Author Archives: Hal Finney

The Future of Oil Prices

One of the topics which I have been following for the past couple of years is “Peak Oil”, the theory that global oil production will soon peak, imposing vast changes on the social and political world order. I find it a great test case for the issues we have been discussing here. The issue brings widespread disagreement, and it’s one where knowing the truth is of great importance even for the average person.

A good starting point to get a handle on the situation is to look at what commodities traders call a “futures strip” for oil prices. Here’s a chart I created showing the prices of oil futures contracts from January 2007 through December 2012 as of the close of trading yesterday:

Oil_20061222


The obvious message of this chart in terms of future oil prices is that they are expected to be relatively stable. The whole next six years stay within the range of $60-$70 per barrel. This is unlikely to be consistent with a significant oil shortage in that time frame. The markets seem to be telling us that Peak Oil is not a near-term concern.

GD Star Rating
loading...
Tagged as:

Modesty in a Disagreeable World

An interesting paradox arise if one tries to apply Aumann’s theorem in a world of widespread disagreement. The problem is especially apparent in considering the stronger principle which Eliezer calls the Modesty Argument, which claims not only that rational, mutually-respecting people should not agree to disagree, but that in general one should be agreeable and allow oneself to be easily persuaded in any argument.

I’ll introduce it with one of my favorite jokes:

This is a story about advice, and any story about advice becomes a story about a village rabbi. Two men came to see the rabbi of their village.

The first one said, "Rabbi, I have a pear tree in my yard. My father planted it, I keep it watered and don’t let the chickens peck on its roots. One of its branches hangs over my neighbor’s wall. So what do I see yesterday but my neighbor standing there eating one of my pears. This is theft, and I want him to pay me damages."

The rabbi nodded his head. "You’re right, you’re right."

The other neighbor said, "Rabbi, you know that I have seven children–without my garden to feed them, how would I manage? But that tree casts a shadow where nothing will grow. So yesterday, when I go out to dig some potatoes, a pear from his tree falls and hits me right on the head. How am I hurting my neighbor if I eat it? And doesn’t he owe me something for his tree’s blocking sunlight?

The rabbi thought and then said, "You’re right, you’re right."

Meanwhile, the rabbi’s wife had been hearing all this. "How can you say, ‘You’re right’ to both of these men? Surely one of the men is right, and the other is wrong!"

The rabbi looked unhappy. "You’re right, you’re right."

Continue reading "Modesty in a Disagreeable World" »

GD Star Rating
loading...
Tagged as:

Finding the Truth in Controversies

One of the problems that interests me is how best to learn the truth in controversial matters. There seem to be several approaches that different people use, but which I see as problematic.

One is to simply go along with what your peers believe. This provides obvious social benefits but for people here who are interested in "overcoming bias" it requires some justification. One can in fact make a case that the majority view is often right based on the Wisdom of Crowds. However there are also many situations in which the majority view is clearly incorrect. And given that we are talking about controversial issues, the populace is often split somewhat evenly on the matter, so the force of the follow-the-crowd argument is reduced.

Another is to try to study the issue and become familiar with the arguments pro and con in some depth, and then to use your own judgment to determine the truth – basically, thinking for yourself. I know many very smart people who do this. However there is often considerable variance in the results of this process, and I have observed that the outcome is often predictable just from the known biases of the individual, such as his ideological orientation.

Oversimplifying, I’d say that ordinary people use the first method, and smart people use the second method, but neither strikes me as very reliable on topics of controversy.

Continue reading "Finding the Truth in Controversies" »

GD Star Rating
loading...
Tagged as: , ,

Bias in Christmas Shopping

Just in time for the holidays I saw this article in yesterday’s Los Angeles Times (strangely, on the op-ed page): Shopping for Person X. "A study proves it: People are worse at buying gifts for their partners than strangers." They are referring to this article from the Journal of Consumer Research: Why It Is So Hard to Predict Our Partner’s Product Preferences: The Effect of Target Familiarity on Prediction Accuracy. According to the Times:

In a series of experiments, marketing scholars in the Netherlands and Belgium showed images of bedroom furniture to couples who had been together for at least six months. Separately, each subject was asked to choose the styles he or she liked best. Then half were asked to predict what their partners would prefer, while the other half was given information about the preferences of a stranger, called "Person X," and asked to choose styles for them based on those preferences.

