1517. Rigor vs. thinking in economics

Vanoufarkis writes

… some economists tried to explain the value of ‘things’ in refer­ence to the production costs involved in their manufacture after defining fully the meaning of ‘cost’. Others built models in which the values of ‘things’ reflected their relative desirabil­ity, based on a particular (utilitarian) theory of desire-fulfilling actions. The result was two equally logical yet incommensurable descriptions of the world; two theories of the object ofstudy (mainly of prices and quantities) that could not be brought together. When these two schools of thought looked at reality, they did so in search of evidence that the ‘other’ school, or its model, was inferior.

From his book modern political economics

For the academic work, something must be pulled out of the flow of a lens that can be quantified. The more complex commonsense thinking about value does not lend itself to that kind of modeling.The institutional problem is that careers can be made on either of the two approaches but not on the quality of writing that compares them in a fairly common sense way.

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1516. narrative and math in economics

It might be that if we moved economics to assumptions that would make narratives in journalism easier it would make the need for analytic capacity less necessary and economists in the universities would have a lot less to do. This needs to be thought about.

My view has been the striving for quantitative models has created an atmosphere where people in economics pay less attention to reality and as result the scoundrels have taken over the economy.

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1515. Lao tzu 62

There was a time when human beings were free  from the network effects that binds everybody together in a highly controlling fabric. .

The way is the refuge for the myriad creatures.
It is that by which the good man protects,
And that by which the bad is protected.

Beautiful words when offered will win high rank in return;
Beautiful deeds can raise a man above others.

Even if a man is not good, why should he be abandoned?

Hence when the emperor is set up and the three ducal ministers are appointed,he who makes a present of the way without stirring from his seat is preferable to one who offers presents of jade disks followed by a team of four horses.
Why was this way valued of old?
Was it not said that by means of it one got what one wanted and escaped the consequences when one transgressed?

Therefore it is valued by the empire.

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1514. Economics and reality

I attended a small philosophy of economics workshop today and was struck by the discussion which centered on the inadequacy of models to capture reality . Implicit in the conversation was the idea that reality and the economic world which is part of it is fixed and timeless and of the models were somewhat like physics in trying to capture the main features of timeless reality.

But economic realityis quite different because like the models themselves the economic reality is human made and constantly changing in the process of history. All the categories such as money, capital, banks,have emerged out of history and are constantly changing their meaning in the social context from which they spring.

We need economics to see that thinking about economics is thinking about something man-made and not something that is given by a timeless nature.

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1513. Scarcity and violence

What girard and dupuy mean by scarcity and violence.

Economics likes to define itself as distributing scarce resources. Scarcity implies that some will get and some won’t who want it. Preventing those who want from taking is violent as would be the taking.

Economics usually starts with the assumption that markets need to protected by contracts law and enforcement. This is implicit in every transaction, the looming hand of potential enforcement.

If too much scarcity violence potential increases but is always present

If too little scarcity no incentive to production.

In earlier societies we might think that violence is in the form of community sanctions but since in such communities there is no scarcity since all are fed or starve together.

Scarcity and violence cannot be regulated away.

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1512. On AI, an intelligent guide

Steve Omohundro writes, from Edge. 


2014 appears to have been a turning point for AI and robotics. Major corporations invested billions of dollars in these technologies. AI techniques, like machine learning, are now routinely used for speech recognition, translation, behavior modeling, robotic control, risk management, and other applications. McKinsey predicts that these technologies will create more than 50 trillion dollars of economic value by 2025. If this is accurate, we should expect dramatically increased investment soon.

The recent successes are being driven by cheap computer power and plentiful training data. Modern AI is based on the theory of “rational agents” arising from work on microeconomics in the 1940s by von Neumann and others. There is an algorithm for computing the optimal action for achieving a desired outcome but it is computationally expensive. AI systems can be thought of as trying to approximate rational behavior using limited resources. Experiments have found that simple learning algorithms with lots of training data often outperform complex hand crafted models. Today’s systems primarily provide value by learning better statistical models and performing statistical inference for classification and decision making. The next generation will be able to explicitly create and improve their own software and are likely to self-improve rapidly.

In addition to improving productivity, AI and robotics are drivers for numerous military and economic arms races. Autonomous systems can be faster, smarter, and less predictable than their competitors. 2014 saw the introduction of autonomous missiles, missile defense systems, military drones, swarm boats, robot submarines, self-driving vehicles, high-frequency trading systems, and cyber defense systems. As these arms races play out, there will be tremendous pressure for rapid system development which may lead to faster deployment than would be otherwise desirable.

2014 also saw an increase in public concern over the safety of these systems. A study of the likely behavior of these systems by studying approximately rational systems undergoing repeated self-improvement shows that they tend to exhibit a set of natural subgoals called “rational drives” which contribute to the performance of their primary goals. Most systems will better meet their goals by preventing themselves from being turned off, by acquiring more computational power, by creating multiple copies of themselves, and by acquiring greater financial resources. They are likely to pursue these drives in harmful anti-social ways unless they are carefully designed to incorporate human ethical values.

Some have argued that intelligent systems will somehow automatically be ethical. But in a rational system, the goals are completely separable from the reasoning and models of the world. Beneficial intelligent systems are vulnerable to being redeployed with harmful goals. Extremely harmful goals that seek to take control of resources, thwart other agent’s goals, or to destroy other agents are unfortunately easy to specify. It will therefore be critical to create a technological infrastructure that detects and controls the behavior of harmful systems.

Some fear that intelligent systems will become so powerful that they are impossible to control. This is not true. These systems must obey the laws of physics and the laws of mathematics. Seth Lloyd’s analysis of the computational power of the universe shows that even the entire universe acting as a giant quantum computer could not discover a 500 bit hard cryptographic key in the time since the big bang.

The new technologies of post-quantum cryptography, indistinguishability obfuscation, and blockchain smart contracts are promising components for creating an infrastructure that is secure against even the most powerful AIs. But recent hacks and cyberattacks show that our current computational infrastructure is woefully inadequate for the challenge. We need to develop a software infrastructure that is mathematically provably correct and secure.

There have been at least 27 different species of humans of which we are the only survivors. We survived because we found ways to limit our individual drives and to work together cooperatively. The human moral emotions are an internal mechanism for creating cooperative social structures. Political, legal, and economic structures are an external mechanism for the same purpose.

We need to extend both of these to AI and robotic systems. We need to incorporate human values into their goal systems to create a legal and economic framework that incentivizes positive behavior. If we can successfully manage these systems, they have the potential to dramatically improve virtually every aspect of human life and to provide deep insights into issues like free will, consciousness, qualia, and creativity. We face a great challenge but have tremendous intellectual and technological resources to build upon.

“Incentivize positive behavior” is quite a chunk. Can it be reasonably disaggregataed?



Furthr thoughts

In the same series of responses  we get

Any scientist will say it’s the search to know. “It’s foundational,” an AI researcher told me recently. “It’s us looking out at the world, and how we do it.” He’s right. But there’s more.

Some say we do it because it’s there, an Everest of the mind. Others, more mystical, say we’re propelled by teleology: we’re a mere step in the evolution of intelligence in the universe, attractive even in our imperfections, but hardly the last word.

Entrepreneurs will say that this is the future of making things—the dark factory, with unflagging, unsalaried, uncomplaining robot workers—though what currency post-employed humans will use to acquire those robot products, no matter how cheap, is a puzzle to be solved.

Here’s my belief:  We long to save and preserve ourselves as a species. For all the imaginary deities throughout history we’ve petitioned, which failed to save and protect us—from nature, from each other, from ourselves—we’re finally ready to call on our own enhanced, augmented minds instead. It’s a sign of social maturity that we take responsibility for ourselves. We are as gods, Stewart Brand famously said, and we may as well get good at it.

