Tag Archives: Inequality

Compulsory Licensing Of Backroom IT?

We now understand one of the main reasons that many leading firms have been winning relative to others, resulting in higher markups, profits, and wage inequality:

The biggest companies in every field are pulling away from their peers faster than ever, sucking up the lion’s share of revenue, profits and productivity gains. Economists have proposed many possible explanations: top managers flocking to top firms, automation creating an imbalance in productivity, merger-and-acquisition mania, lack of antitrust regulation and more. But new data suggests that … IT spending that goes into hiring developers and creating software owned and used exclusively by a firm is the key competitive advantage. It’s different from our standard understanding of R&D in that this software is used solely by the company, and isn’t part of products developed for its customers.

Today’s big winners went all in. …Tech companies such as Google, Facebook, Amazon and Apple—as well as other giants including General Motors and Nissan in the automotive sector, and Pfizer and Roche in pharmaceuticals—built their own software and even their own hardware, inventing and perfecting their own processes instead of aligning their business model with some outside developer’s idea of it. … “IT intensity,” is relevant not just in the U.S. but across 25 other countries as well. …

When new technologies were developed in the past, they would diffuse to other firms fast enough so that productivity rose across entire industries. … But imagine instead of power looms, someone is trying to copy and reproduce Google’s cloud infrastructure itself. … Things have just gotten too complicated. The technologies we rely on now are massive and inextricably linked to the engineers, workers, systems and business models built around them. … While in the past it might have been possible to license, steal or copy someone else’s technology, these days that technology can’t be separated from the systems of which it’s a part. … Walmart built an elaborate logistics system around bar code scanners, which allowed it to beat out smaller retail rivals. Notably, it never sold this technology to any competitors. (more)

A policy paper goes into more detail. First, why is the IT of some firms so much better?

Proprietary IT thus provides a specific mechanism that can help explain the reallocation to more productive firms, rising industry concentration, also growing productivity dispersion between firms within industries, and growing profit margins. … There is a significant literature that identifies IT-related differences in productivity arising from complementary skills, managerial practices, and business models that are themselves unevenly distributed. Skills and managerial knowledge needed to use major new technologies have often been unevenly distributed initially because much must be learned through experience, which tends to differ substantially from firm to firm.

Yes, skills vary, but there are also just big random factors in the success of large IT systems, even for similar skills. What can we do about all this?

While there may be other reasons to question antitrust policies, the general rise in industry concentration does not appear to raise troubling issues for antitrust enforcement at this point by itself. …

Both IP law and antitrust law pay heed to … balancing innovation incentives against the need for disclosure and competition, balancing concerns about market power against considerations of efficiency. … This balance has been lost with regard to information technology … the policy challenge is to offset this trend. … This problem might require some lessening of innovation incentives. … The challenge both today and in the future for both IP and antitrust policy is to facilitate the diffusion of new technical knowledge and right now the trend seems to be in the wrong direction. …

To the extent that rising use of employee noncompete agreements limits the ability of technical employees to take their skills to new firms, diffusion is slowed. Similarly, for extensions of trade secrecy law to cover knowhow or the presumption of inevitable disclosure. Patents are required to disclose the technical information needed to “enable” the invention, but perhaps these requirements are ineffective, especially in IT fields. And if patents are not licensed, they become a barrier to diffusion. Perhaps some forms of compulsory licensing might overcome this problem. Moreover, machine learning technologies portend even greater difficulties encouraging diffusion in the future because use of these technologies requires not only skilled employees, but also access to critical large datasets.

It seems that making good backroom software, to use internally, has become something of a natural monopoly. Creating such IT has large fixed costs and big random factors. So an obvious question is whether we can usefully regulate this natural monopoly. And one standard approach to regulating monopolies is to force them to sell to everyone at regulated prices. Which in this context we call “compulsory licensing”; firms could be forced to lease their backroom IT to other firms in the same industry at regulated prices.

Note that while compulsory licensing of patents is rare in the US, it is common worldwide, and it one of the reasons that US drug firms get proportionally less of their revenue from outside the US; other nations force them to license their patents at particular low prices. So worldwide there is a lot of precedent for compulsory licensing.

