Efficient Markets Hypothesis

There have been a couple of blog posts about the Efficient Markets Hypothesis in the past week:

How To Dis EMH By Robin Hanson January 9, 2010 11:15 am on Overcoming Bias

Then The Efficient Markets Hypothesis by Steve Sailer, Friday, January 15, 2010 on his blog.

According to the Efficient Markets Hypothesis markets reflect ALL relevant information, not just public, since any purchase or sale in a market, even that based entirely on private information is reflected in the price. And if someone has private information but does not act on it, by buying or selling, then it is not relevant as it does not affect the market price.

Two, collapses and delayed effects are PART of the EMH. No one who wasn't out of touch with reality has ever claimed that markets instantly reflect all possible information. I am sure someone, probably an academic somewhere, has made that claim.

Three, the biggest claim is obviously true, that there is NOTHING that produces more accurate prices and hence more efficient exchanges than the market. It's not some magic wand, just there is no humanly better alternative.

Markets are in a way a set of "distributed algorithms" for establishing and managing exchanges. But instead of being established across computers which are much to slow and weak, they work across human minds. Each mind only deals with a small fraction of the available information and outputs its decisions in the form of buy or don't buy or sell decisions; that is a decision as to whether the "market price" is lower, close to, or higher than their evaluation of value.

When we have "minds" more powerful than our own, markets may become obsolete, like in the "Economics 2.0" of Charles Stross's novel Accelerando (Singularity).

But until then there is no viable alternative for humans either to markets or to crippled command-type economies. The so-called "mixed economies" are not stable; special interests, especially the interests of government bureaucrats and politicians in increasing their power, inevitably leads to growth of the command side of the economy at the expense of the market.

Substantially edited to correct poor wording, 1:15 PM.

Rules Destroys Intelligence

Size alone does not a bureaucracy make, though it always helps (or hurts, looking at it from a rational perspective). Rules exist in the first place to benefit the group and its production. A bureaucrat is someone who has forgotten that simple fact, and worships the rules as ends in themselves, rather than means to getting the job done. This is one reason large organizations are more bureaucratic than smaller ones, the distance of most workers from the actual job.

The ultimate in rule-bound work is automated work.


A Web example:

On September 30 I was reading a well-established post on a web site I generally like, that already had lots of comments. Since it has a [reply] button, I naturally replied to comments that warranted it. I didn't even realize how many I had posted until I had gone back to the homepage and found I had 9 of the top 10 comments. I knew from a discussion a year before that the site owners "would prefer" people not post more than 3 of the latest 10 comments - but that was before one of them left and before the reply button, so I didn't know if it would be a problem, and it really didn't even occur to me as I was replying to those comments.

Apparently it did. On October 11, I tried to comment on a new post, my first comment since the 30th, and got an error page with "You are posting comments too quickly. Slow down." Outstanding stupidity on the part of the web site. What an outstandingly stupid contradiction between the site's name and action.

To Spread The Enlightenment and Western Civilization

From Scott Aaronson's "The Singularity Is Far"

And I can’t help thinking that, before we transcend the human condition and upload our brains to computers, a reasonable first step might be to bring the 18th-century Enlightenment to the 98% of the world that still hasn’t gotten the message.

No doubt lead by the sort of liberal halfwits that supported the Soviet Union and who try and fail to manage a couple dozen 9 year olds (ie, professional academics and teachers).

This is like the quote, which I can't find so can't attribute properly, that said intellectual supporters of revolutionaries expected to find themselves running things after the revolution, and in every real world revolution were unpleasantly surprised. But their intellectual descendants never seem to learn. Here what Scott wants to happen should happen; but most people don't want to become civilized, most in Western countries are actively or passively against the very civilization that they depend upon for their lives. The only reason civilization hasn't collapsed under the sheer weight of democratic arrogance and stupidity is that market forces have helped to counterbalance their incompetence and evil. And the only way to raise the rest of the world is by extending the market, and especially protecting it from gov't power, into the rest of the world.

Earlier in the post he wrote,

I see a few fragile and improbable victories against a backdrop of malice, stupidity, and greed—the tiny amount of good humans have accomplished in constant danger of drowning in a sea of blood and tears

Since destroying things is MUCH easier than building, if humans weren't substantially inclined toward helpful and constructive values, civilization would never have existed in the first place nor could it continue to exist at all. Of course, most of the world doesn't have much, largely because they aren't very civilized.

