Friday, August 15, 2008

Isn't every voter a "values-based voter"?

I've discovered a new pet peeve... the use of the redundant term "values-based voter" to describe a voting bloc that might more accurately be characterized as "the religious zealot vote".

Analysis: Candidates can't ignore values-based voters

I wish the media would stop using this euphemism - it reinforces the idiotic prejudice, commonly held by the religious, that only religious people have values.

What about people who believe in social justice? What about people who believe in peace? What about people who believe in equality for all races and sexual orientations? Aren't they "values-based voters" too? Why is it that only homophobic religious wingnuts are allowed to talk about "values"?

Guess what? I'm an atheist... and I have values too.

Sunday, May 25, 2008

Do Economists Understand Opportunity Cost?

When I took Macroeconomics with Richard Harris at SFU in 2003, he remarked one day that "there are only two things you really need to learn as an undergraduate in economics: the government budget constraint and the concept of opportunity cost." I reflected back on that comment when I read this New York Times article:

Virtually all economists consider opportunity cost a central concept. Yet a recent study by Paul J. Ferraro and Laura O. Taylor of Georgia State University (which is short and well worth reading in full, by the way) suggests that most professional economists may not really understand it. At the 2005 annual meetings of the American Economic Association, the researchers asked almost 200 professional economists the following question:

"You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton? (a) $0, (b) $10, (c) $40, or (d) $50." (answer at the end of the post)

The proportion of professional economists able to answer this question correctly?

21.3%. All of the available answers were selected with roughly equal frequency.

Let's pause a moment to contemplate the shocking awfulness of this result. Here we have 200 professional economists, most of them tenured professors at top universities, more than half of them responsible for teaching undergraduates, all of them capable of covering chalkboards with mind-binding mathematics... yet most of them are baffled by a problem from page 4 of Ben Bernanke's introductory economics textbook.

Is there any other academic field so disconnected and untethered from its own basic principles? Would a convention of physicists be unable to answer freshman questions about a ball rolling down an inclined plane?

The paper contained various defences of the economics profession in the face of this result, all of which were unsuccessful in my opinion, but one of which reflected a prejudice in the discipline that as a newcomer to economics I'd already noticed: the idea that the clarity and precision of definition is irrelevant to the skill of correct economic reasoning. It doesn't matter if you know what any of the terms mean, as long as you come up with the "correct result".

In fact, the authors of the paper surveyed nine major introductory textbooks and noted that only two of them provided a clear enough definition of the supposedly crucial concept of opportunity cost (emphasizing that both the costs and benefits of the alternative action must be weighed) in order to enable the question to be answered. The disdain for precision in this supposedly rigourous science is tolerated throughout the discipline.

However, I would assert that the economists' casual approach to clarity of meaning has two grave drawbacks. It is pedagogically ineffective (as evidenced by another fact noted in the paper - that students taking the above survey performed WORSE after taking an economics class than they did before), and it is intellectually dangerous; it flies in the face of 2,000 years of philosophical tradition on what it means to reason well and think clearly.

"If you wish to converse with me," said Voltaire, "define your terms." How many a debate would have been deflated into a paragraph if the disputants had dared to define their terms! This is the alpha and omega of logic, the heart and soul of it, that every important term in serious discourse shall be subjected to the strictest scrutiny and definition. It is difficult, and ruthlessly tests the mind; but once done it is half of any task. Will Durant, The Story of Philosophy (Chapter 2, Aristotle and Greek Science, Part 3, The Foundation of Logic).

The sophisticated manipulation of symbols counts for little if you don't know what the symbols really mean. Clarity matters. Without fully understanding opportunity cost you can't conduct cost/benefit analysis properly. You can't understand economic rent (not that modern economics has much interest in doing so, but that's another topic). You can't fully understand welfare economics. An important concept, indeed!

To any of my former colleagues from Queen's who happen to be reading this, I urge you: do better. Make the discipline better. Encourage it to think harder about what it does and says, and how it does and says it.

By the way, the answer is $10. (I myself got it wrong). Opportunity cost is defined as "the value of the next best alternative", but it is seldom emphasized that both the costs and benefits of that alternative must be considered. The Bob Dylan concert has a WTP of $50, but a ticket price of $40. The net benefit of attending the Dylan concert is 50-40 = $10, and that is the opportunity cost of attending the Eric Clapton concert.

Friday, May 23, 2008

Modelling in Economics, redux

A recent blog comment by "Cranky Observer" on Brad Delong's blog caught my eye. (The context: Brad's discussion of a model for stock valuation based on economic concepts like 'marginal cost of goods sold')

I am approaching 25 years in manufacturing companies of various types ...I have not ONCE encountered an organization that operates in the hyper-rational, mathematical manner that most posters here seem to believe is the norm in actual business. In fact the most successful of the places I have worked deliberately drove out anyone who attempted to make decisions in that manner in favor of people willing to spend long hours with the customer then make decisions intuitively.

I have also worked extensively in business information systems and associated data warehousing and I can tell you with absolute certainty that 97% of the organizations in the world have no bloody idea what their marginal cost is for purchased paperclips much less the product that they make.

Wow, that's quite an indictment. My response was as follows:

Cranky, when I started my economics education (after years in IT), I too was hostile to the use of mathematical modelling that did not take institutional and information realities into account. However, I am beginning to think some* of my hostility was misplaced for two reasons.

Firstly, simple equations governing the behaviour of stylized corporations are only meant to be approximations. It's a model. All models are false. Some, hopefully, are useful.... with a handful of equations you can describe a dynamic system that kinda, sorta, looks like the vastly more complex real world, and that's useful.

Secondly (and this is more speculative) a corporation need not consciously recognize what it is doing in order to behave in a certain way. To extend DLJ's natural argument, corporate structures could have evolved such that the end result is to behave in a way governed by a few simple equations. To borrow an analogy from the excellent Richard Dawkins: a bat's echo-location system involves the bat squeaking, listening to the echos, and inferring where the obstacles are (all in the presense of thousands of other squeaking bats). That little bat-brain must have some US military grade signal processing built in. Does the bat need to know how it does what it does? No. It just evolved: bats that are able to do this find food, bats that can't do this bump into things and die. Perhaps corporations evolve the same way :)

*(There are two places where economics goes astray, IMHO. Drawing naive and careless welfare implications from that same handful of equations is one, and simple overconfidence... forgetting that these models are only MODELS, is another.)

Sunday, May 11, 2008

Rush: The Last Taboo


As the redheaded, one-eyed stepchild in the Mondo Globo omniverse, I’ve written about some really fucked up shit; pretty much everything this side of fecalphilia.

And while I’m generally not shy about exposing my own proclivities, I’m about to reveal one that pushes the very boundaries of counterculture sensibility.

I love Rush.

Now, upon revealing this in person to some, I’ve seen the color completely drain out of the face, in a way that could only be rivaled by a revelation of secret daughter dungeon proportions. In terms of relationships, you definitely don’t want to let this cat out of the bag to a prospective mate until sometime between the farting in the bed phase and marriage.

Saturday, May 10, 2008

Phrase of the Day: "Foolish sophistication"

I enjoyed this article, discussing why the sophisiticated quantitative risk models used in finance have been failing so spectacularly over the last year in describing the expected returns of complex 'Structured Investment Vehicles' used in High Finance (tm).

I like the phrase "foolish sophistication". My own phrase for this phenomenon, coined during my MA in Economics, was "pseudo-rigour".... analysis that covers a whole blackboard with squiggles and LOOKS rigourous, impressive, and irrefutable, but really isn't because the domain of applicability of the analysis has been forgotten. There is a certain kind of person prone to this kind of error, who is very comfortable with mathematics and quantitative analysis but isn't much of a critical thinker (critical thinkers tend to be driven mad by academic economics), and it is exactly THIS kind of person who is selected for in advanced quant finance/econ programs, and goes on to develop risk management models. They really DO believe what the models are telling them.

An Element of Ideology: Welfarism vs Paternalism

I edited a wikipedia entry on "demerit goods" recently, and for posterity I reproduce it here:

In economics, a demerit good is a good or service whose consumption is considered unhealthy, degrading, or otherwise socially undesirable due to the perceived negative effects on the consumers themselves. It is over-consumed if left to market forces. Examples of demerit goods include tobacco, alcoholic beverages, recreational drugs, gambling, junk food and prostitution. Because of the nature of these goods, governments often levy taxes on these goods (specifically, sin taxes), in some cases regulating or banning consumption or advertisement of these goods.

There is an important conceptual distinction between a demerit good and a negative externality. A negative externality occus when the consumption of a good has measurable negative consequences on others who do not consume the good themselves. Pollution (due, for example, to automobile use) is the canonical example of a negative externality. By contrast, a demerit good is viewed as undesirable because its consumption has negative effects upon the consumer him/herself.

