The Butlerian Jihad is looking better all the time

2024-03-242024-03-24 PNRJ book reviews, cognitive science, computer science, core principles, critique of neoclassical economics, inequality, politics, public policy, tribal paradigm abundance, Action Potential, artificial general intelligence, artificial intelligence, Blue Brain, brain emulation, Butlerian Jihad, conservative, Democrat, Dune, economic growth, egalitarianism, Elon Musk, farmer, forager, humanism, insecure affluence, Keynes, liberal, Massachusetts, Millennial, Mississippi, Moore's Law, narcissism, Nigeria, Norway, poverty, psychopathy, Republican, Robin Hanson, scarcity, transhuman, transhumanism, Zoomer

Mar 24 JDN 2460395

A review of The Age of Em by Robin Hanson

In the Dune series, the Butlerian Jihad was a holy war against artificial intelligence that resulted in a millenias-long taboo against all forms of intelligent machines. It was effectively a way to tell a story about the distant future without basically everything being about robots or cyborgs.

After reading Robin Hanson’s book, I’m starting to think that maybe we should actually do it.

Thus it is written: “Thou shalt not make a machine in the likeness of a human mind.”

Hanson says he’s trying to reserve judgment and present objective predictions without evaluation, but it becomes very clear throughout that this is the future he wants, as well as—or perhaps even instead of—the world he expects.

In many ways, it feels like he has done his very best to imagine a world of true neoclassical rational agents in perfect competition, a sort of sandbox for the toys he’s always wanted to play with. Throughout he very much takes the approach of a neoclassical economist, making heroic assumptions and then following them to their logical conclusions, without ever seriously asking whether those assumptions actually make any sense.

To his credit, Hanson does not buy into the hype that AGI will be successful any day now. He predicts that we will achieve the ability to fully emulate human brains and thus create a sort of black-box AGI that behaves very much like a human within about 100 years. Given how the Blue Brain Project has progressed (much slower than its own hype machine told us it would—and let it be noted that I predicted this from the very beginning), I think this is a fairly plausible time estimate. He refers to a mind emulated in this way as an “em”; I have mixed feelings about the term, but I suppose we did need some word for that, and it certainly has conciseness on its side.

Hanson believes that a true understanding of artificial intelligence will only come later, and the sort of AGI that can be taken apart and reprogrammed for specific goals won’t exist for at least a century after that. Both of these sober, reasonable predictions are deeply refreshing in a field that’s been full of people saying “any day now” for the last fifty years.

But Hanson’s reasonableness just about ends there.

In The Age of Em, government is exactly as strong as Hanson needs it to be. Somehow it simultaneously ensures a low crime rate among a population that doubles every few months while also having no means of preventing that population growth. Somehow ensures that there is no labor collusion and corporations never break the law, but without imposing any regulations that might reduce efficiency in any way.

All of this begins to make more sense when you realize that Hanson’s true goal here is to imagine a world where neoclassical economics is actually true.

He realized it didn’t work on humans, so instead of giving up the theory, he gave up the humans.

Hanson predicts that ems will casually make short-term temporary copies of themselves called “spurs”, designed to perform a particular task and then get erased. I guess maybe he would, but I for one would not so cavalierly create another person and then make their existence dedicated to doing a single job before they die. The fact that I created this person, and they are very much like me, seem like reasons to care more about their well-being, not less! You’re asking me to enslave and murder my own child. (Honestly, the fact that Robin Hanson thinks ems will do this all the time says more about Robin Hanson than anything else.) Any remotely sane society of ems would ban the deletion of another em under any but the most extreme circumstances, and indeed treat it as tantamount to murder.

Hanson predicts that we will only copy the minds of a few hundred people. This is surely true at some point—the technology will take time to develop, and we’ll have to start somewhere. But I don’t see why we’d stop there, when we could continue to copy millions or billions of people; and his choices of who would be emulated, while not wildly implausible, are utterly terrifying.

He predicts that we’d emulate genius scientists and engineers; okay, fair enough, that seems right. I doubt that the benefits of doing so will be as high as many people imagine, because scientific progress actually depends a lot more on the combined efforts of millions of scientists than on rare sparks of brilliance by lone geniuses; but those people are definitely very smart, and having more of them around could be a good thing. I can also see people wanting to do this, and thus investing in making it happen.

He also predicts that we’d emulate billionaires. Now, as a prediction, I have to admit that this is actually fairly plausible; billionaires are precisely the sort of people who are rich enough to pay to be emulated and narcissistic enough to want to. But where Hanson really goes off the deep end here is that he sees this as a good thing. He seems to honestly believe that billionaires are so rich because they are so brilliant and productive. He thinks that a million copies of Elon Musks would produce a million hectobillionaires—when in reality it would produce a million squabbling narcissists, who at best had to split the same $200 billion wealth between them, and might very well end up with less because they squander it.

Hanson has a long section on trying to predict the personalities of ems. Frankly this could just have been dropped entirely; it adds almost nothing to the book, and the book is much too long. But the really striking thing to me about that section is what isn’t there. He goes through a long list of studies that found weak correlations between various personality traits like extroversion or openness and wealth—mostly comparing something like the 20^th percentile to the 80^th percentile—and then draws sweeping conclusions about what ems will be like, under the assumption that ems are all drawn from people in the 99.99999^th percentile. (Yes, upper-middle-class people are, on average, more intelligent and more conscientious than lower-middle-class people. But do we even have any particular reason to think that the personalities of people who make $150,000 are relevant to understanding the behavior of people who make $15 billion?) But he completely glosses over the very strong correlations that specifically apply to people in that very top super-rich class: They’re almost all narcissists and/or psychopaths.

Hanson predicts a world where each em is copied many, many times—millions, billions, even trillions of times, and also in which the very richest ems are capable of buying parallel processing time that lets them accelerate their own thought processes to a million times faster than a normal human. (Is that even possible? Does consciousness work like that? Who knows!?) The world that Hanson is predicting is thus one where all the normal people get outnumbered and overpowered by psychopaths.

Basically this is the most abjectly dystopian cyberpunk hellscape imaginable. And he talks about it the whole time as if it were good.

It’s like he played the game Action Potential and thought, “This sounds great! I’d love to live there!” I mean, why wouldn’t you want to owe a life-debt on your own body and have to work 120-hour weeks for a trillion-dollar corporation just to make the payments on it?

Basically, Hanson doesn’t understand how wealth is actually acquired. He is educated as an economist, yet his understanding of capitalism basically amounts to believing in magic. He thinks that competitive markets just somehow perfectly automatically allocate wealth to whoever is most productive, and thus concludes that whoever is wealthy now must just be that productive.

I can see no other way to explain his wildly implausible predictions that the em economy will double every month or two. A huge swath of the book depends upon this assumption, but he waits until halfway through the book to even try to defend it, and then does an astonishingly bad job of doing so. (Honestly, even if you buy his own arguments—which I don’t—they seem to predict that population would grow with Moore’s Law—doubling every couple of years, not every couple of months.)

Whereas Keynes predicted based on sound economic principles that economic growth would more or less proceed apace and got his answer spot-on, Hanson predicts that for mysterious, unexplained reasons economic growth will suddenly increase by two orders of magnitude—and I’m pretty sure he’s going to be wildly wrong.

Hanson also predicts that ems will be on average poorer than we are, based on some sort of perfect-competition argument that doesn’t actually seem to mesh at all with his predictions of spectacularly rapid economic and technological growth. I think the best way to make sense of this is to assume that it means the trend toward insecure affluence will continue: Ems will have an objectively high standard of living in terms of what they own, what games they play, where they travel, and what they eat and drink (in simulation), but they will constantly be struggling to keep up with the rent on their homes—or even their own bodies. This is a world where (the very finest simulation of) Dom Perignon is $7 a bottle and wages are $980 an hour—but monthly rent is $284,000.

Early in the book Hanson argues that this life of poverty and scarcity will lead to more conservative values, on the grounds that people who are poorer now seem to be more conservative, and this has something to do with farmers versus foragers. Hanson’s explanation of all this is baffling; I will quote it at length, just so it’s clear I’m not misrepresenting it:

The other main (and independent) axis of value variation ranges between poor and rich societies. Poor societies place more value on conformity, security, and traditional values such as marriage, heterosexuality, religion, patriotism, hard work, and trust in authority. In contrast, rich societies place more value on individualism, self-direction, tolerance, pleasure, nature, leisure, and trust. When the values of individuals within a society vary on the same axis, we call this a left/liberal (rich) versus right/conservative (poor) axis.

Foragers tend to have values more like those of rich/liberal people today, while subsistence farmers tend to have values more like those of poor/conservative people today. As industry has made us richer, we have on average moved from conservative/farmer values to liberal/forager values. This value movement can make sense if cultural evolution used the social pressures farmers faced, such as conformity and religion, to induce humans, who evolved to find forager behaviors natural, to instead act like farmers. As we become rich, we don’t as strongly fear the threats behind these social pressures. This connection may result in part from disease; rich people are healthier, and healthier societies fear less.

The alternate theory that we have instead learned that rich forager values are more true predicts that values should have followed a random walk over time, and be mostly common across space. It also predicts the variance of value changes tracking the rate at which relevant information appears. But in fact industrial-era value changes have tracked the wealth of each society in much more steady and consistent fashion. And on this theory, why did foragers ever acquire farmer values?

[…]

In the scenario described in this book, many strange-to-forager behaviors are required, and median per-person (i.e. per-em) incomes return to near-subsistence levels. This suggests that the em era may reverse the recent forager-like trend toward more liberality; ems may have more farmer-like values.
The Age of Em, p. 26-27

There’s a lot to unpack here, but maybe it’s better to burn the whole suitcase.

