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Monday, August 14, 2017

White supremacy: bad for whites, too.

I'm writing this two days after the white supremacist rally in Charlottesville, Virginia turned violent.

Trump has decried violence on both sides, but hasn't come out with a condemnation of the white supremacist entities -- which supported him during the campaign. (Trump will criticize anyone -- except white supremacists and Putin.)

If we look at white supremacist regimes -- we'll take the antebellum American South and Nazi Germany as our examples -- we see obvious evils perpetuated against non-whites: slavery, and the murders of millions of Jews as the obvious examples.

Less obvious is the fact that white supremacy isn't so great for whites, either.

In the South, the political strings were pulled by the rich planters. Poorer whites didn't own slaves, and didn't have much real political power, but at least were allowed to feel superior to the slaves -- a bit of a sop which could make them feel more in control than they were in that aristocratic regime.

In Nazi Germany, white was defined narrowly. Of course, if we want to say there are 3 "races" -- white, black, and asiatic -- then Jews are white. So are Poles and other Slavs, gypsies, homosexuals, and "political enemies".  So, for most whites, white supremacy didn't include THEM.

Once we start treating other human beings as being overall inferior, there's no end to the distinctions we can make. This isn't news: Jonathan Swift famously satirized this in Gulliver's Travels with the wars around which end of the egg to open.

Friday, May 12, 2017

Duct/Duck Tape and Marriage

This reminds me of the short speech I gave at one of my daughter's wedding. It went roughly like this.

A few minutes ago you exchanged wedding rings. Perfectly round, made of gold, shiny, to symbolize that you are now one and will have many golden moments together from now until your golden years.

But marriage isn't all about those golden moments. In any marriage, there are rough spots and things that need a temporary repair to keep the marriage together. That's where this roll of duck tape comes in (pulled a roll from behind my back and gave it to my son-in-law).

At those moments when things look like they are coming apart, use some metaphorical duck tape to keep them together until time will eventually heal things and bring you back to your inner joy together.

Sunday, March 26, 2017

Breaking up the Liberal City?

This is a consideration of Ross Douthat's piece, "Break Up the Liberal City" in the New York Times:
https://www.nytimes.com/2017/03/25/opinion/sunday/break-up-the-liberal-city.html?smid=fb-share&_r=0  , so you may want to read that first.

Note that while cities are generally more liberal and rural areas generally more conservative, cities are diverse places. Douthat really means not the liberal city, but what he sees as a monopolistic city:
We should treat liberal cities the way liberals treat corporate monopolies — not as growth-enhancing assets, but as trusts that concentrate wealth and power and conspire against the public good. 
But bashing liberals is good sport, and a better clickbait headline, so we'll give him a pass on that.  But let's consider his proposals:

 First, the easy part: Let’s take the offices of our federal government, now concentrated in the vampiric conurbation of Greater Washington, D.C., and spread them around, in poorer states and smaller cities that need revitalization. 
Of course, there's a policy to try to do this now.  The Center for Disease Control is in Atlanta, far away from NIH in Washington. The mints are in Denver , Philadelphia, and San Francisco, with only the headquarters in Washington. NASA launches from Cape Canaveral for geographic reasons, but the control center is in Houston for political reasons (LBJ).  Yes, more could be done. But due to the need for professional staffing at government salaries that are often lower than the private sector (a controversial topic itself), note that those cities named are still pretty large ones: Atlanta, Denver, Philadelphia, San Francisco, Houston.  Hard to see putting the Department of the Interior in a place like Lost Springs, WY.

we’ll go further, starting with the deep-pocketed elite universities clustered around our bloated megalopolises. We’ll tax their endowments heavily, but offer exemptions for schools that expand their student bodies with satellite campuses in areas with well-below-the-median average incomes. M.I.T.-in-Flint has a certain ring to it. So does Stanford-Buffalo, or Harvard-on-the-Mississippi.
This has a sort of back-to-the-farm feel to it. The large state universities often began as land grant institutions, so they were located in small cities: Nebraska in Lincoln, Iowa State in Ames, Missouri in Columbia, Iowa in Iowa City, Illinois in Champaign (or is it Urbana?), Indiana in Bloomington, Auburn in Auburn, Texas A&M in College Station, Penn State in State College, etc. The problem is, that isn't where the students were in the 1960s, so they weren't really serving their populations.  So, these universities set up branches in the cities.  I went to college at UMSL: the University of Missouri at St. Louis [on the Mississippi], which was 10,000 students, two classroom buildings, a bunch of parking garages and construction cranes when I started there.  Just to finish Douthhat's examples, there's a University of Michigan - Flint and a State University of New York at Buffalo.

Do the inhabitants of Buffalo and Flint need MIT and Stanford, or do they need an affordable public college?  I lived a few miles from one of the country's finest universities (Washington U in St. Louis), but no way was I going there.  Similarly, the excellent University of Chicago is on the south side of Chicago, but doesn't seem to reflect the surrounding ethnicity.

large nonprofits: If you want your full tax exemption, show that you’re employing people in lower-income states and cities. 
Oh, sure, let's make the tax code more complicated, so that lawyers can figure out more loopholes.

But fundamentally, employing the unemployable -- and there are plenty of these in the cities -- is a worthy goal no matter where they are located.

