Attack Ships on Fire off the Shoulder of Orion

For your consideration.

Sex with robots is not euvoluntary.

Because it cheapens the real thing. It alters the BATNA of flesh-and-blood relationships.

Curious how a replicant ban might be enforced? There's a documentary for that. I think there's even a film adaptation somewhere.

Consider how sex with robots might influence intergenerational wealth inequality.

Also, this.

Assume Fragility?

Via SJ, a foray into the perils of being a young person in America. At issue: social expectations can mimic coercion. Saying "no" might be unpopular or urge others to say unkind things.

Assume this is true. Assume further that young people share this sentiment in sufficient numbers to adopt the following as a general heuristic: anyone in a protected class may say "yes" when they actually mean "no."

The consequences of this heuristic are damning for anyone in the protected class. Having to second-guess intonations of consent raises the cost of interacting with this class of people. A rational, risk-averse person will be more prone to avoiding someone whose most elemental words—yes and no—cannot be trusted. A rational, risk-averse person interacting with someone who fits the profile of an untrustworthy person will need to be compensated.

And as with taxes, the party that bears the cost of compensation will depend on the relative elasticities. If there are many substitutes for the young person who expects to be treated with kid gloves, young people in the protected class will pay the larger share of the social tax. If there are few substitutes, it will be the other party to pick up most of the tab. The cost burden of wilting violets is an empirical matter.

The alternative is to pursue virtue. Being able to say yes and no and mean it is an important component of integrity. Integrity is a useful virtue, as it reduces the uncertainty costs of doing business.

The collective action problem is particularly challenging here. To what extent should people form new stereotypes that conform to the yes-is-no-sometimes message in Jordan Bosiljevac's piece? To what extent will people form these new stereotypes? A small, well-organized, vocal constituency can clamor to petition the sovereign, and with enough amplification, can also successfully petition the entire society? If successful, what is the outcome? Is the price of an assumption of fragility one we wish to oblige others to pay?

Open Borders Day

Happy Open Borders Day, everyone. Okay, maybe not "happy." "Melancholy" might be more apt. Strong anti-immigrant sentiment among GSS respondents has barely budged since the project began in 1972, and if anything, legal routes to migration in the US have become ever more baroque and difficult to navigate. On the bright side though, migration in the EU has never been easier, and residents of many former Soviet republics can now live and work in the West all easy-peasy, surpassing the wildest dreams of their parents. So that's good.

Not so good? Well, let's put it this way. Laura Agustin recently did an hour-long BBC panel on international sex trafficking. When I asked her on Twitter if anyone brought up border restrictions, she replied, "They all denied migration's involved."

Yikes, people.

Ignoring the actors in the audience, the British Broadcasting Corporation had assembled academic and policy heavyweights to this discussion, and if they're either too daft, too ignorant, or too myopic to understand that a lot of times "sex trafficking" is what happens when people are so desperate to flee the circumstances of their birth that they arrange to transact with the few endowments nature has provided them with the faint hope of escaping poverty and misery. Each of the well-intentioned rescuers sharing the stage with Dr. Agustin up there would commit those poor souls for whom prostitution is a preferable state of affairs to unending penury. By their insolent refusal to acknowledge the root causes of sex trafficking, they hand down mass sentences, condemning who knows how many millions to a fate literally worse than debt-compelled prostitution. This is a curious moral position.

At any rate, I count myself among the signatories of the Open Borders Manifesto. Because I don't want my daughter to grow up in a world where girls have to turn to prostitution just to put food on the table.

Not unless they want to, but that's a rant for another day.

The End of Poverty Will Be Downloaded at 14kbps

Meet the Ghost Gunner, a home milling machine. Billed as your one-stop shop to craft AR-15 lower receivers, it's a lump of metal and code that turns raw metal into machines of killing. From the site:

Ghost Gunner is a general purpose CNC mill, built upon a large body of open source work, including the gshield 3 axis motion hardware, the grbl g-code parser and motion controller, and popular microcontrollers. All GhostGunner schematics and design files will be published into the public domain, and anyone can program anything for the machine.

FedEx and UPS have elected to decline shipping the device. I understand why. It doesn't take particularly sophisticated game theory to pick out the implied threat posed by the ATF. "Nice shipping company you got there, pal. It'd be a real shame if we found contraband in your trucks."

But think of what the Ghost Gunner really is: an amateur, with no knowledge whatsoever of metallurgy, engineering, design, or gunsmithing can take a pile of scrap and make something useful out of it. Tech like this eliminates the highest barrier for the home manufacturer: expertise. The machine knows the proper milling technique. The machine runs the lathe. The machine knows the proper annealing soak temperature gradients.

Imagine that you're a farmer in rural Uganda. There's an antique tractor rusting at the corner of a field that you haven't been able to get replacement parts for thanks to supply route disruptions courtesy of the local tinpot warlord. Luckily for you, a foreign rogue piloting a nighttime zeppelin airdropped a repurposed Ghost Gunner into the center of the village complete with software to crank out all the pump/compressor/belt wheel/alternator casings you'll need to get your tractor running again. All you have to do is feed in the scrap metal and Bob's your uncle.

Yes, yes. I'm simplifying of course. But a big part of what leads to economic development is what economists call "capital deepening." Airlifting a two million dollar John Deere combine into rural Africa is a waste of perfectly good machinery because to get to the point where such a device can be used properly, farmers need extensive supply chains, commercial infrastructure (roads, rails, &c), and the expertise to use and maintain the thing properly. To get to that point, folks need to be able to start small, to be able to cheaply get their existing gear into working order and to upgrade appropriately (recall your Smithian sympathy & Hayekian humility: "appropriate" in this instance cannot be dictated from afar, as the local residents know best the constraints of their particular situation). Ghost Gunner and similar devices drastically reduce the cost of capital improvements. Demand curves still slope down, people.

Code for new blueprints can be published cheaply and easily by the many, many, many civic-minded engineers throughout the world. These plans can be downloaded cheaply and easily even at throttled rates by bargain-basement ISPs.

