A non-totalitarian future

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As I mentioned the other day, George Gilder does not accept the vision of a totalitarian future. Here is Gilder in the WSJ.

With the cryptographic revolution, he says, “we’re now in charge of our own information. For the first time in history, really, you don’t have to prove who you are, or what you are, before a transaction.” A blockchain allows users “to be anonymous if they wish, while also letting them keep a time-stamped record of all their previous transactions. It allows us to establish unimpeachable facts on the internet.”

In his new book, Life After Google, Gilder argues that the concentration of power at Google or Facebook is a temporary phenomenon. He believes that power will diffuse once again.

Where I a skeptical of his view is that I believe that the power that the top companies have comes from their skills at strategy and managing software development. Those skills are highly concentrated, and I do not see that changing.

Intangible sources of star firms

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we find that the star firms whose returns are diverging from the rest of the firms are in industries that require high cognitive skills and that in these industries average returns are higher. In industries where the tasks involve routine manual skills and which score low on non-routine cognitive and complex problem solving skills, we see lower returns and don’t see the star firms pulling away from the rest.

That is from Meghana Ayyagari, Asli Demirgüç-Kunt, and Vojislav Maksimovic. Pointer from Tyler Cowen.

No surprise, of course. My intuition for quite a while has been that star firms are those that manage the task of software development and business strategy in the age of the Internet particularly well.

A totalitarian future?

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Yuval Noah Harari writes,

AI is a tool and a weapon unlike any other that human beings have developed; it will almost certainly allow the already powerful to consolidate their power further.

So far, computers have been economic complements to high cognitive ability. Harari extrapolates that trend. He thinks that it leads to a loss of autonomy for the great mass of people who lack the highest cognitive ability.

George Gilder, in Life After Google, takes the opposite point of view.

Claire Lehmann and Tyler Cowen

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Interesting conversation, I could have picked many items to excerpt. She says,

If you look at the personality data on libertarians, they tend towards being more systematizing in their cognitive profile. Women, on average, tend to be more empathizing and agreeable, and so arguments around political issues that are based on quantitative reasoning and facts and logic without an emotional layer to it are going to be less appealing to women.

I’ve said to libertarian friends that if you want to be more appealing, get your message across in a more appealing way, you need to wrap up the ideas into a story that has an emotional component.

Yoram Hazony watch

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An op-ed by Hazony.

Consider the Western tradition of limited government, individual liberty and open elections. Historically, free institutions appeared and persisted in national states such as England, the Netherlands and Scotland—countries built upon a dominant national language and religion, as well as a history of setting aside internal differences to fight common enemies. In “Considerations on Representative Government” (1861), John Stuart Mill argued that it is no accident that free institutions exist in such countries. As he wrote, “It is in general a necessary condition of free institutions that the boundaries of government should coincide in the main with those of nationalities.”

Peter Berkowitz offers a critique.

Hazony asserts that independent national states have an interest in promoting an international order of independent national states. Such an order, he insists, “offers the greatest possibility for the collective self-determination” and “establishes a life of productive competition among nations, each striving to attain the maximal development of its abilities and those of its individual members.” But Hazony has little to say about the alignments, legal arrangements, and political institutions that would undergird it. And he declines to examine the circumstances under which national competition turns counterproductive, vicious, and indeed a threat to life on the planet.

I believe that on Monday Russ Roberts’ podcast will be with Hazony. All this relates to his about-to-be-released book.

Is internationalism liberal or imperalist?

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Tyler Cowen writes,

In other words, it could be that the fractious and increasingly nationalistic politics of today are how things naturally are — and the anomaly is this decades-long period of cooperation and harmony.

He calls the internationalist approach “liberalism,” and he laments its inability to persist.

Contrast with Yoram Hazony.

For centuries, the politics of Western nations have been characterized by a struggle between two antithetical visions of world order: an order of free and independent nations, each pursuing the political good in accordance with its own traditions and understanding; and an order of peoples united under a single regime of law, promulgated and maintained by a single supra-national authority. . .

the imperial rulers of the ancient world saw it as their task, in the words of the Babylonian king Hamurabi, to “bring the four quarters of the world to obedience.” That obedience, after all, was what ensured salvation from war, disease, and starvation.

And yet, despite the obvious economic advantages of an Egyptian or Babylonian peace that would unify humanity, the Bible was born out of a deep-seated opposition to that very aim. To Israel’s prophets, Egypt was “the house of bondage,” and they spared no words in deploring the bloodshed and cruelty involved in imperial conquest and the imperial manner of governing

Hazony sees the quest for international order as intrinsically imperialist. He has a forthcoming book that extends these arguments.

