No matter. Try again.

 After almost a decade, going to try again to record some of my thoughts.

In defense of Heuristics

When people (or other animals) run to catch a flying ball, how do they ensure that they get to the right place at just the right time?

The computational theory of the mind says that we have a "mental model" of how things fly through the air. We use this to work out the likely trajectory of the ball, and run to where our model says the ball will come to earth. The embodied cognition people point out that this is wrong. We use a heuristic: we run so as to keep the line of sight to the ball at a constant angle to the horizontal and this simple rule ensures that we get to the right spot just at the right time.

Gerd Gigerenzer touches on this topic during this excellent talk I came across via a tweet by Yves Smith. He gives the clearest explanation I've seen of how the two approaches differ in their predictions, and how the computational theory is simply wrong even if our goal is not a realistic description of how people actually manage to catch balls but is, as Friedman might have argued, merely to be able to come up with good predictions of their observable behavior.



Of course, his topic is not embodied cognition, but rationality in general, and how decision making under uncertainty differs from decision making under risk, how heuristics are not "second best", and how complex problems don't need complex solutions. Robustness is more importance than optimization, when you cannot know the optimum. His argument in favor of a simple 1/N heuristic, as compared to Markowitz's portfolio allocation theory, was quite astonishing.

Dunning Kruger

This post about what the Dunning Kruger effect is, and what it is not, is very good.

So the bias is definitively not that incompetent people think they’re better than competent people. Rather, it’s that incompetent people think they’re much better than they actually are. But they typically still don’t think they’re quite as good as people who, you know, actually are good.

Your lying heart

As a graduate student, I attended some courses on the art and science of psychotherapy. During one of these lectures, our teacher imparted a morsel of clinical wisdom. This is what he told us: "You will from time to time meet a patient who shares a disturbing tale of multiple mistakes in his previous treatment. He has been seen by several clinicians, and all failed him. The patient can lucidly describe how his therapists misunderstood him, but he has quickly perceived that you are different. You share the same feeling, are convinced that you understand him, and will be able to help." At this point my teacher raised his voice as he said, "Do not even think of taking on this patient! Throw him out of the office! He is most likely a psychopath and you will not be able to help him."

From Daniel Kahneman's "Thinking, Fast and Slow."

What words can do justice

From the National Geographic on the Rhino Wars

Game scouts found this black rhino bull wandering Zimbabwe's Savé Valley Conservancy after poachers shot it several times and hacked off both its horns. Veterinarians had to euthanize the animal because its shattered shoulder couldn't support its weight.

Adam Omizek at Modeled Behavior recently blogged

I have argued that consumer pressure for better treatment of animals in agriculture is a good thing, but that pressuring for better treatment of workers might lead to worse outcomes.

He is writing about animals in agriculture, but what he says applies in general. We are the most powerful species ever to roam the planet, and it is amazing how badly we behave.

Moneyball: this is not a review

I recently watched Moneyball.

One of the most moving scenes in the movie is the one where you watch Billy Beane begins to assemble a team from players who have been overlooked by other teams. You can see how much it matters to them when he asks him to play for him.

What does this imply for my post about Meritocracy?

Doesn't it show that free markets reward talent? Doesn't it show that free markets reward those who can see the value in outsiders and put them to work? Doesn't it show that free markets are meritocracies, and isn't that a good thing?
My answers to these questions would be: yes, yes, and a qualified no.

Markets are wonderful. We should try to find the right person for the job, and we should reward people for doing their jobs well. The bourgeois virtues are very real.

My post on Merit was not an argument against using markets.

Since the 1980s, the best cricket players in India have been growing ever richer. However, that they earn a hundred times what their predecessors used to earn doesn't mean that they are a hundred times as good at the game. They have grown richer mainly because Indians now watch television. In some other countries, the benefits have gone to Football players, while in other countries, Basketball players have gained. These beneficiaries may be great athletes, and they "deserve" their incomes in the sense that this is what others willingly pay them in the marketplace. They are like landlords who have seen the value of their properties explode because someone else built a highway or a railway station nearby.

