Tag Archives: Regulation

Regulating Gossip

By Robin Hanson · July 17, 2011 11:35 am · Comments (22)

Did you know that people gossip about you? You don’t know who they are, or what they say, and sometimes they say things that (you think) are not true. Important decisions, like whether you get invited to parties, recommended for jobs, or even married, hang on such gossip. Yet there is almost no regulation of it! Government officials don’t track it, or check it for accuracy. There are no standards for what sources people can use in gossip, or how they state their opinions. You aren’t even notified when people gossip about you. Gossip is a virtually impenetrable system in which people, particularly the most vulnerable, have little insight into the forces shaping their welfare. We must have reform!

Sound over the top? Consider:

Information … comes from thousands of everyday transactions that many people do not realize are being tracked: auto warranties, cellphone bills and magazine subscriptions. It includes purchases of prepaid cards and visits to payday lenders and rent-to-own furniture stores. It knows whether your checks have cleared and scours public records for mentions of your name. Pulled together, the data follow the life of your wallet far beyond what exists in the country’s three main credit bureaus. [Firms sell] that information for a profit to lenders, landlords and even health-care providers. …

Who is worthy of credit? The answer increasingly lies in the “fourth bureau” — companies such as L2C that deal in personal data once deemed unreliable. … Federal regulations do not always require companies to disclose when they share your financial history or with whom, and there is no way to opt out when they do. No standard exists for what types of data should be included in the fourth bureau or how it should be used. No one is even tracking the accuracy of these reports. That has created a virtually impenetrable system in which consumers, particularly the most vulnerable, have little insight into the forces shaping their financial futures. (more)

The consequences of ordinary gossip are just as big as with firm gossip on customer finance. And it would be possible to have stronger regulations on ordinary gossip. Yes such regulations couldn’t be perfectly enforced, but then neither can regulations on firm finance gossip. The main reason we don’t have such regulations is that people dislike them. The same people who may well support more regulation on firm gossip on your finances. Why?

It seems to come down to the usual: we are more willing to regulate firms than individuals, and to regulate activity where money is involved than other activity.

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Respect Forecast Accuracy

By Robin Hanson · July 13, 2011 11:05 am · Comments (13)

The topic at Cato Unbound this month is “What’s Wrong with Expert Predictions.” Dan Gardner and Philip Tetlock’s lead essay points out a puzzling lack of interest in forecast accuracy:

Corporations and governments spend staggering amounts of money on forecasting, and one might think they would be keenly interested in determining the worth of their purchases and ensuring they are the very best available. But most aren’t. They spend little or nothing analyzing the accuracy of forecasts and not much more on research to develop and compare forecasting methods. Some even persist in using forecasts that are manifestly unreliable. … This widespread lack of curiosity … is a phenomenon worthy of investigation.

My response essay considers this puzzle. The editor summarizes:

Robin Hanson argues that most people aren’t interested in the accuracy of predictions because predictions often aren’t about knowing the future. They are about affiliating with an ideology or signaling one’s authority. … He suggests that one way to make predictions more accurate might be to lift both the social stigma and legal prohibitions against gambling.

Key quotes:

Even if disinterest in forecast accuracy is explained by forecasting being only a minor role for pundits, academics, and managers, might we still hope for reforms to encourage more accuracy? …

Hope … mainly comes from the fact that we pretend to care more about forecast accuracy than we actually seem to care. We don’t need new forecasting methods so much as a new social equilibrium, one that makes forecast hypocrisy more visible to a wider audience, and so shames people into avoiding such hypocrisy. …

It isn’t enough to devise ways to record forecast accuracy—we also need a new matching social respect for such records. Might governments encourage a switch to more respect for forecast accuracy? Yes: by not explicitly discouraging it!

