Tuesday, 29 April 2014

Consequences of Some Longevity Treatments

There is much in the world to learn and experience, but relatively little time. I would therefore like to live forever. Alas, the prospects are not too good, but one never knows. Death is a gamble, because in case there is no afterlife, there will be no new things to learn (not even that there is nothing, since one will not be there to see it), and in case there is an afterlife, it is not necessarily one in which there are things to learn. It follows that I would be very keen on effective longevity treatments. With certain of them, however, I wonder if they may be associated with negative externalities such that they do no good in the end.
 
For instance, travelling near the speed of light makes time go by more slowly for the traveller. One potential longevity treatment is to send oneself on a journey through space at a speed close to that of light (according to our best understanding of the laws of physics, it is not possible to exceed the speed of light, only to asymptote towards it), so that upon one's return to Earth, the other humans will have made radical progress towards life extension.
 
But why would the other humans stay on Earth? They should want to travel almost at the speed of light, too. The obvious response is for travellers to compensate relatively stationary individuals to work towards longevity, but how does the market accomplish this? A firm could provide near-speed-of-light travel and charge a price high enough to compensate longevity researchers for their efforts, but another firm could provide only the travel and thereby charge a lower price. The result could then be that we would all be going through life far more slowly than would relatively more stationary people. Nobody gets any benefits of living longer, since research will not progress any more rapidly relative to how long we live. The mechanics of near speed-of-light travel are like those of a positional good.
 
Obviously this is a very scaled-down and simple approach, maybe even simplistic. There are other reasons one might wish to travel near the speed of light, and many individuals may want to spend a large fraction of their lives in relative stationarity, depending on how exactly the travelling would happen (small capsule or Starship Enterprise-style travelling? ways of communicating with other travellers, etc.). But if we imagine that near speed-of-light travel is perfectly comfortable and comparable to purchasing a bike in terms of price, then surely it should be wanted by all. If very few others are doing it, it increases one's life expectancy; if almost everyone is doing it, not travelling means ageing faster than do the travellers, who might make a breakthrough towards longevity (not travelling also means that communication with travellers will be scarce).

Those who travel will effectively lose touch with the folks in relative stationarity, since members of the latter group age so much faster than do members of the former. This is a cost of travelling, but it is one which declines the more people come with, i.e. declines in the number of other travellers with whom communication is possible. Travelling aboard the same spacecraft or in the same direction will ensure the possibility of communicating among the fast travellers.

I suppose similar reasons would apply to many other methods of life extension. Cryonics, if it turned out to work perfectly (the jury is out on that), would be individually rational but socially wasteful. What the Gelehrten usually say about cryonics is that the healthier the frozen body, the better its prospects, so all should do it as soon as possible, but then longevity will improve less quickly since such a great share of humanity is frozen.

Sunday, 27 April 2014

Lies and Social Desirability Bias

Regarding the low faith they have in survey responses and other evidence based upon anything other than what people actually do, Bryan Caplan laments many economists' rejection of "all-pervasive testimony on lame methodological grounds" Caplan argues that words ought to be trusted far more often, especially when there is no reason to be wary of social desirability bias. I am not sure I agree with Caplan that economists have an unsound attitude to words (I personally trust some surveys), but his blog post reminds me of an interesting approach to this problem, first developed by Judith Droitcourt Miller in her mid-1980's PhD dissertation at George Washington University.
 
In her doctoral thesis, A New Survey Technique for Studying Deviant Behavior, Miller outlines a very clever way of ascertaining the prevalence of lies to protect sensitive information by simple survey methods. Suppose one wants to find out how much one can trust survey responses on, say, how much people recycle. I believe there is widespread pressure on most people to say that they recycle, but it is also quite clear that recycling is a deeply unpleasant activity. As the Simpsons' Mr Burns sarcastically commented on the phenomenon, "Yes, I can't wait to start pawing through my garbage like some starving raccoon".
 
Miller's proposal is to take two groups believed to be statistically the same. Call them Groups A and B and send them  questionnaires containing a series of mainly rather harmless statements, as well as the statement of interest. Group A's form might ask respondents to indicate the number of statements with which they agree out of a list such as the following:
  • I remember what I was doing when I learnt of the atrocities of 11th September 2001.
  • I prefer the beach to holidaying in cities.
  • I always recycle my refuse.
  • My favourite colour is blue.
  • My favourite film was released in the 1990's.
 
Group B gets the same statements, but the recycling one is separated from the others, requiring its own "yes" or "no" answer; the other statements are grouped together and respondents indicate the number of them with which they agree. One might in addition want to vary the order of the statements, to ease worries that a particular place among the statements will draw extra attention.
 
The effect of social desirability bias can be estimated from looking at the responses from the two groups. If recycling is privately unpleasant and in high regard socially, one should expect social desirability bias to manifest itself in widespread agreement with the single statement among Group B members. At the same time, the average number of statements with which respondents agree should be lower among members of Group A. Because in Group A's survey, disagreeing with the statement that one is an avid recycler does not stand out as much.
 
This is a very clever strategy for getting at lies in survey data. I wish it were original with me.

Friday, 25 April 2014

Newcomb's Problem

From time to time, I will use this blog to write about problems in philosophy which interest me. I have no particular objective with writings of this nature, except simply to discuss and write about them. Today's topic is Newcomb's Problem, prolonged occupation with which continues to imperil the sanity of many researchers in philosophy and decision science. I first read about it in Robert Nozick's great book Socratic Puzzles.

Here it is: You are told that an entity of incredible intellectual ability (such as God or a space alien) can predict your actions with perfect accuracy. You are also told that you may enter a room in which there are two boxes marked A and B. Box A contains $1,000. The contents of Box B depends on what the intelligent entity predicted. If he predicted that you will take only the contents of Box B, it contains $1,000,000; if he predicted that you will take the contents of both boxes, Box B contains nothing. You go into the room with the boxes. Which box(es) do you open and why?

It is irritating that different solutions seem to have some support in logic. On the one hand, since the entity of vast intellectual prowess does not make any mistakes, one should open Box B only, since it contains more money than does Box A. On the other hand, since the predictions have already been made, one should open both boxes to take all that one can; if there is a million dollars in Box B, one's opening it will not change that fact. As I say, these two arguments both appear to withstand logical scrutiny. This is a problem because two valid analyses of the same problem should not lead to two different answers.

The way I think of this problem (and this is hardly original with me), it needs to be amended slightly so that the prediction is only almost certainly correct. This is because perfect prediction by outsiders and the free will required to make a choice of which box(es) to open are incompatible. Could one intend to open both boxes until the moment one steps into the room? With the intelligent entity's predictive powers, such a change of mind would have been predicted. But if this is true, then the 'choice' of boxes is not really a choice at all, since if all one's future actions can be completely predicted by an outsider, it cannot be that one has free will. This would contradict the premise of the problem that one may choose which box(es) to open.

The premises 'choice' and 'prediction' can logically coexist only if the latter is made imperfect. That is, the intelligent entity must be wrong at least on occasion. If so, a really strong intention to open only Box B, abandoned immediately upon entering the room in favour of opening both boxes, could yield maximal payoff. Still, if the intelligent entity is almost perfect, one should be really wary of abandoning even a very strong intention.

If one thinks one will open only Box B, even while knowing that as one enters the room, whatever it contains is not changed by one's actions, how is it possible to be committed to opening only Box B? One's realization that Box B's contents won't change upon entering the room will have to take the intelligent entity by surprise. But even if one is slow of mind and does not realize that present actions cannot affect the past until one enters the room, this epiphany should have been predicted by an entity as smart as the one of Newcomb's Problem. Or, more precisely, the epiphany, followed by the decision to act upon it, should have been predicted.

It is good to be precise. The intelligent entity could reason that one will realize that the past cannot be affected but force oneself to choose only Box B. Is such a commitment credible? Again, by the 'choice' premise, it is clear that one can choose only Box B. But again, the past is unalterable and, once one has entered the room, opening both boxes will be profitable. Do those claiming they would open only Box B think they can lull the intelligent entity into thinking they won't actually open both boxes? Although maybe they are committed, or maybe they can?

