Tuesday, July 27, 2004
Why is NPR Superior, All Things Considered?
posted by James
For someone educated in free-market economics, one particularly troubling mystery is that public radio is vastly better than privately owned radio stations. Not only is the programming more entertaining and intelligent, it also seems to do a better job of educating its listeners. This press release, from the Program on International Policy at the University of Maryland, shows that NPR listeners (and PBS viewers) are better informed about Iraq and terrorism than viewers of Fox or network news programs, even controlling for demographic factors (I originally read about the report on TAPPED).
Aside from a general mistrust of state media (which can be discounted because NPR isn't really state-run), there are other reasons to expect it to perform suboptimally. In general quality is supposed to result from the discipline of the marketplace. Private radio stations should buy high quality programming because it attracts listeners and advertising dollars; public radio seems to have no such incentive.
You might think that NPR needs high-quality programming to get donations from the public, but in fact it's unclear why anyone gives to NPR in the first place. A good is nonrival when one person's consumption doesn't diminish anyone else's ability to consume the good. Food is obviously very rival; public defense is not. A good is nonexcludable when no one can prevent anyone else from using the good. Toll roads are excludable; most roads are not. Public radio is neither rival nor excludable, so people can enjoy it without contributing. High-quality programming might draw listeners, but since they don't have to contribute, the incentive for NPR to pay for such programming is hard to identify.
It is also no answer that NPR is sheltered from market forces that would otherwise degrade it. The best cars are not made by non-profits, the best housing is not public housing, and the best movies were not funded by charitable contributions. A good answer will explain why some goods are better provided through the marketplace and others (like college educations and radio) seem not to be.
It is these problems that led Richard Posner to comment, on page 33 of Law, Pragmatism, and Democracy, "Suppose you're a strong believer on theoretical grounds in free markets, but you also consider National Public Radio far superior to any commercial radio network. If your fandom causes you to qualify your free-market ideology, you are prioritizing experience, the empirical. But if your ideology causes you to decide that you must have a screw loose in preferring NPR to commercial radio, then you are prioritizing theory." Is there a way, though, to bring reality to our theory? Can the two be reconciled?
An intriguing answer is provided in Law and Social Norms, by Eric Posner, Richard's son. Eric Posner shows how gift-giving is used to identify oneself as a "good type" of person (this means valuing the future highly relative to the present, as well as having certain characteristics such as wealth or intelligence). By giving an expensive gift, an individual shows both that she is wealthy and that she is willing to pay a high price for a deferred benefit. By choosing the recipient and the gift carefully, she can demonstrate her good taste.
Eric Posner then shows how institutions like NPR make good recipients for such gifts, and how this status gives them an incentive to provide good programming. First, the recipient must publicize its donors well so that their generosity is public knowledge. Second, the recipient must have qualities that would impress the community the donor is trying to impress. NPR achieves both qualities by airing high quality programs. The more listeners NPR has, the wider the audience to which its donors are publicized. The more culturally and intellectually elite NPR becomes, the more credit for discernment its donors get.
Now we can see why some institutions are well-suited for non-profit status. If you attain lots of publicity, and have characteristics that attract the wealthy or the intelligent, you can use your name to solicit large donations from individuals eager to burnish their reputations. As Eric Posner puts it, "The choice between non-profit and for-profit status depends on the demand for reputation, on the one hand, and the efficiency with which the non-profit can supply it, which is itself a function of the relative effectiveness of market discipline, and the institution's ability to publicize the names of donors in a way that reaches an elite audience." (page 67) It seems to be the case that universities are at this junction of publicity and intellectual credibility; so, too, is NPR.
Note that this theory requires only that rational people behave in a way that maximizes their own welfare, and that reputation is valuable in this pursuit. These assumptions are close enough to the assumptions underlying free market ideology that we can say that theory has been reconciled with observation. Richard Posner must be proud.
Aside from a general mistrust of state media (which can be discounted because NPR isn't really state-run), there are other reasons to expect it to perform suboptimally. In general quality is supposed to result from the discipline of the marketplace. Private radio stations should buy high quality programming because it attracts listeners and advertising dollars; public radio seems to have no such incentive.
You might think that NPR needs high-quality programming to get donations from the public, but in fact it's unclear why anyone gives to NPR in the first place. A good is nonrival when one person's consumption doesn't diminish anyone else's ability to consume the good. Food is obviously very rival; public defense is not. A good is nonexcludable when no one can prevent anyone else from using the good. Toll roads are excludable; most roads are not. Public radio is neither rival nor excludable, so people can enjoy it without contributing. High-quality programming might draw listeners, but since they don't have to contribute, the incentive for NPR to pay for such programming is hard to identify.
It is also no answer that NPR is sheltered from market forces that would otherwise degrade it. The best cars are not made by non-profits, the best housing is not public housing, and the best movies were not funded by charitable contributions. A good answer will explain why some goods are better provided through the marketplace and others (like college educations and radio) seem not to be.
It is these problems that led Richard Posner to comment, on page 33 of Law, Pragmatism, and Democracy, "Suppose you're a strong believer on theoretical grounds in free markets, but you also consider National Public Radio far superior to any commercial radio network. If your fandom causes you to qualify your free-market ideology, you are prioritizing experience, the empirical. But if your ideology causes you to decide that you must have a screw loose in preferring NPR to commercial radio, then you are prioritizing theory." Is there a way, though, to bring reality to our theory? Can the two be reconciled?
An intriguing answer is provided in Law and Social Norms, by Eric Posner, Richard's son. Eric Posner shows how gift-giving is used to identify oneself as a "good type" of person (this means valuing the future highly relative to the present, as well as having certain characteristics such as wealth or intelligence). By giving an expensive gift, an individual shows both that she is wealthy and that she is willing to pay a high price for a deferred benefit. By choosing the recipient and the gift carefully, she can demonstrate her good taste.
Eric Posner then shows how institutions like NPR make good recipients for such gifts, and how this status gives them an incentive to provide good programming. First, the recipient must publicize its donors well so that their generosity is public knowledge. Second, the recipient must have qualities that would impress the community the donor is trying to impress. NPR achieves both qualities by airing high quality programs. The more listeners NPR has, the wider the audience to which its donors are publicized. The more culturally and intellectually elite NPR becomes, the more credit for discernment its donors get.
