Anomaly UK – Page 24 – Anomalous Opinions

99% chances

Another sensible article by John Kay, this time about financial models. He mentions the Allais Paradox, which relates to what I called folk probability.

I have a quibble though: Kay says “There are no 99 per cent probabilities in the real world”. Clearly, there are. That doesn’t mean, though, that you or I know what they are.

The real point is that at very low probabilities, the chances of your model being wrong dwarf the chances you’re predicting. If you model a probability as 20%, but there’s a 2% chance that your model’s significantly wrong, the true probability is somewhere in 20±2%. That’s useful to know. But if you model a probability as 0.2%, that doesn’t magically make your chance of having got the model wrong a hundred times smaller. What you really have is a probability of 0.2±2 %. It might as well be 1±2% or 0.000001±2% — the question of how sure you are about your model is far more important than whether the model says 1% or 0.1%

More comments on John Kay pieces: ICI rents climate, copyright

Whatever2AV

I don’t have a strong opinion toward what voting system future General Elections will use. I don’t think that who gets elected is very important: voters don’t have any control over immediate policy; they only have influence over the long-term direction of policy, and that doesn’t depend on who wins any given election.

However, I used to be very interested in voting systems, and I have an intense dislike of bad arguments. The bad arguments in the AV debate come mainly from the No side.

The silliest is the cost argument. They claim that a switch to AV would cost 250 million pounds. That is highly improbable, and includes the cost of the referendum itself, which is a sunk cost in any case since the referendum is now going to happen. But just take it at face value for a moment.

Assume AV is an improvement — if it is not then the cost argument is irrelevant. 250 million is about five pounds per voter. The average voter will probably have the opportunity to vote in another six or seven elections. If a significant improvement in the value of a vote is not worth a quid, then what is a vote worth? The only people who should be influenced by the cost argument are those of us who believe that voting is worthless anyway.

There is also talk of voting or counting machines; that is a much bigger and easier argument than AV itself. Introducing machines is a huge mistake. FPTP hand-counted is far superior to AV with machines, since there is no reason for anyone ever to trust the machines.

A bizarre gem came from John Redwood, who wrote on his blog, “we think it undesirable that elections are settled by the second preference votes of those who vote for minor or unpopular parties”. He doesn’t say why. If you like your local independent, or Green, then the fact that you also prefer Conservative to Labour should therefore be of no interest?

A more cogent objection is that AV would produce Labour/Lib Dem coalitions into the indefinite future. I do not dismiss that, but I think it is mistaken. For one thing, the current situation shows that the support for the Lib Dems, being as it is a historically-produced random collection of highly disparate groups, with no policy positions in common at all, cannot survive the Lib Dems actually holding any power. But more to the point, the biggest effect of AV is within the parties themselves.

In 1981, a handful of senior Labour figures broke away from the party to form the SDP. That was only possible because of the utter failure of the previous Labour government, and the sheer disarray that the party was in. The SDP held a handful of seats for a few years, then merged with the Liberal party.

But imagine how much easier the job of splitting a party would be under AV. The problem the SDP faced was that for most Labour supporters, voting for the SDP instead of Foot was more likely to produce a Conservative MP than an SDP MP. AV greatly lessens that effect: if 50% of voters prefer Labour to Conservative, it is almost impossible for the Conservative to be elected because of the Labour vote splitting between two rival factions.

In fact, other factors might turn out more important than the voting system itself: in the face of the threat of splitting, I would not be at all surprised to see steps taken to defend the leadership of parties from internal dissenters. Pay particular attention to rules on party funding or ballot entry.

I think AV would give voters slightly more influence than they have now. I am quite unsure as to whether that’s a good thing or a bad thing: the Establishment in this country does damage in internal competition and through its religious attachment to Universalism, but on the other hand it is generally less stupid than the voters. So at the end of the day I am in the Whatever2AV camp.

Car Insurance

The EU car insurance ruling is a thing of beauty because it rules out most of the theories of why the EU does the things it does.

