Black Crow Events

 

Featured image is the End of the World, by John Martin

Fellow sweet talker Sam has pointed out the surface similarity between the case for space exploration and the case for anti-globalisation.

That is, earth, being our only planet, is vulnerable to certain extinction level events, thermonuclear war, environmental degradation , super-AIDS and the always popular death from the skies, and given that it would be nice for the species to continue existing we should seek out an alternate planet to live on to double the chances of at least some humans surviving. Similarly, given that there is increasingly only one, global economy on which we all depend for meaning and sustenance, it might perhaps make sense to erect some barriers, so that, to give a hypothetical, dodgy securitisation practices in the United States doesn’t obliterate the seemingly unrelated economy of a small island nation. However these risks interact with the rest of the world in fundamentally different ways, and need to be managed differently.

While in school I did an internship at a local electrical utility. Most major urban networks at that time were radial, isolated, and manually redundant, that is power comes from a central distribution transformer and is distributed outwards like spokes on a wheel. Under normal operation there is no active connection between these different islands, however the infrastructure exists and is in place to connect them with the throw of a switch by the operator or command centre.

The advantage of linking the networks together is that when something goes wrong in one network, the other networks can pick up the slack. If a tree hits a major line, and causes a blackout the operator can flip a few switches and get power restored to many of the affected houses in a short period of time. Power to critical infrastructure, like telephones, will be connected to batteries so that if primary power is lost, the batteries will automatically kick in and the system as a whole still works. Telecoms even started installing battery packs at the customer locations, as fibre has overtaken copper as the technology of telecommunications and it was no longer possible to use the telephone wire to power the telephone if your house loses power. This is redundancy, and it is the primary tool we use to keep networks resilient to failures.

The increasing linkages that come with globalisation often operate in the same manner. If there a drought in Florida, oranges can be imported from a different area of the globe. If a major flood destroys the garment industry in Bangladesh other workshops in Africa and Indonesia can be found. Further, since expertise and equipment can be deployed globally, if a disaster destroys a major or sole supplier of a particular good the nexus can be reconstituted elsewhere. It also allows a greater variety of substitution goods, so that if a blight destroys most of a year’s cotton crop, even in all areas, we can substitute linen, or silk, or synthetics and still produce a workable garment.

So given the advantages of linking these networks together, why didn’t we make the links in our power network? There are two good reasons. The first is that when you want to take a particular area down you only need to throw one switch to do it, so that an operator wouldn’t throw a switch and assume that the network was down, only for power from another source to come back in without their knowledge, potentially fatally. The second is that it limits the damage done by any individual fault. If a crow lands on your transformer, only the transformer, and the things downstream of the transformer will be taken down, the rest of the network is oblivious. (The crow is also oblivious, as his internal organs are plasma. RIP crow, I didn’t want to save that report anyway).

It’s the second point that is most relevant here. Near the beginning of my term at the utility we had planned for one of the transformers to go down while we did maintenance on it. The linesmen closed the relevant switches, linking the two networks together, and then got in the truck to open the switches that isolated the transformer to be taken out of service. While they were driving, a tree hit a major line, blowing protective devices on both transformers and melting the wire. What would have been an isolated fault taking out about a third of the city now took out the entire city for the better part of a half a day.

The increasing interlinkage of the global economy leaves it vulnerable to these kinds of events. A problem that wipes out the banking sector will affect the global banking sector instead of being contained in a national banking sector. A pest that destroys a particular tree will spread across the globe, destroying trees all over the globe instead of just on one continent. So why not maintain the same barriers that other networks do for their safety?

First, the networks had certain barriers, but were never actually islands. The linkages between the networks were all in place, waiting for the right moment to be activated. But the global system is closer to a biological than a mechanical system. Linkages have to be grown, and having grown be used to be strengthened. There isn’t a standby export infrastructure waiting for the command centre to throw the switch, there are actual exporters and actual ports and actual longshoremen and truckers and roads that need to be maintained trained and built, and can only be built by being used. Movies need distribution channels and rightsholders working in concert which takes time and skill. The redundancy required for resilience needs to already be in place and operational.

Second, it is easier to cut a connection than to make a new one. The vast majority of systemic faults don’t begin as systemic faults. They begin as relatively minor, localised faults which, when not handled appropriately, escalate into larger faults and sometimes spread, what engineers would call failure cascades, but in finance is usually called contagions. Handling these problems properly means acting quickly to contain them to as small an area as possible while they are still small, or limiting their ability to grow. This doesn’t mean the creation of barriers, but retaining the ability to create barriers quickly. Figuring out how to detect small problems and handle them before they become big problems, and making sure the disease is worse than the cure, is the majority of modern engineering work, and an essential part of any regulatory apparatus. When done well it can be accomplished in a way that the remaining equipment doesn’t even notice, and with minimal downtime for the affected equipment.

