development economics

How Effective Altruism hurt me

PNRJ core principles, development economics, ethics, inequality, personal, public policy , , , , , , , ,

May 12 JDN 2460443

I don’t want this to be taken the wrong way. I still strongly believe in the core principles of Effective Altruism. Indeed, it’s shockingly hard to deny them, because basically they come out to this:

Doing more good is better than doing less good.

Then again, most people want to do good. Basically everyone agrees that more good is better than less good. So what’s the big deal about Effective Altruism?

Well, in practice, most people put shockingly little effort into trying to ensure that they are doing the most good they can. A lot of people just try to be nice people, without ever concerning themselves with the bigger picture. Many of these people don’t give to charity at all.

Then, even among people who do give to charity, typically give to charities more or less at random—or worse, in proportion to how much mail those charities send them begging for donations. (Surely you can see how that is a perverse incentive?) They donate to religious organizations, which sometimes do good things, but fundamentally are founded upon ignorance, patriarchy, and lies.

Effective Altruism is a movement intended to fix this, to get people to see the bigger picture and focus their efforts on where they will do the most good. Vet charities not just for their honesty, but also their efficiency and cost-effectiveness:

Just how many mQALY can you buy with that $1?

That part I still believe in. There is a lot of value in assessing which charities are the most effective, and trying to get more people to donate to those high-impact charities.

But there is another side to Effective Altruism, which I now realize has severely damaged my mental health.

That is the sense of obligation to give as much as you possibly can.

Peter Singer is the most extreme example of this. He seems to have mellowed—a little—in more recent years, but in some of his most famous books he uses the following thought experiment:

To challenge my students to think about the ethics of what we owe to people in need, I ask them to imagine that their route to the university takes them past a shallow pond. One morning, I say to them, you notice a child has fallen in and appears to be drowning. To wade in and pull the child out would be easy but it will mean that you get your clothes wet and muddy, and by the time you go home and change you will have missed your first class.

I then ask the students: do you have any obligation to rescue the child? Unanimously, the students say they do. The importance of saving a child so far outweighs the cost of getting one’s clothes muddy and missing a class, that they refuse to consider it any kind of excuse for not saving the child. Does it make a difference, I ask, that there are other people walking past the pond who would equally be able to rescue the child but are not doing so? No, the students reply, the fact that others are not doing what they ought to do is no reason why I should not do what I ought to do.

Basically everyone agrees with this particular decision: Even if you are wearing a very expensive suit that will be ruined, even if you’ll miss something really important like a job interview or even a wedding—most people agree that if you ever come across a drowning child, you should save them.

(Oddly enough, when contemplating this scenario, nobody ever seems to consider the advice that most lifeguards give, which is to throw a life preserver and then go find someone qualified to save the child—because saving someone who is drowning is a lot harder and a lot riskier than most people realize. (“Reach or throw, don’t go.”) But that’s a bit beside the point.)

But Singer argues that we are basically in this position all the time. For somewhere between $500 and $3000, you—yes, you—could donate to a high-impact charity, and thereby save a child’s life.

Does it matter that many other people are better positioned to donate than you are? Does it matter that the child is thousands of miles away and you’ll never see them? Does it matter that there are actually millions of children, and you could never save them all by yourself? Does it matter that you’ll only save a child in expectation, rather than saving some specific child with certainty?

Singer says that none of this matters. For a long time, I believed him.

Now, I don’t.

For, if you actually walked by a drowning child that you could save, only at the cost of missing a wedding and ruining your tuxedo, you clearly should do that. (If it would risk your life, maybe not—and as I alluded to earlier, that’s more likely than you might imagine.) If you wouldn’t, there’s something wrong with you. You’re a bad person.

But most people don’t donate everything they could to high-impact charities. Even Peter Singer himself doesn’t. So if donating is the same as saving the drowning child, it follows that we are all bad people.

(Note: In general, if an ethical theory results in the conclusion that the whole of humanity is evil, there is probably something wrong with that ethical theory.)

Singer has tried to get out of this by saying we shouldn’t “sacrifice things of comparable importance”, and then somehow cash out what “comparable importance” means in such a way that it doesn’t require you to live on the street and eat scraps from trash cans. (Even though the people you’d be donating to largely do live that way.)

I’m not sure that really works, but okay, let’s say it does. Even so, it’s pretty clear that anything you spend money on purely for enjoyment would have to go. You would never eat out at restaurants, unless you could show that the time saved allowed you to get more work done and therefore donate more. You would never go to movies or buy video games, unless you could show that it was absolutely necessary for your own mental functioning. Your life would be work, work, work, then donate, donate, donate, and then do the absolute bare minimum to recover from working and donating so you can work and donate some more.

You would enslave yourself.

And all the while, you’d believe that you were never doing enough, you were never good enough, you are always a terrible person because you try to cling to any personal joy in your own life rather than giving, giving, giving all you have.

I now realize that Effective Altruism, as a movement, had been basically telling me to do that. And I’d been listening.

I now realize that Effective Altruism has given me this voice in my head, which I hear whenever I want to apply for a job or submit work for publication:

If you try, you will probably fail. And if you fail, a child will die.

The “if you try, you will probably fail” is just an objective fact. It’s inescapable. Any given job application or writing submission will probably fail.

Yes, maybe there’s some sort of bundling we could do to reframe that, as I discussed in an earlier post. But basically, this is correct, and I need to accept it.

Now, what about the second part? “If you fail, a child will die.” To most of you, that probably sounds crazy. And it is crazy. It’s way more pressure than any ordinary person should have in their daily life. This kind of pressure should be reserved for neurosurgeons and bomb squads.

But this is essentially what Effective Altruism taught me to believe. It taught me that every few thousand dollars I don’t donate is a child I am allowing to die. And since I can’t donate what I don’t have, it follows that every few thousand dollars I fail to get is another dead child.

And since Effective Altruism is so laser-focused on results above all else, it taught me that it really doesn’t matter whether I apply for the job and don’t get it, or never apply at all; the outcome is the same, and that outcome is that children suffer and die because I had no money to save them.

I think part of the problem here is that Effective Altruism is utilitarian through and through, and utilitarianism has very little place for good enough. There is better and there is worse; but there is no threshold at which you can say that your moral obligations are discharged and you are free to live your life as you wish. There is always more good that you could do, and therefore always more that you should do.

Do we really want to live in a world where to be a good person is to owe your whole life to others?

I do not believe in absolute selfishness. I believe that we owe something to other people. But I no longer believe that we owe everything. Sacrificing my own well-being at the altar of altruism has been incredibly destructive to my mental health, and I don’t think I’m the only one.

By all means, give to high-impact charities. But give a moderate amount—at most, tithe—and then go live your life. You don’t owe the world more than that.

Israel, Palestine, and the World Bank’s disappointing priorities

PNRJ current events, development economics, inequality, macroeconomics, politics, public policy, tribal paradigm , , , , , , , , , , , , ,

Nov 12 JDN 2460261

Israel and Palestine are once again at war. (There are a disturbing number of different years in which one could have written that sentence.) The BBC has a really nice section of their website dedicated to reporting on various facets of the war. The New York Times also has a section on it, but it seems a little tilted in favor of Israel.

This time, it started with a brutal attack by Hamas, and now Israel has—as usual—overreacted and retaliated with a level of force that is sure to feed the ongoing cycle of extremism. All across social media I see people wanting me to take one side or the other, often even making good points: “Hamas slaughters innocents” and “Israel is a de facto apartheid state” are indeed both important points I agree with. But if you really want to know my ultimate opinion, it’s that this whole thing is fundamentally evil and stupid because human beings are suffering and dying over nothing but lies. All religions are false, most of them are evil, and we need to stop killing each other over them.