Nozick likens the problem to that of a genetic predisposition to a certain illness. Suppose you may carry a gene that significantly shortens your life. Whether or not you carry it cannot be changed. You find out that a fondness for fishing is associated with fewer cases of people's possessing the unlucky gene. You hate fishing, but take it up anyway due to this statistical fact. This obviously would not be rational, so why should one open only Box B in the analogous case? Perhaps the analogy breaks down if one imagines that in the Gedankenexperiment with the boxes one's thoughts and actions can influence the prediction until one gets to the room, but then does that not make the intelligent entity somewhat poorer a predictor, if he has to update his forecasts?

It is hard to get away from the idea that one should try to commit to opening only Box B. But it is at least equally difficult to get away from the fact that both boxes should be opened. No wonder, then, that everyone fails to crack this nut.

Thursday, 24 April 2014

Gordon Tullock on the Clark Medal

Last week, I blogged about Chicago Booth Professor Matthew Gentzkow winning the Clark Medal. What I neglected to do was to highlight a part of the provenance of the idea of media slant and its relation to media consumers. To reiterate, according to research by Gentzkow and fellow Chicago economist Jesse Shapiro, newspapers cater to their customers, so that a left-of-centre audience will get mostly left-of-centre news, and so on. The point of this blog post is to relate this idea to work by Gordon Tullock.
 
I should say that I don't really know how far back this idea goes, but Tullock's enjoyable book Toward A Mathematics of Politics does provide a nice treatment. Tullock talks about many interesting things in this book, so I will restrict my focus to the parts which concern the research discussed above. Tullock's treatment of the issue is largely speculative and he has no empirical evidence the way Shapiro and Gentzkow have, but - as is Tullock's wont - he nevertheless manages to capture the essence of the issue. Also, Tullock is not cited by Gentzkow and Shapiro so this blog post might add some value for those curious about the underlying ideas. (I don't mean to call negligence on Gentzkow and Shapiro, who go well beyond Tullock's analysis, I only state a fact.)
 
Below are two graphs (click to enlarge) Tullock made for the book. The vertical lines show the position of a media consumer. The slanted lines capture willingess to pay (vertical axis) for given media positions (horizontal axis). Tullock suspects that willingness to pay should be highest for media in agreement with one's own politics  (panel a), although he also holds it possible that a media consumer would be prepared to pay a premium to have his position challenged (panel b). This fits well with the idea that markets provide the views which are sought.
An interesting aspect of Panel (b) is the possibility that newspapers and other media change the minds of its consumers. In Panel (b), this would mean that an individual starting out as a centrist (say), can drift left or right as he is influenced by the media he consumes. As he drifts, he exerts some pressure on the media to change their slant, causing further drifts. I don't know, but I would think that this situation is unlikely to apply in reality. My impression is that the media landscapes of many, many countries are rather stable. Since Panel (b) allows for very radical changes over time, we should have seen more of them if Panel (b) is the Truth. But these are only my vague impressions and I am not confident in their accuracy. However, Panel (b) does not have to be interpreted in that way. An alternative interpretation is that the preferences of the media consumer can remain the same; he merely enjoys being challenged, but he won't actually change his mind. I am insufficiently familiar with Gentzkow and Shapiro's research to know whether they can answer which type of panel is more likely to apply in the real world.
 
In addition to these insights on media slant, there is another implication by Tullock's graphs and by Gentzkow and Shapiro's research which says that advocacy is really difficult. Particularly if one tries to advocate radical change (i.e. movements towards positions which are unusual, such as open immigration or the abolition of mandated minimum wages). This is because it will not pay as much to publishers and other providers of platforms for reaching the public to spread unusual views as it will to spread common ones. Aggregate willingness to pay is greater for the latter. Of course, advocacy is no easier if Panel (b) is true but the interpretation is that no changes of mind occur. This brings to mind the related issue of the impotence of ideas.

Wednesday, 23 April 2014

What Is Wrong with Inequality?

Thomas Piketty and the financial crisis have prompted talk and concern about "rising levels of inequality" (in both wealth and income) in recent years. Paul Krugman repeatedly talks about those making most money (the top 0.01 per cent, I believe) as "the Oligarchy", and POTUS has urged people deemed rich to pay "their fair share".
 
A simple question may motivate this blog post: "If A willingly gives B money for some product or service and B piles it up, perhaps only to make a bigger pile, why should there be a problem with that?" Maybe the transaction involved externalities, but suppose that it did not. If transactions of this type happen many times, the vast array of possible outcomes includes some in which B becomes very wealthy, indeed. This blog post collects and evaluates some arguments why inequality is a problem. In my judgement, none of them does very well.
  1. The Utilitarian Argument: Because the utility of additional wealth or income is lower the greater is the wealth already possessed or the income already earned, many utilitarians like to argue that wealth equalization (or, as much of it as is possible without disincentivizing effort) raises total utility because the resources that did little for an already rich person have a greater positive effect on utility for the indigent. The problem with this argument is that there is no way of knowing whether a wealthy individual has become so because even after having amassed millions of dollars he really wants additional wealth. Marginal utility is surely lower for him when he makes a lot of money, but it could still be greater than even the utility of the first dollar for a penniless person. Maybe those preferences are the ones which lead to large fortunes? Conversely, maybe poor folks do not care for even small fortunes, and that those preferences are why they remain poor?
  2. The Idealistic Rational Egoist Argument: This one is also known as the Rawlsian argument. The argument is idealistic because it envisions a scenario in which future generations must agree upon certain rules on how society is to be governed, and it is rational and egoistic because the individuals behind the veil of ignorance are assumed to care only about themselves and to realize that, since they cannot know their position in society, they can sacrifice potential fortune for guaranteed security. I have not read Rawls' book in full, so I am going out on a limb here by critiquing it. If anyone can correct me, I will be very happy, but it is my impression that Rawls envisions realized (post-veil) society as consisting of rather static positions, with individuals denied personal advancement, even if they apply themselves. If I am right, I do not see how the Rawlsian argument can be saved. Certainly, there are some positions in society from which great advancement is really hard, but there are hardly any positions from which it is impossible. Maybe the Rawlsian point is that no effort should have to be so very high? But if effort can improve lives, why should individuals behind the veil of ignorance ignore it in devising society's rules?
  3. Inequality Aversion: Interesting laboratory experiments, mainly associated with economist Ernst Fehr and collaborators, have convincingly shown that persons playing the Dictator Game choose to share what they are given with co-players, even when recipients have no way of finding out who it was that chose to share or not share some given amount. Many smart economists have tried to incorporate these queer preferences into standard models (Matthew Rabin comes to mind), but, unfortunately for them, I believe these efforts are not really going to be remembered in fifteen or twenty years. John List came along and showed that the received wisdom from the laboratory experiments was largely in error. For instance, if participants in these experiments were made to work for their money, or if, in addition to the possibility of giving an option to steal was introduced, the standard results were mostly restored. Since it is not robust to variations of the sort introduced by List, inequality aversion is a poor argument against inequality.
  4. "Guilt-by-Association" Arguments: Finally, there is a whole class of arguments in which opposition to inequality is a by-product of opposition to "really bad" things that happen to be caused by inequality. Maybe inequality makes some few people very politically powerful, so that they monopolize leadership positions in their political jurisdiction and keep others down as best they can? I do not have any evidence on this and I doubt the accuracy of this particular example, but I only mean to suggest the possibility that inequality might bring about disagreeable things. The obvious retort to these arguments is that, since they do not provide any principled opposition to inequality, inequality may persist, or even increase greatly, if the things that are actually bad are solved in a way that does nothing to inequality.
Have I been unduly unfair to some or all of these arguments? Or have I neglected other arguments against inequality? I will be happy to entertain suggestions, but in the meantime I will have to tentatively believe that no really good argument against inequality exists. And because attempts to "rectify infelicitous wealth distributions" necessarily violate private property and voluntary arrangements made on its basis, I will also tentatively believe that there is really nothing that should be done "against" wealth (or income) inequality.