Hockey is supposedly India's "National Game" and the Indian Hockey team is the most successful team in Olympic History. However, they earn a fraction of what Cricketers earn. There are excellent historical and infrastructural reasons for this. However, to say that Cricket is a better team than Hockey, or that Cricketers are better athletes than Hockey players would be silly. That is my first point: however hard we work, and these athletes work very hard indeed, we underestimate the contribution of luck to our wealth.

Merit, in the sense in which we use it here, is also a morally neutral term. In the movie, Billy Beane recruits players whom others won't touch because they are arrogant, or because they take drugs and frequent strip clubs. As he puts it, all he cares about is whether they are cheap and can "get on base". Personally, I have no problems with people who use drugs or go to strip clubs. The point I am trying to make is that if Billy Beane is rewarding merit, both merit and reward are of the narrowest kind: he reognizes technical competence, and rewards it with money.

Billy Beane was doing The Market's work, and that is good. However, The Market giveth, and the Market taketh away.

We underestimate the importance of the environment: we see those who thrive and see that they are intelligent, hard-working, and conscientous, and they often are! We then assume that they would have thrived in all possible worlds. We don't notice that many of those who are left behind are also were hard-working and dilgent. We also forget that we often seem most virtuous (energetic, optimistic, generous) when things are going our way.

This has moral consequences: instead of being grateful, the successful evolve a fine sense of entitlement, while the defeated blame themselves. This is not only a human tragedy, but a mistaken understanding of how the world works.

Note: Prices are a signal. When wages rise, workers should move into that industry. However, the number of spots on the Indian Cricket team is limited to 11 (plus extras). What we see are more players trying to get in, and a few who do make it and earn huge sums. Most of us do not work in such industries. When wages rise, people enter our industry.
However, this does not mitigate the tragedy of declining industries: I doubt former steel plant engineers are any less intelligent or hardworking that programmers, but they cannot easily start over again.

Predictable

I don't intend to write any more posts about tax for a while. However, Tim Harford makes an interesting point in this article

But few people seem to have recognised that if the entrepreneurial activity in question is avoiding tax through artificial loopholes, it might be a very good idea to generate some uncertainty and give pause for thought.

I don't agree, but an interesting comment nevertheless.

Taxes II

I recently read this article in which Samuel Brittan argues for a tax on land, and quotes Winston Churchill

Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains - and all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived.

I am no expert on Georgism, but I am intrigued.

Bryan Caplan, however, doesn't like it.

There's just one problem: While the Georgist tax has no effect on the incentive to pump discovered oil, it has a devastating effect on the incentive to discover oil in the first place. Suppose you could find a $1M well by spending $900k on exploration. With a 99% Georgist tax, your expected profits are negative $890k.

I am nor persuaded by Bryan's argument. The company will look at the total profits which it can make by investing in finding and developing the oil field.

First, it will pay a higher tax on the land it owns, but since it will no longer be taxed on the profits it makes from extracting, refining, and distributing the oil which it finds, it is not clear that its total profits will be any less.

Second, it is not the case that the company's profits from oil exploration are higher in the absence of the land tax: what would be paid as land tax would instead be paid to the landlord. The effect of the Georgist tax is to transfer rent from the current owner of the land to the State. Whether this is a good thing or not is debatable, but the tax is not paid by the company which finds the oil nor the one which develops it, and will not affect their incentives. Note that this is Ricardian rent, and not simply money rent, though the two could be the same.

To be clearer about this, consider a company which is thinking of buying some land outright, where it is confident that it will find oil. It will take the land tax into account when deciding whether to buy the land (just as it would take sales tax, etc into account today). The effect of the land tax will be to reduce the price which the company is willing to pay for the land, and so will in effect be paid by the current owner of the land. The landlord will sell to them if what they can pay is more than he could make from the user with the next best use of that land. If the land tax did not exist, the company would pay more, and the landlord would be end up richer. But the person with the second best use of the land would also be willing to pay more, and so the landlord's decision would not be affected by the tax!

Finally, as a couple of the commentators have pointed out, there is a fatal problem with Bryan's argument: the model which he says cannot work in theory already works in practice.

Or do you think that when Western oil companies rock up in Saudi Arabia, that the Saudis don't make them pay every cent for the value of the land/natural resources? The Western oil companies just get to keep the additional profits made by extracting, refining, shipping the stuff.

and (italics added)

I invite you to check out the world of actual oil and mineral exploration, this happens all the time. Very seldom will a party of oil/minerals exploration not have to negotiate with a private/government party who will extract as much rent as they can, and the stuff still gets out of the ground with a profit for the exploration party.

