Wednesday, 31 December 2014

The Migrants in the Port of Gallipoli

The news recently has contained reports from two distressed ships in the Adriatic and Ionian Seas. The burning one, and the one containing refugees, illegal immigrants, that was tugged to the port of Gallipoli in Southern Italy early on New Year's Eve (Newsweek's report). Apparently, smugglers of people often abandon ship if they fear an inspection by the authorities will cause them to be found out.
I would imagine that events such as these cause other "human traffickers" to be reminded of the risks involved in their trade and therefore to think twice before trying to carry more immigrants to Europe (or anywhere), and that is too bad. The people being smuggled evidently desire to come to Europe. The smugglers, at a price, are willing to take the legal risk to get them there. The evidence as far as I can judge suggests that the people of the recipient countries are mostly better off by the influx of others. What stands in the way for immigrants is typically nothing more than some silly legislation.
The reports from this particular incident mention a spokesman for the Italian Coastguard saying that a "disaster" was averted as the abandoned cargo ship could be safely tugged into port. While I am not clear on exactly why the ship was abandoned, it would seem that, in similar episodes, disaster could also be averted if the authorities simply stopped inspecting cargo ships in the first place. Then the people smugglers would lack one reason to abandon ship and smuggling would be safer. This would cause the prices which illegal immigrants have to pay to fall, and more people to get what they want.
The Yad Vashem Holocaust Memorial in Jerusalem intends to list the many individuals who helped the Jews escape the terrible fate which the Nazis wanted for them. The so-called "human traffickers" who carry illegal immigrants to better places are not in general nearly as righteous as the ones listed in Jerusalem; they resist legislation preventing free movement of people rather than the outright killing or enslavement of them, and their motives are pecuniary (morally neutral) rather than humanitarian, but in terms of what their actions ultimately accomplish they deserve far more honour than do the ones wishing to put a stop to their trade and prevent people from peacefully crossing borders.

No news report I have seen mentions what will happen to the individuals whose risky journey to Europe is now at an end, though I guess it will be some kind of lengthy internment at first, followed by the granting of asylum at best or deportation at worst. I hope they can somehow have a better new year than that.

Thursday, 25 December 2014

Mortality in a Multiverse

This is more speculative than usual, even for me, but when I was little, I remember thinking at one point that one's consciousness could not handle death at all, with the result that one does not experience death but instead lives on, if only in one's mind (I don't remember, but I think this happened after the death of my grand-mother when I was about six years old - I most likely have cleaned up my thinking a bit). Sort of like what happens in William Golding's wonderful book Pincher Martin.
Anyway, I believe it was Richard Feynman who expressed the thought that the universe bifurcates whenever something can go more than one way (a decision or a quantum event, say). A multiverse might then contain all the potential bifurcations. Combine this with the above, and the result is that people die in some universes but not in others. The interesting but apparently unfalsifiable thing about this is the potential that no-one really dies in the sense of ceasing to experience things, since one's consciousness lives on in a different universe.

I don't believe this is true, though I suppose I could believe it. The thing that makes it unbelievable to me is that the idea is beyond the ordinary and that there seems to be no really good reason to believe it. But many things beyond the ordinary may turn out to be true, or have turned out to be true, and even though there is no good reason to believe in it, there may also be no good reason to doubt it. So it would not take much prodding for me to believe in the out-there idea expressed above. Only, prodding in the realm of metaphysics is not something that happens a lot, so I will likely continue not to believe in the above.

If one is suffering from some incurable disease or commits suicide, it may be hard to imagine that one will live on in one of many universes, though maybe that problem could be solved somehow (cures could be discovered in some universes, perhaps, or someone could walk in on the person about to kill himself just in time?). Others could die, of course, just not oneself.

So, how far could this idea be stretched? Could it be that no-one ever really dies? This would be a big stretch. Although hardly anyone lives much beyond a hundred years, there would basically have to be one person (oneself) who is as old as humanity, which seems completely absurd (though not disprovable!). But maybe everyone gets to be really old. If so, healthy living is pretty good, because there are more universes in which one stays alive and remains healthy, in contrast to what happens if one leads the opposite kind of life, though great risk would have a built-in insurance against the worst kinds of risk.

These are just some silly thoughts, but on the subject of death one can perhaps afford to be more speculative than usual. With that said, I wish to say sorry for my infrequent blogging, which has been due to academic work, travelling, and Christmas. It may take me some time to get back on track. Have a Merry Christmas in the meantime!

Tuesday, 2 December 2014

Still Sorely Missed

Today would have been the 84th birthday of Professor Gary Becker, possibly the greatest social scientist who ever lived. He passed away in May, but still I cannot quite believe it. When I was at Chicago, I think only Ronald Coase and Robert Fogel were older than he, yet he was in many ways among the youngest of the participants in the many seminars in which I saw him, always curious and excited to learn new things and making pertinent comments and asking important questions.

Anyway, I talk about this because I notice the Becker-Friedman Institute at Chicago have released a number of videos from their recent conference in honour of my favourite teacher. There are also tributes of the written variety; this one really captures his love for his family, something I often heard of but that is frequently forgotten amidst his magnificent professional contributions. I also like the bit where his daughter said “He taught us how important it is to love your work. He showed what it is to work 16-hour days but but say, ‘I never worked a day in my life.’” My own very best "work" days are exactly like that. Professor Becker was an example for the rest of us to follow in so very many ways. Do give the links a gander.

Saturday, 15 November 2014

How to Circumvent the Minimum Wage (Maybe)

Would it make a difference if the government were to command employers to pay nothing or more to their employees, as compared to a situation when the government did not order anyone about? The former might be annoying; akin to someone telling you over lunch not to stick your fork in the eye and turn (and threatening punishment if you do anyway), but aside from the nuisance of useless advice, maybe there would be no effect?

Perhaps somebody were prepared to pay for the "privilege" of working for someone else. Then the government's command would destroy a valuable opportunity. But the fact that a person is willing to pay to work somewhere indicates to me that it is really the "employer" who provides the service. Thus, the roles are reversed: employer is now employee and employee is employer, as "the present now will later be past, for the times they are a-changin'". Problem solved.

Which leads me to wonder, why do not prospective employees who would like to be working for the minimum wage but cannot because their work is not valuable enough simply hire their employers? The employers would do some sinecure such as guarding a wristwatch. This is easily done, since they might just carry it around, looking at it occasionally, say when wondering what time it is. The wage would be the minimum one and the wage paid to the previously unemployed fellow would be the minimum wage plus what little money his labour is worth. He is paid on net an amount less than the minimum wage.

A concrete example: suppose the minimum wage is $5.00. The worker's labour is valued at $3.50, so he hires his boss at the minimum wage to carry a watch around. The boss hires the worker at a wage of $8.50 to do some proper work. On net, the boss pays the worker $3.50 and it is all legal (and perfectly morally acceptable - if not why not?).

I am ignorant, but I hope to better myself by asking questions. So, is there a law against this or what is the reason these relationships do not exist? Maybe there are fixed costs to hiring someone, or maybe the additional income to the employer working for the minimum wage would be taxed fairly steeply, but then the otherwise unemployed could settle for less instead. If the transaction costs are too great, why not outsource the matching process to a third party that hires the employers on behalf of the workers, paying them the minimum wage ($5.00), and hires the workers on behalf of the employers, paying them $8.50. Such a middle-man could charge $5.01 and $8.51, respectively, for its services.

As far as I can tell, the data on who makes minimum wages show no wristwatch-carrying employers, so I am pretty sure this way of circumventing minimum wage legislation is not legion. But if even I can think of ways to get around idiotic price floors, then others should have developed much more sophisticated techniques. Maybe this is part of the reason why researchers ever and anon fail to find disemployment effects of increases in the minimum wage.

Thursday, 13 November 2014

The Problem with Deserts

Many parents are sometimes heard to tell their children how great they are and how they are worthy of the world. If there are many such children, and if their parents are correct in their estimation, the total quantity of things that are deserved is surely greater than the total quantity of things that exist.

On the other hand, some people like to speculate on how many things we do have root causes in stuff others have done before, which in turn have root causes in still more distant deeds, and so on. On this view, perhaps nobody really deserves anything? If so, there is too much stuff to go round in this world.

