In a newspaper article I once read, a professor of music pointed out the advantages of music education for children. He wrote that music is one way of experiencing and accessing the world.
The literary critic Michael Orthofer expresses similar thoughts about reading novels:
ORTHOFER: But I definitely think [reading fiction] really expands my horizons in a way that other things can’t. Travel, talking to people, meeting people, reading the newspaper, following current events – those things obviously also help you understand the world better, but I think fiction adds a totally different dimension to it. And truly great fiction really can take you much farther than other things can, I think. (link)
Consider Hans Fallada’s novel “Jeder stirbt für sich allein” (“Alone in Berlin”) which takes place in 1940-1942 Berlin. The author follows a working-class couple whose initial hopes in Hitler are disappointed and who become estranged from the Nazi regime. They start to secretly distribute postcards with subversive messages.
I can’t visit the Berlin of the 1940s, but Fallada can take me there. And it’s easy to feel with them. The domesticity of the couple is familiar and typically German. And when they get caught and things turn violent, even the swearing is what you hear today.
The couple really existed, but Fallada didn’t try to find out any facts about them or to document their case. Instead he unearths the “inner truth of the narrative”.1
But an author can do even more, he can depict a world that does not and did not exist, but in our fantasy it could have:
ORTHOFER: Being not tied down. […] That nonfiction, the description of what has actually happened – first of all, it’s also very difficult to capture just precisely what has happened. And often fiction allows you to go beyond that, to imagine the reasons behind it, which you might not be able to if you were doing just purely following the facts, […]. (link)
Paul Theroux calls travel a “mode of inquiry” and that you could also call music and fiction.
The German original by Hans Fallada in the introduction to the book (added emphasis):
Nur in großen Zügen – ein Roman hat eigene Gesetze und kann nicht in allem der Wirklichkeit folgen. Darum hat es der Verfasser auch vermieden, Authentisches über das das Privatleben dieser beiden Menschen zu erfahren: er musste sie so schildern, wie sie ihm vor Augen standen. Sie sind also zwei Gestalten der Phantasie, wie auch alle andere Figuren dieses Romans frei erfunden sind. Trotzdem glaubt der Verfasser an die “die innere Wahrheit” des Erzählten, auch wenn manche Einzelheit den tatsächlichen Verhältnissen nicht ganz entspricht.
What became more and more clear to me while reading this book is just how undesirable the existence of a superintelligence would be. It would be risky, it’s not clear we could get it to do what we want, we don’t know how to specify what we want and even if all these things would be fulfilled: Why should we ever want to lose our agency?
Bostrom’s definition of “superintelligence” (of which he considers artificial intelligence a special case) is silent on if there’s some new mind, but it asks about the capacities of such a thing (his emphasis):
We can tentatively define a superintelligence as any intellect that greatly exceeds the cognitive performance of humans in virtually all domains of interest. (Chapter 2: Paths to superintelligence)
He argues that if ever we could build it, we would:
Some little idiot is bound to press the ignite button just to see what happens. (Chapter 15: Crunch time)
Even after reading this book, I doubt there’ll ever be some other entity that has agency. The internet or Google or the Go bot won’t “wake up”. Bostrom discusses many more sophisticated ways to get to superintelligence, but those too seem speculative to me.
But Bostrom asks: “What if?” What if there existed such a superintelligence? And it’s worth pondering “what if”, for two reasons:
If a superintelligence could be created, then we should plan ahead.
Even if we are never going to create a superintelligence, it’s an interesting thought experiment and we might learn something about our values.
Could we control it?
A superintelligence couldn’t easily be contained (“sandboxed” he calls it) and might become a singleton, a centralized decision maker. Whether the superintelligence is “friendly” would be hard to test, as it might well behave so at first to be let out of the box. And we might not get a warning, as its appearance could be a sudden event. The early superintelligence modifies and improves itself which leads to an intelligence explosion.
Bostrom also describes the following cunning plan of perfect enslavement: Feed the AI cryptographic tokens that are highly rewarding to it. And discount strongly, so that the first token gives 99% of remaining utility and the next token gives 99% of remaining utility again and so on. This makes it less likely that the AI comes up with some weird long-run plan of getting more tokens.
