People have always had a religious or quasi-religious reverence for nature. In modern times, some people have started to see nature more as an enemy to be conquered than as a god to be worshiped.

I would actually say the opposite is true. People have historically and especially prehistorically a fear of nature. This may look like reverence but, from what I understand, it seems likely that people deified nature not out of love and respect, but from fear.

As in – “Lightning God, I’ll sacrifice my best goat if you stop scaring me” or “Rain God, how about some rain so I don’t starve.”

People today have never had a greater understanding of the forces of nature and been as immune to weather effects, in all but extreme cases. Since the hippie movements, and continuing today with the green movements, I don’t think you’ve ever seen a more profound respect for nature from the general public, and have responded by demanding our institutions take measures to protect nature.

We understand that economic growth relies on using nature’s resources, but have people ever before have concluded on such a grand scale that nature needs to be protected? Property rights have been used for this purpose for centuries now.

You can certainly debate the efficacy and the intentions of the political class in regards to environmental legislation, but the motives of the general public seem relatively clear.

I don’t think the reasons are altruistic, but maybe environmentalism is the newest form of signaling status… and it’s cheap too. Becoming an environmentalist only requires the purchase of a few buttons and demanding that other people do the changing.

I think Nassim Taleb (author of the Black Swan) and Daniel Kahneman (prospect theory) would say that the disasters that we are most likely insure ourselves for are the ones that are the least likely to happen, and could leave us even more vulnerable to the real black swans (which we can’t predict anyway).

In other words, trying to prevent disaster (for example, one that would cost a significant portion of GDP) we would spend trillions on and then miss the real problem completely. We simple suck at predicting these sorts of things.

And, if we did get lucky and manage to prevent disaster (the example Taleb uses are laws that could have prevented 9/11) we would never know disaster had been avoided in our version of the multiverse, and all people would see is needless expense.

2. You’ve heard (and perhaps disagreed with) the concept of subsidizing alternative energies… but what about taxing them? Jeffery Miron reports that solar panel importers are facing $70 mill in new tariffs. I suspect this may be part of the ‘buy american’ campaign. I wonder what the environmental left has to say about it.

3. Bob Murphy links to a hilarious video from Jon Stewart about the alleged super-majority of Senate democrats. Why can’t they pass anything? I don’t agree with many of Stewarts supporting points of public option for health care, but still a good video.

4. Dave Prychitko tells us about supply and demand. The Dems arguments for a public option to keep costs down and raise consumership just don’t work, if supply and demand curves are right. I’ve made the same arguments for public option for college education.

Mostly, this seems to be because of field specialization and the general depth of knowledge that exists, especially in scientific fields. You can dabble, but its simply too time consuming to become an expert in lots of different things. In addition, the specialists insists on “jargonizing” their fields, perhaps specifically to prevent polymaths outshining their own work.

My question is whether the internet is helping or hindering the goals of polymaths?

How does one become a polymath without condemning themselves to poverty?

HT2 Tyler Cowen

Quite frequently, I hear, “How do you justify working at a state university and holding libertarian views? That’s hypocritical!”

Many libertarians and other small government-minded people deal with this question. I, myself, meet this accusation frequently because I attended a state university and working for a sector that is funded almost entirely by the federal government. I this his answer is satisfactory:

But the State is involved, and heavily. This involvement makes it artificially difficult for private schools to thrive. So should educators and researchers who oppose such involvement as a matter of principle content themselves to teach only at the very small number of schools that get no government funds? And should those libertarian educators and researchers who can find no employment at such schools find some other occupation, even if it’s likely that they can contribute more to the cause of freedom by teaching and researching than by abandoning that career?

Although my recommendations for policy would create outcomes substantially different than what we have, would critics suggest I pretend that I’m living in that world rather than the one that actually exists? If I did so, I would not be doing work that I love, neither would I be putting myself in a position where I can attempt to change it. For libertarians, our best option is to work within the system so we can transform it. We need an evolution in the role of government, not radical revolution.