It's easy enough for me to be a scold to do-gooder, affluent Westerners who seek to ban sweatshop labor, it's much harder to actually improve the BATNA of the world's poorest. Open source hackers building cottage manufactoriums are doing just that. Instead of hobbling them by refusing to ship their wares, we should be buying them up and giving them away to the world's disenfranchised.

Drop The Internet And Put Your Hands Where I Can See Them

"Revenge" porn is the sort of thing that should offend anyone with even the barest hint of a conscience. But should it be a criminal offense?

The Illinois General Assembly and Governor Quinn think so. Recently signed into statute law, Public Act 098-1138 makes the non-consensual dissemination of private sexual images a crime (h/t E.N. Brown).

Ignore for a moment the vague wording of the statute ("'Intimate parts' means the fully unclothed, partially unclothed or transparently clothed genitals, pubic area, anus, or if the person is female, a partially or fully exposed nipple, including exposure through transparent clothing." [emphasis added]) and consider instead the common-sense jurisprudence.

I don't pretend to understand folks' penchant for taking nude photographs or video. There already exists oceans of pornography cheaply and readily available and let's face it: most amateur photographers don't know the first thing about lighting, framing, mise en scene or the countless other photographic and cinematic tricks to making others look good on film, particularly when disrobed. Still, it is evidently a choice people make, and I have no particular moral authority to gainsay what private people elect to do with their time and talent. Even if it is sending each other grainy, wobbly shots of their grubby buttholes or whatever. What I don't quite grasp is how this sort of thing isn't resolvable in tort. It seems far more akin to a strain of defamation law than to an actual jeopardize-the-community crime.

Whatever the case may be, the Governor's office has held up the statute as a model for the rest of the country. And if it manages to survive First Amendment challenges (I am not willing to bet one way or the other on this, though I confess at least a little skepticism to its robustness), I think it may well have a chance to do just that.

Why? Because BATNA disparity. Though less so than yesteryear, there's still a very large downside to having your nude pictures publicized, a downside that does not exist for the one doing the publicizing. This statute, or ones like it, aim directly at this imbalance. The moral intuition is clear: BATNA parity. If for no reason other than this, it'll be a rousing success.

As for the unintended consequences? Well, I'm sure those will sort themselves out eventually. It's not like America is running short on prison space or anything, nor that public defender offices are desperately overbooked and understaffed. And hey, SWAT raids never go wrong, so why not just criminalize more behavior ordinarily reserved for tort, right? Cops don't accidentally kill or maim non-threatening civilians. This is America, after all.

The Very Model of a Postmodern Major-General

Will human genetic engineering be euvoluntary?

Kaffeeklatch nattering on the nature of fiddling with genes tends, in my experience, towards the far-mode. Most of the conversations I've had on the topic center on aggregate social consequences. The few near-mode chats I've had tend to be fairly mundane: a genetically engineered child still needs periodic diaper changes, cuddles, and bandages on skinned knees. Designer babies still get the sniffles, have their hearts broken, and climb up on the counter to sneak a few jellybeans while daddy's upstairs writing a blog post about human genetic engineering.

In my remarks in my previous post, I omitted much discussion of the peace dividend. Forgoing or delaying child rearing is accompanied by a non-violent mien. Bronies are not generally aggressive. At least not individually. Try to imagine an Applejack cosplayer mugging you for drug money. Now try to stop snickering. Now try to imagine a multitude of families, each playing slightly (sometimes very) different status games, often overlapping, with different status markers, in different communities. Grass-eaters might beget grass-eaters, and outsource protection to genetically modified bodyguards. Is this a problem? Should we expect to see EE violations in a HGE world?

