Thursday, April 16, 2009

tax heaven

Freudian slip - I mean tax haven. It seems that the G20, as part as their plan to save the world from total financial meltdown, is cracking down on tax havens, as the tax revenues are needed in this time of hardships and some claim that "culture of banking secrecy had worsened problems in the global economy". Is this a slippery slope which will reduce freedom? Unlikely, for to paraphrase the UK stance "tax avoidance may comply with the letter of the law but not with its spirit." No wait, never mind.

Is the stationary bandit learning to walk?

But I must agree with this crackdown, for several reasons I will list below. Before reading further: take a minute or so to consider - is this crackdown good or bad? Why?

An informal poll taken on this blog indicates good idea (1 vote) is overwhelmed by bad (3) and evil (2), with nobody saying "who cares?" (0). Small sample size, and not a random sample either, but interesting. My first reaction was between "evil" and "bad", but I further considered and arrived at "good" - here is why.

If someone is a citizen of nation X they are bound by the rules of nation X. Most free countries (all of OECD nations?) allow you to give up your citizenship - if you don't want to pay for the benefits of citizenship, and you are ultrarich, then perhaps you should give up your passport and rights and get citizenship in whatever country you are parking your cash in. They will likely be happy to take you in. Most nations like people with money, and people with lots of cash are the only ones who really do have the freedom to walk away. They also have some power to change things - if they are forced to feel the pain that others feel they may take more of an interest in changing their nations for good. This "walk" argument is somewhat weak and overused, but here both the consequences (positive change in laws) and the current situation (often active law breaking) suggests it is legitimate to make.

Also on the pro side, we will perhaps see
hypocrites like Bono and many other "left wing" proponents get their just deserts and have to pay taxes for the programs they petition governments for - instead of their current situation of tax avoidance and simultaneous pleading for people and governments to help the needy. Shake some of your pocket change out Bono. This is a small, but entertaining, benefit.

In the narrow sense this, the tax haven crackdown, will reduce freedom - but of (mostly) the most free people in the world. In addition, the "loss of freedom" comes from a process of anarchy (international relationships is one of anarchy) and one of voluntary behaviour that does not use force (tax havens are "merely" excluded from benificial trade if they do not conform - standard free market stuff), and, to repeat, if the ultrarich people and companies are forced (by their nations) to pay outrageous taxes in their countries they will either (1) start pushing to change them, or (2) walk, both of which will tend to improve tax structures and freedom.


I do not (sadly) know any strong libertarians, but I suspect they will find it hard to argue against this crackdown - they may think that taxes are a moral evil, but anarchy and noncoericive methods are behind the crackdown, and if they are consequentualists they will have to consider the force for positive reform that will occur - unintentionally this move could reduce tax rates.

So start cracking away G20!

Efficiency? Is it meaningful?

Robin Hanson, arguing for efficiency versus liberty in economic policy: "Each person's dollar value of a deal is (minus) the compensation he or she would need to become indifferent to (i.e, not care to choose) this deal plus compensation package, relative to the status quo. This says how much he wants the outcomes produced by this deal (and may or may not agree with what he says he wants). The sum of such dollar values says how efficient, or good, is the deal; if it is positive, the deal is good; else it is bad. "

Does this not make a key implicit assumption, that is most likely not true?

That is, doesn't this simply assumes that each person will have valuations that are comparible - such as ones that are close together? If 10000 people have a dollar value pro, and one person $9999 anti this summation would say do this. But a buck is almost nothing, money is not a linear scalable - for example, a penny is nothing, most people do not even bother to pick them up, but $100 is something. A buck versus $9999 valuation is a huge difference, one that is lost in this summation process. One can say, yeah but we can set things up so that there is a cash transfer so the guy valuing at $9999 will get paid. Then one asks in retort: how about hold outs? Those who are indifferent can simple misvalue, also - as it is difficult to place value - a "multidimensional measure" - on a single index (money), so isn't the whole process somewhat ineffective for complex issues (where one would want to use this)? And how about close to unbound valuations (i.e. very personally felt issues)? Especially when they are opposite?

Valuations will be highly personal and difficult to accuratly price and extreamly nonlinear - so comparisions will only be meaningful if values are close together, were we can assume (more correctly) that, say your $80 valuation and my $95 valuation can be contrasted. A linear summing process on one metric seems a downright silly thing to do on something that is highly nonlinear, multifaceted, and different for each participant (and potential participant) involved.

