Mixing economics, thermodynamics, and heterogeneity

... or METH, as some call it. And if you want some more drug innuendo, read on.

On Brad DeLong's blog, a commentator named "MJ" deftly applies insights from thermodynamics to the issue of heterogeneity of goods in economics:

What would statistical mechanics be without a quantitative model of heterogeneous vs. homogeneous distributions? Such a statistical mechanics would miss a few subtle but crucial concepts. Such as entropy.

Note how the negentropic development of increasingly heterogeneous capital allocations over the past decade was accomplished through entropy production: bundling good with bad, compromising tranches, etc... Goldman Sachs made a killing, basically, off of knowingly producing entropy. The entropy production, of course (2nd law), far exceeded the negentropy production of their wealth aggregation- as reflected in the order of magnitude between financial industry's gains and the over all loss.

We're now learning Fannie and Freddie also engaged in entropy production, obscuring the distinction between scores over and under 660.

I can vouch for that as showing a good understanding of entropy, and it gives a good perspective for viewing economics:

1) An efficient economy produces as little net entropy as possible: the entropy it generates (destruction of heterogeneity) should be offset by the entropy it destroys in organizing inputs for their uniquely optimal roles.

2) A sign of inefficiency is when economic actors destroy distinctions (like in MJ's example of very different tranches and borrowers being made indistinguishable) without making a corresponding useful distinction or organization.

Definitely some issues worth fleshing out. I know I've seen papers that try to view economics from a thermodynamic perspective, but they invariably have me rolling my eyes.

World's newest space agency: Reuters

I normally don't pay much attention to photo credits, but I had to do a double-take on this one. An article in the Telegraph has a satellite picture of the sun. Of course, to get that kind of picture, you have to get pretty close, exist in a high temperature environment, and have photography equipment capable of significantly attenuating the EM radiation thrown off from the sun

And who do they credit for the photo? NASA, right? No, we get:

Professor Henrik Svensmark argued that the recent warming period was caused by solar activity. Photo: REUTERS

Um, yeah dude. I think Reuters got that photo from someone else. With the budget cuts the media have had to make in the past few years, they can only afford near-earth satellites. Deeper-space probes are just out of the question.

ANYWAY, since I haven't posted on Climategate, or for that matter, anything in a while, here are my thoughts: It's absolutely disgraceful, the way the scientists in question have acted. Disclosure of your data does not mean that skeptics get to go on a multi-year scavenger hunt to find your raw data and then play guessing games about which sources you threw out and why.

The very fact that you have to make a post like this one in order to summon forth all the data is proof that you weren't being transparent enough.

There's also clear evidence that the scientists didn't seem to understand that you can't contort one data source to look like another and then call it two independent sources of data. Eric S. Raymond has done a tremendous job at exposing the tricks in the code, which explains exactly why the insular climate science doesn't want critics poring over their work

Oh, and just a hint: when you only allow people you approve of to review your work, that's not science.

PS: Recall that my outrage at many libertarians has been to their reactions *conditional* on AGW being real, and that outrage remains.

Sarcasm, applied properly

In case you've been living in a cave for the past few weeks -- or rely on the mainstream media for your news -- you've probably heard about climate scientist Joe Romm's expose of the shoddy work on global warming in the new book SuperFreakonomics by Levitt and Dubner. (Excellent compilation of the discussion in the blogosphere and some mainstream publications.)

Long story short, it's like the kerfuffle a while back between me and Bob Murphy about his own, um, imprecise commentary on global warming, except that the mistakes by Levitt and Dubner were much bigger, they got called on their shoddiness by a lot more people, and they continued to dig themselves much deeper that Bob ever tried to. To top it off, they deliberately misrepresented one of their experts (Ken Caldeira added the quote you see to his web page in contradiction of a position attributed to him in the book after he found out what was in it.)

(Note: this isn't about "rah rah let's cut carbon emissions" vs. "those durn whiny hippies". Regardless of your opinion on the issue, Levitt and Dubner's handling was extremely shoddy, and exactly the kind of thing that neither side should want, even and especially if you agree with their policy positions.)

With that in mind, take a look at this post on the Freakonomics blog, where Levitt complains that he's unfairly portrayed, in his university's alumni magazine, as someone not tackling the "big questions" and who's ruining economics.

Yep, this is one of those times when only Silas-grade sarcasm will do. Here's what I posted:

Well, it's a good thing you've moved on from sumo-wrestling into important issues like global warming, where you've carefully researched the issue, accurately represented expert opinion, and presented an even-handed, informative discussion of the issue that helps sustain the University of Chicago's excellent reputation.

