Tag Archives: Signaling

Is Status-Seeking A Context-Neglecting-Value?

The main evolutionary function of sex for humans is obviously procreation. Yet our deep values regarding sex don’t seem to pay that much attention to info we have about if procreation is likely to actually happen in any given sex-related context. Consider our preferences regarding context for pornography, strip clubs, romance novels, and contraception. Oh our sex preferences do attend to cues that robustly correlated with procreation success for our distant ancestors. Such as the status of males and the youthfulness of females. But regarding kinds of context rare among our distant ancestors, our sex preferences seem drawn to the naive appearance of the possibility of successful sex, and neglect the more detailed context info that we have.

This sort of context-neglecting values also seems to happen with media. People seem to act as if the TV actors they watch regularly are actually their friends, and the sports stars they associate with are somehow going to raise their status. They feel they are raising their status by correcting strangers “wrong on the internet”. They also don’t seem to pay that much attention to how the processing of their food might change its nutrition, as long as it doesn’t hurt the taste.

Back in 2010 I posted on a context-neglecting-values theory to explain the demographic transition, i.e., the puzzlingly low fertility that seems to happen as societies get rich. I suggested that women who find that they are rich presume that they are relatively rich, and this have a shot at being “queens”, i.e., at mating with a high status man and producing high status kids. Or a shot at having their kids become kings or queens. This can justify delaying her own fertility to invest in status markers, or justify having fewer kids to let each kid gain more status markers. When entire societies get rich, each person neglects the fact that being absolutely rich doesn’t make you relatively rich. Plausibly among our distant ancestors, societies almost never got very rich for very long, and so this neglect wasn’t much of a problem back then.

Recently I realized that I should consider generalizations of this theory. What if, when societies get rich, we all feel like we have high relative status, and a decent chance to get even more, neglecting the fact that most everyone around us is also richer as well? In this case we’d be primed to take the sort of actions that makes sense for ambitious people with high relative status.

This might explain two big puzzles that I’ve long pondered. The first puzzle is our strong taste for variety in the last few centuries, which doesn’t seem to actually produce that much net value for us. Making new unusual choices can make sense for the high status, if they can use this as a way to show that they are leaders. That is, if they pick or do something different, and lots of people follow their example, they may prove to observers that they are a “thought” leader. And if we all see ourselves as strong leader candidates, we may all be attracted to such strategies.

The other big puzzle I’ve long pondered is our strong taste for paternalism, especially in the last few centuries, which seems to mostly hurt us on average. Instead of showing our high status by showing that others copy us when we do unusual things, we can also show our high status by our visible ability to stop others from doing unusual things. If people hear that we have such power and regularly use it, they have to conclude that we are “somebody.” And so ordinary people lend their support to paternalist policies in the hope that they will be personally credited for it. Much like people seem to think their status will be raised if they associate with celebrities who have never heard of them.

So my new suggestion in this post is that, because in a rich world we all greatly overestimate our relative status, we intuit that it makes sense to try to raise our status either by choosing variety and getting others to copy it, or by showing off our ability to stop others from choosing variety. These both actually make less sense for most of us as ways to gain status, because we aren’t actually high in relative status. But our intuitions don’t notice that.

Why would our preferences neglect context so? The idea is that they are coded in us at very deep levels, at places where our conscious thoughts just can’t change them. Such changes mostly require slower genetic and cultural selection processes.

Should welfare analysis focus on the context-neglecting preferences that we currently express, or on the ones that we would have if we took context more into account. That depends on if you care more about the immediate surface feelings of people today, or longer term outcomes and descendants.

GD Star Rating
a WordPress rating system
Tagged as: , , ,

How Long Will We Distance?

We often go out of our way, collectively, to accommodate small subsets of the population. For example, in parking spots and building entrances for those who use wheelchairs, in extra food sorting and labeling for those allergic to nuts or gluten, and in extra accommodations in language and labels for the non-binary-gendered.

But there are also population subsets that we do not go out of our way to accommodate. For example, we might have helped pay for the famous “boy in the bubble” to have a bubble, but we did not otherwise do much to accommodate him. (There are other subsets where I could actually get into “trouble” for even mentioning that we might consider accommodating them more. As they are besides the point of this post, I won’t mention them here.)

