Amazing New Tool

Thanks to Justin Wolfers' recent column in the New York Times on the dominance of economists, I see this amazing new data tool which gives you the number of times, or the fraction of articles in which, any word has been used in the Times since the mid 19th century. Check it out.

Above is some of its output (click to enlarge). I thought it interesting that the number of times the word nigger has occurred in the Grey Lady's articles has remained fairly constant since the time before the civil war, even though it was frequently used in fiction less than a hundred years ago (William Faulkner's Absalom, Absalom! comes to mind, as does, of course, Joseph Conrad's The Nigger on the Narcissus). Those of us who believe the word's negative power today would be greatly reduced if decent folks were socially allowed to use the word at will should be pleased to see no negative trend in mentions, though this word has always been very rare.

With regard to the race issue, here are some trends in words used to refer to the Black Man. It is interesting to note that negro fell out of favour around 1870, then came back, possibly with the Civil Rights movement, only to decline again. Around this time, black really picks up. African-American has never been too common:

Here's a spelling reform which took hold quickly: writing per cent as one word (although I and many non-Americans do not do that). This pretty much must be the result of official NYT policy as it is inconceivable that nearly everyone should adapt to a new way of spelling so fast without central direction.

Lastly, I thought it might be interesting to see if the growth of government is reflected in the mentions of POTUSes in the New York Times. There indeed does seem to be an upwards trend as judged by the fraction of articles in which the word President appears, though this trend ended around 1980. It is noteworthy that individual names have become more frequently used over time. Ulysses S. Grant is one of very few exceptions of pre-1960 presidents who could compete with post-1960 ones in terms of fraction of articles mentioning the name of the office-holder. But what happened to Obama in 2013? His name was only mentioned in 2.99 per cent of NYT articles.

 

Anyway, this is a fun tool that I suspect will amuse many, many people and lead to numerous interesting speculations.

How Much Toilet Paper Does the Average Person Consume in a Day?

Over on MarginalRevolution, Tyler Cowen had an amusing remark the other day on a figure for average daily toilet paper consumption in the USA. The article he cites has it that the average American uses 46 sheets of toilet paper in a day and Cowen thinks that is excessive. In hindsight it's hard to know what would have been my guess had I not read the article, but I believe I would have though 46 sheets a fairly good one for reasons which I will come to below.

I believe estimates of these things comes from knowing how many sheets there are on a roll and counting how many rolls are sold during a suitable time period. This become an understatement since not all Americans buy all the toilet paper they use in the US throughout the year (some travel abroad on holiday and don't take any toilet paper with them), and it is an overstatement since some of the usage is due to tourists, but if this is the way they estimate things it seems very reasonable to me.

So why might 46 sheets a day be a good estimate? I believe women and so-called "germophobes" in particular will appreciate the fact that public bathrooms are disgusting though one cannot always tell without the aid of a microscope. This necessitates the use of paper covers for persons who need to go and sit down while doing so. I counted the number of sheets required for a decent paper cover in the shared bathroom at my department and reached the figure 17. If somebody goes at the office or on public bathrooms three times in a day, that is 51 sheets that are not really used in the expected way. Not everyone works and not every day is a workday, and of course not everyone has the respect that they should have for germs, but this little calculation might go some way towards explaining the 46-a-day figure.

Toilet paper also acts as a substitute for kitchen towels or similar products, though I am not sure to what extent this drives up the average daily usage estimate since by the same token kitchen towels can substitute for toilet paper.

Anyway, this is an interesting issue because the fact that people like Tyler Cowen question the 46-a-day estimate indicates that not everyone can be equally efficient users of toilet paper. Many people would of course like to be more efficient but the nature of the issue makes it difficult to try to learn from others how to reach peak efficiency.

Some Notable Quotables

Willaim Somerset Maugham once said that "the ability to quote is a very serviceable substitute for wit". Here, in no particular order, are few quotations from some of my recent and not-so-recent readings.

"What is called the existing distribution of income is simply a set of retrospective data at a given point in time. These data are generated by an ongoing process in which buyers choose among alternative products available at varying prices, and the sum total of these prices paid during some time span become various people's incomes. The question is not what to decide, as to whether specific retrospective data are justified, but rather who shall decide what prospective transactions are justified on what terms in an on-going process."

