Separation Anxiety

Friendly Society

If given the choice to live in a world dominated by risk or uncertainty, I would choose risk every time. Risk is manageable. Risk can be hedged. Risk can even bring people together.

Take the Friendly Societies of the 18th and 19th century. These predecessors of the modern insurance cooperative helped to distribute financial risks among their members. But in addition to providing access to doctor care or income in tough times, members could literally count on a shoulder to cry on. The prerogative of a decentralized social safety net had the by-product of strengthening the all around community, in the form civic engagement, social events and close knit relationships.

Friendly and mutual aid societies flourished for over 300 years in places like England thanks to the challenge of measuring risk accurately, especially on an individual level. For the most part, insurance schemes, both formal and friendly, brush over the immense heterogeneity of risk types to come up with a flat rate or membership premium — an average cost — which in our fundamental ignorance we agree to pay.


In fact, when individual risk is well known (usually by the individual him or herself) our ability to manage risk with insurance or mutual aid tends to break down. For instance, a person seeking health insurance may choose to conceal their heightened risk of cancer by not sharing their family history. In their famous 1976 paper, Stiglitz and Rothschild showed how this kind of asymmetry of information makes insurance hard, if not impossible. In contrast, consider that a young man cannot easily conceal the salient fact that he is young and male. Since this correlates with worse driving, auto insurance is able to separate into several pools, or to charge several prices, without worry of members misrepresenting their risk type.

In the jargon of game theory, this is the difference between a pooling and separating equilibrium, and it’s not limited to insurance. In any scenario where the type of person or good is not directly observed, you instead observe a signal — a piece of communication — which may or may not be informative. But when different types put off different signals, even if they’re not wholly accurate, types can be discerned, separated and priced accordingly.

In the case of England, Friendly Societies tended to be grouped around industry, skill level, and other imperfect “types”. As a whole, then, the Friendlies weren’t totally unsophisticated. But relative to modern insurance, the mechanisms available for making members reveal their riskiness were first order approximations at best.

History’s Card Sharks

This wasn’t necessarily a bad thing. In the limit, if every person has an idiosyncratic and public risk profile, insurance would be like trying to bet a round of poker with the cards face up. Rather than spreading the cost of car accidents, or health care, or unemployment across large groups, we would be much closer to paying our own way in full. While this could be considered efficient in a narrow sense (each consensually pays his or her marginal cost), in practice it could also be disastrous. Rather than having the congenitally lucky occasionally support the unlucky, the unlucky would lose by predestination. There’s no point in bluffing — you’re simply dealt the hand you’re dealt.

Now imagine Friendly Societies as represented by a group of casual poker players that meet regularly. The play is sloppy and heuristic based, and no one really knows how to calculate pot odds. Sometimes you’re up, sometimes you’re down, but in long run everyone tends to break even. Then one day a new player is invited, a player who happens to be a poker tournament champion and retired statistician. Sometimes he’s up, sometimes he’s down, but in the long run the rest of the table ends up consistently going bust. A friendly game among friendly society suddenly isn’t that friendly anymore, and the group disbands. This is more less the story of how Friendly Societies went from flourishing to sudden decline around the turn of the 20th century.

Innovations in the science of actuarial analysis (the statistical study of risk) had been diffusing through society since at least 1693, when Edmond Halley constructed the first “life table” allowing him to calculate annuities based on age. Not long after in 1738, Abraham de Moivre published “The Doctrine of Chances,” credited as discovering the normal distribution that was greatly expounded on by Gauss in the 1800s. Then in 1762, The Equitable Life Assurance Society was founded, with the first modern usage of the term “actuary” (the company exists to this day as Equitable Life, the world’s old mutual insurer). However, as a profession, insurance was truly born much later in 1848, with the founding of the Institute of Actuaries in London, thanks to breakthroughs in measurement and accounting techniques (such as commutation functions) that brought the doctrine of chances from theory to practice.

Scientific actuaries were history’s card sharks. In order to compete, Friendly Societies were forced to adapt — to learn to better calculate the odds — and ultimately they converged on many of the same administrative, procedural, and “scientific” insurance-like structures. The growing (and widely misused) economic surplus this generated fueled an insurance boom peaking in the later part of the 19th century. For efficiency advantages, societies began deepening national networks well beyond the scope of brotherly love, and strove to expand risk classifications and reduce exposure to high risk types.


