The Three Ways of Dealing with Outsiders: Sub-Humans, Ignorance, or Evangelism

Humans have so far fully developed only three ways of dealing with outsiders:

1. remaining ignorant of them (or feigning ignorance)
2. considering them sub-humans and acting maliciously or merely neglecting them
3. evangelizing and assimilating them

By "outsider" I mean "people whose behavior is perceived to differ in morally important ways". Those morally important ways are often things like what moral authority you follow, supernatural or otherwise; what you eat; sexual practices; and boundaries of socially sanctioned violence.

You can be perceived as an outsider because you are of a different ethnic group, political system or party, or religion, among other things, whether or not your behavior actually does differ. This seems to offer hope, in case the perceived differences can be found to be mere labels with no real differences in behavior. But that is not always, or even usually, the case. It's not just perception; there are morally important differences. Either a man laying with another man is moral, or it is not. Either violently taking property from the bourgeoisie is moral, or it is not. Either honor killings are moral, or they are not. And inspired by an example from Robert Frank's Choosing the Right Pond: either it is okay to eat ponies, or it is not. It is very difficult to see what a mutually beneficial coexistence might be for people with conflicting views of these things.

We have now arrived at the central problem, which goes as follows.

a) There are genuine differences between groups of humans in moral behavior
b) This forces a choice as to whether morality extends to a morally different group or not
c) If we are living with a morally different group, they may not want your morality extended to them; if you don't extend your morality to them, you are implying that they are not human.

This is a dismal hypothesis, as these three ways are obviously sub-optimal for human dignity and the functioning of a modern multi-ethnic state, so it is imperative that we understand them, and possibly find new ones.

Name of strategy	Ignorance		Sub-humans	Evangelize
Interaction	Trade, at most*		Living with
Underlying strategy	(no strategy)		Degrade	Assimilate

This could be called either the triune theory of moral resolution, or ISE (sounds like "ice" - for Ignorance, Sub-humans, and Evangelism.) They are as follows.

1. Ignorance - for most of the lifespan of our species, humans have lived in small hunter-gatherer groups. Consequently we were spared from having to deal with outsiders. Even if you know they exist, if you don't have to interact with them, then you don't care that much how they behave. You might still interact with them minimally, transactionally, through trade* - often on neutral ground, and possibly not even sharing a common language. (When we behave transactionally, we're calculating and not engaging most of our social cognition.) They don't sleep in your territory and don't eat at your table, or only in settings which are carefully controlled by the tribe or state and prevent extensive contact between populations. This "non-strategy" is what obtained throughout all of pre-history, but starting in the Neolithic this strategy was no longer stable, as some populations began to expand into their neighbors' territories.


2. Sub-humans - unfortunately, the easy and automatic response when you live around people morally different from you is to consider them sub-humans. There is a wide spectrum of how we do this in terms of active, conscious malice. Starting on the more malicious end: you might outright condemn them as filthy animals and sometimes even actively exterminate them. You might just keep them sequestered in ghettoes or certain roles where they can't contaminate the rest of society. There might be a split between upper and lower classes of the dominant group, with the upper classes not worrying much about the sub-humans as long as they stay in their undesirable roles, and the lower class much more resentful, since they sometimes have to work alongside the sub-humans and their own jobs are more threatened by the sub-humans. You might appear to tolerate them because you aren't overly bothered by them, but it's only because the gentiles are dirty and going to hell anyway (or whatever the local terminology is) and you just accept that they can't help themselves. (Minorities with moral codes differing from the majority often take this last position of feigning tolerance and just keeping to themselves, as they're forced to do so if they're not going to agree that they themselves are in fact the sub-humans, and the other options aren't open to them - they're in no position to be exterminating anyone else.)

Most subtly and softly, as is often the case in modern states - you might even be horrified at the suggestion that you're capable of this - but there are groups of people in your society for whom you've drastically lowered your expectations. The Ottoman strategy of governing people, allowing a multi-confessional empire, seems quite modern in some ways - but I'm sure most people in the capital didn't regard with admiration the pork-eating Christians they allowed confessional self-governance. You may even have caught yourself, in the pony-eating example above, finding reasons to excuse the pony-eaters from full moral evaluation, though I doubt if you were told you were invited to a pony-eating party you would be excited.

We also sometimes categorize people in our own society as sub-human, usually based on class. The upper classes do this with the lower classes to explain why they "under-perform" (but might also try to evangelize them about how to improve, i.e., be more like the upper class.) The lower classes do this to the upper class to explain why the upper class has more money - it's not because they're better, it's because they're immoral, engaging in bizarre practices behind closed doors, and they have lots of dealings with dirty foreigners. The lower class of a dominant group rarely evangelizes the upper class, because this exposes that the lower class in the end would actually want to join the upper class, and exposes their self-comforting fiction.

Because moral rules sometimes place inconvenient restrictions on economics, multiple times throughout history conventions have evolved where a sub-human outsider is actually employed to perform morality-violating acts. (E.g., shabbas goys who tend fires on the sabbath, or eta in Japan. How exactly the employer or trading partner avoids naughty-points for this is quite mysterious.)