The Corporation for Public Broadcasting’s funding for flyover-country stations would be expanded, not cut, and a new Corporation for Local News would fund newspapers in smaller cities and rural areas. And this would be paid for by a special surtax on media corporations (print, digital and television) based in New York and Washington, D.C.
Well intentioned, but I'm really ambiguous about CPB being even more of a major news source if it means more government involvement. Sure, the BBC is the world standard for public funded journalism, but would we just end up with the American government's equivalent of RT over time? And if we have publicly funded newspapers in smaller cities, we're setting up even more of a barrier for private newspapers with diverse points of view to compete.

Monday, March 13, 2017

How will the Republicans spin Trumpcare

Nobody seems to like Trumpcare. The Democratic opposition is predictable, but there's also AARP, physicians groups, hospital groups, and, as the final insult, alt-right Breitbart, Trump senior advisor Steve Bannon's home turf:

So what's the political game here?

Having been wrong numerous times before, I tentatively propose this is what's happening.

1. Congressmen are more afraid of losing re-election than anything else. Having promised for years to "repeal and replace" Obamacare, they have to propose something. Hence, Trumpcare. So they've proposed something.

2. They are hustling this thing through the House, without waiting for the CBO to pass it through committees, and without waiting for a really thorough job of estimating.  This is a complex bill, and you don't just enter the numbers in Excel and read out the answer.

3. Let's suppose it passes the House, but not the Senate -- Senator Rand Paul, R-KY is already on record as opposing it, and others are skeptical. Possibly 0 Democrats will vote for it.  So, in 2018, they can say they tried to repeal and replace, but those awful Democrats blocked the bill. 

4. Trump's already blaming Democrats from blocking the bill, even before there have been any real votes, just to get the ball rolling. http://www.cnbc.com/2017/03/09/trump-reportedly-says-hell-blame-democrats-if-gop-health-care-plan-fails.html
5. Since Trumpcare won't actually be in place, it's flaws won't be apparent -- such as the fact that Trump supporters seem likely to be particularly hurt by the bill. So they can still run against those demon Democrats.

6. If Trumpcare isn't in existence by 2018 (point 5) this means Obamacare probably will be. But the added uncertainty about Obamacare is likely to further weaken those parts of Obamacare that need fixing -- e.g. the insurers bowing out, the big price jolt when you move from subsidized to unsubsidized, the increase in price caused by certain mandated coverages, etc. So, instead of fixing up Obamacare the way you'd repair a house you just bought, they're going to let it decay like a 90 year old woman on a fixed income trying to get by without fixing anything.

What should we do, not that we'll do it?

But, if anybody was listening to Kasich, he'd be president now -- he was certainly a better candidate than Hillary or Trump (and that's coming from me, a liberal Democrat). 

Saturday, March 11, 2017

That first Trump jobs report: good, not euphoric

More spin: the jobs data is good news, but it's been treated as a Trump triumph. (1) given lags, the previous administration deserves most of the credit, and (2) it's not like it's an unprecedented gain in jobs. It's well in line with some of the other higher figures in this graph. (Wall Street Journal, March 11, 2017).

Saturday, January 28, 2017

Will the corporate media turn and support Trump?

On the media:

Now that the White House seems to think of the media as the opposition, we need to think about who the media is from a top-down basis. Reporters and editors are one thing. Owners are another.

The news we hear is largely given to us by conglomerates who, in the end, and motivated by quarterly returns. So long as it is profitable to continue their present course (whatever it may be), they will continue to do it. When it ceases to be profit-maximizing, things are likely to change.

Major outlets are owned by conglomerates who depend in various ways on government licenses, contracts, etc. NBC and it's channels? Comcast, dependent on cable monopolies. ABC? Disney. FOX and WSJ? Murdoch. Washington Post? Amazon's Jeff Bezos.... and so on. Outlets that are truly independent of large corporations tend to have a definite ideological point of view (aka bias).

So, what happens when Trump starts a war on the media that threatens profits at Comcast, Viacom, Disney or News Corp?

Just one more thing to worry about.

Saturday, January 14, 2017

Micromanaging the poor, soft drink edition

The New York Times has an article on the horror of people on SNAP (Food Stamps) buying soft drinks.

The findings show that the No. 1 purchases by SNAP households are soft drinks, which accounted for about 10 percent of the dollars they spent on food. “In this sense, SNAP is a multibillion-dollar taxpayer subsidy of the soda industry,” said Marion Nestle, a professor of nutrition, food studies and public health at New York University. “It’s pretty shocking.”
Is there a gigantic difference? Maybe not so gigantic:
SNAP households spent 9.3 percent of their grocery budgets on soft drinks alone. That was slightly higher than the 7.1 percent figure for households that do not receive food stamps 
That's statistically more, and we could be alarmist and say that's OVER 30% MORE!!! But let's chill a bit.

1. On the right, SNAP has always been criticized for various purchases: lobster, for example. So now we have nutrition and public interest experts criticizing from the other side.  Yet, on the whole, the purchases are pretty similar, and it's easy to theorize that this is mostly a way for talk show hosts on the right and public interest groups on the left to get some press.

2. At least part of the higher soft drink purchases may be a result of the soda trade -- when you get food stamps, buying lots of soda (e.g. 24 packs) which you then sell to other retailers below their cost, turning the soda into cash. That's an abuse of the program, of course, but not a nutritional disaster.

3. Most importantly, we can see this as an attempt to micromanage the poor from a position of moral or nutritional superiority by those who "know better".