By better classifying risk, the “flat rate” pooling equilibrium of the 18th century and earlier rapidly became untenable. Across Europe, the market became increasingly separated, with many differentiated premia and some high-risk types pushed out altogether. This fueled a growing industrial unrest that culminated with the consolidation of private social insurance schemes into nationally run systems.

Commercial insurance, by generating a burst of competition and transitory political instability, was in a sense a victim of its own success. But as many economists have noted, while decidedly non-voluntarist, national schemes (like the one instituted in the UK by the National Insurance Act of 1911) were able to discover large efficiencies of scale through less administrative intensity, tax-based collections, and a comprehensive risk pool. This transaction-cost advantage — and the centuries of social capital it crowded out — guarantees that the days of the close knit mutualists are gone for good, save for some religious congregations. In their stead stands L’Etat Providence — The Welfare State — via a historical process that (as I’ve described) was most rigorously identified by French legal scholar Francois Ewald in a book by the same name.


The point of this essay (if you’ve made it this far) is to suggest that we are in the midst of a measurement and statistical revolution of equal or greater scale as the 19th century diffusion of actuarial science, with potentially many of the same social and political implications.

With a $99 genotype and sub-$1000 whole genome sequence, in the near future the idea of an insurer asking for your family history of cancer will seem quaint. The immense and inevitable promise of genomics and personalized medicine also portends the inevitable collapse of large, relatively heterogeneous insurance pools, in favour of equally “personalized” healthcare costs schedules.

As I hinted at earlier, this phenomena of moving from pooling to separating equilibria following  advances in measurement technology is by no means limited to risk or health care. Any qualitative distribution can be theoretically mapped to a price distribution, but wind up collapsing into a single price given practical measurement constraints. For example, in the past mediocre restaurants were partially supported by the churn of ignorant consumers, since reliable ratings and reviews were hard to come by. Today, rating platforms like mean that restaurants of different quality have more room to raise or reduce prices accordingly, to separate based on credible signals. It’s the end of asymmetric information.

In the corporate setting, pooling equilibria are represented by relatively flat salary structures given a particular seniority, department or education level. Sometimes there is a commission or performance bonus, but day to day productivity is rarely if ever tracked. This opacity is what permits the possibility of zero marginal product (ZMP) workers — workers who literally contribute nothing to a firm’s output.

For any given kitchen, at some point an additional cook does not actually produce more food. While it can be misleading to say that any particular cook is non-productive (maybe there are simply too many cooks in the kitchen), in deciding on which cook to dismiss it matters a great deal that the cooks aren’t all equally productive. On the contrary, the individual contribution of every kind of worker to a firm’s output is often extremely heterogeneous, with the top 20% of workers contributing as much as the lower 80%.

With automation and artificial intelligence reducing the demand for human inputs, the kitchen, so to speak, is shrinking.  It has therefore become paramount for firms to identify the 20 and eject the 80. The contemporary increase in country level inequality is widely recognized as technology driven, but few have put their finger on the micro-foundations that explain why. Part of the story is surely “human-machine substitutability,” but in addition firms have simply started monitoring and classifying worker productivity better than in the past. This leads to a separating equilibrium that shows up in the data as job market polarization, rising premia on the central “signals” like college degrees, and (to the extent that signals are sticky) reduced social mobility. Unsurprisingly, a class based society is first and foremost a society which classifies. The silver lining in this case is that, rather than classes based on pedigree, nobility or race, the future promises to be highly — if not brutally — meritocratic.


In one future scenario, just as actuaries identified groups that were uninsurable, perhaps large sections of society will discover they are unhirable. Supposing they have too many “one-star” ratings, as it were, on their HR record, their only hope will be in working for fellow one-stars, and to build a matching-economy around their mediocrity. This is essentially the “Average is Over” scenario imagined by Tyler Cowen, who foresees the return of shanty-towns across the United States. But I wouldn’t bet on it. In many ways, the recent calls for a “universal basic income” exactly parallel the early 20th century’s push towards nationalized social insurance. Only here it is labour-income itself that would be nationalized, as part of the inescapable political economy of separation anxiety.

