The Zero Room

This week, I have been mostly reading:

• Bad Opinions — xkcd:
  
• What a widely attacked experiment got right on the harmful effects of prisons — a frustratingly short read by Ashley Rubin in the Conversation: In news articles, the Stanford experiment has been “debunked” and “exposed as a fraud.” Its findings have been declared “very wrong” and “fake.” It has been further criticized for experimenter interference, faked behaviour from participants and for research design problems, among other things. These serious critiques have generated much discussion in academic circles and in news articles about what, if anything, we can learn from the experiment. And yet, as someone who studies prisons, I’m struck by how much the Stanford Prison Experiment got right. A wealth of other research suggests prisons have serious detrimental effects on prisoners and prison workers alike.
• Calculating art — an excerpt from the latest book by Hannah Fry of the splendidly light and fluffy podcast the Curious Cases of Rutherford and Fry: In October 1997, an audience arrived at the University of Oregon to hear the pianist Winifred Kerner play three short pieces. One was a lesser-known keyboard composition by the master of the Baroque, Johann Sebastian Bach. A second was composed in the style of Bach by Steve Larson, a professor of music at the university. And a third was composed by an algorithm, deliberately designed to imitate the style of Bach. After hearing the three performances, the audience was asked to guess which was which. To Larson’s dismay, the majority voted that his was the piece that had been composed by the computer. And to collective gasps of delighted horror, the audience learned that the music they’d voted as genuine Bach was nothing more than the work of a machine.
• Water-Ski Signals — Phil Are Go!:
  
• Stop telling people who need social care they aren’t eligible – be honest, there isn’t enough money — Peter Beresford in the Conversation: When giving evidence to the Public Accounts Committee about [social care funding] earlier in the year, the permanent secretary at the Department of Health and Social Care, Chris Wormald, told MPs that there was enough money in the social care system to meet all of its statutory obligations. Many of the MPs struggled to reconcile this with the savagery of the cuts since 2010 and the realities facing a service said by its leaders to be in crisis and at a “tipping point”. The truth is that Wormald probably didn’t have the first idea how much resource the service requires. That is because the system operates as a perfect circle – a need is only a need if there is resource to meet it. In this way, there can never be unmet need and “statutory obligations” are always met. It makes no difference how large or small the budget or how much it contracts. It’s a very convenient device for political leaders confronted by a service with high fiscal risk but low public value. [Misleading headline. For a currency-issuing government there is always enough money, but the core argument — that the definition of need for services varies according to the willingness of the government to spend on these services, and that this is duplicitous and inhumane — is entirely sound.]
• Off the Mark — by Mark Parisi:
  
• Death of American on remote Indian island is an indictment of fundie "bubble boy" mentality — Darrell Lucus at Daily Kos: Never mind that the Sentinelese have made it clear on several previous occasions that they want to be left alone. According to Survival International, a human rights organization that advocates for indigenous people, this is largely because of a harrowing incident that happened during the British colonial era. A colonial administrator took some Sentinelese adults and children to Port Blair, the largest settlement in the Andaman Islands, for reasons of “science.” However, the adults quickly died; then as now, their isolation made them vulnerable to illnesses to which they had no immunity. The children were brought back with gifts, though Survival International has good reason to believe they also passed on diseases they picked up on Port Blair. […] Is it possible that Chau didn't know to find out why the Sentinelese didn't want to be contacted by anyone, let alone Christian missionaries? His diaries, provided by his family to The Washington Post, certainly suggest this. In one entry, he wondered, “Lord, is this island Satan’s last stronghold where none have heard or even had the chance to hear your name?”
• Toward Community-Oriented, Public & Transparent Copyleft Policy Planning — by Bradley M. Kuhn: Sadly, the age of license proliferation has returned. It's harder to stop this time, because this isn't merely about corporate vanity licenses. Companies now have complex FLOSS policy agendas, and those agendas are not to guarantee software freedom for all. While it is annoying that our community must again confront an old threat, we are fortunate the problem is not hidden: companies proposing their own licenses are now straightforward about their new FLOSS licenses' purposes: to maximize profits. Open-in-name-only licenses are now common, but seem like FLOSS licenses only to the most casual of readers. We've succeeded in convincing everyone to “check the OSI license list before you buy”. We can therefore easily dismiss licenses like Common Clause merely by stating they are non-free/non-open-source and urging the community to avoid them. But, the next stage of tactics have begun, and they are harder to combat. What happens when for-profit companies promulgate their own hyper-aggressive (quasi-)copyleft licenses that seek to pursue the key policy goal of “selling proprietary licenses” over “defending software freedom”?
• Hidden Treasures — Bizarro by Dan Pirarro:
  

This week, I have been mostly reading:

