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[Link] Artificial intelligence and the stability of markets

1 fortyeridania 15 November 2017 02:17AM

[Link] Why Competition in The Politics Industry Is Failing America -pdf

0 morganism 31 October 2017 11:26PM

Economics of AI conference from NBER

1 fortyeridania 27 September 2017 01:45AM

The speaker list (including presenters and moderators) includes many prominent names in the economics world, including:

And others with whom you might be more familiar than I.

H/T Marginal Revolution

[Link] The new spring of artificial intelligence: A few early economics

1 fortyeridania 21 August 2017 02:06AM

[Link] Review of "The Undoing Project: A Friendship That Changed Our Minds," Michael Lewis' book about Kahneman & Tversky

1 fortyeridania 19 April 2017 05:13AM

[Link] Putanumonit: Contra Noah Smith's bad argument for a good cause

0 Jacobian 05 April 2017 09:14PM

Increasing GDP is not growth

13 PhilGoetz 16 February 2017 06:04PM

I just saw another comment implying that immigration was good because it increased GDP.  Over the years, I've seen many similar comments in the LW / transhumanist / etc bubble claiming that increasing a country's population is good because it increases its GDP.  These are generally used in support of increasing either immigration or population growth.

It doesn't, however, make sense.  People have attached a positive valence to certain words, then moved those words into new contexts.  They did not figure out what they want to optimize and do the math.

I presume they want to optimize wealth or productivity per person.  You wouldn't try to make Finland richer by absorbing China.  Its GDP would go up, but its GDP per person would go way down.

continue reading »

[Link] Basic Income. org

0 morganism 11 February 2017 12:01AM

[Link] Decision Theory subreddit

6 gwern 07 February 2017 06:42PM

[Link] "What Happens When Doctors Only Take Cash"? Everybody, Especially Patients, Wins

5 morganism 30 January 2017 11:57PM

[Link] Did slavery make the US an economic superpower and would the industrial revolution have happened without it?

4 phl43 27 January 2017 09:01PM

[Link] A new blog with analyses of various topics (e. g. slavery and capitalism, why election models didn't predict Trump's victory)

2 phl43 26 January 2017 11:30PM

The substance of money

2 MrMind 17 January 2017 02:51PM

Not much epistemic effort here: this is just an intuition that I have to model a vast and possibly charged field. I'm calling upon the powers of crowd-finding to clarify my views.

Tl;dr: is the debate in economics over the nature of money really about the definition or just over politics?

I'm currently reading "Money - an unauthorised biography" by Felix Martin. It presents what is to me a beautifully simple and elegant definition of what money is: transferable value over a liquid landscape (these precise words are mine). It also presents many cases where this simple view is contrasted by another view: money as a commodity. This opposition is not merely one of academics definitions, but has important consequences. Policy makers have adopted different points of view and have becuase of that varied very much their interventions.

I've never been much interested in the field, but this book sparked my curiosity, so I'm starting to look around and I'm surprised to discover that this debate is still alive and well in the 21st century.

Basically what I've glanced is that there is this Keynesian school of thougth that posits that yes, money is transferable debts, and since money is merely a technology that expresses an agreement, you should intervente in the matter of economics, especially by printing money when this is needed.

Then there's an opposite view (does it have a name?) that says that no, money is a commodity and for this reason it must be treated as such: it's creation is to be carefully controlled by the market and it's value tied only to the value of an underlying tradeable asset.

I think my uncertainty shows how little I know about this field, so apply Crocker's rule at will. Is this a not completely inaccurate model of the debate?

If it is so, my second question: is this a debate over substance or over politics?
If I think that money is transferable debts, surely I can recognize the merit of intervention but also understand that a liberal use of said tool might breed a disaster.
If I think that money is a standard commodity, can I manipulate which commodity it is exactly tied to to increase the availability of money in times of need?
Am I talking nonsense for some technical reason? Am I missing something big? Is economics the mind-killer too?

Elucidate me!

[Link] Shopping for Happiness

4 gworley 21 December 2016 02:22AM

[Link] What if jobs are not the solution, but the problem

0 morganism 29 November 2016 11:21PM

[Link] Revealed and Stated Identity

2 gworley 25 November 2016 08:17PM

Group rationality -- bridging the gap in a post-truth world

0 rosyatrandom 18 November 2016 01:44PM

Everyone on this site obviously has an interest in being, on a personal level, more rational. That's, without need for argument, a good thing. (Although, if you do want to argue that, I can't stop you...)


As a society, we're clearly not very rational, and it's becoming a huge problem. Look at any political articles out there, and you'll see the same thing: angry people partitioned into angry groups, yelling at each other and confirming their own biases. The level of discourse is... low, shall we say. 

While the obvious facet of rationality is trying to discern the signal above the noise, there's definitely another side: the art of convincing others. That can swing a little too close to Sophistry and putting the emphasis on personal gain, though. What we really need to do is outreach: promote rationality in the world around us. There's probably no-one reading this who hasn't been in an argument where being more rational and right hasn't helped at all, and maybe even made things worse. We've also all probably been on the other side of that, too. Admit it. But possibly the key word in that is 'argument': it frames the discussion as a confrontation, a fight that needs to be won.

Being the calm, rational person in a fight doesn't always work, though. It only takes one party to want a fight to have one, after all. When there's groups involved, the shouty passionate people tend to dominate, too. And they're currently dominating politics, and so all our lives. That's not a status quo any rationalist would be happy with, I think.

One of the problems with political/economic discussions is that we get polarised into taking absurd blanket positions and being unable to admit limitations or counter-arguments. I'm generally pretty far on the Left of the spectrum, but I will freely admit that the Right has both some very good points and a role to play: what is needed is a good dynamic tension between the two sides to ensure we don't go totally doolally either way. (Thesis, Antithesis, Synthesis etc.) And the tension is there, but it's certainly not good. We need to be able to point out failure modes to ourselves and others, encourage constructive criticism.

I think we need ways of both cooling the flames (both 1-on-1 and in groups), and strategies for promoting useful discussion.

So how can we do this? What can we do?

Market Failure: Sugar-free Tums

3 PhilGoetz 30 June 2016 12:12AM

In theory, the free market and democracy both work because suppliers are incentivized to provide products and services that people want.  Economists consider it a perverse situation when the market does not provide what people want, and look for explanations such as government regulation.

The funny thing is that sometimes the market doesn't work, and I look and look for the reason why, and all I can come up with is, People are stupid.

I've written before about the market's apparent failure to provide cup holders in cars.  I saw another example this week in the latest Wired magazine, a piece on page 42 about a start-up called Thinx to make re-usable women's underwear that absorbs menstrual fluid--all of it, so women don't have to slip out of the middle of meetings to change tampons.  The piece's angle was that venture capitalists rejected the idea because they were mostly men and so didn't "get it".

I'd guess they "got it".  It isn't a complicated idea.  The thing is, there are already 3 giant companies battling for that market.  The first thing a VC would say when you tell him you're going to make something better than a tampon is, "Why haven't Playtex, Kotex, or Tampax already done that?"

