So, Warren over at Coyote Blog linked to this story in MIT Technology Review about Amazon's Virtual Currency. The idea is really interesting, but I want to find out a few more things:
1: I am going to be able to spend these in Amazon's store on anything, not just apps for the Kindle Fire, right? It seems almost metaphysically certain that will be the case sooner or later. Presumably media downloads like movies and e-books will come first, but, yea being able to drop virtual coins for a toaster would be nice.
2: If I write an app and get paid in virtual coins, am I going to have to pay taxes on the coins in dollars? What would that mean for online games if I do? That's a little odd to think about, considering that I can now spend in game currency for little gamey content things in say SWtoR without paying taxes; how is that going to be distinct from buying a little gamey thing from the app store? Is buying a new desktop theme for my Kindle with virtual coins earned selling some other gamey thing all that different from buying a new hat for my Sith with coins earned from slaughtering Jedi? Am I going to have to to pay taxes for credits earned expanding the Sith Empire?
3: The coins are currently pegged to the US dollar at 1 coin = 1 penny. (Well, ok "currently" Amazon plans on just giving away 10 million or so to Kindle Fire users to try out, but from what I understand the plan is to peg them.) Is there a plan in the future to de-peg them from the dollar?
The last question is what makes the first question important, and the second go from "sort of silly" to "extremely relevant." If I am able to keep my services and transactions denominated only in Amazon coins, how is that different from some in game currency? For example, it is not unheard of for players to offer services in say running instances to help lower powered players in exchange for in game currency. Is that different from lending programming or artistic skills to those with less of them in exchange for a virtual currency? There is an exchange rate of SWtoR credits to dollars currently that is every bit as relevant as any other exchange rate, just traded on different markets, so the exchange rate isn't the key to making a transaction "valid." In fact, if Amazon de-pegs the exchange rate, they would have a lot to offer by way of a stable currency. If they promise that the total number of Amazon Coins only will increase by 5% a year say, they most likely will become a much better store of value than the US dollar, even if only in a limited marketplace. If their use expands to ALL parts of Amazon's store, you could conceivably run most of your life's transactions only using the coins, and even just trade them in at market prices for dollars to pay for whatever else you need.
That is going to raise some interesting legal questions... and maybe some serious improvements in our current monetary regime.
Friday, February 8, 2013
Wednesday, February 6, 2013
EconResonse: Pete Boettke on Living Econ
This past week's EconTalk was with Pete Boettke about his current book Living Economics. I had a busy week last week and just got to really listening the second time yesterday. I might get this week's talk done over the weekend; Woj assures it will whip me into a frenzy.
The discussion starts with some of Pete's memories working with the late, great James Buchanan. (Which I have an inordinate amount of difficulty spelling.) Some very nice stories and reminiscences. One key point, and one that I think is critical to the overall talk (and the ensuing controversy that apparently sprung up) was that Buchanan believed himself to be firmly in the traditions of Adam Smith, David Hume, J.B. Say and others in his work on Public Choice. This segued into a discussion of Smith and how the notion that self interest on the part of individuals leads to better or worse outcomes largely as a function of the institutions they work in. Over all it led to a discussion that I found interesting, and not particularly controversial, but then I generally like what Pete has to say.
Instead of describing what happened, let me instead put forth my understanding of what Boettke was getting at. I haven't followed the tempest that apparently followed in the blogosphere; my favorite tea pot has a little cow face for the spout and contains no abnormal atmospheric events what so ever, and I like it that way. From my second hand understanding, however, it seems that the key grumble was Boettke's quote (itself paraphrasing David Friedman) that
The discussion starts with some of Pete's memories working with the late, great James Buchanan. (Which I have an inordinate amount of difficulty spelling.) Some very nice stories and reminiscences. One key point, and one that I think is critical to the overall talk (and the ensuing controversy that apparently sprung up) was that Buchanan believed himself to be firmly in the traditions of Adam Smith, David Hume, J.B. Say and others in his work on Public Choice. This segued into a discussion of Smith and how the notion that self interest on the part of individuals leads to better or worse outcomes largely as a function of the institutions they work in. Over all it led to a discussion that I found interesting, and not particularly controversial, but then I generally like what Pete has to say.
Instead of describing what happened, let me instead put forth my understanding of what Boettke was getting at. I haven't followed the tempest that apparently followed in the blogosphere; my favorite tea pot has a little cow face for the spout and contains no abnormal atmospheric events what so ever, and I like it that way. From my second hand understanding, however, it seems that the key grumble was Boettke's quote (itself paraphrasing David Friedman) that
The difference between economists like us and other economists is that we are not 9-to-5 economists. We are 24-7 economists; we think about it all the time.
He and Russ then clarified that he didn't mean that they were doing research when they should be playing with their kids, but rather that thinking about institutions and rules leads them to be constantly thinking of economics and how people interact.
In fact, that is the difference he thinks is most important, and the focus of the talk: some economists, he calls them "mainline", think mainly in terms of rules and institutions, with the relevant propositions at their core, while others he calls the "mainstream" focus on "an institutionally antiseptic theory." This latter group disagree on the propositions, with the examples of Stiglitz and Lucas, and only agree on the methodology, which is to say "lots of math." The interesting point is that the math can absorb a lot of propositions, so much so that you can basically create any outcome you want with some tweaking, with just the small problem that certain propositions like 'everyone has different preferences' or 'people have different views on the future' make the math impossible to solve. (Enter multi-agent computer modeling, but so far the mainstream economics journals have not published much of it.) To paraphrase Bryan Caplan "If you assume the economy works just like the requirements of this construct, the construct gives you a great answer. If it doesn't, then you are back to nothing."
Effectively, mainline economics entails thinking of institutions and individual behavior, micro explanations and solutions to macro problems, and mainstream entails looking for macro answers to macro problems, without considering how and why those problems emerged from the behaviors of individuals. Boettke further summarized it as mainline considers the state a referee while the individuals play the game, while mainstream considers the state a player as well.
So, why don't I think this should be controversial? Because I see the economics that is taught at the big schools, the papers that make it into the big journals, the economists with big names, and you generally don't hear them saying "Well, in reality the economy is a hell of a mess and far too complicated for us to really understand deeply, much less control easily, and so it is best just to step back and let people do their thing, and so long as we keep them from directly hurting each other, everything will work out pretty well." Mainstream economists generally say just the opposite, something along the lines of "We can make all the outcomes better, if only you give us the power to make it so!" Which is probably why they are so popular; as much as people need to be reminded there are some problems that we can't try to fix without causing more damage, we love those who tell us otherwise, whether it actually works out or not. And getting back to the 24-7 vs 9-5 point, if you think of economics as the behavior of large aggregates, it is hard to imagine that you are applying those ideas to many different areas of your life.
