Sounds Familiar...

Statistical competency

2010-05-08T20:46:00.003-04:00

A friend posted this on facebook the other day, and I've been thinking: yes, lack of knowledge of even basic statistics leads people to completely moronic opinions. (See the comments on that article for an example.) On the other hand, when you have a little bit of statistical competency but not a lot, you get things like this:

For the first time in history, several countries have transferred directly, from a non-market to a liberal market economy. They stayed at the same technological level, and kept full statistical records of the effects. It is now possible, for the first time, to estimate the free-market contribution to death rates. These effects are significant, and huge numbers of people are involved. In Russia crude death rates rose from 10,7 per 1000 in 1989 to 15,8 per 1000 in 1994. Comparing Europe in 1500 with Europe in 2000 will not show the effects of the free market: society and technology were fundamentally different in 1500. But Russia in 1994 had the same technology, the same urbanisation, the same infrastructure as Russia in 1989. What changed was that a centrally-planned regime collapsed, and a liberal market system replaced it.

Yes, everything stayed the same except the regime collecting the statistics, so this is a perfectly valid inference.

Why don't skeptics get economics?

2010-04-01T14:41:00.004-04:00

Part 1 of a probably continuing series.

Behold, the intellectual output of skeptics on the subject of economics. This is from the Talk Origins newsgroup, a bastion of people who dedicate their time to defending the theory of evolution from spurious attacks, contributing rebuttal after rebuttal to false creationist claims, almost always accompanied by links to genuine peer-reviewed literature in journals in biology, astronomy, geology, etc. But darest one crack open a peer-reviewed journal in economics for once in their lives? Nay, unto you, I say: Nay!

The theory that the free market is a solution to all our economic woes is
based on the [false] assumption that the decisions are rationally based on
correct and full information available to all (the reason why insider
dealing is a crime).

And that's from one of the good posts!

Never mind that insider trading prohibitions actually reduce information in the market, by outlawing information-providing transactions. The theory that the free market is a solution to many (not all) of our economic woes is based on valuable evidence, recorded time and again in experiments, cross-time comparisons, and international comparisons. Despite what some Austrians may tell you, economics is not an a priori science. Assumptions are tested all the time. Where they are found wanting, economists apply that information in laboratories and in the field (PDF). Analysis of market sectors apply such tools as well.

You might expect people who spend most of their time defending the nature of empirical evidence in biology to apply at least some of that intellectual rigor to other academic pursuits. But that's a mistake.

Before I'm accused of generalizing from only one example, let me say that this is a common trend I've noticed. The rationalwiki page for economics, and almost all of its sub-pages, is dismal. The Richard Dawkins forum is even worse. I even once saw a poster there endorse Money as Debt. . . with no rebukes! The JREF forum is marginally better. Less Wrong is by a huge margin the best skeptic or rationalist website I've seen when the posters discuss economics, perhaps because it's a splinter community from the blog of an actual economist. From what I can tell, it's the exception rather than the rule.

What compels someone to actually consult a textbook when someone says something suspicious like, "The spin of the planets contradicts the conservation of angular momentum," but to be all RIGHT ON BRAH! when someone says something equally suspicious like, "The financial crisis was caused by deregulation." You'd think they would at least ask, "Hey, which deregulation, specifically?" But nope.

My guess is group signaling has a lot to do with the problem, but I'll have more thoughts later.

Let the blogging resume

2010-03-01T13:54:00.004-05:00

Unfortunately I'm late to the game on discovering Jamie Whyte, the British philosopher. He has a deep understanding of economics and is witty to boot. Try this 2006 column:

Drug users are simply people for whom the pleasure outweighs the risk of death, illness, addiction and all the rest. In other words, they are people for whom the benefits of drug use exceed the costs. They wouldn’t be drug users otherwise. The same is not true of everyone. Some value health more and pleasure less. For them, drug taking would deliver a net loss. Fine: these people would not take drugs even if they were legal.

But addiction and asymmetric information are grounds for a powerful market failure, are they not? Yes, and Whyte handles this problem deftly:

But underestimation cuts both ways. People might fail to do something that is good for them because they underestimate the benefits. Those who have never taken Ecstasy might not know how wonderful it feels. Should it be made compulsory to eliminate this risk?

There is a simpler case against an outright ban, but it requires an economic argument Whyte doesn't have the space to make in a brief column. To minimize utility loss, the proper response to a case of asymmetric info with high costs is not to ban or regulate but simply to provide the info. Inform the citizens how dangerous and addictive drugs are and they can decide the rest. Of course, the government does spread information about the dangers of drug abuse, but, as in the case of compulsion, misinformation cuts both ways. If the government spreads lies about drugs, this will lower utility as well. Utility is only maximized if government propagates the correct information about the dangers of drugs--that is, if it actually eliminates the case of asymmetric information rather than swinging it the opposite way.

And, seeing as the government spreads lies and misinformation about the dangers of drug use*, it's fair to say that no aspect of modern drug prohibition is justified on efficiency grounds. The other grounds, as Whyte well explains, are basically rubbish.

Unfortunately, Whyte concludes with a mistake:

I suspect that something similar makes legislators systematically discount the benefits of drugs. It is not enough that people value something. To count it as a benefit, our betters in Westminster must deem it worthwhile. And, as with kinky sexual gratification, they do not consider getting high to be worthwhile.

It is not concern for our welfare that explains the illegality of drug use. It is bigotry.

On the contrary, politicians have shown time and again that they are big fans of drugs. I don't disagree that bigotry dominates drug laws, but it isn't the bigotry of elected officials. It is the bigotry of the voting public.

*Don't believe there is misinformation in anti-drug propaganda? Ask yourself how addictive you think various drugs are based on government advertisements, then check the real numbers for yourself. If you significantly overestimated, congratulations, you are imperfectly informed such that you may be missing out on some wonderful utils!

What a waste. . .

2009-07-20T14:49:00.001-04:00

Of a good pejorative.

Fossil Fools Day is an environmental demonstration day. It occurs on April 1st. The name is a play on the term fossil fuels and April Fools' Day.

Clearly "fossil fools" should have been reserved for creationists, not polluters.

The monster at the end of this blog

2009-05-22T13:37:00.001-04:00

The Monster at the End of This Book is now available online. I still tell people how clever this children's book is today. It's very, uh, meta.

Shorter Bill Donahue:

2009-05-22T11:04:00.001-04:00

Molestation doesn't count unless there's penetration! All the other stuff is No Big D.

Pop lessons in economics

2009-05-21T12:23:00.003-04:00

The first in a hopefully multi-part series.

I can't help but analyze the media I see in terms of economics. There are a lot of good and bad lessons found in our entertainment ripe for the analyzin'. Take, for instance, 2Pac's "Brenda's Got a Baby" from the album 2Pacalypse Now. The song begins with a sort of exhortation. You may think that Brenda's problems are not your business, but 2Pac is going to explain why you should care:

I hear Brenda's got a baby
But, Brenda's barely got a brain
A damn shame
The girl can hardly spell her name
(That's not our problem, that's up to Brenda's family)
Well let me show ya how it affects the whole community

In economics, we describe spillover effects as externalities. A transaction may be mutually beneficial but socially harmful. The standard example is pollution. You want to buy heating from your home, a provider wants to sell you electricity, so you both profit. But the burning of fossil fuels creates smog, etc. that harms a third party.

Externalities can range from high-profile planetwide events (global warming) to the totally innocuous. For instance, if I buy an ugly shirt that I like a whole lot, I and the shirt vendor both benefit whereas you suffer a minor externality; that is, you see my ugly shirt and hate it. Since this is extremely common, we tolerate most externalities.

It's important to distinguish between internalized and externalized costs. Yes, making a t-shirt uses cotton, polyester, ink, machines, and so on, which all cost money. But those costs are internalized. The shirt manufacturer outbid other people who wanted to use those things, meaning they went to the person with the highest preference for them. Depriving other manufacturers of those goods is "efficient" (i.e. it satisfies willingness to pay requirements). Other manufacturers wanted to use those goods, but they didn't want them as much as the t-shirt manufacturer. There is no need to use political action to adjust these costs unless you have good reason to oppose efficiency as a rubrick.

Externalized costs spill over onto third parties not involved in the transaction. I may value breathable air, but since I am not involved in the manufacture or purchase of your t-shirt, I don't have a say. Pollution is an externalized cost, one that we often wish to solve through political action.

So when I hear 2Pac say that Brenda's pregnancy affects the whole community, it almost certainly does--but then what doesn't affect the whole community? Few people actually oppose any sort of action just because it "affects the whole community" (though there are exceptions), so what I'm listening for is an explanation of the externalized costs involved. How does Brenda's getting pregnant invoke significant social costs on her neighborhood?

Unfortunately, 2Pac fails to provide. The rest of the song details how Brenda's sad situation affects Brenda. (You can read the lyrics here.) Brenda gets dumped, is not smart enough to know who to ask for help, has the baby, gets abandoned by her family, turns to selling drugs, finally turns to prostitution, and gets murdered.

Little of this affects the surrounding community in any significant way. Some of the community members may be offended by drug-selling or prostitution, but "offense" is not usually considered a significant externality. Again, with exceptions. In the U.S. we seem to use this criterion alone to ban prostitution, drugs, the sale of organs, and so on. But thinking in efficiency terms, political action is only economically justified if the collective amount the offended is willing to pay outweighs the collective amount the transaction parties are willing to pay. The song notes that nobody cares about Brenda, including her family, so it's safe to say that few people in her community would be willing to pay Brenda not to sell drugs or sex. Selling drugs and sex to customers is a benefit, not a cost, so we can't count that. The customers get drugs and sex, Brenda gets money, and they both profit from the transaction.

One could argue that Brenda is too young or stupid to be selling sex. She can't adequately weigh the costs and benefits of her actions, and therefore makes bad decisions. That argument is fair enough, and almost certainly true (2Pac emphasizes her young age and low IQ). But this is an argument that what Brenda perceives as a net gain is really a net loss. This affects Brenda's costs, not the whole community's. There is still not an externality--Brenda's increased costs are offset by the gains to her customers, who would not get her services if she were smarter.

This is where efficiency standards might fail. One might argue that Brenda's costs are more important than her customers' gains. Because of her special status (as an underaged, undereducated rape victim), we have to weigh her costs and benefits differently. I can buy this argument--fully support it, even! But we still haven't established any externalized costs on the community aside from ordinary ol' "I take offense at that!"

From what I can tell, there are none to be found. Brenda gets robbed as a drug dealer and murdered as a prostitute. Crime certainly has spillover effects, but these are the result of criminals' actions, not Brenda's. Drug selling is not an inherently criminal-laced activity. In the U.S. we sell drugs (alcohol) legally all the time with few more robberies than you'd expect from any retail store. So now we have an externality, but not one caused by Brenda's actions. The community is affected by robbers and murderers, not by dumb girls having children.

(There might be an argument that Brenda's child is especially likely to grow up to be a robber or murderer. This is the case made in Elvis's "In the Ghetto." But that's another story.)

The closest thing I can find to a community-wide cost is a mention of social workers. Social workers are taxpayer funded, meaning that other people in the community are subsidizing the care of Brenda's baby, which could be inefficient if they don't actually want to do so. Brenda is less likely to have a baby to begin with if she doesn't have that eased burden.

Somehow, I don't think "we need to reduce government programs to reduce moral hazard" is the theme 2Pac was going for.

Until next time, kiddos!

Rhythm Heaven

2009-05-06T12:08:00.009-04:00

In case you don't feel like reading this, I've provided a TLDR version:

People who play videogames are annoying. I can make fun of them using real theories from real scientists. You should play Rhythm Heaven for the Nintendo DS.

I haven't been posting much because, hey, the end of the year in grad school is a busy time. Tonight is my first (and probably hardest) exam. Yesterday, my roommate commented, "You've been studying all day, how much more studying could you possibly have to do?" I had to control my rage.

However, I have had a little bit of time for videogames. So let me tell you about Rhythm Heaven.

Or, actually, first let's read the stupidest thing ever written. The author of VG Cats, see, thinks that the world owes him something because he used to be a social outcast for his love of videogames. Actually, for the younger generation videogames have always been mainstream--do you know anyone in their 20s who hasn't played Super Mario Bros. 3? But the really funny thing, besides the comic not containing any actual jokes, is that, yes, I have played a great game recently. A great, wonderful, spectacular game; a game that, only 3 years ago, would never have been localized for the United States, and only those emulator-happy nerds would ever have known how awesome it was.

I say "only 3 years ago" because I'm talking about Rhythm Heaven, the DS sequel to Rhythm Tengoku, a GBA game that was great, wonderful, and spectacular, that never got released in the United States, and that only emulator-happy nerds ever played.

And to top it off? It's a casual game if there ever was one.

In fact, it's nothing but a collection of musical minigames. Each game asks you to do some simple task--tap the stylus to the beat, flick the stylus at the top of a musical scale, repeat some musical phrase by a combination of tapping and flicking. And that's it. The rest is all charm. In a game of ~50 different minigames (some of them repeats, yes), there was only one that I didn't completely love--the only one in which the accompanying visuals made finding the rhythm more difficult rather than less.

I can hardly describe what's so great about it. When you see videos of it, you're more likely to think, "What's so great about that?" And, well, what's so great about it is that 1) There's a whole lot of variety and cuteness, the songs are short, and the game even lets you skip the stages you can't beat, so it's pretty much impossible to get bored of it until you're finally done with the whole thing or you just kinda hate rhythm games, and 2) Oh man the remixes. After you complete four stages, the game gives you a remix stage to play, which cobbles all four previous stages together into one omnisong. The first part of this video is my favorite remix thus far. Maybe that will give you an idea of the diversity and charm on display here.

So anyway, back to that awful comic. Thanks to studying economics and cognitive bias, I actually have a s-c-i-e-n-t-i-f-i-c! explanation for how self-described "gamers" manage to get both the "modern games suck" and "casual games suck" points so awfully wrong all the time. First, rosy retrospection and the availability heuristic. People seem to have a tendency to rate past events higher in the future then they did when the events first happened. They also seem to remember more surprising, shocking, etc. events better than others. This causes them to overestimate probabilities by focusing on what's in their memory and ignoring base rates. If you were to ask a "gamer" the percentage of NES games that were TOTALLY AWESOME OMG out of the total, they'd remember the great games they played, remember some of the especially sucky ones, forget about some of the more mediocre ones, and completely ignore the fact that there are about 800 of the freakin' things, and the case gets only worse as videogames became more popular. (Wait, is the PS1 too late in the game for "gamers" to revere it as still being "hardcore"? I don't think it is, but maybe I'm missing some secret gamer's code or something.)

Furthermore, signaling theory explains the exclusion of even totally great "casual games." Gamers, diminished to a low status by society--and no, my little webcomic author, you did not reject society and become a social outcast for the sake of videogames; you couldn't talk about anything else, and it annoyed people, so they stopped talking to you--sought hierarchies among themselves. Status hierarchies are an extremely important factor in human psychology. We can't get away from it, even when we try. So, trashing casual games may seem stupid to you and me, but to people whose focused status-seeking behavior lies in how they play videogames, it's imminently important to make yourself look more important, smarter, or otherwise better than the unwashed masses who play casual games. The cost of missing out on Rhythm Heaven is lower than the cost of being a plebe. Remember, mockery from the likes of me isn't gonna hurt any feelings; I'm on the "outside" anyway. But a loyal following of webcomic readers who all agree with you puts you higher up on a hierarchy.

Besides, you can always just go back and play Rhythm Heaven on emulator when everyone's forgotten about it. Or, better yet, go back and say that you liked Rhythm Tengoku way before Rhythm Heaven ever came out, and Rhythm Heaven is totally just a watered down version (or whatever) and it's so not as cool. You might be able to get away with this; after all, casual games are totally ok as long as they're Japanese.

Austrian Economics Jokes

2009-05-04T01:55:00.000-04:00

Tyler Cowen requests jokes about Austrian economics. Some of the submissions in the comments are pretty good!

Aptly put

2009-04-20T18:36:00.003-04:00

Greg Mankiw puts things in perspective:

The Washington Post reports:
President Obama plans to convene his Cabinet for the first time today, and he will order its members to identify a combined $100 million in budget cuts over the next 90 days, according to a senior administration official....Earlier this month, both chambers of Congress passed Obama's $3.5 trillion budget outline for 2010, which includes unprecedented new investments in health care, education and energy. But the huge budget, which contemplates a $1.2 trillion deficit, has drawn the ire of small-government conservatives, who say that such high deficits jeopardize the nation's economic future.
Just to be clear: $100 million represents .003 percent of $3.5 trillion.

To put those numbers in perspective, imagine that the head of a household with annual spending of $100,000 called everyone in the family together to deal with a $34,000 budget shortfall. How much would he or she announce that spending had be cut? By $3 over the course of the year--approximately the cost of one latte at Starbucks. The other $33,997? We can put that on the family credit card and worry about it next year.

Edit: More from Megan McArdle.

Soc2Econ

2009-04-16T15:07:00.000-04:00

Why do I always miss the best April Fool's jokes when they first hit?

Space Phallus is finally here!

2009-04-12T13:44:00.002-04:00

Indescribably awesome and probably NSFW. Now this is a real game.

Garage Day

2009-04-10T14:24:00.002-04:00

Something about nice weather always puts me in the mood for garage punk.

In light of my inability to find a version of "Teenage Hate" on youtube, have some Coachwhips instead:

Gotta love those homemade music videos kids make specifically for youtube.

The Secret Sins of Economics

2009-04-05T14:40:00.001-04:00

I immediately need to read more Deirdre McCloskey. Her rhetoric is better than your rhetoric.

Drugs and the Economy

2009-04-03T23:03:00.003-04:00

IOZ asks us not to make drug legalization, which is about liberty, into a macroeconomic issue. He's right but he's wrong. As far as macroeconomics goes, the benefit is not that marijuana could be taxed, and I fully agree that there's no reason to go that route. But legalized pot would 1) Create jobs for entrepreneurial marijuana growers and 2) increase the working population because fewer people are being arrested. Think of it as equivalent to increased immigration--yes some populists would argue against it (perhaps not in this case since these pot users are American), but an increased labor supply increases demand as well as supply. Furthermore there would be fewer taxpayer dollars spent on the counterproductive drug war. Even if pot were not taxed at all it would be a free lunch in terms of GDP. Not an enormous jump for macroeconomic growth, but a positive nonetheless.

I still recommend remembering that the right to ingest into your own body what you choose is principally an issue about liberty and privacy, not economics. Will Wilkinson says it as powerfully as possible.

Evolution, Holmes, Lochner

2009-04-02T12:11:00.003-04:00

I'm reading Evolution: The Remarkable History of a Scientific Theory by Edward Larson. It's a history of the progress of evolutionary theory, topic-by-topic rather than chronological. I think it's pretty good, but that may just be my ignorance of history. I caught a major mistake on something I actually do know something about, so maybe the rest is full of simplifications or mistakes too. (Does anyone reading know?)

In Chapter 8, the section on the eugenics movement, Larson writes,

Opponents of public-health and welfare programs drew on Social Darwinist thinking to claim that personal freedom demanded nothing less than an end to social legislation--leading Supreme Court Justice Oliver Wendell Holmes to complain bitterly, "The Fourteenth Amendment does not enact Mr. Herbert Spencer's Social Statics." Holmes wrote these words in a dissenting opinion, however. The court's majority in that landmark case, Lockner v. New York (sic), applied Social Darwinian reasoning to strike down a state worker-protection statute.