Anti-Semitism and Islamophobia are both morally wrong insofar as they involve harming, abusing or discriminating against actual human beings. Let people dress however they want, celebrate whatever holidays they want, read whatever books they want. Even if their beliefs are obviously wrong, don’t hurt them if they aren’t hurting anyone else. But both Judaism and Islam—and Christianity, and more besides—are fundamentally false, wrong, evil, stupid, and detrimental to the advancement of humanity.

That’s the thing that so much of the public conversation is too embarrassed to say; we’re supposed to pretend that they aren’t fighting over beliefs that obviously false. We’re supposed to respect each particular flavor of murderous nonsense, and always find some other cause to explain the conflict. It’s over culture (what culture?); it’s over territory (whose territory?); it’s a retaliation for past conflict (over what?). We’re not supposed to say out loud that all of this violence ultimately hinges upon people believing in nonsense. Even if the conflict wouldn’t disappear overnight if everyone suddenly stopped believing in God—and are we sure it wouldn’t? Let’s try it—it clearly could never have begun, if everyone had started with rational beliefs in the first place.

But I don’t really want to talk about that right now. I’ve said enough. Instead I want to talk about something a little more specific, something less ideological and more symptomatic of systemic structural failures. Something you might have missed amidst the chaos.

The World Bank recently released a report on the situation focused heavily on the looming threat of… higher oil prices. (And of course there has been breathless reporting from various outlets regarding a headline figure of $150 per barrel which is explicitly stated in the report as an unlikely “worst-case scenario”.)

There are two very big reasons why I found this dismaying.


The first, of course, is that there are obviously far more important concerns here than commodity prices. Yes, I know that this report is part of an ongoing series of Commodity Markets Outlook reports, but the fact that this is the sort of thing that the World Bank has ongoing reports about is also saying something important about the World Bank’s priorities. They release monthly commodity forecasts and full Commodity Markets Outlook reports that come out twice a year, unlike the World Development Reports that only come out once a year. The World Bank doesn’t release a twice-annual Conflict Report or a twice-annual Food Security Report. (Even the FAO, which publishes an annual State of Food Security and Nutrition in the World report, also publishes a State of Agricultural Marketsreport just as often.)

The second is that, when reading the report, one can clearly tell that whoever wrote it thinks that rising oil and gas prices are inherently bad. They keep talking about all of these negative consequences that higher oil prices could have, and seem utterly unaware of the really enormous upside here: We may finally get a chance to do something about climate change.

You see, one of the most basic reasons why we haven’t been able to fix climate change is that oil is too damn cheap. Its market price has consistently failed to reflect its actual costs. Part of that is due to oil subsidies around the world, which have held the price lower than it would be even in a free market; but most of it is due to the simple fact that pollution and carbon emissions don’t cost money for the people who produce them, even though they do cost the world.

Fortunately, wind and solar power are also getting very cheap, and are now at the point where they can outcompete oil and gas for electrical power generation. But that’s not enough. We need to remove oil and gas from everything: heating, manufacturing, agriculture, transportation. And that is far easier to do if oil and gas suddenly become more expensive and so people are forced to stop using them.

Now, granted, many of the downsides in that report are genuine: Because oil and gas are such vital inputs to so many economic processes, it really is true that making them more expensive will make lots of other things more expensive, and in particular could increase food insecurity by making farming more expensive. But if that’s what we’re concerned about, we should be focusing on that: What policies can we use to make sure that food remains available to all? And one of the best things we could be doing toward that goal is finding ways to make agriculture less dependent on oil.

By focusing on oil prices instead, the World Bank is encouraging the world to double down on the very oil subsidies that are holding climate policy back. Even food subsides—which certainly have their own problems—would be an obviously better solution, and yet they are barely mentioned.

In fact, if you actually read the report, it shows that fears of food insecurity seem unfounded: Food prices are actually declining right now. Grain prices in particular seem to be falling back down remarkably quickly after their initial surge when Russia invaded Ukraine. Of course that could change, but it’s a really weird attitude toward the world to see something good and respond with, “Yes, but it might change!” This is how people with anxiety disorders (and I would know) think—which makes it seem as though much of the economic policy community suffers from some kind of collective equivalent of an anxiety disorder.

There also seems to be a collective sense that higher prices are always bad. This is hardly just a World Bank phenomenon; on the contrary, it seems to pervade all of economic thought, including the most esteemed economists, the most powerful policymakers, and even most of the general population of citizens. (The one major exception seems to be housing, where the sense is that higher prices are always good—even when the world is in a chronic global housing shortage that leaves millions homeless.) But prices can be too low or too high. And oil prices are clearly, definitely too low. Prices should reflect the real cost of production—all the real costs of production. It should cost money to pollute other people’s air.

In fact I think the whole report is largely a nothingburger: Oil prices haven’t even risen all that much so far—we’re still at $80 per barrel last I checked—and the one thing that is true about the so-called Efficient Market Hypothesis is that forecasting future prices is a fool’s errand. But it’s still deeply unsettling to see such intelligent, learned experts so clearly panicking over the mere possibility that there could be a price change which would so obviously be good for the long-term future of humanity.

There is plenty more worth saying about the Israel-Palestine conflict, and in particular what sort of constructive policy solutions we might be able to find that would actually result in any kind of long-term peace. I’m no expert on peace negotiations, and frankly I admit it would probably be a liability that if I were ever personally involved in such a negotiation, I’d be tempted to tell both sides that they are idiots and fanatics. (The headline the next morning: “Israeli and Palestinian Delegates Agree on One Thing: They Hate the US Ambassador”.)

The World Bank could have plenty to offer here, yet so far they’ve been too focused on commodity prices. Their thinking is a little too much ‘bank’ and not enough ‘world’.

It is a bit ironic, though also vaguely encouraging, that there are those within the World Bank itself who recognize this problem: Just a few weeks ago Ajay Banga gave a speech to the World Bank about “a world free of poverty on a livable planet”.

Yes. Those sound like the right priorities. Now maybe you could figure out how to turn that lip service into actual policy.

The rise and plateau of China’s economy

PNRJ current events, development economics, public policy , , , , , , ,

Sep 3 JDN 2460191

It looks like China’s era of extremely rapid economic growth may be coming to an end. Consumer confidence in China cratered this year (and, in typical authoritarian fashion, the agency responsible just quietly stopped publishing the data after that). Current forecasts have China’s economy growing only about 4-5% this year, which would be very impressive for a First World country—but far below the 6%, 7%, even 8% annual growth rates China had in recent years.

Some slowdown was quite frankly inevitable. A surprising number of people—particularly those in or from China—seem to think that China’s ultra-rapid growth was something special about China that could be expected to continue indefinitely.

China’s growth does look really impressive, in isolation:

But in fact this is a pattern we’ve seen several times now (admittedly mostly in Asia): A desperately poor Third World country finally figures out how to get its act together, and suddenly has extremely rapid growth for awhile until it manages to catch up and become a First World country.

It happened in South Korea:

It happened in Japan:

It happened in Taiwan:

It even seems to be happening in Botswana:

And this is a good thing! These are the great success stories of economic development. If we could somehow figure out how to do this all over the world, it might literally be the best thing that ever happened. (It would solve so many problems!)

Here’s a more direct comparison across all these countries (as well as the US), on a log scale:

From this you can pretty clearly see two things.

First, as countries get richer, their growth tends to slow down gradually. By the time Japan, Korea, and Taiwan reached the level that the US had been at back in 1950, their growth slowed to a crawl. But that was okay, because they had already become quite rich.

And second, China is nothing special: Yes, their growth rate is faster than the US, because the US is already so rich. But they are following the same pattern as several other countries. In fact they’ve actually fallen behind Botswana—they used to be much richer than Botswana, and are now slightly poorer.