First of all, it’s not entirely clear that this is really a single axis of variation, that foragers and farmers differ from each other in the same way as liberals and conservatives. There’s some truth to that at least—both foragers and liberals tend to be more generous, both farmers and conservatives tend to enforce stricter gender norms. But there are also clear ways that liberal values radically deviate from forager values: Forager societies are extremely xenophobic, and typically very hostile to innovation, inequality, or any attempts at self-aggrandizement (a phenomenon called “fierce egalitarianism“). San Francisco epitomizes rich, liberal values, but it would be utterly alien and probably regarded as evil by anyone from the Yanomamo.

Second, there is absolutely no reason to predict any kind of random walk. That’s just nonsense. Would you predict that scientific knowledge is a random walk, with each new era’s knowledge just a random deviation from the last’s? Maybe next century we’ll return to geocentrism, or phrenology will be back in vogue? On the theory that liberal values (or at least some liberal values) are objectively correct, we would expect them to advance as knowledge does—improving over time, and improving faster in places that have better institutions for research, education, and free expression. And indeed, this is precisely the pattern we have observed. (Those places are also richer, but that isn’t terribly surprising either!)

Third, while poorer regions are indeed more conservative, poorer people within a region actually tend to be more liberal. Nigeria is poorer and more conservative than Norway, and Mississippi is poorer and more conservative than Massachusetts. But higher-income households in the United States are more likely to vote Republican. I think this is particularly true of people living under insecure affluence: We see the abundance of wealth around us, and don’t understand why we can’t learn to share it better. We’re tired of fighting over scraps while the billionaires claim more and more. Millennials and Zoomers absolutely epitomize insecure affluence, and we also absolutely epitomize liberalism. So, if indeed ems live a life of insecure affluence, we should expect them to be like Zoomers: “Trans liberation now!” and “Eat the rich!” (Or should I say, “Delete the rich!”)

And really, doesn’t that make more sense? Isn’t that the trend our society has been on, for at least the last century? We’ve been moving toward more and more acceptance of women and minorities, more and more deviation from norms, more and more concern for individual rights and autonomy, more and more resistance to authority and inequality.

The funny thing is, that world sounds a lot better than the one Hanson is predicting.

A world of left-wing ems would probably run things a lot better than Hanson imagines: Instead of copying the same hundred psychopaths over and over until we fill the planet, have no room for anything else, and all struggle to make enough money just to stay alive, we could moderate our population to a more sustainable level, preserve diversity and individuality, and work toward living in greater harmony with each other and the natural world. We could take this economic and technological abundance and share it and enjoy it, instead of killing ourselves and each other to make more of it for no apparent reason.

The one good argument Hanson makes here is expressed in a single sentence: “And on this theory, why did foragers ever acquire farmer values?” That actually is a good question; why did we give up on leisure and egalitarianism when we transitioned from foraging to agriculture?

I think scarcity probably is relevant here: As food became scarcer, maybe because of climate change, people were forced into an agricultural lifestyle just to have enough to eat. Early agricultural societies were also typically authoritarian and violent. Under those conditions, people couldn’t be so generous and open-minded; they were surrounded by threats and on the verge of starvation.

I guess if Hanson is right that the em world is also one of poverty and insecurity, we might go back to those sort of values, borne of desperation. But I don’t see any reason to think we’d give up all of our liberal values. I would predict that ems will still be feminist, for instance; in fact, Hanson himself admits that since VR avatars would let us change gender presentation at will, gender would almost certainly become more fluid in a world of ems. Far from valuing heterosexuality more highly (as conservatives do, a “farmer value” according to Hanson), I suspect that ems will have no further use for that construct, because reproduction will be done by manufacturing, not sex, and it’ll be so easy to swap your body into a different one that hardly anyone will even keep the same gender their whole life. They’ll think it’s quaint that we used to identify so strongly with our own animal sexual dimorphism.

But maybe it is true that the scarcity induced by a hyper-competitive em world would make people more selfish, less generous, less trusting, more obsessed with work. Then let’s not do that! We don’t have to build that world! This isn’t a foregone conclusion!

There are many other paths yet available to us.

Indeed, perhaps the simplest would be to just ban artificial intelligence, at least until we can get a better handle on what we’re doing—and perhaps until we can institute the kind of radical economic changes necessary to wrest control of the world away from the handful of psychopaths currently trying their best to run it into the ground.

I admit, it would kind of suck to not get any of the benefits of AI, like self-driving cars, safer airplanes, faster medical research, more efficient industry, and better video games. It would especially suck if we did go full-on Butlerian Jihad and ban anything more complicated than a pocket calculator. (Our lifestyle might have to go back to what it was in—gasp! The 1950s!)

But I don’t think it would suck nearly as much as the world Robin Hanson thinks is in store for us if we continue on our current path.

So I certainly hope he’s wrong about all this.

Fortunately, I think he probably is.

Productivity can cope with laziness, but not greed

2023-10-082023-10-01 PNRJ core principles, critique of neoclassical economics, ethics, futurism, inequality Ammon Hennecy, anarchism, Bulgaria, Cory Doctorow, crime, economic growth, Ghana, greed, India, laziness, memetics, monastery, post-scarcity, productivity, psychopathy, scarcity, science fiction, sensitivity, signaling, specificity, United States, Ursula Le Guin, utopia, Venezuela

Oct 8 JDN 2460226

At least since Star Trek, it has been a popular vision of utopia: post-scarcity, an economy where goods are so abundant that there is no need for money or any kind of incentive to work, and people can just do what they want and have whatever they want.

It certainly does sound nice. But is it actually feasible? I’ve written about this before.

I’ve been reading some more books set in post-scarcity utopias, including Ursula K. Le Guin (who is a legend) and Cory Doctorow (who is merely pretty good). And it struck me that while there is one major problem of post-scarcity that they seem to have good solutions for, there is another one that they really don’t. (To their credit, neither author totally ignores it; they just don’t seem to see it as an insurmountable obstacle.)

The first major problem is laziness.

A lot of people assume that the reason we couldn’t achieve a post-scarcity utopia is that once your standard of living is no longer tied to your work, people would just stop working. I think this assumption rests on both an overly cynical view of human nature and an overly pessimistic view of technological progress.

Let’s do a thought experiment. If you didn’t get paid, and just had the choice to work or not, for whatever hours you wished, motivated only by the esteem of your peers, your contribution to society, and the joy of a job well done, how much would you work?

I contend it’s not zero. At least for most people, work does provide some intrinsic satisfaction. It’s also probably not as much as you are currently working; otherwise you wouldn’t insist on getting paid. Those are our lower and upper bounds.

Is it 80% of your current work? Perhaps not. What about 50%? Still too high? 20% seems plausible, but maybe you think that’s still too high. Surely it’s at least 10%. Surely you would be willing to work at least a few hours per week at a job you’re good at that you find personally fulfilling. My guess is that it would actually be more than that, because once people were free of the stress and pressure of working for a living, they would be more likely to find careers that truly brought them deep satisfaction and joy.

But okay, to be conservative, let’s estimate that people are only willing to work 10% as much under a system where labor is fully optional and there is no such thing as a wage. What kind of standard of living could we achieve?

Well, at the current level of technology and capital in the United States, per-capita GDP at purchasing power parity is about $80,000. 10% of that is $8,000. This may not sound like a lot, but it’s about how people currently live in Venezuela. India is slightly better, Ghana is slightly worse. This would feel poor to most Americans today, but it’s objectively a better standard of living than most humans have had throughout history, and not much worse than the world average today.

If per-capita GDP growth continues at its current rate of about 1.5% per year for another century, that $80,000 would become $320,000, 10% of which is $32,000—that would put us at the standard of living of present-day Bulgaria, or what the United States was like in the distant past of [checks notes] 1980. That wouldn’t even feel poor. In fact if literally everyone had this standard of living, nearly as many Americans today would be richer as would be poorer, since the current median personal income is only a bit higher than that.

Thus, the utopian authors are right about this one: Laziness is a solvable problem. We may not quite have it solved yet, but it’s on the ropes; a few more major breakthroughs in productivity-enhancing technology and we’ll basically be there.

In fact, on a small scale, this sort of utopian communist anarchy already works, and has for centuries. There are little places, all around the world, where people gather together and live and work in a sustainable, basically self-sufficient way without being motivated by wages or salaries, indeed often without owning any private property at all.

We call these places monasteries.

Granted, life in a monastery clearly isn’t for everyone: I certainly wouldn’t want to live a life of celibacy and constant religious observance. But the long-standing traditions of monastic life in several very different world religions does prove that it’s possible for human beings to live and even flourish in the absence of a profit motive.

Yet the fact that monastic life is so strict turns out to be no coincidence: In a sense, it had to be for the whole scheme to work. I’ll get back to that in a moment.

The second major problem with a post-scarcity utopia is greed.

This is the one that I think is the real barrier. It may not be totally insurmountable, but thus far I have yet to hear any good proposals that would seriously tackle it.

The issue with laziness is that we don’t really want to work as much as we do. But since we do actually want to work a little bit, the question is simply how to make as much as we currently do while working only as much as we want to. Hence, to deal with laziness, all we need to do is be more efficient. That’s something we are shockingly good at; the overall productivity of our labor is now something like 100 times what it was at the dawn of the Industrial Revolution, and still growing all the time.

Greed is different. The issue with greed is that, no matter how much we have, we always want more.

Some people are clearly greedier than others. In fact, I’m even willing to bet that most people’s greed could be kept in check by a society that provided for everyone’s basic needs for free. Yeah, maybe sometimes you’d fantasize about living in a gigantic mansion or going into outer space; but most of the time, most of us could actually be pretty happy as long as we had a roof over our heads and food on our tables. I know that in my own case, my grandest ambitions largely involve fighting global poverty—so if that became a solved problem, my life’s ambition would be basically fulfilled, and I wouldn’t mind so much retiring to a life of simple comfort.

But is everyone like that? This is what anarchists don’t seem to understand. In order for anarchy to work, you need everyone to fit into that society. Most of us or even nearly all of us just won’t cut it.

