Tag Archives: Status

Why Grievances Grow

We have come to call these fields “grievance studies” in shorthand because of their common goal of problematizing aspects of culture in minute detail in order to attempt diagnoses of power imbalances and oppression rooted in identity. (more)

A full 80% [of US] believe that “political correctness is a problem in our country.” … The woke are in a clear minority across all ages. … Progressive activists are the only group that strongly backs political correctness: Only 30% see it as a problem. … Compared with the rest of the [nation], progressive activists are much more likely to be rich, highly educated—and white. … What people mean by “political correctness.” … [is] their day-to-day ability to express themselves: They worry that a lack of familiarity with a topic, or an unthinking word choice, could lead to serious social sanctions for them. (more)

While the American legal system favors the state over the individual in property takings, for example in contrast with the Japanese system, the political system favors NIMBYs and really anyone who complains. Infrastructure construction takes a long time and the politician who gets credit for it is rarely the one who started it, whereas complaints happen early. This can lead to many of the above-named problems [with transit construction], especially overbuilding, such as tunneling where elevated segments would be fine or letting agency turf battles and irrelevant demands dictate project scope. (more)

Chronic Complainers: These folks live in a constant state of complaint. If they’re not voicing about their “woe is me” attitude, they’re probably thinking about it. Psychologists term this compulsory behavior rumination, defined as “repetitively going over a thought or a problem without completion.” Rumination is, unfortunately, directly relayed to the depressed and anxious brain. (more)

Customers with high status tended to register more service failures and to complain more frequently than customers of lower social status. All three social status distinctions explored in this study (gender, education, and age) correlated negatively with formal complaint, but only age correlated negatively with informal complaint. … Two cultural dimensions [power distance and uncertainty avoidance] had the expected negative effect on intention to complain, and moderated the relationship between social status and intention to complain. (more)

My favorite one-factor theory of social attitude (and value) change over the last few centuries is that increasing wealth has induced a drift from farmer back to forager attitude (and values). (A theory I also outline in Age of Em.) Which plausibly helps explains changing attitudes toward fertility, gender, slavery, crime, democracy, war, leisure, art, and travel. In this post I want to suggest a (to me) new hypothesis about forager attitudes, which could help explain some recent attitude trends.

Foragers are fiercely egalitarian. They share many kinds of food and other resources, and enforce a norm of quickly and aggressively squashing any signs of attempts to use or threaten to use force, or any inclinations to do so. In fact, this is probably the uber-norm that drove the evolution of norms in the first place. Bragging about your physical strength is a no-no, as that can be interpreted as an implicit threat to use that strength. Even bragging about your intelligence or other resources is discouraged, as those might also be seen as threats, or as attempts to form coalitions that might threaten. Forager group decisions are to be made by consensus, after everyone has had a chance to weigh in.

Now consider foragers attitudes about complaining. When someone more dominant makes a complaint to someone less dominant, that can often be interpreted as a threat to use power if the complaint isn’t fixed. Which is a big forager no-no. But when a less dominant person complains to a more dominant person, it is harder to see that as a threat to use power. So complaints down are discouraged more than complaints up, just as punching down is more of a no-no than punching up. And we’ll tend to interpret complaints as a pro-down positions.

A complaint that is made to third parties fits the standard norm-enforcement pattern, a pattern of which foragers greatly approve. Thus having A complain to B about how a more dominant person C is treating a less dominant person D badly should generally meet with approval. This is A helping out with norm enforcement, and can be seen as “speaking truth to power.” If A is a high prestige person, and B is a wise and moral audience, this pattern should be especially approved. After all, we naturally believe prestigious people more than others. And if a complaint leads to action of which we later approve, that can increase the prestige of the complainers.

Yes, people who complain a lot tend to seem unhealthy, and we tend to think less of frequent complainers. Even so, foragers likely a big soft spot in their hearts for prestigious people who complain to the whole group that some low dominance people are being treated badly by high dominance people. Those complaints, foragers respected.

In our society today, we tend to frame big firms, governments, rich folks, and larger demographic groups as more dominant actors. So when a local neighborhood group complains about a government plan for a transit construction project, we tend to see that as a low dominance actor complaining about a high dominance actor, and habitually sympathize. And to the extent that we have forager-like attitudes about such situations, this increases the political negotiating power of such complainers, inducing governments to give in to them, and raising the costs of transit construction projects. Similar processes likely increase the power of neighborhood groups who demand rent, zoning, and private construction restrictions, resulting in less new buildings and housing.

Forager-like attitudes similarly prime us to favor ordinary consumers or employees who complain about big firms, and this encourages regulations focused mostly on consumer and employee welfare, relative to the welfare of investors, who are framed as rich and thus dominators. Even rich high status people feel comfortable complaining about how big firms treat them, and in fact they feel more comfortable than low status folks. Their higher prestige can make them feel like respected moral crusaders for all.

