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Steve Horwitz on Corporate Personhood

Corporations are composed of people. So are unions. So are universities. So are families. The belief that we can somehow “tax corporations” without “taxing people” is the fallacy at the heart of Romney’s exchange. It’s the same with any collective: If we take away union rights, we take away the rights of individual union members. If we strip a university’s accreditation, we also strip credibility from its students and its graduates.

I am composed of cells. The belief that we can somehow tax me without taxing my cells is the fallacy at the heart of [something something.]

Is this not the fallacy of division? Why isn’t Steve’s version?

via Yes, corporations are people | The Daily Caller.

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Why I Love Scott Sumner

I love his long post on my paper. But much more than that, I love that he’s willing to write a post denying scientific realism by way of arguing for abolishing the concept of price inflation.

That said, I wish Scott would give up in his Rortyian antirealism, which is false. It may also help to point out that, however entertaining and stimulating Rorty is to read (I am a fan in this regard), he is among the worst possible guides to questions about realism, truth, and knowledge.  As an alternative pragmatism, I would recommend Susan Haack’s. I’d espcially recommend to Scott chapter nine of her Evidence and Inquiry, “Vulgar Pragmatism: An Unedifying Prospect,” which gives it to Rorty good and hard. I’d also recommend Michael Devitt’s Realism and Truth or his review essay on “Scientific Realism” from the Oxford Handbook of Contemporary Philosophy, embedded below.

That said, I think Scott is largely right that the usefulness of a deflator is a function of what you want to use it for. But it’s wrong to say there’s no fact of the matter about the average rate of price inflation, though it may be true that is not a very useful fact. I think the fact of “neurodiversity,” as Tyler Cowen calls it in his delightful book, pushes us toward the conclusion that each person faces her own personal rate of inflation. Perhaps increasingly so. One implication is that a single rate calculated on price changes in a single “typical” consumption bundle isn’t very informative. This necessarily overlooks the very real distributive consequences of new products or quality improvements which affects some people immensely while affecting others not at all. (For a stark intuition-priming case, think of the value to Alf of a new medical innovation that saves his life but was unavailable a month prior at any pirce. Now think of the value of the same innovation to Betty who suddenly dies when a safe lands on her head.) There are CPI-(U-RS, etc.) “real wages” and then there are really real wages, which rise fastest for people who get the most out of new products and quality improvements, or from new innovations in retail that push down prices (Wal-Mart) or that reduce the costs of matching buyers and sellers in secondary markets (Craiglist’s or Ebay). Calculating the average change in really real wages for a group of individuals may be intractable in principle or (as I suspect) it may be a mere technological problem. In any case, the more diverse the preferences and consumption patterns of the group one is averaging over, the less meaningful the application of a single deflator.

I’d like to see more interest in exploring personal inflation rates and individual level changes in really, real wages. It seems to me that a combination of credit and debit cards records together with consumption-focused experience sampling ought to be able to make a good start.

Michael Devitt. Scientific Realism

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Tyler Cowen on Time Management

The cryptic one says:

All people are equally good at time management, but some people are more willing than others to admit that they are doing what they want to do, while others maintain the illusion they wish they were doing something else.

Completely unhelpful. And obviously false!

Here’s the easy proof: (1) If it is possible to improve your time management skills, then time management skills can be better or worse. (2) If time managment skills can be better or worse, then some people (or stages of people) are better at time management than others. (3) If some are better than others, all aren’t equally good. (4) It is possible to improve your time management skills. So, (5) All aren’t equally good at time management.

Tyler apparently denies (4), which is weird. It seems to me he’s just re-stating the well-known fallacy of psychological egoism. That each thing you have done is, ipso facto, the thing you were then most motivated to do, does not imply that you were acting in your self-interest. It implies nothing more and nothing less than that what you do is what you are most motivated to do. That is not very interesting. “Doing what you are most motivated to do” is equivalent to neither “acting in your self-interest” nor “managing your time as well as possible.”

