Question from a reader

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May I recommend an explanation of what economists mean by “Bayesian”? See it everywhere but, even though I’ve googled the term looking for some simple, understandable definition, I just cannot grasp it.

1. I don’t use that term much, if at all. So maybe someone else should answer it.

2. A Bayesian as opposed to what? In statistics, the opposite is a Frequentist. The difference is one of interpretation, and it shows up, for example, in the interpretation of a confidence interval. Suppose we poll a sample of voters and find that 55 percent support policy X, with a margin of error of + or – 3 percent at a 90 percent confidence interval. A Bayesian statistician would be comfortable saying that these results indicate that there is a 90 percent chance that the true proportion of supporters in the overall population is between 52 and 58. The frequentist philosophy is that the proportion of supporters in the overall population is what it is. You cannot make probability statements about it. What you can say about your confidence interval of 52 to 58 is that if the true proportion of supporters were outside of that interval, the probability that your poll would have found 55 percent supporters is less than 10 percent.

3. By analogy, I would guess that economists use the term Bayesian to describe someone who is willing to make probability statements that describe their degree of belief in a proposition that in practice has to be either true or false. When a weather forecaster says that there is a 20 percent chance of measurable precipitation tomorrow, that sounds like a Bayesian forecast. In the end, we will either have measurable precipitation or we won’t. The “20 percent chance” formulation says something like “I don’t expect rain, but I could turn out to be wrong.

4. “Bayesian” also refers to a process of updating predictions. As new information comes in, the forecaster may say, “Now I think that there is a 40 percent chance of measurable precipitation tomorrow.”

5. Similarly, a statement like “The Democrats will nominate an avowed socialist in 2020” is either going to turn out to be true or false. But a Bayesian would be willing to say something like “I give it a 10 percent chance” and then revise that probability up or down as new information develops.

In this case, the opposite of a Bayesian would be someone with firm beliefs that are not responsive to new information.

Again, I don’t apply the Bayesian label myself, so I am not sure that I am the best person to articulate the intent of thsoe who do use it.

Asymmetric ruthlessness

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Suppose that the other side is willing to use ruthless tactics. Suppose that we are not willing to do so. Suppose that these ruthless tactics work. That is asymmetric ruthlessness.

For example, Niall Ferguson in a vidcast with Dave Rubin, argues that conservatives are victims of asymmetric ruthlessness in the culture war. For example, on college campuses, left-wing professors are willing to make hiring and promotion decisions on ideological grounds, and conservatives do not counter.

I tend to think that the movement to increase the status of women in economics could well turn out to involve asymmetric ruthlessness on the part of the left. That is, I think it is unlikely that it will be conservative women whose status gets raised, and it is likely that the males who are pushed out at the margin will be conservatives.

But I am inclined to be very cautious about positing asymmetric ruthlessness. I think that each side can point to asymmetric ruthlessness on the other side, and that this becomes mutually reinforcing.

So you can think of a Type I error as failing to notice real asymmetric ruthlessness. You think that Hitler won’t really do all the horrible things he indicates he might do. You fail to take proper counter measures soon enough.

You can think of a Type II error as believing in asymmetric ruthlessness that isn’t there. You needlessly escalate the conflict. Yuval Levin worries that conservatives are making this sort of Type II error. In a way, Niall Ferguson worries about it, too, because he fears that the Brexit and the Trump Presidency could set in motion forces that bring Jeremy Corbyn and his American equivalent to power.

The Los Angeles school district

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A report from the Reason Foundation says,

in four years the combination of pension costs, health and welfare costs, and special education costs are projected to take up 57.5 percent of unrestricted general fund revenue (LAUSD’s main operational funding) before the district spends a single dollar to run a regular school program.

. . .this structural deficit forged from hiring surges, burgeoning and unaddressed pension and benefit obligations, unaddressed low attendance, overextended facilities, and antiquated management and financial structures— all during a precipitous fall in enrollment.

My guess is that the financial condition of the Montgomery County, Maryland school system is similarly affected by pension costs.

Family breakdown and malaise

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Mary Eberstadt writes,

Traditionalists and other contrarians have been right to argue that the revolution would lead to rising trouble between the sexes and a decline in respect for women — just as James Q. Wilson remains right that family, and lack of family, have replaced money itself as the nation’s most accurate measures of real wealth and poverty.

She attempts to tie nearly every contemporary social problem to the sexual revolution and family breakdown.

