Wednesday, December 21, 2011

Shoes: A Modest Proposal

Yesterday, while buying a new pair of shoes, I noticed something interesting. The wide size was comfortable on my left foot, tight on the right. The extra wide was comfortable on the right, loose on the left.

According to the seller, that is a common, perhaps even normal, pattern—the right foot tends to be just a tiny bit bigger than the left. My wife confirmed the pattern from her own experience.

My first thought was that perhaps a high end brand could take advantage of the pattern by selling shoes individually—one to fit the left foot, one to fit the right—instead of in pairs. It then occurred to me that the mass market approach would be to routinely make the right shoe of each pair a fraction of a size larger than the left. The first firm that did that ought to increase its sales, since lots of people would find its shoes a little more comfortable than the shoes of its competitors. 

At which point it occurred to me that perhaps it was already happening. Does anyone know? Are right shoes and left shoes precise mirror images of each other, as I assumed, or do some firms routinely make one just a tiny bit bigger than the other?

Thursday, December 15, 2011

It's All in How You Say It

"Shamed former French leader Jacques Chirac has been found guilty of corruption and given a suspended jail sentence, becoming France's first ex-president to be convicted for his crimes."   News story

George Orwell, Dishonest Rhetoric, and the Libertarian Movement

 The key-word here is ‘objectively’.
     We are told that it is only people’s objective actions that matter, and their subjective feelings are of no importance. Thus pacifists, by obstructing the war effort, are ‘objectively’ aiding the Nazis; and therefore the fact that they may be personally hostile to Fascism is irrelevant. I have been guilty of saying this myself more than once. The same argument is applied to Trotskyism. Trotskyists are often credited, at any rate by Communists, with being active and conscious agents of Hitler; but when you point out the many and obvious reasons why this is unlikely to be true, the ‘objectively’ line of talk is brought forward again. To criticize the Soviet Union helps Hitler: therefore ‘Trotskyism is Fascism’. And when this has been established, the accusation of conscious treachery is usually repeated.
 George Orwell, "As I please," 8 December 1944.

I was recently reminded of this passage in Orwell by posts on two different libertarian blogs. One, by Roderick Long, is a defense of left-libertarians who accuse right-libertarians of supporting government favoritism towards big business. He writes:
So when left-libertarians accuse (some) right-libertarians of supporting corporatism, this is to be understood in a de re sense, not in a de dicto sense. Thus the claim is that right-libertarians are supporting certain policies/institutions/phenomena that are in fact instances of corporatism; we are not claiming that right-libertarians are deliberately supporting them qua instances of corporatism – and so pointing out that they’re not is not relevant as a reply to the original point.
The language is different, employing the philosophical distinction between de re and de dicto instead of the political misuse of "objectively," but the logic is the same. Accuse someone of supporting something and then explain, when challenged, that you don't actually mean he supports it, you mean he supports things that you think support it.

The other post was by Walter Block, accusing Wendy McElroy of not being a libertarian. To Walter's credit, he goes into some detail in describing the immense evidence that Wendy is a libertarian, having been active in the movement for decades. But he concludes that nonetheless she is not, on the grounds that she opposes the Ron Paul campaign, which Walter believes libertarians ought to support. He writes:
I distinguish between being a libertarian, and agreeing with (virtually all) libertarian principles. The former implies that you act so as to promote liberty. The latter means that you agree with these principles, and, may, perhaps, as in her case at present, act against them. I have no doubt that Wendy is a libertarian in the second sense. Her whole adult life gives amply testimony to that fact. She believes in the libertarian message, fervently. She defends it, brilliantly. She extends it, creatively. But, as far as acting so as to promote liberty, her trashing of Dr. Ron Paul’s candidacy gives the lie to that. Belief is necessary, but not sufficient, for being a libertarian. Wendy passes the first test, but not the second.
Hence "not a libertarian" turns out to mean "disagreeing with Walter Block about what tactics libertarians should employ."

Tuesday, December 13, 2011

Thinking Fast and Slow

by Daniel Kahneman, a psychologist who won (and probably deserved to win) a Nobel prize in economics, is a book well worth reading; I just finished it. Its subject is how the human mind works and, in particular, why we make the predictable mistakes that we do make. 

The central insight is that we act as if we had two different mechanisms for making sense of the world around us and deciding what to do. System 1—intuition broadly defined—works automatically and very quickly to recognize a voice over the phone, tell whether a stranger's face is expressing anger, generate conclusions on a wide range of subjects. System 2—conscious thought—takes the conclusions generated by System 1 and either accepts them or rejects them in favor of its own conclusions, generated much more slowly and with greater effort. Attention is a limited resource, so using System 2 to do all the work is not a practical option. 

System 1 achieves its speed by applying simple decision rules. Its view of probability, for instance, functions largely by classifying gambles into three categories—impossible, possible, or certain. One result is that an increase in probability within the middle category, say from 50% to 60%, appears less significant than an increase of the same size from 0% to 10% or from 90% to 100%. 

That simple fact provides a solution to a very old problem in economics, the lottery-insurance puzzle. If someone is risk averse, he buys insurance, reducing, at some cost, the uncertainty of his future. If someone is risk preferring, he buys lottery tickets, increasing, at some cost, the uncertainty of his future. Why do some people do both?

Kahneman's answer is that insuring against your house burning down converts a very unattractive outcome (your house burns down and you are much worse off as a result) from probability 1% to probability 0%, a small gain in probability but a large gain in category (from possible to impossible). Buying a lottery ticket converts a very attractive outcome (you get a million dollars) from probability 0% to probability .001%, a small gain in probability but a large gain in category (from impossible to possible). Both changes are more attractive, as viewed by System 1, than they would be as viewed by a rational gambler.

If you have read Nudges, many of the errors Kahneman describes will be already familiar to you. The difference is that Thaler and Sunstein take those errors as observed facts; Kahneman explains, for the most part plausibly, why we make them, and supports his explanations with evidence. And while Kahneman has a few comments on political implications of his results, his main focus is on telling the reader what mistakes he is likely to make and why, in the hope of helping him to make fewer of them.

