Libertarian Paternalism: Appearance vs. Reality

In the comments section of Russell Roberts’s link to my previous post, “Charlie” makes some thoughtful points. I was going to respond in the comments there, but then decided a new post would be worthwhile. Charlie begins:

Libertarian paternalism seems to aim to take paternalism and give it choice.

The key word here is “seems.” The advocates of libertarian paternalism have taken great pains to present their position as one that does not foreclose choice, and indeed even adds choice. But this is entirely a matter of presentation. They always begin with non-coercive and privately adopted measures, such as the ski-slope markings in Thaler’s NY Times article. And when challenged, they resolutely stick to these innocuous examples (see this debate between Thaler and Mario Rizzo, for example). But if you read Sunstein & Thaler’s actual publications carefully, you will find that they go far beyond non-coercive and private measures. They consciously construct a spectrum of “libertarian paternalist” policies, and at one end of this spectrum lies an absolutely ban on certain activities, such as motorcycling without a helmet. I’m not making this up! See these two previous posts for details, with direct quotes and page citations. (In a forthcoming article, Mario and I examine the “libertarian paternalist” spectrum in greater detail.)

Charlie continues:

For instance, the 70s Democrat solution to this problem would be to mandate that only one type of "plain vanilla" loan can be given out by all loan offerers. Now it's just that the plain vanilla loan must be offered as a choice.

This is actually an excellent example of Sunstein & Thaler’s rhetorical approach. Yes, it’s true, this policy offers the consumer greater choice than a more restrictive policy. BUT! Notice, first, that the more restrictive policy is no longer in place, which means the actual change advocated here would constitute a greater restriction than the status quo. And notice, second, that the policy in question most certainly does restrict the freedom of the other party – the bank – by requiring it to offer a certain kind of mortgage. Now, there might be great arguments for this approach; as I’ve said, I’m not a finance guy. But can we please not pretend this is a policy that fully respects freedom of choice?

Furthermore, as Sunstein & Thaler’s published work clearly indicates, this kind of policy is the thin end of the wedge. The next step, as outlined in their articles, is to raise the cost of choosing other options. In this case, the government could impose more and more onerous requirements for opting out of the “plain vanilla” mortgage: you must fill out extra paperwork, you must get an outside accountant, you must have a lawyer present, you must endure a waiting period, etc., etc. Again, this is not my paranoid imagination at work. S&T have said explicitly that restrictions like these would count as “libertarian paternalism” by their definition.

Charlie continues:

I find it hard to fault Thaler for not using more gov't anecdotes, because not that many exist. Taxes, tax credits, and subsidies have long been recognized as better ways to achieve public goals than top down regulation. Such as carbon tax > technology regulation, tax free IRA > mandating people save, school voucher > direct school spending. All these are libertarian paternalistic policies. They aim to achieve public goals without destroying choice.

Most libertarians, myself included, are quite willing to say that some interventions are worse than others – and when our favored policies are off the table, we will choose the second best. For instance, most libertarians I know prefer mandatory savings to government-run Social Security. Most libertarians I know prefer education vouchers or tax credits to the public school monopoly. Most libertarians I know prefer medical-marijuana-by-prescription to a total ban on marijuana.

The problem is that S&T’s “libertarian paternalism” is used almost exclusively to advocate greater intervention, not less. I have never, for instance, seen S&T push for privatization of Social Security or vouchers in education. I have never seen them advocate repealing a blanket smoking ban and replacing it with a special licensing system for restaurants that want to allow their customers to smoke. If they have, I would love to see it.

In their articles, S&T pay lip service to the idea that libertarian paternalism lies between hard paternalism and laissez faire, and thus that it could in principle be used to expand choice. But look at the actual list of policies they’ve advocated on libertarian paternalist grounds, and see where their real priorities lie.

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Thaler on Ski Slopes and Mortgages

So what does it take to get me to blog these days? Having an opinion is no longer enough. Apparently I have to be actively irritated.