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Coworker vs. Class Envy

By Robin Hanson · July 12, 2011 3:00 pm · Comments (21)

Almost half of all workers in the U.S. “are either contractually forbidden or strongly discouraged from discussing their pay with their colleagues.” … Researchers … found that employees who know what their peers make—especially if their salaries are below median earnings—were more dissatisfied with their jobs than their peers who knew nothing. (more)

Imagine a national law banning citizens from talking about each other’s income. Similar to the way firm rules against discussing coworker incomes raise job satisfaction, a law against discussing citizen incomes would also probably make people more satisfied. Yet I predict that if such a law were actually passed, a huge public outcry would spell political disaster for supporting politicians. People would wail about the horrors of totalitarianism and suppressing class consciousness, and call for revolution if needed to repeal it.

Yet most who work at firms with no-salary-talk rules are probably ok with it. Few refuse to apply for jobs at such firms, or even demand substantially higher salaries to work there. In fact, there’s a decent case to make that people are on average willing to accept lower salaries to work at such firms. After all, if not such policies would cost firms more in salaries, with few obvious compensating benefits.

This example highlights how differently we act in workplaces vs. national political forums. When talking national politics we refuse to compromise on key ideals that we hardly care about in workplaces. Voting is indeed a far fest, while we submit hyper-farmer style to domination at work.

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Regulating Cool

By Robin Hanson · June 22, 2011 12:00 pm · Comments (42)

The [US FDA] unveiled a plan designed … to shock customers with images of tobacco’s impact: sick smokers exhaling through a tracheotomy hole, struggling for breath in an oxygen mask and lying dead on a table with a long chest scar. Starting next year, cigarette cartons, packs and advertising will feature these and six other graphic warnings, replacing the discreet admonitions that cigarette manufacturers have been required to offer since 1966. …

Some of the images, particularly the warning depicting a diseased mouth, are specifically aimed at dispelling the notion for teens that smoking is cool. “We want kids to understand smoking is gross, not cool, and there’s really nothing pretty about having mouth cancer or, you know, making your baby sick if you smoke,” said FDA Commissioner Margaret A. Hamburg. “So some of these are very driven to dispelling the notion that somehow this is cool, and makes you cool.” (more)

Pause to consider the logic here. We decide it is not a good idea to let the government ban this product, or to require a doctor’s prescription to consume it. We think everyone should be allowed to consume it if they choose. But, we also decide it is a good idea to let government to decide if this product can seem “cool.” In general, the idea must be that if people see the wrong things as cool, the government can require appearance changes, changes the government guesses will make those overly-cool things seem less cool.

For example, if too many kids see not going to college as cool, well then maybe only college students and graduates should be allowed to wear certain sorts of cool clothing. Or if too many think going to the beach is cool, resulting in too much skin cancer, we could broadcast uncool music at the beach.

The basic question is when should the government ban an activity versus merely discouraging it, and what sort of discouragements it should wield. Discouraging activity via reducing its appearance of “cool” seems to me especially hard for distant slow federal regulators to manage — what things seem “cool” often varies in quite subtle ways over short times and between subcultures. Is there any argument that this sort of discouragement is especially useful, to compensate for such added difficulty?

Actually, I see a fundamental contradiction in the idea of government regulating “cool.” While we have many social processes which tell us about what others might approve or disapprove, the “cool” process seems inherently decentralized, and not to be mediated by authorities. We the masses are supposed to each decide what we think is “cool,” and we are not supposed to accept declarations by teachers, employers, etc. on the subject. Whatever authorities recommend as a good idea, it can only accidentally be “cool.”

“Cool” just doesn’t seem the sort of thing government can actually regulate.

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Left vs. Right Dictators

By Robin Hanson · June 14, 2011 10:00 am · Comments (22)

Me on Thursday:

Any process that ignorant voters could use to decide who to trust on [banking] regulations could also be used by ignorant consumers to decide which banks to patronize. Since banking consumers have far stronger incentives to choose well on banks than voters have to choose well on politicians, how can it help to replace a possibly quite severe ignorant banking consumer problem with an even more severe ignorant voter problem?