• Bankers, art and tax paranoia driven Ponzi schemes — Richard Murphy: The evidence it is that the vast majority of this art does not end up being displayed on the walls of a home, gallery, office, or anywhere else. Most of it is stored in the vaults of one of the art warehouses in the free ports of the world. […] What is more, this art market, pumped by a continual stream of new clients created by finance houses seeking to advise clients to join the trend, creates not just another asset bubble, but in fact an alternative currency as a mechanism for transferring value. The fact that art can also be stored in tax-free warehouse locations, beyond the reach of even local tax authorities with regard to any form of taxation in the state where it physically resides, just adds to this appeal. Who needs bitcoin to achieve anonymity when a Picasso in a warehouse achieves the same goal without all the risks that cryptocurrency entails?
• The Alcohol and Health Puzzle — Nigel Barber in Psychology Today: Denmark has more drinkers than any other country (95.3 percent women, 97.1 percent men). Despite drinking a lot, Denmark has repeatedly come out at the top of the heap in surveys of happiness. A skeptic might retort that more Danes take the survey while actually intoxicated. Amusing as this explanation is, it seems far-fetched. A more plausible explanation could be that the Danes, like the Irish, spend more time in pubs that play a central role in social networks in these countries. Another source of happiness in Denmark could be the very good quality of life that residents enjoy thanks to their affluence and the well-developed social democracy that minimizes inequality and alienation
• Central Bankers as ‘Dealers of Last Resort’ — Marshall Auerback in Naked Capitalism and elsewhere: A CDS is an instrument used by a buyer of corporate or sovereign debt. It was designed to eliminate possible loss arising from default by the issuer of the bonds. In theory, the swap acts like an insurance policy, the only difference being that (in the words of Mehrling): insurance is “organized as a network of promises to pay in the event that someone else doesn’t pay whereas our own world [the credit default swap] is organized as a network of promises to buy in the event that someone else doesn’t buy.” Of course, as we learned from the AIG fiasco, it becomes impossible to act as a credible writer of insurance, if you don’t have the financial resources to make good on the insurance payment if and when disaster strikes. Unable to make good the insurance payments arising from the swaps, AIG eventually had to be bailed out. By contrast, the Treasury/Federal Reserve (it’s useful to think of them as a unified whole in this instance) is uniquely placed to make the CDS a credible instrument, as it can always create the dollars required to make good the payment in the event of default (or financial accidents). But for the CDS system to work going forward, the Fed (or any other central banker/dealer of last resort) has to “charge” the right premium to reflect the risks being undertaken by the parties who enter into a contract to buy and sell the CDSs. And if that means charging such an extortionate premium that the underlying activity (or event) isn’t undertaken, so much the better for financial stability.
• Young couples 'trapped in car dependency' — Roger Harrabin, BBC environment analyst: Researchers visited more than 20 new housing developments across England in what they say is the first piece of research of its kind. They found that the scramble to build new homes is producing houses next to bypasses and link roads which are too far out of town to walk or cycle, and which lack good local buses. Gosh. Imagine such a thing! Oh, hang on, I don't have to…
• Bizarro — Wayno & Pirarro:
  
• Cesar Sayoc’s Home Was Foreclosed on by Steve Mnuchin’s Bank, Using Dodgy Paperwork — David Dayen at the Intercept, with everything you need to know to understand US politics: It’s highly doubtful Sayoc knew any of this when he allegedly sent bombs through the mail. But it shows how political partisans cannot often assess what forces carry the greatest impact on their lives. A miscreant bank foreclosed on Sayoc. Democrats could have done more to punish that bank and others like it for a mountain of foreclosure-related crimes, but they failed to do so. That created a sense that the system was rigged, providing an opening for a right-wing populist like Trump.
• Forget jobs. Will robots destroy our public services? — Atif Shafique for the RSA: In her groundbreaking but frightening book Automating Inequality, academic Virginia Eubanks examines how in the US advancements in technology - particularly automated decision-making, data mining and predictive analytics - are being used to control the poor and sever their access to public support. The book shows that this is nothing new: it is part of a historical trend stretching back decades. Crucially, Eubanks doesn’t entertain the science fiction notion that the real threat comes from machines outsmarting humans, becoming unaccountable and wreaking havoc as people look on helplessly. Neither is it just a case of human biases unintentionally finding their way into technology, as critics of algorithmic decision-making have cautioned. Instead, some of the worst features of the tech are intentional and baked in from the beginning.
• Why positive thinking won’t get you out of poverty — Farwa Sial and Carolina Alves in openDemocracy: Poverty alleviation, however, is a hugely complex subject that touches on the strengthening of institutions, the health of governance, the structure and dynamics of markets, the workings of social classes, macroeconomic policies, distribution, international integration and many other issues, none of which can be replicated from one context to another. That means that analyses of poverty have to be based on a critical examination of processes and actors that cannot be ‘controlled’ against—thus violating the principle of [Randomised Controlled Trials]. Recent developments in economics have failed to account for these fundamental determinants of poverty. Instead, the success of RCTs can be narrowed down to essentially statistical arguments that seek to identify ‘what works’ and ‘which interventions’ should therefore be employed to improve the lives of the poor. In such processes, the focus tends towards the individual or the household and (initially at least) to the design of small changes that are supposed to enable them to exit poverty, although eventually the ‘scaling up’ of interventions might also occur. Akin to the ‘nudge’ approach that has been popularised by Cass Sunstein and Richard Thaler, the idea is that people’s choices can be shaped to allow them to escape from poverty and dispossession. As a consequence, this approach individualises the ‘problem’ of poverty whilst failing to acknowledge, contextualize, highlight or analyse the structures, institutions and actors that actually make and keep some people poor.
• 'It's Like Amazon, But for Preschool' — Audrey Watters: A year ago, the richest man in the world asked Twitter for suggestions on how he should most efficiently and charitably spend his wealth. And today, Jeff Bezos unveiled a few details about his plans – other than funding space travel, that is. His new philanthropic effort, The Day 1 Fund, will finance two initiatives: the Families Fund will work with existing organizations to address homelessness and hunger; and the Academies fund “will launch an operate a network of high-quality, full-scholarship, Montessori-inspired preschools in underserved communities.” “We’ll use the same set of principles that have driven Amazon,” Bezos wrote in a note posted to Twitter. “Most important among these will be genuine intense customer obsession. The child will be the customer.”
• On “the policy” and the Governor of the Bank of England — Ann Pettifor for Progressive Economy Forum: Mark Carney was appointed by George Osborne in late 2012 in the hope that new blood at the Bank would give both the institution and the economy a boost. His salary was set at a considerably higher rate (at £480,000) than that of predecessor (£305,000) in the hope that he would deliver. Instead he has presided over a period of prolonged stagnation. In his defence, the persistent weakness of the UK economy cannot be attributed to him, or to any single man or woman. The setting of post-crisis policy by the Treasury and the Chancellor; the stubborn insistence on contracting the economy by grinding it down with austerity – these policies were endorsed by Carney, but were not of his design. He never raised any substantial objection to the dysfunctional nature of ‘monetary radicalism and fiscal consolidation’. Instead, he once remarked correctly that the Bank was “the only game in town.” Five years after his appointment, and ten years after Lehman’s bankruptcy, the economy continues to vegetate.

