open source

Sub-Par IT and the Sub-Prime Mortgage Mess: Time to Blame the Machines

Jerry Sheehan — Sun, 26 Oct 2008 15:23:52 -0700

Description

The last month has seen a fundamental economic downturn in the United States with a lengthy recession or economic depression likely. All agree that the primary cause for the economic calamity is the over-extension of credit and related sub-prime mortgage crisis. However, what few people are talking about is the extent to which information technology shares a burden of the blame.

Back in 2004 the Security Exchange Commission made a fundamental change to their capital rules and essentially agreed to rely on computer models to assess risk in place of regulators. These models were developed, operated, and tuned by the Wall Street firms. Christopher Cox, Chairman of the Security Exchanges Commission argued recently that the impact of this rule change was to essentially outsource the regulatory oversight of the SEC to lenders.[1]

What went wrong with the computer models used to assess risk? Well, it is difficult, if not impossible to know, since these models are closed and their assumptions not publicly known. Alan Greenspan, former Federal Reserve Board Chairman, and a strong proponent of the role of IT in risk management, argues the models were flawed because were based on risk and economic growth from only the last two decades, which he describes as a period of "euphoria".[1]

It is unlikely that financial modeling for risk will go away and so the pressing question is what can/should be done to allow for greater review of these codes? In Europe regulators audit the risk models but do not disclose what they find nor the code.[2]

Eric Gerding, an Assistant Professor of Law at the University of New Mexico School of Law, argues that these models and their related codes should be open sourced. He explains the proposed benefits "First, open source financial code would likely generate more robust financial models – i.e. models with less faulty assumptions or otherwise with a lower degree of model risk error. Scholarship in computer science provides evidence that open source software code are less prone to bugs, because open code allows many minds to tackle debugging.252 Second, opening the source code of risk models would mitigate information gaps between the models of different financial institutions, as the counterparties of banks would better understand the bank’s basis for its risk management.253 Third, the transparency of open source would help individual financial institutions solve the anti-

coordination problems posed by homogenous risk models.254 Even non-banks (which are not subject to Basel II) worried about homogeneity could adjust their own risk models after reviewing open source models. Fourth, open source would solve coordination problems that occur when regulators favor a home country bank by allowing it to use weak risk modeling that sets capital requirements too low.255 Open source would facilitate community policing by both a bank’s competitors and regulators in other

countries which are concerned with regulatory arbitrage."[3]

Attempts to open source the financial community are likely to meet with substantial resistance, along with the difficulty of finding a globally decentralized community that has agreed upon approaches to risk modeling that would agree to do this work for essentially no compensation. So, while their is a great deal of potential promise in this approach, it is unlikely to occur.

Regardless of how we move forward, one of the more important, but less discussed impacts of the current financial crisis will be a re-examination of the financial codes used for risk management with more regulation focused on objective validation. It should be instructive to watch rule changes from the SEC within the next year in this regard.

Computer & Information Science

Source

[1]"Greenspan, Cox tell Congress that Bad Data Hurt Wall Street's Computer Models", Patrick Thibodeau, October 23, 2008, Computerworld.
[2]"Wall Street Meltdown Linked to Outsourcing of Regulation to Private Code", Patrick Thibodeau, October 8, 2008, Computerworld
[3]"THE SUBPRIME CRISIS AND THE OUTSOURCING OF FINANCIAL REGULATION TO FINANCIAL INSTITUTION RISK MODELS: CODE, CRASH, AND OPEN SOURCE" Erik F Gerding, August 16, 2008, pg74-75

Blog-based peer review

Alex Soojung-Kim Pang — Thu, 03 Apr 2008 10:19:36 -0700

Description

The Chronicle of Higher Education reports on a recent "experiment in using an academic blog to peer-review a scholarly book." The results

showed promise, but the approach is time-consuming, and it will not replace traditional blind peer review anytime soon.

That was the assessment of those involved in an effort to post an academic book online, piece by piece over a number of weeks, and let anyone critique it.

The self-selected guinea pig for the experiment was Noah Wardrip-Fruin, an assistant professor of communication at the University of California at San Diego. He is one of six bloggers who regularly contribute to Grand Text Auto, which offers an academic take on interactive fiction and video games, and he thought members of the blog's audience would make ideal peer reviewers for his book. The book, Expressive Processing: Digital Fictions, Computer Games, and Software Studies, examines the importance of using both software design and traditional media-studies methods in the study of video games.

So what happened? Not surprisingly, the blog generated a much larger volume of comments than the anonymous reviews. They provided more detailed grammatical and paragraph-level critiques, but the official reviewers were better at structural things (a finding with interesting implications for projects like Wikipedia). However, this may have partly been an artifact of the way bloggers were given access to the manuscript: "because the book had been posted in short sections, it was hard to step back and get a sense of the overall argument when reading it on the blog."

The experiment is also interesting in that it suggests that binary arguments about Web 2.0/open science versus more traditional publishing structures may miss how the future of publishing actually evolves-- through practices like these that use elements of both old and new media.

Source

http://chronicle.com/free/2008/04/2332n.htm
http://chronicle.com/wiredcampus/article/2865/blog-vs-peer-review-finale-some-positive-results-but-the-approach-probably-wont-catch-on-widely

Physicists criticize APS over Wikipedia

Alex Soojung-Kim Pang — Mon, 17 Mar 2008 11:19:45 -0700

Description

New Scientist reports on a dust-up within the American Physical Society over APS's refusal to allow scientists to reproduce articles published in Physical Review Letters on Wikipedia:

Scientists who want to describe their work on Wikipedia should not be forced to give up the kudos of a respected journal. So says a group of physicists who are going head-to-head with a publisher because it will not allow them to post parts of their work to the online encyclopaedia, blogs and other forums.

