Archive for January, 2010

I was watching a Mises Institute video (not worth linking to) about a new English-language Bastiat compendium (new as of I don’t even know when), and the scholar who edited the works called Bastiat an economist. It got me thinking: I don’t like the term “economist.” It presupposes that something needs economizing. In fact, narrowly speaking, I hate “economists” (for a thorough exposition of this sentiment, see The Black Swan by Nassim Nicholas Taleb). The job description assumes a central planner role. A technocratic role. An OMB/CBO/Peter Orszag/bulls***ter who makes ridiculous claims about, for example, Social Security’s solvency*, based on “economic projections.” It assumes someone who studies economics but thinks that “economics” allows them to know and do much more than it actually does.

“High priests and lowly philosophers” — read it. Economists really shouldn’t act like they transcend the title “lowly philosopher.” That’s why I love Bastiat, Hazlitt, and others (e.g. Stossel) who are outside of the “economics” establishment. They’re observers and lowly philosophers, not technocrats. For all the purported benefits mathematics has brought to economics, I think they have been outweighed by the air of sophistication and accuracy they have afforded economics, exploited by those who wish to use the “science” for authoritarian ends. See “The Pretence of Knowledge,” because if you haven’t read it already you must. This is why Austrians are legit. They realize the limits of their knowledge.

More generally, I hold great respect for scholars who do not reside in academia (or who can at least avoid groupthink within it). I include the aforementioned Bastiat and Hazlitt, along with Mises (virtually unknown in America while he resided here), Hayek (scorned until his unexpected Nobel in ’74), even Rand, and my new favorite intellectual terrorist, Taleb. And of course, the Austrians. Perhaps their status as outsiders in the intellectual tradition of economics has kept Austrian economists free of the pretensions of the mainstream. In any event, I consider economics to be enlightened philosophy — normative arguments must be informed by an understanding of what is, which is why Austrian concepts such as spontaneous order, entrepreneurship, and market processes are so useful.** Useful in a philosophical sense, however — not analogous to the physical sciences, which is what many (most?) mainstream economists desire to emulate.

*Along the lines of intellectual herding, I’m infuriated every time I hear an academic knock Wikipedia, or hear the oft-uttered, sarcastic “Well if its on the internet it must be true.” To which I reply “Well if its in print it must be true.” For first-rate intellectual fraud and ideological rationalization, check out this book on Social Security by Peter Orszag. While researching the (nonexistent)  Social Security Trust Fund a couple of years ago, I came across this book and Orszag immediately made my top 5 most despised public intellectuals. Other notables include Naomi Klein and the notorious Michael Moore (not an intellectual, but you get the idea).

**I highly recommend The Foundations of Morality by Henry Hazlitt. It’s a beautiful synthesis of philosophy with economic understanding to produce a rule-utilitarian ethical system. It doesn’t answer all questions, of course, but its a great approach. And as discreetly as possible, I’m going to concede defeat in my debate with Seth.

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Earlier I made the argument that deontology requires consequentialism.  Over at Less Wrong, Alicorn has a great exploration of consequentialism and deontology that complements the discussion here.

If a deontologist says “lying is wrong”, and you mentally add something that sounds like “because my utility function has a term in it for the people around believing accurate things.  Lying tends to decrease the extent to which they do so, but if I knew that somebody would believe the opposite of whatever I said, then to maximize the extent to which they believed true things, I would have to lie to them.  And I would also have to lie if some other, greater term in my utility function were at stake and I could only salvage it with a lie.  But in practice the best I can do is to maximize my expected utility, and as a matter of fact I will never be as sure that lying is right as I’d need to be for it to be a good bet.”5… you, my friend, have missed the point.  The deontologist wasn’t thinking any of those things. The deontologist might have been thinking “because people have a right to the truth”, or “because I swore an oath to be honest”, or “because lying is on a magical list of things that I’m not supposed to do”, or heck, “because the voices in my head told me not to”6.

Read the whole thing.

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Last week commentator and all-around great guy Brice weighed in with two long responses to two separate posts. There’s quite a lot going on in his comments but they’re fairly interrelated, so rather than deal with them in the comments section, it makes sense to make a unified response here. Sit back, grab some coffee and get ready to nerd up because this is a big one. Let’s go with Part I. (more…)

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I clearly need to develop my thoughts about consequentialism further.  When I attacked the mistake of deriving libertarianism from first principles earlier, I actually thought Aaron and I were in agreement.  Once Aaron and I had a conversation with another person about Kant’s deontological ethics, and both Aaron I remarked to each other later how silly it was that this person advocated Kantian ideas.

