Tag Archives: Current Affairs

Offended By Bets

U.S. presidential candidate Mitt Romney recently offered a $10,000 bet to competing candidate Rick Perry, regarding what Romney said in his book. Pundits say this hurt Romney’s image:

The $10,000 bet … reinforces a narrative already swirling in the political world: that his wealth makes him out of touch with the economic concerns of average folks. …

No matter what the Romney people say, offering a $10,000 bet is, at best, somewhat odd. (You generally either bet someone $1 or $1 million dollars; anywhere in between seems weird and raises eyebrows.) …

“It seems pretty outrageous and out of touch. People around here don’t have that kind of money.” … Critics attacked Romney — a multimillionaire venture capitalist — for tossing out the $10,000 figure like Monopoly money. … “When I talk to my neighbor and want to make a bet, it’s 10 bucks.” (more; HT Maxim Lott)

The idea that a presidential candidate couldn’t afford a $10,000 bet is crazy, as is the idea that ordinary folks don’t know this fact. Candidates pay for TV commercials, which cost lots more than $10,000, and they fly all around the nation in planes, which gets expensive.

So clearly we have moved high up into belief meta-levels here. “Yes, most people know Romney can afford $10,000, but some aren’t sure that most others know this, and so this shows that Romney doesn’t know about such folks.” Or “It is rude to point out that you are rich, even when everyone knows you are rich. Yes wearing nice suits shows he’s rich, but not wearing suits is socially unacceptable. Offering smaller bets is acceptable, however, so offering a big bet could be interpreted as bragging about wealth. Not that I’d interpret it that way, but someone might, and this shows Romney doesn’t realize that.”

Geez it must be a pain to be a presidential candidate. This all shows how much we care about social savvy and signaling in such folks. We don’t much care if they understand supply and demand, but they damn well better know who might try hard to be offended by what.

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Bad Sound, Bad Sign

“Please hold on, please set luggage cart brake to on.”

That sound irritates me every minute or so when I ride the SFO airport tram. George Will feels similarly:

You step onto an airport’s moving walkway …. soon a recorded voice says: “The moving sidewalk is coming to an end. Please look down.” … Is that announcement about it ending really necessary? … Passing through a U.S. airport is an immersion in a merciless river of words … clearly they flow from … the assumption is that we are all infants or imbeciles in need of constant, kindly supervision and nudging … all this noise is symptomatic of … an entitlement mentality that … If something bad … happens to us, even if it results from our foolishness … we are entitled to sue someone for restitution. … Almost none of this noise is necessary for people mature enough to be allowed to walk around the block, let alone fly around the country. (more)

Yes this shows an entitlement mentality, but I see worse: common knowledge that we are well aware of problems we don’t intend to fix. We all know these warnings are excessive, bothersome, and counterproductive. But we also know that they are a reaction to lawsuits where jurors give big awards to show their concern and loyalty for accident victims, and hostility and defiance toward big organizations. When we repeatedly see thousands of others notice and ignore this problem, we learn that we have decided to let that symbolic support continue, accepting the useless-bothersome-warnings costs it imposes.

This sets a bad precedent regarding our many other social problems. The better informed among us might hope that the public doesn’t quite understand many of our problems, and that we’ll fix our problems when the public better understands them. For example, when the public better sees the ineffectiveness of our war on terror, the harm to kids when teacher unions block school reform, or the waste from excess professional licensing. But such informed folks also know that such harmful policies arise naturally as symbolism, to show respect for terrorism victims, teachers, professionals, etc.

So the more that informed folks see cases like excess airport warnings, where everyone seems pretty clearly aware that we’d rather accept high costs and bother to let symbolic signals continue, the more they should reasonably conclude that this holds for our other big problems as well. Why try to work to end a wasteful war on terror, for example, if most everyone seems ok with wasting vast sums to continue to signal our support for terror victims?

The US is rich, but we spend an increasing fraction of our economy on wasteful symbolic signals regarding law, war, medicine, school, the elderly, etc. Yes, this trend cannot continue forever, but it can continue for a few decades more. And our unwillingness to limit the waste in cases where it is the clearest that we all see and understand the waste is a bad sign about our willingness to cut back anytime soon on these other wasteful signals.

One reason to come down hard on visible petty crime like vandalism is that people may interpret getting away with petty crime as a signal that they can probably get away with bigger crimes as well. Similarly, by actually fixing these very visible wastes, we might raise hopes that we’ll also fix not quite so visible problems. For now, alas, I’m not holding my breath.

