Investments, Retirement, And Faith

Every now and then I find the stimulus to a post in a completely unexpected place. Today, the stimulus comes from this article on retirement preparations in the Wall Street Journal:

Take a few minutes. Add up your basic annual expenses, and make sure to include the taxes you’ll owe on required and voluntary withdrawals from your retirement accounts and on the income and capital gains in your taxable assets. Then subtract your Social Security and, if you’re lucky, pension checks. This leaves you with your residual living expenses, or RLE....

The rub is that your retirement is reasonably assured only if the bulk of those assets is in relatively safe holdings.... As such, this may be a good time to start reducing the risk in your portfolio....

I bear in mind Blaise Pascal. The great 17th century philosopher and mathematician posited that belief in God was a paying proposition: If one believed and was wrong, all that was lost was a lifetime of unnecessary piousness and Sunday sermons. Betting against Him and being wrong, on the other hand, produced a different and rather warmer outcome. In other words, the probability of error matters less than its consequences. Put yet another way, when faced with the imponderable, the wisest course is the one with the most acceptable worst-case scenario. [Emphasis added by FWP.]

This, not to put too fine a point on it, is pure horseshit.

The probability of the various possible outcomes always matters. If the probability of total calamity – in the above case, a devastating crash in the equities market – is near enough to zero, you can neglect it in your planning. (This is especially the case if there’s no possible way to brace yourself for that outcome.) The difficulty lies in determining that probability.

Far too many people have far too much faith in their visions of America’s economic and fiscal future. Certain people -- I’m thinking specifically of militant evangelistic atheists such as Richard Dawkins:

Science, after all, is an empirical endeavor that traffics in probabilities. The probability of God, Dawkins says, while not zero, is vanishingly small. He is confident that no Flying Spaghetti Monster exists. Why should the notion of some deity that we inherited from the Bronze Age get more respectful treatment?

Dawkins has been talking this way for years, and his best comebacks are decades old. For instance, the Flying Spaghetti Monster is a variant of the tiny orbiting teapot used by Bertrand Russell for similar rhetorical duty back in 1952. Dawkins is perfectly aware that atheism is an ancient doctrine and that little of what he has to say is likely to change the terms of this stereotyped debate. But he continues to go at it. His true interlocutors are not the Christians he confronts directly but the wavering nonbelievers or quasi believers among his listeners – people like me, potential New Atheists who might be inspired by his example....

Dawkins looks forward to the day when the first US politician is honest about being an atheist. "Highly intelligent people are mostly atheists," he says. "Not a single member of either house of Congress admits to being an atheist. It just doesn't add up. Either they're stupid, or they're lying. And have they got a motive for lying? Of course they've got a motive! Everybody knows that an atheist can't get elected."

...have far too much faith in their own unverifiable, unfalsifiable faiths to admit that there’s no way to gauge the “probability” of the existence of God.

(A tangent of importance: Dawkins’s posturing is doubly wrong. Science does not “deal in probabilities.” It deals in induction from available evidence, the inference of hypotheses to explain observed patterns, the design of experiments that test those hypotheses, and the absolute principle that science offers no proofs and no final answers: i.e., that one failure to predict a properly designed, reproducible experiment’s outcome will falsify any hypothesis, regardless of its previous successes. This is called scientific method, with which pseudo-scientists such as Dawkins who prattle glibly about “scientific proof” are apparently unfamiliar.)

The mathematical purist’s approach to probability relies entirely upon the number of possible outcomes and their frequencies as derived from the governing distribution function(s). This is fine when discussing wholly hypothetical situations such as a completely random selection of one of an array of numbers, all of whose values and frequencies are known. However, it is not applicable to most real-world situations.

The best approach to gauging the probability of a real-world event is empirical. For example, flip a randomly selected coin a thousand times and keep a tally of the heads and the tails. That will give you a close estimate of the probability of each outcome for that coin. Similarly, one can look back at the history of the equities markets since they first arose in organized form, measure the average and maximum lengths of the bull markets and corrections periods, and arrive at a personal, disputable estimate of the probability that the current bull market will end soon. There is significant uncertainty in applying such a technique to the equities market. (The likely depth and duration of the correction to be expected, yet another important consideration in allocating one’s assets, is a separate study.)

