… the birth of Freyja Mallett, who would have been my sister’s first grandchild (my sister died barely two weeks ago). I’m looking forward to visiting Sammy tomorrow and meeting Freyja for the first time.
June 20, 2015
Prediction Markets
Published on 8 Feb 2015
We’ve discussed how prices are signals that convey information about goods — but can prices also convey information about events and even predict the future? For instance, can we predict Middle East politics based on the price of oil futures? Or predict the consequences of climate change based on the price of flood insurance in coastal cities? Of course, prices in these examples are imperfect predictors as there are many factors that influence the price.
We also take a look at some markets that have been designed to make predictions, like the Iowa Electronic Markets, and a specific example of how it was used to predict the outcome of the 2008 presidential election between John McCain and Barack Obama. What about the Hollywood Stock Exchange, where traders buy and sell shares and options in movies and music? What did the studio learn about its casting choices for the film, “50 Shades of Grey”? We discuss these examples and more in this video.
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If World War III had broken out in 1955
Mark Stout looks at what a global nuclear war might have looked like merely ten years after the first nuclear weapons were used to end the Second World War:
Those of us who came of age in the late Cold War imagined that if a nuclear war came it would be The End of Everything. By contrast, those who came of age after the Cold War never thought there’d be a nuclear war at all. With Putin’s military forces on the loose in Ukraine and all around Europe, the chance of war by miscalculation, even a nuclear war is rising. What would such a war look like? With the world situation vastly different from the late Cold War and with nuclear arsenals much smaller, it would probably not be a brief nuclear exchange but something more limited, albeit still horrific.
Perhaps such a war would be like one that the U.S. government imagined in 1955. In June of that year, the government conducted a massive relocation exercise called Operation Alert in cities across the country. A British Pathé newsreel tells the story in breathless shorthand. As part of the exercise, the State Department moved key personnel to an above-ground location at the foot of the Shenandoah Mountains in Front Royal, Virginia that now belongs to the Smithsonian Institution. There, according to records held at the National Archives, they practiced how they would continue to conduct the business of the department in case of World War III.
Among other documents, the Archives holds “Situation Report #1,” issued by the State Department’s intelligence arm on D+1 of the war game. It is an interesting artifact of the time. In 1955 nuclear arsenals on both sides of the Iron Curtain were much smaller than they became later and intercontinental ballistic missiles did not exist. Thus, the Soviet ability to strike the U.S. homeland was also much more limited and the “war” unfolded much more slowly than it would have even ten years later. As a result, the imaginary war of June 1955 combined attributes of World War II as well as the World War III that haunted us in the 1980s.
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ISIS and the endangered archaeological sites of the Middle East
Last month, Michael J. Totten described ISIS as “The Borg of the Middle East”:
ISIS has conquered Syria’s spectacular Roman Empire city of Palmyra, a UNESCO World Heritage site long known affectionately as the “bride of the desert,” and in all likelihood is gearing up to demolish it. We know this because they’ve done it before. ISIS used hammers, bulldozers, and explosives to destroy the ancient Iraqi cities of Hatra and Nimrud near Mosul, and they did it on video.
“These ruins that are behind me,” said an ISIS vandal on YouTube, “they are idols and statues that people in the past used to worship instead of Allah. The Prophet Muhammad took down idols with his bare hands when he went into Mecca. We were ordered by our prophet to take down idols and destroy them, and the companions of the prophet did this after this time, when they conquered countries.”
Muslims have ruled this part of the world for more than 1,000 years. All this time, they’ve been unbothered by the fact that Palmyra, Hatra, and Nimrud include pagan monuments, temples, statues, and inscriptions that predate Islam. Only now are these places doomed to annihilation. ISIS is more belligerently Philistine than any group that has inhabited the region for a millennium. The only modern analogue is the Taliban’s destruction of the ancient Buddhist statues at Bamiyan with anti-aircraft guns, artillery shells and dynamite in March 2001, mere months before their al-Qaida pals attacked New York City and Washington.
This attitude toward history harks back less to the seventh century than to the twentieth, when Pol Pot reset the calendar to Year Zero after the Khmer Rouge seized power in Cambodia, and when Mao Zedong’s Chinese Cultural Revolution murdered millions in the war against everything “old.”
