Cutting debt into little bits

Comprehending what caused the recent credit-crunch/liquidity-crisis is much easier after reading Tom Cunningham's explanation:

But wait, there's a loose end, what about all the risky leftover pieces of investment? Who's going to buy those?

This is the clever part. Suppose you're offered the chance to flip a coin, where you'll get £100 if it's heads, but nothing if it's tails. On average you get £50, but it's risky. Now instead say you pool your winnings with 100 other people who are in the same situation and you all share the proceeds. Again you'll get £50 on average, but it's now a much surer prospect.

This is the trick to deal with the risky parts of the investments: if one firm can buy up a huge number of these separate risky investments then the risks start to cancel out, and as a whole it becomes a fairly safe investment.

It all makes sense. Sort of.

Cutting up debt

The thing investors really don't like is uncertainty. And what the financial engineers in the city have been trying to do is "smooth out" risk. Risk remains, but it is well managed *in theory*.

The logical conclusion would have been one enormous world investment, stitched together from all of the billions of separate individual investments. But the financial engineers stumbled before they could construct that one.

Cunningham's conclusion is that "no one has found any fundamental problem with the principle of sharing risk."

This raises the interesting possibility that once the smoke has cleared financiers might start doing it right.

[image from SqueakyMarmot]

Steal from the best

Because I'm tired and thought this collection of quotations was fun:

A human being should be able to:
change a diaper,
plan an invasion,
butcher a hog,
conn a ship,
design a building,
write a sonnet,
balance accounts,
build a wall,
set a bone,
comfort the dying,
take orders,
give orders,
cooperate,
act alone,
solve equations,
analyze a new problem,
pitch manure,
program a computer,
cook a tasty meal,
fight efficiently,
die gallantly.

Specialization is for insects.

Robert Heinlein

I just had a thought

(It didn't hurt.)

I am capable of summoning resources that will enable me to travel to any densely populated location on Earth within hours, and many more remote places within days.

My life-expectancy is around 70 years, and is likely to rise due to advances in medical technology.

That life is nearly guaranteed to be free of the penury and hardship that characterises the lives of the vast majority of my fellow human beings on this planet at this time, and throughout history.

I can banish pain with ease.

I have direct access to a vast chunk of all human knowledge - I can find an answer to virtually any question.

I can communicate instantly with any and every person I know at a moments notice.


Truly these are good times to be alive.

Impatience with the IMP

It seems I'm in good company with my opinion that the government's IMP (Interception Modernisation Project) is a great big steaming pile of FAIL and that Geoff Hoon is a bit silly, from the The Independent's Open House:

In speaking out against the government's proposed database of telephone and internet records last night, Director of Public Prosecutions Sir Ken Macdonald joined a remarkable cast of critics of Labour's most draconian instincts.

...the really startling chorus of opposition to the raft of illiberal policies that has characterised this government is that which has emerged from the security establishment.

It's former MI5 heads Stella Rimington and Eliza Manningham-Buller speaking out against 42 days, and senior members of the Association of Chief Police Officers saying the same thing. It's former Prison Service director general (now Barnado’s Chief Executive) Martin Narey decrying the rate at which we incarcerate children, or Prison Governors Association president Paul Tidball on the government's decision to build Titan prisons 'in the face of unanimous opposition from professional and expert groups'. And it's Brian Gladman, a former director of strategic electronic communications at the Ministry of Defence and US government security consultant, saying that ID cards would be a disaster.

The list goes on. These people are not partisans. They're professionals. They're experts. If anyone is going to have sympathy with the impulse to 'go quite a long way' in undermining freedom to stop terrorism (another Hoonism) and crime and benefit fraud, it is surely them. And if even these people think the government has got it wrong, one has to ask: who on earth does the government consult when it formulates this stuff?

The appropriate message is that all of this is not "being tough on terrorism" it is giving in to terrorism.

Atheist bus

I blogged about Ariane Sherine's suggestion for an atheist bus advert back in June and it seems the plan has come close to fruition:

The Atheist Bus Campaign launches today thanks to Comment is free readers. Because of your enthusiastic response to the idea of a reassuring God-free advert being used to counter religious advertising, the slogan "There's probably no God. Now stop worrying and enjoy your life" could now become an ad campaign on London buses – and leading secularists have jumped on board to help us raise the money.

Their picture:


And here is my original mock up:


Mine is admittedly less positive and more definite - but whatayagonnado?

However since then I have come to the conclusion that there isn't anything inherently wrong with a belief in God, just as long as belief does not become the basis of any kind of temporal power or influence.

I can empathise with the faithful, even if I don't agree with them.

Still, I applaud this agenda of atheist expression.

{Money? What money? Give it to Amnesty I say!}

[images from the Graun and SideLong on flickr]

A-Holy smokes! H. J. Blackham is STILL ALIVE!

I've been re-reading Humanism by H.J. Blackham. A brilliant book - and much easier going the second time round (I think in the meantime some of the ideas have sunk in).

Anyway I searched the author and Harold John Blackham is still alive:

H. J. Blackham, born on 31 March 1903, has been a leading and widely respected British humanist for most of his life.

...

H. J. Blackham was a key organiser of the World Union of Freethinker's conference in London in 1938. When he tried to refound it after the war he decided a new organisation was needed and together with the Dutch philosopher Jaap van Prag started the International Humanist and Ethical Union, of which Julian Huxley was the first President. Blackham worked closely with Julian Huxley in many ways including helping him to revise Religion without Revelation.

...

He has enjoyed many years retirement in the Wye valley, reading, writing and growing vegetables. He lives the exemplary humanist life that of thought and action welded together.

105 years old!

It makes sense, after all. If you genuinely believe this life is everything that ever will be then you damn well make sure you get your fair share.

Bertrand Russell got a good innings as well [imagine being an adult in the Victorian era and living to see Nixon in the Whitehouse - what an epic journey!] at 97.

Anyway kudos to Blackham.

