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Good economic journalism still elusive

A headline on the Kansas City Star's blog reads: Nixon swings ax, citizens scream "OUCH!". The article's content is more neutral, discussing the financial crunch that led to the cuts. But it's that headline that lets you know what a nasty move it is by this greedy Gov. Nixon.

Well, here's a news flash: governments don't have the money to match their promises. Sometimes they have to cut back. When you or I have personal budget crunches, the solution is to spend less. It's no different at the state government level. (It's different at the federal level, alas.)

And this isn't necessary a bad thing. What government does is create deadweight loss. Less government control over money is all right by me.


No Guarantee of a Benevolent World

(My apologies, this post was inspired by another person's blog post, but I can't seem to recall whose)

Imagine a world where there is perfect equivalence between the set of policies that are just and the set of policies that are beneficial. In this world there is never any trade-off between justice and utility. Many libertarians believe in this beautiful equivalence. Furthermore, they believe that libertarianism describes the set of policies that lie at the optimum point for both curves.

But there is an epistemological problem with this belief. However much we desire this equivalence to be true, we can not prove it a priori, because "beneficial" is an empirical quality. This makes the truth of the equivalence contingent on the scrutiny of evidence. And the sad fact is that I observe more evidence against the hypothesis than for it.

For example, I hold Western values towards gender equality and individual autonomy. They seem just and desirable to me. But all the peoples that hold such views are breeding below the population replacement rate, a phenomenon sometimes referred to as "Demographic Winter".

This raises the possibility that free expression of human individuality is an unstable cultural/policy position for society to adopt. It may be that women's ambitions must be constrained to reproduction and family for a society to survive. Otherwise, too few people will voluntarily choose the pain and effort that comes with raising a family over modern pursuits more carefully tuned to stimulating the pleasure centers of our brains.

Rationalists like the folks over at Less Wrong take the beautiful equivalence a step further by adding a third term: truth. The three-way equivalence is "truth = justice = utility". (I must apologize, it has been awhile since I have read their writing, it could be that any views I attribute to them have changed. I remember it as a naively optimistic place.)

But again, there is no a priori reason for this equivalence to hold. No less than Less Wrong's own Robin Hanson tackles the link between truth and utility, when he opines:

Rationality certainly can have instrumental advantages. There are plenty of situations where being more rational helps one achieve a wide range of goals. In those situtations, "winners", i.e., those who better achieve their goals, should tend to be more rational. In such cases, we might even estimate someone's rationality by looking at his or her "residual" belief-mediated success, i.e., after explaining that success via other observable factors.

But note: we humans were designed in many ways not to be rational, because believing the truth often got in the way of achieving goals evolution had for us. So it is important for everyone who intends to seek truth to clearly understand: rationality has costs, not only in time and effort to achieve it, but also in conflicts with other common goals.

Yes, rationality might help you win that game or argument, get promoted, or win her heart. Or more rationality for you might hinder those outcomes. If what you really want is love, respect, beauty, inspiration, meaning, satisfaction, or success, as commonly understood, we just cannot assure you that rationality is your best approach toward those ends. In fact we often know it is not.

The truth may well be messy, ugly, or dispriting; knowing it make you less popular, loved, or successful. These are actually pretty likely outcomes in many identifiable situations. You may think you want to know the truth no matter what, but how sure can you really be of that? Maybe you just like the heroic image of someone who wants the truth no matter what; or maybe you only really want to know the truth if it is the bright shining glory you hope for.

Rationality is also not necessarily beneficial on a group level. For example, I am a good atheist; I believe that religion is false. However, I also believe that religion may benefit individuals and groups that follow it. Any atheist who believes that religion is solely a scourge upon the human race needs to explain its amazing resilience in human history.

Religion might even be the least bad solution to Demographic Winter - American Mormons live lives that are relatively free compared to most of humanity, but their faith and values still drive them to marry and have babies. If this is the case, then it severs the link between rationality and utility at the level of society. The beautiful equivalence is in tatters.

Assuming the beautiful equivalence is false, we still have choices to make. We can make ourselves martyrs to justice, choosing policies that we believe to be right; knowing that societies with fewer scruples will thrive while we whither away. We can choose policies that make an explicit trade-off between utility, truth, and justice. But if the equivalence is broken, then we must choose. We cannot have everything we desire. The universe is not benevolent.