Monday, 21 April 2014

The Jerry Seinfeld of Social Science

There is a social-science perspective called Symbolic Interactionism, according to which the choices individuals make are restricted to the management of the situations in which they find themselves. Sociologist Erving Goffman (1922-1982) was perhaps the foremost practitioner in this perspective. His essay 'On Face-work' (in his book Interaction Ritual) takes a person's face, which is the social value an individual may claim for himself in interaction with other, to depend upon what line (action which influences others' perceptions of him) this person takes. Face-work is whatever is done to make actions conform to extant perceptions of faces, including A's working to make B retain his face.

This kind of view is, in my opinion, rather too social. Rituals which have emerged to deal with interactions among humans appear to be more powerful than the individuals who choose to conform to said rituals. The unit of analysis is the situation, not the individual, according to Goffman and the symbolic interactionists. This is, of course, anathema to economists who - myself included - will wonder whence the situations came if not from individuals' interacting with one another.

But one should not let this methodological imperfection curtail all that there is to enjoy in 'On Face-work', as well as in other diamonds of social science found in this perspective. Those who think that economists demand a lot of rationality from people will find much to squirm about here. Subtle signs such as tiltings of heads, hands thrown up, or winks of the eye are all expertly used to manoeuvre every social situation. With lots of examples, often from interviews, fellow symbolic interactionst Elijah Anderson discusses in StreetWise how mean streets are navigated so as to avoid trouble: When to cross the street to avoid a confrontation with might-be street toughs, how to grunt one's way to a safe walk home (I am not kidding), etc.

So why was Erving Goffman the Jerry Seinfeld of Social Science? Because of his lively and engaging focus on the little things. He gave a guest lecture at the University of Chicago once called, simply, 'The Lecture', in which he discussed audience behaviour and responses; looking interested, smiling politely at hard-to-get utterances which might be jokes, laughing at rather more obvious ones, etc. While at the University of Pennsylvania (I believe), Goffman called a meeting with several students outdoors in the quadrangles to which he did not show up. Instead, he observed the students from the window of a nearby building to see what they would do and how long they would wait and with what demeanour. A little nasty, perhaps, but a good source of research and quite clever. Some of his observations read like Seinfeld bits. Children riding in merry-go-rounds look outwards for the adults' reactions to make sure they ride according to face. Nothing is too small; the action is all in the minutiae.

I wonder what kinds of large-scale behaviour could be reduced to Goffmanesque concerns. One would think that, for instance, funny characters are appreciated in most groups, but not everyone has the ability to be funny. It would be hard to imagine someone like the late Margaret Thatcher doing stand-up, for instance. So the person for whom it would be most consistent (or perhaps least inconsistent) with his face to be the funny guy in the group assumes this role. The same could apply to various kinds of competitive behaviour (from the vulgar 'who can hold the most alcohol?' to the silly 'who has the most neuroses?'), or to who gets to be the go-to person for certain quaeres. Smiles and words of appreciation could be the currency used in this market for characters. People's being part of different groups would then act differently depending on in what type of constellation  they presently find themselves.

More people should read Goffman. Even if no ideas result from it, his works are almost certain to amuse greatly. Hats off to the Jerry Seinfeld of Social Science.

Sunday, 20 April 2014

What is the Point of NATO?

Tyler Cowen recently quoted a Financial Times article in which London City University's Michael Ben-Gad made the point that protective alliances such as NATO may not be credible in the long run. Quoth Ben-Gad:
"'Would the US and western Europe really go to war to defend the territorial integrity of Estonia? I think Estonia has reasons to worry. Narva is the most obvious place; it is almost completely Russian-speaking,' he says."
In other words, wars are really expensive and the fact that there is a military alliance is therefore not necessarily a guarantee that the alliance's members will be protected. I have made the rather elementary point before that countries risking loss of parts of their territories have every reason to avoid a costly war, and that if the rulers of the "aggressive" foreign country gain more than the present rulers lose, the former should simply compensate the latter in a peaceful way, rather than fight costly wars (see also this article by David Friedman, which touches upon similar issues).
 
Prospective members of NATO must, as far as I know, be approved by each current member, so there is some reason to suppose that members "care" more about each other than about outsiders. But there is nothing here to imply that bargaining about member countries' territories should follow principles different from the ones mentioned above. If the loss is sufficiently small relative to the compensation which may be offered, a NATO territory under dispute will be lost. What about territories outside NATO?
 
If NATO is interested in some region X, why should it matter to potential aggressors whether X is a member of NATO? Said territory can receive NATO backing provided the appropriate compensation schemes between NATO members are arranged. If not, the situation is qualitatively the same as NATO reneging on promises to its members in order to avoid expensive wars.

If this is true, what is the incentive to join NATO? More generally, what is the point of international organizations? Perhaps they are mainly a way to provide sinecures for politicians on hiatus from domestic issues? Maybe there is something in here akin to Ronald Coase's 1937 treatment of firms? Countries economize on transaction costs by being bound together in certain ways. Rather than seeking agreements on issues which members confront from time to time, general guidelines are drawn up which command certain actions.

If this is the case, one should have more confidence that recent agreements will be maintained than than that old ones will. Just like newly-hired workers are not likely to be laid off, it is unlikely that a recently agreed-upon treaty between nations will immediately fail since new circumstances are easier to foresee the nearer they are in time. However, many international agreements are non-binding. This fact would seem to throw the firm analogy out the window. At least it cannot apply to all collaboration between countries.

Some have suggested that declarations by international organizations can have ring effects, such that other actors will not associate as much as would otherwise have been the case with nations which have been condemned in one way or another by well-known international organizations. However, maybe follower-shunners would have done the same thing anyway, but make convenient use the first mover's actions?

So is protection by NATO credible? The stated rationales for international collaboration are not the actual reasons, but NATO could work anyway. In the end, I expect the bargaining issues in my previous post, mentioned at the beginning of this one, to hold. That wars occur at all is a queer fact from this point of view, but it should not change the conclusion that territories eventually end up within the political jurisdictions in which they are most valued. In the long run, and if NATO is truly about protection, there will be war. But this seems much too foolhardy and expensive an attitude to be real. So probably - and hopefully - NATO is not really about protection.

Friday, 18 April 2014

On Public Service Broadcasting

Chicago Booth's Matt Gentzkow was awarded the Clark Medal yesterday. In light of his famous paper with Jesse Shapiro on media bias, I thought I would offer my thoughts on the related issue of public service broadcasting. Because the slant (if any) of such outlets may function according to the same basic principles as those found by Gentzkow and Shapiro.

What the Gentzkow-Shapiro paper does is to scrutinize newspaper articles for phrases which show up disporportionately in Republican and Democratic speeches in the Senate. Estimating political slant in this fashion, they find that the political orientation of a newspaper is explained mainly by the preferences of its readers, rather than by the views of its owners. The consumer is King. It seems to me that the same should apply to state television.

In most of the world, the state is an active operator in the television business. This is usually funded by licence fees for owning a TV set, or through income taxation. Common arguments in favour are that such media outlets are free from commercial influence and interests and thereby provide more objective news and better coverage of high culture and other forms of entertainment which might be too narrow for commercial alternatives.
 
Given the results of Gentzkow and Shapiro, I would be inclined to believe that tax and licence payers get most value out of public service broadcasting when it closely matches their viewing preferences. Because a political decision could do away with public service broadcasting, this media outlet is sensitive to the views of its targeted audience just like newspapers are sensitive to the sentiments of their intended readers. In an efficient market for public policy, this should mean that mostly rather popular programmes end up reaching viewers of state television. It two politicians are otherwise the same, one of them improves his chances of election by proposing a way for the country's public service broadcasting company to show more intensely-valued TV shows. This makes it hard to see the difference between public service broadcasting and private alternatives.

