Monday, March 19, 2018

Rules and Meta-Rules

Really interesting Econlib post here.

Basically, one economist says (paraphrasing, not actually quoting here), "I must be irrational, because I could switch to diet soda, which is cheaper and likely just as good. But I don't bother, because I'm stuck in some bad default mode. Even if it's not just as good, it's probably at least worth trying."

Another economist says, Hold on there! The brain power necessary for decision-making is a truly scarce resource. You aren't being irrational by creating some simple rules that economize on this resource, such as "always buy Diet Coke." (He says a lot more, but this is my blog so I'm summarizing my own take-away.)

This is an important and deep point. You can't simply re-analyze every single decision from scratch. You need some simple rules, such as "Leave work at 4:50", "Set alarm clock for 6:30", and "If we're low on our household stock of Diet Coke, pick up more at the store." You also need a set of meta-rules for resetting these rules of thumb. "If the boss complains about my punctuality twice, set alarm clock for 6:20 instead of 6:30." Or "If the expected benefit of changing from Coke to generic brand exceeds X, switch." The problem here is that you need a rule to even alert you to the possibility of changing a decision-rule. Maybe the benefit of switching from Coke to generic is enormous, so big that almost anyone would agree that it's irrational not to attempt the switch. But you don't just get to know that. You have to sit down for a moment, jot down some figures, grind out a simple calculation, and see the answer. Someone who did this all the time for every little decision would be almost paralyzed by their constant cost-benefit checking. (Flip over a used envelope, or grab a sticky note? Pen or pencil? Or just use Excel? GHAA!) So your meta-rules require not just a set of rules about thresholds that overturn existing rules, but for when you will even bother to check whether the threshold has been crossed.

This is a theme I've discussed before. I think the whole economic irrationality/behavioral economics thing is way overblown and overdone. Examples of people allegedly behaving irrationally usually have an explanation that is fully compatible with a "rational actor" model. Just add in, say, limited computing power or limited information and you get back to "imperfect but serviceable decision rules."  Of course some clever person can pick these rules apart and find that they are occasionally wrong or even that they tend to be biased wrong. Such rules can still be useful.

How Good are Modern Vital Statistics?

From the book Drug War Heresies:
It has been said, for example, that French authorities will only record a death as drug-related if a needle is still sticking in the arm, whereas the Germans will include a driving fatality of a one-time client of a drug treatment clinic.
 Indeed, if you look at the figures in this link (click on "EMCDDA Selection B"), Germany inexplicably has more overdose deaths than France. In 2013, Germany had 1179 while France had 349. Germany had 80.65 million people and France had 66 million in 2013. Not enough to explain the difference. Dividing by populations, we get 1.46 deaths per 100k in Germany and 0.53 deaths per 100k in France. This is for two western European that don't differ in any obvious way (no obvious way that would explain a factor of three difference in drug poisoning deaths, anyway). If the reporting bias mentioned in Heresies is real, though, that would certainly explain a difference in the official statistics.

This is a theme I've written about numerous times. Too many commentators take the official statistics at face value. If mere reporting differences leads to enormous differences in national statistics, then it's likely that changes in reporting biases over time can induce a spurious trend in a time series. It's been a while since I looked at the by-state drug overdose data in any detail, but some patterns in those data suggested a similar bias creeping in. There is enormous state-to-state variation in overdose totals and in the trends over time. Are these differences real or spurious?

Tuesday, March 13, 2018

People Actively, Deliberately Spurn Opportunities to Earn More Income

In my personal and professional life, I see lots of people deliberately foregoing opportunities to earn more money. I wish that the “income inequality” alarmists would take this seriously and admit that this is a widespread phenomenon. Almost everyone could make various decisions that would increase their income. When someone spurns such an opportunity, I take that as an admission that they are comfortable with their level of income and don’t want to earn anymore. I’m thinking of a few examples.

One is from college. Someone (who I barely knew but had a few classes with) told me he’d had an “epiphany” over winter break. He decided to change his math major to a physical education major. I hope he’s doing well, but this decision to change majors severely limited his options.

I know a lot of actuaries who stop after passing a few exams (there are 9 or 10 total, depending on how you count them). I understand. The exams are a pain in the butt, and this is partly by design. It’s a powerful sorting mechanism. If someone passes all the exams, you can be pretty sure they are serious. If someone passes a couple exams and then stops, you know they have some good analytical chops by maybe they lack the combination of ambition, conscientiousness, willpower, and intelligence that makes a really good actuary. The rewards for passing just one more exam are pretty big. Usually when another adult makes a choice like that I try not to second-guess them, but honestly I think some of these people are being short-sighted. Many of them would be more fulfilled in the long run if they just passed another exam or two (or all of them).