Here’s a much more complicated argument from the intensionality of desire. Good time management intuitively has everything to do with coordinating first- and higher-order desires. Tyler seems to maintain that first-order desires are both motivationally decisive (true) and not subject to deliberative or therapeutic revision (false). This implies that higher-order desires don’t really count as desires at all, since they can’t do anything. There is no higher-order. If we are willing to admit that we are always already doing what we most want to do, then it is because we have a first-order desire to admit this. Likewise if we don’t admit this. If not admitting it amounts to an “illusion,” then some people are stuck in illusions because of their first-order desires about what to admit.

Now, while it may be true that not admitting that you’re already doing what you want does amount to an illusion, those of us who don’t admit it may not represent it as an illusion. But a change in representation can create a change in desire. Learning that Clark Kent is Superman may change Lois’ first-order desires with respect to Clark Kent. Likewise, a first-order desire to avoid illusions may lead me to adjust my willingness to admit that I was already doing what I wanted to do. Because of my stong feelings about not being self-deceived, simply reading Tyler’s post may have changed my first-order desires. I have become willing to admit something I was unwilling to admit before!

But notice that I did not previously represent my options the way I did because I wanted to represent them that way. Extensional exquivalence is often a discovery. But we can also induce these discoveries by, say, reading illuminating books on time management. It is a general possibility that redescribing our options can change what we want to do. And if there is some redescription of my options such that I would be doing what I believe I really want to do, instead of what I am actually doing, then it’s true that I have sufficient desire to do what I think I really want to do. I just need to think about my options in a different way. In which case, my “wish” is no illusion.

Some people really do get something out of Getting Things Done.

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More Misbehavioral Economics

I say, again and again, that it is an embarrassing non-sequitur to argue that people are “irrational” and then leap to the conclusion that they need benevolent paternal guidance from the state. After all, if people are irrational then voters are irrational, politicians are irrational, bureaucrats are irrational, etc. To this, Ezra Klein responds:

I’m not sure what exactly it is that Will finds so inexplicable here. Behavioral research often finds that consumers act irrationally in certain situations. So given a specific set of constraints, they may underestimate future risk, prove oversensitive to loss, exhibit significant status quo bias, and so on and so forth. All problems.

Now, the government may be made up of people, but it is not made up of people carrying out transactions under these conditions.

Perhaps Ezra is right, but only because people acting inside government institutions are much less likely to themselves bear the cost of their mistakes, and will therefore likely make more of them. There is no way to wriggle out of the fact that people who win elections are just like the rest of us.

I really wish people would pay more attention to Vernon Smith, who invented experimental economics, won the Nobel Prize for it, and remains by far the most philosophically rigorous theorist of the relationship between individual rationality and institutional performance. (Ted Bergstrom’s paper here [pdf] is a good overview.) What Smith’s work shows is that, yes, individuals in isolation don’t act according to canonical postulates of rationality, but that well-structured market institutions will nevertheless tend to converge on the efficient outcome, as if the agents were behaving with full “rationality”, even though they are in fact limited, confused, and ignorant. The “rationality” of the outcome is more a function of the structure of the institution than of the “rationality” of those acting inside it.

Responsible social science therefore compares the way real people perform when embedded in different real-world institutional settings. What you surely don’t do is perform selective empirical work to discover an “anomaly” in decision making, and then deploy a priori high theory to infer that one set of institutions (markets) won’t work, because, in fact, the performance of a market institution might turn out to be indifferent to the anomaly or limitation. That’s what Smith has proved. If you’re going to be an empiricist, then be an empiricist, and actually test the effect of the anomaly in the performance of the relevant institutions. Until you do this, it’s either arbitrary, naive, or willfully ideological to posit another set of institutions (government) as a fix. Because there may be nothing to fix. And, even if there is, government may be the wrong kind of institution to fix it. You’ve got to run the experiment.

There is a great deal of carelessness in generalizing the results of anomaly-focused behavioral economics. As Steven Levitt and John List write in their short article on behavioral economics in Science ($$$) this month:

Perhaps the greatest challenge facing behavioral economics is demonstrating its applicability in the real world. In nearly every instance, the strongest empirical evidence in favor of behavioral anomalies emerges from the lab. Yet, there are many reasons to suspect that these laboratory findings might fail to generalize to real markets. We have recently discussed several factors, ranging from properties of the situation — such as the nature and extent of scrutiny — to individual expectations and the type of actor involved. For example, the competitive nature of markets encourages individualistic behavior and selects for participants with those tendencies. Compared to lab behavior, therefore, the combination of market forces and experience might lessen the importance of these qualities in everyday markets.