As larger race/ethnicities are framed as dominators relative to smaller ones, forager-like attitudes prime us to sympathize with complaints that the former mistreat the latter. Similarly for complaints on how the larger groups who have more standard gender and sexual preferences treat the smaller groups who have more deviant genders and sexual preferences. Men’s higher physical strength and participation in war, and higher percentage among top positions at most organizations, has long induced us to frame men as more dominant relative to women.

Thus when we have more forager-like attitudes, we naturally sympathize when high prestige people complain that these more dominant groups are mistreating the less dominant groups. And in fact people with the potential for high prestige can seek to cement and increase their prestige via such complaints. Which is plausibly why it is high prestige folks who participate most in “grievance studies” type complaining.

Forager-like attitudes should make us sympathize with most any complaint about how rich people treat less rich people. Including how they conspire to mess up markets, political systems, or legal systems. Also, when criminals are committing crimes, they can seem like illicit dominators relative to ordinary citizens. But police, courts, and prisons can seem like dominators relative to criminals, thus inducing us to sympathize with complaints that criminals are being treated too harshly by the legal system. Perhaps explaining why prestigious folks seem to consistently push for weaker criminal punishments.

My wealth-induces-farmer-to-forager-attitudes story says that this complaint-sympathizing effect has been slowly getting stronger as we’ve been getting richer and more forager-like. It is strongest in the richest nation, which is currently the US, and it will continue to get stronger world-wide as the world gets richer. And these grievances accumulate when we do not use law to try and settle them.

And that’s my story. Hyper-egalitarian foragers were especially sympathetic to complaints by prestigious folks that high-dominance folks were mistreating less-dominant others, and with increasing wealth we’ve been slowly increasing our embrace of this forager attitude. And so we’ve been listening more to such complainers, and giving them more political and social power, which has encouraged more high prestige folks to present themselves as such crusading complainers. Which results in a growing accumulation of such grievances.

What to do about this will have to wait for another post.

Added 10Mar: The conceptual power here is that this theory is more specific than the general idea that we dislike inequality and dominance, and so work consistently to reduce them. A habit of favoring specific complaints against more dominant parties can actually increase inequality and dominance in many cases.

Added 11Mar: Martin Gurri’s book Revolt of the Public can be seen as describing a switch to a focus on popular complaints. He describes many new social movements around 2011 that focused on complaining loudly to an enthusiastic public, but which due to egalitarian ideals weren’t interested in or capable of negotiating concrete demands or working within the usual political systems.

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Enforce Common Norms On Elites

In my experience, elites tend to differ in how they adhere to social norms: their behavior is more context-dependent. Ordinary people use relatively simple strategies of being generally nice, tough, silly, serious, etc., strategies that depend on relatively few context variables. That is, they are mostly nice or tough overall. In contrast, elite behavior is far more sensitive to context. Elites are often very nice to some people, and quite mean to others, in ways that can surprise and seem strange to ordinary people.

The obvious explanation is that context-dependence is gives higher payoffs when one has the intelligence, experience, and social training to execute this strategy well. When you can tell which norms will tend to be enforced how when and by whom, then you can adhere strongly to the norms most likely to be enforced, and neglect the others. And skirt right up to the edge of enforcement boundaries. For weakly enforced norms, your power as an elite gives you more ways to threaten retaliation against those who might try to enforce them on you. And for norms that your elite associates are not particularly eager to enforce, you are more likely to be given the benefit of the doubt, and also second and third chances even when you are clearly caught.

One especially important human norm says that we should each do things to promote a general good when doing so is cheap/easy, relative to the gains to others. Applied to our systems, this norm says that we should all do cheap/easy things to make the systems that we share more effective and beneficial to all. This is a weakly enforced norm that elite associates are not particularly eager to enforce.

And so elites do typically neglect this system-improving norm more. Ordinary people look at a broken system, talk a bit out how it might be improved, and even make a few weak moves in such directions. But ordinary people know that elites are in a far better position to make such moves, and they tend to presume that elites are doing what they can. So if nothing is happening, probably nothing can be done. Which often isn’t remotely close to true, given that elites usually see the system-improving norm as one they can safely neglect.

Oh elites tend to be fine with getting out in front of a popular movement for change, if that will help them personally. They’ll even take credit and pretend to have started such a movement, pushing aside the non-elites who actually did. And they are also fine with taking the initiative to propose system changes that are likely to personally benefit themselves and their allies. But otherwise elites give only lip service to the norm that says to make mild efforts to seek good system changes.

This is one of the reasons that I favor making blackmail legal. That is, while one might have laws like libel against making false claims, and laws against privacy invasions such as posting nude picts or stealing your passwords, if you are going to allow people to tell true negative info that they gain through legitimate means, then you should also let them threaten to not tell this info in trade for compensation.

Legalized blackmail of this sort would have only modest effects on ordinary people, who don’t have much money, and who others aren’t that interested in hearing about. But it would have much stronger effects on elites; elites would be found out much more readily when they broke common social norms. They’d be punished for such violations either by the info going public, or by their having to pay blackmail to keep them quiet. Either way, they’d learn to adhere much more strongly to common norms.