One person I know described his educational trajectory to me: “I finished my poly sci degree with the intention of going to law school. But, man, the slopes of Colorado were calling me. I decided to do some skiing instead.” I assume he knew his own long-term self-interest, but there’s no question such a person is deliberately deciding to earn less than he could.

I sometimes suggest career options to people and get not-very-satisfying excuses for not taking the advice. From a single guy with no kids: “I’d love to take more actuarial exams, but I’m just too busy.” He offered “mowing the law” and “preparing meals” and other mundane household chores as examples of things that made him “too busy,” and he even suggested that people like me with a family had more time because other family members could help with that stuff. (?!) This was really an example of someone not prioritizing the thing that would have allowed him to earn more, and choosing a relatively easy-going home life over long, boring hours of study. I can’t blame anyone for taking that route. But it’s funny how people invent implausible excuses for not doing obvious things that would plainly advance their careers. (This person’s notion that having a family means having more time to do grueling hours of study is exactly backwards, but at that point I was just politely smiling and nodding. He’d already decided on “No” and then back-fit a lame excuse to his answer.) It’s funny. I actually started hiring a guy to mow my lawn because it bought me a couple extra hours of study time each week, and I’d pack my lunch so would have a few extra minutes over my lunch break to study (I didn’t have to walk to a nearby sub shop, which took precious time). For dinner, I’d fix whatever was fastest (throw burgers on the griddle and let them sizzle, or throw chicken nuggets in the oven and let them cook while I studied, pausing briefly to eat when they were done). If you are prepared to hunker down and study, you can make time for it. It might require shaking yourself out of your routine and making some sacrifices and uncomfortable changes, but it’s not hard.

I hear other weird excuses, too. “I don’t want to do any more school.” Really? Even a few online courses to teach you specific skills relevant to a specific profession? Bullshit. Categorically writing off the possibility of continuing your education is a bad move, not to mention completely arbitrary.

Here is one I have heard from several under-employed people: “I want a job as long as it’s not [long list of careers for people with quantitative skills and with an extremely low barrier to entry]. Anything else would be fine.” I think you can afford to be this picky after you’ve had some initial career success and want to do something more creative and rewarding.  But if someone is setting down these rules at the dawn of their working career, they are setting themselves up for failure. I don’t parse this as “I physically cannot do more schooling” or “I physically can’t work an unpleasant job.” I parse it as:  “I could do something unpleasant that would earn me more money, but I choose not to.”

I think even the inequality alarmists understand this point. If you could keep the conversation out of a political context and talk to them about under-performing family members or friends, they would tell you something like what I said above. Everyone has a sibling with unfulfilled potential, or a brilliant friend who is under-employed and content to stay that way. They will tell you, with sighing, face-palming frustration, that their friend or family member is spurning a perfectly good opportunity for no good goddamn reason. Implicitly, they will admit that those folks on the lower end of the distribution could choose to be on the higher end if they only made a few unpleasant choices. 

This is where the inequality mongers need fixate less on metrics and more on philosophy. If people are essentially choosing their position on the income distribution, then income inequality is not a great moral problem. We shouldn't pretend that people are assigned an income by the casting of some cosmic dice or some fickle god's roulette wheel. Sheer introspection and experience with actual people suggests otherwise. At least to this observer.

[Note to people who know me personally: If any of this looks familiar, I am not talking specifically about you. These "examples" are really composites of several people with details changed or made vague enough to not identify their real-life inspirations. My younger self is more represented in the above examples than any other single person I know.]

Monday, March 12, 2018

Make Immigration Restrictionists Pay For Their Own Borders

When I hear immigration-restrictionists describe the problems immigrants bring with them, I want to reply with "That's great. Build your own damn borders. Stop conscripting me to pay for a 'border' that I don't want."

In a previous post, I make the point that someone can't just "come here" even under an open borders regime. They can't just walk across the border and merely exist. They have to somehow link themselves into the existing society. They have to acquire housing. They have to either acquire a job or plead for mercy from someone who will bankroll their stay here. They have to obey the norms and formal rules of any establishment they enter. Or else they will get kicked out. All of this entails convincing someone who is already here that you're worth dealing with as a human being. "Yes, I will rent to you" or "Yes, I will give you a job" or "Yes, I will marry you." I called that post "There Are Adequate Borders Inside Our Borders." Someone who considers coming here not really intending to follow the rules will foresee that the entire venture will not be worthwhile and forego the trip altogether. People know that there are internal borders, and they'll have to cooperate with their neighbors, co-workers, etc. in order to navigate those borders.

