Maths aren't Life....

I've been very struck this past week by the ongoing capacity of the social sciences to fail. I am not, as it were, a disbeliever in their insights. I think that societies and peoples have from time to time been advanced by the discipline that a requirement to model and assess policy and action have placed on decision makers.

However, I've always been very suspicious of what I see as the pretensions of political scientists or econometricians. Building unreal models of the world and then judging people or developments against them seems to me precisely what most of the new philistines think Catholicism is--a platonic effort to hold reality to an unreal standard.

We've had three decades now of 'scientific, evidence based' policy making. The wreckage of the derivatives industry, and of the global warming cult are two of the most interesting consequences.

The two ideas are linked in numerous mathematical ways. Derivative markets, for instance, really took off on the back of David Li's industry-wide model in the mid-1990s. He allowed banks and financial institutions to convince themselves that they could identify what would happen if one or a number of variables in a set went wrong, and how their dysfunction would affect the rest. This allowed banks to assign risks to tranches of collateralized mortgages, or to derivatives of those derivatives. This then allowed them to trade them, and to take the nominal value as an asset, which let them avoid the rules on the amount of reserves that they had to hold in the amount of an economic downturn or a run on the banks.

What started happening was what anyone who has been through elementary school, or for that matter what anyone who has ever been asked what they'd like on a pizza when they were drunk, knows would have happened in their bones. Bankers thought of numbers, doubled them, spun them through a leverage wash, and hid behind the Gaussian copulation they had balanced on a series of knife-edges. Then there was a bloodbath.

It all sounds fairly seedy and psychotic. Knife-edges are terms associated with econometric modelling (in domestic and foreign aid policy)that have also been used in global warming. The basic idea is that some parameters must be limited in order for some models to work. They sit on 'knife edges' of assumption.

So, if one is seeking to establish where a market will stabilise--or, for that matter, whether or not a trend will continue--it is perfectly normal practice to make the numbers fit not only an observation but the condition for which you are looking. People convince themselves that they are just making a qualifying assumption, but the idea is that they know what they are looking for and change the facts to fit it rather than just being a passive observer. They can then compare the fruit of their hypothesis to reality, or prove it unnecessary, odd or false.

I think that the public explanation of global warming as a settled and provable thing, based on models employing forcing techniques like this and others, is now demonstrably invalidated. Not only is it unnecessary, and not only does it not correspond to the observed reality of contemporary temperatures, but it is clearly ignorant of the almost daily interruption of hitherto uncounted variables that prove it wrong.

On a day when antimatter has been observed in the atmosphere given the electrical energies there, and when cosmic wind and solar observations seem to be correlating with global cooling, who is foolish enough to pay any attention to crude, forced, carbon-related and behind the curve ideas?

Our political classes, that's who. They need the delusion of certainty. I suppose it's the same feeling they had when the monasteries were stolen, the church exiled, or the fields enclosed, let alone when Ireland, Africa, Asia, and Native America were raped, albeit with drugs rather than a Latin sword.

The British ones bear a special responsibility. They, and their cleverer mates in banking, were the ones who, for instance, invented derivative markets in swaps, options, futures, and debt-related products, and who perverted them, failed to notice what they were doing to bank leveraging, and who corrupted the world to the tune of thirty-four quadrillion dollars with them.

They were the ones who propagated, along with American liberals, the dangerous nonsense of carbon trading. They are the ones who thought the destruction of whole communities would lead to the elevation of investment into output via savings--just as they were smacking their lips and privatising the state whilst changing the law to encourage the greedy to destroy building societies. I'm sure that the Swann-Solow model of growth provided them with a rational excuse to do so.

They're the ones who are creating a climate of fear amongst parents about parental discipline, and school choice. They are the ones writing stupid rules about landfill and clogging magistrates courts with people who have infringed some social rule whilst Members of parliament defund the Treasury and stuff the bankers' mouths with fiat paper, their pockets with allowances, and their suits with self importance. They're lying to you about Afghanistan and Europe right now, mostly because they lie, and lie, and lie to themselves. Everyone here does. I'm no saint. It's how you get through a day.

English lumpenabiturienten; the ones who gave into the most dangerous delusion of all--that life could be mapped, and calculated, and that the conclusions could be applied as policy. History to them had no meaning, and a common corpus of culture that inculcated commonsense and drew on the wisdom of crowds was elitist. Communities were racist, and had to be diluted. The numbers and the policies had spoken.