Government incentives obviously work to effect behavior, even when the people have rational expectations about the outcome (I think game theory has some interesting explanations about why this may be so). From the perspective of the liberty-minded individual:

Another consideration turns on the distinction between choosing rules and choosing how to act within a given set of rules. It would be a clearer case of unethical behavior on my part if I voted for further government involvement in higher education than if I simply accepted the reality of that involvement–a reality unlikely to be changed any time soon. I can legitimately say, “I would arrange education differently, but because that power is not mine, it’s okay for me to work for a government school even though I would prefer that such things not exist. I don’t make the rules.”

This argument, too, has some merit. But it also has a weakness: Society’s rules often are changed by persons who refuse on principle to accept what seems inevitable. “Playing by the rules” is not a free ticket to violate your ethical norms.

According to the report, the correlation is directed by this cause based on temporal information, but considering all the social changes (not all of which where government directed) where happening at the same time, how can they distinguish between them?

What we might have is Hume’s classic problem of cause and effect. Researchers and officials think that their policies are effecting outcomes just because those policies exist. Its a bit harder to control for these things, since we can’t make controlled experiments with large scale, unpredictable systems like the economy or human social behavior (which smoking could qualify as) .

Hanson suggests that this is unique because he predicts that human exploration into and colonization of space will seriously dampen the abilities of theoretically any individual to communicate with any other individual.

I suppose this is true: even if faster than light communications was invented, perhaps it would be centralized so that individuals couldn’t easily use it (like in the Ender’s Game sequels).

I don’t know if I buy this as a great prediction. Hanson is seemingly letting current technology be a guide for predicting future technology, which by all accounts, is a pretty bad way to make predictions about technology.

I’m a little disappointed with this news. Stossel is a good (albeit not a great) libertarian mind and is now moving to a notoriously conservative network. I’m not sure this association is good for the libertarian movement .

Although Stossel has known to be a bit extreme in his rhetoric and rely too heavily on anecdotal and circumstantial evidence in his claims, I still have enjoyed his shows. Like Glen Beck, I fear that Stossel will become extremist in his right of center views and lose credibility.

On the other side of the deal, I worry about Fox and the mainstream right’s continuing to strengthen their identification with libertarian views, without actually adopting the more intelligent conclusions. People like Judge Napolitano and John Stossel have some good ideas, but is the right wing only pretending to adopt them while they are popular (Read: while a Democrat is in the White House). When power changes hands again, it will be business as usual; expanding government even more and throwing the small government libertarians under the bus.

Of course, I’m personally interested in understanding how I can use rational thinking to get ahead, in personal and professional life, but I haven’t seemed to be able to inductively reason how I might go about this. Any ideas?

1. Provide the energy demands to your virtual city in the online flash game Energyville. HT2 Robert Simione.

2. What do disgraced NY governor Eliot Spitzer and GMU economist Tyler Cowen have in common? They’re both in this economics podcast from The Takeaway (on post bailout banks) – though only one of them had their name misspelled in the transcript (you’ll have to discover which one for yourself).

3. Media power – CNN releases a mistaken report about a US Coast Guard drill, presenting the incident as a real shooting. The scary part is that CNN report was based on intercepted radio signals.  Something tells me it shouldn’t be so easy for the media to do this.

4. The most recent world’s oldest person is no longer the world’s oldest person. Why aren’t people able to live past 115 years? The bible says Moses lived until 120.

5. Arnold Kling thinks that we should lower our expectations of expertise, especially in the social sciences. There’s just just too much we don’t know, that so-called experts claim to know.

6. Take a photographic field trip to the Creation Museum with Rationality Now. Interesting pictures and great (skeptical) commentary from Dan. I highly recommend going through the whole series. HT2 Neece at Having Dead Cats blog.

7. The highly anticipated Monopoly City Street was so popular on it’s Sept. 8th release date, that it crashed servers. The game will be reset next week, presumably with more bandwidth.

For better or worse, 9/11 will forever be associated with patriotism and nationalism. I guess we should take a moment and reflect how the world has (and hasn’t) changed in the last 8 years.

I’ve actually been trying to make an effort to distance myself from nationalist sentiments (its just not the libertarian way) but I can’t help in feeling it every September, especially now that I’m in NY. Maybe the response to 9/11 is something to feel patriotic about.

That’s really all I have to say about that.

Instead, “woofie” is given based on mutual respect (whether its for a job well down or a good conversation). Woofie is used as the de facto currency, and will buy you anything you need, but it also seems to be self-reproducing. In other words, I don’t have to give up my own woofie to give some to another.

