Thanks to many commenters who reminded me of older ones. Below the fold is the list I am working with, grouped by category.
If I devoted an average of three pages to each, I would definitely have a book.
Comments and additions welcome.
Business
When a business transitions from Sub-Dunbar to Super-Dunbar, it has to replace informal management with formal systems.
Most of us are Garett Jones workers.
Price discrimination explains everything.
The game lasts more than one move.
Middle management risk-taking is too risky.
In business, you learn by selling.
You can sort businesses by capital intensity and ambiguity (Amar Bhide).
Culture and human psychology
Culture can be defined as socially communicated norms and beliefs.
With hobbies and group activities, the tendency is for the participant group to become narrower, deeper, and older.
The fundamental social rule is to reward cooperators and punish defectors.
Micro-morality differs from macro-morality.
Society needs a balance of personality types, including some disagreeables
Differences in human traits exist on a continuum, with plenty of overlaps across gender and ethnicity.
The workplace is not a family.
You should leave a job when you have stopped learning.
Take risks with plausible high upside and low downside, and avoid the opposite.
Save and invest to get rich slowly.
Funeral services are deeply life-affirming. Eulogies provide a valuable perspective on life. They remind you of what is important. They remind you of what is best in people. And they tell stories of the variety of human experience.
Economic Methods
What we call social science ought to be called the study of human conflict and cooperation. Psychology deals with the realm of close personal relationships. Political science deals with the realm of formal authority. Sociology deals with the realm of informal authority. Economics deals with the realm of specialization and trade.
I prefer the term “disciplines that study social behavior” to the term “social science.”
The study of social behavior is challenging because of: causal density (James Manzi); the rapid rate of cultural evolution; social systems are complex, not merely complicated
The first iron law of social science is “Sometimes it’s this way, and sometimes it’s that way.” (Merle Kling)
We cannot describe the 21st century economy using 19th century economics. Individual firms cannot measure marginal product, and aggregate measures of output and productivity are only crude approximations.
Economic outcomes are not determined solely by material conditions. They are contingent on beliefs.
In fact, beliefs about the economy tend to be distorted by thinking in terms of sub-Dunbar groups, which leads to what might be called behavioral meta-economics. Probably the most important task for economists is to communicate lessons that enable people to overcome the biases in the behavioral meta-economic beliefs that distort their views of markets and super-Dunbar society.
Education
It is difficult to disprove the Null Hypothesis, which is that educational interventions have no long-term effects on outcomes that can be replicated using rigorous controlled experiments.
When it comes to evaluating teacher effectiveness, parents are better informed than remote officials who rely on metrics.
Teaching equals feedback.
Finance and the crisis of 2008
Households want to hold riskless, short-term assets and to issue risky, long-term liabilities. Financial intermediaries do the opposite.
Large organizations face a suits vs. geeks divide. In the case of finance, bank executives and top government officials do not really understand how derivatives behave.
Financial regulation is like a chess game, in which the regulators are not able to look ahead to see the results of the moves that they make. Kling’s Law of Bank Capital Regulation says that the measure that regulators choose will come to be outperformed ex post by the measure they did not choose.
There are many plausible causal factors for the crisis of 2008. Broadly speaking, they include instances of moral failure and instances of cognitive failure.
It is futile to try to make the financial system hard to break. Instead, we should think about how to make it easy to fix.
Regardless of the stated purpose of financial regulation, governments are out to allocate capital to favored uses, including financing the government
Environmentalism
Recycling wastes resources
Sustainability entails primitivism, which is unsustainable.
Government Debt
The U.S. government is making promises that it cannot keep. This is going to lead to political conflict, as creditors and people who are due entitlements will be disappointed.
A government debt crisis is necessarily based on a sudden shift of beliefs. As soon as enough creditors doubt the safety of government securities, the interest rate goes up, and they become unsafe
We could put the government budget on a sustainable path by adjusting the age of eligibility for Social Security and Medicare for changes in longevity since 1935.
Growth
You cannot explain differences in living standards by looking at the “hardware” of labor, capital, and resources. “Software” plays an important role: innovations, knowledge, formal institutions, and informal norms.
As technological innovation speeds up, progress may increasingly depend on the ability of humans to adapt.
Health Care
As individuals, we would like unlimited access to medical services without having to pay for them. Collectively, that leads to excess spending.