I'd actually like to see existing policy flipped. Currently it is illegal to discriminate on the basis of national origin for someone who lives here legally, but getting legal permission to come here is a bit of a legal/bureaucratic nightmare. I'd like to see almost no discrimination at the national border, aside from perhaps some minimal vetting to keep out known criminals. But I'd like to give property owners and private organizations more freedom to decide who they will or won't take as members or customers. If some bigot wants to put up a "no immigrants" sign on his store front, let him. I think the concern, that this kind of discrimination would be widespread, is vastly overblown. A bigoted store owner knows that an immigrant's money is as green as anyone else's, so he's likely to keep his petty prejudices to himself, perhaps even rethink them. Even if there are store owners who are truly committed bigots, their shops will end up being owned by people who aren't so arbitrarily discriminating. Productive resources tend to end up owned by those individuals who will coax the greatest productivity out of them. Someone without hangups about immigrants will buy the store from the bigoted owner and turn a higher profit, or simply open a store across the street and drive the bigot out of business.

At any rate, a "no national borders, but you're free to discriminate" regime forces immigration restrictionists to pay the cost of building their own borders. The foregone revenue of potential customers, the added security and enforcement mechanisms, the social stigma and potential boycotts for treading on our society's sacred anti-discrimination norms. I think it's cowardly to unload these costs on other people. I want to say, Do your own dirty work, buddy. You get to enter a private booth every two years and secretly mark a little box for the "anti-immigrant" policy. I'd love to see that veil of secrecy taken away. Private policy suffices here; there is no need to make "keep immigrants out of my life" a matter of public policy. Despite the name, private "anti-immigration policy" would actually be more visible and subject to greater scrutiny. And the discriminators would have to pay the costs themselves. I think that would be true justice.

Sunday, March 11, 2018

Jordan Peterson

I’m currently reading Jordan Peterson’s book 12 Rules for Life. Because why not? I probably would not have heard of Peterson if not for his loud and obnoxious detractors making overblown, hysterical criticisms and comparing him to a Nazi. (I sometimes wonder if these agitators understand just how counterproductive their methods are.)

This naturally piqued my curiosity, so I watched a few Youtube videos. He is actually quite mild mannered and reasonable. His overall message is not obviously contrary to the social justice movement, and it would be a stretch to classify him as "conservative" or "right-wing." The outrage directed at him is kind of confusing, but I can think of an explanation.

Part of his message (in my reading anyway) is that you can improve your own life through deliberate, conscious effort. This is threatening if your narrative is that people are assigned their station in life. If you believe that life outcomes are the result of power structures, classism, sexism and racism, then telling people that they can take command of their own destiny is threatening. It places too much moral responsibility back on the individual, rather than placing it on this amorphous blob known as “society” (or “the patriarchy” or “imperialism”). Well, he’s a clinical psychologist. What’s he supposed to tell his clients? “Sorry, there’s nothing you can do about anything, because all social problems are structural and beyond your control.” He started posting his lectures to Youtube because he thought that maybe people other than his direct clients might find some of his advice useful.

The social justice movement has become something of a religious movement in the following sense: People demonstrate their righteousness by making obscenely implausible claims. Anyone who signs on by affirming such claims is seen as having serious conviction. Anyone who pushes back is seen as insufficiently committed, perhaps even a turncoat. If someone makes a ridiculous claim like “All gender differences are socially constructed” or “All inequality is the result of structural oppression,” agreeing with such an absurdity signals your loyalty to the cause. If you object with some obvious criticism, you get a “How dare you go against the cause?!” kind of reaction. The more articulate and thoughtful your objection, the more of a threat you are and the worse you will get denounced for it. I think Peterson triggered this reaction by saying he wouldn’t allow his speech to be controlled by the force of law. (Specifically, he objected to the demand that he use someone else’s prescribed gender pronouns rather than the ones he and other English speakers are used to. More specifically, he objected to being compelled by the force of law to do so. That's a perfectly reasonable objection, unless you're trapped inside a virtue-signalling "How dare you betray the cause?" paradigm.)

All that aside. Peterson's book is useful in the same sense that all other self-help literature is useful. It's a big mix of "That's obvious to any mature adult" and "That's obvious enough, but plenty of people need to hear it" and "That's obvious after the fact, but I needed to hear it just now." Even if the third thing is only 5% of the book, it can still be worth it. There is a chapter on disciplining children that I very much appreciated, even though I was already following most of his advice (I think). His description of putting his defiant 9-month-old son down for a  nap was adorable and hilarious. He also describes teaching the same defiant son to accept a spoon-feeding. It's hard to describe how happy this made me feel. It was a heartwarming dose of humanity.

