Battle in Haiti

Last night, I was listening to the Joseph story and came to the part where Joseph is thrown into prison after Potiphar's wife falsely accuses him of attacking her.  I was struck by the next verse: "But while Joseph was there in prison, the Lord was with him" (Gen 39:20-21).  By earthly standards, it certainly didn't seem like God was favoring Joseph---falsely accused, innocent yet imprisoned.  We might think that if God saw Joseph in his plight and cared for him, He would break him out of prison and vindicate him before his accusers.  However, Joseph remained in prison for some time longer than two years, and yet "the Lord was with him."

A few days ago, Ben (a newlywed who moved to Haiti with his wife last fall to work at a school, and who has been swept up unexpectedly into relief efforts) was asked if he thought the devil knew he was defeated in Haiti.  Ben thought, "This woman clearly has not seen enough dead bodies, food riots, looting and general devastation to know that right now evil is alive and well in Haiti."  The devil certainly does seem to be having a heyday.

I heard it said a number of years ago that Haiti was one of the darkest nations in the world, spiritually speaking.  As I was going to bed, I spent a moment praying for Haiti, and asked God that many of the relief workers flooding into the country would be Christians who would shine the light of Christ into Haiti's darkness---when suddenly I recalled the end of Joseph's story: After Jacob's death, Joseph's brothers fear he'll take vengeance for their mistreatment of him; but, Joseph tells them, "You meant evil against me, but God meant it for good" (Gen 50:20).

From a human perspective, it feels like the devil is winning in Haiti---hunger and suffering are rampant, death and destruction are at every turn, and it's possible (likely?) everything will get worse before it gets any better.  But, I wonder if from an eternal perspective things look a little different:  Could the earthquake signal the beginning of a last great battle for Haiti, as Christ (through His body, the Church) comes galloping in to unseat forever the powers of darkness that have held Haiti in their grasp?  The devil surely meant the quake for evil, but perhaps God means it for good.  And in the midst of the turmoil, we can take courage (John 16:33), for the victor is the same one who said, "And surely I am with you always, to the very end of the age" (Matt 28:20).

Planning First: A Novelty?

From Al Jazeera:

The conference in the Canadian city of Montreal was not intended to bring specific aid promises but to assess immediate needs and begin charting Haiti's long-term recovery from the January 12 earthquake.

"We're trying to do this in the correct order. Sometimes people have pledging conferences and pledge money and they don't have any idea what they are going to do with it," Hillary Clinton, the US secretary of state, said at a closing news conference. ...

"We actually think it's a novel idea to do the needs assessment first, and then the planning, and then the pledging," Clinton said.

It certainly is a sad truth that all too often people in development act before they plan, and decide what to do before figuring out what needs to be done or thinking about the long-term implications of one strategy over another. But, really, is doing needs assessment before planning before acting really a "novel" idea?!

I hope, for the people of Haiti's sake and that of all those in regions in need of development, that the key players in Haiti's reconstruction can pull off the process of conducting needs assessment and careful planning before rushing into action in a spectacular fashion, serving as a model for all development work, particularly if they can integrate evaluation of the redevelopment's implementation and effectiveness into the plan.

Incidentally, I wonder if having a sound redevelopment plan from the outset could help alleviate donor fatigue. It might not have much effect on individual donors, but big foundations/NGOs/governments might find it easier to "stay the course" if they knew where exactly they were headed and how far they had come.

The Investor's Manifesto: Prudence Before Riches

The Investor's Manifesto: preparing for prosperity, Armageddon, and everything in between, by William Bernstein. Rating: 4/5.

A good description of basic investment strategy, written in a familiar, mildly humorous style. Bernstein's approach draws heavily on an investment version of Pascal's wager: Financial ruin in retirement if markets turn south is worse than living modestly (now and in retirement) even if markets are booming. Bernstein advocates for simple, unglamorous investing:

"The name of the game is not to get rich, but rather to avoid dying poor. In fact, if you follow the advice in this book, I can guarantee you that you will not get fabulously wealthy. Rather, I've striven to simultaneously maximize your chances of a comfortable retirement and minimize your chances of living out your final years in poverty. I know of no more laudable or more worthy investment goal." (183)

As a starting point, Bernstein cites the "age rule" for asset allocation: The percentage of bonds in your portfolio should be roughly the same as your age. This percentage should be increased or decreased up to 20 percentage points depending on your risk tolerance. Then, Bernstein recommends between 60-80% domestic stocks and 20-40% foreign stocks, and suggests that money should be placed in low-expense index or passively managed mutual funds. "Does this portfolio seem overly simplistic, even amateurish?" Bernstein asks---"Get over it. Over the next few decades, the overwhelming majority of all professional investors will not be able to beat it" (89). Investors interested in a more complex allocation could divide the stocks into small and large, value and market companies; but, Bernstein indicates that growth companies should be avoided, as they have a small dividend stream relative to stock price, and the dividend growth rate is a better predictor of future performance than growth of stock price.

