Economist's View

"Can Science Fight Media Disinformation?"

Is better science education the answer to our "media disinformation" problem?:

War Is Peace: Can Science Fight Media Disinformation?, by Lawrence M. Krauss, Commentary, Scientific American: ...The rise of a ubiquitous Internet, along with 24-hour news channels has, in some sense, had the opposite effect from what many might have hoped such free and open access to information would have had. It has instead provided free and open access, without the traditional media filters, to a barrage of disinformation. Nonsense claims had more difficulty gaining traction in the days when print journalism held sway and newspaper editors had the final word on what made its way into homes and when television news consisted of a half-hour summary of what a trained producer thought were the most essential stories of the day.

Now fabrications about “death panels” and oxymoronic claims that ”government needs to keep its hands off of Medicare” flow freely on the Internet, driving thousands of zombielike protesters to Washington to argue that access to health care will undermine their fundamental freedom to have their insurance canceled if they get sick. And 24-hour news channels, desperate to provide ”breaking” coverage at all hours, end up serving as public relations vehicles for any celebrity who happens to make an outrageous claim or, worse, decide that the competition for ratings requires them to be anything but ”fair and balanced” in their reporting.

“Fair and balanced,” however, doesn’t mean putting all viewpoints, regardless of their underlying logic or validity, on an equal footing. Discerning the merits of competing claims is where the empirical basis of science should play a role. I cannot stress often enough that what science is all about is not proving things to be true but proving them to be false. What fails the test of empirical reality, as determined by observation and experiment, gets thrown out like yesterday’s newspaper. One doesn’t need to debate about whether the earth is flat or 6,000 years old. These claims can safely be discarded, and have been, by the scientific method.

What makes people so susceptible to nonsense in public discourse? Is it because we do such a miserable job in schools teaching what science is all about—that it is not a collection of facts or stories but a process for weeding out nonsense to get closer to the underlying beautiful reality of nature? Perhaps not. But I worry for the future of our democracy if a combination of a free press and democratically elected leaders cannot together somehow more effectively defend empirical reality against the onslaught of ideology and fanaticism. [full version]

There was plenty of nonsense long before the internet and 24 hour news, but it's probably true that these developments helped to amplify and speed the spread of nonsensical claims, though I'd assert that 24 hour news (plus radio to some extent) is more responsible than the internet.

As for solving the nonsense problem through better science education, I do agree that better critical thinking skills would be helpful, that's true by definition I suppose, but that's not enough. Nobody can be an expert on health care, global warming, and all the other important issues they face. The underlying scientific, economic, political, sociological, etc. issues are too difficult (in some cases even for the experts). To overcome that, we have to rely upon people we can trust, often experts who can help to guide us to the correct decisions, but sometimes it's a trusted intermediary. Critical thinking skills can help us determine who to listen to, but it still comes down to trusting that you are getting the best possible analysis of the problem

For good or bad -- I'm still making up my mind about that -- I think that a trust that was once there is gone, at least to some degree. People believed Walter Cronkite, they trusted scientists, Dr. Spock had all the answers about how to raise your kids, but trust in the media, scientists, politicians, doctors, and so on has eroded (yes, economists too). I'd cite 24 hours news and its ilk as part of the reason, but I'm not sure that's been the fundamental driving force behind the change.

Maybe people are right to be more skeptical of the information they receive -- maybe they trusted too much in the past (and there could be an overreaction during the adjustment, causing trust to fall even further). If so, then the increase in uncertainty brought about by declining trust in experts and other sources of information would be consistent with the appearance of more nonsense in the public discourse attempting to fill the void.

Solving the Free Rider Problem using fMRI Measurements

If we hook up a randomly chosen set of people to magnetic neural imaging machines to see if they are truthfully revealing their valuation of public goods, we can improve our ability to provide these services, but the intrusiveness of the solution seems problematic, at least to me. Does this bother you, or does it seem like a good idea to move in this direction? [Update: Cheap Talk has good comments on the research]:

Caltech scientists develop novel use of neurotechnology to solve classic social problem, EurekAlert: Economists and neuroscientists from the California Institute of Technology (Caltech) have shown that they can use information obtained through functional magnetic resonance imaging (fMRI) measurements of whole-brain activity to create feasible, efficient, and fair solutions to one of the stickiest dilemmas in economics, the public goods free-rider problem—long thought to be unsolvable.

This is one of the first-ever applications of neurotechnology to real-life economic problems, the researchers note. "We have shown that by applying tools from neuroscience to the public-goods problem, we can get solutions that are significantly better than those that can be obtained without brain data," says Antonio Rangel, associate professor of economics at Caltech and the paper's principal investigator.

The paper describing their work was published today in the online edition of the journal Science, called Science Express.

Examples of public goods range from healthcare, education, and national defense to the weight room or heated pool that your condominium board decides to purchase. But how does the government or your condo board decide which public goods to spend its limited resources on? And how do these powers decide the best way to share the costs?

"Revisiting Popper"

Is it true that "History and society are not law-governed systems for which we might eventually hope to find exact and comprehensive theories"?:

Revisiting Popper, by Daniel Little: Karl Popper's most commonly cited contribution to philosophy and the philosophy of science is his theory of falsifiability (The Logic of Scientific Discovery, Conjectures and Refutations: The Growth of Scientific Knowledge). (Stephen Thornton has a very nice essay on Popper's philosophy in the Stanford Encyclopedia of Philosophy.) In its essence, this theory is an alternative to "confirmation theory." Contrary to positivist philosophy of science, Popper doesn't think that scientific theories can be confirmed by more and more positive empirical evidence. Instead, he argues that the logic of scientific research is a critical method in which scientists do their best to "falsify" their hypotheses and theories. And we are rationally justified in accepting theories that have been severely tested through an effort to show they are false -- rather than accepting theories for which we have accumulated a body of corroborative evidence. Basically, he argues that scientists are in the business of asking this question: what is the most unlikely consequence of this hypothesis? How can I find evidence in nature that would demonstrate that the hypothesis is false? Popper criticizes theorists like Marx and Freud who attempt to accumulate evidence that corroborates their theories (historical materialism, ego transference) and praises theorists like Einstein who honestly confront the unlikely consequences their theories appear to have (perihelion of Mars).

At bottom, I think many philosophers of science have drawn their own conclusions about both falsifiability and confirmation theory: there is no recipe for measuring the empirical credibility of a given scientific theory, and there is no codifiable "inductive logic" that might replace the forms of empirical reasoning that we find throughout the history of science. Instead, we need to look in greater detail at the epistemic practices of real research communities in order to see the nuanced forms of empirical reasoning that are brought forward for the evaluation of scientific theories. Popper's student, Imre Lakatos, makes one effort at this (Methodology of Scientific Research Programmes; Criticism and the Growth of Knowledge); so does William Newton-Smith (The Rationality of Science), and much of the philosophy of science that has proceeded under the rubrics of philosophy of physics, biology, or economics is equally attentive to the specific epistemic practices of real working scientific traditions. So "falsifiability" doesn't seem to have a lot to add to a theory of scientific rationality at this point in the philosophy of science. In particular, Popper's grand critique of Marx's social science on the grounds that it is "unfalsifiable" just seems to miss the point; surely Marx, Durkheim, Weber, Simmel, or Tocqueville have important social science insights that can't be refuted by deriding them as "unfalsifiable". And Popper's impatience with Marxism makes one doubt his objectivity as a sympathetic reader of Marx's work.

"Why Sleep?"

Is sleep our power saving mode?:

Why sleep?, EurekAlert: ...Humans ... spend roughly one-third of their lives asleep, but sleep researchers still don't know why. ... Theories range from brain "maintenance" — including memory consolidation and pruning — to reversing damage from oxidative stress suffered while awake, to promoting longevity. ...

Now, a new analysis by Jerome Siegel, UCLA professor of psychiatry ... has concluded that sleep's primary function is to increase animals' efficiency and minimize their risk by regulating the duration and timing of their behavior. The research appears in the current online edition of the journal Nature Reviews Neuroscience.

"Sleep has normally been viewed as something negative for survival because sleeping animals may be vulnerable to predation and they can't perform the behaviors that ensure survival," Siegel said. These behaviors include eating, procreating, caring for family members, monitoring the environment for danger and scouting for prey.

"So it's been thought that sleep must serve some as-yet unidentified physiological or neural function that can't be accomplished when animals are awake," he said.

Siegel's lab conducted a new survey of the sleep times of a broad range of animals, examining everything from the platypus and the walrus to the echidna, a small, burrowing, egg-laying mammal covered in spines. The researchers concluded that sleep itself is highly adaptive, much like the inactive states seen in a wide range of species, starting with plants and simple microorganisms; these species have dormant states — as opposed to sleep — even though in many cases they do not have nervous systems. That challenges the idea that sleep is for the brain, said Siegel.

Predicting Turning Points is Hard

This sounds familiar:

Confusing Patterns With Coincidences, by Susan Hough, Commentary, NY Times: In the aftermath of the earthquake at L’Aquila, Italy, on Monday that killed nearly 300 people, splashy headlines suggested that these victims didn’t have to die.

An Italian researcher, Giampaolo Giuliani, began to sound alarm bells a month earlier, warning that an earthquake would strike near L’Aquila on March 29. ... Mr. Giuliani was denounced for inciting panic..., and he was forced to take his warning off the Web after March 29 came and went without significant activity.

Should Italian officials have listened? Should the public have heeded the warnings? With 20-20 hindsight the answer certainly appears to be yes. The real answer is no.

Scientists have been chasing earthquake prediction — the holy grail of earthquake science — for decades. ... Yet we have little to no real progress to show for our efforts. ... We’re pretty good at forecasting the long-term rates of earthquakes in different areas. But prediction per se, which involves specifying usefully narrow windows in time, location and magnitude, has eluded us.

"Neural Mechanisms of Social Influence in Consumer Decisions"

Today's seminar:

Neural Mechanisms of Social Influence in Consumer Decisions, by Gregory Berns, C. Monica Capra, Sara Moore, and Charles Noussai: Abstract It is well-known that social influences affect consumption decisions.  Although a number of different mechanisms have been hypothesized, a consumer's tendency to purchase a product is influenced by the choices made by his associative reference group.  Here, we use functional magnetic resonance imaging (fMRI) to elucidate the neural mechanisms associated with social influence on a common consumer good: music.  We restricted our study population to adolescents between the ages of 12-17 because music is a common purchase in this age group, and it is widely believed that adolescent behavior is particularly influenced by perceptions of popularity in their reference group.  Using 15-second clips of songs downloaded from MySpace, we obtained behavioral measures of preferences and neurobiological responses to the songs. The data were gathered with, and without, the popularity of the song revealed. The popularity had a significant effect on the participants' ratings of how much they liked the songs.  The fMRI results showed a strong correlation between the participants' rating and activity in the caudate nucleus, a region previously implicated in reward-driven actions.  The tendency to change one's evaluation of a song was correlated with activation only in the anterior insula, a region associated with physiological arousal, particularly to negative affective states.  Our results suggest that a principal mechanism whereby popularity ratings affect consumer choice is through the anxiety generated by the mismatch between one's own preferences and others'.  This mismatch anxiety motivates people to switch their choices in the direction of the consensus, suggesting that this is a major force behind conformity observed in music tastes in teenagers.

This may also explain why economists generally adopt the consensus forecast, and how this tendency to conform to respected opinion within the field due to "mismatch anxiety" can lead to herd-like behavior that causes us to miss things like a housing bubble. Why take the time to think hard about the problem yourself if, in the end, you are going to adopt the view of the most respected and powerful voices in the field anyway?

"Selfish Punishment"

How does altruism survive?:

Thriving on Selfishness, by Marina Krakovsky, Scientific American: It’s the altruism paradox: If everyone in a group helps fellow members, everyone is better off—yet as more work selflessly for the common good, cheating becomes tempting, because individuals can enjoy more personal gain if they do not chip in. But as freeloaders exploit the do-gooders, everybody’s payoff from altruism shrinks.

All kinds of social creatures, from humans down to insects and germs, must cope with this problem; if they do not, cheaters take over and leech the group to death. So how does altruism flourish? Two answers have predominated...: kin selection, which explains altruism toward genetic relatives—and reciprocity— the tendency to help those who have helped us. Adding to these solutions, evolutionary biologist Omar Tonsi Eldakar came up with a clever new one: cheaters help to sustain altruism by punishing other cheaters, a strategy called selfish punishment.

“All the theories addressed how altruists keep the selfish guys out,” explains Eldakar... Because selfishness undermines altruism, altruists certainly have an incentive to punish cheaters—a widespread behavior pattern known as altruistic punishment. But cheaters, Eldakar realized, also have reason to punish cheaters...: a group with too many cheaters does not have enough altruists to exploit. ... That is why, he points out, some of the harshest critics of sports doping, for example, turn out to be guilty of steroid use themselves: cheating gives athletes an edge only if their competitors aren’t doing it, too. ...

In a colony of tree wasps..., a special caste of wasps sting other worker wasps that try to lay eggs, even as the vigilante wasps get away with laying eggs themselves. In a strange but mutually beneficial bargain, punishing other cheaters earns punishers the right to cheat. ...

[T]he idea of a division of labor between cooperators and policing defectors appeals to Pete Richerson, who studies the evolution of cooperation at the University of California, Davis. “It’s nothing as complicated as a salary, but allowing the punishers to defect in effect does compensate them for their services in punishing other defectors...,” he says. After all, policing often takes effort and personal risk, and not all altruists are willing to bear those costs.

Corrupt policing may evoke images of the mafia, and indeed Eldakar notes that when the mob monopolizes crime in a neighborhood, the community is essentially paying for protection from rival gangs—a deal that, done right, lowers crime and increases prosperity. But mob dynamics are not always so benign... “What starts out as a bunch of goons with guns willing to punish people [for breaching contracts] becomes a protection racket,” Richerson says. The next question, therefore, is, What keeps the selfish punishers themselves from overexploiting the group?

Wilson readily acknowledges this limitation of the selfish punishment model..., “there’s nothing telling us that that mix is an optimal mix,” he explains. The answer to that problem, he says, is competition not between individuals in a group but between groups. That is because whereas selfishness beats altruism within groups, altruistic groups are more likely to survive...

"Can Economists Be Trusted?" "Are There Ever Any Wrong Answers in Economics?"

Uwe Reinhardt:

Can Economists Be Trusted?, by Uwe E. Reinhardt, Economix: ...[W]ittingly or unwittingly, economists infuse their analysis with their own (or a political client’s) preferred ideology.

Consider, for example, President Bill Clinton’s 1993-94 health-reform plan. In this plan, President Clinton proposed a mandate on employers to provide their employees with health insurance.

