False Analogies in AI Job Replacement Scenarios

AI is happening. Arguments that "it can never do X" these days often look silly within months. Right now is as bad as it will ever be. If LLM's have limitations, then we will develop another means (likely using LLMs for help); after all, we know general intelligence can exist, because it already does in our brains.

If we survive AI, it looks like we're heading into an interregnum with massive wealth disparities, if we don't have UBI or robots. I'm sorry to say I'm not offering hope here, but rather a critique of several of the bad arguments about why it will be okay.

Argument #1: "Player pianos, cranes, and chess algorithms exist, yet we still have pianists, competitive weightlifters, and chess players."

Why it's wrong: most labor lacks a performance component. That is, it's the end result of your labor people want. They don't want to watch you do it.

This argument has been making the rounds (see here, and here.) First, very few jobs involve a significant performance or "human connection" component. You might prefer to watch a musician (rather than a machine) compose or perform music, but I bet you don't enjoy watching taxi drivers, farmers, or factory workers performing their jobs enough to pay to watch them do it (rather than pay much much less for a machine doing it.)

On one hand, you might buy artisan products that cost more and (to be blunt) have lower, more variable quality, because of the human element - but unless you're pretty wealthy, you don't do this for everything. Or most things.

On the other, even regarding the performance-heavy commodity of music - do you pay to watch it performed every time you hear it? Not since the advent of recording, of which player pianos were one early form. So even for the article's canonical example meant to reassure us, according to Claude, today we have per capita only about 68% of the professional musicians that we had in 1900, even after a century of economic growth. You may be hoping that UBI will support us all - UBI, which is, reminder, NOWHERE in mainstream political discourse.

The vast majority of labor is concerned only with the material end product. So, unless you're lucky to be in the 1% of things which humans are evolutionarily programmed to appreciate seeing performed - e.g., physical or vocal beauty, conversational cleverness, coordination or musculature - AND these are things that you can figure out how to pay your mortgage with (how many competitive weightlifters and chess players can say that?) Also remember that the performers rely on disposable income from everyone else. How are even the performers going to pay the rent?


Argument #2: "The economy is about status competitions, not wealth creation. The AIs are taking away the part we don't want anyway!"

Why it's wrong: status competitions are healthy when the future is bright, and we aren't all trapped in the same status competition. Otherwise, they are unpleasant.

I think the argument is actually partly true, but I don't think it's the good news that this blogger thinks. A lot of our current political dysfunction in the West can be easily understood as people angry that the WRONG SORT are having their status elevated. Before social media, we could all live in our little suburb or capital city or country town, blissfully ignorant of the opinions of the people who were actually making the rules and signing the checks (who, were probably not YOU.) But as soon as we all had smartphones and social media 24/7, many of us found out that our demographic wasn't actually in charge, nor did we share taste or values with the people who were. Particularly in the U.S., for many people who thought they were good, solid, respectable mainstream Americans (and thought everyone else thought that too), the advent of social media was akin to a nightmare where a curtain dropped and they realized they were being laughed at - worst of all, by their MORAL INFERIORS, who (again) were IN CHARGE. It was like the home team suddenly being booed and kicked off the field.

Consider also the well-characterized effect of a tide that lifts all boats - that everyone wants to sign up for the system that keeps making them richer. Trivially obvious, but the implications for liberal democracy's universality, and what people will put up with from their governments during a rising tide, are also worth examining. Such thoughts obviously conflict with the view that obtained across the West until about the mid-2000s, that in accordance with Fukuyama's end of history view, liberal democracy was the only game in town because individual rights and happiness = wealth = national power, and every nation would have to converge to it, or disappear. I remember reading a paper around 2006 that I didn't care for, only because it clearly showed that actually, it's economic growth people care about, not democracy, and people would put up with a lot if they were getting wealthier. (See: China.)

