This piece by the recently deceased James Buchanan is fantastic, and I think explains exactly what is wrong with most people's concept of economics, political economy, and really how any such system works.
The nut shell version is that we often think of people as having utility functions written into them, and all the people trading are maximizing those functions to get some result. In fact, this is not the case, rather the process defines the utility functions. Which is to say, the conditions under which we exist help define our choices and what we think is optimal; the process defines the utility function. Which means you can not just get a pile of random people, figure out their utility functions, and then organize them such that those are met, coming to the same result as a market; without the process, there are no utility functions to consider! Our concepts of utility functions arise from seeing people make a series of choices, but those functions do not themselves exist independently of those choices.
Ok... pretty soon I am going to end up writing more than Buchanan did, and yet won't explain things one half as well. Just go read the link. Then carve out at least 30 minutes to really think about what the piece means to us as economists, policy analysts, philosophers and voters.
Monday, January 14, 2013
EconResponse: Esther Dyson on the Attention Economy
This week's EconTalk is Esther Dyson on the Attention Economy and the Quantification of Everything. She is approaching two topics, one the on and offline market for attention, and then goes into quantification of things, by which she means keeping metrics on different aspects of like like community etc. I intend to start writing about EconTalk every week as it is probably my favorite thing to listen to. Unfortunately, this was not my favorite episode, but it did spur me to write about some of the things I didn't agree with, so hey, there's that!
In the attention segment, there are a few main insights. Attention is something people both intrinsically desire and intrinsically enjoy giving. Attention is also a service (though she doesn't use the word for some reason); it can not be stored or transferred by arbitrage as far as we can tell. At the tail end of this segment she and Russ discuss briefly the idea that productivity increases seem in part to allow people to do more non-measurable, non-monetized things like walk in the woods, pay attention to each other, etc. which make the measured economy look worse but make us better off. This provides a bit of a segue into the next section on measurement. I say a bit, because while Ms Dyson seems to like the idea that we are moving towards a barter economy (her words) that could not be measured easily, and seems to tacitly realize that many things we care about are neither monetizable or measurable, it isn't clear to me then why she thinks that quantification is so valuable.
She does have some good points about quantification, that as a former supply chain guy I can absolutely appreciate. Actually keeping track of who does what in written form can be a big help, and she makes a good point that we should probably do a bit more of that in our lives. My own example would be keeping track of which suppliers are late on deliveries and by how much. Our brains don't keep good track as we tend to only remember the times such issues became problems, like an order arriving two days late causing us to stop production. Often, when we keep track of things we find that some are consistently late by a day, and some are randomly late by a larger margin. Those all affect how you order and keep inventory, as the former just requires ordering a day earlier than normal, while the latter requires keeping more stock on hand. Not an exciting example, but one that costs companies millions when they get it wrong.
One issue with her idea, besides the facts that many things that really matter are very difficult or impossible to measure, and we also don't know what we should be doing with those measurements to affect positive changes, or even what normal or good is... and many more... is the other side of the coin: we often get what we measure. In other words, once you start keeping track of something like steps walked, pounds recycled or whatever, with the understanding that more/less is better, people unconsciously start to adjust behaviors to seek making those metrics larger or smaller, even if doing so is worse over all. This is a frequent problem in business, where maybe you measure days to order fulfillment from order date. Well, there are two ways to get that: low inventory and efficient production processes, or just lots of inventory. The former is great and what you are shooting for, but the latter is expensive for the company yet easier to achieve for the workers and managers. Guess which one happens when managers are implicitly graded on the matter. See also my post about whether incentives imply the ability to pursue them; just as incentives tell our brains that we should be able to affect the outcome, metrics tell our brain what to focus on. How many economists talk about over all happiness, or even wealth, instead of GDP, just because GDP can be more easily measured?
Effectively, a good take away would be to pay more attention to what we do in general, and if something really matters, keep written records of what happens that we care about. Our brains are not naturally attuned to give us accurate measures of these things, and can be tricked in various ways, and so keeping a journal or record can really benefit us. Sites like Beeminder can really help us when it comes to such things. However, I think a broader understanding of the topic would point out that many things we care about can not be measured, and even if we can, we don't always know what to think or do about those numbers. Russ brings up this issue, but Esther does not seem comfortable discussing it. I find this to be the case with many engineers and economists I have spoken to, as well as many business managers: a very strong faith that situations can be reduced to numbers, and once we do that, we can then tweak the system to get the numbers we want.
Russ asks an interesting question as to whether introspection happens less frequently in the iPhone age, and Esther replies (almost in my own voice) that she wonders how much happened before. I personally suspect that if we took away everyone's little toys we distract ourselves with we wouldn't end up with philosophers, but just really bored people. I often think that sort of belief implies that if you took away all my books and things I would become a great athlete (or at least a runner) which is not likely at all. I think we each have things we like to do, and seek to do such things even when we can't obviously do them, and taking away our ability to do them simply frustrates us, and doesn't drive us in different directions. I would argue people don't engage in introspection as much as we should, but I don't think anything in particular is to blame.
Another point Esther makes along those lines is that "Abraham Lincoln used to give 3 hour speeches, and who would sit through that today?" The important point, besides 'what politician gives good 3 our speeches today?' is "How do you know people sat through all of that?" Russ points out, correctly I think, that people habitually sit through long movies, perhaps with an intermission, and other things. Esther laments a bit that people are more interested in short videos than books or longer things. However, I think that she misses the larger point that there are few things good enough to spend lots of time on, but many that are good enough for a few minutes. The internet has not caused us to only like short things, but rather has allowed people with only two minutes of good story to show us that story instead of only those who have two hours of things to say. I would much rather watch three hours of random cat videos on YouTube than have to sit through Avatar again. Now I have the choice, whereas in the late 80's if I wanted to watch a movie, I was limited to the things the movie industry wanted to make.