The author mistakes 100% of the rent for being 100% of the value of, in this case, oil. It's not, it's what the exploring party will bid to profitably extract it.

Bryan argues that we should be taxing negative externalities instead. The windfall gains made by the landlord because of the efforts of others is a positive externality which blesses the landlord alone, and this is what the tax is meant to recover.

Ricardian Rent is an amazingly subtle concept. I only understood it properly after I read Tim Harford's The Undercover Economist. I am not an expert on taxation, and it could be that I have got something wrong, but I really doubt it. I think it is much more likely that his ideological preferences caused Bryan to rush to judgement.

Edit: Gulzar's comment below, and his op-ed are well worth reading.

Unearned Income

Why we are so enamored with the idea of paid work? This is not about political preferences. The Right bangs on about welfare queens, the left proclaims the virtues of the working classes. Does anybody like idle people?

Strangely enough, as this article by Samuel Brittan shows, Hayek seems to have had no problem with them, or those of us who merely aspire to be completely idle some day.

Hayek went out of his way to praise the existence of the person of independent means, who was responsible for much of the innovation of the last few centuries -- whether in high culture, in the launch of good causes such as the anti-slavery campaign or the more mundane development of the art of living including a great variety of hobbies and sports which were afterwards taken up by the mass of the population.

At a time when you cannot open a business magazine without being forced to contemplate over-achieving businessmen who have no life outside of work, and when people actually seek out tips for sleeping less, as if sleep were some great conspiracy by Nature to prevent them from realizing their full potential, this is refreshing stuff.

Indeed Hayek went so far as to say that if there were no other way it would be better to grant an independent income to one householder in a hundred chosen by lots than not to have it at all. In the 40 years and more since his Constitution of Liberty was published, productivity in the developed world has made great strides. Are we not now approaching a position where some non-wage income could be available not to one in a hundred but to all citizens?

As with so many other ideas, I first encountered the Citizen's Basic Income (CBI) in Chris Dillow's blog. Now that Europe is in crisis, it will be argued that a CBI is impossible there, but I don't think that is the case at all. The real obstacle is always going to be the ideology of work.

On Merit

In this very wise essay, Michael Young reminds us that the 1958 book in which he coined the word "Meritocracy" was meant to be a warning.

It is good sense to appoint individual people to jobs on their merit. It is the opposite when those who are judged to have merit of a particular kind harden into a new social class without room in it for others.

There are any number of arguments against Meritocracy:

1. It reassures the powerful and it demoralizes the powerless.
2. It removes all checks on rent-seeking. As Michael Young notes in his essay

   So assured have the elite become that there is almost no block on the rewards they arrogate to themselves. The old restraints of the business world have been lifted and, as the book also predicted, all manner of new ways for people to feather their own nests have been invented and exploited.

3. It confuses merit and marketability.

As always, I've learned a lot from Chris Dillow.

There is one other argument which I encountered on Andrew Gelman's blog, but have not seen elsewhere. In a post about an article by James Flynn (of the "Flynn effect"), Gelman says

Flynn also points out that the promotion and celebration of the concept of “meritocracy” is also, by the way, a promotion and celebration of wealth and status–these are the goodies that the people with more merit get.

Thus, because we believe that we reward virtue with wealth and power, not only do the wealthy and powerful gain legitimacy, but wealth and power themselves gain a moral sheen by association with virtue. At the limit, we no longer believe that virtue can be its own reward: it has to be accompanied by the insignia of social acclaim.

Taxes

Christina and David Romer's new paper, “The Incentive Effects of Marginal Tax Rates: Evidence from the Interwar Era,” says that the incentive effects of marginal tax rates are

consistently positive, small, and precisely estimated

This really should not be a surprise. Most people would rather be rich than poor, but most people get up and go to work in the morning not because they want to be rich, but because they must or because they love their work. People who love their work will work harder as they get richer.

James Kwak notes that these results are based on the richest of the rich, the top .05% of the population and hence the ones who would find it easiest to slack off if they decided that work isn't worth it; the rest of us would have even less choice

To put this in perspective, an elasticity of 0.19 implies that tax revenues would be maximized with a tax rate of 84 percent.