Yes, this would cause harm in some areas where popular norms are dysfunctional. Such as norms to never give in to terrorists, or to never consider costs when deciding whether to save lives. Elites would have to push harder to get the public to accept norm changes in such areas, or they’d have to follow dysfunctional norms. But elites would also be pushed to adhere better to the key norm of working to improve systems when that is cheap and easy. Which could be a big win.

Yes trying to improve systems can hurt when proposed improvements are evaluated via naive public impressions on what behavior works well. But efforts to improve via making new small scale trials that are scaled up only when smaller versions work well, that’s much harder to screw up. We need a lot more of that.

Norms aren’t norms if most people don’t support them, via at least not disputing the claim that society is better off when they are enforced. If so, most people must say they expect society to be better off when we find more cost-effective ways to enforced current norms. Such as legalizing blackmail. This doesn’t necessarily result in our choosing to enforce norms more strictly, though this may often be the result. Yes, better norm enforcement can be bad when norms are bad. But in that case it seems better to persuade people to change norms, rather than throwing monkey-wrenches into the gears of norm enforcement.

So let’s hold our elites more accountable to our norms, listen to them when they suggest that we change norms, and especially enforce the norm of working to improve systems. Legalized blackmail could help with getting elites to adhere more closely to common norms.

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Social Media Lessons

Women consistently express more interest than men in stories about weather, health and safety, natural disasters and tabloid news. Men are more interested than women in stories about international affairs, Washington news and sports. (more)

Tabloid newspapers … tend to be simply and sensationally written and to give more prominence than broadsheets to celebrities, sports, crime stories, and even hoaxes. They also take political positions on news stories: ridiculing politicians, demanding resignations, and predicting election results. (more

Two decades ago, we knew nearly as much about computers, the internet, and the human and social sciences as we do today. In principle, this should have let us foresee broad trends in computer/internet applications to our social lives. Yet we seem to have been surprised by many aspects of today’s “social media”. We should take this as a chance to learn; what additional knowledge or insight would one have to add to our views from two decades ago to make recent social media developments not so surprising?

I asked this question Monday night on twitter and no one pointed me to existing essays on the topic; the topic seems neglected. So I’ve been pondering this for the last day. Here is what I’ve come up with.

Some people did use computers/internet for socializing twenty years ago, and those applications do have some similarities to applications today. But we also see noteworthy differences. Back then, a small passionate minority of mostly young nerdy status-aspiring men sat at desks in rare off hours to send each other text, via email and topic-organized discussion groups, as on Usenet. They tended to talk about grand big topics, like science and international politics, and were often combative and rude to each other. They avoided centralized systems to participate in many decentralized versions, using separate identities; it was hard to see how popular was any one person across all these contexts.

In today’s social media, in contrast, most everyone is involved, text is more often displaced by audio, pictures, and video, and we typically use our phones, everywhere and at all times of day. We more often forward what others have said rather than saying things ourselves, the things we forward are more opinionated and less well vetted, and are more about politics, conflict, culture, and personalities. Our social media talk is also more in these directions, is more noticeably self-promotion, and is more organized around our personal connections in more centralized systems. We have more publicly visible measures of our personal popularity and attention, and we frequently get personal affirmations of our value and connection to specific others. As we talk directly more via text than voice, and date more via apps than asking associates in person, our social interactions are more documented and separable, and thus protect us more from certain kinds of social embarrassment.

Some of these changes should have been predictable from lower costs of computing and communication. Another way to understand these changes is that the pool of participants changed, from nerdy young men to everyone. But the best organizing principle I can offer is: social media today is more lowbrow than the highbrow versions once envisioned. While over the 1800s culture separated more into low versus high brow, over the last century this has reversed, with low has been displacing high, such as in more informal clothes, pop music displacing classical, and movies displacing plays and opera. Social media is part of this trend, a trend that tech advocates, who sought higher social status for themselves and their tech, didn’t want to see.

TV news and tabloids have long been lower status than newspapers. Text has long been higher status than pictures, audio, and video. More carefully vetted news is higher status, and neutral news is higher status than opinionated rants. News about science and politics and the world is higher status that news about local culture and celebrities, which is higher status than personal gossip. Classic human norms against bragging and self-promotion reduce the status of those activities and of visible indicators of popularity and attention.

The mostly young male nerds who filled social media two decades ago and who tried to look forward envisioned high brow versions made for people like themselves. Such people like to achieve status by sparring in debates on the topics that fill high status traditional media. As they don’t like to admit they do this for status, they didn’t imagine much self-promotion or detailed tracking of individual popularity and status. And as they resented loss of privacy and strong concentrations of corporate power, and they imagined decentralized system with effectively anonymous participants.

