Imperfect Information

Different kind of overload

2009-04-16T20:03:00.000-07:00

I have way, way too much going on, so I'm giving up on this blog for now. Maybe I will return to it later, I don't know. In any case, I'll keep the site up.

Now off to do other things...

Experts

2009-04-03T18:07:00.000-07:00

From Wired:

A brain-scanning study of people making financial choices suggests that when given expert advice, the decision-making parts of our brains often shut down.
The problem with this, of course, is that the advice may not be good.

Of course.

Guide to economics bloggers

2009-04-02T12:27:00.000-07:00

Survey here. It looks like econ bloggers have fairly standard economic views. Maybe a bit more libertarian than the average economist (though I don't have much to compare this with).

Analysis of blogs here. Apparently, econ bloggers are fairly agreeable, while econ commenters are not.

HT: Tyler Cowen.

The experts on government control

2009-03-31T10:51:00.000-07:00

Interestingly, seven-out-of 10 government workers (70%) do not believe a financial institution will run better under government control

From here.

Overload

2009-03-28T21:27:00.000-07:00

Gnxp covers a study finding correlations between intelligence and cortical thickness.

Ben Goldacre at Bad Science writes about the Werther effect, the tendency of suicides in the media to spur more suicides.

Jesse Bering discusses another aspect of the psychology of religion.

New technology not changing the different political participation rates of different socioeconomic classes (according to a forthcoming study), says Thomas Sander at his Social Capital Blog.

Intuitive creationism and intuitive socialism

2009-03-26T21:22:00.000-07:00

Jesse Bering explains some of the psychological barriers to understanding evolution at Scientific American.

In short, humans intuitively expect order to be the result of a conscious design.

I find this subject especially interesting because it parallels my favorite topic-- the widespread denial of basic economics.

Like evolution, markets create order without the guidance of a conscious designer. Despite the overwhelming consensus on this, many laymen still believe that the economic order is controlled by rapacious businessmen who set monopoly prices (in competitive markets), exploit third world workers (by "forcing" them to accept low wages), etc. And the solution, of course, is to change the designer, usually to the government.

Intellectual history of the money illusion

2009-03-24T11:20:00.000-07:00

A post at gnxp looks at the data, and gives a nice summary of the history.

Dan Ariely on cheating and integrity

2009-03-18T22:47:00.000-07:00

More on the religious (sort of) boom

2009-03-16T09:59:00.000-07:00

From the Pew Research Center, here's the data:

This doesn't necessarily contradict David Beckworth's theory. More people could be joining evangelical protestant churches, while others are leaving other types of churches.

Slow

2009-03-12T20:30:00.000-07:00

My Free State Project activities have been keeping me very busy lately.

In any case, the plan is to keep this blog going, regardless. Hopefully, the week-long gaps between posts will be few and far between.

Marijuana trends

2009-03-03T22:00:00.001-08:00

Source.

Genetics and culture

2009-03-01T23:14:00.000-08:00

Razib Khan (from gnxp) and Greg Cochran discuss the relationship:

How science bloggers are like used car dealers

2009-02-28T22:27:00.000-08:00

Seed has a nice article up about the effect of science blogging on science diffusion.

One quote from Ed Deiner stuck out to me:

how can we guarantee quality in what is sent around? The internet is full of wonderful information — but it is also full of disinformation and errors. How can readers know whether what they are reading is solid information?

This problem can be solved in the blogosphere the same way it can be solved in the used car market. George Akerlof's famous paper "The Market for Lemons" formally introduced the problem of asymmetric information. Used car dealers and bloggers alike guarantee the quality of their products with their reputation.

If a used car dealer sells bad cars, he loses his good reputation and because of that he loses money (which is presumably his reason for selling cars). If a science blogger posts unscientific drivel masquerading as good science, eventually some people will find out and he loses his good reputation, and because of that he loses his blogger status (which is presumably his reason for blogging).

Information Overload

2009-02-27T11:21:00.000-08:00

Media Matters reports that economists make up only 6% of guest appearances discussing the economic stimulus on cable shows.

Gnxp covers a study of porn subscriptions. A hilarious finding: church attenders have similar levels of porn subscriptions to the general populace, but avoid subscribing on Sundays.

Sales of Atlas Shrugged are "soaring", according to the Ayn Rand Center for Individual Rights. “Americans are flocking to buy and read ‘Atlas Shrugged’ because there are uncanny similarities between the plot-line of the book and the events of our day.”

The Pain Is Worth the Gain-- social discomfort helps college students overcome groupthink.

Who are macro experts?, from Overcoming Bias.

Frank McAndrew explains the science of gossip.

Obama's popularity is... about normal, really.

Ben Goldacre at Bad Science, Vaughan at Mind Hacks, and Jeremy Dean at PsyBlog have been going back and forth recently about Facebook and media scares.

IQ and bias

2009-02-23T19:41:00.000-08:00

An excerpt from a 2008 paper by Stanovich and West:

The framework in Figure 1 illustrates why rationality will not be uniformly related to intelligence. Instead, that relationship will depend upon the degree that rational responding requires sustained cognitive decoupling. When the heart of the task is recognizing the need for heuristic override but the override operation itself is easily accomplished, no sustained decoupling is necessary and rational thinking will depend more on the operations of the reflective mind than on those of the algorithmic mind (Stanovich, 2008a, 2008b). Thus, relationships with intelligence will be attenuated. Additionally, as Kahneman (2000) has argued, when detecting the necessity for override is very difficult (Parameter 2 is low), performance overall will be quite low and no relationships with cognitive ability will be evident.

In other words, smarter people can be less biased— but only when they're paying attention to the relevant biases.

Pinker and Caplan on the anti-market bias

2009-02-20T09:28:00.000-08:00

In his book The Myth of the Rational Voter, Bryan Caplan documents that non-economists have systematic economic biases, one of which he call the anti-market bias. People tend to think of markets as exploitative rather than empowering. (Economists generally agree that they are empowering, and exploitation disappeared from serious economics, along with the labor theory of value, more than 100 years ago.)

Where did this bias come from?

According to Steven Pinker, our minds have a built in system of intuitive economics:

It is based on the concept of reciprocal exchange, in which one party confers a benefit on another and is entitled to an equivalent benefit in return.

...

The most common kind of exchange is what [Alan] Fiske calls Equality Matching. Two people exchange goods or favors at different times, and the traded items are identical or at least highly similar or easily comparable. The trading partners assess their debts by simple addition or subtraction and are satisfied when the favors even out. The partners feel that the exchange binds them in a relationship, and often people will consummate exchanges just to maintain it. For example, in the trading rings of the Pacific Islands, gifts circulate from chief to chief, and the original giver may eventually get his gift back. (Many Americans suspect that this is what happens to Christmas fruitcakes.) When someone violates an Equality Matching relationship by taking a benefit without returning it in kind, the other party feels cheated and may retaliate aggressively. Equality Matching is the only mechanism of trade in most hunter-gatherer societies. Fiske notes that it is supported by a mental model of tit-for-tat reciprocity, and Leda Cosmides and John Tooby have shown that this way of thinking comes easily to Americans as well. It appears to be the core of our intuitive economics. [from The Blank Slate]

The bias results from the application of this mindset to modern economies. As Caplan explains, this knowledge suggests we should rely less on demoacracy.

To balance the other post...

2009-02-18T22:48:00.000-08:00

Razib at gnxp reports that younger people, beyond being less Christian, are more accepting of evolution.

Economic Depressions and Religious Booms

2009-02-16T23:19:00.000-08:00

From a recent New Scientist editorial:

A 2007 study showed that the growth rate of evangelical churches in the US jumps 50 per cent with the downturn of each economic cycle. The global downturn is no different: church leaders (and psychics) are now reporting brisk business.

From an older New York Times article:

In “Praying for Recession: The Business Cycle and Protestant Religiosity in the United States,” David Beckworth, an assistant professor of economics at Texas State University, looked at long-established trend lines showing the growth of evangelical congregations and the decline of mainline churches and found a more telling detail: During each recession cycle between 1968 and 2004, the rate of growth in evangelical churches jumped by 50 percent. By comparison, mainline Protestant churches continued their decline during recessions, though a bit more slowly.

...

Dr. Beckworth, a macroeconomist, posited another theory [to explain the differences between evangelical and mainline Protestant churches]: though expanding demographically since becoming the nation’s largest religious group in the 1990s, evangelicals as a whole still tend to be less affluent than members of mainline churches, and therefore depend on their church communities more during tough times, for material as well as spiritual support. In good times, he said, they are more likely to work on Sundays, which may explain a slower rate of growth among evangelical churches in nonrecession years.

Beckworth's paper can be found here.

Retraction

2009-02-13T16:10:00.000-08:00

Vaughan at Mind Hacks has a response to one of the links I posted earlier. Some excerpts:

The 'modern technology is hurting our brain' argument is widespread but it seems so short-sighted. It's based on the idea that before digital communication technology came along, people spent their time focusing on single tasks for hours on end and were rarely distracted.

The trouble is, it's plainly rubbish, and you just have to spend time with some low tech communities to see this is the case.
...
If you think twitter is an attention magnet, try living with an infant.

...

The difference between this, and the "oh isn't email stressful" situation, is that you can take a break from email and phone calls. You can switch everything off for an hour so you can concentrate. You can tell people you won't be available.

...

In other words, the ability to focus on a single task, relatively uninterrupted, is the strange anomaly in the history of our psychological development.