One of the attractions of Kahneman's book is that although some of his evidence consists of descriptions of the results of experiments, his own or others, quite a lot of it consists of putting a question to the reader and then pointing out that the answer the reader probably offered, the one most people offer, is not only wrong but provably, in some sense obviously, wrong. 

Consider the following example:
Linda is thirty-one years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations.
Which is she more likely to be:

A bank teller
A bank teller and active in the feminist movement
Most of the people to whom the question was put judged the second alternative as more likely than the first—despite that being logically impossible. System 1 has a weak grasp of probability and so, in this case as in many others, substitutes for the question it cannot answer an easier question it can, in this case “which sounds more like a description of Linda.”

The book is more than four hundred pages long; if I tried to summarize all of it this would be a very long post. Read it.

Tuesday, December 06, 2011

Great Comment on Someone Else's Blog

Will being a brilliant software engineer get you a smokin’-hot babe for a wife? No, it won’t. (There are exceptions to this.) But unless you’re a complete jerk, there’s probably an accountant with a cute smile who shares your love of HP Lovecraft, or a genetics lab tech with a great laugh who plays Dungeons and Dragons, or an IT consultant who loves to cuddle and is willing to put up with your cat’s YouTube fame.

It is less the case that shy, successful people are purchasing access to a mate and more the case that the shy, successful people have finally found a common breeding ground to spawn.

(comment by Anatid to a post on The Volokh Conspiracy)

Wednesday, November 30, 2011

Who Profits from the Recession?

Reading Google News this morning, I noticed a headline:

Home Prices Continue to Fall:
D.C. Bucks Trend

I was particularly struck by it because yesterday, driving back to our temporary home in Fairfax from a visit to D.C., my wife commented on the amount of new construction we saw. The economy may not be doing so well, but the government industry is booming

Or, to quote my wife, "People talk about Main Street vs Wall Street. It should be Main Street vs the Beltway."

Monday, November 28, 2011

David Brin and Adam Smith

I've run into yet another case of someone complaining about conservatives falsely claiming Adam Smith in support of their views while doing exactly that himself. The complainer this time is David Brin, who wrote an interesting book on surveillance some years back but has, in my experience, a tendency to pontificate well beyond the limits of his knowledge.

In the relevant passage, he wrote:
But anyone who actually reads Adam Smith also knows that he went on and on about that "fair and open" part! Especially how excessive disparities of wealth and income destroy competition. Unlike today's conservatives, who grew up in a post-WWII flattened social order without major wealth-castes, Smith lived immersed in class-rooted oligarchy, of the kind that ruined markets, freedom and science across nearly 99% of human history. He knew the real enemy, first hand and denounced it in terms that he never used for mere bureaucrats.
In a comment, I asked him to produce a quote from Smith saying that excessive disparities of wealth and income destroy competition. He responded with the following (from The Theory of Moral Sentiments).
"This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect, persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments."
Which, as I pointed out in my response, has nothing to do with disparities of wealth and income destroying competition. Apparently Brin couldn't find any examples of Smith saying what he claims Smith went on and on about, so quoted something else instead.

I could have gone on to point out that Smith's attacks are not, for the most part, against the "class-rooted oligarchy," which at his time consisted mostly of the landed gentry. On the contrary, he tried to persuade the landowners that the policies he thought were in the general interest were also in their interest—sometimes stretching his argument pretty far to do so. His attacks were mostly directed at the "merchants and manufacturers."

But it didn't seem worth the trouble.

Those interested in reading Brin's post and our exchange of comments will find them here
My earlier post on people misrepresenting Smith while complaining about other people doing so is here.

P.S. Since I put this up, Brin posted another response and I answered it. As I suggest in my answer, my fundamental complaint about Brin is the same as my complaint elsewhere about Rothbard—that as long as he believes he is arguing for the right side, he doesn't really care whether what he says is true.

Friday, November 25, 2011

The Price of Money

I have stayed out of macro-economics in my work as an economist for a number of reasons, but it is a hot political subject at the moment and several times of late I have gotten involved in online macro arguments, so I decided it would be worth learning a little more about it. Someone sent me a copy of a recent book of essays by Tim Congdon, who has the interesting distinction of being both a monetarist and a fan of Keynes, and I have started reading it. 

The central claim of the first essay is that the views of the British Keynesians of the sixties and seventies were strikingly inconsistent with Keynes' own views. They saw inflation as a cost push phenomenon to which the proper solution was wage and price controls. Keynes, like later monetarists, saw it as a result of too much money and the solution as tight monetary policy. He was against wage and price controls, not for them.

One other thing struck me about the first essay: Congdon repeatedly refers to the interest rate as "the price of money." This is a very common error, and one that is not only wrong but dangerously wrong.

If the price of an apple is fifty cents, that means that if I give a seller fifty cents he will give me an apple in exchange. If the interest rate is five percent and that is the price of money, I ought to be able to buy money for five cents on the dollar. I doubt that Congdon, or anyone else, will be willing to sell it to me at that price. 

The price of money is what you have to give up to get it—the inverse of the price level. If the price of an apple is fifty cents, the price of a dollar is two apples. The interest rate is the rent on money, measured in money. A change in the price of money affects both the money you are renting and the money you are paying as rent, leaving the ratio of the two unchanged.

Suppose that at midnight tonight every dollar bill in the world twins, along with a similar change in the accounting entries for bank deposits, other forms of money, and all obligations denominated in money. By morning, there is twice as much money as before—and nothing else has changed.

I would ask Congdon whether, under those circumstances, he would expect the interest rate to drop. If his answer is yes, my next question is whether he would expect a much more extreme drop if we relabeled pennies as dollars and dollars as hundred dollar bills, thus increasing the money supply, measured in "dollars," a hundredfold.

The reason the description of the interest rate as the price of money is not only wrong but dangerously wrong is that it implies a simple relation between money and the interest rate—in the extreme (but not uncommon) version, the belief that interest rates are set by central banks, with high interest rates the result of a tight monetary policy.

A central bank can create money and lend it out, increasing the supply of loans (which reduces the interest rate) and increasing the money supply. That is the one element of truth to the relationship. But what is affecting the interest rate is not the amount of money but the amount of loans; the government could get the same effect by collecting more in taxes than it spends and lending out the difference.