Those who "know better" get their 15 seconds of TV, radio, or internet fame, while making little difference in the lives of those on SNAP.  Not much lobster is likely to be bought with SNAP. If the percent spent on soft drinks declined from 9.3% to 7.1% it might help, but probably not all that much. What's more likely is that the carping results in cutting funding from an expensive program, and how much is cutting SNAP going to help the poor?  Aren't we missing the big picture here, which is that feeding the hungry is basically a work of mercy?

4. Finally, I'd note the lack of agreement on nutrition.  Fifteen years ago, eggs were the enemy; now it's soda. The importance of low sodium is unsettled. What sort of fat is bad, good, or less harmful? Is fish helpful to eat, or a source of mercury and harmful to the balance of the ocean?  All these are tough questions not completely settled.

I'm reminded of my own family of four. We used to eat together, but then we ended up with one person a vegetarian, another a vegan, and a third on the high-meat Atkins diet. Other than lettuce (and of course, not the emptiness of iceberg lettuce) there was little that could be eaten in common and we stopped doing family suppers. Fifteen years later, none of the three are vegetarian, vegan, or on the Atkins diet.

5. Do we really help people by trying to micromanage them? Yes, there are obvious things like drug addiction, alcoholism, etc. but even there our attempts are more likely to be resisted than helpful. But in these cases there are very, very real harms to the person and those around them. It's hard to put sugary soft drinks into that category, even though bad diet can lead to obesity and diabetes decades down the road. 

Sunday, January 01, 2017

Celebrating New Year's Eve Early

Last night, the hostess at our New Year's Eve party suggested we celebrate New Year's Eve when New York did -- at 11 p.m. Central Standard Time (UTC -6).  She'd had a cold and was still feeling a bit weak.

This seemed like a good idea. All of us are in our late 60s / early 70s and not much used to staying up until midnight, anyway.  But we're not getting any younger.

If we're celebrating on New York time this year (UTC -5, 11 p.m.), why not Halifax or Caracas next year? (UTC-4, 10 p.m.) In fact, why not keep moving it up as we get older?

There are 39 world time zones.  I know, one would think there would be only 24. But there's those half hour time zones (India at +5:30, rather than two zones of +5 and +6). See https://www.timeanddate.com/time/current-number-time-zones.html  for a list.

There are 7 after us (MST, PST, and so forth) but 31 ahead of us, so we can celebrate successively early as we get older.  Maybe we can celebrate with the appropriate cuisine? Venezuelan next year (UTC -4), some nice Atlantic cod for Newfoundland the year after (UTC -3:30), Argentinian food would follow (UTC -3), then Carnival from Rio (UTC -2) and so forth.

We're unlikely to get through all those 31 time zones, because we'd be nearing 100, so we may want to skip some.  North Korea is at UTC +8:30, Eucla, Australia is at UTC + 8:45 but  I think we'd skip that for South Korea and Japan at UTC +9.

Sunday, December 11, 2016

Segmenting opposition to Trump

In marketing, you can segment the market in several different ways. For example, you might separate soup by product type (dry | ready to serve | condensed) or by customer (seniors | families with kids | college students, etc.)

If we look at opposition to Trump, what segments might we see?

1. We might look at policy opposition.  This is the traditional form of opposition. The candidate proposing policies you favor lost, and you oppose some of the policies likely to be proposed by the new administration.  Lots of examples of this in cabinet appointments. Should we feel good about a Secretary of Labor who opposes minimum wage increases (and, in fact, seem to favor abolishing the minimum wage in whole or in part) and opposes the new overtime rules (because he comes from the fast-food industry, notorious for abusing them)?

2. Next, we might look at moral opposition. In this view, Trump is a narcissist, misogynist (and possible sexual predator), racist, a man on his third wife who's admitted -- really boasted about -- his extramarital affairs.  A man who claims Christian values, but can't cite a bible verse he likes and thinks one of the Pauline epistles is "Two Corinthians".  A hypocrite, who claims giving millions to charity but really hasn't, who hires people to do jobs for him and then doesn't pay them. Who seems to be refusing to divorce himself from his business interests or even reveal what they are. Where are those tax returns he promised to release after his election?

3. Next, we might look at impulse control opposition.  This is personality, rather than character.  We have a president who tweets insults at those who slightly offend him (even people he has previously praised). This is a man who doesn't seem to have the seriousness and calm required to be commander-in-chief and have the nuclear codes.

This worries me most of all.  We might reverse policy. We might have an actual religious revival in the next decade to reverse moral decline.  But if that finger pushes the nuclear button in a fit of pique ...  we have begun something that cannot be reversed.

4. Somewhere we have to make room for Manchurian candidate opposition. How much influence does Russia now have? What's that mysterious server in Trump's headquarters? How far have the Russians hacked and selectively released to help Trump? Will they attempt to re-exert control over eastern Europe?

Manchurian candidate opposition goes beyond policy opposition to veer towards actions in the interest of Russia (and Trump's finances), rather than American interests -- maybe even nearing treason.

But in our system of government, it's the executive branch that would do the investigation: the FBI / Department of Justice, the CIA. Sure, there are congressional investigations, but these often turn into public circuses rather than the type of investigation the investigative agencies do.