Information Overload

2009-02-10T22:34:00.000-08:00

MRIs document that "readers build vivid mental simulations of narrative situations".

More on religious psychology from New Scientist.

Robin Hanson discusses the role of signaling in communication. Don't miss the comments section, which gets unusually interesting.

Maggie Jackson says digital overload is frying our brains.

Tyler Cowen weighs in on economics and selection bias in the media.

John Stossel explains Intrade

2009-02-09T22:12:00.001-08:00

Are political orientations genetically transmitted?

2009-02-06T23:19:00.000-08:00

-is the title of a 2005 paper by Alford, Funk, and Hibbing. The abstract:

We test the possibility that political attitudes and behaviors are the result of both environmental and genetic factors. Employing standard methodological approaches in behavioral genetics—–specifically, comparisons of the differential correlations of the attitudes of monozygotic twins and dizygotic twins—–we analyze data drawn from a large sample of twins in the United States, supplemented with findings from twins in Australia. The results indicate that genetics plays an important role in shaping political attitudes and ideologies but a more modest role in forming party identification; as such, they call for finer distinctions in theorizing about the sources of political attitudes. We conclude by urging political scientists to incorporate genetic influences, specifically interactions between genetic heritability and social environment, into models of political attitude formation.

Because IQ is thought to be partially determined by genetics, this probably has some relation to the correlations between IQ and political ideology.

Name changing

2009-02-05T10:32:00.000-08:00

This blog was not originally a culture/memetics blog. When it started, it didn't have anything in the way of a unified theme, and the title still reflects that.

Preferably, a blog title should hint at what the blog is about. "The Spiral" no longer does that. At the same time, changing the title could lead to some confusion. So I have a few polls:

foreign exchange Flash Poll

casino online Web polls

If anyone has other name suggestions, let me know.

The economics of science

2009-02-03T14:50:00.000-08:00

Article by Terence Kealey in an old issue of Scientific American:

It's a myth that science is a public good. Science is constructed in "invisible colleges"--small groups of people who understand each individual discipline. So the number of people who can really understand the scientific papers is few. To become a member of this club, you have to pay a very high entrance fee. [The late] Ed Mansfield, an economist at the University of Pennsylvania, showed empirically that the average cost to one company of copying the science of another company is 70 percent. But it's worse than that because you've also got to pay for the costs of information. The company has got to have enough scientists out there to read the papers, to read the patents, to go to the conferences, so that you actually know what people are discovering, so you know how to copy it. Add that to the 70 percent, and add the premium you pay in the scientist's salary for all the training he's gone into, and the costs of copying and the costs of doing things originally come out exactly equal. That's in Mansfield, and others have shown this as well.

Compare this to the recent paper by Gans and Stern.

Hat Tip to GV.

Short-term memory

2009-02-01T11:02:00.000-08:00

Scientists at the UT Southwestern Medical Center have discovered that brain cells in the frontal cortex can store trace amounts of memories on their own, for as long as an entire minute. The study, which will appear in the February issue of the journal Nature Neuroscience, details for the first time portions of the brain that are involved in non-permanent memory storage, and is also the first to explain how small bits of memory are kept for short periods of time.

The new find has potential far-reaching implications in understanding various medical conditions and coming up with a way of addressing them. It could offer insight into the establishment of addictions, as well as attention disorders and stress-induced memory loss. A thorough analysis of all brain portions involved may yield a better understanding of the total number of mechanisms associated with retaining memory, and might offer even potential solutions to the various problems.

“It’s more like RAM [random access memory] on a computer, than memory stored on a disk. The memory on the disk is more permanent and you can go back and access the same information repeatedly. RAM memory is rewritable temporary storage that allows multitasking,” UT Southwestern psychiatry assistant professor Dr. Don Cooper, who is also the senior author of the new research that has focused on studying the brains of innocent mice, explains.

“If we can identify and manipulate the molecular components of memory, we can develop drugs that boost the ability to maintain this memory trace to hopefully allow a person to complete tasks without being distracted. For the person addicted to drugs, we could strengthen this part of the brain involved with decision-making, allowing them to ignore impulses and weigh negative consequences of their behavior before they abuse drugs,” he adds.

The team at UT Southwestern says that calcium is the main chemical used to store minute traces of memory in single neuronal cells. That means that the information that is stored is divided in tiny strands, which make their way to single cells in the frontal cortex. After about a minute, they either disappear, or they move to cells that hold them on a permanent basis.

From this site linked to at K21st.

Designing the marketplace of ideas

2009-01-30T12:16:00.000-08:00

From a Al Roth at Market Design:

Joshua Gans and Scott Stern sent me a fascinating market design paper called Is there a market for ideas?, which performs some admirable intellectual arbitrage. They seek to combine modern insights on the unusual properties of intellectual property with some of the recent conclusions from market design.

...

They argue that some of the properties of ideas themselves make it difficult to organize successful markets for ideas along conventional lines: e.g. "...a key property of ideas - the potential for expropriation - limits the potential for market thickness and lack of congestion identified by Roth."

Among the particular examples they discuss of market designs that try to solve these problems and make markets for ideas are the scientific incentive system ("Open Science"), open source efforts such as Wikipedia, and commercial projects such as Ocean Tomo (which runs auctions for IP assets), and Innocentive (which runs a marketplace in which companies can post Challenges in need of solutions).

Edit: the link in the quote isn't working for me. Here's a better link.

Conservatism, inequality, and happiness

2009-01-30T12:00:00.000-08:00

From this paper:

our research suggests that inequality takes a greater psychological toll on liberals than on conservatives, apparently because liberals lack ideological rationalizations that would help them frame inequality in a positive (or at least neutral) light.

Hat tip to Bryan Caplan.

A Puzzle

2009-01-27T12:10:00.000-08:00

About a month ago, Razib at gnxp posted this image from Strange Maps.

There is an uncannily strong correlation between which side of the border a person would have fallen on and which party he votes for.

Matthew Yglesias and Andrew Gelman argue that this is due to persistent wealth differentials-- places which were richer in 1918 are still richer today.

I can think of two alternate explanations:

1) Persistent cultural differences. There are strong network effects for many ideas, political ideas included, and this can lead to path dependency. In other words, popular ideas can stay popular for long periods. It seems likely that, being in two different countries, there would be cultural differences between the two areas. These cultural differences could have persisted and shown up in voting patterns.

2) Coincidence. Given enough maps, one or two will eventually match up reasonably closely.

Or it could be some combination of the three. (Maybe cultural differences drive wealth differences, for example.)

Information Overload

2009-01-25T19:34:00.000-08:00

Some recent articles that don't deserve their own posts, but are still pretty cool:

Bryan Caplan, one of the heroes of this blog, discusses myths about parenting.

Robin Hanson on movie tastes.

Vaughan Bell at Mind Hacks reviews some useful books on irrationality.

Andrew Gelman reviews an article on social influence.

Ideology and support for economic stimulus

2009-01-25T08:48:00.000-08:00

Paul Krugman, Mark Thoma, Tyler Cowen, and Arnold Kling discuss ideological divides in the economics profession. Generally, libertarians are expressing skepticism about economic stimulus, while liberals are wholeheartedly supporting it.

Though some are alarmed by this, it shouldn't be surprising. Changing one's mind is not an effortless process, so people will try to avoid it. In this case, economists approach the issue with a bias in one direction, and do the best they can to rationalize it.

It's especially noticeable in this case, because

1) There aren't strong incentives to be correct in this situation. A single economist is unlikely to have a large effect on the stimulus, and offering an incorrect forecast every once in a while won't destroy anyone's reputation. If, say, one of these economists was personally in charge of administering the stimulus, the bias would probably shrink. This fits with Bryan Caplan's model of rational irrationality. (Caplan himself is a blogger on EconLog with Arnold Kling.)

2) There is room for disagreement. As Arnold Kling notes, "There are no controlled experiments in macro." Thus, rationalizing is easy.

Prediction markets, like Intrade, largely solve the incentive problem, so I prefer them to public debate. It would be fascinating to see, for example, Paul Krugman and Tyler Cowen make a bet on this. However, prediction markets can't do the impossible-- they can't predict the future if the necessary information just isn't there.

Consequences of Determinism

2009-01-24T22:23:00.000-08:00

Jeremy Dean at PsyBlog covers a study on determinism:

In new research published in the Personality and Social Psychology Bulletin, Baumeister, Masicampo and DeWall (2009) theorise that a belief in free will may be partly what oils the wheels of society, what encourages us to treat each other respectfully. They explore this theory with three studies, two on helping behaviours and one on aggression.

...

These experiments aren't the first to examine how a belief in free will (or otherwise) affects our behaviour. In a recent study Vohs and Schooler (2008) also found that a belief in free will seems to have a positive effect on people's behaviour. In that experiment (covered by Cognitive Daily) participants whose disbelief in free will was encouraged were more likely to cheat on a test.

This reminds me of a study that found economists are more likely to defect in prisoners dilemmas.

What's going on here?

My instinctual response is that people are responding to cognitive dissonance-- as determinists/economists, it's more difficult to rationalize altruism. (Selection bias is another possibility, though the determinist study appears to have ruled that out, so it could only apply to economists.)

If you were curious, I'm a compatibilist.

Religion

2009-01-23T19:03:00.000-08:00

Jesse Bering has a post up at Scientific American detailing most of the major theories of religion.

