The injustice of positional goods

July 15 JDN 2458315

At Disneyland, you can now buy a special pass that will let you skip ahead in line. On several airlines including American, Delta, Spirit, and Southwest, you can pay extra to be allowed to board before other passengers (which has been particularly salient for me on the many flights I’ve been taking this summer). This is only an extreme form of a long-standing phenomenon: Since the beginning of commercial ship and train travel, there have been first-class and second-class tickets.

I don’t have any formal survey data on the matter, but just about everyone I have spoken to about such policies is at least vaguely uncomfortable with them, if not totally outraged. The exception is other economists, who typically don’t express any concern whatsoever. “People are willing to pay for this service because they value it,” they say; “so what’s the problem?”

On this one, I think the economists are wrong and everyone else is right. There is something different about this sort of service.

Part of the difference between first-class and second-class is in actual quality of services that actually incur additional costs (I hate to break it to you, but legroom on an aircraft is just such an example; every inch of legroom on each seat is another row of seats they can’t have, which is another $2000 or so they don’t get in revenue on each and every flight). But part of it is something else, something that costs the company literally nothing.

This makes early boarding a clearer example. What are you buying when you pay for early boarding? On most airlines, it’s not even a better seat; your seat is pre-assigned (Southwest is an exception). We could say you are paying for extra time, but that’s not really even true; the plane leaves at the same time for everyone. From your perspective, you are paying for convenience; you get to settle in on the plane, maybe get started working or whatever, before everyone else. Maybe you’d rather wait on the plane than wait in the airport (though frankly I’m not sure why; the airport has restaurants and comfortable restrooms).

What you are really buying is position. Early boarding is a positional good. Every person who gets bumped forward in the queue is someone else who is bumped backward. The net benefit for all customers as a whole is precisely zero, as is the cost for the company to provide it—and yet, it still has a positive price! This is impressive economic alchemy: The airline has managed to take something with zero marginal cost and zero marginal benefit, and still make money off of it. They have transmuted the lead of something costless and worthless into the gold of profit.

They achieve this by pitting customers against one another. In a post awhile back I talked about rent-seeking, such as lobbying and advertising. Usually it’s the corporations doing the rent-seeking, but early boarding and queue-jumping are examples of corporations intentionally generating a circumstances where they can obtain revenue from the rent-seeking of others.

To be fair, there might be some welfare gains to be had from auctioning off order in a queue. Some people have genuinely higher costs of time than others (a cardiac surgeon’s time is particularly important, for example), and an auction could potentially order people who have very high cost of time first.

But this argument is much weaker than it may at first appear, because people also have very different marginal utility of wealth, and indeed I think the correlation between your willingness to pay for time and your total wealth is considerably higher than the correlation between your willingness-to-pay for time and your actual real cost in terms of pain and suffering.

This is a more general problem, as I’ve discussed in previous posts; but I think it’s especially acute in the case of time, because real cost of time doesn’t actually vary all that much between most people. The reason poor people take buses and rich people take limousines isn’t because poor people don’t care about their time; it’s because they can’t afford limousines. A cardiac surgeon and an economist could very well have the same salary and the same willingness-to-pay for time, but people rarely die when an economist turns up an hour late. (It’s not that our work isn’t important—actually a good development economist can save far more lives than any cardiac surgeon—but it’s not nearly so urgent.) Also, consider the fact that teachers and social workers generally contribute a good deal more to society than derivatives traders (and thus, from a social welfare perspective, their time should be considered more valuable), but they are far less likely to pay for first-class seats. In fact, a first-come, first-served method actually seems better than an auction from a social welfare perspective: If your time is really important to you, you’re more likely to go out of your way to check in as soon as you can. That costly signal provides a sorting mechanism which relies directly upon real costs of time, rather than indirectly via monetary willingness-to-pay.

And of course when it comes to Disneyland, this argument utterly fails; I see little reason to think that a cardiac surgeon’s vacation time is substantially more valuable to society. (Don’t get me wrong; surgeons need and deserve vacation time—but if they get too much, their performance actually suffers!) So maybe paying for a place in queue isn’t completely rent-seeking, but it’s pretty close.

That is why paying for positional goods feels unjust to most people: Because it is. Charging a price for positional goods is a means of extracting profit from customers without providing any (net) real service. It’s a way of applying price discrimination without even having much monopoly power. If another airline doesn’t let you pay to skip ahead in the queue, you have a slightly lower expected wait time on that other airline, but any revenue they lose from charging a bit less for economy tickets can be easily made up by charging more for the front of the line.

For example, if the first 10% of the line on airline A is decided by selling spots, while airline B chooses at random, and the average time waiting in line to board is 30 minutes, the expected wait times are as follows. Fly airline A and don’t buy a spot: 16.5 minutes. Fly airline A and buy a spot: 1.5 minutes. Fly airline B: 15 minutes. Those 10% are paying for, on average, 13.5 minutes; but you’re only gaining 1.5 minutes. Of course, there are more people waiting that extra 1.5 minutes than saving those 13.5 minutes (9 times as many, in fact). If the per-minute willingness-to-pay were exactly the same, the airline would break even; but they know of course that the willingness-to-pay of that top 10% is considerably higher than that of most of the bottom 90%. If they have any market power at all (which they generally do, by being the only airline serving certain routes, offering loyalty benefits, etc.), they can squeeze out even more profit.

They may even sometimes go out of their way to make life miserable for those who don’t pay extra, increasing the incentive to pay extra. This requires some market power to pull off, but as I said, they often have that. Most airlines don’t offer power outlets at every seat, for example. This is not a serious question of installation cost or even power consumption. We’re talking about a few hundred dollars on an aircraft that costs hundreds of millions of dollars, or a few kilowatts from a system that can generate over one hundred megawatts (of course most of it is used for propulsion, but adding an alternator that would generate an extra few kilowatts of electrical power would still not be difficult or expensive). This is a way of making life worse for the economy-class passengers so they have a stronger incentive to pay for upgraded tickets.

It’s not always easy to tell what is a positional good: First-class seats are ambiguous, for example. But I think a good heuristic is to ask, “Could everyone benefit from this?” If the answer is “No, even in principle”, then you are definitely dealing with a positional good. Not everyone can be first in line at Disneyland. Not everyone can board the plane first. In theory at least, everyone could be provided the same legroom and meal service as a first-class ticket (it would be expensive, but not impossible), so that is at least in part not a positional good.

