NYT: Economic Incentives Don’t Always Do What We Want Them To (h/t MR). For the first time in history, the title actually understates the article, which argues that incentives can be surprisingly useless:
Economists have somehow managed to hide in plain sight an enormously consequential finding from their research: Financial incentives are nowhere near as powerful as they are usually assumed to be.
The article starts with some surprising facts. Increased taxes on the rich don’t make rich people work much less. Salary caps on athletes don’t decrease athletic performance. Increased welfare doesn’t make poor people work less. Decreased job opportunities in one area rarely cause people to move elsewhere.
Then it presents a neat chart showing that most people believe others would respond to an incentive, but deny responding to that incentive themselves. For example, 60% of people say a Medicaid program with no work requirement would prevent many people from seeking work, but only 10% of people say they themselves would stop seeking work with such a program.
…but keep in mind an alternate interpretation would be “desirability bias makes people deny they would work less and evade taxes”
All this suggests that:
If it is not financial incentives, what else might people care about? The answer is something we know in our guts: status, dignity, social connections. Chief executives and top athletes are driven by the desire to win and be the best. The poor will walk away from social benefits if they come with being treated like a criminal. And among the middle class, the fear of losing their sense of who they are and their status in the local community can be an extraordinarily paralyzing force.
They conclude that this argues in favor of policies like raising taxes on the rich and removing all requirements from welfare programs.
The authors are Nobel Prize winning economists, so I assume they’re basically right. And I’m not up to doing a complicated literature review to compare all the cases where economic incentives do work to the cases where they don’t and develop a well-informed understanding of the subtleties in their position. So instead, a few low-effort thoughts.
First, it matters less whether the average person responds to economic incentives, and more whether the marginal person will. If I need someone to cover the graveyard shift at work, nobody will do it for normal pay, and I offer double pay, all I need is for one employee to be incentive-sensitive enough to take me up on it. Maybe most people wouldn’t accept any amount of money to become an oil rig worker, a McKinsey consultant, or a camgirl, but ExxonMobil/McKinsey/MyFreeCams.com only need just enough qualified people to accept whatever deal they’re offering.
Likewise, perhaps if I had no alarm system protecting my house, 99.999% of people still wouldn’t rob me. But 99.999% of people not robbing you is still known as “getting robbed”.
So “most people don’t respond to most economic incentives” is totally compatible with “economic incentives rule the world and control everything around us.”
Second, grant that most people care primarily about “status, dignity, [and] social connections”. A lot of how that works out in real life is “doing the socially acceptable thing”. Even if incentives are weak in the short term, they can be very strong in the long term after they have time to act on what is or isn’t socially acceptable.
It’s all nice and good to say “most people wouldn’t steal even in the absence of punishment”. But what about music piracy? Nobody had any way to enforce rules against pirating music. Maybe only a few people pirated at first. But then more and more people did it, and eventually the unwritten rule among teenagers became that music piracy was okay – in fact, that you were weird if you didn’t do it. On the other hand, stealing a CD from a record store still feels horrifying and criminal and inconceivable. Although there are subtle differences between the two cases (it costs nonzero money to make a physical CD) I still think a lot of this is social norms that formed downstream of enforcement-related incentives.
Or: most people would never cheat on welfare. But there are Alabama counties where over 25% of the population are on disability, an increase of 50% from just fifteen years earlier. I don’t want to accuse any of them of cheating, per se, and see here for a more in-depth analysis. But I think it’s easy to normalize taking disability for lesser and lesser afflictions, and that part of the normalization process involves an economic incentive to do it and a lack of incentive not to.
Or: in Sierra Leone, 84% of people say they have paid bribes; in Japan, 1% have. So do “people” care about financial incentives or not? Grant that “status, dignity, [and] social connections” are more important, and that this is what prevents bribery in Japan. But once these factors permit bribery, it becomes rampant. And are these factors themselves maintained partly by incentives, eg punishments upon being caught? I’m not sure.
Third, remember that principles are usually downstream of politics. So one fun game is to take a principle usually used on one side of the political spectrum, then apply it in support of the opposite side and see if you still hold it.
So. We know there’s no reason not to raise taxes, since rich people don’t respond to financial incentives. But there’s also no reason to close tax loopholes – rich people defrauding the government of money through tax evasion is surely as unthinkable as poor people defrauding the government through welfare scams. And there’s no reason to question the bonuses of Wall Street traders, since it’s not like anything as crass as a financial incentive would cause them to make risky trades.
Did pharmaceutical companies incentivize opioid overuse through paying doctors to overprescribe? Doesn’t matter, doctors would never let financial incentives affect their prescribing decisions. Are senators cozying up to companies that will give them lucrative sinecures later in a “revolving-door” system of legal bribery? No, because incentives aren’t powerful enough to make senators abandon their dignity. Are billionaires destroying the environment just to make a buck? No, the financial incentives to do so wouldn’t outweigh the cost in status and social connections.
None of this snark disproves the real empirical research the authors use to show that rich people’s taxes, poor people’s welfare use, and economic mobility are not very incentive-sensitive. But I hope they prevent people from generalizing to a general sense that financial incentives don’t matter, or turning this into a purely partisan issue where anyone who believes in financial incentives at all gets accused of “dog whistling” conservativism.
Fourth, and most important, the more we’re ruled by social incentives, the more importance financial incentives take on as a counterweight. Quoting my favorite part of the article again:
If it is not financial incentives, what else might people care about? The answer is something we know in our guts: status, dignity, social connections. Chief executives and top athletes are driven by the desire to win and be the best. The poor will walk away from social benefits if they come with being treated like a criminal. And among the middle class, the fear of losing their sense of who they are and their status in the local community can be an extraordinarily paralyzing force.
I think this is profoundly true, so true that it’s almost impossible to appreciate enough. The article frames it positively – we care about community more than money, how heartwarming. But I find it disquieting – it could equally be framed “We care more about fitting in and not seeming weird than about anything else in the world”. 99% of world-changing ideas are stillborn when their would-be-inventor worries they might sound weird for proposing them. 99% of great companies don’t get off the ground because their would-be-founder worries about what other people would think. The most important ideas for changing government and society sit on the lunatic fringe, because everyone worries that supporting such ideas might keep them out of the Inner Ring.
Paradoxically, I think this argues in favor of financial incentives. The beauty of financial incentives is that they provide a counterbalance to status incentives. The counterbalance is weak, inconsistent, blink-and-you-miss-it, but it is real. If all the cool people say “we do it this way”, 99% of people will do it that way to fit in, but there will be one person who does it the much better way that lets them outcompete everyone else and make $10 billion. And having $10 billion brings “status, dignity, [and] social connections” of its own. Even if only a tiny number of people are sensitive to money, it’s enough to create a core who occasionally try making things better even when that’s not cool.
One corollary of this is that when you remove financial incentives, you don’t get everyone acting ethically for the good of all. You just get status incentives with no counterbalance. I can think of few things scarier.
I think you forgot about the biggest point here. This is a self report study. Those are notoriously inaccurate. I don’t trust people to accurately tell me what they would do. I find it very plausible that people underestimate the extent to which they respond to incentives in order to fuel their delusions that they are less lazy/greedy/self-interested than they really are.
Isn’t that kind of a fully general counterargument?
Like…
Walter: “All people are stinky.”
Scott: “I surveyed them and they aren’t.”
Walter: “Of course they’d say that…”
I mean, if you don’t believe people when they say stuff that is laudable aren’t u in wild west country? Nobody can refute anything (of course you WOULD say you aren’t guilty of so and so, the motive is obvious!), so everyone has to accuse first?
A better description of your hypothetical re: what Scott is saying is:
The question isn’t what people say they’ll do, it’s what they actually do when they have to live with the consequences. In your hypothetical, if you conclude they aren’t stinky by actually smelling them, not asking them.
No, it’s a widely applicable heuristic for weakening of purported evidence.
Also worth pointing out that in economics, there is a general skepticism for believing survey style evidence. People might *say* they will do anything. There are relatively weak incentives to tell the truth, and often can be substantially social desirability motives for giving an untruthful answer. “Do what I do, not what I say” and so forth. In fact, I recall there is evidence that people’s predictions of other people’s behavior is more accurate than their claims about their own behavior, when looking in contexts where these social considerations are at play (for example, people don’t like admitting that they will procrastinate, but quite accurately predict that other people will procrastinate).
This phenomenon is so pervasive, economics has jargon for it: “revealed preference”. As opposed to stated preference.
No. Not all studies are self reports. We could look at places where policies were actually implemented and see how people’s actions changed
It’s not a fully general counterargument, it’s pointing out that the value of self-reporting evidence is low, and larger or more self-reporting studies aren’t completely independent sources of evidence.
@Walter
I think that there is a difference between studies that ask about what people are or did, versus studies that ask them what they would do. The latter are probably much less truthful, because people don’t get anywhere near the same level of cognitive dissonance that they get from misrepresenting the past.
Also, predicting the future allows people to assume circumstances that flatter themselves, while people could not choose the circumstances to such an extent when talking about current or past reality.
Or to give an example:
If I tell you that I’ve never cut someone off in traffic, it feels like a lie if I remember doing it once, for example when I failed to look in my mirrors. Yet if I tell you that I don’t expect to cut people off in the future, I’ll probably think about intentionally cutting off people, which I won’t do.
Sort of. It’s a fully general counterargument against putting too much weight on survey data, which is totally appropriate. If survey data is all the evidence you have for your claim, you don’t have high-quality evidence for your claim.
The bigger issue here is that the survey data they cite simply don’t support the narrative they’re pushing. If a double-digit percentage of people say that they would stop working if they got a basic income, that’s a pretty big deal, and it’s a rather bizarre choice to present it as a refutation of the 50% of respondents who said that a basic income would cause many people to stop working.
It’s not at all clear why they think that those numbers should match. If you polled a bunch of Americans and asked half of them, “Do many Americans speak Spanish?” and asked the other half, “Do you speak Spanish?” and the numbers don’t match, that’s not much of a gotcha moment.
Well put. And further, it depends on the severity of the behavior/event whether it qualifies as ‘many’. As far as social and economic impacts, 12% of the population no longer seeking employment is quite a lot.
True. On the other hand, it’s also a pretty far cry from 50% of the population no longer seeking employment.
If the study is correct, most people reading the study will intuitively estimate the number of people who would quit and live on UBI as 50%. That is, they’d be overestimating by a factor of approximately four.
If you want to know whether people think that 51+% of people will do something, there is a way to ask that, using the word ‘majority.’
Esther Duflo and Abhijit Banerjee are both migrants to the US, coming from countries where English is not the native language, so perhaps their language skills are to blame. Or perhaps they are just careless. Or biased.
If people, purposefully or not, misconstrue “many” into “most” then we have lost the very useful word “many.”
Somewhat related data point. Some years ago I had a pick-up/red pill phase and read everything I could get my hands on, including a bunch of relevant studies (a bit over half a meter high printed, if I remember well). THE defining moment in reading those papers was when I started filtering them based on self reporting. Turns out I could have saved myself quite a bit of time – by far most of them were… I’m not going to say irrelevant, but let’s just say there were different attractors for studies that had a high degree of self reporting and those that didn’t. Once you started paying attention to this it was pretty obvious. (In case anybody is wondering, the second kind strongly suggests women prefer men that are tall, buff and dominant. Now I wonder how prestige plays into this – I’m tempted to guess it’s more likely it wasn’t studied enough, rather than it’s not relevant. But at the time I wasn’t aware of the difference).
For some reason, the article emphasizes a self-report study, but it cites a bunch of much more robust evidence. I presume the self-report study was emphasized because they wanted to highlight the contrast between what people say they expect others would do and what they say they would do themselves (though I’m not sure why they want to emphasize that), but the other evidence they provide much more briefly is obviously more relevant to the question of the effectiveness of financial incentives.
It’s actually really frustrating that the self-report study is what’s being focused on, not the other studies of how people have observably responded to financial incentives. The survey is the new thing these authors have produced, so it’s natural for them to focus on it, but I’d hope folks here would be willing to at least engage with the other studies (I think they linked like 5 in the article?).
FFS, the survey is something they did because of other studies. It was done to explore an observed phenomena in the economics literature of people not responding to financial incentives in the ways a classical treatment would expect!
Scott’s points 1 and 2 above are well-taken. Financial incentives can shape social incentives, and its arguably marginal individuals who matter for that process.
Regarding the other studies, I think that it’s important to note that they mainly focus on the effects of UBI-like policies on labor supply. This is a fairly weak incentive–people aren’t getting paid to not work, they’re receiving unconditional money that at best will slightly lessen the incentive to work (since marginal dollars from working are worth less when you have a basic income). As has been mentioned below, the studies in which the transfers were explicitly temporary are particularly bad: It seems completely financially rational not to quit your job and live off the basic income for three years when you’ll need to have a job to support yourself after the end of the study.
In short, I don’t think these UBI studies show much about people’s general tendency to respond to financial incentives.
I will say though, it is a good way to undermine objections to the welfare work requirement/UBI that I use extensively. I wait until someone conversationally drops “well, without a subsistence level financial incentive, why would anyone even work?” and then I find ways to steer the conversation towards personal incentives and point out how they don’t really align.
There is a strong social incentive to say on a survey that you yourself would not change your behavior for the marginal dollar; it’s quite low-status, undignified, and antisocial to say that you would. And there is no financial incentive to say that you don’t care what others think of you. As for actual behavior…
Are people reliably better at predicting what the average person would do than what they themselves would do?
Very likely. People are MUCH better at predicting test score the median person will receive than predicting what percentile they will rank.
I don’t think that analogy quite works. Test scores are a question of aptitude, not values.
(Which is not to say that people are perfect at predicting how their values will be applied in real-world situations.)
This.
Also as we can see in self report studies about calorie consumption, people tend to missreport their own behavior even when known to be monitored, so we can expect that
our body lies to ussomething makes our memories form in a way that our behavior looks more socialy acceptable.It’s also something we strongly like to tell ourselves, even if we would change our behavior for money.
And when we do, we’re very good at coming up with stories to tell ourselves about how we really made that choice for reason X, and it’s mere coincidence that it happened to be the most financially good.
For more o this, read The Elephant In The Brain.
Unemployed people moving for a job: 30% / 50%
Employed people moving to another state because of taxes: 70% / 85%
I can’t square the two of those. They should be in the opposite order.
I think people are seeing these surveys as political opinion polls. “Do not raise my taxes. I will move!! Or, if not me, then someone else, surely!!!”
Because they were asked in 2018 when the UE rate was under 4%. Who was unemployed during that period? Is this cross section similar at all to those unemployed in 2010?
This seems absurdly high, and pretty clearly false based on the fact that populations of states with the highest taxes haven’t been entirely decimated.
Possibly people are mixing in “could” here. Unemployed people don’t necessarily have the means to move for a job.
I suppose that depends on how much they think of as “high taxes”. Perhaps they’re thinking “well, current Illinois taxes are fine for me, but if they went up from here, I’d have to move”.
Everyone has different price tolerances for such things.
It’s a trickle – you can see its impact in housing markets for properties around the 750k to 1.25MM range in NE, Chicago, and other liberal bastions.
Also, what people report, particularly when being watched, differs from what they actually do, so I’m always skeptical of studies based on self-reporting.
Maybe we can come up with a system where people are led to believe there’s an entity perpetually watching them and evaluating their actions.
The ultimate panopticon lies not in the perception of always being watched, but by taking part in watching oneself and others on society’s behalf.
Exactly.
Revealed Preference > Survey Results in terms of reliability.
If Billionaires say they don’t care about wealth taxes, but most flee the country when they’re passed, those are both evidence, but one of them is a lot stronger evidence than the other.
There’s a whole bunch of comments here which seem to think that this entire research program is based on that one survey they mention. It’s a cute survey, but it’s mostly illustrative.
The evidence that taxes don’t effect behaviour much *is* largely based on revealed preferences. Generally speaking, the early optimal tax literature greatly overestimated people’s sensitivity to changes in tax levels. Fortunately people just keep on trucking regardless- a workaholic surgeon is a workaholic surgeon, even at half the price. Whether specifically billionaires will move in response to wealth taxes is a interesting question though, it’s conceivable that they are unusually responsive to this sort of thing.
I will be the first to admit that I only go as far as what is linked and not canvas their larger corpus of work.
But I also think that’s fair – if they write an op-ed, and I realize that op-ed via Scott, then I’m going to focus on what Scott says and the contents of the op-ed, particularly if I’m already biased, and I am.
For my part, I’m moving out of NYC ASAP, but if you were to ask me similar questions, I’d say no *for now* because my wife is in residency. Of course there’s going to be stickiness in the present, but if you alter certain parameters, the status quo and norms will reset. First at the margins, then to the point where I will become the “other people”
Reverse argument: I’m in software engineering and have considered medical school. Doing the math last time I did it involved a 12-year break-even perspective. That is, I’d be worse off for 12 years if anything happened. If pay for physicians increased it would be less risky for me to do so and I’d be more likely to do so.
Ursus Arctos’s last sentence seems to be the likely case. As per Scott’s number one, those are the margins are far more sensitive to financial incentives, and almost by definition, the 1% are on the margin, and arguably get into/don’t drop out of the 1% because of that sensitivity.
Though we have seen more than a few cases recently where financial incentive sensitivity has been cranked so high that they go full Goodhart’s Law, with Wells Fargo and Boeing. But those may also prove the rule, too, as the billionaires involved tend to make out like bandits, analogy intended, even as their corporations suffer all of the consequences. Those cases, indeed, may precisely occur because they, the individuals on the margin, exploit how the collective is less sensitive to money flows, and so the collective goes along with their schemes as inertia sloshes large amounts of cash around.
