Years ago, I read a sarcastic essay. The specifics I remember not, but I do remember the first line about: When a boy hangs out with a girl on the street, and the girl intends to Jaywalk, the boy can either stops her, or go along and pulls her back when a car rushes by. It is much more likely that the latter choice will impress and move the girl.
It sounds silly, but I cannot deny there is an element of truth. When we do things, it does not matter how worthy they are, it matters (for publicity) how dramatic it is.
For the public, it is much better to rant against, ridicule and rebel against a government than work in the system and improve from within. Why? Rebellion is much more dramatic.
A state man is seldom acknowledged for keeping his country stable and thriving; we would rather give credit to someone who overthrow his own government. As for what happens afterwards, like is there a good government that takes over or is there just anarchy, we could not care less. (Personally, I abhor at the bloodiness of the French Revolution, rather than admire the courage of the people).
A movie about someone who does good job in good times, working relentlessly to prevent things getting out of control could not be exciting. We want to see things our of control and someone comes and bring it back to order.
Such worship of heroism will be counter-productive if it divert energy away from non-dramatic but helpful contributions (come on, working from within and reform gradually takes up patience and skills). What is more worrisome is it might probably distort incentives. Would someone or some country be tempted to create trouble so they could play a more dramatic role.
Drama, I love not.
Friday, October 12, 2012
Friday, September 28, 2012
China, growth star or growth disaster? (1)
When it comes to China, you can hardly find a neutral stance, especially concerning is economic development. While some see a Chinese model and predict that China will overtake US as the largest economy, others constantly predicts a collapse. To the discredit of the latter group, the crisis never materialized. While I can hardly find any common ground with the reasoning of the latter group, I do reach a similar conclusion--China is unlikely to be a growth star in the future.
1. Economic inclusiveness or extractiveness?
I will discuss many of the problems with Chinese economic development, and some of the problems have largely been overlooked, but I wish to start the analysis with a talk given by James Robinson. James Robinson defined four concepts--economic inclusive policy, economic extractive policy, political inclusive institutions, and political extractive institutions. The claim is only inclusive-inclusive economies will sustain growth. In the talk he ascribed China as politically extractive and economically inclusive. Comparing to the grand predictions given to USSR, he point out that China might well be another disappointment in linear projection. While I certainly felt uncomfortable with the sarcasm he ridiculed such projections, the impotence of linear extrapolation is a real one. However, I fear economic extractiveness rather than political extractiveness is putting China's future in danger.
China's economic system is NOT inclusive. The SOE is the epitome of this extractiveness. The state grants many SOE's monopoly power--eg. in the area of petroleum, telecommunication and banking. With monopoly power in such key area, it is little wonder that those SOE's make gigantic profits--in other words, those SOE extract money from the citizens. I would not object to this system as strongly if either 1)the profits are turned to the state as a substitute of taxation; or 2) the employment within SOE is inclusive. Unfortunately, neither is not true. I will not go into details of the former since it has been extensively critiqued by astute observers. The second problem is more server. Some anecdotes might start this. Some of less-able cousins got jobs in banks. I was not surprised because I have enough aunts and uncles working in banks. I will not disclose the specific numbers, but they can take home quite big bonuses and salary immediately after they "launched" their career. On the other hand, I have some friends who are already working were not fortunate enough to secure that quick money. The difference is my friends graduated from the top high school and colleges in China, while some of my cousins graduated from "never-heard-of-colleges". The static welfare ill-distribution is unattractive, but it is not important. The real problem with stuffing those key areas (like banking and petroleum) with dumb people. Will it be any surprise if China's banking industry collapsed and undergo massive bankruptcy when they have to face foreign competition? No! Quite the contrary, I will be surprised if any bank survive. It is easy to lose competitiveness but it is very very hard, if possible, to regain them. The maintenance of SOE privileges serve as a way for economic and political elites to enrich their impotent kids (of course if their kids were potent, they often choose to adopt more extractive method--an easy example is the son of the current prime minister of China). There has been attempts to curtail those extractiveness by introducing competition, but perhaps too little, too late.
