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OT70: Cyclopen Architecture

This is the bi-weekly visible open thread. There are hidden threads every few days here. Post about anything you want, ask random questions, whatever.

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Some Groups Of People Who May Not 100% Deserve Our Eternal Scorn

Or “Contra A Convergence Of Lefty and Far-Right Twitter Making Fun Of The Same People”. I’ll mostly be using Current Affairs articles as foils, not because they’re especially bad, but because they’re especially good and well-written expressions of what many other people are saying. Sorry if this is a little snarky and maybe not 100% fair.

1. Celebrities Who Speak Out Against Donald Trump

No, celebrities are not going to single-handedly change the world. Yes, celebrities are often annoying, and almost by definition out-of-touch. Yes, a Democratic campaign needs to have some substance beyond “look, celebrities!”

But from the celebrities’ own point of view, they’re doing the best they can. If Kim Kardashian wants to help the cause, what do you expect her to do? Write policy white papers? Go door-to-door canvassing? Or would you rather she just stayed silent and didn’t do anything?

Also, I think the “out-of-touch” critique sort of misses the point. Unemployed high school dropouts aren’t going to read Paul Krugman editorials, and they might or might not go to Bernie Sanders rallies. But I guarantee they know who Kim Kardashian is. Now, maybe you don’t develop your opinions by listening to weird-looking people who seem to be famous for no reason, and maybe you’re proud of that fact. But judging by the amount of money people will pay celebrities to endorse their products, a lot of people do develop their opinions this way. And these people are probably the less-educated working-class folks whom the Democrats most need to reach.

Or maybe I’m just being classist and nobody listens to celebrities. Fine. I still think that a celebrity who speaks out about something they think is important is more virtuous than one who doesn’t. By all means criticize tone-deaf celebrities like Lena Dunham who “help” the cause by speaking up in offensive or counterproductive ways. But criticizing celebrities’ activism in general doesn’t seem like a good political strategy.

2. People Who Compare Political Events To Harry Potter

See eg here.

Comparing politics to your favorite legends is as old as politics and legends. Herodotus used an extended metaphor between the Persian invasions of his own time and the Trojan War. When King Edward IV took the English throne in 1461, all anybody could talk about was how it reminded them of King Arthur. John Dryden’s famous poem Absalom and Achitophel is a bizarrely complicated analogy of 17th-century English politics to an obscure Biblical story. Throughout American history people have compared King George to Pharaoh, Benedict Arnold to Judas, Abraham Lincoln to Moses, et cetera.

Well, how many people know who Achitophel is these days? Even Achilles is kind of pushing it. So we stick to what we know – and more important, what we expect everyone else will know too. And so we get Harry Potter.

“But a children’s book?” Look, guys, fantasy is what the masses actually like. They liked it in Classical Greece, where they had stories like Bellerophon riding a flying horse and fighting the Chimera. They liked it in medieval Britain, where they would talk about the Knights of the Round Table slaying dragons as they searched for the Holy Grail. The cultural norm where only kids are allowed to read fantasy guilt-free and everybody else has to read James Joyce is a weird blip in the literary record which is already being corrected. Besides, James Joyce makes for a much less interesting source of political metaphors (“The 2016 election was a lot like Finnegan’s Wake: I have no idea what just happened”)

Harry Potter is not the national mythology I would have chosen. Probably I would have gone for Lord of the Rings. I’m not sure we as a nation deserve The Silmarillion, but a man can dream.

But Harry Potter is at least better than some things (we could have ended out with our national consciousness being shaped by Twilight!), and the point is that comparing your politics to those of a more interesting fantasy world is a natural human urge and probably not indicative of some sort of horrible decay.

3. People Who Like Hamilton

See eg here.

Look. Hamilton was a pretty good Broadway play. It wasn’t the best thing that ever happened. It didn’t single-handedly reinvent America.

On the other hand, it’s also not the source of all evil. It’s not some sort of giant glowing tribute to national elitism where everyone gathers together and eats arugula and talks about how much they prefer symbolic gestures involving identity to actual systemic change. It’s just a pretty good Broadway play.

4. Vox

See eg here.

I think the main complaint is that “explaining the news” is fundamentally condescending. Real Americans personally read all 9,800 pages of Obamacare regulations before forming an opinion on health policy.

Or maybe the complaint is that they’re pretending to do it from an objective point of view instead of admitting that they have a liberal bias? I will take this complaint seriously when I meet any person anywhere in the world who is not aware that Vox has a liberal bias. The aboriginal people of the North Sentinel Islands have been completely isolated from the rest of civilization for thousands of years, yet every single child in their tribe knows that Vox has a liberal bias. SETI believes that if we contact aliens, we will have to determine their language through universally known truths like prime numbers or the digits of pi, but if for some reason the aliens have different mathematics than we do, we will still be able to communicate over a shared understanding that Vox has a liberal bias.

This is fine. All attempts to explain the news are going to end up with some bias, and I’m okay with this as long as they try to minimize it, present the truth as they understand it, and give more light than heat (though see here)

And that’s where my experience with Vox has been reassuring. I’ve occasionally argued with them, or made fun of them, or SHOUTED AT THEM THAT THEY ARE SPREADING DAMNABLE LIES. And every time, I’ve been impressed by their kindness, their openness to criticism, and their willingness to pay attention to me even though I can be very annoying.

Fredrik deBoer has a theory that everybody secretly hates Ezra Klein but publicly pretends to like him because he’s powerful. And I keep wanting to protest that I like Ezra Klein, before realizing that deBoer’s theory predicts I would say that. So I’ll just add that my interactions with Klein have consisted mostly of me yelling at him for being wrong about everything, and him politely listening to me. A few times he’s admitted he was wrong and promised to do better (and has). Other times he’s stuck to his position while continuing to give me way more of his time and energy than I would expect the head of a big media company to give a random and somewhat-confrontational blogger.

This has also been more or less my experience with Dylan Matthews, German Lopez, and Sarah Kliff, the other Vox people I’ve engaged with.

A year or so ago, the media got really interested in neoreaction and published a bunch of thinkpieces, all of which parroted an error-ridden Breitbart article without checking any of its claims. Dylan Matthews wanted to write one for Vox, and he actually took the trouble to contact me, an Internationally Known Expert On Neoreaction. I corrected a few of the worst Breitbart errors and gave him the email address of a couple of neoreactionaries; Matthews actually interviewed them and included their comments in his article instead of relying on third-hand speculation about who they might be. I have heard legends that ancient times there was an arcane art called Juru-Na-Lism which allowed its practitioners to gather information from the furthest reaches of the world, and although I understand it is mostly forgotten this gives me some glimmers of what it could have been like (and for an even clearer example of the same pattern, compare this and this).

Also, Stuart Ritchie is a scientist at the University of Edinburgh who studies intelligence and who makes fun of terrible articles about intelligence in the media. Vox actually worked with Dr. Ritchie to write a series of articles, and ended up with some of the only popular explanations online that someone with a psychology background can read without laughing hysterically.

I disagree with Vox about a lot of things, but they’ve generally impressed me in ways that some other news sources haven’t. Also, let’s be honest. Their competitors are places like Salon and Vice. My standards here are dirt-low, and Vox frequently meets them.

5. Matt Yglesias

Related; see eg here:

The worst of Yglesias’ mischievous endorsements of horrendous moral stances was his column on factory safety. Immediately after the 2013 collapse of the Bangladesh garment factory that killed over 1,000 people, Yglesias took to Slate to explain why workplace safety regulations actually inhibited the operation of free markets. Yglesias explained that high-risk jobs have high compensation, and just like people might choose to be lumberjacks, they might choose to work in highly dangerous garment factories for a premium. Thus “it’s good that different people are able to make different choices on the risk–reward spectrum.” The article was accompanied by a photograph of Bangladeshis loading dead bodies onto a truck.

The column was classic Yglesias, in managing to be both ignorant and appalling. Appalling since Yglesias published it the same day as the factory collapse, as the rubble was still being cleared. Ignorant because Yglesias adopted the most delusional Heritage Foundation economic myth, that somehow people in Bangladesh work in dangerous garment factories because working in dangerous garment factories is what they most want to do. As Mark Brendle summarized:

Yglesias champions one of the most horrifying and widespread implements of oppression and misery yet conceived—factories taking advantage of cheap labor, lack of environmental regulations, and a disregard for human life by those who profit most from having those factories in their countries—then pretends that it exists in a vacuum, where people in “those countries” are happy for these jobs, instead of acknowledging the closed system of the global economy, where those conditions are not only systemic, but inevitable and structural, in order for the wealth and prosperity of the “first world” to exist at all.

When confronted with this outrage, Yglesias simply wrote another explanation of why his original work was justified, admitting that his reaction to the criticism “as a writer and a human being” was annoyance. (It should go without saying that if one’s first reaction “as a human being” to being asked to show a little compassion for dead Bangladeshis is “annoyance,” then one is not a human being at all.) Here is Vox-ism in a nutshell: it is impossible to stop explaining and think, impossible to understand that there are more questions in heaven and earth than “What do the data say?” (Like perhaps, “Am I a good person?”)

One day soon, there’s going to be an Islamic terror attack in the United States, maybe committed by a refugee. The news is going to show pictures of mangled innocents, sobbing relatives, mothers who have lost their children. And maybe Current Affairs, as a good leftist publication, is going to want to say that this is terrible but doesn’t mean that we should ban all refugees or hate all Muslims.

And they won’t be able to, because they’ve already declared that if something tragic happens, then anyone who tries to put it in context, or say that some policies can have occasional awful results while still being beneficial on net, is a moral monster.

And if they try to protest that no, approximately 0% of refugees are terrorists, immigrant crime rates are lower than native crime rates, all of the fear-mongering you’ve heard is a lie, et cetera et cetera – then ah, that’s just worrying about “what the data say” – and how can you worry about something as bloodless as data when there are families literally sobbing over the deaths of their children right there?

Trump should be ultimate proof that the other side is better at the “my righteous indignation is more important than your puny data” game than you are. Don’t even try.

6. Pundits Who Failed To Predict Trump

See eg Michael Tracey in How Pundits Get Everything Wrong And Still Keep Their Jobs:

As the 2016 presidential campaign should have conclusively demonstrated, this pretense of expertise is a fabrication. Far from being especially prescient about matters of public affairs, members of the Pundit-Commentariat Industrial Complex are actually incredibly ill-suited to the task of accurately gauging the political sentiments of their own nation. By virtue of the various self-destructive pathologies that perpetually dull and distort their analytical acuity, it turns out that “pundits” are among the least qualified to accurately predict how far-off events will unfold. Surveying a random selection of Twitter trolls would probably yield one better information than scanning the output of the most revered professional prognosticators […]

For normal people, even the tiniest mistakes often result in drastic consequences. They don’t just get to ignore those failures and barrel forward as if nothing happened. And yet that’s how we permit the pundit class to operate. In the case of Bouie and Beutler, it wasn’t merely that they made erroneous predictions; anyone can mistakenly guess that something might pan out, when it does not. Rather, their entire analytical framework was drastically, catastrophically faulty. If any other American worker had performed his or her job so poorly, they could expect to receive severe sanction—docked pay, unfavorable scheduling, or termination. But in the world of punditry, there is no price to pay for failure. Instead, the American pundit class simply carries on as before, rattling off self-assured predictions about future events.

It would be really fun if I could dramatically reveal that (shock! horror!) Michael Tracey has himself been wrong about things. Alas, he admits it, saying in an earlier article, We Must Demand Pundit Accountability, that he’s made some predictive mistakes himself. For example, he wrote about Why Ted Cruz Could Win In 2016, how Chris Christie Isn’t Dead Yet and Why Jim Webb Poses The Biggest Threat To A Hillary Clinton Presidency. He asks to be judged not on these isolated mistakes, but based on his record as a whole. He provides a (self-curated) list of accurate predictions, which indeed seems very impressive.

Likewise, Current Affairs, which published Tracey’s article, has admitted that its article saying “good riddance” to Trump since he “will not be president” was a bit premature. But once again, they plead that instead of dismissing them the same way they recommend we dismiss other failed predictors like Paul Krugman and Matt Yglesias, we take into account that they also made a bunch of much better predictions, like this one in February predicting that Trump would win unless the Democrats nominated Sanders. I think it’s a good piece and proves that good punditry is indeed important; if people had listened to that maybe we’d be in a better place right now.

But there’s still a tension between their treatment of other pundits’ mistakes (proof that they’re incompetent and that the whole system must be burned to the ground) and that of their own mistakes (worth viewing in the context of a long-term record of good predictions). Might Paul Krugman and Matt Yglesias also believe they have a long-term record of good predictions? Don’t they deserve to be judged on this record instead of on a single event where they missed the mark by barely 1% of voters?

I don’t know much about Yglesias’ record, but I can speak up for Krugman. A team from Hamilton College analyzed the predictions of various pundits over sixteen months to evaluate relative performance; Krugman was judged most accurate of all twenty-six pundits studied.

The moral of the story is stop trying to draw sweeping conclusions from one data point. This also solves the problem where, having discredited everyone who predicted a Hillary victory, we determine the only trustworthy sources of political commentary to be, the Dilbert guy, and all 372,672 subscribers of r/the_donald.

If you’re really interested in well-founded judgments of your own accuracy relative to other people, there’s an established way to make that happen. Make specific predictions, which are clearly flagged as predictions and can’t be disavowed later. When possible, try to predict the same events as other pundits, so that you can compare accuracy. Assign a probabilistic confidence level to each. Keep track of whether each did or didn’t come true. Use some kind of scoring rule to evaluate your calibration. Then report on long-term aggregated statistics of how well you did.

I’ve been doing this for the past three years (2014, 2015, 2016). Last January, I predicted an 80% chance that Trump would lose. He didn’t. Does that mean I’m incompetent person who deserves to lose his job but won’t because he has “pundit tenure”? I don’t think so. Over the past three years I made 37 predictions that something would happen with 80% chance, and of those, thirty (81%) did happen. In other words, over the long run, the things I say have a 80% chance of happening, happen 81% of the time. I have pretty close to the exact right level of certainty in everything I say.

Of course, life would be even better if I could be 100% sure about everything and be right 100% of the time. And the great thing about this methodology is that if there’s someone else like that, they can prove that they’re better than I am. In fact, we’re trying this – over on Arbital, about a hundred people have entered predictions on the same set of sixty-one events that I did. At the end of the year we’ll check results. If other people do better than I do based on something like a Brier score, and if they can keep doing better than I do consistently, I’ll admit they’re a better “pundit” than I am and defer to their expertise.

If Robinson and Tracey want to demonstrate to the world that they are trustworthy pundits in a way that Yglesias and Krugman aren’t, I would invite all four of them to formally keep track of their predictions and see how they do relative to one another. I’m happy to help with this if they’re interested, and I bet Arbital would be too.

6.1. Pundits Who Failed To Predict Trump, Because They Are Out Of Touch With Real Americans

I think the argument is supposed to be that if they had ever left their comfortable Beltway offices and gone to talk to real people in the Midwest, they would have recognized the deep vein of anger in the American people and known that Trump was going to win.

Whoever you are, my “talking to real people in the Midwest” credentials are better than yours. I am a psychiatrist. I work in Michigan. My job is pretty much talking to former industrial workers about all the ways their lives have gone wrong, eight hours a day, every day. I am aware that these people are very angry.

But is it the level of anger where 46% of them will vote Trump? Or the level of anger where 48% of them will vote Trump? Because Hillary got about 47% of the vote in Michigan, so those two points are the difference between Trump winning the state and becoming President, versus losing the state and fading into ignominy. I do not think there is any level of deep connection to the collective consciousness of Michigan that allows you to distinguish between a 48%-Trump level of anger versus a 46%-Trump level of anger. Which means that even if you psychoanalyze Michiganders eight hours a day you still have to read the polls like everyone else. And the polls said that it was more like a 46% level of anger. And they were wrong.

But shouldn’t people who left their Beltway offices have at least realized that there was a significant amount of anger in the American people, and so Trump had a fighting chance? Yes. But all the polls also showed that there were a lot of Trump voters and that he had a fighting chance. If you were so confused that you didn’t realize that lots of people were angry and Trump had a fighting chance, I’m not sure that leaving your Beltway office would have helped much. In fact, I’m glad you didn’t. You probably would have wandered dazed into the street and gotten hit by a truck or something.

(or, if you made it to the Midwest, grain entrapment)

I guess there’s a version of this argument I endorse, which is that people who left their Beltway offices and talked to Real Americans might have realized that Trump voters were human beings with legitimate concerns and not just all alt-right Nazi KKK members. But again, if it takes a round-trip ticket to Peoria to convince our elites that people who disagree with them are not inscrutable hate-filled monsters, we have failed in a way more profound than not giving them that round-trip ticket.

7: People Who Are Worried That The Russians Hacked The Democrats To Influence The Elections

“Can you believe that the Democrats are trying to spin a narrative about foreign bogeymen out to get us?”

Okay, but did you look through the evidence that Russia was involved in the hacking? And don’t you agree it’s pretty strong?

“Yeah, but remember when the Republicans were the party of McCarthyism? And now this is totally the same thing!”

Okay, but did you look through the evidence that Russia was involved in the hacking? And don’t you agree it’s pretty strong?

“And just think, the CIA getting all upset about foreign powers interfering in an election! Pretty hypocritical, huh?”

Okay, but did you look through the evidence that Russia was involved in the hacking? And don’t you agree it’s pretty strong?

“And Hillary Clinton was such a terrible candidate, I bet it feels pretty good to be able to just blame everything on the Russians instead of admitting that you goofed by nominating her.”

Okay, but did you look through the evidence that Russia was involved in the hacking? And don’t you agree it’s pretty strong?

“There was that one guy on Twitter who posted a really cringeworthy rant about ‘game theory’. Can you believe that weirdo?”

Okay, but did you look through the evidence that Russia was involved in the hacking? And don’t you agree it’s pretty strong?

“Did I mention how funny it was that now the DEMOCRATS are the party of McCarthyism! Oooh, bogeyman Putin out to get you!”

Okay, but did you look through the evidence that Russia was involved in the hacking? And don’t you agree it’s pretty strong?

“Look, lay off, I’m not saying it’s false, I’m just saying we have more important things to talk about.”

And yet I checked your Twitter feed, and every tweet for the past two weeks has been you making fun of that game theory guy.

“I’m just saying that we’re focusing on Russia to the exclusion of everything else. Could there possibly be anything more pointlessly distracting from the real work that we’ve got to do?”

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[REPOST] The Non-Libertarian FAQ

[This is a repost of the Non-Libertarian FAQ (aka “Why I Hate Your Freedom”), which I wrote about five years ago and which used to be hosted on my website. It no longer completely reflects my current views. I don’t think I’ve switched to believing anything on here is outright false, but I’ve moved on to different ways of thinking about certain areas. I’m reposting it by popular request and for historical interest only. I’ve made some very small updates, mostly listing rebuttals that came out over the past few years. I haven’t updated the statistics and everything is accurate as of several years ago. I seem to have lost the sources of my images, and I’m sorry; if I’ve used an image of yours, please let me know and I’ll cite you.]


Economic Issues

1. Externalities
2. Coordination Problems
3. Irrational Choices
4. Lack of Information

Social Issues

5. Just Desserts and Social Mobility
6. Taxation

Political Issues

7. Competence of Government
8. Health Care
9. Prison Privatization
10. Gun Control
11. Education

D. Moral Issues

12. Moral Systems
13. Rights and Heuristics

E. Practical Issues

14. Slippery Slopes
15. Strategic Activism
16. Miscellaneous and Meta


0.1: Are you a statist?


Imagine a hypothetical country split between the “tallists”, who think only tall people should have political power, and the “shortists”, who believe such power should be reserved for the short.

If we met a tallist, we’d believe she was silly – but not because we favor the shortists instead. We’d oppose the tallists because we think the whole dichotomy is stupid – we should elect people based on qualities like their intelligence and leadership and morality. Knowing someone’s height isn’t enough to determine whether they’d be a good leader or not.

Declaring any non-libertarian to be a statist is as silly as declaring any non-tallist to be a shortist. Just as we can judge leaders on their merits and not on their height, so people can judge policies on their merits and not just on whether they increase or decrease the size of the state.

There are some people who legitimately believe that a policy’s effect on the size of the state is so closely linked to its effectiveness that these two things are not worth distinguishing, and so one can be certain of a policy’s greater effectiveness merely because it seems more libertarian and less statist than the alternative. Most of the rest of this FAQ will be an attempt to disprove this idea and assert that no, you really do have to judge the individual policy on its merits.

0.2: Do you hate libertarianism?


To many people, libertarianism is a reaction against an over-regulated society, and an attempt to spread the word that some seemingly intractable problems can be solved by a hands-off approach. Many libertarians have made excellent arguments for why certain libertarian policies are the best options, and I agree with many of them. I think this kind of libertarianism is a valuable strain of political thought that deserves more attention, and I have no quarrel whatsoever with it and find myself leaning more and more in that direction myself.

However, there’s a certain more aggressive, very American strain of libertarianism with which I do have a quarrel. This is the strain which, rather than analyzing specific policies and often deciding a more laissez-faire approach is best, starts with the tenet that government can do no right and private industry can do no wrong and uses this faith in place of more careful analysis. This faction is not averse to discussing politics, but tends to trot out the same few arguments about why less regulation has to be better. I wish I could blame this all on Ayn Rand, but a lot of it seems to come from people who have never heard of her. I suppose I could just add it to the bottom of the list of things I blame Reagan for.

To the first type of libertarian, I apologize for writing a FAQ attacking a caricature of your philosophy, but unfortunately that caricature is alive and well and posting smug slogans on Facebook.

0.3: Will this FAQ prove that government intervention always works better than the free market?

No, of course not.

Actually, in most cases, you won’t find me trying to make a positive proof of anything. I believe that deciding on, for example, an optimal taxation policy takes very many numbers and statistical models and other things which are well beyond the scope of this FAQ, and may well have different answers at different levels and in different areas.

What I want to do in most cases is not prove that the government works better than the free market, or vice versa, but to disprove theories that say we can be absolutely certain free market always works better than government before we even investigate the issue. After that, we may still find that this is indeed one of the cases where the free market works better than the government, but we will have to prove it instead of viewing it as self-evident from first principles.

0.4: Why write a Non-Libertarian FAQ? Isn’t statism a bigger problem than libertarianism?

Yes. But you never run into Stalinists at parties. At least not serious Stalinists over the age of twenty-five, and not the interesting type of parties. If I did, I guess I’d try to convince them not to be so statist, but the issue’s never come up.

But the world seems positively full of libertarians nowadays. And I see very few attempts to provide a complete critique of libertarian philosophy. There are a bunch of ad hoc critiques of specific positions: people arguing for socialist health care, people in favor of gun control. But one of the things that draws people to libertarianism is that it is a unified, harmonious system. Unlike the mix-and-match philosophies of the Democratic and Republican parties, libertarianism is coherent and sometimes even derived from first principles. The only way to convincingly talk someone out of libertarianism is to launch a challenge on the entire system.

There are a few existing documents trying to do this (see Mike Huben’s Critiques of Libertarianism and Mark Rosenfelder’s What’s (Still) Wrong With Libertarianism for two of the better ones), but I’m not satisfied with any of them. Some of them are good but incomplete. Others use things like social contract theory, which I find nonsensical and libertarians find repulsive. Or they have an overly rosy view of how consensual taxation is, which I don’t fall for and which libertarians definitely don’t fall for.

The main reason I’m writing this is that I encounter many libertarians, and I need a single document I can point to explaining why I don’t agree with them. The existing anti-libertarian documentation makes too many arguments I don’t agree with for me to feel really comfortable with it, so I’m writing this one myself. I don’t encounter too many Stalinists,
so I don’t have this problem with them and I don’t see any need to write a rebuttal to their position.

If you really need a pro-libertarian FAQ to use on an overly statist friend, Google suggests The Libertarian FAQ.

0.5: How is this FAQ structured?

I’ve divided it into three main sections. The first addresses some very abstract principles of economics. They may not be directly relevant to politics, but since most libertarian philosophies start with abstract economic principles, a serious counterargument has to start there also. Fair warning: there are people who can discuss economics without it being INCREDIBLY MIND-NUMBINGLY BORING, but I am not one of them.

The second section deals with more concrete economic and political problems like the tax system, health care, and criminal justice.

The third section deals with moral issues, like whether it’s ever permissible to initiate force. Too often I find that if I can convince a libertarian that government regulation can be effective, they respond that it doesn’t matter because it’s morally repulsive, and then once I’ve finished convincing them it isn’t, they respond that it never works anyway. By having sections dedicated to both practical and moral issues, I hope to make that sort of bait-and-switch harder to achieve, and to allow libertarians to evaluate the moral and practical arguments against their position in whatever order they find appropriate.

Part A: Economic Issues

The Argument:

In a free market, all trade has to be voluntary, so you will never agree to a trade unless it benefits you.

Further, you won’t make a trade unless you think it’s the best possible trade you can make. If you knew you could make a better one, you’d hold out for that. So trades in a free market are not only better than nothing, they’re also the best possible transaction you could make at that time.

Labor is no different from any other commercial transaction in this respect. You won’t agree to a job unless it benefits you more than anything else you can do with your time, and your employer won’t hire you unless it benefits her more than anything else she can do with her money. So a voluntarily agreed labor contract must benefit both parties, and must do so more than any other alternative.

If every trade in a free market benefits both parties, then any time the government tries to restrict trade in some way, it must hurt both parties. Or, to put it another way, you can help someone by giving them more options, but you can’t help them by taking away options. And in a free market, where everyone starts with all options, all the government can do is take options away.

The Counterargument:

This treats the world as a series of producer-consumer dyads instead of as a system in which every transaction affects everyone else. Also, it treats consumers as coherent entities who have specific variables like “utility” and “demand” and know exactly what they are, which doesn’t always work.

In the remainder of this section, I’ll be going over several ways the free market can fail and several ways a regulated market can overcome those failures. I’ll focus on four main things: externalities, coordination problems, irrational choice, and lack of information.

I did warn you it would be mind-numbingly boring.

1. Externalities

1.1: What is an externality?

An externality is when I make a trade with you, but it has some accidental effect on other people who weren’t involved in the trade.

Suppose for example that I sell my house to an amateur wasp farmer. Only he’s not a very good wasp farmer, so his wasps usually get loose and sting people all over the neighborhood every couple of days.

This trade between the wasp farmer and myself has benefitted both of us, but it’s harmed people who weren’t consulted; namely, my neighbors, who are now locked indoors clutching cans of industrial-strength insect repellent. Although the trade was voluntary for both the wasp farmer and myself, it wasn’t voluntary for my neighbors.

Another example of externalities would be a widget factory that spews carcinogenic chemicals into the air. When I trade with the widget factory I’m benefitting – I get widgets – and they’re benefitting – they get money. But the people who breathe in the carcinogenic chemicals weren’t consulted in the trade.

1.2: But aren’t there are libertarian ways to solve externalities that don’t involve the use of force?

To some degree, yes. You can, for example, refuse to move into any neighborhood unless everyone in town has signed a contract agreeing not to raise wasps on their property.

But getting every single person in a town of thousands of people to sign a contract every time you think of something else you want banned might be a little difficult. More likely, you would want everyone in town to unanimously agree to a contract saying that certain things, which could be decided by some procedure requiring less than unanimity, could be banned from the neighborhood – sort of like the existing concept of neighborhood associations.

But convincing every single person in a town of thousands to join the neighborhood association would be near impossible, and all it would take would be a single holdout who starts raising wasps and all your work is useless. Better, perhaps, to start a new town on your own land with a pre-existing agreement that before you’re allowed to move in you must belong to the association and follow its rules. You could even collect dues from the members of this agreement to help pay for the people you’d need to enforce it.

But in this case, you’re not coming up with a clever libertarian way around government, you’re just reinventing the concept of government. There’s no difference between a town where to live there you have to agree to follow certain terms decided by association members following some procedure, pay dues, and suffer the consequences if you break the rules – and a regular town with a regular civic government.

As far as I know there is no loophole-free way to protect a community against externalities besides government and things that are functionally identical to it.

1.3: Couldn’t consumers boycott any company that causes externalities?

Only a small proportion of the people buying from a company will live near the company’s factory, so this assumes a colossal amount of both knowledge and altruism on the part of most consumers. See also the general discussion of why boycotts almost never solve problems in the next session.

1.4: What is the significance of externalities?

They justify some environmental, zoning, and property use regulations.

2. Coordination Problems

2.1: What are coordination problems?

Coordination problems are cases in which everyone agrees that a certain action would be best, but the free market cannot coordinate them into taking that action.

As a thought experiment, let’s consider aquaculture (fish farming) in a lake. Imagine a lake with a thousand identical fish farms owned by a thousand competing companies. Each fish farm earns a profit of $1000/month. For a while, all is well.

But each fish farm produces waste, which fouls the water in the lake. Let’s say each fish farm produces enough pollution to lower productivity in the lake by $1/month.

A thousand fish farms produce enough waste to lower productivity by $1000/month, meaning none of the fish farms are making any money. Capitalism to the rescue: someone invents a complex filtering system that removes waste products. It costs $300/month to operate. All fish farms voluntarily install it, the pollution ends, and the fish farms are now making a profit of $700/month – still a respectable sum.

But one farmer (let’s call him Steve) gets tired of spending the money to operate his filter. Now one fish farm worth of waste is polluting the lake, lowering productivity by $1. Steve earns $999 profit, and everyone else earns $699 profit.