Oily Irony

Hilarious news from Cuba:

Mother nature, it emerged this week, appears to have blessed the island with enough oil reserves to vault it into the ranks of energy powers. The government announced there may be more than 20bn barrels of recoverable oil in offshore fields in Cuba's share of the Gulf of Mexico, more than twice the previous estimate.

If confirmed, it puts Cuba's reserves on par with those of the US and into the world's top 20. Drilling is expected to start next year by Cuba's state oil company Cubapetroleo, or Cupet.

And the American response:

"It would change their whole equation. The government would have more money and no longer be dependent on foreign oil," said Kirby Jones, founder of the Washington-based US-Cuba Trade Association. "It could join the club of oil exporting nations."

Cuba's unexpected arrival into the big oil league could increase pressure on the next administration to loosen the embargo to let US oil companies participate in the bonanza and reduce US dependency on the middle east, said Jones. "Up until now the embargo did not really impact on us in a substantive, strategic way. Oil is different. It's something we need and want."

Hah! Hilarious.

Where's my fusion reactor?

Best. Resignation Letter. Ever.

This has been floating around for a few days. Andrew Lahde, a Californian hedge fund manager who has made a Lot of Money betting on the sub prime debacle has decided to quit fund managing and live the High Life:

Dear Investor:

Today I write not to gloat. Given the pain that nearly everyone is experiencing, that would be entirely inappropriate. Nor am I writing to make further predictions, as most of my forecasts in previous letters have unfolded or are in the process of unfolding. Instead, I am writing to say goodbye.

Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, “What I have learned about the hedge fund business is that I hate it.” I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.

There are far too many people for me to sincerely thank for my success. However, I do not want to sound like a Hollywood actor accepting an award. The money was reward enough. Furthermore, the endless list those deserving thanks know who they are.

I will no longer manage money for other people or institutions. I have enough of my own wealth to manage. Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck. Appointments back to back, booked solid for the next three months, they look forward to their two week vacation in January during which they will likely be glued to their Blackberries or other such devices. What is the point? They will all be forgotten in fifty years anyway. Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.

So this is it. With all due respect, I am dropping out. Please do not expect any type of reply to emails or voicemails within normal time frames or at all. Andy Springer and his company will be handling the dissolution of the fund. And don’t worry about my employees, they were always employed by Mr. Springer’s company and only one (who has been well-rewarded) will lose his job.

I have no interest in any deals in which anyone would like me to participate. I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle. I now have time to repair my health, which was destroyed by the stress I layered onto myself over the past two years, as well as my entire life — where I had to compete for spaces in universities and graduate schools, jobs and assets under management — with those who had all the advantages (rich parents) that I did not. May meritocracy be part of a new form of government, which needs to be established.

On the issue of the U.S. Government, I would like to make a modest proposal. First, I point out the obvious flaws, whereby legislation was repeatedly brought forth to Congress over the past eight years, which would have reigned in the predatory lending practices of now mostly defunct institutions. These institutions regularly filled the coffers of both parties in return for voting down all of this legislation designed to protect the common citizen. This is an outrage, yet no one seems to know or care about it. Since Thomas Jefferson and Adam Smith passed, I would argue that there has been a dearth of worthy philosophers in this country, at least ones focused on improving government. Capitalism worked for two hundred years, but times change, and systems become corrupt. George Soros, a man of staggering wealth, has stated that he would like to be remembered as a philosopher. My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man’s interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles. This forum could be similar to the one used to create the operating system, Linux, which competes with Microsoft’s near monopoly. I believe there is an answer, but for now the system is clearly broken.

Lastly, while I still have an audience, I would like to bring attention to an alternative food and energy source. You won’t see it included in BP’s, “Feel good. We are working on sustainable solutions,” television commercials, nor is it mentioned in ADM’s similar commercials. But hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products. Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term. The original American flag was made of hemp fiber and our Constitution was printed on paper made of hemp. It was used as recently as World War II by the U.S. Government, and then promptly made illegal after the war was won. At a time when rhetoric is flying about becoming more self-sufficient in terms of energy, why is it illegal to grow this plant in this country? Ah, the female. The evil female plant — marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country. My only conclusion as to why it is illegal, is that Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other additive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers. This policy is ludicrous. It has surely contributed to our dependency on foreign energy sources. Our policies have other countries literally laughing at our stupidity, most notably Canada, as well as several European nations (both Eastern and Western). You would not know this by paying attention to U.S. media sources though, as they tend not to elaborate on who is laughing at the United States this week. Please people, let’s stop the rhetoric and start thinking about how we can truly become self-sufficient.

With that I say good-bye and good luck.

All the best,

Andrew Lahde”

Quoted in full because it's pretty good.

[from The Biog Picture, via the FT, Futurismic, Slashdot, Jon Taplin et al][images from striatic pink n girly gadl dawnzy58 The Consumerist dustpuppy wili_hydrid aforero on flickr]

The Great Depression: what really happened?

Jon Taplin points to a fascinating article on the Great Depression by James Livingston. As ever with this topic it raises as many questions as it answers, but it makes for interesting reading:

...the Great Depression was the consequence of a massive shift of income shares to profits, away from wages and thus consumption, at the very moment—the 1920s—that expanded production of consumer durables became the crucial condition of economic growth as such.

This shift produced a tidal wave of surplus capital that, in the absence of any need for increased investment in productive capacity (net investment declined steadily through the 1920s even as industrial productivity and output increased spectacularly), flowed inevitably into speculative channels, particularly the stock market bubble of the late 20s;

when the bubble burst—that is, when non-financial firms pulled out of the call loan market in October—demand for securities listed on the stock exchange evaporated, and the banks were left holding billions of dollars in “distressed assets.”

The credit freeze and the extraordinary deflation of the 1930s followed; not even the Reconstruction Finance Corporation could restore investor confidence and reflate the larger economy.

Livingston basically seems to be arguing that Milton Friedman's view of the Great Depression as being exacerbated by government intervention was incorrect.

Livingston also argues a fundamental idea of supply-side economics (as advocated by Reagan et al) is incorrect.