I don’t know what “billionaires” are involved in Wells Fargo or Boeing — highly paid execs yes.
It always struck me as amazing that when something goes wrong it’s always because of the “greed” of so and so that caused it, but when you have that same “greed” producing trillions of miles of safe air travel and arguably the best airliners in the world (doesn’t have to be only Boeing) it just sort of gets ignored.
I agree that they went full Goodhart, though. That seems to be a disease of ossified companies and these two look pretty ossified.
Friends of my parents moved from California to Nevada when they wanted to retire and liquidate their $x*10^7 property investments. He explicitly said “Uncle Sam is getting his 30%, but I don’t need to pay another 10% to California.”
They never moved back to California.
I actually just thought the authors formed completely wrong conclusions from the data they presented.
I’m no economist, but if 12% of the workforce left their jobs, wouldn’t that be a very big deal?
Huge deal. And given the likely distribution of such job losses (concentrated in low wage service jobs), I’d expect there to be a spike in wages and costs in those businesses.
I’d expect that the spike in costs would be to add additional automation that results in a further drop in total wages paid.
Particularly since the social incentives for the business would move away from ‘don’t install machines that take people’s jobs’.
I don’t feel like trawling for a source right now, but one of the take-aways from Nixon’s basic-income experiments in the 60s was that most people who received it didn’t quit their jobs altogether, although many dropped their second jobs, with the surprising result that overall, the ditched jobs simply resorbed a lot of unemployment.
$13k/y is a huge deal, but all signs point to people wanting more than that, for comfort, status and a bunch of other reasons.
Of course, we would need empirical evidence that this is still how it would work nowadays. In fact, this is a very important point – that we need more trials of this, rather than heartfelt conviction that freely giving money to people will tank the economy somehow.
In very NIMBY cities in blue states, landlords would capture somewhere around 110% of the surplus from UBI.
And that’s a very good problem to look into! Landlords are very good at capturing surplus, UBI or no, NIMBY blue towns or otherwise. How would that weigh in comparison to the societal ills UBI (or a lesser version of it) would alleviate? It might create new problems, sure, but I don’t think there are solutions that don’t.
If so, those landlords could and should implement UBI within those areas and increase their wealth by 10% per UBI payment cycle.
Wouldn’t work like that. Remember, landlords are long term investors. A UBI in an area without strong border controls, both in and out, serves as a nuisance for anyone trying to run a financially profitable institution. It is expensive which drives out corporations and high income/wealth individuals (who would otherwise pay the taxes), and attracts low skill, low capital, entrants. The end result looks a lot more like Detroit in 1990 than 2019 Nashville for landlords.
Although, presumably, concentrating job losses in low-wage jobs is better than the alternative.
I’d go so far as to say losing low-wage jobs in many cases isn’t bad at all. The important parts of the economy have to do with research and innovation. The world gets better because technology improves, not because consumer goods become more plentiful. Arguably, consumer goods in overabundance make the world worse. Whether because they are sources of super stimuli or they have externalities that go unaccounted for, many consumer goods do harm to people. Low-wage people are less important to research and innovation than they are to the production of consumer goods, so if they were reduced in the economy by ten percent I think that would be a good thing for society at large, to speak nothing of their own gains in happiness.
I don’t know what the argument is for why we need lots of restaurants, cars, and video games, other than that people are pointlessly addicted to them.
Can we not decide other people’s lives aren’t really useful?
There’s no need to frame it quite like that. What if a lot of people’s lives are currently being funnelled in directions that are indeed not useful for society or humanity at large? What if they would be spend more conducively to human flourishing in more… domestic activities? Or what if, indeed, it doesn’t matter how they are spent? I don’t think we want the space of possible social arrangements under consideration to be arbitrarily restricted by the need to keep up polite pretences. If you have a good consequentialist argument for keeping up that pretence, that’s another matter, but you seem to be proclaiming the need to do so as an article of faith.
I’m saying this as someone who, as these things go, is definitely not among the most useful sections of humanity.
What reason is there to believe that?
What reason is there to believe that?
Because they are inconvenient to our Five-Year Plan.
Why do we need art or birth control or delicious food? Are people pointlessly addicted to expression, sex outside procreation and tasty things?
@berk
Let’s say that if North Americans reverted to 1950s levels of consumption or reconstructed their society so it looked more like Western Europe then I would not have as many criticisms to make of it with regards to its consumerism. The fact that its consumerism is gained by coercing people to work jobs they don’t like and may in fact hate, or by forcing people who are unable to work to become homeless, makes me despise it all the more.
Why 1950? Who decides?
Coercion involves force or threats (such as the threat of imprisonment for breaking a law). Where do you see coercion in low wage jobs?
If you are concerned about coercion then closer to Western Europe is the wrong direction.
@berk
I went with the 1950s largely out of caprice. I once read about how Clark Ashton Smith lived prior to and during that decade (or perhaps only prior to it), and it involved a somewhat dilapidated cabin with no electricity or running water, but a well he drew water from (and it was an old mine, at that) and annual controlled burnings of the surrounding vegetation to eradicate any deleterious plants, such as burrs. He furthermore dedicated himself to literary aspirations as well as artworks and minor projects such as constructing a hedge wall out of local rocks. This to me does not seem like a bad way to live, and the idea that all of the material progress we have made that supersedes and precludes that kind of lifestyle is both good and desirable is an absurdity to me.
Coercion is involved in forcing people to work because if they do not do it they will become homeless and suffer various abuses and privations. This is an implicit threat. The people who would drop out of the labor force if granted 13k per year are likely people who are only in it to begin with because of this coercive factor, so wanting to keep these people working by denying them succor is akin to wanting to coerce them to work.
The problem of lots of low-wage workers deciding to stop working isn’t economic. Employers will invest more in automation, there will be more mid-wage jobs making the machines that did low-wage jobs, etc.
It’s psychological. Low-wage workers are either just starting out, and have a clear path to higher-wage work, or they’re long-term low-wage workers. The long-term low-wage workers are not generally the sort of people who will use their free time doing things that look like work but don’t pay; they’re likely to use that time as leisure time. And that’s psychologically bad for people.
Women, much more so than men, can find fulfillment in child-raising, but even among the men who would be happy to raise kids full-time while on UBI, the likelihood of them living full-time with their kids isn’t very high, so effectively, that option isn’t available to long-term low-wage men.
But having large numbers of not-well-educated men with nothing fulfilling in their lives is really not a good social policy.
Anthony,
You are simply poorly informed. Those UBI “retirees” are going to learn to play a musical instrument, go to the opera, the theatre, and read Kant, Stendhal, and Proust. Sheesh!
Exactly. Their own data contradicts their conclusions. How nice of them to show it to us so we can know right away they’re full of shit without having to look up studies!
Unfortunately, no.
Ironically, they may be right that financial incentives matter “less than people think” (although the survey data they present does not really support that), but how they get from there to “and therefore, wealth taxes” is very mysterious.
Well, it’s a pretty big deal, but then again, maybe it’s a big improvement? Aren’t things like early retirement and parents taking more time off good things? And there’s more work and better pay for people who want to work.
But we probably shouldn’t get hung up over where the dividing line is between “a big deal” and “not a big deal.” Binary distinctions are inherently imprecise and disputing them leads to unenlightening arguments.
Not for economic growth/prosperity.
Whether the costs are worth the benefits is subjective & probably depends at least partly on your own circumstances (would this change help you or burden you).
Human labor is not fungible and the extra pay would be more than offset by the higher taxes, so employers and working people would be worse off.
Also please note: the difference between 2% growth and 3% growth is not 1%; it’s 50%(!)
Growth is highly sensitive, and will be the primary determinant of the wellbeing of our grandchildren and their grandchildren.
When you are building something amazing that takes generations of work to inch towards, there are always people who want to eat the seed corn.
Scott had a nice parable here
https://slatestarcodex.com/2017/11/09/ars-longa-vita-brevis/
+1
Good for whom? As measured how?
I would personally call 12% of the American workforce (about 19 million) “many” people. Assuming the self-reporters to be accurate, and that there wasn’t additional qualifying information in the question, I’d say the “many” voters had it right.
Presumably, although it would probably matter a lot how quickly they left.
The labor force participation rate in the US is about 6% lower than it was in 2000 (63.2% vs. 67.3%, 4.1 percentage points). This mostly coincides with bad stuff in the economy during that period.
On the flip side, another 12% of the current labor force exiting would take us down to about 55.6% participation, which would be a low in post-WWII USA, but not by that much – the rate was between 58% and 60% from 1948 to about 1970.
Obviously there’s a lot different between then and now. The biggest difference probably would be the huge influx of women into the labor force between about 1950 and 1990, but also the rate of people completing four years of college went from about 5% to about 35% (keeping them from working for several additional years but presumably increasing their lifetime productivity).
All this is to say that the economy has functioned with various rates of labor participation over the years, so I think it’s not obvious that, for example, slowly losing the least productive eighth of workers would necessarily be catastrophic.
As everyone says, 12% leaving the economy is a big deal, although whether that is good or bad is open to debate.
But really the 12% is a huge guess. As others have said, self-reporting is subject to many flaws. Even when I look into my own head, I don’t really know the answer to this. It depends on so many variables: the current state of my career and whether I think there are more upsides or downsides in the future, the current alternatives I have to living off UBI, my spouse’s career and choices, my needs for money for medical reasons, childcare, etc., and just how I am currently feeling about my job. It could all change next week, and probably will change next year.
I find it curious that people used these results to prove financial incentives don’t really matter.
10% of people admitted they’d quit their job due to basic income. That’s over 15 million people in the United States. Basic income would cause greater net job destruction than the Great Recession!
30% said that if middle class taxes went up substantially, their spouse would quit working. Two in five said they would work substantially less.
Yeah, it’s true that we judge financial incentives as more powerful than perhaps they are, but these are not small numbers. I would have actually guessed the employment impact of basic income would be closer to -2% rather than -10%, for example.
15 million low-wage jobs are not even remotely equivalent to the Great Recession.
What makes you think all the jobs lost would be low-wage jobs?
I, for one, would quit my job and do not hold a low wage job. Since I more or less have to work to earn money and survive I want to both work (1) someplace I am appreciated, and (2) someplace that earns enough to stop working sooner rather than later or allows me to get by working fewer hours. A low wage job wouldn’t fit that criteria. Basic income would address my concerns and allow me to not work.
You would be replaced by somebody. The person who took your job would have quit their previous crap job, but is happier working your job and having your money than not working at all.
The net effect is that the least desirable jobs are the first to be unfilled.
Voluntary and involuntary job destruction are pretty different. For example, if people retired earlier *voluntarily* would that be good or bad?
Could go either way, depending on whether they’re choosing to retire earlier because something has happened to make retirement more attractive, or something has happened to make work less attractive.
I was going to say something similar. 10% of people is “a lot” of people, for at least some definitions of “a lot”, which makes the interpretation weird.
The numbers given don’t feel surprising to me at all. Not saying I would have guessed them correctly in advance or anything, but they don’t come close to making me think financial incentives don’t matter. Rather, they give me a quantifiable first-order baseline for how much financial incentives do matter.
I think you missed the most obvious lazy thought of all: A bunch of people saying they don’t care about money but that other people do is a huge red flag for a hidden preference. Is it possible they’re just saying they don’t care when they’d actually switch?
Overall, I think they’re missing a long term effect. Let’s say you’ve spent twenty years working in finance and working a particular way and all your social status and identity is bound up in that. And then all of a sudden it becomes more lucrative to work as a camgirl or some other low status profession. Will you quit tomorrow and become a camgirl? Maybe not. Maybe never. But a greater proportion of bright young people will and over time the quality of your financial professionals will decrease and of your camgirls will increase.
If that seems far fetched, a similar process happened with computer science. Talk to old computer scientists, the ones who had large portions of their careers before the 1990s (or even earlier). It was not as highly paid or prestigious. Being a computer scientist was mostly the preserve of math nerds and the employment prospects weren’t guaranteed. Many people left computer science for other, better paid fields.
But then financial incentives shifted. Now computer scientists make a lot of money and control some of the most powerful corporations on earth. They were still not prestigious: in fact, analysis from dating sites show that computer programmers score slightly below average as a ‘sexy’ job. And nerd stereotypes are still pretty damn condescending. Hollywood movies about Googlers are often not complimentary. On the other hand, Google and FB and the like have a lot of money. Slowly we’re getting things like Little Big Lies where a bunch of tech workers are being treated like they’re in Mad Men because the money and success has translated into real social power and prestige. It’s on a delay, but it does happen.
You can see numerous other shifts. In fact, the camgirl thing really is happening in some parts of Asia and Eastern Europe. One of the wealthiest women in Romania runs a camgirl site. One of the wealthiest men in Hungary does too. They are actually getting political influence these days.
I think Thiel has a good point here. Remember that a lot of wealth and progress is often created by a minority of very strange people. The more you create complicated rules or redistribute from them to society at large, the more you’re punishing creatives and innovators and rewarding conformity. Because weirdos with a good idea and an incredible work ethic are probably not the popular kids in high school. But they can earn a ton of money. Meanwhile, the handpicked CEO of Morgan Stanley is very good at elite social games. If you ask the Weirdo and Morgan Stanley’s CEO to give up half of their income forever, you’re hurting the Weirdo more than the CEO.
In general, I think we as a society don’t understand the extent to which money doesn’t determine social class. I think this is because we’ve never had a formal titled aristocracy where a poor person whose grandfather was the Count of Bumbleywumbly looked down on a multimillionaire banker. So we imagine that a Harvard professor with all the right friends and a cousin in the Senate is actually less powerful than a working class businessperson just because the businessperson is wealthier.
–From The Notebook of Lazarus Long
This is a very good point. Economists usually are skeptical of self-reported claims about what people will do in certain situations – their answers are subject to all sorts of status-signalling motives, and there is little cost to lying. In fact, when considering behaviors with status considerations, there is evidence that people are more accurate when making predictions about what others will do (e.g. predicting that others will procrastinate) than they are in their predictions about their own behavior (where they vastly underestimate their future procrastination).
I thought I’d read something like that as well, but wasn’t sure where or if my mind was tricking me.
I think an alternate hypothesis is that people have an unrealistically low opinion of others. I can think of cases (voter fraud, drug use by welfare recipients) where policy attempts to solve a problem of people being worse than they actually are.
This is why I called it an obvious and lazy thought. It does bear further investigation but it’s a hypothesis at least as plausible as yours, isn’t it?
@Erusian >
Sounds like a good argument and means to slow down the pace of change to me!
Physically (all the new tower block apartments replacing the homes and businesses that were there for decades) more has changed in the last ten years than in the thirty previous years.
I suppose some teen and twenty somethings like the novelty, but I’m pretty sure the older folks that are dizzy with “future shock” outnumber them.
I approve of the “slow the roll” plan!
I’m genuinely curious how you got that out of what I said. But I could see something like that, yes.
I mean, I wouldn’t say we really want to slow the roll. What we instead want is (rather than protecting some aesthetic sense of comfort) to be assured the changes are good. Thus we could have a system where people who want to make changes are absolutely free to do so but they have to suffer the consequences good and hard. Maybe that’s a billion dollars and a supermodel spouse. Maybe it’s drugged out insanity. But only after we know the results will we implement them in society at large. At least, if such a system could be designed.
Of course, we could also have socialistic community control of any changes. But the issue there is that it will tend towards conservatism and away from innovation or growth.
@Erusian >
I assumed you spoke truly and your prescription would create the results you listed, and since I want the opposite results doing the opposite would have opposite results.
Well I happen to feel that an “aesthetic sense of comfort” promotes mental health, @eric23 linked to a presentation that was pretty convincing that some more constraints and stability than is common in the U.S.A. leads to more happiness.
Yes, that is exactly what I anticipate, and welcome.
If we go too far and induce Cuban levels of stasis than we may liberalize back again, my hope is to dial the rate of change back to the pre-internet era, even just at a 1997 rate would be preferable to the massive disruption we’ve endured lately.
I see. So, my home community has received huge numbers of immigrants, such that Hispanics have gone from about 20-30% of the population when I was born to being about 70% today. Would this also be something you want to turn back the clock on?
Because otherwise my community has been effectively disrupted entirely without technology. I used to be go every Sunday with my father to get corned beef sandwiches and soda at corner delis. Those shops are basically gone: they’ve been replaced by various Hispanic cuisines. Everything has changed: the buildings are different, the cuisine is different, language has changed. (Most of them do learn English but many people speak to each other in Spanish, Spanish is basically required for service positions, and it’s shifted the ways English is spoken). Also, the GDP per capita has declined over the past thirty years because the new immigrants tend to be poor.
It doesn’t bother me just as I’m not against technological disruption. But I certainly know other people it does bother and want to reach something like stasis. We had an election today and one of the candidates was a rather extreme right-wing type that wanted to deport large segments of the population and was pretty open about restoring the city back to its state decades ago by privileging the minority of people that were actually born here. Would you support that in order to maintain the community I was born into?
@Erusian says: “…Would you support that in order to maintain the community I was born into?”
Sounds far too late for that, restoration would disrupt too many kids from the only homes they know.
