Thursday, July 20, 2017

Blockchain the Transformer

Do yourself a favour and read this to “get it” about blockchain and why it matters… or try to make time stand still.

This from Kevin Cooney – ASB’s National Manager Rural:

It's vital that New Zealand's agri industry pays close attention to blockchain development and ensures we are well positioned to capture our share of new value this technology could unlock.

Mention blockchain and agriculture in the same breath, and the image of a heavy duty chain towing one farm vehicle behind another pops into my mind.

Turns out, that's a handy analogy. Like a physical chain, blockchain connects parties directly with one another to enable fast, secure, and borderless transactions.

Blockchain is often confused with digital currency bitcoin and "dark-web" encrypted networks, which means it's often thought of as esoteric and, perhaps, something to be feared.

That's unfortunate. Blockchain will transform the way buyers and sellers connect, regardless of where they are in the world. It will allow radical transparency of a product's origins and journey to end-customers, even if it becomes part of a finished product. Think fast, secure, transparent, low-cost, peer-to-peer transacting.

Blockchain's ability to record and store data makes it ideally suited for both food provenance applications and the deluge of data expected from future precision-farming applications connected by sensors and digital networks.

Its potential to eliminate inefficiency in traditional agri supply chains will also impact strategic thinking and positioning for agri industry companies. Indeed, blockchain could completely reshape the way New Zealand markets, sells and records the provenance of our produce to the world.

For this reason it's vital that New Zealand's agri industry pays close attention to blockchain development and ensures we are well positioned to capture our share of new value this technology could unlock.

The CEO of blockchain solutions start-up Kickr, David Cassidy, has summed up blockchain's inevitability best: "Those that still ask the question whether blockchain is a passing fad or will form a long-term part of business architectures are genuinely in the dark."

So what is blockchain all about?

At its simplest, blockchain forms a trusted network for buying and selling goods. The technology itself is a digital chain, of which the links are replicated databases that correspond with verified or trusted user companies or businesses.

This distribution of databases across all users is more robust in many respects than the traditional, centrally-controlled, single database that businesses use and rely on today. Its greater transparency in peer-to-peer dealings lends itself more readily to meeting growing demands for rigorous traceability.

Blockchain databases record and update in a synchronised fashion for each transaction that occurs on the blockchain. As no one party can change data without the others seeing and verifying it, it's said to be tamper-proof and therefore highly secure (on current technologies).

When combined with other software, such as a "smart contracts", users of a blockchain have the following benefits:

Buyers and sellers can transact directly, and instantly, rather than having to go through and rely on intermediaries (such as banks, trading and clearing houses);

Borderless transactions;

Automated contract execution that removes credit risk in real (or near as real) time;

Identity verification for counterparties;

Superior transparency with secure record trail;

Low transaction costs.

How might farmers use it?

Early trials transacting agri commodities using blockchain demonstrate its potential to sell agri outputs (such as wheat, wool, meat, livestock, wood or fruit) direct to end-buyers in a way that's fast, secure, with high confidence about origin and food safety.

Across the Tasman, Commonwealth Bank of Australia (CBA) was recently involved in a trial testing blockchain's integration with sensor technology. This saw CBA collaborate with a US bank to help a US-based cotton business sell a cotton shipment to its own marketing arm in Australia.

Instead of waiting for payment from CBA under the usual manual letter of credit arrangement, the cotton business was paid automatically with the necessary verification triggered automatically through sensor-based, physical tracking of the shipment in real time.

Here, blockchain provided greater certainty, reduced errors and accomplished in minutes what usually takes days.

Imagine the potential in the opportunity to also integrate a blockchain solution with data-gathering devices that use 'Internet of Things' technology. Buyers might have access to live on-farm and downstream logistics data giving them all details necessary to determine amounts, quality and status of livestock or produce, for verification, inspection and pricing. This sort of efficiency could lessen the information advantage some intermediaries exploit for their share of margin. Customers and end-users will embrace this technology.

Walmart Stores, one of the world's largest retailers, is harnessing blockchain to catalogue huge amounts of data for managing food recalls.

With traditional methods it can take days, if not weeks, to trace an item from shipment through to retailer following a customer complaint. But with a blockchain database, Walmart believes it can determine all necessary details how and where the food in question was grown and who it was inspected by right down to individual packages.

This enables strategic product withdrawals that companies and consumers can have confidence in, due to the detail and integrity of the data.

The saving to Walmart from tracing and recalling just a few packages as opposed to an entire product line across multiple stores is significant.

While it's still early days, excitement about blockchain is growing as awareness of its practical applications develop.

Allowing trusted groups to trade seamlessly at low cost with radical transparency has huge value potential in a world of future scarcity where consumers are concerned about food safety and provenance, and our large food customers seek lean, transparent solutions for managing food waste and supply chain inefficiency.

New Zealand's strength in agri production and commodity supply chain management give us a tremendous opportunity to lead the world in developing food and agri blockchain solutions that connect, shorten and sharpen global supply chains.

However, as for any innovation, we risk losing strategic ground if we don't invest to understand technology such as blockchain, and its potential to transform the global agri supply chain and associated services. Collaboration between industry and government and across the supply chain is critical.

Australia understands this. The Australian Government has recently released a scientific study of blockchain, which was funded in its 2016 budget. As well as highlighting Australia's claim to be a global leader in the technology, the study found supply chain management, including trade finance reform, is a "highly promising" use-case for blockchain. Pointing the way, it implores companies and regulatory authorities to work together to develop its commercial uses.

New Zealand should take note. We must strengthen our focus on developing a world-class national ecosystem to co-ordinate and engage all elements necessary to building the thriving best-in-breed agri tech industry necessary for this to happen.

Blockchain might just be the vital link that enables New Zealand's farming industry to capture our holy grail of more margin.

Monday, June 26, 2017

The Business of Tax

ONE of the hottest debates in economic policy at the moment is how to ensure companies are paying the optimal amount of tax. On the right, politicians think that a lower corporate-tax rate will lead to more business investment and thus faster economic growth. Hence the initial stockmarket enthusiasm after President Donald Trump was elected on a platform that included cuts in business taxes. On the left, the belief is that business is not paying its “fair share” of tax and that it can be further squeezed to pay for spending commitments. Hence the promise of the Labour Party in Britain’s recent election campaign to push the corporate-tax rate up to 26% (from 19%).

How do these theories translate into practice? To find out the effect on business investment, The Economist took the corporate-tax rates in OECD countries and divided them into quartiles from highest (1st) to lowest. Then we calculated the five-year average in each quartile for gross fixed capital formation as a share of GDP.

image

As the top chart shows, the relationship is not very strong. The countries with the highest tax rates generate less investment than those with the lowest, but there is not much difference. That is probably because the decision to invest in a country depends on a lot more than tax. The underlying growth rate of the economy and the regulatory climate also play a big part. Independent of their tax rates, for example, South Korean and Turkish companies are investing a lot. Perhaps they are catching up with mature economies, perhaps they are over-investing.

What about the tax take? The picture is complicated here, too. Lower tax rates may just work by pinching revenues from other countries. For example, Ireland, with a 12.5% rate, earns a higher proportion of GDP in revenues than France, at 34.4%. And the headline tax rate may not be decisive. Countries with high rates (like America) tend to offset them with allowances and deductions that bring down the effective rate that companies pay.

The idea of using tax levels to boost revenues does not get much support, either. Most countries sit within the 2-3%-of-GDP range (see bottom chart). The countries with the lowest corporate-tax rates receive a bit less in taxes. But the difference between the top and bottom quartiles is only 0.9% of GDP. Grabbing this extra chunk might be useful revenue, but when public spending is 40% of GDP or so, other sources of funding are a lot more important.

