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2009-02-26T16:14:00.002-05:00

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the decline of the port authority of new york

2009-02-23T20:21:00.006-05:00

Early successes (documented in the rise of the port authority) endowed the Port Authority with a great amount of capital heading into the 1960s, however, the law of diminishing returns made it much harder for the agency to leverage its resources with its past efficiency. The principle transit problem of the day -- commuter railroads -- were of no interest to the Authority, as the the railroads were simply huge money pits, and while the Authority had a plan to turn around the previously unprofitable airports, it had no such plans for the railroads. Politicians, however, were anxious to move the losses off their books, and argued that the Authority should use its surplus to absorb some of the losses.

The agency reacted by finding big-money projects to make its surplus disappear. Unfortunately, the competency and discipline that served the Authority so well in building bridges disappeared along with the surplus. The agency's major project in the late-70s, the World Trade Center, saw its cost balloon from $355 million to $575 million, for example. Around the same time, the agency agreed to take part of the rail transit burden, while also seeking to expand its prerogative from port-area transportation to port-area economic development, a scope which would would include industrial parks, fishing ports, etc.

The Port Authority had always fought to expand its role, but this time its ambitions were greater than its expertise. By the 90s, the agency was facing annual deficits and was forced to contract. The agency had made a few unwise decisions, and political considerations limited its ability to make the politically unpopular business decisions (e.g., raise tolls) needed. The most significant development in the agency's recent history was the name change to Port Authority of New York and New Jersey. Fitting, that a symbolic appeasement underscored these later years, punctuating a period of "drift, patronage and favoritism, and the search for new goals" (Doig).

The Port Authority's early successes and later struggles reflect the organizational design and changing context. To begin with the latter, the Port Authority was born at a time when there was a large need for infrastructure. There were few bridges in New York, two piers in New Jersey, no major bus or truck terminals, and fledgling, unprofitable airports. By the 1960s, it was a different world. Generally, I'd shy away from this type of statement -- I'm sure there were many in 1921 that believed New York/New Jersey didn't need much infrastructure -- and I want to emphasize that I am not arguing that 1960s New York/New Jersey had maxed out its infrastructure. Indeed there is still work to be done today. I am arguing that the Port Authority of New York's engineers had a lot more blank canvas to work with in 1921 than 1960, and it's logical that the agency found it easier to plan and execute good projects.

And while the agency failed to effectively manage commuter rail, the World Trade Center, and some smaller projects that drew less traffic than anticipated, the Authority's greatest failure was in not finding a next "great" project after the piers and airports. If there was a great engineering project for the undertaking, neither the Authority nor anyone else could find it. Normally, a firm in the Authority's position would do one of two things: expand their business to less mature markets or expand their business offerings. The Authority was prevented from the doing the former by their restriction to the port district, and so the organization was relegated to the latter. At first, engineering competency and visionary planning allowed the agency to shift gracefully from bridges to tunnels to airports to piers; when there were no more airports or piers to expand, however, the agency floundered.

I've gone this far with only a brief mention of the elephant in the room -- central planning. It was no accident that FDR showered praise on the Port Authority for its early successes and modeled the Tennessee Valley Authority on the agency. The four-term president saw the agency as the embodiment of the technocratic central management that FDR would strive to spread to much of the American economy. I'm not interested in debating the tenets of central planning, but it's worthwhile to note that the Port Authority struggled with the same challenges that face all attempts to centrally manage a large, complex system -- like the transportation of New York and New Jersey.

You'll note that nowhere have I argued one way or another with regards to the Port Authority's planning -- only its execution of plans. Would it have been better to construct a bridge in the 50s? Was it wise to place a bus terminal in midtown? Maybe, maybe not; I am not fit to judge and certainly haven't read any compelling arguments on the matter. Instead I have judged the agency by its ability to produce self-sustaining public works in a timely and economical manner. Therefore, my praise of the agency's early work should not be confused with praise of its planning; I do not believe that the available facts allow for a judgment to be passed.

Anyhow, let's wrap up with a review of some of the variables that led to the Port Authority's early successes, later failures, and lessons.

Variables	Early Advantages	Late Disadvantages	Lessons
Agency led by committee appointed by NY and NJ governors	Governors appointed gifted apolitical leaders and competent personnel	Personnel corrupted by political patronage by later governors	Have not figured out how to guarantee technocratic personnel management given democratic leadership's influence
Agency led by committee appointed by NY and NJ governors	Agency planning and execution was largely apolitical and governors supported the Authority against local interests	Influence of political interests grew	Have not figured out how to sustain an apolitical government agency
Self-funded	Direct incentive to efficiently execute sustainable business strategy	Politicians eyed agency surplus and wanted to siphon from it for unprofitable projects	Self-funding can greatly improve accountability, but need to protect integrity of agency budget autonomy
Depending on user payments for funding	Not relevant during growth period	Income through user fees threatened by political incentive to oppose all fees (politicians don't benefit from payments; easy populist issue)	Clear understanding of user payment levels for each project beforehand
Agency limited to port district	Many growth opportunities within the port area	Forced to pursue less profitable enterprises within area, rather than more profitable elsewhere	Don't make agencies servants of jurisdictions, but allow them to grow based on their core competency
Empty infrastructure landscape	Low-hanging fruit that would serve public need and could be profitable to construct and maintain	More mature market	Frame long-term purpose of agency
Vague mandate	Allowed agency to find success outside initial purpose (rail)	Pushed mandate into areas outside expertise and struggled	Allow flexibility
Luck	Good luck on timing of pier development with container revolution		Pray.
Monopoly on port district planning and execution	Allowed for a coordinated development effort; competition was 'political' (not rational) with few rivals	Prevented the rise of a more effective competent replacement and allowed for the Authority's decay	Powerful for initial coordination, but lack of effective marketplace for government agencies precludes destruction of decayed agencies

I still have some questions. While the Authority has not been 'destroyed' by market forces, it has been castrated by political forces; is this an efficient and/or acceptable end? It's certainly better than the institution growing in size, and likely worse than the institution being replaced by a more efficient and competent firm.

In the end, I think the lessons of the Port Authority suggest that a thoughtfully designed 'public goods' marketplace, populated by *private* firms, with well-designed, long-term contracts, would be best, but I also know that this glosses over a lot.

For now, I'll just look for more books on innovations in government design and public contracting. Your thoughts?

the rise of the port authority of new york

2009-02-03T19:49:00.005-05:00

I grew interested in the Port Authority of New York and New Jersey (previously the Port Authority of New York) after reading of its role in creating containerports in the The Box, an excellent history of "How the Shipping Container Made the World Smaller and the World Economy Bigger." I picked up Empire on the Hudson (not recommended) and scoured the internet for information on the bi-state agency. I've quoted from the book below and condensed my learnings to two (free!) blog posts (the second is now up: the decline of the port authority of new york.)

The Port Authority of New York was one of the first government programs designed to be "efficient and nonpolitical ... vigorous and experimental." The agency’s significance does not emanate from its good intentions, however, but from its innovative design, many accomplishments, and gradual decline. Many times before, I have stated the importance of understanding the impact of political economy and organizational design on government program effectiveness. Yet many liberals -who should be the most concerned with a high-functioning government- are ambivalent about the subject, and to no one's surprise, small-government conservatives share this ambivalence. This post will not fill this huge void on its own, but it will provide the first half of a two-part organizational biography of the Port Authority of New York. And to tell the Port Authority's story, we must begin with the history of the port itself.

The Port of New York is the United States' largest port, with "nearly 800 miles of waterfront, dwarfing Boston with its 140, Philadelphia with 37, and Baltimore with 120." New York City capitalized on this great natural advantage, with "nearly half of the nation's international commerce - counting both export and import commodities - [passing] through the Port of New York" in 1919. You'll notice in the accompanying image, however, that New York shares the waterway with New Jersey. Yet while New York enjoyed 230 piers at the time, New Jersey had but two.

New Jersey was understandably frustrated by this state of affairs. Its waterfront was actually better oriented for transit, because it was cheaper to ship cargo by rail from New Jersey to the rest of the country than from the island of Manhattan or Brooklyn. However, freight rates were not dictated by actual transportation costs, but set by a government regulatory body, the Interstate Commerce Commission (ICC). Despite New Jersey's multiple petitions, the ICC maintained that there would be a single rate for rail transit to the Port of New York, whether it was to the New Jersey or New York side, which carried the hidden cost burden of floating freight across the river.

In 1921, New Jersey lost its appeal to the ICC, and New York’s counsel in the case, Julius Henry Cohen, capitalized on the opportunity to win support for a Port Compact, which provided for a bi-state agency to coordinate development for the New York/New Jersey port district. And thus, under the banner of cooperative planning, the Port Authority of New York was born. Each governor would appoint six commissioners to oversee the agency, which would rely "on revenue bonds and user payments (rather than general taxes) to carry out large capital projects," a characteristic unique to the Authority at the time. Furthermore, the Authority worked with the states’ governors to limit local government leaders’ power to disrupt the agency’s plans; a victory for technocratic governance and a (well-deserved) slap in the face of direct democracy.

The autonomous, self-sustaining public agency would largely fail in its initial objective, to resolve the rail problems that had led to the rate discrimination case, but it would leverage its vague prerogative to take on an array of other projects. The Authority’s early years were dominated by bridges, completing the Outerbridge Crossing, Goethals Bridge, Bayonne Bridge, and George Washington Bridge by 1932. The Port Authority wasn’t the first to build bridges, but it managed to build all four bridges under budget and ahead of schedule. A factoid that should make every Boston taxpayer fume. In addition, the agency had beaten out a competing government institution to win control over the Holland Tunnel and its lucrative user fees.

Former New York Governor and then-President Franklin Roosevelt congratulated the Port Authority for its "skill and scientific planning," and celebrated the agency an example for government institutions across America. This praise not only reveals the fantastic reputation the Authority enjoyed in its early years, but also provides the context necessary to understand the agency as the poster child for technocratic progressive government. The Authority’s successes were counted as victories for government-run corporations and cooperation, in contrast to the failure of private firms and dog-eat-dog capitalism. (I’ll return to this subject in the next post).

The Port Authority’s next twenty years were filled with piers and airports. The agency had long lobbied NYC and New Jersey to develop their respective waterfronts, but New York was disinterested in assistance, and Jersey simply couldn’t close the deal. This delay actually ended up working in New Jersey’s favor, however, as by the time the state got its act together in 1955, the shipping container was about to render traditional piers obsolete.

Accordingly, blind luck corrected the ICC’s injustice in the rate discrimination case, with Port Elizabeth leapfrogging its Manhattan and Brooklyn competitors to become the largest containerport in the world. The timing of the waterfront development was a stroke of luck for the Authority as well. The agency had fought hard to construct traditional piers up until the container’s arrival, and only their failre to build the necessary coalition saved them from the embarassment of building infrastructure for the horse-and-buggy of shipping.

In addition to the bridges, the Holland Tunnel, and the containerports, the Port Authority created the Lincoln Tunnel and world’s largest bus and truck terminals downtown, and transformed the Newark, LaGuardia, and JFK airports into the profitable, consumer-driven facilities we know today -- all by 1955.

And there ends the good news. I'l leave the bad news (and the synthesis) for the next post.

when cross-disciplinary studies go bad

2009-01-29T17:44:00.002-05:00

I have long respected the work of the Santa Fe Institute, home to "multidisciplinary collaborations in the physical, biological, computational, and social sciences" in pursuit of an "understanding of complex adaptive systems," which are found everywhere from cells to cities. I was therefore disappointed by a recent article on Santa Fe Institute President Geoffrey West, who appears to believe that mankind is on the path to "imminent destruction" (to his credit, those are the journalist's words, not his.) Beyond the sensational conclusion, I was put off by the surprisingly questionable logic employed by the theoretical physicist and the disconnect between his conclusions and reality.

West is an expert in universal scaling laws, and has focused his recent research on "[understanding] the dynamics of organisms, their structure, their organization, how they grow, how they evolve, how they live and how they die." He adds, "I wanted to see in what way an elephant is just a blown up mouse or a blown up human being, or in what way we are just a blown up cell." West's research has succeeded in uncovering principles of scale: "the pace of life gets slower and slower the bigger you are - in a very systematic, predictable way. You can do this from ecosystems down to cells. All of biology, pretty much across the whole spectrum, obeys this kind of behavior." The differences between the mouse and the elephant exemplify these principles.

How do these principles hold up when applied to human societies? According to West, not well. Greater size in human societies, be they cities or firms, does not lead to greater efficiency. West concedes that larger human societies bring about more wealth produced per capita, but argues that as "the number of patents that are produced goes up, the greater the number of AIDS cases there are, the greater the number of crimes there are, and the greater the amount of pollution that is produced."

Whereas larger organisms will have less disease and consume less energy relative to its size, West found that disease and energy consumption did not decline, leading him to conclude that human societies do NOT benefit from economies of scale like organisms in nature. From West's perspective, human societies grow less efficient as they grow larger. In nature, large animals use less oxygen per gram of weight than small ones, while humans seem to have a unyielding demand for money (the connection between oxygen and money being that each is a "vehicle for transforming goods into something useful"). And while the pace of organisms slows with greater size, activities within human societies grow more rapid with size, from bank transactions to the speed of walking.

It's hard to know where to start in rebuttal. First, if we are to test the applicability of scaling laws in organisms to scaling laws in human societies, it's important to properly assign our roles and keep them consistent. This should be straightforward, as small organism: large organism what small society: large society.

I will note that West fails to maintain the integrity of this relationship; for instance, when he argues that the pace of societies speeds up with size (unlike organisms), he is not talking about society, but its components. The speed of walking or activity of humans within that society is not the speed of society. Individual human beings: society is analogous to cells: organism. Once again, human accumulation of money (in surplus of what is necessary for reasonable expectation of survival) is not analogous to organisms' consumption of oxygen. There are in fact numerous reasons why this analogy doesn't hold, but there's no reason to go beyond the logic found in an SAT handbook – the analogy is violated by comparing a part (man) with a whole (organism).

To restate, West is, in theory, comparing the scaling laws of organisms to the scaling laws of human societies, so the wholes are organisms and societies; analysis of the parts of the wholes (e.g., cells and humans) may indeed be relevant, but they must be contrasted with one another, not with the wholes, to maintain consistency.

Perhaps more striking than the bizarre logic employed is the contrast between the reality and West's perception of cities. He sees larger human societies as more inefficient, yet the greater the size of human settlements, the more efficient they are – whether we are talking about environmental impact or otherwise. He sees the prevalence of disease canceling out the wealth created by economies of scale, but in what world is this born out? Wealth creation has allowed those who participate in the economies of scale to live longer, better lives. Economy of scale has given societies more productive, healthier cells, to the benefit of the whole (the society) and its parts (man).

The societies and the people who are least healthy, the least productive, and the least well-off are those who are least able to participate in the economies of scale. They are the mice. Their lives are short, nasty and brutish. These people and these societies would love to cope with the problems West associates with societies of great scale, and few if any members of large societies would trade their New York residency for a few acres in New Guinea.

West misses an opportunity to demonstrate the scaling laws of organisms actually apply quite well to human societies. From cells to human beings, living things are better able to survive in large vehicles – be they organisms or societies. That is not say greater size is always evolutionary advantageous, but is to say the principles of greater efficiency and durability West found in large organisms applies to large societies as well.

Finally, as the article nears the end, West argues that human society is unsustainable because "the pace of life is constantly quickening and the time between major innovations is necessarily getting shorter." He apparently believes it's a bad omen that while "it may have taken 50,000 years to go from stone to iron, and it may have taken 100 years to go from steam and coal to oil … how long did it take to go from being dominated by computers to being dominated by information technology, as being distinct from computers?"

Wow. And the final head-scratcher: "Products are coming out one after another. I have in front of me this marvellous Mac, but it is already becoming outdated. It's not only that we are on this treadmill that is getting faster and faster, but we are accelerating it."

Perhaps I'm missing something, but I am not sure why any of this is supposed to worry me. Notice that there is no resource depletion argument being made: he's not arguing that we're going to consume our ecosystem into nothingness. Apparently, the human productivity and technological innovation that has come with larger webs of cooperation and exchange have put us on a path to disaster.

Given Mr West's credentials, I'm wary of being too critical –especially, when judging his work through the lens of a journalist– but I am left at a loss.

the city: good for migrants, bad for genes?

2009-01-24T21:04:00.001-05:00

Arnold Kling and Richard Florida have recently started up blog conversation on whether cities are creative growth centers or urban death traps.

Kling quotes Razib Khan:

up until the year 1900 the world's cities were massive genetic blackholes. Cities only kept their population up through migration, which explains how Rome shrunk to 30,000 inhabitants by the 7th century.

Kling asks how this jives with Jane Jacobs, who contends that urban settlements have been the catalysts of economic growth. Jacobs isn't directly contradicted by the genetic data, but the two certainly appear to point in different directions. If cities were genetic graveyards up until 1900, how can it be that cities were simultaneously hubs of economic growth?

One way to reconcile the two perspectives is to restate Jacobs' position: when circumstances allow for economic growth, returns on agglomeration will concentrate this growth in urban settlements, which will in turn spur further development. Population density is not a guarantor of growth. Furthermore, when lacking the conditions necessary for growth, urban settlements' negatives, such as disease, may outweigh any benefits to agglomeration, leading to a relatively poor genetic expectancy.

The Jacobs question, however, really only touches on a more fundamental question: if cities were genetic graveyards, why did migrants continue to flock to these urban death traps?

Why were genetic returns to agglomeration negative during a period when economic returns were relatively high, according to Jacobs and historical migration patterns? What in the name of Charles Darwin was going on?

I'm interested in hearing theories (perhaps the immediate prospects for the migrant is better in the city, but their genes are more likely to be wiped out generations later by a plague...), but for now, I am skeptical that millions of people, throughout history, have lowered their genetic expectancy by migrating to urban death traps.

in defense of historical context

2009-01-22T19:30:00.001-05:00

I was struck by a recent article by Ed Glaeser, which takes a historical look back at the policies and ideologies of politicians from Henry Clay to Woodrow Wilson.

While I generally find Glaeser's perspective to be in line with my own, I found his historical characterizations grating: positive depictions of Andrew Jackson and Woodrow Wilson, negative characterizations of Alexander Hamilton and Teddy Roosevelt -- yikes.

I can't claim complete objectivity in this matter, as the latter are two of my favorite American historical figures, and the former float around the bottom of my informal ranking of American presidents. For reasons distinct from his economic policy, Jackson may be one of the most despicable blemishes on our national record (I'll be reading the "American Lion" soon - we'll see if that sways me.)

But more significant than the details of Glaeser's particular article is what it represents, that is, a tendency amongst modern thinkers to distort the thoughts, motivations, and actions of past figures through a decidedly modern prism.

Many small-government folks will pick up the "Jeffersonian" mantle and sneer at Hamilton, with his love of federal power. Now, people do all sorts of crazy stuff, but this bothers me because I happen to otherwise agree with a lot of these people. Often these are disciples of Friedrich Hayek and Milton Friedman, who view the Hamiltonian legacy as a threat to state -and by extension- individual power.

These moderns have the nasty tendency of reading the words and actions of men and women (namely men) long since dead and gone as if they were writing and acting in the modern world. 'Hamilton - oh jeez, he loves federal power, he'd be all about expanding the reach of The Man at the expense our Ron Paul revolution!'

And so, these men of history are stripped of their historical context.

This is unfortunate. A careful consideration of context allows for a more precise understanding of the historical person, a more objective and apt judgment of their actions, and a sounder understanding of just what lessons to learn from their experiences.

Myself, I believe Hamilton's presence may have carried the second most weight in securing the United States' future prosperity and relative security while also believing that the US would currently benefit from a devolution of power from the federal to the state level (and from the government to the individual): there is no contradiction inherent in these positions.

The age of Hamilton saw the competition of great Atlantic nation-states. The countries were powerful, aggressive, and keen to elbow out competition and expand wherever they might find opportunity. (Just ask the Dutch Republic.) The American colonies were weak and divided, and, without Hamilton's supposedly nefarious central bank and consolidation of debts, would doubtlessly have drifted further apart.

Even with Hamilton's work, the United States had to fend off foreign intrigues that sought to play one state off the others to secure geopolitical and economic interests in America. Given the history of Europe, I feel confident speculating that a country with a Spanish Florida, British Texas/South, French Bayou, and/or Mexican/German/Japanese Pacific would have led to considerably more wars and considerably less economic growth.

My argument, by the way, implies that this added value also supports the westward expansion (unfortunately named 'Manifest Destiny') in the name of continental integrity (the later Mexican/German intrigue and Japanese hostilities would seem to support this logic), as well as forbidding the South from succession (a tricky issue likely deserving of its own post).

Economic liberty should be fought for and celebrated, and Americans are right to be suspicious of any actions that usurp this personal freedom in the name of fighting some greater enemy.

That does not necessarily mean that there are no times when such a sacrifice is not just wise, but necessary for the long-term preservation of this economic liberty. In the early 21st century, with the world's great states at rest and a federal government infinitely more powerful than its 18th century counterpart, there are few if any reasons to further concentrate power (and indeed many to devolve it). As noted above, Hamilton's America was an entirely different beast struggling to survive in a far different jungle. And just as evolution may favor a smaller or larger animal at different points of time, the same is true for the natural selection of human societies.

The intertwining fates of survival and liberalism are recent developments, and to attack figures like Hamilton for failing to live up to 20th century ideals is as silly as criticizing Caesar as a murderer of democracy. To say that circumstances vary widely is to understate the point: in many cases, it may be more effective to use different terminology for different periods of time, so as not to confuse common terms with common realities.

I should note that I don't mean this post to be a final word on the defense of Hamilton, but simply to raise a principled disagreement with the method by which he -and many others- are judged. Economists with no historical background can be just as inane as historians with no economic learning.

That said, I think the econs are right on about FDR. ;-)

three millenia of waste management

2009-01-08T22:29:00.006-05:00

For the past few months I have searched high and low for a book that would provide me with a comprehensive understanding of the history of waste management in relationship to the rise and decline (or perhaps more appropriately, growth and diseased death) of human societies. This book would cover the history of sanitation, from aqueducts to soap to sewers, and explain how proper waste management acted as an upper bound on city growth, with failure resulting in biblical plagues that would wipe out entire towns and set back development hundreds of years.

I came across The Big Necessity and Flushed, among others -reading the latter and adding the former to an increasingly formidable "to-read" pile- but neither had the historical context I was looking for.

I then set about to leverage my limited knowledge and the endless information available on the internets to write a blog post on the matter (if I couldn't read it, perhaps I could write it...)

Up until the last couple hundred years, waste management amounted to nothing more than disjointed efforts -- e.g., Indus Valley, Greece, Rome -- with little relevance to the society's death or survival (sure, Rome reigned supreme at the time, but I've seen no reason to believe that their water works were the key to, rather than the the product of, this greatness).

My hypothesis, of course, is not that waste management leads to glory, but that waste management acts as an upper bound on the growth of human societies; at some point, a city's ability to support their population without falling prey to death and disease depends on waste management. As a further clarification, that is not to say that through adequate waste management a city can avoid the possibility of disease altogether: plagues have many vectors by which they can decimate a population, waste management will not eliminate them all.

This hypothesis jives with the lack of waste management innovation for most of the history of mankind. Looking at the population chart graphic, it's striking just how flat the world population was up until ~1500 - ~1800.

Now, world population growth does not necessarily mean city growth; for a city growth proxy, I took the average of the historical estimates for the top two most populous cities at various points in history:

100 AD Rome / Luoyang (Honan), China: 435,000
1000 AD Cordova, Spain / Kaifeng, China: 425,000
1500 AD Beijing, China / Vijayanagar, India: 586,000
1800 AD Beijing, China / London, United Kingdom: 980,500
1900 AD London, United Kingdom / New York, United States: 5,361,000
1950 AD New York, United States / London, United Kingdom: 10,661,500

Currently, Tokyo and Mexico City are Nos. 1 and 2, averaging ~23,000,000.

In this context, it should be no surprise that there was little development in waste management until the 19th century. Little changed in terms of the demands placed on waste management, and so the history of waste management up until the 19th century is nothing more than series of blips, for the most part.

That is not to deny that some societies appreciated the value and convenience of fresh and streaming water in a central location, however, which sometimes also involved proper waste management.

Water works got an early start, with the the Harappan constructing water systems in the Indus Valley in the third millenium BC. Everyone within the town walls -not just the elite- had running water and indoor plumbing.

Outside of the Romans, there would be little improvement over this flash of brilliance until the 19th century (~4500 years). In the mean time, the Persians developed qanats (like aqueducts, but for agriculture); a Minoan ruler built a luxurious castle in Crete with running water and primitive toilet; and finally the Greeks began capitalizing on aqueducts in the 4th century, setting the stage for the Romans.

The Romans' passion for plumbing grew out of a greater love for baths. The city's plumbers utilized lead (in place of terracotta and other materials) to construct the pipes of the aqueducts, which were built to provide a continuous flow of water to foundations and the baths.

In a trend that continues even up through the 19th century, waste management systems were not created to deal with health issues. Convenience and luxury bear most of the credit for the innovations that did take place. The science of sanitation simply did not exist.

Now I must take a moment to talk about the plagues that struck some of the world's greatest cities before 1800. First, before the Black Death struck down ~400 million in the 14th century (with additional waves sweeping Europe and elsewhere for hundreds of years), the bubonic plague decimated the emperor Justinian's Byzantine empire in 541-542 AD. In both cases, it appears disease spread was spread through fleas and rats, which many speculate came to their new homes free-riding on merchant ships.

These plagues may have been the first large-scale tests of waste management. Would a 21st century sewage system have saved any of these cities? I'm no expert, but surely the plague would still have made an appearance. The effects, however, would likely have been far less devastating with the appropriate disposal of diseased bodies and waste.

For instance, one of the few places with plumbing, Canterbury monastery, escaped unscathed during the darkest days of the plague in London.

But still, the science of sanitation remained a mystery, and no lessons were learned form the terrible episodes.

The waste management innovations that did eventually emerge were not thoughtful responses to newfound health risks, but responses to superficial concerns.

In the 1800s in England, water closets (think toilets) were popular luxury items amongst the have's. These water closets should not be confused with advances in waste management. Quite the contrary, as the water closets grew more popular, more waste emptied into the rivers.

(Fun fact from Flushed: sewers originally only meant waterways for drainage, it was only after they became deluged in feces that the word took its modern meaning.)

In this same period, cholera devestated London, and England's mortality rate rose close to 50%,.

Yet if a plague devestating the entire citycouldn't incite a change in waste management, infants dying of dirty water certainly wouldn't do trick. It would take the "Great Stink" of the summer of 1858, which saw the Thames' stench drive Londoners out of the city and, more impressively, drive the Houses of Parliament, which sit on the Thames, to act.

Dead babies were a problem, putrid stench was unacceptable.

Parliament empowered Joseph William Bazalgette, a civil engineer, to construct a sewage network. Bazalgette's system survives today, and successfully ended London's woes, even making the Thames fishable after decades of dead, diseased water.

At the same time, from 1840 to 1870, the number of communities with water works increased from 50 to 240. Shortly thereafter, the British OK'd public water closets, and inventors brought to bear the innovations that would become the world's modern toilets.

And so the stench of feces set in motion the development of the modern sewer system and the principles of separating the water that goes in from the stuff that comes out.

But just in case you thought that 20th century innovations in waste management would be rooted in medical knowledge, it would take a powerful Boston politico stepping in poop while running around Quincy before the cesspool known as Boston Harbor would be cleaned up in the 1980s.

And here we are, 4600 years after the Indus Valley civilization set a standard for indoor plumbing that was largely ignored up until the late 19th century. While I am troubled that we still haven't guaranteed this basic standard to every man, woman, and child alive today, I am struck by the remarkable progress we have made in the past 150 years, as well as disappointed how small of a role understanding of health risks played in the creation of the waste systems that could have been created hundred of years earlier.

I'm not sure what exactly to take away from the history of waste management, but it is both troubling and fascinating nonetheless.

first crack at transport cost impact

2008-12-20T21:08:00.005-05:00

I recently read Marc Levinson's The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, and was reminded of a task on my to-do list that I have yet to cross off: I want to create one of those fancy maps I love where distance represents transportation cost/time. I'm still not sure of the details. Perhaps I'd take each major market and then have all the other countries orbiting around the market, with distance based on transport cost and country size based on GDP.

Unfortunately, I haven't gotten to that point because it's proven damn difficult to get anything near comprehensive data on the subject. Levinson has a few nuggets:

Being landlocked, one study calculated, raises a country's average shipping costs by half. Another study found it cost $2,500 to ship a container from Baltimore, on the U.S. Atlantic coast, to Durban, in South Africa - and $7,500 more to haul it by the road the 215 miles from Durban to Maseru, in Lesotho.

I checked the bibliography and snagged the source PDFs online. One of them, Infrastructure, Geographical Disadvantage and Transport Costs, has some interesting data on African country transit costs, albeit from 1999.

I threw the data into Excel, popped in the current GDP (PPP) per capita, and below is the result. In the original paper linked above, the transport cost for US to Germany was 1.0. I created a "large market" proxy transport cost by averaging the transport costs from each city to the US, Germany, and Japan.

