Convincing Someone to Reconsider is Hard

It’s a hard sell to get people to change their political beliefs.

Presenting someone with a logical argument is like saying, “Let’s sit down together and do some boring math and logic problems. You’ll have to follow along, even though it might get a bit tedious. In addition to being boring, at the end of the exercise it will destroy some of your most cherished beliefs and your sense of identity.”

So much can go wrong here. Even if they do make a good-faith effort to follow along, if you lead them to a conclusion they don’t like, they’ll assume you “tricked” them somehow. After all, you had time to prepare and plan, and they’re seeing your argument for the first time. Keep that in mind when you think you've just presented a killer argument and people don't instantly bow down to your awesomeness. The psychology here is, "That's too easy, so it must be some kind of trap or trick." This puts an upper limit on how convincing any argument can be: the more inherently convincing the argument, the greater the instinctive recoil, and the greater the effort to explain it away. Most people will indulge motivated reasoning, applying a more stringent standard to the quality of your arguments and evidence than they do to their own.

Mostly this takes patience. Someone might balk at an argument the first time they hear it, but slowly come around the second or third or fourth time. They might slowly realize they don’t have a good answer for it. Some hard-headed individuals just don’t wanna'. You have to learn to write off the truly lost causes, and do so without rudely dismissing the ones who will ruminate on your ideas. You have to clarify your thoughts to someone who misunderstands you on the first pass. (“No, I didn’t advocate murdering all children. Let’s try this again…”)

I think every serious adult has gone through this process of slowly changing their mind about something important. If you’ve had that experience, try to remember how hard this was while it was happening. Consider that some people are silently suffering through the same process.

Don't mistake me as saying "Let's all stop fighting and get along" or "We're all right!" or some other middle-ground nonsense. Anyone who reads this blog knows I hold strong opinions, and I'm not shy about sharing them. I think we should all be having those conversations and debates, and rational policy could arise from this process. I think some people are just plain wrong and need to be told so in no uncertain terms (though I am suggesting that this can be done politely). If our government is doing something terrible, if it has implemented a policy with horrendous consequences, we really should demand that it stop doing so immediately. But we should be aware of the limiting factor in this process: human attention. Human patience. Mental bandwidth. We aren't computers that can instantly start running the new software patch, independent of what any other machine is running. Our pathetically slow meat-brains need to process new information, and our social instincts compel us to seek validation of our beliefs and opinions. Minds change slowly.

The Clinician's Error

Here is a great piece by Maia Szalavitz, titled Most People with Addiction Simply Grow Out of It. She really puts here finger on a common logical fallacy, one that's particularly common in drug policy discussions. She dubs it The Clinician's Error. It's the tendency to think that the cases you see are typical, when in fact they are often extremely biased samples of humanity. The process that generates these examples is not dipping it's ladle into an even mix of human experiences, but is specifically drawn to the worst one-tenth of one-tenth of a percentile of "things that can possibly go wrong." From the article:

So why do so many people still see addiction as hopeless? One reason is a phenomenon known as “the clinician’s error,” which could also be known as the “journalist’s error” because it is so frequently replicated in reporting on drugs. That is, journalists and rehabs tend to see the extremes: Given the expensive and often harsh nature of treatment, if you can quit on your own you probably will. And it will be hard for journalists or treatment providers to find you.
…
Treatment providers get a similarly skewed view of addicts: The people who keep coming back aren’t typical—they’re simply the ones who need the most help. Basing your concept of addiction only on people who chronically relapse creates an overly pessimistic picture.
 This is one of many reasons why I prefer to see addiction as a learning or developmental disorder, rather than taking the classical disease view. If addiction really were a primary, chronic, progressive disease, natural recovery rates would not be so high and addiction wouldn’t have such a pronounced peak prevalence in young people.

I see so many comments on drug policy pieces that start with "as a doctor..." or "as a police officer...", and then the "expert" begins to tell it like it is (in their own minds, anyway). I've personally gotten this kind of response from people in law enforcement or medicine. It's always very condescending. As in, "I'm the experienced and world-weary practitioner and you're simply a book-worm with no practical experience in this matter." Still, these people reach the wrong conclusion by committing a pretty basic error. They ignore sample bias. They ignore the fact that, almost by definition, their professions bring them face-to-face with the worst-case scenarios. They get called in when something bad happens. (I'm also tempted to point out that many doctors and many people in law enforcement have reached the opposite conclusion, so appealing to authority does no good here.)

I want to respond by saying, "Look, pal. Driving is incredibly dangerous. I'm an actuary. I look at auto claims all day. It's all we worry about! It's the only thing that causes my company any trouble. These accidents happen all the time. Here is a long list of fresh examples..." This would be incredibly silly, and a serious person could tell me that I'm just fixating on the rare accidents and not the thousands of safe car trips that occur for each auto accident. In fact, we actuaries have a pretty good tradition of measuring everything that happens, not just the times that something goes wrong. My database contains not just the accidents, but also the automobiles that never file a claim. And we explicitly calculate the risk in a quantitative way. (For example, "The frequency of an auto claim causing bodily injury is 0.5% per car-year.") I'm not driven to make the clinician's error, because I know about all the times that nothing bad happened. (I wrote a post about this a while ago.)