Finally there are some kinds of problems that simply can’t be dealt with internally. A well designed, fully parallel battery back-up won’t save you when the operator comes in drunk and runs over it with a forklift, or when a rattle snake decides to make its home inside and the groundskeeper, being a good west Texas boy decides this is a problem that should be solved with a shotgun. (The snake was reportedly delicious).

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Or when nearby equipment explodes

The only way to deal with this is reduce, as far as possible, the number of systems that will act as single points of failure, by creating parallel systems as far away as practicable. It is these sorts of cases that earth 2 is designed to protect against, and in which the logic of anti-globalisation is strongest. There is one major difference. Earth 2, by its distance, can’t help you when something goes wrong. The species survives, you’re still screwed. By contrast access to rice grown in Thailand can help you, and cutting yourself off from it can decrease global systemic risk only by increasing the chances that a local survivable risk is turned into a local catastrophic one.

The Spirit of Economy

“One must go further, one must go further.” This impulse to go further is an ancient thing in the world. Heraclitus the obscure, who deposited his thoughts in his writings and his writings in the Temple of Diana (for his thoughts had been his armor during his life, and therefore he hung them up in the temple of the goddess), Heraclitus the obscure said, “One cannot pass twice through the same stream.” [Plato’s Cratyllus, § 402.] Heraclitus the obscure had a disciple who did not stop with that, he went further and added, “One cannot do it even once.” [Cf. Tennemann, Geschichte der Philosophie, I, p. 220.] Poor Heraclitus, to have such a disciple! By this amendment the thesis of Heraclitus was so improved that it became an Eleatic thesis which denies movement, and yet that disciple desired only to be a disciple of Heraclitus … and to go further– not back to the position Heraclitus had abandoned.

-Søren Kierkegaard, Fear and Trembling

Featured image is Market Scene, by Aertsen.

The spirit of social science is technocratic. Economics is especially so. Economists seek to understand commerce in terms of its moving parts. Everything recognizably human is stripped away as prejudicing; left behind are algorithms of choice to be studied in terms of how they interact within different systems of rules. And this method has proved quite useful in identifying the strengths and fault lines of such systems.

But they are rarely happy to leave it at that. After failing to find an all encompassing theory of human nature, they relegate what cannot be explained by their methods to a black box. Thus, spirit becomes ranked preferences, the content of which is considered out of the economist’s purview. In as much as this rule is violated, it is because some aspect of human nature has turned out to be tractable to economic mechanics. Thus Robert Frank and the economics of envy—sorry, of status competitions. Frank echoes Thorstein Veblen here, but Veblen was not nearly so mechanistic—though he suffered from other sins.

As economics continues to move in the direction of Frank and those like him, spirit is increasingly being eliminated entirely, rather than kept in a black box. And so economics has moved from inhuman models to becoming actively dehumanizing.

Albert Hirschman believed that this flight from humanity began with the idea that wild, destructive passions must be offset by interests, with successive generations of philosophers narrowing what counts as a person’s interests. Martin Heidegger believed that the problem began with the classical philosophical tradition as a whole, once it lost the original context in which Plato and Aristotle posed their questions.

In any case, the inhuman models, even before they became aggressive in their dehumanizing, rested on a narrow notion of reason that is severed from spirit. The business world is full of rules, choices made under conditions of scarcity, transaction and exchange—these sorts of things make for a great beginning in describing commerce. But they are a bad place to end.

A complete discussion of commerce needs to speak to its spirit, the spirit of business at some place and time. This spirit varies not only across nations or periods of history, but across industries and companies. See Joseph Heath on the criminality that characterizes specific industries.

Whether or not business can be characterized as exploiting the less fortunate or participating in their flourishing, myopically opportunistic or directed towards the common good, may be more a matter of the spirit of the enterprise than of its formal characteristics.

The great apologists for commerce in 18th century Scotland may have done more for the world by developing an ethos of public virtue through prudent dealings, than they did by midwifing the birth of economics as a discipline.

How unfortunate, then, to live in an age characterized largely by the eradication of what spirit we have—in business, in civil society, in government—without a corresponding drive to foster its replacement.

Keynesianism in Democracy

Two years ago, semiconservative pundit Josh Barro declared that “Conservatives Have No Idea What to Do About Recessions.” The eminent progressive economist Paul Krugman agreed, then tweaked crotchety Josh by saying this idea-less condition afflicts not only “anti-intellectual and doctrinaire” Republican policymakers but also “prestigious conservative economists” such as, um, Barro’s father Robert.

Conservative intellectuals like Robert Barro, Krugman suggested, have rejected the economists’ notion of aggregate demand, and in so doing they have rejected not only Keynesian economics but also the wrong-yet-acceptable monetarist alternative and its very great avatar Milton Friedman. Why? Because politics: Krugman sees Barro père as having “the sense that acknowledging that markets fail, ever, would be the thin edge of the wedge for liberal policies.”

