Since this will be my last post on the decisions blog for 2011, I fell into a reflective mood and looked back over the postings of the whole year. We have covered a lot of material: some light-hearted and some serious. One post that caught my eye during the review was an explanation of why I am attracted to decision theory. That piece was written as a result of a conversation in which the other person expressed the thought that decision theory was useless in the real world.

I was appalled. We have just had two good examples of how strict application of decision theory backed by immense computing power could have led to better decisions more quickly and certainly with less expense. The first one is the debacle of the American government stumbling over budget issues and whether to hold the middle class tax cuts hostage for political advantage. The other example is the spate of bombs that hit Iraq days after the USA rolled up the battle flags and left.

When I was a boy, naively I thought that those adults who ran things knew more than I did and they would take care of things correctly. We would all be safe, happy, and healthy. While I will not take a stance here on how the budget negotiations should have turned out or what should have been our moral and proper actions in Iraq or anyplace else, I will take one strong stance: the powers that be are not all that smart. Some of them might be somewhat smarter and better educated than the average American, but that is not good enough.

What Should We Decide in 2012?Consider: what is the result of raising taxes on the wealthiest Americans? That concept provokes heated debate, but little actual analysis — at least little analysis that makes it to the public media.

Consider: Do restrictive gun laws decrease violence? Much more money is spent arguing the pros and cons of this proposition than is spent on serious research and modeling.

Consider: Does announcing a withdrawal date from Iraq undermine the progress? (Define progress.)

All these examples can at least partially be answered by bi-partisan research and modeling. I selected these three examples for their emotion content. Almost everyone has a strong opinion on at least one of them. That is the point. Can we, as a society, acknowledge that we have emotional investment in the answers (e.g., the NRA likes guns) while still participating in analyses that might disprove our favorites? If an honest calculation showed that taxing the wealthy more will be beneficial, would the Tea Party accept it? If an honest calculation showed that taxing the wealthy more would be detrimental, would the progressives accept it? When does your per-conceived decision trump a computed decision? What is an adult?

When I am optimistic, I write decision theory pieces and try to find fun puzzles with joy and an open heart. When I am pessimistic, I still write, but sometimes it is difficult when confronted with real world examples of poor judgment. Right now I am mixed. We must look forward to 2012 with hope. Sometimes that is difficult — such as when I watch some television shows — last week Sixty Minutes had a piece that resonated with my puzzles.

A couple of weeks ago I posted a puzzle about pirates distributing some loot. While the puzzle stands by itself as an amusement, it was chosen because I hoped it would make some people think about the financial crisis we are in and how we got here. The point is that even with a seemingly rational (well, rational in pirate terms) algorithm for dividing the loot, one person makes out at the others’ expense. That is what happened when the banks had at us.

The financial meltdown was bad enough, but Sixty Minutes documented the city of Cleveland bulldozing thousands of perfectly good houses that had been foreclosed and abandoned by the banks. People are homeless on the street and all we can think to do is bulldoze their empty houses. During the Great Depression, in California where people were literally starving to death, farmers poured kerosene over piled up crops and burned them because the prices were too low. We do not seem to have learned much in the interim. We still destroy rather than find a way to utilize.

Nothing I write will likely change such major stupidities, but if one person reads one thing and responds by thinking more clearly, then this will have been a good year for me. Here is an example of someone who responded with clear thinking:

Think outside the box for a moment. After reading the pirate puzzle, Roderic suggested a charming alternative to distributing the pirate’s gold. The original puzzle had five pirates about to divvy up a haul of 100 Doubloons. The captain proposes a formula and everyone votes on it. If it passes, the distribution is made. If it fails, the majority will mutiny, kill the captain, and elect the next strongest pirate as the new captain. The process repeats until a distribution is made. See the earlier posts for the standard analysis and some alternatives.

But Roderic sent me a nifty spin, which I have embellished a bit. He suggests that the captain give 25 Doubloons to each of his underlings and keep nothing himself. When they express wonder at this unexpected generosity, he says that he is retiring and wants to express his appreciation to the crew for all their good work. He does not need the money because he is investing with a guy named Bernie on the mainland who will pay him back 25 to 1 on his investment with Bernie’s company. He has put his personal treasure in Bernie’s hands and expects to be able to retire comfortably. The crew is immediately interested. After some back and forth, the captain reluctantly agrees to act as agent for them to see if he can convince Bernie to let them invest also — as long as they do not hold him responsible. Then he takes the haul, gives each pirate an official receipt, and moves to Miami. A few months later Bernie is arrested. Of course the captain had no business with Bernie, but such is life. However, the wily captain did apply to the government for funds to cover his (non-existent) losses and help re-establish his investment business. That is an optimistic way to end the year!