It is called The Up Side of Down: Why Failing Well Is the Key to Success. I am still digesting it. Meanwhile, you can read this article on why writers procrastinate, which is taken from the book.
they seem to be paralyzed by the prospect of writing something that isn’t very good.
There are plenty of newspaper columnists who clearly do not suffer from such paralysis.
Dan M. Kahan and colleagues write,
If high Numeracy subjects use their special cognitive advantage selectively—only when doing so generates an ideological congenial answer but not otherwise—they will end up even more polarized than their low numeracy counterparts. Such a result, while highly counterintuitive from the perspective of SCT [“science comprehension thesis”], would be consistent with the view of a smaller group of scholars who take the view that identity-protective cognition operates on both heuristic and systematic—System 1 and System 2—forms of infor-mation processing (Cohen 2003; Giner-Sorolla & Chaiken 1997; Chen, Duckworth & Chaiken 1999; Kahan 2013). It would also be consistent with, and help to explain, results from observational studies showing that the most science comprehending citizens are the most polarized on issues like climate change and nuclear power.
Read the draft paper. I got to the link from Jonathan Haidt, which in turn I got to from Tyler Cowen.
I think that there is a general moral here, but I am not sure how to phrase it. Maybe something along the lines of, “Try to find the holes in your own most strongly-held beliefs.”
I hate the Olympics. I hate everything about them… their show-casing of murderous authoritarian regimes, their graft and corruption, their promotion of obscure sports that generate little genuine interest, their hypocritical claim of being non-commercial and non-political, their subordination of athletic excellence to soap-opera story-telling… everything.
Are there libertarians out there who love the Olympics? It occurs to me that anti-Olympics misanthropy might be correlated with anti-state misanthropy. It is true enough in my case.
1. Yihui Pan, Tracy Yue Wang, and Michael S. Weisbach find that
disinvestments are fairly common in the early years of a CEO’s tenure, and that these disinvestments decrease with tenure. Investments, on the other hand, are relatively low in the early years of a CEO’s tenure and increase over time. As a result, the firm’s assets and employment grow more slowly early in the CEO’s tenure than in later years.
Pointer from Timothy Taylor, who speculates
the analysis makes CEOs sound a bit like coaches of sports teams: they arrive to clean up the mistakes of the past regime, but over time many of them gradually drift into their own set of mistakes.
This analogy would suggest that whatever the incumbent’s excesses (too much investment, too little investment), the new CEO would do the opposite. But instead the pattern seems to be that the incumbent eventually tends to over-invest.
The authors’ preferred explanation is that the CEO wants to over-invest, and only over time does a CEO gain control of the board and carry out the over-investment. When the CEO exits, the new CEO is more subservient and understands the need to pare back.
My proposed explanation may be the least dramatic. My thinking is that major projects go through a long gestation period. A new CEO needs to get comfortable before he/she can approve major new projects, so major new projects get put on hold for a year or two. Meanwhile, existing projects wrap up, so you get a lull. My explanation would predict that you would not see a burst of investment just as a CEO is getting close to exit. Rather, you would see low investment when a CEO starts, then ramping up to a higher level that is maintained until the CEO exits.
2. Alison Jane Rauh writes,
While blacks of the second generation have equal or higher education and earnings levels than the first generation, the return on their unobservable characteristics is converging to that of native blacks…Convergence across generations is mostly driven by low-educated second generation blacks that drop out the labor force in greater numbers than low-educated first generation immigrants do. Similarly, convergence within a generation is mostly driven by low-educated blacks who immigrate when they are young dropping out of the labor force in greater numbers than those who immigrate when they are older. A social interactions model with an assimilation parameter that varies by age of immigration helps explain this phenomenon. When making their labor force participation decision, immigrant men of all races, but not women, generally place more weight on the characteristics of natives the earlier they immigrate.
Pointer from Tyler Cowen. Both he and the author embrace a “peer effect” explanation, in which black immigrants start out trying to achieve, but assimilation leads them to see achievement-orientation as acting white.
