Monthly Archives: October 2013

Financing Starships

A science advisor to the not-entirely-realistic recent movie Gravity said:

Often a story worth telling can fall apart if there is a complete dedication to perfect science. The goal is to make everything seem grounded enough in the physical world that it seems real. So story trumps science every time. (more)

Even the science fiction that tries hardest for realism usually sacrifices it for a better story. It isn’t just that authors make accidental mistakes due to a lack of attention. Quite often, realism gets in the way of the story, because realism conflicts with our tastes in stories. That is, many features we want in stories (like good beating evil) are intrinsically unrealistic.

This is why I think it important to highlight story unrealism, especially the unrealism intrinsic to the stories said to be most realistic. Its not just gotchas to show off how much you know, or teach in the process. Its also to counter the popular illusion that stories are how-to manuals, there to teach us about reality in a fast and fun way.

Many have praised Charlie Stross’s novel Neptune’s Brood, released in July. I also enjoyed it. But economists such as Krugman and Tabarrok have praised its econ realism, and I haven’t found anyone criticizing that. So I guess such criticism is up to me (again). (I have thought about related issues before; see here, here.)

The following quotes give the setting of Neptune’s Brood. (Worry not; I give no spoilers.)
Continue reading "Financing Starships" »

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Joiners v. Middlers

Kelley … traced the success of conservative churches to their ability to attract and retain an active and committed membership, characteristics that he in turn attributed to their strict demands for complete loyalty, unwavering belief, and rigid adherence to a distinctive lifestyle. … [Such] a group limits and thereby increases the cost of non-group activities, such as socializing with members of other churches or pursuing “secular” pastime. …

Seemingly unproductive costs … screen out people whose participation would otherwise be low, while at the same time they increase participation among those who do join. As a consequence, apparently unproductive sacrifices can increase the utility of group members. Efficient religions with perfectly rational members may thus embrace stigma, self-sacrifice, and bizarre behavioral standards. …

When we group religions according to the (rated) stringency of their demands, … [we see that] compared to members of other Protestant denominations, [high-demand] sect members are poorer and less educated, contribute more money and attend more services, hold stronger beliefs, belong to more church-related groups, and are less involved in secular organizations. … Data from the 1990 National Jewish Population Survey reveal patterns of interdenominational variation virtually identical to those observed within Protestantism. (more)

I see these tendencies in opinions:

  1. Those with more opinions on some topic categories have more on other categories.
  2. Those with more opinions overall have more extreme opinions on each topic.
  3. Those with more extreme opinions on some topics have more extreme opinions on others.
  4. Those with more extreme opinions are more eager to express their opinions, and vice versa.
  5. Those with more extreme opinions are more eager to join groups and attend their meetings.

(All these could have instead been expressed in terms of less extreme opinions, and “extreme” means noticeably away from the distribution middle.)

One might try to explain these by saying that opinions on a few key topics drive most other opinions. Folks with weak opinions on key topics thus have fewer opinions on other topics, and less interest in expressing opinions or in joining groups to spread the word. Yet there is little evidence that such key opinions exist; most people show little correlation of opinion across topics, or even on the same subject across time.

A more plausible explanation follows the quote above on religion. Religions, ideologies, and other idea-affiliated social groups vary in the level of commitment they ask of members. High commitment groups produce stronger community bonds, and people vary in their taste for such strong bonds. Some folks are “joiners,” with a taste for more strongly bonded groups. Joiners have an induced taste for groups with extreme opinions, and thus an induced taste to have their own more extreme opinions, in order to better fit with stronger groups. Thus joiners tend to let themselves have more opinions and more extreme opinions on many topics.

The opposite group are “middlers,” who prefer to get along mildly well with most everyone, instead of bonding more tightly with a smaller group. Middlers have fewer opinions, fewer extreme opinions, and tend not to join groups that are clearly distinguished by being associated with unusual opinions.

