Saturday, November 22, 2014

Intuiting Large Numbers: A Facebook Exchange

I recently had an interesting exchange with a FaceBook friend, a reasonable person with political views very different from mine. He posted something to the effect that he didn't think a free market society could produce a middle class, and supported it with the claim that at the beginning of the 20th century one or two dozen families held most of the wealth. Pretty clearly, judging by past exchanges, his view was that it was the rise of labor unions that changed that situation. I do not know if he had actual data on the distribution of wealth; if he did, I suspect that "wealth" was limited to forms of wealth, such as stocks and bonds, held mainly by wealthy people. 

What is more relevant is the distribution of income, so I asked if he had data on that. I also suggested that he was being misled by the inability of humans to intuit large numbers. If a hundred people have incomes of a million dollars a year and a hundred million have incomes of a thousand dollars a year, it looks as though the hundred have most of the income. Simple arithmetic demonstrates that they actually have just under a thousandth of it.

He responded with a graph showing the share of income going to the top one percent, .1 percent, and .01 percent of the population. It did not go back quite to 1900, but extrapolating it the share of the top .01 percent then looked to be about 5%. 

The top .01 percent would be about 10,000 people, say 2,000 households. So even after expanding his one or two dozen families by two orders of magnitude, their share of income was still only about one twentieth of the total, making it difficult to see how their existence could have prevented a middle class from coming into existence.

To put the point a little differently ...  . From 1900 to 1905, real GDP per capita increased by about ten percent. So if all of the income of the top 10,000 people in 1900 had been transferred to the rest of the population, their gain would have been equivalent to two or three years of economic growth. If the existence of the rich made the rest of the population too poor to have a middle class in 1900, the problem should have been solved by 1903.

Which I think supports my original point about intuiting large numbers.

Virtual Status

It is natural to think of status as a zero sum game, to assume that anything that raises your status relative to me must lower my status relative to you. What first suggested to me that it wasn't true was my experience as an undergraduate at Harvard. Different people care about status relative to different things, with the result that one can have, in the limit, a society where everyone is at the top of his own ladder. If Eugene is a chess master and Charles a billionaire, the victory that raises Eugene's status does not lower Charles', because Eugene does and Charles does not care about status in the chess world. Similarly, mutatis mutandis, across a wide variety of different reference groups. 

I made this point in another post about eight years ago. What brought my attention back to it was playing the beginning of the new part of World of Warcraft. It consists of walking the player character through a sequence of events, all easy, in which he is interacting almost entirely with computer generated characters—who tell him, over and over, what a wonderful hero he is. The same pattern shows up in earlier parts of the game, but this was a particularly striking version. Everybody can be above average. Everybody, indeed, can be in the top one percent. Provided that the other ninety-nine percent are NPC's, non-player characters. 

Which raises, for those interested in predicting the future or writing science fiction, the possibility of a world where most people spend most of their time in virtual reality, interacting mainly with virtual characters—precisely because those characters, unlike real people, are designed to make them feel superior. To some degree the phenomenon exists already with fraternal organizations where practically everyone is a grand high something or other. But the future may produce an enormously more powerful, hence more corrupting, version.

My son Bill informs me that a particular game, one I have never played, is  very good  in part because it successfully subverts the "you are the world's greatest hero" trope. He also told me that naming the game without a spoiler warning would be a Very Bad Thing to do, and I have edited this post accordingly.

Spoiler Warning













































Jade Empire

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A Revealing Cartoon

The cartoon shown below gets posted to FaceBook by people arguing for policies to reduce global warming. The implicit assumption is that all of the things they want to do for that purpose are good things that they would be in favor of even if warming was not a problem. It apparently does not occur to the people who post the cartoon that one implication of their posting it is that they have a reason to believe in, and preach, the threat of catastrophic global warming—whether or not it's true.

I expect that most of the people who post the cartoon, or approve of it, would see the point in a commercial context. They realize that the fact that someone is trying to sell you a car is a good reason to be skeptical of his account of its condition. Most would also recognize it in the political context, providing it was not their politics in question—many of them, after all, believe that criticism of CAGW is largely fueled by the self-interest of oil companies. 

But it apparently does not occur to them that, for someone not persuaded of their policies, the same argument applies to them, that, from the standpoint of the people they want to convince, the cartoon is a reason to be more skeptical of their views, not less.