Richard Thaler is the newest contributor to the NY Times’ Economic View, where in his first column he uses behavioral economics to justify new financial regulations. In the process, he gets up to the same shenanigans that have become familiar to anyone who follows his work on “libertarian paternalism.” Specifically, he continues to disregard the distinction between public and private action.

Some critics contend that behavioral economists have neglected the obvious fact that bureaucrats make errors, too. But this misses the point. After all, wouldn’t you prefer to have a qualified, albeit human, technician inspect your aircraft’s engines rather than do it yourself?

The owners of ski resorts hire experts who have previously skied the runs, under various conditions, to decide which trails should be designated for advanced skiers. These experts know more than a newcomer to the mountain. Bureaucrats are human, too, but they can also hire experts and conduct research.

Here we see two of Thaler’s favorite stratagems deployed at once. First, he relies on a deceptively innocuous, private, and non-coercive example to illustrate his brand of paternalism. Before it was cafeteria dessert placement; now it’s ski-slope markings. Second, he subtly equates private and public decision makers without even mentioning their different incentives. In this case, he uses “bureaucrats” to refer to all managers, regardless of whether they manage private or public enterprises.

The distinction matters. The case of ski-slope markings is the market principle at work. Skiers want to know the difficulty of slopes, and so the owners of ski resorts provide it. They have a profit incentive to do so. This is not at all coercive, and it is no more “paternalist” than a restaurant identifying the vegetarian dishes.

Public bureaucrats don’t have the same incentives at all. They don’t get punished by consumers for failing to provide information, or for providing the wrong information. They don’t suffer if they listen to the wrong experts. They face no competition from alternative providers of their service. They get to set their own standards for “success,” and if they fail, they can use that to justify a larger budget.

And Thaler knows this, because these are precisely the arguments made by the “critics” to whom he is responding. His response is just a dodge, enabled by his facile use of language and his continuing indifference – dare I say hostility? – to the distinction between public and private.

Now, as for the financial aspects of all this. I’m not a finance guy, so I’m less qualified to speak here. The regulations he advocates might be desirable; behavioral justifications for paternalism might make more sense in this context than others. I’m not saying they do, but I’m open to the argument.

Still, something seems fishy about his argument here, which hinges on people being “fooled” by exotic mortgage contracts. Yes, there were some confusing mortgage deals out there, and I’m sure some people didn’t completely understand what they were getting themselves into. But did the lenders – the supposed experts – know any better? Remember that Thaler’s argument here is about letting the experts drive the decisions; that’s the whole point of the ski-slope story. Yet by all indications, the lenders were fooled, too. Both the debtors and the lenders were making the same bet: that housing prices would continue to rise, if not forever, then at least long enough to refinance. Or to put it another way, with respect to the major issue at hand, most of the debtors knew what they were doing: gambling. So while I’m sure some debtors were fooled by funky mortgage contracts, it’s hard for me to believe that was a major driver of the financial crisis.

But as I said, I’m not a finance guy, so maybe there’s more to the behavioral-paternalist angle in this context. I just wish Thaler would be straight-up when dealing with the arguments of his critics.

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Recipe for a Force Field

We don't yet have flying cars, much less jet packs. I like our Roomba, but domestic robots still have far to go before they can whip up an omelet, set the table, and pour the coffee. In these and many other areas, technology continues to lag behind the rosy sci-fi scenarios of my youth. Allow me, then, to give the future a little kick in the pants by describing how to build a long anticipated and long overdue technology: The force field.

Start with a phase conjugate mirror. A conventional mirror simply reflects light, bouncing it off at an angle in the same way that the bumper on a pool table redirects the motion of a ball. A phase conjugate mirror, in contrast, reflects light in exactly the reverse direction and form as the light comes in. Banking shots would be impossible on a pool table with "phase conjugate" bumpers, as balls would always bounce back in exactly the same direction whence they came.

Add to the phase conjugate mirror this additional ingredient: pumping beams that create a amplified reflection of the incoming wave front. (Read the bit under "phase conjugate mirror" at this source for more details.) To recur to the pool table example, it would be as if you gently tapped a ball at a bumper and it came speeding straight back at you.