Everyone else sees Steve is much more profitable than they are, because he’s not spending the maintenance costs on his filter. They disconnect their filters too.

Once four hundred people disconnect their filters, Steve is earning $600/month – less than he would be if he and everyone else had kept their filters on! And the poor virtuous filter users are only making $300. Steve goes around to everyone, saying “Wait! We all need to make a voluntary pact to use filters! Otherwise, everyone’s productivity goes down.”

Everyone agrees with him, and they all sign the Filter Pact, except one person who is sort of a jerk. Let’s call him Mike. Now everyone is back using filters again, except Mike. Mike earns $999/month, and everyone else earns $699/month. Slowly, people start thinking they too should be getting big bucks like Mike, and disconnect their filter for $300 extra profit…

A self-interested person never has any incentive to use a filter. A self-interested person has some incentive to sign a pact to make everyone use a filter, but in many cases has a stronger incentive to wait for everyone else to sign such a pact but opt out himself. This can lead to an undesirable equilibrium in which no one will sign such a pact.

The most profitable solution to this problem is for Steve to declare himself King of the Lake and threaten to initiate force against anyone who doesn’t use a filter. This regulatory solution leads to greater total productivity for the thousand fish farms than a free market could.

The classic libertarian solution to this problem is to try to find a way to privatize the shared resource (in this case, the lake). I intentionally chose aquaculture for this example because privatization doesn’t work. Even after the entire lake has been divided into parcels and sold to private landowners (waterowners?) the problem remains, since waste will spread from one parcel to another regardless of property boundaries.

2.1.1: Even without anyone declaring himself King of the Lake, the fish farmers would voluntarily agree to abide by the pact that benefits everyone.

Empirically, no. This situation happens with wild fisheries all the time. There’s some population of cod or salmon or something which will be self-sustaining as long as it’s not overfished. Fishermen come in and catch as many fish as they can, overfishing it. Environmentalists warn that the fishery is going to collapse. Fishermen find this worrying, but none of them want to fish less because then their competitors will just take up the slack. Then the fishery collapses and everyone goes out of business. The most famous example is the Collapse of the Northern Cod Fishery, but there are many others in various oceans, lakes, and rivers.

If not for resistance to government regulation, the Canadian governments could have set strict fishing quotas, and companies could still be profitably fishing the area today. Other fisheries that do have government-imposed quotas are much more successful.

2.1.2: I bet [extremely complex privatization scheme that takes into account the ability of cod to move across property boundaries and the migration patterns of cod and so on] could have saved the Atlantic cod too.

Maybe, but left to their own devices, cod fishermen never implemented or recommended that scheme. If we ban all government regulation in the environment, that won’t make fishermen suddenly start implementing complex privatization schemes that they’ve never implemented before. It will just make fishermen keep doing what they’re doing while tying the hands of the one organization that has a track record of actually solving this sort of problem in the real world.

2.2: How do coordination problems justify environmental regulations?

Consider the process of trying to stop global warming. If everyone believes in global warming and wants to stop it, it’s still not in any one person’s self-interest to be more environmentally conscious. After all, that would make a major impact on her quality of life, but a negligible difference to overall worldwide temperatures. If everyone acts only in their self-interest, then no one will act against global warming, even though stopping global warming is in everyone’s self-interest. However, everyone would support the institution of a government that uses force to make everyone more environmentally conscious.

Notice how well this explains reality. The government of every major country has publicly declared that they think solving global warming is a high priority, but every time they meet in Kyoto or Copenhagen or Bangkok for one of their big conferences, the developed countries would rather the developing countries shoulder the burden, the developing countries would rather the developed countries do the hard work, and so nothing ever gets done.

The same applies mutans mutandis to other environmental issues like the ozone layer, recycling, and anything else where one person cannot make a major difference but many people acting together can.

2.3: How do coordination problems justify regulation of ethical business practices?

The normal libertarian belief is that it is unnecessary for government to regulate ethical business practices. After all, if people object to something a business is doing, they will boycott that business, either incentivizing the business to change its ways, or driving them into well-deserved bankruptcy. And if people don’t object, then there’s no problem and the government shouldn’t intervene.

A close consideration of coordination problems demolishes this argument. Let’s say Wanda’s Widgets has one million customers. Each customer pays it $100 per year, for a total income of $100 million. Each customer prefers Wanda to her competitor Wayland, who charges $150 for widgets of equal quality. Now let’s say Wanda’s Widgets does some unspeakably horrible act which makes it $10 million per year, but offends every one of its million customers.

There is no incentive for a single customer to boycott Wanda’s Widgets. After all, that customer’s boycott will cost the customer $50 (she will have to switch to Wayland) and make an insignificant difference to Wanda (who is still earning $99,999,900 of her original hundred million). The customer takes significant inconvenience, and Wanda neither cares nor stops doing her unspeakably horrible act (after all, it’s giving her $10 million per year, and only losing her $100).

The only reason it would be in a customer’s interests to boycott is if she believed over a hundred thousand other customers would join her. In that case, the boycott would be costing Wanda more than the $10 million she gains from her unspeakably horrible act, and it’s now in her self-interest to stop committing the act. However, unless each boycotter believes 99,999 others will join her, she is inconveniencing herself for no benefit.

Furthermore, if a customer offended by Wanda’s actions believes 100,000 others will boycott Wanda, then it’s in the customer’s self-interest to “defect” from the boycott and buy Wanda’s products. After all, the customer will lose money if she buys Wayland’s more expensive widgets, and this is unnecessary – the 100,000 other boycotters will change Wanda’s mind with or without her participation.

This suggests a “market failure” of boycotts, which seems confirmed by experience. We know that, despite many companies doing very controversial things, there have been very few successful boycotts. Indeed, few boycotts, successful or otherwise, ever make the news, and the number of successful boycotts seems much less than the amount of outrage expressed at companies’ actions.

The existence of government regulation solves this problem nicely. If >51% of people disagree with Wanda’s unspeakably horrible act, they don’t need to waste time and money guessing how many of them will join in a boycott, and they don’t need to worry about being unable to conscript enough defectors to reach critical mass. They simply vote to pass a law banning the action.

2.3.1: I’m not convinced that it’s really that hard to get a boycott going. If people really object to something, they’ll start a boycott regardless of all that coordination problem stuff.

So, you’re boycotting Coke because they’re hiring local death squads to kidnap, torture, and murder union members and organizers in their sweatshops in Colombia, right?

Not a lot of people to whom I have asked this question have ever answered “yes”. Most of them had never heard of the abuses before. A few of them vaguely remembered having heard something about it, but dismissed it as “you know, multinational corporations do a lot of sketchy things.” I’ve only met one person who’s ever gone so far as to walk twenty feet further to get to the Pepsi vending machine.

If you went up to a random guy on the street and said “Hey, does hiring death squads to torture and kill Colombians who protest about terrible working conditions bother you?” 99.9% of people would say yes. So why the disconnect between words and actions? People could just be lying – they could say they cared so they sounded compassionate, but in reality it doesn’t really bother them.

But maybe it’s something more complicated. Perhaps they don’t have the brainpower to keep track of every single corporation that’s doing bad things and just how bad they are. Perhaps they’ve compartmentalized their lives and after they leave their Amnesty meetings it just doesn’t register that they should change their behaviour in the supermarket. Or perhaps the Coke = evil connection is too tenuous and against the brain’s ingrained laws of thought to stay relevant without expending extraordinary amounts of willpower. Or perhaps there’s some part of the subconscious that really is worry about that game theory and figuring it has no personal incentive to join the boycott.

And God forbid that it’s something more complicated than that. Imagine if the company that made the mining equipment that was bought by the mining company that mined the aluminum that was bought by Coke to make their cans was doing something unethical. You think you could convince enough people to boycott Coke that Coke would boycott the mining company that the mining company would boycott the equipment company that the equipment company would stop behaving unethically?

If we can’t trust people to stay off Coke when it uses death squads and when Pepsi tastes exactly the same (don’t argue with me on that one!) how can we assume people’s purchasing decisions will always act as a general moral regulatory method for the market?

2.3.2: And you really think governments can do better?

Sure seems that way. Many laws currently exist banning businesses from engaging in unethical practices. Some of these laws were passed by direct ballot. Others were passed by representatives who have incentives to usually follow the will of their consitutents. So it seems fair to say that there are a lot of business practices that more than 51% of people thought should be banned.

But the very fact that a law was needed to ban them proves that those 51% of people weren’t able to organize a successful boycott. More than half of the population, sometimes much more, hated some practice so much they thought it should be illegal, yet that wasn’t enough to provide an incentive for the company to stop doing it until the law took effect.

To me, that confirms that boycotts are a very poor way of allowing people’s morals to influence corporate conduct.

2.4: How do coordination problems justify government spending on charitable causes?

Because failure to donate to a charitable cause might also be because of a coordination problem.

How many people want to end world hunger? I’ve never yet met someone who would answer with a “not me!”, but maybe some of those people are just trying to look good in front of other people, so let’s make a conservative estimate of 50%.

There’s a lot of dispute over what it would mean to “end world hunger”, all the way from “buy and ship food every day to everyone who is hungry that day” all the way to “create sustainable infrastructure and economic development such that everyone naturally produces enough food or money”. There are various estimates about how much these different definitions would cost, all the way from “about $15 billion a year” to “about $200 billion a year” – permanently in the case of shipping food, and for a decade or two in the case of promoting development.

Even if we take the highest possible estimate, it’s still well below what you would make if 50% of the population of the world donated $1/week to the cause. Now, certainly there are some very poor people in the world who couldn’t donate $1/week, but there are also some very rich people who could no doubt donate much, much more.

So we have two possibilities. Either the majority of people don’t care enough about world hunger to give a dollar a week to end it, or something else is going on.

That something else is a coordination problem. No one expects anyone else to donate a dollar a week, so they don’t either. And although somebody could shout very loudly “Hey, let’s all donate $1 a week to fight world hunger!” no one would expect anyone else to listen to that person, so they wouldn’t either.

When the government levies tax money on everyone in the country and then donates it to a charitable cause, it is often because everyone in the country supports that charitable cause but a private attempt to show that support would fall victim to coordination problems.

2.5: How do coordination problems justify labor unions and other labor regulation?

It is frequently proposed that workers and bosses are equal negotiating partners bargaining on equal terms, and only the excessive government intervention on the side of labor that makes the negotiating table unfair. After all, both need something from one another: the worker needs money, the boss labor. Both can end the deal if they don’t like the terms: the boss can fire the worker, or the worker can quit the boss. Both have other choices: the boss can choose a different employee, the worker can work for a different company. And yet, strange to behold, having proven the fundamental equality of workers and bosses, we find that everyone keeps acting as if bosses have the better end of the deal.

During interviews, the prospective employee is often nervous; the boss rarely is. The boss can ask all sorts of things like that the prospective pay for her own background check, or pee in a cup so the boss can test the urine for drugs; the prospective employee would think twice before daring make even so reasonable a request as a cup of coffee. Once the employee is hired, the boss may ask on a moment’s notice that she work a half hour longer or else she’s fired, and she may not dare to even complain. On the other hand, if she were to so much as ask to be allowed to start work thirty minutes later to get more sleep or else she’ll quit, she might well be laughed out of the company. A boss may, and very often does, yell at an employee who has made a minor mistake, telling her how stupid and worthless she is, but rarely could an employee get away with even politely mentioning the mistake of a boss, even if it is many times as unforgivable.

The naive economist who truly believes in the equal bargaining position of labor and capital would find all of these things very puzzling.

Let’s focus on the last issue; a boss berating an employee, versus an employee berating a boss. Maybe the boss has one hundred employees. Each of these employees only has one job. If the boss decides she dislikes an employee, she can drive her to quit and still be 99% as productive while she looks for a replacement; once the replacement is found, the company will go on exactly as smoothly as before.

But if the employee’s actions drive the boss to fire her, then she must be completely unemployed until such time as she finds a new job, suffering a long period of 0% productivity. Her new job may require a completely different life routine, including working different hours, learning different skills, or moving to an entirely new city. And because people often get promoted based on seniority, she probably won’t be as well paid or have as many opportunities as she did at her old company. And of course, there’s always the chance she won’t find another job at all, or will only find one in a much less tolerable field like fast food.

We previously proposed a symmetry between a boss firing a worker and a worker quitting a boss, but actually they could not be more different. For a boss to fire a worker is at most a minor inconvenience; for a worker to lose a job is a disaster. The Holmes-Rahe Stress Scale, a measure of the comparative stress level of different life events, puts being fired at 47 units, worse than the death of a close friend and nearly as bad as a jail term. Tellingly, “firing one of your employees” failed to make the scale.

This fundamental asymmetry gives capital the power to create more asymmetries in its favor. For example, bosses retain a level of control on workers even after they quit, because a worker may very well need a letter of reference from a previous boss to get a good job at a new company. On the other hand, a prospective employee who asked her prospective boss to produce letters of recommendation from her previous workers would be politely shown the door; we find even the image funny.

The proper level negotiating partner to a boss is not one worker, but all workers. If the boss lost all workers at once, then she would be at 0% productivity, the same as the worker who loses her job. Likewise, if all the workers approached the boss and said “We want to start a half hour later in the morning or we all quit”, they might receive the same attention as the boss who said “Work a half hour longer each day or you’re all fired”.

But getting all the workers together presents coordination problems. One worker has to be the first to speak up. But if one worker speaks up and doesn’t get immediate support from all the other workers, the boss can just fire that first worker as a troublemaker. Being the first worker to speak up has major costs – a good chance of being fired – but no benefits – all workers will benefit equally from revised policies no matter who the first worker to ask for them is.

Or, to look at it from the other angle, if only one worker sticks up for the boss, then intolerable conditions may well still get changed, but the boss will remember that one worker and maybe be more likely to promote her. So even someone who hates the boss’s policies has a strong selfish incentive to stick up for her.

The ability of workers to coordinate action without being threatened or fired for attempting to do so is the only thing that gives them any negotiating power at all, and is necessary for a healthy labor market. Although we can debate the specifics of exactly how much protection should be afforded each kind of coordination, the fundamental principle is sound.

2.5.1: But workers don’t need to coordinate. If working conditions are bad, people can just change jobs, and that would solve the bad conditions.

About three hundred Americans commit suicide for work-related reasons every year – this number doesn’t count those who attempt suicide but fail. The reasons cited by suicide notes, survivors and researchers investigating the phenomenon include on-the-job bullying, poor working conditions, unbearable hours, and fear of being fired.

I don’t claim to understand the thought processes that would drive someone to do this, but given the rarity and extremity of suicide, we can assume for every worker who goes ahead with suicide for work-related reasons, there are a hundred or a thousand who feel miserable but not quite suicidal.

If people are literally killing themselves because of bad working conditions, it’s safe to say that life is more complicated than the ideal world in which everyone who didn’t like their working conditions quits and get a better job elsewhere (see the next section, Irrationality).

I note in the same vein stories from the days before labor regulations when employers would ban workers from using the restroom on jobs with nine hour shifts, often ending in the workers wetting themselves. This seems like the sort of thing that provides so much humiliation to the workers, and so little benefit to the bosses, that a free market would eliminate it in a split second. But we know that it was a common policy in the 1910s and 1920s, and that factories with such policies never wanted for employees. The same is true of factories that literally locked their workers inside to prevent them from secretly using the restroom or going out for a smoking break, leading to disasters like the Triangle Shirtwaist Fire when hundreds of workers died when the building they were locked inside burnt down. And yet even after this fire, the practice of locking workers inside buildings only stopped when the government finally passed regulation against it.

3. Irrational Choices

3.1: What do you mean by “irrational choices”?

A company (Thaler, 2007, download study as .pdf) gives its employees the opportunity to sign up for a pension plan. They contribute a small amount of money each month, and the company will also contribute some money, and overall it ends up as a really good deal for the employees and gives them an excellent retirement fund. Only a small minority of the employees sign up.

The libertarian would answer that this is fine. Although some outsider might condescendingly declare it “a really good deal”, the employees are the most likely to understand their own unique financial situation. They may have a better pension plan somewhere else, or mistrust the company’s promises, or expect not to need much money in their own age. For some outsider to declare that they are wrong to avoid the pension plan, or worse to try to force them into it for their own good, would be the worst sort of arrogant paternalism, and an attack on the employees’ dignity as rational beings.

Then the company switches tactics. It automatically signs the employees up for the pension plan, but offers them the option to opt out. This time, only a small minority of the employees opt out.

That makes it very hard to spin the first condition as the employees rationally preferring not to participate in the pension plan, since the second condition reveals the opposite preference. It looks more like they just didn’t have the mental energy to think about it or go through the trouble of signing up. And in the latter condition, they didn’t have the mental energy to think about it or go through the trouble of opting out.

If the employees were rationally deciding whether or not to sign up, then some outsider regulating their decision would be a disaster. But if the employees are making demonstrably irrational choices because of a lack of mental energy, and if people do so consistently and predictably, then having someone else who has considered the issue in more depth regulate their choices could lead to a better outcome.

3.1.1: So what’s going on here?

Old-school economics assumed choice to be “revealed preference”: an individual’s choices will invariably correspond to their preferences, and imposing any other set of choices on them will result in fewer preferences being satisfied.

In some cases, economists have gone to absurd lengths to defend this model. For example, Bryan Caplan says that when drug addicts say they wish that they could quit drugs, they must be lying, since they haven’t done so. Seemingly unsuccessful attempts to quit must be elaborate theater, done to convince other people to continue supporting them, while they secretly enjoy their drugs as much as ever.

But the past fifty years of cognitive science have thoroughly demolished this “revealed preference” assumption, showing that people’s choices result from a complex mix of external compulsions, internal motivations, natural biases, and impulsive behaviors. These decisions usually approximate fulfilling preferences, but sometimes they fail in predictable and consistent ways.

The field built upon these insights is called “behavioral economics”, and you can find more information in books like Judgment Under Uncertainty, Cognitive Illusions, and Predictably Irrational, or on the website Less Wrong.

3.2: Why does this matter?

The gist of this research, as it relates to the current topic, is that people don’t always make the best choice according to their preferences. Sometimes they consistently make the easiest or the most superficially attractive choice instead. It may be best not to think of them as a “choice” at all, but as a reflexive reaction to certain circumstances, which often but not always conforms to rationality.

Such possibilities cast doubt on the principle that every trade that can be voluntarily made should be voluntarily made.

If people’s decisions are not randomly irrational, but systematically irrational in predictable ways, that raises the possibility that people who are aware of these irrationalities may be able to do better than the average person in particular fields where the irrationalities are more common, raising the possibility that paternalism can sometimes be justified.

3.2.1: Why should the government protect people from their own irrational choices?

By definition of “irrational”, people will be happier and have more of their preferences satisfied if they do not make irrational choices. By the principles of the free market, as people make more rational decisions the economy will also improve.

If you mean this question in a moral sense, more like “How dare the government presume to protect me from my own irrational choices!”, see the section on Moral Issues.

3.2.2: What is the significance of predictably irrational behavior?

It justifies government-mandated pensions, some consumer safety and labor regulations, advertising regulations, concern about addictive drugs, and public health promotion, among other things.

4. Lack of Information

4.1: What do you mean by “lack of information”?

Many economic theories start with the assumption that everyone has perfect information about everything. For example, if a company’s products are unsafe, these economic theories assume consumers know the product is unsafe, and so will buy less of it.

No economist literally believes consumers have perfect information, but there are still strong arguments for keeping the “perfect information” assumption. These revolve around the idea that consumers will be motivated to pursue information about things that are important to them. For example, if they care about product safety, they will fund investigations into product safety, or only buy products that have been certified safe by some credible third party. The only case in which a consumer would buy something without information on it is if the consumer had no interest in the information, or wasn’t willing to pay as much for the information as it would cost, in which case the consumer doesn’t care much about the information anyway, and it is a success rather than a failure of the market that it has not given it to her.

In nonlibertarian thought, people care so much about things like product safety and efficacy, or the ethics of how a product is produced, that the government needs to ensure them. In libertarian thought, if people really care about product safety, efficacy and ethics, the market will ensure them itself, and if they genuinely don’t care, that’s okay too.

4.1.1: And what’s wrong with the libertarian position here?

Section 5 describes how we can sometimes predict when people will make irrational choices. One of the most consistent irrational choices people make is buying products without spending as much effort to gather information as the amount they care about these things would suggest. So in fact, the nonlibertarians are right: if there were no government regulation, people who care a lot about things like safety and efficacy would consistently be stuck with unsafe and ineffective products, and the market would not correct these failures.

4.2: Is this really true? Surely people would investigate the safety, ethics, and efficacy of the products they buy.

Below follows a list of statements about products. Some are real, others are made up. Can you identify which are which?

1. Some processed food items, including most Kraft cheese products, contain methylarachinate, an additive which causes a dangerous anaphylactic reaction in 1/31000 people who consume it. They have been banned in Canada, but continue to be used in the United States after intense lobbying from food industry interests.

2. Commonly used US-manufactured wood products, including almost all plywood, contain formaldehyde, a compound known to cause cancer. This has been known in scientific circles for years, but was only officially reported a few months ago because of intense chemical industry lobbying to keep it secret. Formaldehyde-containing wood products are illegal in the EU and most other developed nations.

3. Total S.A., an oil company that owns fill-up stations around the world, sometimes uses slave labor in repressive third-world countries to build its pipelines and oil wells. Laborers are coerced to work for the company by juntas funded by the corporation, and are shot or tortured if they refuse. The company also helps pay for the military muscle needed to keep the juntas in power.

4. Microsoft has cooperated with the Chinese government by turning over records from the Chinese equivalents of its search engine “Bing” and its hotmail email service, despite knowing these records would be used to arrest dissidents. At least three dissidents were arrested based on the information and are currently believed to be in jail or “re-education” centers.

5. Wellpoint, the second largest US health care company, has a long record of refusing to provide expensive health care treatments promised in some of its plans by arguing that their customers have violated the “small print” of the terms of agreement; in fact they make it so technical that almost all customers violate them unknowingly, then only cite the ones who need expensive treatment. Although it has been sued for these practices at least twice, both times it has used its legal muscle to tie the cases up in court long enough that the patients settled for an undisclosed amount believed to be fraction of the original benefits promised.

6. Ultrasonic mosquito repellents like those made by GSI, which claim to mimic frequencies produced by the mosquito’s natural predator, the bat, do not actually repel mosquitoes. Studies have shown that exactly as many mosquitoes inhabit the vicinity of such a mosquito repellent as anywhere else.

7. Listerine (and related mouth washes) probably do not eliminate bad breath. Although it may be effective at first, in the long term it generally increases bad breath by drying out the mouth and inhibiting the salivary glands. This may also increase the population of dental bacteria. Most top dentists recommend avoiding mouth wash or using it very sparingly.

8. The most popular laundry detergents, including most varieties of Tide and Method, have minimal to zero ability to remove stains from clothing. They mostly just makes clothing smell better when removed from the laundry. Some of the more expensive alkylbenzenesulfonate detergents have genuine stain-removing action, but aside from the cost, these detergents have very strong smells and are unpopular.

4.2.1: Okay, I admit I’m not sure of most of these. What’s your point?

This is a complicated FAQ about complicated philosophical issues. Most likely its readers are in the top few percentiles in terms of intelligence and education.

And we live in a world where there are many organizations, both private and governmental, that exist to evaluate products and disseminate information about their safety.

And all of the companies and products above are popular ones that most American consumers have encountered and had to make purchasing decisions about. I tried to choose safety issues that were extremely serious and carried significant risks of death, and ethical issues involving slavery and communism, which would be of particular importance to libertarians.

If the test was challenging, it means that the smartest and best-educated people in a world full of consumer safety and education organizations don’t bother to look up important life-or-death facts specifically tailored to be relevant to them about the most popular products and companies they use every day.

And if that’s the case, why would you believe that less well-educated people in a world with less consumer safety information trying to draw finer distinctions between more obscure products will definitely seek out the consumer information necessary allows them to avoid unsafe, unethical, or ineffective products?

The above test is an attempt at experimental proof that people don’t seek out even the product information that is genuinely important to them, but instead take the easy choice of buying whatever’s convenient based on information they get from advertising campaigns and the like.

4.2.2: Fine, fine, what are the answers to the test?

Four of them are true and four of them are false, but I’m not saying which are which, in the hopes that people will observe their own thought processes when deciding whether or not it’s worth looking up.

4.2.3: Right, well of course people don’t look up product information now because the government regulates that for them. In a real libertarian society, they would be more proactive.

All of the four true items on the test above are true in spite of government regulation. Clearly, there are still significant issues even in a regulated environment.

If you honestly believe you have no incentive to look up product information because you trust the government to take care of that, then you’re about ten times more statist than I am, and I’m the guy writing the Non-Libertarian FAQ.

4.3: What other unexpected consequences might occur without consumer regulation?

It could destroy small business.

In the absence of government regulation, you would have to trust corporate self-interest to regulate quality. And to some degree you can do that. Wal-Mart and Target are both big enough and important enough that if they sold tainted products, it would make it into the newspaper, there would be a big outcry, and they would be forced to stop. One could feel quite safe shopping at Wal-Mart.

But suppose on the way to Wal-Mart, you see a random mom-and-pop store that looks interesting. What do you know about its safety standards? Nothing. If they sold tainted or defective products, it would be unlikely to make the news; if it were a small enough store, it might not even make the Internet. Although you expect the CEO of Wal-Mart to be a reasonable man who understands his own self-interest and who would enforce strict safety standards, you have no idea whether the owner of the mom-and-pop store is stupid, lazy, or just assumes (with some justification) that no one will ever notice his misdeeds. So you avoid the unknown quantity and head to Wal-Mart, which you know is safe.

Repeated across a million people in a thousand cities, big businesses get bigger and small businesses get unsustainable.

4.4: What is the significance of lack of information?

It justifies some consumer and safety regulations, and the taxes necessary to pay for them.

Part B: Social Issues

The Argument:

Those who work hardest (and smartest) should get the most money. Not only should we not begrudge them that money, but we should thank them for the good they must have done for the world in order to satisfy so many consumers.

People who do not work hard should not get as much money. If they want more money, they should work harder. Getting more money without working harder or smarter is unfair, and indicative of a false sense of entitlement.

Unfortunately, modern liberal society has internalized the opposite principle: that those who work hardest are greedy people who must have stolen from those who work less hard, and that we should distrust them at until they give most of their ill-gotten gains away to others. The “progressive” taxation system as it currently exists serves this purpose.

This way of thinking is not only morally wrong-headed, but economically catastrophic. Leaving wealth in the hands of the rich would “make the pie bigger”, allowing the extra wealth to “trickle down” to the poor naturally.

The Counterargument:

Hard work and intelligence are contributory factors to success, but depending on the way you phrase the question, you find you need other factors to explain between one-half and nine-tenths of the difference in success within the United States; within the world at large the numbers are much higher.

If we think factors other than hard work and intelligence determining success are “unfair”, then most of Americans’ life experiences are determined by “unfair” factors.

Although it would be overly ambitious to want to completely eliminate all unfairness, we know that most other developed countries have successfully eliminated many of the most glaring types of unfairness, and reaped benefits greater than the costs from doing so.

The progressive tax system is part of this policy of eliminating unfairness, but if you disagree with that, that’s okay, as more and more of the country’s wealth is staying in the hands of the super-rich. None of this wealth has trickled down to the poor and none of it ever will, as the past thirty years of economic history have repeatedly and decisively demolished the “trickle-down” concept.

None of this implies that any particular rich person is “greedy”, whatever that would mean.

5. Just Desserts and Social Mobility

5.1: Government is the recourse of “moochers”, who want to take the money of productive people and give it to the poor. But rich people earned their money, and poor people had the chance to earn money but did not. Therefore, the poor do not deserve rich people’s money.

The claim of many libertarians is that the wealthy earned their money by the sweat of their brow, and the poor are poor because they did not. The counterclaim of many liberals is that the wealthy gained their wealth by various unfair advantages, and that the poor never had a chance. These two conflicting worldviews have been the crux of many an Internet flamewar.

Luckily, this is an empirical question, and can be solved simply by collecting the relevant data. For example, we could examine whether the children of rich parents are more likely to be rich than poor parents, and, if so, how much more likely they are. This would give us a pretty good estimate of how much of rich people’s wealth comes from superior personal qualities, as opposed to starting with more advantages.

If we define “rich” as “income in the top 5%” and “poor” as “income in the bottom 5%” then children of rich parents are about twenty times more likely to become rich themselves than children of poor parents.

But maybe that’s an extreme case. Instead let’s talk about “upper class” (top 20%) and “lower class” (bottom 20%). A person born to a lower-class family only has a fifty-fifty chance of ever breaking out of the lower class (as opposed to 80% expected by chance), and only about a 3% chance of ending up in the upper class (as opposed to 20% expected by chance). The children of upper class parents are six times more likely to end up in the upper class than the lower class; the children of lower class families are four times more likely to end up in the lower class than the upper class.

The most precise way to measure this question is via a statistic called “intergenerational income mobility”, which studies have estimated at between .4 and .6. This means that around half the difference in people’s wealth, maybe more, can be explained solely by who their parents are.

Once you add in all the other factors besides how hard you work – like where you live (the average Delawarean earns $30000; the average Mississippian $15000) and the quality of your local school district, there doesn’t seem to be much room for hard work to determine more than about a third of the difference between income.

5.1.1: The conventional wisdom among libertarians is completely different. I’ve heard of a study saying that people in the lower class are more likely to end up in the upper class than stay in the lower class, even over a period as short as ten years!