There is no possible ideology behind requiring insurers to ignore risk factors. There is no favoured class which will benefit — even the benefit to young male drivers will be very minor*, and there is certainly no general EU intention to benefit that class. There is no practical benefit. The only reason for the EU to decide to interfere in this particular question is because it can.

And there is nothing irrational in that. The EU wants to interfere in as much as possible, regardless of the lack of any justification, because everything it can touch increases its relevance — its power. This creates jobs for people to check that car insurance rates are in compliance. It creates opportunities for deals, exceptions, opt-outs, and straight out bribes. That is a sound, logical course action for a self-styled government with no country.

*since if the insurers adjust rates to bring in the same revenue as before, the effect will be to discourage low-risk female drivers and encourage high-risk male drivers, which will cost the insurers a lot more in claims — therefore the insurers will have to set the rate much higher than the weighted average of what it charges now, and accept a corresponding fall in business.

Degenerate Formalism

Aretae has responded to my defence of formalism:

My major objection is not North Korea, but china from 1000BC to 1900AD or Japan ~1500-1850. Stable society with stable-ish rulers stagnate hard. In neither case was maintaining rule a big deal…but in both cases, you had enormous periods of malthusian stagnation. That’s what scares the shit out of me about the formalist prescription is that the Game theory seems to guarantee that path.

This time the criticism is not that the leader untrammeled by democracy will be too rapacious, but instead too unambitious — happily sitting at the top of a stable but stagnating civilisation.

Once again, true formalism has an easy answer: as in any underperforming enterprise, the CEO of a stagnating sovcorp will draw the attention of investors who believe that by changing management they can get an improved return. They will buy the shares, call an emergency general meeting, and have the management replaced. Their fully-legal hostile takeover will be bloodless, as the share-purchasing crypto protocols ultimately give them control over the keys that activate the guns.

And again, I don’t buy all that. Mencius described the joint-stock sovcorp as an advance on the “family business” sovcorp, or hereditary absolute monarchy. Formalism without magic guns is just royalism — perhaps we could call it “degenerate Formalism”, as there is just one share of voting stock and it is indivisible.

So, is Formalism in its degenerate form susceptible to this kind of stagnation? I do not feel able to discourse adequately on three millenia of Chinese history. My impression of the last thousand is not of permanent stagnation, but of a complacency that set in after some centuries of being more technically and economically advanced than any neighbour. Success always carries a danger of such complacency, but success is nevertheless worth aiming for.

Japan, similarly, being sufficiently strong and advanced to be quite safe from its only neighbours, made a conscious decision to rest on its laurels, which only ceased to work when the world shrank around it.

No European country made any such abdication of striving for greater wealth and power, not because of different political arrangements, but because the competition between powers never waned.

Malthusian, is, I think, a red herring. Malthus was right about a world where agriculture was the main activity. Adding more people to the same agricultural land produced diminishing returns. It is conceivable that similar contstraints could return, but it does not seem imminent. Again, forms of government are not the determining factor.

On the other hand, it must be recognised that for any government, rapid growth, and particularly growth driven by technological change, is potentially destabilising. The key is that it unpredictably makes different groups in society more and less powerful, so that any coalition is in danger of rival groups rapidly gaining enough power to overwhelm it. Back with Malthus, if one group of families owns land, you can predict that they will continue to own land for many generations. But if another group is powerful because of trade, or manufacturing, or entertainment, they might be bust in ten years’ time. That is why the stability of feudalism is unlikely to return.

There are two circumstances in which the natural tendency of government to restrain technological advance is avoided. One is if it is as easy as possible for the newly rich to take power. That way, whatever the new technology is, those who benefit from it are in charge, and they will drive it on. The other is to totally detach power from wealth creation. Then the ruler will not care who is doing well, provided the country is wealthy enough for him to take a generous cut. The aim of formalism is to achieve the second situation. The ruler should be secure enough that he does not fear growing wealth of any interest group. The question is whether such security is possible.

