Author Archives: wallaceforman

Hanson on Status

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I’ve been thinking about status a lot lately. Status is to life what popularity was to high school. Everyone wants to be high status and to have high-status friends, their claims to the contrary notwithstanding. But what is status? Here is a nice explanation from Robin Hanson:

Imagine that status in a firm was a proxy for one’s usefulness as an ally within that firm, summarizing the threats one could credibly make, the people one could fire, the favors one could plausibly call in, etc. And imagine that the current equilibrium was that opponents of change together held more of these useful resources – they successfully blocked change.

Now imagine that the CEO hires an outside consultant who writes a report recommending change. It should be clear to everyone that this outside firm has no direct power within the firm. It cannot fire anyone, go slow on a project, etc. So if status was just a proxy for relevant local abilities, then this consultant should have little status. Thus if a consultant actually does help the CEO by lending status to the CEO’s side, status must be something else.

So I’m led to consider a sticky-feature concept of status. Long ago coalition politics was important, and foragers had to estimate how useful each person would be if they joined a coalition. So our distant ancestors considered a standard set of features, such as strength, intelligence, charisma, etc., that tended then to indicate that someone would be a useful ally. Humans evolved specialized mental modules for making such estimates, and for estimating common perceptions of such estimates.

Today we have inherited such mental modules, and often use them to estimate which side will win a contest of coalitions. And even though relevant abilities have changed somewhat, our inherited expectations about who will win a coalition contest are somewhat self-reinforcing. For example, if we expect that coalitions of taller people tend to win, then we will be reluctant to cross such a coalition, which will tend to make them win. This can be a self-reinforcing focal equilibrium of the coordination game that is coalition politics.

This doesn’t tell us what features are actually relevant, but it is a potentially useful framework for thinking about status.

Caplan’s Myth of the Rational Voter

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I finally picked up Bryan Caplan’s The Myth of the Rational Voter. Caplan has a crisp writing style, and as I expected, the book was a quick, pleasant read.

Caplan’s basic thesis is that standard economic assumptions lead to a pessimistic view of democracy. Because elections are rarely determined by a single vote, the cost to a voter of his own “incorrect” opinions approaches nil. Introspection and empirical evidence tells us that people naturally prefer some opinions to others. In other words, people have a natural demand for irrational – as opposed to unbiased – opinions. Voters costlessly cater to their appetite for irrational opinions at the ballot box, but society pays for it in the aggregate.

Voters are not merely irrational; they are systematically irrational. If the demand for opinions were distributed randomly, then irrationality might cancel out. Then, elections would be decided by residual “rational” voters, the small number of voters who had formed opinions for reasons other than their natural appetite for those opinions.  But Caplan argues that evidence shows voters to be systematically biased. In particular, he argues that voters suffer from anti-market bias, anti-foreign bias, make-work bias, and pessimistic bias.

The argument that I most wanted Caplan to make, was that society creates incentives for individual voters to adopt specific types of irrational opinions, such as incentives to adopt seemingly altruistic opinions. Caplan touches on this point, but it is mostly beyond the scope of the book.

Caplan views the market, or individual decision-making, as the natural alternative to democracy, or collective decision-making. He suggests that most people are comfortable with theories of market failure, but that they assume that democracy works well. His libertarian punch-line is that, confronted with his argument that democracy should work poorly, people should be incrementally more likely to prefer decisions made by market processes.

The Anti Self-Help Book

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If I were forced at gunpoint to write a self-help book, I would probably focus on two points.

1) Suspect advice from other people.

People who give you advice have very different incentives than you do. They receive little or no benefits for giving good advice, and they usually don’t pay the costs of bad advice. This ought to affect how they think about giving advice, and here is some evidence that it does.

The main effect I expect this has is that advice-givers make an effort to give advice that feels good, instead of making an effort to give good advice. What sort of advice feels good to give? Probably, the advice that an altruistic and idealistic person would give. By giving this sort of advice, we affiliate with altruistic and idealistic people and improve our standing in the eyes of the advice-seeker.

