Sunday, May 1, 2016

Bookish Correlations

I have developed my capacity for self-control by rigorously limiting myself to the number of books I can physically carry out of the store.

Click to enlarge.

Saturday, April 30, 2016

And very few words need be employed in dissuading them from it.

From Book IV, Chapter II, paragraph IX of The Wealth of Nations by Adam Smith. It is interesting how the same words can yield new or additional insight over time.

Smith is famous for the term invisible hand of the marketplace. The concept that in a complex system, individual actions towards one goal can unintentionally yield system wide benefits not otherwise planned for. Here is that famous passage clearly and vividly rendering a complex concept.
But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value, every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.
As an International Economics major, I am well familiar with the passage, having revisited it a number of times over the years. Familiar as it is, some minor nudge in perspective can yield additional insight.

In this instance, for whatever reason, my cognitive focus shifted to the end of the passage rather than the beginning.
By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.
And really, it is the sentence in the middle.

"I have never known much good done by those who affected to trade for the public good." Looking around the OECD and the US, we are nearly buried with illustrative examples of this quarter millennia old drop of wisdom. Here in the US we have the subprime mortgage market debacle engineered by bureaucrats seeking to increase the public good by forcing banks to make riskier loans. We have the cash for clunkers boondoggle which now make used cars so much more expensive for the poorer income quintile population. We have the billions of dollars that have disappeared down the rathole of solar panel manufacturing subsidies and for corn ethanol conversions which manage to make both energy and food more expensive. We have the trillion dollar student loan bubble about to burst all over us and which, under the noblest of guises, has immiserated so many futures. We have the billions of pounds of weight people have gained following government food guidelines.

Smith's observation is well supported today. And of course he has to add that dour Calvinist knife twist, "It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it."

Something so stupid you don't have to dissuade a sentient being from doing it, but rendered more artfully. It echoes of Orwell's comment about an idea so stupid only an academic would believe it to be true.

Friday, April 29, 2016

Contact crony capitalism

Rent seeking and regulatory capture are common forms of commercial and political sclerosis, cronyism and corruption. de Rigby describes one such example which, as a contact wearer, has long stuck in my craw.

From Congress and Crony Capitalists Want to Take Over the Contact Lens Market: Special interests collude with government to hurt consumers. by Veronique de Rugy.

This corruption is a debasement of the democratic process and undermines citizen trust in government. Government has important functions to fulfill but what happens when, through this kind of corruption, it is no longer trusted to do so. Left and Right ought to both be able to agree on this but instead both collude to fleece the private citizen.
The intensity with which some American companies try to use the government to trick or deceive consumers is astonishing. Yet the extent to which lawmakers seem content to cater to these crony pursuits never disappoints, either. Case in point: the current attempt to protect contact lens sellers from competition at the expense of consumers.

An estimated 40 million Americans wear contact lenses. That's a $4 billion industry. Thanks to the heavy-handed government regulation of all things health care, contacts already cost more than they should. However, if an ongoing effort to reduce competition through government cronyism were to succeed, costs might soon rise even more.

What makes the contact lens market unique—and also leaves it extra vulnerable to crony intervention—is the fact that customers are required by federal law to obtain a prescription from a licensed optometrist in order to purchase lenses. It is a rare instance where prescribers are also sellers, which leads to a cozy relationship between manufacturers and the doctors who can steer patients toward their brand.

Prescriptions are brand-specific. This makes it difficult for consumers to shop around. Choosing a different brand would require paying for another exam in order to obtain a new prescription.

The simplest solution would be to do away with the gatekeepers altogether and allow the purchase of contact lenses without a prescription. It works just fine that way in Europe and Japan, but manufacturers and doctors nevertheless protect their legal mandate through lobbying by citing health concerns, even as the same manufacturers happily sell to overseas markets without the same requirements.
It is even worse than de Rigby indicates. She's discussing federal law. Many states require that a consumer have a new eye examine at least every two years before they can reorder their contacts. This is simply a make-work program by legislators for donation-rich opticians. Sure, the individual should periodically get their eye's checked, particularly, after a certain age, for glaucoma and the like. But enforcing that recommendation by holding hostage prescription refills is simply government coercively transferring money from consumers to opticians via the inducement of political donations. Disgusting.

