The (False) Law of Conservation of Effort and Reward

Most people seem to think within the framework of a supposed "law of conservation of effort and reward" (LCER) and its corollary "law of conservation of happiness". One might think of these as a spin on the forever-popular and equally incorrect labor theory of value. 

The thinking goes that somehow there should always be a linear and somewhat direct trade-off between work/life balance--that is, the effort one puts into something should be proportional to what one gets out, and there should be a trade-off between the chosen path and the "obvious" alternative path that together net out. Tightly zero sum. 

People resent the very idea that someone could have it all. The working mother should have delinquent kids who don't love her; the investment banker should long for relaxing weekends and be doomed to an unfulfilling life without meaning. 

The problem with these laws is that they conflict starkly with the magical human ability to tap the power of scale and compounding. The dynamics that these forces bring separate man from nature. Animals cannot coordinate nor plan for the future nor command exponential growth in any meaningful sense the way people can. 

Therefore, it should not be any surprise that some people and organizations can get more out of less and excel along multiple dimensions. In thinking about jobs, sometimes the grass is actually almost always greener. 

Consider how many people look to sports stars and other icons as “great follows” in social media making them big influencers succeeding in a realm outside of their primary area of success. Many adherents to LCER dismiss this as some obviously irrational behavior on the part of those less enlightened than themselves. The truth is these influencers probably are above average in ways that impact both the direct source of their fame (say basketball skills or acting ability) as well as many other areas. IQ becomes more and more important in sports the higher and higher the level. Dumb athletes don't last long at the pro level. 

Jeff Bezos would probably be an above average gardener. The reason he doesn't mow lawns and trim bushes isn't because he wouldn't be very good at it. He might in fact be better than the people who do the job for him at his own house(s). If you think he doesn't do those jobs himself because he is rich, you're right for the wrong reasons. The reason he doesn't is because of the very real law of comparative advantage. 

At the same time I think that some of what makes amazing people amazing often has a dark side. This might make them a bit eccentric or frustrating or detestable. It varies and is not always the case. This might sound like a contradiction, but I don’t think so. Rather it is part of the complexity and mystery of it all—what distinguishes elites. This is very much in agreement with point #6 here. 

Arnold Kling makes related points calling this the "convergence assumption":

What I call the convergence assumption is the assumption that everyone is fundamentally the same, so that it is more natural to expect people to develop the same skills and adopt the same values than for divergence to persist.

... 

We are not all the same. This makes moral issues very complicated. When we acknowledge genetic and cultural differences, what is the meaning of equality? When should we suppress differences and when should we accommodate them?

I think that the great appeal of the convergence assumption is that it allows us to avoid the challenge and complexity posed by these problems. But avoiding complexity is not a good approach if the complexity is an important characteristic of the environment.

Exceptional people are generally and not just specifically exceptional. How this maps onto agreement with you will vary along dimensions of morality as well as taste among others. Those differences are not tradeoffs they are making such that in some cosmic justice sense you and they are on equal footing when all is balanced out.  

Well At Least We Can Agree On This, Right?...

Here is a partial list of some things people commonly get wrong (by my judgment at least) yet believe in them with strong conviction and desire. Therefore, these are just a few examples of times when I disagree with conventional wisdom. 

• Veterans are always human, sometimes (but rarely) heroes. I wonder how much mental anguish in veterans is caused by either an imposter syndrome (these people think I did something I did not do) or a guilt complex (these people don't know what ugly things I endured and perhaps contributed to). Veterans deserve reverence and sympathy, but we do a grave disservice to them when we dismissively and robotically admire them.
• Localized industrial policy is very bad. This includes tax-increment financing (TIF), direct subsidy, government/private partnerships, and other favored-interest actions. The local darling in my neck of the woods is M.A.P.S. Like so many cases of local industrial policy, it suffers from a server case of Bastiat's "what is seen and what is unseen--just look at all the shiny things! There are two crucial and high hurdles for these public (i.e., taxpayer-funded) endeavors to overcome before we can believe in them: 1) there must be a clear market failure preventing entrepreneurs from seeing and acting to realize the positive gains to be had, and 2) the government must be able to identify and execute on these supposed investment opportunities.
• There should be no government licensure for employment (especially law and medicine--those in particular are too important and nuanced to leave up to central planning). I've got strong economic and principle-based arguments against licensure while those supporting it typically rely on that it feels good and that an idealized government can correct a hypothesized problem (not even a market failure mind you). Yet my view is political poison because it takes the unpopular tactic of addressing people's fear through passive action rather than blatant pandering.
• Edward Snowden is an American patriot and hero.
• Almost all acts of state-level aggression (AKA, war) should be met with minimal retaliation if not appeasement and forbearance. This certainly cuts against human nature, but most secondary reactions in response to violent hostility are counterproductive. They make the world a worse place--overall, on net, all things considered. My follow up right there is not my attempt to qualify my view. Rather I am saying I am considering all the supposed benefits people offer as to why vengeance shall be mine! . . . we must stand up to belligerent aggressors. Too often the cost is not worth the cure, and the actions taken in response are just closing the barn door after the horse has bolted. The most I can say in defense of the typical defender of retaliation (too much play on words?) is that if one wants to maintain the world closer to how it is at the cost of how much better it could be, then fight every fire with fire. It is very hard to truly hold territory and control a people. And this difficulty grows more and more as human society advances. Initial victories for would-be rulers become short lived if not pyrrhic. The constant eye-for-an-eye, tooth-for-a-tooth state of the world keeps us in a local maximum, struggling to escape to higher peaks. I think Bryan Caplan says it well.
• The following should all be legal with minimal to no interference from government: prostitution, recreational drugs, performance enhancing drugs, selling/buying organs, prediction markets, actual gambling (games of chance rather than skill), and basically everything else under the sun of If you can do it for free…. The list is what makes this item fully counter-conventional--very few will defend all of these items.
• The motto “Safety First!” is basically nonsense. It amounts to trite virtue signaling. If it is your “highest priority”, then you are incompetent. It is simply not possible for this to be a goal. It is a constraint. Fortunately most of the time when used it is just there to help the naïve and fearful to be a bit braver. In this sense it is innocuous as far as a noble lie can be. But for God’s sake can we grow up and stop saying it or accepting it as a substitute for meaningful signal?

