Showing posts with label theory. Show all posts
Showing posts with label theory. Show all posts

Friday, September 9, 2022

Greenpeace Man

"There is a WALL of water coming toward New York City!"
--Radio announcer (The Day After Tomorrow)

Interesting piece on Greenpeace founder who left the organization when it was 'hijacked by the political left' and morphed it into a 'political fundraising organization.'

Great comments particularly on the 'demonization' of carbon dioxide and its influence on climate. This chart should be particularly telling to any reasoning mind:

Also liked his comments on the dynamics of CO2, plant growth, and robust ecologies--something these pages have discussed.

Friday, August 12, 2022

Remote Work and Lower Productivity

I was standing
You were there
Two worlds collided
And they could never tear us apart

--INXS

For more than a year, I've been wondering when the negative productivity effects of remote workplaces encouraged by pandemic regulations would show up. Coase's seminal work told us that organizations exist to reduce the transaction costs inherent to individual contractors trading on the market. 

Stated differently, productivity tends to increase when people work together.

CV19 pulled workers apart. Consequently, transaction costs should go up and productivity should go down.

It appears that the data are finally starting to reflect this reality. For Q1 and Q2 of 2022, non-farm business labor productivity has printed in negative territory (FRED graph here). Parenthetically, the FRED graph seems to paint a more positive picture than the actual BLS data series, which currently indicates 4 negative prints in the last 8 quarters, including huge -7.4 and -4.6% YOY declines thus far this year. Not sure why the difference.

Some commentators are attributing lower productivity to increased 'sloth' associated with employees being able to get away with goofing off when working remotely. There is certainly some truth to this, as one way to cope with agency problems is increased monitoring. Monitoring is a type of transaction cost, one that certainly increases when distance between employee and supervisor increases.

But the larger point is that costs of trade among workers endeavoring toward the same end go up when they are not working in close proximity.

We're witnessing a large-scale example of this currently.

Saturday, July 16, 2022

Physics of Freedom

Always searching for the real thing
Living like it's far away
Just leave all the madness in yesterday
You're holding the key
When you believe it

--Michael McDonald

Interesting article discussing the physical, rather than philosophical, aspects of freedom. It has a system dynamics flavor to it.

The author proposes that for systems to persist over time, they must freely evolve to permit currents of resources to flow through the system.

When these flows are forcibly restrained, then adaptation is more difficult.

An optimistic implication of this view is that authoritarian states that seek to restrain freedom by censorship, coercion, intimidation, and other means are doomed to failure. People will eventually throw off those constraints in order to adapt.

Perhaps a better label for this concept is 'an evolutionary theory of freedom.'

Friday, March 25, 2022

Wrecking Ukraine

Time respects no person
What you lift up must fall
They're waiting outside
To claim my crumbling walls

--John Mellencamp

2015 lecture by Prof John Mersheimer of the Univ of Chicago that explains the West's primary role in the Urkraine situation. Could have been made yesterday.

The punchline, made at about 44 mins at the end of his formal remarks, is this:

"I actually think that what's going on here is that the West is leading Ukraine down the primrose path, and the end result is that Ukraine is going to get wrecked."

Indeed.

Mearsheimer spoke to a student group from Cambridge a week or so before the invasion. Seven years had done little to alter his view. He did note that after a lull from 2015-2020, the near-term factors driving Russia's acute response included Ukraine's government recent aggressive actions against Russian-speaking citizens in the east, and ramped up arming/training of Ukraine military by the US and other NATO associates.

Mearsheimer also opined that he didn't think Putin would invade because the costs of war and occupation did not justify the potential benefit. Besides, Russia appeared to be winning the strategic battle as, in his view, the country's concerns regarding NATO expansion et al were capturing Western attention.

Apparently Putin didn't share that view.

Nevertheless, Mearsheimer's prescription both then and now is the intuitive one. Make Ukraine a neutral state, including the guarantee of no NATO expansion. 

That would stop the wrecking of Ukraine.

Monday, January 31, 2022

Disinformed

Voices
I hear voices
--Russ Ballard

Well written piece by Glenn Greenwald on the left's escalating impulse to censor. Anything deemed 'disinformation' is worthy of censoring. As Greenwald observes:

"This 'disinformation' term is reserved for those who question liberal pieties, not for those devoted to affirming them. That is the real functional definition of 'disinformation' and of its little cousin, 'misinformation.' It is not possible to disagree with liberals or see the world differently than they see it. The only two choices are unthinking submission to their dogma or acting as an agent of 'disinformation.' Dissent does not exist to them; any deviation from their world view is inherently dangerous - to the point that it cannot be heard."

