u Notes from the Underground: January 2007

The latest issue of the Economist is about globalisation and inequality. The leader article talks about the various options and difficulties in addressing the inequalities due to globalisation without killing the golden goose that is free trade. There's also an article on cotton farmers' suicides in India - the Economist thinks the ultimate problem is the absence of an active enough labour market for farmers to move from farming to other sectors. And then there's a survey - much of which unfortunately, is behind the subscription wall - about why CEOs' pays have been raising so drastically in the last decade, . But you can read the overview article atleast. Excellent stuff, on the whole.

Snow, at last!

Random hodge-podge post

Wednesday, January 17, 2007

Apparently, people are dying for me to resume blogging again. The thing is that I am inundated with quality material to read in my spare time.

First, brief reviews of the books I have been reading:
-> No Two Alike: This is Judith Harris' second book, after her widely successful and controversial The Nurture Assumption, where she argued that parents have zero long-term effect on the personality of their kids, once you control for the genes that they share. (Here's a Malcolm Gladwell article on the book that I haven't read. I recommend this Edge interview for a justification of her seemingly extreme views.) In this book, she picks up from where she left off in her previous book - most components of personality have a heritability of 0.45 - what explains the remaining 55% of the variance in personality? She frames this as some sort of mystery (which I found rather tedious) for which she eliminates the mainstream explanations one after the other. She builds her final hypothesis using the tools of Evolutionary Psychology, and the end result is too complicated for me to explain here. (Go read the review on gnxp, if you want the details.) I find her hypothesis reasonably plausible, but I am reading another book that is a critique of Evolutionary Psychology, so I might rethink my opinions soon.

-> Saving capitalism from the capitalists: Still reading. The point of the book is to first convince the reader of the net benefits of well-developed financial markets, and then try to understand the actual circumstances under which financial markets are likely to develop, which can be useful for framing public policy. The main case study here is the U.S. economy , which has seen an explosion in the kinds of things that are done on financial markets in the last 30 years. In this time, mutual funds, hedge funds and a whole ecosystem of financial derivatives have been born , and credit, broadly defined, has become vastly easier to obtain. The result has been an increase in the number of enterpreneurs and the rate of innovation (most visible, ofcourse in IT), more competitive markets, bigger markets for skills, resulting in more choice for the someone to choose who they want to work for. The approximate causal chain for how this happened is this - a surge in academic research about financial markets and how one can make more money out of them (making them more efficient), which led to removal of regulations that until then prevented people (and businesses) from making "risky investments" and other regulations that were unfavourable to institutional investors , which led to greater institutional ownership of stocks, which meant that resources are used more carefully, because institutional investors have enough incentive and clout to ensure that companies do not waste their money for frivolous reasons. Obviously I am skipping out on a whole lot of other reasons they go on and on about.

The second part of the book is where they conjecture about under what circumstances markets (in general) emerge, and the part I am currently reading. Specifically, the question is - when do governments enforce property rights and tax their citizens, instead of arbitrarily stealing from them? There is a killer chapter where they examine England from the time of Henry the VII to the time of Elizabeth I and trace how the arbitrary power of the monarchy declined and enforcement of property rights improved. It is, along with David Friedman's essay, the best stuff I have read on property rights. I promise to return to this at greater length.

Time for online stuff now:
-> My favourite new blog: Overcoming Bias
There was a wonderful post sometime back there, titled The cognitive architecture of bias
Research from psychology and neuroscience shows that your brain has organizational characteristics similar to this caricature of the Bush Administration. There are systems that are responsible for powerful, simple emotional reactions that serve to focus other systems to give fine-tuned attention to your brain's priorities and preferred outcomes. Most of the detailed systems don't care much about why they have the jobs they are given; they just do the work of carrying them out in a highly distributed, bureaucratic way. And you -- the conscious, chatty you -- are that dimwitted patsy, the misinformed press agent. The conscious you is not the President and you're certainly not Karl Rove. You are the Scott McClellan for your bureaucratic brain. You're constantly being duped into believing public-friendly stories about yourself, because your entire job is to tell stories handed to you by ruthless, clever, unconscious communications systems. You're not the whole head; you're just the talking head.

You can't even trust your own introspection, because your press agent simply doesn't have direct access to the Oval Office. The best you can do, even with your own behavior, is to try to piece together hypotheses about the hidden motives at work based on what the person actually does, situated in the context of things you know are generally true of why people might want to do those things.

I have not quoted the first parts of the analogy - go read the whole post.

To get a good understanding of what these people mean when they say biases and why understanding and overcoming biases is important, you really should read - "Cognitive biases potentially affecting judgment of global risks." (That's a Google cache - the site that hosted this pdf, the Singularity Institute, has mysteriously disappeared - which is a pity, because it had some great content.) Update: The site is up. You can access the pdf here.

-> Drifting to cognitive science, when was the last time you thought about the symbol grounding problem and symbolic vs connectionist cognitive architectures? Go read this and start thinking about it again. Other cognitive science links can be found at Mixing Memory