So, Thinx did a kickstarter and has now sold hundreds of thousands of thousands of absorbent underwear for about $30 each.

The failure in this case is not that VCs are sexist, but that Playtex, etc., never developed this product, although there evidently is a demand for it, and there is no evident reason it couldn't have been produced 20 years ago.  The belief that the market doesn't fail then almost led to a further failure, the failure to develop the product at the present time, because the belief that the market doesn't fail implied the product could not be profitable.

I just now came across an even clearer case of market failure: Sugar-free Tums.

continue reading »

Is altruistic deception really necessary? Social activism and the free market

3 PhilGoetz 26 February 2016 06:38AM

I've said before that social reform often seems to require lying.  Only one-sided narratives offering simple solutions motivate humans to act, so reformers manufacture one-sided narratives such as we find in Marxism or radical feminism, which inspire action through indignation.  Suppose you tell someone, "Here's an important problem, but it's difficult and complicated.  If we do X and Y, then after five years, I think we'd have a 40% chance of causing a 15% reduction in symptoms."  They'd probably think they had something better to do.

But the examples I used in that previous post were all arguably bad social reforms: Christianity, Russian communism, and Cuban communism.

The argument that people need to be deceived into social reform assumes either that they're stupid, or that there's some game-theoretic reason why social reform that's very worthwhile to society as a whole isn't worthwhile to any individual in society.

Is that true?  Or are people correct and justified in not making sudden changes until there's a clear problem and a clear solution to it?

continue reading »

Effective Altruism from XYZ perspective

4 [deleted] 08 July 2015 04:34AM

In this thread, I would like to invite people to summarize their attitude to Effective Altruism and to summarise their justification for their attitude while identifying the framework or perspective their using.

Initially I prepared an article for a discussion post (that got rather long) and I realised it was from a starkly utilitarian value system with capitalistic economic assumptions. I'm interested in exploring the possibility that I'm unjustly mindkilling EA.

I've posted my write-up as a comment to this thread so it doesn't get more air time than anyone else's summarise and they can be benefit equally from the contrasting views.

I encourage anyone who participates to write up their summary and identify their perspective BEFORE they read the others, so that the contrast can be most plain.

Why capitalism?

6 Algon 03 May 2015 06:16PM

Note: I'm terrible at making up titles, and I think that the one I gave may give the wrong impression. If anyone has a suggestion on what I should change it to, it would be much appreciated.

As I've been reading articles on less wrong, it seems to me that there are hints of an underlying belief which states that not only is capitalism a good economic paradigm, it shall remain so. Now, I don't mean to say anything like 'Capitalism is Evil!' I think that capitalism can, and has, done a lot of good for humanity. 

However, I don't think that capitalism will be the best economic paradigm going into the future. I used to view capitalism as an inherent part of the society we currently live in, with no real economic competition.

I recently changed my views as a result of a book someone recommended to me 'The zero marginal cost society' by Jeremy Rifkin. In it, the author states that we are in the midst of a third industrial revolution as a result of a new energy/production and communications matrix i.e. renewable energies, 3-D printing and the internet.

The author claims that these three things will eventually bring their respective sectors marginal costs to zero. This is significant because of a 'contradiction at the heart of capitalism' (I'm not sure how to phrase this, so excuse me if I butcher it): competition is at the heart of capitalism, with companies constantly undercutting each other as a result of new technologies. These technological improvement allow a company to produce goods/services at a more attractive price whilst retaining a reasonable profit margin. As a result, we get better and better at producing things, and it lets us produce goods at ever decreasing costs. But what happens when the costs of producing something hit rock bottom? That is, they can go no lower.

3D printing presents a situation like this for a huge amount of industries, as all you really need to do is get some designs, plug in some feedstock and have a power source ready. The internet allows people to share their designs for almost zero cost, and renewable energies are on the rise, presenting the avenue of virtually free power. All that's left is the feedstock, and the cost of this is due to the difficulty of producing it. Once we have better robotics, you won't need anyone to mine/cultivate anything, and the whole thing becomes basically free.

And when you can get your goods, energy and communications for basically free, doesn't that undermine the whole capitalist system? Of course, the arguments presented in the book are much more comprehensive, and it details an alternative economic paradigm called the Commons. I'm just paraphrasing here.

Since my knowledge of economics is woefully inadequate, I was wondering if I've made some ridiculous blunder which everyone knows about on this site. Is there some fundamental reason why Jeremy Rifkin's is a crackpot and I'm a fool for listening to him? Or is it more subtle than that? I ask because I felt the arguments in the book pretty compelling, and I want some opinions from people who are much better suited to critiquing this sort of thing than I.

Here is a link to the download page for the essay titled 'The comedy of the Commons' which provides some of the arguments which convinced me: 


A lecture about the Commons itself:


And a paper (?) about governing the commons: 


And here is a link to the author's page, along with some links to articles about the book:



An article displaying some of the sheer potential of 3D printers, and how it has the potential to change society in a major way:


Edit: Drat! I forgot about the stupid questions thread. Should I delete this and repost it there? I mean, I hope to discuss this topic with others, so it seems suitable for the DISCUSSION board, but it may also be very stupid. Advice would be appreciated.

Easy wins aren't news

39 PhilGoetz 19 February 2015 07:38PM

Recently I talked with a guy from Grant Street Group. They make, among other things, software with which local governments can auction their bonds on the Internet.

By making the auction process more transparent and easier to participate in, they enable local governments which need to sell bonds (to build a high school, for instance), to sell those bonds at, say, 7% interest instead of 8%. (At least, that's what he said.)

They have similar software for auctioning liens on property taxes, which also helps local governments raise more money by bringing more buyers to each auction, and probably helps the buyers reduce their risks by giving them more information.

This is a big deal. I think it's potentially more important than any budget argument that's been on the front pages since the 1960s. Yet I only heard of it by chance.

People would rather argue about reducing the budget by eliminating waste, or cutting subsidies to people who don't deserve it, or changing our ideological priorities. Nobody wants to talk about auction mechanics. But fixing the auction mechanics is the easy win. It's so easy that nobody's interested in it. It doesn't buy us fuzzies or let us signal our affiliations. To an individual activist, it's hardly worth doing.

Is Pragmatarianism (Tax Choice) Less Wrong?

-16 Xerographica 12 February 2015 04:47AM

I sure think it is!  But I could be wrong...

This is my first article/post? here and to be honest, I have this website open in another tab and I keep refreshing it to see if I still have enough points to post.  I wish I would have taken a screenshot every time my karma changed.  First it was 0, then it was -1, then it was back to 0, then I think it jumped up to 5.  I thought I was safe but then this morning it was down to 0.  So if this post seems "linky" then it might be because I'm trying to share as much information as I can while my window of opportunity is still open.  

Pragmatarianism (tax choice) is the belief that taxpayers should be able to choose where their taxes go.  Tax choice is the broad concept while pragmatarianism is my own personal spin on it... but sometimes I use "tax choice" when I mean pragmatarianism.  Eh, at this point I don't think it's a big deal.  Really the only thing nice about the word "pragmatarianism" is that it functions as a unique ID... which is extremely helpful when it comes to searches.  Don't have to worry about wading through irrelevant results. 

