Computers and the financial crisis

Richard Dooling (whose new book is Rapture for the Geeks) has an op-ed in today's New York Times about computers and the financial crisis. Excerpt:

Somehow the genius quants — the best and brightest geeks Wall Street
firms could buy — fed $1 trillion in subprime mortgage debt into their
supercomputers, added some derivatives, massaged the arrangements with
computer algorithms and — poof! — created $62 trillion in imaginary
wealth. It’s not much of a stretch to imagine that all of that
imaginary wealth is locked up somewhere inside the computers, and that
we humans, led by the silverback males of the financial world, Ben
Bernanke and Henry Paulson, are frantically beseeching the monolith for
answers. Or maybe we are lost in space, with Dave the astronaut
pleading, “Open the bank vault doors, Hal.”

As the current
financial crisis spreads (like a computer virus) on the earth’s nervous
system (the Internet), it’s worth asking if we have somehow managed to
colossally outsmart ourselves using computers. After all, the Wall
Street titans loved swaps and derivatives because they were totally
unregulated by humans. That left nobody but the machines in charge.

Link: The Rise of the Machines.

Dooling points to a related essay by science historian George Dyson at Edge: Economic dis-equilibrium.

Jonathan Franzen doesn’t want to hear your cellphone conversation

Novelist Jonathan Franzen has a good essay in the current issue of Technology Review. It's a complaint about cellphones, though it meanders into personal memoir about 9/11 and his parents (kind of an odd article to see in Technology Review). It begins:

One of the great irritations of modern technology is that when some
new development has made my life palpably worse and is continuing to
find new and different ways to bedevil it, I'm still allowed to
complain for only a year or two before the peddlers of coolness start
telling me to get over it already Grampaw–this is just the way life is

I'm not opposed to technological developments. Digital voice mail
and caller ID, which together destroyed the tyranny of the ringing
telephone, seem to me two of the truly great inventions of the late
20th century. And how I love my BlackBerry, which lets me deal with
lengthy, unwelcome e-mails in a few breathless telegraphic lines for
which the recipient is nevertheless obliged to feel grateful, because I
did it with my thumbs. And my noise-canceling headphones, on which I
can blast frequency-shifted white noise ("pink noise") that drowns out
even the most determined woofing of a neighbor's television set: I love
them. And the whole wonderful world of DVD technology and
high-definition screens, which have already spared me from so many
sticky theater floors, so many rudely whispering cinema-goers, so many
open-mouthed crunchers of popcorn: yes.

Link: "I Just Called to Say I Love You": Cellphones, sentimentality, and the decline of public space (free registration required)

Also in this issue, and also a little unusual, is a book review by Emily Gould of Clay Shirky's Here Comes Everybody and a new collection of Walter Benjamin writings, The Work of Art in the Age of Its Technological Reproducibility, and Other Writings on Media. The gist of her article is: Shirky is a cheerleader, Walter Benjamin was a pessimist (and complicated). Link: "It's Not a Revolution if Nobody Loses": A new age of "technological reproducibility" is here. Ugh.

The picture at right is from a forthcoming Penguin Great Ideas edition of Benjamin's essay.

Convergence 08

I just learned about Convergence 08, a two-day event at the Computer History Museum in Mountain View, CA featuring a bunch of futurists and other thinkers on technology. From their buzzword-heavy blurb:

On November 15-16, 2008, the world's most dangerous ideas will collide in Mountain View, California. Convergence08 examines the world-changing possibilities of Nanotech and the life-changing promises of Biotech. It is the premier forum for debate and exploration of Cogtech ethics, and ground zero of the past and future Infotech revolution. Convergence08 is an innovative, lively unconference, the first and only forum dedicated to NBIC (Nano-Bio-Info-Cogno) technologies.


The speaker list includes some heavyweight futurists/technologists like Paul Saffo, Aubrey de Grey and Peter Norvig, and at least one critic, Denise Caruso.

I'm not sure I get the idea of an "unconference" as the main event, though. I thought those were typically free, alternative forums that took place outside big conferences.

Republican Wacky Math on Health Insurance

I apologize for going off-topic and getting all political but some things are more important than technology right now. And in this post I'm responding to another blog that's nominally related to technology and society: the Diagnosis blog at The New Atlantis. They don't have comments so I thought I'd rant here.

