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Stories are More Persuasive than Data

People seem to be much more persuaded by stories than data. Both David Boaz and Will Wilkinson have commented that Ayn Rand stories have more of an effect on people that Hayek’s non-fiction. I remember Ralph Raico commenting in my IHS seminar that historical examples are much more persuasive to people that are studies or theoretical explanations.

I suspect that has to be with Ray Kurzweil’s insight that the human brain is a slow but massively parallel machine that does a great job of pattern recognition. Thus, analogies are more in tune with the way people think that is data analysis or abstract theories or proofs. People can analogize to stories (and history is a collection of stories that have the virtue of being true!) much more easily than they can analyze data or apply a theory.

I suspect that those sufficiently steeped in a discipline start seeing analogs and patterns where others don’t based on theories and principles that have become second nature. Likewise, it becomes easier be persuaded by data if you have become familiar enough with the data in question that you start seeing how it matches up (or doesn’t) with stories or theoretical predictions.

A good society accords higher status to people who make everyone better off

John Cochrane argues that what the modern left wants most is power.

Consider the possibility that “power” (like money) is just a means to “status.” There is a good argument that status is a primary motivation for a lot of human action. Ideally a system would accord status to those that help everyone to flourish. A well functioning market economy does a pretty good job of this, but not all aspects of *our* economy are well functioning and that leads people to pursue power as an alternative route to status.

If you reduced cronyism (and other similar tendencies) would you reduce the demand for power as an alternative? What if you places a greater emphasis on social equality?

I don’t know the answer, but these possibilities seem worth considering.

Homelessness is not caused by a lack of housing

First, its is well established that it is mental illness (or other pathologies rather than lack of affordable housing) that causes most of the homeless encampments that we see on the street. Some people that prefer that situation to the more structured environment they would have to endure at a shelter. Many have drug problems or other issues that they would not be compatible with programs that provide shelter. Likewise it does seem plausible that regulations that effectively eliminate substandard single room occupancy hotels and the like probably force some people onto the street even thought they might prefer such shelter without the strings of a public program. As a result, having less expensive housing is extremely unlikely to make any serious dent in a city’s homeless population.

Further that last way to get affordable housing is to have the government build it. John Cochrane mentioned on his Grumpy Economist podcast recently the insight that the most affordable housing is really just older housing that is reaching the end of its current (pre-remodel) life. If the government sets out to build affordable housing the very newness of it makes it unaffordable without an extreme subsidy that results in those least in need of it being the ones that will successfully play the game to get it. It is by allowing new housing to be built to free up old housing that they old housing becomes affordable. If you can’t build new housing, people will simply improve the old housing making it unaffordable. Other thoughts form John on affordable housing can be found here.

Social Equality

Mickey Kaus despairs that our meritocratic tendencies undermine the desired goal of social equality. As I wrote on his site in a comment, I am not as discouraged:

A few alternatives ideas:

— What you are really talking about is status competition between individuals. That is arguably a universal phenomenon, that the meritocracy did not solve, but neither do any of the proposed solutions because status is an ordinal concept. As people become more equal in material ways, they look to other methods of distinction to demonstrate status, e.g. ability to entertain or looks. The the problem of unequal status reasserts itself because its part of human nature. At least the meritocracy keeps us well fed and entertained even if it doesn’t solve all the problems inherent in human nature.

— Material differences in living standards are actually declining despite some of the top people accumulating great wealth. For example, is there really that much functional difference between silestone and formica counters or between a Carolla and a Tesla. No. Likewise much wealth is not consumed but invested where it benefits everyone but the owner, perhaps someday it will be consumed, but likely by many heirs and then it won’t be wealth any more. Similarly, no one actually goes without pretty good healthcare in America if they want it. The material prerequisites for social equality are already there if there was some other way to make people value it.

— Why isn’t there a way to develop an ethos of mutual respect (something like social equality) even independent of one’s wealth or income? The anti-racists have been able to achieve that why not focus on thinking of a way to bring that same sort of power to honoring people no matter their material status. Not suggesting this is easy, but it seems like the crux of the issue and focusing on it might generate some good ideas (some of which might work).

— The Andrew Yang world is one in which people don’t have jobs because robots do all our work. That doesn’t seem likely, but I don’t put it beyond the realm of possibility that with more material abundance one’s material well-being gets largely displaced by other indicia of status, e.g. being good looking, being entertaining, having a lot of social media followers. If that happens all the solutions you suggest become worthless and we’ll regret not focusing more purely on nurturing mutual respect regardless of status.