Any road, definitely listen to this Econtalk. Boettke has a lot of good things to say, not only about how we think about economics, but how we teach it to others.
Social Norms and Apathy
Last Monday Woj over at Bubbles and Busts and I got into a bit of a debate after class. Then Tuesday we started again, after clarifying "What were you actually saying Monday?" After a few minutes we started talking past each other again, so obviously it is time to take this to the internets!
The trigger to this long and confusing discussion was the Federal ban on Intrade just after the last election. (Nov. 26 the CFTC sued Intrade for letting US citizens bet on things, see here.) My offhand comment was that, paranoid as it sounded, it was quite a coincidence that this happened right on the heels of Intrade's markets calling the US presidential election correctly, so maybe it was a result of politicians not liking anyone accurately gauging their chances of winning. Woj replied that everyone makes predictions from polls and the like, and those didn't get shut down. My theory (entirely unsubstantiated, mind you) is that most polls are wrong, either due to normal error or strong bias, and really offer very little value to someone making a decision on whether to back a candidate. If you are trying to make a point about a candidate's chances there is always one poll or another you can quote to make it. However, Intrade has the prestige of betting markets, which are known for being more accurate than straight polls over all. It is possible it is too strong a signal to be ignored, and doesn't allow enough wiggle room around it. (The literature on betting markets illustrates many cases where folks don't want accurate forecasts so they can do what they want with less constraint.) The other point in the theory was that at the least, if pols wanted to get rid of ALL predictions of success, they would have to censor news agencies which would whip a large number of people into a frenzy, but shutting up Intrade just required shutting citizens out of an online betting market, which people apparently believe the government has the right to do.
That's when things got hairy.
Woj and I argued back and forth on this, most of which is lost to me now because I didn't understand his disagreement, and I don't think he understood mine. At this point I will digress into spelling out clearly what I meant.
Social norms are strange things. Rules generated by humans in general don't need to be internally consistent, and often just don't make sense as a result. In this case, my position is that the social norm may be that gambling is not inherently wrong, but also that the government has the right to make it illegal (or regulate it, whatever.) At first glance this doesn't make sense, as if the general social rule is that something is ok, why would society also agree that the government can make it not ok? It is not because people are crazy. It is because whether or not you should do something is not attached to whether or not you can, or should be allowed, to do something.
Our classmate Derek provided a good example upon which I will elaborate: If your neighbor puts some really ugly pink flamingo lawn ornaments in his front lawn, you might grumble and hate that he did it, but you can recognize that he has the right to do it. You don't go over and kick them down or call the HOA/police on him, or whatever else you might do if he didn't have the right to put them out, such as you might if he put them up in your yard.
Likewise, as a society you don't have to agree with a given bit of legislation to accept that the government had the right to pass it. You can accept that the government has the right to set speed limits on its roads without agreeing with the level.
Now, in speaking with Woj, I stated that the government's banning of Intrade and the resulting deafening silence could be taken as evidence that the social norm is in fact that the government has the right to regulate and ban organized gambling. This might have been a bridge too far. Woj made a good point that just because you don't see people voting officials out of office or marching on the capital wielding pitch forks doesn't mean that the social feeling was that the government has the right to ban gambling. After all, most people are ok with the idea of poker night for the guys, online poker (which is banned now), and even public figures like Brian Caplan openly betting other economists about certain predictions. Oh, and what is the stock market other than a bunch of people gambling? That's all true, but... things are about to get long. Longer.
1: There is absolutely nothing inconsistent with people breaking the law in small, individual instances and yet thinking the legislature had a right to pass the law. Again speeding/traffic violations. Based on my driving experience, most people exceed the posted speed limits on highways, as well as most other places, and at least in NoVA turn signals are treated as totally optional. However, I feel very confident that most people would think me crazy for asserting that therefore there should be NO speed limits enforced. Historically, most people have when I suggest that.
2: It is possible people consider organized gambling businesses something that need to be regulated, but not small scale individual gamblers. In fact, this seems to be the norm. We also like to regulate super market produce, but don't worry too much about our neighbor who sells stuff out of her garden. This gets back to the previous post about how most people don't think the rules apply to them, or even exist. Humans are strange like that, possessing a certain schizophrenia when it comes to things between people they know and strangers. Your neighbor who is not a professional farmer and just grows tomatoes for a few extra bucks, she's fine, but that guy who makes his living based on whether or not his thousands of tomatoes are good and safe to eat, we had better hire someone to keep an eye on him!
3: Then there is how the great mass of indifferent people affect things. Indifference is actually fairly important here, so I will take a moment to discuss it.
There are five possible states a person can have regarding another's right to do something: strong agreement, weak agreement, total indifference, weak disagreement and strong disagreement. The strong/weak modifier simply denotes whether you are willing to take action to affect that right one way or the other. So for instance, I am strongly against the notion that my neighbor has the right to take my tv over to his house without asking; should he try, he will find locks installed, and probably some lead coming his way should those not do the trick. On the other hand, I am weakly in agreement with his right to play loud music in his car; I wouldn't call the cops on him, yet if someone else did I wouldn't go out and defend his right to deafen himself, I would probably just shake my head and think about what a silly situation it is.
The interesting thing is that weak preferences behave differently from strong. In establishing social norms related to "Does someone have the right to do something" weak and indifferent positions are functionally the same as strong agreement. Functionally is the key word there. If I put up a pink flamingo in my front yard, and the whole neighborhood does nothing but grumble a bit, it is functionally identical to everyone agreeing that I have the right to do so but not liking that I did. Society behaves exactly as if they agree that I have the right to do it. This is important, because if I am not certain if it is ok to do, all I can go on is society's reaction when I do, and if they all act as if it is fine, even if it isn't, the consensus for the next guy considering gaudy lawn ornaments is "Huh, apparently that's fine."
In establishing social norms, inaction in individually enforcing the rule is the same as agreeing that it need not be the rule. Enforcing need not be driving someone out of town on a rail; something as simple as shunning or just commenting on how ugly that plastic bird is are the usual tools. The key is that a large percentage of people need to individually do it for it to matter. A few pushy people attempting to enforce a norm alone are just annoying if they are a small percentage of the group.
