My own review of Eliezer Yudkowsky

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My review of Inadequate Equilibria.

The most significant episodes in my career have been when I stood for heterodox beliefs. For that reason, Yudkowsky’s book raised issues that matter to me, even though I did not always find Inadequate Equilibria to be clear or convincing.

This essay proceeds as follows. I will articulate Yudkowsky’s two major themes in two ways, first using jargon from calculus and statistics, then using plain English. Next, I will tell some stories from my own life that relate to these themes.

Because this is an important topic for me, I recommend reading my entire essay.

The importance of appreciating complexity

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Here is another new essay of mine, called The Simplicity Assumption.

The opposite of the Simplicity Assumption would be a complexity diagram. Imagine a diagram with a social problem, such as the obesity epidemic or the financial crisis of 2008, at the center. Then list all of the plausible factors that could have contributed to this problem, and put those on the diagram, with arrows pointing to the central problem. Next, draw arrows that reflect likely feedback loops among these various causal factors. Finally, draw arrows that reflect likely feedback loops from the central problem to some of these causal factors. For a complex problem, this diagram will look rather messy, like a badly tangled ball of kite string; you cannot be sure that tugging on one part of the knotted mess will make things better or worse.

Economists do not work with complexity diagrams. Such diagrams are not conducive to creating tractable models. Not having a tractable model is not conducive to publishing a paper. Not publishing papers is not conducive to having a successful career.

Read the whole thing.

Too much discipline on the left, too little on the right

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Check out my latest essay on Medium, Restoring Political Health, Left and Right.

People with a temperament that is high on openness and low on conscientiousness are inclined toward the left and tend to be curious, tolerant, and willing to explore the world with a commitment to intellectual honesty. People with a temperament that is low on openness and high on conscientiousness are inclined toward the right and tend to emphasize standards of decency, restraint, and good behavior. As shorthand, I will refer to these as the left and the right, respectively. We are plagued today by an authoritarian left and a badly-behaved right. Restoring health will require work on both sides.

The opening of the essay owes something to Jordan Peterson’s observations about psychology and politics (e.g., here or in his conversation with Jonathan Haidt), as well as to his use of metaphor. But the substance of the essay represents issues that have long concerned me. A dozen years ago, I had the insights that were the seeds of The Three Languages of Politics in an essay that I called Folk Beliefs Have Consequences.

Scott Alexander on Eliezer Yudkowsky

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Scott writes,

Everyone hates Facebook. It records all your private data, it screws with the order of your timeline, it works to be as addictive and time-wasting as possible. So why don’t we just stop using Facebook? More to the point, why doesn’t some entrepreneur create a much better social network which doesn’t do any of those things, and then we all switch to her site, and she becomes really rich, and we’re all happy?

The obvious answer: all our friends are on Facebook. We want to be where our friends are. None of us expect our friends to leave, so we all stay. Even if every single one of our friends hated Facebook, none of us would have common knowledge that we would all leave at once; it’s hard to organize a mass exodus.

This is Scott’s example of what Yudkowsky calls in his new book Inadequate Equilibria. Another excerpt from Scott’s review:

The Inside View is when you weigh the evidence around something, and go with whatever side’s evidence seems most compelling. The Outside View is when you notice that you feel like you’re right, but most people in the same situation as you are wrong. So you reject your intuitive feelings of rightness and assume you are probably wrong too.

…Eliezer warns that overuse of the Outside View can prevent you from having any kind of meaningful opinion at all.

My thoughts:

1. By the time this post goes up, I will have finished the book (recall that I typically schedule posts two or more days in advance). When I finish it, I am likely to write a long review.

2. The book is worth your time and your money.

3. I believe that Yudkowsky describes a real problem. Rather than call it “inadequate equilibria,” I would use a term popular in mathematical economics, “local optimum.” A group can find itself at a local optimum that is not the global optimum. It remains stuck at the local optimum because it resists going downhill to eventually go uphill.

Yudkowsky is focused on what I would call an intellectual local optimum. That is, it is possible for people to be stuck in a set of beliefs (leading to actions) that are difficult to discard but far from the global optimum. This is the way David Colander and Roland Kupers describe the state of economic thinking in their book Complexity Economics, which I described as

highly ambitious, always stimulating, and often frustrating.

I expect to say the same thing about Inadequate Equilibria. It is even more frustrating.

[UPDATE: I did indeed finish the book. I am glad that it stimulated me to think about the topic and to write an essay. But I think that you will find my essay on the topic will be more concise and more helpful than the book itself. I expect to have the essay up later this week on Medium.]

Does tutoring work?

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In 1994, Benjamin S. Bloom wrote,

Using the standard deviation (sigma) of the control (conventional) class, it was typically found that the average student under tutoring was about two standard deviations above the average of the control class (the average tutored student was above 98% of the students in the control class). The average student under mastery learning was about one standard deviation above the average of the control class (the average mastery learning student was above 84% of the students in the control class)

The reader who sent me the link to this paper asked whether it invalidates the Null Hypothesis. The researchers experiments rather than observational studies, so I will give them that. But

1. Usually, educational interventions have small effects. The effect of “mastery learning” of one standard deviation seems rather implausibly high, considering its definition.

Formative tests (the same tests used with the conventional group) are given for feedback followed by corrective procedures and parallel formative tests to determine the extent to which the students have mastered the subject matter.

That does not sound like something that would cause a one-standard deviation difference. My guess is that these findings would not replicate if they were undertaken by different researchers.

2. Even when interventions show large effects for a single subject in a single year, the effects tend to fade out. That is, if you examine the experimental group and the control group three years later, any difference has vanished. Even if these results replicate in the short term, they do not invalidate the Null Hypothesis if they suffer from fade-out.

