## Please tell me what we’ve learned

26 May, 2019 at 18:19 | Posted in Varia | Leave a comment

[h/t Nanikore]

## Julia Kristeva — renowned literary theorist and spy

26 May, 2019 at 16:35 | Posted in Politics & Society | Leave a commentThroughout the recent, highly public exchange of claims and counterclaims, accusations and counteraccusations, Kristeva has expressed concern that her reputation as an engaged intellectual would be unfairly and permanently harmed. In truth, however, the damage had been done long ago, the cumulative effect of her uncritical support, as a member of the

Tel Quelcircle, for left-wing dictatorships during the 1960s and 1970s: the Soviet Union, from 1968 to 1971; and Cultural Revolutionary China, from 1971 to 1976. What makes Kristeva’s partisanship for those regimes and their draconian practices so hypocritical and so objectionable is that Kristeva, as a young woman, had experienced firsthand the ultra-repressive nature of Soviet-style, bureaucratic socialism in her native Bulgaria, where, from 1954 to 1989, First Secretary Todor Zhivkov of the Bulgarian Community Party ruled with an iron fist.In 1968 the

Tel Quelensemble — which, in 1967, had myopically allied itself with the political fortunes of the French Communist Party (PCF) — endorsed the Soviet Union’s military invasion of Czechoslovakia: an act of tyranny that succeeded in crushing the last vestiges of hope for “socialism with a human face” embodied by the Prague Spring. Aping the ideological rationalizations of the Stalin era, the Telquelians argued that those who criticized Soviet ruthlessness were merely providing aid and comfort to the bourgeoisie …The decision to endorse Soviet brutality in Prague was merely one among many political blunders that the Tel Quel group committed during this period. During May 1968, Sollers, Kristeva, and company sided with the PCF’s condemnation of the French student uprising. Echoing the official party line, the Telquelians dismissed the student revolt due to its “insufficiently proletarian character.” In mid-May, when a group of prominent French literati — Jean-Paul Sartre, Simone de Beauvoir, Jean Genet, Nathalie Sarraute, and Marguerite Duras — sought to form a new writers’ union in support of the student strike, the Tel Quel “salon Bolsheviks” expressed their disapproval by demonstratively walking out of the assembly. As Sollers, who, as it turns out, hailed from a family of wealthy Bordeaux industrialists, pontificated at the time: “All revolution can only be Marxist-Leninist!”

## Nu får det vara nog med friskoleeländet!

26 May, 2019 at 13:38 | Posted in Education & School | Leave a commentÄven den som uppskattar konkurrens och privat utförande på skolans område ser nog skandalen kring Vetenskapsskolan som problematisk. Skolans VD har omhändertagits av Säpo, sannolikt beroende på radikalislamistiska kopplingar … Vetenskapsskolan må vara ett extremt fall, men också symptomatiskt för den modell för privat utförande som gäller i skolan …

[I] den svenska modellen [ses det] snarast som en rättighet att driva fristående skolor medan det är upp till tillståndgivande myndigheter att föra bristande lämplighet i bevis … Friskolorna precis som kommunerna är huvudmän för sin verksamhet, men till skillnad från kommunerna har de inget helhetsansvar … Grunden är en lagstiftning som syftar att säkerställa friskolornas rätt att självständigt besluta om sin verksamhet, framtagen i ett sammanhang när friskolorna var få och små. Idag finns emellertid kommuner där friskolor utbildar 60 procent av högstadieeleverna och uppåt 70 procent av gymnasieungdomarna.

Att vi har skolor som Vetenskapsskolan och att skolor som Thorén Innovation School kan fortsätta sin verksamhet trots massiv kritik från Skolinspektionen är alltså inte att förundras över. Det är ett resultat av att det ses som en rättighet snarare än ett privilegium att driva skolor och att beröva någon en rättighet är ingen enkel juridisk process. Eftersom detta synsätt förefaller djupt förankrat så lär den politiska indignationen över olämpliga huvudmän fortsätta att tävla med den politiska oviljan att göra något åt problemet.