One question that Greenwald avoids is why? Although, as he notes, people on the right may occasionally be prone to censor, why is the need to squash opposing viewpoints a dominant trait of leftists?

A primary explanation can be gleaned from social identity theory. Social identity theory is grounded in the proposition that people derive self-esteem from belonging to groups, and that this need for affiliation influences behavior of group members. 

It stands to reason that the need for group affiliation is not evenly distributed. We know, for example, that societies vary relative to their collectivistic tendencies.

Leftists, by definition, have a high collectivist preference. Their strong need for belonging and high levels of self-esteem realized from group attachment should motivate behavior that demonstrates loyalty to their group membership and disdain toward nonmembers. 

Consequently, leftists should be likely to go to great lengths to defend group dogma. Members who question dogmatic beliefs are likely to be sanctioned, perhaps even excommunicated. Because members know this, they are likely to remain silent to prevent damage to their self-esteem.

Outsiders present a different problem, however. Because they have lower collectivist preference, outsiders perceive little or no penalty for contesting group dogma. 

Recognizing that sanctioning is likely to prove ineffective against outsiders, leftists must resort to coercive tactics. lest the cognitive dissonance gets too great. Censoring, or forced silencing, is therefore employed in order to preserve group dogma against outside attack.

That's what we're seeing. Censoring may be more widespread today because leftists feel that they control more public and private machinery for silencing dissenting voices.

Whether such a tactic can be effective against a liberty-minded people remains to be seen. In fact, it seems straightforward to hypothesize that the more leftists attempt to silence dissent among freedom lovers, the louder the dissent gets.

Wednesday, January 19, 2022

Definitions and Methods

Dean Yeager: Your theories are the worst kind of popular tripe, your methods are sloppy, and your conclusions are highly questionable. You are a poor scientist, Dr Venkman.
Dr Peter Venkman: I see.

--Ghostbusters

When engaged in research, debate, or other endeavors that seek truth, two steps must be taken upfront. One is to define all important terms. And those definitions must be agreed upon by all involved. Progress cannot be made unless meaning is shared. 

Stated differently, participants in the process must speak the same language. If not, or if a faction seeks to hijack the language and bend it toward its interests, then progress toward truth will be impaired.

Similarly, methods used to test rival theories or hypotheses must be explicated. Doing so allows participants to understand degree of measurement error present. Biases that slant results toward a particular interest will also be revealed. 

Understanding measurement processes takes time. Written procedures, flow diagrams, audits, and walkthroughs can be useful. 

The extent to which particular factions balk at working this process indicates motivation to bias outcomes away from truth.

Wednesday, December 29, 2021

Mutating Mildly

"I'm dead set on living."
--Harlan Ogilvy (War of the Worlds)

These pages have discussed the concept of evolutionary pressure as it pertains to CV19. One theory is that vaccines increase pressure on the virus to mutate in ways that evade vaccines in order to survive. Behavior of the recent delta and omicron variants appear to support this premise as vaccinated people have been capable of contracting CV19 infections.

If this hypothesis is in fact true, then the question becomes one of severity. Will mutations become more or less severe? These pages have discussed the spectre of vaccine-resistant virus strains that become more deadly and longer lasting.

However, the characteristics of both "deadly" and "long-lasting" may be inconsistent with the central goal of a virus: to survive. Deadly forms of a virus run out of hosts and become extinct. Milder variants, on the other hand, possess more staying power.

This article suggests that the contagious but mild omicron variant is consistent with such a premise. Although it evades vaccines and infects more people, omicron subjects hosts to relatively mild symptoms.

Similar to the Spanish flu of 1918, perhaps CV19 is mutating into milder strains that will ultimately make it indistinguishable from other seasonal flu bugs.

Monday, December 27, 2021

Escalating Failure

No, I'll stand my ground
Won't be turned around
And I'll keep this world from dragging me down
Gonna stand my ground
And I won't back down
--Tom Petty

Although the pandemic has been rich with examples of 'escalation theory,' where people continue or increase commitment to failing courses of action, there may not be a better one than those sticking with vaccines despite their increasing failure rates (and risks).