Chapter 1, "A Brief History of Financial Time," gives an overview of the history of financial markets and lays down a number of important principles of how markets work that undergird Bernstein's investment philosophy. Chapter 2, "The Nature of the Beast," describes the core of the philosophy. Chapter 3, "The Nature of the Portfolio," applies Bernstein's philosophy to creation of a portfolio. Chapter 4, "The Enemy in the Mirror," presents a number of neuro-psychological effects and common mistakes that investors make that derail them from their investing goals. Chapter 5, "Muggers and Worse," warns against brokerage houses and the like. Chapter 6, "Building Your Portfolio," introduces dollar cost averaging and value averaging, and provides four example scenarios of prototypical investors. Finally, chapter 7, "The Nature of the Game," provides a summary of the principal lessons from the book, suitable for sticking to the refrigerator for frequent review.

The book is approachable for beginning investors, though some experience with investment vocabulary is helpful. Important points are placed in call-out boxes, and mathematical details are relegated to sidebars that can be skipped or skimmed without losing the overall message. Each chapter has a bullet-point summary of the most important topics for review.

Augustine on Science and the Bible

Usually, even a non-Christian knows something about the earth, the heavens, and the other elements of this world, ... and this knowledge he holds to as being certain from reason and experience. Now, it is a disgraceful and dangerous thing for a nonbeliever to hear a Christian, presumably giving the meaning of Holy Scripture, talking nonsense on these topics; and we should take all means to prevent such an embarrassing situation, in which people show up vast ignorance in a Christian and laugh it to scorn.

The shame is not so much that an ignorant individual is derided, but that people outside the household of faith think our sacred writers held such opinions, and, to the great loss of those for whose salvation we toil, the writers of our Scripture are criticized and rejected as unlearned men. If they find a Christian mistaken in a field which they themselves know well and hear him maintaining his foolish opinions about our books, how are they going to believe those books in matters concerning the resurrection of the dead, the hope of eternal life, and the kingdom of heaven, when they think their pages are full of falsehoods on facts which they themselves have learnt from experience and the light of reason?

Reckless and incompetent expounders of Holy Scripture bring untold trouble and sorrow on their wiser brethren when they are caught in one of their mischievous false opinions and are taken to task by those who are not bound by the authority of our sacred books. For then, to defend their utterly foolish and obviously untrue statements, they will try to call upon Holy Scripture for proof and even recite from memory many passages which they think support their position, although they understand neither what they say nor the things about which they make assertion.

-- Augustine (354-430), On the Literal Meaning of Genesis, I.19 (translated by John Hammond Taylor)

How true. If only this wisdom given to Augustine were not covered in centuries of dust, but were read and considered by more Christians today. How sad it is when some Christians get so caught up in testifying to their faith that they forget that how they act may be at cross-purposes with sharing that faith with others.

How many bottle caps?

I ran across the following problem and couldn't resist. The original inspiration was a Mountain Dew promotion.

Consider the following game: Suppose you have N bottle caps, each with the name of a different sports team on the underside. You win if you draw (with replacement) three of the same team. Note that a win is impossible for less than three draws and is guaranteed by the 2N+1 draw. For n draws, the probability of having some particular set of caps , , follows a Multinomial distribution:

The probability of not winning by the n'th draw is the sum of all the probabilities with , , and . Now, permutations of the vector are equally likely, and the number of possible non-winning vectors that have teams with two drawn caps is

Then, the probability of not winning by the n'th draw, given that there are k teams with two caps, is

Thus, the probability of winning on the (n+1)'th draw is

If there are 30 teams, the chance of winning on the third draw is 0.1%. It takes about 18 draws to have a 50% chance of winning, 27 draws to have a 90% chance of winning, and 38 draws to have a 99.9% chance of winning.

Graduated Annuity Calculator

I use Google Analytics to keep track of visits to the Cogitorium as a matter of curiosity. When I posted the results of my graduated annuity calculations, I figured most people would respond as my brother did: "Why would you write about something boring like that?" Much to my very great surprise, my entry on the graduated annuity has turned out to be my most popular! Since the beginning of this year, the entry has received nearly one hit per day (which is a lot by my humble standards).

Given the interest in graduated annuities, I thought I would whip up a quick applet to perform calculations with the graduated annuity, since many people might not want to slog through the math on their own. Below are a few usage notes, the applet, and several calculation examples. For those who are interested, the source code is available, and is released into the public domain.

1. The Interest Rate and the Acceleration Rate are entered in percent and cannot be the same.
2. When calculating the Final value, enter a positive Base Value for savings or a negative Base Value (with an Initial Value) for accelerated withdrawals.
3. When calculating either rate, no Initial Value is permitted.
4. Selecting Years calculates the amount of time a given Initial Value will last with accelerated withdrawals. It doesn't work with Final Values other than 0, or with positive Base Deposits.
5. Enter 0 for the Acceleration Rate to calculate a normal annuity.
   