I Sverige år 2019 låter vi friskolekoncerner med undermålig verksamhet få plocka ut skyhöga vinster — vinster som den svenska staten gladeligen låter dessa koncerner ta av vår skattefinansierade skolpeng. Dessa smarta välfärdsplundrare har överlag en högre lönsamhet än näringslivet i sin helhet, men när man väl plundrat färdigt lämnar man över problemen och eleverna till den förkättrade offentliga sektorn.

Många är med rätta upprörda och de som är kritiska till privatisering av vård och skola har haft gyllene tillfällen att tydligt och klart tala om att man nu vill se till att undanröja möjligheterna för vinstdrivande bolag att verka inom vård, omsorg och skola.

Men så har inte skett.

Istället har det kommit en jämn ström av krav på ökad kontroll, tuffare granskning och inspektioner. När nu privatiseringsvåtdrömmen visar sig vara en mardröm så tror man att just det som man ville bli av med — regelverk och ‘byråkratisk’ tillsyn och kontroll — skulle vara lösningen.

Ett flertal undersökningar har på senare år visat att det system vi har i Sverige med vinstdrivande skolor leder till att våra skolor blir allt mindre likvärdiga — och att detta i sin tur bidrar till allt sämre resultat. Ska vi råda bot på detta måste vi ha ett skolsystem som inte bygger på ett marknadsmässigt konkurrenstänk där skolor istället för att utbilda främst ägnar sig åt att ragga elever och skolpeng, utan drivs som icke-vinstdrivna verksamheter med kvalitet och ett klart och tydligt samhällsuppdrag och elevernas bästa för ögonen.

Vi vet idag att friskolor driver på olika former av etnisk och social segregation, påfallande ofta har låg lärartäthet och dåliga skolresultat, och i grund och botten sviker resurssvaga elever. Att dessa verksamheter ska premieras med att få plocka ut vinster på våra skattepengar är djupt stötande.

I ett samhälle präglat av jämlikhet, solidaritet och demokrati borde det vara självklart att skattefinansierade skolor inte ska få drivas med vinst, segregation eller religiös indoktrinering som främsta affärsidé!

Historiens dom ska falla hård på ansvariga politiker — Carl Bildt, Göran Persson, Kjell-Olof Feldt och alla andra som i deras fotspår glatt traskat patrull — som hänsynslöst och med berått mod låtit offra den en gång så stolta svenska traditionen av att försöka bygga en jämlik skola för alla!

## Agnes Heller

26 May, 2019 at 11:06 | Posted in Politics & Society | 1 CommentSie hat das Glück in eine Reihenfolge gebracht. Einer der glücklichsten Momente ihres Lebens war es demnach, als sie spät in der Nacht die Lichter Venedigs in ihrem Zugfenster aufleuchten sah, im Jahr 1960. Die Grenzen zwischen dem Osten und dem Westen Europas waren geschlossen, es war ihre erste Italienreise, und ihr Pass wurde bald wieder eingezogen. Als die ungarische Philosophin Ágnes Heller, deren Werk die Aufmerksamkeit für das mögliche Glück durchzieht, diese Episode in ihrem Buch

Eine kurze Geschichte meiner Philosophieaufschrieb, war sie fast achtzig. Jemand hatte sie nach dem glücklichsten Moment gefragt, doch sie bog ab und wählte stattdessen den “fünftglücklichsten”, wie sie schreibt, die Lichter Venedigs.Im Alter von 88 Jahren dann, in ihrem autobiografischen Buch

