Monday, 30 November 2015

iPredict and the reign of the Vogons

The NBR asked me for comment on the iPredict decision. Here's what I sent through; much of it showed up in Campbell Gibson's piece.
In the Hitchhiker’s Guide to the Galaxy, only one species had the bureaucratic bloodymindedness necessary for seeing things through, no matter how stupid it was to apply the rules in particular cases, or how horrible the consequences: the Vogons.
iPredict is one of New Zealand’s beautiful things. Established at the University of Victoria at Wellington shortly before the 2008 election, it allows real-money trading on political event futures. If you wanted to know the odds that National would win the next election, that Winston Peters would be in the next coalition, or that Wellington might amalgamate, iPredict was the place to go. If you thought the prices were wrong, you could put your dollar vote in and turn a profit by adding your information into the mix.
While other countries never really managed to get these right, New Zealand’s pragmatism saw us through. The Gazetted iPredict regulation let the tiny non-profit operate under rules that were fit for purpose. In America, an unholy coalition of casino gambling interests and anti-gambling Senators worked to ensure that Americans couldn’t easily trade real-money contracts on political events. New Zealand knew better. I considered it an important part of our “Outside of the Asylum” status. While regulations in the rest of the world were dumb enough to prevent beautiful things, New Zealand knew better.
And oh but it was beautiful. Its prices were the best fair-odds around on political events. There was never a ton of money in it – the volume was too low. But because enough politics insiders enjoyed it for its own sake, the listed prices were sharp. At Canterbury, I had fun setting Honours projects based on its data.
New Zealand yesterday took a sharp jump out of the Outside of the Asylum when Simon Bridges decided that a tiny shoestring-budget outfit like iPredict had to comply with anti-money laundering regs that even the big banks found a really tough slog. I don’t know how much he tried to ease things in recognition of iPredict’s smaller scale, but regulatory costs that seem small to a Minister can be impossible for an outfit that was always on the edge of financial viability. And as for the odds that it could have been used for any kind of money laundering? Well, I'd have been shorting the relevant contract even at 5% odds.
In short, the decision is regulatory murder: Vogons crushing beautiful jewelled crabs, just because. I hope the decision can be rescinded.
I visited similar themes in a piece I wrote for the Dominion Post.
That all ended yesterday. On advice from the Ministry of Justice that it was possible that somebody might some day decide to launder money through iPredict, Simon Bridges killed it. iPredict always ran on the smell of an oily rag, subsidised by Victoria University at Wellington. It would never have been able to afford big-bank style Anti-Money Laundering regulations – or even slightly toned down versions. While Ministers and Ministries can glibly reckon that regulatory compliance costs won't be too high, banks have found the anti-money laundering regulations to be incredibly costly. iPredict did not stand a chance.

When iPredict was established, they deemed the money laundering risk so low that there would not be regulatory compliance issues unless either the Americans invaded, or communists were elected. They did not count on the current National government.

The Government has killed a thing of beauty to guard against a risk that would have been implausible as movie scenario. In doing so, they've ruined our best, and one of the world's best, sources of accurate information on the chances of events happening. Colleagues who attended the British High Commission's election night party for the UK election reported that they had iPredict up on the big screen as a way of keeping track of who was winning.

Simon Bridges's decision is incredibly disappointing. I hope he reconsiders it. And, perhaps, it is time to rethink the anti-money laundering regulations as a whole.
I know that the Americans have forced us into the AML regime under threat to basically make financial transactions impossible with American firms. But only Vogon bloody-mindedness can explain hitting iPredict as part of it.

And here's Scott Sumner lamenting what we've lost.

I doubt either the Ministry of Justice or Bridges knew, or cared, about what they were destroying.

When John Key gets around to forcing a referendum on changing the National Anthem, one of the four five options should be "Oh Freddled Gruntbuggly", set to an appropriate tune.

Manitoba envy

Despite massive need for flat-pack furniture following the earthquake, Christchurch didn't manage to get an Ikea.* And there's yet no Ikea anywhere in New Zealand.

Last month, Christchurch people got mad that a Wendy's wanted to serve beer.

Meanwhile, Winnipeg's Ikea serves beer and wine.

* Trading on the iPredict market on whether there would be a Christchurch Ikea went as high as 18%. But Simon Bridges said we can't have iPredict any more, so I suppose there can't be a contract on whether we'll ever get an Ikea. So we're as bad as Manitoba on the predictions-market front now.

Friday, 27 November 2015

Unless the Americans invade or we elect communists

Glenn Boyle, who helped set up iPredict, emails:

When we were setting iPredict up between 2005 and 2008, all the holdups were technological and financial, not regulatory.  Liam Mason and others at the Securities Commission were generally helpful and tried to eliminate roadblocks rather than put them in our way, and there certainly didn't seem to be any impediments thrown at us by ministers.