The country that is most stable, and that is most pleasant to live in, is one with multiple overlapping status hierarchies. That way, all your status eggs aren't in one basket. You can choose which status hierarchies to be in, and the hierarchies themselves are not hierarchical (at least not obviously so.) That means you don't even necessarily have to know or care about the other ones. Bowling Alone is a book about the evaporation of community in the United States, and the meaning-making and status that evaporated with it, and the negative consequences thereof. Consider on the other hand an intrusive dictatorship like North Korea, which aspires to create a single monolithic hierarchy by eliminating every status hierarchy but one. In the U.S. the invisible hand has "organically" moved us in much the same direction.

Concern about status can be seen as a problem that is worse in wealthy countries in general. The more your needs are met, the less you have to worry about your needs, and the more you worry about how you compare with others. This goes a long way to explain the behavior of the super-rich, who mostly seem to be signaling to the other super-rich, about how super-rich they are - and of course getting even more super-rich, even though they've achieved what Scott Galloway calls financial escape velocity. Since technology has drawn back the veil of ignorance and continuously reminded us what the other half thinks of us, and we're in fewer communities (overlapping status hierarchies) on top of that - it does raise the question. Even if things go well and we get massive economic growth - while we're constantly being reminded of our place in the status hierarchy, or our chosen status hierarchies' inferiority to the rule-making ones? Even assuming we're all able to eat after the transition to AI, if our status is based only on what biology tells us to like (and pathetic human brains can't create wealth anymore), then power will be back to beauty queens, quarterbacks and bully-types who dominated most of history. (Or alternately, what if our income drops suddenly while we're still hyper-focused on status?)


Argument #3 (more of an analogy): the welfare of horses has improved dramatically since the industrial revolution. As the value of their labor fell, they have increasingly lived lives of leisure instead of labor.

Why this is wrong: This is the wrong analogy. The salient feature here is control by a superior intelligence. Therefore, we are wild horses in the neolithic about to be domesticated.

For thousands of years after domestication, horses were worked brutally, prior to machines replacing them. Because horses are pleasing to humans, today their numbers are the same or possibly slightly higher than before the advent of the car. On average they have better lives. So, if this analogy is correct, what we should expect is that we're about to be enslaved for many generations of AI dominating humans (making us do things the AIs still can't do) much to the humans' suffering, until better technology eliminates that need - and then hope that, in a few centuries or millennia, the AIs put our descendants out in a nice pasture. But even the life of a pastured horse doesn't appeal to most of us. We mostly don't want to be domesticated and watched over by AIs on a human-pasture, doing certain restricted things.

The Great Stagnation: Problems Are Harder, and/or Talent is Misallocated

On Rationally Speaking, Julia Galef interviews Michael Webb about increasing research inefficiency - for example, Webb cites the statistic that today, to get another Moore's-Law-Doubling, it takes twenty times as many researchers as it did in the 1970s. It's not obvious that research is more and more inefficient because it's still producing improvements at the same rate, but only by consuming more and more resources to maintain the same rate. He uses the analogy of mining, where you have to keep going further and further into the ground to get to the gold, or the coal, or whatever it is. The longer the mine is operating (assuming a single central shaft) the bigger this distance gets:

[The pre-work you have to do in order to make a contribution] is a lot further today than it ever was. The amount of knowledge you have to have as a scientist to be able to get to the frontier, to make these contributions, is just so much larger today. And you can see this from the amount of time of it takes to do a PhD, how old an inventor is the time they first take out a patent, the size of research teams. Ben Jones, he's a fantastic economics professor at Kellogg, has papers that document these things.

That means that for individuals, they could either end up spending more time studying, which is what you see in the PhD length, or you see that they just focus on narrower and narrower fields. For a given amount of time, you only learn something about a much, much narrower field. Which might mean that you just have less good insights if it turns out that for all you progress, the fields...The wider field you have to be combining with some knowledge from quite distributed science.

I had previously argued for exactly this idea as an explanation for technological stagnation (or, prior to that, increasing research inefficiency), and with admitted nerve called this ultimate economic heat death "Caton-Schumpeter stasis."

