Saturday, June 20, 2009

The utility of this blog... now approximately zero. Epsilon can be important, but I have delta's to catch.

I'm closing up shop - Arare Litus was an enjoyable and useful study for me.

The goal of 100 posts on the blog will soon be done (this, #99, is my last post - #100 is a guest post responding to my coalitions & democracy arc).

I've used "Arare Litus" to try to improve my writing/arguing a bit, to consider economics in more detail, and, in general, as as a "living experiment".

Time for Arare to go back solely to the Platonic realm.

Goodbye Arare, sweet dreams.

litmus test

Pete Boettke discusses 21st Century Economic Methodology, where he is critical of the positive science approach to economics.

This seems to be an idea litmus test of Austrians - what do they actually believe, and what support do they have for it. I've taken the position of positive science - easy to do, since I really believe it - and I am attempting to get clarifications of just how Austrians break from this: this is the litmus test, where do Austrians stand? It appears that they are simply taking a reactionary and stylistically critical stance against positivism, but is this simply unclear communication and "they" have clear and productive (positive?) and informed methods other than positivism up their sleeves? To me all the useful and communicable (i.e. meaningful) fruits of Austrians are their positive efforts. Are Austrians lagging due to an unproductive fascination with metaphysics?

I look forward to understanding Austrians better - they are an interesting case study....

Thursday, June 11, 2009

Coalitions & Democracy: Final Cut

The final cut on the coalitions & democracy arc:

There are two ways in which coalitions change things - first of all, they are only effective if they bind the behavior of the parties entering into the coalition, or "new party".

This points towards a key flaw in opposition - instead of acting and moving decisions forward, they peacock and posture. They consider "optics" and bray like jackasses, they do anything but constructive work - after all, anything moved forward would be a possible "point" for their arch nemesis, the sitting government.

This suggests that there is a huge reward for politicians when they grandstand - they find this behavior so rewarding that they must enter a contract in order to prevent this!

While this reflects poorly on the current situation - the system has evolved where the opposition does nothing but whine and bicker - it is a plus on the coalition side in terms of expediency: the general stance of a coalesced party will be similar to the previous parties (or, more accurately, the particular representatives/proxies sitting in government). However, note that the "evolved" norm that says it is okay to be an ass and sacrifice the preferences of ones constituents for ones personal gain and pleasure in being an ass could also be more directly confronted: after all, democracy mandates that representatives represent the interests of ones constituents.

The second, and final point, I have on actual consequences: political decisions are "pruning" decisions, they most often address common actions where we take one action, pruning off all other possibilities. When a new party/coalition is formed they will make a new platform, pruning off many of the particular planks to form a coalesced "average". This is key: once pruned, the particular choice possibility on the tree of choices is pruned off - it is possible to bring them back, but unlikely. So this is the an effective change: by pruning the tree early this limits possibilities. In process management (i.e. process, comp. sci, project management, etc.) there is a key rule of thumb: delay all binding (pruning) decisions until the last possible moment, often stated as "don't optimize too early". This keeps one from mistakenly putting efforts into the wrong direction, and allows choices to be considered with all the data that one uncovers as one works. A particular pruned choice branch may be the sole reason someone voted for a proxy, and keeping options open is inherently good.

So this is the lowdown:

- Coalitions are fraudulent, and thus puts the governments legitimacy (and the particular system as a whole) into question. This is, at best, not good, and at worse - dangerous to a functioning wealthy society.
- People - both voters and politicians - believe coalitions have effective consequences
- One consequence is a reflection of selfish behavior on the party of politicians, which is actually against their entire mandate: the politicians must bind themselves in a contract in order to prevent each other from being chumps
- A second consequence is early pruning. While "expediency" is thus ensured, going in the wrong direction fast is not a good thing: better to be a bit less expedient and actually consider which option is best - once made societies resources as locked-in, resources that may be better used.

Thus ends my initial thought arc on coalitions. I find them fundamentally undemocratic, and it would be healthy to actively prevent them - forcing a general election in order to get a "mandate" from the electorate.

Wednesday, June 10, 2009

Coalitions & Democracy: Take II

Democracy is expedient collective decision making. Aggregates of people, defined spatially (i.e. by neighborhood), select a proxy to represent them in making decisions that effect all the neighborhoods in the collective we call "country".

