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obamawikipedia

Efficiency vs. Robustness in the Private and Public Sectors

Way back, many years ago in college, I attended a local nerd event Penguicon, a sci-fi/Linux/gaming mash-up convention*. By far the most interesting speaker was the science guest of honor, Jack Cohen, a British complex systems Biologist who has done a lot of consulting work with science-fiction and fantasy authors (e.g. The Science of Discworld). In one of Cohen’s talks, he recalled a time when a journalist called him and asked him to explain two seemingly unrelated events: an outbreak of infections from bad milk and a recent railway collision. He was puzzled at first but then responded, “Efficiency is the opposite of robustness.” This idea is probably not so novel to most people reading this blog, but to young me it sounded very profound, and I often think back to Cohen’s phrasing of the trade-offs between the two.

For example, this morning I read two articles from the Economist about the financial crisis and its fall-out: “All you need is cash” and “To spend or not to spend”. The first story reanalyzes pre-crisis debates on the importance of leverage, and critiques of overly-thrifty corporations which kept large reserves of cash on hand:

Ever since the 1980s the fashion had been to make companies as lean as possible, outsourcing all but your core competencies, expanding your just-in-time supplier system around the globe, loading up with debt to “leverage” your balance-sheet. Old-style defensive conglomerates, such as Arnold Weinstock’s General Electric Company, were dismantled. Companies that hoarded cash—even ones as good as Toyota and Microsoft—were viewed with suspicion.

The financial crisis, and particularly the sudden disappearance of liquidity in the commercial paper market, led to a lot of rethinking about the importance of cash-on-hand. In general though, the problem has the form of an efficiency vs. robustness trade-off. High leverage ratios make sense in normal times, and until something goes wrong will produce higher returns. But that seemingly efficient distribution of resources is not robust to shocks of any size. And when everyone is similarly leveraged, small shocks become large ones.

At the other end of the economy, “To spend or not to spend” argues that the US federal government needs to start spending like mad. Wouldn’t it be nice if the government had some sort of reserve of money, saved up from good times? But in good times, saving was seen as inefficient – it would have dampened growth. Consumers and the government spent, spent, spent. Now we think if only we’d tamped down that rampant spending, and not propped up the markets with a housing bubble to replace a dot.com bubble, this crisis could have been averted. Classic Keynesianism sounds pretty good right now, even if it sounds like a fire alarm.

Ok, that didn’t tie together quite as neatly as I might have liked. So it goes. Here’s the provocative close though: Following Cohen, does an “efficient market hypothesis” have a “fragile market corollary”?

* King Jeremy, I have my eyes on your crown. Give me a decade or two, and tenure, and I’ll find a way to top your spectacularly successful academic infocom masterpiece.

Proposed Rule For Writing

You rarely need to hedge twice in the same sentence.
Thoughts?

When Life Feels Like a Borges Story

This post has nothing to do with Sociology, but everything to do with my favorite author – J.L. Borges. Borges is sort of the best, and this best-ness has been recognized by Sociological authors as diverse as Goffman (in a footnote in Frame Analysis), Foucault (in the motivation for the Order of Things) and Hirschman* as well as others on the outside.

Today’s Borgesian moment comes from the NYTimes book review section, by way of Ammon Shea, who is perhaps one of the coolest people I’ve ever read about. Shea decided to read the entire O.E.D. end to end, skipping nothing, and write a book about it. Here’s a bit of the review:

Book Review – ‘Reading the OED,’ by Ammon Shea – Review – NYTimes.com:

And the lovely-ugly words, words that Shea didn’t know existed, leap up to his hand. Acnestis – the part of an animal’s back that the animal can’t reach to scratch. And bespawl – to splatter with saliva. In Chapter D, Shea encounters deipnophobia, the fear of dinner parties; Chapter K brings kankedort, an awkward situation.

Months in, Shea arrives – back-aching, crabby, page-blind – at Chapter N. “Some days I feel as if I do not actually speak the English language,” he writes, his verbal cortex overflowing. “It is,” he observes, “like trying to remember all the trees one sees through the window of a train.” Once he stares for a while, amazed, at the word glove. “I find myself wondering why I’ve never seen this odd term that describes such a common article of clothing.”

By Chapter O there is evidence of further disintegration. Is he turning into, he wonders, one of the “Library People”? The bag-toters and mutterers who spend all their time there? “Sometimes I get angry at the dictionary and let loose with a muffled yell.” At night he hears a deep, disembodied voice slowly intoning definitions.

“A deep disembodied voice slowly intoning definition” sounds like a situation/character straight out of Borges’ central casting, so to speak. I also love the way in which the familiar can be seemingly strange, and also the idea of finding more and more specific words for things. It’s like an inductive version of the analytical language of John Wilkins.

I especially love that Shea is not trying particularly to get much out of reading the OED – he’s not trying to become a better poet or writer of fictions, but rather “He just wants to identify and savor, for their own sweet sakes, malocclusive Greek and Latin hybrids that are difficult to figure out how to pronounce. He is fond of polysyllabic near-homonyms — words like incompetible (outside the range of competency) and repertitious (found accidentally), which are quickly swallowed up in the sonic gravitation of familiar words.”

*See what I did there? I actually did cite Borges in at least two papers, both times citing “Of Exactitude in Science”, a short story that deserves more acclaim in academia, I think. Umberto Eco wrote a 20 page essay just trying to explain, understand and carry through with this one paragraph story.

On Money, Shame and Class

“Money is the alienated essence of man’s work and existence; the essence dominates him and he worships it.” – Marx

For the past year, I have worked as a math tutor to pay (some of) the bill. I worked with high school students, undergraduates (mostly calc 1 and 2), and graduate students (mostly in intro stats classes). One interesting thing I noticed this year was the variability in how people preferred to pay and, more interestingly, the affect associated with that act. For example, some students preferred to give a check each time, and had pre-filled out the check with the amounts and such before meeting. Others paid in crumpled up bills kept in a separate pocket during the tutoring session. With a larger sample, I would love to see what the correlates are, but I have a guess already: class plays a big role.

Let me explain with a key example. One of the students I worked with was a sophomore in high school in an advanced algebra class. For convenience, we met at the student’s house, and the student’s parents were often present for at least some of the time. The parents always paid in cash, but nine times out of ten they put the cash in an envelope, sealed the envelope and put my name on it. Once or twice they put the money in the envelope in my presence, having forgotten to do so earlier. Why? I’m not in any way certain, but I feel like the family’s background (they live in a nice part of town, have three cars, both parents have at least college degrees and work professional jobs with a lot of time flexibility for raising children, etc.) might play a role. There’s something dirty about handing cash to someone for providing a service, especially a sort of professional service (math tutoring) by a professional (in training anyway). So, in order to someone shroud this transaction, the parents put the money in a sealed envelope.

It’s possible that they simply do not want their child to know how much tutoring costs. This explanation seems unlikely to me, but not impossible. Still, that would not really undermine my proto-theory as much as complicate it.

That’s all I’ve got. Back to reading Complex Organizations: A Critical Essay by Charles Perrow.