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The countries with the highest tax takes (over 4% of GDP) tend to be those, like Australia and Norway, with plenty of natural resources. They can take advantage of captive businesses. But that is not an option for most developed nations, especially given the potential for tax competition. OECD countries are trying to co-operate to stop companies from gaming the international tax system. But it is a tricky task; one man’s tax avoidance is another man’s legitimate business planning.

Two other things are worth remembering. The first is that companies are merely legal entities. To the extent they pay more taxes, they must get the money to do so from elsewhere. Politicians on the left think the money comes from shareholders. But it is not as simple as that (and even if it were, those shareholders may represent the pension funds of citizens). For instance, a large company might not want to reduce the profits it pays out to shareholders for fear of becoming a takeover target. So it could move some of its operations to a lower-tax regime. Or it could recoup the loss by charging consumers more, or by paying workers less.

Second, countries do not just want to attract businesses for the taxes they pay but for the workers they employ and for the extra revenues they create for local suppliers. The effective tax take firms generate (on wages, sales and property taxes) is much higher than the tax on profits alone. So there are dangers in driving business away, something Britain needs to contemplate after the Brexit vote.

Some argue that the profits tax should be abolished. Governments should look through the corporate structure and tax shareholders directly. The problem is that many shareholders, such as pension funds and charities, are tax-exempt, and others are based in low-tax regimes. That would also create incentives for individuals to incorporate to cut their tax bills. So such a move should await much more sweeping tax reform. In the meantime, governments will have to make do with what they currently get. There is no magic trick for collecting a lot more.

From The Economist June 17th edition

Monday, May 22, 2017

The Paris Treaty on Climate Change

Matt Ridley notes in respect of the Paris Treaty on Climate change that:

….. the economist Bjorn Lomborg calculated how much the pledges would reduce warming, using standard models and generous assumptions about how quickly the reductions would be achieved and how long they would be sustained.

He found that all the promises made by the US, China, the EU and the rest of the world, if implemented from the early 2000s to 2030, and then sustained through the rest of the century, would reduce the expected rise in global temperature by only 0.17°C in the year 2100. That is to say, instead of rising by 2, 3 or 4 degrees or so by the time our great grandchildren are adults, world average temperature would rise by 1.83, 2.83 or 3.83 degrees. Lomborg put it this way: “Current climate policy promises will do little to stabilise the climate and their impact will be undetectable for many decades”. A different study by scientists at MIT came to similar conclusions. The INDCs add up to the square root of zilch.

However, and this is the crucial point, Lomborg also points out this invisible achievement would come at a staggering cost, somewhere between $1 trillion and $2 trillion a year: “Paying $100 trillion for no good is not a good deal”.

Friday, May 5, 2017

Cohen on Liberalism and Free Speech

Liberalism does not only fail to satisfy the new conservatives who are storming to power across the west. It fails to satisfy many who call themselves “liberal”. It is simultaneously too hard and too soft an ideology to bear. It demands tolerance. But we do not want to be tolerated as if we were poor relations. We want respect, approval and freedom from criticism and insult. In our wilder moments, we want, in our vanity, to be loved.

To paraphrase the paraphrase of Voltaire, the liberal view of sexual tolerance used to be: “I may disapprove of who you take to bed, but I will defend to my death your right to bed them.”

Just as liberals used to tolerate free speech, except when the speaker was inciting violence, so they allowed free love between consenting adults. Few now care about defending rights to the death. Many turn authoritarian and maintain you have no right to disapprove.To recap, the great mid-20th century movement for homosexual rights culminated in the recommendation of the Wolfenden report of 1957 that sexual acts between consenting adults in private should be decriminalised. It did not say that fundamentalist Christians, Jews, Muslims or ordinary secular homophobes must stop believing that homosexuality was a sin. Indeed, their freedom of speech guaranteed their freedom to disapprove. They simply lost the power to call for the police to raid bedrooms.

Equally, the old liberal insistence that free speech must be tolerated, except when it incited violence, did not mean that an audience must approve of a speaker. It remained free to argue back, denounce or satirise in the most robust manner. It just could not call on the authorities to ban speakers or the police to arrest them for “hate speech” when the speech was not so hateful it provoked attacks on its targets.Farron was being a true liberal. He disapproved of homosexuality but was prepared to defend gay rights

The strange controversy the leader of the Liberal Democrats began when he equivocated on whether he believes homosexuality is a sin shows how dead the old liberalism is. On the record, Tim Farron supports “equal rights for LGBT people and LGBT rights in this country and overseas”. But he also believes Christianity is “the most important thing in the universe bar nothing”.

The contortions he put himself through as he dodged questions about homosexuality’s “sinfulness” suggested he took his Bible literally and had dwelt on the murderous condemnations of homosexuality in Leviticus, echoed by St Paul, for longer than is healthy.

If he once did and has now changed his mind, so what? Farron was being a true liberal. He disapproved of homosexuality but was prepared to defend gay rights, just as I disapprove of religious fundamentalists but am prepared to defend their freedom to worship. Even by the low standards of 21st-century culture wars, the Farron “controversy” was absurd.

To give the absurdity a sinister twist, there is a genuine story about religion and equal rights that no one covers because it does not fit into the stereotypes of news coverage, where reactionaries are always conservative or Christian and the convergence of the far left and far right is always ignored.

Jeremy Corbyn worked for Iranian state television and spoke at Khomeinist ralliesin London. Everywhere he went, he looked a willing collaborator with a regime that flogs and executes gay men, treats women as second-class citizens and imprisons trade unionists.

If Corbyn was questioned on this, which he never is, he might say he does not approve of every aspect of Shia theocracy. But he worked for it, and was paid by it, and never found the courage to speak out on Iranian television for the victims of its oppression. A liberal society that condemns one politician who bothers God, but gives a free pass to another who works for a queer-bashing, queer-killing regime is so lost that it may never find its way home again.A liberal society that condemns a politician who bothers god, but not one who works for a queer-killing regime, is lost

At second glance, however, perhaps liberal society isn’t making a complete fool of itself. For why shouldn’t a gay man or lesbian be repelled by Farron’s contortions? At some level, they may suspect that although he will defend them he does not approve of them. Why should they accept that as good enough?

To broaden it out, why must a feminist fed up with seeing women portrayed as lumps of meat accept that she must struggle for years to find a link between pornography and rape? Why should a Muslim incensed by the anti-Muslim bigotry of the worst of the right, or a Jew incensed by the antisemitism of the worst of the left, wait until their enemies incite violence? Why not no-platform or call for dangerously fuzzy laws against hate speech before the tipping point?

For those who practise it, toleration is a hard principle to live with. It forces you to engage with enemies you abhor in argument when you don’t believe they have an argument worth hearing.

Concealed within the hardness is a soft centre, one that is too insipid for many to digest. Emotionally, it feels vapid to say that you must win arguments rather than call for the police. It can feel like an act of treason to dignify misogynists, racists or homophobes by agreeing to argue with them in the first place.

But however much the dismissal of tolerance, and the flight to a politically correct authoritarianism, makes emotional sense, practically it has been a disaster. Trump won in part because tens of millions of Americans had had it with being told what to think. Some were genuine bigots. Others could be won over if only “liberals” stopped upholding an illiberal policing of thought.

Unless they understand how they drive so many into the welcoming embrace of the right, Trump’s four-year presidency could stretch to eight. In Britain, we will have at least five more years of Conservative rule. Basic self-interest ought to persuade liberals not to provide justifications for censorship and control when the right – and the right alone – has the power to deliver both.