So while there are many news articles discussing why China’s economy is slowing down, and some of them may even have some merit (they really seem to have screwed up their COVID response, for instance, and their terrible housing price bubble just burst); but the ultimate reason is really that 7% annual economic growth is just not sustainable. It will slow down. When and how remains in question—but it will happen.

Thus, I am not particularly worried about the fact that China’s growth has slowed down. Or at least, I wouldn’t be, if China were governed well and had prepared for this obvious eventuality the way that Korea and Japan did. But what does worry me is that they seem unprepared for this. Their authoritarian government seems to have depended upon sky-high economic growth to sustain support for their regime. The cracks are now forming in that dam, and something terrible could happen when it bursts.

Things may even be worse than they look, because we know that the Chinese government often distorts or omits statistics when they become inconvenient. That can only work for so long: Eventually the reality on the ground will override whatever lies the government is telling.

There are basically two ways this could go: They could reform their government to something closer to a liberal democracy, accept that growth will slow down and work toward more shared prosperity, and then take their place as a First World country like Japan did. Or they could try to cling to their existing regime, gripping ever tighter until it all slips out of their fingers in a potentially catastrophic collapse. Unfortunately, they seem to be opting for the latter.

I hope I’m wrong. I hope that China will find its way toward a future of freedom and prosperity.

But at this point, it doesn’t look terribly likely.

We do seem to have better angels after all

PNRJ book reviews, core principles, development economics, ethics, futurism, inequality, public policy , , , , , , , , , , ,

Jun 18 JDN 2460114

A review of The Darker Angels of Our Nature

(I apologize for not releasing this on Sunday; I’ve been traveling lately and haven’t found much time to write.)

Since its release, I have considered Steven Pinker’s The Better Angels of our Nature among a small elite category of truly great books—not simply good because enjoyable, informative, or well-written, but great in its potential impact on humanity’s future. Others include The General Theory of Employment, Interest, and Money, On the Origin of Species, and Animal Liberation.

But I also try to expose myself as much as I can to alternative views. I am quite fearful of the echo chambers that social media puts us in, where dissent is quietly hidden from view and groupthink prevails.

So when I saw that a group of historians had written a scathing critique of The Better Angels, I decided I surely must read it and get its point of view. This book is The Darker Angels of Our Nature.

The Darker Angels is written by a large number of different historians, and it shows. It’s an extremely disjointed book; it does not present any particular overall argument, various sections differ wildly in scope and tone, and sometimes they even contradict each other. It really isn’t a book in the usual sense; it’s a collection of essays whose only common theme is that they disagree with Steven Pinker.

In fact, even that isn’t quite true, as some of the best essays in The Darker Angels are actually the ones that don’t fundamentally challenge Pinker’s contention that global violence has been on a long-term decline for centuries and is now near its lowest in human history. These essays instead offer interesting insights into particular historical eras, such as medieval Europe, early modern Russia, and shogunate Japan, or they add additional nuances to the overall pattern, like the fact that, compared to medieval times, violence in Europe seems to have been less in the Pax Romana (before) and greater in the early modern period (after), showing that the decline in violence was not simple or steady, but went through fluctuations and reversals as societies and institutions changed. (At this point I feel I should note that Pinker clearly would not disagree with this—several of the authors seem to think he would, which makes me wonder if they even read The Better Angels.)

Others point out that the scale of civilization seems to matter, that more is different, and larger societies and armies more or less automatically seem to result in lower fatality rates by some sort of scaling or centralization effect, almost like the square-cube law. That’s very interesting if true; it would suggest that in order to reduce violence, you don’t really need any particular mode of government, you just need something that unites as many people as possible under one banner. The evidence presented for it was too weak for me to say whether it’s really true, however, and there was really no theoretical mechanism proposed whatsoever.

Some of the essays correct genuine errors Pinker made, some of which look rather sloppy. Pinker clearly overestimated the death tolls of the An Lushan Rebellion, the Spanish Inquisition, and Aztec ritual executions, probably by using outdated or biased sources. (Though they were all still extremely violent!) His depiction of indigenous cultures does paint with a very broad brush, and fails to recognize that some indigenous societies seem to have been quite peaceful (though others absolutely were tremendously violent).

One of the best essays is about Pinker’s cavalier attitude toward mass incarceration, which I absolutely do consider a deep flaw in Pinker’s view. Pinker presents increased incarceration rates along with decreased crime rates as if they were an unalloyed good, while I can at best be ambivalent about whether the benefit of decreasing crime is worth the cost of greater incarceration. Pinker seems to take for granted that these incarcerations are fair and impartial, when we have a great deal of evidence that they are strongly biased against poor people and people of color.

There’s another good essay about the Enlightenment, which Pinker seems to idealize a little too much (especially in his other book Enlightenment Now). There was no sudden triumph of reason that instantly changed the world. Human knowledge and rationality gradually improved over a very long period of time, with no obvious turning point and many cases of backsliding. The scientific method isn’t a simple, infallible algorithm that suddenly appeared in the brain of Galileo or Bayes, but a whole constellation of methods and concepts of rationality that took centuries to develop and is in fact still developing. (Much as the Tao that can be told is not the eternal Tao, the scientific method that can be written in a textbook is not the true scientific method.)

Several of the essays point out the limitations of historical and (especially) archaeological records, making it difficult to draw any useful inferences about rates of violence in the past. I agree that Pinker seems a little too cavalier about this; the records really are quite sparse and it’s not easy to fill in the gaps. Very small samples can easily distort homicide rates; since only about 1% of deaths worldwide are homicide, if you find 20 bodies, whether or not one of them was murdered is the difference between peaceful Japan and war-torn Colombia.

On the other hand, all we really can do is make the best inferences we have with the available data, and for the time periods in which we do have detailed records—surely true since at least the 19th century—the pattern of declining violence is very clear, and even the World Wars look like brief fluctuations rather than fundamental reversals. Contrary to popular belief, the World Wars do not appear to have been especially deadly on a per-capita basis, compared to various historic wars. The primary reason so many people died in the World Wars was really that there just were more people in the world. A few of the authors don’t seem to consider this an adequate reason, but ask yourself this: Would you rather live in a society of 100 in which 10 people are killed, or a society of 1 billion in which 1 million are killed? In the former case your chances of being killed are 10%; in the latter, 0.1%. Clearly, per-capita measures of violence are the correct ones.

Some essays seem a bit beside the point, like one on “environmental violence” which quite aptly details the ongoing—terrifying—degradation of our global ecology, but somehow seems to think that this constitutes violence when it obviously doesn’t. There is widespread violence against animals, certainly; slaughterhouses are the obvious example—and unlike most people, I do not consider them some kind of exception we can simply ignore. We do in fact accept levels of cruelty to pigs and cows that we would never accept against dogs or horses—even the law makes such exceptions. Moreover, plenty of habitat destruction is accompanied by killing of the animals who lived in that habitat. But ecological degradation is not equivalent to violence. (Nor is it clear to me that our treatment of animals is more violent overall today than in the past; I guess life is probably worse for a beef cow today than it was in the medieval era, but either way, she was going to be killed and eaten. And at least we no longer do cat-burning.) Drilling for oil can be harmful, but it is not violent. We can acknowledge that life is more peaceful now than in the past without claiming that everything is better now—in fact, one could even say that overall life isn’t better, but I think they’d be hard-pressed to argue that.

These are the relatively good essays, which correct minor errors or add interesting nuances. There are also some really awful essays in the mix.