I’m not so sure Aaron and I really do disagree.  Aaron gives deference to utilitarian technologies, which neoclassical economists certainly use, but with an important caveat, that utility is ordinal, not cardinal.  What does this mean?  It’s incoherent to compare the value of $10.00, a market price, of any particular good or service, between two different individuals.  Individuals value what they purchase subjectively.  Trade-offs will be different; individuals have different utility functions.

Ordinal utility serves as a good universal principle.  So does self-ownership, and so does the importance of property rights.  I don’t dispute that these are valid principles that can be universally applied.  Rather, I’m arguing that these principles must be defended consequentially.  I don’t think that Rand solved the is-ought problem, and Aaron hasn’t either.  Even just by describing a solid, consistent principle that can be universally applied doesn’t mean that it has been derived from the intrinsic nature of the principle.  My intuition is that if we evaluate such principles, we’re constantly judging them on the basis of their consequences.

Suppose I tell a progressive that health care should be allocated on a free market.  They object that the consequences of such a policy mean that some people would not be able to afford some minimum amount of health care.  They evaluate the consequences of my recommendation, because in their mind, the consequence they desire is for all people to afford care.

Suppose a Marxist tells me that property is theft, and that all goods and services should be allocated centrally.  I evaluate the problems with this by noting that the failure to legally recognize private property for private goods distorts incentives, and will mean forgoing wealth that is otherwise possible with free markets.  I evaluate the proposed Marxist principle consequentially.

I don’t think Kant was being honest.  What makes a categorical imperative categorical?  Do we not need to evaluate the consequences of a universal principle?

Suppose that I propose, as the basis of an ethical system, that it is proper for every individual to to murder all other individuals, as many people as they possibly can.  This is pretty clearly a terrible ethical principle, but why is it?  Think of what it implies consequentially.

In evaluating ethical claims, consequentialism is unavoidable.

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It’s been a pretty hectic week, and it’ll be the weekend before I get a chance to respond to the various issues raised. For now, I thought everyone might be interested in this list of Scott Brown’s positions on issues besides health care. Enjoy. Sounds like a 70% solution to me.

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What Went Wrong – Every Wednesday, Big Think features new experts to examine the causes of the financial crisis. Some excellent pieces, with competing views and thoughtful commentary.

Style and Substance – Excellent piece from Micheal Barone.

Supreme Court Fail – Ilya Shapiro corrects Justice Breyer’s radically flawed conception of government.

Libertarianism at the Movies – I love Dark City, not least because of the delightful Jennifer Connolly. I now really want to see Brazil.

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I disagree with Seth, and by extension Professor Hanson. I don’t think there’s anything wrong with first principles, it’s just that most first principles are incorrectly derived. I do agree with Prof. Hanson when he reminds me of this classic xkcd. And if you don’t think xkcd is funny, well, sometimes you’re right but not this time.

I disagree with both Seth and Prof. Hanson when the later writes

Liberty is a fine heuristic, but efficiency is more what I want, so I’m willing to consider sometimes violating your liberty axiom.  Like you I am wary of big government, but because of bad consequences that often follow, not a liberty axiom violation.

Efficiency is a fine ideal, and in the absence of a valid first principle, it’s probably the most appropriate one. The question is, can there be a valid first principle? Seth categorically denies that. Instead, as Seth begins, “consequentialism is true”. In many respects it is. Someone who dies in a car accident and someone who has a heart attack are in most respects similar. Dead is dead. (more…)

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Luck and Risk

How would you describe someone who’s made a fortune in the stock market, only to lose it all, many times over? The average journalist would probably choose from among dogged, persistent, undaunted, and maybe irrepressible. According to Professor Rizzo, they should probably just use ‘lucky’.

What is this chart telling us? It is a reminder that current market prices tend to capture any relevant and publicly relevant information about a product, company, sector, or industry. This is the simple foundation for the “Efficient Markets Hypothesis.” What are its implications? Well, it would suggest that an investor, by looking at business cycle conditions, and other publicly available information, cannot profit from that information by trading based on it.

Does that mean investors cannot beat the market? Not at all. But do not confuse luck with competence.

This reminds me of an old Gladwell piece, available here and in his book, that looks at two different Wall Street strategies, and the rise of Nassim Taleb’s no-risk, slow-reward approach.

