Making Algorithms Accountable

Algorithms are ubiquitous in our lives. They map out the best route to our destination and help us find new music based on what we listen to now. But they are also being employed to inform fundamental decisions about our lives.


Companies use them to sort through stacks of résumés from job seekers. Credit agencies use them to determine our credit scores. And the criminal justice system is increasingly using algorithms to predict a defendant's future criminality.


Those computer-generated criminal "risk scores" were at the center of a recent Wisconsin Supreme Court decision that set the first significant limits on the use of risk algorithms in sentencing.


The court ruled that while judges could use these risk scores, the scores could not be a "determinative" factor in whether a defendant was jailed or placed on probation. And, most important, the court stipulated that a presentence report submitted to the judge must include a warning about the limits of the algorithm's accuracy.


This warning requirement is an important milestone in the debate over how our data-driven society should hold decision-making software accountable. But advocates for big data due process argue that much more must be done to assure the appropriateness and accuracy of algorithm results.


An algorithm is a procedure or set of instructions often used by a computer to solve a problem. Many algorithms are secret. In Wisconsin, for instance, the risk-score formula was developed by a private company and has never been publicly disclosed because it is considered proprietary. This secrecy has made it difficult for lawyers to challenge a result.


The credit score is the lone algorithm in which consumers have a legal right to examine and challenge the underlying data used to generate it. In 1970, President Richard M. Nixon signed the Fair Credit Reporting Act. It gave people the right to see the data in their credit reports and to challenge and delete data that was inaccurate.


For most other algorithms, people are expected to read fine-print privacy policies, in the hopes of determining whether their data might be used against them in a way that they wouldn't expect.


"We urgently need more due process with the algorithmic systems influencing our lives," says Kate Crawford, a principal researcher at Microsoft Research who has called for big data due process requirements. "If you are given a score that jeopardizes your ability to get a job, housing or education, you should have the right to see that data, know how it was generated, and be able to correct errors and contest the decision."


The European Union has recently adopted a due process requirement for data-driven decisions based "solely on automated processing" that "significantly affect" citizens. The new rules, which are set to go into effect in May 2018, give European Union citizens the right to obtain an explanation of automated decisions and to challenge those decisions.


However, since the European regulations apply only to situations that don't involve human judgment "such as automatic refusal of an online credit application or e-recruiting practices without any human intervention," they are likely to affect a narrow class of automated decisions.


In 2012, the Obama administration proposed a "consumer privacy bill of rights" — modeled on European data protection principles — that would have allowed consumers to access and correct some data that was used to make judgments about them. But the measure died in Congress.


More recently, the White House has suggested that algorithm makers police themselves. In a recent report, the administration called for automated decision-making tools to be tested for fairness, and for the development of "algorithmic auditing."


But algorithmic auditing is not yet common. In 2014, Eric H. Holder Jr., then the attorney general, called for the United States Sentencing Commission to study whether risk assessments used in sentencing were reinforcing unjust disparities in the criminal justice system. No study was done.


Even Wisconsin, which has been using risk assessment scores in sentencing for four years, has not independently tested whether it works or whether it is biased against certain groups.


At ProPublica, we obtained more than 7,000 risk scores assigned by the company Northpointe, whose tool is used in Wisconsin, and compared predicted recidivism to actual recidivism. We found the scores were wrong 40 percent of the time and were biased against black defendants, who were falsely labeled future criminals at almost twice the rate of white defendants. (Northpointe disputed our analysis. Read our response.)


Some have argued that these failure rates are still better than the human biases of individual judges, although there is no data on judges with which to compare. But even if that were the case, are we willing to accept an algorithm with such a high failure rate for black defendants?


Warning labels are not a bad start toward answering that question. Judges may be cautious of risk scores that are accompanied by a statement that the score has been found to overpredict recidivism among black defendants. Yet as we rapidly enter the era of automated decision making, we should demand more than warning labels.


A better goal would be to try to at least meet, if not exceed, the accountability standard set by a president not otherwise known for his commitment to transparency, Richard Nixon: the right to examine and challenge the data used to make algorithmic decisions about us.