5. And, finally, there's sore loser opposition. Calls for recount, for faithless electors in the electoral college, for the abolition of the electoral college, for obscure U.S. Senate rules that might allow Joe Biden to push the confirmation of Merrick Garland to the Supreme Court in the time between the end of this Congress and the convening of the next.  Hey, we lost. Get over it and don't look for cute ways to duck the outcome. These are both hopeless, and undermine the system.

Saturday, December 10, 2016

Marginal tax rates very high for the poor

Five years ago I posted about the extremely high marginal federal tax rates paid by the poor.


This situation has not improved. Updated tables are here:

At first glance, we seem to have a progressive tax system.  If we look at the 2014 numbers at the average federal tax rate paid by those making half the median annual income for a family of 4, it's -.87% (reflecting things like EITC, which allow you to get money back you didn't pay in).  At the median income, the tax rate is 12.99%, and for twice the median income it's 18.53%.

But that's the average rate.  If we look at the marginal rate, things look much different. At half the median income, it's 38.71%, at the median income it's 22.65%, and at twice the median income it's 26.45%.

Yes, that's right.  The marginal tax rate for the poor is higher than the marginal rate for the average and above average income individuals.

1. Why? Benefits like EITC are phased out as your income grows. I note these figures don't include the effect of the decline in subsidies for the Affordable Care Act.  And you start paying taxes.

2. Economic logic? If the rich are correct that low marginal tax rates are necessary for the rich because they encourage investment and economic activity, we should apply this same logic to the poor, probably more so.  If 40% of that additional income is going to disappear, that should clearly lower the incentive to work at a low paid job.

3. Stability Risk? In addition, low paying jobs also tend to be unstable. So if you lose that job, you then may have a time delay before EITC kicks in, for example -- you have to wait until the next time you file for taxes. For other benefits, there may be a lengthy, somewhat uncertain application process.

This hasn't always be the case. The Tax Policy Center tables go back to 1955, when the marginal rates were 2% (half median income), 20% (median income) and 22% (twice median income).  It was in 1992 that the big change in the marginal rate came, due to a large increase in the marginal rate at the low end (from 22.65% in 1991 to 35.79% in 1992).

Although this issue has been out there for at least two decades now, it doesn't seem to fit into either party's narrative and so it gets ignored.

Monday, November 21, 2016

Trump needs an enemy, and a weakened press is it.

So here's the Trump strategy as I see it.

You can't blame Democrats for much because Republicans control the Senate, the House, the Presidency, and most of the governors and state legislators.

Blaming liberals (a subset of the Democratic party) makes even less sense. Liberals control ... what, exactly?

But, he needs The Enemy, and that's likely to be The Mainstream Media.

Note as of July 2016, Donald Trump had over 10 million Twitter followers. That's a bully pulpit.

The combined circulation of the 3 largest newspapers is considerably less. The circulation of the daily New York Times is 2.2 million (print 590,000), the Wall Street Journal 2.3 million (print 1.4 million). USA Today (hardly known for hard hitting investigative reporting) is at 3.3 million (print 1.2 million).
And, although Murdoch seems to have left the WSJ pretty much alone until recently, let's not forget it's controlled by the same person who controls Fox News.

In addition, investigative reporting is expensive at a time newspapers are losing revenue and circulation. Celebrity news is popular and cheap for all media, as are those shows on CNN where two "experts" yell over each other repetitively.

Evidently the first post-election meeting of the press with Trump was not encouraging, and was compared to a firing squad.

The meeting was off the record, but, of course,

Trump spokeswoman Kellyanne Conway told reporters the gathering went well.

“Excellent meetings with the top executives of the major networks,” she said during a gaggle in the lobby of Trump Tower. “Pretty unprecedented meeting we put together in two days.”

Monday, November 14, 2016

How I would fix Obamacare, part 1

I'm convinced part of the late surge in Trump voting over Clinton voting was the large increases in Obamacare coverage costs. This is a real pocketbook issue for people who have to buy on the exchanges.

Not helping at all were the Jonathan Gruber interviews (he's the economist who had a strong hand in drafting Obamacare).  He minimized the problems with the increases (fine for an academic with paid healthcare to say) and said the solution was to substantially increase the penalty for not buying insurance.  In other words, penalize those who feel they can't afford to be insured.  This is fine economic theory, but sounds bloodless to those actually in the situation of buying unsubsidized policies on the exchanges.

Side note: I had to buy a policy on the Obamacare exchange for a few months between the end of my COBRA coverage and the beginning of Medicare.  This was over a year after they had supposedly fixed the site after the initial problems.  The site was still very difficult to use, slow, and used terminology that only a bureaucrat could love.  Worse yet, when I became eligible for Medicare I had a lot of trouble cancelling the policy -- it couldn't be done via the website, and after calling for help I sat on hold for a long time, then when I got a human they hung up on me as soon as I described my problem.  Luckily, I was paying by check and could just not pay until the insurer cancelled me. (The insurer explained that they couldn't cancel the policy themselves, because it had been purchased through the exchange.)  I kept comparing this to my experience shopping on Amazon.

So, what would I do?

1. I would get employers out of the picture entirely. Involving employers means there is a huge incentive to hire part-time workers, who do not get health care benefits.  In retirement, I'm still working 20% at my old employer, and teaching one course a semester at a local university. In neither case do I get any of the health care benefits that full time employees get.

Part time work is fine if you're a retiree who doesn't need the money, but not good if you are trying to raise a family or move forward in a career.  Yet, current government policy encourages it. Also, since many employers self-insure, there is pressure not to hire older, potentially sicker employees or get rid of them. Yes, there are laws against this, but unless there's a blatant violation there won't be any repercussions.