At the moment we are spending great amounts (too much I’d say) to accommodate the subset of the population who is vulnerable to infection by covid. For a while, that has nominally been a majority of the population, though their risks are far from equal. But over the next year, more people will get vaccinated, and more will get infected, and fewer people will be in the leftover group. And a big question will loom: how far will we go to continue to insist on “distancing” of various forms to protect everyone?

So far the standard story has been that people who’ve been vaccinated or infected must not be held to any more lenient standards; they must all “distance” just as strongly. Not only because there remain other folks, but because protections are not 100% effective. But as the average risk falls, will we get to a point where this standard changes?

To explore this question, I made this poll:

But actually, I think the question hinges more on the moral framing, i.e., the moral colors that will be associated with each side. For example, if the dominant moral story is that the non-vaccinated are anti-social science-deniers who don’t deserve accommodation, then we may switch at a high % still vulnerable.

But if the dominant moral story is instead that those who want to end distancing then are the same people who have always wanted to end distancing, then the previous moral disapproval of such advocates would make people reluctant to embrace their position. Similarly, if the story is that the more vulnerable tend to be the poor and people of color, who don’t have the political and economic clout to cut in line to get vaccines early, and who face larger infection risks due to their jobs.

Another key issue is that at the future time we are seriously considering such a switch, we will have been heavily distancing for over a year. So distancing will have a lot of social inertial then, requiring a substantial degree of social energy and initiative to overcome.

Added 22Feb: I don’t think I was clear enough above that I estimate a low %, say ~3%, and thus a long time before back to normal is allowed.

GD Star Rating
a WordPress rating system
Tagged as:

Counter-Signaling On Aliens

For a long time, people who wrote on U.F.O.s have faced extra hurdles. Compared to those who write on other topics, authors on this topic are scrutinized more carefully for credentials and conflicting interests. The evidence they present is scrutinized much more carefully for detail, consistency, and potential bias and contamination, and much less likely alternative explanations are considered sufficient to reject such evidence. And even when they meet these higher standards, such authors still find it hard to gain much media attention.

A week ago Harvard astrophysics department chair Avi Loeb published a book wherein he argues that the object “Oumuamua” that passed quickly through our solar system in 2017 was an artificial alien artifact. The book doesn’t actually go into much detail on data about the object, certainly not enough to allow readers to apply the scrutiny usually expected of U.F.O. claims.

And even though he says he’s nearly alone among astrophysicists in his view, Loeb doesn’t at all help readers to understand why they believe different from Loeb. His story seems to be that they are all just chicken-shit. And his story about what the aliens are doing out there seems to be that they are mostly long dead.

If Loeb doesn’t talk much about the technical details and evidence, what does he talk about? Mostly his childhood, philosophy, other projects, bigshots he knows, etc. (Though he does also mention me.) And the media have overall been very kind to him, giving him lots of coverage and little criticism.

You might think that Loeb’s claim about this space object and common U.F.O. claims would seem to support each other. But in a few places, Loeb is very dismissive of ordinary U.F.O. evidence. (here and here). He’s clearly trying to say that what he says is nothing like what they say.

All of which seems to me a pretty clear example of countersignaling. Just like you are often nice to acquaintances to distinguish them from strangers, but mean to friends to distinguish them from mere acquaintances, we often do the opposite of the usual signal to show we are special. Loeb doesn’t have to follow the usual rules that would apply to most folks offering data on aliens, because (as he repeatedly reminds us) he is a Harvard astrophysics department chair.

All of which may help you understand why people often don’t follow the usual epistemic rules. Because the usual rules are for little people, and you aren’t little, are you?

GD Star Rating
a WordPress rating system
Tagged as: ,

Hidden Motives of Gratitude

I recently got 568 Twitter folk to say which of these 4 things they are most thankful for:

Assume first that one is most thankful for the process which increased your gains by the highest ratio, relative to prior expectations. If we are just talking about such a degree of selectivity into a better position, then it seems to me that the first answer is obviously best: there are vastly more possible than actual creatures. If you get zero value from not existing, but a positive value from existing, and your prior odds of existing were tiny, then your gain ratio is astronomical.