She also talks about investing a bit, but I don't really have a lot to say about it. Arguably, she doesn't either; she says a lot of things that are general media boiler plate things I have heard dozens of times yet contain no insights (or even accuracy.)
Then space... but not why people would want to go there other than "Hey! Space!"
All in all, a relatively disappointing episode of EconTalk. Esther is not a dynamic speaker, which is forgivable, but her points and ideas are somewhat fuzzy and poorly thought out and communicated, which is less so. Perhaps the latter is due to the former, as speaking extemporaneously is never easy, even when not in front of people. However, I think many of her ideas are somewhat facile, and contradict each other on deeper reflection. She implies that we should, in the normative, it makes a better person sense, spend more time doing long things like reading or listening to three hour political speeches with little regard to what people actually like, or whether spending that much time on something long is actually ideal. Is reading a long, bad book actually better than reading 30 well written blog posts? Personally, I find much more benefit in terms of thinking from reading a handful of really insightful posts than a long, cumbersome journal article. As Tyler Cowen put it, most articles are just blog posts fluffed out to 15 pages and most books are just articles with more filler. I absolutely agree; length does not imply quality, just length. I don't think this podcast would have benefited from being longer, but maybe I just don't have the attention span.
In the attention segment, there are a few main insights. Attention is something people both intrinsically desire and intrinsically enjoy giving. Attention is also a service (though she doesn't use the word for some reason); it can not be stored or transferred by arbitrage as far as we can tell. At the tail end of this segment she and Russ discuss briefly the idea that productivity increases seem in part to allow people to do more non-measurable, non-monetized things like walk in the woods, pay attention to each other, etc. which make the measured economy look worse but make us better off. This provides a bit of a segue into the next section on measurement. I say a bit, because while Ms Dyson seems to like the idea that we are moving towards a barter economy (her words) that could not be measured easily, and seems to tacitly realize that many things we care about are neither monetizable or measurable, it isn't clear to me then why she thinks that quantification is so valuable.
She does have some good points about quantification, that as a former supply chain guy I can absolutely appreciate. Actually keeping track of who does what in written form can be a big help, and she makes a good point that we should probably do a bit more of that in our lives. My own example would be keeping track of which suppliers are late on deliveries and by how much. Our brains don't keep good track as we tend to only remember the times such issues became problems, like an order arriving two days late causing us to stop production. Often, when we keep track of things we find that some are consistently late by a day, and some are randomly late by a larger margin. Those all affect how you order and keep inventory, as the former just requires ordering a day earlier than normal, while the latter requires keeping more stock on hand. Not an exciting example, but one that costs companies millions when they get it wrong.
One issue with her idea, besides the facts that many things that really matter are very difficult or impossible to measure, and we also don't know what we should be doing with those measurements to affect positive changes, or even what normal or good is... and many more... is the other side of the coin: we often get what we measure. In other words, once you start keeping track of something like steps walked, pounds recycled or whatever, with the understanding that more/less is better, people unconsciously start to adjust behaviors to seek making those metrics larger or smaller, even if doing so is worse over all. This is a frequent problem in business, where maybe you measure days to order fulfillment from order date. Well, there are two ways to get that: low inventory and efficient production processes, or just lots of inventory. The former is great and what you are shooting for, but the latter is expensive for the company yet easier to achieve for the workers and managers. Guess which one happens when managers are implicitly graded on the matter. See also my post about whether incentives imply the ability to pursue them; just as incentives tell our brains that we should be able to affect the outcome, metrics tell our brain what to focus on. How many economists talk about over all happiness, or even wealth, instead of GDP, just because GDP can be more easily measured?
Effectively, a good take away would be to pay more attention to what we do in general, and if something really matters, keep written records of what happens that we care about. Our brains are not naturally attuned to give us accurate measures of these things, and can be tricked in various ways, and so keeping a journal or record can really benefit us. Sites like Beeminder can really help us when it comes to such things. However, I think a broader understanding of the topic would point out that many things we care about can not be measured, and even if we can, we don't always know what to think or do about those numbers. Russ brings up this issue, but Esther does not seem comfortable discussing it. I find this to be the case with many engineers and economists I have spoken to, as well as many business managers: a very strong faith that situations can be reduced to numbers, and once we do that, we can then tweak the system to get the numbers we want.
Russ asks an interesting question as to whether introspection happens less frequently in the iPhone age, and Esther replies (almost in my own voice) that she wonders how much happened before. I personally suspect that if we took away everyone's little toys we distract ourselves with we wouldn't end up with philosophers, but just really bored people. I often think that sort of belief implies that if you took away all my books and things I would become a great athlete (or at least a runner) which is not likely at all. I think we each have things we like to do, and seek to do such things even when we can't obviously do them, and taking away our ability to do them simply frustrates us, and doesn't drive us in different directions. I would argue people don't engage in introspection as much as we should, but I don't think anything in particular is to blame.
Another point Esther makes along those lines is that "Abraham Lincoln used to give 3 hour speeches, and who would sit through that today?" The important point, besides 'what politician gives good 3 our speeches today?' is "How do you know people sat through all of that?" Russ points out, correctly I think, that people habitually sit through long movies, perhaps with an intermission, and other things. Esther laments a bit that people are more interested in short videos than books or longer things. However, I think that she misses the larger point that there are few things good enough to spend lots of time on, but many that are good enough for a few minutes. The internet has not caused us to only like short things, but rather has allowed people with only two minutes of good story to show us that story instead of only those who have two hours of things to say. I would much rather watch three hours of random cat videos on YouTube than have to sit through Avatar again. Now I have the choice, whereas in the late 80's if I wanted to watch a movie, I was limited to the things the movie industry wanted to make.
