Tuesday, August 15, 2017

"Diversity and Complexity," by Scott E. Page

The book by Scott E. Page "Diversity and Complexity" is a useful complement of the book written before by the same autor, "The Difference," offering definitions and taxonomies of diverse and complex systems.
In that previous book, Page argued that diverse preferences, although presenting social choice challenges, also offer the opportunity for diverse perspectives that help to solve problems with uncertain solutions. Diverse communities or groups do not succeed automatically, as cycling is not something that one learns without some training. But once you learn, cycling goes much faster than running, which is much easier.
Complexity comes from systems that result from the interaction of diverse adaptive units from which patterns emerge that are difficult to predict in advance. A calculus exam is difficult, but not complex, because the parts do not interact.
The more recent book explains that the role of diversity is to provide insurance, competition, redundancy, and innovation. Although the book has mostly a positive tone, it also reflects a preference for diversity. This preference then must be implemented under the positive constraints set out in the book. There are many examples of this, and that is one of the good reasons to have institutional diversity. A preference for diversity makes many of us prefer big cities rather than small villages, although the countryside is also an example of natural diversity.  The author is very aware of the constraints: diversity is no panacea and not every kind of diversity works. If we put lots of randomly different things together they will not create a coherent system from the beginning. In nature, diverse ecosystems work precisley because they have been evolving for centuries. The book has many interesting insights beyond the relationship between complexity and diversity, like the distinctions between data, information, knowledge, and wisdom (in increasing order of structure).
In biology and non-human nature, change comes from evolution. In human societies, it comes both from evolution and from creative intelligence. However, intelligence has plusses and minuses, the latter especially coming from confirmation and other biases.

Thursday, August 10, 2017

The book about Buchanan, and what it says about Tullock

In Nancy MacLean’s “Democracy in Chains” there is an impressive account of the efforts of Nobel Prize economist James Buchanan to build over his career a theory of government and democracy to justify the reversal of all redistributive or environmental public interventions. These efforts were generously funded by billionaires and helped to create the intellectual infrastructure of what is today a very powerful network of right wing organizations. The origins of that network are traced in the book to the resistance of the Southern oligarchy in the US to the enfranchisement of African-Americans. How the school of thought promoted by Buchanan has come to be so influential not only in the US but also in Europe (this economist was one of the favorite of more than one of my undergraduate teachers) is probably a combination of the originality and audacity of his radical ideas and the financial support he received. The book is stronger in connecting Buchanan to the social context of the time than in analyzing his ideas on their merits, something for which the author delegates into basically only just another author (Amadae, which I’ll read). By this, she leaves aside an interesting history of economic ideas, which is the debate between Buchanan and his co-authors and other more progressive economic thinkers, such as Kenneth Arrow and Amartya Sen, who were also concerned about the problems of government and democracy (which are real), who took seriously the critique of Buchanan to public intervention, but who ultimately reached opposite conclusions.

Interestingly, in the book there is also more than a passing mention of Gordon Tullock, the most famous of Buchanan’s co-authors, and who was recently mentioned in this blog. In p. 99 of the book, for example, we can read: “In 1967 (…) for the third time in as many years, the senior economics faculty, led by Buchanan, again recommended that Gordon Tullock be promoted to full professor. (…) Tullock had never earned a PhD and by his own admission had never completed an economics course. Brilliant though Buchanan and his allies might have believed the law school alumnus to be, he lacked training in the field in which he taught, and his publication record –apart from the book he had coauthored with Buchanan- was undistinguished. He was also an awful teacher. It did not help that Tullock struck many as an egomaniac –or just a twit. (Once, for example, as a new colleague was unpacking his books, Tullock appeared at the door. “Oh, Mr. Johnson, I’m glad that you finally arrived,” he said. “I need the opinion of someone obviously inferior to me.”). Tullock would not be promoted. Buchanan was furious.”

