Category: Philosophy

Claims that intelligent left-wing bloggers couldn’t possibly agree with

We don’t take steps to redress inequalities of looks, friends, or sex life.  We don’t grab a kidney from you to save someone’s life, even though that health difference was unfair brute luck.  Redistribution of wealth has some role in maintaining a stable democracy and preventing starvation.  But the power of wealth redistribution to produce net value is quite limited.  The power of wealth creation to produce net value is extraordinary.  Most of America’s poor are already among the best-off of all humans in world history.  We should be putting our resources, including our advocacy and our intellectual resources, into wealth creation as much as we can.

That’s me, quoting me; I pulled the material from the inner guts of Typepad software.

Richard Rorty dies

1. He emphasized that there is no unique way to translate the results of a model into an interpretation of the real world.  This is trivial for those who know it, but not everyone does. 

That means when DSquared writes: "[The case for free trade] can’t be derived in an economy with a positive rate of profit; Ian
Steedman proved this one in a series of papers discussed on Rob
Vienneau’s blog" the correct response is one never thought it could be derived in the first place.

See Rorty’s readable Philosophy and the Mirror of Nature; to some this is warmed-over Quine mixed with Continental gobbledy-gook but you can think that and still value the book.  This book (only $200!) has a wonderful essay on the importance of Rorty for economists and economic method.

2. Rorty stressed the importance of knowing fiction and the humanities for the social sciences or policy assessment.

3. Rorty wanted to erect "avoidance of cruelty" as a starting point for thinking about the liberal order.  I don’t think this quite works but it does represent a major and important challenge to the economic way of thinking and indeed to the entire classical liberal tradition. 

Unlike many modern liberals I take "the inevitability of death, probably painful" to be one of the starting points for political thought.  That being the case, cruelties are looming all the time and we need to pick and choose our noble actions.  I have mixed feelings about the "letting happen/causing" distinction and I place greater weight on ensuring the peaks of human existence.  Rorty’s view, consistently applied, would turn the entire planet over to the (other) animals.  I am not comfortable when I hear the phrase "optimal amount of cruelty" but I don’t wish to ignore those issues either.

Check out these comments.

The bottom line: Rorty is easy to criticize, but he remains one of more important contemporary thinkers to read.

Near Death Experiences and State-Space Consistency

Tyler (and Ryan) ask, Should near death experiences change your life?  The answer is no.  The reason, however, may surprise you.  It’s not because NDEs are unimportant it’s because they are very important.

Recall that a rational choice-plan is time-consistent, you should not plan today to make choices for tomorrow when you know today that you will renege upon those choices tomorrow.  Eating cake today because you will diet tomorrow is not a rational choice if you will not in fact diet tomorrow.  Time-consistency does not require that you always follow through on today’s plans – new information arrives which may cause you to rationally change your plans – but it does require that you expect to follow through on today’s plans which means that if no new information arrives then you should follow through.

The same idea explains why if you are rational you should not change your life if you experience an NDE.  NDEs are not new information.  You know that you are mortal, right?  You know that you could die today.  You know that experiences like Ryan’s are not uncommon.  Thus, if you are rational you should not change your life if you experience an NDE.

Do I advise, therefore, that Ryan get on with his life as before?  No, not at all.  My advice is not for Ryan, it’s for everyone else; Choosing rationally requires that you choose today so that if you have an NDE you will not change your life. 

The fact that many people who have an NDE do change their lives is evidence that most people do not choose rationally.  Thus the ways in which people who have had NDEs change their lives is important information for the rest of us who want to choose rationally.

Do you recall the secret to happiness offered by Gilbert, the one you almost certainly will not accept?  It is to accept that your own anticipations of what you will do and feel if certain things occur is not as good a guide to what you will actually do and feel as are the actions and feelings of other people who actually have experienced those events.  Thus, if near death experiences tend to make people more giving, caring and less fearful of change then this is how you should act today.

Long-time readers will know that I take the idea of reflective equilibrium quite seriously.

Should near death experiences change your life?

Ryan, a loyal MR reader, asks for good reason:

Three days ago I rolled my car three times on a back country road at least 40 minutes away from the nearest ambulance.  The car was crushed to a considerable degree except for the part I occupied, but I walked away without a scratch.  My question is, what implications should this have for my life?  People around me expect me to act differently, and I do feel more reflective.  But aside from needing a new car, and knowing to drive more carefully on gravel roads in the future, nothing else has actually changed.  Is it reasonable for me to begin introspection, or should I hold to my previous plans and priorities absent new information?