Some people will object that I employ, here as elsewhere, a reductively self-interested view of human nature. Indeed, it’s true that people don’t walk about scheming of ways to eke out an extra increment of utility from every last encounter. But their unconscious motivation to do so is quite enough. It is reasonable to assume that, most of the time, people are naturally inclined, even without a conscious ulterior motive, to present themselves at their most agreeable and attractive.

This creates a difficult interaction between selfishness and altruism. Advice givers really are trying to be altruistic, but by doing so, they adopt the viewpoint of an altruistic person, and give bad advice. They give the advice that an altruistic, idealistic person would want to follow, rather than advice suited to the advice seeker, who is probably just looking for good, pragmatic advice. Instead of altruistically tarnishing their image by giving hard-nosed, pragmatic advice, they selfishly imitate altruistic people.

Of course, not all advice is created equal. Your mother really does care about the results of the advice she gives, and she probably is less concerned with how it makes her look. Your university’s career advisor does have some incentives to make sure the students she advises get placed in jobs. Commencement speakers, on the other hand, have no good incentives whatsoever, and they give the worst, most idealistic advice of all.

Perhaps the fact that this is my main piece of advice should not inspire confidence in my advice.

2) Trust your instincts.

Every human being is the product of a billion years or more of natural selection. This means that not just our bodies, but also our minds, have been molded to best serve our interests. Every one of us is born with a package of appetites, instincts, and intuitions that are well-suited to guide us through life.

Hold on, you might say, evolution serves the interests of our offspring, not our own interests. People have conscious goals besides maximizing their number of offspring. This is true enough. Serendipitously though, most of the things that humans strive for, success, status, wealth, friendship, family, and love, are generally consistent with our “evolutionary” interest in maximizing our offspring, and it’s no accident. Natural selection gave humans these goals, because they were compatible with natural selection. For the most part, natural selection ought to have also given people instincts as well suited to these goals as possible.

It’s easy to overstate this point. Obviously, our instincts operate at a certain level of generality. It may be impossible for our minds to evolve to successfully confront every specific problem, so evolution may emphasize certain heuristic devices. There does seem to be no end to the number of situations for which behavioralists have shown the human mind to be very poorly equipped. Furthermore, humans’ current environment may be quite a bit different from the ones in which our intuitions evolved. As decisions become more specific and more technical, people will be more likely to need advice, or at least expert information, to make good decisions.

For larger questions, however, I suspect that most people, most of the time, can trust their instincts. Should I quit my secure but boring job and try to become an entrepreneur? Should I dump Tom for Eric? Should I go to college, or should I get a job straight from high-school? Should I study more, or worry about my social life? Is it all right for me to drink all my earnings, or do I need to start saving for retirement? Should I settle down and start a family, or focus on my career? Our instincts may be fairly well-equipped to guide us through these decisions. At the very least, they are more trustworthy than advice-givers operating under a very different set of instincts.

People Who Aren’t Poor Shouldn’t Expect Free Stuff

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In my health care class today we discussed the CLASS Act, a part of the health care reform legislation that attempted to create an affordable benefit program for long-term (nursing) care. The program was scrapped after actuaries determined that it could not operate within the financial limits allowed. This should not have been such a surprise, as long-term care can be really, really expensive.

Our professor noted that, in the absence of some federal long-term care entitlement, many people struggle to pay for long-term care. Medicare does not cover nursing services, though Medicaid does. However, in order to qualify for long-term coverage under Medicaid, seniors have to spend through their earnings and, in effect, impoverish themselves. “This,” our professor noted, “poses quite a dilemma.”

My response: huh?

Sure, it is quite a dilemma for the person who must decide between spending through their savings and foregoing long-term care, but how is it a dilemma for society or policy-makers? A person who values nursing services should buy them! Why, though, should the government pay for services of those who live above the level of wealth that society seems to have determined actually merits assistance (i.e. the level at which Medicaid and welfare are provided)?

Surely the strangers who will be taxed to provide for these services derive little benefit for these services. Why should they be forced to pay for them, while the assets of the person who receives the benefits are shielded? The demand for long-term entitlement is a self-serving cry for distributive relief.