I brought these worries up at Less Wrong, but nobody was willing to debate with me before I had familiarized myself with dozens of Eliezer's old essays. So, I post them here. Have at them.


The underground Palestinian economy

Human ingenuity can find ways to deal with just about everything. Your entire territory is blockaded by a vastly superior military force? Approximately 1.5 million people still need goods they can't produce locally? It seems that smugglers in the Gaza Strip are using a vast network of underground tunnels to import everything from baby formula to cars to livestock. Some of the tunnels are small and dark, some have electrical systems and even telephones. Although Hamas is thought to benefit from it, the network appears to be a completely decentralized system, driven by supply and demand. Impressive, really.

Via BLDGBLOG


Cynical Epiphany #2

Same disclaimer as before.

One reason most people think the Sibel Edmonds allegations won't be investigated are that too many people, from both parties, are involved.

But another reason is that potential investigators benefit by having a large file of dirty politicians whenever they need a favor.


Cynical Epiphany #1

I don't like being cynical. I'd rather not focus on the depravity of humans. But sometimes I consider an idea and ask, "What prevents this from occurring?" and can't come up with a good answer.

Thus, the purpose of the collecting all of our communications at the NSA's Utah Datacenter is not to be able to sift through data to identify potentially dangerous individuals. It is the much simpler computational task to start with an individual of interest and then to look through their communications to find some leverage to gain their cooperation. Example: need a to make sure an accused person is convicted? Search through his lawyer's past and the past of her family and colleagues until you have what you need to make sure she isn't quite doing her best during his trial.


Spiteful Competition?

In her latest reply to Nye and Wilkinson at this month's Cato Unbound dialogue on economic inequality, Elizabeth Anderson uses the phrase "spiteful competition" no less than four times. Does anyone have any idea what exactly this is supposed to mean? I could offer some guesses, but let's see what she apparently believes about this concept:

- Conspicuous consumption is a form of spiteful competition
- Not all forms of status competition can be classified as spiteful competition

I'm at something of a loss here. Pure status competition in general is usually seen as a zero or negative-sum activity, and if displacing someone else on the social ladder isn't spiteful, what is? Does it have to be accompanied by an upturned nose and catty banter in order to qualify? This strikes me as an important source of confusion in Anderson's overall argument: What delineates "good" status competition from "bad" status competition? What forms of inequalities give rise to good versus bad forms of status competition?

It's unclear whether Anderson actually believes that reducing income inequality would actually reduce status competition instead of just causing it to be expressed along some other dimensions of identity. Observe the trendy prevelence of food and environmental snobbery among certain parts of the American population - can anyone honestly say that these causes have not become broad cultural movements used in order to create "spiteful" hierarchies of social enlightenment? Anderson appeals to the lack of conspicuous consumption in Scandanavian countries, but does she believe that the fact that these countries have much greater status stratification by job title is completely coincidental? Or is this okay because, for whatever reasons, this sort of stratification isn't done "spitefully"?

I can understand the concerns about status competition, really. And I agree that positive-sum outcomes could often be attained if individuals had mechanisms to constrain themselves from engaging in it. But at the same time it strikes me as incredibly naive to believe that eliminating status competition along one dimension of social reality by fiat wouldn't simply result in greater status competition along other closely-associated dimensions. Basic economic logic argues that banning a good will lead to greater demand for its close substitutes at the margin, and status can often be modeled as a good which obeys these sorts of rules. If income inequality is diminished, why would we not expect for people to just shift their energies into activities that generate status rents but don't actually increase income? Would we expect the subsequent investments in status goods to be less wasteful than investments in Gucci bags and toy dogs? Would these benefits outweigh the costs produced by then the efficiency losses which heavily-progressive taxation would generate? These are the questions which Anderson should be trying to address.


What is the Classical Liberal's answer to Corporate America's co-optation of government?

A friend who's exploring Libertarian ideas just wrote to me with the question, "What is the Classical Liberal's answer to Corporate America's co-optation of government?". I thought I'd give my answer here so others could correct me or elaborate.

