Rebane's Ruminations

Ruminations - 31may12

George Rebane

As a continuous lament on these pages, the country’s lack of technical talent is now reaching new lows.  We hear that “On college campuses these days, the top nerds are getting a taste of what it's like to be star jocks.  Companies big and small are going on school campuses to hire undergraduate tech majors, offering outstanding compensation packages and stock (more here).  Meanwhile tens of thousands of PhDs holding degrees in latino studies and women’s public policy are on the dole, with more arriving daily.  All of this is lost on the country’s liberal contingent.

Sex selective abortions are giving those feminists who understand things a bit of a problem.  There’s a bill in the House that would prohibit such abortions done for the sole purpose of getting a kid with specified outside plumbing.  It turns out that minority women are in the overwhelming majority who request such government sponsored genocide services.  Since such killings are the most basic form of gender bias, what’s a dyed-in-wool leftwing feminist to do?  Opposing the bill would be blatant hypocrisy, yet supporting it would deny the federal dole to clinics that do this kind of thing.  And it didn’t help that someone made a video of a woman having a very understanding interview with a worker in one of those abortion clinics.

The descendants of Lenin’s “useful idiots” are still parroting the denial of government worker pensions as the main cause of fiscal failures of local jurisdictions in America.  Now we hear that Mayor Rahm Emanuel has finally seen the brick wall after having gone splat against it in Chicago.  As the WSJ reports, in Illinois “Many teachers don't pay a penny toward pensions but can retire at age 60 with an annuity equal to 65% of their final salary plus a 3% annual compounded cost-of-living increase. The state's pension bill, which has quadrupled in five years, consumes all $7 billion of additional revenue from last year's income and corporate tax hikes. Even so, the pension funds are projected to go bust in a decade.”  So now that he has executive responsibility, the former Obama chief of staff is singing a different song titled “Illinois pensions are breaking my city.”

The Liberal Mind – Profits vs Jobs

        'Tax rates have no effect on the behavior of the taxed.' - deeply held liberal tenet

George Rebane

This week President Obama made another extremely important statement that reveals his understanding of how the world works.  At a campaign stop he took Romney's credentials to task, doubting that anyone who has focused on business ventures like reorganizing companies for the purpose of making a profit is suited to be President of the United States.  The better recommendation for such a candidate would be to have focused on creating jobs.  On hearing this I could not help but go slack-jawed.

To be sure, it is a tragedy to have such ignorance (or perfidy?) resident in the chief executive of a putatively capitalistic country, but the portents of making such a statement to the electorate should be our real concern.  Obama spoke those words knowing that a large fraction of voters would agree with him simply because of his position, abetted by their inability to understand the basics of economics beyond their own spending habits.  In other words, the man knowingly pandered to the complacantly ignorant.

The correct message should have been that in free markets all businesses are created to make a profit, and when successful, such enterprises also create jobs.  No business is started for the purpose of creating jobs.  You have to be successfully shielded from reality or just plain dumb not to know that labor – i.e. a job – is an element of cost that makes any product or service more expensive to the customer, makes the business less competitive, reduces profits and the ability to grow, and jeopardizes the survival of the company.  In short, a successful business does its best when it minimizes the jobs needed to function profitably, and thereby best guarantees that the jobs it does provide will be the most secure.

It is only the collectivist state with its twisted ideology that sets up organizations, which employ cadres of inept and inefficient workers to impede the increase of wealth and the quality of life for the most people.  And the collectivist state does this without regard to the unsustainability of the entire scheme, counting on increasing the wholesale level of equally applied misery to mask any alternative approach to creating and distributing wealth.  This is what our President has been successfully selling, and through his cadres, successfully imposing on the country.

Part and parcel of such a downward spiral is the notion of a nation, up to its eyeballs in debt, spending its way to economic recovery and wealth.  The Greeks are now demanding to spend more, instead of tightening their belts from profligate borrowing and spending.  The French just voted in a socialist who promises to put their country on the same road.  Spain and Portugal are ready to sign on.

This entire approach was recently given a mind-boggling justification by Hannes Swoboda, a member of the European Parliament and president of the Progressive Alliance of Socialists and Democrats in that ‘august body’.  In his ‘Europe Can Spend Its Way to Growth’ (21may12 WSJ) he advances some economic prescriptions for the EU that have yet to work on this third planet from the sun – nevertheless, member countries are exhorted to throw themselves into the breech one more time.

