Quote of the Day - Colbert

“If this is going to be a Christian nation that doesn't help the poor, either we have to pretend that Jesus was just as selfish as we are, or we've got to acknowledge that He commanded us to love the poor and serve the needy without condition and then admit that we just don't want to do it.” -Stephen Colbert

Why are we still debating democracy? Or, How I learned to Stop Worrying and Love Dictatorship

Alex Tabarrok:

We usually think of democracy as a way of aggregating diverse preferences but we can also imagine that we share similar preferences and that what we disagree about is the best way to achieve those preferences. From this perspective, democracy can be thought of as a tool for information aggregation. Using simple probability theory, Condorcet showed in 1785 that even when each individual voter has only a slightly better than chance probability of choosing the bettier [sic] of two options the probability that majority rule chooses the better outcome quickly goes to 1 as the number of voters increases (the wisdom of the crowds). 

A number of writers at Crooked Timber have been discussing Knight and Johnson’s The Priority of Democracy, one strand of which involves such an cognitive defense of democracy. Cosma Shalizi, for example, writes: 

Democratic debate is a tool for cognition, for harnessing the dispersed knowledge of the citizens and their diversity of perspectives and insights. 

But does an cognitive defense of democracy lead to universal suffrage? Or does it suggest what Melissa Schwartzberg calls “epistocracy”, rule by the educated? (See also Henry Farrell’s comments). The wisdom of the crowds breaks down when the crowd’s errors are systematically biased rather than random. As Peter Boettke notes, Bryan Caplan makes a strong case in The Myth of the Rational Voter that better educated voters are less systematically biased than the average voter and more likely to agree with experts on questions of fact. 

When voters are not equally competent some remarkable mathematical results show that the best cognitive democracy is not universal suffrage and one-person, one-vote but a specific form of weighted voting. 

Begin with a simple example. Suppose there is one correct decision and there are three voters each trying to reach the correct decision with competence levels of {.55, .55, .55}, where the competence levels are just the probabilities that each voter chooses the correct decision. The best a dictator could do in choosing the correct decision is .55 but if use majority rule the probability of reaching the correct decision is 0.57475, higher than that of any individual voter. (We reach the correct decision if all three voters reach the correct decision which has prob .55^3 or if two voters reach the correct decision and one does not, as this can happen in three ways the probability of the latter is 3*.55*.55*(1-.55) for a grand total of .57475.) Moreover, if we were to increase the number of voters to 100, the probability of majority rule reaching the correct decision goes to 84%–far above that of any dictator, this is the essence of Condorcet’s theorem. 

Now let’s assume that the voters have competences of {.55,.60,.70}. Majority rule, using the same reasoning as before, gets us a democratic competence level of .673, not bad but notice that this is less than the competence level of the highest competence individual. The ideal voting system in this case would weight voter three enough so that she determines the outcome, thus giving democracy a competence level of .7. 

More generally, if the voter competences levels are {p1,p2,p3} then the cognitively most efficient voting scheme gives each voter a weight of Log[pi/(1-pi)]–the result is remarkable for a being such a simple formula of the voter’s own competence level (note that the individual’s weighting is not a function of the competency levels of the other voters.) The result was shown first in this context by Nitzan and Paroush, Nobel-prize winner Lloyd Shapely and Bernard Grofman also made important contributions and see Grofman, Owen, Feld for some related results.) 

Democracies make many decisions which are information based (Does Iraq have weapons of mass destruction? Will an invasion make the US safer? Do phthalates cause significant health risks?). Note also that we might also use this method for many committee decisions. Which scientific approach is deserving of greater funding? Which marketing plan should we adopt? Is surgery the best option? and in these decisions weighting votes by a measure of competence, which can be estimated from past decisions, may lead to significant improvements in outcomes. 

Voters have diverse preferences not just competences but we could combine cognitive and preference aggregation theories of democracy by using high competence voters from different demographics categories to estimate what people would think about issues if only they were better informed. In this way we can distinguish differences due to knowledge from those due to preferences and we could upweight the competent while maintaining demographic balance thus creating a cognitive democracy based on enlightened preferences. [emphasis added throughout]

This is reminiscent of Ron Paul's criticism of black voters, that they must not be intelligent because they vote for 'liberty' so rarely. Perhaps Mr Tabarrok measures 'competence' similarly. (On a technical note, I do find the math interesting, elegant, and irrelevant.)

The obvious question raised by the heterogeneous-competence example (which seeks to weigh votes by 'competence') is, "If we can determine 'competence,' why not find the person with the highest competence and elect him dictator?" Then we will always have the 'correct' outcome, or at least we will never have to worry about the incompetents dragging down the likelihood of a 'correct' outcome.