The interest rate is a market price—the price paid for the use of capital—and the central bank controls it only in the same sense in which the government can control the price of wheat by choosing to buy or sell some of it. The central bank does not have an unlimited amount of capital from money creation to lend and so has only a limited ability to shift interest rates from what they would otherwise be. Furthermore, a continued expansion of the money supply creates the expectation of future price rises, which pushes the nominal interest rate up, not down. 

I have been unable to locate an email address for Tim Congdon, so am unable to point out his error to him directly. If any of my readers has one, I would be grateful if you would send it to me.

[Two people have now provided me with his email, I emailed him and received a friendly response.]

Wednesday, November 23, 2011

How to Destroy the Publishing Industry: Take Three

It is now both easy and inexpensive for an author to self-publish his work, either as a print-on-demand paperback or an ebook; for the former I recommend CreateSpace, Amazon's POD subsidiary, which my wife and I used to self-publish a historical cookbook. Self-published books of either sort can be sold through Amazon, making them easily available to anyone who wants them. Thus two of the functions of a publisher, producing books and distributing them, are no longer necessary.

Publishers also help authors write their books by providing copy editors, locating cover artists, occasionally even providing useful feedback on the contents. But all of these functions can be provided almost equally well in other ways. Copy editors are for the most part self-employed free lancers rather than employees; there is nothing to stop the author from cutting out the middleman, or the author's agent from stepping in to fill that role. The best editorial help I ever got came not from a publisher but from my agent.

There remains one more function—filtering. The fact that a book has been published by a major publisher is no guarantee that it is worth reading but pretty good evidence that it is at least worth looking at. To finish the job of replacing the publishing industry, we need a substitute filter, a way in which readers can find, out of a million self-published books, the top ten thousand or so. My experience so far suggests that Amazon reviews are not adequate for the purpose; the novel that I self-published as a kindle has gotten reviews ranging from four to five stars, but sold few copies. We need something better.

My latest idea is to leverage the Kindle. Have Amazon get permission from Kindle owners to have their machines report, anonymously, on how long the owner spent reading each book on the machine. The longer the time spent, the better evidence that the book was, for that reader, worth reading. The rating algorithm should take account of differing book lengths and ignore books that were never looked at.

To make this work better, make downloading free for the first month, in order to increase the number of people who download each book and take at least a brief look at it. Once the month is up, the book price goes to whatever price the author chooses. A fancier version, probably not beyond the technology, is to make such a free book vanish from the Kindle a month after it is downloaded, leaving behind a link to where it can now be bought. 

An even simpler approach would be to leverage the "sample the beginning of this book for free" option that Amazon already provides, implementing it in some form that lets Amazon find out how many of the readers who started the free sample finished it.

As its title suggests, this is not my first post on the subject. Readers interested in my previous suggestions for eliminating the publishing industry will find them here and here.

Saturday, November 12, 2011

Fracking and Earthquakes: Bug or Feature?

According to a recent news story, there is good evidence that forcing water into deep wells, done (among other reasons) in the process of fracturing rock to get at natural gas, causes earthquakes. The story takes it for granted that this is an argument against fracking, but while that might be true, it is by no means obvious.

The energy for an earthquake has to come from somewhere, and I don't think the amount of energy that goes into pumping water underground can be close to enough. What is presumably happening is that pumping in the water causes the release of energy that is already there. Dissipating that energy might mean lots of small earthquakes instead of a small number of big ones, which would probably be a net benefit. 

If so, what has been identified is not a bug but a feature.

Do any of my readers have more information on the subject?

Thursday, November 10, 2011

International Healthcare Comparisons

Some years back, I had a post criticizing the widely cited (and often misrepresented) WHO study comparing medical care in a large number of countries. More recently, an online discussion resulted in someone pointing me at a book by Sheila Leatherman and Kim Sutherland, aimed mainly at evaluating the British National Health Service but with a number of international comparisons, in most cases among the U.S., UK, Canada, Australia and New Zealand. Parts of the book are available online at Google Books.

Judging by the information on the pages shown, the widely believed claim that the U.S. not only spends more per capita on health care than other developed countries but also gets worse results for its money is not supported by the evidence. The webbed parts of the book contain the following comparisons (pp. viii-xviii):

For “mortality from causes considered amenable  to healthcare,” “in 1998 the UK had the highest mortality rates of the five countries compared.”

“England continued to have the highest breast cancer mortality rates among these comparator countries.”

“Of the five countries compared, the US had the highest survival rates from breast cancer, ...”

For colorectal cancer, “New Zealand had the highest mortality rate ... and the US had the lowest.”

“In 2001, England's mortality rate from stroke ... was lower than that in Australia ... but higher than that in the US ...”

“82% of UK respondents indicated that they were treated in [Accident and emergency] in less than four hours, a figure broadly in line with comparator countries (AUS 87%; CAN 74%; NZ 86%; US 87%).

“Patient reports of access to primary care within 48 hours saw the UK … outperform both the US and Canada” (Australia and New Zealand did still better).

“In response to a question regarding whether recent [Accident and emergency] visits would have been necessary if appropriate primary care had been available … the UK had the best result.”

“The UK had the lowest level of health consequences resulting from … errors and mistakes.”


I think these are all of the pieces of information shown that provide information on the relative performance of either the U.S., the U.K. (or in some cases England), or both, although I might have missed something. I am not including various input measures.

By my count, U.S. medical outcomes (including things such as speed of treatment) are superior to U.K. outcomes (in some case English outcomes) on five different measures, inferior on three. On two measures the U.K. (or England) is the worst of the five countries considered, on two the best; on three the U.S. is the best of the five (counting one tied for best), on none the worst. 

There are four pure outcome measures, mortality and survival rates from various causes. The US was superior to the UK on all of them, best of the five countries on two. The UK was worst of the five countries on two.

The overall conclusion, based on this (very fragmentary) data, is that U.S. healthcare outcomes are on the whole better, not worse, than UK healthcare outcomes.

These results might change if I had a chance to look at the entire book. Unfortunately, neither the library at GMU, where I’m currently visiting, nor the library at SCU, where I teach, appears to have it. If by any chance someone reading this has access to the book, I would be interested in a more complete list of comparisons.

