Science and Induction

We give “scientific knowledge” a special status in popular discourse. Once something is covered in the garb of scientific authority, it gains a certain legitimacy in the eyes of the public.  And that’s because science “works”. Whether it’s through medicine, technology, or understanding, there’s no denying that science has improved our lives by leaps and bounds. Yet whenever anyone tries to explain what science is or what makes it special, things quickly fall into vapidness and confusion. People start talk about nonsense like the “scientific method” and other absurdities. After sifting through all of these twisted explanations, it’s clear is that nobody, including scientists, can adequately explain what makes sciences an unique enterprise.

Induction

When most people discuss the nature of science, they usually talk about “the facts”. What separates science from other forms of inquiry is its emphasis on the facts and the objectivity of those facts. In Science and its Backgrounds, H.D. Anthony’s description of Galileo captures this view:

It was not so much the observations and experiments which Galileo made that caused the break with tradition as his attitude to them. For him the facts based on them were treated as facts, and not related to some preconceived idea, as we saw in the case of Kepler’s Harmony of the Spheres. The facts of observation and experiment might, or might not, fit into an acknowledged scheme of the universe; but the important thing, in Galileo’s opinion, was to accept the facts and build the theory to fit them. If he was unable to produce the latter, he declared it better “to pronounce that wise, ingenious and modest sentence, ‘I know it not'” (Anthony 1948: 145)

This description of Galileo is reminiscent of the “scientific method” we learn in primary school, conjuring up images of white coats, fancy instruments, and laboratories:

The scientist begins by carrying out experiments whose aim is to make carefully controlled and meticulously measured observations at some point on the frontier between our knowledge and our ignorance. He systematically records his findings, perhaps publishes them, and in the course of time he and other workers in the field accumulate a lot of shared and reliable data. As this grows, general features begin to emerge, and individuals start to formulate general hypotheses – statements of a lawlike character which git all the known facts and explain how they are casually related to each other. The individual scientist tries to confirm his hypothesis by finding evidence which will support it. If he succeeds in verifying it he has discovered another scientific law which will unlock more of the secrets of nature. The new sea in then worked – the new discovery is applied wherever it is thought it might yield fresh information, Thus the existing stock of scientific knowledge is added to, and the frontier of our ignorance pushed back. (Magee 1985: 14-15)

This method of reasoning is known as induction or inductivism. Inductivism in it’s most crude and naive form says we can generalize from a collection of observations to a general conclusion. When we observe a large number of Xs under a wide variety of conditions, and when all observed Xs have been found to cause Y, then naive inductivism says that it’s logically valid to say that all Xs cause Y. So in the example above, our scientist starts with his experimental observations and uses them to derive some general scientific principle. It might look something like this.

 

 

On face value, inductivism seems like a perfectly reasonable principle. It captures many of the commonly held intuitions on scientific knowledge, i.e. its reliability and objectivity. This is why for most people, including many scientists, induction is considered the hallmark of science.

The Problem of Induction

In The Problems of Philosophy, Bertrand Russell poses this question about induction; “Do any number of cases of a law being fulfilled in the past afford evidence that it will be fulfilled in the future?” If we answer “no”, then we have no grounds for induction and we can’t confirm that Newton’s laws or any other scientific “facts” will continue to hold in the future.

So how do we justify induction?  We can’t logically prove that induction is a valid way of reasoning. If we could then it wouldn’t be induction, but rather deduction (the process of reasoning from one or more premises to reach a logically certain conclusion). The character of inductive arguments is that they proceed from statements about some events to statements about all events. As Alan Chalmers puts it, “General scientific laws invariably go beyond the finite amount of observable evidence that is available to support them, and that is why they can never be proven in the sense of being logically deduced from that evidence” (Chalmers 1999: 45). After all, if induction was just like deduction, then science wouldn’t be any different from math, philosophy, and a host of other disciplines.

To put it another way, think about David Hume’s distinction between relations of ideas and matters of fact:

The former [relations of ideas] are propositions whose content is con- fined to our concepts or ideas, such as a horse is an animal, bachelors are unmarried, and checkmate is the end of a game of chess. (Hume also included mathematics in this category, so triangles have angles totaling 180° is another example.) Propositions concerning matters of fact are those that go beyond the nature of our concepts and tell us something informative about how the actual world is. So, for example, snow is white, Paris is the capital of France, all metals expand when heated, and the battle of Hastings was in 1066 are all propositions that concern matters of fact. (Ladyman 2002: 32)

Consider the proof for infinitely many prime numbers. First, we assume that there are a finite number of prime numbers. Then we use this proposition with other assumed facts about prime numbers (a prime number is a natural number with exactly two distinct divisors, 1 and itself) to derive a contradiction. The concepts are self contained, have a logical relation to one another, and are therefore provable by deduction. The same cannot be said for matters of fact, which are contingent on the nature of existing things:

Take the proposition that Everest is the tallest mountain on Earth.  The concepts involved – mountain, tallest, Earth, and that of some specific mountain in the Himalayas – have no logical relation to each other that determines the truth of the proposition, and there is no contradiction in supposing that some other mountain is the tallest. Hence, it is not possible to find out if the proposition is true merely by reasoning; only by using the senses can the status of such propositions be investigated. (Ladyman 2002: 33)

Since we can’t justify induction by using deduction, that leaves us with another option, an appeal to experience. Newton’s laws have a proven track record, therefore they are justified by experience. However, as we can clearly see, we are using an inductive argument to justify induction. We are assuming what we are trying to prove (i.e. begging the question). 

This predicament is known as the problem of induction and ever since the days of David Hume, it’s been a well known problem in philosophy:

The general principles of science, such as the belief in the reign of law, and the belief that every event must have a cause, are as completely dependent upon the inductive principle as are the beliefs of daily life. All such general principles are believed because mankind have found innumerable instances of their truth and no instances of their falsehood. But this affords no evidence for their truth in the future, unless the inductive principle is assumed (Russell 1912).

This isn’t a critique of the practice of science or the idea that science is a unique form of enquiry. The problem of induction won’t stop scientists from conducting their experiments, building their theories, and making our lives materially better. However, for those who think that “the scientific way of knowing” is the best way of knowing (or as some scientists argue, the only way of knowing), then this famous dilemma is a unavoidable hurdle. I would argue that until we solve this problem (or get around it), people have no basis to say that their theories are true in any sense, at least on the grounds of induction. At best, scientific theories are useful bodies of knowledge with a good track record, a far cry from “true knowledge”.

Links:

1. John Wilkins Defends Philosophy: Begging the Question by Larry Moran

2. Why are there infinitely many prime numbers?

3. The Problem of Induction

4. Hume: Empiricist Naturalism

References:

1. Anthony, H.D. Science and its Background. Macmillan, 1948. Print.

2. Chalmers, A. F. What Is This Thing Called Science? Indianapolis: Hackett Pub., 1999. Print.

3. Godfrey-Smith, Peter. Theory and Reality: An Introduction to the Philosophy of Science. Chicago: U of Chicago, 2003. Print.

4. Ladyman, James. Understanding Philosophy of Science. London: Routledge, 2002. Print.

5. Magee, Bryan. Philosophy and the Real World: An Introduction to Karl Popper. La Salle, IL: Open Court, 1985. Print.

6. Papineau, David. Methodology: The Elements of the Philosophy of Science. In A. C. Grayling, Philosophy 1: A Guide Through the Subject. OUP Oxford, 1998. Print

7. Russell, Bertrand. The Problems of Philosophy. New York: H. Holt, 1912. Print.

The Procedural Veil

Making sense of the SCOTUS controversy after the death of Antonia Scalia isn’t difficult. The Supreme Court, like any branch of government, has a tremendous amount of power, and Republicans and Democrats want to control that power. Supreme Court Judges aren’t mindless drones, but having someone who is ideologically on your side can’t hurt.

What’s amusing from an outside perspective is that the entire debate over Obama and the empty SCOTUS seat is framed around procedure. Consider these tweets from Federalist writer, Sean Davis.

The president has the right to nominate. The Senate has the right to consent. There’s no appointment until *both* of those happen.

— Sean Davis (@seanmdav) February 14, 2016

You must have a different version of the Constitution. Mine says the U.S. Senate has the final say on nominees. https://t.co/reBq12S0fk

— Sean Davis (@seanmdav) February 14, 2016

The Constitution doesn’t care how long a seat is vacant. But it requires the seat to remain vacant until the Senate consents to a nominee.

— Sean Davis (@seanmdav) February 14, 2016

You should skim the Constitution once you’re a little less emotional. Senate has no obligation to confirm anyone. https://t.co/Xhv0WRw80c

— Sean Davis (@seanmdav) February 15, 2016

He doesn’t justify Senate obstructionism on the grounds of ideology or merit, but on procedure. The Constitution says the Senate can do this, therefore it’s OK. And as a matter of procedure, he’s completely correct. Here’s the Appointment Clause in the Constitution:

[The President] shall nominate, and, by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

The nominees of the president must be consented by the Senate. The Senate could delay a Supreme Court nomination until the end of time if they have the political will. But Sean Davis doesn’t give a damn about procedure. This tweet, made right after the news of Antonia Scalia’s death, exposes the rotten argument for all it’s worth.

If Scalia has actually passed away, the Senate must refuse to confirm any justices in 2016 and leave the nomination to the next president.

— Sean Davis (@seanmdav) February 13, 2016

Obama could nominate the revived body of John Marshall and Sean Davis would oppose him. If the judge doesn’t play for your team, then he/she shouldn’t be appointed. Some writers are honest about this, but most aren’t and we shouldn’t be fooled by this procedural veil. The debate about the SCOTUS nominations is about power and ideology, nothing more.

Speech for Me But Not for Thee

John Stuart Mill’s On Liberty is one of the greatest books on political philosophy ever written. Mill gives a powerful argument for freedom of speech and a passionate start for a liberal political philosophy. The idea that coercion is only justified when the individual threatens the well-being of others is one of the most influential liberal doctrines in the history of ideas:

The sole end for which mankind are warranted, individually or collectively, in interfering with the liberty of action of any of their number, is self-protection. That the only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant. He cannot rightfully be compelled to do or forbear because it will be better for him to do so, because it will make him happier, because, in the opinions of others, to do so would be wise, or even right. These are good reasons for remonstrating with him, or reasoning with him, or persuading him, or entreating him, but not for compelling him, or visiting him with any evil in case he do otherwise. To justify that, the conduct from which it is desired to deter him must be calculated to produce evil to some one else. The only part of the conduct of any one, for which he is amenable to society, is that which concerns others. In the part which merely concerns himself, his independence is, of right, absolute. Over himself, over his own body and mind, the individual is sovereign.