Now we can see why some institutions are well-suited for non-profit status. If you attain lots of publicity, and have characteristics that attract the wealthy or the intelligent, you can use your name to solicit large donations from individuals eager to burnish their reputations. As Eric Posner puts it, "The choice between non-profit and for-profit status depends on the demand for reputation, on the one hand, and the efficiency with which the non-profit can supply it, which is itself a function of the relative effectiveness of market discipline, and the institution's ability to publicize the names of donors in a way that reaches an elite audience." (page 67) It seems to be the case that universities are at this junction of publicity and intellectual credibility; so, too, is NPR.
Note that this theory requires only that rational people behave in a way that maximizes their own welfare, and that reputation is valuable in this pursuit. These assumptions are close enough to the assumptions underlying free market ideology that we can say that theory has been reconciled with observation. Richard Posner must be proud.
Sunday, July 18, 2004
The Eternal Sunshine of the Unfree Mind
posted by James
I have just finished reading Order without Law, by Robert Ellickson. The book mainly deals with the power and efficiency of social norms as a system of social control. I think it's a very interesting book, although you might consider reading the second (theoretical) part before the first (empirical) section. The book is particularly useful as an antidote to legal centrism (the tendency to attribute greater power to the law than it actually exerts in human lives). Because of this, I imagine the book is popular among libertarians who seek to reduce the size and scope of our government. Nevertheless, close examination of the book reveals a potentially fatal defect in the libertarian account of how things ought to be.
My immediate response to libertarianism was utilitarian (or at least consequentialist). Certainly, you can imagine a "night-watchman" state that does a decent job of guarding the lives and property of its citizens, but many opportunities for social improvement would be foregone in such a state. Market failures would go uncorrected and wealth redistribution would be suboptimal (I may be repeating myself). Lest "market failure" seem a small price to pay, bear in mind that it encompasses monopolization, excessive pollution, and neglected (in the sense of under-funded) roads, vaccinations, and (depending on definitions) fire protection. This is a very incomplete list of potential market failures, so the consequentialist argument against libertarianism is strong.
Order without Law serves to undermine that argument by providing examples of social norms that arise to encourage efficient behavior seemingly outside the shadow of the law. This tendency is limited, however; norms are only efficient from the perspective of the group in which they function. A norm of loyalty within the mob might be efficient for gangsters, but it's not good for society (see Ellickson, p. 169, text accompanying note 11). Nevertheless, to the extent that norms can do the utilitarian work of law, libertarians might welcome them as desirable alternatives to the rule of law.
Or maybe not. One thing that comes across in Order without Law is just how powerful norms can be. The best argument for a large government may be that the alternative is less liberty. When the Supreme Court ruled that flag-burning is protected speech, flag-burners in Albany, Little Rock, Minneapolis, and New York were instead punished "forcefully" by non-government agents. Some in Louisiana even tried to lower the legal punishment for people who assault flag-burners (see Ellickson, p. 6, text accompanying note 12). Libertarians might argue that such retribution is out of bounds even in a night-watchman state, since the government has a monopoly on the legitimate use of violence. Other norms, though, powerfully constrain liberty in a way that would probably be distasteful to most libertarians.
One example is the use of gossip to constrain behavior. Libertarians (generally) hate the idea of government-mandated redistribution, but presumably they have little problem with private charity. What if it's the case, though, that private redistribution is actually coerced by the threat of informal punishment, as in the widespread practice of tithing (donating a tenth of your income to your church)? Is this somehow more acceptable? Tithing may not be as common as it once was, and donations may be more confidential now. Gossip is still used, however, to punish homosexuality, sexual promiscuity, drug use, and unpopular political and religious beliefs. It was once (and perhaps still is) used to punish interracial friendships.
In sharp contrast, federal law prohibits to varying degrees racism, sexism, and inquiries into sexual behavior. It goes to great lengths to avoid discrimination (except when based on relevant factors, and sometimes even then). Why, then, are we to prefer social control by norms? They may be efficient in some circumstances, but they can also intrude severely into our private lives, in ways a democratic government will not. In short, people may enjoy far greater liberties in the anonymity and privacy of a modern welfare state than they ever could in a nation governed largely by informal norms. The shadow of the law may be a surprisingly welcome sanctuary for the intellectually honest libertarian.
A final qualification is necessary, lest I overstate my case. First, people freely choose their communities and can escape particularly egregious social violations with relative ease. Note, though, that this may involve breaking family ties, and it may be very hard to find a community where, for instance, a gay vegetarian Mormon tobacco farmer will be accepted. At one point it was probably hard to find a community where any sort of homosexual was accepted. Norms such as the ones against sexual promiscuity (for females, at least) are still nearly impossible to escape. Bear in mind too that norms are far more acceptable today in part because of massive government intervention against racism (see Ellickson, p. 256, text accompanying note 62).
Second, it is not clear that norms and governments are entirely substitutes. We live in a "hybrid" society, in which law takes the primary position, but norms form a powerful complementary structure of social control (see Ellickson, p. 254). A large government might represent the worst of both worlds, with liberties constrained from above by the government and from below by society's normative underpinnings.
Still, there are clearly social practices, such as charitable giving, that can be performed either informally or in a centralized fashion. The recipients have good reason to prefer the latter; not only will it likely be more efficient, government redistribution will be blind to color and creed. In practice, a good libertarian might be a good New Deal Democrat after all.
My immediate response to libertarianism was utilitarian (or at least consequentialist). Certainly, you can imagine a "night-watchman" state that does a decent job of guarding the lives and property of its citizens, but many opportunities for social improvement would be foregone in such a state. Market failures would go uncorrected and wealth redistribution would be suboptimal (I may be repeating myself). Lest "market failure" seem a small price to pay, bear in mind that it encompasses monopolization, excessive pollution, and neglected (in the sense of under-funded) roads, vaccinations, and (depending on definitions) fire protection. This is a very incomplete list of potential market failures, so the consequentialist argument against libertarianism is strong.
Order without Law serves to undermine that argument by providing examples of social norms that arise to encourage efficient behavior seemingly outside the shadow of the law. This tendency is limited, however; norms are only efficient from the perspective of the group in which they function. A norm of loyalty within the mob might be efficient for gangsters, but it's not good for society (see Ellickson, p. 169, text accompanying note 11). Nevertheless, to the extent that norms can do the utilitarian work of law, libertarians might welcome them as desirable alternatives to the rule of law.