A common theme of several of the essays seems to be “there are still bad things, so we can’t say anything is getting better”; they will point out various forms of violence that undeniably still exist, and treat this as a conclusive argument against the claim that violence has declined. Yes, modern slavery does exist, and it is a very serious problem; but it clearly is not the same kind of atrocity that the Atlantic slave trade was. Yes, there are still murders. Yes, there are still wars. Probably these things will always be with us to some extent; but there is a very clear difference between 500 homicides per million people per year and 50—and it would be better still if we could bring it down to 5.

There’s one essay about sexual violence that doesn’t present any evidence whatsoever to contradict the claim that rates of sexual violence have been declining while rates of reporting and prosecution have been increasing. (These two trends together often result in reported rapes going up, but most experts agree that actual rapes are going down.) The entire essay is based on anecdote, innuendo, and righteous anger.

There are several essays that spend their whole time denouncing neoliberal capitalism (not even presenting any particularly good arguments against it, though such arguments do exist), seeming to equate Pinker’s view with some kind of Rothbardian anarcho-capitalism when in fact Pinker is explictly in favor of Nordic-style social democracy. (One literally dismisses his support for universal healthcare as “Well, he is Canadian”.) But Pinker has on occasion said good things about capitalism, so clearly, he is an irredeemable monster.

Right in the introduction—which almost made me put the book down—is an astonishingly ludicrous argument, which I must quote in full to show you that it is not out of context:

What actually is violence (nowhere posed or answered in The Better Angels)? How do people perceive it in different time-place settings? What is its purpose and function? What were contemporary attitudes toward violence and how did sensibilities shift over time? Is violence always ‘bad’ or can there be ‘good’ violence, violence that is regenerative and creative?

The Darker Angels of Our Nature, p.16

Yes, the scare quotes on ‘good’ and ‘bad’ are in the original. (Also the baffling jargon “time-place settings” as opposed to, say, “times and places”.) This was clearly written by a moral relativist. Aside from questioning whether we can say anything about anything, the argument seems to be that Pinker’s argument is invalid because he didn’t precisely define every single relevant concept, even though it’s honestly pretty obvious what the world “violence” means and how he is using it. (If anything, it’s these authors who don’t seem to understand what the word means; they keep calling things “violence” that are indeed bad, but obviously aren’t violence—like pollution and cyberbullying. At least talk of incarceration as “structural violence” isn’t obvious nonsense—though it is still clearly distinct from murder rates.)

But it was by reading the worst essays that I think I gained the most insight into what this debate is really about. Several of the essays in The Darker Angels thoroughly and unquestioningly share the following inference: if a culture is superior, then that culture has a right to impose itself on others by force. On this, they seem to agree with the imperialists: If you’re better, that gives you a right to dominate everyone else. They rightly reject the claim that cultures have a right to imperialistically dominate others, but they cannot deny the inference, and so they are forced to deny that any culture can ever be superior to another. The result is that they tie themselves in knots trying to justify how greater wealth, greater happiness, less violence, and babies not dying aren’t actually good things. They end up talking nonsense about “violence that is regenerative and creative”.

But we can believe in civilization without believing in colonialism. And indeed that is precisely what I (along with Pinker) believe: That democracy is better than autocracy, that free speech is better than censorship, that health is better than illness, that prosperity is better than poverty, that peace is better than war—and therefore that Western civilization is doing a better job than the rest. I do not believe that this justifies the long history of Western colonial imperialism. Governing your own country well doesn’t give you the right to invade and dominate other countries. Indeed, part of what makes colonial imperialism so terrible is that it makes a mockery of the very ideals of peace, justice, and freedom that the West is supposed to represent.

I think part of the problem is that many people see the world in zero-sum terms, and believe that the West’s prosperity could only be purchased by the rest of the world’s poverty. But this is untrue. The world is nonzero-sum. My happiness does not come from your sadness, and my wealth does not come from your poverty. In fact, even the West was poor for most of history, and we are far more prosperous now that we have largely abandoned colonial imperialism than we ever were in imperialism’s heyday. (I do occasionally encounter British people who seem vaguely nostalgic for the days of the empire, but real median income in the UK has doubled just since 1977. Inequality has also increased during that time, which is definitely a problem; but the UK is undeniably richer now than it ever was at the peak of the empire.)

In fact it could be that the West is richer now because of colonalism than it would have been without it. I don’t know whether or not this is true. I suspect it isn’t, but I really don’t know for sure. My guess would be that colonized countries are poorer, but colonizer countries are not richer—that is, colonialism is purely destructive. Certain individuals clearly got richer by such depredation (Leopold II, anyone?), but I’m not convinced many countries did.

Yet even if colonialism did make the West richer, it clearly cannot explain most of the wealth of Western civilization—for that wealth simply did not exist in the world before. All these bridges and power plants, laptops and airplanes weren’t lying around waiting to be stolen. Surely, some of the ingredients were stolen—not least, the land. Had they been bought at fair prices, the result might have been less wealth for us (then again it might not, for wealthier trade partners yield greater exports). But this does not mean that the products themselves constitute theft, nor that the wealth they provide is meaningless. Perhaps we should find some way to pay reparations; undeniably, we should work toward greater justice in the future. But we do not need to give up all we have in order to achieve that justice.

There is a law of conservation of energy. It is impossible to create energy in one place without removing it from another. There is no law of conservation of prosperity. Making the world better in one place does not require making it worse in another.

Progress is real. Yes, it is flawed, uneven, and it has costs of its own; but it is real. If we want to have more of it, we best continue to believe in it. And The Better Angels of Our Nature does have some notable flaws, but it still retains its place among truly great books.

If I had a trillion dollars…

PNRJ development economics, ethics, inequality, market failure, politics, public policy , , , , , , , , , ,

May 29 JDN 2459729

(To the tune of “If I had a million dollars” by Barenaked Ladies; by the way, he does now)

[Inspired by the book How to Spend a Trillion Dollars]

If I had a trillion dollars… if I had a trillion dollars!

I’d buy everyone a house—and yes, I mean, every homeless American.

[500,000 homeless households * $300,000 median home price = $150 billion]

If I had a trillion dollars… if I had a trillion dollars!

I’d give to the extreme poor—and then there would be no extreme poor!

[Global poverty gap: $160 billion]

If I had a trillion dollars… if I had a trillion dollars!

I’d send people to Mars—hey, maybe we’d find some alien life!

[Estimated cost of manned Mars mission: $100 billion]

If I had a trillion dollars… if I had a trillion dollars!

I’d build us a Moon base—haven’t you always wanted a Moon base?

[Estimated cost of a permanent Lunar base: $35 billion. NASA is bad at forecasting cost, so let’s allow cost overruns to take us to $100 billion.]

If I had a trillion dollars… if I had a trillion dollars!

I’d build a new particle accelerator—let’s finally figure out dark matter!

[Cost of planned new accelerator at CERN: $24 billion. Let’s do 4 times bigger and make it $100 billion.]

If I had a trillion dollars… if I had a trillion dollars!

I’d save the Amazon—pay all the ranchers to do something else!

[Brazil, where 90% of Amazon cattle ranching is, produces about 10 million tons of beef per year, which at an average price of $5000 per ton is $50 billion. So I could pay all the farmers two years of revenue to protect the Amazon instead of destroying it for $100 billion.]

If I had a trillion dollars…

We wouldn’t have to drive anymore!

If I had a trillion dollars…

We’d build high-speed rail—it won’t cost more!

[Cost of proposed high-speed rail system: $240 billion]

If I had a trillion dollars… if I had trillion dollars!

Hey wait, I could get it from a carbon tax!

[Even a moderate carbon tax could raise $1 trillion in 10 years.]

If I had a trillion dollars… I’d save the world….

All of the above really could be done for under $1 trillion. (Some of them would need to be repeated, so we could call it $1 trillion per year.)