It's not exactly a fair characterization. Holmes' quip was intended to ridicule the majority opinion's arguments about individual contract rights as deriving from a popular libertarian/eugenics text. (Apparently it worked.) The rest of his opinion is not about eugenics, but about the economic theory of the majority decision, which he claimed was unpopular and not protected by the Constitution.

That theory may share some roots with Social Darwinism, but it is not correct to conflate the two. Social Darwinism argues that the "best" survive in social competition, and by this society is made "better" just as a species is made more fit for survival. Economic liberalism argues that deregulation leads to efficient outcomes, maximizing consumer and producer surplus. That is, society (including the poor) benefits from highly competitive markets. It is not an argument about survival of the fittest; it's about maximization of welfare. Consumer surplus is maximized for the unfit as well. (To illustrate one major mistake of Social Darwinist forays into economics, see here.)

Lochner v. New York was specifically about a law restricting the number of hours a baker could work per week in New York. One could argue that the decision that the state may not be allowed to take an interest in the health of bakers was a Social Darwinist argument, but the court addressed and dismissed this idea. They write, "It is impossible for us to shut our eyes to the fact that many of the laws of this character, while passed under what is claimed to be the police power for the purpose of protecting the public health or welfare, are, in reality, passed from other motives." In other words, the majority opinion was that the law was not really about the health of bakers, but a bootleggers and baptists story. They furthermore argue that this specific law was not about health:

It is manifest to us that the limitation of the hours of labor as provided for in this section of the statute under which the indictment was found, and the plaintiff in error convicted, has no such direct relation to, and no such substantial effect upon, the health of the employee, as to justify us in regarding the section as really a health law. It seems to us that the real object and purpose were simply to regulate the hours of labor between the master and his employees (all being men, Sui juris), in a private business, not dangerous in any degree to morals, or in any real and substantial degree to the health of the employees.

If you want to read Lochner v. New York, with majority and dissenting opinions, it is available here.

And just to stress the point that Holmes' dissent was about economics and not eugenics, it's worth noting that Holmes was indisputably a Social Darwinist. In the majority opinion of Buck v. Bell, a case concerning whether the state had the power to sterilize Carrie Buck, a young mental illness patient, Holmes wrote,

The principle that sustains compulsory vaccination is broad enough to cover cutting the Fallopian tubes. . . Three generations of imbeciles are enough.

The final paragraph of his decision demarcates (poorly, in my opinion) the limitations of constitutionally-enforced sterilization. But there it is: Oliver Wendell Holmes believed the state had a public health responsibility to keep stupid people from breeding. Indeed a very short section from Larson's otherwise good book, but almost every detail was wrong.

Edit: The Carrie Buck case is mentioned later in the book. I am still not a fan of the structure.

Scott Sumner on the efficient markets hypothesis

2009-03-22T15:12:00.005-04:00

He doesn't find much use in discarding it.

It's along the same lines as Will Wilkinson's objections to "inefficient market" models of regulation: they don't include irrationality in the regulators. In fact they tend not to model the regulators at all. This is standard in economics; show a socially inefficient outcome according to the theory and suggest a regulation to fix it. Public Choice is the school that attempts to model government agents as well, but its conclusions are not as popular or oft-used as traditional models of markets. Sumner's entry has a small taste.

David Bowie and Klaus Nomi on SNL

2009-03-19T20:07:00.003-04:00

Singing "The Man Who Sold the World":

Stewart v. Cramer

2009-03-16T14:09:00.003-04:00

I enjoyed the interview on The Daily Show, if only for the "gotcha" moments using old Cramer footage, but I told my friends that Stewart readily confused normal activity on the stock market with stupid and unethical activity from banks. He does not have a good grasp on this stuff and his brand of comedic journalism is best used to illuminate hypocrisy.

Megan McArdle explains it better.

Taking Economics

2009-03-03T17:55:00.001-05:00

Money as debt

2009-02-27T14:21:00.029-05:00

I get a big kick out of debunking conspiracy theories. Whenever a new one pops up, I delight in the websites that spawn to take every last claim down. I love Respectful Insolence for amazing posts on anti-vaccinations nonsense, Bad Astronomy for the moon landing, Debunking 911 for the truthers, and talkorigins for creationism. I've spent hours at each of these sites; on talkorigins and Debunking 911 I've read almost every article. It's just a big kick for me to see an expert demolish an arrogant novice.

How can I help but follow in their footsteps when I see a conspiracy theory about my area of expertise?

Money As Debt is a roughly 45-minute presentation that attempts to explain what is wrong with our current monetary system, how it will inevitably lead to disaster, and what to do about it. It is riddled with silly basic errors, made-up evidence, and falsified quotes. It contains almost no citations for any of the arguments it presents. It pretends that it is the only game in town, that economists are completely ignorant of money. And it finally devolves into an outright unsubstantiated, nonsensical, conspiratorial claim about evil international bankers.

It's a real hoot.

Interestingly, it starts out ok. It explains fractional reserve banking, how most of the money supply is created by bank loans, and how runs on banks can lead to harmful deflation.

For those of you not keeping track at home, it works like this. There is a monetary base (M0) made up of hard physical currency, dollars and cents. In the United States, this is created by the Federal Reserve. This printed and coined money is distributed to the population through Open Market Operations and lending to banks.

Individual banks cannot print money, but they can create money by lending. When you deposit money in banks, they don't let it sit in a vault; they lend it out. This process creates money--most of the money invested in banks isn't physically there, even though you never notice when you withdraw from your checking account. This is because banks have to keep some amount of reserves in their vaults. In the United States, this is a required legal fraction called the Reserve Requirement (currently at 10% and not likely to change any time soon).

This all works because of scale economies. The larger a bank is, the less likely it is that it will run into the trouble of people wanting to extract more than is physically in the vault. It takes a bank run to do that, and these are rare, but extremely painful. Milton Friedman pinned the blame of the Great Depression on a series of bank runs cutting the money supply by 1/3rd, and most economists accept this as one of if not the most major cause of the Depression.

Money As Debt explains all of this more or less accurately, though its tone in these beginning stages is fairly conspiratorial. The narrator insists that classes aren't taught about where money really comes from, that the general public is wholly ignorant of this fact. The latter is true but the former is not; every standard Money and Banking or Finance Economics class teaches this fact. It is not a mystery. It is information readily available, even on Wikipedia, as you'll note that I've linked it already. Around the 41 minute mark, the video alleges that surveys of the population and economists shows that neither knows about the fact of money creation by private banks. I beg to differ. I doubt anyone could get a B.S., let alone a PhD, in economics without knowing this basic fact about our monetary system, at least not from any major accredited university. It is not a conspiracy, it is not a secret, and very few economists even think it is a bad thing. Those economists tend to be a fraction of a minority view (Austrian economics). There's no need to go into this debate except to note that it usually takes the form of a property rights debate, rather than the bizarre direction Money As Debt takes it. (See ie here.)

So this is all accurate but with some caveats so far. The narrator goes into the history of banking, which is roughly accurate. I can't fault him for telling a simplified story, but the anthropological and historical evidence on this front is really interesting, especially the repeated patterns of coordination of types of money and the original causes for the popularization of banks. (Highway robbery is among them!) Again, the tone is still annoyingly conspiratorial, as if people weren't willingly contracting with bankers the entire time, as if being in debt isn't good for people sometimes, as if expected value of future goods were completely irrelevant in the production process. But more of that in a minute.

Around 24 minutes in, the video launches into its real point (and real mistake). "Perpetual debt!" it proclaims. The bankers not only lend out money they don't have, but they charge interest on those loans! So you're paying for the use of money that they don't even have, and here's the kicker: the only way to get the money to pay for the interest is to go back to the original money supply, which then gets deposited into banks, which then gets loaned out. . . and the cycle continues forever until there's a massive economy-destroying crisis with bread lines and monsters eating the planet and the bankers OWN EVERYONE FOREVER!

I can't help but describe this hypothesis in mocking language, because it is a true howler on every level. And the mistakes are so many I hardly know where to begin. So I'll just start from the ground up on the most obvious point: the creators of this video have NO IDEA what interest is.

And there's a lot of debate on that point, considering the different objects interest applies to. (In classical economics, "interest" referred to the rents payed to anything; wages are interest to workers, rent is interest to landowners, etc.) But referring specifically to the interest charged by banks, a non-controversial and brief explanation is that the interest rate is the price of future goods relative to the price of present goods.

Human beings tend to have this thing called a discount rate. We discount the value of future consumption relative to present consumption. For example, even if it were 100% certain that I could make this deal happen, would you rather I promise you a candy bar now, or a candy bar exactly one year from now? Most people answer that they would prefer a candy bar now. Now if I were to ask how much you would pay for a candy bar right now, versus how much you would be willing to pay for the 100% guaranteed right to a candy bar a year from now, the difference in prices that you tell me is your current annual discount rate on candy bars.

Virtually everyone prefers present consumption to future consumption, but their discount rates vary. Some people are more patient than others--they have low discount rates. Some are very impatient and want consumption now, future be damned--they have high discount rates. Loans are then voluntary intertemporal trades between these two groups. And interest rates are the price of that trade. If I'm impatient and want to consume now, I can take a loan from someone who is patient and wants to consume later. Since the transaction is voluntary, it is good for both of us. If the interest rate were so high that it wasn't below my discounted value of future goods, then I wouldn't take out the loan.

So how, then, do we pay for interest? Is it by going back to the original money supply, over and over, so that it is a self-selecting cycle and we are forever in debt? Emphatically not! In truth, people use loans not usually for current consumption of goods like televisions or furniture (though this does happen, and these people get badly burned), but for current investment. And if that investment pays out, real goods and services are created. And the money gained from those real goods and services is what borrowers use to pay off their interest rates--and still have some left over, hopefully!

The creators of Money As Debt make it quite clear that they don't understand a lick of this. An interest rate is a price on an IOU, how absurd! A price for something that doesn't exist yet! If you offered me an IOU for a hammer you didn't have, I wouldn't pay you a penny for it is the example it gives. But what if I offered you an IOU for a hammer that you fully expected me to have in the future? If you valued that hammer in the future, why wouldn't you pay me for it?

Money As Debt mentions, at one point, that some have offered "risk to the lender" as an explanation for interest and then quickly dissmises it, but this is not what interest is. Risk does play a factor--the expectations of the lender about the borrower's future income is incorporated into the interest rate. And if a lender has very low expectations, they may refuse a loan or charge an exorbitantly high interest rate. But even in a world of 100% certainty, interest rates would still exist.

The original money supply is mostly irrelevant in this scenario (with a caveat at the end of this entry). The value of a dollar is not intrinsic--it is determined by the amount of goods and services it can purchase. Hence inflation. If the amount of money increases without an equivalent increase in production, a greater number of dollars can only buy the same goods and services, and its value decreases. So we are not stuck forever trying to pay off interest to banks using a failing dollar. Money As Debt decrise inflation as a tax, but inflation is actually great for borrowers and bad for banks, as I'll explain at the end of this post.

MAD alleges that banks can continue to lend on into infinity, and that lending->money supply->lending creates an infinite cycle of debt. It claims that there is no effective limit on banks' money creation ability. This is poppycock. There is a monetary base (M0, mentioned earlier) and a money multiplier created by banks. The cycle ends there. Banks cannot print new money; in the United States, the Federal Reserve has this sole responsibility. The maximum amount of money that can be multiplied on any initial stock of the monetary base is given by 1/R, where R is the reserve requirement. So, since our reserve requirement in the U.S. is 10% (1/10), the maximum amount of money that can be created through the printing of any one dollar is $1/.1 = $10. Here you can find a derivation of the maximum money multiplier. The actual value of the multiplier is determined by the velocity of money--the speed at which it changes hands, or the amount of money that ends up back in banks. The actual multiplier is never as high as the maximum value.

Money As Debt puts forth the completely absurd hypothesis that the government could replace all of its tax policy by an equivalent increase in the inflation rate and make the same amount of money. It's true to a point, but becomes so completely false so quickly that it's only worth mentioning as an example of how not to do economics.

Remember how I said that expectations about the future make their way into interest rates? Expectations about inflation and deflation do as well. If I expect 3% inflation in a year, and I normally charge interest at 2%, I will now start charging interest at 5%. This is because the value of the dollar is going to be decreased by 3%, so to get 2% real interest I have to add in the inflation rate. Likewise, I would subtract deflationary expectations from new loans. The same is true for other prices--the competitive equilibrium is for prices to be adjusted according to inflation or deflation. If the government all of a sudden, without any warning, switched all of its financing by tax into financing by inflation, for one period (and not a very long one at that) the two would be equivalent. But if the population expected this to happen--if the government announced it a month beforehand, or they just had extremely good predictive power, or whatever scenario you can think of that puts expectations in people's heads--the government would raise zero revenues when it made the switch. This is because the true value of the dollar would already be accounted for in prices, so the room for the government to subtract value would have disappeared.

Money As Debt points out that modern economic growth is exponential, which means it must also use resources exponentially. This is partially true, with a major caveat. Growth also includes technological growth. When we creatively learn how to produce more products with fewer resources, it doesn't necessarily follow that resource consumption must be exponential as well.

After blathering on about the evils of a monetary system based on debt, Money As Debt goes on to tell us how to fix these problems. But first it takes a silly deviation through history, a particular fascination of mine: the history of "just price" theories.

MAD points out that "usury," the charging of interest rates, has been demonized throughout history and across several cultures. The Bible insists that Israelites not be allowed to charge interest to one another. Various countries in time have outlawed charging interest, and ethical and religious scholars (especially following from Thomas Aquinas) had once conclusively declared interest unethical. In the 1600s and with the rise of mercantilism and then capitalism, this view faded out of favor. But, MAD tells us, in light of its previous analysis, we need to take their ideas seriously again and abolish lending.

But in light of the analysis that interest is the price of intertemporal trade, all of those religious scholars are ridiculously wrong. Interest is the price of a voluntary beneficial transaction, no better or worse than the price of any other transaction. No society that has outlawed interest has ever experienced the kind of exponential growth we have today. All outlawing interest ever did was keep those with high potential future human capital from ever making use of that comparative advantage. It kept poor people from starting businesses, and other people from enjoying the goods produced by those new businesses. And on the note of the wonderful growth we're blessed with today. . .

Imagine a world, MAD asks us at around 30:30, that, instead of exploiting its future capital stocks, restricted itself to consumption of current income. Wouldn't it be wonderful and sustainable? We'd only use resources we have now, and there would be no crashes or collapses or monster debt eating away at us!

Congratulations, guys, you've just imagined a world without any education. That's right: education is exploitation of a future human capital stock. The price of education is the interest rate on borrowed time, and the opportunity cost is the labor children and teenagers could be doing now. Not only that, but a world in which we survived only on current stocks of resources (without saving or investing) is nothing more than a tragedy of the commons. The nice thing about private property is that property owners are best off when they maximize expected value including future capital stocks. The tragedy of the commons what happens in the unfortunate state of collective property ownership, in which, historically, the resource is then immediately plundered into extinction. This is why there are millions of cows in the U.S. but very few buffalo. People consumed their present capital stock of buffalo without any eye to the future, and the result was abject disaster. The wonderful world MAD has imagined for us is indeed sustainable--sustainable in a steady state of permanent poverty, the destruction of all resources, and no education. It's not a happy world of investment in renewable resources. It's a hunter-gatherer society.

MAD goes on to tell us how to fix the monetary system. Should we switch back to a gold standard? No, it tells us, for a few reasons, all of which are completely laughable. First, gold systems still have problems with money tampering by the government--after all, in ancient Rome, one factor that lead to their downfall was the devaluing of gold coins by the government through shaving, mixing in of other metals, and so on. Furthermore, gold isn't very handy; it's heavy and it was always cumbersome for gold-based societies to carry coins around.

. . .

Yes, the creators of this video are so abhorrently ignorant that they haven't even studied what the gold standard is. Under a gold standard, people don't literally carry around gold coins. Paper money and metal coinage, issued by the government, is backed by a guarantee to be worth a certain weight of gold. Since people are carrying paper money, the cumbersome nature of gold coinage does not enter the problem in any way, shape or form. Since the guarantee is for a weight of gold, shaving and metal mixing do not enter the problem in any way, shape, or form. Since MAD at one point mentions the government-backed guarantee of paper money the U.S. once had under the gold standard, the creators are either lying at this point, are deeply confused, or have devolved into such conspiratorial madness that keeping that facts straight is impossible for their irrationality-addled brains. At no point did the United States, or any other country, suffer problems of gold-tampering under the gold standard.

MAD then goes on to tell us that we should have something very similar to syndicalist labor notes, with interest disallowed. In light of my previous discussion of what interest really is, it should be clear enough that this is nonsense. It's worth mentioning that throughout the video, there's an undercurrent of labor theory of value rhetoric--bankers don't actually produce anything real, nor do stockbrokers, investors, etc. The idea of labor notes clinches it, in my eyes, that the producers buy into the LTV. This post is already quite long enough without opening that can of worms, but I'll go ahead and state flatly that the marginal revolution in economics circa 1871 completely eliminated the LTV in the discipline of economics so thoroughly that no major professional economist now takes it seriously. It is as dead in the discipline as creation theories in biology. In any case, I have already explained how banks do in fact create some "real" good or service--that is, the trade of present consumption and future consumption.

Following this is the piss-poor discussion of inflation that I've already gone over. It's furthermore humorous that the creators think the interest the government pays on its loans somehow keeps it from providing more goods and services. It presently finances its current spending through a mixture of taxes and borrowing. If there were no interest--no loans--the government would not be able to pay for nearly as many goods or services, unless, of course, it raised taxes accordingly. Deficit spending is actually still payed for by taxes--taxes of future generations. The language Money As Debt uses is also inaccurate in this bit. In trying to build a picture of bankers as evil, world-owning scum-sucking charlatans, it keeps saying that banks own the government or the government pays interest to banks too. It's true that the bank pays interest to banks, but banks also pay interest to the government when they take loans from the Federal Reserve. Furthermore, the government pays interest not only to banks but anyone who lends money to it. You don't have to be a bank to buy a T-Bill. You (yes, you!) can go out and do it right now. I wouldn't recommend it in our current situation, but they're usually a pretty stable investment.

This brings us to my absolute favorite part of Money As Debt, where it drops all pretenses of being a serious presentation and straight-up says, "Hey, I'm another idiotic conspiracy theory!" The only thing missing is a dramatic accusation that "THE INTERNATIONAL BANKERS ARE THE JEWS!!!!!"

It starts with a quote:

The inability of the Colonists to get power to issue their own money permanently out of the hands of George III and the international bankers was the PRIME reason for the revolutionary war.

-Benjamin Franklin

Oooooh, Ben Franklin! He was smart! We should listen.

Actually, I was immediately suspicious of this quote. I thought it had been taken out of context. I thought it might not be about the power to "issue" money, but about the Colonists' real, physical money, that Franklin alleged was being stolen from them in the form of taxes.

But I was wrong. The quote wasn't taken out of context. It was completely fabricated. There is no reliable source of Benjamin Franklin ever saying any such thing. To be fair, it appears to be a common misattribution. But it took me three seconds of googling to find out it was a false quote. The people who made Money As Debt could spend the hours and hours it must have taken to narrate and animate this little video, but they couldn't take three seconds to google the quotes they regularly insert.

But that's not even the best part. That single quote is the ONLY piece of evidence to support the next amazing assertion, found at 40:35:

Few people are aware today the history of the United States since the revolution in 1776 has been, in large part, the story of an epic struggle to get free and stay free of control from the European international banks. This struggle was finally lost in 1913, when President Woodrow Wilson signed into effect the Federal Reserve Act, putting the international banking cartel in charge of creating America's money.

