Surviving in an ad-supported world

2024-04-212024-04-14 PNRJ cognitive science, core principles, critique of neoclassical economics, public policy ads, advertising, capitalism, charity, Internet, marketing, sales, scam, shopping

Apr 21 JDN 2460423

Advertising is as old as money—perhaps even older. Scams have likewise been a part of human society since time immemorial.

But I think it’s fair to say that recently, since the dawn of the Internet at least, both advertising and scams have been proliferating, far beyond what they used to be.

We live in an ad-supported world.

News sites are full of ads. Search engines are full of ads. Even shopping sites are full of ads now; we literally came here planning to buy something, but that wasn’t good enough for you; you want us to also buy something else. Most of the ads are for legitimate products; but some are for scams. (And then there’s multi-level marketing, which is somewhere in between: technically not a scam.)

We’re so accustomed to getting spam emails, phone calls, and texts full of ads and scams that we just accept it as a part of our lives. But these are not something people had to live with even 50 years ago. This is a new, fresh Hell we have wrought for ourselves as a civilization.

AI promises to make this problem even worse. AI still isn’t very good at doing anything particularly useful; you can’t actually trust it to drive a truck or diagnose an X-ray. (There are people working on this sort of thing, but they haven’t yet succeeded.) But it’s already pretty good at making spam texts and phone calls. It’s already pretty good at catfishing people. AI isn’t smart enough to really help us, but it is smart enough to hurt us, especially those of us who are most vulnerable.

I think that this causes a great deal more damage to our society than is commonly understood.

It’s not just that ads are annoying (though they are), or that they undermine our attention span (though they do), or that they exploit the vulnerable (though they do).

I believe that an ad-supported world is a world where trust goes to die.

When the vast majority of your interactions with other people involve those people trying to get your money, some of them by outright fraud—but none of them really honestly—you have no choice but to ratchet down your sense of trust. It begins to feel as this financial transactions are the only form of interaction there is in the world.

But in fact most people can be trusted, and should be trusted—you are missing out on a great deal of what makes life worth living if you do not know how to trust.

The question is whom you trust. You should trust people you know, people you interact with personally and directly. Even strangers are more trustworthy than any corporation will ever be. And never are corporations more dishonest than when they are sending out ads.

The more the world fills with ads, the less room it has for trust.

Is there any way to stem this tide? Or are we simply doomed to live in the cyberpunk dystopia our forebears warned about, where everything is for sale and all available real estate is used for advertising?

Ads and scams only exist because they are profitable; so our goal should be to make them no longer profitable.

Here is one very simple piece of financial advice that will help protect you. Indeed, I believe it can protect so well, that if everyone followed it consistently, we would stem the tide.

Only give money to people you have sought out yourself.

Only buy things you already knew you wanted.

Yes, of course you must buy things. We live in a capitalist society. You can’t survive without buying things. But this is how buying things should work:

You check your fridge and see you are out of milk. So you put “milk” on your grocery list, you go to the grocery store, you find some milk that looks good, and you buy it.

Or, your car is getting old and expensive to maintain, and you decide you need a new one. You run the numbers on your income and expenses, and come up with a budget for a new car. You go to the dealership, they help you pick out a car that fits your needs and your budget, and you buy it.

Your tennis shoes are getting frayed, and it’s time to replace them. You go online and search for “tennis shoes”, looking up sizes and styles until you find a pair that suits you. You order that pair.

You should be the one to decide that you need a thing, and then you should go out looking for it.

It’s okay to get help searching, or even listen to some sales pitches, as long as the whole thing was your idea from the start.

But if someone calls you, texts you, or emails you, asking for your money for something?

Don’t give them a cent.

Just don’t. Don’t do it. Even if it sounds like a good product. Even if it is a good product. If the product they are selling sounds so great that you decide you actually want to buy it, go look for it on your own. Shop around. If you can, go out of your way to buy it from a competing company.

Your attention is valuable. Don’t reward them for stealing it.

This applies to donations, too. Donation asks aren’t as awful as ads, let alone scams, but they are pretty obnoxious, and they only send those things out because people respond to them. If we all stopped responding, they’d stop sending.

Yes, you absolutely should give money to charity. But you should seek out the charities to donate to. You should use trusted sources (like GiveWell and Charity Navigator) to vet them for their reliability, transparency, and cost-effectiveness.

If you just receive junk mail asking you for donations, feel free to take out any little gifts they gave you (it’s often return address labels, for some reason), and then recycle the rest.

Don’t give to the ones who ask for it. Give to the ones who will use it the best.

Reward the charities that do good, not the charities that advertise well.

This is the rule to follow:

If someone contacts you—if they initiate the contact—refuse to give them any money. Ever.

Does this rule seem too strict? It is quite strict, in fact. It requires you to pass up many seemingly-appealing opportunities, and the more ads there are, the more opportunities you’ll need to pass up.

There may even be a few exceptions; no great harm befalls us if we buy Girl Scout cookies or donate to the ASPCA because the former knocked on our doors and the latter showed us TV ads. (Then again, you could just donate to feminist and animal rights charities without any ads or sales pitches.)

But in general, we live in a society that is absolutely inundated with people accosting us and trying to take our money, and they’re only ever going to stop trying to get our money if we stop giving it to them. They will not stop it out of the goodness of their hearts—no, not even the charities, who at least do have some goodness in their hearts. (And certainly not the scammers, who have none.)

They will only stop if it stops working.

So we need to make it stop working. We need to draw this line.

Trust the people around you, who have earned it. Do not trust anyone who seeks you out asking for money.

Telemarketing calls? Hang up. Spam emails? Delete. Junk mail? Recycle. TV ads? Mute and ignore.

And then, perhaps, future generations won’t have to live in an ad-supported world.

The problem with “human capital”

2023-12-042023-11-26 PNRJ core principles, critique of neoclassical economics, ethics Buzz Aldrin, capital, capitalism, Elon Musk, human capital, ideology, investment, labor, Mauritania, neoliberal, net wealth, net worth, profit, slavery, value, worth

Dec 3 JDN 2460282

By now, human capital is a standard part of the economic jargon lexicon. It has even begun to filter down into society at large. Business executives talk frequently about “investing in their employees”. Politicians describe their education policies as “investing in our children”.

The good news: This gives businesses a reason to train their employees, and governments a reason to support education.

The bad news: This is clearly the wrong reason, and it is inherently dehumanizing.

The notion of human capital means treating human beings as if they were a special case of machinery. It says that a business may own and value many forms of productive capital: Land, factories, vehicles, robots, patents, employees.

But wait: Employees?

Businesses don’t own their employees. They didn’t buy them. They can’t sell them. They couldn’t make more of them in another factory. They can’t recycle them when they are no longer profitable to maintain.

And the problem is precisely that they would if they could.

Indeed, they used to. Slavery pre-dates capitalism by millennia, but the two quite successfully coexisted for hundreds of years. From the dawn of civilization up until all too recently, people literally were capital assets—and we now remember it as one of the greatest horrors human beings have ever inflicted upon one another.

Nor is slavery truly defeated; it has merely been weakened and banished to the shadows. The percentage of the world’s population currently enslaved is as low as it has ever been, but there are still millions of people enslaved. In Mauritania, slavery wasn’t even illegal until 1981, and those laws weren’t strictly enforced until 2007. (I had graduated from high school!) One of the most shocking things about modern slavery is how cheaply human beings are willing to sell other human beings; I have bought sandwiches that cost more than some people have paid for other people.

The notion of “human capital” basically says that slavery is the correct attitude to have toward people. It says that we should value human beings for their usefulness, their productivity, their profitability.

Business executives are quite happy to see the world in that way. It makes the way they have spent their lives seem worthwhile—perhaps even best—while allowing them to turn a blind eye to the suffering they have neglected or even caused along the way.

I’m not saying that most economists believe in slavery; on the contrary, economists led the charge of abolitionism, and the reason we wear the phrase “the dismal science” like a badge is that the accusation was first leveled at us for our skepticism toward slavery.

Rather, I’m saying that jargon is not ethically neutral. The names we use for things have power; they affect how people view the world.

This is why I always endeavor to always speak of net wealth rather than net worth—because a billionare is not worth more than other people. I’m not even sure you should speak of the net worth of Tesla Incorporated; perhaps it would be better to simply speak of its net asset value or market capitalization. But at least Tesla is something you can buy and sell (piece by piece). Elon Musk is not.

Likewise, I think we need a new term for the knowledge, skills, training, and expertise that human beings bring to their work. It is clearly extremely important; in fact in some sense it’s the most important economic asset, as it’s the only one that can substitute for literally all the others—and the one that others can least substitute for.

Human ingenuity can’t substitute for air, you say? Tell that to Buzz Aldrin—or the people who were once babies that breathed liquid for their first months of life. Yes, it’s true, you need something for human ingenuity to work with; but it turns out that with enough ingenuity, you may not need much, or even anything in particular. One day we may manufacture the air, water and food we need to live from pure energy—or we may embody our minds in machines that no longer need those things.