She also talks about investing a bit, but I don't really have a lot to say about it. Arguably, she doesn't either; she says a lot of things that are general media boiler plate things I have heard dozens of times yet contain no insights (or even accuracy.)
Then space... but not why people would want to go there other than "Hey! Space!"
All in all, a relatively disappointing episode of EconTalk. Esther is not a dynamic speaker, which is forgivable, but her points and ideas are somewhat fuzzy and poorly thought out and communicated, which is less so. Perhaps the latter is due to the former, as speaking extemporaneously is never easy, even when not in front of people. However, I think many of her ideas are somewhat facile, and contradict each other on deeper reflection. She implies that we should, in the normative, it makes a better person sense, spend more time doing long things like reading or listening to three hour political speeches with little regard to what people actually like, or whether spending that much time on something long is actually ideal. Is reading a long, bad book actually better than reading 30 well written blog posts? Personally, I find much more benefit in terms of thinking from reading a handful of really insightful posts than a long, cumbersome journal article. As Tyler Cowen put it, most articles are just blog posts fluffed out to 15 pages and most books are just articles with more filler. I absolutely agree; length does not imply quality, just length. I don't think this podcast would have benefited from being longer, but maybe I just don't have the attention span.
Friday, January 11, 2013
How to pay for roads?
My colleague in my GMU Econ cohort Zachary posted on his blog today about a proposed change in gasoline tax laws in VA. Effectively, the governor suggests the fixed 17.5 cents per gallon tax on gas be dropped altogether in favor of an increase in the sales tax from 5% to 5.8%, from which gasoline would be excluded. Zachary lays out most of the salient points, such as the fact that this tax is not revenue neutral, would help deal with the issue of the fixed gas tax not being pinned to inflation or anything else, and the like.
While I don't strongly disagree with his over all thesis, I do want to pick apart some of his points, as I think he is letting the perfect be the enemy of the good (or at least not so bad) in his analysis.
1: Lighter cars degrade the road surface less than heavier ones. Interestingly, this isn't always true. The relevant comparison is not just weight, but tire surface on the road per pound. As a result, a car weighing 2,000 pounds with 4 tires that puts 50 square inches of rubber on the road per tire has a factor of 10 lbs per square inch, while a tractor trailer weighing 60,000 pounds with 18 wheels only needs each of its much larger tires to have ~334 square inches of surface area on the road to have the same factor. Sounds like a lot, that that is just an 18.25" square compared to the car's ~7" square. This isn't to say that tractor trailers are always easier on the road than cars, but just that they are not nearly so bad as people think. (Hooray for my supply chain degree becoming suddenly relevant!) So more tractor trailers on the road compared to coupes does not necessarily mean much more road degradation.
2: Pro-cyclical nature of the tax Zachary seems to be suggesting here that the revenue generated would not necessarily increase along with increases in road use. While the magnitude might not always be the same amount, it would seem that only a decrease in prices that mitigates changes in volume such that the total sales dollars stays constant or decreases would matter in this sense. If prices increase while volume stays the same, presumably revenue compared to usage would increase (affected by price changes in maintenance, but more on that shortly.) If prices stay the same and volume increases, total sales dollars would still increase, resulting in more revenue and more usage. The ratio of revenue to costs might go down, but the amount of revenue would still go up. So if say prices are fixed but quantities double, the revenue generated is still doubled. Road degradation might more than double, but it isn't clear that is the case. In light of my previous point, it might not at all.
3: Does the tax adjust for inflation? I think Zachary is a bit harsh here. It does adjust to inflation as defined as an increase in the price level. The current fixed number does absolutely nothing of the sort. Now, he is correct that there is no particularly good reason to assume that the rate of inflation will be the same between the road maintenance and consumer goods industries, and thus the tax does not account for that. True, but the current tax does not account for it either. We are not comparing a perfectly priced tax that takes all relative prices into account to the new tax, but rather a current tax that does not shift at all for inflation or any relative prices to one that at least adjusts to changes in prices in the products it affects. (It does it automatically at that, so the CPI doesn't come into the picture at all.)
4: Fuel Efficiency I think Zachary has it largely right here, except that light vehicles are not necessarily easier on the road. Generally more efficient vehicles have smaller tires. (Think of road racing bikes vs mountain bikes, and why the former have tiny little inch wide tires while the latter have nearly 2-3 inch tires.) So that Prius might not in fact cause more wear on the road than that van per mile. Just saying... pricing the damage from use is really tough. Amish buggies play hell on the roads with their metal shod horse hooves and often metal rimmed wheels, yet they get a total pass on gas taxes.
While I generally agree that gas taxes do generally tax those most who use the roads most, and thus helps internalize the cost, I also don't believe that the funds raised for road work actually go only to it, or that other funds don't get moved towards it. I also think that the current fixed number tax is quite poor even as applied. The fact is that government is very poor at directing the taxes at those who actually use the good, and thus their internalizing measures do very little to affect behaviors. Before reading his post, I had no idea the gas tax in VA was 17.5 cents a gallon. I used less gas as the price went up perhaps, but not because a bureaucrat was tweaking the tax level.
Perhaps a better compromise would be a percentage tax on the price of gas, a sales tax that applies only to gas, at say 5%. That punishes those who use premium has instead of standard, but every tax is randomly punishing. Of course, those who don't own cars but still purchase goods shipped by motor vehicle would not directly pay the tax, but it would still be reflected in the price of their goods assuming the truck drives refueled in state. Then again, unless you live ~100 miles inside state lines, or the shipping/truck depot is inside state lines and thus buying their tax there, you would not be paying anymore necessarily.
All that to say: taxing things accurately is nearly impossible for government, and often private firms as well. Sometimes you have to live with some externalities and go with efficiency. A higher state sales tax and no gas tax might well be the optimal along those lines. I think that Zachary is in this case letting the theoretical perfect tax be the enemy of this change, and not the current tax.
