Twofish's Blog

August 31, 2006

Transparency, inclusion and wikipedia

Filed under: academia, china, wikipedia — twofish @ 7:10 pm

One problem with being part of a new power structure (and wikipedia is a new power structure) is trying to avoid the mistakes of the old power structure.  I’ve been in some e-mail conversations about ways of dealing with the PRC’s block, and I always am a bit uncomfortable in these sorts of private e-mail discussions because they involve creating a division between people who have information and people who don’t.  It might seem silly to worry about this since its just an e-mail conversation between people with no particular power, but something that I’m reminded of is the history of how the Communist Parties of the Soviet Union and of China gradually transformed themselves from small bands of committed idealists to big nasty bureaucracies.

At the same time, there is a lot of semi-confidential information that probably shouldn’t be public. The two principles I think of wikipedia and of open culture are:

  • transparency
  • inclusion

I suppose the best way for me to deal with this is to make public that these sorts of conversations exist, and if you want to be a part of it, just e-mail me, and I’ll try to get you linked in.  I’ve been wondering what happens if someone I strongly disagree with wants in, but if that is the case, I’ll just refer them to someone else in the conversation, and see if they can get in through them.  Sort of the reverse of black-balling.

Anyway, the big argument that I’ve come up as to why the PRC and the CCP should lift the block is that they people that they are hurting are supporters of the CCP and the current government.  People who oppose the government are going to be posting to wikipedia anyhow.  The trouble with the block is that it effectively prevents someone who supports the CCP from posting and that runs the risk of creating an imbalance.

It’s also really embarrassing and difficult to be even moderating sympathetic to the CCP as I am, and be working on a project which is blocked by the PRC government.  If the PRC government were to lift the block, this would give a big boost to supporters of the government to participate in wikipedia.

The other arguments are:

  • The Chinese wikipedia is aiding the cause of national unification and promoting unity among Chinese worldwide by creating a common language and set of understandings
  • Chinese wikipedia allows the PRC to export culture and soft power.  It’s a hugely useful language learning tool
  • Chinese wikipedia is an ideal forum to disseminate information about laws and regulations of the Central Government which aids in promotion of rule of law and constructing a advance system of government.

However, I do have this nagging worry.  What if I’m wrong?

What if unblocking wikipedia causes social instability causing the downfall of the party, creating economic problems that wreck the global economic system, thereby destroying the stability of the core regions and handing victory in the Long War to Bin-Laden?

This is the problem with having an open mind and being pragamatic rather than ideological.  Someone who is committed to free speech as a matter of principle and who sees things in black and white is going to just dismiss that argument out of hand.  However, it is very possible that if I were to talk to a Communist Party official, I’d come away with the conclusion that “yes wikipedia must be blocked.”  But the possibility that someone might change your mind is the price one has to accept if one wants a real discussion in which you have a possibility of changing their mind.

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Connecting some dots

Filed under: china, finance, quantitative finance, quantlib, Uncategorized — twofish @ 6:42 pm

The talk about IMF having more voting power for developing nations is part of a deal that the US Treasury Department is trying to orchestrate in which China gets more say in international organizations in exchange for revaluing the RMB.  The prospect of a RMB revaluations means that China is going to buy fewer Treasury bonds and mortgage backed securities which is putting some upward pressure on interest rates which is starting to deflate the housing bubble.

It will be *really* interesting to see what happens next.

Wackier and wackier – Shanghai warrants

Filed under: china, quantitative finance, quantlib — twofish @ 6:43 am

http://www.cs.com.cn/sylm/02/200608/t20060831_986231.htm

And it ends with a large number of people exercising their underwater warrants.  What the heck????

August 28, 2006

Sigh…

Filed under: academia, father, history — twofish @ 7:54 am

Speaking of relics of a bygone era….

http://www1.jsc.nasa.gov/er/seh/ricetalk.htm

We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.

I also was reading Kennedy’s moon space. One of the things that impressed me after reading the speech again is the combination of lofty idealism with the hard noise bookkeepping “where is the money going to come from” thinking.

http://www.jfklibrary.org/Historical+Resources/Archives/Reference+Desk/Speeches/JFK/003POF03NationalNeeds05251961.htm

The most interesting paragraph in the moon speech is the last paragraph….