Indeed, it is the expansion of human know-how and technology that has been responsible for the vast majority of economic growth. We may work a little harder than many of our ancestors (depending on which ancestors you have in mind), but we accomplish with that work far more than they ever could have, because we know so many things they did not.

All that capital we have now is the work of that ingenuity: Machines, factories, vehicles—even land, if you consider all the ways that we have intentionally reshaped the landscape.

Perhaps, then, what we really need to do is invert the expression:

Humans are not machines. Machines are embodied ingenuity.

We should not think of human beings as capital. We should think of capital as the creation of human beings.

Marx described capital as “embodied labor”, but that’s really less accurate: What makes a robot a robot is much less about the hours spent building it, than the centuries of scientific advancement needed to understand how to make it in the first place. Indeed, if that robot is made by another robot, no human need ever have done any labor on it at all. And its value comes not from the work put into it, but the work that comes out of it.

Like so much of neoliberal ideology, the notion of human capital seems to treat profit and economic growth as inherent ends in themselves. Human beings only become valued insofar as we advance the will of the almighty dollar. We forget that the whole reason we should care about economic growth in the first place is that it benefits people. Money is the means, not the end; people are the end, not the means.

We should not think in terms of “investing in children”, as if they were an asset that was meant to yield a return. We should think of enriching our children—of building a better world for them to live in.

We should not speak of “investing in employees”, as though they were just another asset. We should instead respect employees and seek to treat them with fairness and justice.

That would still give us plenty of reason to support education and training. But it would also give us a much better outlook on the world and our place in it.

You are worth more than your money or your job.

The economy exists for people, not the reverse.

Don’t ever forget that.

The inequality of factor mobility

2023-09-242023-09-17 PNRJ critique of neoclassical economics, public policy, tribal paradigm #Scandinaviaisbetter, Cambodia, capital, capitalism, China, factor mobility, free trade, GDP, immigration, intelelctual property, Ireland, labor, labor productivity, Norwa, Norway, production, productivity, trade, TRIPS accord, United States

Sep 24 JDN 2460212

I’ve written before about how free trade has brought great benefits, but also great costs. It occurred to me this week that there is a fairly simple reason why free trade has never been as good for the world as the models would suggest: Some factors of production are harder to move than others.

To some extent this is due to policy, especially immigration policy. But it isn’t just that.There are certain inherent limitations that render some kinds of inputs more mobile than others.

Broadly speaking, there are five kinds of inputs to production: Land, labor, capital, goods, and—oft forgotten—ideas.

You can of course parse them differently: Some would subdivide different types of labor or capital, and some things are hard to categorize this way. The same product, such as an oven or a car, can be a good or capital depending on how it’s used. (Or, consider livestock: is that labor, or capital? Or perhaps it’s a good? Oddly, it’s often discussed as land, which just seems absurd.) Maybe ideas can be considered a form of capital. There is a whole literature on human capital, which I increasingly find distasteful, because it seems to imply that economists couldn’t figure out how to value human beings except by treating them as a machine or a financial asset.

But this four-way categorization is particularly useful for what I want to talk about today. Because the rate at which those things move is very different.

Ideas move instantly. It takes literally milliseconds to transmit an idea anywhere in the world. This wasn’t always true; in ancient times ideas didn’t move much faster than people, and it wasn’t until the invention of the telegraph that their transit really became instantaneous. But it is certainly true now; once this post is published, it can be read in a hundred different countries in seconds.

Goods move in hours. Air shipping can take a product just about anywhere in less than a day. Sea shipping is a bit slower, but not radically so. It’s never been easier to move goods all around the world, and this has been the great success of free trade.

Capital moves in weeks. Here it might be useful to subdivide different types of capital: It’s surely faster to move an oven or even a car (the more good-ish sort of capital) than it is to move an entire factory (capital par excellence). But all in all, we can move stuff pretty fast these days. If you want to move your factory to China or Indonesia, you can probably get it done in a matter of weeks or at most months.

Labor moves in months. This one is a bit ironic, since it is surely easier to carry a single human person—or even a hundred human people—than all the equipment necessary to run an entire factory. But moving labor isn’t just a matter of physically carrying people from one place to another. It’s not like tourism, where you just pack and go. Moving labor requires uprooting people from where they used to live and letting them settle in a new place. It takes a surprisingly long time to establish yourself in a new environment—frankly even after two years in Edinburgh I’m not sure I quite managed it. And all the additional restrictions we’ve added involving border crossings and immigration laws and visas only make it that much slower.

Land moves never. This one seems perfectly obvious, but is also often neglected. You can’t pick up a mountain, a lake, a forest, or even a corn field and carry it across the border. (Yes, eventually plate tectonics will move our land around—but that’ll be millions of years.) Basically, land stays put—and so do all the natural environments and ecosystems on that land. Land isn’t as important for production as it once was; before industrialization, we were dependent on the land for almost everything. But we absolutely still are dependent on the land! If all the topsoil in the world suddenly disappeared, the economy wouldn’t simply collapse: the human race would face extinction. Moreover, a lot of fixed infrastructure, while technically capital, is no more mobile than land. We couldn’t much more easily move the Interstate Highway System to China than we could move Denali.

So far I have said nothing particularly novel. Yeah, clearly it’s much easier to move a mathematical theorem (if such a thing can even be said to “move”) than it is to move a factory, and much easier to move a factory than to move a forest. So what?

But now let’s consider the impact this has on free trade.

Ideas can move instantly, so free trade in ideas would allow all the world to instantaneously share all ideas. This isn’t quite what happens—but in the Internet age, we’re remarkably close to it. If anything, the world’s governments seem to be doing their best to stop this from happening: One of our most strictly-enforced trade agreements, the TRIPS Accord, is about stopping ideas from spreading too easily. And as far as I can tell, region-coding on media goes against everything free trade stands for, yet here we are. (Why, it’s almost as if these policies are more about corporate profits than they ever were about freedom!)

Goods and capital can move quickly. This is where we have really felt the biggest effects of free trade: Everything in the US says “made in China” because the capital is moved to China and then the goods are moved back to the US.

But it would honestly have made more sense to move all those workers instead. For all their obvious flaws, US institutions and US infrastructure are clearly superior to those in China. (Indeed, consider this: We may be so aware of the flaws because the US is especially transparent.) So, the most absolutely efficient way to produce all those goods would be to leave the factories in the US, and move the workers from China instead. If free trade were to achieve its greatest promises, this is the sort of thing we would be doing.

Of course that is not what we did. There are various reasons for this: A lot of the people in China would rather not have to leave. The Chinese government would not want them to leave. A lot of people in the US would not want them to come. The US government might not want them to come.

Most of these reasons are ultimately political: People don’t want to live around people who are from a different nation and culture. They don’t consider those people to be deserving of the same rights and status as those of their own country.

It may sound harsh to say it that way, but it’s clearly the truth. If the average American person valued a random Chinese person exactly the same as they valued a random other American person, our immigration policy would look radically different. US immigration is relatively permissive by world standards, and that is a great part of American success. Yet even here there is a very stark divide between the citizen and the immigrant.

There are morally and economically legitimate reasons to regulate immigration. There may even be morally and economically legitimate reasons to value those in your own nation above those in other nations (though I suspect they would not justify the degree that most people do). But the fact remains that in terms of pure efficiency, the best thing to do would obviously be to move all the people to the place where productivity is highest and do everything there.

But wouldn’t moving people there reduce the productivity? Yes. Somewhat. If you actually tried to concentrate the entire world’s population into the US, productivity in the US would surely go down. So, okay, fine; stop moving people to a more productive place when it has ceased to be more productive. What this should do is average out all the world’s labor productivity to the same level—but a much higher level than the current world average, and frankly probably quite close to its current maximum.

Once you consider that moving people and things does have real costs, maybe fully equaling productivity wouldn’t make sense. But it would be close. The differences in productivity across countries would be small.

They are not small.

Labor productivity worldwide varies tremendously. I don’t count Ireland, because that’s Leprechaun Economics (this is really US GDP with accounting tricks, not Irish GDP). So the prize for highest productivity goes to Norway, at $100 per worker hour (#ScandinaviaIsBetter). The US is doing the best among large countries, at an impressive $73 per hour. And at the very bottom of the list, we have places like Bangladesh at $4.79 per hour and Cambodia at $3.43 per hour. So, roughly speaking, there is about a 20-to-1 ratio between the most productive and least productive countries.

I could believe that it’s not worth it to move US production at $73 per hour to Norway to get it up to $100 per hour. (For one thing, where would we fit it all?) But I find it far more dubious that it wouldn’t make sense to move most of Cambodia’s labor to the US. (Even all 16 million people is less than what the US added between 2010 and 2020.) Even given the fact that these Cambodian workers are less healthy and less educated than American workers, they would almost certainly be more productive on the other side of the Pacific, quite likely ten times as productive as they are now. Yet we haven’t moved them, and have no plans to.