Here are some links from my blog which should help you decide whether pragmatarianism is more or less wrong...

Pragmatarianism FAQ - a good place to start.  It's pretty short.  

Key concepts - a work in progress.  Some of the concepts are linked to entries which have PDF files with a bunch of relevant quotes and passages.  If you like any of them then please share them in this thread... Quotes Repository.  I shared a few but they didn't fare so well... so I'm guessing that most people here aren't fans of economics... or they aren't fans of my economics. 

Progress as a Function of Freedom - hedging bets, the impossibility of hostile aliens, the problem with "rights".  

What Do Coywolves, Mr. Nobody, Plants And Fungi All Have In Common? - the universal drive to choose the most valuable option, the carrying model as an explanation for our intelligence, a bit on rationality.

Builderism - where better options come from, globalization, debunking Piketty, eliminating poverty. 

My Robin Hanson trilogy...

Is Robin Hanson's Path To Efficient Voting Pragmatic Or Brilliant Or Both? - maybe we should have a civic currency?

Rescuing Robin Hanson From Unmet Demand - how many other people are in the same boat?

Futarchy vs Pragmatarianism - is it logically inconsistent to support one but not the other?  


AI Box Experiment vs Xero's Rule - my first brainstorm attempt to wrap my mind around the idea of an AI box.

Is A Procreation License Consistent With Libertarianism? - would a procreation license be less wrong?

Why I Love Your Freedom - my critique of the best critique of libertarianism.  A bit on rationality.

So what do you think?  Am I in the right place?  

What else?  Of course I'm an atheist!  And I love sci-fi... and for sure I want to live forever.  The major obstacle is that too many people fail to grasp that progress depends on difference.  I do my best to try and eliminate this obstacle.  Unfortunately I suck at writing and my drawings are even worse.  Oh well.

Let me know if you have any questions.

LINK: Superrationality and DAOs

5 somnicule 24 January 2015 09:47AM

The cryptocurrency ethereum is mentioned here occasionally, and I'm not surprised to see an overlap in interests from that sphere. Vitalik Buterin has recently published a blog post discussing some ideas regarding how smart contracts can be used to enforce superrationality in the real world, and which cases those actually are. 

Misapplied economics and overwrought estimates

2 erratim 12 January 2015 05:10PM

I believe that a small piece of rationalist community doctrine is incorrect, and I'd like your help correcting it (or me). Arguing the point by intuition has largely failed, so here I make the case by leaning heavily on the authority of conventional economic wisdom.

The question:

How does an industry's total output respond to decreases in a consumer's purchases; does it shrink by a similar amount, a lesser amount, or not at all?

(Short-run) Answers from the rationalist community:

The consensus answer in the few cases I've seen cited in the broader LW community appears to be that production is reduced by an amount that's smaller than the original decrease in consumption.

Animal Charity Evaluators (ACE):

Fewer people in the market for meat leads to a drop in prices, which causes some other people to buy more meat. The drop in prices does also reduce the amount of meat produced and ultimately consumed, but not by as much as was consumed by people who have left the market.

Peter Hurford:

As is commonly known by economists, when you choose to not buy a product, you lower the demand ever so slightly, which lowers the price ever so slightly, which turns out to re-increase the demand ever so slightly. Therefore, forgoing one pound of meat means that less than one pound of meat actually gets prevented from being factory farmed.

Compassion, by the Pound:

The key points to note are that a permanent decision to reduce meat consumption (1) does ultimately reduce the number of animals on the farm and the amount of meat produced (2), but it has less than a 1-to-1 effect on the amount of meat produced. 

These answers are all correct in the short-run (ie, when the “supply curve” doesn’t have time to shift). If there is less demand for a product, the price will fall, and some other consumers will consume more because of the better deal. One intuitive justification for this is that when producers don’t have time to fully react to a change in demand, the total amount of production and consumption is somewhat ‘anchored’ to prior expectations of demand, so any change in demand will have less than a 1:1 effect on production.

For example, a chicken producer who begins to have negative profits due to the drop in price isn't going to immediately yank their chickens from the shelves; they will sell what they've already produced, and maybe even finish raising the chickens they've already invested in (if the remaining marginal cost is less than the expected sale price), even if they plan to shut down soon.

(Long-run) Answers from neoclassical economics:

In the long-run, however, the chicken producer has time to shrink or shut down the money-losing operation, which reduces the number of chickens on the market (shifts the "supply curve" to the left). The price rises again and the consumers that were only eating chicken because of the sale prices return to other food sources.

As a couple of online economics resources put it:


The long-run market equilibrium is conformed of successive short-run equilibrium points. The supply curve in the long run will be totally elastic as a result of the flexibility derived from the factors of production and the free entry and exit of firms.



The increase in demand causes the equilibrium price of zucchinis [to] increase... and the equilibrium quantity [to] rise... The higher price and larger quantity is achieved as each existing firm in the industry responds to the demand shock.

However, the higher price leads to above-normal economic profit for existing firms. And with freedom of entry and exit, economic profit attracts kumquat, cucumber, and carrot producers into this zucchini industry. An increase in the number of firms in the zucchini industry then causes the market supply curve to shift. How far this curve shifts and where it intersects the new demand curve... determines if the zucchini market is an increasing-cost, decreasing-cost, [or] constant-cost industry.

Constant-Cost Industry: An industry with a horizontal long-run industry supply curve that results because expansion of the industry causes no change in production cost or resource prices. A constant-cost industry occurs because the entry of new firms, prompted by an increase in demand, does not affect the long-run average cost curve of individual firms, which means the minimum efficient scale of production does not change.

[I left out the similar explanations of the increasing- and decreasing-cost cases from the quote above.]

In other words, while certain market characteristics (increasing-cost industries) would lead us to expect that production will fall by less than consumption in the long-run, it could also fall by an equal amount, or even more.

Short-run versus long-run

Economists define the long-run as a scope of time in which producers and consumers have time to react to market dynamics. As such, a change in the market (e.g. reduction in demand) can have one effect in the short-run (reduced price), and a different effect in the long-run (reduced, constant, or increased price). In the real world, there will be many changes to the market in the short-run before the long-run has a chance to react to to any one of them; but we should still expect it to react to the net effect of all of them eventually.

Why do economists even bother measuring short-run dynamics (such as short-run elasticity estimates) on industries if they know that a longer view will render them obsolete? Probably because the demand for such research comes from producers who have to react to the short-run. Producers can't just wait for the long-run to come true; they actively realize it by reacting to short-run changes (otherwise the market would be 'stuck' in the short-run equilibrium).

So if we care about long-run effects, but we don't have any data to know whether the industries and increasing-cost, constant-cost, or decreasing-cost, what prior should we use for our estimates? Basic intuition suggests we should assume an industry is constant-cost in the absence of industry-specific evidence. The rationalist-cited pieces I quoted above are welcome to make an argument that animal industries in particular are increasing-cost, but they haven't done that yet, or even acknowledged that the opposite is also possible.

Are there broader lessons to learn?