Government, however, is power wielded by the few pushy people. The social norm that government has the right to pass legislation on a matter only requires weak/indifferent preferences. However, when deciding policy politicians treat the indifferent as if they don't exist. The only ones that matter are those who will act upon and express their preferences in a way that will affect the politicians. This is why relatively small interest groups have such seemingly disproportionate power in government. The NRA wields tremendous power not because they have a lot of members, but because they can get a large number of people to stop simply grumbling and actually go out and vote for or against a candidate. Politics is largely controlled by the people who really care about given issues, and the rest who only provide opinions don't matter. The only thing that matters is whether or not enough people care about an issue one way or another for politicians to get away with it.
Woj at the time pointed out that voting hardly matters, only a tiny fractional amount, in deciding most elections. This is true, but meaningful action in this case is not limited to voting. Often writing letters to congressmen actually helps a bit, or writing a blog that people actually read (not mine), starting organizations to focus people into action, and all sorts of other behaviors that affect how politicians act. Of course, sometimes democracy fails and you have to start rioting and killing politicians like has been popular in the Mid East lately (where democracy will probably fail again.) That's the problem with government: it takes pretty big behaviors on the part of the citizens to limit what politicians can get away with once things get rolling in that direction. Indifference in this dimension gives the government the effective right to do things, and then only those who really care matter, and in any given field those are the tiny minority.
So, it stands to reason that the government would ban Intrade participation because they can without expecting any real push back, even while ignoring news program pols, because if they did ban news program pols those organizations would beat said politicians about the head and neck with the 1st Amendment. (Of course McCain-Feingold limited what people could say about politicians while those politicians were running for office, and that was ok, so who the hell knows.)
Does government acting in a certain way without obvious backlash then act as evidence of a populace with the social norm that government has the right to act that way? I would say yes, if only functionally. If not functionally, one has to then wonder what the effect of social norms is on government if any given norm may or may not actually apply.
The trigger to this long and confusing discussion was the Federal ban on Intrade just after the last election. (Nov. 26 the CFTC sued Intrade for letting US citizens bet on things, see here.) My offhand comment was that, paranoid as it sounded, it was quite a coincidence that this happened right on the heels of Intrade's markets calling the US presidential election correctly, so maybe it was a result of politicians not liking anyone accurately gauging their chances of winning. Woj replied that everyone makes predictions from polls and the like, and those didn't get shut down. My theory (entirely unsubstantiated, mind you) is that most polls are wrong, either due to normal error or strong bias, and really offer very little value to someone making a decision on whether to back a candidate. If you are trying to make a point about a candidate's chances there is always one poll or another you can quote to make it. However, Intrade has the prestige of betting markets, which are known for being more accurate than straight polls over all. It is possible it is too strong a signal to be ignored, and doesn't allow enough wiggle room around it. (The literature on betting markets illustrates many cases where folks don't want accurate forecasts so they can do what they want with less constraint.) The other point in the theory was that at the least, if pols wanted to get rid of ALL predictions of success, they would have to censor news agencies which would whip a large number of people into a frenzy, but shutting up Intrade just required shutting citizens out of an online betting market, which people apparently believe the government has the right to do.
That's when things got hairy.
Woj and I argued back and forth on this, most of which is lost to me now because I didn't understand his disagreement, and I don't think he understood mine. At this point I will digress into spelling out clearly what I meant.
Social norms are strange things. Rules generated by humans in general don't need to be internally consistent, and often just don't make sense as a result. In this case, my position is that the social norm may be that gambling is not inherently wrong, but also that the government has the right to make it illegal (or regulate it, whatever.) At first glance this doesn't make sense, as if the general social rule is that something is ok, why would society also agree that the government can make it not ok? It is not because people are crazy. It is because whether or not you should do something is not attached to whether or not you can, or should be allowed, to do something.
Our classmate Derek provided a good example upon which I will elaborate: If your neighbor puts some really ugly pink flamingo lawn ornaments in his front lawn, you might grumble and hate that he did it, but you can recognize that he has the right to do it. You don't go over and kick them down or call the HOA/police on him, or whatever else you might do if he didn't have the right to put them out, such as you might if he put them up in your yard.
Likewise, as a society you don't have to agree with a given bit of legislation to accept that the government had the right to pass it. You can accept that the government has the right to set speed limits on its roads without agreeing with the level.
Now, in speaking with Woj, I stated that the government's banning of Intrade and the resulting deafening silence could be taken as evidence that the social norm is in fact that the government has the right to regulate and ban organized gambling. This might have been a bridge too far. Woj made a good point that just because you don't see people voting officials out of office or marching on the capital wielding pitch forks doesn't mean that the social feeling was that the government has the right to ban gambling. After all, most people are ok with the idea of poker night for the guys, online poker (which is banned now), and even public figures like Brian Caplan openly betting other economists about certain predictions. Oh, and what is the stock market other than a bunch of people gambling? That's all true, but... things are about to get long. Longer.
1: There is absolutely nothing inconsistent with people breaking the law in small, individual instances and yet thinking the legislature had a right to pass the law. Again speeding/traffic violations. Based on my driving experience, most people exceed the posted speed limits on highways, as well as most other places, and at least in NoVA turn signals are treated as totally optional. However, I feel very confident that most people would think me crazy for asserting that therefore there should be NO speed limits enforced. Historically, most people have when I suggest that.
2: It is possible people consider organized gambling businesses something that need to be regulated, but not small scale individual gamblers. In fact, this seems to be the norm. We also like to regulate super market produce, but don't worry too much about our neighbor who sells stuff out of her garden. This gets back to the previous post about how most people don't think the rules apply to them, or even exist. Humans are strange like that, possessing a certain schizophrenia when it comes to things between people they know and strangers. Your neighbor who is not a professional farmer and just grows tomatoes for a few extra bucks, she's fine, but that guy who makes his living based on whether or not his thousands of tomatoes are good and safe to eat, we had better hire someone to keep an eye on him!
3: Then there is how the great mass of indifferent people affect things. Indifference is actually fairly important here, so I will take a moment to discuss it.