The idea is that if you cut taxes on the rich they will use the additional money to invest in new factories, research, job-creation and infrastructure.

It seems they don't, and in fact invest in speculative (often property-based) securities, and create a speculative bubble. According to James Livingston:

The “underlying cause” of the Great Depression was not a short-term credit contraction engineered by central bankers who, unlike Ferguson and Bernanke, hadn’t yet had the privilege of reading Milton Friedman’s big book. The underlying cause of that economic disaster was a fundamental shift of income shares away from wages/consumption to corporate profits that produced a tidal wave of surplus capital that could not be profitably invested in goods production—and, in fact, was not invested in good production.. In terms of classical, neoclassical, and supply-side theory this shift of income shares should have produced more investment and more jobs, but it didn’t.

Livingston claims that during the 1920s the growing demand for consumer durables meant that massive economic growth was created with almost no investment in factories or job-creation.

At the same time weaker trade-unions meant the owners of capital could increase their share of revenue at the expense of workers.

So profits went up, but wages didn't. As increasing the wages of consumers was the only practical way of growing consumption, this lead to problems.

The lunacy of the IMP

Listen to some of these justifications from transport secretary Geoff Hoon MP for the government's Interception Modernisation Programme:

He said the police and security services needed the powers to deal with "terrorists or criminals" using telephones connected to the internet, for "perfectly proper reasons, to protect our society".

...

"If they are going to use the internet to communicate with each other and we don't have the power to deal with that, then you are giving a licence to terrorists to kill people."

...

He added: "The biggest civil liberty of all is not to be killed by a terrorist."

There is a very straightforward reason why the government shouldn't push forward with the IMP.

The government has shown again and again and again that it is incapable of storing the people's data securely and responsibly. And I'm talking about any government - the more information the state has, the more leaky the state becomes.

Incidentally this is Geoff Hoon MP speaking, who was appointed transport secretary in the recent cabinet reshuffle, the same reshuffle that saw Tom Harris MP sacked from his job as a transport minister, presumably because he committed the cardinal sin of pissing off the Daily Mail by asking why "...is everyone so bloody miserable?"

Geoff goes some way towards answering this question. Misery is an entirely understandable response if the people of Britain are constantly being told that they are under threat from terrorists and as a result have to have their every electronic communication recorded by an incompetent government.

That is a LOT of money - what about global warming?

I've been pondering something for the past few days: the British government can rustle up £37 billion at short notice to solve a banking crisis:




So what about global warming? What about energy security? Couldn't these issues be greatly improved by this cash?

I suspect the reason has to do with the fact that the situation around global warming is extremely uncertain: governments still aren't entirely sure if it will happen as advertised and if it does, will it be all bad?

Bjørn Lomborg and Freeman Dyson have both pointed out that there are potential upsides to global warming and climate change. Bjørn Lomborg claims:

According to the first complete peer-reviewed survey of climate change’s effects on health, global warming will save lives. By 2050, global warming will cause almost 400,000 more heat-related deaths each year – but 1.8m fewer people will die from cold.

And Freeman Dyson claims:

...if the increase of carbon dioxide in the atmosphere is allowed to continue, shall we arrive at a climate similar to the climate of six thousand years ago when the Sahara was wet?

Second, if we could choose between the climate of today with a dry Sahara and the climate of six thousand years ago with a wet Sahara, should we prefer the climate of today?

My second heresy answers yes to the first question and no to the second. It says that the warm climate of six thousand years ago with the wet Sahara is to be preferred, and that increasing carbon dioxide in the atmosphere may help to bring it back.

I am not saying that this heresy is true. I am only saying that it will not do us any harm to think about it.

What I am certain of is that climate change lies in Taleb's fourth quadrant and is liable to be rife with black swans, and maybe a few white ones.

Then there is the misrepresentation of academics' views by the media.

There is also the obvious fact that no one is entirely sure what the best course of action is. Some advocate nuclear power, others advocate wind, tide, and solar power.

I am inclined to agree with the politicians: this is a complicated and unpredictable situation. By all means do something (at least only for reasons of energy security - a much more explicable problem, if no more tractable) but don't imagine we understand everything.

[image from the BBC NEWS]

Self evident truths

It's always nice to remind ourselves of what good people should strive for:




[via Boing Boing]

The future of capitalism and the EU

Some chap called David Marquand has written the most sensible article on the recent economic troubles I've seen so far:

It is not fashionable to say so at the moment, but that makes it all the more important to remind ourselves that globalisation has made it possible for the governments of India and China to lift millions out of the most appalling poverty - and that, as Churchill said of democracy, the capitalist market economy is the worst economic system ever invented, apart from all the others.

In truth, the fundamentalisms of right and left mirror each other. One says, "markets good, states bad". The other says, "states good, markets bad". The truth is that they are both good and bad - at the same time.

He goes on to say:

The need now is for clever regulation, on a global scale.


In the EU, there is an equal need for much stronger political institutions to complement the central bank. But the greatest need of all is for a new theory of the mixed economy, framed for the global marketplace of today, as the now-defunct Keynesian system was framed for the national post-war economies.

This reference to the EU is in line with my own thoughts: the EU can only be fit-for-purpose if it is made stronger, or it should be reduced in influence and importance. The situation we have now is a half-way house that benefits no one.

Problems in the Eurozone

Reading Ambrose Evans-Pritchard's comments on the problems facing the Euro:

Who in the eurozone can do what Alistair Darling has just done in extremis to save Britain's banks, as this $10 trillion house of cards falls down? There is no EU treasury or debt union to back up the single currency. The ECB is not allowed to launch bail-outs by EU law. Each country must save its own skin, yet none has full control of the policy instruments.

Sure, it's part of The Telegraph's house style to criticise the Euro and EU generally, but it makes a fair point about the basic problems of the common currency in this kind of crisis:

Germany has vetoed French and Italian ideas for an EU lifeboat fund. The former knows exactly where that leads. It is a Trojan horse that will be used one day to co-opt German taxpayers into rescues for less Teutonic EMU kin.

