The Ambrosini Critique

Here. Wilkinson says in a multiple dimensional ethical product space that can’t be true. Essentially, Wilkinson is arguing Sartwell can’t have those preferences over policies.

Recall these policy choices:

1. Policy 1: one random member of the community is killed, but the rest of us get $101,0112.
2. Policy 2: Everyone gets a check for $0.89

To which add:

1. Policy 3: status quo
2. Policy 4: everyone gets killed

Sartwell values policy 1 less than policy 3 and his value for it is similar to policy 4. In econospeak, he prefers policy 3 to policy 1 and he’s indifferent between policy 1 and 4. In other words, to him just the possibility the government can do harm is as bad as it actually doing harm. So the government of Switzerland, having never caused harm to its citizens but is entity in that territory with the monopoly on violence, is bad because there exists the potential for it to do harm.

Wilkinson is basically pointing out different people may have different policy preferences; they’d tolerate some chance of harm for big enough average benefit.

If arguments about ethics are just about individual preferences, then its not productive to argue over the content of those ethics (at least when talking about optimal policy and in shorter time frames when those preferences are fixed). Instead, the issue for policy is how to aggregate those preferences.

Gabriel wants to talk about SVL or “statistical value of life” (aka VSL). Where would we be without acronyms.

First, why should we have such a thing? Isn’t putting money value on human life too icky to contemplate? If we have such a value, wouldn’t it suggest Bill Gates could buy our lives? Would it be condoning slavery?

Answers: because we have to, yes but someone’s got to do it, no and really no. Simply put: there’s no way to know how much money to spend on life preserving/extending goods and services if we don’t have a sense of how much its worth to us to preserve that life. “Life is priceless” is a nice sentiment, but taking it literally, and via a sufficiently snarky reductio ad absurdum, this refrain would suggest we spend infinite resources making sure people don’t get the slightest owies. See how absurdum that reductio would be?

Anyway, how much I spend on air bags for my bicycle or how much time I spend indoors instead of braving the mean streets of Davis¹ reflects the value I give to my life. If I value my life more, I’ll spend more time in bed. Usually, I don’t spend all my time in bed so I can’t have an infinite value for my life. If I value my life less, I’ll spend more time sky-diving. Because I’m not spending all my time jumping out of perfectly good airplanes, the value I give to my life can’t be zero. Somewhere between zero and infinity, then, you’ll find the value of my life. The things between zero and infinity are called numbers and that’s all economists are doing when they assign a money value to life; they’re assigning a number to that subjective value we all have in our heads anyway.

There’s a couple of things we’d expect to be true about that number:

1. It shouldn’t vary too much between different types of people
2. To the extent it does vary, it should do so primarily because of the underlying difference in risk preferences of individuals
3. It shouldn’t vary too much by age except in the last moments of life
4. It should be big in any case. It would be really disappointing (and unbelievable) if economists said lives were worth pocket change (even, or especially, for the infirm) .

With my limited imagination, I can think of two ways to put a dollar value on a human life. The first is to use lifetime income or the slight variant, the income yet to be earned. In other words, just add up pay checks. This breaks a bunch of the rules listed above, but mostly it violates #2 and #3.

Another way to come up with a dollar figure is to look at how much money people spend on safety equipment (willingness to pay) or how much extra money they earn doing dangerous jobs (compensating differentials) relative to mortality rates. The fancy folks down the hall that specialize in Public economics call this the value of a statistical life (emphasis on the “statistical”).

There’s lots of estimates of this value, but most put it between $4m and $9m². This method does an OK job not breaking any of the above rules. Take for example the estimates showing a 10% increase in income leads to a 5% increase in VSL. This may seem disturbing at first, but assuming I’ve done my marginal effects calculations right, this values Americans at the poverty line at $2.5m or so³.

1. Bikers don’t think they need to follow road rules. [↩]
2. see Viscusi and Aldy. They find safety is a normal good, unions are associated with higher hazard pay and VSL declines with age. [↩]
3. and Bill Gates at $1.5B, but he may be slightly out of sample [↩]

Government policies have stochastic effects. In particular cases, a policy can lead to government action that is extremely bad. In other cases, that same policy can lead to unmitigated good. In choosing policy, its seems reasonable to choose those where the good outcomes in some sense out weigh the bad ones. Its not obvious, though, how to weigh good versus bad outcomes. Do 10 decent outcomes outweigh one terrible outcome? Does one really great outcome outweigh 10 mediocre bad outcomes?

David Friedman gives an explicit formula for choosing policy:

[I]n order to defend giving government the power to do something, you must argue not only that it can sometimes do good but that, on net, it can be expected to do more good than harm.

That is to say, choose policies such that the average outcome is positive. Suppose “mediocre bad” policy outcomes are -1 bad and one “really great” outcome is 11 good¹. The average of these outcomes is positive, so the policy that produced them should be implemented. On the other hand if “decent” outcomes are +1 good and “terrible” outcomes are -100, the average is negative and the policy shouldn’t be implemented.