Obviously there are others philosophies that value “freedom of speech”. Our Constitution, which was written before Mill was born, has the First Amendment; Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances. For many Americans this passage is easy to interpret and the debate on free speech ends here. But the political language of the 18th century was different than ours. I’ve never been a fan of constitutional originalism, but when James Madison wrote the First Amendment, the emphasis was on the political. The First Amendment was originally about government and seditious libel.  As P. A. Madison convincingly argues:

Freedom of speech and of the press served one purpose in America: To remove the fear of the common law doctrine of seditious libel so citizens could freely speak or publish without license their grievances against public policy or conduct of public officials. One of the distasteful things found under the common law was the government practice of criminalizing or shielding itself through requiring license to publish of any criticism it felt made people dissatisfied with their government or government established religion.

Laws that regulate morality, abusive speech, and public conduct do no violate the First Amendment, at least how it was originally interpreted by our Founders. It’s why blasphemy laws and obscenity laws were on the books for so long. The courts, for better or worse, have gradually moved away from the Founders, and the way “freedom of speech” is currently understood has more to do with John Stuart Mill than with James Madison or Natural Law.

As much as I respect Mill, his principles of freedom and individuality are only useful as a rule-of-thumb. They cannot be used as the sole building block of our social order. When Russell Kirk skewered Libertarians in his famous essay, Libertarians: the Chirping Sectaries, he pointed to John Stuart Mill as their golden calf:

Was the world improved by free discussion of the Nazis’ thesis that Jews ought to be treated as less than human? Just this subject was presented to the population of one of the most advanced and most thoroughly schooled nations of the modem world; and then the crew of adventurers who had contrived to win the argument proceeded to act after the fashion with which we now are dreadfully familiar. We have come to understand, to our cost, what Burke meant by a “licentious toleration.” An incessant zeal for repression is not the answer to the complex difficulties of liberty and order, either… liberty cannot be maintained or extended by an abstract appeal to free discussion, sweet reasonableness, and solitary simple principle.

Even on the issue of free speech, where I lean towards the arguments in On Liberty, things quickly run into absurdities (the Yale Record has an amusing reductio ad absurdum). Fortunately, the writings of Dewey, Rawls, and other political philosophers have allowed us to look beyond the simple principles of 19th century liberalism. But the discussion of free speech in the media has noticeably regressed and the debate over student activism (e.g. at Yale and Mizzou) is instructive.

While it doesn’t surprise me that writers like Jonathan Chait use the language of Mill (1), conservative writers who do the same confuse me (2). When William F. Buckley wrote against flag burning, he thought he was protecting America from pernicious ideas. Distinctions between “speech” and “expression” aside, Buckley thought that anti-American speech lead to actions that would harm American society. In the words of Russell Kirk, “it is consummate folly to tolerate every variety of opinion, on every topic, out of devotion to an abstract “liberty”; for opinion soon finds its expression in action, and the fanatics whom we tolerated will not tolerate us when they have power.” You may agree or disagree with these thoughts, but they at least make sense from a conservative perspective. 

However, the ghost of John Stuart Mill haunts the 21st century press and instead of using the language of Buckley, conservative writers have decided to embrace On Liberty in support of their cause. This is fine as far as it goes, but it makes little sense from a philosophical standpoint. Conservative writers might dress up their articles in the language of Mill, but the echoes of Buckley still linger. They emphatically called for restricting free speech when it came to flag burning, the Ground Zero Mosque, and anything else that seriously threatens their values, just like the student activists in Yale who violently reacted to Erika Christakis’ email. In their minds, we are in the throes of a culture war and “many things that might be said in time of peace are such a hindrance to its effort that their utterance will not be endured” (3). 

I think the debate would be clearer if we all took heed from Alexis de Tocqueville. He understood that freedom of speech was a vital component of democracy; in countries where the doctrine of the sovereignty of the people ostensibly prevails, the censorship of the press is not only dangerous, but absurd (4). But he also understood that speech, like anything else, needed to be regulated in some respect, or else it would lead to a dangerous state of affairs. When he said that “I know of no country in which there is so little independence of mind and real freedom of discussion as in America“, it was more of a backhanded compliment. He disliked the “tyranny of the majority”, but he also admired America’s “regulation” of decadent speech (5):

The Inquisition has never been able to prevent a vast number of anti-religious books from circulating in Spain. The empire of the majority succeeds much better in the United States, since it actually removes any wish to publish them. Unbelievers are to be met with in America, but there is no public organ of infidelity. Attempts have been made by some governments to protect morality by prohibiting licentious books. In the United States no one is punished for this sort of books, but no one is induced to write them; not because all the citizens are immaculate in conduct, but because the majority of the community is decent and orderly.

The only reason we tolerate Neo-Nazis, KKK members, and other depraved ideologies is because they exert little influence on our social order. But what if that changes? Do we sit by and watch them tear down civil society? Or do give into censorship? My example provides an easy answer, but many relevant issues don’t allow for such simple solutions. Prudential judgments are all we can work with.

This is why I find these discussions about “free speech” to be bizarre. When it suits them, conservatives invoke the principles of Mill to support their cause and when it doesn’t, the liberal veneer is stripped away. Everyone and no one is a liberal. And while I generally support mainstream conservative views on academic freedom and “trigger warnings”, that is by mere coincidence. They’ve picked a side in the crowded theater while I’m still deciding where to sit. So unless we’re debating the nitty gritty of free speech, I think we should drop the language of John Stuart Mill. We shouldn’t pretend that we’re serious about protecting “free speech” in its purest form. Because when your values are under attack, only the most ardent liberal is reading On Liberty. At least the Yale protestors are honest about that much.

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Notes:

1. From “Not a Very P.C. Thing to Say” by Jonathan Chait

It is true that liberals and leftists both want to make society more economically and socially egalitarian. But liberals still hold to the classic Enlightenment political tradition that cherishes individuals rights, freedom of expression, and the protection of a kind of free political marketplace. (So, for that matter, do most conservatives.)

2. David French and Alex McHugh enthusiastically support the statements made by Yale President Peter Salovey in support of the free exchange of ideas:

Nonetheless, I recognize that all of us here, in different ways, might also like to live in a campus community where nothing provocative and hurtful is ever said to anyone. And that is the part that I cannot–nor should not–promise you. For if we are not willing to be shocked, then we may not be allowing ourselves to be open to life-changing ideas, ideas that rock our worlds. And isn’t the opportunity to engage with those very ideas–whether to embrace them or dispute them–the reason why you chose Yale?

3. From the majority opinion of the Supreme Court in Schenck vs United States by Oliver Wendell Holmes Jr:

We admit that in many places and in ordinary times the defendants in saying all that was said in the circular would have been within their constitutional rights. But the character of every act depends upon the circumstances in which it is done. The most stringent protection of free speech would not protect a man in falsely shouting fire in a theatre and causing a panic. The question in every case is whether the words used are used in such circumstances and are of such a nature as to create a clear and present danger that they will bring about the substantive evils that Congress has a right to prevent. It is a question of proximity and degree. When a nation is at war many things that might be said in time of peace are such a hindrance to its effort that their utterance will not be endured so long as men fight and that no Court could regard them as protected by any constitutional right. It seems to be admitted that if an actual obstruction of the recruiting service were proved, liability for words that produced that effect might be enforced.

4. From Chapter 11 of Democracy in America by Alexis de Tocqueville:

In countries where the doctrine of the sovereignty of the people ostensibly prevails, the censorship of the press is not only dangerous, but absurd. When the right of every citizen to a share in the government of society is acknowledged, everyone must be presumed to be able to choose between the various opinions of his contemporaries and to appreciate the different facts from which inferences may be drawn. The sovereignty of the people and the liberty of the press may therefore be regarded as correlative, just as the censorship of the press and universal suffrage are two things which are irreconcilably opposed and which cannot long be retained among the institutions of the same people. Not a single individual of the millions who inhabit the United States has as yet dared to propose any restrictions on the liberty of the press.

5. Tocqueville also recognized that “this irresistible authority is a constant fact, and its judicious exercise is only an accident.”

Links:

1. Original Meaning: Freedom of Speech or of the Press by P.A. Madison
2. If our free speech isn’t in jeopardy, then why wont my TA let me spend all of class yelling “FUCK BRIAN” at Brian? by R. Lackner
3. The New Intolerance of Student Activism by Conor Friedersdorf
4. A timeline of events and opining Mizzou protests by Ryan Murphy
5. Not a Very P.C. Thing to Say by Jonathan Chait
6. Yale Comes Down on the Side of Free Speech by David French
7. It Needed to be Said: Yale’s President on Free Expression by Alex McHugh
8. Flag Burning Amendment by Jonah Goldberg
9. Demonization and the Ground Zero Mosque by Dennis Prager
10. On Free Speech at Yale

Conservatives and Authority

Authority has always held an important place in conservatism, but I’ve always been puzzled by American conservatives and their views on authority. They’re clearly skeptical of government programs, welfare, and bureaucracy and they’re quick to jump on stories about government corruption. Yet when it comes to military and police corruption, all of that goes out the window. Conservative writers are ready to defend these institutions through thick and thin. You could find some exceptions to this narrative, but these are exceptions rather than the rule (1).

I’m reminded of an interesting passage in George Lakoff’s book, Moral Politics How Liberals and Conservatives Think:

There is a language of conservatism, and it’s not just words. The words are familiar enough, but not what they mean. For example, “big government” does not just refer to the size of government or the amount spent by it. One can see the misunderstanding when liberals try to reason with conservatives by pointing out that increasing the amount spent on the military and prisons increases “big government ” Conservatives laugh. The liberals have just misused the term. I have heard a conservative talk of “freedom” and a liberal attempt a rebuttal by pointing out that denying a woman access to abortion limits her “freedom” to choose. Again, the liberal has used a word that has a different meaning in the conservative lexicon…

…Here are some words and phrases used over and over in conservative discourse: character, virtue, discipline, tough it out, get tough, tough love, strong, self-reliance, individual responsibility, backbone, standards, authority, heritage, competition, earn, hard work, enterprise, property rights, reward, freedom, intrusion, interference, meddling, punishment, human nature, traditional, common sense, dependency, self-indulgent, elite, quotas, breakdown, corrupt, decay, rot, degenerate, deviant, lifestyle.