In some cases sub-humanism can be "escaped" by assimilation, which requires both the desire of those considered sub-human to be accepted by those considering them sub-human, and those considering them sub-human to want them to escape. This seems like evangelism (see below), but the difference is that there is no open recognition of the former sub-humans having joined the dominant group; indeed after the fact, they're loathe to note that there was ever anything different about them in the first place.

As mentioned, sub-humanism is the default option when morally differing people move out of the "ignorance" category, and this transition is all too easy. Very often this is discovered by traders who have overstayed their welcome. In the current populist surge, we are witnessing discussion of "globalists" now, either outsiders, or people tainted by outsiders through business loyalties. Persian merchants were slaughtered during the Guangzhou massacre for explicitly this reason. The Dutch merchants living near Nagasaki during the Tokugawa Shogunate never made the ignorance-to-subhuman transition because the Shogun kept them sequestered on an island, consistent with state practices that repeatedly appeared in history to keep the population ignorant.


3. Evangelism - This is a more difficult strategy in the sense that it is not innate to humans, but it has been very effective for expanding empires that aim to retain stability. In this strategy, you recognize your neighbors as human - and want to help them! (To avoid Hell, become more economically successful, etc.) So you Christianize them, or send advisors to make them more capitalist/communist, or otherwise "civilize" them in general, etc. Witness Thomas Jefferson's well-meaning attempts to civilize native Americans, the British white man's burden to educate and develop Africa, and communists' attempts to export revolution. (Reading about Che Guevara's frustrations in Bolivia or the Congo, you could almost do a find-and-replace with Thomas Jefferson's irritation with assimilation-resistant native Americans, or anyone working in an NGO in the Muslim parts of the developing world.) Compare the non-evangelical religions to the evangelical ones (better-adapted ones which appeared later in history) and note how they emphasize brotherhood in the faith over national origin. Obviously none of these were done with purely altruistic motives, but the impulse to assimilate rather than exterminate is on plain display.

If this strategy is made to work, it is dramatically successful - witness the success of the Roman Empire, the United States, Christianity, and Islam - although often the evangelized don't want to be assimilated (but that's just because they're incorrigible sub-humans, off with their heads!) This mode can fail as well - when Jews in Spain were forced to convert to Christianity after the final departure of the Moors, this wasn't satisfactory to the rest of the population, who could never be convinced that the conversos were not underneath their baptisms still sub-humans (and the more attempts to convince that the conversion was true, the more outraged the mobs became.) The populism in twenty-first century America is a turn from evangelism as well - from the ideal of the melting pot, to anger that too many foreigners are polluting the creed and are still, underneath their iPhones and Starbucks, sub-humans.

There are instructive differences between states that otherwise seem to have some of the same sorts of beliefs, but where one is more clearly evangelizing than the other. One example is the differences between the Soviet Union and modern China. The USSR was trying to export revolution, because (besides of course strategic reasons) they believed in the universality of communism. China has quickly regressed to the historical mean, and is concerned about their territory, and Chinese people, full stop, even producing tracts on the genetic superiority of the Han - but they don't seem to care much whether the people in Africa for whom they're building roads and stadiums agree. (When ethnic supremacy doctrines are espoused, a tribe or nation is lauding its own immutable and unobtainable heritage, a sure sign of the sub-human strategy instead of evangelism.)



Can There Be Any Solution?

The hypothesis can seem worrisome in the sense of unfalsifiability. It's tempting to play the game of putting every interaction between morally differing people into one of the three boxes - "Are you aware of their existence? You're not ignorant of them then. Do you think what they're doing is wrong, or not care? You consider them sub-humans. Do you want to help them? You're evangelizing." Indeed, most such interactions really do fit.

But we will hopefully never go back to being ten thousand disconnected tribes, able to ignore each other's differences. The way forward will likely depend on the aforementioned sometimes-present gap between perception and reality. In some cases, the perceived differences are not real concrete differences in behavior. For example: the country you live in predicts your moral sense better than your religion. You may claim you share convictions with Muslims or Christians, but your behavior is more likely to resemble your neighbor from another religion than it is someone in a developing country of your religion. I was struck by this when looking at examples of surveys of Christians and atheists in the United States. With rare exceptions, they make the same moral choices in the same situations. It's not just the cliche of focusing on similarities over differences; rather, we need to focus on the concrete outcomes of beliefs. What do our moral convictions actually make us do? If we do the same things for the same reasons, and we're all aiming for a world with more human flourishing, then that makes living together much easier. This approach (of actually dissecting the effects of beliefs) has really only begun in earnest in the past few decades, and it may be a fourth way. My hope is that the people and nations that are able to make this work, in at least part of their populations, will out-compete the other models, just as the evangelism strategy out-competed sub-humanism. I think explicit reasoning about and repudiation of slavery, and later racism, is one such example, although the increasing value of labor certainly helped (both ability to reason morally and increasing value of labor were themselves both products of increasing rationality, i.e. the Enlightenment.) Very metropolitan trade-oriented cities may also be early examples of the fourth way - trade cities on ports have long been thought of as more "relaxed" culturally than the hinterlands around them. I submit that they are not "less moral", nor are they evangelical places, but rather they're necessarily consequentialist. Ironically, it's precisely the transactionalism of New York or London that have driven this; thinking more abstractly about actual effects of behavior prevented conflict between traders during the "ignorance" mode, and it can (and is) again. Voltaire recognized the emergence of such a system of coexistence when he said

