Month: November 2010

Observations on computer chess spectatorship

1. People enjoy watching a live internet human vs. human game more, when they can watch a computer judging the human moves and evaluating the position. 

2. Few people enjoy watching live computer vs. computer games, even though the quality of play is much higher and the likelihood of a complex, wild position is much higher.  Even if you care at all, there is little in-progress suspense; you might as well look back at the moves once they are over.  How many other activities would we enjoy watching or experiencing less if they were done by computers?

3. The quality of play in a computer vs. computer game is so high it is often difficult for humans to tell where the losing computer went wrong, even if the spectator human has the help of a chess-playing computer.

4. I find only the very best computer (Rybka) of interest, although I do not feel the same way about the human players.  Furthermore the fifth best computer is still much better than the best human players.

5. The notion of a computer chess tournament taking place "in time" is an odd one.  You can play all the games back-to-back or simply use multiple copies of the programs and finish the entire tournament in a few hours; see #2.

6. Watching a computer play chess is a window onto a world where, once the opening is past (often, computers are simply told what to do by a pre-programmed "openings book"), there are many fewer presuppositions than what a human mind will bring to bear on the problem.  It's a very good way of learning, in convincing form (the computer will beat you),  how much your intuitions lead you astray.  It's not just your "bad moves" which cause you to lose, it's also the moves which still seem pretty good to you.

7. There are nonetheless many computer moves which I simply cannot believe are any good.  It does seem that every now and then computers get stuck in a "dogmatic trap," usually because of their limited time horizons for evaluation.  Playing against a computer, you will do best in the early middle game and then progressively fall apart as its combinatorial powers destroy you.

8. You can watch chess computers play against each other  at  Click on "enter" and then TCEC5.  

Further thoughts on the TSA debates

The biggest flying/airport outrages are a lack of markets in allocating scarce resources, and the resulting unacceptable airport and flight delay problems in places such as JFK and LaGuardia.  Next come airlines which ruthlessly screw you over, repeatedly, and lie to you and mistreat you.  I do understand the trade-off and prefer the lower prices and fewer quality assurances; still, you can object to their behavior at the margin — it's often unethical.  Let's get worked up over these problems first.    

I view good scans as, in the long run, a substitute for patdowns.  One option is to have very very good scans, nude "photos," fewer patdowns, and to have Americans shift to a more European attitude on nude bodies.  There's even an available status attitude where you don't mind or notice the scans, much as the King allowed himself to be dressed and handled by commoners.  That's the intelligent argument for the current shift in policy.  Maybe the enhanced scans simply aren't useful or maybe Americans can't or won't shift their norms.  Those would be reasons not to do it (and I am not pronouncing a definitive opinion here) but it's simply not, in principle, that objectionable of a policy.  There's a locked-in structure which prevents a competitive test of safety levels and so all alternatives are coercive in some manner, including the difficulty any airline would face in attempting an even more restrictive set of security procedures.

It's worth asking how intrusive a search markets would provide, but keep in mind there are significant negative externalities from exploding airplanes and also there are government bailouts which limit the downside.  Furthermore companies do not always care enough about "extreme negative skewness," as we have learned in financial markets and thus there is a case for regulating a tougher security standard.

Hovering in the background is the reality that a few successful downings will kill many people and furthermore probably wipe out the insurance market and thus lead to nationalization of the airlines.  It's not clear what the freedom-enhancing path looks like and there is no default setting of market accountability.  It's "elephant interventions" all the way down. 

It's worth comparing the current American response to earlier British crises (IRA troubles, and eventual CCTV) or for that matter Israeli responses to Palestinian suicide bombings.  In these kinds of situations something has to give — usually by public demand for better outcomes more than a state usurpation of power.    

I would not say that "we are now at war with the terrorists" but our situation has some war-like elements.  Any persistent war has required major social changes, if only temporary ones, in how the body is viewed and handled.  If we are so unwilling to even consider these changes in body viewing norms, I wonder how we will respond when scarier events happen, as they likely will.  

The funny thing is this: when Americans insist on total liberty against external molestation, it motivates both good responses and bad ones.  It supports a libertarian desire for freedom against government abuse, but the same sentiments generate a lot of anti-liberal policies when it comes to immigration, foreign policy, torture, rendition, attitudes toward Muslims, executive power, and most generally treatment of "others."  An insistence on zero molestation, zero risk, isn't as pro-liberty as it appears in the isolated context of pat-downs.  It leads us to impose a lot of costs on others, usually without thinking much about their rights.