The New Atlantis publishes some good work occasionally, but at times they stray too far into (their right-wing) politics. In a post last week called Biden's Phony Health Care Argument, The New Atlantis's "health care policy expert" James Capretta tried to set the record straight on Joe Biden's statements about McCain's health insurance plan during the VP debate — the plan where McCain wants to give you $5000 to go buy your own health insurance (actually $5000 for families, $2500 for individuals). Biden pointed out that employers are paying $12000 per person on average, leaving a $7000 gap for you to make up on your own.

Here is the first part of Capretta's argument:

Where’s the additional $7,000 going to come from?

Here’s how it would really work.

Suppose a worker gets $50,000 in cash wages and $12,000 in health insurance.

now, he pays federal income taxes on the wages but not the health
insurance. Let’s assume, for reasons of simplicity, that the tax rate
he is paying is a flat 25% on his wages. He therefore pays $12,500 in
federal income taxes. His after-tax, after-health-care income is

Now, under the McCain plan, his employer keeps paying
the premium, which is now counted as income to the worker. He therefore
pays federal income taxes on $62,000, or $15,500.

But he also
gets a tax credit of $5,000 for health insurance, which means that, all
in all, he owes $10,500 in federal taxes, or $2,000 less than he does
today. His after-tax, after-health-care income is $39,500.

Ignore the fancy tax math — it's irrelevant here. Capretta is figuring out the best case scenario — you get the tax credit and your employer still pays for your insurance. That's not very likely, given how employers will have every reason to drop health insurance coverage once McCain sets them free.

What about the other case then? Capretta:

If the worker decides to buy his insurance in the open market instead
of through the employer, the result will be the same. His employer is
indifferent to how he pays his worker as long as total costs are the
same. So instead of paying premiums, the employer pays his worker
$62,000 in cash wages and does not pay anything toward insurance. The
worker again owes $15,500 in taxes on this compensation, and he also
must buy health insurance costing $12,000. So, his pre-tax income is
$62,000, he owes $12,000 in health insurance premiums, and he owes
$10,500 in federal taxes (after claiming his credit). His after-tax,
after-health-care income is the same: $39,500 ($62,000 – $12,000 –
$10,500), or $2,000 more than today. 

First off, I love the illusion of choice — "if the worker decides" — as if everyone will have that luxury. Second, he's assuming your employer will give you a $12000 raise! Is he serious?

That second sentence is quite a howler: "His employer is indifferent to how he pays his worker as long as total costs are the same." Ha! Employers are struggling to pay health insurance costs. They want this plan because it will offload their costs to others.

Capretta also deceives by ignoring the rising cost of health insurance. For many companies it's increasing by double digits every year, I believe. Will McCain's tax rebate keep pace? How about those fantasy raises?

I'm not sure if The New Atlantis is just repeating Republican talking points on this or if this is their original analysis. My guess is the former, given how McCain and others are saying that "if you do the math," his plan will benefit you. This is some kind of math… more like nonsense and deception.

I'm no health policy analyst and I confess I don't know all the details of either candidate's plan. Nor do I think Obama's plan goes far enough, but it's clearly the better choice. More than that — it's the only choice that isn't insane.

In my fantasy world I envision a president Obama with an overpowering mandate to clean up the current messes and enact some truly rational, liberal, people-centered policies. One of which would be single-payer health care or something like it. I've been reading this new fantasy book: 10 Excellent Reasons for National Health Care (see also Physicians for a National Health Program). It's fantasy in the US, of course, but not in the rest of the civilized world.NationalHealthCare

Lewis Lapham on the humanities in a technological age

This is from Lewis Lapham's preamble in the current issue of Lapham's Quarterly. The theme of the issue is Ways of Learning.

From time to time in the scholarly journals and the
alumni magazines I come across articles that might as well be entitled
“What in God’s Name Are the Humanities, and Why Are They of Any Use to
Us Here in the Bright Blue Technological Wonder of the 21st Century?”
The question suggests that within the circles of informed academic
opinion the authorities construe the humanities as exquisite ornaments,
meant to be preserved, together with the banknotes and the jewels, in
the vaults of the university’s endowment—an acquaintance with the
liberal arts one of those proper appearances that must be kept up,
together with the house in Southampton and the season’s subscription to
the Metropolitan Opera. Apparently content to believe that man’s
machines have vanquished nature, subjugated the tribes of Paleolithic
instinct, and put an end to history, the oracles in residence walk to
and fro among the old trees sold to the alumni as naming opportunities,
speaking of tenure and tables of organization, of Rembrandt’s drawings
and Shakespeare’s plays as pheasants under glass. Their piety recalls
the lines of Archibald MacLeish:

Freedom that was a thing to use
They made a thing to save
And staked it in and fenced it round
Like a dead man’s grave.

bury the humanities in the tombs of precious marble is to fail the quiz
on what constitutes a decent American education. Like the sorcerer’s
apprentice, our technologists produce continuously improved means
toward increasingly ill-defined ends; we have acquired a great many new
weapons and information systems, but we don’t know at what or at whom
to point the digital enhancements. Unless the executive sciences look
for advice and consent to the senate of the humanities, we stand a
better than even chance of murdering ourselves with our own toys. Not
to do so is to make a mistake that is both stupid and ahistorical.

Link: Playing with fire.

The New Nuclear Danger

SeventhDecadeI've been reading Jonathan Schell's excellent book The Seventh Decade: The New Shape of Nuclear Danger (new in paperback), so I found this moment from last night's debate interesting:

IFILL: What should be the trigger, or should there be a trigger, when nuclear weapons use is ever put into play?

PALIN: Nuclear
weaponry, of course, would be the be all, end all of just too many
people in too many parts of our planet, so those dangerous regimes,
again, cannot be allowed to acquire nuclear weapons, period.

Her next utterance was a bit more coherent but didn't answer the question either: "Our nuclear weaponry here in the U.S. is used as a deterrent. And that's a safe, stable way to use nuclear weaponry."

imagine that Palin agrees with the Bush doctrine, regardless of whether
she knows what it is.  That doctrine in fact puts US use of nuclear weapons
on the table as a pre-emptive measure against states that are acquiring
weapons of mass destruction. This is a far cry from cold-war era
"no first strike" deterrence postures.

The world has changed a lot since the end of the cold war.  In his book, Schell does an excellent job of describing what's changed, why the end of the cold war did not lead to disarmament, why rogue states acquiring nukes is a tremendous threat, and why Bush's doctrine of US global dominance and pre-emptive war to prevent proliferation is not a solution.  Something needs to be done — nobody can feel comfortable with states like Iran and North Korea wielding nukes — but in Schell's opinion the only rational answer is global nuclear disarmament.  Surprisingly, the world came closest to enacting such a plan during the Reagan/Gorbachev summits in the late 80s.  Reagan was a hawk but he also believed in abolishing nuclear weapons.  Unfortunately nuclear disarmament treaties are all but defunct now. Neoconservatives, on the contrary, have pushed for new types of nukes and new protocols that allow for US first-use (see "global strike" doctrine).

I hope Barack Obama reads this book or has someone like Schell advising him.

Regarding Sarah Palin, I found a post at a foreign policy blog called Democracy Arsenal that describes better than I can why it's so scary that a vice-presidential candidate can't speak intelligently about the decision to launch a nuclear strike: Palin on Nuclear Weapons.

On a related note, check out PD Smith's recent article Faust and the Physicists.

Rapture for the geeks

A new book about the singularity, this one by novelist Richard Dooling: Rapture for the Geeks: When AI Outsmarts IQ. From the publisher description:

In this fascinating, entertaining, and illuminating book, Dooling looks
at what some of the greatest minds have to say about our role in a
future in which technology rapidly leaves us in the dust. As Dooling
writes, comparing human evolution to technological evolution is “worse
than apples and oranges: It’s appliances versus orangutans.” Is the era
of Singularity, when machines outthink humans, almost upon us? Will we
be enslaved by our supercomputer overlords, as many a sci-fi writer has
wondered? Or will humans live lives of leisure with computers doing all
the heavy lifting?

With antic wit, fearless prescience, and
common sense, Dooling provocatively examines nothing less than what it
means to be human in what he playfully calls the age of b.s. (before
Singularity)—and what life will be like when we are no longer alone
with Mother Nature at Darwin’s card table. Are computers thinking and
feeling if they can mimic human speech and emotions? Does processing
capability equal consciousness? What happens to our quaint beliefs
about God when we’re all worshipping technology? What if the human
compulsion to create ever more capable machines ultimately leads to our
own extinction? Will human ingenuity and faith ultimately prevail over
our technological obsessions? Dooling hopes so, and his cautionary
glimpses into the future are the best medicine to restore our humanity.

Dooling has a website and blog.