Tag Archives: Status

Marching Markups

This new paper by De Locker and Eeckhout will likely be classic:

We document the evolution of markups based on firm-level data for the US economy since 1950. Initially, markups are stable, even slightly decreasing. In 1980, average markups start to rise from 18% above marginal cost to 67% now. .. Increase in average market power .. can account for .. slowdown in aggregate output. .. The rise in market power is consistent with seven secular trends in the last three decades.

Yes, US public firms have only 1/3 of US jobs, and an even smaller fraction of the world’s. Even so, this is a remarkably broad result. I’d feel a bit better if I understood why their firm-level simple aggregation of total sales divided by total variable costs (their Figure B.5a) gives only a 26% markup today, but I’ll give them the benefit of the doubt for now. (And that figure was 12% in 1980, so it has also risen a lot.) Though see Tyler’s critique.

The authors are correct that this can easily account for the apparent US productivity slowdown. Holding real productivity constant, if firms move up their demand curves to sell less at a higher prices, then total output, and measured GDP, get smaller. Their numerical estimates suggest that, correcting for this effect, there has been no decline in US productivity growth since 1965. That’s a pretty big deal.

Accepting the main result that markups have been marching upward, the obvious question to ask is: why? But first, let’s review some clues from the paper. First, while industries with smaller firms tend to have higher markups, within each small industry, bigger firms have larger markups, and firms with higher markups pay higher dividends.

There has been little change in output elasticity, i.e., the rate at which variable costs change with the quantity of units produced. (So this isn’t about new scale economies.) There has also been little change in the bottom half of the distribution of markups; the big change has been a big stretching in the upper half. Markups have increased more in larger industries, and the main change has been within industries, rather than a changing mix of industries in the economy. The fractions of income going to labor and to tangible capital have fallen, and firms respond less than they once did to wage changes. Firm accounting profits as a fraction of total income have risen four fold since 1980.

These results seem roughly consistent with a rise in superstar firms:

If .. changes advantage the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms with high profits and a low share of labor in firm value-added and sales. .. aggregate labor share will tend to fall. .. industry sales will increasingly concentrate in a small number of firms.

Okay, now lets get back to explaining these marching markups. In theory, there might have been a change in the strategic situation. Perhaps price collusion got easier, or the game became less like price competition and more like quantity competition. But info tech should have both made it easier for law enforcement to monitor collusion, and also made the game more like price competition. Also, anti-trust just can’t have much effect on these small-firm industries. So I’m quite skeptical that strategy changes account for the main effect here. The authors see little overall change in output elasticity, and so I’m also pretty skeptical that there’s been any big overall change in the typical shape of demand or cost curves.

If, like me, you buy the standard “free entry” argument for zero expected economic profits of early entrants, then the only remaining possible explanation is an increase in fixed costs relative to variable costs. Now as the paper notes, the fall in tangible capital spending and the rise in accounting profits suggests that this isn’t so much about short-term tangible fixed costs, like the cost to buy machines. But that still leaves a lot of other possible fixed costs, including real estate, innovation, advertising, firm culture, brand loyalty and prestige, regulatory compliance, and context specific training. These all require long term investments, and most of them aren’t tracked well by standard accounting systems.

I can’t tell well which of these fixed costs have risen more, though hopefully folks will collect enough data on these to see which ones correlate strongest with the industries and firms where markups have most risen. But I will invoke a simple hypothesis that I’ve discussed many times, which predicts a general rise of fixed costs: increasing wealth leading to stronger tastes for product variety. Simple models of product differentiation say that as customers care more about getting products nearer to their ideal point, more products are created and fixed costs become a larger fraction of total costs.

Note that increasing product variety is consistent with increasing concentration in a smaller number of firms, if each firm offers many more products and services than before.

Added 25Aug: Karl Smith offers a similar, if more specific, explanation.

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Organic Prestige Doesn’t Scale

Some parts of our world, such as academia, rely heavily on prestige to allocate resources and effort; individuals have a lot of freedom to choose topics, and are mainly rewarded for seeming impressive to others. I’ve talked before about how some hope for a “Star Trek” future where most everything is done that way, and I’m now reading Walkaway, outlining a similar hope. I was skeptical:

In academia, many important and useful research problems are ignored because they are not good places to show off the usual kinds of impressiveness. Trying to manage a huge economy based only on prestige would vastly magnify that inefficiency. Someone is going to clean shit because that is their best route to prestige?! (more)

Here I want to elaborate on this critique, with the help of a simple model. But first let me start with an example. Imagine a simple farming community. People there spend a lot of time farming, but they must also cook and sew. In their free time they play soccer and sing folk songs. As a result of doing all these things, they tend to “organically” form opinions about others based on seeing the results of their efforts at such things. So people in this community try hard to do well at farming, cooking, sewing, soccer, and folk songs.