The “pay-to-win” effect of some video game downloadable content (DLC) is also a positional good, which we can see by the above heuristic: If everyone pays to have the best gun in the game, there’s no point in having the best gun in the game. This is why gamers are rightfully outraged by “pay-to-win” effects, but typically have no objection to paying for DLC that provides them with extra game content (such as new characters, locations, or missions) or cosmetic upgrades (hats, decorations, and “skins”). Personally I tend to think that most DLC is overpriced, and succeeds at being so due to a kind of monopoly power (Mass Effect DLC doesn’t work on Skyrim or vice-versa) but I certainly don’t object to the basic idea of charging additional money for additional content. The reason we object to “pay-to-win” is not that winning the game is so important; it’s that this business model is so obviously a form of rent extraction. (It’s interesting that gamers in China don’t seem to be as bothered by “pay-to-win” as gamers in the US; this runs counter to the standard narrative that American people are competitive capitalists and Chinese people are collectivist socialists, don’t you think?)

There may be some circumstances in which we have no choice but to allow corporations to charge prices for positional goods—especially if we can’t tell whether we are dealing with a positional good or not. But it would not be very difficult to draft legislation that would at least reduce such business practices: We could simply use my “Could everyone benefit?” heuristic. If a business charges money for something that even in principle they could not possibly provide all of their customers, they are charging a price for a positional good, and should be penalized. The benefits of such a policy would be relatively small, but the costs would be even smaller. If we are really concerned about letting cardiac surgeons board aircraft faster (we should really be concerned about deboarding faster—and especially faster security screening!), we could make such a rule that applies to particular classes of high-urgency professions; we don’t need to allow airlines to extract millions of dollars in rent by pitting their customers against each other.

The housing shortage is an international phenomenon

Jul 1 JDN 2458301

My posts for the next couple of weeks are going to be shorter, since I am in Europe and will be either on vacation (at the time I write this) or busy with a conference and a workshop (by the time this post goes live).

For today, I’d just like to point out that the crisis of extremely high housing prices is not unique to California or even the United States. In some respects it may even be worse elsewhere.

San Francisco remains especially bad; the median price for a home in San Francisco is a horrifying $1.6 million.

But London (where I am at the time of writing) is also terrible; the median price for a home in London recently fell to 430,000 pounds (about $600,000 at current exchange rates). The most expensive flat—not house, flat—sold a couple years ago for the mind-boggling sum of 150 million pounds (about $200 million). If I had $200 million, I would definitely not use it to buy a flat. At that point it would literally be cheaper to buy a yacht with a helipad, park it in the harbor, and commute by helicopter. Here’s a yacht with a helipad for only $20 million, and a helicopter to go with it for $6 million. That leaves $174 million; keep $20 million in stocks to be independently wealthy for the rest of your life, and then donate the remaining $154 million to charity.

The median price of a house in Vancouver stands at 1.1 million Canadian dollars, about $830,000 US.

A global comparison finds that on a per-square-meter basis, the most expensive real estate in the world is in Monaco, where $1 million US will only buy you 15 square meters. The remaining cities in the top 10 are Hong Kong, London, Singapore, Geneva, New York, Sydney, Paris, Moscow, and Shanghai.

There is astonishing variation in the level of housing prices, even within countries. Some of the most affordable markets in the US (like San Antonio and Oklahoma City) cost as little as $80 per square foot; that means that $1 million would buy you 1,160 square meters. That’s not an error; real estate in Monaco is literally 77 times more expensive than real estate in Oklahoma City. 15 square meters is a studio apartment; 1,160 square meters is a small mansion. Just comparing within the US, the price per square foot in San Francisco is over $1,120, 14 times as high as Oklahoma City. $1 million in San Francisco will buy you about 80 square meters, which is at least a two or three-bedroom house.

This says to me that policy choices matter. It may not be possible to make San Francisco as cheap as Oklahoma City—most people would definitely rather live in San Francisco, so demand is always going to be higher there. But I don’t think it’s very plausible to say that housing is just inherently 14 times as expensive to construct as housing in Oklahoma City. If it’s really that much more expensive to construct (and that may not even be the issue—this could be more a matter of oligopoly than high costs), it must be at least in part because of something the local and state governments are doing differently. Cross-national comparisons underscore that point even further: The geography of Hong Kong and Taiwan is not that different, but housing prices in Taiwan are not nearly as high.

What exactly are different cities (and countries) doing differently that has such large effects on housing prices? That’s something I’ll try to figure out in future posts.

What we could, what we should, and what we must

May 27 JDN 2458266

In one of the most famous essays in all of ethical philosophy, Peter Singer famously argued that we are morally obligated to give so much to charity that we would effectively reduce ourselves to poverty only slightly better than what our donations sought to prevent. His argument is a surprisingly convincing one, especially for such a radical proposition. Indeed, one of the core activities of the Effective Altruism movement has basically been finding ways to moderate Singer’s argument without giving up on its core principles, because it’s so obvious both that we ought to do much more to help people around the world and that there’s no way we’re ever going to do what that argument actually asks of us.

The most cost-effective charities in the world can save a human life for an average cost of under $4,000. The maneuver that Singer basically makes is quite simple: If you know that you could save someone’s life for $4,000, you have $4,000 to spend, and instead you spend that $4,000 on something else, aren’t you saying that whatever you did spend it on was more important than saving that person’s life? And is that really something you believe?

But if you think a little more carefully, it becomes clear that things are not quite so simple. You aren’t being paid $4,000 to kill someone, first of all. If you were willing to accept $4,000 as sufficient payment to commit a murder, you would be, quite simply, a monster. Implicitly the “infinite identical psychopath” of neoclassical rational agent models would be willing to do such a thing, but very few actual human beings—even actual psychopaths—are that callous.

Obviously, we must refrain from murdering people, even for amounts far in excess of $4,000. If you were offered the chance to murder someone for $4 billion dollars, I can understand why you would be tempted to do such a thing. Think of what you could do with all that money! Not only would you and everyone in your immediate family be independently wealthy for life, you could donate billions of dollars to charity and save as much as a million lives. What’s one life for a million? Even then, I have a strong intuition that you shouldn’t commit this murder—but I have never been able to find a compelling moral argument for why. The best I’ve been able to come up with a sort of Kantian notion: What if everyone did this?

Since the most plausible scenario is that the $4 billion comes from existing wealth, all those murders would simply be transferring wealth around, from unknown sources. If you stipulate where the wealth comes from, the dilemma can change quite a bit.

Suppose for example the $4 billion is confiscated from Bashar Al-Assad. That would be in itself a good thing, lessening the power of a genocidal tyrant. So we need to add that to the positive side of the ledger. It is probably worth killing one innocent person just to undermine Al-Assad’s power; indeed, the US Air Force certainly seems to think so, as they average more than one civilian fatality every day in airstrikes.