First and foremost, he recommends compelled borrowing by states and businesses for the purpose of job creation.  This, of course, requires some mysterious compelling of lenders, since prospects for profits that assure a payback are neither apparent nor a necessity.  He then appeals to la-la-land accounting to dictate that such debts “should not be integrated in calculations of structural deficits and hence be punished because (somehow) investment in growth generates income and taxes, and therefore revenues for the state.”

To achieve this new level of unsustainable indebtedness, Swoboda argues that “European institutions should enact legislation that requires all members to make public investments in growth and employement.”  A staple of economic activity in this direction is to re-ignite the efforts that “would finally lead us onto the path toward a seriously environment-friendly economy.”  This in the face of the disastrous recent history that EU countries have experienced in their pell-mell charge into green industries, an experience which subsequently caused everyone to beat a hasty retreat in order to save their national fiscs.

How will all this be accomplished?  Swoboda’s sure-fire approach spells out that “these additional investments need to be financed, one way or another.”  (No kidding, you can’t make this stuff up.)  And just to make sure that capital has every impediment to moving into its most productive use, he prescribes a new “financial transaction tax".   On top of that, the EU would establish additional regulations to “fight against tax evasion” which then would “channel additional funds into national treasuries.”

To put a nice bow on it, we can now all do a little anticipatory happy dance because “once growth takes off, tax revenues will start flowing.  Tax policy that favors lower-income classes and better regulation of financital markets would (then) already be fostering growth.”  Now, do you see how easy all that would be?  And do you finally understand why Team Obama wants to take us down that same road once “after (his) re-election (he) will have more flexibility”?

Ruminations - 21may12 (updated)

George Rebane

President Obama’s background and biography is throwing people for another loop – at least those with their heads still exposed to the sun.  Who knows where the man was actually born?  Who knows what actually happened in South Chicago?  All we know is that the Washington establishment (both parties) and the lamestream don’t want to go there, no matter what is discovered under newly turned over rocks. 

And Obama’s ‘autobiographies’ will now have to be re-cataloged under fiction.  The disparities from truth are becoming so easy to document that a high school sophomore could do it for her term paper, if only her teacher would countenance such research.  PJMedia, Breitbart, and Drudge, along with some local blogs, have been having a field day on the new revelations about the background of our fearless leader.

Everyone with an ability to buy popcorn at a movie should now understand what a private equity firm like Bain does and did when Romney was there.  Especially revealing is the Left’s celebrated cause of telling the country that Romney and company bankrupted GST Steel and destroyed 750 secure long-lasting jobs; worse, sent them overseas to cheap steel makers.  ('Bain Capitalism 101')  Ol’ Joe can say it best of all from the Team Obama side.  Their lies are understandable, but the puzzle remains as to how well such lies work with the Left’s constituents.  A lot of these must be the parents of kids like those in Florida who flunked the state’s reading test. The answer’s gotta be in the double helix.

Placebos vs Big Pharma

George Rebane

A recent ’60 Minutes’ surprised me with a segment in which it was reported that placebos worked just as well as drugs like Prozac for fighting depression – well, almost as well.  Prozac did have a tiny edge in really severe cases of depression.  The research was done by Dr Irving Kirsch of Harvard, and it has reignited a firestorm of debate as to what real effect do many expensive big pharma concoctions have over sugar pills.

The power of the human brainbone to gin up alternative realities has been known for decades.  In the Greece of pre-Dorian invasions the gods regularly conversed with individuals and even attended public events such as weddings and other celebrations.  Everybody saw them and corroborated each other’s experiences.  In the middle ages and later, people actually saw witches fly on broomsticks, and believed such sightings to be as reliable as seeing clouds in the sky.  In the modern age anthropologists have discovered and studied a tribe in Papua-New Guinea whose known world has a boundary at a narrow river, the other side of which has always been invisible to the aboriginals.

Some psychologists have identified the responsible region of the brain for such hallucinations in the right hemisphere opposite Wernicke’s area (used in language processing).  In any event, most of us have heard some astounding stories and are aware of the power of placebos.  It all seems to revolve around the level of credibility (faith) we attribute to the sugar pills presented as medicine and administered by sincere and serious healthcare professionals.  And this effect seems to work in spades with anti-depressant medications.