If the argument in this post is sound, the real reason behind public service broadcasting cannot be the stated reason. (Or, maybe I simply have not heard the true stated reason yet.) Maybe propaganda becomes easier? At several margins, politicians could prefer some (indirect - since public service broadcasting is usually formally independent) control of what is said in the media to audience surplus. Politicians want more propaganda the greater are the benefits from influencing behaviour relative to the losses associated with failing to maximize audience suplus. What other rationales for public service broadcasting are there?

Thursday, 17 April 2014

A Very Good Book

Warning: Spoilers Ahead for Nightfall by Isaac Asimov and Robert Silverberg
 
I really like to read and one of the rather many books I read last year is Nightfall by Isaac Asimov and Robert Silberberg (originally a short story by Asimov, it was turned into a novel by Silverberg in 1990). Written with a sincere love of science that really shines through, the premise is the most scrumptious bit about this book: Kalgash is a planet in a stellar system of six suns and its inhabitants consequently experience continuous daytime. Not knowing darkness, they have not evolved any mechanisms for coping with it and most of them lose their minds from darkness.
 
Continuous daytime, that is, until when only one of the six suns is above the horizon and happens to be covered by a twin planet, causing a solar eclipse once every 2049 years, the darkness from which leads to the inhabitants descending into madness. Nightfall may thus be thought of as a story in which it dawns upon the people of a grand civilization that they are in a large-scale version of the Greek myth of Sisyphos, the one-time king who was punished by the Gods for chicanery to roll a rock up a hill, only for the rock to tumble down once the top was about reached so he had to start all over again.
 
When the story begins, several scientific discoveries are about to reveal this fate. Traces of vast burnings have been found and revealed by carbon dating to recur at 2049-year intervals, and observations of Kalgash's movement in the stellar system have been thought to challenge the established laws of physics - unless there might be a twin planet. At the same time, an amusement park is ordered to close its recently-added attraction in which brave thrill-seekers are exposed to complete darkness, as many of the patrons had to be committed to mental institutions afterwards. If exposed to further darkness, they would have craved light to the extent that everything in sight was thought of as something to be burnt to satisfy their cravings, repeating what many more Kalgashians had done 2049 years before.
 
Once the new findings have been established, the logical deductions made, and the Day of Doom calculated to occur in about a year's time, an interdisciplinary group of scientists attempt to convince the world that necessary precautions must be made. The problem is that the unexpectedness and the unfathomability of the civilization-wide death sentence has the effect that people refuse to believe what they hear. Too few precautionary steps are taken, and in addition to the scientists and some scattered individuals, a group of religious zealots are the only people to have prepared for darkness and, consequently, to retain full use of their mental faculties.
 
Again, what I found to be this book's greatest feature is its premise of recurrent Doom. Somewhat underexplored I found the mechanisms behind the vast majority's refusal to heed the warnings. I would think it fairly easy and rational to seek shelter with a group of like-minded individuals. If one doubts the veracity of the pernicious solar eclipse, it is hardly a great sacrifice to spend just one day in the proximity of facilities that ease the effects of darkness.

Now because of the 2049 years of sunlight, Kalgash cannot produce sufficient energy to safely light the planet at only a year's notice. Fortified large-roomed buildings (so one light source reaches more space) and power generators would be easily obtained by those convinced by sound science, however. Particularly if few others believed the Doomsday to be nigh, so that whatever were the interest rates at the time of discovery, the scientists and those convinced by their findings would happily borrow otherwise crazy amounts (since while few others believe in impending doom, borrowed money is unlikely to have to be repaid).

The book in no way (as far as I can remember anyway) gets the economics plainly wrong. My complaint is quantitative rather than qualitative. There are some shelters and some preparations have been made. It is possible that the vast majority of Kalgashians simply bet that Nightfall was not going to happen. To persons unfamiliar with picking apart arguments, the warnings of Doom may well look like the lunacy of a small minority of fanatics which we Earthlings witnessed ahead of the 22nd December 2012. But I like to think that rather a lot of people have at least some respect for logically coherent argument. These people would have put their money where their mouths were, and bought as much protection as was possible. Noticing that a lot of people were disregarding their warnings and were consequently going to go insane, they would have found it a palatable alternative to borrow money to hire goons for protection and electricity generators for lighting.

All of these things send signals to producers that the demand schedules for these things have now shifted to the right and so the quantities produced go up. Price movements in capital markets would send signals that something's afoot. It is one thing to doubt crazies merely talking about impending disaster. It is much harder to doubt those who - beside having logic on their side - do everything in their power to ensure survival. Nightfall would still bring awful consequences given that it was only predicted a year or so in advance, but I find the scale of destruction in the book just a little bit overblown.

It would be cruelly unfair to focus on the one nit I have to pick in what is otherwise such a wonderfully premissed book. I have not come across the short-story version written solely by Asimov, but I hope I will as I would like to explore how well the same stuff could be fitted into fewer pages. Since I think the greatest feature of the book is the premise, I believe the short-story version is very likely to work well. But as far as the novel goes, it turns out that, in spite of the somewhat insufficient attention to the theory of price, a book can be really enjoyable. Who would have thought it?

Wednesday, 16 April 2014

The Power of Ideas, Eh?

According to a passage in Lord Keynes' important General Theory, the world is ruled by "little else" than the ideas - good and bad - of economists and political philosophers. Virtually every discussion I have seen on Keynes that mentions this belief he had notes it with approval. For instance, I have heard both Milton Friedman and Gary Becker argue that academics' seemingly unimplementable brain-children have a good chance of taking over if old ideas result in failure, which they will if not good enough.

Yet I wonder what the evidence is that this view is right. To be sure, any action that was in some way premeditated may be said to be the result of some idea. To give more content to Keynes' position, I shall take it to mean that those ideas rule the world which have not been shot down, by logic or by empirical research, a generation or so before implementation.

To motivate my quaere, I set up a rivalling hypothesis according to which some ideas indeed do rule the world - namely, the ideas which translate into the greatest returns to whatever ruling politicians care about. These ideas are different from the ones discussed above, since they may never have enjoyed any academic respect at all (which does not necessarily make them bad ideas).
 
A common example of a good idea is free trade. Within the profession of economists, finding anyone willing to argue the benefits of autarky is almost surely impossible. For good reason. Yet, there remain many restrictions on the free movement of goods, services and labour around the world. If ideas truly rule the world, it does not seem to be the ones Lord Keynes had in mind.
 
Against this, one might argue that the world has become significantly more liberal with respect to free trade over the past few decades. Maybe so far Keynes' hypothesis is tied with mine, because I know of no good way to judge how much trade liberalization is enough to justify the proposition that academically respected ideas do eventually prevail.

Like autarky, rent control is a very bad idea. Swedish economist Assar Lindbeck has likened rent control to bombing as a method of destroying cities, yet rent control persists. Again, maybe its prevalence has shrunk in recent times (I don't know), making the truly venerable ideas (i.e. the ones respected on logical and empitical grounds and hence by academics) the really influential ones over time. But how influential is influential? The difficulties remain.

Perhaps one could claim that the existence of cycles in bad policy (such as the introduction of new trade restrictions after periods of relatively free trade) is evidence against Keynes, provided no cycles occurred in the ideas concerned at the relevant time (no apparent Lazarus ideas). Yet, at best this could only push Keynes back a little bit, because the obvious retort is that bad policy would have risen from the dead even more forcefully had it not been for academics' having buried the ideas which supported said bad policy. Alas, I do not seem to get very far in judging this contest between ideas about ideas. But if testing Keynes' proposition is so hard, what makes so many others so confident that Keynes was right?

