Thursday, February 18, 2016

An Economist's Rational Road to Christianity

One bad thing about blogging, or writing a lot, is that it forces one into a foolish consistency. It is hard to really explore new ideas, because tentative steps will be clumsy. In my new position I'm not incented to blog about finance or politics, and that gave me a lot of time to read as opposed to write. Net result: I'm getting baptized this Sunday (note: it happened, see dunk right, video here). That is, I'm becoming a Christian, not just one who occasionally goes to church, but a real one that believes in Christ, loving God with all my heart, etc.

Most ex-atheists who become deists turn to Buddhism, so I thought I'd be clear why they are all wrong (Robert Wright!). I'd like to thank Mencius Moldbug, Dierdre McCloskey, Mike Behe, Tim Keller (four names probably never listed in sequence ever), and hundreds more...Below are snippets (top and bottom) from my Christian apology: I came to Christ via rational inference, not a personal crisis. I haven't read an argument like mine for Christianity, though given everything written about Christianity, I probably haven't tried hard enough.

A Rational Argument for Christianity (pdf here, w/ footnotes)

·         Something created us
·         Created things have a purpose
·         The New Testament’s consistency with economics and psychology work as if our creator wrote it
·         ‘As if’ assumptions are often true

Bertrand Russell (1872-1970) was an eminent philosopher, mathematician, and logician, and avowed atheist. In his History of Western Philosophy, he discusses many arguments for the existence of God—first cause, natural law—and finds them all logically defective, except the argument from design. This is the argument that there are things in the known world which cannot plausibly be explained as the product of blind natural forces, but are reasonably regarded as evidences of a purpose. He notes there is no formal logical defect, and the veracity of this hypothesis turns on ‘comparatively detailed considerations.’ He found the theory of evolution adequate to rebut this theory, but a lot has been discovered since then.

[Hereafter I denote the ‘argument from design’ aka ‘intelligent design,’ as ID, the theory that life, or the universe, cannot have arisen by chance and was designed and created by some intelligent entity. ‘Evolution’ and ‘evolutionist’ the theory and those who believe in the theory, that all life on Earth descended from some primal organism(s) that arose at least 600 million years ago, via strictly natural processes of descent with modification, mutation, and natural selection.]

If you share Russell’s intellectual interests the theory of evolution is the most important argument for the existence of God. That could be any God, and many then rely on miracles, prophesy or historical records, but I am strictly looking at things more inferentially, what actually works. The New Testament reads like an instruction manual by our creator in terms of its helpfulness in this world, consistency with healthful psychology, ethics, and economics.  For these reasons, plus the belief in a creator, I find faith in Christ a purely rational decision.

Evolution Just Like Abiogenesis

Charles Darwin’s grandfather, Erasmus, speculated about spontaneous generation, that life may have arisen via some “living filament” imbued with “animality,” which subsequently continued to improve, generation after generation, and create myriad forms of life. In her 1831 introduction to Frankenstein, Mary Shelly wrote of him, “They talked of the experiments of Dr. Darwin…who preserved a piece of vermicelli in a glass case, till by some extraordinary means it began to move with voluntary motion.” She went on to speculate that electricity was the extraordinary means, clearly influenced by Galvani’s 1780 experiments showing how frog muscles contract when stimulated with this new force of nature. 

Charles Darwin was aware of Louis Pasteur’s recent work that showed that spontaneous generation of anything that looks like a modern living organism was impossible, such that from the beginning, evolutionary theorists conceded that the appearance of initial life forms had yet to be explained. Yet, at that time, the cell and simple life forms were considered trivial, as cells were simply filled with “protoplasm,” some sort of homogenous jelly. Ernst Haeckel, with whom Darwin corresponded and to whom he made reference in his Origin of Species, believed that the first life form was a kind of cell that would be “an entirely homogeneous and structureless substance, a living particle of albumin, capable of nourishment and reproduction.”[1]

Later in Darwin’s life, scientists found something that appeared to be the first proto-cell, and gave it the official scientific name of Eozoon canadense. Darwin noted this as a candidate for the first life form in the fourth edition of the Origin of Species. When Darwin’s friend and advocate, Thomas Henry Huxley, discovered a seeming progenitor to this in oceanic mud, scientists spent several years collecting sea mud looking for evidence of early life. Alas, they soon discovered that one was merely a chemical precipitate of lime produced by the mixture of alcohol and seawater, while the other was a product of heat and pressure. Neither was remotely organic.[2] 

Just as his grandfather did, Darwin believed that the discovery of the first life form would occur soon. However, despite his initial enthusiasm, the problem of the origin of life has become much thornier. The more we learn about the minimum necessary components of life, the more complicated it gets. For something to be an organism, it needs to reproduce, metabolize energy, and create a cell wall. The most basic cell requires at least a hundred proteins, each of which has approximately 300 amino acids, and all need to be able to work with each other.  

To reach this level of sophistication via chemical evolution defies explanation. The famous Miller-Urey experiments in 1953 created some of the amino acids found in all life forms, but this is a far cry from creating proteins. Such experiments do show you can create some of the basic building blocks of life: amino acids, fatty acids, sugars, yet outside the cell, these building blocks make geopolymers, not the biopolymers required. In the cell, amino acids and sugars are sequestered to prevent this, as pre-biotic chemistry generates melanoids and karogen which stops any evolution as soon as it starts.[3] The inevitable conclusion is that showing how a natural process can create a set of letters used in typesetting does not go far in showing how natural processes create words, let alone novels.[4] The origin of life is one of those puzzles that has been right around the corner, for the past two centuries. 