With apologies to Alex Pareene’s version of Malcolm Gladwell: Say that Krugman is right about Robert Barro’s motivations. Could Barro still be right in rejecting Keynesian economics? What if Keynesian economics contains a lot of truth, though? Surely then Barro would be wrong in refusing to advance those true Keynesian ideas.

Or would he?

In 1977, the classical liberal economists James Buchanan and Richard E. Wagner argued that the advancement of Keynesian economic ideas is counterproductive in a mass democracy. Buchanan and Wagner allowed that there could be some ‘truth’ in Keynesianism but said that intellectual economists—few in number and limited in influence—can no longer assert the consistent level of control over economic policy that would be necessary to deliver results. Why not?

John Maynard Keynes, as evidenced in material cited by Buchanan and Wagner, tended to think of policy in his Britain as being handed down by an intellectual aristocracy that would not soon be displaced. Keynes believed that sway over the economic levers could and would be maintained by smart folks, whatever else may transpire. But in America now, as Paul Krugman and Josh Barro both know, that ain’t so. The columns and tweets of today’s smarties, whoever they are, are just an input into the roiling democratic processes that determine policy.

So what should that input be? Krugman’s answer is twofold: Keynesian economics and Democratic Party politics. We are fortunately blessed to have with us a party of politicians who take their cues from sensible people. The Democrats are smartly Keynesian, and so if they remain in power then countercyclical policy is guaranteed. Stimulate the economy when it busts, then use boom times to control inflation and reduce debts.

But Buchanan and Wagner pointed out that since the boom-time Keynesian policies of tighter money, lower spending, and higher taxes are never popular with voters, it doesn’t make a lot of sense to bet on continuous Democratic victories. An opportunistic opposition party could put forward pseudo-Keynesian ideas designed to win elections: Say, if tax cuts are stimulating during recessions, then shouldn’t they be stimulating all the time? A voter who really understands Keynesianism, who learned what she was taught in intermediate macro, wouldn’t be suckered by such an opposition. But in a mass polity dominated by noneconomists, vague notions about the benefits of ever-lower taxes can sink in. Sometimes the Republicans win, and who knows what they end up doing.

So Buchanan and Wagner’s answer was this: Mass democracy requires a wiser brand of economist, one who understands Keynesian economics but refrains from offering the Keynesian policy prescription. Economics professors shouldn’t, in their classrooms, push their smart kids to advocate for strongly countercyclical budgeting. Teach them about the idea, yes, but teach them too about the politics that are likely to frustrate its successful implementation, and remind Timmy in the front row that he’ll never chair Ways and Means.

Buchanan and Wagner thought a better result would obtain if the economists and their sharp students hold that politicians should consider the government to be broadly constrained by its budget. Then less nuttiness gets around. The idea of ever-lower taxes, dumb on its face, is affirmed as dumb. And some of the less defensible Gladwellism in politics is stymied. A crotchety man or two might be happy about that much.

They would be, right?

On Bullshit in Economics Textbooks

“This is important to Wittgenstein because, whether justifiably or not, he takes what she says seriously, as a statement purporting to give an informative description of the way she feels. He construes her as engaged in an activity to which the distinction between what is true and what is false is crucial, and yet as taking no interest in whether what she says is true or false. …

“Bullshit is unavoidable whenever circumstances require someone to talk without knowing what he is talking about. Thus the production of bullshit is stimulated whenever a person’s obligations or opportunities to speak about some topic are more excessive than his knowledge of the facts that are relevant to that topic.”

—Harry Frankfurt

Imagine an economist sitting down to write a textbook. The task requires the economist to write about many matters on which he is not expert. If the economist drafted the entire book in an initial sitting, we who have been edified by Harry Frankfurt would imagine that the chapters on matters outside the economist’s expertise will be relatively suffused with bullshit. With effort—research, correspondence with colleagues, and so forth—the author should in subsequent drafts be able to reduce the proportion of bullshit in those chapters. But it could hardly ever be possible to eliminate the bullshit. Often it may be the case that no one is sufficiently expert in the matters at hand to give an authoritative account. The author may be in the position of a politician who must address a difficult issue and has only the input of divided experts and a divided electorate to go on, and so bullshit ensues.

Presuming this model of authoring to be correct, what does it tell us when we come across big amounts of bullshit in a textbook chapter? It might be that economists at large have no experts on the matters discussed. It might be that the textbook author did not exert much effort in writing the chapter. It might be that the matters at hand are controversial.

Econ 101 has in some quarters a reputation for consisting of dry theoretical propositions. But the opening chapter of an introductory economics textbook is really a prime place to find bullshit. This could be the case because economic science itself does not tell us exactly how to begin speaking about economics. Adam Smith gave us an exemplar when he started The Wealth of Nations with a discussion “Of the Division of Labor,” but there is no definitive reason to follow Smith in this regard and in the succeeding centuries economists have gone about the task in various ways.