Politically conservative economists predicted that the mandate ... would lead to vast unemployment. Economists supporting the Clinton health plan predicted that the ... mandate ... might even ... increase employment.

It can be shown with a simple mathematical model that an economist’s prediction in this regard is powerfully driven by two assumptions about the behavioral responses to mandated employer-paid health insurance. ... Unfortunately, the empirical literature on this responsiveness offers economists a wide range of estimates from which they can choose...

This example starkly illustrates how easy it is for economists to infuse their own ideology – or that of their clients – into what may appear to outsiders as objective, scientific analysis.

We are now seeing a replay of this tendency in the debate on the relative merits of added government spending versus added tax cuts as measures to stimulate the economy.

Writing in The New York Times, for example, the Harvard professor N. Gregory Mankiw, former chief of President George W. Bush’s Council of Economic Advisers, makes a case for stimulating the economy through tax cuts rather than added government spending. ...

To buttress his case..., he then cites an empirical study by Valerie A. Ramey, according to which the $1 of added government spending will ultimately increase gross domestic product (G.D.P.) by only $1.40, while according to another recent study by Christina and David Romer, $1 of tax cuts over time increases G.D.P. by $3.

Non-economists may ask, of course, exactly how a $1 cut in taxes would translate itself into a $3 increase in G.D.P. at a time when traumatized households, whose wealth has been eroded, might use any new tax savings merely to pay down debt or rebuild their wealth through added savings, rather than spend it, and when business firms unable to sell their output even from existing capacity might hesitate to invest such tax savings in more capacity.

But never mind this fine point.

More interesting is the fact that Christina Romer is to be the head of President-elect Barack Obama’s Council of Economic Advisers. In that capacity, last Saturday she released an analysis of fiscal stimulus alternatives, with a co-author, Jared Bernstein. Curiously — or perhaps not — for that analysis, the two authors assume a much larger four-year multiplier effect for added government spending (1.55) than for tax cuts (0.98), although they do confess to a high degree of uncertainty on the actual sizes of these multipliers.

So there you have the flexibility, shall we say, that economists enjoy when they apply their professional skills to affairs of state in what may seem, to outsiders, like purely scientific analyses.

In the first lecture of my freshman economics course at Princeton entitled “The Art of Siffing Among Seasoned Adults,” I demonstrate how seasoned adults routinely structure information felicitously (i.e., “sif”) to further their own agenda, and I point out that economists can be among the most skillful practitioners of this art. ... When economists advise on public policy, the operative mantra is Caveat Emptor!” ...

The answer to this, of course, is that economists should acknowledge the range of estimates, and, if they are committed to one set of estimates over another, if they want to get past the "on the one hand, on the other hand" construction, why they think one set is better or worse than another (let me admit to being less than perfect at this myself).

Brad DeLong:

Fama's Fallacy V: Are There Ever Any Wrong Answers in Economics?: Montagu Norman here, back from my grave once again. This time it is Greg Mankiw whose words have summoned me...

One thing that used to give me nightmares--and that provoked several of my nervous breakdowns--was how you could never get any economist (except for John Maynard Keynes) to take a definite position. They were always "on the one hand--on the other hand." This was what led Harry Truman in later days to wish for a one-handed economist, a wish that has never been fulfilled...

The "on the one hand--on the other hand" nature of discourse raises the question of whether in economics--a "science" where there is enormous intellectual and ideological and political disagreement about how the world works--there can ever be any wrong answers?. I believe that there can be wrong answers in economics, because examinations in economics tend to take a particular form: instead of asking (i) "do expansionary fiscal policies increase output and employment?" we ask (ii) "in models where there are idle resources and high unemployment, do expansionary fiscal policies increase output and employment?" (ii) is a question about a particular class of models of the economy, and so has a definite right answer--"yes, in that class of models they do"--and a definite wrong answer--"no, in that class of models they don't."

Eugene Fama claimed that "when there are idle resources--unemployment" expansionary fiscal policies had no effect in models in which the NIPA savings-investment identity:

investment = (private savings) - (government deficit)

held.

Now the NIPA savings-investment identity holds in all models--it is, after all, an identity, true by definition and construction. And every single model that has been built in which there is a possibility of high unemployment and idle resources is a model in which fiscal policy works because increases in government spending lead to unexpected declines in inventories and unexpected declines in inventories lead to firms to expand production, which leads to increases in income and saving.

I would, therefore, say that Fama's claim is "wrong". Not only does it not hold in all models in the class, it does not hold in any models in the class.

Greg Mankiw disagrees:

Greg Mankiw's Blog: Fama's arguments make sense in the context of the classical model... presented in Chapter 3 of my intermediate macro textbook.... I would go on to the Keynesian model.... But whether one leaves the classical model behind to embrace the Keynesian model is a judgment call...

Mankiw thinks that Fama is not wrong but is, rather, making a "judgment call."

But Mankiw writes in his chapter 3 that the classical model "assume[s] that the labor force is fully employed." And so Greg gets himself into Cretan Liars' Paradox territory here: Fama says that there is high unemployment and idle resources, while Mankiw says that Fama is not wrong because he makes sense as long as the labor force is fully employed and there are no idle resources.

Is Mankiw's answer here a "wrong" answer, or is he too making a "judgment call"? I seek an empirical test. I seek a Harvard undergraduate to take Greg Mankiw's course this spring, to write the following in an appropriate place:

the classical model of chapter 3 shows us that expansionary fiscal policies have no effect on output even where there are idle resources--unemployment.

and to report back on the reaction of the course instructors.

Let's ask another question. Does Greg Mankiw believe in the classical model he is using to defend Fama (in the classical model, the LM curve is vertical, and a vertical LM curve leads to a vertical supply curve, and to the result that demand side policies such as a change in government spending or taxes cannot change real output)?:

I disagree ... that the LM curve is vertical... Introspection is not a particularly reliable way to measure elasticities. There is a substantial empirical literature on money demand that demonstrates that it is interest-elastic. ... According to Ball, the interest semi-elasticity of money demand is -0.05: This means that an increase in the interest rate of one percentage point, or 100 basis points, reduces the quantity of money demanded by 5 percent.

How far off is the vertical LM case as a practical matter? One way to answer this question is to look at the fiscal-policy multiplier. In chapter 11 of my intermediate macro text, I give the government-purchases multiplier from one mainstream econometric model. If the nominal interest rate is held constant, the multiplier is 1.93. If the money supply is held constant, the multiplier is 0.60. If the LM curve were completely vertical, the second number would be zero. ...

Greg has been pretty good at saying there is a lot of uncertainty about the fiscal policy multipliers, and about explaining why estimates differ across studies, and why he favors one set of estimates over another, so I don't want to come down too hard on his disagreement with the 1.93 figure in his "favorite textbook", but it does seem like he is defending Fama with a model that he does not believe in.

Black Holes Grow Galaxies?

Black holes came first:

Which came first--galaxies or black holes?: ...The holes came first, Christopher Carilli of the National Radio Astronomy Observatory and his colleagues announced today at the American Astronomical Society meeting. ... “Black holes came first and somehow—we don’t know how—grew the galaxy around them,” Carilli says. ...

"Undoing the Damage"

Let's hope the war is coming to an end:

Back to Reality, by Olivia Judson: President-elect Obama already has a long to-do list. But here’s another item for it: to restore science in government.

The most notable characteristic of the Bush administration’s science policy has been the repeated distortion and suppression of scientific evidence in order to fit ideological preferences about how the world should be, rather than how it is. ...

The distortion and suppression of science is dangerous ... because it is an assault on ... a method of thought and inquiry on which our modern civilization is based and which has been hugely successful... In many respects science has been the dominant force — for good and ill — that has transformed human lives over the past two centuries.

In schools, science is often taught as a body of knowledge — a set of facts and equations. But all that is just a consequence of scientific activity.

Science itself is something else... It is an attitude, a stance towards measuring, evaluating and describing the world that is based on skepticism, investigation and evidence. The hallmark is curiosity; the aim, to see the world as it is. ... And it is not something taught so much as acquired during a training in research or by keeping company with scientists.

Now, I don’t want to idealize this. To claim that scientists are free of bias, ambition or desires would be ridiculous. Everyone has pet ideas that they hope are right; and scientists are not famous for humility. ...

Moreover, to downplay evidence that doesn’t fit your ideas, and to place more weight on evidence that does — this is something that human brains just seem to do. ...

However, the beauty of the scientific approach is that even when individuals do succumb to bias or partiality, others can correct them using a framework of evidence that everyone broadly agrees on. (Admittedly, this can sometimes be a slow process.) But arguing over data is different from suppressing it. Or changing it. Or ignoring it. For these activities debase the whole enterprise and threaten its credibility. When data can’t be accessed or trusted, when “facts” are actually illusions — well, this threatens the nature of knowledge itself. And a society without knowledge is steering blind.

The rubbishing of science is far more serious than any particular decision over whether to fund research into stem cells, the sexual behavior of fruit flies or the quarks and quirks of particle physics. Undoing the damage of the past eight years may take another eight. But it must be done. We are probably one of the last generations that will be able to use our knowledge and methods to guide human civilization to a sustainable future. This is our time. ...

"Uncertainty, Climate Change, and the Global Economy"

This research concludes that "global warming will be a major problem even under very optimistic circumstances":

Uncertainty, climate change, and the global economy, by Torsten Persson and David von Below, VoxEU.org: What will the climate be like in a hundred years’ time? The answer to this question is highly uncertain, and will depend on a number of socio-economic as well as natural processes, which describe the links between human activity, emissions of greenhouse gases, and warming of the atmosphere. The existing policy discussion in important forums, such as the IPCC and Stern reports (see this Vox column), is largely based on the uncertainty about the biogeophysical and biogeochemical systems, as are analyses such as that of Wigley and Raper (2001). In a recent paper, we include such uncertainty – but highlight uncertainty about the drivers of climate change in the socioeconomic system. [...continue reading...]

Bang-Bang You're Complex

In many economic problems, feedback loops can be used to optimally control a system. For example, the inputs to an economic system might be government spending, taxes, and the federal funds rate, and, given values for these variables the system will produce outcomes for other variables in the system such as output and prices. The goal in these problems is to find a feedback rule for changing the policy variables that best achieves policy objectives.

Take a simpler problem where the system has just one input, the federal funds rate, and one outcome, the level of output. Given a goal such as minimizing the variability of output around a target value, the objective is to find a rule for setting the federal funds rate that minimizes variance in output. That is, if the policy rule is linear and of the form ff = a + b(y-y*), i.e. a Taylor rule, then the solution finds the values of a and b that minimize the loss function (which in this case is the variance of y). The mathematics is very similar to what an engineer might use to control a system with a feedback rule, except that in economics you have to consider how the economic actors respond to actual or expected changes in the feedback policy rule, and that turns out to be much more than a minor complication.

In some classes of these problems, the solution is known as "bang-bang". With bang-bang solutions, the control variable takes just two values, e.g. all the way on or all the way off. The heater in your home probably controls the room temperature with a solution of this form (though it may not be optimal - it depends). The heater is either all the way on or all the way off depending upon the room temperature, and this moderates the variation in the room temperature. The outcome - the temperature - is monitored, and there is a feedback rule that turns the heater on or off when the deviation from the targeted temperature exceeds some set amount. Such solutions are quite common (see here for technical details).

So common, in fact, that according to this research evolution has also discovered bang-bang solutions, and it uses them to regulate evolutionary change, i.e. to "correct any imbalance imposed on them through artificial mutations..." This allows the system to self-correct when random mutations throw it off course, and helps to explain how organisms can "be so exquisitely complex, if evolution is completely random":

Evolution's new wrinkle, EurekAlert: A team of Princeton University scientists has discovered that chains of proteins found in most living organisms act like adaptive machines, possessing the ability to control their own evolution.

The research, which appears to offer evidence of a hidden mechanism guiding the way biological organisms respond to the forces of natural selection, provides a new perspective on evolution, the scientists said.

The researchers ... made the discovery while carrying out experiments on proteins... A mathematical analysis of the experiments showed that the proteins themselves acted to correct any imbalance imposed on them through artificial mutations and restored the chain to working order.

"The discovery answers an age-old question that has puzzled biologists since the time of Darwin: How can organisms be so exquisitely complex, if evolution is completely random, operating like a 'blind watchmaker'?" said Chakrabarti... "Our new theory extends Darwin's model, demonstrating how organisms can subtly direct aspects of their own evolution to create order out of randomness."

The work also confirms an idea first floated in an 1858 essay by Alfred Wallace, who along with Charles Darwin co-discovered the theory of evolution. Wallace had suspected that certain systems undergoing natural selection can adjust their evolutionary course in a manner "exactly like that of the centrifugal governor of the steam engine, which checks and corrects any irregularities almost before they become evident." In Wallace's time, the steam engine operating with a centrifugal governor was one of the only examples of what is now referred to as feedback control. Examples abound, however, in modern technology, including cruise control in autos and thermostats in homes and offices.

"Fibonacci, Fermat, and Finance"

I went to a seminar yesterday in the Physics Department to see the manager of a hedge fund, John Seo, talk about "Fibonacci, Fermat, and Finance: How a Biophysicist Built a Multi-Billion Dollar Catastrophe Bond Fund after Re-Reading the Foundations of Modern Finance" (NY Times magazine story). One thing I learned at the seminar and from asking questions at dinner afterward was about the origins of present value analysis. It goes back to the mathematician Leonardo Fibonacci and chapter 12 of his book "Liber Abaci" written in 1202. Here's a working paper on the topic:

Fibonacci and the Financial Revolution William N. Goetzmann NBER Working Paper No. 10352: ...Traveling Merchant Problems The second type of financial problem is a set of “traveling merchant” examples, akin to accounting calculations for profits obtained in a series of trips to trading cities.

The first example is:

A certain man proceeded to Lucca on business to make a profit doubled his money, and he spent there 12 denari. He then left and went through Florence; he there doubled his money, and spent 12 denari. Then he returned to Pisa, doubled his money and it is proposed that he had nothing left. It is sought how much he had at the beginning.

[Update: the problem isn't clear about this, but 12 denari are spent at each of the three stops, including Pisa] Leonardo proposes an ingenious solution method. Since capital doubles at each stop, the discount factor for the third cash flow (in Pisa) is ½ ½ ½ . He multiplies the periodic cash flow of 12 denari times a discount factor that is the sum of the individual discount factors for each trip i.e. (1/2) + (1/4) + (1/8). The solution is 10½ denari. The discount factor effectively reduces the individual cash flows back to the point before the man reached Lucca.