I, of course, do not, and will almost certainly never have, anything approaching $1 trillion.

But here’s the thing: There are people who do.

Elon Musk and Jeff Bezos together have a staggering $350 billion. That’s two people with enough money to end world hunger. And don’t give me that old excuse that it’s not in cash: UNICEF gladly accepts donations in stock. They could, right now, give their stocks to UNICEF and thereby end world hunger. They are choosing not to do that. In fact, the goodwill generated by giving, say, half their stocks to UNICEF might actually result in enough people buying into their companies that their stock prices would rise enough to make up the difference—thus costing them literally nothing.

The total net wealth of all the world’s billionaires is a mind-boggling $12.7 trillion. That’s more than half a year of US GDP. Held by just over 2600 people—a small town.

The US government spends $4 trillion in a normal year—and $5 trillion the last couple of years due to the pandemic. Nearly $1 trillion of that is military spending, which could be cut in half and still be the highest in the world. After seeing how pathetic Russia’s army actually is in battle (they paint Zs on their tanks because apparently their IFF system is useless!), are we really still scared of them? Do we really need eleven carrier battle groups?

Yes, the total cost of mitigating climate change is probably in the tens of trillions—but the cost of not mitigating climate change could be over $100 trillion. And it’s not as if the world can’t come up with tens of trillions; we already do. World GDP is now over $100 trillion per year; just 2% of that for 10 years is $20 trillion.

Do these sound like good ideas to you? Would you want to do them? I think most people would want most of them. So now the question becomes: Why aren’t we doing them?

The alienation of labor

PNRJ core principles, critique of neoclassical economics, development economics, ethics, futurism, inequality, public policy, science and academia , , , , , , , ,

Apr 10 JDN 2459680

Marx famously wrote that capitalism “alienates labor”. Much ink has been spilled over interpreting exactly what he meant by that, but I think the most useful and charitable reading goes something like the following:

When you make something for yourself, it feels fully yours. The effort you put into it feels valuable and meaningful. Whether you’re building a house to live in it or just cooking an omelet to eat it, your labor is directly reflected in your rewards, and you have a clear sense of purpose and value in what you are doing.

But when you make something for an employer, it feels like theirs, not yours. You have been instructed by your superiors to make a certain thing a certain way, for reasons you may or may not understand (and may or may not even agree with). Once you deliver the product—which may be as concrete as a carburetor or as abstract as an accounting report—you will likely never see it again; it will be used or not by someone else somewhere else whom you may not even ever get the chance to meet. Such labor feels tedious, effortful, exhausting—and also often empty, pointless, and meaningless.

On that reading, Marx isn’t wrong. There really is something to this. (I don’t know if this is really Marx’s intended meaning or not, and really I don’t much care—this is a valid thing and we should be addressing it, whether Marx meant to or not.)

There is a little parable about this, which I can’t quite remember where I heard:

Three men are moving heavy stones from one place to another. A traveler passes by and asks them, “What are you doing?”

The first man sighs and says, “We do whatever the boss tells us to do.”

The second man shrugs and says, “We pick up the rocks here, we move them over there.”

The third man smiles and says, “We’re building a cathedral.”

The three answers are quite different—yet all three men may be telling the truth as they see it.

The first man is fully alienated from his labor: he does whatever the boss says, following instructions that he considers arbitrary and mechanical. The second man is partially alienated: he knows the mechanics of what he is trying to accomplish, which may allow him to improve efficiency in some way (e.g. devise better ways to transport the rocks faster or with less effort), but he doesn’t understand the purpose behind it all, so ultimately his work still feels meaningless. But the third man is not alienated: he understands the purpose of his work, and he values that purpose. He sees that what he is doing is contributing to a greater whole that he considers worthwhile. It’s not hard to imagine that the third man will be the happiest, and the first will be the unhappiest.

There really is something about the capitalist wage-labor structure that can easily feed into this sort of alienation. You get a job because you need money to live, not because you necessarily value whatever the job does. You do as you are told so that you can keep your job and continue to get paid.

Some jobs are much more alienating than others. Most teachers and nurses see their work as a vocation, even a calling—their work has deep meaning for them and they value its purpose. At the other extreme there are corporate lawyers and derivatives traders, who must on some level understand that their work contributes almost nothing to the world (may in fact actively cause harm), but they continue to do the work because it pays them very well.

But there are many jobs in between which can be experienced both ways. Working in retail can be an agonizing grind where you must face a grueling gauntlet of ungrateful customers day in and day out—or it can be a way to participate in your local community and help your neighbors get the things they need. Working in manufacturing can be a mechanical process of inserting tab A into slot B and screwing it into place over, and over, and over again—or it can be a chance to create something, convert raw materials into something useful and valuable that other people can cherish.

And while individual perspective and framing surely matter here—those three men were all working in the same quarry, building the same cathedral—there is also an important objective component as well. Working as an artisan is not as alienating as working on an assembly line. Hosting a tent at a farmer’s market is not as alienating as working the register at Walmart. Tutoring an individual student is more purposeful than recording video lectures for a MOOC. Running a quirky local book store is more fulfilling than stocking shelves at Barnes & Noble.

Moreover, capitalism really does seem to push us more toward the alienating side of the spectrum. Assembly lines are far more efficient than artisans, so we make most of our products on assembly lines. Buying food at Walmart is cheaper and more convenient than at farmer’s markets, so more people shop there. Hiring one video lecturer for 10,000 students is a lot cheaper than paying 100 in-person lecturers, let alone 1,000 private tutors. And Barnes & Noble doesn’t drive out local book stores by some nefarious means: It just provides better service at lower prices. If you want a specific book for a good price right now, you’re much more likely to find it at Barnes & Noble. (And even more likely to find it on Amazon.)

Finding meaning in your work is very important for human happiness. Indeed, along with health and social relationships, it’s one of the biggest determinants of happiness. For most people in First World countries, it seems to be more important than income (though income certainly does matter).

Yet the increased efficiency and productivity upon which our modern standard of living depends seems to be based upon a system of production—in a word, capitalism—that systematically alienates us from meaning in our work.

This puts us in a dilemma: Do we keep things as they are, accepting that we will feel an increasing sense of alienation and ennui as our wealth continues to grow and we get ever-fancier toys to occupy our meaningless lives? Or do we turn back the clock, returning to a world where work once again has meaning, but at the cost of making everyone poorer—and some people desperately so?

Well, first of all, to some extent this is a false dichotomy. There are jobs that are highly meaningful but also highly productive, such as teaching and engineering. (Even recording a video lecture is a lot more fulfilling than plenty of jobs out there.) We could try to direct more people into jobs like these. There are jobs that are neither particularly fulfilling nor especially productive, like driving trucks, washing floors and waiting tables. We could redouble our efforts into automating such jobs out of existence. There are meaningless jobs that are lucrative only by rent-seeking, producing little or no genuine value, like the aforementioned corporate lawyers and derivatives traders. These, quite frankly, could simply be banned—or if there is some need for them in particular circumstances (I guess someone should defend corporations when they get sued; but they far more often go unjustly unpunished than unjustly punished!), strictly regulated and their numbers and pay rates curtailed.

Nevertheless, we still have decisions to make, as a society, about what we value most. Do we want a world of cheap, mostly adequate education, that feels alienating even to the people producing it? Then MOOCs are clearly the way to go; pennies on the dollar for education that could well be half as good! Or do we want a world of high-quality, personalized teaching, by highly-qualified academics, that will help students learn better and feel more fulfilling for the teachers? More pointedly—are we willing to pay for that higher-quality education, knowing it will be more expensive?

