Mark Thoma: "John Bogles: 'A Crisis of Ethic Proportions'"

Mark Thoma reposted part of John Bogles' 'A Crisis of Ethic Proportions', which puts ethics at the front of the current economic crisis. Bogles goes on to identify the corrupted as the agents of the big corporations who put their own interest before that of the ones they are supposed to represent.

All very nicely analyzed. If you are an economist, you would really appreciate this effort of pinning down the real culprits within our theoretical system. Yes. The agency problem is well understood by economists, therefore solving it will not be that hard, once it is identified.

This identification, however, has slipped from Bogles' original point of observation. He effectively transforms a problem of ethics into one of agency, in which process an external factor of economic models is quietly internalized. Fortunately Mark Thoma is clear-headed enough to point out that '[r]ules will never cover everything, so ethics is part of the problem.'

However, my quesiton is, 'What ethics?'

I do not like to predict the death of capitalism like a socialist of the past. Observation is much better than prediction. Yet I believe that we have observed that people are not able to withstand the possible gains from bigger leverages, so much so that they and the huge organizations they represent will inevitably fall. It is the Gresham's law applied to the financial domain, and we seem to have got the problem back into the economists' hand. Congratulations! But do we have a stock solution?

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We have generally given up on 'good money' in currency circulation, but it is not possible to give in to 'bad money' in finance yet. While people were quick to realize the debased value of the 'bad' silver coins, the financial instruments are just too hard for the mortals to understand, and the rating agencies are doing a really evil job in offering (at least to Lehman) unfairly high ratings. So, once the complexity of the 'bad money' gets out of the limit of common human sensibility, all economic laws based on rationality need to be remade.

One Walks Before He Can Run

This is a basic Chinese notion about how things should be done in a gradual order: you don't teach a baby to run if he could not even walk (less true with Forrest Gump though). But too often the civilized West becomes impatient with the 'barbarian Asians' and ask them to jump without knowing where they originally stood.

This impatience is again manifest in the New York Times' editorial, where Afghanistan and Pakistan for violation of human rights and regressing into Islamic war control. I cannot speak for the Pakistan authority which let happen the beating of a woman for refusing a marriage, because it is an extreme case of human rights violation. I cannot speak for Mr. Karzai of Afghanistan, either, as the new law does sanction marital rape. But condemnation does not work.

The very idea that passing a marital rape law could boost Mr. Karzai's re-election campion shows that the law has popular support among the Afghan voters. Now I don't really know if women can vote in Afganistan or not (and given the newly passed law, it seems that they can't), but clearly Mr. Karzai is making a calculated decision. Find him another viable way, or stop telling him that he's doing the immoral thing. You can't condemn him into another presidency.

The popular support for Islamic law, as I understand it (or am unable to understand it), has many complex levels. Scolding Mr. Karzai isn't likely to work; telling them to respect the rights of women overnight isn't either (while telling them to respect the rights of women the Western way is entirely another matter.) The way to do it is to induce the Islamic society (and any other non-Western compliant societies) to form globally acceptable moral codes on friendly terms. The Japanese and the Indians once treated foreigners (Europeans) like dogs, but are now good world citizens (at least in this current world order), and it took them a couple of centuries to get there. Why can't we give other people some time so convergence in value can take place, unless some of us are actively seeking possible enemies to divert attention on local matters?

I don't believe that the word 'befriend' means beat someone repetitively untill they are submissive enough to agree to everything you say. Realize the difference and be tolerant. Since it's always easier said than done, stop condemnation and try to do some real friendly work patiently. Please.

Those Born With Rights and Those Born Without

Irrelevant image: migration destinations of Chinese to the US, generated by NYT

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Debate on immigrant workers is still running on the New York Times' Room for Debate. While the original topic, as I understand it, should be centred around the H-1B visa as an excuse for cheap labour, many of the authors actually take the liberty to warn the US of the danger of losing foreign talents, and consequently, losing her global technological competitiveness.

Whether that debate on NYT is off-topic or not is not my concern. My take on the debate is that if we look at the problem at hand up-side-down, that is, if we ask, 'Is it normal for the US to amass all the talents this world has to offer?' the answer should be quite clear. It is like a permanent trade surplus/deficit which has just proven by the current crisis to be quite impossible.

Why? Because existing American workers (supposedly not as competitive as some of their immigrant counterparts) will not just disappear. Worse still, unlike unemployment in a structural change of the economy, the kind of American workers we are talking about will continue to be born! Now this begins to sound a bit social Darwinian, and I assure you that I will not go down that route. I just wish to make the case clear, that with no ethical way of removing a certain number of the American citizenship, and as the speed of technology cannot keep up with the rate of population growth once high-skilled labour begins pouring in, the US will not be able to retain all the talents coming out of the US higher education system. And since a good number of these talents do not enjoy the same rights as an American citizen does (as has been made apparent in the debate at NYT), they naturally will choose to return to their home country.

So it is about time that we say 'Sorry' to the ideal US which no longer exists. If the market for talents were so biased towards the US, it is now beginning to clear. Any other way out? Yes, when free immigration is realized (a time when national borders cease to exist), we will all be better-off, except that by then it will be meaningless to speak about a 'global technological lead'.

