Monthly Archives: September 2019

Dreamtime Social Games

Ten years ago, I posted one of my most popular essays: “This is the Dreamtime.” In it, I argued that, because we are rich,

Our descendants will remember our era as the one where the human capacity to sincerely believe crazy non-adaptive things, and act on those beliefs, was dialed to the max.

Today I want to talk about dreamtime social games.

For at least a million years, our ancestors wandered the Earth in small bands of 20-50 people. These groups were so big that they ran out of food if they stayed in one place, which is why they wandered. But such groups were big and smart enough to spread individual risks well, and to be relative safe from predators.

So in good times at least, the main environment that mattered to our forager ancestors was each other. That is, they succeeded or failed mostly based on winning social games. Those who achieved higher status in their group gained more food, protection, lovers, and kids. And so, while foragers pretended that they were all equal, they actually spent much of their time and energy trying to win such status games. They tried to look impressive, to join respected alliances, to undermine rival alliances, and so on. Usually in the context of grand impractical leisure and play.

As I described recently, status is usually based on a wide range of clues regarding one’s impressiveness, and the relative weight on these clues does vary across cultures. But there are many generic clues that tend to be important in most all cultures, including strength, courage, intelligence, wit, art, loyalty, social support etc.

When an ability was important for survival in a local environment, cultural selection tended to encourage societies to put more weight on that ability in local status ratings, especially when their society felt under threat. So given famine, hunters gain status, given war warriors gain status, and when searching for a new home explorers gain status.

But when the local environment seemed less threatening, humans have tended to revert back to a more standard human social game, focused on less clearly useful abilities. And the more secure a society, and the longer it has felt secure, the more strongly it reverts. So across history the social worlds of comfortable elites have been remarkably similar. In the social worlds such as Versailles, Tales of Genji, or Google today, we see less emphasis on abilities that help win in larger harsher world, or that protect this smaller world from larger worlds, and more emphasis on complex internal politics based on beauty, wit, abstract ideas, artistic tastes, political factions, and who likes who.

That is, as people feel safer, local status metrics and social institutions drift toward emphasizing likability over effectiveness, popularity and impressiveness over useful accomplishment, and art and design over engineering. And as our world has been getting richer and safer for many centuries now, our culture has long been moving toward emphasizing such forager values and attitudes. (Though crises like wars often push us back temporarily.)

“Liberals” tend to have moved further on this path than “conservatives”, as indicated by typical jobs:

jobs that lean conservative … [are] where there are rare big bad things that can go wrong, and you want workers who can help keep them from happening. … Conservatives are more focused on fear of bad things, and protecting against them. … Jobs that lean liberal… [have] small chances that a worker will cause a rare huge success … [or] people who talk well.

Also, “conservative” attitudes toward marriage have focused on raising kids and on a division of labor in production, while “liberal” attitudes have focused on sex, romance, and sharing leisure activities.

Rather than acknowledging that our status priorities change as we feel safer, humans often give lip service to valuing useful outcomes, while actually more valuing the usual social game criteria. So we pretend to go to school to learn useful class material, but we actually gain prestige while learning little that is useful. We pretend that we pick lawyers who win cases, yet don’t bother to publish track records and mainly pick lawyers based on institutional prestige. We pretend we pick doctors to improve health, but also don’t publish track records and mainly pick via institutional prestige, and don’t notice that there’s little correlation between health and medicine. We pretend to invest in hedge funds to gain higher returns, but really gain status via association with impressive fund managers, and pay via lower average returns.

I recently realized that, alas, my desire to move our institutions more toward “paying for results” is at odds with this strong social trend. Our institutions could be much more effective at getting us the things we say we want out of them, but we seem mostly content to let them be run by the usual social status games. We put high status people in change and give them a lot of discretion, as long as they give lip service to our usual practical goals. It feels to most people like a loss in collective status if they let their institutions actually focus too much on results.