But in fact ordinary people don’t care as much about privacy and corporate concentration, they don’t as much mind self-promotion and status tracking, they are more interested in gossip and tabloid news than high status news, they care more about loyalty than neutrality, and they care more about gaining status via personal connections than via grand-topic debate sparring. They like wrestling-like bravado and conflict, are less interested in accurate vetting of news sources, like to see frequent personal affirmations of their value and connection to specific others, and fear being seen as lower status if such things do not continue at a sufficient rate.

This high to lowbrow account suggests a key question for the future of social media: how low can we go? That is, what new low status but commonly desired social activities and features can new social media offer? One candidate that occurs to me is: salacious gossip on friends and associates. I’m not exactly sure how it can be implemented, but most people would like to share salacious rumors about associates, perhaps documented via surveillance data, in a way that allows them to gain relevant social credit from it while still protecting them from being sued for libel/slander when rumors are false (which they will often be), and at least modestly protecting them from being verifiably discovered by their rumor’s target. That is, even if a target suspects them as the source, they usually aren’t sure and can’t prove it to others. I tentatively predict that eventually someone will make a lot of money by providing such a service.

Another solid if less dramatic prediction is that as social media spreads out across the world, it will move toward the features desired by typical world citizens, relative to features desired by current social media users.

Added 17 Nov: I wish I had seen this good Arnold Kling analysis before I wrote the above.

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Intellectual Status Isn’t That Different

In our world, we use many standard markers of status. These include personal connections with high status people and institutions, power, wealth, popularity, charisma, intelligence, eloquence, courage, athleticism, beauty, distinctive memorable personal styles, and participation in difficult achievements. We also use these same status markers for intellectuals, though specific fields favor specific variations. For example, in economics we favor complex game theory proofs and statistical analyses of expensive data as types of difficult achievements.

When the respected intellectuals for topic X tell the intellectual history of topic X, they usually talk about a sequence over time of positions, arguments, and insights. Particular people took positions and offered arguments (including about evidence), which taken together often resulted in insight that moved a field forward. Even if such histories do not say so directly, they give the strong impression that the people, positions, and arguments mentioned were selected for inclusion in the story because they were central to causing the field to move forward with insight. And since these mentioned people are usually the high status people in these fields, this gives the impression that the main way to gain status in these fields is to offer insight that produces progress; the implication is that correlations with other status markers are mainly due to other markers indicating who has an inclination and ability to create insight.

Long ago when I studied the history of science, I learned that these standard histories given by insiders are typically quite misleading. When historians carefully study the history of a topic area, and try to explain how opinions changed over time, they tend to credit different people, positions, and arguments. While standard histories tend to correctly describe the long term changes in overall positions, and the insights which contributed to those changes, they are more often wrong about which people and arguments caused such changes. Such histories tend to be especially wrong when they claim that a prominent figure was the first to take a position or make an argument. One can usually find lower status people who said basically the same things before. And high status accomplishments tend to be given more credit than they deserve in causing opinion change.

The obvious explanation for these errors is that we are hypocritical about what counts for status among intellectuals. We pretend that the point of intellectual fields is to produce intellectual progress, and to retain past progress in people who understand it. And as a result, we pretend that we assign status mainly based on such contributions. But in fact we mostly evaluate the status of intellectuals in the same way we evaluate most everyone, not changing our markers nearly as much as we pretend in each intellectual context. And since most of the things that contribute to status don’t strongly influence who actually offers positions and arguments that result in intellectual insight and progress, we can’t reasonably expect the people we tend to pick as high status to typically have been very central to such processes. But there’s enough complexity and ambiguity in intellectual histories to allow us to pretend that these people were very central.

What if we could make the real intellectual histories more visible, so that it became clearer who caused what changes via their positions, arguments, and insight? Well then fields would have the two usual choices for how to respond to hypocrisy exposed: raise their behaviors to meet their ideals, or lower their ideals to meet their behaviors. In the first case, the desire for status would drive much strong efforts to actually produce insights that drives progress, making plausible much faster rates of progress. In this case it could well be worth spending half of all research budgets on historians to carefully track who contributed how much. The factor of two lost in all that spending on historians might be more than compensated by intellectuals focused much more strongly on producing real insight, instead of on the usual high-status-giving imitations.

Alas I don’t expect many actual funders of intellectual activity today to be tempted by this alternative, as they also care much more about achieving status, via affiliation with high status intellectuals, than they do about producing intellectual insight and progress.

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Dominance Hides in Prestige Clothing

21 months ago, I said: 

We like to give others the impression that we personally mainly want prestige in ourselves and our associates, and that we only grant others status via the prestige they have earned. But let me suggest that, compared to this ideal, we actually want more dominance in ourselves and our associates than we like to admit, and we submit more often to dominance. In the following, I’ll offer three lines of evidence for this claim. First consider that we like to copy the consumer purchases of people that we envy, but not of people we admire for being “warm” and socially responsible. … Second, consider the fact that when our bosses or presidents retire and leave office, their legitimate prestige should not have diminished much. … Yet others usually show far less interest in associating with such retirees. … For my third line of evidence, … for long term mates we more care about prestige features that are good for the group, but for short term mates, we care more about dominance features that are more directly useful to us personally. (more)

Today I’ll describe a fourth line of evidence: when ranking celebrities, we don’t correct much for the handicaps that people face. Let me explain.

