Occasional reflections on Life, the World, and Mathematics

Archive for June, 2013

Gambling and finance: The 17th century view

I’ve commented on the peculiar dissipation in recent times of the moral stench of gambling, particularly as practiced by the quant elite, who seem at times to revel in their role as gamblers. But I discover now that I was preceded by more than 3 centuries by Daniel Defoe, in his brilliant Essay on Projects:

Wagering, as now practised by politics and contracts, is become a branch of assurances; it was before more properly a part of gaming, and as it deserved, had but a very low esteem; but shifting sides, and the war providing proper subjects, as the contingencies of sieges, battles, treaties, and campaigns, it increased to an extraordinary reputation, and offices were erected on purpose which managed it to a strange degree and with great advantage, especially to the office-keepers; so that, as has been computed, there was not less gaged on one side and other, upon the second siege of Limerick, than two hundred thousand pounds.

This last extraordinary remark, that people were wagering vast sums on the outcomes of sieges. (£200 thousand in the 1690s is probably like £20 million today, or $30 million.) And he goes on to use gambling on the outcomes of siege warfare to present a fascinating example of a sort of arbitrage called a “dutch book”: Combining different wagers with different parties so as to obtain a cumulative certain profit. (De Finetti’s “Dutch Book Theorem”, stating that you need to calculate with something indistinguishable from the standard rules of probability if you don’t want to fall victim to someone else’s dutch book, is the basis of certain approaches to the foundations of probability.) (more…)

Leaker irony

The Guardian comments, with just a trace of snark

A senior Obama administration official who would not provide his or her name told reporters late on Sunday that Snowden’s presumed travel plan undermined the whistleblower’s stated intent to tell the American people about broad government surveillance.

“Mr Snowden’s claim that he is focused on supporting transparency, freedom of the press and protection of individual rights and democracy is belied by the protectors he has potentially chosen: China, Russia, Cuba, Venezuela and Ecuador,” said the official, who did not note that the US was simultaneously attempting to secure the cooperation of China and Russia.

In this new brave new world of cooperation among the US, China, and Russia on criminalising dissidents who reveal government secrets, I look forward with schadenfreude to the next time a Chinese intellectual flees to the US embassy, or seeks refuge in the US from supposed persecution. Now that the US state department has pronounced the sanctity of arrest warrants, I expect to see the US respond favourably to those issued by the Chinese Communist Party or the Kremlin.

Respecting the Constitution

Back when Barack Obama was first running for president, one argument for his candidacy that resonated with me was that a professor of constitutional law was just the sort of person we needed to clean up the war crimes and other illegalities of the Bush years. What they — and I — forgot is the converse of the dictum on laws and sausages often misattributed to Bismarck, that those who acquire expertise in the workings of the law are rarely those who hold them in great respect. To put it differently, when people spoke of cleaning up the illegal activities of the Bush administration, what they (and I) understood was a retreat into general respect for constitutional principles.

But what a lawyer is likely to mean — and Obama is certainly, above all, an ingenious lawyer — is working to map out the exact limits of the law and the president’s authority, to be sure that illegal is cleanly separated from legal, while no iota of presidential power is given up because of unnecessary scruples about the law.

The president’s legal advisor will inevitably have difficulty fulfilling his duty to warn his client away from encroaching too near on the border of illegality. The task is impossible when the client is himself.

This is not to say that someone who abuses a security clearance to leak secrets — however righteous his motives — does not deserve to be punished. It is the job of the president to defend the law. But Obama has shown enormous willingness to forgive the crimes committed from within the government, though these were horrible violent crimes. People like Snowden and Assange, whose crime is mainly to embarrass his government, are pursued with every legal tool at his disposal.

One of the things I most respected about Obama was his commitment to lowering the temperature on issues that had inflamed passions in Washington and beyond. Even when the right wing rebuffed his overtures, I respected the effort. But on the crucial issue of government secrets he seems to be intentionally driving matters to a fever pitch, asserting powers that he, in principle, might be entitled to, but that his predecessors have generally not dared to wield. The fact that he needs to reach back to a legal tool forged in the panic of WWI and barely touched since would give pause to a man less certain of his own righteousness.

I fear that the opponents of Obama who described him as a megalomaniac narcissist may have had some genuine insight that eluded me.

