Wednesday, September 5, 2018

The Logic of Microstates

The first day of the Kavanaugh confirmation hearing exemplifies the breakdown in civil discourse between Liberals/Democrats and Conservatives/Republicans.  As I say, America is headed for a divorce.  The 2014 Pew report on political polarization demonstrates the expectation of compromise, much less consensus, is unrealistic.  This, however, is not about that.  It's about legalization of Microstate formation as a solution.

The two party system is inherently polarizing.  Multiparty parliamentary systems allow for both  extreme and more moderate visions to find expression in the political process.  Republicans must identify the median of the 50%+ most conservative voters and stake out that platform.  Democrats must do the same on the left.

As the two medians diverge, the party platforms also diverge.  As the distributions skew to the extremes, compromise becomes politically less tenable.  If the movement seen from 2004 to 2014, continues from 2014 to 2024, America will likely pass a point of no return.  The 'divorce' will become unavoidable.

Microstates can ameliorate and, perhaps stop, the trend.  The residents of microstates would come from those least satisfied with the two parties' positions and the resultant body of laws, programs and policies.  By leaving and joining microstates, the remaining body politic will average much closer to the middle and compromise will become easier.

Because of this, when properly explained, Democrats, Republicans and aspiring microstate citizens all should favor legal mechanisms for microstate formation.  The biggest impediment will be both Republican and Democrats who fear that they will lose more constituents to microstates than the other party.

It is not clear that one side would lose more than the other.  The Right is prone to ideological insularity and the Left is prone to Marxist and Ecotopic utopianism.  However, because of this concern, if the political class agrees, they will favor this only incrementally.  However, that is good enough because, once initiated, microstates will gain popularity.  

This reasoning just needs to be disseminated.  I favor that and will work for it because I want to live in a Polymathica microstate...Maybe two.  Dissemination is not unrealistic because there are plenty of groups actively pursuing city states and microstates.  

Later as I continue writing "The Rise of the Microstate" I will discuss the necessary characteristics of the enabling legislation, the details of market based governance and the business development of microstates.

Sunday, August 5, 2018

An Information Age Income Model

Inequality has become a political hot button primarily because a shrinking middle class is leading to a bimodal population with regard to income.  It is important to recognize that, as the middle class shrinks, both the upper class and lower class are growing with the upper class growing about twice as fast.

The most common statistics being quoted revolve around the income and wealth of the upper 1%.  This is, of course, good political rhetoric but poor analysis.  That is why I disregard the 1% here.The more technically supported measurement of income inequality is the GINI index which measures the  deviation of the income distribution from perfectly equal distribution. The generally accepted position is that a high GINI, which indicates greater inequality of income, is intrinsically bad.  There is little or no discussion of fairness or economic justness.  I have extreme difficulty with that. 

Although measurement is difficult, I profess, with later modification, that one's right to consume should be commensurate with the value one adds.  This contrasts from the Marxist philosophy of "From each according to their ability, to each according to their need".  Later, you will see that I mostly, but not completely, disagree with Marx.  

Generally, I believe that if you create 100,000 USD of value added, you should receive 100,000 USD in compensation.  If you only receive 60,000 USD in compensation, the other 40,000 USD doesn't disappear.  If someone else got it normally it would be considered theft.  Corporations use the concept of supply and demand in the labor market to pay people less than their value added.

Ever since Vilfredo Pareto found in 1896 that 80% of the Italian real estate was owned by 20% of the population, this Pareto distribution has been found in many human institutions (80% of the sales come from 20% of the sales force) as well as in nature (80% of peas come from 20% of the pods). While not universal, in society or nature, it may generally be assumed that if 80% goes to 20%, that the game is 'fair' or, to put it another way, the outcome is not the result of outside influence.  Because of this, unless economic inequality exceeds the Pareto distribution, it is most likely the natural result of fair competition, not nefarious manipulations and restraint of opportunity by an elite.  Simply put, inequality in outcome is the natural result of free enterprise, a system which has led to truly enormous improvements in standards of life. 

However, as evidenced by the preponderance of graduated taxes, the "fair", Pareto result is not considered fair in contemporary Western culture.  That is not unreasonable. While free enterprise has proven itself to be extremely efficient, it is also heartless.  It can result, for a portion of society, in a status commonly referred to as ''the working poor".  

