Ever Greater Rituals

Tuesday, January 20th, 2015

When there is pressure for leaders to respond to a crisis, they often intensify existing efforts, whether or not they’re relevant to the real problem, Arthur Demarest notes:

To do otherwise requires taking on entrenched practices and asserting power in areas where it often will not be well received. And leaders tend to see major crises more as threats to their own position rather than as systemic challenges for the societies that they govern or the institutions that they manage.

Frenzied grand constructions, wars and great rituals are among the common responses of ancient leaders to crises. These demonstrate powerful responses by the leaders (enhancing their threatened hold on power), but almost never really address the problems themselves. A cynic might characterize the giant U.S. stimulus bill of 2009 as such an effort.

Leaders may recognize that they are not addressing the real problems, but they rationalize their actions with the argument that they must first politically survive in order to later address the hard problems and sacrifices. Of course, they usually don’t ever actually get around to addressing the fundamental problems later, either because they don’t make it through the initial crisis or because, even later, they are not willing to risk sacrificing their own position (or “career”) with needed measures that usually require tough sacrifices by the population.

[...]

The divine kings of the Classic Maya civilization led their societies in religion, religious constructions, and enormous rituals, as well as warfare. When that civilization ran into problems of overpopulation, environmental damage, drought and economic competition in the late eighth century, they could only respond with ever greater rituals and temple construction to appease the (clearly unsatisfied) deities, as well as responding through warfare against other states.

These steps were actually counterproductive, imposing additional costs and damage and not addressing the real problems. Yet, any really helpful response would have involved political change to redefine the very nature [of] leadership and its roles and institutions.

A Beautiful Disaster

Monday, January 19th, 2015

Arthur Demarest — “the real Indiana Jones” — explains why Western civilization is a bubble:

Paradoxically, the key strengths of civilizations are also their central weaknesses. You can see that from the fact that the golden ages of civilizations are very often right before the collapse.

The Renaissance in Italy was very much like the Classic Maya. The apogee was the collapse. The Renaissance status rivalry between cities through art and science and warfare and architecture was a beautiful disaster, and it only lasted about 150 years. The Golden Age of Greece was the same thing: status rivalry with architecture, literature, and all these wonderful things — along with warfare — at the end of which Greece was conquered by Macedonia and remained under the control of foreign powers for 2,300 years.

We see this pattern repeated continuously, and it is one that should make us nervous. I just heard Bill Gates say that we are living in the greatest time in history. Now you can understand why Bill Gates would think that, but even if he is right, that is an ominous thing to say.

Community College: What is the Right Price?

Thursday, January 15th, 2015

Arnold Kling is skeptical about free community college:

Just based on my gut feeling, I think that the vast majority of students attending community college do not have favorable outcomes. [...] I am not even sure that students in the lower tier of four-year colleges have favorable outcomes. Instead, the true cost, including what the students pay out of pocket plus subsidies plus opportunity cost, exceeds the benefit for many who attend college. In contrast, President Obama seems to endorse the fairy-dust model of college, where you can sprinkle it on anyone to produce affluence.

Politicians and policy wonks face different incentives:

If I were President Obama, of course, I would champion universal “free” community college. Worst case, my proposal becomes law. A lot of money gets wasted, but it’s not my money. Best case, the Republicans vote it down and I call them anti-opportunity meanies.

The Case for a Revenue-Neutral Gas Tax

Wednesday, January 14th, 2015

Charles Krauthammer quixotically makes the case for a revenue-neutral gas tax:

The average American buys about twelve gallons of gas a week. Washington would be soaking him for $12 in extra taxes. Washington should therefore simultaneously reduce everyone’s FICA tax by $12 a week. Thus the average driver is left harmless. He receives a $12 per week FICA bonus that he can spend on gasoline if he wants — or anything else. If he chooses to drive less, it puts money in his pocket. (The unemployed would have the $12 added to their unemployment insurance; the elderly, added to their Social Security check.)

The point of the $1 gas-tax increase is not to feed the maw of a government raking in $3 trillion a year. The point is exclusively to alter incentives — to reduce the disincentive for work (the Social Security tax) and to increase the disincentive to consume gasoline.

