Tag Archives: Regulation

Managing Our Cut

By Robin Hanson · March 6, 2010 8:40 pm · Comments (41)

Our income tax system gives each of us a stake in the work of others – the more money others make, the more we each get via taxes.  In principle we could use this fact to justify a great deal of intervention in everyone’s work lives.  For example, one might argue: why should we let folks choose fulfilling but poorly paid jobs like social worker, veterinarian, or forestry agent, if they are capable of becoming an lawyer, doctor, or engineer?  Or why should we let folks work part time to focus on a music or acting hobby, or choose to live anywhere but the city where their skills are worth the most?

To most folks such regulations seem intolerably intrusive.  But when people are asked to justify our common and extensive regulations and subsidies of medicine and education, they often mention exactly this issue – that such interventions make sense because we all have a stake in the work of others via the income taxes those folks pay.  Why the asymmetry?  Why do folks think these arguments make sense regarding medicine and education, but not regarding choice of career or location?

My guess: humans inherited intuitions that the community should have more say in and contribute more to medicine and education.  This is the way our distant ancestors did things in their small nomadic forager bands, and we intuit we should act similarly today.  The stuff about managing our cut of others’ income is just a rationalization.

Tagged as: , ,

Hiding Handouts

By Robin Hanson · March 1, 2010 3:30 pm · Comments (25)

Richard Thaler in the NYT:

Here’s a list of national domestic priorities, in no particular order:  Stimulate the economy, improve health care, offer fast Internet connections to all of our schools, foster development of advanced technology. Oh, and let’s not forget, we’d better do something about the budget deficit. … There [is] a way to deal effectively with all of those things at once, without hurting anyone. …

The usable radio spectrum is limited and used inefficiently. … The target that looks most promising in this regard is the spectrum used for over-the-air television broadcasts. … People in the industry refer to them as “beachfront property” … Over-the-air broadcasts are becoming a nearly obsolete technology. Already, 91 percent of American households get their television via cable or satellite. So we are using all of this beachfront property to serve a small and shrinking segment of the population. …  Professor Hazlett estimates that selling off this spectrum could raise at least $100 billion for the government and, more important, create roughly $1 trillion worth of value to users of the resulting services. …

Who would oppose this plan? Local broadcasters are likely to contend that they are providing a vital community service in return for free use of the spectrum. … [But] about 99 percent of these households have cable running near their homes, and virtually all the others, in rural areas, could be reached by satellite services. The F.C.C. could require cable and satellite providers to offer a low-cost service that carries only local channels, and to give vouchers for connecting to that service to any households that haven’t subscribed to cable or satellite for, say, two years.  Professor Hazlett estimates that $300 per household should do it: that amounts to $3 billion at most.

Yes, Hazlett’s solution would require poor rural couch potatoes to suffer the indignity of accepting more obvious handouts – today’s “free” tv better hides those handouts.  And yes we often pay substantial costs to show our allegiance to certain precious symbols.  But we pass up a trillion dollars of gains to avoid even the hint of dissing poor rural couch potatoes?

We forgo similar benefits when we let poor folk drive old very polluting cars, and then require expensive emissions reductions elsewhere, such as in power plants.  It would be far cheaper to ban old cars, and pay the poor more to compensate, but this also makes our handouts more obvious.

Couch potatoes and polluters are not exactly highly respected in our society.  So why is it that when such folks are also poor, we will throw away trillions in gains to avoid dissing them via direct handouts?

HT Alex.

Tagged as: ,

Legalize Dud Drugs

By Robin Hanson · February 28, 2010 6:00 am · Comments (17)

According to Engber['s article], Human Growth Hormone (HGH or GH) has little to no performance enhancing-benefits. … I have the benefit of working down the hall from several exercise physiologists.  I forwarded [his] article to my colleague, John McLester. … “Oh yeah, I agree with [Engber]. This isn’t even controversial in exercise physiology. … There is no evidence of [benefit from bigger muscles]. It seems that the muscle that is developed is abnormal and not mature. I’ll point you to some studies (see below). …

With [Major League Baseball]’s adoption of mandatory testing for steroids, many thought that home run rates would drop dramatically. They didn’t, and many felt that the lack of a test for HGH could be part of the explanation. Well, it’s time for the scientists working on such a test to start something else more important.

