This book is kind of counterargument to currently very popular idea of behavioral economics that human thinking is often not rational and therefore not effective in dealing with challenges of contemporary live. This counterargument based on two insights: The first is that whatever human approach to economic behavior is, it developed as result of evolutionary success and therefore has deeper rationality than formal logic could provide. The second one is that such seeming irrationality comes from the fact that at any given moment any human is trying to achieve multiple evolutionary goals, which realistically could be in conflict, so decisions are made as compromise between these goals selecting the best mix of actions for this particular time and space.
Introduction: Cadillacs, Communists, and Pink Bubble Gum
Why did Elvis gold plate the hubcaps on his Cadillac?
This chapter provides examples of human irrationality of famous people, posits question: why did they do it, and establishes direction of inquiry that authors believe would allow answer this question.
1: Rationality, Irrationality, and the Dead Kennedys
What do testosterane-crazez skateboarders have in common with Wall Street bankers?
This chapter introduces idea of deep rationality as synthesis that allows overcoming two usual approaches: humans as rational econs vs. humans as morons too stupid to behave rationally. Authors propose notion of deep rationality: humans as animals conditioned by evolution to act in such way as maximize their evolutionary fitness in fast changing, unpredictable environment when criteria of action is not optimization, but rather “good enough to survive.” In short – humans are rational animals with rationality defined as such actions that increase chances of survival.
2: The Seven Subselves
Martin Luther King Jr. had a multiple personality disorder? Do you?
Here authors discuss seven subselves, each of which works to achieve a specific evolutionary goal:
- Self-Protection Subself from other animals including hostile humans
- Disease-Avoidance Subself
- Affiliation Subself – humans survive in a groups so the survival of the group as important as individual survival
- Status Subself – If group survives then individual survival depends on status inside the group
- Mate-Acquisition Subself
- Mate-Retention Subself
- Kin-Care Subself, obviously the most important kin being one’s children
Here is a nice graph for priorities somewhat based on Maslow ideas:
3: Home Economics Versus Wall Street Economics
Why did Walt Disney play by different rules than his successors?
This chapter explores interaction between different subselves and other people and entities. It analyses human economic behavior based on 7 subselves, each of which requiring somewhat different approach, resulting in very dynamic patterns of integration depending on circumstances.
4: Smoke Detectors in the Mind
Why is it dangerous to seek the truth?
This chapter concentrates on mistakes and biases that each of our evolutionary subselves is prone to make. This is very interesting and somewhat counterintuitive approach. The question is how humans treat truth and accuracy of reality representation and answer is: as mainly irrelevant to action. In other word the lie that helps to survive preferred to the truth that would lead to demise and it is not only for external consumption, but also for internal individual believes. Author look at all 7 subselves as to what kind of biases and self-deceptions they promote.
5: Modem Cavemen
How can illiterate jungle dwellers pass a test that tricks Harvard philosophers?
This is a discussion of how our understanding of subselves could help to make better decisions. This chapter includes multiple examples of human logical mistakes and inconsistencies and then provides suggestions on how to avoid them: by using understanding of evolutionary meaning of our approaches and consciously modifying them to fit new contemporary environment when we are not hunter- gatherers any more, but rather members of complex groups interacting with environment via sophisticated technological systems.
6: Living Fast and Dying Young
Why do people who go from rags to riches often end up in bankruptcy court?
This is look at how subselves change human behavior at different stages of live from childhood to old age. The main point here is that all humans are different not only from individual to individual, but also for the same individuals during different periods of live, when different subselves become dominant in defining behavior. Authors identify 3 main stages during lifespan when different types of effort become dominant: somatic effort, mating effort, and parenting effort. They also discuss here fast and slow strategies and thinking that varies greatly between different individuals depending on their genetic makeup and environmental circumstances.
7: Gold Porsches and Green Peacocks
Do people buy a gold Porsche and a green Toyota Prius for the same reason?
This is exploration of mechanism of human decision making, quite correctly pointing out that whatever decisions are made they are always in interest of decision maker. As example for analysis authors use buying Porsche vs. buying Prius: the first one signaling wealth and prosperity, while the second signaling communitarianism and environmentalism. In actuality both behavior serve the same purpose: to demonstrate one’s fitness to the group one wants to belong and be accepted.