We could easily replace this system by requiring an employer to pay into a fund so much per hour. If this was $2, then a full time worker would get $80 a week into the fund. Someone working 8 hours a week would get $16 a week put into the fund.

2. I would require only catastrophic coverage. This is a less expensive mandate, and also is what people most fear -- being bankrupted by suddenly having a catastrophic accident or illness.

This has the side effect of being less controversial than the broader coverage that led to the Hobby Lobby case.

This doesn't mean you couldn't buy a more expensive plan, just that you wouldn't need to.

To be continued ...

Wednesday, November 09, 2016

What went wrong with the presidential polling pundits?

Prediction Overconfidence

As I write this, it is 5 a.m. November 9, 2016.  I got up to see if, perhaps, Clinton had pulled out an unlikely victory. She had not. Trump will be president.

The predictors did not do a good job. Here’s what I got when Googling the Huffington Post presidential prediction a few minutes ago (i.e. AFTER the election):

The Huffington modelers were outliers, but let’s look at what the major modeling groups said the day before the election[1]

New York Times: 84% chance Democrats will win the presidency
FiveThiryEight: 64%
Hufffington Post: 99%
PW: 89%
PEC: >99%
DK: 87%
Cook: Lean Dem
Rothenberg and Gonzales: Lean Dem
Sabato: Likely Dem

So where did they go wrong? Certainly there are difficulties in polling now, with nonresponse rates being very high.  Pew has done a series of studies using the same methodology over the years, so we can compare response rates[2]:

This makes it a challenge to adjust for these nonresponse rates, which are not random. I’d worried earlier that there might be some decent sized pocket of Trump voters who weren’t admitting they were Trump voters, because they thought that was a socially unpopular thing to do. That would technically be a bias, and the bias would be similar (correlated) across all states and polls.

And the results are likely to be within the margin of error of the individual polls. But, still, let’s not gloss over the fact that, in the end, there was a failure.

Oddly enough, this failure seems to me to be similar to the error in financial modeling that was one of the causes of the faulty risk assessments prior to the financial crisis in 2008, that led us into years of recession. That’s a failure to accurately measure the amount of intercorrelation.

I see an inkling of this in statistician and political scientist Andrew Gelman’s blog post election night[3]:

Election forecasting updating error: We ignored correlations in some of our data, thus producing illusory precision in our inferences

Posted by Andrew on
The election outcome is a surprise in that it contradicts two pieces of information: Pre-election polls and early-voting tallies. We knew that each of these indicators could be flawed (polls because of differential nonresponse; early-voting tallies because of extrapolation errors), but when the two pieces of evidence came to the same conclusion, they gave us a false feeling of near-certainty.
In retrospect, a key mistake in the forecast updating that Kremp and I did, was that we ignored the correlation in the partial information from early-voting tallies. Our model had correlations between state-level forecasting errors (but maybe the corrs we used were still too low, hence giving us illusory precision in our national estimates), but we did not include any correlations at all in the errors from the early-voting estimates. That’s why our probability forecasts were, wrongly, so close to 100%.
Put simply, if there is either a late surge for Trump in opinion, or there was a hidden batch of Trump supporters, or Trump supporters were more likely to show up to vote than expected by the models, these errors would not be random, they would be correlated. There would be more Trump votes across nearly ALL states.  Similarly, if Hillary supporters were less likely to show up to vote than expected, this would be likely to affect nearly ALL states, not occur randomly.

Note Gelman is aware of this problem, but doesn’t feel that he adjusted completely enough for it.

So how is this related to the financial crisis? Recall those mortgages that were packaged together, each with a certain probability of failing.  But each mortgage had, say, a 2% chance of failing, then a bundle of 1000 mortgages would have about 20 failing, with a 95% chance that the number will be between 12 and 28. But that’s if the mortgages failures were independent.  They aren’t.  Like Gelman in his note above, it was known that the mortgages weren’t independent and that a correlation needed to be estimated.  Felix Salmon, in his article “Recipe for Disaster: The Formula That Killed Wall Street”[4] notes that this estimation of the correlation by David X. Li using a Gaussian copula function
“looked like an unambiguously positive breakthrough, a piece of financial technology tha allowed hugely complex risks to be modeled with more easy and accuracy than ever before… His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. And it became so deeply entrenched – and was making people so much money – that warnings about its limitations were largely ignored.”
“Using some relatively simple math—by Wall Street standards, anyway—Li came up with an ingenious way to model default correlation without even looking at historical default data. Instead, he used market data about the prices of instruments known as credit default swaps…. When the price of a credit default swap goes up, that indicates that default risk has risen. Li's breakthrough was that instead of waiting to assemble enough historical data about actual defaults, which are rare in the real world, he used historical prices from the CDS market.”
But there’s a problem, as Salmon notes:
“The damage was foreseeable and, in fact, foreseen. In 1998, before Li had even invented his copula function, Paul Wilmott wrote that "the correlations between financial quantities are notoriously unstable." Wilmott, a quantitative-finance consultant and lecturer, argued that no theory should be built on such unpredictable parameters. And he wasn't alone. During the boom years, everybody could reel off reasons why the Gaussian copula function wasn't perfect. Li's approach made no allowance for unpredictability: It assumed that correlation was a constant rather than something mercurial. Investment banks would regularly phone Stanford's Duffie and ask him to come in and talk to them about exactly what Li's copula was. Every time, he would warn them that it was not suitable for use in risk management or valuation.

