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. 

Walter Williams, R.I.P.

 

Walter Williams, one of the greatest communicators and expositors of freedom and economics, passed away this week. While I never had the pleasure of being in his classroom, he was quite certainly a teacher to me. My first encounters with his work were reading his articles in The Freeman and his republished op-eds in the Conservative Chronicle as well as attentively listening when he would fill in for Rush Limbaugh. Over time as I became enlightened, with no small part guided by Dr. Williams, it was only his moments filling in for Rush that I would find that show meaningful.

He was a teacher directly to many teachers I have had including ones who entered his classroom avid Marxists and exited passionate free-market capitalists. 

I strongly encourage you to read Don Boudreaux's tribute to him in the WSJ as well as watch the short documentary, Suffer No Fools.

For more tributes, see this list.

May he rest in peace, and may his great work, wonderful spirit, and inspirational message live on.

There Should Be A Law!

Partial list of areas where there might be a market failure and I might support government intervention:

• Masks and social/physical distancing rules in a pandemic - I much prefer persuasion in the marketplace of ideas backed by good and plentiful information. That said, in a very serious health crisis a government-enforced policy might keep the peace and prevent very costly experimentation from defectors like a business not complying. Bringing this to the news of the moment--I generally do not think SARS-CoV-2/COVID-19 qualifies. A failure on the part of government (and others) to even properly try the persuasion avenue does not then necessitate the force avenue. Further, compliance with practices consistent with most all of the nonpharmaceutical interventions has been remarkably high and widespread as well as ahead of the mandated institution of the NPIs. This is a point the advocates of force ignore until they wish to defend against the accusation that the economic and other costs have come as a result of forced NPIs. Then they are quick to point out that "it is the virus, not the lockdown". Careful thinkers realize it is both and the latter makes matters on net much worse.
• Zoning - but not in the way most people think. This one really is more of a government failure that perhaps needs collective agreement. Zoning way too typically becomes NIMBYism protecting vested current interests at the expense of potential and less powerful interests. Basically we may need higher-order (federal) laws preventing localities from encroaching in private property rights.
• Certain, limited cases of patents - Here is my prior thinking on this subject.

There are at least two problems with most cases of the discovery of market failure:

1. That you're overlooking some critical factor that negates the market failure condition. There is something else going on here; there are needs being satisfied along an unexplored dimension.
2. The market failure does exist but will be short-lived and thus insignificant. Short-lived might be in the eye of the beholder, true enough, but this is definitely an area where a longer than average point of view is needed (near-far mode if you will). 

[Updated 12/1/2020 adding to the partial list]

• Garbage collection
• Subsidies for under-produced goods (e.g., vaccines, General healthcare, education)
• General city planning such as road layout and utilities, etc.

It is best to think of these as coordination problems where a central actor can potentially lower transaction costs. The word potential here is doing a lot of work. Just because government theoretically can solve a problem doesn’t mean government in any way, shape, or form will solve that problem in a desirable manner. And note also that just because government might be desired to be a participant in the solution it doesn’t mean they have to provide the solution. Funding it can be a much better role for government to play with private actors actually doing the operational work. School vouchers are perhaps the best example of this, but garbage collection among many others fits as well.

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. 

Breaking Professions Down Into Three Essential Roles

I think one can categorize most professions into a small number of distinct roles--let's explore this idea and arbitrarily limit the number of roles to three in each case. It is my contention that few of the people practicing these professions are good at more than one role, and many are not very good at any of the roles. Consider:

• Lawyers: navigator, firefighter, bodyguard
• Financial advisors: tour guide, travel agent, psychologist
• Medical doctors: band-aids, antibiotics, placebo
• College professors: inspirational speaker, revealer of truth (model explainer), advancer of truth (researcher)
• Elementary school teachers: babysitter, basic skills tutor, etiquette shaper
• Catholic priests: moral consigliere, charity executive director, art museum curator

No One I Know Committed Voter Fraud

This is not a post about recounts and pursuit of truth. It is not a post about probability. It is a post about imagination.

I don't know 1 million people, much less 70+ million. I cannot even imagine what 1m people looks like. I've been to football games with 100,000 people. One million is like (checks notes) ten times that. 

I can imagine 1 million pieces of paper--dollar bills, pages in books, ballots, etc. 

I know some people who voted for Biden, some for Trump, and some of us (bless our hearts) who still believe in freedom who voted for Jorgensen. But remember, I don't know and cannot even imagine 1m people in any form much less 1m people who all wanted to vote for Biden (or Trump, but that isn't important right now). 

Okay, so I actually can imagine it, but it is a bit hard if I want to concretely think about 1m people showing up and filling out a ballot for Biden. It is much harder still to imagine them all showing up together at one time and doing so. 

But that is what the ballot counting looks like especially after the fact. Boom, X-thousand for Biden, Y-thousand for Trump, etc. 

I've seen enough TV to be able to imagine what a fraud looks like. I can imagine easily a vague picture of what a million or so ballot fraud looks like. Truck pulls up to the back of the warehouse, doors open and a sinister fella peeks out, coast is clear, truck gate is lifted revealing fat stacks of freshly-minted fraudulent ballots, dollies unload the loot...

Add to this that perhaps I have motivated reasoning--I would love (hypothetically) to discover that Biden "won" because of fraud. Combine that with my natural and defensible lack of imagination that millions of people see the world differently than I do and in a way that I think is very significant (it was, after all, the most important election of our lifetime). 

Do you see how it seems more likely, perhaps much more likely, that fraud is at play in the 2020 election? What is more likely, that something I can barely imagine happened or something that I can easily conceive of happened? I'm just asking questions here.

Unfortunately, "seems more likely" is equivalent to "is more likely" for many, many people. The Monte Hall problem contains an amazing paradox. The probability is dependent on the perspective of the chooser; however, the perspective that matters is not the chooser's imagined framing of the problem. It is the fact that from the perspective of the chooser and the new information he now has, the probability assignment has changed in a way for him that it has not changed for an uninformed observer--for the chooser it is 2/3 vs 1/3 (i.e., 67%/33%); for the uninformed observer it is still 50%/50%. 

Probability is in the eye of the beholder. But the beholder doesn't get to invent out of whole cloth the critical elements governing the probability (subjective though they may be).

I lied, this is a post about probability.