The best government is one that nobody is trying to overthrow. Western democracy works as well as it does not because of any virtue it has, but because of the virtue people imagine it has, which false belief induces them to leave the government unmolested. If people were to understand that government is better when it is unchallenged, they would largely cease to challenge it.

I believe this was generally the case in late-medieval Europe. People did respect the anointed King, not primarily out of superstition, but because they understood that politics would only make things worse, as they were worse in the days of feudalism. This happy state of affairs was undone by the Stuarts’ idiotic fumbling of the religion question in England, and the return of politics in England triggered copycats around the world, in just the same way as Tunisia has triggered waves of politics across the Middle East. The world has yet to recover from the English Civil War.

Immigration Poll

The Englishman points at a Guardian article on attitudes to race and immigration in Britain. Apparently, “Huge numbers of Britons would support an anti-immigration English nationalist party if it was not associated with violence and fascist imagery”, according to a new poll.

Taken at face value, that supports the claim I made recently, that “if fascism had appeared twenty years ago, without the baggage of history, it would now be popular enough across Europe that it would probably have taken over most of it”.

It is also, in practical terms, meaningless. Any anti-immigration party is automatically associated with violence and fascist imagery, whatever the views of its founders and supporters, so there is no possibility of such a party becoming genuinely popular.

Taking any opinion poll at face value, however, is unwise. This poll was commissioned by Searchlight Educational Trust, and is the basis of a report to be published in full tomorrow. Whether the report’s primary aim is to directly discredit anti-immigrationists, or else to rally support to the anti-fascist cause, is not immediately clear. It may become more obvious when the report is published.

Incidentally, the language of the summary is revealing; Searchlight is nominally anti-fascist, but it highlights as dangerous the finding that 48% of the population would support a non-fascist anti-immigration party. If they were genuinely anti-fascist, rather than just pro-immigration, that would be good news.

On the Interests of Absolute Rulers

Aretae raises the question with respect to formalism: Doesn’t it depend on the interests of the ruler and the ruled being aligned?

The justification of democracy is that by making the rulers answerable to the population, it prevents the rulers from acting in a manner that is good for them and bad for the population — such as spending all the money on themselves.

Formalism in the true Moldbuggian sense has an answer to that: If a voter has actual influence over the government, that should be recognized alongside whatever other actual influences exist, and turned into a shareholding in the government. That makes the value of the influence more predictable, which makes everything more efficient. Every share in the government is the same as every other, so there is no more need for battle between newspapers and civil service departments, unions and universities, to make one group’s influence more than another’s. Everything runs much more smoothly, and everyone is better off.

I am not a true formalist, however. I see the joint-stock sovcorp as highly desirable but quite impossible. The enforcement of shareholder rights depends on the cryptographic protocols which link shareholdings to the ability to activate or deactivate the security force’s weapons. Without disputing the existence of protocols with the correct theoretical properties, I am utterly unable to imagine them being implemented successfully. It is amusing to contemplate control of the world’s armaments falling into the hands of Anonymous, but nobody is ever really going to risk it.

So, without formalism, what is my own response to the conflict of interest between ruler and ruled? It is to live with it. An absolute ruler will rule in his interest and not mine, and will raise money from taxes for his own use.

The ruler will be in the position of the proprietor of a firm; he is in a position to take any spare cash in the economy for himself. Like any government, he can levy taxes on anything he wants, and like any proprietor he can use the revenue raised to invest in the firm, or withdraw it from the firm as a dividend.

That brings us to the Laffer Curve. Everyone but the dimmest of left-wingers accepts that at some point, increasing a rate of tax decreases the revenue raised by the tax. However, the normal discussions of this miss a whole dimension, of time. Tax rates today affect not only the size of the tax base today, but also the size of the tax base tomorrow and into the future. The tax rate that maximises tax receipts over the next 12 months will not be the same as the tax rates that maximises receipts over the next 10 years, or the next 25 years.