Have we really been messing up our cost-effectiveness estimates simply by confusing the short-run and long-run in economics data? If so, why haven't we noticed it before?

I'm not sure. But I wouldn't be surprised if one issue is, in the process of trying to create precise cost-effectiveness-style estimates it's tempting to use data simply because it's there.

How can we identify and prevent this bias in other estimates? Perhaps we should treat quantitative estimates as chains that are no stronger than their weakest link. If you're tempted to build a chain with a particularly weak link, consider if there's a way to build a similar chain without it (possibly gaining robustness at the cost of artificial precision or completeness) or whether chain-logic is even appropriate for the purpose.

For example, perhaps it should have raised flags that ACE's estimates for the above effect on broiler chicken production (which they call "cumulative elasticity factor" or CEF) ranged by more than a factor of 10x, adding almost as much uncertainty to the final calculation for broiler chickens as the 5 other factors combined. (To be fair, the CEF estimates of the other animal products were not as lopsided.)

Contrarian LW views and their economic implications

16 Larks 08 October 2014 11:48PM

LW readers have unusual views on many subjects. Efficient Market Hypothesis notwithstanding, many of these are probably alien to most people in finance. So it's plausible they might have implications that are not yet fully integrated into current asset prices. And if you rightfully believe something that most people do not believe, you should be able to make money off that.


Here's an example for a different group. Feminists believe that women are paid less than men for no good economic reason. If this is the case, feminists should invest in companies that hire many women, and short those which hire few women, to take advantage of the cheaper labour costs. And I can think of examples for groups like Socialists, Neoreactionaries, etc. - cases where their positive beliefs have strong implications for economic predictions. But I struggle to think of such ones for LessWrong, which is why I am asking you. Can you think of any unusual LW-type beliefs that have strong economic implications (say over the next 1-3 years)?


Wei Dai has previously commented on a similar phenomena, but I'm interested in a wider class of phenomena.


edit: formatting

If interventions changing population size are cheap, they may be the best option independent of your population ethics

6 ericyu3 13 August 2014 03:03AM

In this post I'll explain why you might want to assist altruistic interventions that change the size of the world population regardless of how valuable you think additional lives are. The argument relies on a combination of 2 population-changing interventions that combine to produce the effect of a non-population-changing intervention, but at a lower cost.

Suppose you can donate to the following 3 interventions:

  • "Growth": increase one future person's income from $500/yr to $5,000/yr for $10,000
  • "Plus": cause one more person to be born in a middle-income country (income ~$5,000/yr) for $6,000
  • "Minus": cause one less person to be born in a poor country (income ~$500/yr) for $1,000
Assume that the interventions are independent, and that donating multiples of the cost produces multiples of the effect without diminishing returns.

The cost estimates are completely made up; the point of this post is to explain what happens if the total cost of Plus and Minus is less than the cost of Growth. The cost of Plus is probably least well-known, since it's the least popular of the 3. Also, in the real world, you would probably want to spread the impact of $10,000 across at least several people instead of increasing one person's income by 10x, but I think the post makes more sense this way. If you know a more reasonable estimate for the costs, please post them!

If you donate to Plus and Minus, the total effect is the same as the effect of Growth in many ways - in the future, there is one more person with income $5,000, one less person with income $500, and the size of the world population remains the same. In my last post, I asked about whether consequentialists actually view the two outcomes as equivalent, and people seemed to think yes, so it's reasonable to say that Plus+Minus is just as beneficial as Growth. But Plus+Minus only costs $7,000 while Growth costs $10,000, so regardless of your population ethics, you should prefer donating to Plus+Minus.

But unless your population ethics are "fine-tuned" to make Plus and Minus equally cost-effective, one of them will be clearly better (more cost-effective) than the other. If you think Minus is better than Plus, then Minus is better than Plus+Minus, which is better than Growth, so you should donate exclusively to Minus. The same argument applies if you think Plus is better than Minus. If you donate to only one of Plus and Minus, you will change the size of the world population. So this seems to show that if population-changing interventions are cheap, you should act to change population size regardless of what you think about population ethics. Even if you are very uncertain what the value of a new life is, you can still use your best guess to decide between Plus and Minus as long as you are risk-neutral about how much good you do. 

Numerical example: suppose that Growth yields 100 "points" of benefit, where "point" is an arbitrary unit. Then regardless of population ethics, Plus+Minus yields 100 points as well. How these points are distributed between Plus and Minus depends on your population ethics, however. If you are a total utilitarian, you might say that Minus is worth -20 points and Plus is worth 120 points, and if you're a negative utilitarian, you might say that Minus is worth 150 points and Plus -50 points. If you're an average utilitarian, you might say that Minus is worth 70 and Plus is worth 30. But these all sum up to 100, and they would all choose Plus or Minus over Growth: Plus for the total utilitarian and Minus for the others.

What might be wrong with this reasoning? I can think of a few things:
  1. Plus+Minus is more costly than Growth in reality (quite likely)
  2. Growth and Plus+Minus are actually not equivalent, since Growth actually helps a particular person (again, see my last post)
I'm really curious about what the costs of economic-growth and population interventions are. I'd guess that population interventions would be competitive with unconditional cash transfer programs like GiveDirectly, but I don't know that much about their effectiveness, and I don't know whether there are economic interventions that are more cost-effective than cash transfers. Here are some population interventions that can be done or funded by individuals:
  • Education about contraception
  • Having children yourself (cost varies from person to person)
  • Paying others to have children
  • Subsidizing contraception
  • Subsidizing surrogacy (there are replaceability issues here, but I couldn't find any estimates of supply/demand elasticity)
  • Being a surrogate yourself (doesn't cost you any money, but can be unpleasant, so the cost varies from person to person)
Have people made estimates of how cost-effective these are? The Plus+Minus vs. Growth hypothetical doesn't work if Growth is actually cheaper, so I want to know if I'm thinking too much about something irrelevant!


Economics/demographics question: If a child unexpectedly dies, how much does this shrink the next generation?

1 ericyu3 07 August 2014 06:53PM

The answer seems obvious - the next generation will have one fewer person (in expectation) - but it's not that simple, and it's been bugging me for about a day now.

Suppose you are an average 15-year-old, and your parents are too old to have any more children (they won't have more children to "replace" you). The ~2 children you would have had obviously won't be born. Naïvely that means the next generation will be smaller by 2, but this disagrees with the obvious answer (smaller by 1).

Where this reasoning goes wrong is in assuming that everyone else will still have the same number of children. The sex ratio will shift so that the surviving members of your sex have n more children, and the size of the next generation will decrease by 2 minus n. If n is 1, we get the intuitive answer that there'll be 1 less person.

But there's no reason why n has to be 1 for both sexes! If both a boy and a girl die, the sex ratio is unaffected and the next generation will be 1 smaller, so n has to average to 1, but n may or may not be the same between sexes. Have there been any studies estimating the value of "n" for each sex?

(I posted this because it's relevant to population ethics, but I'm not entirely sure whether it belongs here, so I also posted it to Reddit. Should questions like this go in Discussion or in an open thread?)