Go into the London Stock Exchange – a more respectable place than many a court – and you will see representatives from all nations gathered together for the utility of men. Here Jew, Mohammedan and Christian deal with each other as though they were all of the same faith, and only apply the word infidel to people who go bankrupt. Here the Presbyterian trusts the Anabaptist and the Anglican accepts a promise from the Quaker. On leaving these peaceful and free assemblies some go to the Synagogue and others for a drink, this one goes to be baptized in a great bath in the name of Father, Son and Holy Ghost, that one has his son's foreskin cut and has some Hebrew words he doesn't understand mumbled over the child, others go to heir church and await the inspiration of God with their hats on, and everybody is happy.

You might object that a transactional relationship is not a full one, and you would be correct. Here we can take advantage of the millions of people who we live among in the modern age - you don't have to interact with every single member of your society, and the ones you choose to interact with, you choose at what level you do.

In one sense, this approaches the voluntary ideal. That said, it may be that the only solution to coexisting with people who perceive genuine moral differences is to limit the interaction in this way. And this does seem much better than sub-humanism or assimilation. In cases where concrete moral actions really do differ and people must live intimately together (especially with very limited resources), I have no solution. This should be added to the list of political science problems, along with how to organize a truly voluntary state that is not determined by physical territory (see also here.)


*A complicating observation of tribes (usually not nations) who are mostly ignorant of each other is that one of the "interactions" can be warfare. In traditional tribal warfare, there are ceremonies, there are few casualties relative to what might otherwise have occurred given the technology available, and there are agreed-upon conventions: we don't fight each other when it's raining because our warpaint runs off; we stand in order lines and kneel and fire our muskets because only cowards hide behind trees like savages; etc. (See the Aztec Flower Wars for a well-documented example.) Every so often we witnessed a sudden transition from traditional to modern warfare, with a disregard of previous conventions and much higher casualties (or even extermination; see here for discussion of this in Iroquois and Mongols) that in this framework represents a transition to sub-humanism. As with trade, in traditional warfare, you remain basically ignorant of the other tribe because you have very limited "interaction" with them. The complication is that clearly there must be some cultural norms shared between the two tribes for this arrangement to occur, although again, interaction is quite limited other than at the highest level of the tribe or state.

Chargemasters and Used Cars

Recently there's been a lot of discussion about the use of chargemasters in hospitals. It's an often baseless fiction used for bargaining, and the growth in healthcare costs has been attributed to it. This bothers people, not without reason.

Other industries use price shrouding, but this is something altogether different. The situation is most similar to car salesmanship. Opaque pricing, line items that no one can explain, made-up additional charges, and initial prices that everyone knows are not the final prices. This results in consumers generally not being happy at the end of the car-buying process, and a poor reputation for car salespeople. Why is this? Is it just totally path-dependent cultural inertia that has made the pricing in these industries so bizarre and (some would say) unethical? Or is there something inherent to each that encourages it? There are similarities and differences.

In both, people are making large infrequent purchases. They're spending a lot of money without experience in this specific domain. Furthermore they may not know what they should be paying in the first place; this problem is worse for healthcare consumers. When you buy a car you can get some idea what this Toyota model is going for in this area by doing research online, although the salesman hopes you haven't, and you'll have some ballpark idea even without that research - whereas in the hospital, you certainly have no idea what a paracentesis should cost in your city. What probably makes things worse is that most hospital admissions are not planned. If you're in the hospital, it probably wasn't on your calendar ahead of time (unless you were getting an elective surgery, but that's still a small minority of patients.)

Another problem comes from a collision of values, between trade and the value of human life. We see this every time trade - a dispassionate, utility-calculating way of thinking - collides with a highly limbic behavior, involving immediate pleasure or pain, family, tribal identity, or human life. You can see this best illustrated by the goods and services that are most likely across polities to be banned on moral grounds, or those which are socialized. Healthcare is one of those. (If this collision is still not clear: can I pay you $20 to hop on one foot for 1 minute? Sure, I would take that deal. Okay, now what's the price to sell your child? Disgusting and we shouldn't even be discussing it, right? There's the collision.) To begin with, even when they have time, people don't look up hospital quality ahead of time (let alone cost) as with other businesses - we spend more time on ratings sites for restaurants. For one thing, if your kid needs an operation, do you ask yourself "Is the extra $12,000 at the slightly more highly rated hospital across town really worth it?" If you do, you might feel guilty - anyone who has ever negotiated wedding or funeral costs has had a similar experience. But the other side of the coin is that healthcare providers are not trained as profit maximizers, but as life maximizers and pain minimizers. The ED physicians and nurses have no idea what's on that chargemaster, and they don't care. The system would be a lot worse if this were not the case - that is, if hospital physicians were compensated like car salesmen - because they could take much more horrible advantage of patients if they were incentivized. That said, there should be no surprise that healthcare costs go up, because the service providers are ignorant of the cost and there's no feedback loop.