Lastly, top off the amplified phase conjugate mirror with an illumination beam—a laser that rapidly scans the protected area, say. This illuminating beam can operate at relatively low power levels, given that it serves only to bounce a few photons off of the target. When some of those illuminating photons find their way from the target to the amplified conjugate phase mirror . . . BAM! Out flashes a blast of electromagnetic energy, automatically aimed on-target.

To better understand how the force field works, consider a ready application: Protecting spacecraft from orbiting debris. A scanning laser would rapidly sweep the area from which space junk would most likely approach the protected craft. Most of the time, of course, that beam would dissipate into empty space and the force field would remain quiet. When the scanning laser illuminated an approaching threat, however, the phase conjugate mirror would bounce a beam of electromagnetic energy right back at the debris (or, what would in practice amount to the same thing, given the speed of light, at the location the debris occupied an flash earlier). With enough amplification, the phase conjugate mirror could alter the trajectory of the approaching junk, directing it away from the spacecraft. With more amplification, the force field could simply vaporize the threat.

I could say more, but readers who have read this far can probably work out other interesting applications of the force field, as well as the problems introduced by non-reflective or highly reflective targets and the remedies afforded by using different frequencies for the scanning and amplified beams. Some readers might quibble that, regardless of its merits, I've not really described a force field, but rather only something that appears to function like one. Given that sci-fi authors don't typically explain how force fields work, though, I don't feel too bad about borrowing the label.

I don't claim this recipe for a force field as any sort of breathtaking innovation, granted. Once you get your head around phase conjugate mirrors, the rest of what I've suggested falls into place pretty quickly. I guess you could call it obvious to one reasonably skilled in the relevant arts—dynamic holography—and, thus, unpatentable. Still, though, I've yet to find any references on the 'net about this method of creating a force field.

Given that I make my living as a law prof, rather than a non-linear optical scientist, you might wonder why I dabble in these topics. It turns out that I've long had an interest in holograms. I set up a home lab to make them when I was in high school, and later developed a holographic information processing system that, in theory at least, answered a challenge that a hero of my youth, Douglas Hofstadter, put to me personally. His response left me so disillusioned that I abandoned my plans to pursue a degree in AI, but that is another, much longer story.

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Exercise Breathings

I've long advocated the mental benefits of working out, and recently promised to offer some details about my own, somewhat peculiar regime. Here, I address the question: "How should I breath when I run?" My answer goes a long, long way beyond simply, "In-and-out."

Basically, I treat breathing as a mental exercise that accompanies and improves the brute physical aspects of running. By default, I run in a 3:4 pattern, inhaling for three steps and exhaling for four. On steep grades, in deep sand, or when sprinting, I might switch to a 2:3 or even 1:2 cadence. At other times, like yesterday, when I ran long miles on a flat dirt road, I might shift up to a 4:5 pattern, breathing in for four steps and breathing out for five. (I've also run in a 3:6 "gear," though it poses a problem for reasons I'll relate below.)

Most people who breath in step with their running unthinkingly fall into a 2:2 pattern, breathing in for two steps and breathing out for two. In contrast, I take care to combine a relatively short inhaling period with a slightly longer exhaling one. Why? Because we tend to generate more power when we exhale. Weight lifters, for instance, almost always breath out when working hardest. It thus makes sense, when running, to spend more time exhaling than inhaling.

I also choose breathing cadences that add up to odd numbers, a practice advocated by military trainers and others. Why? Because it helps to keep my stride symmetrical, ensuring that I start exhaling first on one foot and then, in the next cycle, on the other. A 2:2 pattern, in contrast, has you always pushing off the same foot at the most powerful part of your stride.