That leaves the question of whether we will move our capital to them. We have been doing so in China, and it worked (to a point). Before that, we did it in Korea and Japan, and it worked. Cambodia will probably come along sooner or later. For now, that seems to be the best we can do.

But I still can’t shake the thought that the world is leaving trillions of dollars on the table by refusing to move people. The inequality of factor mobility seems to be a big part of the world’s inequality, period.

We ignorant, incompetent gods

2023-05-212023-05-15 PNRJ book reviews, cognitive science, core principles, ethics, futurism, inequality, tribal paradigm artificial intelligence, capitalism, compatibilism, determinism, ethics, free will, future, gods, history, humanism, hypocrisy, ideology, medieval, morality, racism, religion, science, sexism

May 21 JDN 2460086

A review of Homo Deus

The real problem of humanity is the following: We have Paleolithic emotions, medieval institutions and godlike technology.
E.O. Wilson

Homo Deus is a very good read—and despite its length, a quick one; as you can see, I read it cover to cover in a week. Yuval Noah Harari’s central point is surely correct: Our technology is reaching a threshold where it grants us unprecedented power and forces us to ask what it means to be human.

Biotechnology and artificial intelligence are now advancing so rapidly that advancements in other domains, such as aerospace and nuclear energy, seem positively mundane. Who cares about making flight or electricity a bit cleaner when we will soon have the power to modify ourselves or we’ll all be replaced by machines?

Indeed, we already have technology that would have seemed to ancient people like the powers of gods. We can fly; we can witness or even control events thousands of miles away; we can destroy mountains; we can wipeout entire armies in an instant; we can even travel into outer space.

Harari rightly warns us that our not-so-distant descendants are likely to have powers that we would see as godlike: Immortality, superior intelligence, self-modification, the power to create life.

And where it is scary to think about what they might do with that power if they think the way we do—as ignorant and foolish and tribal as we are—Harari points out that it is equally scary to think about what they might do if they don’t think the way we do—for then, how do they think? If their minds are genetically modified or even artificially created, who will they be? What values will they have, if not ours? Could they be better? What if they’re worse?

It is of course difficult to imagine values better than our own—if we thought those values were better, we’d presumably adopt them. But we should seriously consider the possibility, since presumably most of us believe that our values today are better than what most people’s values were 1000 years ago. If moral progress continues, does it not follow that people’s values will be better still 1000 years from now? Or at least that they could be?

I also think Harari overestimates just how difficult it is to anticipate the future. This may be a useful overcorrection; the world is positively infested with people making overprecise predictions about the future, often selling them for exorbitant fees (note that Harari was quite well-compensated for this book as well!). But our values are not so fundamentally alien from those of our forebears, and we have reason to suspect that our descendants’ values will be no more different from ours.

For instance, do you think that medieval people thought suffering and death were good? I assure you they did not. Nor did they believe that the supreme purpose in life is eating cheese. (They didn’t even believe the Earth was flat!) They did not have the concept of GDP, but they could surely appreciate the value of economic prosperity.

Indeed, our world today looks very much like a medieval peasant’s vision of paradise. Boundless food in endless variety. Near-perfect security against violence. Robust health, free from nearly all infectious disease. Freedom of movement. Representation in government! The land of milk and honey is here; there they are, milk and honey on the shelves at Walmart.

Of course, our paradise comes with caveats: Not least, we are by no means free of toil, but instead have invented whole new kinds of toil they could scarcely have imagined. If anything I would have to guess that coding a robot or recording a video lecture probably isn’t substantially more satisfying than harvesting wheat or smithing a sword; and reconciling receivables and formatting spreadsheets is surely less. Our tasks are physically much easier, but mentally much harder, and it’s not obvious which of those is preferable. And we are so very stressed! It’s honestly bizarre just how stressed we are, given the abudance in which we live; there is no reason for our lives to have stakes so high, and yet somehow they do. It is perhaps this stress and economic precarity that prevents us from feeling such joy as the medieval peasants would have imagined for us.

Of course, we don’t agree with our ancestors on everything. The medieval peasants were surely more religious, more ignorant, more misogynistic, more xenophobic, and more racist than we are. But projecting that trend forward mostly means less ignorance, less misogyny, less racism in the future; it means that future generations should see the world world catch up to what the best of us already believe and strive for—hardly something to fear. The values that I believe are surely not what we as a civilization act upon, and I sorely wish they were. Perhaps someday they will be.

I can even imagine something that I myself would recognize as better than me: Me, but less hypocritical. Strictly vegan rather than lacto-ovo-vegetarian, or at least more consistent about only buying free range organic animal products. More committed to ecological sustainability, more willing to sacrifice the conveniences of plastic and gasoline. Able to truly respect and appreciate all life, even humble insects. (Though perhaps still not mosquitoes; this is war. They kill more of us than any other animal, including us.) Not even casually or accidentally racist or sexist. More courageous, less burnt out and apathetic. I don’t always live up to my own ideals. Perhaps someday someone will.

Harari fears something much darker, that we will be forced to give up on humanist values and replace them with a new techno-religion he calls Dataism, in which the supreme value is efficient data processing. I see very little evidence of this. If it feels like data is worshipped these days, it is only because data is profitable. Amazon and Google constantly seek out ever richer datasets and ever faster processing because that is how they make money. The real subject of worship here is wealth, and that is nothing new. Maybe there are some die-hard techno-utopians out there who long for us all to join the unified oversoul of all optimized data processing, but I’ve never met one, and they are clearly not the majority. (Harari also uses the word ‘religion’ in an annoyingly overbroad sense; he refers to communism, liberalism, and fascism as ‘religions’. Ideologies, surely; but religions?)

Harari in fact seems to think that ideologies are strongly driven by economic structures, so maybe he would even agree that it’s about profit for now, but thinks it will become religion later. But I don’t really see history fitting this pattern all that well. If monotheism is directly tied to the formation of organized bureaucracy and national government, then how did Egypt and Rome last so long with polytheistic pantheons? If atheism is the natural outgrowth of industrialized capitalism, then why are Africa and South America taking so long to get the memo? I do think that economic circumstances can constrain culture and shift what sort of ideas become dominant, including religious ideas; but there clearly isn’t this one-to-one correspondence he imagines. Moreover, there was never Coalism or Oilism aside from the greedy acquisition of these commodities as part of a far more familiar ideology: capitalism.

He also claims that all of science is now, or is close to, following a united paradigm under which everything is a data processing algorithm, which suggests he has not met very many scientists. Our paradigms remain quite varied, thank you; and if they do all have certain features in common, it’s mainly things like rationality, naturalism and empiricism that are more or less inherent to science. It’s not even the case that all cognitive scientists believe in materialism (though it probably should be); there are still dualists out there.

Moreover, when it comes to values, most scientists believe in liberalism. This is especially true if we use Harari’s broad sense (on which mainline conservatives and libertarians are ‘liberal’ because they believe in liberty and human rights), but even in the narrow sense of center-left. We are by no means converging on a paradigm where human life has no value because it’s all just data processing; maybe some scientists believe that, but definitely not most of us. If scientists ran the world, I can’t promise everything would be better, but I can tell you that Bush and Trump would never have been elected and we’d have a much better climate policy in place by now.

I do share many of Harari’s fears of the rise of artificial intelligence. The world is clearly not ready for the massive economic disruption that AI is going to cause all too soon. We still define a person’s worth by their employment, and think of ourselves primarily as collection of skills; but AI is going to make many of those skills obsolete, and may make many of us unemployable. It would behoove us to think in advance about who we truly are and what we truly want before that day comes. I used to think that creative intellectual professions would be relatively secure; ChatGPT and Midjourney changed my mind. Even writers and artists may not be safe much longer.

Harari is so good at sympathetically explaining other views he takes it to a fault. At times it is actually difficult to know whether he himself believes something and wants you to, or if he is just steelmanning someone else’s worldview. There’s a whole section on ‘evolutionary humanism’ where he details a worldview that is at best Nietschean and at worst Nazi, but he makes it sound so seductive. I don’t think it’s what he believes, in part because he has similarly good things to say about liberalism and socialism—but it’s honestly hard to tell.

The weakest part of the book is when Harari talks about free will. Like most people, he just doesn’t get compatibilism. He spends a whole chapter talking about how science ‘proves we have no free will’, and it’s just the same old tired arguments hard determinists have always made.

He talks about how we can make choices based on our desires, but we can’t choose our desires; well of course we can’t! What would that even mean? If you could choose your desires, what would you choose them based on, if not your desires? Your desire-desires? Well, then, can you choose your desire-desires? What about your desire-desire-desires?