Ammon Hennecy famously declared: “An anarchist is someone who doesn’t need a cop to make him behave.” But this is wrong. An anarchist is someone who thinks that no one needs a cop to make him behave. And while I am the former, I am not the latter.

Perhaps the problem is that anarchists don’t realize that not everyone is as good as they are. They implicitly apply their own mentality to everyone else, and assume that the only reason anyone ever cheats, steals, or kills is because their circumstances are desperate.

Don’t get me wrong: A lot of crime—perhaps even most crime—is committed by people who are desperate. Improving overall economic circumstances does in fact greatly reduce crime. But there is also a substantial proportion of crime—especially the most serious crimes—which is committed by people who aren’t particularly desperate, they are simply psychopaths. They aren’t victims of circumstance. They’re just evil. And society needs a way to deal with them.

If you set up a society so that anyone can just take whatever they want, there will be some people who take much more than their share. If you have no system of enforcement whatsoever, there’s nothing to stop a psychopath from just taking everything he can get his hands on. And then it really doesn’t matter how productive or efficient you are; whatever you make will simply get taken by whoever is greediest—or whoever is strongest.

In order to avoid that, you need to either set up a system that stops people from taking more than their share, or you need to find a way to exclude people like that from your society entirely.

This brings us back to monasteries. Why are they so strict? Why are the only places where utopian anarchism seems to flourish also places where people have to wear a uniform, swear vows, carry out complex rituals, and continually pledge their fealty to an authority? (Note, by the way, that I’ve also just described life in the military, which also has a lot in common with life in a monastery—and for much the same reasons.)

It’s a selection mechanism. Probably no one consciously thinks of it this way—indeed, it seems to be important to how monasteries work that people are not consciously weighing the costs and benefits of all these rituals. This is probably something that memetically evolved over centuries, rather than anything that was consciously designed. But functionally, that’s what it does: You only get to be part of a monastic community if you are willing to pay the enormous cost of following all these strict rules.

That makes it a form of costly signaling. Psychopaths are, in general, more prone to impulsiveness and short-term thinking. They are therefore less willing than others to bear the immediate cost of donning a uniform and following a ritual in order to get the long-term gains of living in a utopian community. This excludes psychopaths from ever entering the community, and thus protects against their predation.

Even celibacy may be a feature rather than a bug: Psychopaths are also prone to promiscuity. (And indeed, utopian communes that practice free love seem to have a much worse track record of being hijacked by psychopaths than monasteries that require celibacy!)

Of course, lots of people who aren’t psychopaths aren’t willing to pay those costs either—like I said, I’m not. So the selection mechanism is in a sense overly strict: It excludes people who would support the community just fine, but aren’t willing to pay the cost. But in the long run, this turns out to be less harmful than being too permissive and letting your community get hijacked and destroyed by psychopaths.

Yet if our goal is to make a whole society that achieves post-scarcity utopia, we can’t afford to be so strict. We already know that most people aren’t willing to become monks or nuns.

That means that we need a selection mechanism which is more reliable—more precisely, one with higher specificity.

I mentioned this in a previous post in the context of testing for viruses, but it bears repeating. Sensitivity and specificity are two complementary measures of a test’s accuracy. The sensitivity of a test is how likely it is to show positive if the truth is positive. The specificity of a test is how likely it is to show negative if the truth is negative.

As a test of psychopathy, monastic strictness has very high sensitivity: If you are a psychopath, there’s a very high chance it will weed you out. But it has quite low specificity: Even if you’re not a psychopath, there’s still a very high chance you won’t want to become a monk.

For a utopian society to work, we need something that’s more specific, something that won’t exclude a lot of people who don’t deserve to be excluded. But it still needs to have much the same sensitivity, because letting psychopaths into your utopia is a very easy way to let that utopia destroy itself. We do not yet have such a test, nor any clear idea how we might create one.

And that, my friends, is why we can’t have nice things. At least, not yet.

If you stop destroying jobs, you will stop economic growth

2018-12-302018-12-24 PNRJ core principles, development economics, futurism, inequality, macroeconomics, Uncategorized automation, economic growth, growth, jobs, Kill the Jobs Save the Workers, Luddites, technology

Dec 30 JDN 2458483

One thing that endlessly frustrates me (and probably most economists) about the public conversation on economics is the fact that people seem to think “destroying jobs” is bad. Indeed, not simply a downside to be weighed, but a knock-down argument: If something “destroys jobs”, that’s a sufficient reason to opposite it, whether it be a new technology, an environmental regulation, or a trade agreement. So then we tie ourselves up in knots trying to argue that the policy won’t really destroy jobs, or it will create more than it destroys—but it will destroy jobs, and we don’t actually know how many it will create.

Destroying jobs is good. Destroying jobs is the only way that economic growth ever happens.

I realize I’m probably fighting an uphill battle here, so let me start at the beginning: What do I mean when I say “destroying jobs”? What exactly is a “job”, anyway?
At its most basic level, a job is something that needs done. It’s a task that someone wants to perform, but is unwilling or unable to perform on their own, and is therefore willing to give up some of what they have in order to get someone else to do it for them.

Capitalism has blinded us to this basic reality. We have become so accustomed to getting the vast majority of our goods via jobs that we come to think of having a job as something intrinsically valuable. It is not. Working at a job is a downside. It is something to be minimized.

There is a kind of work that is valuable: Creative, fulfilling work that you do for the joy of it. This is what we are talking about when we refer to something as a “vocation” or even a “hobby”. Whether it’s building ships in bottles, molding things from polymer clay, or coding video games for your friends, there is a lot of work in the world that has intrinsic value. But these things aren’t jobs. No one will pay them to do these things—or need to; you’ll do them anyway.

The value we get from jobs is actually obtained from goods: Everything from houses to underwear to televisions to antibiotics. The reason you want to have a job is that you want the money from that job to give you access to markets for all the goods that are actually valuable to you.

Jobs are the input—the cost—of producing all of those goods. The more jobs it takes to make a good, the more expensive that good is. This is not a rule-of-thumb statement of what usually or typically occurs. This is the most fundamental definition of cost. The more people you have to pay to do something, the harder it was to do that thing. If you can do it with fewer people (or the same people working with less effort), you should. Money is the approximation; money is the rule-of-thumb. We use money as an accounting mechanism to keep track of how much effort was put into accomplishing something. But what really matters is the “sweat of our laborers, the genius of our scientists, the hopes of our children”.

Economic growth means that we produce more goods at less cost.

That is, we produce more goods with fewer jobs.

All new technologies destroy jobs—if they are worth anything at all. The entire purpose of a new technology is to let us do things faster, better, easier—to let us have more things with less work.

This has been true since at least the dawn of the Industrial Revolution.

The Luddites weren’t wrong that automated looms would destroy weaver jobs. They were wrong to think that this was a bad thing. Of course, they weren’t crazy. Their livelihoods were genuinely in jeopardy. And this brings me to what the conversation should be about when we instead waste time talking about “destroying jobs”.

Here’s a slogan for you: Kill the jobs. Save the workers.

We shouldn’t be disappointed to lose a job; we should think of that as an opportunity to give a worker a better life. For however many years, you’ve been toiling to do this thing; well, now it’s done. As a civilization, we have finally accomplished the task that you and so many others set out to do. We have not “replaced you with a machine”; we have built a machine that now frees you from your toil and allows you to do something better with your life. Your purpose in life wasn’t to be a weaver or a coal miner or a steelworker; it was to be a friend and a lover and a parent. You can now get more chance to do the things that really matter because you won’t have to spend all your time working some job.

When we replaced weavers with looms, plows with combine harvesters, computers-the-people with computers-the-machines (a transformation now so complete most people don’t even seem to know that the word used to refer to a person—the award-winning film Hidden Figures is about computers-the-people), tollbooth operators with automated transponders—all these things meant that the job was now done. For the first time in the history of human civilization, nobody had to do that job anymore. Think of how miserable life is for someone pushing a plow or sitting in a tollbooth for 10 hours a day; aren’t you glad we don’t have to do that anymore (in this country, anyway)?

And the same will be true if we replace radiologists with AI diagnostic algorithms (we will; it’s probably not even 10 years away), or truckers with automated trucks (we will; I give it 20 years), or cognitive therapists with conversational AI (we might, but I’m more skeptical), or construction workers with building-printers (we probably won’t anytime soon, but it would be nice), the same principle applies: This is something we’ve finally accomplished as a civilization. We can check off the box on our to-do list and move on to the next thing.

But we shouldn’t simply throw away the people who were working on that noble task as if they were garbage. Their job is done—they did it well, and they should be rewarded. Yes, of course, the people responsible for performing the automation should be rewarded: The engineers, programmers, technicians. But also the people who were doing the task in the meantime, making sure that the work got done while those other people were spending all that time getting the machine to work: They should be rewarded too.

Losing your job to a machine should be the best thing that ever happened to you. You should still get to receive most of your income, and also get the chance to find a new job or retire.

How can such a thing be economically feasible? That’s the whole point: The machines are more efficient. We have more stuff now. That’s what economic growth is. So there’s literally no reason we can’t give every single person in the world at least as much wealth as we did before—there is now more wealth.

There’s a subtler argument against this, which is that diverting some of the surplus of automation to the workers who get displaced would reduce the incentives to create automation. This is true, so far as it goes. But you know what else reduces the incentives to create automation? Political opposition. Luddism. Naive populism. Trade protectionism.

Moreover, these forces are clearly more powerful, because they attack the opportunity to innovate: Trade protection can make it illegal to share knowledge with other countries. Luddist policies can make it impossible to automate a factory.

Whereas, sharing the wealth would only reduce the incentive to create automation; it would still be possible, simply less lucrative. Instead of making $40 billion, you’d only make $10 billion—you poor thing. I sincerely doubt there is a single human being on Earth with a meaningful contribution to make to humanity who would make that contribution if they were paid $40 billion but not if they were only paid $10 billion.

