Robert Plomin talks his book

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In the WSJ, Robert Plomin writes,

DNA is the major systematic influence making us who we are as individuals. Environmental influences are important too, but what look like systematic effects of the environment are often genetic effects in disguise: Parents respond to their children’s genetically driven traits, and children seek, modify and even create experiences correlated with their genetic propensities.

His book is Blueprint, which I just finished. His thesis:

DNA is the only thing that makes a substantial systematic difference, accounting for 50 percent of the variance in psychological traits. The rest comes down to chance environmental experiences that do not have long-term effects.

What he calls “chance environmental experiences” could be measurement error. Measurement error always holds down correlation. This raises the possibility that some traits that are measured with error are more heritable than they appear. For example, Gregory Clark found that social status is much more heritable across many generations than would be expected based on parent-child heritability estimates. I explained that this is likely due to error in measurement in social status, which lowers immediate-generation correlation more than multi-generation correlation.

Educational interventions are apparent environmental influences that wear off over time. You raise a test score but do not fundamentally alter ability. That is an element of what I call the Null Hypothesis, which Plomin strongly endorses, although of course he does not use that term. Related: Scott Alexander on pre-school.

This is one of the most important books of the year. Coincidentally, the NYT has an article on economists’ use of polygenic scores. Tyler and Alex both linked to it.

But you should know that I came away from Plomin’s book less than impressed with polygenic scoring. So much data mining. So little predictive value. Also, there is serious criticism of his view that environmental factors exhibit no systematic influence, but he does not confront it. I did a search inside the Kindle edition for “Flynn” and found no results.

Governments and financial fragility

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John Cochrane grumps,

A sovereign default is bad enough. But if the banks are stuffed with government debt, then a sovereign default brings down the banking system. Depositors lose their shirts, and the banks, who know how to distinguish good from bad borrowers, are shut down. A calamity becomes a catastrophe. And an economy with failing banks will be bringing in a lot less tax revenue and more likely to default.

This is what I call the “two drunks” model. The banks are one drunk, leaning on the government for guarantees. The government is the other drunk, leaning on the banks to fund its debt. But will the drunks be able to support one another and stagger home?

Read the whole post. Government, which purports to be our bulwark against financial fragility, is more likely the main contributor.

Maintaining political sanity

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Channeling anthropologist Clifford Geertz, Timothy Taylor offers this advice.

  • What effort do you make to see yourself as those from the other sides of the partisan divides see you?
  • Do you have the “merest decency” to see those with other political beliefs as sharing a nature with you?
  • Do you see yourself and your political beliefs “as a local example of the forms human life has locally taken, a case among cases”?
  • To what extent is your objectivity a matter of self-congratulation?
  • To what extent is your tolerance a sham?

In a similar spirit, I wrote,

I wish that people could treat their political beliefs the way that they treat their religious beliefs: as ideas and values that they find appealing, but which are by no means the one true way.

The Son Also Writes

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Adam Gurri writes,

The institutions of this state stand now like the police in Charlottesville: heavily armed, well staffed, hierarchically organized, yet paralyzed in the face of the foul temper of a mutinous public.

Spoken like his father. Read the whole essay. And of course, read The Revolt of the Public, which is now available.

Coincidentally, one year when I taught at GMU, Adam was in my class on year. Had there been more students like him, I would have stuck it out there longer.

The masses and the internet

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Robin Hanson writes,

But in fact ordinary people don’t care as much about privacy and corporate concentration, they don’t as much mind self-promotion and status tracking, they are more interested in gossip and tabloid news than high status news, they care more about loyalty than neutrality, and they care more about gaining status via personal connections than via grand-topic debate sparring. They like wrestling-like bravado and conflict, are less interested in accurate vetting of news sources, like to see frequent personal affirmations of their value and connection to specific others, and fear being seen as lower status if such things do not continue at a sufficient rate.

Read the whole post. I had some similar thoughts in this essay.

The masses came to the Internet. Many of the new arrivals were less technically savvy, were more interested in passively consuming entertainment than in contributing creatively, and were less able to handle uncensored content in a mature way. They have been willing to give up autonomy in exchange for convenience.

Tyler Cowen, NSF, and DARPA

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Cowen writes,

Let’s start with some possible institutional failures in mainstream philanthropy. Many foundations have large staffs, and so a proposal must go through several layers of approval before it can receive support or even reach the desk of the final decision-maker. Too many vetoes are possible, which means relatively conservative, consensus-oriented proposals emerge at the end of the process. Furthermore, each layer of approval is enmeshed in an agency game, further cementing the conservatism. It is not usually career-enhancing to advance a risky or controversial proposal to one’s superiors.

This also describes the National Science Foundation. You can see how an institution like this would be biased toward funding mainstream incumbents rather than innovative, heterodox projects. It’s fine to have a lot of research money go through this model, but you also want some alternative funding mechanisms in order to have a healthy ecosystem.

Think of DARPA in its heyday. The approval process had fewer layers. Choices were more idiosyncratic.

I think where DARPA succeeded was when it had two other elements. One was a vision, in particular Licklider’s vision for computing. The other was a network of creative people. Licklider knew where to find the groups that could move his vision forward.

In his Emergent Ventures initiative, it seems to me that Cowen is not relying on his network. And I don’t see a guiding vision. It is more scattershot. That may be a valid model. But I prefer the DARPA model.