Things the major tribes actually do unfortunately agree upon: 

• There is lots of speech that needs to be censored (e.g., hateful speech, disruptive speech, unpleasant speech).
• We need to fund the police such that we have a strong and powerful police state
• Government can and should solve the "problem" of big tech.
• A safe world and a safe America requires a overwhelmingly strong, uber-engaged, and extensively involved U.S. military.
• American farmers are a sacred group who need constant support especially to maintain the status quo. They should enjoy private profits and be afforded extensive social insurance against losses. 
• The welfare and education and indoctrination of the young is a state concern and needs strong state intervention. Parents should only be left up to their own desires when those desires fully correspond to the state's interests (defined separately by the two biggest tribes, of course). 
• Incumbent firms and industries need and deserve deference if not extra support. It is wrong that they might be challenged by newcomers and new approaches. 

Thinking in Bets for Calmer Debates

Even the best decision doesn't yield the best outcome every time. There's always an element of luck that you can't control, and there is always information that is hidden from view.

That is from the summary of Annie Duke's book Thinking in Bets. The subtitle is "Making Smarter Decisions When You Don't Have All the Facts". 

Her way of looking at the world inspired Arnold Kling to create an entire category for it in his Fantasy Intellectual Teams (FITs) competition. 

People tend to think in terms of did or didn’t and will or won’t rather than the proper probabilistic and adaptive viewpoint. Couple this with Julia Galef's The Scout Mindset, and you have a very sound method for decision making. But a scout's mind thinking in bets is not only a much better way of getting to solutions and making predictions, it is also more socially constructive since it tempers our emotional responses. 

In the political realm we often devolve and retreat to the simplistic concept of binary conclusions. While this human trait is very common in most all people and realms, it is a natural byproduct and significant downside of government action in general. Governments are the ultimate one-size-fits-all. Democracy adds to the problem by lending credibility to the process--we voted; therefore, the outcome is just/reasonable/practical, of course none of which follows. 

When it is all or nothing, we have too much at stake to compromise much less admit we don't know. This leads us to reject ideas we don’t want to be true along with resisting ideas we believe likely not to be true. 

Consider climate change/global warming and anthropogenic causation or contribution. Do we really want to place all of our bets on the idea we cannot affect the climate? Conversely do we really want to place all our bets that we absolutely can change what is happening to the climate? Do we really want to assume that we know exactly what the solution to the problem(s) will be such as subsidizing solar or wind, outlawing oil and gas, etc.? Wouldn’t the consideration of a carbon tax be a more appropriate response? And shouldn’t we consider the downside and extremities of what introducing a carbon tax might lead to? 

A framework of thinking in bets can help a lot in areas like this. Instead of tribally aligning with one absolute or another, we could take a more measured, agnostic view that allows for experimentation as well as revising. Instead we battle it out on the front end (the public and political stakes placed in the ground) having captured interests and biased reasoners (bootleggers and Baptists) and their lobbyist soldiers actually do the brute-force compromising for us on the back end with all the predictable shortcomings.

The thinking-in-bets perspective allows nuance and graceful position changes. Instead of having to be pro renewables/anti fossil fuels or vice versa we can adopt a mindset that skips past labels to force deeper thinking. Sure a person could always claim 100% confidence that THIS is the problem and THIS is the solution, but then at the very least we know not to waste our time in that discussion. Also, the more we make them be precise with predictions, the more likely they will step back from the barricade. 

Betting is a tax on bullshit, and forcing a bet can be a great method of separating our hearts from our minds. I am after a different benefit in this case, though. I don't necessarily want to call anyone out for bloviation. Rather I want to get a more open-minded and charitable disposition for all sides in a debate--allowing us to consider how little we actually know for sure.

P.S. I thought of this while listening to the recent excellent interview of Mike Munger on The Curious Task Ep. 131: Mike Munger - What’s Wrong With Anti-Trust and Industrial Policy?