Christian exceptionalism

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Jonathan Schulz, Duman Bahrami-Rad, Jonathan Beauchamp, and Joseph Henrich write,

the institutions built around kinship and marriage vary greatly across societies (21–23) and that much of this variation developed as societies scaled up in size and complexity, especially after the origins of food production 12,000 years ago (22, 24–29). In forging the tightly-knit communities needed to defend agricultural fields and pastures, cultural evolution gradually wove together social norms governing marriage, post-marital residence and ingroup identity (descent), leading to a diversity of kin-based institutions, including the organizational forms known as clans, lineages and kindreds (21, 27, 30). The second insight, based on work in psychology, is that people’s motivations, emotions, perceptions, thinking styles and other aspects of cognition are heavily influenced by the social norms, social networks, technologies and linguistic worlds they encounter while growing up (31–38). In particular, with intensive kin-based institutions, people’s psychological processes adapt to the collectivistic demands and the dense social networks that they interweave (39–43). Intensive kinship norms reward greater conformity, obedience, holistic/relational awareness and in-group loyalty but discourage individualism, independence and analytical thinking (41, 44). Since the sociality of intensive kinship is based on people’s interpersonal embeddedness, adapting to these institutions tends to reduce people’s inclinations towards impartiality, universal (non-relational) moral principles and impersonal trust, fairness and cooperation. Finally, based on historical evidence, the third insight suggests that the branch of Western Christianity that eventually evolved into the Roman Catholic Church—hereafter, ‘the Western Church’ or simply ‘the Church’—systematically undermined the intensive kin-based institutions of Europe during the Middle Ages (45–52). The Church’s marriage policies and prohibitions, which we will call the Marriage and Family Program (MFP), meant that by 1500 CE, and likely centuries earlier in some regions, Europe lacked strong kin-based institutions, and was instead dominated by relatively weak, independent and isolated nuclear or stem families (49–51, 53–56). This made people exposed to Western Christendom rather unlike nearly all other populations.

Pointer from Tyler Cowen, who tells us how politically incorrect the paper is by saying that he expected (but did not find) a Steve Sailer citation. This paper should be catnip for the IDW.

Possibly related, but not as controversial: I did a podcast with Russ Roberts recently (it may or not already be up) on the theme that human beings are social. I argue for the importance of culture, based in part on my reading of Henrich. Compared with animals, for humans the ratio of culturally learned behavior to innate behavior is extremely high. This is important, in my view.

Almost certainly related: The Origins of English Individualism, by Alan MacFarlane.

Variation in occupational satisfaction

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Greg Kaplan and Sam Schulhofer-Wohl write in an abstract,

The physical toll of work is smaller now than in 1950, with workers shifting away from occupations in which people report experiencing tiredness and pain. The emotional consequences of the changing occupation distribution vary substantially across demographic groups. Work has become happier and more meaningful for women, but more stressful and less meaningful for men. These changes appear to be concentrated at lower education levels.

I have said that this is worth studying.

A question about monetary systems

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From a reader:

When in real-world, human-designed systems, is fiat money an example of theoretically easy to fix and cryptocurrencies an example of theoretically hard to break?

The reader is referring to my notion of “easy to fix” vs. “hard to break” as a way to think about financial regulation. Permitting, and even encouraging, concentration of financial markets and then regulating the resulting giant firms as carefully as possible is an attempt to make the key firms hard to break. But when one of those firms does fail, the results are catastrophic. Instead, encouraging a wide variety of financial firms, with no single firm vitally important to the system, is an attempt to allow the failure of a single firm to be easy to fix, as other firms take over the failed firm’s functions. Another way to make the system easy to fix is to encourage a low ratio of debt to equity, since equity degrades smoothly while debt default is more of a shock.

In the case of money, I would think that the “easy to fix” approach would be to allow for competing currencies. If one currency gets corrupted, then people can switch to using another one. Having a single government currency is the hard-to-break approach, since the government can insist that its currency is legal tender, using it to pay for goods and services and accepting it as payment of taxes. Of course, when a government currency “breaks” due to hyperinflation, it breaks catastrophically.

I am still a skeptic about crypto-currencies, for the following reasons.

1. They seem to operate like chain letters, as I have written.

2. The most important “use case” for crypto-currencies appears to be for illegal transactions. This means that many of the people who employ crypto-currencies do not feel bound by mainstream social norms. That is not a good crowd to run with.

Can the academy be saved? part 2

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Tyler Cowen thinks that at least part of higher education should be redesigned from scratch.

especially those tiers below the top elite universities. Completion rates are astonishingly low, and also not very transparent (maybe about 40 percent?). I would ensure that every single student receives a reasonable amount of one-on-one tutoring and/or mentoring in his or her first two years. In return, along budgetary lines, I would sacrifice whatever else needs to go, in order to assure that end.

I am not sure I would exempt the elite schools. Just because they have better graduation rates does not mean that the benefits exceed the costs. Depends on how you measure, especially “compared to what.” You can’t just take two people and say this one went to Harvard and that one didn’t and compare their earnings. You have to figure out what would have happened had both taken the same educational path. My reading of the relevant literature is that it supports the Null Hypothesis.

I think that the idea of close personal mentoring is the model that existed hundreds of years ago. It might still be the best model.