1. Conventional ownership. Do you own your genes? Do your genes own you? Do you find it comical, tragic, or perfectly reasonable that gene sequences enjoy IP protection (at least for agricultural products)? If by "conventional" you mean "there's some case law on this" then yes, we have some idea, some precedent for residual rights over gene sequences. But if by "conventional" you mean an established tradition that resides in the minds of the citizenry, my impression (about 60% supported by the most recent release of the General Social Survey) is that the typical person is not of the opinion that tinkering with human genetics is a task for the mind of Man, but rather reserved to the authority of God. The relevant question is this: will opinions change and conventions arise once the practice becomes commonplace? The evidence from other popular technological advancements suggests that, yes, conventions will shift to accommodate valuable exchange opportunities.
2. Conventional capacity to exchange. Let's review Shackel's Motte and Bailey Doctrine. There is a core argument (lynching blacks is an inarguable evil) that is res ipsa loquitor obvious, and a less-defensible, but related claim (racial quotas enforced by state mandate is a natural right) that may or may not be true, but can be defended from the ethical comfort of the core claim (if you oppose race-based university quotas, you may as well put on a white hood and robes, because you're basically a klansman already). In the case of genetic engineering, the Bailey (the core, easy-to-defend proposition) is that there's a whole range of genetic disorders that could be wiped from the earth in but a few scant generations. Huntington's, Crohn's , Cri du Chat, Fragile X—the list is pretty long—these can all be corrected by manipulating embryonic genes (someday). Most respondents would be loath to toss the eradication of these diseases on the dunny heap, so expect most of the rancor to erupt in the Motte: designer babies, with +3SD IQ or the strength of Hercules or what-have-you: these sorts of exchange are outre, and in the interest of honesty, these are the ones I'd like to defend by encouraging you to think about them carefully. So for the rest of this little essay, assume I'll be spending all my time in the middle of the muddy Motte.
3. Absence of regret. Few parents express sincere regret for having had children. It's conceivable that parents might regret having designer babies, but the sorts of duplicitous sales practices that could lead to regret are already covered under the Uniform Commercial Code. Systematic individual regret therefore seems unlikely. But it's aggregate regret that I think worries most skeptics. In agriculture, genetic engineering often results in monoculture: superior strains of corn or wheat or whatever now dominate production, This monoculture leaves the entire species vulnerable to a well-targeted attack: some virus with a taste for a particular protein produced by a swapped-out gene could easily result in widespread crop devastation, leading to famine. In Talebian terms, such a system is fragile. If human genetic engineering produces a similar monoculture in the human population, a clever enough misanthrope might design a bio-weapon that could eat a very popular gene sequence, resulting in a near-extinction event. It might be worth it to invoke the precautionary principle in this case.
4. No uncompensated externalities. This is one where my own beliefs seem at odds with the popular sentiment. I am of the opinion that the success of others does not diminish my own. I believe that specialized production and exchange makes both parties richer, and I believe that envy is an unseemly vice, whether or not it makes its way into statute law. I also think I'm in the minority here. I suspect that if you told regular folks that some idle rich Beverly Hills clan maven had poured a million bucks into designing a superbaby, you'd get sneers, scoffs, looks of disgust, and a tidy sum of invective. How often do you hear "the rich keep getting richer, while the rest of us get left behind?" Having studied economics to some brief extent, I think this sentiment is bunk rubbish. Having studied politics, I am perhaps more inclined to agree with it. If a genetic sequence could be isolated that allows individuals to obtain political favor more readily, then there seems to be a pretty substantial downside. However, there is something that will mitigate this risk. Let me get back to it in a moment.
5. Neither party coerced by human agency. This one is actually the one I worry about the most. Human genetic engineering is so fraught with bioethical issues that it's very likely to be heavily regulated nearly everywhere. Heavily regulated (or banned) industries selling products or services with extremely high consumer surplus tend to encourage black or gray markets. And just like a market in heroin or sex, the logic of prohibition applies. It might be weird to consider bootleg gene re-sequencing, but during the heyday of the Apollo program, was it any sillier to imagine that the computing power of the reel-to-reel mainframes would be utterly dwarfed by tiny little handheld devices in the pockets of everyone from heads of state to boardroom executives to humble day laborers? Unaccountable genetic merchants operating out of the panopticon's view might very well dupe customers. Ne'er-do-well organizations might well kidnap or otherwise coerce hapless women into breeding them an army of genetically superior drug mules or super soldiers or suicide bombers or whatever. If this sounds far-fetched, then consider it a tail risk: unlikely but still possible. So, much like the unsolicited advice I regularly offer for sin taxes or prohibition, it is wise to consider what sort of underground markets would arise in response to attempts at prohibition. The cure might be worse than the disease.
6. Neither party coerced by circumstance. Does "keeping up with the Joneses" count as BATNA disparity? I think this is the presumed mechanism that ends in the gray-goo one-of-us conformity end game many skeptics fear. That, or the parable of the peacock, wherein parents select for socially-impressive-but-practically-useless traits in their progeny, like, oh, long necks or something. 

Here's why I think monoculture fears are (mostly) misguided: there is no one single arena for competition, even with our boring, inherited genes. Some of us are musically apt, others are good at basketball, others yet have tactical finesse in wartime. There are numerous margins along which to compete, and as we've seen with the flowering of leisure activities since the hockey stick of human prosperity took off, there are many more margins yet to be discovered. If there's big money to be had in Starcraft tournaments, don't be too surprised to find at least some parents selecting for fast-twitch muscles and uber micro. Other parents would probably go for an NFL defensive line package: dense bone and heavy muscle. Others would seek a well-tuned ear, others excellent balance, others high cheekbones, others an aptitude for research. Hipster parents might select genes that produce whimsical facial hair. Genetic engineering is more likely to result in more genetic diversity rather than less.

With one important exception: longevity. Immortality is a nearly universal human aspiration. As soon as genetic engineers can switch off the aging process, expect it to become part of the standard package without delay. Everyone will want this. And if anything will increase resource allocation disparity, it will be a cohort of Tolkenian elves freed from the shackles of making hay while the sun shines. All else equal (including what other genetic advantages might attend), extremely long life instantly bottoms out discount rates. If you expect to live centuries, prudent investment is no longer something you take for granted. Similarly, all the good things we're slowing training each other to value, like conservation, environmental quality, honesty and transparency in politics, all the little things we foist on future generations become things long-lived GE people foist on themselves. A lot of my pals on Twitter fret about a Jeb v. Hil ticket in '16. I don't. Political dynasties at least have the virtue of wishing to preserve the integrity of the system. They're less likely to be rapacious in the short term. Jeb in '16, Chelsea in '24, Jenna in '32. Given present institutions, that's how you ensure stability. Genetically modified quasi-immortals would do the trick too. Good stewardship strikes me as too good to pass up.

Now about the downside risks: GM armies, foreign or domestic, running roughshod over the enemy, crushing all resistance. Here, I'm not exactly sure I see the marginal influence of genetic engineering. Modern war is chiefly a matter of capital battery. Yes, infantry still has an important role, but to cow resistance, we tend to use naval and air superiority. Marines storming fortified beachheads is as antiquated as the hauberk and the blunderbuss. Send in the drones. Same goes for defense. As for guerrilla war, suicide bombing, et al, I again direct your attention to the longevity issue. Being personally invested in peace should, I think, give the political elite an incentive to direct more resources towards resolving lingering conflicts. And even if that isn't successful, it seems difficult to believe that folks who would resort to detonating the faithful and gullible would be particularly inclined to engineer a better suicide bomber. If you've got that kind of walking-around money, then as with nation-state armies, it's probably better to just invest in capital. 

Are there any downside risks that I can't comfortably dismiss? Well yes. Political risk. If HGE becomes cheap and effective, and it ends up banned anyway, I think it's reasonable to expect prudence to be an early casualty. One of the more disruptive outcomes would be outright speciation, where the GM offspring bred by one organization is so genetically distinct from those bred by another that they would be unable to mate successfully. High fantasy settings with elves, dwarves. orcs, and men are nearly always only ever held in homeostasis with the generous addition of applied phlebotinum. There's only room on this planet for one sapient species, pardner, and you better bet that it's the one with the nukes. Yes, that's an extreme scenario, but the stringent downside risk hints very strongly in favor of (twice in one post, oh my) invoking the precautionary principle: be very careful about enforcing a drug-war style ban on human genetic modification. A gene war could be devastating.

