Tithing makes quite a lot of sense

2019-12-222019-12-20 pnrj core principles, development economics, inequality, personal charity, Charity Navigator, Charles Dickens, Christmas, donation, GiveWell, Peter Singer, poverty, Slate Star Codex, UNICEF, wealth

Dec 22 JDN 2458840

Christmas is coming soon, and it is a season of giving: Not only gifts to those we love, but also to charities that help people around the world. It’s a theme of some of our most classic Christmas stories, like A Christmas Carol. (I do have to admit: Scrooge really isn’t wrong for not wanting to give to some random charity without any chance to evaluate it. But I also get the impression he wasn’t giving a lot to evaluated charities either.) And people do really give more around this time of year: Charitable donation rates peak in November and December (though that may also have something to do with tax deductions).

Where should we give? This is not an easy question, but it’s one that we now have tools to answer: There are various independent charity evaluation agencies, like GiveWell and Charity Navigator, which can at least provide some idea of which charities are most cost-effective.

How much should we give? This question is a good deal harder.

Perhaps a perfect being would determine their own precise marginal utility of wealth, and the marginal utility of spending on every possible charity, and give of your wealth to the best possible charity up until those two marginal utilities are equal. Since $1 to UNICEF or the Against Malaria Foundation saves about 0.02 QALY, and (unless you’re a billionaire) you don’t have enough money to meaningfully affect the budget of UNICEF, you’d probably need to give until you are yourself at the UN poverty level of $1.90 per day.

I don’t know of anyone who does this. Even Peter Singer, who writes books that essentially tell us to do this, doesn’t do this. I’m not sure it’s humanly possible to do this. Indeed, I’m not even so sure that a perfect being would do it, since it would require destroying their own life and their own future potential.

How about we all give 10%? In other words, how about we tithe? Yes, it sounds arbitrary—because it is. It could just as well have been 8% or 11%. Perhaps one-tenth feels natural to a base-10 culture made of 10-fingered beings, and if we used a base-12 numeral system we’d think in terms of giving one-twelfth instead. But 10% feels reasonable to a lot of people, it has a lot of cultural support behind it already, and it has become a Schelling point for coordination on this otherwise intractable problem. We need to draw the line somewhere, and it might as well be there.

As Slate Star Codex put it:

It’s ten percent because that’s the standard decreed by Giving What We Can and the effective altruist community. Why should we believe their standard? I think we should believe it because if we reject it in favor of “No, you are a bad person unless you give all of it,” then everyone will just sit around feeling very guilty and doing nothing. But if we very clearly say “You have discharged your moral duty if you give ten percent or more,” then many people will give ten percent or more. The most important thing is having a Schelling point, and ten percent is nice, round, divinely ordained, and – crucially – the Schelling point upon which we have already settled. It is an active Schelling point. If you give ten percent, you can have your name on a nice list and get access to a secret forum on the Giving What We Can site which is actually pretty boring.

It’s ten percent because definitions were made for Man, not Man for definitions, and if we define “good person” in a way such that everyone is sitting around miserable because they can’t reach an unobtainable standard, we are stupid definition-makers. If we are smart definition-makers, we will define it in whichever way which makes it the most effective tool to convince people to give at least that much.

I think it would be also reasonable to adjust this proportion according to your household income. If you are extremely poor, give a token amount: Perhaps 1% or 2%. (As it stands, most poor people already give more than this, and most rich people give less.) If you are somewhat below the median household income, give a bit less: Perhaps 6% or 8%. (I currently give 8%; I plan to increase to 10% once I get a higher-paying job after graduation.) If you are somewhat above, give a bit more: Perhaps 12% or 15%. If you are spectacularly rich, maybe you should give as much as 25%.

Is 10% enough? Well, actually, if everyone gave, even 1% would probably be enough. The total GDP of the First World is about $40 trillion; 1% of that is $400 billion per year, which is more than enough to end world hunger. But since we know that not everyone will give, we need to adjust our standard upward so that those who do give will give enough. (There’s actually an optimization problem here which is basically equivalent to finding a monopoly’s profit-maximizing price.) And just ending world hunger probably isn’t enough; there is plenty of disease to cure, education to improve, research to do, and ecology to protect. If say a third of First World people give 10%, that would be about $1.3 trillion, which would be enough money to at least make a huge difference in all those areas.

You can decide for yourself where you think you should draw the line. But 10% is a pretty good benchmark, and above all—please, give something. If you give anything, you are probably already above average. A large proportion of people give nothing at all. (Only 24% of US tax returns include a charitable deduction—though, to be fair, a lot of us donate but don’t itemize deductions. Even once you account for that, only about 60% of US households give to charity in any given year.)

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

2018-05-272020-06-25 pnrj ethics, inequality, personal, public policy Against Malaria Foundation, Bashar Al-Assad, charity, donation, ethics, human capital, income, inequality, moral obligation, morality, Peter Singer, philosophy, poverty, poverty gap, UNICEF, world hunger

May 27 JDN 2458266

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The powerful persistence of bigotry

2016-05-182016-05-18 pnrj cognitive science, critique of neoclassical economics, current events, ethics, heuristics and biases, public policy bigotry, discrimination, Expanding Circle, experiment, last-place aversion, LGBT, North Carolina, Peter Singer, racism, sexism, tribal paradigm

JDN 2457527

Bigotry has been a part of human society since the beginning—people have been hating people they perceive as different since as long as there have been people, and maybe even before that. I wouldn’t be surprised to find that different tribes of chimpanzees or even elephants hold bigoted beliefs about each other.

Yet it may surprise you that neoclassical economics has basically no explanation for this. There is a long-standing famous argument that bigotry is inherently irrational: If you hire based on anything aside from actual qualifications, you are leaving money on the table for your company. Because women CEOs are paid less and perform better, simply ending discrimination against women in top executive positions could save any typical large multinational corporation tens of millions of dollars a year. And yet, they don’t! Fancy that.

More recently there has been work on the concept of statistical discrimination, under which it is rational (in the sense of narrowly-defined economic self-interest) to discriminate because categories like race and gender may provide some statistically valid stereotype information. For example, “Black people are poor” is obviously not true across the board, but race is strongly correlated with wealth in the US; “Asians are smart” is not a universal truth, but Asian-Americans do have very high educational attainment. In the absence of more reliable information that might be your best option for making good decisions. Of course, this creates a vicious cycle where people in the positive stereotype group are better off and have more incentive to improve their skills than people in the negative stereotype group, thus perpetuating the statistical validity of the stereotype.

But of course that assumes that the stereotypes are statistically valid, and that employers don’t have more reliable information. Yet many stereotypes aren’t even true statistically: If “women are bad drivers”, then why do men cause 75% of traffic fatalities? Furthermore, in most cases employers have more reliable information—resumes with education and employment records. Asian-Americans are indeed more likely to have bachelor’s degrees than Latino Americans, but when it say right on Mr. Lorenzo’s resume that he has a B.A. and on Mr. Suzuki’s resume that he doesn’t, that racial stereotype no longer provides you with any further information. Yet even if the resumes are identical, employers will be more likely to hire a White applicant than a Black applicant, and more likely to hire a male applicant than a female applicant—we have directly tested this in experiments. In an experiment where employers had direct performance figures in front of them, they were still more likely to choose the man when they had the same scores—and sometimes even when the woman had a higher score!