Two fundamental views in welfare economics, welfarism and paternalism, differ in their conceptual treatment of 'demerit goods'. Simply, welfarism takes the individual's *own* perception of the utility of a good as the final judgement of the utility of the good for that person, and thereby disallows the concept of a 'demerit good' (while allowing the analysis of negative externalities). As an extreme example, if a heroin addict purchases heroin, they must have done so because heroin makes them better off, and this transaction is viewed as a net social positive (assuming that the addict does not commit any other crimes as the result of their addiction). Paternalism, on the other hand, judges that heroin "isn't good for you", and feels free to override the judgement of the addicts themselves (see 'Welfare Economics, Boadway and Bruce, Basil Blackwell 1984)

Monday, April 21, 2008

Busy, productive, and loving unemployment (2)

I've put the Welfare Economics textbook down and am starting back into the econometrics with Studenmund and Kennedy (including using the free econometrics package R to run little self-designed exercises like "demonstrate the effect of serial correlation by running Monte Carlo simulations"). I'm just finishing the job of getting my head around "what are basic econometric techniques FOR?" It's fun. I'm going to revisit the "significance test controversy" next (don't ask).

I've done things in the following order;
1. Take a soul-destroying grad-level Quant Methods course at Queen's, about 10% of which I understood.
2. BARELY pass said course. (I picked up the Quant Methods textbook the other day, 10 minutes later I was weeping at the memory, the way a concentration camp survivor might weep when seeing Dachau again).
3. Get an extremely demanding quant finance job, about 10% of which I understood.
4. Get fired from job.
5. Sit down and teach myself basic econometrics properly, with full methodological and model specification considerations up front where they belong (it turns out that "model search and evaluation techniques" were a big part of my previous job, not that I really realized it).

School more or less forced this order of tasks upon me, and imposed much wasted effort and suffering thereby.

Wednesday, March 05, 2008

Busy, productive, and loving unemployment

These days I'm reading a textbook called "The Economics of the Welfare State", which is unusual as an economics textbook in that it contains discussion of the underlying issues of political philosophy (but in a "quantitative" way that economists love). Note that economists are normally violently allergic to philosophy in any way, shape or form, and spend zero time discussing ethics, morality, methodology, etc... I found this trait rather disgusting and annoying.

This book is different and is pure catnip. Right now I'm struggling to get my head around John Rawls from the brief blurb in the book. "Social and economic inequalities are to be arranged so that they are to the greatest benefit of the least advantaged?" What the hell does that mean? I might need a better reference. Heck, I might even need the original (Theory of Justice).

Unemployment has its privileges.

Saturday, December 15, 2007

"Choose h" - Policy responses to global warming

It is important to distingish what one country chooses to do from what the rest of the world chooses to do... "we" (meaning the human race) can't do anything, only YOU (either individually or through your elected representives, who exert some minimal control over your fellow citizens) can do anything. The rest of the world will operate largely independently of your actions.

Thus the concern with Kyoto that many nations are not signatories... Canada produces 2% of the greenhouse gas emissions in the world. If the other 98% are obligated to do very little under Kyoto (or are not signatories), then one might ask: "why be suckers for a lost cause?"

(to be continued....)

Some hot air on global warming

One of the positive legacies of my economics education is a tendency to express public policy discussions using mathematics (actually, pseudo-mathematics) and to characacterize public policy debates as debates about the shape or nature of the mathematical functions involved.

The global warming policy discussion is a quest to "do the right thing". Here is one road towards discovering what the right thing is.

The debate can be characterized with some stylized functions. Note that the functions would not describe outcomes, but probabilities of various outcomes. Note also that the arguments and outputs of all these functions would be time-dependent (technically, vectors of time-series data) rather than scalar.

G(h) - response function of greenhouse gases to human activity (h)
T(G) - response of temperature to greenhouse gases
E(T) - effects of temperature changes (increased storms, higher sea level, etc)
B(E) - net benefit (however "benefit" is defined) of these effects. (which would of course likely be negative.)

Of course, human activity (h) has non climate related benefits B(h). Furthermore, greenhouse gases (G) may have beneficial effects (such as faster plant growth) independent of their effects on temperature, B(G).

The entire problem, then, could be described as:
- Choose h, so as to maximize:
B(E(T(G(h)))) + B(h) + B(G(h))

Of course, this is all nerdy common sense so far: the devil is in the details. What I plan to do in this essay (which will likely take a while, but hey, it's important) is characterize the talking points in "the global warming debate" in the context of the above formulation.

"Choose h"

Artist or A-hole?

Recently, an OCAD student turned in a final project whose content was a fictitious bombing of the ROM (Royal Ontario Museum) in Toronto. The project consisted of this YouTube video ... and an mock "bomb"* placed in front of the museum. You may guess the outcome:
  1. Several downtown streets closed for hours at the height of rush hour.
  2. A major fundraising event being held at the ROM cancelled.
  3. The student's expulsion from the school, and subsequent criminal charges.
  4. A long debate about the limits of conceptual art.
Responses ranged from a fellow student's defense of this exercise as a valid exercise in conceptual art ("it's a statement on our culture of fear") to wide-ranging criticisms of conceptual art itself. There was a nice article in the Toronto NOW magazine (for once) that pointed out the real problem with this art project: not that it was in bad taste, or amateurish, or "not really art", but that it involves people who didn't ask to be involved. How many of the evacuated staff and guests of the museum were at least a little worried about this threat? How many members of the bomb squad swallowed a lump in the throat as they brought their equipment to the scene? I wanted to pass along the closing bon mot in the article that I thought summed up the debate perfectly:
You can piss on a canvas and call it art if you want - just don't piss on me!

* The student later said that he "didn't expect such an overreaction", and in his defence, the "bomb" apparently had a sign on the side saying "this is not a bomb". However, it was very carefully built to *look* like a bomb. It's not clear if he made any actual bomb threats to the police.

Sunday, November 18, 2007

Once more into the minefield

Recently, James Watson (the co-discoverer of the DNA molecule) wandered into one of the biggest "no go" areas of modern public discourse - the possible correlation of race and other traits (ie IQ, predisposition to criminality, etc). It's not clear that this foray into the minefield was intentional - he made some very inflammatory-sounding initial statements, followed up with profuse apologies and protestations that that "wasn't what he'd meant." But a clarifying article he wrote for the UK Independent newspaper contained some very intellectually responsible (IMHO) yet dangerous and unpopular sentiments, which I found very interesting.

The money quote:

We do not yet adequately understand the way in which the different environments
in the world have selected over time the genes which determine our capacity to
do different things. The overwhelming desire of society today is to assume that equal powers of reason are a universal heritage of humanity. It may well be. But simply wanting this to be the case is not enough. This is not science.

This is not to say I'm a sudden buyer of this racial differences idea - I've got Jared Diamond's "Guns, Germs, and Steel" on my bookshelf just like every other intellectually responsible adult. But I like Watson's quote because it emphasizes that the principles of intellectual responsibility and objectivity to which I subscribe belong in every debate, including this one. "I don't want this to be true, but that does not prevent me from asking the question."

Of course, I've found that participating in this debate is an icky experience precisely BECAUSE many of the participants harbour an unsavoury desire for racial differences to exist, as a potential means of explaining their failures or justifying their gains. It's icky for another reason as well, as Dr. Watson has found out: he's just been forced to resign his research position as the result of his comments. A minefield, indeed.

Saturday, November 03, 2007

Your friend, the atom

Oil's rise to $95 (and the fact that I think we've hit Peak Oil*) has got me thinking again about a long interest of mine, namely energy security and the future of industrial civilization.

This online 1990 book about nuclear power (by an engineering professor) is very interesting, and seems to me to deal ably with most of the common objections to nuclear power:

As a result of perusing the book I've come to the following conclusions: which might not necessarily be true but certainly sound plausible to me)
1. Electricity is a good thing (if you like light, heat, unspoiled food, manufactured goods, cooking, public transit, the Internet, street lighting, etc)
2. Electricity demand can be divided into "base load" (the minimum level that is needed at the least demanding time of day) and "peak load" (when everyone in Toronto comes home on an August evening and turns on their air conditioner).
3. Electricity can be generated by coal, natural gas, nuclear, hydro power, wind power, or solar.
4. Hydro is pretty good if you've got rivers (that you don't mind damming). Most places don't have nearly enough of those.
5. Burning coal and natural gas to generate electricity kills thousands of people every year with air pollution and helping to change the planet's climate in unknown but potentially serious ways**. And that's really stupid.
6. The preferred "green" approach is a combination of solar/wind/hydro and conservation. The book doesn't talk about electricity conservation, but there's certainly room for improvement there.
7. HOWEVER, the characteristics (notably, the obvious unreliability) of solar and wind power make it TERRIBLE for base load power generation. (Although the book isn't "anti-solar" by any means and cheerfully lists applications where it is useful). Electricity cannot be stored very well and is best used at the time it is generated (batteries that are big enough to actually run the grid would be colossally expensive). Solar power only works when the sun is shining. Wind power only works when the wind is blowing. What do you do the rest of the time?
8. Therefore, if you want to keep the lights on 24/7, the "green" approach is not going to be enough, and that leaves....
9.... the dreaded nuclear reactor. The author of the book feels that nuclear has gotten an absurdly bad rap on various points:
10. The risk of an accident that releases radioactivity into the atmosphere is EXTREMELY low using any kind of modern Western reactor design with a containment building. (Chernobyl was an obsolete and unsafe reactor design with no passive safety systems and no (!) containment building). Have there been "incidents" at Western nuclear plants? Of course there have (Three Mile Island being the most famous). Have those incidents caused any deaths? No. Compare that to the deaths that we cheerfully accept every year from coal-fired power generation, air travel, automobiles, etc, etc.
11. The danger from sabotage is equally remote. A saboteur could certainly destroy the plant if they knew what buttons to push and had time to work, but in the absense of several tons of high explosive, could do little to damage the three-foot-thick reinforced concrete containment vessel. (A car bomb would do nothing to such a sturdy structure).
12. The main danger from the storage of radioactive waste is that the radioactive material will leach into groundwater. However, material that is encased in solid glass (which is extremely resiliant to water), surrounded by a copper case (ditto), and packed in bentonite clay (expands when exposed to water, forming a watertight seal), then buried in geologically stable formations (like the Canadian Shield or Yucca Mountain), well, that's a much smaller disservice to future generations then letting the lights go out on them, in my opinion.