First of all, note that this is insane. Since the total must add up to 100%, this would mean that starting off poor actually makes you more likely to end up rich than someone who didn’t start off poor. If this were true, we should all send our children to school in the ghetto to maximize their life chances. This should be a red flag.

And, in fact, it is false. Most of the claims of this sort come from a single discredited study. The study focused on a cohort with a median age of twenty-two, then watched them for ten years, then compared the (thirty-two year old) origins with twenty-two year olds, then claimed that the fact that young professionals make more than college students was a fact about social mobility. It was kind of weird.

Why would someone do this? Far be it from me to point fingers, but Glenn Hubbard, the guy who conducted the study, worked for a conservative think tank called the “American Enterprise Institute”. You can see a more complete criticism of the study here.

5.1.2: Okay, I acknowledge that at least half of the differences in wealth can be explained by parents. But that needn’t be rich parents leaving trust funds to their children. It could also be parents simply teaching their children better life habits. It could even be genes for intelligence and hard work.

This may explain a small part of the issue, but see 5.1.3 and, which show that under different socioeconomic conditions, this number markedly decreases. These socioeconomic changes would not be expected to affect things like genetics.

5.1.3: So maybe children of the rich do have better opportunities, but that’s life. Some people just start with advantages not available to others. There’s no point in trying to use Big Government to regulate away something that’s part of the human condition.

This lack of social mobility isn’t part of the human condition, it’s a uniquely American problem. Of eleven developed countries investigated in a recent study on income mobility, America came out tenth out of eleven. Their calculation of US intergenerational income elasticity (the number previously cited as probably between .4 and .6) was .47. But other countries in the study had income elasticity as low as .15 (Denmark), .16 (Australia), .17 (Norway), and .19 (Canada). In each of those countries, the overwhelming majority of wealth is earned by hard work rather than inherited.

The United States, is just particularly bad at this; the American Dream turns out to be the “nearly every developed country except America” Dream. That’s depressing, but don’t try to turn it into a political narrative. Given the government’s incompetence and wastefulness, there’s no reason to think more government regulation and spending could possibly improve social mobility at all.

Studies show that increasing government spending significantly improves social mobility. States with higher government spending have about 33% more social mobility than states with lower spending.

This also helps explain why other First World countries have better social mobility than we do. Poor American children have very few chances to go to Harvard or Yale; poor Canadian children have a much better chance to go to to UToronto or McGill, where most of their tuition is government-subsidized.

5.2: Then perhaps it is true that rich children start out with a major unfair advantage. But this advantage can be overcome. Poor children may have to work harder than rich children to become rich adults, but this is still possible, and so it is still true, in the important sense, that if you are not rich it’s mostly your own fault.

Several years ago, I had an interesting discussion with an evangelical Christian on the ethics of justification by faith. I promise you this will be relevant eventually.

I argued that it is unfair for God to restrict entry to Heaven to Christians alone. After all, 99% of native-born Ecuadorans are Christian, but less than 1% of native born Saudis are same. It follows that the chance of any native-born Ecuadorian of becoming Christian is 99%, and that of any native born Saudi, 1%. So if God judges people by their religion, then within 1% He’s basically just decided it’s free entry for Ecuadorians, but people born in Saudi Arabia can go to hell (literally).

My Christian friend argued that is not so: that there is a great difference between 0% of Saudis and 1% of Saudis. I answered that no, there was a 1% difference. But he said this 1% proves that the Saudis had free will: that even though all the cards were stacked against them, a few rare Saudis could still choose Christianity.

But what does it mean to have free will, if external circumstances can make 99% of people with free will decide one way in Ecuador, and the opposite way in Saudi Arabia?

I do sort of believe in free will, or at least in “free will”. But where my friend’s free will was unidirectional, an arrow pointing from MIND to WORLD, my idea of free will is circular: MIND affects WORLD affects MIND affects WORLD and so on.

Yes, it is ultimately the mind and nothing else that decides whether to accept or reject Islam or Christianity. But it is the world that shapes the mind before it does its accepting or rejecting. A man raised in Saudi Arabia uses a mind forged by Saudi culture to make the decision, and chooses Islam. A woman raised in Ecuador uses a mind forged by Ecuador to make the decision, and chooses Christianity. And so there is no contradiction in the saying that the decision between Islam and Christianity is up entirely to the individual, yet that it is almost entirely culturally determined. For the mind is a box, filled with genes and ideas, and although it is a wonderful magical box that can take things and combine them and forge them into something quite different and unexpected, it is not infinitely magical, and it cannot create out of thin air.

Returning to the question at hand, every poor person has the opportunity to work hard and eventually become rich. Whether that poor person grasps the opportunity comes from that person’s own personality. And that person’s own personality derives eventually from factors outside that person’s control. A clear look at the matter proves it must be so, or else personality would be self-created, like the story of the young man who received a gift of a time machine from a mysterious aged stranger, spent his life exploring past and future, and, in his own age, goes back and gives his time machine to his younger self.

5.2.1: And why is this relevant to politics?

Earlier, I offered a number between .4 and .6 as the proportion of success attributable solely to one’s parents’ social class. This bears on, but does not wholly answer, a related question: what percentage of my success is my own, and what percentage is attributable to society? People have given answers to this question as diverse as (100%, 0%), (50%, 50%), (0%, 100%).

I boldly propose a different sort of answer: (80%, 100%). Most of my success comes from my own hard work, and all of my own hard work comes from external factors.

If all of our success comes from external factors, then it is reasonable to ask that we “pay it forward” by trying to improve the external factors of others, turning them into better people who will be better able to seize the opportunities to succeed. This is a good deal of the justification for the liberal program of redistribution of wealth and government aid to the poor.

5.2.2: This is all very philosophical. Can you give some concrete examples?

Lead poisoning, for example. It’s relatively common among children in poorer areas (about 7% US prevalence) and was even more common before lead paint and leaded gasoline was banned (still >30% in many developing contries).

For every extra ten millionths of a gram per deciliter concentration of lead in their blood, children permanently lose five IQ points; there’s a difference of about ten IQ points among children who grew up in areas with no lead at all, and those who grew up in areas with the highest level of lead currently considered “safe”. Although no studies have been done on severely lead poisoned children from the era of leaded gasoline, they may have lost twenty or more IQ points from chronic lead exposure.

Further, lead also decreases behavioral inhibition, attention, and self-control. For every ten ug/dl lead increase, children were 50% more likely to have recognized behavioral problems. People exposed to higher levels of blood lead as a child were almost 50% more likely to be arrested for criminal behavior as adults (adjusting for confounders).

Economic success requires self-control, intelligence, and attention. It is cruel to blame people for not seizing opportunities to rise above their background when that background has damaged the very organ responsible for seizing opportunities. And this is why government action, despite a chorus of complaints from libertarians, banned lead from most products, a decision which is (controversially) credited with the most significant global drop in crime rates in decades, but which has certainly contributed to social mobility and opportunity for children who would otherwise be too lead-poisoned to succeed.

Lead is an interesting case because it has obvious neurological effects preventing success. The ability of psychologically and socially toxic environments to prevent success is harder to measure but no less real.

If a poor person can’t keep a job solely because she was lead-poisoned from birth until age 16, is it still fair to blame her for her failure? And is it still so unthinkable to take a little bit of money from everyone who was lucky enough to grow up in an area without lead poisoning, and use it to help her and detoxify her neighborhood?

5.3: What is the significance of whether success is personally or environmentally determined?

It provides justification for redistribution of wealth, and for engineering an environment in which more people are able to succeed.

6. Taxation

6.1: Isn’t taxation, the act of taking other people’s money by force, inherently evil?

See the Moral Issues section for a more complete discussion of this point.

6.2: Isn’t progressive taxation, the tendency to tax the rich at higher rates than the poor, unfair?

The most important justification for progressive tax rates is the idea of marginal utility.

This is easier to explain with movie tickets than money. Suppose different people are alloted a different number of non-transferrable movie tickets for a year; some people get only one, other people get ten thousand.

A person with only two movie ticket might love to have one extra ticket. Perhaps she is a huge fan of X-Men, Batman and Superman, and with only two movie ticket she will only be able to see two of the three movies she’s super-excited about this year.

A person with ten movie tickets would get less value from an extra ticket. She can already see the ten movies that year she’s most interested in. If she got an eleventh, she’d use it for a movie she might find a bit enjoyable, but it wouldn’t be one of her favorites.

A person with a hundred movie tickets would get minimal value from an extra ticket. Even if your tickets are free, you’re not likely to go to the movies a hundred times a year. And even if you did, you’d start scraping the bottom of the barrel in terms of watchable films.

A person with a thousand tickets would get practically no value from an extra ticket. At this point,t here’s no way she can go to any more movies. The extra ticket might not have literally zero value – she could burn it for warmth, or write memos on the back of it – but it’s pretty worthless.

So although all movie tickets provide an equal service – seeing one movie – one extra movie ticket represents a different amount of value to the person with two tickets and the person with a thousand tickets. Furthermore, 50% of their movie ticket holdings represent a different value to the person with two tickets and the person with a thousand movie tickets. The person with two tickets loses the ability to watch the second-best film of the year. The person with a thousand tickets still has five hundred tickets left, more than enough to see all the year’s best films, and at worst will have to buy some real memo paper.

Money works similarly to movie tickets. Your first hundred dollars determine whether you live or starve to death. Your next five hundred dollars determine whether you have a roof over your head or you’re freezing out on the street. But by your ten billionth dollar, all you’re doing is buying a slightly larger yacht.

50% of what a person with $10,000 makes is more valuable to her than 50% of what a billionaire makes is to the billionaire.

Progressive taxation is an attempt to tax everyone equally, not by lump sum or by percentage, but by burden. Just as taking extra movie tickets away from the person with a thousand is more fair than taking some away from the person with only two, so we tax the rich at a higher rate because a proportionate amount of money has less marginal value to them.

6.2.1: But the progressive tax system is unfair and perverse. Imagine the tax rate on people making $100,000 or less is 30%, and the tax rate on people making more than $100,000 is 50%. You make $100,000, and end up with after tax income of $70,000. Then one day your boss tells you that you did a good job, and gives you a $1 bonus. Now you make $100,001, but end up with only $50,000.50 after tax income. How is that at all fair?

It’s not, but this isn’t how the tax system works.

What those figures mean is that your first $100,000, no matter how much you earn, is taxed at 30%. Then the money you make after that is taxed at 50%. So if you made $100,001, you would be taxed 30% on the first $100,000 (giving you $70,000), and 50% on the next $1 (giving you $.50), for an after-tax income of $70,000.50. The intuitive progression where someone who makes more money ends up with more after-tax income is preserved.

I know most libertarians don’t make this mistake, and that there are much stronger arguments against progressive taxation, but this has come up enough times that I thought it was worth mentioning, with apologies to those readers whose time it has wasted.

6.3: Taxes are too high.

Too high by what standard?

6.3.1: Too high by historical standards. Thanks to the unstoppable growth of big government, people have to pay more taxes now than ever before.

Actually, income tax rates for people on median income are around the lowest they’ve been in the past seventy-five years I meant for the rich. It’s only tolerable for people on median income because “progressive” governments are squeezing every last dollar out of successful people.

Actually, income tax rates for the rich are around the lowest they’ve been in the past seventy-five years. But I heard that the share of tax revenue coming from the rich is at its highest level ever.

This is true. As the rich get richer and the poor get poorer (see 3.4), more of the money concentrates in the hands of the rich, and so more of the taxes come from the rich as well. This doesn’t contradict the point that the tax rates on the rich are near historic lows. I meant for corporations.

Actually, income tax rates for corporations are around the lowest they’ve been in the past seventy-five years.

6.3.2: I meant income taxes are too high compared to what’s best for the economy, and even best for the Treasury. With taxes as high as they are, people will stop producing, rather than see so much of each dollar they make go to the government. This will hurt the economy and lower tax revenue.

The Laffer curve certainly exists, but the consensus is that we’re still well on the left half of it.

Although it’s become a truism that high tax rates discourage production, studies have found this to be mostly false, with low elasticity of real income – see for example Gruber & Saez and Saez, Slemrod, and Giertz.

What studies have found is a high elasticity of taxable income. That is, raising taxes encourages people to find more tax loopholes, decreasing revenue. However, although this effect means a 10% higher tax rate would lead to less than 10% higher government income, the change in government income would still be positive – even by this stricter criterion, we’re still on the left side of the Laffer curve. And of course, this effect could be eliminated by switching to a flat tax or closing tax loopholes.

6.4: Our current tax system is overzealous in its attempts to redistribute money from the rich to the poor. If instead we lowered taxes on the rich, this money would “trickle down” to the rest of the economy, driving growth. Instead of redistributing the pie, we’d make the pie larger for everyone.

If we’re in an overzealous campaign for “equality” intended to lower the rich to the level of the poor, we’re certainly not doing a very good job of it. Over the past thirty years, the rich have consistently gotten richer. None of this money has trickled down to the poor or middle-class, whose income has remained the same in real terms.

“Trickle-down” should be rejected as an interesting and plausible-sounding economic theory which empirical data have soundly disconfirmed.

6.5: Raising taxes would be useless for the important things like cutting the deficit. The deficit is $1.2 trillion. The most we could realistically raise from extra taxes on the rich would be maybe $200 billion. The most we could raise from insane levels of extra taxes on the rich and middle class would be about $500 billion – less than half the deficit. The real problem is spending.

Yes and no.

The deficit is, indeed, very, very large. It’s so large that no politically palatable option is likely to make more than a small dent in it. This is true of tax increases. It’s also true of spending cuts.

Cutting all redistributive government services for the poor including welfare, unemployment insurance, disability, food stamps, scholarships, you name it – would save about $200 billion. That’s less than 20% of the deficit. Cutting all health care, including Medicaid for senior citizens, would only eliminate $400 billion or so. Even eliminating the entire military down to the last Jeep would only get us $800 billion or so. The targets for cuts that have actually been raised are rounding errors: the Republicans trumpeted an end for government aid to NPR, but this is about $4 million – all of .000003% of the problem.

So “darnit, this one thing doesn’t completely solve the deficit” is not a good reason to reject a proposal. Solving the deficit will, if it’s possible at all, take a lot of different methods, including some unpalatable to liberals, some unpalatable to conservatives, and yes, some unpalatable to libertarians.

In particular, we need to avoid the “bee sting” fallacy, where we have so many problems that we just stop worrying. It would be irresponsible to say that since a few billion dollars doesn’t affect the deficit either way, we might as well just spend $5 billion on some random project we don’t need. For the same reason, it would be irresponsible to say we might as well just renew tax cuts on the rich that cost hundreds of billions of dollars each year.

6.6: Taxes are basically a racket where they take my money and then give it to foreign governments and poor people.

According to a CNN poll, on average Americans estimate that about 10% of our taxes go to foreign aid. The real number is about 0.6%.

And although people believe that food and housing for the poor take up about 20% of the federal budget, the real number is actually less than 5%.

So although people worry that 30% of the budget goes to help the less fortunate, the real number is about 6%.

(And this is actually sort of depressing, when you think about it.)

The majority of your taxes go to programs that benefit you and other middle-class Americans, such as Social Security and Medicare, and to programs that “benefit” you and other middle-class Americans, such as the military.

Part C: Political Issues

The Argument: Government can’t do anything right. Its forays into every field are tinged in failure. Whether it’s trying to create contradictory “state owned businesses”, funding pet projects that end up over budget and useless, or creating burdensome and ridiculous “consumer protection” rules, its heavy-handed actions are always detrimental and usually embarrassing.

With this track record, what sane person would want to involve government in even more industries? The push to get government deeper into health care is a disaster waiting to happen, and could give us a chronically broken system like those in Europe, where people die because of bureaucratic inefficiency.

Other places from which we can profitably eliminate government’s prying hands include our schools, our prisons, our gun dealerships, and the friendly neighborhood meth lab.

The Counterargument: Government sometimes, though by no means always, does things right, and some of its institutions and programs are justifiably considered models of efficiency and human ingenuity. There are various reasons why people are less likely to notice these.

Government-run health systems empirically produce better health outcomes for less money than privately-run health systems for reasons that include economies of scale. There are a mountain of statistics that prove this. Although not every proposal to introduce government into health will necessarily be successful, we would do well to consider emulating more successful systems.

We should think twice about exactly how much government we are willing to remove from our schools, gun dealerships, and meth labs, and run away screaming at the proposal to privatize prisons.

7. Competence of Government

7.1: Government never does anything right.

7.1.1: Okay, fine. But that’s a special case where, given an infinite budget, they were able to accomplish something that private industry had no incentive to try. And to their credit, they did pull it off, but do you have any examples of government succeeding at anything more practical?

Eradicating smallpox and polio globally, and cholera and malaria from their endemic areas in the US. Inventing the computer, mouse, digital camera, and email. Building the information superhighway and the regular superhighway. Delivering clean, practically-free water and cheap on-the-grid electricity across an entire continent. Forcing integration and leading the struggle for civil rights. Setting up the Global Positioning System. Ensuring accurate disaster forecasts for hurricanes, volcanos, and tidal waves. Zero life-savings-destroying bank runs in eighty years. Inventing nuclear power and the game theory necessary to avoid destroying the world with it. All right… all right… but apart from better sanitation and medicine and education and irrigation and public health and roads and a freshwater system and baths and public order… what has the government done for us?

Brought peace. But see also Government Success Stories and The Forgotten Achievements of Government

7.2: Large government projects are always late and over-budget.

The only study on the subject I could find, “What Causes Cost Overrun in Transport Infrastructure Projects?” (download study as .pdf) by Flyvbjerg, Holm, and Buhl, finds no difference in cost overruns between comparable government and private projects, and in fact find one of their two classes of government project (those not associated with a state-owned enterprise) to have a trend toward being more efficient than comparable private projects. They conclude that “…one conclusion is clear…the conventional wisdom, which holds that public ownership is problematic whereas private ownership is a main source of efficiency in curbing cost escalation, is dubious.”

Further, when government cost overruns occur, they are not usually because of corrupt bureaucrats wasting the public’s money. Rather, they’re because politicians don’t believe voters will approve their projects unless they spin them as being much cheaper and faster than the likely reality, leading a predictable and sometimes commendable execution to be condemned as “late and over budget” (download study as .pdf) While it is admittedly a problem that government provides an environment in which politicians have to lie to voters to get a project built, the facts provide little justification for a narrative in which government is incompetent at construction projects.

7.3: State-run companies are always uncreative, unprofitable, and unpleasant to use.

Some of the greatest and most successful companies in the world are or have been state-run. Japan National Railways, which created the legendarily efficient bullet trains, and the BBC, which provides the most respected news coverage in the world as well as a host of popular shows like Doctor Who, both began as state-run corporations (JNR was later privatized).

In cases where state-run corporations are unprofitable, this is often not due to some negative effect of being state-run, but because the corporation was put under state control precisely because it was something so unprofitable no private company would touch it, but still important enough that it had to be done. For example, the US Post Office has a legal mandate to ship affordable mail in a timely fashion to every single god-forsaken town in the United States; obviously it will be out-competed by a private company that can focus on the easiest and most profitable routes, but this does not speak against it. Amtrak exists despite passenger rail travel in the United States being fundamentally unprofitable, but within its limitations it has done a relatively good job: on-time rates better than that of commercial airlines, 80% customer satisfaction rate, and double-digit year-on-year passenger growth every year for the past decade.

7.3.1: State-run companies may be able to paper-push with the best of them, but the government can never be truly innovative. Only the free market can do that. Look at Silicon Valley!

Advances invented either solely or partly by government institutions include, as mentioned before, the computer, mouse, Internet, digital camera, and email. Not to mention radar, the jet engine, satellites, fiber optics, artificial limbs, and nuclear energy. And that doesn’t the less recognizable inventions used mostly in industry, or the scores of other inventions from government-funded universities and hospitals.

Even those inventions that come from corporations often come not from startups exposed to the free market, but from de facto state-owned monopolies. For example, during its fifty years as a state-sanctioned monopoly, the infamous Ma Bell invented (via its Bell Labs division) transistors, modern cryptography, solar cells, the laser, the C programming language, and mobile phones; when the monopoly was broken up, Bell Labs was sold off to Alcatel-Lucent, which after a few years announced it was cutting all funding for basic research to focus on more immediately profitable applications.

Although the media celebrates private companies like Apple as centers of innovation, Apple’s expertise lies, at best, in consumer packaging. They did not invent the computer, the mp3 player, or the mobile phone, but they developed versions of these products that were attractive and easy to use. This is great and they deserve the acclaim and heaps of money they’ve gathered from their success, but let’s make sure to call a spade a spade: they are good at marketing and design, not at brilliant invention of totally new technologies.

That sort of de novo invention seems to come mostly from very large organizations that can afford basic research without an obsession on short-term profitability. Although sometimes large companies like Ma Bell, invention-rich IBM and Xerox can fulfill this role, such organizations are disproportionately governments and state-sponsored companies, explaining their impressive track record in this area.

7.4: Most government programs are expensive failures.

I think this may be a form of media bias – not in the sense that some sinister figure in the media is going through and censoring all the stories that support one side, but in the sense that “Government Program Goes More Or Less As Planned” doesn’t make headlines and so you never hear about it.

Let’s say the government wants to spent $1 million to give food to poor children. If there are bureaucratic squabbles over where the money’s supposed to come from, that’s a headline. If they buy the food at above-market prices, that’s a headline. If some corrupt official manages to give the contract to provide the food to a campaign donor along the way, that’s a big headline.

But what if none of these things happen, and poor children get a million dollars worth of food, and eat it, and it makes them healthier? I don’t know about you, but I’ve never seen a headline about this. “Remember that time last year when Congress voted to give food to poor children. Well, they got it.” What newspaper would ever publish something like that?

This is in addition to newspapers’ desire to outrage people, their desire to sound “edgy” by pointing out the failures of the status quo rather than sounding like they’re “pandering”, and honestly that they’re caught up in the same “government can never do anything right” narrative as everyone else.

Since every single time you ever hear about a government project it is always because that government project is going wrong, of course you feel like all government projects go wrong.

7.4.1: But a specific initiative to get money to the poor is one thing. What about a whole federal agency? We would know if it were failing, but we’d also be able to appreciate it when it succeeds, too.

Federal agencies that are successful sink into background noise, so that we don’t think to thank them or celebrate them any more than we would celebrate that we have clean water (four billion people worldwide don’t; thank the EPA and your local water board)

For example, the Federal Aviation Administration helps keep plane crashes at less than one per 21,000 years of flight time; you never think about this when you get on a plane. The National Crime Information Center collects and processes information about criminals from every police department in the country; you never think about this when you go out without being mugged. Zoning regulations, building codes, and the fire department all help prevent fires from starting and keep them limited when they do; you never think of this when you go the day without your house burning down.

One of government’s major jobs is preventing things, and it’s very hard to notice how many bad things aren’t happening, until someone comes out with a report like e. coli poisoning has dropped by half in the past fifteen years. Even if you do hear the statistics, you may never think to connect them to the stricter food safety laws you wrote a letter to the editor opposing fifteen years ago.

7.4.2: You list cases where government regulation exists at the same time as a happy outcome, like the FAA and the lack of plane crashes, but that doesn’t prove it was the regulation that caused the happy outcome.

No, it doesn’t. For example, although workplace accidents have been cut in half since OSHA was founded, CATO wrote a very credible takedown in which they argue that was only a continuation of trends that have been going on since before OSHA existed.

Sometimes there are things we can do to identify cause. For example, as in the CATO study, we can compare trends before and after changes in government regulation; if there is a discontinuity, it may suggest the government was responsible. Second, we can compare trends in a country where a new regulation was introduced to trends in a country where it was not introduced; if the trend only changes in one country, that suggests an effect of the regulation. For example, after the FAA mandated “terrain awareness systems” in airplanes, the terrain-related accident rate sharply dropped to zero in the United States but was not affected in countries without similar rules.

But the important thing is that we apply our skepticism fairly and evenly: that we do not require mountains of evidence that a government regulation caused a positive result, while accepting that a regulation caused a negative result without a shred of proof.

It is very tempting for libertarians, when faced with anything going well even in a tightly regulated area, to say “Well, that just shows even this tight regulations can’t hide how great private industry is!” and when anything goes wrong even in a very loosely regulated area, to say “Well, that just shows how awful regulation is, that even a little of it can screw things up!” But this is unfair, and ignores that we do have some ways to disentangle cause and effect.

And in any case, there is still the difference between “Government destroys everything it touches” and “Everything government touches is doing pretty well, but you can’t prove that it’s directly caused by government action.”

7.4.3: A lot of what government trumpets as “successful regulation” is just obvious stuff anyway that any individual in a free market would do of her own accord.

Very often, yesterday’s regulation is today’s obvious good idea that no one would dream of ignoring even if there were no regulation demanding it. But that neglects the role of government regulation in establishing social norms. Very often these are the regulations which those being regulated fought tooth and nail against at the time.

Many cars did not even include seatbelts until the government mandated that they do so. In 1983, the seat belt use rate in the United States was 14%. It was very clearly the government sponsored awareness campaigns and, later, mandatory seat belt laws that began being implemented around that era that raised seat belt rates; we know because we can watch the statistics state in different states as their legislation either led the campaign or lagged behind it.

After almost three decades of intense government pressure on automakers to allow and promote seatbelts, and on motorists to use them, seatbelt rates are now as high as 85%.

According to estimates, seatbelts save about 11,000 lives a year in the US. Different studies estimate between 80,000 and 100,000 lives saved in the last decade alone. For some perspective that’s the number of American deaths from 9/11 + the Vietnam War + both Iraq Wars + the Afghanistan War + Hurricane Katrina.

I completely acknowledge that if the government completely dropped all seatbelt regulations tomorrow, automakers would continue putting seatbelts in cars, and drivers would keep wearing them. That doesn’t mean government is useless, that means government, the only entity big enough to effect a nationwide change not just in behaviors but in social norms, did its job very very well.

8. Health Care

8.1: Government would do a terrible job in health care. We should avoid government-run “socialized” medicine unless we want cost overruns, long waiting times, and death panels.

Government-run health systems empirically do better than private health systems, while also costing much less money.

Let’s compare, for example, Sweden, France, Canada, the United Kingdom, and the United States. The first four all have single-payer health care (a version of government-run health system); the last has a mostly private health system (although it shouldn’t matter, we’ll use statistics from before Obamacare took effect). We’ll look at three representative statistics commonly used to measure quality of health care: infant mortality, life expectancy, anc cancer death rate.

Infant mortality is the percent of babies who die in the first few weeks of life, usually a good measure of pediatric and neonatal care. Of the five countries, Sweden has the lowest infant mortality at 2.56 per 1,000 births, followed by France at 3.54, followed by the UK at 4.91, followed by Canada at 5.22, with the United States last at 6.81. (source)

Life expectancy, the average age a person born today can expect to live, is a good measurement of lifelong and geriatric care. Here Sweden is again first at 80.9, France and Canada tied for second at 80.7, the UK next at 79.4, and the United States once again last at 78.3. (source)

Taking cancer deaths per 100,000 people per year as representative of deaths from serious disease, here we find the UK doing best at 253.5 deaths, Sweden second at 268.2, France in third at 286.1, and the United States again in last place at 321.9 deaths (source: OECD statistics; data for Canada not available).

So we notice that the United States does worse than all four countries with single-payer health systems, even though America is wealthier per capita than any of them. This is not statistical cherry-picking: any way you look at it, the United States has one of the least effective health systems in the developed world.

8.2: Government-run health care would be bloated, bureaucratic, and unnecessarily expensive, as opposed to the sleek, efficient service we get from the free market.

Actually, government-run health care is empirically more efficient than market health care. For example, Blue Cross New England employs more people to administer health insurance for its 2.5 million customers than the Canadian health system employs to administer health insurance for 27 million Canadians. Health care spending per person (public + private) in Canada is half what it is in America, yet Canadians have longer life expectancy, lower infant mortality, and are healthier by every objective standard.

Remember those five countries from the last question?
The UK spends $1,675 per person per year on health care. Canada spends $1,939. Sweden, which you’ll remember did best on most of the statistics, spends $2,125. France spends $2,288. Americans spend on average $4,271 – almost three times as much as Britain, a country which delivers better health care.

When this argument gets put in graph form, it becomes even clearer that US health inefficiency is literally off the chart.

If these were companies in the free market, the company that charges three times as much to provide a worse service would have gone bankrupt long ago. That company is American-style private health care.

8.3: In government-run health care, people are relegated to “waiting lists”, where they have to wait months or even years for doctor visits, surgeries, and other procedures. Sometimes people die on these waiting lists. Obviously, this is unacceptable and a knock-down argument against government-run health care.

The laws of supply and demand apply in health care as much as anywhere else: people would like to see doctors as quickly as possible, but doctors are a scarce resource that must be allocated somehow.

In a private system, doctor access is allocated based on money; this has the advantage of incentivizing the production of more doctors and of ensuring that people with enough money can see doctors quickly. These are also its disadvantages: assuming more people want to see a doctor than need to do so, costs will spiral out of control and poor people will have limited or no access.

In a public system, doctor access is allocated based on medical need. Although no one will be turned away from a doctor in an emergency situation, people may have to wait a long amount of time for elective surgeries in order that other sicker people, including poor people who would not be seen at all in a private system, can be seen first.

The relative effectiveness of the two systems can once again be seen in the infant mortality, life expectancy, and cancer survival rate statistics.

8.4: Government-run health care inevitably includes “death panels” who kill off expensive patients in order to save money on health care costs.