*Oil-rich country, transport costs for non-oil products may be underestimated

In the bubble chart below, bubble size is proportional to GDP per capita, with the Transport Cost on the Y-axis, countries sorted by GDP per capita (lowest to highest) along the X-axis.

When I sorted by transportation cost, three countries stood out to me as having some of the lowest transportation costs yet only average GDP per capita: Senegal, Togo, Gambia

Further down on the list, three more countries stood out with average transportation cost rates associated with much higher GDP (e.g., $2,000 range) than they achieved: DRC, Guineau-Bissau, Sierra Leone.

I don't know a ton about the countries besides violence, but thought I'd bring them up in case an African aficionado happened to have something to offer.

For my part, I make no conclusions. This is just the first attempt at exploring transportation costs. I'm still on the lookout for better data, but for now, I'll leave you with conclusions from that 1999 paper.

Our main results are, first, that infrastructure – both own infrastructure and that landlocked countries’ transit routes -- is a significant and quantitatively important determinant of transport costs and of bilateral trade flows. For example, improving destination infrastructure by one standard deviation reduces transport costs by an amount equivalent to a reduction of 6,500 sea km or 1,000km of overland travel.

Second, being landlocked raises transport costs by around 50% (for the median landlocked country compared to the median coastal economy). However, improving the infrastructure of the landlocked economy from the median for landlocked economies to the 25th percentile reduces this disadvantage by 12 percentage points, and improving the infrastructure of the transit economy by the same amount reduces the disadvantage by a further 7 percentage points.

Third, combining estimates from transport cost data with the trade data we are able to compute the elasticity of trade with respect to transport costs; it is high, at around –2.5. This means that the median landlocked country only has 30% of the trade volume of the median coastal economy.

Improving infrastructure to the 25th percentiles raises this to over 40%.

stay loyal to principles, skeptical of means

2008-12-09T22:32:00.001-05:00

Once we've acknowledged the potential for regulation to improve the functioning of a market, the next task is to determine the likelihood that regulation will indeed accomplish its stated goal. Just as our market skeptics are right to point out that we need to judge 'capitalism' by it's real-world performance, we must judge government action by the same. And our pluralistic democracy, for all its strengths, does a remarkable job of turning the most noble of causes into dismal and destructive regulation.

The more we break down 'regulation' into its specific components, the better we are able to assess the respective likelihood of attaining stated aims and creating additional negative externalities. Only then can we weigh the likely effects of our darling regulation with the likely effects of inaction. Presumably, at the end of such an exercise, support or opposition of 'regulation' would be less broad and more tailored to specific types of interventions in specific instances.

For example, the appeal of government subsidies for investment in alternative energy is clear. It's become a proxy battle for those who support a large commitment to reducing carbon emissions and those who oppose it. Those that support this large commitment, however, should be more circumspect, and allow for the possibility that they might support the principle of carbon abatement, but still oppose subsidies because of what the regulation will look like at the end of the day.

Ezra Klein has said as much:

"One more time: 79 cents of every dollar the federal government invests in renewable energy goes towards corn ethanol, a heavily subsidized boondoggle that is little better than gasoline. Which is why I worry about targeted investment strategies. It's not impossible to conjure up massive investment strategies that would make a tremendous impact on global warming. Gary Lipow does a nice job of it here. But it's hard to imagine such an initiative entering the United States Congress and not emerging as pork encrusted in corn. The incentives are too poorly aligned."

Klein goes on to briefly mention the idea of a cap-and-trade system, before again agreeing with skeptics that "so much will be exempted and rebated and set aside that it will, in practice, be nearly as bad."

He finally allows that a straightforward carbon tax may indeed be the best option (sidenote: supported by Al Gore and Ralph Nader, among others).

Of course, these aren't the only carbon abatement programs in place or in consideration. We have CAFE standards, which many want to make more stringent, despite the fact that "the premise of CAFE is a little bizarre—that manufacturers are responsible for the choices of their customers and penalized if car-buyers prefer more fuel-intensive vehicles. Across the political spectrum from left to right, the more direct, logical and efficient alternative of a carbon tax has its advocates, but they remain a persecuted minority," as the Economist points out.

Unfortunately, the conversation about what to do about carbon has not allowed much room outside a broad-based support or opposition to carbon abatement programs en sum. Opposition to particular programs is seen as a proxy for half-hearted committment to the principle. Yet it's perfectly possible that Ezra believes more in the destructive power of carbon emissions than John Q, yet supports fewer of the abatement programs.

Subsidies, CAFE standards, cap-and-trade systems, carbon taxes, and gas taxes represent only some of the regulations applicable to a single unpriced externality (carbon emissions). What's more, I don't want to dismiss the potential of subsidies, for instance, out-of-hand because of their massive failure in alternative energy. In fact, I would invite those sympathetic to subsidies to refine their argument, perhaps forming a push for (and only for) 'subsidies for basic research independent of commercial applications.'

I would like to see educated debate move beyond principled support/opposition for more or less government action, and toward a pragmatic analysis of the means. It only takes a look at today's headlines of proposals for a "car tsar" to underscore the importance of differentiating between the principle (well-functioning auto industry that doesn't blow up the planet), which is the end, and the proposal itself (see: tsar, drug... tsar, terrorism), which is nothing more than an often shoddy means.

In the mean time, be just as wary of he who supports all efforts to save the world from carbon and auto bankruptcies as you are of those who make the same pledge to protect us from Islamo-fascists (what a term!) If he can't discriminate between wasteful and ineffective means to serve his principle, he probably is an irrational zealot.

Gas Prices Fall as Big Oil Reduces Profits

2008-11-18T07:57:00.018-05:00

NEW YORK -- Consumer advocates are dancing in the streets after successfully lobbying Big Oil to forego the record profit strategy agreed upon by the cartel this past summer in hopes of improving the competitiveness of the American economy (home to the greatest workers in the world) and the strength of the American family.

After a closed-door meeting this fall, the powerful transnationals agreeing to lower the Big Oil Required Set Price (BORSP) from more than $140 per barrel in June to $55 this November.

"You know, they were right to suspect massive collusion and corruption behind the soaring oil prices," said Bud Budderson, former head of Collusion & Pricing, and now VP of Smiles & Sunshine at BP. "You know who set the prices? Me. And you know how I did that? I created a formula based on how many new toys I wanted to buy that week.

"I was a bad guy. But I did some thinking, listened to Barack explain the unfairness of our windfall profits, and decided to make a change."

Along with the rest of Big Oil, BP made the difficult decision to stop selling oil at a price they now admit was completely detached from supply and demand, supported only by backroom dealing sealed with sweaty handshakes, evil cackling, and whale steaks marinated in peasants' blood.

The price reduction has in turn won over many former critics.

"The fact that Big Oil, in these tough economic times, has chosen to lower prices by nearly 2/3 for the good of America, serves as a beacon of hope for all those who believe in the essential awesomeness of America," said Tuck Tuckerson, senior analyst at MSNBC, and author of "Speculation, Gouging, and Waterboarding: A Year in Big Oil as a Super-Secret Embedded Reporter."

"We just grew tired of being so goshdarn evil," said Exxon CEO Money Monerton. "You can only read headlines like"Record Gas Prices, Record Oil Industry Profits," for so long without rethinking your decision to put excessive personal profit over the humble dreams of hard-working Americans.

"Sure, the record profit strategy had its benefits, but this time around, we made the right choice, both for our companies, and for America."

why bet on climate forecasts?

2008-11-17T21:21:00.008-05:00

I have long enjoyed Bjorn Lomborg's critiques of the climate change mitigation plans (e.g., Al Gore's trillion dollar 10-year plan, T. Boone Pickens' giveaway), as he has used numbers of the UN's scientific consensus to show how little sense most (not all) of the plans make.

Funnily enough, when "green" advocates see the small impact (and immense cost) of the Kyoto Protocol spelled out, they become far more amenable to perhaps a more interesting discussion on the viability of the UN's forecasts.

Furthermore, in the wake of a financial crisis brought on (partly) by a reliance on the financial community's consensus statistical modeling, it's not a bad time to question the reliability of these models in the first place.

Both financial and environmental modeling portend to predict the behavior of a complex system, where even small errors can lead to catastrophically wrong predictions thanks to the great number of feedback loops in the system.

And while the financial system saw the failure of the (Nobel winning) Black-Scholes financial model with the collapse of Long-Term Capital Management, environmental forecasters believed we were actually entering a "global cooling" only 30 years ago (quickly forgotten by the environmentalists' new Nobel-led movement).

In both cases, these massive failures are dismissed with a wave of a hand - 'oh, we have better models this time. I mean, we'd never make a mistake like that again. We just needed to add variable X that my stupid old partner missed and not pay attention to variable Y, which I always thought was wrong.'

I greatly enjoyed Nassim Taleb's "The Black Swan" as Taleb took the financial modelers - indeed all forecasters - to task for just this arrogance and failure to admit their projections should not be relied upon.

He states that he wouldn't trust a projection over five years; for the sake of context, the climate forecasts are 100 years (!) into the future.

I should add that I believe I did read somewhere that Taleb has spoken vaguely in favor of conserving the environment as a natural resource. I won't disagree with this. I have already written on what I think makes sense for climate change (Obama's $150 billion for R&D=good, subsidies for inefficient alternative energy applications right now=bad). This post is about the scientific modeling put forth as a consensus by a community with a long history of making drastically wrong forecasts.

Taleb advises, "Learn to read history, get all the knowledge you can, do not frown on the anecdote, but do not draw any causal links, do not try to reverse engineer too much-but if you do, do not make big scientific claims."

It appears to me that not only are our forecasters drawing causal links based on highly-fragile models, but also making "big scientific claims."

Some of my few readers are likely chomping at the bit to add the comment/question: 'Sure, you can criticize the models, or whatever, but Taleb's book is all about protecting yourself from Black Swans - highly improbable events that carry catastrophic risk - how can you possibly distort his arguments into a critique of climate forecasts: you are missing the forest for the trees!'

Maybe so - only Taleb knows, as he has been uncharacteristically reserved about commenting on climate change from what I've seen - but I do not believe I am misrepresenting his logic.

Taleb writes: "Many of the prediction failures come from hedgehogs who are mentally married to a single big Black Swan event, a big bet that is not likely to play out. The hedgehog is someone focusing on a single, improbable, and consequential event, failing for the narrative fallacy ["creating a story post-hoc so that an event will seem to have an identifiable cause"] that makes us so blinded by one single outcome that we cannot imagine others. Hedgehogs, because of the narrative fallacy, are easier for us to understand- their ideas work in sound bites."

Taleb emphasizes that Black Swans are Black Swans because they are indeed unknowable -- uncertainty is just that. His advice is to "to focus on the consequences (which you can know) rather than the probability (which you can't know)... Likewise, do not try to predict precise Black Swans- it tends to make you more vulnerable to the ones you did not predict. ... These thinkers advocate the opposite: invest in preparedness, not in prediction."

Does this sound familiar? It should, because Bjorn Lomborg has advocated investing in preparedness that will pay dividends regardless of climate change (e.g., "malnutrition policies, immunization and agricultural research and development"). These proposals stand in stark contrast to the energy-exclusive solutions of people like Gore and Pickens, which will make us indeed more vulnerable to the Black Swans we don't predict.

To wrap up, I'll return to Taleb: "I do not forbid myself from using the word cause, but the causes I discuss are either bold speculations (presented as such) or the result of experiments, not stories."

Environmental forecasters have treated us to bold speculations presented as scientific fact as part of a grand narrative that ends in apocalypse -- a Mad Max end of humanity unless if not for drastic, expensive, collective action (but secretly great for our economy!) to reduce our carbon footprints -- and thereby meaningfully mitigate climate change in an environment that has undergone catastrophic changes without the help of mankind for millions of years.

Whew. Maybe that is right on target, but I hope that even believers will admit that it just oozes all mankind's cognitive biases and failings that are now well documented in behavioral economics, psychology, and indeed Taleb's work.

The ceremonial rain dance is also well documented. People observed climate change. They created a narrative whereby they were responsible for it. They used their scarce resources to participate in ceremonies that would theoretically change the environment. Even after doing it for a period of time, they were able to explain away the many failures of their efforts to preserve the narrative. At least these ceremonies didn't cost trillions of dollars.

The late Michael Crichton said, "Nobody believes a weather prediction twelve hours ahead. Now we’re asked to believe a prediction that goes out 100 years into the future? And make financial investments based on that prediction? Has everybody lost their minds?"

I'll end with some more wisdom from Taleb. We should not play the role of hedgehog, but that doesn't necessarily mean we slump on the couch and wait or a new wild theory to take root. We should take the advice of Lomborg and Taleb in maximizing our exposure to positive Black Swans by expanding R&D and allowing for the trial-and-error process necessary to innovate, while also investing in multi-use preparedness, e.g., malnutrition, disease prevention, poverty alleviation efforts, etc.

And lastly, a disclaimer: there are lots of good reasons to reduce our impact on the earth, to use resources more efficiently and expend less energy doing the business necessary to provide humans with a healthy and fulfilling life. This post is specifically criticizing the forecasts that have been coopted and the narrative they support.

quigley's critique of the clerks of history

2008-11-11T20:48:00.002-05:00

I've already posted my summary of Carroll Quigley's narrative of historical development here, and now I'll move straight to the end, where Quigley concludes the Evolution of Civilizations with takeaways for students of the social sciences to better frame inquiries into the past and present. Quigley is disturbed by the inconsistencies and contradictions running rampant in historical study, which he attributes to students focusing on knowing every detail of their area of historical expertise, while failing to carefully consider a deliberate analytical framework from which to understand their historical area.

The eager student would be slower to make bold assertions about the past if he appreciated the complexity of the system he studied. Understanding civilization, and social phenomena more generally, is intrinsically very difficult, as human experience is not static but dynamic: it is a continuum:

"A continuum is a heterogeneous unity each point of which differs from all the surrounding points but differs from them by such subtle gradations in any one respect that no boundaries exist in the unity itself, and it can be divided into parts only by imaginary and arbitrary boundaries."

We are left to cope with the past the same way we deal with the colors of the rainbow, drawing arbitrary lines between red, orange, and yellow. These artificial categories or labels are necessary for discussion, but we must realize they are arbitrary.

Quigley asks students to be ‘executives’ of history, rather than simply its clerks. The distinction is that the clerk concerns himself with knowing the details of history, while the executive is interested in understanding history. The executive’s understanding is only as good as his analysis, and to this end he uses deliberate techniques to provide a systematic understanding of historical development.

These techniques will not be perfect – a fact Karl Popper and Nassim Taleb would insist upon more forcefully than Quigley – but only through the deliberate choice of one technique or another will the student be aware of the potential blind spots of his understanding. That is to say, every understanding of historical development depends on assumptions, whether the student deliberately makes them or remains blissfully unaware.

It is a tremendous err, however, to not deliberately pick a set of assumptions from which to interpret. By unknowingly operating off whatever assumptions make sense at the time, the student ends up with a contradictory and inconsistent assumptions (and interpretation of history). What's more, he never even understands the assumptions implicit in his own garbled understanding.

Quigley also takes issue with the how historical phenomena are compartmentalized into incomprehensible units, such as “nations” or “the middle class.” For the purpose of studying historical development, it is necessary to study distinct groups; a nation-state may have more than one distinct group, or may contain part of a distinct group that exists in another nation-state as well. Defining distinct groups is not easy, but it necessary for rational study.

Quigley also objects to the language of history. Historical terms should be selected to correspond to the process being studied and the technique being employed. Instead, historical development is explained in a language devoid of consistency or meaning, e.g., periods classified as “medieval” and “classical.” At best, terms are descriptive, at worst they are highly misleading. The exact lines drawn to classify different periods or peoples will always be somewhat arbitrary, but that doesn’t excuse sloppiness.

For another example, the time period between 400 and 1400 AD is referred to as the middle ages, medieval period, and the dark ages (for the beginning). The first term provides the student with the knowledge that this period is in the middle of two other periods. Medieval describes the period as “outdated,” which provides the student with the knowledge that this period is less up-to-date than more recent periods. The dark ages provides the student with a similar perception.

None of these terms convey how the events within this period figure in the process of historical development. If anything, they suggest that historical development stopped for 1,000 years. Quigley breaks down the same time period into four parts – mixture, gestation, expansion, and conflict. Quigley deliberately chooses a set of consistent and relevant labels for historical phases that correspond with the process of historical development and the on-the-ground reality; therefore, his technique is better able to explain supposed exceptions to the dark ages or medieval period, such as the Carolingian Renaissance. This periodization is more than a small nuisance: it has led to a high degree of specialization limited within these arbitrary designations. Now the most fruitful studies are likely to come from those who study the gaps and borders of these false categories.

In sum, Quigley joins Arnold Toynbee in arguing for the importance of analytical technique in historical and social analysis. A systematic technique not only provides a more coherent historical narrative, but also provides the self-awareness needed to understand one’s own potential blind spots. Toynbee properly identified these problems in his studies, but failed to provide proper definitions for his own terms and indeed fell prey to the same sloppiness he condemned.

It would be silly to argue that Quigley’s technique of understanding the rise and fall of civilizations is perfect, but with the ubiquitous disclaimer to handle all post-hoc narratives with care, he offers a superior history, an insightful critique of popular history, and a sound reminder for students of history to carefully choose a technique - even if it's not Quigley's.

useful narrative for civilization development

2008-11-10T19:23:00.006-05:00

Carroll Quigley provides probably the best narrative of the rise and decline of civilizations I've come across (better than Toynbee, Durant, Braudel) in his book, Evolution of Civilizations (download a PDF version here). I recently came across a document where I summed up a large portion of his insights and thought I would share it. I also have some notes on his critique of the study of history as a whole, which I'll share shortly.

To begin, Quigley defines civilization as a producing society (as compared to parasitic society) which grows thanks to an “instrument of expansion.” This instrument depends on invention and investment for the purpose of surplus creation. Instruments of expansion appear to be big picture developments, from feudalism to industrial capitalism – means of organizing inputs.

Quigley breaks down the civilization's life cycle into stages: mixture, gestation, expansion, and conflict, with universal empire, decay and invasion follow if the civilization fails to find a new instrument of expansion.

Mixture: A new society needs multiple cultures mixing; while there are millions of cases of cultural mixture, only rarely does it create a new society; usually this occurs on frontiers, where cultures mix to find “alternative ways of satisfying human needs,” e.g., a new instrument of expansion.

Gestation: Period before expansion begins, where few changes are apparent; status is still stabile, but investment and invention are taking place under the radar.

Expansion: Four kinds: a) increased production of goods, eventually leads to rising standards of living, b) increase in population of society as death rate declines, c) increase in geographic extent because of exploration and colonization, d) increase in knowledge; all are interrelated. Period typified by democracy, scientic advance, and revolutionary political change, while in the latter half of expansion, the instrument of expansion becomes institutionalized, “increasingly static and legalistic.” In time, all will see “investment begin to decrease, and the rate of expansion (although not expansion itself) begins to decline.”

Conflict: Period of declining rate of expansion and increasing class conflicts, due to a conflict of interests between the vested minority and frustrated majority, with neither side having clear idea of real issues or workable solution to crisis. The programs the majority want - sharing the surplus of the few with the many - are not germane, since expansion can be resumed only with concentrated surplus; such revolutionary programs will actually make the crisis worse by lowering the accumulation of surplus. The period is also marked by increasingly frequent and violent imperialist wars, along with growing irrationality, pessimism, superstition, and other-wordliness.

Universal Empire: This period is often considered to be the golden age by historians, as there is relative peace and prosperity as there are no competing political units and no struggle with outside societies. There may develop a common set of weights, coinage measures, and extensive government spending. This is all misleading, as there is no real economic expansion, as the previously-productive instrument of expansion has stagnated. Inventions are rare, and real economic investment is lacking. Society is now a monument to the vested interest. Masses live off waste of non-productive expenditures. “Golden age is really the glow of overripeness” - a prelude to decay.

Decay: This period is unsurprisingly marked by “acute economic depression, decline in standards of living, civil wars between the various vested interests, and growing illiteracy.” There is often vain legislation to stop the waste. Religious, intellectual, social, and political levels of society lose the allegiance of masses. Religious movements then sweep society, along with a growing reluctance to fight for the society or pay taxes. This period can last a long time, until it can’t defend itself again the barbarians at the gate.

Invasion: The invaders attack the civilization until it can no longer stand, destroying the civilization, and creating a new period of mixture, providing the possibility for a new gestation period. For instance, the Greek invasion of the Minoans was Classical gestation, the Germanic invasion ended Rome, but birthed Western Civilization. This is not a given though, simply a possibility.

While Quigley’s model is based on the civilization experience, it applies to groups of all sorts all the way down to organisms. Political parties find instruments to expand their influence and popularity. These instruments become institutions protected by individuals who derive disproportionate benefit from their continuance. Over time, this institution sees a declining rate of utility to the party, and many in the party will think it best to reform or circumvent this institution and invest in a new instrument of expansion. If they fail to reform, their party’s position will decay further until they are replaced.

Mancur Olson has a related argument in “The Rise and Decline of Nations,” which argues that small, distributional coalitions form to protect their interests, and as the state endure, it accumulates more and more of these drags on expansion, causing increasing decline.

Quigley essentially takes natural selection theory and incorporates the uniquely human ability to choose. Animals change their instrument of expansion through thousands of years of selective survival and breeding. Humans, and any social groups they might comprise, can change their instrument of expansion simply through a will to change.

At earlier stages in civilization, it was the battle to see who had the strongest few, who would strengthen themselves through plunder abroad and appropriation at home. The chief instruments were indeed war and plunder. However, this initial plunder created a surplus which allowed for inventions that created new economic instruments that created surplus without conflict, and indeed, depended on cooperation and expansion to mature.

This created a lobby for peace and commerce, which butted heads with the entrenched war institution. This economic instrument was also institutionalized to secure its ability to flourish by land barons and guilds. This institution expanded for some time (at less-than-optimal rates) because of expanding items of commerce and expanding markets to sell, before finally commercial capitalism challenged the institution of feudalism. Commercial capitalism became the instrument of expansion until it was displaced by industrial capitalism, which in turn was institutionalized into monopoly capitalism.

Each evolution has depended on surplus-holders with weaker ties to the current instrument of expansion than the draw of potential gains in the untapped instrument. This group will only come into being if the vested interests’ instrument incidentally creates a surplus for another group. The pivotal moment in a society occurs when the vested interests trade a share of surplus to a distinct group for a service they could not provide themselves; if so inclined, the secondary group will continue to accumulate influence through its more efficient instrument before either co-opting the vested interests or stripping the vested institution of its privilege.

It seems like the US is in the Conflict stage, where Quigley offers some sage advice on the popular proscriptions. In this period of growing tension of evolution and increasing class conflicts between the vested minority and frustrated majority, neither side has a clear idea of real issues or workable solution to crisis; agendas to appropriate the surplus of the few by the many are worse than useless, since expansion can be resumed only with concentrated surplus to fund new or reformed instrument of expansion. Revolutionary programs responding to failure of investment will make the crisis worse by lowering accumulation of surplus; both the masses and the few are blind to what’s needed, a new instrument of expansion, which usually appears by accident or circumvention rather than through reform.

Every instrument of expansion sees diminishing returns, and the rate of expansion can only be maintained or increased through reform or circumvention (working around entrenched interests) to ensure surplus is invested in the best available instrument.

Fun with polls

2008-11-02T15:49:00.003-05:00

I designed a quick and easy game for the election that focuses on the battleground states. I don't particularly follow the polls, but since I have to participate in my own game, I wanted a quick and easy method for making predictions I can at least pretend are more than WAG (wild ass guesses).

Battleground states (5): Virginia, Colorado, Ohio, Florida, Pennsylvania
Close states (5): North Carolina, Missouri, Indiana, Montana, Nevada
Popular Vote (1)

For each state, you must pick the winner and the margin of victory. I decided to simply rely on the average polling data, with one minor adjustment. Thanks to RealClearPolitics, I was able to quickly grab the last polling data from 2004 for each state as well as the eventual results. I then compared the polling forecast with the results, and looked to see if the polling data erred for/against Bush/Kerry.

The polling data for Colorado, Ohio, and Montana was virtually the same as the eventual voting outcomes. So I let Obama (CO, OH) and McCain (MT) keep their forecasted victories.

The 2004 Pennsylvania and Nevada forecasts, meanwhile, underestimated Kerry's eventual wins, so that secured Obama's W's in those states.

Bush outperformed his forecasted margins of victory in North Carolina, Missouri, Indiana, Virginia, and Florida. This solidified NC, MO, and IN as McCain victories in my book. In VA, Obama is +3.8, and Bush only outperformed his expected margin by +2, so I'm calling it for the gentleman from Illinois.

The toughest nut to crack is Florida. Obama is up big (+4.2), but Bush was only up +0.6 and ended up +5. It's a tossup according to my unscientific method, but I am going to go Obama with a slim margin.

For the popular vote, Bush outperformed his forecasted margin by a bit, so I am just taking a bit of shine off Obama (currently, +6.3) and leaving him +5.5

According to these predictions, Obama will bring home the victory with 338 votes: 311 if he comes up short in Florida.

VA: Obama +2
CO: Obama +6
OH: Obama +4
FL: Obama +0.5
PA: Obama +7
NC: McCain +2
MO: McCain +2
IN: McCain +3
MT: McCain +3
NV: Obama +6
Popular: Obama +5.5

After the election, I'll recap how everyone did in the prediction game. If you haven't entered yet, Click Here to take survey.

incomplete guide to free market regulation

2008-10-21T22:03:00.005-04:00

I’ve spent the past week or so struggling with how best to write a post on the proper role of regulation in market design. This a difficult topic to synthesize, since each market poses a different set of challenges for regulators; and I do not intend to catalog every regulation that exists and explain why I believe it to be useful or destructive.

That said, the current financial crisis has incited a chorus of criticism of the deregulation movement of the past thirty years. This deregulation has transformed numerous industries: air, bus, shipping, telecommunications, and, yes, finance. Now that there's been a financial meltdown, in the mind's of many, deregulation has been completely invalidated (of course, most of these folks felt this way five years ago).

I'm less than impressed by this mode of argument, as I believe that deregulation is necessary in many instances to reduce distortions in the market. But unlike some caricatures of the free-market position, I don't advocate deregulation to the point of anarchy. I'd like to remove many regulations, keep many others, and selectively add a few as well.

Regulation is tricky business, and I am interested in arriving at a principled differentiation between regulation as appropriate market design versus regulation as nefarious market meddling. I’ve emailed a few highly-regarded bloggers, but in lieu of an appropriate response by these bloggers, I thought I would take a shot.

It’s appropriate to begin with a discussion of what I mean by market design versus market meddling. Market design is the set of formal and informal rules that shape and limit participation in the market: market design rules separate a market from anarchy. Market productivity is indeed enhanced by rules to govern market behavior. Thefts indeed reduce market exchange. Beyond security, consumer confidence is essential: forgeries will quickly empty a market place. The purpose of market design is to maximize voluntary exchange between willing parties.

Here's my (incomplete) theoretical check list for a free market:

* No single buyer/seller should exert significant influence over prices or output (e.g., monopoly, collusion, unions)
* No asymmetric/incomplete information: participants must be straightforward in what they are buying/selling (e.g., used car market)
* No unpriced externalities (e.g., cost of toxic chemicals released into local lake)
* No threats to property (e.g., theft)
* No restrictions on who can buy/sell goods (e.g., licensing)
* No restrictions on prices at which goods can be bought/sold (e.g., minimum wage)
* No restrictions on the quality of the goods exchange (e.g., FDA approval)

Many will point out that by this check list, no market is completely free. This is truism akin to the observable fact that no human being is truly free. Still, just as I'd prefer to be "more free" even if I'm not completely free, I'd prefer to participate in markets that are "more free."

Indeed many of these concerns will be mitigated by the market participants themselves. Two-faced scumbags will be left without a trading partner, while fair-dealing will be rewarded with more business. You probably don't inspect the newspaper you buy in the morning before you hand over your money. But there is no law against selling newspapers with pages missing.

Still, few markets of import are self-regulating in all aspects. Formal legal laws and informal rules are necessary to advance the free-market agenda listed above. This post has served to reestablish the principles of the free market, which has been perverted by critics of the deregulation movement in their zeal to win the political blame game currently taking place.

The next post will be a bit more practical in looking at the issues of regulation, including regulatory arbitrage and capture, specifically in the context of our faltering financial system. It's easy to say we need the "right" regulation (which obviously was lacking). It's even relatively easy to state the principles by which this regulation should abide. It's much harder to explain which, if any, rule-making institution (e.g, Congress?) is likely to produce regulation that improves the sustainability and productivity of the market.

But let's try.

skills to pay the bills - the college years

2008-10-09T18:09:00.005-04:00

We've covered the importance of education, and the problems with our current public school education policy. Next up is the university level.

To begin, our universities truly are the envy of the world. That said, we aren't perfect. There are a few low-cost options: community colleges, online degree programs, and technical schools. But these alternatives are generally considered to be "second class" education with a very firm ceiling that rules out many well-paying careers.

In response, progressives have fixated on making it possible for every high school graduate to go full-time to a four-year college.

On one level this makes sense, even marginal college students can expect at least a 7% wage premium per year of college. This is because the bachelor's degree has achieved a majestical stature for students and for employers, signaling (at the least) a basic capacity to be trained (and eventually perform) in a high-value, well-paying profession.

