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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