However, some insist that they can only compare scenarios where they exist, and so reject the counterfactual possibility that they might not have existed. For them, the second option seems obviously the most selective among the remaining three. Humans are clearly enormously special compared to the vast number of species who will ever exist. For example, far more special than are humans in any one place and time compared to humans in others.

What if the goal of a poll respondent isn’t to identify the option from which they benefited more, but instead to use this poll as an opportunity to signal something about themselves. (Other than literal understanding and honesty.) The apparently most useful thing to signal then would be loyalty to one’s immediate associates, and confidence in one’s local roles. In which case the last poll option seems obviously best.

But oddly, 48% of poll respondents picked the third option! What goal could explain that choice? One possibility is that they sought to signal their “patriotism” toward their place and time in human history. People in different places often feel rivalrous toward each other. Different nations are in different places, and even within nations different culture, ethnic, and political “factions” tend to be in different places.

What about your time in history? Well first, there is less rivalry of feeling between different times, and less to gain by signaling loyalty to your time. Furthermore, if you think you’ve seen a trend in history toward times getting better, to make your time the best so far, you should expect the future to get even better, making your time not so great compared to all the times, past and future. So I suspect that many overt time affiliations are actually covert political affiliations.

Thus I’m led to conclude that the strongest motive in choosing what to be most thankful for is signaling loyalty to one’s region. Nationalism, racism, political alignment, and cultural rivalry. If you encourage people to be more grateful, that’s what you will be encouraging. Not what I would have guessed, but I guess not so crazy either.

GD Star Rating
a WordPress rating system
Tagged as: ,

Contra-Counting Coalitions Value Variety

These events probably happened in the reverse order, but imagine if humans inventing counting after herding. That is, imagine a community long ago which herded animals, and where having a better herd was a big mark of higher status. Since they could not count, these humans gossiped about who had the better herd. For example, they traded anecdotes about times when someone’s herd had seemed especially awe-inspiring or dingy. And via gossip (and its implicit coalition politics), they formed a rough consensus on who had the best herds. A consensus where the opinions of high status folks tended to count for more.

Then someone invented counting and said “This will help us ensure that we aren’t missing stragglers when we bring our herds back from grazing”, and “Now we can objectively measure who has the larger flock”. While this community might be grateful for that first feature, I predict that they would hate the second one.

Folks would point out that size isn’t the only factor that matters for a better herd, that counting mistakes are possible, and that gossip about herd counts might inform herd thieves about who to target. Some say this won’t stop people from gossiping lots about whose herd is better, while others say that it will cut gossiping but that’s bad as gossip is good. Better to ban counting, they all say.

Don’t believe me? Consider these poll results (and attached comments): Continue reading "Contra-Counting Coalitions Value Variety" »

GD Star Rating
a WordPress rating system
Tagged as: , ,

Breadth, Humor Show Privilege

Imagine an old costume drama, showing servants interacting with those they serve. Think about what topics each side is allowed to mention, and how much humor would be tolerated from each. I say it is obvious that there are far fewer topics on which the servants may speak, or if they may speak, may joke. If there is a way of seeing what a servant said as purposely rude or malicious, they will be not be given much benefit of the doubt or chance to argue that they’ve been misunderstood. You must be very careful re first impressions when a second impression is unlikely to follow a bad first one.

Now imagine conversations centuries ago between English and French. Who is allowed to talk or joke about topics related to English-French conflicts, or ways in which the two groups are said to differ? If the conversation is taking place in an English context, with far more English than French present, then unless the French are especially high status or focal to the event, my guess is that the French will have to be more careful about what they say. The French are more at risk of harm here if they are accused of insulting the English, than vice versa.

