"Delivery Service Fills Pot Hole"

No, this is not a story about private services taking over road maintenance.

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.

Former FDA Head: Approve Drugs Based on Safety Only

Andrew von Eschenbach, a former head of FDA, argues that to encourage innovation and save lives, we should mandate testing drugs just for safety to approve them, and then gather efficacy data once they're on the market.

Previously I asked readers to imagine if there were an FDA (and DEA) for the software industry, and whether that would be a good thing for software users.

Make Local Governments Dependent on Legal Drug Revenues

The Federal government is not going to be the first to show any progress on the drug issue; the higher you go, the lower quality the discourse, the more reasons there are to say no and the less to say yes - and the current crackdown that's occurring from Obama's Attorney General's office is far worse than anything that happened under Bush. Any reform is going to come from the states, or even the cities.

So, if you're a marijuana dispensary or a dispensary trade association, what can you do to accelerate the reform process? You volunteer to be taxed! You get a referendum on the ballot, and suddenly the city is dependent on you for revenues, and they will defend you to the death. Walter Russell Mead points out that the City of Oakland (where this really happened) now has 3% of its revenues coming from legal (by local law) marijuana dispensaries, and is proposing allowing more to raise this share to 6%. Not a sustainable way to keep the city solvent, but a great model for marijuana merchants in tolerant places around the country. If Eric Holder's goons try to shut down the Oakland dispensaries, the legal apparatus of a major city will turn against them to defend its revenue stream.

European Invaders from the Future

For the previous Alternative History installment (#5) go here.

Gregory Cochran asks an alternative history favorite question: what period of Old World history did the New World civilizations correspond to at time of contact? Cochran's answer: about 2,400 BCE. In his estimation, Europeans were effectively invaders from the far future.



Above: the pyramid of Cheops, ca. 2560 BCE. Below: the great pyramid at Teotihuacan just outside Mexico City, built ca. 200 CE.

Passivity of Information Correlates with Low Value

In general, the more passively you've acquire information through media, the less value it will have to you, and the less it can be trusted to be free of intent to manipulate your behavior.

We can evaluate passivity and usefulness both in terms of comparing propositions, and comparing various media. For example: say running in salt water cures plantar fasciitis, a painful condition of the tissues on the bottom of the foot that afflicts runners. This would be fantastic, since it would be cheap and easy to do. But no one can make money from such a cure, so there would be no commercials for it, no campaigns, no radio spots. You would have to learn this by looking it up online or digging through running magazines. The key is to think of incentives; a running magazine will make you like them more and buy more issues if they bring you information like that.

There is a difference in passivity of information absorption between various media. It costs money and effort to disseminate information through mass media (especially TV and radio; i.e., those which have a fixed number of outlets, and which by their nature require little effort to absorb.) These passive media are asymmetric, so the information-senders are not especially likely to have utility functions that are closely aligned with information-consumers. That is to say, the information senders are most likely to expend that money and effort only when they believe they're getting something in return, which is not necessarily anything that the information consumers are interested in providing them.

Usually, that's money (from advertising or from a product purchase), but sometimes it can be political power, as in propaganda or political campaigns. In addition, if people have irrational beliefs about the future value of their spreading information (e.g. from religion), that may also cause them to go to great lengths in the same way, although this only occurs a minority of the time.

In some cases, TV and radio companies and stakeholders have information that they do not want information-consumers to have; that is, disseminating this kind of information has negative utility, because this information often lets the information-consumers make more rationally self-interested decisions about how to weight the information they're receiving. This is why investigative journalism exists.

Print is the least passive medium and books are not aggressively marketed, so on a per-hour basis of books consuming one's attention (vs. televsion or radio), we would guess that the end consumer is benefiting more from the content. Books are typically not great vehicles to sell products (other than themselves); there are few commercials in books. Since there are now applications that passably turn print into (more passive) audio, one prediction is that books will begin to be released automatically with sound file versions (or intended only as sound files), and that the information in these books will be on average less valuable to consumers.

This principle does not necessarily hold with acquaintances who bring information (passively) to your attention, because their utility function is more likely to align with yours. You can trust a restaurant tip from a friend who likes you and wants you to be happy, more than a television commercial for that restaurant.

Discounting the Future Can Be a Rational Strategy

We discount the future when we place lower value on the same event or object at some future time than we place on it right now. In other words, a dollar today is worth more than a dollar tomorrow. How much less it's worth tomorrow is how much you discount the future.

Experiments about discounting the future typically take the form of "Would you rather get twenty dollars today, or twenty-five dollars a month from now?" If you take the second one, your discount rate is 25% or lower per month. All humans do this to some degree, but countries differ in how much their residents, on average, discount the future. The residents of developed countries discount the future less than the residents or poorer countries.

In its relationship to economic development, discounting the future is often thought of as a proxy indicator for ability to delay gratification or even general intelligence (and therefore accumulate capital) and this is probably useful. However, ability to delay gratification has a different value in different environments. If someone offers twenty dollars today or twenty-ve dollars a month from now, it makes more sense to go with the future money if you're in Japan than in Somalia. In Japan, things are predictable; when you go to collect your money, the train will come at the same time as the last time you went, the experimenters can be trusted to be there, there are institutions to enforce the contract if they don't honor it, and most importantly, no one will try to kill or rob you on the way and the Psychology Department will still be there, rather than having closed or been blown up. Also, you will not have been killed or lost all your money in the meantime. In Somalia (or places like it) these assumptions do not hold. In Somalia, you're stupid to make those assumptions; you can't know what's going to happen a month from now, or even tomorrow. Discounting the future heavily in unpredictable places is actually a rational strategy.

This is unfortunate. It stands to reason that everyone choosing a heavily discounting strategy in unpredictable places would reinforce the very unpredictability it's accounting for, creating a vicious circle.