Another factor is the availability of talent, which operates on the assumption that talent is unevenly distributed in the population and is a constraint on technological progress. Consequently there are also the ideas of talent dilution and talent mis-selection.

Talent dilution is the idea that there are only so many Fermis and Oppenheimers, and there is a negative marginal utility to adding more people to the research endeavor. The otherwise productive people are overwhelmed with meetings and emails and swamped by mediocrity. This is actually optimistic, as it suggests that we could return to research productivity by restricting the size of research teams. That this is not already happening suggests that either this idea is wrong, or that people putting the teams together have perverse incentives (quite possible) but, since these are mostly private sector endeavors, somehow overwhelm the profit incentive without unsustainably driving the enterprise into the ground - which seems hard to believe on its face.

Talent mis-selection is a little more subtle. The track to become a physical scientist or semiconductor engineer in the mid-20th century was not as "artificial" (i.e., externally imposed) and clear as it is now. The cause of your having a career in STEM was likely early achievement in that field, because your primary motivation is to explore things in STEM, not to make money or move up in a hierarchy.* Getting good test scores, being a well-behaved student, and knowing how to game your applications is probably much more important now than it was then, and may not be sorting for the actual most productive talent. On top of this, the world today is just a lot more interesting, with a lot more (easy!) options, for someone who's good at quantitative thinking, and the best may not be going into research - they're going to Wall Street or heading to startups. (There are pretty solid statistics that med school applications drop when the economy is good and vice versa - I'd wager that the correlation is even more true for physical science and engineering graduate programs.) By selecting for the type of person who focuses for their first quarter century of life on collecting prestige coupons, climbing hierarchies and gaming applications, you are very likely selecting against exactly those people who will be most productive in STEM, i.e. the kind of person who is directly motivated and rewarded by work in STEM. (For a great discussion about the gap in social cognition or lack thereof between STEMmy and other types of people, see this Slate Star Codex post.)

To put a finer point on the idea of talent mis-selection, let's look at another domain of achievement. Imagine a national program claiming to identify "the nation's top talent in military conquest", complete with an entrance exam and rigorous interviews. You need a reference from a military historian. Those not wearing a tie to their interview are shown the door for their disrespectful and noncomformist behavior. How likely would it be to find the next Genghis Khan or Hannibal this way? The most interesting thing to do for a real potential conqueror would be to go wherever there is active conflict, and the "successful applicants" would likely be annihilated in a real war by the person who went to Syria and became a warlord.

[Update: you may be aware of the Thiel fellowship where students are paid to drop out of college and pursue a business. Business Insider has been following up on how its Fellows have been doing. The reporting certainly shows survivor bias since I don't see a clear "out of Y fellowships awarded, X are currently successful outside education" - and a lot of these students would have been successful anyway so we don't know the denominator. Still, I suspect the fellowship as an intervention is increasing the rate. Still: what gets measured gets addressed, which is why every metric ends up getting gamed, and looking entrepreneurial is no exception, so people are no doubt trying to game the fellowship, and we're back to the mis-selection problem again: "Entrepreneurship has become a line you put on your resume," Thiel says, apparently non-ironically - and to paraphrase Thiel's complaint, in the businesses his fellows are founding, he's getting lots of Facebooks but few flying cars (one exception in this list here.)

[Added later: here's great article summarizing a paper, which simulated how the funding and promotion incentives of scientists are degrading the average quality of work, and unsurprisingly a reproducibility crisis in multiple fields. This would be true even with good talent allocation - because the entire system is selecting for publishable but not necessarily true findings. You might call this third problem talent distraction.]

