Party Planning vs. Raising Kids

Lant Pritchett uses a starfish/spider analogy to illustrate differences between bottom-up/top-down systems.

Steve Landsburg explained that people mistake central planning as being something like planning a birthday party. Based on this vision, they think it can work well. You just need good planners. Landsburg says that folks who make such mistakes simply can’t imagine the complexities involved when hundreds of millions of people are added to the mix, so even good planners won’t do well.

Russ Roberts recently distinguished between engineering and economics problems in a post on Cafe Hayek, building off the following Soviet joke:

Yuri Gagarin’s daughter answers the phone.  ‘No, mummy and daddy are out,’ she says.  ‘Daddy’s orbiting the earth, and he’ll be back tonight at 7 o’clock.  But mummy’s gone shopping for groceries, so who knows when she’ll be home.’

Of course, her Mom may be an avid shopper. But, the joke was meant to convey that centrally planning something as mundane as producing products that people want, at reasonable prices and making them available in nearby stores is a much more vexing problem than sending man into orbit. Prices do a better job of coordinating that effort.

I made a similar point in a follow-up to the Landsburg post, because I’ve heard too many people use the “If we can send a man to the moon, then we can do anything” fallacy.

Though, I didn’t distinguish it then as an engineering problem. That is an important observation. It’s also a good question to keep in mind when people start using the man on the moon fallacy, are we solving an engineering or economics problem?

But, I still think some folks may have a difficult time understanding exactly how an economics problem differs from an engineering problem. For many, both fall into one category: complicated. So, if we can solve one complicated problem, why not another?

I think it might help to go back to Landsburg’s party planning analogy. An engineering problem is like planning your kid’s birthday party. It’s straightforward (place, invites, plates, cake, fun, done) and it’s a relatively short time commitment. The short time commitment is important. Any longer and it might be harder to get grandparents to help clean up or for guests to come.

An economics problem is more (though still not quite) like raising kids. That’s much more complex than planning a two-hour party. It doesn’t end. It’s not easy.

Just when you think you figure it out, it changes. Why? Because kids are human and they go through phase. They have preferences. They respond to rewards and punishments — differently to different ones. They make decisions. They like what they like. They change. They will fight you. They won’t always do what you tell them. You need to let them make mistakes and learn for themselves, even though it is painful to do so.

Now, I say it’s not quite like an economics problem because people can do a good job of raising kids. Though, there aren’t many truth-telling parents who will say that it’s easy.

So, an economics problem is much more like being tasked with raising all of the kids in your town, or maybe your state, or more.

Multiply the frustrations, the reactions, the support, attention and love required by a thousand or a million kids.

We’re all smart enough to know that’s impossible. We would never sign up for it because we know we’d do those kids a major disservice. Hmmm…..

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Sachs on Freakonomics

Freakonomics podcast host Stephen Dubner speaks with economist Jeffrey Sachs about the Pope’s recent drubbing of markets.

Several things about this rubbed me the wrong way.

First, the quote from the Pope (in the linked Freakonomics blog post) starts off with “Some people continue to defend…” As I wrote here, readers deserve to know who the Pope is talking about.

Second, Jeffrey Sachs tried too hard to clean up the Pope’s words. Around the 16-17 minute mark, Sachs comes out with ‘getting people into positions where markets work for them, and not against them, is extremely important.’

Granted, I think somewhere Sachs admitted that he switched to his view, not necessarily the Pope’s, but I think the podcast was about making sense of the Pope’s opinion.

This even seemed to annoy Dubner, as he replied:

Of course, that makes sense. But compared to what the Pope has written about capitalism…it was much heavier on the can’t work part and here’s why it doesn’t work. What is the Pope actually calling for?

Third, Sachs complains that the Global Fund to Fight AIDS, TB and Malaria, a fund he helped “architect 12 years ago” (a little self-promotion never hurts), recently fell short of its funding goals. I wasn’t clear on who they were going to for ‘replenishment’, but it sounds like bureaucrats in government.*

Sachs says:

When it [the Fund] came to the replenishment, just now, it couldn’t raise the funds for the minimum package. It was saying that it needed at a minimum to fight these three diseases $5 billion a year, mind you hundreds of million of people and their lives are at stake. $5 billion we know in macroeconomics is nothing in this world, and yet they could not raise $5 billion a year. They raised $4 billion a year.

And that may not sound so consequential [You’re right, especially since one sentence ago you said $5 billion is nothing, that would mean $1 billion is even less] when you’re in a village and the rapid diagnostic tests aren’t there or there’s a medical stock out…this is life and death [oh, that’s when it become consequential, in micro]. Since I’m living in a neighborhood, if not down the block, then a few blocks away, or a couple miles away [let’s keep hedging on terms] are billionaire hedge fund owners taking home personally paychecks of a billion dollars for the year, the fact that we can’t come up with $5 billion for this institution from all worldwide sources (governments?) is the globalization of indifference.

 

Too easy to pick on unpopular hedge funds, many who put their own skin in the game. Let’s not mention sacred cows like taxpayer funded sports venues, where billions of taxpayer money is tied up so team owners can afford to pay millions, even hundreds of millions, to the best kids game players. Soon the team owners will want to offload the liabilities of sports injuries on taxpayers, too.

I wonder if he also views that as a marker for the ‘globalization of indifference’.

Of course, you can probably also tell by the comments I inserted in the quote that Sachs’ verbal fitness annoyed me in how he framed $5 billion as inconsequential in macro, but a billion very consequential in micro in the span of three sentences.