List has run a number of field experiments that show that this is the case. Smith has run a number of lab experiments that show that the frequency of a “mistake” goes down as the cost of making it goes up.

Ezra continues:

An easy example is the research on opt-out 401(k)s. We know, from the economists, that investing in 401(k)s is generally a wise idea. We know, from the statisticians, that far fewer people do it than should. We know, from the behavioralists, that far more people would do it if the default setting put you in the 401(k), rather than forced you to wander down to HR and specifically ask for it. And so folks in the government, acting with more information and in a different context than folks in an office, think up a policy to “recognize the power of inertia in human behavior and enlist it to promote, rather than hinder, saving.”

At exactly which point in this process does Will fear that the same irrationality that keeps someone from creating a retirement account will foul up a regulator’s efforts to ease their way into a retirement account?

As I said to Dan Ariely in our chat, I think behavioral work is really valuable, especially when it suggests to us how people might better structure their affairs to get more of what they want. I think the evidence shows that 401(k) opt-out defaults are often a good idea, and that businesses ought to make that part of their standard labor contract, if that is something that they think would be appealing to their prospective employees.

I also think that this minor fact about the general distaste for filling out complicated forms can hardly be used to justify further encroachments on the right of individuals to negotiate the terms of their contracts with employers. I think Ezra’s argument here is both strangely narrow and ungenerously extreme. I don’t doubt that non-terrible policies are sometimes successfully enacted. To doubt that would be a bit like a market skeptic doubting that anyone ever succeeds in buying a candy bar. That would be terrifically dense. What I doubt, very strongly, is that the discovery of “irrationalities” undermines the authority of market institutions more than it undermines the authority of government institutions. Are people more or likely to behave irrationally when voting for their congressman or when buying a sandwich? Do buyers for private organizations sign contracts for $76 screws? Etc.

So, no. I don’t fear the mandatory opt out 401(k) plans in particular will be a giant debacle. But I do fear that half-baked behavioral economics is being used to undermine support for market institutions in general, way ahead of the evidence. And I fear that a fundamentally confused assault on “rationality” is being used successfully to promote paternalistic control by elites and, necessarily, to encourage the docility of those who are to be controlled.

[Added: If you have not read Ed Glaeser’s “Paternalism and Psychology” [pdf], then you probably should.]

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Meditations on Collective Action and Moral Norms

All this collective action problem debate is delightful. Here are some not-very-structured musings….

The topic of my unwritten dissertation was how solutions to “the contractarian compliance problem” (the fact that an individual can often do better for herself by ignoring moral constraints on self-interest that, if generally heeded, more than compensate for the short-term sacrifices moral constraints require), and the boundary between ideal and non-ideal political theory, turn on assumptions about human motivation that are open to empirical investigation. My position was (and is) that both pure rational choice (as represented by James Buchanan) and modified rational choice (as represented by David Gauthier) are less satisfactory as a matter of empirical psychology than a more deeply-moralized conception of motivation (as represented by John Rawls), but that rationalist accounts of the “moral capacity” or “sense of justice,” like Rawls’s, are also inadequate (in part because of the failure of the Universal Grammar analogy and in part because of naivete about the power of the moral sense to regulate self-interest in many contexts, especially politics).

Anyway, the point is that I don’t accept strict rational choice reasoning about collective action problems. Indeed, I think the fact that we do successfully solve so many of them basically refutes strict rational choice assumptions. (Even if coercion needs to come in to solve a coordination problem, you’ve got to ask why the guys with the guns are doing what they are supposed to, and not just using their powers to plunder, etc.) But if we’re talking about whether or not a certain constraint on self-interest ought to be normatively binding, I think you have to ask: Why? Because I’m a soulless, reductive, naturalist, I think there’s a good answer to that: because heeding the constraint will tend to make the person who heeds it better off, conditional on others heeding it, too. This is where a lot of people will part ways from me. They feel uncomfortable seating normativity in individual flourishing. However, I find all the relevant alternatives to be basically religious.

