By John Qualls
John Qualls is Senior Economist, National Center for Economic and Financial Information, MInistry of Finance, Riyadh, Kingdom of Saudi Arabia 

He can be reached at jhquall@yahoo.com

PC Corner

by John Qualls
February  2000 

Happy 2000, everyone!  This will be my first web-based “PC Corner” column, and I look forward to continuing my long and enjoyable relationship with my NABE readers.  As always, the orientation of this column will be toward those of us who are not computer experts, but who need to use computers on the job and have also found them useful, even indispensable, at home.  I look forward to continuing this tradition on the NABE website.

Publishing the column on the WWW makes sense, since the vast majority of us have web access, even those of us who live and work outside the US.  It also allows me to make use of web hyperlinks and e-mail addresses in the text of my article, links that you can immediately click on if you want more information about a particular topic.  I’ll start by giving you my e-mail address, jhqualls@yahoo.com.  I would enjoy hearing from you – questions, comments, requests, etc.

The Y2K Problem – Colossal Fraud or Narrowly-Averted Disaster?

A year ago, I devoted an entire column to the dreaded Y2K bug, a problem which I felt was overrated, at least among personal computer users.  I take pride in the fact that I counseled Ed Mennis, the editor of Business Economics, “to be careful about the more hysterical Cassandras out there and to look for balance in whatever articles he prints on the subject.”  Ed had gotten a half-dozen proposals from these modern-day Chicken Littles, implying that he would be doing the NABE membership a real disservice unless he printed their “end of the world as we know it” prophecies.  Ed sent me several of their proposals for articles, and there were some real dandies among them.

Most of last year’s column was devoted to some simple steps which you could take to make sure that your PC was “Y2K Compliant”.  (Is anyone else as sick of that phrase as I am?)  I reported that my ancient Dell 486/50, bought in 1992, was not fully compliant, but that a simple reset of the date after January 1 would take care of any problems in that area.  I’m happy to report that the young friend of the family who inherited the old computer last summer says it is still running fine.

In my article, I had predicted that the Cassandras were in a win-win situation.  If disaster struck, they would say that we were warned and claim victory.  If it didn’t, they would say that it was avoided only because of their incessant warnings and claim victory anyway.  I must admit that the latter has not really happened – we have heard very little from the Cassandra chorus lately.  Yes, there are a few who are saying that problems could still crop up and it will be a full year before we can be sure that we have emerged unscathed.  However, most of them are strangely quiet, perhaps embarrassed by the world-wide trouble-free rollover.  Or, perhaps they are just too busy eating their two years’ supply of canned beans before the expiration date passes and figuring out how to get Sears to refund their money on the electrical generators that they never used.

My question is, was the bloated amount of money that was spent in the US on Y2K compliance (in the hundreds of billions, by most estimates) well-spent?  It certainly gave a short-term boost to the US economy last year, just as John Maynard Keynes would have predicted – the old autonomous spending multiplier works every time.  I guess that there are worse things to spend your money on, but my point is that there are a lot of more productive things that could have been done with the hundreds of billions of dollars and millions of man/woman-hours wasted on this.  I have several friends who are small business owners selling to large corporations, and they were driven to distraction by the incessant demands for Y2K compliance certification by their large corporate customers.  They found themselves spending too much time and money on the problem and neglecting other more important issues.

I find it rather interesting that the countries that were identified as being potential Y2K disaster areas coasted into the new year with nary a glitch.  Although not on most of these lists, I can tell you that Saudi Arabia’s preparations were miniscule in comparison with what went on in the US.  As much of a Pollyanna as I was about the general problem, I must admit that I was a bit concerned about the Kingdom’s seeming lack of concern, particularly in comparison with what was going on in the US.

Since I was going to be out of the country during the calendar rollover, I ran down my frozen food supply and gave the neighbors a key, just in case the power went off.  When I got back, they told me that the lights hadn’t even flickered.  The Saudi preparations may have seemed miniscule, but they were well-concentrated and dealt with the real problems.

In answer to the question I posed above, I would say that all the Y2K brouhaha was neither a fraud nor a narrowly-averted disaster – just an example of what happens when mass hysteria grips an entire nation.  It’s good to see that we can mobilize our resources to fight a common enemy, just as we did back in the good old days of WWII.  I just wish that the cause had been worth the effort this time around.

New Census X-12 Seasonal Adjustment Program

I have always been a fan of the Census X-11 seasonal adjustment program, dating back to a great summer job at Dow Chemical Company, working in their Agricultural Chemicals Division several eons ago.  As I recall, there were about 2,500 punched cards in the Fortran program, and it took about 15 minutes to run on the Burroughs B-5500 computer that we used. 

I used the program extensively during my years in the Office of Economic Analysis at Monsanto.  A lot of other people at the company also found it useful, for everything from production scheduling to development of monthly divisional budgets.  Yes, it was a “black box”, and no one really knew how it worked, but we knew that it got the job done and didn’t require a Ph.D. in statistics to use.

Although minor improvements have been made to the program, today’s version of X-11 is strikingly similar to the original version I first encountered while working at Dow.  However, this is all about to change, with the introduction of the Census X-12 program, the most significant revision and enhancement to the program in over 30 years.

The major improvements in the new X-12 program include the following:

·        the use of ARIMA (autoregressive integrated moving average) time series methodology to create “backcasts” and “forecasts” of the series being adjusted.  This is done prior to applying the regular X-11 seasonal adjustment procedure and avoids a common problem with instability in the beginning and ending seasonal factors.  ARIMA methodology has been shown to minimize the frequent revisions to historical seasonally adjusted data that used to plague X-11.  For some reason, Census had never officially embraced this methodology, which was developed by Statistics Canada back in the 1980s.  Now, they have.

