Marginal Revolution

A Million Years of Logic, the End of Economics, and the Sociological Future

This entry is cross-posted at orgtheory.net, the social science and management blog. Also, please check out my on book politics and universities, From Black Power to Black Studies. Thanks for reading!

            We’ve reached the end of Logic of Life, Tim Harford’s engaging tour of economics and its lessons for everyday life. Harford ends the book on a highly speculative note about technology, economics, and growth. Tim does a good job summarizing the emerging consensus. The “normal” state of human life is poverty and near zero economic development. Once a community establishes reasonable institutions for commerce and trade, people can quickly produce and exploit technological advances. The effects are cumulative: once a nation allows markets to work beyond a certain threshold, the population experiences exponentially increasing benefits. The economists’ summary of world history is: “no capitalism = no growth, some capitalism = growth, growth, growth!!”

            This discussion is interesting because of the connections to ideas outside the normal realm of economics, especially in areas like psychology and, my own area, sociology. Here’s just one example. Harford discusses the idea that population size should correlate with innovation. Simply put, if you have a hundred million people, you’ll get a least a few geniuses. The inventions of these geniuses can be mass marketed, which fuels later growth episodes. Fair enough.

But where do “geniuses” come from? Turns out, there is a fascinating literature on creativity and achievement. A few names: R. Keith Sawyer, a sociologist/psychologist, writes eloquently on the emergence of genius from networks and groups. Sociologist Randall Collins wrote a highly regarded book on prominent philosophers showing that “genius level” philosophers tended to be clustered in space and time, suggesting that genius is made possible by very specific kinds of “hot house” situations. Other research, pioneered by Florida State psychologist Anders Ericsson, shows that high level performance isn’t just a matter of talent. It’s also a matter of specific training techniques and immersion in a topic. Basically, it’s not just talent that leads to achievement, it’s also the right kind of social environment.*

What’s the point? It’s this: Economics, as understood for hundreds of years, has played out. The major problems of econ 101 have been solved. We know about supply and demand, marginal utility, choice under uncertainty, and budget constraints. We have a wide variety of tools, ranging from game theory to econometrics, that help us identify  these processes in situations ranging from war, to car sales, to dating. We are also seeing how these processes plug into classic macroeconomic issues, such as growth and international trade.

However, the market system itself, as indicated by Tim’s concluding chapter, depends on population, innovation, and liberal economic institutions. These, in turn, depend on psychology, group culture, and networks, the domain of sociologists, psychologists, historians, and anthropologists. Economists have shown how the market system processes the inputs, but there’s still much, much more to be said about where the inputs come from. That’s what’s going to be exciting in the decades to come, and I can’t wait to see it.

* Author David Shenk nicely covers this research on his blog The Genius in All of Us.

Cuban jokes

One Cuban young woman complains to another. "He lied to me! He told me that he was a luggage handler! It turns out, he's nothing but a neurosurgeon!"

Explanation here.

The Case for Foreclosures, by Steven Landsburg

None of these foreclosed houses is going to disappear. After a foreclosure, one family moves out, and another moves in. We see the sad faces of the people moving out, but we don't as often see the happy faces of the new homeowners moving in. Nevertheless, those happy faces are out there, and we should not discount them.

Here is more.  I take the case against foreclosures to be the following.  The people getting kicked out lose their credit ratings and in the medium term they spend less.  The people moving in presumably have higher credit ratings but they probably aren't rich.  They transfer a big chunk of their liquid wealth to a possibly-low-propensity-to-spend financial institution.  So foreclosures lower nominal aggregate demand and in times of a downturn this can be bad.

Landsburg's title may just be provocative but I would make a distinction between the case for allowing foreclosures (I do not advocate that the federal government rewrite the mortgage contracts, although renegotiation could be made easier) and the case for foreclosures.  I should note he is quite correct to insist that foreclosure victims are hardly among the world's -- or even America's -- neediest cases.  If you think government can do anything well at all, ask what it can do for underprivileged young children.  On both justice and efficiency grounds the greatest potential gains lie there.  And continued home ownership is not the main thing they need.