Now suppose the wealth was extracted by clever financial machinations that took just a few dollars out of every bank account in America. This would be in itself a bad thing, but perhaps not a terrible thing, especially since we’re planning on giving most of it to UNICEF. Those people should have given it anyway, right? This sounds like a pretty good movie, actually; a cyberpunk Robin Hood basically.

Next, suppose it was obtained by stealing the life savings of a million poor people in Africa. Now the method of obtaining the money is so terrible that it’s not clear that funneling it through UNICEF would compensate, even if you didn’t have to murder someone to get it.

Finally, suppose that the wealth is actually created anew—not printed money from the Federal Reserve, but some new technology that will increase the world’s wealth by billions of dollars yet requires the death of an innocent person to create. In this scenario, the murder has become something more like the inherent risk in human subjects biomedical research, and actually seems justifiable. And indeed, that fits with the Kantian answer, for if we all had the chance to kill one person in order to create something that would increase the wealth of the world by $4 billion, we could turn this planet into a post-scarcity utopia within a generation for fewer deaths than are currently caused by diabetes.

Anyway, my point here is that the detailed context of a decision actually matters a great deal. We can’t simply abstract away from everything else in the world and ask whether the money is worth the life.

When we consider this broader context with regard to the world’s most cost-effective charities, it becomes apparent that a small proportion of very dedicated people giving huge proportions of their income to charity is not the kind of world we want to see.

If I actually gave so much that I equalized my marginal utility of wealth to that of a child dying of malaria in Ghana, I would have to donate over 95% of my income—and well before that point, I would be homeless and impoverished. This actually seems penny-wise and pound-foolish even from the perspective of total altruism: If I stop paying rent, it gets a lot harder for me to finish my doctorate and become a development economist. And even if I never donated another dollar, the world would be much better off with one more good development economist than with even another $23,000 to the Against Malaria Foundation. Once you factor in the higher income I’ll have (and proportionately higher donations I’ll make), it’s obviously the wrong decision for me to give 95% of $25,000 today rather than 10% of $70,000 every year for the next 20 years after I graduate.

But the optimal amount for me to donate from that perspective is whatever the maximum would be that I could give without jeopardizing my education and career prospects. This is almost certainly more than I am presently giving. Exactly how much more is actually not all that apparent: It’s not enough to say that I need to be able to pay rent, eat three meals a day, and own a laptop that’s good enough for programming and statistical analysis. There’s also a certain amount that I need for leisure, to keep myself at optimal cognitive functioning for the next several years. Do I need that specific video game, that specific movie? Surely not—but if I go the next ten years without ever watching another movie or playing another video game, I’m probably going to be in trouble psychologically. But what exactly is the minimum amount to keep me functioning well? And how much should I be willing to spend attending conferences? Those can be important career-building activities, but they can also be expensive wastes of time.

Singer acts as though jeopardizing your career prospects is no big deal, but this is clearly wrong: The harm isn’t just to your own well-being, but also to your productivity and earning power that could have allowed you to donate more later. You are a human capital asset, and you are right to invest in yourself. Exactly how much you should invest in yourself is a much harder question.
Such calculations are extremely difficult to do. There are all sorts of variables I simply don’t know, and don’t have any clear way of finding out. It’s not a good sign for an ethical theory when even someone with years of education and expertise on specifically that topic still can’t figure out the answer. Ethics is supposed to be something we can apply to everyone.

So I think it’s most helpful to think in those terms: What could we apply to everyone? What standard of donation would be high enough if we could get everyone on board?

World poverty is rapidly declining. The direct poverty gap at the UN poverty line of $1.90 per day is now only $80 billion. Realistically, we couldn’t simply close that gap precisely (there would also be all sorts of perverse incentives if we tried to do it that way). But the standard estimate that it would take about $300 billion per year in well-targeted spending to eliminate world hunger is looking very good.

How much would each person, just those in the middle class or above within the US or the EU, have to give in order to raise this much?
89% of US income is received by the top 60% of households (who I would said are unambiguously “middle class or above”). Income inequality is not as extreme within the EU, so the proportion of income received by the top 60% seems to be more like 75%.

89% of US GDP plus 75% of EU GDP is all together about $29 trillion per year. This means that in order to raise $300 billion, each person in the middle class or above would need to donate just over one percent of their income.

Not 95%. Not 25%. Not even 10%. Just 1%. That would be enough.

Of course, more is generally better—at least until you start jeopardizing your career prospects. So by all means, give 2% or 5% or even 10%. But I really don’t think it’s helpful to make people feel guilty about not giving 95% when all we really needed was for everyone to give 1%.

There is an important difference between what we could do, what we should do, and what we must do.

What we must do are moral obligations so strong they are essentially inviolable: We must not murder people. There may be extreme circumstances where exceptions can be made (such as collateral damage in war), and we can always come up with hypothetical scenarios that would justify almost anything, but for the vast majority of people the vast majority of time, these ethical rules are absolutely binding.

What we should do are moral obligations that are strong enough to be marks against your character if you break them, but not so absolutely binding that you have to be a monster not to follow them. This is where I put donating at least 1% of your income. (This is also where I put being vegetarian, but perhaps that is a topic for another time.) You really ought to do it, and you are doing something wrongful if you don’t—but most people don’t, and you are not a terrible person if you don’t.

This latter category is in part socially constructed, based on the norms people actually follow. Today, slavery is obviously a grave crime, and to be a human trafficker who participates in it you must be a psychopath. But two hundred years ago, things were somewhat different: Slavery was still wrong, yes, but it was quite possible to be an ordinary person who was generally an upstanding citizen in most respects and yet still own slaves. I would still condemn people who owned slaves back then, but not nearly as forcefully as I would condemn someone who owned slaves today. Two hundred years from now, perhaps vegetarianism will move up a category: The norm will be that everyone eats only plants, and someone who went out of their way to kill and eat a pig would have to be a psychopath. Eating meat is already wrong today—but it will be more wrong in the future. I’d say the same about donating 1% of your income, but actually I’m hoping that by two hundred years from now there will be no more poverty left to eradicate, and donation will no longer be necessary.

Finally, there is what we could do—supererogatory, even heroic actions of self-sacrifice that would make the world a better place, but cannot be reasonably expected of us. This is where donating 95% or even 25% of your income would fall. Yes, absolutely, that would help more people than donating 1%; but you don’t owe the world that much. It’s not wrong for you to contribute less than this. You don’t need to feel guilty for not giving this much.

