Free to Negotiate

"Choice" is unilateral. "Negotiation" is multilateral. One of the astonishing accomplishments of the modern agora was to modify a negotiated transaction to something that more resembled unilateral choice. I don't have to argue price with a grocery store clerk when I decide to purchase a can of tuna. The benefits of impersonal, anonymous exchange are obvious and many. Sparing customers the hassle of the haggle frees both customers and producers to concentrate on doing whatever it is they do best. In my case, if today's breakfast is to be believed, it is preparing the finest buttermilk and apple pancakes this side of the Pecos. I'm only half kidding. If you're ever in the Northern Virginia area, hit me up and I'll ruin the pancake experience for you forever. You may never eat another pancake that can live up to what I am able to deliver. I've even discovered the secret of putting pomegranates in flapjacks. What the even?!?

Focusing on "choice" as a rhetorical device appeals to folks' inherited intuitions about the wonders of the market. Look at this guy and tell me he isn't impressed by choice:

Of course, that's just what's seen. What's unseen is the enormous tacit negotiation that has to take place to put all those different varieties of butter and cheese in that display case. You don't see the supply chain, the individual dairy farmers, the commodities traders, the accountants, or the managers. To a customer, it looks like choice. To an economist, it looks like negotiation, albeit tacit, ex ante, and by proxy.

The rise of the matching* economy exposes the tacit negotiation of the marketplace to the customer. Airbnb isn't just a matter of booking a reservation at a property held by limited-liability corporate entity. It's someone's home. Uber isn't an infinitely-replaceable convenience livery selection. It's someone's car. There's an explicit negotiation there, even if it's conducted quickly and painlessly with the assistance of software. But make no mistake, that negotiation is embedded in each exchange opportunity anyone pursues. Perhaps our rhetoric might benefit from acknowledging that negotiation. Particularly so when one party's "freedom to choose" abuts another's.

Then again, perhaps such a rhetorical shift is to the disadvantage of people with an ideological axe to grind. Changing "school choice" to "school negotiation" runs the risk of recognizing that education professionals have a stake in the learning process. "Women's health negotiation" might inadvertently acknowledge that more than just one person could be affected by reproductive decisions. I suppose I can see the peril in my proposal. Taken far enough, this could be a real mindkiller.

Exercise caution, you guys.

*The phrase "sharing economy" is misleading, even if the term comports with lessons taught in Kindergarten. It's less "sharing" and more "quickly and cheaply finding mutually beneficial pairwise exchange opportunities." I quibble because I care, people.

Individually Prudent, Institutionally Abhorrent

Sandra Bland is the latest (and I predict, tragically, not the last) in a string of unfortunate encounters between police and citizens. ICYMI, she was arrested during a minor traffic stop and [mysteriously] died in police custody. Huffpo has the transcript of the arrest. ATSRTWT. Unfortunately, a great deal of nattering and legal analysis so far has dealt with the speck of the arrest, ignoring the log of her jailhouse death. But as long as we're on the topic anyway, there's something that's been bugging me for a while now and this incident fits the trope.

viz.: There are a great many privately rational decisions that end up collectively irrational. In terms the Scholastics would recognize, it is often prudent for an individual to defer to even unreasonable requests made by belligerent police. The alternative, after all, can be a beating, a tasing, or a broad-daylight street execution. It is often prudent to avoid certain parts of town at certain times of day. The alternative can be a mugging, a stabbing, or an unking. It is often prudent to remain reasonably sober at certain social gatherings. The alternatives are unsavory.

The trouble with our rhetoric, with our language perhaps, is that it's all too easy to conflate the part for the whole, and the whole for the part. Most of us don't want to live in an America where cops are a pack of undisciplined goons with no regard (or knowledge!) of the laws of the land. Most of us don't want to live in an America where racial animus is as thick as Okefenokee midges on an August afternoon. Most of us don't want to live in an America where it's okay to take sexual license with an incapacitated woman.