A focus on results would probably result in the rise to power of less impressive looking people who manage to get more useful things done. That is what we’ve seen when firms have adopted prediction markets. At first firms hope that such markets may help them identify the best informed employees. But are are disappointed to learn that winners tend not to look socially impressive, but are more nerdy difficult inarticulate contrarians. Not the sort they actually want to promote.

Paying more for results would feel to most people like having to invite less suave and lower class engineers or apartment sups to your swanky parties because they are useful as associates. Or having to switch from dating hip hunky Tinder dudes to reliable practical guys with steady jobs. In status terms, that all feels less like admiring prestige and more like submitting to domination, which is a forager no-no. Paying for results is the sort of thing that poor practical people have to do, not rich prestigious folks like you.

Of course our society is full of social situations where practical people get enough rewards to keep them doing practical things. So that the world actually works. People sometimes try to kill such things, but then they suffer badly and learn to stop. But most folks who express interest in social reforms seem to care more about projecting their grand hopes and ideals, relative to making stuff work better. Strong emotional support for efficiency-driven reform must come from those who have deeply felt the sting of inefficiency. Perhaps regarding crime?

Ordinary human intuitions work well for playing the usual social status games. You can just rely on standard intuitions re who you like and are impressed by, and who you should say what to. In contrast, figuring out how to actually and effectively pay for results is far more complex, and depends more on the details of your world. So good solutions there are unlikely to be well described by simple slogans, and are not optimized for showing off one’s good values. Which, alas, seems another big obstacle to creating better institutions.

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Status Apps Are Coming

A person’s social status is a consensus of those nearby on that person’s relative social value and power. Which factors count how much in this status vary across societies and subcultures. (They probably vary more at high status levels.) Most people spend a lot of effort in private thought and in conversations trying to infer the status of they and their associates, and trying to raise the status of their allies and to lower that of their rivals.

Typically a great many considerations go into estimating status. Such as the status of your ancestors and current associates, and your job, income, residence, health, beauty, charisma, intelligence, strength, gender, race, and age. Most anything that is impressive or admirable helps, such as achievements in sports and the arts, looking sharp, and seeming knowledgeable. Most anything that is disliked or disapproved hurts, such as often (but not always) applies for violence, rudeness, unreliability, and filth.

Today we generate shared status estimates via expensive gossip and non-verbal communication, but someday (in 20 years?) tech may help us more in this task. Tech will be able to see many related clues like who talks to who with what tone of voice, who looks how at who, who invites who to what social events, who lives where and has what jobs, etc. Given some detailed surveys on who says who has what status, we may build accurate statistical models that predict from all that tech-accessible data who would say who has what status in what contexts.

Or new social practices might create more directly relevant data. Imagine a future app where you can browse people to see numerical current estimates of their status (perhaps relative to a subculture).  You can click up or down on any estimate to indicate that you consider it too low or too high. Some perhaps-complex mechanism then takes prior estimates, background tech data, and these up/down edits to generate changes in these status estimates, and also changes in estimates of edit source reliability. All else equal, people who contribute more reliable/informative status edits are probably estimated to have higher status.

I don’t know how exactly such an algorithm could or should work. But I’m confident that there are many variations that could work well enough to attract much participation and use. Many people would be tempted to use these status estimates similarly to how they now use the status estimates that they generate via gossip and subtle social clues. They might even use them in even more places than they use status today, if these new estimates were considered more reliable and verifiable.

I’m also confident that governments, firms, and other organizations would be eager to influence these systems, as they’d see some variations as being more favorable to their interests. Yes, that creates a risk that they may push for bad variations, though don’t forget that our informal systems today also have many flaws. For example, many people use false rumors and other underhanded status tricks to hurt rivals and help allies, tricks that may be harder to get away with in a more transparent system.

Yes, this may look like a dystopia in many ways. But it is probably coming whether you like it or not, and this change may offer great opportunities to improve our status systems. For example, today we have many anti-discrimination policies that seem to be crude and awkward attempts to fix perceived problems with our current status systems. A more fine-grained, data-driven, and transparent status system might allow more effective and better targeted fixes. So it seems worth thinking now a bit more about how such systems could and should work, before some big government or tech firm imposes a system that quickly gets entrenched and hard to change.

