I was recently surprised to discover that California has price controls which are designed to encourage hoarding in emergencies and to discourage stockpiling in preparation for emergencies. The law in question is called an anti-gouging law, and temporarily limits price increases to 10 percent in some emergencies. I’ve seen conflicting reports about whether Bush’s declaration of emergency triggers the price controls, or whether it requires a state declaration of emergency. The governator has indicated that he has no plans to join the Bush/Lockyer exploitation of Katrina, but my limited observations suggest that gas stations in the bay area have limited their gas prices increases to 10 percent, and a few of them ran out of gas over the weekend.
It looks like the gas supply problems will ease soon enough that the price controls won’t have done much harm this time (diversions of gas shipments that were intended for other parts of the world will any week now spread the supply reduction over large enough regions that a fairly small price premium over what would have prevailed without Katrina should keep supply and demand in balance).
On a related note, Alex Tabarrok made a claim that suspending gas taxes won’t help consumers. I’m suspicious of his belief that a temporary suspension will have little effect on supply. I expect that oil companies will have an important incentive to draw down their inventory more than they otherwise would, especially just before the taxes are reinstated (since their profit margins will decline when taxes resume). I expect this effect to reduce prices to consumers by a modest fraction of the amount of tax relief. This will come at the cost of increased vulnerability to new supply disruptions. I doubt that the voters who have caused politicians to suspend gas taxes have given much thought to the wisdom of this tradeoff.
Politics
Randal O’Toole has a provocative claim that New Orleans residents had trouble evacuating because fewer of them own cars than in typical cities (urban planners accomplished their goals).
This is clearly not the main reason for the unusual death toll from Katrina (the death toll in Mississippi seems to be an order of magnitude higher than I would have expected based on results of recent storms with similar winds and the long-term trend of declining storm deaths), but it deserves more discussion.
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.
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.
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.
I’m curious how U.S. politicians are rationalizing their support for tariffs to punish China for keeping the yuan high (i.e. propping up the dollar). There’s an obvious alternative if it’s as clear as most people claim that the yuan is undervalued: have the U.S. government buy as many yuan as it can. That would make it more expensive for China to keep the yuan down at a probable profit to the U.S.
There may be some Chinese rules which pose obstacles to doing this, but I doubt the U.S. politicians are able to know that they couldn’t get around such rules.
Note that I didn’t ask what their real motives are (tariffs benefit special interests more than buying the yuan would, which provides a strong hint). I’m interested in what excuses they would give.
In the latest issue of Econ Journal Watch, Bryan Caplan and Donald Wittman hold an inconclusive debate on whether democracy produces results that are sensibly related to voters’ interests. They come much closer than most such discussions to using the right criteria for answering that question.
But they fail because they implicitly assume that inaccuracies in voters’ beliefs are random mistakes. If that were the case, Wittman’s replies to Caplan would convince me that Caplan’s evidence of voter irrationality is as weak as the arguments that consumer irrationality prevents markets from working, and that Wittman’s proposed experiments might tell us a good deal about how well democracy works.
On the other hand, if you ask whether voters have incentives to hold beliefs that differ from the truth in nonrandom ways, you will see a fairly strong argument that voters’ inadequate incentive to hold accurate beliefs causes systematic problems with democracy.
Imagine that you live near a steel mill. This means that believing that steel import restrictions are bad will increase the risk that your acquaintances will dislike you (because you views endanger their jobs or their friends’ jobs), and will probably bias you toward supporting protectionism.
Or take the issue of how gun control affects crime rates. There are some obvious patterns of beliefs about this which the random-mistake hypothesis fails to predict. Whereas the theory that people adopt beliefs in order to indicate that they think like their friends and neighbors (combined with some regional variations in gun ownership that created some bias before people started thinking about the issue) does a much better job of predicting the observed patterns of belief.
Because this seems to be a widespread problem with democracy, I’m fairly certain democracy works poorly compared to markets and compared to forms of government such as Futarchy which improve the incentives for policies to be based on accurate beliefs.
This report from Afghanistan suggests that the situation there has changed enough in the past year to cast a lot of doubt on the claims made in the book Imperial Hubris that I reported a few months ago.