Search Results for: socialism

‘The Profit’ Socialism Challenge

My very favorite TV show ever is The Profit, because it so well concretely illustrates the essence of capitalism. (My favorite board game is Imperial, for a similar reason.) Season 8 is airing now, and supposedly it will be the last. (See 10min episodes.) Alex summarizes:

The Profit, a reality-TV show on CNBC featuring businessman Marcus Lemonis. In each episode Lemonis buys into a failing small-to-medium-sized business and works to turn it around. …

A typical firm on The Profit, for example, has decent revenues, sometimes millions of dollars of revenues, but it has costs that are as high or higher. What happened? Often the firm began with a competitive advantage–a product that took off unexpectedly and so for a time the firm was rolling in profits without having to pay much attention to costs. As competition slowly took hold, however, margins started to decline and the firm found itself bailing. But instead, of going out of business, the firm covers its losses with entrepreneurs and family members who work without pay, with loans which grow ever larger, and by an occasional demand shock which generates enough surplus revenue to just keep going.…

One of the first things Lemonis does in almost every episode is get the numbers right so he can calculate which products are selling and which have the highest price-to-cost margin. Concentrate production on high-margin, big sellers. Drop the rest. Simple; but many firms don’t know their numbers.

Second, in episode after episode, Lemonis cleans up shop. Literally. He cleans the shop floor and gets rid of inventory that isn’t selling. He then arranges the floor to improve process flow (made easier by concentrating production on fewer products). He then creates an inventory system, tracks orders and the inputs needed to create those orders, and takes advantage of costs savings through economies of scale in input purchases. …

Another lesson from The Profit is that firm problems are personal problems. The son who can’t step out from the shadow of the father and the father who can’t let go. The two brothers who haven’t gotten over the death of their father and the problems this creates in the firm they have inherited. The siblings who are still fighting to get their parent’s attention. If Lemonis has a genius skill it’s in keeping his temper and working through bullshit problems to get to the real festering issues that are at the root of inefficiencies. …

It’s difficult to run a business like a business. The analytical mindset that can separate business problems from personal problems isn’t natural. Many people cannot separate business decisions from their own preferences and emotional biases, which is one reason why great business leaders are rare.

The Profit does a great job of illustrating common small business problems and solutions. Furthermore, it shows why capitalism tends to do a good job of getting people to actually adopt such value-increasing solutions to these problems. It is the capital that Marcus has to offer that makes business owners listen to him; he’d mostly get ignored if he were just a business consultant asking instead to be paid for his advice.

In fact, I’m so impressed with how well The Profit scenarios illustrate the value of capitalism that I now build upon it a challenge to socialists: please describe in detail how The Profit style enterprise reform would happen under socialism.

I’ve heard that, under socialism, workers would vote on who they want to be managers, or that some government agency would allocate capital to applicants asking to create or expand their ventures. But I just can’t see those processes going well in these concrete cases, getting someone to look in detail at their problems and then use the prospect of capital as a lever to get venture managers to change their ways. Show me some plausible stories of how these or other socialist processes could achieve such value-increasing changes remotely as well as does Marcus Lemonis, and I’ll pledge my support and allegiance to socialism.

Added 3Nov: Bizarrely to me, many have interpreted my challenge as “offer some good arguments for socialism”. No, I asked for something very specific, namely plausible scenarios for how socialist mechanisms would help in these very particular cases. 

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Roemer’s Socialism

Several times before I have posted on trying to figure out what just people mean when they propose “socialism”, and which variations seem how attractive. I just tried this exercise again, this time reading respected Yale economist and political scientist John E. Roemer’s paper What is Socialism Today? Conceptions of a Cooperative Economy, published Dec. 2020 in International Economic Review.

Roemer says “My intention in this article is to retrieve, from the history of the socialist idea, several alternatives to these two socialist varieties” of (1) central planning, which was “toxic” when combined with state ownership and one-party politics in the Soviet Union, and (2) “social democracy” that taxes and redistributes in a familiar world of private firms. He has two proposals for us to consider, explained via math models.

In “Socialism 1”, there is one profit-maxing firm wherein each worker and owner of capital gets paid their marginal product. Capital owners get paid because we need “incentives for citizens to invest their wealth productively. The remainder of firm income goes to firm owners, whom he insists are not being paid for prior entrepreneurial or managerial efforts or investments, not unless the firm was “created by individuals” who did not sell any ownership to others. Yet Roemer is reluctant to expropriate such illegitimate owners because then

We would … lose the monitoring advantages that might accrue to having firms be in part privately owned. And having the state own a large share of firms introduces the issue of political interference in firm decisions.

A linear income tax is instead imposed on everyone, which would result in inefficient work and investment choices if people behaved according to standard game theory, but which they do not because everyone instead follows a cooperative “Kantian optimization” (except that they are price takers due to “bounded rationality.” )

In “Socialism 2”, there are many profit-maxing firms, each of which is entirely owned by its workers and which pays a firm-specific tax set by the state, though he worries that this tax would “discourage innovation on the part of the firm’s workers and investors, who would have no incentive to cut costs to earn above-normal profits”.

In both Socialism 1 & 2 that cooperative “Kantian optimization” behavior ensures the production of public goods and the suppression of public bads such as “employing child labor, polluting, or running assembly lines at a breakneck pace”.

Roemer says that we know such cooperative behavior is possible because the U.S. once taxed the rich more:

In the period 1930−1970, a more cooperative ethos existed in the United States than we experience today: the key evidence is the existence of very high, even confiscatory, taxes on the very rich.

And he suggests we could enforce cooperation via labor unions:

Each must trust that others will optimize in the Kantian manner if he/she does. … [To achieve this,] workers may entrust decisions (such as supplies of labor) to organizations that represent them—unions—which can carry out the Kantian optimization for them.