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Who Vouches For You?

A <600 word summary of my crime law proposal:

Who Vouches For You?: A Radical Crime Law Proposal

The legal system used by most ancient societies was simply A-sues-B-for-cash. But in the last few centuries, states added “crime law,” wherein the state investigates, sues, and imprisons “criminals.” These centrally-run one-size-fits-all bureaucratic systems don’t innovate well or adapt well to individual conditions. And even though most of your “constitutional rights” are regarding such systems, they still seem badly broken.

In the ancient world, a stranger who came to town was trusted more if a local “vouched” for them. We still use vouching today in bonded contractors, in open source software, in organized crime, and in requiring most everyone to get an insurer ready to pay if they cause a car accident. I propose requiring everyone to get an insurer to vouch for them regarding any crimes they might commit. If you are found guilty of a crime, your “voucher” pays the state a fine, and then pays to punish you according to your contract with them. This fine in part pays the private bounty-hunter who convinced the court of your guilt. Competing bounty-hunters obey law because they can’t maintain a blue-wall-of-silence.

To lower your voucher premiums, you might agree to (1) prison, torture, or exile, if caught, (2) prior limits on your freedom like curfews, ankle bracelets, and their reading your emails, and (3) co-liability wherein you and your buddies are all punished if any one of you is found guilty. In this system, the state still decides what behaviors are crimes and if any one accusation is true, and it sets fine and bounty levels regarding how hard to discourage and detect each kind of crime. But each person chooses their own “constitutional rights”, and vouchers acquire incentives and opportunity to innovate and adapt, by searching in a large space of ways to discourage crime.

Some key details:

  1. Judges and juries can retain discretion to consider case details when setting guilt or fines.
  2. If fines vary with wealth or income, then the rich don’t get a free pass to commit crimes.
  3. We could subsidize premiums, or offer a public option, to poor ex-cons for which we feel sorry.
  4. Other poor ex-cons might have to work for a while at isolated ships or mining or logging camps.
  5. Not being vouched is punished severely, not via a fine. Need violations to be rare, as with license plates today.
  6. Perhaps each person/building wears visible QR code or pingable RFID of voucher-client ID (VCID).
  7. It is enough to know VCID to charge with crime, no need to physically detain them.
  8. Key criteria for being a voucher is showing that will have enough money to pay fines.
  9. Vouchers are held to contracts for as long as it takes clients to find new vouchers.
  10. Contracts typically worse for clients over time if not renewed, to cover revealed-criminal scenarios.
  11. Contracts typically do not cover pre-existing crimes or plans, for which prior voucher pays.
  12. Clients can switch at will, though co-liability partners must all agree to switch at same time.
  13. First-to-file bounty hunter has right to prosecute first, though is crime to file with little evidence.
  14. Courts would remain skeptical of both sides’ evidence, with evidence faking being a big crime.
  15. Bounty-hunters access to evidence varies with contract-specified client privacy levels.
  16. Market estimates of fines given privacy levels set extra fine factors paid by clients with high levels.
  17. As immigrants & tourists must be vouched, it matters less if immigrants cause more crime.
  18. Parents must get vouchers for kids, so “majority” age could be when kids can afford it on own.
  19. These or related vouchers might pay for costs to assist folks suffering poverty or unemployment.
  20. May want solemn voucher signing ceremony, after passing test shows that understand contract.

Added: See also this talk video, and also this two part video.

Added: See also vouching re pandemics.

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Quality Regs Say ‘High Is Good’

95% think doctors should be licensed. … 96% oppose legalizing crystal meth. (more)

One of the main ways that our world is not libertarian is that it is full of government rules requiring minimum quality levels for many kinds of products and services. We see this for food, drugs, building codes, auto/plane rules, allowed investments, censorship, professional licensing, school accreditation, sports equipment, and much more. Once you look for them, you find such rules everywhere. So a key basic puzzle is: why do we have so many min quality rules?