While I’m generally not a fan of psychological explanations for why people hold certain political beliefs, there are some instructive thoughts here. Conservatives view some institutions (the military and law enforcement) as more legitimate authorities than others. There are many words in their collective vocabulary that can positively describe law enforcement, whereas the same can’t be said for bureaucracy.

Police officers often deal with people that would be considered ‘corrupt’ or ‘degenerate’ by most standards, which fits neatly into the conservative narrative on police and authority. Consider this passage from Rachel Lu:

I’m painfully aware that cops do a tough and dangerous job that I probably couldn’t handle. Policemen put themselves on the line for the safety of people they don’t even know. (People like me, and my family.) They spend their lives elbow-deep in violence and vice, so that the rest of us won’t need to.

When it comes to violence, the police are given more leeway because it’s the nature of the job. The police often deal with dangerous people, so it’s only natural that they react violently when their orders aren’t followed. So non-violent, uppity offenders, e.g. black teenage girls, should know better than to disregard an officer’s orders. As David French writes, “This is what happens when a person resists a lawful order from a police officer to move.”  Even when the evidence is as clear as day that excessive force was used, most conservatives are willing to give officers the benefit of the doubt.

This distinction is interesting, but hardly legitimate. Nebulous concepts like honor and discipline shouldn’t be used to mark such differences. It can also lead to dangerous precedents. When German nationalists ignored the gangs of Brown Shirts because they were scared of Communism, violence became the new rule in German politics. Of course, our police officers are not Brown Shirts, and our political system isn’t Weimar Republic, but where does it end? If conservatives continue to excuse the hundreds of civilians killed by police officers every year, where does it stop? If we don’t address this problem what becomes of our rule of law? And how does this square into a conservative political philosophy? These are important questions that are unfortunately neglected by the American conservative political class. 

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Notes:

1. Of course, you could argue the opposite for liberals. They tend to more skeptical of police and military authority while putting more trust in bureaucracy. They viciously react to police brutality and highlight structural problems in our law enforcement institutions while ignroing other forms of government corruption. Some individuals might indulge in corruption, but it’s simply par for the course.

The Reference Class Problem

Let’s say John Smith gets married and we want to calculate the probability that he gets a divorce. Is it possible to find a fixed, objective probability that his marriage will end in divorce? Some interpretations of probability would say yes. Marriage is no different than flipping of a coin. Over an arbitrary time frame, say 20 years, we can observe the frequency of married couples that get a divorce over the total number of married couples in the US:

                      P(Divorce)=  (Married couples that get a divorce)/(Total number of married couples)

But not so fast. As it turns out, this is just one of many interpretations of probability. This approach (which is what we’re typically taught in school) is called frequentism (1), which says that probabilities are defined by relative frequencies (2). However, as we’ll soon see, frequentism isn’t without its problems.

Let’s go back to John Smith and his marriage. We know that 50% of marriages in the US end in divorce (that’s not really correct, but let’s just assume it is). Can we really say that John Smith’s marriage will have 50% fixed, objective probability of ending in divorce? On not very close inspection, this doesn’t seem right, for the simple reason that lots of things affect divorce rates, e.g:

• Individuals who marry at a young age have a greater likelihood of getting a divorce (3).
• People with high levels of educational attainment have lower rates of divorce (4).
• Divorce rates also differ among race (5).

These are just some of the things that need to be considered. The economy, income, religion, and many other factors also have large effects on divorce rates.

So what class of traits should we use to calculate the probability that John Smith will get a divorce? Let’s consider a few:

1. The population of married couples in the US
2. The class of married couples who are white in the US
3. The class of married couples who are white and have bachelors degrees in the US
4. The class of married couples who are white, have bachelors degrees, and who married at the age of 24 in the US
5. The class of married couples who are white, have bachelors degrees, who are religious, and who married at the age of 24 in the US
6. The class of married couples who are white, have bachelors degrees, who are religious, have a high yearly income, and who married at the age of 24 in the US

But this just raises another question, what class should we use? Why not use [5] over [6]? Or why not expand [6] and calculate a probability for each subsequent class?

In probability theory, this is known as the reference class problem:

Let us then suppose, instead, that John Smith presents himself, how should we in this case set about obtaining a series for him? In other words, how should we collect the appropriate statistics? It should be borne in mind that when we are attempting to make real inferences about things as yet unknown, it is in this form that the problem will practically present itself.

At first sight the answer to this question may seem to be obtained by a very simple process, viz. by counting how many men of the age of John Smith, respectively do and do not live for eleven years. In reality however the process is far from being so simple as it appears. For it must be remembered that each individual thing has not one distinct and appropriate series, to which, and to which alone, it properly belongs. We may indeed be practically in the habit of considering it under such a single aspect, and it may therefore seem to us more familiar when it occupies a place in one series rather than in another; but such a practice is merely customary on our part, not obligatory. It is obvious that every individual thing or event has an indefinite number of properties or attributes observable in it, and might therefore be considered as belonging to an indefinite number of different classes of things. By belonging to any one class it of course becomes at the same time a member of all the higher classes, the genera, of which that class was a species. But, moreover, by virtue of each accidental attribute which it possesses, it becomes a member of a class intersecting, so to say, some of the other classes. John Smith is a consumptive man say, and a native of a northern climate. Being a man he is of course included in the class of vertebrates, also in that of animals, as well as in any higher such classes that there may be. The property of being consumptive refers him to another class, narrower than any of the above; whilst that of being born in a northern climate refers him to a new and distinct class, not conterminous with any of the rest, for there are things born in the north which are not men.

When therefore John Smith presents himself to our notice without, so to say, any particular label attached to him informing us under which of his various aspects he is to be viewed, the process of thus referring him to a class becomes to a great extent arbitrary. If he had been indicated to us by a general name, that, of course, would have been some clue; for the name having a determinate connotation would specify at any rate a fixed group of attributes within which our selection was to be confined. But names and attributes being connected together, we are here supposed to be just as much in ignorance what name he is to be called by, as what group out of all his innumerable attributes is to be taken account of; for to tell us one of these things would be precisely the same in effect as to tell us the other. In saying that it is thus arbitrary under which class he is placed, we mean, of course, that there are no logical grounds of decision; the selection must be determined by some extraneous considerations. Mere inspection of the individual would simply show us that he could equally be referred to an indefinite number of classes, but would in itself give no inducement to prefer, for our special purpose, one of these classes to another. This variety of classes to which the individual may be referred owing to his possession of a multiplicity of attributes, has an important bearing on the process of inference which was indicated in the earlier sections of this chapter, and which we must now examine in more special reference to our particular subject. (Venn 1876: 194–195)

In the example above, our list is hardly exhaustive. John Smith’s marriage essentially has an indefinite number of measurable variables and we can always narrow our reference class (6). By changing our references class, we’ll also be changing the relative frequency that our event occurs. In the context of frequentism, this makes finding a fixed, objective probability (that John Smith’s marriage will end in divorce) an arbitrary endeavor (7). But frequentism isn’t alone with this problem. As Alan Hájek puts it, most interpretations of probability “face their own version of the reference class problem“ (8). And the ones that don’t “say precious little about what probability is.”

As we can see, the reference class problem gives rise to some serious difficulties in probability theory. While it certainly doesn’t make frequentism and other interpretations useless, it does show their limitations. This problem won’t stop scientists, journalists, and others from using statistical probabilities, as it shouldn’t, but it should make us aware of the difficulty in finding objective probabilities that are actually useful.

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Footnotes:

1. See page 221 of David Freedman popular statistics textbook:

People talk loosely about chance all the time, without doing harm. What are the chances of getting a job? of meeting someone? of rain tomorrow? But for scientific purposes, it is necessary to give the word chance a definite clear interpretation. This turns out to be hard, and mathematicians have struggled with the job for centuries. They have developed some careful and rigorous theories, but these theories cover just a small range of the cases where people ordinarily speak of chance. This book will present the frequency theory, which works best for processes which can be repeated over and over again, independently and under the same conditions. Many games fall into this category, and the frequency theory was originally developed to solve gambling problems.

2. See (Hájek 2007)

Actual frequentists such as Venn (1876) in at least some passages and, apparently, various scientists even today, identify the probability of an attribute or event A in a reference class B with the relative frequency of actual occurrences of A within B. Note well: in a reference class B.

3.

4.

5.

6. This doesn’t even take into account the infinite number of subjective variables that can cause or prevent a divorce

7. See (Hájek 2007)

By changing the reference class we can typically change the relative frequency of A, and thus the probability of A. In Venn’s example, the probability that John Smith, a consumptive Englishman aged fifty, will live to sixty-one, is the frequency of people like him who live to sixty-one, relative to the frequency of all such people. But who are the people “like him”? It seems there are indefinitely many ways of classifying him, and many of these ways will yield conflicting verdicts as to the relative frequency.

8. Some of these interpretations include classical, logical, propensity, and subjectivism

Links:

1. John Venn on the Reference Class Problem by LK
2. The Truth About the Divorce Rate is Surprisingly Optimistic by Brittany Wong
3. Divorce and Demographic by State by Jacob Langenfeld
4. Is Marriage Under Siege? by Karen Sternheimer

References:

1. Bramlett MD, Mosher WD. First marriage dissolution, divorce, and remarriage: United States. Advance data from vital and health statistics; no. 323. Hyattsville, Maryland: National Center for Health Statistics. 2001.

2. Elliott, Diana B., and Tavia Simmons. “Marital Events of Americans: 2009.” Census Bureau Home Page. 2011.

3. Hájek, Alan (2007). The reference class problem is your problem too. Synthese 156 (3):563-585.

4. Venn, John. The Logic of Chance. An Essay on the Foundations and Province of the Theory of Probability, with Especial Reference to Its Logical Bearings and Its Application to Moral and Social Science. London: Macmillan, 1876. Print.