Short synopsis:

Theory 1- religion is an unavoidable byproduct of consciousness

Theory 2- religion encouraged conformity, and thus religious groups were more likely to survive

Theory 3- religion is personally costly, and, therefore, by being religious people signal their commitment to the group

Theory 4- religious belief has positive effects on health, and so is selected regardless of the truthfulness of the belief

I'm a bit disappointed to see no mention of the memetic theory-- that religion is a defect which natural selection hasn't had the time to correct.

The truth about learning

2009-01-21T22:33:00.000-08:00

A strange thing is happening-- I've been finding post topics faster than I've been posting (I've been limiting myself to one post per day, more or less). I anticipated the opposite problem. In any case, I'll be posting more often now in a Sisyphean effort to keep up.

But back to business:

Tom Stafford has a post up at Mind Hacks detailing the neurological effects of learning:

When you learn a new thing, or get a surprise, there is a shot of a chemical messenger in your brain called dopamine. Dopamine is famous among neuroscientists for its involvement in the reward and motivation systems of the brain.

...

The reason for this electro-chemical connection between learning and drugs of reward is that our brains have obviously been designed to find learning fun.

Personally, I think this lends credence to less authoritarian educational approaches, such as the Montessori method and unschooling. On the other hand, that could just be my libertarian bias.

Do economists suffer from groupthink?

2009-01-21T09:43:00.000-08:00

Robert Shiller argues that they do:

In his classic 1972 book, “Groupthink,” Irving L. Janis, the Yale psychologist, explained how panels of experts could make colossal mistakes. People on these panels, he said, are forever worrying about their personal relevance and effectiveness, and feel that if they deviate too far from the consensus, they will not be given a serious role. They self-censor personal doubts about the emerging group consensus if they cannot express these doubts in a formal way that conforms with apparent assumptions held by the group.

...

I was connected with the Federal Reserve System as a member the economic advisory panel of the Federal Reserve Bank of New York from 1990 until 2004, when the New York bank’s new president, Timothy F. Geithner, arrived. That panel advises the president of the New York bank, who, in turn, is vice chairman of the Federal Open Market Committee, which sets interest rates. In my position on the panel, I felt the need to use restraint. While I warned about the bubbles I believed were developing in the stock and housing markets, I did so very gently, and felt vulnerable expressing such quirky views. Deviating too far from consensus leaves one feeling potentially ostracized from the group, with the risk that one may be terminated.

Of course, economists have different incentives in their roles as expert advisers and academics. In the latter role, there is a strong reputational incentive for non-conformism (think Milton Friedman, whose claim to fame is his prediction that the mainstream Keynesian models of the time would fail.)

Hat tip to Uwe Reinhardt.

Six degrees of separation-- just not true

2009-01-18T20:17:00.000-08:00

Rebecca Skloot explains.

This will slow down the spread of ideas a bit.

HT: gnxp.

Reading

2009-01-18T13:25:00.000-08:00

Here's an interesting report on reading trends courtesy of the NEA.

I didn't see it mentioned in the report, but apparently the number of people who read when they don't have to for some reason has dropped.

I wish there were some way to get this kind of information about non-fiction reading.

... Well, duh

2009-01-16T23:14:00.000-08:00

Surprising information gets more attention.

Hat tip to ~~New Scientist~~ Mind Hacks.

Ideological Compatibility

2009-01-16T10:53:00.000-08:00

Economist Ed Glaeser has an interesting essay up here.

I say interesting because he takes an unusual approach to libertarianism. Rather than arguing that small government is more efficient, he tailors the message to liberals by emphasizing egalitarianism.

In this situation, we can view libertarianism as an ideological innovation that Ed Glaeser is trying to market.

According to Everett Rogers in The Diffusion of Innovations, one of the main determinants of the diffusion of an innovation is its compatibility with other products or knowledge. Because of cognitive conservatism (resistance to changing one's mind-- the best explanation I can find online is here), it can be difficult to get people to adopt new opinions.

By proposing that libertarianism is compatible with egalitarianism, Glaeser is trying to minimize the cognitive resistance from liberals. Instead of asking them to abandon their views on egalitarianism, which would require a major ideological overhaul, he asks them to alter their views on the best strategy-- still requiring an ideological overhaul, but only a modest one.

Looking at this from an economic perspective, Glaeser is trying to lower the ideological costs of libertarianism for liberals.

oil prices cause peak oil, not vice versa

2009-01-15T10:32:00.000-08:00

Matthew Kahn has the numbers.

Hat tip to Institutional Economics.

BTW, if you didn't know, peak oil isn't a coherent concept, economically speaking.

The Positivist Fallacy

2009-01-14T14:36:00.001-08:00

There's a bizarre line of reasoning I often see when discussing issues of economics. It goes something like this:

"Well, sure, your theory says such and such, but that's all theory-- I'm looking at reality here. My political views are superior because I don't rely on theory to inform my beliefs-- I just look at statistics and go from there."

This thinking is really just a rehash of the positivism popular in the early 1900s. It fell out of favor because philosophers realized that it's impossible to derive knowledge from experiments without some kind of underlying theory. Paul Krugman sums up the problem in an essay criticizing William Greider (The Accidental Theorist), another naive positivist:

"I think I know what Greider would answer: that while I am talking mere theory, his argument is based on the evidence. The fact, however, is that the U.S. economy has added 45 million jobs over the past 25 years--far more jobs have been added in the service sector than have been lost in manufacturing. Greider's view, if I understand it, is that this is just a reprieve--that any day now, the whole economy will start looking like the steel industry. But this is a purely theoretical prediction. And Greider's theorizing is all the more speculative and simplistic because he is an accidental theorist, a theorist despite himself--because he and his unwary readers imagine that his conclusions simply emerge from the facts, unaware that they are driven by implicit assumptions that could not survive the light of day."

So why is this patently absurd thinking so common? And why is it especially common with economics?

Human brains have evolved to look for patterns. The world is supposed to make sense. To someone who hasn't studied academic economics, it's incredibly difficult to make sense of the economic world (speaking from personal experience). As a result, many people give up trying and resort to positivism. This approach is supposed to avoid the messiness of theoretical economics.

Ironically, economics isn't very messy if you take the time to learn it. It's odd that it's popularly viewed that way-- maybe this is because people don't like the idea that their behavior can be studied scientifically, or maybe it's because economists in the media usually don't agree on how to apply economics to current events. This is not something I'm prepared to try to explain yet-- maybe later.

Steven Pinker's Genes

2009-01-11T22:40:00.000-08:00

New York Times article here.

Where This Blog Is Going

2009-01-10T13:10:00.000-08:00

I've decided I'm going to focus primarily on memetics here, and move all the anarchism material to FreeKeene.com. I feel like the blog is schizophrenic when I try to cover both.

I'll change the blog up a bit to reflect the new focus, though I won't take away all of the anarchism/libertarianism. I've also been ramming my way through the relevant literature (including some of the popular memetics books, even though I tend to think lowly them). We'll see where that leads.

So The Spiral is now officially a memetics blog.

Agorism, pt. 2: The Mafia

2009-01-06T12:52:00.001-08:00

(pt. 1)

There was a time when agorism was widespread: Prohibition. And the outcome suggests more problems for agorist theory.

The prohibition of alcohol created a perfect situation for black markets, an they obligingly appeared. The result was not predicted by Konkin's agorist theory-- instead of an ever-expanding black market leading to the end of the state, prohibition led to a huge increase in organized crime, which eventually prompted the end of prohibition.

Most agorists would predict that security on black markets would be provided by competing security companies-- basically, a black-market microcosm of full-scale market anarchism. What went wrong?

The problem, predictably, lies with the government. Black market entrepreneurs, in order to protect their businesses from government interference, were forced to bribe politicians-- rent-seeking. But of course, the rent-seeking didn't end there. Black market businesses began using politicians for other purposes-- paying them to bust up their competition while leaving the business with a territorial monopoly on its product. Thus, government corruption turns black market security production into black market governments.

This is undeniably a major problem for agorists. Not only because it creates governments, but because it creates the political will to remove the offending laws in order to get rid of the mafia. When the political scenario favors agorism, it gets altered. Large-scale agorism is self-defeating.

I had a great source for all of this history, but I can't find it right now. (Damnit!)

Still Alive

2009-01-01T15:15:00.000-08:00

I work a ridiculous amount during the holidays.

Anyway, Eliezer Yudkowsky at Overcoming Bias has an interesting comment on why political ideas just won't die:

our brains simply haven't updated to their diminished power in a super-Dunbarian world. We just go on debating politics, feverishly applying our valuable brain time to finding better ways to run the world, with just the same fervent intensity that would be appropriate if we were in a small tribe where we could persuade people to change things.

My schedule should slow down soon, and the blog should speed up accordingly.

Memes

2008-12-19T21:06:00.000-08:00

Nice post on topic popularity, at ICCI.

Iraq war veterans who have killed respond to cognitive dissonance, at Scientific American.

Religion may effect what you perceive.

Wall Street Journal op-ed hints at a brilliant recession fighting strategy-- end the war on drugs.

These are all awesome links, I stole them all from Mind Hacks, and I'll probably do some follow up on them.

The signaling theory of education

2008-12-19T20:10:00.000-08:00

Randall Munroe joins the club:

Network Effects, Path Dependency, and Multiple Equilibria

2008-12-18T12:56:00.000-08:00

I'm taking the time to explain these concepts because they are going to be common in upcoming posts.

Supply-and-demand graphs are all well and good, but in some situations there is more to the story. This post covers markets where the quantity of a good affects the demand.