But I do want to make you feel guilty if you don’t give at least 1%. Don’t tell me you can’t. You can. If your income is $30,000 per year, that’s $300 per year. If you needed that much for a car repair, or dental work, or fixing your roof, you’d find a way to come up with it. No one in the First World middle class is that liquidity-constrained. It is true that half of Americans say they couldn’t come up with $400 in an emergency, but I frankly don’t believe it. (I believe it for the bottom 25% or so, who are actually poor; but not half of Americans.) If you have even one credit card that’s not maxed out, you can do this—and frankly even if a card is maxed out, you can probably call them and get them to raise your limit. There is something you could cut out of your spending that would allow you to get back 1% of your annual income. I don’t know what it is, necessarily: Restaurants? Entertainment? Clothes? But I’m not asking you to give a third of your income—I’m asking you to give one penny out of every dollar.

I give considerably more than that; my current donation target is 8% and I’m planning on raising it to 10% or more once I get a high-paying job. I live on a grad student salary which is less than the median personal income in the US. So I know it can be done. But I am very intentionally not asking you to give this much; that would be above and beyond the call of duty. I’m only asking you to give 1%.

Sympathy for the incel

Post 237: May 6 JDN 2458245

If you’ve been following the news surrounding the recent terrorist attack in Toronto, you may have encountered the word “incel” for the first time via articles in NPR, Vox, USA Today, or other sources linking the attack to the incel community.

If this was indeed your first exposure to the concept of “incel”, I think you are getting a distorted picture of their community, which is actually a surprisingly large Internet subculture. Finding out about incel this way would be like finding out about Islam from 9/11. (Actually, I’m fairly sure a lot of Americans did learn that way, which is awful.) The incel community is remarkably large one—hundreds of thousands of members at least, and quite likely millions.

While a large proportion subscribe to a toxic and misogynistic ideology, a similarly large proportion do not; while the ideology has contributed to terrorism and other violence, the vast majority of members of the community are not violent.

Note that the latter sentence is also entirely true of Islam. So if you are sympathetic toward Muslims and want to protect them from abuse and misunderstanding, I maintain that you should want to do the same for incels, and for basically the same reasons.

I want to make something abundantly clear at the outset:

This attack was terrorism. I am in no way excusing or defending the use of terrorism. Once someone crosses the line and starts attacking random civilians, I don’t care what their grievances were; the best response to their behavior involves snipers on rooftops. I frankly don’t even understand the risks police are willing to take in order to capture these people alive—especially considering how trigger-happy they are when it comes to random Black men. If you start shooting (or bombing, or crashing vehicles into) civilians, the police should shoot you. It’s that simple.

I do not want to evoke sympathy for incel-motivated terrorism. I want to evoke sympathy for the hundreds of thousands of incels who would never support terrorism and are now being publicly demonized.

I also want to make it clear that I am not throwing in my hat with the likes of Robin Hanson (who is also well-known as a behavioral economist, blogger, science fiction fan, Less Wrong devotee, and techno-utopian—so I feel a particular need to clarify my differences with him) when he defends something he calls in purposefully cold language “redistribution of sex” (that one is from right after the attack, but he has done this before, in previous blog posts).

Hanson has drunk Robert Nozick‘s Kool-Aid, and thinks that redistribution of wealth via taxation is morally equivalent to theft or even slavery. He is fond of making comparisons between redistribution of wealth and other forms of “redistribution” that obviously would be tantamount to theft and slavery, and asking “What’s the difference?” when in fact the difference is glaringly obvious to everyone but him. He is also fond of saying that “inequality between households within a nation” is a small portion of inequality, and then wondering aloud why we make such a big deal out of it. The answer here is also quite obvious: First of all, it’s not that small a portion of inequality—it’s a third of global income inequality by most measures, it’s increasing while across-nation inequality is decreasing, and the absolute magnitude of within-nation inequality is staggering: there are households with incomes over one million times that of other households within the same nation. (Where are the people who have had sex one hundred billion times, let alone the ones who had sex forty billion times in one year? Because here’s the man who has one hundred billion dollars and made almost $40 billion in one year.) Second, within-nation inequality is extremely simple to fix by public policy; just change a few numbers in the tax code—in fact, just change them back to what they were in the 1950s. Cross-national inequality is much more complicated (though I believe it can be solved, eventually) and some forms of what he’s calling “inequality” (like “inequality across periods of human history” or “inequality of innate talent”) don’t seem amenable to correction under any conceivable circumstances.

Hanson has lots of just-so stories about the evolutionary psychology of why “we don’t care” about cross-national inequality (gee, I thought maybe devoting my career to it was a pretty good signal otherwise?) or inequality in access to sex (which is thousands of times smaller than income inequality), but no clear policy suggestions for how these other forms of inequality could be in any way addressed. This whole idea of “redistribution of sex”; what does that mean, exactly? Legalized or even subsidized prostitution or sex robots would be one thing; I can see pros and cons there at least. But without clarification, it sounds like he’s endorsing the most extremist misogynist incels who think that women should be rightfully compelled to have sex with sexually frustrated men—which would be quite literally state-sanctioned rape. I think really Hanson isn’t all that interested in incels, and just wants to make fun of silly “socialists” who would dare suppose that maybe Jeff Bezos doesn’t need his 120 billion dollars as badly as some of the starving children in Africa could benefit from them, or that maybe having a tax system similar to Sweden or Denmark (which consistently rate as some of the happiest, most prosperous nations on Earth) sounds like a good idea. He takes things that are obviously much worse than redistributive taxation, and compares them to redistributive taxation to make taxation seem worse than it is.

No, I do not support “redistribution of sex”. I might be able to support legalized prostitution, but I’m concerned about the empirical data suggesting that legalized prostitution correlates with increased human sex trafficking. I think I would also support legalized sex robots, but for reasons that will become clear shortly, I strongly suspect they would do little to solve the problem, even if they weren’t ridiculously expensive. Beyond that, I’ve said enough about Hanson; Lawyers, Guns & Money nicely skewers Hanson’s argument, so I’ll not bother with it any further.
Instead, I want to talk about the average incel, one of hundreds of thousands if not millions of men who feels cast aside by society because he is socially awkward and can’t get laid. I want to talk about him because I used to be very much like him (though I never specifically identified as “incel”), and I want to talk about him because I think that he is genuinely suffering and needs help.

There is a moderate wing of the incel community, just as there is a moderate wing of the Muslim community. The moderate wing of incels is represented by sites like Love-Shy.com that try to reach out to people (mostly, but not exclusively young heterosexual men) who are lonely and sexually frustrated and often suffering from social anxiety or other mood disorders. Though they can be casually sexist (particularly when it comes to stereotypes about differences between men and women), they are not virulently misogynistic and they would never support violence. Moreover, they provide a valuable service in offering social support to men who otherwise feel ostracized by society. I disagree with a lot of things these groups say, but they are providing valuable benefits to their members and aren’t hurting anyone else. Taking out your anger against incel terrorists on Love-Shy.com is like painting graffiti on a mosque in response to 9/11 (which, of course, people did).