Over the last few years, I’ve been told many times that there are many (and increasingly more) topics on which I, as a older white cis male presumed-conservative STEM-associated economist, must not speak. Often not even to directly quote others who may speak. And if I may speak, I must not joke. These categories of mine make me presumed evil, I am told. So if I say any combination of words where, taken out of context, it is possible to interpret them as “dog-whistling” an evil intent, observers are said to be free to treat that as my actual intent. Language being as ambiguous as it is, it is hard to talk long on any topic without such combinations appearing occasionally. And as humor relies much more on ambiguity and exaggeration, humor greatly increases their frequency.

When people separate the world into “us” and “them”, and try to explain why “we” are better, they often say that “we” are more honest, knowledgeable, and open-minded, and so are more willing and able to discuss a wider range of topics. And they often say that “they” are stupid dull humorless inhuman drones, lacking key sparks of life, such as humor, wit, curiosity, and spontaneity. But you can see from the above analysis that this impression is often misleading. In contexts where you hold the upper hand, they will more often have to limit their topics and humor, to avoid your wrath.

GD Star Rating
a WordPress rating system
Tagged as: ,

Problem-Owners Tolerate Risk

In theory, both risk aversion and value of life year relative to income are mainly set by utility function concavity. However, as both also show puzzlingly large empirical variation, there is apparently a lot more going on than a simple context independent utility function. But what?

While pondering this question, I saw some nature videos of cute young mammals, who start out as physically and emotionally fragile, and prone to crying, but who grow to be tough and emotionally steady like their parents. I wondered: might it be useful to frame this as a transition from risk-aversion to risk-tolerance?

Of course youngsters aren’t always risk averse. Sometimes they try to play with a scorpion, or rough-house too close to a cliff. In such cases, mom may restrain their risk-taking. But when kids suffer some mild depredation, such as wanting food or other help from mom, that’s when they act most emotionally needly and fragile:

Oh my, this problem I face is way too hard for my fragile emotions. I’m young, innocent, and nearly dying of fright to think about it. Won’t someone who loves me come to protect me from this terrible anxiety and suffering?

Plausibly parents are built to find it hard to resist wanting to help such puppy-dog eyes, to get them to take care of their kids. And when parents do tend to help when kids suffer, that actually makes kids more risk-tolerant regarding choices to take precautions to prevent future suffering.

Humans are famously neotenous, retaining more childlike features further into adulthood. And living in large social groups that share food and other resources, even human adults have incentives to show puppy-dog eyes, and to feel sympathetic to those eyes when they have something to share. So it seems plausible that human nature would have adapted the fragile-tough child-adult dynamic to apply to the helpee-helper relations in groups of adults.

That is, I’m suggesting that evolution has built we humans to strategically (if unconsciously) make a key attitude choice regarding each particular situation we face: do we project a cool tough self-reliant risk-tolerance, or a more emotionally-expressive risk-averse fragile vulnerability. In other words, do we choose to act vulnerable but sympathetic, or do we choose to act more “emotionally mature”? I’m not saying this is the only factor that influences risk-tolerance, but it may be one of the largest.

Yes, people often talk as if emotional maturity is the product of learning from experience, with perhaps some help from an admirable moral will. But if emotional maturity were always the better strategy, why would evolution have ever encoded in us any other tendency? Evolution could have made the very young take on emotionally mature attitudes if it had wanted. And in fact, it does sometimes want that, such as when kids “grow up too fast” due to getting little help in taking on adult-sized problems.

The key maturity choice here is of whether to “own” each problem that we face. It makes sense to own a problem, and act more risk-tolerant toward it (and more risk-averse re preventing it), when we seek to impress others with our confidence in handling the problem, when we bid for parent/leader roles, and when we want to avoid the embarrassment of others seeing that no one comes when we ask for help. However, when getting help with our problem seems more important, and likely enough, or when showing submission to and dependence on others seems important, it can make more sense to try to get others to own our problem by acting more risk-averse and hurt by the problem. We can suggest that others are to blame for causing our problem, and even if not they are responsible to help fix it.

So does my theory fit the data? In one key study, “Psychosocial maturity proved a better predictor of risk-taking behaviour than age.” Which is striking because age (at least below age 65) is one of our two usual best predictors of risk-tolerance, the other being male gender. Some data suggests that the following groups are also more risk-tolerant: the tall, the married, and those with more kids. People who work in finance, insurance, and real estate seem more risk-averse, and buying insurance on a risk is a strong sign that one is averse to it. Those with mid-level wages and extreme high or low wealth also seem more risk tolerant. The self-employed seem more risk averse.

