Choice: When Less Is More

Last week I attended the annual Morningstar Investment Conference in Chicago, Illinois. Of course, I didn't wear my sunglasses (a little inside money management humor).

Just a brief observation. At breakfast the second day I commented to my colleague who had made the trip with me, "Not to channel Bernie Sanders, but I appreciate the limited selection of this morning's breakfast. At free-buffet-style events like these too many choices allow my eyes to be bigger than my stomach--and I tend to over eat."

To be sure it wasn't Venezuela-level restriction. There were the typical bran, blueberry, and banana-nut muffins, a combination of egg with cheese on an English muffin by itself, with bacon, and with sausage, a little bit of fruit, and yogurt. All coupled with juice and coffee. This breakfast was thorough and well thought out.

So it wasn't vast choices I truly wanted to avoid. I just wanted someone else making them. I wanted curation, and to my estimation that is what I received. That said, as I approached a trash can to discard my empty plate, another attendee converged with me upon the same task only his plate was mostly full. Despite not knowing me, he made plain his opinion of the meal, "What a shitty breakfast!"

Capitalism can't win. If the consumer has to make the choices, they are overwhelmed (according to the likes of Sanders). If someone makes the choices for them, some leave unhappy--no doubt spoiled by the unrealistic cornucopia that other experiences in a capitalistic system have brought. One man's curated meal is another man's shitty breakfast.

Highly Linkable

Aziz Ansari says we're lookin' for love in all the wrong places and in the process channels his inner economist.

This is an awesome new project on Hayek by Don Boudreaux. Be sure not to miss the short videos.

Life is getting better, one thread at a time . . . Project Jacquard by Google.

Alberto Mingardi argues that locavorism is anti quality and anti quantity of life.

Charles Murray wants us to fight (federal) city hall. Arnold Kling dissents insisting exit rather than voice is the answer.

"Scott Alexander" breaks down the California water problem very well and offers some good ideas for solutions.

John Cochrane takes to task Richard Thaler and behavioral economics.

"Minimum wages are great . . . except for us," says LA County union leaders.

Scott Sumner explains how people get confused about monetary policy thinking of it as credit policy. No matter how much cash Apple acquires, it cannot conduct monetary policy.

Bryan Caplan has a simple request: unlock the school library.

I find counter-conventional wisdom delicious--in this case literally so. As illustrated in this Bloomberg article, barbecue impresario Meathead Goldwyn can tell you everything you are doing wrong on the grill (for me it was several things and counting). And he applies science and logic to the process. Bon Appetit!

Highly Linkable

We begin with some short videos:

• Don Boudreaux's latest addition to MRUniversity - An Orgy of Innovation
• Alex Epstein offers in honor of Earth Day Why You Should Love Fossil Fuels

The NFL Draft was last week. Brian Burke re-examined Massey and Thaler's landmark paper "The Loser's Curse: Decision-Making & Market Efficiency in the NFL Draft" applying the new CBA. The findings are interesting in that there continues to be little to no surplus value at the top draft picks with a lot to be had in the second and third rounds. This is not what the typical football fan (or GM) wants to think. Just to illustrate, look at what the Buffalo Bills did.

The supply of land (like all resources) is not fixed in the long run (and the long run does not mean a long time from now)--so explains Don Boudreaux.

Warren Zola asks, "What IS the NCAA's mission?"

Arnold Kling has a new meme: Teaching Emergent Economics. Don't miss the first one on trade as a technology.

Sumner argues that investing is not like guessing the winner of a beauty pageant as suggested famously by Keynes.

I love this technique, The Mellow Heuristic, Bryan Caplan argues using for adjudicating intellectual disputes when directly relevant information is scarce. I discovered it for myself and have used it since late childhood. 

Never shy of asking the tough questions, Robin Hanson asks us to rank the sacred.

Would you/should you/could you pay for a dinner reservation--so asks Tim-I-am Harford.

Finally, some counter-conventional wisdom (AKA, stuff people are getting wrong):

• Alex Tabarrok exposes what business journalists and some economists don't understand about efficiency wages--their idea that paying workers more works magic.
• Terry Burnham empirically challenges the idea born of Kahneman’s Thinking, Fast and Slow and echoed by Gladwell's David and Goliath that simply making problems harder to read improves test taker results.
• Ken Popehat White breaks down what an emblematic McClatchy column on free speech gets wrong.
• Alex Tabarrok appears again to show how Jon Stewart is wrong on many levels about education in Baltimore.
• Scott Sumner says basically NOBODY understands the concept of "currency manipulation".

Why Are We Afraid Of Getting Smarter?

What I would watch for over the next 15 years are developments that enable humans to evolve more rapidly, in order to compete with machines.

That is from Arnold Kling discussing Vinod Khosla's essay about the next technology revolution.

Thinking about the singularity and perhaps it is a bad analogy, but will our future robot overlords be of the demeanor of teenagers or middle-aged adults ... or grandparents, and will they be male or female? Will they be an it or a they (a collective like the Borg or individuals)? Will they be Mr. Spock or Navin Johnson? In other words, how human will they be and how much will that hold them back?

Despite all the worry about the singularity, I come down firmly on the side that advances in AI, et al. will be used to radically improve humans. I foresee improvements by orders of magnitude to cognitive abilities in addition to health, strength, and other physical attributes as we advance scientifically and economically. Basically we are some future cyborgs' impoverished ancestors. And of course realize that from nature's point of view up to now we have been the super AI.

