Inequality

Call me a skeptic, but I remain unconvinced that the current "Occupy Wall Street" movement is really about inequality. Consider the following examples.

1. Much hay has been made about Buffet's nominal tax rate of 17%. Many have pointed out that Buffet's low rate is atypical; however, let's consider this one case on the merits.
   
   Many (even Buffet himself) would like to see his taxes raised from 17% to something like 35%. The money raised would be given to the American workers, reducing "inequality". However, Buffet is another perfect example of a phenomenon I pointed to in an earlier post: he gives nearly every cent he makes to charity, mostly to the poor in other countries. Hence, raising Buffet's taxes would take money headed to the poor and redirect it to middle class Americans, who are quite rich by world standards.
   
   In other words, raising Buffet's taxes would increase inequality by this objective measure. (It would reduce inequality within an already well group, Americans, but increase inequality worldwide.) Hence, raising Buffet's taxes would not be advisable in terms of inequality reduction. It might sound good to you, though, if you happen to be a middle class American.
   
   
2. Much hay has also been made about the fact that the average Fortune 500 CEO makes roughly 200 times the median household income. This is seen as a gross example of inequality.
   
   Let's consider a simple plan to reduce inequality. CEOs continue to make their current salary, but then they take 95% of the cash and burn it. Their effective pay is now only 10 times the median. Hence, inequality is hugely reduced!
   
   Would the protesters prefer that situation to the current one? I doubt it. Yet that situation reduces the inequality in CEO pay leaving everything else constant. Hence, it is a perfect solution if inequality were itself the issue.
   
   One suspects that the solution the protesters want is CEO pay given instead middle class Americans. That does two things: it reduces inequality and makes the middle class better off. As we've seen though, it's not the inequality reduction that would likely make them happy. Hence, we can assume what they really want is just the second part.
   

I have long been suspicious whenever people complain about "inequality" because there have always been plenty of examples showing that people don't actually dislike inequality.

Here's one: if people were really against inequality, they would ban the lottery. The sole purpose of the lottery (aside from making money for the people who run it) is to increase inequality. It takes money from everyone and gives it to a single person. This does not increase the total amount of money; it simply redistributes it in a more unequal way.

If people truly disliked inequality, they would abhor lotteries. But they don't. People seem to quite like the lottery.

This is just one more example. Like those considered above, one has to suspect that the real issue is not inequality. The label of "inequality" is simply a honorable-sounding word to paste on top of base motivations.

Picture Taking Etiquette

Okay, I lied. Here's another anecdote from my trip to Europe.

As I was leaving the Louvre, I came upon a lady about to take a picture. She was standing up against the railing, shooting across 30 feet of hallway to a picture on the wall. Hence, she was using up the entire hallway, blocking the only way out of that wing of the Louvre, and expecting a dozen or more people to wait while she took a picture.

Thinking this was morally unreasonable, I did the courageous thing and walked right through her picture. She made some throat noise and clearly felt I was shockingly rude to have done this.

Now, there were numerous things I could pick on about her behavior. For example, she wasn't actually taking a picture of an exhibit. It was just a generic decoration in the entryway. Oh, and she had her 3x zoom on. She could have simply un-zoomed and then gotten out of everyone's way.

However, it occurred to me as I walked away that there is a good technique for sorting out our moral intuitions in this case. I claim that, if it were reasonable to expect people to act in a certain way, then it would at the very least not seem ridiculous to actually ask people to do it.

How does this lady's action hold up under that measure? If she had called out to the dozen or so people, "Everyone wait! I need to take a picture," I think she would seem quite rude. And I do not think that her not actually saying aloud somehow makes this any less rude.

If people do choose to wait while you take a picture, that is very nice of them. But it doesn't seem fair to expect it of them, especially when, as in this case, they have no way to avoid walking in front of you.

Language Skills

One other quick observation from my European adventure.

It's easy to sit here in America and thinking that majoring in a language will give you a useful advantage over other applicants in the job market. This gets quickly dispelled though when you meet a trilingual man in Paris whose job is fruit merchant.

