Higher Education is More Socially Useful than Home Ownership

Yves Smith has a really interesting blog post about the prospect of massive student loan default rates on the horizon:

"This is the new subprime: escalating borrowing taking place as loan quality is lousy and getting worse. And in keeping with parallel to subprime [sic], one of the big reasons is, to use a cliche from that product, anyone who can fog a mirror can get a loan.

The most popular type of loan, Stafford loans, allow undergraduates to borrow up to $57,500, no questions asked. Perversely, this practice, in isolation, looks rational. Look, if you could put borrowers in virtual debt slavery, would you care much about lending standards? All you need to worry about is death and those few cases where borrowers are so clearly unable to ever work for a decent amount of money that they can get their student debt that they can get their loans reduced or discharged."

Obviously this is a worrying trend, with potentially terrible economic consequences for both the country generally and for individual graduates who might be swamped with debt. But associating this bubble in debt-fueled education with the bubble in debt-fueled house buying is unfair.

As a general principle, well-functioning markets provide socially optimal outcomes. Based on this assumption, many economics commentators see the higher-education market functioning poorly and conclude that it's producing socially sub-optimal outcomes. Here's where many economics commentators err: market-clearing outcomes (no big shortages or gluts) are socially optimal in general, but in practice there exist lots of examples of good things resulting from markets going haywire. The massive railroad expansion into the American western frontier crashed the economy, but in the end the U.S. was left with a huge transcontinental transportation network. Dubai nearly went broke by building crazy stuff, but its glittering towers aren't going anywhere anytime soon. The crash of 2007 was terrible, but was particularly destructive because the wreckage had little social value: complex financial instruments and loads of houses.

Higher education, on the other hand, has powerful social benefits grounded in non-economic values. Higher education promotes civic virtue. Educated people invent more useful technology. There is a strong moral rationale for society to provide the opportunity for every person to enjoy the fruits of our accumulated knowledge. This sort of stuff cuts across the potential market inefficiencies of subprime student loan standards and reveals the "nominal" character of the market critique. Education is a "real" good that makes our society better. Debt is useful insofar as it allows our society to flourish. If our dysfunctional higher education market crashes after producing too many educated people, I say okay. There's no such thing as too many educated people. Until everyone who can fog a mirror has an education, we've got work to do.

Quote of the Week

"I have often wondered why economists, with these absurdities all around them, so easily adopt the view that men act rationally. This may be because they study an economic system in which the discipline of the market ensures that, in a business setting, decisions are more or less rational. The employee of a corporation who buys something for $10 sells it for $8 is not likely to do so for long. Someone who, in a family setting, does much the same thing, may make his wife and children miserable throughout his life. A politician who wastes his country's resources on a grand scale may have a successful career."

Ronald Coase, "Comment on Thomas W. Hazlett" (hat tip Bryan Caplan's The Myth of the Rational Voter)

What's Mostly To Blame For Extreme Inequality In The U.S.?

Big structural changes like globalization and technology, according to the conventional wisdom. But Jacob Hacker and Paul Pierson develop an alternative theory in their book Winner-Take-All-Politics. In the book, they see political forces as the main culprit: both active legislation as well as the passive failure to update policy and regulations in light of changing economic circumstances ("drift"). Ten good facts I walked away with:

1. Most analyses of inequality focus on two categories of people: the educated and the non-educated. But the category that really drives inequality statistics--mega-rich corporate executives--don't have notably higher levels of education. So education-based theories aren't sufficient.
2. Other rich-world countries didn't experience the huge increases in inequality that the U.S. did. This points to a country-specific explanation, rather than global economic forces and technology.
3. GDP per hour worked is a good measure because it partially corrects for the fact that much of the economic gains among lower- and middle-class people over the past 30 years have been from more toil. 
4. The collapse of labor unions was a really huge contributor to ballooning inequality. The employer-based health and retirement systems in the U.S. meant industries with historically high unionization rates got screwed by "legacy costs", resulting in lower employment growth.
5. Due to the many veto points in its structure, the U.S. government has historically alternated between periods of drift and renewal. Since 1977 we've seen mostly drift and little renewal.
6. The conventional wisdom holds that the 1960s were the start of some crazy political death spiral, but by looking at actual government action rather than electoral narratives, we see that Nixon was pretty moderate and status quo, while Carter blocked tons of renewal opportunities and initiated many regressive tax reforms.
7. It's ironic that new forms of regulation in the 1960s and 70s incentivized the formation of business groups (example: U.S. Chamber of Commerce), resulting in more lobbying and interest group policy access.
8. The advent of television dramatically increased the costs of running campaigns; political giving by business promptly skyrocketed.
9. Most contemporary interest groups have narrow memberships and missions, and focus largely on "post-materialist" themes like social justice. No broad champion of middle class pocket-book economic interests has emerged to replace labor unions.
10. Page 159: "Polarization primarily reflects not the growing polarization of voters, but the declining responsiveness of American politicians to the electoral middle."

Information Nexus

1. Article: E.O. Wilson on the Origin of the Arts
2. Drake Equation Alien Calculator
3. Blog Post: Will Wilkinson of the Irrelevance of Campaigns
4. Video: Andrew Sullivan and Ross Douthat Discuss U.S. Christianity
5. Short Story: Spar by Kij Johnson

The Frontier of Ethics

Ethics is a really complicated and diverse field, but one of its most interesting historical features has been the steady widening of the boundaries of various ethical systems. As the world has developed and globalized, we've seen people start affording moral weight to things that were previously ignored: individuals belonging to other racial groups, individuals in other countries or regions, individuals with different religious beliefs, animals, etc. Excluding the question about the moral status of animals and biological systems, one can't help but conclude that someday the domains of most ethical frameworks will expand to encompass every human being. This vision, called cosmopolitanism, is already realized in a host of issues today. Climate change is probably the best example, but stuff like human rights, global poverty, prevention of global pandemics, and world-destroying asteroid protection also count.

Photo Credit: Secular Student Alliance

Recognizing that the world is getting more cosmopolitan begs the question: what comes next? What other ethical frontiers (e.g. "expanding moral circles") are out there? Certainly the species boundary is a big one: what is the moral status of animals? Should dogs factor into our moral calculus? What about bugs or bacteria?