Or maybe not. One thing that comes across in Order without Law is just how powerful norms can be. The best argument for a large government may be that the alternative is less liberty. When the Supreme Court ruled that flag-burning is protected speech, flag-burners in Albany, Little Rock, Minneapolis, and New York were instead punished "forcefully" by non-government agents. Some in Louisiana even tried to lower the legal punishment for people who assault flag-burners (see Ellickson, p. 6, text accompanying note 12). Libertarians might argue that such retribution is out of bounds even in a night-watchman state, since the government has a monopoly on the legitimate use of violence. Other norms, though, powerfully constrain liberty in a way that would probably be distasteful to most libertarians.
One example is the use of gossip to constrain behavior. Libertarians (generally) hate the idea of government-mandated redistribution, but presumably they have little problem with private charity. What if it's the case, though, that private redistribution is actually coerced by the threat of informal punishment, as in the widespread practice of tithing (donating a tenth of your income to your church)? Is this somehow more acceptable? Tithing may not be as common as it once was, and donations may be more confidential now. Gossip is still used, however, to punish homosexuality, sexual promiscuity, drug use, and unpopular political and religious beliefs. It was once (and perhaps still is) used to punish interracial friendships.
In sharp contrast, federal law prohibits to varying degrees racism, sexism, and inquiries into sexual behavior. It goes to great lengths to avoid discrimination (except when based on relevant factors, and sometimes even then). Why, then, are we to prefer social control by norms? They may be efficient in some circumstances, but they can also intrude severely into our private lives, in ways a democratic government will not. In short, people may enjoy far greater liberties in the anonymity and privacy of a modern welfare state than they ever could in a nation governed largely by informal norms. The shadow of the law may be a surprisingly welcome sanctuary for the intellectually honest libertarian.
A final qualification is necessary, lest I overstate my case. First, people freely choose their communities and can escape particularly egregious social violations with relative ease. Note, though, that this may involve breaking family ties, and it may be very hard to find a community where, for instance, a gay vegetarian Mormon tobacco farmer will be accepted. At one point it was probably hard to find a community where any sort of homosexual was accepted. Norms such as the ones against sexual promiscuity (for females, at least) are still nearly impossible to escape. Bear in mind too that norms are far more acceptable today in part because of massive government intervention against racism (see Ellickson, p. 256, text accompanying note 62).
Second, it is not clear that norms and governments are entirely substitutes. We live in a "hybrid" society, in which law takes the primary position, but norms form a powerful complementary structure of social control (see Ellickson, p. 254). A large government might represent the worst of both worlds, with liberties constrained from above by the government and from below by society's normative underpinnings.
Still, there are clearly social practices, such as charitable giving, that can be performed either informally or in a centralized fashion. The recipients have good reason to prefer the latter; not only will it likely be more efficient, government redistribution will be blind to color and creed. In practice, a good libertarian might be a good New Deal Democrat after all.
Thursday, August 21, 2003
Our Blog is Dood
posted by James
Alan and I haven't posted in a while, but we'll resume shortly. I was away from the internet, and in fact all news, for a while. When I returned, I was overwhelmed by the sheer volume of opinion writing floating around on the internet, much of it partisan and shrill. One piece struck me in particular – a Wall Street Journal column that I only read in summary in TAPPED. The point was that colleges are too liberal, and they actively encourage their students to support labor unions, even establishing M.A. degrees in union leadership. TAPPED responded by pointing out that no one complains when business schools cuddle up to businesses who recruit their students.
The problem is that the conclusion depends entirely on what you think of labor unions. The WSJ is right if one of your premises is that organized labor is nothing but legalized extortion, while businesses are productive and make significant contributions to society (this is a reasonable premise). TAPPED is right if one of your premises is that organized labor is necessary for workers to get a fair deal in negotiations (this is also reasonable). The point is that by arguing from particular premises, rather than arguing about those premises, TAPPED and the WSJ were just preaching to the converted.
In retrospect, I wonder if my post on PAM was any different. I still don't think PAM deserved much of the criticism it got, but maybe I'm a market fundamentalist at heart. I am not reassured by the flood of posts, most very similar to mine, that popped up in the aftermath. This indicates that I was merely deriving an obvious conclusion from premises that are commonly believed. That's not really what Cooler Heads is supposed to be about.
In the future Alan and I will try to post more frequently, but also more thoughtfully. Hopefully our posts will be thought-provoking for everyone, no matter what their basic premises. We'll leave the futile partisan bickering to others, and stay up on the dry land.
The problem is that the conclusion depends entirely on what you think of labor unions. The WSJ is right if one of your premises is that organized labor is nothing but legalized extortion, while businesses are productive and make significant contributions to society (this is a reasonable premise). TAPPED is right if one of your premises is that organized labor is necessary for workers to get a fair deal in negotiations (this is also reasonable). The point is that by arguing from particular premises, rather than arguing about those premises, TAPPED and the WSJ were just preaching to the converted.
In retrospect, I wonder if my post on PAM was any different. I still don't think PAM deserved much of the criticism it got, but maybe I'm a market fundamentalist at heart. I am not reassured by the flood of posts, most very similar to mine, that popped up in the aftermath. This indicates that I was merely deriving an obvious conclusion from premises that are commonly believed. That's not really what Cooler Heads is supposed to be about.
In the future Alan and I will try to post more frequently, but also more thoughtfully. Hopefully our posts will be thought-provoking for everyone, no matter what their basic premises. We'll leave the futile partisan bickering to others, and stay up on the dry land.
Thursday, July 31, 2003
Parfit for a King
posted by Alan
I’ve read the first chapter of Derek Parfit’s Reasons and Persons, and it indeed lives up to the back-cover praise. Nonetheless, a little dissent never hurt anyone. So at the risk of challenging an intellectual Goliath without a slingshot, here goes.
Parfit writes, “Suppose that we all believe C [Consequentialism], and all have sets of motives that are among the best possible sets in Consequentialist terms. I have claimed that, at least for most of us, these sets would not include being a pure do-gooder. If we are not pure do-gooders, we shall sometimes do what we believe will make the outcome worse. According to C, we shall then be acting wrongly.”