Unpopular Populism

Monday, January 12th, 2015

Some populist ideas are much less popular than others:

Populism usually refers to the idea that power should rest in the hands of the little guy, and not in the government or some elite. Public-opinion polls show that this basic form of populism has wide appeal. One of every two Americans believes that most politicians are corrupt (51 percent, according to a 2013 poll of national voters); 76 percent that special interests wield too much power; and 88 percent that big money has too much sway. Very low on people’s “trust” lists are all those perceived as powerful, including not just the government but also banks and corporations and labor unions. This kind of populism appeals to both those on the left, such as the Occupy Wall Street folks, and to Tea Partiers. (Polls show that, at least for a while, at least one in 10 Americans favored both!) I call this popular populism.

Much of the appeal is lost — that is, populism becomes much less popular — once leftist themes join the mix. There is little support for policies that look like wealth transfers, taking from the rich and giving to poor, reducing inequality, or making sacrifices for the common good. Large segments of the right and center view these policies as taking from “us” and giving to “them.” That’s why Social Security is so popular, while welfare is not. It’s the reason Medicare is very popular and Medicaid is much less so.

Populations, not Nations, Dictate Development

Monday, January 12th, 2015

One of the more intriguing empirical regularities in recent economic growth research involves population origins:

Rather than thinking about rich and poor countries, work by Louis Putterman and David Weil tells us to think about rich and poor population groups (Europeans and Native Americans, for example). Countries are rich if their population is made up of rich population groups, and vice versa. The U.S. is rich because it has lots of European descendants, and relatively few Native American descendants. Mexico, in contrast, is relatively poor because it has a few European descendants but lots of Native American descendants.

[...]

As an example, the weighted state history for the U.S. is a weighted average of the state history of England, Germany, Italy, etc.. (quite long) as opposed to the state history of North America (quite short).

The length of time that populations have had settled agriculture and organized states is highly correlated with output per worker today. Countries that have more history with economic organization are richer today.

Spolaore and Wacziarg’s next table shows that even holding those features constant, the share of Europeans in the population of a country is highly correlated with output per worker today. The upshot is that Europeans and their descendants are rich (as a group), wherever they are in the world, but not so for other population groups.

Thomas Sowell on Uncommon Knowledge

Wednesday, January 7th, 2015

Thomas Sowell (Basic Economics) talks to Peter Robinson of Uncommon Knowledge:

Moralizing Religions

Sunday, December 21st, 2014

Today’s most popular religions all focus on morality:

Religion wasn’t always based on morality, explains Nicolas Baumard, a psychologist at the École Normale Supérieure in Paris. For the first several thousand years of human recorded history, he notes, religions were based on rituals and short-term rewards. If you wanted rain or a good harvest, for example, you made the necessary sacrifices to the right gods. But between approximately 500 B.C.E. and 300 B.C.E., a radical change appeared all over Eurasia as new religions sprung up from Greece to India to China. All of these religions shared a focus on morality, self-discipline, and asceticism, Baumard says. Eventually these new religions, such as Stoicism, Jainism, and Buddhism, and their immediate successors, including Christianity and Islam, spread around the globe and became the world religions of today. Back in 1947, German philosopher Karl Jaspers dubbed the pivotal time when these new religions arose “the Axial Age.”

So what changed? Baumard and his colleagues propose one simple reason: People got rich. Psychologists have shown that when people have fewer resources at their disposal, prioritizing rewards in the here and now is the best strategy. Saving for the future—much less the afterlife—isn’t the best use of your time when you are trying to find enough to eat today. But when you become more affluent, thinking about the future starts to make sense, and people begin to forgo immediate rewards in order to prioritize long-term goals.

Not coincidentally, the values fostered by affluence, such as self-discipline and short-term sacrifice, are exactly the ones promoted by moralizing religions, which emphasize selflessness and compassion, Baumard says. Once people’s worldly needs were met, religion could afford to shift its focus away from material rewards in the present and toward spiritual rewards in the afterlife. Perhaps once enough people in a given society had made the psychological shift to long-term planning, moralizing religions arose to reflect those new values. “Affluence changed people’s psychology and, in turn, it changed their religion,” Baumard says.

To test that hypothesis, Baumard and his colleagues gathered historical and archaeological data on many different societies across Eurasia in the Axial Age and tracked when and where various moralizing religions emerged. Then they used that data to build a model that predicted how likely it was that a moralizing religion would appear in all sorts of different societies—big or small, rich or poor, primitive or politically complex.