·        new alternatives for trading day and holiday adjustments that include the ability to use user-defined regressors.  Also provided are additional seasonal and trend filter options and an alternative seasonal-trend-irregular decomposition approach.

·        new quality and stability diagnostics of the resulting seasonal adjustments performed under the numerous options that are now possible.

·        “regARIMA”, which is Census-speak for a set of extensive time series modeling and model selection capabilities for the estimation of linear regression models with ARIMA errors.  For those of you really into this, you will be happy to learn that you can use “optional robust estimation of coefficients” rather than the old wimpy techniques.

·        a new user interface with features to facilitate batch processing large numbers of series.  It’s nice to know that Census has finally gotten around to providing us with this capability, although I have not been doing much batch-processing computing for some time now.

All joking aside, X-12 has some major improvements.  With the addition of regARIMA, it has become a real econometric modeling tool, capable of handling causal independent variables, ARIMA time-series techniques, and X-11 seasonal adjustment in a single package.  The complete package with extensive documentation is available for downloading at:

http://www.census.gov/pub/ts/x12a/final/pc

Don’t worry – although the source language still appears to be Fortran, you don’t have to download the source code.  However, the executable programs are all DOS-based, so you need basic familiarity with the DOS command language to run them.  Extensive documentation in Postscript or Adobe Acrobat format is also available at the above website.

As far as I know, none of the econometric programs such as EViews, AREMOS, or EPS/PC have added X-12 yet.  One problem may be that the program has just been released, and Census is reluctant to allow its incorporation into commercial packages until all of the bugs are shaken out.  However, I have found no bugs to date, and, yes, it does take considerably less than 15 minutes to run.  Would you believe a few seconds for a lengthy monthly series with multiple ARIMA models being estimated?

Encryption Programs

The popularity of e-mail as a major communications venue raises the issue of confidentiality and security of information.  In previous columns, I have discussed how to insure a modicum of privacy by using password protection on Microsoft Excel and Word documents.  The Office 97 and Office 2000 versions of these programs scramble the contents of password-protected files so that they cannot be read by file browser programs.  However, be aware that Word 6.0 does not scramble the contents, so your password-protected document can easily be read by any file browser (e.g., WnBrowse, which is one of the best around).

Unfortunately, the problem with passwords is that you have to convey them to others, and the act of conveying them compromises their security.  The larger the number of people to whom you send your document, the greater is the problem.  Wouldn’t it be great if there were a way of encrypting information using publicly available passwords, yet doing so in such a way that only the intended recipient could decode them?

Such a scheme sounds like a pipe dream, yet it is not only possible but also feasible, with the advent of public key/private key encryption/decryption technology.  Don’t ask me how it’s done – it has something to do with two gigantic prime numbers (which are the private key and the public key) that are multiplied together to get a very secure decryption key that would take a billion computers capable of a billion calculations a second over a billion years to crack.

A year ago, I would have been uncomfortable discussing this with you, because the US had declared the export of this technology without a government license to be illegal.  However, several enterprising people put the software out on the Internet, and the US government has given up trying to stuff the genie back in the bottle.  The software is now widely available on the web under the acronym of Pretty Good Privacy, or PGP.  Actually, the name is a considerable understatement, as any encryption technology that takes a billion years to crack is more than just “Pretty Good”!

The latest version of PGP for Windows 95/98/NT is available for downloading at:

http://www.pgpi.org

Keep in mind that the encryption process is the reverse of what you are accustomed to doing with normal passwords.  Normally, if you are protecting a document, you would choose a password with which to encrypt it.  You could still decrypt it once it was encrypted, and the recipient would use the same password to decrypt the document.  However, with PGP, you look up the recipient’s public key and use it to encrypt the document.  At that point, neither you nor anyone else can decrypt the document – only the intended recipient who has the private key.

There are several very nice features of the program.  One is the digital signature concept, which is a neat reversal of the normal procedure.  Instead of using someone else’s public key to encrypt your “signature” (which could just be your name), you use your own private key to encrypt it and attach it to a message that you want to “sign”.  The recipient of the message can use your public key to decrypt the “signature”.  If it decrypts OK, then the recipient knows that you sent the message, since you are the only one who knows the private key which was used to encode the “signature” in the first place.  Actually, this is better evidence of your authorship than a real signature would be, since a real signature can be forged, whereas a private key is known only to you.

Another nice feature is that you can send an encrypted message to someone who does not have PGP.  The message will be in the form of an executable file which will ask the recipient to enter a passphrase to decode the encrypted document.  Of course, you will have to convey the passphrase in advance to the recipient, but it is a handy way to send encrypted information to someone who doesn’t have PGP.

The PGP program can also modify your copy of Outlook or Outlook Express to give you the ability to directly encrypt the body of an e-mail.  Alternatively, you can use it to encrypt a text message or a Word document and attach the message/document to an unencrypted e-mail.

I have not yet registered my public key, as I see no reason to do so at the moment.  However, I would be glad to send a “keyring” containing my public key to anyone who wants to send me an encrypted message.

Believe it or not, the program is completely free, as long as you do not use the program for commercial purposes.  Commercial versions are available, and every corporation in the US concerned about the security of its business correspondence over the Internet should have a copy.

There is a great book about cryptography that got rave reviews in the New York Times last year.  It’s called The Code Book, by Simon Singh, and it takes you through the history of cryptography, from Julius Caesar to PGP.  It’s an easy read and provided me with much enjoyment on the last long trip back to the US.  I recommend it highly, particularly the chapters about the latest innovations such as PGP.

Again, I appreciate your questions, comments, etc.  Send them to me at:

jhqualls@yahoo.com

Insh-allah, the hacker attacks on the Yahoo servers will shortly subside, and I will be able to download any and all correspondence that may come my way.