There are many other forms of economic extractiveness in China--financial repression is one of them. But those are more discussed than the employment issue of SOE. Hence I will not repeat the wisdom of those acute observers.
Next time, I will continue to discuss the problem of SOE, though in a very different (almost opposite) flavor.
1. Economic inclusiveness or extractiveness?
I will discuss many of the problems with Chinese economic development, and some of the problems have largely been overlooked, but I wish to start the analysis with a talk given by James Robinson. James Robinson defined four concepts--economic inclusive policy, economic extractive policy, political inclusive institutions, and political extractive institutions. The claim is only inclusive-inclusive economies will sustain growth. In the talk he ascribed China as politically extractive and economically inclusive. Comparing to the grand predictions given to USSR, he point out that China might well be another disappointment in linear projection. While I certainly felt uncomfortable with the sarcasm he ridiculed such projections, the impotence of linear extrapolation is a real one. However, I fear economic extractiveness rather than political extractiveness is putting China's future in danger.
China's economic system is NOT inclusive. The SOE is the epitome of this extractiveness. The state grants many SOE's monopoly power--eg. in the area of petroleum, telecommunication and banking. With monopoly power in such key area, it is little wonder that those SOE's make gigantic profits--in other words, those SOE extract money from the citizens. I would not object to this system as strongly if either 1)the profits are turned to the state as a substitute of taxation; or 2) the employment within SOE is inclusive. Unfortunately, neither is not true. I will not go into details of the former since it has been extensively critiqued by astute observers. The second problem is more server. Some anecdotes might start this. Some of less-able cousins got jobs in banks. I was not surprised because I have enough aunts and uncles working in banks. I will not disclose the specific numbers, but they can take home quite big bonuses and salary immediately after they "launched" their career. On the other hand, I have some friends who are already working were not fortunate enough to secure that quick money. The difference is my friends graduated from the top high school and colleges in China, while some of my cousins graduated from "never-heard-of-colleges". The static welfare ill-distribution is unattractive, but it is not important. The real problem with stuffing those key areas (like banking and petroleum) with dumb people. Will it be any surprise if China's banking industry collapsed and undergo massive bankruptcy when they have to face foreign competition? No! Quite the contrary, I will be surprised if any bank survive. It is easy to lose competitiveness but it is very very hard, if possible, to regain them. The maintenance of SOE privileges serve as a way for economic and political elites to enrich their impotent kids (of course if their kids were potent, they often choose to adopt more extractive method--an easy example is the son of the current prime minister of China). There has been attempts to curtail those extractiveness by introducing competition, but perhaps too little, too late.
There are many other forms of economic extractiveness in China--financial repression is one of them. But those are more discussed than the employment issue of SOE. Hence I will not repeat the wisdom of those acute observers.
Next time, I will continue to discuss the problem of SOE, though in a very different (almost opposite) flavor.
Tuesday, August 21, 2012
Revelation of blogging
Blogging is a tiring activity. Each time I write on a topic, it often takes me about seven hours. It is forming an opinion that sucks all the time away--the actual writing (as I do not polish them) once I formed an opinion, is quick and brisk. I always need to read extensively on the topic, trying to get a more comprehensive understanding of all relevant details so as to come to a judgement. Most often, under scrutiny, most issues defy an easy judgement, at least not one that is simple to state. Consequently, I blog quite seldom.
However, I form opinions all the time about things I hear and see. Most likely, I fail to do the kind of research that I do for my blogs. It is often that when writing a blog that I changed my opinions, sometimes even reversed them. Then how do I form an opinion in daily life? I guess prejudice, bias, and sloppy thinking all creep in. This problem of sloppy thinking, I fear, haunts most people. Probably, we should be a little bit more cautious when voicing our "opinions", at least I do not wish to be embarrassed by them later in my life.