Interestingly, the thing that happened to abiogenesis happened to the theory of evolution itself: the process is always just around the corner from some obvious demonstration.[5] Darwin wrote about the evolution of the first eye, and stated, “How a nerve comes to be sensitive to light hardly concerns us more than how life itself originated.” Indeed, it did not concern early enthusiasts of evolution, and still does not. When one is unconstrained by knowledge of a process or mechanism, it is easy to imagine that it is simple, although we know now that a light-sensitive spot is as specifically arranged as the eye itself at the molecular level.[6] Thus, the original stories about evolution simply assumed continual transformation. For example, when Darwin noted that black bears had been seen swimming with their mouths open for hours at a time on the surface of a lake, feeding on floating insects, he stated: “I can see no difficulty in a race of bears being rendered, by natural selection, more and more aquatic in their structure and habits, with larger and larger mouths, till a creature was produced as monstrous as a whale.” Imagining such a scenario is not a scientific argument, but simply speculation.[7]

Many present all evolution as similar to how wolves changed to sheepdogs, or the way in which bacteria develop resistance to penicillin, but such change will not create radically new protein complexes or new species.[8] Evolution was accepted as true—Darwin was buried at Westminster Abbey near Isaac Newton—before anyone had any idea how genetics constrains evolutionary pathways, and blind faith in the theory has continued to this day. The problem is that natural selection can explain the survival of the fittest, but not how novel tissues arose, or the way in which amazingly precise and complicated biological processes developed. Some mechanism must exist to take the original life form to all life on Earth, which involves millions of new nucleotides within DNA that create proteins working in concert. Currently most evolutionists consider the diversity of life and the fossil record prove this, but that is an inference based on their assumption it is the only way it could happen; in real-time looking at many thousands of generations of fruit flies and bacteria, we see only a handful of minor mutations.

From Deism to Christianity

If evolution is untrue, it changes everything. Something truly awesome created us, and created things have purposes, they are made “for” something, the way we make hammers to pound nails. We do not create our purpose, we discover it. As an atheist most of my life, I never cared about religious arguments, because I considered anything built on a faulty premise not worth discussing (unlike today’s atheists, who methinks protest too much). However, after I accepted that a creator exists, through some serendipity, I found myself attending church, engaging in Bible study, and reading Christian authors. I experienced a strange consilience, as various facts all began to make much more sense. The unique Christian focus on the heart is genius, and the priorities proposed in the New Testament work as if they were an instruction book from our creator.  Things that work as if they are true, are often really true. 

To be a Christian, you need faith, yet this faith can be completely, totally, rational. The science behind evolution is essential to understand why it is rational to believe in a creator, and psychology, neurology, and economics tell us about human nature and workable social arrangements. History is important, because there is a dialectic in scientific opinion, and so prior ideas were tenable before we had data that refuted them. Many good Christian ideas are not unique to Christianity, but a couple of significant ones are.

In The Blind Watchmaker, Richard Dawkins wrote that Darwin made it possible to be an intellectually fulfilled atheist, in that prior to Darwin, atheists had no idea how life could have arisen without a designer. The tables are now turned, as recent scientific findings now make it possible to be an intellectually fulfilled theist.[9] A little knowledge led us away from God, and now a considerable amount of knowledge has led us back. There is no way a natural process created humans, and the habits of thought and action suggested in the New Testament are highly attuned to our natural instincts, fruitful character habits, and a prospering society.

Unlike what the atheists say about God turning one off to science, it engaged me, because it is much more exciting to search for patterns if you think they exist objectively, rather than something I merely might be able to convince someone is important. The mathematician, Paul Erdos, used to become excited about determining not just mathematical proofs, but ones that were beautiful: inevitable, concise, and unexpected; these were the ones he assumed were in “The Book” God keeps for each mathematical theorem. If an intelligent designer creates objective reality, it is more, not less, interesting.

Once one solves the basic problems of survival, the search for meaning is the essence of being human. In contrast, an animal’s goals are created by instincts, and thus, the Zen calmness of a resting dog does not reflect enlightenment, but simply that instincts restrict its purpose. Dogs, however, were bred from wolves to be human companions, and as a result, they now instinctively obey and love a good and loving human master, and respond to human cues in a way no other animals do. The serenity of a dog comes from following his purpose well.

Alas, this requires the dog to have a good master, as if he finds himself with a bad one, he will suffer. Humans are allowed to choose their master, the thing they love most they orient their lives around. This ability to choose our purpose gives us great potential, whatever our circumstances, but also a responsibility that generates great anxiety. If we worship the wrong thing, we are like a dog with a bad master, destined to suffer; if we worship the right thing, we are like the dog with a good master, content, happy, active: high stakes indeed.

Nietzsche wrote, “The why makes the how infinitely bearable,” in that we are primarily teleological beings. A strong purpose is calming, whereas no purpose generates angst, an uneasy fear of nothing in particular. People want to accomplish some good beyond themselves. When we think our life connects us to something bigger than ourselves, something noble and beautiful and great that appreciates and returns our love, we are satisfied.

The greatest eulogies of all time, Lincoln’s Gettysburg address and Pericles’s funeral oration, focused on showing how those who died did not do so in vain, as they helped create a prosperous and noble future that would be an example to the world. That gave those fallen soldiers’ lives meaning, as they were serving something bigger and nobler than themselves. We all wish to be eulogized in that way, as if our stay on this Earth was not in vain. We want something we esteem to appreciate us, not just now, but after we die. The existential philosopher Jean-Paul Sartre called it a “God-shaped hole” in our heart.

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…..15k words in pdf, but not here related to this argument...
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The Christian Consilience

Once you accept that we were created, it becomes easier to understand our common drive to find meaning and purpose, because it is more likely that we have an objective purpose that gives our lives meaning. Love is the only end in itself, and the love of God is the key to any Christian purpose, the ultimate motivator because, as the creator of the universe, you can be sure that He will always be there. Profound truths should help you prosper, and to the extent that a worldview is based on an incorrect view of human nature or society, daily refutation generates angst. The most profound truth is that some being created us, and that created things have a purpose. Our purpose is hard-wired into our biology, and creates a longing to love something greater than ourselves, and following this simple purpose generates a social optimum via invisible hand. Having one grand objective is a greater virtue than having two, because it constitutes a greater rope to which one’s destiny can cling. 
  
Aristotle taught that the purpose of the state was to encourage virtue among its citizens, which, in turn, would cause humans to flourish. Christianity is consistent with this, because its bottom-up focus encourages decentralized decision-making and individual liberty. Christianity neither legislates nor demands virtue; it merely encourages it as part of a loving relationship with God. By making people sublimate their will to that of Jesus Christ, who represents God on Earth, one becomes more humble, a better spouse, parent, colleague, and friend. The modesty that comes from Christianity is not weakness, but rather, a combination of honesty and intelligence.