Existential Risk Mitigation

This post is partially a response to lesswrong.com/lw/12h/our_society_lacks_good_selfpreservation_mechanisms


From the Less Wrong post (I replaced the bullets with numbers for ease of reference):

"Well, Bostrom has a paper on existential risks, and he lists the following risks as being "most likely":

1 Deliberate misuse of nanotechnology,
2 Nuclear holocaust,
3 Badly programmed superintelligence,
4 Genetically engineered biological agent,
5 Accidental misuse of nanotechnology (“gray goo”),
6 Physics disasters,
7 Naturally occurring disease,
8 Asteroid or comet impact,
9 Runaway global warming,
10 Resource depletion or ecological destruction,
11 Misguided world government or another static social equilibrium stops technological progress,
12 “Dysgenic” pressures (We might evolve into a less brainy but more fertile species, homo philoprogenitus “lover of many offspring”)
13 Our potential or even our core values are eroded by evolutionary development,
14 Technological arrest,
15 Take-over by a transcending upload,
16 Flawed superintelligence,
17 [Stable] Repressive totalitarian global regime, "

First, there are very few real existential risks.

Of these 3 and 16 are the same problem, and 15 is close enough.
And so are 11 and 14.
9, 10, 12, and 13 are not real problems.
2 is not an existential risk.
11, 14, and 17 are not existential problems in themselves, although they could limit our ability to deal with a real existential problem if one arose.

So that leaves:

1 Deliberate misuse of nanotechnology
3/15/16 Flawed superintelligence
4 Genetically engineered biological agent
5 Accidental misuse of nanotechnology
6 Physics disasters
7 Naturally occurring disease
8 Asteroid or comet impact

6 is not likely and the only way to prevent it is deliberately impose 11/14, which while not an existential risk itself will increase the difficulty in handling an existential (or other) danger that may eventually occur.

7 and 8 are so unlikely within any given time span that they are not worth worrying about until the other dangers can be handled.

I used to think 1 was most likely and 5 next, but Eliezer Yudkowsky's writings have convinced me that unfriendly AI (3/15/16) is a nearer term risk, even if not necessarily a worse one.

Libertarianism is the best available self-preservation mechanism. I am using libertarianism in a general sense of freedom from government interference. It is the social and memetic equivalent of genetic behavioral dispersion; that members of many species behave slightly differently which reduces the likelihood of a large percentage falling to the same cause. The only possible defense against the real risks is to have many people researching them from many different directions - the biggest danger with any of these only occur if someone has a substantial lead in the development/implementation of the technologies involved.

Some Notes on Responsibility

Slightly revised version of some comments I left on lesswrong.com - Does Blind Review Slow Down Science?

First I should state that I disagree with anonymous review for the same reasons that I disagree with an unaccountable judiciary - the negative effects on responsibility.

However, there are several problems with the theory in this essay - the most important being that the editors know who the writer or researcher is and can decide to go ahead and publish on that score no matter what the reviewers say. The editors have a strong incentive to advance novel but true theories in that it will advance the reputation of the journal.

About the unaccountable judiciary, you might check out this book by Max Boot, Out Of Order: Arrogance, Corruption, And Incompetence On The Bench, a large proportion of the problems he wrote about arose from judges not being personally responsible for their actions on the bench.

Also, more generally, I am a libertarian largely because I believe that everyone is totally and completely responsible for their own actions. Even if someone is holding a gun to your head, you decide what you do in response (and are responsible for letting yourself get in that position). Or if you are drunk or drugged, you are responsible for putting yourself in that position and therefore for what you do while that way.

By "responsible", I mean that people should bear some part of the forseeable costs of their actions. I say "some part" because the actions of others also influence costs, and stress "foreseeable" because in any complex system things interact to such an extent that only very direct results can actually be attributed reliably to any one party. Most attributions of "fault" in complex systems is scapegoating or motivated by interpersonal status games.

Law and Outlawry

Justification of Law (Mala in se)

Government law is "justified", really defended in the psychological sense, by claiming to be needed to enforce prohibitions of universally recognized wrongs (mala in se), such as robbery and murder.

Perversion of Law (Mala prohibita)

Government perverts the law (mala in se) by making laws (mala prohibita) which mainly favor specific groups - mainly to increase its own power over its subjects/citizens/serfs.

Obedience to Law as Prudential Rule

Breaking the law, or even appearing to do so, increases the risks to your values (especially life and freedom) from government agents and their hordes of unpaid informers that infest the country. Given the errors and arbitrary enforcement (and willing dishonety), everyone who is not themselves members of the government is at some risk of attack by government agents.

Living Outside the Law

Given the various risks and dangers, on both sides of the divide, your values may be more effectively served by living outside the law. I don't think so for various reasons, but it is arguable enough that I decided to include a section discussing it.