But Roemer thinks this cooperation requires redistribution, as people won’t cooperate “with others whom they see have much higher incomes”. And it requires the right sort of politicians, as “ethnic, linguistic, and religious heterogeneity frustrate” it, and “power-hungry leaders seek to divide their citizenries by emphasizing identity and difference”.

So why don’t we see this cooperation today? We have the wrong “ethos”:

The behavioral ethos of socialism is cooperation. … they are engaged in a cooperative enterprise to transform nature to improve the lives of all. … Capitalism’s behavioral ethos is individualistic: economic activity is characterized as the struggle of each person against all other persons and nature. The ethos may be summarized as one of “going it alone.”

But Roemer is famous for studying, and approving of, political competition. So for some reason he doesn’t think that sort of competition hinders the right ethos. Unless maybe “power-hungry” leaders appear? Are labor unions to stop that somehow?

Here are my reactions:

1) I don’t see how Roemer’s proposal really does much to cut back on economic competition, or how it prevents the bad sort of politicians. Or how even it is “socialism”. Workers still compete within professions and firms, investors compete to pick the best firms, firms compete to max profits, and politicians compete in elections. What exactly is different?

2) I don’t think all the math really adds much to his proposals.

3) I’m not convinced that his “public bads” really fit the definition,

4) I’m pretty convinced in the absence of war, theft, slavery, etc. firm ownership gains really are returns to entrepreneurial or managerial efforts or investments.

5) I agree that humans do often vary in how “cooperative” they feel and act, and that it can be valuable to promote such cooperation, all else equal. But I don’t at all see high taxes on the rich as much evidence of or cause of useful cooperation. Nor do I see the existence of economic competition as reducing cooperation more than does political competition.

6) Most fundamentally, I just don’t see what Roemer is proposing to do to increase our cooperative inclinations. In our competitive world nations, firms, political parties, and other orgs have long competed to promote cooperation internally and among alliances. The world we see is the result of those attempts.

Merely declaring that we now have “socialism” won’t ensure more cooperation, nor will mass redistribution, nor will increased control by governments or labor unions. Those might induce some temporary cooperations, but they also seem to hinder the longer-term search by orgs to find better ways to induce cooperation.

In the end I just don’t see much to Roemer’s proposals beyond “if you agree cooperation is good, then you should do everything I say and then maybe everyone will cooperate.” No thanks.

 

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Socialism: A Gift You’d Exchange?

After reading and reviewing a book by a socialism critic, I then did a book by an advocate. Then some told me “No, here is the advocate book you should have read.” I tried one of them: Nathan Robinson’s Why You Should Be a Socialist, said to be “A primer on Democratic Socialism for those who are extremely skeptical of it.”

Robinson won’t commit himself to what exactly is socialism’s proposal, other than pushing for big changes in light of some vague and widely-shared values (mostly equality and democracy). He says conservatives are mean and liberals are wimpy; liberals have similar goals, but are to be disdained for not calling for bigger changes. Yet the only specific changes he’ll clearly endorse are smaller changes widely endorsed by liberals. I’ll get to some of those below, but instead of writing a whole review, I’d rather make one big point, riffing off of these quotes: Continue reading "Socialism: A Gift You’d Exchange?" »

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Socialism Via Futarchy

On Bryan’s recommendation, I just read Niemietz’s Socialism: The Failed Idea That Never Dies, which credibly argues that two dozen socialism experiments over the last century have consistently failed, with roughly this pattern:

The not-real-socialism defence is only ever invoked retrospectively, namely, when a socialist experiment has already been widely discredited. As long as a socialist experiment is in its prime, almost nobody disputes its socialist credentials. On the contrary: practically all socialist regimes have gone through honeymoon periods, during which they were enthusiastically praised and held up as role models by plenty of prominent Western intellectuals. (More)

Noteworthy results from the latest experiment:

The number of worker-run cooperatives increased from fewer than 1,000 when Chávez was first elected to well over 30,000 in less than a decade. By the end of Chávez’s second term, cooperatives accounted for about 8% of Venezuela’s GDP and 14% of its workforce … It soon became clear … that many cooperatives were behaving like capitalist enterprises, seeking to maximize their net revenue … For example, rather than supplying their products to local markets … export them to other countries where they can sell them at higher prices … Also, many cooperatives have refrained from accepting new members. … As Chávez himself said: … if we are 20 in a cooperative, we are going to work for the benefit of us 20, and that is merely capitalism. Cooperatives need to be impelled towards socialism.’ (More)

Even after so many very expensive experiments, they still apparently have only have the vaguest idea of what detailed arrangements might actually achieve what they want. It seems they have mainly waited until an allied group gained control somewhere, and then tried a few random variations that resonate with local supporters.

There still seems to be great passion in the world for further socialism experiments, but it seems hard to hold much hope if they continue with this pattern. While I’m not personally very inspired by the socialist vision, I do like for people to get what they want, and that includes people who want socialism. So I’m taking the time to think about how to help them get it.

Which induces me to consider variations on futarchy to help to achieve socialism. If you recall, futarchy is a form of governance wherein market speculators choose policies to maximize an ex-post-measured welfare measure. The thicker are these markets (perhaps via subsidies), the stronger are the incentives for speculators to learn what is actually effective in achieving that welfare. This seems a good match, if what socialism most needs now is less a good system and more a good learning environment in which to search for good systems.