Are Special Interest Groups Weakening?

Are special interests now weakening? Here's a Jonathan Rauch review of a new book by Gunnar Trumbull about exactly that. Previous I'd written about the problem of increasing specialization for commerce and individual decision-making; really that's just Manicur Olson's special interest sclerosis problem, as it directly affects the lives and commerce of individuals rather than specifically the political process.

Cross-posted at my church-state separation blog.

Specialization: Or, The Rest of Us Have No Chance

One of the problems in complex societies is that specialization produces information asymmetries in the marketplace, and without reasonably efficient information exchange, markets don't work. Three thousand years ago, there just wasn't that much to know about fish or bronze, and even though the the fishmonger might know more than someone else about his product, the imbalance was far less than it is today. Today, someone's whole career (and a whole industry's R&D apparatus) is spent trying to get you (for example) to eat junk food, and you're spending your life trying to devote your attention to multiple things, so chances are more often than not they'll win. The same applies to any industry or profession you might name: finance, cars, medicine, ad infinitum.

It turns out junk food is an excellent example; here is an excellent piece showing how the food industry conceives and sells it.

Wealth, Income Mobility and Intelligence

There's been a lot bouncing around the blogosphere about income mobility. Steve Hsu rounds up some of the recent work, including this figure relating parental and offspring income in terms of percent of offspring achieving it.



In the second post ever at this blog, I made the argument that Gini didn't matter as much as we might think, because of the Chinese proverb that money never stays in families more than three generations; that is, in capitalist societies income mobility rewards the hard and smart workers and punishes the meatheads. Therefore, we have control over our own worlds and are happy, which is what the point of the system is. I'm following this discussion because when I finally looked up data on mobility, I found that the U.S. is actually less mobile than some of the welfare state societies in Europe. My libertarianism took a necessarily paternalistic turn after that. Always change your mind when there's data!

More interesting is the observation in many of these studies (and Hsu's post) that IQ has diminishing returns to income. What would be very interesting is if this has changed over time. I would expect that an IQ of 130 would be more valuable for making money in 2012 than in 1912.

Is That Gravy...or ANTHRAX?

"...when markets respond to the demands of Muslim consumers, freedom dies."

- Adam Serwer at Mother Jones, on Pamela Geller's Islamic turkey warnings

The Capitalist Values of Burning Man

Burners: I promise this post will really not pick on Burning Man or social progressive values in general. Based on the kind of writing that begins this way, I can't blame you if that's your expectation. I'm a one-time Burning Man attendee (2000, eons ago) and would go again if I had the time. I highly recommend it. I have only experienced culture shock once in my life, and it was on returning to "normalcy" after Burning Man. (If I'm a one-hit-wonder I don't think I should call myself a "Burner".) Lots of people I know are repeat customers; lots of people I know are on their way back from it at this very moment.

Open-mindedness is valuable, as are critiques of factions who self-identify as such. The reason that criticism is so important in this case is that when open-mindedness is institutionalized as a moral value - as it actually can and should be - there is a tendency to use self-perceived open-mindedness to insulate one's faction and one's own opinions from self-criticism with the following narrative: "My group/city/party/etc. pride ourselves on being open-minded and inclusive. Therefore, if an opinion differs from the prevailing wisdom in my group, it can only be the result of ignorance and close-mindedness. I'm right, you're wrong, shut up." Confirmation bias is like electricity; it finds the path of least resistance. That usually means straight through our most cherished values.

Maybe I've thought about this because I'm a very proud and patriotic (albeit currently exiled) San Francisco immigrant who also frequently finds myself in the role of apologist. I love that damn city, but the aforementioned "open-mindedness necessarily produces opinions that happen to agree with mine" reflex is all-too-often the subject of justified complaints. And one of the reasons I find Burning Man so interesting is observing the emergence of a common set of non-neutral values - "non-neutral" meaning judging some other values as mutually exclusive and rejecting them - which is something that it seems many Burning Man attendees and San Franciscans would deny they do, at least in the abstract. (But mention specific values and of course, if those values are not the right ones you'll quickly discover that indeed some values are rejected, leading in turn to an uncomfortable denial that they're rejecting values, or just to a statement that you're being unreasonable.)

So what's the connection between San Francisco and Burning Man? I will fully claim Burning Man as a cultural product that could only have come from that place, and a huge portion of its attendees every year hail from there. You're welcome, rest of world. (If you disagree with that, it's because you're ignorant and close-minded.)


The art was the main surprise for me. In innovation from just one year was easily the equal or superior of any museum I've ever been to anywhere in the world. From Rhino Beats.

