Maggie's Farm

Just as professional journals and newspapers are more interested in printing pieces that support hypotheses rather than papers with negative findings, so we all tend to spend more time discussing the risks of action rather than the risks of inaction.

That seems to be human nature, but it ain't rational and, fortunately, people vary across a spectrum of activity/passivity.

Passive people worry about the risks of action. Active people worry about the risks of inaction. I am more-or-less in the middle.

To discuss that half-intelligently, though, I first need to review the notion of Type 1 and Type 2 errors, now that we have taken a look at the null hypothesis a couple of days ago. 

A Type 1 error, also known as False Positive, is the error of erroneously rejecting the null hypothesis. In other words, it supports a connection which does not really exist.

A Type 2 error, or False Negative, is the error of wrongly accepting the null hypothesis. In other words, it says nothing is there, when it is, in fact, there.

For example, a blood test which has a 10% False Positive rate will wrongly tell you that there is an abnormality 10% of the time. A blood test with a 10% False Negative rate will miss an abnormality 10% of the time.

For another example, convicting an innocent person is a Type 1 error; letting a guilty person go free is a Type 2.

Depending on the matter at hand, either sort of error could have worse consequences. A Type 1 error in a death penalty case is a grievous error. But sometimes you need Type 1 errors.

My favorite example of a good Type 1 error is in the emergency treatment of appendicitis. Since medical diagnosis contains both art and luck as well as science, some error rate is inevitable unless you have the diseased organ in hand. But since a False Negative diagnosis would have dire consequences (ruptured appendix), it is necessary to do some unnecessary appendectomies on patients who might have appendicitis, but do not turn out to. In the case of emergency appendectomies: one study indicates that the Type 1 error rate is around 10%, with 18% False negatives. I would have guessed that the False Positives would be higher, and you could argue that there is room for them to go higher. The point is that, with appendicitis, you want to minimize your False Negatives by having more False Positive diagnoses - by being deliberately biased against the Null Hypothesis that there is nothing there, but without cutting open everyone with a bad stomach ache.

Thus that is the opposite of what you want in a justice system, where the null hypothesis of innocence is presumed in order to minimize False Positives.

Part 3 of this mini-series will be ready by Monday or Tuesday. All of the reader interest is much appreciated. If this is too elementary, my apologies, but it helps me to go back to the basics sometimes.

From Wiki:

The conjunction fallacy is a logical fallacy that occurs when it is assumed that specific conditions are more probable than a single general one.

The most oft-cited example of this fallacy originated with Amos Tversky and Daniel Kahneman ^[1]:

Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations.

Which is more probable?

1. Linda is a bank teller.
2. Linda is a bank teller and is active in the feminist movement.

85% of those asked chose option 2 ^[2]. However, mathematically, the probability of two events occurring together (in "conjunction") will always be less than or equal to the probability of either one occurring alone.

Thus is the brain seduced by detail. All writers know this fact. Which works best: "Dick wore a hat." or "Dick wore a green felt hat with a pheasant-feather hatband."

One of my favorite sites to visit, Overcoming Bias, wonderfully discusses When not to use probabilities. He says:

The laws of probability are laws, not suggestions, but often the true Law is too difficult for us humans to compute.  If P != NP and the universe has no source of exponential computing power, then there are evidential updates too difficult for even a superintelligence to compute - even though the probabilities would be quite well-defined, if we could afford to calculate them.

So sometimes you don't apply probability theory.  Especially if you're human, and your brain has evolved with all sorts of useful algorithms for uncertain reasoning, that don't involve verbal probability assignments.

Those algorithms are "gut feelings." Often wrong, often accurate. There is one thing that I know for certain: the more time I have to think about how to hit a tennis ball, the more likely I am to blow the shot. He also says:

In general a rationalist tries to make their minds function at the best achievable power output; sometimes this involves talking about verbal probabilities, and sometimes it does not, but always the laws of probability theory govern.

If all you have is a gut feeling of uncertainty, then you should probably stick with those algorithms that make use of gut feelings of uncertainty, because your built-in algorithms may do better than your clumsy attempts to put things into words.

An argument ex silentio claims "You respond with silence, thus I am proven right."

From Wiki: 

"In general, the claim that the absence of something demonstrates the proof of a proposition. An argumentum ex silentio ('argument from silence') is an argument based on the assumption that someone's silence on a matter suggests ('proves' when a logical fallacy) that person's ignorance of the matter or their inability to counterargue validly."

Of course, there are many reasons for silence besides an inability to make a counterpoint, including a simple lack of interest in pursuing a line of discussion or, as I have often found myself doing in debates with Liberals, reverting to silence out of a feeling of futility.

In the blog world, the common expression "crickets chirping" is a cute way of implying an ex silentio argument. Sometimes it's right, sometimes an error.

Augean Stables has a pretty good example of this fallacy in a debate he is engaged in about the al Durah affair.

...in proportion as the evil decreases the denunciation of it increases; and as fast as natural causes are shown to be powerful there grows up the belief that they are powerless.

Herbert Spencer was a giant of his time. His socio-political "law" is discussed at Cafe Hayek.

You have the best, most modern, and most widely available medical care in the world? But it's terrible - because some few fall through the cracks! You have terrible storms, with wind and rain? Surely governments or the UN can fix that!

Spencer's Law surely applies to many areas of life today.

