Monday, January 31, 2011

Quote of the Week

From Letter to a Christian Nation by Sam Harris:
"I have no doubt that that your acceptance of Christ coincided with some very positive changes in your life. Perhaps you now love other people in a way that you never imagined possible. You may even experience feelings of bliss while praying. I do not wish to denigrate any of these experiences. I would point out, however, that billions of other human beings, in every time and place, have had similar experiences--but they had them while thinking about Krishna, or Allah, or the Buddha, while making art or music, or while contemplating the beauty of nature. There is no question that it is possible for people to have profoundly transformative experiences. And there is no question that it is possible for them to misinterpret these experiences, and to further delude themselves about the nature of reality. You are, of course, right to believe that there is more to life than simply understanding the structure and contents of the universe. But this does not make unjustified (and unjustifiable) claims about its structure and contents any more respectable.
It is important to realize that the distinction between science and religion is not a matter of excluding our ethical intuitions and spiritual experiences from our conversation about the world; it is a matter of our being honest about what we can reasonably conclude on their basis. There are good reasons to believe that people like Jesus and the Buddha weren't talking nonsense when they spoke about our capacity as human beings to transform our lives in rare and beautiful way. But any genuine exploration of ethics or the contemplative life demands the same standards of reasonableness and self-criticism that animate all intellectual discourse."
A new kind of New Athiest?

Friday, January 28, 2011

Co-opting Video Games

A while back I posted this awesome lecture discussing trends in video gaming and where they might logically lead our society. According to Carnegie Mellon Professor Jesse Schnell, video games are so successful and so rich in their psychological qualities that the medium will be extended to all aspects of our social and economic lives. Check out his blog here.

This idea of virtuous video gaming (VVG?) is catching on. The Wall Street Journal recently ran a great article explaining the psychology of video gaming:
In a good game, we feel blissfully productive. We have clear goals and a sense of heroic purpose. More important, we're constantly able to see and feel the impact of our efforts on the virtual world around us. As a result, we have a stronger sense of our own agency—and we are more likely to set ambitious real-life goals. One recent study found, for example, that players of "Guitar Hero" are more likely to pick up a real guitar and learn how to play it.
The writer, UC Berkley professor Jane Mcgonigal, has a great TED Talk about the virtuous potential of video games. Her new book, Reality Is Broken, sounds like a must-read. A fascinating interview here. The remarkable financial success of online video games combined with their expansion of the population that regularly plays video games is remarkable, and I'm eager to see what new innovations will emerge once more creative power is brought to bear. But let's be honest here: the more immersive, time-consuming, technically trickier video games will probably still remain in their existing entertainment niche, cultural stigmas and all.

For the really interested, here's a really long panel discussion about the future of video gaming. GG.

The Best Coverage Around

Al Jazeera English live streaming

Thursday, January 27, 2011


What Caused The Great Recession?

A few days ago a friend mentioned to me that he was interested in learning more about the financial crisis of 2007, and it got me thinking. Identifying one singular cause of a phenomenon as complex as a financial crisis is impossible, because there are many factors operating and interacting between many levels of analysis. That said, we can attempt to simplify a little bit. There are many explanations that don't dig very deep and reveal simple causal relationships. To say that the Great Recession was caused by excessive debt fits this type of explanatory category. But such a simplistic explanation neglects too much: what caused businesses, financial institutions, and households to take on the excessive debt in the first place?

To answer this question, we need a richer model of causal relationships that includes big forces like political and economic context. But we must be wary: too much emphasis on context and structural forces leaves us with an explanation distant and divorced from the reality of the crisis. To say that the Great Recession was caused by capitalism or human psychology, while interesting, is meaningless to policymakers developing solutions. The best explanation should therefore occupy some middle zone, and depend on the ability of policy to influence things within that zone.

