Philosophy

The classical MU [differential marginal utility of money] argument has, in my view, been moderated by the findings of behavioral economics, namely loss-aversion. Taking from the higher-incomes to give it to the lower incomes may be negative utility as the higher incomes are valuing their loss at an exaggerated rate (it’s a loss), while the lower income recipients under value it.

Many on the Left are too quick to grab on to the findings of behavioral economics as a critique of neoclassical economics, but while they often do point away from simplistic free-market views, they do not necessarily point towards left-wing solutions. They are just as likely to point to non-market conservative views.

For example, isn’t it another consequence of the asymmetry of the utility function with respect to the status quo (loss aversion) that social mobility destroys utility? I mean, if the tide is lifting all boats, then you can argue that it’s still better for everyone (the libertarian view), but if your utility function is heavily rank-based (a standard left-wing view) and you accept loss-aversion from the behavioral literature, then social mobility is suspect from an utility point-of-view.

This sounds shockingly old-school conservative when we discuss our own societies (“why should the children of the poor compete with my kids for a place in a good university? they have lower expectations, after all, State U is a step up for them. My kids, on the other hand, would be crushed if they had to go to their safety school”), but is quite acceptable when discussing international inequalities (“it doesn’t morally matter that people in Mexico have much less material wealth, their society has lower expectations”).

That is from Luis Pedro Coelho.

1. You cannot build and sustain a polity on the idea of redistributing wealth to take advantage of differences in the marginal utility of money across varying wealth classes.

2. The ideas you can sustain a polity around often contradict the notion of socially arbitraging MU differences to try to boost total utility.

3. The MU argument, in isolation, is therefore rarely compelling.  Furthermore its “naive” invocation is often a sign of underlying weakness in the policy case someone is trying to make.  The proposed policy may simply be too at odds with otherwise useful social values.

4. This is related to why parties from “the traditional Left” so often lose elections, including in a relatively statist Europe.

5. That all said, sometimes we should in fact take advantage of MU differences in marginal increments of wealth and use them to drive policy.

6. Figuring out how to deal with this tension — ignoring MU differences, or pursuing them — is a central task of political philosophy.

7. The selective invocation of the differential MU argument — or the case against it — will make it difficult to improve your arguments over time; arguably it is a sign of intellectual superficiality.

In 2012 economists at the University of Auckland published research establishing clear correlations between family circumstances and incidents of child abuse or neglect. “No one realized we were sitting on such rich data in terms of its predictive power,” says Rhema Vaithianathan, who led the research. “We can find children who are at considerably elevated risk, and we can find them at birth.”

And:

Using data from welfare, education, employment, and housing agencies and the courts, the government identified the most expensive welfare beneficiaries—kids who have at least one close adult relative who’s previously been reported to child safety authorities, been to prison, and spent substantial time on welfare. “There are million-dollar kids in those families,” English says. “By the time they are 10, their likelihood of incarceration is 70 percent. You’ve got to do something about that.”

Moving closer to home:

Jennie Feria, who oversees risk assessment for L.A.’s Department of Children and Family Services, says one idea is to rate families, giving them a number that could be used to identify who’s most at risk in the way lenders rely on credit scores to determine creditworthiness. “The way we may use it, it’s going to be like it’s a FICO score,” Feria says. The information, she says, could be used both to prioritize cases and to figure out who needs extra services. “It’s at the very early stages, because we don’t know how we’re going to use it yet exactly.”

It will be interesting to see how that one develops.  The article is by Josh Eidelson.

Bryan Caplan considers this question in a very useful blog post.  He serves up these hypotheses, though I think without committing to any particular one of them:

1. Despite their rarity and absence on the front lines of politics, self-conscious libertarians still strongly shape mainstream conservative politicians’ economic policies.

2. Self-conscious libertarians, though rare, have still managed to sharply shift public opinion in a libertarian direction.

3. Self-conscious libertarians, though politically impotent, are a symbol of what’s wrong with American politics.

And then there are the stories the critics won’t embrace, but perhaps they’re true nonetheless…

4. Libertarians, unlike mainstream conservatives, openly defend many unpopular views.  Intellectuals who want to loudly champion popular views have to engage libertarians because there’s hardly anyone else to argue with.

5. Libertarian arguments, though mistaken, are consistently clever enough to get under the critics’ skin.  The purpose of the criticism is not shielding the world from bad ideas but giving the critics some intellectual catharsis.

6. Libertarian arguments are good enough to weigh on the critics’ intellectual consciences.  They attack libertarians to convince themselves that we’re wrong.  And they keep attacking us because they keep failing to fully convince themselves.