Quite reasonably, many people, including me, consider the existence of working poor in the affluent, developed nations to be immoral and a violation of any defensible social contract. Simply put, a community must decide if it feels comfortable with unmodified free enterprise, when it clearly leads to a working poor class.  If not, it will need to modify the result to create a circumstance that it considers fair.

This is quite a bit more difficult than it may seem at first blush.  Attempts at bringing economic fairness to society takes several forms.  Taxes are graduated compared to a straight 'head tax'.  However, there is no well developed theoretical framework with which to determine how the tax should be structured and how graduated it should be.  The government may subsidize basic life expenses up to 100%, as is done with public education over most of the world.  Lastly, minimum wages can be set to assure that working poor are not possible.

This leaves a whole lot of room for differing interpretations and even acrimonious controversy over what constitutes economic fairness.  However, if we set as a goal to assure that all employed people can live with dignity, we may argue over what constitutes 'dignity', at least we have a framework for meaningful discussion.

I will begin with a minimum wage that is sufficient to afford a normal person a dignified, if Spartan, lifestyle.  Any deviation in need that arises due to exigent circumstances, will be handled as an entitlement.  For example, the minimum income may contain $4,000 per year for medical cost.  If a person contracts lymphoma, that treatment will be an entitlement.  One may include government subsidies to assure that the necessities of life will always be available.

Once the minimum income is established, which should include any transfer payments, subsidies and entitlements, it will be possible to establish the percent of total personal income that is guaranteed to all workers and the percent that is available to be apportioned through the processes of free enterprise.  This will allow us to interpret our proposed minimum income and, using economic data and analysis, consider the cost in lower economic growth of our decision.

We can interpret this as a theoretical model for economic efficiency and economic justice that is already completed and can be used as a basis for political discourse.  An employed person's income equals M+P where M is minimum value of productive energy and P is a person's Pareto share determined by free market mechanisms

Let's take an example of 1,000,000 workers earning an average of 50,000USD.  Pareto says that 20% or 200,000 workers will receive 80% or 40 billion USD in income.  That is an average of 200,000 USD.  The other 80% will earn 10 billion USD or an average of 12,500USD.

This is a degree of income inequality even greater than seen today and it would be the norm in a pure Pareto or unregulated competitive economy.

The current situation is somewhat better than Pareto because a minimum value, in the form of a minimum wage, subsidies and entitlements, thankfully, is enforced in most advanced nations which distorts Pareto.  This is evidence that society, while accepting the
benefits of free enterprise, also introduces a degree of compassion and sense of fairness into the system.  The acrimony of contemporary political discourse can be interpreted as a vehement disagreement over the proper value of M & P.

In our example if M=50,000 USD, then P=0 and there will be no collective benefit to society from free enterprise. This has been proven to be wholly impractical and severely damaging to the liberty and economic well being of the body politic.

So, we should consider a more reasonable scenario.  Suppose M=20,000USD.  Then of the 50 billion USD of compensation, 20 billion USD will be earned in M and 30 billion will be distributed according to Pareto.  The upper 20% will receive 20%×20 billion + 80%×30 billion or 28 billion USD/200,000=140,000 average income.  The 80% will earn 80%×20 billion + 20%×30 billion = 22 billion or 27,500 USD each.

One can extend the P as in 80%², 20%² and when we do so we find that 20%³ or 0.8% will receive 20 billion USD or 160 million USD plus 30 billion USD × 80%³×30 billion USD or 15.36 billion which is an average of 1,940,000 USD.  Current income data is actually consistent with this.

Now, people may argue that inequality is too great at these values of M & P, but, at least we now have the theoretical model necessary to ask more empirically testable questions. 

I have made the assertion that in an affluent society, a worker should be rewarded, if not an affluent life, at least a dignified one.  Can that routinely be done on 20,000 USD?  If the answer is yes, then the minimum wage should be increased to 9.62 USD per hour less any subsidies or entitlements generally available to anyone earning 20,000 USD.  If we believe it is insufficient, then the minimum wage should be raised by more, with the understanding that doing so will reduce the percentage of the economy subject to Pareto, which likely will depress economic growth.

