Saturday, March 21, 2009

Statistics (again)

I have, in the past, on this blog commented on statistics. There is a good reason for that: statistics are everywhere.

Statistics are vital to science, politics, economics, ...

Mathamatically statistics can be very simple to very complex. The simpler the analysis the less wiggle room for out and out lying about results (a standard deviation is what it is and if it corresponds to 30% of the value it is not too good). This gets us to political polling. We've heard lots of it and will hear lots more. The math behind the various modeling parameters and resultant presented data is all good and valid. The selected model and any extrapolation to the motivation behind behavior on the other hand...

And now the trouble. It is impossible to perfectly predict behavior of a hydrogen molecule (H2). Billions and trillions of molecules, however, tend to behave. People are somewhat more complicated than hydrogen (and arguably less explosive, but I'll reserve judgment on that), but are not available in sufficiently large and uniform numbers that large number treatment is relevant.

In general 1/sqrt(#) gives an estimate of the deviation from the mean, which is often the stated error in the absence of an error that can be propagated for a system. So 10000 sample points corresponds to 1% error. In science 10k is a small number and 1% dev from the mean is huge. In polling people it is a huge number. Often ~1000 (or ca. 3% error) is used. The problem is that that 3% error assumes that the sampling is random across all major differences. The 1000 must be completely random, but then some race, or religion or region or...may be undersampled invalidating the resulting stated error. This means that the "random" sample must have rules associated with it that preclude true randomness. Often times statisticians use post sampling corrections. That is, a random sample is used, but then various models are used to variably extrapolated different subgroups to their representation in the general population. Those models, of course, are quite variable. In the end this means that the stated % error is pretty much crap. The only validity it holds in practice is if there is sufficient past experience by a particular statistician to lend validity. Of course that is meaningless if something fundamental changes from past samples.

I'm fairly certain I lost sense in there somewhere so I'm posting this for now. May correct later.

Sunday, March 15, 2009

Fable 2 Offline Money Calculator

Is a very fun game. I don't have it but played at a friends. The fighting sucks, but I love the money/real estate side and the interactions with the people around. In particular if you lease a property or own a store you earn money. When you are playing you get it every 5 min of real time. But you get paid when offline too. I finally found some numbers, and used them to give a rough calculator. This is my guess as to how it works in the game. The number of payments you receive when you start playing again goes with the square root of time. Put to numbers it seems:

#pmts = int(sqrt(t/5))

Where t is in minutes since logged out, and with the at max #pmts = 100 (which would occur at near 35 days). I was frustrated by not being able to find this, which at least that serves as a rough estimate.

So it's a good idea to log in, get money and log out daily, even if you don't have time to play every day. (you get 16-17 in the first 24 hrs, but 32-33 in 96, and 45 for 7 days)

Thursday, March 12, 2009

Science in Public Discourse

I generally love the idea of science getting public attention, and the fact that our new administration seems to see science as worthy of respect (and funding) is a good thing. I still don't know how to think about the way that science is conveyed and perceived by the general public.

There are two major problems: 1. Scientists generally do not do a very good job of conveying their studies and message to a general audience, 2. Those who do convey messages well to a general audience typically don't understand science worth a damn. This is why news outlets (tv and papers) so easily fall into the traps of anti-science types. Anti-scientists are dominated, publicly, by religious (anti-evolution, anti-stem cells) and industrial (anti-global warming) anti-science groups. Both groups are much better at presenting things to the public because they represent the same level of science understanding, i.e. virtually none.

I can explain the cyclic voltammetric response to increased solution resistance very well to another electrochemist. And electrochemistry pretty well to a chemist. And I can even do a fair job of explaining general chemistry to a chem student or a physicist. Explaining any level of science to someone who has no background, and little interest in, science is virtually impossible. The language is just too different. The subtle distinction between scientific theory and hypothesis is easily lost to someone who uses the word "theory" synonymously with "guess." The elegance behind the statement that 0% and 100% do not exist in real probabilities is lost when the listener has no familiarity with numbers like 10^-34.

On the one hand it is incumbent on scientists to do our best to share valuable information with the public in a way that they can comprehend. On the other it is the responsibility of media outlets (and the public) to understand that the complexities of scientific discovery and debate are not being kept from them because we are a secretive cabal of elitist decision-makers who are hell bent on silencing all dissenting voices, but because the complexities are just that: complex. They are well beyond the comprehension of most people, including most scientists not in the field being discussed. The anti-scientist arguments meant to sound rational but are not, they are emotional, and most scientists don't like to drag themselves into the mud to argue with them. (It is impossible to debate against a lie if viewers of the debate will not acknowledge the lie for what it is.)

In the face of complexity, it becomes easy to sound correct using the correct talking points against someone who lacks sufficient knowledge/background to dispute. Your high school biology teacher is very unlikely to even have awareness of the real scientific debates and controversies related to evolution, much less the related sciences that contribute and support the theory(like geology). Your high school physics teacher probably knows about relativity, but probably does not understand the mathematics that result, and is probably every bit as lost when it comes to string theory as I am.

Next time: where the hell am I going with this?

Wednesday, March 11, 2009

Simple House Pricing Formula

There are lots of ways to try and figure whether housing prices are reasonable, and there will always be some fudge factor, but for a quick immediate comparison the following seems to work:

House Price ≤ 150xRe - 150xHA - 10xTp

Where Re is equivalent monthly rent, HA is any monthly fee associated with ownership (like a homeowner's association) and Tp is the annual property tax. If a 1 bed 1 bath apt rents for $700 /month then a 1 bed 1 bath condo w/$100/mo fee and $1k/yr taxes should cost no more than $80k. Of course, location is important, as well as amenities. For detached, single family houses, finding equivalent rental prices can be difficult in many places, so some figuring may be necessary to compare with apartment prices instead.

