The problem with explanatory models

This critique of economic models might be helpful in explaining why I am so strongly skeptical about TE(p)NSBMGDaGF as well as the various dating methodologies. As I have mentioned on several occasions before, scientists in many fields simply don’t realize that the conceptual tools they utilize on a regular basis are significantly less reliable than they assume. The foundations upon which their “evidence” rests is much shakier than they understand, for the most part. This is understandable, since very few biologists, geologists, or astronomers have any actual training in history, logic, statistics, probability, higher mathematics, or even spreadsheet use, but that doesn’t excuse their stubborn and willful ignorance when errors, or even the likelihood of errors, based on these factors are pointed out to them.

Carter had initially used arbitrary parameters in his perfect model to generate perfect data, but now, in order to assess his model in a realistic way, he threw those parameters out and used standard calibration techniques to match his perfect model to his perfect data. It was supposed to be a formality–he assumed, reasonably, that the process would simply produce the same parameters that had been used to produce the data in the first place. But it didn’t. It turned out that there were many different sets of parameters that seemed to fit the historical data. And that made sense, he realized–given a mathematical expression with many terms and parameters in it, and thus many different ways to add up to the same single result, you’d expect there to be different ways to tweak the parameters so that they can produce similar sets of data over some limited time period.

The problem, of course, is that while these different versions of the model might all match the historical data, they would in general generate different predictions going forward–and sure enough, his calibrated model produced terrible predictions compared to the “reality” originally generated by the perfect model. Calibration–a standard procedure used by all modelers in all fields, including finance–had rendered a perfect model seriously flawed. Though taken aback, he continued his study, and found that having even tiny flaws in the model or the historical data made the situation far worse. “As far as I can tell, you’d have exactly the same situation with any model that has to be calibrated,” says Carter.

I first realized the nature of the problem when a perfectly straightforward question about the average speed of the evolutionary process was not so much mocked as greeted with complete confusion. And yet, if a process has taken place more than once over time, logic requires that there must be both various measurable speeds as well as an average speed. It doesn’t matter if the process measured is from mutated state to mutated state or from species to species, there must be an answer if the process is occurring. It wasn’t the lack of an answer that was the red flag, but rather, the inability to understand that there absolutely had to be an answer even if the answer was unknown at the present time.

The calibration problem that Carter is pointing out is tangentially related to the “backdating” problem I have hitherto observed. Economists and finance guys are keenly aware of the precarious nature of their models because they are forced to see them tested rigorously in real-time. For example, the administration economists who estimated a 1.6 multiplier effect in 2008 already know they were wrong. (They may not find it politically feasible to openly admit this, but they definitely know it, which is why they’re not proposing another stimulus package on the same basis.) And investment models blow up literally all the time, sometimes in a spectacular, system-threatening manner.

But that same sort of performance pressure simply doesn’t exist in many of the various sciences that concern past events. This is why we can be confident, if not entirely certain, that in the absence of successful predictive models, they have gotten it so substantially wrong that their core concepts will not survive the eventual corrections when they finally arrive.

To give another example, if evolution were a real science, biologists would be able to predict what the next species to evolve would be, as well as which population groups within a species were more evolved than the norm. They would be able to discern the connection between race and evolutionary development in humans. In fact, given the pressure that human activity is putting on various environments, we should be seeing more and more species evolving every more rapidly in comparison with the more sedate natural changes in various environments over the years. But that does not appear to be the case.

And appeals to time don’t wash either. Homo sapiens sapiens is supposed to have evolved to full modernity 50,000 years AGO, a process that is said to have taken 150,000 years. But since there are 59,811 species of vertebrates, even if we assume that the complex human evolution is the norm, we should be seeing a new vertebrate species evolve once every 2.5 years, (and a new mammal species every 27.3 years) even without the increased selection pressure of human habitat modification.

Now, there have been a number of new mammalian species, mostly lemurs and monkeys, discovered since 2000. So, perhaps there is some evidence for this process, if any of those species can be determined to be newly evolved rather than merely previously undiscovered. But the observable fact remains that evolutionary biologists, and many other scientists in other fields, simply don’t even think in a systematic manner that would allow them to perceive the logical holes in their fundamental models.