However, I form opinions all the time about things I hear and see. Most likely, I fail to do the kind of research that I do for my blogs. It is often that when writing a blog that I changed my opinions, sometimes even reversed them. Then how do I form an opinion in daily life? I guess prejudice, bias, and sloppy thinking all creep in. This problem of sloppy thinking, I fear, haunts most people. Probably, we should be a little bit more cautious when voicing our "opinions", at least I do not wish to be embarrassed by them later in my life.
Thursday, August 9, 2012
How relevant is Current Account Balance?
The general perception to how relevant is Current Account (CA) balance is "very relevant", when it comes to exchange rate. Professional economists and politicians alike (and those whose status is somewhat in between) point to China's stunning CA surplus as a convincing evidence that China's RMB is significantly undervalued. While it is for us to judge how convincing each piece of evidence is, the consensus seems to suggest that it is beyond reasonable doubt. This view is so popular that when I questioned the validity of this view on facebook, during casual conversations, or on other occasions, hardly anyone would take it seriously.
Unfortunately, consensus hardly mean convincing. Before the current financial crisis, there was a consensus of "Great Moderation", an optimism that assures us that financial crisis is in history, at least for developed nations, like US, which is soon to be shattered by the hard reality. This view, in the case of China, is equally problematic.
What is Current Account? Current Account is the sum of Balance of Payments (BoP) and capital account. Capital account usually is left out of consideration and the game is on BoP. BoP is defined to be earnings on exports minus payments for imports, and it is intuitive that is captures the trade position of an economy. However, to appreciate what BoP does not capture, let us consider a simple example. There is a country B(ritian) which set up a colony A(merica). I will tell the story where gold is the only currency. B sends some people to A, to extract the natural resources in A. Since A is so resourceful, every year trillions of tons of gold worth of natural resources are exported from A to B, resulting in a huge deficit for B. In other words, BoP for B is stunning. Surprisingly, governors of B are not worried at all, because they know that after ten years, all people in A will return, and A will return to uninhabited (or disappear). This story, while artificial does point to one weakness of BoP--years of BoP surplus (or deficit) can suddenly be reversed by capital account, a normally out-of-picture channel, via emigration.
How relevant is this example for Sino-US exchange rate debate? More relevant than CA at least. The Economist calls attention to facts listed in the latest edition of "Hurun Report":
The above discussion points to one aspect of CA that is often over-looked. Unfortunately, (perhaps fortunately for aspiring researchers), inferring currency overvaluation/undervaluation from BoP or CA is generally problematic. Micheal Spence, a Nobel laureate in economics, pointed on one apparent difficulty:
While I would not short RMB--the market can stay irrational longer than I can stay solvent; but at least, I would not contribute to the hot money. I am actively converting my RMB assets into USD-denominated, though I do not intent to emigrate any time soon.
Reference:
1. Spence, Micheal. "The Exchange-Rate Delusion." Project Syndicate. N.p., 19 Dec. 2011. Web. 09 Aug. 2012. <http://www.project-syndicate.org/commentary/the-exchange-rate-delusion>.
Unfortunately, consensus hardly mean convincing. Before the current financial crisis, there was a consensus of "Great Moderation", an optimism that assures us that financial crisis is in history, at least for developed nations, like US, which is soon to be shattered by the hard reality. This view, in the case of China, is equally problematic.
What is Current Account? Current Account is the sum of Balance of Payments (BoP) and capital account. Capital account usually is left out of consideration and the game is on BoP. BoP is defined to be earnings on exports minus payments for imports, and it is intuitive that is captures the trade position of an economy. However, to appreciate what BoP does not capture, let us consider a simple example. There is a country B(ritian) which set up a colony A(merica). I will tell the story where gold is the only currency. B sends some people to A, to extract the natural resources in A. Since A is so resourceful, every year trillions of tons of gold worth of natural resources are exported from A to B, resulting in a huge deficit for B. In other words, BoP for B is stunning. Surprisingly, governors of B are not worried at all, because they know that after ten years, all people in A will return, and A will return to uninhabited (or disappear). This story, while artificial does point to one weakness of BoP--years of BoP surplus (or deficit) can suddenly be reversed by capital account, a normally out-of-picture channel, via emigration.