The issue reminds me of the taxation and spending debates; many Americans want low taxes and high government spending, forever.  For airline security, at times we want to treat it as a matter of mere law enforcement, to be handled by others, and one which should not inconvenience our daily lives or infringe on our rights.  At the same time, so many Americans view airline security as a vital matter of foreign policy and indeed as part of a war.  We own and promote this view and yet we are outraged when asked to behave as one might be expected to in a theater of war.  

The main danger to liberty here is not the TSA but rather a set of American attitudes which, at the same time, take our current "war" both far too seriously and also not nearly seriously enough.

Overall, I'd like to see less posturing in these debates and more Thucydides.

Faith in the Fed- my last word

In his response to my critique, Tyler calls the Federal Reserve the "saviour institution," a most un-Tyler like phrase although consistent with his earlier plea that all will be well if we just put our faith in the Fed.

Clearly, I am less of a true-believer than Tyler but lets turn from faith based argument towards substantive matters.

I said the case for the Fed is weak, Tyler responds that the case for free banking is weak–this is not a rebuttal.  The point is more than rhetorical since there are many alternatives to the Fed as we know it, Scott Sumner has relentlessly made the case for nominal-GDP targeting (with futures markets), Kotlikoff makes the case for limited purpose banking, Tyler and Randy Kroszner once made the case for a similar idea, mutual fund banking (Tyler is less favorable today), Selgin and White make the case for free banking, and of course there are also commodity standards such as a gold standard and the BFH system (e.g. see this piece by Bill Woolsey). Since the case for the Fed is weak, I see work on all these alternative institutions as important and valuable.

In the 1970s and 1980s there was a large literature on rules versus discretion at the Fed, that literature faded out with the great moderation. The great moderation today looks more like a combination of luck and structural change rather than discretionary wisdom.  The Selgin, Lastrapes, White paper can be read as an argument to put greater weight on rules.

Tyler argues (but compare here) that "Many of the Fed's most serious mistakes are sins of omission, not commission…" and then he seems to argue (it's not entirely clear) that alternative institutions are all omission and thus cannot do better.  The rules versus discretion debate shows us the falsity of this conjunction.  As Sumner has repeatedly reminded us a nominal GDP rule would have required more action not less. Moreover, it's quite possible that other alternative institutions such as free banking would also do better on avoiding sins of omission as well as commission.

Tyler says:

It takes a good deal of imagination to believe that the Fed's periodic overreaches outweigh the benefits it provides through countercyclicality.

If this were correct the benefits of the Fed in reducing variability would be obvious in the data. The benefits are not obvious in the data, why not? I see several possibilities.

1) As Milton Friedman showed, once we take into account lags and uncertainty it's quite easy to see how counter-cyclical monetary policy can backfire even when the case for monetary policy is strong.

2) As I suggested above, it could also be that alternative institutions performed about as well on counter-cyclicality as the Fed.  

3) It could also be that counter-cyclical monetary policy is not as important as we think. Tyler has argued strongly that the current recession is majority structural (e.g. here, here, here) and thus that neither monetary nor fiscal policy is very effective.  If a lot of recessions are structural then monetary institutions of any kind might not matter that much.

Assorted links

1. Who again is going to cut Medicare spending?

2. So it has come to this.

3. We are referred to Charo's Wikipedia page.

4. Ireland may cut minimum wage; they know that AS and AD curves still have their traditional slope.

5. The horse race continues, with news from Portugal: "Pedro Passos Coelho told a meeting of his Social Democratic Party items like state-run companies' debts were not included in the overall public debt, which the government puts at 82 per cent of gross domestic product this year.

He said that the "true" total public debt stood as high as 112 per cent of GDP, while the budget deficit should be at 9.5 per cent of GDP, far above the minority Socialist government's target of 7.3 percent for the end of the year."

More bits on whether we need a Fed

In Alex's response there are various criticisms of me, but you can read both of his posts and you don't find a reason why free banking would offer an advantage over post WWII central banking (combined with FDIC and paper money).  That's long been the weak spot of the anti-Fed case.

