Mathematical economic thinking as one key need for survival

Last night I meditated some on the larger implications of
some technical discussions we have had within IEEE, on the future of automotive
technology, with direct implications for the larger issues of climate change
and global security, which will substantially affect whether the human species
survives or not. More concretely: on the Lifeboat list, I have summarized the
most serious threats of human extinction as “H2S/NUC/AI/(bio?)”. The threat of
death by H2S is not so simple as worrying about our carbon footprint, but
reduction in greenhouse has emission is certainly one of the important
variables affecting our probability of death by the same H2S mechanisms we have
discussed before, which have several times already caused mass extinctions of
species on earth. Likewise, conflicts related to oil directly affect the issue
of death by series of nuclear wars and nuclear terrorism, more than most people
understand when they live their lives in narrow stovepipes and try not to think
too hard about scary unpleasant realities of life. Finally... I do not mean to
discuss the scenario of death by Terminator AI, but there actually are some connections to
what I will discuss here now.

To understand these concepts, starting from square one,
really takes a lot of background. Therefore, this blog entry will be long, and
I will send much briefer bits of it to a couple of places – referring to the
blog for a more complete discussion.

One reason why this is important: Yesterday, at a Quaker discussion
group, someone raised the question: “What good is it for retired people like us
to speak truth to power anyway? We are not the ones doing what really matters.”
I pointed out that folks who develop policy statements in the White House (like
OSTP, which I visited a number of times in earlier years) could say the same
thing. They speak... but are always in the shadow of the people who do real
things. Real things like actually developing new types of space technology or
solar technology, or coping directly with large scale realities of issues like
education, health and poverty.

Auto industry technology is one of those places where real
things are happening, or not happening and possible. It sounds small to many
people to talk about AC versus DC in 480 volt recharge stations, yet this
impinges directly on all three of the things which might kill us all or not.

At the end of a long listserv discussion, one person argued
hard that pure electric vehicles like Tesla are much better than plug-in
hybrids like the Chevrolet Volt or the BYD Qin, because they have a better
carbon footprint. “Therefore we should make it a policy simply to shift directly
to pure EV like Tesla.”

In my view, his argument is just one more example of the
fact that humans in all walks of life can be brilliant about the details of
what they are doing, and how they achieve their subgoals, even as they get
totally mixed up about what their goals do to the larger reality of human life.
I saw that over and over again at NSF, when many proposals were brilliant and
world leaders in “how” to achieve some goal, but totally confused about the
importance of the choice of goals, the “broader impact,” and the connection
between their own work and that of others.

Yesterday, I responded to his argument using the same old
valid but fuzzy principles which any well-informed energy economist would use. I
wasn’t altogether stupid in my reply, but I was operating at my usual late
afternoon level of consciousness:

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I worry about climate change more than 99% of the population does, but even so I view national security, nuclear proliferation and emerging conflicts in the Middle East as adding up to a problem just as big and just as lethal as climate change.

Another way to think about EV versus PHEV is to think about how
to use rational market design to get a kind of optimal mix. In reality, silver
bullets and single products have always never been the best arrangement/mix for
any major energy market; there are lots of segments. If we don't intend to pass
laws requiring everyone to buy EV and not PHEV, the challenge may be more
figuring out what kind of incentive or "externality payment" (ala tax
breaks) would be appropriate for both. EVs and PHEVs both benefit if there are
good and proper incentives for both. Also, the development of the two
technologies is synergistic.

But again, a lot of the details (at least for the national
security side) are in the transportation addendum already out there. (On the
web site of www.ieeeusa.org, an addendum
to the National Energy Policy Recommendations, NEPR, for which I was one of the
many original authors.)

For climate change... I personally worry a lot about whether
anything we can do now is enough. So far as I can tell, our best hope lies in
finding ways to get the technology ready so that we can move quickly when and
if people smell... not the roses... but the poison. That would include not only
new energy technology, but also technology to make various types of
geoengineering better and more available. Despite all the colossal lip service,
most of what we need to be doing to make such breakthroughs possible is still
not being done, due to all kinds of politics at many levels, and I find it ever
more difficult to visualize a way forward with hope. I am glad that some of you
still have hope and energy, at least for part of this.

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But this morning, in meditation, I see that this reply,
while valid, was shallow, and did not capture some of the real issues of life which
will decide whether we live or die. One of those issues is our ability to think
mathematically... something which STEM education should be trying to advance,
at least for those of us able to learn to think more mathematically. People say
“tell it like it is” – but when reality is ultimately mathematical in nature,
that means making a place for the real truth, even when it means being more
mathematical. Local priests and shamans, when trying to defend their power have
often pushed the idea that ancient Hebrew or Arabic or Latin or Greek or Aramaic
or Tagalog are the one true language of power of the spirit and the cosmos –
but I would predict that none of those languages, even English and Spanish, would
have much traction beyond the earth, but that mathematics (albeit with minor
notational differences) is the one language we speak on earth which connects to
the entire galaxy. Mathematics and images. So maybe I need to speak real truth,
mathematics, at least to IEEE folks in such discussions.

Human species extinction is not the only big issue before
us. There are also issues of spiritual growth, quality of life, etc. They also
deserve attention, but to survive we need to be able to think about mundane
survival, to focus with laser-like intensity on the issue of avoiding human
extinction. In this post, I will limit myself to the issue of extinction.

The issue of extinction may reasonably be operationalized by
trying to minimize the probability that the human species goes extinct within
the next 10,000 years or so. (Why 10,000 years? To avoid distraction FOR NOW on
issues like the Darwinian evolution of humans into some other species, and that
kind of thing.) This is mathematically just one example of the classic problem
of maximization over time in a nonlinear stochastic system. The most complete
overview of workable methods to address such problems in given in the IEEE
book, Handbook of Reinforcement Learning and Adaptive Dynamic Programming
(RLADP), edited by Lewis and Liu, for which I wrote the first chapter giving an
overview of the entire field.