But there's a counter-reflex toward the self-identified open-minded types, and this counter-reflex comes from people who love to stir things up - here I'm looking in the direction of otherwise smart and a little bit too self-satisfied young fiscal conservatives and libertarians. That counter-reflex is to smugly point out the existence of certain dogmatic, non-neutral values among self-described open-minded progressive types; or inconsistencies in their worldviews; or that they're more capitalist/carnivorous/consumerist/etc. than they will care to admit, ha ha ha! (Insert "We are not so different, you and I!" villain line here.) And as an aside to my fellow libertarians, these kinds of gotchas don't help the discussion, especially if we want to convince a group of very smart people that maybe rational agents acting individually to optimize their material self-interest is actually a good way to organize society. It's more of a terminology problem. "Material self-determination? Sign me up!", versus "Capitalism? No thanks!"

Hence it was with some dread that I clicked on a Big Government blog article about Burning Man. (H/T Patricia Iniguez of San Diego Skeptics in the Pub). While not completely without its whiffs of condescension and erstwhile-villainy, it's mostly devoid of this trouble-stirring nonsense and instead points out the free market underpinnings of Burning Man. Which shouldn't be a surprise to anyone. In point of fact, Burning Man is what turned me from a somewhat vanilla social moderate Northeast Republican into a full-on libertarian. It was the revelation that here were thousands of people, who'd taken the trouble to go many miles from anywhere to use recreational drugs together where they weren't bothering anybody, and there were still law enforcement arrests in the camp. That's right: not only are our tax dollars still being spent on arresting them, but people get arrested for making choices about what to do with their own bodies. What a waste, what a misprioritization and a distortion of justice in a free society! If the state doesn't let you own yourself, then what can you own? This frightened me in a way it's hard to verbalize, and probably contributed to my culture shock, on leaving Burning Man and going back to the real world, upon seeing people who showed no sign of appreciating the flimsiness of this shared hallucination we call culture and civilization, standing in orderly lines at the airport as I was about to fly to Pittsburgh on business. But here's the kicker: what I didn't appreciate at the time is how much I was placing people in a binary opposition with myself in the more "open-minded" slot; and how normal people look once they wash the playa dust off and go back to the rest of their lives, to positively influence the rest of the world in gradual ways as a result of experiences like Burning Man. No doubt after I showered and changed, other Burning Man attendees saw me standing in line and had the same thoughts about me.

Adam Smith made clear that capitalism was a form of meta-selection: it's the system to find the best system. You need the most degrees of freedom possible to do that effectively. Burning Man, and the people who attend it, are living up to this promise, and it seems from this article that many of us understand this.

Economic Freedom and Happiness

I was recently looking at the economic freedom numbers for countries around the world and I wanted to know what the connection to actual outcomes was; in particular, the happiness of the people in those countries. All the rest are surrogates. Political and economic debates sometimes lose focus on this fact.

I looked at the following data, for all countries that had them (evident in the datasets); for each, it was always a clear majority of countries on the planet.

- The Heritage Foundation's Economic Freedom Index for 2011

- White's Life Satisfaction Index

- GDP per capita (IMF data, supplemented by CIA for small countries, non-reporting countries, or inaccurately reporting countries)

- Gini index (from the U.N., or for some countries in the midst of conflict the Global Peace Index statistic)

- Economic growth for countries 1990-2007 (data from United Nations Statistics Division)

As I've done previously, rather than show a bunch of scatter-plots, I'll give you the statistical highlights. I'm happy to share the spreadsheet if anyone is interested, although this is not quite graduate-study-level QC'd data.


Map of White's life satisfaction index in 2006. This is what counts.

Highlights:

1. Interestingly, economic freedom correlates more closely with life satisfaction than with economic growth (R^2=0.239 vs 0.1075). This suggests that economic freedom adds to utility other than through direct material gain. Freedom does correlate better with per capita GDP than with growth (more below).

2. Economic freedom is associated (albeit weakly) with a decrease in Gini, that is with a more equitable income distribution.

3. There were a number of outliers in the plot of economic growth vs. life satisfaction. Most of these were very high Gini countries.

4. In the "unsurprising" cateogry: there were two R^2 that rose above 0.3 were the correlation between per capita GDP and life satisfaction (0.3106, stronger without outliers). The correlation between economic freedom and per capita GDP was even stronger at 0.3873. The curve appears to flatten at the high end of per capita GDP (removing three outliers raised the R^2 to 0.4665) reinforcing the conclusion that once basic needs are met there is a diminishing return. It bears emphasizing that this is a correlation, not a cause; economic growth may CAUSE economic freedom, or they may both be caused in parallel by the same thing.

Correlation	R^2	Relationship Means?
Econ free & PCI	0.3873	Every point increase in econ freedom (range 0-100), raise PCI US$70
PCI & life sat.	0.3106	Raise PCI US$1,000, increase life sat. 1.14 pts (range 100-250)
Econ free & life sat.	0.239	Add a point in econ freedom (range 1-100), increase happiness 1.67 points (range 100-250)
Econ free & growth	0.1075	Add a point in econ freedom (range 1-100), increase growth 0.001%
Econ free & Gini	0.0837	Add a point in econ freedom (range 1-100), decrease Gini 0.2685
Growth & life sat.	0.0544	Every 10% increase in growth, get 25 points happier (range 100-250)
Gini & life sat.	0.0258	Increase Gini by 1, life sat. drops by 0.5 (range 100-250)

CONCLUSIONS:
Unsurprising, but interesting to see in this form. Adopt policies that expand economic freedom in order to make people happier, partly by increasing growth. The best way to produce happiness is to reach a target high per capita income, but there is a diminishing return. Economic freedom has a weak beneficial effect on Gini, but Gini can offset the happiness effects of high PCI and good growth.