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Wednesday, November 12, 2014

Implications of Academic Dishonesty

There has been a recent flap over the appearance online of a video of Jonathan Gruber telling the truth about the Obamacare bill:
This bill was written in a tortured way to make sure CBO did not score the mandate as taxes. If [Congressional Budget Office] scored the mandate as taxes, the bill dies. Okay, so it’s written to do that. In terms of risk-rated subsidies, if you had a law which said that healthy people are going to pay in -– you made explicit that healthy people pay in and sick people get money — it would not have passed… Lack of transparency is a huge political advantage. And basically, call it the stupidity of the American voter, or whatever, but basically that was really, really critical for the thing to pass. And it’s the second-best argument. Look, I wish Mark was right that we could make it all transparent, but I’d rather have this law than not.
What he is saying, pretty clearly, is that he wishes one could both be honest and get good legislation passed but approves of dishonesty if necessary to get the job done. 

My guess is that his view is shared not only by most politicians but by most academics involved in the political system, although I expect many would be unwilling to say so, especially on camera. Part of the reason I believe that is an experience that happened almost fifty years ago. I was spending a summer in Washington as a congressional intern. My congressman lent me for four days a week to the Joint Economic Committee. They lent me to the Project on State and Local Finance of George Washington University, aka the Project on State and Local Finance of the JEC, aka the Project on State and Local Finance of the Governors' Conference. The Project was producing a fact book, a volume to provide the ordinary voter with information on state and local finance. 

I discovered a fact. It was a demographic fact about people already born. It was a fact about future financial requirements for the largest expenditure in state and local budgets. The people running the project refused to include the fact in their factbook, not because they thought it was not true or not important but because it pointed in the wrong direction. Knowing it would make voters less willing to support increases in state and local revenues, which was the opposite of the result they wanted.

The fact itself is one you can easily check. The date was about 1967. For the previous fifteen or so years, as the baby boom came into the school system, the ratio of students to taxpayers had been going up, which meant that taxes for schools had to increase in order to keep per pupil spending from falling. For the next decade or two, as the baby boom came out of the schools and into the labor force, the ratio of students to taxpayers would be going down. That meant that per pupil spending could be kept at its current level while taxes for schools went down. Schooling was and is the largest expenditure of state and local governments.

I had assumed that professional academics, people I liked and respected, were committed to honesty in their professional work. I think of the discovery that they were not as my loss of innocence.

My gut reaction is to disapprove both of what the people I worked with then did—pretending to inform people while deliberately misinforming them—and what Gruber describes and approves of, but I cannot prove that my reaction is justified. Gruber's position is that he is willing to sacrifice one value for another that he thinks more important, and I cannot show that he is wrong. I can, however, point out a danger in the approach. Once academics accept the principle that dishonesty is justified if done for the greater good, their work cannot be trusted on any subject with regard to which they have an incentive to misrepresent it. I offered an example in one of my previous posts.

Consider the relevance for the current climate controversy. No single academic knows enough to base his conclusion solely on his own work and expertise. Each of them is relying on information produced by many others. The economists estimating the net effect of AGW rely on the work of climate scientists predicting the effects on temperature of increased CO2, the work of other climate scientists predicting the effect of increased temperature on rainfall, hurricanes, and other relevant variables, the work of agronomists estimating the effect of changes in CO2 concentration, length of growing season, temperature on agricultural production, the work of statisticians confirming the models of the climate scientists on the basis of their analysis of paleoclimate data, and many others.

What happens if each of those experts feels entitled, even obligated, to lie just a little, to shade his conclusions to strengthen the support they provide for what he believes is the right conclusion? Each of them then interprets the work of all the others as providing more support for that conclusion than it really does. The result might be that they end up biasing their results in support of the wrong conclusion—which each of them believes is right on the basis of the lies of all the others.

That is one of the reasons I am not greatly impressed by the supposed scientific consensus in favor of Catastrophic Anthropogenic Global Warming.

There is a quote usually attributed to Bismarck but apparently due to Saxe:
Laws, like sausages, cease to inspire respect in proportion as we know how they are made.
Science too. At least when it intersects politics.