One day in 1996, a Wall Street trader named Nassim Nicholas Taleb went to see Victor Niederhoffer. Victor Niederhoffer was one of the most successful money managers in the country. He lived and worked out of a thirteen-acre compound in Fairfield County, Connecticut, and when Taleb drove up that day from his home in Larchmont he had to give his name at the gate, and then make his way down a long, curving driveway. Niederhoffer had a squash court and a tennis court and a swimming pool and a colossal, faux-alpine mansion in which virtually every square inch of space was covered with eighteenth- and nineteenth-century American folk art. In those days, he played tennis regularly with the billionaire financier George Soros. He had just written a best-selling book, “The Education of a Speculator,” dedicated to his father, Artie Niederhoffer, a police officer from Coney Island. He had a huge and eclectic library and a seemingly insatiable desire for knowledge. When Niederhoffer went to Harvard as an undergraduate, he showed up for the very first squash practice and announced that he would someday be the best in that sport; and, sure enough, he soon beat the legendary Shariff Khan to win the U.S. Open squash championship. That was the kind of man Niederhoffer was. He had heard of Taleb’s growing reputation in the esoteric field of options trading, and summoned him to Connecticut. Taleb was in awe.

“He didn’t talk much, so I observed him,” Taleb recalls. “I spent seven hours watching him trade. Everyone else in his office was in his twenties, and he was in his fifties, and he had the most energy of them all. Then, after the markets closed, he went out to hit a thousand backhands on the tennis court.” Taleb is Greek-Orthodox Lebanese and his first language was French, and in his pronunciation the name Niederhoffer comes out as the slightly more exotic Nieder hoffer. “Here was a guy living in a mansion with thousands of books, and that was my dream as a child,” Taleb went on. “He was part chevalier, part scholar. My respect for him was intense.” There was just one problem, however, and it is the key to understanding the strange path that Nassim Taleb has chosen, and the position he now holds as Wall Street’s principal dissident. Despite his envy and admiration, he did not want to be Victor Niederhoffer — not then, not now, and not even for a moment in between. For when he looked around him, at the books and the tennis court and the folk art on the walls — when he contemplated the countless millions that Niederhoffer had made over the years — he could not escape the thought that it might all have been the result of sheer, dumb luck.

It’s an excellent piece, and good reading for any of us who deal in the ideas of business, or the business of ideas.

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Unintended consequences in medicine:

Scientists may have created a vaccine against cocaine addiction: a series of shots that changes the body’s chemistry so that the drug can’t enter the brain and provide a high.

The vaccine, called TA-CD, shows promise but could also be dangerous; some of the addicts participating in a study of the vaccine started doing massive amounts of cocaine in hopes of overcoming its effects, according to Thomas R. Kosten, the lead researcher on the study, which was published in the Archives of General Psychiatry in October.

“After the vaccine, doing cocaine was a very disappointing experience for them,” said Kosten, a professor of psychiatry and neuroscience at Baylor College of Medicine in Houston.

Nobody overdosed, but some of them had 10 times more cocaine coursing through their systems than researchers had encountered before, according to Kosten. He said some of the addicts reported to researchers that they had gone broke buying cocaine from multiple drug dealers, hoping to find a variety that would get them high.

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Reading Recently

What the Dog Saw – When it comes to Gladwell I typically agree with Pinker. What bothers me most is that in the WTDS into, Gladwell claims he’s more interested in being ‘interesting’ than being ‘right’, but his ongoing argument with Pinker would tend to undermine that statement. That’s a shame, because Gladwell does interesting better than all but a handful of writers. If you can be interesting enough, right or wrong are a secondary consideration. Call this the reverse-Brooks principle.

The Book of Basketball – I love basketball, and I love history so on paper this book is perfect for me. But somewhere something went wrong. Until I read this book, I was the biggest Bill Simmons fan. That’s not a derogatory sentiment; he was (and still is) the most consistently funny and entertaining sports commentator of the internet era. What happened was that I read this 700+ page bullet-stopping monstrosity in about four days. Think about the hottest model. Now think about spending four days straight without speaking or interacting with anyone else. Can you say ‘burnout‘? Still, this is an unbelievable accomplishment, and I recommend it to any fan of Bill Simmons, of basketball, or sports or journalism. I’d just suggest reading over the course of four months, not four days. To be fair, that’s the author’s suggestion too.

The Sword of Truth Series – A libertrainish fantasy epic series? Terry Goodkind, it’s like you can see inside my head, with your intense stare and muscle t-shirt. Of the whole series, I think Faith of the Fallen is my favorite, but read it in context.

No Surrender – A novel by an old friend from high school, about my old home town of Portland, Maine. For those of you who haven’t seen Portland, shame. See more of Greg’s writing and his unique art at his website. In addition to being talented, fascinating and prolific, he’s a goddamn great guy too. If I ask nothing else from you in this coming year, please buy his book.

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