American Elephants

Determining risk by using computer models is more complicated than you might think. by The Elephant's Child

Last Friday the U.S. National Snow and Ice Data Center admitted that their sea ice data was off by as much as a half-million square kilometers due to “sensor drift” of the old satellites that they were using.

A new satellite is available, and it is far more precise, but the Snow and Ice Data Center does not use it because its data is inconsistent with their historical data.  The idea of an “ice-free pole” is so much the consensus that they do not want ordinary facts to get in their way.

The extent of Arctic sea ice is an important measure of how rising or cooling temperatures are affecting Earth’s climate.  The satellite sensors caused scientists to underestimate the extent of sea ice by 50,000 kilometers (193,000 square miles) or about the size of California.  But this small error does not change their findings that Arctic ice is retreating.

An article from Anthony Watts blog by Machine Design editor Leland Teschler points out that financial institutions have employed legions of PhD mathematicians and statisticians to model the risks that the firms were assuming under a variety of scenarios.

Huybert Groenendaal’s PhD is in modeling the spread of diseases.  He points out that:

In risk modeling you use a lot of statistics because you want to learn from the past.  That is good if the past is like the future, but in that sense you couuld be getting a false sense of security.

That sense of security plays directly into what happened with banks and financial instruments based on mortgages.  It gets back to the use of historical data.  One critical assumption people had to make was that the past could predict the future.  I believe in the case of mortgage products, there was too much faith in the idea that past trends would hold.

In our experience people have excessive confidence in their historical data.  That problem isn’t unique to the financial area.  You must be cynical and open to the idea that this time, the world would change.  When we work with people on models, we warn them that models are just tools.  You have to think about the assumptions you make.  Models can help you make better decisions, but you must remain skeptical.

Climate change is similar to financial markets in that you can’t run experiments with it as you might when you are formulating theories in physics.  That means your skepticism should go up.

Lots to ponder here.  Read the whole thing.

What’s the matter with Big Government, anyway? by The Elephant's Child
February 23, 2009, 8:41 pm
Filed under: Domestic Policy, Economy, Politics, Progressivism | Tags: , ,

Bu•reauc•ra•cy n. 1. Administration of a government chiefly through bureaus staffed with nonelective officials.  2. Government marked by diffusion of authority among numerous offices and adherence to inflexible rules of operation.  3.  Any administration in which the need to follow complex procedures impedes effective action.

Why do Republicans always talk about “small government” and oppose “big government?” Don’t we need “big government” to fix things, to keep us safe, to build highways and regulate all the things that need regulating?

And isn’t this just hypocrisy?  I haven’t noticed Republicans making the government a lot smaller, nor having the government take on fewer tasks.  True.  It is far, far easier to create a new task force, a new bureau, a new department than to find a way to close one down.

Government and business grow in much the same way.  Workers don’t like working hard all the time, they want more help.  Managers like to have more people to manage, it makes them more important. Senior managers enhance their managerial credibility by reorganizing their department to “increase efficiency”.  CEOs add another layer of management to simplify the number of direct reports. And so it goes.

New Presidents, Governors or Mayors bring in favored associates with their new administration, and create new positions or new departments for those associates.

For example, President Obama is not only struggling to fill all the Cabinet positions, but the positions of  the assistant to the Secretary and the Deputy Secretary, and the Directors of other Bureaus and Departments,and the Deputy Directors,  but he is creating any number of Czars who will overlook something or other and have confused relations with the Cabinet Secretaries who were confirmed by the Senate to be in charge of essentially the same thing.

If anyone can explain the tasks of the various Czars and what the relationship is of the Energy Czar to the Energy Secretary and the Head of the EPA and the Interior Secretary, I would be very interested.

This is how government grows, and how business grows.

In the business world, when things aren’t working or when times turn down, whole layers of management may vanish.  You have heard of massive layoffs, 20,000 here and 30,000 there.  Did you hear of government — any government — laying off people in such numbers?  Eliminating a layer of management? Or eliminating a department?

The car companies are in trouble.  Union agreements have been too generous.  They have too may retirees who receive more retirement benefits than they can afford.  Congress demands ever-increasing mpg from ever less efficient fuel with mandates that the car companies cannot meet.  Car companies cannot build cars for a price that Americans will pay.  Normally this kind of thing is solved by a bankruptcy court.

The White House has announced a Presidential Task Force that will serve in lieu of a bankruptcy judge.  It will contain the following members:

  • Treasury Secretary Tim Geithner
  • National Economic Council Director Larry Summers
  • Secretary of Transportation
  • Secretary of Commerce
  • Secretary of Labor
  • Secretary of Energy
  • Chair of the President’s Council of Economic Advisers
  • Director of the Office of Management and Budget
  • Environmental Protection Agency Administrator
  • Director of the White House Office of Energy and Climate Change

– Ron Bloom, Senior Advisor on the Auto Industry, Department of Treasury

Official Designees of the Members of the Presidential Task Force

  • Diana Farrell, Deputy Director, National Economic Council
  • Gene Sperling, Counselor to the Secretary of Treasury
  • Jared Bernstein, Chief Economist to V.P. Biden
  • Edward Montgomery, Senior Advisor, Dept. of Labor
  • Lisa Heinzerling, Senior Climate Policy Counsel to the EPA Administrator
  • Austan Goolsbee, Staff Director and Chief Economist of the Economic Recovery

Advisory Board

  • Dan Utech, Senior Advisor to the Secretary of Energy
  • Heather Zichal, Deputy Director, White House Office of Energy and Climate Change
  • Joan DeBoer, Chief of Staff, Department of Transportation
  • Rick Wade, Senior Advisor, Department of Commerce

Bureaucracy kills innovation, destroys initiative, and generally turns possibility into pudding.  Republicans may not be very good at making government smaller and more efficient, but at least they have that as a goal.

Democrats believe that bigger is better.

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