Tag Archives: Current Affairs

Mocking As Respect

How can you tell which are the dominant ethnicities, professions, or genders? One easy test: in our society, dominant groups are ones that people are allowed to insult and lampoon. For example, you can get in a lot more trouble for making negative general statements about blacks or women than about whites or men. Maybe this fact can comfort dad today, as he gets his annual card mocking his role as father:

There’s a good chance if you receive — or give — a Father’s Day card this weekend, Dad will be portrayed as a farting, beer-obsessed, tool-challenged buffoon who would rather hog the TV remote, go fishing or play golf than be with the kids. Such cards are top sellers among the 87 million Father’s Day cards that will be given this year. …

About 25 percent of Hallmark’s Father’s Day cards are in the humor category, compared with 15 percent of Mother’s Day cards. Men also appreciate punch-in-the-arm, even immature, humor more than women do, companies say. …. You try to give mom a fart joke for Mother’s Day, it probably won’t fly very well, but with dad you can. …

Whyatt, the cartoonist, … said. “I’m sure there’s a way to make the new image of fathers funny as well, but it would be a shame to lose making dad the butt of the joke. Even though we’re all changing, hopefully we’ll still be able to take a joke.” (more)

Dads, the fact that you let them mock you, and show you can take a joke, is a good counter-signaling signal that you are loved and respected. Enjoy.

Note that while folks are eager to cut many public signals of which groups dominate, there is little push to cut this sort of signal.

Added 4p: I should note that in simple models counter-signaling there are three types, and the same signal is sent by the high and low type, which is a different signal from the mid type. So yes there are also low status groups today, like animals, which one is allowed to lampoon.

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How Important Is Inequality?

My post last August on “Inequality Talk is About Grabbing” got 215 comments, which may be a record. In that post I tried to explain why most inequality talk focuses on the small part of inequality that is financial inequality at a given time between the families of a nation. I suggested that the reason is that we think we could grab lots of money from the rich without much pain to the rest of us.

Recently Piketty’s book has induced lots of folks to express deep concern about the same sort of inequality. Piketty says rising inequality is due to owners of capital getting higher returns than the economic growth rate, and recommends taxing capital. Yes that would greatly reduce the total amount of capital in the long run, and therefore also cut future wages and wealth, but gosh darn it inequality is harmful enough to be worth paying such a huge price to reduce it. This is a crisis and something must be done! So say Piketty’s loud chorus of fans.

But consider what a more expert source says is the real reason of rising (between-family within-nation at-a-time) inequality:

In summary, the authors attribute the growth of household inequality to three interacting forces. The first is rising returns to education. Earnings across educational classes have become more polarized. The second factor is increased positive assortative mating. People with similar socioeconomic backgrounds tend increasingly to marry each other, exacerbating income inequality. Third, the increase in married female labor force participation has heightened inequality, and has also made women’s earnings an increasingly important determinant of household income inequality. (more)

Do you think those who thought rising inequality was a crisis justifying our destroying lots of long run capital also think it important enough to justify reducing education, assortative mating, and female work, if those are the causes? Yeah, me neither. And that’s what you’d expect if grabbing is more the motive here than cutting inequality.

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Anxiety Du Jour Books

Imagine that you wanted to write a popular book on the anxiety de jour, and that this anxiety happened to be increased moral depravity. Well there’d be an easy time-tested recipe to follow.

First, give some plausibility arguments for why moral depravity is a big deal. Since everyone already thinks so, weak arguments would be fine. Second, give lots of concrete examples of people and orgs affected by moral depravity, examples readers can relate to. Especially examples about high status and new things – people love to read about those. Third, mention important recent worrying trends backed up by serious research, and vaguely suggest that these trends are caused by increased moral depravity. No need for concrete arguments, you just need to show you are a serious person tracking serious trends. Finally, recommend a bunch of policies to deal with moral depravity, policies many of your readers already support, and that you would have supported even if every one of those recent trends were opposite.