8: Sexual Economics: His and Hers
When is a gain for the goose a loss for the gander?
This chapter looks at variation of approaches to decision making between men and women and links it to different evolutionary goals that inherent to each sex. As usual this comes down to men distributing their sperm as wide as possible and women capturing a partner good enough to raise children. The interesting and not trivial point here is about jealousy: men jealous at women’s sexual infidelity, while women jealous at men’s emotional infidelity. Finally mating behavior is as much defined by supply and demand as any other human activity involving interaction between people and exchange of goods and services. When there are too few women as in American West in 1880s, men are chivalrous, respectful, and trying to please women as much as possible, while women are selective and powerful. When it is low supply of men as usual happens after big war, men are selective and often neglectful, while women often had to limit their search for reliable men and accept sex without commitment even if it means to have children to rise on their own.
9:Deep Rationality Parasites
How do snake oil salesmen exploit deep rationality?
This is an interesting look at our vulnerability: how knowledge of human subselves allows some human successfully exploit others. The examples provided mainly from sales strategies: selling diamond by creating the need where none existed before or drug advertisement campaigns or books like: “xxx, they do not want you to know”. The recommendation for counteraction: know thy enemy, know thy situation, and know thyself.
Conclusion: Mementos from Our Tour
In conclusion authors provide some mnemonics to remember their ideas and 3 lessons:
- Don’t assume other people are morons
- Rational self-interest is not in your self-interest
- Don’t leave home without consulting your other selves.
MY TAKE ON IT:
This is a great approach to understanding of humans, their behavior, and results of this behavior. I think it clearly supports my believe that humans are way to complex and dynamically changing to try any attempts to control and manage them externally whether these are relatively soft attempts of American elite to “nudge” people into the “right” economic behavior for their own good or murderous concentration and “reeducation” camps of communist countries where alternative is either “right” behavior or death. The logical conclusion is to assure that people have resources to do what they want and forget any ideas about some elite thinkers knowing and having justification to force their ideas on people. I do not think that there is any non-destructive alternative to freedom with resources.
The main idea of this small book is to concisely present key points of the Theory of Public Choice through 3 essays of its intellectual founders. The main point of this theory is that humans remain humans and care most about their own interests regardless of whether they work in private or public sector. Consequently it makes rules of market competition applicable to public sector, providing, however, that in this case the competition is not for market share and profit from selling goods and services to consumers, but for position in political / bureaucratic hierarchy with most power to obtain and direct public resources in one’s own interest regardless of whether it is beneficial to anybody else or not.
PART I: THE THEORY OF PUBLIC CHOICE Gordon Tullock
1. People Are People: The Elements of Public Choice
Public choice is scientific analysis of behavior of individual with respect to government, which comes down to transplanting the general analytical framework of economics into political science. This theory rejects the dominant view of bifurcated human behavior that posits that when moved to political arena individuals magically forfeit their own self-interest and act exclusively in the interest of public. Instead it views politicians as individuals good at being elected into the office and stay in office generated both monetary and psychological benefits not different from any businessman on the market. Author looks at specifics of democratic versus nondemocratic government, their costs and benefits, and how politicians pursue their interest depending on the nature of political market. In the summary the Theory of Public Choice lead to conclusion that government inefficiency if not a bug, but the feature and the best way is to minimize government sector to the areas of absolute necessity where market solutions are not feasible such as military and legal systems.
2. Voting Paradoxes
This is review of electoral systems and their paradoxes. One example of paradox is selection A over B over C over A due to sequence of binary choices. Another example is British system when parties have constantly build coalitions in order to obtain majority. Author looks in a bit more details at Proportional representation and Single-Member Constituencies systems. Finally author discusses multi-dimensional character of politics when different constituencies put different weights on issues.
This is a very important concept for group decision-making when members of the group exchange votes conditioned on support for each other issues. Generally it results in benefits exchange at the expense of people not represented or weakly represented in decision-making group, leading to expansion of lobbying. Author refer to Reagan’s tax cut as example of victory of common interest over special interests, which happens extremely seldom, unlike multiple victories of special interest that occur practically on daily basis.