The opinions habits of both joiners and middlers come mainly from social preferences, instead of a preference for belief accuracy. While it isn’t obvious which group is more wrong, it is more obviously wrong to embody the opinion correlations described above.

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Love Is An Interpretation


As suggested by sex is near, love is far, it seems that we don’t directly feel romantic love. Instead, we rather abstractly interpret our feelings as being love or not, depending on whether we think our relation fits our abstract ideal of love:

When adult women were asked about love and how they have experienced love in their own lives, … many women found it difficult to talk about their feelings generally and love in particular. There was an absence of falling in love stories and rather, women explained that they ‘drifted’ into relationships, or they ‘just happened’. …

Love continues to be used as the legitimating ideology for family, relationships and marriage. Moreover, the representation of love in society is omnipresent; it is depicted in blockbuster films, on daytime television, in novels, in music and in numerous other cultural formats. This ‘commercialization’ of love has commonly captured a specific form of love: one which promises salvation for both sexes, although perhaps more so for women. …

Love was mentioned often by the 23 young, mostly heterosexual (one woman identified as bisexual), adult women with whom this paper is concerned. Yet, the context in which love was mentioned was almost always in relation to abstract discussions about relationships and marriage. Romantic discourses were shunned in favour of pragmatic, objective assessments of emotion. When I asked them to tell me about their own relationships they often seemed to struggle to put their feelings into words and there was a distinct absence of falling in love stories. These women did not openly desire love and many accounts of relationships were based on ‘drifting’ into relationships with friends or finding that love ‘just happened’. …

Eleanor commented, ‘about a month ago I suddenly woke up and I just thought I’m in love with you. And I thought I was before that point but I just woke up and I just knew’. … The absence of love stories is documented in participants’ use of cover stories, metaphors and a ‘drift’ discourse. Yet when asked directly about love, respondents did not shy away from talking about their feelings. …

Narratives of whirlwind romances were rare but the significance and meaning of love, as well as the romantic image of ‘the one true love’, led the respondents to define love in a very specific way. Thus it was common for them to denounce the love they felt in past relationships in the form of ‘I thought it was love . . .’. Michelle was a good example of this: ‘I thought I was in love with him and in hindsight it was quite an inappropriate [relationship]’. Michelle later ‘realizes’ that it was not love at all. (Carter, 2013; ungated)

That is, these women don’t see love in the details of how their relations started or grew. At some point they just decide they are in love. Later, if they change how they think about the relation, they may change their mind about if they were in love. So if they feel love, it is a feeling attached to and drawn mostly from an abstract interpretation of a situation, rather than from particular concrete details. Love is far indeed.

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Beware Value Talk

Decisions depend on both values and facts. Values are about us and what we want, while (beliefs about) facts are about everything else, especially the way everything else changes how what we get depends on what we do. Both values and facts are relevant to decisions.

But honestly, facts usually matter far more. Yes, sometimes we err by mistaking our values, and sometimes our values are more complex than we realize. But for the vast majority of our decisions, we have a good rough idea of what we value, and most of our decision problem (on the margin) is to figure out relevant facts. (If you review the last ten decisions you made, I think you’ll see this is obvious.)

Even when learning values is important, talking values with others usually helps less. To learn what we value, we mostly just need to try different things out and see how we feel about them. So compared to thinking about values, talking values seems even less useful for informing decisions. That is, we have better ways to coordinate to discover the world we share than to coordinate to learn our individual values. Yet we seem to spend an awful lot of time discussing values. Especially on grand topics like politics, religion, charity, sex/love, the arts, the future, etc., we seem to spend more time talking values than facts. (We also love to drop names on these topics.) Why?

Such topics tend to put us in a far mental mode, and far modes focus us on basic values relative to practical constraints. Which makes sense if far modes function more to manage our social impressions. That is, value-focused talk makes sense if such talk functions less to advise decisions, and more to help us look good. By talking values we can signal our loyalties and the norms we support, and we can covertly hint about norm violations we might overlook. (Dropping names also lets us covertly signal our loyalties.)