Maamoun Adbulkarim, Syria’s antiquities chief, told Reuters that the army carted hundreds of ancient statues away to safety, but of course the giant Roman columns and the museum itself aren’t going anywhere except, perhaps, underneath the jaws of ISIS bulldozers. “This is the entire world’s battle,” he said.
That’s how bad things are in Syria now. The mass-murderers, war criminals, sectarian gangsters, and state sponsors of international terrorism in Bashar al-Assad’s Arab Socialist Baath Party regime can plausibly tout themselves as the defenders of civilization. In this particular case and in this particular place, they’re right.
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June 19, 2015
The EFF’s Privacy Badger
Earlier this month, Noah Swartz exhorted the Mozilla folks to put some energy and effort behind the Firefox Tracking Protection technology. While we wait for that to come to fruition, he also recommends the Electronic Frontiers Foundation’s Privacy Badger for Firefox users:
In her blog post, [Monica] Chew flags the need for Mozilla’s management to ensure that this essential protection reaches users, and to recognize that “current advertising practices that enable ‘free’ content are in direct conflict with security, privacy, stability, and performance concerns.” Since advertising industry groups flatly refused to respect the Do Not Track header as a privacy opt-out from data collection, the only line of defense we have against non-consensual online tracking is our browsers.
Safari and Internet Explorer have taken important steps to protect their users against web tracking: Safari blocks third party cookies out of the box, and IE offers a prominent tracker-blocking option. But mainstream users of open source browsers are out of luck. Until that changes, our Privacy Badger add-on for Firefox and Chrome remains perhaps the only one-click solution for users who want to protect their privacy as they browse the web. Since Privacy Badger requires no configuration, we encourage any user who is concerned about online tracking to add it to their browser.
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Cavalry, Spies and Cossacks I THE GREAT WAR Week 47
Published on 18 Jun 2015
The war seems like a romantic novel this week: In the East the Russians are saved by Cossack Cavalry while August von Mackensen’s artillery is plowing through Galicia. In the meantime, the British discover a German spy ring in London and the French gain a few miles in the west.
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Even the Fed pays attention to the rise of craft brewing
The Federal Reserve Bank of Richmond had an interesting article on the rise of craft beer by Jamie Feik and Joseph Mengedoth:
In many places across the country, it’s hard not to notice the shift in product offerings at local bars and restaurants and in the beer aisle of the grocery store. The colorful, ornate tap handles of craft brewers have joined the classic blue, red, and silver posts of the traditional powerhouses, and bartenders play the role of consultant purveying the selections. Shoppers who once stood in the beer aisle trying to decide how many cans of beer to buy now stand in front of coolers filled with different brands and styles of beer available in single bottles, packs of four, six, or 12, and even on tap in a growing number of stores. Many of them have been made at a brewery down the street; according to the Brewer’s Association (BA), the trade association that represents the craft beer industry, approximately 75 percent of the drinking-age population in the United States lives within 10 miles of a brewery.
In 2014, there were 615 new craft breweries that opened, pushing the number in the United States to 3,418, more than twice the number that existed just five years earlier. The BA defines a craft brewery as one that produces fewer than 6 million barrels a year, is less than 25 percent controlled by an alcoholic beverage industry member that is not itself a craft brewer, and produces a beverage “whose flavor derives from traditional or innovative brewing ingredients and their fermentation.” The ownership restriction excludes the craft-style subsidiaries — such as Shock Top, Goose Island, Leinenkugel, and Blue Moon — of large brewers like Anheuser-Busch InBev and MillerCoors (the two largest brewers in the United States).
Although craft beer remains a relatively small segment of the market, accounting for only 11 percent of the beer produced in the United States in 2014, the segment is growing rapidly. Craft beer’s share of production has more than doubled since 2010, when it was just 5 percent. In 2014, craft beer sales volume increased nearly 18 percent, according to the BA, versus just 0.5 percent for the overall beer industry. The retail dollar value of craft beer grew 22 percent in 2014, while the total U.S. beer market increased only 1.5 percent in value.
The growth of small breweries runs counter to the trend of consolidation in the beverage industry that persisted through much of the 20th century. Why are craft brewers thriving?