The politically correct movement is not only an intellectual and practical failure, it fails on the more basic level of human psychology.

You cannot demand respect from others. You can only earn it. You cannot force others to admire you, endorse your lifestyle and drop even private doubts about you. You can only persuade them to see what good there is in you. And if you don’t know by now you that cannot compel others to love you, you never will. All you can do – and all you should want to do – is take the deal when a politician says: don’t ask if I respect you, ask if I respect your rights.

Opinion by Nick Cohen, Journalist.

As originally printed in The Guardian.

Friday, April 7, 2017

Neo wowsers and Regulation

Alcohol Bans in India and the United States

by Alex Tabarrok on April 6, 2017 at 7:29 am in Economics, Food and Drink, Law, Travel | Permalink

The Indian Supreme Court has just banned sales of alcohol within 500 meters of a national highway. The ban affects not just liquor stores but tens of thousands of restaurants and hotels. In response, the Rajasthan Public Works Department announced that they would now recategorize highways in urban areas as roads! Other states may follow suit. (David Keohane at the FT has further background on the India ban.)

Lost in the shenanigans is that even if the ban were implemented perfectly it’s not at all obvious that it would reduce traffic accidents. Alcohol can be easily stored and if you are thirsty driving 500 meters doesn’t seem like very far to go to buy alcohol.

Entire counties in the United States have banned alcohol but that doesn’t seem to have reduced traffic fatalities. It may even have increased fatalities because residents of dry counties drive to a wet county to find a bar and then they drive drunk for longer distances as they head home.

Wednesday, March 15, 2017

Something has to give

Money Illusion

This misalignment is serious. Lights orange to very pink indeed. As ever – when ??!!

From The Economist – Buttonwood -  March 4th 2017:

Interest rates and investment returns

Low rates usually mean low returns; so why are markets so buoyant?

 

IF THERE is one aspect of the current era sure to obsess the financial historians of tomorrow, it is the unprecedentedly low level of interest rates. Never before have deposit rates or bond yields been so depressed in nominal terms, with some governments even able to borrow at negative rates. It is taking a long time for investors to adjust their assumptions accordingly.

Real interest rates (ie, allowing for inflation) are also low. As measured by inflation-linked bonds, they are around -1% in big rich economies. In their latest annual report for Credit Suisse on global investment returns, Elroy Dimson of Cambridge University and Paul Marsh and Mike Staunton of the London Business School look at the relationship between real interest rates and future investment returns. Very low real rates have in the past been associated with poor future equity returns (see chart).

That may come as a nasty shock for state and local-government pension funds in America. They have to assume a future rate of return on their investments when calculating how much they need to contribute to their plans each year. Most opt for 7-8%, a level that has prevailed for years. That return looks highly implausible at a time when ten-year Treasury bonds yield just 2.4%.

There is a strong incentive not to change these assumptions. CalPERS, a Californian state pension fund, has cut its assumed return from 7.5% to 7%. But even that small shift will cost the state $2bn a year in extra contributions.

Why should low real rates and low returns be linked? One reason is that very low real rates are associated with times of economic difficulty, and thus periods when corporate profits are under threat. But a low real interest rate also means a low cost of capital for companies, which ought to be good news. Indeed, central banks ease monetary policy to try to drive down interest rates, and thus encourage business investment.

There has been some recovery in business investment since the last recession. But that recovery has not been as robust as might have been expected, given the low cost of capital. In a recent speech, Sir Jon Cunliffe, deputy governor of the Bank of England, noted that “in the 40 years to 2007, business-investment growth averaged 3% a year. In the eight years since the crisis it has averaged 1.5% annually.”

A number of possibilities could explain this decline, including a lack of access to finance. Banks have been boosting their capital ratios in recent years and have been more reluctant to lend. But another factor relates to the “hurdle rate” companies use before they decide whether to invest. A survey by the Bank of England indicates that firms are still using a hurdle rate of 12%, around the average of the rate of return on investment they have achieved in the past.

In other words, despite the big fall in the cost of borrowing since the crisis, the hurdle rate has not come down. Since the risk-free rate is in effect zero, the bank says British firms are now looking for a 12-percentage-point margin compared with one of seven points before the crisis. This could be a version of “money illusion”, when people fail to adjust their expectations for nominal returns as inflation declines (in this case, both real and nominal expectations ought to have fallen).

There is an alternative explanation for the failure of expectations to shift. Both businesses and investors, realising that the economic outlook is uncertain, may be demanding a higher risk premium for starting new projects or buying shares. That explanation is a little hard to square, however, with the repeated new record highs being scaled by stockmarkets or with the high valuations afforded to American equities.

Since the market low in March 2009, dividends have risen by 48% in real terms and real share prices have risen by 167%, according to Robert Shiller of Yale University. The cyclically-adjusted price-earnings ratio (or CAPE), which averages profits over ten years, is 28.7, its highest level since April 2002. In the past, very high CAPEs have been associated with low future returns.

Indeed, having analysed the data, Messrs Dimson, Marsh and Staunton reckon global investors are expecting a risk premium of 3-3.5% relative to Treasury bills—a level that is lower, not higher, than the historic average. So something does not add up. American pension funds are optimistic. Businesses are cautious. Shares are trading on very high valuations. Not all these assumptions can be proved right.

Wednesday, March 1, 2017

Where Rashid and Juliet can’t wed

Many countries make it hard to marry someone from another religion – change is needed

Around two dozen countries have no provision for civil marriage

ARMAN DHANI, an Indonesian journalist who is Muslim, broke up with his Catholic girlfriend of five years when he reached the heartbreaking conclusion that they would never be able to marry. Indonesian officials refuse to register inter-faith marriages because the law does not mention them. “My mother said: ‘If you want to marry her she must convert to Islam,’” he says. “But I didn’t want to make her betray her religion.” He felt he could not change religion either. “If I converted to Catholicism I would become dead to other Muslims.”

Indonesia is one of about two dozen countries with no provision for civil marriage. Others include Israel, Jordan, Lebanon and almost all Arab states. Only unions conducted according to the rules of officially recognised religions can be registered. In Indonesia children of unregistered unions cannot get birth certificates, without which they struggle to receive health care or schooling.

Some couples of differing faiths, or none, go abroad for a civil ceremony. Each year about 3,000 couples from the Middle East get married in Cyprus, which brands itself the “island of love”.

Campaigns to introduce civil marriage are afoot in many countries. But governments often fear angering politically powerful religious groups. In Lebanon marriages and other matters of family law, such as divorce and inheritance, are left to the religious courts of 18 Muslim, Christian and other sects. This allows politicians to sidestep the tricky task of crafting family laws that would be acceptable to leaders of all those faiths. In Indonesia, says Mr Dhani, both Muslim and Christian leaders fear that an inter-faith marriage would inevitably end up with one of the partners converting.

In many places, anyone who dares to wed across religious lines faces ostracism—and perhaps even violence. Getting rid of legal barriers would not remove all the risks. But it would help, a bit.

As published in The Economist 18th February

Monday, February 20, 2017

USA–Really 11 separate ‘nations’

This map shows the US really has 11 separate 'nations' with entirely different cultures

MATTHEW SPEISER

11 NationsColin Woodward and Tufts/Brian Stauffer

In his fourth book, “American Nations: A History of the Eleven Rival Regional Cultures in North America,” award-winning author Colin Woodward identifies 11 distinct cultures that have historically divided the US.

“The country has been arguing about a lot of fundamental things lately including state roles and individual liberty,” Woodward, a Maine native who won the 2012 George Polk Award for investigative reporting, told Business Insider.

“[But] in order to have any productive conversation on these issues,” he added, “you need to know where you come from. Once you know where you are coming from it will help move the conversation forward.”