It seemed as though every person I met was at least bilingual. Even bus boy spoke perfect English. All of the people at the front desk of the small hotel I stayed at spoke at least 4 languages.

La Republic

I saw this painting, La Republic by Daurmier, at the Louvre last week.


I understand that the point was to show the strong French republic nurturing and educating her children. However, you have to admit, to modern eyes this looks like two children sucking on the teat of government while only one actually works. Doesn't it?

Calvin on Government

The other discussion of Calvin's that caught my attention was that of the 10th commandment: "You shall not covet your neighbor’s house [...] or anything that belongs to your neighbor."

Calvin's understanding of this commandment is as an application of Jesus's message to "love your neighbor as yourself". Calvin points out that an earlier commandment already forbids actually taking your neighbor's belongings, so the essence of this commandment is something else and points us toward Jesus's message. If we are to love our neighbor as ourselves, we certainly must eliminate the covetous envy that we harbor.

Of course, not coveting does not by itself imply love of neighbor. (It is necessary but not sufficient.) However, Calvin's view is that the commandment requires love. He cites Augustine as well as the Apostle Paul, who wrote "the end of the commandment is charity out of a pure heart..." I.e., the goal of the commandment is to love your neighbor not simply to avoid wanting their stuff.

Of all of Calvin's discussions of commandments, this was the one with the most obvious political implications.

For example, it is hard to hear a pundit nowadays talking about the "top 1%" without straying directly against this commandment. Indeed, many political arguments pretty much say, "Look how much bigger their house is than yours!" It's hard to be more blatantly afoul than that.

This is not to say that one cannot care about the poor without being un-Christian. Indeed, Jesus praised charity frequently and loudly.

However, it is possible to try to help the poor without stoking feelings of envy. Indeed, it is not clear that most discussions of the "top 1%" have anything to do with the poor. Usually the pundit is saying that we should take from the rich and give to the middle class (in the form of medical care, education, or retirement benefits for "ordinary Americans").

Finally, it is worth pointing out that, while the author of the 10th commandment describes a scenario that involves clear inequality (e.g., your neighbor has a bigger house), he does not point at inequality as being the primary outrage. Rather, he is outraged by the covetousness of the first man.

Indeed, it is easy to see that inequality is not a moral problem in and of itself. For example, suppose that, of two neighbors, the owner of the smaller house is retched and covetous. Now, suppose that the larger house burns down in an accident. Then the owner of the smaller house may no longer feel covetous. His emotional state has improved, yet the problem in his heart remains.

Calvin on Gay Marriage

I was recently reading Calvin's discussion of the 10 commandments in his Institutes, as part of my ongoing campaign to understand the contribution of Christian theologians to moral theory.

Calvin discusses each of the commandments, but a couple of his discussions in particular caught my attention. The first was his discussion of the 7th commandment: "You shall not commit adultery." I'll discuss the other in a subsequent post.

Calvin does not base his argument for this commandment on the notion of the importance of families, for example. Rather, he follows in the Greek traditions (e.g., stoic): human beings should strive to rise above their base emotions and instead rely on reason. (Recall the Greek tradition of equating reason (logos) with God.)

With this in mind, Calvin states that the ideal is actually not monogamy but celibacy! Unfortunately, few people are capable of being celibate, so God gives them a backup option of being in a life-long, monogamous relationship.

What's intriguing about this argument is that it applies equally well to heterosexual and homosexual people. A homosexual person, in Calvin's view, should be trying to be celibate, but since, like most people, they likely cannot achieve this, they should limit their sexual activities to be within a life-long monogamous relationship.

In other words, it would seem that Calvin is (perhaps unintentionally) making an argument in support of Gay Marriage.

I found that very interesting. On the other hand, I also think Calvin's view sounds antiquated to modern ears. My general impression is that modern philosophers are fairly critical of the Greek tradition that says all emotions are base and should be ignored and overcome.

From a theological point of view, you would have to wonder, if emotions are bad, then why would God have created them. Unless you take the view that life is simply a test that you must past to get into a subsequent, better reality — a view largely rejected by Protestants, I would think — you are left without an explanation for why emotions should exist at all.