There are five possible states a person can have regarding another's right to do something: strong agreement, weak agreement, total indifference, weak disagreement and strong disagreement. The strong/weak modifier simply denotes whether you are willing to take action to affect that right one way or the other. So for instance, I am strongly against the notion that my neighbor has the right to take my tv over to his house without asking; should he try, he will find locks installed, and probably some lead coming his way should those not do the trick. On the other hand, I am weakly in agreement with his right to play loud music in his car; I wouldn't call the cops on him, yet if someone else did I wouldn't go out and defend his right to deafen himself, I would probably just shake my head and think about what a silly situation it is.
The interesting thing is that weak preferences behave differently from strong. In establishing social norms related to "Does someone have the right to do something" weak and indifferent positions are functionally the same as strong agreement. Functionally is the key word there. If I put up a pink flamingo in my front yard, and the whole neighborhood does nothing but grumble a bit, it is functionally identical to everyone agreeing that I have the right to do so but not liking that I did. Society behaves exactly as if they agree that I have the right to do it. This is important, because if I am not certain if it is ok to do, all I can go on is society's reaction when I do, and if they all act as if it is fine, even if it isn't, the consensus for the next guy considering gaudy lawn ornaments is "Huh, apparently that's fine."
In establishing social norms, inaction in individually enforcing the rule is the same as agreeing that it need not be the rule. Enforcing need not be driving someone out of town on a rail; something as simple as shunning or just commenting on how ugly that plastic bird is are the usual tools. The key is that a large percentage of people need to individually do it for it to matter. A few pushy people attempting to enforce a norm alone are just annoying if they are a small percentage of the group.
Government, however, is power wielded by the few pushy people. The social norm that government has the right to pass legislation on a matter only requires weak/indifferent preferences. However, when deciding policy politicians treat the indifferent as if they don't exist. The only ones that matter are those who will act upon and express their preferences in a way that will affect the politicians. This is why relatively small interest groups have such seemingly disproportionate power in government. The NRA wields tremendous power not because they have a lot of members, but because they can get a large number of people to stop simply grumbling and actually go out and vote for or against a candidate. Politics is largely controlled by the people who really care about given issues, and the rest who only provide opinions don't matter. The only thing that matters is whether or not enough people care about an issue one way or another for politicians to get away with it.
Woj at the time pointed out that voting hardly matters, only a tiny fractional amount, in deciding most elections. This is true, but meaningful action in this case is not limited to voting. Often writing letters to congressmen actually helps a bit, or writing a blog that people actually read (not mine), starting organizations to focus people into action, and all sorts of other behaviors that affect how politicians act. Of course, sometimes democracy fails and you have to start rioting and killing politicians like has been popular in the Mid East lately (where democracy will probably fail again.) That's the problem with government: it takes pretty big behaviors on the part of the citizens to limit what politicians can get away with once things get rolling in that direction. Indifference in this dimension gives the government the effective right to do things, and then only those who really care matter, and in any given field those are the tiny minority.
So, it stands to reason that the government would ban Intrade participation because they can without expecting any real push back, even while ignoring news program pols, because if they did ban news program pols those organizations would beat said politicians about the head and neck with the 1st Amendment. (Of course McCain-Feingold limited what people could say about politicians while those politicians were running for office, and that was ok, so who the hell knows.)
Does government acting in a certain way without obvious backlash then act as evidence of a populace with the social norm that government has the right to act that way? I would say yes, if only functionally. If not functionally, one has to then wonder what the effect of social norms is on government if any given norm may or may not actually apply.
Monday, January 21, 2013
EconResonse: Kevin Kelly on... THE FUTURE!
This week's EconTalk is Kelly on the Future, Productivity, and the Quality of Life. This is really a great episode, and I highly recommend giving it a listen, though I am a bit biased because I really like Kevin Kelly. Awkwardly for me, this is essentially the same topic as he wrote on in the previous essay I talked about here. Awkward because I already talked about this a bit, and also because I agree with pretty much everything, so it isn't a target rich environment for me.
The first segment is mostly about that essay, which is a critique of Robert Gordon's paper Is US Economic Growth Over? in which Gordon makes the case that stagnation is pretty much the norm for all human economies over our history, and seeing as how the growth from the third industrial revolution (computers) was pretty minimal, we might well be reverting back to the norm of stagnation after our ~300 yea boom. Kelly makes some excellent points about this, the first being that Gordon himself states that changes in previous industrial revolutions took nearly 100 years to really play themselves out, yet we are only 20-50 years into the whole computer thing, depending on how we look at it. (Gordon starts his clock basically when the first mainframes were used in the 60's-70's, Kelly argues the beginning is really in the mid 90's with networking.)
The second point, and really an over arching theme for the entire podcast is that productivity as we usually measure it, as either GDP or how much stuff we can produce with set inputs, is really only the basis for our growth and well being, and not the end. I really think this is a key insight, not just to understanding what the hell is going on with our economy lately, not just looking at what the future holds, but even understanding just why we bother making things in the first place.
Skipping ahead a bit, because I think this is the most important point in the entire podcast (and maybe the world?) Kevin and Russ talk a bit about how many of the things we make are made because they are "cool" and not because they are practical in some sense. Whether or not "cool" is the right word is sort of besides the point, but one can substitute wonderful, pleasing, awesome, delightful or beautiful and get to the same point. In fact, do that, for each word, and think about things you own or have created that fit the bill. I suspect that nearly everything hits one of those six words, but relatively few fall only into the category of merely productive or efficient. (I would note that those of us who produce things often find things that are more productive or efficient to also be wonderful and pleasing, with a tiny increase in the former generating a huge increase in the latter.)
The larger point here is that while making from less is nice, we do it largely so that we can do all the other things we like more. Things like discovery, experimentation, play, and just plain goofing off. One of the key factors of early, stagnant economies was that there was only just enough production to cover material needs plus a tiny bit extra, and so we had a hard time devoting resources to science and invention, as well as straight up pleasurable things like theater. Russ points out that in all of Elizabethan England there might have been only about 100 people engaged in the production of plays, but now there are far more than that who have employment making a single movie. We spend a great deal of time making things that are just to make us happy, more than at any other time in our history, and that is both awesome, and really difficult to fully measure in terms of productivity. But really, what is the point of doing anything if not to increase over all human happiness and well being?
