Reading carefully your previous post on the Water Analogy for the Economy, I would propose that it makes implicit use of the Resource Model of money. I can see that this theory of money is certainly valid in certain contexts, however I would maintain that it only captures part of the modern concept.
Suppose that we have an economy consisting of just one resource - say wheat. A certain number of people (call them farmers) make a bunch of wheat, which they give to other people in exchange for services such as harvesting the wheat, carrying the wheat etc. Some people take their wheat and store it in a silo in their back yard - this is your 'capital' or 'savings'. Other people use it to buy other services, or eat it. Along comes the government and they take 50% of the wheat that everyone received this year, and throw it away.
Just kidding - they take the wheat and give it to people that don't have any. In this way government is 'neutral' to the economy - they don't produce or eat any wheat themselves, they just re-distribute the wheat from one person to another. So now we introduce more resources - in addition to wheat, we have carrots and shoes. To manage the exchange of all these resources we generate an abstract generic resource which we call money, exchangeable for any other resource. I would venture that a lot of people have this model in their head when they think about money - and it is unquestionably an important concept, especially of commodity money and in the origin of exchange transactions.
However there is another arguably more important aspect to money in the modern economy. Suppose that you want to answer the question "how much wheat should we plant this year?". We can answer this from a top-down perspective - a committee is formed to determine how much wheat should be planted, and the farmers are then instructed to plant this amount of wheat. Or we can answer from a bottom-up perspective, where everyone is polled for their opinion on how much wheat they want, and this information is provided to the farmers. I would argue for a key axiom that on average the quality of a decision is proportional to the number of people making that decision. Now this is not a universal truth, if we developed an artificial intelligence that was smarter than the combined intelligence of 10 billion people, then it would be best to defer to the opinion of our machine overlords. However in the world of human beings, in general the more people that are involved in making a decision, the better the final decision will be. Money provides this function by aggregating the desires of the entire population and signalling this to the farmers via price. This process operates continuously across all resources, answering questions such as "how many shoes do we need?", "is it better to plant a bushel of wheat, or 5 carrots?", "is a large field in Texas better than a small field in Kansas?" etc. All these questions could in theory be answered by one, or a few individuals, but our axiom says that on average we get a better answer if we outsource the question to many people.
Now this is not a democratic process, where everyone has an equal vote. Every dollar is equal, but some people simply have more dollars than others. Money is therefore a proxy for decision-making power. The more of it you have, the more weight your decisions carry or conversely the more decisions you can make. If you have a lot of money, then you run around telling people what to do with their time and what goods to produce. In exercising your decision-making power you 'use up' your stock by delegating future decisions to other people (spending your money). Only if the decisions you make are on average good ones, do you accumulate future decision-making capability in the form of return on investments. On average, people who have accumulated capital are those who have demonstrated a track-record of good decision-making regarding what goods and services are needed. It is beneficial to the overall economy to give more weight to these people, as their past performance indicates that they are more likely to make better decisions (on average).
Now many (most?) of these decisions are self-serving. If I have a million dollars, I could decide to improve my local library, build a small clinic to provide medical services, or buy a large number of Gucci shoes. The last option provides no macro-economic benefit, the second may be beneficial if it is operated correctly - a financial return on my investment in the clinic is the signalling mechanism to tell me that I'm running it in the best way. The first option provides no return to me, but may be of important social benefit (along with services that require coordination such as roads, police etc.). We therefore put in place alternate mechanisms to ensure that these beneficial products and services are constructed by appropriating the decision-making ability of individuals through government taxation. We then bestow this decision-making power on a smaller group of people tasked with the job of making decisions in the public interest.
However in doing this we have converted bottom-up decision-making to top-down decision making, and run the risk of making bad decisions, as well as distorting the economic signalling mechanism. In the case of the wheat economy, if the government appropriates half of the decision-making, they may bias the farmers to produce too much wheat, or too little, as their knowledge of how much wheat is needed is necessarily less than the aggregate knowledge of all the individuals eating the wheat. However this may be an acceptable cost for the benefit of bypassing self-serving individualism and for long-term planning.
When viewed in this way there is no fundamental distinction between capital and income/expenditure. You have a certain amount of decision-making capability, which is your capital. You can use this to make decisions on the production of goods and services, or you may decide that no additional goods and services are required. Both of these are equally valid decisions. Encouraging additional production where none is required is as useless as discouraging needed production, so attempts to stimulate extra production are misguided, and detrimental to the macro-economy. You are substituting decision-making by the few in place of decision-making by the many.
Wednesday, January 30, 2013
Monday, January 28, 2013
Gaming: RTS World - The basics
This is the first in a possible series on The Game I have been mulling over for some time. I'm using the blog as a way to document my ideas for the game and solicit feedback on how to improve it.