Those observations speak only to physiological issues, however. What about the mental side of the equation? Breathing in 2:3, 3:4, or 4:5 time has the salient benefit of not echoing any typical musical rhythm. Especially when I fall into a stretch of composing music, I tend to get tunes stuck in my head. Running in non-musical tempos gives me a reprieve from what would otherwise turn into an oppressively unremitting internal concert. (I take care to not mentally compose tunes in 5/4 or other exotic tempos while I run. Hence, too, the problem with a 3:6 cadence: It tends to stir up melodies written in waltz time.)

Lastly, and perhaps most importantly, breathing in time with my steps calms my restless mind. After years and years of practicing this sort of heart-racing meditation, I of course no longer need to count every breath. Rather, I simply choose a cadence and trust in habit to keep me on-track. Freed from the need to think about my breathing, and soothed by the now-familiar rhythms of lungs, legs, and heart working in concert, I enjoy miles and miles of peaceful reverie.

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How Union Bullies Fund their Critics

The L.A. Times' blog recently reported that the Los Angeles police officers' union tried to bully the San Diego Union-Tribune into firing editorial writers who argue that "lawmakers should cut back on salaries and benefits for public employees in order to help close gaping budget deficits." Gail Heriot calls the incident "chilling," and with good reason. I see a bright side to it, however.

Platinum Equity, a private firm, relies on a $30-million investment from the union's pension fund, along with large sums from the pension funds of other groups of California government employees, to help it buy companies. Platinum recently acquired the San Diego Union-Tribune. The L.A. police officers' union thus regards itself as a part owner of the paper—one that has purchased the right fire unwanted employees.

Exactly how much clout the union actually has over the paper remains to be seen. The San Diego Union-Tribune has publicly rebuffed the union's demands. As Heriot observes, however, "threats like these can cause a newspaper to soft-pedal its views even when the threats aren't carried out."

So what is the bright side? Many newspapers face financial difficulties, and would welcome capital infusions. This imbroglio will suggest to alert publications a ready way to attract investments from government-employees' unions: repeatedly and loudly demand that lawmakers reduce those employees' salaries and benefits. In effect, unions have signaled their willingness to subsidize their critics. State action would never have that effect; there is no profit to be had in suffering censorship. Score another point for the relative efficacy of market mechanisms—even when used by ignorant bullies—in encouraging freedom of expression.

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Surfing Dolphin Property Rights

Do the usual surfing rules apply when a human shares a wave with a dolphin? If so, I might have pissed off one of Flipper's kin, yesterday. But I think that because dolphins use waves differently from humans, both species can ride the same wave without conflict. So, at least, my story of cross-species surfing suggests.

Here's how it went down: I was surfing Churches with my former Marine (not "ex-Marine!") bud, Tracy, who uses his base pass to get us parking right on the beach. We had been surfing for a while when I heard him and some of the other guys yelling and whistling. I looked up to see a pod of dolphins surfing down the face of a big set wave that was rolling towards us. The dolphins glided just under the surface of the water and then—Pow! Pow! Pow!—started leaping into the air and back into the wave. That alone made it a Super Special Rainbow Unicorn Day (with sparklies). The fun, though, had only just begun.

I guess the other guys were too busy laughing and clapping to notice that the wave was shaping up pretty nicely, or maybe they were too deep where it began breaking, but for whatever reason the face came to me with nobody on it. The dolphins seemed to have disappeared, too. So I whipped my board around, took a couple of strokes, and nailed it. As I came out of my bottom turn and hit the lip, I looked down to see a dolphin still in the wave, some 10 feet ahead of me, speeding along under the surface. I laughed and yelled, "Yeah, bro! Let's go!" The dolphin and I rode along a bit, together, and then it peeled off and rejoined its pod. I finished out the wave, getting a nice long ride and a nice big smile.

On the paddle back out, though, my conscience pricked me. The dolphin had caught the wave and worked out to its shoulder when I dropped in at the sweet spot, blocking the dolphin from a making a cutback to the face. Under the usual, human rules of surfing etiquette, I almost certainly would have been in the wrong. I'd get some slack, perhaps, because I couldn't see the dolphin gliding along under water. Then, too, the dolphin was so far out on the shoulder that, even if I had seen it, I might have safely whipped some turns inside, remaining ready to pull out if the dolphin began to cut back. And, of course, it would have been a perfectly fine maneuver between friends—but I didn't even know the dolphin's name.