How relevant is this example for Sino-US exchange rate debate? More relevant than CA at least. The Economist calls attention to facts listed in the latest edition of "Hurun Report":
Mainland China can now boast over 1m wealthy citizens (qianwan fuweng) each with over 10 m yuan ($1.6 m), says the latest edition of the "Hurun Report"...more than 16% of China's rish have already emigrated, or handed in immigration papers for another country, while 44% intend to do so soon. Over 85% are planning to send their children abroad for their education, and one-third own assets overseas.To put this in perspective, China boasts of about 3 trillion USD in foreign reserves, while "the richest 1% of Chinese households own $2 trillion-5 trillion of property and liquid assets" according to Victor Shih of Northwestern University. The emigration wave, not just confined to the richest 1%, could easily deplete China's foreign reserve, which will then force China to depreciate its currency, an event unthinkable for many.
The above discussion points to one aspect of CA that is often over-looked. Unfortunately, (perhaps fortunately for aspiring researchers), inferring currency overvaluation/undervaluation from BoP or CA is generally problematic. Micheal Spence, a Nobel laureate in economics, pointed on one apparent difficulty:
But, in order to explain performance relative to Japan and Germany, one would have to argue that the euro and the yen have been undervalued, which makes no sense.As for the case of China, there are even more reasons to be cautious before subscribing to the majority view. Given a general expectation that RMB will appreciate (partly fueled by the dirty politics), many investors, hoping to reap the benefit from the appreciation, disguised their hot money as trade flows to avoid the capital control imposed by China. With this, when we look at the BoP, the prospect of an appreciation seems more rosy--after all, the exports are so huge compared to imports, while a potentially big chunk (nobody knows how much) of the difference is explained by the disguised hot money. This might in turn, fuel unrealistic expectation, which in the short turn pushes RMB to appreciate. Another danger is the weak or defunct banking sector. Hot money is notoriously myopic--considerable amount flowed into Korea, Thailand, Indonesia and other Asian economies when the banking sector in those economies were already extremely problematic, and only reversed themselves (suddenly) when the crisis breaks out, creating one of the traumatic experience for those Asian economies. Even with the absence of emigration concern, the failure of Chinese banking sector, might trigger a large capital reversal, which would deplete the seemingly inexhaustible foreign reserve of China. An exchange rate collapse, is all but unthinkable.
While I would not short RMB--the market can stay irrational longer than I can stay solvent; but at least, I would not contribute to the hot money. I am actively converting my RMB assets into USD-denominated, though I do not intent to emigrate any time soon.
Reference:
1. Spence, Micheal. "The Exchange-Rate Delusion." Project Syndicate. N.p., 19 Dec. 2011. Web. 09 Aug. 2012. <http://www.project-syndicate.org/commentary/the-exchange-rate-delusion>.
This is a wonderfully and brilliantly piece written by one of my favorite economist--Micheal Spence.
2. "BoP until You Drop; the Balance of Payments." The Economist (US) 4 Aug. 2012: 40. Print.
Sunday, August 5, 2012
An apology
I have taken up some controversial topics recently. It is a dangerous thing for me---as these things often lead to heated heads and distorted reasoning. As they are of enough interest for me to write about them, I am especially exposed to the danger of hot heads. It is nevertheless my hope to analyze these from my perspective. The pulse behind my writing is simple--my distrust of popular media. A reasoning similar to that of Efficient Market Hypothesis (EMH) would convince one that because of free speech, truth will be out, and lies will be exposed. Unfortunately, it is little more than wishful thinking, and any political theory based on that line of logic, just as EMH, will be a terrible reflection of reality, despite its irresistible theoretical beauty and attraction.