The Roman Emperor and Stoic philosopher Marcus Aurelius wrote, “A man’s greatness lies in the consciousness of an honest purpose in life, founded on a just estimate of himself and everything else, on frequent self-examination, and a steady obedience to the rule which he knows to be right.”[10] Epictetus (another Roman Stoic) noted that if you want to be good, assume you are bad, which is consistent with the Christian concept of original sin. Christianity in many ways represents Classical virtues with a radically different motive that actually is inspiring (it is not trivial that Nietzsche called Christianity “Platonism for the masses”).[11]

All major faiths both sublimate the self to something external, but also concentrate on managing and disciplining the self. We have hard-wired emotional responses and we know that Aaron Beck’s Cognitive Behavioral Therapy is useful in disciplining these deep drives. The focus is on repairing oneself, not others: changing unhelpful or inaccurate thinking, problematic behavior, and distressing emotional responses. This makes us prosperous and happy. While status is a function of talent, effort, and luck, for those of us in developed countries, a small amount of effort affords one more than enough food and shelter to live, and everything most valuable to us, our integrity, purpose, and relationships, are all free. If you and your friends judge each other according to the heart, and not cleverness or status, it is completely possible to have a wholly satisfying life, regardless of the luck or innate ability that we cannot control.

Only Christianity is motivated by love of a personal God, and achieving the right will is key to a good purpose. Jesus not only serves as a bridge for humans to achieve salvation, His personal nature makes it easier for humans to love Him—and thus, by extension, God—and His sacrifice highlights the fact that God loves us: if God paid no price for us, it would be difficult to believe that He cares. This esoteric aspect of what Jesus represents, functionally, is necessary when you are trying to appeal to a large group, as Christianity does. The righteous conduct God praises is consistent with the timeless virtues, including such perennials as to know thyself, the golden rule, and an appreciation of the moral equivalence of all men.[12]

A Christian purpose aligns with our nature so well that it is useful to believe and behave “as if” it were true, and in the history of science, many assumptions that were chosen because they worked were later found to be true. Thus, assumptions often are used as contrivances, what Milton Friedman called “as if” assumptions that are not necessarily true, but just good working assumptions. For example, if you assume that individuals are self-interested you can explain many things that are otherwise difficult to explain. When Adam Smith introduced this in 1776, it seemed almost Machiavellian, but it turned out to be a better first-order approximation of individual motivation than any other. It is a miracle that Christianity promotes a societal arrangement as counterintuitive as the free market a couple thousand years before theory and data made this clear. Even in the 1950’s most educated economists thought socialism was more productive than capitalism.

When the positron and wave-particle duality were both introduced first via “as if” arguments, they emerged from the mathematics used to describe quantum events, “as if” they existed; later, they were found to exist. Scientists believe that dark matter exists because, as happens in our solar system, spiral galaxies move “as if” embedded in some form of translucent matter that keeps the innermost stars from moving much faster than the outermost stars. No one has seen dark matter, only its effects, but scientists are certain it exists because the cosmos move “as if” it does.

If you focus first on yourself, next on your family, and then on your neighbors and colleagues, your focus forms a concentric circle based on their proximity. If you focus first on the neediest, that causes your focus to leapfrog out of this concentric circle to groups external to your circle of friends and family. On a purely utilitarian basis, the latter approach seems to dominate because it provides more for those who need it most. Yet the leapfrogging focus demands one truly cares about abstract people more than people one knows intimately, which is counter to our human nature, as the neurotransmitters that underlie pair-bonding are activated by physical contact.[13] Perpetual aid merely increases the population of targeted groups, and does not create the springboard to endogenous prosperity and flourishing. Focusing on those in your immediate circle, including yourself, has the advantage of being more manageable, in that you receive feedback on how well you are doing, and achieve a deeper contextual understanding of what is needed. It is the serenity prayer in action.

The very best thing that people can do for the whole world is to make the most of themselves and those close to them. This is why the Axial age religions have provided so many with good guidance, for example, focusing on mundane virtues, because a society prospers according to the virtues of its citizens, in which they take responsibility for themselves. Your attitude towards yourself is paramount because we really love our neighbor as ourselves; we do unto others as we do unto ourselves. Forgiveness, tolerance, sacrifice, if not practiced towards oneself, are just words. It should be remembered those without any self-interest find it much easier to be cruel when acting selflessly. If you don't value yourself highly, how can you value other selves highly (e.g., ants are selfless animals, yet they are also the most warlike and take slaves)?

The progressive inspired ‘positive’ rights for healthcare, food, education, and housing, are claims on the resources of others backed by coercive bureaucracies. Top-down charity is helpful in a pinch, but as a prolonged policy it is counterproductive and resented. That is, Ben Franklin noted that if you want someone to like you, ask them for a small favor, it shows you appreciate their talents; if you merely give them things, people find it patronizing (they think you are incapable) or a sign of guilt (which means, you probably took more than you are giving). Goods and services received without struggle—and the sense of insecurity that motivates it—leads to resentment, and this leads to a vicious circle of hating the 1% even more; those most in need of help neglect the person who can help them most, themselves.

The Bible is prescient in orienting an individual’s focus in concentric circles from him/herself, to family, etc., all the while avoiding the emptiness of doing it merely for oneself. The first thing a Christian must do is fear, obey, and love God. As God does not speak directly to most people, this means making yourself a better person, not out of narcissism, but rather, in order to look better to someone beautiful who loves you. In contrast,Freudian psychoanalysis centers on fixing oneself for oneself by getting rid of unconscious repressions that often were attributed to religion. This kind of thinking failed because that focus did not soothe, but inflamed us, as the more we thought about ourselves, the more we thought about how others had wronged us. The motivation, the heart, is key.

Our relationship with God begins with fear, but this is only an introduction, in the same way you teach virtue to your children first by making them act polite (any great philosophy has to be esoteric; it has to work at multiple levels, both for the ignorant and the intense). In Christianity, the perfect is not the enemy of the good, because it assumes that all people are imperfect, that such is the crooked timber of humanity. A Christian does not expect heaven on Earth, in that people are base, fallen, yet God loves us anyway if we love Him. Compared to his incredible powers, we are incredibly dumb so our greatest objective achievements in science and art are relatively lame, but our moral sense, our ability to choose our purpose given a glimpse of His power, can generate a sublime achievement that He appreciates, why God is more interested in our faith and love than any other aspect of our character.