A related issue is whether the belief in the power of ideas incentivize people to think harder about world problems. Perhaps, but if so, the incentive should have greatest bite among those who want to influence the world, which could be good or bad. Those wishing to influence society are apt to also want to simply understand it if they are to have any ideas, so the belief that ideas rule the world may not be too strong an incentive after all. At any rate, one should not hesitate to offer arguments against a proposition just because belief in its accuracy may have certain good consequences.

Tuesday, 15 April 2014

The Alchian-Allen Theorem Holds for Randomizing Irrational Actors

In a recent blog post commemorating the 100th anniversary of the birth of Armen Alchian, I discussed his Theorem with William Allen. In this post, I would like to connect to the Theorem some insights on irrational behaviour explored by Gary Becker in the early 1960's.
 
A big theme with Armen Alchian was to assume extremely little doing economics. Alchian believed people to be rational; for instance, on page 437 of Exchange and Production (1983), he and William Allen posit that wars occur because "people are reasonable and act in accord with their interest". But if he could avoid assuming rational behaviour, he did not hesitate to do so. So one might say that it was in Alchianesque fashion that Gary Becker showed that agents need not be rational for demand curves to slope downward. For example*, if people simply randomize, demand curves will retain the familiar slope.
 
Assume as Becker did that consumers make random purchasing decisions. I have added transportation costs on the graph below, which pull the budget line towards the origin and change its slope to approach -1. I have marked the mid-points on the pre- and post-transportation cost budget lines, so that - if random behaviour results in consumers distributing themselves uniformly along the lines - the mid-point is both the mean and the median in the distributions. It is evident from just eye-balling the graph that the proportion of the high-quality good increases when transportation costs are added; the dashed lines reveal the average quantities demanded before and after transportation costs were added, and while low-quality goods were clearly most popular before, the shares are more nearly equal after (click to enlarge).

Random behaviour played a big theme in Alchian's famous article 'Uncertainty, Evolution and Economic Theory', so I wanted to highlight the connection with the Theorem here.

 
*"For example", because Becker also showed that if consumers are characterized by inertia - so that they would simply pick the shortest route to the new budget line from their point on the old budget line - demand curves retain their traditional slope, too. However, for this sort of irrational behaviour, the Alchian-Allen Theorem will not hold, although this point is irrelevant since there was no price less transportation costs with an associated quantity demanded from which consumers receiving exported goods could move inertly.

Monday, 14 April 2014

"Equal Pay" Legislation

Last week was Equal Pay Day in America, this year it fell on the 97th day of the year, marking the amount of additional time a woman needs to work to earn a man's wages. As I have asked before on this blog, it is a mystery to me why anyone would expect men and women to have similar averages in anything they do, since there are good evolutionary rationales why we might differ. Not that differences are necessarily large; the pay gap is not really the 77 cent on the dollar, as the organizers of Equal Pay Day presumably claim, but rather something like five cent once factors such as different occupations and job experience have been taken into account. No-one really knows why there remains a (much smaller) gap and it is an intriguing question.
 
But in this post I want to focus on attempts to equalize pay by legislation under the hypothesis that what really causes the pay gap is employer discrimination against women. Suppose women and men in some occupation possess equal amounts of human capital and are equally productive workers. If employers discriminate against women, they are willing to forego some money income in order to satisfy their taste for discrimination. How much profit depends on the strength of their preferences for discrimination. Since non-discriminating employers are willing to pay a man's wage to a woman, women will prefer working for such employers.
 
This means that positions available at non-discriminating firms be first to be filled, followed by positions at firms which discriminate only a little, followed by firms discriminating a little more, and so on. The employers with the strongest anti-woman preferences will never hire any women, because the women all choose to work for non-discriminating employers who are willing to offer higher wages.
 
The last position which was filled might have paid something like 85 cent on the dollar, but the woman who filled that position - the last woman in the work force - has no better options, so she takes it. Now what happens if all firms are ordered by the government to pay their female employees one hundred cent on the dollar ("Equal Pay for Equal Work")? The 85-cent-on-the-dollar woman is fired at the first opportunity. There is no way her employer will pay a man's wage for her job. In fact, all women are fired whose discriminating employers do not value their work the same as work by men. Maybe the government will make it illegal to fire women as well, but then fewer women would get hired in the first place, so unemploymet would still be the ultimate consequence of "equal-pay" legislation.
 
I wish this analysis were original with me, but it is actually found in Gary Becker's The Economics of Discrimination. It is for the above reason, also, that relatively great unemployment among women or among some minority is probably not explained by discrimination provided firms are not required to pay the same to all groups. Because if firms are allowed to reduce wages for discriminated groups, the incentive to hire members of non-discriminated and discriminated groups will be the same once different wages incorporate tastes for discrimination.
 
I don't know, but I think that, if women are significantly discriminated against by employers, "Equal Pay" legislation is bound to either fail or be fairly toothless given the above considerations. I would not expect governments to introduce legislation which results in significant and relatively great unemployment among women, and if they did I would expect other policies to follow which provide loop holes for discriminating employers, effectively annulling the first piece of legislation. Therefore, if a forceful "Equal Pay" act ever comes into existence, I would take that as evidence that women are not suffering significantly from discrimination in the labour market.

Sunday, 13 April 2014

Fun Applications of Purposeful Behaviour

Having gained some momentum yesterday with my Alchian tribute and applications of the Alchian-Allen Theorem, here are some common phenomena which all find a neat explanation in what rational-choice theorists like to call purposeful behaviour:

1. Soldiers marching in lines - Explained by the fact that, if soldiers are ordered to march in straight formations, defection is more easily detected. Defection is individually rational for each soldier, but not rational for the army that wants battle. I am not sure, but I think I may have originally read this (a long, long time ago) in a book by David Friedman, probably his Price Theory (or its popularized version Law's Order).

2. 42nd Street in New York City - I am a keen fan of the Big Apple, but really this applies to big cities everywhere; homosexuals, being a fairly small minority, have a hard time finding a partner among small populations. In expectation, there are many more potential partners in larger populations, causing homosexuals to abandon low-density sticks. Richard Posner's Sex and Reason contains this very fabulous mechanism.

3. When the standard pie size in America for pies bought in shops was twelve inches in diameter, apple pie was the most frequently bought kind, but when the seven-inch pie was introduced, apple pies plummetted in popularity - Explained (by the late giant in price theory Walter Oi) by people's unwillingness to eat twelve-inch pies by themselves and the consequent necessity to find common ground on flavour. Such beautiful simplicity.
 
4. Women are less prone to violence than are men - Men, except for Arnold Schwartzenegger, cannot get pregnant and therefore do not put their ability to procreate at risk by engaging in physical fighting, say with a rival for a mate. There is some risk, of course, but nowhere near as great as the risk for women, who can lose their baby by getting into a rumble. Professor Ed Laumann at the University of Chicago was the first person to bring this nice titbit to my attention, although I don't think the reasoning is original with him. He said women "fight" their rivals with words instead of punches (e.g. "look at those shoes she can't even walk in those things").

5. Vagrants and proselytizers in towns and cities are stationary; in more rural areas and in residential suburbs they tend to walk around from door to door - this one I have not seen anywhere else, nor have I investigated the accuracy of the claim, but it seems to fit people's experiences. Also, it stands to reason that more people will be on the move at any given time in a city or town than in basically any other area. Since vagrants and proselytizers benefit from contacts with others, this behaviour is to be expected.

6. Bathrooms are located along vertical lines in multi-storey buildings - Coming full circle in this list of examples of purposeful behaviour, this one is again due to David Friedman, and is known as his law of finding bathrooms (or something like that). The reason it works is that it enables the plumbing to be more or less vertical, thereby reducing the costs of labour and material for pipes.
 
These applications are all reasons economics might work. They are fun because they concern everyday topics which are explained in a very simple way. I believe without the idea of purposeful behaviour, the phenomena I have just listed would be much harder to explain. Truly, Economics is everywhere.

