Month: June 2009

In which regards are autistics more rational?

by  Tyler Cowen in

Many bloggers are citing a recent Scientific American piece, one part of which covers how autistics come closer to satisfying some canons of economic rationality.  Since I discuss the underlying research in Create Your Own Economy, I should point out that the SA article doesn't quite get it right.  They serve up:

One group that does not value perceived losses differently than gains are individuals with autism…

I would sooner describe the underlying research as showing that framing effects are weaker (NB: not absent) for autistics.  That is, for the autistics it matters less whether a given change in endowment is described as a gain or a loss, relative to varying frames.  I read the SA account ("when balancing gains and losses") as conflating framing and endowment effects; in any case the exposition is not clear.

SA writes:

…this seeming rationality may itself denote abnormal behavior…

An alternative would have been: "The autistics are in this way more rational."

One underexplored question is whether most people distrust those who are not irrational in particular, commonly realized ways.  Even the researchers on the original piece considers the superior performance of autistics on the test to be a sign of their processing "failures."

Another part of the piece concerns the skin conductance responses; there is preliminary evidence that autistics approached the framed choices in a less emotional manner, at least by that one measure.  

Create Your Own Economy considers a number of possible overlaps between economics and autism, including Vernon Smith's claim that Adam Smith was himself on the autism spectrum.  It also considers other ways in which autistics are likely to be more rational, such as being less likely to encode false memories and less likely to resort to excessive use of narrative to organize their memories and explanations.

Aid Realism for the Idealist

by  Alex Tabarrok in

The failure of foreign aid to lead to economic development has left many cynics in its wake. For this reason, I enjoyed The Blue Sweater, Jacqueline Novogratz's story of moving from aid-idealism to aid-realism without ever passing through the way-station of aid-cynicism.  As a naive, aid-idealist Novogratz spent a lot of time on the circuit in Africa; eventually hard lessons wore away the naivety but not the idealism.  Of course, Novogratz learned a lot about the corruption, failure to experiment, and lack of accountability of the aid agencies but she also learned to be realistic about the do-gooders:

Philanthropy can appeal to people who want to be loved more than they want to make a difference.

But the hardest lessons were about the poor.  In the late 1980s, Novogratz worked with a group of native women to build up a thriving business in Rwanda.  Inevitably some of her friends became terrible victims of the 1994 genocide.  Perhaps even worse, some of her friends became perpetrators.  Hard lessons like these drove Novogratz's evolution.

I've read the following sort of thing many times:

It is so often the people who know the greatest suffering–the poor and most vulnerable–who are the most resilient, the ones able to derive happiness and shared joy from the simplest pleasures.

I've heard it so many times, I tend to dismiss it but Novogratz follows up with this:

That same resilience, however, can manifest itself in passivity, fatalism, a resignation to the difficulties of life that allows injustice and inequity to strengthen and grow…

Which, for me at least, turned a trite observation into an important insight.

Novogratz's experiences eventually developed into the Acumen Fund, a venture capital firm for aid.  The idea is to invest patient capital in scalable, for-profit businesses that deliver services to the poor.  The fund, for example, has invested in a firm producing drip irrigation systems in Pakistan, a Tanzanian firm that produces mosquito nets and an Indian firm producing internet-telephone kiosks in small villages.

The fact that the businesses have been for-profit has been critical.  In selling bed nets for example the Tanzanian firm learned that talking about malaria doesn't sell. What sells, in the words of one of their top salespersons is, "The color is beautiful, and you can hang the nets in your windows so that your neighbors know how much you care about your family."  As Novogratz puts it:

Beauty, vanity, status and comfort….The rich hold no monopoly on any of it.  But we're a long way from integrating the way people actually make decisions into public policy instead of how we think they should make them.

Patient capital is no panacea–what is?–but by investing in entrepreneurs who must listen to their customers a charitable venture-capital firm can multiply the effectiveness of its philanthropy.  

There is a powerful role both for the market and for philanthropy…Philanthropy alone lacks the feedback mechanism of markets, which are the best listening devices we have; and yet markets alone too easily leave the most vulnerable behind.

Cap-and-trade-war

by  Tyler Cowen in

Eric Posner and Paul Krugman defend the use of tariff threats against polluting countries, such as China.  I'll outsource my response to an earlier post by Matt Yglesias:

The bottom line about the international aspects of climate change is that the very idea of an effective response assumes
the existence of a generally cooperative international environment. It
doesn’t assume the non-existence of the odd “rogue” state here or
there, but it assumes the absence of any kind of serious great power
rivalries. Not just China, but also India and probably Russia, Brazil,
and Indonesia as well are going to need to cooperate in a serious way
with the OECD nations on this. And I just don’t see how you’re going to
get where you need to get through coercion. If anything, I think
attempted economic coercion of China is more likely to wind up breaking
down solidarity between the US, EU, and Japan than anything else.
First, we impose our carbon tariff. Then suddenly Airbus and European
car companies are getting all kinds of sales because the EU hasn’t
followed suit. Now not only are the Chinese mad at us, we’re mad at the
Europeans. Optimistically, at this point everyone decides coercion is unworkable and we start to back away.

I'll say it again: the current version of Waxman-Markey will make things worse.  Keep in mind by the time we are slapping those 2020 tariffs on China, we won't have made much progress on emissions ourselves.  How would we feel, and how would it influence our domestic politics, if the Chinese demanded we pass Waxman-Markey, while polluting at a high level themselves, or otherwise they will stop buying our Treasury securities?

