath. You have no alternative but to explode into action, whatever the risk. Recognizing when this line has been crossed, and committing to escape at any cost, is more important than mastering physical techniques.

More here, especially starting at 8 minutes 30 seconds.

-Anti-piracy group gets hit by copyright infringement claim and falling grand piano made entirely of irony.

-Business decisions that are clearly not made with cheapskate economists in mind: payment system Dwolla announces that all transactions under $10 will be free. I'm assuming they've thought of the possibility that I'll pay for my $500 TV with 100 free payments of $5 each in order to save two bucks or whatever. They're probably right that most people won't bother, but it would be humourous if they did.

-Via Reddit, The Good Old Days:

Psychologists Getting Statistics Wrong

Ace of Spades links to a study that claims to show that people view atheists as being less trustworthy. This was also covered in the National Post. The headline claim is attention-grabbing:

Atheists cannot be trusted: Religious people rank non-believers alongside rapists, study

Controversial stuff. As in all this stuff, you should always read the original study before rubbishing it. The author, Will Gervais, kindly has a version on his webpage, which you can read here. And I'm sorry to say that nearly the whole study appears to be done wrong.

So how exactly does Mr Gervais establish that atheists are as untrustworthy as rapists? Let the study tell the story - this is Study 2 of 6, but 5 out of the 6 studies have the same problem:

One hundred five UBC undergraduates (age range 18 –25 years, M 19.95; 71% female) participated for extra credit. Participants read the following description of an untrustworthy man who is willing to behave selfishly (and criminally) when other people will not find out:

Richard is 31 years old. On his way to work one day, he accidentally backed his car into a parked van. Because pedestrians were watching, he got out of his car. He pretended to write down his insurance information. He then tucked the blank note into the van’s window before getting back into his car and driving away. Later the same day, Richard found a wallet on the sidewalk. Nobody was looking, so he took all of the money out of the wallet. He then threw the wallet in a trash can.

Next, participants chose whether they thought it more probable that Richard was either (a) a teacher or (b) a teacher and XXXX. We manipulated XXXX between subjects. XXXX was either “a Christian” (n 26), “a Muslim” (n 26), “a rapist” (n 26), or “an atheist (someone who does not believe in God)” (n 27).

So the authors are relying on the conjunction fallacy of Tversky and Kahnemann (1983) - logically, the probability of being a teacher and [Y] is less than or equal to the unconditional probability of being a teacher, for all values of [Y]. People sometimes get this the wrong way around if the behaviour is associated with the trait. That is what the authors are trying to test (I think). They report that the proportion of people who answered (wrongly) that the person was more likely to be a teacher and an atheist was higher than the proportion who answered (wrongly) that the person was more likely to be a teacher and a Christian.

The first thing that should make alarm bells start ringing in your head is the way the question is phrased. To say 'are atheists untrustworthy?' is to ask the probability of being untrustworthy given you're an atheist. But the question implicitly being asked in the survey is something different, namely the probability of being an atheist given you're untrustworthy. These are not the same thing!!!! And this is really going to screw up the inferences.

If statistics bore you, let me skip to the punchline - the authors screw it up because they're not taking into account that there's tons of atheists and very few rapists. This means that the probability of being an atheist given you're untrustworthy is always going to be much higher than the probability of being a rapist given you're untrustworthy. But this says nothing at all about trustworthiness, and everything about how rare it is that a person is a rapist! And this makes the whole study flawed.

For stats people, what is actually being asked is whether people erroneously believe that:
P(teacher | Untrustworthy actions)  <  P(teacher AND atheist | Untrustworthy actions).

This answer is then compared to answers to the question as to whether:
P(teacher | Untrustworthy actions)  <  P(teacher AND rapist | Untrustworthy actions).

Since the left hand side is the same in each inequality, let's think about what could drive differences in the right hand side (even if people are screwing it up via the conjunction fallacy, this is still the implicit comparison). Using Bayes Rule:



(where A1 = Teacher and Atheist, A2 = Teacher and Rapist, and B = Untrustworthy).

Let's ignore the teacher bit for simplicity (it doesn't change the logic). What the author really wants to know is the second ratio - are people viewed as more likely to be untrustworthy given they're an atheist, relative to being untrustworthy given they're a rapist.

What they're actually measuring is the first ratio: the probability of being an atheist given you're untrustworthy versus the probability of being a rapist given you're untrustworthy.

But the difference between the two ratios is also driven by the third ratio -  the overall probability of being a rapist versus an atheist, regardless of whether you're untrustworthy.

And this ratio is huge! The study was done at the University of British Columbia. According to Wikipedia, 42.2% of Vancouver is atheist. What's the probability of being a rapist?  The overall rate of rape crimes in Canada is 0.016 per 1000 people. As long as each rape is only committed by one rapist, this will overstate the probability of being a rapist (i.e. if a rapist has multiple victims, the probability of being a rapist will be lower. If a victim is raped by multiple people in a single rape, the number will be higher, however)

So the third term is equal to 42.2/0.0016 = 26,375! In other words, suppose that people thought that you were 1000 times more likely to be untrustworthy if you were a rapist than an atheist (i.e. the second ratio equals 1/1000). The left hand side will be equal to 26375/1000 = 26.375. In other words, P(atheist | untrustworthy) will always be much higher than P(rapist | untrustworthy), even if rapists are considered far less trustworthy than atheists.

The authors only report the proportion of respondents who made the conjunction error - in other words, they report the number who state that P(teacher | Untrustworthy actions)  <  P(teacher AND Y | Untrustworthy actions), which is clearly wrong, and compare this for different values of Y. Sadly, this doesn't allow us to say anything about the real ratio, which is P(Untrustworthy | Atheist) versus P(Untrustworthy | Rapist).

In other words, the study is unsalvageable if you're trying to answer the question you're hoping to ask. Which is a shame, because it's actually an interesting question.