From Thomas Sowell's Knowledge and Decisions (p. 77). People respond to incentives and tinkering with income distributions means changing those incentives. Economists mainly know this, but among non-Economists there is need for constant reminders. He goes on to make the Hayekian point that those who wish to change the distribution by imposing different prices are unlikely to appreciate the information which the former prices transmitted. This is a great book for laymen who wish to gain an understanding of Economics, but it's a nice read also for professional Economists.

Here's an unrelated quotation:

"Unfortunate is the king who has only one head! In guarding it with all his power he only shows the first upstart where to strike."

From Montesquieu's Persian Letters (Letter CIV). This is a remarkable book, though some of the exchanges between the Persian travellers in Europe and their many mistresses get a tad lewd. The problem of marginalism and punishment is lucidly described, too:

"A Persian who, imprudently or by mischance, draws upon himself the displeasure of his prince, is sure to die; the slightest fault or the slightest caprice reduces him to that necessity. But if he had attempted the life of his sovereign, if he had intended to betray his towns to the enemy, he would have atoned as before by losing his life; he runs no greater risk in the latter case than in the former.

"And so, under the least disgrace, death being certain and nothing worse to fear, he naturally applies himself to disturb the state, and to conspire against the sovereign - his only remaining resource."

This is from the previous letter of the very same book. I cannot vouch for the historical accuracy as I am too ignorant on the subject, but Economists are sure to appreciate this titbit, as well as many others.

Back to Economists for the last quotation in this instalment:

"In everyday usage, unfortunately, competition is used in a very personalized sense. One football team competes with another; one brand of cigarettes attempts to gain the customers of another. Competition can be 'cut-throat' - a contradiction in terms to the economist. Perhaps the best single warning to the student with regard to the use competition is this: economic relationships are never perfectly competitive is they involve any personal relationships between economic units."

George J. Stigler, The Theory of Price, p. 24.

Dopey Popey

Pope Francis I has reacted to accusations of Marxism in a book of interviews entitled This Economy Kills. Pope Francis has lamented the "unjust" and "evil" economic system before, notably in the Evangelii Gaudium (in Chapter 2, Section 1), a veritable deluge of vituperation directed at a "system" he does not even name. (So maybe it is the socialist aspects of the mixed economy he dislikes, although the common impression seems to be that it is the free market.) It would help if he outlined some arguments rather than an array of assertions (because that is exactly what he does, read for yourselves and see), but I guess job security obviates the requirement to think (or maybe that's actually a requirement in the business of organized religion).

To counter the Pope's vapid and vacuous assertions, here's some actual substance on the benefits of trading freely:

1. Your appendix is about to burst, but trade is restricted so your best substitute for a doctor is your local butcher. Or, you need a spanner to fix your shower, but because free trade is bad, you should not get one made in China but have to pay a lot more for a domestic one - and why stop there? Why not force you to make the spanner yourself? Is free trade conducive or not to life and prosperity in these instances?
2. You live in Haiti and it is truck by a magnitude-7 earthquake. But free movement is restricted so you cannot go to the US (say) but have to suffer cholera and homelessness instead. If this is an instance of "this economy" killing, it surely can't be the free market part of it.
3. You work for a penny a day in some Bangladeshi factory. Your employer is a Western multinational, but is thrown out of the country because "this economy" apparently "kills". What happens to your job and wages? Do you go to the domestic firm which pays $25 an hour plus benefits? I bet there is no such firm, because if there were then that's where you'd have been working in the first place.

For sure, free markets are not perfect, but these are some thought experiments which at least make the argument that a free economy is far better than the Dopey Popey makes it out to be. He, on the other hand, seems to think that a litany can replace reason if only expressed forcefully enough. If he listened to me, I would challenge His Holiness to name a single country that has gone from misery to prosperity without a large measure of economic freedom.