The proxy, aka scumbag or politician, is chosen for various reasons by various people. Many people do not bother to vote, being happy with the status quo or realizing that their vote is not significant (the weight is typically 1/N, where N is a big number - even if most don't vote) and thus not worth the effort. Everyone casts their vote, the votes are counted, and some rule is applied to select the winner(s). We now have a set of proxies to decide for us - most of whom we never heard of prior to their political life, who we never see or talk too, who often have not lived in a community or have anysort of meaningful relationship with that community, who "lead" a "community" that is most often hetrogenious and mobile, have not grounded themselves with serious considerations of social, historical, and economic facts and ideas, etc. So very imperfect proxies, but those are the proxies we have.

What are the bounds on these proxies? There are a few - social norms and the media are two important ones. Parties are another important one - most politicians align themselves with a party in order to signal what they stand for. This party affiliation bounds the behaviour of a politician, mainly through the power relationship of the party (which will punish them for failing to follow the broad sweeps, as well as nitty gritties) but also through "optics" - breaking social norms, such as "flip flopping" on key principles and platforms of ones party, is also punishable by voters, by politicians peer groups, by becoming a legitimate target for mocking in the media, etc.

So the situation is this: we have a group of M contenders viaing for N (N lessthan M) highly valuable political positions, these contenders group themselves in parties, and after posturing voters select N to fill the positions. Then N consists of various factions, which are bound by the parties they are in, which must posture and fight and showboat their way forward, making (mostly costly) decisions of various sorts. We all pretend that they have our interests at heart, and hope we don't get too screwed.

So - given that negotiation must occur to decide various outcomes, does it matter is politicians switch parties post elections. i.e. form a set in coalition. After all, the politicians are aligned with a party, the party makeup is now set, and is various parties coallesce together does this make any functional difference?

The answer must be yes - otherwise the parties would not bother to coallesce.

In addition to this observation, we must also confront the fact that we are not averaging together parties in order to come up with a new party that accuretly reflects those parties. Instead we are averaging together members of parties, who are only partially constrained and defined by the party. Those members will define the new party in their best interest, yes constrained by "optics", but since the ruler is living by party platform and most voters are partially (to not at all) informed there is ample wiggle room.

I previously argued that perception of legitimacy would be seriously harmed, and this is one key problem with allowing ex post redefinition of parties: in business changing a product after a contract was negotiated is fraud, and I don't see how this is any different here. Some will say, but this is inconsequential - its like you require a car, and negotiated red, but you got the exact same car but it was blue. Is that really "fraud" [1] But I think things go even further, and there are actual choice consequences - the path society will travel changes. As noted above, the parties joining a coalitions definitely believe so - otherwise they would not do so.

It is hard to come up with a clear example the demonstrates this - the fact that coalition is being considered at all demonstrates that the politicians believe there is a difference in outcomes. The fact that people support this based on "expediency" suggests that deep down they do also - after all, if there is no difference in practice it is just as expedient to simply ban set coalitions and you loose nothing - as nothing would have been gained from allowing it. This demonstrates a belief. But in a vague complex system it is hard to come up with a nice clean demonstration of this.

So as of now, I have the following:
- coalitions are fraud: to some this fraud is so inconsequential that it doesn't matter, though to others with different preferences it may be huge - thus basic legitimacy is called into question, and this may have very negative implications for society
- both coalition members to be, and people in general who argue pro-coalitions, implicitly believe there is a functional difference: otherwise there is no point in doing so, in particular there is no positive to overweight the (possibly small, but possible large) legitimacy issue.

The hardest part - coming up with a clean example - will have to wait for some sort of inspiration....

[1] Yes. What people think is important and their preferences are often vastly different, and we can't predict or sense how important things are to others, unless we really know them well. For some the colour is completely unimportant, for others that may have been a key selling feature. For me the expediency argument of allowing coalitions - we must make decisions and it is a waste to go back to the polls! - is an implicit statement that others preferences are not important. To me red/blue is stupid, and it is "expedient" to move on - the basic car features and where we are going define expediency, but to someone else perhaps the red is key - they reconize that all cars are basically the same, and pick based on colour as this will make the trip more pleasant, or allows them to feel good about investing in the upkeep of the car, is the truely important distinction between their top two choices, etc. They may not be fine with averaging together red and orange, even though the colours are "very similiar" and are "quite different" than blue.

Thursday, June 4, 2009

Coalitions & Democracy: Take I

Democracy - it is all about expedient collective decision making. Ideally "we" would discuss things, come to some common agreement, have different options for different people, have various voluntary and free flowing groups that form and dissolve to address needs and wants. But who has the time for all of this? What about dealing with the chumps who never listen and don't think, and therefor will never come to an understanding with others, or who are actively coercive? How about groups of such people?