Future questions:
- There are a number of countries that, looking merely at per capita GDP, aren't as life-satisfied as they should be. These countries usually have large Gini; a surface in a 3D scatterplot would show this distortion. It might be informative to see which countries are "off the surface" in terms of how much we expect their Gini to distort their happiness:PCI ratio, and then ask how this effect is transmitted - a first guess to investigate would be degree of media saturation. Prediction: countries with more media and a high Gini will tend to be less happy that those with less media but the same Gini. Seeing how the other half lives forces everyone into the same status game.

- Are certain regions of the world off these curves in predictable ways because of cultural commitments? (See the World Values Survey.) E.g., are Confucianist countries less happy per dollar of PCI? Or are cultures with more family-oriented, traditional values differentially susceptible to the effects of Gini distortion?

- (Added later: personal economic freedom in the 50 U.S. States can be found by category here.)

Unexpected Wisdom from Hayek

"The gullible do find agreement. Meanwhile, growing national confusion leads to protest meetings. The least educated - thrilled and conviced by fiery oratory, form a party."

- From the cartoon summary of The Road to Serfdom (at 2 minutes exactly).

Emphasis mine. Amazingly I've not yet seen Glenn Beck quote this.

"Doctors Tea Party" In San Diego

Because I will be a doctor in 3 years if things go according to plan, I'm of course concerned about any and all changes to the medical marketplace that state programs will bring about.

Given that I have libertarian leanings, I was interested to learn that an organization of physicians critical of the Obama administration's current and planned changes to medicine - the American Association of Physicians and Surgeons - is meeting where I live, in San Diego, tomorrow.

Then I clicked on the event website and saw the speakers: among them Christianist Sharron Angle, and Joseph Farah from the unhinged World Net Daily.

So here's an open letter to organizers: you have now alienated one of the few pro-free-market medical students in my class at UC San Diego by choosing these kinds of openly theocratic clowns to represent you. I'm a capitalist but I'm sorry to say I want nothing to do with your organization as long as I'm excluded based on religion, and as long as you seem as confused as you are about what's more important, economics or faith. Good luck trying to appeal to any demographic but middle-aged and older straight white Christian males.

Do Small Biotechs Really Produce More AND BETTER Drug Candidates?

...and if so, why?

This is a crucial question for the U.S. economy since (until recently anyway) pharmaceuticals were one area where the U.S. wasn't running a massive trade deficit.

It's a cliche that Big Pharma can't find its own leads and has bought its pipeline from biotech for the past 10-15 years, which serves effectively as free-range R&D (until the eventual round-up.) Having spent most of my time before medical school consulting at smaller biotech companies, and several times finding myself with unexpected free time because one of those companies was bought for its portfolio and closed, I've spent my fair share of time wondering about this question. However I actually can't recall seeing an analysis of biotech vs big pharma output, or in particular, of the quality of drug candidates judging by ROI or absolute annual sales. But let's assume that the disparity is real. Big pharmas certainly assumes the disparity is real - they sometimes try to duplicate the perceived success of small biotechs by putting together small entrepreneur-like groups, like Glaxo. So what is it, exactly, that is more productive about small biotechs?

1) The most obvious: small biotechs have a much greater incentive to get their (usually lone) drugs into clinical trials - if they don't, they disappear. Big pharma management is not so incentivized, and timelines of individual drugs are sometimes adjusted to fit the portfolio. What's being maximized is completely different for a start-up biotech and a multi-drug big pharma. Overall sales is what's being maximized in big pharma, while speed to first-in-human and to market is being maximized in biotech (it equates to survival and therefore financial incentive.)

2) Small biotechs may produce more candidates, but on average lower quality candidates. Because of money and therefore time limitations, they're willing to push through the first lead where the Glaxos of the world have the cash to keep tweaking the skeleton. You would think this would necessarily mean that the big pharmas then wouldn't be interested in these low-quality candidates, but a) not all decisions are rational, and hype and groupthink have effects in the real world ("We have to buy them to get the first XYZ inhibitor!") and b) the first-in-humans candidate of a given class is often "lower quality" than what might have been the second-in-humans candidate, which as mentioned above the biotech won't wait around to discover. The perception and impact of candidate quality difference is highly context-dependent in this regard.