Even our assessments of competence are often biased, probably subconsciously; given the same essay to review, most reviewers find more spelling errors and are more concerned about those errors if they are told that the author is Black. If they thought the author was White, they thought of the errors as “minor mistakes” by a student with “otherwise good potential”; but if they thought the author was Black, they “can’t believe he got into this school in the first place”. These reviewers were reading the same essay. The alleged author’s race was decided randomly. Most if not all of these reviewers were not consciously racist. Subconscious racial biases are all over the place; almost everyone exhibits some subconscious racial bias.

No, discrimination isn’t just rational inference based on valid (if unfortunate and self-reinforcing) statistical trends. There is a significant component of just outright irrational bigotry.

We’re seeing this play out in North Carolina; due to their arbitrary discrimination against lesbian, gay, bisexual and especially transgender people, they are now hemorrhaging jobs as employers pull out, and their federal funding for student loans is now in jeopardy due to the obvious Title IX violation. This is obviously not in the best interest of the people of North Carolina (even the ones who aren’t LGBT!); and it’s all being justified on the grounds of an epidemic of sexual assaults by people pretending to be trans that doesn’t even exist. It turns out that more Republican Senators have been arrested for sexual misconduct in bathrooms than transgender people—and while the number of transgender people in the US is surprisingly hard to measure, it’s clearly a lot larger than the number of Republican Senators!

In fact, discrimination is even more irrational than it may seem, because empirically the benefits of discrimination (such as they are—short-term narrow economic self-interest) fall almost entirely on the rich while the harms fall mainly on the poor, yet poor people are much more likely to be racist! Since income and education are highly correlated, education accounts for some of this effect. This is reason to be hopeful, for as educational attainment has soared, we have found that racism has decreased.

But education doesn’t seem to explain the full effect. One theory to account this is what’s called last-place aversion—a highly pernicious heuristic where people are less concerned about their own absolute status than they are about not having the worst status. In economic experiments, people are usually more willing to give money to people worse off than them than to those better off than them—unless giving it to the worse-off would make those people better off than they themselves are. I think we actually need to do further study to see what happens if it would make those other people exactly as well-off as they are, because that turns out to be absolutely critical to whether people would be willing to support a basic income. In other words, do people count “tied for last”? Would they rather play a game where everyone gets $100, or one where they get $50 but everyone else only gets $10?

I would hope that humanity is better than that—that we would want to play the $100 game, which is analogous to a basic income. But when I look at the extreme and persistent inequality that has plagued human society for millennia, I begin to wonder if perhaps there really are a lot of people who think of the world in such zero-sum, purely relative terms, and care more about being better than others than they do about doing well themselves. Perhaps the horrific poverty of Sub-Saharan Africa and Southeast Asia is, for many First World people, not a bug but a feature; we feel richer when we know they are poorer. Scarcity seems to amplify this zero-sum thinking; racism gets worse whenever we have economic downturns. Precisely because discrimination is economically inefficient, this can create a vicious cycle where poverty causes bigotry which worsens poverty.

There is also something deeper going on, something evolutionary; bigotry is part of what I call the tribal paradigm, the core aspect of human psychology that defines identity in terms of in-groups which are good and out-groups which are bad. We will probably never fully escape the tribal paradigm, but this is not a reason to give up hope; we have made substantial progress in reducing bigotry in many places. What seems to happen is that people learn to expand their mental tribe, so that it encompasses larger and larger groups—not just White Americans but all Americans, or not just Americans but all human beings. Peter Singer calls this the Expanding Circle (also the title of his book on it). We may one day be able to make our tribe large enough to encompass all sentient beings in the universe; at that point, it’s just fine if we are only interested in advancing the interests of those in our tribe, because our tribe would include everyone. Yet I don’t think any of us are quite there yet, and some people have a really long way to go.

But with these expanding tribes in mind, perhaps I can leave you with a fact that is as counter-intuitive as it is encouraging, and even easier still to take out of context: Racism was better than what came before it. What I mean by this is not that racism is good—of course it’s terrible—but that in order to be racism, to define the whole world into a small number of “racial groups”, people already had to enormously expand their mental tribe from where it started. When we evolved on the African savannah millions of years ago, our tribe was 150 people; to this day, that’s about the number of people we actually feel close to and interact with on a personal level. We could have stopped there, and for millennia we did. But over time we managed to expand beyond that number, to a village of 1,000, a town of 10,000, a city of 100,000. More recently we attained mental tribes of whole nations, in some case hundreds of millions of people. Racism is about that same scale, if not a bit larger; what most people (rather arbitrarily, and in a way that changes over time) call “White” constitutes about a billion people. “Asian” (including South Asian) is almost four billion. These are astonishingly huge figures, some seven orders of magnitude larger than what we originally evolved to handle. The ability to feel empathy for all “White” people is just a little bit smaller than the ability to feel empathy for all people period. Similarly, while today the gender in “all men are created equal” is jarring to us, the idea at the time really was an incredibly radical broadening of the moral horizon—Half the world? Are you mad?

Therefore I am confident that one day, not too far from now, the world will take that next step, that next order of magnitude, which many of us already have (or try to), and we will at last conquer bigotry, and if not eradicate it entirely then force it completely into the most distant shadows and deny it its power over our society.

Is Equal Unfair?

2016-04-132017-10-08 pnrj book reviews, core principles, ethics, inequality, public policy Andrew Carnegie, antitrust, Ayn Rand, Bill Gates, book review, Darwin, Einstein, Equal is Unfair, exploitation, HSBC, inequality, Jeff Bezos, John Rawls, Keynes, Khmer Rouge, laissez-faire, Latvia, marginal utility, Mark Zuckerberg, Milton Friedman, minimum wage, monopoly, Naomi Klein, Newton, Nikola Tesla, Peter Singer, progressive taxation, public goods, public policy, Randall Monroe, redistribution, Robert Nozick, Steve Jobs, Steve Wozniack, Stiglitz, taxation, The Economist, wealth, XKCD

JDN 2457492

Much as you are officially a professional when people start paying you for what you do, I think you are officially a book reviewer when people start sending you books for free asking you to review them for publicity. This has now happened to me, with the book Equal Is Unfair by Don Watkins and Yaron Brook. This post is longer than usual, but in order to be fair to the book’s virtues as well as its flaws, I felt a need to explain quite thoroughly.

It’s a very frustrating book, because at times I find myself agreeing quite strongly with the first part of a paragraph, and then reaching the end of that same paragraph and wanting to press my forehead firmly into the desk in front of me. It makes some really good points, and for the most part uses economic statistics reasonably accurately—but then it rides gleefully down a slippery slope fallacy like a waterslide. But I guess that’s what I should have expected; it’s by leaders of the Ayn Rand Institute, and my experience with reading Ayn Rand is similar to that of Randall Monroe (I’m mainly referring to the alt-text, which uses slightly foul language).