I think I'll leave it at this for now. This post already exceeds my already generous self-imposed word limit. I think I'll reserve a few other thoughts for a future post. For now, I'll just say that HGE is too dangerous to ban. 

Black List Down

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Twenty-nine states have enacted statutes against blacklisting. Each and every one of them restrains employers from preventing former employees from being hired elsewhere. Each and every one of them owes its pedigree to anti-conspiracy jurisprudence. The economics are easy enough to understand: blacklists destroy the implicit wealth of targeted individuals, obliging them to accept lower wages at no substantial cost to the conspirators. If you're a regular reader, you should instantly pick up on the BATNA disparity tucked neatly away there. If you're an employer, workers are easy enough to replace (or so goes the legislative intuition), but if you're a worker, you could be completely barred from your profession. Yikes!

As you know, the Supreme Court has roundly rejected prior restraint.

These 29 legislatures, in an uncommon fit of forward induction, have therefore been sharp enough to limit blacklisting bans to actual employers, and not to private citizens. Walter Sobchak is still at liberty to carefully write down the names of everyone who's offended him and publish it in the local paper. He might still be liable under defamation statutes, depending on what else he writes, but unless he's an employer, he won't trigger blacklist statutes.

The question I found myself asking yesterday after Popehat patiently and carefully explained all this to a #GamerGate activist is whether or not the moral intuition, if not the actual jurisprudence underpinning anti-blacklist statutes applies to privately-maintained lists. If I, a private citizen, create a public list of people who are heretical in mine eyes, and this list becomes extremely popular, perhaps even gaining a universal following among leaders of the industry I work in, isn't the effect to the people on the list exactly the same as if an employer had done it? Wouldn't I be just as complicit in ruining the career prospects of the people who've offended me?

A few possible differences:

1. Employers can maintain hidden blacklists, and there's no way to tell for sure whether or not the names on it constitute a protected class. Publicly visible blacklists kept by ordinary citizens are open to review and scrutiny.
2. Corporate blacklists can be used to sustain anti-competitive collusion. One of the solutions to a repeated PD game (at least on the margin) is to have a coordination mechanism. A blacklist can serve precisely this function. Put a name or two on there strategically to punish conspiracy defectors, and you raise the ex ante probability of sustainable cartel behavior. Private individuals have no incentive to dally in boardroom shenanigans.
3. My list is entirely opt-in. It's merely an offer. Acceptance of its elements must necessarily be voluntary. I am unable to withhold significant future commerce in the event that an employer crosses the picket line so to speak. I have precious little market power, in other words.

Perhaps you might add to this list. Perhaps not. Perhaps you'd quibble with the logic of the items in this list. I know I would. I'm not all that fond of the idea of protected classes, for example. Still, I am at no more liberty to influence the public jurisprudence than I am to influence the public taste for television programming. What I can do is attempt to parse the prevailing sentiment in an effort to predict what sort of legislative tomfoolery we might see rollin' down the pike.

On the one hand, social media does seem to be increasingly salient in employment selection/termination practices (Pax Dickinson, eg). On the other hand, it's dang hard to muster much public sympathy for the low-caste males that end up on mass Twitter block lists. What legislator would go to the mat for some douche cannon who takes preternatural glee in leveling vague (or sometimes very clear and targeted) rape and murder threats at women? My best guess? Privately-maintained block lists aren't likely to be non-euvoluntary enough to incite legislation unless and until someone starts a practically effective one (i.e. one that employers begin to honor) that actually targets people who are in an honest-to-Jim protected class.

No one would be stupid enough to do that though, right? 

Right?

h/t K.W. (Patrick maybe? Naw, Ken for sure. Like 90% sure it's Ken.) and Randi Harper.

Uber, but for Title 32 Mobilization of Army National Guard and Reservists

Uber makes the news yet again when surge pricing kicked in after the recent Sydney siege. Responses have been fairly predictable. Gawker ran (another) smear piece, offering arguments lifted nearly word-for-word out of the EE corpus: it's simply wrong to charge extra during an emergency situation. I'll let Russ Roberts counter:

People should do the right thing. But if they don't or if they don't even know what the right thing is, sometimes prices help.
— Russell Roberts (@EconTalker) December 15, 2014

Sometimes prices help. Sometimes.

If you'll indulge me, I'd like you to consider for a moment what the underlying trade is here. Ignore the livery branding and what we have is a dangerous situation that bystanders need to flee—need in the sense that their BATNA could be disastrous if not fatal. Asking strangers to ferry folks away from danger is great, but unless you make it worth their while, consider that the answer might well be "no." Remember that most folks sensibly run away from danger.

Most folks.

If only there was a well-funded organization with the expertise and equipment needed to perform the dangerous task of evacuating civilians in emergency situations (apologies to Garett Jones). If only this organization already pre-selected for the type of people who intentionally run into danger. If only this organization enjoyed the sort of longevity encoded into the highest law of the land (Article I, §8; Clause 16), allowing for intertemporal resource allocation smoothing. You've probably already read the title of this post, so you know to which organization I refer. The problem with using Uber drivers to evacuate civilians in emergency situations is that Uber drivers are also civilians. They're generally not trained to deal with extreme situations, and they've not already pledged to put themselves in harm's way. Guardsmen have. Furthermore, your local armory probably has a deuce-and-a-half or two gassed up and ready to roll. The ARNG is the ideal organization for civilian evac.

Unfortunately, individual constituents are unable to invoke Title 32 mobilization by their lonesome. Only the governors of the 54 states, territories, and districts can do that (50 states + Washington DC, Guam, Puerto Rico, & the US Virgin Islands). So an app to call out for your local 88M to pick you up directly probably won't be forthcoming. But something to quickly and directly notify the governor's office is probably fairly reasonable. Think Yo, but with a few extra bits of information, like geodata, type of emergency, number of affected civilians, status of emergency (ongoing, etc). That sort of thing. By quickly crowdsourcing all the relevant characteristics of the emergency, supplemental responders can more rapidly coordinate an appropriate response.