This is something that could be required by regulation, or negotiated into labor contracts. If your job is eliminated by automation, for the next year you get laid off but still paid your full salary. Then, your salary is converted into shares in the company that are projected to provide at least 50% of your previous salary in dividends—forever. By that time, you should be able to find another job, and as long as it pays at least half of what your old job did, you will be better off. Or, you can retire, and live off that 50% plus whatever else you were getting as a pension.

From the perspective of the employer, this does make automation a bit less attractive: The up-front cost in the first year has been increased by everyone’s salary, and the long-term cost has been increased by all those dividends. Would this reduce the number of jobs that get automated, relative to some imaginary ideal? Sure. But we don’t live in that ideal world anyway; plenty of other obstacles to innovation were in the way, and by solving the political conflict, this will remove as many as it adds. We might actually end up with more automation this way; and even if we don’t, we will certainly end up with less political conflict as well as less wealth and income inequality.

Fighting the zero-sum paradigm

2018-12-022018-11-25 PNRJ development economics, ethics, heuristics and biases, inequality, public policy, tribal paradigm authoritarianism, China, climate change, democracy, economic growth, growth, nonzero-sum, politics, progress, racism, sexism, trade, zero-sum

Dec 2 JDN 2458455

It should be obvious at this point that there are deep, perhaps even fundamental, divides between the attitudes and beliefs of different political factions. It can be very difficult to even understand, much less sympathize, with the concerns of people who are racist, misogynistic, homophobic, xenophobic, and authoritarian.
But at the end of the day we still have to live in the same country as these people, so we’d better try to understand how they think. And maybe, just maybe, that understanding will help us to change them.

There is one fundamental belief system that I believe underlies almost all forms of extremism. Right now right-wing extremism is the major threat to global democracy, but left-wing extremism subscribes to the same core paradigm (consistent with Horseshoe Theory).

I think the best term for this is the zero-sum paradigm. The idea is quite simple: There is a certain amount of valuable “stuff” (money, goods, land, status, happiness) in the world, and the only political question is who gets how much.

Thus, any improvement in anyone’s life must, necessarily, come at someone else’s expense. If I become richer, you become poorer. If I become stronger, you become weaker. Any improvement in my standard of living is a threat to your status.

If this belief were true, it would justify, or at least rationalize, all sorts of destructive behavior: Any harm I can inflict upon someone else will yield a benefit for me, by some fundamental conservation law of the universe.

Viewed in this light, beliefs like patriarchy and White supremacy suddenly become much more comprehensible: Why would you want to spend so much effort hurting women and Black people? Because, by the fundamental law of zero-sum, any harm to women is a benefit to men, and any harm to Black people is a benefit to White people. The world is made of “teams”, and you are fighting for your own against all the others.

And I can even see why such an attitude is seductive: It’s simple and easy to understand. And there are many circumstances where it can be approximately true.
When you are bargaining with your boss over a wage, one dollar more for you is one dollar less for your boss.
When your factory outsources production to China, one more job for China is one less job for you.

When we vote for President, one more vote for the Democrats is one less vote for the Republicans.

But of course the world is not actually zero-sum. Both you and your boss would be worse off if your job were to disappear; they need your work and you need their money. For every job that is outsourced to China, another job is created in the United States. And democracy itself is such a profound public good that it basically overwhelms all others.

In fact, it is precisely when a system is running well that the zero-sum paradigm becomes closest to true. In the space of all possible allocations, it is the efficient ones that behave in something like a zero-sum way, because when the system is efficient, we are already producing as much as we can.

This may be part of why populist extremism always seems to assert itself during periods of global prosperity, as in the 1920s and today: It is precisely when the world is running at its full capacity that it feels most like someone else’s gain must come at your loss.

Yet if we live according to the zero-sum paradigm, we will rapidly destroy the prosperity that made that paradigm seem plausible. A trade war between the US and China would put millions out of work in both countries. A real war with conventional weapons would kill millions. A nuclear war would kill billions.

This is what we must convey: We must show people just how good things are right now.

This is not an easy task; when people want to believe the world is falling apart, they can very easily find excuses to do so. You can point to the statistics showing a global decline in homicide, but one dramatic shooting on the TV news will wipe that all away. You can show the worldwide rise in real incomes across the board, but that won’t console someone who just lost their job and blames outsourcing or immigrants.

Indeed, many people will be offended by the attempt—the mere suggestion that the world is actually in very good shape and overall getting better will be perceived as an attempt to deny or dismiss the problems and injustices that still exist.

I encounter this especially from the left: Simply pointing out the objective fact that the wealth gap between White and Black households is slowly closing is often taken as a claim that racism no longer exists or doesn’t matter. Congratulating the meteoric rise in women’s empowerment around the world is often paradoxically viewed as dismissing feminism instead of lauding it.

I think the best case against progress can be made with regard to global climate change: Carbon emissions are not falling nearly fast enough, and the world is getting closer to the brink of truly catastrophic ecological damage. Yet even here the zero-sum paradigm is clearly holding us back; workers in fossil-fuel industries think that the only way to reduce carbon emissions is to make their families suffer, but that’s simply not true. We can make them better off too.

Talking about injustice feels righteous. Talking about progress doesn’t. Yet I think what the world needs most right now—the one thing that might actually pull us back from the brink of fascism or even war—is people talking about progress.

If people think that the world is full of failure and suffering and injustice, they will want to tear down the whole system and start over with something else. In a world that is largely democratic, that very likely means switching to authoritarianism. If people think that this is as bad as it gets, they will be willing to accept or even instigate violence in order to change to almost anything else.

But if people realize that in fact the world is full of success and prosperity and progress, that things are right now quite literally better in almost every way for almost every person in almost every country than they were a hundred—or even fifty—years ago, they will not be so eager to tear the system down and start anew. Centrism is often mocked (partly because it is confused with false equivalence), but in a world where life is improving this quickly for this many people, “stay the course” sounds awfully attractive to me.
That doesn’t mean we should ignore the real problems and injustices that still exist, of course. There is still a great deal of progress left to be made. But I believe we are more likely to make progress if we acknowledge and seek to continue the progress we have already made, than if we allow ourselves to fall into despair as if that progress did not exist.

How rich are we, really?

2017-10-292017-10-22 PNRJ development economics, inequality Botswana, Brazil, China, development, economic growth, Gini, Human Development Index, India, inequality, log points, Norway, Russia, Saudi Arabia, ZImbabwe

Oct 29, JDN 2458056

The most commonly-used measure of a nation’s wealth is its per-capita GDP, which is simply a total of all spending in a country divided by its population. More recently we adjust for purchasing power, giving us GDP per capita at purchasing power parity (PPP).

By this measure, the United States always does well. At most a dozen countries are above us, most of them by a small amount, and all of them are quite small countries. (For fundamental statistical reasons, we should expect both the highest and lowest average incomes to be in the smallest countries.)

But this is only half the story: It tells us how much income a country has, but not how that income is distributed. We should adjust for inequality.

How can we do this? I have devised a method that uses the marginal utility of wealth plus a measure of inequality called the Gini coefficient to work out an estimate of the average utility, instead of the average income.

I then convert back into a dollar figure. This figure is the income everyone would need to have under perfect equality, in order to give the same real welfare as the current system. That is, if we could redistribute wealth in such a way to raise everyone above this value up to it, and lower everyone above this value down to it, the total welfare of the country would not change. This provides a well-founded ranking of which country’s people are actually better off overall, accounting for both overall income and the distribution of that income.

The estimate is sensitive to the precise form I use for marginal utility, so I’ll show you comparisons for three different cases.

The “conservative” estimate uses a risk aversion parameter of 1, which means that utility is logarithmic in income. The real value of a dollar is inversely proportional to the number of dollars you already have.

The medium estimate uses a risk aversion parameter of 2, which means that the real value of a dollar is inversely proportional to the square of the number of dollars you already have.

And then the “liberal” estimate uses a risk aversion parameter of 3, which means that the real value of a dollar is inversely proportional to the cube of the number of dollars you already have.

I’ll compare ten countries, which I think are broadly representative of classes of countries in the world today.

The United States, the world hegemon which needs no introduction.

China, rising world superpower and world’s most populous country.

India, world’s largest democracy and developing economy with a long way to go.

Norway, as representative of the Scandinavian social democracies.

Germany, as representative of continental Europe.

Russia, as representative of the Soviet Union and the Second World bloc.

Saudi Arabia, as representative of the Middle East petrostates.

Botswana, as representative of African developing economies.

Zimbabwe, as representative of failed Sub-Saharan African states.

Brazil, as representative of Latin American developing economies.
The ordering of these countries by GDP per-capita PPP is probably not too surprising:

Norway 69,249
United States 57,436
Saudi Arabia 55,158
Germany 48,111
Russia 26,490
Botswana 17,042
China 15,399
Brazil 15,242
India 6,616
Zimbabwe 1,970

Norway is clearly the richest, the US, Saudi Arabia, and Germany are quite close, Russia is toward the upper end, Botswana, China, and Brazil are close together in the middle, and then India and especially Zimbabwe are extremely poor.

But now let’s take a look at the inequality in each country, as measured by the Gini coefficient (which ranges from 0, perfect equality, to 1, total inequality).

Botswana 0.605
Zimbabwe 0.501
Brazil 0.484
United States 0.461
Saudi Arabia 0.459
China 0.422
Russia 0.416
India 0.351
Germany 0.301
Norway 0.259

The US remains (alarmingly) close to Saudi Arabia by this measure. Most of the countries are between 40 and 50. But Botswana is astonishingly unequal, while Germany and Norway are much more equal.

With that in mind, let’s take a look at the inequality-adjusted per-capita GDP. First, the conservative estimate, with a parameter of 1:

Norway 58700
United States 42246
Saudi Arabia 40632
Germany 39653
Russia 20488
China 11660
Botswana 11138
Brazil 11015
India 5269
Zimbabwe 1405

So far, ordering of nations is almost the same compared to what we got with just per-capita GDP. But notice how Germany has moved up closer to the US and Botswana actually fallen behind China.