Internet Shaming the Pot Prohibitionists

Something interesting is happening. Support for marijuana prohibition is quickly moving outside of the Overton Window.  I sort of knew this was happening, but a recent event still took be by surprise.

Alex Berenson wrote a piece at NYT highlighting the arguments of his new book, and Malcolm Gladwell piggy-backed on it at the New Yorker. Berenson seems to think that marijuana causes psychosis, and that this is a reason to keep it illegal. (He favors "decriminalization" which eliminates criminal penalties on the users but not on the suppliers.) The response was swift and vicious. Some of the snarkier comments on this Twitter feed might give you a taste of how the discourse played out. You can also read some of the comments on his NYT piece. There is an exchange of ideas and information here, but the tone is one of shaming and derision. Berenson is accused of peddling "Reefer Madness". He's accused of not understanding the most widely repeated truth about social science: that "correlation isn't causation."  Some are accusing him of not caring about large numbers of black men being sent to prison for drug charges, implying racial insensitivity in his priorities (if not outright accusing him of actual racism).

I don't care for this type of response, and I don't think it's a productive way to engage with the enemy. If the target of your argument is Berenson or someone who believes his claims, the best approach is to calmly, carefully explain why his claims are wrong. Don't just chant "Correlation isn't causation!", as if everybody doesn't already understand that. Show that careful controls make the correlation go away, or that an alternative causal mechanism is more plausible and explains away the correlation. For example, someone did an analysis with more thorough controls showing that Colorado and Washington have lower murder rates than expected based on prior trends. Read the piece in the link. I don't detect any sarcasm or rudeness, just a careful vetting of one of Berenson's claims. I would prefer our public discourse to be conducted like this.

On the other hand, I'm having this "I didn't want it this way, but I'll take it" kind of feeling. Drug prohibition is just a terribly wrong-headed policy. There is basically no justification for it, theoretical or empirical, that passes muster. Do any kind of sensible cost-benefit analysis, including in the analysis anything that a reasonable person might care about, and prohibition fails by a very wide margin. I'm reminded of a quote from Drugs: America's Holy War by Arthur Benavie. Describing his review of the literature, Benavie writes (emphasis in original):

The more I studied the issue, the more appalled I became. There were no benefits I could find, only costs.

This was my experience after reading anything and everything I could find on drug policy. Nobody can plausibly claim that problematic drug use is significantly reduced by drug prohibition, which would be the one supposed benefit. (There are flippant attempts to make this claim, but they fail.) So there's basically nothing on the Benefits side of the ledger, and on the Costs side we have things like black market violence, infectious disease among IV drug users, overdose deaths due to uncertain drug purity, and pointless harassment of citizens (innocent and "guilty") by law enforcement. (If we're restricting the discussion to marijuana, I acknowledge that only the last thing on that list is really significant.) Some excellent books have been written about this: Drug War Crimes, Why Our Drug Laws Have Failed, Smoke and Mirrors, Drug War Heresies, Ending the War on Drugs, Saying Yes, and the above mentioned Drugs: America's Holy War. Drug policy reformers have tried calmly and carefully to explain why this policy is a failure. Drug warriors have dug in their heels and refused to listen to common sense, and the general public is too apathetic to spend any time or effort revising its opinions. (Tellingly, Drug War Heresies declines to recommend outright legalization, but its authors are quick to point out that prohibition has nothing to recommend it! I read this as the authors trying to be neutral in a non-partisan sense, but hinting strongly that nobody would have any good reason to institute drug prohibition if it weren't already official government policy. It's sheer inertia, status quo bias at work.)

I hate internet shaming. But if this is how policy changes, so be it. I feel like the nice way has been tried, and the debate has been won, but nobody cared enough to actually tune in to watch it. I won't feel terribly sorry for the drug warriors who find themselves being shamed on social media for supporting backwards policies that have horrible consequences. In a few years, they will be regarded the same way that opponents of gay marriage are today. It would be lovely if policy changed resulted from civil discourse. People have a reasonable discussion, presenting and weighting or discounting various kinds of evidence, the participants adjust their priors based on new information, and we arrive at some kind of rational policy. I wish that was the world we lived in. And I tried my best. I really tried to be a gentleman about it. For my efforts, I feel like I actually reached a few people. But I have this nagging feeling that policy change doesn't arise from a process like this. To change attitudes in the general public, you have to make the "wrong" opinion seem backwards, uncool, and shame-worthy, like what happened to racism over the 20th century. (To take a more trivial example, Steven Pinker describes how dueling went out of favor in the 19th century in his book The Better Angels of Our Nature. It wasn't so much that reasoned arguments against dueling gained a foothold, or that it was outlawed in more jurisdictions. Dueling declined and disappeared because the younger generation thought it was a barbaric, even laughable practice. Dueling became very uncool.)