It’s a neat idea, and it makes sense in a society where one’s social capital is more important than one’s labor skill. It seems to me, however, that this would produce hyper-social societies, where “loners” are doomed to be poor, and only the super-rich can afford to take a social holiday.

This NYT article reports on the findings from a book by William Bowen and Michael McPherson, who found that the graduation statistics from US Public Universities are not good.

Only 33 percent of the freshmen who enter the University of Massachusetts, Boston, graduate within six years. Less than 41 percent graduate from the University of Montana, and 44 percent from the University of New Mexico.

Of course, the obvious conclusion that they draw is that Public schools are failing college-goers. The Obama administration is responding by shifting funds from loan subsidies to direct financial aid, but this may only help enrollment not completion.

They also conclude that students pick colleges that aren’t the best match for them, smart kids going to worse schools because of proximity to home or other reasons. This is particularly a problem for poor students.

For poor students, staying in school for four or more years in order to graduate can really rack up the tuition bills. The mainstream conclusion is probably to direct more financial aid and improve college matching programs in high schools.

I think Cato Institute’s Charles Murray would come up with an alternate conclusion. All financial aid does is drive up demand and costs of colleges. Perhaps cutting financial aid and changing social attitudes about seeking 4 year degrees will lower demand, cause costs to fall which will instigate “substandard” universities – which don’t graduate as many students – to close. If we restrict financial aid only to the very poor, we can make college cheaper for everyone, and save lots of time for people who don’t need 4 year degrees.

Right now, I’m coming through the news and trying to predict what the next trending topics will be.

HT2 Tyler Cowen.

Why? Two main reasons:

1. Robert Wright publicly said that this was foolish, apologized for the poor editorial oversight that led to it, and says they’re going to try never to do this again. This looks sincere to me, and given that it’s sincere, people really ought to be allowed more chance than this to recover from their mistakes.

2. Bloggingheads.TV has given me a forum to debate accomodationist atheists who are insufficiently condemning of religion – for example my diavlog with Adam Frank, author of “The Constant Fire”. Adam Frank argues that, while of course we now know that God doesn’t exist, nonetheless scientific wonder at the universe and its mysteries has a lot in common with the roots of religion. And I said this was wishful thinking, historically ignorant of how religions really arose and propagated themselves, and a continuation of such theistic bad habits as thinking that things of which we are temporarily ignorant are “sacred mysteries”. And no one at BHTV complained that I was being too confrontational, or too anti-religious, or that it was unfair to have the diavlog be between two atheists.

In the rest of the post he reiterates his commitment to the mission of antitheism.

One of the few things “pro-labor” movement actually got right?

I’ve heard Nassim Taleb (author of the Black Swan and others) criticizing the government’s response to financial meltdown. You shouldn’t privatize gains and socialize losses, he says. This ends up creating a high risk-taking environment with the government insuring against all sorts of moral hazards.

I wonder if he would say the same about FEMA and other government natural disaster relief agencies. Natural disasters are classic black swan events, perhaps even more so than market crashes. But, if we extend Taleb’s logic, can we assume that socializing the damaging effects of floods, hurricanes or volcanoes creates a similar effect?

If people knew that FEMA wouldn’t rescue them, would we stop building our homes on coasts? Take out more private insurance against storm damage? And what about the social/ethical dilemma of leaving people to deal with disaster on their own?

If anyone knows if Taleb has commented on this, I would like to hear about it.

To continue the noble tradition:

1. I’m not entirely sure, but I think Robin Hanson is saying he’s a successful blogger and economist because he’s so pretty.

2. There seems to be some debate ( started by Steve Horowitz, continued by Mario Rizzo) about Ludwig von Mises’s position on free banking. Horwitz claims that Mises prefers his own approach rather than the strict market-anarchist of Rothbard. I’m glad. I don’t much like Rothbard’s take in this regard.

3. Bob Murphy apologizes to Paul Krugman and Tyler Cowen (I’m not entirely convinced either of them deserve it).

4. Freakonomics reports that, in Detriot, the average home price is less than a good used car. The low price could encourage immigration to Detroit, but probably not since there doesn’t seem to be much to do once you get there (career-wise).

