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Giving thanks for helpful government employees

"Helpful government employee" is not an oxymoron, although libertarians sometimes act that way. I've been reminded of this by a number of positive interactions lately:

  • We had a leaky toilet for several weeks before it was replaced. The city called me up and said "Hey, your water bill got a lot higher - we think you might have a leak." I had already found it, but still, what great service! (I think they were motivated by a drought due to them not setting water prices based on supply and demand, but it was still nice.)
  • The city fire prevention dept called me up about 2 non-code-compliant things they had spotted on our property in their periodic survey. One was a hot tub plugged into an extension cord. The other was a wheelchair lift that had been built un-permitted. They wanted both unplugged until compliant, and the hot tub fenced off, and plugged into a grounded, permitted outlet, and the lift to have an electrical permit.

    Sure, I don't think they should be telling me what to do. But they were very reasonable - and in fact, both the precautions on the hot tub were things we were planning to do and hadn't gotten around to yet. They didn't fine us. They didn't tear them down. They didn't enforce any building permits (only electrical ones, which they felt were important for fire safety), or county health codes (although they warned us that the county might have other objections if they ever noticed the tub). And one could easily imagine a private neighborhood association which inspected properties for fire safety, even in libertopia.

  • Most recently, I'd been fed up with paperwork from the state EDD, which handles the taxes we pay for (some of) our childcare workers. Every quarter, they ask for all quarterly forms since the first quarter, every quarter I would print out and send all of them, and then the next quarter they'd say they weren't received. After a year and a half, they started trying to fine me.

    So I replied with a letter about how I wasn't going to pay the fines, I had sent in these forms again and again, and there must be some snafu on their end, and I would appreciate it if they could figure it out and clear this up. I got a call from a nice lady today who had figured out that I had been issued two different numbers, and so my submissions were under one and the requests under another. Typical bureaucratic snafu - but the state employee involved didn't say "What a whiner, I don't have to do what he says, I have the mighty arm of the state behind me!". Instead she said "Aww, poor guy, let me fix his problem".

None of this changes my belief that there are major, systemic problems with democratic, centralized governments, problems which give rise to worse service on average. Nor that the incentive structures of public vs. private employment tend to draw more talented individuals somewhat more often to the private sector. But surely the incentives also draw more selfish people to the private sector and more altruistic ones into public service. Altruism in the role of managing top-down solutions to problems may tend to do more harm than good, but a genuine enjoyment of helping people, when used to do so directly, is a wonderful thing.

Let's not forget it, lest we be judged arrogant and elitist - with reason.

InTrade bets

I wired $20K to InTrade yesterday and am ready to gambool it up on the upcoming US elections.  Weigh in over at my LiveJournal about what the good bets are.

Ron Paul may not have a snowball's chance in hell, but at least I can make some money from this farce we call democracy.

Tim Harford on libertarian paternalism

He sums it up perfectly - yes, the research is valid, no, the fact that you can still opt-out does not make government intervention "libertarian", but hey, in the end, at least it's better than the nanny state.

Libertarian paternalism makes some sense because we make different decisions in the short term than in the long term. You flush the cigarettes down the lavatory, vowing not to make a widow of your spouse and, before you know it, you have popped out to the corner shop to buy another pack of Marlboros. Who could not sympathise with your better, more patient self’s desire to quit? If Prof Le Grand gets his way, it could not be easier for the state to help. Just rip up your smoker’s card. If you do not want to quit, that is your choice – hold on to the permit.


But hang on. My choice of film should be no business of the government. That is true whether I am a hyper-rational utility-maximising agent or whether I am a weak-willed creature of flesh and blood. The word “libertarian” is being used carelessly here. Libertarianism is not a statement about a free choice between salty and salt-free food. Libertarianism is a philosophy that states that the government should keep its nose out of my affairs unless I invite it to get stuck in.


The British government has already banned smoking in private clubs populated only by consenting adults. It is also confused over the difference between global warming, which is the result of a collective- action problem, and obesity, which is not. The choice is not, it seems, between freedom and libertarian paternalism. It is between libertarian paternalism and the Supernanny state.