As I kept being jostled between “That’s a very good point.”, “Hmm, that’s an interesting perspective.”, and “How can anyone as educated as you believe anything that stupid!?” I realized that there are actually three books here, interleaved:

1. A decent economics text on the downsides of taxation and regulation and the great success of technology and capitalism at raising the standard of living in the United States, which could have been written by just about any mainstream centrist neoclassical economist—I’d say it reads most like John Taylor or Ken Galbraith. My reactions to this book were things like “That’s a very good point.”, and “Sure, but any economist would agree with that.”

2. An interesting philosophical treatise on the meanings of “equality” and “opportunity” and their application to normative economic policy, as well as about the limitations of statistical data in making political and ethical judgments. It could have been written by Robert Nozick (actually I think much of it was based on Robert Nozick). Some of the arguments are convincing, others are not, and many of the conclusions are taken too far; but it’s well within the space of reasonable philosophical arguments. My reactions to this book were things like “Hmm, that’s an interesting perspective.” and “Your argument is valid, but I think I reject the second premise.”

3. A delusional rant of the sort that could only be penned by a True Believer in the One True Gospel of Ayn Rand, about how poor people are lazy moochers, billionaires are world-changing geniuses whose superior talent and great generosity we should all bow down before, and anyone who would dare suggest that perhaps Steve Jobs got lucky or owes something to the rest of society is an authoritarian Communist who hates all achievement and wants to destroy the American Dream. It was this book that gave me reactions like “How can anyone as educated as you believe anything that stupid!?” and “You clearly have no idea what poverty is like, do you?” and “[expletive] you, you narcissistic ingrate!”

Given that the two co-authors are Executive Director and a fellow of the Ayn Rand Institute, I suppose I should really be pleasantly surprised that books 1 and 2 exist, rather than disappointed by book 3.

As evidence of each of the three books interleaved, I offer the following quotations:

Book 1:

“All else being equal, taxes discourage production and prosperity.” (p. 30)

No reasonable economist would disagree. The key is all else being equal—it rarely is.

“For most of human history, our most pressing problem was getting enough food. Now food is abundant and affordable.” (p.84)

Correct! And worth pointing out, especially to anyone who thinks that economic progress is an illusion or we should go back to pre-industrial farming practices—and such people do exist.

“Wealth creation is first and foremost knowledge creation. And this is why you can add to the list of people who have created the modern world, great thinkers: people such as Euclid, Aristotle, Galileo, Newton, Darwin, Einstein, and a relative handful of others.” (p.90, emph. in orig.)

Absolutely right, though as I’ll get to below there’s something rather notable about that list.

“To be sure, there is competition in an economy, but it’s not a zero-sum game in which some have to lose so that others can win—not in the big picture.” (p. 97)

Yes! Precisely! I wish I could explain to more people—on both the Left and the Right, by the way—that economics is nonzero-sum, and that in the long run competitive markets improve the standard of living of society as a whole, not just the people who win that competition.

Book 2:

“Even opportunities that may come to us without effort on our part—affluent parents, valuable personal connections, a good education—require enormous effort to capitalize on.” (p. 66)

This is sometimes true, but clearly doesn’t apply to things like the Waltons’ inherited billions, for which all they had to do was be born in the right family and not waste their money too extravagantly.

“But life is not a game, and achieving equality of initial chances means forcing people to play by different rules.” (p. 79)

This is an interesting point, and one that I think we should acknowledge; we must treat those born rich differently from those born poor, because their unequal starting positions mean that treating them equally from this point forward would lead to a wildly unfair outcome. If my grandfather stole your grandfather’s wealth and passed it on to me, the fair thing to do is not to treat you and I equally from this point forward—it’s to force me to return what was stolen, insofar as that is possible. And even if we suppose that my grandfather earned far vaster wealth than yours, I think a more limited redistribution remains justified simply to put you and I on a level playing field and ensure fair competition and economic efficiency.

“The key error in this argument is that it totally mischaracterizes what it means to earn something. For the egalitarians, the results of our actions don’t merely have to be under our control, but entirely of our own making. […] But there is nothing like that in reality, and so what the egalitarians are ultimately doing is wiping out the very possibility of earning something.” (p. 193)

The way they use “egalitarian” as an insult is a bit grating, but there clearly are some actual egalitarian philosophers whose views are this extreme, such as G.A. Cohen, James Kwak and Peter Singer. I strongly agree that we need to make a principled distinction between gains that are earned and gains that are unearned, such that both sets are nonempty. Yet while Cohen would seem to make “earned” an empty set, Watkins and Brook very nearly make “unearned” empty—you get what you get, and you deserve it. The only exceptions they seem willing to make are outright theft and, what they consider equivalent, taxation. They have no concept of exploitation, excessive market power, or arbitrage—and while they claim they oppose fraud, they seem to think that only government is capable of it.

Book 3:

“What about government handouts (usually referred to as ‘transfer payments’)?” (p. 23)

Because Social Security is totally just a handout—it’s not like you pay into it your whole life or anything.

“No one cares whether the person who fixes his car or performs his brain surgery or applies for a job at his company is male or female, Indian or Pakistani—he wants to know whether they are competent.” (p.61)

Yes they do. We have direct experimental evidence of this.

“The notion that ‘spending drives the economy’ and that rich people spend less than others isn’t a view seriously entertained by economists,[…]” (p. 110)

The New Synthesis is Keynesian! This is what Milton Friedman was talking about when he said, “We’re all Keynesians now.”

“Because mobility statistics don’t distinguish between those who don’t rise and those who can’t, they are useless when it comes to assessing how healthy mobility is.” (p. 119)

So, if Black people have much lower odds of achieving high incomes even controlling for education, we can’t assume that they are disadvantaged or discriminated against; maybe Black people are just lazy or stupid? Is that what you’re saying here? (I think it might be.)

“Payroll taxes alone amount to 15.3 percent of your income; money that is taken from you and handed out to the elderly. This means that you have to spend more than a month and a half each year working without pay in order to fund other people’s retirement and medical care.” (p. 127)

That is not even close to how taxes work. Taxes are not “taken” from money you’d otherwise get—taxation changes prices and the monetary system depends upon taxation.

“People are poor, in the end, because they have not created enough wealth to make themselves prosperous.” (p. 144)

This sentence was so awful that when I showed it to my boyfriend, he assumed it must be out of context. When I showed him the context, he started swearing the most I’ve heard him swear in a long time, because the context was even worse than it sounds. Yes, this book is literally arguing that the reason people are poor is that they’re just too lazy and stupid to work their way out of poverty.

“No society has fully implemented the egalitarian doctrine, but one came as close as any society can come: Cambodia’s Khmer Rouge.” (p. 207)

Because obviously the problem with the Khmer Rouge was their capital gains taxes. They were just too darn fair, and if they’d been more selfish they would never have committed genocide. (The authors literally appear to believe this.)

So there are my extensive quotations, to show that this really is what the book is saying. Now, a little more summary of the good, the bad, and the ugly.

One good thing is that the authors really do seem to understand fairly well the arguments of their opponents. They quote their opponents extensively, and only a few times did it feel meaningfully out of context. Their use of economic statistics is also fairly good, though occasionally they present misleading numbers or compare two obviously incomparable measures.