There seems to be something uniquely "scary" about nuclear power, that shuts off the common sense assessment of benefits and risks that people are able to follow for most other policy debates.

*I'll write more about Peak Oil later, but I'll say this for now:
1. Gasoline is going to get a lot more expensive than it is now, and it's going to stay that way.
2. People who've made investments (ie suburban houses) that depend on the ready availability of cheap gasoline in order to be livable are going to take it right in the neck.

** I'm going to write a post on global warming soon, since I've been doing some thinking about that. Basically, Al Gore made me a believer ;)

Thursday, September 20, 2007

An expansion of "faith-based" schooling... are you kidding me??

There's an election coming up in Ontario, and the notion of faith-based schooling has suddenly become front and center in the campaign, shouldering aside more important issues like... well, heck, I would have thought just about *anything* was more important.

For those of you who don't know, there is such a thing as a "Catholic school system" in Ontario, dating from the time there was a Protestant majority and a Catholic minority, with differences between the two tribes such that seperate school systems was thought necessary.

I do know that "the Catholic school system" receives tax funding just as "regular" public schools do, though I have to confess that I don't know (more research required)
a) if you have to be Catholic to go to a Catholic school.
b) if so, how you prove that you're a Catholic.
c) whether they are required to teach the Ontario cirriculum to the letter, especially if they have to teach certain theories of speciation in biology class which are very unpopular amongst some churchgoers
d) whether there are always extra "private school" fees involved (there often are I believe)
e) whether the Catholic schools are "better" in some way that would appeal even to a non-Catholic (ie better facilities, smarter kids, better teachers, etc)
f) how much extra this costs per year as opposed to directing all funding to a single school system which could more efficiently (?) use the funding, without having to provide two seperate school buildings in one town, etc.

Anyway, anyone who spends more than five minutes in Ontario (*especially* Toronto) these days will notice that there aren't just "Catholics" and "Protestants" anymore. There are plenty of Jews, Muslims, Sikhs, Hindus, and thankfully a growing number of loud-mouthed atheists. The Conservative leader, with the easily associated name of John Tory, has noted (correctly) that one school system for "Catholics" and one for "everyone else" is an absurdity (and rather unfair) in this multicultural melange. However, instead of the obvious and sensible solution (abolish the Catholic school system), he has proposed that ALL religions get their OWN seperate, fully taxpayer funded school systems.


Even if one does not have a visceral distaste for religion, an aversion to its influence in the public sphere, and an opposition to any use of public funds to delay the day when the religion meme is purged from this planet forever, one can still point out any number of problems with this chowder-headed idea.

1. It will be expensive. At a time when governments are struggling to maintain health care funding, and closing down "optional" school programs like libraries, arts, and athletics, it ought to be blindingly obvious that blowing an extra $400 million per year (one estimate) to duplicate all the services that exist now in entirely seperate school systems is the height of folly.

2. Which religions qualify? Shall the Wiccans, the Scientologists, or the Moonies get their own schools? Why not? Is it a question of popularity? What's the cutoff? Are there some objective standards by which a religion would be considered "too absurd" to qualify? And... ahem... what might those standards be?

3. Even if we decide which religions should make the grade the program will be hard to administer "fairly". How many Muslims do there need to be in Thunder Bay before Thunder Bay gets a shiny new taxpayer-operated madrassa of its very own? Tedious arguments of this nature are ubiquitous enough when there is ONE school system... imagine when there are ten?

4. One of the virtues of a single school system is that people of different faiths mingle together, and exactly the time when young people should be taking the time and having the opportunities to meet different kinds of people in the world around them. One commenter on the Globe and Mail website wrote:
I will always remember my good friend Hannah and her sister in highschool. They were Muslim, their father had arranged meetings with potential spouses for them and the were so happy and excited about this. In their view, they had a father who loved them and was helping them to find positive futures. I would never have had this insight into their culture if I didn't go to school with these girls. I would have thought what a backwards patriachal religion. Public schools teach tolerance and understanding by the simple virtue of the fact that you make friends with different people.

Now, I happen to think that arranged marriage *is* a barbaric practice, but if I were an impressionable youth it wouldn't do me any harm to actually meet someone who thought otherwise. Religion and religious people aren't going away in this society any time soon, my Dawkins-inspired fantasies to the contrary, and even a fire-breathing young atheist would be well-served in learning to get along with them. It also wouldn't do Muslim children any harm to find out some of the salient features of the culture that they, you know, *live* in.

Another smart comment from the same thread:
On balance, I do not believe that the public interest is well served by publicly funded separate schools. Ultimately, I believe it is harmful to children to educate them in a setting that creates a sense of 'other-ness' from the children educated in different settings.

Publicly funded schools can be environments in which children of all cultures, religious (or areligious) traditions, abilities and even languages can be brought together.

Call me crazy, but I'm not sure that creating a balkanized generation of students who identify strongly with their religion and cannot comfortably interact with others who do not share their group identity is the best use of taxpayer dollars.

5. I describe above what would be lost by abandoning a "single school system". What would be gained? What are the benefits? To be honest, I have no idea... if I encounter a succint description of what a supporter of this idea thinks they are accomplishing I will post it here. What is a Jew or a Muslim afraid of, such that they cannot rub shoulders in a school with non-Jews or non-Muslims? Defenders of faith-based schooling usually feel pretty threatened by the public school system, as this comment from the same thread shows:

No education system is value-neutral, even the public one... the problem is that the public school system has become one that precludes all religious values....(this is the problem for parents) who would like their children educated by a set of religious values, as opposed to the prevailing secular value-system.

That word "secular" is an interesting one. This writer uses it as some kind of synonym for "atheist", but that's not what it means, and this confusion goes right to the heart of the misguided motivations for faith-based schooling.

Secular means "not OVERTLY or SPECIFICALLY religious." It does NOT mean "not religious", nor does it imply being hostile to religion. Therefore there is no such thing as a "secular value-system" (as opposed to an atheist or humanist value system), unless it means something like "get along with others even if they are of a different religion than you."

Now, since 90% of all religious values are in direct conflict with some *other* religious value, by necessity the schools cannot teach them all without contradicting itself, and can't teach only some of them of them without opening itself to charges of favouritism. Therefore it must be secular, in the way I describe above**.

Of course, people like me are part of the problem, as our tendency towards strident hostility to religion sows exactly the secular/atheism confusion that leads to defensive reaction exemplified in the quote above.

But the troubling questions remain: Can schools really successfully avoid inculcating values at all? What if it is impossible for schools to avoid offending religious sensibilities? Can such a society survive?

** (If a school really *were* teaching atheism, it would list all these religious values and views and point out their contradictions and absurdities so forthrightly that a student would be led very naturally to atheism).

Sunday, August 12, 2007

The Decline of the "Petrodollar"

International crude oil sales (and market price quotations) are conventionally conducted in US dollars (USD). Many people believe that this has some positive implications for the USD and the American economy in general, and they refer to the USD as the "Petrodollar". The story goes that the use of USD in international oil transactions means that the USD is an "oil-backed" currency, and the end of USD-denominated oil sales would cause a rapid decline in the value of the USD.

Recently, Iran announced that they had stopped accepting payment for oil exports in US Dollars (USD), and would henceforth only accept Euros (EUR) instead. This was seen by many as a grevious blow to American economic hegomony, and the same people commonly believe that Saddam Hussein's imminent plan to do the same thing was one of the main motivations for the US invasion of Iraq. Anti-American leftists have gleefully reported on the coming abandonment of the "Petrodollar" for years.

However, the idea that the US economy is propped up by the "Petrodollar" is complete nonsense. What matters is how many USD foreigners want to retain, and that in turn is driven by demand for US goods and services (plus other factors). The currency oil is traded in is not one of those factors.

Scenario 1 (USD oil sales): You have USD. Iran accepts payment for oil in USD... but they would rather hold Euros instead. So they trade USD for EUR in the FX market.

Scenario 2 (EUR oil sales): You have USD. Iran is not accepting the Great Satan's money anymore, they only sell oil in Euros now. So you trade USD for EUR in the FX market and buy your oil. Iran keeps the Euros.

What's the difference? There is no difference. You could change the buyer's starting currency from USD to CAD or EUR or rupees or ringits or yen or anything else and there is still no difference. (OK, there is a very, very slight increase in the liquidity of the USD in global FX markets, but the global oil market is NOTHING compared to the global market in FX, it makes very little difference).

