Greenspan Concedes to `Flaw’ in His Market Ideology — Bloomberg (2nd Term)

‘”If we are right 60 percent of the time in forecasting, we are doing exceptionally well; that means we are wrong 40 percent of the time,” Greenspan said. “Forecasting never gets to the point where it is 100 percent accurate.”‘

Yes, that follows. And when the consequences of bad outcomes are catastrophic and prediction of good outcomes can’t be certain, you have to have policies which are robust to failure. What Greenspan seems to have been suggesting, and what he still seems to be defending, is that when prediction cannot be 100%, it is acceptable or even inevitable to forge ahead as if the outcome was sure to be uniformly positive.

‘Today, the former Fed chairman asked: “What went wrong with global economic policies that had worked so effectively for nearly four decades?”

Greenspan reiterated his “shocked disbelief” that financial companies failed to execute sufficient “surveillance” on their trading counterparties to prevent surging losses.’

So how many catastrophic market failures do we have to have before we get past shocked disbelief when there’s another? Sure, each one is different in specific character than the last, but the insistence that this time we’ve got it all figured out is practically childish when repeated ad infinitum. Marketeers seem capable of convincing themselves that, because they are personally familiar with the mechanisms at play at the level of individuals, they can therefore know what behaviour will emerge at the level of the system. It’s not that neoliberal market theorists don’t believe in emergence, by contrast they are devoted to the elegant efficiencies that they see when markets aggregate information and action. They just don’t seem to want to believe that complex systems (including the ultra-complex systems Wall St. financiers are capable of cooking up) are capable of negative outcomes too.

It comes back to John Kenneth Galbraith’s position that market collapses don’t happen because of unpredictable shocks from somewhere outside of the lines that economists draw around “the economy”, they happen because of the most fundamental rules of capitalist economies. And they will again, particularly if we don’t exercise cautious oversight.

update: See also this interesting and convincing chunk of quotes from the same testimony:

Greenspan: Bad data hurt Wall Street computer models — NYT

‘Business decisions by financial services firms were based on “the best insights of mathematicians and finance experts, supported by major advances in computer and communications technology,” Greenspan told the committee. “The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades a period of euphoria.”

He added that if the risk models also had been built to include “historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today, in my judgment.”‘

We live and learn. Especially about using models to make serious decisions.

“Be modest about what military force can accomplish and what technology can accomplish,” Gates said.

He urged his audience to have an “appreciation of limits” of military power, arguing that although the U.S. has achieved huge advances in targeting and intelligence that have made attacks more precise, warfare is “inevitably tragic, inefficient and uncertain.”

The comments amounted to a critique of a military theory called “effects-based operations,” which argues in part that the government can carefully craft military interventions to have a predictable impact.

“Look askance at idealized, triumphalist or ethnocentric notions of future conflict that aspire to upend the immutable principles of war: where the enemy is killed, but our troops and innocent civilians are spared,” he said.

The above from Defense Secretary Robert Gates.

After getting irritated at humankind’s inability to accept that some things are genuinely uncertain, I open my podcasting device and hey presto:

Resilience: Adaptation and Transformation in Turbulent Times — A World Of Possibilities, May 6th

It opens with Buzz Holling (who NRE 580 alumnus will remember for panarchy theory) on adaptation, uncertainy, adeterminism, non-equilibrium, and such like in the general world. Then it moves onto Brian Walker talking about much of the same in ecosystem management, plus control fetishism. Then it moves on from there. Recorded at a Stockhlom conference on applying biology-based resilience theory to social systems. The idea of which is now creeping me out. Except that maybe, just maybe, this is a group of people that can be trusted to think rationally across disciplines. Maybe. Anyhow, it’s good listening.

Brian Walker’s talk reminded me of a lecture on conservation management from my undergrad, wherein Thom Nudds announced that if you manage to get an ecosystem to not cycle you’ve flatlined it, so congratulations on that.

I have nothing to say about the financial crisis, because I discover that as a heavy news reader who has scraped through classes on law, economics and complex systems, and even read some Galbraith on a bus once, I don’t have even first principles to judge what has just happened in the US financial system. The subject–the impenetrable interplay of financial “instruments”–is so inscrutable that any comprehensible narrative one tries to tease out of it by watching the shadows it casts on the wall seems to have more to do with what goes on in one’s own head than what goes on in the stock markets or boardrooms or policy lairs of the world. I just have no idea about where it came from, or what it means, or what should be done, or where it will go. All I’ve learned is that the people who presumably do have the expertise to deal with this, possibly don’t.

But everyone is telling one story or another about it all the same. And they usually boil down to public versus private, government versus market. Here’s a somehow rather heartening thought from commenter HH at Crooked Timber:

The left-right polarization over and private enterprise is overshadowed by the larger conflict between truth and lies. Both free market and planned economic systems can function with reasonable efficiency when operated with competence and integrity. Neither can function when overrun by thieves and liars.

