We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Central planning causes empty shelves in Cuba, say BBC

Years after the collapse of the USSR, Cuba remains a bastion of communism, central planning… and shortages of basic goods.

I am not surprised that there are empty shelves in Cuba. I am surprised to be reading such things on the BBC.

despite Cuba’s proximity to the US, Washington’s 50-year-old trade embargo – which was designed to squeeze this island’s communist government from power – means there’s no American investment here. There’s no Starbucks, no Coca-Cola plant.

Some might see that as a good thing. But they might not find shopping for essentials quite so quaint. I once approached my big local supermarket full of optimism. I now know I’m likely to find a mixture of half-bare shelves and ones stacked with a single product: cheap ketchup, say, or adult incontinence pads.

Basic items disappear whenever Cuba struggles to meet its import bills. For weeks there was no toilet paper or cartons of milk. Now even the delicious local coffee is “lost,” as Cubans say – “esta perdido”.

Mind you there’s plenty of “partridge in brine,” should anyone fancy that. I’ve seen the same pile of cans on display for more than two years at $25 apiece. Perhaps a central planner ticked the wrong order box.

The story is even promoted from other stories under the banner “in today’s magazine”.

Simon Gibbs on direct health care

Last Friday Simon Gibbs spoke at Brian Micklethwait’s. He explained that libertarians are very good at talking, which is important and useful, but that he wanted to see them doing more, and that inspiring such action is what his Libertarian Home project is really about.

He had many ideas of things that libertarians could do. Some were simple and obvious, such as attending demonstrations so that the media is forced to explain who this strange new breed of demonstrator is, or handing out leaflets at events such as Occupy demonstrations where some of the attendees might not be fully sold on all of the ideas of their movement and might be amenable to persuasion. But what he really wants to see is demonstrations of things that would be everyday in a libertarian society actually working.

An example of this is direct health care. In the USA, Dr Josh Umbehr runs AtlasMD. You pay $50 per month for access to a general practitioner. You get better service, email and phone advice, and out of hours appointments. And someone who sees you as a customer rather than a nuisance, and spends time with you and helps you to find the right consultant or to try different medicines instead of rushing you out in time for the next appointment. Simon found one doctor in the UK who offers such a service for £125 per month for a couple.

I would like to see more of this. Simon explains:

It would not need to be the dominant form of healthcare, but merely to be available for about the price of a gym membership to 10% of the population. We can then start to use this kind of care as a counter example to the sainted NHS. To get there, we need to stimulate demand. We need to talk about this idea with friends and talk about the various ways in which this would be more pleasant and more convenient than the GP service we get from the NHS. We would then be able to talk about the NHS as something like a safety net for very serious medical catastrophes, not something we rely on every day for every kind of medical assistance.

Samizdata quote of the day

Large-scale deployment of synthetic fertilisers enabled the expansion and intensification of agricultural production, resulting in hitherto unprecedented surpluses and a steep decline in food prices that have made agricultural producers in the global North dependent on government subsidies.

- Dr Heike Schroeder, senior lecturer in climate change and international development at the School of International Development, University of East Anglia, whose revealing drivel is currently being ridiculed over at Bishop Hill. (Warning, contains the word “governance”.)

Austerity

The public sector strike the other day, which Perry welcomed and I did not notice, was nominally about austerity. I have heard various conflicting claims about UK government spending, so I decided to find out myself and make my own graphs using figures from ukpublicrevenue.co.uk and ukpublicspending.co.uk.

ukgov_spending_fixed

Spending did go down a bit in 2012 and 2013, so I suppose that is the austerity. But it is still higher than in 2009, and much higher than revenue, even though the latter has increased every year, contrary to the narrative that austerity is to benefit rich taxpayers.

The years 2014 to 2016 are estimates, which if to be believed indicate the plan is to resume the growth of the state.