My prescription for contacts has not changed in some fifteen or twenty years. But every two years, I have to make three or four hours available to go and get my eyes checked anyway, simply in order to get my prescription refilled.

If the government is so clearly on the side of the deep pockets and against the citizenry, why would we trust them to make good decisions on really important issues. Contact lenses are just a reminder that we shouldn't.

Thursday, April 28, 2016

Rather, income redistribution is a tax against other people becoming wealthy.

I have seen this argument put differently before, but never quite so pithily. Why do wealthy celebrities support high tax proposing progressive politicians? It is a strategy for securing one's status as part of the wealthy elite by decimating the rising competition.
Last week, my wife told me that Michael Stipe, the lead singer for one of the favorite bands of my youth, had opened a rally for Senator Bernie Sanders. I knew the guy was an insufferable lefty, but it still got me thinking about why rich celebrities love to support socialists, seemingly against their own interest.

And then I realized — like a snail coming late to a conclusion that everyone else has long since reached — that it actually is in their best interests to support these policies because “income redistribution” — as opposed to “property redistribution” — doesn’t impact the already-wealthy all that much. Rather, income redistribution is a tax against other people becoming wealthy.

Sanders is not proposing that the rich pay their fair share: he’s proposing that people becoming rich cough-up the money they’re busy earning. Those like Stipe have already made their fortunes. Sure, Sanders’s high taxes will have some impact on his further income, but Sanders isn’t proposing to confiscate Stipe’s existing wealth; it’s the next musician — the one who isn’t already filthy rich — who will be paying 80% of his income, thus preventing him from ever reaching the lofty status of those like Michael Stipe.

Wednesday, April 27, 2016

Mistaking choices for bias

A rather interesting example of a common phenomenon. Reporters are often susceptible to the ideological orientations of the left leaning academy and prone to believing some things that are simply not true. The fact that few are quantitatively oriented or have formal grounding in statistics and logic makes the situation even worse. The right sees this as evidence that journalists are a fifth column intentionally advocating for left positions. I think it is much more subtle than that. I don't dispute the empirical fact that most journalists skew Democrat and progressive based on their political donations.

I think the mechanism by which this is revealed is not conscious bias. Instead, I think the bias shows up in two forms. The first is in the matter of what gets reported and what does not. They can't report everything and they tend to report on things that appear important to them (and their editors). What remains unreported are often just as important but not pertinent to their particular political leanings. Corruption, hard and soft, is rife in many major metropolises. For the right, that is one among many indications that big government cannot be trusted and those stories are dramatically underreported. For those of a left persuasion, I think the mental framing is that humans are inherently weak and subject to temptation. It is a dog bites man story and therefore not interesting and indeed is underreported.

The second way that the bias manifests is in the journalist's priors, those assumptions they make in advance. The story is reported in the context of those priors which may be either simply wrong or they may distort the factual data.

The instigating article is from Tax Policy Is Widening the Gender Gap by Victoria Bateman. The argument being made is there in the headline. Another gender grievance. But is it true that tax policy is widening the gender gap?
With British politicians, led by Prime Minister David Cameron, making public their tax affairs, the OECD’s new Taxing Wages report could not have come at a better time. For those tired of Piketty-style class warfare, the report comes as a welcome departure. Move over, class warriors: It’s single people and women who really lose out from our tax and benefit systems.

