Grandmother’s Wisdom

From Taleb’s Antifragility (emphasis mine):

Consider the role of heuristic (rule-of-thumb) knowledge embedded in traditions. Simply, just as evolution operates on individuals, so does it act on these tacit, unexplainable rules of thumb transmitted through generations — what Karl Popper has called evolutionary epistemology. But let me change Popper’s idea…: my take is that this evolution is not a competition between ideas, but between humans and systems based on such ideas. An idea does not survive because it is better than the competition, but rather because the person who holds it has survived! Accordingly, wisdom you learn from your grandmother should be vastly superior (empirically, hence scientifically) to what you get from a class in business school (and, of course, considerably cheaper). My sadness is that we have been moving farther and farther away from grandmothers.

This is Hayekian-thinking. Social norms, traditions, rules-of-thumb — unwritten standards of interacting with each other — are filtered through an evolutionary crucible.

Those sets of norms that carry-on are the ones that are held by those who survive.

I’d add that some social norms (e.g. ‘family values) may even be conducive to propagating themselves by encouraging population growth.

Further, it’s a mistake to discount the traditions and norms too readily as rebellious college students and intellectuals are wont to do (e.g. deriding ‘family values’).

This passage reminded me of some of the bits of grandmotherly wisdom that had been passed down to me — and so far — have served me well. A couple of examples include trying to make yourself useful to others and saving a little of each paycheck, no matter how little.

It also reminded me of couple of newspaper columnists who, now that I think about, were also important educators of practical wisdom.

One was a business columnist in the local newspaper. He passed on more than business wisdom. He did a better job than my b-school teachers in educating me on the wonders of mutually beneficial exchange (another social norm that has survived). He was also very responsive to emails and very appreciative of his readership. He often took the time to respond thoughtfully. I’d also credit him for greatly influencing my writing style.

The other columnist wrote about personal financial management. When I graduated college and started facing everyday life decisions like renting an apartment, buying a car and home, I was shocked at how unprepared I was to even to face those decisions. I didn’t even know what information was important. How much car or apartment could I afford? Why didn’t these subjects ever seem to come up in 16 years of school? That was also one of my first realizations that education wasn’t all it was cracked up to be (I am sometimes a slow learner).

Now, there were many folks who influenced my personal financial habits.. But, I recall this columnist because he offered sound advice and his column provided a regular checkpoint for me to test my actions against.

Both of these columnists were great at relaying ‘grandmother wisdom’. But, I’ve noticed that such columnists are not as accessible. Newspapers seem to have cut back on carrying such content (which is one reason I discontinued my full-week subscription of the local rag). As Taleb said, “we have been moving farther and farther away from grandmothers” — which seems counter-intuitive in this Internet-connected era, but I think there was something to having those voices in my life consistently, twice a week, that made a difference.

It’s not content that you would necessarily go searching for on your own, regularly. But, having it there was good.

 

Advertisement

We win with markets

Paul Rubin made a great point in his Wall Street Journal op-ed (thanks to Don Boudreaux, Cafe Hayek, for pointing to it).

Economists should point out that what makes markets thrive is cooperation, while competition plays a supporting role. This might help the perception of markets. As an example:

…we might say that a poor person has been outcompeted in the market. Or we might say that a poor person cannot successfully cooperate with others because he lacks valuable skills and has little to sell.

Again, the words matter because viewing the circumstance in terms of competition could lead to penalizing those who are viewed as outcompeting him, even though they did nothing wrong. It might even lead to banning certain terms in transactions—with minimum-wage laws, for instance—that make it even more difficult for the poor person to cooperate. The cooperative metaphor, by contrast, would suggest that the solution is increasing the skills of the poor person, giving him something to sell on the market.

Unfortunately, Rubin would still need to convince many other economists that minimum wage laws make it more difficult for the poor person to cooperate.

Taleb on education

I’m currently reading Nassim Taleb’s Antifragility: Things That Gain From Disorder. I’m enjoying it and recommend it. There is much to discuss.

I ran into this today:

Authors theorize about some ancestry of my ideas, as if people read books then developed ideas, not wondering whether perhaps it is the other way around; people look for books that support their mental program.