Imagine you are the first person on the planet to buy a telephone. As far as talking with other people goes, the phone is worthless. You'd be better off playing checkers with yourself.

But now that you have a phone, if someone else buys a phone, he will have someone to talk to. The benefits of a phone have risen. As more and more people buy phones, the benefits of a phone rise higher and higher. This is called a network effect.

Network effects aren't the end of the story. But let me change the example- the use of the same computer operating system has network effects, and so, as more people adopt Microsoft, it causes more people to adopt, until Microsoft has a near-monopoly. Now that Microsoft is widespread, let's say a better operating system comes along -- Apple. Because it's better than Microsoft, it would usually be adopted. But, thanks to the network effects, it may actually be better for each individual to keep using Microsoft. Microsoft, with widespread use, is better than Apple without widespread use. Since no one ever uses Apple, it can't build up the network effect, and people stay with Microsoft- the poorer system. It is collectively rational to switch systems, but it is individually rational to stick with Microsoft. This is called path dependency.

When variables interact with each other like this, there is no one economic optimum that can be found with a supply-and-demand graph. A more appropriate graph looks like this:

The blue curve represents the demand given a certain percentage of adoption. So, for example, if the curve represented cell phone demand, and 50% of the population has a cell phone, about 75% would want one (50% already have one, and 25% go out and buy one).

The red curve represents all the equilibrium points. These are the points where the current quantity is the same as the desired quantity, so, once a society reaches one of these points, there are no further changes.

The demand will move along the blue curve until it hits an equilibrium point on the red curve. In this case, where there are positive network effects, the demand would increase until it intersects with the red curve at 100%. (If there were negative network effects, the blue curve would be below the red curve.) If we start at 10%, about 20% would be demanded, and we'd go from there to 50%, then to 75%, and so on to 100%.

0% is also an equilibrium point. It is unstable, however, because any deviation from 0%, however small, will launch demand back to 100%. The rolling balls below the graph represent this (yes, the circles are supposed to be rolling balls). The ball can balance precariously at 0%, but any small gust may start it rolling to 100%.

100% is stable, because small deviations lead back to 100%.

These effects, though irrelevant for much of economics, are more important for memetics.

Marijuana

2008-12-18T12:47:00.000-08:00

I know this kid. Cool guy.

Hope he doesn't end up in jail for too long.

Agorism, pt. 1: A Simple Model

2008-12-12T20:48:00.000-08:00

Libertarians are in a dilemma when it comes to politics. On the one hand, most are very pessimistic about political action: markets work, politics doesn't. On the other hand, it seems that the only way to a libertarian society is politics.

To solve this, Samuel Konkin proposed a market solution (agora = market). In a long polemic, he claimed that by working on the black market, libertarians could spur a gradual economic secession from the state. More and more people decide to work on the black market, until the state either gives up or loses all relevance.

The Model

Like their legal counterparts, black market entrepreneurs respond to incentives. Thus, black market activity can be modeled economically.

A black market entrepreneur avoids taxation and regulation, and this acts as a subsidy for his business, relative to his legal counterparts. He also pays extra to escape government harassment, and this acts as a tax.

The main determinant of the existence of a black market is the relative sizes of the subsidy and the tax. If the subsidy is greater than the tax, the good is provided cheaper on the black market, and the black market thrives. If the reverse, it's provided legally.

Konkin isn't very clear about why he expects agorism to succeed, but the 28 years since the publication of his essay have not been kind to his thesis. Black markets have only been widespread for goods that have been outlawed — marijuana, illegal immigrant labor, and so on. (In cases where a good is banned, its legal price is infinity— it can't be bought legally— and this guarantees it will be sold on the black market, if at all.)

Later I will discuss network effects, more problems with agorism, possible solutions, and the potential of this strategy.

(pt. 2)

Samuel Kernell is a fan of my work

2008-12-09T13:38:00.000-08:00

My review of his textbook on Amazon, that is.

I got this in my email:

Hi, I just went out to amazon to check the price of Logic’s 4^th edition and spotted your defense of the text. Thanks, sam

Samuel Kernell

Dept. of Political Science

U.C. San Diego
La Jolla, CA 92093-0521
http://polisci.ucsd.edu/faculty/kernell.htm

By the way, his textbook is awesome.

Is Government Still an ESS?

2008-12-09T13:03:00.000-08:00

A few posts back, I proposed that MAD-based defense could substitute for national defense

Not only does this solve the public goods problem, it suggests a new libertarian strategy: nuclear revolution.

This is from my response to _____ (that's seriously his name)-

Let's assume that you're a customer of a retaliation business, and terrorists get a hold of a nuke of their own, and try to use that to threaten people. Now the retaliatory agency has a choice-- mutual destruction (of customers and terrorists, that is, not necessarily the company itself), or give in to the terrorists. You'd think they'd give in to the terrorists.

But the people running these retaliatory agencies are probably going to be smarter than that (if they get any business). The game theorists behind MAD put a lot of emphasis on credibility, that is, the likelihood that the company will actually go through with mutual destruction if attacked.

In your thinking, the company didn't have any credibility, and thus the defense could be overcome. But an effective company is probably going to have some kind of mechanism in place that guarantees that any transgression will end in mutual destruction. If terrorists threaten customers, they are destroyed, guaranteed.

Maybe the source of a guarantee is a computer program that controls the nukes/whatever and can't be altered. Maybe the company agrees contractually to pay an outrageous sum if it doesn't follow through. There's room for experimentation here.

If the thread of MAD is credible, then a society using a defensive strategy can't be invaded by an agressive strategy. (I mean "invade" in the game-theoretic sense -- attackers always get a lower payoff than defenders. Attackers are guaranteed to die, while defenders have a good chance of coming out alive. The defensive strategy is an ESS.)

And in fact, the defensive strategy is the only ESS here. Because of this, the field is wide open for revolutionaries-- provided they stick to the defensive strategy. The governments of today, as far as I know, use no systematic nuclear strategies, and would have little credibility if they threatened to use a nuke offensively-- the risks wouldn't be worth the benefit.

So if a defense company got a hold of a nuclear weapon, or contracted with someone else who had one, they could conceivably hold the entire world at bay. Their customers could live lives unhampered by organized coercion.

Freedom is only one nuke away.

Fun with Kop Busters

2008-12-06T12:39:00.000-08:00

Links

2008-12-05T23:57:00.000-08:00

Smarter people are less likely to be murdered. From Mind Hacks.

Happiness is contagious. Also from Mind Hacks.

Economist and futurist Robin Hanson discusses what types of creatures are likely to inhabit the far future at Overcoming Bias.

Futurist god Eric Drexler now has a blog.

Crazy interactive mirror. From K21st.

National Defense, On The Market

2008-12-04T08:23:00.000-08:00

Wikipedia, mutual assured destruction:

The doctrine assumes that each side has enough nuclear weaponry to destroy the other side and that either side, if attacked for any reason by the other, would retaliate with equal or greater force. The expected result is an immediate escalation resulting in both combatants' total and assured destruction. It is now generally assumed that the nuclear fallout or nuclear winter resulting from a large scale nuclear war would bring about worldwide devastation, though this was not a critical assumption to the theory of MAD.
The doctrine further assumes that neither side will dare to launch a first strike because the other side will launch on warning (also called fail-deadly) or with secondary forces (second strike) resulting in the destruction of both parties. The payoff of this doctrine is expected to be a tense but stable peace.

National defense as commonly envisioned is not excludable. Armies, air forces, and so on aren't capable of selectively defending small areas -- they can either defend a large area or no area at all. This is a problem for libertarians. Without the ability to exclude non-customers, a market cannot form, and the libertarian society cannot protect itself. The resulting equilibrium is government-provided national defense.

Retaliatory approaches, like MAD, however, are easily excludable. If a customer doesn't pay, and if his land is invaded or destroyed by some opposing force, the retaliation business simply doesn't retaliate.

It is thus possible to privatize national defense. People contract with a retaliation company, and attackers avoid them for fear of annihilation. People not contracting may still be attacked, so they have an incentive to pay for the service, and national defense is provided efficiently, on the market.

Furthermore, this approach doesn't necessarily require nuclear weapons. Perhaps a company could retaliate with assassins who kill the person that gave the order to invade a customer's property (and maybe his family, too). There are plenty of creative possibilities waiting to be explored by a society allowing experimentation.

Religion and Politics - A Fancy Graph

2008-11-28T14:58:00.000-08:00

Hat tip to Secular Right.

More fancy graphs here and here.

Friendship and The Supply of Ideas, cont.

2008-11-27T18:52:00.000-08:00

Again, I feel the need to do some clarifying.

In the original post, I said:

For many ideas, which are carried in books, on CDs, in movies, and the like, the supply works just as it does with any other material good. As the market price goes up, so does the amount supplied. The everyday upward-sloping supply curve for material goods applies equally to these ideas — because they are material goods.

This is partially true. I failed to address intellectual property laws, which in some cases invalidates this model.

To make a long story short, the amount of information supplied will not necessarily respond to supply and demand. In general, information subject to IP laws (patents, for example), will be supplied suboptimally. That's about all I can say without getting deep into the details of specific industries, as well as monopoly and monopolistic competition theory, and I don't want to do that. Suffice it to say my supply-and-demand model can break down in these cases.

So moving on:

Friendship-

I feel like my analysis of friendship was pretty weak, so I'm going to try to go through it more thoroughly here. Consequently, I'm about to get fairly meticulous and technical. Feel free to skip this, I reach the same conclusion at the end.

