jamesz

How should interdisciplinary exchange occur?

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A question that’s regularly arisen of late is how economics can learn from, and inform, other disciplines. I think it’s been sparked by the prevalence of scientists commenting on economic growth. We’ve had numerous bloggers up in arms about Shaun Hendy’s semi-informed comments, and now the Royal Society is broadcasting a discussion of the matter.

Economists all seem to agree that it would be a good idea if scientists took the time to understand something about economics before making pronouncements. Where there is substantial disagreement is over the way in which the exchange with practitioners of other disciplines should occur. I don’t think there’s any doubt that disciplines borrow from each other in a fashion that is helpful to both. Witness the success in economics of optimisation and evolutionary game theory, borrowed from physics and biology respectively. The question is how that should occur. Read more

jamesz

Progress is hard to measure

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Wellington Regional Council have recently published their Genuine Progress Indicator, which is intended to measure changes in regional well-being. Measuring well-being is very difficult and the technical documentation provided by the WRC shows how hard they have found it to overcome the challenges.

The GPI has been constructed by taking about 100 variables of relevance to well-being, normalising each, and averaging the 100 indices. The Council have declined to weight the aggregation because they recognise that people may disagree over the weighting. They seem to want to avoid arguments over the normative weighting decisions. Unfortunately, weighting everything equally is just as much of a value judgement as any other weighting system. For instance, the council consider the prevalence of smoking to be a negative indicator. Due to the equal weightings, a 1% decrease in smoking in the region would be as good for progress as a 1% increase in incomes, or a 1% decrease in unemployment. With other variables, from access to public transport to dairy farm soil quality, it seems unlikely that many people would agree with weighting them all equally.

There are plenty of other difficulties, too: ensuring comparability of the variables measured and selecting a baseline for normalisation, for instance. What these difficulties illustrate are the importance of value judgments in creating these GPIs, even when the architects try to steer away from making them. Each of us, given the opportunity to choose our own variables and weightings, could come up with a different result for the region’s progress. Because of that it’s hard to take the GPI seriously as a reliable measure of regional progress, except insofar as it is defined by the council’s own preferences.

Matt Nolan

Careful with regulation

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Here is an article I wrote for the fine people over at Idealog on regulation.  The primer is:

Tobacco prices must be higher, alcohol availability is going to be limited, and even Coca-Cola has come in for a lashing for being an addictive substance. But this obsession comes with a cost that policymakers need to face before they impart harm on innocent Kiwis.

Feel free to go over to the site to see what I said and comment 😉

Matt Nolan

The missing price of food

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According to this story on Stuff, the people of the world are simultaneously threatening to eat all the worlds resources – while being obese.

If that sounds non-nonsensical to you then you would be right – this is the nature of discussing the allocation of resources without taking account of prices.

Here is their “scientific” money quote:

If populations in other countries began to take after the United States, where 36 per cent of the population is obese, the amount of energy required to support all that extra weight would increase by 481 per cent.

Now it is true, the world has finite resources, and our ability to utilise them is constrained by the set of technology available.  If everyone tries to consume lots and lots of food, it will push up the price of food – in essence we can only consume the stock of food we are able to produce, and we will produce food (instead of other goods and services) on the basis of the relative value placed on food … which is shown by the price of food relative to other goods and services.

Merely assuming that everyone will start noming the same amount of food as in the US, and then complaining that we will have obesity and be destroying the world is both unscientific and patently ridiculous.  Essentially, the argument here is that food is “too cheap” for some reason (government subsidies provides the only legitimate driver I can think of here) – if this is the issue, then we should focus on that, instead of arbitrarily attacking obesity.  Furthermore, if we don’t believe food is too cheap then we should just genuinely stop complaining.

Sidenote:  Not to be too cynical, but in what discipline does it take SIX authors to look at the distribution and averages of different populations, multiple to make all the averages equal to the highest one, and write down what the result is?  With six authours you think they could have looked at issues of allocation a bit more intelligently, no?

jamesz

Who’s scared of paternalism?

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Eric has pointed me to the discussion that happened at Cato Unbound over libertarian/new paternalism. It went a bit like this:

Glen Whitman alleges:

New paternalist policies, and indeed the intellectual framework of new paternalism itself, create a serious risk of slippery slopes toward ever more intrusive paternalism.

Richard Thaler (a founding father of LP) replies:

[The] risk of the slippery slope appears to be a figment of Professor Whitman’s imagination… Slope-mongering is a well-worn political tool used by all sides in the political debate to debunk any idea they oppose. For example, when the proposal was made to replace the draft with an all-volunteer army, the opponents said this would inevitably lead to all kinds of disastrous consequences because we were turning our military into a band of mercenaries… Instead of slope-mongering we should evaluate proposals on their merits.

My favourite commentary on the debate was Robin Hanson’s:

As far as I’m concerned, all of these authors avoid the core hard problem. Yes paternalism can be a matter of degree, but even so we need principles by which to choose what degree of paternalism is appropriate in what context. Just repeating ‘More’ and ‘Less’ quickly gets tiresome. Such principles need to explicitly take into account the fact that organizations can give folks advice instead of limiting their choices.

It highlights how the argument often ignores the key normative question: how paternalistic should governments be? I’m constantly surrounded by people arguing from a fairly libertarian, utilitarian perspective so I’m curious about how the other half thinks. For instance, what’s the justification for trying to stamp out smoking? Which modern philosophers have supported positions that economists would refer to as hard paternalism, and why?

jamesz

The importance of economists

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In the comments of a recent post I claimed that philosophers and economists have little sway over important social policy decisions. Discussing the subject with colleagues I was pointed to this stunning quote by Keynes:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.

I’d like to believe it but is there any empirical support? Not that I’d really want to kill such a beautiful idea with brutal facts.