Der Wert des Zufalls, erzählt sie aber doch noch vom “glücklichsten Augenblick meines Lebens”, der am 16. Januar 1945 kam. Sie war in diesem letzten Kriegswinter 15 Jahre alt, drei Mal war sie als ungarische Jüdin der Deportation und den Erschießungskommandos am Ufer der Donau nur zufällig entkommen, und zuletzt war sie im Ghetto von Budapest dem Verhungern nah, als sie plötzlich einen Soldaten über den Hof kriechen sieht, mit einem roten Stern an der Mütze. Ein Russe! Für das Mädchen bedeutete der Einmarsch der sowjetischen Armee seine zweite Geburt. Ein jüdischer russischer General schloss ihr einen Kartoffelkeller auf und eine Wohnung mit Büchern. Später erfuhr sie, dass wohl am selben Januartag ihr Vater in Auschwitz starb. Von den engen Freunden der Budapester Kindheit, wird sich bald zeigen, ist sie die Einzige, die den Mord an den Juden überlebt.

## Economics education needs a revolution

25 May, 2019 at 17:36 | Posted in Economics | 7 CommentsEconomics has become a rather quaint and highly guarded discipline. We urgently need to update economics education to change this – because economics, as taught in universities, does not reflect or speak to many of the issues of the real world, be they political, environmental or social.

Take the tricky entanglement between politics and economics, which economists tend to try to avoid. Such an attempt is futile. Sidelining politics, history and broader ideas while teaching economics, as most professors do, is like studying the “natural” flows of water in the Netherlands without taking into account that there are people living there who are steering it, building dikes, reclaiming land and channelling the water – and ignoring that they have been doing this for thousands of years already. You can’t study the system while ignoring the people who make it …

Economists speak in numbers only, clinging to statistical data and quantitative models. We do so in the hope of looking objective. But this is counter-productive – “data” cannot tell us everything. Other social sciences such as sociology and anthropology use a broader range of methods, and consequently have a broader perspective on society …

Undergraduate economists all over the world learn theories from textbooks that have barely changed since the 1950s. Those theories are based on individual agents, competing in markets to maximise narrowly defined “economic utility” (for people) or profit (for firms). The principles are taught with the same certainty as Newtonian physics, and are as devoid of value judgements.

This is absurd. Clearly, there are values; mainstream economics values efficiency, markets and growth – and puts individuals over collectives. Yet undergraduates are not taught to recognise, let alone question, these values – and the consequences are serious.

A couple of years ago we could see the author in action in this must-see video:

Nowadays there is almost no place whatsoever in economics education for courses in the history of economic thought and economic methodology. This is deeply worrying. A science that doesn’t self-reflect and asks important methodological and science-theoretical questions about the own activity, is a science in dire straits. How did we end up in this sad state?

Already back in 1991, a commission chaired by Anne Krueger and including people like Kenneth Arrow, Edward Leamer, and Joseph Stiglitz, reported from own experience “that it is an underemphasis on the ‘linkages’ between tools, both theory and econometrics, and ‘real world problems’ that is the weakness of graduate education in economics,” and that both students and faculty sensed “the absence of facts, institutional information, data, real-world issues, applications, and policy problems.” And in conclusion, they wrote that “graduate programs may be turning out a generation with too many idiot savants skilled in technique but innocent of real economic issues.”

Not much is different today. Economics — and economics education — is still in dire need of a remake.

More and more young economics students want to see a real change in economics and the way it’s taught. They want something other than the same old mainstream catechism. They don’t want to be force-fed with useless mainstream theories and models.

## Nothing compares (personal)

25 May, 2019 at 14:58 | Posted in Varia | Leave a comment

Tomorrow is Mother’s Day here in Sweden. This one is in loving memory of my mother Lisbeth, and of Kristina, beloved wife and mother of David and Tora.

Those whom the gods love die young.

But in dreams,

I can hear your name.

And in dreams,

We will meet again.When the seas and mountains fall

And we come to end of days,

In the dark I hear a call

Calling me there

I will go there

And back again.