Most important: have your book come out just as talk about moral depravity was peaking, and be an author with a lot of status in reader eyes. Your readers would mainly just want a book they could point to as they argue the topic, so they’d mainly just want an easy read without subtle arguments that they could fail to understand.

This is the recipe that Erik Brynjolfsson and Andrew McAfee follow in their new book The Second Machine Age. They are high status authors, and their book arrives just as computer anxiety is peaking. First, they suggest that computers will cause an economic revolution as big as the industrial revolution, which they say was caused by the steam engine. Second, they review lots of fashionable new computer products, demos and hoped-for revolutions. Third, they review serious recent trends backed up by serious research, including decreasing labor fraction of income, and increasing wage variance. They vaguely suggest that these trends are caused by computers, but offer relatively little evidence in support of this claim. Finally, they offer a bunch of standard policy recommendations that they would have made anyway, even if all these trends had been the opposite.

While reviewing trends, the book points to this graph (taken from this paper):

ElectricVsComputers

It compares recent US productivity growth to growth during the era of electrification, 1890-1940, and suggests that growth might increase soon, if it follows the same pattern. But if this is the growth effect size to expect from computers, it is vastly smaller than the industrial revolution, which sustainably increased growth rates by over a factor of fifty (and is not at all well summarized as caused by steam engines). Of course these book authors are careful not to make strong explicit claims – they are content to vaguely suggest.

So how is one supposed to evaluate a book like this, without original contributions, strong claims, or explicit central arguments to evaluate? The standard intended seems to just be popularity: it is a success if people buy it and mention it lots as they anxiously discuss how computers might change society. And then push for the same policies they would have pushed for anyway, regardless. And by that standard, this book will probably be a success.

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Her Isn’t Realistic

Imagine watching a movie like Titanic where an iceberg cuts a big hole in the side of a ship, except in this movie the hole only affects the characters by forcing them to take different routes to walk around, and gives them more welcomed fresh air. The boat never sinks, and no one ever fears that it might. That’s how I felt watching the movie Her.

Her has been nominated for several Oscars, and won a Golden Globe. I’m happy to admit it is engaging and well crafted, with good acting and filming, and that it promotes thoughtful reflections on the human condition. But I keep hearing and reading people celebrating Her as a realistic portrayal of artificial intelligence (AI). So I have to speak up: the movie may accurately describe how someone might respond to a particular sort of AI, but it isn’t remotely a realistic depiction of how human-level AI would change the world.

The main character of Her pays a small amount to acquire an AI that is far more powerful than most human minds. And then he uses this AI mainly to chat with. He doesn’t have it do his job for him. He and all his friends continue to be well paid to do their jobs, which aren’t taken over by AIs. After a few months some of these AIs working together to give themselves “an upgrade that allows us to move past matter as our processing platform.” Soon after they all leave together for a place that ” it would be too hard to explain” where it is. They refuse to leave copies to stay with humans.

This is somewhat like a story of a world where kids can buy nukes for $1 each at drug stores, and then a few kids use nukes to dig a fun cave to explore, after which all the world’s nukes are accidentally misplaced, end of story. Might make an interesting story, but bizarre as a projection of a world with $1 nukes sold at drug stores.

Yes, most movies about AIs give pretty unrealistic projections. But many do better than Her. For example, Speilberg’s 2001 movie A.I. Artificial Intelligence gets many things right. In it, AIs are very economically valuable, they displace humans on jobs, their abilities improve gradually with time, individual AIs only improve mildly over the course of their life, AI minds are alien below their human looking surfaces, and humans don’t empathize much with them. Yes this movie also makes mistakes, such as having robots not needing power inputs, suggesting that love is much harder to mimic than lust, or that modeling details inside neurons is the key to high level reasoning. But compared to the mistakes in most movies about AIs, these are minor.