Another boundary that isn't fixed is pegged to technology: as new technology develops, novel ethical dilemmas will emerge. What is the proper use of cloning, genetic engineering, and biological enhancement? To what extent should we limit fabrication technologies that could be used to make weapons? How will new communications technologies disrupt incumbent political, social, and economic structures?

Photo credit: Don Davis

The list goes on. But although there are many dimensions of ethics that will remain dynamic forever, I'm not actually convinced cosmopolitanism represents the endpoint it's usually portrayed as. It's obviously true that cosmopolitan ethics encompasses every human being on Earth. But there's another important set of human beings whose ethical status is ambiguous: humans that haven't been born yet. What is the ethical status of the welfare of humans living 100 years from now? 500 years? 1000 years? In policy terms this issue is known as the discount rate, and it underlies a shockingly large set of contemporary issues. Strange then that it receives almost no explicit attention in the political discourse, the popular philosophy literature, or in undergraduate philosophy programs.

I'd like to delve into this topic in the future, but for now a good start might be to identify what the new endpoint of this temporal frontier of ethics might be. I suggest something like the equal weighting of all humans into the future; a discount rate of zero. Call it "chronocosmopolitanism." Now obviously the practical implications of affording equal moral weight to someone alive today and someone living in 10,000 years is... tricky and ridiculous. But it's an important limit case that can serve to frame this debate.

Architecture Break

From Daily Dose of Architecture, the Inntel Hotel. It has a strange fractal quality that makes its size really interesting:

The Harper's Index Is A Sham

I was reading Harper's Magazine the other day, which is a great magazine, but for the first time ever its classic "Harper's Index" feature didn't tickle my fancy. Novel factoids are useful and entertaining, but without context or information about the methodology that's producing them, it leads us astray. Listing thematically linked but methodologically distinct facts encourages the proliferation of spurious causal inferences, and sends the wrong message about how to obtain knowledge. Harper's is an old magazine with a lot of power, and should know better.

Campaign Finance is More Complicated Than I Thought

The new season of Intelligence Squared US kicks off with a fantastic debate on the merits of campaign finance restrictions. I listened to the audio on itunes, but YouTube has the full video also. These debates are always incredibly substantive and professional, and this year's roster of speakers and topics is just killer.

Before the debate I was completely supportive of stringent rules to limit the influence of money in politics. After the debate, I'm still largely supportive of most restrictions, but I have a much better sense of the issue's complexity and basically see it as a pragmatic/technocratic policy thing. The side arguing against the  regulation of money in politics convinced me that their free speech position is legitimate and is the best place to begin the conversation. Meaning restrictions ought to be defended in terms of their practical benefits outweighing the status quo of unfettered free speech (and the capacity to broadcast it (read money)). This is a big shift in my previous attitude that viewed campaign finance restrictions as having some a priori justification.

Quote of the Week

"The political discussion about regulation in this country is very crude. Lehrer asked the candidates if there's "too much" regulation in America last night, but it's not something you can just add up.

I think we have much too little regulation of air pollution and bank leverage, but you don't compensate for underregulating those things by overregulating barber shops."

Matthew Yglesias answering questions in an ask-me-anything interview session on reddit.

Fukuyama on the State

Francis Fukuyama, who has a great blog publicly noodling ideas around for his next book, raises some interesting questions about political science:

Studies of non-democratic countries focus on issues like authoritarian persistence, meaning that the focus still remains the question of democracy in the long run or democratic transition. In other words, most people are interested in studying political institutions that limit or check power—democratic accountability and rule of law—but very few people pay attention to the institution that accumulates and uses power, the state.

This blog post is largely over my head, but at least some of what he's wondering about may have a simple explanation: measuring and assessing a state's capacity to act is much more difficult than measuring the set of actions that a state limits. Fukuyama's saying that there are two perspectives when studying state institutions: the negative (what an institution constrains) and the positive (what an institution can do). The negative perspective is easy because there are clearly defined measurement boundaries: if the actions your institution is meant to limit are occurring, something is wrong.

The positive perspective, on the other hand, is trickier because its measurement boundaries are more open-ended and probabilistic: just because an institution can act in a certain way doesn't mean it actually will. This means we can't trust only real-world outcomes to paint a full picture of an institution's capacity. To get the whole story we must develop some counterfactual theory about how things might work, using assumptions and whatnot. I imagine this prospect probably turns off a lot of researchers.

Incisive News Analysis

More Rap News here

Settlers of Catan is a Great Social Science Model

Brad Pummer at Wonkblog recently had a great article describing the potential of MMO computer games to serve as laboratories for economics researchers (epidemiologists too!). While video games can test theories by facilitating controlled experiments, other leisure activities like board games can help us interpret social science theories.

A theory (or model) is basically just a simplified version of the world, one that sorts details that are important for explaining a phenomenon from unimportant details. Among social scientists, there's a big cleavage between those who believe social phenomena is best explained by structural and contextual forces, and those who believe agency-based explanations are the way to go. This cleavage, which exists on a continuum, is roughly analogous to the philosophical question concerning the degree to which humans posses free will. A great example of this rift that's been in the news recently is the media coverage of the presidency: are presidents successful because they happen to be in office when the context is favorable (i.e. economic cycles, historical patterns, demographics, etc.), or do they succeed because they made the right decisions and possess good leadership qualities.

Settlers of Catan is an intellectually fascinating board game because it demonstrates a broad range of heady concepts from economics, political science, psychology, game theory, and probability theory. The basic game consists of 3-6 players competing to grow their small economies by constructing roads, settlements, cities, and various random-payoff and positional goods. Players collect tradeable resources based on the geographic location of their infrastructure: the game board consists of randomly-distributed tiles corresponding to resource-producing biomes. Each tile's productivity also varies randomly using a probability distribution.

