Entries tagged with “Wired”.

The subtle airbrushing of market manipulation out of the public consciousness continues apace.  Despite clear evidence from IFPRI that market manipulation is creating the conditions of uncertainty that are driving up global food prices, nobody seems to want to address this in a forceful manner – and heaven forbid you raise this in any food security discussions in a development agency.  People will blindly argue that there is no evidence (except, of course, there is), and then when confronted with the IFPRI study will make absurd arguments like the uncertainty is creating the appearance of manipulation because, you know, IFPRI wouldn’t bother to make sure they had the causality going in the right direction before they published.*  So, we will just keep plugging away at the issues of supply to address global food issues, because why address the only factor that IFPRI could identify as having a causal effect on the rising food prices in 2008?

And now we see the same blindness spreading into our discussions of the financial markets.  In the January issue of Wired Felix Salmon and Jon Stokes return to the Flash Crash, the sudden near-600 point drop in the Dow that occurred back in May.  The regulatory agencies assigned to policing market manipulation more or less abdicated their responsibilities and absolved everyone of blame in their report.  This was absurd, and doesn’t hold up to the slightest bit of logic.  Now Wired is on board, running a “blame the algorithms” story that uses the flash crash as exhibit A.  They argue that Waddell and Reed (the managers of the mutual fund that made the trade)

used an algorithm to hedge its stock market position.  The trade was executed in just 20 minutes – an extremely aggressive time frame, which triggered a market plunge as other algorithms reacted, first to the sale and then to one another’s behavior

Sure – this is exactly how it played out.  But the issue here is not that the algorithms themselves were to blame.  Someone had the PROGRAM THE ALGORITHM FOR THE FIRST TRADE.  The algorithm did not decide to dump all of those futures contracts in 20 minutes.  The person who designed the algorithm (or, more likely, his/her employer) made that decision.  Once set in motion, I have no doubt that this trade cascaded through other, more conventionally designed algorithms, triggering all sorts of “irrational” behavior as they tried to adjust to the rapidly-changing market conditions.  I also have no doubt that whoever set up the original algorithm had some idea that this is exactly the sort of chaos that would ensure from their insane trade.  Everyone is now focused on events after the initial trade, and how trading algorithms might need more controls or oversight.  I think that is a reasonable position, but it does nothing to address the behavior of individuals willing to initiate market chaos by setting up insane trades.

Incidentally, nobody in their right mind would set up an insane trade for no reason.  I wonder if the SEC spent any time looking into who was short on the Dow that day and made out big (including people who made out huge before a bunch of trades later in the crash were invalidated), and then examined the connections those folks might have had to Waddell and Reed.  Then again, it seems few folks in major development agencies want to seriously examine market manipulation and its impact on food security.

At what point does willful obliviousness turn into criminal negligence?

*these were actual arguments raised when a colleague of mine attempted to address the issue of market manipulation at a meeting in one of our major development agencies.  Really.  How the hell, exactly, does uncertainty create the appearance of manipulation?

Dammit, Wired, I do like you . . . but why must you guys always assume that new stuff (ok, sometimes pretty cool stuff) will fix all our problems?  There are situations where a new device or good might be important and useful . . . but to argue that a viable development path might be constructed on improving access to cheap consumer goods worldwide fails to acknowledge the reality of the world today.  Even worse, they are not the first to fall into this fallacy – see the Product (RED) trainwreck (or as I like to call it, the buy-your-way-out-of-your-guilt plan), which came at this from the side of providing aid from rich countries.

Why am I so pissy about these sorts of feel-good ideas?  Because perhaps the central challenge that faces us in addressing the intersection of development and environment is the problem that there is simply not enough stuff in the world to allow everyone to consume at the same level as Americans – not even close.  We’d need between 2 and 3 more Earths.  Or, if some Cal Santa Cruz astronomers are correct and they’ve actually found another potentially habitable planet, maybe only 1-2 more Earths.  Hey, it’s progress . . . oh wait, its 20 light years away and we have no way of getting there.  Right, 2-3 more Earths, then.

Under these circumstances, arguing for more consumption makes absolutely no sense at all – instead, it pushes us ever closer toward a zero-sum world, where the only way to improve one’s own material situation is to take away from someone else’s.  I’d argue that this describes the current situation anyway, as we here can only live at our standard because so many do not – but that is a rant for another day.

This is not to say that the global poor should stay that way.  Interestingly, Wired‘s examples of products they like are largely development interventions (irrigation, water filters, rural lighting, etc.) by a different name.  I have no objection to these interventions – they are rather small in terms of consumption footprint, but have tremendous positive effects.  However, the larger message of the piece seems to be that making cheap stuff for these markets is, in the end, good for them.  No.  This rests on the idea that the only products people want are as practical as irrigation – a very bad assumption.  Most of the folks I work with in rural Ghana would love a TV, though I can personally attest that Ghanaian television will not improve their quality of life.  Or anyone else’s for that matter.  Making cheap TVs that people can afford is not going to help us out of the global hole in which we are located – it will just take up more resources faster.

Making development interventions cheap is good.  Further, introducing them through markets, instead of through proscribed programming that is not sensitive to local context, is often good (sometimes markets fail, though).  But assuming that we can generalize from these examples to a wider statement about markets and human well-being doesn’t fly.  We’re not going to buy and sell our way to a more just, sustainable world.

Now, if someone was to get on revolutionizing the generation of electricity such that it is so cheap as to be effectively free, and we could talk about how to really revolutionize development, as this might address the resource shortage problem.  When, for example, recycling becomes super-cheap (a huge percentage of the cost is energy), and we can reuse what we already have instead of constantly digging up more, this equation might change . . .

I’m a fan of Wired magazine – its a pretty amusing read, and every once in a while I see something that really makes me think or go do a bit more reading.  However, I was a little chapped when reading the feature article in their most recent issue – a review of technologies we thought we would have by now, but don’t.  On that list was clean coal (link here, scroll down to find the clean coal piece).  While I appreciated the fact that Wired was willing to run a story that called clean coal an oxymoron, they got the barriers to its implementation wrong:

The good news is that we already have the technology to use [coal] without melting the polar ice caps. It’s called carbon capture and storage — sucking up the CO2 that results from burning fossil fuels, compressing it into liquid form, and pumping it into the ground.

Here’s my problem – we haven’t actually worked out how to keep it in the ground, which is an immense technical challenge.  Liquefying CO2 isn’t all that hard – pressure or very low temperatures will get you CO2 in liquid form.  But once we inject it deep underground, it gets a lot warmer and the pressure levels are likely to drop . . . meaning it returns to a gaseous state.  It’s hard to trap gases underground (geology is tricky – lots of faults and cracks to worry about, not to mention earthquakes!) and even when we do, the CO2 might interact with water, creating carbonic acid which can dissolve (very slowly and inexorably) the stone that makes up the storage reservoir, potentially creating holes through which the CO2 might return to the atmosphere.  We don’t have great fixes for these issues right now, though there are some technologies that might be promising down the road.  So, to summarize, right now we can extract (scrub) a lot of the CO2 from the process of burning coal, liquefy that CO2 and pump it underground.  But if we can’t keep it there, we have just created a very long, expensive and indirect route for those emissions to reach the atmosphere.

This is not to say that carbon capture will never happen.  A lot of money is being poured into this idea (see a recent posting at the NYTimes).  And this is certainly not to say that I don’t want to see it happen – finding a way to produce cheap electricity with minimal environmental impact is a dream that will work in everyone’s favor, both now and into the future.  But the clean coal crowd needs to be honest, as do the wind and solar people – there are still barriers to the successful implementation of all of these technologies.