With that in mind, three big "causes" of the Great Recession stick out to me as deserving special attention:

1. Massive influx of savings from China: Leading up to the financial crisis, a ridiculously large amount foreign savings were deposited in the U.S. This kept interest rates down and meant credit was more accessible to U.S. consumers than ever before. Put another way, China was sending us tons of money, and it had to go somewhere, leading to the expansion of credit and rise in asset prices. (note: clever readers might be tempted to ask: but why does China save so much? There are many reasons, not least China's lack of a social safety net, its rapidly aging population, or its extremely competitive marriage market (due to gender imbalances). But keep in mind the comments above about finding explanations that fit within policymakers' realm of influence. Restricting capital inflows we can do; Chinese social policy we can't.)

2. Shadow Banking & Regulation: Most financial crises have followed a similar path concerning the cat-and-mouse game between businesses and government regulators. Following a crisis, populist outrage results in political incentives for new regulation in the industry or sector most at fault. Typically, such regulation reduces the leverage (or risk/reward) of that industry or sector. Over time, smart business innovators develop new tools to make money that are outside the purview of the most recent regulations. These new tools develop into massive unregulated industries and markets, subject to the economic original sin of unfettered capitalism: boom and bust business cycles. For the 2007 crisis, this periodic pattern manifested itself as the so-called "shadow banking system." More and more financial activity was being conducted on unregulated markets: derivatives trading, collateralized-debt obligations, credit-default swaps, auction-rate mortgages, mortgage-backed securities, etc. These all exploded in a big way.

3. Inequality: To blame the financial crisis on inequality is to tread a risky path. But I believe the extremely high income and wealth inequality leading up to the financial crisis (and still rising today) did more to cause the Great Recession than any other single factor. Whatever the reason for inequality and middle-class wage stagnation (liberals blame social and tax policy, conservatives blame global competition and labor-replacing technology), it has the pernicious effect of decreasing household savings and increasing debt-fueled consumption. The U.S. economy grew a lot between 1980 and 2007, yet most Americans' incomes stayed flat or declined--economic gains went to those at the top. With the rich getting richer and quality-of-life increases a resilient norm, the middle-class turned to three mechanisms to keep consumption high: 1) women moving into the workforce, 2) work longer hours, and 3) draw down savings and borrow. With the gains from 1) and 2) all but spent (Americans work longer hours than anybody), only option 3) remained: debt. And as they say, the rest is history. (note: for more on this idea, check out Aftershock by Robert Reich.)

Wednesday, January 26, 2011

2012 Already? T-Paw

It looks like the 2012 Republican presidential primary is going to start heating up pretty soon, so now is as good a time as any to start learning about the potential candidates. Somebody sure to run is the former governor of Minnesota, Tim Pawlenty. Here's a still-relevant profile of the guy. And here's a tacky video trying to cover up Pawlenty's nasally and slightly annoying speaking voice. This is only the second book-trailer I've ever seen (the first was this), but hopefully it becomes a trend. A more thorough rundown of all the potential Republican candidates will come later in the week.

Monday, January 24, 2011

Marketing With Acronyms

This leaked internal memo run by The Economist a few weeks ago is simply amazing. It reveals either a brilliantly meritocratic decision-making process within a leading Wall Street bank, or a strange sort of marketing nihilism. Maybe both. Excerpt:
We’re in a race with our rivals. Goldman’s idea is the N-11, the “Next Eleven” countries. But that has been around for five years and sounds like a French highway. The Japanese have come up with VISTA, for Vietnam, Indonesia, South Africa, Turkey and Argentina; we are using this discreetly in our own marketing to see if they will assert ownership. HSBC (and some guy at the EIU) are hawking the CIVETS—Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. But why catlike creatures known for producing coffee with their faeces should encapsulate emerging-market growth is unclear.

Sunday, January 23, 2011

I'm Really Excited About This New TV Series

No, it isn't this. It's actually a new BBC documentary series in the vein of Planet Earth called Human Planet:

I recently read Jared Diamond's The Third Chimpanzee, a book explaining the differences between humans and other animals, and it got me excited to learn more about human culture and anthropology. This show looks awesome.