Alas, we have the institutions we have, not the ones we want. For individuals, it is wise to treat the rest of society as if it were a force of nature. It wouldn't be victim-blaming to advise folks in flood-prone areas to stock up on some extra sandbags. For society, it is an arrogant slight to accept an unjust status quo. When a politician or pundit tells college-aged girls to dress modestly and avoid strong drink, the subtext is tacit acceptance of the "she's asking for it" trope. It's reasonable to expect that people speaking far-mode generalities to be speaking of the class rather than the instance.

The same intuitions apply to an appreciation of EE violations. It might be (usually is, indeed) individually rational to raise prices during an emergency, but folks don't like living in a world where the iron laws of scarcity make it necessary.

We have the laws of economics we have, not the ones we want.

Rhetoric in the New Commanding Heights

If you don't get at least a little nervous hearing the word "epidemic," consider the possibility that you conform to one of the following descriptions:

1. You are wealthy and comfortable enough to adequately insulate yourself from a contagious outbreak. You have the foresight and planning to make sure that you can enter self-imposed quarantine lasting 90 days.
2. You are an ignoramus. You don't believe in germ theory, instead subscribing to medieval fancies like vapours or angry spirits or something. Or maybe you think that the marginal benefits of vaccines do not exceed the marginal costs.
3. You have faith in modern medicine. Sure, contagious disease killed off untold hordes of our grubby ancestors, but we've got microscopes now! In the secular West, laboratory analysis has meant the end of a great many of the terrors of our dim past.
4. You have faith in the benevolence of the divine. We are strong in our love of the Lord, and His might shall see us safely to the other side. If this describes you, bless your heart. If it doesn't, I'd wager you probably know someone it does describe.
5. You are weary. You may dimly recall the first time you heard the word "epidemic" applied to obesity, or to smoking, or to trans fats, to to whatever choice-related bugbear happened to catch a scold's eye. Maybe you held a little funeral for the deceased word, scattered its ashes into the ocean. Probably not. But surely you're past lamenting its demise. 

According to the BLS, health care's share of total labor employment is 11.7%, up from 9.5% in 2002. They project that in 2022, it'll be 13.6%. The only rival for that kind of share is "state and local government." Heath care is big business and it appears to be getting bigger. When a sector of human activity repurposes an important bit of language as has happened to "epidemic," alert citizens might be wary of grabs for dominion. 

If it is true that the long conflicts in the culture war are waged with words, with rhetoric, then gaining the higher ground with plastic definitions of scary things is a strategy tailor-made for those that seek dominion over the teeming masses of their fellows.

Smoking isn't particularly euvoluntary. Neither is poor diet, lack of exercise, high fructose corn syrup, or any randomly selected hobgoblin of the medical elite. But if you're making a case for state-sponsored intervention in a non-euvoluntary transaction, just imagine how much easier your task is if you can couch your appeal in the same language used to describe an outbreak of the bubonic plague.

Tea With Danuta and Aristotle

Pictured: In 1985, Danuta Danielsson wallops a neo-Nazi during a nationalist demonstration. Thirty years later, Sweden finds its leadership waffling over whether or not to memorialize the moment in statue. At issue? According to the WaPo link, Danuta's family isn't thrilled about having her so memorialized. Evidently, she was none too proud of this little moment of incivility. There's also some, well, let's call it "tension" in Europe around ethnic identity and nationalistic sentiment. The current politics are of less interest to me than the moral sentiments implied by this photograph however.

Recall first that the law is an ass, and one that needs periodic kicking. Here, the law speaks plainly: assault and battery is a crime. Ms. Danielsson (Mrs? If the surname rules are similar to those in Iceland, the -sson suffix is male and therefore her husband's) is here captured in the process of committing a crime. That she's in the middle of delivering a handbag's worth of street justice to a pitiable remnant of Europe's greatest modern sin is irrelevant when weighed against the plain language of statute law.

Yet something tells me that a randomly selected jury of her peers would elect to acquit 99 times out of 100. Why? The law is an ass. All it can fart out is a single note: you can't hit someone except in self-defense or in the defense of others. Most citizens have more sense than to listen to the exclusive trumpeting of a lonesome flatulatory orifice. Most citizens rightly acknowledge that some forms of speech, some assemblies are so thoroughly odious that they deserve immediate, righteous censure and that sometimes a solid thwack with a hausfrau's satchel is, by the lights of proportional Aristotelian capital-J Justice, the correct rejoinder.