Surprisingly to me, many commenters argued that voters do not control banking regulators – regulators are an autonomous force that choose according to their own reasons. And most who said this seemed to think it a good thing. I’d guess, however, that they wouldn’t be as eager for autonomous regulators in these five areas:

  1. An autonomous police with power to decide who was a criminal, with little oversight from juries, etc.
  2. An autonomous state religion with power to declare God’s will, and to punish those who violate God’s will.
  3. An autonomous military with power to decide when we go to war with whom, and using what methods.
  4. An autonomous “morals” agency responsible for defining and punishing sexual perversion.
  5. An autonomous censor that can ban any “unhealthy” or “misleading” books, movies, music, etc.

Why do so many support “benevolent dictator” autonomous regulators in banking, product safety, workplace safety, schools, medical devices and drugs, etc., but not in the above five areas? One explanation: traditional (i.e., farmer) societies had these five “conservative” types of regulators, and more modern (i.e., forager) societies were proud to have overthrown or constrained them in the process of becoming modern. New “liberal” types of regulators that lower the status of businesses seem much less problematic to those who see liberal-minded folks as intrinsically more trustworthy than conservative-minded folks.

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Paying To Harass?

By Robin Hanson · June 12, 2011 6:00 pm · Comments (16)

Data on claims of sexual harassment … are used to calculate the first measures of sexual harassment risks by industry, age group, and sex. Female workers face far higher sexual harassment risks. On balance, workers receive a compensating wage differential for exposure to the risk of sexual harassment. … The … wage difference between a job with zero sexual harassment risk and a job with the mean sexual harassment risk is … about 25 cents per hour for women, and … about 50 cents per hour for men. (more)

So it seems people can roughly estimate how their chances of being harassed varies with their age and the industry they work in. This appears to influences their willingness to work in such industries, and thus the wages they command in those industries. This all suggests that we are seeing supply and demand at work — on average harassed people are paid for the harassment the expect to suffer, and in fact paid more than their cost. Much like prostitutes who voluntarily accept money for sex, on average workers may voluntarily accept a risk of harassment because they see the added wage as worth more than the added cost of suffering harassment.

The above study didn’t look at the harassers, only at the harassed. That is, it looked at how female wages vary with the rate at which females are harassed, and at how male wages vary with the rate at which males are harassed. But if one did look at the harassers, instead of the harassed, I’d guess that the harassers accept a lower wage for the opportunity to harass, a wage cut that is larger for ages and jobs where harassment is more feasible. In fact, I’d guess this wage cut also varies with the desirability of the people available to harass, just as the wage premium to the harassed probably varies with the undesirability of the harassers.

If these wage changes were the only effect of harassment, there would be no economic reason to oppose harassment – harassers would be paying the harassed an agreeable fee, and no one else would be effected. What if others were effected, but only the firm’s customers, suppliers, investors, or other employees? If firm managers had strong enough incentives to maximize profits, then in the absence of other relevant market failures the firm would internalize the problem. Thus it would make economic sense to let each firm’s management decide whether or not to allow harassment in their firm.

If these conjectures are true, then laws prohibiting sexual harassment do not make the world a richer place. They likely exist instead as ways for voters and politicians to signal their anti-harassment and anti-employer values to each other. Note that we have no laws against sexual harassment in religion, clubs, music, parties, and other recreational activities. As with anti-discrimination laws, it is only employers who are constrained.

More quotes from the study:

Sexual harassment rates … [vary] by sex and major industry, as well as the percent female in the industry. … Women are at a greater risk of sexual harassment in male-dominated industries. … The male rate is not correlated with the female rate. …

Additional variables included in the regressions are a constant, potential work experience, potential experience squared, years of education, and indicator variables for occupation, race, Hispanic ethnicity, married, government employer, union or employee association, full-time employment, metropolitan location, and region. (more)

Added 10a: This paper reviews the state of the art in estimating compensating wage differentials.

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Who Watches Watchers?