The big question for futarchy-based socialism is: what are the ex-post-measurable outcomes that indicate a successful socialism? That is, how would you know one when you saw it? Obviously you’d want to include some basic consumption measures, like G.D.P., but if that’s all you maximize there’s no obvious reason why the result will be especially socialist. You might include risk-aversion over consumption, which punishes inequality to some degree, but again it isn’t obvious that risk-aversion greatly favors socialism. Even more directly and strong punishing inequality and emphasizing the poor doesn’t obviously favor any more socialism than we see in high-redistribution low-regulation capitalist Nordic “social democracies”.

Consider:

Socialism is … characterised by social ownership of the means of production and workers’ self-management of enterprise … Social ownership can be public, collective or cooperative ownership, or citizen ownership of equity. (More)

What all socialism has in common … is … bottom-up governance of society based on local assemblies which elect delegates that share their peoples’ living conditions, can be overridden, answer to and are replaceable by them, who can federate into councils and repeat the process for larger areas and amounts of people. (More; see also)

It seems that to many a central concept of socialism is each person having a high a degree control (also called “ownership”) over their world, including both their immediate world and the larger economic/political world. This is not just control to enable one to achieve high consumption, but also control over one’s workplace, and probably even more control than is required for these purposes. In this view, successful socialism is a world of busybodies with strong abilities to get into each others’ business.

To promote socialism then, we might try a futarchy whose welfare measure includes not just measures of consumption, but also of control.

For example, one measure of control would ask random people to try to induce particular random changes in their world. The stronger the correlation between actual changes afterward and the changes that we randomly assigned them, the more we’d say that people in this world had a lot of control over it. But we’d need to find some widely-accepted weights that say which possible changes count for how much, and we’d need ways to get people to actually try to change their world in the ways we assign them. These seems hard to achieve. Also, this would probably find near zero control for larger social structures, no matter how things are arranged. And we’d need to find ways to prevent this world from suddenly becoming more plastic to support test changes, while less supporting non-test changes.

Also, I worry that simple-minded measures of individual control might induce many decisions to be made via big xor trees. Such trees would seem to let anyone who controls inputs to any leaf of the tree determine the root as well. Though of course in practice not being able to predict the other inputs means you can’t actually usefully control the output. But can we formally define average individual control in a way that doesn’t promote such xor trees?

Probably the simplest solution is to just survey people about their sense of control over their world. You might want to emphasize people who’ve recently visited other worlds, so they can reasonably compare their world to others. And you’d want to limit the abilities of local authorities to force people to give desired survey answers, such as via the threat of retaliation. If a strong central government were part of a socialist society, that may also make it difficult to measure consumption. Such governments have been known to try to distort consumption stats to make themselves look good.

One solution to these problems would be to rely on capitalist foreigners, and on travel to visit them, for both market speculators and welfare measurement.

That is, let random citizens (perhaps whole families) of the socialist society be extracted periodically and made to visit a capitalist foreign land. During that foreign visit, they can be privately interviewed about both their sense of control and their consumption levels, and they can be offered the chance to stay in that foreign land. (Via offers with varying degrees of attractiveness.) Stats on what they said and on who chose to stay could then be used to estimate the welfare of that society, without allowing that socialist government to retaliate via knowing who said what. Foreign speculators could also pay to talk privately to these visitors, to help inform their market speculation choices.

In this scenario, this socialist society would, to help it more quickly learn what works best, commit to delegating to these capitalist foreigners the measurement of its welfare and substantial participation in their speculative governance markets. Of course people at home within this socialist society could also be allowed to speculate in these markets, and to contribute to stats read by foreigners. But this approach avoids extreme corruption problems by making sure that foreigners can speculate, and measure welfare, in ways that are outside of the control of a perhaps powerful socialist government.

Of course if this approach eventually settled on a stable solution for making a good socialist society, they might want to drop this external futarchy run by foreigners to become entirely self-governing. That would make sense if and when full self-governance became more important than faster learning about how to make socialism work.

And that’s as far as I’ve thought for now. Of course if sufficient interest were expressed in this concept, I could put in some more thought.

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Earth: A Status Report

In a universe that is (so far) almost entirely dead, we find ourselves to be on a rare planet full not only of life, but now also of human-level intelligent self-aware creatures. This makes our planet a roughly a once-per-million-galaxy rarity, and if we ever get grabby we can expect to meet other grabby aliens in roughly a billion years.

We see that our world, our minds, and our preferences have been shaped by at least four billions years of natural selection. And we see that evolution going especially fast lately, as we humans pioneer many powerful new innovations. Our latest big thing: larger scale organizations, which have induced our current brief dreamtime, wherein we are unusually rich.

For preferences, evolution has given us humans a mix of (a) some robust general preferences, like wanting to be respected and rich, (b) some less robust but deeply embedded preferences, like preferring certain human body shapes, and (c) some less robust but cultural plastic preferences, such as which particular things each culture finds more impressive.

My main reaction to all this is to feel grateful to be a living intelligent creature, who is compatible enough with his world to often get what he wants. Especially to be living in such a rich era. I accept that I and my descendants will long continue to compete (in part by cooperating of course), and that as the world changes evolution will continue to change my descendants, including as needed their values.

Many see this situation quite differently from me, however. For example, “anti-natalists” see life as a terrible crime, as the badness of our pains outweigh the goodness of our pleasures, resulting in net negative value lives. They thus want life on Earth to go extinct. Maybe, they say, it would be okay to only create really-rich better-emotionally-adjusted creatures. But not the humans we have now.

Many kinds of “conservatives” are proud to note that their ancestors changed in order to win prior evolutionary competitions. But they are generally opposed to future such changes. They want only limited changes to our tech, culture, lives, and values; bigger changes seem like abominations to them.

Many “socialists” are furious that some of us are richer and more influential than others. Furious enough to burn down everything if we don’t switch soon to more egalitarian systems of distribution and control. The fact that our existing social systems won difficult prior contests does not carry much weight with them. They insist on big radical changes now, and disavow any failures associated with prior attempts made under their banner. None of that was “real” socialism, you see.