Related to this point, that sometimes you need to trade production of stuff for researching new ways of making things, there is an interesting discussion of how rather pointless computers were for a long time. Computers just didn't produce much value for companies for quite a while, but it wasn't because they were inherently useless, but because they were new, and everything is difficult the first time. Much like learning to play the piano because you like piano music, for a long time you are going to be objectively worse at producing music compared to a CD player, but after a lot of investment you can reap far better results than if you just relied on CDs, not just in joy from hearing music, but also in new joy in learning new things and creating things yourself. This is important, because optimizing current resources often leads to sub-optimal long term results, as you limit your ability to advance and find yourself stuck on local peaks while greater peaks are just out of reach. I will repeat that, because it bears repeating (and perhaps rephrasing):
Optimizing current resources for production is going to lead to sub-optimal results due to a lack of growth.
Take, for example the case of a college student deciding how to spend his meal budget. He can spend all of his money on campus buying meals, and eat pretty well every day. Alternately, he can attempt to cook at home every day for the same amount of money, or do a mix of both on campus and home cooking. The trouble with home cooking is that his skill at cooking is only about enough to make cold cereal and ramen, and so he won't be able to eat at well at home. Anything more complicated will likely fail, and so waste money.
Now, off the bat, it looks like our poor student should just eat on campus all the time. This gets him the most food for the same money, and probably saves him some time. However, if he has the capacity to improve his skills in the kitchen, such as by borrowing a cook book and trying things out, he might well eat less well in the short run, but over time he may develop skills that allow him to eat much better food than he could get on campus.
Things get more complicated of course when you consider that time spent learning to cook might be better spent studying for class, and that he might only learn that he is a terrible cook no matter what, and so have no more skills than before but less food. On the other hand, he might discover that he loves to cook and finds a new calling in life, or maybe use his cooking skills to impress a mate. If he only eats at the cafeteria, figuring after he gets a job he can either hire someone to cook for him or get married and have his wife do it, only to find he can't get a job or a wife that cooks. Whatever. The key is that due to the uncertainty in the system he can not globally optimize at all at the beginning. Without knowing all the possible outcomes and their probabilities he is limited to guessing what the right mix of stuff now and investment for later is. And while it is impossible to know exactly what the correct mix of those two is, we can be pretty sure it is not all of one and none of the other.
What... EconTalk? Oh, right. Bringing it back to the EconTalk episode, Kevin Kelly might put it as "Seeking productivity and production at all costs is bound to fail. We want people to try out new things, experimenting and playing, regardless of whether it looks like waste or not, because that's the only way we can discover new things that will push our ability to produce farther." He would probably say it better, though.
A related point that Kelly makes is that measuring new things is really hard. We see this in the CPI when it comes to cell phones (which were not even in there for the first 15 years or so of their existence), or in how to measure the GDP gain of free things. We produce a lot of value in YouTube cat videos, but we have no idea how to measure that as part of GDP because people don't pay for them other than with time. Really what we need is a measure in how productive we are at pleasing ourselves which requires what, brain chips? I don't know, maybe we could measure that with FMRI machines for everyone?
Another point in the talk, and I am completely abandoning the framework of the podcast to talk about what I want to here, is that machines are good for optimizing and productivity, while humans are good at goofing off and creating new things. This is a major point in the essay, and really branches from the over all theme of productivity as economists think of it being only the foundation for what we do, not the end all be all. This gets to the future, in terms of "what will we do when machines do everything we do better than people?" The answer seems to be "find new things that we are best at, then make machines to do those, and then repeat." For every thing we stop doing because a machine is better, we end up finding a dozen other things to work on to make ourselves happier. There is a good bit of discussion on this, and it is a really important point.
All in all, a great EconTalk, and highly recommended!
The first segment is mostly about that essay, which is a critique of Robert Gordon's paper Is US Economic Growth Over? in which Gordon makes the case that stagnation is pretty much the norm for all human economies over our history, and seeing as how the growth from the third industrial revolution (computers) was pretty minimal, we might well be reverting back to the norm of stagnation after our ~300 yea boom. Kelly makes some excellent points about this, the first being that Gordon himself states that changes in previous industrial revolutions took nearly 100 years to really play themselves out, yet we are only 20-50 years into the whole computer thing, depending on how we look at it. (Gordon starts his clock basically when the first mainframes were used in the 60's-70's, Kelly argues the beginning is really in the mid 90's with networking.)
The second point, and really an over arching theme for the entire podcast is that productivity as we usually measure it, as either GDP or how much stuff we can produce with set inputs, is really only the basis for our growth and well being, and not the end. I really think this is a key insight, not just to understanding what the hell is going on with our economy lately, not just looking at what the future holds, but even understanding just why we bother making things in the first place.
Skipping ahead a bit, because I think this is the most important point in the entire podcast (and maybe the world?) Kevin and Russ talk a bit about how many of the things we make are made because they are "cool" and not because they are practical in some sense. Whether or not "cool" is the right word is sort of besides the point, but one can substitute wonderful, pleasing, awesome, delightful or beautiful and get to the same point. In fact, do that, for each word, and think about things you own or have created that fit the bill. I suspect that nearly everything hits one of those six words, but relatively few fall only into the category of merely productive or efficient. (I would note that those of us who produce things often find things that are more productive or efficient to also be wonderful and pleasing, with a tiny increase in the former generating a huge increase in the latter.)
The larger point here is that while making from less is nice, we do it largely so that we can do all the other things we like more. Things like discovery, experimentation, play, and just plain goofing off. One of the key factors of early, stagnant economies was that there was only just enough production to cover material needs plus a tiny bit extra, and so we had a hard time devoting resources to science and invention, as well as straight up pleasurable things like theater. Russ points out that in all of Elizabethan England there might have been only about 100 people engaged in the production of plays, but now there are far more than that who have employment making a single movie. We spend a great deal of time making things that are just to make us happy, more than at any other time in our history, and that is both awesome, and really difficult to fully measure in terms of productivity. But really, what is the point of doing anything if not to increase over all human happiness and well being?
Related to this point, that sometimes you need to trade production of stuff for researching new ways of making things, there is an interesting discussion of how rather pointless computers were for a long time. Computers just didn't produce much value for companies for quite a while, but it wasn't because they were inherently useless, but because they were new, and everything is difficult the first time. Much like learning to play the piano because you like piano music, for a long time you are going to be objectively worse at producing music compared to a CD player, but after a lot of investment you can reap far better results than if you just relied on CDs, not just in joy from hearing music, but also in new joy in learning new things and creating things yourself. This is important, because optimizing current resources often leads to sub-optimal long term results, as you limit your ability to advance and find yourself stuck on local peaks while greater peaks are just out of reach. I will repeat that, because it bears repeating (and perhaps rephrasing):
Optimizing current resources for production is going to lead to sub-optimal results due to a lack of growth.