Uncertainty Evolution And Economic Theory: An Overview

 

Like Ronald Coase, Armen Alchian didn’t publish many articles, but the ones he did publish are considered seminal. His papers influenced several schools of thought, ranging from New Institutional Economics, to Neoclassical Economics, to Evolutionary Economics. But unlike Coase, the breadth of Alchian’s thought is too wide to narrowly group him in one these schools. For me at least, to call him a puzzling figure in the history of economic thought is an understatement.

Despite his odd legacy, his stature in the economics profession is undeniable. After his death, economists of all stripes wrote glowing obituaries about him and how his writings influenced their way of thinking. Just consider this paragraph from Econlib’s biographical essay of Armen Alchian:

 Alchian and Allen’s textbook was truly a public good—a good that created large benefits for which its creators could not charge. And while Alchian played the role of selfish cynic in his class, some who studied under him had the feeling that he put so much care and work into his low-selling text—and into his students—because of his concern for humanity.

Reading all of these short biographies of Alchian gives you a sense of why he was such a good economist. He took the phrase “thinking like an economist” to new heights. His creativity and ability to think about economic problems in new ways set him apart from his peers. No where is this more apparent than in his famous paper, Uncertainty, Evolution, and Economic Theory. 

The Marginalist Controversy

Alchian wrote this paper near the end of the marginal pricing debates of the 1940s. In 1939, Robert Hall and Charles Hitch wrote their paper, Price Theory and Business Behavior, which argued that businesses do not set their price according to the dictates of marginal analysis (marginal cost = marginal revenue) (1). Instead, most of the entrepreneurs interviewed used what they called “full cost” pricing (2):

An overwhelming majority of the entrepreneurs thought that a price based on full average cost (including a conventional allowance for profit) was the ‘right’ price, the one which ‘ought’ to be charged.’ In some cases this meant computing the full cost of a ‘given’ commodity,and charging a price equal to cost. In others it meant working from some traditional or convenient price, which had been proved acceptable to consumers,and adjusting the quality of the article until its full cost equalled the ‘given’ price. A large majority of the entrepreneurs explained that they did actually charge the ‘full cost’ price, a few admitting that they might charge more in periods of exceptionally high demand, and a greater number that they might charge less in periods of exceptionally depressed demand. (Hall and Hitch 1939: 19)

This result, among others, caused a heated discussion in American Economic Review, which was started by Richard A. Lester and Fritz Machlup. Lester conducted an empirical analysis similar to the one that Hall and Hitch did, i.e. interviewing companies about their pricing policies. His findings included:

1. Market demand is more important than wages rates in determining the employment levels for a firm.
2. The firm’s actual cost structure was different that the one suggested by conventional marginal analysis
3. When wage rates change, firms generally do not adjust their use of labor and capital.
4. There are huge difficulties in applying marginal analysis to a real world problems. As a result, many business owners consider it impractical.

These results again put marginalism into serious question.

In his response to Lester, Machlup emphasized two points. First, he claimed that Lester misunderstood the nature of marginalism. Marginalism wasn’t designed to predict and explain the behavior of real firms. Rather, it was designed to explain changes:

Instead of giving a complete explanation of the “determination” of output, prices, and employment by the firm, marginal analysis really intends to explain the effects which certain changes in conditions may have upon the actions of the firm. What kind of changes may cause the firm to raise prices? to increase output? to reduce employment? What conditions may influence the firm to continue with the same prices, output, employment, in the face of actual or anticipated changes? Economic theory, static as well as dynamic, is essentially a theory of adjustment to change. The concept of equilibrium is a tool in this theory of change; the marginal calculus is its dominating principle. (Machlup 1946: 521)

Second, Machlup rejected Lester’s claim that marginalism had no practical use because it was difficult for firms to implement. He used the analogy of an automobile driver changing lanes:

The driver of the automobile will not “measure” the variables; he will not “calculate” the time needed for the vehicles to cover the estimated distances at the estimated rates of speed; and, of course, none of the “estimates” will be expressed in numerical values. Even so, without measurements, numerical estimates or calculations, he will in a routine way do the indicated “sizing-up” of the total situation. He will not break it down into its elements. Yet a “theory of overtaking” would have to include all these elements (and perhaps others besides) and would have to state how changes in any of the factors were likely to affect the decisions or actions of the driver. The “extreme difficulty of calculating,” the fact that “it would be utterly impractical” to attempt to work out and ascertain the exact magnitudes of the variables which the theorist alleges to be significant, show merely that the explanation of an action must often include steps of reasoning which the acting individual himself does not consciously perform (because the action has become routine) and which perhaps he would never be able to perform in scientific exactness (because such exactness is not necessary in everyday life). To call, on these grounds, the theory “invalid,” “unrealistic” or “inapplicable” is to reveal failure to understand the basic methodological constitution of most social sciences.  (Machlup 1946: 534-535)

Business owners don’t need to understand the concepts of elasticity of demand, marginal cost, and marginal revenue to implement marginalism. Rather, just like the automobile driver changing lanes, they are implicitly using these concepts in their rule-of-thumb pricing policies. So contrary to the claims of Hall, Hitch, Lester, and others, procedures that appear contrary to marginalism are actually grounded in marginalism (3).

For those familiar with the debates in economic methodology, Malchup’s arguments might look familiar. While he’s certainly not the first economist to support instrumentalism (and Machlup doesn’t explicitly embrace it in his paper), his statements started a noticeable trend in economics. From this point on, neoclassical economists would defend the unrealistic assumptions in their economic theory on the basis of instrumentalism. This would eventually culminate in Milton Friedman’s famous statement (in the context of the marginalist debates) that:

Under a wide range of circumstances individual firm behave as if they were seeking rationally to maximize their expected returns (generally if misleadingly called “profits”) and had full knowledge of the data needed to succeed in this attempt; as if, that is, they knew the relevant cost and demand functions, calculated marginal cost and marginal revenue from all actions open to them, and pushed each line of action to the point at which the relevant marginal cost and marginal revenue were equal. Now, of course, businessmen do not actually and literally solve the system of simultaneous equations in terms of which the mathematical economist finds it convenient to express this hypothesis, any more than leaves or billiard players explicitly go through complicated mathematical calculations or falling bodies decide to create a vacuum.

Alchian’s Uncertainty, Evolution, and Economic Theory

So where does Alchian fall into this? To understand this and why his paper, Uncertainty, Evolution, and Economic Theory, is important, we need to understand how the assumption of profit maximization fits into the marginalist debates. Neoclassical theory assumes that firms want to maximize profits, (which is how they make their price and output decisions) where MC = MR is the profit maximizing condition for the firm (4). Hall, Hitch, and others found was that firms and entrepreneurs don’t really think this way (5). Hall and Hitch suggested several reasons for this, e.g. tradition and fairness, but one of the main things they pointed out was lack of information:

Producers cannot know their demand or marginal revenue curves, and this for two reasons: (a) they do not know consumers’ preferences; (b) most producers are oligopolists, and do not know what the reactions of their competitors would be to a change in price. (Hall and Hitch 1939: 22)

In a world of continuous dynamic change, getting the information needed for marginal analysis is incredibly difficult, if not impossible. In this complicated, uncertain world, profit maximization as a goal doesn’t even make sense, so these firms use rule of thumb policies, e.g. “full cost” pricing, because they provide a helpful benchmark. There needn’t be any assumptions about profit maximization. So we already know how Machlup and others responded to this, i.e. by relying on implicit marginalism (6), but Alchian took a different approach.

For many years, Alchian worked at the RAND Corporation doing systems analysis and the early studies he worked on convinced him that uncertainty (7) was a central challenge to marginal analysis (8). This is immediately clear when he admits that in a world of uncertainty, profit maximization cannot be a guide to action:

In the presence of uncertainty – a necessary condition for the existence of profits – there is no meaningful criterion for selecting the decision that will “maximize profits.” The maximum profit criterion is not meaningful as a basis for selecting the action which will, in fact, result in an outcome with higher profits than any other action would, unless one assumes non-overlapping potential outcome distributions. (Alchian 1950: 212)

But Alchian had a clever way to get around this problem. Instead of focusing on the individual workings of the firm or relying on “implicit marginalism”, Alchian thought that economists should look at the “decisions and criteria dictated by the economic system” (Alchian 1950: 213). To put it differently, an economic system will have a set of “optimal conditions”. We would expect surviving firms, the ones with “positive profits”, to have characteristics closer to these “optimal conditions” (as opposed to the firms that failed). As exogenous and endogenous variables change, the economic system will change over time and the set of “optimal conditions” will be different. New firms will thrive while old firms either adjust or die out and would expect these firms to have characteristics closer to the new set of “optimal conditions”. So via some “evolutionary” process of selection, the system determines which firms will survive and which ones will not.

How specific firms survive doesn’t really matter. Surviving firms could innovate, imitate other successful firms (which would explain why the surviving firms would share many of the same characteristics), use a trial and error process, or just be lucky (9). What matters is that when the economic system changes, the economist can use his analytical tools (i.e. marginalism) to predict where the “optimal conditions” will tend to go. Therefore, the economist can make predictions that are similar to ones in the conventional model with profit maximization. Despite uncertainty, the assumption of profit maximization is still valid:

Empirical investigations via questionnaire methods, so far used, are incapable of evaluating the validity of marginal productivity analysis. This is true because productivity and demand analyses are essential in evaluating relative viability, even though uncertainty eliminates “profit maximization” and even if price and technological changes were to have no consciously redirecting effect on the firms…

…The essential point is that individual motivation and foresight, while sufficient, are not necessary. Of course, it is not argued here that therefore it is absent. All that is needed by economists is their own awareness of the survival conditions and criteria of the economic system and a group of participants who submit various combinations and organizations for the system’s selection and adoption. Both these conditions are satisfied. (Alchian 1950: 217)

This is an ingenious way to get around the problem of uncertainty. Instead of making an unconvincing appeal to instrumentalism, Alchian took a macro-based, realist approach to try and save the generality of marginalism. However, despite Alchian’s creativity, his approach wasn’t without it’s problems. His use of biological analogies, e.g. evolution and selection, has some major flaws and whether his model actually succeeds in its aims is another story all together (10). But I’ll save that for another post.

