Sir Francis Galton penned this salutation in a letter to his cousin Charles Darwin on Christmas Eve 1869. In the letter, this polymath of the 19th century who reified linear regression, and contributed to the burgeoning fields of genetics, meteorology, biometrics, psychology and eugenics celebrated
Darwin for the
emancipating effect of Origins seeing it, "in the same
way as converts from barbarism think of the teacher who first released them
from the intolerable burden of their superstition." In his 1875 publication Statistics by Intercomparison, with Remarks on the Law of the
Frequency of Error, he explains his motivation for population statistics -
the heart of social modeling - as an efficiency of labor. One could, he argues, "marshal a
series" of men, behaviors, or attributes or more efficiently sample a
small set and derive generalizable conclusions so long as we know the frequency
of error. And to be clear, error is defined
as the divergence from the normative mean.
As with so many other social assumptions, I am puzzled by the present moral repugnancy of so much of Galton's inhuman disdain for those of "lesser" standing while we go about promoting his mathematical dogmas without a moment of consideration. Consider the following absolute statement made by the father of regression:
"The practice of sorting objects into classes may be said to be coextensive with commerce, the industries, and the arts. It is adopted in the numerous examinations, wither pass or competitive, some or other of which all youths have now to undergo. It is adopted with every thing that has a money-value; and all acts of morality and of intellectual effort have to submit to a verdict of "good," "indifferent," or "bad.""
Galton uses another term that most of us have lost to antiquity: "binomial ogive." Now you know what this is as you can't pass a day without encountering one or the consequence thereof. It's a line graph on an x-y coordinate. Most of the time we present information where "up" is "good", "down" is "bad" and flat-line is "indifferent". Speed limits were borne of ogives. Interest rates were borne of ogives. Prices on goods and services were borne of ogives. How are students learning and teachers teaching? Ask an ogive. What Galton and is dutiful band of modern adherents fail to sufficiently consider is the implications of this fallacy of simplistic reductionism combined with the confounding effects of dimensional and temporal dynamics.
Now you may be asking yourself, "what does this have to do with the economy or Inverted Alchemy?" long about now. Good question! Let me muddy the waters just a bit more before I shine a light on my thesis.
I took part in an interesting social experiment yesterday in which a group of about 20 individuals were asked to re-imagine a large Intergovernmental Organization derived from multi-lateral treaties and accords nearly a half century ago. What was clear to this group was the dysfunction of the enterprise. What was occult was how one would go about changing the efficacy of the endeavor for the lofty ideals once held as socially desirable. What became painfully obvious within the first 30 minutes was the ghost of Galton. Incentives and outcomes flew across dogma and ideology and our inquiry was reduced, at one point to a literal analogy of a "church" seeking "believers" who would embrace a 50 year old ideology. How do we get people to believe? Why can't we get countries to participate? Why aren't "they" joining "us". As an itinerant heretic, I inquired as to the relevance of the ideology, the institution, for that matter, any proper noun at all. Suddenly the room polarized. Program and Institution pitted against Process and Invitation. What's so Galtonian and simple about Programs and Institutions is that "in" and "out", "good" and "bad", "we" and "they" can be so cleanly dichotomized. What's so uncomfortable and messy about Process and Invitation is that you have to be dynamic and compelling - not through coercion and force but through convening inclusion.
As I was watching the dervishes twist around the notion that institutions may have temporally limited relevance, I reflected on the week's economic news. I watched as another week passed with the
European economies stuck in the 1938 National Bureau of Economic Research
doctrine set forth in Frederick R. Macaulay's seminal work The Movements of Interest Rates,
Bond Yields, and Stock Prices in the Since 1856. Everything we "know" we
"know" about financial instruments is derived from the lines drawn on
scatterplots in ogives constructed by Macaulay.
However, as he pointed out in 1938, what we "know" and what we
"forecast with more assurance" are highly divergent and not overly
helpful. Every investor has seen a
Prospectus statement saying that past performance is not an indicator of future
returns. And few, if any, investors have
taken the informed next step to ask whether there was multivariate validity in the
metrics used to quantify past performance. If we don't go back to the ordinates
used to confine the scattering of data, we can neither describe the past nor
inform the future. United States
Which leads me to the convergence of my point. Institutions, Programs, Outcomes - together the proper nouns - are static artifacts which serve representational roles of a moment in time. Dynamism, flow, interstitial communication give us a sense of periodicity, amplitude, ebbs, and flows. And it's this observation that brings me to my final observation. In one of his best works - though lesser known and referenced - Galton confronted a system that stretched his model by compelling statistics to confront reality. In his paper, On the Conversion of Wind-charts into Passage-charts published in 1866, Galton concedes that multiple, uncorrelated observations frequently taken are the only way to effectively convert wind data into transportation utility. And he concludes his paper with the following compromise: "The method of altering a diagram so as to include the effect of current, is too simple to require explanation." This "too simple" explanation was never given because in the real world of dynamism, it's about provisioning for journeys, not aspiring to destinations. Galton's two dimensional prison could no more explain the tides than our modern economic wizards can predict future performance on past behaviors. My Dear Darwin, we have not yet evolved but we need to.