It’s much the same in my neck of the woods, Hispanics and (to a lesser extent Asians) have largely displaced the African Americans who had been here for decades (they either displaced the Portuguese in some neighborhoods, or the neighborhoods weren’t built yet until WW2), 120 years ago the anglophone “49’ers” displaced the Spanish speaking Peraltake family that owned what are now many cities. Vietnamese immigrants have largely displaced the Chinese-Americans who had previously been there, to a lesser extent Chinese have displaced what had been an Italian neighborhood. Down the highway near San Jose new mostly south Asian immigrants neighborhoods have sprung up on what was once farmland displacing the families that sold the land plus a few mostly Mexican descent farm workers.
But nothing matches the displacement caused by all the college students and graduates who were born elsewhere, while there have always been some (I married one decades back), the sheer scale is epic, they’re like locusts, and there’s no sign yet of the deluge abating.
My first thought to lessen the onslaught is to have a “graduate tax” here to discourage them, but they already do that to themselves with their student loans and how much they bid up housing, yet still they come unrelentingly.
Maybe they are Nobel Prize winners, but this article is very badly argued. I don’t know whether they just wanted to throw some red meat to the readers of the NYT (see the Saez/Zucman article in WaPo that repeats the same stats and data that have been devastated by a number of economists including Larry Summers) or whether the Economics prize has gone the way of Lit and Peace.
In any case if they are right this is very bad news for a carbon tax (and every other behavioral tax). Funny, and I thought they worked. Time to end them all! Start with cigarettes!
But are they right? They compare US athletes with salary cap to European ones with no cap. Which ones are paid more though (on an after tax basis of course)? They don’t say (I have no idea).
That executives don’t work less hard if their pay is reduced does certainly does not cohere with anecdotal personal experience (including my own turn as an executive who moved half way around the world and stopped working solely because of crushing taxes in my preferred country. Retirement is great though.) I wouldn’t mention anecdotal experience but apparently Bannerjee and Duflot have validated gut feelings.
People don’t move to take better jobs — well that’s true, people move much less than they used to. But they need a lot more than just citing that fact to establish that the reason is a mysteriously reduced response to incentives (and the US I think was and still is the country with the greatest internal migration — could be wrong about that).
Re: Carbon taxes. Firms are generally much more responsive than individuals.
They compare US athletes with salary cap to European ones with no
Is this really indicative of anything? Did anyone think that a professional athlete, of all people, is going to run a little less hard because the tax rate is 40% instead of 30%?
Comparing across countries is stupid.
Within the US, tax rates could well matter for where the athlete plays. Establish a residence in Texas and play for the Rangers and pay 0% state tax on all your home games, compared to playing for the Athletics and pay 13%. Anyone attempting to find this effect in performance metrics is smoking dope.
Where you would find it, if anywhere, is how much the Rangers-versus-Athletics needs to pay for an equivalent player. Which involves figuring out what “equivalent” means, which sounds like a lot of work, uggh.
But a baseball player who wants to make a lot of money is playing in the United States regardless of income tax rates, because that is where the baseball market is. If someone wants to make a lot of money in soccer, they are going to Europe. The US Soccer Federation has revenue of about $100 million. The best players in Europe make upwards of $50 million. No tax rate will offset the size of those markets.
A question that has been in my mind since writing this:
Have any baseball teams tried to arrange the pay of their players such that they get paid more for the games in low-tax states? It might be bad PR if your home state is California, but if your home state is Texas maybe your contract gives big bonuses for easy things like signing baseballs for fans before home games.
10% can be “many”. There is not necessarily a paradox here. (Similarly for “would it encourage” in the last question. Doesn’t apply to the third question but there the results are much closer (and also both much lower than I would have expected, guess I have accepted the cosmopolitan lifestyle more than I realized).)
Juxtaposing the two versions of the question looks like a way to lie with statistics; whether an incentive exists (or is large enough to change the behavior of “many”) is distinct from whether the incentive would be large enough to push any given individual across the line, and the questions with “encourage/discourage” are weasellier still.
One thing I’ve been trying to do to get a scope on US population statistics is to translate it into states. With 50 states in the union, you just cut the percent in half: 10% is the population of 5 average US states.
The entire population of Tennessee, Georgia, Alabama, Mississippi, and Kentucky combined would certainly count as “many”, no matter how far away 10% is from “most”.
It sometimes seems like every argument being had ever is just an echo of similar contentions brought up for decades. There is a benefit in this – that you can call upon old dead people far more articulate than you to phase your arguments.
My choice of dead guy then would be Milton Friedman. Just replace the phrase “political self-interest” with “social-status” and you have a striking resemblance to Scott’s objection 40+ years prior
@James Banks
‘Technocrats’ have been working very hard on depoliticization in my country and in the EU, by arguing that there are no alternatives to their politics, signing treaties that bind the hands of politicians without the consequences being discussed before the treaties are signed, having judges make policy, choosing what laws to enforce, etc, etc. This kind of elitist control actually has a long history in my country.
Especially in the Dutch lower class and non-rural areas, there is a lot of apathy about politics, but it is an angry apathy: “They don’t care about our interests or needs & we have no power to change it.”
I’m with Aapje here: Democratic politics aren’t great but non-democratic politics would be worse.
Most people against competitive capitalism tend to focus in on, not the abstract idea of competition, but against the results. They point to the people who win in capitalist competition, and say “look at these people and what they do; are we really better off with them?”
Suppose, hypothetically, that the consequence of a competitive health care market is that 40% of the population has to sell themselves into debt slavery to buy medicine to avoid dying before the age of seventy.
If so, then it is not entirely unreasonable to argue that maybe the game’s not worth the price of admission. Or to argue that a noncompetitive system would pay off better in terms of human flourishing. Because sure, not having innovative medical technology is [i]bad[/i]… but being saddled with rent-seekers and having much of the population in debt slavery is [i]worse.[/i]
@Simon_Jester
Against their interpretation of the results, which is far from the same thing, as it usually involves ignoring or misunderstanding important outcomes.
This is a good example. A very strong case can be made that nearly all of us are winners, at least in a ‘having goods and services’ sense, relative to the alternative, but that some merely win more than others.
A typical error I see is that relative losers are equated to absolute losers, even though the two can differ (as in: if I give Bob $100 and Jane $10 million, then Bob is an absolute winner, but relative loser).
It seems pretty telling that you resort to an example that is the opposite of reality. In 1850’s England & Wales, the life expectancy of a 5 year old was 55. Today, it is 80, without debt slavery.
The evidence is very strong that true rent-seeking is actually very low and that technology has increased the rewards for being very talented and reduced the rewards for being less talented, in many fields. In other words, where once someone with 10 talent could give 10 utils to people and someone with 20 talent could give 20 utils to people, it is now more often the case that the person with 10 talent can only give 1 util and the person with 20 talent can give 100 utils to people.
The logical consequence is then that if people are for a large part self-interested util maximizers, they will increasingly want to coerce the people with lots of talent, by giving them money, while decreasingly wanting to coerce those with less talent.
That is not the fault of capitalism, nor something that I’ve seen anyone offer a solution for, other than sacrifice the overall level of utils for more equality in outcomes.
It seems weird that the survey only asked about financial incentives but not about social ones (or maybe this NYT article only reported results about financial incentives; I haven’t looked at the actual papers). If your goal is to determine if financial or social incentives work best, surely your survey should include both types of incentives? Otherwise it’s like an experiment without a control group.
Aren’t all the people who responded “yes” to “many people would do x” correct? In the “would you?” section at least ten percent of the respondents said “Yes, I would do x”. That sounds like “many people” to me.
Or, to put it another way, if someone asked me:
“If there were a universal basic income of $13,000 a year with no strings attached, would many people stop working or stop looking for work?”
I would probably have said “no”. Then if I was told that 10% of the surveyed people said that they would quit their job, then I would move my beliefs more towards “yes”. Not completely, since it is still just a survey, but some.
Good point! The whole headline comparison in that graph of “oh look, people say they won’t respond to incentives as much as they predict others’ will” is certainly plausibly highly misleading.
It would be interesting to know how people actually behave in the situations presented rather than just how they think they would behave. Incentives, financial and otherwise, impact not just behavior but also cognition in powerful and often subtle ways — witness the famous chapter in Freakonomics dealing with real estate agents and their commissions. Charlie Munger presents it well:
One libertarian talking point that I’m only partially convinced of is that financial incentives reduce the incidence of racism. If all you have is “status, dignity, social connections”, there is less incentive to treat people who don’t look like you fairly, but everybody’s money spends the same. The most notorious example is that the railroad company Homer Plessy rode on fought the law mandating segregation.
More recently Uber has made it easier for black people to get rides, and that’s probably not because Travis Kalanick was deeply concerned about the racism of taxi drivers.
There’s a number of pre-employment personality tests based on the principle of asking questions like “Do you believe other people would steal?” and taking the answers as more reflective of the testee’s own predilections than if they’d asked directly “would you steal?”. If these tests are based on reality (a big question mark) then this survey proves the opposite of the headline.
I really hate those tests. I remember having to take several when applying to retail jobs in high school/college. I never got a call from anywhere that required those tests, so I assume I was failing at roughly a 100% rate. The answer to “do you believe other people would steal” is obviously “yes”.
And you certainly don’t want to entrust anyone who said “no” with any responsibility.
Just look up the right answers ahead of time.
I’m sure they’re readily available now, but I’m less confident they were readily available by a simple search in, say, 2002 (could be totally wrong).
I wish I had a better understanding how to reconcile your point 2 in this piece with your support for a universal basic income designed to ease and remove the stigma from a decision not to work. The obvious objection to the latter is that, consistent with the former, the erosion of the societal stigma against voluntary unemployment will cause cascading decisions of the next marginally inclined workers to quit the workforce, adding ever more strain to the demands on the remaining workers, which will in turn further reduce the societal expectations to engage in productive economic activity, producing a vicious cycle.
The robots get better faster than human generations. More voluntary exit from the workforce over time is probably in the features rather than bugs column.
There’s going to be a limit. People who make 200k aren’t going to start quitting their jobs because they get a 13k basic income.
I’m personally not convinced an actually-livable universal income will equilibrate somewhere good yet, but if income inequality keeps going up we will reach that point eventually.
Just wanted to offer a counterpoint to the take on Point Four above that sounds similar to “Great Man” theories on history regarding entrepreneurs. Yes Jobs, Gates, Bezos etc are brilliant businessmen who started mega-empires of businesses, but sometimes these businesses come from breakthroughs originating from Government research like the GPS, so i don’t believe that removing the moonshot financial incentives would stop people making things or starting companies. Arguably, being comfortable for the rest of your life is a floor, and after that it just becomes a number for comparing power and status and becomes excessive.
Some people, myself included, just enjoy and feel the compulsion to make things. Perhaps due to the social incentives of being known as someone who makes things, but also just for the sake of creation itself. For every operating system that redefines how computers work there’s cases like Volvo giving away the patent for the three-point seat belt. This is undeniably an advancement and boon to society that wasn’t incentivised by money.
I also don’t believe that 99% of important ideas start out on the lunatic fringe. I think it would be 1% of ideas that end up as revolutionary and important start there, with the vast majority of good ideas starting off as an iteration of something that was already a good idea. Take most of science for example. Researchers get paid a pittance compared to other industries doing ground-breaking work but they do it because they might get to name something after themselves one day, i.e. social renown. Arguably most of science is taking existing ideas and trying to go a step further. Not coming at things from the lunatic fringe trying to revolutionise.
This is a genuinely surprising assumption for me to see. My priors are that if you get ten different Nobel-winning economists in a room and ask them questions any more complicated than “is supply and demand real?” you will get ten different answers. It’s not as bad as social science where you’d get eleven answers, but this ain’t physics. Economics? You can prove anything with economics.
Another alternate explanation is that this is instance number ten million of “everyone thinks they’re above average”. Most people think they’re more hardworking or less tax-evadey than others and they don’t even have to be lying, just following whatever broken cognitive process leads them to think they’re a good driver.
It’s not quite that bad. See http://www.igmchicago.org
The simpler explanation is that the Economic Nobel prize is not a real Nobel prize. It was not included in Nobel’s will, and was just tacked onto the other prices. The name is not the same. The regular Nobels are just called “The Nobel Prize in Chemistry”, while the Economic one is “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel”. So the accurate name would be the Sveriges Riksbank Prize.
The Sveries.
The economic prize is awarded by the Royal Swedish Academy of Sciences, just like the Nobels for chemistry and physics. It probably makes more sense to split up the Nobels by who awards them:
Royal Swedish Academy of Sciences: chemistry, economics and physics
Nobel Assembly at the Karolinska Institute: physiology or medicine
Swedish
RapistsAcademy: literatureNorwegian Nobel Committee: peace
I don’t think the founding father of the prizes would like this! Also this would put the Craafordies, Sjobergies, Schockies, Aminoffies and Tobiases prizes in the same standing as the Nobels, economic and not economic.
The Nobel prizes seem like an anachronism to me, with their focus on individuals, whose main ‘value’ is as a mediocre PR mechanism for science.
IMO, the best approach is just to not take them very seriously.
What exactly is explained by the fact that the economics prize was established by someone other than a dynamite manufacturer?
It’s named that way in order to mislead people into giving it the prestige of the dynamite manufacturer. If you don’t think the dynamite manufacturer deserves that prestige, misleading is still misleading. You shouldn’t justify deceit on the grounds that the thing that people are being deceived about is something they shouldn’t care about anyway.
(Emphasis added.)
{Citation needed.}
Why else would they name it the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, at a point in time when the Nobel prizes were very prestigious? If I start a new company called Walmart Fishing Supplies, is it credible that I’m not trying to piggyback off the brand recognition of the well-known supermarket?
Why else? You yourself gave the answer: they’re given out by the same organization that awards some of the other prizes (and at the same ceremony as all of them save the Peace Prize)– a natural extension of their “brand”, if you will. The original complaint is analogous to complaining that Walmart Corp. is trying to bamboozle us into thinking each new Walmart has been personally founded by Sam Walton.
Nobel has prestige because of the prizes, not the other way around. And the prizes have prestige because they generally do a good enough job of picking recipients that people actually working in the various fields regard a Nobel as the highest honor that can come their way. This is every bit as true of the economics Nobel as any of the others.
Interestingly, the Nobel website’s FAQ states that they won’t adopt more prizes, suggesting that they regretted adopting the Sveriges Riksbank Prize.
In this case, its less of a put a bunch of economists in a room and you’ll get a bunch of different answers and more of a “we are writing for politicians, so the truth does not matter.” Its just them using their recent nobel prize to push their political agenda and assuming that politicians will not be able to tell that they are being deliberately misleading.
YES!
I think progressives vastly underestimate how important incentives are to the bottom 4 quintiles, and conservatives overestimate how important they are to the top decile. I think I agree with Duflo and Banerjee that many of the highest paid people are very ambitious and strongly desire to be the best, so they are mostly competing for relative status, not so much their net income. In that case I could see very little deadweight loss from higher tax rates on the top few percent (I’m not sure just how high would be too high, or where to draw the line though).
But they are completely out to lunch just believing some garbage questions that people give false responses to in a survey. Not to mention their explanation of the responses seems to mischaracterize what the responses actually show. e.g. “Seventy-two percent of them declared that an increase in taxes would “not at all” lead them to stop working.” Ok…stop doesn’t mean work fewer hours… so that means that 28 percent of people would quit working if their taxes went up? Maybe they’re just terrible writers that cannot communicate effectively, I don’t know. But then when you look at their chart it completely contradicts what they actually say. Are they intentionally trying to mislead people?! Or, do their survey results give completely contradictory responses? Either way you shouldn’t put too much faith in it.
e.g. “If tax rates went up for you/the middle class, would it encourage…[quitting work/working less?]”
It looks like about 40% of people even admit they would work less if their taxes went up! And remember, a substantial portion of these people are living in a world with relatively fixed schedules and may not be easily able to work less than the standard full-time shift they are employed for.
And then approximately 35% were not expected to work less, implying that the income effect dominates the substitution effect to leisure (or else we should expect 100% of people to be “encouraged” aka incentivized to work less!).
Also, every time someone cites a UBI “experiment” or something like it, you can never let them make any kind of conclusion about how it affects long run labor supply. Of course people didn’t quit their jobs or reduce their hours much (again, even assuming they could reduce them much!) when they got what THEY KNEW was a TEMPORARY income boost. Their lifetime expected income was barely changed, so of course their labor supply should barely change. That provides us with basically no information on how labor supply will change in the long run (e.g. for future generations) when people react to very significant permanent (expected to be, anyway) changes in the welfare and tax structure. I think looking at Europe shows us persuasive evidence that at least in the long run, incentive effects are very powerful and substantially reduce labor output for the vast majority of the population.
Honestly, I’m not sure if Duflo and Banerjee are just trolling, or just ignorant in that article. I’m very disappointed because I thought Poor Economics was an amazing book.
I was about to say the same thing. The casino income study is slightly better proof, but…one study.
The deadweigh loss doesn’t come mostly from the behavioral changes of the person taxed but from the moving of resource allocation from someone competent to someone incompetent (bureaucrat).
I don’t think that’s right? Aren’t deadweight losses by definition the result of behavioral changes on the part of the transacting parties?
The way I heard someone put it is that we have never studied UBI but we do have a lot of data on what happens if you spread your cash transfer program’s payouts across several years.
Some thoughts:
• If some people respond better to financial incentives than others, I’d expect people who respond better to financial incentives to be more likely to try to get high-paying jobs, and therefore be overrepresented in such jobs. If this effect is strong enough, the point about tax evasion and Wall Street bonuses might not apply, since it may be that wealthy people and Wall Street people are particularly likely to care about financial incentives.