In an idealised model of a proprietor of a state, with perfect foresight and perfect security, any extraction of tax that reduces economic growth would reduce the NPV of the proprietor’s interest. In more realistic situations, that would not hold; the rational proprietor would seek to diversify by taking profits out of the state and moving them into other investments, even at the cost of some impact on the profitability of the state.

My support for the idea of a secure, absolute ruler is motivated by the expectation that the cost of what the ruler takes would be smaller than the cost of the deadweight loss imposed by a government in which nobody has a significant interest in overall long-term growth, but which depends for short-term survival on appeasing large and changing interest groups — whether organised voter blocs, civil service departments, the military, or any other party on which an insecure government relies for survival.

I am much less worried about a proprietor’s extraction of profit from a country than I am about how much he will have to do to stay in power. That is the most important divergence of interest: he has an overwhelming interest in preserving his rule, whereas I am much less concerned.

All but one of Aretae’s examples of bad rulers caused damage not to gain wealth from the country, but in the course of maintaining power. The exception is King Leopold’s rule of the Belgian Congo, which was not in any sense a productive economy, but merely a pile of valuable ivory over which ran wild animals and (in the circumstances) uncivilisable natives — the experience does not extend to any country which is not a backward colony of a more advanced civilisation.

The example that is most troubling for me is not Stalin or Leopold but Kim Jong-Il. The same family has ruled there for 60 years, and secure rule in my theory should have produced good government. My assumption is that, while Kim Il-Sung and his successor have succeeded in retaining power, the power of the ruler is neither complete nor secure, and they are in a constant struggle with rivals within the regime. However, the lack of information about the internal politics of North Korea means that there is little evidence for or against this assumption.

Nick Clegg Forgets to Pretend

Nick Clegg is in the papers, appearing not only vague but unconcerned about “who is running the country” while Cameron is away. (Nick Clegg ‘forgot’ he was in charge of the Government this week) (dead link)

One of the most interesting things about politics in the last decade or so is that the fictions are breaking down. That is also the theme of Mencius’ latest post, where he wonders if he is being made redundant by the openness of the USG’s intervention in Egypt, and by Wikileaks.

The notion that the government of Britain is “run” by a handful of well-known politicans has over the last hundred years gone from being somewhat true, to being something often deviated from in practice, to being an earnest pretence, and finally a flimsy charade.

Now Clegg, who as a Liberal Democrat is somewhat more isolated from the continuity of political office than his predecessors in cabinet, seems to be unaware of the tradition of paying lip-service to the idea. If someone really needs for some bizarre reason to ask the Prime Minister something, they have his phone number, and anyway Clegg is thinking of taking a day or two off.

Jeremy Paxman in his book “The Political Animal” quotes an unnamed Tory ex-minister:

‘Once we lost the 1997 election,’ one of the best-known Conservatives of the 1980s and 1990s told me, ‘I knew it was over for me. What was the point of standing up in parliament and lambasting the Labour government, when I knew exactly how limited the options open to them were? It was all empty and pointless.’

It’s a very interesting book. While its aim is to look at the character of politicians, in the process it has to show the environment in which they act in more detail than we normally see.

As an opponent of democracy, I am constantly irritated by the suggestion that there are no practical alternatives. The book reminds us that mass democracy as we understand it today is something that appeared in Britain within living memory:

“In April 1925, for example, the then Chancellor of the Exchequer, Winston Churchill, announced that Britain was to return to the Gold Standard, whereby the value of sterling was guaranteed by allowing pounds to be exchanged for gold. This momentous (if ultimately unsuccessful) decision had been two months in preparation, involving heartfelt arguments on both sides of the debate. Yet not a word of it appeared in the newspapers. Indeed, it was hardly heard outside the confines of the Treasury.”

Decisions were being made by an establishment, and if ministers were part of the process, that was because they, coincidentally, were also members of that establishment. Paxman also describes what happened when ministers were elected from outside the establishment, quoting from the diaries of Hugh Dalton, from the period of the Labour administration of 1929-31.