And really, this is just a starting point. If the economy doesn't pick up, then rental prices may start to slide, and hosing prices that seem a good deal now may prove bad bets.

Tuesday, March 10, 2009

Walking Away Is Not a Morality Issue

It's a financial decision. The more I read the crap about responsibility to honor your obligations the more it ticks me off. CNN has comments from some folks here about whether they will walk away (be foreclosed on), and the answers are generally not in line with the real world. For a much more in line with reality commentary go read this.

Imaginary situation, bought in 2006:
Purchase price: $800k
Down payment: $160k (20%)
Other closing costs/fees: $20k
Total principal paid on mortgage: ~$20k @ 6% interest

Current house value: $400k
Owner out: 100% of investment of $200k+
Bank out: $220k if owner walks, less if they renegotiate, or 34.5%, plus they got another ~$80 interest worth of payments.

The banks are not being screwed by those that walk nearly as much as those that walk have been screwed by the artificial run-up in prices. Now people who put less money down (like $0) are not out as much cash, but are still out 100% of whatever they did put in. Banks are out by a larger amount (dollars and percents), but still not 100%. In this case the bank also bears substantial responsibility for making the loan (well, bad investment on the property).

Mortgages leverage a greater percentage risk on the buyer, not the bank. It is only when values fall precipitously that banks suffer much loss from a foreclosure. Of course, it's also only when values fall precipitously that foreclosure becomes a major concern. Specifically, foreclosure becomes a threat when the "owner" has equity of zero or less. This is a good reason for banks to require something (anything) down (particularly from speculators, who should have been forced to invest much larger down payments than resident owners...2-5% down for a primary home is fine, for a second house/investment property 25-50% down is a must). In rising markets the amount banks require down decreases due to the assumption of being able to sell for more (i.e. equity will always be positive if values always rise). This, naturally, is idiotic. Banks, who are supposed to be the financial experts in the transaction, should know better than to assume that anything (including housing, gold, et cetera) could only go up.

While many buyers were being irresponsible, it is downright vicious to lay blame on them. Banks are supposed to go through underwriting to prevent just these problems...they are supposed to hire appraisers that give them real house values so that they do not put in too much...they are supposed to know what they are talking about. I have never placed much trust in banks (and I've addressed that here before), and I am math capable, so it wasn't hard for me to figure out what I could afford and whether prices were in line with reality. Most people are not nearly so adept with numbers and take for granted when experts tell them they can afford payments.

I think that buyers do have a responsibility to understand what they are getting into, but their responsibility is less than that of the lending institutions in this regard. Of course, in a foreclosure it is the buyer, not the bank, that is hurt the most. They lose everything they invested.

Foreclosure, walking away, is not the irresponsible thing to do. The irresponsibility occurred on closing day.

Monday, March 09, 2009

Housing is Local, The Problem is National

For all the talk of the huge housing/mortgage/foreclosure crisis, it is remarkably confined (this is a good map). Basically pretty much the entire of California and Florida, a fair amount of Nevada, Arizona, Michigan, Ohio and possibly Indiana, and the metro areas of D.C., Chicago, Atlanta, and Memphis are the only areas where foreclosure is a major problem. Really, though, of all those areas, only California, Florida, Nevada, Arizona and DC were riding major speculative bubbles. I was living in Chicago for a bit and the bubble there was just starting to take off when it began collapsing out west, so things there are bad but not as bad. Rust belt states have severe economic issues driving their foreclosures.

The real problem, the reason that it is affecting the whole economy, is that banks (which will heretofore be a bad word) traded off those markets so heavily that everyone gets to suffer for the shortsightedness of a few. Don't get me wrong, housing values everywhere have gone down, and will a bit more. It's a sensible correction, but by and large it won't hurt folks like in those few places. Save for the trouble caused by the banks.

So, yes, it is a confined problem in terms of where the troublesome homes are, but it is a national problem because of the way that GOP desired deregulation allowed major financial institutions to gamble on that confined problem. I have a strong tendency toward letting the banks die, but that exact behavior is what turned one economic recession into the great depression. Maybe that is what is needed, but it won't make people's lives better any time soon to go down that road again.

Thinking Catholic to Vatican: WTF?

So here's the story...

A nine year old girl in Brazil is pregnant with twins, and has an abortion. The pregnancy, aside from being the result of rape, threatened the life of this very young girl (rape and life of the woman/girl are the only grounds for legal abortion in Brazil). On top of this the man who got the girl pregnant: her stepfather.

So the Catholic archbishop excommunicated: the girls mother and the doctors who performed the abortion. The girl's rapist stepfather...not so much. And now the Vatican defends this.

It's no wonder that church attendance has been declining in developed nations, or that people are in greater numbers saying that they are not religious (often that would be spiritual, but not religious). This is the Catholic church basically saying that raping a 9 year old girl is not as bad as her having an act that in this case will most likely help her mental well being and potentially saved her life, and at the very least minimized the potential for harm to her.

No matter your position on abortion, the Catholic church here is very much in the wrong, and will drift further out of relevance. If they want to make a difference when it comes to things like violence, war, poverty, hunger, abuse and other issues that are universally held as valuable, then they need to stay the fuck away from abortion and birth control and sex. That doesn't mean they should say those things are ok, but excommunication and repeated public statements are hurting, not helping with their overall cause. Especially when most people compare this with the Church's expressed level of anger when priests were raping altar boys.

Sunday, March 08, 2009

Interesting Viewpoint

Long post short version:

All economic gains of the past decade were not based on producing anything of real value (just financial numbering games), but we ignored it because rich people got richer, and their politicians were in charge. Also, in the meantime we have atrophied our productivity muscles, so the next decade isn't looking to hot.