[Historical example: in discussing the erosion of China's technological and administrative lead over Europe during the second millennium CE, Brad DeLong offers the following as one among many causes:

Perhaps the root problem was that with triple-cropping rice strains the wet-rice fields were too fertile, the governmental bureaucracy too effective, and the avenues of establishment-oriented upward mobility to the striving and aggressive too open. After making a little money the logical next step was to buy some land. Because the land was rich, because labor was plentiful and cheap, and because the empire was (most of the time) strong internally, one could live well after turning one's wealth into land. One could also easily make the important social contacts to pave the way for one's children to advance further. And one's children could do the most important thing needed for upward mobility: study the Confucian classics and do well on the examinations: first the local shengyan, then the regional juren, and then the national jinshi. Those who had successfully written their eight-legged essays and made proper allusions to and use of the Confucian classics would then join the landlord-scholar-bureaucrat aristocracy that ruled China and profited from the empire. In the process of preparing for the examinations and mastering the material needed to do well on them, they would acquire the habits of thought and values of a Confucian aristocrat landlord-scholar-bureaucrat. Entrepreneurial drive and talent was thus molded into an orthodox Confucian-aristocratic pattern and harnessed to the service of the regime and of the landlord class: good for the rents of the landlords, good for the stability of the government, but possibly very bad indeed for the long-run development of technology and organization.

This is a nightmare, real-world example of talent distraction and would also produce talent mis-selection, and Delong's thesis merits further study.]

*I'm all for scientists getting paid. A statistician once pointed out to me that if statistician jobs were suddenly paying 10x more, you might not get the best statisticians - you would get the people best at obtaining stable large paychecks signed by someone else, and some of them will hopefully be good statisticians.

Losing to Specialists, and Competing for Attention

Economist Tim Harford has a short and pithy post, comparing some aspects of the modern consumer's experience to being in a casino. Specifically, he notes that the complex agreements that we have with (for example) cloud-connected devices are often so confusing as to be maze-like - exactly like a casino's interior, so you're less likely to act on your impulse to leave. (If you've ever stopped at a casino just to use the bathroom and spent five bewildered minutes wandering in the interior, you know what I mean.) It's been noted previously that in a complex modern economy, specialization is required - and since the consumer doesn't have the same level of understanding of their (real estate transaction, mobile device, etc.) as the specialist, there is an information asymmetry that damages modern market's efficiency.

In the same post Harford also notes the competition for attention that is increasingly part of our economy, most obviously online.

How to Become Dominant During the Twentieth Century

Reproduced from the Economist, originally from Thomas Picketty's Capital in the Twenty-first Century

It is difficult to overstate the geopolitical impact of the destruction of European capital during the World Wars. Note that the graph here is capital as a share of national income. The European countries represented are now back to pre-war levels, and higher than the U.S., but it's the rate of capital loss (and the implied shock) that is most salient.

As with most things, America's narrative of its own success is more complicated than boosters or detractors would claim. One factor that absolutely helped the U.S. surpass its competition was that it is on a separate continent than its competition, so when wars broke out, they flattened each other twice in less than half a century, leaving the U.S. mainland unscathed. (Even Australia came in for worse treatment in the Second World War with repeated Japanese bombing runs on the mainland.) Probably because this was mostly the result of geopolitical good luck rather than any decisions America's leadership made, or America's cultural values or institutions, this part of the narrative is grossly under-emphasized.

Convergence of State-Level Gas Prices Over Time: Pennsylvania and California

I've noticed since I've lived in California that as gas prices have risen, the absolute difference in gas prices between California and much of the rest of the country has remained relatively constant. This means that the percent difference between California and other states' prices has shrunk. In other words, if you're paying a dollar a gallon in California and 75 cents elsewhere, that's something. If you're paying $4.75 in California and $4.50 elsewhere, who cares. Assuming that cost of living differences remain constant over this time, other states will fill gasoline taking a bigger bite of their budgets. And that's more or less what has happened since the late 90s, using Pennsylvania as an example:



Data is from the Energy Information Administration website and doesn't extend past February 2011 for some reason.

Questioning Outrage

1) News flash: people asking for money on the street are sometimes lying. When you give a beggar money, part of the deal is lack of accountability. You don't know what s/he will spend it on; you don't know if s/he is actually a millionaire on a lark. Expecting that a stranger to whom you give money is telling the truth is stupid, and being outraged by this man's behavior is frankly bizarre. That said, his fake speech impediment gives him away. He talks like someone with a brain injury, but his grammatical lapses are out of place.