Then again, he doesn't drive as far to school as I do, so maybe I am biased; who wants to pay more in taxes? Maybe I would be more strongly against the change if my personal tax expenditures were shown to up as a result of the change.
While I don't strongly disagree with his over all thesis, I do want to pick apart some of his points, as I think he is letting the perfect be the enemy of the good (or at least not so bad) in his analysis.
1: Lighter cars degrade the road surface less than heavier ones. Interestingly, this isn't always true. The relevant comparison is not just weight, but tire surface on the road per pound. As a result, a car weighing 2,000 pounds with 4 tires that puts 50 square inches of rubber on the road per tire has a factor of 10 lbs per square inch, while a tractor trailer weighing 60,000 pounds with 18 wheels only needs each of its much larger tires to have ~334 square inches of surface area on the road to have the same factor. Sounds like a lot, that that is just an 18.25" square compared to the car's ~7" square. This isn't to say that tractor trailers are always easier on the road than cars, but just that they are not nearly so bad as people think. (Hooray for my supply chain degree becoming suddenly relevant!) So more tractor trailers on the road compared to coupes does not necessarily mean much more road degradation.
2: Pro-cyclical nature of the tax Zachary seems to be suggesting here that the revenue generated would not necessarily increase along with increases in road use. While the magnitude might not always be the same amount, it would seem that only a decrease in prices that mitigates changes in volume such that the total sales dollars stays constant or decreases would matter in this sense. If prices increase while volume stays the same, presumably revenue compared to usage would increase (affected by price changes in maintenance, but more on that shortly.) If prices stay the same and volume increases, total sales dollars would still increase, resulting in more revenue and more usage. The ratio of revenue to costs might go down, but the amount of revenue would still go up. So if say prices are fixed but quantities double, the revenue generated is still doubled. Road degradation might more than double, but it isn't clear that is the case. In light of my previous point, it might not at all.
3: Does the tax adjust for inflation? I think Zachary is a bit harsh here. It does adjust to inflation as defined as an increase in the price level. The current fixed number does absolutely nothing of the sort. Now, he is correct that there is no particularly good reason to assume that the rate of inflation will be the same between the road maintenance and consumer goods industries, and thus the tax does not account for that. True, but the current tax does not account for it either. We are not comparing a perfectly priced tax that takes all relative prices into account to the new tax, but rather a current tax that does not shift at all for inflation or any relative prices to one that at least adjusts to changes in prices in the products it affects. (It does it automatically at that, so the CPI doesn't come into the picture at all.)
4: Fuel Efficiency I think Zachary has it largely right here, except that light vehicles are not necessarily easier on the road. Generally more efficient vehicles have smaller tires. (Think of road racing bikes vs mountain bikes, and why the former have tiny little inch wide tires while the latter have nearly 2-3 inch tires.) So that Prius might not in fact cause more wear on the road than that van per mile. Just saying... pricing the damage from use is really tough. Amish buggies play hell on the roads with their metal shod horse hooves and often metal rimmed wheels, yet they get a total pass on gas taxes.
While I generally agree that gas taxes do generally tax those most who use the roads most, and thus helps internalize the cost, I also don't believe that the funds raised for road work actually go only to it, or that other funds don't get moved towards it. I also think that the current fixed number tax is quite poor even as applied. The fact is that government is very poor at directing the taxes at those who actually use the good, and thus their internalizing measures do very little to affect behaviors. Before reading his post, I had no idea the gas tax in VA was 17.5 cents a gallon. I used less gas as the price went up perhaps, but not because a bureaucrat was tweaking the tax level.
Perhaps a better compromise would be a percentage tax on the price of gas, a sales tax that applies only to gas, at say 5%. That punishes those who use premium has instead of standard, but every tax is randomly punishing. Of course, those who don't own cars but still purchase goods shipped by motor vehicle would not directly pay the tax, but it would still be reflected in the price of their goods assuming the truck drives refueled in state. Then again, unless you live ~100 miles inside state lines, or the shipping/truck depot is inside state lines and thus buying their tax there, you would not be paying anymore necessarily.
All that to say: taxing things accurately is nearly impossible for government, and often private firms as well. Sometimes you have to live with some externalities and go with efficiency. A higher state sales tax and no gas tax might well be the optimal along those lines. I think that Zachary is in this case letting the theoretical perfect tax be the enemy of this change, and not the current tax.
Then again, he doesn't drive as far to school as I do, so maybe I am biased; who wants to pay more in taxes? Maybe I would be more strongly against the change if my personal tax expenditures were shown to up as a result of the change.
Tuesday, January 8, 2013
Excellent Article Review
Hat Tip to Marginal Revolution
This is a fantastic review by Kevin Kelly of an article by Robert Gordon claiming that the 3rd industrial revolution, the whole computer thing, isn't actually a big deal, and didn't do much compared to the other two. The review pretty well eviscerates that claim I think, and is totally worth reading in its entirety. If you can't, here's my favorite segment
This is a fantastic review by Kevin Kelly of an article by Robert Gordon claiming that the 3rd industrial revolution, the whole computer thing, isn't actually a big deal, and didn't do much compared to the other two. The review pretty well eviscerates that claim I think, and is totally worth reading in its entirety. If you can't, here's my favorite segment
Generally any task that can be measured by the metrics of productivity -- output per hour -- is a task we want automation to do. In short, productivity is for robots. Humans excel at wasting time, experimenting, playing, creating, and exploring. None of these fare well under the scrutiny of productivity. That is why science and art are so hard to fund. But they are also the foundation of long-term growth. Yet our notions of jobs, of work, of the economy don't include a lot of space for wasting time, experimenting, playing, creating, and exploring.Seriously though, you want to read this. It is really quite an excellent monologue on how we as economists measure progress, and what progress even means.