I have not asked for a single program which did not cause one or all Americans some inconvenience, or some hardship, or some sacrifice. But they have responded and you in the Congress have responded to your duty–and I feel confident in asking today for a similar response to these new and larger demands. It is heartening to know, as I journey abroad, that our country is united in its commitment to freedom and is ready to do its duty.

That gets me because I don’t remember the last time that an American politician in recent years who has asked people to sacrifice personal interest for the greater good.

Compare Kennedy’s 1961 speech with Bush’s 2006 and 2005 speech….

http://www.whitehouse.gov/news/releases/2006/01/20060131-10.html

http://www.c-span.org/executive/transcript.asp?cat=current_event&code=bush_admin&year=2005

There is not a word in that speech about hardship, inconvenience, or pain.

There are two paragraphs from Kennedy’s 1961 speech that are relevant to the situation in Iraq, and I don’t recall Bush making any of these points in any speech he made.

Let it be clear–and this is a judgment which the Members of the Congress must finally make–let it be clear that I am asking the Congress and the country to accept a firm commitment to a new course of action, a course which will last for many years and carry very heavy costs: 531 million dollars in fiscal ’62–an estimated seven to nine billion dollars additional over the next five years. If we are to go only half way, or reduce our sights in the face of difficulty, in my judgment it would be better not to go at all.

(…)

I believe we should go to the moon. But I think every citizen of this country as well as the Members of the Congress should consider the matter carefully in making their judgment, to which we have given attention over many weeks and months, because it is a heavy burden, and there is no sense in agreeing or desiring that the United States take an affirmative position in outer space, unless we are prepared to do the work and bear the burdens to make it successful. If we are not, we should decide today and this year.

The other thing that I’ve noticed in reading Kennedy’s speechs is that winning the Cold War wasn’t merely military, but involved an integrated military and economic strategy. The Soviet Union ultimately wasn’t defeated by military means, but it was bankrupted.

Also if you look at the two speeches….

http://www.bartleby.com/124/pres56.html
http://www.whitehouse.gov/news/releases/2005/01/20050120-3.html

The one thing that stands out about Kennedy’s speech was how internationalist in character it was, and how there *wasn’t* any sense of historical inevitability.  The United States *could* have lost the Cold War, just as it *could* lose the Long War, and that fact focuses the mind in a way that Bush’s speech didn’t do.

The reason all of this is significant for me is that I’m starting to understand what it was in Kennedy that made my father such a fan of his.

August 27, 2006

Feeling like a professor

Filed under: academia, Career, Uncategorized — twofish @ 9:34 pm

I’m actually starting to feel like a professor.  One of the problems in doing something “different” is that you lack social validation.  I don’t have the nice title, office or parking space that goes with being tenure track faculty, and so a lot of times, there is this nagging feeling that I’m a fake, because there is no one telling me that I’m “real.”

But that feeling seemed to have disappeared in the last two or three days.  Part of it has to do with posting onto the Chronicle of Higher Education website, and realizing that the issues that I’m going through are the same that other people are going through.  The other part involves reading journal articles and realizing that the stuff I’m trying to figure out is as complicated as anything that is in the journal articles.

The other thing is that I think I’ve realized something important about knowledge.  Knowledge isn’t about knowing the answers, it’s about being able to ask the questions.  I have very little idea how to price Shanghai warrants.  Neither does my six year old son, but I think what makes me a little different is that I’m starting to have the background to ask the questions.

Which probably explains why I’m starting to feel like a professor.  I’m starting to realize the level of my ignorance, and be able to state what I’m ignorant of, and to fix those holes.  For example, in going over the papers I started to realize that I had no idea how do to econometric hypothesis testing, and I’m going to have to learn that if I expect anyone to take what I say seriously.  The other thing is that I think I’m starting to ask questions which no one else has asked like “can you use a Garman-Klass formulation to calibrate a variance gamma model?”   or “can you use a Carr-Wu analysis to figure out the parameters of a variance gamma model as the derivative goes near strike?” or “what is the opitimal memory model to use for the objects that SWIG creates in R?”

I have no clue, but I will six months from now.

Lots of work.