If one person put a lot of effort into proving math theorems, they wouldn’t get much social credit for it. Others don’t naturally see outcomes from that activity, and not having done much math they don’t know how to judge if this math is any good. This situation discourages doing unusual things, even if no other social conformity pressures are relevant.

Now let’s say that in a simple model. Let there be a community containing people j, and topic areas i where such people can create accomplishments aij. Each person j seeks a high personal prestige pj = Σi vi aij, where vi is the visibly of area i. They also face a budget constraint on accomplishment, Σi aij2 ≤ bj. This assumes diminishing returns to effort in each area.

In this situation, each person’s best strategy is to choose aij proportional to vi. Assume that people tend to see the areas where they are accomplishing more, so that visibility vi is proportional to an average over individual aij. We now end up with many possible equilibria having different visibility distributions. In each equilibria, for all individuals j and areas i,k we have the same area ratios aij / akj = Vi/ Vk.

Giving individuals different abilities (such as via a budget constraint Σi aij2 / xij ≤ bj) could make individual choose somewhat different accomplishments, but the same overall result obtains. Spillovers between activities in visibility or effort can have similar effects. Making some activities be naturally more visible might push toward those activities, but there could still remain many possible equilibria.

This wide range of equilibria isn’t very reassuring about the efficiency of this sort of prestige. But perhaps in a small foraging or farming community, group selection might over a long run push toward an efficient equilibria where the high visibility activates are also the most useful activities. However, larger societies need a strong division of labor, and with such a division it just isn’t feasible for everyone to evaluate everyone else’s specific accomplishments. This can be solved either by creating a command and status hierarchy that assigns people to tasks and promotes by merit, or by an open market with prestige going to those who make the most money. People often complain that doing prestige in these ways is “inauthethnic”, and they prefer the “organic” feel of personally evaluating others’ accomplishments. But while the organic approach may feel better, it just doesn’t scale.

In academia today, patrons defer to insiders so much regarding evaluations that disciplines become largely autonomous. So economists evaluate other economists based mostly on their work in economics. If someone does work both in economics and also in aother area, they are judged mostly just on their work in economics. This penalizes careers working in multiple disciplines. It also suggests doubts on if different disciplines get the right relative support – who exactly can be trusted to make such a choice well?

Interestingly, academic disciplines are already organized “inorganically” internally. Rather than each economist evaluating each other economist personally, they trust journal editors and referees, and then judge people based on their publications. Yes they must coordinate to slowly update shared estimates of which publications count how much, but that seems doable informally.

In principle all of academia could be unified in this way – universities could just hire the candidates with the best overall publication (or citation) record, regardless of in which disciplines they did what work. But academia hasn’t coordinated to do this, nor does it seem much interested in trying. As usual, those who have won by existing evaluation criteria are reluctant to change criteria, after which they would look worse compared to new winners.

This fragmented prestige problem hurts me especially, as my interests don’t fit neatly into existing groups (academic and otherwise). People in each area tend to see me as having done some interesting things in their area, but too little to count me as high status; they mostly aren’t interested in my contributions to other areas. I look good if you count my overall citations, for example, but not if you only my citations or publications in each specific area.

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When to Parrot, Pander, or Think for Yourself

Humans are built to argue and persuade. We tend to win when we endorse arguments that others accept, and win even more when we can generate new arguments that others will accept. This is both because people notice who originated the arguments that they accept, and because this ability helps us to move others toward opinions that favor our policies and people.

All of this is of course relative to some community who evaluates our arguments. Sometimes the larger world defers to a community of experts, and then it is that community who you must persuade. In other cases, people insist on deciding for themselves, and then you have to persuade them directly.

Consider three prototypical discussions:

  1. Peers in a car, talking on the path to drive to reach an event where they are late.
  2. Ordinary people, talking on if and how black holes leak information.
  3. Parents, talking on how Santa Claus plans to delivers presents Christmas eve.

In case #1, it can be reasonable for peers to think sincerely, in the sense of looking for arguments to persuade themselves, and then offering those same arguments to each other. It can be reasonable here to speak clearly and directly, to find and point out flaws in others’ arguments, and to believe that the net result is to find better approximations to truth.