What isn't a correct rejoinder? Well, if she would have pulled a pistol from her purse and covered the Nazi goon, Or if she would have rounded up a posse to pummel yon skinheads unconscious. Or if she would organize fellow constituents to impose prior restraint against this odious rabble. It is meet and proper to answer speech with speech, even if on occasion you have to let the swat of a pocketbook do your talking for you.'

The moment citizens grant the sovereign the authority to police the content of speech is the moment they yield their liberty to object to the momentary fashions of public morality. A government that can silence neo-Nazi creeps is a government that can silence suffragists, or anti-war protesters, or pretty much anything that strikes their fancy. Anti-hate speech sounds awfully good, at least until the tables are turned and you're the one indulging speech the sovereign finds hateful. 

Munger's addendum to Solon's rule runs something like this: would you trust an actual politician you can name with the authority to exercise the rule you favor? 

This is a fine heuristic. Speech may not always be euvoluntary, and the law may be an ass, but that does not imply that we ought compound insult with injury. 

h/t TGP

Cinematic Appropriation and Cultural Durability

Stewart Dompe on the use of tropes in society. The readers' digest version: geopolitics is hard, so to make it easier to understand, applying stylized version of stories we already know makes economic sense. Note that this is consistent with public choice theories of voter information: there is little incentive for constituents to be well-informed about foreign policy (since no single voter has any practical influence over the conduct of the home country's political affairs abroad), and the lack of direct accountability means that voters are at liberty to believe anything that is pleasurable or that conforms to comfortable preconceptions.

Movies, literature, music, pop journalism—there's plenty out there to feed popular prejudices. An abundance of rhetoric, if you will. Some of it even comes from overseas. Though the great era of foreign remakes seems to have waned in this Age of Bay, some of the important film classics of the 20th century are English-language versions of Kurosawa flicks. And if you'll forgive the conceit, they're insufferable bastardizations of the originals. Beloved gunslinger westerns like The Magnificent Seven, a plains-country interpretation of what was Kurosawa trying to come to grips with his postwar experiences took a complicated tale of honor, duty, desperation, pity, vice, and virtue and dutifully sanitized it, presenting instead a swashbuckling gunslinger story with pretty clearly defined good guys and bad guys. I challenge you to identify a paragon of virtue in Seven Samurai apart from perhaps Shimura's character. Even the Italian interpretations of Yojimbo and Sanjuro watered down the originals. Sergio Leone took Mifune's Man Without A Name and made him an off-the-shelf badass in A Fistful of Dollars and For a Few Dollars More. Clint Eastwood in the spaghetti westerns is just Dirty Harry in cowboy boots and a poncho. It's worth noting that two of Kurosawa's finest films, Ikiru and Red Beard lack even a basic protagonist-antagonist narrative structure (same goes for the relatively obscure but quite excellent Dersu Uzala) to convert into a 3-act popcorn flick that Western audiences would enjoy. Hence, no director has ever (to the best of my knowledge) seriously considered turning these masterpieces into Hollywood releases.

The film purist in me rails against the dessication of quality cinema. But the social scientist in me finds something refreshing. Kurosawa's (beautiful and true) aesthetic is too alien to English-speaking audiences to stick. Even other imports (The Girl with the Dragon Tattoo, Let the Right One In, Old Boy, various Asian horror films) use the tropes and devices of American storytelling much more than those from the source cultures. Even good-faith attempts at importing the finest the rest of the world has to offer shows that the dangers of cultural pollution are probably not all that severe. Even movies get assimilated when they immigrate.

We like our tropes. We like them enough to bend the finest cinema ever put to celluloid to fit them. The downside is an unsophisticated public attitude toward foreign policy, but the upside is that immigration can probably safely be liberalized, and this includes people at risk from violence abroad. The meta-story about good and evil is a refreshing one. See? Culture can be euvoluntary after all.