That is John Bradbury.  He interprets:

The illegality of growth hormone actually promotes its use in sports. … The banning of a drug by anti-doping authorities sends a loud and incorrect signal that it works. … Therefore, I believe that legalizing growth hormone is needed to send the signal that it doesn’t work, largely to undo the widespread common belief that growth hormone does improve performance. … Think of the powerful effect it would have if MLB pulled growth hormone off its banned list. I can’t imagine a more powerful signal of a drug’s lack of potency as a performance enhancer. If we are going to be paternalists, let’s be effective paternalists.

Added 5Mar: See also here, HT Tyler.

Tagged as: , ,

Mate Racism

By Robin Hanson · February 20, 2010 11:40 am · Comments (91)

The latest Time:

My Race-Based Valentine. Why online dating is the last refute of overt racial preferences.

This Valentine’s Day … relatively few women on mainstream dating sites will bother to respond to overtures from men of Asian descent. Likewise, black women will be disproportionately snubbed by men of all races. …  Chemistry.com requires users to identify their ethnicity; like eHarmony, it considers members’ racial preferences when suggesting matches. Match.com lets users filter their searches by race. The site’s profiles include space to indicate interest (or lack thereof) in various racial and ethnic groups. …

Among the women, 73% stated a [racial] preference. Of these, 64% selected whites only, while fewer than 10% included East Indians, Middle Easterners, Asians or blacks. … 59% of [men] stated a racial preference. Of these, nearly half selected Asians, but fewer than 7% did for black women. … In October, [OkCupid.com], 80% of whose members choose to input their race, studied the messaging patterns of more than a million users and concluded on its official blog that “racism is alive and well.” …

But do racial preferences amount to racism? Or is overlooking an entire ethnicity as innocuous as filtering out redheads or people under a certain height? “Just because you take race into consideration in your dating preferences and are aware of race doesn’t make you racist,” says Dr. Nicole Coleman, a psychology professor at the University of Houston. Minorities who prefer to date within their own race or ethnicity — and who look for potential mates on niche sites like BlackPeopleMeet.com and Amor.com — would probably agree with her.

So dating is our last refuge of overt racism because … preferring people based on race isn’t racism if its for dating, especially if minorities do it?!

Of course its racism, if anything is.  But is it good racism?  The obvious reason to allow mate racism is that people better enjoy mating when they better like their mates, and people think they care about the race of their mates.  But this same reason suggests allowing racism by firms, schools, and clubs.  Firms are full of people, including employees, customers, suppliers, and investors, any of which might care about the race of folks they must deal, mingle, associate, etc. with.  At schools, the teachers, students, and ultimate employers of those students may also care about race.

Yes people may be mistaken about how much they care about the race of their associates, and perhaps this justifies government policies forbidding overt racism at firms, schools, or clubs.  But why doesn’t this apply just as well to mating?  Sure it is impossible to legislate away all racism in dating, but the same is true for hiring etc.  Why don’t we at least forbid overt mating racism, such as race-based searches?  We could even collect stats on the race of folks that people contact at dating sites, just as we check now on rates rates in hiring at firms, etc.

One explanation is that we naively think that imposing rules on firms only hurts those abstract entities, not the people associated with them.  Or we think such rules only hurt investors and managers, who we don’t care about.   Perhaps we only dislike racism that changes incomes, not happiness — yet mates often change income a lot.  Another explanation is that we only don’t care about racism in the “personal” sphere, though this just changes the question to what exactly is “personal” and why do we care differently about such things.  What do you think?

Added: The UN definition supports the “personal” theory:

“Racial discrimination” shall mean any … preference based on race … which has the … effect of … impairing the … enjoyment or exercise, on an equal footing, of … fundamental freedoms in … any … field of public life.

Added 25Feb: A Post article encouraging black women to date while men.

Tagged as: ,

Tax Bank Collapse Risk?

By Robin Hanson · February 8, 2010 8:50 am · Comments (3)

A week ago I said:

The main general approaches I know [to avoid total collapse] are refuges, to directly protect against the worst case, and the robustness rewards above, which counter-act known problems that distort our world economy toward fragility.