But that wasn’t really what caught my attention in the TV segment.  The question that popped up was why did the FDA still allow Prozac et al to tout themselves as the clinically effective standard of care for depression.  The answer was that FDA’s approval procedures rate a drug effective, if it bests the performance of placebos in at least two properly conducted drug trials or studies.  It could fail to be better in, say, ten previous studies, but as soon as it racks up two victories over the placebo, it gets to go to market.

My instant reaction was ‘Wow! I didn’t know that.’  So if in a (double?) blind trial Prozac and a placebo are each given to two samples of 500 subjects suffering from depression, and Prozac is judged to effectively reduce symptoms in, say, 100 subjects, while the placebo equally reduces symptoms in only 98 subjects, then Prozac wins.  There was no requirement of statistical significance or any such technical niceties.  Two such victories, and the billions start rolling in.

The question then becomes, what kind of risk do big pharma companies take when bringing to market already developed, marginally performing medicines?

Message to Team Romney

George Rebane

Republican contender Romney is overlooking a key and compelling message to the voters.  He and his are just getting up to speed on, ‘Since Obama did not come close to meeting his first term promises of hope and change, and we are still in economic dire straits; what makes you think that Obama can deliver on the same promises during his second term?’

The real message that no one seems to be talking about in the pundit universe, and that has been totally absent in Romney’s copy is, ‘Since Obama did not come close to meeting his first term  promises of hope and change when his second term prospects still hung in balance; what makes you think that now in his second term he will keep those promises when he has no such requirement to deliver, and need let nothing stand in the way of implementing his twisted (aka ineffective, butt stupid, wrongheaded, socialist, …) ideology on America?’

Wordsmith it as you will, the logic of it is overwhelming, and this message should be heard from Republicans at all levels to the widest possible audiences until we vote on 6 November 2012.

Discrimination by the numbers

 

George Rebane

Sheriff Joe Arpaio of Arizona’s Maricopa County is being sued by the Dept of Justice for discrimination through the use of profiling.  When ol’ Sheriff Joe stops a car for some traffic, licensing, or other safety violation, it seems that he puts the occupants through an immigration check nine times more frequently when they are Hispanics, than when they are not.  This to the feds and other soft heads is clear discrimination through profiling; is it not?  Let’s return to the sheriff after a couple of preliminaries.

Most people who put their feelings on the back burner for a bit and revert to reason will agree that discrimination occurs when some benefit or sanction is directed toward a segment of population that is out of kilter with the proportion of the population having an attribute that legally deserves the benefit or sanction.

Let’s say that 15% of county residences have a specific building code violation, and county winds up writing citations and fining 25% of residences for that violation.  It is clear that 10% of residences have been discriminated against since they can show that no violation existed on their properties.

Also if a population of equally developmentally handicapped people were supposed to get a certain subsidy, and upon examination it was later found that payments went excessively to a subset of the handicapped that had another attribute (say, they were all tall) not contemplated in the law, then the subset without the secondary attribute (the short ones) suffered discrimination.

It gets a little dicier when we start dealing with realworld uncertainties, and when we have to allocate scarce resources to achieve a certain objective.  And this brings us to some of Sheriff Joe’s problems.  So let’s get a few numbers under our belt (they may be off a bit, depending on your source, but I tried to get them all from the Census Bureau, so they should work for this discussion.)

Fair Division 101

George Rebane

It’s usually tough to divide up a set of assets when a partnership breaks up, spouses get divorced, or any set of in/divisible assets or resources must be allocated between multiple parties.  The study of fair division algorithms has seen a considerable amount of research and it isn’t over yet.  A good fair division algo that is adopted by negotiating parties will go a long way toward achieving a mutually acceptable outcome.  I have found Fair Division: from cake-cutting to dispute resolution (1996) by Brams and Taylor to be an excellent survey of such algos.

We all know how two people should divide a cake into equal pieces so that neither would have a reasonable complaint – the algo prescribes that one cuts the cake, the other chooses his piece.  But what happens when there are three or more people who want to divide the cake equally, or even to divide the cake into agreed upon portions?  You can see how things can get complicated very quickly.

In this edition we will consider a simple yet powerful algo – let’s call it FD01 (developed by Bronislaw Knaster) – that allows two parties to divide up a disparate set of indivisible assets, one of which consists of cash.  The entire schema for FD01 is shown in the spreadsheet figure below.