The Pope today decried the mockery of belief, saying that "one cannot provoke, one cannot insult other people's faith, one cannot make fun of faith" (then what have Charlie Hebdo's readers been laughing at?). Notice that again he offers no argument. Notice also that he himself insults when he laments economic freedom without argument. What the Pope insults in these instances is the faith in reason, which is really the only sacred faith.

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.

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.

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.

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.

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?

"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.

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.

Three Pungent Quotations

Every now and then, I read short sentences which contain so much insight that I feel the urge to write them down. I used to have a note pad full of them (quite a sizable one, more so, effectively, because my handwriting is tiny), but unfortunately I lost it when moving house. Fortunately, I found it again when moving a second time! Onwards and upwards! Here are some choice ones:

"[E]agles and lions can never be so plentiful as pigeons and antelopes"

- Alfred Russel Wallace

On a first glance, this looks vaguely mysticist if one is unacquainted with biology. However, it has to be true, because lions and eagles eat antelopes and pigeons. So if there were more predators than prey, the predators would starve and die, making the prey relatively more numerous.

 

Another one:

"Diminishing marginal utility is increasing marginal cost".

- Frank Knight

Optimizing individuals who suddenly produce one fewer of something to make one more of something else are no longer optimizing. This is nothing huge to any economist, but it is a pithy formulation of the fact that increasing marginal cost implies diminishing marginal utility, and vice versa.

"And the angel of the Lord said unto her, I will multiply thy seed exceedingly, that it shall not be numbered for multitude"

- Genesis 16: 10 (quoted on p. 29 of Jan Gullberg's Mathematics: From the Birth of Numbers)

Illustrating the concept of infinity as being beyond numbering, this is a very profound titbit of insight from the Holy Bible.


Here is another quotation to end this post:


"That's all, folks!"

On Disagreeable Disagreement

Boston University's 2012 presidential hopeful and Economics Professor Larry Kotlikoff recently pleaded with Nobel Laureate Paul Krugman to stop being so rude to his intellectual opponents. If Professor Krugman's point with his abrasive debating style is to better advocate his opinions (and I don't know if it is, it just seems like one candidate to explain why he writes his popular column and blog for the New York Times), it strikes me that his rudeness may score points with some subset of like-minded folks who, for one reason or another, have no problem with abrasive commentary, but otherwise fail to advance Krugman's views.

 

The reason is that advocacy is futile, but the point of this blog post is not to talk about Professor Krugman's advocacy or his disagreeable debating style in particular, but rather about disagreeable disagreement in general. If somebody were to tell an adherent of Ideology A that he likes Ideology B, the result may be a fierce and infected dispute. The thing is that this makes about as much sense as scolding a driver of an SUV - or whatever those large cars are called - because he contributes to global warming. It makes about as much sense because the impact on policy and the impact on global warming are both less than a drop in the bucket from an individual's liking some ideology or an individual's driving a car which consumes a great deal of petrol. Your having views different from mine will not affect the world I live in, so why should I display anger about it?

 

Of course, the disputants may succeed in changing one another's opinions, but that success is worth very little in combating the disliked ideology or global warming. More to the point, what reason is there to expect hostile argument to be more successful than a pleasant dialectic? I would think that the psychology of the situation suggests that pleasantness encourages further interaction and thereby increases the odds of conversion, since pleasantness makes it more difficult for one of the disputants to throw up his hands and leave. It is hard to be rude to nice folks.

Maybe the reason for disagreeable disagreements is that in small, hunter-gatherer societies, intimidation, while just as epistemically worthless as it always has been and always will be, could win the "policy" debate. Because humans evolved under such conditions, hostile argument has survived. Such a pity.

HT: Greg Mankiw

Brave New Auctions?

A Swedish glass manufacturer has recently held an auction in which heart rates and how much one sweats when viewing an object were measured. It then awarded the object to the person judged by these measures to "like" it the most. This news made me think of topics in my recent review of Professor Richard Layard's old book Happiness. If the goal is to maximize measurable happiness, this seems to me to be the way to go. It also seems to me to be a profoundly bad idea for whole societies to adopt (except on this small-scale and voluntary basis).