It turned out that one of the best predictors of the emergence of a moralizing religion was a measure of affluence known as “energy capture,” or the amount of calories available as food, fuel, and resources per day to each person in a given society. In cultures where people had access to fewer than 20,000 kilocalories a day, moralizing religions almost never emerged. But when societies crossed that 20,000 kilocalorie threshold, moralizing religions became much more likely, the team reports online today in Current Biology. “You need to have more in order to be able to want to have less,” Baumard says.

Can Money Buy Happiness?

Sunday, November 16th, 2014

Can money buy happiness? Yes, but buying happiness isn’t straightforward:

What matters a lot more than a big income is how people spend it. For instance, giving money away makes people a lot happier than lavishing it on themselves. And when they do spend money on themselves, people are a lot happier when they use it for experiences like travel than for material goods.

[...]

Numerous studies conducted over the past 10 years have shown that life experiences give us more lasting pleasure than material things, and yet people still often deny themselves experiences and prioritize buying material goods.

[...]

“What we find is that there’s this huge misforecast,” he says. “People think that experiences are only going to provide temporary happiness, but they actually provide both more happiness and more lasting value.” And yet we still keep on buying material things, he says, because they’re tangible and we think we can keep on using them.

[...]

One of the main reasons why having more stuff doesn’t always make us happy is that we adapt to it. “Human beings are remarkably good at getting used to changes in their lives, especially positive changes,” says Sonja Lyubomirsky, psychology professor at the University of California, Riverside. “If you have a rise in income, it gives you a boost, but then your aspirations rise too. Maybe you buy a bigger home in a new neighborhood, and so your neighbors are richer, and you start wanting even more. You’ve stepped on the hedonic treadmill. Trying to prevent that or slow it down is really a challenge.”

One approach that can work, she says, is consciously trying to foster appreciation and gratitude for what you have. The process of adaptation, after all, comes from taking what you have for granted, so you can slow it down by reminding yourself of why you value what you have.

It could be as simple as setting aside time every day to follow the traditional advice of “counting your blessings.” Or you might want to keep a daily journal or express your gratitude to other people. The key is to find a way to remain conscious of everything you own and avoid simply adapting to having it around.

[...]

Increasing variety, novelty or surprise can also help you to enjoy your possessions more. “When things become unchanging, that’s when you adapt to them,” Prof. Lyubomirsky says.

If you keep a painting hanging in the same spot on the same wall, for example, you’ll stop noticing it after a while. But swap it with a painting from another room, and you’ll see each of them with fresh eyes, and appreciate them more. Try sharing your possessions with other people, too, and opening yourself up to new experiences, she says.

This could even mean depriving yourself of your possessions for a while, perhaps by lending them or sharing them with someone else. Elizabeth Dunn, associate professor of psychology at the University of British Columbia and co-author of the book “Happy Money,” recently conducted an experiment where she sent people home with a big bag of chocolate, telling some of them to eat as much of it as they could and others that they were forbidden to eat it. A third group could choose how much to eat.

The result? The people who had been forbidden from eating chocolate were able to enjoy their next chocolate bar much more than those who’d either eaten a lot or consumed their normal amount. “Giving something up temporarily can actually help to preserve our capacity to enjoy it,” Prof. Dunn says.

[...]

The paradox of money is that although earning more of it tends to enhance our well-being, we become happier by giving it away than by spending it on ourselves.

[...]

What moves the needle in terms of happiness is not so much the dollar amount you give, Prof. Dunn says, but the perceived impact of your donation. If you can see your money making a difference in other people’s lives, it will make you happy even if the amount you gave was quite small.

[...]

It’s also important to consider how what you’re buying will affect how you spend your time. That big house in the suburbs may seem like a good idea, but a 2004 study by Alois Stutzer and Bruno Frey of the University of Zurich found that people with longer commutes reported lower overall life satisfaction, all other things being equal. They calculated that you would need a 40% raise to offset the added misery of a one-hour commute.

[...]

Finally, although much of the research in this field is on spending money rather than saving it, the researchers agree that spending more than you can afford is a route to misery. Taking care of your basic needs and achieving a level of financial security is important.

[...]

“Savings are good for happiness; debt is bad for happiness. But debt is more potently bad than savings are good,” Prof. Dunn says. “From a happiness perspective, it’s more important to get rid of debt than to build savings.”

This cutting-edge science seems to be delivering advice I’ve heard somewhere before. Don’t covet material things, make a habit of counting your blessings, give to those in need, give up fine food from time to time — where have I heard all this before?

