Yves Smith is an intelligent person whose ability I admire as much as the quality of what she offers at her site.
Today she commented on Open Source Credit Rating:
Can Open Source Ratings Break the Ratings Agency Oligopoly?
Yves comments were based on the analysis of Professor Krassimir Petrov, who has taught economics and
finance in the U.S., Ireland, Bulgaria, Saudi Arabia, Bahrain, Taiwan,
and Macau. He concludes with a solution to the problems he analyzed:
The Open Source Solution to Credit Ratings
The open-source movement has proven to be a powerful force in our modern technological world. It began in the software industry and rose to prominence with the success of Linux. It is steadily spreading in other areas. Open-Source Credit Rating Models provide a superior platform that effectively resolves all of the above problems. One leading example in the field is Public Sector Credit Solutions, which published in May 2012 an open-source sovereign and municipal rating tool called the Public Sector Credit Framework.
My google search on Open Source Credit Ratings returned this hit. Mathbabe (Cathy O'Neil) commented on it here so it must be good! Her comment (I'm excited!) is here. She made another prior comment on the idea here. She included in that comment a link to this Are We Witnessing the Start of a Ratings Revolution? Published Tue, May 8th, 2012 Matthew Weinschenk, Senior Analyst. This was good press for the idea of Marc Joffe that Mathbabe describes:
Specifically, he has a model which, if you add the relevant data, can
give ratings to city, state, or government bonds. I’ve been interested
in this idea for a while now, although more at the level of publicly
traded companies to start; see this post or this post for example.
His webpage is here, and you will note that his code is available on github, which is very cool, because it means it’s truly open source. From the webpage:
"The framework allows an analyst to set up and run a budget simulation model in an Excel workbook. The analyst also specifies a default point in terms of a fiscal ratio. The framework calculates annual default probabilities as the the proportion of simulation trials that surpass the default point in a given year."
His webpage is here, and you will note that his code is available on github, which is very cool, because it means it’s truly open source. From the webpage:
"The framework allows an analyst to set up and run a budget simulation model in an Excel workbook. The analyst also specifies a default point in terms of a fiscal ratio. The framework calculates annual default probabilities as the the proportion of simulation trials that surpass the default point in a given year."
Mathbabe is an application oriented math genius. The nature of her applications can be seen in her participation in the banking aspects of Occupy Wall Street. She gets to the short and curlies of where Wall Street operates: I describe that place this way: It is all about the math stupid! Which means complicated math models. Far beyond me to understand but her models are not a product of unfounded thoughts about anything her thoughts are a product of what the math says. She is good at math. If I had her as a math teacher I might be too.
Today Mathbabe wrote about the application of another model but at the core, (contrary to the way she makes the title statement) it is the need for applying a model that cannot be gamed (an Open Source Designed model to credit rating agencies:)
How to build a model that will be gamed
I can’t help but think that the new Medicare readmissions penalty, as described by the New York Times, is going to lead to wide-spread gaming. It has all the elements of a perfect gaming storm. First of all, a clear economic incentive:
Medicare last month began levying financial penalties against 2,217 hospitals it says have had too many readmissions.
Of those hospitals, 307 will receive the maximum punishment, a 1
percent reduction in Medicare’s regular payments for every patient over
the next year, federal records show.
It also has the element of unfairness:
“Many of us have been working on this for
other reasons than a penalty for many years, and we’ve found it’s very
hard to move,” Dr. Lynch said. He said the penalties were unfair to
hospitals with the double burden of caring for very sick and very poor
patients.
“For us, it’s not a readmissions penalty,” he said. “It’s a mission penalty.”
And the smell of politics:
In some ways, the debate parallels the one
on education — specifically, whether educators should be held
accountable for lower rates of progress among children from poor
families.
“Just blaming the patients or saying ‘it’s
destiny’ or ‘we can’t do any better’ is a premature conclusion and is
likely to be wrong,” said Dr. Harlan Krumholz,
director of the Center for Outcomes Research and Evaluation at Yale-New
Haven Hospital, which prepared the study for Medicare. “I’ve got to
believe we can do much, much better.”
Maybe we need an Open Source Medicare Model!
Maybe we need an open source Money Model.
My bottom line conclusion to wrap up this blog entry:
Open Source: Created by the Public for the Public, maintained by the Public. Created, used and maintained at the best price in terms of money: Free. Free labor expended for the common good, the public good. Free from the motivation of monetary profit gained by monopoly ownership. Nobody can "own" freedom, freedom of expression. It is a right. Open Source is a right to create model systems that defies the "rights" to sub-optimizing monopoly system at the expense of the common good.
Wikipedia is Open Source.
No comments:
Post a Comment