Escalation theory can be joined with prospect theory to explain why people who have been vaxxed multiple times cling to the idea of getting vaccinated despite breakthrough infections. Because people hate losses, including loss of self-esteem when a strongly held belief appear to be wrong, they will cling to those beliefs and perhaps even double down (e.g., my infection would surely be worse if I wasn't vaccinated) rather than question their assumptions.

Add some psychological concepts from what we know about cognitive dissonance, and you've built a solid theoretical foundation for explaining the odd behavior that we're witnessing.

Thursday, December 16, 2021

(In)efficient Markets

I know I could break you down
But what good would that do?
I could surely never know
That what you say is true

--Information Society

The 'efficient market' hypothesis (EMH) posits that investors process new information quickly and accurately, resulting in prices that quickly adjust to the news. In fact, that news is often anticipated in advance of it actually happening.

There are several problems with the EMH. One is that it treats investors as a monolithic entity rather than segments and individuals who tend to process information differently. Fund managers, for example, are likely to process new financial information differently than retail investors.

Another problem is that the effect of new information may be difficult to determine. Is, for example, the Fed's recently announced initiative for combating inflation bullish or bearish for stocks? Moreover, is it likely that the Fed will actually follow through on what it says, or is this merely another example of the 'open mouth committee?'

A third problem relates to how long it takes to process information. Some information may be complex, taking a long time to chew through before actionable conclusions can be drawn. Consequently, considerable lags might precede market price movements. 

Immediately after the FOMC's announcement yesterday, for instance, gold didn't move much. However, this morning the metals and miners are ripping higher. Perhaps investors needed time to digest the announcement overnight in order to come to judgment about the macroeconomic implications of the news before acting.

These problems have prompted some theorists to posit that markets are only 'semi' efficient. Perhaps, but semi efficiency vs outright inefficiency seems only a matter of degree.

position in gold

Monday, December 6, 2021

Thinking Scientifically

"Listen, Meg. God made the angels to show Him splendor, as He made the animals for innocence and plants for their simplicity. But man He made to serve Him wittily, in the tangle of his mind."
--Sir Thomas More

Thinking scientifically involves assessing 'why is it this and not that?' Early on you need a theory or hypothesis that postulates the important variables and how they are connected. A good theory is descriptive and predictive. Often, it is well supported by past scientific work. 

It should also be well supported by reason and logic. Reason and logic transcend measurement problems liable to distort results of empirical studies of complex, multivariate environments.

Due diligence is also required to identify plausible rival theories or hypotheses that raise the question of 'what else could it be?' Many individuals ignore this step, because it often requires stepping outside comfort zones to understand other perspectives that don't agree with yours. Doing so is essential, however, as it helps overcome confirmation bias that clings to pet theories. Developing plausible alternatives pits your theory in the ring against other reasonable explanations of a phenomenon.

Then the theories need to be tested. Testing could be as straightforward as applying logical tests or reason validate some theories and invalidate others. This is a desirable approach both because of its efficiency and its capacity to disentangle empirical complexity.

If empirical testing is required, then care must be taken to develop an appropriate way to measure important variables and relationships in real world contexts. This can be difficult due to the multitude of background factors that could obscure or alter findings from their true value. More often than not, empirical findings are limited or contestable because of measurement problems.

At the end of the day, logic and reason become the final arbiters, because even empirical test results must be evaluated by the mind. If the validity of one theory cannot be reasonably separated from the invalidity of other theories, then scientific progress is stalled until future study advances it.

However, it one theory stands alone after testing, then progress has been made. We know why it is this and not that.

And we are one step closer to the truth.

Friday, November 12, 2021

Long Covid

But it was just my imagination, once again
Running away with me

--The Temptations

'Long Covid' sounds like a position in some arcane financial security. In reality, it is meant to signify a condition where unpleasant symptoms deemed to be associated with CV19 are thought to persist even after acute infections are past. 

Fatigue, muscle pain, insomnia, and other pedestrian symptoms are said to be representative of long Covid. Because such symptoms are common to a variety of illnesses and ailments, the legitimacy of long Covid seems questionable.

Alex Berenson reviews a recent AMA paper that further fuels long Covid skepticism. Researchers asked French adults whether they had previously been infected with CV19 and whether they had subsequently experienced any of 18 symptoms commonly associated with long Covid. They found that self-reported CV19 was strongly associated with reports of lingering symptoms.