To some extent, I can even understand the more misogynistic (but still non-violent) wings of the incel community. I don’t want to defend their misogyny, but I can sort of understand where it might come from.

You see, men in our society (and most societies) are taught from a very young age that their moral worth as human beings is based primarily on one thing in particular: Sexual prowess. If you are having a lot of sex with a lot of women, you are a good and worthy man. If you are not, you are broken and defective. (Donald Trump has clearly internalized this narrative quite thoroughly—as have a shockingly large number of his supporters.)

This narrative is so strong and so universal, in fact, that I wouldn’t be surprised if it has a genetic component. It actually makes sense as a matter of evolutionary psychology than males would evolve to think this way; in an evolutionary sense it’s true that a male’s ultimate worth—that is, fitness, the one thing natural selection cares about—is defined by mating with a maximal number of females. But even if it has a genetic component, there is enough variation in this belief that I am confident that social norms can exaggerate or suppress it. One thing I can’t stand about popular accounts of evolutionary psychology is how they leap from “plausible evolutionary account” to “obviously genetic trait” all the way to “therefore impossible to change or compensate for”. My myopia and astigmatism are absolutely genetic; we can point to some of the specific genes. And yet my glasses compensate for them perfectly, and for a bit more money I could instead get LASIK surgery that would correct them permanently. Never think for a moment that “genetic” implies “immutable”.

Because of this powerful narrative, men who are sexually frustrated get treated like garbage by other men and even women. They feel ostracized and degraded. Often, they even feel worthless. If your worth as a human being is defined by how many women you have sex with, and you aren’t having sex with any, it follows that your worth is zero. No wonder, then, that so many become overcome with despair.
The incel community provides an opportunity to escape that despair. If you are told that you are not defective, but instead there is something wrong with society that keeps you down, you no longer have to feel worthless. It’s not that you don’t deserve to have sex, it’s that you’ve been denied what you deserve. When the only other narrative you’ve been given is that you are broken and worthless, I can see why “society is screwing you over” is an appealing counter-narrative. Indeed, it’s not even that far off from the truth.

The moderate wing of the incel community even offers some constructive solutions: They offer support to help men improve themselves, overcome their own social anxiety, and ultimately build fulfilling sexual relationships.

The extremist wing gets this all wrong: Instead of blaming the narrative that sex equals worth, they blame women—often, all women—for somehow colluding to deny them access to the sex they so justly deserve. They often link themselves to the “pick-up artist” community who try to manipulate women into having sex.

And then in the most extreme cases, they may even decide to turn their anger into violence.

But really I don’t think most of these men actually want sex at all, which is part of why I don’t think sex robots would be particularly effective.

Rather, to clarify: They want sex, as most of us do—but that’s not what they need. A simple lack of sex can be compensated reasonably well by pornography and masturbation. (Let me state this outright: Pornography and masturbation are fundamental human rights. Porn is free speech, and masturbation is part of the fundamental right of bodily autonomy. The fact that increased access to porn reduces incidence of sexual assault is nice, but secondary; porn is freedom.) Obviously it would be more satisfying to have a real sexual relationship, but with such substitutes available, a mere lack of sex does not cause suffering.

The need that these men are feeling is companionship. It is love. It is understanding. These are things that can’t be replaced, even partially, by sex robots or Internet porn.

Why do they conflate the two? Again, because society has taught them to do so. This one is clearly cultural, as it varies quite considerably between nations; it’s not nearly as bad in Southern Europe for example.
In American society (and many, but not all others), men are taught three things: First, expression of any emotion except for possibly anger, and especially expression of affection, is inherently erotic. Second, emotional vulnerability jeopardizes masculinity. Third, erotic expression must be only between men and women in a heterosexual relationship.

In principle, it might be enough to simply drop the third proposition: This is essentially what happens in the LGBT community. Gay men still generally suffer from the suspicion that all emotional expression is erotic, but have long-since abandoned their fears of expressing eroticism with other men. Often they’ve also given up on trying to sustain norms of masculinity as well. So gay men can hug each other and cry in front of each other, for example, without breaking norms within the LGBT community; the sexual subtext is often still there, but it’s considered unproblematic. (Gay men typically aren’t even as concerned about sexual infidelity as straight men; over 40% of gay couples are to some degree polyamorous, compared to 5% of straight couples.) It may also be seen as a loss of masculinity, but this too is considered unproblematic in most cases. There is a notable exception, which is the substantial segment of gay men who pride themselves upon hypermasculinity (generally abbreviated “masc”); and indeed, within that subcommunity you often see a lot of the same toxic masculinity norms that are found in the society as large.

That is also what happened in Classical Greece and Rome, I think: These societies were certainly virulently misogynistic in their own way, but their willingness to accept erotic expression between men opened them to accepting certain kinds of emotional expression between men as well, as long as it was not perceived as a threat to masculinity per se.

But when all three of those norms are in place, men find that the only emotional outlet they are even permitted to have while remaining within socially normative masculinity is a woman who is a romantic partner. Family members are allowed certain minimal types of affection—you can hug your mom, as long as you don’t seem too eager—but there is only one person in the world that you are allowed to express genuine emotional vulnerability toward, and that is your girlfriend. If you don’t have one? Get one. If you can’t get one? Well, sorry, pal, you’re just out of luck. Deal with it, or you’re not a real man.

But really what I’d like to get rid of is the first two propositions: Emotional expression should not be considered inherently sexual. Expressing emotional vulnerability should not be taken as a capitulation of your masculinity—and if I really had my druthers, the whole idea of “masculinity” would disappear or become irrelevant. This is the way that society is actually holding incels down: Not by denying them access to sex—the right to refuse sex is also a fundamental human right—but by denying them access to emotional expression and treating them like garbage because they are unable to have sex.

My sense is that what most incels are really feeling is not a dearth of sexual expression; it’s a dearth of emotional expression. But precisely because social norms have forced them into getting the two from the same place, they have conflated them. Further evidence in favor of this proposition? A substantial proportion of men who hire prostitutes spend a lot of the time they paid for simply talking.

I think what most of these men really need is psychotherapy. I’m not saying that to disparage them; I myself am a regular consumer of psychotherapy, which is one of the most cost-effective medical interventions known to humanity. I feel a need to clarify this because there is so much stigma on mental illness that saying someone is mentally ill and needs therapy can be taken as an insult; but I literally mean that a lot of these men are mentally ill and need therapy. Many of them exhibit significant signs of social anxiety, depression, or bipolar disorder.