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Footnotes:

1. From Hall and Hitch 1939: 18

For the above analysis to be applicable it is necessary that entrepreneurs should in fact: (a) make some estimate (even if implicitly) of the elasticity and position of their demand curves, and (b) attempt to equate estimated marginal revenue and estimated marginal cost. We tried, with very little success, to get from the entrepreneurs whom we saw, information about elasticity of demand and about the relation between price and marginal cost. Most of our informants were vague about anything so precise as elasticity, and since most of them produce a wide variety of products we did not know how much to rely on illustrative figures of cost. In addition, many, perhaps most, apparently make no effort, even implicitly, to estimate elasticities of demand or marginal (as opposed to average prime) cost; and of those who do, the majority considered the information of little or no relevance to the pricing process save perhaps in very exceptional conditions.

2. From Hall and Hitch 1939: 19

The procedure can be not unfairly generalized as follows: prime (or ‘direct’) cost per unit is taken as the base, a percentage addition is made to cover overheads (or ‘oncost’, or ‘indirect’ cost), and a further conventional addition (frequently 10 per cent.) is made for profit. Selling costs commonly and interest on capital rarely are included in overheads; when not so included they are allowed for in the addition for profits

3.Following this discussion, Machlup tried to rationalize these “anti-marginalist” procedures into a marginalist framework:

Machlup extended his critique of the “anti-marginalism” evidence to the full cost pricing evidence presented by Hall and Hitch. In his critique, he argued that even though business people may not have understood the concept of price elasticity of demand, they implicitly used it when basing their prices on average total costs, and that the use of average total costs when comparing actual and potential levels of output was simply an indirect way of using marginal revenue and marginal costs. (Lee 1984: 1115-1116)

From the Handbook of Economic Methodology:

He [Machlup] proceeded to argue that Lester’s data, exactly as Hall and Hitch’s, established only that the textbook model of short-run profit-maximization under perfect competition was inadequate, but that virtually any other model in the marginalist toolkit could be reconciled with the evidence. He clearly took Hall and Hitch’s work more seriously than Lester’s, and made some effort to explain how FCP can be reconstructed as a cartel device in some cases, and a clue to demand elasticity in other oligopolistic contexts.

4. The implications of profit maximization can be seen here. Is should also be noted that not all market structures, e.g. oligopoly, adhere to MC = MR.

5. From Hall and Hitch 1939: 18

The most striking feature of the answers was the number of firms
which apparently do not aim, in their pricing policy, at what appeared to us to be the maximization of profits by the equation of
marginal revenue and marginal cost.

6. From Winter 1964: 231-232

The Friedman position (as it relates to profit maximization) would seem to be that the theory of the firm is misnamed; it is not a theory of the firm at all in the sense of being useful for prediction of events within any particular firm. The theory of the firm is a theory of the external (market) behavior of the firm; more importantly, it is a building block in the theory of firm~, i.e., the theory of how firms in the aggregate will react to market situations. Thus, in particular, the theory of the firm does not predict the answers that decision makers in firms will give when queried about their objectives, nor does it predict how they will go about reaching their decisions. This being the case, how can evidence on these points be relevant to a judgment about the predictive power of the theory? Clearly, says Friedman, it cannot. But the theory does yield hypotheses about what will be observed in market situations; for this purpose, Friedman says, it has served well, and there are no appealing substitutes for it.

7. It should be noted that Alchian defined uncertainty as “the phenomenon that produces overlapping distributions of potential outcomes” (Alchian 1950: 212). This definition has a more statistical emphasis, which is completely different then Keynesian or Knightian uncertainty.

8. From Levallois 2009: 170-171

Alchian’s research highlighted another problem arising from the confrontation between economic models and reality, leading him to an important conclusion about the role of uncertainty in economic theory. Learning curves were used by contractors to predict the production cost of airplanes, with equations typically taking the following form:

log10 m = a + b log10 N,

with m, the direct labor per pound necessitated for the production of the Nth plane.

Alchian put this relation to the test. His conclusion stated that for a given production of 1,000 airplanes, estimated learning curves such as the above were affected by an average error of prediction of 25 percent (Alchian 1963, 679). This result did not lead him to question the robustness of the relation (“the results cast doubts on any of the alternatives being better fits than the usual progress curves”); instead, Alchian insisted on the fundamental uncertainty inherent in such an attempt to predict costs. There again, Alchian was getting close to Hitch and Hall’s objection to the postulate of rational decision making. He noted that some basic assumptions were doomed to be falsified once the actual production process was unfolding. The analyst’s role would be then to provide the decision maker with an estimate of the uncertainty of the prediction, before the decision was made. In any case, reliable decisions could not be made if alternative programs were not “disparate beyond the range of uncertainty of error of estimate of the predictive method” (692). Reached in 1949, this conclusion acknowledged uncertainty as a major obstacle to rational choice. If the difference between any two outcomes were so small that no one had an objective basis upon which to distinguish one from another, then there was no hope to reach a “rational” decision.

9. From Alchian 1950: 219

Uncertainty provides an excellent reason for imitation of observed success. Likewise, it accounts for observed uniformity among the survivors, derived from an evolutionary, adopting, competitive system employing a criterion of survival, which can operate independently of individual motivations. Adapting behavior via imitation and venturesome innovation enlarges the model. Imperfect imitators provide opportunity for innovation, and the survival criterion of the economy determines the successful, possibly because imperfect, imitators. Innovation is provided also by conscious willful action, whatever the ultimate motivation may be, since drastic action is motivated by the hope of great success as well as by the desire to avoid impending failure.

From Alchian 1950: 214

Consider, first, the simplest type of biological evolution. Plants “grow” to the sunny side of buildings not because they “want to” in awareness of the fact that optimum or better conditions prevail there but rather because the leaves that happen to have more sunlight grow faster and their feeding systems become stronger

10. For some critiques of Alchian see (Penrose 1952), (Winter 1964), and (Hodgson 2004)

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Links:

1. An Economist Who Made the Science Less Dismal by David Henderson
2.  Armen Alchian by Alex Tabarrok
3. The Marginalist Pricing Controversy Revisited by LK
4. Keynesian Uncertainty by Jonathan Finegold

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References:

1. Alchian, Armen A. “Uncertainty, Evolution, and Economic Theory.” Journal of Political Economy. 58.3 (1950): 211-21.
2. Alchian, Armen A. “Biological Analogies in the Theory of the Firm: Comment.” The American Economic Review43.4, Part 1 (1953): 600-03.
3. Davis, John Bryan., D. Wade. Hands, and Uskali Mäki. The Handbook of Economic Methodology. Cheltenham, UK: E. Elgar, 1998. Print.
4. Hall, R. L. and C. J. Hitch. 1939. “Price Theory and Business Behaviour,” Oxford Economic Papers 2: 12–45.
5. Lee, Frederic S. “The Marginalist Controversy and the Demise of Full Cost Pricing.” Journal of Economic Issues 18.4 (1984): 1107-132.
6. Lester, Richard A. “Shortcomings of Marginal Analysis for Wage-Employment Problems.” The American Economic Review 36.1 (1946): 63-82.
7. Levallois, C. “One Analogy Can Hide Another: Physics and Biology in Alchian’s “Economic Natural Selection””History of Political Economy 41.1 (2009): 163-81.
8. Machlup, Fritz. “Marginal Analysis and Empirical Research.” The American Economic Review 36.4 (1946): 519-54.
9. Penrose, Edith Tilton. “Biological Analogies in the Theory of the Firm.” The American Economic Review 42.5 (1952): 804-19.
10. Penrose, Edith T. “Biological Analogies in the Theory of the Firm: Rejoinder.” The American Economic Review 43.4, Part 1 (1953): 603-09.
11. Winter, Sidney G. “Economic ‘Natural Selection’ and the Theory of the Firm”. Yale Economic Essays, 4 (1962): 225-272

Margaret Sanger and Eugenics

Who do you think gave this speech?

Perhaps you have long been free, or all your lives. Your race are suffering, in my judgment, the greatest wrong inflicted on any people. But even when you cease to be slaves, you are yet far removed from being placed on an equality with the white race. You are cut off from many of the advantages which the other race enjoy. The aspiration of men is to enjoy equality with the best when free, but on this broad continent, not a single man of your race is made the equal of a single man of ours. Go where you are treated the best, and the ban is still upon you….

…It is better for us both, therefore, to be separated. I know that there are free men among you, who even if they could better their condition are not as much inclined to go out of the country as those, who being slaves could obtain their freedom on this condition. I suppose one of the principal difficulties in the way of colonization is that the free colored man cannot see that his comfort would be advanced by it. You may believe you can live in Washington or elsewhere in the United States the remainder of your life [as easily], perhaps more so than you can in any foreign country, and hence you may come to the conclusion that you have nothing to do with the idea of going to a foreign country. This is (I speak in no unkind sense) an extremely selfish view of the case.

Would you be surprised if it was Abraham Lincoln? Well I have news for you! On Aug. 14 1862, Abraham Lincoln hosted a “Deputation of Free Negroes” at the White House. As far as I know, it was the first time in American history that blacks were invited to the White House to discuss a policy issue. The above paragraphs are from Lincoln’s speech, “Address on Colonization to a Deputation of Negros”. Lincoln, like most of our great leaders, wasn’t a stranger to weird ideas. For most of his political career, he was big on the whole “let’s ship those free blacks back to Africa” thing. There were racial and political reasons for this (1), but the fact is, Lincoln wasn’t very different from his contemporaries. He was a stone cold racist that didn’t think highly of black people (2), a far cry from the president I learned about in high-school.

But you don’t see David Donald and Daniel McPherson throw tantrums over Lincoln’s racism. Instead, they analyze US history during the 1820s-1860s and see that most people who lived in this era were virulent racists (3). Only the most impervious abolitionist might escape this fate. Institutions are powerful things and we shouldn’t underestimate them.

When you judge a historical figure, you should probably have some understanding of the institutions that shaped their views and character. So when people rip on Margaret Sanger for getting caught up in the eugenics movement, they’re usually being disingenuous. You see, eugenics was a big deal during the progressive era. Many of the era’s brightest minds, John Maynard Keynes, Bertrand Russell, Francis Galton, Karl Pearson, and Ronald Fisher, believed in eugenics. This doesn’t even begin to cover the other several thousand or so scientists, biologists, and politicians that took the idea seriously. Even W.E.B. Dubois believed in eugenics (4). In his very short essay, “Black Folk and Birth Control”, he wrote:

The result, among the more intelligent class, was a postponement of marriage which greatly decreased the number of children. Today, among this class of Negroes, few men marry before thirty, and numbers of them after forty. The marriage of women of this class has similarly been postponed.

