Hannah Arendt Center for Politics and Humanities
7Jun/130

In the Age of Big Data, Should We Live in Awe of Machines?

ArendtWeekendReading

In 1949, The New York Times asked Norbert Wiener, author of Cybernetics, to write an essay for the paper that expressed his ideas in simple form. For editorial and other reasons, Wiener’s essay never appeared and was lost. Recently, a draft of the never-published essay was found in the MIT archives. Written now 64 years ago, the essay remains deeply topical. The Times recently printed excerpts. Here is the first paragraph:

By this time the public is well aware that a new age of machines is upon us based on the computing machine, and not on the power machine. The tendency of these new machines is to replace human judgment on all levels but a fairly high one, rather than to replace human energy and power by machine energy and power. It is already clear that this new replacement will have a profound influence upon our lives, but it is not clear to the man of the street what this influence will be.

Wiener draws a core distinction between machines and computing machines, a distinction that is founded upon the ability of machines to mimic and replace not only human labor, but also human judgment. In the 1950s, when Wiener wrote, most Americans worried about automation replacing factory workers. What Wiener saw was a different danger: that intelligent machines could be created that would “replace human judgment on all levels but a fairly high one.”  

Today, of course, Wiener’s prophecy is finally coming true. The IBM supercomputer Watson is being trained to make diagnoses with such accuracy, speed, and efficiency that it will largely replace the need for doctors to be trained in diagnostics.

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Google is developing a self-driving car that will obviate the need for humans to judge how fast and near to others they will drive, just as GPS systems already render moot the human sense of direction. MOOCs are automating the process of education and grading so that fewer human decisions need to be made at every level. Facebook is automating the acquisition of friends, lawyers are employing computers to read and analyze documents, and on Wall Street computer trading is automating the buying and selling of stocks. Surveillance drones, of course, are being given increasing autonomy to sift through data and decide which persons to follow or investigate. Finally, in the scandal of the day, the National Security Agency is using computer algorithms to mine data about our phone calls looking for abnormalities and suspicious patterns that would suggest potential dangers. In all these cases, the turn to machines to supplement or even replace human judgment has a simple reason: Even if machines cannot think, they can be programmed to do traditionally human tasks in ways that are faster, more reliable, and less expensive than can be done by human beings. In ways big and small, human judgment is being replaced by computers and machines.

It is important to recognize that Wiener is not arguing that we will create artificial human beings. The claim is not that humans are simply fancy machines or that machines can become human. Rather, the point is that machines can be made to mimic human judgment with such precision and subtlety so that their judgments, while not human, are considered either equal to human judgment or even better. The result, Wiener writes, is that “Machines much more closely analogous to the human organism are well understood, and are now on the verge of being built. They will control entire industrial processes and will even make possible the factory substantially without employees.”

Wiener saw this new machine age as dangerous on at least two grounds. First, economically, the rise of machines carries the potential to upend basic structures of civilization. He writes:

These new machines have a great capacity for upsetting the present basis of industry, and of reducing the economic value of the routine factory employee to a point at which he is not worth hiring at any price. If we combine our machine-potentials of a factory with the valuation of human beings on which our present factory system is based, we are in for an industrial revolution of unmitigated cruelty.

The dangers Wiener sees from our increased reliance on computing machines are not limited to economic dislocation. The real threat that computing machines pose is that as we cede more and more power to machines in our daily lives, we will, he writes, gradually forfeit our freedom and independence:

[I]f we move in the direction of making machines which learn and whose behavior is modified by experience, we must face the fact that every degree of independence we give the machine is a degree of possible defiance of our wishes. The genie in the bottle will not willingly go back in the bottle, nor have we any reason to expect them to be well disposed to us.

In short, it is only a humanity which is capable of awe, which will also be capable of controlling the new potentials which we are opening for ourselves. We can be humble and live a good life with the aid of the machines, or we can be arrogant and die.

For Wiener, our eventual servitude to machines is both an acceptable result and a fait accompli, one we must learn to accept. If we insist on arrogantly maintaining our independence and freedom, we will die. I gather the point is not that machines will rise up and kill their creators, but rather that we ourselves will program our machines to eliminate, imprison, immobilize, or re-program those humans who refuse to comply with paternalistic and well-meaning directives of the machines systems we create in order to provide ourselves with security and plenty.

Wiener counsels that instead of self-important resistance, we must learn to be in awe of our machines. Our machines will improve our lives. They will ensure better medical care, safer streets, more efficient production, better education, more reliable childcare and more human warfare. Machines offer the promise of a cybernetic civilization in which an entire human and natural world is regulated and driven towards a common good with super-human intelligence and calculative power. In the face of such utopian possibility, we must accept our new status as the lucky beneficiaries of the regulatory systems we have created and humble ourselves as beings meant to live well rather than to live free.

