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July 2018 posts

To a Humanist, It Doesn’t Add Up

By Jonathan B. Wight

John Lanchester has an interesting review in The New Yorker of several economic books (July 23). These are:

Robin Hanson and Kevin Simler, The Elephant in the Brain: Hidden Motives in Everyday Life;

Gary Saul Morson and Morton Schapiro, Cents and Sensibilities: What Economists Can Learn from the Humanities; and

Mihir Desai, The Wisdom of Finance: Discovering Humanitiy in the World of Risk and Return.

Hanson and Simler argue that 90% of all human activity can be traced back to signaling in one form or another. Lanchester, a novelist, finds the argument interesting but overstated; the complexity of human motives does not lend itself to such overreach.

Lanchester has a far better opinion of Morson and Schapiro’s work, which he calls “wonderful” because of its attempt to bridge the gap between economics and the humanities. More on that book later. As for Desai, he uses “warm and engaging” stories that bridge the complexity of finance with real human trials and tribulations.

Lanchester concludes, however, that:

“The project of reducing behavior to laws and the reject of attending to human beings in all their complexity and specifics are diametrically opposed….if I committed any further to economics I would have to give up writing fiction” (p. 63).

The allure of finding some generalities of human nature remain at attractive feature of social science, even if we agree that history, culture, and psychology throw us curve balls. 


The Price of Watches

By Jonathan B. Wight

Critics sometimes complain that Adam Smith’s economics were not very good. The labor theory of value has certainly not held up well in most circles, and Smith was flummoxed by the diamond-water paradox.

But one area where he remains right, apparently, is in his economic history. Kelly and Ó Gráda in “Adam Smith, Watch Prices, and the Industrial Revolution,” (QJE 2016) find that Smith’s rough guess that watch prices fell by 95% over the preceding century was in the ballpark. After adjusting for quality improvements, Smith’s analysis is even closer to the truth.

Here’s the abstract:

“Although largely absent from modern accounts of the Industrial Revolution, watches were the first mass-produced consumer durable and were Adam Smith’s preeminent example of technological progress. In fact, Smith makes the notable claim that watch prices may have fallen by up to 95% over the preceding century, a claim that this article attempts to evaluate. We look at changes in the reported value of over 3,200 stolen watches from criminal trials in the Old Bailey in London from 1685 to 1810. Before allowing for quality improvements, we find that the real price of watches in nearly all categories falls steadily by 1.3% a year, equivalent to a fall of 75% over a century, showing that sustained innovation in the production of a highly complex artifact had already appeared in one important sector of the British economy by the early eighteenth century.”

When we hear justifiable complaints against the dehumanizing effects of the modern industrial system (and Smith was himself such a critic) it should be remembered that there are compensating benefits. In this case, a timepiece has become a much more affordable item for a working person.


Sorry to Bother You

By Jonathan B. Wight

Sorry to Bother You is a sci-fi drama about a young black man who enters the sleazy world of telemarketing because he’s desperate. He starts to excel when he learns to speak like a geeky white guy, and makes lots of money working for a horrible big corporation.

His bigger break comes when he starts marketing for the company WorryFree, where humans around the world live and get three square meals but they are basically slaves. They agree to this because they lack the basics of security on the outside. Our hero uncovers a plot to … well, I won’t spoil that for the reader.

There are interesting issues for ethics and economics in the movie. In marketing, is it ethical to pretend to be someone you are not? On tv we often see actors wearing white coats (presumably playing the role of a doctor). We know from Milgram’s famous experiment that people tend to trust people wearing the garb of authority, and thus willing to suspend their own judgments.

In telemarketing, it is sometimes the case that callers from other countries take on Western-sounding names as a way to promote sympathy with the target. Is such deception good or bad? It could be good if such subterfuge breaks down irrational biases and unfounded prejudices. Some research shows that resumes with African-American sounding names get passed over in hiring compared to Anglo sounding names, and even electronic products held in black hands get purchased less frequently than the same products displayed in white hands. The evidence of such bias is out there, but mixed, and may change over time (see here).

In the movie the main character is taunted for making it, and not showing solidarity with his co-workers and his girlfriend on the bottom of the pay pyramid. There is strong racial tension because this character is able to “pass” as white using his voice. An interesting scene intends to show the hypocrisy of his tormentors when his black girlfriend does an art opening to sell her African art to … rich white collectors, using her "white" voice.

WorryFree promises applicants a steady job, a dormitory bed, and three square meals in exchange for unpaid work, and becomes a commentary on the precarious times in which we live. The extended family as a safety net is largely broken, and corporations are outsourcing jobs to reduce the workforce eligible for benefits like health care and retirement. It’s not a pretty time to be low skilled with kids, and would some people sell themselves into bondage to get peace of mind?

The movie uses caricatures of evil big businesses, which of course gets laughs. The popular and powerful entrepreneur in this movie is a psychopath. There are enough bad companies and entrepreneurs to give some credence to the caricature. One study claims that 20% of CEOs have antisocial personalities and have a tendency to exploit, manipulate, or violate the rights of others, among other tendencies.