Classical Liberals recognize the problem of business influence on government, but refer to it by different names than do members of the left. The Classical Liberal stubbornly insists that "Capitalism" is given its original meaning--an economic system where capital is held privately and transactions can occur between willing sellers and buyers without government intervention. By definition, this should exclude collusion between business interests and government, which Classical Liberals will typically refer to as Corporatism, Mercantilism, or Fascism.

The Classical Liberal recognizes that all humans want to fulfill their goals in life--whether these are as simple as being fed and sheltered, or as complex as achieving world-wide literacy. Classical Liberals distinguish between two methods of realizing these goals--either through productive effort and trade with willing partners, or by using force to steal, defraud, and extort. The first method respects the life, liberty, and property of others, the second does not.

Government, by definition, is that organization which has a monopoly on the legitimate initiation of force within a geographic area. Inherently, it must use force and the threat of force to impose its rules on others, no matter how these rules were derived. The minarchist believes that government action should be limited to only enforce those rules that protect life, liberty, and property. The libertarian anarchist believes that it is never legitimate to initiate force, and thus all governments are illegitimate (libertarian anarchists do allow for non-monopoly organizations to respond with proportional force in order to protect the individual).

Ideologies of the left attempt to limit government-business collusion by increasing the power of government. They promote government as the antagonist of business and suggest that greater regulation of business by government could put an end to collusion. This is puzzling, since government is at the same time a party to the collusion and the regulator of the collusion. To be fair, the collective term "government" includes a lot of different individuals, some of whom could be guilty of collusion and some of whom could be investigating and punishing collusion; the fact remains that whoever can secure control of the monopoly regulator can act without fear of regulation.

The Classical Liberal takes issue with colluding businesses, but not with business per se. Those businesses whose members neither commit crimes nor contract anyone else to commit crimes on their behalf can only continue to exist through productive effort (or by the savings of past productive effort). The focus of the Classical Liberal in stopping collusion is that institution that is committing the harm--the government enforcers who threaten to fine and jail whomever does not follow the rules born of the collusion.

In a Classical Liberal society, those businesses that committed crimes would be prosecuted at the request of the victims of those crimes. Those businesses that did not commit crimes, but merely showed poor taste--say the suppliers of puppy-skin coats--would be regulated by the market. The more objectionable the business, the fewer individuals who will want to deal with them, either as customers or suppliers.

To see how important the definition of "Capitalism" is to understanding this issue, watch this discussion between leftist Michael Moore and a Classical Liberal GWU student:


I was just standing there naked in my kitchen and the next thing you know, I'm in handcuffs

This is one of those stories that's so ridiculous that either the cops are complete idiots or we're missing some of the facts. I'd say either is just as likely as the other.

A Virginia man was busted for indecent exposure after he was caught in the buff. In his own home. Alone.

Eric Williamson, 29, got up at 5:30 a.m. Monday and went to the kitchen to make some coffee. He was naked, but he was alone in the Springfield house, so he didn't think it mattered.

Wrong.

A woman and a 7-year-old boy were cutting through Williamson's front yard from a nearby path, according to WTTG-TV, Channel 5 in Washington. Through his front window, they saw Williamson having coffee in his birthday suit.

Fairfax County police showed up and arrested him. Williamson said he had no idea anyone could see him, but police said they believed he wanted to be seen by the public, said WTTG, a Fox station.

If convicted, Williamson could face one year in jail and a $2,000 fine. He plans to fight the charge.

"If I stood and seemed comfortable in my kitchen, it's natural. It's my kitchen," he told the station.


Cui majori bono?

My local coffee shop carries several varieties of coffee beans, and they'll typically brew three or four in a day. Yesterday they had a variety I'd never seen before, a Peruvian organic. Since it was just me, and I'm chummy with the guys that work there, they told me that it's organic, but for some reason they're not permitted to advertise or sell it as such because they don't have the mandatory certification. A certified seller will store organic beans in separate containers, and who knows what else. I asked why they didn't get the certification, and apparently it's not a matter of simply applying. It costs.

This seems like a pretty unique case of two opposing interests in the same industry favoring the same regulations. The organic distributors want organic coffee highlighted, set apart from non-organic beans. Thus they presumably favor the certification process. On the other hand, the regular coffee distributors are probably happier not having their coffee set apart in a negative light, and since the certification process is apparently a pain in the ass that not everyone is willing to undergo, they would favor it because, as it is, it's keeping their coffees right next to the Peruvian organic blend without any distinction.