But I see more options.  Consider a simple model where bureaucracies maximize output, and try to produce correct output.  In my view, the more mainstream thinkers criticize libertarians so much because a) it helps them generate output, and b) they think they have the better arguments.   There is a clear target, easily explained (not always correctly explained, however), and very often the target can be taken on with a minimum of detailed empirical investigation.  Furthermore the arguments against the libertarian often position the critic in a favorable ideological space, especially for left-wingers: “look, there are people who believe this, better come ally with me!”

If we are talking about “The Left,” the libertarian is about the most welcome intellectual opponent there is.  The real scourge, correctly or not, is the common sense morality of the center.  That’s right, the people who favor and distrust big government at the same time, the people who think the poor deserve welfare support but only so much, the people who distrust intellectual elites and cosmopolitanism, the people who side with police more than they ought to, and yes the people who think Medicare is more based on just deserts than is Medicaid.

That set of views does not describe me well, but the funny thing is — unlike with both far left and libertarian ideas — we do in fact know you can build a workable polity from them.  The libertarians are so much more of a tempting opponent.

His new book Inequality: What Can Be Done?, is out mid-May but already available in some bookstores.  Here is an interview with Atkinson.  I thought this book did not take sufficient care with some very basic distinctions, such as the difference between a problem of poverty and a problem of inequality.   Nor does it put enough emphasis on wealth creation, or explain why Korean-Americans have done pretty well over the last thirty years, among other possible examples.

The book is dedicated to the NHS workers of Britain.  That’s fine, many of them are very good, but Atkinson doesn’t mention a few key points, namely that a) the British system ranks relatively poorly by European standards, b) the British system probably has too much governmental ownership and provision, and c) bureaucracies usually underpay their best workers and thus do not generate enough initial income inequality.

François Bourguignon has a very good and readable new book on the international dimension of inequality, The Globalization of Inequality.

Martin Wolf has an FT review of both books.

For the pointer to the Atkinson interview I thank Enrico Schaar.

Eric Posner’s (with Adrian and Blakey Vermeule) new and excellent venture The New Rambler asked me to write a book review for them.  The impish side of me thought “what book better to review than the old Rambler?”, namely by Samuel Johnson?  Here is the opening of my piece:

A blogger by the ostensible name of “Samuel Johnson” has compiled his previous posts into a book, edited by a supposed W.J. Bate and Albrecht B. Strauss. But the true work here is “Johnson’s,” and the sequential editing, as such, seems to have been done by WordPress. The editorial illusion, of course, is a trick dating from the eighteenth century, as for instance Jonathan Swift and Alexander Pope presented the work of an imaginary Martinus Scriblerus in the 1740s. These Johnson posts claim to date from the early 1750s, a typical blogger’s conceit and misdirection, but the content is too modern and innovative to sustain that illusion for long.

Cutting through the postmodern trappings, Johnson’s blog reflects his ongoing interest in behavioral economics. He is continually skirting the frontier of the latest research insights, although like many bloggers he is lax in providing the proper citations. He writes off the top of his head, though without care for what came before from Thomas Schelling, Jean Tirole, or Cass Sunstein, among other titans of the field. Reading these short pieces is thus a fascinating but often frustrating experience. And as is true for most of the work in behavioral economics, there are insights but a fully fleshed out model, applied consistently to all human choices, is nowhere to be found.

Here is the full review, recommended!

Chad writes me:

What jobs (particularly ones we think of as being inherently beneficial to society) might America have too many of? Political journalism comes to mind this particular month, since we apparently have enough to carefully monitor the Chipotle orders of presidential candidates 19 months before the election. Writers might be another, particularly in a world of self-publishing.

One can imagine lots of reasons for a greater-than-optimal number of people in a particular profession, from government subsidies to cultural biases, but I’m curious if you have a gut feeling about any professions in particular.

A good question, in my view the answer is not so simple.  Writers and artists are indeed a possible nomination, but some of the demand for these professions is likely for consumption, which makes the overinvestment difficult to judge.  And what about lawyers?  Relative to the number of laws and regulations (too many in my view, but take them as given), it is not obvious to me that we have too many lawyers.  Someone has to tell companies when it is safe to proceed, or not.

How about too many people selling medical devices and other high margin items?  Too many people making alcohol?  Too many people raising and selling animal meat?  Those would be my picks.

The finance sector is another obvious culprit, but as a fraction of wealth I do not think it is larger than in the past.  Admittedly people in the finance sector may be engaging in the wrong activities, but I am not sure the case for fewer employees per se is so obvious.  Still, it is another candidate, if only because it (often) involves people selling high-margin items.