But that, too, is far from safe. It turns out that what Bostrom calls the “control problem”, the issue of how to restrain a superior intelligence, is unsolved and hard.
Bostrom discusses different kinds of superintelligences: oracles, genies, sovereigns and tools.
An oracle answers simple questions that we ask it. We might even reduce the possible interactions we could have with it to a chat or to only a yes or no statement, to avoid being charmed by it. I liked the idea of testing the predictions of an oracle by asking the same question to different versions of it that have different goals and varying available information. The distribution of answers (similarly as in bootstrapping in econometrics) then shows us how robust the oracle’s recommendations are.
Genies perform one task, then stop and wait for the next job. A sovereign gets an abstract goal and is relatively unconstrained in how to achieve it. Bostrom thinks these two forms of superintelligence aren’t fundamentally all that different and would both be difficult to control.
A tool is closer to software as we’re used to it. But Bostrom argues that in the future the way we think about software might change and the programmer’s job might become a more abstract activity. So these tools might then develop into general intelligence:
With advances in artificial intelligence, it would become possible for the programmer to offload more of the cognitive labor required to figure out how to accomplish a given task. In an extreme case, the programmer would simply specify a formal criterion of what counts as success and leave it to the AI to find a solution. (Chapter 10: Oracles, genies, sovereigns, tools)
A superintelligence would start reasoning about the world and might even come to the conclusion to think it’s in a simulation (a similar thought concerning humanity’s chance of being in a simulation was recently made famous by Elon Musk):
This predicament [of not being sure whether it is in a simulation] especially afflicts relatively early-stage superintelligences, ones that have not yet expanded to take advantage of the cosmic endowment. […] Potential simulators—that is, other more mature civilizations—would be able to run great numbers of simulations of such early-stage AIs even by dedicating a minute fraction of their computational resources to that purpose. If at least some (non-trivial fraction) of these mature superintelligent civilizations choose to use this ability, early-stage AIs should assign a substantial probability to being in a simulation. (Chapter 9: The control problem)
A superintelligence could react in different ways to such a conclusion. It might not alter its behavior, it might try to escape the perceived or real simulation or this risk of being in a simulation might even make it docile:
In particular, if an AI with resource-satiable final goals believes that in most simulated worlds that match its observations it will be rewarded if it cooperates (but not if it attempts to escape its box or contravene the interests of its creator) then it may choose to cooperate. […] A mere line in the sand, backed by the clout of a nonexistent simulator, could prove a stronger restraint than a two-foot-thick solid steel door. (Chapter 9: The control problem)
What do we want?
So it’s not clear that we could get a superintelligence to do what we want. But say we did, it then remains to specify what we want.
Giving the superintelligence too simple goals wouldn’t be a good idea:
An AI, by contrast, need not care intrinsically about any of those things [that humans care about]. There is nothing paradoxical about an AI whose sole final goal is to count the grains of sand on Boracay, or to calculate the decimal expansion of pi, or to maximize the total number of paperclips that will exist in its future light cone. In fact, it would be easier to create an AI with simple goals like these than to build one that had a human-like set of values and dispositions. (Chapter 7: The superintelligent will)
It’s hard to come up with goals that would be both good for humanity in general and that don’t leave the door open to unintended consequences. If we told it to “make us smile”, well then it might just paralyze all our faces with the corners of our mouths drawn back.