What even is this ultimate uncaused freedom that libertarian free will is supposed to consist in? No one seems capable of even defining it. (I’d say Kant got the closest: He defined it as the capacity to act based upon what ought rather than what is. But of course what we believe about ‘ought’ is fundamentally stored in our brains as a particular state, a way things are—so in the end, it’s an ‘is’ we act on after all.)

Maybe before you lament that something doesn’t exist, you should at least be able to describe that thing as a coherent concept? Woe is me, that 2 plus 2 is not equal to 5!

It is true that as our technology advances, manipulating other people’s desires will become more and more feasible. Harari overstates the case on so-called robo-rats; they aren’t really mind-controlled, it’s more like they are rewarded and punished. The rat chooses to go left because she knows you’ll make her feel good if she does; she’s still freely choosing to go left. (Dangling a carrot in front of a horse is fundamentally the same thing—and frankly, paying a wage isn’t all that different.) The day may yet come where stronger forms of control become feasible, and woe betide us when it does. Yet this is no threat to the concept of free will; we already knew that coercion was possible, and mind control is simply a more precise form of coercion.

Harari reports on a lot of interesting findings in neuroscience, which are important for people to know about, but they do not actually show that free will is an illusion. What they do show is that free will is thornier than most people imagine. Our desires are not fully unified; we are often ‘of two minds’ in a surprisingly literal sense. We are often tempted by things we know are wrong. We often aren’t sure what we really want. Every individual is in fact quite divisible; we literally contain multitudes.

We do need a richer account of moral responsibility that can deal with the fact that human beings often feel multiple conflicting desires simultaneously, and often experience events differently than we later go on to remember them. But at the end of the day, human consciousness is mostly unified, our choices are mostly rational, and our basic account of moral responsibility is mostly valid.

I think for now we should perhaps be less worried about what may come in the distant future, what sort of godlike powers our descendants may have—and more worried about what we are doing with the godlike powers we already have. We have the power to feed the world; why aren’t we? We have the power to save millions from disease; why don’t we? I don’t see many people blindly following this ‘Dataism’, but I do see an awful lot blinding following a 19th-century vision of capitalism.

And perhaps if we straighten ourselves out, the future will be in better hands.

The injustice of talent

2022-09-042022-08-23 PNRJ core principles, ethics, inequality, mathematical models, personal capitalism, contest function, depression, disability, distributive justice, effort, egalitarianism, fairness, justice, meritocracy, Michael Phelps, morality, socialism, Steph Curry, success, talent, Usain Bolt

Sep 4 JDN 2459827

Consider the following two principles of distributive justice.

A: People deserve to be rewarded in proportion to what they accomplish.

B: People deserve to be rewarded in proportion to the effort they put in.

Both principles sound pretty reasonable, don’t they? They both seem like sensible notions of fairness, and I think most people would broadly agree with both them.

This is a problem, because they are mutually contradictory. We cannot possibly follow them both.

For, as much as our society would like to pretend otherwise—and I think this contradiction is precisely why our society would like to pretend otherwise—what you accomplish is not simply a function of the effort you put in.

Don’t get me wrong; it is partly a function of the effort you put in. Hard work does contribute to success. But it is neither sufficient, nor strictly necessary.

Rather, success is a function of three factors: Effort, Environment, and Talent.

Effort is the work you yourself put in, and basically everyone agrees you deserve to be rewarded for that.

Environment includes all the outside factors that affect you—including both natural and social environment. Inheritance, illness, and just plain luck are all in here, and there is general, if not universal, agreement that society should make at least some efforts to minimize inequality created by such causes.

And then, there is talent. Talent includes whatever capacities you innately have. It could be strictly genetic, or it could be acquired in childhood or even in the womb. But by the time you are an adult and responsible for your own life, these factors are largely fixed and immutable. This includes things like intelligence, disability, even height. The trillion-dollar question is: How much should we reward talent?

For talent clearly does matter. I will never swim like Michael Phelps, run like Usain Bolt, or shoot hoops like Steph Curry. It doesn’t matter how much effort I put in, how many hours I spend training—I will never reach their level of capability. Never. It’s impossible. I could certainly improve from my current condition; perhaps it would even be good for me to do so. But there are certain hard fundamental constraints imposed by biology that give them more potential in these skills than I will ever have.

Conversely, there are likely things I can do that they will never be able to do, though this is less obvious. Could Michael Phelps never be as good a programmer or as skilled a mathematician as I am? He certainly isn’t now. Maybe, with enough time, enough training, he could be; I honestly don’t know. But I can tell you this: I’m sure it would be harder for him than it was for me. He couldn’t breeze through college-level courses in differential equations and quantum mechanics the way I did. There is something I have that he doesn’t, and I’m pretty sure I was born with it. Call it spatial working memory, or mathematical intuition, or just plain IQ. Whatever it is, math comes easy to me in not so different a way from how swimming comes easy to Michael Phelps. I have talent for math; he has talent for swimming.

Moreover, these are not small differences. It’s not like we all come with basically the same capabilities with a little bit of variation that can be easily washed out by effort. We’d like to believe that—we have all sorts of cultural tropes that try to inculcate that belief in us—but it’s obviously not true. The vast majority of quantum physicists are people born with high IQ. The vast majority of pro athletes are people born with physical prowess. The vast majority of movie stars are people born with pretty faces. For many types of jobs, the determining factor seems to be talent.

This isn’t too surprising, actually—even if effort matters a lot, we would still expect talent to show up as the determining factor much of the time.

Let’s go back to that contest function model I used to analyze the job market awhile back (the one that suggests we spend way too much time and money in the hiring process). This time let’s focus on the perspective of the employees themselves.

Each employee has a level of talent, h. Employee X has talent h_x and exerts effort x, producing output of a quality that is the product of these: h_x x. Similarly, employee Z has talent h_z and exerts effort z, producing output h_z z.

Then, there’s a certain amount of luck that factors in. The most successful output isn’t necessarily the best, or maybe what should have been the best wasn’t because some random circumstance prevailed. But we’ll say that the probability an individual succeeds is proportional to the quality of their output.

So the probability that employee X succeeds is: h_x x / ( h_x x + h_z z)

I’ll skip the algebra this time (if you’re interested you can look back at that previous post), but to make a long story short, in Nash equilibrium the two employees will exert exactly the same amount of effort.

Then, which one succeeds will be entirely determined by talent; because x = z, the probability that X succeeds is h_x/ ( h_x + h_z).

It’s not that effort doesn’t matter—it absolutely does matter, and in fact in this model, with zero effort you get zero output (which isn’t necessarily the case in real life). It’s that in equilibrium, everyone is exerting the same amount of effort; so what determines who wins is innate talent. And I gotta say, that sounds an awful lot like how professional sports works. It’s less clear whether it applies to quantum physicists.

But maybe we don’t really exert the same amount of effort! This is true. Indeed, it seems like actually effort is easier for people with higher talent—that the same hour spent running on a track is easier for Usain Bolt than for me, and the same hour studying calculus is easier for me than it would be for Usain Bolt. So in the end our equilibrium effort isn’t the same—but rather than compensating, this effect only serves to exaggerate the difference in innate talent between us.

It’s simple enough to generalize the model to allow for such a thing. For instance, I could say that the cost of producing a unit of effort is inversely proportional to your talent; then instead of h_x / ( h_x + h_z), in equilibrium the probability of X succeeding would become h_x² / ( h_x² + h_z²). The equilibrium effort would also be different, with x > z if h_x > h_z.

Once we acknowledge that talent is genuinely important, we face an ethical problem. Do we want to reward people for their accomplishment (A), or for their effort (B)? There are good cases to be made for each.

Rewarding for accomplishment, which we might call meritocracy,will tend to, well, maximize accomplishment. We’ll get the best basketball players playing basketball, the best surgeons doing surgery. Moreover, accomplishment is often quite easy to measure, even when effort isn’t.

Rewarding for effort, which we might call egalitarianism, will give people the most control over their lives, and might well feel the most fair. Those who succeed will be precisely those who work hard, even if they do things they are objectively bad at. Even people who are born with very little talent will still be able to make a living by working hard. And it will ensure that people do work hard, which meritocracy can actually fail at: If you are extremely talented, you don’t really need to work hard because you just automatically succeed.

Capitalism, as an economic system, is very good at rewarding accomplishment. I think part of what makes socialism appealing to so many people is that it tries to reward effort instead. (Is it very good at that? Not so clear.)

The more extreme differences are actually in terms of disability. There’s a certain baseline level of activities that most people are capable of, which we think of as “normal”: most people can talk; most people can run, if not necessarily very fast; most people can throw a ball, if not pitch a proper curveball. But some people can’t throw. Some people can’t run. Some people can’t even talk. It’s not that they are bad at it; it’s that they are literally not capable of it. No amount of effort could have made Stephen Hawking into a baseball player—not even a bad one.