Should we raise taxes on the wealthy?

The normative aspect of taxation is genuinely difficult. I think most people who oppose higher taxes on the wealthy do so for ethical reasons. They feel it would be unjust to people who have worked hard for their wealth, and have benefited others. I often feel similar scruples, and certainly we shouldn't be taxing people merely because we can.

However, I also agree with Hayek on desert. The world is full of intelligent, hard-working, decent people. For every successful man who we admire for his intelligence and energy there are a dozen who we haven't heard of but who are equally worthy in any meaningful sense. The market rewards you not for what you have done, but for what "it" wants you and others to do more of. Certainly I don't see any good reason why the extremely wealthy should pay tax at a lower rate than those poorer than them.

The doubts which I do have are about government's ability to serve our best interests even if they wish to, though the solution to that would be to avoid overcomplicating government. Whatever your opinion of the "right" rate of tax to apply to the extremely wealthy, these estimates should make you revise that upwards.

A little light Sociology

I follow several blogs about Sociology and Anthropology. Their authors see things differently enough from me so that I have to make an effort to understand what they are saying. I frequently disagree with them, but I also change my mind often. It is an interesting exercise.

I took this image from a post by Lisa Wade over at Sociological Images.

It is difficult for us to see ourselves as others see us, and it is difficult for others to see us as we see ourselves. Lisa writes

Many believe that the U.S. is at the pinnacle of social and political evolution. One of the consequences of this belief is the tendency to define whatever holds in the U.S. as ideal and, insofar as other countries deviate from that, define them as problematic.

I suspect she wrote this only because she assumed that she would be read mostly by Americans. The situation in the cartoon is perfectly symmetrical. All people assume their way of life is "natural". Born into our cultures like fish to water, we cannot usually see ourselves from the outside. We assume that people from other communities are all alike. Because we are not aware of how we have internalized our way of life, we believe that we act freely (and why not?).

Because we cannot imagine ourselves into the situation of others, who have internalized their cultures as completely as we have ours, we assume that they act out of fear. As this post by the Last Psychiatrist shows, the media has a lot to answer for. This should be useful when we read about Iran in the newspapers.

Note: None of this is to say that I am a thorough-going cultural relativist. Yet.

Archaeology is hard

Even though rice rarely survives in archaeological deposits, all plants absorb tiny amounts of silica from groundwater. The silica fills some of the plant's cells and when the plant decays it leaves microscopic cell-shaped stones, called phytoliths, in the soil. Careful study of phytoliths can reveal not just whether rice was being eaten but also whether it was domesticated.

Yan and MacNeish dug a sixteen-foot trench in Diaotonghuan cave near the Yangzi valley...

From Why the West Rules- for now

Links for 23 February 2012

First, a charming article by Carl Zimmer in the Smithsonian.com, about biologist Thomas Seeley and what he has learned about bees. When they began to talk about what we can learn about group decision making from bee-hives, this reader (who has read about eusociality and inclusive fitness) began to mutter to himself "but hives are essentially one big organism! How can decision-making in hives have any lessons for genetically diverse groups of humans?! What about free-riders?"

Whereupon I had to tell myself that Seeley knows that, just shut up and try to understand.

Groups work well, he argues, if the power of leaders is minimized. A group of people can propose many different ideas—the more the better, in fact. But those ideas will only lead to a good decision if listeners take the time to judge their merits for themselves, just as scouts go to check out potential homes for themselves.

Groups also do well if they’re flexible, ensuring that good ideas don’t lose out simply because they come late in the discussion. And rather than try to debate an issue until everyone in a group agrees, Seeley advises using a honeybee-style quorum. Otherwise the debate will drag on.

There are any number of ways for groups of people to take decisions collectively. Seeley is describing a way to use norms to arrive at better decisions. It won't work in all conditions. There are reasons why it works well in New England. However, I think our love affair with leadership is such that we may not be giving it a chance where it could be useful and given our present norms, it may not make sense for any one leader to try and change the way we take decisions.

Second, Felix Salmon rips into Bob Shiller for recommending that countries issue GDP bonds. Excellent points all. One point he makes severely weakens JW Mason's argument for rent control. JW Mason argues that

if an asset lasts forever, the share of its present value -- which is what matters for the decision to buy/build it -- that comes from the later years of its life goes arbitrarily close to zero.