Design Goals:
In 'The Game' you are a character who interacts with the world and other players in a persistent way. The actions you perform and the choices you make affect not just your own character but the game world itself and thus, through the game world changes, other players.
The game world should also be 'alive'. It should have its own rules for growth and destruction and elements of the world should be able to interact with each other without involvement from any player.
The ultimate goal is for a genuine second earth: a world that you can live and play in, but that doesn't require your involvement - or the involvement of any players at all - in order to exist and grow.
Inspirations:
Basic Gameplay:
You are a character in a medieval world. Although you are one of several hundred players on the server you start in or near a village by yourself or in a group with the friends who start their characters with you. The village itself is AI controlled and populated by dozens (or even hundreds?) of villagers, each with jobs that contribute to the growth of the village, much like an RTS game settlement. Villagers will gather resources, construct buildings, create items, and compete/fight with other nearby villages or nomadic bands. In the absence of player activity, the villages will expand or decline like an AI controlled faction in an RTS, though on a much slower scale. It should take weeks or months for a village size settlement to conquer another.
Players can help 'their' village to thrive by assisting the villagers with tasks.
Players can collect resources, hunt animals, or exterminate beasts/monsters, like in an old style MMORPG questing structure, with the crucial difference that player actions contribute to the RTS-like growth of the village. Resources gathered or food hunted by players adds to the store of resources in the village, helping the village to grow. Players killing beasts/monsters open up new areas for the village to expand into, to make new farms or gather additional resources.
Players can also build buildings, farms, roads etc themselves, further growing the village. They can also create items (tools, weapons, containers etc.) that the villagers can use for their own purposes.
Players can fight against other villages or nomadic bands, whether simply for loot/experience or to help further the goals of their own village. -- It will be tricky to balance the 'slow growth' model of village development with the typical player expectation of being able to slaughter an entire village of enemies/victims in the space of a few minutes. Some distinction between a respawnable death and perma-death may be needed for NPCs, or maybe civilian villagers could run away and return later when the player leaves --
Player assistance to the village could be guided by quests, generated according to the vllage's current needs based on common templates. Villages would have co-ordinators for each job role that would serve as quest givers. For example the chief woodsman would have a standard quest along the lines of "<name> We need <value> more wood. Please chop <value> trees at <location:wood> and deposit them in <warehouse:wood>"
Players can also, of course, completely ignore 'their' village, i.e. the one near where they spawn, and head off to seek adventure and fame elsewhere. There will be many more villages than players so players can complete quests at other villages, gaining reputation with that village and faction. They can kill randomly spawning monsters or beasts or nomadic bands for the experience and loot. They can attack other villages for fun and/or profit. Maybe they can create their own fort and control their own resource nodes, eventually attracting settlers who want to join with the player. This last could become tricky though.
Considerations:
The following areas would have to be addressed in any such game and/or in a future post.
Design Goals:
In 'The Game' you are a character who interacts with the world and other players in a persistent way. The actions you perform and the choices you make affect not just your own character but the game world itself and thus, through the game world changes, other players.
The game world should also be 'alive'. It should have its own rules for growth and destruction and elements of the world should be able to interact with each other without involvement from any player.
The ultimate goal is for a genuine second earth: a world that you can live and play in, but that doesn't require your involvement - or the involvement of any players at all - in order to exist and grow.
Inspirations:
- Classic fantasy MMORPGs like Everquest, World of Warcraft, Guild Wars etc.
The world theme would be one of low fantasy, a medieval style world with many factions. The player would be a single character at a time, played from first person or over-the-shoulder perspective. NPCs in the world would provide quests and typical MMORPG services. - Real Time Strategy games like Age of Empires, Warcraft, etc.
The factions in the game would be controlled by AIs and capable of growth and expansion. Political boundaries, control of cities and resource nodes, alliances between factions, could all change as the game world lives. - Persistent MMOs like EVE.
The player would be able to change the world, or at least the political and economic overlay of the world. - Minecraft
Simple graphics, generated world, persistent player driven changes to the world.
Basic Gameplay:
You are a character in a medieval world. Although you are one of several hundred players on the server you start in or near a village by yourself or in a group with the friends who start their characters with you. The village itself is AI controlled and populated by dozens (or even hundreds?) of villagers, each with jobs that contribute to the growth of the village, much like an RTS game settlement. Villagers will gather resources, construct buildings, create items, and compete/fight with other nearby villages or nomadic bands. In the absence of player activity, the villages will expand or decline like an AI controlled faction in an RTS, though on a much slower scale. It should take weeks or months for a village size settlement to conquer another.
Players can help 'their' village to thrive by assisting the villagers with tasks.
Players can collect resources, hunt animals, or exterminate beasts/monsters, like in an old style MMORPG questing structure, with the crucial difference that player actions contribute to the RTS-like growth of the village. Resources gathered or food hunted by players adds to the store of resources in the village, helping the village to grow. Players killing beasts/monsters open up new areas for the village to expand into, to make new farms or gather additional resources.