We’re trying. We could fail.

I don’t think it is so fundamental. What is, is the nexus of motives. AI interest is driven by money and opportunity, for biz and military as stated. Consider as an alternative if the same money ere available for poetry and the arts…

Although the artists and poets could do it for half price :)

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1511. Manbiot on wilding.

I just really like this fellow. Being reading his articles for quite a while.

A Small and Shuffling Life – monbiot.com

By George Monbiot, published in the New York Times, 19th January 2015

Live free or die: this is the maxim of our age. But the freedoms we celebrate are particular and limited. We fetishise the freedom of business from state control; the freedom not to pay taxes; the freedom to carry guns and speak our minds and worship whom we will. But despite – in some cases because of – this respect for particular freedoms, every day the scope of our lives appears to contract.

Half a century ago, we were promised that rising wealth would mean less work, longer vacations and more choice. But our working hours rise in line with economic growth, and they are now governed by a corporate culture of snooping and quantification, of infantilizing dictats and impossible demands, which smothers autonomy and creativity. Technologies that promised to save time and free us from drudgery (such as email and smartphones) fill our heads with a clatter so persistent it stifles the ability to think.

Public spaces in our cities are reduced to pasteurised piazzas, in which loitering without intent to shop is treated as suspicious. Protest is muted by dozens of constraining laws. Young people, who have no place in this dead-eyed, sanitised landscape, scarcely venture from their bedrooms. Political freedom now means choosing between alternative versions of market fundamentalism.

Even the freedoms we do possess we tend not to exercise. We spend hours every day watching other people doing what we might otherwise be doing: dancing, singing, playing sport, even cooking. We venture outdoors to seek marginally different varieties of stuff we already possess. “Getting and spending, we lay waste our powers / Little we see in Nature that is ours,” wrote William Wordsworth(1), and it is truer today than it was then.

We entertain the illusion that we have chosen our lives. Why, if this is the case, do our apparent choices differ so little from those of other people? Why do we live and work and travel and eat and dress and entertain ourselves in almost identical fashion? It’s no wonder, when we possess and use it so little, that we make a fetish out of freedom.

Perhaps we have forgotten the bitter complaint made by Benjamin Franklin in 1753. “When an Indian Child has been brought up among us, taught our language and habituated to our Customs, yet if he goes to see his relations and make one Indian Ramble with them, there is no perswading him ever to return.”(2) But when European Americans “have been taken prisoners young by the Indians, and lived a while among them, tho’ ransomed by their Friends, and treated with all imaginable tenderness to prevail with them to stay among the English, yet in a Short time they become disgusted with our manner of life … and take the first good Opportunity of escaping again into the Woods, from whence there is no reclaiming them.” In 1785 Hector de Crèvecoeur asked two European refuseniks why they would not come home. “The reasons they gave me would greatly surprise you: the most perfect freedom, the ease of living, the absence of those cares and corroding solicitudes which so often prevail with us.”(3)

We arose in a thrilling, terrible world. The African savannahs on which the first hominims evolved were dominated by sabretooth and false sabretooth cats, giant hyaenas and bear dogs. When human beings arrived in the Americas, 14,000 years ago, they found ground sloths the weight of elephants; a beaver eight feet from nose to tail; armadillos like small cars; giant lions and sabretooths; short-faced bears whose shocking armoury of teeth and claws suggests they drove giant lions and sabretooths off their prey. A bird in Argentina had a wingspan of 26 feet. Fanged salmon nine feet long migrated inland from the Pacific coast.

We carry with us the psychological equipment, rich in instinct and emotion, required to navigate that world. But our survival in the modern economy requires the use of few of the mental and physical capacities we possess. Sometimes it feels like a small and shuffling life. Our humdrum, humiliating lives leave us, I believe, ecologically bored.