It’s important to get it right because the goals might be hard to change once the superintelligence already exists. But are we sure that our moral judgments right now are exactly right? People in the past probably also thought they had figured things out, but in hindsight we know many of the things they thought were wrong (“the world is flat”) and we object to many of their views (“it’s ok to have slaves”). So our values change:
We humans often seem happy to let our final values drift. This might often be because we do not know precisely what they are. It is not surprising that we want our beliefs about our final values to be able to change in light of continuing self-discovery or changing self-presentation needs. However, there are cases in which we willingly change the values themselves, not just our beliefs or interpretations of them. (Chapter 7: The superintelligent will)
Bostrom proposes a concept called indirect normativity to deal with this issue, in which we let the superintelligence figure out what are better moral standards and it would help us live by them starting now:
Indirect normativity is a way to answer the challenge presented by the fact that we may not know what we truly want, what is in our interest, or what is morally right or ideal. Instead of making a guess based on our own current understanding (which is probably deeply flawed), we would delegate some of the cognitive work required for value selection to the superintelligence. (Chapter 13: Choosing the criteria for choosing)
The superintelligence should also not only act on our short-run urges and passions, but on a more rational and reflective set of preferences. In particular, what Bostrom calls “second-order desires”:
An individual might have a second-order desire (a desire concerning what to desire) that some of her first-order desires not be given weight when her volition is extrapolated. For example, an alcoholic who has a first-order desire for booze might also have a second-order desire not to have that first-order desire. (Chapter 13: Choosing the criteria for choosing)
People can have preference over preferences. I don’t enjoy reading 19th century classical novels from France, but I have a preference for wanting to enjoy those.
So would the superintelligence slap my shallow Third World War blockbuster novel out of my hands and put Victor Hugo there? It suppose it would a have more subtle way.
Say we had solved these problems, so we (i) could actually get the superintelligence to do what we want and (ii) had figured out exactly what we want. Should we press the ignite button, start up the superintelligence and let it do its work?
I don’t think so. I think we still want clarity and truth and to not to be fooled. Simon Blackburn writes:
We might say: one of our concerns is not to be deceived about whether our concerns are met. (Chapter 8: What to Do)
Admittedly, an argument can be made for the opposite. Someone in pain might wish to have his senses clouded with medicine. And not all information is always desirable. I’ll gladly not find out how mediocre the pictures are that I took on my last holiday.
Already now our minds implement what Roland Bénabou and Jean Tirole (pdf) describe as a
[…] tradeoff between accuracy and desirability [in how we form our beliefs]. (p142)
But that’s the thing: our mind actively implements it. We want to build our own model of the world, even if some of our beliefs about it are distorted, not live in the perfect bubble. There’s a “premium” (pdf) that we’re willing to pay, simply to stay in control.
In “Rent-Seeking in Elite Networks” (pdf), Rainer Haselmann, David Schoenherr and Vikrant Vig study what they call the “dark side of social capital”. They show that members of a German service club tend to give each other more favorable lending conditions.
They collect data on corporate CEOs in 211 service clubs in Southern Germany between 1993 and 2011. The authors cannot provide the name of the club, but I presume it’s either the Lions or the Rotary club. They identify 1091 such CEOs and 352 club bankers.
In Germany, mayors have influence on credit decisions by local savings banks. The authors show that after a club member is elected mayor, banks treat club-affiliated firms favorably.
This misallocation of credit within the club mainly takes the form of continuing to provide credit to badly performing firms rather than outright better conditions, such as lower interest rates. It’s a bit surprising that these banks don’t have checks in place to stop such behavior, as there seems no benefit of this relationship to the bank. Well maybe they’ll be more careful after hearing about this paper.
People invest quite a lot into status. But status is sensitive to when the institutional frame changes.
In Germany, there’s a late night talk show called “Domian”, after the host who’s run the show since 20 years. One time I listened to the show and a man called. He grew up in communist East Germany where he had attended a prestigious elite academy which educated future diplomats. He learned to speak several languages and was on track to become an important public servant in his country.
But then the GDR collapsed and he lost everything. He now holds irregular jobs selling electronics and is poor. He never married, is lonely and depressed.
A lot of our status is specific to institutional settings. With hindsight, it seems obvious that this or that regime could not possibly have survived, so people must have been mistaken to put so much trust in them. But I doubt we can foresee the stability of our own institutions so reliably. Some would even say that chasing status is always doomed for failure, as:
Prestige is just fossilized inspiration.
Yet that seems exaggerated as well. A degree from Oxford was a useful status marker in the 19th century and continues to be that. But compare how the perceived desirability of a job at an investment bank has changed relative to that of working at a start-up or an incubator in just the last ten years. So maybe we should value those things more highly that survive institutional change, such as our health, the part of education that’s not signaling and some assets.
But what probably hurts Domian’s caller most are his unfulfilled hopes. He could reasonably have expected to live among the elite of his country, but instead he lives at the fringes of a society he does not feel part of.