4. The Cost of Rent Seeking
This is discussion of rent seeking (government granting of special privileges) and its cost. Author admits that we do not have adequate methods to measure cost of rent seeking, but there is plenty of evidence that it is tremendous and naturally growing with each expansion of government regulation and interference into resource distribution.
This is review of Bureaucracy and its power that in such developed countries as USA and UK actually accedes power of politicians. Obviously Public Choice deny the notion that bureaucrats’ objective is public good or institutional interest as deeply contradictory to empirical evidence. Author stresses his attitude to bureaucrats as not bad, but rather just normal people whose activity is necessary for functioning of big organization public or private. He just rejects notion of bureaucracy as a group of idealists working for common good and promotes empirically valid notion of bureaucrats as self-interested individuals whose actions may or may not be in public interest, but are always in their own interest.
6. Tax “Avoision”
“Avoision” is combination of all legal and illegal methods used to decrease one’s taxes. Author goes through examples such as mortgage deduction, adjustment of corporate structure to minimize tax, cost of multiple loopholes designed to encourage individuals and entities to act in interests of bureaucracy, and even cost of underground economy that exist exclusively to avoid taxes and regulations imposed by government. The conclusion is that Avoision is quite often beneficial for society because it add goods and services that otherwise would not be created and even puts some restrains on government, which could be good or bad depending on what government does.
The final chapter of this part is about interaction between local and centralized government entities and advantages of federalism: more responsive to people local governments combined with high concentration of resources in central government. Also voting with the Feet is very important feature of federalism that allows voters reward or punish local government by moving in or out of its jurisdiction. Author strongly support federalism and express some dismay that movements in recent years is mainly to centralization.
PART II: AMERICAN APPLICATIONS Gordon L. Brady
8. Protection in International Trade
This is review of application of Public Choice theory to international trade. It mainly discusses how personal interests of bureaucrats and politicians sometime support, but sometime impede free trade depending on their constituencies despite generally accepted idea of its benefits.
9. Internet Governance
This chapter reviews Internet as unusual area of minimal regulation and how bureaucratic interest keep pushing to increase in it. It is written a while before Obama’s attack against Internet freedom, but it is quite obvious it was long in coming.
10. Public Choice to Telecommunications
This is an interesting case when Telecommunications that were developed at the pick of bureaucratic power in 1930s got to be regulated to monopolistic level. The most interesting part of this natural experiment was review of benefits created by deregulation of this area. The process of deregulation, as consequence of new technology not covered by regulation and complex political logrolling, is especially interesting as an example of potential decrease in bureaucratic power by setting up various groups of bureaucrats against each other competing for higher rent.
11. Public Choice to Environmental Policy
The final chapter of this part is about environmental regulation and EPA. Created as tool to rule in externalities of industrial production, which harmful effects become obvious to population, it quite successfully put break on most obvious harm caused by emission and pollution, clearly providing for public good. However as any bureaucratic organization it immediately expanded in search of rent and power, eventually becoming a huge impediment on economic development via multiple costly regulation without and meaningful impact on improvement in environment.
PART III: PUBLIC CHOICE IN BRITAIN Arthur Seldon:
12. Public Choices or Political Sovereignty?
This is an interesting discussion about Political Sovereignty in view of the Theory of Public Choice. It stresses that ratio of individual decision making versus collective decision making has great impact on quality of live in any society. It shows in some details in regard to public goods, redistribution, and welfare how increase in collective decision-making actually means increase in decisions made in the interest of bureaucracy at the cost to population, leading to increasing reluctance of population to curry this cost.
13. Government Intentions and Consequences
This is discussion about distinction between public and private interest that author believes to be fictional. In reality the only interest that exist is always private interest and “collective” practically means interest of bureaucrats and politicians. Author also debunks myth of Collective Superiority using example from British history of welfare and public housing.
14. Overdependence on the Welfare State
This is British specific history of welfare state development and harm to population in caused.
15. The Weakening of the Family
This brief chapter is about negative impact on family from expansion of welfare state to the level when bureaucrats substitute parents. The only reasonable solution created by this expansion of government is remove bureaucrats’ power over family live.