One principles text I had the chance to use in recent years doesn’t even contain the phrase “division of labor,” let alone near its outset. The first two words of its Chapter 1 are in fact “Barack Obama.” Its third sentence describes Obama as “the Economist in Chief.” In the sixth paragraph it emphasizes that “President Obama has to decide how best to use the nation’s limited resources.” The second paragraph reports that prior to his inauguration Obama “asked [his economic advisers] whether the economy would recover from recession without further government intervention.” Come on, man. That conversation did not happen.

That there’s this bullshit doesn’t make the textbook’s introduction to economics unworthy. Pointing up shared American identity to connect with students might be okay. The overall impressions students take from the chapter may be useful and correct in the main. But you’d be right to say the author doesn’t care a lot whether every sentence written is true or not. And you have to think bright students notice that. I suspect a number find it alienating.

If bullshit in textbooks is a problem, it’d be good to measure its volume. Possibly one could take the first 50 sentences from several textbooks, mix them up, then present them to economics graduate students as a 50-question test a la Politifact: “Rate each sentence True, Mostly True, Half True, Mostly False, False, or Pants on Fire.” And is our bullshit skewed? The subjects could also rate each sentence in terms of whether it conjures a centralized or decentralized view of economic affairs, a command or market economy, a national or world system. I doubt any will be surprised if economists’ prior commitments primarily manifest themselves amidst bullshit.

The Paradox of Commenting

There is a literature, or at least a batch of memes, holding that voting is not an ‘instrumentally rational’ activity, since casting a ballot is costly and one’s vote is unlikely to decide an election. The expected ‘instrumental value’ of voting is thus held to be low, very low, surely less than the value of a free half an hour. The supposed implication is that a sane person should vote only if it’s fun, like Candy Crush is.

The other day I saw a philosophy professor berating a professed voter in a Facebook thread. The philosopher banged on at length, making comment after comment, editing some of them, over the course of an hour. “If you view voting as a consumption good, like eating a candy bar or wave a flag for fun [sic], then it might not be a waste of time,” said the good prof, appropriately citing “the entire ‘paradox of voting’ literature.”

Say I were to add my two cents, as it were, to this established thicket of ideas. My slice of discourse might be, say, the 10,000th piece of writing that has appeared in the greater literature area.

Probably there is a conventionally diminishing marginal product of additional takes on the matter. While it’s remotely possible my piece will discourage a lot of voting, odds are it will affect no one and deter zero votes. Perhaps it will affect a few folks, though it’s not even certain what effect it would have on them. (Possibly my argument would be so facile and my style so repulsive that readers resolve to vote more often out of spite.)

What is the expected instrumental value of me making my argument? With some probability it causes a few votes not to be cast, saving a few half-hours, though losing the supposedly very low instrumental value of the votes.

The probability that my argument converts a few votes to non-votes might be higher than the probability that a vote swings an election, but that would have to be established. The value of a few half-hours saved is a great deal lower than the value of deciding an election. Also, the half-hour spent casting a ballot entails voting in several contested elections, not just one.

If sane voters can only be getting themselves off, what are sane contributors to the “paradox of voting” literature, as it carries forward in isolated corners of social media, doing? Their refinements, it would seem, are not helping society in an appreciable way. Nor is it likely that one’s latest comment, sentence, correctly spelled word, or well-chosen punctuation mark noticeably furthers one’s career. It’s also not clear that the world is any better off if the careers of “paradox of voting” aficionados do advance.

May it all be irrationality, or a ploy to sell books, or clawing for status. Hopefully no one views the hurling of insults as a consumption good.

Provision and Use

When talking about the nature of business a couple of years back, fellow Sweet Talker David brought up a wonderful quote from the movie Sabrina:

Bogart: Making money isn’t the main point of business. Money is a by-product.
Holden: David -What’s the main objective? Power?
Bogart: Ah! That’s become a dirty word.
Holden: What’s the urge? You’re going into plastics. What will that prove?
Bogart: Prove? Nothing much. A new product has been found, something of use to the world. A new industry moves into an undeveloped area. Factories go up, machines go in and you’re in business. It’s coincidental that people who’ve never seen a dime now have a dollar and barefooted kids wear shoes and have their faces washed. What’s wrong with an urge that gives people libraries, hospitals, baseball diamonds and movies on a Saturday night?

Emphasis added by me.

I wrote a piece about consumers, but it was received very badly by some, mostly (it seemed to me) because of what is implied by the very word “consumer”.

Let’s toss to the side those old notions of production and consumption, so tied to a mental model developed around manufacturing. Instead, let’s think about making use, and provisioning what is being used.

More importantly, let’s stop thinking of these as two separate things apart from one another, and try harder to talk about them like the unity they actually form.

In their home lives, parents may buy books, and educational video games, and Cable TV with cartoons, all for their children. If they’re the planning sort, they buy food for the week. If they’re not, they might find themselves ordering pizza one night. If they want some time away from the kids, they probably need a babysitter, and odds are they will go out to a restaurant, or a movie.