The literature of how life happiness varies over one’s life has documented a U-shape: Young and old people report being more happy than middle-aged people. Hannes Schwandt argues that this is due to unmet expectations when we’re middle-aged. When we’re at the beginning of our careers we have great plans for ourselves and often our aspirations are greater than our achievements. But later in life this reverses and we’re pleasantly surprised more often.
I’m not sure if there’s much we can do to influence how these things will turn out. We could try caring less about status and we’d like to be able to deal well with setbacks.
Her early years were filled with unbelievable accomplishments and a tight-knit, almost claustrophobic relationship with her father, Harry. At age ten, she became the youngest person ever to gain entry into the prestigious Oxford University. […]. She finished her PhD at Oxford at age 18, and at age 19 took on her first academic position, as a junior professor at Harvard University.
The periods around World War I and World War II are routinely overlooked in discussions that focus on deregulation of capital markets since the 1980s. As in the past, during and after financial crises and wars, central banks increasingly resort to a form of “taxation” that helps liquidate the huge public- and private-debt overhang and eases the burden of servicing that debt.
Such policies, known as financial repression, usually involve a strong connection between the government, the central bank, and the financial sector.
John Cochrane has written an overview paper (pdf) (nber) of Macro-Finance:
[The different possible microeconomic explanations] also raise[s] the classic question of macroeconomics, when multiple microeconomic stories give the same macroeconomic answer, whether telling apart microfoundations matters.
Economic models are more quantitative parables than scientifically precise models, and elegant parables are more convincing. Dark matter is particularly inelegant: Models that need an extra assumption for every fact are less convincing than are models that tie several facts together with a small number of assumptions. Financial economics is always in danger of being simply an interpretive or poetic discipline: Markets went down, sentiment must have fallen. Markets went down, risk aversion must have risen. Markets went down, there must have been selling pressure. Markets went down, the Gods must be displeased.
A note to Ph.D. students: All good economic models are reverse-engineered!
None of these modeling approaches stands above the others in the list of facts so far addressed. A serious effort to distinguish them has not been made. But, given the fact that the state variables are so correlated, and that the models are all quantitative parables not detailed models-of-everything meant to be literally true, that effort may not be worth the bother.
Hans-Joachim Voth argues (in German) that the problem with investing in stocks is that when you most want to sell them, you can’t, as financial markets are often “closed” during wars and great economic crises.
So, if not stocks, what else should people put in their rainy day fund?
Nassim Taleb recommends in the “The Black Swan” to follow a “convex” investment strategy: Hold 85 to 90 percent in the most safe assets (such as US government bonds) and the rest in “venture capital-style portfolios” (p205).
But why should the stock prices of risky firms rise during economic catastrophes? They are risky because their business model is speculative, not because they do well in bad times.
Then there’s Kim Oosterlinck who shows (ungated here) that in occupied France during World War 2 small artworks outperformed other assets such as gold, equities, bonds or foreign currencies. He argues that usually such items are “conspicuous consumption”, so they are valued for the bragging rights they come with. But in bad times the fact that they can be transported and sold discreetly is more important.
If you worry about financial Armageddon, it is indeed metaphorically the time to stock your bunker with guns, ammunition, canned food and gold bars.
Taken literally, it would be a bad idea to save like that.
The problem is that we’re not good at dealing with low probability events. Usually we just ignore them and when we do think about them we fixate on some particular kind of catastrophe.
For example, when the nuclear disaster of Fukushima happened, the conversation turned to whether one should take precautions in case a radiation emergency occured in Europe. When there was a major power outage in the North of Germany, people talked about how it was necessary to keep sacks of potatoes at home.
But any such scenario is really unlikely. If you still want to be prepared for them, you should try to come up with a reasonable estimate for how likely each scenario is and then rationally account for them all depending on their relative likelihood. It’s a bit like “moral licensing” for altruism: We spend all our “panic capital” on one scenario and then assume we’ve done enough and don’t think about all others.
So say you’ve bought your potassium iodide tablets, you’ve stored your 14 days (German) of food at home and you keep your Krugerrands hidden away. You then hopefully realize that most investors, most of the time, should keep the majority of their free wealth in a low-cost portfolio of global stocks and bonds.