Here’s how Woodward describes each nation:

YANKEEDOM:

Encompassing the entire northeast north of New York City as well as parts of Michigan, Wisconsin, and Minnesota, Yankeedom values education, intellectual achievement, communal empowerment, and citizen participation in government as a shield against tyranny. Yankees are comfortable with government regulation. Woodward notes that Yankees have a “Utopian streak.” The area was settled by radical Calvinists.

NEW NETHERLAND:

A highly commercial culture, New Netherland is “materialistic, with a profound tolerance for ethnic and religious diversity and an unflinching commitment to the freedom of inquiry and conscience,” according to Woodward. It is a natural ally with Yankeedom and encompasses New York City and northern New Jersey. The area was settled by the Dutch.

THE MIDLANDS:

Settled by English Quakers, The Midlands are a welcoming middle-class society that spawned the culture of the “American Heartland.” Political opinion is moderate and government regulation is frowned upon. Woodward calls the ethnically diverse Midlands “America’s great swing region.” Within the Midlands are parts of New Jersey, Pennsylvania, Ohio, Indiana, Illinois, Missouri, Iowa, Kansas, and Nebraska.

TIDEWATER:

Tidewater was built by the young English gentry in the area around the Chesapeake Bay and North Carolina. Starting as a feudal society that embraced slavery, the region places a high value on respect for authority and tradition. Woodward notes that Tidewater is in decline today, partly because “it has been eaten away by the expanding federal halos around D.C. and Norfolk.”

GREATER APPALACHIA:

Colonised by settlers from the war-ravaged borderlands of Northern Ireland, northern England, and the Scottish lowlands, Greater Appalachia is stereotyped as the land of hillbillies and rednecks. Woodward says Appalachia values personal sovereignty and individual liberty and is “intensely suspicious of lowland aristocrats and Yankee social engineers alike.” It sides with the Deep South to counter the influence of federal government. Within Greater Appalachia are parts of Kentucky, Tennessee, West Virginia, Arkansas, Missouri, Oklahoma, Indiana, Illinois, and Texas.

DEEP SOUTH:

The Deep South was established by English slave lords from Barbados and was styled as a West Indies-style slave society, Woodward notes. It has a very rigid social structure and fights against government regulation that threatens individual liberty. Alabama, Florida, Mississippi, Texas, Georgia, and South Carolina are all part of the Deep South.

EL NORTE:

Composed of the borderlands of the Spanish American empire, El Norte is “a place apart” from the rest of America, according to Woodward. Hispanic culture dominates in the area, and the region values independence, self-sufficiency, and hard work above all else. Parts of Texas, Arizona, New Mexico, and California are in El Norte.

THE LEFT COAST:

Colonised by New Englanders and Appalachian Midwesterners, the Left Coast is a hybrid of “Yankee utopianism and Appalachian self-expression and exploration,” Woodward says, adding that it is the staunchest ally of Yankeedom. Coastal California, Oregon, and Washington are in the Left Coast.

San Francisco City and Homes

Shutterstock / prochasson fredericSan Francisco is a natural fit for Woodward’s Left Coast.

THE FAR WEST:

The conservative west. Developed through large investment in industry, yet where inhabitants continue to “resent” the Eastern interests that initially controlled that investment. Among Far West states are Idaho, Montana, Wyoming, Utah, Washington, Oregon, North Dakota, South Dakota, Colorado, Nevada, Utah, Nebraska, Kansas, Arizona, New Mexico, and California.

NEW FRANCE:

A pocket of liberalism nestled in the Deep South, its people are consensus driven, tolerant, and comfortable with government involvement in the economy. Woodward says New France is among the most liberal places in North America. New France is focused around New Orleans in Louisiana as well as the Canadian province of Quebec.

FIRST NATION:

Comprised of Native Americans, the nation enjoys de facto independence by being far in the North. Woodward says the territory of the First Nations is huge, but its population is less than 300,000, most of whom live in the northern reaches of Canada.

Woodward says that among these 11 nations, Yankeedom and the Deep South exert the most influence and are constantly competing with each other for the hearts and minds of the other nine nations.

“We are trapped in brinkmanship because there is not a lot of wiggle room between Yankee and Southern Culture,” Woodward says. “Those two nations would never see eye to eye on anything besides an external threat.”

TEd Cruz filibuster

APIn 2013, Ted Cruz infamously held the Senate floor for 21 hours in an attempt to filibuster Obamacare.

Woodward also believes the nation is likely to become more polarised, even though America is becoming a more diverse place everyday. He says this is because people are “self-sorting.”

“People choose to move to places where they identify with the values. Red minorities go south and blue minorities go north to be in the majority,” Woodward explains. “This is why blue states are getting bluer and red states are getting redder and the middle is getting smaller.”

The Business Outsider Australia

Friday, February 17, 2017

Foreign Drivers and Driver Testing

Is the number of accidents caused by foreign drivers increasing? No. It has been fairly constant at around 6% of all accidents for the last decade.

In that time tourism numbers have increased 30%.

So would requiring tourists who are here more than three months to undertake a driving test make much of an impact. The data suggests next to nothing.

In 2016 there were 1,817,136 tourists here and only 40,336 stayed for more than three months. That's 2.2%.

So this measure would impact just 2.2% of tourists in NZ. If tourists cause 6% of all accidents then you might expect a 0.13% reduction in the road toll.

And that is only if you make the generous assumption that having them sit a NZ licence test will mean they are guaranteed to have no accidents.

So the proposal, while well intentioned, will achieve basically nothing.

Thanks to Kiwiblog for putting these numbers together.

Friday, January 27, 2017

Why free trade is good and hence the irrationality of protectionism

This new post by Mark Perry – a post titled “2009 tire tariffs cost US consumers $926K per job saved and led to the loss of 3 retail jobs per factory job saved” – is excellent.  Here’s Mark’s closing paragraph:

To paraphrase Thomas Sowell: The first lesson of international economics is that free trade makes us better off and protectionism makes us worse off. The first lesson of politics when it comes to trade issues is to ignore the first lesson of international economics. And that pretty much sums up what we’re getting from the “first authentic protectionist to win the White House since the 1920s” — 0% economics and 100% politics.

Fans of Trump’s protectionism (and, let me not be partisan, also fans of Bernie Sanders’s protectionism, for it is practically identical to Trump’s) should read Mark’s post carefully and ponder it again and again until they see that restricting the flow of goods and services into a country can only make the bulk of the people of that country poorer and not richer.

That such a truth is disputed has always baffled me.  No man thinks that his family would be made richer if thugs surrounded his home and drove away some of the goods and services that he ordered for delivery to his family’s residence.  No woman thinks that her household would be made richer if weapons-wielding goons forced her, her husband, and her children to pay a fine each time they bought a good or service from someone outside of the household rather than she and her family produce that good or service themselves.

But call the economic unit “country” or “nation,” and this commonsensical and correct understanding disappears.  People are, it seems, made illogical – their minds turned into mush, their rational faculties thrown into reverse gear – simply by the words “country” or “nation” or “USA.”  Use these words or their variants, and “less” comes, for too many people, to mean “more” while “more” comes to mean “less.”  “Abundance” suggests inevitable poverty, while “dearth” suggests inevitable wealth.  And those who forcibly prevent peaceful individuals each from taking advantage of the best deals that he or she can find are no longer understood to be the criminals that they are, but, instead to be saviors whose depriving actions will, somehow, make us all less deprived.