Some people view RLADP as just a branch of control theory,
but there are many areas of human endeavor, like economics, which also address
optimization problems. Norbert Wiener, one of the founders of modern control
engineering, explained a lot of the mathematics of what it takes to make a
working thermostat which doesn’t go unstable, but he also had discussions with
Von Neumann about how to push ahead to solve more difficult problems, leading,
for example, to the creation of the neural network field. (Buried somewhere in
my house I have a book containing dialogues of Von Neumann, Wiener, Warren
McCullough and others which led to the McCullough/Pitts neuron model and the
birth of that new field of research.)

Many people in control theory and in fundamentalist religion
(two closely related streams of human thought!) got as far as the thermostat in
their thinking, but find it uncomfortable to push further the way Wiener and
Von Neumann did. “What is a probability anyway? What is the connection between
what Von Neumann talked about and real
life? Either we survive or we don’t. Where is there a probability?” But more
realistic branches of engineering understand that there are stochastic factors
even for humble systems like thermostats, and we need to cope with them. One of
Von Neumann’s followers, Prof. Howard Raiffa of the Harvard Business School,
did a magnificent job of teaching people the real meaning of probabilities and
optimization in real life; his simple, readable book which created the field of
“decision analysis” and decision trees gives lots of real world examples based on
new work he did for real oil companies, where wildcat drilling is an uncertain
game of probabilities – a game without which we wouldn’t have an oil industry.

One of the “thermostat people” complained to me a few years
ago: “You optimization people are ‘way too optimistic. You say you want to make
outcomes better, but in the real world it is hard enough to keep things from
falling apart altogether. In the real world, we need a system of order, a
stable state which may not be the best, but won’t fall apart. We need solid,
ironclad linear degrees of stability – something we can prove, because only
when we assume things are linear can we really prove anything with confidence.
Stability is all.”

I even remember as workshop on electric power where one of
the power engineers (NOT representing all power engineers!) said “you guys can
forget optimization. If someone comes to me talking about anything but
stability and provably stable linear systems, I won’t even talk to him.” At
that same meeting was an executive of a power company who had funded his work,
and he said: “I’m glad you told me that, because you need to know that no one
will get any more money from US unless they show they can include maximizing
value added and consumer benefits in the equation.”

More seriously, when the thermostat guy spoke to me, I
replied: “No, it is YOU who are too optimistic. Life is not really certain or
linear. There is NO WAY that you can actually give an absolute guarantee of
survival or stability under realistic assumptions. The best we can in the real
world is to maximize the PROBABILITY of survival, and that’s an optimization
problem. Even a mouse in the field cannot guarantee it will survive the next
day; the best it can do is to maximize the probability that it survives, and
its entire brain evolved to cope with that kind of real-world problem as best
it can.” (I tend to view sharia and certain kinds of Vishnu thinking, and
JudeoChristian fundamentalisms, all as a search for a stable fixed point
solution – to challenges which do not have that kind of solution.)

So – what happens when we look at the problem of maximizing
the probability of human survival through the lens of ADP mathematics, the mathematics
which is appropriate to that kind of problem? To get real, I need to get a
little mathematical.

It turns out that there is a very tight connection between
economics and ADP. In fact, there is a Greek letter “lambda” which embodies
that connection in a very powerful way. In first year market economics, people
sometimes use the letter “p” for price and “q” for quantity, but more advanced
work (like Ken Arrow’s seminal books) the vector “lambda” represents a vector
of prices. In optimal control theory, there is something called the “Pontryagin
equation”, which uses essentially the same lambda vector – but obeying a
condition which ensures optimal policies and allocations across time.
(Microeconomics usually pays more attention to optimal allocations in
equilibrium, as in general equilibrium theory or the newer dynamic stochastic
general equilibrium.) In RLADP, I developed a stochastic
generalization of the Pontryagin equation, first described in chapter 10 of the
Handbook of Intelligent Control (White and Sofge eds, Van Nostrand, 1992). That
generalization is the basis of Dual Heuristic Programming (DHP), the algorithm
which led to the breakthrough in hit-to-kill missile interception by
Balakrishnan, and a number of other successes.

A well-trained energy economist would explain to my IEEE
colleague that real markets entail a diversity of prices and suppliers,
reflecting the diversity of costs and consumer preferences across a complex
world. That’s embedded in what I actually said. But in actuality, to maximize
the probability of human survival across a dynamic changing landscape... the
real story is that we face a future movement in prices/lambdas if we follow a
policy course which really maximizes our probability of survival. Now only are
there mixes of prices across the world, as the economist envisions, but there
is a trajectory of future prices. The best strategy is not simply to just make
believe we are living in utopia now, but ... it’s like planning the orbit of a
spacecraft (one of the real applications of DHP!)... and yes, I agree with my
old colleague that we do need to be especially careful to develop what we need to
be flexible, to be able to survive and prosper under a wide range of unexpected
conditions, good and bad. That’s reality... and we need to be able to be clear
about it, and not fall back into unrealistic, unviable fundamentalist ways of
thinking when we make the move from general principles to actual implementation
and action and market design. Market design itself is absolutely fundamental,
as is honorable and open competition in general. If we only have honor, or we
only have competition, we die.

"The threat of death by H2S is not so simple as worrying about our carbon footprint"

ReplyDeleteI haven't heard this one before: do you have a reference to the speculation that hydrogen sulfide is a threat to human existence?