In my aforementioned review, I did not touch upon a critique of utility (as well as of happiness) due (as many other profound insights) to the late Robert Nozick, but it fits well here. The critique goes as follows: what if some person is found to have intense positive feelings about a great many things, even after already possessing a great deal of wealth? Such a person would be treated like a god in a society run by the auction's principles, exactly like the Nozickean Utility Monster.

A society run along these principles would neglect every individual (even if it happens to be every individual bar one) who cannot muster the same positive feelings as can the utility monster. This of course violates the dignity due to the individual and his rightfully obtained property. Imagine going shopping only to find the clerk reluctantly handing out your favourite breakfast cereal to a needy individual whom you would immediately outbid in a standard auction.

Fortunately, the chances of the emotion-based auction's principles actually being implemented as legislation are low. This is because objects are costly to produce and it plainly pays more to produce them for those most willing to pay (although a high willingness to pay would probably overlap very frequently with a great intensity of positive feeling). The system would quite palpably be commercially inferior to a vast array of alternatives, and the stationary bandits in charge of nations care a lot about commercial success.

 

HT: MR

Hi, It's Greg... I've Got Nothing to Say...

I have been doing some travelling recently and will do some more of it in a short while, so blogging will be more sporadic than usual over the next few weeks or so. I may write the occasional post, but the frequency will surely not reach "semi daily". I think I have made 46 posts before this one since I started this blog in March, so if anyone feels inclined to read some of those while I am adding to them at a much-reduced pace, I may help out by highlighting a few of them:

• From March, here is some puzzling evidence on death rates and human capital. In brief, more valuable skills should mean more incentives to improve and maintain one's health, which I believe is generally true empirically, but performers of British chart-toppers still have higher death rates at practically every age than do Brits in general. Why might that be?
• And why, given political competition, do the worst atrocities seem to happen in countries led by parties with totalitarian-sounding names?
• On the topic of questions, what is wrong with Hayek's The Road to Serfdom? This book, by the way, celebrates its 70th anniversary this year.
• A post about women's market incomes relative to those of men within their households. I discuss a well-written paper and suggest an alternative interpretation of its findings.
• Here, I question the power of ideas.
• I talked about building façades and externalities in early May.
• A critique of Rawls, original with me as far as I can tell (so caveat emptor!)
• I don't say anything of particular interest here, but I feel compelled to mention again the tragedy which befell the science of economics when my hero Professor Gary Becker passed away. His passing still makes me feel empty. I remembered him here and here.
• Some Economics of Moral Thought.

These are just some posts to which my thoughts have drifted back on occasion, not my "top ten", though I hope they will amuse nonetheless. Happy reading!

Committing Suicide with a Bit of Class (No, Not My Note)

Jerry Seinfeld once remarked that if one's going to kill oneself, the least one could do is to leave a note (this happened in the second-season episode 'The Phone Message'). I tend to agree with this. The note should not point fingers ("it was my wife's fault!"), but simply outline what was troubling the deceased and his reasons for doing the deed, along with some final wishes not expressed elsewhere. There is an even better way of doing it, which I will come to below.

I have little doubt in the rationality of many suicides. Certain variants have near-universal approval, in particular decisions by terminally ill individuals not to medicate or to be euthanized. Maybe some "diseases" affect the mind and are just as terminal as the diseases leaving physiological traces? If so, one cannot claim that suicides by seeminly healthy individuals are in error while simultaneously thinking the cases by the terminally ill are right. Once the decision to off onself is arrived at rationally - there is nothing anyone can say to change the situation for the better. No advice works.

This is not to suggest that one should not urge suicidal persons not to do it, because how can outsiders be certain that the decision was arrived at rationally? And maybe some sort of side-payment could be arranged in order to keep the suicidal person in this life. Even rational suicides are extremely tragic. The people left behind will very frequently and understandably feel in the abyss and so are apt to do all they can to prevent a loved one from committing suicide. I know I would.

Which leads to the following conclusion: If one's going to kill oneself, then yes, the least one should do is to follow the Seinfeldian wisdom and leave a note. Doing so and doing it well avoids very many painful and unanswered questions for those left wondering. But one could, if one is really intent on killing oneself, do one better by killing oneself, in a manner of speaking, by proxy - let circumstances do the work, but look up some of the socially most acceptable circumstances and get immersed in them.