Friday, January 4, 2013
Lessons from Gaming: We are playing different games.
So, earlier I was babbling on about levels of rules and trying to make some sense of things in my head. Laying a ground work for us to stand on as we turn our faces to the world, to see from the same perspective, if you will. (Metaphors mixed: 3?)
Now that we have a shared lens to see through, I want to tell you a secret. For I know why we think lawyers are scummy, why we look down on lobbyists and politicians (those who are not on our team, at least) as little more than criminals in suits, and why we find it so easy to demonize corporate heads etc. We think it is because they are immoral, take advantage of us little guys, or just generally do things wrong. The answer is quite different. The answer is:
They are playing the actual game, by the actual rules.
What the hell is everyone else doing then? We are playing a similar game, with the same pieces, same board, but we are ignoring many of the rules, while coming up with entirely different ones that are not in the book. To explain, allow me to use a parallel from gaming.
Let us consider poker (though almost all deep, competitive games have similar dynamics.) The rules are not too complicated, mostly about how you put in chips, when and how you get cards, and what the hands mean. Lots of people play with their friends, trying to get good hands, playing percentages and guessing what their buddies have. Maybe they read a little on tactics or strategy on the side, but nothing serious. These are the casual players, and they have fun with each other.
Then you have the professionals. These are the people who hardly look at their cards, but stare intently at their opponents. These are the folks who will fold 25 hands in a row just to see what others's behaviors are before actually sticking in for a hand. They study up a great deal, and can tell you percentages off the top of their heads, but will assure you the game isn't about the cards but the players. They play by all the rules, both the written rules of the game and the rules of the world that apply. And they have fun with each other.
Mixing the two types of players though, that is a recipe for trouble. Having one player in your casual game who is a pro means he walks away with the pot every night and everyone else wonders why they pay 50$ a week to sit around and drink but without any strippers. Likewise, one casual player sitting with a table of pros just becomes a chunk of meat for the other sharks to compete for the biggest bites of before he is shredded. Why? Because they are playing essentially different games.
Consider the casual fellow in the high stakes pro game. He goes in perhaps expecting to be beat, but to have fun on the terms he is used to. Instead, he gets smashed, completely unable to even grasp what he is doing wrong and how he can even adjust to improve. He doesn't feel happy with the game, as the feeling of complete impotence makes all of us deeply unhappy. He might not even learn much, as he doesn't even know where to start. He just goes home with a slight feeling of resentment.
Now imagine that he didn't realize he was going to a high stakes pro game, and just thought it was goof off and smoke cigars time with his buddies. He would be really angry, and likely suspecting he had been cheated.
Let's get back to the regular world. We, the general folks, we are all generally casual players of this game of life. We play largely by the broad brush social rules of "Don't Hurt People, and Don't Take Their Things." At least in the US, our sense of things is basically those rules with a rough sense of fairness and helping each other out when it isn't too inconvenient. We spend most of our lives (if we are lucky) ignoring the existence of nearly all of the Natural and Legislative Rules. We generally don't need to know much chemistry for example, and we believe that most legislation just doesn't apply to us. Who pays state sales taxes on eBay items?
In fact, this is so ingrained into our sense of how things work that when we see someone getting arrested for something we think is silly, our response is usually "Hey, he wasn't hurting anyone!"
But those are not all the rules. There are many thousands of pages of legislation and regulation that apply, never mind the Natural Rules. The average person may think they are following the rules in general (no one cares about speeding violations...) but in reality they don't even know what the rules are except in very narrow areas that affect them personally or professionally. The pros, that is the lawyers and politicians etc., those are the ones who really learn them, because they make a living knowing them better than other people. Even then, they specialize because they can't know them all, but the important point is that they are playing a different game than most; they are playing by the full rule book, not just the basic outline version we live with.
This has some very important implications.
1: More rules means more power for those who specialize in knowing rules. Every line of new regulation, every special cut out in the tax code, every random bit of legislation makes specializing in the rules more powerful. If you are unhappy that big corporations can pay nearly zero taxes, or that big farmers can make money by not producing food, or that cops can pull you over and harass you for being black due to a broken tail light, consider that the rules as set up allow for that, just as the rules for poker allow for bluffing.
2: More rules than anyone can keep track of might be a feature for those who exercise power than it is a bug. Those who don't know the rules as well are at a disadvantage compared to those who do, and so if you get to write the rules you want so many that no one knows what all of them are. It then becomes a competition to see who knows the most obscure rules, and the specialist wins that.
3: Discretionary rules allow for immense power for those who enforce them, especially when those they exercise power over do not know all of those rules, or those that protect them. Police very often behave as though they are absolute dictators of the area around them, because they know that most people are violating some minor regulation, and that most people don't know enough to push their rights when the cops assert they have to do something.
4: Fuzzy knowledge of the rules allows those that create and enforce them to be essentially above the rules. For example, many things the Federal Government does are quite outside the bounds set by the US constitution, but we as a citizenry are largely unaware, relying on legislators and the Supreme Court to tell us whether things are ok. In essence, we allow those who make the rules to tell us if they are following the rules they are supposed to be. As it turns out, the answer is generally "Yes. Yes we are."
We hate these pros because we feel they are cheating us, using fancy rules to screw us over. But really, we are hating the player when we should hate the game. These are rules we tacitly accepted by not voting out of office (or lynching) our elected officials when they passed them. We decided that it was ok to make these the rules of the game, and are quite happy to ignore them just so long as there is someone looking over things and making the little irritations against the law.