Malcolm Gladwell dissents from Chris Anderson’s *Free*

by  Tyler Cowen in

Here are excerpts and the full original article.  Excerpt:

Credit Suisse estimates that YouTube will lose close to half a billion
dollars this year. If it were a bank, it would be eligible for TARP funds.

I haven't read the book yet, but hope to report back when I do.  For this pointer I thank Eric Wignall.

Addendum: Via Chris F. Masse, Anderson responds.

Knowledge and Decisions

by  Tyler Cowen in

Today I wanted to cover lots of different topics, so here is a thought from Thomas Sowell:

Perhaps people who are busy gushing over the Obama cult
today might do well to stop and think about what it would mean for
their granddaughters to live under sharia law.

And to think that I was worried about high marginal rates of taxation.  The full article is here.

Not so long ago, Yana asked me: "What does Thomas Sowell think of Barack Obama?"  I believe I now have an answer for her.

The Dark Theorem of Economics

by  Tyler Cowen in

Christopher J. Ayres sends me a paper.with the following abstract:

I begin by proving the "Dark Theorem of Economics," from which it follows that the foundations of economic theory rely on the Axiom of Choice (AC). All current solution concepts in game theory
also require the theorems implied by AC. In particular, lexicographic utility, lexicographic probability, the real line being well-ordered, and the existence of a universal space are all equivalent to AC; therefore any argument to disprove their existence must be false. Any proofs using properties that fail under AC must be redone. The concept of Nash Equilibrium becomes either a tautology (in the absence of AC) or violates rationality (in the presence of AC); we provide an example demonstrating this. Knowledge, Common Knowledge, Epistemics, Game Theory, and Macroeconomics (through the failure of Rational Expectations) must be rebuilt. Any economics Â…field or concept relying on these must also be rebuilt. I begin this process with the deÂ…finition of "Fundamental Game."

I joked with Chris that the other people who pursued this line of inquiry met with unfavorable ends.  But that doesn't mean he is wrong.  Fortunately, I am a pragmatist when it comes to the foundations of economic theory or lack thereof.  It's hard enough to define what a number is, so if you push on the foundations of micro theory, don't expect a completely comfortable journey.

Singapore markets in everything

by  Tyler Cowen in

…the restaurant is designed from top to bottom in a medical theme.
wheelchairs, hospital beds, operating lights, test tubes and more, the
design is completely off the wall. The interior is far more subtle than
the al fresco seating out front.

It's called The Clinic and here is more information, and photos, including information on one of its tastiest dishes.  Here is their imaginative website.  Here is a floor plan with two excellent photos.  You sit in wheelchairs and drink out of IV bags. 

How many interesting cities are there in Venezuela bleg?

by  Tyler Cowen in

That's a serious question.  I've never been to the country.  I was browsing on Wikipedia and I came across the following description of their second largest city, Maracaibo:

Maracuchos are extremely proud of their city, their culture, and all
of Zulia. They usually claim that Venezuela wouldn't be the country it
actually is without Zulia. Rivalry with inhabitants of other regions is
common, specially with Gochos (people of the Mérida state) and Caraqueños (people of the city of Caracas).

Unfortunately, the city of Maracaibo has no facilities to treat domestic sewage.

Actually for a short visit I don't mind the sewage bit; the lack of sights of interest is more off-putting.  I have loved every part of South America I have visited (and that includes many poor places and indeed most of the continent, short of Paraguay and Venezuela), yet when I read about the cities of Venezuela I cannot muster much enthusiasm for seeing them.  Does Wikipedia simply fall flat on this topic?  Or does some factor make these cities boring?

Yes, I know about Angel Falls and the wood sculptures of Mérida.  But of the major cities of Venezuela, how many of them are interesting to see and visit?  And is there a theory behind your answer?

The new Smoot-Hawley?

by  Tyler Cowen in

The House bill contains a provision, inserted in the middle of the
night before Friday’s vote, which requires the president, starting in
2020, to impose a “border adjustment” – or tariff – on certain goods
from countries that do not act to limit their global warming emissions.
The president can waive the tariffs only if he receives explicit
permission from Congress to do so. The provision was added to secure
the votes of Rust Belt lawmakers who were wavering on the bill because
of fears of job losses in heavy industry.

Here is the story and Obama deserves praise for opposing this provision.  Here are my comments on the issue itself.  The bottom line is that Waxman-Markey, as it currently stands, would in fact be counterproductive, once the international scale of the problem is taken into account.  That we learn about this provision only now is startling enough.

I write this all as someone who a) favors a much higher price for fossil fuels, b) thinks that if micro-nutrients are a good idea they are not an alternative to addressing climate change; we could do both with positive expected long-run return, c) thinks that many people on the "Right" oppose W-M mostly because its passage would raise the status of environmentalists and others on the "Left" (but they will not admit as much), and d) thinks that our collective American incompetence in limiting emissions does not eliminate our moral obligation to address the problem.

Sadly, Ezra Klein nailed it:

Climate change is a big problem. It will eventually require a big
solution. My understanding is that the polling suggests that people
don't like it when you tell them this is a big problem and they don't
want to be convinced that they need to spend their time worrying about
something new. In fact, like kids who want to believe that they're
going to the doctor for a lollipop, they want to hear that this is an
awesome new jobs program. But it isn't an awesome new jobs program.
It's an effort to avert a catastrophe on the only planet we know how to
inhabit. I
can't see a successful respon[se] to climate change that doesn't
presuppose a majority sharing that belief.