However, determining how much reducing the Pareto portion will reduce economic growth is subject to empirical estimation.  We may discover that the function of Pareto % to economic growth is not linear.  II that case, we may find that reductions in M experience diminishing returns and an optimal value is relatively constrained and setting it's value is not difficult.  However, the relationship may be linear and consequently the proper value of M may remain contentious.

Either way, this theoretical model will allow us to have a disciplined discussion about inequality, rather than the strident and undisciplined argumentation that dominates the discourse today.  The argument properly is framed as one of how much emphasis should be placed on an equitable division of the pie and how much should be placed on growing the pie?

I argue vociferously for the rise of microstates.  I do so partially because there is no algorithm that will produce an objectively correct answer as to the value of M.  Therefore, there should be a multiplicity of systems.
More Socialist inclined communities will likely use subsidies, rather than minimum wage, to allow for dignity in poverty.  For example, public transportation may cost no more than 10¢USD in many microstates.  It is government subsidy that will make life much easier for low income people while providing no benefit to the affluent, who do not use it.

In my Suma Caye design, I have established a minimum wage of 50USD per hour and very carefully designed all aspects of the microstate to assure that 30 hours per week will finance a pleasant, if not extravagant, lifestyle.  I have attended myself to this aspect of microstate design extensively and by doing so have gained a deep appreciation of the power of the minimum wage and subsidies of community services to forge a just society for all.  In Suma Caye, education, autonomous transportation and most healthcare are free.

The argument in favor of using minimum wage as a tool to enhance economic social justice is frequently countered with the argument that increases in minimum wage will often cause an employer to either automate or find a way to operate without the position.  While this is true in the short run, these are precisely the jobs that need to be eliminated to stimulate economic growth and over time create a higher standard of living and likely a higher minimum wage.

However, this does bring up another issue, that of chronic unemployability.  The controversial Psychologist, Jordan Peterson has pointed out that the U.S. military has concluded that about 10% of the population has an IQ that is too low to adequately perform any duty in its organization.  Therefore, he has, quite correctly raised the issue of what should be done with these people when they are likely unemployable anywhere.  While the precise mechanisms will vary by microstate, the general goal of providing them a life of dignity will be nearly universal.  This is a critical issue, because, as the global economy automates, this portion of the population may increase from 10% to 20%.

If a local economy is functioning at full capacity, there will be productive activities for every able adult.  That, however, is not always the case and for large economies, one can argue that it is never the case.  In the U.S., while funded and administered at the state level, there is general agreement that the state will subsidize the job hunt for up to six month.  This constitutes a failure to apply the general to the specific.  In other words, if there are only 950,000 positions available for our 1,000,000 workers, no matter how much energy is applied to job hunting at the end of the six months of unemployment benefits, the game of musical chairs will be 50,000 jobs short.

So, while not generally done so at present, unemployment should be divided into transitional unemployment and structural unemployment with some variety of accomodation for the latter.

Raising the minimum wage to a level that will finance a dignified lifestyle will ameliorate the heartlessness of a purely free enterprise system.  While it won't solve all poverty issues, it will solve the problem of the working poor and do so in an organized, structural manner.  Discussing the proper value of the minimum wage within the M+P model, while not perfect, will introduce some needed rigor into the discussion.

Wednesday, August 1, 2018

Life Expectancies and Expectations

I was 51 years old when I met my wife.  Being from Russia where male life expectancy was 57 years, she expressed the belief that we would likely have a short, but hopefully happy, life together.  Displeased with her attitude I told her that I planned on living to 93.  It now appears that my prognostication may have been pessimistic.

At the outset, I will emphasize that while I enthusiastically support the research efforts in what is generally known as radical life extension, this article is not about that.  Here, I am examining existing statistical trends in life expectancy.

Recently, there have been several articles discussing life expectancy and income.  What they found is that the upper decile income 50 year old man has a life expectancy of 88.8 years.  That was me at 50.  However, a more precise statement is that of those upper decile men who were 50 in 1971, half of them were alive in 2010.  