Two other points in the book struck me. Judged by per-capita spending on health the U.S. is  the worst of the five, as I would expect, but North Ireland and Wales are close behind, which surprised me a little.

Also, the text has, under “Waiting for elective surgery,” the information that “The UK in 1998 and 2001 had high numbers of patients waiting: and in 2000 had long waits for elective surgery, relative to comparative countries.”

That’s a charge often made against the English system by its critics and routinely denied by its supporters. In this case it is coming from authors whose speciality seems to be the study of NHS performance.

Tuesday, November 08, 2011

Reason Magazine, Sarah Palin, and the Huffington Post

In a webbed "candidate profile" of Sarah Palin, writes:
Regarding the invasions of Iraq and Aghanistan, she said, "Our national leaders are sending U.S. soldiers on a task that is from God."
The actual quote is available in a variety of places. The following is from the Huffington Post; the accompanying video of the speech is no longer up:

"Pray for our military men and women who are striving to do what is right. Also, for this country, that our leaders, our national leaders, are sending [U.S. soldiers] out on a task that is from God," she exhorted the congregants. "That's what we have to make sure that we're praying for, that there is a plan and that that plan is God's plan."

What she is saying is not that the war is a task that is from God but that her listeners should pray that it is. She even says it twice over. Asking people to pray that something is true implies, not that you know it is true, but that you are afraid it might not be.

Reason converted "Pray that X is true" into "X is true." That is either incompetent journalism or a deliberate lie.

During the 2010 elections, I found I had a new hobby—defending Tea Party candidates from claims that they were nuttier than they actually were. One pleasant surprise was the discovery that the Huffington Post, at least in the cases I looked at (example), was a reliable source of information, even when reporting on people whose views they obviously disagreed with. 

One unpleasant surprise was discovering, on, words attributed to a candidate, given in quotation marks, which the candidate had not said. The author of the piece had altered both words and meaning. When I pointed that out to him by email he defended what he had written. The misquote was only corrected after I pointed it out to someone else at Reason.

I find it unfortunate that the leading libertarian magazine is a less reliable source of information than a leading publication on the other side.

Saturday, October 29, 2011

The Evolution of the Camera

Long ago when the world was young and cameras used film, there were two kinds. With a viewfinder camera, the human looked through the viewfinder, the camera looked through the lens, and the two views were different—significantly different for close-up shots. A single lens reflex camera (SLR), typically larger and more expensive, contained an elaborate internal mechanism to permit the human to view the scene through the same lens that the camera saw it through. To  take a picture, the mirror that was directing the image up to the prism that bent it to reach the human's eye swung up and out of the way, in order that the light could get to the film instead. (There is also evidence in the fossil record of a still earlier design known as a twin lens reflex).

After digital cameras came along and I started using them, it occurred to me that the image I was seeing on the view screen was the same image that would be recorded on the camera's memory—one of the advantages of using electronics instead of optics for the purpose. I was already looking through the camera's lens, so no need for a mirror and prism. Oddly enough, however, SLR's (called dSLR's since they were now digital) were still being made, were still large and expensive, still had an elaborate apparatus of moving mirror and prism, and were still regarded as what serious photographers used. 

They had two significant advantages over the less expensive sorts of digital cameras—interchangeable lenses and much larger imaging sensors, permitting them to take better pictures. They also had optical viewfinders that let you look through the camera's lens. The resolution perceivable by the human eye is higher than the resolution of a camera's viewscreen, so getting the image directly to the human was worth something—but, given the quality of the available screens, not very much. That, at least, was how I saw it—making the internal mirror and related apparatus the photographic equivalent of the human appendix.

It couldn't last—and, fortunately, didn't. It eventually occurred to someone in the industry that a camera with interchangeable lenses and a large sensor but without mirror, prism, and optical viewfinder could be very nearly as useful as a dSLR but considerably smaller and less expensive. 

My Sony NEX-3 arrived yesterday. It cost about half as much as a comparable dSLR—and has the same sized sensor. With the smaller of its two lenses it is not very much larger than the pocket camera it replaces.

Friday, October 28, 2011

Celtic Wanderings?

My current writing project is a book on legal systems very different from ours, based on a seminar I have taught for some years at SCU; my current chapter drafts are webbed for a workshop I am doing at George Mason this fall.

The legal systems I have done chapters on so far include ancient Irish law (c. 6th century) and traditional Somali law. Surprisingly enough, they have several features in common. In both, one consequence of injuring someone is the legal obligation to provide your victim with sick-maintainance—hospitality and medical services until he recovers. 

In the Irish system the kin-group called the fine, consisting of all descendants in the paternal line of a common great-grandfather,  is responsible for seeing that its members pay any fines or damage payments they owe or, if they don't, paying for them. In the Somali system the kin-group called the juffo, consisting of all descendants in the paternal line of a common great-grandfather,  is responsible for some but not all fines owed by its members, the rest being the responsibility of the jilib, a group of several related juffos.

All very suspicious. The Celts wandered pretty far but, so far as I know, they never made it to the horn of Africa. Looking at it from the other side there are people referred to as "black Irish," but I don't believe ...   .

Thursday, October 20, 2011

Drones, Geneva Convention, and Other Ambiguous Goods

"Any development that makes war appear to be easier or cheaper is dangerous and morally troubling. It lowers the political threshold of war. It threatens to weaken the moral presumption against the use of armed force." David Cortwright, writing at on drones.

It is a legitimate argument, but its application is wider than may be obvious. The Geneva Conventions, for instance, are designed to make war cheaper—not in dollars but in human costs. The pre-Napoleonic rules of parole, under which a prisoner of war could give his word not to try to escape and then spend his imprisonment in the town inn instead of the much less comfortable prison, or even give his word not to fight until exchanged and then be sent home, were designed to make war less costly. 

Any such change has two effects. One is to reduce the cost, the amount of damage to things that matter to human beings, including human beings themselves, of warfare, which is good. The other is to increase the amount of warfare, which is bad. There is no theoretical basis to say, in general, which effect is larger—it depends on  the elasticity of supply of war.