Due to continued global competition, local adoption of anti-natalist, conservative, or socialist agendas seems insufficient to ensure these as global outcomes. Now most fans of these things don’t care much about long term outcomes. But some do. Some of those hope that global social pressures, via global social norms, may be sufficient. And others suggest using stronger global governance.

In fact, our scales of governance, and level of global governance, have been increasing over centuries. Furthermore, over the last half century we have created a world community of elites, wherein global social norms and pressures have strong power.

However, competition at the largest scales has so far been our only robust solution to system rot and suicide, problems that may well apply to systems of global governance or norms. Furthermore, centralized rulers may be reluctant to allow civilization to expand to distant places which they would find it harder to control.

This post resulted from Agnes Callard asking me to comment on Scott Alexander’s essay Meditations On Moloch, wherein he takes similarly stark positions on these grand issues. Alexander is irate that the world is not adopting various utopian solutions to common problems, such as ending corporate welfare, smaller militaries, and common hospital medical record systems. He seems to blame all of that, and pretty much anything else that has ever gone wrong, on something he personalizes into a monster “Moloch.” And while Alexander isn’t very clear on what exactly that is, my best read is that it is the general phenomenon of competition (at least the bad sort); that at least seems central to most of the examples he gives.

Furthermore, Alexander fears that, in the long run, competition will force our descendants to give up absolutely everything that they value, just to exist. Now he has no empirical or theoretical proof that this will happen; his post is instead mostly a long passionate primal scream expressing his terror at this possibility.

(Yes, he and I are aware that cooperation and competition systems are often nested within each other. The issue here is about the largest outer-most active system.)

Alexander’s solution is:

Elua. He is the god of flowers and free love and all soft and fragile things. Of art and science and philosophy and love. Of niceness, community, and civilization. He is a god of humans. … Only another god can kill Moloch. We have one on our side, but he needs our help. We should give it to him.

By which Alexander means: start with a tiny weak AI, induce it to “foom” (sudden growth from tiny to huge), resulting in a single “super-intelligent” AI who rules our galaxy with an iron fist, but wrapped the velvet glove of being “friendly” = “aligned”. By definition, such a creature makes the best possible utopia for us all. Sure, Alexander has no idea how to reliably induce a foom or to create an aligned-through-foom AI, but there are some people pondering theses questions (who are generally not very optimistic).

My response: yes of course if we could easily and reliably create a god to mange a utopia where nothing ever goes wrong, maybe we should do so. But I see enormous risks in trying to induce a single AI to grow crazy fast and then conquer everything, and also in trying to control that thing later via pre-foom design. I also fear many other risks of a single global system, including rot, suicide, and preventing expansion.

Yes, we might take this chance if we were quite sure that in the long term all other alternatives result in near zero value, while this remained the only scenario that could result in substantial value. But that just doesn’t seem remotely like our actual situation to me.

Because: competition just isn’t as bad as Alexander fears. And it certainly shouldn’t be blamed for everything that has ever gone wrong. More like: it should be credited for everything that has ever gone right among life and humans.

First, we don’t have good reasons to expect competition, compared to an AI god, to lead more reliably to the extinction either of life or of creatures who value their experiences. Yes, you can fear those outcomes, but I can as easily fear your AI god.

Second, competition has so far reigned over four billion years of Earth life, and at least a half billion years of Earth brains, and on average those seem to have been brain lives worth living. As have been the hundred billion human brain lives so far. So empirically, so far, given pretty long time periods, competition has just not remotely destroyed all value.

Now I suspect that Alexander might respond here thus:

The way that evolution has so far managed to let competing creatures typically achieve their values is by having those values change over time as their worlds change. But I want descendants to continue to achieve their values without having to change those values across generations.

However, relatively soon on evolutionary timescales, I’ve predicted that, given further competition, our descendants will come to just directly and abstractly value reproduction. And then after that, no descendant ever need to change their values. But I think even that situation isn’t good enough for Alexander; he wants our (his?) current human values to be the ones that continue and never change.

Now taken very concretely, this seems to require that our descendants never change their tastes in music, movies, or clothes. But I think Alexander has in mind only keeping values the same at some intermediate level of abstraction. Above the level of specific music styles, but below the level of just wanting to reproduce. However, not only has Alexander not been very clear regarding which exact value abstraction level he cares about, I’m not clear on why the rest of us should agree to with him about this level, or care as much as he does about it.

For example, what if most of our descendants get so used to communicating via text that they drop talking via sound, and thus also get less interesting in music? Oh they like artistic expressions using other mediums, such as text, but music becomes much more of a niche taste, mainly of interest to that fraction of our descendants who still attend a lot to sound.

This doesn’t seem like such a terrible future to me. Certainly not so terrible that we should risk everything to prevent it by trying to appoint an AI god. But if this scenario does actually seem that terrible to you, I guess maybe you should join Alexander’s camp. Unless all changes seem terrible to you, in which case you might join the conservative camp. Or maybe all life seems terrible to you, in which case you might join the anti-natalists.

Me, I accept the likelihood and good-enough-ness of modest “value drift” due to future competition. I’m not saying I have no preferences whatsoever about my descendants’ values. But relative to the plausible range I envision, I don’t feel greatly at risk. And definitely not so much at risk as to make desperate gambles that could go very wrong.

You might ask: if I don’t think making an AI god is the best way to get out of bad equilibria, what do I suggest instead? I’ll give the usual answer: innovation. For most problems, people have thought of plausible candidate solutions. What is usually needed is for people to test those solution in smaller scale trials. With smaller successes, it gets easier to entice people to coordinate to adopt them.