Let's take the simplest possible example: one homogenous group of people, who are able to provide what they want on their own. Naturally, no relationships are formed. Everyone is a happy hermit. Supply equals demand, because everyone gets as much of what he wants at the price of providing it.

Now let's say there are two separate homogeneous groups of equal sizes, each of which can provide what the other group wants, and the wants of each group are homogeneous. Naturally, they pair up randomly. Supply and demand again are equal, and the two services are traded. The amount of each service provided depends on the cost of the service.

Two homogeneous groups of different sizes, each of which can provide what the other group wants: scarcer groups attract more friends. Friendship groups are formed with ratios of group 1 to group 2 that are equal to the ratio of group 1 to group 2 of the entire group. So if there are 3 times as many people in group 1, friendship groups will be formed with 3 of group 1 and 1 of group 2. Supply again equals demand.

Now 3 homogeneous groups. Let's say group 1 likes group 2, group 2 likes group 3, and group 3 likes group 1. In this case, the friendship bartering market breaks down, and no trade occurs. Supply doesn't equal demand.

Same as the above case, but introduce a currency to the situation. Let's call the basic unit of currency a "joke". Using jokes, the 3 groups can now purchase the services they like, and supply again equals demand. (Yes, I am proposing that jokes operate as a currency of sorts, but no, I'm not prepared to defend this. Just an example.)

Multiple groups with a variety of services they can provide and services they like: depending on how well friends match up, social currencies may or may not become widespread. In any case, the variety of wants and the variety of abilities allow social currencies to come into play if needed. In the friendship market, supply equals demand (though the process may be relatively crude). This case seems realistic, so I'm feeling confident of this aspect of my model. My conclusion from the last post should hold true.

Also, I keep saying "friendship", but this should apply to all human social interaction, where coercion is not present. People try to avoid those who they dislike and be around those they like. For example, coworkers may be hard to choose, but if the difference between potential coworkers is large enough, it may lead one to change jobs. A person will be willing to accept losses less than the gains from better coworkers. Supply should practically always equal demand in social situations.

I don't like writing these kinds of posts.

[edit- the social currency idea is no good. I should instead argue that as people are able to provide a larger variety of services, there will be a greater likelihood of avoiding the scenario where no trade occurs, so in everyday life the friendship market should be crude but still amenable to economic analysis.]

Human Extinction Greatly Exaggerated?

2008-11-24T09:59:00.000-08:00

Apparently so.

I need to do some clarifying.

In the former post I ended up adding a caveat— "If humans can live off the interest they make from money they have in the bank, this wouldn't apply to them."

Depending on whether AIs have agency, this could be very likely.

If AIs are not their own independent agents, then they will not make money— the capital will stay with the humans. Money is spent to maintain the AIs, but AIs never actually get paid.

In this case, all the money spent in the economy ends up returning to humans as interest. When a human buys a good, the money ends up going to the AI managing the business. From there, it goes to the AI investor and back to the bank to pay back the money loaned him. Humans receive this money as interest. They may earn crappy wages, if they work at all, but they can live well off interest.

If AIs are independent agents, then things are more precarious. The future of humanity, in this case, depends on how much humans have in the bank, and whether people (or AIs) have an incentive to create more AIs.

Here's an essay where Robin Hanson explains his vision (which I'm basing this on): Economics of the Singularity

I've also discovered that the talk that inspired the gnxp post was by Marshall Brain at The Singularity Summit. A video should be up soon, and I'll post it later with criticisms.

Thanks to Ryan for keeping me on my toes.

Friendship and The Supply of Ideas

2008-11-14T17:49:00.001-08:00

I've discussed the demand for ideas. What about the supply? (I'm ignoring beliefs for now.)

For many ideas, which are carried in books, on CDs, in movies, and the like, the supply works just as it does with any other material good. As the market price goes up, so does the amount supplied. The everyday upward-sloping supply curve for material goods applies equally to these ideas — because they are material goods. (Some advertising also works in this manner, with advertisers targeting those who are interested in the information they supply, and then adding the advertising cost onto the price of the good when a person buys it. In effect, the supply increases in response to the "price", that is, the value consumers are willing to pay for it.)

Ideas supplied outside of traditional markets are more problematic. What determines the information brought up in, say, everyday discussions?

The key to understanding the supply of these ideas in these situations is the realization that many social processes, though money is not explicitly involved, operate as markets.

There are 6 billion people on Earth, and you can only be in close relationships with a handful of them. The upper limit to the number of people a person can keep in touch with is probably a few hundred. Somehow, individuals must decide who to befriend and who to ignore. Thus friendship involves the allocation of scarce resources. Whether the reasoning behind the relationship is described best by social exchange theory, Gary Becker's rotten kid theorem, or something entirely different, the result is a market.

Let's say each person is looking for the most rewarding friendship he can get, without searching for too long. Since the value of a friendship is subjective, each individual is going to be looking for somewhat different qualities in a friend.

But there's not enough of each person to satisfy the friendship desires of everyone who wants to be his friend (well, maybe for some people— but wannabe friends still have to compete with other activities, like jobs and television). So a sorting process occurs, each person looking for the best friends he can get that will take him.

One of the things a person looks for in a friend is pleasing ideas. For example, a person who talks constantly about his cat probably won't get many friends outside of cat enthusiasts. People might avoid this person like the plague. A person with an unending supply of hilarious jokes, or who can give profitable stock market advice, will be more successful on the friendship market, other things being equal.

This gives friend-seekers an important incentive, which is the entire reason for jumping into this subject: the incentive to tailor their conversation to their friend's (or potential friend's) interests. By doing this, they can extend the range of possible friendships open to them. In other words, there is a sort of implicit price for information in the friendship market, and, by providing more valuable information, you can ask for a higher price. Presumably, people are aware of this, at some level, and respond accordingly. This means the supply curve looks something like this:

As the benefits of supplying information go up, so does the amount supplied.

Combine this with the demand curve from earlier, and the information market looks like this:

Economics and sociology: 1
Memetics: 0

More

Gary Becker, Altruism, Egoism, and Genetic Fitness: Economics and Sociobiology (from The Economic Approach to Human Behavior) -- the rotten kid version of friendship

Sergio Currarini, Matt O. Jackson, Paolo Pin, An Economic Model of Friendship: Homophily, Minorities and Segregation -- a market-oriented model of friendship

George Homans, Social Behavior: Its Elementary Forms -- the social exchange version of friendshp

NH in a week-ish, and what I'm working on

2008-11-12T22:10:00.000-08:00

It's official.

Because of the Free State Project, I've been wanting to do this for about a year now. Keene (where I'll be) is probably the most active area, activism-wise. You can see a lot of current FSP activity on The Ridley Report.

... So I'm excited.

But I hate to make a blog entirely about my personal life, so here are the posts I'm working on right now:

the supply of ideas, should be finished tomorrow (today?- yeah, I mean today), and a variety of idea/belief-related posts after that

a partial retraction of the human extinction post, should be finished today or Friday

a formal model of agorism w/ some advice for agorist strategy, and probably a few more posts on that

national defense provided privately

an intro to market anarchism- there are a few of these already, but I was going to experiment with a different approach

And that's all I can say for sure right now.

The Economics of Human Extinction

2008-11-04T17:39:00.000-08:00

While I'm going through some sociological material for my supply of ideas post, I thought I'd write about something completely different. Hat tip to gnxp, for bringing this to my attention.

A few necessary explanations:

Complements and Substitutes

When two different markets interact, this interaction can take two opposite forms. In one, a lowering of the price of one good increases the demand for the other good. Gasoline and Hummers, for example. As the price of gasoline goes down, people are more likely to buy Hummers. These two goods are complements.

In the other, a lowering of the price of one good decreases the demand for the other good. Here, Ford and Chevy trucks are an example. When Chevy lowers the price of its trucks, fewer Ford trucks are bought (because people buy Chevy, instead). These goods are substitutes.

Malthus

Malthus is famous for arguing that the human population would always increase to the point where humans earned enough for bare subsistence. If they made more than subsistence wages, the population would increase until the wages went back down. If they made less than subsistence wages, people would die until wages worked their way back up to the subsistence level.

But Malthus didn't know about condoms.

Here's a not-drawn-to-scale representation of where we are now (the point I picked is a total guess):

The curve slopes upward at first because a greater number of people allows for a more extensive division of labor. In other words, human labor acts as a complement to human labor. As more humans enter the market, however, the substitution effect starts to dominate. The division of labor has been taken as far as it can profitably go, and more humans only bid down wages.

Now the fun part:

Robots - "They Took Er Jerbs!"

Right now, technology acts mostly as a complement to human labor. A human in conjunction with a piece of technology (say, a forklift) is more productive than a human without the technology. Since wages are based on productivity (long story), human wages increase.

Fastforward to the future, where cheap artificial intelligences (AIs) can do any job a human can. At this point, technology acts primarily as a substitute for human labor, and the competition from AIs will drive human wages down until they equal the cost of an AI doing the same job. (Otherwise, the employer will just hire an AI instead of a human.)

Now, this would be OK if the supply of AI was unchanging. But this is a marketplace, and people can make a profit selling AIs. Competition among AI sellers will drive the price of AI down to the price of creating it. So, basically, employers will buy AI labor whenever the benefits of the labor outweigh the cost of creating and maintaining the AI. In other words, if AIs fetch more than an AI subsistence wage on the market, the population of AIs will increase until the wages go down. If they make less than AI subsistence wages, some will be decommissioned (die?) until the wages go back up. Malthus has his revenge.