In my Law's Order, I discuss [search for the word "duress" in the chapter] the same issue in a different context—whether contracts made under duress ought to be enforceable. When the mugger threatens to kill you if you don't pay him a hundred dollars and you pay with a check,  should you be free to call up your bank and cancel payment once he is out of sight? Being able to pay  him means that when mugged you don't get killed for failure to offer your mugger enough to let you go. But it also means that mugging is more profitable, so more of it happens.

In that particular case, I am pretty sure that making the contract enforceable has, on net, negative consequences. But there is no good reason to suppose that the same is true for innovations, technological or otherwise, that make war less costly.

Saturday, October 15, 2011

How to Lie With Statistics: Tax Rates

A good deal of the recent rhetoric in support of Democratic proposals for raising taxes is designed to make it sound as though rich people pay federal taxes at a lower rate than everyone else. That, as one can easily check by looking at the published figures from the Congressional Budget Office, is not only false but wildly false. Most people in the bottom half of the income distribution pay no federal income tax at all, although they do pay payroll taxes and, arguably, some of the cost of corporate income tax passed on in higher prices or lower wages. On the CBO calculations, the ratio of total federal tax paid to income rises pretty much monotonically with income.

The less extreme claim, which has been getting a good deal of press of late, is that a quarter of the households with an income of at least a million dollar a year pay taxes at a lower rate than the ten percent of those with incomes of under $100,000 who pay at the highest rate. 

I have not seen any detailed explanation of how those numbers are calculated, but presumably they are based on income and tax for a single year. If so, although the claim may be literally true, it is also highly misleading—an elegant example of how to lie while telling the truth.

Income and tax liability vary for each individual from year to year. If you take a large capital loss one year, part of it carries over to reduce your taxes, but not your income, in the next year. If you have a large capital gain in one year, your taxes go up for that year but your average tax rate goes down, since capital gains are taxed at a lower rate than ordinary income. 

Some of the 25% of high income taxpayers paying at the lowest rate are people who regularly pay less taxes than most, some are taxpayers who happen to be paying a lower rate than average this year. Some of the 10% of middle income taxpayers paying at the highest rate are people who regularly pay more taxes than most, some are people who happen to be paying a higher rate this year than most years. So the widely reported calculation overstates, by how much I have no way of knowing, the spread of both distributions, both the number of middle income taxpayers who on average, year after year, are taxed at a higher rate than the bottom 25% of high income taxpayers and the number of high income taxpayers who on average are taxed at a lower rate than the top 10% of middle income taxpayers.

If the logic is not clear, consider betting on the races. Each day, a significant fraction of the bettors—say a quarter—make money. A few of them make money because they really are much better than most at guessing which horse will win. Most of them make money because that was the day that they happened to be lucky. If you looked only at the day's results, you would conclude that the top quarter make money at the races. If you looked at the year's results, you would come up with a much smaller number.

Just as, if you looked at the tax rates paid by any group of taxpayers over a period of years, you would get fewer paying a rate that was unusually high or unusually low than if you look at them for a single year.

And for readers interested in a more general account of how to lie with statistics, I have a book to recommend.


Here are two summaries of federal tax incidence, one from the Tax Policy Center of Brookings and the Urban Institute, one showing the figures from the Congressional Research Service. The former shows figures for the top one percent and top tenth of a percent. At least by its calculation, the effective rate rises monatonically with income.


I linked to the figure showing the Congressional Research Service numbers, which I found on Google+. That apparently didn't, or at least doesn't, work. Here is the figure:

Are the Amish Anarchists?

I have been reading up on the Amish for one chapter of the book on legal systems very different from ours that I'm currently working on. They provide an example of what I think of as an embedded legal system—a group that is under the authority of an external legal system, but also has its own legal system which it succeeds in enforcing on its members. Other examples are modern gypsies and Jewish communities during the diaspora, which were often given the right to impose Jewish law on their members by their gentile rulers.

It occurred to me that one could view the Amish as a working example of a form of anarchy. It is a very strange form, since the rules that the Amish are under are considerably more constraining—including rules on what styles of clothing they can wear, rules against owning automobiles or flying on airplanes, and much else—than the rules the rest of us are under. But those rules are all voluntarily accepted, and the system that generates them may reasonably be viewed as a competitive system of private law.

To expand on that, for readers not familiar with the Amish... . The only level of Amish "government" with any authority is the congregation, typically made up of about thirty to forty households. Its authority is over individuals who, as adults, have chosen to swear to accept its rules. The only punishment it can impose is shunning—the refusal of members of the congregation to associate in various ways with a member who has been excommunicated. Members, including excommunicated members, are free to resign from their congregation and join any other congregation that will accept them, or drop out of the Amish sect entirely.

The rules—the ordnung—vary from one congregation to another and change over time. In some settlements the congregations are, in effect, miniature territorial sovereigns, so if a member of one congregation wants to shift to another, perhaps because its rules are less (or more) strict than the rules of his current congregation, he has to physically move, although often not very far. In other settlements, especially ones where there are congregations with a considerable range of different versions of the Ordnung, congregations overlap, so you can switch congregations while remaining in the same location.

It's true, of course, that the Amish are under the rule of the U.S. (or, for a smaller number, Canadian) government. But they receive very few services from government, since they are unwilling to accept most of the conventional forms of government aid and, as pacifists, are unwilling to report crimes against themselves to the police or sue in the government courts to collect debts. Off hand, the only significant benefit I can think of that they get is protection against foreign invasion. And, on the other hand, governments at various levels imposes sizable costs on them, in the form of taxes that (with the exception of Social Security) they have to pay and regulations.

So I think they provide pretty good evidence of at least one form of (very structured) anarchy that works.

Monday, October 10, 2011

Mormons, Fundamentalists, and Critics

Various people of late have been going back and forth over claims that Mormons are a cult and are not Christians. What strikes me is how much better press Mormons get, in the political context, than evangelical fundamentalists. If you look at the actual beliefs of the two groups, the official doctrines of the Church of Latter Day Saints are at least as nutty as those of fundamentalist groups that deny evolution, believe humans and dinosaurs coexisted ten thousand years or so back, and get routinely mocked for those beliefs. 

