Book review: This Time is Different: Eight Centuries of Financial Folly by Carmen M. Reinhart and Kenneth S. Rogoff.

This book documents better than any prior book the history of banking and government debt crises. Most of it is unsurprising to those familiar with the subject. It has more comprehensive data than I’ve seen before.

It is easier reading than the length would suggest (it has many tables of data, and few readers will be tempted to read all the data). It is relatively objective. That makes it less exciting than the more ideological writings on the subject.

The comparisons between well governed and poorly governed countries show that governments can become mature enough that defaults on government debt and hyperinflation are rare or eliminated, but there is little different in banking crises between different types of government / economies.

They claim that international capital mobility has produced banking crises, but don’t convince me that they understand the causality behind the correlation. I’d guess that one causal factor is that the optimism that produces bubbles causes more investors to move money into countries they understand less well than their home country, which means their money is more likely to end up in reckless institutions.

The book ends with tentative guesses about which countries are about to become mature enough to avoid sovereign debt crises. Among the seven candidates is Greece, which is now looking like a poor guess less than a half year after it was published.

The Chimera Hypothesis: Homosexuality and Plural Pregnancy makes the surprising claim that:

at least 50-70% of healthy adults are chimeric to some extent.

The hypothesis can explain some homosexual and transgender tendencies, and suggests some reproductive advantages that offset those reproductive disadvantages:

Therefore, women prone to having more than one egg fertilized, but whose pregnancies only resulted in only one live birth, would have the optimum level of fertility. A side effect of this could be an increased incidence of chimerism in human children … even a relatively small increase in female fertility, which is really the limiting factor in human population growth, could outweigh the disadvantage of less fertility in a small number of male infants.

One observation that this hypothesis doesn’t explain is why there are many more homosexuals than transgenders. So my guess is that it explains only a modest fraction of the homosexuality that we observe, but might explain the observed frequency of transgenders fairly well.

Rob Freitas has a good report analyzing how to use molecular nanotechnology to return atmospheric CO2 levels to pre-industrial levels by about 2060 or 2070.

My only complaint is that his attempt to estimate the equivalent of Moore’s Law for photovoltaics looks too optimistic, as it puts too much weight on the 2006-2008 trend, which was influenced by an abnormal rise in energy prices. If the y-axis on that graph were logarithmic instead of linear, it would be easier to visualize the lower long-term trend.

(HT Brian Wang).

Book Review: A Splendid Exchange: How Trade Shaped the World by William J. Bernstein.

This book starts off as a relatively ordinary history book, then toward the end offers a moderate number of valuable insights. Those insights don’t appear to be original, but he performs a valuable service by drawing attention to ideas that aren’t as widely known as they should be.

He argues that the Boston Tea Party was intended to keep tea prices high, and instigated by the merchants who were threatened by increased competition, using the much of the same rhetoric that modern protectionists use.

He describes a strong connection between a decrease in the price of mailing a letter and the ability of people of ordinary wealth to organize opposition to the Corn Laws.

He has an interesting argument that the benefits of international trade is the resulting desire for peace between people who have business relationships with each other, rather than the more obvious but apparently small benefits that are more direct. I wish there were stronger evidence that trade generates peace.

He makes a moderate number of claims that seem poorly thought out. E.g. “a national or central bank” is “the bedrock financial institution of the modern world”.

Impro

Book review: Impro: Improvisation and the Theatre, by Keith Johnstone.

This book describes aspects of the human mind and social interactions which actors often need to analyze more explicitly than others, because actors need to be aware of the differences between various roles/personalities that they play, whereas unconscious understanding is adequate for people who only interact as a single personality.

The best chapter is about status, and emphasizes the important role that status games play in most social situations and how hard it is to be aware of one’s status-related behavior.

One disturbing claim he makes is that “acquaintances become friends when they agree to play status games together”. I’m very tempted to deny that I do that (as he predicts most people will deny acting). But I know there’s more happening in social interactions than I’m aware of, so I’m hesitant to dismiss his claim.

The chapter on spontaneity has apparently important insights about the role self-censorship plays in spontaneity and creativity. But I find it hard enough to change my behavior in response to those insights that I can’t be confident he’s correct.

He has the insight that “personality” functions as a public-relations department for the mind. Personality doesn’t seem like quite the right word here, but this is remarkably similar to an idea that Geoffrey Miller later developed from evolutionary theory in his excellent book The Mating Mind.