Notice that this approach can be generalized to allow for different cash flows at different stages of the trip, a longer sequence of trips, different rates of return at each stop, or a terminal cash flow. In the twenty examples that follow the Lucca-Florence- Pisa problem, Leonardo presents and solves increasingly complex versions with various unknown elements. For example, one version of the problem specifies the beginning value and requires that the number of trips to be found – e.g. “A certain man had 13 bezants, and with it made trips, I know not how many, and in each trip he made double and he spent 14 bezants. It is sought how many were his trips.” This and other problems demonstrate the versatility of his discounting method. They also provide a framework for the explicit introduction of the dimension of time, and the foundation for what we now consider finance.

In case you don't see this, though he didn't explicitly use this formula, he realized that the "present value" of the cash flow is:

PV = [R₁/(1+i)¹] + [R₂/(1+i)²] + [R₃/(1+i)³]

where R_j is the cash spent at each point j on the trip, and i is the profit rate. In this case,  R_j = 12 for all j, and i=100%, or 1.0. Thus:

PV = [12/(1+1)¹] + [12/(1+1)²] + [12/(1+1)³]

      = [12/2] + [12/4] + [12/8]

      = 12[(1/2) + (1/4) + (1/8)] (as above)

      = 10.5

But does Fibonacci realize this applies not just to traveling merchants, but also to discounting financial cash flows over time? Yes. All you have to do is convert the problem back to the traveling merchant example. Going back to the NBER paper:

Immediately following the trip problems, Fibonacci poses and solves a series of banking problems. Each of these follows the pattern established by the trips example – the capital increases by some percentage at each stage, and some amount is deducted. For example:

A man placed 100 pounds at a certain [banking] house for 4 denari per pound per month interest and he took back each year a payment of 30 pounds. One must compute in each year the 30 pounds reduction of capital and the profit on the said 30 pounds. It is sought how many years, months, days and hours he will hold money in the house....

Fibonacci explains that the solution is found by using the same techniques developed in the trips section. Intervals of time replace the sequence of towns visited and thus a time-series of returns and cash draw-downs can be evaluated. Once the method of trips has been mastered, then it is straightforward to construct a multiperiod discount factor and apply it to the periodic payment of 30 pounds – although in this problem the trick is to determine the number of time periods used to construct the factor. Now we might use logarithms to address the problem of the nth root for an unknown n, but Fibonacci lived long before the invention of logarithms. Instead, he solves it by brute force over the space of three pages, working forward from one period to two periods etc. until he finds the answer of 6 years, 8 days and [5 and 1/2] hours. The level of sophistication represented by this problem alone is unmatched in the history of financial analysis. Although the mathematics of interest rates had a 3,000 year history before Fibonacci, his remarkable exposition and development of multi-period discounting is a quantum leap above his predecessors.

And, one final example:

Present Value Analysis The most sophisticated of Fibonacci’s interest rate problems is “On a Soldier Receiving Three Hundred Bezants for his Fief.” In it, a soldier is granted an annuity by the king of 300 bezants per year, paid in quarterly installments of 75 bezants. The king alters the payment schedule to an annual year-end payment of 300. The soldier is able to earn 2 bezants on one hundred per month (over each quarter) on his investment. How much is his effective compensation after the terms of the annuity have changed? ...

As before, Fibonacci explains how to construct a multi-period discount factor from the product of the reciprocals of the periodic growth rate of an investment, using the model developed from mercantile trips in which a percentage profit is realized at each city. In this problem, he explicitly quantifies the difference in the value of two contracts due to the timing of the cash flows alone. As such, this particular example marks the discovery of one of the most important tools in the mathematics of Finance – an analysis explicitly ranking different cash flow streams based upon their present value.

Update: More at  Catastrophe bonds and the investor's choice problem.

"The Sequencing of the Mathematical Genome"

"We may be close to seeing how computers, rather than humans, would do mathematics":

Proof by computer: Harnessing the power of computers to verify mathematical proofs, EurekAlert: New computer tools have the potential to revolutionize the practice of mathematics by providing far more-reliable proofs of mathematical results than have ever been possible in the history of humankind. These computer tools, based on the notion of "formal proof", have in recent years been used to provide nearly infallible proofs of many important results in mathematics. A ground-breaking collection of four articles by leading experts, published today in the Notices of the American Mathematical Society, explores new developments in the use of formal proof in mathematics.

When mathematicians prove theorems in the traditional way, they present the argument in narrative form. They assume previous results, they gloss over details they think other experts will understand, they take shortcuts to make the presentation less tedious, they appeal to intuition, etc. The correctness of the arguments is determined by the scrutiny of other mathematicians, in informal discussions, in lectures, or in journals. It is sobering to realize that the means by which mathematical results are verified is essentially a social process and is thus fallible. When it comes to central, well known results, the proofs are especially well checked and errors are eventually found. Nevertheless the history of mathematics has many stories about false results that went undetected for a long time. In addition, in some recent cases, important theorems have required such long and complicated proofs that very few people have the time, energy, and necessary background to check through them. And some proofs contain extensive computer code to, for example, check a lot of cases that would be infeasible to check by hand. How can mathematicians be sure that such proofs are reliable?

To get around these problems, computer scientists and mathematicians began to develop the field of formal proof. A formal proof is one in which every logical inference has been checked all the way back to the fundamental axioms of mathematics. Mathematicians do not usually write formal proofs because such proofs are so long and cumbersome that it would be impossible to have them checked by human mathematicians. But now one can get "computer proof assistants" to do the checking. In recent years, computer proof assistants have become powerful enough to handle difficult proofs.

Only in simple cases can one feed a statement to a computer proof assistant and expect it to hand over a proof. Rather, the mathematician has to know how to prove the statement; the proof then is greatly expanded into the special syntax of formal proof, with every step spelled out, and it is this formal proof that the computer checks. It is also possible to let computers loose to explore mathematics on their own, and in some cases they have come up with interesting conjectures that went unnoticed by mathematicians. We may be close to seeing how computers, rather than humans, would do mathematics.

The four Notices articles explore the current state of the art of formal proof and provide practical guidance for using computer proof assistants. If the use of these assistants becomes widespread, they could change deeply mathematics as it is currently practiced. One long-term dream is to have formal proofs of all of the central theorems in mathematics. Thomas Hales, one of the authors writing in the Notices, says that such a collection of proofs would be akin to "the sequencing of the mathematical genome".

The articles appear today in the December 2008 issue of the Notices and are freely available at http://www.ams.org/notices.

Anti-Intellectualism

Jeffrey Sachs says anti-intellectualism "could end up getting us all killed":

The American anti-intellectual threat, by Jeffrey D. Sachs, Commentary, Project Syndicate: In recent years, the United States has been more a source of global instability than a source of global problem-solving.

Examples include the war in Iraq, launched by the US on false premises, obstructionism on efforts to curb climate change, meager development assistance and the violation of international treaties such as the Geneva Conventions. While many factors contributed to America’s destabilizing actions, a powerful one is anti-intellectualism...

By anti-intellectualism, I mean especially an aggressively anti-scientific perspective, backed by disdain for those who adhere to science and evidence. The challenges faced by a major power like the US require rigorous analysis of information according to the best scientific principles.

Climate change, for example, poses dire threats... that must be assessed according to prevailing scientific norms... We need scientifically literate politicians adept at evidence-based critical thinking to translate these findings and recommendations into policy and international agreements.

In the US, however, the attitudes of President Bush, [and] leading Republicans ... have been the opposite of scientific. The White House did all it could for eight years to hide the overwhelming scientific consensus that humans are contributing to climate change. It tried to prevent government scientists from speaking honestly to the public. The Wall Street Journal has similarly peddled anti-science and pseudo-science to oppose policies to fight human-induced climate change.

These anti-scientific approaches affected not only climate policy, but also foreign policy. The US went to war in Iraq on the basis of Bush’s gut instincts and religious convictions, not rigorous evidence. ...

These are ... powerful individuals out of touch with reality. They reflect the fact that a significant portion of American society, which currently votes mainly Republican, rejects or is simply unaware of basic scientific evidence regarding climate change, biological evolution, human health and other fields. ...

Recent survey data by the Pew Foundation found that while 58 percent of Democrats believe that human beings are causing global warming, only 28 percent of Republicans do. Similarly, a 2005 survey found that 59 percent of self-professed conservative Republicans rejected any theory of evolution, while 67 percent of liberal Democrats accepted some version of evolutionary theory.

To be sure, some of these deniers are simply scientifically ignorant, having been failed by the poor quality of science education in America. But others are biblical fundamentalists... They reject geological evidence of climate change because they reject the science of geology itself.

The issue here is not religion versus science. All of the great religions have traditions of fruitful interchange with -- and, indeed, support for -- scientific inquiry. ...

The problem is an aggressive fundamentalism that denies modern science, and an aggressive anti-intellectualism that views experts and scientists as the enemy. It is those views that could end up getting us all killed. ...

It is difficult to know for sure what is giving rise to fundamentalism in so many parts of the world. ... Fundamentalism seems to emerge in times of far-reaching change, when traditional social arrangements come under threat. The surge of modern American fundamentalism in politics dates to the civil rights era of the 1960s, and at least partly reflects a backlash among whites against the growing political and economic strength of non-white and immigrant minority groups in US society.

Humanity’s only hope is that the vicious circle of extremism can be replaced by a shared global understanding of the massive challenges of climate change, food supplies, sustainable energy, water scarcity and poverty. ...

The US must return to the global consensus based on shared science rather than anti-intellectualism. That is the urgent challenge at the heart of American society today.

Gut Instinct and Math Ability

In case you are tired of politics and financial crises, here's something a bit different:

Gut Instinct’s Surprising Role in Math, by Natalie Angier, NYT: You are shopping in a busy supermarket and you’re ready to pay up... You perform a quick visual sweep of the checkout options and immediately start ramming your cart through traffic toward an appealingly unpeopled line halfway across the store. As you wait in line and start reading nutrition labels, you can’t help but calculate that the 529 calories contained in a single slice of your Key lime cheesecake amounts to one-fourth of your recommended daily caloric allowance...

One shopping spree, two distinct number systems in play. Whenever we choose a shorter grocery line over a longer one, or a bustling restaurant over an unpopular one, we rally our approximate number system, an ancient and intuitive sense that we are born with and that we share with many other animals. Rats, pigeons, monkeys, babies — all can tell more from fewer, abundant from stingy. An approximate number sense is essential to brute survival: how else can a bird find the best patch of berries, or two baboons know better than to pick a fight with a gang of six?

When it comes to genuine computation, however, to seeing a self-important number like 529 and panicking when you divide it into 2,200, or realizing that, hey, it’s the square of 23! well, that calls for a very different number system, one that is specific, symbolic and highly abstract. By all evidence, scientists say, the capacity to do mathematics, to manipulate representations of numbers and explore the quantitative texture of our world is a uniquely human and very recent skill. People have been at it only for the last few millennia, it’s not universal to all cultures, and it takes years of education to master. Math-making seems the opposite of automatic, which is why scientists long thought it had nothing to do with our ancient, pre-verbal size-em-up ways.

Yet a host of new studies suggests that the two number systems, the bestial and celestial, may be profoundly related, an insight with potentially broad implications for math education. ...

"Doctors vs Economists"

Chris Dillow says this "not to demean doctors, but to elevate economists":

Doctors vs economists, Stumbling and Mumbling: The BBC are offering two series glorifying the medical profession: Superdoctors, which presents the “cutting edge” of medicine, and Blood and Guts, Michael Mosley’s whiggish view of the history of surgery “from butchery to brilliance.”

Which raises a question. Why do doctors  get such great publicity and acclaim when economists don’t?

For all its excellence, the medical profession still leaves a lot to be desired. Medical errors kill tens of thousands a year; doctors still have little idea how to treat many complaints such as gout, the common cold, backache or many degenerative diseases; and their treatment of the mentally ill is still often atrocious.

And yet, for all this, doctors get much less obloquy than we economists get for our frequent failures to forecast recession - even though our errors are less costly than doctors’.  Why is this? Here are some possibilities:

1. Survivorship bias. A man who’s been cured by a doctor lives to tell everyone. A man who’s been killed by one stays quiet. Economists’ “victims” - those stupid enough to believe forecasts- don’t keep schtum.
2. Publication bias. New medical research is often presented as an exciting breakthrough. Economic research rarely lends itself to such glowing headlines.
3. The fight against nature. If doctors are unable to cure disease, this is seen not as a failure of their intellect, but rather as testament to the force of hostility of nature, against which they are heroically battling. What people fail to see is that economic forecasting is also a fight against a powerful force - the existence of free will. The reason for this is simple; economic activity next year is a function of the choices people will make then. But because they have free will, we cannot predict these choices. In this light, what’s astonishing is not that forecasts are wrong, but that they are ever right at all.
4. Selective judgment. Economists get judged, wholly wrongly, on their weakest activity - economic forecasting - whereas doctors get judged on their strongest.
5. Our greater antecedents. Economics has progressed in all sorts of ways. We know now, for example, that protectionism is generally a bad idea; that inflation targeting is a better monetary framework than fixed exchange rates; that countries can’t get rich merely by heavy capital investment, and so on. And yet it’s harder to present the history of economics as pure progress, as Michael Mosley does for surgery. One reason for this, perhaps, is that the great economists of the past were genuinely brilliant whereas their medical contemporaries were quacks, charlatans and butchers.  At the same time as Paul Samuelson was  creating foundations of the economics we learn today, Walter Freeman was hammering ice-picks into people - and he was regarded as a pioneer at the time. And let’s not even consider Adam Smith’s medical contemporaries.

Now, I say all this not to demean doctors, but to elevate economists. Our profession - at its best - should not be regarded as in anyway inferior to the natural sciences.

The Antikythera Mechanism

Lee Arnold sends this along, and says:

Nature magazine has put up a great new video about the Antikythera mechanism. It includes computer animations of the mechanism from 3-D x- rays of the object and someone who is building a working replica. 

This is an astounding thing.

The video is here.

Economics "is at Last a Science"

The subtitle on this article says:

The dismal science is at last a science—and the world is the beneficiary.

Here are a few parts of the article, though much is omitted, which is mostly an argument about the virtues of the market system:

Economics Does Not Lie, by Guy Sorman, City Journal: Though economics as a discipline arose in Great Britain and France at the end of the eighteenth century, it has taken two centuries to reach the threshold of scientific rationality. Previously, intuition, opinion, and conviction enjoyed equal status in economic thought; theories were vague, often unverifiable. Not so long ago, one could teach economics at prestigious universities without using equations and certainly without the complex algorithms, precise (though not infallible) mathematical models, and computers integral to the field today.

Political Participation and Genetic Inheritance

How much influence does genetic makeup have on voting behavior?:

Political participation is partially rooted in genetic inheritance, EurekAlert: The decision to vote is partly genetic, according to a new study published in the American Political Science Review. The research, by James H. Fowler and Christopher T. Dawes, of the University of California, San Diego and Laura A. Baker, of the University of Southern California, is the first to show that genes influence participation in elections and in a wide range of political activities. See the full study.