One of the core points in Equal is Unfair is quite weak: They argue against the “shared-pie assumption”, which is that we create wealth as a society, and thus the rest of society is owed some portion of the fruits of our efforts. They maintain that this is fundamentally authoritarian and immoral; essentially they believe a totalizing false dichotomy between either absolute laissez-faire or Stalinist Communism.

But the “shared-pie assumption” is not false; we do create wealth as a society. Human cognition is fundamentally social cognition; they said themselves that we depend upon the discoveries of people like Newton and Einstein for our way of life. But it should be obvious we can never pay Einstein back; so instead we must pay forward, to help some child born in the ghetto to rise to become the next Einstein. I agree that we must build a society where opportunity is maximized—and that means, necessarily, redistributing wealth from its current state of absurd and immoral inequality.

I do however agree with another core point, which is that most discussions of inequality rely upon a tacit assumption which is false: They call it the “fixed-pie assumption”.

When you talk about the share of income going to different groups in a population, you have to be careful about the fact that there is not a fixed amount of wealth in a society to be distributed—not a “fixed pie” that we are cutting up and giving around. If it were really true that the rising income share of the top 1% were necessary to maximize the absolute benefits of the bottom 99%, we probably should tolerate that, because the alternative means harming everyone. (In arguing this they quote John Rawls several times with disapprobation, which is baffling because that is exactly what Rawls says.)

Even if that’s true, there is still a case to be made against inequality, because too much wealth in the hands of a few people will give them more power—and unequal power can be dangerous even if wealth is earned, exchanges are uncoerced, and the distribution is optimally efficient. (Watkins and Brook dismiss this contention out of hand, essentially defining beneficent exploitation out of existence.)

Of course, in the real world, there’s no reason to think that the ballooning income share of the top 0.01% in the US is actually associated with improved standard of living for everyone else.

I’ve shown these graphs before, but they bear repeating:

Income shares for the top 1% and especially the top 0.1% and 0.01% have risen dramatically in the last 30 years.

top_income_shares_adjusted

But real median income has only slightly increased during the same period.

US_median_household_income

Thus, mean income has risen much faster than median income.

median_mean

While theoretically it could be that the nature of our productivity technology has shifted in such a way that it suddenly became necessary to heap more and more wealth on the top 1% in order to continue increasing national output, there is actually very little evidence of this. On the contrary, as Joseph Stiglitz (Nobel Laureate, you may recall) has documented, the leading cause of our rising inequality appears to be a dramatic increase in rent-seeking, which is to say corruption, exploitation, and monopoly power. (This probably has something to do with why I found in my master’s thesis that rising top income shares correlate quite strongly with rising levels of corruption.)

Now to be fair, the authors of Equal is Unfair do say that they are opposed to rent-seeking, and would like to see it removed. But they have a very odd concept of what rent-seeking entails, and it basically seems to amount to saying that whatever the government does is rent-seeking, whatever corporations do is fair free-market competition. On page 38 they warn us not to assume that government is good and corporations are bad—but actually it’s much more that they assume that government is bad and corporations are good. (The mainstream opinion appears to be actually that both are bad, and we should replace them both with… er… something.)

They do make some other good points I wish more leftists would appreciate, such as the point that while colonialism and imperialism can damage countries that suffer them and make them poorer, they generally do not benefit the countries that commit them and make them richer. The notion that Europe is rich because of imperialism is simply wrong; Europe is rich because of education, technology, and good governance. Indeed, the greatest surge in Europe’s economic growth occurred as the period of imperialism was winding down—when Europeans realized that they would be better off trying to actually invent and produce things rather than stealing them from others.

Likewise, they rightfully demolish notions of primitivism and anti-globalization that I often see bouncing around from folks like Naomi Klein. But these are book 1 messages; any economist would agree that primitivism is a terrible idea, and very few are opposed to globalization per se.

The end of Equal is Unfair gives a five-part plan for unleashing opportunity in America:

1. Abolish all forms of corporate welfare so that no business can gain unfair advantage.

2. Abolish government barriers to work so that every individual can enjoy the dignity of earned success.

3. Phase out the welfare state so that America can once again become the land of self-reliance.

4. Unleash the power of innovation in education by ending the government monopoly on schooling.

5. Liberate innovators from the regulatory shackles that are strangling them.

Number 1 is hard to disagree with, except that they include literally everything the government does that benefits a corporation as corporate welfare, including things like subsidies for solar power that the world desperately needs (or millions of people will die).

Number 2 sounds really great until you realize that they are including all labor standards, environmental standards and safety regulations as “barriers to work”; because it’s such a barrier for children to not be able to work in a factory where your arm can get cut off, and such a barrier that we’ve eliminated lead from gasoline emissions and thereby cut crime in half.

Number 3 could mean a lot of things; if it means replacing the existing system with a basic income I’m all for it. But in fact it seems to mean removing all social insurance whatsoever. Indeed, Watkins and Brook do not appear to believe in social insurance at all. The whole concept of “less fortunate”, “there but for the grace of God go I” seems to elude them. They have no sense that being fortunate in their own lives gives them some duty to help others who were not; they feel no pang of moral obligation whatsoever to help anyone else who needs help. Indeed, they literally mock the idea that human beings are “all in this together”.

They also don’t even seem to believe in public goods, or somehow imagine that rational self-interest could lead people to pay for public goods without any enforcement whatsoever despite the overwhelming incentives to free-ride. (What if you allow people to freely enter a contract that provides such enforcement mechanisms? Oh, you mean like social democracy?)

Regarding number 4, I’d first like to point out that private schools exist. Moreover, so do charter schools in most states, and in states without charter schools there are usually vouchers parents can use to offset the cost of private schools. So while the government has a monopoly in the market share sense—the vast majority of education in the US is public—it does not actually appear to be enforcing a monopoly in the anti-competitive sense—you can go to private school, it’s just too expensive or not as good. Why, it’s almost as if education is a public good or a natural monopoly.

Number 5 also sounds all right, until you see that they actually seem most opposed to antitrust laws of all things. Why would antitrust laws be the ones that bother you? They are designed to increase competition and lower barriers, and largely succeed in doing so (when they are actually enforced, which is rare of late). If you really want to end barriers to innovation and government-granted monopolies, why is it not patents that draw your ire?

They also seem to have trouble with the difference between handicapping and redistribution—they seem to think that the only way to make outcomes more equal is to bring the top down and leave the bottom where it is, and they often use ridiculous examples like “Should we ban reading to your children, because some people don’t?” But of course no serious egalitarian would suggest such a thing. Education isn’t fungible, so it can’t be redistributed. You can take it away (and sometimes you can add it, e.g. public education, which Watkins and Brooks adamantly oppose); but you can’t simply transfer it from one person to another. Money on the other hand, is by definition fungible—that’s kind of what makes it money, really. So when we take a dollar from a rich person and give it to a poor person, the poor person now has an extra dollar. We’ve not simply lowered; we’ve also raised. (In practice it’s a bit more complicated than that, as redistribution can introduce inefficiencies. So realistically maybe we take $1.00 and give $0.90; that’s still worth doing in a lot of cases.)

