Archive for the ‘Ideas’ Category

Stupid Politicians May Be Smart

Disturbed by political distortions (which some would call lying), some earnest commentators make some wonkish proposals. I haven’t reviewed them, but I can almost guarantee that they are DOA. Yes, yes – politicians do some stupid things and stretch the truth like Silly Putty. You might want to read Why Politicians Lie. But more fundamentally, all you need to know is that politicians lie and do other stupid things because such activities win elections. Are voters really that stupid? Yes and no. Modern behavioral psychology explains a lot: most voters are simply neither terribly engaged nor well informed because that would be an inefficient use of their mental energy – they have other things, like families and jobs, to worry about. Politics and policy only gets whatever mental cycles are left over after higher priority needs are serviced. Thus, for politicians, a winning strategy is to portray a simple message which is sympathetic and easy to digest. It’s hard to see democracy working any other way – and it’s hard to see a better system than democracy.

English: Library of Congress summary: "Ca...

English: Library of Congress summary: “Caricature showing politicians and people representing different professions revolving around head of Richard “Boss” Croker as the Sun.” (Photo credit: Wikipedia)

I write this not to express cynicism. Instead, I find it helpful to remember that whenever a see some politician as stupid and venal, it’s just the way it has to be. Lighten up! This ought not to discourage us from thinking about issues and policy – instead, we should manage our expectations and focus where we can make a difference, not where we can’t.

Social Consent and the Market Economy

This damn market economy!..

This damn market economy!.. (Photo credit: iwfx)

Jim Manzi, in his book Uncontrolled, argues correctly that a market economy requires wide social consent. He then asks “Why should those who lose out in market competition give it?”

I think the answer is simple: those who “lose out” in a market economy would probably lose out even more in any alternative arrangement.

You might be tempted to dismiss my answer as some kind of simple right wing ideology (as opposed to a simple left wing ideology), but there are reasons behind my answer that I find compelling.

The first is empirical: we have lots of evidence of market economies, limited market economies, and non-market economies. Evidence suggests that the least well off are usually better off in a market economy. Data matters. But, correlation is not causation, so we must not rely too much on history.

The second is logical: economic theory, particularly that based on deductive logic, predicts that the least well off will be better off in a market economy. I can’t reproduce an entire introduction to economics in a single blog post, but with work, you can explore this and convince yourself. Don’t take my word for it!

In short, both logic and evidence say that the least well off fare best in a market economy. Those who prefer alternatives should be given a hearing, but they must bring logic and data, not just emotion.

Operational Philosophy and Immoral Monsters

Good versus Evil

Good versus Evil (Photo credit: Helico)

We understand a lot of things operationally that we don’t understand intellectually. Almost everyone has some notion about what is moral and immoral, but most of us would be hard pressed to express it in an intellectual framework that could stand much scrutiny. Philosophers are supposed to work at the intellectual framework part, but the news there isn’t very good. After a few thousand years of effort, there is no broadly accepted intellectual framework. Instead, there are several competing frameworks, all of which sound reasonable but also questionable under intense examination. I’m glad I didn’t make philosophy my life’s work. There is no a priori reason to assume that a comprehensive and unobjectionable philosophy is even possible.

Still, you don’t need to be an automotive engineer to drive a car. In most situations, operational philosophy is good enough.

So, why am I dwelling on this? Just another excuse to argue for awareness of moral foundations theory. In the real world, we have to deal with people who have different operational philosophies. The other guy probably isn’t an immoral monster – he’s just building on different moral foundations. Understanding this can make life a lot easier to digest.

Build It and They Will Come

I see more of these every week: we should build X because it will create a zillion jobs or we should build Y because it will cause economic growth or we should do Z because it will save a ton of money. Does anyone ever go back and look at past predictions to see how accurate they were? If they did, they’d see that not only are such predictions usually wrong, they are horribly horribly wrong. Predicting the economic consequences of government spending  makes astrology look like physics. If you want to study a classic case, look at the projections for Medicare spending back when Medicare was enacted.

So, why is this? I think three factors contribute to this mess:

  1. The world is complex and our models are simple. We simply haven’t developed tools that are powerful enough to make prediction reliable.
  2. Technological advances change everything. The original predictions for Medicare couldn’t account for heart transplants, angioplasties, or a thousand other things that have dramatically changed medicine and life expectancy.
  3. Human behavior changes. One of the advantages of getting older is witnessing how much ordinary behavior changes over time. Some of this is in response to technology (think cell phones) and some is a gradual cultural shift (think race relations).

So, what to do? It’s not like we can just decide not to plan or forecast. But we can decide to be very skeptical and only commit to things when we think the case is overwhelming. It may be

President signing the Medicare Bill at the in ...

President signing the Medicare Bill at the in . Former President is seated at the table with President Johnson. The following are in the background (from left to right): Senator , an unidentified man, , Senator , Vice President , and . (Photo credit: Wikipedia)

better to only bet on the sure thing.

How To Make Better Decisions

Flowchart of Rational Planning and Decision Ma...

Image via Wikipedia

In a great article, Higgs points to 3 errors common in government efforts to manage the economy, which is valuable enough, but I believe these errors are common in most decision making. In brief, the quality of our decisions would be improved if we:

  • thought more about the hidden disadvantages instead of the visible advantages
  • thought more about the long term and less about the short term
  • considered what indirect impacts there might be

You could do worse than incorporating these mandates into your decision making process.

Karl Marx on Labor Day

The Marxist school of economic thought comes f...

Image via Wikipedia

It’s Labor Day and my thoughts turn to Karl Marx. My impression is that the general public, to the extent they think about old Karl at all, think of him as some kind of political theorist whose ideas led to the disaster of Communism. There’s some truth to that, but Marx was mostly an economist who had some brilliant insight (as well as a few boneheaded ones). His notion of “historical forces” are pure conjecture and the source of much subsequent anguish. But he did rightly deduce a lot of things about the cost of labor and the cost of capital and how, over time, it was inevitable that labor would become of less and less importance as a factor of production. Some people interpret this to mean a “race to the bottom”, ignoring the fact that as the real cost of labor declines, so does the real cost of capital.

Marx didn’t foresee the enormous improvements in technology ahead, nor the need for complex organizations to cope with those technologies. He didn’t foresee the growth of capitalist participation, where many laborers are also capitalists. He certainly didn’t foresee the growth of the knowledge industries, where the “big earners” are people who possess skills – he didn’t see the arrival or impact of human capital.

I’m not knocking Marx. His contemporaries didn’t foresee these things either.

Marx is worth reading – he was a brilliant thinker. He strikes a chord for some people. But beware: Marx is from a different age and worked with assumptions that aren’t especially germane in today’s world. Marx isn’t the devil, but he’s not  the path to salvation either.

Orwell Watch?

The Orwellian twist to all of this is the repurposing of the word “freedom”. “Freedom” is historically a political idea: freedom from oppression. The idea of economic freedom as promoted by libertarians and Chicago School economists, is ultimately hostile to political freedom.

via Orwell Watch: More Reengineering of Values via Koch Funded “Deep Lobbying” « naked capitalism.

Huh? As I understand it, economic freedom is the freedom for two parties to make a mutually beneficial exchange. Wikipedia says it this way:

The free market viewpoint understands economic liberty as the freedom to produce, trade and consume any goods and services acquired without the use of force, fraud or theft.

And this hostile to freedom from oppression? That only makes sense if you believe it is “oppression” when you are not free to take what you want from those who produce it. Maybe it’s the prohibition of force, fraud, and theft that some people find objectionable. That doesn’t make sense either. What does make sense is for me to stop commenting on these widely read but incoherent blog posts!