In case #2, most people are wise to mostly parrot what they hear experts say on the topic. The more they try to make up their own arguments, or even to adapt arguments they’ve heard to particular contexts, the more they risk looking stupid. Especially if experts respond. On such topics, it can pay to be abstract and somewhat unclear, so that one can never be clearly shown to be wrong.

In case #3, parents gain little from offering complex new arguments, or even finding flaws in the usual kid arguments, at least when only parents can understand these. Parents instead gain from finding variations on the usual kid arguments that kids can understand, variations that get kids to do what parents want. Parents can also gain from talking at two levels at once, one discussion at a surface visible to kids, and another at a level visible only to other parents.

These three cases illustrate the three general cases, where your main audience is 1) about as capable , 2) more capable, or 3) less capable than you in generating and evaluating arguments on this topic. Your optimal argumentation strategy depends on in which of these cases you find yourself.

When your audience is about the same as you, you can most usefully “think for yourself”, in the sense that if an argument persuades you it will probably persuade your audience as well, at least if it uses popular premises. So you can be more comfortable in thinking sincerely, searching for arguments that will persuade you. You can be eager to find fault w/ arguments and criticize them, and to listen to such criticisms to see if they persuade you. And you can more trust the final consensus after your discussion.

The main exception here is where you tend to accept premises that are unpopular with your audience. In this case, you can either disconnect with that audience, not caring to try to persuade them, or you can focus less on sincerity and more on persuasion, seeking arguments that will convince them given their different premises.

When your audience is much more capable than you, then you can’t trust your own argument generation mechanism. You must instead mostly look to what persuades your superiors and try to parrot that. You may well fail if you try to adapt standard arguments to particular new situations, or if you try to evaluate detailed criticisms of those arguments. So you try to avoid such things. You instead seek generic positions that don’t depend as much on context, expressed in not entirely clear language that lets you decide at the last minute what exactly you meant.

When your audience is much less capable than you, then arguments that persuade you tend to be too complex to persuade them. So you must instead search for arguments that will persuade them, even if they seem wrong to you. That is, you must pander. You are less interested in rebuttals or flaws that are too complex to explain to your audience, though you are plenty interested in finding flaws that your audience can understand. You are also not interested in finding complex fixes and solutions to such flaws.

You must attend not only to the internal coherence of your arguments, but also to the many particular confusions and mistakes to which your audience is inclined. You must usually try arguments out to see how well they work on your audience. You may also gain by using extra layers of meaning to talk more indirectly to impress your more capable sub-audience.

What if, in addition to persuading best, you want to signal that you are more capable? To show that you are not less capable than your audience, you might go out of your way to show that you can sincerely, on the fly and without assistance, and without studying or practicing on your audience, construct new arguments that plausibly apply to your particular context, and identify flaws with new arguments offered by others. You’d be sincerely argumentative.

To suggest that you are more capable than your audience, you might instead show that you pay attention to the detailed mistakes and beliefs of your audience, and that you first try arguments out on them. You might try to show that you are able to find arguments by which you could persuade that audience of a wide range of conclusions, not just the conclusions you privately find the most believable. You might also show that you can simultaneously make persuasive arguments to your general audience, while also discreetly making impressive comments to a sub-audience that is much more capable. Sincerely “thinking for yourself” can look bad here.

In a world where people following the strategies I’ve outlined above, the quality of general opinion on each topic probably depends most strongly on something near the typical capability of the relevant audience that evaluates arguments on that topic. (I’d guess roughly the 80th percentile matters most on average.) The less capable mostly parrot up, and the more capable mostly pander down. Thus firms tend to be run in ways that makes sense to that rank employee or investor. Nations are run in ways that make sense to that rank citizen. Stories make sense to that rank reader/viewer. And so on. Competition between elites pandering down may on net improve opinion, as may selective parroting from below, though neither seems clear to me.

If we used better institutions for key decisions (e.g., prediction/ decision markets), then the audience that matters might become much more capable, to our general benefit. Alas that initial worse audience usually decides not to use better institutions. And in a world of ems typical audiences also become much more capable, to their benefit.

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Hail Humans

Humans developed a uniquely strong and flexible capacity for social norms (see Boehm). Because of this, the praise that humans most crave is an acknowledgment that we are principled. That is, that we (mostly) adhere to the norms of our society, even when doing so is costly. And that includes the norm of calling attention to and punishing norm deviators.

In this post, I want to praise most humans for living up to this standard. This isn’t remotely a trivial accomplishment, and it just doesn’t get enough mention. Again, other animals can’t manage it. And most of us are often sorely tempted to defect.