This means, in Parfit’s terms, that C is “indirectly collectively self-defeating” – “if several people try to achieve their [C]-given aims, these aims will be worse achieved.” He mentions a few ways in which the motive to make overall outcomes as good as possible can have sub-optimal effects. One is that overall happiness, a large part of good outcomes, will decrease when pure do-gooders act against or suppress desires such as love and personal ambition. Another is that pure do-gooders will likely often do things in the name of consequentialism, such as kill, that will actually worsen overall outcomes. Perhaps it is, therefore, better if certain “severe” actions such as deception, coercion, and killing were, for the most part, off-limits to consequentialists. As intuitive as this may seem, keep in mind that it would also obviate many cases of deception, coercion, and killing that would actually lead to overall good. Needless to say, these failures to deceive, coerce, and kill would be wrong in consequentialist terms. But might they be blameless wrongs? Might it be a greater wrong to cause oneself to lose the aversion to deceiving, coercing, and killing in ordinary situations?
Along the same lines, Parfit offers the following example: “Clare could either save her child’s life, or save the lives of several strangers. Because she loves her child, she saves him, and the strangers all die.” Consequentialism dictates that Clare save the strangers. However, according to Parfit, she could reply, “I had no reason to believe that my love for my child would have this very bad effect….And causing myself to lose this love would have been blameworthy, or subjectively wrong. When I save my child rather than the strangers, I am acting on a set of motives that it would have been wrong for me to cause myself to lose. This is enough to justify my claim that, when I act in this way, this is a case of blameless wrongdoing.” She could add, “I could not possibly have lost this love with the speed that would have been required….It would have been wrong for me to try to lose my love for my child. If I had tried, I would have succeeded only after the strangers had died.”
Parfit goes on to claim, “We could imagine that our love for our children would ‘switch off’ whenever other people’s lives are at stake. It might be true that, if we all had this kind of love, this would make the outcome better. If we all gave such priority to saving more lives, there would be few cases in which our love for our children would have to switch off. This love could therefore be much as it is now. But it is in fact impossible that our love could be like this. We could not bring about such ‘fine-tuning.’”
Or could we? I think this last assertion illustrates the indispensability of science to moral philosophy. Since the dawn of moral philosophy, its practitioners have made factual claims, often about human nature (e.g., just about any social contractarian), upon which much of their philosophical ones rest. I am by no means implying that disciplines such as evolutionary psychology have directly normative implications. Rather, I am simply pointing out that ignoring such sciences is inconsistent with the pursuit of objectivity, truth, and other philosophical aims. The intersection of science and philosophy should not be limited to metaphysics and debate rounds involving Phil Larochelle. Moral philosophy, in all its talk of “ought” and “is,” cannot afford to ignore the latter.
So what does science say about love for one’s children? In short, natural selection favors organisms that maximize the reproduction of their genes. Since Clare shares approximately fifty percent of her genes with her child, and, odds are, far fewer with the strangers, she is inclined to save her child. Needless to say, such “kin selection” is instinctual, not conscious. But so are many other natural drives that are bad for society. Rationally and morally, most of us care about the entire morally considerable universe, but biologically, we are not inclined to short-change ourselves for the good of the group. Although the cumulative affects of individual selection are sometimes beneficial to groups, species, societies, and even the world, natural selection almost never occurs on such levels; the differential reproduction of entire, discrete groups is a rare event, indeed. Thus, our “altruistic” instincts largely take the form of kin selection, as aforementioned, and “reciprocal altruism.” An example of the latter is taking a minor risk to save a stranger’s life in return for the stranger’s help in the future; both parties’ reproductive success is increased. In our formative environment of small, closely-knit societies, reciprocal altruism was much more realistic. (The stranger’s incentive to “cheat” and fail to reciprocate, and the ensuing biological arms race to gain the upper hand, is arguably the primary impetus behind the evolution of many of our social and moral behaviors, such as deception, self-deception, and the punishment of “cheaters,” as well as the emotions and social intelligence that enable and motivate such behaviors. For more, see this paper.)
As rational beings, we seek, in a sense, to “escape” our nature. We enact laws in order to directly reap group-level rewards (e.g., preventing the tragedy of the commons) that our instincts alone could never sow. Is Clare’s dilemma any different? Arguably, familial love is uniquely rewarding, a good consequence in itself. But it seems even less clear that it would take the loss of familial love to motivate Clare to do the right thing. Clare’s dilemma seems to be less about the “fine-tuning” of a disposition, and more about the everyday weighing that consequentialism demands. In the same way that Clare might be motivated to save the strangers if her child were extremely dangerous or evil, the fact that there are multiple strangers should weigh on her conscience. True, the former factors arguably diminish love, whereas the latter counterbalance it, but is this a relevant distinction? If anything, counterbalancing implies that Clare can maintain her love for her child. Moreover, she could surely derive some deep personal satisfaction from the fact that she did what she believed to be the right thing instead of giving into her nature. It is unlikely that this satisfaction would ever outweigh the loss of a child, but who said being good was supposed to be easy?
Parfit writes, “Suppose that we all believe C [Consequentialism], and all have sets of motives that are among the best possible sets in Consequentialist terms. I have claimed that, at least for most of us, these sets would not include being a pure do-gooder. If we are not pure do-gooders, we shall sometimes do what we believe will make the outcome worse. According to C, we shall then be acting wrongly.”
This means, in Parfit’s terms, that C is “indirectly collectively self-defeating” – “if several people try to achieve their [C]-given aims, these aims will be worse achieved.” He mentions a few ways in which the motive to make overall outcomes as good as possible can have sub-optimal effects. One is that overall happiness, a large part of good outcomes, will decrease when pure do-gooders act against or suppress desires such as love and personal ambition. Another is that pure do-gooders will likely often do things in the name of consequentialism, such as kill, that will actually worsen overall outcomes. Perhaps it is, therefore, better if certain “severe” actions such as deception, coercion, and killing were, for the most part, off-limits to consequentialists. As intuitive as this may seem, keep in mind that it would also obviate many cases of deception, coercion, and killing that would actually lead to overall good. Needless to say, these failures to deceive, coerce, and kill would be wrong in consequentialist terms. But might they be blameless wrongs? Might it be a greater wrong to cause oneself to lose the aversion to deceiving, coercing, and killing in ordinary situations?
