Friday, December 18, 2020

Algorithms Are Stupid

I woke up one morning to find that my Twitter account, @GordonSBrooks, had been locked because, in tweets responding to a reprehensible person trolling Buzz Aldrin, I called her (I assume a her by the profile picture, but there's no guarantee on these things) an "attention whore," meaning someone who is essentially selling themselves in exchange for getting attention.

And Twitter's algorithms locked me out. They didn't lock the account of the person who insulted and trolled a great American hero, whose feed is full of the worst kind of conspiracy tripe, and who accuses the Speaker of the US House of Representatives of being Mafia-connected.

I just deleted my tweets because it's not worth the fight in this case. But at some point we have refuse to let algorithms set the rules. Because this isn't just a problem with Twitter. This is a problem with our attitudes about artificial intelligence.

Companies like Twitter use AI to save money. I understand that. In Twitter's case they pretty much have no choice. The problem comes in the degree to which we believe that AI is doing a pretty good job of being intelligent, and so we let decisions that really should be left to human beings fall to AI instead, with only a passing nod to human review.

I can envision an appeal like this being reviewed. The AI catches the word "whore" without the context of the modifying adjective "attention" and freaks out. The harried human who, at some point, reviews the tweet, also sees the word "whore" and doesn't have enough time to think about the context because they have so many hundreds of tweets to review by the end of the shift that thinking doesn't really come into the equation. The human has a quota to fill, and Twitter gets to say that the tweets were "reviewed" by a real human being. And we all rail against Twitter's rules without really realizing that the whole human review portion of this is a sham.

The real danger of artificial intelligence is not that it's going to take away our jobs, although it will do that in a lot of cases. The danger is that we will, given our tendency to see patterns of intelligence where intelligence doesn't really exist, assign to AI tasks for which it is wholly unsuited.

In the world of social media, this means tainted discourse, which is not a trivial problem. But what happens when we let AI make decisions about larger matters, matters that truly involve life-and-death decisions?

Before we deploy AI, we need to make sure that it really is as smart as we think it is.

Tuesday, December 1, 2020

This Thing Called Economic Growth

My wife and I, approaching the age of retirement, are thinking about the process of downsizing. When the children move out of the house, perhaps even before all of them do, we want to reduce our overhead, both in terms of money and in terms of time spent taking care of a house.

Our house isn't big. The average new house in the US is nearly 2,600 square feet. Ours is legally about 1275 square feet, though if you count the walk-out basement there's almost 2000 feet that can be considered livable space.

That's too much for us. We don't want to take care of that much, we don't need that much, and we can't afford to heat and pay taxes on that much. But we don't look at this as a step down. In fact, we consider it a step forward, from a life where too much time is spent caring and paying for a house, to, we hope, a life where much more time is spent creating, traveling, and just being together.

What if everyone did this? What if everyone scaled back, just had less, and spent less. Would the whole economy just collapse? Well, if you believe the economists, yes. The economy, they say, must grow to be healthy. But what, exactly, is economic growth and why is it so important?

The more I think about this question, the more I get the feeling that economic growth is an illusion, and that it is not, in fact, so important. At least, not in terms of what a real economy is: the trading of goods and services among people. The problem comes when you bring money into the equation.

Now, don't get me wrong. I'm not part of the Zeitgeist Movement or the Venus Project, proposing that we do away with money altogether. Money is a great means for facilitating all that trade, and it makes it far easier to create and distribute things like the Chromebox computer I'm writing this on now, which hooks up to my flatscreen TV. Both of them together costs less than $400, which is amazing, and a testament to our technological society.

The problem isn't the existence of money. The problem is the way we create money, pretty much everywhere in the world. We create it as debt.

Now, the mechanism of how we create money as debt is too big a discussion for this one little blog entry, and others have explained it far better than I can. But let's think about the consequences of creating money as debt.

Let's say that the total amount of money in a fictional economy is $1,000,000.00. The Central Bank doesn't just print this money and spend it, it uses it to buy government bonds, and those bonds pay interest.

Now we have a National Debt of $1,000,000. The money circulates through the economy so that we can trade goods and services with each other efficiently. So far, so good.

But the money has to be paid back. With interest. That creates two problems. First, paying back the debt takes money out of the economy and makes less money available for trade. And second, there is not enough money in the system to pay the interest. In fact, the only way to pay the interest is for the Central Bank to create more money. But the only way for the Central Bank to create more money is to create more debt.

You can see where I'm going with this. If more debt is needed to pay down debt, the amount of money in the system needs to increase just to pay the interest, not because of an increase in actual economic activity. And that's why there has to be all this growth. It's to sustain the debt money system.

Now, a growing economy is not, in itself, a bad thing. But neither is a shrinking economy. The question is: why is the economy growing or shrinking? If the economy is growing because there are more people needing, doing, and wanting more things, that's fine. If the economy is shrinking because people need, do, and want less, that's okay too. Except for that whole debt thing. That's the wrench in the machinery.

Is there an answer? I think so, and I don't have to be an economist to see the sense in it. The answer is to stop creating money as debt. Not eliminating debt altogether, but making it work the way we all think it works, where the money that banks loan comes out of the pool of existing money, and the interest is also paid out of that pool.

How do we do that? Sovereign money. We often accuse the US Treasury of printing money, but that's only true in the most literal sense of the word. In the US, the only money that's issued debt-free is physical coinage. Even our paper money is issued as debt. Look at a dollar bill. It's a Federal Reserve Note. "Note" means that it is a debt. And it's not a debt owed to the US Government; the Federal Reserve System is privately held.