52 Things I Learned in 2021

 As always, these are just in a general order of when during the year I catalogued them. Standard caveats apply--namely, an item learned does not establish its truth value or materiality. 

1. The 16th digit in a credit card number is simply a check digit based on a formula for the first 15 digits (the actual number). A great example of the value of redundancy from this Tim Harford post that is filled with great examples of both redundancy and brevity--like writing an entire email in the subject line alone with such a short message will suffice.

2. & 3. From the same episode of 99% Invisible: The lampposts in NYC's Central Park each have a unique four-digit number on them which can be used for easy navigation. The first two digits are the closest cross street. The second two show which side of the park the lamppost is on (even for east, odd for west) and how deep into the park it is (smaller is closer to the edge). 

The Swiss military had/has elaborate but nearly invisible defenses built throughout its countryside and cities. All of it to help protect it from invasion well into the Cold War, which had the added value of helping to maintain its neutral stance. From the episode, "Switzerland would eventually build out enough bunker space to house the country’s entire population with room to spare — with a buffer of over 10%, no other country’s shelter capacity comes close."

4. Christmas spending is just not that significant despite what you might suspect. In fact it has been getting relatively smaller over the past 80 years. "For every hundred dollars spent across the year in the U.S., just 30 cents are attributable to Christmas retail spending," according to Joel Waldfogel's Scroogenomics as quoted in this Tim Harford post. Also of note, Christmas was illegal in colonial Massachusetts. 

5. The older and more common response phrase is you've got "another think coming" rather than "another thing coming," which is what I've always said. My version is close in American English, and it's been getting closer over my lifetime, FWIW.

6. When Roe v. Wade was first decided it came with the general support of the Southern, Protestant religious right. I found this out reading this Scott Sumner post about what life was like back in 1973 including compared to now. If you think the abortion fact is weird, take a look at the miniskirts of the Middle East including in Afghanistan.

7. "Asian spices such as turmeric and fruits like the banana had already reached the Mediterranean more than 3000 years ago. . . ." Globalization is older than we might think. (HT: Tyler Cowen)

8. When Rep. Emanuel Cleaver II (D-MO) closed the opening prayer of the 117th Congress by saying "amen and awoman", he was not being woke. He was clumsily making a very old joke as pointed out by John McWhorter on FIRE's So To Speak podcast.

9. Today's amphetamine treatments for ADHD are derived from sketchy 1950s diet pills, but they are not methamphetamines and Ritalin is not an amphetamine at all--so, many kids on ADHD medication are not on "speed", but the Adderall kids technically are. 

10. & 11. From the same episode of Every Little Thing: Most people breathe primarily through one nostril at a time plus the gross facts that every day we swallow the equivalent of about three wine bottles full of mucus filled with outside things that we have breathed in.

Wombats' poop comes out as very dense, hard cubes (i.e., they shit bricks). 

12. In the prime of his career Tiger Woods almost quit to become a Navy SEAL. 

13. From Joseph Henrich's book WEIRDest People in the World: when humans developed the ability to learn and to use language, their brains physically changed, and it impeded the part of the brain that is used to recognize faces.

14. One container ship today carries more freight than the entire English merchant fleet 400 years ago, with a fraction of the crewhttps://t.co/9ERrmD0sev pic.twitter.com/pwYY14m1PT

— Jeremy Horpedahl 🍞 (@jmhorp) February 28, 2021

15.  Lots from this video such as: There are more hydrogen atoms in a teaspoon of water than there are teaspoons of water in the world's oceans; you can fit all of the planets between the Earth and the Moon with room to spare; Australia is wider than the moon; . . . and many more.

16. The famous part of Martin Luther King Jr.'s "I Have A Dream" speech that we all remember, the emphatic conclusion, was not from the speech he had painstakingly prepared to give but rather was an off the cuff adaptation made up in the moment.

17. Society of the Cincinnati is the oldest patriotic, hereditary society in America. It has very selective and interesting rules for membership.

18. The Murray-Hill Riot (a.k.a. Montreal's Night of Terror) was new to me. It shows how tenuous at times the wall between order and chaos and how important good police presence can be.

19. With the emergence of the Brood X cicadas in 2021, I learned about how these 13 & 17-year insect events work.

20. Viva la Excel!

21. From the two remnants (Jonah Goldberg and Chris Stirewalt) on these two episodes of The Remnant I learned that large turn out elections do not necessarily favor Democrats. This is a conventional wisdom myth.

22. Conservationists sometimes transport Rhinos upside down via helicopter.

23. Queen Elizabeth is sorta technically the world's largest landowner. 

24. Icebergs always float with about 10% of their mass above the water (tip of the iceberg and all), but their shape determines which part is up and exposed. 

25. In 1930 the Indiana Bell Building was Rotated 90° While Everyone Inside Still Worked!

26. Robert P. McCulloch was the amazing entrepreneur who purchased London bridge, which, as I knew before, was dismantled brick-by-brick and reassembled in Lake Havasu City, Arizona. I did not know that he did it as an effort to bring tourists and publicity to his town nor did I know that he was the inventor of the light, one-person chainsaw. (HT: David Henderson)

27. The awful practice of forcing Jews to wear a yellow star to identify them to unsuspecting others originated not with the Nazis but well before that in the European middle ages.