Of course, self-reported infections and symptoms invites methodological problems of 'common methods variance'--where psychometric data on both proposed cause and effect are taken from the same subject.

Fortunately, the researchers also had CV19 antibody tests for the people they surveyed, meaning that, regardless of the self-reports, they knew who actually had been infected with the virus. 

When the researchers compared the symptoms reported by people who had actually been infected per the antibody tests to symptom reports from the general population, they found no significant difference in most symptoms. One exception was loss of smell, a known lasting side effect of CV19 which becomes a nice validity test of sorts for the study's method.

The researchers also found that nearly 60% of those people with CV19 antibodies did not know that they had been infected.

Results suggest a psychosomatic basis for long Covid. People are using previous CV19 diagnoses, real or imagined, to explain away pedestrian physical symptoms. The findings also suggest that actually being infected with the virus is less risky than thinking you've been infected--at least for many people.

Berenson suspects that patient, physician, and public health investment in the long Covid concept that they won't let it go regardless of evidence to the contrary. 

Seems a safe bet, since it would be consistent with overall response patterns to the virus for going on two years now.

Monday, November 8, 2021

Masks and Exposure Science

Plastic tubes and pots and pans
Bits and pieces and
Magic from the hand

--Oingo Bingo

Insightful video divided into six segments that discusses scientific issues related to universal masking. The narrator is an industrial hygienist who understands theory and associated research that apply to practical masking situations.

He puts many useful concepts to work, including the hierarchy of controls employed to mitigate health and safety risk (of which personal protective equipment such as masks constitutes the final and least effective of all levels), and the hierarchy of evidence (of which anecdotal evidence and expert opinion--those sources that public health officials have emphasized most to justify their policies, constitute the lowest quality evidential source).

After watching this series, only the ignorant or partisan would fail to question the pseudo-science that has been manipulated to support prevailing public health policy.

Wednesday, October 27, 2021

Original Antigenic Sin

Lt A.T. Waters: For our sins
Sgt Ellis 'Zee' Pettigrew: Hooyah.
--Tears of the Sun

When a virus infects the body, white blood cells called B lymphocytes (a.k.a. B cells) imprint on specific virus proteins (a.k.a. antigens) presented to them. Subsequently, many of those B cells become 'memory B cells,' specializing in producing antibodies to combat those antigens. 

When different viral infections arrive in the future, memory B cells quickly pour forth antibodies that they learned to produce in the original case, essentially hogging areas around antibodies that slower moving naïve B-cells would use utilize to learn about new viral features. Although the immune system continues to adapt, it does so with 'path dependence.' Stated differently, immune system responses are shaped by the early stimuli that B cells encounter.

This is the central notion of original antigenic sin. Original virus infections during childhood govern antibody responses thereafter. 

The concept of original antigenic sin carries important implications. Different age cohorts in a population are likely to have overlapping or layered immunity to different viral strains. For example, children exposed to the swine flu develop immune responses that differ from a childhood cohort exposed to the Hong Kong flu. Consequently, different generations interlock to attenuate the influence of a particular pathogen.

One reason that flu shots lack effectiveness is that they may have limited power to redirect the adult immune systems against novel influenza strains since those immune systems have long since been primed along a different path by childhood infections.

The influence of original antigenic sin on vaccine effectiveness has been contested, however. Opponents point toward studies suggesting that all cause mortalities decline after administration of flu shots. Counter studies suggest that such research is subject to confounding variables that produce spurious relationships between flu shots and effectiveness.

To the extent that the theory of original antigenic sin is valid, it suggests ominous consequences for policies that encourage or require vaccines across large swaths of populations. Instead of layered, population-wide resistance to successive SARS-2 strains that are certain to evolve as the virus adapts to its environment, inoculating the majority of a population with a vaccine designed to combat narrow strains of the virus is likely to attenuate antibody responses to future variants. Most people will have their primary immune responses to SARS-2 conditioned to the spike protein of the vintage 2020 configuration, leaving them less adaptive capacity moving forward.

Vaccinating children would be particularly problematic. The virus is not a threat to them, and as they become naturally infected with future CV19 strains they will help the entire population develop the layered immunity essential to long term resistance to the virus. By narrowly conditioning childhood immune systems to current strains via the shot, these policies risk creating a perpetual pandemic state.