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Recent revelations about the U.S. government’s using powerful computers to mine and analyze enormous amounts of data collected via subpoenas from U.S. telecom companies is simply one example of the kind of tradeoff Wiener suggests we will and we should make. If I understand the conclusions of Glenn Greenwald’s typically excellent investigative reporting, the NSA uses computer algorithms to scan the totality of phone calls and internet traffic in and out of the United States. The NSA needs all of this data—all of our private data—in order to understand the normal patterns of telephony and web traffic and thus to notice, as well, those exceptional patterns of calling, chatting, and surfing. The civil libertarian challenges of such a program are clear: the construction of a database of normal behavior allows the government to attend to those whose activities are outside the norm. Those outliers can be terrorists or pedophiles; they may be Branch Davidians or members of Occupy Wall Street; they may be Heideggerians or Arendtians. Whomever they are, once those who exist and act in patterns outside the norm are identified, it is up to the government whether to act on that information and what to do with it. We are put in the position of having to trust our government to use that information wisely, with pitifully little oversight. Yet the temptation will always be there for the government to make use of private information once they have it.

In the face of the rise of machines and the present NSA action, we have, Wiener writes, a choice. We can arrogantly thump our chests and insist that our privacy be protected from snooping machines and governmental bureaucracies, or we can sit back and stare in awe of the power of these machines to keep us safe from terrorists and criminals at such a slight cost to our happiness and quality of life. We already allow the healthcare bureaucracy to know the most intimate details of our lives and the banking system to penetrate into the most minute details of our finances and the advertising system to know the most embarrassing details of our surfing and purchasing histories; why, Wiener pushes us to ask, should we shy away from allowing the security apparatus from making use of our communication?

If there is a convincing answer to this hypothetical question and if we are to decide to resist the humbling loss of human freedom and human dignity that Wiener welcomes, we need to articulate the dangers Wiener recognizes and then rationalizes in a much more provocative and profound way. Towards that end, there are few books more worth reading than Hannah Arendt’s The Human Condition. Wiener is not mentioned in Hannah Arendt’s 1958 book; and yet, her concern and her theme, if not her response, are very much in line with the threat that cybernetic scientific and computational thinking pose for the future of human beings.

In her prologue to The Human Condition, Arendt writes that two threatening events define the modern age. The first was the launch of Sputnik. The threat of Sputnik had nothing to do with the cold war or the Russian lead in the race for space. Rather, Sputnik signifies for Arendt the fact that we humans are finally capable of realizing the age-old dream of altering the basic conditions of human life, above all that we are earth-bound creatures subject to fate. What Sputnik meant is that we were then in the 1950s, for the first time, in a position to humanly control and transform our human condition and that we are doing so, thoughtlessly, without politically and thoughtfully considering what that would mean. I have written much about this elsewhere and given a TEDx talk about it here.

The second “equally decisive” and “no less threatening event” is “the advent of automation.”  In the 1950s, automation of factories threatened to “liberate mankind from its oldest and most natural burden, the burden of laboring and the bondage to necessity.” Laboring, Arendt writes, has for thousands of years been one essential part of what it means to be a human being. Along with work and action, labor comprises those activities engaged in by all humans. To be human has meant to labor and support oneself; to be human has for thousands of years meant that we produce things—houses, tables, stories, and artworks—that provide a common humanly built world in which we live together; and to be human has meant to have the ability to act and speak in such a way as to surprise others so that your action will be seen and talked about and reacted to with a force that will alter the course and direction of the human world. Together these activities comprise the dignity of man, our freedom to build, influence, and change our given world—within limits.

But all three of these activities of what Arendt calls the vita activa, are now threatened, if not with extinction, then at least with increasing rarity and public irrelevance. As automation replaces human laborers, the human condition of laboring for our necessary preservation is diminished, and we come to rely more and more on the altruism of a state enriched by the productivity of machine labor. Laboring, part of what it has meant to be human for thousands of years, threatens to become ever less necessary and to occupy an ever smaller demand on our existence. As the things we make, the houses we live in, and the art we produce become ever more consumable, fleeting, and temporary, the common world in which we live comes to seem ever more fluid; we move houses and abandon friends with the greater ease than previous ages would dispose of a pair of pants. Our collective focus turns toward our present material needs rather than towards the building of common spiritual and ethical worlds. Finally, as human action is seen as the statistically predictable and understandable outcome of human behavior rather than the surprising and free action of human beings, our human dignity is sacrificed to our rational control and steering of life to secure safety and plenty. The threat to labor, work, and action that Arendt engages emerges from the rise of science—what she calls earth and world alienation—and the insistence that all things, including human beings, are comprehensible and predictable by scientific laws.