I suggested fixing current biases in intellectual property, empire bias, crisis metrics, and missing standards.  Here is a finance regulation proposal in the same spirit:

The Obama proposal for bank taxation has simple flat rates on uninsured bank liabilities. This is a better target than total liabilities since deposits were already insured, and the intervention bailed out wholesale funding.  But is such a flat tax designed to control risk creation? John Kay (2010) argues against it. Meanwhile Viral Acharya and Mathew Richardson (2010) argue that the bailouts have generated more moral hazard and suggest a fee discouraging all activity that creates systemic risk – not just leverage – and moreover that banks should be paying more in the good times when risk taking is more attractive.

In recent research, Javier Suarez and I (2009a, b) suggested a more subtle policy than President Obama’s – a Pigouvian tax based on banks’ individual contribution to systemic-risk creation, measured by their exposure to uninsured short-term funding. As in the Obama tax, this approach exempts insured deposits and targets the risk of sudden withdrawals of wholesale funding, which was the engine of the last crisis. Critically, our tax is sharper for shorter-term funding and decreases to zero for medium-term liabilities that do bear risk. In other words, it targets the externality caused by funding fragility and offers strong incentive effects in good times.

I’m not a banking or macro expert, and there is clearly a danger of fighting the last war here, but at least this seems focused on the right sort of problem.  HT Rob Wiblin.

Tagged as: , ,

Enable Raiders!

By Robin Hanson · January 28, 2010 12:25 am · Comments (52)

A robust, properly functioning market for corporate control is vital to the performance of a free-enterprise economy with public corporations. … Shareholders face an array of collective-action problems that prevent them from coalescing to deal with bad management. … The market for corporate control is the only known antidote for all of these collective-action problems.

More here.  It is hard to exaggerate how very important this is – we’d be so much richer now if it it had long been easier for raiders to take over public firms.  We now put many inexcusable obstacles (listed below) before such raiders, including disclosure, super-majority, poison pill, and merging delay rules.  In fact,

Gains to target shareholders average 40–50 percent above the prices at which target firms’ shares traded immediately prior to the takeover. … [But on] returns to bidders, … studies have shown negligible gains.

So raiders have to wait until they can boost a firm’s profits by ~50% before it is worth trying a takeover!  Imagine our progress if raiders could instead win by improving a firm by only 5% (or 0.5%).  Raiders would replace overpaid and out-of-touch CEOs, the new guys would clean house in upper management, and that would induce better incentives and organization all the way down the line.  It seems to me a complete no-brainer to seek to eliminate all takeover obstacles, and to seek even more ways to encourage raiders.

Amazingly, the main anti argument here is that takeovers might hurt other “stakeholders” such as employees, the environment, or civic pride.  Apparently we must protect over-paid CEOs because they are our heroic public-spirited defenders of the little guy against greedy shareholders.  Where oh where would little folks be if not for protection from CEOs? Continue Reading "Enable Raiders!" »

Tagged as: , ,

Subsidize Experiences

By Robin Hanson · January 16, 2010 6:00 am · Comments (14)

Psychologists confirm economist’ findings that experiences like vacations seem less positional than objects like TVs and cameras.:

When it comes to spending disposable income, experiential purchases tend to make people happier than material purchases (Van Boven & Gilovich, 2003). But why are experiences more satisfying? We propose that the evaluation of experiences tends to be less comparative than that of material possessions, such that potentially invidious comparisons have less impact on satisfaction with experiences than with material possessions. Support for this contention was obtained in 8 studies. We found that participants were less satisfied with their material purchases because they were more likely to ruminate about unchosen options (Study 1); that participants tended to maximize when selecting material goods and satisfice when selecting experiences (Study 2); that participants examined unchosen material purchases more than unchosen experiential purchases (Study 3); and that, relative to experiences, participants’ satisfaction with their material possessions was undermined more by comparisons to other available options (Studies 4 and 5A), to the same option at a different price (Studies 5B and 6), and to the purchases of other individuals (Study 5C). Our results suggest that experiential purchase decisions are easier to make and more conducive to well-being.

More here and here.