Really now? Well, that is interesting; I wasn't aware of that history at all! In fact, I'm pretty sure that settlers in the United States had no trouble using their own monies, such as tobacco, and they weren't arrested for it. But that's an interesting hypothesis anyway. Ahhh, three quick questions: 1) Who are these international bankers, 2) In what sense are they in charge of the Federal Reserve, 3) And, oh yeah, one more, what evidence is there for any of this?

The first question is answered by a graphic accompanying the voiceover about international bankers showing two shadowy figures, one saying to the other, "Anonymity is essential" (41:07). So we don't know who they are. How do we know they exist?

By what exact mechanism do they now or did in the past influence the U.S.'s monetary policy? What clause in the Federal Reserve Act says anything like, "And oh yeah, those dudes over in Europe get to determine the money supply"? They just do, apparently. The government's keeping it secret from you.

What evidence is there for any of this? Well, can't you see, man? The banks are evil, Ben Franklin (at no point in recorded history) said so! Besides, it's a conspiracy theory, and the evidence for them is hidden by definition!

Sorry folks, but this is as nonsense, balls-out crazy as it gets. As any good rationalist knows, absence of evidence is evidence of absence. If you're gonna say there's a shadowy conspiracy of international bankers controlling our money system, instead of Ben Bernanke and the board of governors making decisions, you'd better have a serious smoking gun to back it up.

And there it is. All that's left is a few quotes, and the previously aforementioned sourceless accusation that economists don't know how money is created. Money As Debt is a silly conspiracy theory that starts with a little bit of knowledge about how money is created and skyrockets downward into a mess of confusion and piffle about interest rates, the monetary system, capital, expectations, resources, and debt. A little bit of knowledge is apparently a dangerous thing.

The real issue of our monetary system:

I promised throughout this rant that, at the end, I would delve into the alleged unsustainability of a fractional reserve monetary system, including a discussion of deflation. The debunking of Money As Debt is pretty much done at this point if you're ready to duck out.

I said earlier that money is irrelevant when production is used to pay off interest, because money's real value is determined by the amount of goods and services produced, but that there was a caveat. Here it is: interest rates tend to be made in fixed contracts that don't immediately update if there is inflation or deflation. So in a sense, MAD is correct that we have to go back to the original money supply to feed our debt. If there is deflation, our wages will change (decrease) while our contract debt remains the same, leaving borrowers in a rotten position. If there is inflation, our wages increase while the contract debt remains the same, leaving lenders in a rotten position.

I already mentioned that expectations can deal with some of this problem. If people expect the inflation or deflation, they simply adjust the interest rate accordingly and go on borrowing and lending as normal. If it's unexpected, it can cause losses for banks or borrowers.

Imagine a three period model. At time T1, you take out a loan at some positive interest rate. At time T2, there is a deflation, caused by less saving in banks and more money being kept under matresses. At time T3, your wages drop accordingly, but the interest rate you have to pay to the bank is the same. Disaster for you! Is there any solution to this problem?

The obvious, #1 solution is this: inflate! If the Federal Reserve inflates the monetary base by exactly the amount the money supply has deflated, there is no problem, and it ends there. (What happens when people save more in banks again, you ask? The Federal Reserve can then deflate accordingly. They have this power through transacting in Open Market Operations and setting the Reserve Requirement.)

The less obvious solution is that banks could adjust their contracts. Since deflation is good for lenders, this isn't a likely scenario, but if the deflation is so widespread and borrowing so common that a sufficient number of people are facing bankruptcy, it could still be profitable for a bank to do this.

As I said before, a massive deflation was a major trigger of the Great Depression. So it's pretty clear from history that, if it comes to it, the Federal Reserve should inflate.

But is this sustainable? What if we have an incompetent Federal Reserve chairman? Wouldn't a deflation lead to a total collapse?

Well, it would certainly lead to a recession, perhaps even a significantly deep one. But to answer this question it's useful to have an idea about growth paths and steady states. If the money supply deflates such that borrowers are extremely screwed, the economy will reach a new growth path and a new steady state. It will not be permanently mired in recession. Borrowers will get a kick in the pants and everyone else will go on as normal. Prices will adjust, interest rates will adjust, and the deflated money supply will simply be more valuable. That kick in the pants for borrowers can really hurt, but because of the adjustment of prices, the collapse state is not the new steady state. It is an off-balance state that eventually reaches the same old steady state path when prices have adjusted and the losses from the increased debt are paid for.

MAD makes it out as if this cycle involves an inevitable permanent collapse, and I'm sure its creators are seeing the current recession as evidence of this. But a recession happens in the United States an average of every 7 years. Economists have analyzed the impact of monetary policy on recessions; you shouldn't be surprised to know that the Federal Reserve's problem is usually inflation, not deflation.

If the current monetary system isn't perfectly stable, why don't we switch to one that is?

Well, which ones are? A complete-reserve banking system would involve no money creation by individual banks. But considering that this would probably cripple investment and loans, which are Very Good Things as I've explained, economists don't usually favor it.

The gold standard (or silver standard or whatever) would solve nothing. In fact, we were on the gold standard when the money supply crashed in 1929-1932. Just replace "inflating" with "buying more gold" and you have the same thing.

Free banking, which would allow banks to compete and issue their own currencies, would sort-of solve the problem. Individuals could switch their money to a competing currency if there is inflation or deflation, keeping the value stable over time. But the bank in control of the currency suffering the deflation or inflation would surely inflate or deflate in response. With competition over the right amount of inflation/deflation/whatehaveyou, this type of system may be more stable than our current government-issued fiat currency one. Yet free banking has not survived well, historically, and even without legal tender laws we tend to see people of a region adopting only a single currency. This is an academic question that's begging for more research.

Inflation targetting would sort-of solve the problem. If the Federal Reserve aimed for 2% inflation per year, they would be obligated to massively inflate during deflationary periods and vice versa. But this is pretty much what we have now minus a little bit of discretion. Either way, it still requires effort on the part of the Federal Reserve to study money in the economy and match its output accordingly.

But to say that our current system necessarily lends itself to disaster, especially a steady-state collapse, is completely unfounded. In the United States, even with the worst economic crisis we've ever experienced, the balanced path was still lots and lots of growth.

If you want a good, non-conspiracy video about the Great Depression and deflation, watch Volume 3 of Milton Friedman's Free To Choose series.

Pork you like is still pork

2009-02-26T02:03:00.004-05:00

Phil Plait writes:

A lot of commenters are asking why this sort of funding is in the stimulus bill in the first place,and call it pork. They’re missing the point: the point of the stimulus bill is to stimulate the economy, both in the short and the long term. Funding science does exactly that; it helps pay for scientists, experiments, equipment, and more. I have written about this before. Funding science pays off multiply in the long term; it always has.

Two things:

1) No, the stimulus bill is not meant to stimulate the economy in the long term. There is no evidence that the economy needs stimulating in the long term, considering the U.S. is the wealthiest economy in the world. If the bill was meant to stimulate the economy in the long term, we should all be screaming bloody murder, because they'd be throwing over $800 billion dollars at a demonstrable non-problem. It is meant to stimulate the economy in the short term, and it's not very clear that science spending would have any such effect.

2) Even then, the question is not whether science pays off, but how well it pays off relative to other types of spending, in terms of speed and expected value. The value of many kinds of science spending are highly uncertain (science being about discovery and all); the deadweight losses caused by taxing the economy to finance that spending are certain. Insert Keynesian "It doesn't matter what you spend the money on" argument here, but it does matter the speed at which it gets spent.

I agree with Plait that the anti-science Republican rhetoric is ridiculous. Furthermore, volcano watching could turn out to be immensely important and I'd not be opposed to government funding thrown that way, in a normal science funding bill. But stimulus it ain't.

Questions for Ex-Muslims

2009-02-23T11:57:00.001-05:00

Answered here, interesting throughout.

Wikipedia skepticism

2009-02-17T13:29:00.004-05:00

Oliver Kamm has been a longtime critic of Wikipedia. The charge? It makes no distinction between informed and uninformed opinion. It treats knowledge as democratic rather than scientific. Which is absolutely true. I even provided him ammo against the site on one occasion. But as someone who uses Wikipedia very frequently, how can I reconcile this with being a skeptic?

I think the answer is that Wikipedia is a great resource if you're a skeptic. If you don't put too much stock into what it says, if you actually click on the sources to see if they're valid, if you can laugh away all the ridiculous opinion injections, flame wars, and cranks.

And cranks there are many. They see a way to popularize their pet issue and they hammer it hard. Skeptics fight back, and articles just on criticism of crank issues grow to amazing lengths. But the number of critics seems inversely related to a crank issue's popularity. Lots of psuedoscience slips through the cracks. An in articles that should, admittedly, be completely informative and need not contain skeptical criticism, measured scientific temperament gets crowded out by fervor. Take, for instance, the entry for Garden of Eden. The majority of the text lists suspected locations, few of which are particularly important to religious traditions, and none of which are true given the story's completely mythical character. Instead of discussing the Garden's place in the history of mythology or theology, editors have turned the article into a literalist buffet--pick your favorite evidenceless speculation. And, as of the time of this posting, the "Eden in Art" section is just a jumble of namedropping.

So remember, Wikipedia, while handy in a pinch, is still the result of a bunch of internet forum posters angrily fighting with each other. Its quality on controversial issues is about what you'd expect.

Bank nationalization

2009-02-17T13:25:00.001-05:00

Alex Tabarrok explains why you shouldn't fear bank "nationalization." Do read some of the comments, especially look for Tyler Cowen's, for objections. (But then consider the alternatives.)

Chuck the SEO Rapper

2009-02-13T21:43:00.003-05:00

SEO stands for Search Engine Optimization. Here is a song about design coding:

You can explore his website and videos for more, including lyrics. He is also a Christian rapper.

Edit: And let's not forget his blog.

Shame

2009-02-13T20:51:00.007-05:00

Greenwood Village, my hometown, is making the news with its plans to pay contractors to indiscriminately kill coyotes. I first received notice from the Humane Society of the United States in an email urging its members to

"...call Greenwood Village Mayor Nancy Sharpe at 303-486-5741 to tell her that a blanket policy of killing all coyotes is unjustifiable, and that she should rescind Greenwood's coyote-killing plans. Urge her to implement humane methods for reducing conflicts with coyotes such as those being promoted in the nearby city of Centennial."

Aw man, Centennial has one up on us? Seriously? Now I'm really embarrassed.

No humans in Greenwood Village have been injured by coyotes. A fourteen year old boy, the son of one of my mother's "tennis ladies" said that he was lunged at. That is a serious crime for that individual animal, if it's true.

The last time I remember Greenwood Village in the news was when a police officer shot himself in the foot and started a late-night man hunt searching for the perpetrator. The kid at my bus stop proudly informed me that he waited up all night with a gun. Nothing happens in our high income slice of suburbia, so the residents come up with excuses to shoot things.

Here's the deal, Ms. Wilson. Wild animals and humans do coexist. Next time you let your little fluff ball doggy out to pee, go with him to keep him safe. Even the Department of Wildlife says that shooting coyotes in Greenwood Village won't solve your problem.

Lincoln Day as well!

2009-02-12T22:55:00.002-05:00

It also so happens that today is the anniversary of Abraham Lincoln's 200th birthday. I grew up in an environment (a southern U.S. state) that rejected evolution. As it turns out, it also rejected Lincoln as a great president. So a few thoughts on that now.

In fact there is much to criticize about Lincoln. Critics of George W. Bush's civil liberties record might be fascinated to know that Lincoln suspended Habeas Corpus, arrested over 10,000 American citizens, and illegalized many forms of speech (both spoken and symbolic). He was also a heavy lobbyist for railroads, and used his presidential influence to toss favors their way.

But on top of this, Lincoln critics like to acclaim that "slavery would have died out anyway." The evidence to support the Slavery In Decline hypothesis is still extremely contentious, especially since the publishing of Time on the Cross. As far as I can judge the evidence, slavery was still profitable by the time of the Civil War and showed no real signs of decline. Which makes the war decision much more justifiable. Undesirable, yes, but in light of the evidence that slavery was extremely profitable, it's not as easy to say, "There was a better way." There probably wasn't.

So here's to you, Abe Lincoln. You gave some really great speeches.

It is also my friend Fed's birthday. Happy birthday buddy!

Darwin Day

2009-02-12T16:18:00.003-05:00

Today is the 200th anniversary of Charles Darwin's birthday. Many bloggers are celebrating Darwin Day. Some thoughts.

Some people are getting upset about an article on hero-worship. On the one hand, yes, modern biologists have moved far beyond Darwin, so the danger is kept low. On the other, I don't see anyone celebrating Einstein day. For some reflections on hero worship and science, see here.

A while back I looked at a creationist book someone was reading. In the midst of the misinterpretation and lies, there was a discussion of Piltdown Man. Yes, science self-corrects, the author opined, but not quickly enough. They couldn't realize Piltdown Man was a hoax for several years, and they can't now see that evolution is a hoax even as it has been falsified.

He has a point, though it is not the one he intended. Of course the theory of evolution is what the available evidence indisputably points to, much moreso now than Charles Darwin could ever have dreamed. (To quote a biologist blogging The Origin, Darwin "didn't know anything!") Its critics are crackpots, cranks, and demonstrable liars. But I don't blame their following; I was once an ignorant Young Earth Creationist myself. It is a difficult mind-trap to escape, for the same reason that it is hard to switch political parties, religions, economic beliefs, or any other grand idea. They all build up self-preservation techniques--some to the point of absurdity, insisting that nothing else could possibly be true.

No, the point he makes is correct in an entirely different way. Science is too slow. Science is too slow because it allows obviously false hypotheses to survive long past their due date. It's true that science cannot be a guardian of the truth, must always allow for the evidence to lead to different conclusions. But it cannot move backwards. Imagine how much time has been wasted debating whether Darwin was correct. Here we are, 150 years since his book, all the evidence now on his side, none of the evidence on the other, and there are still states in which evolution is not taught in high school. I should know, I never learned a (true) thing about it until college.

So, even though hero-worship is dangerous, even though truth-guarding is equivalent to truth-destroying, I'm still willing to give a little tribute this Darwin Day, to express a wish: That the science of the future will be faster. That it will not be riled up in silly legal battles. That at least 150 years after a discovery--a discovery with predictive value, with evidence on its side, with no reasonable counterevidence of any kind presented--it will be incorporated into the public's mind as easily as a rain on a cloudy day. That the better minds be forced to new discoveries, rather than taking the easy course of debating the old ones. Because after 150 years of astonishingly low-level debate, it's clear we don't have time for this.

The Bible and the environment

2009-02-10T13:02:00.007-05:00

Sir David Attenborough blames environmental ills on the Bible. Subdue the earth, it says, and with the earth as our property, we plunder it.

I'm a fan of his journalism, but I'm sorry, this is outrageously wrong. First because religions adopt the ideas of surrounding cultures as much as cultures adopt religion. Modern Christians do not force rape victims to marry their attackers, even though there is an unambiguous command in the Bible to do so. Yes, the "subdue the earth" stuff may change some minds at the margin, but so will much of the "be good stewards" stuff. It depends on how a culture frames it. And we know that atheistic governments (if not societies) have engaged in ecocide.

Sir Attenborough could use a lesson in economics. Most environmental destruction is a result of the tragedy of the commons. Much of the rest can be chalked up to a belief, held by the vast majority of people, that animals do not have any sort of rights (and even if they do cannot have recourse in courts). I hardly think you can blame either of these two unfortunate circumstances on the Bible.

Types of Hard

2009-02-07T03:16:00.004-05:00

Thinking about R-Type Final, I got to wondering how many types game difficulty could be classified.

There's hard in a cheap way. That's R-Type Final through-and-through. Hard in a practice-makes-perfect way, the most generally desirable kind. Cave shooters, Metal Gear Solid, Devil May Cry, most puzzle games--honestly, most good videogames. Hard in a glitchy way: Chocobo racing in Final Fantasy X. Undoubtedly the worst kind, like solving a crossword puzzle with misspelled words in the key. Hard in a way that demands creativity. Final Fantasy Tactics if you don't grind. Probably the most admirable. And hard in an EXTREEEEEEMELY boring way. Final Fantasy Tactics (or just about any RPG) if you try to overcome all your difficulties by grinding. The easiest kind to implement, hence why RPGs are supposedly about "the story."

Curious that my favorite game is this last type. Any other musings on videogame difficulty, readers? A better way to classify this, maybe?

Vintage econilliterate propaganda

2009-02-04T17:10:00.002-05:00

In their defense, they didn't have monetarism back then. But isn't it amazing that they couldn't differentiate the cause and effect between the value of the dollar skyrocketing in 4 years and a huge economic crisis?

Rush Limbaugh

2009-02-04T16:03:00.005-05:00

There is some talk about him again. Clearly he is the voice of Republican leadership:

There have been a bunch of things going on in Congress, some of this legislation coming out of there that I have just cringed at, and it has been difficult coming in here, trying to make the case for it when the people who are supposedly in favor of it can't even make the case themselves -- and to have to come in here and try to do their jobs.

The man who, in 2006, flatly admitted that he believed his job to be the defense of policies he thought cringe-worthy because they came from people on "his side" is somehow worth any mention at all in the public sphere? It's gonna be a couple years before Republicans figure things out again. (Like, for instance, to make your pets hide behind you rather than the other way around.) In the mean time, don't ever let this quote die. Rush Limbaugh's a self-proclaimed hack.

"Nothing supernatural about it"

2009-02-02T17:36:00.005-05:00

A while back I stumbled on a thread on the JREF forums about feng shui. The members discuss how the claims of feng shui can be cheaply and quickly tested. Unfortunately, it devolves into a discussion of whether or not the original versions of feng shui and "chi" from Asian countries are "supernatural." For instance, user LONGSTABBER PE writes,

In short ( in Eastern terms) theres nothing "supernatural" about KI anymore than there is sunshine. Westerners made all of that crap up- it doesnt exist over there.

I see it all the time in Yoga, Tai Chi and others who have been fed wrong information.

Ki development is good and healthful. It is also a piece of the holistic pie ( all things making a better body) but theres no "secret" energy, no "life force", no magic and no "cosmic" power attached to it. There never was and never will be.

The poster then goes on to describe meridians, pressure points, etc. for which there is little medical evidence.

I thought of an American analogy. You've probably heard that you should wait an hour to swim after eating because otherwise you'll get cramps. If you were to ask people if this were some kind of supernatural phenomenon, they would be shocked. Of course not! It's perfectly medical. Common knowledge. But what causes it? Dunno, ask a doctor.

I wonder if other cultures latch onto "don't swim after eating" and turn it into something "supernatural," like we do their teachings? (I've heard stories to that effect. Cubans seem to believe you need to wait three hours.) Do people who have lived in America get on those countries' forums and proclaim, "Ha ha, there's nothing supernatural about it! It just causes a cramp"? How many join their discussions to say, "Actually, it's just a stupid American myth for which there is no evidence that we gussied up because we're a bunch of suckers"?

One of the best things I've ever heard

2009-01-31T22:54:00.001-05:00

Though it isn't something you should listen to at work:

By the way, Minchin is also an expert in conceptspace, as evidenced by this song:

Conceptspace and creationism

2009-01-31T22:04:00.003-05:00

Sometimes it is useful to imagine a conceptspace, some ethereal place where rests all possible attributes of all possible things. It is infinitely large, as large as the human imagination. I've found a lot of my old errors of thinking stemmed from an inability to deal with the huge size of conceptspace.