If the problem is, "we need more people to run towards danger to help" then adding a surcharge to a peacetime livery service is one way to get there. But it ain't the only way. Before we set to thrashing Uber for their particular solution to a thorny problem, let's consider some other reasonable alternatives.

Oops

Okay, so this is a little bothersome. A trio of poli sci profs co-opt the seal of the state of Montana to do some hum-drum research on voter turnout (if you think the experimental design is exceptional, I urge you to attend an experimental econ seminar once in a while). Folks get upset, complain to the election boards, and now their universities are facing civil action (pending an attorney huddle).

Ordinarily, I'd go with the Angus-ism, but I think in this case I'll let Jeff Goldblum take this one.
It's a little strange though that folks would get bent out of shape about this, thinking that it would influence an election. If you're worried that voters are so easily led astray by a mailer, even one with the official seal of the state, perhaps you should retain a greater skepticism about the validity of choosing through elections. The fact that low-information voters might determine an election surely points to a dire flaw in the system, does it not?

Hm. Poor dudes. If this costs them tenure, they'll have to accept a nasty, brutish BATNA: adjunct.

Shiver me timbers.

Lifehacker on Euvoluntary Exchange.

They don't use the word "euvoluntary," but the moral intuitions are all there.

link

Pay attention to the links at the bottom. Just because a business can fleece distracted or desperate customers doesn't mean help isn't available. A chronic market asymmetry is also an entrepreneurial opportunity for more virtuous merchants.

Thick as Thieves

Regular readers of EE know that Kiesling and Giberson at Knowledge Problem rank very near the top of my list for all-time fave bloggers. Their specialty is the economics of energy heavily informed by public choice. For me, a former nuclear power plant operator and present public choice enthusiast, their work is a perfect blend of the old and the new.This splendid tradition continues with a post yesterday on the philosophy underpinning the regulatory approach taken in utility provision.

You might marvel that anyone could find regulatory theory compelling, but try to take the long view for a moment. You occupy an extremely remarkable time in history. You live in an amazingly well-lit, pleasantly air-conditioned, luxuriously cushioned, outlandishly informed period in the course of human events. The mere fact that a small sliver of the population is able to dig minerals out of the ground and convert them into commonplace creature comforts that would have gobsmacked Solomon himself is miraculous. Humanity got tired of huddling in caves away from the fury of the deities of thunder and said, "you know what? Let's use those blinding columns of the rage of the heavens to look at funny pictures of cats." We live in an age where electricity is boring.

Anyway, because of historical accident, electricity generation and distribution ended up resembling other utilities (water, eg): centralized generation and single-grid parallel distribution. We've mostly got big ol' power plants that make the electricity, transmission gear that send it out, and load centers that consume it. And according to standard (Samuelsonian) economics, the monopoly that naturally arises from this threatens the public weal by potentially charging more for their services than a competitive provider would. The ability of a monopoly to charge higher prices is tied very closely to consumers' alternative arrangements: if the consequences of buying no electricity are extremely unpleasant, the electric company can get away with charging an arm and a leg. To avoid this unpleasant firm-customer relationship, the utility regulatory board is chartered with estimating the cost of power production and setting the price accordingly. In the language of EE, utility pricing regulations exist to prevent the exploitation of BATNA disparity.

But, and it's a big but, this is not the only approach to regulation. Contrast monopoly fetters with regulatory agencies like the Consumer Products Safety Commission. Here's the front matter from the statutory authority for the CPSC:

SEC. 2. [15 U.S.C. § 2051] (a) The Congress finds that—
(1) an unacceptable number of consumer products which present unreasonable risks of injury are distributed in commerce;
(2) complexities of consumer products and the diverse nature and abilities of consumers using them frequently result in an inability of users to anticipate risks and to safeguard themselves adequately;
(3) the public should be protected against unreasonable risks of injury associated with consumer products;
(4) control by State and local governments of unreasonable risks of injury associated with consumer products is inadequate and may be burdensome to manufacturers;
(5) existing Federal authority to protect consumers from exposure to consumer products presenting unreasonable risks of injury is inadequate; and
(6) regulation of consumer products the distribution or use of which affects interstate or foreign commerce is necessary to carry out this Act.

That ain't BATNA disparity, people. It's regret aversion. And it's a guiding principle for the regulation of dynamic industries. It's also the soil in which the precautionary principle grows.

Here's the fun bit that Lynne is asking: what happens when the regulated industry changes from static to dynamic? That is, the institutions that support protections against monopoly rent extraction may not be suitable for an industry looking to adopt new technologies.

Luckily, there's already a pretty good example of a regulatory apparatus that's already gone through (or is going through) a similar transition. Banking and finance were industries where "production is represented by a known cost function with a given capital-labor ratio; that function is the representation of the firm and of its technology" prior to, say, the collapse of Bretton-Woods. Loan originators didn't sell off bundled securities, F. Black and M. Scholes had yet to publish their 1973 paper on options pricing, and you knew what you were getting with the sleepy, predictable 6-3 spread in a Savings and Loan (my younger readers will know the old S&L moniker under the more modern name of "Credit Union"). Well, something happened (some things, actually: plural) that transformed the staid, dull-as-dishwater banking industry into the hydra it is today. Exotic derivatives, loan sales, currency arbitrage, and a phalanx of regulatory agencies to deal with it all now dominate the money side of commerce. Where there were once periodic recessions, we now inhabit a world shared by scary terms like "systematic risk" and "too big to fail."

It'll be interesting to see if the disorderly transition in finance and banking will presage utilities' move towards more rooftop solar, smart metering, and the like. I'm curious if part of the mess that led to events like the S&L crisis or the failure of LTCM (or Enron for that matter) were precipitated by an ill-timed shift in regulatory philosophy. The political kayfabe of the Reagan administration was "deregulate, deregulate, deregulate," but the details surrounding deregulation matter greatly. Was it simply a matter of eliminating flight price controls, as with the Civil Aeronautics Authority, or was it something that disrupted the fundamental cost structure of mortgages? "Deregulation" is just a shibboleth, you guys.