Players can also build buildings, farms, roads etc themselves, further growing the village. They can also create items (tools, weapons, containers etc.) that the villagers can use for their own purposes.
Players can fight against other villages or nomadic bands, whether simply for loot/experience or to help further the goals of their own village. -- It will be tricky to balance the 'slow growth' model of village development with the typical player expectation of being able to slaughter an entire village of enemies/victims in the space of a few minutes. Some distinction between a respawnable death and perma-death may be needed for NPCs, or maybe civilian villagers could run away and return later when the player leaves --
Player assistance to the village could be guided by quests, generated according to the vllage's current needs based on common templates. Villages would have co-ordinators for each job role that would serve as quest givers. For example the chief woodsman would have a standard quest along the lines of "<name> We need <value> more wood. Please chop <value> trees at <location:wood> and deposit them in <warehouse:wood>"
Players can also, of course, completely ignore 'their' village, i.e. the one near where they spawn, and head off to seek adventure and fame elsewhere. There will be many more villages than players so players can complete quests at other villages, gaining reputation with that village and faction. They can kill randomly spawning monsters or beasts or nomadic bands for the experience and loot. They can attack other villages for fun and/or profit. Maybe they can create their own fort and control their own resource nodes, eventually attracting settlers who want to join with the player. This last could become tricky though.
Considerations:
The following areas would have to be addressed in any such game and/or in a future post.
- How would 'levelling up' of villages and regions be handled? Over time factions will become more and more powerful, how will they interact? How should multi-settlement factions be managed? What happens when large factions collide with other large factions? How can you prevent large factions from snowballing? How can factions decline and fall? What happens to their 'champions' if they do?
- How should players interact with each other? How can griefing of other players' home villages/factions be controlled? How can players become and remain relevant to their world as their abilities and gear improve?
- How should the world be created? How can players modify the world? What happens to player modifications over time and/or as other players interact with them.
- How can players interact with NPCs?
- What kind of end-game could be run in a game like this?
Friday, January 25, 2013
Water Analogy for the Economy
Thinking some more about the distinction between economic activity and capital in the economy, I came up with this more elaborate version of the flowing water analogy.
Compare economic activity to the flow of water in a pipe. All the working, the production, the buying and selling of goods and services that makes up GDP is represented by the total flow of water in the pipe. Each of us contributes our little bit of water to the stream whenever we work for pay, or whenever we buy some goods or services from someone else. Companies likewise contribute to the stream by producing, buying, selling, paying their workers and so on. Governments add to the stream by spending money on employee salaries, on social programs, on infrastructure etc.
However, governments also subtract part of the stream through taxation. Whenever income or spending is taxed, some of the water is siphoned off. This siphoned off water is what the government uses to add to the stream via salaries, spending etc. At a macroeconomic level then, government involvement in the economy should be a wash, neither adding to nor subtracting from the overall flow of water. We could talk about inefficiencies in government spending and distortions through the tax system as causing some loss, perhaps represented by leaky government pipes losing some of the water they get through taxation; but that is a finer detail and not really necessary for the core of the analogy.
So that is the flow of water, income and expenditure, economic activity. There is another aspect to the macroeconomy though: savings and investment. Whenever you earn money you have the option of spending it - contributing to the flow of water in the pipe - or saving it. Let's represent savings as a reservoir that everyone has (individuals, companies, governments all have their own reservoirs). You can siphon off some of the income you earn into this savings reservoir, reducing the flow of water while building up the amount of stored water in your reservoir. Whenever you use those savings to, for example, buy a car, you are releasing water from your reservoir back into the stream in the economic pipe. So, even if your earnings are constant, your contribution to the economy may not be. If you save money for 6 months instead of spending it, then your economic contribution for those 6 months is less than it would be without savings. When you then spend those savings in a lump sum purchase of a car your economic contribution for that month is much more than it would normally be.
Releasing water from your reservoir doesn't have to be for large purchases. If your income is extremely volatile (say you own a small business that does most of its sales over Christmastime) then you may save some of your income during the good times (siphon water from the flow to add to your reservoir) in order to spend it on day-to-day expenses like food and rent in the quiet times (release water from your reservoir drop by drop).
In economic terms your reservoir is capital. It is distinct from the flow of economic activity, though related to it of course through the mechanism of siphoning off income to accrue capital and spending capital to add to economic activity. On a personal basis, compare having an annual income of $100K to having a bank account with $100K in it. For a company, compare their annual statements of profit and loss with their balance sheet.
Governments too can have such a reservoir of savings. You mostly see this in oil-rich nations with their sovereign wealth accounts but some countries also fund their future pension liabilities with national savings accounts (Ireland had such a thing briefly, back when we had money).