Ask yourself: do we want a countercyclical money supply, and is central banking or free banking more likely to provide that?  Once you take income effects, credit quality, and bank runs into account, the answer is obvious.  It takes a good deal of imagination to believe that the Fed's periodic overreaches outweigh the benefits it provides through countercyclicality, even if, as Scott Sumner suggests, they don't always go far enough.  The short rates of 2001-2004 weren't the root cause of Armageddon, even if they were one factor of many feeding into what was essentially a private sector bubble.

To whatever extent we can do without a Fed, it's because there are so many Treasury securities, which should be a sobering thought to a market-oriented perspective.  If the Fed were shut down, over time the new base money would not be gold, "Hayeks," or a commodity bundle.  It would be T-Bills.  We would have achieved the full integration of the monetary and fiscal authority but to what useful end?  (Better not balance the budget!)  The real question is whether the Treasury should be the Fed or whether the Fed should be the Fed, but you won't often see it framed that way.

Alex wants to include the early years of the Fed in the Fed vs. no Fed comparison, but other than "pass the nam tok, Tyrone" there is no argument why these early years should be much relevant for a 2010 choice.  Judge what you're likely to be getting, on a forward-looking basis and that's not the Fed of 1929.    

Many of the Fed's most serious mistakes are sins of omission, not commission, including of course 1929-1932, not to mention the lead-up to the recent crisis.  Fed critics sometimes use sleight of hand to turn these sins into a case against the Fed; in other words, they wish to permanently lock in such sins of omission and somehow claim this as a gain.

Alex makes more of an argument when he notes that a non-Fed alternative would have improved over time, just as the Fed has.  Still, recent experience with the shadow banking system, unregulated mortgage brokers, AIG, runs on money market funds, auction-rate securities, and other practices and events raises strong questions as to whether we can expect a general evolution toward stability.  You can — in hypothetical terms — blame all those problems on the Fed and moral hazard (in my view moral hazard was one factor but hardly the whole story) and abolish what was essentially the saviour institution, on the hope that it won't all happen again.  That is what a lot of the case against the Fed boils down to.

One contrarian argument against the Fed is that it would force the Chinese to play lender of last resort and a) they would be less likely to favor Goldman Sachs, and b) they might insist on more fiscal rectitude, as the EU powers are trying with Ireland.  Still, this is not a feasible political equilibrium. 

There is also no practical transition out of dollars, but that is a topic for another day.  In the meantime, that means abolishing the Fed implies freezing the monetary base — forever.  Is Alex willing to advocate that policy?  In this game, transition paths and lock-ins are essential, not a second-order consideration.

In his discussion of foreign policy, Alex admits we're going to have a Fed, like it or not.  And there is no attempt to dispute that the alternative to the Fed is Congress running the bailouts, not real market-based accountability for financial mistakes.

The key question is how to make the Fed as good as possible — there is plenty that can be done – and trying to tear it down won't make that liberty-enhancing end more likely.  Alex dismisses that observation as "sociology," but if so it is true sociology, also known as public choice economics. 

Addendum: Robert Teitelbaum at HP comments on the earlier debate.

What I might be reading more of, or not

1. Hélène Cixous, Stigmata.  I didn't find anything of value here.  Probably the poetic element is better in the French but I wonder what the big deal is about.

2. Erika S. Olson, Zero-Sum Game: The Rise of the World's Largest Derivatives Exchange.  Good inside the scenes account of the CME-CBOT merger, also with material on the rise of ICE.  I read some of it and was glad I did.

3. Kaushik Basu, Beyond the Invisible Hand: Groundwork for a New Economics.  The author is a smart guy and he writes clearly, but I object to the subtitle and what it implies.  I want The New Economics, not the Groundwork for a New Economics.

4. They Live, by Jonathan Lethem.  Scene-by scene commentary on the John Carpenter movie of that name.  I'd like to see more books like this.  It's short.

5. Gabriel Garcia Marquez, Yo no vengo a decir un discurso.  Transcripts of some of his lectures, so far very eloquent although the level of substance remains to be seen.

6. David Edwards, The Lab: Creativity and Culture.  He wants to revitalize labs with a blend of "Artscience" and encourage them to cultivate more ideas which appear impractical but may have long-term payoffs.

7. Bethany McLean and Joseph Nocera, All the Devils are Here: The Hidden History of the Financial Crisis.  Alex liked it, Arnold Kling liked it, and I like it too.  It is more conceptual than most of the crisis books.

7. Robert Alter, translator, The Wisdom Books: Job, Proverbs, and Ecclesiastes.  He is my favorite Biblical translator and this is a sure thing, I will read this one.