But there is no way to determine “the probability that God exists.” That would require:

• The attribution of a specific, spatiotemporally based definition to God;
• Deductions from that definition about what circumstances “should” evoke a manifestation of God;
• A tally of observed manifestations of God and failures to observe such manifestations.

There’s only one word for any such proposed investigation: ridiculous.

Which establishes -- to the limits of measurement, as we engineering types like to say -- that William J. Bernstein, the author of the Wall Street Journal article, has substantially misstated the basis for personal financial planning, and that Richard Dawkins, who makes absurd arm-waving arguments about “the probability that God exists,” is an arrogant idiot who’s merely unhappy that his atheistic faith isn’t shared by the entire world.

Quod erat demonstrandum.

Simple Arithmetic

Back in the Seventies, there was a sporadic feature in Analog science-fiction magazine titled “Probability Zero!” Each segment of that series featured an “impending calamity” that actually had no significant chance of occurring...yet the piece would be written in the panic-style common to the doom-shouters of every era. There’s No Time To Waste!! The Governments Of The World Must Act At Once!! On their face they were humorously intended, but behind the laughs loomed a larger point about the readiness of so many persons to accept crisis-mongering if it comes with even a shred of pseudo-logical cover.

The one I have in mind this morning is “The Population Implosion.” The rationale behind that piece, which purported to demonstrate that the human race is shrinking toward extinction, was that since each of us requires two parents, four grandparents, eight great-grandparents, et seq to exist at all, the number of persons in each generation can only be half of the previous one at most. Why, pretty soon we’ll be down to just one of us...and what then, Gentle Reader?

Of course it’s nonsense. Even a child can see through it. Yet far older and more intelligent persons are regularly seduced by equally simple arithmetic, for an equally simple reason.

The reason, as Thomas Sowell and others have pointed out, is extrapolation in the absence of comprehension.

Consider the temperature of your neighborhood on a spring morning at, say, midnight. At noon, the temperature is virtually guaranteed to be higher, perhaps twenty or thirty Fahrenheit degrees higher. Would it be valid to extrapolate that trend forward by another twelve hours? By twelve hundred hours? Doesn’t it lead to inevitable calamity, specifically the roasting to death of everyone on Earth?

We can see this to be an absurd extrapolation because we grasp the reason for that midnight-to-noon temperature increase: the rotation of the Earth. Your neighborhood has rotated out of the Earth’s sun-shadow and exposed it to sunlight. Over the next twelve hours it will rotate back into the sun-shadow. The process is clear; the extrapolation is faulty because it doesn’t take it into account.

The simple-arithmetic method of forecasting has produced other absurdities as well. Consider “peak oil.” The very persons who in the Seventies predicted the imminent exhaustion of world oil supplies founded their crisis-mongering on simple arithmetic. The proven reserves at that time equaled about thirty years’ global oil consumption. Therefore, in thirty years the oil would all have been used up. Q.E.D., right? Right?

Of course not. Note that those folks are all silent today. Except for the ones who’ve “moved on” to other “crises” and those who are currently lamenting the supply-driven decline in fossil-fuel prices as a blow to their schemes for totalitarian control of the world economy, that is.

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The poster-boy for simple-arithmetic forecasts is Thomas Malthus, he who endeavored to scare us into believing that the “geometric” increase of the world population would soon starve us all to death. Malthus was misled by his static views of both Mankind and technology. He made no allowance for the influence of industrialization and urbanization on birth rates, and even less for the possibility of massive improvements in food production technology. He admitted to those mistakes in a Second Essay on the Principle of Population, which isn’t nearly as well known as the first one. Yet the population-bomb doom-shouters of the Seventies repeated Malthus’s early mistakes virtually without deviation. Even as bright a man as Isaac Asimov was seduced by their pseudo-logic, which merely confirms Einstein’s observation that no one is so smart that he’s immune to gross blunders.