Even for those who aren’t outright mentally ill, psychotherapy might be able to help them sort out some of these toxic narratives they’ve been fed by society, get them to think a little more carefully about what it means to be a good man and whether the “man” part is even so important. A good therapist could tease out the fabric of their tangled cognition and point out that when they say they want sex, it really sounds like they want self-worth, and when they say they want a girlfriend it really sounds like they want someone to talk to.

Such a solution won’t work on everyone, and it won’t work overnight on anyone. But the incel community did not emerge from a vacuum; it was catalyzed by a great deal of genuine suffering. Remove some of that suffering, and we might just undermine the most dangerous parts of the incel community and prevent at least some future violence.

No one owes sex to anyone. But maybe we do, as a society, owe these men a little more sympathy?

Forget the Doughnut. Meet the Wedge.

Mar 11 JDN 2458189

I just finished reading Kate Raworth’s book Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist; Raworth also has a whole website dedicated to the concept of the Doughnut as a way of rethinking economics.

The book is very easy to read, and manages to be open to a wide audience with only basic economics knowledge without feeling patronizing or condescending. Most of the core ideas are fundamentally sound, though Raworth has a way of making it sound like she is being revolutionary even when most mainstream economists already agree with the core ideas.

For example, she makes it sound like it is some sort of dogma among neoclassical economists that GDP growth must continue at the same pace forever. As I discussed in an earlier post, the idea that growth will slow down is not radical in economics—it is basically taken for granted in the standard neoclassical growth models.

Even the core concept of the Doughnut isn’t all that radical. It’s based on the recognition that economic development is necessary to end poverty, but resources are not unlimited. Then combine that with two key assumptions: GDP growth requires growth in energy consumption, and growth in energy consumption requires increased carbon emissions. Then, the goal should be to stay within a certain range: We want to be high enough to not have poverty, but low enough to not exceed our carbon budget.

Why a doughnut? That’s… actually a really good question. The concept Raworth presents is a fundamentally one-dimensional object; there’s no reason for it to be doughnut-shaped. She could just as well have drawn it on a single continuum, with poverty at one end, unsustainability at the other end, and a sweet spot in the middle. The doughnut shape adds some visual appeal, but no real information.

But the fundamental assumptions that GDP requires energy and energy requires carbon emissions are simply false—especially the second one. Always keep one thing in mind whenever you’re reading something by environmentalists telling you we need to reduce economic output to save the Earth: Nuclear power does not produce carbon emissions.

This is how the environmentalist movement has shot itself—and the world—in the foot for the last 50 years. They continually refuse to admit that nuclear power is the best hope we have for achieving both economic development and ecological sustainability. They have let their political biases cloud their judgment on what is actually best for humanity’s future.

I will give Raworth some credit for not buying into the pipe dream that we can somehow transition rapidly to an entirely solar and wind-based power grid—renewables only produce 6% of world energy (the most they ever have), while nuclear produces 10%. And nuclear power certainly has its downsides, particularly in its high cost of construction. It may in fact be the case that we need to reduce economic output somewhat, particularly in the very richest countries, and if so, we need to find a way to do that without causing social and political collapse.

The Dougnut is a one-dimensional object glorified by a two-dimensional diagram.

So let me present you with an actual two-dimensional object, which I call the Wedge.

On this graph, the orange dots plot actual GDP per capita (at purchasing power parity) on the X axis against actual CO2 emissions per capita on the Y-axis. The green horizonal line is a CO2 emission target of 3 tonnes per person per year based on reports from the International Panel on Climate Change.

Wedge_full

As you can see, most countries are above the green line. That’s bad. We need the whole world below that green line. The countries that are below the line are largely poor countries, with a handful of middle-income countries mixed in.

But it’s the blue diagonal line that really makes this graph significant, what makes it the Wedge. That line uses Switzerland’s level of efficiency to estimate a frontier of what’s possible. Switzerland’s ratio of GDP to CO2 is the best in the world, among countries where the data actually looks reliable. A handful of other countries do better in the data, but for some (Macau) it’s obviously due to poor counting of indirect emissions and for others (Rwanda, Chad, Burundi) we just don’t have good data at all. I think Switzerland’s efficiency level of $12,000 per ton of CO2 is about as good as can be reasonably expected for most countries over the long run.

Our goal should be to move as far right on the graph as we can (toward higher levels of economic development), but always staying inside this Wedge: Above the green line, our CO2 emissions are too high. Below the blue line may not be technologically feasible (though of course it’s worth a try). We want to aim for the point of the wedge, where GDP is as high as possible but emissions are still below safe targets.

Zooming in on the graph gives a better view of the Wedge.

Wedge_zoomed

The point of the Wedge is about $38,000 per person per year. This is not as rich as the US, but it’s definitely within the range of highly-developed countries. This is about the same standard of living as Italy, Spain, or South Korea. In fact, all three of these countries exceed their targets; the closest I was able to find to a country actually hitting the point of the wedge was Latvia, at $27,300 and 3.5 tonnes per person per year. Uruguay also does quite well at $22,400 and 2.2 tonnes per person per year.

Some countries are within the Wedge; a few, like Uruguay, quite close to the point, and many, like Colombia and Bangladesh, that are below and to the left. For these countries, a “stay the course” policy is the way to go: If they keep up what they are doing, they can continue to experience economic growth without exceeding their emission targets.

 

But the most important thing about the graph is not actually the Wedge itself: It’s all the countries outside the Wedge, and where they are outside the Wedge.

There are some countries, like Sweden, France, and Switzerland, that are close to the blue line but still outside the Wedge because they are too far to the right. These are countries for whom “degrowth” policies might actually make sense: They are being as efficient in their use of resources as may be technologically feasible, but are simply producing too much output. They need to find a way to scale back their economies without causing social and political collapse. My suggestion, for what it’s worth, is progressive taxation. In addition to carbon taxes (which are a no-brainer), make income taxes so high that they start actually reducing GDP, and do so without fear, since that’s part of the point; then redistribute all the income as evenly as possible so that lower total income comes with much lower inequality and the eradication of poverty. Most of the country will then be no worse off than they were, so social and political unrest seems unlikely. Call it “socialism” if you like, but I’m not suggesting collectivization of industry or the uprising of the proletariat; I just want everyone to adopt the income tax rates the US had in the 1950s.

But most countries are not even close to the blue line; they are well above it. In all these countries, the goal should not be to reduce economic output, but to increase the carbon efficiency of that output. Increased efficiency has no downside (other than the transition cost to implement it): It makes you better off ecologically without making you worse off economically. Bahrain has about the same GDP per capita as Sweden but produces over five times the per-capita carbon emissions. Simply by copying Sweden they could reduce their emissions by almost 19 tonnes per person per year, which is more than the per-capita output of the US (and we’re hardly models of efficiency)—at absolutely no cost in GDP.