The Cabinet is full of overworked men, growing older; more tired and more timid with each passing week. Pressure from below and from without is utterly ineffectual. High hopes are falling like last autumn’s leaves. There is a whisper of spring in the air, but none in the political air. One funks the public platform, and one wishes we had never come in. We have forgotten our Programme, or been bamboozled out of it by the officials. One almost longs for an early and crushing defeat.

We have there an explanation for why Britain has got off so lightly from democracy: the parliament of 1925 was elected under a restricted franchise (women under 30 did not get the vote until the 1929 election), and as we saw above major policy debates occurred without reference to the press. Once outsiders started to be elected, they were largely powerless in the face of the establishment. Dalton presumably became more influential in later administrations, but I suspect that was due not so much to the power of the establishment waning, as to the establishment moving closer to the Labour party’s views.

This is the important but subtle point I’ve made before — elections are not what they are claimed to be, but neither are they irrelevant. The establishment rules, but it is not unanimous, and politicans are able to exert crude broad-brush influence where the establishment is divided. Because the politicians are motivated by elections, the influence they exert tends always to be in the same direction. In the period before politicians were answerable to the mass media, the influence of the electorate was lessened.

Anonymous versus HBGary

I don’t think the HBGary story has had the amount of attention it deserves from the mainstream.

It’s worth reading just as drama: Security researcher takes on the “Anonymous” hacker group, and loses so spectacularly it almost defies description.

It’s important for what it says about any organisation’s IT choices and their security implications. HBGary used Google Apps. Cloud services are enormously convenient, particularly for an organisation that does not really have a physical “home”, but using them means losing perimiter security altogether.

Perimiter security has a bad name, because in the old days it was all there was, and today it is not enough. But the things that are possible even if you try to protect your perimiter are much easier if you don’t even have one.

A basic IT risk assessment question for anybody is, “how much damage can an attacker do with one password?”. With one password, Anonymous downloaded all of HBGary’s corporate email from Google and posted it on the internet. They did more than that — the highlight for security commentators was the social-engineering attack on rootkit.org via a Nokia engineer — but the email was enough by itself, as well as enabling the other attacks. They got the email admin password from an ad-hoc CMS with a SQL-injection vulnerability, as it happens, but if your whole company can be destroyed with one password then you’re doing it wrong. (Damn, it’s so hard to avoid lapsing into dialect on this story).

And the third interesting angle is what is to be found in the data Anonymous posted. The company was proposing to feed fake data to WikiLeaks to discredit it, and to pressure journalists who defended WikiLeaks. There is chatter about government involvement in this, but I haven’t seen that actually substantiated. It may be in there somewhere. The HBGary Federal projects aimed at government clients seem to be standard network monitoring / intrusion detection stuff.

In case anyone gets confused, I’m not here to defend Anonymous, or for that matter to attack them. They exist. If they get caught they’ll get the book thrown at them, which is understandable, but I’m more interested in what the world looks like with them in it. Whereas Assange attempts to define his aims, and appeals for support, Anonymous claim only to be “in it for the lulz”, which is not open to disputation.

Update: Intriguing piece on HBGary government work on rootkits and penetration tools. In principle this should be verifiable from the email dumps, but I haven’t checked.

Fascism and Democracy

Since I’ve been discussing fascism, and since it is topical, at least round here, because of the imminent arrival in Luton of the English Defense League, I will look at it in more detail.

I don’t mean to imply that the EDL actually are fascists — I don’t know what they are, and it really doesn’t matter at all. Their enemies, who control the media, all political parties, and every arm of government, will call them fascist, so any discussion of them is a discussion of fascism, whatever it is that they really believe.

I side with the fascists against many liberals in that I don’t see dispersed political power as a desirable end. It’s not that I’m in favour of concentrated political power as an end — I would happily accept dispersed power as a means if it advanced good ends, but I don’t think it does. Concentrated power, for me, is a means towards government that will protect peace, prosperity, security, freedom etc.

I think many fascists, possibly including Schmitt, would not have listed peace as a good end, as I have done. So on that score I oppose the fascists: other things being equal, peace is better than war.