The candidates on Hollywood

As if you needed another reason not to vote for Mitt Romney or Barack Obama/Soetoro/Soebarkah:

Herman Cain: The Godfather

Michele Bachmann: Braveheart, “or maybe Saving Private Ryan”

Newt Gingrich: “Probably” Casablanca

Rick Santorum: Field of Dreams

Ron Paul: “I don’t watch many movies”

Gary Johnson: Dr. Zhivago

Mitt Romney: O Brother, Where Art Thou?

Rick Perry: Immortal Beloved

Barack Obama: Casablanca, The Godfather, Lawrence of Arabia, and One Flew Over the Cuckoo’s Nest

My translation of their answers:

Herman Cain: Heh heh, get it?

Michele Bachmann: I would have said Notting Hill, but that wouldn’t have looked manly enough.

Newt Gingrich: What movie would sound the most intellectual without sounding too avant-garde for hoi polloi?

Rick Santorum: I’m just a regular guy who drinks beer and watches sports. And dreams.

Ron Paul: I actually read books.

Gary Johnson: I actually like movies.

Mitt Romney: I am the dorkish prick you thought I was. And I have a dreadful sense of humor.

Rick Perry: I’m quite not as dumb as I look and sound.

Barack Obama: Since that all things to everyone worked so well in 2008. (Seriously, what sort of jerk has not one, but four quasi-film buff favorites.)

Personally, I think Ron Paul gave the ideal answer, although I would also consider voting for a candidate who cited either Monty Python and the Holy Grail or Grosse Pointe Blank.


Die another day

The EU puts off the inevitable. But not for long:

Very quickly, there has been much loose talk about EU fiscal union. What was agreed at 4AM this morning is nothing of the sort.

It is a “Stability Union”, as Angel Merkel stated in her Bundestag speech. Chalk and cheese.

“Deeper economic integration” is for one purpose only, to “police” budgets and punish sinners.

It is about “rigorous surveillance” (point 24 of the statement) and “discipline” (25), laws enforcing “balanced budgets” (26), and prior vetting of budgets by EU police before elected parliaments have voted (26).

This certainly makes sense if you want to run a half-baked currency union. As the statement says, EMU’s leaders have learned the lesson of a decade of self-delusion. “Today no government can afford to underestimate the possible impact of public debts or housing bubbles in another eurozone country on its own economy.”

But none of this is fiscal union. There is no joint bond issuance, no move to an EU treasury, no joint budgets with shared taxation and spending, no debt pooling, and no system of permanent fiscal transfers. Nor can there be without breaching a specific prohibition by Germany’s top court, a prohibition that could be overcome only by changing the Grundgesetz and holding a referendum….

EMU break-up is Verboten, fiscal union is Verboten, full mobilization of the ECB – either to lift the South off the reefs through reflation, or to back-stop the system as a lender-of-last resort – is Verboten. Germany will have none of it. Instead we have the summit conclusions – EUCO 116/11 of October 27 2011 – and a great deal of coercion.

Please tell me what exactly has been solved.

I get the feeling that the politicians are desperately trying to play musical chairs, hoping that the collapse occurs on the other side of the Atlantic first. History being a perverse little bitch, this naturally tends to suggest that it is going to start in Asia.


On the other hand, it didn’t stop Obama

Marc Rubio is not a viable candidate for president, in 2012 or afterwards, because he is ineligible for the office:

Rubio is ineligible for the office of President. That’s how it is. I don’t care if you like it or not, that’s how it is. It is because his parents held allegiance to a foreign nation at the time of his birth and therefore so did he.

There’s no way to cure this other than through Constitutional Amendment.

If you don’t like this fix it the right way. All this BS, strum and furor doesn’t change facts – Rubio was born to two foreign nationals; neither was a citizen at the time he was born. And he was not the child of two people “fleeing Castro” either – his parents came to the United States before Castro took power in Cuba.

In addition to being ineligible he’s a damned liar.

It’s interesting to see how many Republicans who like to wave the Constitution around suddenly became silent about what the Constitution says concerning “natural-born citizens” once questions about Obama/Soetoro/Soebarkah arose. If Rubio puts himself forward as a presidential candidate in spite of knowing of his Constitutional ineligibility, he won’t merit a single vote from anyone loyal to the U.S. Constitution. And yet, the conservative media keeps talking him up… what logical conclusion can we draw from this?