28. There are a bunch of things I learned from these cool guides. One is the difference between a swamp and a marsh. Another is the signs a dog will bite. Still another is interpretation of tree rings. And more . . .

29. Humans make up just 1/10,000th of Earth's biomass. We are dwarfed slightly by livestock and greatly by fish (neither too surprising to me), vastly by arthropods (somewhat surprising), and colossally by bacteria (greatly surprising). 

30. Two words: Reindeer Cyclones.

31. I was surprised to learn of these contemporary and relatively important people who opposed the decision to use nuclear bombs on Japan in 1945.

32. Over the past eight years, a Chinese billionaire has died on average every 40 days--in case you're wondering, there aren't enough of them to make that a normal, nothing-to-see-here statistic. This appears to be wrong on its face as well as once the proper framing is applied. I regret the error. 

33. "Pirates understood the advantages of constitutional democracy — a model they adopted more than fifty years before the United States did so." -- From The Invisible Hook

34. Thomas Jefferson's awkward (to say the least) and wrongful position of being a slaveholder had no easy answer for resolution. It was complicated not just by him having inherited his slaves, but that it was an extreme impracticality for him to ever free them. It was statutorily illegal for him to do so, and more importantly his debts outweighed his assets meaning there was no way for him to free them and discharge the debt. Rather he would have to auction them off to other potentially much worse slaveholders which very likely would mean breaking up the slaves’ families.

35. Among so many things in mixology Peter Suderman's Substack has taught me, perhaps the most impactful was what I didn't know or appreciate about sweet Vermouth.

36. This insane development was begun in 2014 in Turkey and sits abandoned, partially finished. It was to be a luxury housing development for wealthy Gulf tourists based on a Disney inspiration it would seem. Here is more on what was to be the Burj Al Babas.

37. Spiders sometimes eat snakes.

38. In what is an unintentional tribute to spontaneous order and entrepreneurial problem solving, the Lagos megachurches are becoming relatively well-run cities unto their own. Perhaps an African-Christian version of Burning Man?

39. The reason horse terms were originally used in describing things about cars and naming some car brands is that many people greatly hated cars as a replacement to their beloved horses, and this marketing technique made peace with those who were so strongly opposed to automobiles.

40. "Organic farming is less polluting than conventional farming when measured per unit of land but not when measured per unit of output." From this abstract which includes hints that magnitude matters. 

41. These facts about Ireland during WWII including that the country was neutral. 

42. From The Soho Forum's Bill Kristol vs. Scott Horton Debate on U.S. Interventionism I learned that Somalia is the U.S.'s longest war rather than Afghanistan. 

43. Hard to summarize, but I learned a lot about genetics from this Richard Hanania CSPI podcast interview of Razib Khan. 

44. Dog's noses are amazing. I knew that. But I didn't know how those slits on the side of the nostrils work or how they can triangulate the source of a smell especially with the help of another dog. 

45. The vastness of the Walt Disney World complex is incredible including how big the parking lots are.

46. Coincidental with the prior item, I learned about this utopian city in India, Auroville, that has a strange Epcot focal point among other things strange and non-utopian. (HT: Scott Alexander)

47. Also from Scott Alexander I learned about all these phenomenal families. 

48. LBJ's daughter once kept a cat fetus in the White House private residence's freezer for months--from the ELT podcast.

49. The best-selling novel I, Libertine was a total hoax played on the elite, snob-class created by late-night radio host Jean Shepherd. 

50. A Bar-tailed Godwit set a world record by flying more than 8,100 miles nonstop! between Alaska and New South Wales, Australia. 

51. I learned about some recent tragic developments in horse racing. These trends look particularly bad and bad for the sport, which will be a future WWCF topic.

52. Philip Van Doren Stern wrote a short story in 1943 titled The Greatest Gift inspired by a dream he had. Because he couldn't find a publisher, he sent 200 copies of it to friends as Christmas cards. That led to a publisher taking interest and publishing it in book form in 1944. Then two magazine publications printed it one in each of the years 1944 and 1945. Eventually it came to the interest of Hollywood where it was adapted and resold to eventually becoming the 1946 Frank Capra film staring Jimmy Stewart, It's a Wonderful Life.

What You Think Versus How You Think

What is more important: what you think or how you think? 

To what degree is it fair to hold people accountable for what they think. Cognitive dissonance should be relative to rational ignorance. It seems unfair to hold people highly accountable for beliefs and other thoughts they shouldn't have legitimately thought much about or simply haven't had much exposure to. Further, what you think is subject to social desirability bias and group identity--factors that are so ingrained as to be a bit out of our immediate control. I think of that not as a pure get-out-of-jail card for bad thoughts (or thinking--see below) but rather as a relaxation of culpability.

How someone thinks implies an examination of reasoning, and that seems to be a much more legitimate way to evaluate thinking. What someone thinks should ultimately be governed by how they think not the other way around. Unfortunately we tend to give a very shallow evaluation of others including leaders especially politicians by getting hung up on what they think.