Saturday, 12 April 2014

Armen Alchian Would Have Been 100 Years Old Today

Armen Alchian passed away in February last year. Had he been alive, today would have been his 100th birthday. On this centennial of his birth, I want to discuss his and William Allen's famous but sometimes misunderstood theorem in price theory, known primarily as the Alchian-Allen Theorem, but also as the "Ship-the-good-apples-out" Theorem, or, I have recently learnt, the "Oranges Principle". I will also provide my favourite application of it. It is a thing of beauty and follows in a straightforward fashion from the First Law of Demand. One of the things that makes it one of my favourite results in economics is the fact that it was first published, not in an academic article, but rather unassumingly in Alchian and Allen's textbook University Economics (later changed to Exchange and Production, in which the theorem can be found on pp. 38-39 in the 1983 edition). Here it is:
 
Imagine some product which varies in quality, such as oranges grown in California. Suppose consumers it costs $1.00/lb to ship oranges from California to New York, regardless of the quality of the oranges. If high-quality oranges sell for $3.00/lb, and low-quality organges sell for $1.50/lb in California. To retain the same profit margin, producers of oranges would have to sell their high-quality produce for $4.00, and their low-quality produce for $2.50, in New York.
 
A pound of high-quality orange in California costs two pounds of low-quality oranges, but in New York, the same quanitity is obtained at the cost of 1.6 pounds of low-quality oranges. Ceteris paribus, it makes sense for the proportion of high-quality oranges shipped to New York to be greater than the proportion of high-quality oranges that stays in California. This follows from the First Law of Demand, because the cost of high quality relative to low quality declines when transportation costs are added. Hence, the good apples (or oranges, or anything that varies in quality) are shipped out. Adding transportation costs makes New Yorkers act as if they prefer high-quality oranges more strongly. In the illustration below (panel a), the quantity of low-quality goods falls proportionately more than does the quantity of high-quality goods, as the slope of the budget line approaches -1 (click to enlarge).
Now in general, it is not a certainty that the Theorem will be observed, because one could imagine that consumers care not about relative prices but about some constant price difference. If, for instance, consumers are always willing to pay some fixed amount of dollars more for high-quality oranges, the theorem does not apply. In panel b of my simple illustration above, the proportion of high-quality goods which are exported actually goes down when the intersection between indifference curve and budget line moves primarily horizontally and very little vertically.

Nevertheless, although one can easily show that the Theorem needn't always hold, there are very many situations which it neatly helps explain. The Alchian-Allen theorem can be applied even when there are no transportation costs; wherever there are two versions of something and another something working as a cost whose size does not depend on which version was chosen, one can discern the Alchian-Allen Theorem.

I like the Theorem so much because I always think about it when I go for a run. Running a long distance is an expensive run; running a short distance is a cheap one, but one must take a shower afterwards or risk losing all contact with the rest of humanity. I don't dislike showering, but I could easily think of many things I'd rather do. Akin to how transportation costs are the same irrespective of quality, the time lost showering does not vary in length with distance run. And, as the Alchian-Allen Theorem predicts, I do indeed tend to run rather long distances; never less than about 6 miles (10 kilometres) in one go, and frequently much longer distances.
 
People with a greater fondness for showering are predicted to run somewhat shorter distances if everything else is the same. More generally, "transportation costs" may be quite subjective in some applications, so one might think of it as variable, in which case, ceteris paribus, more high-quality products should be consumed by those who really dislike the cost involved, and more low-quality products by those who do not mind it, or even like it.

Because it is stated in such simple and general terms, it is exciting to think of other applications of the Theorem. Perhaps longer-lasting holidays are associated with more decorations. This seems to fit Christmas being the most intensely decorated holiday I know of, and also the longest. Persons with shorter Christmas breaks should decorate less if this is true. This is in line with the Alchian-Allen Theorem, because putting up decorations is a "cost" (time sacrificed in order to celebrate Christmas) which does not vary with the length of the holiday.
 
Armen Alchian was and remains one of my all-time favourite economists. It is so sad that he is not around to celebrate his 100th birthday, but at least he had a long and productive life. His Theorem with William Allen is just one of very many highlights of his career. I am sure to blog about more of this great economist's work in future.

Thursday, 10 April 2014

Why Should Illegal Immigration Be A Problem?

Law Professor Ilya Somin recently discussed perceptions of legislation and associated possibilities to justify illegal immigration. Bascially, irrespective of whether there is a strong, weak or a non-existant presumption in favour of obeying legislation, the squalor of the world's poor makes their violating immigration restrictions easily justifiable. Anyone who reads Somin's argument would, I believe, find it very difficult to argue against illegal immigration simply because it is illegal.
 
I don't know, but I suspect that much opposition to immigration is not based on its illegality. I also suspect that part of the unspoken case against immigration from poor countries is the fact that, at least in the short run, the number of poor people in the vicinity of current citizens would go up, and many current citizens do not like to look at poor folks. Perhaps this objection is sometimes rephrased as a fear of losing national identity, or culture.

If part of the case against immigration is unspoken, one would expect the arguments which are used to be rather insincere. If so, they should be easier to beat, but beating them will not necessarily do anything to address the true reason for opposition to immigration. If, for instance, one argues the risk of losing culture or identity, the easy response is that an individual can choose any identity or culture he wants, and that it might be a bit much to demand to control the national origin of one's neighbours.

If someone offers as an argument against illegal immigration the idea that they would get on welfare programmes, the easy retort to the stated argument would be that one could make welfare benefits conditional on citizenship, or on having lived in the country for at least five years, or something like that.

But if the unstated argument really is that it is unpleasant to look at poor people, pointing out that one can choose one's culture or restricting eligibility for welfare payments will accomplish very little in the case for open borders.

Wednesday, 9 April 2014

Quotes for Peace

Returning briefly to earlier discussions of war and peace, I wonder what the best quotation for peace or pacifism is. Tolstoy's War and Peace contains some thought-provoking battlefield scenery in which soldiers are depicted doing their best to avoid fighting, but despite having read it multiple times, I am ashamed to admit nothing stuck from those pages.
 
The same applies to E.M. Remarque's All Quiet on the Western Front, which is even more forcefully anti-war, but whose substance I remember much better than its most noteworthy sentences.
 
My top contender must therefore be Yossarian's offer of a definition of the word 'enemy' from chapter 12 of Joseph Heller's Catch-22:
'"The enemy", retorted Yossarian with weighted precision, "is anybody who's going to get you killed, no matter which side he's on, and that includes Colonel Cathcart. And don't you forget that, because the longer you remember it, the longer you might live."'
Thus, one's government is just another enemy if it puts the lives of its citizens at risk in an attempt to "fight back". Invasions by foreign powers would be far less deadly if the invaded territory did not forcibly resist. Perhaps they do because politicians force them to.
 
Catch-22 is a brilliant piece of writing. Unless I be mistaken, the book was also Heller's first publication, and he could never really top the early achievement. It has a sequel, Closing Time, which I think was Heller's last book, and which is much too sentimental for my taste.

So, Yossarian's definition of what is an enemy is my top choice for a quotation for pacifism. What other good ones are there?

Tuesday, 8 April 2014

The Futility of Advice

When individuals find themselves in tricky situations, others sometimes offer their advice on how to get out of them. There is an implicit assumption the advisor makes in advising which makes me think most advice is not actually about improving the advisee's circumstances, but rather to signal concern, offer criticism (or threats when phrased right) or make a showing of personal accomplishment. The advice-seeker may on his part not even be that interested in getting advice, but instead just look for human contact, for instance. At any rate, all of this is useless for the purpose of actually ridding the advisee of his problems.
 
The implicit assumption is that the advisee has not already thought long and hard about the issue on which advice is offered. If the advisee's circumstances really are in need of improvement, no-one has a greater incentive than he to seek out ways of ameliorating them. This does not mean that all advice falls into one of the above categories. Sometimes people fail to figure out what to do, even though they try hard. One would expect better advice to be given when the advisee has actually asked for it, although the advisor's incentives to improve the advisee's circumstances still need not be that great.
 