A more attractive view (at least, in my opinion) is that emotions are a critical part of the human experience, and that the meaning of life, at least in some small part, is to experience a full, human life.

This view, by the way, is certainly not anti-Christian. Indeed, Christians place critical importance on God, in the form of Jesus, living a full, human life, including all of the emotions. And indeed, the typical Christian view (as I understand it) is not that Jesus was simply trying to show us that these emotions could be overcome — what one might call the "See. Was that so hard?" Christian tradition.

Before this post runs completely off the rails, though, let me just summarize by saying that Calvin's views, though in some ways antiquated, still make for an interesting read.

Optimistic Bias?

I was just referred to this article which discusses optimistic bias.

This piqued my interest (and skepticism) immediately because, while I've never heard of optimistic bias before, I have heard of pessimistic bias. The latter is well known and well studied. We can't have both an optimistic bias and a pessimistic bias, can we?

Well, in principle, we can. The authors talk mostly about our beliefs regarding our own future as being overly optimistic. Pessimistic bias, on the other hand, relates to peoples beliefs regarding others, e.g., their estimation for the future of the country as a whole. It is of course possible that we could have both of these biases at once.

In fact, there are other biases that act this way. Consider, for example, the fundamental attribution error. People attribute more of their own behaviors to circumstances than they should and they attribute more of other people's behaviors to their innate characteristics (e.g. personality) than they should.

So I certainly can't rule out that this is the case.

However, the authors do not present much compelling evidence. They give only two examples with actual statistics (i.e. two examples that are not just anecdotes). Here is one:

A survey conducted in 2007 found that while 70% thought families in general were less successful than in their parents' day, 76% of respondents were optimistic about the future of their own family.

Unfortunately, this is not evidence that either one of these beliefs are false. All we know is that they cannot both be true. They might be perfectly right about their own future.

Funnily enough, this example comes up in the literature on pessimistic bias. We actually know for a fact that these people are very wrong in their first belief: the vast majority of all families are better off than their parents. Pick whatever statistic you like and the numbers will most likely look better today than they did back then.

What about the second belief? I think all the evidence suggests that this estimate is if anything too pessimistic. If 24% of children were worse off than their parents, that would significantly buck the historical trend.

I'll keep my mind open regarding optimistic bias, but at this point, I see no reason to believe it exists.

The History of Christian Thought

I just finished reading The History of Christian Thought. I found it to be full of interesting information. Here are some random notes.

• The amount of internal variation within Christian thought is pretty astounding. Honestly, the Protestant / Catholic split seems quite small compared to all the rest.
  
  
• Christian philosophy was pretty much Greek philosophy for the first 1500 years. That is, it was pretty much Greek philosophers grappling with understanding Jesus.
  
  Of course, I knew already that the authors of the New Testament wrote in Greek, so they would clearly be influenced by Greek thought. But I was unaware of how explicitly Platonist even some portions of the Bible are (e.g., the "logos" part).
  
  Early Christian theologians continued in this vein. St. Augustine was a self-declared Platonist. Thomas Aquinas's philosophy came largely from applying Aristotelian ideas to these questions.
  
  These Greek influences were well known to later theologians.
  
  Bultmann and his colleagues though that the trinity and other ideas were Greek ideas (he's got a point). They tried to separate out the "authentic" Christian faith from these Greek influences.
  
  The Process Theologians said that the classical doctrine of God (perfect, unchanging, omnipotent) "has far more to do with Plato than the Bible". (I'll have to disagree with that, however, since the authors of the Bible were Platonists also.)
  
  
• The book points out some key instances where the contemporary understanding of Jesus was dependent on the cultural surroundings.
  
  Specifically, this had to do with the explanation of Jesus's death and resurrection. Nearly all of the early theologians agreed that this was Jesus somehow giving God the justice he demanded for mankind's sins. However, the notion of what "justice" means has varied through time, and as theories of justice changed, so did these explanations. For example, one theory espoused the "substitution" model (Jesus took our place), but that only made sense when people believed it was okay for one person to take punishment on behalf of another. When people stopped believing that, another theory emerged.
  