It’s these cases when I think egalitarianism becomes most appealing: It just seems deeply unfair that people with severe disabilities should have to suffer in poverty. Even if they really can’t do much productive work on their own, it just seems wrong not to help them, at least enough that they can get by. But capitalism by itself absolutely would not do that—if you aren’t making a profit for the company, they’re not going to keep you employed. So we need some kind of social safety net to help such people. And it turns out that such people are quite numerous, and our current system is really not adequate to help them.

But meritocracy has its pull as well. Especially when the job is really important—like surgery, not so much basketball—we really want the highest quality work. It’s not so important whether the neurosurgeon who removes your tumor worked really hard at it or found it a breeze; what we care about is getting that tumor out.

Where does this leave us?

I think we have no choice but to compromise, on both principles. We will reward both effort and accomplishment, to greater or lesser degree—perhaps varying based on circumstances. We will never be able to entirely reward accomplishment or entirely reward effort.

This is more or less what we already do in practice, so why worry about it? Well, because we don’t like to admit that it’s what we do in practice, and a lot of problems seem to stem from that.

We have people acting like billionaires are such brilliant, hard-working people just because they’re rich—because our society rewards effort, right? So they couldn’t be so successful if they didn’t work so hard, right? Right?

Conversely, we have people who denigrate the poor as lazy and stupid just because they are poor. Because it couldn’t possibly be that their circumstances were worse than yours? Or hey, even if they are genuinely less talented than you—do less talented people deserve to be homeless and starving?

We tell kids from a young age, “You can be whatever you want to be”, and “Work hard and you’ll succeed”; and these things simply aren’t true. There are limitations on what you can achieve through effort—limitations imposed by your environment, and limitations imposed by your innate talents.

I’m not saying we should crush children’s dreams; I’m saying we should help them to build more realistic dreams, dreams that can actually be achieved in the real world. And then, when they grow up, they either will actually succeed, or when they don’t, at least they won’t hate themselves for failing to live up to what you told them they’d be able to do.

If you were wondering why Millennials are so depressed, that’s clearly a big part of it: We were told we could be and do whatever we wanted if we worked hard enough, and then that didn’t happen; and we had so internalized what we were told that we thought it had to be our fault that we failed. We didn’t try hard enough. We weren’t good enough. I have spent years feeling this way—on some level I do still feel this way—and it was not because adults tried to crush my dreams when I was a child, but on the contrary because they didn’t do anything to temper them. They never told me that life is hard, and people fail, and that I would probably fail at my most ambitious goals—and it wouldn’t be my fault, and it would still turn out okay.

That’s really it, I think: They never told me that it’s okay not to be wildly successful. They never told me that I’d still be good enough even if I never had any great world-class accomplishments. Instead, they kept feeding me the lie that I would have great world-class accomplishments; and then, when I didn’t, I felt like a failure and I hated myself. I think my own experience may be particularly extreme in this regard, but I know a lot of other people in my generation who had similar experiences, especially those who were also considered “gifted” as children. And we are all now suffering from depression, anxiety, and Impostor Syndrome.

All because nobody wanted to admit that talent, effort, and success are not the same thing.

Capitalism can be fair

2021-08-222021-08-15 PNRJ core principles, ethics capital, capitalism, fairness, Marxism, profit, socialism, surplus

Aug 22 JDN 2459449

There are certainly extreme right-wing libertarians who seem to think that capitalism is inherently fair, or that “fairness” is meaningless and (some very carefully defined notion of) liberty is the only moral standard. I am not one of them. I agree that many of the actual practices of modern capitalism as we know it are unfair, particularly in the treatment of low-skill workers.

But lately I’ve been seeing a weirdly frequent left-wing take—Marxist take, really—that goes to the opposite extreme, saying that capitalism is inherently unfair, that the mere fact that capital owners ever get any profit on anything is proof that the system is exploitative and unjust and must be eliminated.

So I decided it would be worthwhile to provide a brief illustration of how, at least in the best circumstances, a capitalist system of labor can in fact be fair and just.

The argument that capitalism is inherently unjust seems to be based on the notion that profit means “workers are paid less than their labor is worth”. I think that the reason this argument is so insidious is that it’s true in one sense—but not true in another. Workers are indeed paid less than the total surplus of their actual output—but, crucially, they are not paid less than what the surplus of their output would have been had the capital owner not provided capital and coordination.

Suppose that we are making some sort of product. To make it more concrete, let’s say shirts. You can make a shirt by hand, but it’s a lot of work, and it takes a long time. Suppose that you, working on your own by hand, can make 1 shirt per day. You can sell each shirt for $10, so you get $10 per day.

Then, suppose that someone comes along who owns looms and sewing machines. They gather you and several other shirt-makers and offer to let you use their machines, in exchange for some of the revenue. With the aid of 9 other workers and the machines, you are able to make 30 shirts per day. You can still sell each shirt for $10, so now there is total revenue of $300.

Whether or not this is fair depends on precisely the bargain that was struck with the owner of the machines. Suppose that he asked for 40% of the revenue. Then the 10 workers including yourself would get (0.60)($300) = $180 to split, presumably evenly, and each get $18 per day. This seems fair; you’re clearly better off than you were making shirts by yourself. The capital owner then gets (0.40)($300) = $120, which is more than each of you, but not by a ridiculous amount; and he probably has costs to deal with in maintaining those machines.

But suppose instead the owner had demanded 80% of the revenue; then you would have to split (0.20)($300) = $60 between you, and each would only get $6 per day. The capital owner would then get (0.80)($300) = $240, 40 times as much as each of you.

Or perhaps instead of a revenue-sharing agreement, the owner offers to pay you a wage. If that wage is $18 per day, it seems fair. If it is $6 per day, it seems obviously unfair.

If this owner is the only employer, then he is competing only with working alone. So we would expect him to offer a wage of $10 per day, or maybe slightly more since working with the machines may be harder or more unpleasant than working by hand.

But if there are many employers, then he is now competing with those employers as well. If he offers $10, someone else might offer $12, and a third might offer $15. Competition should drive the system toward an equilibrium where workers are getting paid their marginal value product—in other words, the wage for one hour of work should equal the additional value added by one more hour of work.

In the case that seems fair, where workers are getting more money than they would have on their own, are they getting paid “less than the value of their labor”? In one sense, yes; the total surplus is not going all to the workers, but is being shared with the owner of the machines. But the more important sense is whether they’d be better off quitting and working on their own—and they obviously would not be.

What value does the capital owner provide? Well, the capital, of course. It’s their property and they are letting other people use it. Also, they incur costs to maintain it.

Of course, it matters how the capital owner obtained that capital. If they are an inventor who made it themselves, it seems obviously just that they should own it. If they inherited it or got lucky on the stock market, it isn’t something they deserve in a deep sense, but it’s reasonable to say they are entitled to it. But if the only reason they have the capital is by theft, fraud, or exploitation, then obviously they don’t deserve it. In practice, there are very few of the first category, a huge number of the second, and all too many of the third. Yet this is not inherent to the capitalist work arrangement. Many capital owners don’t deserve what they own; but those who do have a right to make a profit letting other people use their property.

There are of course many additional complexities that arise in the real world, in terms of market power, bargaining, asymmetric information, externalities, and so on. I freely admit that in practice, capitalism is often unfair. But I think it’s worth pointing out that the mere existence of profit from capital ownership is not inherently unjust, and in fact by organizing our economy around it we have managed to achieve unprecedented prosperity.

Escaping the wrong side of the Yerkes-Dodson curve

2021-07-252021-07-18 PNRJ cognitive science, heuristics and biases, personal availability heuristic, capitalism, competition, happiness, personal, stress, work, Yerkes-Dodson

Jul 25 JDN 2459421

I’ve been under a great deal of stress lately. Somehow I ended up needing to finish my dissertation, get married, and move overseas to start a new job all during the same few months—during a global pandemic.

A little bit of stress is useful, but too much can be very harmful. On complicated tasks (basically anything that involves planning or careful thought), increased stress will increase performance up to a point, and then decrease it after that point. This phenomenon is known as the Yerkes-Dodson law.

The Yerkes-Dodson curve very closely resembles the Laffer curve, which shows that since extremely low tax rates raise little revenue (obviously), and extremely high tax rates also raise very little revenue (because they cause so much damage to the economy), the tax rate that maximizes government revenue is actually somewhere in the middle. There is a revenue-maximizing tax rate (usually estimated to be about 70%).

Instead of a revenue-maximizing tax rate, the Yerkes-Dodson law says that there is a performance-maximizing stress level. You don’t want to have zero stress, because that means you don’t care and won’t put in any effort. But if your stress level gets too high, you lose your ability to focus and your performance suffers.

Since stress (like taxes) comes with a cost, you may not even want to be at the maximum point. Performance isn’t everything; you might be happier choosing a lower level of performance in order to reduce your own stress.

