Category Archives: Economics

There is a war.

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Households vs markets

The first symptom was the clutter on the kitchen counter. One cutting board, two pans, one knife. My colleagues had arrived at the rented house the day before, so they'd had plenty of time to arrange things to their liking. I was sure the clutter was not to their liking, if they noticed it at all.

A teachable moment. Instead of tidying the counter myself, and accreting a small amount of resentment, I suggested to one of them that she think of the things on the counter as things that were in her power to arrange however she liked, to suit her taste, selfishly. (“Just as you might optimize your text editor to suit your workflow,” my other colleague chimed in.) She took this suggestion, and spent a few minutes arranging and rearranging the items on the counter. She put away the knife in the knife block.

A puzzle. She noted that she doesn’t usually think of the items in her home this way. Instead, household chores feel as though they are impositions from an abstract, outside authority. She was capable of accessing this other, more pleasant way of working on the things around her. Why wasn’t it natural for her to feel that way in her own home?

An hypothesis. In our usual mode of life, there is a separation between a job - which is done for someone else, to satisfy someone else’s standards, outside the home - and consumption, which is at least ostensibly done to suit one’s own taste. One of the goods you can buy with an income from a job is a nice place to live, and you can also buy services to keep the place clean and tidy. For the most part, you maintain the place you live by leaving it, and entering the domain of an outside authority. Household chores are the remainder that cannot efficiently be outsourced, or an echo of a previous era in which such outsourcing was less common. Continue reading →

Talents

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For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath.
- The Gospel according to Matthew

r > g
-Thomas Piketty, Capital in the Twenty-First Century

From Jesus to Piketty, it is a commonplace that wealth is a positive feedback loop.

Under one model, differential ability to steward capital, plus compounding gains, implies that perfectly benevolent people with more money than most should keep it more often than a naive expected utility maximization would suggest. On the other hand, conquering empires also experience compounding gains; the ability to leverage force into more force implies that this is a harmful positive feedback loop.  Continue reading →

Kidneys, trade, sacredness, and space travel

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To the trader mindset, sacred values are nothing but a confusion; if you don’t like the deal, you just haven’t been offered a high enough price.

There’s something important the trader mindset can’t see. Its modus operandi is to take two different representations of value and profits from resolving discrepancies. It is agnostic as to the validity of those representations. Thus, the trade orientation tends to collapse the map-territory distinction, and in particular confuse exchange rates (i.e. prices) and stores of value.

Consider this music video:

The protagonist is fixated on an image that's been marketed to her by someone wealthy enough to control a planet. The image isn't very detailed, and she's willing to undertake a dangerous and arduous journey, which implies that things aren't very good back home.

She's in a world where travel is expensive. Somehow, improbably, in outer space, she has to pay a toll. This should clue us in that something sketchy is going on. Continue reading →

Cash transfers are not necessarily wealth transfers

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Here’s a common argument:

The problem with the poor is that they haven’t got enough money. There’s ample empirical evidence backing this up. Therefore, the obviously-correct poverty intervention is to simply give the poor cash. You might be able to do better than this, but it’s a solid baseline and you should often expect to find that interventions are worse than cash.

There are technical reasons to be skeptical of cash transfers - which is why it is so important that the cash transfer charity GiveDirectly is carefully researching what actually happens when they give people cash - but until fairly recently, these objections seemed to me like abstruse nitpicks about an intervention that was almost analytically certain to be strongly beneficial.

But they’re not just nitpicks. Cash isn’t actually the same thing as human well-being, and the assumption that it can be simply exchanged into pretty much anything else is not obviously true.

Of course, saying “X is possibly wrong” isn’t very helpful unless we have a sense of how it’s likely to be wrong, under what circumstances. It’s no good to treat cash transfers just the same as before, but be more gloomy about it.

I’m going to try to communicate an underlying model that generates the appropriate kind of skepticism about interventions like cash transfers, in a way that’s intuitive and not narrowly technical. I’ll begin with a parable, and then talk about how it relates to real-world cases. Continue reading →

Why I am not a Quaker (even though it often seems as though I should be)

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In the past year, I have noticed that the Society of Friends (also known as the Quakers) has come to the right answer long before I or most people did, on a surprising number of things, in a surprising range of domains. And yet, I do not feel inclined to become one of them. Giving credit where credit is due is a basic part of good discourse, so I feel that I owe an explanation.

The virtues of the Society of Friends are the virtues of liberalism: they cultivate honest discourse and right action, by taking care not to engage in practices that destroy individual discernment. The failings of the Society of Friends are the failings of liberalism: they do not seem to have the organizational capacity to recognize predatory systems and construct alternatives.

Fundamentally, Quaker protocols seem like a good start, but more articulated structures are necessary, especially more closed systems of production. Continue reading →