Fowler and Dawes have followed this work with research just published in the July issue of the Journal of Politics in which they identify a link between two specific genes and political participation. They show that individuals with a variant of the MAOA gene are significantly more likely to have voted in the 2000 presidential election. Their research also demonstrates a connection between a variant of the 5HTT gene and voter turnout, which is moderated by religious attendance. These are the first results ever to link specific genes to political behavior. The published study will be online July 1, but a pre-publication PDF is linked here.

The initial research is based on voter turnout records in Los Angeles matched to a registry of identical and non-identical twins. These comparisons show clearly that identical twins, who share 100 per cent of their genes, are significantly more similar in their voting behavior than fraternal twins who share only 50 per cent of their genes on average. The results indicate that 53 per cent of the variation in voter turnout is due to differences in genes. The results also suggest that, contrary to decades of conventional wisdom, family upbringing may have little effect on children's future participatory behavior.

To replicate these findings the researchers went beyond the California voter data to examine patterns nationwide using the National Longitudinal Study of Adolescent Health conducted from 1994 to 2002. This data has been utilized in a wide variety of genetic studies, but this is the first time the data has been used to show that participatory political behavior is heritable. For example, among identical twins, the researchers conclude that 72 per cent of the variance in voter turnout can be attributed to genes. Moreover, genetic-based differences extend to a broad class of acts of political participation, including donating to a campaign, contacting a government official, running for office, and attending a political rally. According to Fowler, "we expected to find that genes played some role in political behavior, but we were quite surprised by the size of the effect and how widely it applies to many kinds of participation." ...

"These findings are extremely important for how we think about political behavior," said Fowler. For example, it is widely known that parents and children exhibit similar voting behavior, but this has always been interpreted as learned behavior rather than inherited behavior. It is also well-known that these particular genes influence social behavior, but it has not been widely appreciated that social behavior plays an important role in voting and other forms of political behavior. In particular, the 5HTT gene appears to play an important role in the well-known association between voting and going to church, suggesting that it is the combination of social activity and genes that helps to shape political behavior. According to Fowler, "We are not robots – the genes just seem to make it more likely that some of us will respond to our social lives by getting involved in politics." Fowler also cautioned that there is no such thing as a 'voter gene': "That idea is just silly. Complex social behaviors are the result of hundreds of genes interacting with hundreds of social factors – these results are really just the tip of the iceberg."

The authors point out that while political scientists have typically not focused on the role of genetic and biological factors in political behavior, the present work points to a significant role for genes and, therefore, a next step in research is to determine why genes matter so much. They conclude, "These studies provide the first step needed to excite the imaginations of a discipline not used to thinking about the role of biology in human behavior."

Graduation

My Father's Day gift came yesterday afternoon:

What is Thought?

Steve Hsu over in physics has thoughts about thinking:

The Singularity, AI and IEEE, by Steve Hsu: An entire special issue of IEEE Spectrum has been devoted to the Singularity, with contributions from people like Vernor Vinge, Rodney Brooks, Gordon Moore and Douglas Hofstader. I'm confident it won't happen in my lifetime. I don't even think a machine will pass a strong version of the Turing test while I am around.

My favorite book on AI is Eric Baum's What is Thought? (Google books version). Baum ... notes that evolution has compressed a huge amount of information in the structure of our brains (and genes), a process that AI would have to somehow replicate. A very crude estimate of the amount of computational power used by nature in this process leads to a pessimistic prognosis for AI even if one is willing to extrapolate Moore's law well into the future.

This perspective seems quite obvious now that I have kids -- their rate of learning about the world is obviously enhanced by pre-evolved capabilities. They're not generalized learning engines -- they're optimized to do things like recognize patterns (e.g., faces), use specific concepts (e.g., integers), communicate using language, etc.

What is Thought? In What Is Thought? Eric Baum proposes a computational explanation of thought. Just as Erwin Schrodinger in his classic 1944 work What Is Life? argued ten years before the discovery of DNA that life must be explainable at a fundamental level by physics and chemistry, Baum contends that the present-day inability of computer science to explain thought and meaning is no reason to doubt there can be such an explanation. Baum argues that the complexity of mind is the outcome of evolution, which has built thought processes that act unlike the standard algorithms of computer science and that to understand the mind we need to understand these thought processes and the evolutionary process that produced them in computational terms.

Baum proposes that underlying mind is a complex but compact program that exploits the underlying structure of the world. He argues further that the mind is essentially programmed by DNA. We learn more rapidly than computer scientists have so far been able to explain because the DNA code has programmed the mind to deal only with meaningful possibilities. Thus the mind understands by exploiting semantics, or meaning, for the purposes of computation; constraints are built in so that although there are myriad possibilities, only a few make sense. Evolution discovered corresponding subroutines or shortcuts to speed up its processes and to construct creatures whose survival depends on making the right choice quickly. Baum argues that the structure and nature of thought, meaning, sensation, and consciousness therefore arise naturally from the evolution of programs that exploit the compact structure of the world.

The Evolution of the "Economic Web"

One of the editors at Scientific American brought this to my attention, and he is hoping to receive feedback. This is part of their "Edit This" series. The idea is that they post a draft of an article they plan to print in a future edition of the magazine, then incorporate feedback into the the print version:

Tell us your reactions to the arguments made in this piece. Your feedback will be incorporated into a version of this article that will appear in a future print issue of Scientific American.

The article itself, "which is sure to raise the hackles of some members of the economic community," argues that economists cannot explain the relationship between innovation and growth, and proposes a "grammar model" as an alternative to traditional growth models:

The Evolving Web of Future Wealth, by Stuart Kauffman, Stefan Thurner, and Rudolf Hanel, SciAm: ...Perhaps the most stunning feature of the economy over time is the explosion of goods and services. Yet contemporary economics has no adequate theory to understand this explosion or its importance for economic growth and the evolution of future wealth.

My first reaction was that we do have models of variety and growth:

Optimal Product Variety, Scale Effects, and Growth, by Henri L.F. de Groot and Richard Nahuis: ...Product variety is an important determinant of economic welfare. Following the seminal work by Dixit and Stiglitz (1977), and Spence (1976) the welfare effects of variety have been analyzed from various angles.[1] ... With the presence of economies of scale in production, producing a small variety saves resources that can be used to extend the production volume. Hence a trade-off arises... It turns out that the market supports too low product diversity. Subsequent studies addressed the optimality question in the presence of growth. In a dynamic context, reduced variety not only saves resources that can be used for extending the produced quantity, but potentially also to increase the rate of growth. Grossman and Helpman (1991, chapter 3) analyze welfare in a model of endogenous growth. In their analysis, there is (continuous) growth in product variety resulting from investment in R&D. The more labour an economy allocates in the R&D sector, the less labour remains for producing consumption goods. The question here is one of growth in variety versus volume of consumption goods. The optimal trajectory entails more rapid growth of variety than the market equilibrium sustains, as firms ignore the contribution of their knowledge creation to a common ’knowledge pool’. Grossman and Helpman (1991) also analyze a quality ladder model. ... Here innovative effort aimed at quality improvement might be suboptimal high or low, depending on the size of the quality step. Van de Klundert and Smulders (1997) develop an endogenous growth model in which, contrary to Grossman and Helpman (1991), R&D is an in-house activity aimed at improving quality. Besides quality growth, variety is also determined endogenously. ...

The studies discussed so far assume that variety has a direct effect on consumers’ welfare as consumers have a love for variety. Another branch of literature looks at the productivity effects of increased product variety...

And as footnote 1 notes, "In the overview..., we have no pretension of being exhaustive," so this is by no means all of the work on this topic. But these models don't, as far as I know, explain how new innovations and variety arise, and that is one of the things the Scientific American article is trying to do (though I'm not sure it is fully successful, the model produces broad statistical relationships that predict how frequently innovations ought to occur, but is not precise about the types of innovations that will arise). Back to the article:

Economic growth theory is highly sophisticated about the roles of capital, labor, human capital, knowledge, interest rates, saving rates and investment in existing economic opportunities, or investment of savings in research to find novel goods and services. Yet the major conceptual frameworks that undergird contemporary economics (competitive general equilibrium, rational expectations and game theory) share a crucial failing. They assume that all the goods and services (as well as the relations between them) and all the strategies for engaging with them in a local or global economy can be "pre-stated"—that is, known in advance. In reality, novel goods and services may constantly enter markets, thereby requiring economic actors to develop ever more novel strategies: all the relevant variables cannot be pre-stated.

Thus standard growth theory misses an essential feature of this "economic web" of goods and services. Even more important, as we shall explain, it ignores the role that the structure of the economic web itself plays in driving the creation of novelty and the evolution of future wealth. ...

Why Did the EPA Fire a Respected Toxicologist?

Herbert Needleman speaks out:

Why did the EPA fire a respected toxicologist?, EurekAlert: In March, the US House Energy and Commerce Committee launched an investigation into potential conflicts of interest in scientific panels that advise the Environmental Protection Agency on the human health effects of toxic chemicals. The committee identified eight scientists that served as consultants or members of EPA science advisory panels while getting research support from the chemical industry to study the chemicals under review. Two scientists were actually employed by companies that made or worked with manufacturers of the chemicals under review.

Such conflicts, Chairman John Dingell (D-Mich.) noted, stand in stark contrast to the agency’s dismissal last summer of highly respected public health scientist Deborah Rice, an expert in toxicology, from a panel examining the health impacts of the flame retardant deca. The EPA fired Rice after the chemical industry’s trade group, the American Chemistry Council, complained that was could not provide an objective scientific review because she had spoken out about the health hazards posed by deca.

This trend is neither new nor unique, argues legendary lead researcher Herbert Needleman, a pediatrician and child psychiatrist, in a new article published this week in the open-access journal PLoS Biology. With his groundbreaking research on the cognitive effects of lead on children, Needleman laid the foundation for one of the greatest environmental health successes of modern times—five-fold reduction in the prevalence of lead poisoning in American children.

In “The Case of Deborah Rice: Who is the Environmental Protection Agency Protecting"” Needleman points out that the EPA summarily fired Rice even though it had honored her just a few years before with one of its most prestigious scientific awards for “exceptionally high-quality research into lead’s toxicity.” Why" Because the American Chemistry Council asked the agency to fire her.

“EPA, without examining or contesting the charge of bias, complied,” Needleman write. “Rice was fired. The next formal act of the EPA was to remove all of her comments from the written report completely erase her name from the text of the review. There is now no evidence that she ever participated in the EPA proceedings, or was even in the room.” Needleman is confident that Rice, who is “widely admired by her colleagues for her intelligence, integrity and moral compass,” will “withstand this insult and continue to contribute to the public welfare.”

The full article from full article from Plos Biology:

The Case of Deborah Rice: Who Is the Environmental Protection Agency Protecting?, by Herbert Needleman: For researchers who operate at the intersection of basic biology and toxicology, following the data where they take you—as any good scientist would—carries the risk that you will be publicly attacked as a crank, charged with scientific misconduct, or removed from a government scientific review panel. Such a fate may seem unthinkable to those involved in primary research, but it has increasingly become the norm for toxicologists and environmental investigators. If you find evidence that a compound worth billions of dollars to its manufacturer poses a public health risk, you will almost certainly find yourself in the middle of a contentious battle that has little to do with scientific truth (see Box 1).

"Learning ... Turns Out to Have Dangerous Side Effects"

When nature maximizes survival under constraint, learning is just another parameter in the equation:

Lots of Animals Learn, but Smarter Isn’t Better, by Carl Zimmer, NY Times: ...Learning ... turns out to have dangerous side effects that make its evolution even more puzzling. Dr. Kawecki and his colleagues have produced striking evidence for these side effects by studying flies as they evolve into better learners in the lab.

To produce smarter flies, the researchers present the insects with a choice of orange or pineapple jelly to eat. Both smell delicious to the insect. But the flies that land on the orange jelly discover that it is spiked with bitter-tasting quinine. The flies have three hours to learn that the nice odor of oranges is followed by a nasty taste.

To test the flies, the scientists then present them with two plates of jelly, one orange and one pineapple. This time, neither has quinine. The flies settle on both plates of jelly, feed, and the females lay their eggs.

“The flies that remember they had a bad experience with orange should continue to avoid orange and go to the pineapple,” Dr. Kawecki said.

Dr. Kawecki and his colleagues collect the eggs from the quinine-free pineapple jelly and use them to produce the next generation of flies. The scientists repeat the procedure on the new flies, except that the pineapple jelly is spiked with quinine instead of the orange.

It takes just 15 generations under these conditions for the flies to become genetically programmed to learn better. At the beginning of the experiment, the flies take many hours to learn the difference between the normal and quinine-spiked jellies. The fast-learning strain of flies needs less than an hour.

But the flies pay a price for fast learning.

Are Economists Different?

I've been thinking about economists. We are a different breed, I think, at least in one sense. We see markets everywhere. Thinking of getting married? We see a marriage market where partners rationally look at the costs and benefits of a "partnership" and decide accordingly. It is all very sterile and scientific, nothing more than supply and demand, like always.

Thinking of going for a walk in the woods? We can model that choice, it's fairly simple. It has an opportunity cost, and a benefit, and if the benefit exceeds the cost, the walk will be taken.

In fact, all of the "apparently noneconomic dimensions of society" are no match for the economist:

Gary S. Becker ... sheds new light on previously unconnected and poorly understood social phenomena. ... His singular axiom - that all actors in the social game are economic persons who maximize their advantages in different cost situations - allows Becker to study persistent racial and sexual discrimination, investment in human capital, crime and punishment, marriage and divorce, the family, drug addiction, and other apparently noneconomic dimensions of society.

There are very few choices that cannot be reduced to the language of economics. There are, after all, markets in everything!

But maybe economists are people for whom this way of thinking is attractive. People choose their majors, they are not assigned randomly, and for some people this "economic way of thinking" is very natural (and for some it is quite foreign - explain as you will, it just doesn't seem to "click" with them). The first time you see a problem explained with economic tools you say, yes, that's it - that's how people make decisions because when you look inside, it explains how you see the world. And even where you hadn't viewed the world through the eyes of economics before, you suddenly have new insights. Aha! Now I understand how people choose to get married!

Paul Zak gave a seminar yesterday and it made me wonder if economists might, as a group, have some sort of hormonal deficiency, a bad Oxytocin gene or something.

Oxytocin is thought to increase trust between humans:

Oxytocin is a hormone which is released during many experiences, including birth in women. In the brain, oxytocin is involved in social recognition and bonding.

Oxytocin appears to be the 'social glue' that holds entire families, communities and societies together, without needing the government to monitor transactions. Empathy for others begins with the release of oxytocin, which compels feelings of love.