Here are some clues to keep in mind:

  1. Though these rules limit consumer choices, they have strong voter support.
  2. Such rules were far less common in the ancient world.
  3. Today these rules are extremely widespread, across many areas of life and types of societies and governments.
  4. These rules are implemented via many channels: liability law, regulatory agencies, and legislation.
  5. Poor nations tend to have lower standards, like rich nations did when they were poor, yet we see few exceptions for poor people or neighborhoods.
  6. Product bans are far more common than are official quality evaluations.
  7. Many such rules are retained even when they seem quite ineffective, such as laws against vaping (little health harm), recreational drugs, and prostitution.
  8. We don’t make exceptions for customers who can show that they clearly understand that the product is considered low quality.

Continue reading "Quality Regs Say ‘High Is Good’" »

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Graziano on a World of Uploaded Minds

Princeton neuroscience professor Michael Graziano has a new book out today, Rethinking Consciousness: A Scientific Theory of Subjective Experience, which is mostly on his account of consciousness. On Sunday he published a related WSJ article, on his last book chapter (out of 9), which is on how society would change with uploads (= ems). And while most of his observations about an upload/em world are reasonable points, he misses so many other big changes that his picture ends up badly distorted.

Those reasonable points by Graziano (even when I don’t agree):

  1. Uploads are inevitable, but not soon. “I’d guess at least 100 years if not substantially more”.
  2. We will soon have good/cheap enough computers, brain cell models, body emulations, and virtual reality environments.
  3. We are far from good/cheap enough scans at sufficient scale and resolution.
  4. To survive system redesigns & upgrades, uploads need long lasting computer file & emulation system formats.
  5. The very first uploads may suffer due to imperfections in the emulation process.
  6. “mind uploading … may have some major risks, but I think it also has great possibility. … mind uploading will be a cultural and ethical mess that sorts itself out eventually.”
  7. Long-lived uploads would eventually run out of memory, and so either must add memory or use a rolling memory window.
  8. “We” must decide what rights uploads and their copies get.
  9. “We” must decide which humans are uploaded.
  10. Humans will ask themselves if an upload of them is really them.
  11. Uploads and their still-living human originals can have social conflicts over friends, jobs, etc.
  12. You can be bolder in virtual reality as you can’t get physically hurt there.
  13. Uploads never need to go to the bathroom.
  14. Things like tastes and breathing may not feel exactly the same for uploads
  15. Uploads can continue to do jobs and have social relations with humans.
  16. Instead of “dystopian” policies that insist on only one version of each human at a time, it seems better if “the system remains chaotic and freewheeling, with no restrictions on the number of versions of each person, causing a societal revolution in our concept of identity and individuality.”
  17. The ability to prevent people from being uploaded might be a great power, if that were the only route to immortality.
  18. Immortal uploads would help us to preserve wisdom, knowledge and culture, but they’d also slow down cultural and linguistic change.
  19. Immortality allows bad leaders to more easily retrain control, in both politics and academia.
  20. As uploads have more life experience, “the balance of power and culture would shift rapidly to the [upload] world.”
  21. Uploads could more easily travel in space, and could slow down their minds during boring travel periods.
  22. Eventually it may be possible for uploads to communicate via more direct mind reading.

So, the picture Graziano paints is of an inter-mixed world of humans and uploads, sharing culture and doing jobs for and having social relations with each other. The main difference is that the uploads are immortal, and therefore older, wiser, more powerful, and more conservative: Continue reading "Graziano on a World of Uploaded Minds" »

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Yay Democracy Dollars

My proposal is that we give every American 100 democracy dollars that you can only give to candidates and causes that you like. This would washout the lobbyist cash by a factor of eight to one. (Yang in Thursday debate)

Gillibrand proposed this also, as have some law profs, and its been tried in Seattle. In my Twitter poll, the main concern people express re private firms doing things instead of government is that firms might lobby to change policy. I’m personally not so concerned about firm lobbying, as public employees and agencies also lobby, and as academics find it hard to see any substantial effects of lobbying. But there does seem to be a perception problem and $100 a person per year seems to me a small price to pay to address it.