Juxstaposition

It makes no sense, but I somehow feel as if I wrote the story just in time. I was reading the news when a pair of familiar names leaped out at me.

FINO A IERI Monterosso era una delle perle della Liguria. Case colorate incastonate tra le montagne e il mare nel territorio delle famose Cinque terre. Meta preferita di tanti vacanzieri che oggi guardano increduli le immagini di un paese semidistrutto, tagliato in due un fiume di fango e detriti.

Until yesterday Monterosso was one of the pearls of Liguria. Colored houses set between the mountains and the sea in the territory of the famous Cinque Terre. A preferred destination by many vacationers who today looked on with incredulity at the images of a half-destroyed area, cut in two by a river of mud and detritus.

Villages all but wiped out as storms batter Italy’s ‘Cinque Terre’. The walking trails and picturesque fishing villages of the Cinque Terre attract hundreds of thousands of international tourists, but two of them – Vernazza and Monterosso – were severely affected as rivers of mud poured down from the hills behind them. The mayor of Monterosso said the fishing village had all but been wiped out.

“Monterosso no longer exists,” Angelo Betta told an Italian news agency.

From “The Deported”, published in the October 2011 issue of Stupefying Stories:

“It was the fourth day of our summer holiday in Vernazza, a little fishing village in the Cinque Terre. We had spent the morning on a charming hike through the hills, lunched in Monterosso al Mare, then enjoyed a languid afternoon in the sun on the beach there. After hiking back and taking a brief but restorative nap, the six of us had reconvened for the evening on the terrace overlooking the sea. We were well into our second bottle of prosecco as Francois attempted to convince Bertrand’s wife, Michèle, that one could not genuinely claim to be an atheist and yet still believe in ghosts.

What a tragic pity. I’d merely intended a homage to Maupassant, but I fear it turned out to be far more of a ghost story than I’d ever intended. Prega per noi peccatori.


Filling the spiritual void

My, I wonder how and why that could be?

Halloween taps America’s spiritual void

The holiday just keeps getting more popular. Seven in 10 expect to celebrate it in some way this Oct. 31, up from about six in 10 last year, according to a National Retail Federation report. This is the most in the nine years the NRF has been tracking…. Christmas and Easter may be secularized these days, relative to their past, but they remain Christian holidays. People value Halloween, like Valentine’s Day, because they can tell themselves that it’s not merely secularized but actually secular, which is to say, not Christian, Jewish, Hindu or Muslim.

But as much as we’d like it to be, Halloween isn’t secular. It is Pagan. There’s nothing else to call a set of ceremonies in which people utter magical phrases, flirt with the night and evoke the dead.

I always enjoyed Halloween as a kid, but we don’t celebrate it since it is virtually unknown in continental Europe. I don’t see anything wrong with kiddy trick-or-treating and I don’t think that most people are actually celebrating it per se. That being said, as the pagan world continues to encroach upon Christendom, don’t be surprised as the celebrations grow darker and more serious.

Pagan worship primarily concerns propitiation. In other words, they are religions based on pure fear rather than repentance, contract, or submission. The West is at most mildly nervous now, the real pagan revival is unlikely to seriously begin until it reaches a state of genuine fear and desperation. And Halloween celebrations will likely prove to be a good means of tracking its development.


Why Washington will collapse

It’s mathematically guaranteed, given the total failure of the supposedly responsible party, the Republicans, to even openly discuss the fiscal realities, much less address them. The Market Ticker walks through the numbers:

NOW we need to cut the federal budget not with a knife or a scalpel, but a chainsaw. Bachmann has said “43%.” There were gasps when she uttered those words. Sorry, that’s not enough. (Take your heart medication before continuing folks.)

Here’s the math.

Last year (Calendar 2010) we ran a 12% of GDP deficit, $1.7 trillion. This year we are tracking to run about $1.4, but we have three months left. If history repeats as to size it’ll come in around $1.4 trillion, which is approximately 9% of GDP. This is within the rough range of 9-12% of the last three years. The last year of Bush’s Presidency we ran somewhat over 9% of GDP. Obama has run 11 and 12%, respectively, and this will be ~9-10%, so there’s no change in that regard.