Robert M. Pirsig, best known for his book Zen and the Art of Motorcycle Maintenance, recounts therein a similar mistake by his early, pre-electroshock-therapy self, to whom he refers in the book as “Phaedrus.” Phaedrus was misled into the belief that scientific method – indeed, rationality itself – is inherently defeated by the infinite number of possible observations one can make and hypotheses one can form. That ignores the mind’s ability to filter irrelevancies and the efficacy of Occam’s Razor at winnowing through the possible explanations for the phenomenon under consideration. Yes, “the more you look, the more you see,” but that doesn’t mean that everything you see is therefore relevant to the specific mechanism you’ve set out to explain.

Phaedrus / Pirsig was rather young when he made his admittedly life-altering mistake, so perhaps we should cut him some slack. Then again, he did get a massive bestseller and international fame out of it, so perhaps it needn’t be very much slack after all. And he did piss in his own cornflakes with Lila, which lost him – deservedly – most of the admiration his earlier book had earned.

There’s a moral in there, somewhere.

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If it sounds to you as if I’m about to say something like “Leave the simple arithmetic to the simpletons,” you’re not completely off base. Simple arithmetic is exactly that: simple. It attains its greatest relevance in simple situations. How many cookies are there in the jar? If you eat one per day, how long will they last you? That sort of simple arithmetic works – if we insist on the proviso that no one add cookies to the jar between your visits to it. It’s the failure to contemplate the possibility of such additional mechanisms that causes the forecaster’s problems.

The phrases that belong in all such proposed extrapolations are “Current trends continuing” and “All else being held constant.” Economists know this; the honest ones say it frequently and openly. But not all persons who award themselves the sobriquet of “economist” are honest.

BUT!

Some simple arithmetic can go a long way toward explaining matters that others would prefer that we not understand. For example, consider the current, extremely long (by historical American standards) average period most unemployed Americans of working age remain in that condition. Granted that the economy hasn’t been good, though its condition varies regionally. Granted also that other factors, such as the explosion of financial burdens and legal hazards statutorily laid on employers, have something to do with the reduced pace of business expansion and consequent hiring. But there’s also an arithmetic component:

1. Food stamps are available virtually for the asking;
2. Unemployment insurance pays benefits for more weeks than ever before;
3. It’s easier and safer to work “off the books” – i.e., without it becoming known to officialdom – than ever before;
4. The difference in de facto income between persons in the “working class” economic segment and those exploiting conditions 1, 2, and 3 has been shrinking, and is now smaller in real terms than ever before.

Arithmetic of that sort reminds us of something quite a lot of activist types would rather we’d forbear to consider: people work to improve their lot in life. If work’s ability to improve one’s standard of living should decline, so will its appeal to potential workers. And thus shall it ever be.

Pretty simple, eh?

(Cross-posted at League of Outlaw Bloggers.)

The Limits Of Metrical Argument

"Mathematics is a meaningless formal game." -- David Hilbert.

Mathematics, whether high or low, is inherently independent of any connection to objective reality. It exists in a realm of pure abstraction. (You might even call it a Realm of Essences.) Though mathematical techniques can be used to describe reality, they cannot be used to control reality. (For the use of the inverse assumption as the driver for a fantasy story, see James Gunn's The Magicians.)

That doesn't stop tendentious types with an axe to grind, of course.

The most insidious use of mathematics to deceive is by extrapolation of some identifiable pattern. The extrapolator draws attention to the pattern, then forecasts the future as if it could be relied upon to continue indefinitely, when such continuation is in fact dubious or worse. Mark Twain made humorous note of this practice:

In the space of one hundred and seventy-six years the Lower Mississippi has shortened itself two hundred and forty-two miles. That is an average of a trifle over one mile and a third per year. Therefore, any calm person, who is not blind or idiotic, can see that in the Old Oölitic Silurian Period, just a million years ago next November, the Lower Mississippi River was upwards of one million three hundred thousand miles long, and stuck out over the Gulf of Mexico like a fishing rod. And by the same token any person can see that seven hundred and forty-two years from now the Lower Mississippi will be only a mile and three quarters long, and Cairo and New Orleans will have joined their streets together, and be plodding comfortably along under a single mayor and a mutual board of aldermen. There is something fascinating about science. One gets such wholesale returns of conjecture out of such a trifling investment of fact. [From Life On The Mississippi]

Somewhat more recently, the great Thomas Sowell lassoed, threw, and hogtied it in his masterpiece The Vision Of The Anointed:

[I]f the temperature has risen 10 degrees since dawn today, an extrapolation will show that we will all be burned to a crisp before the end of the month, if this trend continues. Extrapolations are the last refuge of a groundless argument. In the real world, everything depends on where we are now, at what rate we are moving, in what direction, and -- most important of all -- what is the specific nature of the process generating the numbers being extrapolated. Obviously, if the rise in temperature is being caused by the spinning of the Earth taking us into the sunlight, then the continuation of that spinning will take us out of the sunlight again and cause temperatures to fall when night comes.

