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