As it turned out, members of the second group were much better at guessing what furniture Person X would choose than the first group was at guessing on behalf of their partners. Oops. And unbeknownst to those in the second group, their Persons X were their partners.

All of this suggested to the researchers that the more information you may have in your brain about someone, the less you may be able (or likely) to tease out their likes and dislikes. That may be a result of couples having more important things to talk about than bedroom furniture, but sometimes, the study found, it’s because we impose our own preferences on our partners, something we don’t do to mere strangers.

So if you’re having trouble coming up with that perfect gift for your Significant Other, maybe the secret is to forget how much you know about them. Try thinking of them as a stranger, and consider their likes and dislikes in abstract terms. Choose a gift on that basis and you are more likely to come up with something that they will really like, rather than something that your image of them would like.

GD Star Rating
loading...
Tagged as: ,

Ignorance of Frankenfoods

I was reading yesterday about a Pew study on attitudes towards genetically modified foods. Americans are largely against this technology, with 46% opposing its use compared to 27% in favor. The interesting part was that respondents are not well informed about the fact that they are already eating GMFs. According to the press release, 26% believe they have eaten GMFs and 60% believe they have not. However, according to this Los Angeles Times article about the report, genetically modified foods are widespread in the American diet. "Today, 89% of soybeans, 83% of cotton and 61% of corn" are genetically modified to resist pests or tolerate weedkillers.

Given that people are afraid of this technology, it’s surprising that they are so wrong about how much they are being exposed to it. I would speculate that people think that these foods are harmful, and the fact that they don’t ever hear about anyone being harmed means that they assume that no one is being exposed to them. If GMFs actually were harmful and were in widespread use, people would be aware of problems. It’s interesting that the absence of such reports is apparently taken to indicate low levels of use rather than a reduction in judgments of harmfulness.

This fits into the article I mentioned last week about inaccurate perceptions of risk. Maybe our lives today are so safe that there’s no real harm in misjudging risk. It might be that other factors such as social signaling are more important.

GD Star Rating
loading...
Tagged as:

We Are Smarter Than Me

I ran across a note today about a new collaborative book project called We Are Smarter Than Me, where over 900 participants are collectively writing a new business book using a wiki. The WSJ writes: "The effort is inspired, in part, by the best-known wiki-produced work — Wikipedia, a not-for-profit online encyclopedia. Despite occasional hiccups, Wikipedia is increasingly regarded as a reliable source for information, aided by community-enforced rules that it can’t contain either personal points of view or original research… The wiki book… will explore how businesses can use online communities, consumer-generated media such as blogs, and other Web content to help in their marketing, pricing, research and service."

It’s big news in the publishing world largely because the contributors are unpaid (gasp!). But the more interesting question to me is whether the wiki infrastructure will work for this kind of project. As I discussed a few days ago with regard to James Surowiecki’s book, exploiting "the wisdom of crowds" seems to depend crucially on the mechanisms and institutions exploited to gather and organize the collective wisdom.

One problem he notes in juries and other committee discussions is that certain people tend to dominate – generally, simply by talking more. People who talk more are seen as more authoritative by other group members. In the wiki environment, we might expect certain people to write more, to edit more, and just generally participate more. These will not necessarily be the ones with the most to contribute. There needs to be a mechanism by which everyone is motivated to participate and to speak up when they disagree about a direction that the discussion is taken, otherwise they may fall into the groupthink trap where many people privately disagree but each assumes he is in the minority.

I would suggest that they enhance the wiki with some kind of voting mechanism whereby the larger group can approve or reject chapters. Perhaps contributors could be encouraged to produce a few different versions and the group could vote to choose between them. Voting is a good mechanism to collect opinions from everyone and guard against dominance by a vocal minority. Ideally they could find a way to combine voting with the free-wheeling wiki environment and hope to gain the benefits of both.