Moreover, in the First World at least, our standard of living is… pretty high already? Like seriously, what do we really need that we don’t already have? We could always imagine more, of course—a bigger house, a nicer car, dining at fancier restaurants, and so on. But most of us have roofs over our heads, clothes on our backs, and food on our tables.

Economic growth has done amazing things for us—but maybe we’re kind of… done? Maybe we don’t need to keep growing like this, and should start redirecting our efforts away from greater efficiency and toward greater fulfillment. Maybe there are economic possibilities we haven’t been considering.

Note that I specifically mean First World countries here. In Third World countries it’s totally different—they need growth, lots of it, as fast as possible. Fulfillment at work ends up being a pretty low priority when your children are starving and dying of malaria.

But then, you may wonder: If we stop buying cheap plastic toys to fill the emptiness in our hearts, won’t that throw all those Chinese factory workers back into poverty?

In the system as it stands? Yes, that’s a real concern. A sudden drop in consumption spending in general, or even imports in particular, in First World countries could be economically devastating for millions of people in Third World countries.

But there’s nothing inherent about this arrangement. There are less-alienating ways of working that can still provide a decent standard of living, and there’s no fundamental reason why people around the world couldn’t all be doing them. If they aren’t, it’s in the short run because they don’t have the education or the physical machinery—and in the long run it’s usually because their government is corrupt and authoritarian. A functional democratic government can get you capital and education remarkably fast—it certainly did in South Korea, Taiwan, and Japan.

Automation is clearly a big part of the answer here. Many people in the First World seem to suspect that our way of life depends upon the exploited labor of impoverished people in Third World countries, but this is largely untrue. Most of that work could be done by robots and highly-skilled technicians and engineers; it just isn’t because that would cost more. Yes, that higher cost would mean some reduction in standard of living—but it wouldn’t be nearly as dramatic as many people seem to think. We would have slightly smaller houses and slightly older cars and slightly slower laptops, but we’d still have houses and cars and laptops.

So I don’t think we should all cast off our worldly possessions just yet. Whether or not it would make us better off, it would cause great harm to countries that depend on their exports to us. But in the long run, I do think we should be working to achieve a future for humanity that isn’t so obsessed with efficiency and growth, and instead tries to provide both a decent standard of living and a life of meaning and purpose.

Basic income reconsidered

PNRJ development economics, inequality, politics, public policy , , ,

Feb 20 JDN 2459631

In several previous posts I have sung the praises of universal basic income (though I have also tried to acknowledge the challenges involved).

In this post I’d like to take a step back and reconsider the question of whether basic income is really the best approach after all. One nagging thought keeps coming back to me, and it is the fact that basic income is extremely expensive.

About 11% of the US population lives below the standard poverty line. There are many criticisms of the standard poverty line: Some say it’s too high, because you can compare it favorably with middle-class incomes in much poorer countries. Others say it’s too low, because income at that level doesn’t allow people to really live in financial security. There are many difficult judgment calls that go into devising a poverty threshold, and we can reasonably debate whether the right ones were made here.

However, I think this threshold is at least approximately correct; maybe the true poverty threshold for a household of 1 should be not $12,880 but $11,000 or $15,000, but I don’t think it should be $5,000 or $25,000. Maybe for a household of 4 it should be not $26,500 but $19,000 or $32,000; but I don’t think it should be $12,000 or $40,000.

So let’s suppose that we wanted to implement a universal basic income in the United States that would lift everyone out of poverty. We could essentially do that by taking the 2-person-household threshold of $17,420 and dividing it by 2, yielding $8,710 per person per year. (Why not use the 1-person-household threshold? There aren’t very many 1-person households in poverty, and that threshold would be considerably higher and thus considerably more expensive. A typical poor household is a single parent and one or more children; as long as kids get the basic income, that household would be above the threshold in this system.)

The US population is currently about 331 million people. If every single one of them were to receive a basic income of $8,710, that would cost nearly $2.9 trillion per year. This is a feasible amount—it’s less than half the current total federal budget—but it is still a very large amount. The tax increases required to support it would be massive, and that’s probably why, despite ostensibly bipartisan support for the idea of a basic income, no serious proposal has ever gotten off of the ground.

If on the other hand we were to only give the basic income to people below the poverty line, that would cost only 11% of that amount: A far more manageable $320 billion per year.

We don’t want to do exactly that, however, because it would create all kinds of harmful distortions in the economy. Consider someone who is just below the threshold, considering whether to take on more work or get a higher-paying job. If their household pre-tax income is currently $15,000 and they could raise it to $18,000, a basic income given only to people below the threshold would mean that they are choosing between $15,000+$17,000=$32,000 if they keep their current work and $18,000 if they increase it. Clearly, they would not want to take on more work. That’s a terrible system—it amounts to a marginal tax rate above 100%.

Another possible method would be to simply top off people’s income, give them whatever they need to get to the poverty line but no more. (This would actually be even cheaper; it would probably cost something more like $160 billion per year.) That removes the distortion for people near the threshold, at the cost of making it much worse for those far below the threshold. Someone considering whether to work for $7,000 or work for $11,000 is, in such a system, choosing whether to work less for $17,000 or work more for… $17,000. They will surely choose to work less.

In order to solve these problems, what we would most likely need to do is gradually phase out the basic income, so that say increasing your pre-tax income by $1.00 would decrease your basic income payment by $0.50. The cost of this system would be somewhere in between that of a truly universal basic income and a threshold-based system, so let’s ballpark that as around $600 billion per year. It would effectively implement a marginal tax rate of 50% for anyone who is receiving basic income payments.

In theory, this is probably worse than a universal basic income, because in the latter case you can target the taxes however you like—and thus (probably) make them less cause less distortion than the phased-out basic income system would. But in practice, a truly universal basic income might simply not be politically viable, and some kind of phased-out system seems much more likely to actually get passed.


Even then, I confess I am not extremely optimistic. For some reason, everyone seems to want to end poverty, but very few seem willing to use the obvious solution: Give poor people money.

Reversals in progress against poverty

PNRJ core principles, critique of neoclassical economics, current events, development economics, inequality , , , , ,

Jan 16 JDN 2459606

I don’t need to tell you that the COVID pandemic has been very bad for the world. Yet perhaps the worst outcome of the pandemic is one that most people don’t recognize: It has reversed years of progress against global poverty.

Estimates of the number of people who will be thrown into extreme poverty as a result of the pandemic are consistently around 100 million, though some forecasts have predicted this will rise to 150 million, or, in the most pessimistic scenarios, even as high as 500 million.

Pre-COVID projections showed the global poverty rate falling steadily from 8.4% in 2019 to 6.3% by 2030. But COVID resulted in the first upward surge in global poverty in decades, and updated models now suggest that the global poverty rate in 2030 will be as high as 7.0%. That difference is 0.7% of a forecasted population of 8.5 billion—so that’s a difference of 59 million people.

This is a terrible reversal of fortune, and a global tragedy. Ten or perhaps even hundreds of millions of people will suffer the pain of poverty because of this global pandemic and the numerous missteps by many of the world’s governments—not least the United States—in response to it.

Yet it’s important to keep in mind that this is a short-term reversal in a long-term trend toward reduced poverty. Yes, the most optimistic predictions are turning out to be wrong—but the general pattern of dramatic reductions in global poverty over the late 20th and early 21st century are still holding up.

That post-COVID estimate of a global poverty rate of 7.0% needs to be compared against the fact that as recently as 1980 the global poverty rate at the same income level (adjust for inflation and purchasing power of course) income level was a whopping 44%.

This pattern makes me feel deeply ambivalent about the effects of globalization on inequality. While it now seems clear that globalization has exacerbated inequality within First World countries—and triggered a terrible backlash of right-wing populism as a result—it also seems clear that globalization was a major reason for the dramatic reductions in global poverty in the past few decades.