My own anxiety stems from that fundamental uncertainty of the future, as if the social order is dancing along a knife edge dividing two radically different steady states. In either state — from hyper-meritocracy to a New New Deal — the case of the Friendly Societies demonstrates that the only thing for certain will be the loss of our sacred intangibles: the unmeasured qualities that united distinct types under one roof, from the fraternal lodge to the corporate office.


Rehabilitating Neville Chamberlain

After Neville Chamberlain died of bowel cancer in November of 1940, Winston Churchill mourned him privately, “Whatever shall I do without poor Neville? I was relying on him to look after the Home Front for me.”

I think it is oft-assumed that Churchill and Chamberlain were vituperative in their antipathy toward each other. Indeed, nothing can be further from the truth. They saw the Nazi threat differently and understood history differently to the extent that one or the other of them would eventually prevail, but neither of them saw the other as a political foe, not in the sense that one should have power and the other should not. It was the magnanimity of Chamberlain that gave us Churchill to lead the Allies against Hitler; Chamberlain, when he went to King George VI to tender his resignation, stepped over the more senior politician, the more popular and more obvious candidate for Prime Minister, Lord Halifax (who was not pressing his claim to the ministry), suggesting Winston Churchill instead.


We also have the picture and the quote: “Peace in our time,” a signed document, assurances from Hitler that England and Germany would never wage war against each other. On the night of the British declaration of war against Germany, of course, Hitler sent a well-planned and well-rehearsed air raid against London. We, the beneficiaries of almost 80 years of hindsight, shake our heads with the epithet on our lips, “You idiot, how could you have ever trusted Hitler?”

The photograph, however, was taken with too narrow a field of focus to capture the enormous British zeitgeist. Chamberlain was received by England from the Munich meeting with near-universal acclaim. Note: this was after Hitler had taken the Rhineland, had absorbed Austria, had taken the Sudetenland, and had massed on the Polish border. The people cheered in the streets, a veritable sea of people, so that a nine mile journey took Chamberlain an hour and a half. The press lauded him as a hero. King George VI even wrote him a letter congratulating him on the preservation of the Empire.

A few individuals dared act contrarily, most notably Duff Cooper, who resigned as First Lord of the Admiralty, and, of course, Churchill.

Whence this national fantasy? How does history judge so harshly and so easily while those who were present almost unanimously praised him? Even the most friendly historical treatments of Chamberlain note that his reckoning of Hitler was utterly fatuous. All those cheers for so fatuous a gesture.

Any rehabilitation attempt must not seek to defend Chamberlain in an empty context, that of a leader with a set of beliefs, principles, and assumptions about the world with all the evidence laid out before him as so many archaeological artifacts. Instead, his own people, those who approved so tumultuously of his beliefs, principles, and assumptions, must be acknowledged as the sea driving him inevitably into the shoal water of history.

Who knows the ship of state is driven so by the imaginations of her own people?

Participating In The Death Cult

Statistics predict that a city of 1 million should expect to lose about 105 people this year to automobile accidents. Those are the statistics, an average for the last ten years or so. Recently I was driving from Buffalo, NY to Barrie, ON, which means that I drove through a population of about 6.5 million people within two and half hours. Therefore, in my immediate circles, between now and May 1, 2016, over six hundred people will have been killed on the highways. Six hundred people!

On the way back from Barrie, on a beautiful Saturday afternoon, when we were all tired, I passed two injury accidents in the Greater Toronto Area. I don’t think there were any fatalities, but there was considerable property damage, and, in one case, a rescue responder was furiously trying to pry open the car door to get to the driver. Add that as an appendix to the death toll. As soon as we had all acknowledged the wreckage, we accelerated up to speed, hurtling our automobiles toward the exchange from the 403 to the Queen Elizabeth Way, which invariably yields a thrilling experience on the western shores of Lake Ontario. Toronto, by the way, is a magnificent city.

Business, not pleasure, took me to Barrie and back, business which I needed in order to pay for my stuff and my activities, as well as all my family’s stuff, activities, and needs, all of which I am loathe to acknowledge as unnecessary; I will not say no to a single thing as long as I can drive my automobile to fulfill a contract which enables me to earn money to acquire it.