Every profession is made fun of using exaggeration in movies—doctors, lawyers, politicians, and businesspeople. Hopefully, we are all aware that these are the exceptions, not the rule. Watch Sorry to Bother You, grapple with the ethics, and stay tuned for the surprise ending.


Breast is Best

By Jonathan B. Wight

I’m getting to this late, but this is really important for ethics and economics.

There is a product that is very profitable for private producers, who naturally want to promote it. That product is vitally important for a few people, if used properly. But that product is fundamentally worse than a free alternative for most people, and in some countries is improperly used much of time, causing avoidable deaths.

That product is infant formula milk.

Nestlé was famous for pitching this product in sub-Saharan Africa as a modern woman’s product. Billboards suggested that if you really loved your child, you’d give them the best—manufactured infant formula milk—rather than simply a mother’s own milk.  Mothers were bombarded with pamphlets by hospitals and doctors on the take.  And once a woman becomes "hooked" on using infant formula, there's no going back--her own breast milk dries up.

Problem is, a mother’s own milk is usually the best source of nutrition and protection against disease. Poor mothers who use the infant formula often use contaminated water in mixing it, thus resulting in death by diarrhea. Other mothers dilute it, to save money, contributing to malnutrition.

Infant formula milk is desirable and lifesaving in a minority of cases where a mother cannot produce milk. Health workers can and should promote health literacy, which includes endorsing and promoting a woman’s own breast milk, if possible, before considering alternatives. Yet the Trump Administration opposed such a resolution at a recent World Health Assembly, using threats against countries who were going to promote it.

I’d love to be a fly on the wall of the U.S. Department of Health and Human Services (HHS) as they were formulating this attack on women, babies, and health science. Was anyone  in the room getting texts or calls from the infant formula industry? Was a political appointee from the industry involved in spearheading this fight?

Profits are good, provided there is good consumer information. In this case, illiterate women being swayed by aggressive marketing to buy a product they don’t need and that can kill their child, is obscene. 


The Decline of Reason

By John Morton

The United States has become a nation of screaming toddlers having a collective meltdown.  Jonathan has a great post on denying Sara Sanders service at a Virginia restaurant.  There are so many examples of boorish behavior.  One example is how protestors and politicians love to use the f-word; evidently they think that printing it on a sign makes their point more intellectual. 

Jonathan’s review of D.C. Rasmussen’s book The Infidel and the Professor: David Hume, Adam Smith, and the Friendship That Shaped Modern Thought strongly affected my view on this situation.  These friends discussed and argued, agreeing and disagreeing on many ideas.  I bet neither one carried a sign to protest the other’s opinion and neither was kicked out of an Edinburgh pub because the publican disagreed with one or the other.  Hume and Smith were the greatest thinkers of the Scottish Enlightenment, which basically invented the modern world. 

I became more hopeful after reading “To Get Along Better, We Need Better Arguments” by Walter Sinnott-Armstrong (Wall Street Journal, July 14-15, 2018).  He offers the following advice:

*Stop thinking of [arguments] as fights or competitions.  The goal of a good argument is not to attack enemies or to make opponents look silly….The point of engaging in argument is to improve our understanding of one another and of important issues.

*Be candid….State your premises clearly, admit your assumptions and spell out each step in your argument.

*Be respectful….To argue well, you need to recognize that there are points to be made on both sides and to anticipate the strongest objections to your own position.

*Be patient.  Short, simple slogans are memorable, but good arguments take time.

Let’s start a new age of enlightenment by insisting that teachers, politicians, business leaders, and public officials make good arguments.  It’s easy to diss, insult, and ridicule opponents with slogans, jokes, and name-calling.  It takes more discipline to carefully construct an argument to make a case. 


Trump on Russia

By Jonathan B. Wight

The President tweeted: “Our relationship with Russia has NEVER been worse thanks to many years of U.S. foolishness and stupidity and now, the Rigged Witch Hunt!”

This kind of statement, if made by an undergraduate student on a paper, would receive an immediate D (or worse).

I would remind the student to avoid using hyperboles, ridiculous exaggerations, especially about things that easily can be shown to be false.

I would ask the student:

  • “Do you mean our relationship with Russia today is WORSE than during the Berlin crisis of 1961?
  • “Is it worse than the Cuban Missile Crisis of 1962, when we came within hours of annihilating the planet with nuclear bombs?”

We wouldn’t have time or energy in grading a student paper to get into the “rigged witch hunt” material, except to say that assertions are not the same thing as evidence.

On the same trip, our President called our European allies “foes”—the same nations whose troops fought alongside ours in Iraq and currently do in Afghanistan and elsewhere.

        *    *    *

Congress has a solemn duty to protect and defend America against its enemies. One of these, who gives the appearance of conspiring with the enemy, sits in a position of power in our own government. Will Congress act?