Latanya Sweeney and rethinking transparency

By Ethan Zuckerman, on June 14th, 2011

Latanya Sweeney urges us to rethink the challenges of privacy. She’s worked in the space for ten years and tells us that thinking about privacy in terms of the design of public spaces is a helpful and useful conceptual shift. We tend to look at the digital world in terms of physical spaces. In digital spaces, though, we can often look at someone from different perspectives in parallel spaces, and we can learn things about you that might be considered to be “private”, hidden behind some sort of a wall.

She prefers to talk about semi-public and semi-private spaces, and to consider the tension between privacy and utility. It’s not one or the other, but the sweet spot between the two. She’s rethinking privacy, particularly around the topic of big data: pharmacogenomics, computational social science, national health databases. This movement towards the analysis of huge data sets forces us to rethink within legacy environments. How do we de-identify data? What does informed constent and notice mean in these spaces? And we’re rethinking at architectural levels, too – moving towards a realm of open consent and privacy-protecting marketplaces.

Open consent has been popularized by George Church at the Harvard Medical School. Rather than asking consent or making promises or guarantees, he gives you a contract where you sign away liability, because considering future risks is simply too hard. It sounds kooky, but a thousand people have signed up. Another model is a trade secret model – what if I treat your genomic data as a trade secret? As long as I keep it private, you’re exempt from liability – release it and all bets are off. We might also think of data sharing marketplaces where we insulate participants from harm and compensate them when it occurs.

We need to think through these components:

Data subjects – we need to think through the possibility of economic harm to these actors, in part because humans tend to discount risks around privacy

Technology developers – some of these developers are her students, and she urges them to think about the power over privacy and technology decisions they exert. Video recorders record sound and video, and sound is hard to mute. As a result, videotaping often pushes us against wiretapping laws… and this could have been moderated with a $0.01 cost decision

Policymakers

Belief systems

Benefit structures

and Legacy environments

Zeynep Tufekci asks Sweeney to talk through the question of belief systems and false tradeoffs. She suggests that debates have a false belief that you’re trying to maximize privacy or utility – the key is a relationship between the two.



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What purpose is served by an exchange of gifts?

By Winton Bates, on March 16th, 2011

I had thought about writing something about gift giving before Christmas, but it might have looked as though I was complaining about how difficult it can be to buy gifts for people who seem to have just about everything they need already. (Perhaps I might even now be wandering into dangerous territory.)

In the past, economists have had some difficulty in understanding why people exchange gifts. The reason is that since the satisfaction that a person obtains from consumption spending is determined by her or his personal preferences it is difficult for anyone else to know what she or he would like. (I hope this is getting me out of trouble rather than digging a deeper hole.) Thus, some people end up with gifts they don’t want. (Fortunately, this rarely happens to me!) The remedy some economists have proposed is predictably crass: give money not goods. Neerav Bhatt has provided an entertaining discussion of this view here, including a clip from an episode of Seinfeld showing Elaine’s reaction to Jerry’s gift of cash for her birthday.

Greg Mankiw provides a good economic explanation of gift-giving in terms of signaling theory. If a person is able to provide a thoughtful gift – despite the difficulty of discovering what the receiver would really like – this sends a signal of the feelings that the giver has toward the receiver.

I suppose that is how gift giving helps to strengthen bonds. It can be wonderful when that happens. (In my experience it is most likely to happen when the potential receiver of the gift is willing to send some signals by dropping a hint or two about what she might like.)

The exchanges of gifts among members of social and business organizations at Christmas functions etc. is presumably also intended to promote bonding. One approach, which is probably fairly common, is for everyone attending such functions to buy and wrap an inexpensive gift, with all gifts being distributed randomly at the function. A member of a club that I belong to recently proposed a different approach: the names of all members would be put in a hat and each person would draw out a name and buy a gift anonymously for that person. This might have resulted in more people being given things that they might appreciate and might have helped to bond individual members of the club to all other members. It seems likely that if you know that the person who has given you a gift that you appreciate is a member of the club, but you don’t know who it is, you might have good feelings towards all other members. (As it happened, the club decided to continue with the practice established a couple of years earlier of donating gifts for children to a local charity rather than exchanging gifts between members. It would be interesting to know if the proposed method of gift exchange has been used elsewhere and what the effects have been.)

