Part 3: Irrationality does not exist because of data

Part 1 is here.
Part 2 is here.
A very strong contender for an actor most similar to the schizophrenic is an investment or venture capital firm (or trader). Both receive large amounts of potentially specious data and must interpret it in order to predict the future – a high-entropy proposition. All finance and investment relies on complex models and practices. All these models and practices are false: if one was true, there would be no such thing as a failed investment. All these same models are, to at least some degree, descriptive of what the market does, because they would not be used if they did not have some kind of predictive power. It remains to be seen whether this is because the models evolve with the market or the market evolves with the models. The issue here is data: I can’t guarantee you that my interpretation of market data will be accurate or not, but I can guarantee you that I have far less market data than an investment firm. Leaving entropy completely out of this, because we are all victims of high entropy when trying to predict the future: who will do better at reading the market, the person with less or the person with more data? In general, the odds would favour the person with more, and that is our last nail in the coffin of irrationality.

Hindsight is 20/20 they say, and failed investments eventually make sense when fully analysed. The problem is that they have to fail in order to determine holes in the model. The humans who developed the model have to have the humility to make necessary changes to the model to preclude such failures in the future. The model must be disseminated accurately and applied appropriately to have a chance of improving its predictive capability. Do these things happen? Occasionally. Normally, the same well-worn model tends to go back out into the field; its shortcomings described as a 1-in-100-year anomaly or a failure of interpretation. Is this rational? Depends on the environment – how many times had the model succeeded before? Depends on the entropy – was bad data entered into the model? Depends on the data – was there enough to give the model a chance of success? Indeed, hindsight is 20/20, and what was a rational investment choice is now seen, in the light of new data, to have been “irrational”. But was it? With just a little more data, the benefit of hindsight (low entropy), and the ability to understand the whole environment, we can certainly say the decision was wrong, but was it irrational? Not at all.

Environment, entropy, and data can actually be boiled down into one simple concept: information. Environment is the source of all data; entropy is the factor that affects an actor’s interpretation of data; the concepts of data and information are more or less the same. We can truthfully say that “all actors are rational depending on their information”. As an illustration, consider what happens to you after you die. In reality, it doesn't matter what you think, what matters is that you realise you are dealing with a situation in which the information has high entropy. You can easily agree that many people who see these words will believe something different than you about the topic. They will, if they disagree with you, consider your views irrational, and you theirs. If you reflect back on the reasons for which your views are rational, you can see the environment in which you were brought up, the experiences that reinforced the ideas you hold, and the data that you inserted into your mental model of how the world works in order to come to your rational conclusion. You can also transpose that experience directly to all the other people who come to this page and disagree with you. While the result is different, the information was not; while the end decision is rational to everyone who reads these words, it is not, necessarily, right.

Part 2: Irrationality does not exist because of entropy

Part 1 is here.
Another actor who often finds themselves tarred with the classical epithet of irrationality is the schizophrenic. The condition of schizophrenia gives a person access to a new source or sources of data to which others may not have access. This data may or may not be perceived as “real” by the schizophrenic. The condition of schizophrenia may, over time, make the sufferer so suspicious of all data that they become less capable of separating accurate data from the physical world and the data derived from other sources. Information Theory, which considers data not by its content, but by its simple existence as a quantum of communicable information, is the best lens to view this type of “irrationality”. Specifically, the concept of entropy in Information Theory provides a key to one part of the puzzle.

Entropy is the probability of being able to predict the content of a piece of data. It is less probable for me to predict the winning lottery numbers than it is to predict the outcome of a coin-flip. The result of a coin flip is a piece of data. The winning lottery numbers are also, taken together, a piece of data. Entropy tells us that one is easier to predict than the other because there are more potential results for one piece of data than another. While this sounds like straight probability, be warned: Information Theory started in the 1920s and gave you such wondrous toys as the Voyager space probe and the CD. We’ve only just come to the mouth of the rabbit hole on this topic, and this paper isn’t long enough to go too deep.

Experiences that are a product of a schizophrenic’s environment produce interesting results. When a person hears voices or sees things that he is unable to differentiate from the simple physical reality others perceive, his world is no longer bounded by the same rules. Some of the data he receives is unbounded by physical laws. This may or may not help him in trying to sort the physical from the perceived. If a vision or sound accords with the laws of physics, a schizophrenic may be forced to determine whether or not this seemingly real data is truly real. This is akin to flipping a coin and seeing a heads – but not knowing whether the result is due to the actual coin toss or simply due to one’s own perception. There is greater entropy in a schizophrenic’s life because even if he receives data, he must still determine whether it is “real”. In such a high-entropy environment, it is very difficult to discuss rationality simply based on environment. Whereas the environment is the source of sensory input to the actor, the high entropy of the data received from the environment changes the very nature of that data. Environment plus entropy yields potential uncertainty, and that uncertainty can lead to what might be called “irrationality”. Still, if a person is schizophrenic and is acting in a high entropy environment, they are simply making the best choice available to themselves under the circumstances. That is a perfectly rational action, and while the schizophrenic deals with high entropy all the time, everyone experiences a moderate level of entropy because our perception is imperfect.