Reading up on this idea, I see that many try to tie it to other policies they want, and so try to require politicians to accept no other money if they accept this, or only allow it to be spent in your state or only at particular points in the election cycle. Yang seems to have it right; spending constraints are mistakes. As Yang says, let people use the money at any time for any political organization, lobbyist, or candidate.

The only criticism I can find online, beyond harms from spending constraints, is this complaint that it might make politicians listen more to the public:

It would simply multiply the amount of money in politics by an order of magnitude, with effects that wouldn’t be good for the political system at large, but would be good for ad buyers and PR flacks and political operatives. … Citizens have no reason to think too hard about how they spend. … Will politicians get more populist or less? Will voters gravitate towards visionary leaders making hard decisions about confounding policy issues? Or will they pick whoever tells the most flattering lies in the most entertaining way? Because we know what that looks like. It’s ugly, and it’s orange. (More)

Yes, overall I might rather slant the system toward the better informed, and elite money in politics might be seen as doing that. But if that’s going to push people to avoid substituting firms for government, I’d rather use some other method to promote informed voters.

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Stamina Succeeds

You Need the Stamina and Mindset of a Professional Athlete to Make It in Business (more)
a reminder that success takes stamina, and you get stamina by training and experience (more)

It wasn’t until my mid-30s that I finally got to see some very successful people up close for long enough to notice a strong pattern: the most successful have a lot more energy and stamina than do others. Which was a disappointment, as I could clearly see that I didn’t have as much stamina as they.

The quotes above are about business management, but it also seems true in many other achievement areas. And while those above quotes focus on what you can do to increase stamina, I’m not sure you can change your stamina that much. You can do a few things, but stamina seems to me pretty resistant to conscious efforts to change it.

Of course stamina isn’t the only thing you need. It also helps to have motive, drive, intelligence, beauty, connections, charm, and many other things. But without stamina, you won’t be able to use those other things as many hours a day, which in close contests can make all the difference.

I think this helps explain many cases of “why didn’t this brilliant young prodigy succeed?” Often they didn’t have the stamina, or the will to apply it. I’ve known many such people. It helps explain why women have often suffered so much career-wise when they had more family demands, or when they were expected to have such soon. And why ambitious women often seem so sensitive on the topic of fertility.

I also think this explains why so many career paths have early periods with that place huge time and energy demands on competitors. With crazy unproductive work hours, as in medicine, law, and academia. These demands often seem counter productive from the point of view of learning,  production, or flourishing. But they may do well at distinguishing those with the most energy and stamina, and this may be their point.

If this all is true, why don’t we hear more about it when people talk about success? And why, when people do talk about stamina, do they focus so much on attitudes or practice that might improve something that is in fact hard to change? Why not suggest that people gauge their stamina, or potential for it, early on, and then calibrate their hopes for success accordingly?

The obvious answer: honestly about the stamina-success connection conflicts with our (forager-sourced) egalitarian norms, which promise that anyone can succeed if only they try in the right way. We’d rather give everyone hope than help the hopeful to better calibrate their success potential.

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Beware Multi-Monopolies

Back in 1948, the Supreme Court ordered Paramount, Metro-Goldwyn-Mayer and other movie studios to divest themselves of their theater chains, ruling that the practice of giving their own theaters preference on the best movies amounted to illegal restraint of trade.

In 1962, MCA, then the most powerful force in Hollywood as both a talent agency and producer of TV shows, was forced to spin off its talent agency after the Justice Department concluded that the combination gave it unfair advantage in both markets.

And in 1970, the Federal Communications Commission prohibited the broadcast networks — ABC, CBS and NBC — from owning or producing programming aired during prime time, ushering in a new golden era of independent production.