By this, I mean that one should engage in some incredibly risky activity which has some nobility attached to it. Rock climbing, for instance, or volunteer work in risky areas. Call it a major life change. Those happen. The more daring the activity the better, for two reasons: (1) it increases the social benefits in case of survival, and (2) it increases the likelihood of death, which by definition is good for the individual who has rationally reached the conclusion that he should kill himself. Military activity can be socially acceptable, but society is wrong here - perhaps predictably so.

One might ask why not more suicides occur this way. Perhaps those suicides are committed by selfish people, or perhaps they are committed in fits of depression, possibly for irrational reasons. It is conceivable that many deaths from dangerous activities are actually suicides. Maybe the aforementioned military activity is one such venue, though I wish they would find something better in that case. The people close to those who pass away in this fashion may suspect that suicidal factors were part of the diseased individual's choice of activity. But at least in these cases there will remain the added sense of respect for the service the perished person rendered.

Newcomb's Problem

From time to time, I will use this blog to write about problems in philosophy which interest me. I have no particular objective with writings of this nature, except simply to discuss and write about them. Today's topic is Newcomb's Problem, prolonged occupation with which continues to imperil the sanity of many researchers in philosophy and decision science. I first read about it in Robert Nozick's great book Socratic Puzzles.

Here it is: You are told that an entity of incredible intellectual ability (such as God or a space alien) can predict your actions with perfect accuracy. You are also told that you may enter a room in which there are two boxes marked A and B. Box A contains $1,000. The contents of Box B depends on what the intelligent entity predicted. If he predicted that you will take only the contents of Box B, it contains $1,000,000; if he predicted that you will take the contents of both boxes, Box B contains nothing. You go into the room with the boxes. Which box(es) do you open and why?

It is irritating that different solutions seem to have some support in logic. On the one hand, since the entity of vast intellectual prowess does not make any mistakes, one should open Box B only, since it contains more money than does Box A. On the other hand, since the predictions have already been made, one should open both boxes to take all that one can; if there is a million dollars in Box B, one's opening it will not change that fact. As I say, these two arguments both appear to withstand logical scrutiny. This is a problem because two valid analyses of the same problem should not lead to two different answers.

The way I think of this problem (and this is hardly original with me), it needs to be amended slightly so that the prediction is only almost certainly correct. This is because perfect prediction by outsiders and the free will required to make a choice of which box(es) to open are incompatible. Could one intend to open both boxes until the moment one steps into the room? With the intelligent entity's predictive powers, such a change of mind would have been predicted. But if this is true, then the 'choice' of boxes is not really a choice at all, since if all one's future actions can be completely predicted by an outsider, it cannot be that one has free will. This would contradict the premise of the problem that one may choose which box(es) to open.

The premises 'choice' and 'prediction' can logically coexist only if the latter is made imperfect. That is, the intelligent entity must be wrong at least on occasion. If so, a really strong intention to open only Box B, abandoned immediately upon entering the room in favour of opening both boxes, could yield maximal payoff. Still, if the intelligent entity is almost perfect, one should be really wary of abandoning even a very strong intention.

If one thinks one will open only Box B, even while knowing that as one enters the room, whatever it contains is not changed by one's actions, how is it possible to be committed to opening only Box B? One's realization that Box B's contents won't change upon entering the room will have to take the intelligent entity by surprise. But even if one is slow of mind and does not realize that present actions cannot affect the past until one enters the room, this epiphany should have been predicted by an entity as smart as the one of Newcomb's Problem. Or, more precisely, the epiphany, followed by the decision to act upon it, should have been predicted.

It is good to be precise. The intelligent entity could reason that one will realize that the past cannot be affected but force oneself to choose only Box B. Is such a commitment credible? Again, by the 'choice' premise, it is clear that one can choose only Box B. But again, the past is unalterable and, once one has entered the room, opening both boxes will be profitable. Do those claiming they would open only Box B think they can lull the intelligent entity into thinking they won't actually open both boxes? Although maybe they are committed, or maybe they can?

