Wednesday, August 29, 2012

Innovation and Education: A Reason for Slowing Growth?

A while back I argued that the increasing time to educate professionals able to create technical innovations (and therefore growth) could ultimate result in slowing economic growth. The Free Exchange blog at the Economist addresses this same argument. Curiously the piece also points out expensive San Francisco real estate and evidence for a face-to-face requirement for knowledge transfer (using patent metrics) - but these measures don't predict the future.

Tuesday, August 28, 2012

Some Problems in Turchin's War and Peace and War

Peter Turchin aims to be the real-life Hari Seldon, so it's admirable he gets the inevitable comparison out of the way early in the work. (If you're not familiar with Turchin and/or Seldon, go here and here respectively.) And the goal is an admirable one: model history mathematically. His arguments center on the consequences of interactions at culture frontiers between empires and their neighbors, on the mechanisms which cause state-decay from within, and on the crucial effect of metaethnic solidarity, which his macrohistorical predecessor Ibn Khaldun called asabiya.

Indeed one of the strongest values of the book for me was the synthesis of the two most famous works of macrohistory, namely Gibbon's Decline and Fall of the Roman Empire and Ibn Khaldun's Prolegomenon.  Turchin summarizes Khaldun as follows:  empires decline, former barbarians on the borders who were forced to organize are more vigorous, and either supplant the empire through conquest or infiltration, or surround and surpass them. Turchin's work can be seen as largely an expansion of Ibn Khaldun's.  Of course viewing the book's main value as an executive summary of a classic isn't necessarily a compliment, and even in Turchin's goals themselves there are issues. First, the fixation with the history of empires (which, granted, is interesting) is different than a focus on human flourishing, which is much more important. To be fair Turchin never implies that this is what he's doing but if you're going to model history, it seems a more worthy goal is a direct focus on happiness than grand sweeping armies.

Second, and I think far more damaging to the value of the book, the point of a model is to predict. Yes, it's interesting if a model that you built based on the Romans and Byzantines fits the Arabs, but the proof of the pudding (and its true value) is in forecasting the future. To this end he makes only two predictions: one, that if the Islamist Chechen incursion into the Russian Caucasus expands, this means the withering of the Russian state and the growth of a new imperial state will grow from the nucleus of the Chechen insurgency; and second, that China and the United States will be competitors in the twenty-first century. I don't think you need to be a macrohistorian to arrive at the second one. As to the first, while I don't take issue with a growing Chechen insurgency damaging the Russian state's legitimacy, I do find it dubious that an Islamic successor state in the Caucasus would be an "empire" or even a functioning state by any means. I refer to Fukuyama's argument that the Islamist movements of the world are desperate rear-guard measures that will have no lasting impact. To be a real state today you need a real economy, with a real, complex, technological industry. That is to say, the Taliban were never in any danger of building an empire in Afghanistan.

This brings up a point which Turchin half-makes, which is that Things Have Changed. He dedicates a chapter to the effect of cell phones, but I think international economic organizations, a world full of clearly defined borders and terrain, widely available media, and wealthy democratic countries dependent on value-adding labor and human capital might behave differently than the island-civilizations he's writing about. Today, there's just no equivalent to Rome and the Germans on the frontier, or Russians and the Mongols. The world is neatly divided up, everybody knows what everyone else is doing, and plunder does not equate to wealth. The Mongols were the last hurrah of the nomads, the last wave of horsemen emerging from central Eurasia, but since the fourteenth century the balance of strength has favored the sedentary since improving technology enables them to accumulate capital (and defenses) more than adequate to repel would-be marauders. (I'm suggesting here in contradiction to Turchin that it wasn't just the Russian frontierspeople's asabiya that helped them drive out the Mongols, it was improved farming and metalworking.) And yes, today there are certainly cultural fault lines revealed by the end of the Cold War, as Turchin alludes to by referencing Huntingdon, but there are no frontiers. This isn't Turchin's fault but the reader can't help but wonder if his theory still applies. If not, then I can continue predicting a dim future for his hypothetical Chechen Caliphate. 

The frontierless world we now occupy does raise the question of what mechanisms of competition, if any, apply to governments. Nation states are effectively a cartel, enabled by force and their monopoly on a finitely divisible resource (land) - this is a staple observation by many libertarian theorists who point out that such arrangements are much less voluntary than most of us would like. That I know of, this problem has not been discussed in the context of a recently frontierless world where there is no "correction" mechanism for weak, badly run states. Before, complacent despots at least feared finding themselves facing an invading horde that overran their badly-guarded borders. I don't favor a return to the system of state-level survival of the fittest - and in any event an enduring state is not necessary a pleasant one to live in - but one can't help but worry that a fickle and irrational electorate is enough to keep a large and complex modern state running well, when said modern state has, literally, nothing to worry about in terms of its continuing survival.  No barbarians are coming, and it can keep muddling along.