When we feel trusted, our brains release oxytocin. This, in turn, causes us to recriprocate the 'trusted' feeling.

With an added dose of oxytocin, subjects' generosity to strangers increased up to 80%.

Generosity to strangers? With no benefit for me? That can't be right, it doesn't fit our models.

Here's something I found interesting, In Zak's experiments with Oxytocin, there was always one group of people who didn't play the game the same way others played. In the game:

178 students ... were separated into groups of investors and trustees, who were not allowed to communicate with each other. Each investor began the experiment with a fund equal to about five Swiss francs that could be invested with a trustee. Any investment would be automatically tripled. The trustee then could decide how much, if any, of the money would be paid to the investor. Both investor and trustee could take home cash at the conclusion of the experiment, based on how they managed the investments. The more the trustee withheld, the larger his final cash payoff. By design, the investors were caught in a dilemma. If they trusted their partners and invested the maximum allowable, they might reap triple their investment. But they could just as easily lose everything if betrayed by a partner who decided to keep all the proceeds. ...

The researchers found that the volunteers who took oxytocin were twice as likely to risk all their money with a stranger. ... Moreover, the hormone only affected someone's response to another person. Those who engaged in financial trading with a computer partner showed no effect from the hormone...

So, summarizing, we both start with $10. If you send me all of your money, I then have $10 + three times what you sent me = $40 and you will have nothing. If I send you back anything more than $10 but less than $30 we will both be better off. In general, people were willing to trust the other person, and trust increased when Oxytocin was administered. Most of the time, the trust was rewarded.

But there was one group of students with Oxytocin levels that were clear outliers (excessive amounts indicating their receptors were likely inactive) who never gave anything back to the person who had trusted them - they pocketed the $40 (or three times whatever they were sent plus the original $10) and whistled all the way to the bank. They were the exception though, most did choose to give something back so that the gains were shared. But it is not in their self-interest to do so.

Update: Here's the graph I was referring to:

[One other interesting feature. If the first person sent less than 30%, i.e. less than $3.00, people did not tend to send anything back. It was as though the second person said you idiot, we have this great opportunity to make money, yet you won't trust me to hold up my end? - I'll show you by keeping the money.]

So here's what I wonder. Are economists, as a group (and perhaps libertarians foremost among them), more like the students who acted purely according to self-interest? Did they choose to become economists because when they looked inside at their own decisions, this model of the world - the one where people always follow their self-interest - fit? Do we have a chemical make-up that causes us to see self-interest as a primary, dominating emotional force in all decisions? Is that why we have a hard time understanding things like pure altruism?

Hard-Wired for Fairness

Fairness makes us happy:

Brain reacts to fairness as it does to money and chocolate, EurekAlert: The human brain responds to being treated fairly the same way it responds to winning money and eating chocolate, UCLA scientists report. Being treated fairly turns on the brain's reward circuitry.

"We may be hard-wired to treat fairness as a reward," said study co-author Matthew D. Lieberman, UCLA associate professor of psychology...

"Receiving a fair offer activates the same brain circuitry as when we eat craved food, win money or see a beautiful face," said Golnaz Tabibnia, a postdoctoral scholar at ... UCLA and lead author of the study...

The activated brain regions include the ventral striatum and ventromedial prefrontal cortex. Humans share the ventral striatum with rats, mice and monkeys, Tabibnia said.

"Fairness is activating the same part of the brain that responds to food in rats," she said. This is consistent with the notion that being treated fairly satisfies a basic need, she added.

In the study, subjects were asked whether they would accept or decline another person's offer to divide money in a particular way. If they declined, neither they nor the person making the offer would receive anything. Some of the offers were fair, such as receiving $5 out of $10 or $12, while others were unfair, such as receiving $5 out of $23.

"In both cases, they were being offered the same amount of money, but in one case it's fair and in the other case it's not," Tabibnia said.

Almost half the time, people agreed to accept offers of just 20 to 30 percent of the total money, but when they accepted these unfair offers, most of the brain's reward circuitry was not activated; those brain regions were activated only for the fair offers. Less than 2 percent accepted offers of 10 percent of the total money. The study group consisted of 12 UCLA students...

"The brain's reward regions were more active when people were given a $5 offer out of $10 than when they received a $5 offer out of $23," Lieberman said. "We call this finding the 'sunny side of fairness' because it shows the rewarding experience of being treated fairly."

A region of the brain called the insula, associated with disgust, is more active when people are given insulting offers, Lieberman said.

When people accepted the insulting offers, they tended to turn on a region of the prefrontal cortex that is associated with emotion regulation, while the insula was less active.

"We're showing what happens in the brain when people swallow their pride," Tabibnia said. "The region of the brain most associated with self-control gets activated and the disgust-related region shows less of a response."

"If we can regulate our sense of insult, we can say yes to the insulting offer and accept the cash," Lieberman said.

Can taking economics courses can to overcome the fairness hard-wiring?:

We Are What We Learn, by Ray Fisman, Forbes: ...[W]e put 70 Yale Law students in a computer lab, and had them play a game that would reveal to us their views on fairness. (The study, which was coauthored with Shachar Kariv and Daniel Markovits, can be found here.)

The students made 50 decisions about giving. In some cases students started with $10, and for each dollar they gave up, their (anonymous) partner in the game would get, say, $5. In this case, giving was "cheap." In others, giving was expensive (each dollar given up yielded only 20 cents for the partner).

Someone who gives a lot when it's cheap and keeps most of the pie for himself when giving is expensive focuses on efficiency: He's making sure the maximum amount is paid out to him and his partner combined. Someone who keeps 80% of the pie when it would be cheap to give is more focused on equality. Someone who always keeps everything, regardless of the price of giving, is just plain selfish, the very embodiment of the rational, self-interested Homo economicus.

It turns out that exposure to economics makes a big difference in how students split the pie, in terms of both efficiency and outright selfishness. Students assigned to classes taught by economists were more likely to give a lot when it was cheap to do so. But they were also much more likely to take the whole pie for themselves.

Are You Sure?

I wonder if the author is certain about this:

On Being Certain: Believing You are Right Even When You are Wrong: The day after the 1986 Challenger shuttle accident, psychologist Ulric Neisser asked 106 students to write down exactly where they were and what they were doing when they first heard about the explosion. When he interviewed the students two and a half years later, 25 percent of them gave strikingly different accounts. But when confronted with their original journal entries, many students defended their beliefs. One of them answered, “That’s my handwriting, but that’s not what happened.” ...

Robert A. Burton tries to get to the bottom of the curious sensation he calls the “feeling of knowing”—being certain of a fact despite having no (or even contrary) evidence. Throughout his book, Burton makes the compelling argument that certainty “is neither a conscious choice nor even a thought process.” Instead, he says, that unmistakable sense of certainty “arises out of involuntary brain mechanisms that, like love or anger, function independently of reason.”

Burton thinks that just as we perceive our external world through our physical senses, our internal world presents itself in the form of feelings, such as familiar or strange and correct or incorrect. And he shows that these inner perceptions are necessary for us to function properly in everyday life, because our thoughts are subject to constant self-questioning. For example, even though reason may tell us that running up a tree to escape a lion is an excellent strategy, experience shows that great strategies can fail and that there may be better options. Because alternative choices are present in any situation, logical thought alone would be doomed to a perpetual “yes, but” questioning routine. Burton reasons that it is the feeling of knowing that solves this dilemma of how to reach a conclusion. Without this “circuit breaker,” indecision and inaction would rule the day.

One of the startling implications of Burton’s thesis is that we ultimately cannot trust ourselves when we believe we know something to be true. “We can’t afford to continue with the outdated claims of a perfectly rational unconscious or knowing when we can trust gut feelings,” he writes. ...

Cooperating with Strangers

Herbert Gintis on altruism:

Gintis' perspective piece in Science reveiws recent behavioral game theory research, EurekAlert: ...Modern democratic societies are associated with strong economic performance as well as numerous ills -- the decay of traditional family and ethnic ties, loss of community, inequality, and destruction of the environment.

In a Perspectives piece appearing in the March 7 issue of Science, ... Professor Herbert Gintis ... reviews recent behavioral game theory research by Herrmann, Thöni, and Gächter. Their paper ... strongly suggests that systematic differences across societies ... affect their capacity to cooperate effectively.

Using cooperative games, Herrmann et al. collected data in 15 countries with varying levels of economic development. They show that university students in democratic societies with advanced market economies rarely exercised a type of antisocial punishment featured in the game, while this behavior was commonly exercised by students in traditional societies based on authoritarian and parochial social institutions. The results suggest that the depiction of civil society as the sphere of naked self-interest is radically incorrect; rather, the success of democratic market societies may depend critically on individuals balancing self interest with morality.

“The authors’ empirical results show that the advanced market societies with democratic institutions produce an ethic of spontaneous cooperation, with a strong altruistic dimension, that likely accounts at least in part for their material success and legitimacy, says Gintis. ...

The article's introduction explains that although there appears to be a loss of community in large, developed societies relative to smaller, more traditional societies,  large, developed societies require more cooperation with strangers and hence more altruism:

Punishment and Cooperation, by Herbert Gintis, Science: Even champions of modern society agree that it involves a loss of community (based on family and ethnic ties) and an expansion of civil society, with emphasis on the more impersonal interactions among individuals with minimal social ties. ... On page 1362 of this issue, Herrmann et al. report ... that the success of democratic market societies may depend critically on moral virtues as well as material interests, so the depiction of civil society as the sphere of "naked self-interest" is radically incorrect.

The standard view holds that human nature has a private side in which we interact morally with a small circle of intimates and a public side in which we behave as selfish maximizers. Herrmann et al. suggest that most individuals have a deep reservoir of behaviors and mores that can be exhibited in the most impersonal interactions with unrelated others. This reservoir of moral predispositions is based on an innate prosociality that is a product of our evolution as a species, as well as the uniquely human capacity to internalize norms of social behavior. Both forces predispose individuals to behave morally even when this conflicts with their material interests. ...

Ben Stein Watch

Evolutionary biologists have started their own Ben Stein watch:

Ben Stein Wins Intelligent Design Money, by Gary Stix, SciAm Observations: Ben Stein was the goofball host of the cable show “Win Ben Stein’s Money.” A Christian University in southern California has just announced that it is honoring Stein for his upcoming movie that makes the case for taking intelligent design seriously. The press release, issued today, declares: “Ben Stein Wins Money from Intelligent Design Community.”

Stein is scheduled to receive from Biota University the Phillip E. Johnson Award for Liberty and Truth, named after a well-known creationist. ... The release does not mention how much Ben Stein won, but it does cite Stein’s upcoming movie "Expelled: No Intelligence Allowed."

“In his new movie “Expelled,” Stein wonders whether humans were designed by an intelligent being or whether we were simply the result of an ancient natural accident. In his search for an answer, he discovers an elitist scientific establishment that punishes the scientific proponents of Intelligent Design because they reject some of the claims of Darwin’s theory of evolution. ‘Big science in this area of biology has lost its way,’ says Stein. ‘Scientists are supposed to be allowed to follow the evidence wherever it may lead, no matter what the implications are. Freedom of inquiry has been greatly compromised, and this is not only anti-American, it’s anti-science.’ ...

The award ceremony will feature premiere clips from the forthcoming movie ... and will include a brief address by Stein.”

The movie is a potential setback to science educators’ continuing efforts to set the record straight because Stein, the son of renowned economist Herbert Stein, lends a patina of respectability to neo-Creationist science as a result of his status as a minor celebrity. Perhaps more egregious than the movie is Stein’s contention in his writing that "Darwinism, perhaps mixed with Imperialism, gave us Social Darwinism, a form of racism so vicious that it countenanced the Holocaust against the Jews and mass murder of many other groups in the name of speeding along the evolutionary process."

What can only be hoped is that a trenchant critical response by journalistic and science publishing institutions (and, of course, the blogging community)--will suffice so that Ben Stein never gets funding to make an Expelled II. Please download the recent National Academy of Sciences report "Science, Evolution and Creationism" to get the straight story.

Clean Coal?

President Bush, in the State of the Union Address:

To build a future of energy security, we must trust in the creative genius of American researchers and entrepreneurs and empower them to pioneer a new generation of clean energy technology. Our security, our prosperity, and our environment all require reducing our dependence on oil. ... Let us fund new technologies that can generate coal power while capturing carbon emissions. ... Let us create a new international clean technology fund, which will help developing nations like India and China make greater use of clean energy sources. ... The United States is committed to strengthening our energy security and confronting global climate change. And the best way to meet these goals is for America to continue leading the way toward the development of cleaner and more energy-efficient technology. To keep America competitive into the future, we must trust in the skill of our scientists and engineers and empower them to pursue the breakthroughs of tomorrow.

SciAm Observations follows up:

Clean Coal Turns to Cinders, by Steven Ashley, SciAm Observations: For those journalists who have been monitoring “clean coal” technology over the last few years, it was no surprise to hear that the U.S. Department of Energy has canceled its so-called FutureGen plant, which was to burn coal to produce electricity and then sock away the resulting climate change-causing carbon dioxide emissions underground. ...

"Why Don't Chimpanzees Like to Barter Commodities?"

Chimpanzees are reluctant to trade "a very good commodity (apple slices)" for "an even more preferred commodity (grapes)." This research attempts to explain why and in the process learn something about how barter might have arisen among humans:

Why don't chimpanzees like to barter commodities?, EurekAlert: For thousands of years, human beings have relied on commodity barter as an essential aspect of their lives. It is the behavior that allows specialized professions, as one individual gives up some of what he has reaped to exchange with another for something different. In this way, both individuals end up better off. Despite the importance of this behavior, little is known about how barter evolved and developed.

This study (published in PLoS ONE on January 30) is the first to examine the circumstances under which chimpanzees, our closest relatives, will exchange one inherently valuable commodity (an apple slice) for another (a grape), which is what early humans must have somehow learned to do. Economists believe that commodity barter is one of the most basic precursors to economic specialization, which we observe in humans but not in other primate species. First of all, the researchers found that chimpanzees often did not spontaneously barter food items, but needed to be trained to engage in commodity barter. Moreover, even after the chimpanzees had been trained to do barters with reliable human trading partners, they were reluctant to engage in extreme deals in which a very good commodity (apple slices) had to be sacrificed in order to get an even more preferred commodity (grapes).

Prior animal behavior studies have largely examined chimpanzees’ willingness to trade tokens for valuable commodities. Tokens do not exist in nature, and lack inherent value, so a chimpanzee’s willingness to trade a token for a valuable commodity, such as a grape, may say little about chimpanzee behavior outside the laboratory.

In a series of experiments, chimpanzees at two different facilities were given items of food and then offered the chance to exchange them for other food items. A collaboration of researchers ... found that the chimpanzees, once they were trained, were willing to barter food with humans, but if they could gain something significantly better – say, giving up carrots for much preferred grapes. Otherwise, they preferred to keep what they had.