American foreign policy and international macroeconomics are interesting things to think about.... the "petrodollar" is no help.

Monday, July 02, 2007

I'm post-automotive

Recently, I heard that VIA is now operating a new "bike train" from Union Station to Niagara Falls. It's a bit pricey ($59 return for you and your bike) compared to driving (less than 2hrs), and so I scoffed.

I shall scoff no more.

I drove down there yesterday to get some scenic back country cycling in, and the experience was so thoroughly miserable that my commitment to continued car ownership is now being seriously questioned.

Firstly, a two hour drive turned into four, as it was intermittently stop and go for 100km from Mississauga (western burb of Toronto) all the way around the lake to St. Catherines. That's one of the downsides of driving in the GTA... at least when you leave Vancouver, you are suddenly out in the wilds and traffic dies down. Southern Ontario is ten million people and City Everywhere, and you can enjoy stop-and-go freeway hell for hours at a time.

Secondly, I drove to Fort Erie, which is right across the river from Buffalo (the pic shows the Buffalo skyline), but I foolishly drove into the Duty Free shop to use the washroom (no signs warning me of the hazards of a Duty Free Pee), and I spent the next ten minutes explaining myself to Canada Customs.

The ride (64km from Fort Erie to the Falls and back) was awesome, but I was crushingly exhausted AFTER my ride...the drive back was a weary, white-knuckled nightmare of staring down 14 lane freeways through heavy-lidded eyes.

Let's see... driving IN town sucks. Driving OUT of town sucks. There's nowhere else to drive here. Why don't I just move closer to work (once the location of work is more firmly established) so that I can cycle the entire distance and walk to get my groceries, and ditch the car??

I've driven thousands of kms of enjoyable tourist travel, all over North America. My car and I have been to Cape Scott, Tijuana, San Francisco, Utah, the Grand Canyon, Chicago, Detroit, Toronto, Ottawa, Quebec City, and Buffalo. My Happy Motoring career has been fun, but I've had enough... I suspect the world will soon begin moving into a post-Oil age, and I think I'm ready to start moving with it.

Sunday, June 24, 2007

The Road Warrior: Bicycle Edition

Well, I am now a shiny new graduate of the CAN-BIKE commuter cycling program, and it was a real confidence booster for my heavy-traffic riding. You know those lunatic cyclists who fearlessly (but competently and safely) change across three lanes of traffic, stick their arms out, and make left turns as though they were cars?

I'm one of them now. MWAHAHAHAHA!!!!

The most important lessons I took from the course:
1. Lane position. Our instructor referred to cyclists who timidly hug the curb when they ride, fearful of being hit from behind, as "gutter bunnies". But it's not just a macho thing.... riding a meter away from the curb is safer for you. For one thing, being hit from behind is actually a fairly rare car-bicycle collision. What's far more common? Getting smacked by an open car door (aka "the door prize"). You avoid the door prize by ... not riding next to parked cars. So give yourself a meter of clearance, even if that puts you in the traffic lane. Simple.
2. Be predictable. This includes making SIGNALS when you're going to change direction.
3. Be visible.
4. Don't ride on the sidewalk. It's dangerous, because every driveway becomes an intersection (and motorists aren't expecting you to be there, so regular intersections become twice as dangerous.)
5. Don't ride against the traffic. Ditto.

What the course is really trying to imbue is a consciousness change. You are a cyclist, you are a VEHICLE on the road. You have a right to be there, even if your presense involves temporary inconvenience and delay for motorists. (I emphasize the 'temporary'... if you are slowing a motorist down for more than a few seconds, you should probably think about pulling over. But traffic in a typical downtown core is so slow that you are often riding faster than a car is able to drive in the first place.)

Riding in traffic is now... FUN. It's a riot to fly past a line of stopped cars... I feel like a kid again.

I'm riding over 100km per week these days... it's doing my waistline some good too.

Tuesday, May 22, 2007

Cycling through the peaceful countryside... of downtown Toronto

One of Toronto's best features is the Don Valley, through which the modest Don River flows from the north to empty into Lake Ontario. For whatever reason, either because of difficulty of development or due to a spasm of actual urban planning, a delightful system of woodsy parks snakes down the valley all the way from Eglinton Avenue to the lake. All is not perfect... the parks turn into crowded pigstys on the weekend, and a six-lane freeway (the Don Valley Parkway) runs through the valley as well, but the parks collectively form a 10km bikepath towards downtown that would be the envy of Vancouver. I've been enjoying a daily bicycle commute ever since the beginning of "bicycle season" (ie the six months of the year when it's above freezing), and it's been a wonderful respite from the grim and mechanical ordeal that my commute normally is.

The mist rises from the dewy lawns in the morning, and the air is alive with the sound of birds. At many points the trail is actually a disused road, and the trees close in to provide an almost countryside setting. I've seen deer, armies of squirrels, and even a little bunny rabbit scampering comically in front of me this morning. It's a delightful way to begin and end the day.

Of course, the office tower in which I work is in the downtown core of one of the largest cities in North America, so it's not all bunny rabbits and daffodils: the last few kilometers of my ride consist of exhilarating (and sometimes sphincter-clenchingly crowded and dangerous) urban combat on King Street, or "Suicide Alley" as I half-jokingly call it.

Hyperbole aside, it's not quite as bad as I make out. There are plenty of cyclists on the road, and the presense of streetcars actually slows down traffic. I've been doing some reading on safe riding practices in heavy traffic, and learned a few things. For one, cyclists often act as though they have an inferiority complex regarding cars; they are deeply afraid of being hit from behind by a car (which is actually very rare), and convinced that they do not have the right to slow motorists down or inconvenience them in any way, even for a moment (which, if you think about it, is bullshit... cyclists have a right to travel too!) As a result, you'll see cyclists cower as far from the moving traffic as possible out of fear and exaggerated respect, and actually making themselves LESS safe in the process: vulnerable to getting doored by a parked car (many people have died this way), getting wiped out by sewer gratings or gutter junk, or getting clipped by a motorist who takes your lane position as an invitation to pass even when it really isn't safe. I've been guilty of this behaviour, but have vowed to stop it... from now on I'm "taking a lane" whenever necessary for my safety.

But there's lots more to learn, so I've decided to take the CAN-BIKE 2 course starting in June. This is the serious road commuter course, and the prerequisite is that you are already experienced riding in traffic. I expect that I will be told that I have been doing everything wrong and am lucky to still be alive, but I'm looking forward to it.

Sunday, May 20, 2007

Trying to see through the fog with my blog

Here are a few of my favourite quotes, which illustrate the guiding principles behind this little project of mine.

A (frequently) debated subject is often a symptom, a surface manifestation, of a more basic underlying disagreement. Unless this area is explored - and unless some agreement is reached - the conflict will continue, while becoming repetitious and dull. The result is a kind of "intellectual atrophy", where the argument proceeds without significant progress, where no new material is introduced, and where the participants know beforehand that neither side will convince the other.
George H. Smith

The areas I'm interested in (politics, religion) are just those areas where the debate is never-ending. My aim is to explore the underlying disagreements.

I don't want to hurry it. That itself is a poisonous twentieth-century attitude. When you want to hurry something, that means you no longer care about it and want to get on to other things. I just want to get at it slowly, but carefully and thoroughly, with the same attitude I remember was present just before I found that sheared pin. It was that attitude that found it, nothing else.
Robert Pirsig, Zen and the Art of Motorcycle Maintenance

That's how I like to work too. It's unfortunately very difficult to find a workplace that lets you cultivate that attitude.... but my blog is my own and the time I spend on it is my own.

Perhaps someone may say "But surely, Socrates, after you have left us you can spend the rest of your life quitely minding your own business?" This is the hardest thing of all to make some of you understand. If I say I cannot "mind my own business," you will not believe that I am serious. If on the other hand I tell you that to let no day pass without discussing goodness and all the other subjects about which you hear me talking and that examining both myself and others is really the very best thing a man can do and that life without this sort of examination is not worth living, you will be even less inclined to believe me. Nevertheless, gentlemen, that is how it is. – Plato's Dialogues

Ahh, yes. That is indeed how it is.

Saturday, May 19, 2007

Judging Art

Yesterday, I read a record review in the Toronto NOW magazine that really annoyed me. I seldom trust other people's musical judgment enough to read record reviews, but this struck me as a particularly clueless assessment.
Linkin Park - Minutes to Midnight
Man, these guys make it easy to keep on writing them off as colossal nu-metal/alt-rock assholes, especially since they continue to kick the gasping horses of those dying genres... a rehash of the same lame hiphop/metal/electro.... Perpetual dingleberry vocalist Chester Bennington can't move beyond the "My life is so painful, wahhhh" phase... Try as they might to sound different, Linkin Park still sound like they're stuck back in 00, which is where they should have stayed.