GD Star Rating
loading...
Tagged as:

Agreeing to Agree

It’s been mentioned a few times already, but I want to draw attention to what is IMO probably the most interesting, surprising and challenging result in the field of human bias: that mutually respectful, honest and rational debaters cannot disagree on any factual matter once they know each other’s opinions. They cannot "agree to disagree", they can only agree to agree.

This result goes back to Nobel Prize winner Robert Aumann in the 1970s: Agreeing to Disagree. Unfortunately Aumann’s proof is quite static and formal, building on a possible-world semantics formalism so powerful that Aumann apologizes: "We publish this note with some diffidence, since once one has the appropriate framework, it is mathematically trivial." It’s ironic that a result so counter-intuitive and controversial can be described in such terms. This combination of elegance and parsimony of proof combined with the totally unexpected nature of the result is part of what makes this area so fascinating to me.

Continue reading "Agreeing to Agree" »

GD Star Rating
loading...
Tagged as: , , ,

Time on Risk

At the supermarket last week I picked up a copy of Time magazine for its cover story: Why We Worry About the Wrong Things, The Psychology of Risk, by Jeffrey Kluger. It’s an engaging but typically superficial article describing how people pay attention to certain potential risks while ignoring many more serious threats to their longevity and well-being. Describing our worries over hypothetical risks such as bird flu, mad cow, Muslim Imams, and contaminated lettuce, Kluger comments, "At the same time, 20% of all adults still smoke; nearly 20% of drivers and more than 30% of backseat passengers don’t use seat belts; two-thirds of us are overweight or obese." These are far more real risks that we have real control over, compared to the many threats that get public attention.

Continue reading "Time on Risk" »

GD Star Rating
loading...
Tagged as:

The Wisdom of Crowds

James Surowiecki’s 2004 book The Wisdom of Crowds offers a somewhat contrarian view of what is typically seen as a widespread bias: the human tendency to follow the crowd and go along with what the majority says is true. Surowiecki argues that in many cases, this is actually a reasonable thing to do, as crowds and groups are often much smarter and more accurate than even their smartest members.

Continue reading "The Wisdom of Crowds" »

GD Star Rating
loading...
Tagged as: , ,

Future Selves

Via the Freakonomics blog I found this pointer to an article in today’s New York Times: The New, Soft Paternalism by Jim Holt.

It relates to one of the most curious of human failures, our inability to successfully act in our own self-perceived best interest. Now, it’s not clear that this is actually a case of bias in the sense of inability to see the truth. It may be the case that we often take actions we know we will regret, and fully and correctly predict our attitudes and responses throughout the time in which we will experience the consequences of our actions. Yet we find that as we move from one time period to the next, we perceive that the actions that we have taken were not in our self-interest.

The Times article discusses various measures which have arisen to try to help people guard against falling into this error, along with skeptics who question whether it is an error at all. One example is a system where compulsive gamblers can voluntarily put themselves on a list to be excluded from casinos. More commonplace examples include throwing out all the cigarettes in the house, or buying only small containers of ice cream when you know you’ll eat the whole thing.

Robin pointed a few years ago to a paper by Caplin and Leahy which discussed some similar issues: The Social Discount Rate (pdf). They argued that inconsistent time preferences were a dominant feature of human psychology and suggested that social welfare could be improved via institutions to encourage (or coerce) a longer-term perspective in human action. Caplin and Leahy want to overthrow the "dictatorship of the present" and give future selves a greater say in decisions which will affect their welfare.

I am not convinced about these issues; it’s confusing to consider one’s future self as a different person. And there is also the problem of uncertainty, in that I don’t know what his circumstances will be or if he will even be alive. I think this does justify a certain amount of discounting of his preferences over those of the present self, but probably not as much as is commonly done.

GD Star Rating
loading...
Tagged as: