Monthly Archives: November 2009

Walking In Circles

Jan Souman et al in the September issue of Current Biology:

Common belief has it that people who get lost in unfamiliar terrain often end up walking in circles. Although uncorroborated by empirical data, this belief has widely permeated popular culture. Here, we tested the ability of humans to walk on a straight course through unfamiliar terrain in two different environments: a large forest area and the Sahara desert. Walking trajectories of several hours were captured via global positioning system, showing that participants repeatedly walked in circles when they could not see the sun. Conversely, when the sun was visible, participants sometimes veered from a straight course but did not walk in circles. We tested various explanations for this walking behavior by assessing the ability of people to maintain a fixed course while blindfolded. Under these conditions, participants walked in often surprisingly small circles (diameter < 20 m), though rarely in a systematic direction. These results rule out a general explanation in terms of biomechanical asymmetries or other general biases [1], [2], [3], [4], [5] and [6]. Instead, they suggest that veering from a straight course is the result of accumulating noise in the sensorimotor system, which, without an external directional reference to recalibrate the subjective straight ahead, may cause people to walk in circles.

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How To Solve African Desertification

From Africa News, Jan. 15th, 2008, accessed Lexis-Nexis:

But a conversation I had with someone on bus while travelling to Kitgum Town in northern Uganda shaded a new light on the reason why people do what they do. When I raised the issue of environmental impact of tree cutting on the future, my friend quickly reminded me that one worries about environment if they think there is a future. And indeed in the case of Northern Uganda people, it is not hard to believe that such is the prevailing attitude of the day. Life in camps give anyone very little hope of the future. Perhaps, that is the driving force behind desertification throughout Africa. The only solution to this problem is to provide people with alternative means of survival and to offer them basic environmental classes. Without quick change of attitude, Africa will burn and soon the rest of the world will follow. And none of the conservation on environment going on in the western world will mean a damn thing without saving Africa or any other third world continent like South America.

I guess I should file this in the ‘growth good’ file.

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What Is Twitter Good For, Anyway? Probably a Lot.

It is obvious to anyone in the business of media, advertising, and promotion that Twitter and other social networking applications have been become critically important in the generation and dissemination of information. But what else could we do with this? I have a couple ideas.

1. Elections. I was at the Young Democrats of America national convention this August in Chicago where one side of the ticket led by current YDA President Crystal Strait had the election bought and paid for.  Part of why money was so influential in this election is that you didn’t have to literally buy the entire delegation from particular states; you only had to buy the state leadership because it is the state chair who tallies and reports delegate votes. State Young Democrat leadership also rents the hotel rooms and arranges travel with the implicit message that if you are not here to vote for the person they want you to support, you’re going to have to find your own way home. It is hard to maintain the integrity of a ballot when you can control all parts of that process.

How can Twitter change this? Simple. It would be a trivial exercise to have Twitter create an elections application based on their platform. You could register the phone numbers for individual delegates at registration or alternatively assign each delegate a secure ID that they use to tweet votes. No one votes who isn’t registered and cleared by the organization, since you’re able to control access to the voting mechanism, and as a (presumptively) independent and unbiased third-party organization, Twitter can maintain ballot integrity since it’s a trivial exercise for them to ensure the secrecy of the ballot. This guts the ability of state or national officials to control their voting blocs. And since everyone has cell phones anyway, the platform’s infrastructure is already in place. You get all the benefits of electronic voting and none of the disadvantages. There are a few other objections but I’ll address them without loss of generality later on.

2. GPS navigation devices. A friend and I were driving through St. Louis today and her GPS navigation system led us to a highway that was closed for construction (and had been closed for the better part of the past year) and I was reminded of a conversation I had a couple years ago with Dr. Ron Harstad, who presciently asked how we could use cell phone technology to route traffic more efficiently.

The operative principle is that the interface determines behavior. Imagine if there was a realtime integration of GPS navigation with Twitter. Instead of unique avatar names, you could identify posts with a unique identifier for the time and exact geographical navigation and scroll the most recent and most important posts along the sidebar. Crowdsourcing realtime information about traffic routes is both eminently feasible and pretty cheap, since the only additional work you’d have to do is add on a Twitter interface specific to the GPS system. Combatting things like spam or bad information is something that we’ve learned is really feasible through crowdsourcing and the only real work is to design the interface appropriately. You can take a look at Google Earth, where crowdsourcing has added incredible richness and value to an application that would be otherwise prohibitively expensive to engineer, or Facebook or Digg, where posts are subjected to realtime evaluation as users are able to evaluate which signals are valuable and which are not. Imagine the potential for coordinating and managing large emergency situations particularly.