The article above claimed that backroom IT is:

inextricably linked to the engineers, workers, systems and business models built around them. … While in the past it might have been possible to license, steal or copy someone else’s technology, these days that technology can’t be separated from the systems of which it’s a part.

I’m not yet convinced of this, and so I want to hear independent IT folks weigh in on this key question. I can see that different IT subsystems could be mixed up with each other, but I’m less convinced that the total set of backroom IT of a firm depends that much on its particular products and services. Maybe other firms in an industry would have to take the entire backroom IT bundle of the leading firm, rather than being able to pick and choose among subsystems. But when the leading IT bundle is so much better, I could see this option being attractive to the other firms.

The leading firm might incur some costs in making its IT package modular enough to separate it from its particular products and services. But such modularity is a good design discipline, and a compulsory licensing regime could compensate firms for such costs.

Note that I’m not saying that it is obvious that this is a good solution. I’m just saying that this is a standard obvious policy response to consider, so someone should be looking into it. At the moment I’m not seeing other good options, aside from just accepting the increased IT-induced firm inequality and its many consequences.

Added 12:30: Okay, so far the pretty consistent answer I’ve heard is that it is very hard to take software written for internal use and make it available for outside use. Even if you insist outsiders do things your way.

So assuming we are stuck with industry leaders winning big compared to others due to better IT, one worry for the future is what happens when leaders of different industries start to coordinate their IT with each other. Like phone firms are now coordinating with car firms. Such firms might merge to encourage their synergies. They we might have single firms as big winning leaders in larger economic sectors.

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Responses to Sex Inequality Critics

As I promised yesterday, here are specific responses to the nine mass media articles that mentioned my sex redistribution post in the eight most popular media outlets, as measured by SemRush “organic traffic”. (For example, the note (21M) means 21 million in monthly traffic.) Quotes are indented; my responses are not.

My responses are somewhat repetitive, as most seem content to claim that self-labeled “incels” advocating for sex redistribution are deeply icky people, and especially that they are women-hating. Even if that were true, however, that doesn’t to me say much about the wisdom or value of sex redistribution. I’m much more interested in general sex inequality than I am in the issues of the tiny fraction self-labeled “incel” activists.  Continue reading "Responses to Sex Inequality Critics" »

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Comparing Income & Sex Redistribution

Disclaimer: This post is on sensitive topics of sex and power. I try to make it clear when I make a claim; beware drawing indirect inferences; I rarely value signal.

As promised in my last post, I now return after a civility pause to the topic of comparing sex and income inequality and redistribution. This post will be unusually long, as I’m trying harder to speak carefully.

If a feature of individuals can be compared across individuals, and ranked, then we can say that some people have more of it than others. We can then talk about how equally or unequally this feature is distributed across a population. Some features are seen as good things, where most people like to have more of it, all else equal. And the values that people place on some good things exhibit diminishing marginal utility (DMU). That is, people put a higher value on getting a bit more of it when they don’t have much, relative to when they have more.

For good things, we usually seek policies (including informal social norms and formal programs by government, charities, and other organizations) that can raise its distribution, all else equal, and get more of it to more people. And for good things with DMU, unequal distributions are regrettable, all else equal, as any one unit is worth more to those who have less. Any policy that changes a distribution is by definition said to “redistribute” that thing. (If you doubt me, consult a dictionary.) A policy that reduces inequality more might be said to do “more” redistribution.

Of course all else is usually not equal. People vary in their ability to produce things, in the value they place on things, and in how much those people are valued by their society. Both the things that people value, and the arrangements that produce them, tend to be complex, multi-dimensional, and context-dependent. “Income” and “sex” are both labels that point to such complex, multi-dimensional and context-dependent good things. Both are usually produced via unique pairings, sex between a man and a woman, and income between an employer and an employee. The value of these pairings vary greatly across possible pairings, and also with a lot of other context. Continue reading "Comparing Income & Sex Redistribution" »

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A Pullable Thread of the Social Fabric

Political polarization has been long increasing in the U.S., where it also seems unusually high for a rich nation. As one side has dominated the heights of tech, culture, media, law, and academia, and our urban centers of wealth, the other has felt neglected and dissed. So they elected Trump, at least partly knowing his faults, to send a clear signal of their unhappiness.