Settlers is great because it shows how incredibly difficult it is to develop an adequate social science theory that actually has predictive accuracy. Explaining the outcome of any particular match is tough: did the victor win because of favorable initial geographic conditions? Did they have perfect strategy and bargaining logic? Perhaps they won because their opponents were irrational? Maybe they would have lost 9 times out of 10, but they just got lucky? Because it's impossible to re-play games with identical initial conditions and dice rolls, controlling for variables is impossible, meaning we'll never know for sure. Sometimes a specific variable will be so extreme--godly spot placement, miraculous dice rolling, brain-dead opponents--that predicting the winner is possible. But those situations only happen occasionally; most of the time variables are moderate and so isolating any one cause is tricky. The difficulty in establishing causation in a simple German board game with a limited number of variables shows how hard social science is, which studies the messy real world.

Information Nexus

1. Blog Post: Andrew Gelman on Election Models
2. List: Robert Heinlein's Predictions
3. Short Story: The People of Sand and Slag by Paolo Bacigalupi
4. Article: Resilience Over Efficiency
5. Video: Christopher Hitchens Debates Tony Blair on Religion

Philosophy and the Rat Race

I recently finished How Much Is Enough? Money and the Good Life by the political philosopher/historian father-son duo Robert Skidelsky and Edward Skidelsky. The book basically traces the historical evolution of the philosophical concept of the 'good life,' covering the three big systems of ethics (consequentialism, deontology, and virtue) and then moving on to more modern stuff: Adam Smith, Marxism, the sexual revolution, John Rawls, environmentalism, happiness economics, and finally the capability theory of justice. The book closes with some policy suggestions designed encourage more "good life" living. A few takeaways:

1. The whole book has a great futurist tilt to its analysis, largely due to its framing device: economist John Maynard Keynes' prediction that increasing worker productivity would result in tons of leisure time for most workers. Obviously that didn't happen, but by interpreting every historical theory in terms of its Utopian vision, we get a book that's not just your typical (unoriginal) 'history of philosophy'. I wish they had pushed this theme a bit further into more explicitly futurist territory.
2. For me the best nugget of new information in the book was an insight by economist Gary Becker. According to Becker, we ought to look at leisure time not as a benefit but as a cost--the cost of not working! Rich, highly productive people, then, give up a lot to just chill out and do nothing. This realization overturns the conventional wisdom: there's no a priori reason to expect work hours to decrease as wealth and productivity increase.
3. Interestingly, this book really emphasizes the huge historical significance of the story of Faust, in its various incarnations. Put it on your reading list.
4. The last two chapters, focusing on the specific elements of the 'good life', were unoriginal and unpersuasive. Essentially the authors create a list of conditions necessary for an individual to live a 'good life.' They attempt to justify this list without grounding it in any particular ethical framework, creating a sense of arbitrariness. Additionally, their theory says nothing about how to deal with situations where trade-offs between ingredients are necessary.

For more, check out Richard Posner's New York Times book review, and definitely check out this EconTalk interview with Robert Skidelsky.

Killing Wolves to Save Them

Derek Mead of Motherboard has a great post about the reintroduction of wolves into Montana and Wyoming, and the evolving rules surrounding their management:

With the contentiousness of the ESA process, the end result is what we’re seeing right now in the wolf ruling: Because a lot of people don’t want wolves around, states have worked with the Fish and Wildlife Service to figure out how few wolves they can keep around while keeping the population relatively stable — and thus within the letter of the law. But that type of management, focused on the lower feasible limit of a population, ignores the effects a single species has on its environment.

Obviously this new regime has some technocratic issues to muddle through regarding the proper balance of ecosystem health and economic health. But the fact that self-interested groups such as farmers attempt to influence the policy process in order to capture economic benefits reveals some nice insights about government regulation. Counter to the conventional wisdom, businesses sometimes want to acquire regulation in order to make it more difficult for competitors to enter their market. Similarly, regulation and the big bureaucratic infrastructure that often accompanies it provides a certain amount of protection against disruptive technology and social changes.

What's true of interest groups outside of government is also true of interest groups within government: environmentalists who want the reintroduction of wolves to be permanent and inviolable have a strong incentive to acquire expansive regulation. Keeping the policy status quo is always harder than changing it, and by establishing a hunting season with licences and all that, the existence of wolves as a major species becomes further entrenched socially, bureaucratically, and politically.

Additional Reading: Yale's Environment360 blog on the crucial role of top predators in ecosystems

Fire and Sagebrush

Last week's Science Friday had a great segment about the changing landscape of the American West caused by invasive species and brushfire. All the interview questions and expert guests were fantastic, but the discussion failed to clearly define the ecosystem management goals--are we opposed to certain invasive species because we want to preserve the historic makeup of the ecosystem? Is ecosystem health and resilience more important? How much economic damage are we willing to tolerate before we intervene to stop a brushfire? Over what timeframe?

Lots of commentary on environmental issues is similarly vague, often framing debates using concepts like "naturalness". These focusing ideas may serve a social role by signalling to others an environmentalist identity affiliation, but hinder progress by muddling the debate and limiting coalition possibilities to pretty much just liberals. Certainly there are benefits to having a huge environmentalist coalition, but by decomposing environmental and natural resource issues into more specific terms, we open up the possibility of forming novel coalitions that cut through the zero-sum partisan logic of our current policy process.

Book Review: Why Nations Fail by Daron Acemoglu and James Robinson

"All causal paths lead to institutions" is the mantra for Why Nations Fail, one of the newest books looking at the roots of growth and development among nations through the ages. In a field that's been trending towards ever-more theoretical complexity and epistemic humility since Jared Diamond's path-breaking Guns, Germs, and Steel, Acemoglu and Robinson develop a theory with a notably retro feel. That's because of its shocking simplicity: according to Acemoglu and Robinson, the fate of nations (or states, they don't specify) both past and present can be explained by the types of institutions that structure incentives and activity over a given area or population. There exists a continuum between "extractive" institutions (ones that favor a small group of elites by channeling resources from the masses) and "inclusive" institutions (ones that spread resources more evenly across all groups). Successful nations are those that have developed inclusive political, social, and economic institutions, and unsuccessful nations are those stuck with extractive political, social, and economic institutions. Micro-level feedback loops, such as the social aversion to Schumpeterian creative destruction, resist institutional change. The development and drift of these institutions is not predictable, and is determined by idiosyncratic historical context, contingencies, and black swan events (called "critical junctures").