In addition to this, the low income which Negroes receive, make bachelorhood and spinsterhood widespread, with the naturally resultant lowering, in some cases, of sex standards. On the other hand, the mass of Ignorant Negroes still breed carelessly and disastrously, so that the increase among Negroes, even more than the increase among whites, is from that part of the population least intelligent and fit, and least able to rear their children properly.

There comes, therefore, the difficult and insistent problem of spreading among Negroes an intelligent and clearly recognized concept of proper birth control, so that the young people can marry, have companionship and natural health, and yet not have children until they are able to take care of them. This, of course, requires in the first place a revulsion of the general laws, and in the second place, it calls for a more liberal attitude among Negro churches.

This gem sits next to an essay that called women “child factories” (5). DuBois even approved the opening of a birth control clinic in Harlem in 1930. You wanna guess who opened the clinic? Margaret Sanger.

Contrary to the irate ramblings of Sean Davis, Margaret Sanger was more of an equal opportunity eugenicist. When eugenicists used the word “race”, they used it in a nebulous way (6) and Sanger was no different. On top of that, she wasn’t very racist to begin with. In his short essay, Was Margaret Sanger a Racist?, Charles Valenza goes at length to show that many of the “racist” quotes attributed to Sanger are either not racist at all or pretty mild. Even at her worst, Sanger doesn’t even begin to approach the heinous racism of her eugenicist contemporaries. I’m not even trying to defend everything the women said, I don’t know enough about her, but the idea that she was a proto-Nazi is not rooted in historical fact.

That’s not to say we shouldn’t look at her views on eugenics, we absolutely should. We should analyze and criticize them. We should learn from her flaws. We should also look at the good she did. Her activism gave many women access to medical options they’ve never had  and eugenics was hardly her main motivation. Health issues and reproductive rights always occupied her thoughts. That’s huge and, in my opinion, far outweighs her views on eugenics.  If conservatives like Sean Davis want to do propaganda (7), they should probably take a page out of Goebbels, at least he knew what he was doing. But if you want to do history, you need to do some legwork. You need to take a genuine look at the historical context of someone’s actions to make a serious judgment. Moralizing hackery simply won’t do.

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Notes:

1. There’s some literature on why Lincoln supported Black Colonization. This essay by Michael Vorenberg provides a useful overview.

2. It’s important to note that Lincoln did not think blacks were innately inferior to whites.

3. See Lincoln by David Herbert Donald pg. 633:

It would, I think, be a mistake to attempt to palliate Lincoln’s racial views by saying that he grew up in a racist society or that his ideas were shared by many of his contemporaries. After all, there were numerous Americans of this generation – notably, many of the abolitionists – who were committed to racial equality. At the same time, it ought to be noted that Lincoln fortunately escaped the more virulent strains of racism. Unlike many of his fellow Republicans, he never spoke of Africa-Americans as hideous or physically inferior; he never declared that they were innately inferior mentally or incapable of intellectual development; he never described them as indolent or incapable of sustained work; he never discussed their supposed licentious nature or immorality.

4. See In Search of Purity: Popular Eugenics and Racial Uplift among New Negroes 1915-1935 pg. 3:

Eugenic thought and practice among African-Americans, however, was hardly new and appeared in pivotal works by intellectuals like William Hannibal Thomas, Kelly Miller, and W. E. B. Du Bois. Eugenics appealed to many New Negro intellectuals as an extension of racial uplift ideals that promoted marriage and reproduction between physically and intellectually superior members of the race. While sidestepping the racist overtones of mainline eugenic theories, New Negro eugenicists utilized variations of the language and classifications established by white eugenicists to categorize the unfit among them.

5. To be fair to Dubois, his brand of eugenics wasn’t nearly as bad as some forms, e.g. Nazis, but it was still eugenics.

6. See Eugenics and Economics in the Progressive Era pg. 208:

In the United States especially, Progressive Era eugenics tended to be racist. But “race” had connotations in the Progressive Era different than those of today, and eugenicists of that time were both imprecise and inconsistent in their use of the term. Sometimes the term refers to all of humankind—the human race. Sometimes “race” was used in something like its modern sense. But more commonly, the Progressive Era usage of “race” meant ethnicity or nationality, especially when distinguishing among Europeans, so that the English, or those of Anglo-Saxon ethnicity, were presumed to be a race distinct from, say, the Irish race or the Italian race.

7. These malignant idiots make the gratuitous non-sequitur that her legacy somehow makes Planned Parenthood a crypto-fascist organization. Every time they try to uncover some nefarious plot, they’ve failed miserably. Of course you can still believe that abortion is evil, but humans have been doing secular ethics for thousands of years and you don’t need believe in eugenics to support birth control or abortion.

Links:

1. Watch Hillary Praise Planned Parenthood’s Eugenicist Founder Margaret Sanger by Sean Davis

2. Lincoln’s Panama Plan by Rick Beard

3. Address on Colonization to a Deputation of Negroes by Abraham Lincoln

4. What is an Institution? by Alex Lenchner

5. Black Folk and Birth Control

6. Margaret Sanger

7. The Huge Right Wing Anti-Choice Fake Outrage of the Day by Charles Johnson

References:

1. Donald, David Herbert. Lincoln. New York: Simon & Schuster, 1995. Print.

2. Leonard, Thomas C. “Retrospectives: Eugenics and Economics in the Progressive Era.” Journal of Economic Perspectives 19.4 (2005): 207-24. Web.

3. Valenza, Charles. “Was Margaret Sanger a Racist?” Family Planning Perspectives 17.1 (1985): 44. Web.

George Washington, The Forgotten Founder

With Independence Day coming up, I thought it would be topical to look at the men who created this great nation. I specifically want to talk about the founder whose legacy is often lost in American mythos, George Washington. Some might think it’s strange to refer to Washington as a “forgotten founder”, but I think the title is apt. Washington wasn’t like his other peers. Jefferson, Madison, Hamilton, Adams, and others left a paper trail of their thoughts on the role of government, economics, natural law, and all those topics enlightenment thinkers loved to talk about. You might have to do some sifting to see what they actually thought, but at least we have those documents. With Washington that isn’t the case. The private correspondence between George Washington and his wife, Martha Washington, was thrown in the fire after his death, making research on his private thoughts difficult. He was great at writing meticulous instructions, whether they be military orders (1) or instructions on how to run his land empire (2), but he wasn’t steeped in the enlightenment tradition (3) like the other Founding Fathers. There simply isn’t a document we can point to (e.g. the Declaration of Independence, Constitution, Federalist Papers, etc.) that gives us a glimpse of his thoughts on freedom, liberty, and all those fuzzy terms we love to talk about on Independence Day.

So getting a genuine look at Washington, the historical man, is difficult, something you’ll only find in those turgid biographies that no one reads. You certainly won’t find it in a history class. Instead we get stories about cherry trees and wooden teeth, an American mythos that is only rivaled by Benjamin Franklin. It’s is a damn shame if you ask me. Not that I have a problem with some harmless mythos, but Washington is a incredibly interesting guy and historians have written thousands of pages to show us his story. Unfortunately, I’m not a historian and I can’t write a 500 page biography to show why Washington, in my opinion, is the most prescient Founding Father. But I can distill my admiration for the man into two major points.

1. Many Americans, especially the “patriotic” ones, don’t like to talk about this, but Washington had an ego. Like any soldier or politician, he wanted to move up in the ranks. He even tried to “edit” the record (4), but it’s obvious from his letters that the man had ambition. From his early days as commander of the Virginia Regiment during the French and Indian War, Washington’s letters oozed with eagerness and contempt for his British superiors. When John Campbell replaced Edward Braddock after the latter’s death in the Battle of Monongahela, Washington begged Campbell to give his regiment some piece of the action (5). He thought that his soldiers were the best in North America at using the unconventional military tactics needed to beat the French and their Indian allies. 18th century European style warfare didn’t work when the dense forests of Pennsylvania split your columns of troops into smaller, more vulnerable targets. But his words went unheeded and Campbell not only ignored his request, but he temporarily disbanded the Virginia Regiment. Washington had trouble navigating the rules of English aristocrats, and his letters show that he had little respect for his military superiors (6). He even had contempt for the reasonable John Forbes, who actually used to Washington’s advice during his anticlimactic campaign to capture Fort Duquesne, something Braddock failed to do 4 years before. His ambition wasn’t regulated to his younger days, but lasted throughout his military and political career. However, this desire for glory was constrained by an incredible amount of self-control:
   

   The more important and less ambiguous fact is that Washington possessed a deep-seated capacity to feel powerful emotions. Some models of self-control are able to achieve their serenity easily, because the soul-fires never burned brightly to begin with. Washington became the most notorious model for self-control in all of American history, the original marble man, but he achieved this posture- and sometimes it was a posture – the same hard-earned way he learned soldiering, by direct experience with difficulty….Appearances aside, he was an intensely passionate man, whose powers of self-control eventually became massive because of the interior urges they were required to master. (Ellis 2004: 37)

   Any American who knows even a little bit of history knows that the American Revolution did not start out good for the Yankees. A couple of more battles like Battle of Long Island and Battle of Brandywine, and the American cause would have probably of dissipated. While licking his wounds at Morristown (7), Washington, unlike most commanders, learned from these disasters and held back his inner Napoleon. His realized that his troops and equipment weren’t up to standard needed to take on the British army. Deep down he really wanted to fight the British head on, but he settled for a Fabian strategy (a war of attrition) and avoided putting his army at major risk. It wasn’t pretty, and he still lost battles, but it was the correct strategic decision.

   Or consider the Newburgh Conspiracy. The impotent Confederate Congress could not meet the its obligations made to the soldiers of the Revolutionary Army.  They needed to raise money, which required taxes and tariffs, and the individual states were not about to pay up. So some nationalists, probably led by Robert Morris, got together and tried to use the threat of a military coup as a political weapon to raise revenue. When Washington got wind of this, he wasn’t having it. He wasn’t going to follow the path of a Napoleon or Cromwell. He fought for the principles of the American Revolution and he wasn’t about to abandon them. He gave his “Newburgh Address” on March 15th, 1783 and that was the end of it (8). It’s important to note that this wasn’t just some honorable gesture to republican principles, it was also a calculated political move. He knew that his place in history would be enhanced by embracing the principles of the revolution, by surrendering his power, not expanding it. He had the self-control and judgement to realize this. A weaker man might not have taken the same course of action and American as we know it might not exist.