For instance, what if somebody told you that the probability of a coin toss resulting in 10 heads in a row were so low that such an event should be described as a miracle?

What is the probability of flipping 10 heads in a row, anyway? The answer is one in 1024. That's pretty rare! So should we consider it a miracle? (Put aside the law of large numbers for now. Yes, if you do 10 coin tosses 1024 times, you should expect a string of heads at least once. But I'm only talking about one set of coin tosses.)

Even if it's spectacular to witness, I don't think you should consider it a miracle. The problem is that the miracler is attaching significance to a string of heads. But HHHHHHHHHH is equally as rare as HTHTHHTTHT. We don't flip our wigs for any of the other 1023 combinations, except for a string of tails.

But "heads are miracles!" type thinking is exactly what leads intelligent design creationists to make such silly arguments as, "The improbability of life in our universe should lead us to believe in design." Ah, but we only have an understanding of our exact forms of life, because that's all we have to observe. We know very little about what other kinds of life could exist, although we have some pretty good evidence that life can exist in surprising kinds of environments, and natural selection allows us to understand how organisms can turn environmental "bads" into "goods."

Pharyngula takes down a similar argument about the improbability of life:

M(Ex) is a rather important value in Hazen's paper, defined as "the number of different configurations that achieves or exceeds the specified degree of function x". One of the points in that work is that there are many different ways to accomplish function x, so this can be a fairly significant number. To continue our poker analogy, the goal of a hand is to beat the other hands — that's our function x, to have a combination of cards that has a greater rarity than every other player's hand. M(Ex) is actually rather large, since the average poker hand will beat half of all other poker hands (and need I add, every round of poker will have one hand that wins!). How does Durston handle M(Ex)?

He ignores it. He simply sets it to 1. . .

What that means is that he only accepts one possible solution in an evolutionary lineage. He is estimating the probability that an organism will have precisely the genetic sequence it has, as derived from a purely random sequence, within a limited amount of trials. No incremental approach is allowed, and worse, it is the one and only sequence that is functionally relevant. The only way he imagines a sequence can be reached is by randomization, and all he considers is the conclusion.

As Julia Sweeney put it, it's like arguing that hands are so amazing because they're perfectly designed to fit our gloves.

Great news

2009-01-29T11:29:00.002-05:00

Kidney donation doesn't reduce lifespan. Which reduces any sense I could make of opposition to Singapore's organ donation bill.

Something wonderful

2009-01-29T11:22:00.003-05:00

Ron Amundson has a disclaimer on his home page for those interested in taking his Philosophy 310: Metaphysics course. Apparently he is tired of a certain kind of student.

(via)

An economic analysis of Battlestar Galactica's 3rd season

2009-01-26T02:29:00.003-05:00

Found here, a sample:

Why the hell was the MPK (SL: Marginal product of capital) so low on New Caprica?

They had a year before the Cylons showed up. And after that year they were still living in freakin' tents. TENTS! After a year! Lazy ass bastards!

. . .

We are talking about a civilization that has FTL capability here! And they can't fashion tree trunks into adobes.

Also, there's obviously stone - where the execution of Roslin, Zarek and others was gonna take place. Now, if you take stones, and pile one on top of each other, at some point you make these things called *WALLS*. It's not a long shot from there to make a *CEILING*. And then you got a house. But when the Cylons showed up there was no *walls* or *ceiling* or *houses*, just freakin' tents.

The end of the fourth season--along with the show--is finally in swing and I have been mildly disappointed.

For your education

2009-01-25T13:58:00.002-05:00

The Wikipedia entry for cooties:

From its original meaning of head or body lice, the term evolved into a purely imaginary stand-in for anything repulsive. In British English the term lurgy may be used in the same context. However, lurgy has a broader definition and the two concepts are not equivalent. In Great Britain the term mange in some places serves a similar purpose, broadly being a contactable virus that passes through touch or association with an 'infected' person. There are no actual symptoms of "mange" or outwardly visible signs. The terms "girl germs" or "boy germs" are also commonly used. In south Wales the term "scabs" is used, while in Scotland a similar condition is called "feechs". In northern Europe, "cooties" exists but only suggests that the "disease" is found in girls. In Sweden the phenomenon is called "tjejbaciller"[4] (literally "girl bacillus") and in Denmark it is known as "pigelus" (literally "girl lice"), and "drengelus" ("boy lice"). In Norway the form "guttelus" (literally "boy lice") exists parallel to "jentelus" ("girl lice"). In Finland it is known as "tyttöbakteeri" (lit. "girl bacteria").

. . .

Children sometimes "immunize" each other from cooties by administering a "cootie shot." One child typically administers the "shot" by reciting the rhyme "circle, circle / dot, dot / now you've got the cootie shot" while using an index finger to trace the circles and dots on another child's forearm. Yet another variation of the cootie shot is "circle, circle / square, square / now you have it everywhere," in which a child expecting an immunization is hoodwinked by a friend into being infected with cooties throughout his or her body.

Not to be missed

2009-01-25T11:41:00.005-05:00

This is an interview with Zimbabwe's central banker, who is responsible for an 89,700,000,000,000,000,000,000% inflation rate. Choice quotes:

But the United States maintains that the sanctions are targeted toward top members of Mugabe's regime, like yourself.
They do have an impact [on me] but it is the degree of suffering that the world is missing. It's not like I'm an international persona non grata; I often travel. Quite contrary to what the world has been made to believe, the sanctions are not really hitting the middle to high-income bracket. The impact of sanctions is to deny the country access to credit facilities, and then we are unable to import fuel. Then the poor suffer.

Your critics blame your monetary policies for Zimbabwe's economic problems. I've been condemned by traditional economists who said that printing money is responsible for inflation. Out of the necessity to exist, to ensure my people survive, I had to find myself printing money. I found myself doing extraordinary things that aren't in the textbooks. Then the IMF asked the U.S. to please print money. I began to see the whole world now in a mode of practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me.

Is it time to change course then?
Only a fool does not change course when it is necessary. Because economics is not an exact science, you want to be able to be relevant. The only constant is change and adaptation.

In November you shut down Zimbabwe's stock exchange. Will you open it again?
The stockbrokers were creating a money supply that wasn't there. I printed Z$1.5 quadrillion, but the exchange was operating with Z$100 sextillion. So I said, "Who is doing my job?" Unless there is more discipline and honor, the exchange will stay closed. I can't be bothered. I don't know when it'll open. It's a free market, a business which must be allowed to succeed or fail.

Many say you profit off the poverty of others.
That is simply not true.

I love how he adopts economists' rhetoric to excuse himself. A little bit of inflation can help during a recession, so the most massively inflated currency in the world must be vindicated. Economics is not an exact science, so we can try any old wacky thing.

The state of macro

2009-01-24T20:54:00.003-05:00

Will Wilkinson's tirade against macroeconomics reminded me of an interview with Stanley Fischer I read last semester. From A Modern Guide to Macroeconomics, first edition:

Why do you think there is more consensus amongst economists over microeconomic issues compared to macroeconomic issues?

In part because micro is less important and in part because, believe it or not, I think that the empirical standards are lower in microeconomics. Let me justify what I mean. When Rudi Dornbusch and I came to write our principles book I knew macro well but hadn't done much micro for a long time. I thought it was going to be a breeze, the macro part we know and the micro part is all clear - there would be a thousand empirical equations out there to illustrate demand and supply curves. Well the empirical backing isn't around very much - there are lots of stories and models but I don't think micro focuses on a set of issues in the same way that macro does. Microeconomists are not called upon to explain real-world phenomena to anything like the extent that macroeconomists are. They don't have a daily confrontation with policy makers, the newspapers and the capital markets. One of the very successful micro fields is finance, partly because they are really pushed to come up with something that will stand the test of a lot of very sceptical people.

I'm siding with the popular blogger over the star economist. I wonder if recent events have tempered Fischer's arrogance?

Obama's first day

2009-01-22T12:08:00.004-05:00

I've been telling people that the best thing Obama could do on his first day in office would be to release all of the documents on torture policy and other things the Bush administration so desperately tried to keep hidden from the public. For all his rhetoric about open government, I could still think of several political incentives against taking such action, so I was cynical.

Turns out he's made of good stuff after all. Obama has set us on the path of opening the government back up. Huzzah!

The Force

2009-01-17T19:43:00.002-05:00

This goes on a bit long, but it's an entertaining idea. Woo-woos love to use the word "energy" whenever it suits them. Ghosts have energy, vortices have energy, magnets and crystals have healing energy, spirits have energy. There's energy in your body, and dowsing rods amplify this energy. There's energy in everything, and telekinesis just employs this latent energy. And so on.

Of course, they don't really mean energy. Energy is a scalar physical quantity. Various kinds can be measured by ordinary physical instruments. There was a great bit an episode of Penn and Teller: Bullshit! in which the duo take a vortex tour of Sedona, Arizona. They then return to some of the "strong vortex areas" and measure the electromagnetic energy compared to nearby locales. In some cases they're weaker where the tour guide claims them to be the strongest.

Anyway, Jeff Wagg offers a useful trick when a woo uses "energy." Replace every instance of it with "The Force" and see if the meaning changes.

Colbert Report Intro Sequence

2009-01-08T01:46:00.002-05:00

Does that say what I think it does?
The frame was taken from the January 5th episode.

The parable of Jack Welch and Aaron Feuerstein

2008-12-30T02:10:00.002-05:00

I just stumbled across an old article on the profit motive. I agree with the general sentiment that greed as a motive for public behavior ain't such a bad thing. But the author (Radley Balko) really slips up when he writes,

Certainly, there's room for a large corporation to invest in its community, to sponsor local arts, education, and charity programs. But community investment plays into "ruthless profit-seeking" too. A company that is seen as a good "corporate citizen" is a company more likely to win favor and patronage from members of the community.

While a company's ultimate motivation for such behavior may be profit-driven, the favor and patronage comes from the anti-greed sentiments the author's disparaging. The "boo corporations suck!" crowd doesn't make much sense to me, but if those chants get us some profit-driven community investment, they can't be all bad.

Oh my gawd, shoes!

2008-12-24T18:35:00.003-05:00

My word of the day is magnanimity, which pretty much means benevolence except that it's more impressive to say.

Everyone knows about Muntazer al-Zaidi, the shoe-slinging Iraqi journalist who may be in jail for the next fifteen years. Mark Bowden wrote an article in today's Wall Street Journal suggesting that Bush ask the Iraqi government to pardon Zaidi. That's a great idea, right? Would it be some huge international faux pas for Bush to make such a request? I'm looking at you, Conflict Analysis and Resolution majors.

I used to work with a woman who often tried to get arrested (unsuccessfully). We would go to lunch and joke about appropriate projectiles to hurl at President Bush. If the perpetrator was a young American woman with a nerf missile, how would her experience be different from Muntazer al-Zaidi's? At least she'd finally be arrested.

The New Civil War

2008-12-20T17:06:00.004-05:00

On Salon.com:

The South's attempt to kill the North's auto industry is the latest battle in an ongoing conflict.

It's an interesting bit of pseudo-public choice reasoning. Of course, if we're going to play that game, Lind should immediately demand the repeal of the federal minimum wage, which puts workers in the south, where the cost of living and therefore wages are lower than elsewhere, at a disadvantage relative to workers in the north. Well?

Of course, his actual proposals in the article involve reducing the key advantage of federalism: competition between governments. He argues that we should institute more regularizing federal policies so governments in the south cannot make it more attractive to live there. How utterly backwards.

Weddell Seal Voices

2008-12-19T01:22:00.005-05:00

Listen to every sound clip on this page and be inspired. The scientist whom Werner Herzog interviewed in Encounters at the End of the World said that the seals "sound like Pink Floyd." Maybe Pink Floyd's songs would carry well underwater.

I don't know about the internet sometimes

2008-12-16T15:13:00.000-05:00

Link to the Past is a pretty good game.

Dante's Inferno: the Game!

2008-12-15T18:05:00.003-05:00

Back in the beginning of the Pretentious Days of Games Journalism* (i.e. when New Games Journalism became a thing), there was some discussion about postmodernism in games. One person conjectured that videogames were an inherently postmodern medium. At the time I thought it was a cute thing to say, but obviously false, at least for my understood definition of "postmodern."

Now I'm not so sure.

Do watch the movie on the site. Dante slams a giant cross into a zombie-demon-creature's skull.

*Disclaimer: I love Pretentious Games Journalism, and have participated in its creation.

Burglar held captive by ghost for 3 days

2008-12-15T18:03:00.002-05:00

No comment, aside from the tag on this post, of course.

Crow vending machine

2008-12-15T16:17:00.004-05:00

Welcome to my new co-blogger Katrina. As you might be able to tell by her first post, she's an amateur biologist. I'm an amateur economist, of course. So it's fun to stumble upon stories that combine both of our interests:

In June, Josh Klein revealed his master’s-thesis project to a flock of crows at the Binghamton Zoo in south-central New York State. The New York University graduate student offered the birds coins and peanuts from a dish attached to a vending machine he’d created, then took the peanuts away. Klein designed the machine so that when the crows searched for the missing peanuts, they pushed the coins out of a dish into a slot, causing more peanuts to be released into the dish. The Binghamton crows quickly learned that dropping nickels and dimes into the slot produced peanuts, and the most resourceful members of the flock began looking for more coins. Within a month, Klein had a flock of crows scouring the ground for loose change.

It's reminiscent of that old monkey economics study.

I recently finished Walter Williams' grad-level entry microeconomics course. On the last day, he reflected on a story from his graduate days. When he was taking the oral exam at UCLA, Jack Hirschleifer asked him, "Do whales have utility functions?" Williams replied that they do. Hirschleifer immediately countered, "Can you devise a test?" Well, it now appears that at least crows and capuchin monkeys have tested positive for utility functions. Don't be surprised when it's proven among other animals.

Get froze

2008-12-12T18:24:00.004-05:00

Robin Hanson writes:

You who agree, however, let other readers here know it isn't just the two of us. The rest of you, consider saving your life!

Well, I agree. Sign up for cryonics. If we're wrong about it, you're only out a life insurance policy.

(I'm a cryocrastinator for now. But as soon as I'm out of grad school and have the money. . .)

Introduction

2008-12-10T23:22:00.002-05:00

Hi, my name is Katrina and I love cephalopods like this one in the genus Magnapinna (aka Bigfin).

Oh man, do you see the tentacles on that guy? He looks like a jellyfish, idly waiting to ensnare prey as they swim through. No other squid feeds passively, so it would be a great example of convergent evolution. Maybe. They could also drag their long elastic tentacles across the ocean floor to snag delicious deep sea critters. No one has seen a bigfin eat.

Hackwatch: Off to an amazing start

2008-12-10T02:27:00.004-05:00

Radley Balko recently started something called "Hackwatch," where he chronicles rapidly shifting political opinions now that the political balance of power has changed. The first entry is absolutely priceless:

Your inaugural hack-tastic politico: Sen. Jon Kyl (R-Ariz.).

Here’s Kyl in 2005 on the subject of using the Senate filibuster to hold up Supreme Court nominations:
Republicans seek to right a wrong that has undermined 214 years of tradition – wise, carefully thought-out tradition. The fact that the Senate rules theoretically allowed the filibuster of judicial nominations but were never used to that end is an important indicator of what is right, and why the precedent of allowing up-or-down votes is so well established. It is that precedent that has been attacked and which we seek to restore….

My friends argue that Republicans may want to filibuster a future Democratic President’s nominees. To that I say, I don’t think so, and even if true, I’m willing to give up that tool. It was never a power we thought we had in the past, and it is not one likely to be used in the future. I know some insist that we will someday want to block Democrat judges by filibuster. But I know my colleagues. I have heard them speak passionately, publicly and privately, about the injustice done to filibustered nominees. I think it highly unlikely that they will shift their views simply because the political worm has turned.

Here’s Jon Kyl’s warning to President-Elect Obama last month:

Jon Kyl, the second-ranking Republican in the U.S. Senate, warned president-elect Barack Obama that he would filibuster U.S. Supreme Court appointments if those nominees were too liberal.

Kyl, Arizona’s junior senator, expects Obama to appoint judges in the mold of U.S Supreme Court Justices Ruth Bader Ginsburg, David Souter and Stephen Breyer. Those justices take a liberal view on cases related to social, law and order and business issues, Kyl said.

“He believes in justices that have empathy,” said Kyl, speaking at a Federalist Society meeting in Phoenix. The attorneys group promotes conservative legal principles.

Kyl said if Obama goes with empathetic judges who do not base their decisions on the rule of law and legal precedents but instead the factors in each case, he would try to block those picks via filibuster.

Programmers are nerds: News at 11

2008-12-07T20:34:00.002-05:00

If you're reading this on Google Reader (I highly recommend it), go to the home page and input the Konami code:

Up, up, down, down, left, right, left, right, b, a

Oh my God Frank Turner is good

2008-12-04T17:29:00.001-05:00

The Indirect Object Fallacy

2008-12-04T15:09:00.007-05:00

Oh, the joys of generalizing. Recently I've been thinking of how to generalize certain types of incorrect thinking I believe are related. I've taken to calling it the "Indirect Object Fallacy." I'd consider it a subset of the Mind Projection Fallacy. (Or see here if you want something more in-depth.)

The Mind Projection Fallacy goes like this: humans are ignorant. However, our minds don't deal well with absolute uncertainty, so we create models of how the world works. When we're really, truly ignorant, those models tend to mistake the states of our mind with the states of the world. Inherent properties of our brainspace become inherent properties of the world.

My (adorable) nephew is a good example. A while back--I think he was 4 years old--we tried to explain to him that his mommy was daddy's wife, Wes's sister, Tim's sister-in-law, grandma's daughter, and so on. He wouldn't have that--in fact, he broke down crying, saying that she wasn't a sister or any of those things, she was mommy. My nephew didn't understand that his viewpoint of "mommy" wasn't a state of the world, an objective label slapped on his mother, but a state of his relationship to someone. It's meaningful to say, in an objective sense, that someone is a mother, but I sure don't think of my sister-in-law as "mommy."

In the E.T. Jaynes' paper linked above, Jaynes is more concerned with probabilities. Jaynes sees probability, rightly, as human uncertainty, and he criticizes scientists for viewing mere ignorance as indeterminance in nature. As an example, we see the probability of a flipped coin landing heads as 0.5. However, this is a statement of human ignorance; in fact, if one were to model the very fine details of a coin flip, things change very rapidly. A coin flip is determined by the weight of the coin, the strength and angle of the flip, distance to the ground and gravity, air resistance, and so on. If all of these are modeled properly, one would be able to predict the outcome of a coin toss at a much higher probability than 50/50.

The Indirect Object Fallacy is an aspect of the Mind Projection Fallacy. It happens when someone mistakes a word that must, ultimately, have a specific indirect object as being universal. In the Overcoming Bias post linked above, Yudkowsky uses the example of a horrible alien monster carrying away a sexy woman with a ripped dress, as if a non-human would find a human woman sexy. Sexiness is a word that must have an indirect object--a woman must be sexy to someone or something. We can only refer to her as being universally sexy if, in fact, all possible minds find her sexy.

(Now, maybe my proposed name doesn't make much sense. After all, I just said that an adjective needs an indirect object, and don't verbs exclusively need those? But that might be part of the confusion. We get away with the Indirect Object Fallacy because it doesn't sound funny when we say things that fall in this category. However, if you can think of a better name, go for it.)