The private system as it exists now in America also has bodies that make these kinds of rationing decisions. Health care rationing is not some sinister conspiracy but a reasonable response to limited resources. The complete argument is here, but I can sum up the basics:

Insurance providers, whether they are a government agency or a private corporation, have a finite amount of money; they can only spend money they have. In one insurance company, customers might pay hundred million dollars in fees each year, so the total amount of money the insurance company can spend on all its customers that year is a hundred million dollars. In reality, since it is a business, it wants to make a profit. Let’s say it wants a profit of ten percent. That means the total amount of money it has to spend is ninety million dollars.

But as a simplified example, let’s reduce this to an insurance company with one hundred customers, each of whom pays $1. This insurance company wants 10% profit, so it has $90 to spend (instead of our real company’s $90 million). Seven people on the company’s plan are sick, with seven different diseases, each of which is fatal. Each disease has a cure. The cures cost, in order, $90, $50, $40, $20, $15, $10, and $5.

We are far too nice to ration health care with death panels; therefore, we have decided to give everyone every possible treatment. So when the first person, the one with the $90 disease, comes to us, we gladly spend $90 on their treatment; it would be inhuman to just turn them away. Now we have no money left for anyone else. Six out of seven people die.

The fault here isn’t with the insurance company wanting to make a profit. Even if the insurance company gave up its ten percent profit, it would only have $10 more; enough to save the person with the $10 disease, but five out of seven would still die.

A better tactic would be to turn down the person with the $90 disease. Instead, treat the people with $5, $10, $15, $20, and $40 diseases. You still use only $90, but only two out of seven die. By refusing treatment to the $90 case, you save four lives. This solution can be described as more cost-effective; by spending the same amount of money, you save more people. Even though “cost-effectiveness” is derided in the media as being opposed to the goal of saving lives, it’s actually all about saving lives.

If you don’t know how many people will get sick next year with what diseases, but you assume it will be pretty close to the amount of people who get sick this year, you might make a rule for next year: Treat everyone with diseases that cost $40 or less, but refuse treatment to anyone with diseases that cost $50 or more.

This rule remains true in the case of the $90 million insurance company. In their case, no one patient can use up all the money, but they still run the risk of spending money in a way that is not cost-effective, causing many people to die. Like the small insurance company, they can increase cost-effectiveness by creating a rule that they won’t treat people with diseases that cost more than a certain amount.

So, as one commentator pointed out, “death panels” should be called “life panels”: they aim to maximize the total number of lives that can be saved with a certain limited amount of resources.

8.5: Why is government-run health care so much more effective?.

A lot of it is economies of scale: if the government is ensuring the entire population of a country, it can get much better deals than a couple of small insurance companies. But a lot of it is more complicated, and involves people’s status as irrational consumers of health products. A person sick with cancer doesn’t want to hear a cost-benefit analysis suggesting that the latest cancer treatment is probably not effective. He wants that treatment right now, and the most successful insurance companies and hospitals are the ones that will give it to him. Here’s a good article explaining some of the systematic flaws in the economics of health care under the American system.

It could also be that really good health care and the profit motive don’t mix: studies show that for-profit hospitals are more expensive, and have poorer care (as measured in death rates) than not-for-profit hospitals.

9. Prison Privatization

9.1: Privatized, for-profit prisons would be a great way to save money.

No one likes criminals very much. Even so, most of us agree that even criminals deserve humane conditions. We reject cruel and unusual punishment, and try to keep prisoners relatively warm, clean, and well-fed. This is not only a moral issue, but a practical one: we don’t want prisoners to go insane or suffer breakdowns, because we want them to be able to re-adjust into normal society after they are released.

For-profit prisons have all of the flaws of for-profit companies with none of the advantages. Normal companies want to cut costs wherever possible, but this is balanced by customer satisfaction: if they treat their customers poorly or create a low-quality product, they won’t make money. In prisons, the ability to get new “customers” comes completely uncoupled from the quality of the product they provide. If the government pays them a certain fixed amount per prisoner, the prison’s only way to increase profits is by treating prisoners as shabbily as possible without killing them. Indeed, statistics show that prisoners in private prisons have worse medical care, terrible living conditions, and rates of in-prison violence 150% greater than those in public prisons. Private prisons refuse to collect data on recidivism rates, but a moment’s thought reveals that they have an economic incentive to keep them as high as possible.

But the real dangers lie in the corruptibility of the political process, something with which libertarians are already familiar. Private prisons have been active in lobbying for stricter sentencing guidelines like the Three Strikes Law, which encourages governments to imprison criminals for life. In a country that already imprisons more of its population than any other country in the world, it is extremely dangerous to create a powerful political force whose self-interest lies in imprisoning as many people as possible.

But the most striking example of the danger of private prisons is the case of two judges who received bribes from private prisons to jail innocent people.

If this is the alternative, I’m willing to bite the bullet and accept the overpaid prison guards with annoying unions who dominate the public prisons.

9.2: What? Libertarians don’t actually believe in private prisons!

Fair enough; I got this complaint a few times on the first version and I acknowledge it’s not an integral component of libertarian philosophy. I included it because it seems to stem from the same “government can never do anything right and we should privatize everything” idea that drives a lot of libertarian thinking, and because I really, really don’t like private prisons.

10. Gun Control

10.1: Gun control laws only help criminals, who are not known for following laws in any case, make sure that their victims are unarmed and unable to resist; as such, they increase crime.

The statistics supporting this view seem relatively solid and I agree that attempts to ban or restrict access to guns are a bad idea.

On the other hand, many of the issues surrounding gun control are much less restrictive. For example, some involve restrictions on sales to criminals, “cooldown periods” before purchase, mandatory safety training, et cetera.

Although I haven’t seen any evidence either way on whether these laws are beneficial, they should be evaluated on their own merits rather than as part of a narrative in which all gun laws must be opposed because gun control is bad.

11. Education

11.1: Government sponsored public education is a horrible failure.

Compared to what?

Compared to the period when there wasn’t government-sponsored public education…well, that’s hard to say because of poor statistic-keeping at that time, and how one counts minorities and women, who usually weren’t educated at all back then. The most official statistics (eg NOT the ones you find without citation on libertarian blogs that say literacy was 100% way back when and became abysmal as soon as public schooling started) say that white illiteracy declined from about 11.5% in the mid-1800s to about 0.5% in 1980, and black illiteracy from about 80% to 1.5% over the same period.

Compared to other countries, the US does relatively poorly considering its wealth, but all the other countries that do better than the US also have government-sponsored public education, sometimes to a much greater degree than we do.

Compared to private schools, public schools actually do better once confounders like race, class, and income have been adjusted out of the analysis.

(Yes, without such adjustment private schools do better – but considering that private schools cater towards wealthy students – who usually do better in school – and often have selective admission policies in which they only take students who are already pretty smart – whereas public schools have to take everyone including dumb kids, kids with learning disabilities, and kids from broken families in ghettos – such unadjusted data is meaningless. It’s the equivalent of noting that the doctor who specializes in acne has fewer patients die than the doctor who specializes in cancer: it’s not that she’s a better doctor, just that she only takes cases who are pretty healthy already.)

Our educational system certainly has immense room for improvement. But the country that consistently tops world education rankings, Finland, has zero private schools (even all the universities are public) and no “school choice”. What it does have is extremely well-credentialed, highly paid teachers (and, unfortunately, an ethnically homogenous population without any dire poverty or broken families, which probably counts for a heck of a lot more than anything else). So whatever America’s specific failures or successes, the mere existence of public education is not a credible scapegoat.

11.2: Why not dismantle the public education system and have a voucher system that offers parents free choice over where to send their kids?

I think this idea has merit, and that we should at least experiment with it and see if it works. That having been said, I do see one huge caveat.

Libertarians tend not to believe in equality of results – they think it’s okay if more skilled people are more successful – but one of the qualities I most admire about them is that they usually do believe in equality of opportunity: that everyone gets an equal chance at life. I mentioned before how inheriting money from your parents can complicate that, but it would be ethically complicated to try and “solve” that problem, so it might be the sort of thing we just have to live with.

But imagine if your parents chose where to send you for school. Even if we somehow eliminated the cost issue by making everyone accept a school voucher of equal value, clever parents would compare the pros and cons of various schools and send their child to the best one. Not-so-clever parents would get fooled by TV commercials with sexy celebrities and send their kids to terrible schools. Super religious parents would send their kids to schools that taught only religious education and shunned math and science and history as the evil trappings of the secular world. Muslim parents would send their kids to madrassas. Immigrant parents might send their kids to Spanish-only schools so that they didn’t drift too far away from their families. Parents with strong political beliefs could send their kids to schools that did their best to brainwash their kids into having the same beliefs as them.

And there would be kids who succeeded in spite of all this, who made it through twelve years of constant brainwashing and ignorance, and somehow managed to become intelligent adults who could learn all the education they missed during their free time. But statistically, there wouldn’t be very many of them, any more than there were a bunch of Christians in Saudi Arabia in the example a few pages back.

Right now, parents can screw up lots of facets of a kid’s life, but they can only do so much to screw up their education. And I have this vague hope that maybe a kid with horrible parents, if she was exposed to decent people and a free exchange of ideas in school might be able to use that brief period of respite to gain a foothold on sanity.

So what I’m saying is, if there were school choice, if we wanted to protect equality of opportunity and childrens’ rights, we’d probably have to regulate the heck out of them, which to some degree would defeat the point.

11.3: I don’t believe the government should be in the business of “protecting” children from their parents.

You should. It’s a pretty important business, even if you subscribe to libertarian assumptions. Even libertarians tend to agree that the government should generally be protecting people from slavery and from the use of force.

Children are basically slaves to their parents for the first ten to fifteen years of their lives, and parents have a special social permission to use force against their children.

In the best possible case, this is an incredibly silly metaphor and one no one would ever even think about. In the worst possible case, it’s completely and literally true.

I have met people with horrible parents. The first eighteen years (or less, if they were able to get themselves legally emancipated early) of their lives were a living hell. These are people who literally have control of every single thing you do, from whether you can eat dinner to who you are allowed to make friends with to what church you go to to what opinions you can express to whether you’re allowed to sleep at night. They are people who can torture and beat you to within an inch of your life, and maybe a social worker will take you away for a few months, and then that social worker will probably return you right back to them. And if it’s just emotional torture, you can forget about even getting the social worker.

And obviously the parent-child relationship is a healthy one in 99% of cases, and child-rearing has been around since deep prehistoric time, and we would be idiots to mess with it, and no one wants a dystopia where the government takes kids from their parents and raises them in a commune or whatever.

But unless you think rights and morality only start existing on someone’s eighteenth birthday, if if there were one form of government intervention that even libertarians should be able to get behind, it would be protecting children from their parents, in the rare few cases where this is necessary.

Part D: Moral Issues

The Argument: Moral actions are those which do not initiate force and which respect people’s natural rights. Government is entirely on force, making it fundamentally immoral. Taxation is essentially theft, and dictating the conditions under which people may work (or not work) via regulation is essentially slavery. Many government programs violate people’s rights, especially their right to property, and so should be opposed as fundamentally immoral regardless of whether or not they “work”.

The Counterargument: Moral systems based only on avoiding force and respecting rights are incomplete, inelegant, counterintuitive, and usually riddled with logical fallacies. A more sophisticated moral system, consequentialism, generates the principles of natural rights and non-initiation of violence as heuristics that can be used to solve coordination problems, but also details under what situations such heuristics no longer apply. Many cases of government intervention are such situations, and so may be moral.

12. Moral Systems

12.1: Freedom is incredibly important to human happiness, a precondition for human virtue, and a value almost everyone holds dear. People who have it die to protect it, and people who don’t have it cross oceans or lead revolutions in order to gain it. But government policies all infringe upon freedom. How can you possibly support this?

Freedom is one good among many, albeit an especially important one.

In addition to freedom, we value things like happiness, health, prosperity, friends, family, love, knowledge, art, and justice. Sometimes we have to trade off one of these goods against another. For example, a witness who has seen her brother commit a crime may have to decide between family and justice when deciding whether to testify. A student who likes both music and biology may have to decide between art and knowledge when choosing a career. A food-lover who becomes overweight may have to decide between happiness and health when deciding whether to start a diet.

People sometimes act as if there is some hierarchy to these goods, such that Good A always trumps Good B. But in practice people don’t act this way. For example, someone might say “Friendship is worth more than any amount of money to me.” But she might continue working a job to gain money, instead of quitting in order to spend more time with her friends. And if you offered her $10 million to miss a friend’s birthday party, it’s a rare person indeed who would say no.

In reality, people value these goods the same way they value every good in a market economy: in comparison with other goods. If you get the option to spend more time with your friends at the cost of some amount of money, you’ll either take it or leave it. We can then work backward from your choice to determine how much you really value friendship relative to money. Just as we can learn how much you value steel by learning how many tons of steel we can trade for how many barrels of oil, how many heads of cabbages, or (most commonly) how many dollars, so we can learn how much you value friendship by seeing when you prefer it to opportunities to make money, or see great works of art, or stay healthy, or become famous.

Freedom is a good much like these other goods. Because it is so important to human happiness and virtue, we can expect people to value it very highly.

But they do not value it infinitely highly. Anyone who valued freedom from government regulation infinitely highly would move to whichever state has the most lax regulations (Montana? New Hampshire?), or go live on a platform in the middle of the ocean where there is no government, or donate literally all their money to libertarian charities or candidates on the tiny chance that it would effect a change.

Most people do not do so, and we understand why. People do not move to Montana because they value aspects of their life in non-Montana places – like their friends and families and nice high paying jobs and not getting eaten by bears – more than they value the small amount of extra freedom they could gain in Montana. Most people do not live on a platform in the middle of the ocean because they value aspects of living on land – like being around other people and being safe – more than they value the rather large amount of extra freedom the platform would give them. And most people do not donate literally all their money to libertarian charities because they like having money for other things.

So we value freedom a finite amount. There are trade-offs of a certain amount of freedom for a certain amount of other goods that we already accept. It may be that there are other such trade-offs we would also accept, if we were offered them.

For example, suppose the government is considering a regulation to ban dumping mercury into the local river. This is a trade-off: I lose a certain amount of freedom in exchange for a certain amount of health. In particular, I lose the freedom to dump mercury into the river in exchange for the health benefits of not drinking poisoned water.

But I don’t really care that much about the freedom to dump mercury into the river, and I care a lot about the health benefits of not drinking poisoned water. So this seems like a pretty good trade-off.

And this generalizes to an answer to the original question. I completely agree freedom is an extremely important good, maybe the most important. I don’t agree it’s an infinitely important good, so I’m willing to consider trade-offs that sacrifice a small amount of freedom for a large amount of something else I consider valuable. Even the simplest laws, like laws against stealing, are of this nature (I trade my “freedom” to steal, which I don’t care much about, in exchange for all the advantages of an economic system based on private property).

The arguments above are all attempts to show that some of the trade-offs proposed in modern politics are worthwhile: they give us enough other goods to justify losing a relatively insignificant “freedom” like the freedom to dump mercury into the river.

12.1.1: But didn’t Benjamin Franklin say that those who would trade freedom for security deserve neither?

No, he said that those who would trade essential liberty for temporary security deserved neither. Dumping mercury into the river hardly seems like essential liberty. And when Franklin was at the Constitutional Convention he agreed to replace the minimal government of the Articles of Confederation with a much stronger centralized government just like everyone else.

12.2: Taxation is theft. And when the government forces you to work under their rules, for the amount of money they say you can earn, that’s slavery. Surely you’re not in favor of theft and slavery.

Consider the argument “How can we have a holiday celebrating Martin Luther King? After all, he was a criminal!”

Technically, Martin Luther King was a criminal, in that he broke some laws against public protests that the racist South had quickly enacted to get rid of him. It’s why he famously spent time in Birmingham Jail.

And although “criminal” is a very negative-sounding and emotionally charged word, in this case we have to step back from our immediate emotional reaction and notice that the ways in which Martin Luther King was a criminal don’t make him a worse person.

A philosopher might say we’re equivocating between two meanings of “criminal”, one meaning of “person who breaks the law”, and another meaning of “horrible evil person.” Just because King satisfies the first meaning (he broke the law) doesn’t mean he has to satisfy the second (be horrible and evil).

Or consider the similar argument: “Ayn Rand fled the totalitarian Soviet Union to look for freedom in America. That makes her a traitor!” Should we go around shouting at Objectivists “How can you admire Ayn Rand when she was a dirty rotten traitor“?

No. Once again, although “traitor” normally has an automatic negative connotation, we should avoid instantly judging things by the words we can apply to them, and start looking at whether the negative feelings are deserved.

Or once again the philosopher would say we should avoid equivocating between “traitor” meaning “someone who switches sides from one country to an opposing country” and “horrible evil untrustworthy person.”

Our language contains a lot of words like these which package a description with a moral judgment. For example, “murderer” (think of pacifists screaming it at soldiers, who do fit the technical definition “someone who kills someone else”), “greedy” (all corporations are “greedy” if you mean they would very much like to have more money, but politicians talking about “greedy corporations” manage to transform it into something else entirely) and of course that old stand-by “infidel”, which sounds like sufficient reason to hate a member of another religion, when in fact it simply means a member of another religion. It’s a stupid, cheap trick unworthy of anyone interested in serious rational discussion.

And calling taxation “theft” is exactly the same sort of trick. What’s theft? It’s taking something without permission. So it’s true that taxation is theft, but if you just mean it involves taking without permission, then everyone from Lew Rockwell up to the head of the IRS already accepts that as a given.

This only sounds like an argument because the person who uses it is hoping people will let their automatic negative reaction to theft override their emotions, hoping they will equivocate from theft as “taking without permission” to “theft as a terrible act worthy only of criminals”.

Real arguments aren’t about what words you can apply to things and how nasty they sound, real arguments about what good or bad consequences those things produce.

12.3: Government actions tend to involve the initiation of force against innocent people. Isn’t that morally wrong?

Why should it be morally wrong?

12.3.1: Because the initiation of force always has bad consequences, like ruining the economy or making people unhappy.

Sometimes it does. Other times it has good consequences.

Take cases like the fish farming, boycott, and charity scenarios above. There the use of force to solve the coordination problem meets an extraordinarily strict set of criteria: not only does it benefit the group as a whole, not only does it benefit every single individual in the group, but every single individual in the group knows that it benefits them and endorses that benefit (eg would vote for it).

In other cases, such as the retirement savings example above, the use of force meets only a less strict set of criteria: it benefits the group as a whole, it benefits every single individual in the group, but not every individual in the group necessarily knows that it benefits them or endorses that benefit. These are the cases libertarians might call “paternalism”.

Still more cases satisfy an even looser criterion. They benefit the group as a whole, but they might not benefit every single individual in the group, and might harm some of them. These are the cases that libertarians might call “robbing Peter to pay Paul”.

All three of these sets of cases belie the idea that the use of force must on net have bad consequences.

12.3.2: Okay, maybe it’s wrong because some moral theory that’s not about consequences tells me it’s wrong.

If your moral theory doesn’t involve any consequences, why follow it? It seems sort of like an arbitrary collection of rules you like.

The Jews believe that God has commanded them not to murder. They also believe God has commanded them not to start fires on Saturdays. Jews who lose their belief in God usually continue not to murder, but stop worrying about whether or not they light fires on Saturdays. Likewise, evangelical Christians believe stealing is a sin, and that homosexuality is also a sin. If they de-convert and become atheists, most of them will still oppose stealing, but most will stop worrying about homosexuality. Why?

Killing and stealing both have bad consequences; in fact, that seems to be the essence of why they’re wrong. Fires on Saturday and homosexuality don’t hurt anybody else, but killing and stealing do.

Why are consequences to other people seems such a specially relevant category? The argument is actually itself pretty libertarian. I can do whatever I want with my own life, which includes following religious or personal taboos. Other people can do whatever they want with their own lives too. The stuff that matters – the stuff where we have to draw a line in the sand and say “Nope, this is moral and this is immoral, doesn’t matter what you think” is because it has some consequence in the real world like hurting other people. I was always taught that the essence of morality was the Principle of Non-Aggression: no one should ever initiate force, except in self-defense. What exactly is wrong with this theory?

At least two things. First, once you disentangle it from the respect it gets as the Traditional Culturally Approved Ground Of Morality, the actual rational arguments for it as a principle are surprisingly weak. Second, in order to do anything practical with it you need such a mass of exceptions and counter-exceptions and stretches that one starts to wonder whether it’s doing any philosophical work at all; it becomes a convenient hook upon which to hang our pre-existing prejudices rather than a useful principle for solving novel moral dilemmas. What do you mean by saying that the rational arguments for the Principle of Non-Aggression are weak?

There are dozens of slightly different versions of these arguments, and I don’t want to get into all of them here, so I’ll concentrate on the most common.

Some people try to derive the Principle of Non-Aggression from self-ownership. But this is circular reasoning: the form of “private property” you need to own anything, including your self/body, is a very complicated concept and one that requires some form of morality in order to justify; you can’t use your idea of private property as a justification for morality. Although it’s obvious that in some sense you are your body, there’s no way to go from here to “And therefore the proper philosophical relationship between you and your body is the concept of property exactly as it existed in the 17th century British legal system.”

This also falls afoul of the famous is-ought dichotomy, the insight that just because something is true doesn’t mean it should be true. Just because we notice some factual relationship between yourself and your body doesn’t mean that relationship between yourself and your body is good or important or needs to be protected in laws. We might eventually decide it should be (and hopefully we will!) but we need to have other values in order to come to that decision; we can’t use the decision as a basis for our values.

The self-ownership argument then goes from this questionable assumption to other even more questionable ones. If you use your body to pick fruit, that fruit becomes yours, even though you didn’t make it. If you use your body to land on Tristan de Cunha and plant a flag there and maybe pick some coconuts, that makes Tristan de Cunha and everything on your property and that of your heirs forever, even though you definitely didn’t make the island. And if someone else lands on Tristan de Cunha the day after you, you by right control every facet of their life on the island and they have to do whatever you say or else leave. There are good arguments for why some of these things make economic sense, but they’re all practical arguments, not moral ones positing a necessary relationship.

Oddly enough, although apparently your having a body does license you to declare yourself Duke of Tristan de Cunha, it doesn’t license you to use your fist to punch your enemy in the gut, or use your legs to walk across a forest someone else has said they claim, even though your ability to move your hand rapidly in the direction of your enemy’s abdomen, or your feet along a forest path, seems like a much more fundamental application of your body than taking over an island.

All of these rules about claiming islands and not punching people you don’t like and so on are potentially good rules, but trying to derive them just from the fact that you have a body starts to seem a bit hokey. What do you mean by saying that the Non-Aggression Principle requires so many exceptions and counter-exceptions that it becomes useless except as a hook upon which to hang prejudices we from other sources?

First, the principle only even slightly makes sense by defining “force” in a weird way. The NAP’s definition of “force” includes walking into your neighbor’s unlocked garden when your neighbor isn’t home and picking one of her apples. It includes signing a contract promising to deliver a barrel of potatoes, but then not delivering the potatoes when the time comes. Once again, I agree these are bad things that we need rules against. But it takes quite an imagination to classify them under “force”, or as deriving from the fact that you have a body. This is a good start to explaining what I mean when I say that people claim that they’re using the very simple-sounding “no initiation of force” principle but are actually following a more complicated and less justified “no things that seem bad to me even though I can’t explain why”.

Second, even most libertarians agree it can be moral to initiate force in certain settings. For example, if the country is under threat from a foreign invader or from internal criminals, most libertarians agree that it is moral to levy a small amount of taxation to support an army or police force that restores order. Again, this is a very good idea – but also a blatant violation of the Non-Aggression Principle. When libertarians accept the initiation of force to levy taxes for the police, but protest that initiating force is always wrong when someone tries to levy taxes for welfare programs, it reinforces my worry that the Non-Aggression Principle is something people claim to follow while actually following their own “no things that seem bad to me even though I can’t explain why, but things that seem good to me are okay” principle.

(I acknowledge that some libertarians take a stand against taxes for the military and the police. I admire their consistency even while I think their proposed policies would be a disaster.)

Third, when push comes to shove the Non-Aggression Principle just isn’t strong enough to solve hard problems. It usually results in a bunch of people claiming conflicting rights and judges just having to go with whatever seems intuitively best to them.

For example, a person has the right to live where he or she wants, because he or she has “a right to personal self-determination”. Unless that person is a child, in which case the child has to live where his or her parents say, because…um…the parents have “a right to their child” that trumps the child’s “right to personal self-determination”. But what if the parents are evil and abusive and lock the child in a fetid closet with no food for two weeks? Then maybe the authorities can take the child away because…um…the child’s “right to decent conditions” trumps the parents’ “right to their child” even though the latter trumps the child’s “right to personal self-determination”? Or maybe they can’t, because there shouldn’t even be authorities of that sort? Hard to tell.

Another example. I can build an ugly shed on my property, because I have a “right to control my property”, even though the sight of the shed leaves my property and irritates my neighbor; my neighbor has no “right not to be irritated”. Maybe I can build a ten million decibel noise-making machine on my property, but maybe not, because the noise will leave my property and disturbs neighbor; my “right to control my property” might or might not trump my neighbor’s “right not to be disturbed”, even though disturbed and irritated are synonyms. I definitely can’t detonate a nuclear warhead on my property, because the blast wave will leave my property and incinerates my neighbor, and my neighbor apparently does have a “right not to be incinerated”.

If you’ve ever seen people working within our current moral system trying to solve issues like these, you quickly realize that not only are they making it up as they go along based on a series of ad hoc rules, but they’re so used to doing so that they no longer realize that this is undesirable or a shoddy way to handle ethics.

12.4: Is there a better option than the Non-Aggression Principle?

Yes. It’s consequentialism, the principle that it is moral to do whatever has, on net, the best consequences. This is about equivalent to saying “to do whatever makes the world a better place”. It’s the principle we’ve been using implicitly throughout this FAQ and the principle most people use implicitly throughout their lives.

It’s also the principle that drives capitalism, where people are able to create incredible businesses and innovations because they are trying to do whatever has the best financial consequences for themselves. Consequentialism just takes that insight and says that instead of just doing it with money, let’s do it with everything we value.

12.4.1: Best consequences according to whom?

Well, if you’re the one making the moral decision, then best consequences according to you. All it’s saying is that your morality should be a reflection of your value system and your belief in a better world. Your job as a moral agent is to try to make the world a better place by whatever your definition of “better place” might be.

Sticking to the capitalism analogy, consumerism “tells you” (not that you need to be told) to get whatever goods you value most. Consequentialism does the same, but tells you to try to get the collection of abstract moral goods you value the most.

But remember our discussion of trade-offs above. Most people value many different moral goods, and you are no exception. If you’re trying to make the world a better place, you should be thinking about your relative valuation of all these goods and what trade-offs you are willing to make.

12.4.2: Best consequences for me, or best consequences for everyone?

Again, this is your decision. If you’re completely selfish, then consequentialism tells you to seek out the best consequences for yourself. This probably wouldn’t mean being a libertarian – thankless activism for an unpopular political position is really a terrible way to go about looking out for Number One. It would probably mean cheating off the government – either in the form of welfare abuse if you’re poor and lazy, or in the form of crony capitalism if you’re rich and ambitious. As icing on the cake, make sure to become a sanctimonious and hypocritical liberal, as it’s a great way to become popular and get invited to all the fancy parties.

But if you care about people other than yourself, consequentialism tells you to seek out the best consequences for the people you care about (which could be anything from your family to your country to the world). This could involve political activism, and it could even involve political activism in favor of libertarianism if you think it’s the best system of government.

Alternately, it could justify trying to start a government, if there’s no government yet and you think a world with government would be better for the people you care about than one without it.

Most of the rest of this section will be assuming you do in fact care for other people at least a little.

12.4.3: Since many people probably want different things and care about different people, don’t we end out in a huge war of all against all until either everyone is dead or one guy is dictator?

Would that be a good consequence? If not, people who try to promote good consequences and make the world a better place would try to avoid it.

Because this world of violence and competition is so obviously a bad consequence, any consequentialist who gives it a moment’s thought agrees not to start a huge war of all against all that ends with everyone dead or one guy as dictator by binding themselves by moral rules whenever binding themselves by those moral rules seems like it would have good consequences or make the world a better place; see Section 13 for more.

12.4.4: Doesn’t that sound a lot like “the ends justify the means”? Wouldn’t it lead to decadence, slavery, or some other dystopia?

Once again, if you consider dictatorship, slavery, and dystopia to be bad consequences, then by definition following this rule is the best way to avoid doing that.

The rule isn’t “do whatever sounds like it would have the best consequences if you have an IQ of 20 and refuse to think about it for even five seconds”, it’s “do what would actually have the best consequences. Sometimes this involves admitting human ignorance and fallibility and not pursuing every hare-brained idea that comes into your head.

12.4.5: Okay, okay, I understand that if people did what actually had good consequences it would have good consequences, but I worry that if people do what they think has good consequences, it will lead to violence and dictatorship and dystopia and all those other things you mentioned above.

Yes, I agree this is an important distinction. There are two uses for a moral system. The first is to define what morality is. The second is to give people a useful tool for choosing what to do in moral dilemmas. I am arguing that consequentialism does the first. I don’t think it does the second right out of the box.

To try a metaphor, doctors sometimes have two ways of defining disease; the gold standard and the clinical standard. The gold standard is the “perfect” test for the disease; for example, in Alzheimers disease, it’s to autopsy the brain after the person has died and see if it has certain features under the microscope. Obviously you can’t autopsy a person who’s still alive, so when doctors are actually trying to diagnose Alzheimers they use a more practical method, like how well the person does on a memory test.