This February, on the way to a hockey tournament in the Southern Tier of New York State, we encountered a massive blizzard and plummeting temperatures. The northbound I-90 suddenly emptied of traffic. There were no automobiles, no, not one. “Uh oh,” I said to the boys. “That means there was a fatality.” A few miles down the road, there it was: an automobile exactly like mine, same make, same model, same year. What saved me, evidently, was the color: his was red, mine is green. We saw it on the news: the man’s 11-year old daughter was killed when a tractor trailer plowed into the passenger side in a “freak” accident. “Freak” accident in the middle of a gigantic snowstorm.

A roll of the dice in the heavens, I suppose, sent a gust of wind to catch his automobile at just the right moment, turning it into the path of a tractor trailer.

I looked at my 11-year old son and said, “There but for the grace of God go we.” He sits where she sat when she died.

My wife will no longer buy chocolate unless she can be confident, through certification and other means, that slaves did not produce it. But I don’t know: what certification process actually gives confidence that phones, shoes, chocolates, etc. aren’t produced by slaves?

Hence rituals, where “we now call to order this august branch of the International Men’s And/Or Women’s Horned Beast Lodge” to spend some money on communal food, pick a charity to benefit, socialize, gossip, and then disperse.

Maybe it’s as simple as “Wilma! I’m home! No, Dino! No, no!” There exists for just about everyone something done which is ritualistic, formal, expected, a something which is an effort to wash away the stench of participation in The Death Cult. Stepping in cat dirt everywhere comes to mind, which functions for poor Ren as an everyday ritual to recommence home life with his dear Stimpy.


Rituals push aside The Death Cult momentarily, creating spaces wherein we exhort one another, wherein we enjoy a respite from what evil lies beyond, wherein we love one another. Rituals can even occur within the confines of the automobile, those moments for us when the now 12-year old connects his iPod to the stereo system, adjusting its parameters until he has filled the interior space with his music. Outside is death, celebrated, encouraged, sacrificed to, and we participate in it at the expense of only one hundred people per million per year.

Well, that’s just the death toll. You know what I mean.

Battling Anxiety Through Free Range Parenting

A further response to Samantha, who does not like the term free-range parenting, as she says, “Free range just means kids are allowed to be kids.”

This resonates. I have several distinct memories as a kindergartener. Two of them are: 1) I wept uncontrollably when Mommy left me with the stranger in the building with the cold floors and the big windows to let you see outside. 2) Later in the year, I struggled with the math, undecided whether I should count kindergarten as one year toward the completion of 12th Grade. I could not cope with the idea that THIRTEEN YEARS OF THIS PRISON HELL?!?

Institutionalized school is a place, first and foremost, to develop the several kinds of social anxiety. My favorite was performance anxiety, namely that I had to make good grades or I could not possibly succeed in life. On the face of it, this is an entirely contentious statement, but I don’t care: I hated school from day one; during the school year I hated every day of my life, knowing that if I misbehaved, Teacher was going to pin a note to my shirt, sending me home to tell Mommy that she needed yet another conference in order to strategize behavior modification. I wasn’t doing a damn thing wrong: I just wouldn’t sit still. Nevertheless, the first thing I learned in school, about school, at age five, which has never been unlearned, is that the institution is always watching me. From those moments forward, life has been about coping with this intrusion into my personal emotional space.

Roger Waters captured this intrusion perfectly in his little ditty, having the children sing so sweetly, “We don’t need no education.” That record has been played about a billion times over the past thirty years, and not just because it has a good rhythm and a beat you can dance to. The song embodies musically a visceral response to all kinds of anxiety, even the same anxiety you feel when the IRS or CRA demands to know your every wage, tip, and other compensation.


This anxiety is the primary reason my wife and I practice a free-range parenting, as it were. It’s not that there is no anxiety out there, no magical escape from anxiety, no anxiety-free monastery (as one of my friends has remarked about certain quarters of the home schooling world: “the denim jumper brigade”), but that learning the ciphers necessary for groping through this mortal coil can be done in a lower-anxiety environment.