The LDS claims that if you live a good life you will eventually become a god with a universe of your own to run, or that your ancestors can be converted post-mortem and so saved, are a bit odd, but there is no way of proving they are false, any more than one can prove false the beliefs of those who expect the second coming of Christ real soon now. But the belief that there was a lively civilization in the New World long before Columbus, and one that fits the description in LDS scripture, is inconsistent with what archaeology tells us about the relevant history. That surely ranks with the more direct versions of creationism as a denial of accepted scientific views.

The odd beliefs of fundamentalist Christians are an issue at the moment for Republican political candidates, many of whom sound as though they agree with them, raising the question of whether they actually believe or only pretend to. But I have not noticed any of the people who pick on candidates such as Palin or Bachmann for their religious views asking whether Romney and Huntsman really believe in the pre-Columbian "history" that their church proclaims or are being prudently silent on the subject.


P.S. some days later. A British newspaper asks the same question.

Sunday, October 09, 2011

Random Thoughts on Education

Part I: Marshall as Textbook

In a recent book review in The New Republic, Robert Solow writes:

"When I first studied economics in 1940, we were not given Marshall to read as a textbook; it would probably have been an improvement if we had."

Although I was not literally given Marshall to read as a textbook, I came pretty close. My first position as an economics professor was at VPI, and while there I ended up, over a period of years, teaching a wide range of courses. It occurred to me later that my doing so might have been, not an accident, but a deliberate policy by James Buchanan, who was the dominant figure in the department. I had never taken an economics course for credit, and teaching things is a good way of learning them.

One of the courses I taught was the history of economic thought, which I taught as economic thought not as history. As I put it later when teaching the same course at UCLA, I wanted the students to imagine that they were graduate students in economics getting ready for their prelim exams, the year was 1776, and The Wealth of Nations was the latest thing in the field.

I did not learn all that much economics from Smith, a brilliant writer and thinker but a somewhat muddled economic theorist. But the other two figures I focused on were David Ricardo and Alfred Marshall, and I learned quite a lot of economics from them. One result is that, to this day, I teach the concept of economic efficiency in terms of Marshall's version rather than the later, more fashionable, and (in my view) inferior approaches associated with Pareto, Hicks and Kaldor.

Part II: How Kids Learn to Write Nowadays

Talking with my younger son on the phone, he mentioned that he was planning to write and web an account of his recent playing of Rome: Total War, a computer game he is fond of—and do it as the work of a later historian describing the rise of whatever empire established itself as victor in the course of the game. His sister, as of a few years ago, spent a good deal of time writing up and webbing battle reports describing events in World of Warcraft. I don't think either of them has gotten into fanfic, the practice of writing stories set in the world of Star Trek, or Harry Potter, or Lord of the Rings, but a lot of other young people have. And quite a lot of the people I know online who write novels, including some who get them published, started out running role playing games.

All of which suggests to me that English classes, in high school and college, play a much smaller role in teaching this generation how to write than their teachers might suppose.

Tuesday, October 04, 2011

Donating to Both Sides: A Research Proposal

It is, I gather, fairly common for corporate donors to give money to both candidates in some two candidate races. Assuming that is correct, the question is why.

Both donations can't be intended to influence the outcome of the election, since they push it in opposite directions, so presumably the purpose is to buy influence with the winner. But doesn't the donation to the loser reduce the donor's influence with the winner, just balancing an equal donation to the winner?

I can see two possible answers. One is that the information is not always public, so the winner may not know about the donation to the loser. I don't think that's been possible in recent elections, but I'm far from expert on the subject.

The other possibility is that the money isn't intended to be spent on the election. It's my understanding (those who know more are welcome to correct me) that, under some circumstances, a candidate who retires is allowed to keep the balance of past campaign donations. If so, one would expect the pattern of donating to both candidates to be most common when at least one of them is near the end of his career. 

Which suggests some interesting possibilities for research.


P.S. A commenter informs me that my fact is not a fact, that what is actually happening is that donations by employees of a firm, some of whom support one candidate and some another, are being misinterpreted as donations by the firm.

Saturday, October 01, 2011

Should We Hope for a Republican Sweep?

Like many other people unhappy with the administration, I have been worried by the apparent inability of the Republicans to find a candidate who is both electable and likely to make a significant improvement, and worried that they may end up losing an election that they ought to win. Thinking about it this evening, it occurred to me that perhaps that isn't such a bad outcome.

Suppose the Republicans convert Obama's current unpopularity into majorities in both House and Senate, but manage to lose the presidential election. Would that outcome be obviously worse than one in which they won everything?

There is much to be said for divided government. Consider what happened the last time the Republicans had both Congress and the White House.

Or, for that matter, the last time the Democrats did.

Friday, September 30, 2011

Could There Be a European War?

There are lots of things that the supporters of the Euro, and the Common Market, and the broader project of which both are a part, hope to get from increased European unification. But the one big thing is future peace. The first half of the 20th century featured two horrific wars, originating in and largely fought in Europe, largely between European states. Behind all the talk about the convenience of a common currency or the advantages of free trade within the EU is that memory, and a burning desire that it not happen again.

Which raises two interesting questions, to neither of which I can offer a confident answer:

1. If the EU dissolves, with countries going back to separate currencies and separate trade policies, is there any significant risk of a third major European war within, say, the next fifty years? My gut reaction is that there is not, but I do not have any real support for it.

2. If the EU is maintained and European integration increased, perhaps along the lines that the supporters of the Euro have been urging as necessary to save Greece, Italy, Ireland, and Spain, is there any significant risk of a third major European war within, say, the next fifty years? 

Before dismissing the possibility out of hand, it is worth considering what came out of the "integration" of the American states. I am not sure how much of a stretch it is to imagine a future where some of the countries, such as Germany, feel that they are being outvoted and exploited by others, such as Greece and Italy, through the institutions of a United States of Europe, with the tension eventually exploding into civil war. Each side would, of course, start out confident that once it was clear they were willing to fight the other would back down.

(Might make an interesting sf plot.)

Which suggests a third question: Does European integration make a major European war less likely, or more?

Comments welcome.