My BS detector rings off when someone tries to sell me on something because, well, it’s just not that much money. Of course, it’s always enough that they can’t come up with it themselves.

*Sachs said “George Bush said, ‘we won’t let money stand in the way, you show that this works and the money will be there'”. So, I’m assuming it’s folks like Sachs trying to convince bureaucrats how to spend taxpayer money, rather than raising money from individuals. Which is the last thing that I found annoying that I will comment on.

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The Great Stagnation: Evidence in “Back to the Future?”

At lunch yesterday, a friend said that he has been watching the Back to the Future movies with his children and commented on how much he missed in those when he watched them as a kid.

I had the same experience a while ago when I watched them with my kid. I was amazed at how the makers of the film captured the differences in the times. Things like how the desirable subdivision that was being built in 1985 in an open field on the outskirts of town had gone down hill by 2015. Or, how absurd it seemed, even to a brilliant scientist, that a b-list actor in 1955 could become president by 1985.

While we enjoyed those movies as kids, we hadn’t been around long enough to witness the changes through the decades and see how well that was captured.

However, one comment at lunch got me to thinking. One friend laughed about what the film makers thought 2015 would look like. It was a bit too futuristic.

Could this be evidence for Tyler Cowen’s Great Stagnation?

The movie makers did a great job of capturing differences between 1955 and 1985, even 1885 (gritty water and food with buck shot) and 1985. Those time periods had already happened, so that was easy. You just needed some folks who understood the changes and progress that had been made.

Those time periods happened mostly during the time that Cowen contends standards of living improved faster because there was a lot of “low hanging fruit.”

Now, consider the film makers in the 1980s trying to project what life would be like in 2015. The only template they had to guess was how much life had changed in the previous 30 – 100 years.

Could it be that they thought similar advances would be made? Could the fact that we don’t yet have hover boards be evidence that Cowen is correct and that growth stagnated in the 70s and haven’t yet recovered? Is anybody developing a hover board? If so, let me know.

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Random Considerations for Fitness New Year’s Resolutions

I hadn’t thought of these before and thought they were interesting and sharing for your consideration.

I think they both stemmed from Taleb’s Antifragility book, but I’m not so sure about the first one.

1. It’s good to eat a random variety foods rather than the same things every day, or week. Why? All foods contain some natural toxins. If you eat the same things, the levels of those same toxins can build up  in your body.

I have no idea if this is true but I don’t know of too many (any?) downsides in having more variety in a diet, so why not?

2. I just read this one in Taleb’s book (it triggered my memory of #1) and made me think of a personal experience:

Randomness in the quantities and macro nutrient composition (fat, protein, carb) of your daily intake may also be good for you.

Dietary guidelines and diets assume consistent quantities and proportions of things at each meal, or each day. I think we automatically assume that too.

But, Taleb contends our bodies get stronger, more fit, with a bit more randomness. Lots of carbs one day, all protein and fat the next. Skip a meal here and there. He notes most dietary studies are based on consistent intakes, while the effect of random intakes have escaped even being a consideration in those studies.

A personal experience:

As I lost weight 12 years ago, I allowed myself one splurge every five to seven days. I figured if I was “good” the rest of the days, one bender wouldn’t hurt too bad, and would help keep me good the rest of the days.

I would splurge on random things — but it was usually carbs. One week might be a banana split. The next might be a pasta dinner.

I expected to hop on the scale the day after my splurge and see a temporary reversal in my progress. Yet, I was often surprised, on occasion to see the positive progress had continued, sometimes accelerated.

I can’t say for sure how many times that happened. It wasn’t even something I considered that could be a cause. But, it happened enough for it stick in my memory.

I never thought much about that. I thought those were flukes. I was sure there was no way that the splurge would help me temporarily. That didn’t fit with any mental model on diet and weight loss that I knew about.

Then I read #2 and it made me wonder. Maybe that 5-7 day splurge helped more than as a reward for being “good” the rest of the time. Maybe it even played a bigger role in my overall weight loss than I ever imagined.

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If you want to help the poor, you should read this

I agree with Mark Perry (an economist who has bought me a beer), of Carpe Diem, that the reduction in the world poverty rate is the most remarkable achievement in human history.

The percentage of the world population living on $1 per day or less has dropped since 1970 from around 26% to just over 5%.

It’s hard to argue with those results. They are inflation-adjusted.

I can think of a couple things that might be easier to argue about regarding those results.

1. I can imagine some folks would say that 5% isn’t good enough.

2. I can imagine that some folks would argue about the cause of those results. I agree with Perry’s explanation as provided by Arthur Brooks: “globalization, free trade and international entrepreneurship.”

I can imagine that some folks would say it was the growth in government and aid. But, for them, I’d ask, what if you’re wrong? As Brooks says:

…if you love the poor, if you are a good Samaritan, you must stand for the free enterprise system, and you must defend it, not just for ourselves but for people around the world. It is the best anti-poverty measure ever invented.

I agree. I could be wrong and I think — for the benefit of the poor — I should keep that in mind and stay open to evidence to the contrary, because whether I’m right or wrong doesn’t amount to a hill of beans.

What is important it what really helps them.

I also think us supporters of free markets often forget this. The opposition paints us as the defenders of the rich, the “1%” and king-like CEOs, while we’re really advocating for the benefit of everyone, including the poor.