In recent decades, however, because of new technology and the government’s willful neglect of the antitrust laws, most of those prohibitions have fallen by the wayside. (more)

My last post talked about how our standard economic models of firms competing in industries typically show industries having too many, not too few, firms. It is a suspicious and damning fact that economists and policy makers have allowed themselves and the public to gain the opposite impression, that our best theories support interventions to cut industry concentration.

My last post didn’t mention the most extreme example of this, the case where we have the strongest theory reason to expect insufficient concentration:

  • Multi-Monopoly: There’s a linear demand curve for a product that customers must assemble for themselves via buying components separately from multiple monopolists. Each monopolist must pay a fixed cost and a constant marginal cost per component sold. Monopolists simultaneously set their prices, and the sum of these prices is intersected with the demand curve to get a quantity, which becomes the quantity that each firms sells.

The coordination failure among these firms is severe. It produces a much lower quantity and welfare than would result if all these firms were merged into a single monopolist who sold a single merged product. So in this case the equilibrium industry concentration is far too low.

This problem continues, though to a lessor extent, even when each of these monopolists is replaced by a small set of firms, each of who faces the same costs, firms who compete to sell that component. This is because the problem arises due to firms having sufficient market power to influence their prices.

For example, this multi-monopoly problem shows up when many towns along a river each separately set the tax they charge for boats to travel down that river. Or when, to get a functioning computer, you must buy both a processing chip and an operating system from separate firms like Intel and Microsoft.

Or when you must buy a movie or TV experience from (1) an agent who makes actors available, (2) a studio who puts those actors together into a performance, and (3) a theatre or broadcast network who finally show it to you. When these 3 parties separately set their prices for these three parts, you have a 3-way monopoly (or strong market power) problem.

This last example is why the quote above by Steven Pearlstein is so sad. He calls for anti-trust authorities to repeat some of their biggest ever mistakes: breaking monopolies into multi-monopolies. And alas, our economic and policy authorities fail to make clear just how big a mistake this is. In most industrial organization classes, both grad and undergrad, you will never even hear about this problem.

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What’s So Bad About Concentration?

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist. (Keynes)

Many have recently said 1) US industries have become more concentrated lately, 2) this is a bad thing, and 3) inadequate antitrust enforcement is in part to blame. (See many related MR posts.)

I’m teaching grad Industrial Organization again this fall, and in that class I go through many standard simple (game-theoretic) math models about firms competiting within industries. And occurs to me to mention that when these models allow “free entry”, i.e., when the number of firms is set by the constraint that they must all expect to make non-negative profits, then such models consistently predict that too many firms enter, not too few. These models suggest that we should worry more about insufficient, not excess, concentration.

Two examples:

  • “Cournot” Quantity Competition Firms pay (the same) fixed cost to enter an industry, and (the same) constant marginal cost to make products there. Knowing the number of firms, each firm simultaneously picks the quantity it will produce. The sum of these quantities is intersected with a linear demand curve to set the price they will all be paid for their products.
  • “Circular City” Differentiated Products Customers are uniformly distributed, and firms are equally distributed, around a circle. Firms pay (the same) fixed cost to enter, and (the same) constant marginal cost to serve each customer. Each firm simultaneously sets its price, and then each customer chooses the firm from which it will buy one unit. This customer must pay not only that firm’s price, but also a “delivery cost” proportional to its distance to that firm.
  • [I also give a Multi-Monopoly example in my next post.]

In both of these cases, when non-negative profit is used to set the number of firms, that number turns out to higher than the number that maximizes total welfare (i.e., consumer value minus production cost). This is true not only for these specific models I’ve just described, but also for most simple variations that I’ve come across. For example, quantity competition might have increasing marginal costs, or a sequential choice of firm quantity. Differentiated products might have a quadratic delivery cost, allow price discrimination by consumer location, or have firms partially pay for delivery costs.