Dominance is about power, while prestige is about ability. Now on average having more ability does tend to result in having more power. But there are many other influences on power besides individual ability. For example, there’s a person’s family’s wealth and influence, and the power they gained via associating with powerful institutions and friends.  

As I know the world of intellectuals better than other worlds, let give examples from there. Intellectuals who go to more prestigious schools and who get better jobs at more prestigious institutions have clear advantages in this world. And those whose parents were intellectuals, or who grew up in more intellectual cultures, had advantages. Having more financial support and access to better students to work with are also big helps. But when we consider which intellectuals to most praise and admire (e.g., who deserves a Nobel prize), we mainly look at the impact they’ve had, without correcting this much for these many advantages and obstacles. 

Oh sure, when it is we ourselves who are judged, we are happy to argue that our handicaps should be corrected for. After all, most of us don’t have as many advantages as do the most successful people. And we are sometimes willing to endorse correcting for handicaps with politically allied groups. So if we feel allied with the religious and politically conservative, we may note that they tend more obstacles in intellectual worlds today. And if we feel allied with women or ethnic minorities, we may also endorse taking into account the extra obstacles that they often face. 

But these corrections are often half-hearted, and they seem the exceptions that prove a rule: when we pick our intellectual heroes, we don’t correct much for all these handicaps and advantages. We mainly just want powerful dominant heroes. 

In acting, music, and management, being good looking is a big advantage. But while we tend to say that we disapprove of this advantage, we don’t correct for it much when evaluating such people. Oscar awards are mostly the pretty actors, for example. 

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The Model to Beat: Status Rank

There’s been much discussion of income inequality over the last few years. However, I just randomly came across what should be a seminal related result, published in 2010 but mostly ignored. Let me do my bit to fix that.

People often presume that policy can mostly ignore income inequality if key individual outcomes like health or happiness depend mainly on individual income. Yes, there may be some room for promoting insurance against income risk, but not much room. However, people often presume that policy should pay a lot more attention to inequality if individual outcomes depend more directly on the income of others, such as via envy or discouragement.

However, there’s a simple and plausible income interdependence scenario where inequality matters little for policy: when outcomes depend on rank. If individual outcomes are a function of each person’s percentile income rank, and if social welfare just adds up those individual outcomes, then income policy becomes irrelevant, because this social welfare sum is guaranteed to always add up to the same constant. Income-related policy may influence outcomes via other channels, but not via this channel. This applies whether the relevant rank is global, comparing each person to the entire world, or local, comparing each person only to a local community.

That 2010 paper, by Christopher Boyce, Gordon Brown, and Simon Moore, makes a strong case that in fact the outcome of life satisfaction depends on the incomes of others only via income rank. (Two followup papers find the same result for outcomes of psychological distress and nine measures of health.) They looked at 87,000 Brits, and found that while income rank strongly predicted outcomes, neither individual (log) income nor an average (log) income of their reference group predicted outcomes, after controlling for rank (and also for age, gender, education, marital status, children, housing ownership, labor-force status, and disabilities). These seem to me remarkably strong and robust results. (Confirmed here.)

The irrelevance of individual income and reference group income remained true whether the group within which a person was ranked was the entire sample, one of 19 geographic regions, one of 12 age groups, or one of six gender-schooling groups. This suggests that the actual relevant comparison group is relatively narrow. If people cared mainly about their global rank in the whole sample, then analyses of rank within groups should have missed an effect of the rank of the group, which should have appeared as an effect of reference group income. But such effects weren’t seen.

It these statistical models were the correct model of the world, then income policy could only include influence social welfare via the control variables of age, gender, education, marital status, children, housing ownership, labor-force status, and disabilities. You couldn’t improve social welfare directly by redistributing income, though redistribution or taxation might help by changing control variables.

But even that conclusion seems premature. The key idea here is that people care about their social status rank, and income should only be one of many factors contributing to social status. So we should really be looking at models where all of a person’s observable features can contribute to their status. For each feature, such as personality or marital status, we should ask if our data is best described as that factor contributing directly to social status, which is then ranked to produce individual outcomes, or whether that factor also influences individual outcomes via some other channel, that doesn’t pass through social status. It is only effects via those other channels that might change overall social welfare.

This seems a straightforward statistical exercise, at least for someone with access to relevant data. Who’s up for it?

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Marching Markups

This new paper by De Locker and Eeckhout will likely be classic:

We document the evolution of markups based on firm-level data for the US economy since 1950. Initially, markups are stable, even slightly decreasing. In 1980, average markups start to rise from 18% above marginal cost to 67% now. .. Increase in average market power .. can account for .. slowdown in aggregate output. .. The rise in market power is consistent with seven secular trends in the last three decades.