Consider this 2x2 analysis:

In this framework there should be high stakes if the thinking that went into an eventual thought was thorough (deep/rich), but low stakes if the thinking was not. We are rewarding good thoughts and punishing bad thoughts, but the degree to which we do so is dependent on the thinking (process) that created and supported the thought (conclusion). One implication is that more intelligent people should bear a greater burden for their thoughts. 

Another is that a bad conclusion from a thorough process should carry higher blame than would a bad conclusion from a shallow process--the bigger the inconsistency, the bigger the crime. Don't confuse that with allowing a thinker to get off easy for a bad thought when they should have thought more deeply before forming a conclusion. For that we have to change the framework.

To wit: the framework is transposed a bit when we switch from considering thought accuracy (is the thought right, correct, good, moral, etc.) to considering thought significance.

Now the framework assigns greater scrutiny to the interaction of the level of thinking and the meaningfulness of the thought rather than the level of thinking given the ultimate outcome. One obvious implication is that thoughts of trivial/minor significance deserve low stakes regardless of the reasoning level that goes into forming them. 

It is easy but false to assume all thinking should be deep/rich. That is simply not possible. It is out of our grip most of the time. We either don't have the time or the mental faculty or both. Therefore, one implication is don't hold confidently to high-significance thoughts if you did not employ deep/rich thinking in deriving them. Another implication is don't put deep/rich thinking into trivial/minor thoughts. 

How does this compare to the real world experience? I think level of reasoning is generally a non factor in most people's framework most of the time. Rather it all comes down to does it feel good and is it me or like me:

My claim is that reasoning is given very little credit for most people most of the time. Perhaps this is defensible to a degree given the vast ulterior motives we all possess. While that is an apt explanation, it is not a reasonable justification. 

Related: See Arnold Kling's review of The Mind Club.  

Biden O/U Performance Predictions

Admittedly I’m being too vague to be falsifiable, but set some agreeable terms, and I’m willing to bet (#MoneyWhereMyMouthIs #TaxOnBullshit). 

Here is a partial list of what I predict the Biden Administration's performance will be in a number of important areas. Specifically where will it outperform (Over) and where will it underperform (Under) the conventional wisdom’s current estimation. To be clear this is where it will be better/worse from my desired perspective than the conventional wisdom’s current estimation. 

For example, I think the conventional wisdom is that Biden will greatly raise personal and corporate income tax rates, increase capital gains tax rates, and restore the SALT deduction. Mostly all bad items from my perspective. I think it won't be as bad as assumed. Likewise, it is presumed that he will user in a much better world of trade and immigration policy. I think it meaningfully won't be that good. 

Over:
Taxes
Environmental regulation

Other general business regulation

Minimum wage

Under:
Trade
Immigration
Drug policy

Health regulation
COVID

Foreign policy (not including hot wars)

Police reform

On Target (bettingwise = no action):
War (actual hostilities)
Education

Demagoguery and divisive politics

A rose by any other name...

Partial list of things as they really are (these are not all original to me):

• Universities are hedge funds that run research labs and have football teams. 
• Fast food companies are real estate firms with kitchens. 
• Democracies are insurance companies with armies. 
• Public (government) schools are unions that run day care centers. 
• Police departments are unions that run protection rackets. 
• Banks are time-travel machines for assets that tax uncertainty. 
• Home Ownership is tax-sheltered/favored investment masquerading as industrious virtue. 
• Public libraries are intellectual social status symbols with warehouses. 
• Churches are mutual-aid societies that offer moral guidance and tribal solidarity. 

Being Relieved and Reassured When I am Wrong

Considering the realm of points of view where thoughtful minds can disagree, we simply cannot have very much confidence that all of our views are correct and justifiable. In fact unfortunately it is likely that we are right only half of the time, an epistemic coin flip. Therefore, it should be reassuring when we discover areas within this realm where we are incorrect because then we can have more confidence in our other points of view being true. 

Similarly I take comfort when I find error or at least disagreement with the intellectuals I follow and admire. This lets me know I am thinking critically, which holds even if they are right and I am wrong. 

To make sure I am not just stubborn and cherry-picking my points of agreement, I always seek to change my mind (2020 edition coming soon). And by the same token, we must be careful not to use this as a cognitive bias giving confirmation and validation to views we should now doubt. 

If there are correlations and other entanglements between points of view, doubt cast upon one of these casts doubt upon all of them. Being wrong about one part of a system probably means one must be less confident in one's views about the other parts of the same system and perhaps wrong about the system itself. The Bayesian updating is a sticky wicket. 

P.S. One recent example for me was listening to an episode of The Libertarian Angle podcast.  The host Jacob Hornberger is someone for who I very much align in my view of the world. He ran in 2020 to be the Libertarian Party's presidential candidate. If he would have won, I would have gladly voted for him. In fact I would have ideologically preferred him as the actual candidate over Jo Jorgensen (Jorgensen was probably the better candidate for general electoral appeal). Yet he has strong beliefs with high confidence that the JFK assassination was a regime change conspiracy done through the CIA and the rest of the national security state. The case he makes causes me to adjust my views slightly but only slightly. I can believe there was unacted-upon desire to thwart Kennedy's foreign policy changes (Kennedy was making concrete movement away from war and hostility). I just don't believe this materially came together in a conspiracy of action. 