What do you do with your savings, your capital? You can spend it on good and services of course, using your savings from the good times to pay the rent and buy food.
You can exchange it for other capital goods of equal value - e.g. buy a house - which can add to economic activity for that month but leaves you with the same net capital in your reservoir.
You can exchange it for productive capital assets such a a machine to help you do your job better. This will temporarily add to the flow in the pipe just like buying a house, with the added benefit that using the machine will allow you to add a greater amount to the flow in the next few years.
Finally, you can give a bucket of your capital to someone else which they use to fill their reservoir. This last one is often done on the promise that whoever you give it to will give you back a bucketful plus a mugful at some future date. In other words you can loan some person or entity the money at interest. What that person does with the capital is then up to them. Presumably whoever receives the loan can use the capital more productively that you can. They can buy a bigger and better machine to increase their flow so that their total flow is larger even after they subtract what they need to save in order to repay you your bucket plus mugful.
This borrowing and repaying of buckets and mugs of capital/water does not go through the pipes. It is not, by itself, economic activity. This is how you can have trillions of dollars traded on the stock market without it being counted as part of GDP.
What the national government does (or rather should do) with its reservoir is to even out the flow of water through the pipe, to keep the economy on an even keel with neither too much nor too little water flowing. It does this by alternately adding some of the water it siphons off through taxes to its reservoir in good times, and releasing water from the reservoir in bad times. It could in theory keep a constant level of siphoning, of which a portion is constantly added to the reservoir, and manage the flow just by increasing or decreasing/stopping the outflow. Likewise it could keep the outflow constant and just increase or decrease the amount siphoned off so that the reservoir empties and refills in counterpoint to the economic cycle. In reality all modern economies use a combination: in bad times they siphon off less into the reservoir and release more from it, in good times they siphon more into it and reduce the outflow, allowing the reservoir to refill.
The question as to why governments bother to keep the flow evened out is one for another, longer post. For now let's just stipulate that a smooth flow with neither high peaks nor low troughs is a good thing and a worthy goal for governments to pursue.
Which brings us back around to government borrowing. For those countries lucky enough to have an enormous sovereign wealth fund, borrowing is not required. Their reservoirs are full with their own money - earned through royalties on oil most likely - so they can release from their reservoirs whenever they need to, to keep the total flow through the pipe from slowing down during a recession. For most governments, when a recession hits, their reservoirs are close to empty. The only way they can counter the recession is by borrowing some buckets from other people's reservoirs, with a promise to pay back a bucket and a mugful in 3 or 5 or 10 years time, i.e. issue some treasury/national bonds. The bucket brigade springs into action, refilling the government reservoir, which then opens the taps some more to let the money flow out into the pipe. Ideally, the tax income that the government siphons off during the subsequent upturn, is enough to fill all the buckets and mugs that have to be paid back. In practice, in a world of increasing national debt, when the time comes to repay the first bucket and mug, the government borrows that from someone else and promises to pay back a bucket and a bowlful in the future.
So, what government borrowing is doing, is taking capital from those who have it, and spending it, to increase economic activity temporarily. Future taxation, which reduces economic activity temporarily, will be used to accumulate the capital needed to repay the loan. Thus economic activity is kept smooth (or at least smoother than it otherwise would be) while capital is shuffled back and forth in a parallel but separate mechanism.
Compare economic activity to the flow of water in a pipe. All the working, the production, the buying and selling of goods and services that makes up GDP is represented by the total flow of water in the pipe. Each of us contributes our little bit of water to the stream whenever we work for pay, or whenever we buy some goods or services from someone else. Companies likewise contribute to the stream by producing, buying, selling, paying their workers and so on. Governments add to the stream by spending money on employee salaries, on social programs, on infrastructure etc.
However, governments also subtract part of the stream through taxation. Whenever income or spending is taxed, some of the water is siphoned off. This siphoned off water is what the government uses to add to the stream via salaries, spending etc. At a macroeconomic level then, government involvement in the economy should be a wash, neither adding to nor subtracting from the overall flow of water. We could talk about inefficiencies in government spending and distortions through the tax system as causing some loss, perhaps represented by leaky government pipes losing some of the water they get through taxation; but that is a finer detail and not really necessary for the core of the analogy.
So that is the flow of water, income and expenditure, economic activity. There is another aspect to the macroeconomy though: savings and investment. Whenever you earn money you have the option of spending it - contributing to the flow of water in the pipe - or saving it. Let's represent savings as a reservoir that everyone has (individuals, companies, governments all have their own reservoirs). You can siphon off some of the income you earn into this savings reservoir, reducing the flow of water while building up the amount of stored water in your reservoir. Whenever you use those savings to, for example, buy a car, you are releasing water from your reservoir back into the stream in the economic pipe. So, even if your earnings are constant, your contribution to the economy may not be. If you save money for 6 months instead of spending it, then your economic contribution for those 6 months is less than it would be without savings. When you then spend those savings in a lump sum purchase of a car your economic contribution for that month is much more than it would normally be.