How do desert-based theories of distribution deal with this issue? Surely it would be a remarkable coincidence if at any instance the quantity of stuff in the world exactly equalled the quantity of stuff that was deserved by its inhabitants. Ill-gotten things may (should?) be burnt, and if people do not get what they deserve it seems that adherents of desert-based theories should be really anxious to figure out how to get stuff to those who ought to have more.

If one thinks desert is morally important, it seems that one should do all one can to get it aligned with outcomes. One should support policies of constant fine-tuning and privately do what one can to accomplish the same agenda. If one deserves a lot, this may involve stealing from those who deserve less. Of course, one must also find out just what a just desert is.

One way out of some of these problems for desert-based theories of distribution is to argue that what one deserves is a fraction of total stuff. But then one's moral worth would be raised as that of everyone else falls, even if one doesn't do anything. So if one happened to live among Hinckleys, Dillingers and Sons of Sam rather than among saints and angels, one should get more of all the stuff there is. Surely that cannot be.

Another way out of the problem, of course, is to abandon theories of just deserts. Given the problems with it, this would probably be for the best.

Wednesday, 12 November 2014

Gordon Tullock on the Economics of Slavery

Gordon Tullock was a phenomenally precise and well-articulated economist. Since his untimely passing I have spent a few idle hours perusing some of his lesser-known works. A review of two books entitles 'The Economics of Slavery' is a true gem and showcases his excellent grasp of history. Tullock offers commentary on the phenomenon known as manumission, which should strike any slave-based society as the slaves themselves are apt to know better how to take care of themselves and how to work productively than are the slaveholders. Thus, slaves should rent themselves and work where their talents are used best, paying some fraction of their wages to the slaveholder and keeping the rest. Eventually, they might be able to buy themselves. Why was this not common practice?

Quoth Tullock (p. 11):
"The basic reason for the failure of this type of “sale” of the slave to himself in the guise of manumission to develop in the ante-bellum South would appear to be the stringent and steadily growing legal restrictions on manumission. There was also considerable social pressure against manumission, and in the last years before the Civil War a reaction to abolitionist propaganda developed into strong arguments that slavery was somehow a superior form of civilization. The explanation for these developments is fairly simple. The individual slaveholder would have been better off if he could have made a deal with his slaves to sell them their freedom, Large numbers of free negroes, however, would have endangered the “property rights” of the slaveholders in those that were still fully or partially owned. Thus the slaveholders had a motive collectively to favor laws against manumission in spite of the fact that each one would have benefitedfrom permission to manumit his own slave if he were the only one given such permission. The long run outcome of this tension between the individual and collective interests of the slave owners cannot now be known. From 1806 when importation of slaves was forbidden to 1860 was only 54 years, or considerably less than the threescore years and ten which the Bible gives as a normal life span. In economic terms this was not long enough to bring the system even near to full equilibrium. If we add on the numerous sociological factors, adjustment would have been even more delayed. Thus the possibility that slavery would have eliminated itself remains an open one."

 As they say, "read the whole thing". In fact, why not read all of his things.

Saturday, 8 November 2014

Carl Sagan at 80

Tomorrow, on the 9th of November, Carl Sagan would have celebrated his birthday were he still alive. This year would have marked the 80th anniversary of his birth. 80 is not the ripe old age it used to be anymore, so it is really sad that a rare disease took him away about 18 years ago.

He and I would have disagreed on many social policies (but not all of them; I am also in favour of the legalization of drugs as well as of cutting the amount of money spent on the military). In his otherwise truly wonderful book Cosmos, he states his opinion that a nation is more advanced the higher the fraction of its GDP is spent on public libraries. Upon the realization that the government could tax to the maximum and spend all the proceeds on public libraries, this seems like a pretty bizarre view (although it has the advantage of radically downsizing the many wasteful government programmes!).

But disagreement is no reason to hold another person in any less high regard. Besides, Carl Sagan had many - one might say "billions and billions", which, unlike popular belief, was not an expression he was in the habit of using - other terrific qualities, many of which he used to convey science and the scientific method to those of us not working in Departments of Astrophysics. Certainly a part of my appreciation of our astonishing universe I owe Carl Sagan. One of my favourite remembrances from Cosmos the TV series is when he discusses the people of "Flatland", where everything extends forwards and backwards, left and right, but not up and down; where everything is absolutely flat.

Imagine the things the Flatlanders would see were one to pick them up away from their quotidian plane. I find it a wonderful depiction of both what it might be like to experience an additional dimension and of how one might observe a two-dimensional world without them looking back. The people of Flatland ought to be a lot more self-conscious - and perhaps we too, in case of watchers from higher dimensions that we cannot perceive!

Carl Sagan had a great knack for finding the right words for just about anything he wished to say. One might even say that much of his work is poetic, although one must take care not to let this imply that it lacks other qualities. He had this knack because he really knew his subject; for so many others, possessing less engaging personalities and less varied vocabularies and all-round educations, his phrasings would have made them seem like they were aiming too high: But for Sagan they were apposite. His use of similes is impressive in its ability to inspire - who can forget that "we live on the shores of the cosmic ocean"?

Another thing which contributed to his ability to inspire is his genuine sense of wonder at the world around us. I reckon this, coupled with a keen perception of its structure and mechanics, probably made his sole attempt at fiction, the book Contact (dealing with signals being received from the skies), such a great achievement. The fiction here plays second fiddle to the facts, but where the facts are unknown, the fiction, centring on what might be possible, fills in to convey what I suppose must be some of his passion for science. A romantic view, surely, but a real one nonetheless.

The best way of celebrating the life of Carl Sagan on this 80th anniversary of his birth would be to, say, gather some evidence to inform an idea or learn something one did not know before; celebrate the triumph of the physical world, our vicinity of which is the product of stars which burnt out thousand of millions of years ago, by finding out still more about it. I am one of those people supposed to be dedicated to science and the discovery of Truth (and I guess I really am), so for me, finding any specific way of celebrating his life is not so easy. Maybe I will have to settle for (re-)reading one of his books. At any rate, Carl Sagan's was a life well lived. He continues to be missed.

Wednesday, 5 November 2014

Gordon Tullock

Today I was reached by the incredibly sad news that Gordon Tullock passed away on Monday, 3rd November, at age 92. These past few years have seen the demise of many of my great heroes, among whom Alchian, Becker, Coase, and now Tullock, stand out. What a dismal endeavour to go through the list in any detail. I never got to meet him, but the stories I hear all tell of an amazing character. Case in point: visited by what may have been the Governor of Virginia (if I recall the story correctly), then GMU Professor Tullock, always forthright, said to him: "So you're from the government? Very good. Then maybe you can do something about the leak in my ceiling". Actually these were also among the last words spoken between them.

Gordon Tullock is of course best known for his work on Public Choice and he was the founding editor of the eponymous journal, but his interests and articles showcase an astonishing breadth and depth of thought. He even had a publication in the Journal of Theoretical Biology. He wrote extensively on history and it is a great understatement to say that he was very well read. One article of his is 'An Economic Theory of Military Tactics', joint work with Geoffrey Brennan, in which they analyse the general's problem of getting the soldiers not to run away from battle. I have blogged about that article before, and several times about the late legend.

Tullock had a few paradoxes to his name. One, a wee note called 'The Purchase of Politicians' in the Western Economic Journal (now Economic Inquiry), says that political favours are bought for much less money than they reward, a phenomenon known as the Tullock Paradox which as far as I can tell lacks a satisfactory explanation. A better-known paradox of his is, of course, that of revolution: The individual faces great risk from participating in a protest against a tyrant, who might order the firing squads on the protestors, and the benefit he receives from doing so are hardly greater than what he would have got if he hadn't taken part in the protests.

With Tullock's passing, the world also loses a refreshing observation on the lack of necessity of formal training to be educated. Tullock never obtained a PhD in Economics even though he was surely among the two or three greatest economists to have been alive for over 40 years of Nobel Prize announcements and never received one - and a far greater recipient than many a Laureate. Tullock held a JD from the University of Chicago and only took one economics course for that degree. His works are rigorous without the formulae, which he would refer to as "ornamental mathematics". It is a tremendous loss to economic science that his example is no longer among us.