The chapter on masks and trance is strange and hard to evaluate.

Some comments on last weekend’s Foresight Conference:

At lunch on Sunday I was in a group dominated by a discussion between Robin Hanson and Eliezer Yudkowsky over the relative plausibility of new intelligences having a variety of different goal systems versus a single goal system (as in a society of uploads versus Friendly AI). Some of the debate focused on how unified existing minds are, with Eliezer claiming that dogs mostly don’t have conflicting desires in different parts of their minds, and Robin and others claiming such conflicts are common (e.g. when deciding whether to eat food the dog has been told not to eat).

One test Eliezer suggested for the power of systems with a unified goal system is that if Robin were right, bacteria would have outcompeted humans. That got me wondering whether there’s an appropriate criterion by which humans can be said to have outcompeted bacteria. The most obvious criterion on which humans and bacteria are trying to compete is how many copies of their DNA exist. Using biomass as a proxy, bacteria are winning by several orders of magnitude. Another possible criterion is impact on large-scale features of Earth. Humans have not yet done anything that seems as big as the catastrophic changes to the atmosphere (“the oxygen crisis”) produced by bacteria. Am I overlooking other appropriate criteria?

Kartik Gada described two humanitarian innovation prizes that bear some resemblance to a valuable approach to helping the world’s poorest billion people, but will be hard to turn into something with a reasonable chance of success. The Water Liberation Prize would be pretty hard to judge. Suppose I submit a water filter that I claim qualifies for the prize. How will the judges test the drinkability of the water and the reusability of the filter under common third world conditions (which I suspect vary a lot and which probably won’t be adequately duplicated where the judges live)? Will they ship sample devices to a number of third world locations and ask whether it produces water that tastes good, or will they do rigorous tests of water safety? With a hoped for prize of $50,000, I doubt they can afford very good tests. The Personal Manufacturing Prizes seem somewhat more carefully thought out, but need some revision. The “three different materials” criterion is not enough to rule out overly specialized devices without some clear guidelines about which differences are important and which are trivial. Setting specific award dates appears to assume an implausible ability to predict how soon such a device will become feasible. The possibility that some parts of the device are patented is tricky to handle, as it isn’t cheap to verify the absence of crippling patents.

There was a debate on futarchy between Robin Hanson and Mencius Moldbug. Moldbug’s argument seems to boil down to the absence of a guarantee that futarchy will avoid problems related to manipulation/conflicts of interest. It’s unclear whether he thinks his preferred form of government would guarantee any solution to those problems, and he rejects empirical tests that might compare the extent of those problems under the alternative systems. Still, Moldbug concedes enough that it should be possible to incorporate most of the value of futarchy within his preferred form of government without rejecting his views. He wants to limit trading to the equivalent of the government’s stockholders. Accepting that limitation isn’t likely to impair the markets much, and may make futarchy more palatable to people who share Moldbug’s superstitions about markets.

Book review: City of Gold: Dubai and the Dream of Capitalism by Jim Krane.

This book describes how a nearly barren piece of land became a prosperous city. Dubai sounds like what you’d expect if Bill Gates had taken over a small desert tribe and turned it into a real estate development company.

Part of its success is due to having the right amount of oil given its population size. Most non-industrialized countries that find enough oil to affect their economy are corrupted by dependence on it and by political fighting over who profits from it. Dubai found enough to finance a good deal of growth, but quickly saw that oil revenues would decline before long. Also, it had few enough people that the ruling family could afford to buy off any potential opposition.

But Dubai’s development started before it had much hope for oil money, and is partly due to the ambitions of a few people who ruled it. There must be a fair amount of luck involved – it seems to be an accident that Dubai is ruled by competent businessmen who are uninterested in politics (one ordered his reluctant brother to become the ruler). British rule over the region early on also helped ensure political stability.

The book’s description of Dubai’s legal system is confusing. How did a tribe with no tradition of private property make investors feel safe? I’ve read elsewhere that importing a British judge and British common law to the financial district is part of the explanation. The rest of Dubai seems to manage with virtually no legal system. I’m still puzzled about how Dubai provides enough predictability to attract large investments.

He describes Dubai’s lack of democracy as “an embarrassment”. But most of the book suggests that Dubai has been doing better than a democracy could. It makes much faster decisions than a democracy, and it forces bureaucrats to compete for performance scores that would be too easily gamed if voters were in charge.