Obviously I'm not expert on this. Comments welcome.


Democracy for the Modern Era

Democracy, government accountable to the Will of the People: many set it on a pedestal, as the highest ideal of government, or even morality. Others call it mob rule, two wolves and a lamb deciding what to have for lunch. I stand in between. Democracy may be mediocrity, but given the nasty predilections of many monarchs and juntas, I’ll take mediocrity – at least as long as nations are large enough to make government shopping prohibitively expensive. If government is to be a natural monopoly, let it be a consumer coop.

Our democracy has many problems because it isn’t. We don’t have democracy at the national level. We have a representative republic. Given the size of congressional districts and the enormous advantages of incumbency, our republic is not all that representative. Special interests, political parties, and the civil service are heavily overrepresented.

This is not to say I favor direct democracy. Legislation takes time, even for limited government. And why spend the time if your vote is only one of millions? Rational ignorance is no way to run a nation. So I’m game for choosing representatives, but I’d like a real choice.

Under our current system we usually get stuck with two choices: a Democrat and a Republican. This is not the fault of unfair ballot access laws or a sinister conspiracy by The Duopoly. This is a result of the plurality-take-all voting system we use for federal (and most state) elections. Put three or more viable candidates on a ballot and plurality-takes-all breaks down. Consider this ballot in a conservative district:

  • Rudolph Giuliani
  • Newt Gingrich
  • Nancy Pelosi

If conservatives split their votes between Giuliani and Gingrich, Pelosi wins, even though conservatives are a majority. This is hardly representative. And so, conservatives try to line up behind one and only one candidate before the general election. (I’ll leave it to the reader to devise a converse scenario for a liberal district. I’ll stick to this same conservative scenario for the rest of this article for brevity’s sake, not to endorse conservatism or the Republican Party.)

Most viable/moderate Libertarian candidates come off sounding more conservative than liberal, and so they rob more votes from the Republican candidate. A maxed out Democratic donor could thus aid his cause by donating to such Libertarians. This is rather perverse. And so, the people usually ignore third party politicians even when they aren’t on the fringe. The people rationally vote for the lesser of two evils.

The standard American ballot allows the user to express his (positive) opinion about only one candidate per office. If there are only two candidates, this implicitly provides an opinion on the second candidate. With three or more candidates, the missing information is significant. In the scenario above, a Gingrich voter cannot express a preference between Giuliani and Pelosi.

Many election reformers propose some form of ranked choice ballot to provide the missing information. A conservative voter could thus mark the above ballot:

  • 2 Rudolph Giuliani
  • 1 Newt Gingrich
  • 3 Nancy Pelosi

Counting such ballots is surprisingly tricky. Political scientists have devoted thousands of big-brain hours to the problem with no satisfactory solution. The gold standard solution is the method of Condorcet (which was used by the Free State Project to choose New Hampshire). Under Condorcet Voting, we look at each pair of contestants: Giuliani vs. Gingrich, Gingrich vs. Pelosi, and Pelosi vs. Giuliani in this scenario. We can take the ranking from each ballot and assign the vote to one of the two candidates in each pairwise contest. The ballot above would go to Gingrich, Gingrich and Pelosi respectively. If Gingrich beats Giuliani overall and Gingrich beats Pelosi, the Gingrich wins – which might be the case for a solid conservative district. However, if the liberal minority overwhelmingly prefers Giuliani over Gingrich, and moderate conservatives split, then Giuliani wins. The liberal minority doesn’t get their preferred candidate, but they still have influence. The entire district is in some sense represented. This is unifying.

Alas, Condorcet counting is confusing. A two-dimensional table is required to display voting results. This is hard to read and takes up scarce newsprint area. But far worse, Condorcet counts are not transitive. We could get Gingrich beats Giuliani, Giuliani beats Pelosi and Pelosi beats Gingrich! This is a recipe for civil war!