My prediction, if you can call it that, is that any institutional changes that happen in utility regulation should at least consider reviewing the purpose of having a regulatory authority in the first place. If customers are more easily able to share load, then protecting consumers against rapacious pricing is no longer a chief concern. If there is a greater potential for fraud as new electricity generation and delivery is the imminent threat, then the charter authorizing regulatory boards should reflect that.

If we must have regulatory agencies, then it is prudent to align their incentives and their function to best match the interests of the public. Just imagine what would happen if the ruin brought on by the events of 2008 would have centered on power generation and distribution rather than a cabal of oily bankers in Manhattan.

Safety and Efficacy are Separable: Solon's FDA

Imagine for a moment that your parents ran a pharmaceutical company. They've recently developed a new drug that attacks the prions responsible for Creutzfeldt-Jakob Disease and it shows promise in the lab. And by "in the lab", I mean in a petri dish, not in animal tests.

Now, you know as well as anyone that CJD is both currently incurable and fatal in 100% of cases, so you allow yourself a flash of optimism. But you temper your glee because you know that FDA regulations insist on two hurdles before drugs may be brought to market: the drug must be "safe" (holy epistemological problem, Batman) and "effective." The safety criterion is a garden-variety precautionary principle measure, bound in the ubiquitous Hippocratic maxim primum, non nocere: do no harm. Knowingly inflicting harm is criminal mischief, unknowingly inflicting harm is at the very least non-euvoluntary and quite probably criminally negligent. But what of the efficacy requirement? The FDA imposes prior restraint on drug manufacturers to shield consumers against buying placebos. Why? And where's the public outcry?

Establishing efficacy is expensive and time consuming. And much more so when the drugs are to treat rare conditions like CJD. Every year that passes in which a drug is stuck in regulatory purgatory is a year in which patients don't at least have a Hail Mary shot at a cure. Is protecting folks against getting ripped off at the pharmacy so important that the US regulatory authority will routinely, cavalierly send patients to the grave? Or if you're more inclined to the Tullockian view that the raison d'etre of regulators is to protect incumbent organizations, how is it that voters' moral intuitions don't have them storming the gates of 10903 New Hampshire Ave, Silver Spring, MD?

I have a feeling that it's a BATNA disparity issue. Big pharma is suspect because it's big pharma, and for no other reason. Rhetorically, that's a tough point to dismiss. This bias, the skepticism of large organizations (particularly when driven by the profit motive), is well-entrenched. But I urge you, gentle reader, to indulge a Solonic substitution. Imagine it's your parents rather than Ian Read running Pfizer. Under what circumstances should you be willing to let them hawk their wares. Would you let them sell poison to the public? No, of course not. Would you let them sell a drug that maybe might work to fight a rare disease, but might also just be a dud? I'd like to think that you'd lend them and their customers the benefit of the doubt.

Perhaps Plato's Divine Maxim is a better heuristic for regulation than a muscular precautionary principle.

Res Ipsa Loquitur: The Virgin Auctions, Round Deux

A website (here) allows folks to place a bid on obtaining the virginity of a 27 year old medical student going by the pseudonym "Elizabeth Raine."

According to the site, the max bid as of press datetime is US$550k. I wonder if folks are running sealed-bid scripts against this value like you can do on Ebay. Hm. Whoever wrote the terms and conditions seems to be familiar with elementary auction theory (there's a $100 buy-in).

Anyway, is this euvoluntary? According to the site, she doesn't really need the money. She's a well-to-do white American girl who's lived abroad, and she's studying medicine. She's got a pretty good BATNA. I see no evidence of exploitation, at least in the direction you'd expect. If anything, she might be the one doing the exploiting.

How about unconscionablity? This isn't the first time someone's tried a trick like this. Repetition is what morphs the bizarre into the mundane. How many more high denomination virgin auctions need to happen before the price drops sharply and it's just a dreary routine?

If this story is legit (and I have some reservations), I'm curious if it's a leading indicator of... something. I'm not sure what. I agree with Maggie McNeill that the way prostitutes are treated in the US is egregious, but most of the worst is focused on the discount end of the market. Do high-cash-value transactions help alter public moral intuitions towards the sex workers who would most directly benefit from decriminalization?

Stripping for Cash

Gurri on Watterson on the comics industry.

ATSRTWT

Tis this: struggling artists are chicken-winged by syndicates (how did I never notice the sinister undertones of this word before?) into signing away a lot of creative control. In exchange, they get to make a living doing something they love. The alternative is (these days, anyway) webcomics.

I'm friends with a guy who does similar work (I won't reveal his identity) and he tells me that most creatives, be it in games, comics, comic strips, whatever, are in it for the love of the art. The labor market is way over-saturated. The guys producing cover art for whatever Dungeons and Dragons copycat game you enjoy are making but a small fraction of the minimum wage if you count labor by the hour.

And webcomics? I have a hunch Weinersmith drops by here once in a while, and he's top-tier. Despite that, I still bet that he won't be retiring to the Bahamas next year, even if his work is utterly brilliant. Would you say that's accurate, Z?

So where's all the public outrage? Why aren't folks flooding the streets with pamphlets decrying the cruel exploitation of art workers? Why is this instance of non-EE so non-rageworthy?

A few possibilities:

• folks don't retain much pity for people with natural talent
• the actual BATNA is to work a 9-to-5, giving up the dream entirely
• artists obtain unusual status: some of them are well known for having access to mating opportunities in excess proportion to their income or physical appearance (I think this is mostly musicians and actors, but perhaps the same moral intuitions apply)
• selling out is still pretty good: look at what Breathed did with the Sunday pages, and consider that if you're a great, your work will survive long after your bones are dust
• ordinary people don't know about the plight of the struggling artist, or they believe that the struggle is part of the art and without it, all that's left is artifice

I don't know how many, if any, of these are accurate, but it does seem interesting that when people aim to portray the struggle of the working class, they talk about single mothers far more frequently than some dude hunched over an easel.

I too look forward to the forthcoming documentary. I'm a lifelong comics fan myself.