If attributes like intelligence were fungible, I think we’d have a very serious moral question on our hands! It is not obvious to me that the world is better off with its current range of intelligence, compared to a world where geniuses had their excess IQ somehow sucked out and transferred to mentally disabled people. Or if you think that the marginal utility of intelligence is increasing, then maybe we should redistribute IQ upward—take it from some mentally disabled children who aren’t really using it for much and add it onto some geniuses to make them super-geniuses. Of course, the whole notion is ridiculous; you can’t do that. But whereas Watkins and Brook seem to think it’s obvious that we shouldn’t even if we could, I don’t find that obvious at all. You didn’t earn your IQ (for the most part); you don’t seem to deserve it in any deep sense; so why should you get to keep it, if the world would be much better off if you didn’t? Why should other people barely be able to feed themselves so I can be good at calculus? At best, maybe I’m free to keep it—but given the stakes, I’m not even sure that would be justifiable. Peter Singer is right about one thing: You’re not free to let a child drown in a lake just to keep your suit from getting wet.

Ultimately, if you really want to understand what’s going on with Equal is Unfair, consider the following sentence, which I find deeply revealing as to the true objectives of these Objectivists:

“Today, meanwhile, although we have far more liberty than our feudal ancestors, there are countless ways in which the government restricts our freedom to produce and trade including minimum wage laws, rent control, occupational licensing laws, tariffs, union shop laws, antitrust laws, government monopolies such as those granted to the post office and education system, subsidies for industries such as agriculture or wind and solar power, eminent domain laws, wealth redistribution via the welfare state, and the progressive income tax.” (p. 114)

Some of these are things no serious economist would disagree with: We should stop subsidizing agriculture and tariffs should be reduced or removed. Many occupational licenses are clearly unnecessary (though this has a very small impact on inequality in real terms—licensing may stop you from becoming a barber, but it’s not what stops you from becoming a CEO). Others are legitimately controversial: Economists are currently quite divided over whether minimum wage is beneficial or harmful (I lean toward beneficial, but I’d prefer a better solution), as well as how to properly regulate unions so that they give workers much-needed bargaining power without giving unions too much power. But a couple of these are totally backward, exactly contrary to what any mainstream economist would say: Antitrust laws need to be enforced more, not eliminated (don’t take it from me; take it from that well-known Marxist rag The Economist). Subsidies for wind and solar power make the economy more efficient, not less—and suspiciously Watkins and Brook omitted the competing subsidies that actually are harmful, namely those to coal and oil.

Moreover, I think it’s very revealing that they included the word progressive when talking about taxation. In what sense does making a tax progressive undermine our freedom? None, so far as I can tell. The presence of a tax undermines freedom—your freedom to spend that money some other way. Making the tax higher undermines freedom—it’s more money you lose control over. But making the tax progressive increases freedom for some and decreases it for others—and since rich people have lower marginal utility of wealth and are generally more free in substantive terms in general, it really makes the most sense that, holding revenue constant, making a tax progressive generally makes your people more free.

But there’s one thing that making taxes progressive does do: It benefits poor people and hurts rich people. And thus the true agenda of Equal is Unfair becomes clear: They aren’t actually interested in maximizing freedom—if they were, they wouldn’t be complaining about occupational licensing and progressive taxation, they’d be outraged by forced labor, mass incarceration, indefinite detention, and the very real loss of substantive freedom that comes from being born into poverty. They wouldn’t want less redistribution, they’d want more efficient and transparent redistribution—a shift from the current hodgepodge welfare state to a basic income system. They would be less concerned about the “freedom” to pollute the air and water with impunity, and more concerned about the freedom to breathe clean air and drink clean water.

No, what they really believe is rich people are better. They believe that billionaires attained their status not by luck or circumstance, not by corruption or ruthlessness, but by the sheer force of their genius. (This is essentially the entire subject of chapter 6, “The Money-Makers and the Money-Appropriators”, and it’s nauseating.) They describe our financial industry as “fundamentally moral and productive” (p.156)—the industry that you may recall stole millions of homes and laundered money for terrorists. They assert that no sane person could believe that Steve Wozniack got lucky—I maintain no sane person could think otherwise. Yes, he was brilliant; yes, he invented good things. But he had to be at the right place at the right time, in a society that supported and educated him and provided him with customers and employees. You didn’t build that.

Indeed, perhaps most baffling is that they themselves seem to admit that the really great innovators, such as Newton, Einstein, and Darwin, were scientists—but scientists are almost never billionaires. Even the common counterexample, Thomas Edison, is largely false; he mainly plagiarized from Nikola Tesla and appropriated the ideas of his employees. Newton, Einstein and Darwin were all at least upper-middle class (as was Tesla, by the way—he did not die poor as is sometimes portrayed), but they weren’t spectacularly mind-bogglingly rich the way that Steve Jobs and Andrew Carnegie were and Bill Gates and Jeff Bezos are.

Some people clearly have more talent than others, and some people clearly work harder than others, and some people clearly produce more than others. But I just can’t wrap my head around the idea that a single man can work so hard, be so talented, produce so much that he can deserve to have as much wealth as a nation of millions of people produces in a year. Yet, Mark Zuckerberg has that much wealth. Remind me again what he did? Did he cure a disease that was killing millions? Did he colonize another planet? Did he discover a fundamental law of nature? Oh yes, he made a piece of software that’s particularly convenient for talking to your friends. Clearly that is worth the GDP of Latvia. Not that silly Darwin fellow, who only uncovered the fundamental laws of life itself.

In the grand tradition of reducing complex systems to simple numerical values, I give book 1 a 7/10, book 2 a 5/10, and book 3 a 2/10. Equal is Unfair is about 25% book 1, 25% book 2, and 50% book 3, so altogether their final score is, drumroll please: 4/10. Maybe read the first half, I guess? That’s where most of the good stuff is.

The Tragedy of the Commons

2015-12-302015-12-30 pnrj core principles, critique of neoclassical economics, public policy, Top 10 things to know about economics autism, bystander effect, climate change, conformity, diffusion of responsibility, ecology, game theory, identifiable victim, Peter Singer, prisoner's dilemma, public goods, QALY, rationality, redistribution, revolution, tragedy of the commons

JDN 2457387

In a previous post I talked about one of the most fundamental—perhaps the most fundamental—problem in game theory, the Prisoner’s Dilemma, and how neoclassical economic theory totally fails to explain actual human behavior when faced with this problem in both experiments and the real world.

As a brief review, the essence of the game is that both players can either cooperate or defect; if they both cooperate, the outcome is best overall; but it is always in each player’s interest to defect. So a neoclassically “rational” player would always defect—resulting in a bad outcome for everyone. But real human beings typically cooperate, and thus do better. The “paradox” of the Prisoner’s Dilemma is that being “rational” results in making less money at the end.

Obviously, this is not actually a good definition of rational behavior. Being short-sighted and ignoring the impact of your behavior on others doesn’t actually produce good outcomes for anybody, including yourself.

But the Prisoner’s Dilemma only has two players. If we expand to a larger number of players, the expanded game is called a Tragedy of the Commons.

When we do this, something quite surprising happens: As you add more people, their behavior starts converging toward the neoclassical solution, in which everyone defects and we get a bad outcome for everyone.