Every thing or service that they and their children use—books to read, games to play, TV to watch, food to eat, a babysitter to make sure their children are safe and taken care of, somewhere to spend time together away from typical routines—must be provisioned beforehand.

A large number of people are involved in provisioning a children’s book; we may think of the author, of course, and the people who work at the publisher, but complex supply chains bring countless hands into the process. All of these people, in turn, contribute to the provision of books like the ones our initial parents bought, so that they, too, may be able to buy books or games for their own children, or for themselves.

Meanwhile, the parents in the original example must contribute to the provision of some thing or service in order to be able to buy the very items mentioned above in the first place!

In this way, provision and use are processes which form a unity.

Today, a huge supermajority of what we use is provisioned through commerce. But not all of it, not by a long shot. Infrastructure is largely provisioned through tax-financed institutions, for example. Politically, countries like America long ago moved towards provisioning the great bulk of education through such institutions, as well.

Home provisioning, such as cleaning dishes and clothes, or having a vegetable garden, still accounts for a great deal of what we use as well. We may provision a car through commerce, but when we drive our child to school, we are opting to use ourselves as drivers rather than opting for a car service.

For most of human history, nearly everyone had to spend nearly every hour of the day working so that they could provision their own food. The shift from subsistence farming to nearly everyone in developed nations provisioning their food through commerce has been a tremendous gain.

In the 20th century, there were many attempts to provision everything through government administration. They went terribly. As I said above, this does not discredit any provisioning through government administration. But it has certainly made it clear that there are limitations we would do well to heed.

In a country like America, government provision largely takes the form of government participation in commerce. Tax-funds are the basis of the purchasing, and government officials oversee and make key decisions, but the materials must be bought from companies, and the labor is often done by contractors. And government officials go home and buy their children’s books and games just like everyone else—in our country, government provision forms a unity with private use, as well.

While maintaining the wisdom of making distinctions, I think we could stand to be a little less doctrinaire, less categorical. There are many ingredients that go into the making of the ordinary life; a great deal of those ingredients are provisioned through commerce.

Ancient Wisdom and Modern Toolkits: A Review of Economics and the Virtues

Economic theory today exists entirely within the narrow confines of utilitarianism, and positivism still reigns as the accepted philosophy of science. In philosophy itself, the former has been almost entirely abandoned as unworkable, and the latter has been completely demolished.

In a way, that makes the accomplishments of economists all the more amazing, given the materials they were working with. But these philosophies were discredited for a reason—they have serious problems which they lack the resources to resolve. You can see this in the critiques that economists themselves largely agree are merited, such as the results of behavioral economics. With the notable exception of prospect theory, it has proven unfeasible to integrate the insights of behavioral economics into economic theory.

When your theories lack the resources to overcome persistent problems, it doesn’t hurt to start looking at how other frameworks might address those problems. In this regard, the forthcoming Economics and the Virtues, edited by Jennifer Baker and Mark White, proves an invaluable resource.

The collection brings together thirteen different authors, some economists and some philosophers, who each make their attempt to bring the narrow framework of economics into dialogue with broader philosophical questions. As the name of the volume implies, this focuses primarily on virtue ethics, but not exclusively. Mark White’s essay, for instance, attempts to bring Kantian considerations into economic analysis, though he does do so through emphasis on the kind of person necessary to follow Kantian imperatives, bringing it closer to virtue. And Jason Brennan’s essay simply approaches the question of whether markets corrupt our character, a topic he has focused on a great deal lately.

But the rest of the essays focus particularly on how virtue ethics can be used to bring valuable insights and much needed sophistication to economic theory. One essay I would call out as likely to be of special interest to economists is Andrew Yuengert’s “The Space Between Choice and Our Models of It,” a powerful treatment of the limitations of economic models and how Aristotle’s conception of practical reason can fill the gap. Yuengert is the author of Approximating Prudence, where this and related topics are treated in greater depth.

The collection includes a great deal of history of thought in addition to attempts to synthesize different frameworks with economic theory; Eric Schliesser’s essay, for instance, details the way in which the subject matter of economics and moral philosophy went from being treated as one and the same, to distinct.

One criticism I would make of the collection would be that there were several essays that were stronger in their presentation of the history of thought they were interested in than in laying the grounds for a synthesis. The first essay, by Christian Becker, provides an excellent overview of economic rationality in Aristotle and in modern economics, but ends with talk about a “virtue of sustainability” and other such things. This seemed an awkward marriage of the modern notion of sustainability with the ancient notion of virtue—one that improved neither.

This does not, however, detract from the fact that the collection is a valuable source of insight, especially for economists used to operating within only one framework. For anyone looking to enrich their economic analysis with insights from frameworks that have been discussed for thousands of years, the essays in this book are an excellent place to start.

Economics and the Virtues will be out in March.