I am entertained by the examples at hand — gifts to the U.S. Treasury, meat avoidance, and carbon minimization — largely because I see people fighting over whether or not to try to establish or reinforce a moral norm, and that is really interesting. I found Henry’s rational choice-style answer to the question of gifts to the government amusing, because it suggests that he is not interested in reinforcing a moral norm that would motivate us to give money voluntarily to the Treasury. But if he wants the government to have more money, why not? Perhaps such a norm of voluntary giving might undermine a sense of the necessity and/or moral legitimacy of coercive taxation, which he believes it is important to maintain. Perhaps he thinks that this is an area where we cannot realistically expect the moral sense to sufficiently regulate self-interest, and so appealing to morality to do a job only coercion can do will be self-defeating. A new set of moral norms might crowd out a more effective coercive solution.

Well, I can buy that as a real possibility. But then I become very interested in how to apply this kind of reasoning to other similar cases. A lot of people seem to want to pursue a joint moral-coercive strategy to carbon emissions. Might that be self-defeating? Or is it supposed that an optimal carbon tax is politically infeasible without some moral ground-softening? Ethical vegetarians can be very evangelical but don’t seem to be very interested in banning or taxing meat at all. Why not? Maybe all these subjects are more dissimilar than I’m assuming. Then how so?

My philosophy leaves me very skeptical that norms about any of these things (much less coercively-enforced rules) would have any justified normative force — would be rationally binding. I don’t think higher taxes in the U.S. will leave the average person better off over time, much less the person who pays them. I have no idea how to tote up the net externality of carbon emissions (I don’t even know if the sign is positive or negative) and neither does anybody else. And since I think morality is for enabling human flourishing, I care about animals only insofar as our attitudes toward them affect patterns of interaction that bear on human well-being.

“Culture wars” are largely ongoing fights about what the governing norms are going to be. Certain kinds of arguments are useful in discouraging people from adopting or internalizing a new norm. I think a lot of rational choice arguments are like that. Because I think a lot of fledgling moral norms are likely to be harmful if they go viral, I like to encourage people to think like an economist, both to help them understand why the norm may not do any good as a matter of fact, but also to promote a generally inhospitable psychological climate for faddish moral memes.

Did you really read this far?

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Mobility vs. Movement

Point of conceptual clarification. As far as I can tell, income mobility studies don’t actually study mobility in the sense of the ability to move. They study actual movement in incomes. Mobility is a dispositional term. If I have been immobilized, I am prevented from moving. If I am immobile, but not immobilized, then I could have moved, but didn’t. If I sit in my chair all day, my measured physical movement for the day will be low, but I may also be a spectacularly mobile person, able to run marathons, climb sheer rock faces, swim channels, etc. What we are interested in normatively from economic measures of mobility is whether there are structural barriers to upward movement, especially for the less wealthy, not the average deviation from parents’ earnings. Can people earn more if they try? Once the average income reaches a certain threshold of material comfort, we should expect people’s labor market choices to reflect preferences for many things other than income. So relatively low measured mobility (generation 2’s income highly correlated to generation 1’s) could indicate that people are fairly well satisfied with their parents’ level of income and are optimizing on other margins. The better off people become materially, the less you ought to expect actual measured intergenerational movement in average income to reliably indicate the opportunity to move. 

I have an extraordinarily interesting job that probably pays about 1/3 of what I could get on the labor market doing (for me) much more boring things, and so here I am happily foregoing twice what I actually make not to be bored. (So: what are my really real wages?) It turns out that this choice keeps my income in the neighborhood of my Dad’s at my age, I’m guessing. (I, however, don’t have a wife and three kids to support!) I am incredibly grateful to be at liberty, both economically and socio-culturally, to make this kind of tradeoff between income and satisfaction.  And I’m sure I’m not alone. 

The opportunity to make this kind of tradeoff in the labor market is largely a function of education. I think our current system of public schooling does create a structural barrier to upward movement for many of the least well-off, which is why we should scrap that system and replace it with a market in education as a matter of justice. But that’s a matter of particular barriers to upward movement, which are what we should focus on, not some meaningless-by-itself average.