Listening to Hornberger gave me a bit of a challenge to my priors about the Kennedy assassination as he is very much more informed about it than am I. At the same time I didn't change my mind and adopt his view. If we do finally someday get a release of the classified records from the assassination (Trump surprisingly agreed to extend the classified status in 2018 until 2021), I might discover I was completely wrong. Either way I'm relieved and reassured because it shows I am not simply outsourcing all of my views to my intellectual heros, and if I am wrong about this, I can have more confidence in the areas where Hornberger and I are in agreement. 

It Takes a Cynic

I have long been accused of being cynical, and while I will cop to it, I have always maintained that to the degree I am it is a good thing. 

Think of it as the combination of Hanlon’s Razor and Occam’s Razor: the most obvious, self-centered explanation should be considered the most likely until reasonably ruled out. 

This point of view has its dangerous downside. Namely, one can fall into an ugly attitude or a jaded viewpoint that never sees things with an open mind. I strive to avoid this helped a lot by my natural optimism. 

When done appropriately, cynicism has great benefits. Frankly, it cuts through the crap. And it starts one out from a position of epistemic strength as it protects against the fraud of social desirability bias.

In fact I would go so far as to say any analyst worth his salt takes a cynical approach. Let your mind's eye have a cocked eyebrow--it will help keep you from being duped. 

What first got me thinking about this recently was listening to Steve Levitt's story in a recent episode of Freakanomics about advising a firm years ago regarding their advertising budget. The key part was this: 

LEVITT: They said, “Are you crazy?” It was almost if they found out they didn’t work, it was far worse for these people than it was not finding out it didn’t work. Because then they had to explain why for the last 15 years they had been wasting $200 million a year. So, they were happy to just live in a world in which as long as there were ads in every market, every Sunday, life was good.

Or when he says it more plainly in episode 2: 

LEVITT: If you think about it, no chief marketing officer is ever going to say, “Hey, I don’t know, maybe ads don’t work. Let’s just not do them and see what happens.” So, don’t get me wrong. I’m not implying that advertising doesn’t work. I’m implying that we don’t have a very good idea about how well it works.

Add to that this interesting monologue from Dave Chappelle in which he is arguing, unsuccessfully in my opinion, that we should not watch his former show on any streaming network. The part related to this post is his description of the Three-Card Monty scam and that as a analogy for how the [media] industry works. And also, this point: "Never come between a man and his meal." 

If you want to know what underlying motivation is driving a given set of actions, ask yourself first who is standing to gain (or avoid loss).

My cynical demeanor is probably why The Elephant in The Brain resonates so strongly with me. Seeing that X is not about X is a red-pill superpower. 

It is also why I see recent examples from sports like the gyrations in college football's season cancelled/starting/stopping in 2020 and Duke choosing not to play its remaining non-conference games in 2020-21 basketball season for what they are--selfish ploys by powerful vested interests.

To understand what is going on in college football right now you have to view it all through the lens of a labor dispute, cartel behavior, and game theory. COVID is pretense.

— Steve Winkler (@swinkler78) August 10, 2020

Being cynical has its challenges, but it also has its benefits that are underrated. 

Clutch Your Pearls

 

Partial list of false extreme problems government should not be attempting to “solve”:

• Gender pay gaps
• Income inequality (rather than consumption inequality which can be a real problem that government might play a helpful role in reducing)
• Regional discord, violence, and tensions abroad (this is false in that it is never so straightforward as right vs. wrong, good vs. evil)
• OPP - other people’s patriotism or lack thereof
• Overpopulation
• Student debt and higher-education financing
• Business lending in general and in crises like the COVID pandemic (SBA, Fed backstops of direct lending, et al.)
• Illegal immigration (crime risk) (economic affects)
• Tobacco use, alcohol consumption, sugar composition of food, gun ownership, use of currently illicit drugs, et al. as public health issues
• Food deserts
• Jobs lost to automation

P.S. This clip (and the entire movie) is an allegory for my view on this subject.

My Futile Desire For People To See The Truth

I strive for epistemic humility, and my practice is to consider the confidence with which I hold various beliefs. As such I truly don't hold strongly many views and am quite willing to change my mind. Once I have done the work, though, I am willing to hold a view strongly. And I love to hate conventional wisdom.

Hence, this partial list of things about which conventional wisdom is wrong and about which I very much want people to understand the actual truth. 

The formula for when conventional wisdom is held in error is a seductive, persuasive narrative coupled with readily accessible, salient anecdotes that are not indicative of the broader evidence because that broader evidence is largely obscured.

The following are all beliefs that I hold quite confidently after years of study, analysis, and thought (listed in no particular order). Note that I am still learning about these, questioning my priors, and remain willing to change my mind. It is just that the probability I assign to being wrong for these is now quite low.