## Adorno: Jargon der Eigentlichkeit

25 May, 2019 at 12:16 | Posted in Politics & Society | Leave a comment

## 10 Jahre Finanzkrise: Die Party der Banker geht weiter

25 May, 2019 at 10:46 | Posted in Economics | Leave a comment

## Was wollen Europas Rechtspopulisten?

25 May, 2019 at 10:20 | Posted in Politics & Society | 2 Comments

## Expected utility theory

24 May, 2019 at 15:26 | Posted in Economics | 2 CommentsAlthough expected utility theory is both theoretically and descriptively inadequate, mainstream economists gladly continue to use it, as though its deficiencies were unknown or unheard of.

Daniel Kahneman writes — in *Thinking, Fast and Slow — *that expected utility theory is seriously flawed since it doesn’t take into consideration the basic fact that people’s choices are influenced by *changes* in their wealth. Where standard microeconomic theory assumes that preferences are stable over time, Kahneman and other behavioural economists have forcefully again and again shown that preferences aren’t fixed, but vary with different reference points. How can a theory that doesn’t allow for people having different reference points from which they consider their options have an almost axiomatic status within economic theory?

The mystery is how a conception of the utility of outcomes that is vulnerable to such obvious counterexamples survived for so long. I can explain it only by a weakness of the scholarly mind … I call it theory-induced blindness: once you have accepted a theory and used it as a tool in your thinking it is extraordinarily difficult to notice its flaws … You give the theory the benefit of the doubt, trusting the community of experts who have accepted it … But they did not pursue the idea to the point of saying, “This theory is seriously wrong because it ignores the fact that utility depends on the history of one’s wealth, not only present wealth.”

On a more economic-theoretical level, information theory — and especially the so called ‘Kelly criterion’ — also highlights the problems concerning the neoclassical theory of expected utility.

Suppose I want to play a game. Let’s say we are tossing a coin. If heads comes up, I win a dollar, and if tails comes up, I lose a dollar. Suppose further that I believe I know that the coin is asymmetrical and that the probability of getting heads (**p**) is greater than 50% – say 60% (0.6) – while the bookmaker assumes that the coin is totally symmetric. How much of my bankroll (T) should I optimally invest in this game?

A strict neoclassical utility-maximizing economist would suggest that my goal should be to maximize the expected value of my bankroll (wealth), and according to this view, I ought to bet my entire bankroll.

Does that sound rational? Most people would answer no to that question. The risk of losing is so high, that I already after few games played — the expected time until my first loss arises is 1/(1-p), which in this case is equal to 2.5 — with a high likelihood would be losing and thereby become bankrupt. The expected-value maximizing economist does not seem to have a particularly attractive approach.

So what’s the alternative? One possibility is to apply the so-called Kelly criterion — after the American physicist and information theorist John L. Kelly, who in the article *A New Interpretation of Information Rate* (1956) suggested this criterion for how to optimize the size of the bet — under which the optimum is to invest a specific fraction (**x**) of wealth (**T**) in each game. How do we arrive at this fraction?

When I win, I have (1 + x) times as much as before, and when I lose (1 – x) times as much. After** n** rounds, when I have won **v** times and lost **n – v** times, my new bankroll (**W**) is

(1) W = (1 + x)^{v}(1 – x)^{n – v }T

(A technical note: The bets used in these calculations are of the “quotient form” (Q), where you typically keep your bet money until the game is over, and* a fortiori*, in the win/lose expression it’s not included that you get back what you bet when you win. If you prefer to think of odds calculations in the “decimal form” (D), where the bet money typically is considered lost when the game starts, you have to transform the calculations according to Q = D – 1.)

The bankroll increases multiplicatively — “compound interest” — and the long-term average growth rate for my wealth can then be easily calculated by taking the logarithms of (1), which gives

(2) log (W/ T) = v log (1 + x) + (n – v) log (1 – x).