But every time we utter "there ought to be a law," every time we allow politicians to add to the ever increasing pile of legislation, we are divorcing our lives as we wish to live them farther and farther from the actual game of life. And when those who specialize in playing that game come along and win using strategies we didn't even know existed, we have no one to blame but ourselves.
Now that we have a shared lens to see through, I want to tell you a secret. For I know why we think lawyers are scummy, why we look down on lobbyists and politicians (those who are not on our team, at least) as little more than criminals in suits, and why we find it so easy to demonize corporate heads etc. We think it is because they are immoral, take advantage of us little guys, or just generally do things wrong. The answer is quite different. The answer is:
They are playing the actual game, by the actual rules.
What the hell is everyone else doing then? We are playing a similar game, with the same pieces, same board, but we are ignoring many of the rules, while coming up with entirely different ones that are not in the book. To explain, allow me to use a parallel from gaming.
Let us consider poker (though almost all deep, competitive games have similar dynamics.) The rules are not too complicated, mostly about how you put in chips, when and how you get cards, and what the hands mean. Lots of people play with their friends, trying to get good hands, playing percentages and guessing what their buddies have. Maybe they read a little on tactics or strategy on the side, but nothing serious. These are the casual players, and they have fun with each other.
Then you have the professionals. These are the people who hardly look at their cards, but stare intently at their opponents. These are the folks who will fold 25 hands in a row just to see what others's behaviors are before actually sticking in for a hand. They study up a great deal, and can tell you percentages off the top of their heads, but will assure you the game isn't about the cards but the players. They play by all the rules, both the written rules of the game and the rules of the world that apply. And they have fun with each other.
Mixing the two types of players though, that is a recipe for trouble. Having one player in your casual game who is a pro means he walks away with the pot every night and everyone else wonders why they pay 50$ a week to sit around and drink but without any strippers. Likewise, one casual player sitting with a table of pros just becomes a chunk of meat for the other sharks to compete for the biggest bites of before he is shredded. Why? Because they are playing essentially different games.
Consider the casual fellow in the high stakes pro game. He goes in perhaps expecting to be beat, but to have fun on the terms he is used to. Instead, he gets smashed, completely unable to even grasp what he is doing wrong and how he can even adjust to improve. He doesn't feel happy with the game, as the feeling of complete impotence makes all of us deeply unhappy. He might not even learn much, as he doesn't even know where to start. He just goes home with a slight feeling of resentment.
Now imagine that he didn't realize he was going to a high stakes pro game, and just thought it was goof off and smoke cigars time with his buddies. He would be really angry, and likely suspecting he had been cheated.
Let's get back to the regular world. We, the general folks, we are all generally casual players of this game of life. We play largely by the broad brush social rules of "Don't Hurt People, and Don't Take Their Things." At least in the US, our sense of things is basically those rules with a rough sense of fairness and helping each other out when it isn't too inconvenient. We spend most of our lives (if we are lucky) ignoring the existence of nearly all of the Natural and Legislative Rules. We generally don't need to know much chemistry for example, and we believe that most legislation just doesn't apply to us. Who pays state sales taxes on eBay items?
In fact, this is so ingrained into our sense of how things work that when we see someone getting arrested for something we think is silly, our response is usually "Hey, he wasn't hurting anyone!"
But those are not all the rules. There are many thousands of pages of legislation and regulation that apply, never mind the Natural Rules. The average person may think they are following the rules in general (no one cares about speeding violations...) but in reality they don't even know what the rules are except in very narrow areas that affect them personally or professionally. The pros, that is the lawyers and politicians etc., those are the ones who really learn them, because they make a living knowing them better than other people. Even then, they specialize because they can't know them all, but the important point is that they are playing a different game than most; they are playing by the full rule book, not just the basic outline version we live with.
This has some very important implications.
1: More rules means more power for those who specialize in knowing rules. Every line of new regulation, every special cut out in the tax code, every random bit of legislation makes specializing in the rules more powerful. If you are unhappy that big corporations can pay nearly zero taxes, or that big farmers can make money by not producing food, or that cops can pull you over and harass you for being black due to a broken tail light, consider that the rules as set up allow for that, just as the rules for poker allow for bluffing.
2: More rules than anyone can keep track of might be a feature for those who exercise power than it is a bug. Those who don't know the rules as well are at a disadvantage compared to those who do, and so if you get to write the rules you want so many that no one knows what all of them are. It then becomes a competition to see who knows the most obscure rules, and the specialist wins that.
3: Discretionary rules allow for immense power for those who enforce them, especially when those they exercise power over do not know all of those rules, or those that protect them. Police very often behave as though they are absolute dictators of the area around them, because they know that most people are violating some minor regulation, and that most people don't know enough to push their rights when the cops assert they have to do something.
4: Fuzzy knowledge of the rules allows those that create and enforce them to be essentially above the rules. For example, many things the Federal Government does are quite outside the bounds set by the US constitution, but we as a citizenry are largely unaware, relying on legislators and the Supreme Court to tell us whether things are ok. In essence, we allow those who make the rules to tell us if they are following the rules they are supposed to be. As it turns out, the answer is generally "Yes. Yes we are."
We hate these pros because we feel they are cheating us, using fancy rules to screw us over. But really, we are hating the player when we should hate the game. These are rules we tacitly accepted by not voting out of office (or lynching) our elected officials when they passed them. We decided that it was ok to make these the rules of the game, and are quite happy to ignore them just so long as there is someone looking over things and making the little irritations against the law.
But every time we utter "there ought to be a law," every time we allow politicians to add to the ever increasing pile of legislation, we are divorcing our lives as we wish to live them farther and farther from the actual game of life. And when those who specialize in playing that game come along and win using strategies we didn't even know existed, we have no one to blame but ourselves.
Saturday, December 15, 2012
Do Incentives Imply Ability to Pursue Them?