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‘Never Settle’ Is A Brag

From a famous Steve Jobs Stanford graduation address:

Sometimes life hits you in the head with a brick. Don’t lose faith. I’m convinced that the only thing that kept me going was that I loved what I did. You’ve got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don’t settle. (more; HT Alex)

Now try to imagine a world where everyone actually tried to follow this advice. And notice that we have an awful lot of things that need doing that are unlikely to be anyone’s dream job. So a few folks would be really happy, but most everyone else wouldn’t stay long on any job, and most stuff would get done pretty badly. Not a pretty scenario.

OK, now imagine that only graduates from colleges like Stanford or better followed this advice. Since such folks have more fulfilling job options, a larger fraction of them would end up really happy. But we’d still have too much job turnover among our elites, with too much stuff done badly.

Now notice: doing what you love, and never settling until you find it, is a costly signal of your career prospects. Since following this advice tends to go better for really capable people, they pay a smaller price for following it. So endorsing this strategy in a way that makes you more likely to follow it is a way to signal your status.

It sure feels good to tell people that you think it is important to “do what you love”; and doing so signals your status. You are in effect bragging. Don’t you think there might be some relation between these two facts?

Added: Will WilkinsonArnold Kling and Megan McArdle weigh in.

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Irrelevant Relevance

The September Atlantic has an “economics” article, by Don Peck, Can the Middle Class Be Saved? As economics, it is a “scam” I see often, but want to complain about yet again. These articles combine two key features. First, they gain “relevance” via detailed discussions of problematic current trends. Such as:

The most important economic trend in the United States over the past couple of generations has been the ever more distinct sorting of Americans into winners and losers, and the slow hollowing-out of the middle class. … Wide-ranging social consequences of male economic problems [include:] … Women tend not to marry (or stay married to) jobless or economically insecure men—though they do have children with them. And those children usually struggle when, as typically happens, their parents separate and their lives are unsettled. … These sorts of social problems … have been seeping into the nonprofessional middle class.

Second, these articles offer “relevant” policy solutions to such problems:

We can adapt, but we have to start now. … [by] … Bigger tax breaks for private R&D spending, and a much lower corporate tax rate (and a simpler corporate tax code) overall. … A National Innovation Bank that would invest in, or lend to, innovative start-ups. … [For] new and emerging industries … our bias should be toward light regulation. … Redoubling our commitment to improving U.S. schools, to letting in a much larger number of creative, highly skilled immigrants each year. … We must press China on currency realignment, putting sanctions on the table if necessary. … Development of “career academies”—schools of 100 to 150 students, within larger high schools, offering a curriculum that mixes academic coursework with hands-on technical courses. … It is hard to imagine an adequate answer to the problems we face that doesn’t involve greater redistribution of wealth.

The key scam is: standard economic theory, the main authority implicitly invoked by such “economics” articles, offers little reason to think these trends of concern have much relevance to these policy proposals. Whether such proposals are good or bad ideas can depend on many relevant factors, but the exact values of these trends are not among those factors! If R&D tax credits are a good idea (economically), they are a good idea regardless of trends in median wages or divorce rates. If raising taxes on the rich is a good idea because, hey, we gotta tax someone, that is a good idea regardless of how well or poorly the rich have been doing lately. As I said before:

Which institutions will most increase economic welfare rarely depends much on the exact values of the sorts of parameters social scientists and the media track with such enthusiasm and concern. (more)

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Moneyball Slavery

Moneyball is a good movie – it is fun to see an underdog economist start a revolution somewhere. (Though I’d be more inspired if I could see more clearly how the world is better because of this revolution. Are fans happier now? Players? Who?)

Along the way, the movie vividly depicts profit-driven buying and selling of people, over which the people involved have little say. If traded, players must immediately move across the country, with little compensation. On the screen, it sure looks a lot like slavery. But I can’t find a single mention of slavery in any of the Moneyball commentary. It seems viewers don’t even notice the issue — even viewers who don’t know or care much for baseball, and doubt baseball makes the world a better place.

This supports the theory that we see “slavery” as low status by definition – so by definition anyone high status can’t be a slave. You may recall that in May I wrote:

Bryan is probably right – we don’t call conscripts slaves, but do call comfort women slaves, because the first is high status and the second low. … On reflection, the main effect here is probably that many people take “slavery is bad” to be part of the definition of slavery. So therefore by definition anything good cannot be slavery. (more)

Here is some detail on trading of baseball players:

Players eligible for neither free agency nor salary arbitration are very seldom offered contracts for much more than the league minimum salary, as the player has no recourse to try to obtain a better salary elsewhere. For this reason, in the first three major league years of their careers (except for the “Super Two” exception above), it is standard practice for players to accept comparatively low salaries even when their performance is stellar. (more)

Added 10a: It is possible to be sold into slavery, or to sell oneself into slavery, so up front compensation is consistent with slavery. The key is that while you are a slave you have little control over what you do. The “degree” of slavery is set by the size of the penalty if you don’t follow orders. A death penalty makes for a strong slave, while merely being fired from your current job with many similar jobs available makes for a rather weak “slave.” In baseball, the penalty is pretty big — never again working in your chosen profession and life-calling, and having almost no prospect for anything remotely as fun or profitable. For an analogy, imagine that if you don’t do what your boss says, you must to move permanently to a poor country where you don’t know anyone and have no unusually valuable skills.  That is a strong enough commitment that I’d be tempted to call it “slavery.” Even though you still have a choice.