And so a key question has become: has electing Trump somewhat satisfied his supporters’ desire for recognition, or are they instead emboldened to demand more? This is closely related to the question: is the other side now inclined more toward appeasement, or toward doubling-down on the conflict? Had the other side given them Trump, that could be seen as appeasement, plausibly inducing more conciliation from the Trump side. But I expect Trump supporters now mostly see the other side as having offered little appeasement, and instead escalating the conflict. From which I weakly predict that polarization will get worse before it gets better.

My tweet summarizing my recent post on Two Types of Envy induced a hostile tweet storm, one that offers weak clues on future polarization. In the post I riffed on recent attention to “incel” complaints that they suffer a lack of sex, and noted that one could see this as a concern about sex inequality comparable to the concern others express regarding income inequality. I noted that while the two groups focus on different axes of inequality, they each organize to induce envy and identity with a deprived status, to hint at the possibility of violence, and to lobby for “redistribution”, meaning a change in the distribution along their axis. And I was struck by the puzzling lack of overlap between the two groups.

A few engaged this in a more appeasement-like mode, accepting that many people are unhappy and expressing a willingness to consider redistribution policies like better training, legalizing prostitution, targeted cash transfers, or stronger promotion of monogamy. But the vast majority were quite hostile, rude, and insulting, wishing terrible things upon me and saying they’d work to get me fired and arrested. Though I’ve repeatedly denied supporting any redistribution policies, for income or sex, most presumed that not only did I support sex redistribution, I instead supported raping women! Most who admitted I didn’t support rape demanded I provide a detailed redistribution plan to critique. And most who admitted that I wasn’t supporting any policy still called me evil for even comparing sex and income inequality.

Those who argue against redistributing income often complain of the direct coercion that distribution can involve, and say the poor are largely responsible for their own problems. Some even say the world would be better off if the poor just died and didn’t leave descendants. People arguing against sex redistribution made the same arguments. In addition, they said that this is all about men repressing women, that sex is about people while income is about things, that you can’t die from a lack of sex, and that no one really cares much about sex so complainers must really have other agendas. Some said sex inequality is impossible because sex isn’t a commodity, or that it exists but policy can’t influence it because feelings and personal choices are involved.

Most ancient societies had policies that influenced the distribution of sex. Some strongly promoted monogamy, and as a result reduced sex inequality. Which to me suggests that policy can in fact influence sex inequality, and that many people have cared about this kind of inequality. Even if the exact package of sex, romance, respect, etc. that people care about is complex and hard to define. You may think you have good moral arguments why such policies are bad. But as with income inequality, you should admit that people who feel envious and empowered to push policy may not be much influenced by your moral arguments.

Perhaps I’m too close to this to be a good judge, but the extremity and one-sidedness of this reaction seems to me more than typical in what are framed as left responses to right proposals, such as regarding immigration. And this weakly suggests to me that this issue could be an especially potent “loose thread” of our social fabric, that could be pulled toward our unraveling. This hasn’t yet been a big issue on the right, but were they to embrace it, the left seems even less likely than usual to seek compromise or offer appeasement. If so, a big question becomes: how inclined is the right today to embrace a cause just to pick a fight, just to show their defiance? Another is: how inclined is the left to go out of their way to goad the right into such a position to start a fight?

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Two Types of Envy

I’ve long puzzled over the fact that most of the concern I hear expressed on inequality is about the smallest of (at least) seven kinds: income inequality between the families of a nation at a time (IIBFNAT). Expressed concern has greatly increased over the last half decade. While most people don’t actually know that much about their income ranking, many seem to be trying hard to inform those who rank low of their low status. Their purpose seems to be to induce envy, to induce political action to increase redistribution. They hope to induce these people to identify more with this low income status, and to organize politically around this shared identity.

Many concerned about IIBFNAT are also eager to remind everyone of and to celebrate historical examples of violent revolution aimed at redistribution (e.g., Les Misérables). The purpose here seems to be to encourage support for redistribution by reminding everyone of the possibility of violent revolution. They remind the poor that they could consider revolting, and remind everyone else that a revolt might happen. This strengthens an implicit threat of violence should redistribution be insufficient.