I have no real data and only a few intuitions.  I say use the experience to rationalize a change you wanted to make anyway.  Most people have less than perfect courage or willpower, but a near-death experience can provide a pro-change focal point in a multiple-selves game.  Alternatively the trauma of the tragedy can disrupt the previous mindset and thus weaken the hold of status quo bias.  Or the vividness of a shorter time horizon moves the multiple selves to a "trembling hand" solution concept, in which life pursuits are more robust to the probability of an early death.

This account, based on interviews with survivors, suggests that near-death experiences are "beautiful" and make people unafraid of death and more giving and more caring.  Don’t forget the tunnel and the bright white light, etc. 

In part these people are responding to social expectations; would hunter-gatherers offer the same reports?  In part these people may have been fooled by the endorphins which accompany many near-death experiences.   

I suspect a very small minority of people use near-death experiences to become more selfish, backed of course by self-deception.  (Can we measure charitable contributions before and after?)  In these cases the talk about the beautiful white light is in reality a claim that the victim is beautiful (by affiliation?) and thus deserves to be treated better.  The reported change seems hard for others to criticize or deflect ("life is beautiful and hey, I almost DIED!"), but the actual demand is for more of the social surplus.  The victim need only report that the new selfish changes are part of one large intertwined bundle of life reevaluation…

The bottom line?: In predictive terms, I would expect that near-death experiences make good people better and bad people worse.

Addendum: See Ryan’s remarks in the comments.

How to improve your attitude about money

Do you have any credit cards?

I don’t have a debit card because my accountants worry too much about the amount of money I would withdraw, but I do have a Royal Bank of Scotland Mastercard. I’ve had only one credit card for the past 10 years, mainly to keep track of my spending.

I got my fingers really burnt once with an Amex black card. I was about 24, and for some reason I stopped taking taxis and just used helicopters whenever I could. I paid for such things using the Amex, but I didn’t realise that you had to pay off the balance every month. I was incurring huge amounts of interest – I had bills of about £47,000 for a couple of months.

It wasn’t my fault, though. I was told I could use the card to buy anything, from a window to an elephant, so I did. I wasn’t in very good shape at that age. I got into a lot of debt and eventually ended up in rehab aged about 27…

Are you a saver or a spender?

Spender definitely – I’m Spenderella. I’ll buy almost anything. I love art, especially contemporary art. I recently bought a Federico Herrera, which cost about £10,000. I also bought a baby grand piano about a year or so ago, which I play for a couple of hours every day. It cost just over £10,000. It was a nightmare getting it into the house – we eventually found a 100ft crane to do it. I remember people saying they could see a Steinway in the air.

To run my house also costs a bomb. I have about seven people working for me today – decorators, gardeners and cleaners – and about 15 staff in total. When I was in the Fame Academy house earlier this year, I spent a good £35,000 redecorating and repairing my own home…

Do you invest in shares?

I have lots but I don’t have a clue about them. My accountants and Kleinwort Benson, my investment bank, deal with my money but I’m not sure who does what. I think most of my investments are in safe funds though. I can’t say exactly how much I’ve invested but it’s probably a few million.

Do you have a pension or other retirement plan?

I’ve got no idea, but I don’t worry about it really – I’m told it’s all been mapped out.

Do you believe pensions are a good thing?

I hate the word pension. It just annoys me because my philosophy is to live fast and die young…

What aspect of our taxation system would you change?

I don’t like paying 40%. I’d get rid of that. I’d also get rid of parking and congestion charges – in fact, I’d get rid of Ken Livingstone altogether. I’d put him in a lovely health farm somewhere…

What is your financial priority?

To maintain my lifestyle and my health. I want an easy life so my lifestyle expenditure is huge. It includes a concierge service which keeps my life going smoothly. I also have someone come in to reorganise my wardrobe every two months – that costs £600.

I want things to run well and without any stress – a typical capricorn. I deeply believe in a certain order in the universe. I have a moon map and my dad bought me a telescope for my last birthday.

Do you have a money weakness?

Clothes, handbags and shoes. I have hundreds of them. My favourite handbag is a new limited edition Union Jack Chanel handbag, which cost £16,000. The other designer I’m fond of is Azzedine Alaia, who is good for elegant simple clothes. I always buy a few pieces of the collection when they come out. Six pieces could easily cost about £15,000. The clothes last a lifetime, though.

Now here is the clincher:

What is the most important lesson you have learnt about money?

Losing my money was perhaps the best thing that happened to me. It taught me to respect it. Just as Santa Claus isn’t real, I always thought money grew on trees – it doesn’t.