Claims about embryos

by on April 24, 2015 at 12:29 am in Current Affairs, Philosophy, Science | Permalink

A pressing question, said Rudolf Jaenisch, an M.I.T. biology professor, is why anyone would want to edit the genes of human embryos in order to prevent disease. Even in the most severe cases, involving diseases like Huntington’s in which a single copy of a mutated gene inherited from either parent is enough to cause the disease with 100 percent certainty, editing poses ethical problems. Because of the way genes are distributed in embryos, when one parent has the gene, only half of the parent’s embryos will inherit it. With gene editing, the cutting and pasting has to start immediately, in a fertilized egg, before it is possible to know if an embryo has the Huntington’s gene. That means half the embryos that were edited would have been normal — their DNA would have been forever altered for no reason. “It is unacceptable to mutate normal embryos,” Dr. Jaenisch said. “For me, that means there is no application.”

If I were grading an undergraduate philosophy class, I am not sure Dr. Jaenisch would exceed a C minus with that answer (the source article is here).  Besides I have never known a normal embryo.  Then there is the all too obvious question as to why it should be acceptable to abort embryos, but not to modify or mutate them.  Oops.

The better arguments are surely the slippery slope worries that embryo tinkering will change the nature and future of humanity in dangerous ways, perhaps producing too much conformity, too much zero-sum competition (“buy the Harvard splice”), too much discrimination against various “types,” too much induced family loyalty, legal discouragement of rebellious genes, excess advantages for elites, too many decisions which too explicitly lower the social status of some groups of people, and perhaps ultimately too much drift from the world we know (and love?).

Those are my worries.  Whether or not they are valid, they would seem to merit at least a C+.  But many commentators wish to ensure these issues are not actually argued.  Will this prove the new face of anti-scientific, anti-philosophical thinking?  Check out the closing quotation from Professor Daley at Harvard, and his use of the word “deranged.”

A lot of parents will strongly desire some future version of this product, and I believe a number of countries are going to be willing to proceed with such innovations, if and when they become possible.  They’ll also be willing to live with the costs of the failures in the meantime.  So I don’t think the strategy of shutting down debate is going to fare so well in this case.

Dan Klein (from Abigail D.) directs my attention to an interesting paper by Fisher, Goddu, and Keil (pdf):

As the Internet has become a nearly ubiquitous resource for acquiring knowledge about the world, questions have arisen about its potential effects on cognition. Here we show that searching the Internet for explanatory knowledge creates an illusion whereby people mistake access to information for their own personal understanding of the information. Evidence from 9 experiments shows that searching for information online leads to an increase in self-assessed knowledge as people mistakenly think they have more knowledge “in the head,” even seeing their own brains as more active as depicted by functional MRI (fMRI) images.

Having done some further search on this topic, using Google, I can assure you that I now have a much better grasp on whether this hypothesis is true or not…

Jonathan Chait writes:

At a growing number of campuses, professors now attach “trigger warnings” to texts that may upset students, and there is a campaign to eradicate “microaggressions,” or small social slights that might cause searing trauma. These newly fashionable terms merely repackage a central tenet of the first p.c. movement: that people should be expected to treat even faintly unpleasant ideas or behaviors as full-scale offenses.

Read his whole discussion, but he more or less disapproves.  I’ve long wanted to disagree with Chait “from the left,” and it seems this is my chance, I had better grab it while I can.

While teaching Law and Literature this year, I attached very gentle, low key “trigger warnings” to a number of items on the syllabus, namely those dealing with extreme violence, rape, and some other very unpleasant situations.  I am glad I did this.  I told students that if they preferred to do a substitute assignment, I could arrange that.  Is that so unreasonable?  There were no takers, but I don’t see it did anyone harm or limited free speech in the classroom (or outside of it) to make this offer.  If anything, it may have eased speech a slight amount by noting it is OK to feel uncomfortable with some topics, or at least serving up that possibility into the realm of common knowledge.  That struck me as better and wiser than simply pretending we were studying the successful operation of the Coase theorem the whole time.

I don’t doubt that trigger warnings may be misused in some situations by some professors, but overall they seem to me like another small step to a better world.  I do agree we need to liberate trigger warnings from the strictures of the PC movement, no argument there.

Addendum: I am pleased to see that GMU was moved into the highest category for university free speech, according to FIRE.

Here is a long and excellent post, whereby Robin outs himself as a strange kind of environmentalist.  Do need the whole thing, but here is one summary excerpt:

So, bottom line, the future great filter scenario that most concerns me is one where our solar-system-bound descendants have killed most of nature, can’t yet colonize other stars, are general predators and prey of each other, and have fallen into a short-term-predatory-focus equilibrium where predators can easily see and travel to most all prey. Yes there are about a hundred billion comets way out there circling the sun, but even that seems a small enough number for predators to careful map and track all of them.