Of the tributes which I have seen, I particularly like the one by Professor David Friedman. Mine cannot compete, but I humbly add it to the pile, along with a piece of evidence as to how much Gordon Tullock has influenced my own thinking: I still do not know how yesterday's American election turned out. That will change soon enough with the number of interactions I have with others, but if it were not for them, I probably would not find out until I accidentally saw the headline on the news or maybe encountered it as part of some data crunching for a project.

We have lost a great economist and a remarkable character.

Thursday, 30 October 2014

Is Fighting Our Only Recourse?

Milton Friedman and many others have expressed the belief that if all the facts are known, the economist's recommendation (for particular policy or other course of action) is beyond dispute by other economists. I believe Friedman made this statement in a footnote in his highly influential essay on Positive Economics from 1953, and I know he has made similar statements on other occasions. It expresses the Popperian view that empirical observation has the power to reject any scientific theory and Friedman also used this idea to criticize, for instance, the Austrian fixation (most prominently defended by Ludwig von Mises) that economics is an à priori science and that economic facts are reachable only through logic and not through observation.

If neither Austrian (or other disbeliever in the power of observation) party to an intellectual dispute abandons his logic in favour of that of the other fellow, Friedman says that they can only fight (he used this word a number of times). By contrast, if people who believe in the power of observation argue with one another, one can say to the other: "tell me which phenomena you expect not to observe if you are right and I will do likewise". Certainly the latter scenario is more appealing.

I am a great fan of Milton Friedman and he is one of my very favourite economists ever. On this issue, I am sceptical that he was right, however. Now I do not believe he actually meant a proper fight (as in fist fight or other nasty business) in case of disagreement. That belief would have been absurd, since metaphysical questions are not resolved by observation and philosophers engaged in metaphysics do not - to the best of my knowledge - normally engage in fights. Rather, what Friedman must have meant was a "fight" as in an unproductive dispute in which one cannot really gain any ground.

But I do not believe this is really true. Take the issue of free will, for instance. This is a metaphysical issue and believers such as myself can only offer very far-fetched scenarios in which empirical observation would inform the issue, but thinking about it can advance the argument and has done so in the past. I believe it was C. S. Lewis who made the argument that determinism (lack of free will) implies skepticism (and must therefore be false), since if I have no free will, any views I hold are mere products of chemicals interacting in my brain, which epistemically offer no support for my belief in anything. Certainly the case for free will would be weaker today were it not from this contribution, due entirely to logic.

Now Milton Friedman would have been right to argue that this has not settled the argument on free will, but I think it is fair to say that the fact that we can at least advance the debate through means of pure logic does indicate that empirical observation is not absolutely required, though it does of course help a great deal. One could also, of course, ask what empirical evidence there is to support the view that theories falsifiable on grounds of observation are better than are theories which are not falsifiable on empirical grounds. In other words, what observation would reject the idea that observation is epistemically sound basis for rejecting ideas?

The idea that there are moral facts is another reason to be sceptical of the idea that disagreements vanish as empirical facts become known. For instance, if it were made quite clear that immigration restrictions are absolutely required to maximize (let's say global) welfare, I still would not be a fan of them because I believe they infringe upon moral rights. Alternatively, if it were made quite clear to me that I should sentence an innocent Negro to death because otherwise the bigoted people of some town will rebel and cause death and destruction, I still would not kill the Negro. I take moral rights seriously because I believe there are moral facts, of which moral rights form an integral part. Can I prove this? No, but I can offer reasons to think that there are moral facts out there which depend on things other than well-being. If moral facts are facts of the same epistemic status as empirical facts, then maybe they ought to take precedence as guides for action?

I don't want to sound like I reject the power of observation. I absolutely do not. My point in this blog post is merely to defend facts not readily observed empirically, and to highlight the possibility of using logic to advance one's understanding of them.

Tuesday, 21 October 2014

What Is Equality of Opportunity?

I have asked before what reasons there are to be worried about economic inequality, highlighting some plausible candidates and rejecting them all. Now Fed Chair Janet Yellen disappoints by lamenting growing inequality while apparently offering no shred of argument for why it would be a deplorable thing. Consider in which society you would rather live if societies consisted of five groups with income levels as follows:
Group 1: £1,000 in Society A; £1,000 in Society B;
Group 2: £1,100 in Society A; £2,000 in Society B;
Group 3: £1,250 in Society A; £3,000 in Society B;
Group 4: £1,350 in Society A; £4,500 in Society B;
Group 5: £1,400 in Society A; £8,000 in Society B.
Purchasing power is the same for every pound across societies. Inequality is palpably greater in society B, but who would not want to live there? I believe this sufficiently proves that inequality is a non-issue to sensible individuals (except to Yellen, Stiglitz, Krugman, Piketty, and other sensible individuals, whose repeated 'warnings' that it is a scourge of our times I cannot fathom). If high incomes were earned by crooks, that would be a problem with crime, not inequality; if low incomes were "too" low, that would be a problem with poverty, not inequality. I am bound to record my impression that a great deal of the concern with inequality is really a begrudging of high incomes going to top talent.

Professor Yellen says:
"It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation's history, among them the high value Americans have traditionally placed on equality of opportunity."
If those at the top are not getting richer at the expense of those not at the top, I fail to see the problem. To her credit, Professor Yellen continues by discussing the issue of change at "the top"; the fact that members of, say, the "one per cent"  come and go and are apt not to be the same every year. She is dissatisfied with the rate of change between generations, however, and highlights the now famous 'Great Gatsby Curve', the finding that:
"...among advanced economies, greater income inequality is associated with diminished intergenerational mobility. In such circumstances, society faces difficult questions of how best to fairly and justly promote equal opportunity."
Forget for the moment the fact that "society" cannot "face" any questions, easy or difficult (only individuals can do that), and ask what intergenerational turnover would be compatible with equality of opportunity.

If one in ten (or a hundred, or whatever) children from the bottom percentile of families climbed to the top percentile over the course of a lifetime, would that be evidence in favour of, or against, equality of opportunity? Suppose turnover were complete, so that every child would be in every percentile at some stage of his life. Would that, on the other hand, be evidence in favour of, or against, equality of opportunity?

As far as I know, the common measure of equality of opportunity is the intergenerational elasticity of income, obtained, for instance, by looking at covariation between the natural logarithm of an individual's permanent income and that of his parent(s). If the correlation is zero, there is no statistically consistent relationship between incomes at different generations of the same family. Negative values mean higher (lower) family earnings depress (increase) those of offspring, and positive values mean that family and offspring earnings move in the same direction.

I submit the proposition that this is a pretty bad measure of intergenerational mobility. Why? Because it looks at average outcomes rather than choice sets. Who cares if rich (poor) families remain rich (poor) generation after generation as long as everyone has the opportunity to do things differently than did mum and dad? The fact that some fraction of family income influences adult income says something about the choices made by individuals as the grow up, but we cannot really say anything about what choices were available during that selfsame time.

Everything intergenerational is also a two-way street. There is what the children do and then there is what the parents do. If wealthy parents buy annuities for their children, that will influence the intergenerational elasticity of income in a positive direction. If parents run a business that is passed on to their children, that does the same thing. A zero elasticity of income between generations would indicate to me that something is blocking parents from doing what they want. A high intergenerational elasticity of income would suggest to me that mobility is possible but does not happen as often as it would if the measure were lower. It is, of course, possible that even an elasticity of one is "just" in the sense that it violates nobody's rights. I find it very difficult to say at which point between zero and "high" one might find the "ideal".

Alan B. Krueger, who coined the term 'the Great Gatsby Curve' (incidentally an odd name, given that Jay Gatsby was initially but a poor bootlegger in F. Scott Fitzgerald's great novel, though I suppose Professor Krueger's term is not too bad if one thinks of some of the novel's other characters), said in a concomitant talk that "equality of opportunity should be a nonpartisan issue", but if one gets to define equality of opportunity as always rising with intergenerational mobility, one has in fact made rather a partisan definition. There is probably too much focus on intergenerational mobility. Perhaps it would be better if one simply noted that the progress at the top has not come at the expense of those at the bottom and contented oneself with the justice of a procedure that violates nobody's rights.