Along the same lines, Parfit offers the following example: “Clare could either save her child’s life, or save the lives of several strangers. Because she loves her child, she saves him, and the strangers all die.” Consequentialism dictates that Clare save the strangers. However, according to Parfit, she could reply, “I had no reason to believe that my love for my child would have this very bad effect….And causing myself to lose this love would have been blameworthy, or subjectively wrong. When I save my child rather than the strangers, I am acting on a set of motives that it would have been wrong for me to cause myself to lose. This is enough to justify my claim that, when I act in this way, this is a case of blameless wrongdoing.” She could add, “I could not possibly have lost this love with the speed that would have been required….It would have been wrong for me to try to lose my love for my child. If I had tried, I would have succeeded only after the strangers had died.”
Parfit goes on to claim, “We could imagine that our love for our children would ‘switch off’ whenever other people’s lives are at stake. It might be true that, if we all had this kind of love, this would make the outcome better. If we all gave such priority to saving more lives, there would be few cases in which our love for our children would have to switch off. This love could therefore be much as it is now. But it is in fact impossible that our love could be like this. We could not bring about such ‘fine-tuning.’”
Or could we? I think this last assertion illustrates the indispensability of science to moral philosophy. Since the dawn of moral philosophy, its practitioners have made factual claims, often about human nature (e.g., just about any social contractarian), upon which much of their philosophical ones rest. I am by no means implying that disciplines such as evolutionary psychology have directly normative implications. Rather, I am simply pointing out that ignoring such sciences is inconsistent with the pursuit of objectivity, truth, and other philosophical aims. The intersection of science and philosophy should not be limited to metaphysics and debate rounds involving Phil Larochelle. Moral philosophy, in all its talk of “ought” and “is,” cannot afford to ignore the latter.
So what does science say about love for one’s children? In short, natural selection favors organisms that maximize the reproduction of their genes. Since Clare shares approximately fifty percent of her genes with her child, and, odds are, far fewer with the strangers, she is inclined to save her child. Needless to say, such “kin selection” is instinctual, not conscious. But so are many other natural drives that are bad for society. Rationally and morally, most of us care about the entire morally considerable universe, but biologically, we are not inclined to short-change ourselves for the good of the group. Although the cumulative affects of individual selection are sometimes beneficial to groups, species, societies, and even the world, natural selection almost never occurs on such levels; the differential reproduction of entire, discrete groups is a rare event, indeed. Thus, our “altruistic” instincts largely take the form of kin selection, as aforementioned, and “reciprocal altruism.” An example of the latter is taking a minor risk to save a stranger’s life in return for the stranger’s help in the future; both parties’ reproductive success is increased. In our formative environment of small, closely-knit societies, reciprocal altruism was much more realistic. (The stranger’s incentive to “cheat” and fail to reciprocate, and the ensuing biological arms race to gain the upper hand, is arguably the primary impetus behind the evolution of many of our social and moral behaviors, such as deception, self-deception, and the punishment of “cheaters,” as well as the emotions and social intelligence that enable and motivate such behaviors. For more, see this paper.)
As rational beings, we seek, in a sense, to “escape” our nature. We enact laws in order to directly reap group-level rewards (e.g., preventing the tragedy of the commons) that our instincts alone could never sow. Is Clare’s dilemma any different? Arguably, familial love is uniquely rewarding, a good consequence in itself. But it seems even less clear that it would take the loss of familial love to motivate Clare to do the right thing. Clare’s dilemma seems to be less about the “fine-tuning” of a disposition, and more about the everyday weighing that consequentialism demands. In the same way that Clare might be motivated to save the strangers if her child were extremely dangerous or evil, the fact that there are multiple strangers should weigh on her conscience. True, the former factors arguably diminish love, whereas the latter counterbalance it, but is this a relevant distinction? If anything, counterbalancing implies that Clare can maintain her love for her child. Moreover, she could surely derive some deep personal satisfaction from the fact that she did what she believed to be the right thing instead of giving into her nature. It is unlikely that this satisfaction would ever outweigh the loss of a child, but who said being good was supposed to be easy?
Wednesday, July 30, 2003
Wham, Bam, Thank You PAM
posted by James
[update: Glen Whitman makes essentially the same point at Agoraphilia]
I was going to write an angry, incredulous post about just how unfair most criticism of the Policy Analysis Market (PAM) has been, but it looks as though James Surowiecki has already done a pretty good job over at Slate. Slate is perhaps redeeming itself; yesterday it ran a frustratingly inconclusive piece by Daniel Gross, many of whose questions are answered by Surowiecki. The idea behind PAM is fairly simple; it's a market in which you invest in “futures” that pay off depending on certain events in the Middle East (assassinations and political intrigue, as well as mundane things like economic growth). The government would monitor the market and use the information to prevent certain things (presumably the assassinations) and ameliorate others (economic slowdown). In fact, the program sparked a political firestorm, and has been canceled. I expect Democrats to use the program as a rhetorical punch line whenever they criticize Bush's foreign policy. It's too bad, because PAM might well be among the better ideas Bush's team has come up with.
There are some good reasons to think PAM is a bad idea. One is that it depends on people profiting from tragedy; exactly how big a problem this presents has been discussed over on Muxalicious. Additionally, like any market PAM would be subject to manipulation. Since the market would automatically feed back into US policy, it could become a self-fulfilling prophecy, and it might even destabilize political regimes by amplifying any bad news. I'll examine some more shortcomings, but first I should explain why it's such a beautiful idea in the first place.
One principle objection raised against PAM is that terrorists would benefit by gambling on a bombing, and then carrying it out. As Surowiecki points out, though, any action on the market conveys information to everyone else (including the CIA). This is why the market would work; market profits would constitute a powerful incentive to share all accurate information, and the information is then available to the United States. People with no sympathy for us and no inclination to help our cause would nonetheless help us merely by pursuing their own self-interest. Terrorists who attempted to profit off their attacks would essentially be begging the US to anticipate and foil their plans. In reality, terrorists would probably go to great lengths to assure that no one with knowledge of their plans participated in PAM.
The chief objection I've seen to PAM is that it would be self-defeating once the CIA started to take action based on the information. Daniel Gross concentrated on this in his piece in Slate. For instance, if the prices showed that a lot of people were betting on an assassination, and the CIA prevented the assassination, the market would obviously no longer be rewarding accurate information.
