Category Archives: Social Science

Reply to Wilkinson

Responding to Will’s comments, I wrote:

Will Wilkinson seems to me a bit too quick here to assume the activities he likes are less deserving of taxes. …  If we are to tax positional or unhappy activities, then let’s do that consistently, following our best data on positionality or happiness.

Will replied:

First, I think Robin may have missed one of my key points, which is that “negative externality” is not a synonym for “harm” in the relevant sense of the word. It begs the question to just go ahead and talk about various harms as if I had not just argued that they don’t all count as harms just because someone is bothered by each of them. …

There is no clear theoretical basis for selecting a single, clear theoretical basis for determining what does and does not count as a harm. Indeed, no one is rationally bound to accept the normative assumptions underlying the case for economic competition–the clear theoretical basis for “harm” Robin is willing to accept. …

Moral diversity and disagreement are ineradicable. … I think Robin complains that I share Miller’s and Frank’s reliance on intuitions about things we happen to dislike because I’m arguing with them from within what I see to be their prior liberal moral commitments, which I share. We’re all liberals, which means we dislike many of the same things.

Will is such a pleasure to converse with that I didn’t notice how differently we use words.  Like most economists, I do count anything that bothers anyone as a “harm,” and anything that benefits anyone as a good.  (The same act can be both.)  To decide which acts should be taxed or subsidized, I use the usual economists’ efficiency criteria to rank policies.  Call me morally naive, but this seems a good guide to me.

Given these choices it becomes a matter of fact whether taxing any given activity increases or decreases efficiency, and disagreement should be eradicable.  In the absence of substantial market failures it is clear that ordinary competition is favored.  What I meant when asking for “a clear principle we are willing to apply consistently” is a way to see through the mass of detail to discern the efficient policies in the other subtler cases.

I get that you can offer quicker stronger arguments to your fellow liberals by referring to your shared assumptions with them.  But I seek more widely acceptable arguments.

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Just A Handshake

“Between you and me, my friend, a handshake is enough.”

A recent economics journal article says one might reasonably avoid complex formal contracts to show you trust your associates:

This paper shows how the fear of signaling distrust can endogenously lead to incomplete contractual agreements. We consider a principal agent relationship where the agent may be trustworthy (dedicated to the project) or not. The principal may trust the agent (i.e. have a high belief of facing a trustworthy agent), or distrust him. The proposal of a complete contract, including fines and other explicit incentives, is shown to signal distrust. When trust is important in some non-contractible part of the relationship, a principal may prefer to leave the contract incomplete rather than to signal distrust by proposing a complete contract. Contractual incompleteness arises endogenously due to asymmetric information about how much one partner trusts the other side.

There are literally hundreds of papers out there showing how signaling can or does explain various details of human behavior.  In fact, fifteen years ago my Ph.D. thesis advisor tole me not to write such papers, because there were already so many of them that they weren’t very interesting.

Yet people keep complaining everytime I mention a signaling explanation of something, that I’m too free with such explanations.  So I’m stuck between an academic discipline that considers such explanations too obvious to be worth publishing, and an audience that finds them too implausible to believe, even when backed by such publications.

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Tropes Are Treasures

I've blogged before on theories of the functions of fiction in our lives, and celebrated this seminal analysis of the personality and motives of Victorian novel characters.  After browsing the TV Tropes website, it occurs to me that these tropes might be a great data source for studying fiction's functions. 

A possible research plan:

  1. Identify tropes that describe common patterns of fiction which seem to deviate from patterns of reality.  Code these tropes by their degree of deviation, and by how confident we feel that this deviation is real.
  2. Code these tropes according to a wide range of other possibly relevant parameters. 
  3. Look for patterns among the tropes as so coded, and when possible check those patterns via formal statistical tests.
  4. Compare theories of fiction's functions to these trope patterns, seeing which theories best account for the set of observed patterns.

Any student in search of a research project, take note! :)  HT to Doug.

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Prefer Peace

As fiction authors know, compelling stories need conflict; readers love to root for good guys against bad guys.  As college professors know, students perk up when academic topics are posed as conflicts.  Sophomores love to hear each subject posed as a conflict between several possible isms, especially a long bitter conflict.  To them, intellectual maturity consists largely of looking over a long menu and ordering one from column A, one from column B, and so on.  But while I'd like to be a popular teacher, I'd rather be honest, and most subjects are just not well described as a conflict of isms. 

When asked to evaluate a proposed economic policy, most students identify some winners and losers, and then favor or oppose the policy based on which group they like best.  It takes a long time for students to learn to think in terms of economic efficiency, weighing the costs and benefits for all effected parties, and even then students usually find an even-handed approach much less inspiring.  Some econ profs engage students by inviting them to join the few knowing insiders against the ignorant multitudes outside, but even that rings wrong to me.