Imagine a middle-class retiree with $2 million in the bank, and a lower-class retiree with only a few hundred thousand. Neither one is poor enough to qualify for Medicaid and welfare. In other words, they are not so poor that society has determined that they should receive financial assistance, forcibly obtained from wealthier people.

If the lower-class retiree needs long-term care, he may quickly become poor enough to qualify for Medicaid. The middle-class retiree, on the other hand, may spend a million dollars, on long-term care, and still have savings well-above the level of the lower-class retiree. If society pays for his long-term care needs, they have in effect protected his financial status from erosion, while at the same time ignoring and giving no assistance to the poorer lower-class retiree.

What possible principle could justify this? How about, “I deserve to be about as rich as I am now, even if other people are poorer.” Isn’t that a rather unprincipled assertion of privilege? My suggestion is that, at least regarding long-term care, society cannot justify paying for the entitlements of people who live above the level required for general government assistance.

Here are the responses I received from the other members of the class.

1. Long-term care needs can be unexpected.

So what? Why should we favor richer people with unexpected expenses over poorer people without them?

2. Medicaid provides access only to awful long-term care.

Maybe true, but a separate issue. The premise that poorer people need better long-term care does not yield the conclusion that the finances of richer people should be subsidized.

3. The bar for Medicaid is set too low.

Then it should be raised.

4. A married couple may have to liquidate both of their earnings to pay for care for one of them.

This is a poignant objection. A wife might not really assign much value to the long-term care that her husband receives, but there may not be a realistic way for her to protect her portion of the couple’s assets. She is “locked in” to his health care expenses.

But my same argument holds here too, I think. Surely a spouse values the long-term care of their partner more than the strangers who would otherwise be forced to pay. Why should strangers be forced to pay to maintain a spouse’s lifestyle when other poorer people receive no assistance?

The Law of Diminishing Marginal Utility

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Dan Klein has published a retraction of his earlier claim that progressives are more susceptible to economic ignorance than conservatives and libertarians. Along the way, he makes a mistake that is one of my pet peeves.

More than 30 percent of my libertarian compatriots (and more than 40 percent of conservatives), for instance, disagreed with the statement “A dollar means more to a poor person than it does to a rich person”—c’mon, people!—versus just 4 percent among progressives.

“A dollar means more to a poor person than it does to a rich person” is Klein’s misstatement of the law of diminishing marginal utility. A proper statement might be “a dollar would be worth more to a man if he were poor than if he were rich, other things equal.” The law of diminishing marginal utility does not give you the ability to make interpersonal comparisons of utility.

President Obama’s Student Loans Op-Ed

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My sister forwards me the President’s rather tepid call to action on student loans, in the Harvard Crimson. My reactions:

One subtext seems to be that he wants to continue putting pressure on the small minority of student loans that are still made by private lenders. (“We’re also going to take steps to help you consolidate your loans so that instead of making multiple payments to multiple lenders every month, you only have to make one payment a month at a better interest rate.”) But it’s a little unclear.

He also wants to “give about 1.6 million students the ability to cap their loan payments at 10 percent of their income starting next year.” These numbers could mean a lot of different things. Likely it works out as a subsidized loan to people with low incomes, and an implicit tax on loan repayments of people with high incomes. Or just an explicit tax, to subsidize student loans in general.

The only other proposal I see is to give more information (“we want to start giving students a simple fact sheet called ‘Know Before You Owe’ so you can have all the information you need to make your own decision about paying for college.”). This is a pretty typical feature of garden variety progressive initiatives. If you give people more information, people will supposedly make more rational decisions.

Of course people don’t actually act like rational economic calculators. At best, most people just imitate what other successful people around them seem to be doing. Students will stop taking out such large student loans only if they believe taking out loans tends to lead to bad consequences. To that extent, the pain of repaying student loans is not the problem – it is the solution. Taking away that pain by artificially lowering interest rates or passing the costs to taxpayers only encourages people to make the lousy educational investments that they may be making today.

Mostly Obama just wants you to know how much he (and Michelle) cares about students. I wish he cared less. Nobody made students take out those loans.