Friday, August 4, 2017

The Scaramuccis of the world

The theatrical part of politics attracts individuals like Anthony Scaramucci, the financial executive that lasted ten days as communications director of the Trump administration. It is tempting to say that the chaotic current US presidency is fertile ground for this kind of characters, but the fact is that it is easy to come up with examples from other corners. In fact, the generals that had no option but to take over the sinking Trump presidency have sacked Scaramucci without much hesitation. In private I can give local examples of similar characters from my personal experience. Scaramucci and those like him are fast talking and arrogant. For them, what is important is not any particular ideas or values (they can defend different, sometimes opposite, things in a short period of time), but to express anything with apparent conviction. They have a tendency to talk about themselves and to emphasize humble origins or their contact with important people. In one of the few interviews he had time to give during his brief spell at the White House, he behaved with reporter Emily Maitlis more or less as a drunken youngster would behave in a night club at two o'clock in the morning. It is very revealing to know how this reporter obtained the interview in the gardens of the White House. It seems that she was there for a press conference and she saw Scaramucci taking selfies. She told him that she was from the BBC and asked him without preparation if he was interested in answering a few questions for the prestigious Newsnight program. Scaramucci, who probably had not much traing in international media, probably didn't know anything about the seriousness and the style of reporting at Newsnight. He felt flattered and he gave the interview without preparing anything. The resulting interview did not cause any dramatic accident for Scaramucci, but a similar contact with another journalist around the same days finished with him insulting other White House colleagues. When a new chief of staff was appointed and knew about that, Sacaramucci was fired. In a world of tweets, noise and self-promotion it is probably a matter of time before we see new examples of Scaramuccis, while honest citizens will keep looking for recognized adult behavior in politics. Expect more flamboyant individuals with expensive suits supporting opposite ideas and candidates, but always being flattering to the one they obtained power from.
Before I go to the beach for one week, let me give you two book recommendations to think about politics, economics and much more: the book about the role of James Buchanan in influencing the American right, and a book by Scott Page about complexity and diversity. More about them after the beach.

Monday, July 31, 2017

Cooperate or die

Here is an excellent speech about the virtues of cooperation in permanent institutions like the EU. It was meant to be about Brexit, but it is actually against any sort of nationalism in the 21st century. I found out about it from an article in The Guardian that says this: "In the weeks running up to the referendum, when Peter Mandelson was trying to galvanise remainers with an appeal to their pockets, and Yanis Varoufakis was making complicated speeches about conjuring forth ever deeper democracy, one man gave a simple, passionate speech that at the time I found bizarre. John Gummer, speaking to the Environmentalists for Europe, said – almost tearfully – that, because of the EU, nobody had had to send their son to another country to kill someone else’s son for 70 years. A eulogy to peace seemed quite tangential to the argument, but only if you had failed to see, as I had, how much bellicosity the leave side were generating, how much their nationalism and sovereignty were rooted in nostalgia, not for any old Britain of yore, but for a victorious Britain."

Sunday, July 30, 2017

Gordon Tullock's dangerous "minimal federalism"

Branko Milanovic twitted some days ago about a book on sovereignties apparently in Serbo-Croat by Gordon Tullock, so bad according to Milanovic that nobody cared to translate it into English. However, I did some research and found two pieces in English by Tullock that seem to correspond to the same period of time (early 1990s). These are a participation in a roundtable with among others Kenneth Arrow (to me, the one with the best arguments, which I am not aware that he developed in his research work) and a book that is available on-line, entitled "The New Federalist". From what I have seen in Google Scholar, this book has been cited by other authors suchs as Bruno Frey. The latter has some interesting work on what he calls FOCJ: "Functional, Overalpping, Competing Jurisdictions." The link with Tullock is what I believe Tullock calls sociological federalism, by which he means non-territorial sovereignty, that is sovereign institutions based on interests, ethnicity, preferences or any other affinity. Of course one can imagine dangerous developments of this, such as people getting organized only after some sort of ethnic cleansing. But the work of Frey has been interpreted as lending support to institutions like special districts in the US, where the organization of some public services gets structured overlapping but not coinciding with traditional administrative jurisdictional borders. These special districts have advantages and disadvantages, but perhaps would be (or perhaps already are) an input towards a more flexible European Union. In general, the Public Choice school of Tullock and Buchanan has been influential in a sort of free-market minimal federalism with a key role for jurisdictional competition and constraining public intervention. I would include in this tradition Tiebout, Weingast, Frey and also Alesina and Spolaore. Some of the work of these authors is valuable, as are valuable and should be taken seriously some of the contributions of Public Choice, even if those like me who advocate strong public intervention do not share the value judgements behind it. For example, the main points of public choice that government agents are no different from market agents, or that the outcomes of democracy have no particular normative properties for the fact of resulting from majority rule (but what matters is contractual process) are serious points that deserve to be taken into account, and that progressive authors such as Amartya Sen have taken seriously and responded to. But one can see the dangers of pushing the ideas of Tullock too far in federalism. For example, seeing some of his words in the above mentioned roundtable, one can be afraid of the kind of world that awaits us if that minimal federalism is ever implemented:
-"From 1790 until 1930, the US federal government, except in war time, regularly absorbed about 2.5 percent of our GNP. Most of that was used to mainatin a rather small military force (...). We got along beatifully -in fact, rather more beatifully tan we have gotten along since we became more fully integrated, I would say." I'm not sure that African-Americans among others share this view.
-"So, what we need, theoretically, is free trade and a lack of economic integration beyond that (...). Will the European Common market become a contribution to free trade, or will it build a tariff wall of its own, or will it disintegrate? I would not be at all surprised if it disintegrates." I'm happy that his prediction has failed on this.
-He also argues that Canada has no justification for existing beyond the fact that they do not like the USA: "if I were to offer them advice, I would suggest they just disintegrate." Here I'm happy that Canadians did not follow his suggestion, and remain today one of the most civilized federations on Earth.