It puzzles me when the mass media coverage are systematically biased, just as when individuals' expectation are systematically biased in economic setting. We do not have any convincing models for them in economics or political science, but to deny their existence, and build arguments, and recommendations upon them is only the favourite sport of those living in Ivory Tower. As for me, I will continue to explore their origin, and at the same time will speak up against those biases, popular and deep-rooted as those biases might be.
As I have commented many times people are haunted by confirmation bias---instead of reviewing relevant evidence and updating their belief, they cling to them for too long. They choose to disregard relevant information challenging their belief. As a result, media coverage that confirms their bias will be popular, while those telling uncomfortable truth will not be. The more nuances truth is, most information is ambiguous, and people like to read information interpreted their way (just see how many conservatives like to read NYT?) Media, by catering to public taste, reinforce their bias and prejudice. Government campaign, of course, plays a role as well. The true picture of course is more complicated, but these are some elements that I conjecture are present.
As a human being, I am not immune to irrationality and confirmation bias. As I get dragged into those controversial topics, I can expect that I will lose my head sometimes. Hence, I do not wish to persuade, but rather, I would rather explain my angle, and wish to see some intelligent and logical replies regardless of their angles. There is one thing I do not wish to see though---the logic representing that of EMH, or unreasonable assumptions that treat people as "noble in reasons" and "infinite in faculty".
There was once a friend dismissed my arguments on Tiber as a result of "brainwash by Chinese government". I wish to point out some facts: I was anti-government in my attitudes and felts that US was the role model until 2007 (as evidenced by my continuous sarcastic remarks in class about the government, online blogs). In the summer of 2007, I went to US as an exchange student. I learned American history (and got a 5 on AP US history), and changed my attitudes toward government in general. I get more disillusioned with an idealist thinking that is in line with EMH, and started to approach the problem from a more realist point of view. I became cynical and more reluctant to trust what politicians say. At the same time, I began to understand what Chinese government did. While I continue to lament the rampant corruption and collusion, I appreciated the difficulty they are confronted with in eliminating corruption, and the dilemma. I continued to dismiss my once firmly-held belief, introduction of democracy will do the job. While I continue to be critical of Chinese government on some policies, I became more critical of those criticisms from US politicians, as I began to suspect they are hypocritical in nature.
You are welcome to point out my systematic bias, but please take the above history into account.
It puzzles me when the mass media coverage are systematically biased, just as when individuals' expectation are systematically biased in economic setting. We do not have any convincing models for them in economics or political science, but to deny their existence, and build arguments, and recommendations upon them is only the favourite sport of those living in Ivory Tower. As for me, I will continue to explore their origin, and at the same time will speak up against those biases, popular and deep-rooted as those biases might be.
As I have commented many times people are haunted by confirmation bias---instead of reviewing relevant evidence and updating their belief, they cling to them for too long. They choose to disregard relevant information challenging their belief. As a result, media coverage that confirms their bias will be popular, while those telling uncomfortable truth will not be. The more nuances truth is, most information is ambiguous, and people like to read information interpreted their way (just see how many conservatives like to read NYT?) Media, by catering to public taste, reinforce their bias and prejudice. Government campaign, of course, plays a role as well. The true picture of course is more complicated, but these are some elements that I conjecture are present.
As a human being, I am not immune to irrationality and confirmation bias. As I get dragged into those controversial topics, I can expect that I will lose my head sometimes. Hence, I do not wish to persuade, but rather, I would rather explain my angle, and wish to see some intelligent and logical replies regardless of their angles. There is one thing I do not wish to see though---the logic representing that of EMH, or unreasonable assumptions that treat people as "noble in reasons" and "infinite in faculty".
