Thoughts at Random

The main idea: two joint cryptocurrencies are programmed such that one can be exchanged for the other as long as their product remains constant, thus tracking the minimal necessary volume of circulation required by a growing economy in a decentralized fashion.  0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 30.09.2021, and the current version may have been updated several times from its original form.  1 Setting the stage 1.1 The economy under the division of labour is a massive and massively complex system with immense degrees of freedom. Commie silliness notwithstanding, only money, an emergent computer of comparable capability, is equal to the task of daily optimising resources such as to fulfill demand to the greatest degree possible. Money alone can run such calculations at any reasonable speed. 1.2 Calculations need to be run in the moment as well as in time, hence the true and core function of money as a uni

The main idea: Fred Gohlke’s idea of iteratively setting up groups of 3 people who vote on each-other’s progression to ever-higher tiers presents the only credible alternative to liberal democracy. 0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 22.11.2021, and the current version may have been updated several times from its original form. 0.1 The Tryptic Model of elections featured in part 2 of this post is not mine at all, but was devised by Fred Gohlke as practical democracy , to which system I'm making relatively minor changes mechanics-wise and explaining in my own words below. Still, though the system is almost unchanged, the context to which I apply Gohlke's idea couldn't be more different, the original tweak to empower real democracy made into a full alternative to liberal democracy. Thus, all resulting errors, departures from the original design or broader implications readers may choose to draw re

The main idea: the concept of the efficient frontier can be generalized such as to allow the rank-ordering of extremely complex datasets based on a large set of mutually contradicting criteria. 0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 24.01.2022, and the current version may have been updated several times from its original form.   1.1 Say you have a list of things you’d like to compare with regards to a number of criteria. Obviously, if all things are such as to be ranked in the same order across all of these criteria, comparisons are easy. What to do when entities are ranked differently with regards to different criteria though? 1.2 To make this less esoteric, let’s take a simple example: I wish to purchase a used vehicle, and the only relevant considerations are its price (the lower the better), its production year (the more recent the better) and its mileage (the lower the better). I have this narrowed

The main idea: iteratively replacing the highest deviating cell in a reserving triangle with the expected result for that cell removes without ignoring abnormally large claims.  0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 27.10.2021, and the current version may have been updated several times from its original form.   1.1 In a previous post I discussed a general method for removing outliers from a dataset given that one has a model. Let's try now to apply this to non-life claims reserving by triangles. 1.2 The cumulated triangle below includes one obvious outlier incurred in 2018, and emerging one year after. 1.3 Having a model of the data arranged in triangle form means breaking down the triangle into a vertical (exposure) and horizontal (pattern) component. These two are dependent on the choice of reserving method, with the additive method being an obvious example of splitting the triangle into two dimensio

The main idea: the area under an assumed linear demand curve is a far better approximation of utility gains than current GDP accounting practices.  0. Posts on this blog are ranked in decreasing order of likeability to myself. This post was originally posted on 04.11.2021, and the current version may have been updated several times from its original form.   1 The Nominal 1.1 I was inspired to think of this when reading this post (h/t Astral Codex Ten ). All of the relevant critique of the post itself can be found in the comments, but it helped me realize there is something off with real GDP as a measure of standard of life. I will take the opposite view of Less Wrong though, and state that real GDP accounting overestimates gains in standard of life. 1.2 Let's take a simple economy that only produces and consumes widgets. I am not interested in nominal – real distinctions here, so I need not assume any more than one product class, and will stick to inflation not being a thing in

The main idea: pay agent commissions in a temporary staggered fashion that allows for claims to materialise and capture some of the agent’s underwriting intuition.    0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 01.05.2022, and the current version may have been updated several times from its original form. 1.1 There is an obvious conflict of interest non-life insurers will suffer from when they pay agents a commission to sell policies: an agent getting a fixed percentage of the premium will have an interest in maximising revenue per unit of time, whilst the insurer’s interested in maximising profit per unit of time. In other words, agents have no reason to care about which clients will cause more or fewer claims. If they know, they conveniently forget. 1.2 Most if not all insurers try to mitigate this issue by centralising underwriting, such as to leave no power in the hands of the agent when it comes to the deci

The main idea: conditional consols are a cheap and easy way to implement futarchy today. 0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 02.12.2022, and the current version may have been updated several times from its original form. 1.1 Robin Hanson’s futarchy proposes we give prediction markets some role in governing nations or other organisations, in the former case by having people vote on beliefs but bet on results. 1.2 A grave issue with this otherwise interesting proposal is the lack of a quantifiable goal (the “belief” part) that can be fed to the markets, this being AFAIK one of the vectors by which Moldbug attacked the idea. 1.3 But fear not, for whilst true futarchy may be a highly speculative proposal today, there’s a much simpler iteration available to us right now, and which delivers much of the promise but requires less of the suspension of disbelief. A poor man’s version of futarchy, if you will. I eve

The main idea: require all listed firms to act as their own shares’ clearinghouses, considerably narrowing the gap between market cap and book value.  0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 18.06.2022, and the current version may have been updated several times from its original form.   1 All equity is overvalued 1.1 There’s a fundamental bias built into equity (and most other capital) markets: its far easier to cause a stock’s price to go up than down. 1.2 If you think stock X is underpriced, just go and buy it. What can you do if you think stock Y is overpriced? 1.3 You can sell, but this means that only those who hold the stock in the first place are entitled to vote on whether its overpriced or not, compared to how everyone is entitled to vote on whether its underpriced. 1.4 You can sell short. Which mechanism is based on leverage, hence very risky to a degree buying a stock that may lose value isn’t. The d

The main idea: switching government (or at least regional) borrowing to fully amortized schedules only would greatly limit the propensity to acquire leverage beyond reason.   0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 16.10.2021, and the current version may have been updated several times from its original form.   1. Problem: balloon loans 1.1 As far as I know, all borrowing taken out by governments the world over is repaid in bullet / balloon format, where the principal is fully repaid in one single payment at the end of the loan term, and only interest is payable up until that time. Some of those loans run for 50 years, just so we are clear. 1.2 At the other end of the repayment schedule spectrum, you find a fully amortized loan, whereby the borrower repays both the principal and interest on it in a series of equal repayments throughout the term of the loan (ask Excel). The issue and solution should now both

The main idea: iteratively replacing the datapoint most distant from the expected by the latter allows a model to account for outliers without ignoring them.    0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 17.10.2021, and the current version may have been updated several times from its original form. 1.1 Another technique which would be rather obvious, just writing about it as I don’t remember encountering it. The application to claims reserving could be a bit more original, that’s coming in a next post. 1.2 So, a technique that would help to smooth out any outliers in your dataset (as long as you have a model of the underlying pattern, which if you don’t, how do you know that you even have outliers?) is to iteratively replace the datum that diverges by most (absolute value or percentage, depending on context) by the expected datum by the latter. Recalculate the model parameters given the new data, and repeat unti