Leo Katz is Guest-Blogging on Volokh

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I may want to read his book. Snip:

But perhaps you in fact think the parliamentarian ought to feel bad about using a killer amendment? Once you think about the matter a bit more, it is hard to see that what the parliamentarian did as the least bit objectionable. To be sure, he did derail a bill that had majority support. But did the bill he derailed in fact deserve to pass? To be sure, a majority supports it as against the status quo. But there is another bill, the amended bill, that yet another majority would prefer, and then there is another majority that would prefer the status quo over that one. Given that, what makes the proposed bill anymore expressive of the legislature’s “true” wishes than these other alternatives?

Happiness and Genetics

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A friend forwarded an article from the Economist summarizing some evidence that happiness is genetic.

THE idea that the human personality is a blank slate, to be written upon only by experience, prevailed for most of the second half of the 20th century. Over the past two decades, however, that notion has been undermined. Studies comparing identical with non-identical twins have helped to establish the heritability of many aspects of behaviour, and examination of DNA has uncovered some of the genes responsible. Recent work on both these fronts suggests that happiness is highly heritable.

As any human being knows, many factors govern whether people are happy or unhappy. External circumstances are important: employed people are happier than unemployed ones and better-off people than poor ones. Age has a role, too: the young and the old are happier than the middle-aged. But personality is the single biggest determinant: extroverts are happier than introverts, and confident people happier than anxious ones.

Surely there is a strong genetic component to happiness. However, I’m mostly interested in the environmental components of happiness.

In my experience, people react negatively toward displays of unhappiness. This suggests that happiness signals something desirable about an individual, perhaps success or social status. If unhappy people are unsuccessful or undesirable, it’s best not to invest too heavily in them. If happiness didn’t signal, then why avoid unhappy people?

One problem with looking for simple genetic determinants of happiness: success and social status have genetic factors too. Twin studies won’t eliminate this complication, and I’m not sure how easy status should be to control for – status within a local social network, rather than within society, seems more likely to be important.

Presidential Primaries as Mate Selection

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Voters look for the same qualities in presidential candidates as they do in mates – or at least, as I imagine women look for in their ideal man.

The ideal presidential candidate is tall, handsome, and confident. He is ambitious, and his career history is extremely impressive. He is probably rich, or if not he is at least famous. He should come from the same cultural background as you, and he should like the same things you do. He should be compassionate, eloquent, and outspoken. In debates, he should be able to embarrass his competitors without loosing his composure, and he should never appear confused, apologetic, or defensive. It’s easier to like him if he is already popular. He definitely shouldn’t have a habit of making outrageous statements in public. How would you be able to explain him to your friends and family then? Obviously, he is a man and not a woman.

Is it a good metaphor? Or a perfect one?

Consequences of Political Zen

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Political Zen [earlier Upside article] is what I call acceptance of the notion that politics is beyond the control of any individual. Certain consequences may flow from accepting this notion.

Political Zen may cause you to decide not to get involved in politics. Some people become activists because they want to “make a difference.” Thousands of journalists, activists, policy experts, and staffers spent years in Washington debating the merits of a single piece of health care legislation. Collectively, their discussion may have been very profound, but no individual can reasonably claim that he played a decisive role in the legislative process. Most political issues are like health care insurance reform: whether or not you get involved, they will be resolved in substantively the same way.

A person who accepts his inability to “make a difference” in politics needs some other reason to stay politically involved. The most obvious reason is that, even if you cannot make a “difference,” you can still make a living in politics. Politicians, their staff, journalists, policy experts, bureaucrats, lobbyists and more at least earn a paycheck, even if none of them really achieve anything.

Other people derive a sense of fulfillment from participating in politics. If you think participating is inherently meaningful or perhaps a sort of duty, then you may not care whether or not you have made a quantifiable contribution. Activism can be its own reward. Political involvement can also be a truth-seeking exercise. Debating politics is a way to test your own understanding, and hopefully improve it.  Or it can be a way to help improve the understanding of other people. Debate can be enjoyable for its own sake, even when if it is unproductive. You may just enjoy being right – or arguing with people who aren’t – or just arguing.