I recall the money laundering bogeyman coming up only once, and then only in jest.  I don't remember the exact wording, but it was something along the lines of "you'll probably get hit with money laundering charges if the Americans invade or we ever elect a communist government."  Ouch…

This wasn't taken seriously at the time though.  Looking back through all the various memos etc I prepared during the 3+ years iPredict was being set up, I can't find any reference to money laundering regulation at all.  I guess we were naive!
There seem to be more than a few people who reckon Lianne Dalziel did a far better job on this stuff under the prior Labour government than we've seen under National.

Thursday, 26 November 2015

Inside The Asylum

I'd cited iPredict as an example of New Zealand's cherished "Outside of the Asylum" status. While other countries did stupid things banning socially useful prediction markets, either at behest of gambling interests or because of anti-gambling politicians, or the bootleggers-and-baptists combination of the two, New Zealand was sane.

Simon Bridges just killed iPredict. The because is potential money laundering. But that's just the proximate cause. The ultimate cause is absolute Vogon-scale bloody-minded bureaucratic idiocy. Applying bank-style money laundering regs to a tiny non-profit with minuscule financial turnover -and that was always a dubious proposition for the University in the first place - that could never do anything but kill the thing. And it takes absolute Vogon-level bloody-mindedness to do that.

Idealog has the best write-up on it.

Can somebody set "Oh Freddled Gruntbuggly" to music? We might need a new national anthem.

Wednesday, 25 November 2015

Police muzzles?

There's a strong academic freedom case against the kinds of restrictions that the New Zealand Police, and other government agencies, put on the use of data. But it's not quite as clear-cut as it might seem.

Jarrod Gilbert is New Zealand's leading expert in crime and gangs. Between him and  Greg Newbold, there's not much the Canterbury sociology team don't know about crime. Gilbert's having trouble getting access to police data on crime that he needs for his research, though, because his research has meant he's spent a lot of time with gangs.

This part seemed especially concerning:
The degree of control the police sought over research findings and publications was more than trifling. The research contracts demand that a draft report be provided to police. If the results are deemed to be "negative" then the police will seek to "improve its outcomes". Both the intent and the language would have impressed George Orwell.
Researchers unprepared to yield and make changes face a clause stating the police "retain the sole right to veto any findings from release". In other words, if an academic study said something the police didn't like - or heaven forbid was in any way critical of the police - then the police could stop it being published.
These demands were supported by threats. The contracts state that police will "blacklist" the researchers and "any organisations connected to the project ... from access to any further police resources" if they don't abide by police wishes.
I worried about this kind of thing in Ministry of Health RFPs a while back.

But we have to balance it too against the following kind of scenario. Suppose that you're a government agency who's contracted with some researchers to do some work for you. Somewhere along the way, things go off the rails. The researchers' drafts don't look good, the statistical analysis doesn't line up, and it's starting to look like they're trying to grind an axe rather than provide you with a down-the-line assessment of results.

Worse, they've started shopping around their working draft at conferences [legit!] and putting out press releases about their working draft [uh-oh], touting their initial results, using the Ministry's funding as imprimatur, and calling for policy change based on it. You know they've missed a pile of important stuff in their analysis and that the results really aren't sound. What do you do?

In an ideal world, academic freedom prevails. The researcher presents their results, but the Ministry puts out contextual information noting what the researchers have missed and why the results are only tentative and preliminary. But there's a lot of risk that's then come in. The opposition might have latched onto the preliminary work and called the government cowards for not having changed policy, or, worse, bought out by "Big Industry Interests". Or, even worse, the preliminary wrong results conform to the Minister's priors and the Minister won't even let you put out a contradictory note because they've already tasked you with formulating policy based on it.

I'm not saying muzzle clauses are justifiable, but rather that this can be where Ministries are coming from.

It is interesting, though, that the University of Canterbury in general is happy to sign contracts for government funding that put strong muzzles on its researchers. I suppose the presumption is that government contracts are always wonderful and that the restrictions are always for the best in this the best of all possible worlds. On the other side, it doesn't seem to matter how rock-solid the academic freedom provisions are in an external funding arrangement if industry's involved - somebody's going to object to it. Again, the one-sided scepticism problem.

Tuesday, 24 November 2015

Consenting and rocket science

Looks like Christchurch has lost its shot at a space-port.

Rocket Lab is moving its proposed launch facility from Birdlings Flat out to the Mahia Peninsula. They've cited slow Christchurch resource consenting as one of the reasons.
Auckland-based Rocket Lab said its decision was partly due to the time it was taking to get the necessary resource consent from Christchurch City Council.
When the company announced the Canterbury site, it said it was also considering moving its rocket manufacturing operation to Christchurch - creating up to 200 jobs.
It has now decided on a location on the Mahia Peninsula, for which it already has the necessary consents, as the site where it aims to launch rockets from 2017.
Does that make getting a consent harder than rocket science?*

As of June, they had over 30 launches booked.  
Beck said preparations were under way to submit resource consent applications to Christchurch City Council for the launch site.