Excess spending in the United States is mostly due to spending on procedures with high costs and low benefits. Compared to that phenomenon, there is not much that we can squeeze out that is pure waste (procedures with no benefits at all) or pure excess profit.
What we call health insurance is not really insurance. It is insulation from having to use our own money in medical transactions.
We value medical procedures that offer hope for the badly sick and reassurance for the healthy, even though resources might be better used elsewhere (public health, for example).
Income Distribution
The distribution of income is neither completely fair nor completely unfair. The neoclassical model does not hold. Profits are determined by luck as well as by skill and effort.
The profit system is better than systems that reward only credentials and connections.
To obtain economic status (or other forms of status, for that matter), we can think of people as competing in tournaments. Some tournaments are more governed by merit than others.
In recent decades, income distribution has been affected by four forces: The New Commanding Heights, computers, globalization, and assortative mating.
The New Commanding Heights are education and health care, which are rapidly expanding sectors where credentials and regulation are important sources of rents.
One possible consequence of an increased concentration of wealth would be the emergence of a toady class, as people try to affiliate themselves with the very wealthy.
Our hodge-podge of means-tested income support programs puts a large implicit tax on low-wage workers. This impedes upward mobility. Replacing these programs with a universal basic income would lower the tax on work that people in the lower third of the wage distribution currently face.
The Internet and Information Goods
Information wants to be free, but creators need to be paid.
Content should be provided through a club rather than a silo. A silo is a single magazine subscription. A club lets you read every magazine for a monthly fee.
The Internet greatly increases the number of asympototically free goods. These are goods where the marginal cost of production and distribution is close to zero. This poses problems for business strategy and public policy.
Open source software disenfranchises the end user, assuming that the end user has no technical ability.
The key management problem in software development is managing talent. You cannot just hire bodies. CEOs with some background in coding have an advantage in managing companies that develop a lot of their own software.
Micropayments are not an effective way to create a market for content, because of mental transaction costs (Clay Shirky).
Macroeconomics
(I am not sure I want to include this topic. I don’t think that the “maxims” format works well here, even though I have some, for example:
The approach of treating all of as as working in a GDP factory is misleading.
Central bank is just another bank. We don’t think that Citibank can target national inflation and/or unemployment, and we should not think that the Fed can, either.
Economic activity consists of sustainable patterns of specialization and trade. Fiscal policy can mess with the patterns, but it does not really create new sustainable patterns.
Markets vs. Government
Markets fail. Use markets.
Economists are no different from other outsiders. To the extent there are outsiders who see a flaw in how the market serves consumers, those outsiders have the option of starting a business to address the problem. from Specialization and Trade
In practice government intervention generally works to restrict supply and subsidize demand.
Progress depends on experimentation, evaluation, and evolution. As a system, the market handles this better than government.
The regulator’s calculation problem is like the socialist calculation problem.
Bewared of the intention heuristic, in which government programs are evaluate by their intention rather than their outcomes.
The trend toward increased use of the Federal government in the United States has exacerbated the knowledge-power discrepancy, meaning that people with power are more remote from the knowledge required to make good decisions.
Beware of over-esteeming non-profits. A for-profit firm is accountable to the individuals who need its services, while a non-profit is only accountable to its donors.
Consider the following definition of freedom: the absence of monopoly. Whenever you have a choice of more than one organization with which to deal, you have at least some freedom.
Exit is more powerful than voice, and unbundling government services is key to allowing exit to operate.
Political Debate
Be charitable to those with whom you disagree.
Beware of type M arguments, also known as Asymmetric Insight.
Progressives, conservatives, and libertarians tend to demonize one another along their preferred axes.
Another axis that emerged in the Donald Trump era is Bobo vs. anti-Bobo
Specialization
Do-it-yourself is an indicator of market failure. We should out-source everything that we either don’t enjoy doing or don’t earn the highest return from doing.
The two-by-two model of comparative advantage that economists teach fails to capture the richness of specialization in the real world. What students really need to learn is “I, Pencil.”
When it comes to evaluating teacher effectiveness, parents are better informed than remote officials who rely on metrics.
My gut feeling is this is wrong. Not because remote officials are so good. Rather, everyone is about equally ignorant. In the United States, near officials are pretty good at maintaining a minimum level of competence: the teacher knows the material (at least at the level she’s teaching), she comes in most every day, she doesn’t abuse students, etc. But beyond that, there is not much detectable difference in “teacher effectiveness”–especially since “effectiveness” is like Coasian social cost; different teachers do well with different students.