There is nothing inherently wrong with a degree acting as a signaling device; we depend on just such signals for societal trust and exchange.

The problem is that the bachelor's degree is a very expensive signal, and there is reason to believe a very wasteful signal. And while it's not a societal problem if rich people want to spend their money on extravagant signalling, it is a societal problem when our anti-poverty program depends on subsidizing the poor's purchasing of this overpriced signal.

(This is what $60,000 apparently buys you! Apparently, they didn't budget for a decent sense of humor.)

In theory, this problem should resolve itself as firms exploit this opportunity by hiring and training smart high school graduates themselves for less than they would pay the college grads. That is indeed what has happened in India: at least one software company is thriving by hiring young professionals whom others disregard. They don’t look at colleges, degrees or grades, because not everyone in India is able to go to a top-ranked engineering school, but many are smart. The firm goes to poor high schools, and hires kids who are bright but are not going to college due to pressure to start making money right away. They train them, and in nine months, they produce at the level of college grads.

This is not occuring in the US, primarily because of a coordination problem.

Good future workers know they need to go to college to signal their ability to firms and firms know that they have a much higher chance of finding good future workers in the college group. Furthermore, employers are much less likely to have their competence called into question if a hire with a degree doesn’t work out than if they hire a worker without a degree (because of the correct perception of the low likelihood of that hire being a wise choise).

The question is how to credibly signal to good future workers that a four-year college degree isn’t necessary to be considered as a candidate and to convince firms that there are enough good future workers without a four-year college degree to make it a wise investment to include them in their employee search.

The challenge is to develop viable alternatives to the bachelor's degree that don't confer a 'second-class' status. I'd like to see the proliferation of shorter, no-frills academic programs that focus on teaching professional skills and testing relevant capacity (take a lesson from master's programs). In addition, I do believe that CPA-like exams for different professions (or areas of competency) will allow for a more fair and open competition.

There can be great value-added by a four-year liberal arts program, just as there can be value-added by a PHD or masters program; the problem is that the bachelors degree hasn't become an option for those so inclined, but a requirement for a well-paying job - and an expensive requirement at that.

It would be wonderful if we could afford to send every child to a four-year sleepaway camp, where they could sleepwalk through four years of classes (if they so chose) and receive a magic ticket to a well-paying job -- but that isn't the case.

There is a lot of fat to be cut and changes in educational philosophy to be made. Perhaps rethinking the well-manicured campuses and live lectures, for instance. The academic lecture, by the way, has its roots in the medieval training of theologians in a time when one-book-a-course for four years of schooling would cost about $1.6M in book outlays. Back then, it made economic sense to have a lecturer (from latin lector - reader) read from a single book aloud to a hall filled with students. Yet despite the fact that nowadays students could read the contents of a lecture in an instant at virtually no marginal cost, or even watch a video of the lecture -- the lecture remains at the foundation of university teaching.

Everyone in every occupation starts as an apprentice. This is as true of history professors and business executives as of chefs and welders.

The challenge is to make both our advanced schooling and our advanced signaling more efficient and thereby, more accessible. A proper long-term strategy is not to subsidize students' purchasing a $160,000 education, but to support the establishment of alternative means, be it CPA testing or shorter, low-cost advanced degree programs for students to prove their merit to potential employers.

no skills to pay the bills, pt. 1

2008-10-08T21:49:00.005-04:00

I'm sure if you asked Barack Obama or John McCain directly about the importance of schools, they'd give you a rousing sermon (or at least a few firm talking points). Yet education reform has been notably absent from our political debate. The candidates love riling up voters' economic nationalism, whether it's talk of foreign oil, foreign cars, China (everyone's favorite boogeyman), outsourcing, globalization, immigrants, or any other buzzword that places blame for American worker woes far from the doorstep of the American government and people.

Yet it’s not globalization or immigration or computers that have widen inequality and slowed wage growth for many Americans. It’s the skills gap.

And while there are plenty of expensive plans to alleviate American poverty to varying degrees, tax-and-redistribution will never provide the economic opportunity and security that we wish for all Americans.

Education should be the primary program to cure our social ills as the key to sustainable high compensation. It is both the key to advancing the welfare of the American poor, and also the means of securing America's economic growth.

This post will focus on primary/secondary education, with a post to follow on college education. Some of the prettier lines from this post I've lifted either from my summaries (linked below) or the original articles (also linked below), but I've spent a bit more time for the sake of flow and coherency to reformulate these ideas.

First, let's recount why education is more important than ever.

The labor market has expanded dramatically in the past 50 years -- undoubtedly for the better of Americans and all mankind. That said, unskilled Americans have had a much, much, much smaller share of the bounty than their fellow citizens.

The problem is that employing unskilled American labor isn't much more profitable than buying a simple machine or employing unskilled labor in a third-world country, yet many unskilled Americans will only accept wages that are much higher than a third-world laborer will accept or a machine will cost.

The value of unskilled labor is low. This sounds like a truism, but it wasn't always the case. Before the machines took over the world and the cost of doing business far from market plummeted, an unskilled laborer simply giving you a few hours time could get a decent wage (of course, that is relative to his peers; relative to his 21st century counterpart his life would be shorter and more brutish). What's more, the American laborer with a high school education likely still had an advantage over his global competition - that advantage has since disappeared.

Meanwhile, unskilled laborers have watched the skyrocketing wages of skilled laborers,. This shift in labor value has been jarring for many Americans, who are ill-prepared to compete for wages based on value-added by their labor, rather than simply time spent at work. And let's be clear, the days of factories full of high-paying manufacturing jobs are gone forever.

Most means of fighting this growing inequality carry large costs that reduce the size of the economic pie (e.g., taxes on capital gains, rent control, large welfare programs). By contrast, investing in human capital encourages work and offers the potential for permanent increases in earnings.

It is no surprise we are seeing a divergence in income when the most valuable skills (soft) are only being attained by a minority of students who graduate college and high-school graduates lack both hard and soft skills.

The skill-wage hierarchy will always exist. Education -increasing skills- is the lone hope for the poor to actually improve their condition.

The wage premium for a high school degree has all but disappeared. There is little point in recounting the soul-crushing underperformance of American public schools, so let us instead look abroad to high-performing examples.

Two of the best primary/secondary schooling examples to learn from reside in Sweden and Finland. The Fins explain the key to their success is to develop excellent initial training for teachers (only ~10% of applicants are accepted for teacher training), start education late and gently (Fins start at 7), and don't waste resources on national testing. The Fins' biggest problem? Getting rid of bad teachers- even with alcohol problems.

While the Fins are more focused on testing achievement (...just not national testing), the Swedes are more interested in developing well-rounded thinkers, evidenced by their varieties of schools and competition, forcing schools to think more pointedly about quality as they risk losing 70k kronor if an unhappy student goes elsewhere.

Swedish reforms in 1994 allowed nearly anyone who satisfies basic standards to open a new school and take in children at the state's expense. Schools can't admit based on religion or entrance exams and nothing additional beyond the set payment by the state can be charged for - but making a profit is fine. Since the reforms, the share of Swedish children educated privately has risen significantly, leading to the proliferation of many "chain" schools.

In these chains, teachers update material on websites, utilize tutors, student-specific syllabi, and weekly student progress reports, and received performance monitoring and bonuses as personal tutors and subject teachers. There are no large school-owned facilities.

The schools are profitable despite only getting a fixed $8-12 thousand per student rate from the locality. The average returns on capital are 5-7% per year thanks to the adept, no-frills, IKEA-style management. I imagine its hard for Americans to imagine so little money can get you student-specific syllabi and tutors - but it can.

Back in the US, efforts to reform public education have centered completely on one thing: money. (One exception is the widely panned NCLB... Why is it panned? Big reason is lack of funding!)

Yet there is scant to any literature that shows increased spending leading to improved results, despite many court decisions mandating increased spending on the premise it is responsible for achievement gaps. That is not to say that less books are as good as more books, but it is to say that spending is not the binding constraint on academic achievement, and that dramatic increases in funding will not lead to the academic gains we'd like to see.

I believe that the public school organizational structure is incompatible with the flexibility and experimentation needed to attain the efficiency and productivity found in Sweden or Finland. Yet until recently, experimentation with other types of schooling has been verbotten. Thankfully, the crumbling public school empire couldn't hold off the barbarians at the gate forever.

Free-market types have managed to carve out a few nooks and crannies for educational experimentation in the US, and we are beginning to see the first efforts to sprout out of these charter-school reservations.

The nation's largest laboratory can be found in New Orleans, where 55% of public school students attend charter schools, by far the highest percentage of any city in the country. Dayton, Ohio and Washington, D.C. are second and third in charter-school market share.

It is still too early to draw firm conclusions on the New Orleans charter system, but there has been demonstrable achievement improvement in what was an entirely stagnant district. Classes are smaller, principals have been reshuffled or removed, school-hours remedial programs have been intensified, and after-school programs to help students increased. Much of the gains are attributed to the quality of instructors.

It would appear that government would be able to accomplish these aims, but it has not. New Orleans charter schools have capitalized on their flexibility to try different programs, allocate resources differently - to innovate. Surely, there will be success and failure in this process; the belief is that the successes will survive and reproduce, while the failures will whither away from disuse.

Top-down government management is ill-suited to support this process.

Meanwhile, in NY, charter schools are experimenting with increased principal autonomy, higher teacher salaries (with cutbacks elsewhere), and other education philosophies. In Washington D.C., there is a pilot program that will pay middle school students that meet academic and behavioral goals.

Are any of these ideas answer? Maybe, maybe not. But whether they work or not, the path to progress in education lies in entrepreneurial districts not national standards, empowered teachers not accredited teachers, and education markets not education mandates. Progressives are often quick to suggest we take notes from top performers around the world. I would love to see us take a page out of the Swedish playbook.

Next, we will look at what's holding back America's university system from reaching its potential.

SNL nails the financial rescue

2008-10-05T16:05:00.001-04:00

Hat tip to Mankiw.

What to do about Climate Change...

2008-09-28T13:48:00.008-04:00

The 'natural resources' tag encompasses everything from oil to water to the earth itself. This is a large area to canvas, and I'll focus specifically on international and national proposals to "green" our development. Once again I've taken much of the language in this digest from the sources linked to at the bottom of the piece, and while this post is quite long, I wanted a comprehensive take. I will note that I left out the many legitimate criticisms of environmental modeling and forecasting in the first place. There are many reasons to be suspicious of all of the forecasts that essentially "predict" the weather in a hundred years. This post will ignore these concerns, however, and concentrate on the data that is put forth by the UN and the UN's Intergovernmental Panel on Climate Change (IPCC).

High Cost

Three examples of these environmental proposals are the Kyoto Protocol, Al Gore's plan, and T. Boone Pickens' plan. All three are costly. Pickens plans to generate 20% of America's power through wind, and he estimates it would cost $1 trillion to build that capacity and another $200 billion to update our electrical grid. Gore wants the US to "produce every kilowatt of electricity through wind, sun, and other Earth-friendly energy sources within 10 years. This goal is achievable, affordable, and transformative."

Environmental economist William Nordhaus ran the numbers on Gore's idea to reduce carbon emissions by 90% by 2050. He found that such a plan would reduce the maximum increase in global temperatures to between 1.3 and 1.6 degrees Celsius, and it did so at very high cost of between $17 trillion and $22 trillion over the long term. Even at a very, very low estimate, Gore's plan would cost about $300 billion per year for the next ten years.

Meanwhile, the Kyoto Protocol is estimated to cost around $165 billion annually.

The costs of these plans are large (and I ask that you compare them to the costs of different types of interventions I will raise later), and I will contend they are not worth it, and that lower-cost R&D and "focused adaptation" plans would be far more sensible.

But how do the proponents of these plans justify these massive interventions?

Super Ultra Emergency?

Thomas Friedman justifies massive green spending by explaining that humans are an "endangered species" and none of us "are going to make it" as we experience disasters "of a biblical scale." Friedman trumps Gore five-fold, coming to claim that sea levels might rise a hundred feet, whereas the UN expects between six inches and two feet this century. Friedman says that in 22 years the evening news will feature 'weather, other news and sports' - in that time sea levels will have risen fewer than three inches.

If you buy in to the rhetoric of humans being "an endangered species" with disasters of "biblical scale," then we should start shutting down power plants and confiscating cars tomorrow. We have no good evidence that such a disaster scenario is imminent, but nobody can conceivably prove it to be impossible. Once you get past the table-pounding, any rationale for rapid emissions abatement is really a restatement of the precautionary principle: downside possibilities are so bad that we should pay almost any price to avoid almost any chance of their occurrence. Of course, this same principle would justify spending trillions on countless other "possibilities."

I disagree with those who view global warming as a super-ultra emergency, and agree with those view warming as a problem, one that must be managed via greenhouse-gas restrictions and a weaning away from fossil fuels.

Putting the Benefits of Mitigating Climate Change in Context

Most scientists warn that a temperature rise of 2 degrees Celsius (3.6 degrees Fahrenheit) could have serious consequences. How serious? Well, according to the UN IPCC a 4C increase – twice this amount – would reduce global economic output by 1% – 5%. That’s in the world of the 22nd century which is expected to have per capita consumption of something like $40,000 per year versus our current consumption of about $6,600 per year. So we are condemning future generations to be only 5.7 times richer than us.

But global warming isn't just about wealth reduction -- it's about the death and disease that would hit already at-risk populations. But even using the IPCC's warmest scenario - increased global temperature of 4°C between 1990-2085, climate change will contribute ~10% of the death toll from hunger, malaria — a surrogate for vector-borne diseases in general — and flooding. Thus, eliminating climate change completely would reduce annual mortality by 2 million to 6 million in 2085, depending on the IPCC scenario employed.

That's the potential upside of completely stopping climate change. Of course, the initiatives we are talking about don't even pretend to make such claims. The Kyoto Protocol would reduce climate change by less than 10% in 2085-2100, while costing $165 billion annually.

I mentioned initially the idea of "focused adaptation," which amounts to dealing with the symptoms of potential climate change, such as hunger, malaria, and coastal flooding. For instance, by 2015, malaria could be reduced by 75% for $3 billion per year, hunger by 50 percent for $12-15 billion per year. Please take a look above again to see how small these costs are in comparison to the efforts to mitigate climate change. Climate change will contribute ~10% of the death toll from these causes and look at the amount of spending it will take to even reduce 10% of climate change. Meanwhile, we can reduce 75% of Malaria for $3 billion per year.

My beef with the Environmental Movement

The environmental movement has welcomed a flurry of, at best, benign and wasteful, and, at worst, destructive movements and legislation - all in the name of "green." For instance, Al Gore, among others, pimped ethanol hard, and the government policies that followed made it harder for people to eat -- accounting for as much as 75% of the global increase in food prices since 2002.

These same folks want us to commit enormous amounts of resources to ideas like the Kyoto Protocol, Gore's Plan, and Pickens' plan, as they attempt to win support for these ideas with exaggerated doomsday scenarios and refusing to acknowledge the immense opportunity costs of their plans.

Environmentalists such as Friedman respond that we should still help the poor, for instance, but instead of giving them diesel, we should give them solar panels to power their lives.

That's a nice thought, but not relevant to the question of opportunity costs. If the investment cost for solar power is 14 times more expensive than diesel, the money spent on helping the poor will simply not go as far -- instead of 14 kids getting power you help just one. The large-scale emissions abatement central to Gore and Friedman's strategies would carry astronomical costs, and they would carry real tradeoffs that its proponents should acknowledge.

It's time to quit endorsing every lame-brained environmental strategy lobbyists dream up.

Ideas I'll get behind

Contrary to popular belief, many of us who are 'skeptics' of the environmental movement's claims don't believe in doing nothing at all. The harshest critics of Gore's plan still believe that global warming is real and poses a serious risk, and agree that an R&D program is a component of a solution. We also support adaptation to weather problems (disease, hunger, flooding mitigation), and believe ongoing efforts to analyze physical and economic trade-offs involved in various proposals through the IPCC and similar bodies are valuable and should be supported.

The government has no business picking winners in the alternative-energy competition (sorry, Illinois constituents and T. Boone Pickens), but augmenting basic research spending (as it is does in medicine) makes sense. And, again, taking steps to deal with hunger, disease, and flooding will do much more to help poor people, whether the climate change predictions come true or not.

Conclusion

Thomas Friedman sums up the environmental position when he equates spending trillions of dollars on greening with "training for the Olympic triathlon. If you make the Olympics and you run the race and do the whole triathlon, you may win. But if you don’t, even if you come in second or third, you’ll still be so much fitter, so much stronger, so much healthier, so much more respected, so much more secure. Which part of this sentence don’t you understand? Why would we not want to run this race?"

To continue with his analogy, my response is that while in 100 years you are much more toned and fit, your wife has left you, and your kid dropped out of school to sell drugs. But hey! You are in TERRIFIC shape. No denying that. The point of the analogy is that our resources are not unlimited, and that you concentrate them on one area (climate change mitigation) to the detriment of other areas (UN's Millenium Development Goals).

Attempting to be an Olympic gold medal winner in "greening" isn't the smartest use of our limited resources. As I've argued above, we can do much more to help both ourselves and the poorest people in the world by using some of the resources (that would otherwise be sucked up by the cost of olympic training) on other things we care about.

We live in a world abundant with poverty, disease, dictatorships, terrorism, nuclear proliferation, lack of girls' education, and more than 1 billion people without cleaning drinking water or electricity.

These people would likely be better served if Daddy ditched the Olympic medal delusion, and started acting like a rational adult. That doesn't mean he shouldn't stay fit; but maybe instead of buying muscle milk he gives the kids some clean drinking water.

digest: trade, the global growth engine

2008-09-22T19:29:00.000-04:00

(Much language borrowed from the summaries and articles linked at the bottom of the post)

Free trade is blamed for a lot of things, often for exporting American jobs and forcing poor people to work in terrible circumstances. Of course, the poor locals are not enslaved, they are offered jobs, and while (sometimes) these work standards may not be up to 21st century American standards, they are still better than the poor people's other options.

With regards to American job losses, trade is often tarred with blame that would be better assigned to technological innovation. American industrial production has actually increased significantly over the years, the secret is that Americans have lost their job to machines. Like technological innovation, trade can lead to losses for particular groups of workers; however, if you oppose free trade on these grounds you should realize you are borrowing your argument from the Luddites and should call for horse-and-buggy subsidies as well (and of course, those workers' jobs wouldn't have existed in the first place were it not for trade).

More practically, if it was good for Vaclav in W. Czech to trade with Vlad in E. Czech in '88, why is it any less good for them to trade now that the country is split in two?

One of the better arguments against simply advancing free trade is that while the gains to winners from free trade are sufficiently large that a hypothetical redistribution of these gains from winners to losers could make everyone better off, economic analysis doesn’t say that these compensations actually take place.

This is true, but again, it's also true of all change, whether it's from trade, technological advances, or simply a change in people's tastes (Woe is the Pog maker! Where is his safety net?)

To oppose free trade on these grounds is again to take up arms with the Luddites. Would you have supported a "timeout" on technological innovation until we came up with a plan to help out the horse-and-buggy industry? Then why support a trade timeout??

Free trade gets a bad rap because of man's wonderful suspicion of foreigners and tendency to divide people into "in groups" and "out groups" and to elevate one and demonize the other. So free trade and immigration get tarred and feather as the enemies of America's workers, as opposed to the truly significant (entirely domestic) problems, e.g., health care, bad schools, and, in recent times, bad banking practices.

Overall, trade has yielded not only a bounty of material good, but also of intellectual and cultural capital, an understanding of our neighbours, and a desire to sell things to others rather than to annihilate them. Yet the astonishing increase in the sum of human happiness that has been wrought by lifting hundreds of millions of Asians from the misery of subsistence farming into comfortable prosperity is [often] conveniently forgotten.”

In the course of human existence, poverty has been the rule. The past few hundred years has seen an explosion of wealth previously unimaginable. Those that have been left behind are notably those excluded from the global exchange. Trade doesn't impoverish people; people are naturally impoverished, and in global exchange there lies the opportunity (not a guarantee) to attain wealth and security.

I'll quickly add that none of this it to argue against a societal safety net, which I believe can be justified (in some forms) as creating a more resilient workforce and therefore economy. It is to say that free trade should not be held up as we figure out what the safety net should look like (alas, it likely will.)

American poor see major gains after '80

2008-09-16T19:07:00.005-04:00

Of course, the day after I write up the post on 'American poor,' the WSJ features a piece that reexamines income growth for the poorest Americans. What follows are my takeaways from the piece, which can also be found at www.delicious.com/prottas. My one sentence conclusion is that the poor have shared in the gains of the past 25 years - especially historically oppressed groups (e.g., black females) - and that chronic American poverty is a much smaller problem demanding a more surgical solution.

When all sources of income are included and taxes paid are deducted, households in the lowest income quintile saw a roughly 25% increase in their living standards from 1983 to 2005: the poor are not getting poorer. Looking at the last two business cycles, this low-income group experienced a 10% rise in their after-tax incomes from 1983 to 1992 and then another 11% rise from 1992 to 2002. Household income gains have been underestimated for a few reasons: number of people living in the households has been shrinking (44% real income gain per capita for low-income households from '83-'05), and EITC requirements have led to counting more poor families today than in the past. 66% of '87 most poor have attained a higher tax bracket. Top 1% in '98 saw a decline in their income of 52% over the next ten years. Only 3% of Americans are chronically poor (impoverished for three years or more). Since '80, white males have seen the smallest income gains (+9%), black females the largest (+79%).

publius' digest: american poor edition

2008-09-15T21:32:00.005-04:00

This post will look at understanding the American poor, and critique some of the efforts to help them. This post will not cover education (my top priority for the American poor), health care, or trade, which I cover under those 'tags' specific to those categories.

I agree with the Dems that alleviating poverty is a moral call which also has positive externalities for all. I depart from the Democratic party line when they talk about relative poverty or inequality. I believe that relative poverty 'justice' is not rooted in an objective assessment of the negative consequences of income disparity (though I would love to see such a study of income disparity, not poverty, effects), but an emotional, superficial gut reaction to seeing the wealth of others when many are in need. I am concerned with advancing the condition of those in need, but I believe relative poverty taints the moral imperative of poverty alleviation with jealousy and envy -- relative status warfare.

While I am not very concerned with the cries of relative poverty, I am concerned with the decline of wage growth for many Americans. Growing income inequality is caused by the returns to highly-skilled labor outpacing the returns to low-skilled labor, of which there is an abundance outside of America with workers who have much worse options than the American poor. Americans whose labor does not add value over the global poor's labor are seeing their income and job security decrease. I explore this with the 'education' tag.

People like Barbara Ehreneich do a disservice to the debate on how best to help the American poor with their narrative of class warfare. She is wrong in saying that total compensation has stagnated since 1981, and (more importantly) wrong in linking compensation to class warfare, instead of productivity. She is wrong in implying that the presence of high CEO pay is what is holding back the American poor's compensation (instead of the value of their skills).

While wage growth has been leveling off, the past 15-20 years made it much cheaper to clothe and feed poor families due to the benefit of global trade (inflation on 'poor' goods is less than that of 'rich' goods); so income inequality statistics also undervalue the improved well-being of the American poor by ignoring how much further a dollar goes for a poor American in 2008 as compared to 1985.

As I near the end, I'll look at housing policy and the minimum wage as examples of policies I think are not helpful, and representative of many efforts from the left aimed at helping the American poor.

Housing policy had noble aims, securing the poor by making it easier for them to own homes, but the policies created a huge industry built on taxpayer guarantees of inherently risky lending -- a very bad idea. Better plan would be checks/vouchers for putting towards a down payment, if home ownership is really something we want to incentivize in the first place. Rent control is another well-intentioned bad idea; the real solution to low-income housing is making it easier and cheaper to build new housing. Increase the supply, you'll lower the cost of renting and buying.

Meanwhile, the minimum wage increases the cost of employing low-skilled workers. If a poor person's labor is worth less than $6.55 an hour, you don't help that person by making it illegal for anyone to profit from hiring them. Thankfully, the wage floors are low enough that they don't make a difference one way or another -- they are political distractions from real anti-poverty programs like the EITC.

In both cases, I think that assistance that takes the form cash transfers either through tax refunds or through vouchers are preferable. If we want to guarantee a 'living wage,' then let's use the tax system to subsidize their income, not create incentives to buy houses they can't afford or create a wage floor.

Overall, Americans making $2,000 a year are still in the top 18% in the world, and the great majority of the American poor are doing just fine by world standards. Immigration is by far the number one 'American poor' issue. I'll explore it later, but it trumps every other issue as both a moral imperative and in the interest of the American economy. More generally, global welfare rates higher as a moral cause worthy of investment than the American poor. That said, we should should spend more time thinking creatively about education, as well as slums, or poverty traps, (different than simply low-income areas), which cannot be corrected by providing more money, but still demand attention.

overview of foreign policy

2008-09-09T19:45:00.003-04:00

Our chief foreign threats do not rest in the developed world, but in failed states, which are present with great suffering and pregnant with the potential for great destruction to us. Both morality and self-interest dictate that we intervene if we can have a positive impact, and despite our past mistakes, I believe we can develop a strategy, which is economic, diplomatic, and militaristic, to "prepare our partners to defend and govern themselves." We need a 21st century coherent doctrine that includes both soft and hard power.

We have missed many opportunities to advance our interests in areas from Central Asia to Somalia, and there many more human rights atrocities taking place every year that could be resolved or prevented by a legitimate, credible commitment to peacekeeping and conflict prevention.

Clearly, we cannot count on China to sacrifice their immediate interests for these moral aims, and I would add that Europe's moral posturing is just that, and nothing more (by extension, I include the UN). While international support is desired, we should seek it as a political tool, not as moral approval. Likewise, state sovereignty is a very real political concern, but not a moral reason to avoid intervention.

Global stability is a public good that only we have the incentive to provide at any cost greater than lip service. In many instances, if we do nothing, no one will.

To this end, our military must continue to shift from its historical large-scale conventional warfare focus to a 'small-war' mentality. We should maintain an active, albeit selective, participation in aiding in governing failed states. Concretely, I think this will take the form of security guarantees and quick-response peacekeeping initiatives.

This is not an inclusive post, but I will summarize: we must learn from our recent mistakes, and engage much more thoughtfully; that said, we should not lose or nerve; we should not hand out moral compass to the UN, and we should not shy from engaging the world economically, diplomatically, or militarily. Isolationism, in any of these instances, is immoral and unwise.

Scroll over the link titles to read the summary.

overview of health care

2008-09-07T19:50:00.007-04:00

It's been awhile, but I've been trying to figure out how to leverage the delicious tagged articles and reduce redundant writing (and reading). So below is a summary I've written up on the health care perspective I've amassed, along with supporting articles and their summaries below.

US health care is bad, but less so in providing access to expensive treatments (we do have the best cancer survival rates) than in paying for everything under the sun. Universal health care is not the primary health care issue facing the US; the primary problem is cost containment. If you want universal health care, you better first deal with that - Medicare spending is projected to some insane percentage of GDP (like 30-40%) of GDP, yes GDP, in not too long - as neither Medicare (nor private payers) have figured out how to deny coverage or payment to over-priced products or services. The reason Western Europe is more cost-effective than the US is that they DON'T COVER a lot of expensive drugs and therapies (explaining why our cancer survival rates are better). They let the government apply a cost-benefit analysis to every product/service -- if a private payer or Medicare does that, they end up in SiCKO.

We shouldn't try to emulate Western Europe, but take lessons from less-visible systems like Singapore. We need to separate redistribution for care for the sick from actual health insurance. We also need to change the way we think about care and coordination, which means changing Medicare's payment systems for physician services and health care products. The emphasis should not be on reducing profits, but ensuring payment is linked to value-added, not service provided.

Below the fold is more information.

Scroll over the link titles to read the summary.

step back to step forward

2008-08-26T18:09:00.002-04:00

I've enjoyed blogging on current events and policy issues as new happenings and writings trigger responses that end up being blog posts, but I've found it a bit frustrating. The idea of spinning my wheels, repeating myself on the same issues bores even me. I would like to make a point, record that point and the supporting evidence, and move on -- drawing on that point when useful in further discussions.

That's a bit problematic. The blog medium has become (needlessly) something of a disposable art. Written, sometimes read, and forgotten; it's no surprise that bloggers repeat their main points in slightly altered forms, like a late night TV host who provides the same slightly off-kilter angle on daily events.

I've neither the time nor the interest in disposable reporting. I would like to isolate some of the larger issues of the day and explore the validity of potential solutions. This means updating the blog with any new arguments or developments in the issue area, expressing my perspective, and isolating and exploring disagreement.

To this end, I've signed up for delicious.com, a social bookmarking website that allows you to "tag" webpages with titles, descriptions, and labels (e.g., immigration). I am in the midst of converting my posts and the articles I've shared through Google Reader into labeled delicious entries. It's quite a process, but I think worth it. It will allow me to systematically accumulate knowledge and understanding of particular issues, and hopefully allow this site to serve as a medium for acknowledging the valid points on both sides of the argument, and debating the points of contention.

Furthermore, I hope some will find it useful for finding interesting points of view on the topics found on this blog -- from cognition to immigration to trade to health care.