If you reformulate the model, and assume that 'correct' and 'incorrect' decisions are simply preference A and preference B (no value judgement), then the voter that was closest to 'correct' in Mr Tabarrok's model (who ought to be voted king, as we've already learned) is simply the person who wants preference A the most, and since he is running things now, that is what we shall get. Funny how nicely that works out, isn't it? Mr Tabarrok's intellectual forebears certainly thought so.

Why, oh why, does the liberty cult hate democracy so?

"Questions that are rarely asked"

"VTProf," via Tyler Cowen:

Another consistency question: can you simultaneously believe that minimum wages have small disemployment effects (implying inelastic demand for labor) and that higher immigration has small negative wage effects (implying elastic demand for labor). Sign me up for relatively elastic demand for labor (in the long run) – that’s why I support immigration and am skeptical about min wage!

This assumes that the demand for immigrant labor and the demand for minimum wage labor are one and the same, which is not necessarily the case.

Some questions are rarely asked because they aren't good questions. Others, because they aren't relevant to the discussion. Still others, well...

Stand Back

Inspired, or course, by this.

Gavin Wright and the Racial Wage Gap

Gavin Wright:

By the 1930s, labor markets in the South had come to display a distinct “racial wage gap,” supported by systems of vertical workplace segregation.  Not only were job categories classified by race, but black wage rates typically peaked about where white pay grades began.  These structures persisted through World War II and the 1950s, showing few signs of softening even in the presence of rapid urbanization and industrial employment growth. [emphasis added]

This gets exactly to the laissez-faire notion that discrimination is unsustainable in business, from either a customer- or an employee-relations perspective. The reasoning is usually expressed in this manner:

"If a firm discriminates, they will fail to maximize business and/or fail to hire the best workers, which will lead to their downfall. Therefore, anti-discrimination laws are unnecessary."

Of course, the missing word is "eventually." Over a long enough time span, the above reasoning is probably true, but history has shown that such social institutions can endure for generations.

On a macro level, such institutions retard the growth of the efficiency of labor, which, in the long-run, is the sole determinant of overall economic growth. Indeed, Wright argues in the book that the Civil Rights Movement benefited white and black alike.


from here.

more.

yet more.

via.

Demand Side Economics

Conscience Warrior has a new reader in the person of Alan Harvey, chief cook and bottlewasher over at Demand Side Economics. He very generously mentioned us in the most recent episode of his podcast. While I don't subscribe to every last detail of his views, I think we are in broad agreement on the way in which the world works, and as to what the best solutions are to the problems we face.

He published Demand Side: The Book last year, which compiles the ideas of some of the great minds of economics past and present into a sort of field guide to modern markets and the macroeconomy.

Mr Harvey also maintains the excellent forecasting site re: Macro Baseline.

Things Ain't Always As They Seem...

Politician and professor Michael Munger wants to “build a bridge between philosophers and economists.” To do so, he's coined a term, "euvoluntary exhange," which means a "truly voluntary" exchange, as opposed to an exchange which is voluntary only in the sense that no individual is coercing any other. Professor Munger's formulation allows that coercion can be circumstantial rather than personal, in that one party to a transaction is so disadvantaged by circumstance that his choice is not truly (eu-) voluntary.

This might be a useful distinction, and perhaps the impetus for an interesting discussion, if bridge-building were truly Professor Munger's goal.


Mike Munger, 4 February 2013:

This is a trick to draw my friends on the left into a discussion of voluntary choice. Euvoluntary choice is a warm and fuzzy idea that we can all agree on, but what I'm really arguing is that nearly all choices are welfare-enhancing regardless of whether they are euvoluntary or not.

Michael Munger's papers on euvoluntary exchange.

Title Inflation, German Edition

Nicholas Kulish and Chris Cottrell:

The university revoked the doctorate of the minister, professor Annette Schavan, on Tuesday, and on Saturday she was forced to resign her Cabinet post. It was the second time a minister had quit the government of Chancellor Angela Merkel for plagiarism in less than two years.
...
But many people attribute the underlying deceptions to an abiding lust and respect for academic accolades, including the use of Prof. before Dr. and occasionally Dr. Dr. for those with two doctoral degrees, which Rieble called “title arousal.” [emphasis added]

More here.


I'm not entirely sure what I can add here, except that, somewhere, Sir Bernard Woolley is smiling.

Republicans' Latest Existential Crisis

No One Makes You Shop at Wal-Mart

Tom Slee: No One Makes You Shop at Wal-Mart: The Surprising Deceptions of Individual Choice: Chapter 1 — A World Of Choice:


We live in a world of choice.

We make choices every day. We choose the clothes we wear, the way we travel, the movies we watch, and the places we shop. From time to time we make bigger choices as well: the neighbourhoods we live in, the jobs or universities or schools we go to, and even the cultures we identify with. These choices give us a measure of control over our lives, and it seems natural to believe that individual choice is, almost by definition, a good thing.