One of Turchin's objections to other theories of history and economics is the failure of rationally self-interested models to explain the mass behavior of humans with respect to their meta-ethnic groupings.  His claim is that asabiya would not exist in a rationally optimizing animal. This is flawed on several levels.

The first flaw is that pre-committed solidarity is actually a very powerful and therefore rational strategy - just not over "single-round games" for a single individual. In fact we see it in organisms besides humans (e.g. ants). These strategies rely on a) a pre-committed signal that one is a member of a group and b) behaving differently toward members of said group. (Richard Dawkins referred to this in hypothetical genetic terms as the green beard gene.) The emphasis on pre-commitment in humans is that our behavior is much more plastic. An ant is pre-programmed to attack those with a different scent; humans have more degrees of freedom. Consequently we rely on early life experiences (family and ethnic identification) that we can't choose to opt out of, because there's an emotional response built into us that remains with us for life, like it or not. Individually and in single round games, this behavior seems irrational, but in the aggregate and over indefinite rounds (in the massively multiplayer game of real-life) it's very powerful. Indeed a lot of human behavior that seems irrational in isolation is actually pre-programmed game-theoretic heuristics that make sense over multiple rounds; e.g. that we are willing to punish wrongdoers even when such punishment costs us and doesn't reverse the crime. (The point? Stop future wrongdoers!) The more generalized solution for human behavior is that we maximize utility, which is partly calculated with money, and partly with feeling different degrees of good or bad about helping or hurting human beings that we have varying connections to.

The second flaw is that it's difficult to imagine the motivations of the peasants that Turchin describes as "patriotic" in any sense that we would recognize.  Patriotism is a relatively recent development. A Chinese emperor didn't much care if peasants were patriotic Chinese - and why would an absolute monarch, as most rulers were throughout history, give a damn? What would the peasants do about it?  There are also considerable direct costs to not risking one's life to go to war - censure from neighbors (or outright violence), plus throughout history people were making these decisions based on poor information, plus in the desperate poverty that existed throughout most of history, the chance at plunder or a few dollars from a royal coffer may have been a better bet than staying at home barely subsisting on the feudal lord's land.  All this is to say that the medieval Russian farmers that he focuses on never had a choice to say, "I could peacefully trade with other Russian farmers, or Mongol merchants. I shall choose the Russian farmers out of ethnic solidarity." It was economic reality that drove them. Since Turchin is more realistic about the economic forces that drove change in thirteenth-fourteenth century Europe (climate shfit and plague), you would think he would be less prone to romanticizing. That said, culture does matter - it profoundly affects institutions and delay of gratification, and therefore wealth and happiness. The two options on this question, both unpalatable to the politically correct, are that either culture is pointless noise and mere window-dressing, or it has an impact on material well-being. Russian peasants chose to accumulate agricultural wealth and defend their land while Mongols continued raiding. The farmers' successor state today is much bigger and more successful than the Mongols'. An accumulation of coincidences, or a real trend?

A final shortcoming is that Turchin makes a common mistake by correlating two high-level characteristics of societies by cherry-picking; in this case, that the more central a government a region or state had over time, the less overlapping levels of status and trust there will be and therefore the worse the institutions and economic situation will be. (There are other lines of thought converging on the conclusion that multiple overlapping status hierarchies are good.) Talk about cherry-picking; Turchin refers to a specific book about Italy for this argument. True, people have applied similar arguments to the success of Japan and England (multiple feudal states kept decentralized and weak by a remote-from-the-people monarch intentionally keeping the mid-level nobility weak), and to China vs. Europe - yet is England really that much better off than France as a result? As a "dissident" libertarian, I frequently point out that for markets to work you need some commons, and for that you need some centralized functioning government. Otherwise, Nepal and Somalia would be veritable Galt's Gulch-paradises of innovation and venture capital, and guess what? They're not. What about far eastern Siberia for that matter? People who make the kind of argument Turchin is making (about anything, not just economics) usually respond by saying that you need "just the right amount" of centralization. Which is to say, the amount that England and Japan and Northern Italy have is the right amount because they're all successful, except a) that turns it into a completely atheoretic, circular, empirical argument and b) their centralization is in fact all different.