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On Clark And Caplan

Greg Clark:

[Bryan] Caplan [says] … children impose not costs, but benefits, on the rest of society. …. I think Caplan’s … proposition will soon prove to have applied only in a limited historical window. Future population increases will likely exert substantial downward pressure on the growth of living standards. … There is thus a race between resource costs and scale economies as population grows. … For 99.9% of human history, up till 1800, the winner in that competition was resource scarcity. …

The downward march of food and energy prices since 1800 may well end soon. Current high prices may presage a food scarce-energy scarce future. … Population will again be an important determinant of income. This implies a negative externality associated with fertility, with all the unpleasant implications this holds for those of libertarian persuasion.

Caplan responds:

Clark is right to name economies of scale as one social benefit of population. But he neglects the far more important effect on innovation. … As long as parents are financially responsible for their children, any negative effect of population on living standards is internal to the family. … If parents didn’t care about their already existing children … there might still be a problem. But parents do care about their already existing children. … So it’s unclear whether a problem even exists. … Are you actually willing to bet that global real per-capita GDP will be lower in 2020 than it is today? How about 2030? 2050?

Clark is right that in the long run resource scarcity dominates living standards – that applied for most of human history, and will apply to most of our descendants. Our special dreamtime era of rapid growth and rising living standards can’t last long – probably within a few centuries (and certainly within ten millenia), average consumption will be way down from today.

But Caplan is right that fertility has a net positive externality. Yes property rights are not perfect, so people can hurt each other. But people help each other far more via innovation and scale economies. Yes those will dwindle in the long run, but so will property rights violations.

Of course if you are willing to look only at tiny elites, you can find high average consumption in both the distant past and future. The tiny fraction of future humans who are not robots might well manage to keep a high living average living standard. But most creatures recognizably decended from us will have near subsistence consumption. And that, I think, will mostly be a good thing.

Added 8a: Bryan responds; Tyler comments.

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Hail Winter’s Bone

Though Intrade gives it the lowest odds of winning best picture tonight, like Tyler my fav was Winter’s Bone. Like another Oscar contender, True Grit, it is the story of a teen girl’s gritty struggle. Except that the world of Winter’s Bone is rural and low class. A colleague’s wife confessed to me that she was so horrified and repulsed by the world depicted as to make her reluctant to venture out of the city. While most folks in our society pride themselves on their respect for other cultures and ethnicities, such folk have little reason to fear being mistaken for someone from most such cultures. Their respect extends the least to “white trash,” who they have the most reason to fear being confused with.

Words like seamy, sleezy, and seedy are negatives vaguely associated with sloppiness, immorality, and low class, as if to imply that such things naturally go together. Which seems to me the worst sort of vague insinuation. I can accept that low class folks tend to be sloppier, and in some folk’s morality that in itself makes them less moral. But while I’m happy to celebrate our new better top class, if we are talking about an economists’ sort of immorality, i.e., hurting other folks on net, it isn’t clear to me that low class folks are less moral. They contribute a larger fraction of income to charity, if I recall. I can see you might be terrified of associating with them if you feared being confused with them, but I can’t sympathize much with that, as your desire to keep your status high comes at the expense of keeping the status of others low. I don’t see great cause to fear more direct harms.

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Define By Consequences

If corporations must be treated as “persons” for the purpose of campaign contributions – as the Supreme Court mandated last year in the infamous Citizens United decision – why shouldn’t they also enjoy “personal privacy”? The case threatens to weaken an important tool used to hold government and corporations accountable. … The court should not repeat that mistake by again allowing corporations to masquerade as people. (more)

People often argue about “definitions” as if the main issue was conceptual essences, or “cutting nature at its joints.” But in fact the vast majority definition disputes are really about social convention (including law). For example, I was interviewed recently on our changing “definition of death.” I said we’d long had a perfectly sensible and timeless concept: death is when life is no longer possible. What people want instead is an easy to apply criteria, so they can know when it is socially acceptable to “give up” on someone, or to declare someone a “murderer.” The timeless concept doesn’t serve this role well, so they seek something else. (Which then limits cryonics.)

Similarly, we’ve long had a decent concept of “father,” the man from whom half of a kid’s DNA comes. But some say that since it is good for each kid to have the support of a man, we should declare a cuckolded husband to be the “father” of his wife’s kid. Debates about the definitions of “naked” or “porn” are similarly about social convenience.