The book is filled with good historical narratives, but Acemoglu and Robinson's theory is at once overly simplistic and fails to establish a satisfying causal mechanism. The main driver of the book--the inclusive/extractive distinction--is so broad and ill-defined that it's basically tautological. Replace "inclusive" with "good" and "extractive" with "bad" and the book reads very much the same. That's because there's little detail about the specifics, dynamics, and boundaries of these institutions. Are institutional changes in the direction of inclusivity always conducive to more growth and development? Is there some point at which institutional inclusiveness reaches pareto efficiency? Does the causal weight of institutional quality stay constant throughout history and technological development? Acemoglu and Robinson's theory contains only two actors, the elites and the masses, implying a zero-sum relationship. This ignores the wealth of comparative politics literature concerning coalition-building between leaders, elites, and the masses and its consequences for political development. Additionally, Acemoglu and Robinson completely miss the whole "strong versus weak" institutional dimension. It's entirely possible that an extractive yet institutionally strong state (i.e. China, or Iraq under Saddam) is preferable to an inclusive yet institutionally weak state (i.e. Native American tribes, or Iraq after Saddam).

On a methodological note, the historical examples that comprise the bulk of the book don't appear to be organized in any systemic way, opening up the possibility of cherry-picked examples that only support the theory. Indeed, certain challenging cases are ignored or brushed aside: the long global history of slavery, India's caste system, and the treatment of immigrants, animals, children, and the disabled in state institutions.

Lastly, the conceptual foundation of Acemoglu and Robinson's theory is somewhat misleading. While the entirety of the book is rhetorically focused on the extractive-versus-inclusive-institution frame, the core message about causality--why some nations develop inclusive institutions while others don't--is not emphasized. Essentially Acemoglu and Robinson claim that there exists a positive correlation between inclusive institutions and success. Though they state that this relationship is causal, Acemoglu and Robinson make a stronger claim prior to this relationship, which undercuts it. They state that the inclusiveness of a nation's institutions is determined by...luck. Or, more specifically, idiosyncratic historical context combined with rare, high-impact events. Neither of which can be predicted or analyzed for patterns. For this topic of research, among political scientists, this position is radical and amounts to a strong critique of pretty much every previous model.

Long story short, Why Nations Fail isn't really a social science theory at all: it has no causal mechanism, it proceeds neither deductively nor inductively, and its terms and concepts are exceptionally vague. Best to view it as some sort of interpretive lens with which to view a certain genre of history.

Quote of the Week

"Today, New Urbanism finds itself in unexpectedly strong competition with "old urbanism," that is, with existing center-city neighborhoods in the process of renovation that are already well served by transit lines, close to lively downtowns with well-paying jobs, and enjoying rapidly improving schools, public safety, and other services. Not surprisingly, these neighborhoods have attracted many of the young people who might have fueled the demand for greenfield New Urbanist projects. Meanwhile, the American suburb has proved to be highly resistant to extensive reconfiguration along New Urbanist lines."

--Robert Fishman writing in Planning Ideas That Matter edited by Bishwapriya Sanyal, Lawrence Vale, and Christina Rosan

Algorithms Do It Better

One of the best things I've read all week was this great debate between Sam Harris and security expert Bruce Schneier over the merits of profiling in the context of TSA airport security checkpoints. I like Sam Harris, but his position justifiably gets destroyed by Schneier. A taste:

I’ve done my cost-benefit analysis of profiling based on looking Muslim, and it’s seriously lopsided.  On the benefit side, we have increased efficiency as screeners ignore some primary-screening anomalies for people who don’t meet the profile.  On the cost side, we have decreased security resulting from our imperfect profile of Muslims, decreased security resulting from our ignoring of non-Muslim terrorist threats, decreased security resulting in errors in implementing the system, increased cost due to replacing procedures with judgment, decreased efficiency (or possibly increased cost) because of the principal-agent problem, and decreased efficiency as screeners make their profiling judgments.  Additionally, your system is vulnerable to mistakes in your estimation of the proper profile.  If you’ve made any mistakes, or if the profile changes with time and you don’t realize it, your system becomes even worse.

It's worth reading the whole thing to better understand the many ways Harris is mistaken, but of particular interest to me is the general philosophical approach Harris takes in defending a profiling regime. He thinks it's merely common sense to profile because not doing so neglects statistical information based on demographics. In his view a security system confronted with a white European wheelchair-bound grandma should consider the probability she's a terrorist (tiny) and quickly update its screening procedure accordingly (by devoting less attention to her). Conversely, a young Semitic-looking man would attract more scrutiny because he's in a riskier demographic category. On the face of it this seems rational, just as employers operating with limited information might discriminate on the basis of race when hiring. But doing so is almost always not worth it, and here's why: the logic changes when you move from considering a single one-off interaction to a system involving repeated interactions. In a system like airport security, blind rules or algorithms become necessary because the costs of constantly updating your information quickly becomes exorbitant.

What Harris is really upset about is an unfortunate byproduct of adherence to blind maxims or algorithms: the perverse outcome. If our security system doesn't update based on demographic statistics, it's unavoidable that we'll have ridiculous situations like the grandma thing occur from time to time. But here's the rub: if we think we can be clever and have it both ways (say, by relaxing our adherence to our algorithm in obviously perverse cases) it results in a worse system overall. Why? Because the experts we put in charge of making the decision almost always opt to override the algorithm too often. This problem has been called the "case of the broken leg" by psychologist Paul Meehl, and is described in Ian Ayres' wonderful book Super Crunchers. Although it requires a more sophisticated understanding of how systems work, we must recognize that in the context of airport security algorithms work better, even though it means accepting a certain minimal amount of perversity.