Take, for example the case of a college student deciding how to spend his meal budget. He can spend all of his money on campus buying meals, and eat pretty well every day. Alternately, he can attempt to cook at home every day for the same amount of money, or do a mix of both on campus and home cooking. The trouble with home cooking is that his skill at cooking is only about enough to make cold cereal and ramen, and so he won't be able to eat at well at home. Anything more complicated will likely fail, and so waste money.
Now, off the bat, it looks like our poor student should just eat on campus all the time. This gets him the most food for the same money, and probably saves him some time. However, if he has the capacity to improve his skills in the kitchen, such as by borrowing a cook book and trying things out, he might well eat less well in the short run, but over time he may develop skills that allow him to eat much better food than he could get on campus.
Things get more complicated of course when you consider that time spent learning to cook might be better spent studying for class, and that he might only learn that he is a terrible cook no matter what, and so have no more skills than before but less food. On the other hand, he might discover that he loves to cook and finds a new calling in life, or maybe use his cooking skills to impress a mate. If he only eats at the cafeteria, figuring after he gets a job he can either hire someone to cook for him or get married and have his wife do it, only to find he can't get a job or a wife that cooks. Whatever. The key is that due to the uncertainty in the system he can not globally optimize at all at the beginning. Without knowing all the possible outcomes and their probabilities he is limited to guessing what the right mix of stuff now and investment for later is. And while it is impossible to know exactly what the correct mix of those two is, we can be pretty sure it is not all of one and none of the other.
What... EconTalk? Oh, right. Bringing it back to the EconTalk episode, Kevin Kelly might put it as "Seeking productivity and production at all costs is bound to fail. We want people to try out new things, experimenting and playing, regardless of whether it looks like waste or not, because that's the only way we can discover new things that will push our ability to produce farther." He would probably say it better, though.
A related point that Kelly makes is that measuring new things is really hard. We see this in the CPI when it comes to cell phones (which were not even in there for the first 15 years or so of their existence), or in how to measure the GDP gain of free things. We produce a lot of value in YouTube cat videos, but we have no idea how to measure that as part of GDP because people don't pay for them other than with time. Really what we need is a measure in how productive we are at pleasing ourselves which requires what, brain chips? I don't know, maybe we could measure that with FMRI machines for everyone?
Another point in the talk, and I am completely abandoning the framework of the podcast to talk about what I want to here, is that machines are good for optimizing and productivity, while humans are good at goofing off and creating new things. This is a major point in the essay, and really branches from the over all theme of productivity as economists think of it being only the foundation for what we do, not the end all be all. This gets to the future, in terms of "what will we do when machines do everything we do better than people?" The answer seems to be "find new things that we are best at, then make machines to do those, and then repeat." For every thing we stop doing because a machine is better, we end up finding a dozen other things to work on to make ourselves happier. There is a good bit of discussion on this, and it is a really important point.
All in all, a great EconTalk, and highly recommended!
Thursday, January 17, 2013
Gun Control Redux
There were a few other points I wanted to make in response to Nick's article, but I kind of felt they were secondary and didn't want to shoe horn them into an already overly long post.
Assuming for a moment that guns in the hands of citizens are neither deterrent nor defense against tyranny, what exactly is? Legislation seems to do very little, and often is the very source of tyrant's power. Constitutions are a start, but as we have seen can be eroded pretty well over the years. So what keeps a given president, say possessed by the ghost of F.D.R. from just declaring himself dictator for life? Were it not for disease, the original might well have, after all.
If you say culture and institutions, ask who or what creates and enforces those. The answer of course are the citizens themselves. But once deprived of the power to vote for a different government, what enforcement mechanism is left? What defense does the minority have against a majority in an unlimited government?
If you want to say "None; all free societies are only so at the whim of their governments," well, I might be willing to accept that on some level, but I think it still requires demonstrating then why some nations remain free while others do not, why tyranny takes hold in some and not others. Why isn't every national revolution a replay of the "one man, one vote, one time" cliche we see so frequently in the third world?
I think the answer there is that all governments require at least the tacit support of their people and their military. If no one is willing or able to resist in a meaningful way, things can just keep going on. However, if some can actually directly oppose a government, show that it is unable to enforce its will, that not only affects the power of the direct area the uprising occurs in, but also demonstrates the weakness of the government, encouraging others to stand up.
Now, meaningful resistance is a little vague, and for good reason. In India during British occupation, Ghandi's "passive resistance" was meaningful and effective, encouraging others to push out the unpopular rulers instead of simply grumbling under their breath. Now, one might argue that what worked against the rather human rights oriented British would have failed against say the Russians of the time; Ghandi probably would have wound up with a bullet in him shortly after he became a problem. But the key here is that stopping Ghandi's actions would have required killing him, a line the British were apparently unwilling to cross. Doing so would likely have seriously undermined the British citizens' support of their government, to say the least.
Considering now the case of a US tyrant, one might be able to keep order so long as one could do it with police, both local and federal. If, however, an armed uprising was too much for the normal law enforcement groups and the tyrant had to resort to calling in the National Guard or regular army, that would be a huge step, one which would put serious strain on both the order in the military (which traditionally never operates against US citizens at home) as well as eroding any support the tyrant might have among the citizenry, likely sparking further uprisings. Consider how much the 90's Waco massacre shook a lot of law and order types' (myself at the time included) faith in the government's dedication to law and order.
This is not to say that it wouldn't happen; it is quite possible that fellow Americans could distance themselves enough from those resisting to see them fully as 'the other' and not care what happens to them. However, consider how unhappy Americans were with civilian casualties in any of the wars the US has involved itself in in the past 40 years. And even if you think that say New Yorkers would be fine with the idea of nuking Dallas if Texas secedes, you have to admit that having weapons at your disposal makes any form of resistance more powerful. You can always choose to not use them and go the full passive resistance route, but it is good to have the option.
Assuming for a moment that guns in the hands of citizens are neither deterrent nor defense against tyranny, what exactly is? Legislation seems to do very little, and often is the very source of tyrant's power. Constitutions are a start, but as we have seen can be eroded pretty well over the years. So what keeps a given president, say possessed by the ghost of F.D.R. from just declaring himself dictator for life? Were it not for disease, the original might well have, after all.