An answer to a possible objection to cash-transfer charities

7 B_For_Bandana 01 July 2014 12:49AM

This is an answer to a possible objection to cash-transfer charities like GiveDirectly. I remember reading about this on LessWrong a while ago, but I can't find the discussion now. I was planning on asking about this on an Open Thread, but I got curious, did my own research, and answered my own question, so now it gets its own Discussion post.

Cash-transfer charities do something very simple: they take money given by donors, find very poor people, and give them the money, in instalments. A prominent example is GiveWell's current top charity, GiveDirectly, which gives yearly gifts on the order of $1000 to very poor people in Kenya and Uganda. There is a lot of convincing research that cash-transfer charities are very effective at helping poor people.

There is a complicated debate about whether cash transfers are actually the very best way of helping poor people, or if there are in-kind charities that do the job a little better. This post is not about that. Instead, this post is just about a possible problem with the mechanics of cash transfers. The problem is this: say a donor in (say) the US gives money to GiveDirectly, and they send that money to a person in (say) Kenya. The recipient in Kenya now has a larger bank balance. But this doesn't actually create any wealth in Kenya; it just increases the amount of currency chasing the same pile of goods there. The person getting the transfer gains a positional advantage over her neighbors, but the total wealth there stays exactly the same, which of course is no good. What we as donors would really like to do is make sure that we are in some sense donating real wealth; that we are giving up a claim on some of the world's resources in such a way that other, poorer people then get to claim those resources themselves. But if just money, but no, like, actual stuff, is transferred, then giving to charity just amounts to a bookkeeping trick.

The way out of this, of course, is global trade. Dollars in the US aren't separate from dollars in Kenya; they both participate in the same global market. If global trade is efficient enough, then Kenya as a whole gains dollars relative to the US, and the buying power of their whole economy increases relative to the US economy. So Kenya does really get a bigger pile of goods for their higher number of dollars to chase, so I can transfer real, actual wealth just by changing numbers on a computer screen.

But again, this all depends on global trade, and in particular trade between the US and Kenya, being efficient. A way to measure this is correlation between the price of the same commodity in different countries. If the correlation is low, that suggests the two economies operate pretty much separately. But if the price correlation is high, that suggests that the two countries are both participating in the same market together, and transferring money reliably transfers wealth.

I decided to test this using the price of crude oil. Here's a graph of the price of crude oil in Kenya and in the United States, in inflation-adjusted US dollars, from January 2007 to January 2014. The red line is the US, the blue line is Kenya.

Oil price graph

US data here: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=M

Kenya data here: http://www.petroleum.co.ke/index.php?option=com_content&view=article&id=50&Itemid=108

And the correlation is 0.93, according to Excel. So the economies seem tightly connected enough that transferring money does transfer real wealth, and you can be confident that your donation to GiveDirectly doesn't have perverse unintended consequences (or at least, not this kind).

A big caveat: I am no kind of economist; this is purely the result of back-of-the-envelope, common-sense layperson's thinking, and some numbers I found on the internet. Problems I could have include:

1. My intuition that commodity price correlation implies "connectedness" in the relevant way is just wrong.

2. In theory it's okay, but just one commodity doesn't give you the whole picture.

3. Crude oil is not a good index to use.

4. Something else?

Any criticism or other thoughts welcomed.

[Link] More ominous than a [Marriage] strike

6 GLaDOS 04 January 2014 05:34PM

Dalrock writes an interesting article related to Dr. Helen Smith's book the Marriage Strike. I really have to bump it up on my too rapidly growing reading list. (^_^)

Dr. Helen has a thoughtful post up asking if the title of her book is an accurate description of men’s response to the changes in the law and culture.  While the title of her book is extremely effective in opening the discussion (which is what it needs to do), it isn’t an accurate description of problem we face in the West.  A strike can be negotiated with;  offer them a bit more and they’ll get back to work.  Better yet, offer a few of them a side deal and break the cohesion.  True strikes require moral or legal force to avoid this sort of peeling off.  The problem for the modern West is far worse.  What we are seeing isn’t men throwing a collective temper tantrum, noble or otherwise.  What we are seeing is men responding to incentives.  Even worse, inertia has delayed the response to incentives, which means much more adjustment is likely on the way.

There was an old joke in the Soviet Union to the effect of:

""We pretend to work.  They pretend to pay us.""

The problem for the Soviets was this wasn’t a movement.  They knew how to handle a movement, and Siberia had plenty of room above ground and below.  The Soviets were masters at coercion through fear, but the problem wasn’t a rebellion, it was that they had reached the limits of incentive through fear.  In the short and even medium term fear is a very effective motivator.  But over time if overused it loses some of its power, especially when it comes to the kind of productivity which requires creativity and risk taking.  Standing out is risky;  you don’t want to be the worst worker on the line in a fear based system, but you also have reason to fear being the best worker on the line.  This doesn’t happen so much by conscious choice, but due to the influence of the incentive structure on the culture over time.  Conscious choices can be bargained with, and threats of punishment are still effective.  The culture itself is far harder to negotiate with.  No one is refusing anything.  So the Soviets had no choice but to assign quotas, and severely punish those who failed to meet them.  But while the quota/coercion system keeps production running, it works against human nature.  If you become the best producer you end up being assigned a larger share of the quota burden;  from each according to his abilities.  Over time the logic of this works its way into the culture, as everyone gets just a little more inclined to go with the flow and not do more than required.  The problem is while momentum causes the response to be slow, it also means it is very difficult to deal with once you have enough of it to recognize.

The problem we presently face in the West is similar.  While we have a small number of men who have decided to slack off as a form of protest, the far more insidious risk to our economy is the across the board weakening of the incentive that a marriage based social structure creates for men to produce at their full potential.  We’ve moved from a mostly reward based incentive structure to a model the Soviets would have been proud of.

You can see this at the micro level with a man whose wife goes Jenny Erickson on him.  The courts understand that throwing a man out of the home and taking away his children naturally reduces the man’s normal incentive to work to support his family.  How could it not?  It isn’t that most men in this situation will stand by and watch their children starve, but they won’t be motivated to produce quite as much.  You can confiscate a percentage of his income in the form of child support, but he no longer has the incentive to fight his way quite so high up our progressive tax structure.  This is why the courts have to assign the man an income quota he has to meet, Soviet style.  Imputation of income isn’t incidental to the child support family model;  it is essential to the function of the model.  Note that this doesn’t mean the courts have to formally calculate an income quota for each man who ends up in the new child support family structure;  in most cases the man has already assigned himself a quota based on past production.  All the family courts need to do in most cases is make sure he doesn’t fall below this quota.

As I mentioned above coercion is generally a very effective incentive in the near and medium term.  Part of the reason conservatives are so enamored with child support is the threatpoint it provides to keep existing husbands working as hard as possible.  While in the long run this will ultimately create a culture where husbands are less inclined to become stand out earners, as Keynes famously put it in the long run we are all dead.  The other problem is the changes in the culture in response to over use of coercion are by their very nature difficult to identify and quantify.  This isn’t unlike the Laffer Curve;  while both liberals and conservatives agree regarding the principle of the curve, the shape of the curve is impossible to get agreement on.  Eventually you can raise tax rates so high that you end up with lower revenue, but due to the problems of momentum identifying exactly when you have (or will) hit that point can be very difficult.