(Thanks to Cafe Hayek for the pointer to this post)

Thursday, January 26, 2017

2.3 per cent of all NZ taxpayers contribute 21.4 per cent of all the personal income tax collected

IRD have recently released information regarding income distributions of New Zealand individual taxpayers from 2007 to 2015 which makes for some interesting reading around trends.

The following breakdown was produced by The Herald:

These estimates provide a good insight into how New Zealanders pay tax, and since 2007 there has been:

• 247,000 more people are filing tax returns

• $44 billion increase in taxable incomes in 2015 compared to 2007

• $4b more in personal tax collected

• 17,000 fewer people are paying no tax at all

• Double the number of people now earning more than $150,000 a year.

The number of taxpayers has risen by 247,000 (7.4 per cent) to 3,614,000 since 2007, and the total amount of personal tax collected rose $4 billion (16.1 per cent) from $25b in 2007 to more than $29b in 2015.

It is interesting to note this overall amount of tax has increased after the effect of the income tax cuts the National-led government put into place.

Startlingly, the amount of overall taxable income in 2015 was almost $150b, up from $106b in 2007; an increase of 41.1 per cent.

There are many other good indicators from the IRD data of growing incomes and an economy in good shape.

For instance, the number of people paying no tax at all has fallen to just less than 100,000 in 2015 from 117,000 in 2007.

Also the number of people earning more than $150,000 a year, has more than doubled to more than 84,000.

Individuals earning $150,000 or more (2.3 per cent of all taxpayers) have contributed 21.4 per cent of all the personal income tax collected, and on average each paid $74,000 of income tax.

However, the average tax rate dropped from 35.8 per cent in 2007 to 29.4 per cent in 2015 which reflects the reduction in the top individual tax rate from 39 per cent to 33 per cent.

Spikes of higher numbers of taxpayers receive around $16,000 and $21,000 of taxable income, and these correspond with the amounts of welfare and superannuation payments received by those taxpayers.

There are other spikes at the change of tax thresholds, particularly at the $70,000 threshold where the personal income tax rate changes from 30 per cent to 33 per cent.

Interestingly, the number of people in 2015 earning between $69,000 and $70,000 was 6870 more than those earning between $70,000 and $71,000, so the spike only relates to a small number of people.

However, this spike is easily explained, as trusts often distribute income to beneficiaries so the beneficiaries' income is about $70,000.

This is because the trust tax rate and the highest individual tax rate are both 33 per cent; so there may be little point in distributing any further income if the beneficiary does not require any further income.

There is no tax avoidance in these circumstances as the same amount of tax will be collected irrespective of whether further income is distributed due to the 33 per cent common tax rate.

Having said that, I believe once the tax rates were aligned at 33 per cent, trustees are more inclined to distribute more of a trust's income to beneficiaries and this is another reason why the individual's amount of taxable income has increased so much.

Overall the information provided by the IRD is encouraging with incomes rising, and consequently the income tax collected is rising as well.

- NZ Herald

Monday, January 23, 2017

One new regulation means one out the door

In 2015 Canada passed a regulation requiring just that. In principle it is bang on; implementation can be problematic.

New Zealand has a net benefit policy which falls into much the same category – same principle different implementation.

The following was published on the AgainstCronyCapitalism.org website in April 2015.

Why is this so important? Regulation, both necessary and unnecessary (red tape), are a huge hidden tax on all Canadians. The latest estimate from the Canadian Federation of Independent Business suggests that regulation costs $37 billion a year. To be clear, not all of these costs could or should be eliminated. But Canada’s small business owners suggest that about 30 per cent of these costs, $11 billion, could be eliminated with no negative impact on human health, safety or the environment. This number seems reasonable given that British Columbia has reduced its regulatory requirements over the past decade by over 40 per cent with no one arguing the cuts had any serious negative impacts.

Now it seems this is also a concept which according to Donald Trump’s 7 point plan for the first 100 days he wants to institute:

“for every new federal regulation, two existing regulations must be eliminated.”

Tuesday, January 17, 2017

Crime, Ink and Tattoos

A statistical analysis of the art on convicts’ bodies. What can be learned from a prisoner’s tattoos - how they affect ability to get work and to stay out of prison.

IN THE mid-1990s a man named Frank, recently released from prison, came to Gregory Boyle, a Jesuit priest in Los Angeles, for help. Frank was having a difficult time finding a job, in part because of his chequered past. It probably wasn’t helping that he had the words “FUCK THE WORLD” inked across his forehead.

Father Boyle hired Frank to work at a bakery he had set up to provide jobs to people trying to go straight. He also found a doctor to help remove his act of nihilistic rebellion from his face. The bakery was the first business in what is now Homeboy Industries, a non-profit which has since grown to be America’s largest gang-rehabilitation centre, offering employment and other services to hundreds of former gang members. Its free tattoo-removal service has become the organisation’s biggest claim to fame.

Such programmes are spreading all across America. Half a mile from Homeboy, at the Twin Towers correctional facility, a Los Angeles County jail, inmates on good behaviour are eligible to have their tattoos removed free of charge while still incarcerated. The process is painful—one ex-convict describes it as being hit by a rubber band that’s on fire—and can take multiple sessions stretching over months. But many decide that changing the personal yet public messages written on their skin makes the pain worth facing.

Talking to the prisoners reveals that sometimes it is the personal that matters most. When asked what suddenly spurred him to want to erase the name of an ex-girlfriend, Edward Marron at Twin Towers responded matter-of-factly that his “baby’s mom didn’t like it”. (On his left arm the name of another ex-girlfriend is almost but not entirely obscured by a cover-up tattoo of a tree.) Some just resent the shoddy craftsmanship of their prison ink—one inmate wants to have his Pittsburgh Steelers tattoo removed so it could be redrawn by a professional.

However, tattoo removal can be a more meaningful endeavour: zapping away an old tattoo can change how others see you. When those others are judges, or prospective employers, that can be good; when they are erstwhile gang-mates, it can carry risks. Perhaps most important, removing your tattoos can also change how you see yourself.

The personal is statistical

Individuals choose to write stuff on their bodies—or erase it—because of what that specific tattoo means to them. But the prevalence of tattooing in America’s prison population means that, in principle, it should be possible to formulate general rules about what people say on their bodies, too—to add a statistical meaning to the tattoo’s biographical, or simply graphical, one. The Economist decided to investigate what inferences about a life of crime it might be possible to draw from different types, and numbers, of tattoos.

The websites of many state prisons feature public, searchable databases of their inmates. The data usually include their names, height, weight, demographics, criminal histories, and, sometimes, whether or not they have any distinguishing marks, including tattoos. The most impressive of these, for our purposes, was that of the Florida Department of Corrections (FDOC): a downloadable database featuring records for all the 100,000 inmates currently incarcerated in the Florida state prison system. It provides a great deal of detail on their markings as well as their ethnicity, age and crimes. With a few lines of code it is possible to discover what tattoos a particular Florida inmate has, and where on their body they are located.

The most obvious thing these data show is just how common tattoos are. Our tabulations of the data show that three-quarters of the Florida prison population has at least one tattoo; the median inmate has three. The data also confirm how generational criminal tattoos are: a whopping 85% of prisoners under 35 have tattoos compared with 43% for prisoners aged 55 and over. In the public at large the rate is 23%. The majority of these tattoos have no explicit associations with the criminal world. The most popular designs and motifs include names, animals, mythical creatures (dragons and unicorns are especially voguish) and Christian symbols such as crosses, rosary beads and scrolls with verses from scripture.