But once thing is certain: You do not want to be to the right of that maximum. Then you are paying the cost of not only increased stress, but also reduced performance.

And yet I think many of us spent a great deal of our time on the wrong side of the Yerkes-Dodson curve. I certainly feel like I’ve been there for quite awhile now—most of grad school, really, and definitely this past month when suddenly I found out I’d gotten an offer to work in Edinburgh.

My current circumstances are rather exceptional, but I think the general pattern of being on the wrong side of the Yerkes-Dodson curve is not.

Over 80% of Americans report work-related stress, and the US economy loses about half a trillion dollars a year in costs related to stress.

The World Health Organization lists “work-related stress” as one of its top concerns. Over 70% of people in a cross-section of countries report physical symptoms related to stress, a rate which has significantly increased since before the pandemic.

The pandemic is clearly a contributing factor here, but even without it, there seems to be an awful lot of stress in the world. Even back in 2018, over half of Americans were reporting high levels of stress. Why?

For once, I think it’s actually fair to blame capitalism.

One thing capitalism is exceptionally good at is providing strong incentives for work. This is often a good thing: It means we get a lot of work done, so employment is high, productivity is high, GDP is high. But it comes with some important downsides, and an excessive level of stress is one of them.

But this can’t be the whole story, because if markets were incentivizing us to produce as much as possible, that ought to put us near the maximum of the Yerkes-Dodson curve—but it shouldn’t put us beyond it. Maximizing productivity might not be what makes us happiest—but many of us are currently so stressed that we aren’t even maximizing productivity.

I think the problem is that competition itself is stressful. In a capitalist economy, we aren’t simply incentivized to do things well—we are incentivized to do them better than everyone else. Often quite small differences in performance can lead to large differences in outcome, much like how a few seconds can make the difference between an Olympic gold medal and an Olympic “also ran”.

An optimally productive economy would be one that incentivizes you to perform at whatever level maximizes your own long-term capability. It wouldn’t be based on competition, because competition depends too much on what other people are capable of. If you are not especially talented, competition will cause you great stress as you try to compete with people more talented than you. If you happen to be exceptionally talented, competition won’t provide enough incentive!

Here’s a very simple model for you. Your total performance p is a function of two components, your innate ability aand your effort e. In fact let’s just say it’s a sum of the two: p = a + e

People are randomly assigned their level of capability from some probability distribution, and then they choose their effort. For the very simplest case, let’s just say there are two people, and it turns out that person 1 has less innate ability than person 2, so a₁ < a₂.

There is also a certain amount of inherent luck in any competition. As it says in Ecclesiastes (by far the best book of the Old Testament), “The race is not to the swift or the battle to the strong, nor does food come to the wise or wealth to the brilliant or favor to the learned; but time and chance happen to them all.” So as usual I’ll model this as a contest function, where your probability of winning depends on your total performance, but it’s not a sure thing.

Let’s assume that the value of winning and cost of effort are the same across different people. (It would be simple to remove this assumption, but it wouldn’t change much in the results.) The value of winning I’ll call y, and I will normalize the cost of effort to 1.

Then this is each person’s expected payoff u_i:

u_i = (a_i₊e_i)/(a₁+e₁+a₂+ e₂) V – e_i

You choose effort, not ability, so maximize in terms of e_i:

(a₂ + e₂) V = (a₁ +e₁+a₂+ e₂)² = (a₁ + e₁) V

a₁ + e₁= a₂ + e₂

p₁ = p₂

In equilibrium, both people will produce exactly the same level of performance—but one of them will be contributing more effort to compensate for their lesser innate ability.

I’ve definitely had this experience in both directions: Effortlessly acing math tests that I knew other people barely passed despite hours of studying, and running until I could barely breathe to keep up with other people who barely seemed winded. Clearly I had too little incentive in math class and too much in gym class—and competition was obviously the culprit.

If you vary the cost of effort between people, or make it not linear, you can make the two not exactly equal; but the overall pattern will remain that the person who has more ability will put in less effort because they can win anyway.

Yet presumably the amount of effort we want to incentivize isn’t less for those who are more talented. If anything, it may be more: Since an hour of work produces more when done by the more talented person, if the cost to them is the same, then the net benefit of that hour of work is higher than the same hour of work by someone less talented.

In a large population, there are almost certainly many people whose talents are similar to your own—but there are also almost certainly many below you and many above you as well. Unless you are properly matched with those of similar talent, competition will systematically lead to some people being pressured to work too hard and others not pressured enough.

But if we’re all stressed, where are the people not pressured enough? We see them on TV. They are celebrities and athletes and billionaires—people who got lucky enough, either genetically (actors who were born pretty, athletes who were born with more efficient muscles) or environmentally (inherited wealth and prestige), to not have to work as hard as the rest of us in order to succeed. Indeed, we are constantly bombarded with images of these fantastically lucky people, and by the availability heuristic our brains come to assume that they are far more plentiful than they actually are.

This dramatically exacerbates the harms of competition, because we come to feel that we are competing specifically with the people who were handed the world on a silver platter. Born without the innate advantages of beauty or endurance or inheritance, there’s basically no chance we could ever measure up; and thus we feel utterly inadequate unless we are constantly working as hard as we possibly can, trying to catch up in a race in which we always fall further and further behind.

How can we break out of this terrible cycle? Well, we could try to replace capitalism with something like the automated luxury communism of Star Trek; but this seems like a very difficult and long-term solution. Indeed it might well take us a few hundred years as Roddenberry predicted.

In the shorter term, we may not be able to fix the economic problem, but there is much we can do to fix the psychological problem.

By reflecting on the full breadth of human experience, not only here and now, but throughout history and around the world, you can come to realize that you—yes, you, if you’re reading this—are in fact among the relatively fortunate. If you have a roof over your head, food on your table, clean water from your tap, and ibuprofen in your medicine cabinet, you are far more fortunate than the average person in Senegal today; your television, car, computer, and smartphone are things that would be the envy even of kings just a few centuries ago. (Though ironically enough that person in Senegal likely has a smartphone, or at least a cell phone!)

Likewise, you can reflect upon the fact that while you are likely not among the world’s most very most talented individuals in any particular field, there is probably something you are much better at than most people. (A Fermi estimate suggests I’m probably in the top 250 behavioral economists in the world. That’s probably not enough for a Nobel, but it does seem to be enough to get a job at the University of Edinburgh.) There are certainly many people who are less good at many things than you are, and if you must think of yourself as competing, consider that you’re also competing with them.

Yet perhaps the best psychological solution is to learn not to think of yourself as competing at all. So much as you can afford to do so, try to live your life as if you were already living in a world that rewards you for making the best of your own capabilities. Try to live your life doing what you really think is the best use of your time—not your corporate overlords. Yes, of course, we must do what we need to in order to survive, and not just survive, but indeed remain physically and mentally healthy—but this is far less than most First World people realize. Though many may try to threaten you with homelessness or even starvation in order to exploit you and make you work harder, the truth is that very few people in First World countries actually end up that way (it couldbe brought to zero, if our public policy were better), and you’re not likely to be among them. “Starving artists” are typically a good deal happier than the general population—because they’re not actually starving, they’ve just removed themselves from the soul-crushing treadmill of trying to impress the neighbors with manicured lawns and fancy SUVs.

Capitalism isn’t bad for the environment

2020-09-272020-09-20 PNRJ public policy authoritarianism, capitalism, carbon emissions, climate change, democracy, environment, environmentalism, Scandinaviaisbetter, social democracy, socialism

Sep 27 JDN 2459120

There are certainly many legitimate criticisms to be made against capitalism, particularly unregulated, unfettered capitalism. But many of the criticisms the left likes to offer against capitalism really don’t hold water, and one of them is the assertion that capitalism is bad for the environment.

The world’s most polluted cities are largely in India and China. In fact, as China has opened up to world markets and become more capitalist, it has become more ecologically efficient, in the sense of producing far less greenhouse emission per dollar of GDP.

Indeed, the entire world has been getting more efficient on this metric: We now produce about twice as much GDP per ton of CO2 emitted than we did in 1990.

Pollution in the Soviet Union was horrific; even today, many of the world’s most polluted places are in the former Soviet Union. Much of the ecological damage was hidden while the USSR was still in place, but once it collapsed, the damage that Soviet policy had done to the environment became obvious.

If you sort countries by their per-capita greenhouse emissions, the worst offenders are Kuwait, Brunei, Qatar, Oman, and Bahrain—small, oil-producing countries in the Middle East. The US and Canada also do pretty badly, and are certainly quite capitalist; but so do Libya, Kazakhstan, and Turkmenistan, not exactly known for their devotion to free markets.