Furthermore, we have a decent general account that explains this general pattern. It is a lot like how there is typically overfishing if new boats enter a fishing area whenever they expect a non-negative profit per boat; each boat ignores the harm it does to other boats by entering. Similarly, firms who enter an industry neglect the costs they impose on other firms already in that industry.

Yes, I do know of models that predict too few firms entering each industry. For example, a model might assume that all the firms who enter an industry go to war with each other via an all-pay auction. The winning firm is the one who paid the most, and gains the option to destroy any other firm. Only one firm remains in the industry, and that is usually too few. However, such models seem more like special cases designed to produce this effect, not typical cases in the space of models.

I’m also not claiming that firms would always set efficient prices. For example, a sufficiently well-informed regulator might be able to improve welfare by lowering the price set by a monopolist. But that’s about the efficiency of prices, not of the number of firms. You can’t say there’s too much concentration even with a monopolist unless the industry would actually be better with more than one firm.

Of course the world is complex and space of possible models is vast. Even so, it does look like the more natural result for the most obvious models is insufficient concentration. That doesn’t prove that this is in fact the typical case in the real world, but it does at least raise a legitimate question: what theory model do people have in mind when they suggest that we now have too much industry concentration? What are they thinking? Can anyone explain?

Added 11a: People sometimes say the cause of excess concentration is “barriers to entry”. The wikipedia page on the concept notes that most specific things “cited as barriers to entry … don’t fit all the commonly cited definitions of a barrier to entry.” These include economies of scale, cost advantages, network effects, regulations, ads, customer loyalty, research, inelastic demand, vertical integration, occupational licensing, mergers, and predatory pricing. Including these factors in models does not typically predict excess concentration.

That wiki page does list some specific factors as fitting “all the common definitions of primary economic barriers to entry.” These include IP, zoning, agreements with distributors and suppliers, customers switching costs, and taxes. But I say that models which include such factors also do not consistently predict excess firm concentration. And I still want to know which of these factors complainers have in mind as the source of the recent increased US concentration problem that they see.

Added 7Sep: Many have in mind the idea that regulations impose fixed costs that are easier on larger firms. But let us always agree that it would be good to lower costs. Fixed costs are real costs, and can’t be just assumed away. If you know a feasible way to actually lower such costs, great let’s do that, but that’s not about excess concentration, that’s about excess costs.

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10% Less Democracy

My GMU econ colleague Garett Jones has a book coming out in February: 10% Less Democracy: Why You Should Trust Elites a Little More and the Masses a Little Less. I just read it, and found it so engaging that I’ll respond now, even though Jones’ publisher surely prefers book publicity nearer its publication date.

Regarding to the vast space of possible governments, it seems to me that Jones uses “more democratic” to describe situations closer to a 100% democracy ideal, wherein all citizens have an equal say and can vote directly on all government choices, with government able to control all other choices. In this framing, anything that makes it harder for voters to simply and directly choose the options they understand and prefer makes a system less democratic.

That includes electing representatives instead of directly voting on policy, and also logrolling, divided government, and other complexities that make it harder for citizens to tell what is going on and to assign responsibility. It includes any limits on who can vote, and any ties to outsiders that limit internal discretion, like treaties with other nations or selling debt to bondholders. And it includes longer terms for the elected, and more indirection, such as when politicians appoint other officials instead of directly electing those other officials.

By these standards, our current system obviously deviates greatly from a fully democratic ideal, and Jones approves of most of these deviations, especially ones that result in longer term views and in more informed voters and officials. And he’d like to move modestly further in such less-democracy directions, though not too far, as he accepts that strong autocrats tend much more to kill their citizens, allow famines, and create more economic growth volatility (though similar average levels of war and growth). Jones musters a lot of data in support of his modestly-cut-democracy view.