Historically, the outlaw was not necessarily a criminal - but one who for whatever reason lived outside of the limits and protections of the law. It was often used as a punishment, sort of an extension of shunning and ostracism, sometimes to an explicit withdrawl of the law's protection - where anyone who wanted to, and could manage it, could kill the outlaw. But it was sometimes used by those who simply wanted to be left alone, given human nature any outlaws usually became the scapegoats for anything that went wrong in the area.

The growth of government power and the use of mala prohibita is likely closely related to the decline of voluntary outlawry.

The only benefit today in living outside the law is reduction in tax burden. Most other possible benefits I have heard of you can actually get legally with a little thought and care. And even the benefit of tax avoidance is questionable since it is harder to earn income outside the law, than it is without the need to evade detection. If discovered, or even suspected, it would be dangerous for the outlaw/evader and with modern computer databases and communications it would be likely to be noticed, and ever more likely to be noticed in the future.

Trying to live outside the law is not generally worth it, but may be worth keeping in mind. The only way it would be cost-effective would be if you were interested in
an extremely low, subsistence-level life where you would need almost no income. In that case you could do handyman work and day labor for cash. The biggest problem with that is getting older. Long before retirement age, if you are doing physical labor, you are going to start aching, eventually more or less continuously. I
don't recommend it.

Toleration

Toleration means putting up with, not using force against others for their beliefs or actions that do not directly threaten me.

It does not imply approval, just acceptance that it is their business and not harming me. Too many people try to leverage toleration to mean approval - Leftists in their continuing attack on any standards in their continuing attempt to destroy civilization, especially industrial civilization, and Conservatives in their continuing attempt to destroy freedom of expression in their continuing attempt to homogenize culture into their mindless morass of Judeo-Christian faith.

The Austrian Method

Based on Economic Science and the Austrian Method by Hans-Hermann Hoppe.

This book is very dry and difficult reading, as bad as Mises "Human Action", though thankfully much shorter, or I never would have read it, as I never finished "Human Action".

The Austrians try to base everything on fundamental ideas, what they call "synthetic a priori" after Kant; I have never read Kant so I can't tell you whether their claim that their ideas are Kant's "synthetic a priori" or not; but they are the same types of ideas I have been calling for years "undefinable primitives". These ideas that they try to base everything on, "action", "value", "cause and effect" aren't some mystical information from nowhere, which is what earlier reading about Kant had suggested he thought - I think they are ideas absorbed from observation of reality and how humans act (and, unfortunately, what people have absorbed through reading and stories, which is why so much "intuition" on larger issues where people don't have direct experience is often so irrational), but they are so basic that they are hard even to discuss intelligibly, much less define.

A second part of the Austrians' disagreement with conventional economics is based on the supposed differences between human motivations and interests and the natural world - "the impossiblity of causal predictions in the field of human knowledge and actions" (p.43). Human preditions must be based on actions and goals, and what the particular human knows at the time he chooses his actions and goals. The particualrity of what a human knows is another reason they dislike and distrust statistical knowledge, like the GDP, it loses too much necessary information.

"... empirical knowledge which is based on understanding - just as according to our intuitions economic propositions claim to be based on understanding - rather than on observations." (p.57) Actually, as I suggested above, our intuitions and understanding are based on internalized observations and knowledge received from others.

"In explicitly understanding knowledge as displayed in argumentation as a peculiar category of action, it becomes clear immediately why the perennial rationalist claim that the laws of logic - ... - are a priori true propositions about reality and not mere verbal stipulations regarding the transformation rules of arbitrarily chosen signs, as empiricist-formalists would have it, is indeed correct." (p.71)

A part of Hoppe's argument in the book is a misguided (in my opinion) attack on a sort of naive empiricism that I have never actually encountered. I haven't read much technical economics literature, so it's possible some economists are making these sort of shallow mistakes, but what I have read in economics suggests this is unlikely.

Another part of his argument is an attack on historicism in economics, I think this is even more misguided, without historical knowledge Austrian economics could not have been developed. Also, some of the best economic reading I have done has been by Thomas Sowell, an economic historian. Another good economics writer is David D Friedman, a non-economist.

The best part of Austrian economics is that they give a clear rational account of the few things nearly all economists agree on: minimum wages increase unemployment, wage and price and rent controls cause other (non-price) forms of rationing, and so on.

Cautions when Dealing with Others

Caution is needed in dealing with others because they often don't know what is in their best interests; they only know what they want. And what has been "promised" them by politicians and their media allies.

Worse, the intelligent tend to overestimate the intelligence of those they have casual dealings with and the ethical tend to overestimate others' ethics.

A Declaration of Separation

Bravo. Except for that line about god.

A Declaration of Separation

Maybe it's time to go Galt.