Bad Economics and Net Neutrality

I see bad economic arguments all the time in news commentary and in casual conversation. It feels to me like people are “under-theorizing” the problem. It’s not that everyone should have a rigorous mathematical model behind every piece of commentary, but a little bit of disciplined thinking could go a long way.

In discussions of net neutrality, I get the impression that people have a very crude model such as: “Internet Service Providers are monopolies, so they get to call the shots. They can throttle competitors and direct you to their partners or to their own services.” This model gets it wrong because it’s too crude. Even monopolists face a downward-sloping demand curve. They lose revenue if they set the price too high, or if they intentionally sabotage their own product in the way that neutrality advocates claim they do.

This isn’t the only example of under-theorizing. “Employers have monopsony power, so they call the shots.” is another example. Or “Employers have market power, so they can force employees to tolerate working conditions worse than what they’d actually like.” These stories are too simple. Even an employer with monopsony power (a rarity in the real world) loses out if they set the wage too low. Even an employer with some kind of market power would rather give their employees relatively cheap perks and fringe benefits rather than more money. If the employer (no matter how powerful) can provide safety features for $1 that the employee values at $3, the employer will do so. There’s no opportunity to exploit here, no matter how much power the employer has and no matter how greedy he is.

The elixir for bad economic reasoning isn’t a thorough formal model. A tiny amount of formal reasoning usually suffices. “Monetize the value of ‘directing internet users to my products’ and compare it to the monetized value of ‘making the internet more valuable by opening it up to my direct competitors’.” Or how about “Monetize the value of air conditioning and safety features that my employees value, and compare it to the extra wages I’d have to pay to make them go without.”

Friday, March 9, 2018

Why Grandparents are More Lenient Than Parents: Possible Explanations

There is often tension between parents and grandparents regarding how strictly small children should be disciplined. Grandparents are much more permissive of misbehavior and do not enforce the boundaries set by the parents. This often leads to resentment by the parents. The child is learning bad habits because the grandparent tolerates them, and the parent will be tasked with correcting the behavior later. Even excepting this, the child learns that the rules are different when the grandparents are around. (Perhaps it’s always worth pleading to other adults for a better deal when mom and dad are being big meanies?) The grandparents sometimes actively sow confusion and discord by protesting. (“Oh, it’s okay.” Or “Oh, just let him have it.”) This poisons the parents’ moral authority when they have to eventually lay down the law and enforce a rule. Finally, “Where the hell was all this permissiveness when I was a misbehaving little brat!?”

Possible explanations present themselves.
  1. Different incentives. If the grandparent spoils the child, either by giving them too many presents or permitting too much misbehavior, they get all the benefits of spoiling the child with almost none of the costs. The parents will have to deal with the problem the next time the child, say, begs for a toy in the store or jumps on the couch. The grandparent gets a temporarily happy kid, while the parents have to deal with the petulant little monster this creates.
  2. Mellowing out. Young parents are often stressed and not fully mature. A 60-year-old has more social intelligence than a 20-something or even a 30-something. So maybe younger parents really are too harsh and short-tempered and keep their children on too short a leash? Maybe if the parents mellowed out a little, they’d act more like their grandparents. And maybe if the grandparents could impart their full wisdom on their 20-something selves, they would have been more permissive, too.
  3. Changing generational norms. Maybe the younger generation simply has stricter parenting norms than the previous generation? This is distinct from 2) because it is about how society as a whole changes over time, as opposed to how individuals change as they age. I find this one hard to believe, given that corporal punishment has been declining for decades (see Steven Pinker’s The Better Angels of Our Nature for a long treatment). I doubt if many grandparents suddenly pull out the paddle when the kid misbehaves.


Of course these explanations are not mutually exclusive. It could be some combination of all three. I put most of the weight on 1) because I have seen some particularly dunderheaded grandparental meddling, and done by grandparents who would certainly not have tolerated the child’s bad behavior from their own children. Also, I have seen where a grandparent suddenly become stricter when they have to deal with the child for an extended period of time. For example, when they take the child for a weekend. In this case, the cost of spoiling the child is "internalized"; the grandparent feels those costs, so they learn not to spoil quite so much. It was amazing to witness this lesson being learned. Something like, "Oh, now I see what you're dealing with!"

Still, there’s something to be said for 2). My gut says 3) should go in the other direction (making grandparents stricter than the parents). That said, I can imagine ways that the younger generation of parents are more constraining without being quite as authoritarian. We millennials are a generation of so-called “helicopter parents.” Maybe our parents and grandparents gave us more freedom to roam, but came down harder when news came back to them that we’d misbehaved. They had a “low surveillance, low probability-high severity” regime, compared to the opposite today. (Gary Becker would have approved.)