And how do you get people to try smaller versions? Dare them, inspire them, lead them, whatever works; this isn’t something I’m good at. In the long run, such trials tend to happen anyway, by accident, even when no one is inspired to do them on purpose. But the goal is to speed up that future, via smaller trials of promising innovation concepts.

Added 5Jan: While I was presuming that Alexander had intended substantial content to his claims about Moloch, many are saying no, he really just mean to say “bad equilibria are bad”. Which is just a mood well-expressed, but doesn’t remotely support the AI god strategy.

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Elites Must Rule

While I’ve spent much of my life doing institution/mechanism design, I’ve only lately come to see that, at least on prestigious topics, most people want relevant institutions to take the following ideal form:

Masses recognize elites, who oversee experts, who pick details.

While experts are known by other experts to be knowledgeable and skilled regarding particular topic areas, elites must be widely seen by the masses as having connections and features that are admirable and appropriate for leadership and governance roles. (More on experts vs elites.)

For example, with democratic governance the voter masses elect politician elites, who appoint mixed-elite-expert agency heads, who oversee expert agency personnel, who choose details. And debates on who should get to vote can be seen as debates on voter eliteness.

Long ago, it was seen as sufficient for the masses to recognize the natural eliteness of kings and aristocrats, who descended from or choose each other. You might think we are past that now, but academia and medical regulation both work this way. That is, we are all supposed to recognize that top academics and doctors are sufficiently elite to be trusted to run those orgs, and to pick their own successors, all without substantial outside oversight. And actually, this is how regulation works in many prestigious areas in many nations; the elites of each area are given a free hand to run those areas, and choose their successors.

If one sees the typical rich investor as sufficiently elite, then one can accept investors overseeing CEOs who oversee middle managers who oversee line workers, in a progression from relatively elite to relatively expert. The main reason that people object to this arrangement is that they are reluctant to see investors as sufficiently elite; they prefer instead to have government officials decide which firms get funding, and to have workers elect their managers.

Most people don’t like direct democracy, and dislike it more more when ordinary voters have more influence over the proposals on which to vote. And most people aren’t actually that comfortable with legal juries, unless jury choices are greatly limited by elite judges, and advised by expert lawyers. The U.S. uses juries today much less than it used to, and most nations have little use for them. It seems that most people instead want something closer to the ideal form described above.

Back in 2003 my Policy Analysis Market project hit the news, and was immediately killed. While the loudest complaints against it, of sabotage and price manipulation, had little basis in fact, this oft mentioned criticism was solid: such prediction markets would somewhat displace prestigious intelligence elites with more ordinary people. Markets producing better decisions via more accurate estimates was not seen as sufficient justification.

In the CIA today they tolerate internal prediction markets, but only under the rule that market estimates are never to be cited in official reports, which are the coin of prestige in that realm. Having prestigious reports cite prediction markets would let low level CIA experts somewhat displace CIA elites.

Wariness of many of my other institution ideas, such as tax career agents, life maintenance orgs, and crime vouchers, might also be attributed to their more overtly distrusting elites in various ways, and displacing the usual elites somewhat by for-profit firms and financial investors. And these are parties that many see as insufficiently elite. Producing more cost-effective outcomes is not seen as sufficient justification.

While I will continue to try to persuade people to weaken this constraint, and to consider institutions that rely less on our just trusting prestigious elites, I will now also try to take this seriously as a design constraint, and design institutions that conform better to the ideal form described above. I’ll start in my next post.

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Status Explains Lots

Some complain that I try to explain too much of human behavior via signaling. But the social brain hypothesis and common observations suggest that we quite often do things with an eye to how they will make us look to others.

Here’s another big influence on human behavior strongly supported by both theory and common sense: status. While it seems obvious that dominance and prestige matter greatly in human behavior, even so it seems to me that we social scientists neglect them, just as we neglect signaling. In this post, I will try to support this claim.

Humans have only domesticated a tiny fraction of animal species, even smart primates. In fact, apes seem plenty smart and dexterous enough to support a real Planet of the Apes scenario, wherein apes do many useful jobs. The main problem is that apes see our giving them orders as an attempt to dominate them, which they sometimes fiercely resist.

And humans are if anything more sensitive to domination than are other primates. After all, while other primates had visible accepted dominance hierarchies, human foragers created “reverse dominance hierarchies” wherein the whole band (of ~20-50) coordinated to take down anyone who would try to overtly dominate them. Which both makes it plausible that dominance matters a lot to humans, and also raises the question of how it is that we’ve come to accept so much of it.

Farmers accepted more domination that did foragers; farmers had kings, classes, wealth inequality, slavery, and generals in war. But most farmers didn’t actually spend much time being directly dominated. War wasn’t the usual condition, most workers had no bosses, and most of their interactions were with people at their same level.

But in the modern world, most workers put up with far more than would most foragers or farmers. Our performance is frequently evaluated, we are ranked in great detail compared to many others around us, and we are given many detailed orders, and not just during an apprenticeship period. All of which allows our complex modern organizations and social interactions, the key to industrial-era wealth, but which raises the key question: how did we get Dom-averse humans to accept all this?

Bosses: It might seem odd to ask what bosses are for, as they have so many plausible functions to perform in orgs. Yet to explain many details, such as the kinds of people we pick for management, and the ways they spend their time, we must still ask which of these functions are the most important. And my guess is that one of the most important is to give workers excuses to obey them.

Here’s the simple story: we often have a choice about whether to frame an interaction as due to dominance or prestige. Humans are supposed to hate dominance, but to love prestige. So if we can frame our boss as prestigious, not dominant, we can tell ourselves and others that we are following their lead out of admiration and wanting to learn from them, not from fear of being fired. If so, firms will want to spend extra on hiring prestigious bosses, who are handsome, articulate, tall, well-educated, pro-social, smooth, etc., even if those features don’t that much improve management decisions. Which does in fact seem to be the case.