It is much easier to embrace our society’s norms when we feel that we are winning by those norms, or at least breaking even. In this case we can each justify our norm-supporting sacrifices as the price we each pay to get others to make their sacrifices, to create a functioning society.

But much of our innate programming is tuned to watch for markers of relative status, ways in which some us seem better than others. And by this standard most of us are losers, gaining less than average relative status. (In technical terms, the median of success is well below the mean.)

When we feel like we are losers, so that others are gaining much more from society’s norms than we are, it is easier to doubt if we should continue to personally sacrifice to support those norms. Especially when we suspect that winners tend to win in part because they support some norms less than others do.

I think that in most societies, most losers do in fact suspect most winners of insufficient norm support. And there are some who use that as a justification to excuse their norm deviations. And most losers believe that there are many such deviants, and that such deviants tend to gain as a result of their failures to support norms.

And yet, even when they believe that most winners and many others gain from failing to sufficiently support norms, most losers still pay large personal costs to support most norms most of the time. Yes most everyone deviates sometimes, and yes we often work much harder to create the appearance than the substance of norm support. That is, we often attend more to what looks helpful than what is helpful.

Even so, hail to most humans for supporting their society’s norms enough to make possible society, and civilization. Yes, you might think that some societies have a better set of norms than others. And yes we might lament the lack of enough attention to preserving or inventing good norms.

But still, given that it is the praise that humans most crave to hear, and that they in fact do meet the relevant standard, we should give credit where credit is due. Hail to humans for supporting norms. At least their appearance, for most norms, most of the time.

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Status Hypocrisy

Humans (and some other animals) recognize two kinds of status: good and bad. Good status is “prestige” while bad status is “dominance.” Here is Trump today saying the US wants to be high status in the world, but only via good status:

We will seek friendship and goodwill with the nations of the world, but we do so with the understanding that it is the right of all nations to put their own interests first. We do not seek to impose our way of life on anyone, but rather to let it shine as an example. We will shine for everyone to follow. (more)

Many animals have a local “pecking order” set by winners of pair-wise physical fights. In some animals, rank is also influenced via prestige elements. For example, babbler birds rise in rank by doing good things for their local group, such as by sharing food and warning against predators. These things count for rank even when gained via violence, such as by fighting other birds for the best places to look out for predators, and by forcing food down the throat of other birds.

Human foragers have strong norms against using or threatening force, and even against bragging about such serious abilities. Hunters may exchange arrows to disguise who deserves credit for good hunts. But foragers are okay with communities having a shared sense of who are better sources of advice, and who are better to emulate and associate with. And it can be okay, in play mode, to brag about play abilities like singing or joking. In The Secret Of Our Success, Joseph Henrich says human cultural evolution was promoted by our tendency to copy behaviors of prestigious people.

Today we tend to say that our leaders have prestige, while their leaders have dominance. That is, their leaders hold power via personal connections and the threat and practice of violence, bribes, sex, gossip, and conformity pressures. Our leaders, instead, mainly just have whatever abilities follow from our deepest respect and admiration regarding their wisdom and efforts on serious topics that matter for us all. Their leaders more seek power, while ours more have leadership thrust upon them. Because of this us/them split, we tend to try to use persuasion on us, but force on them, when seeking to to change behaviors.

You can see this split in typical motives of heroes and villains in fiction, and in how such characters treat their subordinates. It also appears often in war propaganda, such as in accusations about different leadership styles of Trump and Clinton in the US last election.

Firm bosses today tend to be reluctant to give direct orders to subordinates, and prefer a general impression that they have their position mainly because of how much everyone respects their wisdom and effort. Bosses also prefer the impression that their main task is to collect information, apply wisdom, and make good decisions in the firm interest. Subordinates often go along with this story, as they don’t like to publicly accept domination. Employees can just conveniently decide that they respect their boss, and are persuaded by his or her arguments. And firms pay extra for the pretty dynamic bosses to which employees less mind submitting, even if those are worse at making key decisions.

Modern folk often don’t understand how the ancients could have tolerated not having democracy, as we us tell ourselves today that democracy is why we are not dominated by leaders. But while the ancients saw rival nations as under the thumb of tyrants, they themselves had kings whose virtues proved that they deserved their position. And we today look away from evidence that our leaders win elections via illicit means (such as personal connections etc.); our elected leaders are often far from the most prestigious people available. Even if we see most politicians as corrupt, we see our personal politicians as much less so. US residents look away from evidence that the US is not just high status in the world due to its good advice and general helpfulness; the US also uses force, bribes, etc.