This is what bugs me personally about most discussions of grand topics — they are so full of value affirmations (and name dropping), and so empty of info to improve decisions. The modes that we prefer for such topics, such as stories, music, testimonials, and inspirational speeches, are much better for transmitting values than facts. Worse, people love to revisit the same value topics over and over, even though their values rarely change; it is info about facts that change, and so justify revising topics often. Also, the “experts” we prefer on these grand topics are mostly those whose main celebrated credentials are about their values and their abilities to move values, not about their understanding of facts.

I’m glad to be an academic, since our standard mode of talk is better suited to discerning and sharing facts than values. And I’m especially glad to be an economist, since our using a standard value metric lets us focus most of our disagreement on differing views about facts. Of course even so most academic discussion isn’t very well targeted at improving decisions; we are far more interested in getting better credentialed as being impressive. But at least we mostly talk facts.

If you think you are one of the rare folks who actually cares more about making better decisions than about signaling loyalties, and if you wanted to find other like minded folks to work with, I’d think you’d tend to avoid talking values, as that would be a bad sign about your interests. But in fact most folks who say they are the rare ones who care mainly about better decisions, and who take lots of personal time talk about it, seem in fact to spend most of their time talking values. They even tend to prefer the value focused modes and experts. Why are so few folks willing to even pretend to focus on facts?

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Writers Focus On Topic Or Audience?

Writers must attend both to their topic, and to their audience. They must learn things both about the topics on which they write, and about the people who will evaluate their writings. But to which of these do they attend more? For some kinds of writers, idealists say that they mostly attend to their topics, and for other kinds of writers, cynics say that they mostly attend to their audience. Who is more right?

To help answer this question, I suggest a simple test. When a writer solicits commentary on her drafts, does she mostly seek out people who know about the topics on which she writes, or does she mostly seek out people who are or are like or who can predict the audience she must please? Of course there is often a strong correlation between these features, as the audience one must please often knows a lot about the topic. And sometimes the audience is part of the topic. So attending to the audience can indirectly attend to the topic, and vice versa.

Even so, since knowledge of the topic and representation of the audience are not perfectly correlated, if one sees enough writers solicit enough commentary on drafts, one should be able to make out a difference. And in my limited experience, the writers I’ve known seem to focus much more on audience than on topic. They are eager to get comments from folks who know little about the topic but could be influential in getting their writing accepted (or are like or can predict such evaluators), and pay less attention to folks who know a lot about their topic but have little influence (and aren’t much like influential folks).

But what do the rest of you see? True, even if you confirm my observation, we might explain it by saying it is just much easier to learn by reading about a topic than about an audience – so direct feedback is better for learning about audiences. But first, let’s get this datum straight.

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Finance Celebrated, Ignored

There is no way to predict the price of stocks and bonds over the next few days or weeks. But it is quite possible to foresee the broad course of these prices over longer periods, such as the next three to five years. These findings, which might seem both surprising and contradictory, were made and analyzed by this year’s [Economics Nobel] Laureates, Eugene Fama, Lars Peter Hansen and Robert Shiller. (more)

Today news outlets of all sorts will report on this year’s Nobel prize in economics, which goes to three giants of finance. There will be lots of commentary on subtle results in finance and what they mean for stock returns and financial crises. But one thing you might not notice in all that commentary is a simple fact that seems too obvious and widely accepted among finance experts and the Nobel committee to be worth mentioning: speculative markets generally do an excellent job of aggregating information.

Among the many theories still debated to explain the wide variety of odd patterns in market prices, virtually none of them have much to do with speculators failing to act on cheaply available information. Why? Because so many folks in finance have long tried and failed to find satisfactory explanations along those lines, and have basically given up. This isn’t to say that we never see price errors after the fact, along with previously available info not very well considered. (See this nice example.) The point is that there are few interesting or consistent pattern of such things; mostly speculators just make excusable mistakes about what info to consider.