Reasoned arguments reach a few disciplined thinkers, but most people are not terribly thoughtful. Most people don't hold up their beliefs for examination; they are too tribal or too lazy or simply too busy worrying about other things. (I really think most people are just sleep-walking with respect their opinions and beliefs. They often don't even have well-formulated opinions.) To get the necessary critical mass of popular support, maybe shaming and other kinds of dirty-fighting are necessary. I've said this before. There is a role for calm, rational debate. But maybe there's also a role for assuming the moral high ground and publicly shaming your enemies. Claiming "We hold these truths to be self-evident..." and then listing the sins of the king: this is not the stance of someone who's ready to sit down for a nice chat. Words like those are a commitment strategy. It's saying, "I'm done talking. I tried that, and it didn't work. Now it's time to get some shit done."

(Of course this strategy is risky. At least half the time, the person who is dripping with moral rectitude is in the wrong. Adopting this "I'm not moving" stance just confirms to everyone else that they're a thick-headed idiot. It's a means of getting your way, but it does nothing to ensure you're actually in the right.)

Like I said, I don't care for this. But if I'm being totally honest here, I do see support for drug prohibition as a moral failing. Someone is advocating the use of violence to stop something without giving a very good reason for it. Drug warriors aren't simply saying they disapprove of something. They want to use state power to actively suppress it. They are approving the use of armed men, sometimes sporting military-grade weapons and armor, to suppress mutually agreed-upon, voluntary transactions. Some grant this support in a thoughtless, implicit way; they simply don't think about how some people will be non-compliant and make themselves the targets of state violence. Some are much more explicit about supporting theses extremely violent tactics. I think it takes a pretty serious case of moral blindness to support this kind of thing, and it really is shameful. I think about all the innocent people subjected to extremely violent raids of their residences to serve drug warrants. Some of these innocent people are the children or spouses of actual drug dealers, so from the point of view of the state this kind of raid isn't even a mistake! Targeting innocent people is done on purpose in these cases. I think about the hundreds of thousands (millions?) of people who have had their lives turned upside down by the legal system. Some spend multiple decades in prison. Some never see the inside of a prison, but nonetheless go through a terrifying legal ordeal. This is evil in plain sight. I'm flummoxed by the unrepentant drug warriors who actually participate in this: the police officers who actually serve drug warrants and conduct no-knock raids, the prosecutors who actually build cases and bring charges against dealers, even the milder case of a cop at a traffic stop who calmly talks a scared kid into waiving his 4th amendment rights and busts him for pot possession.  It reminds me of the East German Stasi (the agents and the sniveling informants who served them) who spied on their fellow countrymen and ratted them out for political crimes. I don't understand how someone can so thoroughly betray their fellow citizens, unless they have been deeply morally compromised. If policy change comes about because drug warriors are finally getting the public shaming they deserve, I guess I'm okay with that. I feel I did my honest best to bring this around the right way. Sorry if it's coming to this.

I acknowledge that I am arguing for more than just marijuana legalization; I think the arguments for legalizing marijuana apply to other drugs, too. And I think the arguments for criminalizing those drugs are just as lame. This puts me in the minority for now, but stay tuned. Attitudes are shifting, and people are growing wise to the failures of prohibition in general.
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Is it weird for something that's still widely supported and still official government policy to be outside the Overton Window? Not really. I'd say that was the status of gay marriage very recently, when it was widely supported but still not officially legal in all states. Oh, there were still opponents, but they quickly learned that they couldn't discuss their opinions without being shamed and shouted down.

How Skewed Is the Distribution of Medical Spending?

Following up on some topics I raised in this post.

I found this document titled The Concentration of Health Care Spending by the National Institute for Health Care Management. It gives some good figures for the distribution of actual annual health care spending. See the chart on the 3rd page. The top 1% of spenders spend ~$90,000 on average. The top 5% of spenders spend ~$40,700 on average. The top 10% of spenders spend ~$27,000 on average. The top 30% spend ~$12,000 on average. You can get cute with these numbers and infer that, for example, spenders between the 1st and 5th percentile spend about $28,000 on average. (Do a weighted-average of the 1% spending $90,000 and another 4% of individuals in the 1-5 percentile range spending $28,000 and you get the $40,700 figure.) People in the 5-10 percentile range spend on average $13,000 a year. People in the 10 to 30 percentile range, about $5,000 a year. Clearly this is a pretty skewed distribution, with the very top percentiles accounting for a large share of total spending. If someone is in the top 1% of spending year after year, health spending could easily be higher than their lifetime income.

But wait. Are people persistently in the top 1% (or top 10% or top 20%), year after year? When we talk about "the top 1% of spenders", is it the same people year after year?  Turns out the answer is "No." (Or mostly "No.") Look at the figure on page 8. It shows the probability that someone in a high-spending quantile will transfer out of that quantile within a year. If you're in the top 1% in one year, the probability is only 20% that you'll be in that quantile the next year; you have an 80% chance of moving to a lower-spending percentile. If you're in the top 5%, you have a 62% chance of moving to a lower-spending quantile. If you're in the top 10%, you still have better-than-chance odds of moving to a lower spending quantile. Clearly this demonstrates that there is some persistence in remaining in a high-spending quantile. Which is consistent with our intuition that there are unhealthy people who need ongoing, expensive care throughout their lives. If transition probabilities were completely random, people in the top 1% would only have a 1% chance of being in that group in the next year; 20% is a lot higher than 1%. But it's a lot lower than 100%.