If you do remain involved in politics, you may find the nature of your involvement changing. Although wonks prefer to discuss politics in terms of concrete, achievable policies, there is no need for any individual partisan to do so. You may find yourself becoming more Utopian, and less concerned with following the political horse race. You might stop caring about political strategy. Or you may not. Like sports, elections have their own inexplicable appeal, though not to me. Unfortunately, if you make a living in politics, you may have to at least pretend to care about “practical” politics. This is perhaps something to consider before getting involved.

Finally, you may start to think about politics differently. You may reluctantly accept that, in politics, no one is really to blame – and conversely, that no one really deserves credit. If you don’t have any real control over policy, then your political opinions are just thoughts. Even elected politicians only have the power to legislate within the strict constraints imposed by public opinion and the decisions of their colleagues. In practice, laws don’t get passed merely because politicians choose to support them – rather, politicians only have office in the first place because they have credibly committed to satisfying the legislative demands of their constituents.

Some people find Political Zen to be bleak or depressing, but it isn’t that way to me. Political Zen only tells us what we should know already – that the world is big and an individual is small. Along the way, it lifts the burden of responsibility from our shoulders. You cannot be to blame for what is out of your control. You don’t have to worry about the results of getting politics wrong, because the world will be no different if you do. And because you aren’t responsible, you can work toward your own goals instead of worrying about the political disposition of society at large. If you want to discover truth, share it with others, fulfill a categorical duty despite the hopelessness of achieving specific results, or if you decide to simply give up on politics, then Political Zen is no obstacle to you, just a first step.

This piece was originally written for Stephen Dewey’s UpsidePolitics.com

Political Zen

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For me, political zen begins with the realization that I have no influence over the broader political forces at large in this country, or the world. Most people who care about politics want to change society, reverse injustice, or alter the vision of morality held in the minds of their countrymen. None of these things are achievable.

Take voting. More than 300 million people live in the United States. More than 131 million people voted in the last presidential election. No individual voter could have hoped to change the result of an election by voting. If a person were a tie-breaker, it would probably not matter who they had voted for. Whichever politician won would preside over a strongly divided electorate. He would not be likely to have the political support to pass drastically different legislation. And in two, four, or six years, there would be another election, and whatever votes passed or failed on thin margins could be reversed.

Many people who understand the futility of voting hope to change politics by entering it. There may be 300 million voters, but there are only one hundred senators, fifty governors, and one president.

But it is just as hard to make a difference by running for office as by voting. There are 300 million people in America, and each has only a small chance of becoming president. On a more fundamental level, politicians can only win elections if many people will vote for them.  To win votes, a politician must promise to do what people want him to. A politician can lie about his beliefs, or he can believe the things that people already want, but over the long run he cannot resist the political regression to the voters’ mean.

Many people stake their hopes not on voting or political office, but on ideas. Politicians and activists alike both suppose that if they study ideas carefully, learn which ideas are true, and argue for those ideas forcefully, they can convince voters to want different things. This strategy suffers from the same basic problem as the others. In a nation of 300 million people, why imagine that you will be the one whose ideas spread to others? Why think that you will be the one who argues more forcefully than anyone else? Why imagine that you will learn truer ideas than all others? Moreover, the truth of an idea is a part of external reality. No personal efforts will change an idea’s “truthiness.” If an idea is true, and if truth recommends itself (but who knows if it does?), then the truth does not need any individual advocate’s support.

Ideas have their power external to their believers. The welfare state did not occur because Otto von Bismark imagined it; Martin Luther King could not have prevented the Civil Rights movement if he had tried. Idealists who want to make a difference often hope that they will be able to spread their ideas to others. But an activist’s ideas are not attractive because he believes them, he believes them because they are attractive. We can participate in change, but we cannot change it.

People can make a difference. They can make a difference in their own lives, in the lives of their friends and family; they can make a difference to their coworkers and the people they interact with from day to day. In a sense, whether you are rude or generous or cruel to others is “political.” And this difference may be vastly important to these other people. But this is not politics as generally conceived, or as people usually seek to practice it.

This piece was originally written for Stephen Dewey’s UpsidePolitics.com.