The proposal has attracted concern about the potential impact on the environment from the Green Party.

Spokeswoman for conservation, Eugenie Sage said the Kaitorete Spit was a nationally significant ecosystem and natural landscape feature containing habitat for threatened lizards, rare invertebrates and threatened plants such as Muehlenbechia astonii .

"The launch activities potentially disturb wildlife."

Sage said local residents were concerned about the potential impact of a launch on access to conservation reserves and other public land during the launches.

Applications for three consents from Rocket Lab were lodged with Environment Canterbury on June 15.
I'd started getting worried when I'd seen these kinds of conditions a few months ago:
Rocket Lab was restricted to four test firings, lasting no more than 30 seconds and, when operational, would have to provide 10 days' notice before launches. It would be restricted to 12 launches a year.
They'd want to give plenty of notice due to the exclusion zone they'd have to run around a launch site. But 12 launches a year? And wouldn't they need a few options around any potential launch in case of weather issues?

I'm rather glad that if Christchurch couldn't see fit to give them clearance for lift-off, others could.

What does it say about Councils' incentives to get their consenting offices straightened out if they can manage to chase away a potential space port?

 * Jason Krupp takes credit for this quip.

Cinderella men

I think this is the first time I've seen evolutionary biology featured in a Press piece on crime. The piece notes the disproportionate number of children in New Zealand killed by step-fathers.
Why stepfathers kill their lovers' small children but spare their own has troubled Canadian evolutionary psychologist Martin Daly for decades.

He and his late wife Margo Wilson founded the Cinderella theory in the 1980s, researching the deaths of 700 Canadian children.

What they found suggested the unconditional love a parent feels for a screaming child who has soiled their nappy, is not innate for a stepparent - and makes them more likely to lash out.

... Building on Darwin's theory of evolution, the relationship between the new man on the scene and his lover's child is forged by biological altruism, Daly and Wilson found.

That means humans, like other animals, are programmed to investing their time into reproducing their own genes - not someone else's - and sometimes that resentment becomes deadly.

..."My argument, in psychology - and it's the same with those other animals who engage in step-parenting - is the step-parent is doing it as a courting step.

"People love their own children more than they love someone else's child. That's not to say they don't love them... [but] generally, they're not going to throw themselves in front of a truck for them."

In the Canadian research, birth parents overwhelmingly smothered or shot their children, and a third of fathers committed murder-suicide.

Stepfathers usually beat children to death and just 1 in 67 killed themselves too, Daly and Wilson found.
They note that the New Zealand data for a proper test would be hard to come by (as is all NZ data about everything because of because).

Satoshi Kanazawa explained it this way:
In retrospect, this makes perfect sense. Parental love for children is evolutionarily conditional on the children’s ability to increase the parents’ reproductive success. Stepchildren do not carry any of the genes of the stepparents, so there is absolutely no evolutionary reason for stepparents to love, care for and invest in their stepchildren. Worse yet, any resources invested in stepchildren take away from investment that the stepparents could make in their own genetic children. So, in the cold, heartless calculus of evolutionary logic, it makes perfect sense for the stepfather to kill his stepchildren, so that his mate (the mother of the stepchildren) will only invest in their joint children, children whom the stepfather has had with the mother and who carry his genes. Only they can increase the stepfather’s reproductive success.
But he also cites some contrary evidence from Sweden suggesting that the background characteristics of stepdads do a lot of the work.
In their paper, Temrin et al. do not question that stepchildren are more likely to be killed and maimed by their stepfathers; they only question discriminative parental solicitude as the explanation for it. They point out, and empirically demonstrate with a small Swedish sample, that men who become stepfathers, by marrying women who already have children from previous unions with other men, are more likely to be criminal and violent to begin with. And Temrin et al. argue that their greater tendency toward criminality and violence, not their genetic unrelatedness, is the reason they are more likely to kill and injure their stepchildren.

Once again, in retrospect, this makes perfect sense. Divorced women with children are on average older, so they have lower mate value than younger women without children. Given choice, and all else equal, all men would prefer to marry younger women without children rather than older women with children with other men. The logic of assortative mating would suggest that women with lower mate value are more likely to mate with men with lower mate value. And, as I explain in an earlier post, men with lower mate value are more likely to be criminal and violent.
So a proper New Zealand study would want to correct for the stepfathers' ex ante characteristics. It would also then partially answer Jan Pryor's question of the theory, raised in the original Press piece:
The theory also did not explain whether solo-mothers living financially strained lifestyles were targeted by men who preyed upon them and their children, Pryor said.
I'm curious how much of the effect here works through the biological Cinderella story and how much works through the assortative mating dynamics at the lower tail of the distribution.

Add to the list of "open questions that could be answered by somebody with time to muck around in IDI applications and the Stats Data Lab", or "Masters theses waiting to be written".