Also, to counter the doom and gloom regarding the loss of jobs taken by robots, I offer (in addition to this evidence): Some people predicted the device that is the modern smart phone, but who predicted the massive size of the app universe that serves it? Some predicted how computers would bring productivity enhancements and job replacement/elimination in modern business, but who predicted the magnitude or breadth of information technology jobs?

It is much easier to imagine the elimination of work through improvements. It is much harder to imagine what it takes to get there and what else is created along the way. It is simple to master a pencil and imagine how useful it is immediately upon first encounter. It is virtually impossible to fully comprehend what it takes to create a pencil or to conceive of the smallest sample of that which it can be used to design.

There is always more out there.

Wedding Industrial Complex

"It's wedding season, kid!" 

People amply agree it is out of control until it is their little princess going through the rite of passage. At that point they rush headlong into all the trite and sometimes ridiculous traditions including songs, bouquet tossing, and smashing cake in faces not to mention all the apes in tuxedos riding in limos. The nonsense starts with an arms race in diamond rings and doesn't end until the honeymoon on the International Space Station catered by the Food Network. But is it really that out of bounds? Despite going from something around $6,000 in the 1930s (inflation adjusted to 2013) to around $30,000 (or over $31,000 according to this), this growth does not outpace the growth in real GDP per capita. 

The importance of de gustibus non est disputandum must be invoked here. Yes, these expenses would nicely make a down payment on a home [or insert your own favorite worthy cause], but it is not your (the outsider's) decision to make. In fact one shouldn't look back with second-guessing regret about their own decision years ago to spend all that money on a wedding and reception they can scarcely remember. You are a different you than you were then. You're not better now or were better then. You are just different. And in most cases the preferences you have now are not relevant to the decisions you made then.

Highly Linkable

Want to know how much better life is? Look to the Easter Bunny.

Water, water everywhere . . . before you get caught up in the hyperventilating panic, read this and listen to this. Thirsty for more? Try this and this and don't miss this including the block quote at the bottom from a reply to Mother Jones.

They weren't wanting for water at Woodstock as these rainmakers played on. (HT: Tyler Cowen)

Jeffrey Tucker blends up market confusion.

Arnold Kling offers some brief but vital points on sustainability properly considered under the wisdom of economics.

While we're on the subject of the environment, Ronald Bailey asks a great question with wide applicability, but in this case he focuses on global warming. I could make my thoughts on this a much longer post, but for now allow me to make four points:

• Climate change is a fact! Well, yes. But that is not the debate of substance. No serious thinker believes the climate is static. Many in the environmental movement seem to take as a given that the climate should not change, that species should not go extinct, that man most certainly should not alter his environment . . . in extreme conflict with evidence and reason. This emanates from a status quo (change-hating) bias in opposition to the scientific viewpoint of adaptation. The serious questions are more subtle. 
• It is important to understand what we can know versus what we most certainly cannot yet prove. Is the climate changing (evolving)? Yes. Are the actions of man partially responsible? Yes. Do we know how much? Not with any reasonable amount of precision. Can we make confident predictions of how the climate will be in the future? No, at best we can make a range of predictions resting on high sensitivity to a host of assumptions. Can we "solve" climate change? No, this kind of question is intellectually bankrupt.
• There are many implications behind possible climate futures. The good news is we won't be simply thrust into one via time warp. We will have time to continue to discover solutions to various problems including adapting to climates different than what we have become accustomed to as opposed to the impractical luxury of always avoiding those climate changes. Much of Florida might be underwater in 100 years. It is not obvious that Florida as currently conceived is morally superior to things that might significantly affect Florida in the future--assuming we even can pinpoint what those causal things are. Regardless, the future generations will most likely be fabulously wealthier than we are today. They will have resources that we cannot possibly dream of to resolve climate changes. 
• Beware top-down, all-powerful solutions. This is good advice almost always. Especially this is true when the problem is multifaceted and ill-defined. 

David Henderson has a very good grasp on freedom of association and its implications.

Here's an idea: take a super-powerful organization that is failing at two things and give them a third important task to fail at. Brilliant!

Megan McArdle shows two examples (one for the young and one for the old) where government is making systematic errors that WILL have colossally bad effects.

The Bundle Is Dead

Advertising-financed, pushed, bundled-content media is quickly dying. For newspapers there are two critical truths: the medium has changed (newsprint is now online), and (much less understood in the industry) the nature has changed (one-way production and distribution of "the news" from one to many is no longer reality). The second point is the more important. We now can have access in depth to a much, much wider array of news and it is a two-way channel, "a conversation" in the words of BuzzMachine, that is many to many many times over. Often this is in a more raw, unrefined form. And it extends much beyond news into all aspects of media entertainment--it's not just Hildy Johnson that we're losing.

Before fretting that this is all a huge net loss, remember we used to have milk delivered to our doorstep--Those were the days! That was the cost-effective method, but it was a lot more expensive than milk is today. As markets evolve, the value propositions shift. There are always tradeoffs. More of everything for less cost is not ever a near-term option. So you shouldn't be surprised when to get the same channel lineup in a cord-cut world you have to pay as much or more than you pay today. Some of us are enjoying bundles that will not for long be profitable. This media trend began in earnest for print about 15 years ago. It began for radio about 10 years ago. And it began for television about 5 years ago, and it is accelerating.

Bundling was a natural and rewarding byproduct of economies of scale--falling average fixed costs created by mass production. But we are progressing past that part of economic growth into an era dominated by falling total fixed costs--Moore's Law has crossed a tipping point in magnitude. As that unfolds, we will continue to see the withering of business models singularly reliant on a combination of high fixed costs as a barrier to entry and the consequent economies of scale in production and marketing.