Now, what's particularly interesting to me about this fallacy, and why it deserves some kind of separation from Mind Projection, is how extremely emotional and defiant people get when you take away their universalizations.

As a (maybe petty) example, think about musical taste, or taste at all. John Stuart Mill proposed that we could determine objective taste democratically (if all the participants actually experienced the art in question), but we have some reason to believe he wasn't exactly on to something. A good way to dissolve the Indirect Object Fallacy is to ask yourself, "How would this work on the moon?" For instance, "How good is Bach on the moon?" The idea is not to consider how much you'd like Bach on the moon, but to consider how much the citizens of the moon (of which there are none) would enjoy Bach. Would they think he's better than 50 Cent? Would emo still be unlistenable garbage? Would 28 Days Later still have problems? Of course they wouldn't. All of those above adjectives require indirect objects. Bach isn't good or bad on the moon. He isn't anything. If no one exists to hear it, it's impossible to attach those adjectives.

But try telling that to these poor girls. They're absolutely devastated that their conception of "good" isn't universal. "How could they vote for that LOSER, THAT LOSER THAT DOESN'T SHAVE!?"

And if you think adults are immune to that sort of unwarranted passion for other people's tastes, you need to spend more time on videogame message boards.

A few other examples: The Labor Theory of Value, a key element of much Marxist and anarchist economics, is an Indirect Object Fallacy. It says that the value of an object lies in the cost, toil, or work required to obtain it. But "value" is one of those sneaky words. What's the price of gold on the moon? How much would you get if you worked 50 years to mine some gold, build a spaceship, and fly to the moon to sell it? Hint: the answer is nothing. Value always has to take an indirect object. Marx tried to get around this by tossing in the "socially-necessary" clause, but if that doesn't imply subjective value, I don't know what does. As much as we may care for the plight of proletariat, the value of an object, of work, of everything, lies only in others. Amusingly, subjectivism was the original answer to the question of value; the Labor Theory of Value only popped up to answer the water-diamond paradox, something economists have now much better answered according to subjective theory. I probably don't have to point out how much certain individuals cling to such an obvious fallacy.

Following my deconversion from Christianity, a friend asked me to read Tim Keller's The Reason for God, in which Keller commits the same fallacy. This post is here because I've been thinking about how amazingly similar it is to the Marxist mistake. He argues that widespread beliefs in universal morality are anchored in a de facto belief in God, so if we act morally we must believe in God, no matter what we proclaim:

We all live as if it is better to seek peace instead of war, to tell the truth instead of lying, to care and nurture rather than to destroy. We believe that these choices are not pointless, that it matters which way we choose to live. . . We can hold on to our intellectual belief in [moral relativism] and yet live as if our choices are meaningful and as if there is a difference between love and cruelty. Why would we do that?

Didja catch it? "Meaningful" requires an indirect object. I don't believe for a second that my actions are meaningful on the moon or to the plant-people of pj238. I simply believe that my actions are meaningful to the people my actions affect. Furthermore, one can replace others as the indirect object with God. So it's possible for someone to 1) believe in objective morality, 2) believe in God, 3) only care about morality being meaningful to that God, and 4) ignore the meaning to other people, thereby murdering and so on if that's what he believes God wants. (And, no surprise, this is exactly what we find.)

By Keller's argument, if the human race had a morality developed such that stealing and murder were right, and this were universal to humans, and we all tended to feel as though this were objective even though we couldn't say why, this would be equally good evidence for God. Sorry, but much like Marxists, you can't make this case without ultimately ascribing an indirect object. Just as a Marxist can't get away with objective value without adding "socially-necessary," a theist can't get away with objective meaning in life without adding "to God." Keller's argument is still for a subjective morality, he simply chooses a very big indirect object.

Addendum: It's possible to have even more fun with this. Keller might respond that, were our morality evil, this would be evidence for no God rather than a God, but he couldn't get away with that. Keller contends that our current morality is inexplicable in terms of evolution. If universal morality not explained by evolution is evidence for God--and widespread killing and stealing certainly seems to be counterproductive from an evolutionary standpoint--then my example still holds. However, it might be evidence for an evil God. In which case we can play around some more and decide whether the God Keller proclaims to exist is "good" or "evil" based on what our universalized traits are. I can think of at least one trait that's pretty darn evil.

Obomberman

2008-12-03T20:22:00.001-05:00

The War on Christmas

2008-12-03T17:44:00.003-05:00

For the record, I'm completely apathetic what people say to each other around Christmas. But I'm vehemently opposed to measures that try to force one traditional phrase over another.

Politics Isn't About Policy

2008-12-03T16:39:00.001-05:00

The original quote is from here. Will Wilkinson shares some evidence.

The Pope Ought Not To Be Catholic

2008-11-26T16:14:00.001-05:00

A musing based on a quote from the Pope and Bayesian decision theory.

Markets, Property Rights, and Air Pollution

2008-11-25T14:10:00.002-05:00

Matthew Yglesias explains the correct view.

Entropy

2008-11-10T18:22:00.004-05:00

PZ Myers explains a paper that calculates the amount of entropy decreased by the process of evolution compared to the amount of net energy the earth gets from the sun. The results, naturally, completely demolish the common creationist argument that evolution must violate the second law of thermodynamics.

I hope someone's listening

2008-11-07T15:56:00.003-05:00

There are rumors floating around that Robert F. Kennedy, Jr. is a potential appointee to the head of the Environmental Protection Agency.

I can't do any better than Orac's screed against him, except to concisely summarize: In supporting antivaccinationist conspiracy theories far past the point of any scientific evidence, Kennedy has shown himself unqualified to head a position that requires significant scientific input in its decision making.

Obama, don't do it!

Dinosaur Comics again

2008-11-06T15:18:00.000-05:00

This time on behavioral economics:

Sarah Palin and Noam Chomsky really are this stupid

2008-11-01T21:13:00.005-04:00

Radley Balko asks:

Republican vice presidential nominee Gov. Sarah Palin said she fears her First Amendment rights may be threatened by “attacks” from reporters who suggest she is engaging in a negative campaign against Barack Obama.

“If [the media] convince enough voters that that is negative campaigning, for me to call Barack Obama out on his associations,” Palin told host Chris Plante, “then I don’t know what the future of our country would be in terms of First Amendment rights and our ability to ask questions without fear of attacks by the mainstream media.”

So I see one of two options, here. The first is that Palin really is this stupid. The second is that she actually knows how stupid this statement is, but says it anyway because she knows the base will eat it up. Which means she is knowingly perpetuating a gobsmacklingly ignorant interpretation of the First Amendment.

So let’s hear it, Palin defenders. Which of those two options do you find more appealing?

I'm hardly a Palin defender, so I have no problem submitting that she really is this stupid. Unfortunately, so is the world's "top public intellectual." To wit:

In 1979-80 Chomsky intervened in the case of a French Holocaust denier, Robert Faurisson. Chomsky’s admirers habitually and indignantly insist that the support extended to Faurisson was nothing more exceptionable than a defence of free speech, which they claim Faurisson was being denied. The unboundedly credulous among those admirers – such as Neil Smith, Professor of Linguistics at London University, in his book Chomsky: Ideas and Ideals – even present Chomsky’s actions as heroic. . .

. . .the Faurisson affair had nothing to do with freedom of speech, but was a university’s response to a faculty member’s demonstrable fraud in presenting his arguments. By fraud, I don't mean just that Faurisson's claims about the Holocaust were false (though of course they were); I mean he was caught out by a genuine historian. . . in doctoring his source material in order to suppress those parts of it that clearly stated the existence of the gas chambers. With offensive sophistry, Chomsky (Chronicles of Dissent, 1992, p. 349) describes the charge of 'falsifying history' that was brought against Faurisson as 'a case where a fascist law was applied' and as 'standard Stalinist, fascist doctrine'. The truth is that 'falsifying history' is a literal and exact description of what Faurisson was proved to have done. Faurisson is a charlatan and a crook whose methods disqualify him from teaching in a university.

It's actually a very common interpretation of the freedom of speech. But I'll gladly cheer the media's right to attack foolish vice presidential candidates and a university's right to fire demonstrable frauds.

For a Chomsky defense of his defense, see here.

Tax incidence in the Obama health plan

2008-10-19T20:15:00.004-04:00

Taking a short break from grueling midterm studying to point out a post on Greg Mankiw's blog:

Most economists agree on these two propositions about tax incidence (covered in Chapter 6 of my favorite textbook):

1. It does not matter which side of a market you tax. A tax on buyers is the same as a tax on sellers. In particular, a tax on employers is equivalent to a tax on employees.
2. Because labor demand tends to be more elastic than labor supply, a payroll tax falls largely on employees.

Now consider the Obama health plan. A major element of the plan is an extra payroll tax on firms that do not give their workers health insurance. By the basic theory of tax incidence, this is equivalent to a tax on workers without insurance.

In other words, the Obama plan is much the same as imposing a health insurance mandate, backed up by the penalty of a tax surcharge on your earnings if you fail to have coverage.

One difference: If an individual buys his own health policy, rather than getting it through his employer, he still pays the tax. That is, the Obama policy continues, even reinforces, a strong policy-induced preference for employer-provided over individually-purchased health insurance.

Mankiw goes on to assure that this is just an observation rather than a "don't do it!" I'll go ahead and say that this is a good reason to rethink it. There are already lots of structural problems with tying health insurance to employment.

What to do?

2008-10-10T18:33:00.008-04:00

I've summarized some of the problems with democracy. Since the value of a single vote is marginally zero, voters have no incentive to curb their irrational beliefs or cure their ignorance. Politicians have every incentive to favor special interests over the average citizen, causing all of us to be much worse off. All voting systems are imperfect and can lead to highly variable results with the same populations and preferences. Strategic voting and agenda setting can influence election outcomes much more than even a large number of votes, causing everyone to be worse off.

Here are some proposals to "fix" democracy, given this knowledge.

1) Remove more options from the whims of democratic policy. This is Bryan Caplan's preferred option. He thinks the economy is too serious to be left in the hands of ignorant, dogmatic voters. He thinks something like an economics committee would make much better decisions. Nobel laureate and public choice father James Buchanan would prefer the amendment method. He supports a balanced budget amendment, which would make the costs of special-interest voting bear more immediately on voters' wallets.

2) Limit suffrage. Some want to raise the voting age, some want to impose income or land-owning restrictions. I don't think these are particularly good ideas. An education requirement sounds a little better, but education is fairly subjective. Some even think something as simple as solving a quadratic equation would be a better test than none at all. It sounds very elitist, and it is. But some of us don't think, "We should preserve the badness of democratic policy because doing otherwise would be elitist" a very convincing argument.

3) Futarchy. This is Robin Hanson's idea. Prediction markets are betting markets on future events. People put money down on, say, X being the outcome of an election, and get a return if they're correct. Hanson proposes we use these to "vote values, but bet beliefs." That is, he thinks we should use democracy not to elect representatives or to pass laws, but to elect a consensus on values. For instance, society could vote to increase the incomes of the poor. Then a betting market for policy would kick in: people would bet money on which policy would accomplish that goal. Whichever policy gets the best odds after a set period of time automatically goes into effect, and after the time allotted in the terms of the original bet, a measurement is taken and the success of the policy is assessed--again, based on the terms of the bet.

The benefit of futarchy is that people actually have to put money down to influence policy. If Caplan is right about rational irrationality, a futarchy would have more rational policy as it would be very costly for people to have input in the political system. Another benefit is that we wouldn't have to rely on the wisdom of politicians; the market would quickly skyrocket the odds of policies with the best wording. Technically, anyone could propose any policy.

The biggest problem should be obvious: lots of policy effects are hard to measure, let alone attribute a cause. Hanson thinks, however, if our final metric is broad enough (ie, high GDP), some correlation should be available.

"Predictocracy" is another government structure that's been proposed to take advantage of prediction markets. In predictocracy, betting markets make the full range of government decisions, except when the markets decide to relegate a decision to another mechanism. For a discussion about the pros and cons of each, see here and here. The final purpose, however, is to institute a mechanism by which people have to pay for forcing potentially wrong beliefs on others, to aggregate people's true, willing-to-stake-money beliefs, to find out not only what people believe but also how confident they are in those beliefs. Another nice benefit is that prediction markets do away with the problem of agenda setting. Competition, rather than an agenda setter, determines when and how policies go in effect.

4) Less agenda setting. This one isn't discussed as much in some circles, so allow me to get righteous for a second. The DNC and the RNC are illegitimate institutions and should be abolished. They have no constitutional authority. What elements of their authority derive from voters only derive from a small portion of the voting population--and not based on an arguable restriction like an education requirement, but an arbitrary one, the status of voter registration. Yet they wield enormous power over the outcome of U.S. elections. They have enough power to deny voters the ability to nominate a Constitutionally eligible candidate.

"But Colbert's run was a joke!" you say. I say, so? Colbert has the Constitutional right to make that joke. Where did the DNC get its authority to deny him a political presence? And if they have the authority to do that to a jokester, they have equal authority to do it to a serious candidate. Since when did politicians' motives determine how our democratic proceedings should evaluate them?

Back when people feared the Obama v. Clinton nomination run would end in a superdelegate vote, some in the DNC worried that this would be an undemocratic outcome. Did it not occur to them that, uh, in that case they should immediately change the system--that the potential for the DNC to override democracy is enough to render the DNC illegitimate in a democratic system?

Far be it from me to vehemently defend democracy--I've been attacking it for several entries, after all. But the presence of the DNC and the RNC, unlike the other "democracy substitutes" I've proposed, do nothing to fix any of the pathologies of democracy. They only enhance the problems of agenda setting and strategic voting. I can see that they fill some sort of organizational purpose, but they also unjustly influence and even override voter preferences.

5) Stop worshipping democracy. This is the easiest to accomplish. None of the problems of democracy will change if you don't first admit that democracy isn't sacred. I couldn't possibly say this better than Caplan:

One good thing to come out of the bailout: Barney Frank gave me another nice example of what I call "democratic fundamentalism."
If you don't want politics in this process, you probably shouldn't be handing it over to 535 politicians. That's democracy.

The first sentence, of course, is rhetorical: Don't hand things over to 535 politicians?! Ridiculous!

The second sentence is where the fundamentalism shines through: So what if we paid $100B in pork/bribes to pass this bailout? Since we did it democratically, you have no business criticizing us.

Notice: If someone said, "So the economy's tanking. That's capitalism," everyone would assume the speaker wanted to limit capitalism. But when someone says, "That's democracy," we assume the speaker wants to end the conversation. Democracy is truly the sacred cow of the modern world.

And there's no reason for it to be. Stop encouraging uninformed people to vote, stop insisting that voting for a scumbag is morally or civically important, stop defending the outcomes of democracy even if they're demonstrably terrible, and stop voting for nincompoops. Do these things until you and everyone else are no longer offended by the question of the sanctity of democracy. And then, fix democracy. If you don't like any of the above answers, use the evidence and ideas available to you to come up with better ones. But don't pretend it isn't broken or can't be fixed.

The morality of voting

2008-10-09T22:57:00.002-04:00

Sorry about the long delays in finishing the voting series. There are only two more entries, including this one. But grad school has been wiping me out.

Is not voting immoral? That it doesn't matter much doesn't matter much. As Tyler Cowen points out:

Let's say you were asked to join a firing squad of ten expert marksmen, all shooting at an innocent man, and so good they never miss. Still, they want a louder execution with eleven bullets instead of ten. In return they will donate five dollars to your favorite charity. Should you join and shoot?

Most of us would say no, even though your bullet has no chance of changing the final outcome. Once you buy this conclusion, it is easy to see why people might vote. Most moral judgments reflect some mix of estimated marginal and average products, not just marginal products alone. In part morality means the ability to take a longer-run, universalizable, or more rules-based perspective.

With which I agree. After all, I'm a vegetarian.

But the "civic duty" argument for voting may still be deeply flawed. He continues:

The best argument for not voting is the following: in lieu of voting you should earn extra income and donate it to the very poor. Or perhaps take the day off and work at the soup kitchen. After all, why should voting be the most important collective good you can contribute to? And even if voting has a special importance, maybe you should work harder, earn more money, and use the funds and your time to get other people to vote. Spend a day driving people to the polls rather than voting, for instance.

If my previous analysis of the expected value of voting is accurate, then voting is almost certainly one of the least important collective goods. But more importantly, what Cowen only slightly addresses is the case of voting being a public bad. After all, bad voting is pollution, a negative externality. If one is ill-informed or biased, that person's civic duty might be to not vote. Jason Brennan has a paper on this idea, or see Will Wilkinson for further thoughts.

In the U.S., the two-party system has ensured that most people will vote for "the lesser of two evils." Imagine two candidates; one is a war-mongerer who will kill many people in an unprovoked war, while the other is an economic protectionist who will shorten people's lifespans and increase infant mortality rates. The first candidate will likely injure and kill many more people, but does the second is still a butcher. Reconsider Cowen's argument. If marginally ineffective actions can be considered very immoral, isn't voting for either of these two candidates immoral?

Of course, that's very simplistic. Either candidate will have a position on a huge number of policy decisions. On net one could argue that the "moral" candidate is the one who maximizes some function (life length, life quality) for the most people, but there could also be many more "non-viable" candidates who would do even better.

These are just some musings. The point is, it's not at all clear to me what one's moral duty is when it comes to voting. To put it another way, consider this post from Helen Rittelmeyer:

[W]e aren’t all special political snowflakes, and we have to pick teams. The rules would be different if politics were meant to be a process for discovering truth, but it isn’t, not even in a democracy. You stick with your team and help it win, and, if you have problems with the ideas your team is promoting, you take it up with them outside the political realm.
. . .
I should distinguish between two slightly different claims I’m trying to make: that elections are about tactics and not ideas, and that democratic dialogue is about pulling for your team and not about discovering truth through argument. Even assuming that you find the first statement both false and overly cynical (which, on some days, I do), there’s still the second. If you want a clash of ideas that eventually leads to an agreed-upon truth, try philosophy. This is democracy.

If she is considered more moral than a non-voter, I want nothing to do with the moral calculus that returned this result.

(Read the response to that post, by the way. It's good.)

Voting Errata

2008-10-01T17:17:00.003-04:00

How Much a Vote? Free Speech and Democracy

I previously explained why I wouldn't pay two cents for another person's vote in a national election. Actually, thanks to corruption, there's an interesting paper about the subversion of Democracy by a licentious ruler. Abstract:

Which of the democratic checks and balances - opposition parties, the judiciary, a free press - is the most critical? Peru has the full set of democratic institutions. In the 1990s, the secret-police chief Vladimiro Montesinos systematically undermined them all with bribes. We quantify the checks using the bribe prices. Montesinos paid television-channel owners about 100 times what he paid judges and politicians. One single television channel's bribe was four times larger than the total of the opposition politicians' bribes. By revealed preference, the strongest check on the government's power was the news media.

Of course, there's a kind of reverse-causality going on here. Democratic institutions ensured the value of the media and free speech. Voters, had they known about Montesinos' full behavior, would have outed him immediately. Montesinos apparently found this possibility much more threatening than individual in-government votes challenging his policies.

Despite the presence of rational ignorance, democracy seems to keep rules from really pissing off voters. Which is great, but we still get things like the Iraq War. How do you think that one would have turned out had there not been so much debate in the media? Just something to think about. The input of the media has enormous effects on policy, or at least Montesinos seemed to think so. Which leads me to think that ideas like the Fairness Doctrine are extremely dangerous, much moreso than limiting suffrage.