If you say culture and institutions, ask who or what creates and enforces those. The answer of course are the citizens themselves. But once deprived of the power to vote for a different government, what enforcement mechanism is left? What defense does the minority have against a majority in an unlimited government?
If you want to say "None; all free societies are only so at the whim of their governments," well, I might be willing to accept that on some level, but I think it still requires demonstrating then why some nations remain free while others do not, why tyranny takes hold in some and not others. Why isn't every national revolution a replay of the "one man, one vote, one time" cliche we see so frequently in the third world?
I think the answer there is that all governments require at least the tacit support of their people and their military. If no one is willing or able to resist in a meaningful way, things can just keep going on. However, if some can actually directly oppose a government, show that it is unable to enforce its will, that not only affects the power of the direct area the uprising occurs in, but also demonstrates the weakness of the government, encouraging others to stand up.
Now, meaningful resistance is a little vague, and for good reason. In India during British occupation, Ghandi's "passive resistance" was meaningful and effective, encouraging others to push out the unpopular rulers instead of simply grumbling under their breath. Now, one might argue that what worked against the rather human rights oriented British would have failed against say the Russians of the time; Ghandi probably would have wound up with a bullet in him shortly after he became a problem. But the key here is that stopping Ghandi's actions would have required killing him, a line the British were apparently unwilling to cross. Doing so would likely have seriously undermined the British citizens' support of their government, to say the least.
Considering now the case of a US tyrant, one might be able to keep order so long as one could do it with police, both local and federal. If, however, an armed uprising was too much for the normal law enforcement groups and the tyrant had to resort to calling in the National Guard or regular army, that would be a huge step, one which would put serious strain on both the order in the military (which traditionally never operates against US citizens at home) as well as eroding any support the tyrant might have among the citizenry, likely sparking further uprisings. Consider how much the 90's Waco massacre shook a lot of law and order types' (myself at the time included) faith in the government's dedication to law and order.
This is not to say that it wouldn't happen; it is quite possible that fellow Americans could distance themselves enough from those resisting to see them fully as 'the other' and not care what happens to them. However, consider how unhappy Americans were with civilian casualties in any of the wars the US has involved itself in in the past 40 years. And even if you think that say New Yorkers would be fine with the idea of nuking Dallas if Texas secedes, you have to admit that having weapons at your disposal makes any form of resistance more powerful. You can always choose to not use them and go the full passive resistance route, but it is good to have the option.
Gun Control and Tyranny
Recently Nick
Gillespie over at Reason wrote a piece
about gun control discussing his discomfort with many of the proponents and
their arguments. He makes a quite reasonable argument overall, one I think
reflects the thoughts of many people who are pro-gun rights on principle. I am
particularly happy he makes the general point that free people are free to own
what they will without justification. The notion that people need sufficient
justification to own guns (the only thing they are made for is killing people!)
has continually come up in the past few months, and I have seen precious few
people even challenge it.
However,
there is one passage I want to challenge, as people seem very comfortable
making the argument without really considering it:
The notion that a rag-tag band of regular folks armed with semi-automatic weapons and the odd shotgun are a serious hedge against tyranny strikes me as a stretch (and I even saw the remake of Red Dawn!).
This is a counter point
to the common argument by gun rights activists that gun ownership protects
against tyranny, particularly that of our own government. Others who have
elaborated (Nick didn't bother) point out that the US government has tanks,
bombs, nukes and the like, so how could a few semi-auto rifles and shotguns in
the hands of the citizens matter? Likewise, if China gets crazy and invades,
are some citizens with rifles going to make the difference?
The main issue of this
argument is that it does not acknowledge the different stages of warfare, and
how the tools apply to them. I am going to lay out three different types of
warfare, and show how the tools, the tanks, missiles, bombs, and guns are used
to very different effect. But first, some talk about goals. Because you gotta
have goals.
The classic
understanding of how to win a war is to take away your opponent's ability or
desire to resist. Effectively this is the economic approach to war as well: it
is cheaper over all, both in lives and resources, to either leave your opponent
unable to fight any longer, or compel them to stop fighting of their own
accord. You do this by either destroying their capability to compete (say by
destroying their navy in a primarily maritime conflict) or by making it so
costly to continue that they decide that their best option is to quit the war
early (say by nuking a city or two.) No matter which path you choose (Can't or
Won't) the goal is to avoid having to kill your opponent down to the last man,
the worst possible way to win. (If you are in a hurry, skip to the TL:DR heading
below.)
So now that we know how
wars are won on a high level, we need to look at the types of wars people
fight. I am going to go really broad and say there are three types:
1: Conquest
2: Defense
3: Internal
The interesting thing
about these categories is that one side is always Conquest, with the other side
beginning in the Defense type and transitioning into Internal. The interactions
between these types determine the methods that are most useful.
Conquest is effectively
"You have stuff, and I want to take it." This is the idea behind
China invading the US; they want to control our country or what have you. The
second Iraq war (let's just call it that for now) was basically the same thing.
Hussein had control of Iraq, and the US and others wanted to take it away from
him. Effectively you have an attacker who has to force control on another.
A Conquest/Defensive war
looks a lot like how we see war in movies, with battlefields and sides fighting
over territory. The defenders try to keep the attackers out entirely, focusing
on removing their ability to attack, such as destroying units, cutting bridges,
all the usual things we think of with regard to war. At the same time, the
defender is attempting to make the attacker lose interest but making attacking
costly, by destroying units, and possibly launching counter attacks into the
attacker's territory. The latter tactic was pretty much the underpinning of the
whole Cold War strategy: no one will attack because if they do, their cities
get nuked shortly thereafter.
If the defense wins at
this point in the war, things generally end. The attacker gets repelled, and
either the defender stops at their border or starts their own war of conquest
into the former aggressor's territory, continuing the war from the other side.
If the defense loses, however, the war is not over and instead transitions into
the internal phase.
The Internal phase
begins when the attacker has control of territory, but has not removed
resistance to their will. We often think of this as revolution, insurgency or a
dozen other terms, but the general point is that while the attacker has control
of an area and cannot be stopped from rolling tanks and troops into it they
still do not face a populace who will do as they say without direct, individual
violence. This is the stance of most resistance fighters, civil uprisings, and
underground fighters, either when their preferred government is overthrown or
when they deem their government as illegitimate. The internal phase is often
referred to as asymmetric warfare, as the would be conqueror has all the
military might compared to the insurgents.