Now consider this recent news:

Shortly before the [recent Toronoto van] attack, a post appeared on the suspect’s Facebook profile, hailing the commencement of the “Incel Rebellion”. …There is a reluctance to ascribe to the “incel” movement anything so lofty as an “ideology” or credit it with any developed, connected thinking, partly because it is so bizarre in conception. … Standing for “involuntarily celibate”,… it [has] mutate[d] into a Reddit muster point for violent misogyny. …

It is quite distinctive in its hate figures: Stacys (attractive women); Chads (attractive men); and Normies (people who aren’t incels, i.e. can find partners but aren’t necessarily attractive). Basically, incels cannot get laid and they violently loathe anyone who can. Some of the fault, in their eyes, is with attractive men who have sex with too many women. …

Incels obsess over their own unattractiveness – dividing the world into alphas and betas, with betas just your average, frustrated idiot dude, and omegas, as the incels often call themselves, the lowest of the low, scorned by everyone – they then use that self-acceptance as an insulation.

Basically, their virginity is a discrimination or apartheid issue, and only a state-distributed girlfriend programme, outlawing multiple partners, can rectify this grand injustice. … Elliot Rodger, the Isla Vista killer, uploaded a video to YouTube about his “retribution” against attractive women who wouldn’t sleep with him (and the attractive men they would sleep with) before killing six people in 2014.  (more)

One might plausibly argue that those with much less access to sex suffer to a similar degree as those with low income, and might similarly hope to gain from organizing around this identity, to lobby for redistribution along this axis and to at least implicitly threaten violence if their demands are not met. As with income inequality, most folks concerned about sex inequality might explicitly reject violence as a method, at least for now, and yet still be encouraged privately when the possibility of violence helps move others to support their policies. (Sex could be directly redistributed, or cash might be redistributed in compensation.)

Strikingly, there seems to be little overlap between those who express concern about income and sex inequality. Among our cultural elites, the first concern is high status, and the later concern low status. For example, the article above seems not at all sympathetic to sex inequality concerns.

Added 27Apr: Though the news article I cite focuses on male complaints, my comments here are about sex inequality in general, applied to both men and women. Not that I see anything particular wrong with focusing on men sometimes. Let me also clarify that personally I’m not very attracted to non-insurance-based redistribution policies of any sort, though I do like to study what causes others to be so attracted.

Added 10p: 27Apr: A tweet on this post induced a lot of discussion on twitter, much of which accuses me of advocating enslaving and raping women. Apparently many people can’t imagine any other way to reduce or moderate sex inequality. (“Redistribute” literally means “change the distribution.”)  In the post I mentioned cash compensation; more cash can make people more attractive and better able to afford legalized prostitution. Others have mentioned promoting monogamy and discouraging promiscuity. Surely there are dozens of other possibilities; sex choices are influenced by a great many factors and each such factor offers a possible lever for influencing sex inequality. Rape and slavery are far from the only possible levers!

Many people are also under the impression that we redistribute income mainly because recipients would die without such redistribution. In rich nations this can account for only a tiny fraction of redistribution. Others say it is obvious that redistribution is only appropriate for commodities, and sex isn’t a commodity. But we take from the rich even when their wealth is in the form of far-from-commodity unique art works, buildings, etc.

Also, it should be obvious that “sex” here refers to a complex package that is desired, which in individual cases may or may not be satisfied by sexbots or prostitutes. But whatever it is the package that people want, we can and should ask how we might get more of it to them.

Finally, many people seem to be reacting primarily to some impression they’ve gained that self-identified “incels” are mostly stupid rude obnoxious arrogant clueless smelly people. I don’t know if that’s true and I don’t care; I’m focused on the issue that they help raise, not their personal or moral worth.

Added: On June 26, after a civility pause, I wrote a long clarifying post on Comparing Income & Sex Redistribution.

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The Model to Beat: Status Rank

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

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

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

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

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

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

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

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

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A Salute To Median Calm

It is a standard trope of fiction that people often get angry when they suffer life outcomes well below what they see as their justified expectations. Such sore losers are tempted to retaliate against the individuals and institutions they blame for their loss, causing increasing damage until others agree to fix the unfairness.