So, I was playing Bejeweled 2 this morning when I should probably have been sleeping, when something about the game play triggered an errant thought: Do I assume that because I am rewarded for doing something that I have some control over achieving that?
In particular, B2 gives you a special explosive gem for connecting 4 gems in a row instead of the usual 3. These are very useful, and get saved between levels, so they are the only way you can affect the future by your current actions outside the current level. So, obviously they are very important and valuable, especially since you have relatively little control over the game.
In fact, you have so little control, getting those special gems is nearly random. As you can only move gems if it results in a breaking combo (3+ gems in a line of the same color) you have to plan very far ahead. Sometimes you get lucky and are basically handed board set ups where you can make it happen easily, or it randomly occurs due to lucky set ups with falling blocks. In fact, usually when it happens, it is due to random blocks; planning is limited as you have no foresight of what gems you will get as you make room, and so even if you really work at it your success rate is not highly correlated with your effort. At best you can just break lots of gems and hope for the best.
So, ok, B2 rewards achievements that are largely random and not due to player behavior (at least in getting the gems; good players save those things forever.) But B2 is a pretty easy game to analyze. What about bigger games like the Total War series? What about school? Work? Are we assuming that we have control over good things happening simply because we get rewarded for them? Are we getting rewarded based on largely random, unpurposeful achievements?
I think yes. There is a fair bit of research pointing towards success being a matter largely of random interactions and associations (who you know, not what), as well as around stocks and investing (see Nassim Taleb). External rewards are often not as rules based as people would like, and often we care about the results as well as the effort and inputs. If you think Olivia Wilde is hot, you don't care how much is genetics and how much is lifestyle choices.
We can't control that too well, so perhaps it isn't worth worrying about too much. What we can, and probably should, worry about is how we approach such things ourselves. If we don't know that a certain incentive is tied to results we can not directly control, we can spend a huge amount chasing a state that we have little or no influence over. For example, cancer is bad, but whether or not we avoid seems to be largely random for most people. However, the belief that somehow we can avoid it if only we pick the optimal combination of eating only grapefruit and whole grains pounded by hand is likely to have costs far outweighing the benefits of influencing our likelihood of getting cancer. We can spend our lives doing all manner of silly things believing that if only we practice the 7 Habits of Highly Effective People we can become hugely successful.
It isn't clear to me that this is a subject we are very good at analyzing. Maybe future research is required.
In particular, B2 gives you a special explosive gem for connecting 4 gems in a row instead of the usual 3. These are very useful, and get saved between levels, so they are the only way you can affect the future by your current actions outside the current level. So, obviously they are very important and valuable, especially since you have relatively little control over the game.
In fact, you have so little control, getting those special gems is nearly random. As you can only move gems if it results in a breaking combo (3+ gems in a line of the same color) you have to plan very far ahead. Sometimes you get lucky and are basically handed board set ups where you can make it happen easily, or it randomly occurs due to lucky set ups with falling blocks. In fact, usually when it happens, it is due to random blocks; planning is limited as you have no foresight of what gems you will get as you make room, and so even if you really work at it your success rate is not highly correlated with your effort. At best you can just break lots of gems and hope for the best.
So, ok, B2 rewards achievements that are largely random and not due to player behavior (at least in getting the gems; good players save those things forever.) But B2 is a pretty easy game to analyze. What about bigger games like the Total War series? What about school? Work? Are we assuming that we have control over good things happening simply because we get rewarded for them? Are we getting rewarded based on largely random, unpurposeful achievements?
I think yes. There is a fair bit of research pointing towards success being a matter largely of random interactions and associations (who you know, not what), as well as around stocks and investing (see Nassim Taleb). External rewards are often not as rules based as people would like, and often we care about the results as well as the effort and inputs. If you think Olivia Wilde is hot, you don't care how much is genetics and how much is lifestyle choices.
We can't control that too well, so perhaps it isn't worth worrying about too much. What we can, and probably should, worry about is how we approach such things ourselves. If we don't know that a certain incentive is tied to results we can not directly control, we can spend a huge amount chasing a state that we have little or no influence over. For example, cancer is bad, but whether or not we avoid seems to be largely random for most people. However, the belief that somehow we can avoid it if only we pick the optimal combination of eating only grapefruit and whole grains pounded by hand is likely to have costs far outweighing the benefits of influencing our likelihood of getting cancer. We can spend our lives doing all manner of silly things believing that if only we practice the 7 Habits of Highly Effective People we can become hugely successful.
It isn't clear to me that this is a subject we are very good at analyzing. Maybe future research is required.
Friday, December 14, 2012
Changing Minds
I want to put forward a somewhat pessimistic model of people's changing views. I will call it the Cost/Company model for now.
First, I am going to assert that there are two types of people: those who have arrived at a conclusion with regards to a situation or belief, and those who have not.
The first group has, as stated, decided that they know what is right in some context, having arrived there through careful thought, study, indoctrination, what have you. How they got there is not important. What is important is that they got there, and believe they are correct. In fact, they are so certain that nothing will change their mind short of a direct cost to themselves of exercising their belief. So for instance, they might believe that the minimum wage has dis-employment effects no matter the evidence you provide, but not believe that they can take a speeding cement truck to the chest.
The second group, on the other hand, has not. Usually through ambivalence, but perhaps through lack of awareness of the subject, they have no real belief attached to the matter.
Now, this would generally cause some consternation; others are always ready to lecture one on why they should think one way or the other when you admit that you don't know. As a result, members of this second group are likely to agree with whatever their current social group thinks on the matter, to a greater or lesser extent depending on the social stigma attached to disagreement.
To be clear, I suspect all humans belong to both groups simultaneously, depending on the subject and their interests in it. However, on any one subject, everyone will fall into one of the two groups.