Then there are countries like Mongolia, which produces only $12,500 in GDP but 14.5 tonnes of CO2 per person per year. Mongolia is far above and to the left of the point of the Wedge, meaning that they could both increase their GDP and decrease their emissions by adopting the model of more efficient countries. Telling these countries that “degrowth” is the answer is beyond perverse—cut Mongolia’s GDP by 2/3 and you would throw them into poverty without even bringing carbon emissions down to target.

We don’t need to overthrow capitalism or even give up on GDP growth in general. We need to focus on carbon, carbon, carbon: All economic policy from this point forward should be made with CO2 reduction in mind. If that means reducing GDP, we may have to accept that; but often it won’t. Switching to nuclear power and public transit would dramatically reduce emissions but need have no harmful effect on economic output—in fact, the large investment required could pull a country out of recession.

Don’t worry about the Doughnut. Aim for the point of the Wedge.

Why is redistribution of wealth so difficult to achieve in the US?

Jan 28 JDN 2458147

Income and wealth in equality is much higher in the US than in other First World countries. Within the OECD, only Mexico, Turkey, and Chile have higher income inequality than we do. Over 60% of Americans agree that the distribution of wealth in the US is unfair. Furthermore, the majority of Americans support the use of taxes and transfers to directly redistribute wealth from the rich to the poor.

Why, then, is it so hard to actually get any meaningful wealth redistribution in the United States?

Part of it is surely partisan differences: While about 70% of Democrats favor redistributive taxes, about 70% of Republicans oppose them. So one would not expect a move toward redistribution when Republicans control all three branches of government, and indeed we have seen quite the opposite. (Then again, one would also not expect a government shutdown under one-party rule, and yet that is what we have.)

But even most Republicans say they would like to see a much more equal distribution of wealth than the one we actually have. In fact, when I as an inequality economist look at the distribution of wealth people say they want, it looks a little too equal! Even Denmark and Sweden aren’t that egalitarian! I know more or less how to get from here to Denmark; but from here to “Equalden” looks like an awful long way. So if this is really the distribution of wealth people want, we need to be doing a huge amount of wealth redistribution—but we’re hardly doing any at all.

Indeed, we didn’t actually see all that much redistribution of wealth when Democrats more or less controlled all three branches in the period from 2008-2010. We may have seen a little bit shortly thereafter, and tax policy typically does come with a delay of a year or two. But as you can see in this graph, the Great Recession did more to reduce the top 1% income share than any tax policy changes:

US_top_income_share_1pct

The biggest changes made to our tax code under Obama were actually the handling of capital gains; the increase of the top rate on capital gains from 15% to 20%, plus the 3.8% capital surtax from the Affordable Care Act raised the tax bill for the top 0.1% by tens of billions of dollars. Surprisingly, Trump’s tax cuts don’t actually remove these provisions, though they did dramatically cut the corporate tax rate, which will probably have a similar effect on the income distribution.

To be honest, I’m not as disappointed with Trump’s tax cuts as I thought I would be. Some genuinely good ideas (like the reduction of the mortgage interest deduction, tighter restrictions on carried interest, and increase of the personal standard deduction) and some reasonable but debatable ideas (like cuts to the corporate tax rate, switching to a territorial corporate tax system, limits to deductions on corporate debt payments, removal of the deduction of state taxes, and extensions of 529 savings plans to private primary and secondary schools) were mixed in with the absolutely ludicrous and terrible ideas (like eliminating the Obamacare mandate, doubling the estate tax threshold, cutting the alcohol tax, and allowing offshore drilling in Alaska [One of these things is not like the other ones….]). Some of the terrible ideas, like ending the deduction of student loan interest and tuition waivers, were actually removed in the final version of the bill. Of course, you won’t be surprised when I tell you that the overall US tax system became a lot less progressive as a result of this bill. And even if cutting the corporate tax while raising the capital gains tax is probably a good idea (as I and many economists believe), cutting the corporate tax without raising the capital gains tax probably isn’t.

(An aside: For how much they claim to be “tough on crime”, it’s always kind of baffling to see how often Republicans like to cut alcohol taxes and pollution regulations, which are pretty much the only things that have ever been empirically shown to actually reduce crime. There is some evidence that maybe more policing also helps, but if so, it does so in a far less cost-effective way—indeed, the direct cost of alcohol taxes and pollution taxes is negative. Even if they didn’t work at all, they’d still be worth it just because they raise revenue. I begin to suspect that Republicans don’t actually want to reduce crime, because they know they can use the fear of crime to win votes; they simply want to appear tough on crime, and so they press as hard as they can for more policing and incarceration in the country that already has the highest incarceration rate in the world. This may be a more general phenomenon: While Democrats want to actually solve problems, Republicans want to appear to solve problems while actually exacerbating them, thus insuring their own job security. Compare how Bush kept talking about Osama bin laden while invading Iraq, and Obama actually killed Osama bin Laden. Is this too cynical? Can anything be too cynical in the era of Trump? There were 50,000 Russian bots on Twitter trying to tilt our election! Mueller’s FBI investigation is already implicating several of Trump’s top officials! Everything that seemed like paranoia or cynicism just a few years ago is turning out to be entirely true.)

This is what seems to happen: Year after year, we raise some taxes, then we cut some taxes. Then when raise some taxes, then we cut some taxes. The tax system gets a little more progressive for a few years and inequality begins to fall, and then those changes are removed and inequality begins to rise again. Back and forth and round and round we go.

Is there some way to lock in these tax changes for a longer period of time? The only way I can see would be a change in voter behavior: Keep voting in Democrats to all branches of government consistently for 20 years, and then maybe we would see a serious reduction in income and wealth inequality. Or at least stop voting in Republicans; aside from the Democrats, there are some third parties that would also support redistribution, like the Green Party. And yes, it really is about voting behavior: As prevalent as gerrymandering has become, as terrible as the Electoral College is, as widespread as voter suppression has gotten, Trump only won because 63 million Americans voted for him. Even after everything he’s done, Trumps’ approval rating is still about 39%. As long as there are enough people in this country whose partisan loyalty so strongly outweighs any rational assessment of policy, we are going to continue to see such travesties continue.

It would certainly help if our voting system were fairer, so that third parties had a better chance at taking seats. But it’s also difficult to see how that could happen any time soon. For now, the best I can come up with is trying to show people two things:

First, most Americans favor redistribution of wealth. You’re not alone in wanting that. It’s not some fringe opinion.

Second, there is a real difference between Democrats and Republicans on this issue. The canard “The two parties are the same” is the most untrue it has been in at least twenty years.