This would only stop the markets from functioning properly if every piece of accurate information were acted upon perfectly by the CIA. It's easy to see that no one will bet on a bombing if the very fact of betting precludes the bombing. However, imagine that the CIA is only 90% effective when it gets the information. Now, most terrorist activities are hugely unlikely ex ante. I would expect that short-term futures on assassination would be quite cheap, because assassinations are rare. Thus, you could get very good “odds” for most drastic terrorist activities. Now, you should make a bet if its expected value is positive. In a market like PAM, this means that you multiply the probability that an event will happen (p) by the amount you stand to make if you win. Then you multiply (1 – p) by the cost of the bet, and if the expected gains outweigh the expected losses you take the bet.
Thus, if the CIA is only 90% effective, p will be quite low. Nevertheless, because of the great odds that you can get on unlikely events, this high probability can be overwhelmed by the high ratio of returns to initial money down. Of course, eventually the odds will be driven to the point that the bet is no longer profitable. This will often happen too late, from the terrorists' point of view, because the CIA will be tipped off by the very fact that the odds are shifting in favor of whatever the event is. Note that it's not so much the collected wisdom of thousands of minds that will provide the real information bonanza; it's the ability of people within terrorist organizations to exploit their "insider information" that brings the really sensitive information to market.
Of course, the CIA wouldn't be the only group watching the market. One disadvantage of a market like PAM is that it makes all the information public. Terrorists would know everything the CIA would know about the market, and thus they would be able to see how the CIA responds to different knowledge. The terrorists, if they were well-organized, could then manipulate the markets to paint the picture they wanted the CIA to see.
One final objection might prove to be the best. Fighting terrorism isn't just a matter of killing bad people and stopping attacks. It also depends on the political will and social cohesion of the United States. A program like PAM, while probably effective, might unleash cynicism and disillusion within America, ultimately sapping morale and undermining the war on terrorism. Regardless of the actual morality of PAM, its usefulness could be destroyed by its perceived immorality. It is probably this consideration that has scuttled a program that showed unexpected cleverness from an administration not noteworthy for its economic acumen.
I was going to write an angry, incredulous post about just how unfair most criticism of the Policy Analysis Market (PAM) has been, but it looks as though James Surowiecki has already done a pretty good job over at Slate. Slate is perhaps redeeming itself; yesterday it ran a frustratingly inconclusive piece by Daniel Gross, many of whose questions are answered by Surowiecki. The idea behind PAM is fairly simple; it's a market in which you invest in “futures” that pay off depending on certain events in the Middle East (assassinations and political intrigue, as well as mundane things like economic growth). The government would monitor the market and use the information to prevent certain things (presumably the assassinations) and ameliorate others (economic slowdown). In fact, the program sparked a political firestorm, and has been canceled. I expect Democrats to use the program as a rhetorical punch line whenever they criticize Bush's foreign policy. It's too bad, because PAM might well be among the better ideas Bush's team has come up with.
There are some good reasons to think PAM is a bad idea. One is that it depends on people profiting from tragedy; exactly how big a problem this presents has been discussed over on Muxalicious. Additionally, like any market PAM would be subject to manipulation. Since the market would automatically feed back into US policy, it could become a self-fulfilling prophecy, and it might even destabilize political regimes by amplifying any bad news. I'll examine some more shortcomings, but first I should explain why it's such a beautiful idea in the first place.
One principle objection raised against PAM is that terrorists would benefit by gambling on a bombing, and then carrying it out. As Surowiecki points out, though, any action on the market conveys information to everyone else (including the CIA). This is why the market would work; market profits would constitute a powerful incentive to share all accurate information, and the information is then available to the United States. People with no sympathy for us and no inclination to help our cause would nonetheless help us merely by pursuing their own self-interest. Terrorists who attempted to profit off their attacks would essentially be begging the US to anticipate and foil their plans. In reality, terrorists would probably go to great lengths to assure that no one with knowledge of their plans participated in PAM.
The chief objection I've seen to PAM is that it would be self-defeating once the CIA started to take action based on the information. Daniel Gross concentrated on this in his piece in Slate. For instance, if the prices showed that a lot of people were betting on an assassination, and the CIA prevented the assassination, the market would obviously no longer be rewarding accurate information.
This would only stop the markets from functioning properly if every piece of accurate information were acted upon perfectly by the CIA. It's easy to see that no one will bet on a bombing if the very fact of betting precludes the bombing. However, imagine that the CIA is only 90% effective when it gets the information. Now, most terrorist activities are hugely unlikely ex ante. I would expect that short-term futures on assassination would be quite cheap, because assassinations are rare. Thus, you could get very good “odds” for most drastic terrorist activities. Now, you should make a bet if its expected value is positive. In a market like PAM, this means that you multiply the probability that an event will happen (p) by the amount you stand to make if you win. Then you multiply (1 – p) by the cost of the bet, and if the expected gains outweigh the expected losses you take the bet.
Thus, if the CIA is only 90% effective, p will be quite low. Nevertheless, because of the great odds that you can get on unlikely events, this high probability can be overwhelmed by the high ratio of returns to initial money down. Of course, eventually the odds will be driven to the point that the bet is no longer profitable. This will often happen too late, from the terrorists' point of view, because the CIA will be tipped off by the very fact that the odds are shifting in favor of whatever the event is. Note that it's not so much the collected wisdom of thousands of minds that will provide the real information bonanza; it's the ability of people within terrorist organizations to exploit their "insider information" that brings the really sensitive information to market.
Of course, the CIA wouldn't be the only group watching the market. One disadvantage of a market like PAM is that it makes all the information public. Terrorists would know everything the CIA would know about the market, and thus they would be able to see how the CIA responds to different knowledge. The terrorists, if they were well-organized, could then manipulate the markets to paint the picture they wanted the CIA to see.
One final objection might prove to be the best. Fighting terrorism isn't just a matter of killing bad people and stopping attacks. It also depends on the political will and social cohesion of the United States. A program like PAM, while probably effective, might unleash cynicism and disillusion within America, ultimately sapping morale and undermining the war on terrorism. Regardless of the actual morality of PAM, its usefulness could be destroyed by its perceived immorality. It is probably this consideration that has scuttled a program that showed unexpected cleverness from an administration not noteworthy for its economic acumen.