America’s moon landing program and nuclear submarine projects were masterpieces of centrally planned, government sponsored endeavors. France’s nationally controlled nuclear power program achieved great success, while America’s privately managed nuclear power efforts stumbled. It is the animating vigor and functional integrity of a program that is the best predictor of success, not its ideological grounding.

To which I think I would add that we get a somewhat better chance at choosing thoughtful criteria for what ’success’ means for public enterprises than for private.

Here’s an old-hand financial technician interviewed by Reason magazine people:

(Just incidentally, I’m tickled to note that the Reason blog linked to this little old website a few days back).

I don’t understand how he gets from some of his premises to some of his conclusions. But his central premise feels about right: nobody knows how to value these derivatives, which seem to have absorbed so much of the nations wealth and now may or may not even particularly exist as real entities in the real universe. The old bosses didn’t know how to value them, and the new bosses won’t either, once they’ve sunk so much more of the country’s treasure into getting a chance to try.

But we won’t admit to ourselves that we’re dealing with an uncertainty, will we? Instead we’ll talk ourselves into believing one thing or the other, and forge ahead on that basis.

A separate but related question: how does a country that can’t afford equitable education or health care keep finding hundreds of billions of dollars lying around when there’s a country to be invaded or a bank to be bought out? Where does all this money come from? And why wasn’t it there before?

Steve Steinberg argues that human terrain mapping, and in particular emergent group simulation, may be a damaging technology we are developing without due thought to it’s consequences.

With regard to Paul Torrens‘ work:

“The next example was more disturbing. The scenario this time is a public demonstration, similar to the WTO protests that occurred in Seattle a few years ago. The model includes such details as tear gas which causes civilians to stampede, extremists who are trying to instigate violence, and mounted police. Torrens shows that changing a few small initial conditions controls whether the protest spins out of control or not, and suggests this simulation is a valuable tool for policing. Indeed. Demonstrating either startling ignorance or touching naïveté, Torrens argues that this scenario is really a public health issue, due to the possibility of injury. Well, yes – but, more importantly, it’s a democratic, human rights issue, and improving the state’s ability to squash demonstrations doesn’t strike me as a desirable development.”

NYT: Asking a Judge to Save the World, and Maybe a Whole Lot More

“But Walter L. Wagner and Luis Sancho contend that scientists at the European Center for Nuclear Research, or CERN, have played down the chances that the collider could produce, among other horrors, a tiny black hole, which, they say, could eat the Earth. Or it could spit out something called a “strangelet” that would convert our planet to a shrunken dense dead lump of something called “strange matter.” Their suit also says CERN has failed to provide an environmental impact statement as required under the National Environmental Policy Act.

Although it sounds bizarre, the case touches on a serious issue that has bothered scholars and scientists in recent years — namely how to estimate the risk of new groundbreaking experiments and who gets to decide whether or not to go ahead.”

I’m reminded of the (variously reported, often contradictory) stories of Fermi and others at the Trinity site laying bets on whether the atom bomb would ignite an atmospheric chain reaction consuming the state of New Mexico. I guess the stakes are higher this time.

Dean Bavington is a prof at the School of Natural Resources. He co-teaches one of my classes this semester. I’m not sure exactly how to describe what he studies, some kind of science studies/science philosophy thing with an emphasis on cod. Interesting guy with interesting ideas, sure enough.

His episode is available at the CBC. I haven’t heard it yet, but I started listening to earlier episodes in anticipation and they’re good, especially #1, with Simon Schaffer.

Seed Magazine has published the first- and second-place entries in their 2nd annual science writing contest.

Both entries are explicitly not about science as fact or even science as method, but rather insist that science is about uncertainty and rigorous discourse in the context of physical evidence. So I’m down with either one or both, and if challenged for a manifesto might provide a photocopy of either.

1st: Scientific Literacy and the Habit of Discourse, Thomas W. Martin.

2nd: Camelot is Only a Model: Scientific Literacy in the 21st Century, Steven Saus, which gets bonus points both for pumping up the primacy of models in thought and for referencing Python.

The media is bit by bit beginning to accept that the scientific consensus really is that serious human-induced global warming is a go. It has taken years for us to get to this point, and we’re not fully here yet anyway. One of my most grumpy moments this summer was on a day off in town, standing in a line up in a king sized grocery store, staring at a 3″ National Post headline claiming that global warming skeptics have been unfairly ignored.

Strangely enough, it hasn’t been very difficult to figure out what the scientific community has actually been thinking on this issue. Not for years. There is a single credible and comprehensive international body which coordinates global warming research and goes to great lengths to assemble and summarize findings on the topic. I can’t offhand think of any other major science-related issue that has been made as transparently easy to research.

But I guess that wasn’t enough for the press. They could hardly be expected to, you know, read the Intergovermental Panel on Climate Change’s reports. They had stories to write and deadlines to meet. Poor buggers. It must be a real existential challenge, keeping a sense of reality when you are charged to make it up without reference to it on a daily basis.