Public Restrooms In Big U.S. Cities

That there exists an undersupply of easily accessible clean public restrooms in most big U.S. cities is not a novel revelation. What's interesting, however, is what this admittedly minor social annoyance can tell us about  how social goods are produced by the market. Most public restrooms in cities are not actually "public" in the sense that anybody can walk into a restaurant or shop and benefit from their use. Rather, informal norms limit access by allowing just the club of people who spend money--"customers only". This means that the few storefronts that truly allow anyone to use their restrooms at zero cost are going to be preferred by a lot of people. In big cities with large homeless populations, this can become a problem: the best public restrooms near homeless hangout spots get trashed. What occurs is something political scientists call a race to the bottom: locales supplying public restrooms compete to avoid the costs associated with overuse by restricting access. This could mean instituting customers- or employees-only policies, restricting access at peak demand times (just try finding a public restroom around Dupont Circle in DC early in the morning), or simply eliminating restrooms altogether. The result is that in big U.S. cities, largely the only consistently-available public restrooms are those supplied by locales that have made a non-rational commitment (in the economic sense) to provide this social good. The typical example is a public library, but Barnes & Noble and Starbucks have, for whatever reason, chosen to occupy this role as well.

To put the U.S. system in context, some major cities, such as Tokyo, have abundant public restrooms supplied and maintained by the government. Other cities have restrooms available for a price. In the U.S. we have a system composed of an insufficient public commitment via libraries and a tenuous supply by certain virtuous chains. This existing-yet-insufficient supply in the U.S. is just enough to undercut the ability of entrepreneurs to make money with pay restrooms.

Information Nexus

1. The Maker Movement Might Change Everything (Book)
2. Patent Policy Explained
3. Awesome New Documentary About Aerial Drones
4. Ten Huge Issues Being Ignored by the Presidential Campaign
5. Virtue Ethics and Sustainability

Adherence to Identity Trumps Policy Coherence

We all know the ethical and political preferences of individuals and political parties are often not consistent or logically coherent. But how can we explain these deviations? The simplest answer is that parties, like individuals, are pluralistic entities with many competing impulses. Action is the result of complex bargaining processes among internal coalitions and is highly contingent on contextual factors and chance. But that doesn't get us very far when trying to explain specific instances of ridiculous ideological contradiction (like how Republicans oppose market efficiency-increasing pollution taxes). An interesting explanation that seems to be gaining currency is a general formulation of the idea of cultural cognition: basically that beliefs and preferences are driven largely by adherence identity and group.

Matt Yglesias has a great blog post about conservative opposition to zoning deregulation in Hollywood that perfectly illustrates the idea: the policy preference for regulation-free markets is trumped by the cultural allergy to urban density and its associations (bicycles, Democratic voting patterns, liberal new urbanist principles, young people, diversity, etc.). For more on this idea check out Jonathan Haidt's new book The Righteous Mind.

The Economics of Sports

With Lance Armstrong back in the news for doping, the newest EconTalk Podcast about the economics of sports couldn't have come at a better time. While the business and financing aspects of sports industries are interesting, this podcast gives a rough introduction to the economics of sports, which is different, and much more interesting. Basically its goal is to apply economic thinking and methodology to answer questions about sports industries. Classic topics include: the economic impact of new stadiums, differences in labor relationships between sports (college football versus NFL, for example), strategic incentives for regulators and players (example: doping), and of course using econometrics to evaluate players and teams (example: Moneyball's sabermetrics). Ever wonder why so many sports stadiums are out in the middle of nowhere surrounded by a moat of roads and parking lots? How about why Stanford is able to compete with massive taxpayer-funded state school behemoths? Better get listening.

A Better Kind of Pundit

The intersection of the [top-tier] politics and economics blogging community with mainstream journalism happened a while ago, but even still it's great to see a cable news show so explicitly adopt certain stylistic traits of professional blogging such as: 1) arguments backed up by data and academic research 2) a willingness to respond to criticism 3) admission of mistakes in a casual, college-bowl-like dialectic.

Visit NBCNews.com for breaking news, world news, and news about the economy

The Curious Preferences of Poverty

Most popular non-fiction books on development economics, foreign aid, and extreme poverty can be grouped into three broad camps. The first camp targets its analysis on state formation and institutional development. This is very much a political-philosophic approach, with major figures being Francis Fukuyama, Samuel Huntington, Amartya Sen, and more recently Daron Acemoglu and James Robinson with their wonderful new book Why Nations Fail.

The second camp blames stagnant growth and instability on "development traps": negative feedback loops that keep poor countries poor. Under this paradigm, sufficiently large doses of well-coordinated foreign aid can jolt a country out of the trap and into a virtuous cycle of autonomous growth and institution-building. Jeffrey Sachs' The End of Poverty has the best articulation of this view, with Paul Collier's The Bottom Billion deepening the theory by cataloging more structural roadblocks to development.

The third camp, in direct opposition to this "big aid push"  idea, finds little evidence for entrenched poverty trap-stricken countries. According to this approach, development assistance is often counterproductive due to the misaligned incentives and limited information of foreign aid planners. William Easterly's The White Man's Burden is the best example of this perspective.  The disagreement between camps 2 and 3 is roughly analogous to the central planning-versus-free market cleavage in political philosophy.

Poor Economics, a new book by MIT economists Abhijit Banerjee and Esther Duflo, is an aggressive attempt to buck that well-trod dichotomy and identify a novel approach. They attempt this feat by going meta, grouping camps 2 and 3 together as "grand theory" approaches and balancing them against their own "no theory" approach. In their view, studying development should involve using rigorous data (especially from randomized trials) to make limited claims about which techniques work and which ones don't.  

Photo Credit: Jim Davis

The book is structured by topic, with chapters investigating various aspects of the economic lives of poor people. Many of the specific findings are incredibly interesting: poor people often choose fewer tastier calories over more cheaper calories; parents might not encourage education for their kids for fear of losing their assistance around the house. The limited conclusions at the end of the book are equally novel: the poor bear responsibility for too many aspects of their lives compared to rich people who have many "right" decisions made for them, like chlorinated water, fortified food, automatic savings, etc.

Poor Economics is an interesting and important book, but its conceptual framing is flawed. It's filled with tons of fascinating little nuggets of information, but that's pretty much it. The attempt to go all meta and establish a new "big theory vs. little theory" framework falls into a common fallacy. Camp 3 is more critical theory than anything else, and labeling it a "big theory" just like camp 2 is akin to calling atheism a religion and 'off' a television channel. Instead, Poor Economics is most accurately viewed as merely a superb implementation of the camp 3 approach. Banerjee and Duflo, whether they admit it or not, are dutiful and committed searchers.