What Danny Glover and I have in common

In a kind of a weird back-door way, I also support Hugo Chavez. Or put another way, and going a little Hegelian, as Tyler likes to say, I think Chavez is an historical necessity, and a richly deserved one at that.

Venezuela has relatively high levels of income inequality (a gini coefficient in 2000 of around .44 compared to .36 for the US according to the UN) from a relatively low base and was run by a corrupt elite class who swallowed up oil wealth while the economic standing of the country plummeted. In 1957, Venezuela’s GDP per capita was 51% of the US, in 2003 it stood at 18.5% of the US.  Existing institutions had no credibility with a very large
portion of the population and simply could not continue to exist as they had.

Don’t get me wrong here, I’m NOT endorsing Hugo. Do I think that Chavez and his policies are going to serve the long term economic interests of Venezuela? NO. Do I think Chavez is a charming guy? NO. Would I be sad if Chavez lost power? NO. If George Bush and Chavez were in a burning building and I could only save one would it be Chavez? NO.

I am just saying that Venezuela was run into the ground by its ruling class and Chavez is the (I hope only temporary) result of their short sighted, poor governance.

A similar analysis applies to Evo Morales. Bolivia has even higher income inequality (year 2000 gini of .60) from an even lower base, and has fallen even more precipitously in economic standing relative to the US, From 25% of US per-capita GDP in 1951 to 8.7% in 2003. That is just a disaster. The ruling elite of Bolivia had Evo Morales coming and I hope he gives it to them but good.

I am not sure whether this type of path is inevitable in Latin America. Lula was a populist firebrand but has governed quite moderately.  Brazil though, did not suffer nearly the same fall in its relative living standards. Their peak of per-capita income relative to the US occurred in 1980 at 31% and it "only" declined to 21% by 2003. Income inequality though is very high (2003 gini of .58).  Will Brazil avoid a Chavez, or is that yet to come for them?

Note that the GDP figures used here are from the Penn World Tables 6.2 and are adusted for deviations from purchasing power parity (the variable I use is "CGDP relative to the United States" and it is available from 1950 – 2003).

How to debate with one’s wife

Even if I can debate with the devil himself, I cannot debate with my wife.  She has, namely, only one syllogism, or rather none at all…The consequence of this is that all my skill in debating becomes a luxury item for which there is no demand at all in my domestic life.  If I, the experienced dialectician, fairly well exemplify this course of justice, which according to the poet’s dictum is so very long, my wife is like the royal Danish chancery, kurz and bündig [short and to the point], except that she is very different from that august body in being very lovable.

That is again Kierkegaard, from Prefaces.

Will bad things get better?

Jane Galt, who is (was?) down, later argued:

So probabilistically, the chances that something good will happen to me right now are, I assume, about the same as they always were.

Holding quality of type constant (an important qualification, as some people are simply prone to bad events, and receiving another bad event signals as such), I more readily expect reversion to the mean.  Good economies grow rapidly after wartime, often because they find it easier to reassemble preexisting pieces than to press forward from full employment.  Much of the human capital is still there and rebuilding can occur quickly once in motion.  The personal analogy is that once you start recovering from (some) catastrophes, the process is speedy.  You already know where you need to go, and you might sample more randomness to court additional good events.

There is also a "naive" evolutionary argument for bad things getting better.

When things go badly, your body borrows resources from the future.  It pumps adrenalin, eats stores of fat, in some views it mobilizes the (only temporarily available) placebo effect, etc., all of which restore better states of affairs and make up lost ground.  More psychologically, a setback may cause a person to try harder.  If a computer crashes and wipes out a page I wrote, I can write it again at an especially high speed and with the energy of anger and adrenalin.

Of course those short-run compensations can herald a problem for the longer-run future, a’la Long and Plosser.  You are digging into your capital stock.  At some margin pumping more adrenalin brings a long-run health cost.  The computer crash means that I write lots today but tomorrow I feel a bit burnt out, and so on.

So if there is anything to worry about, it is the day after tomorrow.  The immediate future appears quite bright.

Can one add by subtracting?

When a man applies for a permit to go into business as an innkeeper and the application is turned down, this is not comic.  But if it is turned down because there are so few innkeepers, it is comic, because the reason for the application is used as the reason against it.  For example, there is a story about a baker who said to a poor woman, "No, mother, she does not get anything; there was another one recently who didn’t get anything, either.  We can’t give to everybody."  The comic aspect lies in his appearing to arrive at the sum total "everybody" by subtracting.