“In hindsight, ignoring those warnings looks foolhardy. But at the time, it was easy. Banks dismissed them, partly because the managers empowered to apply the brakes didn't understand the arguments between various arms of the quant universe. Besides, they were making too much money to stop.”
So, in both the election forecasting and in the financial forecasting of those tranched mortgage securities we have a problem in not accurately understanding the correlations (and the stability of the correlations) between events. There are a lot of differences, of course, but still those high level similarities.

And there is the human tendency to overconfidence in predictions, which has been amply demonstrated many times[5], including even in a survey of Messy Matters blog readers (who tend to be professional statisticians) taking part in a survey called “Are You Overconfident”![6]

“The bad news is that you’re terrible at making 90% confidence intervals. For example, not a single person had all 10 of their intervals contain the true answer, which, if everyone were perfectly calibrated, should’ve happened by chance to 35% of you. Getting less than 6 good intervals should, statistically, not have happened to anyone. How many actually had 5 or fewer good intervals? 76% of you.”

So, in both the financial collapse and in the 2016 election predictions we have an inability to accurately understand the correlation between events, combined with the bias toward overconfidence that seems to be a persistently human trait. 

Regardless of our posthac understanding, we still had a deep recession after the financial collapse and we will still have Donald Trump as president. So, there may be understanding, but there will also be pain.  Can we not have a gain in learning without pain?

I’m trying not to think about the more complex situation of climate models.

Fun Fact: Here's a surprising number. I downloaded the polls data from FiveThirtyEight (polls only forecast), and only looked at polls since Sept 1. The total sample size in these polls? 3,155,370 (these include polls done in states, mostly in swing states). That's a truly staggering number. So, while individual polls have a sampling error margin of error, the error in polling as a whole is due to nonsampling errors (most commonly summarized under the term "biases".

[1] Josh Katz, The Upshot, New York Times, 2016 Election Forecast: Who Will Be President, updated Monday Nov 7, 2016 6:58a.m.
[2] http://www.people-press.org/2012/05/15/assessing-the-representativeness-of-public-opinion-surveys/  accessed November 9, 2016. “Assessing the Representativeness of Public Opinion Surveys“ (May 16, 2012 report)
[4] Felix Salmon “Recipe for Disaster: The Formula That Killed Wall Street” Wired, February 23, 2009 https://www.wired.com/2009/02/wp-quant/ , accessed November 9, 2016.
[5] Mannes, A. and Moore, D. (2013), I know I'm right! A behavioural view of overconfidence. Significance, 10: 10–14. doi:10.1111/j.1740-9713.2013.00674.x
[6] Daniel Reeves “Are You Overconfident?” Messy Matters (blog) Sunday, February 2010 http://messymatters.com/calibration/ and results “Yes, You Are (Maybe) Overconfident”, Wednesday, March 31, 2010. http://messymatters.com/calibration-results/ (accessed November 9, 2016)

Monday, October 24, 2016

Is Trump cleverly setting us up for fraud?

Trump's gotten a lot of heat for saying that the election is rigged and he won't necessarily accept the outcome.

But, just to engage in a bit of conspiracy speculation -- what if he's really setting us up?

The media has responded to Trump by arguing that there's practically no voter fraud. But they are talking there about voter fraud due to dead people voting, people voting twice, illegal aliens voting, etc.

But in the history of American elections, it's hard to argue there's not reason to be careful.

  1. There's 2000 Bush-Gore. That's not really fraud so much as bad ballot design, ambiguous situations (ballots from troops arriving too late, but not due to the fault of the troops), and conflict of interest (Katherine Harris).
  2. There's 1960, with Daley holding back Chicago ballots until very, very late -- with some speculation this was to be sure JFK carried Illinois over Nixon.
  3. There's the election of Lyndon Johnson to the Senate in 1948, pretty clearly due to ballot box stuffing.

So, despite the media's current insistence that there's no way the 2016 election could be rigged, it's hard to feel like it's impossible. Particularly since We've had Russian hacking of the DNC, and this week's large DNS attack on a variety of websites.

So, what if Trump is actually setting us up?  What if the Russians (or some other nefarious group) have figured out a way to change the counts in key precincts in enough swing states to get a narrow Trump victory? It's hard to prove fraud; easy to suspect it. And if it is cyber-rigging, we probably won't know exactly who did it -- just like we are pretty sure the Russians hacked the DNC, but don't seem to have a good idea exactly which Russians.

But, if fraud is suspected, we'll have to have all those media "experts" eat their words and do a 180 degree turn.  Suspicion will be both rampant and understandable.

Is this Trump's game? Does he know the Russians / Chinese / etc. will be hacking the election, so he's setting up all these "election is rigged" statements so that he can get nearly everyone else in the U.S. telling us (incorrectly!) that this is impossible?

And, if it is Putin, he doesn't actually have to get Trump in office to succeed. He succeeds if U.S. political institutions are thrown into disarray, which they surely would be if we have something bizarre.

So, what might be a "bizarre" conclusion?  Fraud is highly suspect, but can't be proven. Electors desert Trump, and some sort of compromise is worked out (?Paul Ryan as president?). Trump supporters cry foul.