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Camouflage – the changing of the spots
At Strategy Page, a quick look at the US Army’s latest change in camouflage clothing and equipment:
The U.S. Army has begun issuing its new combat uniforms featuring a new and improved camouflage pattern. This is yet another effort to deal with troop complaints about the shortcomings of earlier camouflage patterns. Back in 2012 the army has decided to scrap its current digital pattern camouflage combat uniforms and replace them with the more effective (according to the troops), but more expensive, MultiCam. Actually, MultiCam itself was not used but a pattern selected for the new uniforms, but one based on MultiCam. This variant is called Scorpion W2 and the army gave it another, official, name; Operational Camouflage Pattern (OCP). So if you hear someone talking about the new uniform being Scorpion W2 or MultiCam they are not entirely wrong. But the final, official term is OCP.
Since 2001 both the army and marines adopted new, digital camouflage pattern field uniforms. But in Afghanistan U.S. soldiers noted that the marine digital uniforms (called MARPAT, for Marine Pattern) were superior to the army UCP (Universal Camouflage Pattern). Both UCP and MARPAT were introduced at the same time (2002). From the beginning there was growing dissatisfaction with UCP, and it became a major issue because all the infantry have access to the Internet, where the constant clamor for something better than UCP eventually forced the army to do something.
This is ironic because UCP itself was another variant of MARPAT but a poor one, at least according to soldiers in UCP who encountered marines wearing MARPAT. Even more ironic is that MARPAT is based on research originally done by the army. Thus some of the resistance to copying MARPAT is admitting the marines took the same research on digital camouflage and produced a superior pattern for combat uniforms.
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QotD: There is a lot of ruin in a nation … but not an infinite amount
Over the years, I’ve had many arguments about economic policy with my statist friends. I put them into three categories.
- The completely unreasonable statists blindly assert, notwithstanding all the evidence around the world, that bigger government and more intervention are actually good for growth.
- The somewhat unreasonable statists acknowledge that bigger government and more intervention might have some minor “efficiency” costs, but those costs are acceptable and affordable in the pursuit of more “equity.”
- The semi-reasonable statists admit that bigger government and more intervention hurt growth, but they argue that “libertarian types” must somehow be wrong because our predictions of economic chaos never materialize.
The folks in the last category have a point. For decades, advocates of limited government and free markets have warned about the economic cost of bad policy, yet where’s the collapse?
Why hasn’t Atlas shrugged, as libertarians have warned? Why have predictions of economic dystopia (examples here and here) been wrong?
I have two responses to these questions.
First, the economic damage caused by an expanding welfare state has been offset by improvements in other types of economic policy.
Second, maybe dour libertarians have been right, but got the timing wrong because it takes a long time and a lot of bad policy to destroy an economy.
And that’s today’s topic, because it certainly looks like both Greece and Venezuela have finally reached the end of the road. Let’s call it the Thatcher Inflection Point.
Dan Mitchell, “Atlas Is Shrugging in Greece and Venezuela: Two Case Studies of Statist Failure”, International Liberty, 2015-05-27.
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June 18, 2015
P.J. O’Rourke – Donald Trump may be the perfectly “representative” candidate
If you’re looking for the Tsar of Tacky, the Baron of Bad Taste, the Grand Duke of Garishness, then you really will love Donald Trump for President, because he is America personified:
Has the office of the presidency diminished in stature until it attracts only the midgets of public life?
Or have our politicians shrunk until none of them can pass the carnival test “You Must Be Taller than the Clown to Ride the White House Tilt-A-Whirl”?
During this endless grim, foggy, electoral season with its constant drizzle of wannabes, I intend to make little prose pictures of each candidatural dwarf until we are down to two.
I tremble for my country when I reflect that the two may be “Clinton” and “Bush.” Members of the electorate in their right minds will go into the ballot booth, see the names, think to themselves, “I did this already.” And leave with the ballot unmarked. Voter turn-out will be 6 percent. The shuttle from the local extended care facility will send a few memory-impaired Republicans to the polls. A DNC bus will collect some derelicts from skid row. And we will have the first President of the United States elected by a franchise limited to sufferers of Alzheimer’s disease and drunken bums.