  
• More recent theologians have continued to point out how earlier theories were projecting their own ideas onto Jesus.
  
  Schweitzer said "there is no historical task which so reveals a man's true self as a writing of the life of Jesus".
  
  The Liberal Theologians (in the generations just before Bultmann) were perhaps the worst offenders here. They ignored common themes repeated many times by Jesus that happened not to fit nicely in their theology. But they are certainly far from the only ones who did this. As Schweitzer pointed out, nearly every theology suffers from this.
  
  Indeed, Bultmann pointed out that this goes back to the authors of the Bible themselves. He described how their description of the events in the Bible is strongly shaped by their worldview, which he described as a "mythological" view (meaning that it involves and describes phenomena as one would find in mythology — he's not implying they were liars).
  
  
• I continued to be surprised by all of the "modern" ideas that appeared long ago. For example, I knew that St. Augustine did not believe the Old Testament was literally true (he thought it was allegorical), but there were many others: the nature of God is unknowable, God exists outside time, predestination (i.e., a deterministic universe), etc. all date back 1000 years or more.
  
  
• Bonhoeffer's had an interesting observation about "the God of the gaps" (that is, when God is used to fill in gaps in knowledge). We're all aware of how this was done in understanding of nature in the past. But Bonhoeffer claims this was true in theology as well, and that it had the same outcome: people who understood God as inhabiting these gaps saw their theologies wither away as our understanding of theological principles increased over time.
  
  Bonhoeffer, in general, seemed to me to be the most original thinker over 2000 of Christian thought. (That is not to say that I agree with him, of course.)
  

Certainly, the book is far from perfect in my eyes.

There was a huge amount of effort spent on topics that I find uninteresting (e.g., the structure of heaven or the interaction between the components of the trinity). To be fair, though, this is just the fact that I have a modern perspective. Clearly, the Platonist thinkers found these questions to be interesting. However, if you also find that boring, then you would be bored by many sections of this book.

Finally there was very little emphasis on moral philosophy. Here, I do not know whether to blame the book or the philosophers themselves. Clearly, some theologians spent a time thinking about moral philosophy, but perhaps they were in the minority or not especially influential in the long run.

That said, learning about Christian moral philosophy was the reason I picked up the book in the first place, so that was disappointing. I'll have to look elsewhere for a better discussion.

The Other Type of Outliers

Another application of Malcolm Gladwell's observations about outliers occurred to me on the drive home today.

For those of you who have not read the book, here is the key point (actually, it's the only point) made in the book. People like to speculate about whether success is due to being hardworking (internal causes) or lucky (external clauses). However, people who are just hardworking or just lucky are not going to be as successful as those who are both hardworking and lucky. Most of Gladwell's book is a series of case studies of true outliers like Bill Gates, showing that in each case they had both properties.

Of course, a series of non-random samples isn't proof of anything. But basic common sense suggests this should be true: those who have both internal and external causes in their favor are the most likely to be at the far end of the distribution.

What I was thinking about today was the other end of the distribution, about people who are extremely unsuccessful. The same reasoning as above applies. These should generally be people who have both internal and external causes of failure.

As one specific example of this, we could consider people who commit heinous crimes. Such characters are described in many novels, and each novel is in a way pontificating about whether the causes are internal or external. For example, is their behavior down to having an innately evil psychology (internal cause) or being in an environment which would push someone toward such behavior (external cause). It stands to reason that they should have both.

Difficult Facts About Redistribution

I suppose it is somewhat odd that "redistribution" is a bad word in the political sphere given that (1) we do it today and (2) no one seriously argues for stopping that. For example, I haven't heard any calls to end welfare or medicaid (though you do hear suggestions of various reforms). And unless you are prepared to say that welfare and medicaid are morally wrong, presumably redistribution is not always bad.

That said, I think there is a difficult fact for those who want more widespread redistribution.

This is easiest to explain by example. Let's look at Bill Gates. Many would suggest we should have taxed away most of Bill Gates's wealth and used it to improve the public welfare. That sounds nice. However, it must be kept in mind that Bill Gates is already spending nearly all of his money on improving public welfare.