I’m not complaining here about the editorial position of journalists or journalism outfits. People are free to dismiss the findings of the scientific enterprise if they have doubts about its integrity or value. The thing is, the media haven’t been casting doubt on the value of the science, they’ve just been routinely misstating that science, for years. For the most part it’s been to play up the uncertainty angle. Maybe it made for more exciting reading. You would think certain impending social and environmental disaster would be more interesting than uncertain impending social and environmental disaster. Guess not.

So the poor folks at the IPCC who have been writing these reports every few years have, I imagine, been getting more and more desperate each year at the lack of impact of their crucially important publications. The last one came out in 2001. The next one is due out in 2007.

Looks like the scientificos are trying some tactics this time round. In particular, individual scientists are giving interviews talking up the report as being wildly important and containing amazing information. Which it is and does, no doubt, it’s just not like an esteemed international scientific body to pimp it’s pubs with teasers and interviews.

There are, for example, some great lines in this newspaper article from CanWest:

”I can tell you for sure that the statements in that report will be far stronger than what existed in 2001. It will be flabbergastingly stronger.”

Holy crap, that’s a lot stronger. Let’s hope the brave new edition of the report will be enough to do it. And let’s hope that if it is action-jam-packed with unequivocal statements of flabbergasting strength, that they will be interpreted for what they are: the highly unusual result of the highly unusual situation in which the level of doubt around a scientific question has drained almost completely away; and not for what they aren’t: evidence that the scientists have lost objectivity and are making personally motivated overclaims.

I guess we’ll see. If anybody pays attention.

I haven’t been trying very hard to find out what’s going on in Iraq. I don’t have TV and wouldn’t have the time to watch it anyway, the newspapers are heavy on unhelpful analysis and light on reliable facts, and unfortunateley Enemy Combatant Radio hasn’t set up a Basra satellite van.

(note to self: is ECR still casting these days?)

It’s also a questionable undertaking. Do I really want to try and find out the details of the war? What would it benefit me? Is half truth or even 3/4 truth better than no truth at all? Do any of the details have any particular bearing on my life?

If an average person did want to find out what was happening on the ground in Iraq, could it be done? This is, after all, the information age. The internet and an associated suite of communication technologies indisputably changed the process and quality of the antiwar movement in a way that has been alledged/predicted since the anti-globalization “battle of Seattle”. If you stay very quiet and listen to the academics muttering to themselves in their closets, you will learn that information distribution is now really, really pending a revolution courtesy of audio blogging, photo blogging, plain ‘old’ blogging, text messaging, wikis and CMSs (gracias Chiron), bluePods and their inevitable ilk, news.google.com-esque information filtering algorithms and other things I’m not quiet enough to be aware of.

But can it be done now? Can you or I, given a PC and an internet account, get a genuine sense of what’s happening? I certainly don’t know, mostly because I haven’t tried. A few possible resources for someone who was trying:

globalsecurity.org offers a truck stop breakfast sized serving of operational details. Or it did, I don’t know if they’ve been able to keep up with troop movements and whatnot since the combat proper began. Interestingly, they also offer a serious point-counterpoint on the strategical benefits of the invasion, and a decent library of anti-war graphics. If you’re really bored, you could just play “guess their personal opinion”.

Iraqwar.Ru offers daily executive summaries of the battles. I am told third-hand that the “This center was created recently by a group of journalists and military experts from Russia to provide accurate and up-to-date news and analysis of the war against Iraq. Daily english-language translations are being offered by Venik’s Aviation. A brief scan of the reports suggest that they are either markedly unfriendly to the US/British forces, or the battles are going much more poorly than we are being led to believe be CNN.

Several intercepted reports by the US field commanders stated that their troops are unable to advance due to their soldiers being demoralized by the enemy’s fierce resistance and high losses.

Kevin Site’s war blog used to provide a dramatic example of the power of direct publishing. As a CNN war correspondant on the ground in the middle east, Kevin was well set up to provide very interesting coverage. His own remarks that “This experience has really made me rethink my rather orthodox views of reaching folks via mass media…. Blogging is an incredible tool, with amazing potential. “ are indicative of at least the potential for real information flow from places from which information is a hotly contested material. Unfortunatley, CNN requested that he stop blogging. Much has been said of this, in chat-room discussion and publications.

Iraq Body Count goes the other way, offering contextless aggregate statistics filtered from the ceasless torrent of mass media, rather than independanly verified on-site details. The methodology is based on past work to document the citizen death toll in Afghanistan. It doesn’t count actual death tolls, only reported citizen fatalities. But it is information that otherwise isn’t being compiled. This is the site that powers the banner-counter on this blog.

news.google.com is a way to dip a net of one’s own into the river of mass-media reporting. Google uses a purely-automated algorithm, presumably related to their famous page-ranking system, to monitor many news sources in realtime and summarize the most “significant” stories in frequenly updated lists.

Then of course, there’s this.

Of these links, only the second two seem to be using technological changes to make more directly-sourced information available. There may well be other methods. There certainly will be in the future. The possible implications of these maybe-existing sources of fact-distribution would seem to include the ability for citizens to stay better informed of the distant actions of their governments, as well as providing a much larger heap of data for analysts and historians to process in after-the-fact attempts to dissect what really happened.