Dan Buettner found longevity hotspots around the globe, in small communities in places as diverse as Costa Rica, Japan, and Italy, and found a strong sense of purpose was common in all of these places.[14] Victor Frankl wrote about how those who survived in concentration camps felt a strong sense of purpose, and this finding seemed to confirm that hypothesis.[15] If you find a community of people with a shared sense of purpose, whose values inspire virtuous conduct, and whose relationships provide support, guidance, and encouragement, your life will be better. Thus it should come as no surprise people who attend religious services on a weekly basis are nearly twice as likely to describe themselves as “very happy” (45%) than are people who never attend (28%).[16] It would seem obvious that it is beneficial to become religious if we judge ideas on what they make of men. Pascal’s wager would be amended from the focus on the afterlife, to one on the current life. 

Poor areas tend to be more religious, not just across countries, but across counties in the US, whereas prosperous areas tend to be more educated and less religious (Mississippi, one of the poorest states in the US, has the most churches per capita). Relatively prosperous people are also happier, yet within these prosperous cohorts, religious people are happier. This creates a true paradox: at the margin, an increase in prosperity causes more happiness and more atheism, but given any level of prosperity, religion increases happiness. Educated people today choose atheism because religion seems logically absurd, as it was wrong on heliocentrism and now seems to contradict evolution. Among the academics who teach young people, the proportion of progressives increases the higher you go in those hierarchies. Progressives continue to argue, ever more angrily, that evolution is a fact, and actually ban ID from high school curricula. However, secular humanism is not rational because it does not understand how economics, psychology, and history show the dominance of the Christian-centered life over the progressive approach here on earth. The inconsistency of means to ends for progressives guarantees failure, just as the Soviet Union and Venezuela were guaranteed to fail.

Coda

In Jerry Coyne’s Why Evolution is True, he writes “the battle [for evolution] is part of a wider war, a war between rationality and superstition. What is at stake is nothing less than science itself and all the benefits it offers to society.”[17] Wars, alas, are not known for their rationality, rather their propaganda to maintain popular support. In the 1930s the mathematical models of evolution thought single mutations could alter genes in such a way to create a new trait, and such changes were normally distributed in terms of ‘fitness.’ We now know such changes are almost always detrimental, and for a gene to acquire radical new function takes hundreds of specific mutations, many in concert. The mechanism to create novel protein complexes is a miracle, its mechanism unknown, whether God or evolution did it.

Science and rationality are tools of the will, and become more tendentious and tortured when those applying it assume by definition their views are objective, their opponents characterized by dogmatism and bias. Atheists are preoccupied with convincing people that evolution is a fact because they know that evolution is key to keeping progressive thought dominant. Their hegemony is more important than any other principle because their goal is to accelerate the arc of social justice, and that can only come from top-down state power, which is why American atheists have a more favorable view of Islam than Protestants, even though Islam is much more repressive on all the social positions it abhors in Christianity (Evangelical Christians, not Muslims, are blocking progressive policies in the USA currently).[18] 

Like all untrue foundational insights, the evolutionary mechanism becomes more complicated the more we see. As the appearance of design becomes stronger, expect greater division, because doubt breeds anger. That is, no one holds with fervor that 7 times 8 is 56, because it is known that this is the case; fervor is necessary only in commending an opinion which is doubtful. They have reason to be concerned, because as Bertrand Russel noted, evolution as a theory is strictly an empirical issue, looking at detailed considerations, and as with all bad theories, the more data we have, the convoluted the theory becomes (in contrast, true theories become clearer). The contempt and ridicule directed at intelligent design intimidates young people to concede evolution, which is merely expedient; however, given evolution as a fact, it is harder to believe anything in the Bible is true or even useful.

I was a secular humanist most of my life, contemptuous of Christianity because I thought it was not merely based on myth, but that it also mislabeled pride as a vice and humility as a virtue. Human science and art reflect our genius, and their successes were built upon bold individuals. Yet, after learning about the incredibly precise nano-machinery in the cell, and how microevolution does not imply macroevolution, and all the failed examples and predictions of evolution, I became convinced that something created us. It was only then that I decided to take seriously the arguments of Christians like Kierkegaard, C.S. Lewis, Tim Keller, and even the Bible itself, and was amazed at the wisdom in these writings. The idea that Christianity was dogma, a crutch for repressed or ignorant individuals, was not true, although that is what my secular humanist worldview told me.

The focus on the will over reason, classical liberalism, classical virtues, love as the primal motive, that humans are by nature base, shows that the New Testament is right on all the issues that really matter. At the personal level, and for creating a thriving society, Christianity works. The emphasis on the will, that love of God is more important than what you do, is uniquely Christian, and uniquely profound.

The key to Christianity is the heart, to love God, and therefore, to want to serve Him, and you can only love something you are sure loves you as well. The Corinthians 13 verse often read at weddings is not mawkish, rather foundational.[19]  True love, like my love for my daughter, is something about which I am certain—that I love, and am loved by, my daughter—and it gives me intense joy and purpose.

The New Testament argues that God is love and from an emotional standpoint, it is our strongest desire and need. When we feel love and express it through compassion, caring, empathy, serving, supporting, encouraging, and much more, the power of God’s love within us creates a sense of joy and fulfillment that goes beyond the definition of happiness. Loving relationships make us feel complete—in our Creator, spouses, children, friends, and even enemies. All the other ends people seek like status, power, wealth, and sex are preoccupations until acquired, then we think about everything else. Love is the only end not like that.

No non-human animal understands physical forces, not just animals that have no sense for light or magnetism, but no awareness of the strong nuclear forces in atomic nuclei.  It seems likely that humans also do not perceive or understand the totality of forces at work in the universe. Nonetheless, we can infer transcendent forces indirectly, and most of our knowledge is inferential, not deductive. That is, we see a universal desire for purpose, the benefits in this world of living for the next by focusing on our own virtues and vices and the evidence of a creator; we believe further that it is most likely that a creator gave us our various instincts. It is our duty to recognize that there are things that we cannot understand; as Schopenhauer stated, “Every person takes the limits of their own field of vision for the limits of the world,” not recognizing that they do not see everything. It would be irrational to presume the universe is constrained to what atheist humans have figured out circa 2016 AD.

