Book Review: Freakonomics : A Rogue Economist Explores the Hidden Side of Everything by Steven D. Levitt
This book does a pretty good job of tackling subjects that are worth thinking about but which few would think to tackle. Their answers are interesting but not always as rigorous as I hoped.
The implication that this is an economics book is a bit misleading. While it is occasionally guided by the principle that incentives matter, it is at least as much about Kelvinism (the belief that we ought to quantify knowledge whenever possible), but then some of the book consists of stories which have little to do with either.
My favorite parts of the book explore the extent to which experts’ incentives cause them to pursue goals that don’t coincide with their clients’ interests. But his arguments about realtors exaggerate the extent of their conflict of interest – it is likely that part of the reason they are quick to sell a client’s house more cheaply than they would sell their own is that the realtor is less likely to need to sell by a deadline.
I am left puzzled by the claim that crack gang leaders want to avoid gang wars, but gang members are rewarded for starting violence with promotions. Who’s controlling the rewards if it isn’t the leader? Why can’t he ensure that members who engage in nondefensive violence aren’t promoted?
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Two years ago a DARPA project was canceled after some demagogues attacked a straw man which bore a superficial resemblance to the actual project. Now Robin Hanson (who had some involvement with the project) has written a defense of the straw man, i.e. an argument that futures markets might be of some value a predicting specific features of terrorist attacks (although not nearly as valuable as more natural uses of futures markets such as predicting the effects of changes in Homeland Security budgets on the harm done by terrorism).
He has a somewhat plausible argument that there is useful information out there that might be elicited by markets, particularly concerning the terrorist choice of method and targets. An important part of his argument is that in order to be useful, the markets might only need to distinguish one-in-a-thousand risks from one-in-a-million risks. One weakness in this argument is that it makes mildly optimistic assumptions about how reasonably people will respond to the information. There is clear evidence much spending that is advertised as defense against terrorism is spent on pork instead. Markets that provide a few bits of information about which targets need defending will raise the cost of that pork-barrel spending, but I can’t tell whether the effect will be enough to meet whatever threshold is needed to have some effect.
The section on moral hazard seems to contain a rather strange assumption about the default level of trader anonymity. The “reduced” level he talks about seems to be about as much as the U.S. government would allow. It isn’t clear to me whether any anonymity helps make the prices more informative (does anyone know of empirical tests of this?). The optimal level of anonymity might vary from issue to issue according to what kind of trader has the best information.
The proposal to hide some prices is more difficult than it sounds (not to mention that it’s far from clear that the problems it would solve are real). Not only would the exchange need to delay notifying traders of the relevant trades, but it would need to delay notifying them of how the trades affected the traders’ cash/credit available for trading other futures. Which would often deter traders from trying to trade when prices are hidden (it’s also unclear whether the trades that would be deterred would add useful information). In addition, I expect many of the futures that would be traded would be about targets and/or methods covering some broad range of time; it’s unclear how to apply a condition about “attacks to occur within the next week” to those.
The proposals to deal with decision selection bias sound politically difficult to implement (unless maybe Futarchy has been substantially implemented). But there isn’t much risk to experimenting with them, and elected officials probably don’t have the attention span to understand the problem, so there probably isn’t much reason to worry about this.
Liberty Magazine has an interesting article on Dubai called Freedom Blossoms in the Arabian Desert about the remarkable prosperity and freedom in that city.
A quick internet search shows reports such as this Report on International Religious Freedom and this report on Sunshine and censorship: Press freedom in UAE suggest the Liberty article exaggerates how free it is, suggesting it’s more like another Singapore than a Hong Kong. But even with that caveat, there’s still plenty of room to hope that it’s providing an opportunity for the Muslim world to escape the political systems that have kept it primitive.
Book Review: The Blank Slate : The Denial of Human Nature and Modern Intellectual Life by Steven Pinker
Pinker makes a good case that there’s a widespread bias toward a blank-slate world-view. But when dealing with serious scientific literature, his attempts to find clearcut enemies seem mistaken.
Pinker’s claim that “The second scientific defense of the Blank Slate comes from connectionism” is pretty puzzling. This “defense” consists of modeling the mind as “a general-purpose learning device”. But the books that Pinker references (Rethinking Innateness, and Parallel Distributed Processing), are both careful to point out why their models are completely consistent with the kind of genetic influences on behavior that evolutionary psychologists are talking about. Their disagreements with Pinker seem to be at most about how those influences are implemented, and even there I can’t find anything in Pinker’s arguments that clearly rejects what the connectionists believe.