PS. This was my 100th blog post. As Groucho Marx Said, "Time flies like an arrow. Fruit flies like a banana".

Sunday, 19 October 2014

What to Do if Enemies Are Mapping out a Country for Conquest?

Recent activities in the Stockholm archipelago, coupled with prior infringements of Finnish air space and of course the unruliness in the Ukraine, have sent people wondering what the best response is if Russia might be aggressive towards its neighbours. The best response for leaders may well be to spruce up their countries' militaries, because if they are taken over these people will lose their positions of power.

I am not saying there is any risk of a Russian invasion of any parts of Scandinavia. These activities were observed during the Cold War as well and of course no invasion took place then. Rather, entering the waters and air spaces of other countries might serve to extract benefits by bullying other countries into concessions. Still, the political leadership in Scandinavia may well benefit from increased military preparedness, so as not to appear too weak while making such concessions.

For the citizens, however, the best response depends, as I have said before, on the likely changes in policy which come from a more aggressive Russia, and in the limit on the likely policy changes which come from Moscow Rule. It is not obvious to me that these changes are big enough to justify increased outlays on weapons and on training people to commit murder. It might be that the bulk of the citizenry actually favour more of this kind, but the bulk of the citizenry lack incentives to make informed judgements, so that would not be strong evidence in any direction.

Case in point: Finland used to be a part of Russia from its war with Sweden of 1808-1809 until 1917. For over a century, it would seem to me that Finland was not very "russified". Finland held autonomous status as a Grand Duchy during all of this time and as far as I know, most of, if not the only Russian spoken in Finland today is by the numerous Russian tourists coming in to see Helsinki or other pleasant places. I also believe that Finland could set its own rules regarding a great deal of foreign trade as well as taxation and many regulations, but I am no expert so don't quote me here. At least culturally, Finland today is Scandinavian and apart from the beautiful Uspenski Cathedral and some other buildings not Russian in the slightest, so the status as a Grand Duchy must have meant something substantial.

The situation with a more aggressive Russia is very unfortunate, but my impression is that it would be far less unfortunate if the outside world responded as one does when stumbling upon an angry wasp: Do not move, especially not suddenly. Alas, this is not what has happened with sanctions and condemnations taking up much space in the newspapers. Neither Finland nor Sweden is a member of NATO, but it would not surprise me if this were to change given how things are going.

I don't know, but I reckon it would be a lot harder for anyone to kill another person knowing he was committed to non-resistance. It seems to me that nonviolence has its appeal from the fact that it is rare indeed for it to lead to the death of its practitioners by slaughter of their adversaries, so maybe there would be less death and destruction if countries gave this strategy a try?

Wednesday, 15 October 2014

National Defence as a Public Bad

In textbook treatments of price theory and of public economics, one invariably sees national defence cited as an example of a public good. But how useful national defence is surely depends upon the expected change in policy if a foreign power took over. If this change is for the better, then clearly national defence is only an impediment to amelioration; if the change is for the worse, the utility of national defence would depend upon how much worse and compare that magnitude to the costs. If the change is neutral, national defence is again a public bad.

One could argue that citizens want a national defence and so their preference for it makes it a public good. But why should citizens qua citizens know what is good for them? Facing virtually no chance of their opinion being pivotal to any national decision, they can indulge in whatever idiocy they want. I do not normally like the distinction behavioural economists make between decision utility and experienced utility, but it seems serviceable in this case. If citizens want national defence, that is just their decision utility talking, but in actual fact it could be that they are throwing money away. Maybe it is a purely normative issue, but it seems to me to be just as normative to refer to something with such ambiguous effects as a public good.

If one goes along and takes the right name to depend upon whether national defence safeguards against changes for the worse or just keep things bad, it would seem to me that national defence is to be referred to as a public bad in the countries which pursue the most horrendous policies (certainly it would seem a normative point to give a name like "public good" to racist polcies such as the nuking of areas containing people of a certain skin colour, wanted by racists). I have made the case before that policy may not actually improve from outsiders invading such countries, but of course if policy is about the same the war was wasteful and so national defence was a bad idea.

With no spending on the military in the countries pursuing the worst policies, the countries pursuing the second-worst policies face no threat of invasion from countries with worse policies anymore. Again, maybe invasions by countries with better policies would not actually result in improvements, but if things do not change appreciably it would seem that these countries also waste resources now by spending them on national defence.

In this way, we regress to a situation in which no country spends anything on national defence. This is an equilibrium because no country now has any incentive to spend money on protection, though the people in the countries pursuing the most horrendous policy arguably still have an incentive to change things somehow - just not by getting invaded. The operative assumption here is that countries which are invaded suffer only if policy is changed for the worse (otherwise why resist?) and that the risk that this happens goes away if the invading country is one pursuing better policy.

In equilibrium, national defence is a public bad. Outwith equilibrium there may be a point to it in countries with good policies at risk of invasion by countries with bad policies (though there are problems with this view, too), but still many countries today do not face any serious risk of that happening (e.g. Switzerland, New Zealand, Canada). If the language of economics textbooks took steps to approach value neutrality by calling national defence, say, a "public-bad-or-good(-but-probably-bad)", my guess is there would be no less national defence anywhere. It would be better language, though, and reflect better thinking. That's something.

Tuesday, 14 October 2014

Charles Tiebout at 90

It escaped my notice that the man behind the Tiebout Model (short for "feet voting"), Charles M. Tiebout, would have turned 90 on Sunday last week had he had as long a life as his insights deserved. Alas, he died suddenly, in his 40's, in 1968, but I belatedly celebrate his memory with a blog post on the Tiebout Model, his most famous brain-child.

The Tiebout model says that perfect competition between local political jurisdictions ensures an efficient supply of public goods. Perfect competition here means that there are no costs of migration, so that if Town A has better street lights but a higher sales tax than Town B, those who do not mind paying more for their purchases while having more ample light on the streets move to Town A and the rest move to Town B.

Obviously perfect competition is unlikely to hold, but the essence of the Tiebout Model is hard to escape when looking around oneself. If a local community decides to tax high-income earners at a higher rate than low-income earners, it will quickly lose most of the former. This is not necessarily so if this is done at the country level where movement costs are greater (compare moving abroad to moving to the neighbouring municipality). This implication of the Tiebout Model is evident in the fact that the world looks pretty much like what Tiebout predicted. Local governments have little to offer high-income persons by way of services, so cannot really tax them as much as can nations.

Chances are that most readers of this blog post, if they have ever moved house, have based some part of their decision on the tax-services bundles available in their destinations under consideration. If so, they act according to the Tiebout Model, works in several other ways, too, including if local governments engage in the production of private goods, such as schooling: In a celebrated paper (gated) from the year 2000, Stanford Economist Caroline Hoxby shows that competition among public schools benefit school quality as judged by available measures and Professor Hoxby's ingenuity. This adds a great deal of relevance to the Tiebout Model since pure public goods are few and far between.

There are ways of attacking the Tiebout Model, of course. For instance, one could belabour its assumption of perfect mobility, which does not hold for land and buildings. However, this critique is only partially successful, because the value of such stationary objects depends on the quality of human genius that tries to make something out of it. If land is taxed a lot by one local government, it is apt not to be as well developed as the land in the neighbouring jurisdiction in which it is lightly taxed.

EconLog blogger and GMU Economics Professor Bryan Caplan, whose judgement I respect immensely, has challenged the Tiebout Model on the grounds that it really deals with non-profit competition, which fails to provide the necessary incentives for the Tiebout Model to hold:
"If a business owner figures out how to produce the same good at a lower cost, he pockets all of the savings.  If the CEO of a publicly-held corporation figures out how to produce the same good at a lower cost, he pockets a lot of the savings.  But if the mayor of a city figures out how to deliver the same government services for lower taxes, he pockets none of the savings.  That's how non-profits "work.""
I find his critique unconvincing. Armen Alchian pointed out in his classic paper 'Uncertainty, Evolution, and Economic Theory', that whatever an actor does will result in an enhancement or a reduction in his capacity to survive. Thus, if firms choose strategies randomly, those that come closest to maximizing profits survive and the others are successively eliminated, so that it looks like firms maximize profits in the end. Similarly, local governments may behave randomly and those who offer "good" tax-services packages will gain population at the expense of others.