'nudge' tops short action-verb econ books

2008-08-18T22:01:00.002-04:00

I second-guessed my purchase of Richard Thaler and Cass Sunstein's Nudge: Improving Decisions About Health, Wealth, and Happiness, almost the minute I received my Amazon e-mail receipt -- I had already read Malcom Gladwell's Blink, and heard about the literary disaster that is Sway, and yet there I was, reading Nudge's introduction about the arrangement of cafeteria food.

I'm glad I did. While Thaler and Sunstein are happy to revel in the small ways that their insights into "choice architecture" can lead to better or worse choices, they also lay out their political principles and detail their impact on current policy debates (e.g., Social Security, Medicare Part D, Education.) To top it all off, they begin the book with a treatment of our cognitive failings, distinguishing between our automatic and reflective processing systems (what's not to love!), leading right into their arguments for how to help the automatic majority overcome their cognitive frailty without infringing the reflective minority's ability to choose.

So what is choice architecture? Well, are you choosing out of ten choices, or 100? Are you automatically enrolled in one choice or another if you don't make an active decision? How is that default set? How is information presented to you to about the available choices? All of these questions speak to choice architecture -- in other words, the arrangement and organization of choices -- which has a nasty habit of leading individuals to choices that they themselves would not find optimal (see don't be bob bias, the mind and morality).

Furthermore, "choice architecture, both good and bad, is pervasive and unavoidable." This point is essential to Thaler and Sunstein's argument if you are a libertarian. Ignoring choice architecture won't make it go away, it will only make it more likely that the choices favored by choice architecture are more likely to be poor. For instance, you can make the default option for new employees enrolled at 5% in a 401(k) with an option to opt-out, or you can make the default option to not be enrolled (as is often the case). If you stick with the current default, many who would otherwise enjoy being enrolled will not do so because of the choice architecture. Thaler and Sunstein recommend acknowledging the importance of choice architecture and deliberately deciding on its design.

Thaler and Sunstein aren't interested in helping individuals pick out their dry cleaners; as the authors note, if a dry cleaner performs poorly, it is fairly easy for individuals to make a better decision the next team.

Rather, "people are most likely to need nudges for decision that are difficult, complex, and infrequent, and when they have poor feedback and few opportunities for learning."

Individuals are primed to make poor choices for Medicare Part D, Mortgages, and retirement investments. Thaler and Sunstein don't advocate for eliminating choices because of these problems. On the contrary, their final chapter points to the infamous "third way" -- separate from both the command-and-control left and the single-minded 'choice' monkeys of the libertarian right.

There needn't be a war between 'no choice' and 'unlimited choice.' Thaler and Sunstein spend around 250 pages explaining that this is indeed a false choice. Like myself, they side with the libertarians when it comes to the importance of choice, and side with the left when it comes to the failure of 'choice' to solve all problems. Choice is important. Coercion isn't necessary. Focus on the choice architecture.

Oh, and I have to add. As someone who has long supported responding to the gay marriage debate by taking government out of the marriage business (perhaps keeping a civil union or partnership business) and leaving it to independent churches, I was very happy to see Thaler and Sunstein put forth such an argument in Nudge.

Whether you are on the left or right, worth a read!

priorities for helping humanity

2008-08-16T11:19:00.006-04:00

Bjorn Lormborg isn't against reducing man's carbon footprint, but -- like me -- he just thinks that the proposals bandied about cost too much given other available choices for helping the world's worst off. The Copenhagen Consensus ranked a list of solutions to the world's problems based on their cost and estimated benefits. The Copenhagen Consensus was originally sponsored by the Danish government and The Economist to assess proposals to advance global welfare under the stewardship of Lormborg, a Danish economist. There have been two rounds of discussion by the group -- which invites the world's top economists to participate (five Nobel laureates this year) -- the most recent in the spring of 2008.

Lormborg recently penned an opinion piece for the WSJ answering the Copenhagen Consensus' question, "How to get the biggest bang for 10 billion bucks." You can also watch his past Ted talk below for an introduction to his work, and read more (link also appears below the video) for a few select factoids from his work. Lormborg is something of a controversial figure, because of his skepticism regarding the global warming movement, but if you watch the Ted talk and read what he has to say, I think you'll agree that he is very intelligent and very reasonable.

Of Lormborg's top five priorities to improve global welfare, three address malnutrition, one disease, and one trade. At the bottom of Lormborg's list (of 30 priorities), two fall under global warming, two under pollution, and one under disease.

What's number one?

"Providing micronutrients -- particularly vitamin A and zinc -- to 80% of the 140 million or so undernourished children in the world would require a commitment of just $60 million annually, a small fraction of the billions spent each year battling terrorism or combating climate change. The economic gains from improved productivity and a lower burden on the health system would eventually clear $1 billion a year. Every dollar spent, therefore, would generate economic benefits worth $17."

I'll leave you with Lormborg's take on the current environmental proposals, which I largely agree with:

"If mitigation -- economic measures like taxes or trading systems -- succeeded in capping industrialized emissions at 2010 levels, then the world would pump out 55 billion tons of carbon emissions in 2100, instead of 67 billion tons.

This is a difference of 18%; but the benefits would remain smaller than 0.5% of the world's GDP for more than 200 years. These benefits simply are not large enough to make the investment worthwhile.

Spending $800 billion (in total present-day terms) over 100 years solely on mitigating emissions would reduce temperature increases by just 0.4 degrees Fahrenheit by the end of this century.

When you add up the benefits of that spending -- from the slightly lower temperatures -- the returns are only $685 billion. For each extra dollar spent, we would get 90 cents of benefits -- and this is even when things like environmental damage are taken into account.

A continued narrow focus on mitigation alone will clearly not solve the climate problem. One problem right now: Although politicians base their decisions on the assumption that low-carbon energy technology is being rapidly developed, that is not the case. These technologies just do not exist. Wind and solar power are available -- at a high expense -- but suffer from intermittency. Researchers need to develop better ways to store electricity when those renewable sources are offline.

If we took that $800 billion and spent it on research and development into clean energy, the results would be remarkably better. In comparison with the 90-cent return from investing solely in mitigation, each dollar spent on research and development would generate $11 of benefits."

As Lormborg emphasizes in the Ted talk above, it's time to stop conflating goals and proposed solutions. You can believe that it's important to save the environment and still think the Kyoto Protocol is a waste of resources. Pumping funds into R&D will be a lot less visible and might give us a less fuzzy feeling than taking Hummers off the road, but that doesn't make it the wrong choice.

Returning to Lormborg's number one priority, if anyone has information on well-run programs to distribute micronutrients (e.g., vitamin A) I would love to check it out.

meditation, prozac, and cognitive therapy

2008-08-11T21:01:00.008-04:00

The final chapter of the Happiness Hypothesis series (1) book to own: happiness hypothesis, 2) the evolution of the elephant and the rider, 3) the mind and morality, 4) man's misuse of morality) looks at what works and what doesn't when it comes to improving our flawed cognitive processes. The elephant and rider aren't perfect, but by understanding their nature, we can improve their functioning.

To begin, let's remember that the elephant (often equated with our intuition or instinct) "was shaped by natural selection to win at the game of life and part of its strategy is to impress others, gain their admiration, and rise in relative rank. The elephant cares about prestige, not happiness." I want to stay on topic, but I'll note that Haidt distinguishes between the interest in relative social status and happiness, which have been conflated in modern discussion about inequality.

Back to the main show, what do with our intelligent, but slow-acting rider and stubborn, hyper-emotional elephant?

The answer isn't whipping the stubborn elephant into submission, but rather to "drop the brute force method and take a more psychologically sophisticated approach to self-improvement. ... Human rationality depends critically on sophisticated emotionality. It is only because our emotional brains works so well that our reasoning can work at all. ... Reason and emotion must both work together to create intelligent behavior."

Leave it to Ben Franklin to put the point most succinctly, "If Passion drives, let Reason hold the Reins."

Reason, in this case, "knows how to distract and coax the elephant without having to engage in a direct contest of wills."

Enough of the vagueries, Haidt points to three methods for improving our cognition: meditation, cognitive therapy, and Prozac. I'm only going to spend a moment on meditation (its utility is well-documented), a few more on Prozac (for the eyebrows raised by its inclusion), and concentrate on cognitive threapy.

The "goal of meditation is to change automatic thought processes ... proof of taming is the breaking of attachments." These types of attachments "are like a game of roulette ... the more you play, the more you lose. The only way to win is to step away from the table ... Although you give up the pleasures of winning, you also give up the larger pains of losing."

Prozac is controversial because it appears to be a shortcut -- "cosmetic psychopharmacology" -- that shapes minds like a cosmetic surgeon augments breasts. Haidt notes that our culture endorses two partly opposing perspectives -- "relentless self-improvement as well as authenticity - but we often escape the contradiction by framing self-improvement as authenticity. ... As long as change is gradual and a result of the child's hard work, the child is given the moral credit for the change, and that change is in the service of authenticity. But what if there were a pill that enhanced tennis skills? ... Such a separation of self-improvement from authenticity would make many people recoil in horror."

Haidt explores the stigma on cosmetic surgery as well, but I'll focus on his criticism of those who criticize Proaz as a chemical shortcut -- "It's easy for those who did well in the cortical lottery to preach about the importance of hard work and the unnaturalness of chemical shortcuts."

Haidt supplies research that argues that each person is born with an inherited chemical balance, which goes largely unchanged throughout life, which will dictate the range of emotion of happiness and sadness the person is susceptible to -- " many people really do need a mechanical adjustment. It's as though they had been driving for years with the emergency break halfway engaged."

Prozac shouldn't be seen as cosmetic for the "worried well", but "like giving contact lenses to a person with poor but functional eyesight who has learned ways of coping with her limitations." Contact lenses and Prozac both are a "reasonable shortcut to proper functioning."

Fascinating.

Finally, cognitive therapy was born as a means for therapists to engage depressed people, who weren't being reached by the Freudian exploration of painful memories and forced sexual innuendo. Cognitive therapy allowed patients to get beyond the bad memories and critical thoughts by questioning "the legitimacy of his patients' irrational and self-critical thoughts." The key was to "[map] out the distorted thought processes characteristic of depressed people and [train] his patients to catch and challenge these thoughts."

Just as depressed patients are convinced of their self-critical beliefs, we also deploy distorted thought processes "not to find the truth but to invent arguments to support our deep and intuitive beliefs (residing in the elephant)." For depressed people, the three types of irrational distortions are "personalization" (seeing events as reflection of self), "overgeneralization" (take an event and believing it ALWAYS happens), and "magnification" (arbitrary inference, or jumping to a conclusion without evidence).

These should sound familiar, as they are cousins of the cognitive biases and distortions that are well documented in non-depressed people. I think this is meaningful. Accurate and realistic judgment is good for your mental health.

Cognitive therapy is about "challenging automatic thoughts and engaging in simple tasks" to create positive habits that will further shape your automatic thought processes -- "it teaches the rider how to train the elephant rather than how to defeat it directly in an argument." You get better at thinking the same way you do at anything -- practice -- "write down your thoughts, learn to recognize the distortions in your thoughts, and then think of a more appropriate thought."

Specifically, Haidt refers to psychological studies that found that writing about the impact of biases doesn't change behavior, though it does allow one to predict the behavior of others better, and neither does writing an essay arguing the opposing view. The only thing that worked was asking subjects to read an essay on biases and then write an essay about the weaknesses of their own case; this made study participants far more fair-minded. That said, the study didn't ask them to question the deeply-held beliefs one associates with personal character, only recently assumed positions. Still, it's a start.

In sum, man comes "equipped with cognitive processes that predispose us to hypocrisy, self-righteousness, and moralistic conflict. ... By knowing the mind's structure and strategies, we can step out of the ancient game of social manipulation and enter into a game of our choosing. ... By seeing the log in your own eye you can become less biased, less moralistic, and therefore less inclined toward argument and conflict."

Redux

why are the other guys wrong?

2008-08-10T16:26:00.006-04:00

It's been a while since I've posted, as I've waited to see if I'd be hit with a stroke of inspiration (...no, not yet.) So I thought I would see if any of my few (but dedicated) readers could get the game going.

One of the reasons I am sympathetic to both conservative and liberal perspectives is that I agree with both sides' criticisms of the other -- both sides fail to recognize distortions in their perspectives, which, in turn, undermine the intellectual integrity of their arguments.

My theory is that each of us internalizes one or more insights about different policy issues. For instance, if someone talks to me about the problems with public schools, I will be drawn to the inefficiencies that public schools has in common with other government programs. On the other hand, a more liberal friend will point to the fact that the public schools don't get enough funding.

I think it's important both for self-awareness and public discourse to explore these prepackaged insights, as they can get you in trouble. For instance, those who yelled for "liberalization!" in poor countries over the last 40 years when privatization was only going to lead to exchanging public corruption for private; also, for those on the other side of the aisle who have routinely demanded more and more funding for government programs (e.g., those public schools) that also do not lead to positive results. In both cases, even when the results aren't positive, both sides simply say, 'Well, the problem is you need more liberalization/funding.'

So, fair readers, why do you think the other side is routinely wrong? What don't they get? I'll be supplying my own thoughts later on, but I'd like to respond to what YOU think as well.

publius recommendations on the 'net

2008-08-05T18:33:00.006-04:00

Yelp.com
Terrific resource for finding great restaurants, bars, etc. in your neighborhood or any place you might be visiting.

RememberTheMilk.com
Post-it notes are useful to keep track of "to-do's" -- RememberTheMilk is even more useful in managing your tasks, both personal and professional. You can integrate your list into your iGoogle homepage, Gmail, download an application on to your computer, or just use their homepage. I use it for work and personal tasks.

Google Reader
It's hard to overstate the degree to which Google Reader has changed the way I used the internet. Before I would add some of my favorite websites' RSS feeds (lists that automatically update with the newest articles or posts on the website) to my iGoogle homepage, or add them to my bookmarks, and spend all my time hopping from one blog to another website, etc.

Now I just open up the Google Reader page, which automatically updates with the new posts on everything from the Economist to Soccer by Ives. And, of course, you can more easily track Publius' Shared Items.

Google text message search
Text GOOGLE or 466453 from your cell phone for quick and easy searches. Check out the link above for how to get the information you need on the run with only a quick text message -- no need for a high-price data plan

Gmail phone app
Yet another shortcut provided by Google -- once you download this application to your cellphone, you can check your email from your phone without data charges.

Buxfer.com
This is a new addition to my harem of internet stops. Buxfer is a powerful financial management tool that allows you to centralize the records of your credit cards, checking, savings, etc. accounts. Not only can you see your balances, but it automatically tags your purchases (if you'd like) with labels like "food and drinks" for restaurants, etc. What's more, you can create your own labels and automatic labels so that everytime "JJ Foley's Bar and Grill" pops up on your credit card charges, it gets labeled "alcohol" (...or food?) An excellent way to take control of your financial future.

Am I missing anything?

what to worry about...

2008-08-04T21:48:00.007-04:00

I may be wrong, but I'd say most of my posts are about positive developments (e.g., my latest post). Generally, I look around and see a lot of fear-mongering that I find dangerous.

This post is different. I was struck by a scenario presented by Tyler Cowen that strikes to the heart of a nuclear threat that current debates about rogue states and terrorist non-state actors only begin to touch on.

"...let's say that you can blow up the world if a) you can exceed 1550 on your two main SATs, b) you are willing to spend $50,000, and c) you sincerely wish for world destruction for one month straight.

How long would the world last?"

While I think we are lucky to have the problems we have now as compared to every other point in history, I don't think Tyler is wrong to say: "We may someday envy the problems we have now."

Past 100 years of human development

2008-07-31T18:45:00.006-04:00

Hans Rosling is the creator of gapfinder.com, a tremendous resource for global statistics, ranging from public health to economic development. I highly recommend checking out the website, but first, watch his Ted Talk below, where he uses the gapfinder visual statistics to explore the past 100 years of development -- keep watching until he makes an excellent point about the distinction between excellent goals and excellent means to those goals (human rights= great goal, bad means; economic development=great means, bad goal). Frames the issue very well. I also like his comments on how every actor in the global development debate thinks *THEIR* area is both the most excellent goal and the most excellent means (e.g., NGO thinks gender rights is tops, health analysts thinks health is tops, etc. etc.)

mass transit in chile: public failure

2008-07-27T20:40:00.004-04:00

Podcasts are fairly new to me and currently there are only two that I've found worth tracking -- TedTalks and Econtalk. Russ Roberts, host of Econtalk, recently spoke with Duke U's Michael Munger on public transportation in a particularly interesting podcast on...

"Munger's recent trip to Chile and the changes Chile has made to Santiago's bus system. What was once a private decentralized system with differing levels of quality and price has been transformed into a system of uniform quality designed from the top down. How has the new system fared? Not particularly well according to Munger. Commuting times are up and the President of Chile has apologized to the Chilean people for the failures of the new system. Munger talks about why such changes take place and why they persist even when they seem inferior to the original system that was replaced."

The reforms weren't hijacked by special interests; they had the best intentions. Like most failed public programs, there was a worthy aim. The private system had imperfections; the buses were heavy polluters, people with more money were able to get better service, etc.

Before the reforms, public transportation mainly consisted of independent, private buses of all shapes, sizes, and comfort. To the reformers, it was chaos. To Jane Jacobs and Friedrich Hayek, the spontaneous order would be less disconcerting, and more inspiring. There were no public subsidies, and public transportation was profitable -- the industry brought in more than $60 million a year.

The reformers didn't like the inequity or the pollution, however, and decided to remove public transportation from the private market. The reformers saw the future in the metro. The dirty, greedy buses ran all over the city, making the reformers' prized metro system irrelevant. The locals prefered the buses -- they were flexible, cheap, and went to all sorts of destinations. So the reformers made it illegal to own a private bus company, and then deliberately set the bus routes so that locals wouldn't be able to choose buses over the metro; bus routes were offered that complimented the metro, but not replaced it -- increasing travel time, public annoyance, and decreasing profits and ridership.

Commute times that were 30 minutes in the private system turned in to 1-2 hour trips that demanded switching buses/metros multiple times, to the point that people had to quit their jobs. The President herself has said,"We owe the people of Santiago an apology, particularly the poor people."

Munger notes that the only success of the reforms was reducing inequality -- everyone now rides (or doesn't ride) the same terrible public transportation.

The situation has gotten so bad that public transportation is now costing the citizens of Santiago $100 per person for the privilege of public transport that they are actually using less than before the reforms. To add some greater color to the financial change, the reformers took a system that brought in $60 million in profit and created a public system that operates at a $600 million loss.

(Makes me think about Medicare)

Again, I would recommend listening to the podcast yourself -- the devil is in the details. If you don't, however, I think its worth looking at a case study in "public-ization." Now that we've seen the light with Fung Wah, Lucky Star, Megabus, etc., perhaps Americans will be more open to private mass transit. More generally, the podcast spend a lot of time addressing why Chile has yet to revert to the previous system, when everyone -- including the President -- deems it a destructive failure. This is crucially important, and while I can't provide a catchy one-liner to explain the phenomena, I will say that one of the fatal flaws of government programs is that they are almost impossible to kill.

The answer is never, 'We screwed up, let's put it back the way it was, and let someone else try.' The answer is always, 'We are on the right path, we just need to plan a little better; there's nothing wrong with our management, just some of the decisions that were made, but we'll do better this time.'

Meanwhile, schools keep failing. Health care grows increasingly expensive, leading to benefit reductions. Social security grows insolvent. And yes, our public transportation system is a mess. Like Chile, the planners like the idea of the rail-transit services that offer inflexible routes at equitable prices.

So what happens? People drive their own cars. Instead of having a private market with more buses and such, we have one or two local bus services and millions of private automobiles. In the end, we are left with a worse mass transit system and LESS equitable transit in general.

"Mistake that the government of Chile made was they thought the problem is: in a market people are greedy, so let's take them out of the market." You can't simply conflate the market and greed. People are greedy, in the market or out. The trick is aligning the incentives with the public interest. You do that through smart market design, not through allowing the rule-making body (the government) to have a monopoly on the game it sets the rules for. Regulations have a place, but the emphasis should be on shaping the private market, not giving a monopoly to central planners.

drew carey on mexicans, machines, trade

2008-07-18T14:59:00.006-04:00

I can post a hundred articles on why its wrong to slam trade for job losses or general economic woes, but a well-made, entertaining 7-minute clip is probably more likely to open some eyes. I never knew Drew Carey was capable of this, but he clearly has found a role that utilizes his talents well. Share this with your buddies.

man's misuse of morality

2008-07-16T17:47:00.007-04:00

We’ve established that there are two interdependent cognitive processes, automatic (elephant) and controlled (rider), that are active when we make a decision. For some decisions, such as jumping out of the way of a speeding card, the elephant takes the lead. For other decisions, such as voting for President, we’d like to believe that the rider takes the reins, but, in reality, the elephant plays a large, often dominant, role. Surely, this isn’t a pretty thought to tend on, but it’s going to get even uglier before we break out the scalpel and explore how to fix this mess.

(If you want to take a step back, check out 1) book to own: happiness hypothesis, 2) the evolution of the elephant and the rider, 3) the mind and morality.)

Jonathan Haidt quotes from Robert Wright’s The Moral Animal (…on my to-read list), "Human beings are a species splendid in their array of moral equipment, tragic in their propensity to misuse it, and pathetic in their constitutional ignorance of the misuse."

Most are likely willing to accept that, at times, we’ll employ tenuous reasoning to justify not doing what we would consider the 'right thing' (at a time when it would not be inconvenient to do so…). Haidt argues that these cases are exceptional ONLY in that they mark the few times we are actually aware of how immoral our moral decisions are.

He cites one study where Person A was told that two tasks, one pleasant and one not pleasant, were to be assigned to Person A and Person B. Furthermore, Person A was allowed to delegate the tasks. Person A was left alone in a room with a coin.

The experimenters found that “people who think they are particularly moral are in fact more likely to "do the right thing" and flip the coin.” No surprise there, "but when the coin flip comes out against them, they find a way to ignore it and follow their own self-interest."

But how does this happen? Why doesn’t the rider step in and take control of the cognitive process?

For one, the rider isn’t giving orders, he’s taking the role of lawyer:

"Although many lawyers won't tell a direct lie, most will do what they can to hide inconvenient facts while weaving a plausible alternative story for the judge and jury ... For example, whether the minimum wage should be raised - they generally lean one way or the other right away, and then put a call in to reasoning to see whether support for that position is forthcoming." If the person asked about the minimum wage has an aunt who works on minimum wage and can't support her family, the person will support it.

Haidt cites Deanna Kuhn as one researcher that has found that decisions are mostly made based on such pseudoevidence, precluding the search for any contradictory evidence that might be more robust.

Haidt continues: "Studies show that people set out on a cognitive mission to bring back reasons to support their preferred belief or action. And because we are usually successful in this mission, we end up with the illusion of objectivity. We really believe that our position is rationally and objectively justified."

Even the people who WANT to be fair, and make a dedicated effort TO BE fair, still end up being unfair.

At this point, I expect that most readers agree that this flawed decision-making exists, but if questioned directly, would still refuse to believe that their partisan alliances, policy preferences, and everyday moral judgments are so baseless and hypocritical.

Haidt channels this position: “Everyone is influenced by ideology and self-interest. Except for me. I see things as they are."

As I read this book I tried to constantly bear in mind man’s poor ability to assess his limitations. Here are three quotes that helped me to focus on getting passed my own biases, rather than simply dismiss others as biased:

"We think we have special information about ourselves - we know what we are "really like" inside, so we can easily find ways to explain away our selfish acts and cling to the illusion that we are better than others."
"Subjects used base rate information [average/mean] properly to revise their predictions of others, but they refused to apply it to their rosy self-assessments."
"When comparing ourselves to others, the general process is this: Frame the question (unconsciously, automatically) so that the trait in question is related to a self-perceived strength, then go out and look for evidence that you have the strength." At that point, you can stop thinking.

Haidt terms mankind’s distorted worldview “naïve realism,” and proceeds to assail it as “the biggest obstacle to world peace and social harmony.” Why? Because naïve realists form naïve realist groups. No one cares if Joe always think he’s getting the short-end of the stick because of the people he doesn’t like at work, but it becomes all our problem when there’s a group of 1,000 Joe’s with the same distorted perception.

Naïve realism creates a narrative of pure virture (our side) versus pure vice (those who disagree with us). We’re fair and they are not. We’re just trying to do the right thing, they are selfish and immoral.

Haidt argues that the root causes of evil within naïve realism are high self-esteem and moral idealism. But why?

“Threatened self-esteem accounts for a large portion of violence at the individual level, but to really get a mass atrocity going you need idealism - the belief that your violence is a means to a moral end. ... [For instance,] when people have strong moral feelings about a controversial issue - when they have a "moral mandate" - they care much less about procedural fairness in court cases."

As we wrap this installment, let me return to Robert Wright’s excellent quote:

"Human beings are a species splendid in their array of moral equipment, tragic in their propensity to misuse it, and pathetic in their constitutional ignorance of the misuse."

First it was necessary to convince ourselves that we indeed do misuse our moral equipment, and that we have only begun to understand the depths of this misuse. The next post will look at how we improve our use of our wide array of moral equipment.

Links:

the mind and morality

2008-07-14T17:45:00.006-04:00

For those that missed the preceding posts on this topic (book to own: happiness hypothesis, the evolution of the elephant and the rider) or haven’t yet committed their content to memory, allow me to reintroduce some of the key terms and concepts. Our brain understands the world by processing the information received by our senses. These processes can be grouped by whether they are automatic/subconscious or controlled/deliberate. This post will focus on my primary interest: how cognitive processes affect moral judgments.

The automatic system has a long history and has evolved to serve elemental needs linked to survival (e.g., fight/flight, don’t eat the green berries, etc.). The controlled system is a relatively new adaptation, which separates us from (most, if not all) animals, and has evolved to allow humans to make better long-term decisions and expanding their ability to cooperate in large-scale communities. Jonathan Haidt equates the dynamic between the controlled and automatic systems as akin to a rider atop an elephant:

"The automatic system [the elephant] was shaped by natural selection to trigger quick and reliable action, and it includes part of the brain that make us feel pleasure and pain (such as the orbitofrontal cortex) and trigger survival-related motivations (such as the hypothalamus) ... The controlled system, in contrast, is better seen as an advisor. It's a rider placed on the elephant's back to help the elephant make better choices. The rider can see farther into the future, and the rider can learn valuable information by talking to other riders or by reading maps, but the rider cannot order the elephant around against its will."

It would be pleasant to believe that the human brain is a modicum of efficiency – seamlessly switching to and from the elephant (automatic system) and the rider (controlled) based on what is most appropriate. A car runs a red light and starts careening toward you as you walk down the sidewalk? The elephant throws you to the ground before the rider even puts together what’s happened. Deciding your position on a political or social issue? The elephant steps aside to let the rider judge the merits on each side.

This last step, the peaceful transfer of power from the elephant to the rider, is the destructive delusion that will be the subject of this post. The elephant will not go quietly into the night. Or rather – to be less poetic and more precise – the elephant is unable to see when his services are productive (decision to respond to runaway car) and unproductive (decision on complex policy issue). The elephant takes the lead no matter what the issue. So what does the rider do?

When confronted with a moral issue or really any issue that elicits a strong feeling, the rider is relegated to the role of the lawyer for the elephant: "It is the elephant holding the reins, guiding the rider. It is the elephant who decides what is good or bad, beautiful or ugly. Gut feelings, intuitions, and snap judgments happen constantly, and automatically."

Haidt compares moral judgment to aesthetic judgment: “When you see a painting, you usually know instantly and automatically whether you like it. If someone asks you to explain your judgment, you confabulate. You don't really know why you think something is beautiful."

I think some would disagree that they don’t know why something is beautiful, but I don’t think they would deny the chronology of events:

1. See a Painting
2. Instantly like/dislike the painting
3. Begin to think about why you like/dislike the painting
4. Decide on a reason why you like/dislike the painting

This understanding of moral and aesthetic decision-making is humbling. No one wants to think they are simply confabulating post-hoc explanations for a gut reaction to complex issues like trade agreements or environmental issues. No one really wants to believe that their rider is reduced to "[stringing] sentences together and [creating] arguments to give to other people … fighting in the court of public opinion to persuade others of the elephant's point of view."

Haidt brings up a situation we’re all accustomed to: “When you refute a person's argument, does she generally change her mind and agree with you? Of course not, because the argument you defeated was not the cause of her position; it was made up after the judgment was already made."

It’s quite common to hear people decry “strawmen” arguments. Haidt argues that all of our arguments are (to some degree) strawmen. They are all post-hoc justifications. When "two people feel strongly about an issue, their feelings come first, and their reasons are invented on the fly, to throw at each other.”

To set aside the elephant/rider metaphor, different parts of the brain correspond to different mental activities – the frontal insula is active during “unpleasant emotional states, particularly anger and disgust,” while the “dorsolateral prefrontal cortext, just behind the sides of the forehead, [is] known to be active during reasoning and calculation.” Haidt’s argument merries with my perception that judgments are made in the parts of brain associated with emotion and the subconscious, while the arguments defending the judgments are constructed after the fact in the parts of the brain associated with reasoning and calculation.

The more emotionally detached you are, the more likely the rider can take the reins from the elephant and steer it on a rational, calculated path.