When I read that, I should've remembered that rents typically go up, and so what Salmon says here about bonds more or less applies

If the coupons are steadily increasing, however, the math becomes very dangerous. The coupons will rise at the rate of nominal GDP growth, which in the US will probably be somewhere in the 4% to 5% range over the long term. As a result, if you’re a risk-averse person who wants a perpetual US government security and your discount rate is say 3%, then the expected value of a singe Trill is actually infinite. Of course, no security trades at a price of infinity. But the fact that valuations can get so high in a low-interest-rate environment is all you need to know about just how volatile Trill prices could get.

I like Shiller though, and I hope Salmon is wrong in his guess of why Shiller backs GDP bonds.

Third, another excellent post by Felix Salmon, this time about the market for art. I agree with everything he says here

I do hold out some small hope that the Chinese art market will provide a correction to this syndrome — there, I’m told, the value of an art work is (at least sometimes) much less a function of its recognizability as the work of a certain artist, and much more a function of the way that it can fit itself into a long artistic tradition.

I recently exchanged emails with a close friend, in which I expressed a similar hope: that the (expected) rise of China, India, South America, and hopefully Africa will someday change art forever, that the European tradition which we all now consider to the mainstream of art worldwide will prove to be a tributary of a something much greater. It will mean that many artists we today consider established masters will be relegated by our descendents into the second rank, but it is our best bet for a fresh start in art.

Fourth, via a tweet by @EpicureanDealmaker, an excellent review of David Graeber's new book Debt: The First 5000 years by Gabriel Rossman.

Other interesting points he makes on debt are various ways that it becomes a moral obligation such that debtors are seen as sinners and religious salvation is seen as a spiritual analog to redemption. This helps explain something I never completely understood when watching The Sopranos, which is why gangsters first go to the trouble of getting someone to incur an illegal debt before shaking them down? It turns out that the point of loan-sharking instead of mere naked extortion is the victim feels a certain moral obligation to repay the debt and so loan sharks exploiting gambling addicts has the same logic as how many grifts (e.g., 419 advanced-fee fraud, the fiddle game, etc.) first involve the victim as co-conspirator in a crime against a real or imagined third party.

I've not read the book yet, but the many excellent reviews have made me really think and shaken some of my assumptions. However, like Grossman, I am very worried about Graeber's biases. We'll see.

Fifth, Richard Wiseman pays tribute to psychologist Ulrich Neisser. The monograph which he links to is great fun to read, and I had no idea that Neisser was the grandfather of the Invisible Gorilla experiment.

Sixth, via @MathUpdate on Twitter, an article: Ten misconceptions from the history of analysis and their debunking. I've only just begun to read this, but seriously, we need more such works. Too many laypeople assume that Mathematics is complete and have no idea what living Mathematicians do, but why blame them when there are so many mathematicians who assume that Mathematics is complete and all that living Mathematicians are doing is uncovering what remains hidden of its Platonic reality. Works like these help to complicate that picture, bring to the forefront the actual human process of making Mathematics.

Links for 22nd February 2012

First, I am so glad to see a neuroscence article which says that there is something we do for which we do not have a specialized brain region. Tom Stafford writes about why we find it so easy to remember faces, and so difficult to remember names.

Or to put it another way, we might use the same word – ‘remember’ – to describe our ability to place faces and names, but in fact we are describing two different psychological processes: recognition and recall.

Second, Alex Tabarrok at Marginal Revolution describes the secret agreement that created modern China.

Word of the secret agreement leaked out and local bureaucrats cut off Xiaogang from fertilizer, seeds and pesticides. But amazingly, before Xiaogang could be stopped, farmers in other villages also began to abandon collective property. In Beijing, Mao Zedong was dead and a new set of rulers, seeing the productivity improvements, decided to let the experiment proceed.

Incentives aren't everything, but they aren't nothing either.

Third, pretty much every introductory Economics textbook I have looked at discussed the evils of Rent Control. JW Mason has two posts at The Slack Wire, asking whether rent control really is really such a bad thing. I am not entirely convinced by his arguments, but I am impressed.
On why Rent Control is desirable

The most compelling argument for rent control is neighborhood stabilization, the idea that social capital in an urban environment requires stable residence patterns. If prices are volatile, and this leads to a lot of residential turnover, the result can be a less desirable neighborhood for everyone.