There would have to be different incentives to behave "badly" for Tiebout competition not to work, but I don't see them. Probably failing local governments would attempt to learn from thriving ones. I am also unsure whether non-profit competition really is applicable to this case since politicians could be crooked (and probably frequently are) and thereby extract some tax theft from the population, which seems to give them an incentive to increase the tax base.

So to me, the Tiebout Model looks like it is holding up very well. Tiebout thought of it as a graduate student and had it published in 1956, so his brain-child would be 58 years old this year. Every parent should live to see his children, including brain-children, reach that age. It is a tragedy that Tiebout did not. I hope it gave him great satisfaction to imagine how economists and otherwise interested individuals might continue to experience many hours of deep spiritual joy from his work long after his demise which proved so untimely. I know he would not have been wrong.

Sunday, 12 October 2014

Another Nobel Post

If the Peace Prize has gone rather awry, my impression is that the other prizes hold up pretty well to the standards which say that excellence in their respective fields should be rewarded. There are, of course, a number of economists to whom I would not have given the Prize, and others who have died without winning what would have been a well-deserved one (e.g. Armen Alchian and Albert O. Hirschman), but no winner as far as I can recall has a really bad case and certainly no-one has caused the field to regress in the way some winners of the Peace Prize have.

Tomorrow the Economics Prize is awarded. I have never made an accurate prediction, but if I keep making them maybe some day I'll be lucky. In years in which so-called "microeconomics" may be rewarded, I usually stick to a team of maybe five economists and pick one or a few of them. Prominent members of this team have been the aforementioned Alchian and Hirschman, and otherwise Gordon Tullock, Richard Posner, Anne Krueger and Sam Peltzman. Consequently, for my prediction to be accurate, the prize this year must reward applications of economic science to Political Economy and rent-seeking. The prize cannot, I believe, be shared by more than three people, so my guess would be that either Tullock, alone or with Peltzman, will be the winner(s), or that Tullock shares it with both Posner and Krueger.

Tullock, of course, ought to have won the prize already in the 1980's with James Buchanan but that was not to be. I am not sure of this is accurate or not, but several people have told me that Tullock vomited when finding out about his exclusion from the prize. And why not? A great deal of Buchanan's best work was joint with Tullock. Anyway, now my prediction is official. If accurate, my foresight will be remarked upon. If inaccurate, everyone will forget the prediction very quickly.

There are of course many other deserving candidates. Tomorrow we'll whom the Riksbank pick.

Friday, 10 October 2014

Good Intentions Are Overrated

There is a lot of talk about this year's joint winner of the Nobel Peace Prize, Ms. Malala Yousafzai, but amidst all of it, I cannot find any information about what she has actually done. My ignorance is as deep and vast as the ocean, so maybe she actually has real accomplishments, but what appears to be normally mentioned as her main feats are talks and writings which advocate more education for girls in Pakistan and elsewhere. Now there is nothing wrong with any of this (maybe education is overrated and so she proposes bad policy, but she has the right to do that as far as I'm concerned), but I do not see why it should be worth £860,000 or $1.4 million (then again, the error-prone gentlemen in Oslo have, as far as I know, not violated anyone's rights by awarding the Prize to a great many feeble choices, so I guess that would make it OK).

Yet, awards like this devalue peace. Ms. Yousafzai wants to be a politician. If my impression is correct that she has never actually accomplished anything, never achieved any of the change she frequently talks about (which is OK for a seventeen-year-old), then her career choice means she will continue doing that forever. Remarkable statement? Not at all! If politicians were all about changing the world (for the better or for the worse), we would see a lot of policy changes whenever a new party comes into power. We quite palpably see extremely little of that sort (gated example here), meaning that politicians probably do what popular opinion, or some function of it, tells them to do, rather than influence it. That is why Ronald Reagan said that politicians have a great deal in common with workers in the world's oldest profession.

Ms. Yousafzai has spoken in favour of education for girls which is about as platitudinous as it gets unless one gets into the messy details about the ethics of craving positive rights, or about the economics of third-world education for girls, which I believe, suggests that it reduces domestic violence, but fails to impact policy views or voting intentions (some evidence here). But the yokelry and even most of the gelehrten do not go this deep and tend to think in simplified terms such as "education-good". Not that they are mentally defective; they very likely only lack incentives to think more deeply. So Ms. Yousafzai's campaign for girls' education hardly needs to influence anyone. Things are different in Pakistan, of course, and her very brave outspoken style would not always be platitudinous there, but she is rewarded and seems to be best liked where her words offend no-one and are met with disagreement by rather few (though possibly by many who are well-versed on the issues, I don't know). Would she have received the peace prize if she had campaigned against, say, agricultural subsidies or the minimum wage? Their abolition would surely benefit the world while avoiding the issues of positive rights and difficult cost-benefit analyses, but unlike education they do not enjoy widespread support.

Consequently, if Mr. Jagland and the other members of the Peace Prize Committee are really serious about peace, they should award the price to people or organizations who are likely to bring about more of it in this world. They have got some choices right, like Norman Borlaug and possibly the one to Muhammad Yunus (the evidence on the impact of microcredit is mixed, though I believe theoretically their case is a good one), but this one, the one to the EU (for preserving peace in Western Europe since the end of WWII - have they ever heard of the post hoc, ergo propter hoc fallacy?), the one to POTUS, to Jimmy Carter, Mikhail Gorbachev and a vast array of others, can do absolutely nothing for peace. Professor David R Henderson of EconLog has remarked that some of these prizes could actually promote war, since for a politician to be a peace dove it helps if he has first got himself into a violent conflict.

Again, I don't mean to say that Ms. Yousafzai has not accomplished anything and she is clearly a brave young woman for being outspoken in the face of threats; I merely say that I have not heard of anything she has done. I have looked, but I could have missed it. What seems to be a much more defensible proposition than that she has accomplished great things is that she means well. But given their beliefs, everybody means well. The real trick is to actually do something good. Certainly my own accomplishments are very few, but if my impression of Ms. Yousafzai is correct, maybe mine are more numerous than are hers. If the prize money is taxed, I'm hoping to receive a quiet ceremony next year so that it will be easier to hide the income from the tax authorities.

Tuesday, 7 October 2014

The Poverty Trap

Some people argue that poor countries stay poor because they are in a poverty trap of health and nutrition. According to this idea, labour capacity increases more than proportionately in income at the absolute bottom where one dies if not fed, then less than proportionately during a stage of living just above the minimum, and then more than proportionately again as "good health" is reached. In the graph below, nutritional intake is captured by the red line. If income (the "S-shaped" curve) is below point B, corresponding capacity to work leads to a nutritional intake which lowers capacity to work (and income) the next day (or whichever period one considers), eventually leading the individual to Point A ("the bad equilibrium", or poverty trap). This is because the point on the red line which corresponds to the capacity to work for an income below point B is associated with a reduced income (one may draw lines on the graph to see this). Above point B, capacity to work is increased by more income, leading to a stable point at C ("the good equilibrium").
However, this relationship suggests that most of the truly poor around the world spend the vast majority of their income on victuals. However, this is false; many studies show that the highest fraction spent on food by the very poor typically does not exceed 70 per cent, and that they could get a great deal more nutrition out of the money spent by rearranging their food outlays, akin to how richer people would eat more on the same money if they buy chicken and vegetables rather than caviar and smoked salmon. Why the world's poor do not consume more food is still up for debate. It may be that they would benefit, in which case the above curve could be very useful, but it may also be that they are spending their money rationally and that something else is preventing them from getting rich.

That something else may not be a poverty trap and it could not be one based on nutrition, but it may be one based on something other than victuals. Here is one example: When Westerners go to very poor countries like Haïti or India, they may be surrounded by indigents asking for alms. Maybe natives living amidst these people - including potentially every indigent individual - correctly deduce that they would face a similar situation if they did something to improve their productive capacity and thereby raise their income. Unlike Westerners, natives have ties to other indigents and may find it prohibitively expensive to refuse to help them.