Most outcomes, like income or fame, are distributed with mean outcomes well above median outcomes. As a result, well over half of everyone gets an outcome below what that they could have reasonably expected. So if this sore loser trope were true, there’d be a whole lot of angry folks causing damage. Maybe even most people would be this angry. Hard to see how civilization could function here. This scenario is often hoped-for by those who seek dramatic revolutions to fix large scale social injustices.

Actually, however, even though most people might plausibly see themselves as unfairly assigned to be losers, few become angry enough to cause much damage. Oh most people will have resentments and complaints, and this may lead on occasion to mild destruction, but most people are mostly peacefully. In the words of the old song, while they may not get what they want, they mostly get what they need.

Not only do most people achieve much less than the average outcomes, they achieve far less than the average outcomes that they see in media and fiction. Furthermore, most people eventually realize that the world is often quite hypocritical about the qualities it rewards. That is, early in life people are told that certain admired types of efforts and qualities are the ones with the best chance to lead to high outcomes. But later people learn that in fact that other less cooperative or fair strategies are often rewarded more. They may thus reasonably conclude that the game was rigged, and that they failed in part because they were fooled for too long.

Given all this, we should be somewhat surprised, and quite grateful, to live in such a calm world. Most people fall below the standard of success set by average outcomes, and far below that set by typical media-visible outcomes. And they learn that their losses are caused in part by winners taking illicit strategies and lying to them about the rewards to admired strategies. Yet contrary to the common fictional trope, this does not induce them to angrily try to burn down our shared house of civilization.

So dear mostly-calm near-median person, I respectfully salute you. Without you and your stoic acceptance, civilization would not be possible. Perhaps I should salute men a bit more, as they are more prone to violent anger, and suffer higher variance and thus higher mean to median outcome ratios. And perhaps the old a bit more too, as they see more of the world’s hypocrisy, and can hope much less for success via big future reversals. But mostly, I salute you all. Humans are indeed amazing creatures.

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Toward Better Signals

While we tend to say and think otherwise, in fact much of what we do is oriented toward helping us to show off. (Our new book argues for this at length.) Assuming this is true, what does a better world look like?

In simple signaling models, people tend to do too much of the activities they use to signal. This suggests that a better world is one that taxes or limits such activities. Say by taxing or limiting school, hospitals, or sporting contests. However, this is hard to arrange because signaling via political systems tends to create the opposite: subsidies and minimum required levels of such widely admired activities. (Though socializing such activities under limited government budgets is often effective.) Also, if we put most all of our life energy into signaling, then limits or taxes on just signaling activities will mainly result in us diverting our efforts to other signals.

If some signaling activities have larger positive externalities, then it seems an obvious win to use taxes, subsidies, etc. to divert our efforts into those activities. This is plausibly why we try to praise people more for showing off via charity, innovation, or whistleblowing. Similarly, we tend to criticize activities like war and other violence with large negative externalities. We should continue to do these things, and also look for other such activities worthy of extra praise or criticism.

However, on reflection I think the biggest problem with signals today is the quality of our audience. When the audience that we want to impress knows little about how our visible actions connect to larger consequences, then we also need not attend much to such connections. For example, to show an audience that we care enough about someone via helping them to get medicine, we need only push the sort of medicine that our audience thinks is effective. Similarly for using charity to convince an audience we care about the poor, politics to convince an audience we care about our nation, or using creative activities to convince an audience we promote innovation.

What if our audiences knew more about which medicines helped health, which charities helped the poor, which national policies help the nation, or which creative activities promoted innovation? That would push us to also know more, and lead us to choose more effective medicines, charities, policies, and innovations. All to the world’s benefit. So what could make the audiences that we seek to impress know more about how our activities connect to these larger consequences?

One approach is make our audiences more elite. Today our efforts to gain more likes on social media have us pandering to a pretty broad and ignorant audience. In contrast, in many old-world rags-to-riches stories, a low person rose in rank via a series of encounters with higher persons, each of whom was suitably impressed. The more that we expect to gain via impressing better-informed elites, the better informed will our show-off actions be.

But this isn’t just about who we seek to impress. It is also about whether we impress them via many small encounters, or via a few big ones. In larger encounters, our audience can take more time to judge how much we really understand about what we are doing. Yes risk and randomness could dominate if the main encounters that mattered to us were too small in number. But we seem pretty far away from that limit at the moment. For now, we’d have a better world of signals if we tried more to impress via a smaller number of more intense encounters with better informed elites.