There was once a friend dismissed my arguments on Tiber as a result of "brainwash by Chinese government". I wish to point out some facts: I was anti-government in my attitudes and felts that US was the role model until 2007 (as evidenced by my continuous sarcastic remarks in class about the government, online blogs). In the summer of 2007, I went to US as an exchange student. I learned American history (and got a 5 on AP US history), and changed my attitudes toward government in general. I get more disillusioned with an idealist thinking that is in line with EMH, and started to approach the problem from a more realist point of view. I became cynical and more reluctant to trust what politicians say. At the same time, I began to understand what Chinese government did. While I continue to lament the rampant corruption and collusion, I appreciated the difficulty they are confronted with in eliminating corruption, and the dilemma. I continued to dismiss my once firmly-held belief, introduction of democracy will do the job. While I continue to be critical of Chinese government on some policies, I became more critical of those criticisms from US politicians, as I began to suspect they are hypocritical in nature.
You are welcome to point out my systematic bias, but please take the above history into account.
Does China has a reason to distrust Dalai Lama?
Ethnic unrest has been a common theme in China recently (mysteriously for many, but not for me). One source of that comes from Tibet. I was once asked why Chinese government treats Dalai Lama with such hostility and distrust? Why would China distrust such a peace-loving, caring, charismatic and perfect Nobel Peace prize winner? Digging a little bit into history, with basic information from wikipedia, I find the distrust makes perfect sense.
So a brief history is in order (from wiki): On 17 November 1950, at the age of 15, the 14th Dalai Lama (the one you know) was enthroned formally as the temporal ruler of Tibet. He sent a delegation to Beijing, which ratified the Seventeen Point Agreement for the Peaceful Liberation of Tibet. (which allowed a high degree of autonomy) He worked with the Chinese government: in September 1954, together with the 10th Panchen Lama he went to the Chinese capital to meet Mao Zedong and attend the first session of the National People's Congress as a delegate, primarily discussing China's constitution. On 27 September 1954, the Dalai Lama was selected as a deputy chairman of the Standing Committee of the National People's Congress, a post he officially held until 1964.
However, Dalai Lama was planning something else. He accepted assistance from CIA. In 1956, a large rebellion broke out in eastern Kham, an ethnically Tibetan region in Sichuan province. To support the rebels, the CIA launched a covert action campaign against the Communist Chinese. A secret military training camp for the Khampa guerrillas was established at Camp Hale near Leadville, Colorado, in the U.S. The guerrillas attacked Communist forces in Amdo and Kham but were gradually pushed into Central Tibet.
At the outset of the 1959 Tibetan uprising, fearing for his life, the Dalai Lama and his retinue fled Tibet with the help of the CIA's Special Activities Division, crossing into India on 30 March 1959, reaching Tezpur in Assam on 18 April.
This excerpt from wikipedia should have explained the origin of the distrust. Oran's Dictionary of the Law (1983) defines treason as "...[a]...citizen's actions to help a foreign government overthrow, make war against, or seriously injure the [parent nation]."(from wiki). I think what Dalai Lama did fit the definition of treason. Then it is not all that surprising that China treats a traitor with suspicion, distrust, and hostility, especially after that traitor has publicly embarrassed China many times afterwards. To build trust is a lengthy process, and once destroyed, it is hard to rebuild, isn't it?
While Dalai Lama likes to instill some Tibetan teaching, I wish to quote Conscious: I used to judge a person by what he says, now I have learned to judge a person by what he does.
So a brief history is in order (from wiki): On 17 November 1950, at the age of 15, the 14th Dalai Lama (the one you know) was enthroned formally as the temporal ruler of Tibet. He sent a delegation to Beijing, which ratified the Seventeen Point Agreement for the Peaceful Liberation of Tibet. (which allowed a high degree of autonomy) He worked with the Chinese government: in September 1954, together with the 10th Panchen Lama he went to the Chinese capital to meet Mao Zedong and attend the first session of the National People's Congress as a delegate, primarily discussing China's constitution. On 27 September 1954, the Dalai Lama was selected as a deputy chairman of the Standing Committee of the National People's Congress, a post he officially held until 1964.