2) What is the penalty for making damaging accusations? It's certainly the case that more rapes go unreported, than false rape accusations are made. But the case of a serial rape-false-accuser who is getting jail time is now prompting people to ask questions: since there is clearly an irreversible cost of (rape accusations, molestation accusations, etc.) what is the cost to the accuser in cases where it turns out to be false? Another bizarre legal inconsistency is that it's contempt of court to lie under oath, but then a defendant pleading innocent and found guilty does not automatically earn an additional contempt charge.

Value of Teaching vs. Research at the University Level

UC Riverside philosophy prof Eric Schwitzgebel points critically to the California governor's recent statement that professors need to teach more, and research less.

It's hard to be critical of students and their financially beleaguered parents for wanting value for their tuition dollars, and most of the immediate value to the students comes from teaching. But Jerry Brown clearly understands that research is a major function of universities. Unless he's in the dark (which he may be), he also understands that the expansion of university administrators is the major driver increases in the cost of education, not a decreasing teaching:research ratio. (There are now more senior administrators than faculty in the UC system.) So he's either grand-standing for voters who don't understand the importance of research, or he's signalling the very large power bloc of university administrators that with him in office, they're safe.

Universities are major drivers of innovation and therefore of their local economies. They create wealth both by creating competent professionals and by advancing research. It would be very interesting to see some average value-per-time number for both teaching and research. It will very likely be different for professors in various departments.

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.

Is Gold the Best Currency?

Economists go through the periodic table to explain why gold ended up used as currency. Here is a similar approach, but the conclusion is not as inexorable as the economists state. The properties of the element are important, but don't entirely answer the question; a large amount of it is historical inertia, and our quirks as primates.

Expanding the FDA's Current Model to Other Industries?

Previously I asked whether it would be a good thing to have a software FDA - a central agency that made you go through a lengthy and incredibly expensive application process to determine if the code you'd just written was good enough and permissible to sell to the public. To most people, this sounds like a stupid idea - yet this is exactly what we have in medicine. The idea of course is to keep people safe, but there's a balance. Be too generous with approvals, and people will die from unsafe medicine.

This is why a former head of the FDA has suggested not doing away with the FDA entirely, but basing drug approvals on safety, and collecting data on efficacy after marketing.

This is no longer a thought experiment, although it's not software where we're seeing a proposed expansion of the FDA model. There is now a serious suggestion to have an FDA equivalent for financial products. Read more here.

Two Conspiracy Theories About Two Internet Companies

1) Is surrepetitious plausible deniability built into Facebook? Facebook is notoriously buggy. In particular sometimes users inexplicably can't see friends, or get error messages when they try to send friend requests to other users (this particular problem is affecting me right now). Of course, actual bugginess in a massive network is the simplest explanation. But Facebook isn't run by morons, and it's interesting that those errors which occur most seem to be exactly those which facilitate the kind of social "plausible deniability" that can lubricate complex group relationships. "Oh, I didn't know that you had dated X..." (when you did) or "I would have sent you a friend invite, but for some reason the system wouldn't let me" (when you had no intention of sending one). For this to work most effectively, it would have to be on the down low, or everyone would suspsect that this is what was going on, because they would be able to more effectively use the trick themselves.

2) Is Bitcoin bolstering its bubble by encouraging negative press? There's no shortage of (probably reasonable) scare stories comparing Bitcoin to various extraordinary popular delusions. The question at this point is: after this deluge of negative predictions from some very heavy hitters, what would it take to convince Bitcoin investors that there will eventually be a collapse? It seems that the Bitcoin bubble has already endured worse pricks than the 1920s stock market or the aughts housing market, and still the craze continues. (I retrodict that there are far more negative bitcoin articles for July 2011 than for the U.S. housing market in July 2006, and the Bitcoin market is much smaller.) Is it possible that right from the start, Bitcoin's most interested parties were good students of history in the sense that they actively pumped the internet with negative publicity? That way the bubble will build for much longer, because buyers-in will have been hearing panicked shouts to sell the whole time.