Indeed, people in general become less cooperative, less courageous, and more apathetic the more of them you put together. K was quite apt when he said, “A person is smart; people are dumb, panicky, dangerous animals and you know it.” There are ways to counteract this effect, as I’ll get to in a moment—but there is a strong effect that needs to be counteracted.

We see this most vividly in the bystander effect. If someone is walking down the street and sees someone fall and injure themselves, there is about a 70% chance that they will go try to help the person who fell—humans are altruistic. But if there are a dozen people walking down the street who all witness the same event, there is only a 40% chance that any of them will help—humans are irrational.

The primary reason appears to be diffusion of responsibility. When we are alone, we are the only one could help, so we feel responsible for helping. But when there are others around, we assume that someone else could take care of it for us, so if it isn’t done that’s not our fault.

There also appears to be a conformity effect: We want to conform our behavior to social norms (as I said, to a first approximation, all human behavior is social norms). The mere fact that there are other people who could have helped but didn’t suggests the presence of an implicit social norm that we aren’t supposed to help this person for some reason. It never occurs to most people to ask why such a norm would exist or whether it’s a good one—it simply never occurs to most people to ask those questions about any social norms. In this case, by hesitating to act, people actually end up creating the very norm they think they are obeying.

This can lead to what’s called an Abilene Paradox, in which people simultaneously try to follow what they think everyone else wants and also try to second-guess what everyone else wants based on what they do, and therefore end up doing something that none of them actually wanted. I think a lot of the weird things humans do can actually be attributed to some form of the Abilene Paradox. (“Why are we sacrificing this goat?” “I don’t know, I thought you wanted to!”)

Autistic people are not as good at following social norms (though some psychologists believe this is simply because our social norms are optimized for the neurotypical population). My suspicion is that autistic people are therefore less likely to suffer from the bystander effect, and more likely to intervene to help someone even if they are surrounded by passive onlookers. (Unfortunately I wasn’t able to find any good empirical data on that—it appears no one has ever thought to check before.) I’m quite certain that autistic people are less likely to suffer from the Abilene Paradox—if they don’t want to do something, they’ll tell you so (which sometimes gets them in trouble).

Because of these psychological effects that blunt our rationality, in large groups human beings often do end up behaving in a way that appears selfish and short-sighted.

Nowhere is this more apparent than in ecology. Recycling, becoming vegetarian, driving less, buying more energy-efficient appliances, insulating buildings better, installing solar panels—none of these things are particularly difficult or expensive to do, especially when weighed against the tens of millions of people who will die if climate change continues unabated. Every recyclable can we throw in the trash is a silent vote for a global holocaust.

But as it no doubt immediately occurred to you to respond: No single one of us is responsible for all that. There’s no way I myself could possibly save enough carbon emissions to significantly reduce climate change—indeed, probably not even enough to save a single human life (though maybe). This is certainly true; the error lies in thinking that this somehow absolves us of the responsibility to do our share.

I think part of what makes the Tragedy of the Commons so different from the Prisoner’s Dilemma, at least psychologically, is that the latter has an identifiable victim—we know we are specifically hurting that person more than we are helping ourselves. We may even know their name (and if we don’t, we’re more likely to defect—simply being on the Internet makes people more aggressive because they don’t interact face-to-face). In the Tragedy of the Commons, it is often the case that we don’t know who any of our victims are; moreover, it’s quite likely that we harm each one less than we benefit ourselves—even though we harm everyone overall more.

Suppose that driving a gas-guzzling car gives me 1 milliQALY of happiness, but takes away an average of 1 nanoQALY from everyone else in the world. A nanoQALY is tiny! Negligible, even, right? One billionth of a year, a mere 30 milliseconds! Literally less than the blink of an eye. But take away 30 milliseconds from everyone on Earth and you have taken away 7 years of human life overall. Do that 10 times, and statistically one more person is dead because of you. And you have gained only 10 milliQALY, roughly the value of $300 to a typical American. Would you kill someone for $300?

Peter Singer has argued that we should in fact think of it this way—when we cause a statistical death by our inaction, we should call it murder, just as if we had left a child to drown to keep our clothes from getting wet. I can’t agree with that. When you think seriously about the scale and uncertainty involved, it would be impossible to live at all if we were constantly trying to assess whether every action would lead to statistically more or less happiness to the aggregate of all human beings through all time. We would agonize over every cup of coffee, every new video game. In fact, the global economy would probably collapse because none of us would be able to work or willing to buy anything for fear of the consequences—and then whom would we be helping?

That uncertainty matters. Even the fact that there are other people who could do the job matters. If a child is drowning and there is a trained lifeguard right next to you, the lifeguard should go save the child, and if they don’t it’s their responsibility, not yours. Maybe if they don’t you should try; but really they should have been the one to do it.
But we must also not allow ourselves to simply fall into apathy, to do nothing simply because we cannot do everything. We cannot assess the consequences of every specific action into the indefinite future, but we can find general rules and patterns that govern the consequences of actions we might take. (This is the difference between act utilitarianism, which is unrealistic, and rule utilitarianism, which I believe is the proper foundation for moral understanding.)

Thus, I believe the solution to the Tragedy of the Commons is policy. It is to coordinate our actions together, and create enforcement mechanisms to ensure compliance with that coordinated effort. We don’t look at acts in isolation, but at policy systems holistically. The proper question is not “What should I do?” but “How should we live?”

In the short run, this can lead to results that seem deeply suboptimal—but in the long run, policy answers lead to sustainable solutions rather than quick-fixes.

People are starving! Why don’t we just steal money from the rich and use it to feed people? Well, think about what would happen if we said that the property system can simply be unilaterally undermined if someone believes they are achieving good by doing so. The property system would essentially collapse, along with the economy as we know it. A policy answer to that same question might involve progressive taxation enacted by a democratic legislature—we agree, as a society, that it is justified to redistribute wealth from those who have much more than they need to those who have much less.

Our government is corrupt! We should launch a revolution! Think about how many people die when you launch a revolution. Think about past revolutions. While some did succeed in bringing about more just governments (e.g. the French Revolution, the American Revolution), they did so only after a long period of strife; and other revolutions (e.g. the Russian Revolution, the Iranian Revolution) have made things even worse. Revolution is extremely costly and highly unpredictable; we must use it only as a last resort against truly intractable tyranny. The policy answer is of course democracy; we establish a system of government that elects leaders based on votes, and then if they become corrupt we vote to remove them. (Sadly, we don’t seem so good about that second part—the US Congress has a 14% approval rating but a 95% re-election rate.)

And in terms of ecology, this means that berating ourselves for our sinfulness in forgetting to recycle or not buying a hybrid car does not solve the problem. (Not that it’s bad to recycle, drive a hybrid car, and eat vegetarian—by all means, do these things. But it’s not enough.) We need a policy solution, something like a carbon tax or cap-and-trade that will enforce incentives against excessive carbon emissions.