I believe that this is an issue that is particularly challenging for libertarians. We believe that national borders restrict freedom, including the freedom to live where you want. But what if every project to get rid of national borders is one in which power is concentrated in a central authority?

Closing your mind

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Nat Eliason writes (better link?),

Every time you laugh with your friends about “how stupid Trump voters are,” you do a few things:

You further cement the idea in your head that Trump voter = stupid.

You create greater social consequences for those around you voicing anything pro-Trump, thus encouraging greater homogenization of your social group.

You reduce your ability to reasonably engage with ideas that don’t fit your group’s narrative.

I wrote The Three Languages of Politics in part because I realized that most political statements are made for the purpose not of opening anyone’s mind but instead for the purpose of closing the minds of people on your side. Even though President Trump does not fit into my original three axes, the reaction to him is an example of this mind-closing phenomenon.

I keep thinking that I ought to write something on the topic of socialism. But I don’t want to just write something that would closes the minds of those of you who already oppose socialism. I would want to write something that would engage with and open the minds of those who support socialism.

Where are the profits in health care?

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Melanie Evans of thw WSJ writes,

For nearly a decade, Gundersen Health System’s hospital in La Crosse, Wis., boosted the price of knee-replacement surgery an average of 3% a year. By 2016, the average list price was more than $50,000, including the surgeon and anesthesiologist.

Yet even as administrators raised the price, they had no real idea what it cost to perform the surgery—the most common for hospitals in the U.S. outside of those related to childbirth. They set a price using a combination of educated guesswork and a canny assessment of market opportunity.

The actual cost? $10,550 at most, including the physicians. The list price was five times that amount.

This fits in with the theme of Overcharged, by Charles Silver and David A. Hyman. They argue that the problem is third-party payments. They say that if American consumers had to pay more out of pocket, health care prices would have to come down.

I am all in favor of increasing the share of out-of-pocket spending and reserving insurance for the most costly illnesses. But I am skeptical of the view that there is a lot to be squeezed out of health care prices. Some thoughts.

1. I was surprised that knee surgery is so prevalent. Is it that prevalent in other countries? Contrary to the claim that Americans get the same amount of health care as people in other countries, I bet that knee surgery per capita is much higher in the U.S. than elsewhere. I think that Americans spend more on health care because we undergo more medical procedures, particularly high-end procedures, than people in other countries. On the whole, these additional procedures are not all that effective, so undergoing more of them does little or nothing to help overall health outcomes.

2. If you charge five times what something costs, you should show fantastic profits. I don’t believe we find that in the health care sector. Profits in many cases, yes. But nothing so spectacular. A lot of hospitals are non-profits, after all.

3. If hospitals only charged for variable cost, they would lose money. Hospitals have a lot of overhead. Lots of administrative paperwork. Lots of janitors, orderlies, laundry workers, cafeteria workers, and so on. That overhead has to be allocated somewhere. You can only allocate so much of it to the patient who visits the emergency room for strep throat or food poisoning. So more of it gets allocated to surgical patients.

4. If you want to convince me that America’s health care mess is primarily a price problem, then don’t just tell me anecdotes.
If you think that America overpays for health care by $1 trillion a year (a figure that Silver and Hyman toss around), then show me where that money goes in the aggregate. Add up all the excess returns on capital at hospitals, pharmaceutical companies, medical supply companies, etc. I bet you won’t find anything close to $1 trillion.

What I am re-reading

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George Gilder’s Microcosm. The copyright date is 1989. I checked it out of the library shortly after it was published, and I have been meaning to buy a copy for a while.

When I first read it, I was struck by his emphasis on human ingenuity as more important than physical resources. That has stuck with me ever since. It influenced my decision in April of 1994 to quit my job to start an Internet-based business. It influenced my economic views, where I emphasize intangible assets.

I was also struck by his echoing Carver Mead that in the future analog computing would experience growth. It seems to me that this did did not happen, although one can argue that computing devices are increasingly linked to analog sensors.

He also did not mention the Internet. But he did stress the potential of computers as communication tools, and he understood that the cost of switches was falling relative to the cost of wires, which is the technological reason that the Internet took over the communication process. And of course, by 1994 he was writing long articles for Wired extolling the Internet.

He prophesied a decline of centralized power. On p. 361, he wrote,

The military threats of the future come not from mass mobilizations for territorial expansion but from nihilist forces of terrorism and reaction. . .all democracies will face the challenge of using new methods of electronic surveillance, security, and control, together with new non-lethal weapons, without seriously infringing on the rights of law-abiding citizens.

It all seems obvious now. It didn’t in 1989.