Part 3 here.

R.A.M.ifications: the Failure of the Rational Actor Model

The Rational Actor Model (RAM) is one of the principal foundations of Game Theory. It assumes that an actor, be it individual or corporate, will always act in its own self-interest when faced with a decision. Self-interest is taken to be objectively interpreted: there is a “best choice” in any situation that can be mathematically proven. Suboptimal choices are considered irrational. The concept of rationality itself is the very first problem with the RAM, as I will argue that there is no such thing as irrationality, and therefore rationality is a red herring. RAM tends to place all actors in the model on the same level in terms of environment, entropy, and data. This renders the model nondescriptive, as RAM cannot apply when actors come from different environments, have different weights assigned to their experiences (entropy), and have different levels of data about a situation. Data gaps are a fact of life and “perfect” data is an anomaly. These three ideas spell the death knell of the current RAM as a descriptive assumption. The only way to save RAM is to rid ourselves of the concept that there is such a thing as “irrationality”.

Irrationality does not exist because of environment

A poster child for the classical concept of irrationality is North Korea. Of the states in the world, few are more erratic, and none so erratic are so disruptive. The problem with analysing North Korea is that it can be seen through numerous lenses, and many of those lenses are not objective, but based on values judgements. Anyone who asks a question of Korea that starts with the words “why don’t they just…” and then recommends a course of action simply hasn’t put the time in to understanding North Korea as a rational actor. If anything other than the perpetuation of the regime was North Korea’s sole interest, such speculation would be potentially instructive. As it stands, we have a nation of some 20 million people which supports a tiny oligarchy – the only people who truly have “skin in the game” – in their chessboard of internal politicking. Internally, the Kim clan must assure dominance over the other petty power brokers, and externally, North Korea must milk the international community for aid while never truly allowing one state to become their sole interlocutor. Erratic acts – such as powering down the Yongbyon reactor only to power it up again secretly, kidnapping Japanese citizens and then releasing them some decades later, and sinking the occasional South Korean patrol ship then denying such activity on the world stage – serve to draw close and then alienate states each in their turn. So long as one state can give it aid and begin to make headway in the Hermit Kingdom, North Korea can afford to push away another for its own internal ends.

North Korea acts erratically, but not irrationally. Time and time again, results have proven to North Korea that such continuous games of “he loves me, he loves me not” get it the results it desires. Like a spoilt child, rewarded for his tantrums, so is North Korea a classic enfant terrible of the global stage. If such action is calculated to produce a desired result, and if such action is based on previous experiences of success, then how can it be called irrational? The best way to understand an actor like North Korea is not to ask “will North Korea react rationally to this offer”, but “what is the environment in which this action could be considered rational?” In the case of Korea, its experiences dictate that these actions will produce a desired result. The actions taken are erratic, but calculated; to consider North Korea anything but a rational actor in such a situation likely betrays an ideological presupposition on behalf of the interpreter.

In order to understand North Korea’s actions, we require access to data regarding its previous decisions and the results thereof. Environment is key – even applied Game Theory teaches us this. For example, in a 2005 paper (“Investigation of Context Effects in Iterated Prisoner’s Dilemma Game”), Evgenia Hristova and Maurice Grinberg detailed predictive strategies for cooperation in iterated Prisoner’s Dilemma games, finding that cooperation was not simply based on the games being played with the current opponent/partner, but all previous partners. Based on reading I had done in University, I determined that I would attempt an experiment myself that came out of Post-Modernist critique of the RAM through discourse analysis. I had a class of MBA students in a Business Strategy course divide into two teams. The professor of the course explained the rules for iterated Prisoner’s Dilemma in extremely competitive terms. For example, we made certain he said “opponent”, “beat”, “compete”, and “win”.  When I explained the rules, I used extremely cooperative terminology: “partner”, “resolve”, “cooperate”, and “participate”. The results were definitive, at least to me: In one-off games, the competitors always won. In iterated games, when cooperators were paired with cooperators, they by far scored highest. Any other pairing was so affected by the existing discourse – or became so disenchanted by their “partner’s” lack of cooperation – that they were dominated by defections. The history, the environment of each player, was a factor in their strategic choices. Those strategic choices were preordained by our simple choice of words. Were those choices irrational? No. They were purely environmental.