Let us therefore begin at the bottom of the campaign barrel with the lees, the dross, and the dregs, by which I mean Donald Trump.
Or is Trump just using the garbage of his personality to chum for publicity again? If he isn’t really a candidate, I see no reason to take him at his word, any more than I’d take him at his word about anything else.
Besides, I, personally, support his candidacy. “Democracy,” said H. L. Mencken, “is the theory that the common people know what they want, and deserve to get it good and hard.”
The American government is of the people, by the people, for the people. And, these days, America is peopled by 320 million Donald Trumps. Donald Trump is representative of all that we hold dear: money. Or, rather, he is representative of greed for money. We common people may not be able to match Trump’s piggy bank, but we can match his piggishness.
Nutrition … what we thought we knew is wrong, again
At Real Clear Science, Ross Pomeroy explains how historical “expert knowledge” and government cheerleading pointed in exactly the opposite direction of today’s experts and government regulators:
For decades, the federal government has been advising Americans on what to eat. Those recommendations have been subject to the shifting sands of dietary science. And have those sands ever been shifting. At first, fat and cholesterol were vilified, while sugar was mostly let off the hook. Now, fat is fine (saturated fat is still evil, though), cholesterol is back, and sugar is the new bogeyman.
Why the sizable shift? The answer may be “bad science.”
Every five years, the Dietary Guidelines Advisory Committee, composed of nutrition and health experts from around the country, convenes to review the latest scientific and medical literature. From their learned dissection, they form the dietary guidelines.
But according to a new editorial published in Mayo Clinic Proceedings, much of the science they review is fundamentally flawed. Unlike experiments in the hard sciences of chemistry, physics, and biology, which rely on direct observational evidence, most diet studies are based on self-reported data. Study subjects are examined for height, weight, and health, then are questioned about what they eat. Their dietary choices are subsequently linked to health outcomes — cancer, mortality, heart disease, etc.
That’s a poor way of doing science, says Edward Archer, a research fellow with the Nutrition Obesity Research Center at the University of Alabama, and lead author of the report.
“The assumption that human memory can provide accurate or precise reproductions of past ingestive behavior is indisputably false,” he and his co-authors write.
Two of the largest studies on nutritional intake in the United States, the CDC’s NHANES and “What We Eat,” are based on asking subjects to recall precisely what and how much they usually eat.
But despite all of the steps that NHANES examiners take to aid recall, such as limiting the recall period to the previous 24 hours and even offering subjects measuring guides to help them report accurate data, the information received is wildly inaccurate. An analysis conducted by Archer in 2013 found that most of the 60,000+ NHANES subjects report eating a lower amount of calories than they would physiologically need to survive, let alone to put on all the weight that Americans have in the past few decades.
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John Kay’s Other People’s Money
John Kay posts the introduction to his new book Other People’s Money: Masters of the Universe or Servants of the People? to be published in September:
The assets of British banks are around £7 trillion – four times the aggregate of the yearly income of everyone in the country. The liabilities of these banks are a similar amount. The assets of British banks are five times the liabilities of the British government. But the assets of these banks mostly consist of claims on other banks. Their liabilities are mainly obligations to other financial institutions. Lending to firms and individuals engaged in the production of goods and services – which most people would imagine was the principal business of a bank – amounts to about 3 per cent of that total (see Chapter 6).
Modern banks – and most other financial institutions – trade in securities, and the growth of such trade is the main explanation of the growth of the finance sector. The finance sector establishes claims against assets – the operating assets and future profits of a company, or the physical property and prospective earnings of an individual – and almost any such claim can be turned into a tradable security. ‘High-frequency trading’ is undertaken by computers which are constantly offering to buy and sell securities. The interval for which these securities are held by their owner may – literally – be shorter than the blink of an eye. Spread Networks, a telecoms provider, has recently built a link through the Appalachian Mountains to reduce the time taken to transmit data between New York and Chicago by a little less than one millisecond.