One can sympathise with Berlin. But sharing debts with Italy and Spain was implicit when they agreed to launch the euro.

A shared currency entails obligations. We have reached the watershed moment when Germany has to decide whether to put its full sovereign weight behind the EMU project or reveal that it is not prepared to do so in a crisis.

All this shows that the EU should either:

1. Get it's act together and become a highly federalised super-state a la the USA, with a common economic policy, constitution, common military and foreign policy.
2. Accept that it will only ever be an economic bloc, like a collection of Norways. Each country should retain control over central banks, economic policy etc.

I'm fairly ambivalent towards the EU. The arguments for or against it haven't been made clear by politicians.

The basic problem is that the creation of a United States of Europe requires local governments to unilaterally give up power, evolving legislative and executive power to a congressional European government, and devolving power concerning local policies to local assemblies.

But no politician will ever do this: so the EU is stuck between being a common market with minimal oversight and a federal superstate.

From a purely patriotic perspective it'd be nice to be a citizen (as opposed to a subject) of a liberal, democratic, enterprising global power that would effectively counterbalance China, Asia, and the USA, but I wish our politicos would pull their fingers out and get on with it.

There are no words...

"If you have a garden and a library, you have everything you need" --- Cicero.

Oh Fucking Hell

Ugh. Why?

LATER: When I first read this I was paralysed with rage.

I don't usually engage emotionally with politics - but...

No, no. I really can't express myself.

Finance and computers: an analogy

A computer takes digital data and transforms it in fairly basic ways. Adding, subtracting, logical statements etc.

Computers are powerful tools because we can make them perform more complex tasks than these basic functions by building new layers of abstraction on top of these basic processes.

Machine code can be used to make a compiler for the C programming language, which can in turn be used to make an operating system, on top of which can run applications, which can be used in ever more complex and elaborate ways.

Abstraction and "higher order" properties are important in computing, but when the same ideas are applied to finance things go all gooey.

The basic unit of economic interaction is not a bit or a logic gate; it is a human being, an absurdly complicated thing, and one that we don't fully understand.

In computing, logic gates and machine code are fairly simple. Because they are simple and well understood, we can build a layer of abstraction on top of them and rely on them to function correctly whilst we pursue higher order things (like writing and reading blogs).

This is what SF writer Iain Banks calls the "dependency principle" - complex software is based on a simpler layer beneath it, which is in turn based on an even simpler layer beneath it, until you get out of software and into the bare metal.

In the recent economic troubles - the credit crunch caused by the insidious spread of bad mortgage debt and the fact that banks now don't know how much these assets are worth (if anything) - can be thought of in similar terms to the structure of software.

A layer of abstraction is based on a simpler substrate: derivatives that are based on the risk of a given mortgage defaulting.

The difference between finance and computers is the layer beneath the abstraction isn't straightforward and predictable.

Penstroke and Complex

There are two kinds of problems in the world:

• Penstroke problems: problems caused by legislators or businesses that could be solved with effective legislation. Prohibition is one such problem.
  
• Complex problems: problems of huge scale and complexity, which require a great deal of effort, experimentation, thought, and consideration from many people to be solved. Global warming is an example.

John McCain in the Actuarial Sense

If John McCain has a heart attack a month before the election what will happen?

Presumably the election will have to go ahead - but would the American people elect a guy who had a heart attack a month before the polls open?

They have elected a dead guy to political office a few times.

Interesting times and not the end of Capitalism

As before, Wil Hutton in The Guardian:

This is not the end of capitalism, as some wildly claim; there is no intellectual, social or political challenge to a market system based on respect for private property rights, even by the Chinese Communist party.

Rather, it is a crisis of a particular capitalism that has set aside respect for trust, integrity and fairness as fuddy-duddy obstacles to 'wealth generation'.

Well thank goodness for that.

Now hopefully the Americans will get a handle on their borrowing; quit Iraq in as orderly and rapid manner as possible, invest in infrastructure, education, nationalise their healthcare as well as their banks and mortgage companies and leave running the world to the Europeans or Chinese.

In fact the ideal situation would be one where there were three Great Powers - the Europeans, Americans, and Chinese, with an influential G8 and India. According to this article by Jon Taplin, and based on The Great Transformation by Karl Polanyi, Taplin's analysis:

His conclusion is that the key to a long period of peace is a stable Balance of Power between three or more states, combined with a stable world financial system (he calls it Haute Finance) which constantly stresses that war is destructive to trade.

Also worth checking out is The Rise and Fall of Great Powers by Paul Kennedy and Charles Stross' commentary on this essay on the fall of the USSR by Yegor Gaidar:

Normally empires decline slowly; it took nearly half a century for the British empire to descend from planetary hegemony to the edge of bankruptcy in 1945, for example.

The USSR took a decade from the first serious worries about its balance of trade to the final abortive Putsch and Gorbachev's resignation.

But the US Empire has developed a uniquely unstable financial system over the past two or three decades, and we may be witnessing a catastrophic collapse. (I hope not; this sort of event is deeply uncomfortable and unpleasant to live through, even when it doesn't coincide with major environmental crises, a power vacuum, and a disciplined cadre of apocalypse-obsessed religious fanatics waiting in the wings to seize power if they can.)

Clearly I need to write a list of lessons to be learned from the current economic problems.

[image credit to thegoldguys, via luxamart on flickr]

Operating system analogies

After reading Neal Stephenson's excellent ebook In the Beginning was the Command Line I was struck by the brilliance of his OS analogies (the book was written in 1999 but still holds true today):

• Apple OS X: a beautiful, reliable, ergonomic, brilliantly designed, European coupe. The only problem is when you open the boot everything is covered by plastic, and the only way you can repair any problems is by returning the car to the manufacturer.
• Windows anything: an ugly, inefficient, unergonomic and poorly designed station wagon that nevertheless became incredibly successful.
• Linux: an incredibly efficient, military-spec machine that never fails and can do 100 mph at 100 mpg over rough terrain. Anything and everything about it can be altered in the field by the user. Oh, and it's completely free and support is also completely free.