I tried to get clever with this and come up with the transition matrix for various quantiles. I spent about an hour thinking about it and gave up. I think someone cleverer than me could come up with at least a transition matrix that is consistent with these figures; I'm thinking there is not an exact solution to that puzzle. If someone knows about a successful attempt to come up with these transition probabilities, or if someone knows what keywords to search for so I can look them up, feel free to share. Having that transition matrix would allow me to come up with expected future health care costs for various quantile ranges. (Given the transition matrix, you can multiply through to determine your odds of being in any given quantile in the next year, the year after that, the year after that, and so on. And with the average cost per quantile two paragraphs up, you can calculate their expected future costs in each year, given their current status. Use some interest rate to discount future spending, maybe add some assumptions about "absorbing states", because people eventually die, and you can come up with at least a rough-and-ready estimate for future costs. And that would tell you roughly what a health insurance policy would cost in a free market.)

I wanted to show that the expected future cost for someone in the top 1% is actually modest. Plainly it's less than "$90,000 per year, every year forever, discounted using a reasonable interest rate." Most people who transition out of the top 1% probably transition to another high-spending quantile. They may still be in, say, the top 5% or 10% in the next year. They don't transition to a perfectly random quantile, such that  they are equally likely to be at the 2nd percentile and the 99th percentile in the next year. But the odds of several very bad years in a row gets pretty small, if you simply multiply through the probabilities. Here is a darker consideration: some of those people who are in the top spending quantiles several years in a row are in the last years of their life. It's not a happy thought, but it means that there aren't that many more future years to consider, which means that future expected health costs are not quite as high as the distribution of one year's actual health cost implies. Most of the people who will be in the top 1% are probably insurable on a prospective basis, before the severity of their condition is fully realized. And anyway, a lot of this very high spending is Hail Mary medicine, enormously costly with very little chance of extending life. A sensible health insurance plan that excludes this kind of spending would be still more affordable.

I don't doubt that there are some people who are "uninsurable" in the sense that Ed Dolan means (explained in my previous post). There are probably some illnesses or injuries that are so severe and require such expensive care that even expected future health spending exceeds lifetime income. Once again, the solution to that problem is to insure health status changes rather than having insurance pay all your medical bills. The coverage trigger should be the diagnosis or the injury event, rather than the acquisition of health care years later. Your insurer at the time you were diagnosed with diabetes should eat all the future costs of health care related to treating your diabetes. If you switch insurers, that part of your future health spending should stay with the previous insurer. That way you can shop around and other health insurers don't treat you like a hot potato. (They might charge you more because your poor health is predictive of other problems not related to your diabetes, but they don't have to price or underwrite against you for spending related to your diabetes, which at that point is no longer "fortuitous." At that point, your condition a known entity.) As David Friedman once put it, the trick is to insure before the die is cast. Our stupid system insists on insuring after the dice have already come up snake-eyes.

By the way, I've read some posts from Ed Dolan's excellent blog, here. Go read some. I highly recommend it. I agree with a lot of his policy proposals and a lot of what he says about health policy. Implementing his solutions would vastly improve our health care system, and if I were in a position to deal, I'd be quite happy to accept these as "second best" solutions. I pounced on his Econtalk interview because he repeats a bad argument (in my opinion) that vastly overstates the "some people are uninsurable" problem.

How Many People are Really "Uninsurable"?

In a recent Econtalk, Ed Dolan attempts to make the argument that a fully free market in health-care is not feasible. He claims that some people are completely uninsurable and cites some (very) rough figures on the distribution of health care cost on individuals. I think this is a bad argument, and for reasons I've stated several times before.

The first problem is that health care spending is very, very asymmetrically distributed, and it goes by basically a--some people call it the 80-20 rule, that 20% of people account for 80% of health care spending; and in fact the top 1% account for about 10% of health care spending. So, the result of that is that there are a lot of people for whom it is true that their health care spending needs exceed their income. In fact, exceed their entire lifetime income in a certain number of cases. Now, of course, it's also true that if your house burns down, the cost of rebuilding your house exceeds your income; and we solve that through insurance. But, health care needs are increasingly uninsurable, because in order to be insurable, a risk has to be fortuitous--it has to be due to random chance. But an increasing number of health care risks are predictable on the basis of pre-existing conditions or things that are determined, testing that's determined before you are born. So, we have this combination of catastrophic risks--which are risks that exceed your ability to pay, sometimes even on a lifetime basis, not just on current income--and we have uninsurability.

The problem with the claim that 20% of people account for 80% of the costs is that it's not grouping things the right way. I've seen this done in a very sloppy way, but as an actuary I'm used to seeing it done the correct way. The wrong way to do this is to line everybody up in order of their actual medical spending, pick out the top 20%, and calculate their share of total medical spending. The skewness of actual spending tells you nothing whatsoever about whether a risk is insurable. By this standard, fewer than 1% of homes account for 100% of fire-related homeowners insurance claims. About 1% of drivers account for 100% of bodily injury liability claims in auto insurance. Of course, all of these risks are actually quite insurable, and there are thriving insurance markets in these areas. The distribution is skewed, but not nearly as much as this presentation implies. (This Incidental Economist post by Austin Frakt has some figures, which are in the range of what Dolan says.) This greatly exaggerates how many people are truly "uninsurable."