Of course to fill this role of a better informed audience, it isn’t enough for “elites” to merely be richer, prettier, or more popular. They need to actually know more about how signaling actions connect to larger consequences. So there can be outsized gains from better educating elites on such things, and from selecting our elites more from those who are better educated on them. And anything that distracts elites from performing well in this this crucial role can have outsized costs.

Of course there’s a lot more to figure out here; I’ve just scratched the surface. But still, I thought I should plant a flag now, and show that it is possible to think more carefully about how to make a better world, when that world is chock full of signaling.

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Exclusion As A Substitute For Norms, Law, & Governance

Hell may not be other people, but worry sure is. That is, what we worry most about is what other people might do to us. People at the office, near our home, at the store, on the street, and even at church.

To reduce our worries, we can rely on norms, law, and governance. That is, to discourage bad behavior, we can encourage stronger informal social rules, we can adopt more formal legal rules, and we can do more with complex governance mechanisms.

In addition, we can rely on a simple and robust ancient solution: exclusion. That is, we can limit who is allowed with the circles we travel. We can use exclusion to limit who lives in our apartment complex, who shows up at the parties we attend, and who works in a cubicle near us.

Now the modern world tends to say that it disapproves of exclusion. The bad ancient world did much gossiping about what types of people could be trusted how, and then it relied a lot on the resulting shared judgements within their norms, law, and governance. We today have instead been trying to expunge such judgments from our formal systems; they are supposed to treat everyone equally without much reference to the groups to which they belong.

In addition, we’ve become more wary of using harsh punishments, like torture, death, or exile.  And we are more wary of using corruptible quick and dirty evaluations within our norms, law, and governance. For example, we have raised our standards for shunning neighbors, pulling over drivers, convicting folks at court, and approving large bold governance changes. And people today seem less willing to help the law via reports and testimony. Oh we may be more willing to apply norms to people we read about on social media; but we apply them less to the people we meet around us.

As a result of these trends, many people perceive that we have on net weakened the power of our systems of norms, law, and governance to constrain bad behavior. In response, I think they’ve naturally increased their reliance on exclusion. They look more carefully at who they allow into their schools, firms, apartments, and nations. And they are less willing to give a marginal person the benefit of the doubt.

Since we don’t want to look like we are excluding on the basis of simple group affiliations, we instead try to rely on a more intuitive and informal aggregation of many weak clues. We try to get a feel for how much we like them or feel comfortable with them overall. But that need not result in more mixing.

For example, colleges that admit people just on GPA and test scores can be more open to lower class students than colleges that require applicants to have adopted the right set of extracurricular actives, and to have hit on the right themes in their essays. Lower class people can find it is easier to get good grades and scores than to track the new fashions in activities and essays.

Similarly, Tyler Cowen makes the point somewhere that when firms had simple and clear rules on dress and behavior, someone with a low class background could more easily pass as high class; they just had to follow the rules. Today, without such simple rules, people rely more on many subtle clues of clothes, conversation topics, travel locations, favorite music and movies, and so on. Someone with a lower class background finds it harder to adopt all these patterns, and so is more obviously outed and rejected as not one of us.

The point seems to apply more generally. The net effect of our today relying less on norms, law, and governance, and avoiding simple group labels in exclusion, is that we rely more on exclusion based on an intuitive feel that someone is like us.

This may be a cause of our increasing class and political polarization, at home and work. Feeling less protected by norms, law, and governance, and shy of using simple group identifiers, we are more and more surrounding ourselves with others who feel comfortably like us. We can tell ourselves that we aren’t excluding Joe or Sue because they are Republicans, or don’t have a college degree. Its just that those sort of people tend to give off dozens of other off-putting signs that they are just not people like us.

We would call it an outrage if society as a whole excluded them explicitly and formally because of a few simple signs. Only ignorant and rude societies do that. But we feel quite comfortable excluding them from our little part of the world based on our just not feeling comfortable with them. Hey, as anyone knows, in our part of the world it is just really important to have the right people.

Consider this another weak argument for relying more on stronger norms, law, and governance. That could let us rely less on exclusion locally. And mix up a bit more.