At some level, this requires faith, as something able to create life clearly is outside of anything for which I have direct evidence. Paradoxically, faith can be rational.[20] There is evidence of a creator, and the Christian creator’s message works best in this life, as it gives one a profound motivation for adopting standard stoic virtues and bourgeois morality. If you estimate rationally, there is a sufficient probability (e.g., 73%) that Christianity is true, with this probability it makes sense to act as if Christianity has a 100% probability of being correct. This is because, in any strategy that takes persistence, once you make the choice to do it you should be “all in.” In the words of a famous short green deist, “Do, or do not, there is no try.”

Faith motivates us to use our will to navigate life’s challenges. It entails choosing to trust, cling to, and depend upon someone greater and more powerful than ourselves. In that sense, faith is primarily an act of will in which we choose not to allow events or circumstances to drag us down because we have a relationship with God and He is in our lives to help us. Faith strengthens us to face life’s obstacles, and this produces deep peace and inner happiness. Faith is essential for a happy life.

My previous attempts to create meaning within the secular humanist worldview were not failures because I did not try hard enough, but rather because you need a lot of luck to do this without God. That is, I have no doubt that there are many, millions in fact, who are happy and contented without God. If you are excellent at something and content in simple virtues, if your friends and family are stable and of good character, life can be very satisfying. In a world of 7 billion people, it should come as no surprise that some are able to find this without God, let alone Christ. The success various local demographics across the world highlight some groups can generate eudaimonia in this world just as well as any Christian community.

Their success comes from the fact they somehow got into a positive feedback loop where their community that supported them also championed classical virtues that made them better people, highlighting the importance of loving something beautiful, and a community of thriving, virtuous people who look after each other is that; it will make you a better person. Indeed, all the Axial age religions do a better job of focusing our priorities than does progressivism, and this tempts many who find them attractive to think they all are equally true. Any good practical objective should be robust, in that it should work fairly well if you approximate it.

While the Axial age religions, and many subsequent ones, offer a better purpose in life than trying to create one yourself, not all the major faiths can be true, as they are contradictory. They could all be untrue, just correct on, say, the importance of the golden rule. However, if there is a creator, Christianity may work best precisely because it actually is true. Christianity places unique emphasis on the heart, a motivation based on the love of God, and the gratitude generated by appreciating such a God leads to greater happiness in this world. I will not find my purpose by adopting the worldview of some village in Costa Rica. That would not work primarily because I have no social connections in such a village, and without those relationships, the whole thing does not work at all, even if it works for them. Further, if Christianity is true, those close substitutes will not work in the afterlife, which is more important than anything we experience here on Earth.

We were given a unique ability to choose our purpose, and that choice alone is important to God, which should make sense, because anything powerful enough to create us is unimpressed by our worldly achievements, which are technically trivial to such a being. Having the ability to understand life a little bit the way God does, yet subordinate our will to glorifying Him, pleases Him. Life is a test, and as Lincoln said, the best way to test a man’s character is to give him power. We all have the power to choose what to serve and to love, and most choose a secular focus out of pride, our greatest sin.

The purpose of life is to practice virtue inspired by the love of something transcendently beautiful. The object from which one is seeking esteem should be beautiful, in that it inspires healthful behavior in us—virtue—and we find satisfaction in its appreciation. It must be long-lived, because a beautiful thing that may end soon cannot sustain hope. Love, meanwhile, is the only end in itself that endures and is never sated, though it requires reciprocation, meaning, the transcendently beautiful love object needs to appreciate and reflect love. A good life is a synchronicity of behavior and thought motivated by love that advances something noble, in that achieving one’s higher destiny helps humans flourish. There’s no better example than loving the creator God described in the New Testament.