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Thursday, November 06, 2014

A Debunker Debunked

The late Stephen Jay Gould was both an evolutionary biologist and a popular essayist. In the book The Mismeasure of Man he argued that scientists unconsciously manipulate their data to fit their preexisting prejudices. As evidence he cited the work of Samuel George Morton, a 19th century physical anthropologist who assembled a large collection of skulls from many parts of the world and measured their cranial capacity in an attempt to answer questions about racial differences. According to Gould, Morton skewed his data in various ways to fit his racial beliefs.

I have just read an article by a group of modern anthropologists who went over Morton's data and remeasured many of the skulls that Morton measured—something Gould did not do. The authors concluded that most of Gould's criticisms were poorly supported or falsified. The errors that Gould reported in Morton's analysis resulted from errors by Gould, not by Morton. Morton did make some mistakes in his work, but they were in the opposite direction from his biases. Thus, for example:
Morton’s three most over-measured skulls are an Egyptian Copt that Morton considered "Negro" (+12%), a Seminole (+8%) and a "Native African Negro" (+7%).
The obvious conclusion, not stated by the authors of the article, is that Gould's central claim was correct. Scientists sometimes bias their work to fit their preconceptions. As Gould demonstrated by doing so.

The article fit a conclusion that I long ago reached about Gould on other evidence—that he misrepresented the work of people he disagreed with, taking advantage of the fact that since he was a widely read popular essayist and they were not, most of his readers would never read either the work he was attacking or any response that the authors might make. In this case he took further advantage of the fact that the man he was slandering was no longer alive to reply. 

For evidence in another case, here is a response to Gould by Tooby and Cosmides. And here is a perceptive comment on Gould by someone with whom, on other subjects, I often disagree.

Wednesday, November 05, 2014

How Much Does Control of the Senate Matter?

In the weeks leading up to the election, the key question everyone focused on was whether or not the Republicans would get control of the Senate. It was never clear to me why that was supposed to be so important. As long as the Republicans control the House, the Democrats cannot pass any bills that the Republicans are solidly against. As long as the Democrats control the White House, Republicans cannot pass any bills that the Democrats are solidly against unless they have large enough majorities in both houses to override a presidential veto, which they were not going to get.

I do not want to overstate my case. A Republican majority in the Senate means that Obama cannot appoint judges, in particular Supreme Court judges, that the Republicans are solidly opposed to. It means that the Republicans can pass popular legislation that the Democrats oppose and force Obama to either sign it or veto it. It might make it possible to override a veto of popular legislation with the help of a few Democratic legislators. But the bottom line for legislation is still what it was. Nothing can get passed if either party is solidly opposed to it.

Which brings me back to my theory of why people vote. It isn't to change the political outcome, since any reasonable person knows that, in a large population polity, his vote has virtually no chance of doing that. It's for the same reason people go to football games—to cheer for their side.

In order to have a game you need some definition of winning and losing. In order for it to be interesting, the definition has to leave the outcome in doubt. If winning the midterm elections was defined by whether or not the Republicans retained their majority in the House or by whether they gained enough seats in both houses to override a presidential veto, it would have been a very boring contest, since the answer to both questions was known long in advance.

Viewing it as a contest over who ended up in control of the Senate, on the other hand, made it a game worth watching.


Tuesday, November 04, 2014

Memories of Gordon Tullock

Gordon died yesterday. We were colleagues at the Public Choice Center at VPI and I have affectionate memories of him. Some bits and pieces ...  .

Gordon gave the impression that he read every book that was published. As best I could tell, he was bluffing about half the time.

Like George Stigler, he was sharp tongued but not, so far as I could tell, in the least malicious. The best advice he gave me was that the one part of the submission cycle you can control is the time your article spends on your desk. 

My wife remembers meeting him when she was my girlfriend. He started the conversation by asking why she was wearing a backpack. Her interpretation was that the only form of conversation he knew was argument, he only knew two things about her—that she was my girlfriend and that she was wearing a backpack—so he flipped a mental coin and chose the backpack. He never made the common mistake of thinking that an argument was a quarrel.

One chapter of the recent third edition of my first book is based on something I published when I saw an opportunity to argue, in print, that something Gordon had written was both obvious and wrong. Anyone who knew him will understand that it was a temptation I could not resist.

The last time I saw him was an event at George Mason a good many years ago. I told him that I had heard he was publishing a book of his rejected articles. He smiled and nodded. So I asked when the first volume was coming out.

I will miss him.