Although I do not have aggregate data, Bill Gates is hardly alone amongst wealthy people. In addition to other rich businessmen (like Sergey Brin), many rich athletes like Lionel Messi (the best soccer player in the world) and even lesser known but still rich athletes like Dirk Kuyt (another soccer player) have foundations that spend their money on others.

In these cases, the question is not whether that money would be spent on the public good, because that would occur either with redistribution or without it, but rather how it would be spent. And this brings us to the difficult fact: Bill Gates is undoubtedly improving the public good more than the government would with the same money.

How can I say this? Well, most of Bill Gates's money is spent on improving health across the world. In other words, it's spent mostly on helping the poor. In contrast, most money spent by the U.S. government is not. It is spent on defense, social security, and medicare, which largely help the non-poor.

Indeed, I think there theory that explains why this would often be the case. The U.S. government is going to spend money on what the median voter wants, and the median voter largely wants to improve the lot of the median voter. Of course, they do want to help the poor as well, but a much smaller fraction of both their wealth (and the U.S. government's wealth) is sent on the helping the non-poor.

Hence, in the case of BIll Gates, "redistribution" would not mean transferring wealth from the rich to the poor but rather from the poor to the middle class.

The Politics of Happiness (part 1)

Many have become enamored with the idea of defining social welfare as the sum of each person's individual happiness. The advantage of adopting this idea is that it gives us a clear way to decide which public policy is the best (as happiness can be measured). And for those with more liberal leanings, another advantage is that one would expect this approach to favor progressive taxation since the marginal increase in happiness with each extra dollar is decreasing.

I am very skeptical of this idea though. And there are at least a couple of good arguments against it.

First off, it is highly questionable whether the state of maximal happiness is also the state of maximum "goodness" according to virtually any moral system.

Certainly, there is no religion on earth today that teaches people to try to make everyone as happy as possible. Instead, they talk about being a "good" person, that is, a moral person, and at a policy level, they strive to create a society that is as moral as possible.

Indeed, this is true of even non-religious moral philosophies. For example, the "virtue ethics" philosophy that goes back to at least the Greeks and has been popular for much of history (even today) strives to maximize virtue not happiness.

The second argument against this has to do with the oddities of what actually makes people happy. A large amount of "happiness research" has appeared in the literature in recent times and some of the results are surprising. I bought a book on this a few months ago but haven't read it yet. Once I do, I'll include some examples in part 2 of this post. However, just today a good example of this occurred to me.

In order to explain this example, let me start with a simple observation: shortages make people unhappy. When people can't get as much as they want of something, they bitch about it. And there is often no political solution short of having the government buy enough to make everyone happy.

Let me mention two examples of this.

The first example is transportation. A shortage of transportation resources is called "traffic". People hate traffic. In fact, I have heard traffic is the second most hated part of life after taxes.

If you talk to economists about traffic, they will tell you there is a perfect "solution" for it: tolls. It is a solution in the sense that it makes traffic go away. However, it does not make the shortage go away. It just rations transportation resources more efficiently.

Singapore is one place where tolls have been widely deployed, and economists love to point out how "successful" this has been. Indeed, traffic is nonexistent. However, when economists travel to Singapore, they are surprised to learn that citizens of Singapore hate tolls. They bitch about them constantly.

The only time when people seem happy about transportation is when there is more than everyone can consume. This may come in the form of enough roads to eliminate traffic or a public transportation system that is so pervasive and cheap that everyone has as much as they want.

People are happy (or at least they're not unhappy) if there's a surplus of transportation. But as far as I know, there is no political solution for living with a transportation shortage that will stop people from bitching.

My second example is healthcare. In particular, let's talk about medicines. Developing a new medicine is often expensive, which is another way of saying that there is a shortage. Indeed, when a new drug is first released, it is often very expensive. Once it becomes generic, it usually becomes much cheaper, but while the patent remains in effect, the drug has a high price.