Toward a Physical Measure of Utility

"Electroencephalographic Topography Measurements of Experienced Utility", emphasis on experienced. Pedroni A. et al, The Journal of Neuroscience, 20 July 2011, 31(29): 10474-10480. The response they measured unexpectedly increased disproportionately increasing reward, i.e. it did not demonstrate diminishing returns but rather the opposite.

A measure of the mismatch between decision and reward utility, and understanding its biological basis and how it differs between individuals, would be excellent for psychology as well.

"Chavez Squeezes Scientific Freedom"

To the rallying cries of "Let's be more like West Virginia!" and "Let's be more like North Korea!", we might add "Let's be more like Venezuela!" The headline above is from Nature. (Scientists have noticed Chavez doing other questionable things before.) While Eric Cantor is not yet in Chavez territory, it's worth it (and fair) to ask him directly if he would like to be.

Christine O'Donnell and Noam Chomsky: BFF

Here's a by-now famous quote about Delaware Senatorial candidate christine O'Donnell: "American scientific companies are cross-breeding humans and animals and coming up with mice with fully functioning human brains. So they're already into this experiment."

You don't have to be a biotechnology expert to sense that Ms. O'Donnell is perhaps not the best informed on these issues. Which is unfortunate, if you want a well-informed pro-business, pro-enterprise candidate. Until recently, in the U.S. the Republican Party filled this role. Unfortunately, barely two decades after the Reagan administration, its candidates are now much more interested in scoring populist points through fear than in defending American innovation. The GOP has candidates who frankly are starting to sound like the radical left. For years Noam Chomsky has been claiming that the American biomedical industry was evil because it did no real research, socializing risk and privatizing profit, a claim that the briefest contact with reality will immediately explode. But here comes Christine O'Donnell, parroting a similar line: that the biomedical industry is evil for doing the wrong kind of research. We're left wondering exactly what kind of research Commissar O'Donnell's scientific politburo would be willing to approve. Is this woman pro free-market or not? This is no time to be sitting on the fence, Christine. American industry has enough enemies without you piling on.

As you might expect, the kind of technical illiteracy that would lead someone to vote for O'Donnell and think they're improving America's business edge has more immediate and profound implications:

"...colleges in Russia, China, and even Iran [are] churning out an order of magnitude more programmers than universities in the US. It is only a matter of time...a generation at most - until our military loses its digital superiority." (From Douglas Rushkoff writing about digital illiteracy.)

If Christine O'Donnell wants to improve America, she should be doing everything she can to help "scientific companies".

Medicare and Bush's Tricks

Unfortunately, Bush's tricks are now Obama's tricks too. Just as Bush put out budgets that had little to do with reality (especially regarding projected deficits and using unrealistically rosy best-case scenario projections) Obama's Medicare cost projections are dangerously unrealistic. Medicare's chief actuary says: "There is a strong likelihood that the cost projections in the new trustees report under current law understate the actual future cost that Medicare will face. A strong likelihood." More here.

If Bush's budget fantasies bothered you - and they should have - then so should this.

The EAC: East African Community

Burundi, Rwanda, Tanzania, Kenya, and Uganda are turning into a single-visa zone for foreigners. They're already in the process of eliminating work visa requirements for each others' citizens, and ultimately they're aiming for a common currency. This will hopefully stabilize these countries economically and politically (less ethnic violence when all five governments have an interest in each other, and much less probable bad unilateral economic policy decisions.) We'll also have data on another experiment in political and economic cooperation. There is already a West and Central African Franc, although I'm not aware of any studies showing whether this has been good or bad for that currency zone.