The physicists were upset after the American Physical Society withdrew its offer to publish two studies in Physical Review Letters because the authors had asked for a rights agreement compatible with Wikipedia. The APS asks scientists to transfer their copyright to the society before they can publish in an APS journal. This prevents scientists contributing illustrations or other "derivative works" of their papers to many websites without explicit permission.

One interesting aspect of this is that the argument isn't over the freedom to summarize the articles, but to republish the articles. The ability to circulate reprints or preprints, to abstract results in other publications, etc., isn't restricted by publishers (any rational ones, anyway).

Source

http://www.newscientist.com/article.ns?id=mg19726473.300&print=true
http://chronicle.com/wiredcampus/article/2820/physicists-press-scholarly-society-to-accept-open-access-publishing

Wikipedia Joins Academe to Evaluate Itself

Alex Soojung-Kim Pang — Thu, 24 Jan 2008 09:57:28 -0800

NOTE: This content was aggregated from RSS feed. Original source is http://chronicle.com/wiredcampus/article/2692/wikipedia-joins-academe-to-evaluate-itself

The Chronicle of Higher Education reports:

Wikipedia is famous for its philosophy that ordinary people, not just scholars, have expertise to offer the public. But when it comes to evaluating the online encyclopedia itself, Wikipedia officials have apparently concluded that academe is best suited for the task.

The Wikimedia Foundation, which operates Wikipedia, announced today that it will work with a research center — UNU-Merit — run by the United Nations University and the Netherlands’ Maastricht University to conduct its first Wikepedia survey. It will collect data over the next several months on who Wikipedia’s readers and contributors are, why they visit the site, and what they do there. The results are expected to be released this year at the Wikimania conference in Alexandria, Egypt.

The Wikimedia Foundation, which operates Wikipedia, announced today that it will work with a research center-- UNU-Merit-- run by the United Nations University and the Netherlands' Maastricht University to conduct its first Wikepedia survey. It will collect data over the next several months on who Wikipedia's readers and contributors are, why they visit the site, and what they do there. The results are expected to be released this year at the Wikimania conference in Alexandria, Egypt.

Broadening Amateur Participation in Science

Alex Soojung-Kim Pang — Tue, 23 Oct 2007 11:10:30 -0700

Description

Interested amateurs are likely to have increased opportunities in the future to donate resources, time, or labor in support of scientific research, thanks largely to low-cost distributed computing.

The growth of peer-to-peer networking systems has created opportunities for amateurs to play a role in scientific research by donating computer time or labor. The pioneers in this arena are SETI@Home, Folding@Home, and other projects that invite people to load a piece of analytical software onto their computers. During periods of inactivity, the software downloads some data, analyses it, and then sends back the results. These programs enable those with computers to "donate" processor cycles to computationally intensive scientific or charitable activities.

It's important to remember the difference between:

Doing science on a personal level, and for the individual being involved in the science as a scientist. Advanced computer systems could help leverage individuals.

Exploiting distributed resources (e.g., SETI@Home) without the individual participating much themselves. Other examples are informed participation in medical developments (e.g., on the individual). In the future, people (and their houses, etc) will have lots of sensors, so possibilities here are substantial, especially for informing social policy (energy use, etc).

Gathering data, typically geographically specific data, or otherwise being a lab assistant, the individual devoting time and basic labour. Involving school children here, especially, can make them feel part of doing science, which will (hopefully) influence them for the rest of their lives.

SETI@Home, Folding@Home and other experiments have shown that amateurs can donate their time to analyse scientific data directly. The NASA Clickworkers system put volunteers through a simple training program to do routine analysis of Martian landscapes. The success of the system suggests that complex professional tasks done by highly trained and salaried individuals can be reorganized to tap a vast pool of tens of thousands of trained volunteers.

The strategy of Clickworkers and SETI@Home is to make science more accessible by making pieces of it very simple and by taking advantage of low-cost computing and communications. In the future, it is possible that more scientific research projects willdraw upon volunteered equipment or labour. In addition to distributed computing projects and efforts to mobilize volunteer observers, volunteers could be involved in gathering data using existing mobile communications or computing technologies -- for example, taking pictures of flora and fauna at specified times, or noting the GPS coordinates of certain objects.

Peer-to-peer and analytical computing projects have shown that it is possible to mobilize massive quantities of unused processing power or unskilled labour to do basic data analysis; such groups could be mobilized by advocacy and interest groups (e.g., supporters of breast cancer research or environmental causes) to create massive networks of volunteer labour. Expert knowledge that currently is underused in scientific research could be harnessed by custom-designed instruments with simple interfaces Finally, a new generation of sensor and smart dust technology could be used to make small instruments that volunteers carry with them, scatter about their environments, or leave in specific places, thus increasing scientists' mobility.

This will be enabled by:

Falling cost and increasing ubiquity of mobile communications and computing technologies
Growth of the open source movement
Establishment of the precedent of distributed computing projects in the 1990s and 2000s

Early indicators include:

"Proliferation of open-source, distributed computing and analysis projects such as Clickworkers and SETI@Home"

What to watch:

Volunteer projects are organised around popular issues like climate change and pollution.
NGOs and advocacy groups like Greenpeace or the World Wildlife Fund organise research projects for amateurs.

open source

Sub-Par IT and the Sub-Prime Mortgage Mess: Time to Blame the Machines

Description

Source

Blog-based peer review

Description

Source

Physicists criticize APS over Wikipedia

Description

Source

Wikipedia Joins Academe to Evaluate Itself

Broadening Amateur Participation in Science

Description

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