Releasing water from your reservoir doesn't have to be for large purchases. If your income is extremely volatile (say you own a small business that does most of its sales over Christmastime) then you may save some of your income during the good times (siphon water from the flow to add to your reservoir) in order to spend it on day-to-day expenses like food and rent in the quiet times (release water from your reservoir drop by drop).
In economic terms your reservoir is capital. It is distinct from the flow of economic activity, though related to it of course through the mechanism of siphoning off income to accrue capital and spending capital to add to economic activity. On a personal basis, compare having an annual income of $100K to having a bank account with $100K in it. For a company, compare their annual statements of profit and loss with their balance sheet.
Governments too can have such a reservoir of savings. You mostly see this in oil-rich nations with their sovereign wealth accounts but some countries also fund their future pension liabilities with national savings accounts (Ireland had such a thing briefly, back when we had money).
What do you do with your savings, your capital? You can spend it on good and services of course, using your savings from the good times to pay the rent and buy food.
You can exchange it for other capital goods of equal value - e.g. buy a house - which can add to economic activity for that month but leaves you with the same net capital in your reservoir.
You can exchange it for productive capital assets such a a machine to help you do your job better. This will temporarily add to the flow in the pipe just like buying a house, with the added benefit that using the machine will allow you to add a greater amount to the flow in the next few years.
Finally, you can give a bucket of your capital to someone else which they use to fill their reservoir. This last one is often done on the promise that whoever you give it to will give you back a bucketful plus a mugful at some future date. In other words you can loan some person or entity the money at interest. What that person does with the capital is then up to them. Presumably whoever receives the loan can use the capital more productively that you can. They can buy a bigger and better machine to increase their flow so that their total flow is larger even after they subtract what they need to save in order to repay you your bucket plus mugful.
This borrowing and repaying of buckets and mugs of capital/water does not go through the pipes. It is not, by itself, economic activity. This is how you can have trillions of dollars traded on the stock market without it being counted as part of GDP.
What the national government does (or rather should do) with its reservoir is to even out the flow of water through the pipe, to keep the economy on an even keel with neither too much nor too little water flowing. It does this by alternately adding some of the water it siphons off through taxes to its reservoir in good times, and releasing water from the reservoir in bad times. It could in theory keep a constant level of siphoning, of which a portion is constantly added to the reservoir, and manage the flow just by increasing or decreasing/stopping the outflow. Likewise it could keep the outflow constant and just increase or decrease the amount siphoned off so that the reservoir empties and refills in counterpoint to the economic cycle. In reality all modern economies use a combination: in bad times they siphon off less into the reservoir and release more from it, in good times they siphon more into it and reduce the outflow, allowing the reservoir to refill.
The question as to why governments bother to keep the flow evened out is one for another, longer post. For now let's just stipulate that a smooth flow with neither high peaks nor low troughs is a good thing and a worthy goal for governments to pursue.
Which brings us back around to government borrowing. For those countries lucky enough to have an enormous sovereign wealth fund, borrowing is not required. Their reservoirs are full with their own money - earned through royalties on oil most likely - so they can release from their reservoirs whenever they need to, to keep the total flow through the pipe from slowing down during a recession. For most governments, when a recession hits, their reservoirs are close to empty. The only way they can counter the recession is by borrowing some buckets from other people's reservoirs, with a promise to pay back a bucket and a mugful in 3 or 5 or 10 years time, i.e. issue some treasury/national bonds. The bucket brigade springs into action, refilling the government reservoir, which then opens the taps some more to let the money flow out into the pipe. Ideally, the tax income that the government siphons off during the subsequent upturn, is enough to fill all the buckets and mugs that have to be paid back. In practice, in a world of increasing national debt, when the time comes to repay the first bucket and mug, the government borrows that from someone else and promises to pay back a bucket and a bowlful in the future.
So, what government borrowing is doing, is taking capital from those who have it, and spending it, to increase economic activity temporarily. Future taxation, which reduces economic activity temporarily, will be used to accumulate the capital needed to repay the loan. Thus economic activity is kept smooth (or at least smoother than it otherwise would be) while capital is shuffled back and forth in a parallel but separate mechanism.
Saturday, January 19, 2013
Why Government Borrowing is a Good Thing
All the brouhaha over the debt ceiling got me to wondering - why do governments borrow money anyway? Of course the trivial answer is that they lack the political cojones to either cut spending or raise taxes, or that it's more self-serving to simply borrow the money rather than having to ask for it. No doubt all true to an extent, but given that at some point the debt has to be paid back from tax revenues (with interest) it would seem to be a self-defeating strategy doomed to failure (when the politicos are out of office, of course). Is this true though - or is there a macro-economic justification for debt?