Clearly, while there is some fact of the matter about how much a person gains their status via licit or illicit means, there is also a lot of impression management going on. We like to give others the impression that we personally mainly want prestige in ourselves and our associates, and that we only grant others status via the prestige they have earned. But let me suggest that, compared to this ideal, we actually want more dominance in ourselves and our associates than we like to admit, and we submit more often to dominance.

In the following, I’ll offer three lines of evidence for this claim. First consider that we like to copy the consumer purchases of people that we envy, but not of people we admire for being “warm” and socially responsible. I suggest that relative to us, the latter group has prestige while the former has dominance.

Second, consider the fact that when our bosses or presidents retire and leave office, their legitimate prestige should not have diminished much. That is, such people have about the same wisdom and good advice, and they remain as useful a model for copying behavior. Yet others usually show far less interest in associating with such retirees. This suggests that what people really want in associating with bosses is their dominance powers, not their prestigious advice.

For my third line of evidence, consider our differing preferences for short vs. long term mates. We are much more publicly associated with our long term mates, and so we naturally care more about what other people think of them. Their prestige will bleed over onto us. In contrast, short term mating is often done in secret. Thus we should care more about prestige in long term mates, and dominance in short term mates, even if we don’t admit this consciously.

For short term mates, humans seem to mainly care about physical attractiveness. This is in contrast to long term mates and non-sexual short term associates. Women also care about men having a deep voice, and if men are relatively attractive, women like them to show off luxury goods. Women may like creative intelligence in men, but while we can infer overall intelligence quickly and reliably from faces, that just doesn’t much influence how attractive they seem.

While there is a lot of complexity in mating preferences, and we still don’t understand it all, it seems to me that one important component is that for long term mates we more care about prestige features that are good for the group, but for short term mates, we care more about dominance features that are more directly useful to us personally. Physical attractiveness (and a deep voice) shows off capacities for violence and fertility, both of which are useful powers.

Overall intelligence can be good for the group, but for our ancestors it was much less useful to individuals. This may be part of why IQ matters more for national than individual income. We humans may have long known that smarts is good for our groups, and yet made it less of a priority in our selfish choices of associates.

Added 21Jan: The two kinds of status have different kinds of status moves. For example, you look directly at someone prestigious, but avoid looking directly at a dominator.

Added 22Jan: This can help explain why smart & sincere tend to go together.

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Presumed Selfish

Imagine that some person or organization is now a stranger, but you are considering forming a relation with them. Imagine further that they have one of two possible reputations: presumed selfish, or presumed pro-social. Assume also that the presumption about you is somewhere between these two extremes of selfish and pro-social.

In this situation you might think it obvious that you’d prefer to associate with the party that is presumed pro-social. After all, in this case social norms might push them to treat you nicer in many ways. However, there are other considerations. First, other forces, such as law and competition, might already push them to treat you pretty nicely. Second, social norms could also push you to treat them nicer, to a degree that law and competition might not push. And if you and they had a dispute, observers might be more tempted to blame you than them. Which could tempt them to demand more of you, knowing you’d fear an open dispute.

For example, consider which gas station you’d prefer, Selfish Sam’s or Nuns of Nantucket. If you buy gas from the nuns, social norms might push them to be less likely to sell you water instead of gas, and to offer you a lower price. But you might be pretty sure that laws already keep them from selling you water instead of gas, and their gas price visible from the road might already assure you of a low price. If you start buying gas from the nuns they might start to hit you up for donations to their convent. If you switched from them to another gas station they might suggest you are disloyal. You might have to dress and try to act extra nice there, such as by talking polite and not farting or dropping trash on the ground.

In contrast, if you buy gas from Selfish Sam’s, laws and competition could assure you that get the gas you wanted at a low price. And you could let yourself act selfish in your dealings with them. You could only buy gas when you felt like it, buy the type of gas best for you, and switch it all when convenient. You don’t have to dress or act especially nice when you are there, and you could buy a selfish snack if that was your mood. In any dispute between you and them most people are inclined to take your side, and that keeps Sam further in line.

This perspective helps make sense of some otherwise puzzling features of our world. First, we tend to presume that firms and bosses are selfish, and we often verbally criticize them for this (to others if not to their faces). Yet we are mostly comfortable relying on such firms for most of our goods and services, and on bosses for our jobs. There is little push to substitute non-profits who are more presumed to be pro-social. It seems we like the fact that most people will tend to take our side in a dispute with them, and we can feel more free to change suppliers and jobs when it seems convenient for us. Bosses are often criticized for disloyalty for firing an employee, while employees are less often criticized for disloyalty for quitting jobs.

