Migration

Getting Movable Type set up is actually surprisingly easy. This blog will now live at http://bactra.org/weblog/; I'll leave old entries up here, on the off-chance that somebody got permalinks to work.

Life Considered as a Series of Multiple-Choice Questions

So, while waiting for a simulation to finish running, I've just taken the "Essential Differences" quiz at the Guardian. According to my (unfeigned) answers, I'm an emotionally normal woman (which my wife finds laughable) and an autistic man. How I managed the latter while admitting a complete lack of interest in car engines, stereos, household wiring, freeways and sports statistics, I dunno. (The Jungian explanation, perhaps, is that my anima has Asperger's syndrome.)

Teresa Nielsen Hayden, Maria Farrell [permalink bloggered], Kieran Healy and Matt Yglesias are all saying the right, intelligent things about how appalling it is that something like this is being presented as evidence of hard-wired gender differences. What I want to know, though, is what happened to Simon Baron-Cohen, who wrote the book occasioning this quiz: he used to be a pretty good cognitive scientist.

AAARGH!

I have just discovered a Turkish creationist (and anti-Masonic conspiracy theorist) linking to my notebook on Ilya Prigogine, mining what I say there and my accompanying citations to try to make it sound like self-organization is a myth, and evolution is thermodynamically impossible. I guess this means I have to go on record as saying that I have no connection with this "Harun Yahya", that his arguments about evolution and thermodynamics are century-old fallacies, and that self-organization can be demonstrated, in nature, in the lab, even in bloody cocktails, to anyone with eyes to see. It's true Prigogine's theories fail to account for these phenomena, but to go from that to saying the phenomena don't exist is mere bullshit. How someone can in one breath say they expect to stand soon before the Throne of Judgment to account for their words and deeds, and in the next breath be so blatantly dishonest, I will never understand.

Bloggered

Archives seem to be screwed up, everything gets posted twice, and I can't change my sidebar to save my life. I'm preparing to switch over to Movable Type at my main site.

Aground on Scholes of Finance

I am generally receptive to (legal) propositions which involve my receiving sums on the order of my paycheck in exchange for a few days of work. The latest of these came from an editor at Quantitative Finance, and led to my conducting a telephone interview with Myron Scholes and writing a profile of him for QF. (If you don't know who Scholes is, well, read my piece!) Here then a few reflections which it wouldn't have been appropriate to work in to the profile.

1. Scholes is the fifth Nobel laureate I've had a chance to talk to at some length. He's pretty clearly the second most arrogant of the five, though also pretty clearly not the smartest, or even the second smartest. He was understandably completely bored by the idea of discussing the origins of the Black-Scholes formula yet again; other topics interested him more.

2. I did not have the gumption to ask what it felt like to lose several billion dollars over a summer, or if it was true that when LTCM was raising capital, he'd respond to skeptics by saying they'd make money "because of fools like you".

3. Black-Scholes portfolios, combining stock and options in just the right proportions, are supposed to be riskless. This is obviously false. Back in the day, one of my in-laws bough stock in WebVan.com, and has made a return to date of -100%; they're so belly-up I can't give you a link. Could she have hedged away the risks of that stock by suplementing it with the right number of WebVan options? The question answers itself; stuffing the money under her mattress would've had better risk/return properties. Obviously, the problem is that the Black/Scholes/Merton argument assumes the company you're buying stock in will persist indefinitely into the future. Presumably somebody has modified it to include a finite risk of default (though estimating that risk would be tricky at best; see below). But when you make a list of all the over-simplifications that go into deriving the formula, you have to ask whether it relying on it is ever a good idea.

4. When Scholes started talking about how finance needed to embrace non-stationary processes, it was all I could do to not quote D-Squared at him:

"Sir, you can't work out the answer to that question in any statistically reliable manner, sir, because economic processes are nonergodic, sir, because the economy is subject to positive destabilising feedback sir!"

Very well done that pupil. The rest of you, go back to the books and revise.

(For extra credit, reconcile this observation with the fact that chaotic systems are generally ergodic, though "subject to positive destabilising feedback".)

5. Finally, something I was able to hint at in the profile. Scholes seems to seriously think that the growth of finance & financial engineering is supposed to make life in general, and economic decision-making in particular, simpler for non-financiers. If that's the case, well, they're not doing such a good job of it, are they? I can now go to an ATM in Belgium with my American bank card and get euros (his example), which does depend on a very liquid foreign exchange market. Without certain kinds of derivatives on foreign exchange, it would be slightly more expensive for the banks to offer that service, but the magnitude of the expense isn't at all commensurate with the size of the foreign exchange derivative market.

Financial markets (say Scholes, along with the Chicago School which trained him) are the mechanism by which capitalist societies allocate productive resources. It follows that financial markets are economically efficient to the extent that they make better, more productive, allocations than other potentially available mechanisms. (So far so good, says my inner market socialist.) The total profits of the financial sector, in competitive equilibrium, should thus be approximately equal to the waste which would be entailed by using our second-best allocation mechanism. (Larger profits, and it wouldn't pay to use the market; smaller, and they could charge more and get it.) What makes this unbelievable is that the profits of the financial sectors of developed economies have grown dramatically since the 1970s, i.e., at exactly the same time as the great productivity and growth slow-down of those same economies. So assuming the financial sector is fulfilling its role efficiently requires us to believe that the growth slow-down would've been immensely worse without its services. It's hard to tell a plausible story why this should be so, much less back it up with non-tautological evidence. I'm tempted by the idea that around 1975 the financial sector found a new way of extracting rents (perhaps through exploiting some kind of lock-in or switching cost?), but also can't come up with a decent story for that.

