Tag Archives: Social Science

Selection Is Slow

By Robin Hanson · June 25, 2011 3:25 pm · Comments (6)

If you imagine that a 25% cost advantage would let your firm quickly displace all rivals, think again. Yes more efficient firms and plants eventually displace less efficient ones, but it is easy to overestimate the strength and speed of this effect. For example, in a US manufacturing industry with five plants in use, the best plant will typically produce about twice as much with the same inputs (including materials, land, labor, etc.) as the worst plant. In India and China, it will make five times as much:

[The median] four digit SIC industr[y] in the U.S. manufacturing sector [has] a TFP ratio of … 1.92. … This … says … the plant at the 90th percentile of the productivity distribution makes almost twice as much output with the same measured inputs as the 10th percentile plant. Note that this is the average 90–10 range; … several industries see much larger productivity differences among their producers. U.S. manufacturing is … if anything … small relative to the productivity variation observed elsewhere. … [Researchers] find even larger productivity differences in China and India, with average 90–10 TFP ratios over 5:1.

These figures are for revenue-based productivity measures; i.e., where output is measured using plant revenues (deflated across years using industry-specific price indexes). TFP measures that use physical quantities as output measures rather than revenues actually exhibit even more variation than do revenue-based measures as documented. …

Another robust finding in the literature—virtually invariant to country, time period, or industry—is that higher productivity producers are more likely to survive than their less efficient industry competitors. …

Aggregate productivity growth in the U.S. retail sector is almost exclusively through the exit of less efficient single-store firms and by their replacement with more efficient national chain store affiliates. … Why is within-store productivity growth so small on average in retail, but not manufacturing? (more)

Yes, some of these large differences may be due to unmeasured quality differences.

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Tagged as: Finance, Social Science

Raid The Rich

By Robin Hanson · June 19, 2011 12:10 pm · Comments (9)

Me in March on Why Track Trends?:

Tyler’s thesis is that the US has slower growth than decades ago because we’ve used up the low hanging fruits. … My grad school (Caltech) didn’t teach macro … so I’ll stay agnostic for now. But what I can speak to is how little such trend analysis or projection matters, at least for most economic policy. … The question of which institutions will most increase economic welfare rarely depends much on the exact values of the sorts of parameters social scientists and the media track with such enthusiasm and concern.

Me 1.4 years ago on Enable Raiders!:

A robust, properly functioning market for corporate control is vital to the performance of a free-enterprise economy. …

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.

Today’s Post:

Growing income disparity in the United States … has reached levels not seen since the Great Depression. In 2008, … the [140,000 member] top 0.1 percent of earners make about $1.7 million or more, including capital gains. Of those, 41 percent were executives, managers and supervisors at non-financial companies, … with nearly half of them deriving most of their income from their ownership in privately-held firms. An additional 18 percent were managers at financial firms or financial professionals at any sort of firm. …

In 1975 … the top 0.1 percent of earners garnered about 2.5 percent of the nation’s income, including capital gains. …. By 2008, that share had quadrupled and stood at 10.4 percent. … The share of the income commanded by the top 0.01 percent rose from 0.85 percent to 5.03 percent over that period. For the 15,000 families in that group, average income now stands at $27 million.

The inquiring mind is surely curious to know who exactly are today’s super-rich, and how much richer they are now than before. But good policy is mostly about good institutions, which just shouldn’t depend much on such parameters. If you worry that managers get paid more than they contribute to firm value, a robust solution is to strengthen competition for corporate control, so raiders can takeover and then fire overpaid managers. Trying to independently determine manager contribution is far far harder.

If you worry instead about how much managers respond to taxes by reducing their efforts or moving to other jurisdictions, that also probably doesn’t depend much on just how rich they are or how much that has changed in recent decades. Wanting to tax managers more because you learned that they made more money than you thought seems much more like envy than neutral efficiency analysis.

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Tagged as: Management, Politics, Social Science, Wealth

Wolfers Gets Loopy

By Robin Hanson · June 17, 2011 4:50 pm · Comments (24)

Over the years I’ve not only met folks who do drugs, I’ve met folks who’ve had deep mystical experiences on drugs. They have told me that their drug experiences made them feel sure the physical world we see around us just can’t be all there is — they’ve touched something deeper and more important. When asked how exactly a weird drug experiences could possibly count as evidence on basic physics, they have little coherent to say. It seems their subconscious just told them this abstract conclusion, and they can’t not believe a cocksure subconscious. Even one on drugs.