I think the best answer I’ve been able to come up with is that globalization is overall a good thing, and we must continue it—but we also need to be much more mindful of its costs, and we must make policy that mitigates those costs. Expanded trade has winners and losers, and we should be taxing the winners to compensate the losers. To make good economic policy, it simply isn’t enough to increase aggregate GDP; you actually have to make life better for everyone (or at least as many people as you can).

Unfortunately, knowing what policies to make is only half the battle. We must actually implement those policies, which means winning elections, which means restoring the public’s faith in the authority of economic experts.

Some of the people voting for Donald Trump were just what Hillary Clinton correctly (if tone-deafly) referred to as “deplorables“: racists, misogynists, xenophobes. But I think that many others weren’t voting for Trump but against Clinton; they weren’t embracing far-right populism but rather rejecting center-left technocratic globalization. They were tired of being told what to do by experts who didn’t seem to care about them or their interests.

And the thing is, they were right about that. Not about voting for Trump—that’s unforgivable—but about the fact that expert elites had been ignoring their interests and needed a wake-up call. There were a hundred better ways of making that wake-up call that didn’t involve putting a narcissistic, incompetent maniac in charge of the world’s largest economy, military and nuclear arsenal, and millions of people should be ashamed of themselves for not taking those better options. Yet the fact remains: The wake-up call was necessary, and we should be responding to it.

We expert elites (I think I can officially carry that card, now that I have a PhD and a faculty position at a leading research university) need to do a much better job of two things: First, articulating the case for our policy recommendations in a way that ordinary people can understand, so that they feel justified and not simply rammed down people’s throats; and second, recognizing the costs and downsides of these policies and taking action to mitigate them whenever possible.

For instance: Yes, we need to destroy all the coal jobs. They are killing workers and the planet. Coal companies need to be transitioned to new industries or else shut down. This is not optional. It must be done. But we also need to explain to those coal miners why it’s necessary to move on from coal to solar and nuclear, and we need to be implementing various policies to help those workers move on to better, safer jobs that pay as well and don’t involve filling their lungs with soot and the atmosphere with carbon dioxide. We need to articulate, emphasize—and loudly repeat—that this isn’t about hurting coal miners to help everyone else, but about helping everyone, coal miners included, and that if anyone gets hurt it will only be a handful of psychopathic billionaires who already have more money than any human being could possibly need or deserve.

Another example: We cannot stop trading with India and China. Hundreds of millions of innocent people would suddenly be thrown out of work and into poverty if we did. We need the products they make for us, and they need the money we pay for those products. But we must also acknowledge that trading with poor countries does put downward pressure on wages back home, and take action to help First World workers who are now forced to compete with global labor markets. Maybe this takes the form of better unemployment benefits, or job-matching programs, or government-sponsored job training. But we cannot simply shrug and let people lose their jobs and their homes because the factories they worked in were moved to China.

Risk compensation is not a serious problem

PNRJ development economics, ethics, mathematical models, public policy , , ,

Nov 28 JDN 2459547

Risk compensation. It’s one of those simple but counter-intuitive ideas that economists love, and it has been a major consideration in regulatory policy since the 1970s.

The idea is this: The risk we face in our actions is partly under our control. It requires effort to reduce risk, and effort is costly. So when an external source, such as a government regulation, reduces our risk, we will compensate by reducing the effort we expend, and thus our risk will decrease less, or maybe not at all. Indeed, perhaps we’ll even overcompensate and make our risk worse!

It’s often used as an argument against various kinds of safety efforts: Airbags will make people drive worse! Masks will make people go out and get infected!

The basic theory here is sound: Effort to reduce risk is costly, and people try to reduce costly things.

Indeed, it’s theoretically possible that risk compensation could yield the exact same risk, or even more risk than before—or at least, I wasn’t able to prove that for any possible risk profile and cost function it couldn’t happen.

But I wasn’t able to find any actual risk profiles or cost functions that would yield this result, even for a quite general form. Here, let me show you.

Let’s say there’s some possible harm H. There is also some probability that it will occur, which you can mitigate with some choice x. For simplicity let’s say that it’s one-to-one, so that your risk of H occurring is precisely 1-x. Since probabilities must be between 0 and 1, thus so must x.

Reducing that risk costs effort. I won’t say much about that cost, except to call it c(x) and assume the following:

(1) It is increasing: More effort reduces risk more and costs more than less effort.

(2) It is convex: Reducing risk from a high level to a low level (e.g. 0.9 to 0.8) costs less than reducing it from a low level to an even lower level (e.g. 0.2 to 0.1).

These both seem like eminently plausible—indeed, nigh-unassailable—assumptions. And they result in the following total expected cost (the opposite of your expected utility):

(1-x)H + c(x)

Now let’s suppose there’s some policy which will reduce your risk by a factor r, which must be between 0 and 1. Your cost then becomes:

r(1-x)H + c(x)

Minimizing this yields the following result:

rH = c'(x)

where c'(x) is the derivative of c(x). Since c(x) is increasing and convex, c'(x) is positive and increasing.

Thus, if I make r smaller—an external source of less risk—then I will reduce the optimal choice of x. This is risk compensation.

But have I reduced or increased the amount of risk?

The total risk is r(1-x); since r decreased and so did x, it’s not clear whether this went up or down. Indeed, it’s theoretically possible to have cost functions that would make it go up—but I’ve never seen one.

For instance, suppose we assume that c(x) = axb, where a and b are constants. This seems like a pretty general form, doesn’t it? To maintain the assumption that c(x) is increasing and convex, I need a > 0 and b > 1. (If 0 < b < 1, you get a function that’s increasing but concave. If b=1, you get a linear function and some weird corner solutions where you either expend no effort at all or all possible effort.)

Then I’m trying to minimize:

r(1-x)H + axb

This results in a closed-form solution for x:

x = (rH/ab)^(1/(b-1))

Since b>1, 1/(b-1) > 0.


Thus, the optimal choice of x is increasing in rH and decreasing in ab. That is, reducing the harm H or the overall risk r will make me put in less effort, while reducing the cost of effort (via either a or b) will make me put in more effort. These all make sense.

Can I ever increase the overall risk by reducing r? Let’s see.


My total risk r(1-x) is therefore:

r(1-x) = r[1-(rH/ab)^(1/(b-1))]

Can making r smaller ever make this larger?

Well, let’s compare it against the case when r=1. We want to see if there’s a case where it’s actually larger.

r[1-(rH/ab)^(1/(b-1))] > [1-(H/ab)^(1/(b-1))]

r – r^(1/(b-1)) (H/ab)^(1/(b-1)) > 1 – (H/ab)^(1/(b-1))

For this to be true, we would need r > 1, which would mean we didn’t reduce risk at all. Thus, reducing risk externally reduces total risk even after compensation.

Now, to be fair, this isn’t a fully general model. I had to assume some specific functional forms. But I didn’t assume much, did I?

Indeed, there is a fully general argument that externally reduced risk will never harm you. It’s quite simple.

There are three states to consider: In state A, you have your original level of risk and your original level of effort to reduce it. In state B, you have an externally reduced level of risk and your original level of effort. In state C, you have an externally reduced level of risk, and you compensate by reducing your effort.

Which states make you better off?

Well, clearly state B is better than state A: You get reduced risk at no cost to you.

Furthermore, state C must be better than state B: You voluntarily chose to risk-compensate precisely because it made you better off.

Therefore, as long as your preferences are rational, state C is better than state A.

Externally reduced risk will never make you worse off.

QED. That’s it. That’s the whole proof.