Other analogies that spring to mind from the Star Wars mythos:

• Apple OS X: Queen Amidala's shiny spaceship in A Phantom Menace. Really nice to look at but a bitch to repair if something goes wrong (not that anything does go wrong unless you're being attacked by someone).
• Windows: tricky. I'm inclined to go with Star Destroyers: big, slow, ugly, cumbersome, but incredibly powerful (but not by virtue of good design).
• Linux: the Millennium Falcon. The best there is, and fully user-alterable. However the anaology breaks down when you consider that the Millennium Falcon is fairly unreliable, and requires constant maintenance.

Comment on "The Sleepwalkers" by Arthur Koestler

The Sleepwalkers by Arthur Koestler, is a history of the study of the cosmos, starting with the ancient Babylonians and ending with a discussion of Newton, via Aristotle, Plato, Copernicus, Kepler, Galileo.

Koestler seeks to demolish the assumption that the history of this particular subset of science is a Whiggish story of Progress towards a Theory of Everything. Rather it is a story of various people blundering around and gradually and haphazardly building a picture of the universe.

These philosophers and scientists "sleepwalk" towards understanding.

Enjoyable and iconoclastic, well written but with some flaws.

Some spiritualist stuff, which comes off sounding a little odd against the otherwise respectably skeptical tone.

Claims that electromagnetism and gravity are "verbal fetishes ... disguising the fact that they are metaphysical concepts dressed in the mathematical language of physics."

Well that's an interesting perspective. I wish I knew if Koestler was speaking from a view of ignorance or understanding as regards the mathematical underpinnings of gravitational theory.

It is unfair to say gravity is a metaphysical construct. It is a theory that currently suits all available evidence very well. We believe in it because the evidence suggests it exists.

However Koestler is right to reinforce how peculiar the idea of "action at a distance" (spooky or otherwise) really is. Descartes was having none of it. Newton presented his theory of gravity but said:

"gravity must be caused by an agent acting constantly according to certain laws; but whether this agent be material or immaterial, I have left to the consideration of my readers"

Dismissive of Einstein (p 504, Chapter 3 The Newtonian Synthesis 1. 'Tis all in Pieces):

"Einstein's correction to Newton's formula of gravity is so small that for the time being it only concerns the specialist. The two most important branches of modern physics , relativity and quantum mechanics, have not so far been integrated into a new universal synthesis; and the cosmological implications of Einstein's theory are still fluid and controversial."

I think Koestler rather misses the point here: as I understand it Newton was wrong to assume space is "flat" and Einstein demonstrates that space is not flat. Newton's theories are a good approximation of what goes on in the universe, and for most purposes do well enough, but Einstein is closer to being correct than Newton.

The book was published in 1959: I think Einstein's theories were bedded down by then.

All in all, an excellent read, drawing on the original sources.

The End of capitalism?

I wish commentators wouldn't blather on about the current economics problems being "the end of capitalism" - it's a lazy use of words. As John Gray has it in The Guardian:

There has been a good deal of talk in recent weeks about imminent economic armageddon. In fact, this is far from being the end of capitalism. The frantic scrambling that is going on in Washington marks the passing of only one type of capitalism - the peculiar and highly unstable variety that has existed in America over the last 20 years.

David Cox on The First Post has it that this is a crisis of democracy, not capitalism:

Some see our current plight as a crisis of capitalism. It may become instead a crisis of democracy. Already, we have cheerfully sacrificed free speech, habeas corpus and personal privacy to lesser threats than economic cataclysm.

My personal feeling: there is nothing wrong with capitalist, free-market systems that are effectively-regulated by democratic states. I don't think what has happened in the debt derivatives market has been effectively regulated by anyone. This is the root of the problem.

The Heavens align...

I finally decided to bite the bullet and buy a new PC (with Vista, natch --- read the tagline) and now this happens.

ION: I've been reading Neal Stephenson's classic essay In the Beginning was the Command Line.

Let me just review my real reasons for not just using Ubuntu:

1. I use Dreamweaver and Photoshop, and I see no reason why I should install a completely different operating system just so I can run two of the three applications I actually use in WINE.
2. That's it.

What I really need to do is buy a new hard drive for the 'ol lappy and fire up Ubuntu on that.

Aha. A plan.

Evil video post

"If you start from the perspective that anyone who seeks power is basically unsuited to posses power then you come to the conclusion that the only thing we can ask of our leaders is that they be honest about who they are."¹



Well he gets my vote!

[¹] Me.

CERM

How to make a Fantasy Series

Following is a series of easy steps to take to make you a Rich And Famous Fantasy Writer by manufacturing your very own EFP:

1. Read The Lord of the Rings. by JRR Tolkein
2. Take a bit of A3 paper and put loads of blobs, triangles, and dots on it. Give the blobs names like "The Forest of Freetard." Give the triangles names like "The Brokeback Mountains." Give the dots names like "The Free City of Generica."
3. Come up with a Main Character. Your Main Character has to be humanoid, and masculine, even if it's a woman.
4. Come up with a Quest. Your Quest must involve the Main Character going from where they are at the beginning of your text, to where they are at the end. It must also involve some kind of small, portable object. Examples include: rings, swords, crowns, cloaks, gold, or amulets.
5. Come up with a Title. It's best to base your Title around your portable object. Identify the object and where it came from/was made and then use that as your title.
   
6. Write the entire plot of The Lord of the Rings in your own words, but using your bit of A3 instead of Tolkein's map, and using your Main Character in place of Aragorn, lose the Hobbits, and use your portable object in place of the Ring (remember in your version Aragorn has the ring).
   