I beg to differ. I've been listening to rock music for quite a long time now (especially the heavier flavours), and for me, Linkin Park works; the dual vocalist attack, walls of catchy nu-metal guitar (no solos), and imaginative DJ-style beats and scratchings form a genuinely innovative and interesting musical synthesis. It's angry and passionate, it's energetic as hell, it sounds great live, and it's just the thing for exercise or housework! ;) *

The astonishingly well-read Neil Peart, in his book "Travelling Music", recounts his favourite criteria for assessing a work of art:
1. What was the artist trying to do?
2. How well did they do it?

It follows that a reviewer should understand the forms and the goals of the genre of the work they are reviewing. Or, as Peart says:

Early in my career I found it frustrating, and often hurtful, to be judged, misunderstood, and insulted by people who, if they were going to help me, ought to know more than I did about the music I wanted to make. Sadly, they did not.

Personally, I'd never offer an opinion on a teen diva or New Country album. Oh, I know how I'd probably feel about it: I'd despise it. But I don't know or care enough about the forms and goals of those genres to say anything of value about such works, and silence seems the only honest response. It appears to me that these considerations do not trouble our intrepid NOW music reviewer.

This might apply to "modern art" too. Who hasn't seen the "pile of bricks" sculpture in the Tate Gallery of Modern Art in London and thought: "that isn't art, it's crap! I could do that!" I certainly used to think such thoughts. But maybe I was wrong ... maybe art isn't just about virtuosity of technique (though in my opinion that certainly helps)... maybe there is a whole vocabulary and artistic tradition that I know nothing about, which that work is a faithful part of.

(or maybe there's no artistic tradition there at all, it's just a joke on the audience. Or maybe a work is so inept that the audience can see past their own inexperience and recognize it. Ahh, but is your reaction due to your own unfamiliarity or the artist's incompetence? Jeez, art criticism is tough work!)

* Note: I'm responding to the blanket dismissal of the band, whose work has been uniformly excellent up to this point. The new album, is, in fact, not very good IMHO.

Sunday, March 11, 2007

The Music Industry: Downloading reconsidered

Astonishingly, a radio-ready record costs around $250,000 to record these days. I'm not sure how this can be when for $5k you can buy a Protools rig that is 1000 times better than what the Beatles used to record Abbey Road, but let's accept for the sake of argument that that's the way it is (one wonders why it is that way... are modern production values a substitute for good songs and performances? Are we looking for ear candy or music?).

How does a record contract work? The chart below shows the distribution of earnings for various levels of record sales, assuming a 500k advance to the band (recoupable out of the band's share of royalties), out of which the band must spend 250k to make the record. The royalties at $10/CD (wholesale) are split 85/15 between the record company and the band. This is a simplified picture: normally the record's producer would get a few percentage points as well (which would come out of the band's share), and the record company would incur additional costs (music videos, tour start-up costs), all of which would be recoupable as well.

The 85/15 split is meant to compensate the record company for their risk of potential losses. If the album goes platinum (a million copies), the record company does very well indeed... the band, not so much. In practice, given all the other recoupable record company expenditures, it is very unlikely that the band will see any money at all for the album beyond their advance, unless it is a truly colossal hit. But there are several thousand albums released per year in the U.S., and only about 30 of them go platinum. Most of them don't even earn back their advance, and disappear into the discount bins as money-losers for the record company.

Naturally, an established "big name" band is not going to accept an 85/15 split, as such a band is very likely to sell several hundred thousand copies even with an "off" record. The downside risk to the record label is near zero, and the split is adjusted accordingly.

What does all this have to do with downloading? First of all, the insistence of the record companies that they are just "defending the artists" by fighting downloading rings extremely hollow... they are defending *themselves*. Most artists earn the bulk of their income from touring and merchandise sales, where they get a much higher share of the proceeds. Only a handful of superstar recording acts are harmed by downloading - the rest are in the flat part of the blue curve and couldn't care less if their songs are downloaded or not - in fact they probably benefit from the increased exposure.

So, if downloading only hurts the big evil record companies, should we all start downloading with light hearts and clear consciences? I'm not sure. I'm beginning to think about the service that a record company still provides in an Internet world. We don't need them to manufacture and distribute a shiny disc for us anymore (and we don't need to pay Apple a 35 cent cut of a 99 cent song to ship us a few megabytes when bandwidth and disc space are too cheap to meter), but we DO (perhaps) need record companies for *filtering*. I live in a major city, and on any given weekend there are 100 bands plying their trade. The job of the record companies is to prowl these sweaty clubs, looking for the "good" bands and signing them to record contracts, fronting the money they need to make a professional-sounding record, and thereby increase the odds that this band will come to my attention. Even if I disregard all record company advertising, don't own a radio, and rely on word-of-mouth from my musically sophisicated peers to make musical discoveries, the chance that *they* will have heard of the band in the first place is greatly increased by the intervention of the record company. Is that worth something to me?

The reward the record companies get for this service are the windfall profits they get when they manage to hit it big with a new artist, and it is exactly those profits that are most threatened by downloading. No wonder they're pissed.

There are so many other interesting economic issues here, but that's enough for now.

Monday, January 15, 2007

Solow Growth Model and differences in the wealth of nations

You will have noticed that there are vast disparities in wealth between rich and poor nations. The standard economist response is to start talking about the "Solow Growth Model".
Problems with this approach
1. A philosophical one: is GDP the best (or even a particularly good) measure of a nation's well-being?
2. How do you measure capital?
3. The standard Left answer for this question is: rich countries became rich by stealing from poor countries This is an intriging possibility that is beyond the ken of macroeconomics... byu postulating that everything happens in markets, it doesn't know how to even THINK about power or theft.
4. Land and resources are typically left out of growth theory. Given the recent commodity and land price increases, is this justified?

Sunday, January 07, 2007

How Economics gets "is/ought" right, but "is" and "ought" wrong.

In Economics education, the prevailing methodology draws a distinction between "positive" economics (how things are, and why) and "normative" economics (how they ought to be). In this view, the economist's key contribution is objectivity: the ability to see how things are, without allowing one's own desires to colour their interpretation. Many observers (frequently on the "left") do not believe that such objectivity is possible; a researcher's views on how things ought to be will inevitably and unavoidably affect their view on how things are, and the researcher may as well abandon any pretense of objectivity and shamelessly promote their preferred viewpoint. These people tend to see modern economics as bearing a "right wing" agenda, and to them, the ostensible "objectivity" of economics makes its right wing influence all the more pernicious.

I have a foot in both camps. I believe objectivity is possible, and that the vigorously enforced positive/normative distinction is one of the very few things that economics gets right.* But the devil is in the details: while economics includes many of the correct ingredients when it teaches about "is" and "ought", it includes these ingredients in proportions that are so skewed as to appear intellectually negligent, if not downright sinister, to the thoughtful observer. The net effect is to leave economists with a much more "right wing" viewpoint than is warranted or healthy.

Starting out in economics, students are taught a model of perfect competition in markets ("is") and then taught that this is economically efficient in the Pareto sense ("ought").

From this foundation (and it's not a bad one), various avenues can be explored:
A) The model of perfect competition can be applied to various problems in macroeconomics, trade, etc (this is still "is"). It should be noted that solutions suggested in the framework of perfect competition and Pareto efficiency will pretty much always be market-based... any form of government intervention in a perfectly competitive market can easily be shown to be inefficient in the Paretian sense.
B) Departures from perfect competition (externalities, imperfect information, public goods) can be explored (more "is"). These are technically more difficult than the simple perfect competition model, but more "realistic", and government intervention often has a role to play.
C) The implications of these departures in B can be applied to macro, trade theory, etc. (still more "is")
D) A richer array of moral choices than those offered by Pareto optimality can be explored and quantified (like equality, justice, etc), and policy settings can be evaluated in the light of these various choices (here at last, we revisit "ought" and move it beyond utilitarianism). Exploring this richer array of market choices might also tend to lead one away from utilitarianism.

In my view, markets are rife with significant departures from perfect competition described in 2 above - perfect competition is not the rule, it is the exception. That's just the way things are: information is costly and some things can't be bought or sold in markets**. Also, I think it is self-evident that Pareto optimality is morally inadequate to guide economic policy.

If I'm right, then we can derive some good advice for economics from these observations. The first piece of advice is that economics should spend a great deal of time in economics on avenues B and C, and pay relatively less attention to A. The second conclusion is that economics should spend a great deal of time thinking about D, since this is what 80% of policy debates are really about, and economists presume to offer policy advice.

One might imagine that a first course in economics would concern itself largely with a perfect competition/Pareto efficiency framework while acknowledging the many possible limitations of that model, while more advanced courses would largely abandon the seductive ease of perfect competition and Pareto efficiency in favour of the realism and usefulness of imperfect markets and richer behavioural assumptions and moral viewpoints.

Sadly, this is not even remotely what happens.

What ACTUALLY happens is that the underlying paradigm (perfect competition and Pareto optimality) remains largely unchanged as the student progresses, but the mathematical rigour with which it is applied increases almost exponentially (especially in graduate school). The dead horse of perfect competition is beaten to a bloody pulp, and so are any critically minded, curious, and imaginative students. By the time a critically minded and curious student of economics gets to graduate school, the education process has become a nightmare.

Now, nobody *says* that Pareto efficiency is the be all and end all, nobody explicitly *denies* that departures from perfect competition exist, and your professors don't really *believe* in the completely selfish and unlovable people who inhabit our models. However, the relentless emphasis on technique*** occupies all available time and renders consideration of any broader criteria or approaches completely impossible.