Now let’s try a parameter of 2, which I think is the closest to the truth:

Norway 49758
Germany 32683
United States 31073
Saudi Arabia 29931
Russia 15581
China 8829
Brazil 7961
Botswana 7280
India 4197
Zimbabwe 1002

Now we have seen some movement. Norway remains solidly on top, but Germany has overtaken the United States and Botswana has fallen behind not only China, but also Brazil. Russia remains in the middle, and India and Zimbawbe remain on the bottom.

Finally, let’s try a parameter of 3.

Norway 42179
Germany 26937
United States 22855
Saudi Arabia 22049
Russia 11849
China 6685
Brazil 5753
Botswana 4758
India 3343
Zimbabwe 715

Norway has now pulled far and away ahead of everyone else. Germany is substantially above the United States. China has pulled away from Brazil, and Botswana has fallen almost all the way to the level of India. Zimbabwe, as always, is at the very bottom.

Let’s compare this to another measure of national well-being, the Inequality-Adjusted Human Development Index (which goes from 0, the worst, to 1 the best). This index combines education, public health, and income, and adjusts for inequality. It seems to be a fairly good measure of well-being, but it’s very difficult to compile data for, so a lot of countries are missing (including Saudi Arabia); plus the precise weightings on everything are very ad hoc.

Norway 0.898
Germany 0.859
United States 0.796
Russia 0.725
China 0.543
Brazil 0.531
India 0.435
Botswana 0.433
Zimbabwe 0.371

Other than putting India above Botswana, this ordering is the same as what we get from my (much easier to calculate and theoretically more well-founded) index with either a parameter of 2 or 3.

What’s more, my index can be directly interpreted: The average standard of living in the US is as if everyone were making $31,073 per year. What exactly is an IHDI index of 0.796 supposed to mean? We’re… 79.6% of the way to the best possible country?

In any case, there’s a straightforward (if not terribly surprising) policy implication here: Inequality is a big problem.

In particular, inequality in the US is clearly too high. Despite an overall income that is very high, almost 18 log points higher than Germany, our overall standard of living is actually about 5 log points lower due to our higher level of inequality. While our average income is only 19 log points lower than Norway, our actual standard of living is 47 log points lower.

Inequality in Botswana also means that their recent astonishing economic growth is not quite as impressive as it at first appeared. Many people are being left behind. While in raw income they appear to be 10 log points ahead of China and only 121 log points behind the US, once you adjust for their very high inequality they are 19 log points behind China, and 145 log points behind the US.

Of course, some things don’t change. Norway is still on top, and Zimbabwe is still on the bottom.

Think of this as a moral recession

2017-08-272017-08-29 PNRJ core principles, current events, development economics, ethics Donald Trump, economic growth, Germany, Great Depression, history, income, inequality, justice, Nazis, nuclear war, progress, recession, war, wealth

August 27, JDN 2457993

The Great Depression was, without doubt, the worst macroeconomic event of the last 200 years. Over 30 million people became unemployed. Unemployment exceeded 20%. Standard of living fell by as much as a third in the United States. Political unrest spread across the world, and the collapsing government of Germany ultimately became the Third Reich and triggered the Second World War If we ignore the world war, however, the effect on mortality rates was surprisingly small. (“Other than that, Mrs. Lincoln, how was the play?”)

And yet, how long do you suppose it took for economic growth to repair the damage? 80 years? 50 years? 30 years? 20 years? Try ten to fifteen. By 1940, the US, US, Germany, and Japan all had a per-capita GDP at least as high as in 1930. By 1945, every country in Europe had a per-capita GDP at least as high as they did before the Great Depression.

The moral of this story is this: Recessions are bad, and can have far-reaching consequences; but ultimately what really matters in the long run is growth.

Assuming the same growth otherwise, a country that had a recession as large as the Great Depression would be about 70% as rich as one that didn’t.

But over 100 years, a country that experienced 3% growth instead of 2% growth would be over two and a half times richer.

Therefore, in terms of standard of living only, if you were given the choice between having a Great Depression but otherwise growing at 3%, and having no recessions but growing at 2%, your grandchildren will be better off if you chose the former. (Of course, given the possibility of political unrest or even war, the depression could very well end up worse.)

With that in mind, I want you to think of the last few years—and especially the last few months—as a moral recession. Donald Trump being President of the United States is clearly a step backward for human civilization, and it seems to have breathed new life into some of the worst ideologies our society has ever harbored, from extreme misogyny, homophobia, right-wing nationalism, and White supremacism to outright Neo-Nazism. When one of the central debates in our public discourse is what level of violence is justifiable against Nazis under what circumstances, something has gone terribly, terribly wrong.

But much as recessions are overwhelmed in the long run by economic growth, there is reason to be confident that this moral backslide is temporary and will be similarly overwhelmed by humanity’s long-run moral progress.

What moral progress, you ask? Let’s remind ourselves.

Just 100 years ago, women could not vote in the United States.

160 years ago, slavery was legal in 15 US states.

Just 3 years ago, same-sex marriage was illegal in 14 US states. Yes, you read that number correctly. I said three. There are gay couples graduating high school and getting married now who as freshmen didn’t think they would be allowed to get married.

That’s just the United States. What about the rest of the world?

100 years ago, almost all of the world’s countries were dictatorships. Today, half of the world’s countries are democracies. Indeed, thanks to India, the majority of the world’s population now lives under democracy.

35 years ago, the Soviet Union still ruled most of Eastern Europe and Northern Asia with an iron fist (or should I say “curtain”?).

30 years ago, the number of human beings in extreme poverty—note I said number, not just rate; the world population was two-thirds what it is today—was twice as large as it is today.

Over the last 65 years, the global death rate due to war has fallen from 250 per million to just 10 per million.

The global literacy rate has risen from 40% to 80% in just 50 years.

World life expectancy has increased by 6 years in just the last 20 years.

We are living in a golden age. Do not forget that.

Indeed, if there is anything that could destroy all these astonishing achievements, I think it would be our failure to appreciate them.

If you listen to what these Neo-Nazi White supremacists say about their grievances, they sound like the spoiled children of millionaires (I mean, they elected one President, after all). They are outraged because they only get 90% of what they want instead of 100%—or even outraged not because they didn’t get what they wanted but because someone else they don’t know also did.

If you listen to the far left, their complaints don’t make much more sense. If you didn’t actually know any statistics, you’d think that life is just as bad for Black people in America today as it was under Jim Crow or even slavery. Well, it’s not even close. I’m not saying racism is gone; it’s definitely still here. But the civil rights movement has made absolutely enormous strides, from banning school segregation and housing redlining to reforming prison sentences and instituting affirmative action programs. Simply the fact that “racist” is now widely considered a terrible thing to be is a major accomplishment in itself. A typical Black person today, despite having only about 60% of the income of a typical White person, is still richer than a typical White person was just 50 years ago. While the 71% high school completion rate Black people currently have may not sound great, it’s much higher than the 50% rate that the whole US population had as recently as 1950.

Yes, there are some things that aren’t going very well right now. The two that I think are most important are climate change and income inequality. As both the global mean temperature anomaly and the world top 1% income share continue to rise, millions of people will suffer and die needlessly from diseases of poverty and natural disasters.

And of course if Neo-Nazis manage to take hold of the US government and try to repeat the Third Reich, that could be literally the worst thing that ever happened. If it triggered a nuclear war, it unquestionably would be literally the worst thing that ever happened. Both these events are unlikely—but not nearly as unlikely as they should be. (Five Thirty Eight interviewed several nuclear experts who estimated a probability of imminent nuclear war at a horrifying five percent.) So I certainly don’t want to make anyone complacent about these very grave problems.

But I worry also that we go too far the other direction, and fail to celebrate the truly amazing progress humanity has made thus far. We hear so often that we are treading water, getting nowhere, or even falling backward, that we begin to feel as though the fight for moral progress is utterly hopeless. If all these centuries of fighting for justice really had gotten us nowhere, the only sensible thing to do at this point would be to give up. But on the contrary, we have made enormous progress in an incredibly short period of time. We are on the verge of finally winning this fight. The last thing we want to do now is give up.

What we lose by aggregating

2017-06-252017-10-08 PNRJ core principles, critique of neoclassical economics, inequality, macroeconomics agent-based model, aggregation, business cycle, constant relative risk aversion, development, economic growth, econophysics, Gorman Aggregation Theorem, growth, heterogeneity, inequality, microfoundation, Pareto distribution, poverty, representative agent, Robert Lucas

Jun 25, JDN 2457930

One of the central premises of current neoclassical macroeconomics is the representative agent: Rather than trying to keep track of all the thousands of firms, millions of people, and billions of goods and in a national economy, we aggregate everything up into a single worker/consumer and a single firm producing and consuming a single commodity.

This sometimes goes under the baffling misnomer of microfoundations, which would seem to suggest that it carries detailed information about the microeconomic behavior underlying it; in fact what this means is that the large-scale behavior is determined by some sort of (perfectly) rational optimization process as if there were just one person running the entire economy optimally.

First of all, let me say that some degree of aggregation is obviously necessary. Literally keeping track of every single transaction by every single person in an entire economy would require absurd amounts of data and calculation. We might have enough computing power to theoretically try this nowadays, but then again we might not—and in any case such a model would very rapidly lose sight of the forest for the trees.

But it is also clearly possible to aggregate too much, and most economists don’t seem to appreciate this. They cite a couple of famous theorems (like the Gorman Aggregation Theorem) involving perfectly-competitive firms and perfectly-rational identical consumers that offer a thin veneer of justification for aggregating everything into one, and then go on with their work as if this meant everything were fine.

What’s wrong with such an approach?