Ultimately, though, I decided that I had not triggered a cross-species diplomatic incident. As I've explained elsewhere, surfing's rules of etiquette create transitory property rights in wave faces, a custom that helps us humans maximize the a very valuable and scarce resource: surfable wave faces. Dolphins don't surf the same way that humans do, though. They have so much power, speed, and efficiency that they can ride waves far out from the steep, breaking portions that we humans require. Like mega longboarders, dolphins pick up waves long before they begin to pitch, tend to ride far out on the shoulder, and eschew sharp turns for long, graceful lines.

I conclude that dolphins and surfers—especially shortboarders—can happily share the same waves without conflict. So, at least, my experience suggests. So, too, does this video of humans and dolphins peacefully enjoying the same waves.

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Longboard Helicopter! Shortboard Air?

Today I finally managed a surf move that I've been on working for over a year: a fin-forward take-off with a regular-footed pop-up, followed by a 180-degree spin and a goofy-footed ride, wrapped up with a switch-step back to regular. If you're not a surfer, that might not mean much to you, granted. Suffice it to so say that it rates as reasonably difficult longboard trick.

I can't say I exactly nailed the move, but neither did I just slop through it. It helped, I think, that I grabbed the rail during the turn and made sure to work up some momentum before trying to switch my stance. Perhaps on a longer board, with practice, I could pull off a graceful cross-step. As it was, on my 9'0", I had to sort of shuffle through the transition.

Next on my surfing "to do" list: Getting air. For that, I'll rely on my shortest and favorite board, the 6'10" hybrid fish that I added to my quiver about three years ago. These days, I surf it almost exclusively. I still remember fondly the first time I really figured out how to work a wave on that little pony: August 17, 2006. After a long, ripping ride on a waist-high right at Churches, I flopped down, grinned, and thought, "Ahhh! So that is why people shortboard!"

Since then, I've gotten ton of great rides on that board. I've figured out how to pump it down the line, stomp the tail, and even throw a little spray. But although I've had some pretty good drives off the lip, I don't think I've gotten it fully airborne; the fins have yet to disengage. Perhaps I need a shorter board or bigger waves. More likely, though, I just need more practice. That, I will find it a pleasure to try!

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The Transcendental Value of Consent

Consent plays a prominent role in moral reasoning. I here offer a new, transcendental argument for the moral value of consent: Because an attempted justification aims, by definition, to obtain its audience's consent, justifications presume the moral significance of consent.

Students of philosophy tend to associate transcendentalism with Immanuel Kant, who argued against metaphysical skepticism on grounds that reason necessarily presumes both time and substance. Kant had no monopoly on "transcendental," however, which simply describes a particular form of argument. A transcendental argument begins with an uncontroversial fact, adds a proposition that necessarily follows from that fact, and concludes in support of the proposition. Following that form, the transcendental argument for consent's moral relevance runs as follows:

1. A justification aims to win the consent of its intended audience.
2. If a justification aims to win the consent of its intended audience, then the argument's efficacy covaries with the consent of that audience.
3. Therefore, justification presumes the value of consent.

This argument for consent's moral relevance begins with a (supposed) truism about the nature of justification. Readers who regard step one as an obvious truth can skip to step two without delay. Some might doubt its truth, however; in particular, a skeptic might counter that justifications sometimes aim to mislead their intended audiences, as when political leaders conspire to mislead gullible citizens about the causes of social unrest, blaming foreign provocateurs rather than native disaffection. In such a case, however, we cannot properly say that the justification aims to win the consent of the governed; it aims, rather, to win their ignorant acquiescence.

The claim made in step two of the transcendental argument for consent's role in justification might, like the claim made in step one, strike many readers as obvious. As long ago as Aristotle, philosophers have regarded the end, or teleos, of a thing as a fair gauge of its proper function. On that reasoning, if a justification (or, more properly, the person offering the justification) aims to win the consent of a particular audience, we can judge whether or not the argument succeeds by measuring the consent that the argument rouses.