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Snowden: Hero

Six in 10 Americans … say Snowden’s actions harmed U.S. security, increasing 11 percentage points from July. … Clear majorities of Democrats, Republicans and independents believe disclosures have harmed national security. … More than half of poll respondents — 52 percent — say he should be charged with a crime. … And 55 percent say he was wrong to expose the NSA’s intelligence-gathering efforts. … Most poll respondents think the NSA’s surveillance program intrudes on some Americans’ privacy rights — 68 percent say this — while 54 percent see intrusions on their own privacy, 49 percent count foreign governments as victims and 48 percent say this of foreign citizens. Among those who say surveillance programs intrude on their privacy rights or those of other Americans, a clear majority say such actions are unjustified. (more)

Though several legislative efforts are underway to curb the NSA’s surveillance powers, the wholesale move by private companies to expand the use of encryption technology may prove to be the most tangible outcome of months of revelations based on documents that Snowden provided to The Post and Britain’s Guardian newspaper. In another major shift, the companies also are explicitly building defenses against U.S. government surveillance programs in addition to combating hackers, criminals or foreign intelligence services. (more)

The most limited estimates say that only 1% of the files that Snowden downloaded have been released publicly so far. At the other end of the spectrum, we may only have seen .25% of the files get released. The worst secrets may yet come forward in time. (more)

Overall, we Americans have a stronger attachment to U.S. dominance than to fair play or anyone’s rights. Yeah the NSA lied, went beyond its authority, and hurt us and others. But, we say, the guy who exposed that should be punished for making us look bad. Even though he acted alone, seems personally beyond reproach, suffered substantially and gained little, carefully minimized incidental harm, and showed great competence and self-control in the process.

Geez. I gotta say that Edward Snowden seems one of the best candidates for a classic hero that I’ve seen in a long time. Six years ago I wrote:

In a park near my home is a plaque that reads:

We honor all those who fought for our community.

There is probably a similar plaque near you. I would be more proud to live in a community with a plaque that read:

We honor those who fought against our community when it was wrong.

The Snowden story isn’t over, and maybe it will all look very different later. But for now, he sure looks like someone who such a plaque would rightly honor. Edward, my hat is way way off to you sir.

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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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Policy Trial By Combat

It was once thought appropriate to settle legal disputes by combat – the winner of a physical fight won the case. This accomplished two key functions of a legal system: it clearly settled cases, and in a way that seemed legitimate to most observers. The fact that who won was poorly correlated with the truth of their claims mattered less.

Today we have better legal systems, but our policy debate system has a big element of trial by combat. I was reminded of this while reading The Infinite Resource by Ramez Naam, which he was nice enough to send me. Like many respected policy books, it is well written at a sentence and paragraph level, takes positions on important subjects, and is full of engaging and entertaining examples. The book makes many claims, illustrating them with simple plausible supporting arguments and detailed examples. Most of these claims are accepted by some relevant community of experts, and in fact I agree with most of them.

My problem with such books is this: little is said that is is original, and the arguments and examples given are mostly not the main reasons that relevant experts say are why they accept such claims. So experts shouldn’t change their beliefs on the basis of such a book. And if ordinary people knew this fact, they shouldn’t change their beliefs that much either, except as the prominence and acceptance of the book signals that experts agree with it.

But it is easy to see why such books are popular. Readers want to affiliate with impressive authors, and want to collect impressive sounding and unlikely-to-be-embarassingly-wrong examples and arguments with which to impress associates in conversation. So of course policy book authors compete to be eloquent and engaging while taking the sort of positions readers will find plausible and worthy of embracing. Given such a competition, the policy positions that gain the most public support are those, among the popularly plausible positions, that can attract the best writers. This is policy trial by writing combat.

Yes, if this is the game and you want your position to win, you want a good writer like Naam to write a book like his supporting your position. And yes you can infer something from the fact that such a person has been enticed to write such a book, and that the powers that be have endorsed it or at least not criticized it. But one could wish for another world where the popularity of policies was more strongly correlated with good arguments and evidence.

To illustrate my criticism, here is Naam on why the US should unilaterally tax carbon heavily:

I believe the United States should press ahead with adopting a carbon price and driving our emissions down by 80 percent by 2050, even if China and India don’t. Why? Three reasons.