In case you don’t think politics makes a difference, all of the Democrat candidates for President have proposed such plans—Bernie Sanders favors a carbon tax, Martin O’Malley supports an aggressive cap-and-trade plan, and Hillary Clinton favors heavily subsidizing wind and solar power. The Republican candidates on the other hand? Most of them don’t even believe in climate change. Chris Christie and Carly Fiorina at least accept the basic scientific facts, but (1) they are very unlikely to win at this point and (2) even they haven’t announced any specific policy proposals for dealing with it.

This is why voting is so important. We can’t do enough on our own; the coordination problem is too large. We need to elect politicians who will make policy. We need to use the systems of coordination enforcement that we have built over generations—and that is fundamentally what a government is, a system of coordination enforcement. Only then can we overcome the tendency among human beings to become apathetic and short-sighted when faced with a Tragedy of the Commons.

Scope neglect and the question of optimal altruism

2015-03-08 pnrj heuristics and biases altruism, Bill Gates, bounded rationality, charity, Charity Navigator, donation, effective altruism, foreign aid, GiveWell, Hamilton's Rule, human capital, John Stuart Mill, malaria, optimal, Peter Singer, QALY, rationality, representative heuristic, scope neglect, UNICEF, utility

JDN 2457090 EDT 16:15.

We’re now on Eastern Daylight Time because of this bizarre tradition of shifting our time zone forward for half of the year. It’s supposed to save energy, but a natural experiment in India suggests it actually increases energy demand. So why do we do it? Like every ridiculous tradition (have you ever tried to explain Groundhog Day to someone from another country?), we do it because we’ve always done it.
This week’s topic is scope neglect, one of the most pervasive—and pernicious—cognitive heuristics human beings face. Scope neglect raises a great many challenges not only practically but also theoretically—it raises what I call the question of optimal altruism.

The question is simple to ask yet remarkably challenging to answer: How much should we be willing to sacrifice in order to benefit others? If we think of this as a number, your solidarity coefficient (s), it is equal to the cost you are willing to pay divided by the benefit your action has for someone else: s B > C.

This is analogous to the biological concept relatedness (r), on which Hamilton’s Rule applies: r B > C. Solidarity is the psychological analogue; instead of valuing people based on their genetic similarity to you, you value them based on… well, that’s the problem.

I can easily place upper and lower bounds: The lower bound is zero: You should definitely be willing to sacrifice something to help other people—otherwise you are a psychopath. The upper bound is one: There’s no point in paying more cost than you produce in benefit, and in fact even paying the same cost to yourself as you yield in benefits for other people doesn’t make a lot of sense, because it means that your own self-interest is meaningless and the fact that you understand your own needs better than the needs of others is also irrelevant.

But beyond that, it gets a lot harder—and that may explain why we suffer scope neglect in the first place. Should it be 90%? 50%? 10%? 1%? How should it vary between friends versus family versus strangers? It’s really hard to say. And this inability to precisely decide how much other people should be worth to us may be part of why we suffer scope neglect.

Scope neglect is the fact that we are not willing to expend effort or money in direct proportion to the benefit it would have. When different groups were asked how much they would be willing to donate in order to save the lives of 2,000 birds, 20,000 birds, or 200,000 birds, the answers they gave were statistically indistinguishable—always about $80. But however much a bird’s life is worth to you, shouldn’t 200,000 birds be worth, well, 200,000 times as much? In fact, more than that, because the marginal utility of wealth is decreasing, but I see no reason to think that the marginal utility of birds decreases nearly as fast.

But therein lies the problem: Usually we can’t pay 200,000 times as much. I’d feel like a horrible person if I weren’t willing to expend at least $10 or an equivalent amount of effort in order to save a bird. To save 200,000 birds that means I’d owe $2 million—and I simply don’t have $2 million.

You can get similar results to the bird experiment if you use children—though, as one might hope, the absolute numbers are a bit bigger, usually more like $500 to $1000. (And this, it turns out, is actually about how much it actually costs to save a child’s life by a particularly efficient means, such as anti-malaria nets, de-worming, or direct cash transfer. So please, by all means, give $1000 to UNICEF or the Against Malaria Foundation. If you can’t give $1000, give $100; if you can’t give $100, give $10.) It doesn’t much matter whether you say that the project will save 500 children, 5,000 children, or 50,000 children—people still will give about $500 to $1000. But once again, if I’m willing to spend $1000 to save a child—and I definitely am—how much should I be willing to spend to end malaria, which kills 500,000 children a year? Apparently $500 million, which not only do I not have, I almost certainly will not make that much money cumulatively through my entire life. ($2 million, on the other hand, I almost certainly will make cumulatively—the median income of an economist is $90,000 per year, so if I work for at least 22 years with that as my average income I’ll have cumulatively made $2 million. My net wealth may never be that high—though if I get better positions, or I’m lucky enough or clever enough with the stock market it might—but my cumulative income almost certainly will. Indeed, the average gain in cumulative income from a college degree is about $1 million. Because it takes time—time is money—and loans carry interest, this gives it a net present value of about $300,000.)

But maybe scope neglect isn’t such a bad thing after all. There is a very serious problem with these sort of moral dilemmas: The question didn’t say I would single-handedly save 200,000 birds—and indeed, that notion seems quite ridiculous. If I knew that I could actually save 200,000 birds and I were the only one who could do it, dammit, I would try to come up with that $2 million. I might not succeed, but I really would try as hard as I could.

And if I could single-handedly end malaria, I hereby vow that I would do anything it took to achieve that. Short of mass murder, anything I could do couldn’t be a higher cost to the world than malaria itself. I have no idea how I’d come up with $500 million, but I’d certainly try. Bill Gates could easily come up with that $500 million—so he did. In fact he endowed the Gates Foundation with $28 billion, and they’ve spent $1.3 billion of that on fighting malaria, saving hundreds of thousands of lives.

With this in mind, what is scope neglect really about? I think it’s about coordination. It’s not that people don’t care more about 200,000 birds than they do about 2,000; and it’s certainly not that they don’t care more about 50,000 children than they do about 500. Rather, the problem is that people don’t know how many other people are likely to donate, or how expensive the total project is likely to be; and we don’t know how much we should be willing to pay to save the life of a bird or a child.

Hence, what we basically do is give up; since we can’t actually assess the marginal utility of our donation dollars, we fall back on our automatic emotional response. Our mind focuses itself on visualizing that single bird covered in oil, or that single child suffering from malaria. We then hope that the representative heuristic will guide us in how much to give. Or we follow social norms, and give as much as we think others would expect us to give.

While many in the effective altruism community take this to be a failing, they never actually say what we should do—they never give us a figure for how much money we should be willing to donate to save the life of a child. Instead they retreat to abstraction, saying that whatever it is we’re willing to give to save a child, we should be willing to give 50,000 times as much to save 50,000 children.

But it’s not that simple. A bigger project may attract more supporters; if the two occur in direct proportion, then constant donation is the optimal response. Since it’s probably not actually proportional, you likely should give somewhat more to causes that affect more people; but exactly how much more is an astonishingly difficult question. I really don’t blame people—or myself—for only giving a little bit more to causes with larger impact, because actually getting the right answer is so incredibly hard. This is why it’s so important that we have institutions like GiveWell and Charity Navigator which do the hard work to research the effectiveness of charities and tell us which ones we should give to.