Well, first of all, a representative agent model can’t talk about inequality at all. It’s not even that a representative agent model says inequality is good, or not a problem; it lacks the capacity to even formulate the concept. Trying to talk about income or wealth inequality in a representative agent model would be like trying to decide whether your left hand is richer than your right hand.

It’s also nearly impossible to talk about poverty in a representative agent model; the best you can do is talk about a country’s overall level of development, and assume (not without reason) that a country with a per-capita GDP of $1,000 probably has a lot more poverty than a country with a per-capita GDP of $50,000. But two countries with the same per-capita GDP can have very different poverty rates—and indeed, the cynic in me wonders if the reason we’re reluctant to use inequality-adjusted measures of development is precisely that many American economists fear where this might put the US in the rankings. The Human Development Index was a step in the right direction because it includes things other than money (and as a result Saudi Arabia looks much worse and Cuba much better), but it still aggregates and averages everything, so as long as your rich people are doing well enough they can compensate for how badly your poor people are doing.

Nor can you talk about oligopoly in a representative agent model, as there is always only one firm, which for some reason chooses to act as if it were facing competition instead of rationally behaving as a monopoly. (This is not quite as nonsensical as it sounds, as the aggregation actually does kind of work if there truly are so many firms that they are all forced down to zero profit by fierce competition—but then again, what market is actually like that?) There is no market share, no market power; all are at the mercy of the One True Price.

You can still talk about externalities, sort of; but in order to do so you have to set up this weird doublethink phenomenon where the representative consumer keeps polluting their backyard and then can’t figure out why their backyard is so darn polluted. (I suppose humans do seem to behave like that sometimes; but wait, I thought you believed people were rational?) I think this probably confuses many an undergrad, in fact; the models we teach them about externalities generally use this baffling assumption that people consider one set of costs when making their decisions and then bear a different set of costs from the outcome. If you can conceptualize the idea that we’re aggregating across people and thinking “as if” there were a representative agent, you can ultimately make sense of this; but I think a lot of students get really confused by it.

Indeed, what can you talk about with a representative agent model? Economic growth and business cycles. That’s… about it. These are not minor issues, of course; indeed, as Robert Lucas famously said:

The consequences for human welfare involved in questions like these [on economic growth] are simply staggering: once one starts to think about them, it is hard to think about anything else.

I certainly do think that studying economic growth and business cycles should be among the top priorities of macroeconomics. But then, I also think that poverty and inequality should be among the top priorities, and they haven’t been—perhaps because the obsession with representative agent models make that basically impossible.

I want to be constructive here; I appreciate that aggregating makes things much easier. So what could we do to include some heterogeneity without too much cost in complexity?

Here’s one: How about we have p firms, making q types of goods, sold to n consumers? If you want you can start by setting all these numbers equal to 2; simply going from 1 to 2 has an enormous effect, as it allows you to at least say something about inequality. Getting them as high as 100 or even 1000 still shouldn’t be a problem for computing the model on an ordinary laptop. (There are “econophysicists” who like to use these sorts of agent-based models, but so far very few economists take them seriously. Partly that is justified by their lack of foundational knowledge in economics—the arrogance of physicists taking on a new field is legendary—but partly it is also interdepartmental turf war, as economists don’t like the idea of physicists treading on their sacred ground.) One thing that really baffles me about this is that economists routinely use computers to solve models that can’t be calculated by hand, but it never seems to occur to them that they could have started at the beginning planning to make the model solvable only by computer, and that would spare them from making the sort of heroic assumptions they are accustomed to making—assumptions that only made sense when they were used to make a model solvable that otherwise wouldn’t be.

You could also assign a probability distribution over incomes; that can get messy quickly, but we actually are fortunate that the constant relative risk aversion utility function and the Pareto distribution over incomes seem to fit the data quite well—as the product of those two things is integrable by hand. As long as you can model how your policy affects this distribution without making that integral impossible (which is surprisingly tricky), you can aggregate over utility instead of over income, which is a lot more reasonable as a measure of welfare.

And really I’m only scratching the surface here. There are a vast array of possible new approaches that would allow us to extend macroeconomic models to cover heterogeneity; the real problem is an apparent lack of will in the community to make such an attempt. Most economists still seem very happy with representative agent models, and reluctant to consider anything else—often arguing, in fact, that anything else would make the model less microfounded when plainly the opposite is the case.

What is the point of democracy?

2017-04-092017-04-09 PNRJ cognitive science, core principles, critique of neoclassical economics, public policy Applause Light, autocracy, California, collective action, commitment, corruption, deep state, democracy, Denmark, economic growth, government, inequality, Less Wrong, Luxembourg, Mississippi, oligarchy, republic, Russia, South Korea, Switzerland, taxation, technocracy, Turkey, voting

Apr 9, JDN 2457853

[This topic was chosen by Patreon vote.]

“Democracy” is the sort of word that often becomes just an Applause Light (indeed it was the original example Less Wrong used). Like “freedom” and “liberty” (and for much the same reasons), it’s a good thing, that much we know; but it’s often unclear what is even meant by the word, much less why it should be so important to us.

From another angle, it is strangely common for economists and political scientists to argue that democracy is not all that important; they at least tend to use a precise formal definition of “democracy”, but are oddly quick to dismiss it as pointless or even harmful when it doesn’t line up precisely with their models of an efficient economy or society. I think the best example of this is the so-called “Downs paradox”, where political scientists were so steeped in the tradition of defining all rationality as psychopathic self-interest that they couldn’t even explain why it would occur to anyone to vote. (And indeed, rumor has it that most economists don’t bother to vote, much less campaign politically—which perhaps begins to explain why our economic policy is so terrible.)

Yet especially for Americans in the Trump era, I think it is vital to understand what “democracy” is supposed to mean, and why it is so important.

So, first of all, what is democracy? It is nothing more or less than government by popular vote.

This comes in degrees, of course: The purest direct democracy would have the entire population vote on even the most mundane policies and decisions. You could actually manage something like a monastery or a social club in such a fashion, but this is clearly unworkable on any large scale. Even once you get to hundreds of people, much less thousands or millions, it becomes unviable. The closest example I’ve seen is Switzerland, where there are always numerous popular referenda on ballots that are voted on by entire regions or the entire country—and even then, Switzerland does have representatives that make many of the day-to-day decisions.

So in practice all large-scale democratic systems are some degree of representative democracy, or republic, where some especially decisions may be made by popular vote, but most policies are made by elected representatives, staff appointed by those representatives, or even career civil servants who are appointed in a nominally apolitical process not so different from private-sector hiring. In the most extreme cases such civil servants can become so powerful that you get a deep state, where career bureaucrats exercise more power than elected officials—at that point I think you have actually lost the right to really call yourself a “democracy” and have become something more like a technocracy.
Yet of course a country can get even more undemocratic than that, and many are, governed by an aristocracy or oligarchy that vests power in a small number of wealthy and powerful individuals, or monarchy or autocracy that gives near-absolute power to a single individual.

Thus, there is a continuum of most to least democratic, with popular vote at one end, followed by elected representatives, followed by appointed civil servants, followed by a handful of oligarchs, and ultimately the most undemocratic system is an autocracy controlled by a single individual.

I also think it’s worth mentioning that constitutional monarchies with strong parliamentary systems, like the United Kingdom and Norway, are also “democracies” in the sense I intend. Yes, technically they have these hereditary monarchs—but in practice, the vast majority of the state’s power is vested in the votes of its people. Indeed, if we separate out parliamentary constitutional monarchy from presidential majoritarian democracy and compare them, the former might actually turn out to be better. Certainly, some of the world’s most prosperous nations are governed that way.

As I’ve already acknowledge, the very far extreme of pure direct democracy is unfeasible. But why would we want to get closer to that end? Why be like Switzerland or Denmark rather than like Turkey or Russia—or for that matter why be like California rather than like Mississippi?
Well, if you know anything about the overall welfare of these states, it almost seems obvious—Switzerland and Denmark are richer, happier, safer, healthier, more peaceful, and overall better in almost every way than Turkey and Russia. The gap between California and Mississippi is not as large, but it is larger than most people realize. Median household income in California is $64,500; in Mississippi it is only $40,593. Both are still well within the normal range of a highly-developed country, but that effectively makes California richer than Luxembourg but Mississippi poorer than South Korea. But perhaps the really stark comparison to make is life expectancy: Life expectancy at birth in California is almost 81 years, while in Mississippi it’s only 75.

Of course, there are a lot of other differences between states besides how much of their governance is done by popular referendum. Simply making Mississippi decide more things by popular vote would not turn it into California—much less would making Turkey more democratic turn it into Switzerland. So we shouldn’t attribute these comparisons entirely to differences in democracy. Indeed, a pair of two-way comparisons is only in the barest sense a statistical argument; we should be looking at dozens if not hundreds of comparisons if we really want to see the effects of democracy. And we should of course be trying to control for other factors, adjust for country fixed-effects, and preferably use natural experiments or instrumental variables to tease out causality.

Yet such studies have in fact been done. Stronger degrees of democracy appear to improve long-run economic growth, as well as reduce corruption, increase free trade, protect peace, and even improve air quality.

Subtler analyses have compared majoritarian versus proportional systems (where proportional seems, to me, at least, more democratic), as well as different republican systems with stronger or weaker checks and balances (stronger is clearly better, though whether that is “more democratic” is at least debatable). The effects of democracy on income distribution are more complicated, probably because there have been some highly undemocratic socialist regimes.

So, the common belief that democracy is good seems to be pretty well supported by the data. But why is democracy good? Is it just a practical matter of happening to get better overall results? Could it one day be overturned by some superior system such as technocracy or a benevolent autocratic AI?

Well, I don’t want to rule out the possibility of improving upon existing systems of government. Clearly new systems of government have in fact emerged over the course of history—Greek “democracy” and Roman “republic” were both really aristocracy, and anything close to universal suffrage didn’t really emerge on a large scale until the 20th century. So the 21st (or 22nd) century could well devise a superior form of government we haven’t yet imagined.
However, I do think there is good reason to believe that any new system of government that actually manages to improve upon democracy will still resemble democracy, because there are three key features democracy has that other systems of government simply can’t match. It is these three features that make democracy so important and so worth fighting for.