I think this in fact too generous to socialist countries. We really should adjust for GDP per capita. It’s easy to produce zero pollution: Just let everyone starve to death. And if that sounds extreme, consider that millions of people literally did starve to death under Stalin and Mao. It’s a fair question whether we really need the high standard of living we have become accustomed to in the First World; perhaps we could afford to cut back. But clearly some kind of adjustment is necessary: A country is obviously doing better if they can produce more GDP for the same carbon emissions.

Therefore, let’s see what happens when we rank countries by kilograms of CO2 emissions per dollar of GDP. The highest polluters are then the Central African Republic, Belize, Libya, Gambia, Eritrea, Niger, Grenada, Palau… not a First World country among them. CAR produces a horrifying 126 tons of CO2 per $10,000 of GDP. The US is near the world average at about 3.0 tons of CO2 per $10,000 of GDP, and as usual Scandinavia Is Better with about 1 ton of CO2 per $10,000 of GDP. China does worse than the US, at about 4.0 tons of CO2 per $10,000 of GDP. Russia and most of the former Soviet Union does substantially worse, generally around 5.0 tons of CO2 per $10,000 of GDP.

Then again, these figures use production-based accounting; perhaps we should be using consumption-based accounting, so that First World countries can’t simply offshore their emissions. The data is less complete and probably less reliable, but it’s still pretty clear that the highest per-capita emissions are in small oil-exporting countries in the Middle East, like Qatar and Brunei.

Moreover, on consumption-based accounting, the highest emissions per dollar of GDP are in Mongolia, Namibia, Ukraine, South Africa, and Kazakhstan. The US actually does better at 2.6 tons of CO2 per $10,000 of GDP, while Scandinavia is still at about 1 ton of CO2 per $10,000 of GDP. China closes the gap, but still does worse than the US, at about 3.0 tons of CO2 per $10,000 of GDP.

No matter how you slice it, the US just isn’t the world’s worst polluter, and we only look like we are in the top 10 because we are so fabulously rich. If it were generally true that higher wealth always comes with proportionally higher pollution, then perhaps capitalism could be blamed for producing all this pollution—though then we’d have a difficult tradeoff to make between reducing pollution and increasing wealth. But in fact there is wide variation in the ecological efficiency of an economy; nuclearize your energy grid like France did and you can cut your emissions in half. Do whatever Scandanavia does and you can do even better.

Now I suppose it would be fair to say that France and Scandinavia are less capitalist than the United States; they certainly have much stronger social welfare states (including universal healthcare) and more redistribution of wealth. But they’re still quite capitalist. They have robust free-market economies, thousands of for-profit corporations, and plenty of billionaires. France has 41 billionaires among 65 million people, just a slightly lower rate of billionaires-per-capita than the US. Sweden has 31 billionaires among 10 million people, a substantially higher rate of billionaires-per-capita than the US. It may be that the optimal level of capitalism for environmental sustainability is not 100%; but it doesn’t seem to be anywhere near 0% either. National Review overstates the case a little (I mean, they are National Review), but I don’t think they are wrong when they say that socialism is bad for the environment.

Indeed, it seems quite important that France and Scandinavia are democratic (by some measures the most democratic places in the world), while China and Russia are authoritarian. It’s not hard to see why democracy would be good for the environment: It solves the Tragedy of the Commons by including the interests of everyone who is impacted by pollution. Policies that produce really catastrophic pollution tend to get leaders voted out.

The rather surprising result is that empirically there doesn’t appear to be a strong effect of democracy on environmental sustainability either. There’s some evidence that it helps, but it seems to depend upon a lot of factors, and on some measures democracy may actually make matters worse. I honestly don’t have a good explanation for this; I would have expected a really strong benefit, since the theoretical argument is quite strong: Voters have strong reasons to want clean air and water, while dictators don’t (especially water, which they can easily pay to import).

Perhaps capitalism is bad for the environment, but democracy is good, and the two sort of cancel out? But there isn’t even much reason theoretically to think that capitalism would be worse for the environment. Private ownership yields private stewardship, and poisoning your employees and customers is not good business. Yes, some forms of pollution spread out far enough that they become a Tragedy of the Commons; but it’s actually hard to find clear examples where pollution spreads far enough to be a Tragedy of the Commons for a corporation but doesn’t spread far enough to be a Tragedy of the Commons for a whole country. Some multinational corporations are large enough that they probably have more reason to care about the environment than many small countries—Walmart’s total revenue is nearly 15 times higher than Brunei’s total GDP. Indeed, one of the few upsides of concentrated oligopolies is that they are less likely to pollute!

I can understand why it’s tempting to blame capitalism for the degradation of the environment. Indeed, if the argument could stick, it would be a really compelling reason to dismantle capitalism—we simply cannot continue to degrade the environment at the rate we have been for much longer. But empirically it just doesn’t work; whatever determines a country’s ecological sustainability or lack thereof, it’s something subtler than capitalism versus socialism—or even democracy versus authoritarianism.

Failures of democracy or capitalism?

2020-05-242020-05-18 PNRJ core principles, current events, public policy authoritarianism, capitalism, democracy, Donald Trump, slavery, socialism

May 24 JDN 2458992

Blaming capitalism for the world’s woes is a common habit of the left wing in general, but it seems to have greatly increased in frequency and volume in the era of Trump. I don’t want to say that this is always entirely wrong; capitalism in its purest form certainly does have genuine flaws that need to be addressed (and that’s why we have taxes, regulations, the welfare state, etc.).

But I’ve noticed that a lot of the things people complain about most really don’t seem to have a lot to do with capitalism.

For instance: Forced labor in Third World countries? First of all, that’s been around for as long as civilization has existed, and quite probably longer. It’s certainly not new to capitalism. Second, the freedom to choose who you transact with—including who employs you—is a fundamental principle of capitalism. In that sense, forced labor is the very opposite of capitalism; it spits upon everything capitalism stands for.

It’s certainly the case that many multinational corporations are implicated in slavery, even today—usually through complex networks of subsidiaries and supply chains. But it’s not clear to me that socialism is any kind of solution to this problem; nationalized industries are perfectly capable of enslaving people. (You may have heard of a place called the Gulag?)

Or what about corporate welfare, the trillions of dollars in subsidies we give to the oil and coal industries? Well, that’s not very capitalist either; capitalism is supposed to be equal competition in a free market, not the government supporting particular businesses or industries at the expense of others. And it’s not like socialist Venezuela has any lack of oil subsidies—indeed it’s not quite clear to me where the government ends and PDVSA begins. We need a word for such policies that are neither capitalist nor socialist; perhaps “corporatist”?

And really, the things that worry me about America today are not flaws in our markets; they are flaws in our government. We are not witnessing a catastrophic failure of capitalism; we are witnessing a catastrophic failure of democracy.

As if the Electoral College weren’t bad enough (both Al Gore and Hillary Clinton should have won the Presidency, by any sensible notion of democratic voting!), we are now seeing extreme levels of voter suppression, including refusing to accept mail-in ballots in the middle of a historic pandemic. This looks disturbingly like how democracy has collapsed in other countries, such as Turkey and Hungary.

The first-past-the-post plurality vote is already basically the worst possible voting system that can still technically be considered democratic. But it is rendered far worse by a defective primary system, which was even more of a shambles this year than usual. The number of errors in the Iowa caucus was ridiculous, and the primaries as a whole suffered from so many flaws that many voters now consider them illegitimate.

And of course there’s Donald Trump himself. He is certainly a capitalist (though he’s not exactly a free-trade neoliberal; he’s honestly more like a mercantilist). But what really makes him dangerous is not his free-market ideology, which is basically consistent with the US right wing going back at least 30 years; it’s his willingness to flaunt basic norms of democracy and surround himself with corrupt, incompetent sycophants. Republicans have been cutting the upper tax brackets and subsidizing oil companies for quite some time now; but it’s only recently that they have so blatantly disregarded the guardrails of democracy.

I’m not saying it’s wrong to criticize capitalism. There certainly are things worth criticizing, particularly about the most extreme free-market ideology. But it’s important to be clear about where exactly problems lie if you want to fix them—and right now we desperately need to fix them. America is in a crisis right now, something much bigger than just this pandemic. We are not in this crisis because of an excessive amount of deregulation or tax-cutting; we are in this crisis because of an excessive amount of corruption, incompetence, and authoritarianism. We wouldn’t fix this by nationalizing industries or establishing worker co-ops. We need to fix it first by voting out those responsible, and second by reforming our system so that they won’t get back in.

Just how rich is rich?

2019-05-262019-05-16 PNRJ core principles, ethics, inequality, public policy Ann Arbor, Bill Gates, billionaires, capital, capital gains, capitalism, GiveDirectly, Gordon Gekko, Jeff Bezos, millionaires, Mitt Romney, poor, Queen Elizabeth, rich, Scandinaviaisbetter, socialism, wealth

May 26 JDN 2458630

I think if there is one single thing I would like more people to know about economics, it is the sheer magnitude of global inequality. Most people seem to have no idea just how rich some people are—and how poor so many others are. They have a vision in their head of what “rich” and “poor” are, and their “rich” is a low-level Wall Street trader making $400,000 a year (the kind of people Gordon Gekko mocks in the film), and “poor” is someone who lives under a bridge in New York City. (They’re both New Yorkers, I guess. New Yorkers seem to be the iconic Americans, which is honestly more representative than you might think—80% of Americans live in urban or suburban areas.)