These are absolute numbers. Other charts I have seen correct for inflation or GDP and population. I do not trust official inflation figures, and I think government spending makes the GDP statistic less useful. So I got average earnings figures from measuringworth.com and using the population figures from ukpublicrevenue.co.uk calculated spending per person as a percentage of average earnings. This makes sense to me because the fraction of my earnings that are appropriated by the state is what directly affects me.

ukgov_spending_over_income

The graph ends in 2013 because I have no estimates for average earnings. There has been a slight decrease in spending by this measure in 2012 and 2013, but no return to conditions before the step change in 2008.

In short, there is a lot of talk about not a lot of action. I have a suspicion that small cuts have been made to the wages of particularly vocal and popular public servants in order to make austerity seem like a bigger deal than it is while keeping powerful public servants in the manner to which they have become accustomed.

You can see bigger graphs and my working out in my spreadsheet.

Edit: I had mis-labelled the y axis on the first graph; it shows revenue and spending per person in Pounds. I have fixed the labels now.

Withholding on payments to foreign persons

I asked my stockbroker why part of my dividend payments were being witheld, despite the fact that I had filled in form W-8 declaring that I am not a US citizen. It turns out that there is a tax witholding on certain payments to foreign persons, including dividends. I am lucky that the UK has a treaty with the US meaning this is a mere 15% instead of 30%.

I imagine this highway robbery marginally reduces foreign investments. I wonder what interesting forms of taxation will surprise me next.

Equity crowdfunding

In a comment on my previous post, Mastiff wrote, “It is easier for me to buy stock in Microsoft than it is for me to buy equity in my friend’s clothing design business down the street, thanks to the state of securities law. So which will I tend to do?”

Which is a very good point indeed, and something I had not really considered that now seems obvious. It is just another way that large incumbents can use the state to stifle competition.

However, I have not read the Financial Conduct Authority’s policy statement on crowd funding, but there do seem to be some interesting ways of investing in small companies. Have a look at Abundance Generation, Seedrs, Bank To The Future and Crowdcube.

In the USA, there was the Jumpstart Our Business Startups Act, and Rock The Post offer startup investing.

Is this the start of something world-changing, or is it set to be stifled by too much regulation?

Positive Money

Positive Money want to end fractional reserve banking and have the state create money directly. According to them, when quantitative easing created £375 billion, only £30 billion was made available for the government to spend, at a time when construction workers were being laid off and school building plans to fix leaky buildings were cancelled (which juxtaposition made for a nice Facebook meme). The quantitative easing also caused a stock market bubble and made some rich people even richer.

Instead, the government could have simply invented some sovereign money, debt free with no bookkeeping, and paid the builders to fix the schools. No unemployment and happy children.

Detlev Schlichter points out that it is the government who encourage fractional reserve banking, and all that really needs to happen is for them to stop doing this and banks will create some money but not nearly as much. Also, having the state create money is no less a recipe for disaster than having the banks do it, and maybe more of a disaster. The same economic distortions will apply.

If I attempt to apply Detlev’s thinking, I imagine that perhaps the state invents lots of money and gives it to schools to spend on building repairs. Suddenly the demand for construction is skyrocketing. Prices go through the roof. This stimulates supply. Software developers and professional bloggers quit their jobs for better paid jobs in the construction industry. Whole new construction businesses are started. Pensioners put all their savings into construction industry shares. And then all the school buildings get repaired, and the government moves on to curing some other perceived shortage, and the construction bubble bursts and you are back to having unemployed construction workers and starving pensioners.

Now, Positive Money responded to Detlev Schlichter. It turns out they more or less agree with him — apart from the bit about how we do not need anyone at all to create money, which they never got around to addressing directly but I gather from their criticism of Bitcoin is because they think without inflation people will speculate and not spend. But, importantly, they do not trust politicians to control the money supply either. It turns out they think some sort of “public and transparent body” can do it.

The whole thing strikes me as wishful thinking. It sounds so good it might even get somewhere. You get to bash bankers and have free money and keep politics out of it. All you need is for the public and transparent body to stay truly transparent and public and be able to manipulate the economy with precision from a central point of control. What could possibly go wrong?