And on why it won't deter new investment because in the United States all existing Rent Control only apply to units built before a certain date. In NYC, it is 1974.

The significance of this is that, even if an asset lasts forever, the share of its present value -- which is what matters for the decision to buy/build it -- that comes from the later years of its life goes arbitrarily close to zero. Say the discount rate is 6 percent. Then 95 percent of the value of a perpetuity comes from the returns in the first 50 years. 99.7 percent comes from returns in the first 100 years

Fourth, I've just started to try GitHub and enjoyed reading this article in Wired. Nice insights into the culture of Silicon Valley. Maybe Jack Welch should read it.

And three months after that night in the sports bar, Wanstrath got a message from Geoffrey Grosenbach, the founder of PeepCode, a online learning site that had started using GitHub. “I’m hosting my company’s code here,” Grosenbach said. “I don’t feel comfortable not-paying you guys. Can I just send a check?”
It was the first of many. In July 2008, Microsoft acquired Powerset, the startup that was providing Preston-Werner with a day job. The software giant offered Preston-Werner a $300,000 bonus and stock options to stay on board for another three years. But he quit, betting everything on GitHub.

The Superman in the corner office

I was a remarkably simple-minded young man. To see this, you only need to know that I actually used to believe what I read in the business press. Since Businessweek told me that Jack Welch is a great manager, I believed them. All I can say in my defense is that all young people I've met have been stupid. That, though, is a subject for another post.

Now Felix Salmon shows us that Jack and Suzy Welch believe that they have a hammer, and that all employees are nails. This is their advice for Zuckerberg on how to manage post-IPO Facebook.

With all this exultant “barking,” there also needs be bite — in the form of frequent, rigorous performance reviews. The facts are, if Facebook wants urgency, speed and intensity around its mission, those behaviors must be explicit values that, when demonstrated, result in bonus money and upward mobility — or not.

This is how Welch managed GE. Why does he believe that this is a good way to run Facebook? Has he given it any real thought? Does he think all organizations are the same? As Salmon writes

What’s more, it’s far from clear that the best way to motivate a Silicon Valley engineer is to dangle an annual bonus in front of his face and tell him that if he works hard he could get an extra couple of months’ salary at the end of the year. Rather, the best way to get the most out of engineers is to surround them with other great engineers, in a collegial atmosphere where everybody works hard and everybody does really well building great products that everybody is proud of.

We are prone to self-serving bias. Successful people tend to assume that what worked for them will work for anyone, at any time. "Do as I did, and you will be alright" they say. To believe anything else would be to accept the power of contingency, to admit that their success may have no timeless lessons.

This, though, only explains why Welch is willing to supply a steady stream of unoriginal commentary. How about the demand side? Why is Welch paid good money to prattle on about how to manage a company he knows nothing about?

Economics is built on the principle that people respond to incentives. This is a useful guide when thinking about economic problems, but it becomes an ideology when you no longer think about the specifics of the situation. For example, it is elementary economics that a minimum wage increases unemployment, but does that mean that abolishing the minimum wage is the best way to reduce unemployment? In this post about the minimum wage, Dillow shows us that we don't live in an Econ 101 world

Let’s instead do some simple maths. There are 4.06 million 18-24 year-olds not in full-time education. 2.77 million of these are in work, and 1.29m - 31.8% - are unemployed or inactive. This means that to get the employment rate up to 80% for this group would require an increase in employment of 17.3%.
How could such a rise be achieved by abolishing the NMW? There are only two possibilities: either the abolition allows wages to fall a very long way; or the price elasticity of demand for young workers is very high.

He tackles the same question in this magnificent post where he explicitly calls the reliance of incentives an "ideology"

Nick Clegg says we need a cap on benefits “not least to increase the incentives to work.” This runs into an obvious objection - that the big problem right now is not so much a lack of incentives to work but a lack of opportunities to do so. There are 2.69 million unemployed chasing 459,000 vacancies - that’s 5.85 unemployed per opening.

He goes on to discuss the cognitive biases which cause people to over-estimate the importance of incentives to work. Read it all. Read it again.