The folks over at Positive Money UK have some great videos on their YouTube channel. Even though some of the specific refer to the UK, the fact is that it's pretty close to the same situation here in the US, in some ways worse. Have a look. And if it makes as much sense to you as it does to me, drop a letter to your legislators, and perhaps your favorite presidential candidate, to ask them why, after 100 years of the Federal Reserve System, we still borrow nearly all the nation's money into existence.

Monday, November 16, 2020

Saving the Daylights Out Of Me

Every year it's the same thing. March and November, we manipulate the clocks in the vain quest of extra time, extra hours of sunlight that we can use productively. In the early days of Daylight Saving Time, it was supposed to be for the farmers. After the 1970s energy crisis, it was supposed to save energy.

But here's news: the farmers hate Daylight Saving Time, and always have. And it doesn't save any energy. It makes everyone (including the farmers' animals) out of sorts for up to a week after each shift. And, of course, it doesn't actually save anything at all; it's just an illusion.

A harmless illusion? No, not really. During the transition period, traffic accident rates are higher, along with industrial accidents. Even suicide and heart attack rates seem to be higher.

There are a lot of benefits touted for Daylight Saving Time, but upon further study, all of them prove to be spurious.

I think it's time we were saved from Daylight Saving Time.

Wednesday, July 8, 2020

The Debt Underworld

I read this article on the Web site of the New York Times, adapted from thisbook by Jake Halpren, about the shady world of debt collectors. It’s a real eye-opener. I already knew that the buying and selling of old debts was a questionable business, but I never realized the extent to which it is infected with thieves and cheats. But it’s only the extent that surprised me. I think that the debt economy as a whole cannot be conducted with complete honesty the way it is set up.

More on that in a moment, but the article is largely about the theft of consumer debt accounts. Unscrupulous collectors get data for accounts they do not own, and collect on them anyway. The legitimate (as much as these things can be legitimate) buyer of the debt goes to collect and finds—surprise—that someone else has already collected the money. One of the proposals to solve this problem is a database:
A centralized loan registry might help, and there are some in development. Mark Parsells, the chief executive of a company called Global Debt Registry, has developed a database that tracks the ownership of consumer debts once they are sold off by banks or original creditors.
But this sounds remarkably like MERS, the database of home loan notes that has caused so much trouble in the mortgage industry. Not only has MERS sidestepped the time-honored system of recordation of mortgage transfers by separating the note (the debt instrument) from the mortgage (the security), but their database has proved to be of questionable accuracy. The problem with databases is that they contain information about a loan, not necessarily accurate information, and nothing concrete, like a signed contract.

Of course, a lot of consumer debt is issued in the first place without any kind of signed contract, so where is the proof that the debtor agreed to this debt in the first place, much less that the buyer (or the second buyer, or the tenth) has any right to collect, knows the correct amount, and even has the right person?

These are not easy problems to solve, and yet I don't even think they get at the heart of the matter, which is how most consumer debt is created in the first place. And here I'm talking about credit issued by banks, which account for most loans. For one thing, because of the special place that banks hold in our economy, the vast majority of the money they lend to you and me is created out of thin air. Yes, just like the Federal Reserve, federally-chartered banks have the power to create money.

So they loan you money. They may pretend that they agonize over lending you that money, but the downside risk is very small and you can bet that whatever tightening of credit is foisted upon us in tough times will loosen up long before the tough times do.

So, say you've gone into hock with some bank, via your credit card, to buy a big-screen TV. You never actually signed anything to get the card; you did something online and they sent you the card, and you agreed to the terms the moment you used the card to make a purchase. And you bought this $1000 TV set. Why did you pay that much? Because it's a good round figure, that's why.

Now, the bank, if they are following the rules, put up about $100 of that money, and the rest they just created as an entry on their books. If they are not following the rules, they may have put up only about $20. Really. And they probably won't get into any trouble over it.

Now the bank has very little at stake. The company that sold you the TV is okay, because although they traded a set for the money, they have the money in hand after a certain waiting period. They paid a fee for that safety net, but it's just the cost of doing business.

And you got a TV. But what happens if you lose your job and can't pay the credit card bill? You are liable for the full amount, plus interest, plus fees, plus penalties. Now, maybe the bank will take you to court to collect. But often, they won't. They will "sell" the debt.

As an aside, when did a contract, and agreement between two parties, become a commodity that can be sold like so many bushels of corn? Isn't trust a part of any agreement? How do we know we can trust our new creditor?

So, back to the subject. When your bank "sells" the debt, they are only selling an electronic spreadsheet with the salient information. They don't even guarantee that the information is accurate. So the amount, the interest rate, and even the Social Security number might be wrong. And who's to say that they have only sold that information once?

And, certainly, as Mr. Halpren's books reveals, even if the bank is totally above-board with its information transfer, the collectors down the line may not be. And no database is going to stop a crook from calling you in the middle of the night trying to collect that 10-year-old credit card debt that he or she bought the information for, but never owned. And how many debtors are going to know how to find out for sure?

Of course, there are two things that would help this situation tremendously. One is to eliminate fractional reserve banking and debt-money creation in our economy. If banks were only lending money they were liable for, they would be more careful about lending. Tight credit isn't a bad thing; consumers in particular should think twice about borrowing money for anything.

The other thing we could do is go back to signed contracts. Actually putting pen to paper (a "wet-ink" document) and making the physical contract part of any sale of the debt would give a true paper trail. Would it slow down the whole credit-issuing process? Yes! Would the economy come screeching to a halt? No. Credit doesn't drive the economy, it drains it.

And making debt harder to issue, harder to accept, and harder to collect can only make things better.