I would even understand if there are other issues you consider more important than wealth redistribution. Ecological sustainability is the most defensible—you can’t eat GNP—though that would push you even harder toward the left. Among things that might push you right, I can understand being concerned about higher taxes hurting economic growth, and while I think the view that abortion is murder is ludicrous, given that as your belief I can understand why you would want to prioritize fighting abortion. (If I thought we were murdering millions of babies every year, I’d be pretty mad too! Of course, you should be glad, then, that the US abortion rate has been falling. Right? You know about that, right?)

What I don’t get, however, is people who thought that voting for Donald Trump would help working people. I don’t understand how you can see someone who epitomizes everything that is wrong with the billionaire rentier class and think, “Yeah, he seems like he’s definitely a populist. That guy who was born insanely rich and made even more mind-boggling amounts of money by lying and screwing people over is definitely going to look out for folks like me.”

If I understood that, maybe I would know where to go from here. But people’s political beliefs can be astonishingly intransigent to evidence. Politics is the mind-killer.

Did the World Bank modify its ratings to manipulate the outcome of an election in Chile?

Jan 21 JDN 2458140

(By the way, my birthday is January 19. I can’t believe I’m turning 30.)

This is a fairly obscure news item, so you may have missed it. It should be bigger news than it is.
I can’t fault the New York Times for having its front page focus mainly on the false missile alert that was issued to some people in Hawaii; a false alarm of nuclear attack definitely is the most important thing that could be going on in the world, short of course of actual nuclear war.

CNN, on the other hand, is focused entirely on Trump. When I first wrote this post, they were also focused on Trump, mainly interested in asking whether Trump’s comments about “immigrants from shithole countries” was racist. My answer: Yes, but not because he said the countries were “shitholes”. That was crude, yes, but not altogether inaccurate. Countries like Syria, Afghanistan, and Sudan are, by any objective measure, terrible places. His comments were racist because they attributed that awfulness to the people leaving these countries. But in fact we have a word for immigrants who flee terrible places seeking help and shelter elsewhere: Refugees. We call those people refugees. There are over 10 million refugees in the world today, most of them from Syria.

So anyway, here’s the news item you should have heard about but probably didn’t: The Chief Economist of the World Bank (Paul Romer, who coincidentally I mentioned in my post about DSGE models) has opened an investigation into the possibility that the World Bank’s ratings of economic freedom were intentionally manipulated in order to tilt a Presidential election in Chile.

The worst part is, it may have worked: Chile’s “Doing Business” rating consistently fell under President Michelle Bachelet and rose under President Sebastian Piñera, and Piñera won the most recent election. Was that the reason he won? Who knows? I’m still not entirely clear on how we ended up with President Trump. But it very likely contributed.

The World Bank is supposed to be an impartial institution representing the interests of global economic development. I’m not naive; I recognize that no human institution is perfect, and there will always be competing political and economic interests within any complex institution. Development economists are subject to cognitive biases just like anyone else. If this was the work of a handful of economic analysts (or if Romer turns out to be wrong and the changes in statistical methodology were totally reasonable), so be it; let’s make sure that the bias is corrected and the analysts involved are punished.

But I fear that the rot may run deeper than this. The World Bank is effectively a form of unelected international government. It has been accused of inherent pro-capitalist (or even racist) bias due to the fact that Western governments are overrepresented in its governance, but I actually consider that accusation unfair: There are very good reasons to make sure that your international institutions are managed by liberal democracies, and turns out that most of the world’s liberal democracies are Western. The fact that the US, France, Germany, and the UK make most of the decisions is entirely sensible: Those are in fact the countries we should want making global decisions.

China is not underrepresented, because China is not a democracy and doesn’t deserve to be represented. They are already more represented in the World Bank than they should be, because representing the PRC is not actually representing the interests of the people of China. Russia and Saudi Arabia are undeniably overrepresented. India is underrepresented; they should be complaining. Some African democracies, such as Namibia and Botswana, would also have a legitimate claim to underrepresentation. But I don’t lose any sleep over the fact that Zimbabwe and Iran aren’t getting votes in the World Bank. If and when those countries actually start representing their people, then we can talk about giving them representation in world government. I don’t see how refusing to give international authority to dictators and theocrats constitutes racism or pro-capitalist bias.

That said, there are other reasons to think that the World Bank might actually have some sort of pro-capitalist bias. The World Bank was instrumental in forming the Washington Consensus, which opened free trade and increase economic growth worldwide, but also exposed many poor countries to risk from deregulated financial markets and undermined social safety nets through fiscal austerity programs. They weren’t wrong to want more free trade, and many of their reforms did make sense; but they were at best wildly overconfident in their policy prescriptions, and at worst willing to sacrifice people in poor countries at the altar of bank profits. World poverty has in fact fallen by about half since 1990, and the World Bank has a lot to do with that. But things may have gone faster and smoother if they hadn’t insisted on removing so many financial regulations so quickly without clear forecasts of what would happen. I don’t share Jason Hickel’s pessimistic view that the World Bank’s failures were intentional acts toward an ulterior agenda, but I can see how it begins to look that way when they keep failing the same ways over and over again. (I instead invoke Hanlon’s razor: “Never attribute to malice that which is adequately explained by stupidity.”)

There are also reports of people facing retaliation for criticizing World Bank projects, including those within the World Bank who raise ethical concerns. If this was politically-motivated data manipulation, there may have been people who saw it happening, but were afraid to say anything for fear of being fired or worse.

And Chile in particular has reason to be suspicious. The World Bank suddenly started giving loans to Chile when Augusto Pinochet took power (the CIA denies supporting the coup, by the way—though, given the source, I can understand why one would take that with a grain of salt), and did so under the explicit reasoning that an authoritarian capitalist regime was somehow “more trustworthy” than a democratic socialist regime. Even in the narrow sense of financial creditworthiness that seems difficult to defend; the World Bank knew almost nothing about what kind of government Pinochet was going to create, and in fact despite the so-called “Miracle of Chile”, rapid economic growth in Chile didn’t really happen until the 1990s, after Chile became a democratic capitalist regime.

What I’m really getting at here is that the World Bank has a lot to answer for. I am prepared to believe that most of these actions were honest mistakes or ideological blinders, rather than corruption or cruelty; but even so, when millions of lives are at stake, even honest mistakes aren’t so forgivable. They should be looking for ways to improve their internal governance to make sure that mistakes are caught and corrected quickly. They should be constantly vigilant for biases—either intentional or otherwise—that might seep into their research. Error should be met with immediate correction and public apology; malfeasance should be met with severe punishment.

Perhaps Romer’s investigation actually signals a shift toward such a policy. If so, this is a very good thing. If only we had done this, say, thirty years ago.