But withdrawing the deficit spending is not enough because the withdrawal of that money, when it runs through the economy, then produces a (gross) reduction in tax receipts. Figure 1/3rd of that deficit spending ultimately returns to the government in the form of taxes in some form or fashion by the time all of the “turns” those funds made in the economy (e.g. from company making the presidential limo to the folks making the alternator to the folks making the copper wire to the mine pulling the copper out of the ground), and subtract that off as well.

So now we need to reduce spending not by $1,700 billion but that plus about another $500 billion for the tax impact, for a total of $2.2 trillion out of $3.7 trillion spent. About $500 billion of our spending at present is interest so this means we have: $3.7 – $2.2 – $0.5 = $1 trillion in total actual federal spending available to us out of an original $3.7 trillion.

One can – and I will – take exception to the estimate of $800 billion for the net revenue consequences from what economists describe as “the multiplier effect”, but the more important point is that changing government spending patterns will have an effect on the economy. It is as foolish to apply a static government spending cut model as it is to apply a static tax revenue model. Now, we can come up with a total range of estimates by utilizing the very high multiplier of optimistic Obama administration economists, who assumed it to be 1.6, then comparing that to the actual Four Wars multiplier of Robert Barro, which worked out to 0.8.

At present, federal tax revenues are $2.3 trillion. This means tax revenues/GDP are 2.3/15.0, or 15.3 percent. For the maximum range, we’ll ignore the BEA’s estimate of G and go with the actual amount of federal spending, which is $3.7 trillion. The range of multiplier effects means that the net contribution of that government spending to the economy is somewhere between $5.92 trillion (Obama) and $2.86 trillion (Barrow). Applying the Tax/GDP ratio indicates a TOTAL tax benefit of between $906 billion and $453 billion from ALL $3.7 trillion in government spending, which means that Karl’s estimate of $800 billion in lost taxes from the aforementioned 1.7 billion reduction is almost surely too high, even before we notice that the 0.8 multiplier means that reducing government spending would tend to increase GDP and therefore tax revenues by a factor of 1.25.

So, in order to obtain the most conservative estimate of the tax effect, we have to multiply (1.25 x 1.7 trillion) x .153. This would indicate a benefit of $325 billion to GDP from the reduction in spending rather than an additional loss. On the other side, (1.6 x 1.7 trillion) x .153 means a maximum tax revenue loss of $416 billion.

I’m not sure where Karl got his interest figure, (it looks like he used the 2015 estimate), but the reported interest on the national debt is $240 billion for 2011. So, in order to prevent the debt situation from expanding, and depending upon which economist you trust concerning the multiplier effect, federal spending must be reduced to somewhere between $2,085 trillion on the high end and $1.344 trillion on the low end. And here are the current big-ticket items:

$761 billion – Social Security
$468 billion – Medicare
$269 billion – Medicaid
$598 billion – Unemployment/Welfare
$679 billion – Department of Defense + Foreign Wars

So, this is why the Tea Party and the Republican Party cannot possibly salvage the situation They’re not proposing the end of ANY of these major programs even though the nation can only afford to keep two of them, three in the unlikely event that both Defense and Social Security are entirely junked. Since that’s not going to happen, given the way in which the incompetence of politicians presently inhabiting Washington aren’t willing to even consider such drastic action, the financial collapse of the US federal government is assured.

Because I harbor Austrian School inclinations and the propensity for government malinvestment is obvious, I think the higher figure based on Barro’s multiplier is the more relevant one. It’s hardly a surprise that the Keynesian model would make government spending look more desirable and cuts to that spending more horrific, and obviously the administration economists were incorrect about that 1.6x multiplier given the failure of their $787 billion stimulus plan. But I found it to be interesting to discover that the $2.085 trillion figure works out to a 43.6% required reduction in federal spending, which tends to suggest that Michele Bachmann’s economists are utilizing an equation similar to the one that I have worked out here. Perhaps old Crazy Eyes really does read Mises at the beach.


The conundrum of the anti-Christian

Brian Philips examines the dichotomy of the Tebow hater’s cheering for the failure of the Denver quarterback:

I find myself half-consciously rooting for Tebow to fail, even though I have nothing against him, have lots of religious friends, am not especially tribal by nature, and wouldn’t want to be responsible for the nacho-related deaths of any prominent evangelical leaders, even if I detest their politics. Doesn’t matter. The part of me that wants to eat pork and not stone people just switches on and cheers for the blitzing linebacker.