The bad things associated with fascism are excessively aggressive foreign policy, persecution of selected minorities, economic collectivism, omnipresent dishonest propaganda, and a clampdown on opposition.

The belligerence, persecution, collectivism and propaganda all derive from the requirement for a broad popular base. This differs slightly from a democracy: democracy requires the acquiescence of a large majority, fascism requires the active support of at least a large minority. The similarities are close enough, however, that in the last 60 years the democracies have taken on levels of collectivism and propaganda that are indistinguishable from those of 1930s fascism. (George Street is still strewn with the purple streamers of “Luton in Harmony“, a fairly typical government propaganda exercise). Collectivism is part of the mix because it enables the government, by controlling economic activity, to reward support and punish dissent in a subtle but sustainable way that a laissez-faire government cannot.

The direction of the democratic propaganda is of course opposite to that of fascism; this reflects the difference between the popularity requirements of democracy and fascism. Luton in Harmony is supposed to generate a diffuse low-level hostility to opponents of the regime across as wide a base as possible, whereas Fascists need to stir active fear and hatred among a a smaller group who will maintain the regime in power — what Dsquared elegantly paints as “arseholes”. That is the reason why democracies are generally less unpleasant to live under than fascist parties. The ability of the regime to survive on no more than passive acquiescence of the population is the real advantage of democracy, though it only exists because people believe other good things about democracy that aren’t true. It is the feature of democracy that needs to be held onto through a transition to a better system.

Comparisons between democracy and fascism on the foreign policy side are interesting. Britain has operated an aggressive foreign policy over the last decade, but that appears on the face of it to have arisen despite the demands of democracy rather than because of them — it does appear to have been driven by the personal convictions of Tony Blair. But just possibly that is missing the point. The link between war and popularity is not necessarily that war is popular; it is that the people are more inspired by a leadership personality who displays the characteristics that are likely to lead him to war. Hitler and Blair, then, were popular not because they had war policies, but because they had the conviction and charisma of crusaders. That conviction is what then produced the war policies.

Or maybe Blair was just weird. After all, many other democracies are less belligerent. I’m not really convinced either way on this question.

As for the curbing of opposition, I have no problem with it. The reason why it is generally considered proper for a government to tolerate opposition is that it is generally believed that the need to compromise and satisfy opponents pushes government policy in a beneficial direction. I believe the exact opposite: that nearly all governments, good or bad, are made worse by opposition. All competent governments treat sedition as a crime. Politics in the real world is a matter of life and death, and those who perpetrate it must accept the risks.

That is not to say that opposition to any government is bad: even if all governments become worse when they are opposed, they may be replaced by something better if they are actually overthrown. But I don’t expect bad governments to cooperate in their own overthrow.

Concretely, if the current events in Egypt result in regime change, that could possibly be beneficial (though I would be surprised). But if they don’t, any “reforms” that the current regime is driven to will make things worse. True revolutionaries understand this — they want concessions not for their own value, but because concessions further weaken the regime, bringing its fall nearer.

So to strengthen my earlier post, which was slightly equivocal, I reject fascism. It relies on mass popularity, and therefore fails to improve on democracy, but going further, because it has to win more positive support from the population than democracy does, it has the problems of democracy in a stronger and more dangerous form. One of the worst things that can be said about democracy is that, particularly in it’s young form, it has a tendency to devolve into fascism. A young democracy is little more than a battle between competing fascisms — each party is the active street-fighting kind, rather than the passive tick-in-the-box democratic kind.

That actually explains a mystery that troubled me in the past: why it is that there is such an exaggerated fear of fascist or near-fascist organisations like the BNP, despite their appearing laughably weak and incompetent. At some level, the regime must recognise that in intellectual terms fascism is the obvious response to democracy, however irrelevant a particular party might be. I think it’s fair to say that if fascism had newly appeared twenty years ago, without the baggage of history, it would by by now be popular enough across Europe that it would probably have taken over most of it.