Of course, it is not outside the realm of possibility that this is precisely what some policymakers may have in mind.

Wednesday, October 20, 2021

Specialization and Adaptive Strategies

If I go there will be trouble
If I stay it will be double

--The Clash

Last time we discussed the relationship between specialization and the external environment. Essentially, the higher the degree of uncertainty in the external environment, the lower the appropriate level of specialization. 

How can producers manage the tradeoff between productivity and adaptability inherent in specialized work? Two strategies seem plausible--both involving reduced degrees of specialization (or higher degrees of diversification) as uncertainty increases. 

The first strategy we'll call static diversification. The concept parallels portfolio theory in finance, except that instead of a portfolio of securities, producers deal with a 'task portfolio.' The narrower the task portfolio, the fewer the skills and the more specialized the portfolio.

In certain environments, task portfolios should be very narrow so that producers can reap the productivity benefits of specialization without concern for having to alter the portfolio to cope with environmental change. 

However, in uncertain settings, producers must spread it around, investing in various skills to hedge risk that some skills will be obsoleted by disruptive change. By embracing the adage of not putting all eggs in one basket, producers operate in various lines of work and perhaps in various markets so that they are not dependent on one specific skill set. This variety improves adaptive capacity.

How much static diversification is necessary? Returning to our core proposition that degree of specialization is inversely proportional to level of environmental uncertainty, the more turbulent and uncertain external contexts are, then the more diversified the task portfolio should be.

The second strategy is dynamic diversification. Using this strategy, producers broaden their task portfolios with learning skills that allow them to quickly adapt to changing environments. Ability to sense change, skill in new product and process development, and prowess in organizational change management all constitute 'dynamic capabilities' (Teece et al., 1997) that can be developed or acquired to improve adaptive capacity.

Such dynamic skills may not be directly useful in the production of output for today's market. Instead, they constitute resources that enable timely reconfiguration of production for tomorrow's markets. 

Because payoff associated with dynamic diversification is often delayed--perhaps for extended periods of time, managers may be reluctant to invest in it, preferring instead the immediate and visible fruits of static diversification. On the other hand, due to its potential for quickly shaping new, relevant skills when environments change, dynamic diversification may tie up smaller fractions of an overall task portfolio in diversification--allowing producers to specialize more in the here and now--and reap the associated productivity benefits.

So, if both static and dynamic diversification strategies are both viable approaches for dealing with the productivity/adaptability tradeoffs of specialization in uncertain settings, then which one is more preferable? Perhaps the better way to ask the question is this: Under what situations are static or dynamic diversification preferable?

That, my friends, constitutes an interesting research question--one that scholarship will hopefully help us answer at some point in the future.

Reference

Teece, D.J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7): 509-533.

Saturday, September 25, 2021

Evolutionary Pressure

Look in the mirror
And see that you've been taken
Oh, you won't surrender
And now your heart is breakin'

--John Waite

The Darwinian perspective of evolution famously highlights processes of variation, selection, and retention that bring about adaptive change. These processes are often assumed to unfold gradually. When something is said to 'evolve,' the pace of change is commonly seen as slow and measured.

However, research in biology, scientific progress, organizations, and other domains suggests that evolutionary change is commonly not gradual, but abrupt (Gersick, 1991). Following long periods of relative stability, radical change occurs in brief periods of upheaval. Surviving these disruptive periods requires timely adaptive response.

This 'punctuated equilibrium' view of adaptation suggests that pressure for change exerted by environments varies temporally. Most of the time, pressure is relatively mild and necessitates only minor, incremental responses. During periods of upheaval, however, pressure is acute and demands major reorientation in order to adapt. 

Stated differently, 'evolutionary pressure' increases dramatically in disruptive environments. As evolutionary pressure grows, so does impetus for radical response.

Among the interesting points made in this article is the notion that public health policies, particularly those related to mandatory vaccination, create disruptive environments for CV19 that increase evolutionary pressure for adaptation. Vaccinating large groups of people, particularly groups that generally do not benefit from the vaccine (e.g., young people) puts strong evolutionary pressure on the virus to become vaccine resistant. To become more vaccine resistant, viruses must develop new characteristics that enable them to infect hosts--a process that may make adaptive forms of the virus more dangerous.