Thursday, September 29, 2011

3D printing of clothing

At least, sort of 3D.

My wife, as usual, has been complaining about the difficulty of finding dresses that meet her requirements, which include fitting her, looking reasonably attractive, being washable, and pockets. Having read a number of things recently about 3D printing, it occurred to me to wonder if something along similar lines would, or soon will be, practical for clothing.

It requires an accurate model of the customer's body, which I'm not sure you could get from photos, although it's possible that smart software could manage it. But for a less demanding version, imagine something like a phone booth in a shopping mall. You go in, shut the door, take off your clothes—if Clark Kent could do it, so can you. The sensors in the booth take a 3 dimensional picture of you. Perhaps you move around a little and they take more pictures, since how your shape changes as you move is relevant to getting clothing that will be comfortable. The description of your body shape is uploaded to the firm that put the booth there.

You go to the firm's web site, select fabric, color, style. The web page displays what the resulting dress will look like. If you like it, automatic machinery produces the dress for you. 

Custom tailoring for the masses.

If customers are worried that their naked pictures will get ogled by someone in the cloud, the booth delivers its data directly to the customer, perhaps on a flash disk. The customer downloads the relevant software, plugs in the flash disk, connects to the web site for availability of fabrics, colors, and styles.

Is it doable? Is it being done? It seems like an easier problem than full scale 3D printing, since clothing is made from 2D shapes joined together. The quality of the material should be at least as good as with conventional clothing, since it's the same cloth. And the fit a good deal better.

Anything I'm missing? Any ambitious entrepreneurs out there?

Monday, September 26, 2011

D. Friedman vs D. Brin

[Here's a link to Brin's post and the comments, including mine, courtesy of Chris Hibbert]

I've been having an exchange on Google+ with David Brin, started by a post of his that began:
Is it "class war" to reset tax levels to the levels of the prosperous 1990s?

I pointed out that, according to the CBO figures, the top quintile of the income distribution was paying a slightly higher average federal tax rate in 2007, the last year for which I could find CBO data, than in 1990, while the bottom quintile was paying about half the rate in 2007 it was paying in 1990, and asked him if what he was proposing was doubling the taxes on low income taxpayers.

My point, of course, was that although there is lots of rhetoric about the rich paying low taxes, what actually happened over the past twenty years was a sharp cut in federal taxes for the lower half of the income distribution.

Brin responded with:

Quintiles are utterly utterly misleading. 90% of the people in the topmost quintile still earn most of their income from wages, not dividends or capital gains. Try the top 5% and 1% and 0.1% and include shelters overseas (estimated.) This is exactly the kind of razzle dazzle switcheroo you should be wary of and have spotted for yourself.

To which I replied by quoting his post, followed by:

I don't think I'm the one offering razzle-dazzle--and I note that while you ask me to look up data, you don't actually offer any.

As you could easily have discovered if you looked up the numbers yourself, the CBO figures for 2007 show the top 1% paying an effective federal tax rate of 29.5%. The figure for 1990 is 28.8%.

The bottom quintile, on the other hand, paid an effective rate of 8.9% in 1990. In 2007, it was 4.0%.

So you have your facts backwards, at least so far as I can tell from the CBO figures--if you have something better, feel free to offer it. The effective rate on the bottom quintile has been cut in half since 1990, on the top 1% it has increased a little. I have no idea, and you don't say, what your source is for "shelters overseas (estimated)," but I suspect it's bluff--do you have figures showing that the top 1% is sheltering much more of its income now than in the 1990's? That's what your argument requires.

Let me repeat my question, since you didn't answer it the first time. You suggest rolling back tax levels to what they were in the 1990's. Does that mean that you want to double taxes on low income taxpayers, to get them back to where they were then? That's the big change, after all.

My figures are only up to 2007, since that's all I could readily find from the CBO; my guess is that the 2010 figures, if I could find them, would show a lower tax rate than in 2007 for all groups, since the current Administration has financed its budget largely with borrowing. But the big change from 1990 would still be the sharp drop in the effective tax rates paid by the lower part of the income distribution. For some reason neither you nor Obama seems to have noticed that--or at least let it interfere with your rhetoric.

Brin has so far not responded. I'm waiting to see if he will support his claims, concede error, or simply leave the argument unanswered. The fact that his response to my first post was, so far as I can tell, pure bluff--no data, just the implication that if one looked at the data it would support his beliefs--is disturbing. 


David Henderson has a link to a piece that goes into much more detail than I have and finds that the tax system has been becoming pretty steadily more progressive over the past fifteen years, under both Democrats and Republicans.


The argument continues. For those who don't want to follow the link at the top of this and then search through the comments, here is my most recent response (to two of his):


David B. writes:

In fact I agree that taxes for everybody are lower now than they were in the 1990s.”

Because current spending is financed by borrowing. Which, absent a default, will eventually have to be paid for by higher taxes.

That was not however the point of my comments. My point was that taxation has become more progressive since the 1990’s, when you and lots of other people, including Obama, want to claim it has become less. Do you agree with that? If so, why have you gone to so much trouble, with your handwaving about the top 1% and tax shelters, to deny it?

“Put this in the context of 6000 years of history …”

More evasion. If I can’t get you to face demonstrable facts about taxation in the U.S. over the past few decades, I doubt that arguing with you about the past 6000 years of history would be very useful.

You keep trying to make this an argument about whether one supports or opposes the policies of the Bush administration. I didn’t vote for Bush, didn’t approve of his policies at the time, and don’t approve of their continuation by Obama, so you can have that argument with someone else. I’m simply trying to get you to face the fact that the federal tax system has gotten more progressive over time, not less.

And when I point you at evidence that that’s true, your response isn’t to try to rebut it, or even to understand it, but to talk about “you guys” and try to change the subject to your grand theories about America. If I’m going to argue about grand theories, I would prefer to do it with people who care whether the facts they use in their arguments are true or not.

“You even seem to implicitly say that tax rates SHOULD be progressive. Of course they aren't. Look closely.”

I have said nothing at all about whether tax rates should or shouldn’t be progressive. I’ve merely been trying to establish what they are, and how they have changed over time.