Now and then, a tendentious extrapolator will resort to even worse deceits, such as picking his time base specifically to conceal the reversal of the trend upon which his argument is based. For example, a passionate advocate for increasing the number and visibility of police might pick a year -- say 1960 -- with an unusually low number of murders, compare it to the present number of murders per year, and thus imply that murder is increasing in frequency even though the murder count was higher in 1990 than it is today and has been declining steadily since then. He who fails to check the source data is vulnerable to being misled in this fashion.

Tendentious extrapolation is bad enough, but when we add the "apples to oranges" comparison -- i.e., inviting the audience to assume that the same rules and processes apply to greatly dissimilar situations -- it approaches criminality and should be treated with a comparable degree of contempt. That's what the "Global warming / climate change" evangelists do: they produce "simulations" of the atmosphere and biosphere that they claim "prove" that global warming -- and specifically anthropogenic global warming, at that -- is occurring and will have catastrophic effects in the reliably foreseeable future -- and then go on from there to scream that "the science is settled!" Yet as I wrote some time ago:

Science is entirely encompassed and defined by the scientific method. Scientific hypotheses must be confirmed or challenged by predictions about the outcomes of properly designed experiments that others can replicate. However, the anthropogenic global warming hypothesis cannot be confirmed or challenged by experiments of any sort, for several reasons:

1. Earth is an "open system," with a multitude of feedback mechanisms that influence atmospheric and oceanic temperatures; thus, producing a replicable experimental setup is inherently impossible.
2. There is no way to control or measure the amounts of the various "greenhouse gases" that are emitted per unit time.
3. The Sun, which is the principal determinant of temperatures on Earth, is a mildly (4%) variable star.
4. Temperature measurement itself is an inexact matter that's easily disturbed by environmental fluctuations of all sorts.
5. Even the most careful measure of temperature is nevertheless a local phenomenon, pertaining only to the immediate region around the measuring device. Thus, the exact placement of those devices, which is inherently a matter of judgment, is far more important to the readings than any other aspect of the matter.

Which is why the warmistas rely on simulations. But simulations, as I have excellent reason to know, are relevant only to the exact conditions simulated -- and those conditions cannot, in the nature of things, match the far more complex dynamics of the Earth's atmosphere and oceans.

Perhaps the supreme irony that emerges from this deceit-by-numbers is that those who perpetrate it ceaselessly congratulate themselves on how much smarter they are than "those rubes." The irony sharpens still further when we discover that among them are many who've succeeded only in deceiving themselves. On that note, I will conclude by citing a pithy passage from a recent essay by Charles C. W. Cooke:

One part insecure hipsterism, one part unwarranted condescension, the two defining characteristics of self-professed nerds are (a) the belief that one can discover all of the secrets of human experience through differential equations and (b) the unlovely tendency to presume themselves to be smarter than everybody else in the world. Prominent examples include MSNBC’s Melissa Harris-Perry, Rachel Maddow, Steve Kornacki, and Chris Hayes; Vox’s Ezra Klein, Dylan Matthews, and Matt Yglesias; the sabermetrician Nate Silver; the economist Paul Krugman; the atheist Richard Dawkins; former vice president Al Gore; celebrity scientist Bill Nye; and, really, anybody who conforms to the Left’s social and moral precepts while wearing glasses and babbling about statistics.

There is no substitute for familiarity with the ground data -- the unmassaged, reproducible facts provided by agenda-free Nature herself, including when and where they were gathered, how, and by whom -- and skepticism toward those who claim to know better than you, no matter how many numbers they claim to have at their command.