The observed chimpanzee behavior could be reasonable because chimpanzees lack social systems to enforce deals and, as a society, punish an individual that cheats its trading partner by running off with both commodities. Also because of their lack of property ownership norms, chimpanzees in nature do not store property and thus would have little opportunity to trade commodities. Nevertheless, as prior research has demonstrated, they do possess highly active service economies. In their natural environment, only current possessions are “owned,” and the threat of losing what one has is very high, so chimpanzees frequently possess nothing to trade.

“This reluctance to trade appears to be deeply ingrained in the chimpanzee psyche,” said one of the lead authors, Sarah Brosnan ... at Georgia State University. “They’re perfectly capable of barter, but they don’t do so in a way which will maximize their outcomes.”

The other lead author, Professor Mark F. Grady, Director of UCLA’s Center for Law and Economics, commented: “I believe that chimpanzees are reluctant to barter commodities mainly because they lack effective ownership norms. These norms are especially costly to enforce, and for this species the game has evidently not been worth the candle. Fortunately, services can be protected without ownership norms, so chimpanzees can and do trade services with each other. As chimpanzee societies demonstrate, however, a service economy does not lead to the same degree of economic specialization that we observe among humans.”

The research could additionally shed light on the instances in which humans also don’t maximize their gains, Brosnan said.

"Time to Reexamine Time"

Taking a momentary break from the subprime crisis, the fall in the dollar, the distribution of income and wealth, the Fed, tax cuts, and so on, here's something on the nature of time:

Making Space for Time, by Scott Dodd, Scientific American: ...Many of the world’s top theoretical physicists and cosmologists gathered ... to grapple with the mystery of how time works. New telescope observations and novel thinking about quantum gravity have convinced them that it is time to reexamine time. ...

On the face of it, time seems pretty simple, like a one-way street: eggs don’t unscramble, ... and your grandparents will never be younger than you. But the universe’s basic laws appear to be time-symmetrical, meaning they are unaffected by the direction of time. From the point of view of physics, the past, present and future exist simultaneously.

For more than a century, physicists have proposed any number of explanations for this apparent contradiction, from the psychological (the flow of time is an illusion) to the physical (some unknown property of quantum mechanics reconciles the contradiction). None has proved satisfactory. In 1927 astrophysicist Sir Arthur Eddington coined the term “time’s arrow” for the phenomenon and linked it to entropy: as the universe gets older, it becomes more disordered, following the second law of thermodynamics. But scientists cannot explain why order lies in the past and disorder in the future. ...

Laura Mersini-Houghton, a physicist at the University of North Carolina at Chapel Hill [says]... “It’s been very difficult to make progress over the past 20 years, because there hasn’t been much new to say.” That is all changing thanks to stronger instruments for probing the heavens. The cosmic microwave background radiation, a remnant of the big bang, shows that 380,000 years after its birth, the universe was filled with hot gas, all evenly distributed and highly ordered. Eventually the early cosmos underwent inflation and began to coalesce into the disordered universe of stars and atoms we know today.

What remains puzzling, though, is why the early universe was so orderly—a condition that physicists consider highly improbable—and what caused it to swell so rapidly. “The arrow-of-time problem, once you get down to the nitty-gritty of it, is, Why was the early universe the way it was?” says Sean Carroll, a cosmologist at the California Institute of Technology. ...

Prominent physicists ... invoked string theory, black hole equations and the idea that we live in one of many parallel universes as possible explanations.

The multiverse concept emerged as one of the more favored—or at least frequently talked about—theories for the strange tidiness of the early cosmos. “If you accept the idea that this might be only one of many possible universes, then that makes it more plausible,” Mersini- Houghton says. Universes that started out more chaotic might not have survived or evolved to support intelligent life. So one-way time—and our entire existence, for that matter—could be just a happenstance. ...

Menu Invariant Neurons and Transitivity

Interesting. Transitivity may be hard-wired:

Neurons in the frontal lobe may be responsible for rational decision-making, EurekAlert: You study the menu at a restaurant and decide to order the steak rather than the salmon. But when the waiter tells you about the lobster special, you decide lobster trumps steak. Without reconsidering the salmon, you place your order—all because of a trait called “transitivity.”

“Transitivity is the hallmark of rational economic choice,” says Camillo Padoa-Schioppa, a postdoctoral researcher in HMS Professor of Neurobiology John Assad’s lab. According to transitivity, if you prefer A to B and B to C, then you ought to prefer A to C. Or, if you prefer lobster to steak, and steak to salmon, then you will prefer lobster to salmon.

Padoa-Schioppa is lead author on a paper that suggests this trait might be encoded at the level of individual neurons. The study, which appears online Dec. 9 in Nature Neuroscience, shows that some neurons in a part of the brain called the orbitofrontal cortex encode economic value in a “menu invariant” way. That is, the neurons respond the same to steak regardless if it’s offered against salmon or lobster.

Faithful to Science

I haven't had much time to think about this, but posts are getting stale amid the rush of the holiday weekend, so, staying in "echo mode":

Taking Science on Faith, by Paul Davies, Commentary, NY Times: Science, we are repeatedly told, is the most reliable form of knowledge about the world because it is based on testable hypotheses. Religion, by contrast, is based on faith. ...

The problem with this neat separation into “non-overlapping magisteria,” as Stephen Jay Gould described science and religion, is that science has its own faith-based belief system. All science proceeds on the assumption that nature is ordered in a rational and intelligible way. You couldn’t be a scientist if you thought the universe was a meaningless jumble of odds and ends haphazardly juxtaposed. ...

The most refined expression of the rational intelligibility of the cosmos is found in the laws of physics, the fundamental rules on which nature runs. The laws of gravitation and electromagnetism, the laws that regulate the world within the atom, the laws of motion — all are expressed as tidy mathematical relationships. But where do these laws come from? And why do they have the form that they do?

When I was a student, the laws of physics were regarded as completely off limits. The job of the scientist, we were told, is to discover the laws and apply them, not inquire into their provenance. The laws were treated as “given” — imprinted on the universe like a maker’s mark at the moment of cosmic birth — and fixed forevermore. Therefore, to be a scientist, you had to have faith that the universe is governed by dependable, immutable, absolute, universal, mathematical laws of an unspecified origin. You’ve got to believe that these laws won’t fail, that we won’t wake up tomorrow to find heat flowing from cold to hot, or the speed of light changing by the hour.

Over the years I have often asked my physicist colleagues why the laws of physics are what they are. The answers vary... The favorite reply is, “There is no reason they are what they are — they just are.” The idea that the laws exist reasonlessly is deeply anti-rational. After all, the very essence of a scientific explanation of some phenomenon is that the world is ordered logically and that there are reasons things are as they are. ...

Although scientists have long had an inclination to shrug aside such questions concerning the source of the laws of physics, the mood has now shifted considerably. Part of the reason ... that the laws of physics have now been brought within the scope of scientific inquiry is the realization that what we long regarded as absolute and universal laws might not be truly fundamental at all, but more like local bylaws. They could vary from place to place on a mega-cosmic scale. A God’s-eye view might reveal a vast patchwork quilt of universes, each with its own distinctive set of bylaws. ...

The multiverse theory is increasingly popular, but it doesn’t so much explain the laws of physics as dodge the whole issue. There has to be a physical mechanism to make all those universes and bestow bylaws on them. This process will require its own laws, or meta-laws. Where do they come from? The problem has simply been shifted up a level from the laws of the universe to the meta-laws of the multiverse.

Clearly, then, both religion and science are founded on faith — namely, on belief in the existence of something outside the universe, like an unexplained God or an unexplained set of physical laws... For that reason, both monotheistic religion and orthodox science fail to provide a complete account of physical existence. ...

It seems to me there is no hope of ever explaining why the physical universe is as it is so long as we are fixated on immutable laws or meta-laws that exist reasonlessly or are imposed by divine providence. The alternative is to regard the laws of physics and the universe they govern as part and parcel of a unitary system, and to be incorporated together within a common explanatory scheme.

In other words, the laws should have an explanation from within the universe and not involve appealing to an external agency. The specifics of that explanation are a matter for future research. But until science comes up with a testable theory of the laws of the universe, its claim to be free of faith is manifestly bogus.

Very quick (and probably wrong) reaction: I guess I don't see why falsifiability isn't enough to distinguish science from faith. The argument - I think- is that a statement like "this object is blue," which appears falsifiable isn't since if the laws of the universe change the object may be red instead of blue tomorrow. So I have to take it on "faith" that blue will stay blue forever. Fine, but as I look at the object it's either blue or it isn't. If it changes from blue to red someday, then that is an indication that either the hypothesis itself or one of the maintained hypotheses (i.e. that the laws of physics are constant, at least locally) is false. So I don't see why the scientific method fails us in this particular instance. But as I said, I didn't give this the thought it deserves, so feel free to explain why I've totally missed the point. It wouldn't be the first time that has happened.

"How Much Inequity Can You Take in a System?"

On equity:

Money motivates -- especially when your colleague gets less, EurekAlert: The feelings an individual has on receiving his pay cheque depend critically on how much his colleague earns. Hard evidence for this comes from an experiment conducted by economists and brain scientists at the University of Bonn. They tested male subjects in pairs, asking them to perform a simple task and promising payment for success. ... Participants who got more money than their co-players showed much stronger activation in the brain's "reward centre" than occurred when both players received the same amount. Details of the study are ... in the renowned academic journal "Science". ...

In the experiment ... the participants had to lie down next to each other in parallel brain scanners. They were asked to perform the same task simultaneously. Dots appeared on a screen and they had to estimate the number being displayed. They were then told whether their answer was correct. If they had solved the task correctly, they received a financial reward, which might range from 30 to 120 euros. Each participant also learnt how his partner in the game had performed and how much he would pocket in return.

Throughout this procedure the tomograph monitored the changes in blood circulation in the different regions of the subject's brain. ... A total of 38 men took part in the experiment. "We registered enhanced activity in various parts of their brains during the test," explains the Bonn neuroscientist Dr. Bernd Weber. "One area in particular, the ventral striatum, is the region where part of what we call the 'reward system' is located."

The reward system is activated when an individual has an experience he considers worth aspiring to. "In this area we observed an activation when the player completed his task correctly," says Bernd Weber... By contrast, when the subject got his estimate wrong, activity in his ventral striatum would subside. For us, however, the exciting finding here was the role played by another factor: the performance of the player in the other scanner. Weber's colleague Dr. Klaus Fliessbach sums up the outcome, "Activation was at its highest for those players who got the right answer while their co-player got it wrong."

The researchers then took a closer look at those cases in which both players estimated the number of points correctly. If the participants received the same payment there was relatively moderate activation of the reward centre. But if player one was given, say, 120 euros, while his partner received only 60, the activation turned out to be much stronger for player one. For player two, on the other hand, the blood flow into the ventral striatum actually decreased - even though he had performed the task successfully and had been rewarded for his efforts.

"This result clearly contradicts traditional economic theory," explains Bonn-based economist Professor Dr. Armin Falk. "The theory assumes that the only important factor is the absolute size of the reward. The comparison with other people's rewards shouldn't really play any role in economic motivation." It is the first time that this hypothesis has been challenged using such an experimental approach. It does not mean, of course, that the absolute size of the reward has no impact on the "reward centre": more excitement was registered in response to 60 euros than 30. "But the interesting point to emerge from our study is that the relative size of one's earnings plays such a major role," Armin Falk insists. ...

And:

Monkeys Have Sense of Fairness, Study Finds, by Susan McMillan, Emory Wheel: Two researchers at the Yerkes National Primate Research Center have found that brown capuchin monkeys have a sense of fairness and will reject inequitable rewards, much as humans do.

Frans de Waal, C.H. Candler ... said his work with Georgia State University professor Sarah Brosnan was based on a study they did in 2003. In that experiment, monkeys responded negatively when a partner received a superior reward for completing the same task, retrieving a pebble and placing it the researcher’s hand.

“As soon as the partner’s getting something better, like grapes, they don’t want to do it any more,” de Waal said. “They throw the food out of the cage sometimes.”

Brosnan and de Waal conducted a follow-up study to rule out alternative explanations for why monkeys would reject slices of cucumber, a previously acceptable reward.

“The most important one was you could argue that the monkeys reject the cucumber pieces because they see grapes and they want grapes,” de Waal said. “We would show them grapes, but we would put them away, and showing them the grapes didn’t make a difference in our test. It had to do with what partner was getting.”

Brosnan and de Waal also varied the amount of effort required to complete the task to see its effect on the monkeys’ reactions.

They found that when monkeys had to expend more effort, they were more sensitive to inequity and less likely to accept cucumber slices when partners had received grapes for equal or less work. But both would accept grapes even if they completed tasks at different levels of difficulty, de Waal said.

“If you gave them grapes, they were not sensitive to effort,” he said. “The grape is such a good reward that they would do whatever to get the grape.” ...

According to de Waal, the research illustrates inequity aversion, a concept from the field of behavioral economics, which applies behavioral psychology to economic interactions. Like the monkeys in de Waal’s study, humans do not always act as rational profit maximizers and sometimes turn down good offers if someone else is getting a better deal.

“For a monkey to refuse a perfectly fine food like cucumber just because somebody else is getting something better is an irrational reaction,” de Waal said. “Profit maximizing requires that whenever you can get something you take it.”

Some scholars, however, argue that reactions like the monkeys’ make sense in a social context. The capuchins’ sense of fairness has “evolved within the context of cooperation,” de Waal said, because capuchins live in groups and sometimes hunt squirrels together.

“If you don’t get in accordance to your effort, you should be sensitive to that, or everyone will take advantage of you,” he said. “It’s actually a rational response to make sure you get the right rewards for the right amount of work.”

De Waal said reactions to inequity are important for researchers to study because of widening gaps between haves and have-nots.

“How much inequity can you take in a system?” he said.

"The Theory of Moral Neuroscience"

Adam Smith's Lost Legacy says this discussion of how neuroscience is confirming the role of empathy in human sociality and morality is "worth a look":

The Theory of Moral Neuroscience, by Ronald Bailey, Reason Online: "As we have no immediate experience of what other men feel, we can form no idea of the manner in which they are affected, but by conceiving what we ourselves should feel in the like situation," observed ... Adam Smith in the first chapter of ... The Theory of Moral Sentiments (1759). "Whatever is the passion which arises from any object in the person principally concerned, an analogous emotion springs up, at the thought of his situation, in the breast of every attentive spectator." Smith's argument is that our ability to empathize with others is at the root of our morality.