When I started graduate school, I felt torn, as there were so many courses that I wanted to take. Trade looked interesting. Public Economics looked interesting. Environmental looked interesting. So much choice! So much variety! I felt like a puppy let loose in a public park. I soon learned that my "choices" were largely illusory: all the courses were the same shit with different labels on the buckets.

WHY this happens, I do not know. It might be institutional (perfect competition is simply easier to teach cf. Blaug). Partly it is because economics professors really believe that teaching you the high end stuff is really the best way to learn the low end stuff, even if they admit the low end stuff is better for you (cf. Solow). There might be something sinister at work, a shadowy cabal of capitalists wants it this way. I believe that this is just an example of accidental evolution: the profession didn't have to become this way, it just did. Those who don't want to get with the program leave, and the new leaders of the discipline end up creating little clones of themselves.

That this all does incalculable ruin to the world, as "ruin" is generally understood by most people, goes without saying.

* I might be wrong. In doing positive economics, one must inevitably describe what happens in terms of models. The economy is simply too complicated to describe or explain otherwise. But models include assumptions: behavioural assumptions about people and institutional assumptions about how the world works.

** Here, I am not alluding to the notion that some things "shouldn't be" bought or sold in markets. That's not an unworthy idea but it lies firmly on the normative side of the ledger. I'm saying that for technical reasons, they CAN'T be.

*** Economics professors claim that the emphasis on technique is necessary to do "cutting edge" research in the field, but what is "cutting edge" (ie what impresses the closed profession of academic economists and allows advancement in their insular little world) and what is actually useful are two different things.

Sunday, December 10, 2006

Laughed Behind: Tribulation Farce

I've just spent far too much of my Sunday reading a savagely funny dissection of the geopolitical naivety, lack of imagination, errors of continuity and logic, and sheer Bad Writing of the first novel of the "Left Behind" series.

If you don't know it, "Left Behind" is a 12-book series by Jeffrey Jenkins and Timothy LaHaye about the Rapture, the event many Christians believe will take place (any day now) in which all of them - plus all children - everywhere in the world, will immediately *disappear*, being whisked directly to Heaven by God. Thereafter, a World Government is formed, the anti-Christ comes, and various extremely unpleasant events happen - all of which make those Left Behind wish strongly that they were somewhere else. The theme of the Left Behind books is: "you intellectuals, you laughed at us. Well, we told you so!"

This would all be rather silly, and of no importance, if it were not for a few observations:
1. Many who believe in the Rapture take features of the modern world like European monetary union, 9/11, the war in Iraq to be harbingers of the imminence of the Rapture. (The first and most important event, I'm told, is the founding of the state of Israel).
2. It is plain that many who believe in the Rapture *want* it to happen - they can't wait for it, in fact. This affects how they think and it affects how they vote.
3. The Left Behind series has sold something like 50 million copies. There are *millions* of people who believe this stuff. Even in the darkest depths of liberal Canada, I've met people who believe this stuff. In Democratic areas of the U.S. (such as Seattle, where I worked for a time) they are numerous indeed - and in the more religious areas of the U.S. they are apparently a veritable plague. *Somebody* is buying these 50 million books.

I will let Fred Clark, who is a much better writer than I am, reiterate the point:

This eagerness, this enthusiasm for apocalypse, is theologically malodorous, but it is also politically dangerous. Here again are L&J and
their 50 million readers cheering for entropy, celebrating calamity, wars and
rumors of war as the confirmation of their desires, and railing against
peace and progress as setbacks to this consumation for which they devoutly
wish. They believe that things must fall apart and the center must not hold,
because even now the beast is slouching toward Jerusalem.

They want this to happen. And, whenever they can, they vote for it.

Fred's review (as a series of blog posts over the past two years) reads as though he put more effort into it than the authors of the book he is reviewing did. It is hilarious and highly recommended.

An interesting element: careful "scholars" of the book of Revelation have noted that the allegorical tale therein seems to refer to Europe (the ten headed monster, a la the 10 members of the EU - although it's actually over twenty now), Russia (Gog and Magog, apparently), Israel (explicitly by name)... but there seems to be a player left out. The world's sole superpower, the home of most of the True Believers of this stuff, seems not to be referred to in Revelations. Is the United States supposed to lose power and influence before this stuff comes to pass? The way George Bush governs the country - by seeming deliberately to want to destroy America's economic position, military capabilities, and international standing - I almost wonder if his secret motivation is not to speed the Rapture along.

Sunday, July 31, 2005

Does Israel have the right to exist (and if so, how would you have it act?)

I've wondered about this one for a while. I would love to get into a serious discussion someday with a supporter of the Palestinian cause about this. What do you want all the Jewish Israelis to do? Drop dead on the spot? Pack up and move to Florida? Allow the right of return? Abandon the West Bank/Gaza strip? Provide better compensation to all Palestinians who no longer have their homes?

And if Israel has no right to exist in its current form, why does Canada? The only difference between the two countries is that Canada has far more room and fewer troublesome natives.... the land theft in the two countries differs only by scale.

So why does ANY country have the right to exist? Every country in the world is built on top of the graves of the disposessed.

An element of idelogy: the negative existence value of corruption

CBA analysis talks about 'existence value'.... the value (or negative value) that something has just by virtue of its existance. One of the things to which this could be applied is corruption... consider the Canadian sponsorship scandal.... the cost to an individual taxpayer is only a few dollars at most. So why get so upset? It's the *idea* of it, that's why!

Tuesday, July 12, 2005

Should you bow down to terrorism?

At his excellent blog Informed Comment (at, Juan Cole wrote something really interesting. In the course of a lengthy post about Bin Laden, Ariel Sharon, et al, Cole wrote (and I encourage you to check out the original)...

If what Sharon is doing were the right thing, morally and politically, then he should do it anyway and we'll just soldier on against the terrorists. But it is wrong in the first place, wrong morally, and wrong in international law and an insult to the United States in completely departing from the roadmap.

When I read this, I had what is known as a "moment of clarity" (sharing such moments is what this blog is about).

If we are doing the right thing, and other people oppose it and are willing to use terrorism to stop it, then we should keep doing it and fight on against the terrorists.

But if we are doing the WRONG thing to start with, and terrorists attack us for it, then we perhaps should NOT say "we will never bow down to terrorism". Perhaps we should say "you know, those terrorists have a point, and they are making it the only way they can."

Is the rising incidence of cancer a sign that our society is toxic?

The following exchange took place on the forum... while I participated in the discussion, a post by a participant called MarkR was so good that I had to include it here. The quoted text is from an environmentalist. The text in italics is MarkR.


In the US today a third of the population will get cancer and die of it or its complications. Heart attack and stroke will get most of the rest. Diabetes and other degenerative diseases will clean up the survivors. This was unhead of one hundred years ago. Cancer was very rare, as were all these complaints. These are lifestyle diseases in pandemic proportions. There are many today who believe that these are essentially a deficency disease exacerbated by the toxic chemical environment that people live in these days.

This reasoning is utter nonsense.

Cancer (and to some extent cardiovascular disesases like heart attack and stroke) are primarily diseases of old age.

There are multiple reasons why cancer was not as commonly diagnosed in the 19th century.
The primary reason is that the population nowadays is much older than it was then. Life expectancy these days is approx 75 years, compared with 38 years in 1850. The vast majority of cancers occur in the over 60s - if people don't live into their 60s there aren't going to be many cases of cancer.
The second is that there was less access to medical care, and many people died without seeing a doctor - death certificates were often completed by the relatives, who would write whatever they thought was the cause of death.
The third is that standards of diagnosis were much less good, and many diseases that we now recognise today were not individually recognised, or were thought to be something different.

For similar reasons heart disease and stroke were less common, because they too are diseases of old age. Again, heart attack is uncommon in the under 50s, and stroke in the under 60s.


Nor has there ever been a study that has conclusively proved that any of the treatments for cancer actually cured anyone. It may well be that the higher survival rate for cancer sufferers, if that is indeed the case, has been caused by alternative medicine of which improved diet is a pillar.

This is also complete nonsense.

There are many cancers which are completely curable and there are hundreds of high quality studies which demonstrate, beyond doubt, the modern treatments that achieve these cures.

Some do not need drugs - e.g. early Breast cancer (called DCIS stage) is 100% curable with a mastectomy operation (or, if prefered minor surgery and chemotherapy).

Some type of blood cancers, e.g. Hodgkin's disease are curable in about 90% of cases with chemotherapy. Childhood leukaemias are curable in about 90% of cases. Some types of testicular cancers, are curable in about 90%. Choriocarcinoma, a type of cancer of the womb is curable by chemotherapy in about 95% of cases. 50 years ago, before these drugs were developed - all these diseases were invariably fatal.

For other cancers cure rates aren't as good, but they have improved dramatically over the last 50 years, with improved chemotherapy and surgery regimes.

Monday, July 04, 2005

An element of ideology: the moral limits of private property

I've read of a few cases recently where a company faced with unionization of its workers threatens to simply close its doors if the unionization proceeds. (I'm sure this is not a new phenomenon in labour relations).