In Defense of Status Competitions

As SpaceX successfully landed their 23 story tall Falcon-9 rocket in upright position, Jeff Bezos, the CEO Blue Origin (a rocket company which performed a superficially similar, but technically much less impressive feat days before), tweeted the following:

Ouch! Within an instance, Bezos became the target of scorn for hundreds of fawning SpaceX and Elon Musk fans who derided Bezos’ “welcome to the club” comment as classless and back handed. Yet as my colleague Andrew noted at the time, “given that space exploration is mostly a billionaire dick measuring contest, petty squabbling is probably the best motivator we could ask for.”

I think this is exactly right, but I will go a big step further. “Dick measuring contests,” more generally known as status competitions, are often called “wasteful,” “zero-sum,” and “inefficient.” Yet even when those labels are technically accurate (and they often aren’t—the private sector space race, for example, is clearly socially useful), another important truth can be simultaneously true: Status competitions are our main, if not only, source of meaning in the universe.

The Anxieties of Affluence

For all the wealth controlled by the three comma club, they turn out to be relatively poor when it comes to status goods. The reason relates to the inherent positionality of status. As in a game of King of the hill, moving up a rank necessarily means someone else must move down one, with the top-most players having the least to grab on to. Climbing from second-from-the-top to “King” is thus exponentially harder than moving from third to second, forth to third, and so on. And for whomever is King, with no one above to latch on to, the only way to truly secure one’s position against the penultimate scourge would be to invent a (proverbial) sky hook.

If not for this zero sum (at the psychosocial level) drama, what would drive Musk or Bezos to invest so heavily in their own (quite literal) sky hooks? Bezos tweet is at least evidence that Musk’s aeronautical successes have gotten under his skin—ahh, the anxieties of affluence. But all that means is one of the world’s most socially productive people has all the more reason to wake up in the morning.

In contrast, for a middle class and median IQ American to broadcast their status relative to their peers they can always buy a bigger house, drive a faster car, learn a new talent, travel to more exotic places, or give more to charity. That is, the space to broadcast ever greater social distinction is seemingly unbounded from the top. This was the nouveau riche mindset of Elon Musk circa 1999, when he bought (and later crashed) a million dollar McLaren F1. But today, as an ennuyé riche multi-billionaire, simply owning an awesome car is old-hat, cheap-talk, something any rich CEO can do. So now he builds and designs even better cars from first principles, incidentally spurring innovation as he literally pushes against the physical and technological boundaries of keepin’ up with the Bezos.

As the McClaren incident shows, for all his self-effacing talk about saving humanity from extinction even Musk is human, and in that humanity ultimately motivated by subterranean vanity. Bezos’ only sin was to let his vanity see the light. At least he punches up.

SpaceX's first attempt at landing the Falcon 9 rocket erupted into a bonfire of vanities
SpaceX’s first attempt at landing the Falcon 9 rocket erupted into a bonfire of vanities

Darwin’s Wedge

Critics of the free market point to these sorts of positional arms races as the downfall of the neoclassical economists’ conception of efficiency. On the one (invisible) hand, competition and exchange can guide the butcher and baker to produce meat and bread for the common good. On the other hand, identical competitive forces can lead nations to the brink of nuclear war, marketing and political campaign budgets to balloon, and large SUVs to pollute the roads due to safety in relative size. That is, individual incentives need not be aligned to the collective good. (As I’ve argued before, classical liberals like Adam Smith understood this full well).

Robert Frank influentially explained markets where individual and collective goals diverge in terms of what he calls Darwin’s Wedge (or what writer Jag Bhalla variously calls “dumb competition” and “spontaneous disorder”). The term comes from evolutionary biology, where wasteful arms races are ubiquitous. In the classic example, deer evolved large, cumbersome antlers because whenever a mutation made a buck’s rack marginally larger he was able to beat out and reproduce more than his sexual competitors, passing on the trait. But since what really matters is not the absolute size of the antlers, but their size relative to the local average, competition over the trait lead sexual selection to favor ever larger antlers up to the point where the marginal benefit of a bit larger antler equaled its marginal cost (i.e. until it was evolutionarily stable).

In economics MB=MC is the mark of optimality, but here it’s clear competition in some sense failed. Male deer must now go through life with awkward bone-branches extruding above their eyes, getting them caught on trees, and generally using caloric resources that might be better spent procreating. Had the ancestors of deer somehow colluded genetically to cap the size of antlers, or else to compete along some other, less handicapping marker of genetic fitness, the entire deer species would in some sense be made “better off” through greater numbers.

Optimally Boring

But alas, genes are selfish. As the famed selfish gene raconteur Richard Dawkins himself once wrote:

In a typical mature forest, the canopy can be thought of as an aerial meadow, just like a rolling grassland prairie, but raised on stilts. The canopy is gathering solar energy at much the same rate as a grassland prairie would. But a substantial proportion of the energy is ‘wasted’ by being fed straight into the stilts, which do nothing more useful than loft the ‘meadow’ high in the air, where it picks up exactly the same harvest of photons as it would – at far lower cost – if it were laid flat on the ground.