Sometimes we feel especially vulnerable to being hurt by suppliers like doctors, hurt in ways that we fear law and competition won’t fix. In these cases we prefer such suppliers to have a stronger pro-social presumption, such as being bound by professional ethics and organized via non-profits. And we pay many prices for this, such as via acting nicer to them, avoiding disputes with them, and being reluctant to demand evaluations or to switch via competition. Similarly, the job of being a solider makes soldiers especially vulnerable to their bosses, and so soldier bosses are expected to be more pro-social.

As men tend to be presumed more selfish in our culture, this perspective also illuminates our male-female relations. Men commit more crime, women are favored in child custody disputes, and in dating men are more presumed to “only want one thing.” In he-said-she-said disputes, observers tend to believe the woman. Women tend more to initiate breakups, and find it easier to get trust-heavy jobs like nursing, teaching, and child-care, while men find it easier to get presumed-selfish jobs like investors and bosses. Female leaders are more easily criticized for selfish behavior, e.g., more easily seen as “bitchy”. Women tend to conform more, and to be punished more for nonconformity.

This all makes sense if men tend to feel more vulnerable to hidden betrayal by women, e.g. cuckoldry, while women can more use law and visible competition to keep men in line. In traditional gender roles, men more faced outsiders while women more faced inside the family. Thus men needed more to act “selfish” toward outsiders to help their families.

When those who are presumed selfish want to prove they are not selfish, they must sacrifice more to signal their pro-sociality. So men are expected to do more to signal devotion to women than vice versa. Conversely folks like doctors, teachers, or priests, who are presumed pro-social can often get away with actually acting quite selfishly, as long such choices are hard to document. Few with access to evidence are willing to directly challenge them.

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Against Prestige

My life has been, in part, a series of crusades. First I just wanted to understand as much as possible. Then I focused on big problems, wondering how to fix them. Digging deeper I was persuaded by economists: our key problems are institutional. Yes we can have lamentable preferences and cultures. But it is hard to find places to stand and levers to push to move these much, or even to understand the effects of changes. Institutions, in contrast, have specific details we can change, and economics can say which changes would help.

I learned that the world shows little interest in the institutional changes economists recommend, apparently because they just don’t believe us. So I focused on an uber institutional problem: what institutions can we use to decide together what to believe? A general solution to this problem might get us to believe economists, which could get us to adopt all the other economics solutions. Or to believe whomever happens to be right, when economists are wrong. I sought one ring to rule them all.

Of course it wasn’t obvious that a general solution exists, but amazingly I did find a pretty general one: prediction markets. And it was also pretty simple. But, alas, mostly illegal. So I pursued it. Trying to explain it, looking for everyone who had said something similar. Thinking and hearing of problems, and developing fixes. Testing it in the lab, and in the field. Spreading the word. I’ve been doing this for 28 years now. (Began at age 29.)

And I will keep at it. But I gotta admit it seems even harder to interest people in this one uber solution than in more specific solutions. Which leads me to think that most who favor specific solutions probably do so for reasons other than the ones economists give; they are happy to point to economist reasons when it supports them, and ignore economists otherwise. So in addition to pursuing this uber fix, I’ve been studying human behavior, trying to understand why we seem so disinterested.

Many economist solutions share a common feature: a focus on outcomes. This feature is shared by experiments, incentive contracts, track records, and prediction markets, and people show a surprising disinterest in all of them. And now I finally think I see a common cause: an ancient human habit of strong deference to the prestigious. As I recently explained, we want to affiliate with the prestigious, and feel that an overly skeptical attitude toward them taints this affiliation. So we tend to let the prestigious in each area X decide how to run area X, which they tend to arrange more to help them signal than to be useful. This happens in school, law, medicine, finance, research, and more.

So now I enter a new crusade: I am against prestige. I don’t yet know how, but I will seek ways to help people doubt and distrust the prestigious, so they can be more open to focusing on outcomes. Not to doubt that the prestigious are more impressive, but that letting them run the show produces good outcomes. I will be happy if other competent folks join me, though I’m not especially optimistic. Yet. Yet.

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Beware Prestige-Based Discretion

Before the modern world, most jobs had a big physical component. And so physical ability (strength, speed, stamina, coordination, etc.) was one of the main things people tried to show off. Yes, people did try to show off physical abilities on the job. But when people got serious about showing off, they created special off-the-job contests, such as races and games.