[1]  They knew cells had other parts, like a nucleus, but did not know much about it, and believed that first life was simpler. That is, scientists had already seen how electricity causes frog legs to move (Galvani in the 1780s), and organic compounds could be synthesized (urea in 1828), so it seemed reasonable that life was not that complicated (e.g., why Frankenstein’s monster was not as crazy as it now seems).
[2]  Gould, S.J. Bathybius and Eozoon. In The Panda’s Thumb. London: Norton, 1992, S. 236–244.
[3] This was the “oily red goo” Stanley Miller created, documented, and ignored in his initial experiment; no biopolymers were formed.
[4]  Now scientists are focused on comets with amino acids that, via their impact, create polymers three amino acids long, or hydrothermal vents at the bottom of the ocean, and bacteria that survive deep in the earth’s crust.
[5] The theory of evolution, I am referring to the conventional theory of Matt Ridley, Richard Dawkins, Larry Moran, Sam Harris, Steve Pinker, PZ Myers. They disagree on particulars like group vs. individual selection, neutral drift vs. selection, but there is a gist.   
[6]  When light strikes the retina a photon is absorbed by an organic molecule called 11-cis-retinal, causing it to rearrange within picoseconds to trans-retinal. The altered protein can now interact with another protein called transducin. Before associating with rhodopsin, transducin binds tightly to a small organic molecule called GDP, but when it binds to rhodopsin, the GDP dissociates itself from transducin and a molecule called GTP, to which it is related closely, but is critically different from, GDP, which binds to transducin. Several other proteins then interact in a cascade, including an equilibrating mechanism to restore the initial state and enable the continued ability to process light. These proteins are hundreds of amino acids in length, and interact with each other in very specific ways. An initial light sensitive spot requires mutations to create this functionality incidentally, a staggeringly complex, but highly specific set of instructions within the DNA to create such proteins and put them next to each other.
[7] The change needed for even the smallest change involves many specific proteins, which need specific protein coding genes, promoters, and all the other parts needed to put such parts in place. For example, unlike other animals, in mammals the red blood cell is enucleated, ejecting its nucleus before entering the bloodstream. It takes place 2 million times per second, and involves an elaborate and highly choreographed process where the entire cytoplasmic machinery of the cell is reorganized in order to achieve the result. Some think the evolution of enucleated red blood cells is simple: a red blood cell once split and did not have a nucleus in one of the daughter cells, which gave rise to enucleated cells. Yet the earliest recognizable red blood cell undergoes four or five mitotic divisions to create the enucleated blood cells that humans use to transport oxygen. The shape differences between these cells as they turn into enucleated cells reflect progressive accumulation of hemoglobin and decrease in nucleus. The nucleus becomes dense because of chromosome condensation, and is isolated from the cytoplasm by a ring of cytoplasmic membranes and moves to one side of the cell. In the last step, the red-blood cell is partitioned into two daughter structures and the nucleated one is destroyed by the immune system. The protein mesh encases the cell into a rigid scaffolding framework which reduces cell deformability but ensures that during mitosis both nuclear and cytoplasmic contents are appropriately partitioned in the two daughter cells. The profound changes in structural membrane protein synthesis and loss of microfilament protein synthesis occurring during erythroid maturation destroy plasma-nucleus useful because red blood cells are very flexible, necessary function for travelling small capillaries. This involves enzymes that work in multiprotein complexes with transcription factors, and protein kinases. The several genes involved in this are not fully understood, but clearly involves the creation of thousands of specific nucleotides that create the process above; it is not as simple as a single accident.
[8]  The subtitle of the Origin of Species is Preservation of Favoured Races in the Struggle for Life, and Darwin clearly thought this was relevant to humans, with Europeans at the top, and the uncivilized races at the bottom.
[9]  I should note that I am not a young earth creationist, nor a fundamentalist. I think the Bible is filled with metaphors, exaggerations for emphasis, and was written by humans. For example, in the NIV, Galatians 5:22-23 says the fruit of the Spirit is love, joy, peace, forbearance, kindness, goodness, faithfulness, gentleness and self-control. The KJV has patience and the ESV has longsuffering, instead of forbearance. As forbearance is a synonym of “self-control,” it seems the NIV authors were objectively wrong to include forbearance in a listing with self-control. Such errors, I find, are not important.
[10] Long, G. M. Aurelius Antoninus. (1862). Harvard Classics, Vol. 2, 1909.
[11] In contrast, the Epicurean tetrapharmakos is that we should not fear death because when it comes we will not know it, we will be dead.
[12] Matthew 7:12. “So whatever you wish that others would do to you, do also to them, for this is the Law and the Prophets.” 1 Tim. 2:1. “I exhort, therefore, that, first of all, supplications, prayers, intercessions, and giving of thanks be made for all men.” 2 Corinthians 13:5. “Test yourselves to see if you are in the faith; examine yourselves! Or do you not recognize this about yourselves, that Jesus Christ is in you—unless indeed you fail the test?”
[13] Prairie voles without receptors for vasopressin and oxytocin have sperm donor dads, those with the receptors hang around to raise the kids.
[14] Buettner, D. The Blue Zones: 9 Lessons for Living Longer from the People Who’ve Lived the Longest. National Geographic Books, 2012.
[15] Frankl, V.E. Man’s Search for Meaning. New York: Simon and Schuster, 1985.
[16] http://www.breitbart.com/national-security/2014/12/24/religious-people-much-happier-than-others-new-study-shows/
[17] Coyne, Jerry A. Why evolution is true. Penguin, 2009.
[18] http://www.pewforum.org/2014/07/16/how-americans-feel-about-religious-groups/
[19] 1 Corinthians 13:4-7 Love is patient, love is kind. It does not envy, it does not boast, it is not. It does not dishonor others, it is not self-seeking, it is not easily angered, it keeps no record of wrongs.  Love does not delight in evil but rejoices with the truth.  It always protects, always trusts, always hopes, always perseveres.
[20] James,W. Will to Believe, 1896.

Thursday, December 11, 2014

Requisite Assumptions for the Persistence of the Low Volatility Anomaly

My new paper was motivated by Frazzini and Pedersen's model of the low volatility anomaly. Though I think they are profoundly wrong, I think the paper was done well in good faith. Wrong mainly because it still implies people think there's a positive Security Market Line, even though at best it's flat, and wrong also because high vol assets like puts lose just as much money as calls (ie, the alpha is not linear in beta so much as correlated with volatility).  As to it being well done in spite of that, note that unlike Buffa, Vayanos and Woolley (2014), it's not so convoluted it could basically never be estimated, rather it has a concise and simple implication. Working through F&P's result, I think they actually made a math error; not something like a wrong sign, but rather, assumed an invertible matrix in one place, which is then applied to a world where such a matrix is non-invertible. If that doesn't make sense but sounds interesting, take a look at my paper, where I think I have the simplest relative utility model out there (eg, compared to DeMarzo et al, 2005, or Roussanov, 2010). I could have a big mistake in there, so comments welcome.

Alas, I needed three assumptions to get the low volatility result to hold while still matching some other big datapoints. That is, I don't want a result that implies the equity risk premium is zero, or that rational investors are all shorting high vol stocks, because that's clearly counterfactual, and I also want to explain why high beta/vol assets have a negative alpha in equilibrium. Those assumptions are
  1. some delusionally optimistic investors
  2. systematic risk across beta (eg, high beta stocks can't be hedged with Spiders to create arbitrage)
  3. relative utility (though, not completely, otherwise the equity risk premium is zero)
I put in some data related to items 1 and 2, because I didn't see a lot of references for these points even though they are pretty plausible and I don't think too controversial. Item 3 is quite controversial, so I motivate that a little by pointing to a lot of other data, especially non-economic data.

It's here, Requisite Assumptions for the Persistence of the Low Volatility Anomaly.

Sunday, December 07, 2014

History of Low Volatility Investing

I saw this story in Bloomberg magazine a couple weeks ago, so I decided to speak with Ric Bratton again on the history of the low volatility effect. I wanted to speak more about other people's work, especially Ed Miller and Bob Haugen, but somehow we missed that (it's one take and he leads).  In any case, here it is.


 The risk premium is central to Asset Pricing Theory, one of the main things people learn in business school.  If it’s not true, this generates a very different way to assess investments. Below is an outline of what I consider to be the history of low volatility with links to relevant articles. I should have a new paper out in a few days related to my 'solution' to the low volatility effect [update: it's at the SSRN here].