World trade has grown rapidly, but trading in foreign exchange has grown much faster. The value of daily foreign exchange transactions is almost a hundred times the value of daily international trade in goods and services. The annual volume of payments processed in Britain is £75 trillion: about forty times Britain’s national income. Trade in securities has grown rapidly, but the explosion in the volume of financial activity is largely attributable to the development of markets in derivatives, so called because their value is derived from the value of other securities. If securities are claims on assets, derivative securities are claims on other securities, and their value depends on the price, and ultimately on the value, of these underlying securities. Once you have created derivative securities, you can create further layers of derivative securities whose values are dependent on the values of other derivative securities – and so on.The value of the assets underlying such derivative contracts is three times the value of all the physical assets in the world.
What is it all for? What is the purpose of this activity? And why is it so profitable? Common sense suggests that if a closed circle of people continuously exchange bits of paper with each other, the total value of these bits of paper will not change much, if at all. If some members of that closed circle make extraordinary profits, these profits can only be made at the expense of other members of the same circle. Common sense suggests that this activity leaves the value of the traded assets little changed, and cannot, taken as a whole, make money. What, exactly, is wrong with this commonsense perspective?
Not much, I will conclude. But to justify that conclusion, it will be necessary to examine the activities of the finance sector and the ways in which it does, or might, make our lives better and our businesses more efficient. Assessing the economic contribution of the industry is complex, because there are many difficulties in interpreting reported information about the output and profitability of financial sector activities. But I will show that its profitability is overstated, that the value of its output is poorly reported in economic statistics, and that much of what it does contributes little, if anything, to the betterment of lives and the efficiency of business. And yet many things that finance could do to advance these social and economic goals are not done well – or in some cases at all.
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Six Days in June
Published on 23 Feb 2014
Six Day War – Israeli victory – Documentary
The shooting lasted on six tense days in June 1967, but the Six Day War has never really ended. Every crisis that has ripped through this region in the ensuing decades stems from those six fateful days. On its 40th anniversary, the region remains trapped in conflict and is every bit as explosive as it was in 1967. “Six Day War” chronicles the events of forty years ago with a fresh historical perspective. Beginning with the buildup for the war, and the political and military maneuvering of Israeli Prime Minister Levi Eshkol and Egyptian President Jame Adel Nasser, the film takes us through the six days of fighting, the war with Jordan, the occupation of the West Bank and the annexation of Jerusalem. Featuring stunning archival footage and first-hand accounts of the war from both the Israeli and Arab soldiers who fought it, “Six Day War” explores how these events became the flash point in history that reshaped the regional political landscape, destroyed old systems and brought new forces to the fore.
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QotD: The “optimal” level of corruption
Quick question for you: What’s the optimal amount of corruption in politics?
If you said “zero,” then I’m sorry. You do not win the prize. (It was a year’s supply of Mr. Clean Magic Erasers, just so you know.) The optimal amount of corruption in any system is almost never zero, and that goes double for politics.
We shouldn’t try to get corruption to zero because fighting corruption is costly. Think, for example, of government contracting, which mindlessly awards contracts to the low bidder, as if quality and reliability were irrelevant considerations. This sloppiness inevitably adds time and costs. Or the various requirements we impose on civil service workers to make sure that not one of them enjoys so much as a stray sandwich on the taxpayer dime … and thereby ensure that normal business practices, like sitting down for an inexpensive group meal to discuss something, are almost comically difficult to arrange. All these procedural rules make government less effective and more costly. My father, who was the head of a trade association for contractors on heavy infrastructure projects, estimates that adding federal money to a project adds about five years to its completion date.
There’s even more reason not to strive for zero corruption: Politics is the art of getting widely disparate factions to come to some sort of policy agreement, and “clean graft” greases those wheels. Now, calm down — I’m not advocating that we move to a full-on kleptocracy like Russia. What I’m suggesting is in attempting to root every last vestige of pork and patronage out of the system, we have inadvertently produced the partisan gridlock that we now decry. Anyone who thinks that this is a crazy statement should read Jonathan Rauch’s terrific new e-book, Political Realism: How Hacks, Machines, Big Money, and Back-Room Deals Can Strengthen American Democracy. At a trim 55 pages, it is a fast read, and at $0, it is the bargain of the century.
Megan McArdle, “In Politics, It’s Good to Be a Little Bad”, Bloomberg View, 2015-05-07.
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