This is from Tim's new blog.

Side-payments and efficient law

I was discussing free trade with a coworker last night, who expressed the belief that changing legal rules was not OK unless it was a Pareto improvement. I replied that I was fine with side payments made to, say, domestic producers of uncompetitive products, if that was what it took to make the change. (A one-time payment is fleeting, the benefits of free trade are forever).

I wonder if acceptance of side payments would be a useful principle for a legal system to adopt. In anarcho-capitalism, you have it sort of built-in: the PPAs have a financial stake in the legal compromises, so they can make side-payments to each other, reflected in lower premiums (in a competitive market). So the PPAs have incentive to generate efficient law and make side-payments (or create bundles of legal changes) such that all of them gain from adopting it.

Dynamic geography
I see more as being a competitive market of monopolistic legal systems, so it is interesting to think about how those local monopolistic systems could grow and improve, besides just competitive destruction. Since people tend to be satisficers, rather than maximizers, Pareto actually makes sense as a criterion when you consider things in utility space. If you change the laws of my village in a way that doesn't help or hurt me, but helps some of you, I'll think "hey, good for you". If you change the laws in a way that helps some of you, and costs me a buck a day, I may think "you selfish bastards!" So an explicit legal policy and social norm for estimating the effects of a legal change and doing a one-time side payment might allow the legal system to change much more frequently.

It also helps ensure that the system is generating efficient changes, since the money for the side payments has to come from somewhere, presumably the beneficiaries of the change, so the actual test of getting people to agree to the set of side payments is essentially a test of efficiency. Otherwise, how do you determine efficiency?

Has the United States lost value since 9/11?

One of my favorite styles is when humor and truth are combined with sardonic wit, as exemplified by the Onion's Our Dumb Century, with headlines like "LBJ deploys 40,000 body bags to Vietnam". The Onion has long since gone downhill, and my current favorites in this genre are Fake Steve Jobs and Long or Short Capital. The latter recently wrote, in an open letter to the Fed titled "Re: you suck":

You’re lying to yourself if you think we still have real GDP growth in this country.

I challenge you to find one measure of wealth OTHER THAN THE DOLLAR
which shows the US economy as worth more now than in 2001. If I wanted
to buy our country it would cost me 30% fewer euros today than it did
in 2001, it would cost me less bars of gold, less barrels of oil, less
ounces of copper, less btu’s of natural gas, less cubic feet of lumber,
less of almost anything that has intrinsic value. Yet you keep
reporting GDP growth, why? Because your quick fix is to effectively
print more money so that in dollar units everything is getting more
“valuable”. But guess what, to the 95% of the world that doesn’t use
dollars the true value of the US economy has been shrinking, rapidly.

It’s like a company doing a 5 for 4 reverse stock split every year
and claiming to have 20% eps growth, you haven’t changed the earnings
just the units those earnings are measured in. The rest of the world is
telling you our country is worth less by massively selling our currency
and you still naively think we’re growing value - I feel like I’m at a
gathering of the flat earth society or in Zimbabwenomics 101.

I'm curious to know what y'all think about this argument, as I find it unsettling but superficially plausible. I mean, the fact that you could buy the entire US GDP for less of anything with intrinsic value than in 2001 seems pretty telling. Does that actually mean we have produced less value than in 2001? That I find hard to believe. But perhaps it just means that people see less expected future use & value for dollars. In other words, the purchasing power of our country is being written down based on changes in expectations, just like writing down the value of a subprime loan on the books.

Anyway, I've never had very good intuition for macro or currency issues, so I'd like to hear other people's thoughts. How many of you are US residents, but have decided to keep > 50% of your net worth in non-USD-denominated assets?

Clarification from Miéville

I got a nice email from China Miéville this morning. The key:

I am not remotely surprised that you are enraged at the thought that I lifted material from you without attribution. I would be absolutely livid in your situation.

You are right that I had read your work, as part of my long-running fascination with and research on ocean-based polities. Please know that I take the principle of attribution extremely seriously, and for that reason your book _is_ credited (and lauded) in the essay.