The third step of the argument for the moral relevance of consent follows as a matter of logic from the first two steps. Even hardcore skeptics do not trouble themselves challenging modus ponens, so perhaps we could stop here. As a safeguard against sophistry, however, let us double-check whether the argument's conclusion—that justification presumes the value of consent—conforms with common sense.

Note, first, that an argument nobody accepts cannot work as a justification. We thus laugh off the arguments, no matter how internally consistent or ardently pressed, a madman makes when he claims the right to rule the Earth. Because his argument wins nobody's consent, nobody regards it as sufficient justification for his coronation. Note, next, that we commonly regard informed consent as adequate justification for imposing far-ranging conditions on those who accept them; we hesitate to second-guess another's pursuit of happiness. Lastly, note that we tend to recognize exceptions to that rule only in defense of consent itself, as when we refuse to enforce an agreement to submit to slavery, when we deny the power of fraud to justify a transaction, or when, far from praising a mugger for successfully inducing his victim to give up her purse in exchange for not losing her life, we condemn his acts as coercive and unjustified. Logic and experience alike thus suggest that we judge an attempted justification in terms of whether or not it wins the consent of its intended audience. Unsurprisingly, the plain meaning of "justify" conforms to that understanding.

[NB: The foregoing comes, after various edits, from Part I.B. of Graduated Consent Theory, Explained and Applied, Chapman University School of Law, Legal Studies Research Paper Series, Paper No. 09-13 (March 2009) [PDF].]

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A Call for Citizen Courts

It stands as a fundamental principle of justice that we cannot entrust one party to unilaterally judge its disputes with other parties. This poses a problem for the resolution of disputes between a State and those subjected to its legal jurisdiction. How impartially can agents of the State, acting as the judges of its courts, decide such disputes? "Not well enough," citizens and residents might worry. It thus looks at least unwise, and arguably unjust, to give federal authorities exclusive jurisdiction over disputes that call for applying the U.S. Constitution.

If we view the U.S. Constitution as a contact—a standard form agreement offered on a take-it-or-leave-it basis by an awesomely powerful government to a comparatively powerless individual—we cannot help but note the glaring inequity of letting only federal authorities decide questions of federal power. No just court would enforce a standard form agreement between grossly unequal parties, imposed by one on the other under conditions that raise serious doubts about the offeree's consent, that lets the all-powerful offeror alone decide disputes arising under the agreement. A clause reading, "I have the sole power to interpret this agreement," reeks too much of substantive unconscionability to win a court's approval. Indeed, the patent unfairness of such a clause cannot help but raise procedural doubts about whether the parties bargained for an exchange at all, undermining the enforceability of the entire agreement.

Happily, we can easily read the U.S. Constitution to avoid the vice of self-judgment. Its plain text by no means mandates that only federally employed judges can decide the scope of federal power. . . . We thus remain at complete liberty to adopt this remedy for self-judgment: Decide disputes between the federal government and other parties under the same arbitration procedures that private parties customarily use in deciding their contractual disputes. In other words, we should establish Citizen Courts.

A Citizen Court would arise at the option of any party to a legal dispute with the federal government being heard by a federal court. Each party—including the federal one—would choose one judge. Those two judges would then agree on a third. Together, the panel of three judges would decide the parties' dispute. Rather than leaving questions about the power of the federal government solely in the hands of federal agents, therefore, a Citizen Court would rely on judges to which the disputants have consented. A Citizen Court would help to remedy the partiality of federal courts and, thus, would offer more justifiable judgments.

[NB: The foregoing comes, after various edits, from Part III.B.3.c. of Graduated Consent Theory, Explained and Applied, Chapman University School of Law, Legal Studies Research Paper Series, Paper No. 09-13 (March 2009) [PDF].]