Gilles Kepel

Since it seems staggeringly unlikely I'm ever going to write my review of Gilles Kepel's Jihad: The Trail of Political Islam (it's been hanging fire for nine months now), I'll just blog his dialogue with Joan Smith, and his precis of Jihad that lead me to buy the book. (Via the valuable openDemocracy.net.) The dialogue was occasioned by a new book, Bad Moon Rising, but I can't find any indication it's going to be published in the US, which seems odd.

Civis Americanus Sum

For years I've been fond of the idea that American citizenship should be extended to all nationals of our allied countries, but I've never gotten around to writing it out. (The fact that I'm especially fond of the idea after a few drinks has perhaps something to do with this.) Imagine, then, my disappointment at seeing it appear, bylined by Régis Debray no less, complete with my extended Roman analogy, in the New Left Review. Of course, appearing in that venue, it can't help but contain certain flaws I like to think I would have avoided*. This does not make it any more likely I'm going to write my version, though.


* E.g.: (1) In what sense could Europeans possibly be "descendants" of the Pilgrims? (Perhaps this is a translation error.) (2) Debray makes one of the selling points of the idea, on American side, that of making the US population more white. I'd be the last to deny that there are still plenty of racist yahoos in this country, or that the GOP is their party, but this is simply not something that would be acceptable in American politics; it feels like a projection on the part of a European. Bush, for all he's an awful president and apparently a bit of a moral idiot, has a black national security adviser, a Jamaican secretary of state, a Hispanic immigrant sister-in-law, etc. (3) Nature is a British journal, not an American one.

"I'm afraid I've committed an egregious foucault"


John Holbo is a professor of philosophy at the National University of Singapore, and (like everyone else) has a blog. He's also tried his hand at a Socratic dialogue, The Advantages and Disadvantages of Theory for Life, with excellent results. Holbo (or rather, Socrates and Phil) demolishes the following bit of received wisdom: that it is impossible to engage in criticism without some theory or another; "those who resist theory commit it by other means". As he says, this rests on an equivocation about "theory". On the one hand, there is little theory, which are the ordinary reasonably-coherent ideas one does indeed use to get through the day, or the book review. On the other hand, there is big theory, which is something like Freud, or Althusser, or (pace my friend J. J.) whatever the hell it is Deleuze tried to say. The cliche only has any bite if one believes that little theory is always some kind of disguised form of big theory, which is, to say the least, not obvious. Indeed, Holbo can't think of any sense in which this might be.

Here I wish to record a small quibble. A defender of the cliche might argue as follows. Consider (they would say) someone who seems to only be employing little theory in their reasoning. On closer examination, however, it turns out that the explicit part of their reasoning is full of formally invalid inferences, which are not positively fallacious but simply lacking major premises --- in a word, enthymemes. If one were to collect those suppressed major premises, which might be tacit and not consciously available to the reasoner, might they not constitute a system of generalizations as grandiose as any big theory? Thus "those who resist theory commit it by other means".

As usual, a lot rests on "might". There are usually lots of ways of fixing a formally defective argument, and the missing premises could be more or less grandiose. Why should we believe that the hidden premises are generally very ambitious? The partisan of theory-by-other-means might point to their friends who study particular cases of implicit theory and conclude that ambitious implicit premises are themselves good theories, since they parsimoniously account for large numbers of enthymemes. But this would only be good evidence if these analysts had severely tested alternatives involving quotidian, reasonable hidden premises. So the partisan of theory still loses, though they can put up more of a fight than Holbo allows.

(This takes it as a given that tacit premises are the right way to explain enthymemes and their kin. But I'll save the problems with that for a book reivew.)

When Did They Get a Blog? Dept.

Ken MacLeod, one of my favorite novelists, writes The Early Days of a Better Nation.

Juan Cole, a professor here in Ann Arbor, offers Informed Comment. Only recommended if you want to learn about Islam and Middle-Eastern politics from somebody who, you know, studies them very well for a living. It's not like their judgments might be a bit better grounded than, let us say, Andrew Sullivan's.

How to Not Blog for a Month

1. Agree to present a paper at a conference ten months in the future, because you are, after all, on the program committee and getting other people to attend.

2. Further agree to present new work.

3. Completely forget about this, until you get an email from the relevant society a week before the deadline for final manuscripts.

4. Spend every fungible moment working on said paper. If you are on eastern time, and the society is on Pacific time, your absolutely final, last-chance deadline is 3am, not midnight.

5. Remember that your code will contain at least two irritating numerical bugs.

6. Remember that LaTeX style files have only a conjectural relationship to the actual format demanded by the proceedings.

Actually, I'm pretty happy with the resulting paper; it'll be fun to see what kind of reaction it gets.

Malawi Revisited

Some time back, there was a bit of a stir among the blogs regarding vampire rumors in Malawi. Now here's some context: the country is dying of AIDS. Society is collapsing from disease, and they're looking for scapegoats: well duh.