• The general causes of and problems in the Great Recession as well as the housing crisis before, during, and after the Great Recession.
• The labeling asset prices as being "bubbles" (e.g., tulip mania, dotcom tech, housing markets--see above, et al.) is neither useful nor helpful. The term is loose, vague, and indeterminate. A classic case of seeming to say something, but being so obscure as to be unfalsifiable. It is the modern financial economics equivalent of blaming disease on the imbalance of humors.
• The current and historical lack of parity in college football and other sports—my first great example of things not being what is so commonly believed in the conventional wisdom. Big firms like regulation and so do big sports programs. The NCAA benefits the blue bloods at the expense of the lesser schools.
• The cause and nature of the Great Depression and the subsequent recovery (it wasn’t WWII).
• The cause and nature of long-term economic progress as told by McCloskey, et al.; the true nature of economic inequality (consumption versus income); how good things actually are and how much they have actually improved.
• The shallow and near emptiness of news journalism and that watching and reading the main-stream media is a form of entertainment done at the expense of one’s intellect.
• The immorality of conducting and impossibility of 'winning' the drug war. One can extend this to all prohibitions on victimless crimes, activities and trades done by consenting adults that are labeled crimes not because of a violation of anyone's property or personal rights but because society has deemed it taboo, immoral, or otherwise contemptible (e.g., organ sales, prostitution, price gouging, etc.). 
• The harm and unintended consequences of price controls in all there guises: minimum wages, rent controls, anti-price gouging laws, restrictions on compensating college athletes, et al.
• The injustices that exist and persist in the world, how good it could be in terms of justice and wealth for all of us, and the multiplicative benefits of free markets and free minds.
• The economics especially and general state of the science concerning environmental policy.
• The policy responses to the COVID pandemic.

I should probably take a cue from Bryan Caplan and call “Impasse” more often. It would give my head a chance to recover from its battle with the wall. 

Emergency Situations Call For Proven Failed Policies

The pandemic of the novel coronavirus (SARS-COV-2) is upon us. But rest assured; our fearless leaders are here to help by making sure we keep reality at bay. I'm talking about an old favorite of head-in-the-sand, wish-it-all-away virtue signalers--price gouging laws (aka, price controls).

Because it worked so well exactly never but makes those who don't like an certainly very bad and difficult (but nevertheless necessary) change feel like something is being done, we shall inflict self harm.

Let's turn this into a partial list of things to remember about price gouging laws:

• Price controls that limit market clearing prices don't change the reality that suddenly and acutely certain goods and services are more scarce--demand has risen while supply is temporarily mostly or entirely fixed.
• They don't allow us to efficiently allocate goods. I hear you cry, "But what pray tell is so great about efficiency in a crisis?!?" Okay, okay, I sneaked in some technical jargon. When economists speak of efficiency, they are sorta saying how can we do the best for the most. We have to get what we have (water, ice, lumber, medical supplies, etc. depending on the disaster) to those who need it most. Most is key. While we always want to satisfy this to the best of our abilities, in a crisis it becomes crucial. What substitutes do we have for allowing prices to gauge who wants/needs it most? We could use:
• First come, first served
• Personal, arbitrary preferences
• Non-price competition (to the beautiful, the rich and powerful, the special interest, etc. go the spoils)
• Government or other authorities trying (honestly trying) to determine who should get what (more on this fantasy world below)
• All other methods listed above have SUBSTANTIAL costs associated with them. And there is very little reason to believe they would outperform the price dimension. They are all subject to manipulation (both malicious and innocent; intentional and accidental). They waste resources including time when resources are especially scarce. They encourage hoarding and black markets (more below). The best they possibly can do is match the outcome price would achieve while avoiding some of the dreaded downsides of allowing prices to rise. But just how bad and realistic are those downsides?
• The downsides to letting prices rise to the new equilibrium levels are hypothetical straw men. If you are worried or distressed by the idea that someone, somewhere will profit off of a bad situation you need to realize that is a reflection of your own envy and a mischaracterization of who actually is in a position to provide goods and services. If you are worried that only "the rich" will be able to get the precious thing(s), then you are ignoring the fact that "the rich" always will have access, ignoring the charitable impulses of most everyone including those with more wealth, and ignoring that your wrongheaded description of "the rich" still leaves "the not rich" without access--store shelves get emptied when prices don't rise properly (see the Art Carden link at the bottom).
• Black markets will spawn and propagate where markets in the light of day are prohibited. If you think you are ending the high prices "problem" by stopping prices in stores, etc. from rising, you are woefully naive. Those same "greedy" people who would otherwise raise their price up to the market-clearing, too-high-for-your-comfort level will simply take the items off the shelves and sell them in the alley at a more reasonable (given the new economic reality) level. And who do you think is buying in the alley? I can assure you, it is not the Boy Scouts.
• Demand is not the only curve that can change. Supply very crucially can and will if we entice it. As also indicated in the next bullet point, one must answer the always important question: "And then what?". Allowing prices to rise sends signals literally worldwide that scream: "HEY, STOP WHAT YOUR DOING! THOSE [goods and services specific to the given situation] ARE DESPERATELY NEEDED ELSEWHERE. Help us reallocate them there. And help us make more of them!" The Mike Munger links at the bottom have a lot on this very important point. In a dire situation I don't just want some (water, medicine, etc.). I want all we can get including that for which it has not yet been economical to access/build/develop. I want the best pharmaceutical firms and minds working on a vaccine today--not just the most altruistic. I want the best doctors out of their personal quarantines and on the front lines--not just the most altruistic or frankly those with lower opportunity costs. If you have a severe, acute, and emergency back injury, you don't want to be paying only enough to entice a chiropractor to help you.
• Think past the first level--there are strong incentives (social and economic) for businesses to not allow prices to fully rise or to themselves supply the charity we would want to make sure those without means can get the goods and services they truly need.
• It is a very bad way of forcing charity as it imposes the cost of charity on those supplying goods and services as well as those who otherwise would have access to those goods and services. Think of the guy who really needs ice for baby formula or a nearby hotel room to keep his job but who showed up later than the guy who didn't need those things so badly but wasn't deterred from taking them because the price wasn't giving him the crucial information that somebody else needs it more who isn't yet here to say so.
• It is immoral as it denies the property right that the owner of the resource has and it disallows her from most easily finding the person who needs it most and it punishes her for having been there in the first place to supply it. In a disaster we want the church to have been built and maintained for Easter Sunday. That is expensive. One way to get that insurance policy against pain in a disaster is to allow those who bear it 99% of the time to reap the reward for having bore it. 
• Lastly, you want to substitute a market process with a government process in a time of desperate need. Do you really, really, really think those in government are in a better position (access to knowledge, incentives and feedback effects, corruption temptations, organizational structure, etc.) than the market to do the job? I would not trust a group of (non-government) people to have the judgement, knowledge, and ethics to dictatorially make the best decisions. Why would that change for those same people if I simply put them into a government system?