The correct way to do this is to rank people by their expected costs, then take the top 20% (or whatever quantiles you're doing this for) and calculate their share of total medical spending. Expected cost is calculated based on some statistical model applied to a large database of historical costs, using predictors like age, gender, general health, and treatment history. For most kinds of insurance, annual premiums are determined based on these results. Doing the calculation this way, grouping by expected rather than actual costs, you don't see such extreme values. The top 1% of auto risks (measured by their expected costs, which is reflected in their policy premiums) might be responsible for, say, 5% of claims. Even these very bad risks can usually find insurance.

There are a lot of people who are predictably unhealthy: they have chronic conditions or genetic predispositions to something. But within this population, in a given year some of them will require a lot of care and others won't. Some will have a medical episode of some sort: an infection, a fall, a complication. It will result in their consuming a lot of health care in that year and possibly for a several years in a row. But the question of which person in the high-risk population actually incurs these costs is still a random guess. Contra Dolan, these costs are fortuitous (meaning random, not the colloquial meaning of "fortunate"). They are imminently insurable. If Dolan can show that health costs are as skewed as his presentation implies after doing it the right way, I might concede that there should be a government risk pool for the very highest cost (again, expected cost) individuals.

This is disappointing, because Dolan even mentions house fires and states why they are insurable. He should have had the tools to see why his "skewness" argument doesn't make sense.

Contra his argument on pre-existing conditions, those risks are also insurable. They key to solving this problem is getting people to insure against the risk of acquiring a pre-existing condition ahead of time. If you sustain an injury that requires years of expensive treatment, that's a "pre-existing condition" if you attempt to switch health carriers. But if you injure someone with your automobile, your insurer at the time of the accident will cover the costs of that injury (up to the policy limits), even for care that happens years later. Health insurance could (and should) cover injuries the same way that auto insurance does. It's just as feasible that we could sell insurance that pays out if you are diagnosed with some kind of chronic condition (and my post lists several ways of doing this). Dolan mentions the possibility of testing for conditions prior to birth. Those conditions are insurable, too. Expecting parents can purchase a policy that will cover a child's genetic conditions, so long as they purchase it before any genetic testing is done. This could (and should) even be the default setting for a family health insurance policy, so they don't have to worry about buying it at exactly the right time (after the child is conceived but before any neonatal care is done). This way, the presence of a genetic condition is fortuitous, from the point of view of the insured and from the point of view of the insurer. All of this admittedly requires overhauling of our existing health insurance markets, but it's doable. What I'm describing is basically how other kinds of insurance work. Life insurance and chronic illness insurance policies often have long coverage terms, (very) high face-values, and affordable premiums. Covering the prospect of a pre-existing condition would be no different.

Dolan says some other things that I found off-putting. Russ Roberts mentions that people spending their own money would make wiser health spending decisions. They wouldn't blow their children's inheritance on last-ditch hail-Mary medicine. ("You wouldn't impoverish your children" he says.) Dolan stops him bluntly and somewhat rudely: "Stop right there. That's false." False? Always false? It's sometimes false? Is there a careful experiment or handy dataset? Oh, yeah, there is. Oh, and there's more. Roberts is basically right here, according to the best randomized controlled studies we have, the RAND health experiment and the Oregon Medicaid Experiment. People who have to pay more out of pocket (because they have less insurance coverage) consume less health care, and they don't experience a deterioration in health outcomes for it. Dolan is a health economist. He should know that.

Of course, I'm fixating on the negative. I'm specifically nit-picking at Dolan's errors (they are errors in my opinion, anyway). Don't let that put you off listening to the full podcast. It was a very interesting discussion.

Does "Diminishing Marginal Utility" Justify Income Redistribution?

Of course not. But let's explore why some people think so and explain why that reasoning is wrong.

Diminishing marginal utility is the notion that the first thousand dollars of your income is way more important than the last thousand. The first $1,000 or so is enough to buy the bare necessities required for life: food, shelter from the elements, clothing. (Note that many people in the world make due on less than this. It's not pleasant, but it's doable.) The next thousand might buy you a few amenities, but mostly you'd use it to further ensure your survival: cleaner food, more secure shelter, warmer clothing, maybe some medicine and basic health care. As your income rises, eventually your survival is ensured as much as is feasible, and you start buying more amenities. Television, a computer, a smart-phone, a house with a man-cave. Get rich enough, and you go all-out: a swimming pool, a trampoline room, a yacht. Plainly the first few thousand dollars are more valuable to you than the last few thousand.

Some people argue that this has implications for income redistribution. If you have a million dollars and that guy over there is stuck on his first $10,000, obviously it makes sense to take some of the million and give it to the guy with only $10,000. The millionaire's loss is much smaller than the poor man's gain. The dollar amount of the transfer is equal to both individuals, but diminishing marginal utility makes that money more valuable to the poor man than the millionaire.