It appears to be _In These Times_'s policy to dispense with references. The original, longer essay, in the book (Evil Paradises, New Press 2007), however, cites all sources. Page 254 contains the clause that commences - not coincidentally - 'the archives of seasteading are irresistible reading' concludes with Endnote 11, which on p.314 is expanded: 'See in particular <>' The note also refers to James Lee's 'Castles in the Sea', at your site.

While I obviously still have substantial disagreements with Mr. Miéville's perspectives as expressed in his piece, it was the attribution issue that I was most angry about. It sucked to feel like my work was being used to make seasteading look bad, without people having a pointer to go read it and see a different take on it themselves. I'm relieved to know that that isn't true, or at least, wasn't intended and isn't true for the original piece.

So we may still disagree, (quite violently so, I'd say), but at least we disagree as gentlemen, and as writers who understand the importance of attribution.

Yet another triumph for the internet, and its marvelous way of connecting people so that things like this can be cleared up overnight. What an age we live in!

More on Mieville

Unsurprisingly, given his vituperation about libertarians, Mieville is a socialist:

He stood unsuccessfully for the British House of Commons in the 2001 General Election as a candidate for the Socialist Alliance. He is a member of the British Socialist Workers Party, and his left-wing politics colour his writing (they are particularly evident in Iron Council, his fourth novel).

Not that this excuses his piece. After all, I think that socialism is miguided and often hateful, yet I think that the fact that seasteading would enable socialists to make more socialist societies is a good thing. I have opinions, sometimes strong opinions, about my preferred type of society, but they are not facts. I might be wrong about what turns out to be a good way to live.

But what I am quite sure about is that increasing the amount of experimentation with types of new societies is a good thing, and will only lead to better ones, to more diversity and better serving of niche markets for government types (like socialism). You can believe that without believing that you have the One True Answer. In fact, a healthy skepticism about whether the One True Answer exists is one reason that I am so in favor of experimentation. Let's all test out our opinions - and may the best one triumph, and mutate, and merge, until we get amazing social structures that we never would have imagined beforehand.

That's my vision - a better world for people of all political persuasions. But I guess that doesn't make for as pleasurably condescending a story as Mieville's tale of selfish and politically narrow-minded elitists.

I think I got some beef w/ China Mieville

Here is what he wrote. My summary in my initial response:

"The bottom line to me is that it feels like the piece, while prettily written, is in essence a hatchet job by someone who demonizes libertarians. And demonization is antithetical to understanding. Yeah, it makes for nicely flowing vituperative prose, but not a very accurate picture of libertarianism's flaws, let alone a balanced viewpoint. There are plenty of reasonable criticisms to be made about libertarianism and seasteading. I've made lots myself, and heard plenty more from smart people who knew enough about the subject to argue about the actual movements, rather than the caricatures which Mieville paints here."

But it's worse than that. Here's my second take, after mulling it over enough to get indignant:

Assuming that the congruence between his article's list of projects and those in our book is not some kind of wacky coincidence, you get the following:

1) Someone who detests libertarianism decides to write an article about how libertarian seasteading is crap.
2) He uses, as a source, our book's listing of libertarian seasteading projects, most of which we think were crap.
3) He talks about how they are crap.
4) From (2), we can see that he is aware of the existence of our book. And the whole point of our book, at least as I see it, is to say "Hey, here's this really cool idea, of settling the ocean, which has heretofore been explored only by dreamers and nut cases. What happens if you try to look at it more practically, and figure out if it could realistically be done?"

At this point, he could: a) mention the existence of this useful source which also happens to be a less crazy, less easily parodizable take on the same subject, as exemplified by the fact that they agree with him about the impracticality, if not the ignobleness, of most of the projects he lists, or b) ignore it completely, because nothing should get in the way of a good story.

Maybe I am foolishly succumbing to the temptation to be indignant. But as someone who has poured a lot of effort into trying to realistically explore an idea I think is important but has been the province of dreamers and nut cases in the past, it pisses me off to see someone apparently using my work to paint that idea as the province of dreamers and nut cases without admitting the existence of a more sensible alternative approach.

Fortunately his article allows comments, so I replied there. Perhaps some of y'all can add your (polite) thoughts too.