Yet even though this simple fact seems too obvious for finance experts to mention, the vast majority of the rest of news coverage and commentary on all other subjects today, and pretty much every day, will act as if they disagreed. Folks will discuss and debate and disagree on other subjects, and talk as if the best way for most of us to form accurate opinions on such subjects is to listen to arguments and commentary offered by various pundits and experts and then decide who and what we each believe. Yes this is the way our ancestors did it, and yes this is how we deal with disagreements in our personal lives, and yes this was usually the best method.

But by now we should know very well that we would get more accurate estimates more cheaply on most widely discussed issues of fact by creating (and legalizing), and if need be subsidizing, speculative betting markets on such topics. This isn’t just vague speculation, this is based on very well established results in finance, results too obvious to seem worth mentioning when experts discuss finance. Yet somehow the world of media continues to act is if it doesn’t know. Or perhaps it doesn’t care; punditry just isn’t about accuracy.

Even these Nobel prize winners, now that they have the attention of the world for a few days, won’t bother to mention how we could use finance to effectively answer most of the non-finance questions we commonly debate. These academic finance experts won’t even think to discuss how the academic finance community itself could use speculative markets to create and disseminate accurate estimates on important disputes in academic finance. Is that because they don’t notice, or don’t care, or what?

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Stories Change Goals

Narratives typically consist of protagonists pursuing goals. … Not only do readers of a narrative process protagonists’ goals in order to understand the story, but they may also appropriate those goals as their own. … There is ample evidence of increased accessibility of goal-related information (com- pared to neutral information) in narrative processing. …

The studies reported here yielded results consistent with the hypothesis that embedding a concept in a narrative is more likely to activate a goal than is priming that same concept out of narrative context. Specifically, embedding the concept of high achievement in a narrative led to greater post-delay behavioral assimilation than did priming the same concept in a non-narrative context, and lower post-fulfillment accessibility. … Narrative processing involves fitting the semantic information presented in a story into a situation model that is centrally structured around goals, and this processing serves to activate that goal. …

Cues that signal expended effort in the pursuit of goals increase the accessibility of goal-related information and increase goal-pursuit. In one study, for example, they had participants watch a short animated film in which a protagonist (a ball) tries to get a kite out of a tree for another character. In different versions of the film, the ball expends more or less effort in attempting to retrieve the kite. When participants were later asked to help the experimenter, those exposed to a more effortful protagonist were more helpful. …

There is growing recognition of the importance and effectiveness of narrative communication techniques in public service domains, such as health-related behavior change. (more)

You may see this as a good thing if you see yourself as a story-teller changing the goals of others. You may see more cause for concern if you see yourself as a story-reader whose goals are being changed by story-tellers.

I also consider this to be weak evidence that stories tend to put people in a more far mental mode.

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In Praise Of Profanity

Cursing … is a human universal. Every language, dialect or patois ever studied, whether living or dead, spoken by millions or by a single small tribe, turns out to have its share of forbidden speech. … The earliest writings, which date from 5,000 years ago, include their share of off-color descriptions of the human form and its ever-colorful functions. …

“Studies show that if you’re with a group of close friends, the more relaxed you are, the more you swear,” Burridge said. “It’s a way of saying: ‘I’m so comfortable here, I can let off steam. I can say whatever I like.’ ” Evidence also suggests that cursing can be an effective means of venting aggression and thereby forestalling physical violence. …

Men generally curse more than women, unless said women are in a sorority, and that university provosts swear more than librarians or the staff members of the university day care center. … Chimpanzees engage in what appears to be a kind of cursing match as a means of venting aggression and avoiding a potentially dangerous physical clash. (more)

My parents were very religious. They never drank alcohol, gambled, or used profanity. Since leaving them I’ve become comfortable with alcohol, and with gambling on important topics, but I’ve never been comfortable with profanity. Yet on refection, that is mostly a problem with me, not with profanity. Let me explain.