If they know how to increase production, there would be no problem, because everyone could just do it and even if the destitute neighbours "tax" away all the surplus with cries for help, learning from the successful ones means that this "tax" will shrink over time. However, if the poor do not know precisely how to be more productive, they will face a choice between the status quo or experimentation. Experimentation could result in great success or abject failure, but any success will be greeted by clamour for donations by the hapless neighbours who experimented differently or not at all, while failure may mean death.

Maybe the deep poverty that still persists is simply a result of this sort of coordination failure?

Monday, 6 October 2014

Disasters and the Drake Equation

The fact that we know of no other civilization in our galaxy gives social scientists a hint of the potential future of human kind. If no other intelligent life form has developed technology advanced enough to reach us, maybe that means we won't either. I believe Carl Sagan suggested - perhaps during the height of the Cold War? - that other life forms, once sufficiently advanced, rub themselves out, though I will propose below that it may also be that they stagnate forever. The Drake Equation takes the number of stars in the Milky Way (or the rate of star formation), multiplies the number by a series of fractions less than one to weed out the ones unsuitable for life, and arrives at an incredibly rough estimate of the number of advanced life forms. The equation's purpose is not actually to estimate any number, but to stimulate discussion on the topic and it seems a widespread opinion that there ought to be at least a few more civilizations in the Milky Way in addition to humanity.

One of those fractions reduces the number of solar systems home to intelligent life to the number of them which go on to develop technology useful for interstellar communication. Maybe there are non-violent explanations - which would still be disastrous - for why this fraction is actually such as to render it extremely unlikely that a civilization should progress far enough to have radio communication or other ways of contacting the stars - not to mention travelling there. One such explanation is found in the potential for laws of social science to cause intelligent civilizations to stagnate forever.

I am not suggesting that this will happen. Nobody knows the future, so I merely point out that it could happen for all we know. There are a number of mechanisms by which stagnation could happen and go on forever. For instance, Joseph Schumpeter predicted socialism to become the norm due to advances in technology and material life. Judging by long-run trends, it could be that the government continues to expand and the resultant increase in incompetent decision-making could kill growth forever.

Alternatively, spending on health care as a share of GDP has grown steadily over the past several decades and health care is subject to Baumol's Cost Disease. A nurse cannot very well increase her productivity without worsening the care provided, but to attract nurses requires payment of competitive wages, which means that a nurse's salary must increase in line with the wages of sectors where productivity does grow. Thus, in this simplified way, if the quantity demanded of health care rises over time, spending on it must rise more than proportionately. Health care is increasingly the government's business and I am not confident that the government will deliver any growth.

Or it could be that voters favour increasingly bad policies the richer they get. For example, the people of developing countries consistently have more positive (i.e. more accurate) views on international trade than do people in rich countries, according to this Pew Research Report from last month. To the extent that public opinion matters to political decisions, any general tendencies here could be dangerous. Similarly, if one goes to the Heritage Foundation's Economic Freedom Website and runs rather a façile regression of the government's share of GDP on purchasing-power-adjusted GDP per capita, one finds a statistically significant positive-but-small relationship. Maybe citizens become more active politically as they get wealthier? Given the (rational) incompetence of the average citizen, this would not be a good development. Since the individual citizen has no incentive to support good policies (being merely one voice amidst millions), individuals can indulge their fallacies and the gross domestic product suffers accordingly.

I don't know, but there appears to be some potential in these trends and explanations. Given that advanced alien civilizations must also have societies and given that several of these suggestions may be general enough to apply even to extraterrestrial life, perhaps part of the reason we receive no signals from other parts of the Milky Way is that these tendencies simply stop them from progressing that far?

Friday, 3 October 2014

"Generous" Government Transfers?

Oftentimes one finds implied value judgements in common speech. One such instance is when people talk about "generous" payments received from the government. To me, "generous" means primarily that one is unselfish with respect to that with which one is generous; that one could legitimately keep more for oneself but chooses not to. I cannot see how a word defined in this manner can be applied to the government. Consider:
  1. If the government give me a currency unit, it must either have printed it or taxed it from someone (who may or may not be me).
  2. In the first case, the government's generosity requires that the money holdings of others be diluted of real value;
  3. In the second case, it requires that someone else be made to lose money. In any event, "generosity" requires the violation of the natural rights of others (in the event that there are no natural rights, talking about government generosity implies that value judgement).
What is also required, as per the definition above, is that the government could legitimately have retained the currency unit for its own use. This means that the currency unit, obtained either by use of the printing press or by taxation, is the government's legitimate property. It does not necessarily follow that the government are really the owner of anything and anyone wealth-producing - because it could be that the word "generosity" is applied only when taxation does not exceed a certain point or only when the government do not hoard resources to a sufficient degree - but the way the term "generosity" is applied to government expenditure certainly seems to me to come close.

What would value-neutral language look like? There are a number of rather obvious candidates, such as "large" or "big", optionally qualified with the word "relatively", and a bunch of variations on adjectives such as these. Not that I think language must necessarily be value neutral (I really do not). Still, there are value-loaded terms one could apply to the selfsame transfer labelled "generous", but which take a different view on good value. "Excessive", comes to mind, although it is not the ideal candidate since it has the connotation that the recipient is less deserving than other potential recipients (and they may all be equally undeserving of others' resources).

So what would be the optimal word replacing "generous" with an adjective coated in natural rights rather than statism? Profligate? Wanton? Dissolute? What I am looking for is a word which describes wastefulness with ill-gotten resources though I am not sure I get any closer than these. Suggestions are welcome.

Tuesday, 30 September 2014

Why the Catholic Church May Have Caused France to Have Too Low a Population Today

Usually when the Catholic Church is mentioned, one thinks of persons encouraging people to have more children and consequently populations to grow. However, in a current working paper, Oxford economist Ferdinand Rauch and his LSE colleague Guy Michaels show that the Catholic Church may have caused there to be fewer Frenchies today than what would otherwise have been the case. From the abstract:

"Do locational fundamentals such as coastlines and rivers determine town locations, or can historical events trap towns in unfavorable locations for centuries? We examine the effects on town locations of the collapse of theWestern Roman Empire, which temporarily ended urbanization in Britain, but not in France. As urbanization recovered, medieval towns were more often found in Roman-era town locations in France than in Britain, and this difference still persists today. The resetting of Britain’s urban network gave it better access to naturally navigable waterways when this was important, while many French towns remained without such access."
One reason why this happened is the decline of the Catholic Church on the British Isles after the collapse of the Western Roman Empire in 453 AD, while the bishoprics of France remained strong and attracted people who might have otherwise founded new towns.

This is a very interesting working paper and I hope it will be published in a good journal. This is not really my field, but before, I put a great deal of stock in the locational fundamentals hypothesis, but now I tend to think that maybe cities are also partially just random formations from a group of people's at one time happening to live close together.

Still, I am not saying that randomness is a big part, just somewhat greater than I had thought before. To adjudicate between the competing hypotheses, one can look at bomb raids and natural disasters and see whether the affected cities have risen again. This is the approach taken by many economists and as far as I can tell it tends to favour the locational fundamentals hypothesis. But Rauch and Michaels do a great job of achieving variation in the sources of evidence and that is why I update my beliefs and why I - again - hope this paper gets its authors a really good publication.

Sunday, 28 September 2014

Football Associations' Dislike of (Some) Property Rights

Football's ("soccer's") worldwide governing association are apparently attempting to ban third-party ownership of footballers (link will start an annoying video, though the video can be switched off), which means that one can play for a club "on loan" from some consortium or other owner-organization. The cited reason is that the phenomenon has been found to influence where players are going, which seems to be against FIFA regulations for some reason. European counterpart UEFA's official stance is similar:
"UEFA says the practice drains huge sums of money from the sport, and threatens the integrity of competitions when players are transferred regularly to generate profits. "It threatens the integrity of our competitions, damages football's image, poses a long-term threat to clubs' finances and even raises questions about human dignity,'' Platini said."
I don't see why third-party ownership's influencing where players are going should matter. All owners are apt to be interested in making money and so players go wherever there is most of it (provided that they want to themselves), irrespective of ownership. This means going to the club whose fans are willing to pay the most to see the player in action. So why would third-party ownership matter for footballers' destinations? Probably because it enables them to get around certain transfer rules or because transfers can be more difficult to negotiate with additional parties involved, but I am not sure.