The problem with this method for choosing policy is that it doesn’t take into account the fact that we may really hate bad outcomes relative to quantitatively equal, but positive, good outcomes. In other words, the optimal policies may be ones that avoid “terrible” outcomes entirely or makes them really unlikely. This will mean there are some policies that have positive average outcomes, but that we’d still not like.

Let me make a stark example: Friedman’s formula would suggest indifference between these two policies in a community of 100 people and his method suggests both should be implemented:

1. Policy 1: one random member of the community is killed, but the rest of us get $101,011².
2. Policy 2: Everyone gets a check for $0.89

Given certain assumptions about the value of a statistical life, these two policies have the exact same value in expectation. Problems?

1. How to measure these outcomes is a different topic entirely… just suppose we can do so. [↩]
2. Here I’m assuming the statistical value of a life is $10m. I think the normal estimates are between $2m and $10m, but I’m too lazy to look it up. [↩]

This is not why people are opposed to free trade:

When factories move abroad, however, the shift is perceived to be due to poorer labour conditions, laxer environmental standards, and lower wages in the competing nation. This seems akin to breaking the rules, and is the source of anti-trade passion on the issue.

— The Economist

The reason people don’t get up in arms about technological advances even though they do with trade-induced changes in labor demand is because technological advances are usually diffuse in time and space. Computers, for example, impacted almost every job in the economy. Today over 60% of workers use one on the job. The invention of computers and their subsequent diffusion in the economy put people like my Mom, a file clerk at a doctors office in the 80’s, “out of work”¹ and it also reduced the demand for jobs like book keepers and secretaries. These changes didn’t happen suddenly and some sectors of the economy are still reorganizing work around computers.

Removing a trade barrier, on the other hand, has almost immediate, concentrated effect. Reducing steel tariffs results in the next orders of steel being to suppliers over seas. Steel workers lose their jobs and they do so all at once when the factory goes idle.

Why should people care about sudden and concentrated disruptions in the demand for labor, but not diffuse ones? Its easy to come up with psychological just-so stories (e.g. people just don’t like sudden shocks or they’re unable to discern more gradual changes). Just like their evolutionary psychology cousins, these stories are ultimately unsatisfying. You can explain any behavior by appealing to preferences.

The economic explanation is this: there is some time cost to bitching². Bitching is unproductive and it takes resources. If there was no cost to bitching, that’s all people would do. There’s a possibility, though, if one bitches, they’ll get attention (in the form of political coddling of one form or other). So if a labor demand shift is short and severe, the costs of bitching are out-weighed by its expected benefits.

Notice I didn’t have to appeal to collective action.

The Economist’s psychological explanation is a little different; people care about “fairness.” This seems even more unlikely to be driving the opposition to trade than the just-so psychology cited above. Its not clear why some demand shifts would be unfair and some fair except if one appeals to just-so-ness. In any case, people may care about “fairness” (even though this hasn’t been experimentally proven), but in explaining economic phenomenon we should exhaust pure economic explanations before we resort to psychological ones.

1. She wasn’t laid off or anything, she just got a job across the street and the doctor’s office didn’t have to hire a replacement. [↩]
2. this is a technical term [↩]

I dunno, but if its “capabilities” or equality of opportunity then tracking income inequality between various income percentiles is the wrong measure to concern themselves with.

Income is a flow. Its tenuous. Its dynamic. It does not determine the size of your budget set; it does not determine your capabilities or opportunities.

If you doubt this, talk to Dell about the new computer I just bought on credit ¹. Talk to the Bank where I took out my student loans.

If you care about the size of budget sets, then you care about lifetime income (and access to the credit market, but I don’t think this is a problem in the U.S.). This is because if someone has earning potential (let’s say they’re a college student or they’re just starting their career) then lenders will loan them money, even if they have low income today, because the lenders know their earnings, and thus their ability to pay the lenders back, will increase over their lifetime.

Is current income at least a good measure for lifetime income? Nope. Early in careers, there’s little correlation between current earnings and total lifetime earnings². This picture shows the ratio between current and permanent income (annualized):

So, why do egalitarians seems to care so much about (current) income inequality dynamics?

1. I know, I know… Cash flows are very irregular for grad students and I got a good price on the computer with zero interest [↩]
2. see this paper for a nice discussion of the issues involved in measuring lifetime income. They use some really, very cool Swedish data to estimate the relationship between current income and lifetime income. [↩]

XKCD’s got your number Lester Freamon.

If abortion is universally wrong, then it doesn’t matter what one’s beliefs about it are, its always wrong everywhere¹. Some argue for Federalism and they say people could move to the jurisdiction that has an ethical system parsimonious to their individual beliefs. If abortion is universally evil then its not clear how moving jurisdictions changes that. Do we have the obligation to oppose evil acts (what else are ethics for but to force particular behaviors in others?) ONLY when they occur in our particular jurisdiction? Federalism is incompatible with all ethics being universal.