UPDATE: Miéville replies.  The original article did cite my book as "irresistible reading", but the site it was republished on removed all references (and shortened the essay).

We already have bond-backed currency

Daniel makes a modest proposal to have a private currency that is backed by an index fund.

I love the idea, but I claim that such a currency already exists, thanks to the ubiquity of credit card/debit card processing. Many brokerages offer debit cards that access your cash holdings. Your cash holdings also earn interest as part of a sweep/money market fund. So in essence, your "cash" is really a very low risk bond fund (or whatever it is that sweep accounts get invested in).

Now, there is plenty to improve about this. Since sweep accounts are simply interest-bearing, they are still vulnerable to dollar decline.  Money market funds earn pretty low rates of interest, and it would be better to put the cash into a bond or equity fund.  The brokerage could make a single purchase / redemption a day in order to account for the net flow of money kept in this form by all customers, so transaction costs would be low. Tax consequences would matter, and complicated strategies might be needed to reduce them. It might be worthwhile having physical cash representing shares in this fund, although calculations would be required whenever you spent it.

But I think it's pretty exciting that, thanks to the fact that POS sales are everywhere, tied into a global network for credit/debit transactions, a version of his proposal is already true, and so perhaps more are not far behind.

An important factor in evaluating the realism of this proposal is: why are sweep account returns so low?  At Etrade, a balance of less than $25K only eearns 0.25% or so, while a $25K - $50K balance earns 2.7%.  I don't see why the balance size should matter, since all the cash of all customers should be invested together.  One nice feature is that you can opt to use a sweep account based on municipal bonds in your state, which are thus tax-exempt.

Southwest switching to a more efficient seat allocation system

A friend reports that: "what's changed (implemented in San Antonio, "coming soon to your airport, too!") is that you get a number within the group A, B or C, based on when you checked in, and you board the aircraft in roughly that order (groups of 5) and still get to select what seat you want. So you no longer have to camp out in line if you want to get on first, it's all determined by check-in order. SW has a explanation done in Flash."

This is great, because they are getting a problem right that our society frequently seems to get wrong, at our loss. Specifically, our society seems to view queuing as a standard "solution" for allocation. The problem is that it is wasteful because you are paying via a loss instead of a transfer.

For example, say the city opens a free movie theater. They have to ration tickets somehow, so they use lines. Townspeople respond by standing in line to get tickets until the time spent in line is almost equal to the value of the ticket. Compare this to an auction. The price will still go up until it is almost at the value, so to the person paying, it looks the same. But there is a crucial difference: the payment is a transfer (I hand you pieces of paper), instead of a loss (I stand in line). Looking at the whole pie, the auction does not use up any wealth, whereas queuing uses up lots of people's time, thus reducing their happiness by denying them opportunities to do more fun things.

Systems which ration through loss (gameplayers can think of it as "a payment to the bank") are wasteful, yet we seem to like them. Perhaps it's related to some kind of jealousy or anti-business bias, where we are happiest if no one is gaining at our expense. Sadly, that kind of thinking makes us all poorer. Alternately, queuing rewards those with low value for their time, while auctions reward those with the most money, so perhaps it is a redistributive mechanism, although it's a terribly inefficient one.

And of course, it isn't like auctions are the only efficient mechanism - anything where people can't use up resources works. For example, Southwest seems to be using check-in order, which in this world of printable boarding passes and check-in kiosks should not lead to much wasteful competition.

Moral question about Front Sight lawsuit

Years ago, I took a basic handgun class at Front Sight, and afterwards purchased the lowest level of lifetime membership, which allows me to take a small number of classes as many times as I want for the rest of my life. LIke most such impulse decisions, this turned out to be a mistake, as I have not taken a class since. The quality of training was incredible, and I expect to take more classes there in the future, but not enough to make the membership worthwhile.

A current class action lawsuit against Front Sight alleges that lifetime memberships were sold under misleading terms, and a settlement has been reached where Front Sight has put up $8M to buy out lifetime members. Is it immoral for me to take advantage of this opportunity to exit this poor performing investment, even if I do not feel that I was misled in any way?