However, Dalai Lama was planning something else. He accepted assistance from CIA. In 1956, a large rebellion broke out in eastern Kham, an ethnically Tibetan region in Sichuan province. To support the rebels, the CIA launched a covert action campaign against the Communist Chinese. A secret military training camp for the Khampa guerrillas was established at Camp Hale near Leadville, Colorado, in the U.S. The guerrillas attacked Communist forces in Amdo and Kham but were gradually pushed into Central Tibet.
At the outset of the 1959 Tibetan uprising, fearing for his life, the Dalai Lama and his retinue fled Tibet with the help of the CIA's Special Activities Division, crossing into India on 30 March 1959, reaching Tezpur in Assam on 18 April.
This excerpt from wikipedia should have explained the origin of the distrust. Oran's Dictionary of the Law (1983) defines treason as "...[a]...citizen's actions to help a foreign government overthrow, make war against, or seriously injure the [parent nation]."(from wiki). I think what Dalai Lama did fit the definition of treason. Then it is not all that surprising that China treats a traitor with suspicion, distrust, and hostility, especially after that traitor has publicly embarrassed China many times afterwards. To build trust is a lengthy process, and once destroyed, it is hard to rebuild, isn't it?
While Dalai Lama likes to instill some Tibetan teaching, I wish to quote Conscious: I used to judge a person by what he says, now I have learned to judge a person by what he does.
Should race be a factor in statistical inference?
This is a question I have long been thinking about. Ye's incident brought this question back to my attention. While I despise and lament the racist comments concerning Ye's performance, I should give a qualified "yes" to the question posed in the title. While apparently paradoxical, this response does not contradict my attitudes on Ye's matter, as I pointed out in the previous post that race should be accounted for properly in a scientific manner.
Conditioning is the soul of statistics. Whenever possible, we should condition on relevant information to aid in our inference. Race, in some cases, could be a relevant information. When that is the case, we should not simply discard the information for political correctness. Being fair-minded does not mean we should turn our head away from any information concerning gender and race. We are seeking truth, uncomfortable it might be, and when those information contains information about the truth, we choose to extract the information from it. (The book Intelligence Paradox contains a good discussion relating to academic political correctness in its Introduction, which I wish to quote in my incoming blogs, and which I agree whole-heartedly.) The hallmark of a racist is not reading information from race, but rather read non-existent information from race and refuse to consider other information.
However, what is lamentable is that many people do not do it properly. We might have different priors based on race, but those priors cannot be dogmatic. They should contain information about race, but they should recognize the limited scope of the information, and allow enough flexibility in the prior so as to readily accept any new relevant information. Put in another way, even if we allow the priors to be different, this difference will be dominated once new relevant information becomes available. Thus, incorporating race, in most circumstances, will only be pertinent in theory, and non-significant in practice, unless one has very strong evidence that the racial information is extremely relevant and reliable, a case for which I am having an extremely difficult time to construct an example.
The problem with most racial information people wish to incorporate is that they are not "structural"--- The relation between race and certain behavior are not constant or fundamental. Given that most of the information is historical data, and that the possibility of a structural change, the past observations contains little relevant information for today, and it will be detrimental to make decisions based on past non-structural observations (similar to the Lucas Critique in economics). For example, African Americans might have lower literacy historically, but this association is non-structural, and it will (and did) change as time passes by. In general, blindly incorporating historical information as if they are historical is a sign of sloppy thinking and crappy reasoning, both of which might bring severe consequences. The current financial crisis, as some economists would argue, results from people's extrapolating from historical data on real estate (believing future performance will mirror past performance). Those traders who were stupid enough to commit such fallacy, brought tremendous loss to their companies. In the case of Ye, the Chinese swimming team had a dishonorable history in the 1990's, and that was the past. To blindly project 1990's to 2010's is similar to what those garbage traders did, except in this case, the consequences is born by the potentially innocent Chinese swimmer Ye.