3. We do not know how what would be necessary to enable tutoring to scale. Bloom seems to believe that tutoring works by adapting to the needs of the student. If so, then my guess is that the process of matching tutoring style to student characteristics would be quite a challenge.

Disaggregating the economy: California

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Carson Bruno wrote,

between 2009 and 2014, the Silicon Valley metro areas – a region that accounts for just 1/5th of the state’s population – accounted for 50% of California’s private industry real GDP growth.

Steve Baldwin adds,

a far more accurate assessment of [California’s] economy, [Richard] Rider writes, would be per capita GDP as compared to the rest of the country. After adjusting the GDP figures to account for the cost of living (COL), the Golden State ends up with a paltry 37th place ranking within the U.S.A., with a $45,696 per capital GDP. Even rustbelt states, such as Michigan and Ohio, have a higher adjusted per capita GDP.

There are parts of California where adjusting for the cost of living makes incomes lower than they might otherwise appear to be. Other parts of California have low incomes, but this is alleviated slightly by a lower cost of living.

It is difficult to think of California as a homogeneous economy with a single GDP factory. It is even more problematic to try to look at the entire United States through that lens.

Public schools, private goods

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Salim Furth writes,

we do not, in the suburbs, have a system of public schools. We have private, government-run schools. A public good is something available to all—non-excludable and non-rival in consumption, like clean air or a radio broadcast. But access to local school is eminently excludable: those who do not buy or rent a home in the right area cannot access it. And it is at least somewhat rivalrous in consumption, since crowding and peer effects play such a large role, at least in the perception of educational quality.

He says that universal school vouchers are a political non-starter.

The two most stable organizing principles of the political economy of the American family in the twenty-first century are that educational access is purchased with one’s home, and that established suburbs do not change their character.

Health spending negatively correlated with health outcomes

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Tomoaki Katera writes,

life expectancy at age 40 for males in the 90th income percentile is 45.3 years whereas the corresponding indicator in the 10th income percentile is only 35.8. For comparison, according to the report from National Center for Health Statistics, if all cancer deaths were eliminated, life expectancy at birth would increase only by 3.2 years.

…inequality would seem to matter since it can create differences in access to medical services. Interestingly, however, when I compare average medical spending by income groups, low income individuals tend to spend more on healthcare than high income individuals in most ages. The second viewpoint is motivated by the income-health gradient. It is widely accepted that higher income individuals tend to be in much better health than lower income individuals even when they are young. Moreover, the gap widens as they age. Many papers in health economics point out that widening health disparities by income can potentially arise from differences in unhealthy behaviors.

Pointer from Tyler Cowen. In the paper, Katera argues that the lower life expectancy of lower-income individuals reflects differences in their behavior rather than differences in access to medical services. My thoughts:

1. This seems consistent with Hansonian medicine, in which on average the benefits of more health care spending are about zero. But it also could suggest a counter to the Hanson view. That is, it could be that at the margin everyone benefits from more health care spending, but because the people who spend more tend to be people who behave in unhealthy ways, the benefits of more spending are difficult to tease out from the data. It is like trying to measure the relationship between policing and crime. If areas with a lot of crime tend to require more police, then a simple correlation analysis might suggest that adding police does not help to reduce crime.

2. Katera’s findings are not politically correct. I am on the record as saying that academic economics is headed toward a state in which findings like this will make one almost unemployable. Imagine trying to get Katera hired in a sociology department. Katera’s experience as a job candidate will be help to indicate how far along we are on this path.

Cantercap Charlie on finance and the 2008 crisis

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He wrote,

if banks are doing their job, the banking system is illiquid, and the rest of the economy —us— have lots of cash. In Econ 101 this is known as “maturity transformation.” Liquidity-wise, the banking system is simply the mirror image of the economy. Thus, compelling banks to become more liquid inevitably drains cash from all of us who are not banks.

This is another way of saying what I like to say, which is that the public wants to issue risky, long-term liabilities and to hold riskless, short-term assets, and financial intermediaries accommodate this by doing the opposite. This implies that for financial firms, a liquidity crisis blends into a solvency crisis. Banks must shrink their activity if there is sudden pressure on them to make their balance sheets more liquid.

In a more recent post, he writes,

what did cause the crisis? The causes were complex, but one force overwhelmed all others: regulation. Bad regulation. Mainly, the Basel I and Basel II Capital Standards.

He is referring to the Financial Crisis of 2008. Actually, I don’t believe that Basel II was all that important, because it still was mostly unimplemented by the time of the crisis. I would focus on Basel I and also on the Recourse Rule of 2001, which we might think of as Basel I(a).

More interestingly, he goes on to say,

the great untold secret of the crisis was the strength of the US commercial banking industry.

As crazy as this sounds, it may be spot on. Yes, Citigroup was in trouble, as he acknowledges. But most other commercial banks were not in bad shape. Some U.S. investment banks (aka “shadow banks”) were shakier, but the real problems were in Europe. He writes,

European banks in 2007 had aggregate tangible equity of roughly 1 trillion euros (at the time, about $1.1 trillion.) With a sensible leverage ratio of 5.0%, this equity would have supported E20 trillion in assets. But by 2000, the average European bank leverage ratio already had dwindled to 3.8% (insufficient), and then fell further — to 3.0% (wow) in 2007.* That may not sound like a big deal, but it’s more than a 20% systemic increase in leverage in just 7 years. This meant that for European banks alone, the Basel Regs goosed asset demand by at least E7 trillion ($8 trillion).** To think of it another way, European bank assets in 2007 exceeded what would have been prudent leverage (i.e. 5%) by E13 trillion ($15 trillion) — a third of European banking system assets.

I would add that many of the beneficiaries of the “AIG bailout” were European banks.

There is a lot of potential for revisionist history here.