Arendt’s response to these collective threats to the human condition is that we must “think what we are doing.” She writes at the end of her prologue:

What I propose in the following is a reconsideration of the human condition from the vantage point of our newest experiences and our most recent fears. This, obviously, is a matter of thought, and thoughtlessness—the heedless recklessness or hopeless confusion or complacent repetition of “truths” which have become trivial and empty—seems to me among the outstanding characteristics of our time. What I propose, therefore, is very simple: it is nothing more than to think what we are doing.

Years before Arendt traveled to Jerusalem and witnessed what she saw as the thoughtlessness of Adolf Eichmann, she saw the impending thoughtlessness of our age as the great danger of our time. Only by thinking what we are doing—and in thinking also resisting the behaviorism and materialism of our calculating time—can we humans hope to resist the impulse to be in awe of our machines and, instead, retain our reverence for human being that is foundation of our humanity. Thinking—that dark, irrational, and deeply human activity—is the one meaningful response Arendt finds to both the thoughtlessness of scientific behaviorism and the thoughtlessness of the bureaucratic administration of mass murder.

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There will be great examples of chest thumping about the loss of privacy and the violation of constitutional liberties over the next few days. This is as it should be. There will also be sober warnings about the need to secure ourselves from terrorists and enemies. This is also necessary. What is needed beyond both these predictable postures, however, is serious thinking about the tradeoffs between our need for reliable and affordable security along with honest discussion of what we today mean by human freedom. To begin such a discussion, it is well worth revisiting Norbert Wiener’s essay. It is your weekend read.

If you are interested in pursuing Arendt’s own response to crisis of humanism, you can find a series of essays and public lectures on that theme here.

-RB

Roger Berkowitz
Roger Berkowitz is Associate Professor of Political Studies and Human Rights at Bard College, and Academic Director of the Hannah Arendt Center for Politics and the Humanities. He is also the author of "Gift of Science: Leibiniz and the Modern Legal Tradition", as well as co-editor of "Thinking in Dark Times: Hannah Arendt on Ethics and Politics".
8Aug/121

The Fecundity of the Unexpected

Readers of the Hannah Arendt Center blog are well acquainted with the pension train wreck that is heading our way.  It is not only public union pensions but also those corporate pensions that still guarantee defined benefits that are radically underfunded. And what hides the immensity of the problem is continued unrealistic assumptions about long-term future returns.

As was reported recently, Maryland—to take just one example—continues to assume a 7.75% annual return on its public pensions, which is even higher than the 6.6% 100 year historical average on stock returns.

While there is blame to go around—including feckless politicians and Wall Street hucksterism—the root of the problem may be a general unwillingness on all sides to realize that the last 100 years may have been an aberration. This is the argument that legendary investor Bill Gross makes in a report he sent to PIMCO clients this week.

Gross takes aim at the oft-repeated "truth" that over time stocks will return a real return of 6.6%. He argues that the returns over the last century were predicated on a Ponzi scheme, giving extra returns to shareholders at the expense of laborers (declining real wages) and government (declining real taxes). As those trends reach their limits, it is inevitable, Gross writes, that real returns must decline as well:

The legitimate question that market analysts, government forecasters and pension consultants should answer is how that 6.6% real return can possibly be duplicated in the future given today’s initial conditions which historically have never been more favorable for corporate profits. If labor and indeed government must demand some recompense for the four decade’s long downward tilting teeter-totter of wealth creation, and if GDP growth itself is slowing significantly due to deleveraging in a New Normal economy, then how can stocks appreciate at 6.6% real? They cannot, absent a productivity miracle that resembles Apple’s wizardry.

And it is not only stocks that will suffer. With treasuries yielding 2.55% (less than inflation), it is increasingly unlikely that long term bonds will provide meaningful returns.  The sad result:

Together then, a presumed 2% return for bonds and an historically low percentage nominal return for stocks – call it 4%, when combined in a diversified portfolio produce a nominal return of 3% and an expected inflation adjusted return near zero. The Siegel constant of 6.6% real appreciation, therefore, is an historical freak, a mutation likely never to be seen again as far as we mortals are concerned.