Traditionally, lower classes did hard physical labor, and as a result wore tough work clothes, and had skin that was callused, tanned, and wrinkled. Upper classes showed that they were too rich or skilled for such work by wearing fragile clothes and having soft smooth light skin. Similarly, upper classes have often nurtured polite language, avoidance of direct insult, and a heightened sensitivity and squeamishness on topics like sex or excrement. Such habits have helped the upper classes to contrast themselves with the tough and calloused attitudes of lower classes toward such things.

While upper classes have often portrayed lower class habits as due to ignorance of the universal benefits of politeness and sensitivity, lower class habits seem to me to in fact be functional adaptations to common environments. Just as it can be important to judge physical strength and toughness when allocating workers to hard physical labor, it can also be important to judge emotional toughness for tasks that may be emotionally stressful.

So lower class cultures tend to not only have more demonstrations of physical strength and toughness, including dangerous dares, fist fights, and excess drinking, such cultures also tend to have more direct and aggressive verbal challenges as well as profanity, insults, teasing, and taunting. People are even given nicknames that highlight their embarrassing weaknesses.

Such habits not only let lower class workers distinguish themselves from upper class managers and customers, they also help such workers to better express and gauge their physical and emotional weaknesses and strengths. This lets them better select and allocate people to tasks, and to push group members up to but not beyond their limits. So it makes sense that today profanity is more common in work groups that depend closely on one another, and who have high levels of physical and emotional stress. This includes surgeons, warriors, finance traders, movie makers, and restaurant servers.

Today, laws against sexual harassment, and wider monitoring of worker speech, discourage workplace profanity, in an apparent attempt to impose high class cultural standards on other classes. We should expect this to raise our status in the eyes of the world, even as it reduces the functionality of workgroups who strain against the limits of their capacities.

I also expect us to allow exceptions for work we consider to be especially important, like war and movies. I take recent increases in campus speech codes that basically ban any talk that anyone might offend anyone as further evidence that schools are more about signaling status than about gaining productivity.

If the world continues to get richer and more pampered, expect more rules against profanity in places that want to show themselves as high status. If, however, the world ever returns to really needing to get things done, expect any such rules to be mostly ignored, as people focus on productivity.

The em world scenario that I’ve been working on should have low wages, more competition, and work groups pushed to the limits of their emotional abilities, even as differences in physical abilities disappear. Em kids would also be rare, and rarely mix with adults. This all suggests that em work groups would more often adopt traditional working class habits, except emphasizing emotional over physical toughness. Em work groups will probably use lots of strongly emotional profanity, insults, and teasing.

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Graeber’s Debt book

About a year ago I finished David Graeber’s 2011 book Debt: The First 5000 Years. Since he’s an Occupy Wall Street anthropologist, you might expect me to dislike the book. But I enjoyed it, and learned a lot, even though it does ramble, and his economics is weak.

Graeber’s overall mood is anti-debt:

For thousands of years, the struggle between rich and poor has largely taken the form of conflicts between creditors and debtors – of arguments about the rights and wrongs of interest payments, debt peonage, amnesty, repossession, restitution, the sequestering of sheep, the seizing of vineyards, and the selling of debtors’ children into slavery. By the same token, for the last five thousand years, with remarkable regularity, popular insurrections have begun the same way: with the ritual destructions of the debt records – tablets, papyri, ledgers, whatever form they might have taken in any particular time and place. (After that, rebels usually go after the records of landholding and tax assessments.) As the great classicist Moses Finley often liked to say, in the ancient world, all revolutionary movements had a single program: “Cancel the debts and redistribute the land.” (p.8)

That is sure a dramatic image, and makes one’s opinion on debt seem pretty fundamental. Oddly, Graeber never actually comes out directly against debt. He doesn’t seem to want to forbid it. Instead he seems to just want to set a low bar for forgiving the debts of the poor, mainly because helping the poor is a good thing. The closest thing to an argument I found:

The remarkable thing about the statement “one has to pay one’s debts” is that even according to standard economic theory, it isn’t true. A lender is supposed to accept a certain degree of risk. If all loans, no matter how idiotic, were still retrievable – if there were no bankruptcy laws, for instance – the results would be disastrous. What reason would lenders have not to make a stupid loan? (p.3)

Actually standard economic theory doesn’t say that the results without bankruptcy laws would be disastrous. Yes, the more stuff people can promise as collateral to support loans, or promise to suffer if they fail to pay, the more loans will be made, and the more people there will end up poorer or suffering because they can’t pay loans. But economists can’t say this is bad without adding assumptions about why such poverty is inefficient.

You might say that poverty is economically inefficient because it makes other people feel bad to know it exists, or because it keeps investments from being made in poor folks’ human capital. It could make sense to support general redistribution to deal with such problems. But debt forgiveness is not general redistribution. A policy of forgiving the debts of the especially poor mainly keeps the nearly poor from taking out loans from which they expect to gain overall, and raises the loan interest rates they pay.

Standard economic theory says that such debt forgiveness redistributes to the very poor, but not by taxing the rich. Anticipated future debt forgiveness instead taxes the nearly poor who take out loans and then do well, by raising the interest rates at which they repay their loans.

Yes debts are one of the ways by which people take chances with their wealth level, sometimes rising and sometimes falling. And yes if we stopped the nearly poor from taking such chances we might reduce the numbers of the very poor. But why pick only on loans? There are lots of other ways in which the nearly poor take chances with their wealth level, such as by trying new careers, jobs, neighborhoods, and social groups. Should we try to stop these risky behaviors as well?

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On End Of Period Spending

Last week US federal agencies were in a hurry to spend the last of their annual budget. Agencies that don’t spend all of their budget not only don’t get to save it for next year, next year’s budget will likely be reduced by the unspent amount. And the manager sacked. This last minute burst of spending is usually less carefully considered, and less useful, than other spending. (More about it all here.)

This situation is mildly puzzling. Why is not spending all of a budget such a bad sign? If needs and opportunities vary in time, spending that varies in time seems appropriate. Perhaps incompetent managers who just can’t plan induce more spending fluctuations. But is that really so much more likely than varying needs and opportunities? Some say that spending less than budgeted shows an agency “needs” less overall. But any tendency for agencies that sometimes spend less than budget to be less valuable seems to me much weaker than the tendency of last minute spending to be less valuable. So why aren’t bursts of last minute spending seen as just as bad or worse?

One explanation is that we developed habits of judging organizations and managers based on their budget habits in contexts where it was much harder to observe the time pattern of spending than the total amount spent. We developed the social norm of disapproving of unspent budgets in that context, and have been slow to adapt to a world where the time pattern of spending is visible.

A related explanation is while spending more near period end looks bad, there is a less clear bright line to coordinate on to say which time patterns of spending look bad. So while we each privately know last minute spending bursts look bad, we don’t coordinate to say it together.

Perhaps there are other plausible explanations. But one relatively robust conclusion here I think is that the political process can be pretty terrible at coordinating to react to simple easily visible info. It isn’t enough that we can all know something. We have to all know that we can know and then coordinate to switch new social norms, so that we all know that we all expect us all to actually look at this visible info sometimes, and to react in a certain easily verified way to that info.

Not very encouraging for folks who hope that government will finally sit up and notice other kinds of relevant policy info that it has long neglected.

Added 11Oct:

Spending in the last week of the year is 4.9 times higher than the rest-of-the-year weekly average. … Quality scores for year-end projects are 2.2 to 5.6 times more likely to be below the central value. Allowing agencies to roll over unused funding into the subsequent year can improve efficiency. We calibrate a dynamic model of spending and show that allowing rollover leads to welfare gains of up to 13 percent. … The one federal agency that has the ability to roll over unused funding for I.T. projects does not exhibit a year-end spike in spending or drop-off in quality in this category of spending. (more)

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