Now to address objections. Generally speaking, objections to these proposals are all parametric questions that we can easily engineer around. Questions of security: how can we preserve a ballot’s integrity or prevent people from misusing realtime emergency navigation data can generally be addressed with the right set of protocols (you have a 3rd party control the voting platform or time-delay realtime emergency tweets in appropriate situations). Questions of workability: can we depend on telephone communications and satellites? What if Twitter goes down? These problems are generally managed by ensuring redundancy in the system. Questions of access: not everyone has a  cellphone (fortunately almost everyone does and they are really cheap).

Thoughts?

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A Story of Revolution in Venezuela

Before Chavez there was Bolivar, before Bolivar there was Miranda, who is now known as El Precursor. Interestingly, the link is to the entry in the Encyclopedia Britannica, not Wikipedia (it is both jarringly strange and wonderful to me that Wikipedia has made the Encyclopedia Britannica irrelevant to me). This selection is from the excellent A Way In The World, a selection of autobiographical personal narrative by the Nobel Laureate V. S. Naipaul:

…Venezuela is a colony in the New World, with slave plantations, and it has all the divisions of that kind of place: Spaniards from Spain, who are the officials; a creole Spanish aristocracy; creole Spaniards who are not aristocracy; mulattos; the Negros of the plantations; the aboriginal Indians. This kind of place is held together only by a strong external authority. When that external authority goes, people can begin to feel they are sinking. Freedom for one group can mean slavery or oppression for another group.

So the Venezuelan revolution, as it progresses, deepens every racial and caste division in the country, encourages every kind of fear and jealousy; and the revolution begins to fail. The ordinary people of the country begin to go over to the other side, the side of old authority, and the reverences and law and religion they know.

Miranda appeals to the slaves to join him. They don’t listen; in fact, the slaves of Barlovento rebel, and there is a moment when it seems they might capture the capital, Caracas. And now, to buy peace, or at any rate to buy time, some of the very men who had called Miranda out from London, to lead their revolution, decide to hand him to the Spaniards. They wake him up one night and march him to the dungeon of a coastal fort.

There is some very interesting material here and many things to note. One is the sheer impact of Spanish colonialism, which as part of its economic and territorial imperialism has reshaped the human map of Venezuela in very vicious ways. I am curious about the evolutionary path of these kinds of coalitions and the strategic games they play and why particularly these coalitions aren’t able to mutually coordinate a revolution or (later stable non-authoritarian government).

The line of thought also plays out some interesting questions. It seems to me that bad governance is path-dependent and part of the story is that turmoil itself retards the formation and optimal evolution of institutions that make civil governance possible. If you have any thoughts of readings to point me further along this path please post them in the comments.

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More Problems With The GOP Socialist Narrative

It seems to me that if conservatives really cared or really understood what they were standing against when they drag out Soviet imagery at teabag parties, they would also care very much about placing checks on the government’s power over life and death by promoting the use of an independent judiciary for criminal trials. Specifically they should advocate using jury trials in federal court to try alleged terrorists or grant them access to the rights stipulated by things like the Geneva Convention.

You don’t have to reach my conclusion (that military tribunals for alleged criminals are wrong) to realize that this is a major gap in the conservative narrative, which now has become “We don’t trust government to do anything because that leads to gulags”.

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Cigarettes Contain Infectious Bacterial Pathogens Line of the Day

The commercially-available cigarettes that we tested were chock full of bacteria, as we had hypothesized, but we didn’t think we’d find so many that are infectious in humans, explains Sapkota, who holds a joint appointment with the University’s Maryland Institute for Applied Environmental Health and the Department of Epidemiology and Biostatistics.

“If these organisms can survive the smoking process—and we believe they can—then they could possibly go on to contribute to both infectious and chronic illnesses in both smokers and individuals who are exposed to environmental tobacco smoke,” Sapkota adds. “So it’s critical that we learn more about the bacterial content of cigarettes, which are used by more than a billion people worldwide.”

Link here. Researchers from the Ecole Centrale de Lyon were also involved.

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Some Posts Just Write Themselves, Umberto Eco Edition

This interview in the German daily der Spiegel with the famous author of Foucault’s Pendulum has this gem:

Eco: The people from the Louvre approached me and asked whether I’d like to curate an exhibition there, and they asked me to come up with a program of events. Just the idea of working in a museum was appealing to me. I was there alone recently, and I felt like a character in a Dan Brown novel.