Now, how the attacker
goes about things is very different depending on the phase of the war. In the
Conquest/Defense stage, there is often a mix of destruction of ability to
resist and destroying willingness to resist, but the focus tends to be on the
latter for the simple reason that if you destroy everything you are obviating
your reason to attack in the first place. You don't want to destroy the very
things you want to take. The major exceptions to this are wars of genocide,
where the goal isn't so much taking as destroying, and wars that begin to drag
on to the point that getting things over with becomes more desirable than any
particular city or what not.
The defender in the
Conquest/Defense phase, however, often uses destruction of means and will at the
same time. Destroying enemies in the field accomplishes both goals, and
launching counter attacks, such as destroying factories, often does as well.
Importantly the Defender needs to show much less restraint, as if they are only
defending, they can destroy their opponent's country freely. Having not had
interest in taking it in the first place, nuking a city or two does not change
their cost/benefit analysis.
In the Conquest/Internal
phase, the attacker is further restricted in their behavior. Unless they
absolutely see no value in the populace (which is possible, but unlikely) they
have strong incentives to not be destructive for two reasons. Firstly, they
have already taken control of non-human resources, and so destroying the area
to remove resistance is counterproductive. Secondly, while some portion of the
populace might be willing to accept the killing of insurgents (say in the case
of civil war, or simply those who don't want to fight the attacker any
more) indiscriminate killing will only create backlash against the
attackers, making their occupation more expensive, and possibly being counterproductive.
It is possible that massacres and extermination will decrease resistance to an
attacker, but in general it is not considered likely. So, between destroying
the very resources and people you wish to control, and likely increasing
resistance over all, the attacker needs to be careful to only choose tactics which
will on whole reduce the insurgents’ willingness to resist, as destroying
ability is generally extremely costly.
The insurgents, however,
have a somewhat clearer position, with many more degrees of freedom. Destroying
the attacker, say by ambushing patrols, convoys or the like, is easier because
it is clear who the attacker is. If this is not an option, simply making
control of an area extremely expensive is very much an option, by very much the
same tactics. By being able to blend back into the populace, the insurgents
become effectively the prize and the enemy, making the attacker use very labor
intensive methods to root them out. From the insurgent's side, all they need to
do is make the cost of control more than the benefit.
To add just one more
layer to these considerations, let’s look quickly at how you fight from an
economic standpoint. That is to say, do you fight in a labor intensive manner,
or capital intensive?
Labor intensive is how
wars used to be fought: more bodies, each with very limited capability, but
there are lots of them. As technology improved over the eons, however, things
start to shift towards capital intensive warfare, where you spend more on each
soldier to make them more effective. Fewer bodies, but they are individually
more effective.
Some examples over time
would be the Aztec hordes (labor intensive) vs. the Conquistadors in their
armor (capital intensive); the Russians in WW2 (labor intensive) vs. the
Germans (capital intensive); the North Koreans (labor) vs. the United States
(capital.) Essentially, it is a question whether a side has more access to lots
of people compared to lots of equipment, training, defensive positions,
etc.
The difficulty with
capital means of warfare is that they generally destroy indiscriminately.
Bombs do not kill only those who fight you, but everyone nearby. A tank is not
effective for guarding anything you don't want big holes in except against
other tanks. Only human capital in the form of highly trained troops and
personal equipment for those troops can function as a scalpel in combat, but
that still leaves the difficulty of knowing just who your target is.
Importantly, those forms of capital make shifting to a labor intensive process
such as policing and occupation even more expensive, as each soldier is more
expensive individually. (Arguably, this is why the USA currently fields very
elite units such as Marine, Rangers, etc. in addition to the regular army; the
highly trained troops take areas, and the lesser trained, and thus less
expensive, troops hold them.)
TL:DR
So, consider the
scenarios brought up by both Nick and anti-gun advocates: gun owners against
domestic tyranny, and a foreign power invading.
In the first case, we
see a direct move to an attacker in tyrannical government vs. an insurgent
force. As recent events in Iraq and Afghanistan, this is a difficult position
for the attacker. In fact, the entire war on terror demonstrates the
difficulties of an attacker attempting to destroy an insurgency armed only with
basic weapons. The improved capital of the attacker, the tanks, bombs, and
missiles that we are in awe of in the battle between states do the attacker
very little good unless they are willing to destroy indiscriminately. The
conflict quickly turns into one of small arms and improvised weapons, and in
many cases the insurgents have the advantages. If the general populace is
generally supportive of the insurgence, the job of the attacker of even knowing
who to shoot is exceedingly difficult, while the insurgents can easily
determine their enemies. Further in such conflicts the difference between small
arms is very small; a good deer rifle is an effective sniper rifle, a
semi-automatic AR-15 is roughly as good as an M-16, an IED works as well as a
landmine. Making things impossibly expensive for the attacker is well within
the ability of a small armed group if they have support of the populace. The
Second World War and many later conflicts clearly demonstrate that even
irregular troops can make a very effective fortress out of a city, against
which tanks and planes are only effective if the attacker is willing to
outright destroy the entire city. In the case of Stalingrad even that was not
sufficient.
In the case of a foreign
invasion, it is true that the small arms of the citizenry will do little in the
Conquest/Defense phase of the war, but all wars of conquest devolve into an
attacker required to control ground, at which point we are back the situation
of tyrannical government vs. an insurgent force discussed above.
The question people
often ask when confronted with the statement that personal firearms are needed
to defend against their own government is often "What is
granddad's shotgun going to do vs. a tank or bombs?" This is, however the
wrong question. Tyrants cannot use tanks and bombs effectively to enforce their
will on the people, they need soldiers performing a police role, and shotguns
work perfectly well against people. The oppressed do not even need to destroy
every tank and every soldier, but only make the cost of control greater than
the tyrant is willing to pay. A tyrant or conqueror who wants to take control
of a country for its resources must preserve the population, as people are the
most valuable resource.
Wednesday, January 16, 2013
Oh... oh my. This might actually contain the best real sentence ever. Really.
Kids Prefer Cheese: The Culture that is Germany: "Why he threw a puppy at the Hell's Angels isn't clear"
Thanks to Mungowitz for posting this... I, I can't even explain how happy it made me.
Thanks to Mungowitz for posting this... I, I can't even explain how happy it made me.
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