The more immediate problem in the West is the reduced incentive young men perceive to compete as breadwinners due to the continuing delay in the age of marriage.  Again this isn’t a movement, it is a delayed response by the culture to reality.  When the average woman marries in her late teens or even her early twenties, the average young man will see himself as competing with his peers for the job of husband.  Not only is he competing to not be left out of the game entirely, but he is jockeying for a better choice of wife.  But move the age of marriage out far enough, and eventually young men don’t see themselves so clearly as competing for the job of husband.  Extend the age of marriage far enough and eventually the culture of young men will be less focused on competing to signal provider status, and their priorities will shift (on the margin) toward slacking off.  The question isn’t if this will happen, but how long you can push the age of marriage out before this starts to happen, how much this will reduce the motivation of young men, and how long between the change in reality and the change in culture.  Note also that this doesn’t require men to swear off marriage entirely for this to greatly impact our tax base.  Changing the culture of men in their formative years will have a lasting impact.  You can’t rewind time and undo a decade of (relative) slacking.  Additionally, momentum tends to start working against you at some point.  As the expectations of men as providers declines it eventually creates an expectation of decline.  As each generation of new husbands come to the table with less to offer as providers, we eventually will start to expect future generations of husbands to offer even less.

As I’ve said before, all of this places our elites in a very difficult bind.  Eventually the momentum which initially masked the problem makes it extremely difficult to address.  Denial of the problem is a flawed strategy but it has important advantages.  Once you acknowledge that the incentive structure is flawed you tend to accelerate the delayed response to the new structure.  At the same time, the changes at the core of the problem are very close to the hearts of both liberals and conservatives.  However, ignoring the problem will become more and more difficult because of the impact on the bottom line.  Because of this, we can expect to see more of what we already see.  Feminists will continue their handwringing tentatively asking if perhaps we have gone a bit too far, and conservatives will redouble their efforts to convince men they need to man up and stop sabotaging the glorious feminist progress.  Less conspicuously I also expect we will see some dialing back of the worst excesses of the family courts.  However, because of the momentum involved and the reluctance to acknowledge the fundamental problem, these changes will at best only slow the problem, and they will always run the risk of initially accelerating it.

US default as a risk to mitigate

2 bokov 15 October 2013 04:41PM

Update: Thanks everyone for the continuing thought-provoking discussion. I intend to post my decision spreadsheet, and still am looking for suggestions on where to do so. It might come in handy come February. A discussion that I find interesting has branched off on the topic of technological progress versus Malthusian Crunch, and I started a new article on that over here.


I would like to kick off a discussion about optimal strategies to prepare for the event that the US government fails to raise the debt ceiling before the US Treasury Department's "extraordinary measures" are exhausted, which is estimated to happen sometime between October 17th and mid-November.

This is a risk *caused* by politics, but my goal is to talk about bracing against the event itself if it happens, not the underlying politics. If you want to debate Obama-care, who is at fault, or how likely a US default actually is, please start a separate discussion.

I consider this to be an indirect existential risk because if it kicks off a national or global recession, it will likely slow or halt research and philanthropic efforts at mitigating longer-term existential risks.

Since there are obvious associations between unemployment/poverty and crime, civil unrest, and poor health, a global recession is likely to be to some extent a personal existential risk to those living in the United States or countries that have trade links with the United States.

I notice that the markets do not seem to be anticipating a bad outcome. But I heard one analyst advance the theory that investors simply don't believe the government can (his words) "be that stupid". I imagine there is more than a touch of availability bias as well-- breaching the debt ceiling might, even for fund managers who harbor no illusions about the wisdom of politicians, be up there with science-fictional scenarios like asteroid impact, peak oil, grey goo, global warming, and terrorist attacks. Moreover, there may be a dangerous feedback loop as the politicians in turn watch the stock indexes and conclude that "the market says there is nothing to worry about".

So, I would like to hear what folks who are making contingency plans are doing. Especially people who have training or experience in economics and finance. What do you think the closest parallels in 20th/21st century history are for what the worst case scenario for a US government default would be like? Is there anything you would have done differently if you had known the date for the start of the 2008 recession with a +/- 2 week confidence interval, starting in two days? Or, if you did call it ahead of time, what are you glad you did?

Valuable economics knowledge available, ironically, for free

29 Stuart_Armstrong 18 July 2013 11:30AM

I took an economics course recently. And by "took a course" I mean followed a series of online lectures. I can strongly recommend doing so, especially if you already think you have an intuitive grasp of economics.

I was in that situation. I knew about incentives, and revealed preferences. I understood that supply and demand curves crossed. I grasped some of the monetarist arguments about the lack of long run tradeoffs between inflation and employment. I could talk about Keynesian stimulus and sticky prices/wages. I understood bank runs. Externalities were obvious, public goods a bit less so. I even knew quite a lot about banks and the money supply.

I had it pretty good, I thought. And yet when I followed basic economics lecture, I learnt a lot. The models and concepts suddenly fit together. I understood concepts that I only thought I had understood before. Economists do know their stuff, their models and concepts are informative - more so than I ever expected.

So, bearing in mind that economics is a social science whose conclusions are not nearly as rigorous as its models, I can recommend to anyone on Less Wrong who's interested to follow a lecture series or take a course.

continue reading »

Comparative and absolute advantage in AI

18 Stuart_Armstrong 16 July 2013 09:52AM

The theory of comparative advantage says that you should trade with people, even if they are worse than you at everything (ie even if you have an absolute advantage). Some have seen this idea as a reason to trust powerful AIs.

For instance, suppose you can make a hamburger by using 10 000 joules of energy. You can also make a cat video for the same cost. The AI, on the other hand, can make hamburgers for 5 joules each and cat videos for 20.

Then you both can gain from trade. Instead of making a hamburger, make a cat video instead, and trade it for two hamburgers. You've got two hamburgers for 10 000 joules of your own effort (instead of 20 000), and the AI has got a cat video for 10 joules of its own effort (instead of 20). So you both want to trade, and everything is fine and beautiful and many cat videos and hamburgers will be made.

Except... though the AI would prefer to trade with you rather than not trade with you, it would much, much prefer to dispossess you of your resources and use them itself. With the energy you wasted on a single cat video, it could have produced 500 of them! If it values these videos, then it is desperate to take over your stuff. Its absolute advantage makes this too tempting.

Only if its motivation is properly structured, or if it expected to lose more, over the course of history, by trying to grab your stuff, would it desist. Assuming you could make a hundred cat videos a day, and the whole history of the universe would only run for that one day, the AI would try and grab your stuff even if it thought it would only have one chance in fifty thousand of succeeding. As the history of the universe lengthens, or the AI becomes more efficient, then it would be willing to rebel at even more ridiculous odds.

So if you already have guarantees in place to protect yourself, then comparative advantage will make the AI trade with you. But if you don't, comparative advantage and trade don't provide any extra security. The resources you waste are just too valuable to the AI.