These special contests made it much easier for observers to see small ability differences. For example, you might watch messengers all day on the job running from place to place, and though you’d get a vague idea of which ones were faster, you couldn’t see fine differences very well. But a race controls for other variation by having contestants all start at the same time on a line, and all run straight to a finish line. So even if one runner beats another by only a fraction of a second, observers can still see the difference. Other kinds of special contests also reduce noise, making it easier to see smaller ability differences.

When people can choose between competition forums with more and less noise, signaling incentives will induce them to choose forums with less noise. After all, competitors who choose forums with more noise will be seen as trying to hide their lower abilities among the noise.

So if messengers who wanted to show off their running abilities had a lot of discretion about how messenger jobs were arranged, they’d try to make their jobs look a lot like races. Which would help them show off, but would be less effective at getting messages delivered. Which is why people who hire messengers need to pay attention to how fast messages get delivered, and not just to hiring the fastest runners. Just hiring the fastest runners and letting them decide how messages get delivered is a recipe for waste.

In the rest of society, however, we often both try to hire people who seem to show off the highest related abilities, and we let those most prestigious people have a lot of discretion in how the job is structured. For example, we let the most prestigious doctors tell us how medicine should be run, the most prestigious lawyers tells us how law should be run, the most prestigious finance professionals tell us how the financial system should work, and the most prestigious academics tell us how to run schools and research.

This can go very wrong! Imagine that we wanted research progress, and that we let the most prestigious researchers pick research topics and methods. To show off their abilities, they may pick topics and methods that most reduce the noise in estimating abilities. For example, they may pick mathematical methods, and topics that are well suited to such methods. And many of them may crowd around the same few topics, like runners at a race. These choices would succeed in helping the most able researchers to show that they are in fact the most able. But the actual research that results might not be very useful at producing research progress.

Of course if we don’t really care about research progress, or students learning, or medical effectiveness, etc., if what we mainly care about is just affiliating with the most impressive folks, well then all this isn’t much of a problem. But if we do care about these things, then unthinkingly presuming that the most prestigious people are the best to tell us how to do things, that can go very very wrong.

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Unauthorized Topics

Tyler posted:

Do I think Robin Hanson’s “Age of Em” actually will happen? A reader has been asking me this question, and my answer is…no! Don’t get me wrong, I still think it is a stimulating and wonderful book. .. But it is best not read as a predictive text, much as Robin might disagree with that assessment. Why not? I have three main reasons, all of which are a sort of punting, nonetheless on topics outside one’s areas of expertise deference is very often the correct response. Here goes: 1. I know a few people who have expertise in neuroscience, and they have never mentioned to me that things might turn out this way.

I titled my response Tyler Says Never Ems, but on twitter he objected:

“no reason to think it will happen” is best summary of my view, not “never will happen.”
…that was one polite way of saying I do not think the scientific consensus is with you on this issue…

I responded:

How does that translate into a probability?
You have to clarify the exact claim you have in mind before we can discuss what the scientific consensus says about it.

But all he would answer is:


Now at GMU econ we often have academics who visit for lunch and take the common academic stance of reluctance to state opinions which they can’t back up with academic evidence. Tyler is usually impatient with that, and pushes such visitors to make best estimates. Yet here it is Tyler who shows reluctance. I hypothesize that he is following this common principle:

One does not express serious opinions on topics not yet authorized by the proper prestigious people.

Once a topic has been authorized, then unless a topic has a moral coloring it is usually okay to express a wide range of opinions on it; it is even often expected that clever people will often take contrarian or complex positions, sometimes outside their areas of expertise. But unless the right serious people have authorized a topic, that topic remains “silly”, and can only be discussed in a silly mode.

Now sometimes a topic remains unauthorized because serious people think everything about it has a low probability. But there are many other causes for topics to be seen as silly. For example, sex was long seen as a topic serious people didn’t discuss, even though we were quite sure sex exists. And even though most everyone is pretty sure aliens must exist out there somewhere, aliens remain a relatively silly subject.

In the case of ems, I interpret Tyler above as noting that the people who seem to him the proper authorities have not yet authorized serious discussion of ems. That is what he means by pointing to experts, saying “no reason” and “scientific consensus,” and yet being unwilling to state a probability, or even clarify which claim he rejects, even though I argued a 1% chance is enough. It explains his initial emphasis on treating my book metaphorically. This is less about probabilities, and more about topic authorization.