Mathematically this argument makes sense, but treating this as a pure math problem implicitly assumes that the incomes are distributed at random. If we acknowledge that the two individuals are decision-making human beings, the argument falls apart. Presumably the two individuals had different goals. The millionaire placed a high value on a prestigious career and high income. The other guy presumably valued something else and did not go full gunner on his career. Almost certainly, the millionaire works more hours than someone in the lowest income bracket. Of course I'm not claiming that the entire difference between these two people's incomes is determined by choice, but much (I'd venture most) of it is.

Let's take a closer look at leisure time. Doesn't leisure also have diminishing marginal utility? If you only had a single hour of leisure time each day, wouldn't you cherish it more than if you had eight or sixteen hours? Should we, as Landsburg puts it in the preceding link, round up assembly-line workers and make them mow the lawns of corporate vice presidents? Of course not. The VP could choose to spend some of their earnings to buy back a little leisure time for themselves. At the same time, albeit to a more limited extent, the assembly line workers could trade their leisure time for higher incomes. This could take the form of working more hours at the same job, working more diligently, working a job in the gig economy, earning an education in their off hours, and a dozen other things I'm not even thinking of.

Diminishing marginal utility does not by itself justify income redistribution. That requires additional assumptions about how income differences between individuals depend on deliberate choices versus random chance. Those additional assumptions need to be exposed to the light of day, so we can know if they are reasonable or not. (By the way, suppose we can perfectly determine how much of everyone's income is due to effort and how much is due to chance. Government policy should not necessarily "correct" the entirety of income differences that are due to chance. Sometimes people are offered the opportunity to insure against some kind of risk, and they decline. If there's a thriving market for fire insurance and people decline to insure their homes against fires, that means people don't place much value on flattening this risk. We need to know how much people value flattening the risk of "earning a low income." Maybe it's a lot, maybe it's not much. But someone who thinks seriously about these topics should want to know that.)

None of this even gets into the topic of taxes distorting incentives and making society as a whole poorer. This consideration makes the optimal amount of redistribution even lower than whatever the above discussion would. In my comparison above of the millionaire and the poor person, I say "The dollar amount of the transfer is equal to both individuals...". This assumption is violated if there are transaction costs. We need to know how big those transaction costs are, and more specifically how they depend on the total amount of redistribution.

Tyler Cowen Is "Not Even Wrong" About Decriminalization

[I originally titled this "Tyler Cowen Is Wrong About Decriminalization." This was the wrong title. "Wrong" would imply that Cowen offered an argument for his position, and that argument had some fatal flaw or easy refutation. His claim that decriminalization is the way to go is not even wrong.]

In a recent links roundup post, Tyler Cowen repeats his claim that decriminalization is superior to legalization of marijuana. He links to a story by Malcolm Gladwell and another one by Alex Berenson and, adding his own commentary, says, "Decriminalization, not legalization, is the way to go." Nothing in either piece supports his policy recommendation. ("Decriminalization" generally means no criminal sanctions or light fines for users, but continuation of prohibition on the supply side.) I've written before that I see this as a major blind spot for Cowen.

It's true that both pieces suggest that the harms from cannabis use may be understated. The legalizers may have been too zealous in denying any possible harmful effect of the drug, not wanting to give drug warriors any hooks to hang their policy on. But what's missing here is any kind of cost-benefit analysis. Is legalization a bad policy if any social problem (crime/mental illness/accidents) increases at all? Is there any accounting at all for the enjoyment that people get from consuming cannabis? Like I've said before, pleasure counts. As I've also pointed out before, Cowen and Tabarrok's own economics textbook provides an ironclad economic case against drug prohibition. (See the link for the full details of the argument.) Cowen owes his readers some explanation of why that analysis, which was important enough to include in his textbook, doesn't apply to marijuana. He might have some deep cultural or "histeresis" argument, about how the standard economic treatment is missing something important. I'd like to hear it so I'd know if it's a thoughtful argument that I might actually agree with, or if it's a collection of un-curated, pasted-together factoids assembled by a news-junkie. (Sorry, Tyler.)

Another thing that's missing here is a thorough vetting of the claims. The Berenson piece claims that violent crime has risen in the states that have legalized marijuana, since 2014. It's also risen nationwide over that period, so it's hard to claim anything about the effects of legalization without a more thorough analysis. (Yikes! I haven't noticed this before. Hope it's just a blip.) Both pieces suggest that some people are susceptible to developing psychosis from marijuana use. I think this claim needs to be parsed. I have heard elsewhere that marijuana use does interfere with the treatment regimes of some mental disorders (schizophrenia in particular), causing them to deteriorate or making treatment impossible. But I think there's a huge difference between saying that a cannabis harms a small percent of the population with pre-existing mental health problems and suggesting that it's dangerous for normal people using at moderate rates. Good on Berenson and Gladwell if they are simply pointing out that some people are more susceptible than others to the hazards of drug use. I'd like to see more of that kind of thinking. Other obvious examples of this: some people are allergic to marijuana smoke, and some AIDS patients are susceptible to fungus that might be growing on poorly cultivated marijuana. (And it sure looks like people with chronic health conditions are more susceptible to opioid overdose than normal, healthy people.) These are useful things to know. It's important to identify risk factors, but this should lead to a nuanced, targeted drug policy. Not general prohibition or "decriminalization", which is still prohibition on the supply side.