1. Everyone’s interests are equally represented.

Perhaps no real system actually manages to represent everyone’s interests equally, but the more democratic a system is, the better it will conform to this ideal. A well-designed voting system can aggregate the interests of an entire population and choose the course of action that creates the greatest overall benefit.

Markets can also be a good system for allocating resources, but while markets represent everyone’s interests, they do so highly unequally. Rich people are quite literally weighted more heavily in the sum.

Most systems of government do even worse, by completely silencing the voices of the majority of the population. The notion of a “benevolent autocracy” is really a conceit; what makes you think you could possibly keep the autocrat benevolent?

This is also why any form of disenfranchisement is dangerous and a direct attack upon democracy. Even if people are voting irrationally, against their own interests and yours, by silencing their voice you are undermining the most fundamental tenet of democracy itself. All voices must be heard, no exceptions. That is democracy’s fundamental strength.

2. The system is self-correcting.

This may more accurately describe a constitutional republican system with strong checks and balances, but that is what most well-functioning democracies have and it is what I recommend. If you conceive of “more democracy” as meaning that people can vote their way into fascism by electing a sufficiently charismatic totalitarian, then I do not want us to have “more democracy”. But just as contracts and regulations that protect you can make you in real terms more free because you can now safely do things you otherwise couldn’t risk, I consider strong checks and balances that maintain the stability of a republic against charismatic fascists to be in a deeper sense more democratic. This is ultimately semantic; I think I’ve made it clear enough that I want strong checks and balances.

With such checks and balances in place, democracies may move slower than autocracies; they may spend more time in deliberation or even bitter, polarized conflict. But this also means that their policies do not lurch from one emperor’s whim to another, and they are stable against being overtaken by corruption or fascism. Their policies are stable and predictable; their institutions are strong and resilient.

No other system of government yet devised by humans has this kind of stability, which may be why democracies are gradually taking over the world. Charismatic fascism fails when the charismatic leader dies; hereditary monarchy collapses when the great-grandson of the great king is incompetent; even oligarchy and aristocracy, which have at least some staying power, ultimately fall apart when the downtrodden peasants ultimately revolt. But democracy abides, for where monarchy and aristocracy are made of families and autocracy and fascism are made of a single man, democracy is made of principles and institutions. Democracy is evolutionarily stable, and thus in Darwinian terms we can predict it will eventually prevail.

3. The coercion that government requires is justified.

All government is inherently coercive. Libertarians are not wrong about this. Taxation is coercive. Regulation is coercive. Law is coercive. (The ones who go on to say that all government is “death threats” or “slavery” are bonkers, mind you. But it is in fact coercive.)

The coercion of government is particularly terrible if that coercion is coming from a system like an autocracy, where the will of the people is minimally if at all represented in the decisions of policymakers. Then that is a coercion imposed from outside, a coercion in the fullest sense, one person who imposes their will upon another.

But when government coercion comes from a democracy, it takes on a fundamentally different meaning. Then it is not they who coerce us—it is we who coerce ourselves. Now, why in the world would you coerce yourself? It seems ridiculous, doesn’t it?

Not if you know any game theory. There are in fall all sorts of reasons why one might want to coerce oneself, and two in particular become particularly important for the justification of democratic government.

The first and most important is collective action: There are many situations in which people all working together to accomplish a goal can be beneficial to everyone, but nonetheless any individual person who found a way to shirk their duty and not contribute could benefit even more. Anyone who has done a group project in school with a couple of lazy students in it will know this experience: You end up doing all the work, but they still get a good grade at the end. If everyone had taken the rational, self-interested action of slacking off, everyone in the group would have failed the project.

Now imagine that the group project we’re trying to achieve is, say, defending against an attack by Imperial Japan. We can’t exactly afford to risk that project falling through. So maybe we should actually force people to support it—in the form of taxes, or even perhaps a draft (as ultimately we did in WW2). Then it is no longer rational to try to shirk your duty, so everyone does their duty, the project gets done, and we’re all better off. How do we decide which projects are important enough to justify such coercion? We vote, of course. This is the most fundamental justification of democratic government.

The second that is relevant for government is commitment. There are many circumstances in which we want to accomplish something in the future, and from a long-run perspective it makes sense to achieve that goal—but then when the time comes to take action, we are tempted to procrastinate or change our minds. How can we resolve such a dilemma? Well, one way is to tie our own hands—to coerce ourselves into carrying out the necessary task we are tempted to avoid or delay.

This applies to many types of civil and criminal law, particularly regarding property ownership. Murder is a crime that most people would not commit even if it were completely legal. But shoplifting? I think if most people knew there would be no penalty for petty theft and retail fraud they would be tempted into doing it at least on occasion. I doubt it would be frequent enough to collapse our entire economic system, but it would introduce a lot of inefficiency, and make almost everything more expensive. By having laws in place that punish us for such behavior, we have a way of defusing such temptations, at least for most people most of the time. This is not as important for the basic functioning of government as is collective action, but I think it is still important enough to be worthy of mention.

Of course, there will always be someone who disagrees with any given law, regardless of how sensible and well-founded that law may be. And while in some sense “we all” agreed to pay these taxes, when the IRS actually demands that specific dollar amount from you, it may well be an amount that you would not have chosen if you’d been able to set our entire tax system yourself. But this is a problem of aggregation that I think may be completely intractable; there’s no way to govern by consensus, because human beings just can’t achieve consensus on the scale of millions of people. Governing by popular vote and representation is the best alternative we’ve been able to come up with. If and when someone devises a system of government that solves that problem and represents the public will even better than voting, then we will have a superior alternative to democracy.

Until then, it is as Churchill said: “Democracy is the worst form of government, except for all the others.”

Should we give up on growth?

2016-07-022016-07-02 PNRJ core principles, development economics, ethics, futurism, macroeconomics, public policy China, David Attenborough, economic growth, environment, environmentalism, externalities, GDP, Great Leap Forward, growth, Liberia, Mali, Mao, Norway, nuclear energy, Positive Money, productivity, Saudi Arabia, Scandinaviaisbetter, Solow-Swan model, Star Trek, Sweden

JDN 2457572

Recently I read this article published by the Post Carbon Institute, “How to Shrink the Economy without Crashing It”, which has been going around environmentalist circles. (I posted on Facebook that I’d answer it in more detail, so here goes.)

This is the far left view on climate change, which is wrong, but not nearly as wrong as even the “mainstream” right-wing view that climate change is not a serious problem and we should continue with business as usual. Most of the Republicans who ran for President this year didn’t believe in using government action to fight climate change, and Donald Trump doesn’t even believe it exists.
This core message of the article is clearly correct:

We know this because Global Footprint Network, which methodically tracks the relevant data, informs us that humanity is now using 1.5 Earths’ worth of resources.

We can temporarily use resources faster than Earth regenerates them only by borrowing from the future productivity of the planet, leaving less for our descendants. But we cannot do this for long.

To be clear, “using 1.5 Earths” is not as bad as it sounds; spending is allow to exceed income at times, as long as you have reason to think that future income will exceed future spending, and this is true not just of money but also of natural resources. You can in fact “borrow from the future”, provided you do actually have a plan to pay it back. And indeed there has been some theoretical work by environmental economists suggesting that we are rightly still in the phase of net ecological dissaving, and won’t enter the phase of net ecological saving until the mid-21st century when our technology has made us two or three times as productive. This optimal path is defined by a “weak sustainability” condition where total real wealth never falls over time, so any natural wealth depleted is replaced by at least as much artificial wealth.

Of course some things can’t be paid back; while forests depleted can be replanted, if you drive species to extinction, only very advanced technology could restore them. And we are driving thousands of species to extinction every single year. Even if we should be optimally dissaving, we are almost certainly depleting natural resources too fast, and depleting natural resources that will be difficult if not impossible to later restore. In that sense, the Post Carbon Institute is right: We must change course toward ecological sustainability.

Unfortunately, their specific ideas of how to do so leave much to be desired. Beyond ecological sustainability, they really argue for two propositions: one is radical but worth discussing, but the other is totally absurd.

The absurd claim is that we should somehow force the world to de-urbanize and regress into living in small farming villages. To show this is a bananaman and not a strawman, I quote:

8. Re-localize. One of the difficulties in the transition to renewable energy is that liquid fuels are hard to substitute. Oil drives nearly all transportation currently, and it is highly unlikely that alternative fuels will enable anything like current levels of mobility (electric airliners and cargo ships are non-starters; massive production of biofuels is a mere fantasy). That means communities will be obtaining fewer provisions from far-off places. Of course trade will continue in some form: even hunter-gatherers trade. Re-localization will merely reverse the recent globalizing trade trend until most necessities are once again produced close by, so that we—like our ancestors only a century ago—are once again acquainted with the people who make our shoes and grow our food.

9. Re-ruralize. Urbanization was the dominant demographic trend of the 20^th century, but it cannot be sustained. Indeed, without cheap transport and abundant energy, megacities will become increasingly dysfunctional. Meanwhile, we’ll need lots more farmers. Solution: dedicate more societal resources to towns and villages, make land available to young farmers, and work to revitalize rural culture.

First of all: Are electric cargo ships non-starters? The Ford-class aircraft carrier is electric, specifically nuclear. Nuclear-powered cargo ships would raise a number of issues in terms of practicality, safety, and regulation, but they aren’t fundamentally infeasible. Massive efficient production of biofuels is a fantasy as long as the energy to do it is provided by coal power, but not if it’s provided by nuclear. Perhaps this author’s concept of “infeasible” really just means “infeasible if I can’t get over my irrational fear of nuclear power”. Even electric airliners are not necessarily out of the question; NASA has been experimenting with electric aircraft.