16. Voters versus Consumers
This is about perception and actions of politicians depending on their values. It practically means that politicians consistently value voters much higher than consumers, creating condition for intentional promotion of unjustified fear and resentments so politician could use them to win election, even if in reality it causes real harm to their voters as consumers causing them for example to avoid Genetically modified food, which has much higher quality and lower price than conventional.
17 The Political Fate of Economic Federalism
This is about current centralization of government at the expense of federalism. Author reviews this process and its consequences and concludes that it leads to rejection of democratic government and attempts to escape to open markets.
18. The Escapes from Overgovemment: Political Power Yields to Economic Law
The final chapter is about future and unsustainability of infinite government growth that increasingly hurts population. Author strongly rejects an idea that the choice is between Government and Anarchy and stresses new opportunities to escape excesses of Public Choice and expand sovereignty of the public.
MY TAKE ON IT:
The Theory of Public Choice is the great achievement of political thinking that while still mainly in infancy will eventually become dominant due to the simple fact that growth of government and bureaucratic abuses of individual will, supports rent seeking on the large scale, and creates opulent political / bureaucratic enclaves such as Washington DC becoming richer, while population becoming poorer. It will inevitably force people to reject socialist / statist ideas of XX century as unworkable. The only problem here is that while correctly and wonderfully clearly describing Public Choice of bureaucrats and politicians it does not provide solution for this conundrum. I, on other hand, think that I have one: equal marketable (time limited rent only) rights for natural resources that would provide all individuals with resources and allow for automatic selection via market mechanism of individuals most capable for effective and efficient application of these resources to generate goods and services. I also think that limitation of government to its legitimate area: use of violence to prevent and/or retaliate for violence, enforcement of legitimate contracts, and acquisition of factually correct information to support individual decision making, would dramatically decrease abilities of bureaucrats and politicians to seek rent and to use other people’s resources for themselves.
The main idea here is that doomsayers who consistently over the years declare that humanity is moving to catastrophe either due to overpopulation or mineral resource depletion, or cancer epidemics, or genetic engineering were wrong every time for as long as this alarmist industry exists. Being wrong however did not prevent them from reaping huge benefits in form of academic positions, grants, prestige awards, and publishing success. Actually it is pretty much a reliable way to become rich. Consequently author states his believe that human resourcefulness will again prove all them wrong in current cycle of doom predictions.
- Peak Population?
This starts with review of “population bomb” prediction so popular and so profitable for its promoters in 1970s. Author reviews these predictions and actual development to demonstrate how they failed: green revolution of modified crops, decrease in birth rates with increase in survivability of children and education levels of women. Author also makes a very interesting point that with development of welfare society children became kind of luxury that people spend their resources on without any expectation of significant material returns, instead of children being the only source of resources and protection in the old age as it was the case in the past.
- Is the World Running on Empty?
This chapter is about pick oil scare and multiple other picks in natural non-renewable commodities that never ever happened in reality. The important point here is that richer society is normally cleaner society and it also uses a lot less natural resources due to more efficient technology. Eventually humanity will move to sustainable processes, but there is no rush because we have plenty of resources with demand for them per unit of output going down quite dramatically in practically all areas.
- Never Do Anything for the First Time
This is about the latest craziness called precaution. By and of itself it kind of makes sense, stating that one should not harm. However if taken to extreme it is used to prevent any actions and/or improvements in technology or processes. Author makes a good point about seen and unseen when, for example, not allowing new treatment bureaucracy assures that nobody will be hurt (seen), but prevents a lot more people from being saved (unseen). Obviously it could not be possibly trial of something new without errors so the only way prevent errors is to stop all trials and froze humanity in place.
- What Cancer Epidemic?
This is about a number of health scares and their methodologies, which typically are highly misleading and self-serving. In this regard “cancer epidemic” is a very good example. Typically stated number of increase in deaths from cancer often miss any age adjustment and do not mention simple fact that significant part of population that used to die in young age from all kind of diseases typical for their age now live long enough to get old and to die from old age diseases, pushing up statistics for cancer or Alzheimer higher and higher.
5.The Attack of the Killer Tomatoes?