If vaccines were instead administered only to the elderly and other at-risk groups, then evolutionary pressure on the virus would have been reduced and, plausibly, the vaccines would have been effective for longer periods of time. Moreover, with less motivation to mutate radically, the virus would be prone instead to follow a path of incremental change as it adapts to a less threatening environment. As hosts contract less acute forms of the virus, natural immunity increases and infection severity decreases, leading to dissipation of the public health threat.

Reference

Gersick, C.J.G. (1991). Revolutionary change theories: A multilevel exploration of the punctuated equilibrium paradigm. Academy of Management Review, 16: 1-36.

Sunday, August 1, 2021

In-Kind Censoring

All my instincts
They return
And the grand façade
So soon will burn

--Peter Gabriel

A conceptual framework that guides yesterday's post is resource dependence theory. When organizations depend on outside entities for important resources, they are prone to create 'negotiated environments' with those entities to facilitate resource acquisition. 

The more dependent an organization is on an outside entity for resources, the more beholden that organization is to the entity. In markets for economic goods, this asymmetric influence is sometimes called bargaining power. Walmart, for example, wields sizeable bargaining power in negotiations with suppliers due to the resources that can be obtained via the Walmart channel.

In markets for political favor, the resources that organizations desire rest in control of government. Government contracts, tax breaks, monopolistic grants, favorable regulatory treatment, etc. In negotiations to obtain those resources, organizations might offer several politically valuable items in trade, including campaign contributions, out-of-office 'grants' (e.g, cushy jobs for the relatives of politicians or even for the politicians themselves once they leave office), and access to large voter blocs.

Organizations might also offer 'in-kind' political resources in trade. In-kind resources include housing, transportation, labor, and equipment that politicians can use to their advantage. An attractive feature of in-kind contributions is that they are difficult to account for and often fly under the radar of political contribution limit watchdogs.

Media companies offer particularly attractive in-kind resources for politicians. They can publish political endorsements, provide editorial space for politicians and their cronies, and slant content in favor of candidates/parties that offer prospects of resource gains. They can also slant content away from political opponents.

This is where Trump's lawsuit of social media companies comes in. Social media companies have been pushing content that favors leftist agendas, while censoring content that opposes those agendas. In fact, the federal government recently signaled that it wants to work closer with social media outlets to advance its 'messaging' further.

Must the Trump side prove that Twitter et al and the government have explicitly negotiated a trade that involves in-kind media gifts for political favor? 

In a just legal system, no.

What Trump should need to show is that these media companies are, or have been, subject to favorable government treatment. If they can do so, then these companies should be deemed extensions of government and thus subject to the same rules that limit the power of any government agency--including limitations on restricting speech.

Whether our legal system is in fact just is, of course, questionable.

Saturday, June 26, 2021

Pawning CRT

"Look at my life. The life you tried to take. There was Annapolis, Vietnam, so on. I missed the Sixties. And I believe if I had been there--to contribute--everything would've been fine."
--William Strannix (Under Siege)

Two articles from a weekend spread on the always interesting American Greatness website about growing public pushback against 'critical race theory' (CRT). The first one touches on the Marxist roots of CRT. When the Marxian 'class war' hypothesis was falsified, proponents pivoted toward cultural rationales to spark unrest. As these pages have recounted, that pivot spawned CRT.

The second article argues that CRT is primarily a product of leftist baby boomer regret/guilt about the civil rights movement of the 1960s. Many of them sat out the movement. Now, they are projecting their shame on others by creating a new civil rights movement that rallies against concocted bogeymen.

In reality, these two threads are related. Cultural Marxism is constantly in search of narratives with capacity to recruit useful idiots to take up the cause of social disorder. These narratives lean heavily on mechanisms of superstition and emotional capture. Similar to climate change and corona fables, CRT narratives conveniently serve to mobilize the weak-minded as pawns for cultural Marxists.

Sunday, May 9, 2021

Theory and Practice

Is this the real life?
Is this just fantasy?
Caught in a landslide
No escape from reality
--Queen

Classic Dow Theory posits that healthy bull markets are led by the transportation sector. It's basic supply chain management, really. For stocks (which are generally proxies of economic activity) to be strong, "stuff" must be moving.

We seem to be witnessing this theory in action. The trannies have been relentlessly marching higher--so much so that the oscillators are pinned to the ceiling.

Major indexes have been obliged to play along.