The consequence of these reduced expectations for public and private pension funds (and also for retirees with 401k plans that assume healthy investment returns) are dire. Simply put, throughout society, we are living beyond our means. We are in denial and continuing to make unrealistic investment assumptions. Gross draws the inevitable lesson for pension plans:

Private pension funds, government budgets and household savings balances have in many cases been predicated and justified on the basis of 7–8% minimum asset appreciation annually. One of the country’s largest state pension funds for instance recently assumed that its diversified portfolio would appreciate at a real rate of 4.75%. Assuming a goodly portion of that is in bonds yielding at 1–2% real, then stocks must do some very heavy lifting at 7–8% after adjusting for inflation. That is unlikely. If/when that does not happen, then the economy’s wheels start spinning like a two-wheel-drive sedan on a sandy beach. Instead of thrusting forward, spending patterns flatline or reverse; instead of thriving, a growing number of households and corporations experience a haircut of wealth and/or default; instead of returning to old norms, economies begin to resemble the lost decades of Japan.

We should applaud Gross for saying what many of us suspect: that the efforts of technocrats who populate pension plans to predict future returns is unpredictable at best and more likely subject to rosy biases. And yet even Gross then goes on to assume the tone of an all-knowing sage, something that seems de rigueur for public commentators today. We will solve the problem, Gross assures us, by turning to inflation.

Maybe Gross is right. But whatever the future holds, we must first confront the fact that as things now stand, we face a collective reduction in our wealth. How we respond to the reality of that threat will define the United States in coming generations. Either we can continue to insist that we are a wealthy nation and go on spending and living as if nothing had changed, or we can adjust our expectations downward.

Or we can somehow seek to unleash new forces of wealth creation that would generate the kind of economic growth and social and economic change that will lead to unexpected transformations in who we are.

We should neither take Bill Gross' prognostications as prophecy nor deny the reality he describes. Gross offers merely a hypothesis about the future, something far different from a fact. We do not have an adequate understanding of human nature and human economy to predict the GDP for this year, let alone for 2030. Human spontaneity, chance, and freedom mean that predictions of the future are simply calculations based upon the assumption that such and such will happen if men act rationally and nothing unexpected happens. In such cases it is helpful to recall Pierre-Joseph Proudhon's remark (loved by Hannah Arendt) that "the fecundity of the unexpected far exceeds the statesman's prudence."

Read more from Bill Gross here. You can also read more on Pensions as Ponzi schemes here and here.

-RB

*This post originally appeared yesterday on Via Media.

The Hannah Arendt Center
The Hannah Arendt Center at Bard is a unique institution, offering a marriage of non-partisan politics and the humanities. It serves as an intellectual incubator for engaged thinking and public discussion of the nation's most pressing political and ethical challenges.
21Oct/112

The Robin Hood Tax?

Occupy Wall Street has been looking for issues to coalesce around. Now the Canadian group Adbusters—the group that issued the initial call that began the protests—has proposed that Occupy Wall Street adopt a Robin Hood Tax on financial transactions as its first issue. Here is their call to action.

The Financial Transaction Tax (FTT) is an idea that has lots of support amongst some economists. My friend David Callahan has been arguing for the FTT for a while now. By far the best and most balanced analysis of an FTT is by the IMF, here. On the positive side, the FTT has the advantage of being simple and intuitively attractive. But is a Financial Transaction Tax really a good issue for Occupy Wall Street to coalesce around?

The main problem is that the FTT employs a sawed off shot-gun approach to a real but specific problem and unintended consequences. Thus, the IMF study cited above concluded that a FTT would not clearly target financial excesses:

Where the goal is to curb financial market excesses, [FTT] offer a less specific remedy for the excessive leverage that is believed to cause them than other tax and/or regulatory solutions. Financial complexity does not derive solely or even primarily from trading activity. The buildup of hidden financial risks in the recent crisis resulted predominantly from excess leverage, risk concentration, and product innovation such as asset securitization, which would have been largely unaffected by a transactions tax. An [FTT] also does not directly address systemic risk.

The point is that the real problem in speculation is leverage and volatility. The FTT doesn't address leverage, and it doesn't target the high frequency traders who drive volatility. Instead, the FTT taxes ALL transactions.

What is more, the FTT will penalize smaller and retail investors—precisely those in the 99%. As the chart below shows, most stock in the U.S. is held by middle-class investors—those between the 80th percentile and the 99th percentile. They are responsible for the vast majority of financial transactions (this is especially true since a large percentage of the equity holdings of the 1% in the chart are enormous trusts containing dividend paying stocks that have been held for generations and which never trade).  Thus, the FTT falls most heavily on the people who own the most stock in the country and depend on that stock for our retirements and investments.