The basic liberty vs. efficiency argument comes down to this: distributed free choice, or aggragated bound choice. Not having aggragated bound choice may limit what is possible - but given that some minority will most likely always be bound by an "efficient" outcome (otherwise what are we arguing? If not bound, then this is simply a way to pick among different "liberty" choices, and Hanson is simply saying - "here is one metric to help us compare": who doesn't agree with this? After all, we can ignore the metric, or take it into account - if cheap to do, why not? Information is good.) that they don't like picking the efficiency approach is picking to hurt a few for the many.

I look forward to more postings (and possible release of the taped version) regarding the debate: the questions of choice & exchange & interactions is what makes me interested in economics. Without further information I can't say too much on this, but as it sits I can't tell how serious Robin Hanson takes efficiency.

To me the question is a deep & difficult one - how do we make aggragate decisions? A simple linear summing of a single index seems useless for any important issue. Efficiency arguments are useful at the margin, for selecting choices that are similiar and where participants have similar tastes - here they can be effective in finding better solutions, added up this can offer a lot of wealth and value. Beyond that, i.e. for anything we actually care deeply about in life, they are not so useful.

Liberty as a policy is also limited, but in trying to pick "just one" it would be the more valuable as a starting point. If Hanson disagrees with this, would he not think that debate and discussion - which assumes honest actors whos choice and understanding can be influenced- is not as meaningful as simply polling people? After all, debate and discussion is based on, for me at least, a liberty perspective - we are looking for understanding and treat our "opponents" as intelligent free agents who can change our minds (or the audiences). We do not force the issue by taking a poll and saying "yes, efficient outcome says that 52% agree that liberty is the winner so that is... wait a minute, what does this mean?!!".

By entering the debate format, didn't Robin automatically lose? Didn't his action suggest he actually does believe in liberty? ...of course this assumes that debate is related to liberty, which perhaps Robin does not agree with?

Tuesday, April 14, 2009

Economics & Math

"People who go into economics, in modern times, tend to be people who are good at math but didn't want to be engineers or physicists, and if you have that talent, what do you do? You go into economics. You can't get a Ph.D. without going through an intensively mathematical program. That's the hurdle you have to pass. It's kind of like a hazing to get into the profession."
-- Robert Shiller

Friday, April 10, 2009

In praise of ad hominem

"Feel superior. Feel smug. Feel clever." - Don Boudreaux against cheap shot ad hominem attacks.

There is no doubt that ad hominem accusations are fun and tempting - even rhetorical masters, such as Deirdre McCloskey, lean on this tool and pencil "opponents" into association with bad company.

But presumably there is more behind such attacks than simple smugness - we have finite resources & facts, so taking in the whole situation that the argument is embedded in is one additional source of information. Yes, often overused, yes often without thought, or without even trying to address the underlying issue - instead sweeping generalizations and insults are used. But I believe there is some information there, sometimes.

For example - professors, including those promoting free markets, have tenure. In one sense - big deal. We live in a society that has tenure as a characteristic. But it means that a tenure holder can focus on the long run without being as concerned about the short run - one of the key reasons for tenure, and in this case this fact is of interest as the free marketer prof does not have to worry about the pain of job dislocation involved with change. This is a fundamental fact - one that can be overblown, but there it is. Surely this is a legitimate consideration, is it not?

Strong libertarians also claim taxes are a moral evil, but the actions of strong libertarian professors suggest that the use of "evil" is hyperbole: they live off taxes. This suggests they think taxes are BAD but probably not EVIL. It makes it sound like they overstate things on purpose, or at the very least have not thought through their actions (or have a very low threshold of what "evil" is - diluting the use of the term). As such, it weakens the speakers statements in other regards: are they overstating again? Or do they really have righteous anger here? How much should I discount? In particular it undercuts their specific claim, in general it calls the level of their language and appeals into serious questions - like the person calling everyone a Nazi, racist, and homophobe: who takes them seriously? Have they actually met a person who actually was one of [insert hateful/hated group X]?

If taxes really were EVIL a strong libertarian would work for a private think tank, not a public university - they have the ability to do so, they write well, they have the bona fides, they are smart. But they choose to live off taxes as the position they have is very nice - their actions says "taxes bad, but not evil". Sure, they grudently pay taxes - otherwise serious consequences come down - but if they really believed it was EVIL they would not live off it. Instead they see the position of professor as sweet and rewarding to them, and the fact that it is tax funded a sad reality of our society but one that we must live with. I see no evidence they really belief in the rhetoric of "evil" they slopply use {if I am wrong, please let me know}.