Oomph. I don’t want to dilute this crucial point about how our brains take moral positions and make moral arguments with any additional content. In the next post, I’ll look at how the elephant further muddles our moral judgments by filtering the information that gets to the rider. For now, are there doubts about this theory of making and supporting judgments? If so, I could dig back and supply some of the studies that have looked at brain activity and behavior, which support this understanding, but I don’t want to lose the theory amidst the details if it’s not necessary.

The final post in the series has arrived: man's misuse of morality.

Links:

the evolution of the elephant and rider

2008-07-12T17:20:00.007-04:00

This post is the second in a series responding to Jonathan Haidt's excellent book, "Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom." You can my initial brief review of the book here. This post will set the stage for a more substantive discussion about how and why our brains will sometimes lead us down paths we wouldn't deliberately choose for ourselves, and what can be done to guard against this tendency. First, we need to understand our mind's evolution.

Mankind is one of the few species able to live in large, relatively peaceful societies. So what do we have in common with ants, termites, and naked mole rats? We've all been able to overcome "the laws of evolution (such as competition and survival of the fittest)" through kin altruism.

Kin altruism is short-hand for the expansion of an organism's genetic self-interest to family members beyond his own young. Bees, for instance, are all siblings, and its in their genetic self-interest to sacrifice themselves for the hive - "selfishness becomes genetic suicide." This kin altruism, however, only takes a species so far; it breaks down quickly, especially for species that aren't all brothers and sisters. For humans, "gratitude and vengeance are big steps on the road that led to human ultrasociality."

Robin Dunbar has demonstrated that animal brain size correlates with social group size. Evolutionary success depends on playing the social game well. Brain power allows the animal to do just that, improving the animal's odds of surviving and reproducing. Mix in some natural selection, and you explain the evolution of larger, increasingly sophisticated brains in humans.

The evolutionary backstory is essential to understanding why the brain functions as it does. Haidt identifies three cognitive developments that allowed humans to live in large, cooperative societies: language, reciprocity and vengeance.

Reciprocity and vengeance are two sides of the same coin to Haidt. He notes, "Reciprocity is a deep instinct; it is the basic currency of social life." Social cohesion and cooperation depends on the promise of reciprocity and fear of vengeance. Haidt restates Jane Jacobs’ observation that a neighborhood has a lot of problems when a parent doesn’t feel comfortable castigating someone else’s unruly child.

While language has evolved to serve a variety of purposes, Haidt infers that one of its principle uses to early man was gossip, which serves as a “policeman and a teacher.” What hit home for me was Haidt’s insight that “many species reciprocate, but only humans gossip, and much of what we gossip about is the value of other people as partners for reciprocal relationships."

Language, reciprocity, and vengeance all work together to a socially productive end; “Gossip paired with reciprocity allows karma to work here on earth, not in the next life. As long as everyone plays tit-for-tat augmented by gratitude, vengeance, and gossip, the whole system should work beautifully."

Yet Haidt notes that the system doesn’t work perfectly. Evolutionary quirks leave us biased and hypocritical, sabotaging our collective efforts for social cooperation. My primary interest is identifying these destructive quirks, figuring out why they exist, and developing a plan of action to minimize their destructive impact.

The reason for our cognitive hiccups is simple – “evolution never looks ahead” (terrific insight). For instance, “linguistic ability spread to the extent that it helped the elephant do something important in a better way.” Vocalization didn’t evolve so that we could reproduce every sound perfectly. Language itself didn’t evolve so that we could communicate with perfect efficiency and clarity. Natural selection finds better ways to do things, not the best ways.

Haidt compares the human mind to a rider on top of an elephant. The elephant is our ancestral, subconscious system of automatically processing that drives our most elemental impulses. Buddha offers further insight: "In days gone by this mind of mine used to stray wherever selfish desire or lust or pleasure would lead it. Today this mind does not stray and is under the harmony of control, even as a wild elephant is controlled by the trainer." Buddha’s elephant trainer, the rider, is a relatively new addition to the cognitive space, as "language, reasoning, and conscious planning arrived in the most recent eye-blink of evolution.”

In sum:
"The automatic system [the elephant] was shaped by natural selection to trigger quick and reliable action, and it includes part of the brain that make us feel pleasure and pain (such as the orbitofrontal cortex) and trigger survival-related motivations (such as the hypothalamus) ... The controlled system, in contrast, is better seen as an advisor. It's a rider placed on the elephant's back to help the elephant make better choices. The rider can see farther into the future, and the rider can learn valuable information by talking to other riders or by reading maps, but the rider cannot order the elephant around against its will."

If the rider and the elephant sounds like the basis for a Disney buddy film, you’re right on track. Haidt describes the rider/elephant dynamic: “I was a rider on the back of an elephant. I'm holding the reins in my hands, and by pulling one way or the other I can tell the elephant to turn, to stop, or to go. I can direct things, but only when the elephant doesn't have desires of his own. When the elephant really wants to do something, I'm no match for him.”

The rider couldn’t do without the elephant, because “the mind performs hundreds of operations each second, all but one of them must be handled automatically," but, likewise, the elephant depends on the rider for its chance for evolutionary success. For it’s the rider that "allows people to think about long-term goals and thereby escape the tyranny of the her-and-now, the automatic triggering of temptation by the sight of tempting objects."

As Haidt notes in the block quote above, the elephant and rider (or automatic and controlled processing systems) correspond to different areas of the brain. The distinction does have basis in the way different parts of our brain are active when we are emotional and rushed versus detached and deliberate.

The next posts in this series (the mind and morality, man's misuse of morality) look at where and why these dual systems of processing information go awry.

Links:

letter to the editor: creative capitalism

2008-07-10T18:47:00.003-04:00

One of the more interesting web experiments I've come across recently is a new blog titled Creative Capitalism: A Conversation, which truly is a blog conversation "designed to produce a book -- a collection of essays and commentary on capitalism, philanthropy and global development -- to be edited by us and published by Simon and Schuster in the fall of 2008." The blog features economic luminaries such as Richard Posner, William Easterly, Gary Becker, and more, and the idea for creative capitalism emanates from a speech given by Bill Gates at the World Economic Forum at Davos.

I recently learned that a letter I wrote to the editors will be included on the site within the next week, so I thought I would provide my fiercely loyal readership an early glance. I will offer a disclaimer that I likely should have added to the original letter -- the idea expressed in the latter half is meant to be a discussion point, not an endpoint. My impression from Gates' speech was that he wants capitalism to search for new ways to serve the needs of man, and that's the spirit in which I wrote this letter.

The creative capitalism blog can best be described as working group of top economists assigned two tasks: clarify what exactly creative capitalism entails, and debate its relative merits. Of course, an economist would wisely note that the dialogue's production would be greater if it specialized in answering one question at a time. The conversation is certainly a bit confused. One moment, Bill Gates and Warren Buffet are talking about the positive impact on profits of cause branding. A post later, the discussion centers on supporting causes that simply reduce revenues. In the next breath, Milton Friedman is arguing that capitalism has more social benefits than creative capitalism.

What question is the project answering again? Depends on the monologue you're reading. I might be so brazen as to suggest that the dizzying directions this discussion has taken indicate that a bit of top-down coordination might better utilize the immense human capital brought to bear on these issues. But I am but a poor part-time blogger, so I will join the chorus with my own interpretation of "what creative capitalism means to me ..."

Many libertarians would agree (looking at you, GMU) that increased competition for government services would be a good thing. We simply haven't figured out how to do it yet (problems of jurisdiction and spatial sporting come to mind). When I think of creative capitalism, I consider the opportunity to take the corporate model as the foundation for the voluntary associations that Alexander de Toqueville described in "Democracy in America."

When liberals ask the country to come together to tackle a social injustice, market enthusiasts counter that liberals should turn to personal charity. Yet the market enthusiast's response fails to provide a viable alternative to the liberal's public programs. The "charity" market is poorly defined, suffers from serious asymmetry of information, and a lack of coordinating institutions. Yes, this is partly because the government has crowded out private charity with its large programs. But still the market enthusiast will convince few liberals to disband the public safety net by asking them to have faith that the market will immediately respond with equal or better charitable services. In fact, without well-designed institutions, oversight, and coordination mechanisms, I think liberals are right to not rely on private charity to tackle social problems, even when compared to the wildly-efficient public systems.

But there is hope. Consider the industry titans modern feudal lords, forced to subsidize the wasteful public programs of the King. Their only hope is to create a parallel system of public programs that are more effective than those of the King. People want public services. If creative capitalism can provide these services, they can displace government services. Tocqueville saw the great strength of America in her civic associations. The federal government has grown so large so as to crowd out many of these ventures, and it will take the action of independent pillars of wealth, such as Bill Gates, to provide an alternative vision that liberals can believe in will better serve the needs of humanity.

To view creative capitalism as simply a value-destroying concession is to ignore the quiet competition between the private and public systems for satisfying the desires of the masses. The question is whether voluntary associations are up to the task. Surely, with friends like Gates and Buffet, the financial resources are there, but where's the vision?.

book to own: happiness hypothesis

2008-07-09T18:07:00.002-04:00

When pitching Jonathan Haidt's "Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom" to friends, I often find myself explaining away the title -- no, it's not another self-help book and yes, it's about more than just plastering a silly smile on your face. With that said, the title is appropriate; Haidt is chiefly concerned with what's responsible for making humans happy.

The title fails, however, to convey the breadth and depth of Haidt's search, which touches on philosophy, psychology, economics, evolution, and cognitive science, and skips effortlessly across the centuries, from the Stoics' philosophical minimalism to Ben Franklin's pragmatism to Robert Cialdini's work on Influence.

Haidt documents the evolution of the human mind, producing an overarching narrative that explains everything from the use of gossip and prozac to mental tendencies that steer men away from their stated values and towards self-destruction.

Along with "Kluge," this book has profoundly shaped the way I view my brain. Before Haidt, I was aware that our brains appeared to systematically work against our best interest, and that these tendencies manifested in more general cognitive biases. Haidt, however, takes you behind the curtain, and provides a look at what exactly is going on in your brain and the evolutionary logic behind it. This book provided a more systematic take on cognition than the discrete observational work I had previously encountered.

My interest in correcting my cognitive failings largely emanates from my concern with my ability to grasp the truth. Haidt rightly adds that it's profoundly important to happiness in general. Cognitive therapy has allowed many to escape depression by directly attacking distortions in thought. These depressive distortions are direct relatives to those that scare up trouble in all of our lives, and Haidt provides an excellent primer on how to exorcise your cognitive demons through a few different means, thereby improving the way you think and possibly making you happier.

This isn't the end of my cognitive kick, I'm working on a series of posts that explore Haidt's ideas in greater detail, which will dovetail nicely with Kluge, which I'm currently finishing up.

Links:

conservatives, liberals, and libertarians

2008-07-05T19:51:00.000-04:00

I've been slow on the posting recently as I've been ensconced with the Happiness Hypothesis by Jonathan Haidt (see goodreads link to the right, open an account, and add me). I'm also plotting a new task for myself which I'll document here in the future -- a running list of insights that I've come across in my readings which I think are crucial to improving decision-making. This post, meanwhile, is considerably less ambitious, but it's been something I've meant to sort through for a while now.

I often find myself hop-scotching from from liberal to conservative to libertarian perspectives on the merits of policies and the role of government in general. Conservative P.J. O'Rourke once said, "The Republicans are the party that says government doesn't work and then they get elected and prove it." On the other hand, Democrats are the party that says the market doesn't work and then they intervene in the market and prove it.

After my recent post on conservative efforts to reform the Republican party, Will Wilkinson has a series of blog posts that details how libertarians have now become 'free agents' in the political battle:

"20th century libertarian-conservative alliance was based on anti-communism/socialism. The reasonable, sophisticated consequentialist pragmatism of the great 20th century market liberals seemed an insufficient bulwark against the slippery slope from the liberal, capitalist welfare state to full-on illiberal, totalitarian socialism."

I identify completely with Wilkinson when he describes himself as "an old-fashioned market liberal who thinks Hayek, Friedman, and Buchanan get it right, and who thinks Rawlsian welfare liberals should be able to recognize themselves in these thinkers."

Wilkinson sees some middle ground, "now that the welfare-liberal elite has become rather more economically literate and is no longer sighing over five year plans." Friedrich Hayek, Milton Friedman, and James M. Buchanan supported a societal safety net, so that's not an incontrovertible divide between liberalism and libertarianism.

Just as the young Republicans see potential to reignite a Grand New Party, Wilkinson sees potential for a liberal/libertarian joint effort to solve the major problems of the day:

"The question these days is whether the U.S. will have the good sense to adopt more rational market-based old-age pension policies, like Sweden or Australia, or lower corporate tax rates to a level more in line with the rest of the wealthy world. Slightly higher personal tax rates and slightly more redistribution is a possibility, but a slide into socialism just isn’t on the table."

Arnold Kling, for his part, douses the liberal/libertarian loveparty with a healthy dose of skepticism:

"I just don't think that the contemporary American left cares for that sort of thing. Instead, I see an obsession with market failure and the need to centralize power. The basic approach is:

1. X is a crisis.
2. Collective action through government is necessary to solve X.
3. Collective action through government is sufficient to solve X.
4. Government needs more power in order to solve X.

You can let X be anything from the sub-prime mortgage problem to the uninsured to obesity. My view tends to be:

1. X is being over-dramatized.
2. Private initiatives are probably sufficient for dealing with X.
3. Collective action through government to solve X will turn out much worse in practice than in theory.
4. Government already has more than enough power to solve X. The problem is not lack of power--the problem is, well, see point 3."

I'll let Wilkinson get the final word:

"Left-liberal welfare statists, insofar as they are actually liberals and not just progressive-style paternalist technocrats or closeted socialists, would better achieve their distinctively liberal aims by accepting something like the Friedmanite or Hayekian version of welfare statism."

I certainly agree with Wilkinson, but I share Kling's skepticism. Your thoughts?

idea for better health care

2008-06-29T21:00:00.001-04:00

The strongest criticism of consumer-driven healthcare is that consumers lack the knowledge necessary to make informed decisions, especially given the complexity of the choices presented before them. There is something to this. Then again, people know relatively little about how the thousands of available computers or restaurants, but they are able to make relatively sound choices. Why?

We have Consumer Reports. We have expert advice. We have friends. We have the internet, with thousands of customer ratings and reviews.

With health care? Not so much.

Outcomes reporting is getting better, but still isn't particularly actionable for your average patient.

And while I'm not of the camp that believes it's impossible to assess the quality of physician care, hospital management, or health care plan, I will agree that adequate information is not currently available (thanks in large part to those vested in protecting their care monopolies). So while I'll continue to push for more information and health care results sharing at every level of the health care system, I am also interested in providing patients with more leverage in the mean time.

Arnold Kling has written about the need for a "single case manager" for "when a complex patient enters the healthcare delivery system."

I'd go a step further.

Currently, insured patients choose a general practitioner (also known as, primary care physician, etc.), who, in theory, manages their care; the doc will give you a physical, make sure you're blood pressure's at a decent level, etc.

Of course, most of these tasks are actually done by a nurse, with the GP popping in for a quick hello, write a prescription, or hand out a referral.

This dynamic is not only grossly inefficient, but it fails to deliver the expertise that would most improve a patient's health. I would like to see the GP hand over a lot of his/her clinical duties to the nurses (which means buy-in from the American Medical Assocation...), and take on managerial duties.

I envision patients choosing between different GP corporations who would advise patients on which insurance plan makes the most sense for them, which specialists delivers the best value, how to choose between a generic drug and a more expensive brand drug, and sets up appointments at local clinics (e.g., Wal-mart one-stop shops or more expensive, more typical practices).

It would be relatively inexpensive, as one GP could oversee the health management of hundreds of patients a year, with the assistance of health care professionals (you don't need to be a GP to gather information, or setup appointments, or chart blood pressure; just like you don't need a construction team of architects to build a house).

The GP would be a health advisor, similar to a financial advisor (tangentially, I think if you want to help poorer people, subsidizing financial management could improve outcomes substantially).

What do we lose in this system? Well, for those that can afford going to see a quality GP regularly, you might not get a physician with as much experience as your current GP giving you a checkup next time around. Not because you wouldn't be able to find an experienced GP to do so, but because you would also have the option to have a nurse provide the same service at a fraction of the cost, and you'd probably go with the cheaper option.

Why? Well, because your GP advisor would break down the costs and benefits associated with each of your health care decisions, and provide you with simple, straightforward choices. Have I completely worked out this system yet? No. But I think its the right direction.

Related posts: value-based health care, real chance for health care reform

grand new party on the horizon

2008-06-28T15:33:00.007-04:00

Ross Douthat and Reihan Salam's new book, "Grand New Party: How Republicans Can Win the Working Class and Save the American Dream," has built itself some politico buzz thanks to opportune timing and a novel perspective on how to revive an ailing Republican party. A few people forwarded me David Brook's review of the book, which is certainly worth a read.

Brooks' review is about more than this specific book, but about the greater movement of "young and unpredictable rightward-leaning writers.
...
"These writers came of age as official conservatism slipped into decrepitude. Most of them were dismayed by what the Republican Party had become under Tom DeLay and seemed put off by the shock-jock rhetorical style of Ann Coulter. As a result, most have the conviction — which was rare in earlier generations — that something is fundamentally wrong with the right, and it needs to be fixed."

Brooks points specifically to Megan McArdle and Will Wilkinson - two of my favorite bloggers - as examples of the "new" Republican archetype.

Brooks believes that these writers will fill the conservative "intellectual vacuum" that currently hampers the Republicans:

"Liberals have a way to address these inequalities — the creation of a Denmark-style welfare state. Conservatives have offered almost nothing. The G.O.P. has lost contact with its own working-class base. This is the intellectual vacuum that “Grand New Party” seeks to fill."

What will the basis of the the Grand New Party? Douthat and Salam write, "It's hard-work conservatism, which uses government to increase the odds that self-discipline and effort will pay off."

Sounds excellent to me, and I think this would be a good thing for Democrats as well (though elections would be harder to win...) Will it happen? I doubt we'll say a Republican revolution, but perhaps we'll see a change of face and leadership more in tune with this Grand New Party.

what makes a just nation-state

2008-06-23T23:21:00.002-04:00

This post follows the utility of the nation-state in exploring the importance of properly defining fairness, a concept that weighs heavily in most discussions while rarely being explored on its own merits.

At some point, a nation ingrains a conception of fairness in the national fabric, most often in the constitution itself. I think many would refer to this as the "social compact." Europe emphasizes distributive justice among citizens, both increasing the possibilities for the worst off among their citizens and decreasing the opportunities for those branded outsiders.

Some of those outsiders headed to the New World looking for a type of fairness very different from that found in Europe at the time, or, for that matter, in modern Europe.

The Statue of Liberty stands a testament to that uniquely American ideal: "Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tossed to me. I lift my lamp beside the golden door."

The American Dream was characterized not by distributive, but procedural justice. Each person would be given the same opportunity regardless of their ethnicity, religion, creed, etc. Talent and hard work would determine how far you'd go in life, not whether you were Catholic or Protestant or born from "proper stock" or any other determination of what was a "proper citizen."

What's happened since then?

Well, the frontier's been settled. The moment the Italian no longer considered himself an immigrant he spat upon on the 'Irish dogs, who, in turn, cast a wary eye and a perjorative slur at the Mexican.

Yet despite the natural human inclination to protect one's kin and consequent belief in the "defective moral quality of being a stranger," the American notion of procedural fairness has remained remarkably resilient.

Despite nativist attacks at nearly every stage in American development -- from the Know Nothing Party to Lou Dobbs -- immigrants continue to flock to the United States and power American development and innovation, from the atom bomb to Google.

The United States has ridden the creative powers and hard work of the "poor and huddled masses" to a level prosperity unmatched in the history of the world. The American social compact is to be credited.

Yet societies have remarkably short memories, and apparently a 305-foot high statue warmly welcoming the world's "wretched refuse" in the nation's richest city is not enough to remind Americans of how the US developed into an economic titan.

The trouble is that energetic, hard-working immigrants eventually have kids. Some of their kids will keep their parent's spirit, most will not. While the immigrants who venture to the US leave behind their lazier and less talented brothers and sisters, there is no self-selection mechanism for those born in the US.

While that may sound in bad taste, it's no different than the way we talk about being born into a rich family. While the original entrepreneur was likely hard-working, there's no reason to suspect the same of their children.

The American paradox is that we all want to be treated fairly as we grow up (procedural justice), and then we all want our children to receive the best treatment available even if they don't deserve it (distributive justice).

Who loses?

Well, who would have lost if the Know-Nothings successfully closed the door on Irish immigration, or if the racists in California had succesfully shut the door on Japanese immigration?

Clearly, the immigrants themselves would have lost dearly, as well as their children, and their children's children. In addition, the children and great grandchildren of the earlier Americans benefitted as well, as dynamic labor markets spurred on the creation of new industries and created new jobs and opportunities for all Americans. Yet in both cases loyal Americans tried to slam the door in the face of these immigrants in defense of what they perceived as the American interest.

The trouble is that it's only easy to see the benefit of immigration 100 years later, removed from the emotional tug that drags down most political discourse. It's hard to put much weight in the positive externalities of productive new immigrants if you think things could be better in your life at that moment ("My son lost his job + I see a lot more Mexicans around + They have jobs = they took his job.")

The changing economic dynamics of the 21st century once again raise the question, what kind of country should America be? Should it be a nation-state in the static European sense? An exclusive club that sets up barricades and pampers its few members? Is distributive justice the next step?

Clearly, I don't think so. I don't think it would be healthy for America in the long run to choke off her access to fresh ideas and hard work, and I don't think it's just.

The United States is not, and should not be static, like a France or Germany. It should be dynamic and everchanging, a whole composed of parts bound not by blood but belief in a fair shake. That's not to say we need be as superficial in our understanding of procedural justice as our ancestors. We can still admit we have a lot to learn from Scandinavia while staying loyal to procedural justice. How we can do so is a subject for another post. But our core strength lies in equal opportunity, and we'd be wise to focus discussions of justice within that paradigm, rather than the distributive justice of our country-club cousins in Europe. It's both in our interest and more helpful to the disparate.

good tv: fareed zakaria's GPS

2008-06-22T17:50:00.003-04:00

Fareed Zakaria doesn't seem well-suited for the role of television show host. He's stiff as a board, and he lacks the Jon Stewart wit so effective in livening up otherwise dry issues. Yet Zakaria has managed to create the best news show on TV in Global Public Square (or GPS). How?

First, Zakaria chooses great guests, carefully chosen for their unique takes on otherwise tired issues (e.g., Bjorn Lomborg); these aren't the standard news circuit hacks. Second, Zakaria avoids the standard pitfalls of tv hosts when questioning his guests. Nobody gets a free pass, but the questions are not designed to embarass or "nail" the guest, but rather force them to respond to the best counterarguments to their position. For example, he presses Condi Rice on why the US doesn't treat Iran the same way it treats North Korea. And when a guest, such as Ms. Rice provides a vague response, such as her explanation of the political situation in Iraq as a well-functioning Iraqi democratic government, Zakaria points out that the Sunnis are still largely excluded from the regime.

The show airs at 1 p.m. ET on Sunday, and as long as you can stomach the Lou Dobbs advertisements during breaks, I would highly suggest it.

No, Zakaria isn't a TV host at heart, but if you're looking for "good tv," GPS is a great place to start. Enjoy Stewart's light-hearted take after a hard day's work, and turn to Zakaria for your critical analysis of the world's most pressing issues.

obama v mccain: round one

2008-06-19T20:42:00.000-04:00

Good ol' election season/year/century/millenia. It's been awhile since I've had any election-related material, because there really hasn't been much to say. We are now starting to see a bit more on the policy end from McCain and Obama (and Barr?)

Most recently, both candidates managed to whip up some economic blog buzz -- response has been mixed. Barry Obama has demonstrated he has no problem spending money, promising $15 billion a year for 10 years on energy technology, $60 billion for high-speed railways and improved energy grids, increased spending on basic research, subsidized high-speed internet infrastructure, and $4,000 a year in tuition for students who later enter public services.

A lot of that makes sense in the abstract (except the last part; why, praytell, am I subsidizing a future DMV employee over someone who will be working harder in a more productive job that is almost definitely more useful to society?)

Then again, so did the Big Dig. The question is never simply about the proposed end (better transit, SURE!), but also about the means. To Barry's benefit, he does seem to understand that these programs need to work with Joe Market rather than slit his throat and steal his life.

He compares his energy investment program to venture capital, designed to support the "middle stage" between innovation and commercialization. "You have this point in time when things haven't quite taken off yet and still entail huge risks."

Megan McArdle isn't quite as impressed with Obama's "infrastructure plan which will undoubtedly do approximately nothing to increase the rate of economic growth (though it probably won't much harm it, either)." She does add that his economic plan includes "a cause near and dear to my heart: simplifying and lowering the corporate income tax."

So Dani Rodrik is in heaven, and McArdle thinks Obama "has the right sort of left-wing ideas; he wants to model America on Denmark, not Germany or Italy."

McArdle's probably not far off; Sweden's Prime Minister himself said that Obama's economic and tax policies were in step with his homeland.

Meanwhile, the Economist's heart is a patter after Obama said: "There are some who believe that we must try to turn back the clock on this new world; that the only chance to maintain our living standards is to build a fortress around America; to stop trading with other countries, shut down immigration, and rely on old industries. I disagree. Not only is it impossible to turn back the tide of globalization, but efforts to do so can make us worse off."

Why so much Obama and so little McCain in this economic discussion? Well, the Economist recalls McCain doing his best Hillary impression: "I trust the people and not the so-called economists to give the American people a little relief."

Yikes.

All that said, let us not deify Barry yet. Obama's decision to forgo public campaign funding makes sense given his war chest, but it also unequivocally violates the commitment he made to go the public funding path last year with McCain. Ain't no real way to sell this as anything more than political opportunism. Obamaniacs will surely shrug this off ("Everyone does it"), but, of course, Barry has built his fervent following by making an obscene amount of people believe that he will never sell out his values like the "Washington establishment."

In this case, Obama fought the Washington Establishment by making a pledge a year in advance to show to voters that he would defend the only hope for elections to stave off corruption and improper influence... and then got a glimpse of the promise land and grabbed the cash and ran.

Perhaps it's an exception -- certainly, not reason enough to not vote for him -- but reason enough to put an end to these ridiculous conceptions of Barry. Seeing very smart people giggling and swooning like 12-year old girls at an NSYNC concert is a bit troubling.

don't be bob bias

2008-06-18T18:36:00.005-04:00

Meet Bob Bias. Bob is an insufferable know-it-all (no wonder, he assumes the worst about everyone) and truly believes that if he wills it, it will be done. He's statistically-incompetent, his memory is pretty bad, and yet he still thinks he is always right.

Unfortunately, we all have a little more Bob in us than we would like.

Bob, along with the rest of us, is simply a human being trying to find his way within an infinite flux of particles and processes with a human mind that is finite and cannot comprehend the infinite. Bob has to comprehend reality though thinking about simplified models of reality. For instance, Bob thinks of the infinite number referred to as Pi as 3.14 or as "Pi" as we can't really comprehend or describe its infiniteness.

These models work very well for most of our tasks. My mental representation of toothpaste is unbelievably superficial, but it captures the value that is important to me.

Our comprehension, however, isn't infinite, and it runs into some trouble in different areas. I've been checking out the cognitive bias work of Max Bazerman and incorporated his different biases into different traps that sabotage our decision-making.

General traps
Seen-it-all trap
Bob thinks his perception of a variable or process captures it in its entirety
Result: Bob thinks that his odds of winning a dice game have fundamentally changed since he has been "hot" recently

Never-wrong trap
Bob thinks that all of his simple finite models are accurate representations
Result: Bob plays a dumb bet in the stock market based on a superficial analysis

All-powerful trap
Bob thinks that every process or variable can be controlled by his action
Result: When Bob rolls a pair of dice, he throws harder when he's going for high numbers, softer when he wants low numbers

Dealing with data
The human mind is good at registering extremes. You remember the feeling of fire burning your skin. This ability hurts our ability to compute large amounts of data. We aren't good at abstraction, dealing with big numbers. We have a hard time comprehending probabilities. We're also oversensitive to causal relationships; we see causes everywhere, from lucky hats to less ridiculous, but no more causal variables

Descriptive-recall trap
Bob's ability to recall events and people is based on the vividness and recentness of the memory rather than their frequency
Result: Bob is more afraid of dying in a plane crash than a car crash or of heart failure

Rain-dance trap
Bob is very bad at differentiating between correlation and causation
Result: Bob believes his team won the game because he wore his lucky hat

Big-number trap
Bob is very bad at measuring statistically significant relationships and dealing with probabilities
Result 1: Bob estimates his travel time based on his last trip which was exceptionally quick, rather than his last 30 trips
Result 2: Bob thinks that three events with a 80% each of occurring are more likely to ALL occur than one event with a 25% chance

Self-assessment
This should come as no surprise. The mind has a lot of information that has been validated internally, and it shouldn't be surprising that it tends to trump all else. I think of it this way; the signals from the self, the feelings, the motivations, etc. create a dynamic digital signal to the brain of what Bob enjoys, didn't enjoy, etc. Bob's mind has a hard time testing the voracity of what it thinks. This is common sense, it's hard to objective about what you think. As I said before, this leads to the never-wrong trap, but is also has added negatives when dealing with others.

