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Cathy's use of 'problematic' seems to paper over any need to actually go into an analysis of cost and benefits of using statistics and statistical learning in s

by pliny 10y ago

Cathy's use of 'problematic' seems to paper over any need to actually go into an analysis of cost and benefits of using statistics and statistical learning in sentencing, personal banking etc. In the business of making credit decisions (specifically, who to extend credit to, and at what rates), preventing banks from using better information only harms people who would have been the subjects of erroneous decisions in their favour, and the ability of the bank to consistently make better judgements means they can also offer lower rates and fees to people they choose to extend credit to. This is in contrast to sentencing, where you prefer (in theory, at least) to bias judgements in favour of leniency (in the spirit of Blackstone's formulation), and you might even to prefer to make mistakes, if making the right decisions alienates people who interact with the justice system.

mcherm 10y ago
> In the business of making credit decisions (specifically, who to extend credit to, and at what rates), preventing banks from using better information only harms people who would have been the subjects of erroneous decisions in their favour I disagree. For instance, in the credit-card business a key factor in the ability of a bank to be successful is the ability to assess the likelihood of a person defaulting on their payments. There are a lot of factors that go into the formula to calculate that risk today, especially things like previous payment patterns and previous borrowing history. There are some factors that do NOT go into the formula like the borrower's race or the payment patterns of family members. Now, I am sure (although I have not actually run the numbers) that an analysis would show that race and family-member credit scores are fairly strongly correlated with default rates. That means that a credit card company chose to use factors like race as part of the scoring decision the company would do better than another bank that didn't use those factors. But we do not WANT to be using race or family wealth to decide credit decisions. Speaking as a banker, my company does not want to be using those criteria; speaking as a citizen, my country does not want banks to be using those criteria. Restricting what criteria are permissible for making credit decisions enables the banks that would refuse to use that data for ethical reasons to remain competitive. Restricting it allows us to craft a society where any citizen has an equal chance of success.... well, that may be a stretch but at least it is CLOSER to such a society than if we did not have such restrictions. Sure, you can categorize this as "erroneous decisions in the favor of those who come from a poor or minority background", and I suppose you are technically correct. But that pretty phrasing doesn't make it ethical.
- sopooneo 10y ago
  This is well put, and speaks to me of why we do need to legislate morality at times.
- anthony_james 10y ago
  It's important that while we keep in mind the ethical considerations of minorities there is also an ethical consideration of marginalized users of financial capital, who are denied credit because banks are unable to afford them a lower rate due to lacking information. This isn't a black-and-white choice between including peripheral information into credit lending. When banks and lenders make a deliberate decision to ignore information that could allow them to be more accurate with lending, those costs are passed down to users - and although it may not hurt the typical HN user, marginalized credit-seekers can literally have their hopes of home-ownership or education denied because of a bank's choice to be ignorant but considerate. Neither choice is completely without consequences.
  - wfo 10y ago
    It's true -- we also, however, ban firing based on race or sex. Purportedly, in the view of the managers who would wish to do so, their company would be more efficient if they were allowed to hire and fire whomever they wish (i.e. only employ white people, for example) -- perhaps they believe, in their racist world view, that having a company full of one race would create workplace unity, etc. We could just let the market decide, and since we know the antiracist hypothesis is true, racist companies would miss on a huge amount of qualified labor and get beaten in a free market, forgetting for a moment that free markets are a myth and don't exist, and that the markets we do have aren't even close to efficient. But we don't. We force companies to act a certain way even though they don't wish to because we are forcing ethical standards on them. This is, akin to your point at the expense of all of the workers not protected by the law. Every time we prevent a black person from being fired because he is black, it's at the expense of the white person who would take his job. The costs are passed down to white people. Neither choice is completely without consequences, yet we've made the one against racism.
    - 10y ago
pron 10y ago
> Cathy's use of 'problematic' seems to paper over any need to actually go into an analysis of cost and benefits Before you choose to make a tradeoff, you should know what it is that you're trading off. If anything, much stronger forces than this book are pulling in the other direction.

by pliny 10y ago

mcherm 10y ago

> In the business of making credit decisions (specifically, who to extend credit to, and at what rates), preventing banks from using better information only harms people who would have been the subjects of erroneous decisions in their favour I disagree. For instance, in the credit-card business a key factor in the ability of a bank to be successful is the ability to assess the likelihood of a person defaulting on their payments. There are a lot of factors that go into the formula to calculate that risk today, especially things like previous payment patterns and previous borrowing history. There are some factors that do NOT go into the formula like the borrower's race or the payment patterns of family members. Now, I am sure (although I have not actually run the numbers) that an analysis would show that race and family-member credit scores are fairly strongly correlated with default rates. That means that a credit card company chose to use factors like race as part of the scoring decision the company would do better than another bank that didn't use those factors. But we do not WANT to be using race or family wealth to decide credit decisions. Speaking as a banker, my company does not want to be using those criteria; speaking as a citizen, my country does not want banks to be using those criteria. Restricting what criteria are permissible for making credit decisions enables the banks that would refuse to use that data for ethical reasons to remain competitive. Restricting it allows us to craft a society where any citizen has an equal chance of success.... well, that may be a stretch but at least it is CLOSER to such a society than if we did not have such restrictions. Sure, you can categorize this as "erroneous decisions in the favor of those who come from a poor or minority background", and I suppose you are technically correct. But that pretty phrasing doesn't make it ethical.

sopooneo 10y ago
This is well put, and speaks to me of why we do need to legislate morality at times.
anthony_james 10y ago
It's important that while we keep in mind the ethical considerations of minorities there is also an ethical consideration of marginalized users of financial capital, who are denied credit because banks are unable to afford them a lower rate due to lacking information. This isn't a black-and-white choice between including peripheral information into credit lending. When banks and lenders make a deliberate decision to ignore information that could allow them to be more accurate with lending, those costs are passed down to users - and although it may not hurt the typical HN user, marginalized credit-seekers can literally have their hopes of home-ownership or education denied because of a bank's choice to be ignorant but considerate. Neither choice is completely without consequences.
- wfo 10y ago
  It's true -- we also, however, ban firing based on race or sex. Purportedly, in the view of the managers who would wish to do so, their company would be more efficient if they were allowed to hire and fire whomever they wish (i.e. only employ white people, for example) -- perhaps they believe, in their racist world view, that having a company full of one race would create workplace unity, etc. We could just let the market decide, and since we know the antiracist hypothesis is true, racist companies would miss on a huge amount of qualified labor and get beaten in a free market, forgetting for a moment that free markets are a myth and don't exist, and that the markets we do have aren't even close to efficient. But we don't. We force companies to act a certain way even though they don't wish to because we are forcing ethical standards on them. This is, akin to your point at the expense of all of the workers not protected by the law. Every time we prevent a black person from being fired because he is black, it's at the expense of the white person who would take his job. The costs are passed down to white people. Neither choice is completely without consequences, yet we've made the one against racism.
  - 10y ago

pron 10y ago

> Cathy's use of 'problematic' seems to paper over any need to actually go into an analysis of cost and benefits Before you choose to make a tradeoff, you should know what it is that you're trading off. If anything, much stronger forces than this book are pulling in the other direction.