If we divide both sides by n we get

(3) [log (W / T)] / n = [v log (1 + x) + (n – v) log (1 – x)] / n

The left hand side now represents the *average* growth rate (**g**) in each game. On the right-hand side the ratio v/n is equal to the percentage of bets that I won, and when n is large, this fraction will be close to p. Similarly, (n – v)/n is close to (1 – p). When the number of bets is large, the average growth rate is

(4) g = p log (1 + x) + (1 – p) log (1 – x).

Now we can easily determine the value of x that maximizes g:

(5) d [p log (1 + x) + (1 – p) log (1 – x)]/d x = p/(1 + x) – (1 – p)/(1 – x) =>

p/(1 + x) – (1 – p)/(1 – x) = 0 =>

(6) x = p – (1 – p)

Since p is the probability that I will win, and (1 – p) is the probability that I will lose, the Kelly strategy says that to optimize the growth rate of your bankroll (wealth) you should invest a fraction of the bankroll equal to the difference of the likelihood that you will win or lose. In our example, this means that I have in each game to bet the fraction of x = 0.6 – (1 – 0.6) ≈ 0.2 — that is, 20% of my bankroll. Alternatively, we see that the Kelly criterion implies that we have to choose x so that E[log(1+x)] — which equals p log (1 + x) + (1 – p) log (1 – x) — is maximized. Plotting E[log(1+x)] as a function of x we see that the value maximizing the function is 0.2:

The optimal average growth rate becomes

(7) 0.6 log (1.2) + 0.4 log (0.8) ≈ 0.02.

If I bet 20% of my wealth in tossing the coin, I will after 10 games on average have 1.02^{10 }times more than when I started (≈ 1.22).

This game strategy will give us an outcome in the long run that is better than if we use a strategy building on the neoclassical economic theory of choice under uncertainty (risk) – expected value maximization. If we bet all our wealth in each game we will most likely lose our fortune, but because with low probability we will have a very large fortune, the expected value is still high. For a real-life player – for whom there is very little to benefit from this type of ensemble-average – it is more relevant to look at time-average of what he may be expected to win (in our game the averages are the same only if we assume that the player has a logarithmic utility function). What good does it do me if my tossing the coin maximizes an expected value when I might have gone bankrupt after four games played? If I try to maximize the expected value, the probability of bankruptcy soon gets close to one. Better then to invest 20% of my wealth in each game and maximize my long-term average wealth growth!

When applied to the neoclassical theory of expected utility, one thinks in terms of “parallel universe” and asks what is the expected return of an investment, calculated as an average over the “parallel universe”? In our coin toss example, it is as if one supposes that various “I” are tossing a coin and that the loss of many of them will be offset by the huge profits one of these “I” does. But this ensemble-average does not work for an individual, for whom a time-average better reflects the experience made in the “non-parallel universe” in which we live.

The Kelly criterion gives a more realistic answer, where one thinks in terms of the only universe we actually live in, and ask what is the expected return of an investment, calculated as an average over time.

Since we cannot go back in time — entropy and the “arrow of time ” make this impossible — and the bankruptcy option is always at hand (extreme events and “black swans” are always possible) we have nothing to gain from thinking in terms of ensembles and “parallel universe.”

Actual events follow a fixed pattern of time, where events are often linked in a multiplicative process (as e. g. investment returns with “compound interest”) which is basically non-ergodic.

Instead of arbitrarily assuming that people have a certain type of utility function – as in the neoclassical theory – the Kelly criterion shows that we can obtain a less arbitrary and more accurate picture of real people’s decisions and actions by basically assuming that time is irreversible. When the bankroll is gone, it’s gone. The fact that in a parallel universe it could conceivably have been refilled, are of little comfort to those who live in the one and only possible world that we call the real world.