7. Make sure you get it all up to 100, 000 words.
   
8. Pad out the text you've written to get it up 500, 000 words. Do this by sticking an Event every 10, 000 words or so. These events must involve either a Troll, a Meeting, an ASA, or a WC.
9. Pad the text out further with Discursive Rambling, Expositional Infodumps, and Boring Internecine Politics. By this point your text should be up to 1, 000, 000 words.
10. Split the 1, 000, 000 word text into arbitrary clumps of about 100, 000 words each and label each clump as Book 1, Book 2, etc, and mail the first one to a publisher.
11. Sit back and let the moolah roll in.
    

Glossary of terms:

• EFP: Extruded Fantasy Product
• Main Character: a humanoid being that your text talks about.
  
• Quest: the thing that drives your Main Character to do what he does.
  
• Event: something that happens to your Main Character.
• Troll: a big scary monster of some kind.
  
• Meeting: your Main Character will meet some Secondary Characters.
• Secondary Characters: anyone in the story who isn't the Main Character. Some of these will be Enemies and some will be Allies. Some will also be suitable for your Main Character to perform ASAs with.
  
• ASA: Arbitrary Sexual Act
• WC: War Crime

Further Tips:

There needs to be plenty of WCs and ASAs. WCs should be against threatening and unattractive people. ASAs should be with unthreatening but attractive people.

Names should be long, vaguely foreign, and end with a description of what that person has done. Also remember that people are always "the." So, for example, Dr Perry Cox MD becomes Dr Perry Cox the Medical Doctor. Or better yet: Dr Perry Cox the Doctor of Medicine.

[[Incidentally: am I the only one who thought the last episode of Scrubs was appalling?]]

Discussions of morality and whatnot are optional: it might be worth doing it to fill up a few pages.

Your Dark Lord character doesn't really matter. It's all in the minions. ;)

Well Good Night, and Good Luck!

A failure of ownership

An interesting article by Chris Dillow in The Times concerning the current financial crisis:

...one form of ownership has caused a crisis, and another hasn't. The reason for this lies in what economists call the principal-agent problem, and what everyone else calls the difficulty of getting your employees to act in your interests rather than their own.

Big, quoted companies have been unable to solve this problem. Shareholders - often, ordinary people with pensions - have little control over fund managers. Fund managers have little control over chief executives. And chief executives have had little control over trading desks, partly because they just didn't understand the complexities of mortgage derivatives.

I'll give you this for some lovely CDOs...

So traders were free to gamble with other people's money. They got multimillion bonuses if they did well, but faced almost no meaningful sanction if they failed: John Thain, Merrill Lynch's chief executive, is rumoured to be in line for an $11 million payout. The result was excessive risk taking.

This makes a lot of sense: free markets are powerful tools, but like many powerful tools they need to be carefully controlled, primed, and monitored.

Creating situations where the ownership of firms results in employees and owners having different aims and agendas is a recipe for this sort of failure.

Dillow refers to a book called The Subprime Solution by Robert Schiller:

The solution to our troubles, he says, is more markets, not fewer. He proposes the introduction of markets in livelihood insurance, so that people can buy protection against job losses, and better markets in house-price futures, so we can insure against falling house prices.

People need to learn to respect the free market: understand what it does, how it does it, and what its limitations are.

It isn't a case of more regulation and state control vs. less regulation and state control, it is a case of finding the appropriate levels of state control.

The Liberal Party

Daniel Finkelstein is rapidly becoming one of my favourite columnists, up there with Johann Hari.

He suggests in this article that it would be a good idea to merge the Labour party and the Liberal Democrats into one political party, call it the Liberal party, and ensure that the Tories never get into power!

In his 1991 book The Progressive Dilemma, Marquand noted that the in the 20th century the Conservative Party had so far spent 60 years in power. At the time of the Liberal landslide of 1906 such Tory dominance seemed unlikely. And a number of Conservative historians have observed that for ten years after that victory the Liberal offering seemed so potent that the Tories struggled to find a response.

Then, as Marquand tells it, came tragedy for the Left. It split. A new party emerged commited to two things that the Liberals refused to endorse - the power of organised labour and socialism. The split was not inevitable. The Liberals might have offered their support to the unions, the effort to commit Labour to socialism might have failed. But inevitable or not, the split happened. And the result has been years of Tory hegemony.

Good idea.

Any further analysis?

Such a party would be rife with internal divisions.

But I don't think there are as many old-guard socialists in the Labour parliament as there were.

However as Finkelstein points out, socialism doesn't really work (Finkelstein claims that democratic socialism is a contradiction in terms - which is why I prefer to think of Sweden, France et al as liberal democracies, as opposed to social democracies) and unions are certainly necessary, but I don't see why they have to be any more powerful than other interest groups in society.

So a liberal party wouldn't necessarily be any more divided than the Tory party.

New PC

I have a new PC. It is joygasmically fast. It is one of these:


The keyboard supplied didn't work, irritatingly, but the company are sending a new one and I bought a cheap one for £7.96 from Tesco for the time being.

[image from Arbico]

Muscular socialism

Interesting article by Matthew Parris in The Times. He points out that all this "caring and sharing" Christian socialism that he says Tony Blair was so enamoured with, with it's obsession with the poor and disabled, has little to do with what Marx talked about:

Away (the socialist should say) with caring and diversity: let's hear about investment, not subsidy; progress, not equality; about Crossrail (what's the betting Mr Brown cancels it?); about how Britain generates its own power, how we rescue our rail network from impending insolvency, how we get from London to Scotland by train in two hours, and how we stop the planning system throttling every big project; about how we develop a global positioning system that the Americans don't control, how we pay for better highways and uncongested streets with proper road pricing, and how we research and market carbon-free transport, heat and power.

Muscular socialism

From a pluralistic, or agonistic point of view it is necessary that there be a muscular, statist, centralising, collectivist alternative to the economically liberal, capitalistic, federalising tendency of the past few decades.

The problem with Labour at the moment is their complete lack of ideological candour and legislative narrative.

Parris claims he is an economic liberal: but he observes the necessity of a socialist or social democratic tendency in the political debate with the coming economic difficulties.

This is very astute.

(So much muscularity! I will need to go and have a lie down!)

[image from Trevor H]

An Atheist Catholic

I am an atheist Catholic. I have been confirmed but I don't believe in God.