Friday, July 28, 2017

Celebrating the 25th anniversary of the Barcelona Olympics

Barcelona celebrates these days the 25th anniversary of the Olympic Games. This event was hugely popular and an organizational success. A sub-literature in economics emerged more or less after those games concluding that these events have more costs than benefits for society, which is why some cities like Hamburg, Boston and Oslo have withdrawn from bidding races. Unfortunately this literature has not reached the general public in Spain. I believe there is no contradiction between deeming Barcelona 92 a success and accepting that in general Olympic Games are bad economic propositions. This is the same view that is taken by Andrew Zimbalist in Circus Maximus. I tried to develop it in a joint paper with Eloi Serrano that was published last year. This is the abstract of the paper: "An extensive literature mostly developed after the Barcelona Olympic Games has questioned the existence of net economic benefits arising from the organization (with significant amounts of public resources) of major sporting events such as the Olympics, although some studies still defend their positive impact. Host cities tend to become hostage of the governing bodies organizing the games. The Barcelona Olympic Games were exceptionally successful but still suffered from cost overruns, white elephants and the exaggeration of social benefits as it is usual in many mega sporting events. We report about the socio-political and economic considerations that surrounded the initial project of Barcelona 1992, and we evaluate the uniqueness of these games, including the legacy of infrastructures and sports facilities. Barcelona, a relatively rich city, was emerging from a long centralist dictatorship when the games were initially planned. It had many urban deficits and the games were used as a catalyst to coordinate public and private agents in a complex society that was in a fast process of decentralization. The games had enormous social support. Although it may be argued that the public funds could have been used in alternative projects, it is hard to think that this degree of coordination and support could have been achieved for them."

Wednesday, July 26, 2017

Non-conventional rationality and social choice in a referendum

Most of the Theory of Social Choice is based on the assumption of the exogenous nature of the preferences of rational voters acting in a consistent way. However, modern behavioral economics suggests that the presentation of options ("framing") plays a crucial role in determining people's choices. In this sense, the traditional sequence in the Social Choice Theory (exogenous preference formation, election of a voting system, final vote) does not have to be fulfilled, and the choice of details of the voting system can influence the formation of preferences. This raises the neverendum issue: the campaign for a referendum or the referendum campaign, even if secessionists lose the referendum (as in Scotland), they succeed in convincing the electorate to pay attention to what they want. That is, they are part of the battle for the attention of the electorate. The more plebiscitarian campaigns there are, the better. If the battle of the referendum demos is implicitly and cognitively won as a symbolic manifestation of the nation itself, democratic standards and international recognition are secondary to those who have nationalistic preferences. In this sense, the questions and the exact words of the questions are not innocent. In Catalonia, the referendum questions in ilegal plebiscites are barely innocent. Voter opinions can fluctuate greatly depending on how exactly the questions are asked. For example, before the 1991 Gulf War, nearly two-thirds of Americans said they were willing to "use military force," but less than 30 percent wanted to "go to war."
Our preferences are more vague and incomplete than the traditional theory assumes, and co-evolve with the institutions that claim to aggregate them. Hence the importance for Amartya Sen of the reasoned discussion and of being able to make a decision with the maximum possible information, something that according to this economist and many other observers did not facilitate the dichotomous character of the campaign of the Brexit referendum, where even the more neutral and respected media organizations had to treat both opinions and facts equally to comply with an appearance of neutrality. The objective of making decisions after reasoned discussions, negotiating taking into account the multidimensionality of problems, links with a tradition somewhat forgotten in economics and political science, due to the Swedish economists Wicksell and Lindahl, pointing to the virtues in terms of social harmony and efficiency of unanimity. In addition, as Amartya Sen reminds us, the perspective view of people from other latitudes should be welcomed in any debate to avoid the excesses of "parochialism": sometimes passions and emotions prevent us from facing the pros and cons of a decision, and observers from other latitudes can help us broaden the angle of observation and decide with more perspective.Research on these issues, insofar as it departs from the assumption of absolute rationality, should prioritize the study of conditions or interventions that facilitate cooperative solutions to social dilemmas (as is done with experiments on the voluntary provision of public goods) by adapting the study to the typical situations of this type of conflicts of sovereignty. For those involved in advocating one or another option, consideration of behavioral issues may also be important. For example, Matt Qvortup has pointed out that for Brexit supporters in the UK, Brexit was a commodity with inelastic demand (the perception of a high "price" did not alter preferences) while those who might be in favor of staying in the European Union did have more elastic behavior. By focusing on economic issues (although the economic debate was objectively won),  remainers focused on the price of exit, which did not guarantee them the vote of their potential "elastic" voters and did not allow them to conquer the vote of the "inelastic" and hyper-mobilized a priori supporters of Brexit.