Yesterday I discussed the tension between the ideals we often verbalize and the goals our usual choices seem designed to achieve.  I tried to argue for compromise, for seeking "variations on common ideals which one can more easily admit serve ordinary non-ideal ends."  But, most commenters did not want compromise; they instead wanted to take sides and seek better ways for their side to win the war.  Generation after generation, the [added: some] old tell the young to seek internal peace; no internal side has the strength to win a clean victory, so all out war risks all out destruction.  But the young will not hear.

It seems that one of humanity's strongest ideals is actually war, i.e., uncompromising conflict.  In our culture we are supposed to oppose ordinary bloody war, preferring peace when possible there. But we do not generalize this lesson much to other sorts of  conflicts.  We celebrate those who take sides and win far more than we do peacemakers and compromisers.  But the principle is the same; every side can expect to get more of what it wants from compromise deals than from all out conflict.

Added: Byran Caplan asks:

What makes Robin think that "every side can expect to get more" from compromise than conflict?  Doesn't anyone have a comparative advantage in conflict?  And all it takes to get a conflict is one willing combatant, no?

Deals are not always enforceable, admitting interest in a deal might send the wrong signal, and one may need to threaten conflict to get the best deal.  Even so, there is some deal that beats each conflict for each party.

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Meta Institutions

Institutions are stable social contexts which make and coordinate actions.  Examples include elections, agencies, courts, clubs, debates, peer review, malls, games, media, etc.  It is by now an economic truism that institutions matter a lot.  Good institutions can induce good choices and info sharing, while bad institutions do the opposite.  

Rather than advise particular choices, economists prefer to advise on general policies, that apply to many choices.  We prefer even more to advise on choice of institutions, since an institutional choice can influence a great many policies.  Following this meta line of reasoning, we should prefer even more to advise on meta-institutions, i.e., institutions that structure our choices of institutions. 

We allow most of our familiar institutions to at least influence our institutional choices.  But no doubt we use some more often in that role, and some are better suited to that role.  While I'm excited that decision markets can help advise organization decisions, I'm most excited about their potential as meta-institutions, advising us on key policy and institutional choices.  Of course we'll have to demonstrate their effectiveness more on small issues before folks will rely on them for big issues.

Some basic questions:

  1. What institutions are especially good as meta-institutions?
  2. What institutions should we use to evaluate meta-institutions?
  3. What institutions are biased to prefer other institutions like themselves?
  4. How often do different institutions agree on particular institutional choices?
  5. What institutions can sensibly say if to rely on them as meta-institutions?
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Efficient Economist’s Pledge

Tuesday’s debate with Bryan Caplan was great fun; thanks Bryan for being such a gentlemanly and compatible discussion partner!  I don’t know when an official vid will be posted, but my amateur audio is here.  In before and after audience polls, Liberty vs. Efficiency got 42-10 before, and 25-20 after.  My argument and Bryan’s many responses inspired me to compose this pledge:

The Efficient Economist’s Pledge

I pledge to be an efficient economist, who helps clients find win-win deals to resolve social conflicts.

I need not accept all clients, but for the clients I do accept, my suggested deals should, if accepted straight or as a starting point for negotiation, get them more of what they want, relative to no deal.  I resist temptations to slant my advice to give hidden benefits to myself or my associates.  I accept my client’s situation and wants as they are, and unless asked do not preach to them on what they should want.  When actions conflict with words, I mostly infer wants from actions, and avoid needlessly exposing contradictions.

For individual clients, I suggest actions that try to best get them what they want. When I advise groups of clients together, I seek win-win deals for them all together.  That is, I seek ways to suggest deals with a high chance of putting each client in a situation where, given their limited info, they should expect to benefit from the resulting deals. And I seek the best deals; it should not be easy to find other deals which all should expect to get them even more.  When trading client expected gains against the chance each expects to gain, I consider how many are needed to clinch a deal.

Continue reading "Efficient Economist’s Pledge" »

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On Liberty vs. Efficiency

To "win" a debate you aren't supposed to tip your opponent to the arguments you'll use.  But to promote a more productive conversation, that is exactly what you might do.  So in this post I'll lay out my basic (rather technical) argument for tonight's debate.  I've said:

The topic, as I see it, is the relative value/importance for economists of pushing "liberty," i.e., a policy of minimal government interference, and "efficiency," a standard policy evaluation metric that attempts to neutrally weigh policy consequences for different people.

Humans often find themselves in conflicts where they might make (and enforce) "deals" instead of "fighting" (or doing "nothing").  Such conflicts are often complex enough for many parties to be uncertain how they would fare, relative to fighting, under various possible deals.  In such situations, I see a noble and important role for expert arbiters who are "neutral," i.e., who develop deserved reputations for suggesting "win-win" deals where most or all parties should expect to benefit, relative to fighting.  Given access to such neutral expert advisers, conflicting parties can make better deals, to their mutual benefit. 