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On tap banking licence: RBI says entity must have Rs500 crore capital, get listed in six years
The Reserve Bank of India (RBI) came out on Monday with its guidelines for 'on-tap' licensing of universal banks in the private sector. According to the guideline the initial minimum paid-up voting equity capital shall be Rs500 crore and thereafter the bank should have a minimum net worth of Rs500 crore at all times.
A minimum start-up capital of Rs500 crore; minimum promoter holding of 40% (lock-in period five years); listing of the shares within six years; and promoters' holdings to be brought down to 15% in 15 years are some of the stipulations laid down by the regulator on Monday for getting a bank licence on tap.
The bank shall open at least 25% of its branches in unbanked rural centres (population up to 9,999 as per the latest census). The bank shall comply with the priority sector lending targets and sub-targets as applicable to the existing domestic scheduled commercial banks, RBI said.
As per the guidelines, promoters and the promoter group or non-operative financial holding company (NOFHC), as the case may be, should hold a minimum of 40% of the paid-up voting equity capital of the bank, which will be locked in for five years from the date of commencement of business of the bank.
The promoter group shareholding shall be brought down to 15% within 15 years from the date of commencement of business of the bank, the RBI said.
"The bank shall get its shares listed on the stock exchanges within six years of the commencement of business by the bank," as per the RBI guidelines.
As to the eligibility of the promoters the RBI said (i) Individuals/professionals who are 'residents' and have 10 years of banking and finance experience at a senior level;
(ii) Entities/groups in the private sector that are 'owned and controlled by residents' (as defined in FEMA Regulations) and have a successful track record for at least 10 years. However if such entity/group has total assets of Rs 50 billion or more, the non-financial business of the group does not account for 40% or more in terms of total assets or gross income;
(iii) Existing non-banking financial companies (NBFCs) that are 'controlled by residents' and have a successful track record for at least 10 years.
The RBI said the promoter of the bank should be 'fit and proper' with a past record of sound financials, credentials, integrity and have a minimum 10 years of successful track-record.
Promoters having other group entities shall set up the bank only through an NOFHC. Not less than 51% of the total paid-up equity capital of the NOFHC shall be owned by the promoter/ promoter group, as per the RBI guidelines.
No shareholder, other than the promoters/promoter group, shall have significant influence and control in the NOFHC, the RBI has stipulated.
The bank is precluded from having any exposure to its promoters, major shareholders who have shareholding of 10% or more of paid-up equity shares in the bank, the relatives of the promoters as also the entities in which they have significant influence or control.



MG Warrier

3 months ago

The RBI initiative to issue bank licences to those who are serious about doing the business of banking and can mobilise the resources needed and provide leadership to professionally manage new banks has not come a day earlier. Reserve Bank of India has been struggling to reconcile the interests of multiple institutional systems, broadly coming under commercial banks, cooperative banks and NBFCs, all trespassing each other’s operational jurisdictions and the competing claims for regulatory, supervisory and administrative controls from central and state governments and a variety of statutory bodies. Thank God, RBI has been there!
We had to wait 65 long years after passing of the Banking Regulation Act for Raghuram Rajan to arrive and tell us some ingenuous solutions to handle some of the tricky problems faced by Indian banking sector. He has opened many taps to ensure smooth and competitive functioning of the banking system and it will not be easy for RBI and GOI to take an easy diversion, as in the past. The institutional system that is emerging to take care of the banking needs in the present Indian context envisioned by RBI under his leadership will cover the entire banking business.
Ideally, all institutions which were hitherto ‘outside’ the definition of banks and were doing the business of banking in some pretext, will have to transform themselves into banks or transfer their banking business to banks. Consolidation of small private sector banks and professionalization of the working of cooperative banks (some initiatives in this direction have already been taken by states like Kerala) also need to be prioritised.

Automobile manufacturer's post healthy July sales
Indian automobile manufacturers saw higher sales in July with industry experts attributing the acceleration in demand to good monsoon and positive consumer sentiments.
“The automotive industry is in the recovering phase, with good monsoon and positive customer sentiments, the growth this year is expected to be better than last year,” said Abdul Majeed, Partner with Price Waterhouse.
Passenger cars, utility vehicles and two wheeler manufacturer's reported positive sales growth for last month, whereas a leading commercial vehicle maker's off-take declined.
The country's largest carmaker Maruti Suzuki reported a 12.7 per cent increase in its total sales for last month.
The company sold 1,37,116 units during the month under review -- up from 1,21,712 units sold in the same month last year.
It also posted its highest ever monthly domestic sales for the month. The sales surged by 13.9 per cent to 1,25,778 units, from 1,10,405 units sold in the July 2015.
Exports during the month increased marginally by 0.3 percent to 11,338 units as compared to 11,307 units in July last year.
The second largest car maker Hyundai Motor reported an overall sales growth of 10.7 per cent, with total sales for the last month at 55,807 units, as against 50,411 units sold in the corresponding month of 2015.
The automobile manufacturer's domestic sales grew by 12.9 per cent and exports rose by five per cent during July 2015.
Another major automobile manufacturer Tata Motors' passenger and commercial vehicle sales including exports edged higher by seven per cent to 43,160 vehicles.
The company's domestic sales of commercial and passenger vehicles grew by eight per cent to 37,789 units.
Mahindra and Mahindra's (M&M) total sales rose by 14 per cent.
The company sold 39,458 units during the month under review from an off-take of 34,652 units during the corresponding period of last year.
In addition, the company's exports surged by 16 per cent to 4,153 units from 3,565 units shipped-out during July 2015.
Ford India's total sales grew to 17,742 units in July 2016, up from 13,116 units sold in the like month in the previous fiscal. The company's domestic sales grew to 7,076 vehicles, while exports grew to 10,666 vehicles.
Eicher Motors logged 31 per cent sales growth, selling 53,378 units in July 2015 from 40,760 units sold in the corresponding month last year. The exports of the company rose by 40 per cent.
In two wheeler segment, Hero MotoCorp's overall sales grew by 9.13 per cent. 
According to the company, its total sales for the last month stood at 532,113 units of two-wheelers -- up from 487,580 units sold in the corresponding month of 2015.
However, commercial vehicles major Ashok Leyland logged a five per cent drop in sales volume last month selling 10,492 units, down from 11,054 units sold in July 2015.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.


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