8. Wolfgang Fengler and Homi Kharas, editors, Delivering Aid Differently: Lessons from the Field.  This is too specialized for my current reading interests, but overall the content looks substantive and interesting.

I am still impressed by having watched Lars von Trier's Antichrist.  I believe no one (at least no male) can watch that movie straight through, for reasons which I cannot explain on a family blog (though perhaps it will someday be part of TSA procedures?).  Yet more than a month later I continue to think about the good parts of the movie and I am not overall a von Trier fan.  The film is dedicated to Tarkovsky.

Assorted links

1. Earmarks do cause higher spending.

2. Exactly when was Ireland capable of having a balanced budget?

3. Excellent travel photo albums, mostly of Asia and Latin America, by Jodi Ettenberg, a marshmallow enthusiast.  Here is why she did it.  Here is Q&A (another interview here):

Q: What drives your instinct to travel?

A: A desire to soak up as much as possible, as intensely as possible. I know this sounds broad, but it applies to almost every facet of what I've done these past few years. I am continuously energized by learning new things and experiencing them firsthand.

She skipped undergrad and went right to law school, saving up money for the purpose of later travel and eating street food around the world.  Here are her tips for how to pack for a year.

Simon Johnson analyzes the Dublin gambit

There is little doubt that Ireland, as a one-off situation, is handled easily, albeit at greater expense than anyone would like.  But how does the game tree run?

…the Irish leadership has every incentive to delay until other countries can be dragged into turmoil. The crisis will become euro-zone wide, at which point all eyes will turn to some combination of the European Central Bank, the German taxpayer, and the IMF. But the ECB can’t pay and the German taxpayer won’t pay. Does the IMF have the resources to tackle Spain, let alone a bigger country like, say Italy or even France?

The U.S. could add sufficient funding to the mix — this is what it means to be a reserve currency — but the mood in Washington has shifted against bailouts.

As an alternative, Europe could place a call to Beijing to find out if China would like to commit some of its $2.6 trillion in reserves to keep European creditors whole. This would be an enormous opportunity for China to vault to a leading global role. Perhaps it was a good idea to place Min Zhu, a top Bank of China official, in a senior position at the IMF.

The microcredit paradox

Felix Salmon surveys some of the recent trouble in India.  The dilemma behind microcredit is simple.  Let's say the interest rate is, annualized, fifty percent a year (not atypical) and that a family is borrowing on a regular basis.  The debt payments can suck through their resources fairly rapidly, even if they are using the loans for valuable purposes, such as bringing the kid to the doctor.  It all works fine if the family earns more than fifty percent liquid return, annually, on its marginal capital investment.  How often is that the case?

Another scenario is that the borrowing allows the employment of another family member and thus it is self-financing for a good while but not forever.  Eventually the "rate of change" effect overtakes the higher income level from the extra job.

How many decent-sized regions have rates of return above twenty percent?  How many have micro-credit rates below twenty percent?

Nonetheless banning micro-credit is a mistake because the alternative is the moneylender, who charges an even higher rate of interest, and sometimes a kid who doesn't get to visit the doctor.  The lesson is that escaping poverty is very difficult.

What are your rights on private cruise ships?

Have you wondered?  Here is one take:

The unpleasant reality is that the cruise vessel's responsibilities and your rights as an injured passenger are governed not by modern, consumer oriented common and statutory law, but by 19th century legal principals, the purpose of which is to insulate the maritime industry from the legitimate claims of passengers. The policy enunciated by the Second Circuit Court of Appeals 35 years ago in Schwartz v. S.S. Nassau67, a case involving a passenger's physical injuries, applies equally today, " The purpose of [ 46 U.S.C. 183c ]…' was to encourage shipbuilding and ( its provisions )…should be liberally construed in the shipowner's favor `". Although recent years have seen the expansion of travel consumers' rights and remedies in actions against airlines68, domestic hotels69, international hotels70, tour operators71, travel agents72, informal travel promoters73 and depository banks74, there has been little, if any, change in the passengers' rights and remedies in actions against cruise lines."75 Cruise passengers are at a distinct disadvantage in prosecuting their claims.

Being a good Coasean, I do not object to these arrangements (though I prefer to avoid them), but they are worth keeping in mind as the debate over the TSA proceeds.  Note that private contracting, between passengers and the cruise ships, has not done so much to extend these rights.  Here are further readings.  Or try this book.