Since human wages must be at least as low as their AI competitors, humans will get paid AI subsistence wages. If the AI subsistence wage goes below the human subsistence wage... sorry, humans, that's the end.

Caveats

There are a few crucial assumptions this rests on.

1) Diminishing returns for labor. If AI wages never go down, no matter how many are made, this doesn't apply. In the earlier graph, the curve would never go down below the subsistence wage. This is very unlikely.

2) AIs can replace a human in any job. If humans are wanted as, say, pets, this doesn't apply.

3) If humans can live off the interest they make from money they have in the bank, this wouldn't apply to them.

I almost wrote that enhanced humans would avoid the problem, but this is incorrect. Enhanced humans also have to compete with AIs. (Even scarier!)

The future is a strange place.

More

Gary Becker, An Economic Analysis of Fertility -- an in-depth discussion of condoms and other factors that threw Malthus off

Robin Hanson (my new hero), Economic Growth Given Machine Intelligence

Edit- partial retraction here.

Homo Memeticus

2008-10-15T01:45:00.000-07:00

In his book The Selfish Gene, Richard Dawkins famously argued that ideas (memes) are analogous to biological replicators. They replicate, mutate, and evolve, and human brains are their playgrounds.

In this essay I offer an alternative to biological memetics.

Why is an alternative needed?

Unnoticed by memeticists, there is a crucial difference between biological replicators and ideas: in biology, organisms are subject to natural selection; ideas, however, are created and selected by humans. This is an odd situation, which throws a wrench in the normal evolutionary model. Biologists would have to create new models, almost entirely from scratch, to take account of human peculiarities in the reproduction of ideas.

Fortunately, they don't need to. There's already a science dedicated to evolutionary processes guided by humans. This science is economics. (I just rewrote that, by the way.)

Homo Memeticus

"Everyone recognizes that most people respond to costs and benefits in deciding how much to buy of simple goods such as fruit, clothing, or a car. I claim that this common-sense idea applies to all human decisions."
- Gary Becker, The Economics of Life

To simplify their work, economists often use a stripped-down model of humans that is completely rational and informed. This superhuman has been nicknamed homo economicus by detractors.

In this essay I am proposing a slight alteration to this model. I am positing that humans select both information and beliefs in the same way they select other economic goods. (Since homo economicus is completely rational and informed, he never has to select information or beliefs.)

This new model — homo memeticus — looks for the most rewarding information at the cheapest cost. When the costs of a piece of information increase, the likelihood of his "consuming" it decreases. He is utility maximizing, just as homo economicus, but he is not blessed with perfect information.

There are, however, some limits to the analogy with material goods. The market price for many ideas is negligible, allowing other costs to gain primary significance, such as the time and effort needed to understand the idea, or the adverse consequences of understanding it (maybe ignorance is bliss). These costs could apply to material goods as well, but presumably they exert more influence in the realm of ideas.

Homo memeticus also chooses his beliefs economically. Beliefs, though not traded on a market, have many costs. There are the costs of the information needed to understand the belief — for example, the time spent at church to understand Christianity, or the cost of an economics textbook to understand economic theory. There are psychological costs — for example, many people find the belief in human evolution painful, and prefer, psychologically, to believe humans were created by a god. Then there are financial costs — a business CEO will not get far with the belief that he is exploiting workers, and that the only way to rectify the situation is to transform the business into a workers' coop.

The model can be employed like so:
International trade economics is an obscure subject, filled with strange terminology and math. A good deal of time and effort is required to grasp it, not to mention the cost of buying a textbook! And the benefit to the layman is small — how many non-economists make more money or sleep better at night because they know that exports minus imports equals savings minus investments? Protectionism, on the other hand, is an easy theory to grasp. You can almost surely get the theory for free, and it gives you the mental security of knowing that our economic problems can be blamed on foreigners. Any man on the street can pride himself on having serious views about national policies with no schooling whatsoever, and without sacrificing his nationalist prejudices, thanks to protectionism.

The cheapness, simplicity, and psychological satisfaction of protectionism all play a significant role in its spread. In this area, protectionism — in spite of the almost unanimous support of free trade by economists — is the belief best suited to the stereotypical layman (a fact that bugs Paul Krugman to no end).

It is my belief that this simple model, with the help of empirical research, can explain the distribution of human beliefs. And though it is intuitive — obvious, really — it leads to surprising conclusions. More on these later.

More

Bryan Caplan, Rational Irrationality: A Framework for the Neoclassical-Behavioral Debate

Bryan Caplan, Rational Ignorance vs. Rational Irrationality

Intelligence and Political Views

2008-09-27T16:41:00.000-07:00

Interesting essay here.

His three conclusions about intelligence:

1) Social liberals are smarter on average

2) Fiscal conservatives are smarter on average

3) Radicals are smarter on average

From this, it follows that the ideology with the highest average intelligence is probably market anarchism.

I won't comment on the relationship between intelligence and realistic beliefs right now.

Lessons from Hurricanes

2008-09-26T19:14:00.000-07:00

The situation created by hurricane Ike is a tragedy — and a perfect example of basic economic principles. Aggravating and dangerous shortages — particularly of ice, water, and gas — were caused by the extreme circumstances. Or were they?

If supply shortages were caused by the hurricane, how does one explain the reported shortages in Arkansas, Tennessee, and North Carolina — hundreds of miles from the Gulf Coast, and days before the hurricane arrived? It is difficult or impossible to make sense of this in light of the "extreme circumstances" theory.

Modern economics suggests that, instead, shortages are caused by overly low prices. In normal market situations, consumers will bid up the price until the total amount people are willing to buy equals the total amount available. Shortages do not happen, because people are forced by high prices to conserve. Those who don't need the resource decide it's not worth the cost, leaving those who do need it with dependable access to the supply. Prices also serve as an important signal to entrepreneurs. When prices are abnormally high, entrepreneurs see an opportunity to make easy money — and go to great lengths to deliver supplies to where they are most needed.

If the price, for whatever reason, doesn't increase in response to competition among consumers, then supplies aren't properly conserved, and sellers run out. Unresponsive prices, not hurricanes, cause shortages.

The question now, following modern economics, is "what is keeping prices too low?" Those who have been paying attention will already know the answer: anti-price gouging laws. (It just so happens that these were also in effect in Arkansas, Tennessee, and North Carolina.) These laws are made without regard to supply and demand — any company that sharply raises prices in times of crisis is liable to be prosecuted. Unfortunately, in times of crisis the price of many goods should rise sharply as a natural response to increased demand and uncertain supply. Anti-price gouging laws in this manner create de facto price ceilings.

In 1973, Richard Nixon famously instituted a price ceiling for gas. The result was easily predicted by economists — gas shortages. This high-profile case has become a staple in discussions of price controls. The result of price ceilings during emergencies is equally predictable — more shortages. The end result of gouging laws is that desperate people are forced to depend on government agencies, such as FEMA, for basic necessities, rather than a competitive, consumer-driven marketplace. If this kind of policy was legislated during normal times, there would be widespread outrage. Why, then, do we encourage it during emergencies? And what's the point of having low prices if supplies aren't available, or if you have to spend five valuable hours waiting in line to get them?

Let's imagine the situation if price gouging laws were not in place, and prices of hurricane-related goods doubled or tripled, or rose even higher. Anyone with a truck can now make a substantial profit by filling the back with gas, water, ice, food, etc., and selling it in areas where they are most needed. The incentive for owners to keep stores open and well-stocked is now increased many times over. Yes, prices are high, but supplies are readily available, available enough that FEMA is no longer needed. And as the situation stabilizes, prices will gradually sink back to their former levels, thanks to competition among sellers.

It is a serious possibility that anti-gouging laws, and the ensuing shortages, did about as much damage as the hurricane itself. At the least, they were irritating as heck.

Edit: I thought I should add a picture-

Edit #2: I originally wrote price floor when I meant price ceiling. Shame on me.

On Hot Girls and Government

2008-06-22T17:24:00.000-07:00

For almost a century, the negative externalities theory of Arthur C. Pigou has guided political theory. (Be patient. I'm getting to the hot girls.) The theory works like so: when two people trade, there may be side effects (externalities) for a third person, such as pollution. These effects are not taken into consideration by the two traders, who are only worried about their own welfare. Because effects on the third person are ignored, too many externalities are created. The end result is inefficient. Pigou's solution is to tax activities that lead to negative externalities. (The opposite is true of positive externalities.)

For example, many men enjoy seeing groups of hot girls blasting heavy metal in convertibles. According to Pigou, since the girls don't take the men into account when planning their roadtrips, there are fewer groups of mobile metal girls than would be socially optimal. He would have the government subsidize the roadtrips to compensate.

Coase changed this. His insight was simple — the third person doesn't sit back and let other people make decisions that affect him. He gets involved.

The results of the Coase theorem (see David D. Friedman's explanation, or one of Ronald Coase's original papers) are that

1) when transaction costs are low, the market works optimally, and

2) when transaction costs are high, it doesn't.

According to the Coase theorem, men would pay hot women to blast heavy metal — but they can't, because there are too many men, and we can't organize the payments among ourselves.

I am going to argue in this post that high transaction costs, which are often used to justify government intervention, can be cut more efficiently by private enterprise, without abandoning the optimal outcomes of the market.