Managerialism is the ideology of my generation. I see it all around, and I have not been immune to it myself. It is not the same as Management Theory but is the idolatry of Management. It is the belief that the problems of the world can be solved, that the solution is "management" (or "leadership"), that there are great leaders but (thank goodness!) you can learn to be one too. It is why journals on management have abandoned mundane matters of operations, trade, and policy to become glossy lifestyle magazines about the rich and powerful. Chris Dillow has described the problems with this ideology in yet another splendid post.

In this tweet, John Cook quotes Stanislav Datskovskiy

Employers much prefer that workers be fungible, rather than maximally productive.

This makes excellent sense for employers, since highly productive employees who are difficult to replace can claim most of the value they create. In today's large corporations, power resides with the managers, not with the shareholders who are ostensibly the owners of the business. Managerialist ideology makes firms themselves fungible: the good manager can be good in any context, and so the firm needs him far more than he needs it. The balance of power moves further towards the managers and away from the owners.

Links for 21 February 2012

First, a wonderful post by John Cook, on how to deal with singularities when integrating functions.

Second, a post in which Chris Dillow asks whether Management matters. He describes a study of medium-sized manufacturers which seems to say it does. He doesn't agree, because his idea of what "management" means is different.

The practices it identifies are largely about whether there are good feedback mechanisms in place. Is the production process sufficiently well monitored that errors can be eliminated and efficiencies identified? Is there good performance appraisal of employees? Are goals clear and sensible? And so on.

What we have here, then, is not a story about CEO’s “strategic vision”, or about the power of great individuals, but about day-to-day administrative structures. Common sense says these must matter, and must be basic good practice for any firm.

I think he is right, but there could be even more to this. Few things are so disruptive of good administration as management which wants to be doing things all the time, trampling their way through the organization like a herd of elephants cavorting in a field, shaking things up in reorganization after reorganization. Thus, the fact that these organizations have good practices may mean simply that they are lead by sensible people who know to put good systems in place and generally stay out of the way. In any case, I am entirely in favor of calling the things which we do "administration" rather than "management", as Joel Spolsky puts it in this recent essay.

The “management team” isn’t the “decision making” team. It’s a support function. You may want to call them administration instead of management, which will keep them from getting too big for their britches.

Of course, maybe it is simply selection bias. There are times when management do have to shake things up if the firm is to have a chance of returning to good health, and maybe these firms have been doing well for other reasons altogether, and their systems have had a chance to mature. We see that firms which have good systems seem to be doing well, and we assume that the one caused the other.

Um, but there is this awkward point

However, Bloom and colleagues find that less than one fifth of the variance in total factor productivity can be explained by these management practices. I’m surprised by how low this is.

Indeed.

Third, another old post by Dillow, in which he asks whether politics should be based on morality.

My answer would be that it will be whether we want it to be or not, since morality seems to be a basic drive in human beings. We cannot help it. This is not always a bad thing but it can be, especially in a democracy where the median voter will not be unduly discomfited if he gives in to his taste for revenge, moral outrage, and spasms of maudlin sentimentality. I find Jonathan Haidt's work quite persuasive.

How much of moral thinking is innate? Haidt sees morality as a "social construction" that varies by time and place. We all live in a "web of shared meanings and values" that become our moral matrix, he writes, and these matrices form what Haidt, quoting the science-fiction writer William Gibson, likens to "a consensual hallucination." But all humans graft their moralities on psychological systems that evolved to serve various needs, like caring for families and punishing cheaters. Building on ideas from the anthropologist Richard Shweder, Haidt and his colleagues synthesize anthropology, evolutionary theory, and psychology to propose six innate moral foundations: care/harm, fairness/cheating, liberty/oppression, loyalty/betrayal, authority/subversion, and sanctity/degradation.

Chris Dillow feels that we should try to keep morality out of politics, and offers excellent reasons to do so. I believe that what he wants is desirable, but impossible. As he points out in his post, we should be looking at structures and asking why things turn out the way they do. I fear that his post is thought provoking but fundamentally similar to the moralistic thinking he deplores.