If I had the money to dole out, I would do so based on overall vision. One vision is for “rules and norms for competitive governance.” The idea would be to develop the legal framework that would allow people living side by side, in existing locations (not seasteads or charter cities), to have more choice in government services and policies. The widely-unread Unchecked and Unbalanced includes more of my thoughts about that. Of course, some of you are thinking, “Go back to the founding fathers,” but it’s not as simple as that. The founding fathers did not provide for a society in which the preponderance of people, and an even bigger preponderance of economic activity, could be found in large cities.

The other vision I have concerns economic research. I would promote an agenda that I call disaggregating the economy.

But for neither of these visions do I have anything resembling a network.

Road to sociology watch

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“The Scholar’s Stage” writes,

Haidt et. al. are confident they can win the debate if they are allowed to debate. For the heterodox anthropologist or sociologist the game is already over: their discipline has already been conquered. For the economist, the threat is too remote to take seriously. Behavioral science exists in that rare in-between: methodologically, it has the tools to fight back against the excesses of the activist. Socially, it provides a compelling reason for its practitioners to use them.

Pointer from Tyler CowenAlex Tabarrok. The entire post is interesting, and it is worth contemplating why the blogger chooses to remain anonymous.

I am pessimistic about academia. Go through the following exercise:

1. When I ask you to name a prominent individual under the age of 45 who speaks up for reason against dogma, who comes to mind?

2. Does the person you just named have an academic job?

It looks to me as though when Haidt and Pinker leave the scene, no one will replace them. And I think that the threat in economics is not all that remote. I am on record as predicting that in twenty years economics will look like sociology.

Bruce Schneier watch

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Farhad Manjoo in the NYT writes,

Mr. Schneier argues that the economic and technical incentives of the internet-of-things industry do not align with security and privacy for society generally. Putting a computer in everything turns the whole world into a computer security threat — and the hacks and bugs uncovered in just the last few weeks at Facebook and Google illustrate how difficult digital security is even for the biggest tech companies. In a roboticized world, hacks would not just affect your data but could endanger your property, your life and even national security.

. . .Mr. Schneier is painting government intervention not as a panacea but as a speed bump, a way for us humans to catch up to the technological advances. Regulation and government oversight slow down innovation — that’s one reason techies don’t like it. But when uncertain global dangers are involved, taking a minute isn’t a terrible idea.

My bet would be that when it comes to securing the Internet of Things, government will be more of a problem than a solution.

Kotlikoff on PSST

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Laurence J. Kotlikoff writes,

Economics has many theories of economies rapidly flipping from good to bad. They go under the headings multiple equilibrium, contagion, self-fulfilling prophecy, panics, coordination failures, strategic complementarities, sun spot equilibria, collective action, social learning, and herding.

Pointer from John Cochrane, who offers extensive comments. Read his whole post.

Kotlikoff argues that the mere perception that the economy was in trouble was enough to cause trouble.

Employers laid off their workers in droves to lower their payrolls before their customers stopped arriving. This was the worst of the many types of multiple equilibria associated with the GR.

…The slow recovery is hard to explain except as the result of everyone expecting a slow recovery.

I see this as a PSST story. Patterns of specialization and trade depend on business managers’ confidence that those patterns will continue.

I, too, have been thinking a lot about the contingent nature of economic outcomes. I am mulling an essay that will strongly criticize the view that the market acts like a set of equations providing a deterministic solution for given tastes, technology, and resource endowments. Instead, there are multiple equilibria that depend on people’s perceptions and beliefs.

Part of my argument is that hardly anyone in the economy has a measurable marginal product. Most of us are producing intangible output, even if we work in goods industries. For example, relatively few of the employees at a pharmaceutical company are actually bottling pills.

Businessmen operate in a world of high fixed costs, with mostly overhead labor. If they doubt that revenue is going to remain at current levels, one response is to cut costs by reducing overhead labor. If enough firms do this at once, their fears of recession becomes self-fulfilling. This sort of self-fulfilling recession is particularly easy to fall into when there is a financial crisis.

Kotlikoff’s main point, which Cochrane emphasizes and expresses support for, is that a financial crisis of 2008 was itself a sudden shift in perceptions that took place in the context of an inherently fragile financial system.

Does W = MP?

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Scott Sumner writes,

merely by changing the laws on intellectual property rights you will impact the distribution of wage income. But the appropriate IP laws are a complex issue, about which even free market economists do not agree. There is no obvious straightforward way to think about the marginal product of labor; it depends on many institutional factors.

This is somewhat beside his main point, but it pertains to the central point that I will make in an essay that I am working on. My point is going to be that the whole neoclassical apparatus of marginal product is not valid in the real world. We have no precise idea what the marginal value of a worker is to an enterprise. Can you calculate the bushels-of-wheat equivalent of what you accomplish with an hour of your labor? I bet not. We are mostly Garett Jones workers, meaning that we are overhead labor. And firms’ cost is mostly overhead (recall the discussion on this blog of hospital costs). And if the people inside the market cannot measure accurately the quantities that economists think matter, what does this mean when economists try to use market measures as a basis for intervention?

What I see as Sumner’s main point is probably this, concerning the perception of fairness among non-economists vs. economists:

people probably visualize something like the following thought experiment. In 1820, a hardy pioneer and his family move out to a remote valley in Montana, where they build a cabin, plant crops and hunt for animals. There are no other families nearby. Doesn’t that family earn their marginal product? Yes, but that’s not why our intuition tells us that their compensation seems fair. Rather the perceived fairness comes from the fact that they also earn their total product.