UEFA's stance is odder still. The way in which the integrity of competitions is threatened by third-party ownership is not made clear in the article. Maybe (again) because the transfer rules are different, so that third-party-owned players can be signed even outwith the transfer window? (I don't know if this is the case.) I have to make yet more guesses as to why the phenomenon damages football's image or raises questions about human dignity.

Presumably Michel Platini (the head of UEFA) might think less of football, but maybe others will be attracted to the game, so it does not damage its image? The lost human dignity is perfect nonsense, since third-party ownership is an option, not an imposition. Rather, the dignity of individuals is damaged when they want to have a third-party ownership relationship but busybodies prevent it.

A footballer's transfer rights can be partially owned by a club, and partially by a third party, which may be the reason behind Platini's lament of the draining of "huge sums of money from the sport", since when a player is sold, it may be that only a small fraction of the transfer fee goes to the selling club. I suppose Plataini is forgetting that this means they also paid less for him in the first place. So no drainage.

On the whole, then, I do not see any problems with third-party ownership. I mentioned that transfers may be harder to negotiate, but nobody is forced to enter a third-party ownership arrangement ex ante, so probably the benefits exceed the costs. I suspect this proposed ban comes down to some influential clubs being unhappy with present arrangements and pressuring governing associations to take action. The losers if the ban goes through will probably be smaller clubs, unable to come up with the funds required to purchase 100 per cent of top players' transfer rights.

Thursday, 25 September 2014

The Morality of Markets

On the Freakonomics blog, they highlight a new podcast called "Fitness Apartheid", discussing a the decision by a building board in a partially rent-controlled New York City building not to let tenants paying below the market rate use the building's gym. The transcript, which I cannot seem to access in full, contains Professor Steve Levitt's two pence:
"LEVITT: I would call this disrespect. It’s intentionally showing through your actions that you have no respect for the old-guard people, and rubbing it in their face in a way that markets don’t really do. Markets are not moral or immoral, they’re amoral. Markets don’t care. In a market world, you say, ‘I don’t care if you live here or not. I don’t care who the identity of the person is. As long as you pay the right price and you don’t impose negative stuff on other people, it’s fine.’"
Since I lack access to the full transcript, I need to interpret what the original Freakonomist says here. I take it that he disagrees with the building board's decision and thinks of it as an anti-market one. The problem that Professor Levitt has with the decision is that it disrespects certain tenants, and the contrast he offers is with a market in which those who pay would use the gym.

I think the comparison does a good job of suggesting that the board's decision is perhaps not an optimal one since it allows no market for use of the gym. Personally, I would think that the board, as long as it is in legitimate control of the building, has the right to be disrespectful, but if I understand things correctly I can basically go along with calling their decision disrespectful. (Those referring to this as "fitness apartheid" take disrespect to a whole other level, however, since it is not really about keeping anyone unfit; those who live in rent-controlled flats should have more money to buy a gym card outside of the building.)

But what I really want to discuss here is Professor Levitt's argument that markets are amoral. What are markets? They cannot be touched and not really painted either, except perhaps if the motif is goods and/or money changing hands, or eyes looking as though they are inspecting a product. Markets are interactions between people. To say that interaction is morally superior to no interaction would be hard to justify, since not every interaction is desirable. For instance, I have absolutely no desire to buy beer or spend any time at all with millions of people. I don't drink and while I do not have any enemies as far as I know, there are certainly people who would not benefit from my company, nor I from theirs.

The way Professor Levitt seems to define amorality strikes me, however, as rather moral. As seen above when talking about what the market is all about he says ‘I don’t care if you live here or not. I don’t care who the identity of the person is. As long as you pay the right price and you don’t impose negative stuff on other people, it’s fine’. Compare this to the moral theory of negative rights and I don't think you'll find any difference. What Professor Levitt adds which markets do not necessarily do is the clause that one must not impose "negative stuff" on others. Take this away and markets would be (potentially) immoral by the negative rights point of view.

On the other hand, F. A. Hayek argued, notably in his important book The Constitution of Liberty, that (free) markets reward social use, since voluntary payments for products and services are larger the more important are the products and services in question. This sounds like a good case for the general morality of markets, but Hayek's defence of free markets rests on his argument that no man is smarter than the market and that no one individual can allocate resources more efficiently than can freely interacting individuals in the market. However, one could imagine a supercomputer or a genius coming up with a way to beat the market, and since its outcomes are not always morally blameless (e.g., externalities, again), markets would not look so generally moral anymore.

I am of course a great fan of the free market, but I believe Professor Levitt is basically right in calling markets amoral, though I suspect I may have somewhat different reasons. As interactions, I don't see how markets can have any moral value, positive or negative. It would be immoral of somebody to meddle in two individuals' voluntary interaction, but to suggest that the voluntary interaction in itself has moral value opens the possibility that there can be net gains in moral value from one person's being forced to facilitate interaction between others. This could potentially justify murder if sufficiently many interactions were thereby enabled.

So no, markets cannot violate moral rules, nor are they moral in themselves. Only individuals can be morally blame- or praiseworthy.

Monday, 22 September 2014

Utilitarianism and Free Will

If utilitarianism is true, our morally permissible actions are constrained to the ones which maximize the net present value of total aggregate utility. Absent possibilities to reach the maximum by different actions, this means that, if we have chosen to act morally, we are not thereafter free to choose anything at all.

Free will is of course a debatable phenomenon. It is fine for reasonable people to disagree with me and claim that there is no such thing as free will - though I am probably right!). But whichever answer one reaches on the issue, it seems to be true that free will bestows upon us a certain dignity which we would otherwise lack.

Might not utilitarianism therefore rob us of that dignity? I am no utilitarian, but it seems to me that the answer is no. A utilitarian who is free to choose could simply keep making choices completely in accord with the utilitarian demands because that is what he fancies. Even if he believes utilitarianism is an objective moral fact, it will not stop him from arguing that a person can choose not to obey moral facts.

This reminds me of a classic attempt to refute free will. It starts by assuming that a person's actions are completely predictable (such as they are if a person always behaves according to strict utilitarianism), and notices that if actions are predictable the actor could not choose them. On the other hand, the attempt goes on, assume that actions are random and so unpredictable. In this case, the agent can hardly be said to choose, since choice would imply randomness. (But what if actions exhibit some tendencies with a measure of noise?)

What the attempt misses is that one could behave according to some rule because one wants to. This, incidentally, is also why rational choice is compatible with free will. Perhaps one simply wants to maximize one's own utility. That one wants it is no evidence for the proposition that one could not want differently.

Sunday, 21 September 2014

Immigrant Lingo

Of the many interesting things to learn from H. L. Mencken's The American Language, some are to be found in its section, near the end, on foreigners living close together in America and how their language evolves. One famous such group is the Pennsylvania Dutch, who were not actually Dutch but German. They were called Dutch, not because of any confusion but, according to Mencken, because they called themselves Deutch (pronounced in their dialect as Deitch, though the diphthong is pronounced oi in standard German) which, of course, is German for German.

Mencken writes about how Norwegians, Germans and many other groups began to use English terms in their regular speech amongst themselves, providing very many fascinating examples to illustrate what appears to be a gradual trend towards an increasingly Anglicized language.

It occurs to me that I know of no similar examples today. Most immigrant English I have heard is rather high-functioning, but when I hear immigrants talk amongst themselves I never really recognize any words at all, although some book titles (like Econometrics) are obvious exceptions. Society is of course different in many ways today compared to the 1930's when Mencken last amended his great work of linguistics. If my casual observations are right, the question is in which ways society has changed to make immigrants use fewer loan words among themselves.

One possible way is telecommunication. When Mencken wrote, I believe there was no trans-Atlantic telephone line whereas today it is easy to get on Skype with almost anyone else in the world. Even before Skype, telephone communication has of course been feasible and inexpensive for several decades. It strikes me that any possible decline in English influence in immigrant lingo attributable to more contacts with the Mother Country should be discernible provided that immigrant speech has been continuously studied.