Except, the numbers and the policies don't speak. Those are voices they hear, but they're inside their heads. They reflect the topography of their auditing minds, and feed their desperate need for certainty.

It's sad, when I reflect that more human things would have prevented so much pain. If more people in the Labour government had had at some point and for an extended period a proper job, for instance, or more people at the senior criminal bar had respect for themselves and for others, or more people in the Bush administration had really--and I'm conscious this is crude, but its a basic truth--got laid or drunk when they were younger, (other than the President) then no one would have fallen for the rubbish.

I exempt Bush; he of all of them knew what he was doing and did it simply and he'll be damned for that. The rest were driven by their psychological problems.

We wouldn't have been on mad campaigns to kill, or waste money, or grind the faces of the poor in fear and moral righteousness whilst heckling God with atheism and telling women they were free to be debt slaves by letting male and wannabe male members of the educated middle classes abort their children.

It was either Jesse Jackson or Willie Brown who characterised the Democratic Leadership Council as 'a bunch of white boys in suits'. That sort of practical wisdom, and the understanding it conveys, is worth a tonne of papers on the fibonacci sequence in bistro swaps.

The link, by the way, takes you to a socioeconomic video on logarithms and stock markets, beneath which is a link to 'animal porn'. I wonder which would tell you more about investment banks.

Perhaps I ask too much. Even if they did know what was happening, could the political classes have spoken over the rant of money, could they have been expected to want to put a smile on an old face over some cold-blooded rich one, any more than Friedrich Olbricht could have been expected to stop Hitler?

It might be too late now, though. The more I look at the west and its follies, which begin with an over-reliance on mathematics, the more I think about how much colder the world is getting, the more I think about the last time we had this peculiar concatenation of environmental change down the thermometer, political illegitimacy and corruption, economic crisis, and social hysteria born of deliberate ignorance, the more I want to head East or South. Very, very quickly.

Oh, sod it. Here's a video depicting some robust Texan political analysis. I have three weeks of nonsense in front of me and I want a good tune.


DBC Reed said…
You have n't dwelt on the Black Scholes formula that won a Nobel prize and took down Long-Term Capital Management and whole chunks of the U.S.economy with it when it went well and truly phut.Also the Post Autistic Economic Movement is worth looking at: Sorbonne students rebelled against all the maths in their Economics syllabus in 2000.
Martin Meenagh said…
I didn't dwell on it for three reasons (including my own long-winded knuckleheadedness).

Firstly, LTCM always seemed to me the collapse that was presented as the exception that defied the rule. This upheld the rule. By that I mean, people touting reasonably justifiable, if risky, ways to avoid the requirement to have capital reserves, like collateralised products and derivatives therefrom, could say 'we're not mad, like they were'.

'They' were suggesting that they had found a risk-free, instantly realisable way to carry out transactions with a smiley graph and some guff about physics and motion. 'We' are simply suggesting that you match and swap capital and debt on a global basis and develop leveraged products on the back of a tranche of a mix of safe and riskier investments.

The effect was similar to Alexander Hamilton's call for an American monarchy. Hamilton wasn't stupid and didn't, I think, believe for a second in an American House of lords or an hereditary president. But he saw that America wouldn't get a Madisonian President and Senate unless he came up with a madder idea, which the herd could then retreat from straight into Madion's pen.

I didn't know about the PAEM, or the Sorbonne students, and am in two minds about their behaviour. All the maths? Kalecki? Keynes? I do think mathematicizing greed and delusional self-justification is typical of lots of economics maths, at which I am an amateur, but then, at least it is a discipline--yet another our schools have lost.

My girlfriend is Korean. She can, when she raises her eyes from vogue, do calculus and compound interest at the drop of a hat, because they still teach that there. If those who thought themselves educated knew it here, maybe we would have been able to see that what was really going on was not stabilisation after LTCM's lunacy, but the rant of money....

Many thanks for your comment.
Martin Meenagh said…
The second reason, by the way, was that I wanted to draw a connection between equilibria-based maths and extrapolations across disciplines, and the third is that I'm no mathematician and didn't want to specifically compare formulae. I also keep forgetting to finish my blog answers!

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