And – most importantly – the bulk of risks that people face are idiosyncratic, so they’re specific to an individual. You might fall seriously ill, loose your job or there could be a fire in your home. But the fallout from such cases is best mitigated with classical insurance rather than some specific asset.
But do contractions cause uncertainty, they ask, or does uncertainty cause contractions? Given that we know that people are highly reactive to each other, the causality most likely runs both ways, in a feedback loop.
The deeper and more interesting question concerns what initiates this uncertainty.
Paul Romer (again) discusses a paper by Martin Stuermer and Gregor Schwerhoff (pdf):
It is conditional optimism that brings out the best in us.
In the book by Swiss author Martin Suter “Der Koch” (“The Chef“), the Tamil cook Maravan comes from Sri Lanka to Zurich as a refugee. He works in a good Swiss restaurant and his cooking skills have unexpected side effects.
When I studied in Zurich, I lived in a ramshackle old house next to the forest at the edge of the city and in the apartment above us lived a Tamil family. When they cooked, the stairway filled with the scent of spices and a couple of times they brought us food.
Sri Lanka’s largest ethnic group are the Sinhalese of which most are Buddhists. The North of Sri Lanka with its center Jaffna is predominantly Tamil who are Hindus. Tamils also populate India’s state Tamil Nadu just across the Palk Strait. Their language is a Dravidian non-Indo-European language and there are visible cultural differences. Men wear lungis and the Tamil Temples are adorned by colorful figures and look more like angled Mayan pyramids than the curved shapes of the North of India.
The Tamil Tigers have been seeking independence from the rest of Sri Lanka for several decades and in 2008 and 2009, they were finally defeated by the Sri Lankan army.
Switzerland has a sizable Tamil community. And back then, I saw the family’s father at a demonstration. He wore a Tamil Tigers T-Shirt and flag and marched with a group of other Swiss Tamils over the Quay Bridge towards Bellevue.
I traveled to Sri Lanka last year and the differences between North and South are stark. The South is better developed than India, there are more middle-class cars and fewer beggars.
Sri Lanka’s capital and largest city Colombo is in the Southwest, the island’s Southern center is moist and lush with green tea plantations and in the East there are laid-back surfer villages. But as you get to the North, the country becomes more flat. The sun burns and you can view far into the distance. The Lonely Planet likens it to the savannas of East Africa.
Jaffna is a weird place. There are many ruins. At night, large swarms of bats cross the city. Singapore’s Lee Kuan Yew had just died and there were posters in the street mourning for him.
The military holds a strong presence in the Northern Province. This is criticized, as they basically treat it like a colony.
It felt not just more Tamil there, but more Indian. The food was better, especially the Dosas. In the South it’s “rice and curry” most of the time.
The Dutch left the city a castle and the library is pretty. But when the Lonely Planet says the most exciting place to go during evenings is an expat bar run by former aid workers during the civil war, then you know there isn’t much going on.
In the book, Maravan cannot escape the troubles from home. And Jaffna, too, is a far from having recovered.
“La Grande Peur” or the Great Fear was a time of great uncertainty that happened in France just before the onset of the Revolution. Rumors of violent hords of bandits roaming the country-side spread and people thought the old order had stopped functioning.
Are we experiencing a Great Fear right now?
In many ways it’s not clear why we should. The world in 2016 is actually in quite a good shape. But somehow people seem to hold particularly gloomy views this year.
The term overheated economy, as we shall use it, refers to a situation in which confidence has gone beyond normal bounds, in which an increasing fraction of people have lost their normal skepticism about the economic outlook and are ready to believe stories about a new economic boom. It is a time when careless spending by consumers is the norm and when bad real investments are made, […].
Most economists are uncomfortable with such notions.
Most academic economists, if asked to define the term overheated, would say that it describes a period in which inflation, […], has been increasing.
Inflation itself, particularly when it is increasing, can ultimately create a negative effect on the atmosphere of an economy, akin to the effect of broken windows and graffiti on a city. These lead to a breakdown in the sense of civil society, in the sense that all is right with the world. (p65, “Animal Spirits”)