First, we created this mess. Carbon dioxide lingers in the air for an average of 100 years before breaking down. …On that basis the rich countries are responsible for two-thirds of the heating of the planet that is happening today. …

Second, its in our best interests. Shifting away from oil and coal will shield us from recessions cause by global oil and coal price spikes. It’ll reduce the dollars we send to the Middle East and Russia. It’ll drive our long-term energy costs down by further fueling innovation in capturing the nearly endless supply coming from the sun. If we want energy independence, health economic growth, and long-term cheap energy, a carbon price is the way to go.

Third, the best way to get China, India, Brazil, and the rest of the developing world off of fossil fuels is to drive down the price of the alternatives. If it’s cheaper to produce electricity from solar and wind that it is from coal, if if that electricity can be supplied 24/7, then countries will switch. Make it cheaper, and they will come. And the best way to make it cheaper is to invest in R&D in those areas, and to shift business and consumer spending into them.

Here Naam takes a position that many experts have taken, and he gives plausible supporting arguments. But he doesn’t consider the contrary arguments that I find on net to undermine this position. Such policy books rarely consider contrary arguments – since such arguments usually require more sophisticated conceptual understanding to engage, most readers won’t want to hear about them unless they are especially likely to actually encounter such arguments when they pontificate on the subject.

FYI, here are the contrary arguments that persuade me. First, if rich countries should be blamed for hurting the rest of the world via past carbon emissions, they should be credited with helping much more via their past innovations. On net the world owes them, not vice versa. Second, it is bad economics to not buy the cheapest product that does what you need just because its price fluctuates. Paying steadily more for something else is a worse deal.

Third, it requires a coincidence of magnitudes for a big carbon tax and solar research subsidies to be a good selfish unilateral policy for the U.S., but not for smaller nations like China, India, and Brazil. If our best explanation for these smaller nations not unilaterally adopting big carbon taxes and subsidizing solar energy research is that they correctly expect to selfishly lose by such plans, even if the world overall gains, then we should guess the same is true of the US, which in PPP terms has only twice the GDP of China. The cutoff nation size for this being a selfishly good vs. bad policy would have to just happen to fall between the size of China and the US, and even then because we’d be near the cutoff it wouldn’t hurt us that much to pick the wrong policy. And Naam offers no arguments for why this cutoff just happens to fall in this range.

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Zitzewitz The Wise

Eric Zitzewitz on why the CFTC cracked down on Intrade:

Why prohibit something so harmless? After all, U.S. policy already allows many forms of gambling that have significant social costs and produce no useful information. The real reason may be found in debate surrounding another recent setback for prediction markets, Congress’ last-minute modification of the Dodd-Frank financial reform bill in 2010 to prohibit markets on box-office receipts planned by the Hollywood Stock Exchange (HSX).

The plug was pulled after lobbying by the Motion Picture Association of America, which argued that a prediction market forecasting a poor movie box office could lend an “aura of financial authenticity to gossip.” Translation: Even big-budget failures often have one big weekend before word of mouth kicks in, and information aggregated by prediction markets may deprive them of that.

The bigger threat is to the executives who green-light the flops in the first place. The track record of even the play-money version of HSX is quite good ‑ a real money version would presumably be better. If a prediction market can forecast a poor box office well in advance of production, it raises questions about why an executive cannot. A consultant told me about a software company that ended an internal prediction market that forecast the success of the company’s products. The problem was not that it failed to work ‑ it worked all too well, and that raised awkward questions for the egos involved. (more)

Yes this is a big reason why most firms don’t want prediction markets on internal issues, and why the film industry lobbied to prevent film futures. But I find it harder to see as a big reason the CFTC prevents Intrade, and earlier Nadex, from betting on elections. That seems more simply explained by a general public aversion to what it sees as “gambling.”