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Original Reasons for Non-Originalism

Although some of my closest friends might respond with expressions of fury and disappointment, I am coming out of the closet on originalism. I am not convinced that we should interpret the Constitution's text to mean what those who ratified it thought it meant, over 200 years ago. Instead, I think we should favor the plain, present, public meaning of the Constitution's text, resolving any ambiguities in favor of individual liberty.

Given the popularity of originalism among self-proclaimed libertarians and conservatives, my view risks raising some hackles among the very people with whom I so often agree in questions about the constitutional limits on government action. So be it. Originalism's foundations have always seemed pretty shaky, to me, even though I usually like the theory's results. It has taken me some years to formulate a different, and I think much more solid, foundation for resolving questions of constitutional meaning. I describe that new approach in a working paper, Graduated Consent Theory, Explained and Applied, Chapman University School of Law, Legal Studies Research Paper Series, Paper No. 09-13 (March 2009) [PDF]. For a snapshot view of the theory, consider this figure from the paper:





That may look familiar, given that I earlier blogged about The Scale of Consent, a working paper that, in revised form, constitutes one part of this larger paper. Rest assured, though, that this later work has a different, and more ambitious goal. Here is the abstract:

We often speak of consent in binary terms, boiling it down to "yes" or "no." In practice, however, consent varies by degrees. We tend to afford expressly consensual transactions more respect than transactions backed by only implied consent, for instance, which we in turn regard as more meaningful than transactions justified by merely hypothetical consent. A mirror of that ordinal ranking appears in our judgments about unconsensual transactions. This article reviews how a wide range of authorities regard consent, discovering that they treat consent as a matter of degree and a measure of justification. By abstracting from that evidence, we can outline a theory of graduated consent. This article concludes by testing a graduated consent theory against such problems as enforcing standardized agreements, justifying political coercion, and reading a constitution. In those and other applications, a theory of graduated consent can help to advance legal, moral, and economic reasoning.

If I don't sidelined by other, more pressing obligations, I'll post here some excerpts from Graduated Consent Theory. It offers a number of original (but not originalist!) arguments, which I'd like to air for commentary. I plan to publish the paper in a law review and want to make sure the best possible version makes it into print.

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The Problem with Rational Expectations in Macro

I'm not much of a macroeconomist, which is why I haven't had much to say about the current financial crisis and recession. But I did have to take the standard macro courses in grad school, and I remember having one major methodological objection to the rational-expectations models we were learning at the time. Arnold Kling nails it:

Economist X has one model of the economy. Economist Y has another model of the economy. In X's model, people believe in X's theory. In Y's model, people believe in Y's theory. It is logically impossible for economist X and economist Y to inhabit the same universe! Yet they do. This tells me that the axiom of rational expectations is too strong.

Exactly. But notice that this is not a criticism of the rationality assumption. Nor is it a criticism of incorporating expectations into an economic model. Neither component of the label "rational expectations" was the problem. The real problem was the additional assumption, rarely stated explicitly but applied repeatedly when solving the models mathematically, that all economic actors shared the economist's model of the world. And that's manifestly false if even economists don't all share the same model.

I sometimes wonder (idly, with no intention of doing the research to find out) if any macroeconomist has constructed a model in which the modeled agents make rational decisions based on assumptions that differ from those of the model.

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The Singles Map

Richard Florida has posted a nice map (originally from National Geographic) showing which cities have the greatest numerical disparity between single men and single women. It appears that I'm in a pickle, being a single guy in L.A., which has the largest excess of men over women.



But wait a minute... the spots on the map are based on absolute differences, not scaled for population. It looks like Las Vegas has about 20,000 more single men than women, a difference that constitutes about 1% of the Las Vegas region's population. The L.A. region has a larger difference of 40,000, but that constitutes only 0.3% of the region's population. (It would be even better to take the ratio of men to women in each region, but I don't have that data.)

Also, shouldn't we take demographics into account? I'll bet a lot of those single women are aging widows. Notice that the retirement mecca of Miami has a rather large female-over-male disparity. (I'm reminded of this old post about where to find single women.)