In Gurgaon, India, Dynamism Meets Dysfunction

Saturday, November 8th, 2014

Gurgaon was widely regarded as an economic wasteland:

In 1979, the state of Haryana created Gurgaon by dividing a longstanding political district on the outskirts of New Delhi. One half would revolve around the city of Faridabad, which had an active municipal government, direct rail access to the capital, fertile farmland and a strong industrial base. The other half, Gurgaon, had rocky soil, no local government, no railway link and almost no industrial base.

As an economic competition, it seemed an unfair fight. And it has been: Gurgaon has won, easily. Faridabad has struggled to catch India’s modernization wave, while Gurgaon’s disadvantages turned out to be advantages, none more important, initially, than the absence of a districtwide government, which meant less red tape capable of choking development.

[...]

Ordinarily, such a wild building boom would have had to hew to a local government master plan. But Gurgaon did not yet have such a plan, nor did it yet have a districtwide municipal government. Instead, Gurgaon was mostly under state control. Developers built the infrastructure inside their projects, while a state agency, the Haryana Urban Development Authority, or HUDA, was supposed to build the infrastructure binding together the city.

And that is where the problems arose. HUDA and other state agencies could not keep up with the pace of construction. The absence of a local government had helped Gurgaon become a leader of India’s growth boom. But that absence had also created a dysfunctional city. No one was planning at a macro level; every developer pursued his own agenda as more islands sprouted and state agencies struggled to keep pace with growth.

The solution isn’t that complicated, as Alex Tabarrok points out:

If the rights to develop Gurgaon had originally been sold in very large packages, some five to seven proprietary but competitive cities could have been created in that region. Within this system the role of the state is to make it possible to auction large parcels of land. Once such parcels and associated rights to develop the land are created, private developers will provision public goods and services up to the edge of their property.

Peter Thiel Is Wrong About the Future

Thursday, November 6th, 2014

Peter Thiel is wrong about the future, Virginia Postrel argues:

The obstacle to more technological ambitions isn’t our idea of the future. It’s how we think about the present and the past.

Americans in the mid-20th century were not in fact sanguine about the future. Anxieties about the march of technology were common. In February 1961, a statistics-filled Time magazine feature warned that automation was wiping out jobs and, worse, “What worries many job experts more is that automation may prevent the economy from creating enough new jobs.” At least nine episodes of the original “Star Trek” series were about threatening or out-of-control computers. (Still others involved menacing androids or ominous artificial intelligences whose exact nature was vaguely defined.) Movies such as “Colossus: The Forbin Project” (1970) and, of course, “2001: A Space Odyssey” (1968) picked up the scary-computer theme. Nor was the space program as universally popular as we nostalgically imagine. Americans liked the moon race, but only in July 1969 — the month of the moon landing — did a majority deem the Apollo program “worth the cost.”

Meanwhile, back in those good old days people were already voicing worries about technological stagnation that sound a lot like Stephenson’s and Thiel’s. “Before 1913,” Peter Drucker wrote in 1967, economic development “was taken for granted, but since then we’ve apparently gone sterile. And we don’t know how to start it up.” He noted that “with the exception of the plastics industry, the main engines of growth in the past 50 years were already mature or rapidly maturing industries, based on well-known technologies, back in 1913.”

[...]

The reason mid-20th-century Americans were optimistic about the future wasn’t that science-fiction writers told cool stories about space travel. Science-fiction glamour in fact worked on only a small slice of the public. (Nobody else in my kindergarten was grabbing for “You Will Go to the Moon.”) People believed the future would be better than the present because they believed the present was better than the past. They constantly heard stories — not speculative, futuristic stories but news stories, fashion stories, real-estate stories, medical stories — that reinforced this belief. They remembered epidemics and rejoiced in vaccines and wonder drugs. They looked back on crowded urban walk-ups and appreciated neat suburban homes. They recalled ironing on sweaty summer days and celebrated air conditioning and wash-and-wear fabrics. They marveled at tiny transistor radios and dreamed of going on airplane trips.

Then the stories changed. For good reasons and bad, more and more Americans stopped believing in what they had once viewed as progress. Plastics became a punch line, convenience foods ridiculous, nature the standard of all things right and good. Freeways destroyed neighborhoods. Urban renewal replaced them with forbidding Brutalist plazas. New subdivisions represented a threat to the landscape rather than the promise of the good life. Too-fast airplanes produced window-rattling sonic booms. Insecticides harmed eagles’ eggs. Exploration meant conquest and brutal exploitation. Little by little, the number of modern offenses grew until we found ourselves in a 21st century where some of the most educated, affluent and culturally influential people in the country are terrified of vaccinating their children. Nothing good, they’ve come to think, comes from disturbing nature.