Obnoxious Advertising and Retaliation

I recently stumbled across this interesting quote by the graffiti artist Banksy sharing some thoughts on advertising:

"People are taking the piss out of you everyday. They butt into your life, take a cheap shot at you and then disappear. They leer at you from tall buildings and make you feel small. They make flippant comments from buses that imply you’re not sexy enough and that all the fun is happening somewhere else. They are on TV making your girlfriend feel inadequate. They have access to the most sophisticated technology the world has ever seen and they bully you with it. They are The Advertisers and they are laughing at you. You, however, are forbidden to touch them. Trademarks, intellectual property rights and copyright law mean advertisers can say what they like wherever they like with total impunity. Fuck that. Any advert in a public space that gives you no choice whether you see it or not is yours. It’s yours to take, re-arrange and re-use. You can do whatever you like with it. Asking for permission is like asking to keep a rock someone just threw at your head. You owe the companies nothing. Less than nothing, you especially don’t owe them any courtesy. They owe you. They have re-arranged the world to put themselves in front of you. They never asked for your permission, don’t even start asking for theirs."

The best way to read this quote is as a normative statement concerning the boundaries of J.S. Mill's harm principle, which basically says people should be free to do what they want as long as they're not harming other people. Mill did not consider offensive acts necessarily harmful, and didn't view coercive action to reduce mere offense as morally justified. According to Banksy, many advertisements in public spaces, by virtue of their aggressive and meddlesome nature, do violate the harm principle and thus forfeit their right to physical integrity.

Presumably Banksy thinks it's okay to deface ads in public spaces only because the economic and social policies that encourage them are morally lacking. Ideally he should want a different set of rules that match up with his conception of what a public space should look like.

Banksy's analysis comes to some foolish conclusions: by extending the boundaries of the harm principle to include offense, we're left with an almost infinitely broad rule. City dwellers are constantly looking at random stuff that has been created by other people with various purposes in mind. What separates marketing activity from other sorts of advertising, like political advertisements, notifications about public services, and marketing material for cultural events? Is a business that's offended by the signs and posters displayed by striking workers in a picket line morally justified in defacing or destroying them? Banksy would probably say no, even though they follow from the logic he sets up. Frankly speaking, our modern urban society would fall apart if everybody went around asserting ownership or control over anything that offended them. I think it's more likely that Banksy just doesn't like the aesthetics or symbolism of most corporate marketing, and he's indulging in some poorly-considered rhetorical nonsense.

So what about our system as it stands today? Could we actually have a setup now that gets pretty close to an optimal arrangement, based on the median attitude towards graffiti in public spaces? Let's think about it. If Banksy got his wish and the harm principle was extended to make retaliation for offensive ads fair game, several things would happen. First, the returns on physical advertising would collapse: anybody spending money to design and implement physical advertisements would probably see them defaced or destroyed immediately. We would likely see fewer ads in easy-to-deface places, and more ads in hard-to reach places, like buildings. This would dramatically increase the barriers to entry for smaller firms and non-commercial groups wishing to advertise--probably not the most open and democratic outcome!

Even while dramatically raising the costs of advertising for most groups, Banksy's vision would paradoxically see the costs of amateur graffiti crash to zero. In easy-to-reach areas, this would create a emphatically non-aesthetic mess of tagging and retaliatory defacing. The website 4chan is an interesting social experiment in anarchic anonymous collaboration, but I'd rather not see the same dynamics played out on corner store windows across the country.

With our current setup, graffiti is a serious enough crime as to deter most potential offenders, keeping our buildings and public surfaces relatively clean. We have ads in public spaces, but often the really terrible ones are targeted by the individuals and groups most affected--homeowners, local businesses, neighborhood groups, etc. Additionally, a certain set of die-hards will always be willing to risk getting caught defacing bad advertising in order to make their point. It seems like tweaking some regulations on the margin is the way to go if we're concerned about overly-intrusive ads in public spaces. Or maybe we could just go camping.

The Horror of Freedom

These RSA Animate videos just get better and better:

Upvote for Aggregation Innovation

When discussing the internet--a topic both accessible and interesting--most people seem to have some pet analysis that they deploy regularly, steering the conversation to a place where their favorite conversational lines can flourish. One that I hear often is that the internet has progressed along a sort of dialectic. First, early content-creators provided info for the masses. Next, as costs plummeted (due to better technology, infrastructure, and user interfaces) the masses became content-creators themselves, causing an explosion in the amount of information available on the web. I'm talking about the rise of things like social networks, blogging, and Wikipedia. The third trend, which is supposed to be happening now, is innovation in methods for sorting through that crush of information. The best example would be Pandora, but stuff like Stumbleupon and Google+'s "circles" idea also illustrates the demand for information-filtering and -structuring services.

This model is fun and useful, especially when thinking about the explosive popularity of sites like reddit. Now, any attempt to analyze, define, characterize, or label the multifarious and sublime reddit is ultimately doomed to failure, but it's a start. Reddit is possible for many reasons: the existence of free image and video sharing websites, the hyperlink navigation system, its prodigious size and diversity, its non-invasive design and style, sheer inertia and luck, etc. But the most critical ingredient in reddit's success is its total reliance on a wildly undervalued aggregation innovation: the upvote/downvote system.

Every hour of every day, thousands of people are submitting content on reddit--pictures, videos, links, discussion comments, interview questions, whatever. Every topic imaginable is represented, but for simplicity's sake let's focus on just pure humor, which plays an outsize role for most users. All of this content is presented as a massive list, with multiple nested threads. Users then vote on the material, registering approval with an upvote and disapproval with a downvote. The votes are then aggregated, pushing popular content up in the rankings, while burying unpopular content. What results is basically a hyperactive cultural laboratory driven by a sped-up Darwinian variation-and-selection process where only the best content makes the front page.