Nozick likens the problem to that of a genetic predisposition to a certain illness. Suppose you may carry a gene that significantly shortens your life. Whether or not you carry it cannot be changed. You find out that a fondness for fishing is associated with fewer cases of people's possessing the unlucky gene. You hate fishing, but take it up anyway due to this statistical fact. This obviously would not be rational, so why should one open only Box B in the analogous case? Perhaps the analogy breaks down if one imagines that in the Gedankenexperiment with the boxes one's thoughts and actions can influence the prediction until one gets to the room, but then does that not make the intelligent entity somewhat poorer a predictor, if he has to update his forecasts?

It is hard to get away from the idea that one should try to commit to opening only Box B. But it is at least equally difficult to get away from the fact that both boxes should be opened. No wonder, then, that everyone fails to crack this nut.

A Very Good Book

Warning: Spoilers Ahead for Nightfall by Isaac Asimov and Robert Silverberg

 

I really like to read and one of the rather many books I read last year is Nightfall by Isaac Asimov and Robert Silberberg (originally a short story by Asimov, it was turned into a novel by Silverberg in 1990). Written with a sincere love of science that really shines through, the premise is the most scrumptious bit about this book: Kalgash is a planet in a stellar system of six suns and its inhabitants consequently experience continuous daytime. Not knowing darkness, they have not evolved any mechanisms for coping with it and most of them lose their minds from darkness.

 

Continuous daytime, that is, until when only one of the six suns is above the horizon and happens to be covered by a twin planet, causing a solar eclipse once every 2049 years, the darkness from which leads to the inhabitants descending into madness. Nightfall may thus be thought of as a story in which it dawns upon the people of a grand civilization that they are in a large-scale version of the Greek myth of Sisyphos, the one-time king who was punished by the Gods for chicanery to roll a rock up a hill, only for the rock to tumble down once the top was about reached so he had to start all over again.

 

When the story begins, several scientific discoveries are about to reveal this fate. Traces of vast burnings have been found and revealed by carbon dating to recur at 2049-year intervals, and observations of Kalgash's movement in the stellar system have been thought to challenge the established laws of physics - unless there might be a twin planet. At the same time, an amusement park is ordered to close its recently-added attraction in which brave thrill-seekers are exposed to complete darkness, as many of the patrons had to be committed to mental institutions afterwards. If exposed to further darkness, they would have craved light to the extent that everything in sight was thought of as something to be burnt to satisfy their cravings, repeating what many more Kalgashians had done 2049 years before.

 

Once the new findings have been established, the logical deductions made, and the Day of Doom calculated to occur in about a year's time, an interdisciplinary group of scientists attempt to convince the world that necessary precautions must be made. The problem is that the unexpectedness and the unfathomability of the civilization-wide death sentence has the effect that people refuse to believe what they hear. Too few precautionary steps are taken, and in addition to the scientists and some scattered individuals, a group of religious zealots are the only people to have prepared for darkness and, consequently, to retain full use of their mental faculties.

 

Again, what I found to be this book's greatest feature is its premise of recurrent Doom. Somewhat underexplored I found the mechanisms behind the vast majority's refusal to heed the warnings. I would think it fairly easy and rational to seek shelter with a group of like-minded individuals. If one doubts the veracity of the pernicious solar eclipse, it is hardly a great sacrifice to spend just one day in the proximity of facilities that ease the effects of darkness.

Now because of the 2049 years of sunlight, Kalgash cannot produce sufficient energy to safely light the planet at only a year's notice. Fortified large-roomed buildings (so one light source reaches more space) and power generators would be easily obtained by those convinced by sound science, however. Particularly if few others believed the Doomsday to be nigh, so that whatever were the interest rates at the time of discovery, the scientists and those convinced by their findings would happily borrow otherwise crazy amounts (since while few others believe in impending doom, borrowed money is unlikely to have to be repaid).