I don't think that's the case. I think Trump's ego just doesn't allow him to think he could lose unless the other side is unfair.  But, still, it's been a very strange election cycle so far, so it's hard for me to 100% rule this out.

Monday, October 10, 2016

On women and the 2016 election

A few points after listening to the 2nd presidential debate, October 9, 2016.

1. These are mostly thought about the harassment of women. I'm going to use the term harassment here, but clearly some of this behavior is beyond harassment. Let me state at the outset that I am not a woman. I have 7 aunts (1 uncle), 4 sisters (no brothers), 1 wife, 2 daughters (no sons) -- but this is NOT the same as being a woman.

2. Donald Trump's relationships with women clearly show a lack of respect. The affairs, the locker room talk (which seems to be more than just "talk"), the need to have a trophy, arm-candy wife, all indicate objectification.   Is this the type of person we want as president? No.

3. What kept the debate from being entirely X-rated was likely the presence of four women in the audience who've accused Bill Clinton of various improprieties. There's an awful lot of smoke there, and at least some fire with the settlement with Paula Jones and the Monica Lewinsky affair.

4. I'm not going to defend Bill Clinton on this. I voted for a 3rd party candidate in 1996 because I didn't think Bill Clinton was trustworthy, and that was before Monica. I can't, and I won't try.

5. Bill's not running for president; Hillary is. But the allegations that Hillary was in the lead group of trashing the female accusers seem credible.  Was she doing the noble thing of standing by your man or making a cold political calculation for the two of them? And in that cold political calculation, was she selling out her sisters for their political future?

But now I'm getting to the part I really wanted to get to.

6. Do we have a syndrome here? Trump has responded that he's had a fair number of female executives. On Frontline (I think; somewhere on PBS) they interviewed a woman who Trump put in charge of managing the contractors on Trump Tower in New York City, an unusual job to be give to a woman, particularly at that time.  Bill Clinton appointed more women to cabinet posts and judgeships than his predecessors. And I am reminded of Senator Robert Packwood, who had a strong reputation for years for being a supporter of women's issues in the U.S. Senate, before his career collapsed in a harassment scandal.

For years, Packwood, the embodiment of a quirky Oregon species, the socially progressive Republican, has been a strong supporter of women's causes. A leader of the abortion-rights brigades, he introduced the first Senate bill to legalize abortion in 1970; a decade later, after Bill Bradley and Daniel Patrick Moynihan demurred, he led a lonely filibuster against his own party's bill to make abortion the equivalent of murder. He has also regularly hired women to run his campaigns and to serve as his top aides.
But after the first wave of news accounts, many more women came forward with accusations of sexual misconduct, raising the total to at least 24.
 7. So what's the nature of this syndrome? What do these cases have in common?

  • Man with charm, good looks, money/power.
  • Man either thinks because he's supporting women in some areas (women's issues) he can harass them in others? 
  • Or maybe, man is trying to balance out the sexual harassment by promoting some women to responsible positions?
  • We might call these men with charm, good looks, and money/power alpha males.  Which means, culturally, that in order get sex they wouldn't need to resort to bad behavior. So why do it?  Is it perhaps a desire for conquest? And is that conquest more satisfying if it's over a member of a class of people (women) that you've ceded some power to? (sort of like beating another pickup team in basketball after you've given them a good player to make the game more competitive?) 
  • That line of reasoning seems to work a bit, but he have to recognize that many of the victims (e.g. all those women accusing Bill Clinton) were not powerful women at all. So I'm left with that either/or argument in italics above.

Friday, September 23, 2016

Is 99.8% accuracy good enough?

There's an article in the Wall Street Journal about the complications of the government declaring you dead, when you aren't. http://www.wsj.com/articles/if-the-government-thinks-youre-dead-thats-really-hard-to-fix-1474474793?mod=e2fb  I couldn't read the article because it was behind a paywall, but did read a couple of other articles about how terrible this can be.



From the fusion.net story:

During his testimony, SSA’s inspector general, Patrick O’Carroll said there is still room for improvement in addressing DMF errors, noting that in a 2008 report they’d found more than 20,000 individuals over a three year period who had been incorrectly declared dead.
“Erroneous death entries can lead to benefit termination—and government underpayments—and cause severe financial hardship and distress to affected individuals,” he said.
The WSJ story evidently includes this quote: " "The VA said its accuracy is around 99.8%...“It might not seem like a big problem statistically but it’s happening more often—and it’s a huge problem if you are not really dead"." 

Is 99.8% good enough?

99.8% doesn't seem very impressive to me. After all, it's not an ambiguous situation. You're either dea or not. It's not like trying to figure out whether you are still a practicing member of a religion, for example.

My friend responded: "One keystroke and the person is deceased. Not unlike a drone pilot except the former is reversible."

Both my friend and I have spent years in marketing. 99.8% would be impressive in marketing (and, in fact, is far above the typical accuracy in, say, target marketing).  But drones? Is that a good comparison?

Drones operate in hostile territory during war. Let's take O'Hare airport, instead. In one month (July 2016) there were over 76 thousand takeoffs and landings. At an error rate of 2 per thousand, that would be about 150 crashes at O'Hare per month. 7.4 million passengers -- that would be almost 15,000 casualties per month. [actually, thinking about numbers like this makes me say a prayer of thanks for the entire airline industry.]