Agreed. That sets up a section about education that ties in with a recent discussion about education on this blog. He introduces what he calls epiphenomenom, which is

…mistaking the merely associative for the causal; that is, if rich countries are educated, immediately inferring that education makes a country rich, without even checking.

He refers to work from Lant Pritchett (recent EconTalk guest) and Alison Wolf that supports that education is a marker of a wealthy country, not necessarily a cause (wealthy countries can afford education). I liked this story:

I once ran into Alison Wolf at a party (parties are great for optionality). As I got her to explain to other people her evidence about the lack of effectiveness of funding formal education, one person got frustrated with our skepticism. Wolf’s answer to him was “real education is this,” pointing at the room full of people chatting.

Taleb is clear in that he is not saying that education and knowledge are not important to an individual, it’s just oversold as a cause of a nation’s wealth. I also agree with this (emphasis mine):

…note that I am not saying that universities do not generate knowledge at all or do not help growth (outside, of course, of most standard economics and other superstitions that set us back); all I am saying is that their role is overly hyped-up and that their members seem to exploit some of our gullibility in establishing wrong causal links, mostly superficial expressions.

That puts into words something I’ve often thought about credentials. In so many areas credentials play on our gullibility and the folks with the credentials seem okay with that, which is a reason I have an inherent distrust for someone who rests on their credentials. You don’t often hear people qualify their credential and caution you to not put that much weight into it. They usually appeal to it.

Unemployment ending?

Well, not quite. According to the news, 1.3 million will be losing unemployment checks as the extended unemployment benefits come to an end.

Note the extension was from 26 weeks (~6 months) to 99 weeks (~2 years) at one point and, if I’m reading the article correctly, 73 weeks (~1 year and 3 months). All of those periods seem long for something that is meant to be a temporary stop-gap.

One lady who will stop getting unemployment checks interviewed on one TV news spot that I watched said she was going to have to start spending more time looking for a job and less time on school. Isn’t looking for a job a condition of receiving unemployment? Don’t be to harsh, but unemployment isn’t meant to be a ‘take time off from work so you can go to school’ program.

Another news spot said that unemployment benefits help the economy because recipients spend the money. It didn’t say where that money came from. (Answer: A taxpayer, either now or in the future, who could have also used that money to ‘help the economy’).

Another lady who will stop receiving unemployment checks was asked what she thought about Congress going on break without extending ‘her’ benefits. She said something like (paraphrased from memory), My benefits shouldn’t be dependent on the whim of other people like that. Apparently, not realizing that her receiving the benefit was dependent on exactly that whim.

Of course, none of the folks who will not be receiving unemployment checks any longer took the time to thank their fellow taxpayers for helping them out. How rude.

Kling’s 3-axis model and income inequality

I’d like to extend a warm welcome to a new commenter at Our Dinner Table, Adam, who pointed me to this article: Rising Riches: 1 in 5 in US reach affluence.

Arnold Kling’s 3-axis model can help us predict what various folks might believe about income inequality and why they will continue to talk past each other.

Liberals operate on the oppressed-oppressor axis. The rich are the oppressors and the poor are the oppressed. They believe something must be done (government action) to ‘fix’ this situation. This view seems to be expressed in the article.

Conservatives operate on the barbarism-civilization axis. Rich people earn their money based on traditional values of strong work ethic and responsible choices. The poor may be more responsible for their position that liberals believe. So, using government to ‘fix’ income inequality erodes the values of work ethic and responsible choices.

This view is also expressed in the article, but by a successful pharmacist who “grew up on food stamps, but now splurges on…Hugo Boss shoes,” which I took as a subtle attempt to discredit his view.

Libertarians (as if anyone really cares what libertarian think) operate on the freedom-coercion axis. As long as the rich didn’t violate anybody’s freedoms to become rich, then all the power to them. Using force to try to ‘fix’ income inequality violates freedom, so is bad.

I fall into a mix conservative/libertarian camp here. Though, I am sure there are some poor people who are ‘disadvantaged’ and not merely victims of their own bad choices and unwillingness to take advantage of the tremendous opportunity this country has to offer (like a free $100,000 education).

I have a question for people who believe the ‘disadvantaged’ explanation.

Have you considered that encouraging responsible behaviors may be a better way to help the disadvantaged than redistribution?

Don Boudreaux, of Cafe Hayek, has some good thoughts on the article in his post, A Barrier to Reducing Income Inequality??? 