It seems the simplest way of dealing with this in a good enough way is democracy - we make binary group decisions, based on some proxies who "we" select to make decisions. The most important decisions are protected in a constitution, which is very difficult to change, and then there is a spectrum of increasingly easy to institute decisions - from super majority, down to bare majority. The outcome isn't perfect, but possibly the most effective approach - democracies are on the whole very rich nations, with people who are relatively free, and that are fairly stable from dissolution due to external/internal violence. i.e. democracies seem to be a decent way of dealing with the intrinsic social aspects of people, and that take a handful of fundamental facts about people into account: time is of the essence (we don't live forever) so decisions must be "good enough" (our wealth and relative freedom is a measure that decisions in democracies are, in fact, good enough), humans are violent (anarchy is a nice limiting condition [1] to consider but, given violence is intrinsic and basic evolutionary ideas, dealing with violence is the first and most important order of business), and specialization is key in modern societies (this relates to "good enough" decisions ).

So what is done? People vote for proxies: typically based on personality, party, ideology, looks, whim, chances of success, feeling good, social pressure, to prevent worse options, etc. Essentially a huge complex bag of reasons. After voting the votes are counted, some rule is applied, and out come our fearless leaders.

Those professional decision makers then try to write and pass various rules for society to live by - mostly dealing with who pays, how much they pay, and who gets the collected cash. Predictably many problems arise - for one they will tend to listen to organized voting blocks (rewarding with direct money, less taxes, or favorable rules). But putting that to the side, how do they operate? How to we predict action and hold politicians accountable?

A key aspect of politicians is their party. The party is the group that the politician works within, and thus gives structure to their actions. The party will have some platform that lays out the nature of this structure, i.e. bounds on the political actor, which includes some ideological aspects (i.e. their vision of long term utopia) as well as various specific "planks" that the party wishes to focus on and implement in the short term. Post election we have a group of various proxies, bound by parties, which then propose and vote on various specific decisions. Parties often will "whip" their members into taking specific decisions, so the party will vote as one. If the ruling party doesn't have enough votes to force decisions they will negotiate with others to come to a common ground and move decisions forward.

Okay, enough of a setup. Here is the question to consider: in a minority situation (the nominal leading party cannot force decisions) does it matter if, post election, various parties form a coalition in order to become a majority and lead? Is this any different then what will happen anyways - since decisions must be negotiated and moved forward, does it matter if all the negotiation happens up front and then specific decisions made versus a one by one negotiation and decisions?

I believe the answer is "yes" - it makes a large difference, others believe "no" - effectively nothing is different. To clarify language coalitions are NOT the common even-based coalitions that are required in minority (or free vote, the ultimate in minority) situations but are instead are campaign coalitions - essentially a new party that is set up, either for a given timeframe, or for good.

In this first take I will only address one issue: what people voted for.

To be legitimate, a proxy should be the proxy that one selected. When picking your proxy you look at many things. For example, I may vote for the NDP knowing full well that they will never lead the country - judging that if in power they would do enormous financial damage to the country, but believing that they will constrain my expectation that the Conservatives will be in power. What happens then if the NDP & Liberals form a coalition? Perhaps not much - after all the NDP & Liberals are somewhat similar in nature [3]. How about if the Liberals and Conservatives joined together - what then? This happened in the outbacks of Saskatchewan [4]. Since what I decided to vote for is changed ex post, is this legitimate? For some people they will have no problem, but for some they will see a huge problem - their entire reason for selecting someone will no longer be true: in business this is called fraud.

This reason alone, ex post change of a party, seems to make things illegitimate - yes, everything changes ex post anyways: depending on the specific makeup of government the path taken may change significantly, but if an ultimate reason for voting is broken, even for one voter, is this not fraud?

Democracy is all about expediency, which is a hard thing to make clean cut ethical arguments about, and some will say - yeah, whatever: the effects will not be very different, and we have to move forward. Coalitions are expedient. Move on, suck it up, live with it, not a big deal.

I sense there will be a large difference in outcome, but must think further. But in terms of fundamental choice - the ultimate reasons people chose their proxies change under a coalition, for some people there will be a big difference. If democracy is effective in part due to its ability to make people feel okay about decisions this is important, quite important: to the extent that people are embittered and divided and feel illegitimacy [5] there will be "negative externalities". We simply do not know how large this is, if there are thresholds, if this is a positive feedback problem, etc. Given how terrible most of the world is, do we really want to do an uncontrolled experiment here?