What-about-me trap
Bob's brain registers the pain and pleasure of friends and others, but only through a relatively weak analog signal. This weak analog signal has to stack up against the dynamic digital input from Bob's mind, the same mind now tasked with measuring the value of Bob's digital signal v. the outsider analog input. The dice are clearly loaded.

Result 1: Bob thinks his cup is worth more than he would if it were not his cup
Result 2: Bob thinks that he cut off the guy because he had to, while that OTHER car cut him off because the driver is a jerk
Result 3: Bob hears that a person was killed in the town over, but that news causes him less anxiety than his migraine.
Result 4: Bob dismisses Frank because he sees that he is biased, but doesn't think about his own biases

This isn't an exhaustive list. Bryan Caplan has come up with a list of biases relevant to voters - "anti-market, anti-foreign, pessimism, and make-work" - but it's a good place to start.

to blink or think is not the question

2008-06-17T18:51:00.004-04:00

Malcom Gladwell wrote the book Blink to celebrate the mind's ability to make very adept judgments in the blink of an eye. These judgments are based on our intuition (the "gut" or "heart") and allow the human mind to make millions of calculations and decisions very quickly.

Gladwell is critical of those who ‘overthink’ things and don’t respect the value of the ‘blink’ decision simply because we don’t know how to articulate what makes the hairs on our neck stand up. Gladwell’s first example sees an art gallery acquire an ancient statue despite many experts believing the statue was fake based just on their visceral first impression (it was indeed fake.) Gladwell hammers home that the experts didn’t know how they knew the statue was fake, they_just_did.

The author of The Tipping Point does admit later in his book that there are some problems with the ‘blink’ judgment. It’s highly sensitive to a person’s experiences. Gladwell mentions a race experiment, which measured his ‘blink’ reactions to questions of race and achievement, and he learned that his ‘blink’ judgments discriminated much more than he did when making conscious, deliberate decisions.

Since Gladwell is black, it appears safe to say that his ‘blink’ associations are unequivocally bad (and/or damaging, etc.) in this case, while his deliberate associations are significantly better (if not ‘good’). Furthermore, Gladwell explained that the race experiment results could be easily manipulated by showing the respondent negative or positive images of black people beforehand. 1 point for thinking, 0 for blinking, in this case.

This example underscores a tangential point made by Gladwell that I think is VERY important: our "unconscious attitudes may be utterly incompatible with our stated conscious values."

I think Gladwell is correct that ‘blink’ reactions are not necessarily wrong simply because we can’t articulate the reasoning behind them. I do think that even framing a discussion of the matter with the title “Blink” is giving deliberate decision-making short-shrift, and I don’t think the world really needed another anti-contemplation lobbyist.

Blink decisions are decision-making shortcuts that are undoubtedly necessary (who wants to carefully weigh the pros and cons of every decision with which they are presented?), but the focus should be on overcoming the cognitive failings that sabotage our stated conscious values both subconsciously and consciously.

The question isn't blink or think, but how can we ensure our blinking and thinking isn't sabotaged by "unconscious attitudes ... utterly incompatible with our stated conscious values."

political utility of the nation-state

2008-06-15T21:12:00.001-04:00

This post has taken me awhile, but I think it's worthwhile. Inherent in any discussion of a nation-state's policies, from societal safety nets to immigration, is an understanding of the nation-state and its proper role. This post argues that the "value-added" by the nation-state is declining, and in turn, the values of local governance and international institutions are growing. I argue that the historical experience of the nation-state has effectively "nationalized" popular understandings of fairness and self-interest, and that these understandings are increasingly inappropriate.

To begin, it's important to understand that the United States, like most nation-states, was created to respond to an external oppressor. The colonies integrated their governance only so far as absolutely necessary for defeating the British. The nation-state is built for this zero-sum militaristic competition. This zer- competition rewarded size, and the more resources that could be brought under the leadership of a singular decision-making body, the better the nation-state would do in the competition.

Zero-sum competition not only led to societies growing in size to the point of becoming the modern nation-state, but also brought about the creation of the market economy. As Robert Reich put it, the king wanted more silver to prosecute his wars, and allowed for greater economic freedom in a mercantilist trade system, which eventually created independent pillars of wealth and power, forcing the king to eventually allow greater political freedom, which, in turn, begat the free market system.

Mercantilism fit neatly within the zero-sum militaristic competition model, as trade was perceived as a weapon to accumulate a larger slice of the fixed economic pie that made up the world. But clearly, mercantilism has fallen out of fashion. It's come to be understood that trade can, and usually does, benefit all parties (to varying degrees), and that economic prosperity is not a zero-sum game; quite the contrary, trade is a non-zero-sum game, where each nation-state benefits from the economic success of other nation-states.

The market economy erodes the value of the nation-state because the market economy thrives on cooperation both internally and externally, i.e., trading with a guy from Ontario or Detroit depending on who is giving you the better deal. Meanwhile, the value of the nation-state depends on high internal cooperation, and low external cooperation. If you don't differentiate between dealing in Ontario or Detroit, then what's the purpose of having a different nation-state for each location?

The nation-state has historically convinced its citizens of its value by taking on an external enemy, such as the British, the Nazis, Soviet Union, etc. Within the perspective of zero-sum militaristic competition, the ideas of national interests and national fairness maintain a certain logical consistency. In a game of nation-state survival, your interests extend only so far as your borders, or at the most, the borders of your allies. Furthermore, fairness applies only to the citizens of the nation-state.

While that zero-sum competition still exists to some degree, I argue that it's been diluted by the increase of non-zero-sum cooperation, wherein those national notions of self-interest and fairness are NOT logically consistent. Outside of zero-sum nation-state competition, the foreigner is not an adversary for the citizen anymore than any of his fellow citizens -- the national border no longer divides the citizen's interests and sense of fairness.

Does this all mean that I think the nation-state has outlived its use? Not entirely. While the nation-state inhibits exchange across borders, it has facilitated exchange within the nation-state. Europe is just now catching up to the United States in picking apart the economic barriers, brick-by-brick, constructed in between the tiny nation-states. The nation-state has value in lowering transaction costs and promoting exchange (and, of course, providing for the common defense of the member states). I am calling into question the role of the nation-state as the de facto level for policy action to advance one's interest or sense of fairness.

Whereas the powerful nation-state best serves the interests of the citizen in the day of zero-sum competition, a dynamic federalism best serves the citizen in our world today. In addition, I have mentioned 'fairness' along with interests in this post for a purpose. Many of our policy debates, from welfare to healthcare to immigration to free trade, end with one side claiming that it is only fair to "fix" the economic system to provide jobs or services for relatively poor Americans, even if it comes at the expense of much poorer foreigners. This mindset is a remnant of historical zero-sum competition that has no place in a discussion of trade with poor and well-meaning foreigners. Justice should know no borders.

I'll end with an analogy. Let's say you're in charge of a business. The nation-state mindset would lead you to hire your family and friends, while the market mindset would prompt you to throw open your doors to the world, and higher whoever seemed like they would be most productive. Even though you share a kinship with your family and friends, you appreciate that it is not "fair" to pass over a hard-working, smart employee for your less talented, lazy cousin. Favoring your kin is neither fair nor in your self-interest, because your interests and sense of fairness are not "kin-based," nor tribal, nor ethnic, nor national.

In a post in the (hopefully) near future, I will spell out the implications of this non-zero-sum mindset with regards to policy. Specific attention will be paid to how policies can be crafted to advance citizens' self-interest without offending their sense of justice. I should also consider the alternative view of the nation-state put forth by Robert Reich and state where I believe he gets it wrong.

For a sneak peek, I agree wholeheartedly with Will Wilkinson's theory:

"For my part, I have a fairly radical ideal theory of a cosmopolitan liberal global order of trade, migration, and peace. I think the “nation state-as-primary-moral-community” assumption at bottom of most modern liberal arguments for the welfare state (and in many libertarianism-in-one-country arguments, for that matter) is morally backward."

amazon buying binge

2008-06-15T15:57:00.004-04:00

It's rare that I buy more than one or two books at once, but once in a while I've accumulated such a long list of books that I want to read at that very moment that I end up buying a boatload. In case you were interested, here's what I'll be reading over the next while -- you'll likely some of these names on this site again...

"Power, Sex, Suicide: Mitochondria and the Meaning of Life" Nick Lane; Paperback; $12.21
"Network Power: The Social Dynamics of Globalization" David Singh Grewal; Hardcover; $19.80
"Nudge: Improving Decisions About Health, Wealth, and Happiness" Richard H. Thaler; Hardcover; $17.16
"Mirroring People: The New Science of How We Connect with Others" Marco Iacoboni; Hardcover; $16.50
"A Dash of Style: The Art and Mastery of Punctuation" Noah Lukeman; Paperback; $11.16
"The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom" Jonathan Haidt; Paperback; $10.85
"Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond" Deepak Malhotra; Hardcover; $17.16
"Kluge: The Haphazard Construction of the Human Mind" Gary Marcus; Hardcover; $14.40

I'd be happy to provide info on why I chose a particular book if you have a request...

gentrification, sprawl and city failure

2008-06-12T19:18:00.001-04:00

How about those for buzz words?

Gentrification is an object of hatred on the left because it is viewed as a source of added suffering for those already poorly off. While I agree that the byproducts of gentrification are certainly unfortunate, I think the gentrification opponents are wrong in identifying gentrification as a source, rather than a symptom, of a deeper problem.

(Related Jane Jacobs posts: the poverty trap, borders)

Gentrification, like city overcrowdedness in general, is a symptom of "the demand for lively and diversified city areas [being] too great for the supply." The problem isn't too much gentrification, it's too little city. I'll join Jacobs in stating, "The sheer supply of diversified, lively, economically viable city locations must be increased."

The immediate response to this proposition would rightly be skepticism -- why hasn't city supply grown with demand?

Hypothesis: well-intentioned (giving the benefit of the doubt...) government intervention has stunted city growth over the past fifty-odd years, creating a large "city deficit."

It's economically advantageous to live in large concentrations, which is why cities evolved in the first place. Yet the wealthy left... Why?

One of the myths is that the wealthy turn and ran of cities because of a fear of black people, or something similar; this is mistaking cause and effect, the wealthy left because a large carrot was dangled in the suburbs, housing prices were then depressed, and in move poorer folks, including a large population of minorities. Just look at two of the signals the government sent post 1950:

Brand new interstate system: Made it cheaper to live further away from economic cores
Juicy government-guaranteed home mortgages: Rent in New York or own at a bargain price in a suburb? (I think this is the key...)

It would be incorrect to say that government-subsidized sprawl is a 20th century innovation. The West was settled because the government provided incentives ("you stand on it, you own it") to leave the big cities.

The product of this sprawl has been a great deal of economically-depressed dead space. I won't complain about how the earlier government subsidies played out -- California, for all it's crazies, has been a huge economic advantage and while it took a questionable Mexican War to obtain continental integrity, we likely spared a couple more wars by preempting the possibility of a European/Asian presence on the left coast.

But the 20th century subsidies are much more questionable. Beyond the city crunch, the reason we drive cars so much is because we have to, because everything is so spread out in the US. Don't blame GM, blame the national sprawl.

Correcting deficits is never painless, and the dislocations brought on abrupt gentrification of city areas (UWS of Manhattan) and total city cleanup (is Newark a good example?) are the products of the market looking to correct what the government screwed up.

As Paul Krugman notes here, the fuel crunch is making our sprawl even more economically painful.

To conclude, greater concentrations of people are more productive than sparsely populated areas. Rather than help our cities grow, government planners have systematically driven individuals away from our economic hubs, lowering economic productivity, and greatly increasing the difficulty of managing overcrowded cities. Finally, I'll add that before reading Jane Jacobs' book, I agreed with the "widespread belief that Americans hate cities" -- the dirtiness, poorly functioning transportation, etc. all bother me -- but I've come to agree I, like most Americans, really only "hate city failure." Presently, the city is like a company's first store, which is filled with customers who want to use the store, but can't even fit through the door. The problem isn't the store, it's that there isn't enough store.

don't know much biology...

2008-06-07T22:15:00.004-04:00

This post will examine the implications of the new economy (see previous post on what's changed here) on education, focusing on the insights of Robert Reich, from his book, The Work of Nations. The broad challenge for the educational system is to transform itself from an ineffectual vestige of the industrial age to meet the needs of the new economy. One of friends who teaches in a NY public school commented that the school system appears to simply exist as a measure of social control. While I don't think this design is deliberate, it does reflect the values - order, discipline, obedience - upon which the educational system is built.

As asserted previously, these values were handsomely rewarded by the old economy. Unfortunately, as the volume-based, assembly-line industrial jobs have disappeared, so has the demand for those values.

Reich identifies four skills that define the value of an individual's labor in the new economy, and thereby, wages: abstraction, system thinking, experimentation and collaboration.

Abstraction: Ability to reduce the infinite parts of reality into simplified mental models, and, in turn, recognize patterns and meanings

System thinking: Understand relationships between various phenomena and underlying processes (e.g., don't simply think about how to solve a problem directly, but why the problem arises and how it's linked to other problems)

Experimentation: Pretty straight forward, but yet poorly taught and understood -- the art of trying out hypothesis, failing/succeeding, analytically assessing results and process of experimentation

Collaboration: Ability to articulate, clarify, restate, critique, and respond to criticism

These skills allow the individual to find unexpected relationships and potential solutions by looking at broader system of processes, variables, and outcomes. Furthermore, these skills empower the individual to hold off his/her natural tendency to view life as static snapshots, which is unfortunately reinforced by compartmentalized subjects like biology, math, etc.

Reich notes that good schools don't ask students to memorize data, but rather present data, and then ask student to assess how/why this particular data is chosen, how it might be contradicted, and, more generally, to critically assess the validity and significance of information in various forms.

Unfortunately, Reich never presents a coherent vision for reforming education because he doesn't see education as the solution to increasing inequality, dismissing the possibility of teaching the children who would become routine producers or interpersonal servers (see past post for more) to become symbolic analysts as "daunting."

While I understand that not every kid can be Einstein, I do think education is *THE* way to improve individuals' abilities to attract higher wages. You can't extort high wages (well, you can, but not forever), and it's the only way to increase individual leverage in the long-term. Furthermore, I think modern-day education is so wildly inefficient and unproductive that we don't truly understand the potential impact of education.

We do know that creative thinking, and problem-solving, is like a muscle, and if it falls into disuse it will atrophy. I often felt that my middle school curriculum killed my creativity, lulling me into an intellectual comatose that I'm only now escaping, and there may be some truth to that.

I will avoid being seduced into an attempt at a holistic take on education reform, but I can't help but offer some brief reflections. First, I think schools are trying to do two different tasks at the same time, and their ability to either suffers because of it. Most straightforward is the desire to impart knowledge and mold young minds. Secondary (?) is the goal of acclimating individuals to interacting with others and building a social acumen. Of course, while we understand that kids will learn more with the guidance of an experienced elder, we somehow think that the best way to socially acclimate these same kids is to let them learn from equally immature and chemically-imbalanced youths.

I think the Ancients really had something with the tutor-pupil relationship afforded to the noble children (except the whole sex thing...). It was understood that learning how to think demanded intense interaction and focus. In addition, social interaction was learned not among emotionally-retarded peers, but with people of vastly different ages and experiences. The Ancients were taught how to be adults. Nowadays, children are taught to be children, and often are taught how to act BY children.

I don't think we can necessarily emulate this example, but I do think it suggests a different role for the teacher and a different dynamic to the classroom. One in which the teacher should be seen a human resources executive, in charge of the development of his/her students. This would include ensuring that top performers receive additional training as well as are given additional responsibility to work with lower performers -- they should be taught to be leaders. In addition, I think it probably doesn't make sense to separate classes by age, and that cross-grade interaction is a good thing for all involved. As a final note, as Reich noted, the breakdown of learning by discrete subjects, like biology or math, is entirely unhelpful for the modern student.

More effort should be placed on teaching students how to think critically, communicate and collaborate effectively, and how to "learn" more generally. The subject matter is secondary to the development of the skills that will allow them to succeed in whatever field they enter. Efforts to stimulate academic interest through "pointless" explorations of sports or popular music are entirely worthwhile if they develop these habits of thinking and learning.

And while I don't want to explore this subject at greater length, I will point my curious readers to this Economist article on education innovations in Finland and Sweden.

work in the 21st century

2008-06-06T09:00:00.011-04:00

The American job market has changed dramatically over the past fifty years as the cost of transportation and communication has decreased and the capacities of other nations have grown. This transformation has been accompanied by a rise in overall wages, but growing inequality. This inequality has been attributed to everything from tax changes, destruction of unions, Reagan’s slashing of social programs, the proliferation of single-parents households, immigrants, and rent-seeking by the rich at the expense of the poor.

While these factors may play a secondary role, Robert Reich properly attributes the gap to a change in the returns on human capital. In the mid-latter half of the 20th century, the wage premium that a college degree commanded was much smaller than it is today. According to Reich’s aforementioned book, a high school graduate earned ~$32,000 (1987 dollars) in 1973, and $28,000 in 1987. Meanwhile, a college graduate earned 80% more than his high school counterpart in 1980, and nearly doubled that by 1990.

Inequality is growing because the market for labor is changing. The assembly-line worker was paid X because his input was worth X, given the fact that these large corporations needed a great deal of simple human input – and it needed to be American – to produce and distribute their product at a high volume. Human labor wasn’t a commodity because the supply of labor was limited by geographic location.

Technological developments have both directly (replacing men with machines) and indirectly (lowering the cost of doing business across oceans) rendered the high-school graduate a commodity. If all you can do (with your current training) is effectively follow orders, you will compete with both billions of other human beings and machines (either that currently exist or could be developed cheaply relative to your salary.)

I don’t want to pigeon-hole this phenomenon as strictly a “high-school graduate” thing. It’s not about education, per se, it’s about the reproducibility of the work. From textiles to tech support to pathology, if the work is simply applying an existing solution to a straightforward problem, the value of the work is plummeting. This decrease in value is generally leading to a decrease in wages, though the workers are doing their best to secure wages that are higher than the value of their work.

Reich divides the labor market into three types of jobs:

Routine productive services (e.g., data entry): Low pay, can be outsourced, primarily value is hours put in to work
Interpersonal services (e.g., cleaning lady, acting coach): Similar to routine services but pay ranges widely, can’t be outsourced, pay reflects both hours and assessment of quality of work
Symbolic analytic services (problem “solvers, identifiers, brokers,” e.g., consultants): Can be outsourced, Value-based payment (rather than time)

The last group, symbolic analysts, is the “creative class” about which Richard Florida writes, though not all symbolic analysts are professionals, and not all professionals are symbolic analysts (this cannot be overstated). A secretary can be a symbolic analyst, and a manager can be a professional, but not a symbolic analyst. The old categorizations of types of work are no longer applicable.

Reich labels this group symbolic analysts because they simplify reality into abstract symbols, which they then can manipulate, and translate back into reality. The return on this skillset has exploded because its value to enhancing productivity (however that is defined) is unparalleled. In the 20th century, mastery of knowledge, accumulated through experience or study carried a high value, as the supply of people with such knowledge was limited. Now, that supply is much less limited.

Knowledge isn’t a commodity, but it’s value is falling as it becomes less scarce. Meanwhile, the value of understanding how to use knowledge to increase outputs has increased as the potential payoff becomes bigger.

Knowing is cheap. Understanding is expensive. The premium is placed on brokering solutions by identifying and/or solving problems.

Reich estimates that symbolic analysts made up 8% of jobs in 1950, and 20% in 1990. After the dot-com revolution, I can only imagine that number has grown.

This shift in labor value has been jarring for many Americans, who are ill-prepared to compete for wages based on value-added by their labor, rather than simply time spent at work. Those Americans are seeing their wages stagnate, jobs disappear (mechanized/digitalized/out-sourced). The days of factories full of high-paying manufacturing jobs are gone forever. The question is how to respond to this change in economic dynamics. In a future post I will look at what Reich proposes, and where I think he goes astray.

passenger or policymaker

2008-06-03T22:50:00.000-04:00

Alexander Hamilton is probably my favorite founder, not because he was necessarily the most brilliant (though he’s up there), or has the best life story (though he does…), but because he was right where nearly everyone was wrong. Outside of George Washington, you could take away any of the founders and reasonably expect their place to be taken by someone with similar views. Hamilton was an exception. History has borne out his belief that American survival and prosperity hinged upon a militarily and economically integrated United States. Hamilton’s actions provided the opportunity for the US to become the economic superpower of the mid-late 20th century.

Hamilton wasn’t a popular man. He was brash and direct to a fault, but more than his mannerisms, his ideas themselves engendered a political and, at times, personal revulsion. He told brilliant men that not only were their proposals not optimal, but that they were backwards, and that the direction they actively support traveling would bring about our destruction. Compromises would be famously hashed out, but there was no real middle ground to walk.

Nassim Taleb, author of The Black Swan: The Impact of the Highly Improbable, plays a similar role today. Taleb is telling governments and policy-makers that they have it all wrong. Whereas Hamilton demanded economic and military integration, Taleb asks only for economists, bankers, and civil servants to get a real job.

Taleb observes the brazen interventions of government and business leaders into complex systems as foolishly overconfident. I think 18th century physician (and American founder) Dr. Benjamin Rush is a prime example of this trend. Rush was a brilliant man and student of medicine, however, he he was overconfident about what he knew. Rush was a champion of bloodletting because he was not aware of how little he understood about how the human body worked.

The problem with knowledge is that the human mind will be more confident it is correct with more pieces of information, even if that additional information is not useful, "Give a bookie 10 pieces of information about a race and he’ll pick his horses. Give him 50 and his picks will be no better, but he will, fatally, be more confident."

Taleb sees "governments and policy makers" as the modern-day bloodletters, who "don't understand the world in which we live." Taleb isn't critical of the policy-makers ignorance, but he is critical of "their attempt to control the ecology, [when] they don’t understand that the link between action and consequences can be more vicious. Civil servants say they need to make forecasts, but it’s totally irresponsible to make people rely on you without telling them you’re incompetent."

Let me take a step back and explain the phenomenon with which Taleb is concerned. His book title references how it was assumed that all swans were white for quite some time, but all it took was "the sight of just one black swan" to destroy that theory. Taleb argues that "every theory we have about the human world and about the future is vulnerable to the black swan, the unexpected event. We sail in fragile vessels across a raging sea of uncertainty. “The world we live in is vastly different from the world we think we live in.”

Taleb is therefore very critical of policy-makers, economists, and most of all, bankers, because "they live in a fantasy world in which the future can be controlled by sophisticated mathematical models and elaborate risk-management systems."

Normally, I would be skeptical of this type of expert-bashing, as it's usually accompanied by some superficial pandering to the "common man" or some other abstraction. But Taleb can't be dismissed so easily.

He has an alternative, less ambitious, but he would argue more effective attitude towards progress, "Medicine improved exponentially when the tinkering barber surgeons took over from the high theorists. They just went with what worked, irrespective of why it worked. Our sense of the good tinker is not infallible, but it might be just enough to turn away from the apocalypse."

Taleb is pushing inductive over deductive reasoning, which resonates with what other smart people are saying with regards to economic development, and jives with the tendencies I (among others) have observed towards overconfidence.

Bill Easterly, author of The Elusive Quest of Growth, is similar to Taleb in in his damning indictment of economic development experts. Easterly argues that while we have seen tremendous economic growth over the past 100 years, it has been in spite of the advice of economic development experts, not because of it. He argues that "the end of the “development expert” paradigm does not mean the end of hope for development. Development is already gradually ending poverty (global poverty rates have fallen by more than half in the past three decades) – not be- cause of development experts such as those who wrote the World Bank Growth Commission report – but thanks to more freedom for more of the 6.7bn individual development experts alive today." (If "freedom" seems a little vague, worry not, I will have a post exploring this notion more fully in the future.)

Megan McArdle also had a recent post which adds a nuance to the aforementioned overconfidence cognitive failing -- a self-importance bias. McArdle is writing specifically about adoption officials and airport security guards, but the lessons are broadly applicable:

"A big part of the problem is that people have a natural tendency to over-estimate their own importance. Nobody takes a job he believes is a waste of time, and people self-select into professions they happen to think make a big difference in society. So TSA security screeners believe they're making air travel safer, even when the evidence says they're not. Patent attorneys believe they're promoting innovation, even in industries where the evidence says otherwise. And adoption officials naturally believe that they play a vital role in ensuring kids get placed in loving home."

The lesson I take from these stories is not that we are incapable of understanding anything, but that our fortunes will benefit from understanding that our minds are programmed to overestimate how much we know and how important we are to causes we care about. It is only when we are separated from the suffering brought on by our egoism that these delusions feel harmless or even pleasant.

I would rather join John Maynard Keynes' “brave army of heretics, who, following their intuitions, have preferred to see the truth obscurely and imperfectly rather than to maintain error, reached indeed with clearness and consistence and by easy logic but on hypotheses inappropriate to the facts.”

I haven't exactly reconciled Taleb's fierce criticism of economists, nor Easterly's dismissal of economic development experts, but I am inclined to believe that rather than shutting the door on "experts" the proper response is to cut the fat on what these experts are capable of understanding and sharing and what they are not. In the end, it equals gradualism over revolution, more tinkering, less forecasting, more experimentation, less paternalistic restraints and dictates, and perhaps most uncomfortably, reconciling the fact that we are resigned to be passengers in some processes that we simply cannot affect one way or another.

Taleb's warning is akin to a Greek tragedy. To act with the certainty of a paternalistic planner is to act hubristically; no man can understand the infinite amalgam of interrelated processes that make up the world around him, and if he acts as if he does, he will be punished by the force of his ignorance.

Self-awareness is the difference between a passenger who knows he is a passenger and a passenger who thinks he is a policy-maker and therefore makes the world a lot worse for him and everyone else through his floundering back and forth.

posting pipeline

2008-06-02T13:19:00.004-04:00

There are quite a few "big idea" posts in the pipeline that are currently gestating in different forms. It's helpful for me to organize thoughts beforehand into questions or topic areas, and I thought I would share what I'm thinking about. Any comment requests one way or another will affect what I get around to sooner rather than later:

1) Passenger or Policy-maker?
Rather than “Yes, We Can!” a more thoughtful response to a promising proposal would be, “Yes! Can we?” This post will explore how we have a tendency to be overconfident about what we know and we can do to bring about end results we desire. From individuals playing the stock market (such as myself) to high-powered execs in the banking world, there is good reason to believe we are living in a world very different from how we perceive it. The repercussions of this lack of understanding wouldn’t be so devastating if it wasn’t accompanied by an overconfidence that caused us to act brazenly despite the folly of running down a dark flight of stairs. This topic has direct and significant implications for business and political leaders, and by, extension, us, as the shareholders and citizens who support their leadership.

2) Hope for the Bottom Billion
There is reason to hope for the bottom billion people in the world, who have been excluded from the tremendous economic growth of the mid-late 20th century. This post will explore what is changing for them, why, and what we can learn from the process.

3) What is a nation-state?
In light of a book by Robert Reich, former Secretary of Labor, this post will examine the role of the nation-state, and how different modes of interpretation can change the nation-state’s perceived utility.

4) Work in the 21st century
In light of the same Reich book, this post will look at how the value of different types of work has been changing, and how these changes have affected both the spatial distribution of workers and the income potential of different types of workers.

5) Translating environmentalism into policy
Most people agree that it’s better to conserve the environment than to destroy it, especially if it will cause large-scale destruction in the not-so-distant future. Disagreement arises because of unclear costs and benefits. I’ve already posted before about the lack of clarity on the actual goals of many environmental plans (Why 30% reduction in X? Why not 40%? Or 20? Why not a reduction in Y?); this post will focus on the cost end of conservation plans (SPOILER ALERT: Al Gore’s plan is a little extravagant…)

6) What is Freedom?
Are you free from oppression, or free to do something? Is freedom a negative right or a positive right? This post will join the chorus that economic freedom is the key to personal and public prosperity, but with an understanding of freedom as a positive, not negative, right.

7) Learning from video games
If I had to define my computer supraliteracy period I would call it the “Pre-Second Life Age.” The 21st century has ushered in the creation of parallel virtual worlds, whose potential has not come close to being tapped. The Harvard Business Review recently had an article on the potential for leadership development in these massive multiplayer role-playing games, and adeptly notes that the current crop of games is especially well-suited for quick tactical decision-making often found in military action. I don’t know a ton about these games first-hand, but they appeal to me as incredible social science laboratories.

8) Reverse engineering the Swedish Kool-Aid
The Nordic states seem to have it all figured out. They eclipse the competitiveness of the US while providing the social net of Europe. How? Why? What can we learn from our blonde friends?

9) Gentrification, suburbia, and sprawl
In light of Alex’s comment on the Jane Jacobs book, an exploration of how the government has accidentally preconditioned cities for gentrification, scared up White Flight, promoted suburban sprawl, and created an incentive for people to arrange themselves spatially in an unproductive and inefficient pattern.

10) The problem of fairness
In light of Max Bazerman’s work on cognitive biases, a look at how we perceive fairness, and how sensitive our perception is to the presentation of data. Special attention paid to understanding how to develop a coherent conception of fairness.