The book in no way (as far as I can remember anyway) gets the economics plainly wrong. My complaint is quantitative rather than qualitative. There are some shelters and some preparations have been made. It is possible that the vast majority of Kalgashians simply bet that Nightfall was not going to happen. To persons unfamiliar with picking apart arguments, the warnings of Doom may well look like the lunacy of a small minority of fanatics which we Earthlings witnessed ahead of the 22nd December 2012. But I like to think that rather a lot of people have at least some respect for logically coherent argument. These people would have put their money where their mouths were, and bought as much protection as was possible. Noticing that a lot of people were disregarding their warnings and were consequently going to go insane, they would have found it a palatable alternative to borrow money to hire goons for protection and electricity generators for lighting.

All of these things send signals to producers that the demand schedules for these things have now shifted to the right and so the quantities produced go up. Price movements in capital markets would send signals that something's afoot. It is one thing to doubt crazies merely talking about impending disaster. It is much harder to doubt those who - beside having logic on their side - do everything in their power to ensure survival. Nightfall would still bring awful consequences given that it was only predicted a year or so in advance, but I find the scale of destruction in the book just a little bit overblown.

It would be cruelly unfair to focus on the one nit I have to pick in what is otherwise such a wonderfully premissed book. I have not come across the short-story version written solely by Asimov, but I hope I will as I would like to explore how well the same stuff could be fitted into fewer pages. Since I think the greatest feature of the book is the premise, I believe the short-story version is very likely to work well. But as far as the novel goes, it turns out that, in spite of the somewhat insufficient attention to the theory of price, a book can be really enjoyable. Who would have thought it?

Fun Applications of Purposeful Behaviour

Having gained some momentum yesterday with my Alchian tribute and applications of the Alchian-Allen Theorem, here are some common phenomena which all find a neat explanation in what rational-choice theorists like to call purposeful behaviour:

1. Soldiers marching in lines - Explained by the fact that, if soldiers are ordered to march in straight formations, defection is more easily detected. Defection is individually rational for each soldier, but not rational for the army that wants battle. I am not sure, but I think I may have originally read this (a long, long time ago) in a book by David Friedman, probably his Price Theory (or its popularized version Law's Order).

2. 42nd Street in New York City - I am a keen fan of the Big Apple, but really this applies to big cities everywhere; homosexuals, being a fairly small minority, have a hard time finding a partner among small populations. In expectation, there are many more potential partners in larger populations, causing homosexuals to abandon low-density sticks. Richard Posner's Sex and Reason contains this very fabulous mechanism.

3. When the standard pie size in America for pies bought in shops was twelve inches in diameter, apple pie was the most frequently bought kind, but when the seven-inch pie was introduced, apple pies plummetted in popularity - Explained (by the late giant in price theory Walter Oi) by people's unwillingness to eat twelve-inch pies by themselves and the consequent necessity to find common ground on flavour. Such beautiful simplicity.

 

4. Women are less prone to violence than are men - Men, except for Arnold Schwartzenegger, cannot get pregnant and therefore do not put their ability to procreate at risk by engaging in physical fighting, say with a rival for a mate. There is some risk, of course, but nowhere near as great as the risk for women, who can lose their baby by getting into a rumble. Professor Ed Laumann at the University of Chicago was the first person to bring this nice titbit to my attention, although I don't think the reasoning is original with him. He said women "fight" their rivals with words instead of punches (e.g. "look at those shoes she can't even walk in those things").

5. Vagrants and proselytizers in towns and cities are stationary; in more rural areas and in residential suburbs they tend to walk around from door to door - this one I have not seen anywhere else, nor have I investigated the accuracy of the claim, but it seems to fit people's experiences. Also, it stands to reason that more people will be on the move at any given time in a city or town than in basically any other area. Since vagrants and proselytizers benefit from contacts with others, this behaviour is to be expected.

6. Bathrooms are located along vertical lines in multi-storey buildings - Coming full circle in this list of examples of purposeful behaviour, this one is again due to David Friedman, and is known as his law of finding bathrooms (or something like that). The reason it works is that it enables the plumbing to be more or less vertical, thereby reducing the costs of labour and material for pipes.
 

These applications are all reasons economics might work. They are fun because they concern everyday topics which are explained in a very simple way. I believe without the idea of purposeful behaviour, the phenomena I have just listed would be much harder to explain. Truly, Economics is everywhere.