The database shows relatively few inmates with overtly criminal tattoos. For example, 15% of white inmates had heart tattoos, while just 3% had tattoos relating to the white-supremacist movement. Some tattoos reflect remorse: at least 117 inmates have tattoos with variations of the phrase “Mother tried”. Thirty-one Florida inmates appear to be big fans of the hip-hop group NWA, sporting “Fuck the police” tattoos. Some tattoos are humorous: at least seven inmates have the words “Your name” tattooed on their penises.

Different demographic groups opt for very different tattoos. Unsurprisingly, white inmates are more likely to feature images associated with the white-supremacist movement: swastikas, Iron Crosses and the like. Hispanic inmates, often raised in Catholic households, favour Christian imagery: the Virgin Mary is a common subject. Black inmates prefer words, eg “Precious”, and often carry slogans relating to gang life. Female inmates are more likely to carry tattoos of butterflies, hearts and the reminder that “This too shall pass” (“Boss bitch” isn’t often seen on men, either). Male inmates are more likely to have tattoos of images directly relating to incarceration such as prison bars and guard towers.

If people’s ethnicity and sex determines their tattoos, can the same be said of their types of crime? Using data from the FDOC, The Economist built a series of statistical models to predict the likelihood criminals had committed particular crimes based on their demographic traits and choices of tattoos (see table).

Our analysis finds that inmates convicted of property crimes and weapons-possession offences have the most tattoos, while sex offenders, particularly those convicted of paedophilia, tend to have the fewest. Inmates with at least one tattoo were actually 9% less likely to have been incarcerated for murder than those without. The effect is even more pronounced for those with tattoos on the head or face, who are around 30% less likely to be murderers. Similar associations can be found for perpetrators of domestic crimes. Those relationships hold even after controlling for age, race and sex.

Some prison-specific motifs are also more common among the less violent. These include tattoos of clocks without hands, prison walls and spider webs, all reflecting the tedium of incarceration, and a popular tattoo depicting the thespian masks of comedy and tragedy along with the slogan “Laugh now, cry later”. Such tattoos are positively associated with low-level offences, but negatively associated with homicide.

Inmates with Christian tattoos—that is, those inked with images or passages from scripture—do seem to be slightly more virtuous. They are 10% less likely to be murderers than those without (this result holds regardless of any difference in types of crime committed between Hispanic and other prisoners). But though the godly may be slightly more good, the devilish are not obviously more evil; tattoos featuring pentagrams or images of Satan are not statistically significant predictors of homicidal tendencies.

Kevin Waters, a criminologist at Northern Michigan University and former Drug Enforcement Administration agent, notes that understanding which tattoos are purely aesthetic and which are signals can be a lot of help to law enforcement, distinguishing truly hardened criminals from posers—gang members do not take kindly to outsiders adopting their imagery. What can tattoos more directly associated with criminality tell us about an inmate?

A common Florida prison tattoo, predominantly seen on Hispanics, features three dots between the thumb and index finger. The tattoo is shorthand for mi vida loca, or “my crazy life”, and its wearers are 45% more likely to have been jailed for murder. Members of the Latin Kings, the largest gang in Florida, often sport tattoos of a five-pointed crown or the letters “ALKN”, which stands for “Almighty Latin King Nation”. Our analysis shows that inmates bearing such tattoos are especially dangerous—they are 89% more likely to be killers.

The truth in black and grey

Nazi imagery is the most obvious characteristic of white prison gangs, but they also favour classically European images ranging from four-leafed clovers to the Valknut, a Viking symbol comprised of three interlocking triangles. Perhaps because of their ubiquity, white-supremacist imagery is not as predictive of murder charges as some other tattoos—still, we find that inmates bearing such symbols were 19% more likely to be murderers.

Picking up on your cellmate’s record from his skin is doubtless a useful skill for those inside. Policymakers, though, may care more about what tattoos say about the future than what they reveal about the past. Nearly half of inmates released from federal prisons and placed under supervision, and three-quarters of those from state prisons, are rearrested within five years of release. Demographics serve as depressingly effective predictors of recidivism. At the federal level, eight years after release, men are 43% more likely to be taken back under arrest than women; African-Americans are 42% more likely than whites, and high-school dropouts are three times more likely to be rearrested than college graduates.

How do tattoos fit in the picture? In a study published in 2013 Mr Waters, along with fellow researchers William Bales and Thomas Blomberg, looked at the link between recidivism and the presence of tattoos in Florida prisoners. They found that after controlling for demographics and crimes committed, inmates with tattoos were 42% more likely to be re-incarcerated for committing a violent crime. A subsequent study by Kaitlyn Harger, now of Florida Gulf Coast University, found that upon release, ex-cons with tattoos could be expected to last just 2.4 years outside prison before being re-incarcerated, compared with 5.8 years for those without. The effect was especially pronounced for those with tattoos on the hands and face.

Our own analysis of Florida prison data corroborates previous research. We find that of the 60,000 first-term prisoners released between 1998 and 2002, 45% have since landed themselves back in prison. Tattoos are unreasonably effective predictors of recidivism: we find that of the inmates who have been re-incarcerated, 75% percent had tattoos. Just 30% of the former convicts who have managed to stay out of prison were noted as having tattoos. Gang life looks notably hard to escape. Eighty-one per cent of those recorded with Latin Kings tattoos were rearrested at least once after their initial release.

Predictive as they may be, it would be hard and probably foolish to argue that the tattoos cause the recidivism; far more likely that both reflect something else about character and circumstance. Similarly, tattoo-removal programmes seem unlikely in and of themselves to make anyone an intrinsically better person. But they can reflect a genuine investment in change (remember those burning rubber bands) and they may also help reduce the amount of discrimination reformed ex-cons face.

As tattoos permeate the mainstream, though, being ink-free may mean less and less. Attitudes towards tattoos are liberalising: in a study that the Pew Research Centre, a think-tank, released in 2010 38% of Americans aged 18-29 had tattoos, compared with 15% for those aged 46-64. Indeed, an intriguing example of their mainstreaming can be seen in the influence of Californian prison gangs on tattoo culture at large.

Tattooing behind bars is prohibited. This does not come close to stopping it; but it does mean inmates must be creative when it comes to art supplies. One constraint is ink, which often has to be improvised from materials like boot polish or the soot from burned textiles—say, cotton. Such sources limit artists to monochromatic tattoos.

Finding the right tools can be challenging too, as hand-poking a tattoo on one point at a time can be both laborious and painful. A breakthrough came in the 1970s when inmates in California discovered how to create improvised tattoo guns using the motors from cassette players. The new gadgets made tattooing behind bars quicker, but featured only a single needle, which made drawing thick lines more difficult.

These constraints, along with the aesthetic sensibilities of Hispanic prison gangs, led to an entirely new style of tattoo—the “black and grey”. The style’s thin lines and colourless palette was put to the service of more realistic imagery than Americans had previously been accustomed to. The style quickly spread to prisons in other states—and then to the outside world.

Freddy Negrete, one of the original pioneers of the black and grey when an inmate (and the originator of the “Laugh now, cry later” motif), notes that initially, people on the outside got the tattoos so as to look as if they had been in prison. But he suspects that the hipsters and celebrities he now tattoos in the same style at his parlour on Sunset Boulevard know nothing of the style’s origin.

Nor, it seems likely, would most of them feel comfortable around the gang members from whom their style of tattoo is derived. Walking through the doors of Homeboy Industries is a jarring experience for those who have no previous experience of a life of crime beyond the occasional speeding violation: the dozens of former convicts decorated with images of skulls and Aztec warriors in the lobby look pretty forbidding. Some are inked from head to toe. Very few are keen on eye contact.

But walking through those doors for job advice, for a tattoo removal, or for any sort of help can be just as difficult. The staff, many of them former convicts themselves, are eager to help, but the criminal life is not one which fosters trust in others. Many former convicts have too much pride to ask for help. Others are convinced that they can never reform themselves. But for those who can muster up the courage, removing the marks of a prison tattoo can be the ultimate act of rebellion.