Our coin toss example can be applied to more traditional economic issues. If we think of an investor, we can basically describe his situation in terms of our coin toss. What fraction (**x**) of his assets (**T**) should an investor – who is about to make a large number of repeated investments – bet on his feeling that he can better evaluate an investment (p = 0.6) than the market (p = 0.5)? The greater the x, the greater is the leverage. But also – the greater is the risk. Since p is the probability that his investment valuation is correct and (1 – p) is the probability that the market’s valuation is correct, it means the Kelly criterion says he optimizes the rate of growth on his investments by investing a fraction of his assets that is equal to the difference in the probability that he will “win” or “lose.” In our example this means that he at each investment opportunity is to invest the fraction of x = 0.6 – (1 – 0.6), i.e. about 20% of his assets. The optimal average growth rate of investment is then about 2 % (0.6 log (1.2) + 0.4 log (0.8)).

Kelly’s criterion shows that because we cannot go back in time, we should not take excessive risks. High leverage increases the risk of bankruptcy. This should also be a warning for the financial world, where the constant quest for greater and greater leverage — and risks – creates extensive and recurrent systemic crises. A more appropriate level of risk-taking is a necessary ingredient in a policy to come to curb excessive risk-taking .

The works of people like Kelly and Kahneman show that expected utility theory is indeed transmogrifying truth.

## Randomization and experimental design in the social sciences

22 May, 2019 at 18:59 | Posted in Economics | Leave a comment Thad Dunning’s book *Natural Experiments in the Social Sciences* is a very useful guide for social scientists interested in research methodology in general and natural experiments in specific. Dunning argues that since random or as-if random assignment in natural experiments obviates the need for controlling potential confounders, this kind of “simple and transparent” design-based research method is preferable to more traditional multivariate regression analysis where the controlling only comes in* ex post* via statistical modelling.

But — there is always a but …

The point of making a randomized experiment is often said to be that it ‘ensures’ that any correlation between a supposed cause and effect indicates a causal relation. This is believed to hold since randomization (allegedly) ensures that a supposed causal variable does not correlate with other variables that may influence the effect.

The problem with that simplistic view on randomization is that the claims made are exaggerated and sometimes even false:

• Even if you manage to do the assignment to treatment and control groups ideally random, the sample selection certainly is — except in extremely rare cases — not random. Even if we make a proper randomized assignment, if we apply the results to a biased sample, there is always the risk that the experimental findings will not apply. What works ‘there,’ does not work ‘here.’ Randomization hence does not ‘guarantee ‘ or ‘ensure’ making the right causal claim. Although randomization may help us rule out certain possible causal claims, randomization *per se* does not *guarantee* anything!

• Even if both sampling and assignment are made in an ideal random way, performing standard randomized experiments only give you averages. The problem here is that although we may get an estimate of the ‘true’ average causal effect, this may ‘mask’ important heterogeneous effects of a causal nature. Although we get the right answer of the average causal effect being 0, those who are ‘treated’ may have causal effects equal to -100 and those ‘not treated’ may have causal effects equal to 100. Contemplating being treated or not, most people would probably be interested in knowing about this underlying heterogeneity and would not consider the average effect particularly enlightening.

• There is almost always a trade-off between bias and precision. In real-world settings, a little bias often does not overtrump greater precision. And — most importantly — in case we have a population with sizeable heterogeneity, the average treatment effect of the sample may differ substantially from the average treatment effect in the population. If so, the value of any extrapolating inferences made from trial samples to other populations is highly questionable.

• Since most real-world experiments and trials build on performing a single randomization, what *would* happen *if* you kept on randomizing forever, does not help you to ‘ensure’ or ‘guarantee’ that you do not make false causal conclusions in the one particular randomized experiment you actually do perform. It is indeed difficult to see why thinking about what you know you will never do, would make you happy about what you actually do.

• And then there is also the problem that ‘Nature’ may not always supply us with the random experiments we are most interested in. If we are interested in X, why should we study Y only because design dictates that? Method should never be prioritized over substance!

Randomization is not a panacea. It is not the best method for all questions and circumstances. Proponents of randomization make claims about its ability to deliver causal knowledge that are simply wrong. There are good reasons to be sceptical of the now popular — and ill-informed — view that randomization is the only valid and the best method on the market. It is not.

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