The most charitable reading I can give of this (in my terminology of argument “men”, I’m trying to make a banana out of iron), is as promoting slightly deurbanizing and going back to more like say the 1950s United States, with 64% of people in cities instead of 80% today. Even then this makes less than no sense, as higher urbanization is associated with lower per-capita ecological impact, which frankly shouldn’t even be surprising because cities have such huge economies of scale. Instead of everyone needing a car to get around in the suburbs, we can all share a subway system in the city. If that subway system is powered by a grid of nuclear, solar, and wind power, it could produce essentially zero carbon emissions—which is absolutely impossible for rural or suburban transportation. Urbanization is also associated with slower population growth (or even population decline), and indeed the reason population growth is declining is that rising standard of living and greater urbanization have reduced birth rates and will continue to do so as poor countries reach higher levels of development. Far from being a solution to ecological unsustainability, deurbanization would make it worse.

And that’s not even getting into the fact that you would have to force urban white-collar workers to become farmers, because if we wanted to be farmers we already would be (the converse is not as true), and now you’re actually talking about some kind of massive forced labor-shift policy like the Great Leap Forward. Normally I’m annoyed when people accuse environmentalists of being totalitarian communists, but in this case, I think the accusation might be onto something.

Moving on, the radical but not absurd claim is that we must turn away from economic growth and even turn toward economic shrinkage:

One way or another, the economy (and here we are talking mostly about the economies of industrial nations) must shrink until it subsists on what Earth can provide long-term.

[…]

If nothing is done deliberately to reverse growth or pre-adapt to inevitable economic stagnation and contraction, the likely result will be an episodic, protracted, and chaotic process of collapse continuing for many decades or perhaps centuries, with innumerable human and non-human casualties.

I still don’t think this is right, but I understand where it’s coming from, and like I said it’s worth talking about.

The biggest mistake here lies in assuming that GDP is directly correlated to natural resource depletion, so that the only way to reduce natural resource depletion is to reduce GDP. This is not even remotely true; indeed, countries vary almost as much in their GDP-per-carbon-emission ratio as they do in their per-capita GDP. As usual, #ScandinaviaIsBetter; Norway and Sweden produce about $8,000 in GDP per ton of carbon, while the US produces only about $2,000 per ton. Both poor and rich countries can be found among both the inefficient and the efficient. Saudi Arabia is very rich and produces about $900 per ton, while Liberia is exceedingly poor and produces about $800 per ton. I already mentioned how Norway produces $8,000 per ton, and they are as rich as Saudi Arabia. Yet above them is Mali, which produces almost $11,000 per ton, and is as poor as Liberia. Other notable facts: France is head and shoulders above the UK and Germany at almost $6000 per ton instead of $4300 and $3600 respectively—because France runs almost entirely on nuclear power.

So the real conclusion to draw from this is not that we need to shrink GDP, but that we need to make GDP more like how they do it in Norway or at least how they do it in France, rather than how we do in the US, and definitely not how they do it in Saudi Arabia. Total world emissions are currently about 36 billion tons per year, producing about $108 trillion in GDP, averaging about $3,000 of GDP per ton of carbon emissions. If we could raise the entire world to the ecological efficiency of Norway, we could double world GDP and still be producing less CO2 than we currently are. Turning the entire planet into a bunch of Norways would indeed raise CO2 output, by about a factor of 2; but it would raise standard of living by a factor of 5, and indeed bring about a utopian future with neither war nor hunger. Compare this to the prospect of cutting world GDP in half, but producing it as inefficiently as in Saudi Arabia: This would actually increase global CO2 emissions, almost as much as turning every country into Norway.

But ultimately we will in fact need to slow down or even end economic growth. I ran a little model for you, which shows a reasonable trajectory for global economic growth.

This graph shows the growth rate in productivity slowly declining, along with a much more rapidly declining GDP growth:

This graph shows the growth trajectory for total real capital and GDP:

And finally, this is the long-run trend for GDP graphed on a log scale:

The units are arbitrary, though it’s not unreasonable to imagine them as being years and hundreds of dollars in per-capita GDP. If that is indeed what you imagine them to be, my model shows us the Star Trek future: In about 300 years, we rise from a per-capita GDP of $10,000 to one of $165,000—from a world much like today to a world where everyone is a millionaire.

Notice that the growth rate slows down a great deal fairly quickly; by the end of 100 years (i.e., the end of the 21^st century), growth has slowed from its peak over 10% to just over 2% per year. By the end of the 300-year period, the growth rate is a crawl of only 0.1%.

Of course this model is very simplistic, but I chose it for a very specific reason: This is not a radical left-wing environmentalist model involving “limits to growth” or “degrowth”. This is the Solow-Swan model, the paradigm example of neoclassical models of economic growth. It is sometimes in fact called simply “the neoclassical growth model”, because it is that influential. I made one very small change from the usual form, which was to assume that the rate of productivity growth would decline exponentially over time. Since productivity growth is exogenous to the model, this is a very simple change to make; it amounts to saying that productivity-enhancing technology is subject to diminishing returns, which fits recent data fairly well but could be totally wrong if something like artificial intelligence or neural enhancement ever takes off.

I chose this because many environmentalists seem to think that economists have this delusional belief that we can maintain a rate of economic growth equal to today indefinitely. David Attenborough famously said “Anyone who believes in indefinite growth in anything physical, on a physically finite planet, is either mad – or an economist.”

Another physicist argued that if we increase energy consumption 2.3% per year for 400 years, we’d literally boil the Earth. Yes, we would, and no economist I know of believes that this is what will happen. Economic growth doesn’t require energy growth, and we do not think growth can or should continue indefinitely—we just think it can and should continue a little while longer. We don’t think that a world standard of living 1000 times as good as Norway is going to happen; we think that a world standard of living equal to Norway is worth fighting for.

Indeed, we are often the ones trying to explain to leaders that they need to adapt to slower growth rates—this is particularly a problem in China, where nationalism and groupthink seems to have convinced many people in China that 7% annual growth is the result of some brilliant unique feature of the great Chinese system, when it is in fact simply the expected high growth rate for an economy that is very poor and still catching up by establishing a capital base. (It’s not so much what they are doing right now, as what they were doing wrong before. Just as you feel a lot better when you stop hitting yourself in the head, countries tend to grow quite fast after they transition out of horrifically terrible economic policy—and it doesn’t get much more terrible than Mao.) Even a lot of the IMF projections are now believed to be too optimistic, because they didn’t account for how China was fudging the numbers and rapidly depleting natural resources.

Some of the specific policies recommended in the article are reasonable, while others go to far.

1. Energy: cap, reduce, and ration it. Energy is what makes the economy go, and expanded energy consumption is what makes it grow. Climate scientists advocate capping and reducing carbon emissions to prevent planetary disaster, and cutting carbon emissions inevitably entails reducing energy from fossil fuels. However, if we aim to shrink the size of the economy, we should restrain not just fossil energy, but all energy consumption. The fairest way to do that would probably be with tradable energy quotas.

I strongly support cap-and-trade on fossil fuels, but I can’t support it on energy in general, unless we get so advanced that we’re seriously concerned about significantly altering the entropy of the universe. Solar power does not have negative externalities, and therefore should not be taxed or capped.

The shift to renewable energy sources is a no-brainer, and I know of no ecologist and few economists who would disagree.

This one is rich, coming from someone who goes on to argue for nonsensical deurbanization:

However, this is a complicated process. It will not be possible merely to unplug coal power plants, plug in solar panels, and continue with business as usual: we have built our immense modern industrial infrastructure of cities, suburbs, highways, airports, and factories to take advantage of the unique qualities and characteristics of fossil fuels.

How will we make our industrial infrastructure run off a solar grid? Urbanization. When everything is in one place, you can use public transportation and plug everything into the grid. We could replace the interstate highway system with a network of maglev lines, provided that almost everyone lived in major cities that were along those lines. We can’t do that if people move out of cities and go back to being farmers.

Here’s another weird one:

Without continued economic growth, the market economy probably can’t function long. This suggests we should run the transformational process in reverse by decommodifying land, labor, and money.

“Decommodifying money”? That’s like skinning leather or dehydrating water. The whole point of money is that it is a maximally fungible commodity. I support the idea of a land tax to provide a basic income, which could go a long way to decommodifying land and labor; but you can’t decommodify money.

The next one starts off sounding ridiculous, but then gets more reasonable:

4. Get rid of debt. Decommodifying money means letting it revert to its function as an inert medium of exchange and store of value, and reducing or eliminating the expectation that money should reproduce more of itself. This ultimately means doing away with interest and the trading or manipulation of currencies. Make investing a community-mediated process of directing capital toward projects that are of unquestioned collective benefit. The first step: cancel existing debt. Then ban derivatives, and tax and tightly regulate the buying and selling of financial instruments of all kinds.

No, we’re not going to get rid of debt. But should we regulate it more? Absolutely. A ban on derivatives is strong, but shouldn’t be out of the question; it’s not clear that even the most useful derivatives (like interest rate swaps and stock options) bring more benefit than they cause harm.

The next proposal, to reform our monetary system so that it is no longer based on debt, is one I broadly agree with, though you need to be clear about how you plan to do that. Positive Money’s plan to make central banks democratically accountable, establish full-reserve banking, and print money without trying to hide it in arcane accounting mechanisms sounds pretty good to me. Going back to the gold standard or something would be a terrible idea. The article links to a couple of “alternative money theorists”, but doesn’t explain further.

Sooner or later, we absolutely will need to restructure our macroeconomic policy so that 4% or even 2% real growth is no longer the expectation in First World countries. We will need to ensure that constant growth isn’t necessary to maintain stability and full employment.

But I believe we can do that, and in any case we do not want to stop global growth just yet—far from it. We are now on the verge of ending world hunger, and if we manage to do it, it will be from economic growth above all else.

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Human Economics

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

economic growth