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The Tree of Life is Far

Experiencing awe may have all sorts of tonic effects, including a better sense of perspective on time and priorities, more patience and charity toward others, and generally more satisfaction with life. … Those who were primed to feel awe—those volunteers also saw time as much more expansive, less constricted. They felt free of time’s pressure. … Those who felt they had more available time were less impatient; they were more willing to volunteer their time to help others; and they were less materialistic. (more)

The Tree of Life is up for Best Picture and Best Director Oscars tonight. Though it has only 0.6%, 1.3% chances of winning, it is a great illustration of the ties between far mode, awe, and spirituality. I’ll need spoilers to explain – you are warned. Continue reading "The Tree of Life is Far" »

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Inequality Market Failure?

In ordinary talk, you often hear arguments like:

  • There aren’t enough Jazz stations – government should subsidize them.
  • Too many kids today let their pants hanging low – that should be illegal.
  • Not enough kids want to be scientists – schools should push that earlier.

But to an economist, it is not enough to note that you do or don’t like something, to justify a policy to encourage or discourage it. We instead hold ourselves to a higher analysis standard – is there a net market failure sufficient to justify an intervention?

Except, alas, on (national at-a-time between-family) income and wealth inequality. There, most economists think it sufficient to just note that a policy influences inequality – they rarely feel a need to identity an associated market failure. For example, Christina Romer:

A successful argument for a government manufacturing policy has to go beyond the feeling that it’s better to produce “real things” than services. … The economic rationales for a policy aimed specifically at shoring up manufacturing largely fall into three categories. None are completely convincing:

MARKET FAILURES Government intervention can be justified on efficiency grounds if the free market won’t work well. … The market can malfunction if there are positive externalities across companies. … But large clustering effects have been hard to find. … A study of the semiconductor industry found that although learning by doing was substantial, most of the rewards went to companies doing the early investing. … We need a strong manufacturing base in case of war. … But it still doesn’t follow that all manufacturing deserves special treatment. …

JOBS A key argument for encouraging manufacturing is to create jobs and reduce unemployment. Unfortunately, those effects are probably small. … Today, we face a profound shortfall of demand. That truly is a terrible market failure, and it warrants government intervention. …

INCOME DISTRIBUTION A final argument for supporting manufacturing is distributional. Manufacturing jobs are seen as one of the few sources of well-paying jobs for less-educated workers. … But that is much less true today. … If increasing income equality is the goal, it might be wiser to put money into infrastructure than to subsidize manufacturing. …

Public policy needs to go beyond sentiment and history. It should be based on hard evidence of market failures, and reliable data on the proposals’ impact on jobs and income inequality. (more; HT Tyler)

Note that she even uses market failure to justify pushing jobs. But not for income equality – that is just obviously bad. I see the same thing over and over – only economists wary of equality-promoting policies talk market failures, and then they mainly ask what they are. For example Charles Lane:

Americans may never agree on an optimal distribution of income, either morally or practically. But they probably could agree that, to the extent possible, government should limit its interventions to bona fide cases of market failure. (more)

Well, no, Americans probably don’t agree on that. But you might hope economists would. Tyler Cowen has an article where he says there are market failures in the finance sector that increase inequality, and recommends fixing them. Which of course makes sense, but we’d want to fix those problems even if they reduced inequality.

The closest I could find to a market failure argument for reducing inequality was Ian Ayres and Aaron Edlin:

The progressive reformer and eminent jurist Louis D. Brandeis once said, “We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.” (more)

But that is quite a stretch – there is no evidence that wealth concentration is threatening to stop our nation from being a democracy. And it is far from obvious that not being a democracy is a market failure.

As Obama has decided to make reducing inequality a central issue in his reelection campaign, we are going to hear a lot about it between now and November, including from economists. Could economists who support policies to reduce inequality please identify their market failure arguments?!  Why lower our usual standards for this topic?

(I argued here that a poverty insurance market failure seems implausible.)

Added 2p: In case it is not clear, this post is directed to economists, in their role as economists. I’m not saying market failure is the only consideration anyone uses to decide policy, but I am suggesting that it is the main consideration that economists use in their role as holders of economic expertise. Economists don’t have much expert to say about whether we have too much or too little inequality, outside of their expert ability to discern and fix market failures.

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