At times this sensation has overwhelmed me. It happened in a newly-discovered bone cave in southern England. The walls and floor were encrusted with calcite crystals, that glittered in the torchlight. One of the archaeologists with whom I was exploring it handed me the atlas vertebra of a Bronze Age cow. Then he picked up another bone, this time with both hands: another atlas vertebra, but monstrous. “It’s the same species as the first one. But this is the wild version. The aurochs.” As I turned it over in my hands, feeling its great weight, I experienced what seemed like an electric jolt of recognition. It felt raw, feral, pungent, thrilling. The colour seemed to drain from modern life.

I felt it again when stalking up a tidal channel with a trident, trying to spear flounders. After two hours scanning the sand intently for signs of the fish, I was suddenly transported by the fierce conviction that I had done it a thousand times before. I felt it most keenly when I stumbled across the fresh corpse of a deer in a wood. I hoisted it onto my shoulders. As soon as I felt its warmth on my back, my skin flushed, my hair stood on end and I wanted to roar. Civilisation slid off like a bathrobe. I believe that in these cases I accidentally unlocked a lumber room in the mind, in which vestigial faculties shaped by our evolutionary past are stored. These experiences ignited in me a smouldering longing for a richer and rawer life than the one I lead.

Unless we are prepared to reject civilization altogether and live in the woods, there is no complete answer to this predicament. But I think there is a partial one. Across many rich nations, especially the United States, global competition is causing the abandonment of farming on less fertile land. Rather than trying to tame and hold back the encroaching wilds, I believe we should help to accelerate the process of reclamation, removing redundant roads and fences, helping to re-establish missing species, such as wolves and cougars and bears, building bridges between recovering habitats to create continental-scale wildlife corridors, such as those promoted by the Rewilding Institute(4).

This rewilding of the land permits, if we choose, a partial rewilding of our own lives. It allows us to step into a world that is not ordered and controlled and regulated, to imagine ourselves back into the rawer life from which we came, to discover, perhaps, the ecstasy I experienced when I picked up that deer. We don’t have to give up our washing machines and computers and spectacles and longevity to shed our ecological boredom and recover some measure of the freedom that has been denied to us. Perhaps we do need to remember who we are.

George Monbiot’s book Feral: rewilding the land, the sea and human life is published this month by the University of Chicago Press.


1. http://www.bartleby.com/145/ww317.html
2. Benjamin Franklin, 9th May 1753. The Support of the Poor. Letter to Peter Collinson.

3. J. Hector St. John de Crèvecoeur, 1785. Letters from an American Farmer and Other Essays. Letter 12. Edited by Dennis D. Moore. Harvard University Press.

4. http://rewilding.org/rewildit/

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1510. Growth and inequality

It continues to be that people cry ” growth” after hearing “inequality” The problem is that while growth could help get rid of e deep[ inequality, in the real; world growth intersects with climate change on the one side and banking institutions on the other.  Growth is a completely co-opted process as part of making the banks key players and the results increasing returns to those already wealthy.

Growth also is mostly to be done by increasing use of stuff, which means energy and pollution. The only solution to these problems is time consuming if possible. We need to get past one variable defined problems and one variable designed solutions.Her is an article by Danny Rodrick , otherwise quite good, that reinforces this problem

This Challenge Will Determine the Fate of the World’s Market Economies

PRINCETON, N.J. — A specter is haunting the world economy — the specter of job-killing technology. How this challenge is met will determine the fate of the world’s market economies and democratic polities, in much the same way that Europe’s response to the rise of the socialist movement during the late 19th and early 20th centuries shaped the course of subsequent history.

When the new industrial working class began to organize, governments defused the threat of revolution from below that Karl Marx had prophesied by expanding political and social rights, regulating markets, erecting a welfare state that provided extensive transfers and social insurance, and smoothing the ups and downs of the macroeconomy. In effect, they reinvented capitalism to make it more inclusive and to give workers a stake in the system.