(If this is true, this could also suggest companies might care less about prioritizing profits over other things if executives were paid less and therefore weren’t selected for caring about financial incentives. I don’t know how strong of an effect that would be, though, and whether it would be worthwhile overall.)
• Even if tax evasion is not accepted in society in general, it might be accepted among wealthy people the same way music piracy is accepted among teenagers.
One thing I see mentioned on twitter in certain circles is the idea that “status is zero sum, while wealth/money etc. isn’t”.
People paint the picture of the 1% or whatever gaining wealth at the expense of others, but that’s not necessarily true. Often they (whoever ‘they’ is – entrepreneurs? Business owners?) add to the overall size of the pie.
Status, on the other hand, usually means someone holds a position at the expense of others.
Not sure that’s true. High status people can use status to increase the size of that niche, allowing more high status positions, without decreasing the number in other niches. Most apparent in the arts, I would think.
I’d argue there’s some kind of Dunbar number but for famous people we can remember. Every time someone new rises to a high status position it does decrease the number of others in that niche in that they become less relevant. How many artists are desperately chasing the shadow of their past success?
A complication: there are many different status hierarchies. There’s one for each sport, game, and league. There’s one for the politics of each country, region, and city. There’s one for each industry and career path. There’s one for each kind of art, hobby, craft, lifestyle, ideology, and philosophy. There are literal hier-archies of priests in many different religions. My husband will pay good money to attend a live interview of a prestigious actor whom I’ve never heard of and don’t care about; I may have instead gone to a meetup with a blogger in attendance that he didn’t care about. 😀
Then there is the meta-game where people who are good at climbing social hierarchies try to reduce the number of the hierarchies (because the profit from being at the top is greater when the entire hierarchy is greater), and people who suck at climbing social hierarchies try to create their own (where even at the bottom they won’t be too deep).
For example, the forbidden topic where the gamers want to be left alone, and the socially powerful people insist that they are not allowed to, because there is too much money to be extracted. (“What a nice game you have here. Wouldn’t it be a shame if someone with really good social connections publicly accused you of being sexist?”)
How do you differentiate between:
1) People who want to invade your hierarchy from outside, and want to change the rules in order to more effectively conquer your hierarchy?
2) People who already live in your hierarchy, but want to change the rules in ways they consider more appropriate, say because it results in their head getting stepped on less?
Like, women who play video games are part of the gamer hierarchy. If they say “having all the female characters strut around in bikinis is sexist,” is it because they’re socially adept hierarchy-climbers trying to not allow gamers to have a separate hierarchy? Or is it because they actually don’t like having all the female characters strut around in bikinis?
Are they a conspiracy of people high up another hierarchy who want to grind you under their boot heel by changing rules that are necessary to keep you from getting hurt?
Or are they an internal movement of people low down in your hierarchy who want to change rules that are necessary to keep them from getting hurt?
How do you tell those cases apart?
Pretty much all environments have people who want to push the environment in a direction, where different people want different directions. Some want more bikinis in games, some want less. Some want more hardcore technical topics at conferences, some less. Some want vegan food, others want a roasted whole pig. Etc, etc.
The liberal solution to such disagreements is to allow the organizers of an environment to set their rules, so people can self-select into the environments they like (which typically requires compromising) and make new spaces if they dislike the existing ones.
Invaders don’t make new spaces and do all the required hard work, but try to hijack existing spaces or worse, try to make and enforce rules for all spaces.
What I object to, is exactly this kind of hyperbole, where people who voluntarily enter a space with certain norms and values, demand a change to those norms and values for their own well-being (and/or status), without recognizing that this in turn reduces the well-being (and/or status) of others.
If I hate loud music and go to a loud nightclub, the people running the club are not “grind[ing me] under their boot heel.” I crawled under their boot.
I’m perfectly free to seek out or start a nightclub that fits my preferences/needs. If that is not feasible because too few people want to participate (with money and/or their presence) than it sucks that my preferences are too peculiar, but complaining that this is oppression, is actually a sense of entitlement to the money, time, etc of others.
Ultimately, illiberalism pretty much always seems to distill down to a sense of entitlement and/or unwillingness/inability to empathize with others.
The traditional solution to “some people want girls in bikinis in video games, and some don’t” is the same as “some people prefer vanilla ice cream, and some prefer chocolate”. Let people produce whichever they want, and buy whichever they want.
I don’t organize protests against Harlequin Romance novels. Not because I wouldn’t think they contain harmful gender stereotypes (if a man isn’t a pirate captain, a billionaire, or a vampire, obviously he is unworthy of love), but because I realize I am not the target audience. I also don’t write angry articles about how dildo sizes create unrealistic expectations and therefore the industry should be regulated. I respect other people’s right to have their fantasies. Are you the kind of pervert who puts a pineapple on their pizza? Not my concern.
There are tons of games not containing girls in bikinis. (There are also games containing muscular guys. Who cares?) And there is always the option to create your own game. The tools are available for free; sometimes you only have to add a few pictures and texts. Kids can do that, and they literally do; there are game-making competitions for high-school kids. Being the change you want to see is very easy here.
By the way, there were famous games with female protagonists / made by women / played mostly by women long before social justice decided to liberate the gaming for women.
If you are an insider, you sometimes recognize the people who go like: “How do you do, fellow kids?” They keep making all kinds of mistakes which show their unfamiliarity with the subculture.
Another way to tell the difference is ex post, when after the people succeeded to change the subculture according to their wishes, they leave it. Which is the opposite of what a person who wants to make the subculture more comfortable for themselves would do. We don’t see people who fighted against girls in bikinis in video games creating new video games without girls in bikinis. (Neither we see the Atheism+ people fighting against religion in general.)
One of the most prominent anti-gamer gaters, Brianna Wu, created a game that looks like this.
So I’m not sure that they truly care about ‘objectification’. In general, there seems to be a lot of: ‘I can do X because I’m oppressed, you can’t do X because you are an oppressor.’
To be fair, the problem that many of these people seem to have is an immense lack of talent.
On point four: Well said!
To briefly expand on your point, I think a lot of the problems that those opposed to “capitalism” attribute to it are not problems caused by markets, but pre-existing problems that are actually restrained by competitive markets. Remove the market or the competition and the problem will intensify, not lessen. Look at all the dysfunctions discussed in moral mazes — are these caused by the company’s need to earn a profit? No! These behaviors are hurting the company, not helping it. The problem isn’t the market, the problem is that the managers have managed to protect themselves from its workings; turn up the heat and the company either throws them out on their asses or it dies. They’re nothing but a bunch of courtiers — and you don’t need a market to be plagued with those.
(…of course, it’s easy to say “turn up the heat”, but how to actually implement that without causing other negative effects is a problem. So, uh, be careful going too far with this. Still, the general point that the market is not causing such behavior, but rather keeping it in check, stands.)
I think the WORST part of this article is that some of their contradictions aren’t contradictions at all.
And
Aren’t the 50% of people right? 28% of people is definitely some people.
Why didn’t they just ask them “what percentage of people would stop working”?
Because there are large costs to moving–both concrete financial costs (of finding somewhere to live and moving all your stuff there), and in terms of losing all of your connections (which can help support you economically as well as socially).
I think the corruption example especially demonstrates how money as an abstraction layer serves as a sort of conceptual semantic stop sign. Money is doing very different things in different situations, and people aren’t propagating that in a non-compartmental way (i.e. people don’t actually treat money as fungible against all their possible needs) so it’s no wonder we get confused when we try to cross various domains and assume the common sense frame that money is indeed fungible.
I’m reminded of Susan Blackmore’s point about narrative based cognition seeming like the main thing that is happening because considering that question activates a part of cognition that is capable of representing anything as narrative. Any time we think about money in this frame we’ve automatically entered a frame where of course we’re able to think about it in a more fungible way, despite the fact that our behavior does not reflect this.
>We know there’s no reason not to raise taxes, since rich people don’t respond to financial incentives. But there’s also no reason to close tax loopholes – rich people defrauding the government of money through tax evasion is surely as unthinkable as poor people defrauding the government through welfare scams.
But there is a reason to make it socially unacceptable to take advantage of tax loopholes, a monumental task that starts and pretty much ends with ‘remove them from the law’.
>And there’s no reason to question the bonuses of Wall Street traders, since it’s not like anything as crass as a financial incentive would cause them to make risky trades.
But there’s a powerful reason to remove the social incentives to do so, which is a monumental task that starts and pretty much ends with not giving them a huge status signal in the form of a large cash bonus.
>Did pharmaceutical companies incentivize opioid overuse through paying doctors to overprescribe? Doesn’t matter, doctors would never let financial incentives affect their prescribing decisions.
Did doctors consider it socially unacceptable for pharmaceutical companies to influence them using non-data-based methods? Suppose we made it less socially acceptable to be affected by such incentives, a process that, again, starts and pretty much ends with an official body making it against an official standard (although this time it can be a professional body rather than a regulatory one).
>Are senators cozying up to companies that will give them lucrative sinecures later in a “revolving-door” system of legal bribery? No, because incentives aren’t powerful enough to make senators abandon their dignity.
And yet again, if it was socially unacceptable for senators to take those types of legal bribes, they wouldn’t – and it would become socially unacceptable instantly upon becoming illegal.
>Are billionaires destroying the environment just to make a buck? No, the financial incentives to do so wouldn’t outweigh the cost in status and social connections.
That would be the case if there were any notable cost in status and social connections; but the typical person who can become a billionaire by destroying the environment gains status and social connections by doing so, and would lose that status and social connectivity if they undid the damage and profit done.
Your conflation of illegal and immoral/low status is extremely confusing to me. Politics is downstream of culture. Laws get passed because we already decided it was immoral. If things don’t generally work that way you cannot get compliance. This is why people driving on a highway fear seeing a police car, but care little when someone is going 30 over the limit. And indeed generally go over the limit themselves. And gripe and grumble if their totally normal behavior gets dinged.
And its why the prison system is populated by something like 90% violent criminals, not sad teens carrying a bag of weed. If people thought stealing was morally fine, no amount of policing could stop it. If there is a country where gays are thrown off rooftops by mobs, an anti-throwing law isn’t going to stop it unless the chuckers are a minority.
Does that theory adequately explain why USPS mail carriers don’t accept gratuities?
Appearance of bribery and extremely high cost if caught explains it. Most people don’t offer or accept bribes in the US, because we have strong norms against it. This is not true in many countries, like Russia or Mexico. If a guy is seen handing his mailman $20, his neighbor will likely presume the operation was either bribery or a drug deal and report it.
If they really think incentives don’t matter, I assume they’ll be turning down their share of the cash award?
This is a survey asking people about hypothetical future behavior, hence even more unreliable than self-reports of past behavior. Since people can lie to their heart’s content without even feeling like liars. Such surveys should be taken with salt mine. Especially if the behaviors in question carry some social stigma. Note that the three responses with the largest stigma also have the largest gaps: “would stop working”, “does discourage work”, “would evade taxes”. Few want to admit they would be a lazy bum if they got welfare without the requirement to apply for work. Few want to admit they would evade taxes. What this survey really shows is that if people were actually the angels they pretend to be on surveys, then incentives would often be superfluous.
Whenever I here about incentives and culture, I always think about Nub City.
We say people do not respond to financial incentives, yet somehow Vernon, Florida (then population of 700) became the site of over 66% of the claims for loss of limbs in the nation for multiple national carriers. Initial payouts were around $5,000 (maybe $50,000 in today’s cash), but over time the fraud became increasingly obvious. Eventually a few dozen town residents self-mutilated in order to cash out insurance policies.
As time went on the payouts increased, eventually rising to over a million in the 60s when one guy took out dozens of policies from multiple companies just days before shooting off his foot. People became increasingly brazen as juries refused to convict for fraud. Eventually the scheme dried up simply because insurance companies either left the market or raised premiums to astronomical levels.
Are financial incentives too weak to affect change? I would submit no, somehow dozens of people were willing to self-mutilate for cash. Likewise, the freak rates of limb loss dropped dramatically when the insurance companies bailed out.
Further, it seems like the financial incentives become cultural ones story holds. The initial payouts were actually quite small and the rate of self-mutilation only slowly increased. Eventually it became acceptable to commit this sort of fraud and to live as a “cripple” afterwards, so more people did it.
And this makes sense. The love of money may be the root of all evil, but at some fundamental level we only give out money for things “worth” something. If getting money for something lessons the incentives against some action, then we should expect a lot of little Vernons. There will be many such places were some local quirk results in odd feedback loops that give rise to atypical behaviors.
Maybe I am wrong and these economic incentives cannot budge behavior, but then I really want to know why else a bunch of small town Floridians were shooting off their limbs.
> So. We know there’s no reason not to raise taxes, since rich people don’t respond to financial incentives. But there’s also no reason to close tax loopholes – rich people defrauding the government of money through tax evasion is surely as unthinkable as poor people defrauding the government through welfare scams. And there’s no reason to question the bonuses of Wall Street traders, since it’s not like anything as crass as a financial incentive would cause them to make risky trades.
I’m not sure these are comparable. If I am an uber-billionaire and hire an accountant to find loopholes for me, they will likely do so, and it’s not just through financial incentive. They probably like doing that kind of work and receive praise and social status for doing it. This human satisfaction overrides whatever vague moral principle might say “hey maybe don’t slightly damage the financial system for the rest of us”.
This is a pretty dangerous thing – letting people be good at bad things while abstracting away the guilt they might otherwise feel. Normally, that accountant might exploit one system but not a million others, but in a sufficiently large economy, everyone’s hiring everyone else to exploit the one thing they’re good at exploiting.
> Are billionaires destroying the environment just to make a buck? No, the financial incentives to do so wouldn’t outweigh the cost in status and social connections.
This, too, I think misses how people operate in the business world. At that level, money isn’t a financial incentive the way it is to you and me. It’s not a means by which to buy things, at least not directly. It’s a score that indicates how good you are at Doing A Business and a symbol of status.
> Paradoxically, I think this argues in favor of financial incentives. The beauty of financial incentives is that they provide a counterbalance to status incentives. The counterbalance is weak, inconsistent, blink-and-you-miss-it, but it is real. If all the cool people say “we do it this way”, 99% of people will do it that way to fit in, but there will be one person who does it the much better way that lets them outcompete everyone else and make $10 billion. And having $10 billion brings “status, dignity, [and] social connections” of its own. Even if only a tiny number of people are sensitive to money, it’s enough to create a core who occasionally try making things better even when that’s not cool.
This is basically the flip side of Meditations on Moloch. Sure, Moloch doesn’t care about us puny humans, but he also doesn’t care about our stupid status games as a result. Elua loves joy and love and shiny things, but he also mocks the ugly kid in class and won’t give someone a job unless they say the magic words and wear the proper ritual clothes.
That sounds oddly like a financial incentive.
I really wish that surveys that ask you to predict the behavior of others would include a confidence metric. If you asked me in a free-form manner how much a given rate of UBI would generate unemployment, my response would be “I have absolutely no idea, why don’t you ask someone more qualified.” Unfortunately, that answer doesn’t fit into a survey that accepts only an integer value.
I think that many results, perhaps even ones like these, would be a lot less impressive if there were another number next to them that indicated that the responses were of very low subjective confidence.
This is even worse, since respondents could only give a binary answer: “many people would X” or “no, many people would not X”. And “many people” is so ill-defined as to make the entire survey virtually meaningless.
Nice piece, I just strongly object to comparing file sharing with stealing (a physical object): notwithstanding patent/copyright/trademark laws, it is not possible (and never will be) to own an idea like you own a CD. It’s like comparing regular apples to Super Mario’s mushrooms. This doesn’t detract from your argument about incentives shaping behaviour, but I find it super annoying when people mix stealing with copying: it will never make sense.
Correct. Copyright infringement is not stealing.
Fraud is not stealing either.
This is just a semantic argument resulting from the imprecision of the word “stealing” compared to “fraud” or “copyright infringement”.
There is a crime “theft by deception” that stands at the intersection of theft and fraud. But not all fraud is theft and not all theft is fraud. Copyright infringement is not an example of either. And I’m not sure if most people would call theft by deception “stealing”, the way they would shoplifting.
Let me assure you, my dear Nybbler, that it feels just the same to be on the receiving end regardless of how you want to slice the semantics.
Enriching yourself at another’s expense is not cool.
Faza,
Let me assure you that it does NOT feel just the same to be on the receiving end.
With theft, your property has been taken away from you and you can no longer enjoy it. With copyright infringement, a copy has been made of something.
Spoken as a consumer. The only “enjoyment” a shopkeeper was ever hoping to gain from merchandise on his store shelf, was the ability to sell it to a customer for money. So either shoplifiting is OK, or we have to evaluate IP “theft” in terms of lost revenue as a harm.
The only “enjoyment” a shopkeeper was ever hoping to gain from merchandise on his store shelf, was the ability to sell it to a customer for money.In the case of shoplifting, the shopkeeper paid money for the merchandise, and cannot recoup it; it’s a negative value. In the case of a copied song, the IP holder gets 0.
0 $> -X$
The shopkeeper cannot sell stolen merchandise, until he pays for more new merchandise out of his pocket. The IP holder can provide you with more copies of his song/program/book/video, without having to spend more money on that.
Sunk cost fallacy. And if you’re going to include the sunk costs, the IP developer paid money to produce that song or app or whatever, just like the shopkeeper paid money for that pallet of widgets.