5. Carl Zimmer quits bloggingheads and hints at a conspiracy that the editor Robert Wright is a secret creationist (or at least sympathetic).

I was wondering how people respond to different incentives. For example, which would turn Oliver into a more prolific blogger: if I paid him, per post, some relevant sum or if I threatened to cut off a digit for every week he went without crossing some threshold for number and quality of blog posts?

Ron Paul’s new book End the Fed has a few celebrity endorsements:

“Rarely has a single book not only challenged, but decisively changed my mind. ”
–Arlo Guthrie

“Everyone must read this book — Congressmen and college students, Democrats and Republicans — all Americans. The Federal Reserve, which serves private banks, has compromised our economy and is undermining our freedom. It can and must be stopped now. Ron Paul shows us how and why we must end the Fed. Read this book!”
–Vince Vaughn

I knew Arlo Guthrie, to the chagrin of his hippy and yuppy fans I’m sure, is a libertarian-minded conservative. I didn’t know about Vaughn, though.

HT2 Taking Hayek Seriously

I’m always excited when life presents us with ready made natural experiments. A couple days ago, I wrote about the dedicated line manager at the cafeteria where I work and how I thought that his salary is probably more costly than the benefits he provides (efficiently moving lines). Well today, just my luck, the line manager was no where to be found. Lunch goers would have to navigate to the cash registers by ourselves.

Did the cafeteria devolve into a den of chaos?

The answer is no! People where just about as good at creating order spontaneously, as when managed by a central planner.  Well this isn’t exactly true. The cashiers themselves called out to whoever was next on line, notifying that they were free, and could accept a new customer.

I did make one interesting observation, which may or may not be significant. The only major difference between the outcomes of the two scenarios is that the line manager would generally arrange for two customers to be waiting at a register at a time. Without the manager, people waited for the cash register to completely clear before walking up to it. At higher volumes of traffic it *may be* that this would slow down the flow, but I didn’t notice a difference in practice.

I think this hesitation could be traced back to a customer’s self interested behavior. We’ve all gone through times at the grocery store where you get behind a short line, only to wait behind a really slow person while people waiting on longer lines pass you by. At the cafeteria, perhaps people wanted to make sure that a short line would also be the quickest, by avoiding slow people.

I would like to see a mathematical model of this, because I can’t reason out whether this would cause an overall increase or decrease in the customer flow rate. On the one hand, cashiers have more work to do and spend longer without customers in front of them. On the other hand, new customers direct themselves behind the fastest payers (whereas, the line manager doesn’t know how fast the paying customer will be, before putting a new customer behind them). I don’t know which effect would dominate.

Maybe I could work out this model for a fall project (graphical model to come soon?)

You can understand why big-pharmaceutical industries would be interested in studying the placebo effect. In order to fabricate good medicines, the effects have to be real… in the sense that the healing effects are not simply due to psychological residues.

Robin Hason, on Overcoming Bias suggests that their are gaming the system; seeing how, when and where they should conduct research on certain drugs to maximize the placebo effect. In other words, placebo effects for different drugs is widely variant based on different cultures, geographies and the like. Since no drug trial is truly randomized (despite appearances), some studies will report different effects when tested in different areas or subgroups. Pharmaceutical companies would like to test their drugs in ways that allows them to maximize their apparent effectiveness against the placebo ‘background.’ Worse, the NIH and (probably) FDA are staying mute on the subject because they don’t want to lose their corporate funding. Talk about the importance of financial signals!

In a related post, Mind Hacks has an excellent post about how the placebo effect isn’t just the effect of “mind over body” healing, but it is also statistical variations in the way different people respond to disease and medicine. If the subjects of a study are not properly randomized into groups (or a poor sample population is chosen in the first place) then the placebo effect will change the “background” signal of disease progression sans drugs, which will change the apparent effectiveness of the drug. (HT2 TGGP in the comments at OB)

Tyler Cowen links to this piece by Daniel Callahan about how the technology innovations are driving up the price of health care. The point Callahan is attempting to make is that we need to focus more on basic care, rather than higher cost, high-tech approaches (coincidentally, what’s needed when conditions worsen). It’s an argument for funding preventative care, so we don’t need to use these tech-heavy, innovative solutions for care… things that drive up costs.