This is about another craziness – fight against genetically modified food. Needless to say that humans do not really use natural food since beginning of agriculture. It is the new method of gene selection done in laboratory by genes splicing rather than in the field by selective breading what scares the heck out of functionally illiterate activists. Needless to say that highly profitable organic industry supports these protests not because of illiteracy of its leaders and scientists, but rather for profitability reasons.
- Can We Cope with the Heat?
This chapter is somewhat different from previous chapters because here author agrees with doomsayers about global warming. He repeats their regular trope: more greenhouse gases in atmosphere (true) inevitably lead to warming (questionable) that will cause dramatic negative impact in the future as shown by computer models (unknown, since models being highly unreliable). However author seems to be capable maintain reasonable approach despite his conversion, so he goes through counter argument: warming not happening over last 15 years, lack of observable damage from climate change, low probability of catastrophic warming even according to models specifically designed to prove it, and finally unreasonably high cost of extreme measures to stop CO2 production. Most important, author seems to understand ideological rather than practical approach to the warming that dominates leftist environmental movement and correspondingly ideological approach of their free market opponents. His recommendation is to encourage economic growth so future generations have resources to handle climate change if it does occur and has negative consequences.
- Is the Ark Sinking?
Here author briefly looks again at multiple doomsday scenarios from the past and their current status in corresponding area and finds that lots of staff actually getting better: farmland use is decreasing, forests are growing, cities are incorporated into natural environment rather than substituting it, and so on. Actually he even trying to debunk idea of “pristine and benevolent nature spoiled by evil humanity”. Such nature never really existed. It is and always been tough and unforgiving randomly changing environment in which complex interaction of material components, energy, and time regularly eliminate species, create new ones, runs some of them through bottleneck of survival, and sometime allows some to expand dramatically.
His conclusion is optimistic: humans managed to survive and prosper for a long time in environment they poorly understood by fixing problems one at the time as they presented themselves. There is no reason to believe that with contemporary technology and science humanity would not be able to continue its success. The multiple panics created by ideological environmentalists and supported by bureaucracies usually used to transfer more resources to these groups, increase their power, and most often are detrimental to everybody else. Eventually humanity will overcome its nature consumption phase and switch to sustainment mode when nature will be not a source of raw materials, but “arena of human pleasure”, but this future state should come through economic growth and prosperity, not from restriction and raw political power of ideologues.
MY TAKE ON IT:
It is a very nice review of environmental scares and their consistent failure to materialize. This book is pretty much in tradition of Julian Simon, whom I consider the most profound ecological thinker and who believed that the only really limited resource is human individuals and their capability to invent and implement good ideas. Despite multiple self-enriching schemas of leftist ideologues and their supporters, humanity seems to be able to limit damage they cause, especially in democratic societies. For example it is highly teachable and is something ironic that damage caused by population bomb promoters was very limited to non-existent in democratic societies in which all they could do was to scare a lot of people into buying their books and tolerate bureaucratic transfer resources to themselves, while totalitarian China actually implemented one child policy leading not only to suffering of huge amount of people on the short run, but also to looming demographic catastrophe on the long run. Overall this book is a nice reprieve from stupidity of political environmentalism.
The main idea of this book is to present a nice collection of data linking inequality with everything bad one can think about from obesity to murder rate and consequently convince reader that inequality had to be eliminated or at least dramatically decreased in order to improve quality of live for everybody. The method of inequality correction is usual: big government with political will for equalizing.
PART ONE Material Success, Social Failure
- The end of an era
This is about the end of era of materialism, which is consistent improvement in material wellbeing. Authors believe that contemporary western society achieved limit when material improvement does not provide for improvement in quality of live. Here is typical “evidence” they provide to support this view:
Obviously people in Tanzania or Vietnam are as happy as people in USA despite huge difference in resource availability. Besides authors really believe that there environmental limits to growth.
- Poverty or inequality?