That is from Kierkegaard’s Concluding Unscientific Postscripts.  I will ponder this question as I fly to Denmark…

Contingency

On my first trip to adopt in China, I happened to sit at a table
next to another adopting couple from the United States. They were
older, with no prior children, and had been assigned a three- or
four-year-old girl. If memory serves me correctly, the father was a CEO
of a large firm in New Jersey. They seemed like very nice people. The
child that was assigned to them was very headstrong. She did not want
to go with her adoptive parents and proceeded to throw tantrums,
screaming, throwing things and spitting on and punching them for
several days. They decided they couldn’t go through with it, and the
girl was returned to the orphanage. My understanding is that she would
not be eligible for adoption (at least, not internationally) in the
future.

The next day, the couple told me, another three-year-old was brought
over from an orphanage. The first thing she did when she met them was
say, in English, “I love you, Mommy. I love you, Daddy.” The person
who had transported the child from the orphanage had taught her the
words. She had no idea what she was saying, but it didn’t
matter. Needless to say, this little girl went home with them to New
Jersey.

That is from Steve Levitt, in one of his best posts.

Is the minimum wage coercive?

Over at CatoUnbound, Dan Klein writes:

In 2006 there appeared a “raise the minimum wage” statement signed by 659 economists. I wanted to know why they favored the minimum wage, so I wrote up a questionnaire and sent it to them. But I also used the occasion to get their views on a very important matter: Did they view the minimum wage law as coercive?

Ninety-five graciously completed the survey. Very few of them simply accepted that the minimum wage law is coercive. More than half said the law is not coercive in any significant sense.[1]

But the minimum wage law (and concomitant enforcement) threatens the initiation of physical aggression against employers who pay less than the minimum wage. It threatens physical aggression against people for engaging in certain kinds of voluntary exchange. To me, that is coercion. Just imagine if your neighbor decided that he would impose a minimum wage law on us. Wouldn’t we all agree that he was coercing us? If it is coercion when he does it, why isn’t it coercion when the government does it?

Coercion is not always bad, all things considered, but surely Dan is correct.  Ed Glaeser, Richard Epstein, and others are due to respond.

Trade and the Moral Community

Much of the recent trade debate between Rodrik, Mankiw, Tyler and others (see Tyler’s excellent post for links) is primarily not about positive economics but about the relevant moral community. Rodrik, for example, hasn’t argued that trade does not increase aggregate wealth he has argued that trade is not guaranteed to increase national wealth – something quite different.  I consider three moral communities and the case for trade.

Peter wishes to trade with Jose.  The individualist says the relevant moral community is Peter and Jose and presumptively no one else.  Trade, the right of association, is a human right and on issues of rights the moral community is the individual.  When Jose offers Peter a better deal than Joe it’s wrong – a moral outrage – for Joe to prevent Jose at gun point from trading with Peter.

The more common view expressed implicitly by Dani Rodrik, but by many others as well, is the nationalist view, the moral community is Peter and Joe.  Joe gets a vote on Peter’s trades.  Peter should be allowed to trade only if both Peter and Joe benefit, otherwise too bad.  Jose counts for less.

A third view, that of the liberal internationalist, says that Peter, Jose and Joe count equally and are together the moral community.

Now how does the positive economics apply to these three cases?  Peter and Jose presumptively are better off from trade otherwise they wouldn’t trade so the individualist economist (the economist who takes Peter and Jose as the relevant moral community) will support free trade.  The liberal internationalist will also support free trade because there is a strong argument from positive economics that trade increases total wealth (comparative advantage, specialization, competition etc.).

In between, we have the nationalist economist for whom it depends.  The case for trade for the nationalist economist is pretty good – after all the individuals involved benefit and the world benefits – so the case is reasonably strong that Peter and Joe taken together will also benefit especially if we consider many trade pacts on some of which Joe benefits directly.  Nevertheless, Rodrik is correct that when you exclude Jose it is possible to come up with examples where Joe’s losses exceed Peter’s gains.

I would argue, however, that economists are too quick to take the nation as the relevant moral community.  It is quite possible, for example, for Peter to benefit from trade but for Peter’s city to be harmed, for Peter’s state to benefit but for his region to be harmed, for his country to benefit but for his continent to be harmed.  Why should we cut the cake in one way, excluding some from the moral community, but not in another?  Indeed, geography is not the only way we can define the moral community.  Why not ask whether English speakers benefit from free trade or Christians or left handed people?  Each of these is just as valid as asking whether the collection of people called the nation benefit from free trade.

I understand individual rights and I understand counting everyone equally but I see less value in counting some in and some out based on arbitrary characteristics like which side of the border the actors fall on.