The technical definitions of solipcism and sophistry tend to elude my memory. I study them, and a month later they slip away. "Sophistry" is of course often used as a general insult towards arguments with which one might disagree, but that usage degrades the meaning.

AVI did my work for me today, on sophistry. His handy practical definition: "Sophistry is a phrase so neat you can't see the loose end that would unravel it. It's flawless, but wrong."  Sleight-of-mind.

One of the examples he offers is:

You cannot simultaneously prevent and prepare for war.

Hmm, wait a minute - why can't you do both? I'll offer this one:

If the glove don't fit, you must acquit.

Wait a minute - a glove gets to make the decision?

One more:

Heard from a New Zealand interviewer last week re global warming:
"It's very important for New Zealanders to try to help, even if it doesn't make a difference."

It is? Futility is an essential part of the Kiwi national character?

Thus sophistry is designed to defeat thought, not to provoke thought. Such assertions are designed to ward off that "Hey, wait a minute, does that make sense?" reaction. Always check the premises before discussion, even if they sound OK. Or especially if they sound OK.

You can read AVI's piece here.

From the Wiki entry:

"Anchoring or focalism is a cognitive bias that describes the common human tendency to rely too heavily, or "anchor," on one trait or piece of information when making decisions."

The notion of Anchoring Bias comes from Cognitive Psychology, not from Logic.

I suppose it could be a fancy way of saying that sometimes we cannot see the forest for a single tree, and are thus "prevented" from considering all of the relevant facts or options.

This sort of cognitive bias typically operates, as do most biases, unconsciously or reflexively, as a gravitational pull towards some decision or reaction.

A true example (but not an unconscious one, from the Mrs., on considering what new car to buy): "It just has to be the right shade of maroon."

Another example, reported to me by a pediatrician friend: "I ordered a brain MRI ($800) for a 10 year-old kid with tension headaches.  Totally unnecessary, and I realized afterwards that I did it because I had read a journal article over the weekend about an undiagnosed brain tumor in a 10 year-old."

Thus, like most fallacies and biases, it's part of the brain's effort to be efficient or persuasive in its heuristics by tossing out an anchor on one detail (ouch - that's bad writing), and often might, but doesn't always, lead to the most realistic choices.

As we learn more about how our brains make decisions outside of our awareness, being aware of, and being able to monitor, the shortcuts our brains take should serve us well.

I could not resist this free association, having recently learned that "Anchors Aweigh" was written in 1906 to be a swinging football song (which it is):

We rarely miss an excuse to discuss this law of nature. From a piece by Rob Norton at the Library of Economics and Liberty, which begins:

The law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or "unintended." Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.

The concept of unintended consequences is one of the building blocks of economics. Adam Smith's "invisible hand," the most famous metaphor in social science, is an example of a positive unintended consequence. Smith maintained that each individual, seeking only his own gain, "is led by an invisible hand to promote an end which was no part of his intention," that end being the public interest. "It is not from the benevolence of the butcher, or the baker, that we expect our dinner," Smith wrote, "but from regard to their own self interest."

Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 John Locke, the English philosopher and a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. Locke argued that instead of benefiting borrowers, as intended, it would hurt them. People would find ways to circumvent the law, with the costs of circumvention borne by borrowers. To the extent the law was obeyed, Locke concluded, the chief results would be less available credit and a redistribution of income away from "widows, orphans and all those who have their estates in money."

Read the whole thing.

The brilliant one-time lawyer and Warren Buffet partner Charlie Munger (I think the cynical - or should I say skeptical - Munger does the deep thinking, and Buffet is the practical guy) loves Robert Cialdini, who writes about influence and persuasion. Here's Cialdini's The Psychology of Persuasion.

(Also, a lifetime of thought is condensed in Poor Charlie's Almanac: The Wit and Wisdom of Charles T. Munger)

You bought a house two years ago, no money down, with a one-year teaser interest-only rate. You knew what you were doing: you gambled that in a year you might be able to make the second year's payments and, if not, the house would have more equity in it. That equity would belong to you.

Can you really blame the mortgage broker?

Or, maybe, you bought a second house or two to rent out, as an investment a speculation, with that same deal, planning to flip it when the time seemed right.

You had no skin in the game, except for your hope for wild profit - it was all the bank's money. You had nothing to lose.

Now the house is worth less than your buying price, and you can't keep up with this year's payment because you didn't get the promotion you hoped for. Logical (if dishonorable) person that you are, you consider dumping your committment and going back to renting again - or hoping that the taxpayer will somehow rescue your reckless real estate  investment gamble.

Well, not to worry. The Dems want to bail you out. McCain thinks it's nuts, and so do I. Am I a heartless Scrooge? In truth, buying a home mortgage is no different from an LBO, or buying options on margin. Didn't these people ever play Monopoly?

Newspapers and pandering politicians call these unlucky gamblers "homeowners," but they aren't. They own nothing but debt and a contract.

As prices drop, houses are becoming more affordable to credible buyers instead of crazy gamblers. And, in ten years, there will be another housing bubble. You can bank on it.

If your house is an investment, and not a home, sell it then.

Editor's note: There are comparable moral hazards with rescuing the banks. See Fed eyes Nordic-style bank nationalization. I am not convinced that we are at that point. Power-people see every problem as an opportunity for a power and/or money grab. Just label it a "crisis."