3) At biotech start-ups, scientists have the greatest influence on senior management or are senior management. At companies in general, typically the management of the group closest to revenue generation is the one that has the most influence over the CEO. In contrast to biotechs, at big pharmas, this means sales, not drug discovery. In a company that doesn't yet have any sales, this means clinical, or (if even earlier in the cycle) chemists and biologists. Once sales obtains this position, the amount of time the CEO spends thinking about new drug candidates decreases and development plans tend to be de-emphasized (until everyone panics and it's too late.) I had long suspected that Genentech owes its productiveness to keeping its scientists in key decision-making positions (including at the very top) and after having consulted there I'm more convinced that this is the case.

4) There are scale-dependent effects that would be present in any organization but are exacerbated by the uniquely long product development cycle in pharmaceuticals. Amplifying this is the level of government oversight in the industry and the consequences of regulatory transgressions, leading to what are referred to in politics as Olsonian veto blocs inside the company, large groups of people who have a say in the process and have nothing to lose by saying "no" but everything to lose by saying "yes" at an inappropriate time. In the pharmaceutical world this is legal, regulatory, and QC - absolutely necessary to the industry, but their influence on timelines seems to be strongly scale dependent. In my own experience in the industry, some of the most focused "how do we get this done" people I've worked with were in QC at the biotech level. Some of the most obstructionist were in QC at the big pharma level. In general a company with a large revenue stream should be expected to be much more risk-averse than a company with no profits. In the same vein, once a drug is approved, any new investigations could potentially yield a new indication that would either provide some new revenues for one indication, or new safety findings that would diminish revenues across the board for the whole molecule, for all indications. Consequently post-marketing investigations are usually done with kid gloves.

5) Free-riders are proportional to company size (again we see scale-dependent effects.) At a smaller company, free-riding is obvious to all, more immediately detrimental to the future of the entire company, and more quickly punished. This is not the case at large companies with deeper pockets, many of the employees of which seem to be benefiting from a kind of corporate welfare state. This situation often arises at low surface-area-to-volume companies, where a greater fraction of employees interacts only with other employees rather than with customers, vendors, or industry contacts outside the company. It would be worth seeing whether there's a sweet spot for company size in terms of a relationship between number of personnel vs. first-in-human clinical trials per person*year, including outlicensed compounds. (My prediction is that this drops with increasing company size, with a curve that steepens around 250 head count and starts leveling out a little at a thousand.) Anecdotally, I have also noticed an odd scale-dependent increase in the proportion of employees at a company who have ever worked in government - not from related agencies like FDA, but from local governments or other areas. Larger companies are more government-like.

[Story time - and if you know me personally, you know which company I'm talking about. I couldn't help but reflect that the strategy of employees of one big pharma subsidiary company where I worked was exactly that of a parasite in the gut of a large, warm mammal that can afford to miss a few calories here and there. They downside to the strategy is that they're super-specialized to thrive only in that environment; that is, their skillset degenerates into "how to stay employed at ABC Big Pharma". Consequently sometimes they have to transfer between mammals of the same species (i.e. subsidiaries) to survive. They day it was announced this particular subsidiary was being shut down by the parent, I saw groups of people openly weeping as if Princess Diana had died all over again.]


CONCLUSION

If you didn't get enough speculation already, read on. Plus this part also has colorful analogies that I think are nonetheless still useful.

- Though I haven't been able to find the papers, from my undergraduate classes in anthropology I learned that there was research done on Amazonian hunter-gatherers showing that there are village sizes beyond which there tend to be fission events. It's not that the village hits 150 and everyone draws straws to determine who moves, but there are dynamics that invariably take advantage of a trigger event to cause the split (the chief and his brother have a fight, there's a food shortage and some families move to find better hunting areas, etc.) This suggests that there are in general optimum sizes for human social organizations. This research may have a direct bearing on the productivity of small vs. large companies.

- The biotech industry in each part of the country where there is an active scene (the Bay Area, Seattle, San Diego, and Boston) is a notoriously small world. People often end up working together in different combinations at different companies, merely being re-sorted based on skillsets. In Edward Bellamy's 1888 utopian novel Looking Backward, he describes a system where workers have general industrial skills and are (centrally) resourced to new factories based on need. Of course Bellamy was arguing from a socialist standpoint but in biotech it seems that the free market has already generated exactly this arrangement.

- The pharmaceutical industry is not the only one that is dominated by deep-pocketed century-old behemoths that present barriers to entry and snap up competition. If biotechs are as everyone expects more productive than big pharma, this is bad for patients and bad for the economy, and yet there is no check on the growth of the largest companies. It's as if we're at the end of the Cretaceous (with animals so large they need second brains to coordinate their movements) or in the middle of the Second World War (where the incentive to build ever-bigger battleships yielded the monster Yamato.) In both cases, conditions changed (climate and aircraft, respectively), and selection no longer favored the most massive, but it's hard to see how this trend will ever reverse itself, since it's hard to see how capital accumulation can ever be economically selected against. That is, I don't know what would be capitalism's equivalent of Chicxulub or P-51 Mustangs that would obviate the uneven accumulations of capital, so for now we're stuck with biotech serving as free-range R&D for big pharma. (Unless tax burdens on the largest corporations goes up to make those accumulations into liabilities. Even so, this would be a dangerous game for small biotechs to want the government to start playing.)