Tiebout Competition

Imagine you're at your local DMV. You've been standing in line for God knows how long, been pushed back and forth between offices to sign papers, had any number of problems that people have at these places. Finally, you shout for the whole office to hear, "Damnit, I'm not going to stand here and take this anymore! I'm going to take my business elsewhere!"

Of course the embarrassment of the laughter is enough to make you leave anyway.

Never underestimate non-pen-and-ink forms of voting. Tiebout competition, or "voting with your feet," is a powerful incentive for institutions to cater to your preferences. Some opponents of school voucher programs claim that the power of exit will lead only the most motivated parents to exit, instead of staying in the distraught school system that they're needed. It's an argument I find absolutely absurd. Have motivated drivers made the DMV any better? Did all the best and brightest in Soviet Russia make the poorer that much better off? In fact, weren't they almost universally either part of the oppressing party or imprisoned or killed? Without the right of exit, what threat can you make to a monopolist that will give incentive for a change in policy?

Along with a free press, Tiebout competition has the potential to be more influential than voting. In fact, this is pretty much the economic case for Federalism. Free movement between countries, to the degree that their respective governments can't even question one another's legal documents, allows competition between laws. There's a reason corporations flock to Deleware.

There are still things we, nationally, want to take off the table--the ability to censor the press, for instance. Environmental regulation. And so on. But this also makes a case against the nationalization of certain regulations like the minimum wage. For instance, when the cost of living varies by state, businesses in high cost of living states advocate federal minimum wage laws to suppress their competition (pdf). There are countless other examples, and if Federalism hadn't so waned since the Civil War, we might not have such a problem with rent-seeking.

Another brief interlude

2008-10-01T17:10:00.003-04:00

Since I was recently in Denver, I thought it would be fun to post about this shirt, made by the police union to commemorate the 2008 convention:

Ha ha! It's funny because they abuse the power they're given and get away with it. Ell oh ell!

"The lesser of two evils": an indifference analysis

2008-09-28T16:54:00.003-04:00

It's time to get graphical again.

In economics, we talk about indifference curves. An indifference curve represents a set of tradeoffs between two goods to which a person is indifferent. To derive an indifference curve, we require a few assumptions. The first is transitivity--a person cannot be infinitely milked by being sold A, B, C, and A in succession. This would imply that preferences must be consistent and two indifference curves on the same graph can't intersect. Another is the existence of utility--a person derives utility by consuming the goods in question (but only to a point, as you'll see). The last is that more consumption of any of the goods, and no less of another, yields more utility (again, only to a point, and there's at least one major exception to this rule). There are some others, but they're unimportant for this analysis.

When we add it all together, we get something that looks like this, with X and Y both being goods of some kind:

In the above graph, I2 is preferred to I1 because every point on the line has more of every good than in I1. The arrow represents the direction of utility--as you move northeast on the graph, the person in question gains more utility. If we were to zoom out quite a bit, it would look like this:

Indifference curves are ultimately circular. After a certain point, a good becomes a bad (for various reasons)--something which gives negative utility if there is any more of it. So, to the southeast of the Bliss Point, X is a bad. To the northwest of the Bliss Point, Y is a bad. To the northeast of the Bliss Point, both X and Y are bads.

Now imagine that X and Y are not goods but policies. A person will still have policy preferences that resemble an indifference curve. Perhaps Y is "funding to artists" and X is "welfare." There is not unlimited money in the economy, so posing the two as a tradeoff makes sense.

Now imagine two people with the following indifference curves:

The line between the curves is the tangent to both circles. The line connecting the two Bliss Points is, necessarily, at a 90 degree angle to the tangent line. Furthermore, any point along the tangent line that is closer to the intersection between the two lines than another point on the same line is preferred by both voters.

However, as we've seen with our cyclical voting model, three voters with intransitive choices (ie different bliss points) can't choose a "preferred" candidate. The indifference curve analysis allows us to extrapolate the agenda-setter problem outward to degrees. Instead of choosing among three candidates, an agenda setter can pose a vote between any two points on an indifference graph. In the following graph, A, B, and C represent three voter Bliss Points, while Z0-Z4 represent policy proposals:

Since I'm stealing this example, I might as well quote Alex Tabarrok's analysis:

Suppose that the status quo is point Z0 and Z1 is brought to vote. Voters A and C prefer Z1 to Z0 and so Z1 will beat Z0 by majority rule. . . Can we find a point which beats Z1? Yes, note that line Z2Z1 is perpendicular to line BC and along this perpendicular Z2 is closer to BC than Z1. By our rule it follows that [B and C vote for Z2 over Z1]. Similarly, [A and B vote for Z3 over Z2 and A and C vote for Z4 over Z3]. . . If we don't limit the number of votes, majority rule is incapable of choosing a "best" policy, voting will cycle over an infinite number of issues without ever reaching a stopping point. Suppose, however, that only four votes are taken so the final policy is Z4. But everyone prefers Z0 to Z4! Majority rule can lead a group of people to choose a policy which everyone agrees is worse than another possible choice!

This is no different than the problem explained in the last entry--agenda setting of pairwise voting is enormously more influential than voting itself.

In the U.S. system, third parties are inviable strategically, not procedurally. But adopting a "lesser of two evils" strategy rather than a "vote your preferences" strategy yields results very similar to agenda-set, pairwise voting. In other words, it can lead to Pareto inefficient--demonstrably suboptimal--results.

Strategic voting and agenda setting

2008-09-28T13:16:00.004-04:00

A brief note on strategic voting:

In the last entry, I examined problems with voting when people voted, honestly, their values. But people seem not to do that. What's the rejoinder if you claim to be voting for a third party? "But you're wasting your vote!" People seem to vote a mix of honestly and strategically. Candidates who are seen as "most electable" win primaries. Third-party candidates, which can match many people's values more closely than first-party candidates, get very few votes in the United States because everyone expects everyone else to vote for a dominant party. This just adds another problem to aggregating societal preferences.

Strategic voting is difficult because we can't read others' minds. But through polls and prediction markets, we often have an idea of what other voters are thinking. In elections with runoff or multi-part elections like United States primaries, information of other voters' preferences are revealed and strategic voting becomes easier. Voting systems like the Borda Count, which give weight to individual second-order preferences, are very susceptible to certain types of strategic voting. Strategic voting in final-round, two-person elections, however, is useless. When there are only two options, you cannot gain anything by voting for your less-favored candidate.

Here is an online tutorial on the basics of insincere voting; I don't think I can create or find better examples than the ones it offers. If you're curious about the complications of insincere voting, check it out. But for the purposes of this series, it's enough to say that voting based on your expectations of other people's votes is probably not going to yield a social optimum, especially if everyone does it. It may, however, yield individual optimums.

Agenda Setting

Let's return the the set of voter preferences that are intransitive:

A	B	C
B	C	A
C	A	B

Certain voting systems, like cumulative voting or approval voting, may solve this gridlock depending on how much each voter dislikes each candidate, but if they can't, the voting cycle can't be solved without an agenda that pits two candidates against each other, and then the victor of that against the remaining candidate.

Assuming honest voting, imagine that the agenda setter picks the order A v. B, Winner v. C. In this case, A wins the battle against B and C wins the battle against A. Now imagine that the agenda setter picks A v. C, Winner v. B. C beats A, B beats C, and B wins. And of course the final possible combination would yield A as the victor.

So in the case of an intransitive election, the winner is determined more by the agenda setter than by the voters.

This can lead to Pareto inferiority. If an option is Pareto inferior, there exists some other available option that makes everyone better off and no one worse off. To steal an example (pdf), imagine this society with three voters and seven candidates, A, B, C, D, E, F, G:

V1	V2	V3
A	C	D
B	D	A
C	A	G
D	F	B
E	G	C
F	B	E
G	E	F

Now the agenda setter runs the vote as follows:
C v. D: C wins.
B v. C: B wins.
G v. B: G wins.
F v. G: F wins.
E v. F: E wins, and has now won the election.

But all three voters prefer A, C, and D to E! E is Pareto inferior. Even if the agenda setter isn't trying to rig the election, doesn't have a clue about voter preferences, and has no preferences itself, it has still ensured an outcome that nobody wants.

An agenda setter with enough power and knowledge of voter preferences can rig an election, however. For instance, in the U.S. Congress, the Speaker of the House acts as an agenda setter, and determines which issues Congress will vote on first. However, the Speaker is also a congressperson who can introduce new legislation. Say a vote is upcoming on two bills or options, A and C. (Either one could represent "no action" rather than an actual bill.) A is preferred to C, but the Speaker hates C. If the Speaker expects Congress to have intransitive preferences, he or she can introduce legislation B, which is preferred to C but not to A, pit B v. C and then A v. B. A will win.

"But does this happen?" It's hard to say. There are some supposed examples in history. This pdf nominates the 17th amendment in 1913 as a successful instance. A Speaker could also push votes on undesired legislation as far back in time as possible while counting on external factors to sway public opinion. Agenda setters have an extraordinary amount of power.

Apart from congressional staff and other officials, political parties themselves are enormously powerful agenda setters. During primaries, political commentators love to watch candidates gain momentum as they win states in succession, but for some reason very few of them ever ask, "Who gave the RNC and DNC enough collective power to rig elections that way?" It's a pretty important question! The agenda setter in the above example has enough power to win E the election even though nobody likes E. The RNC and DNC have the exact same power. They are bodies whose staff are elected by a fraction of the population, whose decisions affect the entire population, who have no Constitutional authority or even recognition, yet who get to decide not only what order states will vote on candidates, but also when they can, what voting system they will use, and even who can appear on the primary ballot. As if the voters themselves shouldn't have maybe a little bit of say in that last decision. They even have "superdelegates" or "delegate selections" which can take even more information power from voters in election decisions.

Agenda setting has implications for the "lesser of two evils" voting strategy. Stay tuned.

Societal preferences and Arrow's Impossibility Theorem

2008-09-27T13:09:00.008-04:00

This is gonna be a heavy one. Hunker down.

In general, the justification for democracy is that it legitimizes the state and, as a corollary, is a way of determining preferences on a societal level. The state is, in traditional Lockean philosophy, here to serve us, and democracy acts as the input mechanism by which the state learns our preferences and is forced to enact them into policy.

Which is great. I'm all about keeping politicians in check. Democracy is highly imperfect, but we still see lots of good coming out of it, major declines of mass-death famines for one.

But what about that whole societal preferences thing?

Take a mini-society with three voters V1, V2, and V3; three politicians A, B, and C; and preferences for each voter ranked 1, 2, and 3. Assume no strategic voting, ie voting based on expectations of others' votes, is taking place (and this assumption holds for the rest of this entry as well):

	V1	V2	V3
1	A	B	C
2	B	C	A
3	C	A	B

Notice a problem? Who should this society elect?

If you said, "It depends on what voting system they employ!" you'd be right. Think of all the ways you could do this. In a simple plurality rule system, nobody can technically win--they each get 1/3rd of the vote. To deal with a tie you could try cumulative voting. Give each voter 4 votes to cast. But if they each cast all four for their favored candidates, you still have a gridlock. If you tried a Borda count, in which everyone writes a rank order of their preferences and each preference is given diminishing votes, you'd still have a gridlock. Probably the best way to solve such a tough voting cycle is to pit two candidates against each other and then pit the remaining two against each other. But this has a huge problem--the order in which you face the candidates off determines the outcome! (More on that when I write about agenda setting.)

In economics, this would fall under the standard definition of irrationality because it's "intransitive." If A > B > C > A, you can sell a person, in succession, A, B, C, and A again infinitely. But societies aren't individuals. They can be and are irrational.

Which brings us to Arrow's Impossibility Theorem.

Arrow begins with six axioms--qualities that he thinks, justifiably, any voting system should have:

1) Non-dictatorship. If it were a dictatorship, it wouldn't be a democracy.
2) Non-imposition. "Imposition" is non-dictatorship dictatorship. That is, non-democratic rule from some authority that isn't a dictator. As an example, see the Bill of Rights. Laws prohibiting free speech are off the table in our democracy--our constitution imposes limits on us. But in general, we want things to be open to change, hence why even the Bill of Rights could be rescinded by a large enough vote.
3) Unrestricted domain. We want all preferences taken into account, and therefore universal suffrage.
4) Transitivity. A > B > C > A is intransitive. We want our voting system to turn out transitive results, ie, A > B > C.
5) The Independence of Irrelevant Alternatives. If society transitively prefers A to B and both A and B to C, and C falls in popularity, it should have no bearing on society's preference of A to B. If C is irrelevant, it shouldn't affect the election's outcome.
6) Monotonicity, aka positive association. If A becomes more popular relative to B, this should translate into positive results for A rather than negative results. A rise in popularity shouldn't hurt a candidate.

Given these six axioms, is there any imaginable voting system that satisfies all six?

No. It is impossible to devise a voting system that does not potentially violate at least one of Arrow's six axioms. In his original paper, there's a mathematical proof of this, to which you needn't be subjected. Instead I'll write up some examples to make things more clear.

I shouldn't need to address items 1-3. Obviously if we have a dictator, a near-dictator, a one-person-only voting system, etc., the problem of aggregating societal preferences disappears by being ignored. I've already shown an example for item 4. In the above preference ranking, most voting systems cannot solve intransitivity.

So let's cover a voting system that can violate axiom 6 (monotonicity), plurality with runoff. In plurality with runoff, all candidates are faced against each other and the last-place candidate is dropped out. The remaining candidates go through the vote again until a winner is declared.

Imagine a society with 27 voters, with the following order of 6 preferences for politicians A, B, and C:

6	6	6	4	2	3
A	C	B	B	C	A
B	A	C	A	B	C
C	B	A	C	A	B

What would the results look like if we ran the election now? B gets 10 votes, A 9, and C drops out of the election with only 8 votes. When the vote is taken again, A gets 15 votes and B 12. A would win.

Now suppose that, before the election, A gives a really nice speech and gains some popularity. Voters' preferences change to the following:

9	8	6	1	0	3
A	C	B	B	C	A
B	A	C	A	B	C
C	B	A	C	A	B

(If you want to double-check the math, the two voters from column 5 shifted A upward, placing them in column 2, and three voters from column 4 shifted A upward, placing them in column 1.)

Who wins the election now? A gets 12 votes, B gets 7, C gets 8. B drops out. When the votes are run again, A gains 1 of B's votes, taking it to 13, while C gets 6 of B's votes, bringing it up to 14. C wins.

Yes, that's right. A became more popular and it cost the election!

Let's look at a voting system that can violate axiom 5, the independence of irrelevant alternatives. In a Borda Count, voters are asked to rank their preferences, and votes are allocated accordingly. So if I marked on my voting sheet 1) A 2) B 3) C, this would give 2 votes to A, 1 vote to B, and 0 votes to C. In a Borda Count, the least unpopular candidate wins.

Imagine a society with 7 voters and 4 candidates, A, B, C, and D. The Borda Count allocates votes such that the first-ranked candidate gets 3 votes and the last-ranked candidate gets 0. The voters vote in the following way:

3	2	2
A	B	C
B	C	D
C	D	A
D	A	B

When we tally the votes, we get A = 11, B = 12, C = 13, and D = 6.

Suppose D becomes more popular, such that we now have:

3	2	2
A	B	C
B	D	D
C	C	A
D	A	B

Now A = 11, B = 12, C = 11, D = 8. D became more popular, but this affected A's standing relative to B. But if society preferred B to A, why should D's popularity matter?

By now you should get the picture. There is no voting system that can make societal preferences properly aggregable. And changing voting systems can give an election wildly different results. The only way around this is if there are no transitivity problems to begin with--that is, if a society is very homogenous, Arrow's paradoxes become less important. At the same time, however, if society is so homogenous, voting as a decision-making tool also becomes less important!

How do we solve this quandary? Well, by arguing about which violations are worse than others. For instance, I think it's great that the Bill of Rights violates non-imposition. I think we could do with a bit more of that. But that's "elitist." You hear John McCain kvetching very often about how darned mean politics is, but you never hear him advocating a Borda Count, which would put the least objectionable candidate in office. Why not? And why's everyone so gung-ho about plurality? Compared to the independence of irrelevant alternatives, I think intransitivity is a bigger problem. Besides, in a multi-party plurality, extremely unpopular parties can gain the most power. Imagine if there are 10 parties. The people who favor the 9 other parties can all think the 10th party is the absolute worst, but if they're all divided roughly evenly except for a slight advantage to the 10th, the hated 10th wins! Americans tend to be happy with their two-party system, which resolves the problem of intransitivity by putting all positions on a two-party spectrum, but the association of positions is completely arbitrary! Why on earth should an advocate for free markets also support a pro-life position? How are they remotely on the same spectrum, ideologically?

It's obvious to me that the Impossibility Theorem is a big problem, but it's not even discussed, even a little bit, in our political arena. It certainly puts a new light to the old canard, "If you didn't vote, you can't complain." How absurd. Our entire voting system was decided without our consent hundreds of years ago, before anyone had even thought about the problems in deciding between various ways of counting votes. Since Arrow published this paper, nobody in our government has sat down and said, "Hey, maybe we should have a debate about changing our voting system." There's never been a national, public discussion about which of Arrow's axioms is best to violate. Nobody's even considered it! I can't complain about that? I can't complain that the outcome of an election is determined by what voting system is in place much more than it will ever be by my vote? Is that a joke? If I can't complain about it, how are politicians supposed to know I even care about it?

And there's a funny question: if we did want to change our voting system, how would we go about doing it?

Would we. . . take a vote?

Deadweight loss

2008-09-27T12:18:00.003-04:00

I mentioned that I would speak more on deadweight loss, and I had planned to in an entry about the incentives of interest groups in a democratic system, but I found it impossible to discuss politicians without discussing businesses at the same time, so in a more basic entry I want to review the theory of monopoly and the cause of rent-seeking. Economists love graphs!

In economics, we have "competition" if a large number of firms or buyers can offer and buy a product, good, or service. We have "monopoly" if only one firm can offer a product and "monopsony" if only one buyer can buy a product. Monopsony's unimportant for the current discussion. A monopoly exists if there is one seller. There can be complicated cases of monopolistic competition--that is, partial monopolies--and oligolopies, collusion among sellers to form a many-seller monopoly. But the following analysis approximates the effects of all monopolistic market restrictions.

Here's an ordinary supply and demand graph--Quantity of a good on the x-axis, Price on the y-axis, Demand sloping downward--more of a good demanded as the price is lower, and Supply sloping upward--more of a good supplied as the price is higher. Also labeled are P1, the price of the product at the equilibrium, Q1, the quantity of the product sold at that price, CS, the consumer surplus, and PS, the producer surplus.

If it's not obvious what consumer and producer surplus are, look carefully at the lines. As the Demand line extends above P1, it portrays all prices consumers would have been willing to pay for given quantities of the product. Therefore, the triangle area above P1 and to the left od the Demand line is money that consumers are saving by the market being in equilibrium. Likewise, producer surplus is money the producers are making by being able to offer a price at a point higher on the Supply line. If it's still confusing, well, I don't have enough space in this short blog post to make it clearer. But I can try if you ask nicely.

Now, in the case of monopoly, the product is priced differently:

Because the producer is no longer constrained by competition, it is able to set the price at P2, a higher price than before, and sell only quantity Q2, a lower quantity than before. The producer chooses this quantity because, even for a monopolist, S (or marginal cost) = MR is always the most efficient production function, where MR is marginal revenue. It makes no sense to produce more of a good if the marginal cost of that production is higher than the marginal revenue. The producer surplus is now the area beneath P2, to the left of Q2, and above S--greater than it was before. The consumer surplus is now smaller. The little triangle this creates, labeled DWL in the graph, used to be a combined area of consumer and producer surplus, but now it's what we call deadweight loss.