Research impact and road construction

I’ve been interested in the turn of government funders of scientific research in several countries — in particular, US, UK, and Canada — to target research spending likely to have high economic benefit. I’ve commented here on Canadian developments, and satirised UK impact obsession here (though I actually think the UK bureaucracy has done a fairly good job at diverting the ill-informed government rhetorical pressure into less harmful directions). Lawrence Krauss, writing in Slate, has pulled together some of these recent developments with some interesting commentary.

One interesting analogy has recently occurred to me: Scientific research is a public good, like roads. I’m no expert on transportation policy, but my impression is that when transportation plans are laid, when they decide to invest the necessary capital in widening this highway, or paving that cowpath, the political decision-makers don’t devote a lot of energy to questioning whether it’s really productive for people to be travelling along this route, whether people going from A to B (and back) is actually going to provide economic benefits. The arguments usually stop at the evidence that people are travelling that route, that the current roads are congested, and so on. Experience has shown that efficient transportation infrastructure promotes economic growth and general public welfare, and government should provide people with the means to get where they want to go reasonably quickly and safely, without needing to micromanage exactly why everyone wants to go wherever it is they want to go.

Similarly, experience shows that thriving scientific research promotes economic growth, and public welfare, and we should invest in making it thrive. Where should we invest? We should look where the traffic is going, and not ask why it is going there.

This is not quite as straightforward as the road-building problem, because we do want to distinguish between high-quality research and low-quality research, but even a certain amount of boring, non-paradigm-breaking, grey-skies research can play an important part in keeping the scientific enterprise healthy. Making this distinction is the job of peer-review, and maybe it needs to be done differently, but I would contend that trying to slather on another layer of “impact” evaluation is not going to make the process or the research more productive.

The Socratic whistleblower

Cybersecurity law expert Joel Brenner says (hat tip to Andrew Sullivan) Eric Snowden is a wimp because he didn’t stay to face the legal consequences of his whistleblowing. In fact, it’s not civil disobedience at all unless you stay and drink the hemlock.

From Socrates through Thoreau, Gandhi, and King, the great theorists and practitioners of this form of resistance to law have told us in words and actions that civil disobedience requires the disobedient citizen to suffer the legal consequences of his or her unlawful act. In Socrates’s case, the consequence was death at the hands of the Athenian authorities. For Thoreau, Ghandi, and King, the consequence was jail. Through their suffering and example, they sought to undermine the moral position of law they found objectionable. Because unless the disobedient citizen takes the legal consequences of his unlawful action – he’s nothing but a criminal or a rebel.

Now, I love Thoreau, and he invented the term “civil disobedience”, but he spent one night in his hometown jail and then let a friend pay his fine. As with his roughing-it-in-the-cabin-but-don’t-miss-Sunday-dinner-with-the-folks stay at Walden, Thoreau knew better than anyone how to leverage a minimum of physical discomfort into a maximum of moral example. It’s hard to compare him to Snowden, who would have to at least take seriously the possibility that falling into the hands of US authorities would result in him being tortured and/or incarcerated permanently without trial.

But this is also completely wrong as regards Socrates, for a different reason: He precisely refused to flee so as not to undermine the moral position of the law. To put it simply, Socrates (as reported in the Crito) imagines the Law addressing him as follows: (more…)

Billions or millions?

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This headline is on the Guardian home page at 11:30 PST (no link, because it’s presumably going to be changed). I thought $3.6bn seemed like an unimaginably large sum for copyright infringement related to a single photo, and indeed, when I clicked through I found

A photographer who failed to see the funny side of a Buzzfeed post on “The 30 Funniest Header Faces” is suing the site for $3.6m (£2.3m) over claims it breached his copyright.

Billions or millions? It seems important… And that’s not even mentioning the fact that I thought British billions were actually American trillions, which would push the error up by another factor of a thousand.

Intellectual property is theft

Chris Bertram at Crooked Timber has pointed to this paper by esteemed Harvard economist N. Gregory Mankiw, in which he raises the temperature on the tired old “taxation is theft” thesis. In Bertram’s pithy summary, “Taxing the 1 per cent would be like the state forcibly ripping out their spare internal organs!” This just shows how easy it is to get people to accept almost any moral argument once you frame it to appeal to their squeamishness.

As mathematicians know well, from an inconsistent logical system any proposition may be derived, and human moral calculus is nothing if not inconsistent. Here we see that you can make a perfectly coherent-sounding argument for why taxation is in principle just like forcing people to give up their second kidney to someone who needs it, and that obviously seems wrong, when the alternative might be a situation where people literally need to part with their second kidney in order to eat, or to obtain needed medical treatment for their children.