Emotional maturity tends to increase on average with age, range of experiences, intelligence, self-esteem, and work performance, positive attitudes toward childcare, and not being an orphan. Here are some descriptions of the concept:

An emotionally mature individual gives off a sense of ‘calm amid the storm.’ They’re the ones we look to when going through a difficult time because they perform well under stress. … When you’re less mature, the world is full of minor annoyances, and you’re unaware of your own privileges. Think about how often a day you complain about others or different situations. (more)

Accept[s] the sorrows of life whole heartedly and … show[s] distress when there is occasion to be worried, without feeling a requisite to use a false facade of bravery. (more)

If my theory is right, and much of the variation in risk aversion (and value of life) we see results from strategic context-dependent choices to act risk-tolerant or risk-averse, this makes it harder to used measured risk-aversion (and value of life) to inform policy. Yes, if true risk aversion were higher, that would justify paying more to save lives, including via stricter regulation, and also justify more redistribution and social insurance. But if much of what we see people do is done for show, then we have to try to infer the real level of risk aversion behind all that show.

My guess is that on average in a social species with lots of sharing, free-riding is a bigger problem than excess autonomy. If so, we more often try to seem more needy to gain more help, than we try to seem less needy to gain respect. And thus typical behavior will exaggerate our real overall degree of risk aversion (and value of life). But I don’t yet know how to show this. It does seem worth further study; we may well figure out some way to see.

Added 3p: Related datum: “women are more sensitive to pain and less tolerant of pain than men.”

GD Star Rating
a WordPress rating system
Tagged as: , , ,

Radical Signals

Many people tout big outside-the-Overton “radical” proposals for change. They rarely do this apologetically; instead, they often do this in a proud and defiant tone. They seem to say directly that their proposal deserves better than it has gotten, and indirectly that they personally should be admired for their advocacy.

Such advocacy also tends to look a lot like costly signaling. That is, advocates seem to go out of their way to pay costs, such as via protests, meetings, writing redundant boring diatribes, accosting indifferent listeners at parties, implying that others don’t care enough, and so on. But it so, what exactly are they signaling?

If you recall, costly signaling is a process whereby you pay visible costs, but make sure that those costs are actually less when some parameter X is higher. If you get a high enough payoff from persuading audiences that X is high, you are plausibly willing to pay for these costly signals, in order to produce this persuasion. For example, you pay to go to school, but since school is easier if your are smart and conformist, going to school shows those qualities to observers.

Here are six things you might show about a radical proposal:

Investment – It is a good financial investment. You pay costs to initiate or improve a business venture or investment fund that includes variations on this proposal. Doing so is less costly, and even net profitable for you, if this turns out to be a profitable project. By visibly paying costs, you hope to convince others to join your investment.

Popularity – It will eventually become more popular. You lend your time, attention, and credibility to a “movement” in favor of this proposal. This effort on your part may be rewarded with praise, prestige, and attention if this movement becomes a lot more popular and fashionable. You hope that your visible support will convince others to add their support.

Morality – You, and the other supporters of this proposal, are unusually moral. You pick a proposal which, if passed, would impose large costs in the service of a key moral goal. For example, you might proposal a 90% tax on the rich, or no limits on encryption. Others have long been aware of those extreme options, but due to key tradeoffs they preferred less extreme options. You show your commitment to one of the values that are traded off by declaring you are willing to lose big on all the other considerations, if only you can win on yours.

Conformity – You are a loyal member of some unusual group. You show that loyalty by burning your bridges with other groups, via endorsing radical proposals which much put off other groups. This is similar to adopting odd rules on food and dress, or strange religious or ideological beliefs. Once a radical proposal is associated with your group for any reason, you show loyalty to that group by supporting that proposal.