[As I was writing this post, I saw Jacob Sullum's excellent piece in Reason on the two Berenson/Malcolm pieces. Apparently some other people have considered the recent rise in violence more thoroughly, and they've found that it can't be plausibly blamed on marijuana legalization. See also this Twitter feed that Sullum links to. Or don't. Ugh. Way too much snark. Legalization advocates, stop doing this. It poisons your moral credibility. ]

Berenson also points out that the black market still exists. This is because excessive taxes have made it more expensive than it needs to be, and onerous regulations make it difficult to obtain in some places. So of course a black market is still going to exist, just as black market cigarettes and black market moonshine still exist, even though these goods are legal. We are still way better off with legal markets in these goods. The black market counterparts to these legal goods represent diversions from clean, regulated, audited industrial processes rather than filthy illegal operations. So it's a cleaner illegal market that we'd have under total prohibition. (More so for cigarettes than for moonshine, but still true of both.)

Both pieces gave me plenty to think about, but they ultimately miss the mark. The notion that marijuana use increases rates of psychosis at the population level is alarmist in the extreme. There is a way of saying this that implies that the entire population is at risk, as if everyone who smoked were making a role of the same set of dice. There is a more accurate way of saying this that reveals to the reader/listener that most normal people don't have anything to worry about, but some people with pre-existing issues and impulse-control problems might experience harms from cannabis use. I don't think it's useful to talk about drugs use as if  it exposed the user to randomly distributed harm, as if randomly sampling from a probability distribution. Usually the harm requires deliberate, excessive use, which means the user has a great deal of control over whether any harm occurs. (Of course, this is less true of, say, heroin, where the user can't know the concentration. Another hazard of prohibition.)

Property Rights: Who Is the Crass Materialist Here?

There are people who reflexively sneer at any mention of property rights. It's usually people on the left. Either it's full-on socialists who think that property rights aren't even a thing, or its moderate leftists who are reflexively bracing for a "conservative" argument against raising taxes or against confiscatory regulations.

According to this mindset, we advocates of property rights are just crass materialists, even imbuing inanimate property with "rights." We're doing this at the expense of living people with actual rights, perhaps denying them an opportunity to fully enjoy those rights. By restricting the revenues of the government, we prevent the welfare state that assures (or "assures", if you're a skeptic of such assurances like I am) that everyone has the minimal material standard of living that would actually allow them to enjoy their other rights. And by hobbling the regulatory state, we're removing the only bulwark against corporate overlordship. (Labor regulations to protect the workers from their corporate masters, product safety regulations to protect consumers from unsafe products, regulations preventing misleading advertising, etc.). Arguing from a principled defense of property rights is a non-starter if you're trying to convince someone who doesn't already believe they're important. You tend to get something like an eye-roll,  and a "Here we go, another rich person wants to protect his 'property'." "Property rights" is just a phrase that rich babies use to prevent their toys from being taken away. It's a materialistic ideology that elevates property over flesh-and-blood people.

I actually think it's property rights deniers who are the crass materialists. One of their major grievances is that some people have more stuff than other people. They are obsessed with national statistics about the income of the upper class and the supposedly flat incomes of median households (which are only flat if you overstate inflation and don't account for increasing transfers, employee benefits, changing household demographics, and decreasing numbers of earners per household). This grievance persists even in a society like the U.S., where "the poor" have a much higher material standard of living than the middle class in most other nations (or for that matter the rich in most other nations). The argument that the redistributionists are just trying to ensure a minimal material standard of living is just not credible in this context. It is entirely about who has more stuff and why they should be resented for having that stuff.

More importantly, the poor need property rights to function, too. The underclasses tend to fair most poorly in societies that don't respect property rights. The economist Hernando de Soto argues in his various works that the inability to acquire title to property is a major hindrance to the world's poor. Establishing clearly who has the right to use, modify, sell, or buy an object, building, or parcel of land would remove a lot of confusion. There would be less conflict with clear rules of ownership. Property owners would also have an incentive to perform maintenance and make improvements on property that they actually own, especially if they can eventually sell it. (If you want a stark example of how lack of property rights leads to decaying infrastructure, listen to Casey Mulligan describe crumbling buildings in Cuba in this interview.)

Unclear property rights lead to unnecessary conflict. Take a simple example. Imagine a car in a world without any property rights. (How a car came to exist in that world is a mystery. Who would bother to build it knowing they couldn't sell it and recoup the production costs? Who would buy it knowing they couldn't keep it for their own use?) You approach the car and reach for the handle, thinking you're going to climb in and drive off. Someone else is approaching with the same intent. You notice each other, and each of you speeds up. This is bound to become an "I saw it first" versus "I touched it first" shouting match, which would likely escalate to a shoving contest. Or suppose we manage to solve that particular problem (of fights breaking out) because we institute an elaborate set of norms and rules for how to adjudicate the conflict. It's still a conflict, with unnecessary argumentation and shouting. Society's resources are wasted arguing over who gets what, constructing elaborate arguments, currying favor with judges, etc. A far more elegant solution is to have clear ownership rules so that not just anybody can lay claim to any property they set their eyes upon. Property rights are basically social norms that have been constructed to minimize conflict. I see property rights deniers as wanting to instigate all that conflict because they are offended by the distribution of material goods. "Let's fight it out so that we can take some of your stuff." This is crass materialism in the extreme. I want to tell them, "You're the ones who are imputing moral worthiness to material wealth, not us. You're the ones initiating a conflict where none is necessary."