Biggest flaw in this theory that I can think of? Inflation. Massive monetization of debt and the proceeds pouring into equities create illusions of economic strength.

Reality blurs when money starts moving faster than the planes and the trains.

Saturday, September 5, 2020

Critical Race Theory

Dean Yeager: Your theories are the worst kind of popular tripe, your methods are sloppy, and your conclusions are highly questionable. You are a poor scientist, Dr Venkman.
Dr Peter Venkman: I see.
--Ghostbusters

Critical race theory (CRT) is a collection of propositions related to the social justice movement--e.g., that so-called 'white privilege' and 'institutional racism' restrain upward mobility of black people. Calling this 'theory' is like putting lipstick on a pig. It is a rhetorical device meant to cast legitimacy on an amalgamation of popular tripe.

Not surprisingly, agencies under the Obama administration had been using taxpayer dollars to indoctrinate CRT on the masses. Thankfully, the Trump administration is ending this indoctrination program.
Government should not support 'training' of any type. The CRT situation demonstrates why.

Saturday, August 8, 2020

Theories of Viral Response

"I hate losses, sport. Nothing ruins my day more than losses."
--Gordon Gekko (Wall Street)

As strange as the past few months have been, there are actually theories that help explain the unusual behavior of people and policymakers. These pages have been documented a few. Let's review some of them here.

Social identity theory. Behavior of out-group members is criticized while behavior of in-group members is largely given a pass. Because leftists tend to be, by definition, more collectivist, we should expect in-group/out-group norms to be more prevalent among those on the political left. Helps explain division of CV19 discourse and policies along political lines.

Institution theory. Institutions are rules and norms that exert pressure for sameness and compliance. Pressure for 'isomorphism' can be classified in one of three types: coercive (laws, regulations), normative (customs, common practices), mimetic (imitating behavior of others). Mimetic isomorphism is particularly prevalent in uncertain times--which helps explain quick spreading policies such as lockdown and mask wearing.

Agency theory. Agents are supposed to work on behalf of their principals, but often pursue their own interests at the principals' expense--particularly when principals are unable to monitor/assess agent work. Helps explain behavior of public health officials as well as efforts to manipulate data to hide error.

Resource dependence theory. Entities are rarely self-sufficient. Instead, they must trade with others to obtain resources necessary for survival and growth. Larger resource providers exert more power over smaller dependents. Helps explain why sectors highly dependent on government funding, such as health care, are likely to fall in line with CV19 policy mandates.

Threat rigidity theory. Facing conditions of threat, individuals, groups, and organizations tend to do two things. One, they restrict information processing channels to reduce information overload and to economize attention on lessons learned from dealing with past threats. Two, they tighten control processes by centralizing decision making authority. These actions combine to rigidify response to threat. Creative solutions are shunned in favor of customary responses that worked well to quell previous threats. When the nature of the threat differs radically from previous episodes, then failing to consider novel responses results in a reinforcing loop of maladaptive behavior. This theory, coupled with the next one, says much about collective response to a new virus.

Fast and slow thinking. People posses two decision making processes. System 1 is emotional and reactive. Instead of deliberately processing information which takes time and effort, this 'fast thinking' processes makes snap decisions. The vast majority of decisions are made using fast thinking processes. System 2 is rational and data driven. It collects evidence and deliberates before deciding. This slow thinking process--the truly rational one--is rarely used. It is easy to surmise that most people have been engaging their fast thinking system 1 brains when making sense of the CV19 pandemic and associated policy responses.

Transaction cost economics. Econ 101 assumes that exchange is cost-free. In reality, 'transaction costs' accompany trade. Search, contracting, arbitration, translation, regulation. The higher the transaction costs, the less likely people trade on the market (outsource) with other specialists. Instead, they will pull more activities in-house (insource) and diversify. Higher transaction costs associated with CV19, particularly those imposed by regulation (mask wearing, hand washing, sanitizing, spacing), are keeping people from trading with each other.

Prospect theory and escalation of commitment. You plan out what seems like a great strategy. You begin implementing it. But it doesn't work. What to do? Rather than cut your losses and change course, you will be prone to keep going and perhaps even escalate your commitment. A key reason: loss aversion. People hate losses more than they like gains. This theory says much about why officials are unlikely to reverse failing CV19 policies.

My sense is that these threads could be woven into an interesting theory of viral response.