The Rational Optimist: How Prosperity Evolves
While bonding helps explain exchanges of gifts between close friends and members of some organizations, does it is also explain exchanges of gifts between people who don’t know each other well? Exchanges of gifts between people in different organizations in the modern business world can be viewed as gestures of goodwill (albeit often tax deductible). Some anthropologists and archaeologists have encouraged the view that such exchanges of gifts to establish goodwill were much more common in tribal societies. According to this view, people in pre-industrial economies exchanged gifts to cement relationships, but people in modern economies trade with each other to make profits. Matt Ridley suggests that is ‘patronising bunk’ (‘The Rational Optimist’, p. 133-4).

As Ridley suggests, there is no reason to suppose that traders in all cultures have not always been acutely aware of the desirability of getting a good bargain for the valuable items that they are exchanging. There is some evidence that money can change the way that people perceive exchanges, but this seems to me to be based on misconceptions about money. An exchange of goods with strict reciprocity (barter) might appear more like an exchange of gifts than a commercial transaction, but people are fooling themselves if they think it is different in important respects (other than possible tax avoidance) from an identical exchange facilitated with the use of money.



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Chaotic Fingers Of Instability

By Trace Mayer, on October 7th, 2009

The world economy is incredibly intertwined.  For example, a butterfly flapped its wings in the Amazon resulting in typhoon after typhoon hitting the Philippines.  This has interrupted the work flow for RunToGold because one of my wonderful assistants located there has had his village decimated, been flooded out of his house and therefore been unable to complete several projects.  As a result, thousands of people are not able to consume information that may affect the decisions they make.  Often when we are in the moment we do not fully comprehend the gravity of the situation until it is fully upon us.

CHAOS THEORY


Chaos theory is a branch of mathematics which studies the behavior of certain dynamical systems that may be highly sensitive to initial conditions. This sensitivity is popularly referred to as the butterfly effect. As a result of this sensitivity, which manifests itself as an exponential growth of error, the behavior of chaotic systems appears to be random. That is, tiny differences in the starting state of the system can lead to enormous differences in the final state of the system even over fairly small timescales. This gives the impression that the system is behaving randomly. This happens even though these systems are deterministic, meaning that their future dynamics are fully determined by their initial conditions with no random elements involved. This behavior is known as deterministic chaos, or simply chaos.

Chaotic behavior is also observed in natural systems, such as weather with typhoons pummeling the Phillipines. This may be explained by analysis of a chaotic mathematical model which represents such a system.  Quantum chaos investigates the relationship between chaos and quantum mechanics.

HUMAN ACTION

While we like to think that human action is largely individual and unique, and it is, the branch of statistics allows us to make incredibly accurate predictions regarding populations.  In economics this is perhaps the chief competing premise between the Austrian school of economics and others:  starting with the individual and deriving the macro or vice versa.

The problem with starting somewhere besides the individual is that there is always a previous history to that choice; every individual has their own story.  To discount the individual is to discount their humanity; their ability to choose.  And it is that humanity which will often lead to choices which do not always conform with game theory or ‘rational behavior’.

That is not to say an individual cannot build mighty towers with and through other people.  The issue is whether he will view them as bricks or stones (Genesis 11:3).  The problem with individuals as bricks, or in other words human livestock, is that it is immoral and the immoral policy will always fail.  While the behavior of the chaotic system may appear random it is deterministic.  Mankind will be what he was born to be:  free and independent.

FINGERS OF INSTABILITY

John Mauldin wrote a great piece Another Finger Of Instability:

Imagine, Buchanan says, dropping one grain of sand after another onto a table. A pile soon develops. Eventually, just one grain starts an avalanche. Most of the time it is a small one, but sometimes it builds on itself and it seems like one whole side of the pile slides down to the bottom.

Well, in 1987 three physicists, named Per Bak, Chao Tang, and Kurt Weisenfeld, began to play the sandpile game in their lab at Brookhaven National Laboratory in New York. Now, actually piling up one grain of sand at a time is a slow process, so they wrote a computer program to do it. Not as much fun, but a whole lot faster. Not that they really cared about sandpiles. They were more interested in what are called nonequilibrium systems.

They learned some interesting things. What is the typical size of an avalanche? After a huge number of tests with millions of grains of sand, they found that there is no typical number. “Some involved a single grain; others, ten, a hundred or a thousand. Still others were pile-wide cataclysms involving millions that brought nearly the whole mountain down. At any time, literally anything, it seemed, might be just about to occur.”