For these reasons ad hominem is valid, sometimes, it brings in the context of the argument and adds information. True, the fact it is easy and fun makes this too often used, but as we have few resources and little data should why not use this - carefully, and prepared to explain the attack (which, if legitimate, is a shorthand for a bundle of evidence that can be pulled into the light for further discussion), like we judge and use all other data?

Discounting ad hominem is very "un-Hayekian"; Hayek recognizes that we should use all the information we can, and let the many consider all the information they have in judging. Ad hominem - when used honestly - is a short cut to pulling in the context. Like all rhetoric it can be misused, overstated, blah blah blah. So what? Isn't this a complaint about the listener (either who you are arguing against, or some 3rd party "listener" or "reader"?) and their intellectual honesty - not the tool as such?

I like ad hominem, when used honestly - and I think this is one reason that people tend to use it, they implicitly know that this brings in the context and more information. As long as "the shorthand" of ad hominem is backed up, when called on, this seems like both an useful, and legitimate, tool.



Note: this post is a slight mutation of a comment to the "Cheap Shot" Cafe Hayek posting mentioned above.

Tuesday, April 7, 2009

What is Austrian Economics? What is it's future?

What is Austrian Economics? What is it's future?

The first things that struck me about "Austrians" are - a nice subset of very interesting people (many of who dropped the label and moved on - such as Bryan Caplan), a larger pool of crackpots (note: this post evolved out of my comment to above link), "whats up with the name? Seems crankish.", and a strange focus of a sizable subset on defining themselves to the exclusion of creating themselves via works.

Basically, a small set of very productive, interesting, thoughtful people in a group of not so much. But is it even meaningful to call this subgroup "Austrian"? Do Austrians have a good definition of themselves - it does not seem so, despite the efforts, and little work seems to be focused on creating evidence to discriminate between "orthodox" and "Austrian". We are in a golden time, in terms of a lot is happening socially and economically, where is the public and intellectual muscle?

What appears to discriminate "Austrian" from "orthodox" economics seems to be mostly the personal history and interests of practitioners: many Austrians come into the field from a philosophical rather than technical perspective - they care about deep and subtle ideas and reality, not cranking out technical machinations. As such we can label Austrians as being more of this type, but from looking at the apparent large subset of Austrians that don't seem to challenge themselves and instead focus on intragroup peer acceptance, this seems a poor labeling - there are also many people like this in "orthodox" economics, and indeed, there is a subset of the curious and engaged in all fields. In addition we can identify a tradition of libertarianism, some key figures (von Mises & Hayek & others) and their bodies of work, and a few key theories. But these anchors of Austrianism are somewhat arbitary, as others can and do read them, and many who do not identify as Austrian are inspired by those and other works. And the theories do not seem to be very distinct, or correct. This is also an insufficient labeling scheme.

I look at Austrianism as forming two components: a "core economics" that is not actually viable as an alternative, at least Austrians themselves have not demonstrated that it is, and as a community that attracts those interested in deep ideas, people, choices, actions - philosophers in the good sense. These people are influenced by "Austrianism", and may even label themselves as so, but they are merely curious and engaged people who are intellectually honest (the opposite of crackpots).

I see the future of Austrianism as being dictated by the subset of Austrians I would not label Austrians - either they will actually distinguish Austrian Economics in a meaningful manner, or they will continue to engage other intellectuals with what is essentially not exclusivly Austrian methods and approaches and Austrianism will wither as a meaningful community.

Right now, to an outside observer, it appears that Austrian Economics is a community that grew out of a failed, but important experiment, and "top Austrians" are actually "just" intetellecually curious and honest economists who have come through the Austrian community (and continue to self-identify with the community).

"Interesting Economist" = (economist|"intellecually curious & honest")

where "intellecually curious & honest" = subset of (Austrian community, "masonomics", philosophy interest, basically any group....).

Some Austrians seem to think they have an exclusive niche on "intellecually curious & honest", but they are just one of many communities, people, backgrounds, and disciplines that are (or rather, a subset of Austrians, like a subset of other groups, are part of this niche). "intellecually curious & honest" does not equal "Austrian Economics", and to an external observer it seems that as time goes by "intellecually curious & honest" people will have to increasingly strain in order to stomach the label of Austrian Economics (unless something fundamentally changes, and the programme because a viable possiblity again - so far the experiment seems to have failed, the evidence suggests moving on).

If and when that time comes that Austrian Economics wimpers into the trashbin of history, will we lose anything? I don't think so - we always will have a subset of the "intellecually curious & honest", and they will always tend to find each other and work together. In the medium run GMU and other current departments will will hold the mantle that Austrian Economics once did (I see it as an ember, now dying), in the long run other groups with spark up, carry the mantle for a while, and then die. There are markets in everything - it is not the particular insitutions we care about, but the availablity of the "products". The market for likeminded honest & curious minds will remain, and insitutions will evolve, grow, and die in meeting this want. That is the beauty of the market.