Right now I’m arguing that consequentialism is the gold standard for morality: it’s the purest, most sophisticated explanation of what morality actually is. At the same time, it might be a terrible idea to make your everyday decisions based on it, just as it’s a terrible idea to diagnose Alzheimers with an autopsy in someone who’s still alive.

However, once we know that consequentialism is the gold standard for morality, we can start designing our clinical standards by trying to figure out which “clinical standard” for morality will produce the best consequences. See Section 13 for more.

12.4.6: I still am not completely on board with consequentialism, or I’m not sure I understand it.

For more information on consequentialism, see the sister document to this FAQ, the Consequentialism FAQ.

13. Rights and Heuristics

13.1: Is there a moral justification for rights, like the right to free speech or the right to property?

Yes. Rights are the “clinical standard” for morality, the one we use to make our everyday decisions after we acknowledge that pure consequentialism might not lead to the best consequences when used by fallible humans.

In this conception, rights are conclusions rather than premises. They are heuristics (heuristic = a rule-of-thumb that usually but not always works) for remembering what sorts of things usually have good or bad consequences, a distillation of moral wisdom that is often more trustworthy than morally fallible humans.

For example, trying to tell people what religions they can or can’t follow almost always has bad consequences. At best, people are miserable because they’re being forced to follow a faith they don’t believe in. At worst, they resist and then you get Inquisitions and Holy Wars and everyone ends up dead. Restriction of religion causing bad consequences is sufficiently predictable that we generalize it into a hard and fast rule, and call that rule something like the “right to freedom of religion”.

Other things like banning criticism of the government, trying to prevent people from owning guns, and seizing people’s property willy-nilly also work like this, so we call those “rights” too.

13.2: So if you think that violating rights will have good consequences, then it’s totally okay, right?

It’s not quite so simple. Rights are not just codifications of the insight that certain actions lead to bad consequences, they’re codifications of the insight that certain actions lead to bad consequences in ways that people consistently fail to predict or appreciate.

All throughout history, various despots and princes have thought “You know, the last hundred times someone tried to restrict freedom of religion, it went badly. Luckily, my religion happens to be the One True Religion, and I’m totally sure of this, and everyone else will eventually realize this and fall in line, so my plan to restrict freedom of religion will work great!”

Every revolution starts with an optimist who says “All previous attempts to kill a bunch of people and seize control of the state have failed to produce a utopia, but luckily my plan is much better and we’re totally going to get to utopia this time.” Or, as Huxley put it: “Only one more indispensable massacre of Capitalists or Communists or Fascists and there we are – there we are – in the Golden Future.”

So another way to put it is that rights don’t just say “Doing X has been observed to have bad consequences”, but also “Doing X has been observed to have bad consequences, even when smart people are quite certain it will have good consequences.”

13.3: Then even though you got to rights by a different route than the libertarians, it sounds like you agree with them that they’re inalienable.

It’s not as simple as that either. Every so often, the conventional wisdom is wrong. So many lunatics and crackpots spent their lives trying to turn lead into gold that it became a classic metaphor for a foolish wild goose chase. The rule “stop trying to transmute elements into each other, it never works” was no doubt a good and wise rule. If more would-be alchemists had trusted this conventional wisdom, and fewer had thought “No, even though everyone else has failed, I will be the one to discover transmutation”, it would have prevented a lot of wasted lives.

…and then we discovered nuclear physics, which is all about transmuting elements into one another, and which works very well and is a vital source of power. And yes, nuclear physicists at Berkeley successfully used a giant particle accelerator to turn lead into gold, although it only works a few atoms at a time and isn’t commercially viable.

The point is, the heuristic that you shouldn’t waste your life studying transmutation was a good one and very well-justified at the time, but if we had elevated it into a timeless and unbreakable principle, we never would have been able to abandon it after we learned more about nuclear physics and trying to transmute things was no longer so foolish.

Rights are a warning sign that we should not naively expect breaking them to have good consequences. In order to claim even the possibility of good consequences from violating a right, we need to be at least as far away from the actions they were meant to prevent as nuclear physics is to alchemy.

13.3.1: Can you give an example of a chain of reasoning where some government violation of a right is so radically different from the situation that led the right to exist in the first place?

Let’s take for example the right that probably dominates discussions between libertarians and non-libertarians: the right to property. On the individual scale, taking someone else’s property makes them very unhappy, as you know if you’ve ever had your bike stolen. On the larger scale, abandoning belief in private property has disastrous results for an entire society, as the experiences of China and the Soviet Union proved so conclusively. So it’s safe to say there’s a right to private property.

Is it ever acceptable to violate that right? In the classic novel Les Miserables, Jean Valjean’s family is trapped in bitter poverty in 19th century France, and his nephew is slowly starving to death. Jean steals a loaf of bread from a rich man who has more than enough, in order to save his nephew’s life. This is a classic moral dilemma: is theft acceptable in this instance?

We can argue both sides. A proponent might say that the good consequences to Jean and his family were very great – his nephew’s life was saved – and the bad consequences to the rich man were comparatively small – he probably has so much food that he didn’t even miss it, and if he did he could just send his servant to the bakery to get another one. So on net the theft led to good consequences.

The other side would be that once we let people decide whether or not to steal things, we are on a slippery slope. What if we move from 19th century France to 21st century America, and I’m not exactly starving to death but I really want a PlayStation? And my rich neighbor owns like five PlayStations and there’s no reason he couldn’t just go to the store and buy another. Is it morally acceptable for me to steal one of his PlayStations? The same argument that applied in Jean Valjean’s case above seems to suggest that it is – but it’s easy to see how we go from there to everyone stealing everyone’s stuff, private property becoming impossible, and civilization collapsing. That doesn’t sound like a very good consequence at all.

If everyone violates moral heuristics whenever they personally think it’s a good idea, civilization collapses. If no one ever violates moral heuristics, Jean Valjean’s nephew starves to death for the sake of a piece of bread the rich man never would have missed.

We need to bind society by moral heuristics, but also have some procedure in place so that we can suspend them in cases where we’re exceptionally sure of ourselves without civilization instantly collapsing. Ideally, this procedure should include lots of checks and balances, to make sure no one person can act on her own accord. It should reflect the opinions of the majority of people in society, either directly or indirectly. It should have access to the best minds available, who can predict whether violating a heuristic will be worth the risk in this particular case.

Thus far, the human race’s best solution to this problem has been governments. Governments provide a method to systematically violate heuristics in a particular area where it is necessary to do so without leading to the complete collapse of civilization.

If there was no government, I, in Jean Valjean’s situation, absolutely would steal that loaf of bread to save my nephew’s life. Since there is a government, the government can set a certain constant amount of theft per year, distribute the theft fairly among people whom it knows can bear the burden, and then feed starving children and do other nice things. The ethical question of “is it ethical for me to steal/kill/stab in this instance?” goes away, and society can be peaceful and stable.

13.3.2: So you’re saying that you think in this case violating the right will have good consequences. But you just agreed that even when people think this, violating the right usually has bad consequences.

Yes, I admit it’s complicated. But we have to have some procedures for violating moral heuristics, or else we can’t tax to support a police force, we can’t fight wars, we can’t lie to a murderer who asks us where our friend is so he can go kill her when he finds her, and so on.

The standard I find most reasonable is when it’s universalizable and it avoids the issue that caused us to develop the heuristic in the first place.

By universalizable, I mean that it’s more complicated than me just deciding “Okay, I’m going to steal from this guy now”. There has to be an agreed-upon procedure where everyone gets input, and we need to have verified empirically that this procedure usually leads to good results.

And is has to avoid the issue that caused us to develop the heuristic. In the case of stealing, this is that theft makes property impossible or at least impractical, no one bothers doing work because it will all be stolen from them anyway, and so civilization collapses.

In the case of theft, taxation requires authorization by a process that most of us endorse (the government set up by the Constitution) and into which we all get some input via representative democracy. It doesn’t cause civilization to collapse because it only takes a small and extremely predictable amount from each person. And it’s been empirically verified to work: as I argued above, countries with higher tax rates like Scandinavia actually are nicer places to live than countries with lower tax rates like the United States. So we’ve successfully side-stepped the insight that stealing usually has bad consequences, even though we recognize that the insight remains true.

13.4: Governments will inevitably make mistakes when deciding when to violate moral heuristics. Those mistakes will cost money and even lives.

And the policy of never, ever doing anything will never be a mistake?

It’s very easy for governments to make devastating mistakes. For example, many people believe the US government’s War in Iraq did little more than devastate the country, kill hundreds of thousands of Iraqis, and replace Saddam with a weak government unable to stand up to extremist ayatollahs.

But the other solution – never intervening in a foreign country at all – didn’t work so well either. Just look at Holocaust-era Germany, or 1990s Rwanda.

Why, exactly, should moral questions be simple?

There is a certain tradition that the moral course of action is something anyone, from the high priest unto the youngest child, can find simply by looking deep in his heart. Anyone who does not find it in his heart is welcome to check the nearest Giant Stone Tablet, upon which are written infallible rules that can guide him through any situation. Intelligence has nothing to do with it. It should be blindingly obvious, and anyone who claims it has a smidgen of difficulty or vagueness is probably an agent of the Dark Lord, trying to seduce you from the True Path with his lies.

And so it is tempting to want to have some really easy principle like “Never get involved in a foreign war” and say it can never lead you wrong. It makes you feel all good and warm and fuzzy and moral and not at all like those evil people who don’t have strong principles. But real life isn’t that simple. If you get involved in the wrong foreign war, millions of people die. And if you don’t get involved in the right foreign war, millions of people also die.

So you need to have good judgment if you want to save lives and do the right thing. You can’t get a perfect score in morality simply by abdicating all responsibility. Part of the difficult questions that all of us non-libertarians have been working on is how to get a government that’s good at answering those sorts of questions correctly.

13.5: No, there’s a difference. When you enter a foreign war, you’re killing lots of people. When you don’t enter a foreign war, people may die, but it’s not your job to save them. The government’s job is only to protect people and property from force, not to protect people from the general unfairness of life.

Who died and made you the guy who decides what the government’s job is? Or, less facetiously: on what rational grounds are you making that decision?

Currently, several trillion dollars are being spent to prevent terrorism. This seems to fall within the area of what libertarians would consider a legitimate duty of government, since terrorists are people who initiate force and threaten our safety and the government needs to stop this. However, terrorists only kill an average of a few dozen Americans per year.

Much less money is being spent on preventing cardiovascular disease, even though cardiovascular disease kills 800,000 Americans per year.

Let us say, as seems plausible, that the government can choose to spend its money either on fighting terrorists, or on fighting CVD. And let us say that by spending its money on fighting terrorists, it saves 40 lives, and by spending the same amount of money on fighting CVD, it saves 40,000 lives.

All of these lives, presumably, are equally valuable. So there is literally no benefit to spending the money on fighting terrorism rather than CVD. All you are doing is throwing away 39,960 lives on an obscure matter of principle. It’s not even a good principle – it’s the principle of wanting to always use heuristics even when they clearly don’t apply because it sounds more elegant.

There’s a reason this is so tempting. It’s called the Bad Guy Bias, and it’s an evolutionarily programmed flaw in human thinking. People care much more about the same amount of pain when it’s inflicted by humans than when it’s inflicted by nature. Psychologists can and have replicated this in the lab, along with a bunch of other little irrationalities in human cognition. It’s not anything to be ashamed of; everyone’s got it. But it’s not something to celebrate and raise to the level of a philosophical principle either.

13.6: Stop calling principles like “don’t initiate force” heuristics! These aren’t some kind of good idea that works in a few cases. These are the very principles of government and morality , and it’s literally impossible for them to guide you wrong!

Let me give you a sketch of one possible way that a libertarian perfect world that followed all of the appropriate rules to the letter could end up as a horrible dystopia. There are others, but this one seems most black-and-white.

Imagine a terrible pandemic, the Amazon Death Flu, strikes the world. The Death Flu is 100% fatal. Luckily, one guy, Bob, comes up with a medicine that suppresses (but does not outright cure) the Death Flu. It’s a bit difficult to get the manufacturing process right, but cheap enough once you know how to do it. Anyone who takes the medicine at least once a month will be fine. Go more than a month without the medicine, and you die.

In a previous version of this FAQ, Bob patented the medicine, and then I got a constant stream of emails saying (some) libertarians don’t believe in patents. Okay. Let’s say that Bob doesn’t patent the medicine, but it’s complicated to reverse engineer, and it would definitely take more than a month. This will become important later.

Right now Bob is the sole producer of this medicine, and everyone in the world needs to have a dose within a month or they’ll die. Bob knows he can charge whatever he wants for the medicine, so he goes all out. He makes anyone who wants the cure pay one hundred percent of their current net worth, plus agree to serve him and do anything he says. He also makes them sign a contract promising that while they are receiving the medicine, they will not attempt to discover their own cure for the Death Flu, or go into business against him. Because this is a libertarian perfect world, everyone keeps their contracts.

A few people don’t want to sign their lives away to slavery, and refuse to sign the contract. These people receive no medicine and die. Some people try to invent a competing medicine. Bob, who by now has made a huge amount of money, makes life difficult for them and bribes biologists not to work with them. They’re unable to make a competing medicine within a month, and die. The rest of the world promises to do whatever Bob says. They end up working as peons for a new ruling class dominated by Bob and his friends.

If anyone speaks a word against Bob, they are told that Bob’s company no longer wants to do business with them, and denied the medicine. People are encouraged to inform on their friends and families, with the promise of otherwise unavailable luxury goods as a reward. To further cement his power, Bob restricts education to the children of his friends and strongest supporters, and bans the media, which he now controls, from reporting on any stories that cast him in a negative light.

When Bob dies, he hands over control of the medicine factory to his son, who continues his policies. The world is plunged into a Dark Age where no one except Bob and a few of his friends have any rights, material goods, or freedom. Depending on how sadistic Bob’s and his descendants are, you may make this world arbitrarily hellish while still keeping perfect adherence to libertarian principles.

Compare this to a similar world that followed a less libertarian model. Once again, the Amazon Death Flu strikes. Once again, Bob invents a cure. The government thanks him, pays him a princely sum as compensation for putting his cure into the public domain, opens up a medicine factory, and distributes free medicine to everyone. Bob has become rich, the Amazon Death Flu has been conquered, and everyone is free and happy.

13.6.1: This is a ridiculously unlikely story with no relevance to the real world.

I admit this particular situation is more a reductio ad absurdum than something I expect to actually occur the moment people start taking libertarianism seriously, but I disagree that it isn’t relevant.

The arguments that libertarianism will protect our values and not collapse into an oppressive plutocracy require certain assumptions: there are lots of competing companies, zero transaction costs, zero start-up costs, everyone has complete information, everyone has free choice whether or not to buy any particular good, everyone behaves rationally, et cetera. The Amazon Death Flu starts by assuming the opposite of all of these assumptions: there is only one company, there are prohibitive start-up costs, a particular good absolutely has to be bought, et cetera.

The Amazon Death Flu world, with its assumptions, is not the world we live in. But neither is the libertarian world. Reality lies somewhere between the “capitalism is perfect” of the one, and the “capitalism leads to hellish misery” of the other.

There’s no Amazon Death Flu, but there are things like hunger, thirst, unemployment, normal diseases, and homelessness. In order to escape these problems, we need things provided by other people or corporations. This is fine and as it should be, and as long as there’s a healthy free market with lots of alternatives, in most cases these other people or corporations will serve our needs and society’s needs while getting rich themselves, just like libertarians hope.

But this is a contingent fact about the world, and one that can sometimes be wrong. We can’t just assume that the heuristic “never initiate force” will always turn out well.

13.7: The government doesn’t need to violate moral heuristics. In the absence of government programs, private charity would make up the difference.

Find some poor people in a country without government-funded welfare, and ask how that’s working out for them.

Private charity from the First World hasn’t prevented the Rwandans, Ethiopians, or Haitians from dying of malnutrition or easily preventable disease.

It’s possible that this is just because we First Worlders place more importance on our own countrymen than on foreigners, and if Americans were dying of malnutrition or easily preventable disease, patriotism would make us help them.

The US government currently spends about $800 billion on welfare-type programs for US citizens. Americans give a total of $300 billion to charity per year.

Let’s assume that private charity is twice as efficient as the government (in reality, it’s probably much less, since the government has economies of scale, but libertarians like assumptions like this and I might as well indulge them).

Let’s also assume that only half of charity goes to meaningful efforts to help poor American citizens. The other half would be things like churches, the arts, and foreign countries.

Nowadays, a total of $550 billion (adjusted, govt+private) goes to real charity (800b*1/2+300b*1/2). If the government were to stop all welfare programs, this number would fall to $150 billion (adjusted). Private citizens would need to make up the shortfall of $400 billion to keep charity at its current (woefully low) level. Let’s assume that people, realizing this, start donating a greater proportion (66%) of their charity to the American poor instead of to other causes. That means people need to increase their charity to about $830 billion ([400b + 150b]/.66).

Right now, 25% is a normal middle-class tax rate. Let’s assume the government stopped all welfare programs and limited itself to defense, policing, and overhead. There are a lot of different opinions about what is and isn’t in the federal budget, but my research suggests that would cut it by about half, to lower tax rates to 12.5%.

So, we’re in the unhappy situation of needing people to almost triple the amount they give to charity even though they have only 12.5% more money. The real situation is much worse than this, because if the government stopped all programs except military and police, people would need to pay for education, road maintenance, and so on out of their own pocket.

My calculations are full of assumptions, of course. But the important thing is, I’ve never seen libertarians even try to do calculations. They just assume that private citizens would make up the shortfall. This is the difference between millions of people leading decent lives or starving to death, and people just figure it will work out without checking, because the free market is always a Good Thing.

That’s not reason, even if you read it on That’s faith.

13.8: People stupid enough to make bad decisions deserve the consequences of their actions. If government bans them from making stupid decisions, it’s just preventing them from getting what they deserve.

One of my favorite essays, Policy Debates Should Not Appear One-Sided, provides a much better critique of this argument than I could. It starts by discussing a hypothetical in which the government stopped regulating the safety of medicines. Some quack markets sulfuric acid as medicine, and a “poor, honest, not overwhelmingly educated mother of five children” falls for it, drinks it, and dies.

If you were really in that situation, would you really laugh, say “Haha, serves her right” and go back to what you were doing? Or would it be a tragedy even though she “got what she deserved”?

The article ends by saying:

Saying ‘People who buy dangerous products deserve to get hurt!’ is not tough-minded. It is a way of refusing to live in an unfair universe. Real tough-mindedness is saying, ‘Yes, sulfuric acid is a horrible painful death, and no, that mother of 5 children didn’t deserve it, but we’re going to keep the shops open anyway because we did this cost-benefit calculation.’…I don’t think that when someone makes a stupid choice and dies, this is a cause for celebration. I count it as a tragedy. It is not always helping people, to save them from the consequences of their own actions; but I draw a moral line at capital punishment. If you’re dead, you can’t learn from your mistakes.

Read also about the just-world fallacy. “Making a virtue out of necessity” shouldn’t go as far as celebrating deaths if it makes your political beliefs more tenable.

Part E: Practical Issues

The Argument: Allowing any power to government is a slippery slope toward tyranny. No matter what the costs or benefits of any particular proposal, libertarians should oppose all government intrusion as a matter of principle.

The Counterargument: This fundamentally misunderstands the ways that nations collapse into tyranny. It also ignores political reality, and it doesn’t work. Libertarians should cooperate with people from across the ideological spectrum to oppose regulations that doesn’t work and keep an open mind to regulation that might.

14. Slippery Slopes

14.1: I’m on board with doing things that have the best consequences. And I’m on board with the idea that some government interventions may have good consequences. But allowing any power to government is a slippery slope. It will inevitably lead to tyranny, in which do-gooder government officials take away all of our most sacred rights in order to “protect us” from ourselves.

History has never shown a country sinking into dictatorship in the way libertarians assume is the “natural progression” of a big-government society. No one seriously expects Sweden, the United Kingdom, France, or Canada to become a totalitarian state, even though all four have gone much further down the big-government road than America ever will.

Those countries that have collapsed into tyranny have done so by having so weak a social safety net and so uncaring a government that the masses felt they had nothing to lose in instituting Communism or some similar ideology. Even Hitler gained his early successes by pretending to be a champion of the populace against the ineffective Weimar regime.

Czar Nicholas was not known for his support of free universal health care for the Russian peasantry, nor was it Chiang Kai-Shek’s attempts to raise minimum wage that inspired Mao Zedong. It has generally been among weak governments and a lack of protection for the poor where dictators have found the soil most fertile for tyranny.

14.1.1: But still, if we let down our guard, bureaucrats and politicians will have free rein to try to institute such a collapse into dictatorship.

I have always found the libertarian conviction that all politicians are secretly trying to build up their own power base to 1984-ish levels a bit weird.

All the time, I am hearing things like “No one really believes in global warming. It’s just a plot by the government to expand control over more areas of your life.” Or “since private charity is a threat to government’s domination of social welfare, once government gets powerful enough it will try to ban all private charity.”

Sure, people really do like power. But usually it’s the sort of power that comes with riches, fame, and beautiful women willing to attend to your every need. Just sitting in your office, knowing in an abstract way that because of you a lot of people who might otherwise be doing useful industry are fretting about their carbon emissions – that’s not the kind of power people sell their souls for. The path to ultimate domination of all humanity does not lead through the Dietary Fiber Levels in Food Act of 2006.

Most folk like to think of themselves as good people. Sure, they may take a bribe or two here, and have an affair or two there, and lie about this and that, “but only for the right reasons.” The thought process “Let me try to expand this unnecessary program so I can bathe in the feeling of screwing American taxpayers out of more of their hard-earned money” is not the kind that comes naturally, especially in a society where it leads to minimal personal gain. A politician who raises your taxes can’t use the money to buy himself a new Ferrari. At least, he can’t do it directly, and if he really wants that Ferrari there have got to be much easier ways to get it.

Human beings find it hard to get angry at a complicated system, and prefer to process things in terms of evil people doing evil things. Eliezer Yudkowsky of Less Wrong writes:

Suppose that someone says “Mexican-Americans are plotting to remove all the oxygen in Earth’s atmosphere.” You’d probably ask, “Why would they do that? Don’t Mexican-Americans have to breathe too? Do Mexican-Americans even function as a unified conspiracy?” If you don’t ask these obvious next questions when someone says, “Corporations are plotting to remove Earth’s oxygen,” then “Corporations!” functions for you as a semantic stopsign.

And if you don’t ask some of these same questions when someone says “Government wants to take away freedom!,” then you’re not thinking of government as a normal human institution that acts in normal human ways.

15. Strategic Activism

15.1: All you’ve argued so far is that it’s possible, in theory, for an ideal government making some very clever regulations to do a little more good than harm. But that doesn’t prove that the real government does more good than harm, and in fact it’s probably the opposite. So shouldn’t we admit that in a hypothetical perfect world government might do some good, while still being libertarians in reality?

I think if you’ve got enough intelligence and energy to be a libertarian, a better use of that intelligence and energy would be to help enact a properly working system.

15.2: It’s impossible to improve government; because power corrupts, all conceivable forms of government will be ineffective, wasteful, and dishonest.

“Impossible” is a really strong word.

Economist Robin Hanson has a proposal for a market-based open-source form of government called “futarchy”, in which government policies are decided entirely by a prediction market. Prediction markets operate similarly to stock markets and allow participants to buy or sell shares in predictions – for example, a share that pays out $100 if the economy improves this year, but $0 if the economy deteriorates. If it settles around a price of $60, this means the investing public predicts as 60% chance that the economy will go up.

A prediction market could be used to set policy by predicting its effects: for example, by comparing the prices of “we will institute the president’s economic plan, and the economy will improve” , “we will not institute the president’s economic plan, and the economy will improve” and “we will institute the president’s economic plan”, we can determine the public’s confidence that the president’s plan will improve the economy. There are some nifty theorems of economics that prove that such a market would produce a more accurate estimate of the plan’s chances than any other conceivable method (including consulting experts), and that it would be very difficult to corrupt. You can read more about it here.

My point isn’t that futarchy would definitely work. It’s that it’s an example of some of the best ideas that smart people trying to improve government can come up with. And unless you’re creative enough to develop futarchy on your own, or well-read enough to be sure you’ve heard of it and everything else like it, you’re being premature in calling improvements in government “impossible”.

15.3: Even if there are ways to improve government, they are impractical because they’re too politically unpopular.

Let’s be totally honest here. The US Libertarian Party currently has a grand total of zero state legislators, zero state governors, zero representatives, and zero senators. It’s never gotten much above one percent in any presidential election. Nor have any successful or nationally known major-party candidates endorsed genuinely libertarian ideals except maybe Ron Paul, who just suffered his third landslide defeat.

The libertarian vision of minimal government is politically impossible to enact. This is not itself an argument against it – most good ideas are – but it does mean you can’t condemn the alternatives for being politically impossible to enact.

Incremental attempts to improve government have a much better track record, both in terms of political palatability and success rate, than libertarian efforts to dismantle government whole-cloth. If you want to focus on something that might work, you should concentrate your efforts there.

15.4: Isn’t it better to draw a line in the sand and say no government intervention at all? This keeps us off the slippery slope to the kind of awful, huge government we have today.

Empirically, no. Again I point out that libertarianism has been completely ineffective as a political movement. The line-in-the-sand idea is an interesting one but obviously hasn’t worked.

And there are some serious advantages to erasing it. If non-libertarians see libertarians as ideologues who hate all government programs including the ones that could work, then they will dismiss any particular libertarian objection as meaningless: why pay attention to the fact that a libertarian hates this particular bill, when she hates every bill?

But if libertarians took a principled stand in favor of some government regulation that might work, they could credibly say “Look, it’s not that we have a knee-jerk hatred for all possible regulations, it’s just that this particular regulation is a horrible idea.” And people might listen.

It might also help arrest the polarization of society into factions who apply ideological “litmus tests” to all proposals before even hearing them out (eg pretty much all self-described “progressives” will automatically support any proposal to be tougher on pollution without even looking at what the economic costs versus health benefits will be, and most self-described libertarians will automatically oppose it just as quickly.) This sort of thing needs to stop, libertarians are one of the at least two groups who need to stop it, and the more people who stop, the more people on both sides will notice what they’re doing and think about it a little harder.

16. Miscellaneous and Meta

16.1: I still disagree with you. How should I best debate you and other non-libertarians in a way that is most likely to change your mind?

The most important advice I could give you is don’t come on too strong. Words like “thievery” and “enslave” are emotional button pressers, not rational arguments. Attempts to insult your opponents by calling them tyrants or suggesting they want to rule over the rest of humanity as slaves and cattle (yes, I’ve gotten that) is more likely to annoy than convince. And please, stop the “1984” references, especially when you’re talking about a modern liberal democracy. Seriously. It’s like those fundamentalists who have websites about how not having prayer in school is equivalent to the Holocaust.

Many non-libertarians aren’t going to be operating from within the same moral system you are. Sometimes the libertarians I debate don’t realize this and this causes confusion when they try to argue that something’s morally wrong. If you want to convince your opponent on moral grounds, you’re either going to have to show how their theories fail even by their own moral standards, or else prove your standards are right by deriving them from first principles (warning: this might be impossible).

Don’t immediately assume that just because we are not libertarians, we must worship Stalin, love communism, think government should be allowed to control every facet of people’s lives, or even support things like gun control or the War on Drugs. Non-libertarianism is a lot like non-Hinduism: it’s a pretty diverse collection of viewpoints with everything from full-on fascists to people who are totally libertarian except about one tiny thing.

Finally, you may have better luck convincing us of specific points, like “Government should not set a minimum wage” than broad slogans, like “Government can never do anything right.” It’s really hard to prove a universal negative.

16.2: Where can I go to see a rebuttal to this FAQ?

David Friedman wrote a short response here

Bryan Caplan wrote a response to some of the points about labor here.

Sarah wrote a longer rebuttal here: Why You Shouldn’t Hate My Freedom.

And Nintil wrote another long rebuttal here: The Non-Non Libertarian FAQ

If you’ve written another rebuttal or you know of one, email me and I’ll add it here.

16.3: Where can I go to find more non-libertarian information?

Mike Huben has a terrifyingly large collection of non-libertarian and anti-libertarian material of wildly varying quality and tone at his website.

Highlights From The Comments On Cost Disease

I got many good responses to my Considerations On Cost Disease post, both in the comments and elsewhere. A lot of people thought the explanation was obvious; unfortunately, they all disagreed on what the obvious explanation was. Below are some of the responses I found most interesting.

John Cochrane:

So, what is really happening? I think Scott nearly gets there. Things cost 10 times as much, 10 times more than they used to and 10 times more than in other countries. It’s not going to wages. It’s not going to profits. So where is it going?

The unavoidable answer: The number of people it takes to produce these goods is skyrocketing. Labor productivity — number of people per quality adjusted output — declined by a factor of 10 in these areas. It pretty much has to be that: if the money is not going to profits, to to each employee, it must be going to the number of employees.

How can that happen? Our machines are better than ever, as Scott points out. Well, we (and especially we economists) pay too much attention to snazzy gadgets. Productivity depends on organizations not just on gadgets. Southwest figured out how to turn an airplane around in 20 minutes, and it still takes United an hour.

Contrariwise, I think we know where the extra people are. The ratio of teachers to students hasn’t gone down a lot — but the ratio of administrators to students has shot up. Most large public school systems spend more than half their budget on administrators. Similarly, class sizes at most colleges and universities haven’t changed that much — but administrative staff have exploded. There are 2.5 people handling insurance claims for every doctor. Construction sites have always had a lot of people standing around for every one actually working the machine. But now for every person operating the machine there is an army of planners, regulators, lawyers, administrative staff, consultants and so on. (I welcome pointers to good graphs and numbers on this sort of thing.)