Another, more dire, reason, is that regulations have made immigrants harder to hire (think minimum wages and work safety, for instance), and that we are more regulated today than we were in the 1930's. If immigrants as a result associate less with the indigenous population, their language will not be as influenced. I reckon this explanation might fit some refugees or asylum seekers who come to escape in addition to finding work, but persons coming in specifically to seek work are not captured by this explanation, since they simply cease coming when opportunities decline.

Maybe there are other contenders to explain my casual observations. Or maybe my casual observations are wrong. Comments with information on these issues are greatly encouraged.

Tuesday, 16 September 2014

Teaching vs. Learning

I sometimes wonder if there might be too much teaching in a "crowding-out" sense. There is only so much time and teaching takes it away from independent learning. If one is assigned sufficiently many books to read and techniques to learn, one cannot pursue independent thoughts to the possible detriment of new ideas. However, if one is not assigned anything, one might conclude that one should not do anything. What is the optimal mix between independence and "teaching"?

Dr. Johnson's adage that "a man should read as his fancy takes him for what he reads as a chore will do him little good" seems to me to be almost self-evident, though many will require some assistance in getting the most out of their fancies. For instance, there are exceedingly many books worth pursuing and one's fancy may find difficulties in choosing among several at the top. The guidance of seniors, such as teachers assigning books to read, may then prove helpful.

This approach regards fancy as rather finely divisible, since one is allowed guidance to pursue it, in contrast to the route of choosing a subject (say, in graduate school) and being offered guidance there according to often fairly stringent limits: these very courses and these specific books or papers. But again, maybe that is the right approach?

Here is a radical idea that I wish would be implemented to test the relative merits of the finely-divisible fancy and the block-fancy: Let students take whatever courses they like (if any) and judge their progress by paper output after three or four years. Students taking courses may begin writing papers more slowly, but to the extent that courses help them their papers will be of a much higher quality when they begin. Students who want very narrow specialization can avoid several courses and, if they were right in doing so, will benefit from the freedom to pursue their own projects which reduced course work allows.

Maybe there are some programmes of this variety, only I have not been acquainted with them yet. It would be interesting to attempt to measure the calibre of the students they graduate as compared to that of other programmes.

Friday, 12 September 2014

The Morality of Monopoly

If somebody controls all of some valuable commodity or service and no-one else knows how to produce it, that somebody is a monopolist. If I lament that his high prices are therefore immoral, do I have a case? I would say that the answer is in general "no".

Consider now the analogous case in which one man possesses very many characteristics prized by females, so that hundreds of women really would like to marry him in a gargantuan group marriage. This is of course not without precedent as harems have historically been a part of many countries' institutions. However, the man only wants one woman - who may or may not end up paying a higher "price" for having him all to herself.

The man is a monopolist for only he possesses that very combination of qualities which makes women like him so much. One could imagine that he has done something really extraordinary so that he really has no close substitutes. So why should it be OK to deplore the traditional monopolist but not the popular gentleman? As far as I can tell, it should not be OK. Perhaps the reason has to do with rights.

One has the right to do as one pleases with what one owns. Therefore, popular males have no obligation to be polygynists and monopolists have no obligation to supply more of what they can produce. Of course, this assumes rightful appropriation, so very many actual monopolies might be said to be immoral. But in my idealized case, I have trouble seeing some other plausible defence of the monogamous man, though maybe I am wrong.

With some things, the appropriation of some of it leaves less for others to enjoy, some of whom are unborn. John Locke defended private property of land as long as the appropriator leaves as much, and of as good quality, to others, which seems quite impossible on a spherical earth. But maybe one's efforts on one's land can raise the value of land nearby and produce stuff others value, which compensates the non-owners. However, if one has the right to do as one pleases with what one owns, one can also use the land as a dump.

The thinking presented in the paragraph above contradicts the defence of the monogamist. If one has an obligation to leave as much for future generations who could not help not existing yet, then one should make maximal use of one's resources now, including capacity to procreate with willing persons. But if one may do what one wants with one's property, there is of course no such obligation.

The justification for why one might have an obligation to future generations (even if one has no obligation to one's contemporaries) says that contemporaries can act now, so any resources presently up for grabs may go to them if they apply themselves. Not so for the unborn. It is right and proper to point to the tendency for individuals to use their resources optimally so that future generations are compensated, but what this blog post deals with is the moral question of why it would be wrong to fail to optimize.

Notice, however, that if people did not care about material things, nobody would challenge the landowner who refuses to do anything worthwhile with his property. It is only because people care that some say he is obliged to maximize. If people care by and large, but the landowner does not, those who care will probably get rich and either buy the land from the non-maximizer or find ways to live without his land. In this way, non-maximizers count, too.

In other words, if there are people who do not care about maximizing, should not their wishes count to those who do? This argument appears to me to win the game for natural rights.

Thursday, 11 September 2014

Tit for Tats

Recent interesting posts on MarginalRevolution about the so-called "body art" known as tattoos have got me thinking about the issue. I find them thoroughly objectionable, but as is said in the new book by Professor Steve Levitt and Stephen Dubner, one should put one's moral (or in this case perhaps one's aesthetic) compass out of commission when analysing a phenomenon as a social scientist.

What do tattoos signal? For women, they probably signal some degree of promiscuity. As far as I understand things, in order to get a tattoo, one needs to be touched and those otherwise functioning people who want something to stand out like a scar on their skin normally pay someone to ink them up in this way. In other words, they pay to be touched. Provided there is no discrepancy in price for men and women, this seems to me to indicate that tattooed women are a little bit on the easy side. If they paid to be touched, imagine how much one could touch them, if so inclined, if one did not charge for it. Or, maybe that is just me not seeing the point of touching outside a relationship. This point may be sensitive to the decision of where on one's body to get it.

For men, the promiscuity signal is of weaker value because men are biologically more inclined towards such behaviour anyway (greater downside risk for women than for men, since men don't become infertile for nine months). If I have understood correctly, it hurts to get a permanent mark on one's body, so perhaps tattoos signal that one withstands pain? If so, they make other people less likely to attack, since they will then know that the fight can take a long time before there's any chance of submission.

Historically, tattoos have been more common in prisons and on ships, both of which are male-dominated environments. In such environments, some men exhibit homosexual tendencies. A tattoo which signals a high tolerance for pain (apart from embarrassment...) could then say to potential rape victims that they had better give in. To a potential rapist, they will signal greater resistance as the above paragraph makes clear. I have always found tattoos to signal a bit of "butch"-ness as well, in which case a tattoo turns a man who was previously an acceptable substitute for a woman into a poor substitute.

However, this last point is at odds with the conjecture above that women get tattoos to signal availability. But actually, I conjectured that they signal promiscuity, which is slightly different from availability. Maybe tattooed women are promiscuous and stupid, so they want "it" more but choose inefficacious ways of getting it. Or is my aesthetic compass getting in the way after all? I suppose even a somewhat "butchified" woman will still find it rather easy to find a mate for the short term. Generally women only have to say "yes" rather than make an effort for very short-term relationships. Or maybe tattoos do not signal "butch"-ness after all? I wonder what the relative ratios are between men and women who sport those nasty things.

There is probably a bit of a low-brow association with tattoos. In sports such as football ("soccer", that is, I don't know the American kind) they are very common indeed, and since that sport does not require much in the way of equipment, it may be that lower-class backgrounds are overrepresented in the game. By contrast, I have never seen a golfer or a tennis player with a tattoo and those are considered gentlemen's game (though it may be that their respective associations also have rules prohibiting tattooed persons to play). Perhaps tattoos are had by folks who know their mental faculties are so deficient that higher aspirations are futile, alternatively, by people who are so brilliant that even something so objectionable as a tattoo won't hurt their career prospects?

Tattoos were nowhere before this century as far as I can recall, but now they are not uncommon. I wonder what has caused this trend. If social interactions were enough, why have they not risen and fallen in the past? And why should one permanently mark oneself because of social interactions? Maybe I am missing something, but peer effects do not seem to have such big impacts in other contexts. Perhaps laser removal technology has improved and come down in price, so that tattoos are not in fact quite so permanent anymore? These are strange things to me, possibly because I failed to disable my aesthetic compass.