The left column lists the six assets (the cash asset is not required).  Parties A and B agree that their split is 40-60 respectively as shown.  Each party has the assets appraised.  This step is not required, and may be completed mutually if desired, or the two appraisals may even be shared.

Both parties, using all the information available to each that may include tax considerations, future plans, and knowledge of the other’s propensities, will now place a ‘bid value’ by each asset that represents his own assessment of what he considers to be the dollar value of the asset to be used in the subsequent calculations.  Each party submits a sealed bid list for all assets to be divided.  The bid values for each are listed in their respective columns.

The Bayes Surface and more

 George Rebane

[This post continues the numeracy series on the Bayes contribution to our civilization.  For more background and examples, please see ‘Making Medical Decisions’.]   


What you see here is a 3D graphical illustration of the celebrated Bayes Theorem (or formula).  I have not seen this beautiful surface presented in the literature, so I wrote a little program to do just that.  In this representation the Bayes formula (seen above the surface) is expressed in its likelihood form.  We are reminded that the Bayes Theorem is the correct and most powerful process by which we take existing uncertain knowledge, combine it with new data or observations, and update that knowledge.

Today the Bayes Theorem underlies the operational principles embedded in so much of what makes our modern world.  It is safe to say that most new technologies in fields that include medicine, energy exploration and production, finance, communication, space exploration, transportation (land, sea, air), defense, the internet, manufacturing, distribution of goods and power, … would be handicapped beyond belief were we to remove their Bayesian components – we would literally be thrown back into the technological age of the 1950s, and our modern world would cease to exist.

To the above list we add artificial or machine intelligence (AI for short), all forms of which are now based on Bayesian inference and its newest offspring, the new calculus of causality.  These applications focus on learning from the real world, a world which presents itself ambiguously within confounding frames of uncertainty.   As critters, our brainbones have evolved to make Bayesian kinds of decisions within a utility that ranks survival highest.  Many of our neural structures appear to have parts of the illustrated surface hardwired into what Daniel Kahneman (Thinking Fast and Slow, 2012) has identified as our intuitive ‘System 1’ cognitive processor that lets us come to rapid conclusions.

Education, teacher meritocracy, and our national future

George Rebane

RR has long promoted the idea that education in wealth producing/sustaining fields is the ONLY solution to America’s economic and social problems.  Former SecState and now distinguished senior fellow at Stanford’s Hoover Institution, George Shultz co-authors ‘Education Is the Key to a Healthy Economy’ with Eric Hanushek in which they acknowledge our broken K-12 public school system, and make the argument that quality STEM (Science, technology, engineering, math) education correlates strongly with and is a causal factor promoting economic growth – see nearby chart.  Their conclusion is that “An improved education system would lead to a dramatically different future for the U.S., because educational outcomes strongly affect economic growth and the distribution of income. ... (And) if we fail to reform K-12 shools, we'll have slow growth and more inequality."

The authors point out research that shows how per capita GDP is affected by STEM proficiency, and that –

Current U.S. students—the future labor force—are no longer competitive with students across the developed world. In the OECD's Programme for International Student Assessment (PISA) rankings for 2009, the U.S. was 31st in math—indistinguishable from Portugal or Italy. In "advanced" performance on math, 16 countries produced twice as many high achievers per capita than the U.S. did.

Continuing on this path, as is the current strategy promoted by the nation’s teachers unions, will guarantee to nail us to a slow growth future in which all the catastrophes from our indebtedness and unfunded liabilities will come home to roost in spades.  We will quickly become a second rate nation and all that entails in our ability to remain as the world’s most salutary and beneficent hegemon in history.

Socialism as predicted ...

George Rebane

Thousands of businesses are paying their 'fines' to opt out of Obamacare as they terminate their healthcare packages and leave their employees to fend for themselves.  Wait until they see how much money they'll be saving sailing steerage class on this Titanic2.

In the meantime, Mercatus Center's Veronique de Rugby has published the graphic below that illustrates the updated report from the Social Security trustees as to when SS will go bust.  Remember how the know-nothing leftwingers were screaming at anyone who dared question that SS was 'fully funded into the indefinite future' because of all those 'Lock Box' IOUs (aka Treasurys).  The more interesting thing to note is how much louder they scream next time when their butt stupid understanding of economics is pointed out to them as being the basis for the last disaster they promoted.