I don’t think this is what sunk cost fallacy is.
It’s a bit semantic – you’re violating the property owner’s right to exclude.
If I break into Disneyworld after hours and go on all the rides, am I “stealing” from Disney in the same way as if I break in and eat some Dole Whip?
Not in exactly the same way, sure, but there are enough similarities that I could see saying it was stealing, or that it wasn’t, depending on context.
Sure, you are stealing their electricity, and adding wear and tear to their equipment. You are also adding huge liability insurance probably doesn’t cover.
You are also trespassing, a different crime from theft.
It’s not semantic.
This is the same category of error as arguing that helping slaves escape to the north is somehow stealing from the slave’s ‘owner’. Just because some old white dudes in washington wrote down in their little notebook that someone can own an idea, or a melody doesn’t make it any more true than when they wrote down in that same notebook that someone could own another person.
I’m sure those slave owners *felt* just as bad as if you stole their actual property, but it doesn’t make them equivalent.
Believing that a group of anointed high priests of the religion of state holding a séance to channel the ephemeral ‘will of the people’ and then writing it down as a ‘law’ can alter reality is definitionally magical thinking. I expect better from the rationalist community.
Reread point 1. This is a really important fact to keep in mind when setting those expectations.
@Dan L
This is a good reminder, though I don’t mean SSC specifically. I really do mean ‘the rationalist community’ (and before that the skeptic community) I find are often confusing laws for facts.
Confusion springs from conflation of two types of property:
Legal property: Things you can control the usage of, and go to the courts and make claims over. This includes legal ownership of money, land titles, IP law, and slavery in the 1800s.
Normative property: What you think someone ought to own, based on your particular theory of distributive justice. Whether copyright violations, or freeing slaves, is a violation of this form of “property” depends on your own particular moral framework.
The category error is believing writing something down makes it true. Laws are just The Secret at scale. A 55mph speed limit sign does not prevent you from driving 60mph. The shape of all circles in Indiana didn’t change when they legislated Pi equals 3.2. Pluto does not transmogrify when it passes over New Mexico. No amount of wishful thinking can make changing a random ordering to an arbitrary ordering of 1s and 0s on my own hard drive ‘theft’.
By the way, my claim is not merely that people ought not own other people; I believe people cannotown other sentient beings. Similarly, I don’t believe people ought not own thoughts, I believe people cannot own thoughts; government permission slip in hand, or no.
The argument that freeing slaves does not count as stealing rests on the principle that it’s immoral to own people.
Most people so far have been arguing that piracy is different from stealing physical property because it’s non-rivalrous, not that owning IP is immoral, so I wasn’t responding to that argument.
(For what it’s worth, I don’t think it’s immoral to permit ownership of IP under current circumstances, although some of the current laws are IMHO pretty dumb).
@J Mann
This is not correct. I can conceive of many items one can own which might be classed as immoral, but taking them away from their owners would still be stealing. My claim is that it is *not possible* to own another person, and this is why you can’t steal one.
Furthermore, I do not argue that IP cannot be owned based on non-rivalrusness. I can imagine a post-scarcity world where I would consider it theft if you took my wedding ring, even if I could replicate an atom-for-atom copy at a whim.
In both cases, my argument is from non-excludability. People cannot be someone else’s property because it is not possible to exclude them from themselves. Likewise, thoughts cannot be property because it is not possible to exclude others from having them.
Think of the absurdity of IP: No one can own language, no one can own words, but if you put the words together in the wrong sequence, suddenly someone has stolen something from you? I could set up a random word generator, and if it accidentally puts the wrong words together, someone has been stolen from? If I launched the word generator into space, does the theft occur in real time, or do the copyright infringement rays travel back to earth at merely the speed of light?
My response was intended to argue that Nicholas is confused here.
It’s not a “category error” to describe whether something is “theft” in legal terms. It’s actually a lot more clarifying than the alternative.
If the question is “is this thing the law”, then writing something down via a legislative body does make it true for this question.
If the question is “is this thing moral”, then of course writing it down as law may have no effect.
So when you say:
This depends on whether you are using the word “theft” in terms of whether that ordering on 1s and 0s is violating legal property, or violating normative property.
And again:
In terms of legal property, the evidence that people can own human beings is overhwleming. Numerous historical documents from the 1800s confirm that legal ownership of human beings was widespread.
In terms of normative property, then of course you can morally reject the ownership of humans, the ownership of IP, ownership of land, and ownership of anything really.
@Guy in TN
You’re deflecting. Saying freeing slaves is “legally theft” is begging the question; I’m interrogating the space between the law and reality, which you seem to refuse to acknowledge exists, just dismissing anything outside the law as normative.
So let me ask explicitly: do you think Pi is just normatively less than 3.2 if the law says otherwise?
Can an apple also not be property, since it is impossible to “exclude an apple from itself”?
For any apple which is sentient, and has self-agency, I’d say “Yes”. And also “yes” for AI meeting those criteria.
@Nicholas
You seem to be implying that there is a “real” property, in the descriptive sense, that exists outside of the law. Well, what is it? Is it relatively neutral description that we can use to communicate with each other (such as “property is legal ownership” is), or is it something tightly bound with a particular economic philosophy, such that only people who already agree with you would understand?
I mean, anyone can come up with their own novel definition. Here’s one I just made up: Property is when you hold something for longer than 30 seconds. Resulting in: If you can’t hold something at all (like IP, land), you can’t own it. Also, if someone picks up something you own for 30 seconds, they become the new owner.
Now I could say that this is just a neutral, descriptive statement. But to an outside observer, it looks a heck of a lot like I’m trying to smuggle in my own normative claims of what property ought to be.
And most importantly, you can’t even have a conversation with me about property if I insist on using this definition, without me first explaining it to you. Defaulting to “legal property” solves this problem.
Do you see the difference between this and pi now? We can easily know and agree on what pi is, outside of its definition by the law. Unlike pi, property (in either the legal or normative sense) is something that humans created, and therefore something we get to choose to define.
@Guy in TN
Yes, I am claiming that words have meaning. And rivalrousness and excludability are hardly niche philosophical concepts; this is econ 101 stuff.
If you think the concept of ‘property’ is too squishy, let’s try a thought experiment:
I’m going to make the claim that forcing someone to have non-consensual sex is definitionally rape. That’s not a normative claim about what a terrible thing rape is, and it’s not a legal claim – It’s a claim about the definition of the word.
Now imagine in the 1700s someone passed a law that if you had an idea and wrote it down, that idea became your ‘intellectual body’ and if someone else wrote the same idea down later without your permission, they were violating your ‘intellectual body’. Well, what do we call it when someone violates your body against you will? So over time it get’s added to the laws under the rape statutes: ‘don’t violate people’s bodies or intellectual bodies’ And years later, before movies they run adds with slogans like: ‘File-sharing is rape!’
Now, you could say Intellectual Body violation is ‘legal rape’, and you’re absolutely right. And you can make the critique that language is squishy, and some people might disagree about where the exact lines of someone’s ‘body’ begin and end, and if we just use the *legal definition* those problems go away, and I admit that that’s true.
…But all of that doesn’t negate the fact that the (non-legal) definition of ‘body’, squishy around the edges though it may be, cannot reasonably be construed such that an arbitrary string of 1s and 0s on my computer, or a random word generator in a distant galaxy can ‘rape’ someone.
It’s easy to imagine a commonly-shared definition of human body that exists outside of the concept of the law, which renders the example you gave as “intellectual rape” as definitionally unsound. It’s the same as your pi example.
Coming up with a third example won’t help. Because all of these examples have the same distinction that separates them from your still-undefined concept of property: Their existence is something we can simply observe about the universe, and saying that “they exist” is description based on a relatively neutral definition. Legal property also works this way.
I contrast, I don’t even know what you are saying when you use the word “property” in a non-legal sense. You might as well be saying “zjcxhkcj”. How am I judge to argue the merits of that? What even is the argument, here?
Consider this:
A: I am going to say that the sales tax in the U.S. is 90%.
B: No, the tax rate is actually much lower that that.
A. No, it’s actually 90%. You are just using the legal definition of the “tax rate”. Just because some senator in DC wrote words on paper, doesn’t mean that what he wrote became reality.
B: Wait…so you are saying that there is a “real” sales tax that exists outside of the law?
A: Do words not have meaning?
B: …
There are plenty of different conceivable definitions of ‘body’. Some people feel physical sensations in limbs that don’t exist, for example, are they part of their bodies? Is hair part of your body? What about a limb that’s been amputated? Reasonable people can disagree. So really what you’re saying is *you* have a clear conception of what a body is, and *you* don’t have a clear conception of what property is.
How can you even have a concept of “legal property” without a concept of “property” what is the word “legal” modifying to you? It has to be something more cogent than “zjcxhkcj”.
The word “planet” is a human construct; do you believe that Pluto literally becomes a planet when it passes over New Mexico (as dictated by state law), or at least, a “legal planet”? Can I even use the word “planet” or is that incomprehensible to you if we’re not discussing a “legal planet”?
I mean, that last thing is a bit unfair, but this is just a post-modern language critique at this point.
By itself, the word “property” just refers to the rules regarding the distribution of resources. So, without the modifier of “legal”, all I know you are talking about some kind of system that distributes resources.
What I don’t know without the modifier, is whether you are referring to a system that actually exists in physical reality, or one that exists only as a hypothetical in your head.
And since anyone can come up with anything that relates to the rules of resource distribution (“a thing becomes your property when you are touching it, and that thing is the color blue”), you need some sort of explanation when you use the word “property”, especially when you insist that you are not referring to the legal property that actually exists.
Oh, here’s your third example. Please don’t give me a fourth.
The word “planet” is a human construct. A planet is not.
The concept of “legal pi” is a human construct. Pi is not.
But here’s where things change: Both the word “property” and the concept of property are human constructs.
If a planet is a physical constant like Pi, how did pluto cease to be one recently????
Do you believe that pluto *is* a planet when it passes over New Mexico airspace, but at no other times, as proscribed by New Mexico law: Yes or no?
And by the way, you have *no clue* what actually is meant by “property” in the legal sense either. You haven’t read centuries of case-law, and if you had they’d only be good in one county as legal definitions vary widely across geography. When you say “legal property” you are just making an appeal to authority. If we ever have a question about the meaning of “legal property” there’s no way to look it up, you literally have to have a priest of state don her robes, squint at the sacred texts, and tell you what it means today.
Like, the law says the sales tax rate in my state is 10%. This is the legal tax rate.
Question: What is the real sales tax rate in my state, the one not defined by legal fiat? Writing something down doesn’t make it true, after all.
A “tax” is by definition a sub-set of “law” (and words have meaning) so this is argument from tautology.
The analogy is:
You: “You have an duty to pay government 10%”
Me: “I don’t think I do”
You: “But the tax rate is 10%”
Me: “I agree the tax rate is 10%, but I don’t think that’s what the word ‘duty’ means. I pay the IRS 10% because they’ll do bad things to me if I don’t, so I don’t think I have a ‘duty’ to pay them any more than I wouldn’t have a ‘duty’ to pay a mugger.”
You: “Well, the words ‘duty to pay’ appear in the IRS codes, so you have a ‘legal duty’ to pay them”
Me: “Yeah, that’s true, but if there wasn’t a tax, you wouldn’t say I had a ‘duty’ to pay them anything, would you?”
You: “There is a tax, so you do have a legal duty to pay.”
Me: “I’m not debating that, I’m saying I think passing a tax doesn’t create a ‘duty’
in the non-legal sense. I know ‘duty’ can be a squishy word, but I don’t think a bunch of old guys writing in a notebook at IRS HQ can change the whole meaning of the language.”
You: “What do you even mean by ‘non-legal duty’? This word is meaningless unless we’re talking about ‘legal duty’. You could just make up any definition you want! What if I said a ‘duty’ was when you think about a rainbow for too long? Someone would have to already agree with your very specific views on the morality of taxes to even conceive of this so called ‘non-legal duty’.”
Okay, but this is just generalized post-modern language critique and has nothing to do specifically with ‘property’ or the nature of IP, or any of the arguments I’ve actually made. And frankly, is both sophomoric and trite. You’re here typing away, so you think your words will have meaning to me, and we don’t have to litigate every article and verb, so you’re just using it strategically to deflect from having to address the actual arguments I’ve made.
@Nicholas
You are actually using a fairly atypical definition of rape that is based on a morality that very many people don’t share. Using such a definition to argue a morality seems silly, since their disagreement on the morality is almost certainly reflected in them having a different definition.
The same is true for your attempt to convince people with your definition of ownership.
@aapje,
Can you provide a more fair, value-neutral definition?
Also, I am specifically NOT arguing morality, despite Guy in TN’s insistence that everything I say normative, that’s not my position.
You are confusing the word for the thing, with the thing itself. Although our definitions of “planet” have changed, Pluto itself has not. Because unlike property, Pluto is not a human construct.
Property law is usually rather unambiguous. For the vast majority of property holding, no one ever has to go before a judge to resolve a dispute regarding who holds the legal title. And for when there is a dispute, we have an easy answer: What the judge says, is.
At the very least, legal property is less ambiguous than the definitions that you have have offered (none, so far).
This is so puzzling to me: it seems the same as saying: “when there’s a dispute, we have an easy answer: What the rabbi says, is.”
To me they’re both just “appeal to authority” fallacies. If you think one authority is make-believe, but the other is in a deep sense true, I don’t think we’re going to get to ‘eye to eye’ here.
What is the non-legal sense of the meaning of “property”?
I agree that there are some words that have non-legal meanings (such a “duty”, “planet”, “pi”, “rape”). It would be absurd of me to insist that people use the legal definition of these words.
Property on the other hand, is like taxation. It is a subset of law. It makes no more sense to talk about non-legal property, than it does non-legal taxation. So when you say “property, but not legal property” it is like saying “sales tax, but not the legal sales tax”.
This is elucidating: I think I understand several of your previous posts in a new light. I’m sorry I didn’t understand your position earlier, and I hope I didn’t cause you too great offense. I think there is simply a gulf between our conceptions of the world wider than internet comments can bridge.
Another thought — perhaps this is directed towards the quoted passage rather than yours, but as for the legal status of property: Perhaps you are familiar with the work of Hernando de Soto, who make the point that (I’m probably paraphrasing badly) that poor countries or at least poor people in certain countries (he was thinking about Brazil, but the same applies to many countries) are actually rich. They are rich because they sit on rich land and they have been granted the right (implicitly or explicitly) to sit on that land and to work it. But they have no capital because what turns land (even land with quasi-property rights) into capital is the legal structure that guarantees title and allows that capital to be liquefied or exchanged.
@Bill
I have heard of de Soto, but have never read any myself. I think there could be alternate rights enforcement mechanisms (e.g., norms, customs) that allow for capital accumulation. In fact I find it difficult to imagine that codified legal structures could emerge prior to capital accumulation, but that’s a purely empirical question.
He was trying to characterize what capital consists of that is distinct from wealth rights conferred by norms and traditions. So, for him, a certain kind of legal structure (property registration, property rights, the right to buy and sell property, etc.) is constitutive of capital. So it is logically impossible on his view for their to be capital prior to this. And he went further to say that there can be a difference between wealth and capital, hence the apparent paradox of people with wealth who had no capital.
Stuff for which there is a broad local consensus that a particular “owner” ought to exercise exclusive control over. Yes, this is a thing that happens even in the absence of law, and sometimes in defiance of law.
@Nicholas
My take is that all authorities are “make-believe”, in the sense that they are human creations. This includes the priest, the judge, and the property owner.
The law decides legal property in the same way that the pope decides the doctrine of the church. None of it is “real” in any sense beyond our social constructs.
@John Schilling
Emphasis added, to illustrate that this is the “normative property” in the sense that I described earlier. It’s not wrong, it’s just a different usage.
Just pinging in that what Guy in TN is saying makes perfect sense to me even though I’m pretty sure we probably disagree on many other things.
“Property” makes sense to me as being either a legal or a normative concept like he says.
I’m not sure how a concept of it that was neither legal nor normative would mesh with common understanding.
@Nicholas
Your question is incongruous, because there is no value-neutral view on what is fair.
I prefer your definition (of rape) and think that it is fair, but I certainly won’t deceive myself in thinking that it is value-neutral.
When you claim that something is tautologically true because of a specific definition, but that definition incorporates a specific morality, the claim is no more value-neutral than the definition.
every single time
I would expect the strength of social incentives (conformance?) v.s.financial incentives (greed?) would look like a bell curve: when you are poor in a way that bare survival is not garanteed, financial incentives are likely extremely strong, and social conformity will take second seat if not vanish completely.
At the other end, when you are really very wealthy you become quite mobile and can move to get a new social circle (or select/change your social circle as you want, even if you do not physically move). The proverbial “fuck-you money”…
Maybe a better prediction of social strength would be how tightly bound you are to your social circle, and how severely social non-conformance is punished. For example, drug addicts (no or very loose social circle – would do anything for a quick buck) v.s. gang member (social betrayal have more consequence than not being invited to neighborhood barbecues).
Not a very original nor insightfull idea, but it would predict financial incentive to be relatively stronger than social norm in cities (where you are relatively anonymous and can change social circle quite easily) v.s. small towns. Same for young (mobile, not yet installed, can change lifestyle) v.s. old (less easy to change life). Within compagnies, high turn-over will make financial incentive stronger.
Plenty of people say advertising maybe affects buyers in general, but doesn’t work on them personally.