2. Washington had an incredible sense of judgement. His thoughts on almost every major political or military problem that confronted him, sparse as they were, were almost prophetic. He predicted war with Great Britain after George III ordered British troops to occupy Boston in 1774 (Intolerable Acts). He predicted that Western expansion would be an integral part of America’s future. He predicted the death of the Articles of Confederation and its eventual replacement by a more powerful federal government. He predicted the tragic trajectory of French Revolution into blood and tyranny. Without the benefit of hindsight, this is an impressive list of predictions.Ironically enough, it was Washington’s lack of education that helped him make such clear judgements. His mind wasn’t influenced by those enlightenment preconceptions that sometimes plagued his peers. As much as I love the writings of Jefferson, Madison, and our other founders, they sometimes read like paranoid lunatics who fret about every supposed “attack” on liberty. As Bernard Bailyn showed in his famous book, The Ideological Origins of the American Revolution, this wasn’t by accident (9). Our founders were steeped in a tradition that thought in conspiracy-theorist like terms. Gordon Wood summarizes the sentiment:
   

   Conspiratorial interpretations – attributing events to the concerted design of willful individuals – became a major means by which educated men in the early modern period ordered and gave meaning to their political world. Far from being symptomatic of irrationality, this conspiratorial mode of explanation represented an enlightened stage in Western Man’s long struggle to comprehend his social reality. It flowed from the scientific promise of the Enlightenment and represented an effort, perhaps in retrospect a last desperate effort, to hold men personally and morally responsible for their actions. (Wood 2011: 92)

   Washington was, most of the time, an exception to this rule. He didn’t let these paranoid thoughts cloud his judgement. He understood, based on his experience during the American Revolution and failed Articles of Confederation, that an expansion of power was sometimes needed to create a functioning government.

   He also held no qualms about people. Washington didn’t need to read Hobbes to understand that people were motivated by self-interest. He learned through experience, which can be traced back to his days leading the Virginia Regiment. He frequently saw the principle of voluntarism fall apart, especially when it came to military matters (10). It’s why he had contempt for militias during the American Revolution (11). His convictions about people also extended to nations, which is why he never committed American power to Europe during the chaotic French Revolution. A fledgling America would gain little, if anything, from helping the French shift the European balance of power in their favor. Washington instead focused America’s energies at home, consolidating control of the land east of the Mississippi, which eventually culminated Treaty of London (or Jay Treaty) of 1794. Washington’s farewell address provided a seminal statement for the realist tradition; “There can be no greater error than to expect or calculate upon real favors from nation to nation. It is an illusion which experience must cure, which a just pride ought to discard.” Ultimately, it was Washington’s lack of intellectual preconceptions, and his willingness to learn from experience, that allowed him to make such prescient judgements.

At this point, you’re probably sick of my hagiography, but I genuinely think that out of all of our Founders, Washington is the least understood. Americans known Washington the myth, not Washington the man. As a result, he is, in an important sense, the least appreciated founder. The revolutionary writings of Jefferson are timeless. The Federalist Papers, written by Madison and Hamilton, are still surprisingly useful. The self-criticism of John Adams is something we should all aspire to. The wisdom of Benjamin Franklin, while at times hokey (12), is instructive. But Washington, with his emphasis on self-control, clarity, and realism, is in my opinion, the man we can learn the most from and his guiding principles are needed in the calamitous political fervor of today.

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Notes:

1. Washington didn’t actually write his orders and correspondence. He left that job to his aides, Joseph Reed, Alexander Hamilton, John Laurens, and others.

2. Washington owned an obscene amount of land. He owned 8000 acres at Mount Vernon and had enormous land holdings in the Ohio Valley, West Virginia, Maryland, Pennsylvania, New York, and Kentucky. It all amounted to over 50,000 acres by the time of his death.

3. Washington at best received a grade-school eduction. He was never exposed to the “classics” (Greek and Roman thinkers) and he didn’t attend college.

4. See Ellis 2004, pages 153-154

Despite hie earlier refusal to cooperate with any biographical venture that did not confine itself to the wartime years, Washington felt sufficiently comfortable with Humphreys to cooperate in sketching a memoir of his youthful exploits during that earlier war in the Ohio Country. In what might be called revisionist history, he edited out his early ambition to become a British officer and inserted slight distortions or evasion designed to conceal the controversies surrounding his surrender at Fort Necessity and his partisan behavior during the Forbes campaign, thereby sanding down the rough edges of his pre-hero phase of development.

5. From George Washington to John Campbell, Earl of Loudoun, 25 July 1756:

We the Officers of the Virginia Regiment beg Leave to congratulate Your Lordship on your safe Arrival in America: And to express the deep Sense We have of His Majesty’s great Wisdom and paternal Care for his Colonies in sending your Lordship to their Protection at this critical Juncture. We likewise beg Leave to declare our singular Satisfaction and sanguine Hopes on your Lordship’s immediate Appointment over our Colony, as it in a more especial Manner entitles Us to your Lordship’s Patronage.

6. From George Washington to John Stanwix, 4 March 1758:

Your favours of the 13th Jany and 24th Ulto with part of a Letter from Lord Loudoun was this day deliverd me;1 in the latter you condescend to ask my opinion of Major Smith: Is not his Plan a sufficient testimony of his Abilities? Can there be a better Index to the Man than his scheme for reducing the Enemy on Ohio? and his expeditious March of 1000 Men to Detroit? surely he intended to provide them first with Wings, to facilitate their Passage over so Mountainous & extensive a Country; else whence comes this Flight?

As I am unacquainted with the Navigation of those Rivers he purposes to traverse, so consequently, I cannot be a Competent judge of the Plausability of his Scheme; but the distance is so great, and that thrô an Enemy’s Country, (for we have too much Reason to believe the Indians on Ohio are Enemies to Us) that I must look upon it as a Romantick whim that may subsist in Theory, but must fail in practice; for if we are strong enough to attempt the Reduction of the Ohio what necessity is there for Our making such a Compass about, and leaving Fort Duquesne behind Us which is the Scource from whence proceeds all our Ills—and if we are too weak to attempt this place, what have we to expect by leaving it in Our Rear but absolute Destruction; while the French have the Indians at Command.

7. After the Battle of Trenton and Battle of Princeton, Washington entered his winter quarters at Morristown, New Jersey.

8. Newburgh Address

But as I was among the first who embarked in the cause of our common country. As I have never left your side one moment, but when called from you, on public duty. As I have been the constant companion & witness of your distresses, and not among the last to feel, & acknowledge your merits. As I have ever considered my own military reputation as inseperably connected with that of the army. As my Heart has ever expanded with joy, when I have heard its praises and my indignation has arisen, when the mouth of detraction has been opened against it it can scarcely be supposed, at this late stage of the war, that I am indifferent to its interests….. And let me conjure you, in the name of our common country as you value your own sacred honor as you respect the rights of humanity; as you regard the military & national character of America, to express your utmost horror & detestation of the man who wishes, under any specious pretences, to overturn the liberties of our country, & who wickedly attempts to open the flood gates of civil discord, & deluge our rising empire in blood.

9. See Bailyn 1967, page 95

They saw about them, with increasing clarity, not merely mistaken, or even evil, policies violating the principles upon which freedom rested, but what appeared to be evidence of nothing less than deliberate assault launched surreptitiously by plotters against liberty both in England and in America. The danger to America, it was believed, was in fact only the small immediately visible art of the greater whole whose ultimate manifestation would be the destruction of the English constitution, with all the rights and privileges embedded in it.

10. See Ellis 2004, page 28

He described one scene in which a thirty-man militia unit refused to assist in the construction of a fort unless paid forty pounds of tobacco for each day of labor, this despite the fact that the fort was designed to protect their own families from annihilation. On another occasion, when reports of a large Canadian and Indian patrol arrived at his headquarters at Winchester, most of the militia assigned to his command declared their enlistments up and simply walked out. Washington resented that his Virginia Regiment was frequently mistaken for a mere militia unit. He did not believe you could trust in the principle of voluntarism, or the spontaneous expression of public virtue, to meet a wartime crisis.

11. From George Washington to Lund Washington, 30 September 1776:

I do not know how to account for the unfortunate steps which have been taken but from that fatal idea of conciliation which prevailed so long—fatal, I call it, because from my soul I wish it may prove so, though my fears lead me to think there is too much danger of it. This time last year I pointed out the evil consequences of short enlistments, the expenses of militia, and the little dependence that was placed in them. I assured [Congress] that the longer they delayed raising a standing army, the more difficult and chargeable would they find it to get one, and that, at the same time that the militia would answer no valuable purpose, the frequent calling them in would be attended with an expense, that they could have no conception of. Whether, as I have said before, the unfortunate hope of reconciliation was the cause, or the fear of a standing army prevailed, I will not undertake to say; but the policy was to engage men for twelve months only. The consequence of which, you have had great bodies of militia in pay that never were in camp; you have had immense quantities of provisions drawn by men that never rendered you one hour’s service (at least usefully), and this in the most profuse and wasteful way. Your stores have been expended, and every kind of military [discipline?] destroyed by them; your numbers fluctuating, uncertain, and forever far short of report—at no one time, I believe, equal to twenty thousand men fit for duty. At present our numbers fit for duty (by this day’s report) amount to 14,759, besides 3,427 on command, and the enemy within stone’s throw of us.3 It is true a body of militia are again ordered out, but they come without any conveniences and soon return. I discharged a regiment the other day that had in it fourteen rank and file fit for duty only, and several that had less than fifty.4 In short, such is my situation that if I were to wish the bitterest curse to an enemy on this side of the grave, I should put him in my stead with my feelings; and yet I do not know what plan of conduct to pursue.

12. Read Mark Twain’s hilarious essay “The Late Benjamin Franklin“. It’s more about the myth of Franklin than the real Franklin, but it’s still funny.

References:

1. Bailyn, Bernard. The Ideological Origins of the American Revolution. Cambridge, MA: Belknap of Harvard UP, 1967. Print.