11) Cognitive biases in business
Bazerman has laid out a ton of cognitive biases borne out in psychological studies. This post will briefly summarize them and connect them to current policy issues.

shared items feature to your right

2008-05-31T07:53:00.002-04:00

Just wanted to include a brief explanation of the recent addition to the blog -- shared items. Basically, Google Reader allows me to centralize the posts from all the blogs I read, as well as magazine articles, etc. It also allows me to "share" posts/articles I find of particular interest, which I do, and often include a brief note on what I take from the post. It's quick and easy, and fun for the whole family!

you thought the miracle fruit was cool...

2008-05-30T07:48:00.000-04:00

Man, two articles in one week that completely change what I thought was possible. There was an 'Uncontacted tribe' sighted in Amazon, one of the "few remaining peoples on Earth who have had no contact with the outside world."

A small airplane flew over overhead of the tribe and managed to take some pictures which you can see by clicking the link. In one of the shots, some of the tribesmen aim their bows at the large alien object overhead -- truly surreal.

Even looking at the pictures, I am struck that most of the qualities we consider to be "human," are actually social, and it makes sense that those with the least social interaction/exposure would appear the least human, or most primal; I don't think we quite recognize how much "civilization" depends not on the work of man, but on the collaboration of men. Without that exchange, there is no growth, and you're still hoping that there's not a flood, drought, or disease that season to wipe out you and your family.

According to Survival International, there are more than 100 uncontacted tribes worldwide, most of them in Brazil and Peru. There a few groups like Survival that are fighting to preserve a space (really more like a wildlife preserve than they would care to admit) for these indigeneous people to live without every coming into contact in the world.

ammo for liberals

2008-05-29T16:26:00.003-04:00

No, I don't mean some juicy rumor about a McCain/Bush romantic romp through Saudi Arabia paid for by stolen welfare funds. This post aims at providing the left with some rational material to work off for criticizing the right and their insistence on market-driven everything. I've come across a blog post that provides some (surprising) insights into health care, which I don't think the people to the right of me would necessarily accept, but I find very interesting and worthy of discussion.

I stumbled across the treatise on health care, via Bryan Caplan over at EconLog, who offered his comments on this supremely interesting recent article on health care in Singapore. Caplan characterizes the Singaporean system as "not laissez-faire, but it is state intervention with the hands of a surgeon."

Caplan then quotes from the piece:

"What’s the reason for Singapore’s success? It’s not government spending. The state, using taxes, funds only about one-fourth of Singapore’s total health costs. Individuals and their employers pay for the rest. In fact, the latest figures show that Singapore’s government spends only $381 (all dollars in this article are U.S.) per capita on health—or one-seventh what the U.S. government spends.

Singapore’s system requires individuals to take responsibility for their own health, and for much of their own spending on medical care. As the Health Ministry puts it, “Patients are expected to co-pay part of their medical expenses and to pay more when they demand a higher level of service. At the same time, government subsidies help to keep basic healthcare affordable.”

The reason the system works so well is that it puts decisions in the hands of patients and doctors rather than of government bureaucrats and insurers. The state’s role is to provide a safety net for the few people unable to save enough to pay their way, to subsidize public hospitals, and to fund preventative health campaigns.

In Singapore’s system, the primary role of government is to require people to save in order to meet medical expenses they don’t expect. While the Singaporean government does regulate prices and services, its hand is nowhere near as heavy as that of governments with extensive nationalized healthcare, such as the United Kingdom or Germany."

Unlike the United States, Singapore features four related, but distinct entities to provide health care. By dividing the health care responsibilities to distinct bodies, Singapore avoids the problem that plagues the American health care market -- trying to accomplish fundamentally different tasks within the same entities: (a) provide everyday care, b) provide insurance for catastrophic unplanned care, c) subsidize care of those who can't afford it, d) subsidized the disabled elderly.

In the US, we try to do it all within the same program, and we do it poorly. Singapore specializes, and is unsurprisingly much better at each task.

1) Medisave: "covers about 85 percent of all Singaporeans, is a component of a mandatory pension program... accounts can be used to pay directly for hospital expenses incurred by an individual or his immediate family."

2) Medishield: "a national insurance plan that covers the higher cost of especially serious illness or accident, which in Singapore’s system is described as “catastrophic.” Singaporeans can choose Medishield or several private alternatives, some offered by firms listed on the Singaporean stock exchange. Premiums for the insurance plans, including Medishield, can be paid using Medisave accounts. "

3) Medifund: "for the roughly 10 percent of Singaporeans who don’t have the means to pay for their medical needs, despite the government’s subsidy of hospital and outpatient costs. The fund was set up in 1993 with $150 million, with the budget surplus providing additional contributions since then. Only interest income, not capital, may be disbursed." (A self-perpetuating financial assistance program, WHAAAAAAAA?!?!?!?)

4) Eldershield: "private insurance for disability as a result of old age. It pays a monthly cash allowance to those unable to perform three or more basic activities of daily living."

It's important to note that patients aren't isolated from price in this system, unlike in the US and Europe:

"Nearly all Singaporeans contribute directly toward each treatment, including prescription drugs, through patient co-payments of 20 percent for amounts above deductible levels. The money to meet deductibles and co-payments can come out of a person’s Medisave account."

A Singaporean health policy professor cites these principles as the source of Singaporean success:

“The creation of incentives for responsible behavior and the efficient delivery of services; the discouragement of overconsumption through cost-sharing; the regulation of hospital beds, doctors, and the use of high-cost medical technology; the promotion of personal responsibility; targeted government subsidies; and the injection of competition through a mix of public- and private-sector providers.”

Does Singapore have all the answers? Definitely not. Check out the article yourself to see Singapore deal with the same issues we are struggling with in the US.

I certainly would prefer a more market-based approach, but if you are more market-averse, Singapore is a much stronger example than France, Cuba, or anything else you'll find in SiCKO. Advocates of the single-payer system should be a bit more discerning in the examples they seek to emulate. I think even most single-payer advocates would admit that the single-payer strategy depends absolutely on intelligent design to work (at all), and simply pointing to the most politically-convenient or recognizable is not a recipe for reform, but simply more of the same.

tripping on miracle fruits

2008-05-28T20:21:00.002-04:00

No, miracle fruit isn't slang for some new street drug, though it should be. The Miracle Fruit, or Synsepalum dulcificum as its known to those in the know, was recently featured in the NY Times. Suffice to say, this fruit blows my mind.

The Miracle Fruit works because of an aptly named protein, Miraculin, which binds to your taste receptors and turns all those sour tastes sweet. This isn't some minor transformation. For one to two hours, you could theoretically drink down battery acid like syrup (though that doesn't sound great either).

More practically, one person interviewed drank Tabasco sauce and said it tasted like donut glaze, and lemons like candy -- mind-blowing.

It works for about 2 hours it seems. You can order them online, though they are pricy.

Given the proliferation of diabetes and other sugar-induced disease, this would seem to indeed be a miracle drug. Unfortunately, the FDA killed that idea about 30 years ago. Why exactly? Haven't looked to see. There are no safety issues I've come across -- it may not be good enough for the FDA, but it's good enough for me.

one point for social cripples

2008-05-21T23:39:00.006-04:00

While searching the internets for results-driven philanthropic efforts, I came across a Wired magazine article by Clive Thompson on "why we can count on geeks to rescue the earth." Thompson is interested in why Gates, "practically a social cripple, and at times he has seemed to lack human empathy" is the "first major humanitarian to take action" against malaria, diarrhea, and parasitic infections, all of which "flew under the radar of philanthropists in the West."

The answer? Gates has been the first to target the world's biggest and most preventable killers not in spite of his social backwardness, but because of it -- "He's also a geek, and geeks are incredibly good at thinking concretely about giant numbers."

Thompson argues that this analytical ability is a particular advantage in philanthropy because of a cognitive failing ingrained in most human beings -- "We are very good at processing the plight of tiny groups of people but horrible at conceptualizing the suffering of large ones.
...
We'll usually race to help a single stranger in dire straits, while ignoring huge numbers of people in precisely the same plight. ... We'll break the bank to save Baby Jessica, but when half of Africa is dying, we're buying iPhones."

This isn't idle speculation. Psychologist Paul Slovic has explored this cognitive failing, including one experiment in which "people were asked to donate money to help a dying child. When a second set of subjects was asked to donate to a group of eight children dying of the same cause, the average donation was 50 percent lower."

Gates' ability to think concretely about big numbers enables him to "truly understand mass disease in Africa. We look at the huge numbers and go numb. Gates looks at them and runs the moral algorithm: Preventable death = bad; preventable death x 1 million people = 1 million times as bad."

Thompson concludes his piece:

"We tend to think that the way to address disease and death is to have more empathy. But maybe that's precisely wrong. Perhaps we should avoid leaders who "feel your pain," because their feelings will crap out at, you know, eight people.

What we need are more Bill Gateses — people with Aspergian focus, with a direct sensual ability to understand what a million means."

That is a terrific advantage if you actually can "understand what a million means" -- I can't -- but I think Thompson is ignoring the power of being aware of that cognitive failing. Your instinct is likely to turn out of a skid, but once you are aware of that instinct and its negative repercussions, you can alter your behavior through purposeful thinking to create a better end.

Overall, I am happy to find an article exploring the negative effect of cognitive bias on philanthropy. I am researching the world of philanthropy in hopes of identifying low-hanging fruit (such as malaria, diarrhea, infectious disease) that take only a little investment for a large payoff.

What is interesting is that early results would suggest the problem isn't necessarily a lack of available philanthropic capital, but a fragmented market of NGOs with unclear objectives, little accountability, and varying visibility.

The answer might not be more money, but structural changes to the way NGOs execute the business of doing good. We'll see.

poor and huddled masses

2008-05-21T22:05:00.004-04:00

Kevin Mawae is sick and tired of being confined to the lower class. He's worked for 15 years in a gritty industry and is tired of watching flashy prodigies get huge salaries that he could only dream of, despite being among the best at his job. Like most people in that situation, he wants to do something about it. He wants to limit the salaries and bonuses of that higher strata of workers. As it is, the current system of financial reward simply isn't fair in the mind of Mr. Mawae.

The catch?

Mawae is an offensive lineman for the New York Jets, and in 2002 made more than $9 million as the highest paid offensive lineman in the league. Yet the aforementioned sentiments are very real -- Mawae is upset with the contracts first-round picks are getting nowadays, specifically BC alum Matt Ryan's six-year, $72 million deal.

"I know there is sentiment around the league amongst the players like, 'Let's do something to control these salaries and control these signing bonuses' and things like that," said Mawae.

I'm reminded of a quote from P.J. O'Rourke that Greg Mankiw recently cited:

"I have a 10 year old at home, and she is always saying, “That’s not fair.” When she says that, I say, “Honey, you’re cute; that’s not fair. Your family is pretty well off; that’s not fair. You were born in America; that’s not fair. Honey, you had better pray to God that things don’t start getting fair for you.”

I think there is something telling in Mawae's reaction to the Ryan contract. He wants fairness, but his conception of fairness extends only so far as he would benefit. You don't see Mawae admitting that his salary should be controlled to better serve fairness.

The consultant who's watching the Jets in the stands feels the same way about rookie contracts as Mawae, but not simply about rookie contracts, but Mawae's contract as well.

The low-skilled worker feels the same way as the consultant, but not simply about football contracts, but about the prosperity enjoyed by college graduates as well.

Of course, like Mawae, the low-skilled worker may be treated "unfairly" relative to some, but if he were to be treated fairly along with low-skilled people all over the world, he would not like the result.

I think this story is helpful for the greater discussion of poverty. Liberals still stick to their guns with "relative poverty" indicators, so that a person in the US with a car and a microwave is labeled "poor," the same as if he had malnutrition and a life expectancy of 40 years in a developing country living on less than a dollar a day.

The Mawae story is relevant because it demonstrates that there is no magic dollar figure when an individual ceases to believe he is not being rewarded fairly; pursuing the end of relative poverty is chasing a ghost. If we could somehow snap our fingers and the world's citizens were paid like NFL players, people would still think there were significant "relative poverty" wrongs that must be righted.

In this worldview, lowering the well-being of others, the redistribution of poverty, is a victory. When Mawae goes to the bargaining table with the owners, he has stated he will look to stop these high rookie salaries. Will he benefit at all? Likely not, it will simply mean more money for the owners.

When it comes to millionaire football players, who cares if they screw the pooch. The problem is when this same attitude leads individuals to throw away large pieces of the general economic pie because of petty jealousy and envy. The socially just shouldn't be trying to turn princes into paupers in the name of relative-poverty justice. Justice isn't relative.

Update: How does this relative poverty argument play out in the real world? Consider this article, Has Ireland’s Rising Tide Benefited Its Poor? Within, Lane Kenworthy explains how poverty is "on the rise" in Ireland according to standard indicators, despite the fact that the poorest Irish are better off now than they have ever been. Kenworthy offers a worthy substitute for the current relative poverty indicators -- income at the tenth percentile of income distribution; in other words, how much better or worse off are the lowest 10% of income-earners in a given area. Given this indicator, Mawae, the low-skilled worker, and the Irish would all see that their well-being has improved greatly over the past 10-20 years, even as "relative poverty" has grown, allowing us to focus our attention on the genuinely poor and huddled masses.

learning from jane jacobs: the poverty trap

2008-05-21T20:40:00.002-04:00

Paul Collier, author of The Bottom Billion, and Jane Jacobs, author of The Death and Life of Great American Cities, are both careful to differentiate between slums and low-income areas. While Collier and Jacobs' focuses of study differ (far-away nation-states vs. local ghettos) , they both arrive at the same conclusion -- certain geographic areas are caught in poverty traps that prevent the people therein from enjoying any improvement in well-being or opportunity without moving out. Unfortunately, I have only sparse, disjointed notes from the Collier book at the moment (a mistake I must rectify...), so this post will focus on Jacobs. And while I probably should ignore the easy Thomas Friedman diss, I can't help myself -- once again, the world is not flat, geography is still very important to billions of people.

Jacobs describes the American slum as "a human catch-pool ... that breeds social ills and requires endless outside assistance." Slums are notable by their "stagnation and dullness" and "[failure] to draw newcomers by choice."

Jacobs defines a slum as "an area which 'because of the nature of its social environment can be proved to create problems and pathologies,'" which is different than "'a stable, low-rent area.'" The difference is that citizens are able to "make and carry out their own plans right there" in low-rent areas, but not slums. Low-rent areas help their denizens improve their lot in life, and generally eventually become higher-rent areas, not so in slums.

In slums, high-achieving families are driven out (perhaps because of the unsafe streets, lack of available financing for low-income areas, etc.), acting to reverse natural selection for slums. Herein lies the poverty trap at work -- a negative feedback loop that prevents the area from enjoying the positive externalities of economic development.

I'm reminded of a shallow pool of standing water, breeding disease and poisoning those who drink from it. Except most pools evaporate or are washed away; in the slum, the forces that would purify the water source through dilution or some other manner simply leave -- the pool persists.

Part of this negative feedback loop is the lack of social fabric, which only gets worse over time as more and more people act without accountability. Normal state policing can never reproduce the social control a community needs, the community itself must (and indeed the non-slum does) provide a check on illicit behavior, generally without anyone noticing they are a part of this self-policing effort. No such internal check exists in slums. In fact, the opposite occurs; the city continues to act as a conduit for its denizens to cooperate, but to destructive, rather than productive ends. The narc, rather than the drug dealer, gets ratted out.

What are the constraints that trap slums? The most glaring is safety. Just as commerce across the seas has depended on safe seas, so does city commerce depend on safe streets. The analogy extends even further; just as sea trade amounts to a competition between productive forces of exchange and destructive forces of extortion for dominance, so does street life.

The productive forces (often taking the form of bodega owners or other local shops) must make the streets "lively enough to be able to enjoy city public life and sidewalk safety." Jacobs argues the key is to generate productive activity through the stimulation of commerce and cross-use to tip the balance of local power in favor of those who desire peace and commerce. The competition is complex, and the failure of good men and women in slums is a reflection less of their intention or ability than it is of the greater failure to comprehend the specific constraints that are preventing a community from concentrating productive individuals (e.g., is it isolated from the productive outsiders needed for development, does low-income housing push individuals out of the community who reach a certain level of success, is the entry barrier so high that it precludes entrepreneurial citizens or outsiders from establishing themselves?)

Tangentially, I've come to think that 'trap,' while a useful term, may be less so than 'constraint' for economic development discussion. Collier's book categorizes constraints under: conflict trap, natural resource trap, the trap of being landlocked with bad neighbors, and the bad governance trap. While these terms are proper descriptors, they are not as actionable as, say, the market access constraint. We can't do much about a nation-state being landlocked, but we can enhance market access. Or take the natural resource trap; sure it exists, but wouldn't it be more worthwhile to deal more explicitly with the specific constraints produced by these natural resources?

helpin out in Burma

2008-05-20T21:11:00.003-04:00

I recently received an update from the Buddhist Relief Mission, which is working with the Young Buddhist Student Literacy Mission, in Kolkata, West Bengal, India, a non-profit organization carrying out educational and social welfare activities, including a school and a micro-finance program aimed at women's empowerment, to supply local volunteer aid workers inside Burma:

"We purchased $6000 worth of water purification tablets, essential medicines, and canvas (at wholesale prices), translated all the instructions for the medicine into Burmese, packed everything, and sent it with two groups of travelers returning to Burma. Because of our close relationship with airport and airline officials, we were able to have all of these relief supplies transported without paying any overweight charges."

The supplies and funds have been directed to the worst-hit areas of the Irrawaddy Delta. Clearly, there is more to be done. They've said they will provide photos from the area of the volunteers in action. Please consider a quick and easy donation via Paypal through the Buddhist Relief Mission. Makes a great gift.

Words not enough to get that emotional pull of the homeless mother and son on the corner? Click here for some graphic images...

chris matthews sounding sensible?

2008-05-19T23:23:00.006-04:00

I certainly have my share of conservative tendencies, and often find myself agreeing with Republican policies, but I simply cannot join them (though to be fair, I often feel the same after hearing Michael Moore, et. al sound off).

Media loser Chris Matthews proves that if you give a monkey 100,000,000 hours of cable news broadcast time you'll get one Colbert-esque "nailing" moment when he takes it to a partisan hack -- in this instance, Kevin James. You see, James wanted to defend Bush's recent comments criticizing "someone's" interest in negotiating with bad guys, which Bush equated with appeasement of Hitler.

Unfortunately, while Mr. James is keen on defending on Bush's criticism of Allied appeasement in WWII and appeasement in general, Mr. James has no idea what Neville Chamberlain did , or what appeasement even means. Though to be fair, Mr. James is correct in his rebuttal that he didn't bring up the Hitler analogy (Bush did); still that isn't a very convincing argument when you remember that James has just spent the past three minutes on the broadcast yelling about the evils of appeasement, while blissfully unaware of the primary justification for dismissing appeasement as dangerous and self-defeating. This is up there with Colbert nailing the Congressman who wanted to put the 10 Commandments on public property when he couldn't even name them.

Negative points to Matthews for having this joke of a radio host on his show. Positive points to karma for nailing that annoying know-it-all moron who somehow made it "big" while being as dumb as a log. Man I hated that kid. (If I could, I'd make this post "fair and balanced" with a similar critique of the pompous ass hippie liberal, but those guys simply don't dominate the air waves in the same fashion; suffice to say, I'll be ordering an Ingrid Newkirk sandwich in a few years).

workers are consumers, too

2008-05-19T09:37:00.005-04:00

As the Democratic primary enters its fourth year, it’s as good as time as any to pay heed to the potential pitfalls of government intervention. Sure, it’s easy to see the appeal of the small local grocer and pharmacy over the Wal-mart behemoth. In addition, frustration with the destruction of local jobs, which has accompanied the gale of globalization and technological development, is understandable. But let us not ignore the benefits – and no, I don’t mean benefits that disproportionately benefit the most well-endowed with money and/or brains. Quite the contrary, some benefits concentrate in the lower economic strata, especially lower prices.

A recent article in the Economist documents the increasingly high cost of living in France, even when compared to (21st century) ally Germany: “A basket of identical items costs 30% more in France [than in Germany], says a study by La Tribune, a daily.” Efforts to inject greater competition into the marketplace have been stymied as “voters see competition through the eyes of producers—as a menace to jobs and factories—rather than consumers.”

Would you rather have the ~30 million Americans below the poverty line paying 30%+ for groceries to preserve the inefficient employment of a small subset of that population? The (il)logical conclusion of ‘producer preservation’ can be found in a story (lifted from Bryan Caplan article) about an economist who visits China under Mao Zedong. He sees hundreds of workers building a dam with shovels. He asks: “Why don't they use a mechanical digger?” “That would put people out of work,” replies the foreman. “Oh,” says the economist, “I thought you were making a dam. If it's jobs you want, take away their shovels and give them spoons.”

One of my favorites.

great leap forward for biblical art

2008-05-18T22:34:00.007-04:00

He Qi's paintings conflate the biblical scenes of Michalengelo with the stylings of Picasso and the experience of a child of the Cultural Revolution. Check out his web page here and "read more" if you want to see his take on Moses' flight into Egypt and Jonah and the Whale. (Who doesn't?) If anyone wants to make me happy they can pay Qi to make me a stained glass window...

real chance for health care reform

2008-05-14T20:15:00.006-04:00

Everyone wants to fix healthcare. McCain likes the market, but his plan for insuring those with pre-existing conditions is somewhat shoddy, and certainly doesn't put your mind at ease if you have a loved one with any sort of debilitating disease. The Dems offer two different flavors of the same lollipop, but won't offer a realistic plan for financing their operations (expiration of Bush tax cuts won't cut it). But did you know there was a reform proposal being debated in Congress that actually passed mustard as budget neutral by Congressional Budget Office? A bipartisan bill that seeks to finally move American health care beyond the employer-based model of the 20th century while upgrading the regulatory infrastructure and providing universal health care?

Sigh, if only we weren't in an election year (or had a ceaseless election cycle), the Wyden-Bennett plan would be getting more attention. Sens. Ron Wyden (D) and Bob Bennett (R) hail from Oregon and Utah, respectively, and yet found enough common ground to rehaul the American health care system:

"Under the Wyden-Bennett system, health dollars would be controlled by the individual (a long-time conservative goal) and used within a restructured, heavily regulated, totally universal, insurance marketplace."

The proposal has six Republicans and six Democrats on board, already making it "the largest bipartisan coalition ever assembled around a concrete piece of universal health-care legislation.
...
The Lewin Group, a highly respected health-care consulting firm, estimates that the plan would save $1.4 trillion over 10 years.

Unlike the proposals being bandied about now, this proposal will actually control cost to some degree -- which is *THE* problem of American health care, while still providing a "minimum standard for comprehensiveness (equivalent to the standard Blue Cross/Blue Shield plan currently offered to members of Congress), and they could not discriminate based on pre-existing conditions, occupation, genetic information, gender or age."

As you might imagine, a legitimate health care reform package is far too massive to relate in its entirety via blog post, so I will once again point you to this article on Health Care's Odd Couple. I have a few questions, but I would support its adoption tomorrow, especially if meant that none of the Presidential candidates' plans were implemented. One Health Affairs article I read directed readers to keep an eye on this proposal, as it has a better chance of being the grand plan for reform than the Presidential plans. I hope so.

living with cognitive bias

2008-05-14T16:52:00.011-04:00

There are few things scarier to an individual than losing the capacity to think. Alzheimer's disease is heart-breaking, as individuals' capacity to mentally engage the world drowns in increasing levels of bewildering uncertainty.

Yet few are concerned with exploring how their own brain works, and how it can be made to work better in hope of inching a few steps closer to the shore of understanding.

I haven't been particularly interested. I knew the cliches about your brain being a muscle, and agreed that even if given all the information in the world, some people just lack in mental chops. I came to equate brainpower with natural ability and hard work. I paid no regard to form -- or working "smart"-- yet anyone who has swam in a pool knows you can have all the ability in the world and splash like crazy, but your achievement depends on your understanding of how you swim.

The natural reaction is panic, an instinct as ill-suited for water as quicksand. This predisposition -- evidence of a more broad cognitive bias -- sabotages one's efforts to swim, and indeed survive.

How these cognitive biases can submarine our thinking, specifically with regards to man's efforts to help others, is the subject of this post.

The story of how I came to focus on cognitive biases may very well be case study #1920812 in their effects. After years of study (in young-people time), I began to recognize a pattern in thinking and policy that failed to heed any liberal/conservative distinction. I tried to isolate the causal variables of this mischievous pattern on the macro level, but failed. The logical disconnects (to use a term I once hated, but alas...) were everywhere.

Not the usual kind either; it wasn't the deliberate misrepresentation of facts or outright lying. It was sincere, complex, intellectual, but also, irrational. In attempting to identify the disease, I managed only to flail wildly at the symptoms, confusing one of my few readers to the point of distraction.

My dad mentioned heuristics and on exploring the topic, I came across cognitive bias. I was aware of the term, but it didn't mean much to me. On reflection, I noted that Bryan Caplan's book, "The Myth of the Rational Voter," dealt with the notion of cognitive biases. Caplan identified four biases, "anti-market, anti-foreign, pessimism, and make-work," which he contended drove individuals to vote irrationally in a systematic (and thereby destructive) manner. Caplan is interested in cognitive bias as an independent and detrimental factor in public choice.

I won't explore these biases directly, as they aren't exactly what I'm interested in. I will explore the role of cognitive biases in "doing good" (I am open to suggestion for a change in scope, however).

Cognitive biases make a boring nemesis for the do-gooder (and by extension, have seen relatively little academic treatment.) It is far more exciting to perceive of the do-gooder as an clever underdog, held back by the selfish and greedy who will one day be undone and the the do-gooder will be free to do the good deed. I will look into how the do-gooder can be his own worst enemy, and how understanding revelant cognitive biases can empower the do-gooder to do "better."

NOLA -- cutting edge of education

2008-05-13T18:08:00.003-04:00

Alex Tabarrok over at MR finds some supporting evidence for the advantage and viability of charter schools and school choice in an unexpected place - New Orleans. With little fanfare, Hurricane Katrina's destruction allowed for a “once-in-a-lifetime opportunity to reinvent public education.”

"Stripped of most of its domain and financing, the Orleans Parish School Board fired all 7,500 of its teachers and support staff, effectively breaking the teachers’ union. And the Bush administration stepped in with millions of dollars for the expansion of charter schools—publicly financed but independently run schools that answer to their own boards. The result was the fastest makeover of an urban school system in American history."

The transformation hasn't turned the kids into Einsteins, but there has been demonstrable improvement in what was an entirely stagnant school district.

"Classes are smaller, many of the teachers are youthful imports brought in by groups like Teach for America, principals have been reshuffled or removed, school-hours remedial programs have been intensified, and after-school programs to help students increased... Mr. Vallas attributed many of the improvements in testing to the new teachers. 'The biggest contributing factor was the quality of the instructors,' he said."

A commenter at MR gets at the crux of the issue:

"Smaller classes. Young, energetic teachers. More remedial programs. More after-school programs. Can't government do this? If the answer is no, why not? If the answer is yes, why hasn't it?"

Those are very fair questions for both sides of the private/public debate. I think the government cannot be relied on to do this because education, especially to low-income kids, is too dynamic for top-down management. No Child Left Behind has highlighted the difficulty in top-down accountability, and the low reported results demonstrate that we have not figured out how to relay even the basic concepts needed for success.

There's a lot of experimentation that needs to be done. Teachers and principals need the flexibility to try different programs, allocate resources differently -- in short, to innovate. There will be success and failure in this process.

I think government programs are ill-suited to support this process, as they are vertically-structured organizations that manage local institutions by ensuring they comply with certain processes, curricula, standards of practice, etc. They inherently stifle innovation and create incentives to stick to established practices, even when the established practice is not providing acceptable results to a large number of students.

I don't think it's necessarily impossible for any government managed school to be innovative or successful. The government (likely state level) might introduce market concepts (increase flexibility and accountability for principals, school choice, etc.) into the government-owned system; this artificial environment could certainly be better than what we have now.

Still, the artificial dynamism will never reproduce the dynamism of the actual market. Just as I would rather hire a consultant to teach me how to improve my business, I would rather have a professional, than a bureaucrat, in charge of teaching my kid how to write complete thoughts. If you don't like how they're doing, you can always hire a different one.

value of military intervention

2008-05-11T16:32:00.004-04:00

Paul Collier is back again with cost-benefit analysis of foreign aid and military invention in conflict areas. The short story is that foreign aid and military intervention can and indeed usually do reduce bloodshed around the world. The invasion of a centrally-controlled and ordered Iraq, Collier notes, is not representative of the usual efficiency and effectiveness of such engagements; "the far more typical scenario is political violence within a small, low-income, low-growth nation burdened with strong ethnic divisions."

Collier begins by arguing that conditions prohibiting military spending of aid packages by host countries is important, as "about 11% of all aid is currently diverted into military spending, which significantly increases the likelihood of violence." The reduction in risk and increase in discretionary cash would allow benefits from aid to more than quadruple costs.

Even still, aid is less cost effective than the use of peacekeeping forces:

“Compared with no deployment, spending $100 million on a peacekeeping initiative reduces the ten-year risk of conflict from around 38% to 16.5%. At $200 million per year, the risk falls further, to around 12.8%. At $500 million, it goes down to 9%, and at $850 million drops to 7.3%.”