Inventive – You are clever enough to come up with surprising solutions. You take a design problem that has vexed many, and offer a new design proposal that seems unusually simple elegant, and effective. Relative to someone who wanted to show effectiveness, your proposal would be simpler and more elegant, and it would focus on solving the problems that seem most visible and vexing to observers, instead of what are actually the most important problems. It would also tend to use theories that observers believe in, relative to theories that are true.

Effective – If adopted, your proposal would be effective at achieving widely held goals. To show effectiveness, you incur costs to show things that are correlated with effectiveness. For example, you might design, start, or complete related theoretical analyses, fault analyses, lab experiments, or field experiments. You might try to search for problematic scenarios or effects related to your proposal, and search for design variations that could better address them. You might search for plans to do small scale trials that can give clearer cheaper results, and that address some key potential problems.

In principle showing each of these things can also show the others. For example, showing that something is moral might help show its potential to become popular. Still, we can distinguish what an advocate is more directly trying to show, from what showing that would indirectly show.

It seems to me that, among the above options, the most socially valuable form of signaling is effectiveness. If we could induce an equilibrium where people tried to show the other things via trying to show effectiveness, we’d induce a lot more useful effort to figure out what variations are effective, which should help us to find and adopt more and better radical proposals. If we can’t get that, inventiveness seems the second best option.

GD Star Rating
a WordPress rating system
Tagged as: ,

Against Irony

Papua New Guinea. There are nearly 850 languages spoken in the country, making it the most linguistically diverse place on earth. … Mountains, jungles and swamps keep villagers isolated, preserving their languages. A rural population helps too: only about 13% of Papuans live in towns. …. Fierce tribal divisions—Papua New Guinea is often shaken by communal violence—also encourages people to be proud of their own languages. The passing of time is another important factor. It takes about a thousand years for a single language to split in two, says William Foley, a linguist. With 40,000 years to evolve, Papuan languages have had plenty of time to change naturally. (more)

British printer who used a mirrored question mark to distinguish rhetorical questions in 1575, and John Wilkins, a British scientist who proposed an inverted exclamation mark to indicate irony in 1668. … The problem with adopting new irony punctuation is that if the people reading you don’t understand it, you’re no better off. … The ironic punctuation mark that the social internet can claim as its own is the sarcasm tilde, as in, “That’s so ~on brand~” … But tildes can feel a bit obvious. For a wryer mood, a drier wit, one might try a more subdued form of ironic punctuation—writing in all lowercase. …

Irony is a linguistic trust fall. When I write or speak with a double meaning, I’m hoping that you’ll be there to catch me by understanding my tone. The risks are high—misdirected irony can gravely injure the conversation—but the rewards are high, too: the sublime joy of feeling purely understood, the comfort of knowing someone’s on your side. No wonder people through the ages kept trying so hard to write it. (more)

Just as the urge to signal loyalty to people nearby has kept New Guinea folks from understanding people over the next mountain, our similar urge pushes us to write in ways that make it hard for those outside our immediate social circles to understand us. Using irony, we sacrifice ease of wide understanding to show loyalty to a closer community. 

Language is like religion, art, and many other customs in this way, helping to bond locals via barriers to wider interaction and understanding. If you think of yourself instead as a world cosmopolitan, preferring to promote world peace and integration via a global culture that avoids hostile isolationist ties to local ethnicities and cultures, then not only should you like world-wide travel, music, literature, emigration, and intermarriage, you should also dislike irony. Irony is the creation of arbitrary language barriers with the sole purpose of preventing wider cultural integration. 

GD Star Rating
a WordPress rating system
Tagged as: ,

Who Likes Simple Rules?