And there is the sad reality that beyond about 6th grade, all teachers are pretty much ineffective, if effectiveness means that students understand and remember. Most students memorize and after a while, their knowledge “decays”. People who read a blog like this are highly unusual–though I suspect that most readers could not pass more than a few of their high school finals if they took them today.
There are certainly teachers who are more or less pleasant, who students get along better or worse with (often different teachers for different students), but that makes little difference in “effectiveness”.
If there were a substantial difference in teacher effectiveness and if parents were well informed about who was good and who was bad, I suspect the null hypothesis would often be disproved.
I had just a couple exceptionally good and effective teachers in what was otherwise a mass of time-serving mediocrity, and this in a “good school”. My parents, who weren’t dummies or disengaged by any means, still had zero clue who those excellent teachers were, that they were superior in terms of their impact on me, or what made them superior. If anything, they were aware I liked and respected them and had good relationships with them, but that was it. These teachers had good reputations in the school and district at large, and I think the ‘system’ understood at least to some degree these individuals were above average in effectiveness, certainly better than my parents could.
That being said, perhaps not everyone in the classes of these teachers would have agreed with my assessment, which was positive precisely they targeted the upper tier of ability, went through concepts quickly enough to keep me interested, and didn’t assign too much ‘drill’ type work. Some of the other students in the class were probably very dissatisfied and left behind. It’s hard to be “effective” for everybody.
At any rate, these people were exceptional because of their rare personal qualities, motivation, intelligent, and natural pedagogical gifts. That is, it was a kind of positive externality dividend of the previous generation’s pool of human and social capital, and, perhaps, even a kind of compensating future benefit to a subsequent generation of whatever ‘misallocations’ of talent occurred in the previous generation to encourage these people to choose careers as teachers, due to quirks of historical contingencies and temporary economic conditions.
One wonders what Laszlo Ratz would have been doing besides teaching high school math in Hungary if he faced the kind of incentives present in today’s global economy. Ratz inspired so much reverence his former student Wigner took some serious time out of his Nobel Prize acceptance speech to say:
How did Ratz get that way? Well, like my own great teachers, not only did it have nothing whatsoever to do with whatever they were taught on their way to getting their teaching credential, but increasing the proportion of people like this in the ranks of the teaching profession is precisely the kind of thing which can’t be done at scale at reasonable cost (and opportunity cost!) or by means of ordinary measurements or incentives. Weeding out some really terrible teachers seems much more feasible with this approach, but that’s not what most people are concerned with.
There’s also the problem that bad educational outcomes happen mostly to the children of poor families. I believe this is not because those parents are unable to evaluate teacher effectiveness but because they just don’t care about it (usually because they superstitiously blame their own and their children’s failures on discrimination rather than take responsibility for preventing them).
There is a notion is that as you go down the socio-economic pyramid, the belief is that it’s the teacher’s job to educate the child, and the parent doesn’t have to do anything much. Bad outcomes are the teacher’s fault, and he/she (probably she) has to work harder. I think of this attitude as “ghetto” but am willing to stand corrected.
It would be easier to study this in mono-ethnic societies with class mobility.
Ben Carson claims his mother required him and his brother to read books and write book reports, so not all ghetto dwellers are “ghetto.”
There must be multiple axes, partially correlated if not orthogonal, because the lower classes also tend to stress discipline and strict adherence to the commands of authority figures. Judge Clarence Thomas wrote that his grandfather’s mother, a freed slave, would issue a command, spit on the hot Georgia ground, and say “you better do it before that’s dry.”
Robert Sternberg has discussed this as well. There is a classic sociology study of three communities with goofy faux-accurate names like Trackton, Roadville, etc.
Someone (probably Kay Hymowitz, but also Malcolm Gladwell) has argued that the difference is where you are on the continuum between believing in “natural growth” vs. “concerted cultivation.” She has an article in City Journal about this.
Citation: “What’s holding Black kids back,” 2005, still worth reading if a bit scoldish in tone.
Probably the issue is not degree of “ghetto” but rather class defined as orientation to the future, as argued by Ed Banfield in _The unheavenly city_.
The longer I write the less I’m sure I know what I’m talking about. Thanks for listening.
An obvious problem is these discussions tend toward the invidious. As said, “Cultures can and do change, but trying to change a culture is a hard and thankless task.”