Optimistic science fiction does not create a belief in technological progress. It reflects it.

Gordon Tullock on Voting

Tuesday, November 4th, 2014

Gordon Tullock just passed away, and Don Boudreax quips that it’s appropriate that his old colleague died during election week:

Six Policies Economists Love (And Politicians Hate)

Monday, October 27th, 2014

NPR’s Planet Money shares six policies economists love (and politicians hate):

  1. Eliminate the mortgage tax deduction.
  2. End the tax deduction companies get for providing health-care to employees.
  3. Eliminate the corporate income tax.
  4. Eliminate all income and payroll taxes.
  5. Tax carbon emissions.
  6. Legalize marijuana.

Transportation, Divergence, and the Industrial Revolution

Tuesday, October 21st, 2014

Nick Szabo explores transportation, divergence, and the Industrial Revolution:

After about 1000 AD northwestern Europe started a gradual switch from using oxen to using horses for farm traction and transportation.  This trend culminated in an eighteenth-century explosion in roads carrying horse-drawn carriages and wagons, as well as in canals, and works greatly extending the navigability of rivers, both carrying horse-drawn barges. This reflected a great rise in the use of cultivated fodder, a hallmark of the novel agricultural system that was evolving in northwestern Europe from the start of the second millennium: stationary pastoralism.  During the same period, and especially in the seventeenth through nineteenth centuries, most of civilized East Asia, and in particular Chinese civilization along its coast, navigable rivers, and canals, faced increasing Malthusian pressures and evolved in the opposite direction: from oxen towards far more costly and limited human porters. Through the early middle ages China had been far ahead, in terms of division of labor and technology, of the roving bandits of northern Europe, but after the latter region’s transition to stationary pastoralism that gap closed and Europe surged ahead, a growth divergence that culminated in the industrial revolution.  In the eighteenth century Europe, and thus in the early industrial revolution, muscle power was the engine of land transportation, and hay was its gasoline.

Metcalfe’s Law states that a value of a network is proportional to the square of the number of its nodes.  In an area where good soils, mines, and forests are randomly distributed, the number of nodes valuable to an industrial economy is proportional to the area encompassed.  The number of such nodes that can be economically accessed is an inverse square of the cost per mile of transportation.  Combine this  with Metcalfe’s Law and we reach a dramatic but solid mathematical conclusion: the potential value of a land transportation network is the inverse fourth power of the cost of that transportation. A reduction in transportation costs in a trade network by a factor of two increases the potential value of that network by a factor of sixteen. While a power of exactly 4.0 will usually be too high, due to redundancies, this does show how the cost of transportation can have a radical nonlinear impact on the value of the trade networks it enables.  This formalizes Adam Smith’s observations: the division of labor (and thus value of an economy) increases with the extent of the market, and the extent of the market is heavily influenced by transportation costs (as he extensively discussed in his Wealth of Nations).

How to see into the future

Saturday, October 18th, 2014

So, what is the secret of looking into the future?

Initial results from the Good Judgment Project suggest the following approaches. First, some basic training in probabilistic reasoning helps to produce better forecasts. Second, teams of good forecasters produce better results than good forecasters working alone. Third, actively open-minded people prosper as forecasters.

But the Good Judgment Project also hints at why so many experts are such terrible forecasters. It’s not so much that they lack training, teamwork and open-mindedness — although some of these qualities are in shorter supply than others. It’s that most forecasters aren’t actually seriously and single-mindedly trying to see into the future. If they were, they’d keep score and try to improve their predictions based on past errors. They don’t.

This is because our predictions are about the future only in the most superficial way. They are really advertisements, conversation pieces, declarations of tribal loyalty — or, as with Irving Fisher, statements of profound conviction about the logical structure of the world.

Some participants in the Good Judgment Project were given advice, a few pages in total, which was summarised with the acronym CHAMP:

  • Comparisons are important: use relevant comparisons as a starting point;
  • Historical trends can help: look at history unless you have a strong reason to expect change;
  • Average opinions: experts disagree, so find out what they think and pick a midpoint;
  • Mathematical models: when model-based predictions are available, you should take them into account;
  • Predictable biases exist and can be allowed for. Don’t let your hopes influence your forecasts, for example; don’t stubbornly cling to old forecasts in the face of news.