I agree with the basic premise, but could you imagine someone saying, “no lets keep using this old 386/9mhz computer with 50mb hard drive space and 4mb ram that we bought for $3000 in the mid 90s… new computers are just too expensive.”

My point is that technological innovations should be driving down costs, not bringing them up. When this fails to happen, it is a sure sign of a non-competitive market with insufficient pricing signals going on.

Tyler Cowen says:

The Democrats are right about the need to constrain Medicare expenditures, but the more they attack Republican stupidity and lies, the further they are from understanding why Americans now trust them less with health care reform than before.

This point is well taken. Dems are too focused on bringing down costs without trying to understand why costs are high. Without competition, the only way that I know to bring costs down is by introducing shortages and reducing innovation by by introducing disincentivizing signals to the market. They claim to want to introduce competitiveness through a public or non-profit option, but refuse to take down barriers that prevent organic market competition. Does this make sense?

Don Bordeaux’s son sends a letter to WTOP radio station, schooling them after an announcer incorrectly attributed a market innovation for a government one.

My dad and I were listening to your show today at about 12:15pm when co-anchor Mark Lewis said that Velcro is “a product of the space program.”

That’s not true.  Velcro was invented by a Swiss engineer, George de Mestral.  Mr. de Mestral got the idea, during a walk in the woods, from burrs that stuck to his clothes.  He was granted a patent on Velcro in 1955.
Sincerely,
Thomas M. Boudreaux
7th Grade
Westminster School

I guess this error reveals something about our perceived relationship with government versus markets these days. Is it a common assumption that the government is the source of creativity and innovation? It wouldn’t surprise me and I would like to see some statistics on this.

This a continuation of Monday’s post.

In the comments of this post by Scott Sumner he links to an exercise of opportunity costs (note that this is apparently not the question that stumped nearly 80% of economists at an AEA convention, but is apparently similar[?]).

Prof. Jungshik Sonof Hanyang University (Seoul) asks:

Suppose Mr. A, B and C would like to buy one refrigerator costing $1,000. The best alternative forgone for each of them are as follows: Mr. A would have deposited the money at the bank which pays 10% interest per year. Mr. B would have built a parking facility on his own land with the money from which he would expect net income of $10 per month. Mr. C would have treated lavish dinner costing $1,000 for his large families. In this case, what would be the opportunity cost to buy the refrigerator for Mr. A, B and C, respectively?

Fellow False Symmetry blogger Robert Simione wrote:

Mr. A will have an infinite payoff unless the rate of inflation is positive and increasing. Mr. B will have an infinite payoff unless inflation is positive and Mr. C. may get included in a few more wills i guess, but all in all it seems like a question with incomplete information.

I agree with his assessment of the relevant opportunity costs. If its possible to predict the rate of return on A & B’s investments, then we can say their potential profits (and therefore opportunity costs) will be infinite for an undefined (presumably infinite) number of periods. Of course, reality rarely works like this and so there must be some real, finite, opportunity cost, which happens to be incalculable because we cannot predict future conditions. Mr. C’s costs present an interesting problem, because his potential gain is even more incalculable than A and B.  It cannot be defined by any direct monetary amount – even if he does increase his financial capital via improving his ‘human capital‘ – and it’s harder to predict human intention than market processes (I think).

So I agree that this is a question without enough information. But the question I pose takes this one step further: Is there any real situation (or even a realistic theoretical scenario) where it is possible to accurately calculate real opportunity costs?

Read the post, and then my comment:

I understand the fascination with the Joker about as much as I understand the fascination with Obama.

And a quick point about your last paragraph: The “Capitalist ideologues” he’s talking about are having a hard time distinguishing (for good reason) between the government and the “opportunistic corporate mafioso.” I think – intending only … Read moreconstructive criticism – this strengthens the free market argument to decentralize economic corrective forces.

Additionally, perhaps Obama refuses to state that it was “Republican (pro-(extreme-)capitalist) policies that brought us to the brink of disaster” because, since we haven’t really had “pure capitalist” in the country (since its inception) its hard to isolate free market forces as the sole source of the economic problems. This theory diminishes the importance of gov’t incentives in markets (which are all too real) and boils down to a pure partisan position – doesn’t the left accuse pro-capitalists of committing the same fallacy?

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