David Friedman on prediction

Mathematical physicist John Baez made a Google Plus post about finding trends in data. David Friedman responded. My emphasis:

The problem is that, absent a theory, you don’t know what the shape of the function should be and different assumptions about the shape will lead to very different fits. If the ultimate reason to fit the curve is to test a theory and the person doing the fitting wants to believe in the theory, as we often do, it’s tempting to find some functional form that gives a result producing the desired outcome. I gather there is now even software out there that will do the specification search for you. The researcher can to some extent control the problem by specifying his form in advance, but there is always the temptation, if the result turns out wrong, to find some reason to try a different form—and if you don’t do so and as a result don’t publish, someone else with better luck in his first try or fewer scruples does. In the limiting case you try a hundred specifications and report the best fit as confirmed at the .01 level—the same result you would get with a hundred tries on random data. And the same thing can happen with a hundred perfectly honest researchers if only the significant result ends up published.

One solution, of course, is to make your data freely available so that other people can analyze it for themselves. The other solution, and the one that I think best from the standpoint of an outsider trying to decide whose theories and models to believe, is to evaluate by prediction rather than by the fit to past data. If the model is wrong and looks right when applied to past data because the past data was used to choose the specification and parameters, it is quite likely to go wrong on future data.

After being in lots of online arguments on climate issues, I decided to apply that approach to the IPCC models. I concluded that they had done a worse job of predicting the rate of warming than a straight line fit from 1910, when the current warming trend started, to the date of the first IPCC report. That strikes me as a reason to have low confidence in current projections coming out of the same approach.

For details see:

http://daviddfriedman.blogspot.com/2014/03/have-past-ipcc-temperature.html

And for a more general sketch of the argument for taking prediction as better evidence of a correct theory than the fit to past data, see:

http://daviddfriedman.blogspot.com/2010/03/prediction-vs-explanation.html

Update: What is particularly fascinating to me is the idea that 100 perfectly honest researchers will make models and by chance one of the models will validate against old data and that is the one that gets published. So there is a publication bias.

Food banks

Food banks provide invaluable support for families on the breadline but the fact they are needed in 21st Century Scotland, as across the UK, is a stain on our national conscience.

So says Jamie Livingstone, head of Oxfam Scotland, in a report on the increase in the use of food banks. Quite right too. That the nation has allowed its state to impede economic growth to such an extent is indeed a stain on its conscience. The nation should probably do something about that. Food should cost almost nothing by now.

The report said changes to the welfare systems, low and stagnant wages and increases in food prices were all contributing to the increase in numbers.

Indeed: welfare makes the nation dependent on an ever expanding state, inhibiting the growth that would make food prices fall in relation to human labour prices.

Of course I am quoting out of context. What Oxfam and the Trussell Trust, who co-authored the report, are really saying is that more state welfare is needed.

All your bank accounts are belong to us

HMRC wants to make withdrawals from your bank account if it thinks you owe it money. As a commenter on Reddit noted, “This is actually very good for bitcoin.” It is also very good for gold, paper money stashed under the matress, property, and anything else that is not keeping money in a bank account.

Back-pedalling

Even the best democracies agree that when a major war approaches, democracy must be put on hold for the time being. I have a feeling that climate change may be an issue as severe as a war. It may be necessary to put democracy on hold for a while.

James Lovelock in 2010.

The Revenge of Gaia was over the top, but we were all so taken in by the perfect correlation between temperature and CO2 in the ice-core analyses [from the ice-sheets of Greenland and Antarctica, studied since the 1980s]. You could draw a straight line relating temperature and CO2, and it was such a temptation for everyone to say, “Well, with CO2 rising we can say in such and such a year it will be this hot.” It was a mistake we all made.

James Lovelock in 2014.