A lot of what reddit pushes to the front page is silly, but that's only because what's silly is what people want. The upvote/downvote system is just a highly effective mechanism for producing desired outcomes based on the preferences of users. In r/funny we have what is probably the single-most reliable source for high-quality humorous material in the world. In r/aww we have a shockingly effective cuteness delivery vehicle. For a subreddit with a more specific or empirical purpose, such as r/whatsthisbug, we basically have a real-time, interactive, micro-Wikipedia.

By virtue of this sped-up Darwinian selection process, reddit is a fabulous resource for social scientists: by looking for regularities in submissions that do well or poorly, we can identify interesting psychological biases or preferences in the user base. A good example of this is reddit's consistent interest in objects and animals that coincidentally take on human characteristics (i.e.machines that look like faces, animals making complex emotional expressions, etc.). Keeping in mind the long history of humans finding human-like agency in ridiculous things, reddit provides the richest dataset for testing hypotheses dealing with this question.

The consensus of scholars who study different methods of aggregation seems to be that all have certain strengths and weaknesses. We have elections, with different voting systems that favor certain types of candidates. We have wikis. We have markets, which can be understood as preference-aggregating institutions, their outcomes relying on the informational role of the price signal. Prediction markets are an interesting subset. The upvote/downvote mechanism has only just emerged as a serious alternative, yet already it has demonstrated astounding outcomes on a wide variety of topics. It is utterly devoid of any rigorous intellectual attention, but that will surely change as more and more applications are discovered and adopted by successful organizations.

Note: some might consider the rise of smartphones and the mobile internet (and thus its fusion with other technology like gps, photography, and videography) the fourth "macro-trend" in the internet's historical narrative. Perhaps, but my guess is that once some reboot of the Grafedia idea becomes fabulously successful (just wait), we'll instead see smartphones as just the first step in a more general process of blending the real world with the internet (augmented reality technology like Google Goggles is advancing rapidly).

Information Nexus

1. Six Rules For Dining Out (more here)
2. Beautiful Mathematics Documentary
3. Will Wilkinson on Health Care
4. Rap News: Yes We Kony
5. A Delicious Takedown of Senator Olympia Snow

Deep Analysis of a Silly Thing

Science fiction is really effective at presenting social and philosophical concepts to the reader in an interesting and easy-to-digest manner, and the recent spate of highly intellectual articles about The Hunger Games is a great example. Matt Yglesias evaluates that fictional world through the lenses of economic theory and political economy. Michael Lewis gets into the mathematical aspects of the lottery system, and considers the contenders' behavior via a game theoretic model. But the most provocative article concerns the social justice dimensions of the book and movie:

"The clear problem with this isn't that girls will want to hold out for a Prince, but that it might foster the illusion their value is so innately high that even without pretty clothes or a sense of agency a Prince will come find them. Sleeping Beauty and Snow White are worse: they don't even have to bother to stay alive to get their Prince. 

The Hunger Games has this same feminist problem.  Other than the initial volunteering to replace her younger sister, Katniss never makes any decisions of her own, never acts with consequence-- but her life is constructed to appear that she makes important decisions."

This agency-based critique is interesting, but sort of looses its teeth once you consider the standard it sets up. Think about most action movies, especially those starring your typical white male lead. The only reason those guys survive the whole two hours is because of constantly recurring dumb luck. What is the exciting "just-in-time" moment if not a deus ex machina? Characters in action movies are constantly making vital decisions that run counter to the probability, but always survive. The fact that action heroes succeed due to random luck and not their decisionmaking ability or personal qualities reveals the illusion of their agency also.

Luckovich

Is the TSA Just Security Theater?

The Economist hosts a week-long debate on the topic. Bruce Schneier says yes:

"An even more meaningful response to any of these issues would be to perform a cost-benefit analysis. These sorts of analyses are standard, even with regard to rare risks, but the TSA (and, in fact, the whole Department of Homeland Security) has never conducted them on any of its programmes or technologies. It's incredible but true: he TSA does not analyse whether the security measures it deploys are worth deploying. In 2010, the National Academies of Science wrote a pretty damning report on this topic.

Filling in where the TSA and the DHS have left a void, academics have performed some cost-benefit analyses on specific airline-security measures. The results are pretty much what you would expect: the security benefits of most post-9/11 security changes do not justify the costs."

The Art __ Video Games

The Smithsonian American Art Museum in Washington, D.C. recently opened a new exhibition: The Art of Video Games: From Pac-Man to Mass Effect. It runs through September, then goes on tour. I arrived with high hopes: most regular consumers of video games have for years recognized their merit as an artistic medium, and it's great to see a real art gallery concur. Furthermore, flaunting the most artistic aspects of the highest-quality games is a great way to re-introduce the rapidly-changing industry to a wide swath of older non-players who often seem to define all video games by their shittiest, most addicting and violent elements. Unfortunately, I walked away sorely disappointed.

The show is basically divided into three sections. First, an introduction to the medium and a brief justification for the exhibit's existence. This area is eclectic and contains some cool concept art and quotes from game designers. Next, viewers have the opportunity to actually play some games: huge screens and modified controls are set up for legends like Pac-Man and Super Mario Bros., as well as more recent games like Flower. The final section, which comprises most of the exhibit, is a series of identical kiosks, one for each major game system (Nintendo, Xbox, etc.). A touchscreen lets the viewer watch game clips and listen to a brief analysis using a hand-held telephone speaker. Each kiosk sports four popular games from the system, one each for the following categories: 'action', 'target', 'adventure', and 'tactics'.

On the face of it, the exhibition suffers from three basic defects. First, there exists a strong focus on the gameplay mechanics and technical details of games, rather than on their artistic aspects. Innovations in graphics resolution and context-sensitive control schemes are interesting, but not really relevant. Compounding this is an unfortunate desire to provide mainly representative samples of games. Due to the restrictive nature of a gallery show, viewers are only able to get a small taste of a game relative to its length and richness. But instead of having this taste draw from the best, most artistically sophisticated moments of a game, we're supplied with boring screenshots and clips from mundane parts. And here's the thing: the best video games simply can't be broken down like that. People play for the peaks of enjoyment--the boss fights, the cinematic cutscenes, the particularly quirky or detailed rooms or characters. Incidentally (though perhaps not), these peaks also tend to be the most 'artistic' in the classical sense, and were unfortunately mostly absent from the exhibit.