As of the middle of April, I think our goal at this point should be to delay what infections we can at relatively low cost. That means eliminating most government controls and letting people make their own judgments about how to do that. The delay gives us a shot a getting lucky that we find therapies or vaccines that work, but that is not assured.

I think this approach will dictated by some new knowledge we have gained over the past month:

(1) Lockdowns (at least in the West) don’t appear that effective. At best they push R down slightly below 1 and come at great cost. That is the experience of Europe. The great cost is evident in the drastic decline in US employment and the growing political pressure to lift them.

(2) Distancing doesn’t require lockdowns. Data pre-lockdown in most areas show that people were already doing significant distancing at the expense of things like conventions and restaurant reservations. This made the marginal effect of lockdowns small, and means that lifting them won’t restore normal levels of economic activity.

(3) SARS CoV2 is significantly more infectious than we thought. This makes attempts to stamp out the virus likely to fail even when done well (see Singapore). Even were one successful, you would have to isolate your country from the rest of the world (as China is now trying to do) which imposes significant costs itself.

(4) SARS CoV2 is significantly less deadly than we thought– especially to healthy young people. The IFR is probably between 0.3% and 0.6% overall and much lower for the healthy young. This means it makes sense for many to run the risk of infection and build toward herd immunity. It also means it makes more sense to concentrate efforts on protecting the vulnerable (even if that is a lot of people).

(5) The dynamics of building toward herd immunity mean that as more people recover from infection and become immune, R falls because there a fewer people to infect. As the number of recovered people increases, the safer it is for the vulnerable. This is a reason to flatten the curve of infection (ideally with people that recover) rather than to bend it down.

I think things will be better the sooner that government imposed lockdowns end. As in other cases where you eliminate harsh regulation, people will adapt in innovative ways to these new circumstances in ways that make their lives better.

BUT, I think that absent finding a great vaccine or great therapies, the facts outlined above mean that you probably have 100,000-500,000 Americans dying and significant losses to the welfare of the living as they adapt to a distanced world.

I wouldn’t end lockdowns because I think that will make things great and return to normal. I would end lockdowns because they make a bad situation worse.

Political Philosophy as Institutional Design

Are differences in political philosophy really just differences about the efficacy of different types of institutions? For a while I have believed that we should be extremely skeptical of government because it is far worse institution than those that operate in a market (e.g. a company) because even in a democracy, voting for elected officials is a far cruder mechanism for reflecting preferences of the people affected by that institution than the signals and incentives of the price system that governs the market.

First a definition: What is the proper measure for efficacy of an institution? Let’s say: an increase in the aggregate welfare of those that interact with it.

I think insight above about government is accurate, but I wonder if it can be generalized (and taken to a higher level of abstraction) to apply to other questions about institutions. For example, do we have more reason to trust the operation of a small town government than a large monopolist (at least in the short term)? How should we think about the efficacy of self-perpetuating boards of non-profit organizations, e.g. churches or universities? Do we have reason to defer to them when they conflict with contrary government desires? Do we have reason to put more faith in decisions of state governments in the US where people can easily move out of a state with a poor government and into a state with a better one?

Slightly more concretely, in the US does this framework help us analyze whether courts should we defer than decisions be made by administrative agencies? In what circumstances? Does it depend on the specific court and the specific agency involved? If so, can we generalize at least somewhat?

At this point I don;t have great (elegant?) answers, but perhaps that will come upon further thought

“In the future everyone will be in show business.”

I remember Penn Jillette making that comment to Glen Beck. Sadly, a Google search for it does not reveal the video in which he said it. Much like Kara Swisher’s “nobody knows” mantra about AOL, it encapsulates a lot.

The general context for the quotation was a prognostication about what jobs people will have in the future, perhaps when technology has eliminated many current jobs.

Many people are able to make a living our of entertaining others in ways that would have been impossible a short time ago, e.g. Youtubers, streamers, podcasters, so perhaps this is not so far fetched.