Advertising is a big, big thing.
Plenty of people are full of shit when self-reporting, even when they believe they’re saying what they think.
I think you’re comparing different things. When people say advertising doesn’t work on them, they’re talking about the quasi-magical brainwashing effects advertising is claimed to have. I see lots of advertisements for things, but consequently do not buy them, or have any desire to buy them. Advertising does not work on me, in the strong sense of “work.”
But advertising doesn’t work on anyone in the strong sense. That’s a myth. The way it actually works is much more subtle, and the effect is much weaker. It just says, “Hey! Here’s a thing! We make a version of this thing! When you’re thinking of this thing, remember us!”
When I think of cola, I think mostly of Coca Cola. Then Pepsi. RC Cola is a distant third. I probably hadn’t even thought of it for years until just now. I don’t drink soda, but if I were going to buy cola, I’d probably buy Coca Cola. So advertising works on me, in the weak sense. That’s worth something, and that’s why companies pay for it. But it’s not what people are talking about when they say advertising doesn’t work on them.
Advertising has more effects than that. For example, giving people a sense of social approval/expectation around the product, because high-status person X favors the product.
There are a lot of those lizard-brain mechanisms that advertising taps into & the effects go beyond merely buying the product. For example, by having others respond more positively to the person buying the product.
The impact of each of these mechanisms may be small, but the combined effect is probably quite large.
Very true. When I’m in a strange city on business, I may very well stop in to McDonald’s for a quick bite, something I wouldn’t think of doing when I’m near home.
Hey, SSC for once accepted my comment!
I’ve already written about 5 comments which never showed up.
@pressedForTime
There are a couple possible reasons for that. If your comments included links, sometimes certain links will cause the comment to be filtered out (I don’t know what exactly the filter looks for in the links).
More likely, there are some banned words/phrases (to avoid bad/corrosive discussion using charged words, and to avoid showing up in searches for those words/phrases as I understand it). I don’t know if there is a complete list anywhere, but go here for the comments policy and scroll down a bit to the “Censored Words” section for a sampling to get an idea of the kinds of words/phrases not allowed. My guess is that you inadvertently included one.
Finally, sometimes the filter appears to eat comments for no reason at all, although that has never happened to me. One good thing to do, especially for longer posts that you don’t think you could easily recreate, is to copy the text of your post before submitting so that you can easily paste it and re-post (maybe with some edits) without having to retype it.
Is that our future, 20 or 200 years from now when we have perpetual AI-induced abundance?
I had a bunch of comments on your third point, but I noticed they all boiled down to the same thing, so here it is:
I think you can trust people to do whatever will make them feel like they’re winning.
That means I do in fact trust doctors to ignore financial incentives to prescribe opioids, because I don’t think doctors consider money to be their main win condition (that’s not the same as thinking that they’re selfless, saintly healers or anything. I just think that the temptations they fall prey to are different in nature). All the other examples are cases where getting more money means winning, so no, I don’t trust politicians to not take bribes, corporations to not pollute, etc, etc. That some people might wrinkle their noses at them won’t make them feel like they’re not winning, it’ll just make them feel like those people are sore losers.
I do however trust executives to keep running around doing their utmost even if you limit their bonuses, because the exact number of zeroes on your bonus is not particularly relevant to the feeling of winning, just as long as you still get more than other people. And I also trust middle-class people to not cheat on welfare, because cheating and stealing to get small sums feels like losing, whereas making your way honestly and without needing to lie feels like winning. I don’t trust the completely down-and-out not to do the same, because if you’re losing anyway, you might as well take the free money to go with it – but honestly, the down-and-out probably genuinely need all the help they can get.
I am a little confused how this squares with the constant hand-wringing about the evils of people trying to improve stuff that I usually see on this blog. If everything is the way it is for a reason and trying to change it will inevitably run afoul of human nature, why shouldn’t we have strong defense mechanisms against the sort of people who think that they can make everything better by organising it into perfectly square grids?
This is probably true, as long as you actually limit the bonuses across the board & they don’t find alternative means to compete. For example, companies might suddenly buy/lease yachts, where the CEO gets free use, so CEOs then get to compete on indirect salaries anyway.
The issue is more that some of us see the car heading for the cliff. Objecting to driving in that direction is not the same as being against improvement.
Also, there is a big difference between inventing something and allowing people to use it vs forcing people into things.
I’ve reviewed a number of pill mill cases, and I’d caution you that:
(1) While many doctors might have non-monetary motivations, more of them have monetary motivations than you might think. (A lot of doctors like having second homes, boats, one of the nicest homes in town, well-funded retirement portfolios, etc.)
(2) Financial pressures build slowly – once you have a practice, you have a powerful incentive to keep your offices full, staff and equipment busy, etc., and one way to keep people coming in is to prescribe stuff your clientele wants.
(3) Even if most doctors are not motivated by a desire to increase their income, the ones who are get disproportionately attracted to the areas where it’s easy to make money.
Self-reporting is basically worthless – there is no incentive for stating the truth if it makes you feel bad about yourself, and biases are given unchecked reign.
If we thought self-reporting worked, we would conclude that 88% of all drivers are better than average.
Going by social capital theory, people will want money, either for its own sake or as a means to buy social capital or power.
Look at their chart: 60-70% have answered that they would be encouraged to move to another state if taxes were increased. People also think 80-90% of others would be encouraged to do that.
How can that be possibly interpreted as saying that financial incentives are weak?
On the other hand, if that was true, where are all the tax refugees from California?
You rang?
I’m from California. Most of my family lives in California. I left to go to college, but taxes are the reason I never came back.
California has had net emigration to the rest of the United States for decades. On the order of hundreds of thousands leave California yearly.
That’s nice but shouldn’t it be a lot bigger?
This map shows me -0.35% net migration for CA but -1.34% for Alaska and -1.47% for Wyoming, and neither even has an income tax. What’s going on there?
Alaska and Wyoming aren’t exactly innovation hubs, so young smart people there go to Washington and Colorado instead. And it doesn’t take much to do that since their base populations aren’t large.
That map really backs up that high tax states are losing population dramatically. California is doing marginally better than Illinois and New York, but dramatically worse than the rest of the West.
Great, that makes me happy. I wish Europe worked that way too.
@eigenmoon
My understanding is that it is a lot harder to move countries in Europe, and because US states are so different, you’d have to actually move countries, not just to a different state in the same country.
@EchoChaos
EU citizens can move relatively freely as long as they don’t try to claim social benefits.
The EU migration map looks very strange to me though. Only low-tax Cyprus with highest net migration makes some sense.
Edit: this makes more sense: Malta, Luxembourg, Cyprus and Ireland are the ones with the highest migration rate and also lowest taxes. That’s nice.
The map is a mix between non-EU immigrants, both legal (not really part of any big media story) and illegal (the immigration crisis), and people moving within EU. The latest is very likely the cause of the net negative in former eastern bloc countries.
Belgium probably because of Brussels and our social benefits are better than our neighbors.
Italy, Spain, Greece, I guess from non-EU immigrants (the ones that all medias speak about) and possibly nothern europe retired people.
Scandinavia have (had) very immigration-friendly policies. It is changing fast…
UK because of english and easier to work without a legal status, probably drawing both EU (from eastern net-negative immigration countries) and non-EU
Switzerland, and especially Austria is very strange, I would not have expected it.
Well, I don’t see a big mystery. If migration in value terms, rather than numbers of people, is counted then the French ISF drove a lot of wealthy people to Belgium. It also drove a lot of non-wealthy aspiring people to various other countries, notably UK and US. Sometimes I think France’s greatest export is brains. Well trained ones too. Switzerland is pretty low tax, but very high cost of living, even in local currency (I have very well paid friends who seldom eat meat, and then low quality meat). Italy, Spain and Greece are obvious cases — tax advantaged retirees move there, among other reasons because they’re cheaper for them (maybe not the employed in the case of Spain). And bear in mind the large number of Americans who have moved to Central America. Speaking of ISF, I know a number of people who would like to move to France but won’t do it, previously because of the ISF and now because they think it will be reinstated. I will certainly leave France if that happens.
Net is doing a lot of work here.
Please elaborate?
It’s the equivalent of asserting I haven’t eaten in the past 12 years because on net my weight is the same. If you don’t know the inflows, net tells you nothing about the outflows, and vice versa.
California refugees are a big thing and you’ll find plenty of news about it online, including people in Colorado, Texas, Washington and Oregon complaining about the immigrants from California. It is likely more about cost of housing than taxes although they obviously both count as financial incentives.
Wow — Hawaii has one of the biggest negative migration rates. Why would such a beautiful place have so many folks moving out? All I can guess is there are few jobs there. Which certainly argues against the idea that financial incentives don’t matter much. Could there be some other reason for this?
Extremely high cost of living, high taxes, lack of jobs, poor education
Is it taxes or housing, though?
California and NY housing is crazy expensive. Texas, a state with a positive net migration rate, has reasonable taxes and builds houses.
Reasonable housing costs seem to have a huge impact; taxes are a percentage of your expenses, whereas housing is a more fixed part. So even when income drops, housing costs doesn’t go down, whereas taxes do.
Hong Kong has really low taxes but people are really unhappy because of high housing cost.
I don’t know of a first world country with cheap housing, and high taxes, but I guess it’s a much better place than the opposite.
Yes material incentives are quite limiting in contrast to what anti-socialists say. One of the reasons the USSR economy was so efficient was that it didn’t have a narrow view of incentives and utilised a variety of incentives (example – Stakhanovite movement)
> the USSR economy was so efficient
No. Just no.
(I was born in USSR.)
> Stakhanovite movement
That was a cheap propaganda trick.
Yes and I was born in Europe but that doesn’t make me right about everything I believe about the European economy.
It was quite clearly effective.
> that doesn’t make me right about everything I believe about the European economy.
But surely it gives you a lot of circumstantial information to fend off people like Holocaust deniers.
> It was quite clearly effective.
Sure, because it wasn’t just brainwashing, it also involved free stuff (and apartments!) for workers in the “movement”.
Yes but it doesn’t give the power to be automatically right and I certainly wouldn’t cowardly use it as an argumentative shield.
The “brainwashing” (not a real thing) was quite effective also.
@An Fírinne
Right, I haven’t yet given any arguments. Here’s a couple:
1) Standing in long queues is obviously economically inefficient. People in USSR had to regularly endure queues for many hours. There, a gross economic inefficiency.
2) Most goods produced in USSR were shit. People greatly valued stuff made in Europe, with DDR stuff being most prized and Czechoslovakian being close second. And yes, people had to stand 8+ hours in queues to buy a cup.
Don’t tell me that didn’t happen.
The “brainwashing” (not a real thing) was quite effective also.
In the 20s, maybe. Then up to 53 it’s difficult to measure. During Khrushchov – I’m not sure, but during Brezhnev – definitely no longer. The work culture disappeared completely while the government said it’s the best in the world.
A couple of late USSR proverbs to illustrate the propaganda collapse:
– “где бы ни работать – лишь бы не работать” (it doesn’t matter where you work as long as you don’t work)
– “капитализм – это эксплуатация человека человеком, а коммунизм – наоборот” (capitalism is when a human exploits a human, and communism is when it’s vice versa)
@eigenmoon
Also: “We pretend that we work, and they pretend that they pay us.”
If you rephrased this as “the efficiency of the USSR economy was because it tried to use other incentives besides financial” I would agree with it entirely.
Which is to say “The USSR economy was very inefficient relative to the West because those other incentives didn’t work nearly as well”.
The first is what I meant.
The USSR economy was trash. No one knew how much stuff to build and since there was no incentive to build more stuff than people thought you could, whenever you came up with a way to be more productive you applied it yourself and just went home early instead of monetizing it or telling your boss for a promotion. Scientists were paid less than cashiers, etc.
I’m so glad my parents got out before having me.
The USSR went from an agrarian backwater to an industrial powerhouse in mere decades. That’s impressive whether your communist or not.
An apt analogy, as much like Soviet (literal) powerhouses, the economy was poorly designed and operated, and then blew up.
The USSR accomplished feats unseen in history. That’s socialism.
The USSR won the space race despite 50 years earlier being a feudal backwater
Such as having to print propaganda posters to discourage the surfs from eating their own children amidst a government-engineered famine. Very novel indeed.
https://en.wikipedia.org/wiki/Holodomor
Poverty was previously a natural condition, or at least manufactured by hand in small batches. Only communism has managed to produce it at industrial scale! Yes, socialism invented negative value-add industry, but because it was new does not mean it was desirable! #SubjectiveValueTheory
And if you think the USSR won the space race, you must be reading soviet-made history books.
The Russian Empire was a developing industrial powerhouse that traded blows with Imperial Germany at the height of its power and narrowly lost.
It fell back to an agrarian backwater because of the Revolution.
Then it came back to an industrial powerhouse with a per capita GDP equal to the mighty industry of Ghana.
That’s not a joke. The USSR’s highest per capita GDP was 3,655 current US dollars in 1983. Ghana’s per capita GDP that year was 3,300.
Sources: https://en.wikipedia.org/wiki/List_of_countries_by_past_and_projected_GDP_(nominal)_per_capita http://data.un.org/Data.aspx?q=gdp+ussr&d=SNAAMA&f=grID%3A101%3BcurrID%3AUSD%3BpcFlag%3A1%3BcrID%3A810
Most socialists cheat by taking a broken country in the immediate aftermath of a destructive war followed by a destructive revolution and calculating growth from the bottom of that pit. And it did technically grow a lot from there. But it was still trash.
Ah so its only a coincidence the huge economic and industrial growth unseen in history until perhaps China (also socialist) happened under the Bolsheviks.
Yes because it was all sunny skies and roses under the tsar’s economic management.
@An Fírinne
No, it isn’t coincidence. It’s because they totally destroyed the country’s infrastructure and had to rebuild it.
In 1897 the rough per capita GDP of Imperial Russia was $850. Source: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_in_the_nineteenth_century
It then absolutely collapsed over the next 30 years because of an apocalyptic war and an apocalyptic revolution.
So in terms of growth from 1897-1983 (their per capita peak), the socialist miracle grew their economy by about 3-4 times in 90 years.
The United States in 1890 was already at their per capita peak ($3414), and by 1983 was at $15,561. So the United States started higher than socialism ever reached and still grew faster.
So by “unseen in history” you mean “substantially worse than capitalist powers”.
@EchoChaos
GDP as being the divine arbiter of economic progress is a flawed and silly idea but lets assume this is the case.
Comparing the USA and the USSR is also quite flawed for two reasons
1) The USSR was under an economic siege by the Western powers all throughout its existence, the USA was not. Also as you rightly point out the Soviets inherited an economy scourged by war which you ironically accuse me of ignoring. Looks like you’re doing it now!
2) The USSR and USA didn’t have fair starting points (even putting aside WW1 and the revolutions thereafter). Its like comparing the height of a man in his bare feet with a man on 10 foot high stilts.
@An Fírinne
When you break the economy, yeah, I’m going to blame you for it. Post War Russia was in a really bad state. Lenin made it far, far worse, to the point where everyone could see it had totally failed and they had to introduce the NEP. Stalin stopped making it worse and started making it better, but that growth rate was still anemic.
Per capita GDP grew only a few percent while similarly dictatorial Germany and Japan were growing at insane 8-9% rates. So apparently the miracle of the 30s was actually the miracle of fascism, not communism.
This is leaving aside that the industrialization killed millions in the Holodomor.
The Soviets CAUSED the decrease between 1916 and 1920. I can absolutely blame them for that.
And the USA started with a higher GDP. We know from history that catchup growth is easier than is growing from a higher standard, which is why China’s modern growth is achievable but no other country can achieve 8-10% yearly growth.
As you well know this is not relevant to what we’re discussing.
Well as I said GDP per capita is completely irrelevant.
Catch up growth is quite difficult when you’re an agrarian backwater who’s economy is undergoing economic sabotage and just went through a decade of death and chaos.
Nobody expects nations to undergo dramatic economic changes under such circumstances but socialism delievered
@An Fírinne
How is it not relevant to how much growth the socialists produced if we’re taking a starting point from after they crippled the economy first?
What is relevant?
Catch up growth went great for the agrarian backwaters of South Korea and Taiwan.
Are you claiming that the reason that Taiwan boomed and China and the USSR failed is because capitalists wouldn’t engage in capitalism with them? Do you think that’s an endorsement of socialism?
And you started this discussion with:
Except that you are now backing off of that and admitting that they in fact grew a lot slower, but it was the fault of the West. Which is it?
@EchoChaos
As you well know it has nothing to do with merits of an economic system. Also the Bolsheviks didn’t cripple the economy, they played a part in it but they didn’t single handidly cripple it. The Tsar mostly did that.
More concrete things, not highly abstract monetary value measurements.
They certainly didn’t have comparable starting points or develop under the same circumstances. Western governments pumped money like their life depended on it into those areas.
Capitalists have resources and wealth due to the compulsive theft of their wage-slave’s toil.
Where have I done that?
I think a lot of people don’t understand that Stalin was aggressively pro trade with the West. In fact the USSR had a revolutionary design for drapes made entirely of metal that they wished to export to all of Europe, sadly the backwards West refused to import these curtains of iron and only Eastern Europe benefited from them.
@An Fírinne
What specific concrete thing? And why would it be unable to be translated into monetary value measurements?
Western aid to Taiwan in the entire decade of the 1950s was less than a billion dollars. That is hardly “Life depended on it” amounts of money.
They did buy things from those areas, because that’s capitalism.