But I’m a behavioral economist, am I not? What if people aren’t being rational? Perhaps there’s some behavioral bias that causes people to overcompensate for reduced risks. That’s ultimately an empirical question.

So, what does the empirical data say? Risk compensation is almost never a serious problem in the real world. Measures designed to increase safety, lo and behold, actually increase safety. Removing safety regulations, astonishingly enough, makes people less safe and worse off.

If we ever do find a case where risk compensation is very large, then I guess we can remove that safety measure, or find some way to get people to stop overcompensating. But in the real world this has basically never happened.

It’s still a fair question whether any given safety measure is worth the cost: Implementing regulations can be expensive, after all. And while many people would like to think that “no amount of money is worth a human life”, nobody does—or should, or even can—act like that in the real world. You wouldn’t drive to work or get out of bed in the morning if you honestly believed that.

If it would cost $4 billion to save one expected life, it’s definitely not worth it. Indeed, you should still be able to see that even if you don’t think lives can be compared with other things—because $4 billion could save an awful lot of lives if you spent it more efficiently. (Probablyover a million, in fact, as current estimates of the marginal cost to save one life are about $2,300.) Inefficient safety interventions don’t just cost money—they prevent us from doing other, more efficient safety interventions.

And as for airbags and wearing masks to prevent COVID? Yes, definitely 100% worth it, as both interventions have already saved tens if not hundreds of thousands of lives.

Realistic open borders

PNRJ core principles, development economics, ethics, inequality, personal, public policy, tribal paradigm , , , , , ,

Sep 5 JDN 2459463

In an earlier post I lamented the tight restrictions on border crossings that prevail even between allied First World countries. (On a personal note, you’ll be happy to know that our visas have cleared and we are now moved into Edinburgh, cat and all, though we are still in temporary housing and our official biometric residence permits haven’t yet arrived.)

In this post I’d like to speculate on how we might get from our current regime to something more like open borders.

Obviously we can’t simply remove all border restrictions immediately. That would be a political non-starter, and even ethically or economically it wouldn’t make very much sense. There are sensible reasons behind some of our border regulations—just not most of them.

Instead we would want to remove a few restrictions at a time, starting with the most onerous or ridiculous ones.

High on my list in the UK in particular would be the requirement that pets must fly as cargo. I literally can’t think of a good reason for this; it seems practically designed to cost travelers more money and traumatize as many pets as possible. If it’s intended to support airlines somehow, please simply subsidize airlines. (But really, why are you doing that? You should be taxing airlines because of their high carbon emissions. Subsidize boats and trains.) If it’s intended to somehow prevent the spread of rabies, it’s obviously unnecessary, since every pet moved to the UK already has to document a recent rabies vaccine. But this particular rule seems to be a quirk of the UK in particular, hence not very generalizable.

But here’s one that actually seems quite common: Financial requirements for visas. Even tourist visas in most countries cost money, in amounts that seem to vary according to some sort of occult ritual. I can see no sensible economic reason why a visa would be $130 in Vietnam but only $20 in neighboring Cambodia, or why Kazakhstan can be visited for $25 but Azerbaijan costs $100, or why Myanmar costs only $30 but Bhutan will run you over $200.

Work visas are considerably more demanding still.

Financial requirements in the UK are especially onerous; you have to make above a certain salary and have a certain amount of savings in the bank, based on your family size. This was no problem for me personally, but it damn well shouldn’t be; I have a PhD in economics. My salary is now twice what it was as a grad student, and honestly that’s a good deal less than I was hoping for (and would have gotten on the tenure track at an R1 university).

All the countries in the Schengen Area have their own requirements for “financial subsistence” for visa applications, ranging from a trivial €3 in Hungary (not per day, just total; why do they even bother?) or manageable €14 per day in Latvia, through the more demanding amounts of €45 per day in Germany and Italy, to €92 per day in Switzerland and Liechtenstein, all the way up to the utterly unreasonable €120 per day in France. That would be €43,800 per year, or $51,700. Apparently you must be at least middle class to enter France.

Canada has a similar requirement known as “proof of funds”, but it’s considerably more reasonable, since you can substitute proof of employment and there are no wage minimums for such employment. Even if you don’t already have a job you can still apply and the minimum requirement is actually lower than the poverty line in Canada.

The United States doesn’t require financial requirements for most visas, but it does have a $160 visa fee. And the H1-B visa in particular (the nearest equivalent to the Skilled Worker visa I’ve got in the UK) requires that your wage or salary be at least the “prevailing wage” in your industry—meaning it is nearly impossible for a company to save money by hiring people on H1-B visas and hence they have very little incentive to hire H1-B workers. If you are of above-average talent and being paid only average wages, I guess they can save some money that way. But this is not how trade is supposed to work—nobody requires that you pay US prices for goods shipped from China, and if they did, nobody would ever buy anything from China. This is blatant, naked protectionism—but we’re apparently okay with it as long as it’s trade in labor instead of goods.

I wasn’t able to quickly find whether there are similar financial requirements in other countries. Perhaps there aren’t; these are the countries most people actually want to move to anyway. Permanent migration is overwhelminginly toward OECD (read: First World) countries, and is actually helping us sustain our populations in the face of low birth rates.

I must admit, I can see some fiscal benefits for a country not allowing poor people in, but this practice raises some very deep ethical problems: What right do we have to do this?

If someone is born poor in Laredo, Texas, we take responsibility for them as a US citizen. Maybe we don’t treat them particularly well (that is Texas, after all), but we do give them access to certain basic services, such as emergency services, Medicaid, TANF and SNAP. They are allowed to vote, own property, and even hold office in the United States. But if that same person were born in Nuevo Laredo, Tamaulipas—literally less than a mile away, right across the river—they would receive none of these benefits. They would not even be allowed to cross the river without a passport and a visa.

In some ways the contrast is even more dire if we consider a more liberal US state. A poor person born in Chula Vista, California has access to the full array of California services; Medi-Cal is honestly something close to a single-payer healthcare system, though the full morass of privatized US healthcare is layered on top of us. Then there is CalWORKS, CalFresh, and so on. But the same person born in Tijuana, Baja California would get none of these benefits.

They could be the same person. They could look the same and have essentially the same culture—even the same language, given how many Californians speak Spanish and how many Mexicans speak English. But if they were born on the other side of a river (in Texas) or even an arbitrary line (in California), we treat them completely differently. And then to add insult to injury, we won’t even let them across, not in spite, but because of how poor and desperate they are. If they were rich and educated, we’d let them come across—but then why would they need to?

“Give me your tired, your poor, your huddled masses yearning to breathe free”?

Some restrictions may apply.

Economists talk often of “trade barriers”, but in real terms we have basically removed all trade barriers in goods. Yes, there are still some small tariffs, and the occasional quota here and there—and these should go away too, especially the quotas, because they don’t even raise revenue—but in general we have an extremely globalized economy in terms of goods. The same complex product, like a car or a smartphone, is often made of parts from a dozen countries.

But when it comes to labor, we are still living in a protectionist world. Crossing borders to work is difficult, time-consuming, and above all, expensive. This dramatically reduces opportunities for workers to move where their labor is most valued—which hurts not only them, but also anyone who would employ them or buy products made by them. The poorest people are those who stand to gain the most from crossing borders, and they are precisely the ones that we work hardest to forbid.

So let’s start with that, shall we? We can keep all this nonsense about passports, visas, background checks, and customs inspections. It’s probably all unnecessary and wasteful and unfair, but politically it’s clearly too popular to remove. Let’s just remove this: No more financial requirements or fees for work visas. If you want to come to another country to work, you have to go through an application and all that; fine. But you shouldn’t have to prove you aren’t poor. Poor people have just as much right to live here as anybody else—and if we let them do so, they’d be a lot less poor.