Needless to say, the comment didn't make it through moderation.

By the way, it's my birthday today! Wish me a happy 28th if you haven't already!

Silas experimentally tests "wisdom of crowds" effect

In case you hadn't heard of it, James Surowiecki has gathered a substantial amount of evidence supporting the "Wisdom of Crowds" Hypothesis, which says, basically, that if you can aggregate the independent guesses of large numbers of people, they will average out to be the correct answer, even though the individual guesses will tend to be far off. Surowiecki found confirmation of this hypothesis in such varied cases as guessing the beans in a jar, the weight of a bull, and the location of a missing submarine.

Well, just for kicks, I went out and did my own experiment to see if could replicate his results. When I went out for a night on the town last Friday (8/08/08), I asked the people I talked to how much they thought I weighed. Here's what I looked like, so you can make a guess and tell how far off you would have been:







To help them make their best guess, I allowed them to see me without the blazer and from different angles, and to, ahem, touch me. To adhere to the protocols necessary to find wisdom in crowds, I made sure they didn't discuss guesses with each other until they submitted them, and that they made the guesses anonymously (by writing it town and putting it in a plastic bag out of my view). I excluded non-numerical entries such as "Fuck U".

The results? After collecting 16 entries at two venues, here is what I got (and this will be expressed in terms that conceal my weight and their guesses, which will be revealed in a later post):

The average (mean) of their guesses was off by 3.6%.
The average error (mean error) of all the guesses was 10.3%.
The median guess was off by 6.3%

This is pretty much consistent with the Wisdom of Crowds phenomenon: the average of the guesses was much more accurate than most of the individual guesses, and the median guess. It probably would have been even better if I had collected a bigger sample.

Pretty neat, huh?

The shortest, safest libertarian case for IP

Am I going too far with that claim? Nope. I've argued it many times and haven't seen any response that's even remotely plausible. Here goes:

***

Most libertarians have no problem seeing why property rights in radio waves (i.e. the exclusive right to emit at a certain frequency) are justified.

Next, notice that IP (intellectual property) rights have the exact same form. Just as spectrum rights allow exactly one entity to form his property into a specific pattern (such that it emits at a specific frequency), IP lets exactly one entity form his property into a specific pattern. They are rights to configurations of objects rather than objects as such.

It is true (as many, many will remind me) that to broadcast at the same frequency as someone else "interferes" (!) with their "signal" (!). However, your judgment that there is "interference" is itself an arbitrary value judgment about the merit of someone's intended use. In exactly the same way, copying someone's ideas can interfere with their intended use.

Remember, the ether does not somehow "want" to carry information. It is simply one positive attribute humans have been able to wring out of it; if people merely loved to blast radio waves for the heck of it, the conflict wouldn't arise. So the characterization as "interference" is solely a function of the uses people want to make of it.

Unless and until you can make a libertarian case why one desired use justifies exclusion rights for specific patterns and the other does not, the cases are perfectly parallel.

***

There, that's all there is to it. Don't let the length of this post confuse you; the entire case is self-contained between the asterisk lines. I want to now briefly review my history of making it.

If you look at this comment and the preceding, you see Stephan Kinsella make a seemingly innocuous but actually damning admission: that attempts to differentiate the cases of IP and radio waves reduce to (the very arbitrary decision of) what counts a "relevant use" for purposes of discerning property rights boundaries, a distinction mentioned nowhere in Kinsella's widely quoted case against IP.

The argument persuaded some participants to reluctantly bite the bullet and admit that they couldn't therefore support radio wave rights either. (Yikes!)

You're rightly skeptical to wonder why I'm not quoting a peer-reviewed, published exposition of this argument, and indeed many have suggested I flesh it out and submit it to a (very ungrateful) libertarian journal. While probably a worthwhile pursuit, if I have spare time, it kind of misses the point of journals: to get results, whether they be new, useful scientific laws, or evidence in favor of propositions, or establishment that something is or is not possible. If the above remark by Stephan Kinsella is the best response he, the eminent opponent of IP, can marshal, we already have a result. Wanting it in a journal article is putting the cart before the horse.

I've probed other intellectuals on this and found similar inability to refute -- I'm just posting the best response I've gotten.

Comments are greatly, greatly welcome. Unlike some other people who shall remain nameless[1], I want to see where I'm wrong.

[1] A name is a label intended to refer to a proper noun. An example of a name might be Stephan Kinsella or Bob Murphy.