So, clearly some systems both involve the government and are substantially more than 99.8% accurate.  If being declared dead involves a single random keystroke, shouldn't we change that to require a bit more? After all, usually when you want to collect an estate's assets you must provide a death certificate.

Tuesday, September 20, 2016

Review of "Our Mother" in AVClub

Nice review of Luke Howard's book, Our Mother, in AVClub today:


The conceit is similar to that of Pixar’s Inside Out, but Howard’s metaphor lacks the cloying and reductive simplicity of the film and features the incompleteness and pervasive unknowability that makes a rendering of mental illness sensible without being insulting. 

Sunday, September 18, 2016

Long term care insurance: post #6. More people agreeing with me.

I previously had a series of posts on long term care insurance.


To summarize these posts: I'm skeptical that this insurance generally makes any sense, and skeptical of government agencies' attempts to push it.

Today, I find further support from an article in Decision Analysis. Here's the abstract:

The purchase of long-term care (LTC) insurance is a difficult lifetime choice made in the face of highly uncertain risks, including mortality, morbidity, timing and length of LTC, and portfolio investment risk. Many individuals do not know how to think about this decision properly and, in the face of too much anecdotal and too little objective information, will not proactively decide.

We used Monte Carlo simulation modeling with detailed, experience-based distributions for LTC uncertainties and their correlations to project investment growth to death given alternative levels of LTC insurance. Using constant risk aversion, we calculate certainty equivalents for the resulting distributions of final holdings at death. Decisions were separated for male and female individuals and group and individual market insurance opportunities. Sensitivity analysis was conducted varying age, cost of coverage, starting investment amount, risk tolerance, return on portfolio investment, inflation, and length of LTC coverage.

Optimality results suggest low levels of coverage or no insurance, [emphasis added] with higher use of insurance only for individuals who are young, have low risk tolerance, low starting portfolio amounts, or combinations of these characteristics. While the contribution of this work is to assist individual decision making, it will also be informative to policy makers and insurance companies.

Long-Term Care Insurance Decisions


Permalink: http://dx.doi.org/10.1287/deca.2016.0332 

Saturday, September 10, 2016

Another nice review of Luke Howard's book, in Slate

Son-in-law Luke Howard's first book just got a nice review in Slate:

Howard wrote and drew Talk Dirty to Me, and it feels refreshing on several levels. It’s sexy without being vulgar, curious without being exploitative. It gives its heroine agency over her choices while still recognizing the precarious hold she has on her own twentysomething self. And Howard’s cartooning is endlessly inventive—the traditional six-panel page bends, slows down, speeds up, stops on a dime, and then rockets into a new surprising place. Howard has a remarkable knack for bringing abstractions to visceral life on the page, and he makes desire both comic and erotic with a quavering line and a vivid pink-and-blue palette.

More on Amazon: https://www.amazon.com/dp/1935233378/?tag=slatmaga-20

Ant Farm companies

I used to work for a company that got bought very cheaply by an entepreneur, who proceeded to make a lot of changes in the company.

  • He owned an oursourcing company in India, so much of our operations and programming went over to the Indian company.  This gave the Indian company more scale, and the lower costs meant the company went from money-losing to money-making.
  • During our money-losing phase, layoffs were continuous.  But with all the oursourcing they continued.  We went from about 4400 employees to less than 1500 in five years (approximate numbers based on repeatedly dumping the company phone directory). From four buildings and part of a fifth in Chicago, we are moved down to one after he sold the company.
He already had a fortune, and was in his sixties. We wondered why he kept working so obviously hard. He wasn't at all a hands-off investor, but clearly knew a lot of details down in the organization.

I used to explain it by saying that the company was his ant farm.
How was the company like an ant farm?

He watched us for a bit, but then
  • couldn't resist taking a magnifying glass to some of the ants and burning them (layoffs).
  • when he got bored, it would be like taking a stick and stirring up the ant farm (reorganizing, with again more layoff casualties).
  • eventually got tired of us and got rid of us (sold us off).
So, we're a bit like a toy. Running companies was far more interesting than, say, playing golf. As to why he was so driven to make more money, we might look at this Barney and Clyde cartoon about a man who owns a drug company:

Now, the entepreneur saved the company, which was losing so much money we would probably have disappeared. And despite feeling that every year would be the year I would finally get laid off, my career actually did quite well during his ownership.

It's a fair question to ask what "saved the company" means. Saved for whom? Almost all the employees are different. We're in mostly different physical locations. Our customers could have bought our services for others.  A corporation is really not a person, and has no feelings.

As for the entepreneur, he made enough money to make it back on the Forbes 400 list by selling the outsourcing firm (now with larger scale) and selling us.  

The new owners are bloodless guys from the east coast. Unlike the entepreneur who got involved in as many aspects of the business as he could, they seem to have little interest in what we actually do. I met the entepreneur a number of times in meetings, sometimes one on one. I've only seen the news guys from the back of the auditorium on rare occasions (and that usually by audio or videoconference). 

It's hard for me to believe I feel nostalgic for the crazy, disruptive years of the entepreneur's reign, when he said that in five years the jobs of everyone who wasn't having direct contact with clients would  have their job outsourced.  (I didn't have direct contact.)  But I miss the raw energy, the joy of creation that he embodied.

Basket of deplorables is a deplorable comment


That's the way to follow up that positive convention with a positive campaign!
HRC usually speaks from a script -- did nobody read it and think "basket of deplorables" is going to make a deplorable sound bite?