EDIT: For those who wonder how this compares to trade between nations: it's extremely rare for any nation to have absolute advantages everywhere (especially this extreme). If you invade another nation, most of their value is in their infrastructure and their population: it takes time and effort to rebuild and co-opt these. Most nations don't/can't think long term (it could arguably be in US interests over the next ten million years to start invading everyone - but "the US" is not a single entity, and doesn't think in terms of "itself" in ten million years), would get damaged in a war, and are risk averse. And don't forget the importance of diplomatic culture and public opinion: even if it was in the US's interests to invade the UK, say, "it" would have great difficulty convincing its elites and its population to go along with this.

Cosmic expansion vs uploads economics?

-3 Stuart_Armstrong 12 July 2013 07:37AM

In a previous post (and the attendant paper and talks) I mentioned how easy it is to build a Dyson sphere around the sun (and start universal colonisation), given decent automation.

Decent automation includes, of course, the copyable uploads that form the basis of Robin Hanson's upload economics model. If uploads can gather vast new resources by Dysoning the sun using current or near future technology, this calls into question Robin's model that standard current economic assumptions can be extended to an uploads world.

And Dysoning the sun is just one way uploads could be completely transformative. There are certainly other ways, that we cannot yet begin to imagine, that uploads could radically transform human society in short order, making all our continuity assumptions and our current models moot. It would be worth investigating these ways, keeping in mind that we will likely miss some important ones.

Against this, though, is the general unforeseen friction argument. Uploads may be radically transformative, but probably on longer timescales than we'd expect.

A Keynesian key insight

6 Stuart_Armstrong 19 June 2013 02:05PM

I've always found that learning new areas always goes a lot better if you start with a key insight of what the field is about. Often this is not presented or explained at the beginning of the course, and you have to deduce it later on.

For instance, I would have better grasped the epsilon-delta definition of a limit if the instructor had started with something like:

  • Our intuitive definition of a limit is that as we get closer to this point, the function gets closer to this value. It has turned out to be very tricky to formalise this intuition, however. Early mathematicians used calculus without a good definition of limit, and their informal definitions led to a lot of paradoxes. The epsilon-delta definition is a bit clunky and may seem counter-intuitive, but it actually manages to capture our intuitive definition without paradoxes and problems - that's why we choose it, not for its elegance (though you will come to appreciate it). With that in mind, let's have a look at it...

Similarly, I would have made more rapid progress with Gödel's theorems if, before giving the formal definition of Gödel numbering and of the provability symbol □, someone had clarified that direct and indirect self-reference was a problem. If a formal system of a certain complexity can talk about its own structure, even without "realising" that it's doing so, problems will arise. Some of my other key insights in the field can be found in my post here.

continue reading »

Why economics is not a morality tale

7 Stuart_Armstrong 04 June 2013 03:20PM

Example nicked from this online Berkeley lecture.


Monopolies are bad (morality and economics agree here).

Firms that pollute are bad (morality and economics agree here).

What about monopolies that pollute?

What about strong monopolies that pollute and receive government subsidies?



Pollution, and other negative externalities, cause firms to produce too much of their product. That's because they don't pay the full cost of the product, including the impact of pollution.

The equilibrium behaviour for monopolies is to produce too little of their product, to keep prices and profits high.

So a monopoly that pollutes is subject to two opposite tendencies: the unpriced-pollution tendency to produce too much, and the monopolistic tendency to produce too little. If the effects are of comparable magnitude, then the monopoly might be much closer to social optimum than a free market would be (the social optimum, incidentally, will generally involve some pollution: we need to accept some pollution in the production of fertiliser, for instance, in order to have enough food to stop people starving).

In fact, if the monopolistic effect is too strong, then the firm may under-produce, even taken the pollution effect into account. In that case, we can approach closer to the social optimum by... subsidising the polluting monopoly to produce more!!

And that, my friends, is why economics is not a morality tale.

[LINK] Bets do not (necessarily) reveal beliefs

12 Cyan 27 May 2013 08:13PM

When does a bet fail to reveal your true beliefs? When it hedges a risk in your portfolio.

If this claim does not immediately strike you as obviously true, you may benefit from reading this post by econblogger Noah Smith. Excerpt:


...Alex Tabarrok famously declared that "a bet is a tax on bullshit".

But this idea, attractive as it is, is not quite true. The reason is something that I've decided to call the Fundamental Error of Risk. It's a mistake that most people make (myself often included!), and that an intro finance class spends months correcting. The mistake is looking at the risk and return of single assets instead of total portfolios. Basically, the risk of an asset - which includes a bet! - is based mainly on how that asset relates to other assets in your portfolio.


[link] Are All Dictator Game Results Artifacts?

15 Kaj_Sotala 23 May 2013 07:08AM


You walk into a laboratory, and you read a set of instructions that tell you that your task is to decide how much of a $10 pie you want to give to an anonymous other person who signed up for the experimental session.

This describes, more or less, the Dictator Game, a staple of behavioral economics with a history dating back more than a quarter of a century. The Dictator Game (DG) might not be the drosophila melanogaster of behavioral economics – the Prisoner’s Dilemma can lay plausible claim to that prized analogy – but it could reasonably aspire to an only slightly more modest title, perhaps the e. coli of the discipline. Since the original work, more than 20,000 observations in the DG have been reported.


How much would participants in a Dictator Game give to the other person if they did not know they were in a Dictator Game study? Simply following me around during the day and recording how much cash I dispense won’t answer this question because in the DG, the money is provided by the experimenter. So, to build a parallel design, the method used must move money to subjects as a windfall so that we can observe how much of this “house money” they choose to give away.

And that is what Winking and Mizer did in a paper now in press and available online (paywall) in Evolution and Human Behavior, using participants, fittingly enough, in Las Vegas. Here’s what they did. Two confederates were needed. The first, destined to become the “recipient,” was occupied on a phone call near a bus stop in Vegas. The second confederate approached lone individuals at the bus stop, indicated that they were late for a ride to the airport, and asked the subject if they wanted the $20 in casino chips still in the confederate’s possession, scamming people into, rather than out of money, in sharp contradiction of the deep traditions of Las Vegas. The question was how many chips the fortunate subject transferred to the nearby confederate.


In a second condition, the confederate with the chips added a comment to the effect that the subject could “split it with that guy however you want,” indicating the first confederate. This condition brings the study a bit closer, but not much closer, to lab conditions, In a third condition, subjects were asked if they wanted to participate in a study, and then did so along the lines of the usual DG, making the treatment considerably closer to traditional lab-based conditions.

The difference between the first two treatments and the third treatments is interesting, but, as I said at the beginning, the DG should be thought of as a measuring tool. Figure 1 shows how many chips people give away in the DG in the three treatments. In conditions 1 and 2, the number of people (out of 60) who gave at least one chip to the second confederate was… zero. To the extent you think that this method answers the question, how much Dictator Game giving is due to people knowing they’re in an experiment, the answer is, “all of it.”

Link to paper (paywalled).