The home, in other words, can be relatively free from institutional intrusion into the emotional world of a child.

Readers who have successfully emerged from the gauntlet of institutional education can attest that success in “real life” (whatever that is) didn’t require so much behavior modification, such competition to achieve, such confrontation with the institution. Again, I’m advocating a via media here: behavior modification is necessary, competing to achieve must be instilled, the confrontation with the institution is inevitable. Too much of these things threatens to create a person who struggles to experience pleasure in the challenges of everyday, ordinary experiences, whether they are climbing their way to the top, or are satisfied in a low-ceiling career, or find their way to the end somewhere in the middle.

Therefore, I submit to Samantha another term: low-anxiety parenting. Failure is always an option, and failure is probably good for you. Every once in a while.

This post is the second post following up “Let’s Go Do Something Dangerous,” a companion to “The Structure of Free-Range Parenting.”

The Structure of Free Range Parenting

A commenter on my defense of free-range parenting mentioned that she doesn’t like the term “free-range.” I take it as an implication that the burden is on those who dislike unstructured, unsupervised free-time for children. Unfortunately, the social context has changed so that the burden is on those of us who are risking our children being kidnapped by the zealots of the state, complete with badges and everything.

It should come as no surprise to you, dear reader, that we also practice something called “home schooling,” where my wife and I inculcate ciphering skills unto our children at home, without any help or compulsion from the state whatsoever, meaning, that in a state of total anarchy, without government schools, private schools, parochial schools, or even community one-room schoolhouses, our kids would still be able to cipher.

New York state, being interested as it is in the ability of her citizens to cipher, tests us, and our children have not been found lacking. The implications of this are rather clear, with respect to so-called free-range parenting: there is a some sort of structure in our household.

In fact, on reflecting upon our home life, I am convinced that we are very structured; it’s just that I wouldn’t know how to describe it: our daily life must resemble, to an outsider, one of those outlandish perpetual motion machines of the Medieval Era. And then the door opens, two boys stumble out, the door slams behind them, and they do not return inside for a very long time.

Nathanael D. Snow makes the point elsewhere that children have been referred to in ancient times as arrows in a quiver. He further remarks that arrows, however, are not made for the quiver; they are made for the bow, to be nocked and fired into the world. Children, in other words, have potency. They are, now, in the neighborhood, within a literal arrow’s shot, carrying our life into other people’s lives, and there our philosophies and beliefs are being tested. Later, they will be fired into the world at large, to lodge into it, hopefully wounding it with justice, morality, virtue, and every other sort of good (to stretch the metaphor). I mean, we hope we’re moral and virtuous in our household, and we measure it against what we consider moral institutions, and we further hope that what we are trying to teach sticks to our arrows, like a healing elixir to act as an antidote against all the poison out there.

Who knows? We’re only one family. And who knows if we are actually moral and virtuous? Not knowing, nevertheless, we’re willing to be tested.

This post is the first of two as follow-ups to “Let’s Go Do Something Dangerous,” a companion to “Battling Anxiety Through Free-Range Parenting.

Happy Birthday, Thomas, From Nicaragua

It’s my son’s 12th birthday today. I was in Nicaragua for his 9th birthday, doing some leadership training. “Do you have any children?” they asked. “Yes,” I said. “Two boys. Thomas is turning 9 tomorrow.” And then I heard a lot of chattering about “sus hijos,” and I was pleased that they thought so much about it, but I had work to do, so I returned to the task at hand.

The next day: Que sorpresa! They sang a happy birthday song to him, knowing that I could get it uploaded to him by that evening. At first I thought they were going to sing “Feliz Cumpleaños,” which is what all good Grade 9 Spanish language students learn, but they didn’t. Well, they did, but it’s nothing like you can imagine until you’ve heard it. There was a moment when I wasn’t sure what paradise I had come into. It was a kind of ecstasy of love that electrified and healed. For those of you who have an ear for a proper Spanish accent, I do not, and for my own pronunciation I offer you mis más sinceras disculpas. Take a listen:

Some notes:

  • I was there at their request.
  • It was not a mission trip.
  • They paid me to be there. I watched them do it, each individual, with cash, every day, for two sessions per day for ten days.
  • Suyapa Beach is a magnificent place to rest and relax during that all-important free weekend.
  • They apply what I teach them, for better and for worse, all around. That is, I learn, and they learn. My learning is far easier than theirs. Describing it requires a lengthy post, mostly involving family relationships.
  • I got sick. Look: I get sick when I visit Michigan, so it was a given that I was going to get sick visiting the tropics. At one point I convinced myself that I was going to perish of a tropical fever, but they took care of me, and I had the distinct impression they liked that they could take care of me.
  • A little bragging: after my first time down there they have requested me by name, that I come to them to teach them, cycling through new students once every three or four years. We have a mutual respect–love–for each other.

The Factory Closed

A Generation X Tale

We were kids when the factories closed. This is significant.

Can you imagine being told that if you work hard in school, keep your nose clean, and watch your social Ps & Qs you’d get a job right out of high school, and if you went to college, you’d get a career? Guaranteed?

Yes, we were guaranteed. The misery of school was therefore bearable, knowing that enduring thirteen years of it would yield a steady flow of cash and the strong possibility of upward mobility. We were treated to thousands upon thousands of stories about young and upwardly-mobile professionals, the Yuppies. There was even a very popular and critically acclaimed TV show about Yuppies, Thirtysomething. They made so much money they had problems! Real problems!

At the same time, they were inventing terms for us, the children of the Baby Boom. First, we were Generation X, the unknown quotient, which I found, immediately, insulting. Then we were the Latchkey Kids, the first generation of children ever in the history of the universe to come home from school alone, with no parental supervision. My mom and dad were wise enough to hire a high-school girl to supervise us while she watched TV and talked on the phone. Misfits records, and the like, became my surrogate parents. Other kids picked other things.

I have distinct memories of riding around on bikes and skateboards talking to my coevals about these new terms for us. We were talking about them because there was no framework for us to interpret what was happening. It was true: the stability of the middle of the 20th century was coming to an end, and it was emerging that the stability of the middle of the 20th Century was something of a pristine ideal, somewhat removed from common, everyday experience.

Here are some examples: even though culture was unified by the three television networks and endless reruns of cultural artifacts via syndication, cable television was nascent, driving a wedge into that unity. Independent radio stations sprang up, splintering pop music into a thousand shards. Proto-emo, anyone? It was on a radio station in Mobile, Alabama, circa 1988.

That’s just pop culture, right? Perhaps. Perhaps symptomatic. We talked an awful lot about divorce. There was no such thing as counseling for children whose families were splitting up. What dad did to mom, and what mom did to dad, in full view of the children, was unprecedented, at least by sheer number of cases. We ceased being individual tragic stories and became statistics, truly the heirs to our name: psychology was racing to solve for x.

Dad never wore a shirt when he drove the kids to Church and Sunday School. Two hours later, he was at Grandma’s house for Sunday Dinner.

The E.T. movie resonated so strongly because it reflected this disintegration. If you recall the setting, E.T. happened upon little Elliot and Gertie’s house ensconced in prototypical American Suburbia, a home overseen by a single mom, who was struggling to provide financial and emotional support for everyone, even for her teenage son Michael. Why was she single? Unspoken, the truth was that her husband ran off to Mexico with another woman. E.T. rescues them all with a strong resurrection motif. Effective, eh?

See? The bottom was falling out. The abyss has always been there for every generation, but Generation X is unique in that its progenitors conceived of a lie that there was a scaffolding over which to traverse the abyss in ignorant bliss. Who believed it more: the Baby Boomers or their children?

The fascistic scaffolding of school gave birth to a stillborn generation, having trained us for the factory floor or for factory management. Our parents, split up, a hopeless Penelope, stood upon the shores of Lake Erie, gazing westward, waiting for the lofty sails of Bethlehem Steel to set upon the horizon, marking its triumphant return from the Far East. We popped out of the womb into a decrepit and empty cinder-block shell. Thankfully, the nearby bars were still open, and nostalgia flowed there freely, and some of us made do until the beer ran dry.

Not all of us, at least not entirely. Angry is no condition in which to navigate the abyss. The mainsail can be repaired. We are the mothers of invention, after all; every generation is.