Druggies might say such things in private, but it is much rarer to hear a professional physicist say them in public. Odd then to hear professional economist Justin Wolfers say his near-mystical parenting experience makes him doubt standard econ:

I learned economics in my twenties, before I became a dad. … Hard math and complex models … exploring the basic idea … that people are purposeful, analytic decision makers. … I had always believed in the analytic self; I was rational, calculating, and tried to make smart decisions. Of course real people don’t use math, but I figured that we’re still weighing costs and benefits just as our models say. …

Today, I’m not so sure. My feelings toward my daughter Matilda aren’t easily expressed in analytic terms. … Her laugh is the greatest joy, and it thrills me that she shares it with me. … She’s central not only to my life, but to who I am. There’s something new and strange about all this. Today, I feel the powerful force of biology. It’s visceral; it’s real; it’s hormonal, and it’s not in our economic models. I’m helpless in the face of feelings that overwhelm me.

Yes, I know that a twenty-something reader will cleverly point out that I just need to count kids as a good which yields utility, or perhaps we need to add a state variable to the utility function as in rational addiction models. But that’s not the point. I’m surprised by how little of this I’ve consciously chosen. While the economic framework accurately describes how I choose an apple over an orange, it has had surprisingly little to say about what has been the most important choice in my life.

I’m a committed neoclassical economist. … But what kind of economists would we be if we learned our economics only after we were parents? It’s an interesting thought experiment, and truth is, I don’t know the answer. … Slivers of evidence—my own introspection, conversations with other economist-parents … —all tell me that it would be different. (more)

I don’t need to speculate – I am exactly that kind of economist. I started econ grad school with two kids, ages 0 and 2, and had no undergrad econ. I’ve seen a lot of the parenting cycle – my youngest graduates from high school tomorrow. My kids are central to who I am, and I’ve known well feelings that are visceral, hormonal, and that overwhelm me.

But none of that makes me doubt the value of neoclassical econ. How could it? First, econ makes sense of a complex social world by leaving important things out, on purpose – that is the point of models, to be simple enough to understand. More important, econ models almost never say anything about consciousness or emotional mood – they don’t at all assume people choose via a cold calculating mindset, or even that they choose consciously. As long as choices (approximately) fit certain consistency axioms, then some utility function captures them. So how could discovering emotional and unconscious choices possibly challenge such models?

Having an emotional parenting experience is as irrelevant to the value of neoclassical econ as having a mystical drug experience is to the validity of basic physics. Your subconscious might claim otherwise, but really, you don’t have to believe it.

Added 11p: Wolfers is usually an excellent economist, and here he seems to realize he is acting a bit loopy. This suggests a “religious” scenario, where someone tries to show devotion via a willingness to believe extreme things. Wolfers feels a new strong attachment to his family, and shows it by a willingness to change related beliefs in an extreme way. Being an economist, one of the biggest beliefs he can sacrifice on this altar is his belief in the standard economic framework. So Wolfers says that his new family attachment has made him question this framework.

Added 22June: Wolfers responds here.

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Tagged as: Kids, Personal, Social Science

The SETI Game

By Robin Hanson · April 19, 2011 11:00 pm · Comments (7)

When listening for signals from aliens, it isn’t enough to just point an antenna at the sky. One must also choose details like directions, angles, frequencies, bandwidths, pulse widths, and pulse intervals. Apparently most SETI searches assume that for a given signal power density, aliens would pick details to make it as easy as possible for us to detect their signals. So standard SETI searches are optimized for such easily-seen signals. Two excellent papers, published back in July, instead consider what sort of signals would be sent by “beacon” building aliens, who seek to create the maximum possible power density at any given distance away from them. (One of the authors is SF author Greg Benford.) Such signals are quite different, and most of today’s SETI searches are not very good at seeing them:

Minimizing the cost of producing a desired power density at long range … determines the maximum range of detectability of a transmitted signal. We derive general relations for cost-optimal aperture and power. … Galactic-scale beacons can be built for a few billion dollars with our present technology. Such beacons have narrow “searchlight” beams and short “dwell times” when the beacon would be seen by an alien observer in their sky. … Cost scales only linearly with range R, not as R². … They will likely transmit at higher microwave frequencies, 10 GHz. The natural corridor to broadcast is along the galactic radius or along the local spiral galactic arm we are in. …

Cost, spectral lines near 1 GHz, and interstellar scintillation favor radiating frequencies substantially above the classic “water hole.” Therefore, the transmission strategy for a distant, cost-conscious beacon would be a rapid scan of the galactic plane with the intent to cover the angular space. Such pulses would be infrequent events for the receiver. Such beacons built by distant, advanced, wealthy societies would have very different characteristics from what SETI researchers seek. … We will need to wait for recurring events that may arrive in intermittent bursts. …