Yes, that’s the benefit of capitalism. It produces tremendous amounts of resources and wealth. Even for those wage-slaves! It’s wonderful, isn’t it! Which owned more material wealth, a wage-slave American like my granddad or an average Soviet comrade? You know the answer.
Two posts ago:
So can I, or can I not compare the USA and USSR?
GDP may be flawed, but it’s not too difficult to compare USSR (and eastern europe communist satellite countries) with it’s western competitors: just look a the net flow of citizens. How many moves from west to east? a few, ideologically motivated (and from those some had regrets). And for east to west? A lot. So many that walls and retribution policies on family left behind were put in place so that those countries kept their citizens. GDP, net happiness a la bhoutan, whatever, people voted with their feet (so much that the loosing part had to force them to stay).
It’s still the same for north korea.
A little bit less for cuba.
And even less for China, which indeed could be a possible example of the superiority of communism for tech/economic development….except it is not commnunist anymore. It was, but now it’s fully capitalist, but with a government with much more power than in western countries, inherited from the not so distant communist past….
USSR also extracted wealth from Eastern Europe and ruined it.
Did it? Is it? Is that evidence that the USSR economy was more efficient than other economies?
There’s also another force at work in some instances. If someone figures out a clever way to save money by changing their behavior they can often raise their social standing by sharing it with other people and proving how smart and helpful they are. A lot of bad advice does get shared this way but large groups of people often seem to converge around the “economically efficient” solution even when most people would never have adopted that behavior individually. This does require that feedback is fast enough for good advice to drive out the bad. And the exeternalities can’t be so bad that you don’t lose points with your audience for admitting to them. But most people don’t seem to think of paying less money to the government as a bad thing, at least when done by people of their economic class, so advice on saving money on taxes is certainly something you see passed around.
This is very just so libetrtarian stuff.
I really don’t think people with these ideas are balancing being seen as a bit weird versus potentially having lots of money. Social incentives include to standing out as well as fitting in. They also include showing those you don’t fit in with, or fitting in with a small group of like minded people.
That’s not to say financial incentives aren’t important or for the most part good. Or that they aren’t an important motivator for starting companies. Just that the idea of oppositional forces balancing each other is, well, guff.
Okay, but… is there any reason to think the net effect of financial incentives at the high end of the distribution is socially desirable outcomes? Like, even remotely? In this very post you mention, just ho hum in passing, the opioid crisis and ecological destruction as products of such financial incentives. And I am not looking at the class of people who have actually made $10 billion and seeing people who have made society meaningfully better. They are rather the ones who have most efficiently extracted value from society – often precisely by ignoring such social incentives as shame and moral regard.
Is your life not meaningfully better off by the existence of drugs that weren’t available decades ago, or technologies like google/facebook/(especially) amazon, etc.?
Or Elon Musk, because he started multiple successful billion dollar startups, having the resources now to do the really cool stuff he wants to do like space colonization in the future.
My life is not even the tiniest bit better because Elon Musk uses his billioons to indulge his adolescent fantasies.
My life is definitely better because of medicine. However, it isn’t better because the people who own pharmaceutical companies, driven by financial incentives, do things like foment addiction epidemics. Perhaps they would be less likely to do so if they were merely driven by social incentives like, say, saving millions of lives. If that doesn’t sufficiently stir their ambition, perhaps this sector of the economy should be socialized.
Because political incentives so reliably produce more desirable outcomes than economic incentives do?
A problem with social pressure as a force opposed to unemployment is that people care about their subculture or their local environment more than about the society in general.
If there is a 70% unemployment in your town, unemployment becomes the new normal.
If people in your subculture are mostly unemployed, the opinions of your best friends will be more important than the opinions of your parents. Some subcultures may actively encourage you to quit your job, because it would give you more time to do what your subculture values.
The society will adapt to many people not having jobs. That will make people with jobs feel a bit like outcasts. Have you ever walked around your city at 10AM and wondered what are all those people doing out there? It’s like a secret club where you are not allowed to go. It’s probably best for your mental health to quickly forget about it, because why worry about something you can’t have anyway. But with more people having no jobs, there will be more social life in the city during the working hours. And you will regret being locked out of it. Your high income may allow you to impress potential mates in the evenings or during weekends, but your unemployed friends will be dating and having fun all day long.
Speaking for myself: give me sufficiently high basic income, and I will not spend another day at a job. I might start working on my own projects, but you should not rely on it.
I think Scott’s final conclusion about financial incentives is very salient. If aliens ever land on this planet, I bet that a lot of really educated yet dumb government officials are going to be very surprised and alarmed when it turns out that they value money as much as we do, and are probably very willing to go to war with us if they are unfairly denied equal economic opportunities. But when you think about it, this is the least surprising thing in the world. Money buys influence, technological expertise, security, resources, and even privacy. It allows you to reshape culture itself. An alien with 0 dollars is going to be sneered at by ignorant twitterati. An alien with $50 million dollars is going to be treated very respectfully because it can use financial incentives to gradually reshape society in its image. And if our thought-experiment aliens can do it, then why can’t billionaires today? Peter Thiel was able to change the way journalists operate by making an example of Gawker. All it takes is a little money applied in the right places to reshape the culture.
For example, a lot of smart people today are unfairly persecuted by the hyper-woke left when they refuse to allow political correctness to influence their scientific research. Scott himself has mentioned that he has to self-censor because he lives in the Bay Area, and his life (and employment) could get very difficult and uncomfortable if he said something that the Twitter mobs disagreed with. But imagine if an altruistic billionaire was willing to fund lawsuits against ignorant idiots who slander the Grey Tribe by confusing them with “racist right-wing sympathizers.” One might say that it’s just ignorance that causes woke people to experience this confusion, but I would argue that it’s an incentives problem. If you punish ignorant people for making these kind of mistakes, they will be highly incentivized to remedy their own ignorance and might possibly even spend a few minutes on self-reflection before immediately leaping on a keyboard to make false accusations. If our altruistic billionaires use retaliatory lawsuits to destroy the lives of a few self-righteous journalists who make these “accidental” slanders that result in online lynch mobs, soon the others will be much more careful about unfairly whipping up lynch mobs against the Grey Tribe, because that’s how behavioral Darwinism works. And won’t that be a great thing for all of us? Won’t it improve society as a whole when scientists are encouraged to create things that improve society, instead of committing suicide due to online harassment?
To be clear: the argument here is that we want financial incentives to induce the production of billionaires so that billionaires will then be able to wield veto power over the practices of journalists?
No, I’m saying something very different. I don’t advocate for either the creation or destruction of the billionaire class (which I am completely ambivalent towards): I am simply saying that the current crop of self-styled “billionaire altruists” have the ability to set up financial incentives in a way that maximally benefits humanity, and they are currently failing very badly at doing so. Let me break it down for you.
1. Inventors with varying degrees of Aspergers have a disproportionate tendency to create inventions that drive societal progress. This is because Aspergers is an evolutionary adaptation to the increasing mechanization of our society, ie, systems-driven thinking becomes more important than interpersonal-driven thinking. In a highly technological society, mild Aspergers is not a bug, it’s a feature, which is why it is becoming more common as society becomes increasingly mechanized. Algorithms don’t care if you’re polite or politically correct, all they care about is whether you understand their underlying logic. Therefore aspies are far better suited to interacting with algorithms than normies, which is important in our increasingly algorithm-driven world.
2. Virtue signalling SJW journalists have a disproportionate tendency to bully aspie inventors into unemployment or even death, causing the potential societal progress that they could have driven to die stillborn in the womb. In this regard, those small-minded journalists serve a purpose similar to the medieval Inquisition; ie, to suppress and punish anybody whose ideas threaten the dominant orthodoxy. This bullying is made easier by the fact that aspie people have a difficult time navigating the social norms of politically correct society.
3. Because aspie scientists who could create wondrous inventions are far more valuable to society than envious virtue-signalling neurotypical bigots with a journalism degree, the most altruistic thing that any billionaire could do for the world is to use their wealth to destroy the lives of small-minded journalists/twitterati who are currently holding back scientific progress by bullying and stigmatizing the aspie people who drive it forwards. This can be easily accomplished through Church of Scientology methods (ie, fund lawsuits against those journalists, attack their employment prospects, etc). Once enough badly-behaving journalists have had their lives destroyed through these techniques, the others will learn that bad behavior carries consequences and will stop acting in a shitty way that holds back scientific progress.
4. Proof of concept has already been demonstrated by the way Peter Thiel funded his lawsuit against Gawker. We have a demonstration that this methodology works: now all we need are the finances and backers to use it.
Corollory: Since many people in this community have a touch of Aspergers themselves, the new world order that arises from these techniques would benefit you as well. Imagine a world where you didn’t have to let petty people of limited intelligence bully you and tell you what you could or couldn’t say in public. A world where the only thing constraining what you said would be whether you brought the receipts (ie, scientific data) to back up your assertions. Wouldn’t that be a fun world to live in? Wouldn’t science and technology flourish so much more in a world like that?
Wow, this sure is ascribing so much benevolence to the billionaires, as if they aren’t already suppressing aspie researchers pursuing anything that might hurt their bottom line.
It’s just as easy to construct a world where the army of benevolent journalists should use their power of the press to punish corrupt billionaires for things like patent hoarding shenanigans, censorious copyright abuse to advance a DRM hell state, or a “””virtue””” signalling President suppressing any sort of climate research and putting wolves in charge of the regulatory agency henhouses.
This might be awfully hard on the normal people. They may hate living in this world as much as people suffering from Asperger’s syndrome do in ours, and I’m not convinced that we should reorder society to cater to a small minority.
‘This is because Aspergers is an evolutionary adaptation to the increasing mechanization of our society, ie, systems-driven thinking becomes more important than interpersonal-driven thinking. In a highly technological society’?!?!?
That’s not how evolution works! Evolution doesn’t benevolently produce traits that are socially useful. It produces traits that lead to *reproductive success*. I think, even without running stats, it is safe to say this is NOT a feature of asperger’s.
Or did you mean ‘evolution’ in some kind of metaphoric sense, where you mean people are *adopting* or *teaching* autistic traits in order to make people better at working in tech? That’s less crazy, but what’s your evidence for it exactly?
Also, not that you said otherwise, but I think it’s worth emphasizing that not all autistic people, or even all autistic people of normal and above intelligence are either interested in tech or “greytribe”. I am pretty autistic: 32-year old virgin, asperger’s diagnosis as a small child, totally unable to stop public very visible stimming and so don’t pass, tendency towards long monologues, anxiety and depression, somewhat socially isolated (though not to an extreme), hit myself when I feel angry, regard listening to a seminar on probabilistic equivalents of the liar paradox to be a fun way to spend an evening, regard nerdy enthusiasm as very sexy in women, regularly read this blog. But I have literally zero interest in tech, and precious little in the sciences more generally. (Though I do think people should respect the epistemic authority of the sciences. Or at least, the hard sciences.) I did two years of English literature during my degree (before I switched from a joint to a single major.) I have very ambivalent feelings about “geek culture”. And although I’m not exactly a fan of the wilder, internet mob end of wokeism, I find grey tribe tolerance of Trumpism to be a much greater danger, have a strongly negative view of US conservatism, and think that many of the grey tribers on this blog (and sometimes our host) are pretty paranoid about the actual level of power wokeism has.
I think it’s important to remember that the culture of autistic tech people isn’t autistic culture but *autistic tech culture*. It’s not a random sample of autistic people, and it will be influenced by the tech part as well as the autism part, in, for example, the relatively higher prevalence of libertarianism among tech people (even though I assume most tech people are conservatives or liberals not libertarians.) It’s quite different from, for example, my background as someone who has spent their life in academia, and comes for a family of socialist (I’m not) public sector workers in a European country. In comparison, this summer I went to an ‘autistic pride’ picnic organized by friend and it was socialism and ‘social justice’ central, to a point where I actually felt quite uncomfortable. I don’t think this typical of autistic people, rather it’s what you get when you have an event that combines ‘autistic’ with a framing that comes from current identity politics.
Also remember that very many people with autism, even with normal or above intelligence are unemployed, and many of the rest are underemployed relative to their IQ. This, rather than special skills, is probably the most salient fact about us and the labour market.
Overall, if you want some patronizing advice from an internet stranger who is guessing things about you from your post (i.e. you don’t but I’m going to give it anyway to make a wider point 😉 ), I think you should beware of a) thinking that autistic people are some kind of rationality elite to which you belong, and then b) identifying that with your own political (and perhaps cultural) tastes.
I can at least come up with a plausible just-so story of how it may have been true from say 1760-1960, in that Aspergers (as opposed to autism) made it easier for a man to get a job as e.g. an engineer or an accountant, at which point mothers would go out of their way to encourage their daughters to marry such a man under penalty of dying alone in a gutter if they don’t land a man with a Good Job(tm). The children of such unions would then be born into an environment highly conducive to their own survival and reproductive success, giving the father an edge over his non-aspie fellows who didn’t get the scholarship to Harvard or even State and so grew up to be farmhands. And the aspie daughters would perhaps be seeking out such marriages rather than settling for the local farmboy.
This obviously gets deprecated when mothers start telling their daughters that, hey, they can get their own Good Jobs, and the state makes sure nobody dies in a gutter. And I’m very skeptical that this plausible but marginal advantage drove all that much evolutionary adaptation while it lasted.
I mean, it’s not a labour market advantage now, all-things considered. That much is clear. So presumably it was less so in the past, when there were less tech-y jobs etc. And it’s whether people with asperger’s were overall more likely to be safely and stably employed that matters, not whether there are some randomly selected well-paying secure jobs that they found it easier to get.
This is a highly nonstandard usage of the word “veto”, referring to something that requires a supermajority vote and is subject to judicial review. But under the current legal regime, it takes substantial wealth to even put “maybe that last bit of libel went over the line?” to a vote, and so it may be useful that we have rich people.
Ideally, we’d want them distributed evenly and maybe camouflaged so that any broad attempt at libel would at least have to tiptoe very carefully to avoid stepping on one of the rich members of the target class.
I’m paywalled out of the article, but I’d note that:
1) Elasticity is a highly studied area. I assume that from the “Economists have somehow managed to hide in plain sight” language that the authors are saying that (a) economists have a fairly accurate picture of how much response there is to a given change in tax or other factors, and (b) everyday people don’t have an accurate understanding of current economic research.
2) This is not surprising, because people generally do not pay much attention to economists, so hiding economic findings from the average citizen is not as much of a trick as that sentence makes it sound.
3) The real question is how much response should we expect, and how does that inform policy. Note that one of the biggest consequences of tax policy isn’t just how much it affects the raw activity, but how it affects the way the activity is structured. For example, if you start taking a lot more of your income in benefits rather than cash or investing in life insurance rather than something else because of taxation, that also has a (generally undesirable) consequence.
When Paul Krugman wants to soak the rich to the maximum possible extent, he still settles for a 70% peak marginal income tax because of elasticity. While the Laffer Curve isn’t quite a real thing, the general idea is approximately correct – above a certain level of tax, tax income starts to drop off instead.
The general idea is the real thing; there’s nothing else to it.
ETA:
Disclaimer: I did not read the source article, but have read all of the comments. I think it was a worthwhile tradeoff.
I’m not sure how one is supposed to disambigate financial from status incentives. I spend a substantial amount of my paycheck on a mortgage for a nice house in a nice neighborhood. That sure sounds like a status marker, no?
Do top athletes often get recruited from pick-up games at local rec centers, or do scholarships that afford them time and resources to train play a large part in developing top performance in the first place? Money often becomes status, and it’s very difficult to pursue non-financial status without being financially supported.
I recently heard an interview with Sam Altman (Y combinator) where he said he never colocates startups because they’ll think each other’s ideas are bad or weird, and that negative reinforcement kills the high variance strategy. They go back to the drawing board and come up with something normal and boring to appease their peers, which is the opposite of what Sam wants.
https://conversationswithtyler.com/episodes/sam-altman/
Of course, you can only distinguish the two when they do not align. This happen when money is earned in a way that decrease your social status, i.e. considered “immoral” in your social circle. camgirl in a traditional town, drug dealer everywhere except within drug subculture (and even there, the dealer is an ambiguous figure). Organ smugler everywhere (I hope 😉 ). Go out of this circle, you keep the money and get rid of the status penalty…
In a way, money can be considered as social status that has been anonymized and thus made transferable.
A consequence of this is that you can’t effectively bribe your population out of social unrest. A rise in living standards is poor consolation if inequality increases, for example. Just look at Chile.
I think you’re only half right. Yes, once social unrest spills over into riots, it’s probably too late for bribery. But you never would’ve gotten to that point to begin with if everyone was healthy, well fed, with a roof over their heads.
Inequality has been decreasing in Chile, though
It has, but in the later years it has reverted somewhat, hovering around .47 according to the worldbank.
Problem #1: Economic incentives and social incentives cannot be decoupled, particularly when you want to use the social incentives to pursue economic “gains”. If you raise the tax on cigarettes, or inheritances, or the incomes of the ultra-rich, you are signaling a reduction in the relative status of smokers, or hereditary wealth, or wealth generally in your society. So you’re never going to get the sweet, sweet economic resources you thought you were by mobilizing society and ignoring economics.