One justification is that borrowing money helps "smooth the dips and bumps" in an economy. A related justification is that in a growing economy you will have more revenue later to pay back the debt. This could be true if you were borrowing from someone else's economy. However if you are borrowing from your own economy then it makes less sense, since whether you appropriate the money through tax revenue or through borrowing you are still pulling money out of the economy. In a truly global economy where you are trying to maximize the fortunes of everyone then this rationale makes no sense whatsoever. However it does point the way to a possible viable explanation.
Suppose in a closed economy (no borrowing from outside) the government is left with a shortfall of revenue - assume that spending is fixed, they are faced with the choice of either raising taxes or borrowing the money. On the face of it these would seem to be equivalent propositions, as they pull an equal amount of money out of the economy. However since the borrowing is voluntary, the money that is being appropriated is more likely 'excess' wealth - wealth that the individuals who own it don't really need at that time (they can't think of anything better to do with it, like investing in someone's good idea). In this way the borrowing is less harmful to the economy since it is taking wealth from where its not really being used anyway, whereas taxes could take wealth from people that really need it for vital stuff like food, or investing in good ideas.
In this way a constant (though not increasing!) level of government borrowing is good for the macro-economy, by efficiently soaking up unused resources.
One justification is that borrowing money helps "smooth the dips and bumps" in an economy. A related justification is that in a growing economy you will have more revenue later to pay back the debt. This could be true if you were borrowing from someone else's economy. However if you are borrowing from your own economy then it makes less sense, since whether you appropriate the money through tax revenue or through borrowing you are still pulling money out of the economy. In a truly global economy where you are trying to maximize the fortunes of everyone then this rationale makes no sense whatsoever. However it does point the way to a possible viable explanation.
Suppose in a closed economy (no borrowing from outside) the government is left with a shortfall of revenue - assume that spending is fixed, they are faced with the choice of either raising taxes or borrowing the money. On the face of it these would seem to be equivalent propositions, as they pull an equal amount of money out of the economy. However since the borrowing is voluntary, the money that is being appropriated is more likely 'excess' wealth - wealth that the individuals who own it don't really need at that time (they can't think of anything better to do with it, like investing in someone's good idea). In this way the borrowing is less harmful to the economy since it is taking wealth from where its not really being used anyway, whereas taxes could take wealth from people that really need it for vital stuff like food, or investing in good ideas.
In this way a constant (though not increasing!) level of government borrowing is good for the macro-economy, by efficiently soaking up unused resources.
In Thrall to Cognitive Programming
The idea of conscious vs. unconscious thinking is not new - going back to Freud, the Greeks and probably a long time before that. However it has recently been given a sharper focus with insights into the neural underpinnings of cognitive processing. The detailed work of neuroscientists and popular expositions from Hubel, Koch, Pinker and Dennet have reinforced how much of cognition is automatic and below conscious control. A lot of our thoughts and especially our day-to-day behavior are governed not by deliberate, reflective thinking but by autonomous sub-threshold cognitive processes. In many ways our conscious experience, even when we appear to be making decisions, is more of a post-hoc story-telling narrative that we tell ourselves to justify why we did what we just did. There have been a number of experiments that explored this concept, including with patients that had surgically separated hemispheres (Gazzaniga), as well as a recent study on normal people using trick surveys.
In the excellent book The Robot's Rebellion, Stanovich explored how we use automatic and reflective thinking in our day-to-day lives. A key concept is that our interest as rational agents does not always align with our automatically programmed cognition. In particular our automatic cognition may operate in our genetic interests, rather than our interests as rational human beings. Furthermore, it can be difficult to overcome automatic cognition. We have to first identify that a concept requires rational, reflective consideration (either by someone else bringing it to our attention, or by noticing internal cognitive dissonance). We then usually need to expend considerable mental effort to analyze the concept, and essentially reprogram our automatic cognition to conform to our rational analysis, resolving any further chains of dissonance that this may provoke. Not everyone is motivated to do this, and fewer still are motivated to do it often. Yet this is an essential part to adapting to new ideas.
Is it possible that a difference between conservatives and liberals lies in a willingness and capability to reprogram automatic cognition to conform to rational reflective thought? It is telling that some key conservative issues are contraception, abortion and hostility to out-groups, exactly what you would expect from a cognitive architecture programmed for our genetic interests. Other issues such as male/female division of labor were adaptive in the EEA. It is less clear where traits such as religiosity and authoritarianism come from, however it could be that someone who is less well able to overcome genetically programmed automatic cognition is also less able to overcome socially programmed automatic cognition instilled mostly during the formative childhood years. We should keep in mind that today's conservative would have been considered quite liberal 50 years ago, and liberals will probably be looked on as hopelessly biased by our descendants 50 years hence. So clearly there is a mixture of genetic and social programming. Is overcoming your cognitive programming an indicator of a liberal mind?