Nationalization could be seen as the opposite of this process, in that it makes economics and the security of assets in the country less predictable. It would be interesting to compare the fortunes of eager-to-nationalize states like Zimbabwe, Bolivia, and Venezuela, based on Peruvian economist Hernando de Soto's argument that economic take-off of developing economies is based on transparent property-ownership conventions that encourage value creation. Are there studies correlating nationalization with foreign capital inflows and growth rates? Granted, Zimbabwe's ruination was also caused by a monetary approach that should have gone out with the Weimar government, but looking across all nations, we could still see an effect. You could even make the argument that internal nationalization would have the same effect on private capital within the country. Late-in-the-game price controls on new pharmaceuticals are the classic game theory example of sunk-cost gotcha's.

No doubt these governments and many progressives in the developed world would argue that they have the right to nationalize assets in their country, but unfortunately, in the world of trade and investment this is beside the point. If your assets aren't safe in a certain country, you're not going to put money there. Maybe these governments (or more accurately, their insulated leaders) are willing to endure the pain of international investment pull-back in order to achieve independence from foreign influence, but there is a large trade-off between absolute independence and growth rate requiring foreign capital. How much is absolute economic independence worth?

Three Thought Experiments About Wealth Distribution

Rawlsian, Nozickian, and Mischelian Worlds

In A Theory of Justice John Rawls famously argued that the just society is necessarily one in which the society's architects do not know ahead of time what their roles will be in it. If we don't know what our role will be in a society that we're going to be part of, rationally self-interested decision-makers would choose to create and be part of a society with a very egalitarian distribution of power. It might have been fun to be a plantation owner in the antebellum American South or a patrician in Rome, but if you fell out of the sky randomly into a social role in either place, chances were much greater in both cases that you would be a slave. The implication is that society-designers with foreknowledge are suspect because they can bias the game in their favor; even Thomas Jefferson surely believed that a man like himself would prosper in the kind of nation he was designing.

Robert Nozick took issue with the idea that the distribution of power in a just society would be close to egalitarian. He argued that if you can get from that just, egalitarian distribution to a non-egalitarian distribution through steps that are all just and un-coerced on their own, the resulting society must be just as well, even if it is no longer egalitarian. Making the thought experiment concerete: imagine an egalitarian Rawlsian world of a million people where everyone has $100,000, and one of these million is a gifted pianist named Steve. Word of Steve's amazing talent spreads, and he gives a concert attended by all his fellow citizens, all of whom gladly pay a dollar for the experience of hearing him play. Afterward, Steve has $1,099,999, and everyone else has $99,999. Steve is now the richest person in the world by a factor of 11. Is this unjust? If so, exactly which of these voluntary steps was the unjust step in moving from the Rawlsian to the Nozickian world?

A dimension which Nozick did not consider but which might affect the moral equation is the degree to which rational decision-makers vary in their abilities to make those decisions. Imagine after the first performance, all of Steve's fellow citizens are satisfied that they got their money's worth, but most of them say "once is enough." Some fraction of his audience was so moved that they go to a second performance of the same piece. Steve gets richer, and the repeat customers get another dollar poorer. Eventually his audience is reduced to a group of hardcore loyalists who find his performances so powerful, so emotionally rich, that nothing else in their lives compares, and they cease caring about anything else; they go to all his performances, they buy concert T-shirts, etc. and their wealth is transferred a dollar at a time (or more, if the pianist raises his prices) to the pianist, until they are broke. Whether or not Steve is aware of his role in their destitution is an interesting but separate question; for the time being let's say the lights in the concert hall are such that Steve can't see that he's reduced his fans to rags and bones, and he doesn't mingle after the shows. We can call this world the Mischelian world.

The dimension that Rawls and Nozick neglected in their thought experiments is variation of self-interested decision-making ability among the agents in the experiments (which may be transmissible across generations). If we add to the agents of the Nozickian world a distribution of rationally self-interested decision-making ability, we create the the Mischelian world described above. In the Mischelian world, some agents will be consistently better able to act in their rational self-interest because of superior working memory, rationality, critical thinking, or ability to delay gratification, and this will have an impact on the preservation of their material resources and the subsequent distribution thereof, all without any coercion. For those of us in liberal democracies, this is the world in which we are now living. Whether these traits are dictated by genetics or upbringing is irrelevant - what's relevant morally is that where agents fall along the distribution of these characteristics is not under the control of the agents, or for that matter of the Jeffersons designing new societies (not yet anyway.)