An older version of this article is cross-posted at my science and philosophy blog, Cognition and Evolution.

Sun Yat-Sen and the Enlightenment

I was confused to find universities in mainland China named after Sun, since I'd always associated him with the KMT and therefore the government now in Taiwan. Learning more about him he quickly stands out as a clear extension of the Enlightenment to the East. Scanning through Google Books you'll find some fascinating essays from Sun himself:

Monarchy has steadily shrunk as democracy has steadily expanded. Following the recent war in Europe, which witnessed the downfall of all its remaining autocracies, monarchy has been left with scarcely a foothold on the continent. This has been the tide of political progress throughout the world; it is beyond man's capacity to resist it, being precisely what the ancients meant by the "will of heaven." "Those who follow the way of heaven prosper, while those who defy it perish."

The Enlightenment in China didn't ignite independently of politics of the rest of the world - Sun attended the 'Iolani School in Hawaii and was especially inspired by Western principles through American political history, in particular by Lincoln. (Sun is considered the father of modern China both in Taiwan and on the mainland, hence the institutions named after him in both places; I wonder if this strong American influence on his philosophy is taught in schools in Beijing?) But it's exactly his ancestry to both China's capitalists and (at least nominal) communists that is key. Both Karl Marx and Adam Smith were arguing for liberties and an economic order based on reason and material improvement, rather than on authority invested in monarchs by a deity. Sun wasn't afraid to point out problems he perceived with either's theses or the constitutions of contemporary democracies, and as a result he still isn't easy to classify in any Enlightenment ideology dating after the free-market/central planning split. Go back up and read that quote again - this was a revolutionary speaking, but (ignoring the spiritual rhetorical fluorish) these could easily have been the words of Jefferson or Lenin. It has echoes of Marx's inevitable current of history, and every American President's evangelism about the expansion of democracy.

But Sun was primarily concerned with the legitimate basis of governance and liberty - which Jefferson and Lenin largely shared - not with economics. In contrast, today's religious terrorists have more in common with yesterday's deity-justified hereditary autocracies. Even without debating the moral definition of legitimacy, we can look at the practical impact. Countries with strong, predictable, transparent institutions, along with freedom of speech and the press and assembly and open elections, are the ones with the most sustainable growth. Certainly at the two extremes of economic policy, having either zero safety net or absolute redistributivism would hamper development, but the imposed tax burden or lack of social supports turn out to be secondary influences on the fates of nations, after resilient institutions and liberties. When these conditions obtain, it is assured that the political system in question will have mechanisms to correct itself by allowing innovations (which sometimes shine through despite a bad system's best efforts.) It seems that Sun had deduced this early on, since he was willing to align with the communists even though he was not one. Little did he know in 1911 how seriously and literally communist revolutionaries in Russia and later in his own country would take the points of Marx's program for a dictatorship of the proletariat. And how curiously disinterested they would be in its eventual dissolution, as Marx also wrote.

It's also worth observing that although China's communist government appeared later than the Soviet Union's, China's anti-monarchist revolution occurred 6 years earlier. This might lead us to ask why China had a 38 year interregnum between its revolution and the establishment of its lasting government, when Russia's was less than 1 year. More generally it's also worth asking why the U.S. was so fortunate in terms of instability. The U.S. had a 6-year interregnum (the Articles of Confederation) from the official end of hostilities with Britain to our Constitution, but very little fighting, even including my own pugnacious home state of Pennsylvania. Compare these light casualties to the post-revolutionary histories of Mexico and even France. Why was the transition in America so relatively tranquil? But these are separate questions.

In the end, Sun was at heart a patriot who wanted to see a stronger China, and patriotism is a relatively recent phenomenon. When your master and de facto owner is Louis XIV or the Tokugawas, why bother being proud of being part of a French or Japanese nation? Why did it matter if any subject liked or approved of their government? The idea probably would have seemed a little precious and naive to le roi or the shoguns, and puzzling and pointless to peasants. As such, Sun initially approached the Qing court with suggestions for a stronger China. These were either rejected or ignored. In the Qing Dynasty, if you weren't Manchu, your chances of having any influence were slim, although you still had some chance of access to the inner circle of you were willing to jump through the hoops: learn the classics and pass the civil service examinations, all relatively costly signaling that you would devote all your attention and time to the pointless exercises set by the Qing, rather than doing something useful and merit-based. Sun wasn't willing to do this, and many sources connect his turning from a would-be reformer to a revolutionary to these experiences in the mid-1890s. (Modern corporations and governments take note! Do you want talent, or do you want people willing to submit to mindless ritual?) But the Qing were not long for the world, and the resources they forced their best-and-brightest to waste on hoop-jumping was doubltess one factor in their demise.

Finally: the Western world would benefit from a new, well-researched account of the colonization of the New World, as well as of the classical era from the Battle of Marathon through the fall of the Western Roman Empire, by East Asian authors. Doubtless there are artificial distinctions we make and myths that have been promulgated for centuries that Westerners no longer notice or question, and that Asian writers would quickly identify and explode.