Economics has been hijacked by cargo cult thinking that superficial similarities with physics is the way to create good new theories (eg, see Samuelson's Foundations). As rigor and logic are both more correlated with successful physics and easier to teach, these are the main emphasis at top graduate schools. Alas, rigor is always parochial, because outside a set of small assumptions the rigor doesn't work, which is why no proof in econ has changed anyone's mind about an important issue.  Thus, in finance we had decades of focus on technical econometric issues (e.g., simultaneity of estimating the slope and the intercept, randomness in the risk-free rate, GMM tests of overidentifying restrictions), but not size (market cap) or low-price which would have killed the CAPM in utero. The omitted variables bias and overfitting remain the main scourge of social science empirical research, but that is only taught incidentally.

Back in my day you couldn't publish a paper showing high volatility had lower returns than low volatility because there was no theory for it, so it must be wrong in some technical way, and thus uninteresting. One reviewer told me that if I was to show low volatility had higher returns than high volatility I had to show how low volatility had more risk, which was what I was arguing wasn't true,  That is, the main paradigm has to hold.

A led to strange threads within the low volatility history such as Harvey and Siddique's 2000 paper on skewness and returns. To the degree skewness relates to returns, it's incidental to the low volatility anomaly. Yet back then you could not address it directly because it was too anomalous to standard theory--utility functions imply some kind of risk premium in an iff sense, they both imply the other.  So, they document that 'co-skewness' (which is positively correlated to volatility), is an extra preference by investors. This allows them to nest their finding within the standard paradigm, because understandibly people like the right tail of a distribution, not the left.

Yet, while they set up the model with the utmost rigor, they never paused to see if their results were  consistent with global risk aversion. It's not.  More practically, the counteracting effect in the Fama-French 3-factor world isn't skew, it's more basic, just volatility; no one makes 'low skewness' portfolios, though common low vol portfolios are correlated with that.

Harvey was for a time the editor of finance's best known journal, The Journal of Finance, and so represents the conventional wisdom of the best academics. Yet this paper is obtuse, they kind of result that gives the word 'academic' the implication 'clueless.'

Another great example is Ang, Hodrick, Xing and Zhang's now seminal 2006 paper documenting the volatility effect for the first time in a top journal. Bob Hodrick is a very prestigious academic, and was on the faculty at Northwest when I was there in the early 1990s, and I showed him my results that low volatility portfolios generated huge 'alpha's in the context of Fama-French 3-factor models, and he couldn't have been more indifferent.  Yet, 12 years later he basically scooped me within the academic literature (my low vol dissertation findings never made a journal).

The trick was that he presented these findings as an addendum to a paper that primarily addressed the extension the returns are a function of changes in volatility. Now, at 30k feet this is a within-the-box extension of the standard model, but note they found it had the wrong sign, that is, stocks correlated with changes in volatility were volatile, and these had lower-than-average returns. Strange. When Ang et al got to the part of the paper that had the lasting interest, the low volatility effect, they then dropped any pretext of a model (as was laid out for their new volatility innovation factor) and showed the tabular results of alpha by volatility, which was the big addition to the literature. At the time (circa 2006) this was the kind of pretext still needed to introduce this result.

That's why the CAPM has dominated academic thinking for decades in spite of it never actually working.

After Freakonomics (2005) and Kahneman's Nobel prize (2002) became famous partial equilibrium empirical findings were publishable in top papers without much motivation, so we see less silliness anymore (alas, the pendulum has perhaps gone too far the other way).  Of course, if you are famous, you could have always gotten a break from an editor, which is why the seminal refutation of the CAPM came from Fama and French, as only they had the credibility to publish a paper seemingly refuting the paradigm (plus, they softened the blow by merely extending it). This phenomenon highlights a strange behavioral bias to the wisdom of smart crowds whatever their pedigree; arguments are strongly constrained by authority and consensus in fields where you can’t do definitive experiments.

Every successful theory has both a principled and unprincipled support; most people who spout correct theories do so for incorrect or selfish reasons. For example, listen to a radio call-in show on some topic you agree with, and note most callers have dumb reasons to agree with you; most people are wrong even when they are right.  The ‘risk begets return’ theory was very convenient for hucksters because they could argue that their vague ‘risk management’ skills generated excess returns, which is tenable because presumably risk is omnipresent and subtle, like the quality of a fine wine.  The theory was also very convenient to economists because it is perfect for teaching a course, where a set of seemingly innocuous assumptions creates a clear set of implications and is amenable to many rigorous extensions. At bottom, the CAPM made logical sense, so it had a principled rationale as well.

Researcher have always thought has occurred that if we can only define our terms, find the basic unit for an indicator, we can create a new science.  The idea that investing would become an exercise in mathematical optimization is very attractive.

As Kant argued, there are two types of knowledge, assumptions vs. theorems, a priori vs. a posteriori.  Assumptions are contingent, empirical, we infer them from data, and inference is imperfect, whereas theorems are logical and can be proven.  Laymen feel that facts are easy and theory is difficult, but this is misleading. Surely smart educated people are better at theory, and so like to spend more time there, but conventional social science facts have always contained major errors.

The most exciting phrase to hear in science - the one that heralds new discoveries - is not "Eureka!" but "That's funny...", which is how the low volatility anomaly was born.  Funds like Unigestion, Robeco, Analytic Investors, and Acadian, were on to this pattern around 2006 even if they didn't have a full model explaining why it made sense. Unlike size or value, it isn't an anomaly so much as death blow to the standard paradigm. You can’t rationalize volatility as a risk factor because its return has the wrong sign with everything intuitively risky (covariance, leverage, size, liquidity, distress). Further, you can't simply add frictions to conventional model to get this as an equilibrium result, unless you invoke massive irrationality, and this isn't tenable because most investors are not irrational in the same way, there’s too much incentive (e.g., money) for that to work.