Deadweight loss is technically the complete dissolution of consumer and producer surplus. That is, rather than money being spent on any one particular thing, it's money that vanishes into thin air, disappears, goes down the drain never to return. As you should be able to see from the graph, the size of the deadweight loss is determined by the slope of the Supply and Demand functions. So it's possible for the deadweight loss to be enormous, to the tune of billions of dollars, while the producer surplus is only in the millions.

If it's too hard to think of deadweight loss as money that's simply disappeared, think of the non-price ways people allocate in the case of monopolies. Waiting lines. Unhealthy or undesirable substitutes. Black markets. The cost of these and more are lumped under "deadweight loss."

This is why businesses seek to be regulated--why else would florists need to be licensed?--and why regulation is so costly.

Dirty politicians and rent-seeking

2008-09-26T18:00:00.003-04:00

People who talk to me about politics find me pretty cynical. Especially the Obama fans, who think he's some kind of political Messiah ready to enact Change and fix our country with his breath of life, are annoyed when I say, "He's just another politician who will screw people over in favor of vested interests."

It sounds like I'm being harsh on politicians, and I am. But I should set the record clear right now that I'm being somewhat hyperbolic. I do not think Obama is a bad person, a dirty politician, a jerk, or even a remotely ill-intentioned person. I think he is a fine, upstanding individual with some good ideas, scores of intelligence, lots of hope for the future, and a real motivation to do great things in the service of our country.

I just don't think any of that matters.

Once again, we can't analyze people by their intentions. Institutions shape our decisions. When you make an ordinary person a guard in a fake prison, he becomes an atrocious bully. And when you make a person a ruler in a country of crummy voter incentives and a median voter quagmire he becomes, well, a politician.

First and foremost, this is because, for a politician to do any of the things they may want, they have to get elected. They can want to get elected for the most sinister or the most noble of reasons. They can want the income and prestige, or change for the better. It doesn't matter. Unless that politician makes it to office, they can't do squat.

So how does one go about getting elected?

1) Pandering to people's rational irrationality.

2) Pandering to the median voter.

3) Taking advantage of people's rational ignorance.

2 means that competing politicians' actions will be similar. 1 and 3 mean doling out favors to rent-seekers!

"Rent-seeking" is a general term in economics for seeking a monopoly profit. There's plenty of debate in econ about how monopolies come about, but without question, the easiest way to obtain one is to get one from the government. Many people don't understand this point--the common belief seems to be that regulation is bad for industries. But this can't possibly explain why they seek to be regulated so often. I promise you it's not social responsibility!

Businesses seek regulation as protection from competition. If you have to get a government license to be a doctor, all would-be doctors who can't pass the tests are stricken from the market. If there's a sugar quota, foreign sugar producers are reduced from the market. If there's a steel tariff, foreign steel producers are reduced from the market. If there's airline regulation, smaller airline startups can't enter the market.

Businesses make "public interest" arguments to justify their government-granted monopolies, some of which (doctors) are more convincing than others (florists). But if the general economic argument for competitive equilibrium is true, almost all of these arguments become much less convincing. For more on this, see this article, especially the section "Bootleggers and Baptists."

Ok, but so what? Politicians pander to interest groups, not all of which have the "public interest" in mind. But consumers can start a lobbying organization for consumer advocacy, right? All of the special interests will cancel each other out in the end, right?

Oh, were Mancur Olson still alive, and were The Rise and Decline of Nations more easily summarized in a short blog post. But I'll do my best.

Rational ignorance tells us that small group size is actually an advantage. There aren't as many sugar farmers in America as there are farmers in general. The American public has less of an eye on smaller interest groups. Again, most people don't know about the sugar quota.

Rational irrationality tells us that people get utility from holding wrong but popular beliefs--from voting their biases. So larger interest groups like farmers in general, the AARP, etc. can manage efficient advertising campaigns to get people to rally for their protection. If people have an anti-market bias, populist public interest stories sound much better, despite what the data actually say.

Dispersed costs (ie one cent extra for every can of Coke) tells us that most people will be indifferent to the costs born on them by rent-seeking.

Finally, the above all implies that dispersed benefits (ie one cent less for every can of Coke) tells us that people will not form together to solve collective action problems. The costs of forming an interest group, paying for membership, keeping up on legislation, and advocating to Congress are too high for most people to be interested. In this case, a small size is not an advantage, because it would be one small-sized group advocating against every single rent-seeking interest group in Washington. Who do you think the politicians are going to pay attention to? A large, effective group like the AARP simply cannot form--the benefits are too meager per person, even though for the aggregate economy we're talking billiions and billions and billions of dollars.

Furthermore, according to Olson, evidence shows that older interest groups have much more power than newer ones. This fact may be due to rational irrationality--older interest groups have more time to implant themselves as purveyors of public interest, no matter how much they screw people over. (Hello teachers' unions.)

So if a politician wants to get elected, they've gotta pander. Hard. They have to promise favors even as they claim to be fighting against such things.

Note that this is not an argument that money wins elections. Politicians are pandering for votes--large numbers of votes at a time. After all, chances are if you're a member of an interest group, you're going to vote on that pet issue above all else. What easier way for a politician to gather the votes of America's farmers than to promise more money to them?

A politician has no choice but to screw over the vast majority of people in favor of special interests if they want to win an election. Principles don't matter. Incentives do.

"So vote for the politician who favors the best interest groups!" I was told once. Please. There are 34,000 registered lobbyists in Washington, D.C., all of which represent a combined enormous number of organizations. Unless you have only one single pet issue, the above suggestion is a non-starter. And if you're a libertarian like me, very few of those lobbying organizations are on your side, and thosethat are do not necessarily congregate to a specific party. And just think: each of those lobbyists has vastly more influence on the final outcome of public policy than your vote ever will.

Both McCain and Obama claim to be against special interests and have passed laws limiting their influence on politicians. But Campaign Finance Reform adds another problem--that is, the status quo bias. Incumbent politicians have a huge statistical advantage over non-incumbents. Ideally, we want non-incumbents to be able to make up that difference, and campaign finance laws limit their ability to do so.

Seem kinda hopeless? Later I'll address how we could potentially fix this problem, among the others I'm discussing, without giving incumbent politicians a big handout.

The Median Voter

2008-09-26T16:29:00.004-04:00

Note: The series on voting is now tagged with the "Voting" label, which you can click to read them all on the same page.

Before I get into what makes politicians tick, I should go over the Median Voter Model, which applies iff (if and only if) we're discussing a choice between two candidates. It's time to get graphical! God, I love being an economist.

Since we're only talking about two candidates, we're talking about degrees between two extreme positions. Of course, in the real world, you can mix and match positions on all sorts of issues. But in the United States we like to pretend that you can only be something between liberal and conservative, and we vote accordingly, so this model applies pretty well.

So we'll label extremely liberal as A and extremely conservative as B. Imagine a spectrum of positions between A and B:

Yes, I realize I'm a masterful artist. Demarcated is the midpoint or median position between the two extremes, and the percentage of voters lying on either end.

Now assume that everyone in the population is adopting a "lesser of two evils" voting strategy. This may not be accurate--perhaps the extremes don't vote out of frustration. This would affect the analysis significantly, because it would change the actual median point on the graph. But, empirically (in the U.S.), we tend to find that hardcore Republicans and Democrats vote more often than swing voters, independents, and otherwise unaffiliated voters, so the assumption doesn't seem too far off. Remember, since this is a two-party system, we've taken third parties off the table.

A "lesser of two evils" strategy implies that, graphically, voters will vote for any any politician advocating a point closer to their personal point on the line:

In this graph, "V" represents the voter in question, "1" represents Politician 1, and "2" represents Politician 2. Shown here, V will vote for 1 rather than 2.

What, then, should each candidate do to maximize votes? Well, they could each try this strategy, which would seem to work:

In this case, Politician 1 and 2 pick the medians between the medians. This gives them each roughly fifty percent of the vote, and they could leave the rest up to chance. But that would be an absurd strategy, because either of them could do this instead:

Politician 2, by moving closer to the Median Voter, has now captured some of the votes Politician 1 was previously getting! That is, by moving 10% of the vote to the left, P2 captures the 5% of voters to the left of the Median Voter who are now closer to P2's platform. P2 is getting 55% of the vote.

It should be obvious, now, that P1 will respond in turn, and the stable equilibrium will look like:

Politicians converge on the Median Voter, the person whose politics are perfectly centrist. This goes for a swathe of electorates, hence why politicians pander to their "base" in a primary but signal that they're moderates in general elections. Of course, you should keep in mind that the Median Voter is only vaguely known, so politicians will pander to who they think is the median voter; this explains differences between politicians, and how political gaffes (misestimations of the Median Voter) can lead to landslide victories. And if all of that seems too "just-so," I'll offer what it can't explain: "Extremist" politicians (ie Ron Paul, Dennis Kucinich, Ralph Nader, etc.) winning very often, especially in larger populations; and the rapid and successful rise of third parties in a two-party system. Since we do see politicians change their positions after primaries and since we don't see many "extremists" in political office or successful third parties, I put a lot of weight behind the Median Voter Model's predictive power. This is why I don't tend to think of the expected value difference between most politicians as being very high.

A brief interlude

2008-09-25T18:18:00.002-04:00

To bring you this flowchart, displaying how difficult it is to "get in line" and "follow the law" if you're looking to immigrate to the United States.

Incentives, rationality, and irrationality

2008-09-25T12:58:00.009-04:00

The objections of famous racists aside, psychologists, anthropologists, and economists are all pretty sure that incentives matter. (The final link is a pdf summary of Vernon Smith's work in experimental economics, which you may find useful to understand the following discussion.) Institutional frameworks change human behavior so profoundly that the average Joe turns into a horrible, abusive monster after he's made a prison guard. Very few behaviors are off the table when talking about how incentives affect us.

If the above is true, we can use economic theory to analyze not only market action but also government action. This is the driving insight of Public Choice theory. Rather than viewing the government as the corrector of externalities, the collector of efficient taxes, and the righter of market wrongs, we should examine what institutions, and therefore incentives, influence the behavior of government actors. If you find this controversial in any way, there's a lot of literature you need to go back and read, at the very least the earlier-linked Vernon Smith summary. This is a proposition we know pretty darn well to be experimentally true.

And, if it is true, we have a lot of groundwork to cover. There are two sides to the political process, voters and politicians, and besides these there are appointed bureaucrats and market entitities acting to influence government behavior. We want to develop a complete explanation for their actions in terms of incentives (with predictive power, of course).

I'll begin with voters, as it will further help explain the behavior of politicians.

Rational Ignorance

We've already covered the worth of an individual vote. But how much does this insight matter? If economists are to be trusted, quite a lot, as it's the cause of much bad policy.

In the United States, we have a sugar quota. American producers are legally allowed to import only a certain amount of sugar each year. The rest must be bought domestically. The justification is that we should protect America's sugar farmers. . . for some reason. Their jobs are being threatened by poor, non-American sugar farmers whose wages and living standards would rise if we bought sugar from them instead, and we can't have that!

So, in the U.S., we now use high-fructose corn syurp rather than sugar as a substitute (and we use it in eeeeeeeeverything, even SpaghettiOs). It's slightly more expensive and some research shows slightly higher health risks, but the overall cost per consumer isn't very much. It might add a cent or two to the price of every soft drink you consume. On the other hand, we drink a lot of soda, and those one or two cents per can adds up to billions a year when aggregated for the whole economy. And don't comfort yourself by being happy for the sugar farmers raking in that much money--their profit is only in the millions. Most of the money spent is pure deadweight loss, billions of dollars down the drain, spent on absolutely nothing. (A future entry will contain a graphical analysis of rent-seeking to make deadweight loss more clear.) On top of that, corn-growers are now also a vested interest, and they've taken to making ridiculous commercials to protect high-fructose corn syrup. So we have two huge lobbies protecting the sugar quota.

Did you know that this one little law was costing the U.S. billions of dollars a year? Did you even know we had a sugar quota? Congress typically passes over 300 laws per session. How many of them are you familiar with?

The answer is, most likely, not very many. I know that's my answer. Why do we ignore acts which cost us billions of dollars? Why do we not even know about them?

If you think like an economist, you can already guess the answer. 1) These laws tend to cost us, individually, very little, even as they cost our economy billions. 2) Reading the details of every congressional law would be very costly. 3) Our votes don't count for much anyway. In terms of cost/benefit analysis, being well-informed just doesn't win out.

This can explain why the public is very ignorant about the cost and frequency of unnecessary regulation, but it can't tell us why so many people actively support demonstrably bad policy. There's little question among economists that tariffs for established industries are a bad idea, but they have immense popular support. Nor can it answer the exasperated question of many Democrats right now: "Why is this election close?"

Rational Irrationality

Once again, Vernon Smith's work is appropriate. His general finding: as per behavioral economics, people are neither rational nor self-interested according to economic definitions. But proper institutional frameworks lead to efficient outcomes anyway. Markets tend to make people rational. Why might that be?

The obvious answer is that market structures often force people to absorb the costs of their irrationality. Yes you can make 10 bad hiring decisions in a row (hiring your prejudices, for example), but that means 10 points your competitor can gain an advantage over you, 10 ways for you to lose money and your competitor to make it.

In voting, our correction mechanism isn't so strong.

I'm going to steal an example straight from the lecture (ppt) on this topic I got in undergrad Public Choice. Alex Tabarrok writes:

Suppose there are 1 million voters and the nation is debating whether to go to war. Each individual wants to believe that their cause is just and "One patriot can lick twenty foreigners, so victory is assured!"

Note that the contrary belief will put you out of step with your fellow citizens and exposes you to a charge of being unpatriotic. Thus, suppose the value of this belief is $100. If a war is declared, however, it will be bloody and will cost each individual on average $100,000. Will the nation smarten up or will the nation vote for war?

It's war! The belief has positive value so long as 100-p*100,000 > 0 where p is the probability that the voter's vote changes the outcome. But with 1 million voters p is very, very small. . .

As you can see, the probability analysis in my last entry can lead ordinary incentive-following individuals to make stunningly bad decisions. (And note this theory seems to have major predictive power!)

There are many, many irrational biases that cause voters to not only hold but favor as policy prescriptions very stupid beliefs. As long as the cost of holding those beliefs is sufficiently low, they seem to stick around.

To put it another way, you would have a very hard time being a professional biologist and a young earth creationist. You couldn't get anything published, for one. Your colleagues would demolish you with evidence. But to be a creationist and a voter? To actively pursue forcing schools to teach your irrational belief? Why, that doesn't cost a penny! In fact people seem to get quite a lot of personal utility from it, imagining themselves as heroes standing up to big science. And on down the line. If you've been reading along on this blog, I should have no trouble convincing you that people enjoy believing very stupid things. And, with the cost of voting their beliefs so widely dispersed and the marginal effect of a single vote so astoundingly small, they have no incentive not to, literally, force their stupid beliefs on the rest of us.

In this view, voting is very similar to the economics of pollution. Bad voters engage in a transaction that benefits them yet places a larger cost on the rest of the population. It's an externality. And keep in mind that "bad voting" can mean any bad voting, not just greater-of-two-evils voting. (A more in-depth explanation of that is to come.) Ordinary policy prescription for externalities is regulation, but, philosophically, we don't want to regulate voting--we want everyone to have a voice. (And, as you'll see when I get to the incentives of politicians, regulators aren't always to be trusted.) We may want to take certain options off the table, however, as the Bill of Rights already does. And we may want to look for further ways to internalize the costs of bad voting--to enforce an institutional structure that encourages rationality, as markets tend to. At the very least, we shouldn't fetishize voting and tell everyone that they ought to vote. If our goal is good policy, we should encourage uninformed or biased people to stay home and stop polluting!

This may all sound very elitist. But this is a real, identifiable, empirically testable hypothesis that explains sub-par outcomes in democracy. The economic beliefs of the majority differ hugely from those of economists. The scientific beliefs of the public differ significantly from those of scientists of all stripes. And so on.

And if it's true, we can do something about it.

Much more to come.

Two cents

2008-09-25T03:59:00.013-04:00

It's one of those nights. So that means, after an argument on the topic, it's time to finally begin the series on voting. The election draws nigh, so why not?

I will be saying nothing that you can't already read in the standard public choice literature. I have no new, brilliant insights to add. This is all standard economic, statistical, and game theoretical analysis. I'll even try to keep the philosophy and morality bits to a minimum. My goal is only to make a full case in a series of readable blog posts for non-voting.

(I'll start with the statistical argument. It is not even the most important point on a long list of complications, which, don't worry, I'll get to.)

Vote-selling is illegal in the United States. You cannot pay another person to vote for your guy, let alone for you. Besides, it would be horribly useless, as we have secret ballots. But if we didn't, and it were legal, how much would you pay for someone else to vote for your favored candidate in a presidential election?

My answer? The phrase "my two cents" isn't even apt; I wouldn't pay that much.

Why?

In decision theory and statistics we talk about "expected value" and "expected utility." The expected value of a variable is the probability of that variable's occurence times the value of that variable. Example: what's the expected value of the Virginia lottery? The grand prize is $1,000,000. The probability of winning this prize is 0.0000000057. The expected value is therefore (.0000000057 * $1,000,000) = $0.0057. Buying a lottery ticket is irrational because you face a cost of $1 for a benefit of 57/10000ths of a dollar. Yes, there are secondary prizes, but they still don't add up to make the lottery worth playing apart from the kicks you get out of it.

In democracy, or at least American democracy (much more on the effects of different voting systems later), there are no secondary prizes--it's winner-take-all. And, worse, a candidate's win isn't even a jackpot. The value is only the value a candidate would generate minus the value of the other candidate. This is further compounded by such values only being imagined--there's no real way to know how good a president will be until he gets into office.

So, what's the expected value of a single vote? Start with the value of a candidate--if I think John McCain is a -$500,000 candidate and Barack Obama is a $1,000,000 candidate, then Obama's value is $1,500,000. And the probability that one vote will influence his election? Some math from Steven Landsburg:

Your individual vote will never matter unless the election in your state is within one vote of a dead-even tie. (And even then, it will matter only if your state tips the balance in the electoral college.) What are the odds of that? Well, let's suppose you live in Florida and that Florida's 6 million voters are statistically evenly divided—meaning that each of them has (as far as you know) exactly a 50/50 chance of voting for either Bush or Kerry—the statistical equivalent of a coin toss. Then the probability you'll break a tie is equal to the probability that exactly 3 million out of 6 million tosses will turn up heads. That's about 1 in 3,100—roughly the same as the probability you'll be murdered by your mother.

And that's surely a gross overestimate of your influence, because it assumes there's no bias at all in your neighbors' preferences. Even a slight change in that assumption leads to a dramatic change in the conclusion. If Kerry (or Bush) has just a slight edge, so that each of your fellow voters has a 51 percent likelihood of voting for him, then your chance of casting the tiebreaker is about one in 10 to the 1,046th power—approximately the same chance you have of winning the Powerball jackpot 128 times in a row.*

I happen to live in Virginia, with a population of 7,642,884. 3,067,452 of them voted in the 2004 election. Even though Virginia is a "swing state," Bush got 54% of the vote. If I figure the same demographics this time around--3,000,000 voters, 54% Republican--then my chance of influencing the election is one in 10 to the 4186th power. Remember, my chance of winning $1,000,000 in the lottery is only 5 in 10 to the 8th. I could win the lotto hundreds of times before I could influence the election. I could, as Landsburg suggests, donate all of that money I won to my pet causes and come out with a much, much higher value than I could by voting for Obama.