Now, what if ethics aren’t universal truths but just preferences over moral outcomes? For example, I might prefer abortion to be considered by my community to be morally wrong (over morally right or morally ambivalent) or I might prefer helping the weak to be considered morally right. Abortion isn’t universally evil and helping the weak isn’t universally good; I just prefer my community to believe abortion is wrong and helping the weak, right. This suggests, like other types of preferences and in contrast to universal ethical laws, preferences over morals can differ between people. In fact, Federalism only makes sense when you believe ethical preferences can differ between people. The possibility of different ethical rules for different sets of people can only exist if there’s heterogeneity of preferences over moral outcomes². If there were no differences in preferences, there wouldn’t be the need for Federalism. The world government would just busy itself recording universal moral laws into the world constitution.

There are problems with Federalism, though. If different States can have different rules reflecting the variety of ethical preferences between States, then counties within States can have different rules reflecting the variety of ethical preferences between counties. And if counties need different rules, then so do cities. And if cities do then so do neighborhoods, households and finally individual people. People have different preferences over abortion, so if you’re ok with States having different rules about abortion, then you’re ok with individuals having different rules about it. In other words, States are as arbitrary a choice of moral community as the nation is and so an argument for Federalism can be used to argue for even greater granularity in the size of moral communities. In the limit, arguments for Federalism are arguments for individual ethics.

Take something that is clearly a moral preference rather than universal moral law; abortion for instance. As I said above, arguments for letting States, rather than the nation, decide the issue can be used to argue individuals, rather than communities, should decide the issue. So abortion is a decision for the individual woman to make. The problem here is that people that feel strongly against abortion are harmed deeply by its occurrence. This is in the nature of moral preferences. We feel very strongly when our preferences aren’t met, even by strangers; there are negative externalities generated by people that don’t follow our preferred ethics. Now, on the flip side, the woman having the abortion obviously gets some benefit from doing so otherwise she wouldn’t have the operation done and clearly she doesn’t find it unethical.

The point of the ethical community on the abortion issue is to balance the negative externalities of abortions with the benefits to women who get the procedure done. The larger the ethical community the more people who are forced to act according to its ethics and the lower the negative externalities. In other words, the benefits of living in the community increase as the size of the community increases. On the flip side of the coin, the more people in the community the more likely any one member’s ethical preferences will come in conflict with the community’s. Thus, there’s a trade-off between size and respecting individuals’ preferences. The optimal size of the ethical community is the size of the community where the costs are exactly balanced by the benefits. For some issues, e.g. slavery, this optimal size is the nation and for other issues, e.g. age of consent, its the State. There may be other issues for which the optimal community size is the city, the individual or even the whole world.

One problem with this analysis is that people tend to see their ethical preferences as universal ethical truths. I don’t just prefer abortions to be thought of as wrong, I know they’re wrong! Pragmatically though, I know that this *can’t* be a universal ethical truth because I know other people have different beliefs about abortion and I know views on abortion have changed over the ages. That said, I can’t help but feel like abortions are universally wrong³.

It seems, though, that this belief that our preferences reflect universal truth is important for binding ethical communities together. If the function of ethical communities is to force behavior on people (via physical force or just shunning), then its seems like the belief that ethical preferences are universal truths makes it easier for people to enforce those ethics. I imagine it would be hard for one to physically prevent women from getting abortions if they didn’t think those women were violating some universal law but just optimizing their preferences.

1. This post is slightly adapted from a post I made to a discussion group [↩]
2. abstracting from differences in wealth between communities… some ethical rules, like “just” war, may be inferior goods [↩]
3. Thanks to the Catholic Church for this one. [↩]

… until they spend 10 years on the job market (pdf). Improvement in literacy (in the broad sense of the term) is most pronounced between 25-35 year olds and 35-45 year olds. This is to say the jump (or lack there of) in literacy between the college-graduate-aged cohort (25-35 year olds) and the high-school-graduate-aged cohort (16-25 year olds) is much less than the improvement later on in people’s careers¹. Doesn’t say much for the impact of college, does it.

Also, American adults actually catch up to adults in other countries in literacy scores. Here’s the US ranking (out of 19 countries) in the three types of literacy test by age groups²:

Given Americans go to college at much higher rates than those in other countries (at least this was true when these literacy tests where administered), this is even more evidence for the signaling theory of higher education or it at least takes the wind out of the sails of the idea that colleges are good at creating human capital.

The catch-up effect suggests Americans are learning things on the job they should have learned in high school. Because we end up high in the rankings, though, this is more than just catch up. It seems there’s something about the American labor market that makes it especially good at producing human capital.

1. I saw a seminar yesterday in which it was suggested this isn’t a so-called cohort effect, i.e. the older folks didn’t get better educations. [↩]
2. see page 16 in Sum/Kirsch/Taggart 2002, linked above [↩]

Perhaps no other task is more vital to his hopes of becoming the first black president, and only the second Democrat elected to the White House in four decades.

— AP

(h/t Jonah Lehrer who has a great book out)