The issue of calling firms “people” is also really about social consequences of doing so, even though many talk as if there was a “natural kind” out there to discover, if only we did enough conceptual analysis. I’ve argued that since the function of “free speech” is best served by “free hearing“, it shouldn’t matter who wants to talk. Unless we are willing to censor, we should let citizens hear any sources they desire.

Similarly, we should ask about the social functions served by privacy protections. Yes weaker privacy protections make it easier to hold firms accountable, but that applies to individual humans as well. And if stronger privacy protects folks more against abuse by governments or others, that benefit should apply to firms as well. Yes people may just have a direct preference for privacy, but such preferences may be weak, and perhaps people working at a firm feel similarly about the privacy of their firm.

For most definition disputes, pretending to resolve it via conceptual analysis just isn’t very honest. It is more honest to argue about the desirability of various consequences of alternate social conventions.

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Heroes Of Heroes

What do we do when we at last come together [at Christmas]? We watch TV.  To some, this sounds awfully tragic. Shouldn’t we be gathered around the piano instead of the Wii? … All that Christmas idealism is sustained by television. Everything we know about how Christmas should appear and feel, we learned from watching Christmas happen on TV to people who don’t exist. Have a look at the pretty, pretty trees in all those living rooms and in all those diamond necklace ads and in Hallmark specials. What’s the one thing missing from these people’s homes? Correct: No TVs are on. The people we see on television at Christmastime have chosen to put their tree up in a formal living room, safely away from the television. (more)

It may be reasonable to be skeptical of stories, preferring to live a real life with real friends, problems, careers, etc. And it may be reasonable to enjoy stories, to embrace the ideals they embody, and to find life-lessons in their exaggerations. But if you approve of your habit of spending time and energy admiring story heroes and exemplars, then consistency suggests that your heroes and exemplars should also devote their own time and energy to stories, admiring their own heroes. If your heroes don’t waste much time with stories, why should you?

So make up your mind. If you think it good for your family to spend holidays together watching inspirational stories, well then the families in those stories should also think it good to spend holidays together being inspired by other stories.  And if you can’t really admire heroes who much time watching TV, well if your want to admire yourself maybe you shouldn’t spend much time watching TV either.

Here’s a related post by Katja.

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Against Trade War

I’m a huge fan of Robert Samuelson’s long repeated harping on the coming Medicare train wreck – tell it brother! But I much oppose his war-mongering:

No one familiar with the Smoot-Hawley tariff of 1930 should relish the prospect of a trade war with China — but that seems to be where we’re headed and probably should be where we are headed. Although the Smoot-Hawley tariff did not cause the Great Depression, it contributed to its severity by provoking widespread retaliation. Confronting China’s export subsidies risks a similar tit-for-tat cycle at a time when the global economic recovery is weak. This is a risk, unfortunately, we need to take. …

The trouble is that China has never genuinely accepted the basic rules governing the world economy. … China’s worst abuse involves its undervalued currency and its promotion of export-led economic growth. …. China’s underpricing of exports and overpricing of imports hurt most trading nations. … One remedy would be for China to revalue its currency, reducing the competitiveness of its exports. … [Some say] a revaluation of 20 percent would create 300,000 to 700,000 U.S. jobs over two to three years. …

If China won’t revalue, the alternative is retaliation. This might start a trade war, because China might respond in kind. … More realistic would be a replay of Smoot-Hawley, just when the wobbly world economy doesn’t need a fight between its two largest members. Economic nationalism, once unleashed here and there, might prove hard to control. But there’s a big difference between then and now. Smoot-Hawley was blatantly protectionist. Dozens of tariffs increased; many countries retaliated. By contrast, American action today would aim at curbing Chinese protectionism. (more)

Relative currency values set relative prices. China’s current currency level now sets low prices for the stuff it sells to others, and high prices for the stuff it buys from others. You might dislike this if you compete with China to sell stuff, but you should mostly love it if you buy stuff from China, or compete with them to buy stuff.  Often you should love it if you sell stuff to China. Low China prices do not obviously hurt the non-Chinese overall.

Fear of being outcompeted in selling stuff is a terrible reason to start a war! If someone is outcompeting you in selling stuff, well either step up your game or step aside. That is how supply and demand should work. We want a system where stuff is produced by the lowest cost suppliers and goes to the buyers who value it the most. If some supplier offers to sell stuff to folks at a lower price, well then we want folks to switch to buying from that supplier. If a supplier offers an unsustainably low price, it will soon go broke and buyers will switch away.

This logic applies just as well to distant nations as it does to a convenience store down the street.  Don’t be fooled into treating China differently because you were built to fear foreigners.  Wars are not needed or wanted as part of our supply and demand adjustment process!

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