School: I’ve discussed several times my story that schools use prestige to train people to take orders:

When firms and managers from rich places try to transplant rich practices to poor places, giving poor place workers exactly the same equipment, materials, procedures, etc., one of the main things that goes wrong is that poor place workers just refuse to do what they are told. They won’t show up for work reliably on time, have many problematic superstitions, hate direct orders, won’t accept tasks and roles that that deviate from their non-work relative status with co-workers, and won’t accept being told to do tasks differently than they had done them before, especially when new ways seem harder. … How did the industrial era get at least some workers to accept more domination, inequality, and ambiguity, and why hasn’t that worked equally well everywhere? … prestigious schools. … if humans hate industrial workplace practices when they see them as bosses dominating, but love to copy the practices of prestigious folks, an obvious solution is to habituate kids into modern workplace practices in contexts that look more like the latter than the former. … while early jobs threaten to trip the triggers than make most animals run from domination, schools try to frame a similar habit practice in more acceptable terms, as more like copying prestigious people. … Start with prestigious teachers [teaching prestigious topics]. … Have students take several classes at at a time, so they have no single “boss” … Make class attendance optional, and let students pick their classes.… give … complex assignments with new ambiguous instructions,… lots of students per teacher, … to create social proof that other students accept all of this. Frequently and publicly rank student performance, using the excuse of helping students to learn.

In two recent twitter polls, I found a 7-2 ratio saying college teachers were more impressive/prestigious than one’s job supervisor then, and a 2-1 ratio for high school teachers. Many descriptions of teaching describe the impressiveness and status of teachers as central to the teaching process.

Governance: we are even more sensitive to dominance in our political leaders than in our workplace bosses. Which was why all though history, each place tended to think they had a noble king, while neighbors had despicable tyrants. And why prestige was so important for kings. In the last few centuries we upped the ante via democracy, a supposedly prestigious mechanism wherein we pretend that all of us are really “ultimately” in control of the government, allowing us to claim that we are not being dominated by our leaders.

The main emotional drive toward socialism, regulation of business, and redistribution from the rich seems to me to be resentment of domination, which is how most people frame the fact that some have more money than others. Our ability to use democracy to frame government as prestige not domination lets us not see government agencies who regulate and redistribute as domination. Furthermore, aversion to dominance by foreigners is the main cause of world poverty today:

Most nations today would be richer if they had long ago just submitted wholesale to a rich nation, allowing that rich nation to change their laws, customs, etc., and just do everything their way. But this idea greatly offends national and cultural pride. So nations stay poor.

Disagreement: I spent many years studying the topic of rational disagreement, and I’m now confident both that rational agents who mainly wanted accurate beliefs would not knowingly disagree, and that humans often knowingly disagree. Why implies that humans have some higher priorities than accuracy. And the strongest of these priorities seems to me to be to avoid domination. People often interpret being persuaded to move toward someone else’s position as being dominated by them. Why is why leaders so often ignore good advice given publicly by rivals. Pride is one of our main obstacles to rationality; it is the main reason we disagree. Prediction markets are able to induce an accurate consensus even in the presence of such pride, but pride prevents such markets from being allowed or adopted.

Mating: Dominance and submission seen central to mating; relations are often broken due to one party being either too dominant, or not dominant enough. See also clear evidence in BDSM:

~30% of participants in BDSM activities are females. … 89% of heterosexual females who are active in BDSM [prefer] the submissive-recipient role … [&] a dominant male, … 71% of heterosexual males preferred a dominant-initiator role … 19.2% of men and 27.8% of women express a desire to attempt in masochistic behavior

So in this post I’ve outlined how status is central to bosses, school, governance, disagreement, and mating, more central than you might have realized. Status really does explain lots.

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To Cut Inequality, Face Hard Choices

In her new book The Right To Sex, Amia Srinivasan mentions my post on “sex redistribution”: 

Hanson asked on his blog why progressives are preoccupied with redistributing wealth but not with redistributing sex. He was widely decried—a Slate headline read, “Is Robin Hanson America’s Creepiest Economist?” But Hanson, who is an opponent of wealth redistribution, was charging progressives with hypocrisy. His question was: if wealth inequality is an injustice that demands to be corrected, why isn’t sex inequality, too?

Now in fact I have neither supported nor opposed wealth redistribution; I instead just noted the odd fact that the groups interested in income and sex redistribution don’t overlap much. And Srinivasan never answers my question, why redistribute income but not sex? She seems sympathetic to income redistribution, but opposes sex redistribution, and yet offers no principle on which to base this different treatment:

Suppose your child came home from primary school and told you that the other children share their sandwiches with each other, but not with her. … We wouldn’t think it coercive were the teacher to encourage the other students to share with your daughter, or were they to institute an equal sharing policy. But a state that made analogous interventions in the sexual preference and practices of its citizens—that encouraged us to “share” sex equally—would probably be thought grossly authoritarian. …

giving sex-less men money to spend on prostitutes, or encouraging traditional norms of … “enforced monogamy.” The irony is that these proposals, like rape, are also coercive. Women sell sex, on the whole, because they need money; to give sex-less men money with which to pay for sex presupposes that there are women who need to sell sex to live. 

Okay, but why is sandwich-sharing not also unacceptably “grossly authoritarian” or coercive? Srinivasan offers no distinguishing principle, even though this question seems to go to the core of her book. Srinivasan doesn’t say why using taxes or subsidies to influence anything related to sex is unacceptably “coercive”, even as she supports tax-supported guaranteed income, housing, and childcare.