Again, no political solution to this actually makes people happy. No one likes the fact that the drug is expensive. It doesn't matter whether people pay out of their pocket or in the form of taxes. They're not going to like it. People will either bitch about the price of the drug or they'll bitch about the taxes.

In other words, new drugs make people unhappy. On the other hand, they save lives. However, the number of lives saved by new drugs is decreasing. For example, there is still no cure for cancer, but there are an ever increasing number of treatments that continue to improve health outcomes by a small amount. In fact, with many types of cancer, the odds of survival have changed radically in the last 25 years, but that has not come as a big jump due to any one drug or procedure. Instead, it is come as a result of many small improvements.

Hence, when we look at investment in new drugs, it's not clear that many of these new drugs would pass a cost-benefit test in terms of happiness. A new drug makes many people unhappy, while only improving the health of a smaller number of people by a small amount.

Unlike the case of traffic, where we can simply choose to buy enough for everyone, we cannot buy enough medicine to make everyone happy. Creating the new drug is actually making people unhappy. So the paradoxical conclusion, if we are to chose the policy that maximizes happiness, is that we might decide to stop developing new drugs.

I have hard time accepting that this is the right answer. Personally, I'd rather keep more people alive, even if they will use their time on earth to bitch about things.

Hence, this is an example where social welfare (at least my definition of social welfare) does not correspond to the state of maximal happiness. So I remain skeptical about happiness.

P.S. How are you, Andrew?

Tax Realism

The numbers shown in this graph (from [1]) are appealing to my skeptical mind. While democrats believe that taxes (particularly on the rich) can always be increased to get more revenue and republicans try to argue that increasing taxes (particularly on the rich) actually reduces revenue, the reality is that... tax rates don't have much effect at all:



Over the 60 years shown in the graph, tax rates fluctuated enormously (between ~90% and ~25%). Yet tax revenue to the government as a percentage of GDP stayed almost always at 15-20%.

One idea I like, at least to focus the debate properly, would be to mandate that tax revenues are to be fixed at, say, 18% of GDP. Some advantages of doing so would be the following.

1. It reminds everyone that we don't have a limitless supply of money. There is a fixed percentage of GDP that can be spent on services, and so the only question is how we will divvy that up.

2. On the other hand, we can increase the amount of tax revenue in absolute terms by increasing GDP. Hence, this gives even big-government types an incentive to be pro-growth.

3. One other approach to increasing tax revenue is to switch to more efficient taxes. Hence, this gives big-government types a reason to like some of the tax proposals typically supported by pro-growth types. It's worth pointing out that European countries tend to have more efficient tax schemes than the US already, while they also tend to have more government services, so this scenario is not as outlandish as it may sound.

[1] http://www.deptofnumbers.com/blog/2010/08/tax-revenue-as-a-fraction-of-gdp/

This article in the Atlantic mentions some numbers that skeptics should be aware of:

“80 percent of non-randomized studies (by far the most common type) turn out to be wrong, as do 25 percent of supposedly gold-standard randomized trials, and as much as 10 percent of the platinum-standard large randomized trials."

The latter two numbers deserve discussion at a later point, but for now, I just want to highlight the first number: 80% of non-randomized studies -- i.e. observational studies -- turn out to be wrong.

This should not be surprising. Unlike a randomized trial, an observational study is not necessarily proof of anything, which is why it is not part of the scientific method. Statisticians typically ignore observational studies unless the relative risks they find are very large, e.g. at least a 50% or 100% increase in risk between the two treatments compared. For a point of comparison, observational studies showed smokers having a 1000% increased risk of cancer.

However, the media often reports the results of observational studies that found a 10-20% (or even smaller) increase in risk. Yet such small effects can easily turn out to be other sorts of correlations. I.e., if a study finds a 5% decrease in risk of cancer in people who eat brussel sprouts, there is no reason to think it is the brussel sprouts: those people probably take better care of themselves in lots of other ways as well.

The numbers cited above back this up. 80% of observational results report effects that turn out to be wrong. Hence, it is certainly fair to be legitimately skeptical of observational studies, and I would say, particularly those with small effect sizes.