Essentially, advice frequently fails to advise because people are rather self interested. Many people care about specific persons other than themselves, but it would be rare indeed to find individuals who care about themselves less than they care about other particular individuals. This means that the incentive to advise one's self is greater than is the incentive to advise others. Therefore, most advice will turn out to be obvious to the advisee.

How should advisees respond to unsolicited advice? Given that advice sometimes, perhaps often, signals sympathy, and given that sometimes even unsolicited advice is helpful, knee-jerk hostile reactions are not smart. I would write more about this issue, but now I feel a bit wary of being seen just now offering unsolicited advice.

This is perhaps a reason to be sceptical about the efficacy of certain labour-market services of an advisory character, such as the UK's Jobcentre Plus (which is in a sense asked for, but, unless I be mistaken, jobless persons receive no unemployment benefits if they do not go to the job centre). Also suspicious are admonitory efforts by schools to make kids stay away from tobacco and drugs ("drugs are bad, m'kay?"). But again, although the overall quality may not be as high as one might na├»vely hope, some advice will turn out to be good. Certain sources of advice, for instance one on how to improve written communication, are in fact really terrific.

Monday, 7 April 2014

Women Earn Less than Half of Their Household's Income, But Why?

Last year (this bears bringing up even though it is not really recent), I attended an unusually rewarding workshop at the University of Chicago (this is saying a great deal, for almost every workshop is a veritable party in one's mind that never stops - well, at least not until the discussions are over...). This one was given by Professor Marianne Bertrand of the Booth School of Business and the topic was male-female relative earnings in married couples. In a working paper with Emir Kamenica and Jessica Pan, Bertrand displays the stunning pattern in marriages that women rather consistently contribute less than half of the household's market income. It looks as if there is widespread aversion to the woman's earning more than does the man within the household. I will offer much praise and one piece of constructive criticism on the thesis, but I start with the praise. The graph is beautiful (click to enlarge):
Households in which the wife earns more than does the husband seem to form much less frequently than do households in which the husband earns more. The discontinuity above is larger for less educated couples. Bertrand and her coauthors also document a tendency for divorce to occur more frequently in couples in which the woman earns more than fifty per cent of household income. Bertrand and her coauthors argue that this is due to a version of identity economics (made famous, most prominently, by research by George Akerlof and Rachel Kranton), saying that there is a problem in case the wife earns more than does the husband.

I really enjoyed this paper, which is all the more important considering that women are increasingly acquiring all that is needed to out-earn men (I am thinking specifically of college graduation rates, in field after field).

Now for my piece of constructive criticism. The focus in the paper is wholly on how norms shape male-female relative income within households, but not mentioned is an alternative interpretation of the data based on socio-biology. It goes as follows: Men have more to lose than have women if their spouse is unfaithful. This is standard evolutionary biology (or at least it is my impression of what is considered standard evolutionary biology). If a man is unfaithful, his wife will not spend scarce resources raising some other woman's child. But if a woman is unfaithful, her husband ends up caring for someone else's genetic material.

This means that a husband has particularly strong reasons to look for an effective punishment mechanism so that the wife will be disincentivized to cuckold him. Supposing husband and wife have equal shares in household income, the punishment is greater if the woman's contribution to it was less than half. This also means that women occasionally have incentives to commit to earning less, say by spending less time working and consequently acquiring less human capital (such as experience and on-the-job training), in order to attract a husband.

My explanation is a bit akin to the theory of efficiency wages, according to which workers receive greater compensation than their productivity would indicate in order to instill fear in them not to shirk on the job, since wages higher than marginal product imply a risk of involuntary unemployment. Analogously, if women receive a share of household income greater than the share they contribute, they will be less likely to commit adultery ("shirk"), since there would be more to lose.

However, the socio-biological explanation has no counterpart to involuntary unemployment. The woman could then simply re-marry. However, since initially the man earned more than half of household income, the probability of the wife's finding a man of similar income to her first husband is not as great as it would be if male-female incomes had initially been the same.

I don't believe anybody actually chooses their partner based on explicit thinking along my suggested lines, but evolutionary biology merely gives us certain preferences, not necessarily ready perception of them or the ability to rationalize them.

Sunday, 6 April 2014

The Power of Asking

Asking questions is so simple, yet it is not used nearly enough. By posing a question upon hearing some claim, one will learn something new. More precisely, it will be one of three things:
  1. The other person has a good answer. In this case, one learns something about what is discussed.
  2. The other person has a bad answer. In this case, one might point this out to him and he may revise what he had hitherto thought on the topic.
  3. The other person has a bad answer or even no answer. In this case, one can point it out and, if no revision occurs, one is safe to think the other person a fraud.
The best questions are, I think, the ones demanding either a mechanism to back up what was said, or evidence in support of it (including the nature of the evidence so one might judge how believable it is). Except for the risk of appearing a little bit ignorant, (politely) asking questions of this character in no way imperils one's status in front of others and the potential benefits are vast: simply wanting to know stuff can hardly be bad socially as long as one is polite, and getting to learn new things is clearly privately desirable.
 
Frequently in public debates, questions are not asked, particularly not questions of my preferred variety. In lieu of questions, there are attacks on the other person or re-statements of what was said before. Perhaps this happens because the expected retort will insult the asker's intelligence, or perhaps they do not want listeners to hear a potentially very good answer. Not always and everywhere, of course, but this happens a depressingly large fraction of the time I come across such debates. (So I do not watch or attend very many of them.) When this happens, what might have been a Socratic dialogue has turned into something quite ugly. I think in such cases one can conclude that the people involved are not interested in truth but in advancing some agenda of their own.
  
Off the top of my head, here are just some issues in which basic questions can go a long way. The questioned claims may be right or wrong, and I have some tentative answers of my own, but I mention them because I find that there is typically extremely little substance in public discussions about them:
  • Why is territorial expansion by one country to be feared by its neighbours? What is the mechanism? What is the evidence?
  • Why should we expect men and women to be equally well-represented in most or every occupation, and to earn exactly as much in these occupations? Again, mechanism? Evidence?
  • Why is domestic poverty more important to address than poverty in very poor countries?
  • Why is it a civic duty to vote?
Lastly, an analogue to the Golden Rule also applies for asking questions: The questions you are asked by others - and by yourself - you should treat as seriously as you expect others to treat the questions you ask them.

Friday, 4 April 2014

What Is Wrong with Hayek's 'The Road to Serfdom'?

This year marks the 70th anniversary of the publication of F.A. Hayek's famous book The Road to Serfdom. Its thesis is that democracy is imperilled by citizens' viewing it as a means to just about any ends they might have. One may think of it as two wolves and a sheep voting on what to have for dinner, a sort of doll's-house view of society in the sense that voters use democracy to order fellow citizens about.
 
Examples include demands for safety nets, public provisions of education and health care, etc. All of these policies use a measure of force to achieve their ends. One may approve of the policies anyway, of course, but the resources to achieve them must come from somewhere and this means individuals' scope to decide their own ends must necessarily decline. One can be served from a government tray, or one can decide how to put together one's own tray with whatever means one has.
 
Hayek argued that such tendencies must inevitably spell the end for liberty and indeed for democratic institutions, because once the erosion of freedom to decide individual ends has proceeded too far, the resultant state control over many, many aspects of life gives it, ultimately, the power to decide who eats and who does not, who prospers and who perishes. The many things at the state's command also necessitate delegation to committees and departments which cannot be subject to democratic choice, or they simply won't be able to run smoothly.
 
There is a lot more to the argument and I encourage everyone to read the book, but what I want to discuss here is why, even in countries in which governments tax around fifty per cent of GDP, tyranny does not seem to lure around the corner. With the growth of government having continued since 1944, why do Hayek's fears appear ill-founded?
 