So, my bottom line: administrative bloat.

Well, how does bloat come about? Regulations and law are, as Scott mentions, part of the problem. These are all areas either run by the government or with large government involvement. But the real key is, I think lack of competition. These are above all areas with not much competition. In turn, however, they are not by a long shot “natural monopolies” or failure of some free market. The main effect of our regulatory and legal system is not so much to directly raise costs, as it is to lessen competition (that is often its purpose). The lack of competition leads to the cost disease.

Though textbooks teach that monopoly leads to profits, it doesn’t “The best of all monopoly profits is a quiet life” said Hicks. Everywhere we see businesses protected from competition, especially highly regulated businesses, we see the cost disease spreading. And it spreads largely by forcing companies to hire loads of useless people.

Yes, technical regress can happen. Productivity depends as much on the functioning of large organizations, and the overall legal and regulatory system in which they operate, as it does on gadgets. We can indeed “forget” how those work. Like our ancestors peer at the buildings, aqueducts, dams, roads, and bridges put up by our ancestors, whether Roman or American, and wonder just how they did it.

David Manheim:

I think there is another dynamic that’s being ignored — and I would be surprised if an economist ignored it, but I’ll blame Scott’s eclectic ad-hoc education for why he doesn’t discuss the elephant in the room — Superior goods.

For those who don’t remember their Economics classes, imagine a guy who makes $40,000/year and eats chicken for dinner 3 nights a week. He gets a huge 50% raise, to $60,000/year, and suddenly has extra money to spend — his disposable income probably tripled or quadrupled. Before the hedonic treadmill kicks in, and he decides to waste all the money on higher rent and nicer cars, he changes his diet. But he won’t start eating chicken 10 times a week — he’ll start eating steak. When people get more money, they replace cheap “inferior” goods with expensive “superior” goods. And steak is a superior good.

But how many times a week will people eat steak? Two? Five? Americans as a whole got really rich in the 1940s and 1950s, and needed someplace to start spending their newfound wealth. What do people spend extra money on? Entertainment is now pretty cheap, and there are only so many nights a week you see a movie, and only so many $20/month MMORPGs you’re going to pay for. You aren’t going to pay 5 times as much for a slightly better video game or movie — and although you might pay double for 3D-Imax, there’s not much room for growth in that 5%.

The Atlantic had a piece on this several years ago, with the following chart:

Food, including rising steak consumption, decreased to a negligible part of people’s budgets, as housing started rising.In this chart, the reason healthcare hasn’t really shot up to the extent Scott discussed, as the article notes, is because most of the cost is via pre-tax employer spending. The other big change the article discusses is that after 1950 or so, everyone got cars, and commuted from their more expensive suburban houses — which is effectively an implicit increase in housing cost.

And at some point, bigger houses and nicer cars begin to saturate; a Tesla is nicer than my Hyundai, and I’d love one, but not enough to upgrade for 3x the cost. I know how much better a Tesla is — I’ve seen them.
Limitless Demand, Invisible Supply

There are only a few things that we have a limitless demand for, but very limited ability to judge the impact of our spending. What are they?

I think this is one big missing piece of the puzzle; in both healthcare and education, we want improvements, and they are worth a ton, but we can’t figure out how much the marginal spending improves things. So we pour money into these sectors.

Scott thinks this means that teachers’ and doctors’ wages should rise, but they don’t. I think it’s obvious why; they supply isn’t very limited. And the marginal impact of two teachers versus one, or a team of doctors versus one, isn’t huge. (Class size matters, but we have tons of teachers — with no shortage in sight, there is no price pressure.)

What sucks up the increased money? Dollars, both public and private, chasing hard to find benefits.

I’d spend money to improve my health, both mental and physical, but how? Extra medical diagnostics to catch problems, pricier but marginally more effective drugs, chiropractors, probably useless supplements — all are exploding in popularity. How much do they improve health? I don’t really know — not much, but I’d probably try something if it might be useful.

I’m spending a ton of money on preschool for my kids. Why? Because it helps, according to the studies. How much better is the $15,000/year daycare versus the $8,000 a year program a friend of mine runs in her house? Unclear, but I’m certainly not the only one spending big bucks. Why spend less, if education is the most superior good around?

How much better is Harvard than a subsidized in-state school, or four years of that school versus 2 years of cheap community college before transferring in? The studies seem to suggest that most of the benefit is really because the kids who get into the better schools. And Scott knows that this is happening.

We pour money into schools and medicine in order to improve things, but where does the money go? Into efforts to improve things, of course. But I’ve argued at length before that bureaucracy is bad at incentivizing things, especially when goals are unclear. So the money goes to sinkholes like more bureaucrats and clever manipulation of the metrics that are used to allocate the money.

As long as we’re incentivized to improve things that we’re unsure how to improve, the incentives to pour money into them unwisely will continue, and costs will rise. That’s not the entire answer, but it’s a central dynamic that leads to many of the things Scott is talking about — so hopefully that reduces Scott’s fears a bit.

A reader who wishes to remain anonymous emails me, saying:

In the business I know – hedge funds – I am aware of tiny operators running perfectly functional one-person shops on a shoestring, who take advantage of workarounds for legal and regulatory costs (like Then there are folks like me who are trying to “be legit” and hope to attract the big money from pensions and big banks. Those folks’ decisions are all made across major principal/agent divides where agents are incentivized not to take risks. So, they force hedge funds into an arms race of insanely paranoid “best practices” to compete for their money. So… my set up costs (which so far seem to have been too little rather than too much) were more than 10x what they could have been.

I guess this supports the “institutional risk tolerance” angle. There must be similar massive unseen frictions probably in many industries that go into “checking boxes”.

Relatedly, a pet theory of mine is that “organizational complexity” imposes enormous and not fully appreciated costs, which probably grow quadratically with organization size. I’d predict, without Googling, that the the US military, just as a function of being so large, has >75% of its personal doing effectively administrative/logistical things, and that you could probably find funny examples of organizational-overhead-proliferation like an HR department so big it needed its own (meta-)HR department.

Noah Smith:

That could be one force behind rising costs; it definitely seems important for K-12 education. But it doesn’t explain why the U.S. is so much worse than countries such as France, Germany or Japan. Those countries are about as productive as the U.S., so their cost disease should be comparable. Something else must be afoot.

Another usual suspect is government intervention. The government subsidizes college through cheap loans, purchases infrastructure, restricts housing supply, and intervenes heavily in the health-care market. It’s probably part of the problem in these areas, especially in urban housing markets.

But again, government intervention struggles to explain the difference between the U.S. and other rich nations. In most countries, health care is mainly paid for by the government — many countries have nationalized the industry outright. Yet their health outcomes are broadly similar to those in the U.S., or even a little bit better. Other countries have strong unions and high land acquisition costs — often stronger and higher than the U.S. — but their infrastructure is much cheaper. And there is no law or regulation propping up high wealth-management fees or real-estate commissions. In general, lower-cost places like Japan and Europe have more regulation and more interventionism than the U.S.

So if cost disease and government can at most be only part of the story, what’s going on? One possibility Alexander raises is that “markets might just not work.” In other words, there might be large market failures going on.

The health-care market naturally has a lot of adverse selection — people with poor health are more inclined to buy insurance. That means insurance companies, knowing its customers tend to be those with poorer health, charge higher prices. Also, hospitals could be local monopolies. And college education could be costly in part because of asymmetric information — if Americans tend to vary more than people in other countries with respect to work ethnic and natural ability, they might have to spend more on college to prove themselves. This is known as signaling.

When high costs are due to market failures, interventionist government can be the solution instead of the problem — provided the intervention is done right. So the more active governments of countries like Europe and Japan might be successfully holding down costs that would otherwise balloon to inefficient levels.

But there’s one more possibility — one that gets taught in few economics classes. There is almost certainly some level of pure trickery in the economy — people paying more than they should, because they don’t have the time or knowledge to look for better prices, or because they trust people they shouldn’t trust.

This is the thesis of the book “Phishing for Phools,” by Nobel-winning economists George Akerlof and Robert Shiller. The authors advance the disturbing thesis that sellers will continually look for ways to dupe customers into paying more than they should, and that these efforts will always be partially successful. In Akerlof and Shiller’s reckoning, markets don’t just sometimes fail — they are inherently subject to both deceit and mistakes.

That could explain a number of unsettling empirical results in the economics literature. For example, transparency reduces prices substantially in health-care equipment markets. More complex and opaque mortgage-backed securities failed at higher rates in the financial crisis. In these and other cases, buyers paid too much because they didn’t know what they were buying. Whether that’s due to trickery, or to the difficulty of gathering accurate information, it’s not good — in an efficient economy, everyone will know what they’re buying.

So it’s possible that many of those anomalously high U.S. costs are due to the natural informational problems of markets.

Megan McArdle:

It’s pretty easy to tell a libertarian story where markets work fine, but government intrusions into these markets have rendered them so unfree that they no longer function the way they’re supposed to. And I think that is at least part of the story here. Yes, these things are often procured from private parties. But everywhere you look you see the government: blocking new entry (through accreditation standards, “certificate of need” laws, and zoning and building codes), while simultaneously subsidizing the purchases through artificially cheap loans and often, direct price subsidies. It would be sort of shocking if restricted supply combined with stimulated demand didn’t produce rapidly rising prices. Meanwhile, in areas that the government largely leaves alone (such as Lasik), we pretty much see what you’d expect: falling prices and improving consumer service.

But that’s perhaps a little simplistic. Agriculture is also the focus of a great deal of government intervention, as are sundry things such as air travel, and we don’t see the same phenomenon there. So we need to dig a little deeper and describe what’s special about these three sectors (we’ll leave public transportation out of it, because there, the answer is pretty much “union featherbedding combined with increasingly dysfunctional procurement and regulatory processes”).

First, and most obviously, they involve vital purchases made on long time horizons, and with considerable uncertainty. Food is more vital than health care to our well-being, but its price and quality are really easy to assess: if you buy a piece of fruit, you know pretty quickly whether you liked it or not. This is a robust market, and it’s going to take communist-level intervention to fundamentally mess it up so that food is both scarce and not very good.

Homes, schooling and health care, on the other hand, are more complicated products. You don’t know when you buy them how much value they will be to you, and it is often difficult for a lay person to assess the quality of the product. You can read hospital rankings and pay a home inspector, but these things only go so far.

The fact that these are expensive purchases that can go terribly wrong creates a great deal of pressure for the government to intervene. As ours has, over and over, in all sorts of ways.

And at the risk of giving up a little bit of my libertarian cred, I’ll say that government intervention in these markets did not have to be as expensive-making as it has turned out to be in America. Other countries have these sorts of problems too, but they’re nowhere near as large as ours.

Part of that is just that we’re richer than most of those other countries. We were going to spend the portion of our budgets no longer needed for food somewhere, and health care, education and housing are pretty good candidates. But that’s only part of the story. A big part of the story is that America just isn’t very good at regulation. When you talk to people who live elsewhere about what their government does, one thing that really strikes you about those conversations is how much more competent other rich industrial governments seem to be at regulating things and delivering services. Their bureaucracies are not perfect, but they are better than ours.

That’s not to say that America could have an awesome big government. Our regulatory state has been incompetent compared to others for decades, since long before the Reagan Revolution that Democrats like to blame. There are many, many factors in this, from our immigration history (vital to understanding how modern urban bureaucracies work in this country), to the fact that we have many competing centers of power instead of a single unified government providing over a single bureaucratic hierarchy. There is no way to fix this on a national level, and even at the level of local bureaucratic reform, it’s darned near impossible.

In other words, this is probably what we’re stuck with. It may not be Baumol’s cost disease — but it’s potentially even more serious, and it’s going to be a lingering condition.

Scott Sumner:

I certainly don’t claim to have all the answers, but I do feel that much of the problem reflects the fact that governments often cover the cost of services in those three areas. This leads producers to spend more than the socially optimal amount on these products. I’m going to provide some examples, but before doing so recall that economic theory predicts that costs in those areas should be wildly excessive. If the government paid 90% of the cost of any car you bought, and that didn’t lead to lots more people buying Porsches and Ferraris, then we’d have a major puzzle on our hands.

Scott mentions that private for-profit hospitals are also quite expensive. But even there, costs are largely paid for by the government. Close to half of all health care spending is directly paid for by the government (Medicare, Medicaid, Veterans, government employees, etc.) and a large share of the rest is indirectly paid for by taxpayers because health insurance is not just income tax free, but also payroll tax free. I’d be stunned if health care spending had not soared in recent decades.

A sizable share of my health care spending has been unneeded, and I’m fairly healthy. I met one person in their 80s who had a normal cold and went to see the doctor. They said it was probably just a normal cold, but let’s put you in the hospital overnight and do some tests, just in case. There was nothing wrong, and the bill the next day was something in the $5000 to $10,000 range, I forget the exact amount. This must happen all the time. No way would they have opted for those services if Medicare weren’t picking up the tab.

Just to be clear, I don’t think any monocausal explanation is enough. Governments also pay for health care in other countries, and the costs are far lower. It’s likely the interaction of the US government picking up much of the tab, plus insurance regulations, plus American-style litigation, plus powerful provider lobbies that prevent European-style cost controls, etc., etc., lead to our unusually high cost structure. So don’t take this as a screed against “socialized medicine.” I’m making a narrower point, that a country where the government picks up most of the costs, and doesn’t have effective regulations to hold down spending, is likely to end up with very expensive medicine.

To be fair, there is evidence from veterinary medicine that demand for pet care has also soared, and that suggests people are becoming more risk averse, even for their pets. But there is also evidence cutting the other way. Plastic surgery has not seen costs skyrocket. (Both are medical fields where people tend to pay out of pocket.)

I started working at Bentley in 1982, teaching 4 courses a semester. When I retired in 2015, I was making 7 times as much in nominal terms (nearly 3 times as much in real terms), and I was teaching 2 courses per semester. Thus I was being paid 14 times more per class (nearly 6 times as much in real terms). No wonder higher education costs have soared! (Even salaries for new hires have risen sharply in real terms.) Interestingly, the size of the student body at Bentley didn’t change noticeably over that period (about 4000 undergrads.) But the physical size of the school rose dramatically, with many new buildings full of much fancier equipment. Right now they are building a new hockey arena. There are more non-teaching employees. You can debate whether living standards for Americans have risen over time, but there’s no doubt that living standards for Americans age 18-22 have risen over time—by a lot.

As far as elementary school, my daughter had 2, 3, and once even 4 teachers in her classroom, with about 18 students. We had one teacher for 30 students when I was young. (I’m told classes are even bigger in Japan, and they don’t have janitors in their schools. The students must mop the floors. I love Japan!)

There are also lots more rules and regulations. By the end of my career, I felt almost like I was spending as much time teaching 2 classes as I used to spend teaching 4. Many of these rules were well intentioned, but in the end I really don’t think they led to students learning any more than back in 1982. I wonder if Dodd/Frank is now making small town banking a frustrating profession in the way that earlier regs made medicine and teaching increasing frustrating professions.

People say this is a disease of the service sector. But I don’t see skyrocketing prices in restaurants, dry clearers, barbers and lots of other service industries where people pay out of pocket.

The same is true of construction. Scott estimates that NYC subways cost 20 times as much as in 1900, even adjusting for inflation. The real cost of other types of construction (such as new homes), has risen far less. Again, people pay for homes out of pocket, but government pays for subways. Do I even need to mention the cost of weapons system like the F-35?

To summarize, the case of pet medicine shows that costs can rise rapidly even when people pay out of pocket. But the biggest and most important examples of cost inflation are in precisely those industries where government picks up a major part of the tab–health, education, and government procurement of complex products. And excessive cost inflation is exactly what economic theory predicts will happen when governments heavily subsidize an activity, without adequate cost regulations. Just as excessive risk taking is exactly what economic theory predicts will happen if government insures bank deposits, without adequate risk regulations. Let’s not be surprised if the things that happen, are exactly what the textbooks predict would happen. Even FDR predicted that deposit insurance would lead to reckless behavior by banks, and he (reluctantly) signed the bill into law.


I’ve seen some evidence that corporations can be equally vulnerable to cost disease as public institutions.

For example, since the 1980s CEO pay has quintupled despite the lack of any growth in profits or otherwise to justify this. Now this is probably going to result in far smaller effects on overall cost, but it still stands as a demonstration of how market failure can occur and result in large cost increases in these firms.

I would venture that many firms have seen huge increases in both revenues and costs so that when you adjust profit for inflation it hasn’t really changed at all, on average.

Andrew Swift

What you observe is fifty years of optimization of wealth extraction. Price outcomes depend on the contributions of hundreds of participants. Every participant optimizes his/her earnings, exerting a constant upward pressure on price. Participants become ever more expert at getting rich. Wealth-extraction schemes (scams) are refined and optimized (in all markets), and price increases are pushed downstream (in markets where buyers can’t push back). Radical price increases reflect markets where consumers have reduced ability to push back:

– complex markets (can’t understand)
– opaque markets (can’t see)
– entrenched/highly-regulated markets (can’t modify)
– necessary-to-keep-living markets (can’t avoid)
– limited-quantity markets (really want)
– intermediated markets where the end buyer doesn’t decide how things are purchased (don’t choose)

Some systems are resistant to contributors’ efforts to extract wealth and some systems are not. There’s an equilibrium between cost and readiness to pay. To reduce the costs in expensive domains, willingness to pay the high costs has to be reduced. As long as the buyer won’t or can’t say no, costs will increase through the entire production process. There won’t necessarily be one big obvious rip-off, but every participant will optimize the heck out of his contribution and the overall pressure will push costs up.

Could one provide a cheaper alternative in these domains? Sure for a little while, but if the bottom line is that people are willing to pay more for the service the prices will creep back up.

The only exception would be where the new, lower-priced, alternative sets a new standard and buyers refuse to continue paying the old prices. See for a great article about this.


My favorite example of ridiculous order-of-magnitude type cost increases is nuclear power plant construction costs. The plots from this paper illustrate it nicely.

Except, in the case of power plant costs, the causes – at least, for the increasing US costs – are quite a bit more apparent. Pre TMI, US costs were in line with the rest of the world’s cost. Post TMI, not so much. New regulatory burdens all by themselves increased the cost of new plants by a factor of ten. Now, this is of course not proof that any of the other problems that Scott mentioned are entirely – or even mostly – caused by increasing regulatory burdens. It does however, show that government institutions as awful as the NRC do exist, and that their effects can raise costs by the amounts seen health care, education, etc…”

John Schilling:

[Fear of lawsuits] is well understood as the cause of the substantial rise in light airplane prices since 1970. A single-engine, four-seat Cessna 172 cost an inflation-adjusted $77,000 in 1970. A substantially identical airplane cost $163,000 in 1986. And went out of production the next year, because people weren’t willing to pay that price. When congress passed laws relaxing the manufacturer’s liability for older airplanes, Cessna was able to reinstate production in 1996 at an inflation-adjusted $190,000. Today, the price seems to literally be “if you have to ask, you can’t afford it”; the manufacturer only advertises fleet sales, but I’d estimate about $400,000 (of which ~$100K is fancy electronics that didn’t exist in 1986 and weren’t standard in 1996).

In this case it is particularly easy to pull out the lawsuit/liability effect because there aren’t many cofounders. The 1986 Cessna is so little changed from the 1970 model that they sell at about the same price on the used market when controlled for condition and total flight time. And fear of lawsuits didn’t manifest as safety enhancements of inscrutable cost and value, because light airplane crashes are almost always due to Stupid Pilot Tricks and almost everything that a manufacturer could do to mitigate that (e.g. tricycle landing gear) was standard in 1970. But the manufacturers still get sued, and have to pay millions, so there’s nothing to be done but pay for liability insurance. And, second-order effect, cut production when your customers start balking at the increased prices, so you have to amortize the fixed costs of actually building airplanes over a smaller sales volume.

So, a doubling in price over fifteen or so years, a quadrupling over fifty years in spite of Congress noticing the problem and trying to mitigate it, attributable to safety/liability concerns but not resulting in actual safety improvements. I have no trouble believing something similar is happening in other industries but is harder to discern because too many other things are happening at the same time.

Alex Zavoluk

Wikipedia suggests that almost all of those other countries have litigation rules that make weak civil cases more costly, which seems like evidence in favor of the litigation hypothesis. It also means that there’s a relatively straightforward solution.

Doug on Marginal Revolution, in response to a lot of people asking whether maybe we were just calculating the CPI wrong:

That’s a plausible hypothesis, but viewed through that frame of reference, median wages have also gone down tremendously. It’s still the case that the median person spends at least six times more of their paycheck on healthcare. If healthcare is a closer metric to “true prices” then manufactured good, then that means median wages have fallen by around 80%. It also means that overall GDP has crashed since 1970, since the price deflator now averages 6-7%, and nominal GDP has only averaged around 4%. It would mean that the economy has literally been in recession 90% of the past 40 years.

The only reason we’re not all starving in the street is from the miraculous gains in manufacturing productivity and automation. But again, in this framework, that process is largely exogenous to the terrible macroeconomic situation. If those gains slow down even a little, and the macro trends continue, we’re probably facing imminent economic collapse. So maybe this is a plausible hypothesis, but it certainly comes with a whole lot of extreme implications. I think medicine/education specific cost disease is a much more likely explanation.


One commonality in the examples cited is disintermediation/subsidies. College is paid for by a third party, and financed by generous government loans. Generous in the sense that they are easy to get, not easy to get out of. Health care has massive tax subsidies, and for a good period of time felt “free” to employees. Public schooling is paid for indirectly.

Regarding the section on risk aversion, I happen to be in the playground business. The most common injury is broken bones from a fall. Consequently, our industry has ended up with poured in place surfacing, which costs 10x as much as mulch or pea gravel. It is wonderful stuff, but really increases the cost of the playground. Again, no one pays directly for their playground, and the paying party cannot risk not being in tune with the regulations.

Markets cannot function if the risk reward relationship is not direct.


In all of these problem sectors it seems the resources consumed in each industry has shifted to servicing and extending the definition of the marginal ‘customer’. This can explain I think some of the above

E.g.. 40 years ago hospitals received 100 customers. Ranked, patients 1-20 died. And no one really tried to save them (some comfort but that was it). Today they are trying (are obliged) to try to save patients no 5-15 (the 85 year old with triple bypass, 20 week premie). The total no of staff needed for this task swamps increases in individual productivity. You just need more people, even if they each are more productive or trained than in the pasts. So salaries for each does not go up that much, there are just more of them, total cost go up, and outcomes over the patients treated are somewhat but not much better (some now make it but some fraction still die). Hence medical curve shows some improvement but not 1:1 with cost.

In education, in the 1950-1970s we could afford to socially promote non-academically inclined students, not really expend effort on them as long as they kept quiet in class, then have them leave at age 16 to go work at Ford. Universities could count on getting the higher performing students. Today, we have to deliver much weaker students all the way to the end of high school, also force many into college. And ALL the extra resources go to get this new lower end close to what used to be the minimal university student performance. The top cohort gets little extra resources and has not really improved. Hence, the scores across the new ‘extended’ student population stays flat.

I base this partly on what I have seen from my wife (engineering professor at top university), resources are heavily consumed by the lower performing students, top students have better opportunities than 20 years ago but in general the resources are much less focused on them than on the marginal students.

So if you assume these industries for whatever reason shifted focus to servicing deeper into the tail of the population aptitude/effort over the years (I am not saying this is good/bad, was for social reasons, for humanistic reasons or making any comment), this would very much explain the overall cost rise, coupled with the lack of desired improvement in statistics measured across the population that now gets services as a whole.

In short, in the US we define policies that drive costs based on the tail of the population, but we experience performance on the average. As an immigrant from a third world country I think this is a big difference often invisible to the US-born citizens I talk to. Maybe why this is a great country and I am here. All I can say is that it is a world view that is not common world wide. Where I grew up, No Child Left Behind law would have been designed as 1 Child Left Behind. There just were not the resources, but more important, it was just more socially acceptable to just halve the no of slots halfway through an academic program, for example.

So I guess the question is why are we so focused on pushing services into the tails and will we continue to do so? Does society really benefit from having a larger fraction of the population capable of doing crappy algebra? Clearly there will be some point where the cost becomes prohibitive and it will stop: maybe that is what we are seeing now. But it is stunning that this was a 50 year process — if the dynamics in social policy “markets” are that slow it is going to be really difficult to manage.


I can’t help but wonder if part of the ever-expanding expenses isn’t that we mediate our interactions through the legal system more than we used to.

What got me thinking about it was what I’m working on this week. To answer Incurian’s question above about why I was posting during the workday, I was avoiding working on a report for selecting a contractor for a project I’m working on. (I owe the taxpayer about three hours this weekend, since I spent time on Friday here and reading about the Oroville Dam spillway.)

We had contractors submit proposals, and we had two structural engineers and a construction quality assurance rep sit in a room for three days, writing our individual reports about each proposal, then coming to agreement about how we rate them. Then I have to write a report summarizing all of our individual reports, which gets fed into the arcane machine that will eventually spit out an award. This process costs about $10,000, and had zero value for evaluating the proposals. However, it has to be done this way or we’ll get dragged around in court by an offeror’s lawyer if they choose to make a case of their rejection. I think that in years past they’d use a simple low-bid process, which has its own problems, or the rejected contractors would bitch to their Congressmen or something but wouldn’t literally make a federal case of it.


I think you gave short shrift to libertarian explanations of this phenomena. In particular, the Kling Theory of Public Choice may explain a significant fraction of cost disease: public policy will always choose to subsidize demand and restrict supply. If you restrict supply holding everything else equal, prices will go up. If you subsidize demand holding everything else equal, prices will go up. If you do both, prices will really go up.

(1) Healthcare: The government restricts the supply of all healthcare professionals (for example, doctors, nurses, CNAs, pharmacists, dentists, LPNs, etc.) via occupational licensing. (I should note that maybe everyone can get behind the simple idea that the number of doctors per 10,000 people in the US should at least remain constant over time and not go down, as it has.) It restricts the supply of healthcare organizations (for example, hospitals, surgery centers, etc.) via onerous regulations, like the very ridiculous “certificate-of-need“. You have already explained in previous posts how things like the FDA restrict the supply of generic drugs. In terms of demand, the government subsidizes health insurance via the corporate income tax code, CHIP, the Obamacare marketplace, Medicaid, Medicare, etc.

(2) Education: I have done less investigation into this sector’s regulations. You mentioned Title IX. David Friedman has some nice blog posts on how the American Bar Association’s regulations on law schools make cheap law schools impossible. (This same concept also applies to healthcare-related professional schools, by the way.) If Bryan Caplan is right about signaling, a lot of education involves negative externalities, so it should be taxed or limited by the government. Instead, it subsidizes demand via loans. K-12 education, meanwhile, receives massive subsidies from the government; everyone can enjoy a totally free K-12 education.

(3) Real estate: Land-use regulations restrict the supply of housing. (Explanations of this can be found by googling “Matt Yglesias housing”.) It also subsidizes housing via Section 8, various other HUD programs, Freddie Mac, the mortgage-interest tax deduction, etc.

In short, any industry that the United States government has a heavy hand in has/will experience cost disease.


Scott, help me out here because I’ve read a long article about the mysterious nature of rising costs in certain sectors as well as hundreds of bemused comments, and the article had no more than a throwaway paragraph saying that maybe rising inequality is a sign that the ‘missing’ money is ending up in the pockets of the super-wealthy elite.

I come from a left-wing perspective, so I hope you can see that to me ex nihilo, “the super wealthy are becoming much richer than was historically the case, also all of these important services are becoming way more expensive than they used to be, but the one does not explain the other” looks like an extraordinary claim. I would like to see more evidence presented that this is not the case before updating in this direction!

In particular, I can see that a large majority of the odd features you have picked out about these services are acting exactly as predicted in Das Kapital volume 2, where Marx studies the process of realisation of invested capital (ie, money spent on labour, materials, tools etc) as the principal plus surplus value in money form. In particular, some of his predictions were:

1. Gains made by workers through collective action in sites of production can be taken away again by the landlord, the grocer, the financier etc.

2. The difficulty in the realisation of capital will incentivise businesses to strive for monopoly positions (whether by government mandate, mutual cooperations, quasi-monopolies such as real estate, branding and advertising).

3. The tensions between the production of surplus value and the realisation of surplus value will tend to set certain sectors of capital against one another – for example landlords would prefer if workers were well paid, but had to spend larger amounts of money on rent whereas factory owners would prefer to pay workers as little as possible, and that includes low housing costs.

Later analysis in the tradition of Marx have noticed that financial capital these days is doing very very well compared to workers, but also compared to traditional industrialists. And four out of the five of your examples are fields in which debt and financing plays a very large role. It’s pretty easy to see that financial capital would be incentivised to make these things more expensive so that they can extract more money through larger loans and financing. (I’m not certain about subways. Are they typically debt-financed?).

Financial capital certainly has the economic and political power to push for this, and they don’t particularly care if they squeeze other holders of capital along they way. They are debt-financed fields in which large monopoly powers exist for one reason or another. And while I acknowledge that bureacratic bloat is certainly playing its role, I’m baffled by the relative lack of consideration of normal capitalist tendencies on this thread. As far as I can see it is the single most important factor driving up the costs of these services. Please present me with evidence that I am wrong about this!