This week, I have been mostly reading:

• Perry Bible Fellowship — by Nicholas Gurewitch:
  
• There’s a psychological link between conspiracy theories and creationism — Stephan Lewandowsky in the Conversation: The Fribourg researchers conducted three studies with more than 2,000 participants overall. Echoing previous studies, the findings showed that teleological thinking was associated with the rejection of evolution and the acceptance of its pseudo-scientific alternative, creationism. But the researchers also showed a strong association between creationism and conspiracism. People who believed in creationism also tended to believe in conspiracy theories, regardless of their religious or political beliefs. Conspiracism was also associated with teleological thinking. This confirms that seeking purpose in random events, such as the death of Princess Diana in a drink-driving accident, or natural phenomena such as rain clouds or the necks of giraffes, reflects a common underlying way of thinking.
• The economy of permanent war — Claire Connelly in Medium: What the world thinks of as debt creation is actually the creation of credit for the financial sector. Dr Kadri says the west can make far more money from destruction than from trade. […] “You cannot expand the economy without war. War is, in fact, a necessity; it absorbs the surplus. By issuing bonds the state absorbs the excess surplus existent in the western hemisphere. That is the principal condition for global economic imbalance.” Issuing bonds has the effect of creating a military economy in a way that doesn’t interfere or compete with the private sector and acts as conveyer belt for its resources.
• Non Sequitur — by Wiley Miller:
  

Among the headlines in the AFR Real Estate section this morning:

• Brisbane buyers now look to sell at discount
• Mortgage payments to near 20-year high
• New home sales fall 27pc from peak
• 6700 projects across Australia blacklisted for loans
• Developers squeal over apartment price slump

So, soft landing?: "Allianz-owned PIMCO, like many analysts, expects a decline in overall housing prices of 10 per cent over the next couple of years and says the market slowdown engineered by macroprudential regulator APRA does not indicate a crash likely to threaten financial stability."

What's happened since the last time I looked at private sector debt to GDP ratios? Not much, but something:

If you zoom in on the post-GDP period (caution: non-zero y-axis origin ahead):

(Source: BIS total credit statistics)

Usual disclaimer: This is the rear mirror view. Only part of the picture, and systemic crises may be closer than they appear. The fall in the total since 2016 is entirely due to the corporate sector; the situation for households is no better than a couple of years ago. To get household debt down in the face of falling property values (which should never have been allowed - indeed encouraged - to get that high in the first place) somebody has to do some spending to both raise GDP and the income necessary for repayment of household debt. Corporations won't do it; they are delevering. Households can't do it; they have debt, not savings.

The government must step in to fill the spending gap by increasing benefits and decreasing taxes on households, and by employing (lots of) people. If they don't, the best outcome will be a continuation of the post-GFC new normal of stagnation and unnecessary hardship. As far as I can see, an Australian domestic mortgage-backed crash is no less likely in 2018/19 than in 2016, and the qualitative evidence (not least: sanguine predictions by very smart people with very vested interests, designed to quell restive animal spirits) points in the same direction.