A partial resolution of this puzzle is, I think, that Srinivasan sees herself as having different plans to deal with two kinds of inequality, income and sex, and sees both plans as “non-coercive”. She plans a non-coercive socialism for income, and non-coercive efforts to “transfigure our desires” for sex. From her interview with with Tyler Cowen:

I have a huge amount of anxiety about state power … I broadly identify as a democratic socialist. … When you’re asking about what kind of socialist models, I’m not proposing — I don’t think any plausible socialist does propose — that what we need is a form of Soviet state socialism. I think what we need to be thinking about is the radical democratization of the institutions that shape political and social and family life.

Somehow the creation and maintenance of a “radical democratization” would greatly cut income inequality without requiring “coercion” as she defines it (she offers no definition). And with such socialism, it would become easier to “non-coercively” rethink our desires, after which sex inequality would also fall greatly. Srinivasan says she offers a “utopian feminist response to our current situation”, which apparently has little to say about what to do now about inequality, in our actual world, before her envisioned utopian revolutions.

Except, Srinivasan does seem to endorse current policies like guaranteed income, housing, and childcare. If she has some special definition wherein such policies are not “coercive”, why can’t that also cover policies to cut sex inequality? 

So what is really going on here? My best guess: Srinivasan just refuses to admit that we can’t have it all, at zero cost. She won’t admit that inequality is a robust natural result of many social and biological processes, and that we have a rather limited range of costly options to cut it. And her suggestion to cut sex inequality by reconsidering our desires seems no more promising than cutting wage inequality by asking employers to reconsider their employee preferences. 

We do have some options though. For example, if you don’t like the inequality that would naturally happen across your different possible future selves, you can buy insurance. Even more inequality might be cut if parents could commit their kids to such insurance. But we now see little interest in buying or promoting such options. What we see instead is great interest in cutting inequality via coercive government “social insurance”. Yes, a great many other policies can have minor effects on inequality, but in the absence of the sudden appearance of utopian socialism, which no one today seems to know how to arrange, these seem to be our main actual options today for big cuts.  

While government redistribution involves many costs and risks, for people sufficiently averse to inequality it can make sense to support that. I am not personally very averse to inequality, but as a professional economist I stand ready to advise others with preferences different from mine. 

However, such advisees must prepare to make hard choices. They will have to decide which kinds of inequality – among income, lifespan, progeny, popularity, sex, and more –  matter more to them and why. And advisees should accept that big cuts in inequality may come at big costs, and also require things that look a lot like “coercion”, either via governments or parents.

We must all face hard facts, make hard choices, and then live with the consequences. Regarding inequality, or most anything. 

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Elite Biases Make Policy Biases

A 2014 paper predicted U.S. policy changes over four years for 1,779 issues, using the positions of four groups of influencers: business-based interest groups (55), mass-based interest groups (31), median public opinion (6), and elite public opinion (100), i.e. that of people at the 90th percentile of income. (I’ve listed their relative influence in parenthesis. Criticism says mid-class (not poor) influence is bigger.) While elite and median public opinion had a 0.78 correlation, the other pairs were uncorrelated. (A poll sets median influencer at 92% income percentile.)

What this says is that, even in a democracy, the ~90th percentile rich have the most influence, business interest groups have about half as much, and mass interest groups have about a third as much. We less rich folks only get what we want, to the extent we do, mainly because these elites mostly agree with us, and because we sometimes influence mass interest groups.

This median influencer household has income of $210K/yr and wealth of $1.2M, and households above this cut pay 70% of US Federal income taxes. This income is near the median doctor ($207K) and U.S. District Judge ($218K), more than the median full professor ($141K), lawyer ($139), lobbyist ($115K), judge ($109K), and CEO ($103K), and much more than the median federal civil servant ($64K) and high school teacher ($63K). (The median household made $64K, while the median CEO of the top 500 firms made $12.7M.)

These elites who set policy get most of their status and income from labor, not capital, and they are quite comfortable with, and in fact love, large bureaucratic organizations. Their highest hopes tend to be of gaining positions in, getting promoted in, or creating, such organizations. When they have dreams for the world, they dream of new versions with higher mandates and bigger budgets. (Think socialism.)

They can distinguish each other by their elite accomplishments, school credentials, org affiliations, and styles of talk, dress, etc. And their internal dynamics are dominated by status and gossip. That is, they are very social and join mutually-supporting coalitions which help get them the right jobs, party invites, speaking invites, etc. Via extensive gossip, they quickly form an apparent consensus on the policy issues of the day, on who is higher status among them, and on who should be ostracized and expelled from their ranks. Today these elite communities of gossip and status are integrated across the world.

Simple as it is, this account of who most influences policy seems to me promising as the basis of a theory of policy bias. That is, the natural biases of the group who most influences policy may plausibly explain many of our overall policy biases.

For example, policy set by elites may give elites too much benefit of the doubt, and defer too much to their status-gossip system. As elites tend to see their internal status-gossip processes as sufficient to discourage malfeasance and encourage excellence, they tend to see little need for other forms of track records, incentives, or accountability within elite professions and organizations, including government agencies. They see themselves as mostly good people, trying to do good things, who should be supported not hassled.

As another example, when there are groups that elites see as more outside of themselves, as rivals competing with them for power, then elites may push for policies that control, suppress, and disrespect such rivals.

The most obvious candidate for such a rival group is business. Even though these elites are richer than most of us, like most of us they focus more on those who are above them in status, relative to those who are below. Furthermore, the study above says that business is in fact their main rival for influence over policy. And while most business profits go to elites, elites don’t think of themselves as having their main influence on the world via business; elites instead identify more with their roles as org leaders and elite gossipers.