Some puzzles:

  • People are often okay with having either policy A or policy B adopted as the standard policy for all cases. But then they object greatly to a policy of randomly picking A or B in particular cases in order to find out which one works better, and then adopt it for everyone.
  • People don’t like speed and red-light cameras; they prefer human cops who will use discretion. On average people don’t think that speeding enforcement discretion will be used to benefit society, but 3 out of 4 expect that it will benefit them personally. More generally people seem to like a crime law system where at least a dozen different people are authorized to in effect pardon any given person accused of any given crime; most people expect to benefit personally from such discretion.
  • In many European nations citizens send their tax info into the government who then tells them how much tax they owe. But in the US and many other nations, too many people oppose this policy. The most vocal opponents think they benefit personally from being able to pay less than what the government would say they owe.
  • The British National Health Service gets a lot of criticism from choosing treatments by estimating their cost per quality-adjusted-life-year. US folks wouldn’t tolerate such a policy. Critics lobbying to get exceptional treatment say things like “one cannot assume that someone who is wheel-chair bound cannot live as or more happily. … [set] both false limits on healthcare and reducing freedom of choice. … reflects an overly utilitarian approach”
  • There’s long been opposition to using an official value of life parameter in deciding government policies. Juries have also severely punished firms for using such parameters to make firm decisions.
  • In academic departments like mine, we tell new professors that to get tenure they need to publish enough papers in good journals. But we refuse to say how many is enough or which journals count as how good. We’d keep the flexibility to make whatever decision we want at the last minute.
  • People who hire lawyers rarely know their track record at winning vs. losing court cases. The info is public, but so few are interested that it is rarely collected or consulted. People who hire do know the prestige of their schools and employers, and decide based on that.
  • When government leases its land to private parties, sometimes it uses centralized, formal mechanisms, like auctions, and sometimes it uses decentralized and informal mechanisms. People seem to intuitively prefer the latter sort of mechanism, even though the former seems to works better. In one study “auctioned leases generate 67% larger up-front payments … [and were] 44% more productive”.
  • People consistently invest in managed investment funds, which after the management fee consistently return less than index funds, which follow a simple clear rule. Investors seem to enjoy bragging about personal connections to people running prestigious investment funds.
  • When firms go public via an IPO, they typically pay a bank 7% of their value to manage the process, which is supposedly spent on lobbying others to buy. Google famously used an auction to cut that fee, but banks have succeed in squashing that rebellion. When firms try to sell themselves to other firms to acquire, they typically pay 10% if they are priced at less than $1M, 6-8% if priced $10-30M, and 2-4% if priced over $100M.
  • Most elite colleges decide who to admit via opaque and frequently changing criteria, criteria which allow much discretion by admissions personnel, and criteria about which some communities learn much more than others. Many elites learn to game such systems to give their kids big advantages. While some complain, the system seems stable.
  • In a Twitter poll, the main complaints about my fire-the-CEO decisions markets proposal are that they don’t want a simple clear mechanical process to fire CEOs, and they don’t want to explicitly say that the firm makes such choices in order to maximize profits. They instead want some people to have discretion on CEO firing, and they want firm goals to be implicit and ambiguous.

The common pattern here seems to me to be a dislike of clear formal overt rules, mechanisms, and criteria, relative to informal decisions and negotiations. Especially disliked are rules based on explicit metrics that might reject or disapprove people. To the extent that there are rules, there seems to be a preference for authorizing some people to have discretion to make arbitrary choices, regarding which they are not held strongly to account.

To someone concerned about bribes, corruption, and self-perpetuating cabals of insiders, a simple clear mechanism like an auction might seem an elegant way to prevent all of that. And most people give lip service to being concerned about such things. Also, yes explicit rules don’t always capture all subtleties, and allowing some discretion can better accommodate unusual details of particular situations.

However, my best guess is that most people mainly favor discretion as a way to promote an informal favoritism from which they expect to benefit. They believe that they are unusually smart, attractive, charismatic, well-connected, and well-liked, just the sort of people who tend to be favored by informal discretion.

Furthermore, they want to project to associates an image of being the sort of person who is confidently supports the elites who have discretion, and who expects in general to benefit from their discretion. (This incentive tends to induce overconfidence.)

That is, the sort of people who are eager to have a fair neutral objective decision-making process tend to be losers who don’t expect to be able to work the informal system of favors well, and who have accepted this fact about themselves. And that’s just not the sort of image that most people want to project.

This whole equilibrium is of course a serious problem for we economists, computer scientists, and other mechanism and institution designers. We can’t just propose explicit rules that would work if adopted, if people prefer to reject such rules to signal their social confidence.

GD Star Rating
a WordPress rating system
Tagged as: ,