A final observation: despite taking issue elsewhere, I was very happy to see a historian observing that we should be circumspect in our weighting of Machiavelli's the Prince as either an accurate historical document or an effective political manual, since Machiavelli was after all writing it in exile. Why should we listen to this guy? He was a screw-up!

Friday, August 3, 2012

How to Game Status Hierarchies

At Meteuphoric, Katja Grace recently wrote about the fragmentation of status hierarchies.  Briefly:  because humans want to protect and expand their status, they do strange things, i.e., every shooting by a disgruntled employee in the process of being let go.  Status is a positional good - every move you make up the ladder is a move down for everyone else - so one strategy to game the system is to split off into a new hierarchy.

Ever notice that most people don't spend extra time in the company of their work colleagues?   (Unless, oddly enough, they're at or near the top.)  And ever wonder why CEOs and department chairs are less frequently involved in "extracurricular" hobby-type groups?  Well, why would they?  They already have all the status they need!  They LIKE being at work for that very reason.  Once they retire of course, that's a different story.

One interesting thing about living in a modern wealthy society is that status is for sale - we can now buy our way into status hierarchies.  Hence Harley Davidson-types, and brand-crazy shop-aholic women, and beer enthusiasts, and young people who define themselves by what genre of music they listen to. The down-side is that in this wealthy society, we can define ourselves by what we consume rather than what we produce. Whatever happened to people saying, "I'm a plumber" or "I'm the assistant manager" and taking that seriously and proudly?   What happened is we now define ourselves by what we consume, rather than what we produce, because that's the best way for us to maintain status.  This makes it less mystifying that people signal these kinds of things with bumper stickers, T-shirts, etc. Thanks for telling me you run marathons with your clever 26.2 sticker, I would've died if I didn't know that!

Two asides:  the single thing about the country of Japan that impresses me most is people continuing to take their responsibilities seriously and defining themselves by their production activities, regardless of their positions in status hierarchies.  Second, as a nontraditional medical student, I'm often struck by certain strangenesses of medical culture.  For isntance, it's striking how completely most physicians and medical students are socially absorbed into the world of medicine, with no friends outside that hierarchy - mention your significant other,  and the next question is always, "Is s/he a doctor/medical student too?"  (Does this happen with librarians?  Mechanics?  Publicists?)  In fact, maybe I'm paranoid, but I often feel I'm regarded as arrogant and/or clueless for having the majority of my social life outside of medicine, since for my sanity I choose to remain as active as I can in all the realms of my pre-med school life.  Maybe that's another way of saying that I'm older and my ego is fully formed so I'm not as worried about what the faculty and other students think of me, which is maybe another way of saying I don't want the status demotion entailed in going from a successful professional in another field to the bottom of the totem pole - so I spend all that time with all those people outside my profession to preserve my status.  (While I'm on my rotations, I intentionally spend time thinking about who I'm going to see and what I'm going to do when I get away from the hospital.  When I forget to do this I seem to get irritable and depressed.)

People have offensive and defensive strategies to protect and improve their status.  Offensive ones are actively cultivating social circles where our comparative advantages are valued and give us status as mentioned above, although it doesn't have to be consumerist as I've described here.  There's also the defensive approach of being part of multiple status hierarchies, in order to spread social risk across them.  Have a falling out with your poker buddies?  Fine, spend more time with work or your bird-watching friends!  This is what Jaron Lanier and Stephen Pinker were discussing when they suggested that the decrease in global violence could be the result of multiple overlapping status hierarchies.

Finally, there's probably also an element of trying to keep social circles manageable based on our hunter-gatherer hardware.  I personally find it more gratifying to work at companies that are at or under the Dunbar Number, than I do at the Toyotas and Googles of the world.

One final speculation:  in general, it's a good idea to stay out of zero-sum games.  In my experience, it seems that the smarter people are, the less interested they are in playing status games, almost in an instinctive way.

Thursday, August 2, 2012

More on the Coast-Interior Divide

From here.  Many of these currently unemployed were "masked" by the housing boom in the late 90s and aughts.  And do we think the economy will be more or less based on human capital (and education) ten years from now?  An interesting metric is education-years per square mile, which has been shown to correlate better with per capita patents than just average education.  Seattle has higher average education than San Francisco but SF is denser, and produces more patents.

A low-education, low-density area shows little promise for economic growth, and produces voting patterns that aren't promising in terms of rescuing things.