An alternative explanation is that first-generation immigrants of all races are more willing to strive and sacrifice than are their children. However, suppose that there are differences in average ability by race, and that even high-ability first-generation immigrants are hampered by lack of cultural background. As immigrants assimilate, differences in outcomes start to reflect differences in ability.
I am not saying that my alternative explanations are necessarily correct. My point is that these are both papers that strike as presenting interesting findings that might have many possible explanations.
Self-doubt can be the first step to moral improvement. But our biases are so subtle, alluring, and persistent that converting a wave of doubt into enduring wisdom takes work. The most-impressive cases of bias neutralization I’m aware of involve people who have spent ungodly amounts of time—several hours a day for many years—in meditative practices that make them more aware of the workings of their minds. These people seem much less emotion-driven, much less wrapped up in themselves, and much less judgmental than, say, I am. (And brain scans of these highly adept meditators have found low levels of activity in brain networks associated with self-regarding thought.)
Read the whole thing. I think he is saying that utilitarianism is insufficient as a moral framework, because utilitarians with too much hubris can be morally dangerous. Maybe you will read him differently.
John Cochrane’s post on Nobel Laureate Robert Shiller is certainly a contender. It’s long, and you should read the whole thing. Of many possible excerpts, I choose:
No matter where you look, stock, bonds, foreign exchange, and real estate, high prices mean low subsequent returns, and low prices (relative to “fundamentals” like earnings, dividends, rents, etc) mean high subsequent returns.
These are the facts, which are not in debate. And they are a stunning reversal of how people thought the world worked in the 1970s. Constant discount rate models are flat out wrong…
To Fama, it is a business cycle related risk premium. He (with Ken French again) notices that low prices and high expected returns come in bad macroeconomic times and vice-versa. December 2008 was a recent time of low price/dividend ratios. Is it not plausible that the average investor, like our endowments, said, “sure, I know stocks are cheap, and the long-run return is a bit higher now than it was. But they are about to foreclose on the house, reposess the car, take away the dog, and I might lose my job. I can’t take any more risk right now.” Conversely, in the boom, when people “reach for yield”, is it not plausible that people say “yeah, stocks aren’t paying a lot more than bonds. But what else can I do with the money? My business is going well. I can take the risk now.”
To Shiller, no. The variation in risk premiums is too big, according to him, to be explained by variation in risk premiums across the business cycle. He sees irrational optimism and pessimism in investor’s heads. Shiller’s followers somehow think the government is more rational than investors and can and should stabilize these bubbles. Noblesse oblige.
By the way, Cochrane’s post on Lars Hansen is also top notch.
On this post, Jeff R. writes
The uncharitable view of liberal empathy is that humans did not evolve to feel empathy in order to solve problems; empathy exists because it helped our ancestors build and strengthen coalitions and outcompete other coalitions to ascend the status hierarchies of their tribal/feudal world.
There are two kinds of empathy: cognitive empathy (being able to gauge others’ thoughts or perspectives) and affective empathy (being able to gauge others’ emotions and attitudes). Cognitive empathy helps us guess what our adversaries are thinking and perhaps anticipate their actions; it is this capacity which made Robert E. Lee a great military leader and Boris Spassky a great chess player. It has tremendous value in the modern economy for entrepreneurs and managers, helping them predict what new products and services consumers (many of whom will have much different tastes and preferences from their own) might want to buy and how much they’d be willing to pay for them.
Affective empathy isn’t actually very useful for solving problems of any real complexity. It’s primary usefulness is enhancing group cohesion. We praise people who demonstrate affective empathy merely because we recognize that they’d make a good and loyal ally, and we want to signal to our existing allies that they should empathize more with us. Affective empathy is thus reduced to a crude Machiavellian tool for attaining (and retaining) power and social status. Liberals have much of this latter kind of empathy and somewhat less of the former.
One might think that we would evolve low-cost ways to signal affective empathy. For example, putting a political bumper sticker on your car is cheaper than making a large donation to charity.
1. Scott Sumner:
Note that the instant reaction of stocks is a more reliable indicator of monetary policy that long term bond yields. Long term rates rose on the announcement of QE3, and rose again on taper talk. Why is the long term bond market so schizophrenic? I have no idea.