Armen Alchian Would Have Been 100 Years Old Today

Armen Alchian passed away in February last year. Had he been alive, today would have been his 100th birthday. On this centennial of his birth, I want to discuss his and William Allen's famous but sometimes misunderstood theorem in price theory, known primarily as the Alchian-Allen Theorem, but also as the "Ship-the-good-apples-out" Theorem, or, I have recently learnt, the "Oranges Principle". I will also provide my favourite application of it. It is a thing of beauty and follows in a straightforward fashion from the First Law of Demand. One of the things that makes it one of my favourite results in economics is the fact that it was first published, not in an academic article, but rather unassumingly in Alchian and Allen's textbook University Economics (later changed to Exchange and Production, in which the theorem can be found on pp. 38-39 in the 1983 edition). Here it is:

 

Imagine some product which varies in quality, such as oranges grown in California. Suppose consumers it costs $1.00/lb to ship oranges from California to New York, regardless of the quality of the oranges. If high-quality oranges sell for $3.00/lb, and low-quality organges sell for $1.50/lb in California. To retain the same profit margin, producers of oranges would have to sell their high-quality produce for $4.00, and their low-quality produce for $2.50, in New York.

 

A pound of high-quality orange in California costs two pounds of low-quality oranges, but in New York, the same quanitity is obtained at the cost of 1.6 pounds of low-quality oranges. Ceteris paribus, it makes sense for the proportion of high-quality oranges shipped to New York to be greater than the proportion of high-quality oranges that stays in California. This follows from the First Law of Demand, because the cost of high quality relative to low quality declines when transportation costs are added. Hence, the good apples (or oranges, or anything that varies in quality) are shipped out. Adding transportation costs makes New Yorkers act as if they prefer high-quality oranges more strongly. In the illustration below (panel a), the quantity of low-quality goods falls proportionately more than does the quantity of high-quality goods, as the slope of the budget line approaches -1 (click to enlarge).

Now in general, it is not a certainty that the Theorem will be observed, because one could imagine that consumers care not about relative prices but about some constant price difference. If, for instance, consumers are always willing to pay some fixed amount of dollars more for high-quality oranges, the theorem does not apply. In panel b of my simple illustration above, the proportion of high-quality goods which are exported actually goes down when the intersection between indifference curve and budget line moves primarily horizontally and very little vertically.

Nevertheless, although one can easily show that the Theorem needn't always hold, there are very many situations which it neatly helps explain. The Alchian-Allen theorem can be applied even when there are no transportation costs; wherever there are two versions of something and another something working as a cost whose size does not depend on which version was chosen, one can discern the Alchian-Allen Theorem.

I like the Theorem so much because I always think about it when I go for a run. Running a long distance is an expensive run; running a short distance is a cheap one, but one must take a shower afterwards or risk losing all contact with the rest of humanity. I don't dislike showering, but I could easily think of many things I'd rather do. Akin to how transportation costs are the same irrespective of quality, the time lost showering does not vary in length with distance run. And, as the Alchian-Allen Theorem predicts, I do indeed tend to run rather long distances; never less than about 6 miles (10 kilometres) in one go, and frequently much longer distances.

 

People with a greater fondness for showering are predicted to run somewhat shorter distances if everything else is the same. More generally, "transportation costs" may be quite subjective in some applications, so one might think of it as variable, in which case, ceteris paribus, more high-quality products should be consumed by those who really dislike the cost involved, and more low-quality products by those who do not mind it, or even like it.

Because it is stated in such simple and general terms, it is exciting to think of other applications of the Theorem. Perhaps longer-lasting holidays are associated with more decorations. This seems to fit Christmas being the most intensely decorated holiday I know of, and also the longest. Persons with shorter Christmas breaks should decorate less if this is true. This is in line with the Alchian-Allen Theorem, because putting up decorations is a "cost" (time sacrificed in order to celebrate Christmas) which does not vary with the length of the holiday.

 

Armen Alchian was and remains one of my all-time favourite economists. It is so sad that he is not around to celebrate his 100th birthday, but at least he had a long and productive life. His Theorem with William Allen is just one of very many highlights of his career. I am sure to blog about more of this great economist's work in future.