Here authors make the point that inequality is more important characteristics than income in defining quality of live:
- How inequality gets under the skin
In this chapter authors analyze how exactly inequality causes deterioration of quality of live. Here are reasons:
- High Anxiety
- Impact on self-esteem and social insecurity
- Impact on pride, shame, and status
- Threats to social self
- Destruction of community with defined place for individual
PART TWO The Costs of Inequality
All chapters in this part pretty much about negative impact of inequality on all aspects of people well being from trust between people to obesity. This thesis illustrated by a bunch of interesting graphs showing relation between levels of inequality and other aspects of human live.
- Community life and social relations
PART THREE A Better Society
- Dysfunctional societies
After presenting correlation between inequality and everything that is conceivably bad authors trying to analyze alternative explanation of correlation via external factors. They look at ethnicity, society history, and social class. They generally reject all other explanations and provide a separate discussion on causality of inequality – everything bad correlations. This explanation is pretty much comes down to: inequality correlates with everything bad so it must be causal. Even such seems to be obvious causal link as poor health – inability to work – low income is rejected. They also reject direct influence of ideology, but consider its indirect impact via: neoliberal free market lead to increase in inequality causing everything bad to occur. However authors admit that they really cannot prove causality and claim that it could require impossible experiment by dramatically changing level of inequality in some country and observe results.
- Our social inheritance
This is look at social impact of inequality such as difficulty of real friendship between individuals with high difference in status and negative impact on human relations by perceived unfairness and strict hierarchy. Authors bring in research on chimps versus bonobos, ultimatum games, and anthropological research of Paleolithic societies and their social structures. They also discuss human duality of individual and group survival both of which are necessity for humans.
- Equality and sustainability.
Here authors link everything to ecology sharing their dream for “steady-state economy”. As usual this dream includes hope to decrease consumption of the “rich people” who work too much and consume by far more than other people. Here is their graphic representation of this idea:
- Building the future
This chapter is about what should be done to decrease inequality, after authors put blame for it on political development. Interestingly enough they point out that level of taxation seems to be irrelevant providing example of low tax New Hampshire with very high quality of live and health. However they see solution in politics of society that would force equality on people and suppress corporate power that authors believe promotes inequality. They also see solution in non-profit corporations, trade unions, and employees ownership. However ultimate do-gooder should be big benevolent government that would have political will to make people more equal.
MY TAKE ON IT:
The data set provided in this book is nice, but ideology is somewhat stale. In their passion for equalizing authors somehow manage completely ignore that huge equalizing experiments ware conducted and on the huge scale: Russia, China, and many other countries that were taken over by communists with immediate and drastic decrease in inequality to such level of equalization that even amount of available food was made equal. Probably authors ignore it because it makes their thesis of inequality causing everything bad kind of ridiculous if compared to millions of deaths caused by extreme equality. Another interesting phenomenon, typical for all socialists, is authors’ completely blind spot to inequality created by government and myriad “non-profit” organizations. It seems to be that huge amount of resources spend on building palaces and providing good live for government bureaucrats, politicians, non-profit CEOs, and Union bosses somehow is not counted into inequality. For them a multimillion private 12 seats plane compared with economy middle seat in jumbo jet is huge example of inequality, while government jumbo jet used to carry one important politician to play golf over weekend is not. Especially egregious example is calculation of Gini coefficient without taking into account control over resources by bureaucrats and politicians, so for example country like Sweden, where a few hundred people at the top of government control about 60% of country’s resources, has lower levels of inequality than USA where similar number of top politicians and bureaucrats control just over 30% of all resources. With this approach one gets a ridiculous result when something like North Korea where current Kim controls 100% of country resources somehow has Gini coefficient less than USA, rather than 1, as it should.
While agreeing with findings that inequality hurts people and causes health and other societal problems, I think that most important part is missing: causes of inequality. People are not equal, but this inequality could not cause income/wealth ratio in millions. The real cause of inequality is government that forces on people such rules of game that allow some individuals acquire control over huge amounts of resources, while leaving others with nothing. I think it does not matter whether this control is implemented via mechanism of private or government property. What does matter is real control over resources.
My approach to fixing this problem would be to equalize natural resources availability and making people who use more than average to buy this right from people who use less. With no restrictions and no redistribution of produced wealth the inequality between people would be limited to difference in productive abilities and luck, that could not possibly be that huge, therefore removing all these negative problems that authors wrote about.