Twice Upon a Time

I like my moral philosophy like I like my economics: descriptive rather than prescriptive. I see Adam Smith's two big works (Wealth of Nations and Theory of Moral Sentiments) as written in precisely the same manner: Big Daddy Smith observed and reported rather than sermonized. The tradition that proceeded from this approach (which has roots in the Western canon) is reflected in one of the first exhortations breathed in the direction of ruddy-faced first year grad students in economics: economics is a positive science. It's okay to have normative views, but keep them partitioned from your work.

Let's commit a utopian fallacy and say that this advice sticks. Moral philosophy isn't concerned with what should be, but rather with what is. A positive moral philosophy takes intuitions as exogenous. Jon Haidt's half-dozen dimensions lay the foundation for a moral analysis of, for example, voter opinion. And the origins of moral intuitions can be examined with neither approbation nor disapproval.

Ur-morality, the genesis of the thing, may be ultimately inscrutable. It's plausible that a long, arduous guess-and-selection process eliminated those societies with dysfunctional common moralities, and only those with good group preservation characteristics survived to spread their memes far and wide, but this is difficult to test for pre-civilization societies, since they left no record of their stories. But it's an appealing hypothesis. And we can certainly observe what happens to the transmission mechanism under duress.

In that last link, Sarah plucks the heart from what F. Spufford hinted at in chapter 3 (I think it was chapter 3) of Red Plenty: fairy tales are how societies ensure morality survives. Crack open a compendium of bedtime stories and you'll find wee nilla wafers of temperance, prudence, wit, wisdom, courage, excellence, love, harmony, patience, faith, and all nicely resolved in the time it takes a toddler to fall asleep. Under the totalitarian panopticon in Spufford's Soviet dystopia, the fairy tales evaporate, even in the minds of the elders that drifted off to dance in the Dreaming with iron-toothed Baba Yaga beating the sides of her mortar chasing them there when they were but babes in their mothers' arms. Luckily, after the Iron Curtain fell, a number of former Soviet state universities funded efforts to collect and record the many regional folk tales and songs across their lands. The University of Vilnius boasts 1.9 million folk artifacts. And that's just for dinky little Lithuania, a nation of scarcely 3 million people. Granted, not all of those are concerned with the intergenerational transfer of moral foundations, but it's a great relief to find that this sort of lore is at least being preserved.

I'm needled by a concern, however. Fairy tales are nicely adaptive for the purposes of their society. They are cultural capital, if you will. And like ordinary capital, they are suited to the production of a particular output. And like the farriers' foundry optimized to produce horseshoes in the age of the automobile, it could be that some fairy tales have outlived their usefulness. But, and here's the bit that troubles me, how do we know which tales have outlived their usefulness? How do we liquidate old ones? How do we create new ones?

I commiserate with folks who bemoan the bowdlerization of the old stories at the nibs of Disney's screenwriters, but I don't think it follows that the old stories in their original forms are necessarily best suited to the moral challenges of today's social orders. Sure, I'm classicist (and classist) enough to insist that Aristotelian virtue ethics still have a place in modern society, but I'm not so naïve to imagine that parents will read the Ethics to put their children to sleep at night. Nor do I fancy that there exists a silver bullet that will permit the technocratically-minded to develop era-appropriate morality tales ex nihilo. Morality emerges from the complex interplay of history and individual choice. And it has a natural lifespan linked inextricably to the lifespan of the men and women in whose righteous minds it inhabits. The dilemma of the intergenerational exchange in morality is how to make this trade in intuition more euvoluntary without overmuch risking either incoherence or sclerosis. It's a worrying puzzle, one unlikely to become less so as the pace of cultural change increases.

For those of you who can't wait that long, you can pre-order Augie and the Green Knight here.

Kirznerian vs Schumpeterian Entrepreneurship, a Review of Knightian Uncertainty: in Which I Pick a Bone with One of My Favorite People

The always-excellent Lynne K reviews Jill Lepore's critique of Clayton Christensen's The Innovator's Dilemma. She delves quite the rabbit hole. I'll do my best to parse the arguments as I see them.