The piles were indeed completely chaotic in their unpredictability. Now, let’s read this next paragraph from Buchanan slowly. It is important, as it creates a mental image that helps me understand the organization of the financial markets and the world economy.

“To find out why [such unpredictability] should show up in their sandpile game, Bak and colleagues next played a trick with their computer. Imagine peering down on the pile from above, and coloring it in according to its steepness. Where it is relatively flat and stable, color it green; where steep and, in avalanche terms, ‘ready to go,’ color it red. What do you see? They found that at the outset the pile looked mostly green, but that, as the pile grew, the green became infiltrated with ever more red. With more grains, the scattering of red danger spots grew until a dense skeleton of instability ran through the pile. Here then was a clue to its peculiar behavior: a grain falling on a red spot can, by domino-like action, cause sliding at other nearby red spots. If the red network was sparse, and all trouble spots were well isolated one from the other, then a single grain could have only limited repercussions. But when the red spots come to riddle the pile, the consequences of the next grain become fiendishly unpredictable. It might trigger only a few tumblings, or it might instead set off a cataclysmic chain reaction involving millions. The sandpile seemed to have configured itself into a hypersensitive and peculiarly unstable condition in which the next falling grain could trigger a response of any size whatsoever.”

AVALANCHE

Often I get questions such as when is the dollar is going to collapse, when is the DOW going to crash, etc.  Now I like to profit from trading just as much as the next guy and have made a few recommendations that have made tidy returns for diligent readers.  But I try to look at all possible events, assess the probability of an outcome occurring and then acting in accordance with that assessment.

Is it possible that a CIA employee will be charged or indited for detainee abuse charges before December 31, 2010?  Yes.  Is it probable?  Well, Intrade puts the probability at 25%.  I think it is even lower; criminal gangs costumed in government regalia do not like to prosecute those in their fraternal brotherhood.

Many people seem to think that the evaporation of the world’s reserve currency is something that can be played for profit.  When we are in the moment and bursting with confidence of greenshoots we seem to ignore out better judgment and ski down the slope.  But to the 3rd party observer it looks all too predictable and probable.  This likely will not be a period of history easily played for profit; at least not for those lacking a costume or cohorts with one.

I recommend being more concerned with principles of provident living and prepare for survivalism in the suburbs.  Will they be necessary?  We hope not but The Black Swan now the norm it is wise to be prepared.

THE SAFEST HAVEN OF GOLD

While the world is in commotion the bull market for gold is in forward motion like never before.  The 24 day moving average is above $1,000 per ounce with the 50 day moving average above $970.

The Gold Wars have been waged for centuries.  The latest incarnation is the US government and central banks engaging in a gold price suppression scheme.  The US government has gone ‘all in‘ and they are losing.  And that is primarily driving the demand for the ancient metal of kings.  But this is deterministic of the chaotic system’s future dynamics.  Empires rise; empires fall and always for economic reasons.

Sure, many think that gold has effectively been demonetized.  But Information Age technologies like GoldMoney allow for gold, silver and platinum to easily circulate as currency in ordinary daily transactions.  The King is dead!  The King is dead!  Long live the King!  Gold has only begun to stir from its long slumber.  The prime form of money’s price will only continue to rise as its value does from increased daily use among individuals as currency.

CONCLUSION

When you own an unencumbered ounce of gold your wealth is sovereign.  Hoard it.  Whether buried under an avalanche or on the bottom of the ocean in one of the most corrosive environments on earth; gold will have value one, ten or hundreds of years later.  Every empire that has fought gold has lost.  Those who own the bullion are riding in the helicopter safely away from the ruinous effects of the Kondratieff Winter’s avalanche.

Humanity’s gold lust has been dormant for nearly a century and when it awakens it will be extremely vehement and go viral. Those who own gold know of what I speak.  The yellow metal seems to call out to the inner conscience and resonate with our DNA.  And that is perhaps the most bullish aspect of this bull market.  Gold has been the only safe haven and how much of the general public has actually touched a gold coin let alone owns one?  The result will be that the pitiful garrets of the central banks will be overrun as The Great Credit Contraction continues.  These chaotic fingers of instability will shake these giant welfare states until they implode.

Disclosures:  Long physical gold, silver and platinum with no positions in the problematic GLD or SLV ETFs, S&P 500 or DOW.



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