Patent Pending: Virtual Music Library

By now everybody is (or should be) familiar with the idea of cloud computing--the movement of computing power from individual machines to big data centers, allowing applications and storage services to be accessed online from any location. Google Docs and Dropbox are great examples.

The music industry has a complicated relationship with cloud computing. Apple's iTunes successfully makes money by allowing users to download music, but having your music trapped in one device (like a computer) is becoming increasingly frustrating. That's because websites like Pandora and YouTube offer a wide variety of music that is accessible anywhere via the internet. The main drawback of streaming music on these websites is the lack of an organized music library.

It seems clear that somebody could develop a music system that combines the best of both worlds: a smartly organized music library that is accessible anywhere. In terms of existing online music stores (like iTunes), this means simply keeping a list of customers' downloads and allowing them free access to their music online. Tweaking existing streaming websites is a bit trickier, but very doable. For YouTube, a slick organization system could create a library comprised entirely of YouTube links. For Pandora, this could mean keeping a list of all "thumbs up" songs and organizing them logically. Because Pandora codes songs across tons of dimensions, I could see some cool data visualization features being available to users. Grouping songs based on the same-old artist/album/genre categories is so C20th.

Friday, January 21, 2011

Science and Law

Governments worldwide are not doing enough to prevent the occurrence of low-probability, high-impact events, also known as catastrophic risks. This is the primary message in the book Catastrophe: Risk and Response by Richard Posner, a federal judge and University of Chicago professor. But aside from the horrors of asteroid collisions and bioterrorism, Posner sketches a fascinating critique of our current legal system.

Among the many deficiencies in our catastrophic risk management system, the law stands out as an institution particularly ill-suited towards dealing with issues of science and risk. As the wealth of human scientific and technological knowledge has grown, so too has its complexity. Understanding many scientific topics requires more and more specialization, something anathema to the law in its current structure.  Although some lawyers specialize in scientifically rigorous fields, judges and juries by design do not. This can result in tragically misinformed legal outcomes, such as the 1980 Diamond v. Chakrabarty which established that living organisms can be patented just like new chemicals.

A second problem concerns the culture of the law. With its emphasis on verbal logic, legal professions overwhelmingly attract students who are either bad at, or uninterested in, math and science disciplines. In fact, the absence of math and science in the law is a big factor that attracts many students from humanities disciplines. Science illiteracy is a big problem everywhere, but the law's unique importance in our policy process makes it especially damaging.

A third concern relates to the law's obsession with personal testimony and human cognitive bias. It's best explained here, go to 1:50 in.

Lastly, a more philosophical point. In all areas of science, but especially in quantum physics and biology, the idea of isolating simple cause-effect relationships is breaking down. It turns out that reality is a lot more complex that we thought. Instead of simple, linear, causal relationships we have interacting feedback loops of overlapping conditional and causal networks. Chaos theory and fractal geometry have shown us that randomness is a massively powerful and pervasive force that affects everything. In light of these new truths, the law's singular structure of "one party versus one party; who's to blame" seems almost quaint. Take environmental law, for example. Does this company's pollution make it guilty of contributing to this community's health problems? This type of question is terribly suited for the law's "guilty/innocent" decision structure. Maybe the low socioeconomic status of the community reduced its members' overall health and made them especially vulnerable to the effects of the pollution, and the same pollution had no effect on the richer, healthier, more resilient communities in the area. In this case, assigning blame on the basis of one direct causal relationship is naive in light of other causal factors. 

So how can the law improve its relationship with science? Increasing scientific specialization among lawyers, judges, and juries in the form of a "science court" could go a long way towards improving the quality of scientifically complex legal decisions. Massive investments in science and math education could also help, as well as mandating higher levels of science and math coursework in basic education guidelines. That many of today's students will never take an introductory statistics course in their lifetime is quite a chilling thought indeed.