Now that we have these models of people, let us pose a scenario. Let us suppose that you meet a random person on the street, and while waiting for the bus, strike up a conversation about some event on the news that morning. He has a differing view regarding it, and since he is pleasant and the wait is long you decide to discuss it with him. Let us call the positions 1 and 2, 1 being yours.Over time you will come to one of four general outcomes:
1: He will agree with you and you will not change, ie. you will hold combination (1,1)
2: He will disagree with you and you will not change (1,2)
3: He will agree with you, and you will change your mind. (2,2)
4: He will disagree with you, and you will change your mind. (2,1)
So, we can agree that option 4 is highly unlikely; you would have be a really terrible interlocutor to convince someone of your position and at the same time abandon it yourself. So that leaves us with either you agree because one of you changed your mind, or you just disagree and decide to talk about the local sports franchise till the bus gets there.
However, even if you get results 1 and 3, there is the possibility that either you or he did not actually change your mind, but merely agreed with the other person because it was socially acceptable. That is to say you were each other's only group at the moment, and so you said what you thought would make the group happy, not what you thought, and vice versa.
If that seems a little overly cynical, consider for a moment when the last time was when you had a debate with someone and one of you actually, really, deep down changed your mind. Not in the "Huh, I never really thought of that ever, but I guess that is true" sense of learning physics for the first time, but in the "Wow, that completely opened my mind" kind of way, where one or both of you really thought you were right, and then decided you were wrong. I am putting forth that after a point in someone's life, that NEVER happens, short direct, personal cost. Any seeming change in someone's opinion is only due to their being ambivalent and so speaking simply to please their current company.
Seem too extreme? Consider how easily most people ignore other people's points and evidence, while latching on to anything that supports their view, no matter how tenuous. Academics are (or should be) aware of this as Confirmation Bias, where you instantly accept anything that effectively tells you what you want to hear, and go out of your way to poke holes in what doesn't. Even being aware of it, it takes conscious effort to look for data that does not support your position, while data that doesn't can easily be explained away by mis-measurement or whatever.
Also, consider how often, and easily, we paint those who disagree with us as almost subhuman, being irrational, paranoid, or the like. It is difficult to acknowledge that those who disagree with us are real people, with real reasons for disagreeing, and just crazy outsiders we right minded folks should avoid.
Consider that, and now tell me that anyone's mind can be changed. Not with direct Costs; the rest is just posing for Company.
First, I am going to assert that there are two types of people: those who have arrived at a conclusion with regards to a situation or belief, and those who have not.
The first group has, as stated, decided that they know what is right in some context, having arrived there through careful thought, study, indoctrination, what have you. How they got there is not important. What is important is that they got there, and believe they are correct. In fact, they are so certain that nothing will change their mind short of a direct cost to themselves of exercising their belief. So for instance, they might believe that the minimum wage has dis-employment effects no matter the evidence you provide, but not believe that they can take a speeding cement truck to the chest.
The second group, on the other hand, has not. Usually through ambivalence, but perhaps through lack of awareness of the subject, they have no real belief attached to the matter.
Now, this would generally cause some consternation; others are always ready to lecture one on why they should think one way or the other when you admit that you don't know. As a result, members of this second group are likely to agree with whatever their current social group thinks on the matter, to a greater or lesser extent depending on the social stigma attached to disagreement.
To be clear, I suspect all humans belong to both groups simultaneously, depending on the subject and their interests in it. However, on any one subject, everyone will fall into one of the two groups.
Now that we have these models of people, let us pose a scenario. Let us suppose that you meet a random person on the street, and while waiting for the bus, strike up a conversation about some event on the news that morning. He has a differing view regarding it, and since he is pleasant and the wait is long you decide to discuss it with him. Let us call the positions 1 and 2, 1 being yours.Over time you will come to one of four general outcomes:
1: He will agree with you and you will not change, ie. you will hold combination (1,1)
2: He will disagree with you and you will not change (1,2)
3: He will agree with you, and you will change your mind. (2,2)
4: He will disagree with you, and you will change your mind. (2,1)
So, we can agree that option 4 is highly unlikely; you would have be a really terrible interlocutor to convince someone of your position and at the same time abandon it yourself. So that leaves us with either you agree because one of you changed your mind, or you just disagree and decide to talk about the local sports franchise till the bus gets there.
However, even if you get results 1 and 3, there is the possibility that either you or he did not actually change your mind, but merely agreed with the other person because it was socially acceptable. That is to say you were each other's only group at the moment, and so you said what you thought would make the group happy, not what you thought, and vice versa.
If that seems a little overly cynical, consider for a moment when the last time was when you had a debate with someone and one of you actually, really, deep down changed your mind. Not in the "Huh, I never really thought of that ever, but I guess that is true" sense of learning physics for the first time, but in the "Wow, that completely opened my mind" kind of way, where one or both of you really thought you were right, and then decided you were wrong. I am putting forth that after a point in someone's life, that NEVER happens, short direct, personal cost. Any seeming change in someone's opinion is only due to their being ambivalent and so speaking simply to please their current company.
Seem too extreme? Consider how easily most people ignore other people's points and evidence, while latching on to anything that supports their view, no matter how tenuous. Academics are (or should be) aware of this as Confirmation Bias, where you instantly accept anything that effectively tells you what you want to hear, and go out of your way to poke holes in what doesn't. Even being aware of it, it takes conscious effort to look for data that does not support your position, while data that doesn't can easily be explained away by mis-measurement or whatever.
Also, consider how often, and easily, we paint those who disagree with us as almost subhuman, being irrational, paranoid, or the like. It is difficult to acknowledge that those who disagree with us are real people, with real reasons for disagreeing, and just crazy outsiders we right minded folks should avoid.
Consider that, and now tell me that anyone's mind can be changed. Not with direct Costs; the rest is just posing for Company.
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