And this brings us face to face with the difference between a designed economy and an evolutionary economy. In a designed economy there would be no trees, or certainly no very tall trees: no forests, no canopy. Trees are a waste. Trees are extravagant. Tree trunks are standing monuments to futile competition – futile if we think in terms of a planned economy. But the natural economy is not planned. Individual plants compete with other plants, of the same and other species, and the result is that they grow taller and taller, far taller than any planner would recommend.

And how lucky we are that this is the case! I am grateful for hemlock forests, flamboyant peacock tails, and even moose, the silly looking cousin to deer. Were it not for the playing out of these so-called wasteful competitions, instead of a world of immense biodiversity and wonder, life on Earth would consist in a hyper-efficient photosynthesizing slime spread thinly across the globe.

Indeed, the self-defeating hunt for relative fitness, including social (and sexual) distinction, is responsible for bootstrapping literally every one of our perceptual and cognitive faculties, including our ability to appreciate aesthetics. If not for positional arms races around sexual selection, for instance, it is unfathomable that beauty would exist at all. All creativity, when not strictly for survival, is rooted (in the sense of ultimate causation) in status games. Even the fact that I’m writing this right now.

Beyond biology, the same story explains the artistic and cultural diversity created by market societies. While there are no doubt those who think the classical era represented a pinnacle of cultural achievement, a stationary point at which we should have made every effort to hold in perpetuity, this is nothing more than the golden age fallacy. Instead, the greatest classical musicians were only great because they superseded their predecessors and contemporaries by chasing the same ephemeral distinction as Elon Musk and the white-tailed deer, and as such were contributing to a self-defeating cultural churn that baked-in its own impermanence. This holds true today, as dozens of musical and artistic genres have been invented, grown steadily popular, and then “mainstream” and stale as their social cachet dries up.

Ironically, it is often those who are most critical of neoclassical economics that still seem wedded to its narrow and lifeless conception of optimality. Rather than moving beyond the Samuelsonian allocation paradigm to one based in creation, innovation and discovery, they thus double down on the dangerous illusion that positional status competitions can be easily muted or improved on by a central planner (the “design economy” referred to by Dawkins). While there’s obvious merit in blocking literal arms races, tweaking the tax deductibility of marketing expenses, and so on, I always worry whenever I read calls for a general luxury tax, or other excoriations of variability in the type and quality of consumables.

In the extreme, this thinking is what underlied the Marxist-Leninist ideology that transformed Mao’s China into a literal “Nation in Uniform.” A bit earlier in history it also motivated the Soviet government’s attempt and failure to make the luxury goods used by the petite bourgeoisie available to one and all. Rather than try to “eliminate” bourgeois values, in contrast, a capitalist society is healthy precisely because it enables a nation of rebels and the inequality that implies.

Resistance is Futile

One thing neoclassical economics did get right is non-satiation. Humans can never be fully satisfied: not with our mates, not with our station in life, nor with this final draft. However, this is not because we have neat, monotone preferences, but rather it’s because relative status has shaped every corner our psyche.

Buddhism rightly teaches that this dissatisfaction, called dukkha, pervades all of existence. As Buddha supposedly once said, “I have taught one thing and one thing only, dukkha and the cessation of dukkha.” But why? If resistance is futile, why not embrace it. Satisfaction is over-rated anyway. What person has ever achieved any kind of success or excellence without being tortured by anxiety, stress, or self-consciousness?

Of course Buddhists, like Stoics, would presumably question my definition of success. Maybe if we all meditated daily and simply learned to lower our expectations we’d learn to be satisfied with poverty. Yet we ran that experiment and we self-evidently were not.

Rather than be zen about our lack of zen, even Buddhist practices have ironically become (or was it not always?) their own dimension for pursuing social distinction. Don’t forget, Veblen’s magnum opus on status goods was called “The Theory of the Leisure Class,” and what could be a greater advertisement of belonging to the leisure class than the ability to sit absolutely idle for hours out of every day.

I don’t deny that meditation can be incredibly useful for reducing and controlling the stresses and anxieties of civilization. But if you’re a fan of meditation you should also not deny nor feel shame in the bourgeois half of your BoBo paradise. You are not above consumerism or hedonic treadmills. On the contrary, you are a leading light, an early adopter, an innovator in waste.

Otherwise, a monomaniacal focus on achieving nirvana (the state when all attachments and dukkha have melted away) simply becomes an agent-centric example of the social planner’s protoplasmic conception of optimality. At the same time, I recognize the futility in my own attempt to disillusion you, dear reader. As Mises wrote, human action is predicated on “the expectation that purposeful behavior has the power to remove or at least to alleviate felt uneasiness.” It just turns out that that expectation is as mistaken as it is incorrigible.