This does not include the conflict abatement that occurs because the belligerents know that well-armed, well-trained troops will be dispatched if they are to act violently. To that end, Collier recommends “an “over the horizon” security guarantee: a reliable commitment to dispatch troops if they are needed. A guarantee could be offered by the UN or a regional power like the African Union to protect governments that came to power through certified democratic elections.”

Collier believes that such “a guarantee could credibly help the world avoid three of the four new civil wars expected in low-income countries in each decade.”

What would the cost be for a capable security force? Around $2 billion annually. And the benefits? Collier argues that the returns on the “significant reduction in the risk of conflict and faster economic growth are between 11.5 and 39 times higher.”

Not a bad investment.

Collier concludes by providing an overview of a general strategy for helping nations escape the conflict trap, which I would endorse without question: “Combine aid, limits on military spending, peacekeeping forces, and “over the horizon” security guarantees in a way that ensures that the developed world deals with hot spots consistently. The UN Peace-Building Commission has the potential to coordinate this. The annual cost of the full package would be $10.8 billion, but the benefits to the world would be at least five times higher.”

The problem is no one, but the US (for all its problems), has shown much of a commitment to aid with this public good.

what to do in myanmar?

2008-05-10T13:40:00.007-04:00

I remember speaking with some German friends a few years back about just war and objecting to their characterization of ALL military engagements as inherently unjust. The context was the war in Iraq, but we weren't discussing the wisdom of the invasion or the objective virtue of that particular engagement, but the potential for war to be just.

My stock scenario is the genocidal regime, which most people I talk to seem to agree justify the consideration of military intervention (the decision to actually intervene should also take into account the likelihood of success and potential fallout).

Romesh Ratnesar, over at Time, raises another scenario that might pass mustard with the peacenik crowd, or at the very least, make them acknowledge the terrific human loss that their international consensus politics and soft power allow to occur quite regularly. Ratnesar poses the question, "Is It Time to Invade Burma?"

I would rephrase the question; does the crisis in Burma warrant the consideration of military force to alleviate the crisis if need be? A less-appealing headline to be sure, but a bit more useful for our purposes.

Here are some relevant snippets from the article:

"By most reliable estimates, close to 100,000 people are dead.
"With as many as 1 million people still at risk, it is conceivable that the death toll will, within days, approach that of the entire number of civilians killed in the genocide in Darfur."
"The military regime that runs Burma initially signaled it would accept outside relief, but has imposed so many conditions on those who would actually deliver it that barely a trickle has made it through."
"The Burmese haven't shown the ability or willingness to deploy the kind of assets needed to deal with a calamity of this scale — and the longer Burma resists offers of help, the more likely it is that the disaster will devolve beyond anyone's control."
"A lot is at stake here. If we let them get away with murder we may set a very dangerous precedent," says Jan Egeland, the former U.N. emergency relief coordinator.
"Some observers, including former USAID director Andrew Natsios, have called on the US to unilaterally begin air drops to the Burmese people regardless of what the junta says. The Bush Administration has so far rejected the idea — "I can't imagine us going in without the permission of the Myanmar government," Defense Secretary Robert Gates said Thursday — but it's not without precedent: as Natsios pointed out to the Wall Street Journal, the US has facilitated the delivery of humanitarian aid without the host government's consent in places like Bosnia and Sudan.
"If there were, say, the threat of a cholera epidemic that could claim hundreds of thousands of lives and the government was incapable of preventing it, then maybe yes — you would intervene unilaterally." But by then, it could be too late."
"The world has yet to reach a consensus about when, and under what circumstances, coercive interventions in the name of averting humanitarian disasters are permissible."

Is there a difference in allowing hundreds of thousands to die from disease and hunger and outright execution? In some ways, yes, just as first degree murder differs from second and third. What is consistent in both cases is the preventable loss of human life.

Members of the international community have stated multiple times that state sovereignty extends only as far as the state's willingness (and I would add ability) to protect its people from preventable death.

The issue is that these pronouncements carry little weight. Soft power (which usually ends up meaning economic bullying) works very well for certain types of regimes, but incentives have their limits.

I'm not advocating military intervention in Myanmar. I am suggesting that you don't have to be a neocon to believe that the international community's ability to act through existing international institutions to alleviate large-scale human suffering and death is basically non existent, and it is unacceptable to allow these preventable real human tragedies to occur because of abstract notions of state sovereignty (I'd love to hear someone, anyone, argue that the Burmese junta represent the people) or international consensus (couldn't avoid a security council veto short of an alien invasion). We should reinforce the processes of international cooperation when possible and respect the people's right to self-determination, but we mustn't join our European friends in sacrificing the lives of others at the altars of multilateralism and state sovereignty.

what jane jacobs can teach us: borders

2008-05-08T19:00:00.008-04:00

Jane Jacobs wrote the book on city planning for the latter half of the 21st century, and it's yours for a little more than $10 at Amazon -- The Death and Life of Great American Cities. Need more convincing?

Jacobs has a little something for everyone, whether you're interested in learning about why a neighborhood is hip or dull, slums improve or decline, your university's neighborhood was so boring, border towns are wastelands, automobiles are so problematic yet important, visual perception affects city life, city planning and public spending failed miserably, different processes of scientific thought shape city policy, the role of economic development in city formation, and/or the role of city formation on economic development. (Exhale)

I'll have a series of posts bringing out some of her broader points that I think are applicable to not only cities, but economic development at home and abroad. First up, is Jacobs' treatment of borders, which for the most part refers to borders between towns, but I find quite applicable to most borders.

Dead End or Hub?

Border areas suffer from a lack of land use and circulation of people, which stimulate local growth and safety. Intensity is low because border areas are the last stops on the line, dead ends that inhibit individuals from traversing across the border area. These border areas suffer from "fewer users, with fewer different purposes and destinations at hand," creating vacuums that are typically unproductive and unsafe. Some borders allow traffic one-way (Arizona/Mexico), others see traffic, but only at certain times, but the effect is the same. Border areas are best served by making the border a "seam rather than a barrier, a line of exchange along which two areas are sewn together." It's not that border areas, or frontiers, are prone to blight and disuse. To the contrary, frontier areas are positioned to be uniquely original and creative thanks to cross-border exchange and ability to escape potentially crippling central oversight. Jacobs' insight is that the border areas have their fate in their own hands, at least to some degree. They can fade into disuse and disrepair as the last building in the dead end, or they can serve as a hub for interaction between both sides of the border. The potential for these areas cannot be overstated -- frontier cities are often the centers of the next empires. Historically, commerce, exchange, and the free flow of ideas and goods have been the keys.

Claustrophobic borders

Some areas are large enough and diverse enough to be productive and vibrant despite being cutoff by a border (though the smaller area specifically near the border won't be vibrant), but it becomes increasingly problematic when the neighborhood is too small to support itself as a district. This merries well with the literature I've seen with regards to small nation-states -- too small to support the diverse commerce needed -- damned to exist as fragments by borders which inhibit the pooling of human and financial resources needed to grow. What if Rhode Island had its own currency, tariffs and regulated employment visas for other states in 1960? Well, if you add in a bunch of poor, violent neighbors and make our little state a land-locked country with no history of effective governance and scarce resources you'd have Burundi, with a GNP per capita of about $90. Would the dissolution of borders make Burundi the center of an African superpower? Likely not, but it does serve as a barrier to the the accumulation of capital -- financial and human -- needed to escape the poverty trap.

Minor internal borders as wasteful barriers

Jacobs has additional insights into man-made barriers that lead to dullness and blight, which I think are worth noting. She focuses on single elements with low intensity land use, such as civic centers, large medical centers, large parks, and universities. She reserves special criticism for universities, which orient inwards, completely disengaged from their surroundings, producing a deadness to all that borders them. She looks at Central Park and notes that the area goes nearly unused at night; it features many attractions like carousels buried deep inside, which should be pushed to the border with the city, to allow for greater utility. The challenge is to minimize these large single-use areas, or at least pack them near multi-use, high-concentration areas that can overcome the single-use area's deadening externalities. City planning misconceptions have even taken some positive city features, like waterfronts and parks, and made them dull, by insisting on single uses that serve only small segments of the populations at specific times -- making the areas dull and even unsafe at other times.

Next to you are walking around a city, pay attention to the buildings around you and how they are used; do they serve multiple uses, populations? Do the buildings use throughout the day, or only at specific times? Are there large single-use facilities? Are the blocks small or large (I'll have to return to this later)? By what visual cues do you segment the city? Jacobs packs a lot of insight to both shape how you understand the world around you and how the city around you is shaping your perception, habits, and opportunities.

maximize your ROI on social investment

2008-05-08T09:10:00.003-04:00

One of the concepts I often explore is how one most positively impacts the world given their scarce amount of personal resources. If you've read any past posts, you've noted that I've downplayed domestic policies' importance, and stressed more abject suffering abroad.

The death toll in Myanmar numbers in the tens of thousands, and will likely take many more lives in the future due to famine and disease. If you have no problem supporting relatively-well off Americans, I'd ask you to consider donating to disaster relief. Outside the incredible need in the devastated area, disaster relief is also more likely to make a positive impact than money spent in social programs, because it's much easier and cheaper to solve the problem of not having a roof with short-term assistance, than it is to fix behavioral problems through long-term subsidization of sub-standard living. Assistance following a disaster should be considered preventative care, to ward off the harbingers of disease and famine that accompany such destruction. Workable land and drinkable water are worthy, doable aims.

Bottom line, your dollar goes a lot farther to people who need it a lot more. Of course, this immense amount of suffering only underscores the despicable depth to which Myanmar's military regime has sunk. Even France wants to trample on their sovereignty... but alas, we wait on the UN for the OK. I wish we could see statistics for death by red tape.

You can do a small part, by donating to the Buddhist Relief Mission, which works in the area. The question with these organizations is always whether the money is actually being directed to the intended cause. I suggest the Buddhist Relief Mission based on the recommendation of Yale economic development professor Chris Blattman.

Blattman has ties to the area, namely friends who run a community program for Burmese refugees in Thailand, and they recommend the Buddhist Relief Mission. Blattman also points to a list of international aid agencies in the NY Times, if you want to play it safe.

hillary makes play for stupid, selfish vote

2008-05-05T09:25:00.009-04:00

Hillary Clinton's campaign has clearly segmented the voters and focused on the population who likes to whine about energy prices and will embrace any plan, no matter how inane.

UPDATE: Hoping for that last-second push in Indiana, Hillary busted out this gem at a minor-league baseball stadium, “We're going to knock balls out of the country's park, for the home team, which is America."

There are no typos in that sentence.

Credit must go to John McCain for getting the ball rolling on this stinker, but Hillary gets big points for not only supporting a stupid idea, but digging in against the entire economics profession when asked why her proposal could not find one_single_economist to endorse it: "I'm not going to put my lot in with economists. ... We've got to get out of this mind-set where somehow elite opinion is always on the side of doing things that really disadvantage the vast majority of Americans."

Apparently, Hillary is going with her gut on this own instead of listening to high-minded, so-called experts, with their "facts" and "years of study." Remind you of anyone?

As Arnold Kling wrote, "Soon I expect to hear the Senator from New York promise to jump out of a tenth-story window and fly, to demonstrate defiance of "elite" physicists who doubt the feasibility of the project. "

the rise of the rest

2008-05-04T19:50:00.006-04:00

Fareed Zakaria is back on Newsweek with a feature-length version of his upcoming book, "The Post-American World." Zakaria's piece is largely optimistic about the world at-large, but that doesn't mean he overlooks its problems -- he simply places these concerns in their proper context -- and advises the world's actors -- namely the US -- on how to best advance their interests.

Americans aren't quite sold on Zakaria's story of shared prosperity, as Zakaria quotes a figure of 81% of Americans believing the country is on the "wrong track." He argues that while the financial panic, war in Iraq, and terrorism are the hot topics of the day, Americans are actually disoriented by the greater changes at work -- the tallest building is in Taipei, biggest refinery is in India, largest passenger airplane is built in Europe, biggest movie industry is in Bollywood, etc.

Intellectuals wax about the 'decline' of the United States. An upcoming book asks if America is to follow the self-destructive path of the Roman Empire.

This is a sexy story, as there are certainly plenty of savory, superficial parallels between the US and fallen powers of the past.

Zakaria provides a different -- less American-centric -- narrative about the "rise of the rest," complete with insights into what the next steps are for global prosperity and American competitiveness.

Below, I will excerpt liberally from Zakaria's piece to skip to the juicy parts:

Rise of the Rest

The US has succeeded in its great, historical mission—globalizing the world.
The world will be enriched and ennobled as they become consumers, producers, inventors, thinkers, dreamers, and doers.
This is all happening because of American ideas and actions. For 60 years, the United States has pushed countries to open their markets, free up their politics, and embrace trade and technology.
Now, the underlying reality across the globe is of enormous vitality.
Share of people living on $1 a day has plummeted from 40 percent in 1981 to 18 percent in 2004 and is estimated to drop to 12 percent by 2015.
The global economy has more than doubled in size over the last 15 years and is now approaching $54 trillion.
Global trade has grown by 133 percent in the same period.
There are more power centers, with nearly all are invested in order, stability and progress.

Remaining Challenges

There remains real poverty in the world—most worryingly in 50 basket-case countries that contain 1 billion people [ED: This is where Paul Collier comes in...]
Global growth is also responsible for some of the biggest problems in the world right now. It has produced tons of money—what business people call liquidity—that moves around the world. The combination of low inflation and lots of cash has meant low interest rates, which in turn have made people act greedily and/or stupidly.
Prices are rising because of growing global demand; the effect of more and more people eating, drinking, washing, driving, and consuming will have seismic effects on the global system.
As economic fortunes rise, so inevitably does nationalism. [ED: China, India...]
Whether the problem is a trade dispute or a human rights tragedy like Darfur or climate change, the only solutions that will work are those involving many nations. But arriving at solutions when more countries and more non-governmental players are feeling empowered will be harder than ever.
The G8 does not include China, India or Brazil—the three fastest-growing large economies in the world—and yet claims to represent the movers and shakers of the world economy.
If China, India, Russia, Brazil all feel that they have a stake in the existing global order, there will be less danger of war, depression, panics, and breakdowns. here will be lots of problems, crisis, and tensions, but they will occur against a backdrop of systemic stability.

The US still has a lot going for it...

Currently ranked as the globe's most competitive economy by the World Economic Forum.
Dominant in many industries of the future like nanotechnology, biotechnology, and dozens of smaller high-tech fields.
Universities are the finest in the world, making up 8 of the top ten and 37 of the top fifty
If you exclude the car mechanics and repairmen—who are all counted as engineers in Chinese and Indian statistics—the numbers look quite different. Per capita, it turns out, the United States trains more engineers than either of the Asian giants.

Secret to American success

Immigrants! Most of these engineers are immigrants. Foreign students and immigrants account for almost 50 percent of all science researchers in the country. In 2006 they received 40 percent of all PhDs.
Faced with the new technologies of foreign companies, or growing markets overseas, it adapts and adjusts. When you compare this dynamism with the closed and hierarchical nations that were once superpowers, you sense that the United States is different and may not fall into the trap of becoming rich, and fat, and lazy.

Challenge to the US

American society can adapt to this new world. But can the American government?
Yet just as they are beginning to do so, we are losing faith in such ideas. We have become suspicious of trade, openness, immigration, and investment because now it's not Americans going abroad but foreigners coming to America. Just as the world is opening up, we are closing down.
London is now the world's leading financial center, because they have became more friendly to foreign capital and better regulation
Or take the U.S. health care system, which has become a huge liability for American companies. U.S. carmakers now employ more people in Ontario, Canada, than Michigan because in Canada their health care costs are lower.
Twenty years ago, the United States had the lowest corporate taxes in the world. Today they are the second-highest. It's not that ours went up. Those of others went down.

My takeaways are the importance of cutting the fat of the American economy, embracing talented, hard-working immigrants from other countries, continuing our higher-education dominance, and acknowledging the multi-polar world we have helped to create.

So far the story of the 21st century is the "rise of the rest," whether it is also the decline of the US depends on us.

the food crisis explained

2008-05-03T12:43:00.006-04:00

The Financial Times features some of the best economists and political scientists in the world, and recently, it's been the universally-celebrated Paul Collier talking sense in their Economists' forum. One of my first posts lauded Collier's terrific analysis of global poverty and general strife in his book, The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It." (Link to Amazon).

Collier is back once again to explain the why there is a food crisis, what stands in the way of an adequate food supply, and what should be done about it. (Hat tip: Alex T at MR)

First, Collier explains the why:

"Why have food prices rocketed? Paradoxically, this squeeze on the poorest has come about as a result of the success of globalization in reducing world poverty. As China develops, helped by its massive exports to our markets, millions of Chinese households have started to eat better. Better means not just more food but more meat, the new luxury. But to produce a kilo of meat takes six kilos of grain. Livestock reared for meat to be consumed in Asia are now eating the grain that would previously have been eaten by the African poor."

Next up, a realistic solution:

"The remedy to high food prices is to increase food supply, something that is entirely feasible. The most realistic way to raise global supply is to replicate the Brazilian model of large, technologically sophisticated agro-companies supplying for the world market."

But, of course, there is a catch:

"Unfortunately, large-scale commercial agriculture is unromantic ... We laud the production style of the peasant: environmentally sustainable and human in scale."

Collier notes that we grew out of this perception of manufacturing (who dreams of owning a small manufacturing "ranch"?), and have enjoyed the manufacturing wealth since.

Yet this romanticism has taken root in agricultural development:

"In Africa, which cannot afford them, development agencies have oriented their entire efforts on agricultural development to peasant style production. As a result, Africa has less large-scale commercial agriculture than it had fifty years ago. Unfortunately, peasant farming is generally not well-suited to innovation and investment: the result has been that African agriculture has fallen further and further behind the advancing productivity frontier of the globalized commercial model."

In case you thought it couldn't get worse, Africa is the victim of more than one breed of romanticism:

"Our longstanding agricultural romanticism has been compounded by our new-found environmental romanticism. In the United States fears of climate change have been manipulated by shrewd interests to produce grotesquely inefficient subsidies for bio-fuel. Around a third of American grain production has rapidly been diverted into energy production."

Collier also reserves some blame for the European Commission, which has its own bio-fuels policy, albeit less "effective" and thereby less damaging. More damning is the EU's ban on the "production and import of genetically modified crops has obviously retarded productivity growth in European agriculture: again, the best that can be said of it is that we are rich enough to afford such folly. But Europe is a major agricultural producer, so the cumulative consequence of this reduction in the growth of productivity has most surely rebounded onto world food markets. Further, and most cruelly, as an unintended side-effect the ban has terrified African governments into themselves banning genetic modification in case by growing modified crops they would permanently be shut out of selling to European markets."

But wait, there is one more nail in the coffin for food supply. Export-restrictions in grain-exporting countries, a product of "the internal tussles between the interests of poor consumers and poor producers, the interests of consumers have prevailed. Governments in grain-exporting countries have swung prices in favour of their consumers and against their farmers by banning exports."

The effect is that grain-exporting countries have lower prices, but less grain is produced than would otherwise be produced, reducing the overall food supply, and greatly raising the prices for grain-importing countries.

What's the main takeaway?

"Unfortunately, trade in agriculture has been the main economic activity to have resisted being subject to global rules. We need stronger and fairer globalization, not less of it."

I like this piece for a few reasons -- it's comprehensive, it's straightforward -- but I especially take note of Collier's condemnation of romanticism. It's similar to what I've been trying to get at in the "moralizing" series of posts, and it demonstrates the shallowness of thinking on the left as well as the right. I'm reading Jane Jacobs' "Death and Life of Great American Cities" right now, and she strikes me a similar thinker, one who is able to see the err of well-intentioned, but entirely unintellectual pursuits.

health care as a moral issue

2008-04-30T15:42:00.005-04:00

Preventable deaths accounted for 32% of all deaths in 2002, and this map and link convey where those deaths are occurring (PS - I love these types of maps).

It's not surprising more preventable deaths are occurring in Africa and India, but the magnitude might be a bit jarring.

One of the issues I have with the health care debate is my liberal side agrees that no American should live a diseased life that ends in premature, painful death because they can't afford the treatment. That seems wrong. On the other hand, I don't think these people deserve to be healthy simply because they are Americans, I think they deserve it because they are human beings. The argument 'they deserve to be healthy because they live in the United States' doesn't resonate well with me -- there is no moral high ground there. All your doing is expanding the privilege of birth to not just include those born into a high-income family in the US, but all who happen to be born in the US. The message for health care justice shouldn't be "share your privilege with a few more people nearby," it should be that health is not a privilege at all, but something all people deserve.

This distinction has major ramifications for health policy, as it speaks to where 'justice-minded' folks should direct their intellectual, political financial capital. Given the map above, I think it's clear that the choice would fall outside America. Spending tons of resources trying to change people's eating and exercise habits in the US, or providing relatively straightforward fixes to preventable diseases and conditions that we overcame a century ago?

To continue to focus on domestic policy (even if carving out time for foreign missions as well) would be to a) deny the obvious opportunity costs of domestic efforts and/or b) forsake the moral imperative for the mantle of nationalism (one step closer to conservatives, one step further away from winning them over to your policies).

The odor of local poverty and disease may be stronger given my location, but I should remember that this odor pales in comparison to the stench of death found abroad. There is a continuum of health problems -- and America's are way down on the list.

On a related note, Megan McArdle has an old post on the morality of health care finance, where she makes the argument that most believe in a single-payer system because they feel it is indeed more just, and she explores the alleged violations of justice that the proponents are seeking to rectify.

"1. They are needy. The class we propose to benefit has greater need for the money than the class from whom we propose to take.

2. It's not fair. The class we propose to benefit has been unluckier than the class from whom we propose to take.

3. They are responsible. The class from whom we propose to take has in some way contributed to the problems we are trying to rectify."

In the end, she argues convincingly that these reasons fall flat. Check it out to see if you buy it.

How Publius beats the market...

2008-04-28T21:46:00.004-04:00

What stocks does Publius own? In case you were wondering, here's my portfolio. If you don't, ah well, you're here anyway. I've let go of Apple, Intuitive Surgical, and a few other big winners; here's my current crew.

Blue Chip Stocks

JNJ
Johnson & Johnson is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. Johnson & Johnson has more than 250 operating companies. The Company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics.

GE
General Electric Company (GE) is a diversified technology, media and financial services company. With products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and industrial products.

MMM
3M Company (3M) is a diversified technology company with a presence in various businesses, including industrial and transportation, healthcare, display and graphics, consumer and office, safety, security and protection services, and electro and communications.

Energy

BEXP
Brigham Exploration Company is an independent exploration, development and production company that uses three dimensional (3D) seismic imaging, drilling and completion technologies to explore for and develop domestic onshore oil and natural gas reserves. The Company's exploration and development activities are concentrated in four provinces: the Onshore Gulf Coast, the Anadarko Basin, the Rocky Mountains and West Texas.

TNP
Tsakos Energy Navigation is a provider of international seaborne crude oil and petroleum product transportation services. Tsakos Energy Navigation owns a fleet of tankers providing worldwide marine transportation services for national and other independent oil companies and refiners under long, medium and short-term charters.

COP
ConocoPhillips is an international, integrated energy company. It has six operating explores, produces, refomes markets crude oil, natural gas, natural gas liquids, and petroleum products.

CHK
Chesapeake Energy Corporation is a producer of natural gas in the United States (first among independents).

Water

SBS
Companhia de Saneamento Basico do Estado de Sao Paulo (SABESP) provides water and sewage services to a range of residential, commercial, industrial and governmental customers in the City of Sao Paulo, Brazil area. The Company also supplies water on a bulk basis to municipalities in the Sao Paulo Metropolitan Region, in which it does not operate water systems.

SJW
SJW Corp. is a holding company with three subsidiaries: San Jose Water Company, SJW Land Company and SJWTX, Inc. San Jose Water Company is a public utility in the business of providing water service in the metropolitan San Jose area.

PHO
PowerShares Water Resources Portfolio (the Fund) seeks investment results that correspond generally to the price and yield of an equity index called the Palisades Water Index, which includes water companies drawn from sectors, which include water utilities, treatment, analytical and monitoring, infrastructure and distribution, water resource management, and conglomerate water companies.

Electricity

JST
Jinpan International Limited (Jinpan International) through the Company’s wholly owned subsidiary, Hainan Jinpan Electric Company Ltd. (Hainan Jinp), designs, manufactures and sells cast resin transformers for voltage distribution equipment in China.

HWCC
Houston Wire & Cable Company (HWC), formerly known as HWC Holding Corporation, is a distributor of specialty wire and cable and related services to the United States electrical distribution market.

Technology

AMX
America Movil, S.A.B. DE C.V. (America Movil) is a provider of wireless communications services in Latin America. As of December 31, 2006, it had 124.8 million subscribers in 15 countries.

GOOG
Google Inc. maintains an index of Websites and other online content, and makes this information freely available to anyone with an Internet connection. The Company’s automated search technology helps people obtain nearly instant access to relevant information from its online index. Google generates revenue primarily by delivering online advertising.

CTRP
Ctrip.com International, Ltd. (Ctrip) is a consolidator of hotel accommodations and air tickets in China. The Company aggregates information on hotels and flights, and enables its customers to make hotel and flight bookings. The Company targets its services primarily at business and leisure travelers in China.

Finances

NYX
NYSE Euronext operates a liquid exchange group offering a range of financial products and services. In the United States, through NYSE Group, the Company operates the New York Stock Exchange, Inc. (the NYSE) and NYSE Arca, Inc., and in Europe, it operates five European-based exchanges that comprise Euronext: the Paris, Amsterdam, Brussels and Lisbon stock exchanges, as well as the Liffe derivatives markets.

HTGC
Hercules Technology Growth Capital, Inc. (Hercules) is a specialty finance company that provides debt and equity growth capital to technology related and life sciences companies at all stages of development. It primarily finances privately-held companies backed by major venture capital and private equity firms.

MRH
Montpelier Re Holdings Ltd. is a provider of global property and casualty reinsurance and insurance products through its principal operating subsidiary, Montpelier Reinsurance Ltd.

BBD
Banco Bradesco SA (Bradesco) is a Brazil-based holding company involved in the banking sector. It is engaged in two main areas: banking and insurance.

PCAP
Patriot Capital Finding, Inc. is a closed-end, non-diversified investment company. It is a specialty finance company that provides customized financing solutions to small- to mid-sized companies.

Transport

GEF
Greif, Inc. is a global producer of industrial packaging products with manufacturing facilities located in over 45 countries. The Company offers a line of industrial packaging products, such as steel, fiber and plastic drums, intermediate bulk containers, closure systems for industrial packaging products, and polycarbonate water bottles, which are complemented with a variety of value-added services, including blending, packaging, logistics and warehousing.

SSW
Seaspan Corporation (Seaspan) is engaged in the business of owning and chartering containerships pursuant to long-term, fixed-rate charters to container lines.

Natural Resources

ACH
Aluminum Corporation of China Limited (Chalco), along with its subsidiaries, is engaged in the exploration and production of bauxite; and the production, sales and research of alumina, primary aluminum and aluminum-fabricated products.

PCU
Southern Copper Corporation is an integrated copper producer. The Company produces copper, molybdenum, zinc and silver. All of its mining, smelting and refining facilities are located in Peru and in Mexico, and it conducts exploration activities in those countries and Chile.

RIO
Companhia Vale do Rio Doce (Vale) is a diversified metals and mining company. The Company is a producer and exporter of iron ore and pellets and a producer of nickel. It also produces copper, manganese, ferroalloys, bauxite, precious metals, cobalt, kaolin, potash and other products. Directly and through affiliates and joint ventures, the Company has investments in the aluminum, coal, energy and steel businesses.

Industrial

CX
Cemex S.A. B de C.V. (Cemex) is a holding company primarily engaged, through its operating subsidiaries, in the production, distribution, marketing and sale of cement, ready-mix concrete, aggregates and clinker.

MTW
The Manitowoc Company, Inc. diversified industrial manufacturer in three principal markets: Cranes and Related Products (Crane), Foodservice Equipment (Foodservice) and Marine. The Company’s Crane business is a global provider of engineered lift solutions, which offers a line of lifting equipment. It designs, manufactures, markets, and supports a line of crawler cranes, mobile telescopic cranes, tower cranes, and boom trucks.

SDA
Sadia SA (Sadia) is a Brazil-based company involved in the food processing sector. It is principally engaged in the production of refrigerated and frozen food products. Sadia operates 14 industrial units and 16 distribution centers located in 14 Brazilian states. The Company’s product line includes pork meat, cooked meat, poultry cuts, sausages, margarines, pizzas, soups, desserts and pasta.

Automotive

TM
TOYOTA MOTOR CORPORATION (TOYOTA) primarily conducts business in the automotive industry. Toyota also conducts business in the finance and other industries.

TTM
Tata Motors Limited is mainly engaged in the business of automobile products consisting of all types of commercial and passenger vehicles, including financing of the vehicles sold by the Company.

Agriculture

SYT
Syngenta AG (Syngenta) is an agribusiness that is involved in the discovery, development, manufacture and marketing of a range of products designed to improve crop yields and food quality.