Today’s technological revolutions call for a similarly comprehensive reinvention. The potential benefits of discoveries and new applications in robotics, biotechnology, digital technologies and other areas are all around us and easy to see. Indeed, many believe that the world economy may be on the cusp of another explosion in new technologies.

The trouble is that the bulk of these new technologies are labor-saving. They entail the replacement of low-and medium-skilled workers with machines operated by a much smaller number of highly skilled workers.

To be sure, some low-skill tasks cannot be easily automated. Janitors, to cite a common example, cannot be replaced by robots — at least not yet. But few jobs are really protected from technological innovation. Consider, for example, that there will be less human-generated trash — and thus less demand for janitors — as the workplace is digitized.

A world in which robots and machines do the work of humans need not be a world of high unemployment. But it is certainly a world in which the lion’s share of productivity gains accrues to the owners of the new technologies and the machines that embody them. The bulk of the workforce is condemned either to joblessness or low wages.

Indeed, something like this has been happening in the developed countries for at least four decades. Skill and capital-intensive technologies are the leading culprit behind the rise in inequality since the late 1970s. By all indications, this trend is likely to continue, producing historically unprecedented levels of inequality and the threat of widespread social and political conflict.

It doesn’t have to be this way. With some creative thinking and institutional engineering, we can save capitalism from itself — once again.

The key is to recognize that disruptive new technologies produce large social gains and private losses simultaneously. These gains and losses can be reconfigured in a manner that benefits everyone. Just as with the earlier reinvention of capitalism, the state must play a large role.

Note that growth is implied and climate not mentioned.

Consider how new technologies develop. Each potential innovator faces a large upside, but also a high degree of risk. If the innovation is successful, its pioneer reaps a large gain, as does society at large. But if it fails, the innovator is out of luck. Among all the new ideas that are pursued, only a few eventually become commercially successful.

These risks are especially high at the dawn of a new innovation age. Achieving the socially desirable level of innovative effort then requires either foolhardy entrepreneurs — who are willing to take high risks — or a sufficient supply of risk capital.

Financial markets in the advanced economies provide risk capital through different sets of arrangements — venture funds, public trading of shares, private equity, etc. But there is no reason why the state should not be playing this role on an even larger scale, enabling not only greater amounts of technological innovation but also channeling the benefits directly to society at large.

The key words are “larger” and “greater.”

As Mariana Mazzucato has pointed out, the state already plays a significant role in funding new technologies. The Internet and many of the key technologies used in the iPhone have been spillovers of government subsidized R&D programs and U.S. Department of Defense projects. But typically the government acquires no stake in the commercialization of such successful technologies, leaving the profits entirely to private investors.

Imagine that a government established a number of professionally managed public venture funds, which would take equity stakes in a large cross section of new technologies, raising the necessary funds by issuing bonds in financial markets. These funds would operate on market principles and have to provide periodic accounting to political authorities (especially when their overall rate of return falls below a specified threshold), but would be otherwise autonomous.

Designing the right institutions for public venture capital can be difficult. But central banks offer a model of how such funds might operate independently of day-to-day political pressure. Society, through its agent — the government — would then end up as co-owner of the new generation of technologies and machines.

The public venture funds’ share of profits from the commercialization of new technologies would be returned to ordinary citizens in the form of a “social innovation” dividend — an income stream that would supplement workers’ earnings from the labor market. It would also allow working hours to be reduced — finally approaching Marx’s dream of a society in which technological progress enables individuals to “hunt in the morning, fish in the afternoon, rear cattle in the evening, criticize after dinner.”

The welfare state was the innovation that democratized — and thereby stabilized — capitalism in the 20th century. The 21st century requires an analogous shift to the “innovation state.” The welfare state’s Achilles’ heel was that it required a high level of taxation without stimulating a compensating investment in innovative capacity. An innovation state, established along the lines sketched above, would reconcile equity with the incentives that such investment requires.

The idea that capitalism was stabilized spray paints out that it was a period of huge growth  and climatic catastrophe.

© Project Syndicate



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