Why so extreme? Why do I mess about national borders? Because within these borders, people are born with certain rights the outsiders do not enjoy. American vs non-American, urban household vs rural household (as in China)... People are not born equal. And since it is not politically right to say that someone is superior to another as a human being, displacement of the right-holders by non-right-holders will be impossible. The 'most' equal method is to let the population within the border grow; and the result is that some people can get a better life by qualification, while some will get it by birth.

In the advanced countries, nowadays, city growth has slowed down, and there is trend of migration back to the countryside. I would suggest that this is a better world, at least better than the swelling big cities in the past. Maybe this will happen on a global level, as well. In order to solve the problem of 'the immigration of high-skilled workers', some Americans will have to go. In a social-Darwinian way the goers are those at the bottom of the social ladder; in a more ethical way, it could be the richest guys. Either way, being an American will not be that important any more. Sadly the current debate seems to insist on the unviolatable rights of the Americans, and is too politically correct to become social-Darwinian, while too reluctant to let the elite get out of the US.

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I have actually concealed one solution. According to economic theory, instead of amassing factors of production, the real advantage of a country should lie in the progress of its productivity, or level of technology, or (very unfortunately) randomness in the equation! Productivity is a black box, but it does point to the fair solution:

Educate the existing US citizens so they over-perform most of their foreign counterparts, and the US will always lead. Immigration is always a cheap way to excellence, and it is good that the Americans have already realized that the current cheap plan does not work.

24 & G.O.P.

Being rather unfamiliar with American politics, I had some difficulty getting the meaning of the 'G.O.P.' derided by Paul Krugman.

Nonetheless, enlightenment can still come quite unexpectedly. 'And the parties are, of course, being promoted heavily by Fox News.' Krugman wrote, and I suddenly realize that why 24, the TV series that I happen to come to love, happens to be a Fox product. It now seems clear why the show happens to feature a lot of torture of terrorist suspects (rightly suspected by the hero), why the government that tries to shut CPU down is wrong, and how stupid the FBI agents who play by the rules are. It seems less clear, though, why the current 24 president is so stubborn and inept that she is almost certainly the clone of the 2001~08 president, although her female status still gives us a hint that the role was designed to create an on-screen Clinton.

Susan Hough: 'Confusing Patterns With Coincidences'

I've been quoting a lot recently, as I do not have enough web time for blogging. But for this one, I do have something to say.

The quote goes first:

The game goes like this: you look back at past recordings of X, where X is radon or whatever, and find that X had shown anomalies before large earthquakes. But the problem is that X is typically what we call a “noisy signal” — data that includes a lot of fluctuations, often for varied and not entirely understood reasons — so finding correlations looking backward is about as meaningful as finding animals in the clouds.

We do know that some earthquakes, including the L’Aquila event, have foreshocks, but we can’t sound alarm bells every time little earthquakes happen because the overwhelming majority — 95 percent or so — will not indicate a coming major quake.

And the full article is available here.

Does the story sounds remotely similar to the one happened in China last year? Or indeed to the current economic crisis centered around the Wall Street melt-down? The choice is ours to make: find a way to neutralize these high-stake risks, or live on like we do now and let issuance of one kind or another to clear up the aftermath. The strange thing is that we have so far opted unanimously for the latter option, which seems to be cheap in comparison. But is it? Clearing up the mess in L'Aquila might be cheap (no derogative use here), but for the other 2 cases, the consequences are all too severe.

I seriously suspect that the whole world nowadays is risk-loving, for my problem is your problem, but my profit is too often my profit alone--the negative externality problem is everywhere. In theory people would look to the government for solution, but governments are more concerned about social unrest than about the possible loss of lives... What other options have we got?

"Predicting the Present with Google Trends"?

I was very interested at the research co-authored by Hal Varian and Hyunyoung Choi titled: "Predicting the Present with Google Trends" until I found that the source is Google blog. Now I'm not sure if I'm still reading an unbiased research report or a piece of Google propaganda. Perhaps neither.

It has been said that if you put a million monkeys in front of a million computers, you would eventually produce an accurate economic forecast.

Got to love this quote. Let's wait and see the result.

Just survived my GNOME 2.26 upgrade

Arch Linux is for the lazy. Yes. When everything goes as planned. If not, this beautiful OS will turn into a thing for the crazy... At least for a non-programmer like me.

To cut a long story short, I upgraded GNOME on Arch installation last night, and came back this morning only to discover that CPU usage went up 100% 99% of the time, and Xorg (again) is identified as the culprit. As suggested on the Arch forum, upgrading xorg-server to 1.60 will solve the problem, but I was not so lucky. After the upgrade, CPU usage still hung around 50%, and my laptop still turned into a burner very fast.

It is suggested that creating a new user will solve the problem, as some of the old configs are not working well with the new version of GNOME. After some messing around I accidentally discovered that disabling nautilus show desktoy in Gconf-editor make cpu usage spike, and turning it back on put my cpu usage back at bay. I suggest that people try this first before flushing their home directory. Good Luck! Happy Arching!

Edit:
Seems that a quick xorg fix on the 1.5 branch has fixed this problem. Kudos to the devs.