 

“Some say…”

Reporters and columnists love to use this. It usually goes something like this, “Some say that drinking is bad for you.” Or, “Some say paying taxes is good for your health.”

I’m sure I’ve used it myself, but I try not to. I think readers deserve to know who says it. I’ve started quite a few blog posts to address something ‘some say’, but when I did my research to figure out exactly who said it, I no longer thought it was worth writing about.

 

More good stuff from Cochrane on health care

I recommend reading John Cochrane’s op-ed in today’s Wall Street Journal, What to do when Obamacare unravels. It’s a great follow-up to my health care reforms.

Here are a couple quotes from Cochrane’s piece that addresses some common concerns over non-government medicine.

What about the homeless guy who has a heart attack? Yes, there must be private and government-provided charity care for the very poor. What if people don’t get enough checkups? Send them vouchers. To solve these problems we do not need a federal takeover of health care and insurance for you, me, and every American.

And (emphasis mine)…

No other country has a free health market, you may object. The rest of the world is closer to single payer, and spends less.

Sure. We can have a single government-run airline too. We can ban FedEx and UPS, and have a single-payer post office. We can have government-run telephones and TV. Thirty years ago every other country had all of these, and worthies said that markets couldn’t work for travel, package delivery, the “natural monopoly” of telephones and TV. Until we tried it. That the rest of the world spends less just shows how dysfunctional our current system is, not how a free market would work.

My recommended health care reforms

In the comments of this post, Wally asks:

If you were given a free hand to reform the health care system in the US, what would you do with it? What would be the philosophical goals (if any) of the system?

What follows is my short answer. I will elaborate on them more in future posts.

1. Eliminate the tax advantage employers have over individuals for health insurance (either give the same advantage to individuals or remove it from employers).

2. Modify the emergency care act to encourage responsibility. A couple of ideas include putting a limit on the freebies that can be received and having the expectation that something will be paid somehow.

3. Allow for experimentation and choice. If someone living in New York wants to buy an insurance policy that meets Idaho’s state mandates, let them. Btw, before Obamacare, Idaho’s insurance plans were dirt cheap compared to New York’s. Nobody seemed all that interested in understanding why.

4. Convert as much of medical care as possible to first-party payments. This can be done with health savings accounts and medical stamps for the poor. See Singapore.

Update: In the comments, Mark Rossow reminded me of some excellent pieces by economist John Cochrane on health care.

Here’s a link to Cochrane’s paper and an EconTalk podcast where he discusses it. I previously discussed the paper here and here.

Also, I elaborated on #1 in this post from 2009, Fix Pre Existing Condition, which explains how I think the tax advantage for employers provided insurance contributed to the oft cited problem of pre-existing conditions. Cochrane agrees.

Why does socialism fail?

In the same radio discussion that I mentioned in my previous post, I heard the radio talk show host say that socialism — and variants of it — has been responsible for millions of deaths and has proven over and over to be a failure. He encouraged the self-described socialist to read some history.

I hear this point made on occasion. I find it frustrating because rarely is it mentioned why socialism fails.

Why does it?

I believe it’s for a couple main reasons.

There’s the knowledge problem. A free market of prices communicates vastly more and better information to allocate resources better than any small group of people can.

I also believe it stifles risky experimentation, which is the source of most innovations, large and small. Without risky experimentation, society rots. I’m not sure, but I think this may actually be a subset of the knowledge problem.

 

Greed is not unique to capitalism

A discussion I heard on the radio today between a self-described socialist and a radio talk show host reminded me of this post about greed.

It also brought into a focus an important point that many people miss and may even be a source of dislike or distrust for capitalism.

The point is that greed is not unique to capitalism. Many people seem to think it is. Or maybe they mistake any money-making endeavor for capitalism.

There are greedy politicians, greedy not-for-profit chairmen, greedy welfare recipients and greedy welfare administrators. There were greedy kings, greedy socialists, greedy communists and greedy fascists.

When a corrupt politician sells his vote, that’s not capitalism. That’s corruption. And it’s greed.

What is unique to capitalism is its ability to harness greed for the greater good, as Walter Williams discusses in the post I linked to.

It does this by encouraging people to produce something of value — using what is rightfully theirs’ — for others to satisfy their greed.