A 'Jobs Council' is not an Economic Council

Eve Troeh:

The president's Council on Jobs and Competitiveness is set to end tomorrow. It came together two years ago, to generate ideas and policies for accelerated job creation. I asked economist Gary Burtless at the Brookings Institution what he thought about the president's jobs council calling it quits.

"Well, as probably more than one economist would remark to you, I didn't even remember we had one," he says.

Most of the American public would answer the same, though the 26 members of the council did include some big names, mostly CEOs from companies like GE, Intel and DuPont. Burtless says the general idea was to have leaders in the business community offer advice to the president on how jobs could be created more quickly with government help.

But he says those leaders had a hard time seeing past their own interests. Their insights and suggestions mostly applied to their own companies.

The lesson here is that business leaders have no special insight into the macroeconomy. This is not, of course, news, but it bears repeating because the fallacy that the economy is solely composed of businesses, and therefore business leaders are the great sages of the economy as a whole, is ruthless and persistent.

Obviously, most business leaders are smart people, so it makes some sense that they are included in discussions of the macroeconomy. Their precise expertise is microeconomic in nature, however. That is, they can tell us something about the decision-making of individuals and firms. But, while a nuclear biologist could tell you something about the composition of muscle cells, you wouldn't ask her to perform your heart surgery.


link

Repost: MLK Day Every Day

Today I am reposting an essay I wrote last year on the occasion of Martin Luther King Day. I don't have much to add, except some edits for clarity.

MLK Day Every Day

Today, our nation honors its single greatest citizen, Dr Martin Luther King, Jr. Dr King seized upon the ideals of the founders and sought to bring intellectual honesty to the precept, "Justice for all." Like so many people of beneficent conscience, he sought to remake the world in the image of what it could be. Unlike so many before or since, he succeeded, at least in moving our society toward that goal, chiefly through the relentless courage of his convictions.

In the immediate aftermath of the Second World War, black Americans who'd served overseas began to agitate for the sort of equality to which they'd been exposed in Europe. They came to realize that, if they were to fight and die for the American cause, perhaps that cause ought to include their interests. From this burgeoning movement emerged Martin Luther King. A young minister with a degree in divinity, he was radicalized by the rampant culture of abuse inflicted upon American blacks, particularly in the south. His expansive philosophical interest led him to, among others, Henry Thoreau, whose views on the tyranny of the majority were the intellectual foundation of Dr King's interpretation of the problem faced by black Americans, and Mohandas Gandhi, whose philosophy of non-violence was the inspiration for Dr King's solution.

The importance of the cultural shift under way in the 1950s to the effectiveness of Dr King's message cannot be overstated. In the years after the Second World War, Americans collectively enjoyed a growth in prosperity previously unseen. As more and more white Americans escaped poverty and enjoyed President Roosevelt's "freedom from want," it became increasingly clear to non-whites that they were not to be included. The expansion of radio and the advent of television hammered home the point that economic security and middle class luxury in 1950s America were monochromatic. Radio and television also provided the viscerally powerful orator an audience wider than that enjoyed by earlier prophets.

In 1965, Dr King's focus on social improvement expanded to include the economically disadvantaged, regardless of race. The escalation of the war in Vietnam struck at the heart of Dr King's fervent belief in non-violence. He also came to see conscription, as practiced in 1960s America, as an unfair burden upon the less fortunate, and blacks in particular. His inclusion of poor whites in the pantheon of the dispossessed whose lot he sought to improve posed a particular threat to the political and economic establishment because then, as is still so sadly the case now, this establishment relies upon poor whites as their agents of oppression, forming a bulwark against the political and economic gains of poor minorities.

That Dr King was killed before his job was done is not to be mourned. It is not appropriate, either, to draw primary inspiration from his tragedy. It is a disservice to his legacy to focus our attention too greatly on any aspect of his story beyond his message. Dr King was no utopian; he lived in, and was of, our time. He did not advocate equality of result, merely equality of opportunity. Much of the last forty years has seen the rise of philosophies committed to the maintenance of the status quo, such as free-market fundamentalism. While this would surely sadden Dr King, it is important to take a long view, as Dr King acknowledged when he observed that “The arc of the moral universe is long, but it bends toward justice." To recognize that our society has come so far in furtherance of the betterment Dr King envisioned is not to blindly settle for what progress has been made, but rather to understand how much more is possible.

The holiday in honor of Dr Martin Luther King, Jr comes once a year, in January. Every day that we consider the plight of the poor and of the disadvantaged and work toward improving our shared prosperity, however, is Martin Luther King Day.

"True compassion is more than flinging a coin to a beggar; it comes to see that an edifice which produces beggars needs restructuring."