2. A press release about a new behavioral economics study:
Dr Benedetto De Martino, a researcher at Royal Holloway University of London who led the study while at the California Institute of Technology, said: “We find that in a bubble situation, people start to see the market as a strategic opponent and shift the brain processes they’re using to make financial decisions. They start trying to imagine how the other traders will behave and this leads them to modify their judgment of how valuable the asset is. They become less driven by explicit information, like actual prices, and more focused on how they imagine the market will change.
“These brain processes have evolved to help us get along better in social situations and are usually advantageous. But we’ve shown that when we use them within a complex modern system, like financial markets, they can result in unproductive behaviours that drive a cycle of boom and bust.”
The team found that when participants noticed disparity between how much they perceived an asset to be worth and the rate of transactions for that asset, they began making poor business decisions and bubbles started to form in the market.
Professor Peter Bossaerts from the University of Utah, a co-author of the study, explains: “It’s group illusion. When participants see inconsistency in the rate of transactions, they think that there are people who know better operating in the marketplace and they make a game out of it. In reality, however, there is nothing to be gained because nobody knows better.”
Colin Camerer, Robert Kirby Professor of Behavioral Economics at the California Institute of Technology, said: “There’s a mathematical measure of when the flow of traders’ orders to buy or sell changes from steady to choppy. A choppy flow is a clue that trades are bunching up around new information or pausing to see what happens next. This way of measuring has been sitting on the shelf for years. This is the first study to show that it seems to correspond to what the brain is computing.”
My own view is that the stock market is efficient in the sense that returns are nearly impossible to forecast, but it is not rational. In 1979, stocks may have been undervalued by a factor of two or more. By 2000, they may have been overvalued by that much. Given that I think that the market can be off base by 50 percent, I am reluctant to draw inferences about moves of 2 or 3 percent.
On this post, Kay Hymowitz left a comment.
Women today marry on average at 27; in 1950 it was closer to 20. Eighty percent of women marry at some point. Though that’s down from 90% in the mid century,it’s still the large majority. The big story is that though the age of marriage has gone up markedly, the age of first birth has not. I co-authored a report on the “crossover” between marriage and birth ages; you can find it here: http://nationalmarriageproject.org/wp-content/uploads/2013/03/KnotYet-FinalForWeb.pdf
In his book, Nick Schulz writes,
in 1960 almost 70 percent of adults ages 20 to 29 were married, while in the late 200s about one quarter were hitched.
He quotes James Heckman as saying that parenting matters for early childhood motivation to learn, which in turn affects longer-term outcomes. Thus, he is not on the same side as Bryan Caplan and Judith Rich Harris, who see nature mattering much more than nurture.
Nick tells an anecdote about asking manufacturing executives what was missing in the skill set of the labor pool.
“To be honest,” said one executive, rather sheepishly, “we have a hard time finding people who can simply pass a drug test.
Nick ends up advocating for building support for marriage and disdain for unwedded pregnancy.
when the baleful effects of certain cultural norms, actions, and behaviors become overwhelmingly evident for all to see, societies are able to shape their cultures in a healthier direction…the recognition of the harms of smoking. Something similar seems to be happening with recognition of the harms of obesity.
I wish Nick had gone into more depth about why women are having children before marriage. I have the sense that without knowing what their thought processes are, it is hard to know what to recommend.
Philip M. Fernbach, Todd Rogers, Craig R. Fox and Steven A. Sloman write,
We hypothesized that people typically know less about such policies than they think they do (the illusion of explanatory depth; Rozenblit & Keil, 2002) and that polarized attitudes are enabled by simplistic causal models. We find that asking people to explain policies in detail both undermines the illusion of explanatory depth and leads to more moderate attitudes (Experiments 1 and 2). We also demonstrate that although these effects occur when people are asked to generate a mechanistic explanation, they do not occur when people are instead asked to enumerate reasons for their policy preferences (Experiment 2). Finally, we show that generating mechanistic explanations reduces donations to relevant political advocacy groups (Experiment 3). The evidence suggests that people’s mistaken sense that they understand the causal processes underlying policies contributes to polarization.
This paper was cited in a recent WSJ article by Daniel Akst, forwarded to me by a reader.