By Robin Hanson · June 9, 2011 9:00 pm · Comments (32)

James Surowiecki says U.S. voters should support a new Consumer Financial Protection Bureau (C.F.P.B.) because consumers make finance mistakes:

Many Americans are ill informed about financial products. … You might think that businesses offering better products would have an incentive to make sure that potential customers were able to distinguish between ripoffs and good deals, but … there’s “a limit to how much explaining a creditor can do before losing the attention of its customers.” … Warren … talked to a number of banks about introducing a credit card with a higher up-front interest rate but lower penalty fees—a cost-effective arrangement for many people. But … there was no way to convince consumers that it was a good deal. In a world where marketing is all about the lowest teaser A.P.R., … you end up with a race to the bottom. …

The C.F.P.B. hopes to change this, largely by insuring that consumers will be told the true terms of a deal, in a simple and clear fashion. … Some bankers … maintain that the C.F.P.B. will go too far and end up strangling financial innovation. But, over the past century or so, new regulatory initiatives have inevitably been greeted with predictions of doom from the very businesses they eventually helped. … History suggests that business doesn’t always know what’s good for it. (more)

Let’s see, banks offer bad products, because many consumers are too lazy to notice and choose good products. So voters should empower regulators to make rules banning bad products, or at least overly hidden products. But isn’t it also possible that regulators might offer bad regulations, because voters are too lazy to notice and choose politicians who support good regulations? Why would voters pay more attention to choosing regulators than banking customers pay in choosing banks? And if voters pay less attention, how does adding this extra layer of choice improve the overall situation?

You might argue that when choosing their votes, ignorant voters can rely on interest groups and better informed elites, who share their interests. But banking customers could also rely on interest groups and informed elites in deciding where to bank. Yes, banks often try to create and buy off apparently independent groups and elites that pretend to offer neutral informed advice, to fool uninformed customers into buying bad products. But the same thing can happen at the political level – how can voters know which organized groups and elites are actually informed and share their interests?

It would seem that any process that ignorant voters could use to decide who to trust on regulations could also be used by ignorant consumers to decide which banks to patronize. Since banking consumers have far stronger incentives to choose well on banks than voters have to choose well on politicians, how can it help to replace a possibly quite severe ignorant banking consumer problem with an even more severe ignorant voter problem?

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Blocked State Innovation

By Robin Hanson · May 30, 2011 1:00 pm · Comments (10)

I’ve complained that regulation usually slows innovation. For example, huge driverless cars gains seem needlessly delayed by excess regulation (Tyler agrees). The problem, however, is not government per se, but the citizens to whom government defers. Politics is not about policy; voters are far more interested in showing off symbolic stances than in giving citizens more of what they want.

But to be fair, citizens hinder not only private innovation, but also government innovation. Long ago when people were imagining a future of cheap computing and communication, they imagined dramatic gains from government databases and citizen monitoring. But then some warned of how such data and monitoring could support tyranny, and ever since most voters have been so eager to signal their disapproval of such Big Brother domination that they are unwilling to consider the most promising government innovations in data and monitoring.

For example, me a year ago:

Overall my students oppose change, moderately favoring whatever is the status quo. So I was quite surprised to see … 85% of my students said yes to: Should all medical practice data be published, aside from data identifying patients?

I assigned this paper topic again this year and, combining the two years, 76% of 76 students favored the change, which correlated 0.29 with student ability to identify relevant pro/con arguments. Again, I don’t grade students on their position, I don’t say what I support, and students usually oppose change. (For example, they overwhelmingly opposed stricter public-place policies on hand washing after sneezing or using restrooms.)

Last year, commenters’ main complaint was that it is impossible guarantee privacy. And this is true. In principle, any piece of info you publish about someone could be the last little clue someone else needs to uncover a great secret about them. It all depends on what other info people reveal, and to whom. The only safe policy is to never publish anything about anyone. And since info supposedly only visible to government employees are often leaked via bribes, the only really safe policy is to never collect any info.

But note that this same argument applies to every piece of info the government reveals about anyone, including date of birth, addresses, who/when they marry or divorce, professional licenses, lawsuits, bankruptcies, tax liens, criminal records, etc. The reason few complain about privacy leaks due to such revelations is that most folks have adapted their other info behavior to expecting this info to be made public.

Similarly, if we gave sufficient advanced warning on a new regime of revealing all med info (minus directly identifying info), most people could adapt their other info behavior to preserve the privacy they want. Don’t let friends drive you to the doc if you don’t want them to know who is your doc. Of course some would mistakenly reveal themselves, and illegal bribery would reveal more. But that can be a price worth paying if there is much to be gained.