If we take a global perspective, this is not what “rich” and “poor” truly mean.

In next week’s post I’ll talk about what “poor” means. It’s really appallingly bad. We have to leave the First World in order to find it; many people here are poor, but not that poor. It’s so bad that I think once you really understand it, it can’t but change your whole outlook on the world. But I’m saving that for next week.

This week, I’ll talk about what “rich” really means in today’s world. We needn’t leave the United States, for the top 3 and 6 of the top 10 richest people in the world live here. And they are all White men, by the way, though Carlos Slim and Amancio Ortega are at least Latino.

Going down the list of billionaires ranked by wealth, you have to get down to 15th place before encountering a woman, and it’s really worse than that, because Francoise Bettencourt (15), Alice Walton (17), Jacqueline Mars (33), Yang Huiyan (42), Susan Klatton (46), Laurena Powell-Jobs (54), Abigail Johnson (71), and Iris Fontbona (74) are all heirs. The richest living woman who didn’t simply inherit from her father or husband is actually Gina Rinehart, the 75th richest person in the world. (And note that, while also in some sense an heir, Queen Elizabeth is not on that list; in fact, she’s nowhere near the richest people in the world. She’s not in the top 500.)

You have to get to 20th place before encountering someone non-White (Ma Huateng), and all the way down to 65th before encountering someone not White or East Asian (the Hinduja brothers). Not one of the top 100 richest people is Black.

Just how rich are these people? Well, there’s a meme going around saying that Jeff Bezos could afford to buy every homeless person in the world a house at median market price and still, with just what’s left over, be a multi-billionaire among the top 100 richest people in the world.

And that meme is completely correct. The math checks out.

There are about 554,000 homeless people in the US at any given time.

The median sale price of a currently existing house in the US is about $253,000.

Multiply those two numbers together, and you get $140 billion.

And Jeff Bezos has net wealth of $157 billion.

This means that he would still have $17 billion left after buying all those houses. The 100th richest person in the world has $13 billion, so Jeff Bezos would still be higher than that.

Even $17 billion is enough to spend over $2 million every single day—over $20 per second—and never run out of money as long as the dividends keep paying out.

Jeff Bezos in fact made so much in dividends and capital gains this past quarter that he was taking in as much money as the median Amazon employee’s annual salary—which is more than what I make as a grad student, and only slightly less than the median US individual income—every nine seconds. Yes, you read that correctly: Nine (9) seconds. In the time it took you to read this paragraph, Jeff Bezos probably received more in capital gains than you will make this whole year. And if not (because you’re relatively rich or you read quickly), I’m sure he will have in the time it takes you to read this whole post.

When Mitt Romney ran for President, a great deal was made of his net wealth of over $250 million. This is indeed very rich, richer than anyone really needs or probably deserves. But compared to the world’s richest, this is pocket change. Jeff Bezos gets that much in dividends and capital gains every day. Bill Gates could give away that much every day for a year and still not run out of money. (He doesn’t quite give that much, but he does give a lot.)

I grew up in Ann Arbor, Michigan. Ann Arbor is a medium-sized city of about 120,000 people (230th in the US by population), and relatively well-off (median household income about 16% higher than the US median). Nevertheless, if Jeff Bezos wanted to, he could give every single person in Ann Arbor the equivalent of 30 years of their income—over a million dollars each—and still have enough money left to be among the world’s 100 richest people.

Or suppose instead that all the world’s 500 richest people decided to give away all the money they have above $1 billion—so they’d all still be billionaires, but only barely. That $8.7 trillion they have together, minus the $500 billion they’re keeping, would be $8.2 trillion. In fact, let’s say they keep a little more, just to make sure they all have the same ordering: Give each one an extra $1 million for each point they are in the ranking, so that Jeff Bezos would stay on top at $1 B + 500 ($0.001 B) = $1.5 billion, while Bill Gates in second place would have $1 million less, and so on. That would leave us with still over $8 trillion to give away.

How far could that $8 trillion go? Well, suppose we divided it evenly between all 328 million people in the United States. How much would each person receive? Oh, just about $24,000—basically my annual income.

Or suppose instead we spread it out over the entire world: Every single man, woman, and child on the planet Earth gets an equal share. There are 7.7 billion people in the world, so by spreading out $8 trillion between them, each one would get over $1000. For you or I that’s a big enough windfall to feel. For the world’s poorest people, it’s more than they make in several years. It would be life-changing for them. (Actually that’s about what GiveDirectly gives each family—and it is life-changing.)

And let me remind you: This would be leaving them billionaires. They’re just not as much billionaires as before—they only have $1 billion instead of $20 billion or $50 billion or $100 billion. And even $1 billion is obviously enough to live however you want, wherever you want, for the rest of your life, never working another day if you don’t want to. With $1 billion, you can fly in jets (a good one will set you back $20 million), sail in yachts (even a massive 200-footer wouldn’t run much above $200 million), and eat filet mignon at every meal (in fact, at $25 per pound, you can serve it to yourself and a hundred of your friends without breaking a sweat). You can decorate your bedroom with original Jackson Pollock paintings (at $200 million, his most expensive painting is only 20% of your wealth) and bathe in bottles of Dom Perignon (at $400 per liter, a 200-liter bath would cost you about $80,000—even every day that’s only $30 million a year, or maybe half to a third of your capital income). Remember, this is all feasible at just $1 billion—and Jeff Bezos has over a hundred times that. There is no real lifestyle improvement that happens between $1 billion and $157 billion; it’s purely a matter of status and power.

Taking enough to make them mere millionaires would give us another $0.5 trillion to spend (about the GDP of Sweden, one-fourth the GDP of Canada, or 70% of the US military budget).

Do you think maybe these people have too much money?

I’m not saying that we should confiscate all private property. I’m not saying that we should collectivize all industry. I believe in free markets and private enterprise. People should be able to get rich by inventing things and starting businesses.

But should they be able to get that rich? So rich that one man could pay off every mortgage in a whole major city? So rich that the CEO of a company makes what his employees make in a year in less than a minute? So rich that 500 people—enough to fill a large lecture hall—own enough wealth that if it were spread out evenly they could give $1000 to every single person in the world?

If Jeff Bezos had $1.5 million, I’d say he absolutely earned it. Some high-level programmers at Amazon have that much, and they absolutely earned it. If he had $15 million, I’d think maybe he could deserve that, given his contribution to the world. If he had $150 million, I’d find it hard to believe that anyone could really deserve that much, but if it’s part of what we need to make capitalism work, I could live with that.

But Jeff Bezos doesn’t have $1.5 million. He doesn’t have $15 million. He doesn’t have $150 million. He doesn’t have $1.5 billion. He doesn’t even have $15 billion. He has $150 billion. He has over a thousand times the level of wealth at which I was already having to doubt whether any human being could possibly deserve so much money—and once it gets that big, it basically just keeps growing. A stock market crash might drop it down temporarily, but it would come back in a few years.

And it’s not like there’s nothing we could do to spread this wealth around. Some fairly simple changes in how we tax dividends and capital gains would be enough to get a lot of it, and a wealth tax like the one Elizabeth Warren has proposed would help a great deal as well. At the rates people have seriously proposed, these taxes would only really stop their wealth from growing; it wouldn’t meaningfully shrink it.

That could be combined with policy changes about compensation for corporate executives, particularly with regard to stock options, to make it harder to extract such a large proportion of a huge multinational corporation’s wealth into a single individual. We could impose a cap on the ratio between median employee salary (including the entire supply chain!) and total executive compensation (including dividends and capital gains!), say 100 to 1. (Making in 9 seconds what his employees make in a year, Jeff Bezos is currently operating at a ratio of over 3 million to 1.) If you exceed the cap, the remainder is taxed at 100%. This would mean that as a CEO you can still make $100 million a year, but only if your median employee makes $1 million. If your median employee makes $30,000, you’d better keep your own compensation under $3 million, because we’re gonna take the rest.

Is this socialism? I guess maybe it’s democratic socialism, the high-tax, high-spend #ScandinaviaIsBetter welfare state. But it would not be an end to free markets or free enterprise. We’re not collectivizing any industries, let alone putting anyone in guillotines. You could still start a business and make millions or even hundreds of millions of dollars; you’d simply be expected to share that wealth with your employees and our society as a whole, instead of hoarding it all for yourself.

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Human Economics

Cognitive development economics: Understanding the mind in order to feed the world

capitalism