A large part of religion for many people is the sense of community spirit and identity that comes with it.

I don't have to give up my tribe just because I don't believe in God.

Not even wrong

Another reason all this nonsense about the end of the world is completely silly is that the thing that everyone misinterpreted as being the thing that might herald the end of the world won't even happen today!

The history eraser button

Appropriate on this, the day the LHC will be activated...

Fonejacker season 2

Lovely ad.

"The time for stupid statements is over."

I seem to spend a lot of time talking about politics in this blog, which is weird, as I claim not to be that interested in the damn business.

I think it's because a big chunk of my daily ration of cruft and filler (rubbish text IOW) concerns politics and it's easier to bloviate on the subject of politics than on something important, like particle physics, neuroscience, business, graphic novels, computers, engineering, science fiction, or transhumanism.

In that spirit I have a question: why is it that journalists think political speeches are so important? Why are they so important? Why do so many people watch them?

The important thing in politics is the substance of a candidate's policy. Her character is a secondary, but important, consideration. But I also think it's impossible to accurately judge a person's character unless you have the opportunity to meet them and have a frank, private, face-to-face discussion. In the absence of this there is very little you can do to determine the character of an individual.

Speeches and interviews and debates show you a human being trying to show themselves off. They do not demonstrate the character of that human being.

In the real world I'd be happy with two things from any political candidate: a postcard with the elevator-pitches for their policies, and a chit signed by several randomly-selected qualified psychiatrists affirming that the candidate is a sane, well-balanced, mentally and emotionally healthy human being.

Assuming the candidate isn't stark-raving bonkers then the only thing that actually matters is policy. And policy is much better expressed in text than in some speech.

A political speech is essentially a sales-pitch: "vote for me." But as everyone knows when dealing with salesmen you always have to read the small print. Just listening to them isn't enough. In fact it's a downright bad idea - it gives them the opportunity to play you for a sucker.

When making a purchase or casting a vote, you need to read the details of what you're getting, ask the candidate a few questions for clarification (and ask them to reply by email) and that's all you need to do.

I don't buy into this nonsense of politicians as "leaders." They are servants of the public, tasked with optimally allocating the funds of the state. We're not being lead into battle (whatever certain War-on-[ill-defined-presumed-social-ill] agitprop-spouting spin-doctors will tell you) and it is inappropriate to suggest otherwise.

Update 07/09/2008:

Check out these images from Wordle via Wired regarding the speeches at the recent American party conventions:

Education in the UK

This started out as a commentary on an article by Johann Hari, but then spread into a more general ideological point (not that I'd ever pursue an ideological principle in the Real World directly, I'd only do so after a decision based on [very] basic ethics and available evidence).

After reading Johann Hari's excellent comment on equality, education and the estate tax I am inspired to add my own comment on education.

Freedom

I'm a liberal. I believe that individual freedom is both good and necessary.

Equality of Opportunity

People are not born equal. Because some people are naturally better than others at different things some people become more powerful than others. These people can exert power over their fellows, thus limiting their freedom.

Because of this it is impossible to create a truly "equal" society. However "equality" is not the same as "freedom."

What can be done is to ensure that everyone has an equal opportunity to succeed. So if they wish, and they are capable of doing so, they can increase their power, income, intellect, ability, comfort, compassion, number of friends, or whatever their personal measure of success is.

I don't mind inequality in society as long as everyone has an equal opportunity to succeed.

Education

A good step towards establishing equality of opportunity is to ensure that everyone receives the same standard of education. In the UK today we have a three-tier school system:

1. The best schools are "private schools." These are schools where fees have to be paid for education.
   
2. The next level of schools are a mix of "grammar schools," which select on the basis of academic ability, "faith schools," which select on the basis of religion, and "good comprehensives," which select on the basis of where you live.
3. The lowest level of schools are called "bad comprehensives" or "sink schools." These are schools that are not very good. Because they aren't very good only the poorest people go there.

Because poor people have to send their children to bad schools poor children are more likely to receive a bad education, and are less likely to succeed in later life and therefore more likely to be poor when they are older.

Because rich people are more likely to send their children to private schools, the children of the rich are more likely to receive a good education than the children of the poor.

This runs counter to the principle of equality of opportunity. The freedoms of the poor are inhibited by their poverty.

Private Schools Should be Run as Private Businesses

In the UK private schools benefit from "charitable status." This means they don't have to pay as much tax as most private businesses.

I have no problem with private schools, but they must be run as private businesses, rather than as institutions subsidised by that state for the benefit of the rich.

Comprehensive Schools

In order to ensure equality of opportunity and the freedom of individual children then a truly comprehensive school system must be created. Such a system will be one where all children go to their local state-funded school.

There will still be problems whereby the lower quality-of-life of some poorer areas will have a negative impact on the quality of education in that area. But the problem will then become a (relatively) straightforward task of improving certain specific schools.

In this case the children in schools in poor areas will have access to the opportunities needed to leave poor areas if they wish to.

Collectivism vs. Individualism

I am not a collectivist, I believe in individual freedom, and that society, or the state, interfering in the lives of individuals is a bad thing. A representative government is the way our society has decided to pay for all the things that can't easily be provided by private companies or private individuals. But the state should not become too powerful.

It is important to realise that the state is not the only potential source of tyranny and enslavement. Monopolistic businesses, powerful individuals, ignorance, and poverty are also things that inhibit the freedom of the individual.

The Question of Private Schools

I believe that if someone believes that they can run a good business educating children for profit then they have every right to do so.

But what happens if the rich send their children to private schools? The children of rich people will then have an advantage relative to others, which contravenes the principle of equality of opportunity!

In this scenario the children of the rich will have a head-start by virtue of better education, and are therefore more likely to succeed!

The Imperfection of Life

Life isn't fair. However I believe that the objective of the state schools should be to improve, not remove competition from private schools.

In any case, without the unfair advantage of tax-exempt status enjoyed by private schools the number of private schools would fall. Also the cost of private school would increase.