Examples:

1. To calculate the savings of $1000/year (unaccelerated) for 10 years at 5% interest, enter 0 for the Initial Value, 1000 for the Base Deposit, 5 for the Interest Rate, 0 for the Acceleration Rate, and 10 for Years. Pressing calculate gives $12,577.89.
2. Suppose we choose to accelerate the savings in the previous example by 4% each year. Enter 4 for the Acceleration Rate. Pressing calculate shows the savings grow to $14,865.03.
   
3. Suppose we have $10,000 and would like to reach $100,000 in 5 years. How much would need to be saved each year, if we expect an 8% return on the savings? Select the Base Deposit radio button, enter 10000 for the Initial Value, 100000 for the Final Value, 8 for the Interest Rate, 0 for the Acceleration Rate, and 5 for Years. Pressing calculate gives $14,541.08.
4. Suppose we want to reach $100,000 in 10 years. If we start with a $6,000/yr deposit, how fast would the deposits have to accelerate to reach our goal, if we expect an 8% return on the savings? Select the Acceleration Rate radio button, enter 0 for Initial Value, 100000 for Final Value, 6000 for Base Deposit, and 10 for Years. Pressing calculate shows that the deposit amount must increase by 3.6% each year to reach the goal.
5. Suppose we have $500,000 saved for retirement, earning 5% per year. We plan on withdrawing $30,000/yr and would like to increase this amount by 2% each year to account for cost of living increases (price inflation). How much will be left after 10 years? Select the Final Value radio button, and enter 500000 for Initial Value, -30000 for Base Desposit, 5 for Interest Rate, 2 for Acceleration Rate, and 10 for Years. Pressing calculate shows that $404,547.11 will remain.
6. How long will the savings in this scenario last? Select the Years radio button. Pressing calculate shows that the savings will last almost 24 years.
   

Poverty Measure Proposals

Last month, New York City Mayor Michael Bloomberg announced the findings in the city's Center for Economic Opportunity's proposal for a new poverty measure to replace or supplement the measure used by the Federal government.  The Federal poverty measure was originally based on the cost of the U.S. Department of Agriculture's economy food plan that detailed the minimum nutritional requirements for a family in need.  The poverty threshold was calculate as three times the annual cost of the food plan, based on the average composition of family spending when the measure was developed in the 1960s.  Since its development, the measure has been updated only based on increases in the Consumer Price Index.  Advocates for the poor claim that the forty-year old measure is now out of date, and thus does not accurately represent the level of poverty in America.  To support this, the advocates claim that food spending now makes up only one-eighth (not one-third) of family expenditures, due to increases in other necessary spending such as shelter and health care.  Moreover, although the Federal poverty measure is used uniformly throught the nation, cost of living varies dramatically by location---for the cost of renting a studio apartment in New York City, one could buy a small house in a less-urban location.

In response to this, the NYC CEO has proposed adopting a more detailed measure developed by the National Academy of Sciences in 1995.  The new measure sets a threshold just under median family expenditure on food, clothing, shelter, and utilities in a particular geographic location.  Additionally, instead of counting only pre-tax income, the new measure includes both post-tax income and the value of near-cash benefits such as food stamps and housing subsidies, minus work-related expenses (such as child-care and transportation costs) and out-of-pocket medical expenses, which reduce a family's resources available for meeting its basic needs.

While this new measure makes significant strides in providing a more accurate picture of poverty in the United States, it suffers from at least two particular weaknesses.  First, the poverty threshold's calculation of expenditures for basic needs is based on the median expenditure among all families, and not on a family's actual needs for survival.  Over time, as the real income of median families increases, a significant number of these families are bound to choose to purchase more-expensive food items or more-expensive clothing.  As a result, median expenditures will increase beyond the cost of minimally adequate goods to meet basic needs.  Although establishing a budget of minimally adequate goods does depend on the judgement of experts, as the NAS panel points out, the solution to expert bias is to include more and varied voices in the deliberation of what constitutes minimally adequate.  Instead, the multiplier approach the panel recommends is based not on what consumers' needs, but simply on how consumers choose to spend their money, whether those choices are motivated by wants or needs.

Second, the new measure's proposal to include welfare receipts among a family's resources gives a misleading picture of the family's ability to support itself.  While it is certainly true, as the panel notes, that welfare services have "have made important contributions to reducing material hardship in the United States," the fact that families must rely on these services to make ends meet is itself an indicator of poverty, thus it makes little sense to reduce poverty figures based on the input of social services.  These services, while highly valuable and eminently necessary to relieve immediate suffering, merely treat the symptoms of poverty---they cannot and do not reduce it.

Bloomberg is not the only public official to recommend use of the new NAS-proposed poverty measure: Representative Jim McDermott has also drafted a bill based on the NAS panel's findings, though the bill has yet to be introduced in Congress.  While the new poverty measure is a step in the right direction, I believe more work is necessary before we arrive at a high-quality picture of poverty in the U.S.