Instant run-off is simpler, and more familiar, than Condorcet. Unfortunately, it leads to the same two-party duopoly as our current system. Moreover, it can produce perverse results. Suppose most conservatives pick Gingrich, Giuliani, Pelosi; liberals pick Pelosi, Giuliani, Gingrich. Moderates divide between Giuliani, Pelosi, Gingrich and Pelosi, Giuliani, Gingrich. Under instant run-off, Giuliani loses in the first round. If moderates plus liberals outnumber conservatives, then Pelosi wins, even if conservatives outnumber liberals. Our current system of primaries, where in this case conservative voters could consider the electability as well as the desireability of the Republican during the primary, is less perverse.

Fortunately, a better system exists: Score Voting. Score Voting is how multiple judges decide between multiple contestants. If you’ve ever watched figure skating, high diving, gymnastics, or a beauty contest, you’ve seen Score Voting in action. Each judge assigns a numerical score to each contestant. The scores are added up or averaged and the contestant with the highest score wins. Score Voting is also how most schools pick their valedictorian. Grade points are scores. We do a better job of choosing beauty queens and top figure skaters than we do choosing our president and congresscritters.

Score Voting is an old system – for judging contests – but it is largely forgotten in a political context. The only political context I know of is the ancient Teutonic tradition of beating on shields in favor and shouting down in opposition to a measure or candidate. Score Voting is too much work for counting thousands of votes in the days of hand-counted ballots and so it disappeared in the political context. In the computer age, Score Voting is very easy to implement, however, so it is high time to give it a new try.

Mathematician Warren Smith is leading the charge to bring Score Voting back for political contest. His Center for Range Voting web site features in-depth analysis of Score Voting vs. other systems, and how Score Voting defies Arrow’s Theorem. (Range Voting was his original name for this system.) Take special note of his simulation studies, on how Score Voting minimizes Baysian regret. This is rather important. When Baysian regret gets too high, people die!

Consider a nationwide ballot in Iraq featuring the following candidates:

  • A Shiite extremist
  • An Arab Sunni extremist
  • A Kurdish separatist
  • A moderate social democrat
  • A moderate classical liberal

With plurality-take-all voting, the Shiite extremist wins — and the rest of the population takes up arms. Similar failure modes happen in other deeply divided countries around the world. When racial, tribal, linguistic, religious or ideological divisions grow too deep, democracy leads to dictatorship or civil war. This is the sad story of the Third World.

Now, consider the ballot above using 0-10 Score Voting. Shiite extremists may still give their man a 10, but they are likely to give the other divisive candidates zeros. Ditto for Arab Sunni extremists and Kurdish separatists. Under such an environment, unifying candidates such as the social democrat and the classical liberal have a real chance of winning, even though they have small enthusiastic bases. Score Voting favors candidates that are “less bad for all” vs. “best for the biggest gang.” The political culture should become less poisonous over time, and peacekeeping troops can come home after peaceful democracy takes root.

Of course democracy is not the same thing as freedom. In fact, many of you reading this may fear the spread of democracy, as it does lead to lefty governance. The poor outnumber the rich, so keeping the masses from looting the treasury is a problem. Moral arguments can help, but try explaining why are lazy poor people collecting welfare checks is bad while lazy rich heirs collecting interest is acceptable? This is an important objection, and I’ll deal with it in depth in future posts. For now, let’s look at the benefits of improved representation:

  • Incumbents can no longer hide behind fear of the other party. A corrupt conservative can be challenged by a fresh conservative without fear of electing a liberal. Ditto for corrupt liberals.
  • New ideologies can be explored: libertarianism, eco-conservatism, free-liberalism, Georgism, etc.
  • While more ideologies can be explored, they will be explored incrementally. Extremism loses under Score Voting. Excessive change in government is bad. People can adjust to even bad laws if they don’t change. Think of our ever changing tax code or ever changing monetary policies.
  • Score Voting applied within legislatures provides clear accountability. We will know where legislators stand.
  • Score Voting applied within legislatures might allow legislatures to take powers back that they delegated over to regulatory agencies.
  • Improved democracy might allow us to weaken the power of the civil service.
  • More efficient democracy might render state and local government competent enough to forgo help from the federal government. This could be a step to restore federalism.

Some of these benefits are conjectural. Experiments are required. But the experiments can be done. I’ll detail how in a future post.