Problem #2: Social incentives can’t be accurately measured or modeled at the level of individual response, because individuals responding to social incentives do not do so in isolation. If, hypothetically, you could isolate the effect to one person and say “to be accepted as a member of society you must do X”, you’ll probably be able to get them to go along with a fairly expensive X. But if you do this to a hundred people at once, they’re at least going to get together in private to gripe about it. If you do it to ten thousand people at once, and make it expensive enough to maintain status in your society – which see #1 has already signalled its disfavor of them – they’re eventually going to figure out that the winning move is to create their own society with their own rules, where status comes from signalling how much they hate and despise your society and your rules.
#2 sounds like high school!
Regardless of the quality (or lack thereof) of the study (or studies), this is an argument in favor of increased taxes, from Warren and Sanders’ wealth tax, to France’s proposed internet tax, all fairly explicitly aimed to take down American technology giants a notch or two.
While I agree that entrepeneurs would, uh, entrepeneurize even with limitations to their acquired wealth, I think these taxes would be fairly damaging nonetheless. Tesla is worth something like $60B, a 2% wealth tax would reduce its worth by $1.2B every year, effectively increasing its yearly losses by more than 50%. Amazon is worth $900B, paying $18B/year would mean a $10B profit becomes a $8B loss. Microsoft makes $40B on $1T market cap, and a 2% wealth tax would “only” mean a 50% tax on profits. Similar for a 3% internet tax on revenues – with Amazon’s revenues of $230B, this would amount to $7B per year.
Would it even be possible to build up these kinds of companies under such a tax regime? What would the effect be? Would valuation be much lower? Or would companies to a much smaller extent be owned by their founders, since capital is much more profitable below the $50M wealth tax floor. Would ownership go to foreigners instead, or would also entrepeneurship happen in more capital-friendly countries?
How many times do we have to rediscover marginal thinking before it sticks?
It’s not about getting everyone to understand marginal thinking, it’s about getting a few more people to understand it every time.
ISWYDT
The funniest part is that Scott picked it up from Marginal Revolution.
It appears even those who should understand marginal thinking still don’t get it all at once, but a little at a time.
It’s interesting that in the survey a significant minority of people answer “yes” in the personal case, even though the majority answered “no”. This tells us that there’s a marginal person in the population who will respond to financial incentives for each question. Therefore, people who said, “no” personally, but “yes” about the general population were correct! (Unless the question asked whether the “median” person would respond to the financial incentive, but that doesn’t look like how the questions were asked.)
Implicitly, they were making a marginal calculation and they got it right – some people respond to incentives even if you aren’t personally swayed by the incentive. Animals and young children have difficulty with this kind of abstract thinking. If they like bananas and not broccoli, they often project that others must share those preferences. This survey demonstrated that people aren’t that naive. But the economists looking at the answers weren’t able to see that and instead came to weird conclusions about people thinking financial incentives work on others but not themselves. Why would minor financial incentives have to work on everybody the same way?
Look, if the median household income in the US in 2019 is $59k, the median respondent isn’t going to quit their job for a UBI of $13k/yr. But surely someone is going to quit their lousy part-time freelance job that brings in a pittance, maybe so they can take a month off to write a novel. That doesn’t mean everyone at or above the median is making irrational assumptions about the population. It means certain economists are.
This ties in nicely with Henrich, which I’ve been suggesting to everyone (Thanks!) I am a professional economist and the importance of norms over incentives is pretty obvious to anyone who looks. And the norms depend on culture, which explains Japan vs. Sierra Leone. The point of behavior on the margin is the crucial one, and the the counterweight of financial incentives to norms is a powerful explanation of cultural advance, a sort of gloss on Deirdre McCloskey who notes that in spheres where financial incentives don’t conflict with cultural norms (pretty rare in human history), the advances can be spectacularly rapid.
This NYT article is simply bizarre. The numbers clearly reveal that individuals (and their spouses) would be affected by financial incentives. It further shows that (most) people are also smart enough to realize that others will respond to financial incentives.
Note that none of the questions ask if EVERYBODY will respond, it just asks if many or some would. If twenty five percent of individuals answer that they would be affected, then it is irrelevant how many people think that “many” would respond. The Individual, self focused answer, when summed up, answers the issue. Yes, many or some people would respond to incentives.
The actual take away from this survey is as follows:
1) People consistently and significantly UNDERESTIMATE the effects of incentives on others.
2). These authors are either fools or propagandists. They proved the exact opposite of their summary.
3) The NYT editorial staff owes us some answers.
There is no good explanation of how a person can become an economist (or editor) and legitimately look at this data for even 5 minutes and come to the conclusion that the authors are peddling. I presume the authors spent months gathering and summarizing and discussing this data, and this never occurred to them?
This data reveals that financial incentives matter a lot and people, if anything, underestimate its effects on others.
Can I get my Nobel prize now?
I’m pretty sure the article is talking about marginal financial incentives, not economic incentives in a broad sense that, as you kinda sorta already point out in the “Second” part, is essentially indistinguishable from incentives without adjectives.
The rich (I suppose we share this assumption) have an incentive to get even richer. That’s a “financial incentive” alright, but equivocating this with the article’s point is missing it. The point is that they will not stop trying to get richer once you make it harder to do so, or make them return more, or whatever. No John Galt will abandon society and go live in a hermitage because you raised his income tax by a few percent. (That he will indeed gladly use any loophole available to him is, of course, both obviously true and completely beside the point.)
Same for the poor. They have many incentives to work, most of which, like the incentive not to starve or freeze under some bridge, can be considered economic. But they will generally not choose to refrain from meaningful, productive work when some sane and humane policy makes their lives more stable, safe and dignified.
This observation is not contradicted by the fact that people will perform, say, welfare fraud in extreme situations when (they feel that) it’s the best option left for them, usually because most other ones are simply nonexistent. Society tends to turn the blind eye to bad behaviors which are commonly understood to be necessary to subsist. It’s a feature, not a bug. Marginal financial incentives again do nothing, the solution requires fixing what’s fundamentally broken about their circumstances, in this case e.g. providing them with opportunity to work. I’m not saying it’s easy, I’m saying that’s what would actually change anything.
Of course, society is not a magical force of good. But if it’s stifling diversity, progress and creativity, the default solution should be to fix how it operates. Your proposition that one use economic incentives instead requires a particularly far-reaching assumption – that fixed it can’t be, because blind oppressive conformism is its natural state. That’s actually a really strong ideological statement. One which I believe can be easily and conclusively disproven by example, simply by pointing to modern history of science (even remembering its various local setbacks, some ongoing).
So what incentives are the authors responding to in these studies/articles?
The NYT article looks cherry picked and with no consideration to alternatives. Here is a big tell
Well duh, you took the survey in 2018 when the UE rate had been falling for 9 years and was at 40 year lows. Who is going to be over represented within the unemployed? People who aren’t willing to move for a new job. Likewise citing a study about Alaska’s basic income isn’t going to tell you anything worth extrapolating, if you live in Alaska you have basically already declared that you have very non-traditional preferences. Likewise if you are living on an Indian reservation.
There’s so much stupid in this article I could not finish it.
The theory of financial incentives does NOT predict that a basic income would make people stop working! The whole point of the negative income tax (and reasonable UBI proposals) is to make marginal amounts of work worth doing!
A generous welfare benefit can have more work incentive than U.S. style benefits — if by generous you mean that more people qualify. A stingy welfare state that cuts off benefits once you start making money has the effect of a greater than 100% marginal tax rate. A 50% income tax on everyone coupled with free healthcare, back rubs, etc. can thus provide more financial incentive to work.
As for the surveys — that worth a retraction of one’s economics credentials. What people say they would do in a hypothetical situation and what they actually do are wildly divergent.
Finally, regarding tax rates: the degree to which income taxes are progressive can have more effect than the actual rate — at least for high risk endeavors. With a flat tax rate — even if high — more income is better whether it comes in a steady trickle or in a lump sum. With a progressive tax rate the expectation value for high risk high reward endeavors gets clobbered. Then entrepreneur who works for little for years to make a big income later makes less than the boring wage serf.
Or consider a time investment that has a 10% chance of making a million dollars per year. Before taxes, this is an expectation value of 100K/year. This also compares with a $100K/year income under any flat tax scheme. But if a million dollar income gets taxed at a higher rate than a 100K income, the effective expectation value drops. A steeply progressive tax rate penalizes entrepreneurship.
The thing that bothers me the most about these types of articles is that they so ridiculously straw man conventional wisdom. It is well known and understood that if you increase the marginal tax rate for doctors you aren’t going to significantly reduce the number of doctors in short order. Any qualified doctor is unlikely to have a nearly equally lucrative career that they can transition to immediate, even those who are still in the process (residency, med school) of becoming doctors are going to be resistant to such measures. It will take years for disincentives for doctors to show up in the data.
Scott is getting dangerously close to scooping the premise of my next book, and I’d ask him to stop but he keeps finding ways to state my point better than I could.
FWIW, given the tax rates I pay, which aren’t all that remarkable, I’ve already looked at working part-time instead of full-time. Why work to pay for the lives of others as long as I can make due myself? The limiting factor is that it’s hard to keep health benefits at a company while only working part-time.
I suppose if we go for Medicare-for-all with the associated tax rate increases it will make it easier for me to otherwise justify.
1. For the people who are (righly) sceptical of self-reported survey data: there’s a related line of research where there is quite a bit of empirical data confirming this kind of thing at work, namely incentive crowding-out. Some of you may have come across the idea that giving people rewards tends to reduce their intrinsic motivation, sometimes enough to offset entirely the effect of the extrinsic incentive. See eg. some examples in Gintis et al. p. 20n:
– paying for blood donations decreases donation rates (Titmuss 1970)
– Elinor Ostrom provided some examples where giving material incentives for conservation may destroy community-level norms (Gintis et al. ch 9)
– some lab experiments confirm this pattern – threatening to fine people for noncooperation in some situations may decrease cooperation levels (Fehr, Gachter 2000; Fehr, Rockenbach 2002)
– there was also a fairly well-known example where fining parents for picking up children from kindergarten late led to people assuming that leaving children late is just a service with a fee which they were willing to pay, rather than a favour on part of the teachers – so they picked children up late more often
– A good review is (Gneezy, Meier, Rey-Biel 2011), which demonstrates that:
a) extrinsic incentives crowd out intrinsic ones, but if the reward is good enough, they can dwarf them
b) the destruction of intrinsic incentives or norms is long-term (after removing the extrinsic incentives, the results are even worse than before)
c) a lot depends on what you’re paying for, eg. paying for participation in education tends to work, paying for grades – not so much; paying to achieve narrow, specific goals is better than nebulous ones
2. From the various experiments and examples in the Gintis book, an interesting pattern emerges, which connects to Scott’s second point: people don’t like punishments, but they really hate to be suckers. It seems the best kind of punishment is applied very selectively to free-riders – not to motivate them, but to show others that they aren’t being had and the system is just. Given that, people will tend to contribute freely.
I suspect a lot of these weird effects have to do with signalling intentions and setting up different kinds of relationships. If you introduce explicit incentives directly, you’re signalling that you’re doing a one-off quid-pro-quo and all negotiation options are on the table. If there are no incentives or they’re only introduced in a roundabout way (we executed the last people to betray us, but of course you’re not that kind of person), you’re signalling that you’re looking for a relationship of trust.
3. There’s one important aspect Scott didn’t mention: income effects. A possible reason for why higher taxes don’t reduce incentives is that the taxed might start working more to make up for the loss.
4. It would also be interesting to investigate how this ties into the literature on the income/happiness relationship – it seems that a lot of the happiness from money comes from having more than the other guy; maybe money is also a kind of status marker (one of many capitals, to be a bit Bourdieauish) that’s just traded off against other status markers – but then, why the crowding-out? Maybe it’s just more difficult to signal monetary incentives obliquely than other kinds of status incentives?
Gintis, Bowles, Boyd, Fehr (eds.) – Moral Sentiments and Material Interests, MIT Univ Press, Cambridge, 2005.
Titmuss – The Give Relationship, Allen and Unwin, London 1970
Gneezy, Meier, Rey-Biel – When and Why I(ncentives (Don’t) Work to Modify Behavior, vol. 25 No 4, Fall 2011, pp 191-210
I believe this turned out to be incorrect
Do you have a reference for the incorrectness?
A lot of the third part seems weakmanish.
I don’t think this really makes sense. Evidently some rich people do evade tax and some poor people do do welfare scams. The correct conclusion from “financial incentives have very little effect” isn’t “these things don’t happen” (which would be absurd because they do). It’s the (much less snappy) “marginal changes to relevant financial incentives will not have significant effects on prevalence of these things”. That means a minor increase in taxes or welfare payments won’t change anything much with regards to those issues, but something like changing the likelihood of tax evaders or welfare scammers being imprisoned would might do. (So this is less an accusation of weakmanning and more a claim that your statement doesn’t work in either direction).
I don’t believe “they encourage risky trades” is at all a ground people criticise bonuses on. The actual reasons I see are “traders don’t create societal value consumerate with their bonuses” (mild steelmanning of “they don’t deserve them”), “the money would be better spent elsewhere (i.e. by the government)” and “bankers get huge bonuses even when they make huge mistakes”.
These are fairly reasonable.
The common claim is that corporations are destroying the environment, not individuals. The financial incentives of a corporation are translated into other incentives for their executives (e.g. status, fear of uncertainty if they get fired).
It seems like the situations that are described are a grab-bag of different things. A true, straight-up financial incentive is where I make a fairly simple choice, and my income changes by some amount of money — but the context I live in does not. But changing the tax system isn’t like that — if you raise taxes by some amount, everybody’s taxes go up and my position relative to everyone around me is largely unchanged.
As for moving to find work, it’s extremely well known that people will do that for money. An extreme case is McDowell County, W.Va., which lost its economic base in 1960 and has been more or less the poorest county in the country since then. It has been losing about 20% of its population per decade since then. You see similar results for marginal farming areas and places undergoing natural resources extraction booms.
What you don’t see is a lot of middle-aged people with established lives moving unless the financial incentives are quite large. Generally, people in their 20s move, when the costs of moving are the least.
Calling it a “subtle” difference is understating the gap between a action causing immediate harm to someone and a victimless crime.
The conclusion I take from this is we need to go one step further in considering our incentives. It used to just be wages; then it became Total Compensation Packages because you have to include bonuses and benefits; now we should go to Total Incentive Packages to account for the rest of our lives in weighing the decision.
I note some of this information is protected, like family status, medical conditions, etc. Seems like it would be hard for companies to do themselves as a result. But a tool could be offered to employees for their personal use, and companies could do general calculations on representative data as part of their retention and hiring research.
Has anyone tried asking why survey takers chose their answers? This seems to me far more important than the answer proportions themselves.
It is probably too late for you to see this, but my father has a PhD is economics and I sent him an email with a link to the NYT article and asked for his opinion on it. He said:
Exactly as Saez and Zucman. On the basis of pre-publication copies of their new book, NYT and WaPo carried screaming headlines about how the 400 and top percentile in general paid lower taxes than the median. Economists from the private sector and Treasury responded detailing numerous illegitimate data manipulations they made (including, but far from limited to, counting 2018 taxes in their charts before the majority of very wealthy people had even filed their tax returns — for them Oct 15). Other economists weighed in with many more accounts of outrageous data manipulation. One Econ journal editor opined that it was unprofessional to publish a book based primarily on data from a single published paper without returning to that journal to discuss why they had “adjusted” in such a radical way the data they had presented in that paper and let that be reviewed before publishing the book. The comble was a panel discussion of Mankiw, Summers, and Saez. Summers said he was 98.5% certain that the data had been “substantially misrepresented” and went on to blast Saez on a number of other grounds, including his/Warren’s wealth tax proposal. Saez in response to all this said “Well maybe we got our numbers wrong” but then went on to advocate the wealth tax as if nothing had ever been said. A week later WaPo published (Sunday) their front page repetition of the same line, again without the slightest acknowledgement of the very substantial objections that had been made. This is a case of academic fraud (and journalistic fraud on the part of the editors of WaPo) of the first water. No wonder we have people like Trump in the White House.
Scott,
I would love if you did a book review on The Missing Risk Premium by Eric Falkenstein. It’s only 160 pages and delves into the idea of absolute versus relative utility, or in other words our countable wealth versus our “status, dignity, social connections” and how they affect how we feel and how we act.
I work in finance so the book is specific to my line of work, but you’ve written a lot about economics and I’m sure your view would be fascinating (as usual).
Scott,
people not doing what they preach is a classic. See, e.g. Timur Kuran: “Private Truths – Public Lies”.
An interesting note here would be the folk wisdom that nerd culture become popular because nerds made a lot money in tech which made being a nerd high status. Hard to verify/falsify that hypothesis, but it describes a mechanism parallel to what you described where financial incentives become social incentives.
Unfortunately, a low-status nerd with a lot of money is still a low-status nerd, which seems to be a problem with that theory.
@VivaLaPanda
Arguably, nerd culture became popular because nerd technology became so nice. Imagine a 50’s – 80’s person time traveling to our time and seeing everyone playing with their phones, ignoring those around them. They’d think that a toxoplasmic bacteria had turned everyone into nerds.
However, that it became cool/accepted to be a nerdy neurotypical person doesn’t necessarily mean that it became cool to be a nerdy nerd.
Oldie but a goodie. https://www.youtube.com/watch?v=u6XAPnuFjJc&t=3s
The findings that economic incentives don’t have linear impacts have been with us for years. Surprised that you are surprised.
And reading so many of the comments, obsessing over the survey aspect of the article, missing or ignoring the rest of the literature that backs up the concept. Folks here are self-reporting their over-emphasis on financial incentives in this comments section.