I am against ex post formation of parties, as I feel that this changes things, and as this will definitely make some feel "ripped off" and color the system as fraudulent in their eyes. In terms of perception there will be negative, and likely inestimably, effects; in terms of actual legislative effects - that is an argument for another day....

One final note here: the question is not whether this is "legal" or not, but if it is legitimate. Slavery was once legal. Force feeding acid to animals to make MSDS sheets is both legal and mandated (even though we get no useful information here... anyone can predict the effects, and anyone who "uses" an MSDS knows how useless they are - they are effectively a buracratic neccessity). In terms of legistlation this may be legal, if only because this falls outside the rule set and the precedents are allowed to stay, in terms of common law it is questionable, in terms of what is just - that is the whole point of discussion here....

[1] I tend to favor "proxy anarchy" - democracy where all decisions made by politicians are "free votes", i.e. parties cannot force members to vote in a certain manner. In Canada we do not have this system, with parties setting a common line and forcing their members to vote as such. In the US I believe the system is closer to free votes in congress - and as the US is much more socialist [2] than Canada one can see that perhaps my preference does not work in practice.

[2] This is the reverse as normally claimed - but considering that in practice there is little difference between the US & Canada, that the official tax rates are basically the same, and that the US has a further tax component that is debt funded (i.e. a tax on even unborn people - or spending peoples money that are not even alive yet, if socialism is spending other peoples money this is the ultimate in socialism!), i.e the US effectively taxes at a higher rate than "socialist" Canada, it seems that the US is more socialist. Of course there is nothing wrong with socialism, I'm using the term to describe negative socialism - the misuse of other peoples money.

[3] This is the perception at least, it appears to me that the Liberals and Conservatives are actually more similar, but since people tend to call them "Left" and "Right" people think they are vastly different. Perhaps better to call them "middle + delta_minus" and "middle + delta_plus", and call the NDP "middle_if_ the_world_was_still_in_a_time_that_communism_was_intellectually_viable").

[4] My previous footnote may seem to undercut this - but now we have two aspects, 1) the perception of small differences joining, but in fact somewhat large, versus 2) the perception of large differences joining, but actually not that difference. Some votes will perceive no problem, but some will perceive a problem, for both of these situations. Going back to the NDP/Liberal/Conservative split - of course things are not very clean cut, it is like paper-rock-scissors, there is not clean ordering of who is closer/further, so this confuses the issue further. Some people may be OK with a NDP/Liberal coalition, some with a Literal/Conservative one, because what they care about is common. Others will have the opposite preference. Others would hate either. It depends on the voter.

[5] Some would claim we are already there, with many people not voting. Of course the opposite conclusion is also possible - if one didn't vote one is okay with the status quo. After all, if one really thought the current situation was horrid it would be more reasonable to walk over and spoil your ballot (as long as this is an option; which I think is an important one to keep). If everyone who hates the system wrote "destroy the system" on their ballot everyone would know deep changes are required.

Wednesday, May 27, 2009

word of the day: publicani

Roman times, contractor to the state. Seems like a useful word to bring back for public discourse...

Thursday, April 30, 2009

In praise of BB&T

In praise of a bank?

I first heard of BB&T through an Econtalk podcast, in which John Allison spoke about values.

I was highly impressed by John, and after hearing mention of the company reading list in the interview, and not being able to find any information on this in the aether, I contacted John. In short order I received the reading list and some material from him. I was quite struck by his taking the time to respond to me - even a small personalized note that was signed by him, not a "digital" signed stock letter.

Later, I noticed that there are BB&T chairs to help support free market economics research programs.

John's message resonates, and the actions of BB&T are where their mouth are.

BB&T is a great business in the classic sense - they maximize not solely and abstractly profit, but value. The cartoon version of maximizing only profit falls flat under a moments consideration, as profit is linked to so many other aspects of behaviour and cannot be "cleanly" pursued (and life would be boring if it could be!).

If BB&T had a branch near me I would move my business to them - if you have the option, I suggest you consider BB&T: what one wants in a bank is prudence and integrity. All the evidence strongly suggests that BB&T has just those characteristics.

I think I will re- listen to the EconTalk podcast discussion with John. On a personal note I listened to the podcast during a particularly difficult time in my life, and John's message - and his response to my inquiry - struck me in a very positive way, it will be interesting to see how the discussion sounds on a second listen...

Thank you John. Enjoy your retirement!