Economists often look at the tax wedge -- the difference between the total labor costs to an employer and the net take-home pay of the corresponding employee. Income taxes are just one of a number of factors that can drive a wedge between the two figures, reducing incentives to employment. The tax wedge calculated by the OECD captures much more: the sum of income tax, social security contributions (paid by the employer and the employee) and payroll taxes, netted for any cash transfers (or “benefits”), all expressed as a proportion of the labor cost. The higher the tax wedge, the greater is the overall tax on labor.
The article is full of interesting empirical information which is reported but not generally elaborated on. The elaboration comes later in the article.
As the OECD notes, where governments choose to tax family income instead of individual income, “the second earner is effectively taxed at higher marginal tax rates than a single individual would be,” disincentivizing paid employment. Where countries provide tax allowances and tax credits to families (both of which are regularly justified on the grounds of equity), they come with a similar adverse effect, as has been the case in Italy.

Quantitatively speaking, the difference in tax between primary and secondary earners is certainly significant. For a family with two children in which the primary earner is receiving the average wage, the tax wedge on the secondary earner (who is assumed to earn two-thirds of the average wage) was 37.8 percent across the OECD in 2014. This compares with 26.7 percent for the primary earner, a difference of over 10 percentage points.

Where the majority of secondary earners are women, this means that women are being taxed more than men, which raises issues of fairness and potentially affects women’s labor force participation. According to a report published last year by the European Commission, fiscal disincentives facing female secondary earners are a particular problem in Belgium, Germany, Slovenia, Portugal and Luxembourg. Three of that list -- Belgium, Germany and Luxembourg -- have a high proportion of women in part-time as opposed to full-time roles. Joint tax filing (or joint elements) in these countries also means that the tax effectively paid by the second earner is dependent on -- rather than independent of -- the income of the primary earner.

It seems that the tax and benefit system is implicitly working against the achievement of gender equality in the workforce. Rather than blame the private sector for exacerbating inequality, it might be time for the state to look more carefully at how its own labor market interventions are impacting the gender gap.
Because, presumably, of her prior assumptions, Bateman fails to make a distinction. It is possible for two apparently contradictory statements to both be true. Based on her own reported information, it is obvious that "The tax policy is gender neutral" is true as well as that "Women are, on average, more heavily taxed than men." The reason is not that companies are discriminatory or that government is malevolent. The reason that both statements can be true rests with patterns of individual choices.

"The tax policy is gender neutral" is true because the government is not taxing by gender but by type of taxpayer condition. In other words, it is not distinguishing between male and female tax payers but between primary and secondary earners, regardless of sex. It is observable for a variety of economic and policy reasons, that the secondary earner is usually taxed at a higher rate.

It is also true that "Women are more heavily taxed than men." This is because, again for a variety of usually social and familial reasons, people make sets of decisions about the nature of the work they are willing to do and that women more often end up, within their family circumstances, as the secondary earners and therefore more heavily taxed because they are secondary earners (not because they are women.) In families where the male is the secondary earner, he will be taxed at exactly the same rate, given the same circumstances, as the female secondary earner.

The more accurate argument, compared to that made by Bateman, is that "On average, women's choice of work patterns, more often lead them to being taxed at a higher rate than men who make different patterns of choices." The more succinct headline might, "Secondary earners are taxed at a higher rate than primary earners."

It would appear that Bateman subscribes to a prior assumption that women are unfairly treated in the marketplace and therefore she reads the gender neutral tax policy as one more burden that working women bear. In fact, the burden falls equally on men and women and only differs because men and women, as individuals and as family units, make career and work decisions that yield the outcome where women are more often the secondary earner.

Because of her priors, Bateman draws the wrong conclusion from the data.

Because she draws the wrong conclusion, conservative readers conclude that this is one more instance of victim advocacy.

I don't think this is deliberate ideological advocacy. It is simply careless reporting, a result of priors and lack of numeracy.

Which is a pity, because there is a lot of useful and interesting information in the article.

Tuesday, April 26, 2016

By the 1530s, the writings of Erasmus accounted for 10 to 20 percent of all book sales in Europe.