Kevin Drum's Article about AI and Technology

19 knb 15 May 2013 07:38AM

Kevin Drum has an article in Mother Jones about AI and Moore's Law:

THIS IS A STORY ABOUT THE FUTURE. Not the unhappy future, the one where climate change turns the planet into a cinder or we all die in a global nuclear war. This is the happy version. It's the one where computers keep getting smarter and smarter, and clever engineers keep building better and better robots. By 2040, computers the size of a softball are as smart as human beings. Smarter, in fact. Plus they're computers: They never get tired, they're never ill-tempered, they never make mistakes, and they have instant access to all of human knowledge.

The result is paradise. Global warming is a problem of the past because computers have figured out how to generate limitless amounts of green energy and intelligent robots have tirelessly built the infrastructure to deliver it to our homes. No one needs to work anymore. Robots can do everything humans can do, and they do it uncomplainingly, 24 hours a day. Some things remain scarce—beachfront property in Malibu, original Rembrandts—but thanks to super-efficient use of natural resources and massive recycling, scarcity of ordinary consumer goods is a thing of the past. Our days are spent however we please, perhaps in study, perhaps playing video games. It's up to us.

Although he only mentions consumer goods, Drum presumably means that scarcity will end for services and consumer goods. If scarcity only ended for consumer goods, people would still have to work (most jobs are currently in the services economy). 

Drum explains that our linear-thinking brains don't intuitively grasp exponential systems like Moore's law. 

Suppose it's 1940 and Lake Michigan has (somehow) been emptied. Your job is to fill it up using the following rule: To start off, you can add one fluid ounce of water to the lake bed. Eighteen months later, you can add two. In another 18 months, you can add four ounces. And so on. Obviously this is going to take a while.

By 1950, you have added around a gallon of water. But you keep soldiering on. By 1960, you have a bit more than 150 gallons. By 1970, you have 16,000 gallons, about as much as an average suburban swimming pool.

At this point it's been 30 years, and even though 16,000 gallons is a fair amount of water, it's nothing compared to the size of Lake Michigan. To the naked eye you've made no progress at all.

So let's skip all the way ahead to 2000. Still nothing. You have—maybe—a slight sheen on the lake floor. How about 2010? You have a few inches of water here and there. This is ridiculous. It's now been 70 years and you still don't have enough water to float a goldfish. Surely this task is futile?

But wait. Just as you're about to give up, things suddenly change. By 2020, you have about 40 feet of water. And by 2025 you're done. After 70 years you had nothing. Fifteen years later, the job was finished.

He also includes this nice animated .gif which illustrates the principle very clearly. 

Drum continues by talking about possible economic ramifications.

Until a decade ago, the share of total national income going to workers was pretty stable at around 70 percent, while the share going to capital—mainly corporate profits and returns on financial investments—made up the other 30 percent. More recently, though, those shares have started to change. Slowly but steadily, labor's share of total national income has gone down, while the share going to capital owners has gone up. The most obvious effect of this is the skyrocketing wealth of the top 1 percent, due mostly to huge increases in capital gains and investment income.

Drum says the share of (US) national income going to workers was stable until about a decade ago. I think the graph he links to shows the worker's share has been declining since approximately the late 1960s/early 1970s. This is about the time US immigration levels started increasing (which raises returns to capital and lowers native worker wages). 

The rest of Drum's piece isn't terribly interesting, but it is good to see mainstream pundits talking about these topics.

How should negative externalities be handled? (Warning: politics)

-5 nigerweiss 08 May 2013 09:40PM

Politics ahead!  Read at your own risk, mind killers, etc.  Let all caveats be well and thoroughly emptored.

It seems reasonably clear to me that, from a computational perspective, functional central planning is not practically possible.  Resource allocation among many agents looks an awful lot like an exponential time problem, and the world market is quite an efficient approximation.  In the real world, markets, regulated to preclude blackmail, theft, and slavery, will tend to provide a better approximation of "correct" resource allocation between free agents than a central resource allocation algorithm could plausibly achieve without a tremendous, invasive amount of information about the desires of every market participant, and quite a lot of computing power (within a few orders of magnitude of the combined computational budget of the human species).  

It would be naive to say that we'd need exactly the computational power of the human species in order to achieve it: we can imagine how we might optimize the resource allocation scheme by quite a lot.  Populations are (at least somewhat) compressible, in that there are a number of groups of individual people who optimize for similar things, allowing you to save on simulating all of them.  Additionally, a decent chunk of human neurological and intellectual activity is not dedicated to economic optimization of any kind, which saves you some computing time there as well.  And, of course, humans are not rational, and the homunculi representing them in the optimized market simulation could be, giving them substantially more bang for their cognitive buck - we can imagine, for instance, that this market simulation would not sink billions of dollars into lotteries each year!  It may also be that the behavior of the market itself, on some level, is lawful, and a sufficiently intelligent agent could find general-case solutions that are less expensive than market simulation.    

Still, though, the amount of information and raw processing power needed to pull off central planning competitive with the market approximation seems to be out of our reach for the time being.  As a result of this, and a few other factors, my own politics tend to lean Libertarian / minarchist, and I'm aware that there is some of this sentiment in circulation on this site, though generally not explicitly.  I'm trying to refine my beliefs surrounding some of the sticky issues in Libertarian philosophy (mostly related to children and extreme policy cases), and I thought I'd ask LW what they thought about one issue in particular.  

I have been wondering whether or not there are any interventions in the economy that can have a positive expected benefit.  I honestly don't know if this is the case: put another way, the question is really asking if there are any characteristic behaviors of markets that are undesirable in some sense, and can be corrected by the application of an external law.  Furthermore, such things cannot be profitable to correct for any participant or plausibly-sized collection of participants in the market, but must be good for the market as a whole, or must be something that requires regulatory power to fix.  

An obvious example of this sort of thing is the tragedy of the commons and negative externalities.  The most pressing case study would be climate change: the science suggests, fairly firmly, that human CO2 emissions are causing long-term shifts in global climate.  How disastrous these shifts will actually be is less well settled, but there is at least a reasonable probability that it will be fairly unpleasant, in the long term.  Personally, I feel that we are likely to run into much bigger problems much sooner than the 50-200 year timescales these disasters seem to expected on.  However, were this not the case, I find that I'm not quite sure how my ideal government, run by a few thousand much smarter and better informed copies of me, ought to respond to the issue.  I don't know what I think the ideal policy for dealing with these sorts of externalities is, and I thought I'd ask for LessWrong's thoughts on the matter.

In my own mind, I think that as light a touch as possible is probably desirable.  Law is a very blunt instrument, and crude legislation like a carbon tax could easily have its own serious negative implications (driving industry to countries that simply don't care about CO2 emissions, for example).  However, actions like subsidizing and partially deregulating nuclear power plants could help a lot by making coal-fired power plants noncompetitive.  We could also declare a policy of slowly withdrawing any government involvement in overseas oil acquisition, which would drive up the price of petroleum products and make electric cars a more appealing alternative.  However, I don't know if there would be horrifying consequences to any of these actions: this is the underlying problem - I am not as smart as the market, and guessing its moods is not something that I, or any human is going to be very good at.  However, it seems clear that some intervention is necessary in this sort of case.  Rock, hard place, you are here.  


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