Oh Lord, Stuck in Conyers Again

Reports here and there of folks stuck in and around the Atlanta area thanks to inclement weather. In the first case, people end up spending the night in grocery stores. In the second, kids enjoy a sleepover at school.

I might be peering through rose-colored glasses, but neighbors helping neighbors is the finest expression of human cooperation we've got. A night spent snoozing on a Piggly Wiggly tile floor or in the gymnasium is better than freezing to death in the cold, but it's probably not as good as a warm bed in someone's house.

Even if you'd have to spend a couple of c-notes for the privilege.

One of the things that struck me about traveling in Europe was the proliferation of pensions: homeowners who (usually after retirement) would let out a room for travelers for the night. For those of you who've not done much backpacking abroad, they're a step lateral from a bed and breakfast—cozier than dedicated lodging, but typically cheaper and with higher quality variance. Also, they tend to be marginally (marginally!) unregulated, ceteris paribus.

The Atlanta snow.. what to call it... event probably qualifies as non-ergodic. Whether you pin it strictly on the weather or a concatenation of snowfall and a poor municipal response, Atlanta residents were caught with the pants further down than they usually are.

Here, our troublesome counterfactual problem once again rears its slovenly visage. What's actually blocking folks from selling rooms to stranded travelers? Price gouging statutes are popular when put to a vote, suggesting to me that an entrepreneurial effort that would enjoin folks to renting out a spare bedroom to a waylaid wayfarer would be far from peachy under the harsh light of day. Another way, it's not the scribbled-down statute law that keeps people from opening their doors to strangers in return for a modest profit, but rather the underlying moral intuition that supports both price-gouging legislation and the urge to cheer when the cops dump the yahoos' ice on the ground in Raleigh.

Tender sentiment against taking advantage of folks' situation can easily strand those unfortunates to hardscrapple attempts at sleeping on hard tile floors (or worse).

Cleanup on aisle 3.

The Headline Meme Persisteth: Paid in Beer

Amsterdam alcoholics paid in beer for collecting litter.

Moral intuitions engaged: BATNA desperation, ex post regret, conventional capacity to exchange (funded as this is by the public coffers).

A euvoluntary feast, no?

Antifragile Amish

Eccentric columnists are one thing. The infamously hedonistic Amish are quite another. While Thompson urged the young people of this fair nation to flirt with the weird, our dulcet domestic Dutch diaspora demands nothing from us English. Nothing beyond ordinary peaceable recognition of property rights anyway. From the wool I've gathered, the yarn I see spun is that the Appia Amish is one of family and community first. Their take on technology is that alienation is the tip-top cardinal error. Gazing into the unblinking eye of the television (or, egads, Buzzfeed) bears the opportunity cost of foregone time forging social bonds. No and no, and no again. Nein. Neen. Stem tegen.

Incidentally, the rite of rumspringa is of interest to euvoluntary exchangeurs on its own merits, questioning what counts as coercion. Nominally, kids who've finished sowing their wild oats have the option of abandoning the community for good. Few elect to do so. Why? From what I gather, the practice of strengthening community bonds is extremely effective. There appears to be a nice thick margin where the (relative) nihilism of the English Ways is sufficiently terrifying that the home community retains a strong appeal, privations notwithstanding. Does this count as a flavor of coercion? "Sure you can move to Austin and work in an office with people you don't know, an outsider for the rest of your life. Or, you can come back home where everyone you've ever known (for better or worse) is waiting for you." Coercion by... what? Love? Community? Uncertainty aversion? It's definitely (probably? possibly?) not a coercion likely to engage the moralizing sentiments of the moderate English (for those not in the know, "English" is the term the Amish use to describe non-Amish, so even my blushing full-blood direct immigrant Lithuanian bride would be English to Amish folks). But enough digressing, people. I'd like to consider the larger upshot of a robust Amish community.

And that upshot is the preservation of a not-horrendous aggregate BATNA. Amish communities preserve heirloom seed stock, a fine hedge against a tightly-wound GMO monoculture disaster. They retain vast stores of knowledge of animal husbandry, carpentry, masonry... well, pretty much all the skilled trades you need to run a fully-functioning community minus a nationwide power grid or electronic communications network. Should some great gnashing non-ergodic event wipe out global power distribution, the odds that the world would end up looking like a Kevin Costner movie would be at least somewhat hedged by trade in physical goods as well as skill capital between the Amish and the English.

So then to the moral intuition. It's my general impression that most workaday Americans, when they take a moment to even think about the Amish (and I don't mean to focus on them specifically, I think the moral intuitions could apply to Mennonites, Quakers, or other plain-style religious Diasporas) find the notion behind opting out on a community scale to be perfectly hunky-dory, offensive "Amish Mafia"-style nonsense television programming notwithstanding. Question then: is the intuition behind this similar to what I posited for truck systems? Or is it thanks to a widespread appreciation for the First Amendment? Something else entirely? I'm hesitant to pin my hopes on people's appreciation for my BATNA preservation argument. I think that this sort of reasoning appeals to people who support more funding for near-earth collision monitoring, but not to the median voter.

What of it then, my cherished readers? Do you think the various Pennsylvania Dutch are euvoluntary? Why or why not? If not, how far should political paternalism extend into the community? Does your answer to that last question encourage you to think about how far political paternalism should extend into any community? What's the difference?

Platykurtosis, Bounds, and BATNA

I have no attention span for movies but if that's what your family suggests doing, just go. quality of alternative activities varies WIDELY.
— Pamela J. Stubbart (@amelapay) December 26, 2013

 The "Best" Alternative To a Negotiated Agreement is a little mental fiction useful for considering soap-bubble moral puzzles, floating freely in the atmosphere, undaunted by the cruel shackles of practical gravity. In practice, life is a bit grittier, a bit more uncertain. A "best" alternative is just the #1 spot in a subjective rank ordering of plausible alternatives. For our thought experiments, we rig a guy stumbling through a desert or someone on the verge of being mugged, but actual alternatives out there in the actual world are largely unknown most of the time. If I don't go out to the movies (an odd example for someone with a toddler at home, but please bear with me), what shall I do instead?