Transaction Costs

Transaction costs are simply the costs of making a transaction. (It tends to be higher when more people are involved, if only because more coordination is required.) If Bob has a good worth $5 to him, but $10 to George, and George has a good worth $5 to him but $10 to Bob, then it seems natural that they'd trade. But if it costs Bob more than $5 worth of effort (or gas, or whatever) to organize the trade, they don't trade. It wouldn't make sense; Bob would lose money. Thus as the transaction costs go up, a trade must be more and more profitable to occur.

This in itself isn't used often used to justify government intervention. The government obviously has similar transaction costs. People have to reach some sort of agreement, pay shipping costs, etc., regardless. The major transaction cost problem used to defend government is a special case — public goods.

Public goods are goods that can't be provided individually — say, national defense, a clean environment, or hot girls driving convertibles. This creates a mass prisoner's dilemma. Everyone wants the public good, but to get it, the cooperation of a large number of people is required. However, each person, individually, would be better off not cooperating. If everyone else contributes, and the good is provided, then the person gets the good regardless of whether he pays. If no one cooperates and the good is not provided, the person is better off not paying. The money would be wasted, since no one else is contributing.

Table-wise, the payoffs for each course of action look like this (the player on top gets the first payoff, the player on the right gets the second):

	Cooperate	Defect
Cooperate	2, 2	3, 0
Defect	0, 3	1, 1

No matter the circumstance, each individual is better off not paying. And yet, at the same time, each person would prefer to have the good. This is the problem.

The key to solving the prisoners' dilemma is changing the payoffs. The ideal payoffs look like this:

	Cooperate	Defect
Cooperate	2, 2	0, 1
Defect	1, 0	0, 0

In this case, the best choice of each individual is always to cooperate.

Many have assumed that only a government can directly alter the payoffs. However, a mass contract could accomplish the same thing neatly, if it has an enforcement mechanism. For example, a contract could be propagated with these three clauses:

1. The signer will pay a certain fraction of the cost of the public good.

2. The signer will boycott (or punish in some other way) those who don't sign the contract.

3. This contract is only valid after a sufficient amount of people (the number to be determined by the situation) have signed it.

(3. is required to make sure there are enough signers to make the threat of punishment severe enough to discourage defection.)

This kind of contract would replace the prisoners' dilemma with a situation where the most profitable choice is always to cooperate.

If one man signs the contract and no one else does, he loses nothing — the contract is only valid if enough men sign for it to take effect. If one man signs it and many other men also sign it, he gets more headbanging highway hotties. If many other men sign it, but he does not, he does not gain as much because other men boycott him.

Business

This creates a role for a transaction company. Someone is needed to determine the best course of action, collect the payments, provide a way to discriminate between signers and non-signers (so signers know who to boycott), and make sure there is no cheating. The company could take its profit from the payments. I estimate the cost of this would be about ten thousand dollars, depending on the amount of people involved — probably less than current government solutions.

Even if this somehow is more expensive than government solutions, there is still a strong argument for adopting the private system. First, as public goods will be sold on the market, their allocation will be efficient in ways a government can't possibly imitate — supply will finally equal demand. Second, competition will give an incentive for improvements and therefore a constant lowering of transaction costs. The same cannot be said of government solutions, since they require a monopoly by definition. The governmental system allows no competition and has changed little in over two hundred years; the private system would quickly pass it up.

On top of that, the government suffers from its own public goods problems, as demonstrated by Buchanan and Tullock, 1962, Olson, 1965, and Caplan, 2007, among others. In real life, transaction costs aren't cut by government, only reorganized.

This is why there is no government subsidization of hot babes.

(Now if we could only legalize prostitution...)

Amazing

2008-05-08T14:27:00.000-07:00

John McCain and Hillary Clinton have done something amazing. They have discovered the world's only bad tax cut. OK, a political pollster actually discovered it, but McCain and Clinton have publicized the find for him.

The plan is this: remove the gas tax over the summer, to relieve strained consumers.

The result is this: gas companies get rich at the expense of taxpayers.

Some explaining is called for here.

The important thing to know is that the supply of gas, over the course of the summer, is already set. Gas companies don't have enough time to build new refineries and do the rest of the work that would be involved to get more, so the supply will not change. In other words, the supply curve looks like this:

Tax cuts push demand up. Prices, thanks to the tax cut, are lower, and people react by going on shopping sprees, in this case at the gas pump.

But this can't be good— supply and demand are already at an equilibrium (this is what markets do) so what happens to all the extra demand? The supply can't change, so that can't fix it.

This is what happens to the extra demand:

See the intersection of the blue and gray lines? That's the market equilibrium. That is what the price and quantity of products sold will be in a competitive market. When the demand is pushed upward by a tax cut, and the supply is inelastic (rigid, unchanging, vertical), sellers respond by raising prices the exact same amount. They have to, or they would run out of gas to sell.

This is why no economists agree with McCain or Clinton.

Clinton, for her part, doesn't trifle with little things like economics: "I'm not going to put my lot in with economists." She'll make the government chase it's own tail (replace one tax with another) if she damned well pleases.

And McCain is even worse. He doesn't seem to mind giving tax money to gas companies. (Hey, it's not like he's got any wars to fund.)

Also, both McCain and Clinton have received large campaign donations from oil companies. Coincidence? Probably.

This is a good point at which to sit back and reflect. There's a 2/3 chance (3/4, if you figure it as two separate races) that an utter dimwit will soon be our president. If you haven't already lost faith in democracy, now is the time to do so.

(If you're having a tough time with the graphs, here's a textbook that will help [look under the section "Many vs. Many"]. It's not very complicated, I promise.)

By the way, I am now endorsing Barack Obama. He is the world's only major presidential candidate with a brain, which is amazing.

Score One for the Economic Creationists

2008-05-03T19:26:00.000-07:00

Congress recently passed a bill, 414 to 1, banning the use of genetic discrimination by employers. I'm not impressed.

The justification is that it isn't moral for someone to be judged by their genes. Can you imagine not getting a job because you have bad genes? It just wouldn't be fair!

And this is where economics (the most resented of all the sciences) comes in.

Why would a company discriminate on the basis of genes? It is safe to assume that genetic tests are used to help determine who is best suited for a particular job. (If the tests are being used for anything else, the company loses money, so that wouldn't occur often.) Genetic tests improve the process whereby individuals are put in the place where they do the most good. They increase the productivity of the economy, and everyone benefits.

Consider:
Each genetically challenged person, if the law were applied only to him, would undoubtedly be better off. But what happens when we apply the law to everyone? Now each of the genetically challenged have to pay higher prices (due to lower productivity) which offsets his gain.

Will some of the genetically challenged benefit, overall? Will some gain more due to non-discrimination than they lose thanks to lower productivity? Certainly, but others will not be so fortunate. On top of that, the rest of society uniformly loses.

Because of this, the idea that genetic discrimination is immoral is discredited.

But these moral ideas have a bad habit of lingering when they aren't welcome, so let's examine this more closely.

Presumably, this moral judgment on genetics stems from the idea that people should not be judged based on something which they can't control. In some situations, such as legal cases, this makes sense. But economies are not courts of law; no employer is making judgments of guilty or not guilty. The idea is completely inapplicable in this sphere.

Example: When a tone-deaf singer fails to get a record deal, is that immoral? She's been working hard to improve, and her deficiency is no fault of her own, so she should be given a record deal — by the government, if necessary — right?

But you say: "No one wants to listen to that!" And of course, no one does. But that's not her fault, now is it?

The results of this line of reasoning are plainly horrific — innumerate engineers, illiterate novelists, and basically an all-encompassing government-enforced incompetence. Nobody wants this, and it's hard to blame them.

Clearly, no one really subscribes to this view of morality — so why did this legislation have such unanimous support? The problem is that no one bothered to think it through. It was supported only because it felt good.

(The same line of reasoning applies to health insurance, though I don't want to go into that for simplicity's sake.)

This legislation serves as strong evidence that American politics is not, as popularly believed, suffering from the subtle conspiracies of special interests; on the contrary, it is suffering from a vast, bipartisan conspiracy of stupidity.

Economics in One Lesson

2008-04-01T16:31:00.000-07:00

Liberty is the mother, not the daughter, of order.
- Pierre-Joseph Proudhon

Economics is usually presented in a Newtonian, axiomatic light, but in this essay I am taking a Darwinian approach. This perspective is used because it provides an intuitive understanding of the big picture in economics, which is too often hidden behind a wall of math and jargon.

From this evolutionary vantage point, businesses in a free market are subject to Darwinian selection. There is a limited amount of money in an economy. Firms producing products that satisfy customers are selected with that money — they get the resources. Unproductive firms, on the other hand, are not selected, and die (go out of business). Thus a free market, as with biological evolution, weeds out the unfit and leaves only the fit. The fit being those that make customers happy.

And there's more.

Entrepreneurs take successful business practices, and apply them in new businesses, and sometimes create new practices. Thanks to the entrepreneurs' desire to make money, productive business practices, which attract money, spread (on average) and unsuccessful business practices are abandoned (on average). Business practices in this way serve the role of genes.

Therefore all humans control the economy, through their discerning choices (selection) and through their innovations (mutation). Because all human knowledge is consulted, the invisible hand is, in a very real sense, pantomathic. In a free market, the economy evolves to serve humans.

Here is a proof: nobody on Earth (except perhaps Leonard Read) knows how to make a pencil. The rubber, the lacquer, the graphite, the wood, the metal, the glue — no single person on Earth could create or harvest these on his own and combine them to create even a simple pencil. How, then, did pencils come to be produced?