My tentative answer is that it depends on the wording of the settlement. My reasoning is that lawsuits for fraud would happen in the kind of government that I consider just, and so the lawsuit and settlement both moral and are substantial evidence that the charges are true. If the terms of the settlement compel Front Sight to buy out any member who wants to exit, I see nothing immoral about taking the opportunity. On the other hand, if the settlement specifies that this is only for members who feel they purchased their memberships under false pretenses (which I do not), then I would be lying by signing it.

(I don't feel like looking up any links about this lawsuit, but I'm sure they are easy to find, so I'll leave it to the commentariat)

Stand up economist

In defense of Michael Vick

I don't understand why people think Michael Vick ought to go to jail. From what little I've read, he killed dogs as part of running an illegal dogfighting ring. So what? I just don't see animals as having that much weight in moral calculations. For example, I would happily shoot a thousand dogs to save a person's life. Why would you lock away an actual human being (albeit a moronic and possibly sadistic one) for something that happened to animals?

I do think that dogfighting is barbaric, gross, and weird. Knowing that someone liked it would change my opinion of them in negative ways. The thought of it makes me queasy. But I don't think people should go to jail just because they do things that make me queasy.

The best argument I can see against Vick is that animal-focused sadists are much more likely to commit crimes against people. But that suspicion doesn't seem like enough cause to lock someone up.

Are there good arguments as to why animals should have rights?

(And of course, PETA is all over this, even though they kill orders of magnitude more dogs than Vick does.)

Lovely Legal Loopholes

As someone who likes recreational drugs, yet is concerned about legal safety, I have done a fair amount of looking for legal loopholes which let me obtain enjoyable chemicals with minimal risk.

For example, did you know that while the refined products of papaver somniferum, such as heroin and morphine, are scheduled, the dried pods themselves are perfectly legal to obtain for the purpose of making floral arrangements? As long as you use them for decorative purposes, and refrain from grinding the pods in your coffee grinder, then putting them into your espresso machine, and drinking the mildly narcotic tea which results, you are acting within the law. (Here is Erowid's take).

My floral arrangements have certainly benefited aesthetically from the pods produced by Poppies International, an expensive but reliable source of decorative materials.

Another useful fact is that the San Pedro Cactus, a relative of the illegal Peyote Cactus, contains significant amounts of mescaline, yet is legal to purchase, grow, and own. At least, as long as you don't follow any of the instruction guides on the net about how to use San Pedro to open the Doors of Perception.

Hedge Fund domino effect

via my hedge fund quant friend comes some articles about how the credit market problems may spillover into hedge funds which concentrate on stocks:

One theory that some on Wall Street are subscribing to says that the trouble with quants began in the credit portfolios of a few large multi-strategy quantitative hedge funds. After the subprime meltdown and the troubles at two Bear Stearns hedge funds revealed that many formerly highly rated credit products could not be easily sold in the market at the values that had been assigned to them using financial models, hedge fund managers may have realized that they were facing significant losses in their credit portfolios.

To stem possible losses, the managers sought to scale back their leverage. But selling the illiquid credit products risks uncovering even deeper losses as the credit positions were marked-to-market instead of marked-to-model, so these managers likely de-levered by selling more liquid assets—namely, US stocks.

“As these managers unwound significant factor based portfolios, these factors started to behave in unexpected and potentially troubling ways. Short names started to rally and long names started to fall as these trades started to hit the market. As most quantitative managers use similar quantitative factors, this abnormal factor phenomenon was not confined to a few funds.

As I read it, the idea here is that hedge funds are making leveraged bets on many things, including mortgages and CDO's. When those crash, they get margin calls, and have to liquidate other assets. Other assets include stat arb positions in the stock market. But the inverse of the idea that when you bet on a theory, you make the market closer to that theory is that when you sell a position you make the market *less* like the theory. So when stat arb funds liquidate, that makes all the other stat arb funds lose money, since they are all using similar strategies.

Which could make even funds with no mortgage/credit market exposure take big losses and get margin calls, thus leading to a domino effect as hedge fund after hedge fund liquidates and closes.

Not auspicious.