I once heard a physicist describe the nature of time. He said something like, "Time is the universe's way of preventing everything from happening at once." The corollary here is that property rights are society's way of making sure everybody isn't using the same property at once. It is physically impossible for a single piece of property to satisfy all potential claims on it. The car in the example above cannot service more than a few people at any one time. A house in the same world could only comfortably fit a few people (even if we overlook non-physical discomfort of sharing a space with strangers). There must be rules governing the use of property, otherwise things get so overused or so bogged down with conflicting claims that they are basically worthless to society. There are some things that genuinely belong to the public and are more valuable if owned and managed communally. Fisheries, grazing lands, forests, etc. Even for these things, there must be clear rules for how they can be used, or they will inevitably be overused and ultimately their value destroyed. (For an excellent discussion of communal properties, I suggest Governing the Commons by Elinor Ostrom and Order Without Law by Robert Ellickson.) But even granting this point about communal property, it's a huge mistake to think that everything is in this category just because some things are.

Another argument for denying the existence of property rights goes something like this: "Historical injustices leading up to the present left property in the hands of people who aren't its rightful owner. Land was taken from displaced or exterminated people, property was confiscated by governments hostile to certain racial groups, and so on. So we can't really know who owns anything."  I think this is an incredibly silly argument. For one thing, it acknowledges that someone at some point rightfully owned property, and that it was wrong for some other party to come along at take it by force. The people who make this argument implicitly believe in property rights. (They even occasionally slip and explicitly acknowledge this belief.) More importantly, this critique of property rights doesn't provide any useful commentary about how we should adjudicate property disputes or tell us what should be distributed to whom. Yes, there are vast historical injustices whereby some powerful group pillaged, displaced, and perhaps exterminated a weaker group. Does that mean the ownership of my car is in dispute? Does that mean someone has to offer their home to anyone who needs shelter? No. The fact that there are hard cases doesn't mean that the easy cases don't exist. Most of what exists is in the "easy cases" category, and these easy cases can be handled by common-sense notions of ownership and property rights.

A related argument is the Barack Obama/Elizabeth Warren notion that "You didn't build that." If you're successful, your success depended on many inputs and required help from a lot of people. Your teachers, who built your human capital. The workers who built your establishment and staff it daily. The government roads and infrastructure that bring customers to your place of business and that generally allow you to transact. These were necessary inputs to whatever wealth you currently own. All of that is true enough, but it doesn't have any implications whatsoever for redistributing resources. If I pay someone to build a structure for me, they offer me a quote, which I can agree or decline to pay. If I pay, and they build the structure and I pay up. Deal complete, honor served. There is no residual claim. If I build a thriving, hopping business out of this structure, the builder's construction contract does not entitle him to a fraction of my revenues in perpetuity. The builder builds, the buyer pays, deal done. The same is true of almost every transaction in our society. It would be incredibly unhealthy for us to go around feeling like we had residual claims against other people's success, just because something we once did (even things we were compensated for according to an explicit contract) was a necessary input to their success. If you want to lay claim to the future profits of some company, buy stock in it. (You can't really buy stock in the future earnings of an individual person, except in some rare cases like top athletes or actors. Maybe you should be able to do this more easily? Maybe this would be a reasonable way to finance education?) It's best to start from clear rules of ownership. If people want to "sell shares" of their future earnings or buy shares of someone else's, they should do so explicitly. The Obama/Warren framing is a thinly veiled justification for grabbing more tax revenue. It doesn't tell us how much to tax, just that the amount should be "more." (Is there a way to start with the Obama/Warren formulation and arrive at the conclusion, "Therefore taxes should be lowered on top earners."? If not, I don't think it's useful for discussing tax rates.)

None of this tells us anything useful about what the optimal tax rates should be. One could be a rigid-minded "property rights extremist" in such a way that no taxation is ever justified. "It's mine, so you can't have it." But most people, even most libertarians, think that the government needs some revenue to fund its programs. (Even some anarchocapitalists, like yours truly, think that the government should remain a going concern for quite some time. If there is a necessary interim between our current massive government and future statelessness, that inevitably means some level of taxation for the foreseeable future.) These taxes might be seen as mild-but-justifiable abrogations of property rights. Or they may be seen as a necessary cost that overall improves property rights, because government police and courts discourage theft and settle disputes. I don't know what the optimal tax rate should be. But I do think it should be troubling if people start arguing that there are no moral constraints on tax collection and income redistribution because "property rights aren't even a thing." Most people are quite reasonably troubled when they hear this kind of talk. They are right to be troubled. And property rights deniers are wrong to dismiss these worries.