Schumpeter: the entrepreneur advances the possibility frontier of economic production by introducing novel products, new methods of production, or changes to how products are bought and sold. Entrepreneurs disrupt, in other words, existing patterns of production and exchange. [okay, I snuck in a little Arnold Kling in there. I'll cop to it] Entrepreneurs create even as they destroy. This creative destruction ultimately leads to greater abundance as firms are able to produce more output using fewer inputs. [SLW: these are paraphrases, not actual quotes]

Christensen: firms that refrain from sustained disruption, even to their own business models risk ossification and decline. Disruptive innovation is The Spice: it must flow. Try to imagine what the roadways would look like if automobile manufacturers refused to update model specifications year after year. We'd all still be driving the Model A.

It's worse than that, of course. We'd still be going blind in droves from handwashing our clothes using raw lye, frittering hours each week mending (relatively) expensive clothes, and dying early after a short, rough life of backbreaking toil.

Kirzner: saying that the role of the entrepreneur is simply 'to disrupt' misses the whole point of production. The point is mutually beneficial, peaceful, voluntary exchange. The entrepreneur busies himself with the task of discovering new opportunities for exchange. If destruction happens, that's merely a consequence, a side-effect of people finding better ways to enrich each others' lives. This important task of discovering new channels for mutual service is obfuscated by pointing to the aftermath and claiming that it, rather than the action that gave rise to it, is the purpose of entrepreneurial discovery. [SLW: again, these aren't quotes, they are merely my interpretation]

Josh Gans: Kirzner, ftw. Customers ultimately test whether or not an innovation is any good. Disruption on its own tells us nothing about if a new product or service is any good. Firms must take calculated risks under conditions of uncertainty. Ex ante, it could have seemed possible that Crystal Pepsi was a good idea. You don't know till you try. The customers have to sort it out. And even with careful study, risk management, and attentive marketing teams, your customers are almost always sure to surprise you.

Furthermore, what counts as "important" today may not be important tomorrow. Metrics are a locus of attention. Attention shifts.

Frank Knight: the difference between "risk" and "uncertainty" is crucial to understanding the nature of the problem of the firm. Risk governs a probabilistic relationship over a known domain of outcomes. When you randomly draw a single playing card from a standard poker deck, you can calculate the odds that the card will be the Queen of Spades because you know how many cards are in the deck and what each of their values are. If, contrarily, you randomly draw a card from a pile of business cards dropped in an urn by passersby, you lack the ability to calculate the odds, as you don't know what the underlying distribution is. I submit to you that the challenge of productive activity deals far more often in an environment of uncertainty than of risk.

North: when discussing large-scale upheaval, the problems of knowing the underlying distribution are worse than those offered by Professor Knight. To extend the business card-and-urn metaphor, imagine that passersby could drop anything into the urn. Not only does the forecaster lack knowledge of the probability distribution, but the entire domain itself is obscure. The system is non-ergodic. This is to say that if there are patterns in the system, they are incomprehensible thanks to small sampling problems, timing inconsistencies, and the difficulty, if not impossibility of consistently outperforming other actors. Institutional or regime change is best modeled as non-ergodic, meaning that hopes for reliable predictions are futile.

Kiesling: "My epistemic/knowledge problem take on the innovator’s dilemma is that both risk and uncertainty are at play in the dynamics of innovation, and they are hard to disentangle, both epistemologically and as a matter of strategy. Successful innovation will arise from combining awareness of profit opportunities and taking action along with the disruption (the Schumpeter-Knight-Kirzner synthesis)." [SLW: that one is actually a quote]

The economics of energy delivery are particularly salient here. Every now and again, there are big, non-ergodic disruptions to how humans convert heat and light into something useful. The rest of the time, clever folks, ever alert to the importance of mutual, (eu)voluntary production and exchange work to improve, refine, distill this conversion. Prediction is cheap talk (and perhaps impossible). Action is better.

Me: Adam Smith was right. Euvoluntary exchange expands when the entrepreneur retains dignity in an environment of peace, easy taxes, and a tolerable administration of justice. I find rhetoric concentrating on the mutually beneficial nature of entrepreneurship more natural, more accurate, more important than a narrow focus on mere disruption. Side effects are worth acknowledging, but it is the chief effect, that innovation results in mutually beneficial cooperation, that is the real story, the one worth telling loudly and often.