There’s a problem with this, though, a problem that I’m convinced lies at the heart of the minor cultural puzzle that Tebow represents. The problem is that if you’re rooting against Tebow because he’s religious, you’re giving way to the trial-by-combat impulse. And the whole idea of the trial by combat is that there’s a higher power adjudicating the combat. It means something for the blue knight to kill the green knight only if God is moving the swords. So what I, many secular football fans, and Imaginary Daniel Dennett are really rooting for is for God to make Tim Tebow fail as a means of discrediting Himself, God, in accordance with our wishes, and against His, God’s, own interests.

This — arguably — doesn’t make a whole lot of sense.

It all comes down to atheist logic. Which, as FA von Hayek could have pointed out for us, is simply not logic at all.


Blind eyes won’t see

If you’ve placed a negative value on unborn little girls, then you shouldn’t be terribly surprised when those who manage survive the pre-natal gauntlet aren’t valued any more highly:

So was it capitalism that deadened those drivers and passers-by to the death of one little girl, or was it a culture that traditionally devalues girls and that has, for thirty years, had enforced a government policy that, inevitably, means that girls are killed in utero? If girls are so valueless in utero, why should their value increase ex utero? The message that Chinese citizens have absorbed is simple: Don’t get involved as a general matter because the government is likely to come after you — and considering the risk, you should especially avoid getting involved with a manifestly disposable citizen, i.e., one little girl in bright pink trousers.

It is sheer lunacy to attempt to blame capitalism for the more than a dozen people who walked by, indifferent to the suffering of the dying little girl. These are people who have been taught for the entirety of their existence that a) there are too many people and b) killing little girls is a social good. Now they’re supposed to suddenly switch gears because there is one less undesirable little girl to overpopulate China?

Quite clearly, that’s not going to happen. There is nothing wrong with those Chinese individuals that isn’t the result of social engineering. This is the New Chinese Man that Mao wanted to create. They aren’t monsters so much as they are the product of a monstrous society, raised from birth to be blind to the suffering and death of little girls.


The incompetence of the elite

Lest you think the people of the West are being governed by their betters. It’s gotten to the point that we need a new word to collectively describe the increasingly inept oligocracy. I suggest “an incompetence of politicians”:

Her rapid rise to become the youngest minister in government has taken some colleagues by surprise. Now extraordinary claims are circulating at Westminster that Chloe Smith was appointed because David Cameron was confused about her credentials. Miss Smith, who became the youngest MP in Parliament when she won the Norwich North by-election in 2009, was promoted last weekend to become Economic Secretary to the Treasury in the mini reshuffle that followed Liam Fox’s resignation….

After Mr Cameron told Miss Smith he would like to offer her the post, she is said to have replied: ‘Well, thank you Prime Minister. . .It would be an honour, but the Treasury…it’s a little daunting…’

The Prime Minister allegedly responded: ‘Not daunting surely for someone who was a chartered accountant?’

The confusion may have arisen because the MP, an English literature graduate, worked for accountancy firm Deloitte before entering politics, but as a consultant not an accountant. The confusion may have arisen because the MP, an English literature graduate, worked for accountancy firm Deloitte before entering politics, but as a consultant not an accountant The Norwich North MP is then said to have admitted: ‘Er, well, actually Prime Minister, I wasn’t an accountant. I was a management consultant in an accountancy firm.’

Mr Cameron apparently then said ‘never mind’ and welcomed Miss Smith aboard.

So chartered accountants are supermen? What? Anyhow, it can be little surprise that the economies of the West are sinking into a slough of debt and contraction when they are overseen by such a group of astonishingly corrupt and incompetent individuals. Now, I’m not a credentialist by any means, but even I would say it is going a just a bit too far in the other direction when, in a time of very dangerous economic and financial crisis, the Economic Secretary to the Treasury is a young woman with a degree in English Literature.

That being said, she’d be hard pressed to do worse than Gordon Brown did as Chancellor of the Exchequer. Or, for that matter, as Paul Krugman would if given half the chance.