Usually, the company claims that it will lose money if it must pay the benefits/wages/etc that unionization would entail. Now, this may be so (although this claim is seldom not believed when it is made), or it may not.

  • If a company really will lose money under the new scheme, is it moral for them to close?
  • If the company will NOT lose money under the new scheme (but will now make less money than they could in some new location with new, non-unionized workers), is it moral for them to close?
  • What moral obligations does a company have to its workers?

Be careful of envy...

A certain kind of person (and haven't we all been that person at some point?) finds it very tempting to say "nobody really needs a _____", where that something is an ostentatious luxury good of some sort. But one must be careful with that kind of reasoning. Just as a mock definition of 'promiscuous' could be "anyone who has more sex than I do", a definition of 'ostentatious' or 'unnecessary' could be "anything nicer than what I've got".

So, the next time you criticize someone for driving an 'unnecessarily large' SUV, remember that you're opening yourself up for attack from the cycling advocate who doesn't think you need a car at all. Can they not use the same reasoning you do? Who gets to define what is 'necessary' and what isn't?

What I love about Cost/Benefit Analysis

The neat thing about economic cost/benefit analysis, in my humble opinion, is the way it provides a means of parameterizing ideological debate.

Are you an environmentalist? Use a generous valuation of environmental items in your study. Do you believe that government should alleviate the suffering of the poor? Incorporate a high value for 'the basic needs externality' in your study. Are you jealous of the rich? Include something analogous to the basic needs externality (ie the "they-are-too-damn-rich negative externality).

And on and on and on it can go. In fact, the adjustable parameters of a cost/benefit study ARE, to a large extent, the "Elements of Ideology" that this website is trying to discuss and enumerate.


Sunday, July 03, 2005

The general mistrust of Cost/Benefit Analysis

It seems to me that Economic Cost/Benefit Analysis has gotten a bit of a bad name, especially among environmentalists and progressives in general. When an economist *says*: ".... we're going to perform a cost/benefit study....", what the public *hears* is something alone the lines of: "...we're going to write a document which systematically ignores every factor that is really important in life, so that we can provide justification for a project that our masters have already decided to proceed with."

I'm sure that's how Economic Cost/Benefit Analysis often *is*, but it needn't be that way. It *doesn't* have to be dishonest. It *doesn't* have to neglect everything that is good and important in life. The environment can be included. The effects on income distribution can be included. And so on.

Monday, April 04, 2005

Modern Economics is Sick

This Mark Blaug article is brilliant. I used to wonder if I was crazy for thinking about grad school as I did.

If I'd read this before I'd gone back to school, I might have changed my mind.

Sunday, April 03, 2005

The ethics of file-sharing

Which of us can forget the first time they discovered that with a computer and a high-speed internet connection, the WHOLE WORLD of music (or at least quite a lot of it) was available to them? For free? Right now?

But there's a catch. It's illegal, and it might even be unethical.

I won't talk about the legality of this, since that's not a very interesting discussion: downloading copyrighted music from the internet is illegal in most jurisdictions, case closed.

But is it *ethical* to download music? Is it ethical to share music files you have downloaded with others? (ie let them upload from you, just as you did?)

Obviously, the artist doesn't get the revenue that "they would have gotten if you'd gone down to the store and bought the record" (see how old I am! I talk about 'records'!) And that might be worth feeling bad about. However:
  1. Some of the money you spend on a record covers manufacturing costs, and some of it covers retailing overhead. Well, you don't need to pay for manufacturing costs because your computer does all the "manufacturing", and you don't need to pay for retailing costs because the other person's computer does all the retailing for free. So you needn't feel any guilt about forgoing *those* costs. (I'll deal with the "but what about all the poor starving record clerks and entertainment lawyers" argument in a second).
  2. Some (quite a lot, actually) of the money goes to the record company. Do you really feel bad about 'shortchanging' them? What did THEY ever do to deserve your money? (I'll get to the "but they promote new artists" argument in a moment).
  3. In fact, only about 7 cents of your record dollar goes to the artist.
  4. What if the artist is far too rich need the money? Many of them are, of course. Paul McCartney has several hundred million dollars in the bank. So what if I download a Paul McCartney song, rather than giving him yet another dollar that he'll never be able to spend before he dies? (I'll deal with the "yeah, but you're still getting something for nothing, and that's bad" argument in a moment).
  5. What if the artist is dead? Kurt Cobain certainly doesn't care if I download any Nirvana tunes.
  6. What if the artist hates the music business and doesn't give a crap if you download their songs or not? (see 5)
  7. What about all the times you bought a new album and found out it was crap? Did the record company ever send you a refund cheque?
  8. Legitimate downloads are crappy quality 128 kpbs files. No way I'm paying a dollar for those. A dollar is an absurdly high price to pay for a bunch of recycled bytes anyway.
  9. What if I'm downloading music from an album that I used to own, but was stolen? If my CDs are stolen am I morally obligated to go to the store and buy them again if I want to hear those songs?
  10. What if my CD becomes scratched or damaged? Am I obligated to give the artist MORE money?
  11. Here's the biggie: What if I wouldn't have bought the record anyway?? Let's say I value a particular song at 25 cents. I can download it for free, or I can download it for a dollar from a legitimate source. What if I had no way of illegally downloading the song, but the song isn't worth a dollar to me? Then I don't download the song, and the artist doesn't get any money anyway.
  12. Here is a related question: what if I don't want to buy the album until I know whether I like the music or not? Not everything I like gets played on the radio. If I can't preview the album I'm not going to plonk down $15 on an unknown quantity. (The conclusion of this last: it's OK to download music, but if you like it you should buy it.)
Some more random thoughts before I have to go back to work:

Some more random thoughts.

Getting "something for nothing" is not immoral, it's the heart of economic efficiency.
People losing their jobs because a more efficient way of doing something is found is also part of economic efficiency.

What do record companies DO, anyway?
Do music lovers need record companies? Do artists need record companies?

If you're an artist, the record company will elevate you to undreamt-of heights of wealth and success... if they think you'll sell. Otherwise, they'll elbow you aside.

How would I hear about new music if the record companies weren't kind enough to tell me about it? They bribe radio stations to play music. But I can hear about music via word of mouth. Radio stations play songs which they would have played for free anyway.

Record companies CREATE value by creating 'network effects'. The value for the listener is the fact that everybody else is listening to it.

Sunday, December 05, 2004

Iraq elections - so what?

I think the controversy about whether to reschedule Iraq's election misses the point. Bush seems to think that the election will change something, but I don't think it will. Right now, the insurgents (Sunnis mostly, with a sprinking of foreign Jihadis?) appear to be slaughtering the new Iraq National Guard (Shiites and Kurds mostly). As long as that continues, as long as the "government" cannot impose authority on the country (which they plainly cannot at this point - in fact the situation appears to be growing worse daily), then it doesn't matter if it is "elected" or not.

Given the performance of the Iraq National Guard and police against the insurgents, I think the US is going to be in Iraq for years to come. 140,000 troops are barely keeping a lid on things. Does anyone doubt that there would be a full fledged civil war 5 minutes after an American departure? When will the US be able to reduce its committment? Looks to me like *years* off.

Another element of ideology: the evaluation of very very long term environmental effects

In Economic Cost/Benefit Analysis, there is something called "the discount rate". Things that happen in the future are "discounted", or weighed less heavily than things that happen today. There are some pretty good common-sense justifications for this practice.
  1. If we are talking about impacts that can be monetized (that is, treated as equivalent to flows of money - which is sometimes controversial in itself), there exist financial markets that allow you to save or borrow at a given rate of interest to obtain equivalent economic effects over time. Let's say that we have the choice to build a $100 million bridge today, that will deliver $2 million per year in "economic benefits" (time saved, expected number of lives saved, and so on) over the 100 year life of the bridge. Obviously, 100 years x $2 million per year = $200m, that's more than the $100m cost of the bridge, so we should build the bridge, right? Not so fast. We could simply stick the $100m in the bank, and we would wind up with *more* than $200 million after 100 years. (A lot more, in fact). Sticking the money in the bank is judged by cost benefit analysis to be "better" than building the bridge, even though we are comparing apples and oranges (that's what CBA does).
  2. People are impatient, and they would rather have benefits today than benefits tomorrow.
The practice of discounting is pretty uncontroversial for the sort of 10-20 year projects that governments are likely to get involved in. Where it *really* starts to get problematic is in evaluating environmental regulations, where the costs are immediate but the benefits potentially stretch out over hundreds or thousands of years. Using the standard discount rates invoked in most public projects, any benefit that happens after 100 years or so is discounted right out of existence. What happens in the far future literally *doesn't count*. This really shows up in climate change projects. If you do a standard cost/benefit analysis of Kyoto or any other greenhouse gas initiative, it comes out terribly. The costs are now, the benefits are in 100 years... "don't do it". Stick the money in the bank instead.

Assuming that all costs and benefits can be monetized, do the results of Kyoto CBA imply that it would be better for future generations if we DIDN'T do anything about climate change, but simply "stuck the money in the bank". What does that mean? In other words, what does the discount rate even MEAN when the timescales are so long that the costs and benefits accrue to completely different generations?