Ozymandias / Pomp and Circumstance

Filed under: china, massachusetts institute of technology, Uncategorized — twofish @ 9:15 pm

One of my odder personality quirks is that I tend to listen to patriotic songs from empires long past such as British Imperial marches and songs from the Soviet era.  The reason for this is the the poem from Shelley, Oxymandias.  I happen to live in a period when China is rising, but nations rise and fall and rise again, and it’s always important to have a sense of your own mortality.  The question that every person and every nation has to realize is the impermanence of history, and after one’s time in the sun disappears, what will people remember.  That thought crosses my mind as I read about the Mars mission which China and Russia are jointly setting up for 2009.

The one march that comes in my head a lot is “Land of Hope and Glory” which is also known as Pomp and Circumstance.  This song has a lot of personal significance for me because it is the graduation march for American universities.  It also has a lot of historical resonance.  It was written at the height of British imperial power and released on the date that Cecil Rhodes died, right after the end of the Boer Wars.  When it was first played there was little sense that in a little over a decade, the British would face the horrors of Flanders Fields.

The analogous situation for the United States was the year I graduated MIT which was the year the Soviet Union collapsed with little sense that in less than a generation the United States would be in an exhausting war with a much more dangerous enemy.

August 26, 2006

Why I can’t cooperate with Human Rights Watch…..

Filed under: china, human rights — twofish @ 8:03 pm

Yesterday I posted an articles on Chen Guangchen and Zhao Yan. One would think that since I do think that China should be more liberal and have much more rule of law that I would be on the same side as Human Rights Watch, Reporters Sans Frontiere and other Western NGO’s, but unfortunately I find myself on the different side of the fence. Let me explain why.

The basic issue is that I am trying to do everything I can to keep the Communist Party in power and to prevent a revolution from happening, because I believe that the costs of a political collapse or of a revolution are far worse than the benefits. This might sound odd. If’ I’m trying to keep the Communist Party in power, then what am I doing trying to circumvent the Great Firewall with wikipedia or what am I doing supporting Chen Guangchen and Zhao Yan? The answer is simple. I’ve worked in large bureaucracies. You do not do anyone any good by being a “yes-man.” If you really want to help an organization, you must constantly challenge it, and push it to improve itself. Loyalty to an organization or cause means being a constant irritant, and it means constantly finding fault with it.

There is a tendency for Western groups to sensationize and mischaracterize what is going on. Chen Guangchen and Zhao Yan are important figures, but they are only one of thousands if not hundreds of thousands of people that are putting pressure on the Chinese Communist Party to liberalize and institutionalize rule of law. The two of them have received far more attention in the Western press (because of Time Magazine article on Chen and because Zhao worked for the New York Times), but in the grand scheme of things what they are trying to do isn’t very unique. If you look at people that are involved in this, sometimes they lose, sometimes they win, but in all cases its helping to slowly create a society based on rule of law.

The mischaracterization happens because one of the principles of rights defense is the legitimacy of both the law and the Communist Party’s legitimacy to rule. Both principles, that I have accepted (for lack of another alternatives).
People in rights defense are not basically interested in overthrowing the Communist Party. People are merely trying to defend their rights under Chinese law. This is important because the law provides a balance between freedom and anarchy, and without that balance, you end up in the state of nature which resembles Iraq. The Chinese government is worried that if it relaxes these too far, it will end up in a situation like Russia, the EDSA or Color Revolutions. So am I. People power revolutions look great on television, but depressingly little happens afterwards.

The key to prevent this collapse is strict observance to “rule of law.” There is a law on the books that outlaws “state subversion, “threatening national unity” and “releasing state secrets.” Zhao Yan and Chen Guangchen were doing none of these things, and the things that they were convicted of had enough procedural irregularities that the convictions need to be reexamined on appeal. In the case of Chen Guangchen, his “crime” was to basically to insist that local officials act according to national directives.
The thing HRW talks about sanctions by the US government. This is bad for a number of reasons:

First, it makes the actions of the US government relevant. Frankly, in discussing the human rights situation in China, the human rights situation in the United States should be irrelevant. Encouraging the United States to try to influence China through state action just makes things more complex since we get into a “your human rights abuses are worse than my human rights abuses” argument. Overall, the human rights situation in the United States is better than China, but it’s nowhere good enough so that the US can expect to lecture people on how to run their countries.