Yes, US public firms have only 1/3 of US jobs, and an even smaller fraction of the world’s. Even so, this is a remarkably broad result. I’d feel a bit better if I understood why their firm-level simple aggregation of total sales divided by total variable costs (their Figure B.5a) gives only a 26% markup today, but I’ll give them the benefit of the doubt for now. (And that figure was 12% in 1980, so it has also risen a lot.) Though see Tyler’s critique.

The authors are correct that this can easily account for the apparent US productivity slowdown. Holding real productivity constant, if firms move up their demand curves to sell less at a higher prices, then total output, and measured GDP, get smaller. Their numerical estimates suggest that, correcting for this effect, there has been no decline in US productivity growth since 1965. That’s a pretty big deal.

Accepting the main result that markups have been marching upward, the obvious question to ask is: why? But first, let’s review some clues from the paper. First, while industries with smaller firms tend to have higher markups, within each small industry, bigger firms have larger markups, and firms with higher markups pay higher dividends.

There has been little change in output elasticity, i.e., the rate at which variable costs change with the quantity of units produced. (So this isn’t about new scale economies.) There has also been little change in the bottom half of the distribution of markups; the big change has been a big stretching in the upper half. Markups have increased more in larger industries, and the main change has been within industries, rather than a changing mix of industries in the economy. The fractions of income going to labor and to tangible capital have fallen, and firms respond less than they once did to wage changes. Firm accounting profits as a fraction of total income have risen four fold since 1980.

These results seem roughly consistent with a rise in superstar firms:

If .. changes advantage the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms with high profits and a low share of labor in firm value-added and sales. .. aggregate labor share will tend to fall. .. industry sales will increasingly concentrate in a small number of firms.

Okay, now lets get back to explaining these marching markups. In theory, there might have been a change in the strategic situation. Perhaps price collusion got easier, or the game became less like price competition and more like quantity competition. But info tech should have both made it easier for law enforcement to monitor collusion, and also made the game more like price competition. Also, anti-trust just can’t have much effect on these small-firm industries. So I’m quite skeptical that strategy changes account for the main effect here. The authors see little overall change in output elasticity, and so I’m also pretty skeptical that there’s been any big overall change in the typical shape of demand or cost curves.

If, like me, you buy the standard “free entry” argument for zero expected economic profits of early entrants, then the only remaining possible explanation is an increase in fixed costs relative to variable costs. Now as the paper notes, the fall in tangible capital spending and the rise in accounting profits suggests that this isn’t so much about short-term tangible fixed costs, like the cost to buy machines. But that still leaves a lot of other possible fixed costs, including real estate, innovation, advertising, firm culture, brand loyalty and prestige, regulatory compliance, and context specific training. These all require long term investments, and most of them aren’t tracked well by standard accounting systems.

I can’t tell well which of these fixed costs have risen more, though hopefully folks will collect enough data on these to see which ones correlate strongest with the industries and firms where markups have most risen. But I will invoke a simple hypothesis that I’ve discussed many times, which predicts a general rise of fixed costs: increasing wealth leading to stronger tastes for product variety. Simple models of product differentiation say that as customers care more about getting products nearer to their ideal point, more products are created and fixed costs become a larger fraction of total costs.

Note that increasing product variety is consistent with increasing concentration in a smaller number of firms, if each firm offers many more products and services than before.

Added 25Aug: Karl Smith offers a similar, if more specific, explanation.

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Organic Prestige Doesn’t Scale

Some parts of our world, such as academia, rely heavily on prestige to allocate resources and effort; individuals have a lot of freedom to choose topics, and are mainly rewarded for seeming impressive to others. I’ve talked before about how some hope for a “Star Trek” future where most everything is done that way, and I’m now reading Walkaway, outlining a similar hope. I was skeptical:

In academia, many important and useful research problems are ignored because they are not good places to show off the usual kinds of impressiveness. Trying to manage a huge economy based only on prestige would vastly magnify that inefficiency. Someone is going to clean shit because that is their best route to prestige?! (more)

Here I want to elaborate on this critique, with the help of a simple model. But first let me start with an example. Imagine a simple farming community. People there spend a lot of time farming, but they must also cook and sew. In their free time they play soccer and sing folk songs. As a result of doing all these things, they tend to “organically” form opinions about others based on seeing the results of their efforts at such things. So people in this community try hard to do well at farming, cooking, sewing, soccer, and folk songs.

If one person put a lot of effort into proving math theorems, they wouldn’t get much social credit for it. Others don’t naturally see outcomes from that activity, and not having done much math they don’t know how to judge if this math is any good. This situation discourages doing unusual things, even if no other social conformity pressures are relevant.

Now let’s say that in a simple model. Let there be a community containing people j, and topic areas i where such people can create accomplishments aij. Each person j seeks a high personal prestige pj = Σi vi aij, where vi is the visibly of area i. They also face a budget constraint on accomplishment, Σi aij2 ≤ bj. This assumes diminishing returns to effort in each area.