Alas, while even my undergrads can see that revealing all med info could easily meet a cost benefit test, voter distaste for anything smacking of Big Brother will probably long block this innovation. This even though recent legal changes go a long way to actually enabling future dictators:

Our Presidents can now, on their own: order assassinations, including American citizens; operate secret military tribunals; engage in torture; enforce indefinite imprisonment without due process; order searches and seizures without proper warrants. (more)

Citizens don’t make a careful tradeoff between social value and preventing future dictators. Instead, thoughtless voters enable Big Brother while symbolically opposing him, and block useful government innovation in the process.

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Status And Glory

By Robin Hanson · May 28, 2011 12:10 pm · Comments (43)

Once upon a time it was elites who went to war, who took the risks but could gain the glory. Once upon a time gambling was banned for ordinary folks but elites could take such risks and gain glory if they won. Today, consider this NYT article (in which I’m quoted):

John Delaney, an Irish businessman who founded Intrade, an online prediction market that allows customers to bet on world political, entertainment and financial events, died on Saturday after coming within 50 yards of the summit of Mount Everest. He was 42.

This article said nothing on banning Everest climbs; few articles on Everest climbs do. Yet:

The overall mortality rate for Everest mountaineers during the entire 86-year period was 1.3 percent; the rate among climbers was 1.6 percent and the rate among sherpas was 1.1 percent. During the past 25 years, a period during which a greater percentage of moutaineers climbed above 8,000 meters, the death rate for non-Himalayan climbers descending via the longer Tibetan northeast ridge was 3.4 percent, while on the shorter Nepal route it was 2.5 percent.

Contrast this to strong widespread feelings that bike helmets should be required, even though cyclists suffer only about 7 injuries per million miles of biking, and despite serious doubts if helmets help. Even the proverbial banned lawn darts caused ~30 deaths a year with 10-15 million of them in use, far far less than a 2% user death rate.

Why do ban activities with very low risks yet celebrate very high risk mountain climbing? Status seems the obvious explanation. It takes a lot of money to even attempt to climb Everest. We celebrate high status risk-takers, and ban low status ones.

Need more data? Consider the widespread bans on “noodling”, i.e., catching fish with your bare hands:

Brady Knowlton believes it’s his inalienable right as a Texan to shove his bare hand into the mouth of a 60-pound catfish and yank it out of a river. But wrestling a flapping, whiskered giant as it latches onto your arm with its jaws isn’t among Texas’s accepted methods of capturing fish. It is, rather, a class C misdemeanor, with fines of up to $500. … Rod-and-reel anglers … say noodling is unfair to the fish, since they’re grabbed in their burrows without a chance to swim away. … Missouri … prohibits fish-grabbing on grounds that it would deplete the fish population. (more)

When you picture a fish-noodler do you picture someone high status? Didn’t think so.

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Regulatory Bias

By Robin Hanson · May 11, 2011 2:50 pm · Comments (57)

Restaurants are held to a higher standards of food preparation than individuals. Few rules constrain your holiday meal for twenty, but if you served ten folks for lunch in a tiny diner, a huge rule book applies.

In Europe, firms are also held to a higher privacy standards than individuals. Firms must be careful to store your emails to them very carefully, to ensure a very low risk they might be stolen. But individuals can be very sloppy in how they store emails.

There are many such apparent regulatory “biases,” i.e., ways that regulations hold some things to higher standards than others, even when the relevant consequences seem similar. For example we seem to prefer:

  • Individuals over firms
  • Non-money over money exchange.
  • Natural over artificial chemicals
  • Old over new practices
  • Human over machine control
  • Locals over foreigners
  • Non- over for-profit organizations.
  • What else?

Now I’m sure clever folks can think up justifications for such preferences. But as with the common preference to redistribute money but not grades, I expect few folks could quickly come up with those reasons, even though most embrace such preferences. This again suggests that the clever reasons some can offer are not the main reasons most folks support such biases. And the obvious reasons that might drive most folks to support such biases do not suggest these are biases worth keeping.

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