The irony of Eco commenting on Dan Brown is too wonderful to miss. The article by the way is interesting throughout and Eco has brilliant things to say on the origin of culture and lists.

Edit: Just for the record, I don’t think I could ever say something nearly as nice about Dan Brown.

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On Reforming the Missouri Payday Loan Industry

This Monday I attended a legislative forum on payday loans held by Missouri House representative Mary Still (D, MO-25). Also on the panel were Representatives Stephen Webber (D, MO-23), Chris Kelly (D, MO-24), John Burnett (D, MO-40) and Charlie Norr (D, MO-137). Roughly 18 people were scheduled to testify though unfortunately I was only able to be there for the first 5-7 or so witnesses. Here is the Columbia Tribune covering; here is coverage from the Columbia Missourian.

The big concern with payday lending is that we want to prevent people from overborrowing. It is a simple scenario: people in financial difficulty borrow money and can’t repay the loan on time, so the loan rolls over with additional fees or interest, aggravating an already difficult financial situation. As an outcome, this is undesirable, particularly when the victims are vulnerable to exogenous economic shocks and politically weak, like single mothers, or people with terminal illnesses living on a very limited income.

So what are the problems with payday lending? My biggest problem with both sides of the debate is a lack of data. Or rather, a lack of clear data. Payday loan providers tend to show off their own data that claiming that people who take out these loans are generally financially stable and use them as bridge loans. But data from organizations dealing with complaints (473 in Missouri in 2008) about payday lenders show that people making complaints are generally low-income and not financially stable. Some complaints also highlight questionably ethical or downright illegal conduct by payday loan companies in collecting debts, from vicious harassment to threats of jail or violence (this is particularly undesirable when it impacts the poor and politically weak). But we don’t know the true size or magnitude of these problems since neither sides of the market have incentives to accurately self-report (we can safely assume some proportion of consumer complaints are efforts to game the system and not legitimate complaints, though the Better Business Bureau does distinguish between legitimate complaints and illegitimate complaints).

Payday loan companies might be truly reporting the consumer data that they have. But there is no guarantee that their data is correct. Generally the only vetting of clients happens through an employment check, and clients may have incentives to provide deceptive or misleading information to get loans. So that data set may have serious problems. But data from organizations like the Better Business Bureau also faces some selection bias: it is likely that their survey data comes from people looking to use these legal structures to force a renegotiation of their loan terms or have registered complaints about the conduct of loan companies (I was unable to find a methodological note on their 2007 survey of 3,700 borrowers, which is important given that the industry did 2.8 million loans in Missouri in 2008). So BBB data may not include input from a representative sample of customers. I also don’t trust a lot of the data on industry profits, which this study by Tobacman and Skiba puts at around 10.1% (here is a Columbia Tribune article that provides an unattributed statistic of 6.6% for the 5 biggest payday lending companies). The problem with profit data from payday lenders is that a large number of transactions happen in cash, which leads me to believe that  there is some level of revenue that companies have the option of keeping off their books.

Here more data is useful in determining the size of the market and the impact of regulation. But we don’t need it to claim that the existence of claims alleging serious misconduct by businesses merits attention. What we do need is a cost benefit analysis that examines the incentives the market faces. Specifically, if regulation is enacted (and it is fairly well demonstrable that even basic regulations curtail payday lending operations substantially) where does the market re-locate? A possibility is that some of this business becomes part of the black or grey market. Is it worse to be gouged by regulated providers (companies with business licenses) or gouged by unregulated providers? Do markets with unregulated providers have better ability to vet clients, make better loans, and have fewer negative outcomes, since they aren’t constricted by the law? Do those markets have better social outcomes, despite the absence of legal protections for either party? Or do black markets end up looking up like the Mafia? This line of questioning is to me unanswered, but there are valuable lessons for the market in the economic literature.

Jon Zinman of Dartmouth has a forthcoming paper in the Journal of Banking and Finance that examines credit market substitutions that consumers make in the absence of access to credit. It finds that the market looks different when interest caps are in effect: payday loan providers start charging larger service fees where they still exist and households shift to credit cards and bank overdrafts to find liquidity. Zinman finds particularly Oregon interest rate caps left households worse off when their options for liquidity were curtailed by the exit of payday loan providers.

So there are two differing theories on expensive loans. First there is the idea that access to expensive credit leaves a percentage of users (we don’t know what percentage) worse off, because they aggravate the financial distress of people already struggling. There are several models in the economic and behavioral literature that support this. I point particularly to Rabin and O’Donohue in 2006, along with Carrell and Zinman 2008 (payday loans make airmen in the USAF worse off), and Campbell et al 2008 (where payday loans exist people are more likely to have their bank accounts involuntarily closed).