But thinking about this more abstractly leads to some important insights:

  • People will continue to work, even if current jobs change.
  • The skills and characteristics that are socially valuable now, may not always be so.
  • Although scarcity of tangible goods, is unlikely to go away anytime soon, if it did would people simply trade in the currency of popularity? Status would cease to be correlated with wealth and instead become correlated with popularity. (Even more than now.)
  • Are we already on this road? Despite the great wealth of billionaires, the differences in material well being between the rich and poor in the US is probably less than ever. This is because to the extent that the wealth is consumed (and much stays invested until given away) goes to purchase status goods or rarer good with a small incremental increase in quality.
  • If material wealth ceased to be as important, there would still be inequality, but it might well be in the number of fans that your endeavors had. Is that better, given the difficult in redistributing that sort of immaterial wealth?
  • What if patents (and other intellectual property) ceased to be necessary because inventors were compensated in status rather than monopoly rents? Would this lead to a flowering of creative endeavors or just lead to different problems such as how to make sure foundational creators were adequately compensated with status?
  • Is the redistributive impulse really about wealth or status? Probably the latter, notwithstanding that no one talks about it in those terms. Thus, if the redistribution of material wealth were entirely successful– or ceased to be important, there would still be differences in status between people. Would we really be better off in the eyes of the redistributionists?

For those of us who have been successful at accumulating material wealth, how would we feel in a society that valued popularity but not our skills? We might find out when, in the future, everyone is in show business.

On Becoming More Like Sweden

Samuel Hammond released a paper on The Free-Market Welfare State. I had a few thoughts:

1. I am generally sympathetic to the idea of trading greater micro-economic freedom for a somewhat more generous income support system. I would prefer that that greater generosity come from the private sector, but even without that modification, such a trade would probably leave us better off than the status quo.

2. The studies used to support the proposed changes are remarkably weak. I don’t doubt there are improvements to be made but I would hope for better empirical data.

3. Consider whether such changes are more likely if many of these programs were block granted to the states, perhaps with some increase in funding. Then you get to use states a laboratories and potentially try many different reforms, while competition for workers encourages states to design better programs.

4. Consider dynamic scoring of the revenue effects of regulatory relaxation (i.e. more micro-economic freedom) and using those increased revenues to pay for more generous income support payments. I suspect that making such payments more generous is the only way they might be approved politically. (This is the same reason why the 2017 tax bill could not be revenue neutral, BTW.)

5. Is there any reason this needs to be linked to the state? Consider making state payments supplemental to those provided by private organizations. For example, the government could set a support level of $10K/year, that would reduce by a dollar for each dollar of private support made available, and give citizens tax credits for money given to such private support. I know this suggestion is too crude to workable, but it would be nice to avoid the state crowding out the supports of civil society further than it already has.

6. Given the magnitude of medical costs, you probably need to address those specifically in ways that don’t involve spending more money. This is bound to be politically problematic, but you might be able to do something as part of a larger trade.

Why Does the News Focus on Government?

Tyler Cowen writes “The real puzzle this year is why so much of America’s noxious discourse has become concentrated in national politics.” This is an interesting question, but the phenomenon of America’s discourse being focused on politics (and government) is not unique to this year. I don’t have a great answer, but I do a have a few thoughts:

1. The mass media discourse is only a small part of the actual discourse in America. If you looked closely at the proliferation of online discussion platforms, I suspect you would see the vast majority of discussion is on non-political topics. Politics has some universal interest, however, so it is disproportionately covered by media with a universal reach.

2. We know more about what is going on in government and that leads to news coverage of the political. The easy access to information makes stories about the political easy to write so they get written. The easy access exists both because (I) politicians are elected creatures and want to reach a mass audience, and (ii) open government laws make it easier to get information about government activities than those of private entities.

3. I question whether this phenomenon is stable. Just as no TV show gets a 30 share anymore, I hypothesize that coverage of politics will become more niche just like everything else. I am not sure whether that change would be good or bad.

Behavioral Changes in Large Groups

As I listened to this podcast I was struck by the link between the selfless behavior described and behavioral economics. They both seem mainly to describe behavior in small groups.

For example, the behaviorists describe many ways in which individuals are irrational in decision making (e.g. being more averse to losses that they would value like gains). Yet stock markets operate efficiently at least in the sense that no one can use these insights to consistently profit. The behavior is observed in individuals, but in not when they act with many others in a crowded market. Why? The structure of the market (*e.g. opportunities for arbitrage) bleeds the irrationality out of market prices.

Likewise, the selfless traits of individuals (and perhaps their innate sense of justice) also seem to get lost when they deal with others in large anonymous market– witness past political demands for mandatory minimum sentences, multi-level marketing schemes, people taking advantage of government programs who are not truly needy.

The simple conclusion is that crowded markets (and perhaps other spheres) produce more rational results– but that is not always a good thing.

I suspect there are deeper insights to be had about institutional design to incorporate this insight, but for now I leave that to others.