2. Ellis, Joseph J. His Excellency: George Washington. New York: Random House, 2004. Print.

3. Wood, Gordon S. The Idea of America: Reflections on the Birth of the United States. New York: Penguin, 2011. Print.

Economic Equality vs Efficiency

“Equality vs efficiency” is a classic debates in economics. Moralizing liberals pout about the poor, while those cold conservatives wave around their economics textbooks. Both sides are usually talking about completely different issues and they always talk past each other. It doesn’t get much more left vs right than this.

Take Bernie Sanders’ statement about economic growth:

If 99 percent of all the new income goes to the top 1 percent, you could triple it, it wouldn’t matter much to the average middle class person. The whole size of the economy and the GDP doesn’t matter if people continue to work longer hours for low wages and you have 45 million people living in poverty. You can’t just continue growth for the sake of growth in a world in which we are struggling with climate change and all kinds of environmental problems. All right? You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country. I don’t think the media appreciates the kind of stress that ordinary Americans are working on.

This is probably the clearest expression of the typical liberal position on inequality I’ve ever seen. If you actually sit down to consider it, and not scoff at the fact that Sanders is a socialist, I think it’s a pretty reasonable position. Yet the media still managed to botch it. They thought he was literally talking about how 23 choices of deodorant causes poverty. Or they thought he was advocating central planning Soviet style. Or they thought he hated economic growth or something. This is all completely wrong.

I’ll illustrate my point with numbers, because I find that numbers make everything much clearer. Let’s consider two cases.

• In case 1, we have a simple economy made up of units of “economic benefits”. These benefits are things like wealth, innovation, and whatever else you would consider good for the economy. Let’s assume that this economy has legal structure A. After a year of economic activity, there are 100 more “economic benefits”. This legal structure causes pre-tax distribution to go disportionately, say 80%, to the top 20%. It might look something like this:

Top 1%	50
19%	30
50%	12
20%	7
Bottom 10%	1
Total Benefits	100

• In case 2, we have the same simple economy, but with legal structure B. This results in more equitable distribution, but we only get 90 units of “economic benefits”. It might look something like this:

Top 1%	30
19%	20
50%	18
20%	13
Bottom 10%	9
Total Benefits	90

It’s obvious from Sanders’ statement that he would prefer case 2 to case 1. That’s what he means when he says “you can’t just continue growth for the sake of growth“. He’s not “opposed to growth”, he’s just thinking about the “trade-off” between growth and equality. It’s a moral issue that he thinks is important. If the economy is growing but the poor are only getting 1%, that doesn’t really help them much. It’s a simple, but reasonable argument and none, literally none, of the pieces I’ve read addressed it.

Of course his point is nothing new and it’s heavily disputed. Perhaps economic growth will falter because of the distortions caused by redistribution, which would hurt the poor even more. Dismantling the welfare state could result in economic gains beyond our wildest dreams. You might even dispute the ethics. These are all possibilities, but extraordinary claims require extraordinary evidence. Unfortunately, most of the debate on inequality is rhetoric, and not the good kind (1).

Personally, I think the whole “equality vs growth” dichotomy is utter nonsense, a mischievous framing device. Just off the top of my head, I can think of several things that cause inequality and hurt economic growth:

• Occupational licensing artificially restricts the supply of labor and raises the wages of that profession. This is form of economic rent. While necessary on some level, there are major costs when the practice is taken too far (2). And lo and behold, the percentage of US workforce that is licensed has increased dramatically since the 1960s:

• Bad incentive schemes used in the finance sector not only inflate the incomes of CEOs, but also provide horrible incentives. When compensation increases with stock prices, CEOs and management will want to increase the value of those stocks. Unfortunately, there’s a lot of dishonest ways to do this, e.g. excessive risk taking, deceptive accounting, etc. (3). Given these incentives, it’s no wonder that these schemes played a role in the recent financial crisis.
• Subsidies that have long outlived their usefulness also contribute to inequality. Farm subsidies , stadium subsidies, and many others are a pernicious form of rent-seeking.

This is just a small list. Some of these things are caused by the government, some by the market and getting rid of all of them would improve economic growth. They also have one thing in common, i.e. a contempt for the rule of law. Major legislative efforts to reduce inequality won’t mean a damn thing if we continue to see pervasive levels of rent-seeking in our economy. Our problem of inequality won’t be solved until we are serious about the rule of law. Unfortunately, I don’t think any of these presidential candidates care about that, except, ironically enough, Bernie Sanders.

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Footnotes:

1. There’s also a problem of bad data. That will probably change in the near future and maybe we can get some more definitive answers. But that doesn’t mean they’re aren’t some great debates going on. There’s stuff in the dark corners of the econ-blogosphere. You’ll have to do some digging, but it’s definitely there.

2.

The most obvious social cost is that any one of these measures, whether it be registration, certification, or licensure, almost inevitably becomes a tool in the hands of a special producer group to obtain a monopoly position at the expense of the rest of the public. There is no way to avoid this result. One can devise one or another set of procedural controls designed to avert this outcome, but none is likely to overcome the problem that arises out of the greater concentration of producer than of consumer interest. The people who are most concerned with any such arrangement, who will press most for its enforcement and be most concerned with its administration, will be the people in the particular occupation or trade involved. They will inevitably press for the extension of registration to certification and of certification to licensure. Once licensure is attained, the people who might develop an interest in undermining the regulations are kept from exerting their influence. They don’t get a license, must therefore go into other occupations, and will lose interest. The result is invariably control over entry by members of the occupation itself and hence the establishment of a monopoly position. (Friedman 1962: 148)

3. Joseph Stiglitz has written at length about the problem of poorly constructed incentive pay schemes. See his book, The Price of Inequality, pages 108-114 and his congressional testimony on January 22, 2010 for the clearest expression of this position.

Links:

Bernie Sanders’ ‘deodorant’ comment ignores realities of economic growth by Jeff Jacoby

Sorry, Bernie Sanders. Deodorant isn’t starving America’s children by Jim Tankersley

Bernie Sanders’s Dark Age Economics by Kevin D. Williamson

Bernie Sanders’ Fossil Socialism by Matthew Continetti

Economists and Rhetoric: Defending McCloskey by Alex Lenchner

Why Conservatives Should Care About Occupational Licensing by Adam Ozimek

Incentives and the Performance of America’s Financial Sector by Joseph Stligliz

References:

1. Baker, Dean. The End of Loser Liberalism: Making Markets Progressive. Washington, D.C.: Center for Economic and Policy Research, 2011. Print.

2. Friedman, Milton. Capitalism and Freedom. Chicago: U of Chicago, 1962. Print.

2. Stiglitz, Joseph E. The Price of Inequality:. New York: W.W. Norton, 2012. Print.

4. Weeden, K. A., and D. B. Grusky. “Inequality and Market Failure.” American Behavioral Scientist. 58.3 (2013): 473-91.

Economists and Rhetoric: Defending McCloskey

When I read history books, I tend to focus on the major themes, and not so much on the smaller stuff. When historians get bogged down with details, reading their books becomes tiresome. Things just don’t click. All I see are a bunch of names, dates, and academic terms. There isn’t a coherent story. After reading through some of these turgid books, I realized that it’s no coincidence that many of the best historians are also fantastic writers. Ron Chernow, Richard J. Evans, David Herbert Donald, and many others are great writers. They understand how to tell a story that conveys the facts and narrative they want to present. They don’t use jargon. They don’t just list a bunch of names and dates. It makes reading their 800-1000 page tomes a little easier and their arguments much clearer.

Here comes Noah Smith skewering Deirdre McCloskey. First, let me say that I’m a provisional fan of McCloskey. I haven’t read any of her major works, but I have read several of her essays, which are fun and informative reads. Contrary to the grumblings of her critics, she’s a very entertaining writer and I find that her style doesn’t distract from her arguments. She appreciates the art of writing and thinks that our use of language is important. See this excerpt from her essay, Keynes was a Sophist, and a Good Thing, Too:

“Sophistry” in Plato’s sense means “mere verbal trickery,” as against Really Knowing, the sort of ting a true philosopher Knows. True, how one would really know that one Really Knows is a detail the philosophers have not quite worked out in 2400 years of trying, but they are agreed that mere opinion created by exchange of words is to be loftily sneered at.

The contrary view, that of the sophists themselves (including arguably Socrates himself, Plato’s teacher), is that we humans must get along on exchanges of words, and had better learn to use them well. Democracies and courts of law depend on an art of persuasion exercised in the here and now, not on a doctrine of Really Knowing established by an aristocracy with time on its hands. The sophists were, so to speak, professors of law. In later classical times the great Roman sophist Quintilian defined the ideal law student as “vir bounus dicendi pertius,” the good man skilled at speaking. You don’t have to believe this characterizes many law students, or economics students, to recognize it as an ideal, which recommends honest rather than dogmatic Truth.

When I read McCloskey (and many historians for that matter), I read her as a sophist. I don’t take everything she says too literally, especially her rhetorical flourishes (1). They certainly add to the narrative, but you can ignore them. It rarely takes away from the central argument being made. It’s what makes reading people like McCloskey enjoyable.

So when people critique someone’s work by obsessing over rhetoric, it usually turns out bad. This is essentially what Noah Smith did. He tried to pick apart every statement McCloskey wrote, and it made for a unconvincing post. Some of his points are wrong. Others are nitpicks that have little to do with McCloskey’s review. He simply couldn’t get past her style. I wonder if he applies that same standard to journalists or historians who frequently use rhetoric. The War Nerd, whom I know he reads, makes statements like McCloskey’s all the time. It’s what makes him so damn interesting! Unfortunately, economists like Noah Smith don’t appreciate that style of writing and it’s why, I think, many social scientists simply don’t understand the art of good writing. They don’t understand the art of rhetoric.

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1. For example, when McCloskey is talking about economist theorists and “existence theorems”, I pretty sure she’s exaggerating:

With such and such general (or not so general, but anyway non-quantitative) assumptions A there exists a state of the imagined world C. A typical statement in economic “theory” is, “if information is symmetric, an equilibrium of the game exists” or, “if people are rational in their expectations in the following sense, buzz, buzz, buzz, then there exists an equilibrium of the economy in which government policy is useless.”

References:

The Trouble with Mathematics and Statistics in Economics by Deirdre McCloskey

Keynes was a Sophist, and a Good Thing, Too by Deirdre McCloskey

Deirdre McCloskey Says Things by Noah Smith