Now, for a lot of environmentalists, all this talk of discounting is devil's talk. Sustainability is their mantra, and if environmental impacts can be monetized at all (many think they cannot be) then they should be discounted at rate zero.

Why did 9/11 happen?

That was the first question I asked myself on that terrible day: "What the hell was *that* for?"

I'm not going to explore the question of "did America get what it deserved" in this post, nor am I going to look at any conspiracy theories. Nor do I think, that in asking the question, I am seeking to absolve the people behind 9/11, or justify their actions. I'm just going to assume that the official story behind 9/11 is accurate (ie that 19 Arabs, trained and funded by Osama Bin Laden and his 'Al Queda' group, hijacked the four planes with boxcutters and crashed them into NY and Washington) and ask "what was on the minds of the people behind this?" After all, you certainly can't question the *sincerity* and *commitment* of the attackers. They knew they were going to die too. What makes them so?

The standard administration response has been: "they hate us because we're so great. They hate us for our freedom, they hate us for our prosperity, they hate us because we're diverse, they hate us because we're democratic."

I always thought that way of thinking was both wrong and dangerous. Firstly, it's pretty plainly wrong. Are 19 men really ready to strap on an airplane and die (as James Fallows in the Atlantic Monthly puts it) "just to keep us from voting in the Iowa primaries?". Other Western countries are democratic too. Why aren't there terrorists bombing Canada? Or Switzerland? Or Sweden? Those countries vote too, you know! They're prosperous, they're diverse, yet they don't get bombed.

This way of thinking is also dangerous because it deflects attention away from particular *actions* of the United States, and absolves the United States of any possible need, responsibility, or ability to take the greivances of the Arab world seriously. If Al Queda wants to kill everyone in the United States unless the country turns into an Islamic theocracy, then there's obviously no grounds for negotiation or understanding. They hate us and want to kill us, so we'd better kill them first.

However, I think that is highly unlikely to be true.

Saturday, December 04, 2004

Two more elements of ideology

1. Self-sufficiency. The idea that providing everything you need for yourself is somehow better or more satisfying in and of itself than providing some goods to the marketplace and trading for others. This idea underlies economic nationalism and "back-to-the-land" movements.

2. Interdependency of utility: standard economic models usually suppose a complete indifference to the choices and lifestyles of others: your utility is derived solely from your own consumption. But this neglects essential human emotions like compassion and envy. Sometimes our happiness depends on the happiness and well being of others (especially the poor, or our families). At other times, our sense of how well off we are depends not just on what we consume, but on what OTHER people are consuming. ("Keeping up with the Joneses"). We feel bad if we are lagging behind others, and we feel good if we have our "status goods". After all, do you ever wonder what kind of idiot would pay $10k for a Rolex watch? As time-keeping appliances they can't possibly be worth $10k, but as devices to communicate how rich and successful the wearer is relative to others, they are evidently worth every penny.

Friday, December 03, 2004

An element of ideology (the right to pollute versus the right to breathe)

One of the goals of this blog is to enumerate as completely as possible the differing principles which underlie the differences in political worldviews. In more or less random order, I shall attempt to capture as many of these fundamental sources of disagreement as I can.

Every economics student eventually encounters the Coase Theorem as one possible solution to the problem of externalities. (In layman's terms, an externality is something that someone else does that affects YOU, like pollution).

The Coase Theorem says that the "economically efficient" (that phrase again) outcome to a pollution problem can be reached if "property rights to pollute" can be bought and sold (and enforced).

That is, the people of the town might start with the "right" to breathe clean air, but they'd be willing to accept a certain amount of pollution in exchange for a $10,000 cash payment each, every year. If a factory owner is willing to make that payment, he can pollute (otherwise, the Environment Ministry swoops in and shuts him down).

Alternatively, the factory might start out with the "right" to pollute, but the people of the town would be willing to pay $1million to have the plant shut down. If that is more than the profits the factory owner makes, he'll take that offer and shut down the plant.

One of the "elements of ideology", then, is: "should the factory owner start with a 'right' to pollute, or should people with lungs start with a 'right to clean air'"?

To an environmentalist, this one is a no brainer.

Economic efficiency, part 1

At last, a post about economics! (There will be many more, I promise).

The stated goal of economic policy is often "economic efficiency". However, an exploration of what "economic efficiency" really means will reveal that "efficient" outcomes can look pretty perverse to anyone with a soul.

Imagine a little valley with an automated factory upstream from a small, poor hamlet. The factory makes $100k a year in profit for its owner, but discharges various kinds of nasty gunk into the stream, which makes the children of the village sick and makes it hard for the old ladies of the village to breathe.

Imagine an economist completely beholden to the concept of economic efficiency. Upon encountering this sad scene, he would ask the villagers "what would you be willing to pay the factory owner in order to be free of this nasty gunk". The answer, of course, will be "not much", since the poor villagers, while they love their kids, don't have all that much money. The economist nods in satisfaction, picks up his briefcase, and leaves the village whistling cheerfully. The current state of affairs yields a total surplus of $100k minus "not much", and is therefore more *efficient* than shutting down the factory.

However, the scene in the next valley is different. There is another automated factory, but *this* factory is upstream from a billionaire's mansion. The billionaire doesn't have any kids, in fact this is his scenic getaway that he doesn't use much, and he doesn't swim in the stream anyway, so he is not actually bothered that much by the gunk. But it does bother him a little. The economist asks the billionaire what he'd pay to have the factory stop producing gunk. The billionaire says "Smithers, what have we got in the petty cash box...? One hundred fifty thousand? That would do. It does get a little smelly some days, and I *do* so love this spot". The economist's eyes widen in horror. The total social surplus of the status quo is 100k for the factory and -150k for the billionaire. The social surplus is negative! Economic inefficiency! This outrage must be stopped!

The point: in the market, the preferences of rich people matter a whole lot more than the preferences of poor people. And at no point in any economics class is this idea ever discussed.

Wednesday, December 01, 2004

A post in honor of "World Aids Day"

I've read that the Bush administration (and other conservative groups) are very interested in promoting "abstinence only" education programs, instead of condom use. On one hand, conservatives are correct when they point out that "waiting until you're married" is a 100% defence against AIDS, and a pretty good defence against pregnancy out of wedlock (which most accidental pregnancies are). But just how well do conservatives expect "just say no" to work? Do they expect to be able to stand against the human sex drive?

Here's how an economist might analyze the problem of AIDS education.

The number of AIDS cases per year is, let's say, A = pC(NT + (1-N)F)
Where A is the number of new AIDS cases.
C is the number of casual sex encounters
p is the proportion of casual sex encounters where one person has AIDS and the other does not.
N is the percentage of these encounters where no condoms are used.
T is the transmission rate of AIDS if you don't have a condom.
F is the failure rate of Condoms. (ie the conditional probability you will AIDS from a casual sex encounter even WITH a condom).

This equation is very simplified (I haven't tried to capture how risky a particular casual sex act is, for example), but it's good enough for my purposes.

Liberals look at the above equation and are interested in only one thing: reducing the amount of suffering caused by AIDS. The "objective function" of the liberals is min(A).... the fewer AIDS cases the better. The number of casual sex encounters itself is not important.

There are various approaches to that goal. T and F are pretty much fixed, so not much you can do about those. If you want to reduce A, you can try to reduce C, or you can try to reduce N. (or try to do both, obviously).

Now, liberals think that C (the number of casual sex encounters) is pretty inelastic. Wagging a finger and saying "just say no" is unlikely to have much effect against the power of millions of years of human sexual evolution. So, since F is pretty low, liberals are usually strongly in favour of condom-based sex education. They don't care about C, they just want to get N as low as possible.

However, conservatives view the problem differently. They say that they believe the right approach to reducing A is by reducing C. But why would they be opposed to reducing N at the same time? They feel that promoting condom use works against their goal of reducing C, that you can't say "abstinence is best.... oh and by the way, here are some condoms." Conservatives feel that people are like children, or maybe like a flock of sheep that need to be guided by the wise shepard, whereas liberals feel that adults are, well, adults, and can make up their own mind on these matters if they have all the facts.

I think what the conservatives are after is a cultural shift. They imagine that there was a time in Western Civilization where "that sort of thing just wasn't done" (ie, nobody had casual sex or even wanted to), and they want to go back to that time.

Leaving for the sexual historians the question of whether there ever was such a time, it seems to me that trying to engineer a wholesale cultural shift against casual sex is much, much more difficult (and less likely to succeed) than a campaign to persuade everybody to use a condoms.

In other words, I think the liberal approach is more likely to be effective in reducing AIDS.

However, I think conservatives are more interested in the above mentioned cultural shift AS A GOAL IN ITSELF than they are in reducing AIDS. AIDS, to conservatives, is a secondary phenomenon of lesser importance. To some conservatives it might be of no importance at all. Jerry Falwell came right out and said as much back in the 1980's: AIDS is God's punishment for immoral behaviour. In fact, if abstinence only programs were to reduce casual sex and condom use, but *increase* AIDS as a result (because condom use dropped by more than casual sex did) I believe that would be OK with most conservatives.

It seems to me that conservatives are more worried about "immorality" than they are about human happiness.