The Spanish idea of the film canon

I've been reading César Vidal's El Camino Hacia la Cultura, which might translate roughly as "The Path Toward Culture."  Imagine a Spanish Harold Bloom, yet trying to be more representative than idiosyncratic in his canonical picks.  Overall his choices are what you would expect, albeit with a strong emphasis on modernism and in fiction he stresses the Continental novel of ideas.  The very useful poetry list is full of Spaniards.  Here is his list of the best movies (worldwide) since the 1990s:

Jacob's Ladder (TC: I love this movie), Dances with Wolves, Dreams (Kurosawa), JFK, Glengarry Glen Ross, Malcolm X, Groundhog Day, Schindler's List, Forrest Gump (ugh), The Shawshank Redemption, Braveheart, Fargo, The English Patient, Titanic, The Apostle, Saving Private Ryan, Matrix, Magnolia, The Sixth Sense, Nueva Reinas, El hijo de la novia, Gladiator, Return of the King, De-Lovely, Apocalypto (TC: !...another winner).

The absence of traditional indie cinema and most European cinema is striking.  Sadly Asian movies are missing altogether, except for Kurosawa.  Overall I am struck by a) the gutsiness of this list, and b) the author doesn't seem to see it as gutsy at all.

Spanking and Sex

Spanking Kids Increases Risk Of Sexual Problems As Adults.

Spanking Children Causes Sexual Problems Later in Life.

Researchers have uncovered another damaging consequence of spanking: risky sexual behaviors, or even sexual deviancy, when the child grows up.

Those are three headlines about a new study by long-time spanking opponent Murray Straus.  All are nonsense.  Straus's study, which does not appear to be available yet but which is described at the links, surveyed "14,000 university students in 32 nations."  The basic finding is that survey responses about being spanked in childhood are correlated with verbally and physically coercing someone into having sex as an adult.

Need I shout it from the rooftops?  Correlation does not imply causation! 

Here is a simple alternative explanation of the data.  Bad kids are spanked a lot.  Bad kids turn into bad adults.

I bet MR readers can suggest several other explanations as well.  In addition, there are a number of other oddities with the study including some which lend support to my potential alternative explanation, I'll mention a few of these in the extension.

By the way, I'm not a proponent of spanking.

Addendum: Andrew Sullivan offers further analysis.

Here are some more oddities about the study.  According to this report:

"the study found that 29 percent of the male and 21 percent of the female students had verbally coerced sex from another person....The percentages of those who physically forced sex were much lower: 1.7 percent   of the men and 1.2 percent of the women...."

Don't these percentages seem very high? Especially for the women?

And get this,

"Straus found that 15 percent of the men and 13 percent of the women had insisted on sex without a condom at least once in the past year.

Using the four-step corporal punishment scale, Straus found that of the group with the lowest score on the corporal punishment scale, 12.5 percent had insisted on unprotected sex. In contrast, 25 percent of students in the highest corporal punishment group engaged in this type of risky sex."

13 percent of the women insisted that the man not use a condom?

More importantly, I believe that there is a causal connection between child abuse (rather than spanking) and later problems of violence but to me a connection between the kid being spanked and later engaging in risky sex is especially suggestive that the connection is a risk-loving person.  Children who take a lot of risks, like running out on to the street a lot, are going to get spanked more.  Later these same children also engage in risky activities.  Not having seen the data I would be willing to bet that spanking is also correlated with skydiving, not wearing your seatbelt, gambling, and many other risky behaviors which are plausible not caused by spanking.

Finally, how about this for a non sequitur of the day:

"because over 90 percent of U.S. parents spank toddlers, the potential benefits for prevention of sexual and relationship violence is large,” Straus says."

What's the real European growth rate?

During my visits in England and Spain -- admittedly two of the winners -- I was wondering if we haven't underestimated European growth rates.  It is well known that when new commodities are entering the market, measured growth rates can significantly understate the real increase in well-being.  (Imagine that the price of an iPod fell from infinity in 1995 to $200 or so today; measuring this gain in terms of "more bundles of $200 in value" is missing some of the very high gains from those people who love iPods but were previously "at a corner" of no purchases, due to unavailability.)

So how does this apply to Europe?  I'm not mainly talking about iPods.  Rather migration is rampant.  When a Pole moves to London he can buy many more goods and services.  It's a big move up in real income plus lots of new goods are introduced to the consumption basket.  So when there is lots of voluntary movement from poorer to richer regions, changes in measured income will understate some of the true gains.

Frequently I stressed to Spanish reporters just how big a success their country and economy has been; they almost didn't believe me.  When I said things like: "Spain is in a much better competitive position than China, which still doesn't have half the per capita income of Mexico" they were truly shocked.