I am ignorant of the historical details, but, presumably, a smart man had the idea of using graphite to write. An entrepreneur then took this idea, and turned it into a profitable business. Because these graphite rods were selected rigorously by consumers, other entrepreneurs entered the market — the ancestral pencil genes reproduced. After the second entrepreneur entered the market, competition ensued. Mutations were introduced. Mills were exapted to provide the wood holder for the graphite. And so on, up to the modern pencil. Along the way, the evolution in other industries — mining, metallurgy, and chemical production, among others — was harnessed by the pencil entrepreneurs, who in turn gave money to the businesses they judged to be most fit.

The result was, and still is, a complex system of cooperation where a large variety of people, acting only to benefit themselves, are led to contribute directly and indirectly to the creation of your pencil. Most are not aware of this cooperation, and they do not need to be — it is a natural consequence of the incentives created by private property and trade. This is the force organizing market economies, creating a social order designed specifically to satisfy human needs.

There are many economic myths possessing our society which can be discredited by a careful application of this model. Socialists, for example, advocate an economy organized by the government. This simple model shows why the idea is silly — through the use of force, governments avoid the Darwinian selection of the market. When consumers have no power to select, the institutions do not evolve to serve them. (There is some choice, in voting and location, but these are negligible compared to voluntary market interaction.) The result is an uncoordinated, unadapting economy and mass poverty, as shown by the failure of communist China and the Soviet Union. Beware of economic creationism.

More

John P. Birchall's Evolutionary Economics

Paul Krugman, What Economists Can Learn from Evolutionary Theorists

Greg Mankiw, Principles of Economics — the math and jargon version

My Beef With Thomas Hobbes

2008-03-02T09:21:00.000-08:00

Thomas Hobbes is the father of modern political philosophy. I think he should have been burned at the stake. This is why:

Hobbes was a conservative — which, in the terms of 1651, meant he was a totalitarian monarchist. In his highly regarded book, Leviathan, he sets out to prove that totalitarian monarchy is based on a “social contract”, and is, therefore, completely moral. In other words, tyrannical dictators are OK, because the populace agrees to be controlled.

This theory is wrong on every relevant level.

First, it is historically inaccurate. There has never, in the history of the world, been a coercive government which resulted from a contract between individuals. Hobbes says this doesn’t matter. His apathetic attitude is impossible to defend, for a contract that hasn’t been signed is void. If government should be a contractual creation, and no one signed a contract, it follows that there should be no government.

He then goes on to explain that life without government is, to use the famous quote, “nasty, brutish, and short”. This is because no agreements are possible in an anarchy. There must be a government to enforce the rules:

For if we could suppose a great Multitude of men to consent in the observation of Justice, and other lawes of nature without a common Power to keep them in awe, we might as well suppose all Man-kind to do the same; and then there neither would be, nor need to be any Civill Government, or Common-wealth at all; because there would be peace without subjection.

He assumes agreements can't be enforced without a government, then assumes that an agreement to create a government can be enforced. As he has admitted, his assumption that a government-creating contract can be enforced obliterates the need for a government in the first place. This is characteristic of Hobbes. As long as it favors the monarchy, logical consistency is unnecessary.

Another flaw is his inconsistent use of the word "contract". The entirety of Hobbes' argument depends on a definition of contract which excludes coercion. Why? Because contracts are regarded as more ethical than forced relationships only because the former are voluntary, that is, non-coercive. By altering the definition of contract to allow for coercion, he alters the moral composition of contracts, so that they aren't automatically ethical. Imagine: "Rape is not a crime. If a woman didn't want to be raped, she wouldn't walk alone after dark. As you can see, rape is completely moral." It's the same bait-and-switch. All he did was give coercion a new name. He even, in a Freudian slip, consistently refers to government as "coercive", despite the explicitly non-coercive nature of a contract.

Lastly, his description of the state of nature is completely outdated thanks to modern sociobiology. There is wide agreement among psychologists that morality is an evolved, and thus inherent, property of human individuals. Thanks in part to this, it has been shown, historically and theoretically, that in societies in which every person knows every other, order can be kept without a government. This is due to a tit for tat strategy — basically, revenge — that we've evolved to cope with social environments. As long as a person can keep track of criminals, the potential for revenge creates a strong incentive for cooperation, and peaceful society is possible. (Axelrod, 2006) In short, the Hobbesian state of nature does not exist.

To sum up Hobbes’ argument, he says, and I paraphrase, “People should accept the coercive power of the government because
1) They signed a contract — well, OK, they didn’t really sign a contract — and they did this because
2) Anarchy is perpetual war, and no one can reach agreements while in it — except when they want to create a state — and
3) Even though contracts are, by definition, non-coercive, this one is coercive — hey, I’m writing the book here, it can be coercive if I want it to be — and
4) This defies all psychological and historical evidence, but that’s not the point. The point is that
5) People cannot be free.”

In Conclusion:

The social contract theory is not only historically inaccurate, psychologically inaccurate, and logically indefensible, it also presupposes that men can create and abide by contracts in the absence of state authority, which is more appropriately the basis for a contractual anarchic society. Q. E. D.

Hobbes' theory has been indirectly responsible for more misery than that of any other in history. I hope he's tortured by a totalitarian government in Hell. (The torture being voluntary. Otherwise he'd leave, right?)

My Civilized Amorality

2008-02-21T21:25:00.000-08:00

I am criticized occasionally for my selfish ethics. I try to avoid debating this — I have realized that ethics, like religions, are usually not chosen rationally (even celebrated philosophers such as Immanuel Kant, when tackling the subject, resort to complicated apologetics), but I wanted to at least clarify my views.

So let me explain, just once, why I am an egoist, why you should be one, and why this would be a good thing.

I have been an egoist for… close to a decade now, before I was an atheist even. I was a cool kid back then (still am), and thought about these kinds of issues constantly. When wondering why I should be a good person, I decided it was so that I would benefit in Heaven (I would benefit on Earth, too, but Heaven was more important then). The reason was not, as most people assumed, that morals were their own purpose — that morality was good “just because” (deontology). Morality was good because it benefited me.

In ninth grade, I read The Fountainhead. I had kept my moral theory to myself, sensing it would upset those around me who put so much stock in “altruism” and “selflessness”. In The Fountainhead, I found my theory refined, expanded, and brilliantly portrayed. I also found a name for this theory — egoism, and have advocated it openly ever since.

As I expected, this upset many knee-jerk “selfless altruists”, who then proceeded to “disprove” me.

Many non-egoists, when debating ethics, tend to assume that egoism would have disastrous long-term effects. But this is a misunderstanding. How would sacrificing the future to the present serve anyone? As my antagonists have pointed out, it wouldn’t. From this it follows that an egoist will take these effects into account and act accordingly. (Oddly, these people rejected egoism for purely selfish [egoistic] reasons.) There is an hedonistic element in egoism, yes, but in general it is closer to Aristotle’s eudemonia, depending on the values of the particular individual.

Another common objection is that egoism is immoral.
What can I say? If “immoral” means “selfish”, then, yes, it is (though I prefer “amoral”). This argument, however, assumes what it is trying to prove. Does morality matter if it doesn’t make sense? The reasonable answer is no, but these debaters want me to think in circles and answer yes. This seems to be a tough habit to break for many people. It might help them to keep in mind that the discussion is about meta-ethics — the basis for ethics — so an ethical rule cannot be used as an argument.

In his 1739 work A Treatise of Human Nature, the philosopher David Hume put forth what is now known as the is/ought problem. The problem is this: moral imperatives cannot be derived from objective facts. This means morality, in the usual transcendent/deontological sense, is irrational. This has historically given moralists trouble, and no vindication of the traditional morality has yet emerged. I am convinced that this problem cannot be solved and thus that morality, as commonly conceived, cannot be supported with reason. The only logically consistent choices are egoism — and nihilism. I like things which benefit me (by definition!), so egoism is my choice.

In more recent times, sociobiologists have lent scientific credibility to egoism by discovering an evolutionary explanation for our instinctive morality. I won’t go into detail here, except to say that evolution acts almost entirely through the selection of individuals, which means that our morality actually served the individual self-interest of our ancestors. (If you’d like more information on this subject, see The Evolution of Cooperation by Robert Axelrod, or basically any current scientific work on ethics.)

So what does this mean?

The major effect this philosophy has on my life is the conscious suppression of my moral instincts when they interfere with my well-being. I do this in the same way I suppress my instinctual aggression, sexual instincts, etc., when they become a hindrance. In particular, I tend to ignore guilt trips.

In short, the major insight of my philosophy is that guilt trips are irrational. : )

I guess what irritates some people about my mindset is not really that I ignore guilt trips — it’s that I consciously decide not to feel guilty about ignoring them. For these people, moral feelings are taken as a justification for self-righteousness. This attitude annoys me. Moral feelings are emotions like any other, not supernatural messages from the human spirit granting moral omniscience.

(But here I’m getting bitter…)

You should adopt egoism because — obviously — it benefits you.

This is good because you are better off. Let others worry about themselves. Insofar as their welfare doesn’t affect you, it’s their business.

This is not to say you should be a robot (or a “Randroid”, heh). You have moral instincts, and many times it will be worth going along with them, if only to make yourself feel nice.

So don’t be ashamed to be selfish. Don’t let anything get in the way of your happiness. No one else has a right to your life.

What a mushy post.