Applying Economics to Champerty
posted by James
One perennial question is how much light economics can shed on legal issues. I happen to believe that it can be quite illuminating, but my viewpoint is far from universal. Champerty provides a good case study, partly because the analysis is accessible, but also because I think it is an example in which the economic analysis doesn't provide a conclusive answer. I started thinking about this after reading about a debate round on Phil's blog. It occurred to me that the round could probably have benefited from some economic analysis (although, who knows, you can't explain much in eight minutes without graphs). All of the following economic analysis comes from a lecture by Professor Nicholson at Amherst College.
Champerty is trading the right to sue for a particular harm. So, if I'm injured because of a faulty part in my car, for which the car manufacturer is liable, under champerty I can sell the right to sue to a third party. That party (probably an attorney or a law firm) would pay all the costs of bringing the case to trial, and would keep the entire payment in the case of victory or a settlement. A separate issue, which I might address later, is selling your right to sue for harms that haven't happened yet. That's distinct from champerty, though.
Clearly, the most a company will pay for the right to a suit is the expected value of that suit. Furthermore, the only reason a plaintiff would ever sell a suit for less than its expected value is if he is risk averse. Thus, other than a sort of insurance market, there doesn't seem to be much room for profitable exchange.
This ignores something called the “agency problem.” Specifically, most plaintiffs don't have a lot of legal expertise. A plaintiff has to depend on a lawyer to represent him as well as possible. The lawyer, on the other hand, is merely trying to maximize profits (within ethical guidelines). Consider a plaintiff who is bringing his suit to trial. He wants the lawyer to spend effort on the suit, but how much effort? If he has to pay his lawyer by the hour, he won't know how many hours to “purchase.” A right answer exists: he should purchase the amount of effort that maximizes the profit, which is the difference between the total cost and the total expected returns from the case.
One common arrangement is a “contingency fee,” in which the plaintiff pays his lawyer a share of the winnings in the case of victory, and nothing otherwise. We might ask the question, does this give the lawyer incentives to invest the right amount of effort? This is easy to illustrate graphically.
[note: Blogger wants to sell us an upgrade, so they've set it up so that the free version can't display images. At least, that's my theory right now; if anyone knows how to display images (which we've uploaded to a different website), please let me know. Sorry about the inconvenience of having to click to see the graphs.]
Graph 1
Graph 2
The first graph shows the expected value of the case as a function of how much effort the lawyer expends. The curve illustrates diminishing returns. The curve representing the lawyer's costs is linear. The lower curve represents the amount of the winnings that would go to the lawyer; in this graph it is 30% (usually lawyers aren't allowed to set contingency fees higher than 40% or so).
The second graph just shows the vertical distance between the different curves. The upper curve shows the overall profits for the plaintiff (overall profit – costs); the lower curve shows the share of those profits that go to the lawyer under a contingency plan (30% of overall profit – costs). Now we can easily see that contingency fees do not maximize profits. The lawyer will choose to exert the amount of effort that corresponds to the peak of the lower curve. This isn't nearly enough effort to maximize overall profits (which happens at the peak of the upper curve).
Now, consider a lawyer who has purchased a case through champerty. Since he gets all of the profits, his incentives are represented by the top curve. He will thus invest the optimal amount of effort, maximizing profits. We can now see why champerty might do more than create an insurance market for plaintiffs: by solving the agency problem, champerty increases the expected value of each case, so that the buyer gets more than the seller gives up. Of course, the insurance effect still exists, increasing the profit potential even further. Champerty also increases the incentives for companies to make safe products; an increase in the expected value of a case must come from a higher probability of victory or a higher payout from the defendant. This in turn will increase the desire of the company to avoid lawsuits in the first place.
Of course, there's no free lunch. While the attorney's incentives might be improved by champerty, there has to be a mechanism to ensure that the plaintiff will cooperate by testifying as if it mattered. Further, juries must be willing to give the same verdict regardless of who gets the money, which will be difficult for some jurors (even though ultimately a well-functioning champerty system primarily benefits plaintiffs).
Another objection is that plaintiffs will be somehow exploited. Note that this would be difficult to judge ex post; a large verdict might seem disproportionate to the price the plaintiff received, but ex ante it might have been perfectly fair. Perhaps plaintiffs will be poorly informed and easily fooled. This seems unlikely, if only because tort law is an incredibly competitive field. With so many bidders, it's difficult to imagine any significant market power being used. However ignorant of the law a plaintiff might be, he ought to be able to identify the highest bid and accept it.
Ultimately, though, the question can't be answered in merely economic terms. The question is whether it can be answered satisfactorily without reference to economics. In the case of champerty at least, economics is crucial to a complete understanding of the issue. This suggests that someone who wants to understand the complexities of law must first learn some economics.
Champerty is trading the right to sue for a particular harm. So, if I'm injured because of a faulty part in my car, for which the car manufacturer is liable, under champerty I can sell the right to sue to a third party. That party (probably an attorney or a law firm) would pay all the costs of bringing the case to trial, and would keep the entire payment in the case of victory or a settlement. A separate issue, which I might address later, is selling your right to sue for harms that haven't happened yet. That's distinct from champerty, though.
Clearly, the most a company will pay for the right to a suit is the expected value of that suit. Furthermore, the only reason a plaintiff would ever sell a suit for less than its expected value is if he is risk averse. Thus, other than a sort of insurance market, there doesn't seem to be much room for profitable exchange.
This ignores something called the “agency problem.” Specifically, most plaintiffs don't have a lot of legal expertise. A plaintiff has to depend on a lawyer to represent him as well as possible. The lawyer, on the other hand, is merely trying to maximize profits (within ethical guidelines). Consider a plaintiff who is bringing his suit to trial. He wants the lawyer to spend effort on the suit, but how much effort? If he has to pay his lawyer by the hour, he won't know how many hours to “purchase.” A right answer exists: he should purchase the amount of effort that maximizes the profit, which is the difference between the total cost and the total expected returns from the case.
One common arrangement is a “contingency fee,” in which the plaintiff pays his lawyer a share of the winnings in the case of victory, and nothing otherwise. We might ask the question, does this give the lawyer incentives to invest the right amount of effort? This is easy to illustrate graphically.
[note: Blogger wants to sell us an upgrade, so they've set it up so that the free version can't display images. At least, that's my theory right now; if anyone knows how to display images (which we've uploaded to a different website), please let me know. Sorry about the inconvenience of having to click to see the graphs.]