In this situation, each person’s best strategy is to choose aij proportional to vi. Assume that people tend to see the areas where they are accomplishing more, so that visibility vi is proportional to an average over individual aij. We now end up with many possible equilibria having different visibility distributions. In each equilibria, for all individuals j and areas i,k we have the same area ratios aij / akj = Vi/ Vk.

Giving individuals different abilities (such as via a budget constraint Σi aij2 / xij ≤ bj) could make individual choose somewhat different accomplishments, but the same overall result obtains. Spillovers between activities in visibility or effort can have similar effects. Making some activities be naturally more visible might push toward those activities, but there could still remain many possible equilibria.

This wide range of equilibria isn’t very reassuring about the efficiency of this sort of prestige. But perhaps in a small foraging or farming community, group selection might over a long run push toward an efficient equilibria where the high visibility activates are also the most useful activities. However, larger societies need a strong division of labor, and with such a division it just isn’t feasible for everyone to evaluate everyone else’s specific accomplishments. This can be solved either by creating a command and status hierarchy that assigns people to tasks and promotes by merit, or by an open market with prestige going to those who make the most money. People often complain that doing prestige in these ways is “inauthethnic”, and they prefer the “organic” feel of personally evaluating others’ accomplishments. But while the organic approach may feel better, it just doesn’t scale.

In academia today, patrons defer to insiders so much regarding evaluations that disciplines become largely autonomous. So economists evaluate other economists based mostly on their work in economics. If someone does work both in economics and also in aother area, they are judged mostly just on their work in economics. This penalizes careers working in multiple disciplines. It also suggests doubts on if different disciplines get the right relative support – who exactly can be trusted to make such a choice well?

Interestingly, academic disciplines are already organized “inorganically” internally. Rather than each economist evaluating each other economist personally, they trust journal editors and referees, and then judge people based on their publications. Yes they must coordinate to slowly update shared estimates of which publications count how much, but that seems doable informally.

In principle all of academia could be unified in this way – universities could just hire the candidates with the best overall publication (or citation) record, regardless of in which disciplines they did what work. But academia hasn’t coordinated to do this, nor does it seem much interested in trying. As usual, those who have won by existing evaluation criteria are reluctant to change criteria, after which they would look worse compared to new winners.

This fragmented prestige problem hurts me especially, as my interests don’t fit neatly into existing groups (academic and otherwise). People in each area tend to see me as having done some interesting things in their area, but too little to count me as high status; they mostly aren’t interested in my contributions to other areas. I look good if you count my overall citations, for example, but not if you only my citations or publications in each specific area.

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When to Parrot, Pander, or Think for Yourself

Humans are built to argue and persuade. We tend to win when we endorse arguments that others accept, and win even more when we can generate new arguments that others will accept. This is both because people notice who originated the arguments that they accept, and because this ability helps us to move others toward opinions that favor our policies and people.

All of this is of course relative to some community who evaluates our arguments. Sometimes the larger world defers to a community of experts, and then it is that community who you must persuade. In other cases, people insist on deciding for themselves, and then you have to persuade them directly.

Consider three prototypical discussions:

  1. Peers in a car, talking on the path to drive to reach an event where they are late.
  2. Ordinary people, talking on if and how black holes leak information.
  3. Parents, talking on how Santa Claus plans to delivers presents Christmas eve.

In case #1, it can be reasonable for peers to think sincerely, in the sense of looking for arguments to persuade themselves, and then offering those same arguments to each other. It can be reasonable here to speak clearly and directly, to find and point out flaws in others’ arguments, and to believe that the net result is to find better approximations to truth.

In case #2, most people are wise to mostly parrot what they hear experts say on the topic. The more they try to make up their own arguments, or even to adapt arguments they’ve heard to particular contexts, the more they risk looking stupid. Especially if experts respond. On such topics, it can pay to be abstract and somewhat unclear, so that one can never be clearly shown to be wrong.

In case #3, parents gain little from offering complex new arguments, or even finding flaws in the usual kid arguments, at least when only parents can understand these. Parents instead gain from finding variations on the usual kid arguments that kids can understand, variations that get kids to do what parents want. Parents can also gain from talking at two levels at once, one discussion at a surface visible to kids, and another at a level visible only to other parents.

These three cases illustrate the three general cases, where your main audience is 1) about as capable , 2) more capable, or 3) less capable than you in generating and evaluating arguments on this topic. Your optimal argumentation strategy depends on in which of these cases you find yourself.

When your audience is about the same as you, you can most usefully “think for yourself”, in the sense that if an argument persuades you it will probably persuade your audience as well, at least if it uses popular premises. So you can be more comfortable in thinking sincerely, searching for arguments that will persuade you. You can be eager to find fault w/ arguments and criticize them, and to listen to such criticisms to see if they persuade you. And you can more trust the final consensus after your discussion.