A concept of frugality, economy. … directly contradicts the Altruistic Alien Argument that the beacon builders will be vastly wealthy and make everything easy for us. An omnidirectional beacon, radiating at the entire galactic plane, for example, would have to be enormously powerful and expensive, and so not be parsimonious. … For transmitting time t, receiver detectability scales as t^1/2. But at constant power, transmitter cost increases as t, so short pulses are economically smart (cheaper) for the transmitting society. A 1-second pulse sent every 10 minutes to 600 targets would be 1/600 as expensive per target, yet only *1/25 times harder to detect. Interstellar scintillation limits the pulse time to >10^-6 s, which is within the range of all existing high-power microwave devices. Such pings would have small information content, which would attract attention to weaker, high-content messages. …

Cost-optimized beacons … can be found by steady searches that watch the galactic plane for times on the scale of years. Of course, SETI literature abounds with consideration of the trade-offs of search strategy (range vs. EIRP vs. pulse vs. continuous (continuous wave, CW) vs. polarization vs. frequency vs. beamwidth vs. integration time vs. modulation types vs. targeted vs. all-sky vs. Milky Way). But, in practice, search dwell times are a few seconds in surveys and 100–200 seconds for targeted searches. Optical searches usually run to minutes. And integration times are long, of order 100 s, so short pulses will be integrated out. …

Behind conventional SETI methods lies the assumption that altruistic beaming societies will send persistent signals. In searches to date, confirmation attempts, when the observer looks back at a target, in practice usually occur days later. Such surveys have little chance of seeing cost-optimized beacons. … Distant, cost-optimized beacons will appear for much less time than as assumed in conventional SETI. Earlier searches have seen pulsed intermittent signals resembling what we (in this paper) think beacons may be like, and may provide useful clues. We should observe the spots in the sky seen in previous work for hints of such activity but over year-long periods. (more)

Of course both the usual assumption that aliens will pay any cost to make a given power density signal easy for us to see, and the new assumption that aliens ignore our costs and merely seek to maximize power density, are both somewhat unsatisfactory. It would be better to model this interaction as a game, where each side has a limited budget and seeks to maximize the probability of at least one successful communication, holding constant the behavior it expects from the other side. Each side would of course also have to integrate over possible locations and budgets for the other side.

I’m very interested in working with (sim, math, or physics) competent folks to more formally model this SETI communication game.

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Tagged as: Aliens, Origin of Life, Project, Social Science, Space

Skyscraper Scale Econ

By Robin Hanson · March 1, 2011 9:15 pm · Comments (21)

Edward Glaeser says regulation doubles New York housing prices:

The cheapest way to deliver new housing is in the form of mass-produced two-story homes, which typically cost only about $84 a square foot to erect. That low cost explains why Atlanta and Dallas and Houston are able to supply so much new housing at low prices. …

Building up is more costly, especially when elevators start getting involved. And erecting a skyscraper in New York City involves additional costs (site preparation, legal fees, a fancy architect) that can push the price even higher. But many of these are fixed costs that don’t increase with the height of the building. …The actual marginal cost of adding an extra square foot of living space at the top of a skyscraper in New York is typically less than $400. Prices do rise substantially in ultra-tall buildings—say, over 50 stories—but for ordinary skyscrapers, it doesn’t cost more than $500,000 to put up a nice 1,200-square-foot apartment. … At those heights, the land costs become pretty small. If there were no restrictions on new construction, then prices would eventually come down to somewhere near construction costs, about $500,000 for a new apartment. That’s a lot more than the $210,000 that it costs to put up a 2,500-square-foot house in Houston—but a lot less than the $1 million or more that such an apartment often costs in Manhattan.

Glaeser also tosses in this shocking stat:

Driving the 15 miles from the [Mumbai] airport to the city’s old downtown, with its landmark Gateway of India arch, can easily take 90 minutes. There is a train that could speed your trip, but few Westerners have the courage to brave its crowds during rush hour. In 2008, more than three people each working day were pushed out of that train to their death.

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Tagged as: Regulation, Social Science

How To Doubt

By Robin Hanson · January 5, 2011 6:00 pm · Comments (15)

Doubting conventional wisdom seems pretty central to my style and central issues. So I took some time to ponder the general issue of doubt. Here’s what I came up with.

The relation between confident and doubtful states of belief is like that between the three corners of a triangle and the points within the area of the triangle. Even though there are far more area points than corner points, area points are more similar to each other, in a distance sense. In the same way, there are far more states of doubt than confidence, yet states of doubt are more similar to each other, in that they lead to similar decisions.

What can you do about serious skepticism, i.e., the possibility that you might be quite mistaken on a great many of your beliefs? For this, you might want to consider which of your beliefs are the most reliable, in order to try to lean more on those beliefs when fixing the rest of your beliefs. But note that this suggests there is no general answer to what to do about doubt – the answer must depend on what you think are actually your most reliable beliefs.