Graph 1
Graph 2
The first graph shows the expected value of the case as a function of how much effort the lawyer expends. The curve illustrates diminishing returns. The curve representing the lawyer's costs is linear. The lower curve represents the amount of the winnings that would go to the lawyer; in this graph it is 30% (usually lawyers aren't allowed to set contingency fees higher than 40% or so).
The second graph just shows the vertical distance between the different curves. The upper curve shows the overall profits for the plaintiff (overall profit – costs); the lower curve shows the share of those profits that go to the lawyer under a contingency plan (30% of overall profit – costs). Now we can easily see that contingency fees do not maximize profits. The lawyer will choose to exert the amount of effort that corresponds to the peak of the lower curve. This isn't nearly enough effort to maximize overall profits (which happens at the peak of the upper curve).
Now, consider a lawyer who has purchased a case through champerty. Since he gets all of the profits, his incentives are represented by the top curve. He will thus invest the optimal amount of effort, maximizing profits. We can now see why champerty might do more than create an insurance market for plaintiffs: by solving the agency problem, champerty increases the expected value of each case, so that the buyer gets more than the seller gives up. Of course, the insurance effect still exists, increasing the profit potential even further. Champerty also increases the incentives for companies to make safe products; an increase in the expected value of a case must come from a higher probability of victory or a higher payout from the defendant. This in turn will increase the desire of the company to avoid lawsuits in the first place.
Of course, there's no free lunch. While the attorney's incentives might be improved by champerty, there has to be a mechanism to ensure that the plaintiff will cooperate by testifying as if it mattered. Further, juries must be willing to give the same verdict regardless of who gets the money, which will be difficult for some jurors (even though ultimately a well-functioning champerty system primarily benefits plaintiffs).
Another objection is that plaintiffs will be somehow exploited. Note that this would be difficult to judge ex post; a large verdict might seem disproportionate to the price the plaintiff received, but ex ante it might have been perfectly fair. Perhaps plaintiffs will be poorly informed and easily fooled. This seems unlikely, if only because tort law is an incredibly competitive field. With so many bidders, it's difficult to imagine any significant market power being used. However ignorant of the law a plaintiff might be, he ought to be able to identify the highest bid and accept it.
Ultimately, though, the question can't be answered in merely economic terms. The question is whether it can be answered satisfactorily without reference to economics. In the case of champerty at least, economics is crucial to a complete understanding of the issue. This suggests that someone who wants to understand the complexities of law must first learn some economics.
Friday, July 25, 2003
Wealth and History
posted by James
Brad DeLong, a "saltwater" economist who served in Clinton's Treasury Department, has a great post with some very striking graphs. It's worth thinking about how much better our world has gotten in the last fifty years. The term "saltwater" refers to economists in Cambridge and California, as opposed to the more conservative economists in Rochester and Chicago. Professor DeLong teaches at Berkeley.
Thursday, July 24, 2003
Black, White, & Brown
posted by James
I took a class on constitutional law my senior year at Amherst. It was my first serious exposure to Brown v. Board, although of course I knew about the aftermath. Many things about the case surprised me, but most striking was the analysis of various constitutional scholars. Those who adhere to particularly austere interpretations found themselves struggling to come up with a justification for the ruling, and apparently this was a major source of frustration.
Certainly it must continue to be a major source of frustration for various legal scholars who seek to serve in the judiciary (I'm thinking here of Bork, except that he found a way to justify Brown). After all, to admit that you think the ruling in Brown was wrong is to abandon all hope for approval by the Senate. Similar, if less intense, pressure awaits anyone who disagrees with Griswold v. Connecticut (contraception), and perhaps someday the same will be true of Lawrence v. Texas (sodomy).
This is deeply ironic precisely because the results aren't supposed to matter, at least to someone who interprets the Constitution strictly. If the strictly interpreted Constitution tells you to let states segregate their schools, but you sympathize with the desegregationists, guess which way you're supposed to vote? This is fine, and in fact I think anyone would go along with the general notion that judges should transcend their personal politics. The problem is that this kicks responsibility up one level, not to the ruling in a particular case, but to the choice of judicial philosophy.
This isn't so much a problem for adherents of other judicial philosophies, such as pragmatism, in which the results are allowed to matter. It's very funny, though, to see people who claim that the results can never matter squirming to find ways of achieving the right results. The more successful they are, the more dubious is their claim to be able to provide convincingly “correct” answers to judicial questions, for their success illustrates the malleability of their method.
Of course, a serious defender of strict interpretation of the Constitution can simply say that Brown was wrong, that the public shouldn't expect the Supreme Court to fix its social problems by fiat, and that judicial appointees shouldn't be disqualified because of their opinions on a particular case. The truth is, though, that not only would such scholars never be appointed to federal court, they would have trouble getting the rest of us to take them seriously. No one wants to live in a world where Brown v. Board was decided the other way.
Certainly it must continue to be a major source of frustration for various legal scholars who seek to serve in the judiciary (I'm thinking here of Bork, except that he found a way to justify Brown). After all, to admit that you think the ruling in Brown was wrong is to abandon all hope for approval by the Senate. Similar, if less intense, pressure awaits anyone who disagrees with Griswold v. Connecticut (contraception), and perhaps someday the same will be true of Lawrence v. Texas (sodomy).
This is deeply ironic precisely because the results aren't supposed to matter, at least to someone who interprets the Constitution strictly. If the strictly interpreted Constitution tells you to let states segregate their schools, but you sympathize with the desegregationists, guess which way you're supposed to vote? This is fine, and in fact I think anyone would go along with the general notion that judges should transcend their personal politics. The problem is that this kicks responsibility up one level, not to the ruling in a particular case, but to the choice of judicial philosophy.
This isn't so much a problem for adherents of other judicial philosophies, such as pragmatism, in which the results are allowed to matter. It's very funny, though, to see people who claim that the results can never matter squirming to find ways of achieving the right results. The more successful they are, the more dubious is their claim to be able to provide convincingly “correct” answers to judicial questions, for their success illustrates the malleability of their method.
Of course, a serious defender of strict interpretation of the Constitution can simply say that Brown was wrong, that the public shouldn't expect the Supreme Court to fix its social problems by fiat, and that judicial appointees shouldn't be disqualified because of their opinions on a particular case. The truth is, though, that not only would such scholars never be appointed to federal court, they would have trouble getting the rest of us to take them seriously. No one wants to live in a world where Brown v. Board was decided the other way.