Dubai’s ambitious expansion has made it resemble a financial bubble for much of the past 55 years, but most of its gambles have succeeded. This makes me wonder how to distinguish similar expansions from bubbles in the future (or in China, the present).

Dubai is an important model for how seasteads might develop, and will compete with any seastead.

The author has a modest pro-Dubai bias, but reports some serious problems such as workers being unable to leave because their passports has been confiscated, and wasteful subsidies of energy and water prices.

He claims that until 2008 the region “hadn’t experienced a financial shock for more than three decades”. Was the 1982 Kuwaiti stock market crash in a different region? It’s not obvious where to get enough financial data to say how the shock from that affected Dubai.

Book review: Moral Machines: Teaching Robots Right from Wrong by Wendell Wallach and Collin Allen.

This book combines the ideas of leading commentators on ethics, methods of implementing AI, and the risks of AI, into a set of ideas on how machines ought to achieve ethical behavior.

The book mostly provides an accurate survey of what those commentators agree and disagree about. But there’s enough disagreement that we need some insights into which views are correct (especially about theories of ethics) in order to produce useful advice to AI designers, and the authors don’t have those kinds of insights.

The book focuses more on near term risks of software that is much less intelligent than humans, and is complacent about the risks of superhuman AI.

The implications of superhuman AIs for theories of ethics ought to illuminate flaws in them that aren’t obvious when considering purely human-level intelligence. For example, they mention an argument that any AI would value humans for their diversity of ideas, which would help AIs to search the space of possible ideas. This seems to have serious problems, such as what stops an AI from fiddling with human minds to increase their diversity? Yet the authors are too focused on human-like minds to imagine an intelligence which would do that.

Their discussion of the advocates friendly AI seems a bit confused. The authors wonder if those advocates are trying to quell apprehension about AI risks, when I’ve observed pretty consistent efforts by those advocates to create apprehension among AI researchers.

Book review: What Intelligence Tests Miss – The Psychology of Rational Thought by Keith E. Stanovich.

Stanovich presents extensive evidence that rationality is very different from what IQ tests measure, and the two are only weakly related. He describes good reasons why society would be better if people became more rational.

He is too optimistic that becoming more rational will help most people who accomplish it. Overconfidence provides widespread benefits to people who use it in job interviews, political discussions, etc.

He gives some advice on how to be more rational, such as thinking the opposite of each new hypothesis you are about to start believing. But will training yourself to do that on test problems cause you to do it when it matters? I don’t see signs that Stanovich practiced it much while writing the book. The most important implication he wants us to draw from the book is that we should develop and use Rationality Quotient (RQ) tests for at least as many purposes as IQ tests are used. But he doesn’t mention any doubts that I’d expect him to have if he thought about how rewarding high RQ scores might affect the validity of those scores.

He reports that high IQ people can avoid some framing effects and overconfidence, but do so only when told to do so. Also, the sunk cost bias test looks easy to learn how to score well on, even when it’s hard to practice the right behavior – the Bruine de Bruin, Parker and Fischhoff paper than Stanovich implies is the best attempt so far to produce an RQ test lists a sample question for the sunk costs bias that involves abandoning food when you’re too full at a restaurant. It’s obvious what answer produces a higher RQ score, but that doesn’t say much about how I’d behave when the food is in front of me.

He sometimes writes as if rationality were as close to being a single mental ability as IQ is, but at other times he implies it isn’t. I needed to read the Bruine de Bruin, Parker and Fischhoff paper to get real evidence. Their path independence component looks unrelated to the others. The remaining components have enough correlation with each other that there may be connections between them, but those correlations are lower than the correlations between the overall rationality score and IQ tests. So it’s far from clear whether a single RQ score is better than using the components as independent tests.

Given the importance he attaches to testing for and rewarding rationality, it’s disappointing that he devotes so little attention to how to do that.

He has some good explanations of why evolution would have produced minds with the irrational features we observe. He’s much less impressive when he describes how we should classify various biases.

I was occasionally annoyed that he treats disrespect for scientific authority as if it were equivalent to irrationality. The evidence for Big Foot or extraterrestrial visitors may be too flimsy to belong in scientific papers, but when he says there’s “not a shred of evidence” for them, he’s either using a meaning of “evidence” that’s inappropriate when discussing the rationality of people who may be sensibly lazy about gathering relevant data, or he’s simply wrong.