On the other side of the debate are arguments that restricting access to credit is bad. Here is Karlan and Zinman defending usury in the Wall Street Journal. Here is Deyoung also in the WSJ, looking at firm-level microdata from Colorado and concluding that regulation increases the cost of credit which leaves consumers worse off. Here is Adair Morse, who examines data from disaster financiers during the San Francisco earthquake and finds out that even expensive credit is key to maintaining the pre-disaster trends in human well-being (using human welfare indicators like the number of births, deaths, foreclosures, and substance abuse). And here is Greg Elliehausen who finds that consumers act rationally in calculating the costs of high-interest loans (my thought: the fact that consumers make rational calculations doesn’t mean that calculations are right or that outcomes are optimal, ex: the subprime loan market).

The problem that we face is that both sides of the debate are true in some fashion. Studies on both sides are hobbled by selection biases at some level. Morse, particularly, notes that her study faces a huge selection bias: people applying for disaster financing in San Fransisco are not representative of people applying for payday loans in conditions of economic instability, nor are the data on outcomes generally capable of catching people who are left worse off. Interesting aside: Morse references the Italian immigrant who later founded the Bank of America after events left him in a position to be a monopoly supplier of loans after the earthquake.

Perhaps regulation should focus on improving the vetting process, to select out the people who are likely to be worse off if they obtained a high interest loan. That avenue isn’t attractive to me because as a libertarian I distrust paternalistic government, but if we can establish that some level of regulation minimizes or eliminates undesirable social outcomes then it is better than the status quo. I do caution against regulations that drive this market underground because that hurts our ability to be conscious of its existence and as social engineers the limits on what we know about populations is very meaningful in terms of what we can or can’t conceptualize in terms of solutions.

I think that the lesson from the economic literature is that populations are not homogenous, generally, and that there are sectors of the market that would benefit from regulation, specifically the slice of consumers who would be left worse off in the case of default. It is also a very pertinent question of social policy as to how we can aid or assist this sector of the population without incentivizing free-riders. The difficulty lies in tranching the payday loan market without closing it.

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On Reality

I don’t watch much television so my knowledge of the historical background is shaky but lately I have become fascinated by a couple of television dramas, Lost and Heroes. Both have exceptionally convoluted plots in which reality itself is a main player. Lost is a show where I’m never sure precisely what the reality is and Heroes tells stories in which reality itself is constantly shifting through the actions of several main characters, one of whom can time travel and change the path of time itself.

I find in these stories a wonderful skepticism. If there is one dominant strategy or Nash equilibrium for the people in these worlds it is to never completely accept the reality in front of them: it may be imaginary (hallucination), it may be systemically unpredictable (particularly when invisibility or shapeshifting or any one of a dozen other idiosyncratic factors are at play), and it may be variable, as when the fabric of time is accidentally or willfully rewoven. In these worlds history and sensory knowledge are even poorer guides than the one I know and one must be willing to accept the constant possibility of delusion as well as a knowledge base that is terminally unstable. Survival means the ability to accept the fluidity of paradigms through which experience is optimized.

In a sense this is very minimalist. At the same time one is aware of the utter scale of possibility and learns that the worst enemy is not being aware of one’s cognitive biases and limitations. In a sentence, self-knowledge is the only meaningful currency for these realities (and by extension, our own).

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Things You Don’t Hear Very Often, Tom Daschle Edition

From an interview with Tom Schaller of FiveThirtyEight:

“If there’s a silver lining, it’s that we conserved our resources. We spent half what the RGA spent,” said Daschle. “It was the right call because neither race would have been helped by more spending.” He said the DGA spent $4 million in VA to the RGA’s $5M, and about $3.5 million in New Jersey to the RGA’s $7 million.

You don’t hear politicos say that more campaign money would have been useless very often.

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3 Ways To Think About Economics

From The Virtues and Vices of Equilibrium and the Future of Financial Economics, Geanakoplos and Farmer 08, SSRN:

Equilibrium theory focuses on individual actions and individual choices. By contrast Marx emphasized class struggles, without asking whether each individual in a class would have the incentive to carry on the struggle. Similarly Keynesian macroeconomics often posited reduced form relationships, such as the positive correlation between unemployment and inflation (called the Phillips curve), without deriving them from individual actions. Equilibrium theory is an agent based approach which does not admit any variables except those that can be explained in terms of individual choices.

 

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