If our beloved PJS is like ordinary people... okay, like ordinary people along this particular dimension, she'll be averse to both risk and ambiguity (see Ellsberg, 1961 for the OP, or go here for an overview) and the chore of searching for alternatives will be costly, even in the sweet land of peaches.

With that in mind, what is a BATNA when it's at home? It's a menu with orthogonal elements defined by a multi-dimensional probability distribution. Eek, that sounds gruesome. Fret not, for you're well-equipped to handle it. In your daily routine, you regularly make probabilistic decisions over orthogonal alternatives. Put to the point-blank question, you'd look at me askew if I asked to rank order eating an orange or inflating your basketball. They're not comparable. Yet you still choose between the two without too much fuss. Your mind is built to handle these kinds of decisions, even if categorizing them is daunting in a way that categorizing your favorite shoelaces isn't.

So here's one thing I do with my 2 year old daughter to overcome issues of poorly-defined alternatives. I expressly offer her a false dichotomy. Milly, would you like to watch one Kitty Show then go to bed or just go to bed right away? That way, instead of trying to pluck options from the phlogiston, she's better able to rank-order easily available elements. Until she's able to do this mindhack on her own, I see it as one of my duties as a parent to provide this valuable service for her.

Consider to what extent the Man of System wishes to duplicate my parental efforts for constituents in his jurisdiction.

De novo euvoluntary exchange opportunities arise from the Kirznerian weeds off the trail that's been scribbled on the well-worn menu slate slung like an albatross around our necks. Mind the tradeoff between exploring the platykurtotic edges of the world and œconomy of transacting. There ain't no such thing as a free elimination of search options.

Adoption Flea Markets

Tyler Cowen comments here on an extensive Reuters investigative piece here. This isn't the first time Munger and I have discussed this sort of thing, but I must admit that discovering the extent of secondary adoptions came as a bit of a surprise.

And like the trained euvoluntary exchangeur I am, my thoughts immediately flew to the alternatives. There are some horrible outcomes that could occur in black market adoptions, things I won't list here mostly because I don't want to squeeze my own emotional trigger. But if you consider those, you become beholden to consider the BATNA. For foreign adoptees, we're talking Dickensian nightmare orphanages. I elect to refrain from the graphic details, but when I lived in East Europe, I became friends with a man who had grown up in one of the nicer Lithuanian facilities. The thing that sticks in my mind is how the younger boys had to teach each other to fight just so they could avoid being raped nightly by the older boys. I again stress that this was one of the nicer facilities.

So it's wonderful that the precautionary principle insists on vetting new adoptive parents, but even with this process, it's still a gamble whether or not the adoption will "take", so to speak. Even with careful matching by above-board agencies, we're still looking at probability distributions fraught with high SD events. Bad things can happen to good people.

So we're pretty much left with institutional questions. It's already arbitrarily hard for couples that want to adopt from overseas to hack though all the red tape on both sides of the border. And if this Reuters piece is on the money, the secondary market has yet to develop its own rigorous self-monitoring mechanisms. Is there a free lunch on the table where a few tweaks can ensure better, faster matches and proper, accountable follow-up? It's something to think about, particularly if you're the sort of person who likes matching algorithms.

The other thing to carefully consider is what we might expect from a realpolitik policy adjustment. I worry that the seemingly needed crackdown will fall on the legitimate agencies rather than on the fly-by-night online matchmakers.

It's a tough problem.

Bargaining Power and Immigration: The He-Man Conjecture

The masses have spoken. You seem to like my little dialogues, so here's one between Eric the Economist and Pete the Pedestrian.

Eric: Hey guys, what if wage and income justice are two separate concerns? Economics tells us that in competitive markets, W=MPL. Social justice tells us that mothers who can't buy baby formula is intolerable. Why not get out of the way of wage pricing so that competition can do its job of striving towards full employment and provide a guaranteed minimum income so that no one has to eat garbage or whatever it is very poor people do to keep from dying.

Pete: Typical economist drivel. Jobs aren't about wages, they're also about dignity. A paycheck earned is more than the bundle of rights it commands in your vapid formulations. It's dignity. It's pride. Your handouts insult folks' self-esteem.

Eric: Well, we've got this idea in economics called "revealed preference" that suggests that workers who actually do value the self-esteem generated by productive work will seek to become more productive workers. They accumulate skills, education, discipline, they lay their hands on those characteristics that serve both their narrow self-interest and the interests of their customers and employers.

Pete: What a load of bull. Pay and productivity have nothing to do with each other. Can you link CEO pay to actual value generation? No. And in case you haven't heard of a little something called "bargaining power", there's another idea that says that employers can bid down wages like crazy since low-skilled employees are a dime a dozen.

Spivonomist: Hm. Interesting, Pete. That's actually an empirical claim. Yes, there's the normative notion of BATNA disparity in there that underpins your moral intuition, but is it actually the case that employers enjoy a superior bargaining position? Let's see what the literature has to say.

And the econ literature is a little inconsistent. Where it is pretty clear is when it comes to immigration. Study after study after study (including my own research) shows that middle on up immigration is a complement for native labor. That is to say that professionals that come to work in the US appear to actually boost the wages of natives. Only for low-skilled labor does this pattern reverse, and the effects tend to be pretty mild. Statistically significant, yes, but the magnitudes are small (in my judgement anyway) and they don't linger.

This seems to suggest to me that the bargaining power is actually on the side of the low-skill native workers' side. Only by restricting the supply of their competition can they sustain artificially high wages, just like plain-jane relative price economics predicts. Low-skilled labor is not euvoluntary, but for the precise opposite reasons that are usually brought to bear.

Of course, there's a lot more to it than that. The question is fraught with measurement bias, longitudinal concerns, endogeneity problems, and GE projection errors. What if most of the problem can be attributed to the capitalization of existing labor market restrictions? Important concerns, of course, but I think it might be wise to reconsider how we think about the relative market power of different productive entities.