“Most of these right wing "studies" incorporate corporate taxes INTO the recipient's claim of taxes paid, under the bizarre incantation that this envelopes what the call "double taxation."”

Does that include the “right wing studies” by the Congressional Budget Office? Have you looked at their figures on the federal income tax alone? That by itself is highly progressive. That plus payroll taxes—which they treat as entirely a tax on the employee—is still progressive, although not as progressive.

How progressivity has changed over time requires a little effort to determine, and you would rather demagogue than make that effort. To see that the federal tax system is progressive, under any plausible assumption about incidence, requires only the ability to read and do arithmetic. But it apparently doesn’t fit your current ideology, whatever that may be.

I am curious, however, as to who you believe pays corporate income tax, since you think the notion that it comes out of money that would otherwise go to dividends and capital gains is bizarre. Is it just manna from heaven?

Saturday, September 17, 2011

What's Wrong With Gestational Surrogacy?

Gestational surrogacy is the arrangement by which a couple arrange to fertilize the woman's egg with the man's sperm, then have the fertilized ovum implanted and gestated in another woman's womb. In the U.S. the practice is regulated by state law, illegal in some states, legal in others, which means that in practice it is legal, since the couple can arrange to do it in a state where it is legal. 

I gather, however, from a conversation with someone who has been researching the subject, that in most of western Europe it is illegal, and that while it is legal de jure to arrange to have it done abroad—India and the Ukraine are apparently the favored destinations—it is made difficult de facto by administrative obstacles put in the way of bringing the resulting infant back to its parents' home country. The U.K. is a partial exception; gestational surrogacy is legal, but only if it is altruistic, which is to say, only if the host mother is not paid for undergoing the inconvenience and risk of bearing another woman's child.

Which raises an obvious question: Why would anyone be against the arrangement? In many cases, it makes it possible for a couple to have a child—their own child—when they otherwise could not. Even in those cases where the biological mother could bear her own child, why should anyone else object if she can find another woman willing to do it for her on mutually acceptable terms?

There are, I think, a number of possible answers, although none that in my view justify the restrictions. One is that the decision to be a host mother is not freely made since it is "compelled" by poverty. This sort of argument is common in a variety of contexts, but I find it hard to make any sense of it. Put in its simplest terms, the claim is that if the potential host mother does not accept the offer she will starve to death, hence accepting the offer is not really a free choice, hence she should not be permitted to make it. Which, if the starting point is correct, means that out of our generous concern for a poor woman we will compel her to starve to death.

A second possibility, following a line of argument originated (I think) in the context of prostitution by professor Margaret Radin of Stanford Law School, is that by permitting a woman to rent out the use of her womb (body) we "commodify" motherhood (sex), cause people to think of it as something to be bought and sold, and so cheapen the human experience. Restated, the claim is that the  transaction of buying sex or renting a womb is  both an exchange and a statement. The exchange is one that, in Radin's view, should be permitted, since the woman owns her own body and so is entitled to decide how it is employed. But the statement, because of its effect on other people's view of their lives, is one that ought not to be made, hence the transaction may, arguably should, be prohibited.

What is bizarre about this argument is that it was made by an American law professor. The American constitution, as routinely interpreted by judges and law professors, contains a very strong protection for freedom of speech, making it a violation of the constitution to prohibit an act, such as flag burning, which is also speech. Following out that principle, Radin's argument ought to imply that even if there were good reasons to prohibit surrogacy or prostitution, the fact that both are speech as well as acts ought to protect them. She, along with those who accept her argument, reaches precisely the opposite conclusion.

A somewhat better argument that might be made against surrogacy is that permitting a couple to produce a child when they otherwise could not means that they will have no need to adopt, hence prohibiting surrogacy benefits children in need of parents. There is some logic to the argument, but its morality is questionable. Surely a legislator willing to forbid a couple from producing their own child in the only way they can in order that they will have to adopt someone else's ought at least to feel obligated to refrain from producing any children of his own until he has adopted at least one.

Finally there comes what I suspect is the real reason. Natural is good, and surrogacy (like IVF before it, and many other things as well) is unnatural. Our grandparents didn't do it, our pre-human ancestors didn't do it, so there must be something wrong with it, something wicked, sinful. Icky. 

And worse still if done for money.


On the principle of full disclosure, I should mention that my granddaughter Iselle might not have come into existence were it not for surrogacy. A hard argument to rebut (see below).

Saturday, September 10, 2011

Have I Been Tuckerized?

Someone yesterday told me that I had been Tuckerized by Jerry Pournelle in Prince of Mercenaries. A little quick research found that that book has been included in a larger volume called The Prince. Both books are out of print, I don't think I own either, and in any case am currently something over two thousand miles from my library. 

Is there anyone reading this blog who has one of the versions of the book and can check to see if my name appears, linked to one of the characters? I don't think the novel I'm currently working on has a space for a character named J. Pournelle, Destitute Nelly, or anything close, but perhaps one of the scenarios in my current nonfiction project ...  .

Religion, Law, and Sex

"We certainly respect First Amendment rights. However, religious freedom does not allow for criminal acts," Phoenix police spokesman Steve Martos told CNN.

From a news story describing the arrest of 20 people at Arizona's "Goddess Temple," on charges that the temple was a actually a brothel. 
"In addition to sex-ed and sex toy classes, the church offered "sessions" to heal sexual blockages for up to $650 a pop, ABC News reported. And that, cops say, has nothing to do with praising Jesus, or any other higher power."
"For these patients, some sex therapists turn to surrogate partners — people who help patients with intimacy issues using a hands-on approach. This can include having sex with the patient." 
From a news story on the use of surrogate partners to solve sexual problems. 
"The practice is controversial, and most sex therapists don’t work with surrogate partners. Some question its legality, although no laws specifically prohibit surrogate partners, according to the International Professional Surrogates Association (IPSA)."
Or in other words, selling sexual services is clearly illegal if done under the pretense of religion—despite the fact that religious prostitution is a well established historical practice, even if one not associated with Jesus. But it is presumptively legal if "exotic religion" is replaced by "sex therapy." 
Which suggests that the law may not be as nearly neutral among religions as it claims. You just have to take care to pick a religion that judges respect.