Pinker’s attacks on Gould’s quasi-defense of the blank slate mainly convinced me that Gould didn’t want to think clearly about the subject, probably because he considered that any mechanistic explanation of the mind (genetic or environmental) was demeaning.
Pinker’s arguments that it’s silly to believe in the tabula rasa and noble savage world-views are eloquent and compelling, but his response to the “it’s demeaning” attitudes will convince fewer people, because he ignores the very real benefits of holding an unrealistically high opinion of one’s self (overestimating one’s abilities seems to be an effective means of advertising one’s strengths). To those who want to portray themselves as angelic or as wiser than software of the future, an accurate model of the mind is genuinely demeaning.
Pinker seems somewhat inconsistent about how important it is to know whether the mind is a blank slate.
On pages x – xi he says “the conviction that humanity could be reshaped by massive social engineering projects led to some of the greatest atrocities in history.” But in the chapter on fear of inequality, he claims (more convincingly), while defending his views from the charge they will encourage Nazism, that the differences between Nazi beliefs in genetic superiority and the blank slate viewpoints of Stalin and the Khmer Rouge didn’t have much effect on whether those tyrannies engaged in genocide – it was the greater tendency to divide people into in-groups and out-groups that best distinguishes the worst of the genocidal tyrants.
Pinker exaggerates the importance of finding the correct answer to the nature-nurture debate in other ways as well (I suppose we shouldn’t be surprised that an author overestimates the importance of what he’s selling).
He gives examples such as forcing people to live in drab cement boxes (as if their taste for a more natural surrounding could be reversed by social engineers), or releasing psychopaths (because societal problems caused their insanity).
But a genetic component to these behaviors doesn’t prove that they can’t be altered (I have genes for brown hair – does that mean I can’t dye my hair blue?). It only gives hints as to why they might be difficult to alter.
It sure looks like careful scientific studies of whether we knew how to alter these behaviors would be a more reliable way of debunking the faulty conclusions.
There’s a report that the Flynn effect has stopped fairly abruptly in the industrialized countries. The new data suggest a more sudden halt than nutritional theories would predict. I’m uncertain what to make of this.
In the past few weeks two different studies showing the shortcomings of democracy have been getting a modest amount of publicity, but they deserve more.
One reports evidence that voters reward politicians for manipulating the economy so that personal income is maximized in the two quarters before an election.
That short-sightedness isn’t good, but it leaves plenty of room for defenders of democracy to claim it’s unclear that the effect is harmful on balance. The most recent report claims to demonstrate that the outcomes of about 70 percent of recent U.S. Senate races are predicted by a measure of how babyfaced each candidate is. The bad part about this is that this effect is negatively correlated with measures of competence such as intelligence, education, and ability to win military medals.
I guess I should think harder about what I can do to create something like Futarchy.
Book Review: The Emperor of Scent : A Story of Perfume, Obsession, and the Last Mystery of the Senses by Chandler Burr
This is an entertaining and informative story of how a failed class of theories that tried to explain smell as purely shape recognition have been challenged by a theory that involves detecting the vibrational frequencies of bonds.
Burr does a very good job of making some rather technical discussions of chemistry readable and accurate without intimidating amateurs. The story is enjoyable except when reporting the ugly side of academic and corporate politics. The extent to which he claims that researchers who have based careers on the failed approach to smell refuse to think about the vibrational theory seems rather extreme. Yet I can only find one instance in which Burr unfairly criticizes one of those researchers (on page 233, when he says it’s strange not to know what “the same vibration” means, and implies that “same” simply means an identical integer number of nanometers. Yet it would be strange if vibrations had an integer number of an arbitrary unit such as nanometers, and on page 64 Burr implies that vibrating at 2550 nanometers is the same as 2500 nanometers).
One other incidental comment the book makes about the peer review process is worth repeating. One of the reasons that big name research labs continue producing good results is that they have an advantage comparable to insider trading as a result of seeing papers at the peer review stage, while the average lab has to wait longer to get the same ideas.
Bryan Caplan writes about Robin Hanson’s contrarian views on the effectiveness of medicine and parenting.
Caplan’s conclusion about medicine involving a mix of beneficial and harmful practices is probably correct (and probably consistent with Robin’s views), but some of his reasoning is bogus:
Start with medicine. Modern techniques have clearly saved a lot of lives. If memory serves me, survival rates for premature babies have skyrocketed from 10% to 90%.
Part of Robin’s point is that we can’t tell from the improved survival rates that medicine was responsible. It may be that improved maternal nutrition has made babies better able to withstand premature birth. There is no easy way to distinguish the causes, and there’s some reason to think doctors are more effective at biasing consumers to credit them with improving peoples’ health than farmers are.