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The One Ruler Obsession

I often teach undergraduate law & economics. Sometimes the first paper I assign is to suggest property rules to deal with conflicts regarding asteroids, orbits, and sunlight in the solar system, in the future when there’s substantial activity out there. This feels to students like a complex different situation, and in fact few understand even the basic issues.

Given just two pages to make their case, a large fraction of students (~1/3?) express fear that one person or organization will take over the entire solar system, unless property rules are designed to explicitly prevent that. And a similar fraction suggest the “property rule” of having a single government agency answer all questions. Whatever question or dispute you have, fill out a form, and the agency will decide.

Yet in my lectures I talk a lot about concepts and issues of property rights, but never mention government agency issues or scenarios, nor the scenario of one power taking over everything. And econ undergrads at my school are famous for being relatively libertarian.

I conclude that most people have a strong innate fear of power concentrations, and yet also see the creation of a single central power as an attractive general solution to complicated problems. I’ve seen the same sort of thing with a great many futuristic tech and policy issues. Whatever the question, if it seems complicated, most people are concerned about inequality, especially that it might be taken to the max, and yet they also like the idea of creating a central government-like power to deal with it.

I’ve certainly seen this in concerns about future rampaging robots (= “AI risk”). Many, perhaps most, people express concerns that one AI could take over everything, and many also like the “solution” of one good AI taking over everything.

I recently came across similar reasoning by Frederick Engels back in 1844, in his Outlines of a Critique of Political Economy. Having seen the early industrial revolution, not understanding it well, but fearing where it might lead, Engels claims that the natural outcome is extreme concentration of power. And his solution is to create a different central power (e.g., communism). Of course while there was some increase in inequality and concentration, it wasn’t remotely as bad as Engels feared, except where his words helped to inspire the creation of such concentration. Here is Engels:

Thus, competition sets capital against capital, labour against labour, landed property against landed property; and likewise each of these elements against the other two. In the struggle the stronger wins; and in order to predict the outcome of the struggle, we shall have to investigate the strength of the contestants. First of all, labour is weaker than either landed property or capital, for the worker must work to live, whilst the landowner can live on his rent, and the capitalist on his interest, or, if the need arises, on his capital or on capitalised property in land. The result is that only the very barest necessities, the mere means of subsistence, fall to the lot of labour; whilst the largest part of the products is shared between capital and landed property. Moreover, the stronger worker drives the weaker out of the market, just as larger capital drives out smaller capital, and larger landed property drives out smaller landed property. Practice confirms this conclusion. The advantages which the larger manufacturer and merchant enjoy over the smaller, and the big landowner over the owner of a single acre, are well known. The result is that already under ordinary conditions, in accordance with the law of the stronger, large capital and large landed property swallow small capital and small landed property – i.e., centralisation of property. In crises of trade and agriculture, this centralisation proceeds much more rapidly.

In general large property increases much more rapidly than small property, since a much smaller portion is deducted from its proceeds as property-expenses. This law of the centralisation of private property is as immanent in private property as all the others. The middle classes must increasingly disappear until the world is divided into millionaires and paupers, into large landowners and poor farm labourers. All the laws, all the dividing of landed property, all the possible splitting-up of capital, are of no avail: this result must and will come, unless it is anticipated by a total transformation of social conditions, a fusion of opposed interests, an abolition of private property.

Free competition, the keyword of our present-day economists, is an impossibility. Monopoly at least intended to protect the consumer against fraud, even if it could not in fact do so. The abolition of monopoly, however, opens the door wide to fraud. You say that competition carries with it the remedy for fraud, since no one will buy bad articles. But that means that everyone has to be an expert in every article, which is impossible. Hence the necessity for monopoly, which many articles in fact reveal. Pharmacies, etc., must have a monopoly. And the most important article – money – requires a monopoly most of all. Whenever the circulating medium has ceased to be a state monopoly it has invariably produced a trade crisis; and the English economists, Dr. Wade among them, do concede in this case the necessity for monopoly. But monopoly is no protection against counterfeit money. One can take one’s stand on either side of the question: the one is as difficult as the other. Monopoly produces free competition, and the latter, in turn, produces monopoly. Therefore both must fall, and these difficulties must be resolved through the transcendence of the principle which gives rise to them. (more)

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