Second, whenever you organize political action, you have to build coalitions, and some people in those coalitions may have agendas that are different than yours. Western human rights groups always has very little political power, and to do anything useful they have to cooperate with people with much more power and different agendas. In the case of China these include labor unions in support of protectionism and “dragon slayers” who want to maintain US power in East Asia. Even at a smaller level, my views are simply irreconcilable with those of the Tibetan government-in-exile or Falugong, and I simply cannot cooperate with these people.

One thing that you see in “people power” demonstrations is that you have the loud demonstrations in front, and then you have the power brokers in back. In the case of the 1911 Chinese revolution, the power brokers were New Army militarists. In the case of EDSA revolution, they were the Philiphines military. It’s very important to understand who the power brokers are, because after the revolution, they will be in charge, and the power brokers behind some of the measures on Chinese sanctions are people that I just don’t like.

Something that has to be recognized is that over time, the PRC government is getting more and more powerful, and is less and less subject to external pressure. I think this is a good thing, but that means that what happens to the government will be more and more determined by people within the PRC with the rest of the world standing merely as bystanders.

And I think that is the way it should be.

August 25, 2006

Comments on Stephen Roach

Filed under: china, finance — twofish @ 2:47 pm

http://www.morganstanley.com/GEFdata/digests/20060821-mon.html

I agree with most of the points that Mr. Roach makes, although I wish he’d stop using the term “policy bank” in referring to the big four banks.  The one thing I’d like to point out is the linkage between the global import/export imbalances caused by the Chinese economy, and the internal imbalances in the Chinese economy.

The problem is that Chinese growth is focused mainly in the coastal provinces which derive this growth largely from exports.  Since these are the richest provinces, they are basically consuming as much as they can, and so any expansion in those economies has to come from investment.  The priority for China is to spread growth into the relatively poor interior, and if China wants to boost consumption, this means increasing the incomes of the poor interior which fortunately is in the agenda of the government.

The big question I have is where is the investment and fixed asset production talking place.  If the investment is being used to build infrastructure that links the poorer provinces to the richer ones, this is good.  If the investment is being used to increase infrastructure in the richer provinces, this is bad.

Notes on Chen Guangchen – Two steps forward – One and a half step back

Filed under: china, human rights, wikipedia — twofish @ 12:16 pm

A few notes on the cases of Chen Guangchen and Zhao Yan.

First of all, I don’t think that this marks the start of a “crackdown” against rights defenders.  Chen Guangchen and Zhao Yan’s cases have been pending for some time, and this does mark an effort to get those cases resolved in some way.  What will be significant is to see how much jail time Chen and Zhao actually serve, and its been a pattern for the Chinese government to convict someone of a crime, and then find some excuse to release them early.

Second there is a silver lining on all of this.  Even with the deck stacked against the defendants, the prosecutors couldn’t get them on “state crimes” (i.e. subverting public order, undermining national security, and releasing state secrets).  In both cases, they had to get some sort of bogus public order charge.  This is significant in two ways.  First the penalties for the public order crimes (i.e. blocking traffic) are a lot less, and we are looking at three to four years rather than a life sentence.  Second, this sets the boundaries of “state crimes” for other actions.  If they couldn’t get Chen and Zhao on “subverting public order” then it is highly unlikely that they will be able to get anyone else for doing stuff like reading wikipedia or circumventing the Great Firewall.

Just one note.  I’ve gotten in trouble in the past for showing insufficient moral outrage when stuff like this happens.  There’s a reason I don’t show too much moral outrage, and that this is going to be a very, very long fight (i.e. decades).  If you constantly get emotional over each headline, and don’t look for small victories, then you aren’t going to have the energy to sustain this fight over a very long period of time.

August 24, 2006

This is going to be a *FUN* paper to write

Filed under: china, quantitative finance, quantlib — twofish @ 2:13 am

http://www.cs.com.cn/sylm/04/t20060824_983387.htm

Baosteel warrants drop 80.0% in one day. This is one week before they expire. Cool.

I probably will have something in time for the Darden Conference on Emerging Markets

I’ll have to keep an eye on this page
http://finance.sina.com.cn/focus/bgqzdc/index.shtml

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