The evidence that medicine is less effective than most believe has fewer practical implications than a superficial glance suggests. It implies that you shouldn’t choose an expensive health plan over a cheap one, but leaves open the possibility that you should still see your doctor fairly often, and the possibility that you can “buy” health care that will slightly increase your life expectancy by moving from, say, Havana to San Francisco.
The argument (started by Judith Rich Harris) that parenting styles have little effect has a stronger conclusion. Caplan claims:
The same goes for parenting. We all know kids who let their parents plan their lives for them. Maybe it’s 100% genetic, but that’s a stretch. It’s more plausible to acknowledge that these pliable kids exist, but point out that they’re only half the story. We also all know kids who heard their parents’ plans for their future, and did exactly the opposite just to spite them.
I do not know kids who come close to fitting the first pattern after puberty. Essentially all kids need to demonstrate to their peers by about puberty that they are mature enough to be somewhat independent of their parents. And if you think about the sexual selection pressures on children around that age, you should expect that to be just one symptom of the pattern that Harris points out. Their reproductive success is heavily dependent on their ability to compete with and to impress people who are sufficiently close to their age to become a mate or to compete for a mate. That implies that it is important for them to adapt their personalities in ways that respond to evidence about their peers, and to treat parental opinions as much less relevant.
Unlike the arguments about the ineffectiveness of medicine, the evidence against the importance of parenting styles appears to show that all attempts to improve parenting styles (except for those, such as choosing the best school, which influence whom the child can have as peers) have failed to show benefits.
We have a large industry devoted to convincing parents to buy its advice on parenting styles. This creates a nontrivial incentive to provide evidence that some parenting styles work better than others. That includes incentives to distinguish children that will be helped by style X from those who will be helped by the opposite style. And unlike the evidence that some medical practices work, the evidence for the value of advice on parenting styles consistently fails when subjected to close scrutiny.
It is still possible that parenting styles are sometimes helping and sometimes hurting, but theory and the breadth of the evidence suggest betting against that. Eventually, given tools as drastic as manipulating the child’s genes, parents will someday find ways to manipulate their kids minds. But since there’s little reason to think that children are currently suffering from negligent parenting styles, and there are moderately good reasons to guess that youthful rebellion is mainly the result of children pursing their (gene’s?) interests, it’s hard to see why parents should be trying to alter their children’s behavioral strategies rather than ensuring that they have the resources to do what they want. (Unless, of course, parents have good reasons for pursuing different goals than their children. I’m having trouble analyzing that possibility.)
Social Security was created based on the premise that people of certain ages are unable to support themselves due to poor and declining health. Yet Aubrey de Grey has made a fairly strong argument that this bad health can be cured (see Strategies for Engineered Negligible Senescence), so that the elderly will be as healthy as the young.
Since it’s probably inevitable that the government will end up paying for the initial round of anti-aging treatments, why not make government payments for such treatments conditional on the beneficiary leaving the Social Security system? This would probably save the government enough that it would be worthwhile for it to speed the research up by offering a few billion dollars in prizes for people who complete milestones such as extending the lifespans of lab animals.
There’s a good deal of doubt as to how many decades it will take to produce a good enough cure (and some ambiguity as to how good a cure would need to be to qualify). But the a combination of Aubrey de Grey’s arguments and those of Rob Freitas and Eric Drexler suggest that there’s a very good chance that it can be done before Social Security is expected to collapse. And anyone who thinks Congress might turn Social Security into a system that is certain to remain solvent is drastically overestimating the reliability of demographic forecasts and/or the far-sightedness of Congress.
Book Review: Intangibles: Management, Measurement, and Reporting by Baruch Lev
It isn’t easy to make a book about accounting interesting and uplifting, but this book comes fairly close to accomplishing that. It provides a clear understanding of why it matters how well accounting rules treat intangible assets, and gives some good guidelines on how to improve them.
Some of the proposed improvements are fairly easy to evaluate, such as breaking down R&D into subcategories for basic research, improvements to recently released products, etc., but with some of the book’s suggestions (e.g. trademarks) I’m puzzled as to whether there’s little to be gained or whether he has a good idea that he hasn’t adequately explained.
Alas, accounting standards are a public good that few people have an incentive to create. The improvements suggested by the book could generally be adopted without first being approved by a standards committee because they mostly involve adding new information to reports. But the first company to adopt them gains little until investors can compare the information with that from other companies. And accounting standards committees tend to attract people whose main concern is preventing harm rather than creating new value. And that tendency is currently being reinforced by investors who want a scapegoat for their complacency at the peak of the recent stock market bubble.