Recent discoveries in neuroscience are bolstering Smith's insights about the crucial role of empathy in human sociality and morality. For example, in the 1990s, Italian scientists researching motor neurons in macaque monkeys discovered mirror neurons. As the story goes, a monkey's brain had been wired up to detect the firing of his neurons... One researcher returned from lunch licking an ice cream cone. As the monkey watched the researcher, some of his neurons fired as though he were eating the ice cream... The monkey's neurons were "mirroring" the activity that the monkey was observing.

Neuroscientist Giacomo Rizzolatti and his colleagues ... reported their discovery of monkey mirror neurons in 1996. Researchers soon found evidence for mirror neurons in human beings. Just like monkeys, it turns out that when we see someone perform an action—picking up a glass of water or kicking a ball—our mirror neurons simulate that action in our brains. Researchers have suggested that mirror neurons are crucially involved in the distinctive human development of language, morality, and culture.

Research looking at the brains of autistic people highlights the role that some neuroscientists believe that mirror neurons play in empathy. ...[T]he symptoms of autism often involve a marked lack of awareness of the feelings of others and little or no social interaction or communications with others. In 2005, researchers at the University of California San Diego (UCSD) ...[found] "...results [that] support the hypothesis of a dysfunctional mirror neuron system in high-functioning individuals with ASD"... Mirror neurons are not absent from the brains of ASD people, but they are misfiring. ...

Mirror neurons are not the sole source of our moral sense. After all, ASD individuals are not notably immoral. However, they are an important part of it. Empathy, the ability to feel someone else's joy, pain, and gratitude, helps guide our pre-reflective moral values. So let's consider the limits of empathy for schooling us in morality. Harvard University psychologist Joshua Greene offers the case in which, while driving, you see a bleeding hiker lying by the roadside. You must decide between taking the man to the hospital or refuse to do so because the injured man would bleed all over your expensive upholstery.

Greene correctly observes, "Most people say that it would be seriously wrong to abandon this man out of concern for one's car seats" But what about the case in which you receive a letter from an international charity that promises to lift a poor family in Africa out of abject misery at the cost of a $200 contribution from you? "Most people say that it would not be wrong to refrain from making a donation in this case," writes Greene. What's the difference? ... Greene proposes an evolutionary answer. He points out that our ancestors evolved in an environment in which they could only choose to save people that they knew personally, not total strangers living continents away.

Greene's findings again buttress Adam Smith's insight from more than two centuries ago that empathy works to prompt us to help our neighbors but attenuates with social distance. "That we should be but little interested, therefore, in the fortune of those whom we can neither serve nor hurt, and who are in every respect so very remote from us, seems wisely ordered by Nature," writes Smith. ...

But we do not have to be the slaves of our evolved moral intuitions. By showing us the neural workings of our moral sense, neuroscience is giving us the tools to understand and improve our moral choices. As Greene concludes, "I am confident that the scientific study of human nature will have an increasingly important role in nature's grand experiment with moral animals." ...

What is Intelligence?

I don't know a lot about this topic, it's psychology not economics, so please add anything you can in comments. This is part of the lead essay to a discussion at Cato Unbound that attempts to answer questions such as "Is intelligence a unitary, general factor — the psychometrician’s famed g — or is it more plural and fragmented? What role do genes play in determining IQ? The environment? If intelligence is in the genes, then why do IQ scores continue to rise generation after generation all over the world?":

Shattering Intelligence: Implications for Education and Interventions, by  James R. Flynn, Cato Unbound: The concept of a general intelligence or g factor has proved enormously fruitful in two respects. On the level of individual differences, it captures the fact that if one person outperforms another on one kind of conceptually demanding task, that advantage is likely to persist over a whole range of other cognitive tasks. ...

An example of a good IQ test is the WISC (Wechsler Intelligence Scale for Children). The reason it is good is that its ten subtests have enough cognitive complexity so that a high IQ person tends to beat the average person by a handy margin on all ten. That is equivalent to saying that it is a good measure of g. A test that included subtests of minimal cognitive complexity, let us say tying your shoes, would be a bad IQ test. The task is so simple that unintelligent people would perform it as well as intelligent people.

Shattering general intelligence Despite all the triumphs of the concept of general intelligence, I believe intelligence is like the atom: you have to know both why its parts cohere and why they sometimes fly apart. Americans made massive IQ gains on the WISC between 1947 and 2002 amounting to almost 18 points... These gains ranged from only 2 points on the WISC subtest called Information to 24 points on the subtest called Similarites (what do dogs and rabbits have in common?), despite the fact that both have the cognitive complexity that makes them good measures of g.

A bright person tends to accumulate more general information than a dull person at any given time and also tends to better at classifying things (will say that dogs and rabbits are both mammals). But over time, we find that society can develop these conceptual skills quite independently of one another. Children may progress a lot over time in putting on scientific spectacles, which means that many more of them will say “both mammals” rather than say something like “I use my dog to hunt rabbits.” While thanks to the rise of a visual culture that discourages reading, the average child today may have no greater store of general information than children did 55 years ago.

Diagnosing how conceptual skills actually develop The fact that various conceptual skills develop so independently over time has wide implications for education. ...

Once you break intelligence down into its autonomous components, many things become clear. For example, the Nation’s Report Card shows that today’s children are ahead of their parents in reading at early ages and then the gains fade away by the age of 17. How is that possible? The children are doing much better on heavily g loaded IQ tests like the WISC at all ages. Should not brighter people be able to read adult novels better?

This mystery is solved when you look at IQ trends over time. Since 1972 (when the NRC began), the big IQ gains have been on certain subtests and not others. There have been virtually no gains in vocabulary and information. You cannot enjoy War and Peace very much if you have to run to the dictionary or encyclopedia every other paragraph. We are doing a better job of teaching children the mechanics of reading at early ages. But their parents had mastered the mechanics by age 17 and at that age, neither generation has an information or vocabulary advantage. So we have made no progress is teaching young people how to enjoy adult literature. ...

The transience of intelligence General intelligence or g has something to do with brain quality, and good genes have a lot to do with having an above average brain. Therefore, there was a tendency in differential psychology to think that our genes-determined brain accompanies us throughout our lives and that environment, except in extreme conditions (living with wolves since infancy), merely leaves minor imprints on that brain. After all, twin studies showed that even when identical twins were separated at birth, they had IQs at adulthood that were much more similar than the IQs of randomly selected people. What better evidence did you need that genes/brain went though life and environment just did a bit of tinkering along the way?

But this created a dilemma: if genes were so dominant, how could IQ gains over time be so huge? Unless you thought that there was a large genetic upgrading from one generation to the next, large intelligence gains should be impossible. Yet they occurred, which implied that there were environmental factors of huge potency. How could environment be both so feeble and so potent?

Environmental Change and Agricultural Output

New results on the impact of environmental change on the world's agricultural economy:

Human-generated ozone will damage crops, Nancy Stauffer, MIT Energy Initiative: A novel MIT study concludes that increasing levels of ozone due to the growing use of fossil fuels will damage global vegetation, resulting in serious costs to the world's economy.

The analysis, reported in the November issue of Energy Policy, focused on how three environmental changes (increases in temperature, carbon dioxide and ozone) associated with human activity will affect crops, pastures and forests.

The research shows that increases in temperature and in carbon dioxide may actually benefit vegetation, especially in northern temperate regions. However, those benefits may be more than offset by the detrimental effects of increases in ozone, notably on crops. Ozone is a form of oxygen that is an atmospheric pollutant at ground level.

The economic cost of the damage will be moderated by changes in land use and by agricultural trade, with some regions more able to adapt than others. But the overall economic consequences will be considerable. According to the analysis, if nothing is done, by 2100 the global value of crop production will fall by 10 to 12 percent.

"Even assuming that best-practice technology for controlling ozone is adopted worldwide, we see rapidly rising ozone concentrations in the coming decades," said John M. Reilly, associate director of the MIT Joint Program on the Science and Policy of Global Change. "That result is both surprising and worrisome."

Stratospheric Reflections: The Mount Pinatubo Solution to Global Warming

I hope we aren't reduced to this type of solution to the global warming problem:

How to Cool the Globe, by Ken Caldera, Commentary, NY Times:  Despite growing interest in clean energy technology, it looks as if we are not going to reduce emissions of carbon dioxide anytime soon. The amount in the atmosphere today exceeds the most pessimistic forecasts made just a few years ago, and it is increasing faster than anybody had foreseen. ...

What can be done? One idea is to counteract warming by tossing small particles into the stratosphere (above where jets fly). This strategy may sound far-fetched, but it has the potential to cool the earth within months.

Mount Pinatubo, a volcano in the Philippines that erupted in 1991, showed how it works. The eruption resulted in sulfate particles in the stratosphere that reflected the sun’s rays back to space, and as a consequence the earth briefly cooled.

If we could pour a five-gallon bucket’s worth of sulfate particles per second into the stratosphere, it might be enough to keep the earth from warming for 50 years. Tossing twice as much up there could protect us into the next century.

A 1992 report from the National Academy of Sciences suggests that naval artillery, rockets and aircraft exhaust could all be used to send the particles up. The least expensive option might be to use a fire hose suspended from a series of balloons. Scientists have yet to analyze the engineering involved, but the hurdles appear surmountable.

Seeding the stratosphere might not work perfectly. But it would be cheap and easy...

This is not to say that we should give up trying to reduce greenhouse gas emissions. ... Think of it as an insurance policy, a backup plan for climate change.

Which is the more environmentally sensitive thing to do: let the Greenland ice sheet collapse and polar bears become extinct, or throw a little sulfate in the stratosphere? The second option is at least worth looking into.

The Other Half

I think it was Greg Mankiw who wrote about lesser known co-authors getting the short end of the stick when it comes to recognition for their work even when they are the driving force behind the research. The IPCC is suffering a similar fate with Al Gore seeming to have won the Nobel Prize all by himself from the press and pundit coverage, so I'm glad to see Jeff Sachs shine a light on scientists at the IPCC who played a key role in establishing the scientific basis for the climate change problem:

The appliance of science, by Jeffrey Sachs, Project Syndicate: Al Gore's Nobel peace prize is a fitting tribute to a world leader who has been prescient, bold, and skillful in alerting the world to the dangers of man-made climate change. Gore's co-recipient of the Nobel peace prize is less known, but no less deserving. The Intergovernmental Panel on Climate Change (IPCC) is the UN's global body for assessing the scientific knowledge on climate change and bringing that knowledge to the attention of the public and the world's policy makers. Its receipt of the Nobel peace prize sends three powerful messages.

First, the world's leading climate scientists and most of the world's governments have brought climate science to the forefront of global policy debates. Climate change is complicated. ... A worldwide effort is needed to understand changes in all parts of the world.

Since its inception in 1988, the IPCC has harnessed the best scientific minds from around the world to document and explain what is known and not known about human-induced climate change. ... The review process is transparent and governments are invited to participate by nominating experts to various working groups, reviewing and commenting on IPCC draft documents, and approving final IPCC reports. This process builds accuracy and confidence. ...

The second message is that such a global process linking scientists and governments in a common effort is vital, because without it the airwaves can get clogged with the ignorance and misinformation peddled by special interest groups. For years, oil companies such as Exxon ... sponsored misleading journalism and groups that masqueraded as "thinktanks." The IPCC faced down these vested interests. Today, ExxonMobil and other major oil companies are much more honest and constructive in their discussions... They could not, in the long-term, beat the science without gravely damaging their reputations.

Finally, this year's Nobel peace prize is a wake-up call to governments, starting with the United States, to get more serious about science and sustainable development. The Bush administration has been disastrously anti-scientific. It has been staffed with ideologues who reject or neglect climate science... Most governments are in fact ill-equipped to understand the scientific issues, even when they are much less ideological and dogmatic than Bush. ...

The world should respond in three ways. First, we should take seriously the need for a new climate-change accord when global negotiations begin in Bali, Indonesia this December. ...

Second, we should initiate IPCC-like scientific processes for other global challenges, including the global loss of biodiversity, desertification, and over-fishing of the oceans. In each area, the general public and the world's governments only dimly perceive a global crisis. Governments have signed treaties to limit the damage, but they are not acting on those promises with the urgency required, in part because they do not understand the underlying scientific challenges.

Finally, we must revamp national governments so that they have processes and capabilities similar to the IPCC. Global processes like the IPCC are crucial, but the issues must also be "brought home" to the conditions and challenges facing each country. ... The IPCC proved that science can contribute powerfully to meeting these challenges, and that scientists and policymakers can work together to help solve problems of critical importance for humanity.

Human Capital

An email suggests this article from Economic Principles:

The Generation of 1958, by David Warsh: Fifty years ago last week, the Soviet satellite known as Sputnik roared into orbit around the Earth, catching the United States completely by surprise. Americans had expected that their Vanguard satellite would lead the way into space. ... The Soviets’ successful launch was a beacon to some, a fright to many. A future in space for mankind suddenly seemed an exhilarating possibility, at least to those who had thought about it since the time of Jules Verne. But so did missile-driven global thermonuclear war. In its way, Sputnik was every bit as galvanizing an event as 9/11. ...

The real watershed came the next year, however, when Congress passed the National Defense Education Act. President Dwight Eisenhower signed the NDEA into law on September 2, 1958. School reform had been on the table for most of a decade. ...  As Peter Dow makes clear in Schoolhouse Politics: Lessons from the Sputnik Era, the October surprise broke a longstanding logjam on Capitol Hill. Southern Democrats in the House of Representatives, for whom “the three Rs” meant Reds, race and religion, were finally forced to report out a bill. 

What exactly was the $10 billion NDEA?  It depends on whom you ask.  (A billion dollars was a lot of money in the 1950s; the National Defense Highways Act of a couple years before, which created the Interstate highway system, was budgeted at $25 million over a decade. In today’s dollars, each program would cost ten or fifteen times as much.)

"Swarm Theory"

Part of a much longer article:

Swarm Theory, by Peter Miler, National Geographic: I used to think ants knew what they were doing. ... I just figured they had a plan... How else could ants organize highways, build elaborate nests, stage epic raids, and do all the other things ants do?

Turns out I was wrong. Ants aren't clever little engineers, architects, or warriors after all—at least not as individuals. When it comes to deciding what to do next, most ants don't have a clue. ... Deborah M. Gordon, a biologist at Stanford University. ... [says] "Ants aren't smart, ... Ant colonies are." A colony can solve problems unthinkable for individual ants, such as finding the shortest path to the best food source, allocating workers to different tasks, or defending a territory from neighbors. .... They do it with something called swarm intelligence.

Where this intelligence comes from raises a fundamental question in nature: How do the simple actions of individuals add up to the complex behavior of a group? ...

The Economics of Time Travel

Ever wonder how much it would cost to build a time machine? No? Well, if you ever do, here's the answer:

Time machine possible says professor, Gold Coast News: Building a time machine that travels into the future is not science fiction - if you are a multi-trillionaire, a physics expert says.