When asked what the next 100 years will be like: “That’s impossible to answer. All I can say is that it will be nowhere as near as bad as the worst-case scenario.”

Incidentally, I am skeptical that heat is disappearing into the oceans, as he now appears to think. I think it is much more likely that the positive feedback needed to achieve high sensitivity to carbon dioxide doubling simply does not exist. Nonetheless, respect is due to James Lovelock for admitting a mistake. Let’s see if the rest of the global warming movement follows suit.

The Heartbleed bug

The Heartbleed bug is one of the more serious computer security vulnerabilities I have seen. It was discovered yesterday and is just starting to hit mainstream media now, so I will summarise my understanding of it.

It affects some web sites that use HTTPS secure connections. The purpose of HTTPS is, among other things, to encrypt data sent between your computer and the web server, so that anyone who sees the data in transit across the internet cannot read it. So it is used whenever you log in to a web site or enter personal information. You know you are using it when your web browser displays a little padlock icon somewhere.

The bug is in a software library that implements HTTPS, called OpenSSL. Not all web sites use this library, but many do. The bug affects certain versions of the library. Importantly, though, the bug has been in the library since December 2011, and has only recently been detected and fixed.

During this time, an attacker who knew about the bug could send a request to a web server, and get back some random information from the server’s memory that should not be public. This information could be almost anything known by the web server software. It is a lucky dip: the attacker can not choose what information he will get. Importantly, though, it can include server certificates, and user names and passwords of the web site’s users.

Having obtained a certificate, an attacker could spy on data transferred from the user to the web site, including passwords and any information entered. This is not trivial, but can be quite easy in certain circumstances. For example, anyone can sit in a coffee shop and intercept WiFi traffic of other customers using WiFi in the shop, but they will only get information about the other coffee shop customers. On the other hand, the NSA can presumably spy on all data sent to any web site. There will be attackers with levels of sophistication between these extremes. Normally a web browser will shout warnings at you if a HTTPS connection has been intercepted. Having a web site’s certificate enables an attacker to silence such warnings.

User names and passwords can also be obtained directly using the Heartbleed bug. This only happens on certain web sites, and the details retrieved are random. It is not possible to quickly obtain all details of all users. Rather, every time the attack is made, one or two users’ details might be revealed. That said, the attack can be repeated, and in two years it can be repeated a lot. So a determined attacker could gather details of many people in this time. This is real. Users on Reddit were claiming to have seen Yahoo Mail passwords as recently as a few hours ago. Right now, Yahoo Mail is fixed.

So what can you do? Realise that you are affected, but don’t panic. There is a very good chance none of your details have leaked. You can not be certain, but you already were not certain. There are likely many more security holes that are not yet common knowledge. However, on services that you have particularly sensitive information, it would be wise to first check that the bug has been fixed, and then change your password.

You can check if the bug currently affects a given service with an online tool. If the service is at all high profile, it is a fairly safe bet that it is already fixed. But you can not tell if your details or a service’s certificate have been leaked in the past. Unless a service takes action, credentials and certificates obtained in the last two years can still be used by attackers to log in or spy on communications. Hopefully web administrators will communicate whether they have been affected and whether they have changed their certificates, so watch for announcements.

When you change your passwords, now is a good time to stop using the same password for every service you use. Start using a password manager such as LastPass, 1Password or Password Safe. All of these are acceptably safe in my opinion, but there is some interesting discussion on this topic. The great thing is that a password manager will generate a different, random, impossible to guess password for each site you use, meaning that if someone does find out your password to one service, the damage is limited to that service.

If a service offers two factor authentication, where you use a smartphone app which generates an ever-changing code, use that, because it means knowing your password alone is useless to an attacker.

If you run a web server that uses HTTPS and handles users’ information, educate yourself, upgrade, and inform your users.

More generally, if you can possibly arrange to live your life under the assumption that everything you have ever done on the internet could become public knowledge tomorrow, you could save yourself a lot of trouble. Keeping secrets is hard.