Some additional links less-directly related or less easy to excerpt:

National Center for Policy Analysis: Should All Medicine Work Like Cosmetic Surgery? Because plastic surgery isn’t a life-or-death need, it’s not covered by insurance. Costs in the sector have risen 30% since 1992, compared to 118% for other types of health care. Does this mean that being sheltered from the insurance system has sheltered it from cost disease?

The American Interest: Why Can’t We Have Nice Things? A breakdown of exactly why infrastructure and transportation projects cost so much more in the US than elsewhere, with an eye for Trump’s promise of $1 trillion extra infrastructure spending.

Arnold Kling: What I Believe About Education. I have to include one “it’s all the teachers’ unions fault” post for completeness here.

Neerav Kingsland on education spending and the role of charter schools

The comment thread on Marginal Revolution contains some insight

The Incidental Economist: What Makes The US Health Care System So Expensive FAQ. From July 2011. Includes links to a lot of other things.

And some additional comments of my own:

I think any explanation that starts with “well, we have so much money now that we have to spend it on something…” ignores that many people do not have so much money, and in fact are really poor, but they get the same education and health care as the rest of us. If the problem were just “rich people looking for places to throw their money away”, there would be other options for poor people who don’t want to do that, the same way rich people have fancy restaurants where they can throw their money away and poor people have McDonalds.

Any explanation of the form “evil capitalists are scamming the rest of us for profit” has to explain why the cost increases are in the industries least exposed to evil capitalists. K-12 education is entirely nonprofit. Colleges are a mix but generally not owned by a single rich guy who gets all the money. My hospital is owned by an order of nuns; studies show that government hospitals have higher costs than for-profit ones. Meanwhile, the industries with the actual evil capitalists – tech, retail, restaurants, natural resources – seem mostly immune to the cost disease. This is not promising. Also, this wouldn’t explain why so much of the money seems to be going to administrators/bells-and-whistles. If prices increase by $100,000, and the money goes to hiring two extra $50,000/year administrators, how does this help the capitalist profiting off it all?

Any explanation of the form “administrative bloat” or “inefficiency” has to explain why non-bloated alternatives don’t pop up or become popular. I’m sure the CEO of Ford would love to just stop doing his job and approve every single funding request that passes his desk and pay for it by jacking up the price of cars, but at some point if he did that too much we’d all just buy Toyotas instead. Although there are some barriers to competition in the hospital market, there are fewer such barriers in the college, private school, and ambulatory clinic market. Why hasn’t competition discouraged administrative bloat here the same way it does in other industries?

Maybe a good time to reread the post How Likely Are Multifactorial Trends?

Links 2/17: Site Your Sources

A while ago when we discussed drug tolerance here, some people taught me about receptors that activated two different second messenger chains, and how you could modulate the balance of effects by finding agonists that disproportionately activated one or the other. Now it looks like this principle has born fruit in oliceride, a new opioid which may be far safer than eg morphine. Just remember that heroin was also originally advertised as a safer and less addictive version of morphine.

Something I’d never heard before but which fits with a lot of people’s observation: Wellbutrin works really well the first few days, but true evaluation of its effects has to wait for a “second wind” later on. Does this fit with the experiences of Wellbutrin users here? (h/t Brienne)

The United States not only does poorly on education benchmark PISA, but each decile of wealth also does poorly compared to equivalent deciles in other countries. I find this surprising. Does this torpedo the theory that each US ethnic group does as well as its foreign counterparts, and US underperformance is a Simpson’s Paradox on ethnic distribution?

Twitter: @EveryoneIsDril. EG:

Some followup to the “Fetlife bans offensive fetishes to satisfy payment processors” story from last month: the official announcement, Jadagul’s analysis.

New Study Finds Performance-Enhancing Drugs For Chess. Okay, fine, just modafinil, which we already knew about, but the exact pattern is interesting. Modafinil makes people take longer to make their moves, but the moves are ultimately better. That suggests that its advantage is not increasing IQ per se, but in giving people the increased attention span/concentration to work harder on finding good moves. I think this elegantly ties together a lot of stuff into a good explanation of modafinil’s cognitive-enhancing properties.

New Zealand Wants To Know How Peter Thiel Became A Secret Citizen. Give up, New Zealand; Peter Thiel is a citizen of any country he wants to be a citizen of. Also: Peter Thiel Denies California Governor Run Despite Mysterious Group’s Backing.

I was going to link to the paper Physics Envy May Be Hazardous To Your Wealth, but the part that actually interested me is small enough that I’m just going to include it here as a jpg (h/t Julia Galef):

Nature: Prevalence And Architecture Of De Novo Mutations In Developmental Disorders. There’s been a lot of debate over paternal age effects, and this paper helps clarify that by actually counting people’s de novo mutations and finding that children of older fathers (and to a lesser degree older mothers) have more of them. I am not sure to what degree this answers the objection that fathers with worse genes will tend to get married later; my impression is that it’s circumstantial evidence against (de novo mutations are more specific to paternal age than just bad genes) but not complete disproof.

Psssst, kid, wanna buy a parasitic worm? Key quote: “Those who experience the ‘hookworm bounce’ tend to describe it as ‘feeling as if they are teenagers again'” (h/t pistachi0n)

New moth species neopalpa donaldtrumpi (cf List Of Organisms Named After Famous People)

Topher Brennan on obstructing everything. “Our system of government requires compromise, but Democrats shouldn’t be worrying about that right now because Democrats don’t control Congress. Force Trump to compromise with the dozen Republican Senators who were still saying #NeverTrump on election day. Force him to compromise with the Republican Senators who endorsed him but have spoken out against him on specific issues.”

Donald Trump to slash funding for United Nations. What could possibly go wrong?

Koch brothers plan to help lead conservative resistance to Trump.

QZ’s profile of Steve Bannon. I keep on hearing about this guy as some kind of esoteric conservative mastermind with unpredictable goals and visions, but his positions don’t look that different from what you’d expect to hear on Rush Limbaugh or something. Related: Fox News makes a very unconvincing case that Bannon is not so bad. Also related: the pro-Trump intellectuals (1, 2)

Are companies buying ads on shows Donald Trump watches in order to influence policy?

Okay, enough Trump links. Moving on to history, check out the Twitter account of 10th century English king Donaeld The Unready, who wants to “make Mercia great again!” and fight off enemies like fake chroniclers, people who didn’t attend his coronation, and Grendel:

New paper in Crime And Delinquency: “We find no evidence that the number of fatal police shootings either increased or decreased post-Ferguson. Claims to the contrary are based on weak analyses of short-term trends.” This is especially surprising in light of claims that increased inner-city crime is caused by police withdrawing in order to prevent further fatal shootings; if that’s the police’s plan, it doesn’t seem to be working very well.

Intranasal ghrelin vaccine prevents obesity in mice.

Gene drive testing thwarted when organisms quickly develop resistance. There goes that idea. joins in the probabilistic prediction for 2017 movement.

Slate: The Most Dangerous Terrorists Are From North Carolina…”They talk about building walls and vetting refugees. If we were serious…we would seal our borders against North Carolina.” DEAR WILLIAM SALETAN, PLEASE READ ALBION’S SEED. YOURS, SLATE STAR CODEX.

It is the grim cyberpunk future of 2017, and hackers are plotting to exploit insecurities in your virtual blowjobs.

New poll: Majority of Europeans support banning Muslim immigration. It’s an Internet-based poll, which is always cause for suspicion, but they seem to be a reputable organization and not the sort of group whose results are 100% due to trolling by 4chan, plus it’s consistent with some other results. Still pretty shocking and an existential-terror-level reminder of partisan bubbles. Also: Rasmussen finds most Americans support Trump’s refugee ban order.

Closely related: M.G. Miles makes the case for banning Muslim immigration. Maybe the first person I have seen make this case in a principled way; everyone else just seems to be screaming about stuff and demanding their readers reinterpret it into argument form. Also, he uses the word “terrorism” zero times, which seems like the correct number of times for a case of this sort. This is what people should be debating and responding to. Rebuttals by Americans would probably want to start with the differences between Muslim immigrants to Europe and Muslim immigrants to the US – Miles discusses the European case, but by my understanding these are very different populations with very different outcomes).

Second Enumerations podcast: Grognor reading interesting essays.

SSRN: Extreme Protest Tactics Reduce Popular Support For Social Movements: “We find across three experiments that extreme protest tactics decreased popular support for a given cause because they reduced feelings of identification with the movement. Though this effect obtained in tests of popular responses to extreme tactics used by animal rights, Black Lives Matter, and anti-Trump protests (Studies 1-3), we found that self-identified political activists were willing to use extreme tactics because they believed them to be effective for recruiting popular support.” Cf. The Toxoplasma Of Rage. (h/t Dain)

Major accountancy firm Ernst & Young announces its intention to recruit earnest young people by removing the requirement for employees to have a college degree, “saying there is ‘no evidence’ success at university correlates with achievement in later life.” While they’re wrong about the specific correlational claim, they’re right about the implicit causal claim, so congratulations to them and here’s hoping they’re the first of many. Cf. Against Tulip Subsidies.

The Cagots were an underclass of people in medieval France whom everyone hated, with various purity laws around how decent people weren’t allowed to associate with/marry/touch/go near them. In the 1500s, the Pope personally intervened to tell the French to stop persecuting them, but the French ignored him and persecuted them more than ever. As far as anyone can tell, they looked, spoke, and acted just like everyone else, and exactly how they became so despised is one of the minor mysteries of medieval history.

New ultra-anonymous cryptocurrency Monero takes off. Distantly related: are Republicans and tax-prep companies in a Baptists-and-bootleggers coalition to make paying taxes as difficult and annoying as possible?

Scientists discover new phase of matter: time crystals. Studies suggest that if researchers were to find all seven of them and place them in the slots on the Altar Of Eternity, they could gain +5 Holy damage to all attacks.

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OT69: The Open Of Akhnai

This is the bi-weekly visible open thread. There are hidden threads every few days here. Post about anything you want, ask random questions, whatever. Also:

1. This might be your last chance to take the SSC Survey before I close it. Thanks to everyone who has already responded.

2. Comment of the week is Douglas Knight’s commentary on the American genetic clustering post. I still haven’t looked through most of the cost disease comment thread.

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Considerations On Cost Disease


Tyler Cowen writes about cost disease. I’d previously heard the term used to refer only to a specific theory of why costs are increasing, involving labor becoming more efficient in some areas than others. Cowen seems to use it indiscriminately to refer to increasing costs in general – which I guess is fine, goodness knows we need a word for that.

Cowen assumes his readers already understand that cost disease exists. I don’t know if this is true. My impression is that most people still don’t know about cost disease, or don’t realize the extent of it. So I thought I would make the case for the cost disease in the sectors Tyler mentions – health care and education – plus a couple more.

First let’s look at primary education:

There was some argument about the style of this graph, but as per Politifact the basic claim is true. Per student spending has increased about 2.5x in the past forty years even after adjusting for inflation.

At the same time, test scores have stayed relatively stagnant. You can see the full numbers here, but in short, high school students’ reading scores went from 285 in 1971 to 287 today – a difference of 0.7%.

There is some heterogenity across races – white students’ test scores increased 1.4% and minority students’ scores by about 20%. But it is hard to credit school spending for the minority students’ improvement, which occurred almost entirely during the period from 1975-1985. School spending has been on exactly the same trajectory before and after that time, and in white and minority areas, suggesting that there was something specific about that decade which improved minority (but not white) scores. Most likely this was the general improvement in minorities’ conditions around that time, giving them better nutrition and a more stable family life. It’s hard to construct a narrative where it was school spending that did it – and even if it did, note that the majority of the increase in school spending happened from 1985 on, and demonstrably helped neither whites nor minorities.

I discuss this phenomenon more here and here, but the summary is: no, it’s not just because of special ed; no, it’s not just a factor of how you measure test scores; no, there’s not a “ceiling effect”. Costs really did more-or-less double without any concomitant increase in measurable quality.

So, imagine you’re a poor person. White, minority, whatever. Which would you prefer? Sending your child to a 2016 school? Or sending your child to a 1975 school, and getting a check for $5,000 every year?

I’m proposing that choice because as far as I can tell that is the stakes here. 2016 schools have whatever tiny test score advantage they have over 1975 schools, and cost $5000/year more, inflation adjusted. That $5000 comes out of the pocket of somebody – either taxpayers, or other people who could be helped by government programs.

Second, college is even worse:

Note this is not adjusted for inflation; see link below for adjusted figures

Inflation-adjusted cost of a university education was something like $2000/year in 1980. Now it’s closer to $20,000/year. No, it’s not because of decreased government funding, and there are similar trajectories for public and private schools.

I don’t know if there’s an equivalent of “test scores” measuring how well colleges perform, so just use your best judgment. Do you think that modern colleges provide $18,000/year greater value than colleges did in your parents’ day? Would you rather graduate from a modern college, or graduate from a college more like the one your parents went to, plus get a check for $72,000?

(or, more realistically, have $72,000 less in student loans to pay off)

Was your parents’ college even noticeably worse than yours? My parents sometimes talk about their college experience, and it seems to have had all the relevant features of a college experience. Clubs. Classes. Professors. Roommates. I might have gotten something extra for my $72,000, but it’s hard to see what it was.

Third, health care. The graph is starting to look disappointingly familiar:

The cost of health care has about quintupled since 1970. It’s actually been rising since earlier than that, but I can’t find a good graph; it looks like it would have been about $1200 in today’s dollars in 1960, for an increase of about 800% in those fifty years.

This has had the expected effects. The average 1960 worker spent ten days’ worth of their yearly paycheck on health insurance; the average modern worker spends sixty days’ worth of it, a sixth of their entire earnings.

Or not.

This time I can’t say with 100% certainty that all this extra spending has been for nothing. Life expectancy has gone way up since 1960:

Extra bonus conclusion: the Spanish flu was really bad

But a lot of people think that life expectancy depends on other things a lot more than healthcare spending. Sanitation, nutrition, quitting smoking, plus advances in health technology that don’t involve spending more money. ACE inhibitors (invented in 1975) are great and probably increased lifespan a lot, but they cost $20 for a year’s supply and replaced older drugs that cost about the same amount.

In terms of calculating how much lifespan gain healthcare spending has produced, we have a couple of options. Start with by country:

Countries like South Korea and Israel have about the same life expectancy as the US but pay about 25% of what we do. Some people use this to prove the superiority of centralized government health systems, although Random Critical Analysis has an alternative perspective. In any case, it seems very possible to get the same improving life expectancies as the US without octupling health care spending.

The Netherlands increased their health budget by a lot around 2000, sparking a bunch of studies on whether that increased life expectancy or not. There’s a good meta-analysis here, which lists six studies trying to calculate how much of the change in life expectancy was due to the large increases in health spending during this period. There’s a broad range of estimates: 0.3%, 1.8%, 8.0%, 17.2%, 22.1%, 27.5% (I’m taking their numbers for men; the numbers for women are pretty similar). They also mention two studies that they did not officially include; one finding 0% effect and one finding 50% effect (I’m not sure why these studies weren’t included). They add:

In none of these studies is the issue of reverse causality addressed; sometimes it is not even mentioned. This implies that the effect of health care spending on mortality may be overestimated.

They say:

Based on our review of empirical studies, we conclude that it is likely that increased health care spending has contributed to the recent increase in life expectancy in the Netherlands. Applying the estimates form published studies to the observed increase in health care spending in the Netherlands between 2000 and 2010 [of 40%] would imply that 0.3% to almost 50% of the increase in life expectancy may have been caused by increasing health care spending. An important reason for the wide range in such estimates is that they all include methodological problems highlighted in this paper. However, this wide range inicates that the counterfactual study by Meerding et al, which argued that 50% of the increase in life expectancy in the Netherlands since the 1950s can be attributed to medical care, can probably be interpreted as an upper bound.

It’s going to be completely irresponsible to try to apply this to the increase in health spending in the US over the past 50 years, since this is probably different at every margin and the US is not the Netherlands and the 1950s are not the 2010s. But if we irresponsibly take their median estimate and apply it to the current question, we get that increasing health spending in the US has been worth about one extra year of life expectancy.

This study attempts to directly estimate a %GDP health spending to life expectancy conversion, and says that an increase of 1% GDP corresponds to an increase of 0.05 years life expectancy. That would suggest a slightly different number of 0.65 years life expectancy gained by healthcare spending since 1960)

If these numbers seem absurdly low, remember all of those controlled experiments where giving people insurance doesn’t seem to make them much healthier in any meaningful way.

Or instead of slogging through the statistics, we can just ask the same question as before. Do you think the average poor or middle-class person would rather:

a) Get modern health care
b) Get the same amount of health care as their parents’ generation, but with modern technology like ACE inhibitors, and also earn $8000 extra a year

Fourth, we se similar effects in infrastructure. The first New York City subway opened around 1900. Various sources list lengths from 10 to 20 miles and costs from $30 million to $60 million dollars – I think my sources are capturing it at different stages of construction with different numbers of extensions. In any case, it suggests costs of between $1.5 million to $6 million dollars/mile = $1-4 million per kilometer. That looks like it’s about the inflation-adjusted equivalent of $100 million/kilometer today, though I’m very uncertain about that estimate. In contrast, Vox notes that a new New York subway line being opened this year costs about $2.2 billion per kilometer, suggesting a cost increase of twenty times – although I’m very uncertain about this estimate.

Things become clearer when you compare them country-by-country. The same Vox article notes that Paris, Berlin, and Copenhagen subways cost about $250 million per kilometer, almost 90% less. Yet even those European subways are overpriced compared to Korea, where a kilometer of subway in Seoul costs $40 million/km (another Korean subway project cost $80 million/km). This is a difference of 50x between Seoul and New York for apparently comparable services. It suggests that the 1900s New York estimate above may have been roughly accurate if their efficiency was roughly in line with that of modern Europe and Korea.

Fifth, housing (source:

Most of the important commentary on this graph has already been said, but I would add that optimistic takes like this one by the American Enterprise Institute are missing some of the dynamic. Yes, homes are bigger than they used to be, but part of that is zoning laws which make it easier to get big houses than small houses. There are a lot of people who would prefer to have a smaller house but don’t. When I first moved to Michigan, I lived alone in a three bedroom house because there were no good one-bedroom houses available near my workplace and all of the apartments were loud and crime-y.

Or, once again, just ask yourself: do you think most poor and middle class people would rather:

1. Rent a modern house/apartment
2. Rent the sort of house/apartment their parents had, for half the cost


So, to summarize: in the past fifty years, education costs have doubled, college costs have dectupled, health insurance costs have dectupled, subway costs have at least dectupled, and housing costs have increased by about fifty percent. US health care costs about four times as much as equivalent health care in other First World countries; US subways cost about eight times as much as equivalent subways in other First World countries.

I worry that people don’t appreciate how weird this is. I didn’t appreciate it for a long time. I guess I just figured that Grandpa used to talk about how back in his day movie tickets only cost a nickel; that was just the way of the world. But all of the numbers above are inflation-adjusted. These things have dectupled in cost even after you adjust for movies costing a nickel in Grandpa’s day. They have really, genuinely dectupled in cost, no economic trickery involved.

And this is especially strange because we expect that improving technology and globalization ought to cut costs. In 1983, the first mobile phone cost $4,000 – about $10,000 in today’s dollars. It was also a gigantic piece of crap. Today you can get a much better phone for $100. This is the right and proper way of the universe. It’s why we fund scientists, and pay businesspeople the big bucks.

But things like college and health care have still had their prices dectuple. Patients can now schedule their appointments online; doctors can send prescriptions through the fax, pharmacies can keep track of medication histories on centralized computer systems that interface with the cloud, nurses get automatic reminders when they’re giving two drugs with a potential interaction, insurance companies accept payment through credit cards – and all of this costs ten times as much as it did in the days of punch cards and secretaries who did calculations by hand.

It’s actually even worse than this, because we take so many opportunities to save money that were unavailable in past generations. Underpaid foreign nurses immigrate to America and work for a song. Doctors’ notes are sent to India overnight where they’re transcribed by sweatshop-style labor for pennies an hour. Medical equipment gets manufactured in goodness-only-knows which obscure Third World country. And it still costs ten times as much as when this was all made in the USA – and that back when minimum wages were proportionally higher than today.

And it’s actually even worse than this. A lot of these services have decreased in quality, presumably as an attempt to cut costs even further. Doctors used to make house calls; even when I was young in the ’80s my father would still go to the houses of difficult patients who were too sick to come to his office. This study notes that for women who give birth in the hospital, “the standard length of stay was 8 to 14 days in the 1950s but declined to less than 2 days in the mid-1990s”. The doctors I talk to say this isn’t because modern women are healthier, it’s because they kick them out as soon as it’s safe to free up beds for the next person. Historic records of hospital care generally describe leisurely convalescence periods and making sure somebody felt absolutely well before letting them go; this seems bizarre to anyone who has participated in a modern hospital, where the mantra is to kick people out as soon as they’re “stable” ie not in acute crisis.

If we had to provide the same quality of service as we did in 1960, and without the gains from modern technology and globalization, who even knows how many times more health care would cost? Fifty times more? A hundred times more?

And the same is true for colleges and houses and subways and so on.


The existing literature on cost disease focuses on the Baumol effect. Suppose in some underdeveloped economy, people can choose either to work in a factory or join an orchestra, and the salaries of factory workers and orchestra musicians reflect relative supply and demand and profit in those industries. Then the economy undergoes a technological revolution, and factories can produce ten times as many goods. Some of the increased productivity trickles down to factory workers, and they earn more money. Would-be musicians leave the orchestras behind to go work in the higher-paying factories, and the orchestras have to raise their prices if they want to be assured enough musicians. So tech improvements in the factory sectory raise prices in the orchestra sector.

We could tell a story like this to explain rising costs in education, health care, etc. If technology increases productivity for skilled laborers in other industries, then less susceptible industries might end up footing the bill since they have to pay their workers more.

There’s only one problem: health care and education aren’t paying their workers more; in fact, quite the opposite.

Here are teacher salaries over time (source):

Teacher salaries are relatively flat adjusting for inflation. But salaries for other jobs are increasing modestly relative to inflation. So teacher salaries relative to other occupations’ salaries are actually declining.

Here’s a similar graph for professors (source):

Professor salaries are going up a little, but again, they’re probably losing position relative to the average occupation. Also, note that although the average salary of each type of faculty is stable or increasing, the average salary of all faculty is going down. No mystery here – colleges are doing everything they can to switch from tenured professors to adjuncts, who complain of being overworked and abused while making about the same amount as a Starbucks barista.

This seems to me a lot like the case of the hospitals cutting care for new mothers. The price of the service dectuples, yet at the same time the service has to sacrifice quality in order to control costs.

And speaking of hospitals, here’s the graph for nurses (source):

Female nurses’ salaries went from about $55,000 in 1988 to $63,000 in 2013. This is probably around the average wage increase during that time. Also, some of this reflects changes in education: in the 1980s only 40% of nurses had a degree; by 2010, about 80% did.

And for doctors (source)

Stable again! Except that a lot of doctors’ salaries now go to paying off their medical school debt, which has been ballooning like everything eles.

I don’t have a similar graph for subway workers, but come on. The overall pictures is that health care and education costs have managed to increase by ten times without a single cent of the gains going to teachers, doctors, or nurses. Indeed these professions seem to have lost ground salary-wise relative to others.

I also want to add some anecdote to these hard facts. My father is a doctor and my mother is a teacher, so I got to hear a lot about how these professions have changed over the past generation. It seems at least a little like the adjunct story, although without the clearly defined “professor vs. adjunct” dichotomy that makes it so easy to talk about. Doctors are really, really, really unhappy. When I went to medical school, some of my professors would tell me outright that they couldn’t believe anyone would still go into medicine with all of the new stresses and demands placed on doctors. This doesn’t seem to be limited to one medical school. Wall Street Journal: Why Doctors Are Sick Of Their Profession – “American physicians are increasingly unhappy with their once-vaunted profession, and that malaise is bad for their patients”. The Daily Beast: How Being A Doctor Became The Most Miserable Profession – “Being a doctor has become a miserable and humiliating undertaking. Indeed, many doctors feel that America has declared war on physicians”. Forbes: Why Are Doctors So Unhappy? – “Doctors have become like everyone else: insecure, discontent and scared about the future.” Vox: Only Six Percent Of Doctors Are Happy With Their Jobs. Al Jazeera America: Here’s Why Nine Out Of Ten Doctors Wouldn’t Recommend Medicine As A Profession. Read these articles and they all say the same thing that all the doctors I know say – medicine used to be a well-respected, enjoyable profession where you could give patients good care and feel self-actualized. Now it kind of sucks.

Meanwhile, I also see articles like this piece from NPR saying teachers are experiencing historic stress levels and up to 50% say their job “isn’t worth it”. Teacher job satisfaction is at historic lows. And the veteran teachers I know say the same thing as the veteran doctors I know – their jobs used to be enjoyable and make them feel like they were making a difference; now they feel overworked, unappreciated, and trapped in mountains of paperwork.

It might make sense for these fields to become more expensive if their employees’ salaries were increasing. And it might make sense for salaries to stay the same if employees instead benefitted from lower workloads and better working conditions. But neither of these are happening.


So what’s going on? Why are costs increasing so dramatically? Some possible answers:

First, can we dismiss all of this as an illusion? Maybe adjusting for inflation is harder than I think. Inflation is an average, so some things have to have higher-than-average inflation; maybe it’s education, health care, etc. Or maybe my sources have the wrong statistics.

But I don’t think this is true. The last time I talked about this problem, someone mentioned they’re running a private school which does just as well as public schools but costs only $3000/student/year, a fourth of the usual rate. Marginal Revolution notes that India has a private health system that delivers the same quality of care as its public system for a quarter of the cost. Whenever the same drug is provided by the official US health system and some kind of grey market supplement sort of thing, the grey market supplement costs between a fifth and a tenth as much; for example, Google’s first hit for Deplin®, official prescription L-methylfolate, costs $175 for a month’s supply; unregulated L-methylfolate supplement delivers the same dose for about $30. And this isn’t even mentioning things like the $1 bag of saline that costs $700 at hospitals. Since it seems like it’s not too hard to do things for a fraction of what we currently do things for, probably we should be less reluctant to believe that the cost of everything is really inflated.

Second, might markets just not work? I know this is kind of an extreme question to ask in a post on economics, but maybe nobody knows what they’re doing in a lot of these fields and people can just increase costs and not suffer any decreased demand because of it. Suppose that people proved beyond a shadow of a doubt that Khan Academy could teach you just as much as a normal college education, but for free. People would still ask questions like – will employers accept my Khan Academy degree? Will it look good on a resume? Will people make fun of me for it? The same is true of community colleges, second-tier colleges, for-profit colleges, et cetera. I got offered a free scholarship to a mediocre state college, and I turned it down on the grounds that I knew nothing about anything and maybe years from now I would be locked out of some sort of Exciting Opportunity because my college wasn’t prestigious enough. Assuming everyone thinks like this, can colleges just charge whatever they want?

Likewise, my workplace offered me three different health insurance plans, and I chose the middle-expensiveness one, on the grounds that I had no idea how health insurance worked but maybe if I bought the cheap one I’d get sick and regret my choice, and maybe if I bought the expensive one I wouldn’t be sick and regret my choice. I am a doctor, my employer is a hospital, and the health insurance was for treatment in my own health system. The moral of the story is that I am an idiot. The second moral of the story is that people probably are not super-informed health care consumers.

This can’t be pure price-gouging, since corporate profits haven’t increased nearly enough to be where all the money is going. But a while ago a commenter linked me to the Delta Cost Project, which scrutinizes the exact causes of increasing college tuition. Some of it is the administrative bloat that you would expect. But a lot of it is fun “student life” types of activities like clubs, festivals, and paying Milo Yiannopoulos to speak and then cleaning up after the ensuing riots. These sorts of things improve the student experience, but I’m not sure that the average student would rather go to an expensive college with clubs/festivals/Milo than a cheap college without them. More important, it doesn’t really seem like the average student is offered this choice.

This kind of suggests a picture where colleges expect people will pay whatever price they set, so they set a very high price and then use the money for cool things and increasing their own prestige. Or maybe clubs/festivals/Milo become such a signal of prestige that students avoid colleges that don’t comply since they worry their degrees won’t be respected? Some people have pointed out that hospitals have switched from many-people-all-in-a-big-ward to private rooms. Once again, nobody seems to have been offered the choice between expensive hospitals with private rooms versus cheap hospitals with roommates. It’s almost as if industries have their own reasons for switching to more-bells-and-whistles services that people don’t necessarily want, and consumers just go along with it because for some reason they’re not exercising choice the same as they would in other markets.

(this article on the Oklahoma City Surgery Center might be about a partial corrective for this kind of thing)

Third, can we attribute this to the inefficiency of government relative to private industry? I don’t think so. The government handles most primary education and subways, and has its hand in health care. But we know that for-profit hospitals aren’t much cheaper than government hospitals, and that private schools usually aren’t much cheaper (and are sometimes more expensive) than government schools. And private colleges cost more than government-funded ones.

Fourth, can we attribute it to indirect government intervention through regulation, which public and private companies alike must deal with? This seems to be at least part of the story in health care, given how much money you can save by grey-market practices that avoid the FDA. It’s harder to apply it to colleges, though some people have pointed out regulations like Title IX that affect the educational sector.