The graph clearly shows the life expectancy of a 50 year old upper decile man has been consistently increasing at the rate of .225  years per year.  Since I am 29 years younger than the cohort used for the analysis, one would have to adjust and render a life expectancy of 88.8+(29×.225) or 95.3 years.  That was my "if trends continue" life expectancy when I was 50.  However, every year you survive doesn't bring you a year closer to your death because surviving that year increased you life expectancy.  So, we can look at the actuarial tables and see how much surviving the last 18 years since I was 50 has gained for me.  Using a life expectancy calculator, I find that it has added 3.0 years.

So, a pure extrapolation of current trends suggests that my life expectacy is about 98.3 years.  There are reasons why that may be too high and reasons that it may be too low.  However, that just means that 98 is a well balanced estimate based upon current trends.  Of course, life extension breakthroughs over the next thirty years could increase life expectancies, which is the basis of the life expectancy escape velocity concept.

A very valid question is whether the extra years will be productive years?  Or will it just add 15 years of increasing frailty?  I know that at 68 I am nowhere near ready to sit back in my rocking chair and just watch the days and weeks and months and years roll by.  Certainly I can take encouragement from Andy Rooney who did his show up to six weeks of his death at 92.  Milton Friedman died at 94 with a Wall Street Journal column "in the mail".  So, based on history, it seems probable that those extra years can be productive.

But, it doesn't end there. Based on Mayo Clinic research, United Biotechnology is beginning clinical trials on senolytics, which, while not demonstrated to increase lifespans in mouse models, appears to stimulate youthful phenotypes.  In other words, while they won't make you live longer they will make you live younger.

This is going to be a huge change for most people.  For many people 'empty nest and working' is an idyllic time.  Income is high, one is engaged in life and free from the encumbering responsibility of parenting.  Sadly, it is also often one of the shortest phases of life, typically lasting no more than ten to fifteen years.  Now, if like Andy Rooney and Milton Friedman, one works into one's 90s, this time of life may last for 35 years or more.

I just told my wife about these new calculations.  It may seem like a surprising conclusion, but why? Prince Phillip is 98 and he just retired.  Queen Elizabeth II is 92 and still working.  The last two POTUS to die were 93 and Bush I and Carter are 94.  Over the next few years, as we get more examples like the ones I mention here, it will seem less fanciful.

When articles discuss this, they routinely emphasize that, depending upon the study, the upper decile collects 15 to 20 years more social security than the lower decile.  They imply, though they do not substantiate, that the gap in life expectancy is the result of the income disparity.  Most of it, in all likelihood, is not.

First, sickly people generally earn less and also die sooner.  Second, lower income people tend to use various drugs that are a contributory factor in both lower income and life expectancy.  Third, it appears that the genes that contribute to higher IQ also contribute to longer lifespans.  IQ and income are positively correlated.  Lastly, the success traits that lead to higher income also lead to healthier lifestyles.

Having said that, there is a tendency for lower income people, out of the fear of cost, to wait longer to seek medical services once symptoms appear.  Still, the lowest decile in the U.S. generally qualify for Medicaid and/or Medicare.  This would be more of a likely explanation for the second and third decile.

My son just turned 30 and if you run these numbers on his age group, you get ridiculous results that, without radical life extension breakthroughs, won't happen. The reason is because these gains are the result of delaying the age related causes of death.  This means that the life expectancy curve will be sigmoidal with, according to current research, an asymptote at just over 100.  So, this 100 year life expectancy applies to nearly everyone.

For me, I plan on spending the next five years or so working primarily on The Polymath Institute.  Then I will shift my focus to building some expression of Suma Caye.  That will take me to 83.  After that I will put my efforts into investing in polymathic enterprises and writing books, if I have any more in me.  Those are my plans, since I'm planning on thirty more years.

How about you?  Will the expectation of a 100 year lifespan change how you plan your life?

Thursday, June 28, 2018

Humanoid Robots May Be Imminent

Star Trek: The Next Generation, set in the 2360s had a crew member, Data, that was an android or humanoid robot.  While a Data is not likely any time soon, a reasonable facsimile may be available far sooner than is generally imagined.  Current technological progress is not inconsistent with a product introduction around 2030.

The problem of creating one is comprised of two pieces -.  one, the robotic body, two the artificial intelligence.  Both technological pieces are currently exploding. What is necessary, primarily, is to bring together the various technologies in one robot.