Notes on Game Theory and human choices:

http://users.auth.gr/~kehagiat/GameTheory/05PapersAdvanced/Shubik1970.pdf

http://rss.sagepub.com/content/4/1/8.full.pdf+html

http://dornsife.usc.edu/labs/alker/documents/reason_causes_games.PDF

parts 2 and 3 here!

It... Lives!

Now witness the mushrooms of this fully COLONISED and OPERATIONAL spawndry basket!

Mushroom Projects and New Hobbies

I'm back after a long vacation away in Northern Canuckistan and I'm devouring Sandor Katz' paean to pickling: The Art of Fermentation. I've just today gone out to Salcedo Market to get some farm-fresh ginger root and turmeric root, and grabbed some red ginger from the local Rustan's. Also, with the availability of Muscovado sugar (from raw cane juice), I couldn't help but liberate a couple kilos for my nefarious purposes.

Using instructions from the book, I've put together a ginger bug and a turmeric bug: these things are simply fermentation starters made from water, sugar, and shredded roots (with skin). Each day, you add a little more shredded root and sugar. It can take about three days for a good vigourous ferment to get going, but once the ferment starts to work, it's going to be time to make ginger beer! I'll also make turmeric beer and if I can find galangal, I'll do that one, too.

In other news, I have been able to clone the reishi mushroom from my front yard using a rather unorthodox method. Thanks to the fact my wife was away, I was able to do this. I took a bunch of wood chips and stuck them in a couple jars. I then topped the jars with water and stuck them in the microwave for five minutes. It made the room smell interesting, but the water-infused wood (and the jars) were well and truly sterilised. I sealed the jars and let them cool. Once cooled overnight, I plopped a few bits of wood chips from my tree stump into them, and left them about four weeks. This is what I now have:

Thoroughly mycelially - enhanced wood chips with no apparent source of contamination.

I also colonised some pure coir just to prove it could be done. This was done in conjunction with my spawndry basket. News on the spawndry basket front: It flushed!!!!!

And then it deliquesced because I wasn't at home to see the mushrooms flush (see above note on me being in Northern Canuckistan on long holiday). I've since put the basket out in the rain where it will keep wet and hopefully flush again. The mushrooms had grown only at the bottom of the bucket (close to the only source of moisture) due to lack of water, in my reckoning. If I can infuse the whole thing with moisture, I hope that I can get a better second flush.

Projects, projects, projects... at least I am on the right track with the ginger beer, my wife is highly supportive of any activity that provides her with yummy and nutritious ginger beer!

Spawndry Basket

I must admit to wondering whether my wife reads my blog. If she does, I should find out soon after she discovers this post.

I'm calling this a Spawndry Basket because it's yet another crazy mushroom spawn experiment, only this time with a laundry basket. One of the projects from the DVD "Let's Grow Mushrooms" was a great big laundry basket filed with straw bulk substrate and pleurotus spawn. I'm doing the "Philippines version" of that by boiling up some shredded coir and layering that with spawn.

I'm accustomed to my mushroom projects failing, but that's not to say I'm too terribly sad about the failures. I'd rather get them out of my system now while it doesn't matter. I'm also not really setting myself up for success. I'm primarily interested in totally dumb methods of doing stuff, because I'm dumb. I want resilience, not perfection. In this case, if the substrate isn't colonised, I will try again with more coir. Eventually something will work. We had to have done this in an era before clean rooms, so I'm going to keep banging at it until I've got something that functions.

If it works, WHEE! more oyster mushrooms for me, and I will start stealing people's waste coconut husks.

Vermicomposter

Thanks to the kind Hala Chaoui of UFO, I now have a vermicomposting unit! I went from shipping box to fully built in ten minutes exactly. Instructions were clear and well-illustrated. I've got a few projects this week, after getting some more spawn from the mighty men of the Ministry of Mushrooms, I want to make at least one (maybe two, maybe three) laundry-basket mushroom projects. I learned the process from the DVD "Let's Grow Mushrooms", and as long as I can get spawn, it seems bloody easy. Just boil your substrate and layer it lasagne-style in a laundry basket... keep it watered, and BOOM! Mushrooms. Let's see if it works. If it does, I will have more num-nums for the worms in the form of spent mushroom substrate.

Anyhow, after all that work I was tired so I had a beer and sat down for a while.