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Adverse Selection in BDSM Clubs

In last week’s Savage Love Podcast, Dan Savage responds to a 22-year-old female caller who digs BDSM. Her problem is that when she goes to BDSM clubs, she can’t find any young, attractive men. Instead, she mostly finds creepy, gross, dirty old men. In answering, Dan says:

[T]here’s a lot of attractive people into S&M, they’re just not necessarily at the BDSM clubs. … A lot of attractive people will dip in for a minute and say, “Wow, y’know, everybody here is way out of my league -- way, y’know, under my league.” And they don’t tend to come back, which makes the problem worse when the next objectively hot hottie comes along.

To which my reaction was, of course, “Adverse selection! Dan’s talking about an adverse selection problem!”

But this isn’t your run-of-the-mill adverse selection, which usually happens in a context of asymmetric information. For instance, adverse selection can happen in used car markets because sellers know more about the quality of their cars than do buyers. As a result, sellers have to assess used cars by their average (not individual) quality. But in the BDSM club, one can quickly assess the age and hotness of specific people (or so Dan’s caller leads us to believe). So why can’t the hots simply pair up with other hots, and the nots with other nots?

The problem arises because people choose where to go based on their expectations about the quality distribution. If hot people into BDSM think there’s a reasonable likelihood of finding other hot people at the BDSM club, they will go there. If not, they will go elsewhere. And by not attending, they reduce the likelihood of hot people being there, thereby inducing other hot people not to attend either. The resultant unraveling leads to a club filled almost entirely with icky (or at least unimpressive) people.

So why doesn’t this problem happen at all clubs, not just the BDSM clubs? Well, to an extent it does. In some bars, you won’t find many attractive people. But there are other clubs filled with attractive people. You might expect the same kind of sorting to happen with BDSM clubs. The problem, I suspect, is caused by thin markets -- that is, markets in which the number of players is too small to generate the usual efficiency gains. People into BDSM are, I assume, a relatively small fraction of the general public; nevertheless, there are enough to create a demand for BDSM clubs, at least in large cities. But multiply the fraction of people into BDSM by the fraction of people who are attractive (by some standard of hotness), and you get a fraction small enough that it’s hard to get a thick market going. As a result, potential club-goers must consider the possibility that there might not be any attractive targets on any given night, and that leads to adverse selection.

I have not seen adverse selection explicitly connected to thin markets in any textbook I can recall, though a quick Google search for both terms pulls up a number of papers that appear to bring them together.

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Did Prop 8 Divorce Anybody?

Whew. It’s been a long time since I posted anything here, but this video (h/t to Julian) has been on my mind:


"Fidelity": Don't Divorce... from Courage Campaign on Vimeo.

My reaction, like Julian’s, was to get just a bit teary-eyed. If you can look at these photos and still oppose gay marriage, I think your moral intuition is broken.

But at the same time... I really wish that no one, gay or straight, invested state-sanctioned marriage with so much emotional significance. Did Prop 8 actually divorce anybody in the emotionally or spiritually relevant sense? No. I figure that most of the loving couples shown in the video are still together (or at least, they’re as likely to be still together as heterosexual married couples). There is no law preventing gay people from having marriage ceremonies, celebrating anniversaries, presenting themselves as spouses, and so forth. Churches that permit gay marriage can continue to marry same-sex couples. (And churches that oppose gay marriage could refuse to marry them even before Prop 8.) The only question is whether the state ought to formally recognize them.

State-sanctioned marriage does matter, for reasons relating to tax treatment, legal power-of-attorney, parental rights, and so forth. As a matter of civil rights and equal treatment, I favor state-sanctioned gay marriage -- at least until the state backs out of the marriage-sanctioning business entirely. But somehow “don’t take away our preferred tax treatment and legal power of attorney” doesn’t ring the same emotional bell as “don’t divorce us.” If we all viewed state marriage as nothing more than a standard form of contract with a few attendant privileges, maybe the anti-gay-marriage contingent would be less agitated over the whole thing to be begin with.

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