Furthermore, while elites see themselves as mostly well-meaning good people, they see business as transparently and dangerously selfish. Elites see businesses as tending to do what makes them more money, even when their leaders are ostracized and not invited to the right parties. Meaning that the usual pressures that work on most elites may not work on business and the super-rich. Thus elites support harsh, intrusive, and punitive business taxes, regulations, and legal liability. Yes when the super-rich are taxed, these elites are also taxed, but that may seem worth the price to take them down a peg or two. Most ordinary people miss this conflict by not distinguishing these two different kinds of “rich”.

Even though ordinary people seem to have little influence on policy, and mostly agree with elites on policy, elites are still wary of them as individuals. After all, we outnumber them at least five to one, we might revolt, and they must rely on us to do most of the things that need doing. So as employees, we must be tracked, assigned, and incentivized. As consumers and investors, we must be regulated. As authors and voters, our thoughts must be shaped and channeled via teachers, censors, media, interest groups, and politicians. As potential criminals we need to be tracked and threatened with punishment. And the poorest of us need even more direct management, such as via social workers and parole officers. All of which not only keeps us under control, but asserts elite status via the fact of their managing such controls.

Mass-based interest groups mostly don’t seem to scare elites as a whole, because usually such groups are dominated by elites at their top levels. It is only when a mass-based group seems to oppose elites as a whole that elites close ranks and warn against the dangers of such “populism”. While our society gives a lot of lip service to populism, populism is usually crushed aggressively whenever it actually seems threatening.

So how does this theory do empirically? It seems to me that policy does tend to be overly trusting of elites and their status-gossip system, and overly punitive and disrespectful of rival groups. For example, policy pushes us to pick docs, lawyers, and other prestigious professionals based more on the prestige of their affiliations, and less on track records or incentives. Business does seem greatly overly regulated, and taxes seem overly punitive. And policy seems to rely too much on the consensus of elite gossip, relative to more accurate sources like experts or prediction markets.

While roughly half of all regulation of individuals seems to be justified as protecting people from themselves, warnings seem just as helpful but would be far less controlling. Free speech (really free hearing) would be as effective at informing as is censorship. Pandemics could be more efficiently handled via law. And the poor could be helped more via simple cash transfers instead of expensive intrusive management of their lives.

Our legal system has high costs of suing people (from not using lotteries) but no required liability insurance. This makes law available to elites to sue each other, and to punish business, but not available to ordinary people to sue elites or each other. Elites can protect themselves well from ordinary people via strong prosecutor powers of plea bargaining together with broad surveillance and huge numbers of crime laws on the books, and also judges who are elites and give elites the benefit of the doubt. Oh and living, shopping, and working in separate neighborhoods.

And that’s my simple theory of who runs society, and policy biases that naturally result from their rule.

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Who Wants Social Insurance?

During the Biden administration, we will hear many argue that we should hand out more benefits to more people. Now when we economists argue for policy, we usually make economic efficiency arguments. So it is worth noting that for many of these policies, the main economic efficiency rationale for such handouts is “social insurance”. We are already seeing related arguments regarding pandemic relief and school loan forgiveness.

The “social insurance” argument posits a scenario where many people would have wanted to buy private insurance against big risks that they (or their descendants) face, but private insurance markets failed to offer such insurance. And thus the government should step in and produce the effect that such insurance would have produced, which is to pay certain people in certain situations, and tax everyone else to pay for it.

Now it is certainly true that insurers don’t offer all possible kinds of insurance. This can be due to legal restrictions, transaction costs, and information asymmetries. But it can also be due to limited demand. What if most people don’t actually want the insurance that “social insurance” would provide?

We already see many puzzling patterns in common insurance choices. Insurance was long illegal most everywhere, but then in the 1800s the first big retail success of insurance was life insurance sold to husbands as a way to signal devotion to their wives. Today, people often insure small risks like a new piece of electronics breaking, but fail to insure many of the largest risks in their lives, like failures at school, career, or marriage. And when I’ve asked students if they want to insure against such big risks, most usually say no, they don’t.

To explore this further, I did some Twitter polls on willingness to pay for 15 kinds of risks. Here are those risks, sorted by the fraction of respondents who says they would find value in fairly-priced insurance:

Note that only a majority favors private insurance for the top six items, and private insurance is in fact available for all of these today. Note also that these results are from the 3rd version of these polls that I tried. I found smaller fractions wanting insurance in the 2nd and 1st sets.

Of course people aren’t always honest in polls; maybe they really do want to insure far more risks than they say. And the fact that people often push political systems for “social insurance” policies is supporting evidence. But equally plausible, I think, is the theory that many really just want to use government to induce transfers, but when those folks are economists they try to justify such plans using econ efficiency lingo.

A clean test would be for the government to offer fairly-priced insurance against many risks, to ensure that no market failures prevents the availability of such insurance. Or even to subsidize such insurance. If there were actually a market failure preventing such insurance, that seems the most direct way to fix the problem. Yet we almost never see proposals like this; people almost always just push for more handouts. I wonder why.

Added 9a: The usual insurance “market failures” are:

  1. Moral hazard – which government can only fix if it can see more private acts than can private insurers.
  2. Adverse selection – which can be solved by requiring purchase of private insurance, and whose existence requires the opposite correlation between risk level and insurance quantity than the one we usually see,
  3. Scale economics – which private insurers might also achieve if not forbidden by antitrust rules.

To get private long term insurance, we could let kids sign insurance contracts when young, or empower their parents or grandparents to agree on their behalf. Note that today parents could, but usually do not, implement partial poverty insurance by insisting that their richer kids transfer to their poorer kids. As more than half of of national income variance is of this within-family form, this could achieve more than half of the gains possible from poverty insurance within a nation. And parents are much better placed than government to adjust for moral hazard of varying child efforts.

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