Links to more thorough sources:

Art Carden
Mike Munger

Munger on Econtalk

Disease Diagnosis - 2019 New Year's Resolution fulfillment

With the unintentional help of Alex Tabarrok and Eric Helland, I fulfilled my annual New Year's Resolution to change my mind on something. Specifically, I changed my mind:

That the runaway cost increases in higher education over the past several decades were simply due to third-party funding (spending other-people's money by the education-industrial complex (Big Chalkboard)). It turns out there is a much more elegant, though less tribally satisfying, answer: the Baumol Effect (aka, Cost Disease).

If relative productivity doesn't rise in a sector for which demand is rising, prices in that sector must rise relative to the sectors for which productivity is rising. This elegant explanation applies to health spending as well. Here is Tabarrok on the prototypical example:

The Baumol effect is easy to explain but difficult to grasp. In 1826, when Beethoven’s String Quartet No. 14 was first played, it took four people 40 minutes to produce a performance. In 2010, it still took four people 40 minutes to produce a performance. Stated differently, in the nearly 200 years between 1826 and 2010, there was no growth in string quartet labor productivity. In 1826 it took 2.66 labor hours to produce one unit of output, and it took 2.66 labor hours to produce one unit of output in 2010.

Fortunately, most other sectors of the economy have experienced substantial growth in labor productivity since 1826. We can measure growth in labor productivity in the economy as a whole by looking at the growth in real wages. In 1826 the average hourly wage for a production worker was $1.14. In 2010 the average hourly wage for a production worker was $26.44, approximately 23 times higher in real (inflation-adjusted) terms. Growth in average labor productivity has a surprising implication: it makes the output of slow productivity-growth sectors (relatively) more expensive. In 1826, the average wage of $1.14 meant that the 2.66 hours needed to produce a performance of Beethoven’s String Quartet No. 14 had an opportunity cost of just $3.02. At a wage of $26.44, the 2.66 hours of labor in music production had an opportunity cost of $70.33. Thus, in 2010 it was 23 times (70.33/3.02) more expensive to produce a performance of Beethoven’s String Quartet No. 14 than in 1826. In other words, one had to give up more other goods and services to produce a music performance in 2010 than one did in 1826. Why? Simply because in 2010, society was better at producing other goods and services than in 1826.

The 23 times increase in the relative price of the string quartet is the driving force of Baumol’s cost disease. The focus on relative prices tells us that the cost disease is misnamed. The cost disease is not a disease but a blessing. To be sure, it would be better if productivity increased in all industries, but that is just to say that more is better. There is nothing negative about productivity growth, even if it is unbalanced.

And this has very interesting implications. Tabarrok again:

• The Baumol effect predicts that more spending will be accompanied by no increase in quality.
• The Baumol effect predicts that the increase in the relative price of the low productivity sector will be fastest when the economy is booming. i.e. the cost “disease” will be at its worst when the economy is most healthy!
• The Baumol effect cleanly resolves the mystery of higher prices accompanied by higher quantity demanded.

Note that this does not change my view that we have inappropriately encouraged too many people to go to college and we have pushed and pulled too many resources into that chasm. Other-people's money and wishful thinking are still in play (as this discussion with Bryan Caplan indicates). But it seems they are only contributing and potentially secondary factors.

See here for lots of brief blog posts. See here, here, and here for very good podcasts on the study.