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IQ, Clusters, and Francisco Gil-White

Tyler Cowen shares his thoughts on the idea that it is important to try to preserve the average level of a society’s IQ, as though this is some kind of precious public good:

I don’t assign special status to The Conservation of IQ for two reasons.  The first is the Flynn effect, or the fact that measured IQs have been rising steadily over time.  This implies some combination of a) IQ gains come naturally under conditions of progress, and b) IQ statistics are to some extent phony and don’t measure real intelligence.  We can debate the mix, but either deflates fears that IQ is somehow especially scarce or endangered.  These data also suggest that IQ is an artifice to be unpacked rather than a primary category.

Second, defenders of the IQ view tend to read evolutionary biology and intelligence research.  My roots are in cultural history.  Clusters of amazing achievement come and go pretty quickly, usually through some mix of environmental effects and luck.  Look at Venetian painting.  It was much better centuries ago, but I doubt if Venetian IQs have been falling.  Once we see how such enormous differences can be explained by non-IQ factors, I again don’t obsess over the variable.

I find this pretty persuasive. The most stimulating thing I’ve read about IQ lately is the chapter on the topic in Francisco Gil-White’s webbed book on Resurrecting Racism: The modern attack on black people using phony science, which is mostly an attack on John Entine’s book Taboo: Why black athletes dominate sports and why we’re afraid to talk about it. I did not know, for example, that the IQ test was invented by Binet and Simon specifically as a test of the cognitive skills middle/upper-class French public schools were trying to develop in their students, and explicitly not as an assessment of raw, genetic, mental processing power. I also didn’t know that Sir Cyril Burt was a huge fraud. Gil-White’s theory an adapted cultural capacity that helps accounts for cultural and cognitive variation (a theory he shares with Boyd, Richerson, and Henrich, among others), seems to me to make good biological sense, to help make sense of the Flynn effect, and to pose a big problem for the Murray-Herrnstein Bell Curve thesis. Reading Gil-White changed my p on the existence of genetically inherited general intelligence from above .5 to below.  I get excited when that happens!

 

Brief aside on clusters of achievement: I want better explanations! What accounts for 4th c.  BCE Athens? Late 18th-early 19th c. Scotland? Early 20th c. Vienna?  Philosophy mostly just coasts along on these efflorescence’s of genius. What’s going on?  Why aren’t we having having one of these NOW, in the US? One idea is that our system of supporting our top intellectuals through the huge, geographically dispersed university system practically guarantees that no single place will develop enough of a critical mass of talent to create a world-historical outburst of brilliance. What if the world’s best economists, philosophers, psychologists, etc., were clustered in the same place in the same way the world’s best software engineers are clustered in Silicon Valley?   

 

Fun facts about Gil-White: (1)  he was canned from the Penn psychology department he says for his controversial views about recent history regarding several ethnic conflicts. I have developed no opinion on Gil-White’s opinions about these matters. I just know he’s a fascinating and intellectually solid theorist in biological anthropology.  (2) He is the son of Francisco Gil Diaz, who was Secretary of Finance for Mexico under Vincente Fox.

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Bounded vs. Unbounded

Lately I’ve been noticing a general phenomenon that strikes me as shady… comparing something unbounded against something bounded. The top quintile, decile, percentile, or whatever on, say, the income distribution is going to have no limit on the number. Which is why it is possible to have such a huge gap between the median and the mean when it comes to the top 1% in the income distribution, but unlikely at an n-tile beneath the top.

Or… The fact that happiness surveys lay a 1 to 4 or 1 to 10 scale on top of an in-principle unbounded income distribution, or in-priniciple unbounded growth in income over time, seems to me as a reason not to make a huge deal out of the fact that the average score on a bounded scale doesn’t necessarily rise with an essentially open-ended thing like economic growth. If growth is ongoing, and self-reported happiness rises with growth — even excruciatingly slowly — then it is just a logical necessity that there is some time in the future when everybody hits the ceiling of the scale. Even if income and happiness continues to grow, the scale will HAVE to report a flat average, and will HAVE to stop being fully informative. Now, if — as seems to be the case — people have a kind of aversion to putting themselves at or near the top of the scale (if I don’t know how happy I can get, I may not want to say that I’m already there, or even almost there), then you’ve got a case for totally banal scale re-norming that will also produce a flat trend over time, below the top of the scale — again, even if the effect of growth on happiness is ongoing. Perhaps someone can explain to me why this is not considered a huge problem.