When seeking your most reliable beliefs, to help fix other beliefs, you might be tempted to just consider simple beliefs like “George is my friend” or “carrots are orange.” But you may do better to rely on your less often stated beliefs that it is quite unlikely for a great many of your “independently” generated beliefs to all be mistaken.

That is, our most potent beliefs for dealing with doubt are often our beliefs about the correlations between errors in other beliefs. This is because having low error correlations can imply that related averages and aggregates are very reliable. For example, if there is little correlation in the errors your eyes make under different conditions in judging brightness, then you need only see the same light source under many conditions to get a reliable estimate of its brightness.

Since beliefs about low error correlations can support such strong beliefs on aggregates, in practice doubt about one’s beliefs often focuses on doubts about the correlations in one’s belief errors. If we guess that a certain set of errors have low correlation, but worry that they might really have a high correlation, it is doubts about such hidden correlations that threaten to infect many other beliefs.

So then what do we actually worry about, when we worry that our belief errors might be correlated? It seems to me that we mainly worry about two sources of correlated error:

Hidden psychological tendencies: We worry that our mind are built in such a way as to give related errors on what appear to be unrelated topics. Our minds might, for example, be biased toward high estimates of our ability, for many kinds of unrelated abilities.
Hidden social coordination: We worry that our social groups coordinate so as to give related errors from what appear to be unrelated social sources. Sources that share a common ideology might, for example, make similar errors on diverse topics.

Most academic consideration of radical skepticism happens in philosophy. But the above analysis suggests that if you were serious about actually doubting, instead of just discussing doubt, you’d want to study psychology and social sciences, especially hidden psychological biases and social coordination. Getting a grip on these subjects might position you well to actually consider the possibility that you might in fact be quite mistaken about a great deal.

Of course once you do understand psych and socsci, there is no guarantee that such understanding enables you to, on your own, powerfully address your doubts. If fact, you may end up agreeing with me that our best approach is for would-be doubters to coordinate to support new institutions that better reward correction of error, especially correlated error. I refer of course to prediction markets.

In sum: States of doubt are diverse, yet lead to similar decisions, relative to states of confidence. To productively doubt, you’ll want to identify beliefs in which you have greater confidence. When your belief errors have low correlation, you can have quite high confidence in certain aggregate beliefs. So doubts about belief error correlations are central to real skepticism. Since most doubts about correlations seem to arise from concerns about hidden mental tendencies and social coordination, a serious doubter will give those topics the most attention. And an ambitious doubter might join me in supporting something like prediction markets.

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Tagged as: Philosophy, Prediction Markets, Psychology, Social Science

Roberts On Robots

By Robin Hanson · January 3, 2011 4:30 pm · Comments (48)

Russ Roberts and I talked for over 90 minutes on the possibility of a future robot-induced “singularity”, i.e., a sudden drastic social change, including a much faster growth rate. As this was his longest podcast in over two years, Russ seems to have been quite engaged by the subject.

Russ said “This may all sound crazy but Robin makes it actually sound plausible.” His two main points of skepticism were:

I say our brains are big piles of brain cells that send signals to each other. We’ve know what parts the brain is made of, and they are the same familiar parts that everything else around us is made of. We know well how these parts interact locally, though figuring out what this implies on large scales is usually beyond our calculation abilities. So a good enough model of the parts and how they are connected must reproduce the same overall input-output behavior. Russ says “there is a reductionist element to this which says–and this is controversial–all there is to our brain is its physicality. Nothing else there. That’s not universally accepted, correct? … Being a religious person I’m capable of imagining something that is not observable.”
I say prices usually fall when a very elastic supply curve rapidly gets cheaper. Russ would probably agree for something like computer memory, but is reluctant to agree for wages – he doesn’t think cheap plentiful immigrants lower wages. I say that if trillions of immigrants willing to work for a dollar an hour were waiting just offshore, letting in as many as wanted in would lower wages to that level. So I say cheap robots getting cheaper fast should rapidly lower wages for tasks they do. Russ objects “You can’t just say your wage will be driven down, because if there are complementary types of labor they’ll increase the wage rate of some people. … There’s all these complicated secondary effects.” I say all things considered, the likely effect is falling wages.

The first point reminds me of my disagreements with Tyler:

The three items on which Tyler most clearly identifies a disagreement [with me] are all in hard science and technology … Tyler doesn’t know that much about hard science and technology. … And yet Tyler feels confident enough in his perception of expert consensus on such topics to base his disagreements with me on them, even though I’ve spend years in such area.

The second point seems easier to settle, as it is just an application of standard econ theory. Any other economists care to weigh in?

Added 5Jan: Karl Smith, Nick Rowe , Steven Hsu weigh in.

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Tagged as: AI, Future, Personal, Social Science

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