One factor that seems to speak out against this is that starting with Reagan in 1980, and picking up steam with Gingrich in 1994, we got an increasing presence of Republicans in government who declared war on overregulation – but the cost disease proceeded unabated. This is suspicious, but in fairness to the Republicans, they did sort of fail miserably at deregulating things. “The literal number of pages in the regulatory code” is kind of a blunt instrument, but it doesn’t exactly inspire confidence in the Republicans’ deregulation efforts:

Here’s a more interesting (and more fun) argument against regulations being to blame: what about pet health care? Veterinary care is much less regulated than human health care, yet its cost is rising as fast (or faster) than that of the human medical system (popular article, study). I’m not sure what to make of this.

Fifth, might the increased regulatory complexity happen not through literal regulations, but through fear of lawsuits? That is, might institutions add extra layers of administration and expense not because they’re forced to, but because they fear being sued if they don’t and then something goes wrong?

I see this all the time in medicine. A patient goes to the hospital with a heart attack. While he’s recovering, he tells his doctor that he’s really upset about all of this. Any normal person would say “You had a heart attack, of course you’re upset, get over it.” But if his doctor says this, and then a year later he commits suicide for some unrelated reason, his family can sue the doctor for “not picking up the warning signs” and win several million dollars. So now the doctor consults a psychiatrist, who does an hour-long evaluation, charges the insurance company $500, and determines using her immense clinical expertise that the patient is upset because he just had a heart attack.

Those outside the field have no idea how much of medicine is built on this principle. People often say that the importance of lawsuits to medical cost increases is overrated because malpractice insurance doesn’t cost that much, but the situation above would never look lawsuit-related; the whole thing only works because everyone involved documents it as well-justified psychiatric consult to investigate depression. Apparently some studies suggest this isn’t happening, but all they do is survey doctors, and with all due respect all the doctors I know say the opposite.

This has nothing to do with government regulations (except insofar as these make lawsuits easier or harder), but it sure can drive cost increases, and it might apply to fields outside medicine as well.

Sixth, might we have changed our level of risk tolerance? That is, might increased caution be due not purely to lawsuitphobia, but to really caring more about whether or not people are protected? I read stuff every so often about how playgrounds are becoming obsolete because nobody wants to let kids run around unsupervised on something with sharp edges. Suppose that one in 10,000 kids get a horrible playground-related injury. Is it worth making playgrounds cost twice as much and be half as fun in order to decrease that number to one in 100,000? This isn’t a rhetorical question; I think different people can have legitimately different opinions here (though there are probably some utilitarian things we can do to improve them).

To bring back the lawsuit point, some of this probably relates to a difference between personal versus institutional risk tolerance. Every so often, an elderly person getting up to walk to the bathroom will fall and break their hip. This is a fact of life, and elderly people deal with it every day. Most elderly people I know don’t spend thousands of dollars fall-proofing the route from their bed to their bathroom, or hiring people to watch them at every moment to make sure they don’t fall, or buy a bedside commode to make bathroom-related falls impossible. This suggests a revealed preference that elderly people are willing to tolerate a certain fall probability in order to save money and convenience. Hospitals, which face huge lawsuits if any elderly person falls on the premises, are not willing to tolerate that probability. They put rails on elderly people’s beds, place alarms on them that will go off if the elderly person tries to leave the bed without permission, and hire patient care assistants who among other things go around carefully holding elderly people upright as they walk to the bathroom (I assume this job will soon require at least a master’s degree). As more things become institutionalized and the level of acceptable institutional risk tolerance becomes lower, this could shift the cost-risk tradeoff even if there isn’t a population-level trend towards more risk-aversion.

Seventh, might things cost more for the people who pay because so many people don’t pay? This is somewhat true of colleges, where an increasing number of people are getting in on scholarships funded by the tuition of non-scholarship students. I haven’t been able to find great statistics on this, but one argument against: couldn’t a college just not fund scholarships, and offer much lower prices to its paying students? I get that scholarships are good and altruistic, but it would be surprising if every single college thought of its role as an altruistic institution, and cared about it more than they cared about providing the same service at a better price. I guess this is related to my confusion about why more people don’t open up colleges. Maybe this is the “smart people are rightly too scared and confused to go to for-profit colleges, and there’s not enough ability to discriminate between the good and the bad ones to make it worthwhile to found a good one” thing again.

This also applies in health care. Our hospital (and every other hospital in the country) has some “frequent flier” patients who overdose on meth at least once a week. They comes in, get treated for their meth overdose (we can’t legally turn away emergency cases), get advised to get help for their meth addiction (without the slightest expectation that they will take our advice) and then get discharged. Most of them are poor and have no insurance, but each admission costs a couple of thousand dollars. The cost gets paid by a combination of taxpayers and other hospital patients with good insurance who get big markups on their own bills.

Eighth, might total compensation be increasing even though wages aren’t? There definitely seems to be a pensions crisis, especially in a lot of government work, and it’s possible that some of this is going to pay the pensions of teachers, etc. My understanding is that in general pensions aren’t really increasing much faster than wages, but this might not be true in those specific industries. Also, this might pass the buck to the question of why we need to spend more on pensions now than in the past. I don’t think increasing life expectancy explains all of this, but I might be wrong.


I mentioned politics briefly above, but they probably deserve more space here. Libertarian-minded people keep talking about how there’s too much red tape and the economy is being throttled. And less libertarian-minded people keep interpreting it as not caring about the poor, or not understanding that government has an important role in a civilized society, or as a “dog whistle” for racism, or whatever. I don’t know why more people don’t just come out and say “LOOK, REALLY OUR MAIN PROBLEM IS THAT ALL THE MOST IMPORTANT THINGS COST TEN TIMES AS MUCH AS THEY USED TO FOR NO REASON, PLUS THEY SEEM TO BE GOING DOWN IN QUALITY, AND NOBODY KNOWS WHY, AND WE’RE MOSTLY JUST DESPERATELY FLAILING AROUND LOOKING FOR SOLUTIONS HERE.” State that clearly, and a lot of political debates take on a different light.

For example: some people promote free universal college education, remembering a time when it was easy for middle class people to afford college if they wanted it. Other people oppose the policy, remembering a time when people didn’t depend on government handouts. Both are true! My uncle paid for his tuition at a really good college just by working a pretty easy summer job – not so hard when college cost a tenth of what it did now. The modern conflict between opponents and proponents of free college education is over how to distribute our losses. In the old days, we could combine low taxes with widely available education. Now we can’t, and we have to argue about which value to sacrifice.

Or: some people get upset about teachers’ unions, saying they must be sucking the “dynamism” out of education because of increasing costs. Others people fiercely defend them, saying teachers are underpaid and overworked. Once again, in the context of cost disease, both are obviously true. The taxpayers are just trying to protect their right to get education as cheaply as they used to. The teachers are trying to protect their right to make as much money as they used to. The conflict between the taxpayers and the teachers’ unions is about how to distribute losses; somebody is going to have to be worse off than they were a generation ago, so who should it be?

And the same is true to greater or lesser degrees in the various debates over health care, public housing, et cetera.

Imagine if tomorrow, the price of water dectupled. Suddenly people have to choose between drinking and washing dishes. Activists argue that taking a shower is a basic human right, and grumpy talk show hosts point out that in their day, parents taught their children not to waste water. A coalition promotes laws ensuring government-subsidized free water for poor families; a Fox News investigative report shows that some people receiving water on the government dime are taking long luxurious showers. Everyone gets really angry and there’s lots of talk about basic compassion and personal responsibility and whatever but all of this is secondary to why does water costs ten times what it used to?

I think this is the basic intuition behind so many people, even those who genuinely want to help the poor, are afraid of “tax and spend” policies. In the context of cost disease, these look like industries constantly doubling, tripling, or dectupling their price, and the government saying “Okay, fine,” and increasing taxes however much it costs to pay for whatever they’re demanding now.

If we give everyone free college education, that solves a big social problem. It also locks in a price which is ten times too high for no reason. This isn’t fair to the government, which has to pay ten times more than it should. It’s not fair to the poor people, who have to face the stigma of accepting handouts for something they could easily have afforded themselves if it was at its proper price. And it’s not fair to future generations if colleges take this opportunity to increase the cost by twenty times, and then our children have to subsidize that.

I’m not sure how many people currently opposed to paying for free health care, or free college, or whatever, would be happy to pay for health care that cost less, that was less wasteful and more efficient, and whose price we expected to go down rather than up with every passing year. I expect it would be a lot.

And if it isn’t, who cares? The people who want to help the poor have enough political capital to spend eg $500 billion on Medicaid; if that were to go ten times further, then everyone could get the health care they need without any more political action needed. If some government program found a way to give poor people good health insurance for a few hundred dollars a year, college tuition for about a thousand, and housing for only two-thirds what it costs now, that would be the greatest anti-poverty advance in history. That program is called “having things be as efficient as they were a few decades ago”.


In 1930, economist John Maynard Keynes predicted that his grandchildrens’ generation would have a 15 hour work week. At the time, it made sense. GDP was rising so quickly that anyone who could draw a line on a graph could tell that our generation would be four or five times richer than his. And the average middle-class person in his generation felt like they were doing pretty well and had most of what they needed. Why wouldn’t they decide to take some time off and settle for a lifestyle merely twice as luxurious as Keynes’ own?

Keynes was sort of right. GDP per capita is 4-5x greater today than in his time. Yet we still work forty hour weeks, and some large-but-inconsistently-reported percent of Americans (76? 55? 47?) still live paycheck to paycheck.

And yes, part of this is because inequality is increasing and most of the gains are going to the rich. But this alone wouldn’t be a disaster; we’d get to Keynes’ utopia a little slower than we might otherwise, but eventually we’d get there. Most gains going to the rich means at least some gains are going to the poor. And at least there’s a lot of mainstream awareness of the problem.

I’m more worried about the part where the cost of basic human needs goes up faster than wages do. Even if you’re making twice as much money, if your health care and education and so on cost ten times as much, you’re going to start falling behind. Right now the standard of living isn’t just stagnant, it’s at risk of declining, and a lot of that is student loans and health insurance costs and so on.

What’s happening? I don’t know and I find it really scary.

Albion’s Seed, Genotyped

Last year I reviewed Albion’s Seed, historian David Fischer’s work on the four great English migrations to America (and JayMan continues the story in his series on American Nations). These early migrations help explain modern regional patterns like why Massachusetts is so liberal or why Appalachia seems so backwards. As always, there’s the lingering question of how much of these patterns are cultural versus genetic versus gene-cultural interaction.

Now Han et al take this field high-tech with the publication of Clustering Of 770,000 Genomes Reveals Post-Colonial Population Structure Of North America (h/t gwern, werttrew)

The team looked at 770,000 genomes analyzed by the AncestryDNA company and used a technique called identity-by-descent to find recent common ancestors. Then they used some other techniques to divide them into natural clusters. This is what they got:

This is the European-settler-focused map – there’s another one focusing on immigrant groups lower down here

This is kind of beautiful. While not exactly matching Albion’s Seed, it at least clearly shows its New Englander and Pennsylvania Quaker migrations (more realistically the Germans who came along with the Quakers), with less distinct signals for Borderers and Virginians. It shows how they spread directly west from their place of origin in almost exactly the way American Nations predicted. It even confirms my own conjecture that the belt of Democrat voters along southern Michigan corresponds to an area of New Englander settlement there (see part III here, or search “linear distribution of blue”). And it confirms Razib Khan’s observation that the Mormons are just displaced New Englanders and that their various unusual demographic features make sense in that context.

My biggest confusion is in the Southern/Appalachian region. I think Fischer would have predicted two distinct strains: a Tidewater/Virginian population along the coasts, and a Borderer/Appalachian population centered in West Virginia and Kentucky. Instead there are three populations, all of which start along the Atlantic Coast and continue inland in about the same way. Assuming red/”Appalachian” is the Borderers, I don’t know if Fischer has a good explanation for the purple/”upland south” vs. gold/”lower south” distinction. Nor I do get understand why, if one of those two represent the Tidewater Virginians, they don’t seem to be in the Tidewater Virginia region (which here is inhabited mostly by Borderers). Maybe this has something to do with the Civil War, or with the growth of the DC suburbs?

(And I guess we still haven’t ruled out the maximally boring explanation that interbreeding is entirely geographic and north-south is a bigger distinction than east-west so we’re just seeing the country divided into five equal-sized latitudinal bands.)

Not exactly a confusion, but more a disappointment: this map doesn’t provide the confirmation I’d hoped for that Californians, Seattleites, and other “Left Coasters” are displaced New Englanders – which would complete the circle of “Liberal Democrats = Puritan/Quaker population subgroup”. It’s also disappointing how little data they have for the Mountain West in general; I don’t know if that’s because there weren’t enough people there to show up, or because they’re a mix of every genetic lineage and don’t fit into any of the clusters nicely.

Still, I find this a really elegant example of hard science confirming historical speculation. Thanks to everyone who brought it to my attention.

[EDIT: Jayman goes much more into depth on this]

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Notes From The Asilomar Conference On Beneficial AI

Last month I got to attend the Asilomar Conference on Beneficial AI. I tried to fight it off, saying I was totally unqualified to go to any AI-related conference. But the organizers assured me that it was an effort to bring together people from diverse fields to discuss risks ranging from technological unemployment to drones to superintelligence, and so it was totally okay that I’d never programmed anything more complicated than HELLO WORLD.

“Diverse fields” seems right. On the trip from San Francisco airport, my girlfriend and I shared a car with two computer science professors, the inventor of Ethereum, and a UN chemical weapons inspector. One of the computer science professors tried to make conversion by jokingly asking the weapons inspector if he’d ever argued with Saddam Hussein. “Yes,” said the inspector, not joking at all. The rest of the conference was even more interesting than that.

I spent the first night completely star-struck. Oh, that’s the founder of Skype. Oh, those are the people who made AlphaGo. Oh, that’s the guy who discovered the reason why the universe exists at all. This might have left me a little tongue-tied. How do you introduce yourself to eg David Chalmers? “Hey” seems insufficient for the gravity of the moment. “Hey, you’re David Chalmers!” doesn’t seem to communicate much he doesn’t already know. “Congratulations on being David Chalmers”, while proportionate, seems potentially awkward. I just don’t have an appropriate social script for this situation.

(the problem was resolved when Chalmers saw me staring at him, came up to me, and said “Hey, are you the guy who writes Slate Star Codex?”)

The conference policy discourages any kind of blow-by-blow description of who said what in order to prevent people from worrying about how what they say will be “reported” later on. But here are some general impressions I got from the talks and participants:

1. In part the conference was a coming-out party for AI safety research. One of the best received talks was about “breaking the taboo” on the subject, and mentioned a postdoc who had pursued his interest in it secretly lest his professor find out, only to learn later that his professor was also researching it secretly, lest everyone else find out.

The conference seemed like a (wildly successful) effort to contribute to the ongoing normalization of the subject. Offer people free food to spend a few days talking about autonomous weapons and biased algorithms and the menace of AlphaGo stealing jobs from hard-working human Go players, then sandwich an afternoon on superintelligence into the middle. Everyone could tell their friends they were going to hear about the poor unemployed Go players, and protest that they were only listening to Elon Musk talk about superintelligence because they happened to be in the area. The strategy worked. The conference attracted AI researchers so prestigious that even I had heard of them (including many who were publicly skeptical of superintelligence), and they all got to hear prestigious people call for “breaking the taboo” on AI safety research and get applauded. Then people talked about all of the lucrative grants they had gotten in the area. It did a great job of creating common knowledge that everyone agreed AI goal alignment research was valuable, in a way not entirely constrained by whether any such agreement actually existed.

2. Most of the economists there seemed pretty convinced that technological unemployment was real, important, and happening already. A few referred to Daron Acemoglu’s recent paper Robots And Jobs: Evidence From US Labor Markets, which says:

We estimate large and robust negative effects of robots on employment and wages. We show that commuting zones most affected by robots in the post-1990 era were on similar trends to others before 1990, and that the impact of robots is distinct and only weakly correlated with the prevalence of routine jobs, the impact of imports from China, and overall capital utilization. According to our estimates, each additional robot reduces employment by about seven workers, and one new robot per thousand workers reduces wages by 1.2 to 1.6 percent.

And apparently last year’s Nobel laureate Angus Deaton said that:

Globalisation for me seems to be not first-order harm and I find it very hard not to think about the billion people who have been dragged out of poverty as a result. I don’t think that globalisation is anywhere near the threat that robots are.

A friend reminded me that the kind of economists who go to AI conferences might be a biased sample, so I checked IGM’s Economic Expert Panel (now that I know about that I’m going to use it for everything):

It looks like economists are uncertain but lean towards supporting the theory, which really surprised me. I thought people were still talking about the Luddite fallacy and how it was impossible for new technology to increase unemployment because something something sewing machines something entire history of 19th and 20th centuries. I guess that’s changed.

I had heard the horse used as a counterexample to this before – ie the invention of the car put horses out of work, full stop, and now there are fewer of them. An economist at the conference added some meat to this story – the invention of the stirrup (which increased horse efficiency) and the railroad (which displaced the horse for long-range trips) increased the number of horses, but the invention of the car decreased it. This suggests that some kind of innovations might complement human labor and others replace it. So a pessimist could argue that the sewing machine (or whichever other past innovation) was more like the stirrup, but modern AIs will be more like the car.

3. A lot of people there were really optimistic that the solution to technological unemployment was to teach unemployed West Virginia truck drivers to code so they could participate in the AI revolution. I used to think this was a weird straw man occasionally trotted out by Freddie deBoer, but all these top economists were super enthusiastic about old white guys whose mill has fallen on hard times founding the next generation of nimble tech startups. I’m tempted to mock this, but maybe I shouldn’t – this From Coal To Code article says that the program has successfully rehabilitated Kentucky coal miners into Web developers. And I can’t think of a good argument why not – even from a biodeterminist perspective, nobody’s ever found that coal mining areas have lower IQ than anywhere else, so some of them ought to be potential web developers just like everywhere else. I still wanted to ask the panel “Given that 30-50% of kids fail high school algebra, how do you expect them to learn computer science?”, but by the time I had finished finding that statistic they had moved on to a different topic.

4. The cutting edge in AI goal alignment research is the idea of inverse reinforcement learning. Normal reinforcement learning is when you start with some value function (for example, “I want something that hits the target”) and use reinforcement to translate that into behavior (eg reinforcing things that come close to the target until the system learns to hit the target). Inverse reinforcement learning is when you start by looking at behavior and use it to determine some value function (for example, “that program keeps hitting that spot over there, I bet it’s targeting it for some reason”).

Since we can’t explain human ethics very clearly, maybe it would be easier to tell an inverse reinforcement learner to watch the stuff humans do and try to figure out what values we’re working off of – one obvious problem being that our values predict our actions much less than we might wish. Presumably this is solvable if we assume that our moral statements are also behavior worth learning from.

A more complicated problem: humans don’t have utility functions, and an AI that assumes we do might come up with some sort of monstrosity that predicts human behavior really well while not fitting our idea of morality at all. Formalizing what exactly humans do have and what exactly it means to approximate that thing might turn out to be an important problem here.

5. Related: a whole bunch of problems go away if AIs, instead of receiving rewards based on the state of the world, treat the reward signal as information about a reward function which they only imperfectly understand. For example, suppose an AI wants to maximize “human values”, but knows that it doesn’t really understand human values very well. Such an AI might try to learn things, and if the expected reward was high enough it might try to take actions in the world. But it wouldn’t (contra Omohundro) naturally resist being turned off, since it might believe the human turning it off understood human values better than it did and had some human-value-compliant reason for wanting it gone. This sort of AI also might not wirehead – it would have no reason to think that wireheading was the best way to learn about and fulfill human values.

The technical people at the conference seemed to think this idea of uncertainty about reward was technically possible, but would require a ground-up reimagining of reinforcement learning. If true, it would be a perfect example of what Nick Bostrom et al have been trying to convince people of since forever: there are good ideas to mitigate AI risk, but they have to be studied early so that they can be incorporated into the field early on.

6. AlphaGo has gotten much better since beating Lee Sedol and its creators are now trying to understand the idea of truly optimal play. I would have expected Go players to be pretty pissed about being made obsolete, but in fact they think of Go as a form of art and are awed and delighted to see it performed at superhuman levels.

More interesting for the rest of us, AlphaGo is playing moves and styles that all human masters had dismissed as stupid centuries ago. Human champion Ke Jie said that:

After humanity spent thousands of years improving our tactics, computers tell us that humans are completely wrong. I would go as far as to say not a single human has touched the edge of the truth of Go.

A couple of people talked about how the quest for “optimal Go” wasn’t just about one game, but about grading human communities. Here we have this group of brilliant people who have been competing against each other for centuries, gradually refining their techniques. Did they come pretty close to doing as well as merely human minds could manage? Or did non-intellectual factors – politics, conformity, getting trapped at local maxima – cause them to ignore big parts of possibility-space? Right now it’s very preliminarily looking like the latter, which would be a really interesting result – especially if it gets replicated once AIs take over other human fields.

One Go master said that he would have “slapped” a student for playing a strategy AlphaGo won with. Might we one day be able to do a play-by-play of Go history, finding out where human strategists went wrong, which avenues they closed unnecessarily, and what institutions and thought processes were most likely to tend towards the optimal play AlphaGo has determined? If so, maybe we could have have twenty or thirty years to apply the knowledge gained to our own fields before AIs take over those too.

7. People For The Ethical Treatment Of Reinforcement Learners got a couple of shout-outs, for some reason. One reinforcement learning expert pointed out that the problem was trivial, because of a theorem that program behavior wouldn’t be affected by global shifts in reinforcement levels (ie instead of going from +10 to -10, go from +30 to +10). I’m not sure if I’m understanding this right, or if this kind of trick would affect a program’s conscious experiences, or if anyone involved in this discussion is serious.

8. One theme that kept coming up was that most modern machine learning algorithms aren’t “transparent” – they can’t give reasons for their choices, and it’s difficult for humans to read them off of the connection weights that form their “brains”. This becomes especially awkward if you’re using the AI for something important. Imagine a future inmate asking why he was denied parole, and the answer being “nobody knows and it’s impossible to find out even in principle”. Even if the AI involved were generally accurate and could predict recidivism at superhuman levels, that’s a hard pill to swallow.

(DeepMind employs a Go master to help explain AlphaGo’s decisions back to its own programmers, which is probably a metaphor for something)

This problem scales with the size of the AI; a superintelligence whose decision-making process is completely opaque sounds pretty scary. This is the “treacherous turn” again; you can train an AI to learn human values, and you can observe it doing something that looks like following human values, but you can never “reach inside” and see what it’s “really thinking”. This could be pretty bad if what it’s really thinking is “I will lull the humans into a false sense of complacency until they give me more power”. There seem to be various teams working on the issue.

But I’m also interested in what it says about us. Are the neurons in our brain some kind of uniquely readable agent that is for some reason transparent to itself in a way other networks aren’t? Or should we follow Nisbett and Wilson in saying that our own brains are an impenetrable mass of edge weights just like everything else, and we’re forced to guess at the reasons motivating our own cognitive processes?

9. One discipline I shouldn’t have been so surprised to see represented at the multidisciplinary conference was politics. A lot of the political scientists and lawyers there focused on autonomous weapons, but some were thinking about AI arms races. If anyone gets close to superintelligence, we want to give them time to test it for safety before releasing it into the wild. But if two competing teams are equally close and there’s a big first-mover advantage (for example, first mover takes over the world), then both groups will probably skip the safety testing.

On an intranational level, this suggests a need for regulation; on an international one, it suggests a need for cooperation. The Asilomar attendees were mostly Americans and Europeans, and some of them were pretty well-connected in their respective governments. But we realized we didn’t have the same kind of contacts in the Chinese and Russian AI communities, which might help if we needed some kind of grassroots effort to defuse an AI arms race before it started. If anyone here is a Chinese or Russian AI scientist, or has contacts with Chinese or Russian AI scientists, please let me know and I can direct you to the appropriate people.

10. In the end we debated some principles to be added into a framework that would form a basis for creating a guideline to lay out a vision for ethical AI. Most of these were generic platitudes, like “we believe the benefits of AI should go to everybody”. There was a lunch session where we were supposed to discuss these and maybe change the wording and decide which ones we did and didn’t support.

There are lots of studies in psychology and neuroscience about what people’s senses do when presented with inadequate stimuli, like in a sensory deprivation tank. Usually they go haywire and hallucinate random things. I was reminded of this as I watched a bunch of geniuses debate generic platitudes. It was hilarious. I got the lowdown from a couple of friends who were all sitting at different tables, and everyone responded in different ways, from rolling their eyes at the project to getting really emotionally invested in it. My own table was moderated by a Harvard philosophy professor who obviously deserved it. He clearly and fluidly explained the moral principles behind each of the suggestions, encouraged us to debate them reasonably, and then led us to what seemed in hindsight the obviously correct answer. I had already read one of his books but I am planning to order more. Meanwhile according to my girlfriend other tables did everything short of come to blows.

Overall it was an amazing experience and many thanks to the Future of Life Institute for putting on the conference and inviting me. Some pictures (not taken by me) below:

The conference center

The panel on superintelligence.

We passed this store on the way to the conference. I thought it was kabbalistically relevant to AI risk.

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[GUEST POST] The International Refugee Assistance Project

[This is a guest post by Elizabeth Van Nostrand of Aceso Under Glass.]

How do you judge the effectiveness of preparing for something that might never happen? Consider emergency room capacity; if you have enough space and staff to deal with a diphtheria epidemic, it will seem wasted during the 99% of the time there isn’t one. But this is false economy; during a crisis the extra reserve may be the difference between disruption and disaster.

Whatever the staff of the ACLU was doing on Friday morning, it wasn’t as important as what they did Friday afternoon, after Trump banned legal immigrants from reentering the country, even if they were in flight.  If you just evaluated the effectiveness of their Friday morning work, you’d miss that they were also holding the capacity to respond to Trump’s order as quickly as they did.  That speed mattered – not just to residents being badgered into giving up their green cards, but because it demonstrated to Trump and America that the consequences of violating the Constitution are severe and immediate. Once the crisis hit, it became easy to see how everything that went into preparing for it was high leverage – which was why people donated $20,000,000 over the weekend.

But the ACLU didn’t act alone. One partner was the International Refugee Assistance Project, founded by Becca Heller.  While in Jordan on an internship, Heller talked to Iraqi refugees there whose applications to emigrate to the US had been denied; they had given up because there was no way to appeal Homeland Security decisions. But rejected applicants can effectively appeal by asking that DHS “reconsider” their application. Using case law from asylum decisions, Becca filed requests to reconsider on behalf of these Iraqi refugees. Back home, she began recruiting other Yale law students, then students at other law schools. As her organization grew in scope,  it effected some at-the-margins policy work as well. A notable win here was using FOIA to force the DHS to release their refugee decision manual.  Last year IRAP received a grant from the Open Philanthropy Project to increase the extent of their policy work.

The majority of IRAP’s day to day work involves processing appeals for individual refugees whose requests to resettle in the U.S. were denied.  Their staff manages a team of volunteer law students and lawyers who pour hours into interviewing clients, investigating cases, collecting documents to prove refugee status, and writing appeals. This aspect of their work isn’t glamorous. It’s not arguing before the Supreme Court to establish rights people didn’t have a week before. It’s tracking down proof that someone is from the country they say they are, when 95% of record-keeping institutions in the country have been blown up and the procedure for getting a passport is to find Mr. Big Beard’s stall in the market and give him some money. It’s very ground-level work that makes an enormous difference in the lives of individual immigrants. But each person helped in this way represents the investment of many, many hours from lawyers and law students; if you were analyzing their effectiveness, they’d probably score poorly relative to AMF (especially if you included the value of in kind donations of time from skilled individuals). Where they did advocacy work, it was relatively quiet and uncontroversial.


Under American law, an arbitrary person can’t challenge a government policy or decision in court.  You have to have standing, meaning you personally are hurt by the action.  And to be represented by a lawyer, you have to say “I am represented by this lawyer,” which normally isn’t a problem, unless you’re being held incommunicado and no one knows where you are.  There are ways around this, but they’re time consuming.

IRAP’s ground level work meant that when Trump’s order went out, it took them approximately four seconds to create a list of extremely sympathetic/photogenic immigrants who would be caught at airports that day, for some of whom they were already the legal representative of record. It took another six seconds to find even more photogenic supporters of those immigrants who were willing to loudly support them in media interviews. Veterans are Not Fucking Around when it comes to their translators.

IRAP doesn’t have a long history of challenging the federal government the way the ACLU does.  But by partnering with the ACLU (with its very strong history of challenging the federal government), the National Immigration Law Center (extensive knowledge of immigration policy) and Yale Law School (I don’t know, cheap labor from students? Money?), they were able to launch the strongest possible campaign to force Trump to keep promises we made as a country.

Also, for someone whose organization spends most of its time on individual cases, Becca Heller sure is good at publicly nailing the government to the wall.  I want her on this team just so she can keep going on TV and talking over congresspeople who she deems insufficiently proactive.

Ultimately I think the part where Trump flat out ignored the judicial branch is more important than changes to immigration (although I would like to see us expand immigration), and the ACLU is best positioned to fight constitutional battles.  But the ACLU will need similar assistance from ground-level organizations for the next fight too, and they just got twenty million dollars. Yale Law School needs your money even less. IRAP, by contrast, has an annual budget of $2 million. I exhausted my charity budget at the beginning of the year on my personal cause area, Third World poverty, but my ability to continue giving is dependent on the United States having a functional government and economy. I am genuinely afraid Trump will destroy both of those. I’m donating $100 to IRAP to support the upcoming legal fight, and as a retroactive bonus for building this capacity before most of us knew how much it was needed.

I encourage others to donate to IRAP, or to find similar small charities doing ground level work.