One reason I'm proud to be an economist is that we often fill this neutral expert arbiter role to varying degrees, and could do so even more if we tried.  And "efficiency," also known as "cost-benefit analysis," helps make this possible.  To estimate the efficiency of a deal, relative to a status quo, one adds up estimates for each person of the dollar value that person would place on this deal. 

Continue reading "On Liberty vs. Efficiency" »

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College Prestige Lies

Over the next two weeks my eldest son will be rejected by some colleges, accepted by others.  And then we’ll likely have to make a hard choice, between cheap state schools and expensive prestigious ones (or online colleges).  A colleague told me the best econ paper on this found it doesn’t matter.  From its 1999 abstract:

We matched students who applied to, and were accepted by, similar colleges to try to eliminate this bias. Using the … High School Class of 1972, we find that students who attended more selective colleges earned about the same [20 years later] as students of seemingly comparable ability who attended less selective schools. Children from low-income families, however, earned more if they attended selective colleges.

A 2006 NYT article confirms this:

Higher education experts have this message … Pay less attention to prestige and more to “fit” — the marriage of interests and comfort level with factors like campus size, access to professors, instruction philosophy. … A 1999 study by Alan B. Krueger … and Stacy Dale … found that students who were admitted to both selective and moderately selective colleges earned the same no matter which they attended.

as does a 2004 Atlantic Monthly article:

Continue reading "College Prestige Lies" »

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Lying Stimuli

In economic downturns, most economic activity arguably has a positive externality; when A buys services from B, not only do A and B benefit but the downturn is reduced a bit as well.  (In an upturn, extra activity arguably exasperates the boom-bust cycle.)  This fact can justify subsidizing economic activity a bit more (or taxing it a bit less) during a downturn.  But it turns out this isn't the main rationale for "economic stimuli" now being debated; those plans are largely based on the idea that people can be fooled because they are biased.  Tyler Cowen

Let's say government can spend $100 billion today or spend the present expected value of $100 billion, stretched out over time so it is a commitment in perpetuity.  Both spending programs are financed by bonds. … The Keynesian boost to aggregate demand arises because people consider the resulting bonds to be "net wealth" even when they are not. …  People are tricked by the government's fiscal policy, but of course the extent, timing, and nature of the trickery is hard to predict.  Is it easier to trick people "a lot all at once" or "a little bit by bit over time"?  It depends.  If you try to trick them slowly over time, temporal learning and adaptive expectations may work against the policymaker.  But if you try to trick people a lot all at once, the trick may rise over their threshold of attention, perhaps because of media coverage.

Wise taxpayers who get stimuli tax rebate checks should mostly save them, realizing that future taxes must rise to pay for those checks.  For similar reasons, wise taxpayers should also spend less upon hearing about government spending increases.  So with wise taxpayers it is not obvious that tax rebates or government spending increases would help much with the downturn. 

The consensus among macro-economists seems to be that people can in fact be fooled by such stimuli, but as Tyler indicates, it is not clear which policies most fool us.  In particular, the more public attention we give to the stimuli, the less they might work.  We might make people realize that they need to compensate via saving, and the more we scare folks into thinking we need huge stimuli, the more we might scare them away from normal economic activity levels.

So should we stop explaining macro-economics during this crisis, and stop saying how desperately we need stimuli?  After all, similar rationales were offered against allowing financial market short-sales.

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Weak Social Theories

Much of armchair social science is pondering "puzzles," i.e., social behavior that doesn't fit well with simple theories, such as yesterday's cashless Christmas wish-list puzzle. A few standard theories can be easily invoked to explain most any social puzzle:

  • Preferences – we just intrinsically want the specific outcomes produced by certain behavior; it is not instrumental toward other goals. E.g., folks pick their nose because it just feels good, not to clear out their noses. 
  • Mistakes – typical mental heuristics and patterns of thought just consistently misjudge the situation. E.g., we buy mid octane gas because just we didn't think of mixing high and low octane gas.
  • Norms – we do the usual thing so we won't look weird; norm violators tend to be odd and poorly informed about social conventions. E.g., you don't want to hire a guy who doesn't wear a suit to an interview.

The problem is that it is way too easy to explain most anything with such theories, at least if most possible preferences, mistakes, and norms seem nearly equally plausible. We can get more mileage out of specific and constrained theories of what are plausible preferences, mistakes, and norms. But no doubt many puzzles are in fact explained by odd preferences, mistakes, and norms. So what do we do?

It seems to me that the right approach is to seek theories that, with only a few free parameters, can explain a wide range of diverse puzzles. Trying to explain each puzzle with a new ad hoc story just doesn't get you very far; much better to lay out lots of related puzzles on the table and then ask how to explain many of them all at once. For example, instead of making up an ad hoc theory to explain US Christmas giving, collect "stylized facts" about holiday, wedding, birthday, and other gifts from across diverse cultures, and then look for theories which might explain a lot of that variation all at once.

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