“It is futile to try to make the financial system hard to break. Instead, we should think about how to make it easy to fix.”
Left to themselves, markets tend to be heterogeneous and, therefore, resilient. Regulated markets tend to be more homogeneous and, therefore, more fragile.
Please keep at your task. There are some real gems here, insights that speak not only of time-tested verities (especially your culture and human psychology section), but also contemporary issues and situations (health care seems spot on).
A compressed approach to broad thinking has the added benefit of concentrating the mind, not in the way that escaping a bullet does (Churchill), but in the way a juggler does, eye on every ball even as he never loses sight of the mass taken together.
“Consider the following definition of freedom: the absence of monopoly. Whenever you have a choice of more than one organization with which to deal, you have at least some freedom.”
I would say, rather, freedom of entry and exit. Even the possibility of a rival is typically enough to discipline an organization.
“Price discrimination explains everything.”
In an EconTalk episode, Mike Munger told about one of his professors (Coase?) who claimed that transaction costs explain everything. I’d love to see a list of economic phenomena in which each listed item is provided with both a Coasian and a Klingian (Klingon?) explanation.
Munger was talking about Douglass North. Seems to me that transactions costs explain price discrimination too, so maybe Munger and North were correct!
Political Debate is missing the Three Axes!
“Economics deals with the realm of specialization and trade.” This is an excellent condensation.
Please write your book now, with a short title.
In economics, you are missing a lesson on “Camping Trip vs Woolen Coat” — and while “I, Pencil” is indeed a great into, it fails to discuss the attraction to socialism: real camping trip economics, like many families, is pretty socialistic.
While I agree with your preference, it’s a hopeless waste of time to change:
I prefer the term “disciplines that study social behavior” to the term “social science.” Too long. “Social behavior science” might be feasible, with “behavior science” the short form (tho proponents hate bs); or “group behavior”.
Typo note: Bewared of the intention heuristic, in which government programs are evaluate by their intention rather than their outcomes.
— Beware evaluated intentions
Sounds like a great book. I would preorder.
Ditto
Thanks for putting these thoughts in complete declarative sentences with action verbs. Noun phrases (typically lacking any verb at all) are good shorthand when we all have a meeting of minds, but often your thoughts escape me when you present these ideas in shorthand form.
It would also be good to have a more clear policy on why some comments await moderation. Perhaps an improvement if there was a “white list” of folk who comment responsibly.
Does linking to your own “Camping Trip vs Woolen Coat” article put a comment into moderation, or any links?
Links seems to automatically go to moderation.
asdf wrote:
>>Links seems to automatically go to moderation.
That is my impression. Never do I provide links, though in my own posts often I look at one just to make sure it’s there and I’ve recalled the author correctly and (mehopes) the argument. And that the work has some relation to the topic at hand, rather than being essentially digressive.
I appreciate other people’s links, but have long since avoided providing any myself. In my copious spare time, perhaps I will provide links in a stand-alone post below any original post. Usually a title and author and website are enough–but for me I know what I’m looking for anyway. It’s harder if you’ve never seen the quarry.
It seems like the norms are still emerging on this.
When Glenn Reynolds said he was quitting Twitter, he asserted that he suspects that people on Twitter never look at a link, ever. Twitter wars, he claimed, are now free floating food fights in which no one ever goes back to see what the original person being referred to actually said (in contrast to what he is she is accused to have said).
Reynolds said he thought that in the blogging culture, roughly half the time readers went back to the original source. Let’s hope we manage that–though often Prof. Arnold is directing our attention to something paywalled at WSJ. Medium keeps asking me for money, too, come to think of it.
WordPress controls the algorithm for putting comments into moderation. The algorithm is nearly as mysterious to me as it is to the people who write comments.
I’ll add too that sheer comment length can sometimes get something into moderation.
Ironically, links are often an attempt to cut down on length (follow this link rather than me try to sum it all up in a comment).
An impressive body of work and it’s been a joy to read it.
Just because people quibble in the comments doesn’t mean they don’t have a general agreement with you on a lot of these matters. There is just little point in commenting as such.
Thanks again for posting this content to the wider world!
Arnold,
You stated a worthy, new Klingism in today’s blogpost: normative sociology is the study of what the causes of problems ought to be.
“policies that are based on normative sociology (the study of what the causes of problems ought to be) will do even worse.”