In the excellent book The Robot's Rebellion, Stanovich explored how we use automatic and reflective thinking in our day-to-day lives. A key concept is that our interest as rational agents does not always align with our automatically programmed cognition. In particular our automatic cognition may operate in our genetic interests, rather than our interests as rational human beings. Furthermore, it can be difficult to overcome automatic cognition. We have to first identify that a concept requires rational, reflective consideration (either by someone else bringing it to our attention, or by noticing internal cognitive dissonance). We then usually need to expend considerable mental effort to analyze the concept, and essentially reprogram our automatic cognition to conform to our rational analysis, resolving any further chains of dissonance that this may provoke. Not everyone is motivated to do this, and fewer still are motivated to do it often. Yet this is an essential part to adapting to new ideas.
Is it possible that a difference between conservatives and liberals lies in a willingness and capability to reprogram automatic cognition to conform to rational reflective thought? It is telling that some key conservative issues are contraception, abortion and hostility to out-groups, exactly what you would expect from a cognitive architecture programmed for our genetic interests. Other issues such as male/female division of labor were adaptive in the EEA. It is less clear where traits such as religiosity and authoritarianism come from, however it could be that someone who is less well able to overcome genetically programmed automatic cognition is also less able to overcome socially programmed automatic cognition instilled mostly during the formative childhood years. We should keep in mind that today's conservative would have been considered quite liberal 50 years ago, and liberals will probably be looked on as hopelessly biased by our descendants 50 years hence. So clearly there is a mixture of genetic and social programming. Is overcoming your cognitive programming an indicator of a liberal mind?
Saturday, January 12, 2013
The Goldilocks Temperature
Missing from many discussions on climate change is an exploration of what average temperature we would ideally like the climate to have. On the low side snowball earth is clearly bad, and raising the temperature to the point of cooking everyone would be very unfortunate. Somewhere in the middle is the ideal temperature - what temperature is that?
There seems to be an implicit assumption by many environmental advocates that any rise in temperature is detrimental. There are several possible justifications for this:
1. We are already at the ideal temperature, any change up or down will make things worse.
2. We are already above the ideal temperature, and we should be trying to cool the planet.
3. We are not at the ideal temperature, but the consequences of changing the status quo have negative effects in the short term, with the positive benefits only being realized in the long-term.
Of course we can ask the question - what is meant by ideal temperature - ideal for who? For the sake of argument let's say the ideal temperature is one that maximizes biological productivity on the planet.
Option 1 then seems pretty unlikely - anyone advocating that the long term ideal temperature just happens to be the one we have now is in need of strong proof to show they are not the subject of status quo bias.
Option 2 is also almost certainly wrong - paleological records indicate that planetary bioproductivity was higher in the past during times of warmer climate, and the overall long-term trend in the last several hundred million years has been to a colder, less productive environment.
This leaves option 3 - it is possible that the environment is "balanced" around the current temperature, and that warming the planet even though of benefit in the long term (say 1 million years from now) would have negative effects in the short term. But how likely is this really? Plants and animals already adapt to day/night and seasonal temperature changes. Even though climate effects may be unevenly applied the changes we are talking about are still small compared to seasonal variation in both degree and time scale. There may be negative consequences for humans, but we can adapt and move around pretty easily too.
There is another position:
4. We don't know enough to know what the ideal temperature is, and so we should avoid making drastic potentially irreversible changes until we know better.
I am sympathetic to this position, but there are consequences to no-change just as there are to change.
Taking a position on a divisive topic such as climate change can put the advocate into a 'tug-of-war' scenario with their opponents. There is an unwillingness to give up any ground whatsoever, for fear that every inch conceded is a gain for the opposition. This can lead to arguing weak positions, and in the case of climate change a reluctance to ask "what _is_ the best temperature that we should be aiming for?"
Friday, January 11, 2013
What's the Problem with Healthcare Costs?
One of the biggest issues in the US right now is around how to pay for Medicare for the increasingly large cohort of retirees. Projections show spending on healthcare in the US on track to exceed 20% of GDP by mid-century, and other countries are not far behind. The policy debate is focused on how to reduce government spending on healthcare, especially on Medicare for those over 65, but most suggestions seem to involve shifting costs to individuals. That could result in an overall reduction of healthcare costs in one of two ways:
- People will be less wasteful of spending on healthcare when they must pay a larger portion of costs themselves. The idea here is that people are making unnecessary trips to the doctor, having unnecessary tests and procedures done, taking unnecessary medications, or visiting overqualified and thus more expensive doctors than they really need to. All this because there is little or no cost to them for doing so. I haven't seen any estimates of how much of this is going on so I don't know how much of the cost of healthcare could be saved by reducing this overspending but it doesn't feel like a lot.