Tagged as:

Fragile Free Speech

By Robin Hanson · January 4, 2010 6:00 am · Comments (28)

Under the [Irish] law, which went into effect Friday, a person can be found guilty of blasphemy if “he or she publishes or utters matter that is grossly abusive or insulting in relation to matters held sacred by any religion, thereby causing outrage among a substantial number of the adherents of that religion.”  The penalty is a fine of up to 25,000 euros, or more than $35,000. … Nugent, who estimates that there are a quarter-million atheists in Ireland, said the new law is “silly” and “literally medieval.”

More here.  Such free speech limits have a straightforward efficiency rationale – the gains of the few who enjoy saying outrageous things are plausibly outweighed by the harm to the many who are outraged.  The best consequential argument against these limits is the long run innovation gains from free speech; outrageous speakers sometimes change our minds, to our great benefit.  But this innovation rationale for reduced regulation applies pretty well to most regulation; regulation usually hinders innovation.  So why don’t we apply the same argument as eagerly there?

Our cultural heritage is that “modern” nations had freer speech while “medieval” ones did not, so of course nations now prefer freer speech to gain status.  We make up rationales as required to get the high status policies we want.  If in the future a low-free-speech nation becomes higher status, nations will instead copy that policy, and make up reasons as needed for that.

Tagged as: ,

Tiptoe Or Dash To Future?

By Robin Hanson · December 23, 2009 11:30 pm · Comments (58)

To test who should TA elite classes, new physics grad students at U Chicago in ‘81 were asked to pick a physics problem and explain its solution to the group.  I did well by picking the question: should you walk fast or slow if you want to get the least water on your front while moving a certain distance in the rain.  The answer is: move as fast as you can.

On the other hand, I’m told that when working one’s way across a minefield, one is well advised to move slowly; in that case the extra time to look closely for mines pays off in a lower chance of tripping mines.  So whether you want to move fast or slow through a destructive region depends on the details of the region.

Humanity is now moving through a dangerous region in tech/econ growth. It will be very hard to squash us once we are spread across space with strong robust advance abilities, but we are now small, dumb, and weak.  Between here and there is a minefield of disasters that could destroy us; should we tiptoe slow or run fast?  That is, if the world economy now grows at 4% a year, should we prefer to slow it to 2%, speed it to 8%, or what?  The answer depends on which factors dominate:

  • Natural resources – Today’s tech uses certain natural resources most heavily, while tomorrow’s tech will probably use different resources.  If we run out of today’s resources before we can reach the next tech level, we risk not being able to grow to reach that level.  This factor says go fast.
  • Crazy Outbreaks – Our political and business organizations usually work tolerably, but every once in a while some crazy takes over one and all hell breaks loose.  (Similar for natural disasters like asteroids.)  We want a minimum of such events between here and there.  A faster growing economy might release such crazies faster, but as long as that rate less than doubles as growth doubles, this factor says go fast.
  • Pundit Foresight – If we have a limited number of thoughtful pundits who can consider the implications of new upcoming techs and changes, then the fewer changes that arrive per year the more thought our pundits might give to each change.  If more pundit thought per change leads to better policies to avoid terrible change, this factor says go slow.

My guess is that going fast is better.  But it seems an open question.  So what other factors say to grow fast or slow, to survive?

Tagged as: ,

Football Decimation

By Robin Hanson · December 13, 2009 9:35 pm · Comments (65)

Football is by far America’s favorite sport to watch, and has been since the 60s. Football is also far less healthy than most sports.  For example, while Italian soccer players live longer than most folks, US football players live far shorter:

While U.S. life expectancy is 77.6 years … the average for NFL players is 55, 52 for linemen.

(HT Nancy Lebovitz.) Apparently:

The average NFL player plays just 3.52 seasons and loses two to three years off his life expectancy for every season played.

If true, this is an amazingly huge health harm, especially considering how much we regulate health harms in most areas.  It is far beyond the risk we’ll allow people to take on most jobs, even soldiers or astronauts.  And it is far beyond the risk we’d let customers accept in a consumer product.

Surely we can see football hurts players – we often see them carried off in on stretchers.  But I wonder: would we accept this harm nearly as much if we saw it all up close?  Players would suffer the same average loss if each season one out of ten players just dropped dead on the playing field!  (A dead 25 year old player loses 55-25 = 30 years, which is ten times the three years life lost per player per season.)

Would we really accept such carnage before our eyes?  And why do we regulate other health harms so strictly, yet so eagerly watch this decimation?

Tagged as: ,