Dr Craig Savage, who lectures in relativity and quantum mechanics at the Australian National University, says it is possible for people to travel forward in time but the costs involved are too great.

''If you could build a spaceship that could go three quarters of the speed of light you would time travel one hour into the future for every hour of your time,'' he said.

''People have designed such spacecrafts at various times but they would just be unimaginably expensive to create. ''It's not an issue of technology, it's one of economics.''

The cost of operating a time travelling machine, in relation to the cost of electricity, would be ten trillion dollars, Dr Savage estimates.

Politicizing Science

Should science be more political?:

Science must be more political, by Michael Schrage, Commentary, Financial Times: ...The great tragedy of science today, complain its champions, is its ugly and polarising politicisation. ...

Perhaps the tragedy, though, is not that science is too political – it is that science is not political enough. ... Public policy would be significantly better off if scientists were treated with greater scepticism and less deference.

Public debate would be far better informed if scientists were pushed to make their work more accessible, self-critical and contextually aware of findings in complementary technical disciplines. Politicians in democracies should not hesitate to exploit publicly the inherent uncertainties and legitimate disagreements in scientific analyses on sensitive issues. Highlighting science’s flaws – not unlike highlighting flaws in healthcare, national security and economic programmes – is good politics and even better policy.

Science as an enterprise may be objective; scientists as individuals are not. ... Scientists can be as vulgar, pigheaded and contemptuously dismissive of contrary evidence as any lawyer, civil servant, journalist or elite professional. ...

An individual scientist deserves much the same standing in a science policy debate as would a parent or teacher in policy disputes over education. Institutionally, however, America’s National Academies of Science, the UK’s Royal Society and the acronymed jumble of United Nations agencies have increasingly abandoned traditional roles as science “advisers” in favour of actively lobbying for their quantitative models and scenario extrapolations to be public policy planning tools. In effect, scientific institutions have evolved into “special pleaders”, as vested in the rightness of their recommendations as any influence-seeking industrial trade group or bar association. The “scientific objectivity” of their forecasts is achieved through negotiated committee consensus.

Unfortunately, most of these consensus declarations minimise methodological disagreements, competing interpretations and self-criticism. Judicial rulings by supreme courts may include two or three cogent dissenting views from the bench; elite science review committees typically do not. Are distinguished scientists less ideological and more objective about evidence than distinguished jurists? Hardly.

The core problem is fundamental confusion over scientific consensus in public policy. A scientific consensus on how to split the atom is not a policy consensus on which bombs or nuclear reactors to build; a scientific consensus around the origins and transmission of HIV/Aids is not a consensus about public health interventions; and scientific consensus about climate change is not policy consensus around carbon taxes or renewable energy. History teaches that culture, ethics, economics and, yes, politics overwhelmingly determine how scientific consensus ultimately translates into policy. Scientific consensus is overrated as a successful policy rationale. ...

But to the extent rational people insist “consensus science” justifies brave new policies, they invite closer scrutiny of how that consensus was reached. Here science does not do well. Ask physicists, molecular biologists, meteorologists, climatologists or economists what rules define “consensus” in their respective disciplines. Their answers will disappoint. No scientific consensus exists about what constitutes a scientific consensus.

Not 20 years ago, the scientific consensus declared the human genome filled with useless “junk DNA”. Today the emerging “consensus” insists junk DNA is useful after all. A century ago, elite scientific consensus said “eugenics” should determine the west’s population, immigration and education policy. How sustained should the perceived scientific consensus be before multi-billion-pound, life-and-death public policies are fixed around it? ...

Scientists will be more credible and persuasive not if they are less political but if their arguments are more accessible, more testable and, yes, more humble. Then again, that is just a ... hypothesis.

I don't have any problem at all with an honest debate over the validity of scientific claims used to support a particular policy. I do have a problem with dishonest debate, with distorting what science says to support or oppose a policy.

Uncertainty will be present in most cases, but the mere presence of uncertainty does not justify inaction. If a broad, though incomplete scientific consensus exists on a particular topic, and if the science implies that we face large costs of one sort or another in the future, precautionary action may still be justified. We can't just worry about the consequences if the science is wrong. We also need to worry about what might happen if it is right.

"If The Uncertainties Are Not Small, Standard Cost–Benefit Analysis As Applied To The Economics Of Climate Change Becomes Incoherent"

Partha Dasgupta reviews Cool It: The Skeptical Environmentalist's Guide to Global Warming, by Bjorn Lomborg (via email):

A challenge to Kyoto, by Partha Dasgupta, Nature: Bjorn Lomborg's The Skeptical Environmentalist created a sensation six years ago. The author offered figures to dismiss claims that the ecological-resource base in many parts of the world is deteriorating, and argued that the costs of reducing ecological losses are usually higher than the benefits. Never mind that several of the world's foremost environmental scientists expressed more than mere scepticism towards Lomborg's grasp of their science: prominent publications such as The Economist promoted the book vigorously... People learning of my own work in developing ecological economics would ask, "And have you read Lomborg?" — implying, "Why have you thrown away so much of your working life?"

Things have changed over the past year. Former US vice-president Al Gore's film An Inconvenient Truth and the Fourth Report of the Intergovernmental Panel on Climate Change have given rise to great public concern, and many now regard global warming to be the central problem facing humanity. Lomborg's latest book, Cool It, is a response to that change in public perception. He doesn't question the science...; he questions whether we should do much about it. ...

"The Really Hard Science"

This is from the latest issue of Scientific American:

The Really Hard Science, by Michael Shermer, Commentary, Scientific American: Over the past three decades I have noted two disturbing tendencies in both science and society: first, to rank the sciences from “hard” (physical sciences) to “medium” (biological sciences) to “soft” (social sciences); second, to divide science writing into two forms, technical and popular. And, as such rankings and divisions are wont to do, they include an assessment of worth, with the hard sciences and technical writing respected the most, and the soft sciences and popular writing esteemed the least. Both these prejudices are so far off the mark that they are not even wrong. ...

[I]f there must be a rank order (which there mustn’t), the current one is precisely reversed. The physical sciences are hard, in the sense that calculating differential equations is difficult, for example. The variables within ... the subject matter, however, are comparatively simple to constrain and test when contrasted with, say, computing the actions of organisms in an ecosystem... Even the difficulty of constructing ... models in the biological sciences pales in comparison to ... modeling the workings of human brains and societies. By these measures, the social sciences are the hard disciplines, because the subject matter is orders of magnitude more complex and multifaceted.

Between technical and popular science writing is what I call “integrative science,” a process that blends data, theory and narrative. Without all three of these metaphorical legs, the seat on which the enterprise of science rests would collapse. ...

Consider data and theory first. ... Darwin ...[explains] the proper relation between data and theory: “About thirty years ago there was much talk that geologists ought only to observe and not theorize, and I well remember someone saying that at this rate a man might as well go into a gravel-pit and count the pebbles and describe the colours. How odd it is that anyone should not see that all observation must be for or against some view if it is to be of any service!”

Charles Darwin’s dictum holds that if observations are to be of any use they must be tested against some view—a thesis, model, hypothesis, theory or paradigm. The facts that we measure or perceive never just speak for themselves... We can[not]...separate our theories and concepts from our data...

Data and theory are not enough. As primates, humans seek patterns and establish concepts to understand the world around us... We are storytellers. If you cannot tell a good story about your data and theory— that is, if you cannot explain your observations, what view they are for or against and what service your efforts provide—then your science is incomplete. The view of science as primary research published in the peer-reviewed sections of journals only, with everything else relegated to “mere popularization,” is breathtakingly narrow and naive. Were this restricted view of science true, it would obviate many of the greatest works in the history of science, from Darwin’s On the Origin of Species to Jared Diamond’s Guns, Germs, and Steel...

Well-crafted narratives by such researchers as Richard Dawkins, Steven Pinker, the late Stephen Jay Gould and many others are higher-order works of science that synthesize and coalesce primary sources into a unifying whole toward the purpose of testing a general theory or answering a grand question. Integrative science is hard science.

Brain Study: Liberals and Conservatives Differ

Some of you might be quite closed-minded about this:

Brain study finds political divide, by Denise Gellene, Los Angeles Times: Exploring the neurobiology of politics, scientists have found that liberals tolerate ambiguity and conflict better than conservatives because of how their brains work.

Scientists at New York University and UCLA showed through a simple experiment to be reported Monday in the journal Nature Neuroscience that political orientation is related to differences in how the brain processes information.

Previous psychological studies have found that conservatives tend to be more structured and persistent in their judgments whereas liberals are more open to new experiences. The latest study found those traits are not confined to political situations but also influence everyday decisions.

The results showed "there are two cognitive styles -- a liberal style and a conservative style," said UCLA neurologist Dr. Marco Iacoboni, who was not connected to the latest research. ...

Frank J. Sulloway, a researcher at UC Berkeley's Institute of Personality and Social Research who was not connected to the study, said results "provided an elegant demonstration that individual differences on a conservative-liberal dimension are strongly related to brain activity." ...

Sulloway said the results could explain why President Bush demonstrates a single-minded commitment to the Iraq war and Sen. John F. Kerry, the liberal Massachusetts Democrat who opposed Bush in the 2004 presidential race, was accused of being a flip-flopper for changing his mind about the conflict.

Based on the results, he said, liberals could be expected to more readily accept new social, scientific or religious ideas.

"There is ample data from the history of science showing that social and political liberals indeed do tend to support major revolutions in science," said Sulloway, who has written about the history of science and has studied behavioral differences between conservatives and liberals.

Lead author David Amodio ... of ... New York University cautioned that the study looked at a narrow range of human behavior and it would be a mistake to conclude that one political orientation was better than another. The tendency of conservatives to block distracting information could be a good thing depending on the situation, he said.

Political orientation, he noted, occurs along a spectrum, and positions on specific issues, such as taxes, are influenced by many factors, including education and wealth. Some liberals oppose higher taxes...

Still, he acknowledged that a meeting of the minds between conservatives and liberals looked difficult given the study results.

"Does this mean liberals and conservatives are never going to agree? Maybe it suggests one reason why they tend not to get along," Amodio said.

Might this also explain why college faculty tend to be Democrats?

"Rediscovering Intelligent Design"

Interesting question. Does anyone know the answer?:

Rediscovering Intelligent Design Posted, by Kieran Healy: Here is a likely poorly-specified question for biologists... The premise is unlikely (something that kills people—all people—but leaves the rest of the world standing) but intriguing. ...

I wondered, what if, long, long after our disappearance, some other species arose on earth at least as intelligent as us and eventually started doing evolutionary and molecular biology. Let’s say they have a working theory of evolution much like our own. Now say for the sake of argument that a bunch of transgenic organisms produced by humans have survived and prospered in the interim. So our future biologists find things like a bacteria that produces insulin, or a plant that secretes insecticide, or rice that is high in beta carotene, or more exotic stuff as needed.[1]

I’m wondering, would such organisms even present themselves as empirical anomalies? (That is, how much would you have to know about genomes and evolution for them to seem odd?) And if they did seem odd, how would they be explained? That is, would the evidence of their intelligent design by a previous, now-extinct species be clear? ... Would some Arthropod-staffed functional-equivalent of the Discovery Institute point its claw at some of these organisms, saying they were anomalies that could only be explained by the intervention of a divine intelligence? Would Charles Crustacean find a story that could account for their evolution by natural selection? I’m particularly interested in whether the artificial provenance of transgenic organisms would be clear on internal evidence alone. I don’t know anything about this stuff, so probably the answer is “Yes” for reasons obvious to experts. But if it weren’t …

Here's the uninformed answer of an economist. I don't think they could tell because if the organism had anomalous traits, they would be genetically selected out over time and thus would not even be observable in the future. Making insulin is a waste of energy if it provides no benefit to the organism.

If they weren't anomalous and provided some sort of competitive advantage, then it would appear to be an evolved trait. The key is that the organism's genetic structure would not be static over time, but instead would evolve in response to its environment. If such evolution wipes out all traces of anything that looks (and is) anomalous in the environment the organism lives, then there will be no way to detect prior design. A counter argument is that there may be dependence on initial conditions, i.e. even though the organism evolves over time, the paths it can follow are set by its initial genetic structure and hence anomalies can still be identified later (traces of insulin making are still evident). Which means all I've done is re-ask the question - are initial conditions detectable later - not answer it.

Okay, I've thrashed around enough. Anyone know the real answer?

Fixing the Dents in the Neoclassical Model

Free Exchange, the blog at The Economist, has a nice find and write-up:

Un-Endowing the Endowment Effect, by Economist.com: Let's say you agree to participate in an economics experiment. You show up at the lab ... and are randomly assigned to a specific group. You are then given a coffee mug. Finally, you’re asked if you’d like to trade the coffee mug for a candy bar. If you’re like most ... participants..., you probably don’t trade, but stick with what you’ve got. And perhaps it really is an awfully nice coffee mug, so you've made the right decision. Yet something perplexes economists. When the experiment is repeated with the other group, where the candy bar is the endowed good, most of them keep the sweet instead of taking home the mug.

And that, according to the behavioral economists like Nobel laureate Daniel Kahneman and University of Chicago’s Richard Thaler, is a direct challenge to the deep premises of neoclassical economics. Since the goods were randomly distributed, neoclassical theory predicts that there should have been much more trading than there actually was. Thus the concept of the “endowment effect” was born. It seemed to explain a whole host of other exchange asymmetries, too, such as why people often require a higher price to sell a good than they would ... pay to buy it.

The theory is that everyone in the experiment was acting on ... “loss aversion”..., which causes us to worry more about losses than equivalently sized gains. Parting with an endowed good is perceived as a loss greater than the potential gain from acquiring another good of putatively equal value.

Now a new paper ... forthcoming ...[in] the American Economic Review argues that this asymmetry might not be as formidable as it seems. The paper is based on experiments conducted by Charles Plott of Cal-Tech ..., and Kathryn Zeiler of the Georgetown University Law Center. (A working paper version is available here.)

Plott and Zeiler thought that perhaps traditional signaling theory could help explain the results of those previous experiments. For instance, when the endowed good was handed to the experiment participant, they were usually told, “I’m giving you the mug. It is a gift. You own it. It is yours.” But what if that signaled a certain level of value to you as the recipient of the mug? You don’t know if that candy bar is any good, but the chap who handed you mug seemed really insistent that you should hold onto it.

So, Plott and Zeiler simply told the participants: “The mug is yours. You own it.” They also adjusted for other possible factors. ...[T]hey had students signal their decision to trade (or not) by anonymously marking a card, rather than raising their hands in the midst of a crowd. And the participants got to inspect the other good, without giving up the one they had, before they made their choice.

The result? The exchange asymmetries disappeared. ...