I believe a big part of the explanation must be that there are built-in breaks in political competition which inhibit totalitarian tendencies. Hayek argued that the only thing that can stop creeping totalitarianism is a popular opinion which favours the liberal principles upon which democracy was once founded. But popular opinion has limited (although not nonexistent) influence on legislation. Given how little influence an individual voter has on political outcomes, it would be foolish to suppose that he keeps himself au courant with what politicians do.
 
This opens the door for special interests. On the surface, it might not seem like an improvement, but there is nothing to suggest that interest groups only favour illiberal policy. They are frequently at loggerheads over all sorts of issues, some wanting more redistribution but others wanting less. Candlemakers might petition the government to block out the sun, but tourist resorts will lobby against such a move. Various Green groups may lobby against GMOs, but if so they are likely to face some opposition, for instance from firms researching GMOs.
 
Furthermore, politicians may try to reap rents by taxing citizens whose willingness to pay for certain policy is relatively great, giving away a share of these rents to other citizens with a negative-but-lower-in-absolute-value willingness to pay for the selfsame policies. If clear-headed thinking is associated with greater willingness to pay, poor policy is at an inherent disadvantage. Of course, clear-headed thinking in politics may be very rare (I don't know), but it is conceivably a force opposing bad policy.
 
Another contender to explain why liberal democracy has survived is that the tax-to-GDP ratio has not climbed quite high enough yet. I think this is a poor contender reminiscent of Marxian explanations that capitalism must progress just a little more before the advent of the workers' revolution. I do doubt that any speck of freedom would survive if governments suddenly started taxing in excess of ninety per cent of GDP, but my favoured explanation above already covers this because the built-in breaks prevent that from occurring. And if what saves Hayek's thesis is that it has, at least so far, been impossible to go far enough, there just does not seem to be much point to Hayek's warning. 'Beware of the Hydra' would be a poor warning for the same reason. Because there is no Hydra.

Thursday, 3 April 2014

What's in a Name?

Imagine you want power above all else. "Public service" or "duty by one's nation" are mere catch-phrases without any real meaning. You will do whatever you deem necessary in order to hold sway. This is the kind of thinking that is behind a great deal of standard economic treatments of politics. If a politician does care about stuff other than securing sway, he will lose out to those more focused in their aim.

Strange, then, that the vast majority of the most eye-catching atrocities committed in the 20th century appear to have been committed with either communist or fascist parties in power. If politicians care mainly about power and less about policy, should not who gained power to commit these crimes have been a toss-up between whatever political forces were established at the time of the preceeding election, or between which movements were around to grab power when the country in question was last in an unsteady state? I have no good explanation for why totalitarian names should dominate. Why should not an established party on occasion have changed policy preferences to accommodate communist or fascist tendencies to prevent a party with one of those words in its name from coming to power? The atrocities would have been the same, but the perpetrators would have called themselves the Agrarian Party, the Democrats or the Conservatives. Why did this not happen?

Thoughts?

Wednesday, 2 April 2014

Does This Strengthen the Case for the Theory of Negative Moral Rights?

A slight proviso: This post is a bit more speculative than is most other stuff on this blog (which, I suppose, is quite often already rather speculative). I am really only wondering aloud whether the following works at all:

If somebody threatens to kill me unless I steal something of questionable significance (say, a peanut) from somebody else (who has never wronged me in any way), I believe most people's ethical compasses would indicate that it is up to me whether I should commit theft or suffer the consequences. Followers of deontological ethics are the ones who may disagree, but they may suppose one has an implicit contract with the peanut's owner and may compensate him later. If the demand were that I do something rather more objectionable (say, kill an unsuspecting family), I am less certain of how others would react. Some people would find my hypothetical murder defensible ("he acted in self-defence"), but others would not ("more deaths occurred this way"). But none of this is really crucial for the points I am going to make (if any!).
 
Now suppose it were known about me that I was a keen adherent of the theory of negative rights (or "deontological libertarianism"). My normative ethics would then tell me that I may do whatever I please with what is mine, but I may not interfere with the ability of others to do whatever they want with what is theirs. In this case, I believe very few people would object to my refusing to steal (and certainly to commit murder). Kantians sometimes confound my predictions about their attitudes, so I will restrict myself to how consequentialists (such as utilitarians and egoists) might reason. Utilitarians would, I think, reason that I am better off this way (at least that I believe I am better off this way; maybe I could not live with myself knowing that I had committed murder or stolen a peanut). An egoist should be OK with it since he is not affected. Thus, it seems it would be hard to argue that adherents of negative rights are wrong to refuse to steal (or kill). These adherents of moral theories different from that of negative moral rights would still oppose my normative ethics, of course, but that being what it is, this is how I think they would react.
 
Now blow up this example to some variant of the common "is it right to steal if it saves humanity"-problem. For instance, suppose an asteroid (which should really be called planetoid since they are more "like" planets than stars) is about to hit the Earth, and that some curmudgeon has invented a ray gun which could blast the asteroid to smithereens. There is no palatable alternative to using the ray gun: if it is not used, the Earth will be destroyed and humanity will cease to exist. The curmudgeon, true to character, does not want to share his ray gun with anyone and intends to let the asteroid hit the Earth.
 
Is it right to steal the ray gun from the curmudgeon? Well, suppose everyone on Earth was an adherent of the theory of negative moral rights. If no consequentialist has a problem with an individual's refusing to violate others' rights, why should the answer change just because now we are talking about many individuals making up their own minds to reach the same conclusion?
 
To object to many individuals' choosing not to violate rights requires, I think, that one in this example cares more about some notion of "humanity" than about the sum of its parts. But what is humanity if not the sum of its parts? I suppose one could argue that unborn generations would suffer from never getting to live, but then in the original example in which only I am affected by my refusal to violate others' rights, critics would have to argue that I am not at liberty to refuse to procreate.
 
The point here is that those claiming that the  asteroid problem shows that adherents of negative rights are wrong would, if I am correct, be OK with the world ending if everyone (or perhaps just most people, depending on how tolerant are the few utilitarians and how they rate their own utility in relation to the utility of the deontological folks) actually believed it right not to steal in this sort of situation. Again, there would be objections to these ideas about negative rights, but given that people have them, I don't think consequentialists would see a problem with the refusal to violate rights.

Notice that those who believe in negative rights do not have to interfere and attempt to protect the curmudgeon if someone else (say, a utilitarian) chooses to steal the ray gun and save the Earth. Why should they be prevented from doing what they want with their own time just because someone else chose to violate rights?

So here is where I end up: If man kind consisted of (almost?) only adherents of the theory of negative moral rights, consequentialists cannot use the asteroid example to criticize their lack of action in the face of looming disaster. If, on the other hand, there were any (or sufficiently many) consequentialists around, consequentialists cannot criticize adherents of the theory of negative moral rights, since their refusal to violate rights had no bad consequences. Either way, the asteroid example cuts no ice with the theory of negative moral rights.

Tuesday, 1 April 2014

Pacifism and Political Economy (Speaking of the Crimea...)

EconLog's Bryan Caplan rightly criticizes The Economist Magazine today for a stunning lack of substance in discussing what attitude the West should take in response to recent Russian activities. It occurs to me that my post from a few days ago fits well with Caplan's case for pacifism, which can stand repetition: Sometimes, wars have arguably accomplished good things (though one cannot be too sure sans a counterfactual), but other times they have worsened life greatly (again, arguably: it is difficult to know what would have happened had things gone differently). Since, irrespective of final outcomes, the short-run costs are plainly tremendous, wars are to be avoided.

Similarly, from the more theoretical point of view of my recent post, if policy won't change as a result of military takeover, it makes no sense to resist invading armies. Maybe the idea that wars are not worth fighting would make it more tempting for foreign powers, unsympathetic to this idea, to invade, but for resultant policy to be different, it would have to be that the threat of war, now absent, impacts which policies are chosen. But there are many pacific threats which also influence policy (e.g. demonstrations, black-market activities...), so I am not sure how significant the threat of war is.

If my thoughts from a few days ago have any merit, it seems to me that they strengthen the case for pacifism, at least a little bit.