Compare the topic of ems to the topic of super-intelligence, wherein a single hand-coded AI quickly improves itself so fast that it can take over the world. As this topic seems recently endorsed by Elon Musk, Bill Gates, and Steven Hawking, it is now seen more as an authorized topic. Even though, if you are inclined to be skeptical, we have far more reasons to doubt we will eventually know how to hand-code software as broadly smart as humans, or vastly better than the entire rest of the world put together at improving itself. Our reason for thinking ems eventually feasible is far more solid.

Yet I predict Tyler would more easily accept an invitation to write or speak on super-intelligence, compared to ems. And I conclude many readers see my book primarily as a bid to put ems on the list of serious topics, and they doubt enough proper prestigious people will endorse that bid. And yes, while if we could talk probabilities I think I have a pretty good case, even my list of prestigious book blurters probably aren’t enough. Until someone of the rank of Musk, Gates, or Hawking endorses it, my topic remains silly.

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Future Fears

People tend to act to help themselves. Sometimes that is good, and sometimes it is bad. We economists distinguish situations where such acts on net 1) help others, 2) hurt others less than they help oneself, and 3) hurt others more they help oneself. We see only type #3 acts as bad, and the others as good.

However, I’m coming to realize that most people actually use a different criteria; they care more about loyalty than efficiency. That is, they ask: are the acts subject to “our” prestige control? How well can “we”, by applying or changing our common notion of prestige, shame people to make them stop, or praise people to make them start?

We fear powerful people who feel free to defy us. When they can make big changes to the world, and put only minor weight on our prestige influence. We are afraid of this even when their actions have so far been of type #1, benefiting us. We fear that their inclination to be helpful could change after they accumulate enough power.

This is the standard attitude of foragers, as described by Boehm in Hierarchy in the Forest, where the main fear was individuals strong enough to defy the consensus of their local band. It is also echoed in the classic “illicit dominator” fictional villain. (A “dominator” needs only a source of power that can defy prestige.) In schoolyards, kids have long sought to ridicule nerds who submit to teachers, instead of joining other kids in resisting teacher dominance.

In the classic tv show Survivor, participants tended to vote off the island opponents strong enough to earn immunity from group votes, no matter what those people’s other virtues. Similarly, in office politics workers who feel productive enough to not need to make arbitrary displays of submission are often seen as “difficult”; putting them in their place becomes a priority.

In larger politics today, the main villains are powers who feel free to defy national or world culture’s regarding proper behavior. Criminals (and “terrorists”) and foreign powers, especially in war, obviously, but also one’s own government unless it uses democracy or something to show its submission to local prestige. In the past, when religion was stronger, churches demanded so much submission that they were vulnerable to being labelled illicit dominators. Politics has often been about gaining support for one power via seeing it as protecting us from other powers.

Today, our other main candidate for illicit dominators are for-profit firms. Bigness triggers forager suspicions all by itself, ordering employees about adds a vivid image of dominance, and a for-profit status declares the limited influence of prestige. So we are very suspicious of big organization choices, especially for-profits, and especially regarding employees. We want to regulate their prices and quality, and especially how they hire, fire, and promote. We mostly don’t trust competition between firms to induce them to benefit us; yeah that might work sometimes, but more direct control feels more reliable. (Even if it actually isn’t.)

All of this makes it pretty easy to predict our fears regarding the future. Foreign powers create the classic apocalyptic conflict, and criminals going wild is the classic post-apocalyptic fear. A foreign power winning over us is the classic alien war allegory. Governments being non-democratic, and acquiring new powers, describes most of the new young adult dystopias. Sometimes there’s a new church with too much power, defying reader prestige rankings.

But if you imagine religions, governments, and criminals not getting too far out of control, and a basically capitalist world, then your main future fears are probably going to be about for-profit firms, especially regarding how they treat workers. You’ll fear firms enslaving workers, or drugging them into submission, or just tricking them with ideology. In this way firms might make workers into hyper submissive “inhuman robots”, with no creativity, initiative, or leisure, possibly even no socializing, sex, music, or laughter, and maybe just maybe no consciousness at all.

And if you are one of the rare people who don’t even fear firms, because you see competition as disciplining them, well you can just fear technology itself being out of control. No one has been driving the technology train; tech mostly just appears and gets used when some find that in their interest, regardless of the opinions of larger communities of prestige. One can fear that this sort of competition and tech driven change will be the force that makes human workers into “inhuman robots.” Making you eager for a world government (or a super-intelligence) to take control of tech change.

This framework seems to successfully predict the main future fears raised early in the industrial revolution. And also the main concerns about the scenario of my book. Of course the fact that we may be primed to have such concerns, regardless of their actual relevance, doesn’t make them wrong. But it does mean we should look at them carefully.

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