Five Ways of Power

I am using power analogously to its use in physics; instead of power is the ability to do work, I am using it more generically as power is the ability to get work done.
In that sense, the title could just as easily have been:

The Five General Means of Getting Things Done

Love or Shared Purposes: People work for (with) another party for goals they both share. Political parties and families are common examples. For more on this Way, see David D. Friedman's chapter "Love Is Not Enough" in The Machinery of Freedom: Guide to a Radical Capitalism.

Politico-Criminal Power or Coercion: People are forced to produce work for another party through violence or the threat of violence. People tend to resist or slack-off, so although this can be effective, it is inherently limited unless combined with fraud (legitimacy).

Politico-Religious Power or Fraud: People are tricked into doing work for another party's benefit. This is probably the most effective over the short term, but once people start seeing through the trickery they start ignoring the "message". Unless it is combined with force (police powers).

Economic Power or Trade: People are paid, through a fair exchange, to do something for another party's benefit. Though also for their own, through the payment they receive. This is the best long term, and often short term, way of dealing with people. The biggest advantage is a free economy's ability to harness the power of specialization to increase productivity. The only real weakness is in transaction costs, and they are less of a problem than the analogous costs in any of the previously mentioned Ways.

Personal Power: Do it yourself without depending on another party. This is the ground state. Most people can only do a limited amount for themselves, and for a whole society, depending on an economy mostly limited to what they can do would result in a very poor Paleolithic technology and standard of living. In a modern economy, though, a person who because of high-functioning autism (Aspies) or because they are "going Galt", can live far beyond what others would expect if they develop their own abilities sufficiently and invest a minimum of economic work to buy the necessary tools and supplies.


In Machinery of Freedom, especially the chapter "Love Is Not Enough", David Friedman writes specifically about dealing with others, so he doesn't mention Personal Power, and he conflates Coercion and Fraud, but even though they are often together in the real world, there are sufficiently different that they should be treated separately.

KISS: Keep It Simple and Succinct

Succinct means brief and concise, to the point. A succinct argument is one that more directly addresses the point under discussion.

The "traditional" meaning of KISS completely misses the point. The biggest problem KISS addresses is over-complication of plans - and it is not a problem of stupidity. Those most prone to over-complicate are the more intelligent, especially the highly intelligent and highly educated, but lacking in practical experience. Experience, especially wide experience, is the best prophylaxis for over-elaborate plans.

In large-scale planning, especially where the planner cannot see it through to completion or which has too many complications, it is easier to come up with excuses as to why it didn't work out than to actually figure out what caused any problems.
It is human nature to try to explain mistakes away - if you want to get better though you need to avoid situations that make it easy to do. Almost all government projects fall into this group, which is why many who tend towards libertarianism have practical experience and have dealt with the government enough to understand the way it actually works . (Former police, former military, and engineers, for example, tend to be over-represented among libertarians (in my reading and experience anyway, I haven't seen any really reliable statistics)).

Space Fanatics Not Serious

I figured L-5 Society and similar space "fanatics" weren't serious. If they were serious they would have been working on getting to space, not jawboning, mostly to each other, about how important it is and how they need to get the government to spend more money on it or to do it.

Most of the cost of getting to space is spent on the people who do the work (except for bureacracy costs in NASA, that is). If the "space fanatics" had actually been willing to work at it, and cooperate and do the work themselves, they should have been able to build decnet quality rockets and start actually putting people into space. Instead, they all just sat around talking about how important it was to get someone to pony up the money for it.

And before someone starts talking about the space entrepreneurs, they were just a bunch of underfunded companies, trying to do "demonstration" project to get more funding. They weren't even trying to actually start a serious business of getting to space. To be fair they didn't have the resources for that anyway. But "space fanatics" as a group probably did have the abilities and resources needed, if they could work together and do it.

The closest anyone has come is Robert Zubrin, author of Entering Space: Creating a Spacefaring Civilization and The Case for Mars: The Plan to Settle the Red Planet and Why We Must. And most of his work was the cheaper problem of using Martian materials and was paid for by his aerospace employer. Unfortunately, the Mars Direct bunch is just like the earlier L-5 Society, instead of getting together to work, they're just getting together to whine.

In reality, they are just another version of welfare liberals who want the government to pay for what they want.

Plausibility - Entertainment Versus Survival

Apparently people are willing to consider gov't incompetence or evil or both for entertainment purposes (entertainment plausibility) but not where it may involve their life or economic future. Wildly improbable gov't actions that could almost certainly not be covered up regularly occur in movies (eg, Quarantine). Even more destructive gov't policies (eg, the Federal Reserve and Social Security) occur regularly in the real world and most people dismiss arguements and complaints about them as "conspiracy theories" or exaggerations.