I did a few surveys yesterday which suggest that overall my Twitter followers find the existing degree of democracy pretty close to their ideal, though a majority would also prefer a reduction. So, for them, Jones’ position doesn’t seem at all controversial:

In the past I’ve tended to think about all this in terms of principal-agent problems. It doesn’t always make sense to make all decisions yourself, if you can instead consult an agent who does or could know more than you. But you must be careful to keep such agents under sufficient control. So if they are careful, voters may reasonably gain by delegating to experts. However, the reason I found Jones’ book so engaging is that I found a lot of the data Jones presented to be challenging to understand from this principal-agent view. (And also, it was a pleasure to engage such fundamental issues.)

For example, politicians with longer terms but without safe districts act at the end of their term more like politicians who have shorter terms. They pass fewer bills, make more pork projects, more trade protection, more labor market regulation, more environmental reforms, have optimistic budget forecasts, and support fewer currency devaluations. Apparently, voters don’t remember much of what politicians do beyond the last years or so.

Cities with appointed (vs elected) city treasurers pay 0.7% lower interest rates. Central bankers who are more independent produce lower inflation and fewer financial crises, at no overall cost to unemployment or real growth rates. Elected judges give more awards to in-state folks at the expense of out of state folks, and their legal opinions are less often cited as precedent. Nations with more independent judges have stronger property rights, less red tape to start a business, fewer employment regulations, and less government ownership of banks.

In general, elected regulators allow utilities to pass fewer costs on to customers, resulting in both lower prices but also in less investment and worse service. Electric utilities regulated by elected officials have lower consumer prices, pay higher interest rates, and more blackouts. Elected telecom regulators oversee lower capacity services, and independent telecom regulators gave in less to demands by government telecom organizations.

Jones is inspired by these examples to support Alan Blinder’s proposal to create an independent central-bank-like expert body to set tax policy, with Congress deciding only broad parameters like total take, progressively, and corporate fraction.

Some of these patterns can be understood in terms of commitment problems. When there is a temptation for politicians to renege on prior commitments, it can help to let them commit via choosing appointees who are out of their control at the crucial moments of temptation. Commitment problems seem especially important for city treasurers, central bankers, and utility regulators. And law court decisions are a classic commitment problem.

These results can also be somewhat understood in terms of the advantages of retrospective relative to prospective voting, and of aggregation in retrospective voting. That is, if voters are impatient and can better judge how their life has gone in the past than they can judge the effects of policies on the future, then voters can be better off when politicians are judged more on their past accomplishments, which happens more with longer terms. And if voters find it hard to attribute responsibility to specific officials, it can be better if they they focus on electing fewer bigger politicians (like mayors) who appoint more other officials.

However, I’m not sure that commitment problems and retrospective voting actually account for most of these patterns. Jones’ book subtitle talks instead about trusting elites, and do note that there is a much more widespread pattern of governments authorizing high status experts in each area to decide key results in their area, including who are to be considered the next generation of experts.

Consider how much we defer to military experts on defense, police on crime, medical experts on health, academics on research, lawyers on law, etc. Yes, in principle we could punish them if past outcomes in their area were bad, but we rarely do this. And professional licensing is a more general policy by which government authorizes control by the high status people in each area. These policies seem less like clever indirect ways to commit or to enable retrospective voting, and more like a simple status effect, wherein voters and politicians want to be seen as respecting and not opposing those high in status.

While all these examples that Jones didn’t include seem to be examples of less democracy, they seem to me to less clearly support his position that this kind of less democracy is good. Excess professional licensing does a lot of harm. The military seems to overemphasize things that high status leaders like more, like fighter planes and aircraft carriers. Medicine seems to overemphasize high status doctors over other medical professionals. Education and research seems to overemphasize the topics by which academics gain the highest status. Law seems overly complex and to overemphasize the need for expensive lawyers. And so on.

Compared to arguing over specific policies, I very much appreciate Jones calling our attention to larger more general issues regarding the design of our political system. But I prefer to generalize even further, via something like futarchy. I can support futarchy without needing opinions on whether tax policy should be run by a panel of independent experts, nor even whether it is in general better or worse to let high status experts in each area control those areas. As long as we use some reasonable (broad retrospective) national welfare measure, with futarchy I could instead trust a general mechanism to make good choices about such things.

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