So meditate if you have to, but don’t be afraid to day dream a little, too. It may fill you with anxiety, and it definitely won’t make you happy, but later in life you just might find yourself building a spaceship to Mars.

The Private Life is Dead In New York State

It seems like only yesterday I went to the marketplace to pick a health insurance plan that was right for me and my family. Already, it was tricky because New York State had some cockamamie law in place that prevented insurance companies from underselling a certain level-benefit, in order to not compete against the state subsidized “Healthy NY” program, which was designed, in effect, for pregnant teenagers in New York City and Albany.

Despite that, I remember the good ole days, when I had, I think, nine different plans to choose from. Even though I am a sole proprietor, I was able to join a group through the chamber of commerce, which spread morbidity risk, you see, lowering costs.

The giant gavel of Spring 2010 struck. Almost immediately, cost increases accelerated until, after a few short years, the plans were double in price. Last year, the law forced me out of my group because I am a sole proprietor. I joined the New York State co-op because it had the most affordable plan. The premiums were somewhat less than before, but the deductible was sky-high, and the care was less amenable to my needs.

In other words, instead of a suite of plans to choose from, I was forced into one. I mean, I could conceivably have chosen a different plan, but the price was, shall we say, prohibitive.

I just received a letter from the co-op announcing that the New York State Insurance Commission is forcing them to close at the end of November 2015, and that I should look for a new plan for December of 2015 before I go through the dreaded Exchange to pick a plan for 2016. Something about a $250 million debt and sick people in Upstate New York. I don’t live in Upstate New York. I live in Western New York.

What a disaster.

How did this happen? Why can’t I just go get health care and pay for it myself? Why can’t I negotiate with an insurance company for a plan that suits my family’s needs? I was doing just fine in the cold, cruel, unprotected marketplace before. What’s going on?

Why bother? Just tell me where to sign. Here, take my stuff. What do you want me to do? Just tell me, OK? I’m exhausted. I give up. Which line do I shuffle toward? Should I look you in the eyes, in make-believe fashion, or should I keep my eyes to the ground like a good little citizen?

Just to spell it out so there’s no misunderstanding: I’m mourning the state’s subsuming a large chunk of my manhood unto itself.

Exemptions, ladies and gentlemen, did not apply to the individual market, for obvious political reasons. How much longer are those exemptions from which you currently benefit going to hold back the tides of the marketplace?

No worries, though, my friends. Pretty soon, the metric for health care will be reduced to one thing: not customer satisfaction, not affordability, not availability, not quality, but efficiency.

And it will be efficient.

serf and lord

The Road Goes Ever Backward

Sometimes while I’m driving the two older boys from our home north of Buffalo to their hockey games in the Southtowns, tootling along the I-90, my mind will wander from the task at hand to some of the work I find myself doing. Certain tasks grind away in my consciousness, nearly to the point of making the whole works come to a stop.

At that point, to clear the gears, so to speak, I’ll jam on the brakes, bringing the truck to a complete stop so that I can look them in the eyes without putting any of us in danger.

“Listen to me, boys,” I’ll say. No, that’s not what I say. What is it? Oh yes, “Listen to me, my sons,” I’ll say. “For the love of all things good and right, please forgive me and your mother for whatever we might be doing wrong to you, whatever we might be doing to hurt you or bring you harm. I swear to you, on all that’s holy, on all that’s pure, that we’re just doing the best we can.”

When I know I have their full attention (which I scientifically ascertain by the quotient of fear in their eyes), I continue, “Promise me you won’t leave me and your mother alone when we’re old. Please promise me you won’t do that.”

The older one is the one who usually speaks, “Okay, Dad.”

When I hear him renew his promise, I put the truck back in gear, and we continue our journey into the mundane, usually before any traffic enforcement officer can be summoned.

The lady with the picture: remember her? The picture has moved from the living room into her bedroom. She had her 91st birthday recently. Her body gave her the gift of stopping the bleeding from the gut into her stool, so she’s feeling pretty zippy. “I got some bad news,” she said at one point. “It seems I’m always getting bad news lately.”

“What’s that?” I said.

“I found out that my son is dead.”

She hasn’t seen or heard from her son in decades. This is her only child.

She continued, “I knew he was out of state somewhere, but they never told me where he was exactly. I don’t know when he died or where he died when he died. I don’t know what year he died. I don’t know what he died of, and they never even told me when I had a new grandchild.”

“How did you find out he was dead?”

“Some girl put it in the computer.”

One tries to learn instead of judging. And when one judges, one avoids judging the person; dear God, let me not judge. The story didn’t stop. So I listened.

“When I was a little girl, we lived on a farm. One day, she saw a small garden snake in the kitchen. She hates snakes, so before my father had even come in from the field, she had the house packed and we moved to another house that day.”

The center of the story of this old lady has departed from her and moved to her mother.

Hers may be atypical, but the margins are being pushed inward.