Another problem is that if the Financial Transaction Tax is not adopted globally, it may well drive trading off shore to even less well-regulated markets than our own. The U.S. tried a similar tax in the 1960s and repealed it when trading moved to London. Sweden tried a FTT tax in the 1980s and 1990s and repealed it later when trading fled to other countries.

Finally, the IMF concludes that the FTT would increase consumption and reduce savings by lowering the returns of investment and savings—a result directly opposite to at least some of the goals of Occupy Wall Street. In addition, the FTT discourages the rebalancing of portfolios, thus depressing total returns on mutual funds investments and 401ks.

So what might be some other ideas for Occupy Wall Street—and also our political leaders (such as they are)—to consider? Here are a few ideas that a number of professionals I spoke with mentioned:

1. Ban all High Frequency Trading. It has no purpose except to make some very big and wealthy firms money while increasing volatility for the rest of us. High frequency traders justify the practice as increasing market efficiency. But there is no economic justification to prefer a system that makes 1000 trades per second to one that makes 10 trades per second. Such trading is disruptive and very profitable. Ban it outright. Doing so would be much easier than getting the global cooperation needed to make a Financial Transaction Tax workable. And doing so would also make the U.S. markets more stable and thus give them a competitive advantage over other markets worldwide.

2. A Cancelled Order Tax. It turns out nearly 99% of the orders placed on Wall Street are never filled, but cancelled. A small percentage of these cancellations are just people changing their minds. But the vast majority of cancelled orders are used to manipulate prices by tricking other traders into thinking that a stock is moving in a particular direction. According to one study on an average trading day in 2010, only 1% of all the 89.7 billion orders were executed, which means that nearly 99% of all orders placed can be attributed to high frequency traders trying to manipulate stock prices. A tax on cancelled-orders has distinct advantages over a tax on all financial transactions. First, it will fall primarily on hedge funds and large high-frequency traders, and will not affect retail investors. Second, it will specifically target the casino-like aspect of Wall Street. A cancelled-order tax is not as simple or sexy as a financial transaction tax. Less has been written on it. But it actually seems like a better idea. Read more about the idea here and here.

3. Reinstate the Uptick Rule. Nearly every market professional I polled supports the re-instatement of the "Uptick Rule," a rule that was imposed in 1938 during the Depression and repealed in 2007—just before the market crash and the financial crisis. The Uptick Rule prevents hedge funds and traders from betting on falling stock prices when the markets are already falling, thus reducing volatility and reducing the ability of traders to make money by encouraging market panics. There is a debate about how effective the Uptick Rule is, but there seems to be little or no downside to reinstating it. The only people who oppose doing so are traders.

4. Taxing Corporate Debt and Leverage and Raising Margins. The IMF proposes taxing not financial transactions but corporate debt, thus discouraging corporations from using debt and leverage to finance their activities. As part of this approach, it would be wise to raise margin requirements, the amount of money that someone has to put up before buying a stock or financial instrument on credit.

While Hannah Arendt may not have been much interested in the minutiae of Wall Street regulation, she did care deeply about the importance of facts in thoughtful and reasoned argument.  In just one week, on Friday Oct. 28, the Hannah Arendt Center will open our two-day conference on Truthtelling: Democracy in an Age Without Facts. When facts and opinions blur, reasoned argument falls prey to spin and deception. Politics is a realm of conflicting opinions, Arendt argued, but the opinions must necessarily be grounded on facts.

Whether or not the Financial Transaction Tax is a good idea, the debate around it should be based on solid knowledge of the financial system, the affects of such a tax, and also the alternatives. These are very complex issues and, in all honesty, much of the debate so far has traded in simplifications, soundbites, and falsehoods.

If Occupy Wall Street really wants to distinguish itself from the Tea Party and change our political culture, let's use this first foray into politics as an opportunity to model adult argument, something that has been absent from our public life for far too long. If they do want to model a future of fact-based decision making, they will do well to look deeply into the cons as well as the pros of a financial transaction tax. They would also do well to consult those people who work in financial markets daily. Many of these people—both those in the 99% and the 1%—want to eliminate market excesses and reign in the speculation and insanity that helped lead to the recent financial crisis. In the name of common sense and a way forward, let's have a real debate based in both fact and expertise.

-RB

The Hannah Arendt Center
The Hannah Arendt Center at Bard is a unique institution, offering a marriage of non-partisan politics and the humanities. It serves as an intellectual incubator for engaged thinking and public discussion of the nation's most pressing political and ethical challenges.