How much difference in value would Obama have to generate over McCain for my vote to be worth two cents? More math: 1x10^4186X = .02, solve for X. It comes out to 2*10^4188.

Now, I think Obama will be a better president than McCain by quite a lot. I don't think he will generate value for me or anyone else of $2*10^4188. So I don't see any particular reason to vote, even if I'm in a swing state. We're talking orders of magnitude far beyond your average lottery.

Yet most people find this argument unconvincing. Common rejoinders: "Well what if everyone did that?" Then the expected value of voting would go up, and people like me would be more likely to vote. "But you have a civic/moral duty to vote." Maybe, maybe not. I'll get very heavily into why democratic fundamentalism is flawed in the coming posts, and I'll spend at least one entry discussing morality. "There are other rewards to voting." Yes, and that's where expected utility comes in. If you find voting fun, signaling worthwhile, or democracy super-freakin'-cool, that could influence the expected utility of voting. But it doesn't do anything for me.

Honestly, I think the reason most people find this unconvincing is scope insensitivity. Our minds have trouble separating "near zero" (the lottery) and "really really really really near zero" (voting). I bet if you asked the average Joe the question I posed at the beginning, "How much would you pay someone to vote for your guy," he would respond with at least a dollar. And, when I bring these odds up to people, they often get righteously angry. They call me names, tell me I'm the ruin of civilization, etc. However, I tend to only use this argument when people tell me, "Don't vote for a third party, it's like throwing your vote away!" A pretty meaningless point, considering.

Maybe democratic fundamentalism is a noble lie, something people think they need to believe to hold society together. But, as I'll discuss later, if we could get past all of that, maybe we could come up with even better alternatives. We could at least have a discussion about which voting system is best.

*Landsburg's math is wrong here, see his correction: "Thus the chance of swaying the election in Florida is comparable not to winning at Powerball 128 times in a row as I said in the column; instead it's comparable to the relatively easy task of winning at Powerball a mere 64 times in a row."

As clear as it can be

2008-09-24T21:05:00.000-04:00

Oliver Kamm addresses the short-selling ban.

Dinosaur Comics on the division of labor

2008-09-11T15:33:00.000-04:00

Cave Story

2008-09-03T16:58:00.002-04:00

If you're familiar with popular indie games, this is hilarious:

Norm Stamper on the drug war

2008-08-29T20:46:00.001-04:00

A must-watch video from Reason:

Stamper is an ex-cop who very eloquently lays out some of the basic problems with the war on drugs.

In related news:

Celebrities are ordinary people

2008-08-27T15:11:00.003-04:00

And, just like all the other ordinary people, they're ignorant enough to think that the next president can do anything about gas prices (Language NSFW):

Also, wah wah wah wah wahhhhhhhhhh.

The Montauk Monster

2008-08-14T11:54:00.003-04:00

What is this freakish, beaked, hairless, clawed aberration, you ask? It's a rotting raccoon. But don't let that stop you from speculating that it's a genetically engineered government warbeast. Or perhaps a creation of The Shredder.

For more in the department of Rotting Animals Sometimes Look Different from Whole Animals Because Different Parts Decompose at Different Rates (it is a fun department to work in), see the the ol' plesiosaur/basking shark mess.

Todd Barry on astrology

2008-08-13T12:37:00.002-04:00

About halfway through this video. The language is probably not work safe.

Sigh

2008-08-10T17:23:00.004-04:00

Greg Mankiw comments on another unfortunate Obama quote:

Are oil companies, I ask, more morally culpable than other industries that would not be subject to Obama's proposed [winfall profits] tax?

"Not in the view of most economists," Obama replies. "I'm well aware of the argument (about) singling out oil companies rather than soda pop manufacturers," he says.

Yes, but what does Obama himself believe?

"I think oil companies are amoral. They want to make as much money as they can for their shareholders, which is what corporations do," he says. "The difference is the nature of the kind of outsized profits they make that may have no relationship to their investments or their production. The fact, for example, the shortage of refinery capacity could actually increase their profits so the less they invest the more they make indicates that you are not dealing with someone making widgets out there."

Obama is right about the amorality (not immorality) of oil companies. But he seems to suggest that oil markets are fundamentally different than others. In fact, in all markets, reduced production capacity would increase prices and, sometimes, would increase profits as well. That is why farmers can benefit from policies that induce them to leave land fallow. (I can't say about widgets--empirical studies of that market are hard to come by.)

Maybe Obama is saying that the forces of competition are absent in the oil market and that the deliberate decision by oil companies to keep capacity below competitive levels is the reason for today's high prices. That would be a logically coherent story, but not an empirically plausible one. It is not lack of competition that is keeping oil prices high but, rather, the basic forces of supply and demand. Even if you blame OPEC for noncompetitive behavior, that fact would hardly provide a rationale for taxing domestic oil producers, as Senator Obama is proposing.

Public Works

2008-08-06T19:21:00.002-04:00

Megan McArdle explains something it seems several people don't know about these days:

the idea of using infrastructure spending as a stimulus is a complete fantasy. This is not your grandfather's stimulus spending. FDR could spend whacking great sums on dams and roads and rural electrification, and hope to have an immediate effect, because FDR was working on a multi-year depression, and in the pre-1960s regulatory environment.

Between the environmental impact statements, public review periods, and byzantine bidding process, the development cycle for anything more complicated than painting a bus station is now measured in decades, not years. This wouldn't even work to get us out of the ten-year Great Depression, much less the more modest recessions of today. As my father likes to point out, if Bush had come into office declaring that his number one priority was shoring up the levees in New Orleans, by the time Katrina hit they might, with luck and a huge amount of political pressure, have been ready to put the EIS out for public review.

If stimulus is your goal, public infrastructure projects no longer cut it. We've effectively signed this one off as a "never."

Your daily dose of crazy

2008-08-05T20:19:00.001-04:00

Hey hey, long hiatus

2008-08-01T03:38:00.003-04:00

Not much to talk about in the way of politics, as I've been away from the blogs for a while, so instead a few quick notes about games I've been playing.

Final Fantasy Tactics A2 is just going through the motions. I like how lighthearted it is--it doesn't pretend for even a second that the main story is even remotely interesting, and most of the "story battles" are completely unrelated. Instead the game focuses on a lot of sidequests, which often tell little stories of their own. None of which are any good, but the game is just an excuse to fight some tactics battles and make a ridiculously strong party anyway. The reason this glorious shallowness doesn't work entirely is because the game is really, really, really long. Not so much if you don't do the side quests, but like I said, the main story is as boring as it gets. Once you get far enough into the game, the battles all run together. The quests are all the same. The characters have no personality. The stories aren't engaging enough. The law system has occasional little glitches that trip it up and make certain actions arbitrarily illegal.

So it was nice to go from that to The World Ends With You. Hey, Squaresoft still has some originality left? How absolutely lovely! Read Jason Moses' blog for a glowing description; I can't add any more.

I really wanted to talk about Lufia. I tried this game on emulator, years ago, noticed an immediately grating mechanic (as in the original Final Fantasy, if a character attacks a blank space where a dead monster is, it registers as a miss rather than attacking the nearest living monster) and turned it off. I got ahold of a copy recently and, revisiting it, it's really good. The monster-miss thing isn't a problem because 1) As in Dragon Warrior, monsters appear in groups, which will not suffer the monster-miss problem, and 2) As in Dragon Warrior, battles are really really fast. Very little flashiness to behold here. Get in, attack a few times, take a little damage, get out. People who are more Final Fantasy-oriented tend to hate this kind of presentation, but I'm ever-amazed by how much more tolerable it makes an RPG. Lufia's story is simple and poorly-translated, but I'm still compelled to keep going because I know how little effort and time it will take in the end.

The payoff, of course, is that it will (hopefully) give me a better appreciation for Lufia II, which I also never finished. Lufia II is a prequel, and in fact the throwaway characters at the beginning of the first game are the heroes of the second game, making the beginning of the first a huge spoiler for the second. Maybe. I've never found out if Lufia II adds anything more after the grim fade-to-black in the intro of its predecessor. I'll tell you when I find out.

Oooooooooklahoma

2008-07-18T00:34:00.004-04:00

This one you just have to see to believe.

Oklahoma County, Oklahoma Commissioner Brent Rinehart is facing a tough reelection campaign. He's been accused of abusing his office for personal gain, and will go on trial in the fall on felony campaign finance charges. But apparently, this is all a conspiracy of homosexuals, liberal do gooders, and good ol' boys to force Rinehart out of office. Rinehart lays out his case in a comic book he's sending out to voters, which—you may be surprised to learn—he wrote himself.

I went ahead and compiled every page of the comic into one very big image, available beneath the fold.

And now for something depressing

2008-07-16T11:10:00.003-04:00

The NYT asks readers what we should do to stimulate the economy. Most of the responses are predictably short-sighted and ignorant; the very first one takes the cake:

Triple the minimum wage.

That would bring it more in line with increases in efficiency and rates in the late 70s. People make more, they spend more. All the money is just tied up in investments now, like bonds in Fannie and Freddie.

I'll link pretty much anything pertaining to Slimes

2008-07-15T18:38:00.000-04:00

It's called a road

2008-07-15T17:38:00.000-04:00

What it means to be a "skeptic"

2008-07-15T16:29:00.003-04:00

Why all the posts on Bayes? As I said last time, a statement has to concentrate probability mass to be meaningful. The other day I got in a discussion with someone about global warming and the theory of evolution, respectively. Both times, he claimed to be a "skeptic." But I don't think that word means what he thinks it means. In common parlance, it's often used to mean, "I disbelieve whatever the mainstream view is." So you'll see very silly people commenting on blogs and Youtube videos, reassuring the reader, "I'm the most skeptical person in the world, but. . . you should really look into the 9/11 truth movement." And so on.

But I caught myself producing a meaningless thought, or at least it was meaningless until I thought of exactly how to delineate the two: "That's not skepticism, that's denialism."

So, how to differentiate them? 9/11 truthers who claim to be valid skeptics, it seems to me, are using the word to mean that they are open to any and all points of view. I use skeptic to mean that one is open to any and all points of view, but assigns much higher probability to those hypotheses with more evidence. Saying, "I'm uncertain" isn't enough. If you're uncertain about something for which the evidence shows to be orders of magnitude more reasonable than any other hypothesis, then you're no longer a skeptic, you're a denialist. Though the vast number of priors are false, most can be updated through proper Bayesian inference. But lo, priors of 0 and 1 screw things up royally. Welcome to the human race.

The secret to science

2008-07-15T15:40:00.002-04:00

I ran across this entry, the other day, in which Gene Callahan takes issue with Bayesian inference, as described in the last post:

the basic idea is that you "start out" by assigning some "prior probabilities" to various theories about some phenomenon, or outcomes of some event, and then multiply those "priors" by a factor based on how much more or less likely new evidence makes the prior.

For instance, you are a late 19th century physicist, and you are evaluating how likely it is the Newtonian mechanics is the true description of matter in motion. At that time, there would have been physicists who would assign p=1 to it being true, and p=0 to it being false. At the very least, many physicists would have assigned p=0 to something as weird as quantum mechanics being true!

Now, as the years pass, you are presented with startling new evidence about black body radiation, the photoelectric effect, and so on, and with a startling new theory in addition. According to the theory of Bayesian updating, the "rational" response is just to think you must be delusional in believing you have heard this new data! You had assigned an alternative theory a prior of 0, and now no factor the new evidence recommends multiplying that prior by can ever change that initial assignment of p=0.

Of course, that is not what real scientists did at all. Instead, they assigned whole new "priors" -- they thought, "Mon Dieu, I had never considered the possibility of this theory or this evidence, and therefore I was in a state of 'radical uncertainty,' and ought to re-think everything." But allowing that maneuver thwarts the whole motive for Bayesian updating, which is to turn rational choice between theories into a formal, mechanical procedure.

I have my own response to this, which I'll get to in a bit, but I noticed Callahan also leaves this message in the comments for someone who disagrees with him:

Oh, and anonymous, it's really best you leave this sort of thing to the experts, OK?

It was a response to something the anonymous poster said to the same effect, but in a far more arrogant context. So, yes, let's do exactly that. Let's find out what E.T. Jaynes, the expert of Bayesian probability, had to say, discussing the case of scientific experiments appearing to validate ESP:

[An ESP researcher] will then react with anger and dismay when, in spite of what he considers this overhwelming evidence, we persist in not believing in ESP. Why are we, as he sees it, so perversely illogical and unscientific?

The trouble is that the above calculations represent a very naïve application of probability theory, in that they consider only Hp and Hf; and no other hypotheses. If we really knew that Hp and Hf were the only possible ways the data (or more precisely, the observable report of the experiment and data) could be generated, then the conclusions that follow from [the above equations] would be perfectly all right. But in the real world, our intuition is taking into account some additional possibilities that they ignore.

Probability theory gives us the results of consistent plausible reasoning from the information that was actually used in our calculation. It can lead us wildly astray. . . if we fail to use all the information that our common sense tells us is relevant to the question we are asking. When we are dealing with some extremely implausible hypothesis, recognition of a seemingly trivial alternative possibility can make orders of magnitude difference in the conclusions. . .

There are, perhaps, 100 different deception hypotheses that we could think of and are not too far-fetched to consider, although a single one would suffice to make our point. . .

Introduction of the deception hypotheses has changed the calculation greatly. . . each of the hypotheses is, in my judgment, more likely than Hf, so there is not the remotest possibility that the inequality could ever be satisfied.

Therefore, this kind of experiment can never convince me of the reality of Mrs. Stewart's ESP: not because I assert Pf = 0 dogmatically at the start, but because the verifiable facts can be accounted for by many alternative hypotheses, every one of which I consider inherently more plausible than Hf, and none of which is ruled out by the information available to me

You can read the chapter for the probability calculations. The point is, there are many inequalities that can arise in Bayes' Theorem applications that look like unreasonable dogma. Sometimes they are and sometimes they are not. Physicists from the 19th century didn't dogmatically believe their theories with 100% probability. They simply took the evidence they had currently available to them and applied it. The fact that they were open to evidence at all means that their priors were not really 1 or 0! If you don't believe it, it's pretty easy to think of groups who do have priors of 1 or 0 for their beliefs. Young Earth Creationists can be presented with all the evidence in the world for an old earth, but most of them will never be convinced. 9/11 truthers can examine the evidence for their grand questions all day, and never arrive at the right answer.

The secret to science is this: you never assign a probability of 0 or 1 to a proposition. Even if you think you're doing so, as long as you're willing to believe something else, your brain is revising that probability you think you have slightly downward.. What follows is that, likewise, human argument is about concentrating probability mass. This is where so many logical fallacies come from, it's why politicians are miserable to listen to, and it's why Smith, from my modified example in the last entry, is a very foolish person for assigning an exactly equal probability to all alternate, non-cigarette hypotheses. If the reverse can't be true, it's not an argument. If a statement doesn't give us something to plug into a Bayesian framework, no matter if it can only vaguely approximate the mathematical calculations, it's effectively meaningless.

A quick intro to Bayesian inference

2008-07-15T13:57:00.004-04:00

This, oh readers of my blog, is Bayes' Theorem, which you should learn well:

In english, it says, "The probability of A given B is equal to the probabilty of B given A times the probability of A, all divided by the probability of B."

But that's still not quite english, so let me put it another way. P{(A|B) and P(B|A) are called "conditional probabilities." P(A) and P(B) are what we call "prior probabilities"--they exist independently of information about each other. So, when you're solving for P(A|B), you're asking, "What's the probability of something given the probability of some other, related thing?"

People incorrectly apply probabilities all the time without considering Bayes' Theorem. You might even catch yourself doing it. Try out a probability problem and see: 10% of the population uses marijuana regularly, and a given drug test is 90% accurate. What's the probability that a randomly selected person who tests positive for marijuana use actually uses marijuana?

In general, people tend to ignore the ever-important prior information that 90% of the population doesn't use marijuana. They tend to think that the probability that our randomly selected person does pot is 90%. It's actually 50%. If you want the math, it works out like this:

P(B|A) = 0.9
P(A) = 0.1
P(B) = P(B|A)*P(A) + P(B|A')*P(A') = 0.9*0.1 + 0.1*0.9 = 0.18

In this case, P(B|A)*P(A) is the probability of a true positive and P(B|A')*P(A') is the probability of a false positive. Adding these two cases gives us the probability of B independent of A, or the odds that the test is positive regardless of whether the person uses marijuana. Now we have

(0.9*0.1)/0.18 = 0.5

So, as you can see, prior information is essential when calculating conditional probabilities. We can shift the probability that this given person smokes pot from 10% to 50%, and no more. This is counterintuitive to a lot of people, but it's strictly true. If this test comes back positive, it can only give you 50% confidence that a person smokes pot.

Now for something a little more controversial--and I'll write a post about the controversy later. Bayes' Theorem can be used to update our beliefs.

Well, maybe you don't think it's that controversial, when you think about the above example. You shift your belief from P=.1 to P=.5, no problem, right? Ah, but what if you don't have a nice, handy prior given to you from the annals of science? What if you don't know that 10% of the population smokes pot? What if you think it's significantly higher? Lower? What if you believe 0% of the population smokes marijuana? Then, according to Bayes' Theorem, even a 100% accurate marijuana test can't convince you otherwise--you simply won't believe the test can measure marijuana use.

But we'll come back to that. For now, a quick example, so you know what I'm talking about in the next entry. I'm going to steal this bit from Against the Modern World:

A stubborn, but rational, man, Smith, thinks it is extremely unlikely that cigarette smoking causes lung cancer. For Smith, say, P(cigs cause cancer) = 0.2. Instead, he licenses only one alternative hypothesis: that severe allergies cause cancer. Since these hypotheses are exhaustive, on pain of inconsistency, Smith must believe P(allergies cause cancer) = 0.8.

Now, suppose Smith's Aunt Liz dies of lung cancer. Furthermore, suppose Aunt Liz has been a heavy smoker her entire life, then P(Liz gets cancer | cigs cause cancer) = 1 (certainty). Suppose, also, that Liz has had minor allergies for most of her life; since these allergies are only minor, let's say the probability she gets cancer under the hypothesis that severe allergies cause cancer is only 0.5.

Briefly, how should we calculate P(E) here? We sum over the weighted possibilities:

P(E) = P(H1)P(E|H1) + P(H2)P(E|H2) = 0.2(1) + 0.8(0.5) = 0.6

So, now we can use Bayes' Rule to calculate Smith's (only consistent) subjective degree of belief in the hypothesis that cigarettes cause cancer given the evidence that Aunt Liz has died of cancer.

P(H=cigs cause cancer) = 0.2
P(E=Liz gets cancer | H=cigs cause cancer) = 1
P(E=Liz gets cancer) = 0.6

Plugging these values into Bayes' Rule we get:

P(H|E) = P(H)P(E|H)/P(E) = 0.2(1) / 0.6 = 1/3

So, in light of this evidence, Smith's belief in the hypothesis that cigarettes cause cancer has increased from 1/5 to 1/3.

Here's something to note: what if Smith didn't assign the remainder of his cancer hypothesis to allergies? What if he assigned it to absolutely anything else?

We'd have gotten the denominator to be

0.2*1 + 0.8*1 = 1. His inference would become (0.2*1)/1 = 0.2. He wouldn't have changed his belief at all.

This, my friends of blogland, is the secret to science.