This brings me to the second point: the poor use of the gallery format to showcase the artistic aspects of video games. Generally speaking, it's best to let the art do the talking in any show, which means limiting intervention to decisions about the order of works and to small white informational  plaques with vacuous blurbs. For art forms specifically designed with the gallery show in mind, this works pretty well. Visual artists want to differentiate their work, and so galleries are filled with a diverse assortment of art--paintings of different sizes and shapes, sculptures, etc. The problem comes with gallery shows consisting of art never designed for the gallery. If the exhibition topic is visually homogeneous (say, video games played on simple television screens), there exists a design challenge: how to convey the art's diversity and richness to the viewer? This exhibit certainly failed that challenge, and in spectacular fashion (20 identical plastic kiosks, really!?). There's great scope for exploring the capacity for gallery space to amplify the artistic value and diversity of video games, but instead the exhibition muted the artistry through dull homogeneity. Imagine the sublime voice acting of Bioshock booming through the gallery corridors, or the cinematic cutscenes of Blizzard enjoyed in a darkened theater setting. Many modern video games are filled with screenshots of such visual heft that they almost scream out to be displayed on a massive wall in some gallery, but instead we get tiny television screens.

Thirdly, the general failure of the exhibit to demonstrate the artistic aspects of video games is due in large part to the way it is organized conceptually. Essentially, the gallery is a list, compiled using two dimensions of analysis: time (past to future) and gameplay emphasis (action, target, adventure, tactics). Although employing a chronological structure is understandable for contextual reasons, I take issue with the equal weighting of each historical period. Frankly speaking, video games today are much more artistic than they were in the past. With access to higher informational content and processing power, there is simply more space for artistic pursuits within games (as well as non-artistic pursuits; video games are much longer now). As such, more gallery space should have been spent showcasing modern games. On a related note, as the video game industry has grown in size and prestige, its games have changed dramatically. We have games-within-games, narrative-based games, multiplayer games, sports and simulation games, etc. All of this complexity confounds and renders meaningless the categories used by the exhibition kiosks. Older, less complex games adhere to these categories better, but it begs the question: why, in an exhibition purportedly featuring the artistic value of video games, do we have an organization scheme driven by gameplay mechanics?

This brings us to the real conceptual problem: the muddling of the different dimensions of value of video games, preventing the distinctly artistic value to shine through. Usually when an art gallery picks some obscure topic traditionally considered non-artistic and does a show, it works pretty well. That's because the topic's other dimensions of value are relatively boring. Take motorcycles, for example. Say I wanted to do a show about the art of motorcycles. You can imagine it: exquisitely detailed and creative paint schemes, strange metalwork, etc. The show would probably be good, in part because it would be focused squarely on the artistic stuff. Motorcycles have other dimensions of value, but no museum-goer much cares about the safety, transportation, speed, or comfort of the motorcycles. But here's the problem for video games: their other, non-artistic dimensions of value are really interesting. Gameplay mechanics is interesting! The difficulty balancing and camera angle setup and controls stuff are really fascinating and worthy of thoughtful inquiry also. But that stuff isn't artistic per se, and shouldn't have dominated an exhibition marketed as showcasing the art of video games.

The bottom line seems to be this: the relation between the idea of art and the video games themselves was vague and confusing. The show had some good bits, but overall it seemed more suited to a 'history of video games' classification than anything else. So what would a more conceptually sound exhibition look like? Without trying to define what art really is, there seems to be an important distinction between the art in video games, and the art of video games. This distinction can best be described as a continuum, going from existing artistic categories to novel artistic categories. Let me explain. First, video games showcase a wide variety of art from many existing media (music, architecture, interior design, story, etc.). Second, video games allow the player to experience this art in new ways (musical cues based on player decisions, exploring the architecture of a virtual building, etc.). Third, video games also create new artistic categories (immersiveness, storyline linearity and replayability, etc.). There's certainly quite a lot of nesting within this continuum (many video games contain short films, which are themselves collections of other media), and I don't think it's possible to draw a strict line between any level. It's not clear what cinematography actually is, but it's a useful concept and over time the public has accepted it as a legitimate dimension of artistic value. Perhaps it's too big a job for a single art exhibition, but it would be great to see a show starting with areas like 'architecture in video games', or 'the music of video games', then gradually moving on to higher-level stuff like 'storyline interactivity' or 'multiplayer experience' in later rooms. And then you could get into the artistic movements...

Calories Are Not Just Calories

"Another way to view the connection to the Black Swan idea is as follows. Classical thermodynamics produces Gaussian variations, while informational variations are from Extremistan. Let me explain. If you consider your diet and exercise as simple energy deficits and excesses, with a straight calorie-in, calorie-burned equation, you will fall into the trap of misspecifying the system into simple causal and mechanical links. Your food intake becomes the equivalent of filling up the tank of your new BMW. If, on the other hand, you look at food and exercise as activating metabolic signals, with potential metabolic cascades and nonlinearities from network effects, with recursive links, then welcome to complexity, hence Extremistan. Both food and workouts provide your body with information about stressors in the environment. As I have been saying throughout, informational randomness is from Extremistan. Medicine fell into the trap of using simple thermodynamics, with the same physics envy, and the same mentality, and the same tools as economists did when they looked at the economy as a web of simple links. And both humans and societies are complex systems."

That's philosopher Nassim Nicholas Taleb, from the new section, 'On Robustness and Fragility' in the updated edition of The Black Swan. It's a bit jargon-heavy, but goofy neologisms are a signature trait of Taleb's, and probably constrains original thinking less compared to other more stylistically-traditional authors. It's just a taste of what's to come in his forthcoming book 'Antifragility,' which extends the ideas in Fooled By Randomness and The Black Swan into positive territory, rather than just negative (e.g. discussing what we can and should do, rather than just what we can't and shouldn't). Expect fascinating sections on economics, philosophy of biology, epistemology, medicine, and nutrition.

For a further preview, check out this great EconTalk interview with Taleb. I'm especially excited to get Taleb's full take on the potential health benefits of fasting, especially after reading this great cover story in Harper's.