By improving bad comprehensives, removing all the remaining grammar schools, and sending people to schools based on where they live or by a lottery there will be an incentive for all parents and politicians to lobby for all schools to be equally good.

It may seem like a limitation on the freedom of the parents to choose the best school for their children, but rather it is an enhancement of the freedom of poor people to succeed if they can or if they wish to.

In this case a clever child will still be more likely to succeed and exert power over those who are less driven or clever or ambitious or aggressive, but at least that child will have got to that position by her own ability.

The Rich

As I said before, it is likely that there will still be some inequality in the school system by virtue of private schools and home schooling and private tutors.

However the unfair or unequal advantages of the extremely rich can be compensated for to some degree by a 100% estate tax.

This would ensure that the children of the rich have the freedom to be their own person. They would not held as slaves to the tyranny of their parent's financial success.

They will still have significant advantages in terms of superior education, but they will then be free to make their own way in the world, unencumbered by inherited wealth.

Transhumanism

The ultimate expression of tyranny is that of our enslavement to our own biology. The enslavement of genetic predisposition.

I believe that once the relevant technologies are available then this problem should be addressed. Unfortunately the technologies of human enhancement are currently at a fairly limited stage.

To me there is no distinction between asking the following two questions:

• Why should someone have greater advantages at the start of their lives by virtue of their parent's money?
• Why should someone have greater advantages at the start of their lives by virtue of their genetic predisposition to intelligence?
  

I see transhumanism as the ultimate expression of the Enlightenment Project, extending individual liberty and self-determination to the logical end of controlling all aspects of your personal biology, gender, proclivities, beliefs, skin-colour, physical abilities and body-forms.

Freedom

I believe in freedom. I believe that in order to preserve the delicate balance required for individual freedom to flourish there are certain corrections that need to be addressed in society.

Education is clearly the area to start, and the closest thing to transhumanism we already have.

Daring Darling: an update

It's nice when people agree with you. Apparently former BBC economics commentator Evan Davis agrees with my opinion that it was right for the Chancellor to tell the truth, from his blog:

Anyway, since when has it been the government's job to encourage investors to invest, or to entice consumers back into the shops? I would rather ministers gave us unbiased guidance on these matters, rather than advice it thinks is wrong on the grounds there is some bigger social purpose from so-doing.

And why do free market newspapers now find that an important government role is to talk up the pound? (The currency probably needs to drop to soften the downturn, as the falling dollar has done in the US. Who knows what the "right" level of the pound is at the moment?)

David Davis

Yes! This is exactly what I was trying to say! He goes on:

In the face of all the evidence to the contrary, I think it would have been a mistake for Mr Darling to have stuck to his previous line that we are uniquely well-placed to weather the storm. It seems unlikely he had special powers to move us all with his words of encouragement and positive thinking .. if only he hadn't blown it.

If political spin could move the economy so far, let's improve the quality of our schools by demanding that education ministers tell us inner city schools are better than suburban ones. And maybe the foreign secretary could get Russia out of Georgia by telling us they are not there at all.

No, if we could make the economy strong by lying about it, I would be out there for lying all the time. But it didn't work in the Soviet Union, and it won't work in a country with a free press either. Better that Mr Darling tells us what he thinks, than he tells us what we'd like to hear.

Now though, it seems, the former Conservative shadow Home Secretary David Davis is criticising Evan Davis for being biased in favour of the government:

"It is completely wrong for a BBC presenter to start defending Government actions when they have made mistakes. Why is a Labour Chancellor being helped out by a presenter of the BBC’s flagship political programme?"

Evan Davis (no relation [I think...])

A couple of points:

1. Evan Davis is entitled to his own political opinions and is equally entitled to present them on a personal blog, even if that personal blog is hosted by the BBC and he is a BBC presenter.
2. Evan Davis was not claiming to speak for the BBC.
3. The BBC may or may not be institutionally biased in favour of the government. Who cares? Other news outlets are institutionally biased against the government or against the Conservative party. This blog is biased in favour of smart, honest, selfless, and hard-working politicians. So what?

I still believe that Darling made the right decision.

I understand politics, I just don't like it...

Why is it that when the Chancellor of the Exchequer says that the economic times faced by Britain and the rest of the world "are arguably the worst they've been in 60 years" is it suggested that he is damaging the economy?

Check out what David Cameron has to say:

"I think it's extraordinary that the chancellor said it, because – remember – a chancellor of the exchequer has got to think not only 'I must tell the truth at all times' but also 'I must use my words carefully, so that I don't actually create a situation that's even worse, that creates a crisis of confidence'."

The "crisis of confidence" was apparently indicated by a fall in the value of Sterling.

However I'm still having difficulty with the idea that telling the truth at all times is a bad thing in a politician, particularly when you're dealing with your own constituents (the British people).

It's possible there is a causal connection between what Darling said and the fall in Sterling (I don't understand currency trading enough to know if this is an entirely bad thing or not --- doesn't it mean that we'll be able to sell stuff abroad more easily?) but if Darling is telling the truth then perhaps this fall in Sterling is entirely warranted, and would have happened anyway once everyone else caught on to the Chancellor's way of thinking.

And if he's wrong then it doesn't matter either, because if GDP starts growing again and inflation and unemployment continue to remain low then things will be alright.

In short, Darling is hoping for the best but preparing (and warning us about) the worst.

It's important that politicians be honest and straightforward with the public, so why is Alastair Darling being criticised for commenting on the economic outlook? He is, after all, the government minister in charge of the Treasury.

And it seems I am not alone in thinking this, here are the results of a Guardian poll asking the question "do you admire Darling's frankness?":

Well said, Darling

There seems to be a disjoint between the public's perception (a politician not only telling the truth, but being honest and open with his opinions) and the perception of rival politicians and some in the media who see this as a mistake.

It does seem a bit overblown to say that things are the worst they've been since 1948. I'm pretty sure they aren't. But Darling is the professional so I suppose if he says it is there's a chance he's right.