Holding onto Austrian Economics seems like trying to prop up GM or Chrysler - release the resources to productive ends already. Stop blowing on the ember and accept the evidence at hand.

Whorf

The Sapir-Whorf hypothesis: a language's nature influences the thought of its users.

Apparently Chomsky's Universal Grammar (underlying universality of language, due to brain structure) has reduced the "popularity" of the Whorf hypothesis. I believe some lefties (in the political sense) also do not like the idea, as it hurts their feelings of equality.

But is this not common sense that the hypothesis must hold? In terms of computer languages we can say that any Turing complete language is theoretically equivalent, but anyone who has done assembly versus any higher language coding knows that in practice there is huge differences - in theory you could write everything we currently have on a computer in binary, in practice you do not and could not. Language makes some things easier, and coders pick languages (in part) based on what they make easy to do. The fact we have pretty constrained resources (puny brains, limited time, etc.) suggests the language we use will have a profound effect on what we think and do. This should effect how a culture evolves, as language and culture play back and forth on each other.

An interesting question is - are all languages "Turing complete" (in the sense that all cultures can represent ideas from other languages) or not? Are languages even close to Turing complete in a functional manner? Persumably, languages can be close or far apart in ease of transfer of ideas - do "they" have a map illustrating the relative positions to each other?

Are some languages functionally more orthogonal relative to each other? (i.e. if I want to expand my capability to think, what language should I pick as my second language?) What is the most limited and easy to learn language? Pirahã? Rotokas? Klingon? Are there good books out there that teach minimal languages, that evolved in the "wild"? Is it worth someones time? English is the Borg of languages, so it is very rich and useful, but what should one pick to supplement it? Perhaps a "clean" language like latin or Haskell brings more to the table than any real language (i.e. more logical, structured, mathematical, closed (well defined, and essentially static, base), and "clean" then the messy, wonderful, evolved, and crazy language that is English - and therefore nicely orthogonal.). Is Englishes "borg like" tendancy one feature that has lead to Western societies strength? Can we measure this?

Are there people who try to predict political situations and reactions based on language (and other insitutional) constraints? Is there a team of neat people in some think tank or militiary group that analysis how the Chinese may react to things to gain predictive power? Are the Chinese doing this to us? (sorry for the bad pun) I suspect the Chinese are doing this, and Western nations are not, possibly in part due to the nature of our insitutions which makes for some easier predictibility (though, apparently not by most of us...) and the fact that our society tends to focus on short term (think tanks and universities being partial exceptions).

Notation, language, logic, mathematics - very interesting stuff, very deep stuff: if anyone can recomment a great book on linguistics that works through a lot of the ideas, with examples and practical applications in it, please post on this ("Contemporty linguistic analysis", by O'Grady & Dobrovolsky, is decent with a wide survey of stuff including "Bee language" and I have vague happy recollections using this book for an intro class, but I would like something similiar but with a few "case" studies threading through the book - for example, learning Rotokas or some small or subset language to really illustrate things).

A final idea - I liked Star Trek as a child, but do not know the backstories, how intelligent the writers were, etc (TV is very limited for addressing "big ideas"). But is "Worf", the Klingon, a hat tip to the Whorf hypothesis, with his language being warlike and having a feedback effect on his society? It seems quite plausible - does anyone know? Have the writers spoke on this? Have the rabid fans declared this? Have linguists chuckled and wrote about this as a nice tie in to connect with the "general public" and leverage the zeitgeist in promoting their ideas?

Update (8 April 2009): The cover of "Lognet" had a cartoon regarding this...

Sunday, April 5, 2009

Inflation - yes or no?

Now seems to be a good time for "heterodox" economists to show their stuff: we are in the midst of a time of turmoil, a time when solid statements can be made to demonstrate utility of ones framework.

From what I read from Austrians & other heterodox economists they seem to think that inflation will increase shortly - but they also seem to hedge their beliefs by being overly vague and making no real claims. Will inflation kick in? Yes or no? Do Austrians have some sort of estimate? Time frame? If not, what exactly is the power (read: use) of "heterodox economics"? We can bicker about complexities of the world, but if you cannot make statements that are distinguishable from other points of view, what exactly distinguishes your viewpoint?

I will lay out my belief - no significant inflation will occur as we transition out of our current mess. I say this, knowing that the money supply has recently (roughly) doubled. Will an Austrian counter this claim?