The arc of how a pillar of science, the CAPM, was created and fell (or, is falling)...
  1. Profits and thus stock returns were a mystery up to 1950
    1. Persistence shouldn’t happen in competitive equilibrium
      1. See Marx, Marshall
    2. Knight (uncertainty, 1921) 
    3. Schumpeter (innovation 1942)
  2. Risk begets return theory developed 1947-62 (CAPM)
    1. Risk premium on investments comes from an if and only if relation to standard economic assumptions, one implies the other and vice versa
    2. Followed creation of macroeconomics in the 1930’s, which basically tried to apply microeconomics to an aggregate  (macro also unsuccessful)
    3. See von Neuman and Morgenstern (1947), Friedman and Schwartz (1948), Markowitz (1952), Tobin (1958), Sharpe (1962)
    4. Empirically confirmed via the 'equity premium' estimate of 9.0% by Lorie and Ficher (1964).
  3. CAPM assumed true 1962-1992
    1. Initial tests of the ‘Capital Asset Pricing Model’ (CAPM) were not supportive of the idea ‘beta’ measures of risk, 
      1. Sharpe, Jensen, Treynor and Mazuy
      2. but still made cover of Institutional Investor Magazine in 1971
    2. Douglas (1969) found little support
      1. Miller-Scholes (1972) added a bunch of corrections, but not size
    3. Statistical tests ‘confirmed’ CAPM in 1973
      1. Fama-MacBeth,  or Black, Jensen and Scholes
      2. Nothing is so convincing as an anticipated discovery
      3. Same papers used as proof through 1990s
  4. CAPM shown incomplete 1992+
    1. Size explains ‘beta’, beta explains nothing within equities
      1. Fama and French 1992, important Fama wrote paper
      2. New 3-factor F-F model, where 'anomalies' are now 'risk factors'
    2. Funds based on size and value blossom
    3. Turned asset pricing theory into a framework, not a theory
  5. Low vol anomaly 2006+
    1. Ang, Hodrick, Xing and Zhang (2006) first big pure academic paper
      1. Finding incidental to paper looking at factor based on a covariance with volatility innovations, and found a slight correlation.  
      2. Bigger finding was that returns were lowest for the highest volatility quintile.
    2. Ang, Hodrick, Xing and Zhang (2009)
      1. Updated volatility to international
      2. Alpha falls off a cliff for high vol stocks 
    3. Funds and papers start in 2006
      1. Clarke, de Silva, and Thorley (2006) at Analytic Investors
      2. Blitz and van Vliet (2007) at Robeco 
      3. Asness, Frazzini, and Pederson (2010, 2013) at AQR
      4. Baker, Bradley and Wurgler (2011) at Acadian.
      5. Analytic Investors, Robeco, Acadian all created a low vol funds around 2006, subsequently outperformed benchmarks with 1/3 less volatility.
    4. Lots of data show this pattern generalizes
      1. For equities: Beta, distress, leverage, penny stocks, options, IPOs, analyst disagreement, mutual funds, over time within a country, across countries
      2. Private equity, C-corps, currencies, corporate bonds, yield curve, futures, movies, sports books, lotteries, real estate, hedge funds, CTAs, merger arb, senior vs. sub distressed debt, peak-peril vs. rebalanced reinsurance portfolios, low vs. high moneyness converts
      3. See my books Finding Alpha (2009), The Missing Risk Premium (2013)
  6. How did we miss this from 1960’s to 2006?
    1. Given standard assumptions, should be true
      1. Consistent with basic economic assumptions about utility functions increasing at a decreasing rate
      2. Intuitive and logical
    2. Creates mathematically beautiful models of endless application 
      1. Keys to a convincing theory: simple enough to be apprehended without much strain but convoluted enough to require a caste of interpreters.  
    3. Focused on statistical techniques 
    4. Explanations today would not work prior to 
      1. Behavioral Economics – Kahneman Nobel Prize (2002)
      2. Freakonomics (2005)
    5. Eventually the truth gets out
  7. With hindsight, lots of early papers saw this
    1. Richard McEnally (1974) found high risk stock to have lower returns, and suggested the following reasons that are now considered highly relevant: 
      1. Seek access to high beta because of leverage constraints
      2. higher taxes on capital gains
      3. delusional investors
      4. skew preferences
    2. Bob Haugen
      1. Haugen and Heins 1975, Haugen and Baker MVP 1991, Haugen and Baker Common Factors (1996) 
      2. In 2008, Haugen found out the low vol funds were all referencing his work, and then claimed to be the ‘father of low vol’ investing. He didn’t emphasize this in real time, however, rather he emphasized a multifactor alternative.
    3. Ed Miller 
      1. 1977 paper modeled how high vol implies a lower return
      2. 2001, Miller mentions this strategy in the Journal of Portfolio Management.  "An implication of [my winner's curse] theory] is that investors can improve their return relative to risk by exploiting the flatness of the security market line."
    4. My experience
      1. First Paragraph of my 1994 dissertation: "This paper documents two new facts. "First, over the past 30 years variance has been negatively correlated with expected return for NYSE and AMEX stocks and this relationship is not accounted for by several well-known prespecified factors (e.g., the price-to-book ratio or size). More volatile stocks have lower returns, other things equal. In fact, one of the prespecified factors, size, obscures this inverse relationship. Second, I document that open-end mutual funds have strong preferences for stocks that are liquid, well-known, and most interestingly, highly volatile stocks."
      2. All the right people thought it was wrong, 'like saying the world was flat' (true quote from one reviewer). Portion of dissertation made Journal of Finance, so it wasn't that I just couldn't write.
      3. Created C-corp fund in 1996, tried to get a backer, no success until I eventually started plying it within hedge funds circa 2003.
  8. Why Important
    1. Clearly the utility function used by economists is simply wrong
      1. Big implications for how we model human behavior
    2. Science as a collective has biases just like individuals
      1. Smart, educated experts see things that aren’t there for decades
      2. Concentrated selectively on rigor
      3. Focused on econometric issues (eg, Shanken, 1985, Gibbons 1982), not omitted variables like size
  9. My Solution to Why the Low Vol 
    1. Everything is a vice at extremes: an excess or deficit. Risk too can be too little or too much
      1.  Risk is not merely a preference as taught by modern finance.
      2. Optimal risk is varies objectively across individuals based on intelligence, connections 
    2. Low Vol Anomaly needs relative and standard preferences
      1. Highlights we are always thinking about ourselves egotistically and socially
      2. Our desires are both absolute, and relative
      3. These objectives can conflict when fads arise