The main exception here is where you tend to accept premises that are unpopular with your audience. In this case, you can either disconnect with that audience, not caring to try to persuade them, or you can focus less on sincerity and more on persuasion, seeking arguments that will convince them given their different premises.

When your audience is much more capable than you, then you can’t trust your own argument generation mechanism. You must instead mostly look to what persuades your superiors and try to parrot that. You may well fail if you try to adapt standard arguments to particular new situations, or if you try to evaluate detailed criticisms of those arguments. So you try to avoid such things. You instead seek generic positions that don’t depend as much on context, expressed in not entirely clear language that lets you decide at the last minute what exactly you meant.

When your audience is much less capable than you, then arguments that persuade you tend to be too complex to persuade them. So you must instead search for arguments that will persuade them, even if they seem wrong to you. That is, you must pander. You are less interested in rebuttals or flaws that are too complex to explain to your audience, though you are plenty interested in finding flaws that your audience can understand. You are also not interested in finding complex fixes and solutions to such flaws.

You must attend not only to the internal coherence of your arguments, but also to the many particular confusions and mistakes to which your audience is inclined. You must usually try arguments out to see how well they work on your audience. You may also gain by using extra layers of meaning to talk more indirectly to impress your more capable sub-audience.

What if, in addition to persuading best, you want to signal that you are more capable? To show that you are not less capable than your audience, you might go out of your way to show that you can sincerely, on the fly and without assistance, and without studying or practicing on your audience, construct new arguments that plausibly apply to your particular context, and identify flaws with new arguments offered by others. You’d be sincerely argumentative.

To suggest that you are more capable than your audience, you might instead show that you pay attention to the detailed mistakes and beliefs of your audience, and that you first try arguments out on them. You might try to show that you are able to find arguments by which you could persuade that audience of a wide range of conclusions, not just the conclusions you privately find the most believable. You might also show that you can simultaneously make persuasive arguments to your general audience, while also discreetly making impressive comments to a sub-audience that is much more capable. Sincerely “thinking for yourself” can look bad here.

In a world where people following the strategies I’ve outlined above, the quality of general opinion on each topic probably depends most strongly on something near the typical capability of the relevant audience that evaluates arguments on that topic. (I’d guess roughly the 80th percentile matters most on average.) The less capable mostly parrot up, and the more capable mostly pander down. Thus firms tend to be run in ways that makes sense to that rank employee or investor. Nations are run in ways that make sense to that rank citizen. Stories make sense to that rank reader/viewer. And so on. Competition between elites pandering down may on net improve opinion, as may selective parroting from below, though neither seems clear to me.

If we used better institutions for key decisions (e.g., prediction/ decision markets), then the audience that matters might become much more capable, to our general benefit. Alas that initial worse audience usually decides not to use better institutions. And in a world of ems typical audiences also become much more capable, to their benefit.

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Hail Humans

Humans developed a uniquely strong and flexible capacity for social norms (see Boehm). Because of this, the praise that humans most crave is an acknowledgment that we are principled. That is, that we (mostly) adhere to the norms of our society, even when doing so is costly. And that includes the norm of calling attention to and punishing norm deviators.

In this post, I want to praise most humans for living up to this standard. This isn’t remotely a trivial accomplishment, and it just doesn’t get enough mention. Again, other animals can’t manage it. And most of us are often sorely tempted to defect.

It is much easier to embrace our society’s norms when we feel that we are winning by those norms, or at least breaking even. In this case we can each justify our norm-supporting sacrifices as the price we each pay to get others to make their sacrifices, to create a functioning society.

But much of our innate programming is tuned to watch for markers of relative status, ways in which some us seem better than others. And by this standard most of us are losers, gaining less than average relative status. (In technical terms, the median of success is well below the mean.)

When we feel like we are losers, so that others are gaining much more from society’s norms than we are, it is easier to doubt if we should continue to personally sacrifice to support those norms. Especially when we suspect that winners tend to win in part because they support some norms less than others do.

I think that in most societies, most losers do in fact suspect most winners of insufficient norm support. And there are some who use that as a justification to excuse their norm deviations. And most losers believe that there are many such deviants, and that such deviants tend to gain as a result of their failures to support norms.

And yet, even when they believe that most winners and many others gain from failing to sufficiently support norms, most losers still pay large personal costs to support most norms most of the time. Yes most everyone deviates sometimes, and yes we often work much harder to create the appearance than the substance of norm support. That is, we often attend more to what looks helpful than what is helpful.

Even so, hail to most humans for supporting their society’s norms enough to make possible society, and civilization. Yes, you might think that some societies have a better set of norms than others. And yes we might lament the lack of enough attention to preserving or inventing good norms.

But still, given that it is the praise that humans most crave to hear, and that they in fact do meet the relevant standard, we should give credit where credit is due. Hail to humans for supporting norms. At least their appearance, for most norms, most of the time.

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