Cordelia Fine at The Cellular Scale

The Cellular Scale reviews Cordelia Fine's Delusions of Gender. This is a book I must read. As the review summarizes it

• You are bound to find differences when you are looking for them.
• Differences are more likely to be reported and publicized than similarities
• There are glaring flaws in many neuroscience studies showing brain differences between men and women
• Even if all the studies showing brain differences between men and women were taken as true, that still wouldn't mean that the differences are 'hard wired' or 'inherent' or 'because of evolution'
• Even if all the brain differences are real, and even if they are 'hard wired', that still doesn't mean that women and men actually think differently

For me the key passage was this

Since everyone knows men and women are different re: genitalia, let's test whether they are different in brain or behavior. This may seem totally reasonable, but a counter example is finger-print pattern. People can be grouped by their fingerprint pattern into 'loop-shape' or 'swirl-shape' people. This fingerprint pattern is determined genetically, but since it is not an obvious difference (you probably don't even know which group you belong to), no one has ever tested whether 'loop-shape' people have bigger hippocampi than 'swirl-shape' people.

Again, because "no difference" is not interesting, every study which talks about the observed differences between men and women is shadowed by all the studies which did not find any differences and so were not even published. This is a common issue in Science, but its good to be reminded of it.

The Platonic essence of a book

The Epicurean Dealmaker demolishes E-Books can't burn, Tim Parks' recent essay in the NYRB.

Where Tim Parks' says

The e-book, by eliminating all variations in the appearance and weight of the material object we hold in our hand and by discouraging anything but our focus on where we are in the sequence of words (the page once read disappears, the page to come has yet to appear) would seem to bring us closer than the paper book to the essence of the literary experience.

The Dealmaker responds

A book, properly considered, is a recorded performance of a piece of literature, just like a CD is a recorded performance of a particular piece of music. While musicians have more artistic discretion in interpreting a piece than a book designer and publisher do, the latter are not aesthetically invisible. They subtly influence a book’s format and packaging: font, margins, page breaks, cover art, etc. The sequence, timing, pace, and even completion of the work—its interpretation—lie in the hands of a reader, but the packaging and presentation of the physical object is not. And because reading is a performance, the time and place where you read is important, too. Reading Lord Jim on a plane is not the same as reading it on a tropical beach. The former is forgettable; the latter is not, as I can personally attest.

Beethoven’s Ninth Symphony is the same music, whether it is interpreted by the Berlin Philharmonic or the Boise Symphony. But nobody ever hears Beethoven’s Ninth Symphony: they hear a performance of it. By the same token, nobody ever reads Ulysses, they read a version of it, as presented to them through the medium of some sort of delivery device at a particular time and place, and interpreted according to their own engagement, interest, aptitude, and sensitivity.

He is absolutely right, of course. The whole things is wonderfully written, and reads well even on a laptop screen.

An axe, not a scalpel

I came across this Neuroconscience article through a tweet by Uta Frith.

Reading it, I wonder how many of the fMRI results we read about will survive even 20 years. I am grateful to them for this wonderfully clear description of some of the challenges involved in using this tool. Some of the good bits points are below.

The essential problem of fMRI is that, while it provides decent spatial resolution, the data is acquired slowly and indirectly via the blood-oxygenation level dependent (BOLD) signal. The BOLD signal is messy, slow, and extremely complex in its origins. Although we typically assume increasing BOLD signal equals greater neural activity, the details of just what kind of activity (e.g. excitatory vs inhibitory, post-synaptic vs local field) are murky at best.

Setting aside the worry about what neural activity IS measured by BOLD signal, there is still the very real threat of non-neural sources like respiration and cardiovascular function confounding the final result.

If cognitive load differs between conditions, or your groups (for example, a PTSD and a control group) react differently to the stimuli, respiration and pulse rates might easily begin to overlap your sampling frequency, confounding the BOLD signal.

You’ve probably guessed where I’m going with this: hold your breath in the fMRI and you get massive alterations in the BOLD signal. Your participants don’t even need to match the sampling frequency of the paradigm to confound the BOLD; they simply need to breath at slightly different rates in each group or condition and suddenly your results are full of CO2 driven false positives! This is a serious problem for any kind of unconstrained experimental design, especially those involving poorly conceptualized social tasks or long periods of free activity. Imagine now that certain regions of the brain might respond differently to levels of CO2.

The whole piece is well worth reading.