But I’m interested in another feature of this essay. Mankiw sets the stage as follows:

Imagine a society with perfect economic equality. Perhaps out of sheer coincidence, the supply and demand for different types of labor happen to produce an equilibrium in which everyone earns exactly the same income. […] The society enjoys not only perfect equality but also perfect efficiency.

Then, one day, this egalitarian utopia is disturbed by an entrepreneur with an idea for a new product. Think of the entrepreneur as Steve Jobs as he develops the iPod, J.K. Rowling as she writes her Harry Potter books, or Steven Spielberg as he directs his blockbuster movies. When the entrepreneur’s product is introduced, everyone in society wants to buy it. They each part with, say, $100. The transaction is a voluntary exchange, so it must make both the buyer and the seller better off. But because there are many buyers and only one seller, the distribution of economic well-being is now vastly unequal. The new product makes the entrepreneur much richer than everyone else.

The society now faces a new set of questions: How should the entrepreneurial disturbance in this formerly egalitarian outcome alter public policy?

The sharp-eyed reader may be wondering, why are these people paying $100 to J.K. Rowling for a pile of paper with printing on it? Why didn’t someone take the first copy, reprint it, and sell copies for $5? Oh yes, because there’s copyright, and the strong arm of the state willing to use force to prevent you from printing certain words on the page. Without that implicit threat of violence, Ms. Rowling’s creation would be worth very little. So what does she owe us in return? A thank-you card? The cost of enforcing her copyright? Or maybe just some constraint on how much of the potential profit she should be allowed to retain, from the monopoly position that wouldn’t exist without the effort and investment of many other people, both living and of prior generations.

The fact that this guy is considered one of the top minds in economics today is sobering…

Not the Lake Wobegon Hospital

From the front page of the West County Times:

Death rates at Bay Area hospitals vary widely, new report reveals

While some hospitals excelled at keeping patients alive, more than half of institutions around the Bay Area had worse-than-average death rates for at least one medical procedure or patient condition in 2010 and 2011, a new state report reveals.

PRISM and leaks

Plenty of people commenting on the revelations of secret US government acquisition of vast quantities of personal data on telephone calls and other communications (my comments here and here) suggest that this is all overblown, even paranoid. William Saletan wrote about the telephone surveillance

Chill. You can quarrel with this program, but it isn’t Orwellian. It’s limited, and it’s controlled by checks and balances.

David Simon compares it to wiretapping payphones and calls The Guardian’s reporting “the heights of self-congratulatory hyperbole”.

So here’s just one example of how far-reaching the negative impact of this sort of surveillance could be — even if it is never misused. There has been much discussion of the Obama administration’s stepped up attacks on leakers, and on the journalists who publish leaks. Imagine you are a government employee in possession of significant evidence of official crimes or corruption. You would like to turn it over to a journalist, but you also know that once you do, the government will be able to trawl through all of the journalist’s email and telephone calls — not just prospectively, but going back years into the past, and find all contacts and contacts of his contacts. They will have plenty of private and embarrassing information that they can use to pressure you or the journalist, or his boss.

Now that the leaker has revealed himself, Farhad Manjoo put the case against the NSA’s power-grab succinctly: The very fact that such an unexceptional 29-year-old was able to gain access to so much information by itself disproves their claim that “you can trust us to do the right thing with your data”. The question you need to ask yourself is not, do I trust the president with this surveillance capacity? The question is, do I trust the most frustrated (or bored) FBI agent or NSA contractor with a top security clearance with this capacity.

Julian Assange’s password

One of the weirdest facts in the fascinating book on underground cryptography and the anti-secrecy movement represented by Wikileaks — beyond the general fundamental link, which I’d never quite put together before, between cryptography (keeping secrets) and whistleblowing (revealing secrets) — was the comment that Guardian journalist David Leigh had published Julian Assange’s password — ACollectionOfDiplomaticHistorySince_1966_ToThe_PresentDay# — to the unredacted US State Department cables. Master of Secrets Assange gives out his own password to a journalist — rather than giving the Guardian a version encoded with a throwaway password — and then expresses shock and dismay when it ends up in print. Did he also give Leigh the PIN code for his bank card, but ask him only to use it to check the balance?

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