Needed to brush up on my Erasmus and so resorted to Wikipedia. Some interesting information:
Erasmus wrote both on ecclesiastic subjects and those of general human interest. By the 1530s, the writings of Erasmus accounted for 10 to 20 percent of all book sales in Europe. He is credited with coining the adage, "In the land of the blind, the one-eyed man is king." With the collaboration of Publio Fausto Andrelini, he formed a Paremiography (collection) of Latin proverbs and adages, commonly titled Adagia. Erasmus is also generally credited with originating the phrase "Pandora's box", arising through an error in his translation of Hesiod's Pandora in which he confused pithos (storage jar) with pyxis (box).
Wow - 10-20% of all book sales. I know the absolute sales were still low in such early days of the printed book, but still. That is an incredibly dominant literary/intellectual/theological position for one person to hold, particularly given that the Bible probably accounted for 50% or more of all book sales at that time.

Man has not the faintest idea of who he is or what he is doing

Yeah, that's kind of a pervasive problem. From Lost in the Cosmos: The Last Self-Help Book by Walker Percy.
You live in a deranged age—more deranged than usual, because despite great scientific and technological advances, man has not the faintest idea of who he is or what he is doing.

Monday, April 25, 2016

Playfulness and Piety

From Anti-Intellectualism in American Life by Richard Hofstadter.
The professional man lives off ideas, not for them. … He has acquired a stock of mental skills that are for sale. The skills are highly developed, but we do not think of him as being an intellectual if certain qualities are missing from his work—disinterested intelligence, generalizing power, free speculation, fresh observation, creative novelty, radical criticism. At home he may happen to be an intellectual, but at his job he is a hired mental technician who uses his mind for the pursuit of externally determined ends. It is this element—the fact that ends are set from some interest or vantage point outside the intellectual process itself—which characterizes both the zealot, who lives obsessively for a single idea, and the mental technician, whose mind is used not for free speculation but for a salable end. The goal here is external and not self-determined, whereas the intellectual life has a certain spontaneous character and inner determination. It has also a peculiar poise of its own, which I believe is established by a balance between two basic qualities in the intellectual’s attitude toward ideas—qualities that may be designated as playfulness and piety.

Sunday, April 24, 2016

Income mobility from circumstantial change versus from inherent change

A thought prompted by some material in Thomas Sowell's recent book Wealth, Poverty and Politics. He writes so prolifically that you always have to be careful to claim a book as being his most recent. If it's more than a few months old, it seems, there may be another more recently published.

Sowell is discussing the advocacy interest and concern about declines in income mobility in the US (and in the OECD more broadly). Income Mobility being measured in many different fashions but broadly trying to capture the capacity of children to move up or down the income quintiles compared to their parents. A society with very low income mobility would have most kids remaining in the income quintile of their parents, be that high or low. In a society with high income mobility, a child would have only a twenty percent chance of remaining in the income quintile into which they were born, all the rest moving up or down essentially randomly.

This is part of the advocacy/ideology aspect that is often hidden in the debate of income mobility. It assumes that outcomes are essentially a matter of chance and that therefore any child has an equal probability of being in any one of the five income quintiles.

Of course we know that that is not true but no one is willing to identify what the precise "natural" level of income mobility might be. We know that children of college educated, two income working parent households are highly likely to remain or rise in their income quintile compared to their parents on a probabilistic basis. In other words, at the level of the individual, there are no guarantees but at the level of the population, there are probabilistic/predictable trends.

The postmodern/critical theory ideologist try and ascribe this to better nutrition, better schooling, more test prepping, etc. They want the outcome to be the results of material advantage. Regrettably for their position, the actual evidence doesn't support that. Upper income children are less likely to use test prep services. High SES children in thinly populated areas where everyone uses the same public school, have similar life outcomes to those of their SES peers in rich urban areas where the highest quintile do attend expensive private schools.

Mobility is fraught with these issues of irreconcilability between empirical evidence and what the ideological wish to be the case.

What no one is contesting (or at least very few) is that income mobility has declined in all developed nations. After World War II there was an increase in income mobility till around circa 1980-2000 with declines since then. Perhaps this is a data quality and measurement bias issue. Could be, but I suspect not. I am guessing that the directional trend is real though the absolute numbers might be off.