The product will rely on distributed simulated general intelligence.  This is already within current technology.  The robot will house a program similar to SiriAlexa, Google Assistant, Cortana  or Bixby. These personal assistant programs can interface with users using natural language, voice recognition and voice synthesis.

Using a search function it can access anything on the Internet and, in this way it can simulate general intelligence.  If you ask the robot to play chess, it will access an online chess program and will play you.  If you ask it whether a bump on your arm is worrisome, it will access IBM's Dr. Watson and interact with you with that expertise.

If you ask it to clean the house or make you beef stroganoff it will access the necessary information online.  In fact, once Personal Assistant Robots (PAR) are introduced, "apps" will proliferate simulate a myriad of knowledge realms and capabilities. Again, this does not exceed current technology.

By this method, it will accurately simulate AGI and appear to be a conscious entity more knowledgeable, expert and expert than any human.  However, as we know with current personal assistants, chess programs, etc. it is not.  It is SGI or simulated general intelligence.  While the quest for AGI will likely continue in the lab, SGI will be a cheaper and less troublesome product.  SGI is the future and it is here in rudimentary form, already.  And the competition is stiff and improvement is therefore rapid.

Scene analysis is critical to the effectiveness of a PAR.  Fortunately, due to multiple applications, the technology is advancing rapidly.  Clearly, Boston Dynamics has installed relatively good software.  Facial recognition software has also become more sophisticated, driven by law enforcement demand.

While nobody has yet put together all the software required of a PAR, the pieces either currently exist or is within easy reach of current technology requiring only moderate modification to simulate a cohesive whole.

Boston Dynamics Atlas robot not only can run over uneven terrain it recently demonstrated a back flip.  While being developed for defense, the technology is about to move into the consumer market with the 2019 introduction of SpotMini.

Boston Dynamics is not a leader in robotic hands and fingers.  This research and development has been driven primarily by prosthetics and it is already very advanced.

The construction of humanlike bodies and faces, driven, in part, by competition between sex robot manufacturers, is progressing rapidly.  The companies that are creating the most humanlike faces are not at state of the art voice interaction, but, while not at the point of fooling anyone are getting quite good.  It is important to note, especially those presented by Hanson Robotics, that many videos of humanlike robots are scripted and presented as real AI that is well beyond current technology.

However, as Siri and Alexa demonstrate the current AI is quite sufficient to function as a useful personal assistant.  We are seeing that these executive programs are advancing rapidly.

It is clear that bringing together the most advanced current technology, in just a few years a first shot at a humanoid robot would likely be successful.  The business potential may enormous.

Of course, the likelihood of market acceptance will be based, among other things, upon price vs. benefits.  One of the primary benefits is to organize and execute the details of one's life.  As Google demonstrates here, much of that can be done already. However, picking up dry cleaning, grocery shopping, etc. will require a physical presence.

The other significant benefit is as a domestic, that cleans, cooks, gardens, does home and auto maintenace, etc.  It is, in fact, the primary benefit of a humanoid robot, over a virtual robot, such as Alexa.

Robots have no life of their own, so the only down time is for maintenance.  They may need 10% for charging and maintenance.  At $10 per hour equivalent, the net present value of a robot's work will be around 500K USD.

While the present value may be 500K USD, the cost will need to be less in order to be a successful product.  A basic robot may cost the same as a luxury car, say 100K USD.  There will also be some operating costs.  A monthly cost may be around 1,000 USD.

With, say a 2% initial market penetration, the industry may start St about 100 billion USD but has the potential to grow much, much larger.

The basic models will likely look like Atlas or Asimo.  Many people find the more human robots 'creepy' and they actually prefer the Asimo style models. There is controversy right now over Harmony, the sex doll, by Real Doll.  Real Doandll is naturally the most aggressive group in pursuing human like robots.  On one hand, most people will likely have a negative reaction to this degree of human simulation, but on the other hand, some people may be willing to spend substantial funds to create very life like and custom designed robots, a la Stepford Wives.

Most humanoid robots are currently not for sale, the exception being Harmony, which costs 15,000 USD.  She is, however, far complete, with no movement below the neck.