- Poor and/or unlucky people will suffer more and die earlier since they cannot afford to pay for their own care. This strikes me as the biggest potential cost saving. Most healthcare spending comes in the final six months of life. If we can simply let the poor and sick die six months earlier rather than wasting money treating their diseases it would certainly help keep overall healthcare spending below 20% of GDP.
That's the background, as I see it. The only way to keep spending on healthcare below a level that economists seem to consider reasonable is to just not spend it, and let the poor and/or unlucky suffer more and die earlier. My question then is why is this the case? Why can we as a society not afford to give everybody all the healthcare that they desire and that is technologically possible?
- Does it go all the way back to the most fundamental level; that humanity is still unable to produce enough of a food surplus to support all the specialists we need to provide healthcare? Seems unlikely but I suppose it is a theoretical possibility, especially if we consider the normally uncounted infrastructure needed to provide healthcare: e.g. engineers to design and build engines that power ambulances, laborers to build roads for them to drive on. There is a lot of 'stuff' required to provide the best possible healthcare that is never counted as healthcare spending.
- Is it rather that there aren't enough people with the natural skills required to provide comprehensive healthcare to everyone? In other words there aren't enough people who could train to become cardiologists to provide best possible care to all the people with heart disease. Thus we need some way to ration the skilled cardiologists between those who need them. Somewhat more possible than option one, I think, but is it true?
- Maybe it's just a matter of allocation of resources after all. Despite what the economists say we could spend 20% or 30% or more on healthcare if we really wanted to, but for whatever reason we don't want to. And if we don't want to spend all those resources on healthcare, why not?
So, in the end, what is the fundamental problem with funding healthcare? Is it impossible to give everyone the best care that our technology allows and if so, why?
Monday, January 7, 2013
What is a Conservative
What is the difference between a right-winger and a left-winger (conservative and liberal in US parlance)? Why is it that right-wingers in many different countries and at many different times seems to embrace a similar set of policies that, on the surface, have little in common? Why do right-wingers tend to:
- Dislike immigrants and racial/ethnic/religious minorities
- Oppose equal rights for women
- Support strong law enforcement and harsh penalties for criminals
- Support business / oppose unions
- Support the criminalization of 'vice' and the establishment of religion
Could you not support the interest of wealthy business owners and women's rights? Could you not want powerful law enforcement but still welcome immigrants and minorities? In theory you could of course, but in practice few do. Compared to the relative philosophical consistency of, say, US libertarianism, most right wing factions and parties appear to have just selected a grab-bag of random policies and positions. Yet right-wingers across the world have largely selected the same grab-bag, so there must be some unifying driver behind it.
My theory on what the unifying driver is, has long been what I called 'groupishness'. Selfishness is putting one's own needs ahead of anyone else's and that isn't an accurate description of right-wing thought since many right-wingers willingly sacrifice their own interests to protect or advance their family's, extended family's or affinity group's. But the sphere of sacrifice ends quite abruptly at the edge of whatever the right-winger feels is their group (although the definition of group can be quite fluid). Outsiders are expected to look after themselves, the right-winger will 'take care of his own first'. Thus 'groupishness' as the defining characteristic of what makes a right-winger. There's probably a better word for it.
This theory aligned very well with the moral pillars concept described in http://www.yourmorals.org/. The idea that conservatives value group loyalty, authority, and purity to a much greater degree than left wingers is both confirmation of and expansion upon my primitive 'groupishness' theory. So it seems I was right, and now there is academic backing for my interpretation. It's great to be proven smart!
But was I right? (note that I don't doubt the 'smart' bit). The idea of heuristics and biases in cognition seems to arise from a discipline closely related to the moral pillars theorists and gives me reason to doubt them. The idea that right-wingers are motivated by group loyalty, deference to authority, and purity - values that I consider mostly counter to morality - is pleasing to me, confirms my earlier unproven theory, and makes me feel good about myself. So I should be extremely suspicious of it.
Another pitfall is the danger of applying a description to people that they themselves don't recognise or remotely accept. Reading right-wing blogs you find a pervasive image of left-wingers that is completely unrecognisable to me. Apparently we hate our country, want to control everyone's lives, want to steal from hardworking people to give handouts to the lazy and so forth. These are not descriptions that are debated or discussed on right wing blogs, they are taken as read, understood as the plain truth by all participants. And no doubt this view of left-wingers makes the right wing authors and commenters feel good about themselves, confirms their world-views, and justifies their hatred and suspicion of all things left-wing.
So, am I correct in thinking that 'groupishness' is the unifying factor for right-wingers, that it is the unacknowledged driving force behind their policy positions and their self-stated principles? Or am I falling into the trap of defining a group of people by a criterion that makes me feel comfortable but that they themselves would correctly point out is complete bullshit?
Subscribe to:
Posts (Atom)