A less innocuous phenomenon is confirmation bias. When the information of race is entered, the person directly forms a (racist) belief, and he looks for information that only confirms his belief, and interpret ambiguous information so as to confirm his belief. In the case of Ye, the history is just information he digs up to rationalize his belief, he discard relevant information (other swimmers could improve more significantly from personal best and drug test), and he biasedly interprets ambiguous information (interpreting Ye's second not-as-startling performance as evidence of backing-off, rather than symptom of fatigue after staying up late for drug tests nights in a row till right before the contest and extreme psychological pressure resulting from media defamatory coverage).
To conclude, while incorporating racial information per se is scientific and non-racist, many tend to err on the side of over-incorporating racial information. The real racist behavior is not just to incorporate such information, but to do it improperly. The real danger results from forming a dogmatic prior and indulging in confirmation bias.
Conditioning is the soul of statistics. Whenever possible, we should condition on relevant information to aid in our inference. Race, in some cases, could be a relevant information. When that is the case, we should not simply discard the information for political correctness. Being fair-minded does not mean we should turn our head away from any information concerning gender and race. We are seeking truth, uncomfortable it might be, and when those information contains information about the truth, we choose to extract the information from it. (The book Intelligence Paradox contains a good discussion relating to academic political correctness in its Introduction, which I wish to quote in my incoming blogs, and which I agree whole-heartedly.) The hallmark of a racist is not reading information from race, but rather read non-existent information from race and refuse to consider other information.
However, what is lamentable is that many people do not do it properly. We might have different priors based on race, but those priors cannot be dogmatic. They should contain information about race, but they should recognize the limited scope of the information, and allow enough flexibility in the prior so as to readily accept any new relevant information. Put in another way, even if we allow the priors to be different, this difference will be dominated once new relevant information becomes available. Thus, incorporating race, in most circumstances, will only be pertinent in theory, and non-significant in practice, unless one has very strong evidence that the racial information is extremely relevant and reliable, a case for which I am having an extremely difficult time to construct an example.
The problem with most racial information people wish to incorporate is that they are not "structural"--- The relation between race and certain behavior are not constant or fundamental. Given that most of the information is historical data, and that the possibility of a structural change, the past observations contains little relevant information for today, and it will be detrimental to make decisions based on past non-structural observations (similar to the Lucas Critique in economics). For example, African Americans might have lower literacy historically, but this association is non-structural, and it will (and did) change as time passes by. In general, blindly incorporating historical information as if they are historical is a sign of sloppy thinking and crappy reasoning, both of which might bring severe consequences. The current financial crisis, as some economists would argue, results from people's extrapolating from historical data on real estate (believing future performance will mirror past performance). Those traders who were stupid enough to commit such fallacy, brought tremendous loss to their companies. In the case of Ye, the Chinese swimming team had a dishonorable history in the 1990's, and that was the past. To blindly project 1990's to 2010's is similar to what those garbage traders did, except in this case, the consequences is born by the potentially innocent Chinese swimmer Ye.
A less innocuous phenomenon is confirmation bias. When the information of race is entered, the person directly forms a (racist) belief, and he looks for information that only confirms his belief, and interpret ambiguous information so as to confirm his belief. In the case of Ye, the history is just information he digs up to rationalize his belief, he discard relevant information (other swimmers could improve more significantly from personal best and drug test), and he biasedly interprets ambiguous information (interpreting Ye's second not-as-startling performance as evidence of backing-off, rather than symptom of fatigue after staying up late for drug tests nights in a row till right before the contest and extreme psychological pressure resulting from media defamatory coverage).
To conclude, while incorporating racial information per se is scientific and non-racist, many tend to err on the side of over-incorporating racial information. The real racist behavior is not just to incorporate such information, but to do it improperly. The real danger results from forming a dogmatic prior and indulging in confirmation bias.
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