The Economist December 24th 2016

Friday, January 13, 2017

The media: actual terrorism (data) versus media coverage

Behaviour often reflects coverage in the media not reality on the ground. Not necessarily the media’s “fault” – they reflect their readership but the contrast is truly startling…. here are the data and graphs:

How Media Fuels Our Fear of Terrorism

By Nemil Dalal

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“A wide expanse of America’s populace finds itself engulfed in a collective fear … a creeping fear of being caught in a mass rampage has unmistakably settled itself firmly in the American consciousness”

Sonny Kleinfield, New York Times article after the San Bernardino terrorist attack

***

A very large portion of the news we consume is about terrorism in America and Europe. That coverage has consequences on how people live their lives.

In the wake of the San Bernardino terrorist attacks, one women (who did not yet have kids) told the New York Times she planned to home school her future children for fear of mass shootings. Another man recounted that he now watches movies at home instead of in public theaters. Another stated she now steers clear of crowded public areas.

We hear about terrorists attacks in the media and then adjust our lives based on how we process that information. But is the amount of media coverage dedicated to terrorism in the West in anyway commensurate with the actual risk of terrorism we face?

In this article, let’s see how an American newspaper (The New York Times) covers terrorism, and show that this selective coverage can give us a distorted sense of the world using actual data. The aim of this analysis is to show how news media — especially social media — cover/distributes a non-representative set of events based on what is relevant/engaging to their audience. Readers and viewers then use this selective data to infer what the entire reality is.

Media is data for human decisions, and selective media is selective data. Selective data can lead to bad inferences and bad decisions, as was the case with the explosion of the Space Shuttle Challenger. Selective facts can actually be worse than no facts or fake news, as it can give us a false sense of confidence.

***

With horrific attacks in Paris, Orlando, San Bernardino, Brussels, and Berlin, there has been wide coverage of the threat posed by radicalized Muslims in the last two years. 

For example, this is an animation of how the Orlando nightclub shooting was covered on the New York Times website over several days, with a substantial number of articles about the attack.

Source: New York Times

After looking at the news coverage, are you afraid of terrorism? What about mass shootings? Does it make you want to change your life in any way? What would you ask of your political representatives?

But how rare is terrorism actually versus other horrors? First, let’s look at terrorism deaths versus homicide deaths.  At left, we have the actual number of deaths in the US and world, with coverage in the New York Times in the rightmost bar.

Measuring Terrorism Deaths versus Terrorism Coverage


Source: Terrorism data from National Consortium for the Study of Terrorism and Responses to Terrorism (START). (2016). Global Terrorism Database [Data file]. Retrieved from https://www.start.umd.edu/gtd. Custom NY Times analysis for media coverage data, with articles representing the first few pages of the New York Times shown. Homicide data from the CDC and the World Bank.

Note: We’ll use a 15-year average for US terrorism deaths, which includes 9/11 in the US. As a result, these numbers will be higher than any single year in the last 14 years – but also less than 9/11. We’ll also use a shorter multi-year average for world terrorism. Front page+ is defined as the first few pages (~3) of the New York Times, consistent with how an average reader may experience it.

Homicides and terrorism have roughly the same number of articles in 2015-2016, despite the fact that homicides killed many more in the US and in the world in that time period.

Some will argue that the reason for heavy terrorism coverage is because tens of thousands (or more) may die in a future attack - and so heavy coverage of current events ensures our vigilance. Others will argue it is because terrorism evokes more reader interest and terrorists purposefully design their attacks to get heavy coverage. Regardless of the reason, currently terrorism deaths are the single most heavily covered type of death per capita in the first pages of the New York Times compared to every other way a human can die.

If you’re a consumer of American media, you might be under the impression that terrorism is a large source of deaths in the United States. If we were to graph the number of deaths due to terrorism in 2015 by region of world, however, it would look like this:

Source: National Consortium for the Study of Terrorism and Responses to Terrorism (START). (2016). Global Terrorism Database [Data file]. Retrieved from https://www.start.umd.edu/gtd

Approximately 30,000 people – most of them innocent civilians – lost their lives to terrorism in 2015, with the majority in current war zones (Iraq/Syria and ISIS, Nigeria and Boko Haram, Afghanistan/Pakistan and the Taliban, Ukraine and ethnically Russian separatists/special forces). Most deaths were in Muslim countries, suggesting that many victims were Muslim (you can also see this world map of incidents that I’ve put together).

By comparison, an American will likely see the coverage of terrorism deaths like it’s covered in the first few pages of the New York Times over the course of 2015:

Source: NY Times Today’s Paper links for 2015 with manual tagging and custom analysis (the top two sections - h3 and h6 HTML tags - were chosen, which are similar to the first three pages of the NY Region print edition). The graph above composes ~180 stories of the ~6,000 stories in 2015. The majority of terrorism death stories above are on the front page, not the second or third page. I’ve excluded the Charleston Church shooting in coverage, which some may not consider terrorism - though the START terrorism dataset previously shown includes it.

To make the comparison easier to see, I’ll show the two graphs side by side:

Sources: NY Times Today’s Paper links with manual tagging and custom analysis. National Consortium for the Study of Terrorism and Responses to Terrorism (START). (2016). Global Terrorism Database [Data file]. Retrieved from https://www.start.umd.edu/gtd. Part of the difference may be due to different definitions of “terrorism” and how war deaths are less covered than general war events, though this will likely only impact the magnitude of the skew not the presence of it.

The graphs are nearly inverted: Less than 1% of terrorism deaths are in Western Europe and the US, while 70%+ of terrorism death coverage on the first few pages in the New York Times is of these events (Try the interactive version of the chart in a different form - that lets you filter different regions)

This is what media observers call a filter bubble or echo chamber. The audience’s preference for certain “newsworthy” and “relevant” topics (and lack of interest in others) will then give us a distorted view of the world. We’ll call this effect the invisible hand of the reader and examine it throughout this series.

I won’t argue that media should cover events as the blue bars. By focusing on events that don’t interest their audience, news outlets and social media companies would in fact be diminishing their readership — and their profits. But humans mistakenly use media coverage to understand what’s going on in the world — instead of realizing how selective this coverage is and making adjustments.

Media critics will also argue that “the media” is biased, without realizing the audience and economic forces that underlie much of this. This effect gets even more problematic in social media, where relevance is based on an individual reader’s interests and beliefs - not the more diverse audience within a country.

The New York Times editors realize how much interest there is in Western terrorism incidents over everything else for an American audience, and set their coverage appropriately. In journalism parlance, they cover “newsworthy” topics that interest their readers, featuring it heavily and crowding out many other potential stories each day. This is also consistent with the terrorists’ objectives, as they are trying to maximize the coverage they get in certain populations, to intimidate the largest group — and to recruit the largest number of people.

While filter bubbles have received substantial interest in the social media era, they have always existed. In the past, filter bubbles were based on your country or social group. Today, because of social media, we are now each surrounded by individualized filter bubbles that can confirm our pre-existing beliefs. This is because we now have the power to determine what media to consume based on what our like-minded friends share.

Media Matters for Decision Making

We read the news to form opinions and make decisions. A facile model of how humans make decisions might be as follows:

Let’s compare the different inferences that an American might make based on the differing graphs, like we did with the Space Shuttle Challenger:

While we’ve only filled out the inferences, you can reflect on what decisions you might make from the different graphs. How would you think about the danger level when you take your children to school? What thoughts come to mind when you think of all of the 1.6 BN followers of Islam, especially after 9/11? Would you visit France for a vacation?