“At first they came for the rabbits…and then they came for me.”  I find that intriguing, but I have a more marginalist approach, and perhaps one which encompasses Robin’s hypothesis as a special case.  The death of human (and other) civilizations may be a bit like the death of the human body through old age, namely a whole bunch of things go wrong at once.  If there were a single key problem, it would be easier to find a patch and prolong things for just a bit more.  But if we have reason to believe that, eventually, many things will go wrong at once…such a concatenation of problems is more likely to defeat us.  So my nomination for The Great Filter, in a nutshell, is “everything going wrong at once.”  The simplest underlying model here is that a) problems accumulate, b) resources can be directed to help solve problems, and c) sometimes problems accumulate more rapidly than they can be solved.

This is also why, in many cases, there is no simple “fact of the matter” answer as to why various mighty empires fell in the past.  Here is my earlier review of Apocalypto, a remarkable and still underrated movie.

Joseph Heath’s Enlightenment 2.0 is one of the best books I have read in years. I offer an extensive review at the New Rambler. Here’s the opening:

Heath-Enlightenment-2Joseph Heath is a Canadian philosopher who is unusually conversant with economics and also unusually capable of writing sparkling prose for a popular audience. His earlier book Economics Without Illusions was split into 6 right-wing fallacies and 6 left-wing fallacies, and he did a commendable job on both sides. Heath has his own left-liberal point of view: the subtitle of Economics Without Illusions was Debunking the Myths of Modern Capitalism and in the original Canadian version, the book was subtitled Economics For People Who Hate Capitalism. However, I like capitalism and I still enjoyed it! Enlightenment 2.0 is Heath’s foray into political philosophy. Drawing on psychology, economics and political science, Enlightenment 2.0 is a brilliant defense of reason, an important call for a more rational politics, and a great read.

Heath is worried that the foundations of liberal society are being eroded by the cultural denigration of reason combined with ruthlessly competitive economic and political forces that exploit the biases and hooks of our unreasoning mind.

Although I admire Enlightenment 2.0, I answer the question of the post differently than does Heath and my review contains plenty of critical commentary. Ayn Rand, Idiocracy, mind viruses and other interesting characters make an appearance. Read the whole thing.

Tyler Cowen’s three laws

by on April 15, 2015 at 9:55 am in Economics, Law, Philosophy | Permalink

Many of you have been asking for a canonical statement of what I sometimes refer to as Cowen’s Laws.  Here goes:

1. Cowen’s First Law: There is something wrong with everything (by which I mean there are few decisive or knockdown articles or arguments, and furthermore until you have found the major flaws in an argument, you do not understand it).

2. Cowen’s Second Law: There is a literature on everything.

3. Cowen’s Third Law: All propositions about real interest rates are wrong.

I coined those some time ago, when teaching macroeconomics, yet I remain amazed how often I see blog posts which violate all three laws within the span of a few paragraphs.

There is of course a common thread to all three laws, namely you should not have too much confidence in your own judgment.

Addendum: Kevin Drum comments.

Steven Quartz writes:

…our current Gilded Age has been greeted with relative complacency. Despite soaring inequality, worsened by the Great Recession, and recent grumbling about the 1 percent, Americans remain fairly happy. All of the wage gains since the downturn ended in 2009 have essentially gone to the top 1 percent, yet the proportion of Americans who say they are “thriving” has actually increased. So-called happiness inequality — the proportion of Americans who are either especially miserable or especially joyful — hit a 40-year low in 2010 by some measures. Men have historically been less happy than women, but that gap has disappeared. Whites have historically been happier than nonwhites, but that gap has narrowed, too.

In fact, American happiness has not only stayed steady, but converged, since wages began stagnating in the mid-1970s. This is puzzling. It does not conform with economic theories that compare happiness to envy, and emphasize the impact of relative income for happiness — how we compare with the Joneses.

Here is part of the answer, consistent with what I argued in my book What Price Fame?:

…social status, which was once hierarchical and zero-sum, has become more fragmented, pluralistic and subjective. The relationship between relative income and relative status, which used to be straightforward, has gotten much more complex.

…A new generation of ethnographers has discovered an explosion of consumer lifestyles and product diversification in recent decades. From evangelical Christian Harley-Davidson owners, who huddle together around a motorcycle’s radio listening to a service on Sunday mornings, to lifestyles organized around musical tastes, from the solidarity of punk rockers to yoga gatherings, from meditation retreats to book clubs, we use products to create and experience community. These communities often represent a consumer micro-culture, a “brand community,” or tribe, with its own values and norms about status.

The article is very interesting throughout, hat tip goes to Claire Morgan.

Note that the closing bit of this piece is…this: “Money may not buy happiness in the long run, but consumer choice has gone a long way in keeping most Americans reasonably content, even if they shouldn’t be.”

Walmart critics embrace two moral standards: in the first, morality requires payment of high wages to 1.2 million people. In the second, morality can be achieved without employing anyone at all–that is, by paying zero wages. Most of us have chosen to live by the second standard, and from our lofty moral position we can criticize Walmart for not meeting the first standard. How convenient!
There is more here, from Ryan Decker, via Ben Southwood.