Yet even if we can properly prioritize which charities to give to first, that still leaves the question of how much each of us should give. 1% of our income? 5%? 10%? 20%? 50%? Should we give so much that we throw ourselves into the same poverty we are trying to save others from?

In his earlier work Peter Singer seemed to think we should give so much that it throws us into poverty ourselves; he asked us to literally compare every single purchase and ask ourselves whether a year of lattes or a nicer car is worth a child’s life. Of course even he doesn’t live that way, and in his later books Singer seems to have realized this, and now recommends the far more modest standard that everyone give at least 1% of their income. (He himself gives about 33%, but he’s also very rich so he doesn’t feel it nearly as much.) I think he may have overcompensated; while if literally everyone gave at least 1% that would be more than enough to end world hunger and solve many other problems—world nominal GDP is over $70 trillion, so 1% of that is $700 billion a year—we know that this won’t happen. Some will give more, others less; most will give nothing at all. Hence I think those of us who give should give more than our share; hence I lean toward figures more like 5% or 10%.

But then, why not 50% or 90%? It is very difficult for me to argue on principle why we shouldn’t be expected to give that much. Because my income is such a small proportion of the total donations, the marginal utility of each dollar I give is basically constant—and quite high; if it takes about $1000 to save a child’s life on average, and each of these children will then live about 60 more years at about half the world average happiness, that’s about 30 QALY per $1000, or about 30 milliQALY per dollar. Even at my current level of income (incidentally about as much as I think the US basic income should be), I’m benefiting myself only about 150 microQALY per dollar—so my money is worth about 200 times as much to those children as it is to me.

So now we have to ask ourselves the really uncomfortable question: How much do I value those children, relative to myself? If I am at all honest, the value is not 1; I’m not prepared to die for someone I’ve never met 10,000 kilometers away in a nation I’ve never even visited, nor am I prepared to give away all my possessions and throw myself into the same starvation I am hoping to save them from. I value my closest friends and family approximately the same as myself, but I have to admit that I value random strangers considerably less.

Do I really value them at less than 1%, as these figures would seem to imply? I feel like a monster saying that, but maybe it really isn’t so terrible—after all, most economists seem to think that the optimal solidarity coefficient is in fact zero. Maybe we need to become more comfortable admitting that random strangers aren’t worth that much to us, simply so that we can coherently acknowledge that they aren’t worth nothing. Very few of us actually give away all our possessions, after all.

Then again, what do we mean by worth? I can say from direct experience that a single migraine causes me vastly more pain than learning about the death of 200,000 people in an earthquake in Southeast Asia. And while I gave about $100 to the relief efforts involved in that earthquake, I’ve spent considerably more on migraine treatments—thousands, once you include health insurance. But given the chance, would I be willing to suffer a migraine to prevent such an earthquake? Without hesitation. So the amount of pain we feel is not the same as the amount of money we pay, which is not the same as what we would be willing to sacrifice. I think the latter is more indicative of how much people’s lives are really worth to us—but then, what we pay is what has the most direct effect on the world.

It’s actually possible to justify not dying or selling all my possessions even if my solidarity coefficient is much higher—it just leads to some really questionable conclusions. Essentially the argument is this: I am an asset. I have what economists call “human capital”—my health, my intelligence, my education—that gives me the opportunity to affect the world in ways those children cannot. In my ideal imagined future (albeit improbable) in which I actually become President of the World Bank and have the authority to set global development policy, I myself could actually have a marginal impact of megaQALY—millions of person-years of better life. In the far more likely scenario in which I attain some mid-level research or advisory position, I could be one of thousands of people who together have that sort of impact—which still means my own marginal effect is on the order of kiloQALY. And clearly it’s true that if I died, or even if I sold all my possessions, these events would no longer be possible.

The problem with that reasoning is that it’s wildly implausible to say that everyone in the First World are in this same sort of position—Peter Singer can say that, and maybe I can say that, and indeed hundreds of development economists can say that—but at least 99.9% of the First World population are not development economists, nor are they physicists likely to invent cold fusion, nor biomedical engineers likely to cure HIV, nor aid workers who distribute anti-malaria nets and polio vaccines, nor politicians who set national policy, nor diplomats who influence international relations, nor authors whose bestselling books raise worldwide consciousness. Yet I am not comfortable saying that all the world’s teachers, secretaries, airline pilots and truck drivers should give away their possessions either. (Maybe all the world’s bankers and CEOs should—or at least most of them.)

Is it enough that our economy would collapse without teachers, secretaries, airline pilots and truck drivers? But this seems rather like the fact that if everyone in the world visited the same restaurant there wouldn’t be enough room. Surely we could do without any individual teacher, any individual truck driver? If everyone gave the same proportion of their income, 1% would be more than enough to end malaria and world hunger. But we know that everyone won’t give, and the job won’t get done if those of us who do give only 1%.

Moreover, it’s also clearly not the case that everything I spend money on makes me more likely to become a successful and influential development economist. Buying a suit and a car actually clearly does—it’s much easier to get good jobs that way. Even leisure can be justified to some extent, since human beings need leisure and there’s no sense burning myself out before I get anything done. But do I need both of my video game systems? Couldn’t I buy a bit less Coke Zero? What if I watched a 20-inch TV instead of a 40-inch one? I still have free time; could I get another job and donate that money? This is the sort of question Peter Singer tells us to ask ourselves, and it quickly leads to a painfully spartan existence in which most of our time is spent thinking about whether what we’re doing is advancing or damaging the cause of ending world hunger. But then the cost of that stress and cognitive effort must be included; but how do you optimize your own cognitive effort? You need to think about the cost of thinking about the cost of thinking… and on and on. This is why bounded rationality modeling is hard, even though it’s plainly essential to both cognitive science and computer science. (John Stuart Mill wrote an essay that resonates deeply with me about how the pressure to change the world drove him into depression, and how he learned to accept that he could still change the world even if he weren’t constantly pressuring himself to do so—and indeed he did. James Mill set out to create in his son, John Stuart Mill, the greatest philosopher in the history of the world—and I believe that he succeeded.)

Perhaps we should figure out what proportion of the world’s people are likely to give, and how much we need altogether, and then assign the amount we expect from each of them based on that? The more money you ask from each, the fewer people are likely to give. This creates an optimization problem akin to setting the price of a product under monopoly—monopolies maximize profits by carefully balancing the quantity sold with the price at which they sell, and perhaps a similar balance would allow us to maximize development aid. But wouldn’t it be better if we could simply increase the number of people who give, so that we don’t have to ask so much of those who are generous? That means tax-funded foreign aid is the way to go, because it ensures coordination. And indeed I do favor increasing foreign aid to about 1% of GDP—in the US it is currently about $50 billion, 0.3% of GDP, a little more than 1% of the Federal budget. (Most people who say we should “cut” foreign aid don’t realize how small it already is.) But foreign aid is coercive; wouldn’t it be better if people would give voluntarily?

I don’t have a simple answer. I don’t know how much other people’s lives ought to be worth to us, or what it means for our decisions once we assign that value. But I hope I’ve convinced you that this problem is an important one—and made you think a little more about scope neglect and why we have it.

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Human Economics

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

Peter Singer