Some argue that uneven coverage is morally wrong (and others disagree), but for our purposes, the issue is that uneven coverage negatively affects our decisions.

I began this post by quoting Americans who made major life changes out of fear of mass shootings from rethinking their children’s education plans to refusing to leave home. We can also note the 70% decline in tourism to one French site or the US’s large counter-terrorism budget. Or consider the fact that the drop in US air travel after the plane crashes on 9/11 potentially led to 1,000 more auto deaths in subsequent months. Cars are many times more dangerous than planes, even on 9/11.

This media dynamic of course exists in other countries as well, and that shapes their views of the United States. What would you think if the majority of media coverage about America that a Middle Easterner read focused exclusively on American drone strikes and Guantanamo Bay? After all, this would be newsworthy and relevant for the Middle Eastern reader - and something they want to read. And yet, this is just selective coverage that gives the reader a dangerously distorted view of the US, fanning anti-Americanism.

Our (Collective) Distorted View

These results become especially worrisome when we consider the impact media coverage has on the world's perception of Americans.

For most Middle Easterners, their perspectives of Americans are driven by media coverage, not personal encounters. If the same selectivity exists for them, they will see substantial coverage of American drone strikes that kill civilians and civilian deaths after the Iraq war (at least one hundred thousand) and blame that on Americans — rather than empathizing with the pain inflicted on Americans by terrorism in the US. We can add other widely covered issues such as Abu Ghraib, Guantanamo, and American military aid to unpopular governments, not to mention continuing bias attacks against Muslims in the US.

A Middle Eastern Muslim’s view of Americans may be far divorced from reality. After all, their coverage focuses on these events, rather than giving them a broader and more accurate perspective.

The primary way that most Americans are exposed to Muslims is through some form of media as well. Today, most US coverage is of war in the Middle East, terrorism, and radicalized Muslims, especially after 9/11. Given their small part of the US population, Muslims also aren’t an economically appealing audience for most American media organizations.

Ask yourself a few questions: How much have you read about Western terrorism by Muslims? What perspectives do you have of all 1.6 billion Muslims as a result? Would the US coverage be different if Muslims were 10% or 25% of the US population?  On the other hand, how much have you read about civilian deaths from US action in the Middle East or terrorism against Muslim civilians?

How much do you think a Muslim in the Middle East has read about potentially controversial American activity in the region? How much have they read about recent Western terrorism by comparison - or all the positive impacts America has on the world? Do you think this affects how they perceive all Americans?

With the growth of social media, we can apply this argument for many other groups within a country: Democrat vs. Republican, conservative vs. liberal, Black Lives Matter activists vs. those believing in “law and order”. In each case, a supporter is selectively seeing the media coverage that confirms their views, while not seeing those that are at odds with it. A Clinton supporter may see only racist attacks against minorities in their news feed, while a Trump supporter may only see attacks on Trump supporters. Both do happen. In addition to selective data, as readers we’re over-generalizing our view of the entire other side, based on extreme events or commentary from a select fringe.

This analysis is limited in a number of ways — especially because we’ve chosen the first pages of a single media source. But it’s not an unfair representation for how a typical media source covers terrorism in the US. This selectivity for death coverage for similar social and ethnic groups likely exists in all parts of the world — and is a collective challenge for effective decision-making when using media.

***

This was a post by Nemil Dalal and is Part 2 in a series where he looks at data to highlight media selectivity. Signup to be notified when the next post in this series is published. Thanks to Shay Maun for reading early drafts of this article.

Wednesday, January 11, 2017

Grey Mater

Scanning reveals what pregnancy does to a mother’s brain

New mothers experience reductions in the volume of grey matter in their brains

AS ANY parent will tell you, once you have had children nothing is ever quite the same. Including, it seems, their mothers’ brains. In a paper just published in Nature Neuroscience, a team led by Elseline Hoekzema of the Universitat Autònoma de Barcelona, in Spain, describe for the first time how pregnancy alters women’s brains, rewiring them in ways that persist long after a child has been born.

Dr Hoekzema and her colleagues performed detailed brain scans on 65 female volunteers, none of whom had been pregnant before, but hoped to be in the near future, and a further 20 who had no such desire. About 15 months later, by which time 25 of their volunteers had carried babies to term, they repeated the process.

Comparing the scans showed significant reductions in the volume of grey matter in the brains of the new mothers. (Grey matter contains the main bodies of nerve cells; white matter, the brain’s other component, consists mostly of the nerve fibres that link those cells together.) The effect was reliable enough that it could be used by itself to predict, with perfect accuracy, which of the women had been pregnant and which had not. And it was persistent, too. When the researchers retested the mothers two years later, most of the alterations were still present.

Dr Hoekzema and her colleagues suspected that something in the biological process of pregnancy itself was causing the changes. To double-check, and to make sure that the experience of preparing for parenthood was not the true culprit, they also compared their women’s brains with those of some men—both fathers and those without children. The men’s brains, like those of the childless women, showed no such pattern of changes. And the results fit with studies on animals. Rats that have had pups, for instance, show notable and lasting changes in brain structure. They also tend to be less anxious, better able to cope with stress, and to have better memory than their pupless contemporaries.

Pregnancy, then, does indeed do things to a woman’s brain. But what exactly those things mean is hard to tease out. Neuroscientists do not really understand how the brain works. That makes it difficult to predict how a change in the organ’s structure will alter the way it functions.

Some of the changes took place in the hippocampi. These are a pair of small, banana-shaped structures buried deep in the brain, one in each hemisphere, that are known to be important for forming memories. Administering a few simple cognitive tests to the new mothers—including tests of memory—revealed no obvious changes in performance. And the hippocampi had partially regrown within two years. But Dr Hoekzema and her colleagues point out that most of the more permanent reductions in grey matter happened across several parts of the brain that, in other experiments, have been found to be associated with the processing of social information, and with reasoning about other people’s states of mind.

That would make sense from an evolutionary point of view. Human babies are helpless, and, in order to care for one, a mother must be good at inferring what it needs. The rewiring may also affect how well women bond with their infants. After the women in Dr Hoekzema’s study had given birth, the research team administered a standard psychological test designed to measure how attached those women had become to their babies. The ones with the greatest reductions in grey-matter volume were, on the whole, the most strongly bonded.

Efficient wiring

Ascribing all this to a reduction in grey-matter volume, rather than an increase, sounds counter-intuitive. But Dr Hoekzema reckons it is probably evidence of a process called synaptic pruning, in which little-used connections between neurons are allowed to wither away, while the most-used become stronger. That is thought to make neural circuitry more efficient, not less so. She points out that the surge of sex hormones people experience during adolescence is thought to cause a great deal of synaptic pruning, moulding a child’s brain into an adult one. So it is reasonable to assume that the even greater hormonal surge experienced during pregnancy might have a similar effect. When it comes to the brain, after all, bigger is not necessarily better.

The Economist, 24th December 2016

Monday, January 9, 2017

Not nearly as unequal as you thought

This example is about travel. It applies to numerous other goods and services – electronic goods for one comes to mind. 

Flight Centre NZ has calculated that in 1947 an average return airfare to London from Auckland would have cost approximately $1170, equivalent to more than $110,000 today.

That would equate to 85 weeks' pay for the average worker. In 2016 the same airfare cost on average $1700 or 1.2 weeks' pay.

Flight Centre's general manager product, Sean Berenson, says travel is booming right now and Kiwis are making the most of it.

"Where 10 years ago our average customer might have saved to take one holiday every second year, many are now booking two or three annually and there aren't really any places that are out of reach.”

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