I wonder if a different perspective might be that of societal sorting?

Prior to World War II nearly half the population lived in the country and a large majority were in country/small town. In other words, materially isolated from the ebbs and flows of civilizational life in the big cities.

Post World War II, 15 million servicemen saw the world, were extracted from their cloistered environments and tasked with developing skills based on their IQ (via the Army equivalent testing). They gained experiences, knowledge and skills. Some returned to the country and small towns but after the war there was a major increase in urbanization approaching the 80% of today. People now living in much more intense, complex and competitive urban environments which demand the most of their cognitive capabilities.

On top of that, pre-WWII we sent 5% to college and now we send 30% to college. To get into the best of those universities, you have to take IQ tests (SAT and ACT) which force a harsh ranking of potential.

On top of that, post-WWII we had first increased national sorting and then global sorting based on increased connectedness. The national highway system followed by containerization of shipping supplemented by digital telecom, the internet, smartphones, etc. In a highly integrated, competitive world, there is further sorting based on capability.

Military IQ sorting, followed by university IQ sorting followed by urban capability sorting, all in the space of thirty years.

I wonder if we didn't have a high degree of pre-WWII isolation (rural, bad roads, little communication, marginal sorting) followed by a high degree of post-WWII sorting (urbanization, global connectedness, IQ sorting in all facets of life, etc.) for thirty years. By circa 1980-2000, perhaps we had done most of the transitioning? People who, through isolation, might have been locked into isolation in lower quintiles, had burst those bonds and advanced into the upper quintiles warranted by their IQ/Behaviors/Capabilities. In that period we would have seen high income mobility as people moved between quintiles in a relentlessly growing national economy.

But after nearly two generations of sorting, perhaps people are roughly in the "right" quintiles reflective of their core capabilities. Sure there will be individuals moving up and down based on variance of circumstance, but perhaps the big shifts are passed. Given that IQ and critical pro-social, life enhancing behaviors are substantially heritable, if people have settled into their "proper" quintiles based on their capabilities, we would expect that future income mobility will indeed be lower than it has been in the past.

This raises the specter of unintended castes. We have in the past counted on income mobility to take the strain off of contextual societal stresses. In other words, if most people believed that there was the prospect of bettering their own lives or that of their children, there was likely some good flex in the system. If, after sixty years, people are reasonably settled in their prospective quintiles, it seems to me that the system becomes much more fragile. If that safety valve is done, then what?

If what I am speculating is true, then the only real solution is to find ways that enable people to change their own interior life circumstances more effectively than in the past. In the past, people could move from low opportunity environments (such as remote country) to high opportunity environments and improve their prospects, regardless of their native capabilities. Likewise with communication technology, logistical infrastructure, etc. If we have gotten most the benefit out of those aspects, then all that remains is changing/improving native capabilities.

A much harder task but one that probably has some potential, but only once we focus on it with clarity.

56% of our air war in Afghanistan is by drone

Always interested in tipping points. The headline of this article is anodyne, Afghan drone war - data show unmanned flights dominate air campaign by Josh Smith but the more explicit intro paragraph is interesting.

The article is cluttered with factoids and data that hasn't been synthesized to match the narrative. You have to work a bit to make sense of it. What it comes down to is this:
Drones fired more weapons than conventional warplanes for the first time in Afghanistan last year and the ratio is rising, previously unreported U.S. Air Force data show, underlining how reliant the military has become on unmanned aircraft.


Data reviewed by Reuters show strikes by unmanned aircraft accounted for 56 percent of weapons deployed by the Air Force in Afghanistan in 2015, up dramatically from 5 percent in 2011.
AI, drones, autonomous weapons. Moore's law, digitization and all our other technological capacities are fast changing both the nature and the capacity of our military systems in ways that are yet unfamiliar. Not necessarily bad, just unfamiliar.