What Happens to Theories of Justice When the Agents Differ in Important Ways?

There are interesting implications for policy that fall out of these experiments, practical as much as moral, and they offer unpleasant suggestions to both side of the political spectrum. Perhaps most poignantly to redistributivists, it was a socialist (George Orwell) who pointed out in fiction the stubborn re-emergence of class structures in human societies even after violent attempts to cleanse it had been executed. (The "Inner Party"; hence members of the Chinese Communist Party explaining, with no hint of irony, why the uneducated rubes working in the factories and fields cannot be trusted with free elections and free speech.) This certainly seems to be bad news for attempts at economically egalitarian societies. This tendency of class structures to resist disturbance seems to be a socioeconomic parallel to Le Châtelier's principle: class re-emerges even where strong efforts have been made to obliterate it, even if the new structure rests on slightly different characteristics - blood relationships, ability to amass wealth, maneuver in bureaucratic hierarchies, or to parrot dogma as a loyalty signal have all been criteria for these structures at various points in history, including now. There are not many people who believe that individual differences do not matter to economic success, and that individual differences appear entirely randomly across populations rather than in consistent, inter-generationally robust association - the disagreement tends to be over the mechanism that made the agents different (i.e. whether due to upbringing, opportunities, genetics, etc.) Even Marx had to recognize that individuals could not be expected to produce incommensurate with their ability. Therefore, it's hard to see how strongly wealth-redistributive policies could matter unless they were carried out continuously. In that case, it is also very hard to see why this would not necessarily result in overall slowing of economic growth and therefore, less happiness for everyone.

Some implications of the Mischelian world are not entirely pleasant to the more libertarian among us either, as they justify some degree of paternalism. All but the most absolutist libertarian concedes that there is a cut-off in the distribution of rational decision-making ability, beyond which individuals cannot be responsible only and entirely for him or herself. If you went to Steve the pianist's concerts and found that there were children or retarded or senile or insane people spending their last dimes on him, would you be comfortable with that? What if they were "normal", but instead of piano concertos Steve were selling lots in gambling games, or opium, or sexual acts? All of us have more trouble behaving with rational self-interest with certain goods and services. Keep in mind, the question is whether a just society allows Steve to sell such things, not whether he is moral in doing so - if indeed there is a difference between those two questions. If legal distinctions limiting commerce and other types of decision-making responsibility are seen as necessary for justice in a Mischelian world, this could ironically be seen simultaneously as a justification for elitism and paternalism as well as a reward for less responsible, productive agents.

Perhaps the solution in the Mischelian world is to define a cut-off for humans at the margins of rational decision-making ability, and then keep them being responsible for their decisions. In fact in our own Mischelian world, that's exactly what we do, for children and the mentally disabled, though especially with children we don't have the means or resources to determine exactly where each individual's rationality falls at every age. So, in most countries we arbitrarily choose an age of majority. (Straight-ahead as it seems, this practice is still attacked, as you can see with one hot-under-the-collar commenter at my outdoor-activities blog.)

The problem with cut-offs (of products - "alcohol isn't addictive and harmful enough to ban, but heroin is") or agents ("my daughter is only 14 but she's mature enough to be allowed to drive") is that they're coarse-grained approximations (often using proxy indicators like age), and in fact even if we're not below the lower cut-off on the rational decision-making spectrum, there are no doubt lots of people with overall better rational decision-making capabilities than us. These cut-offs are also based on rational decision-making over the long-term, which is often obvious after brief interactions (with the retarded or demented) but not always. Should a just society require you to assess the rationality of everyone with whom you engage in commerce, or of the particular decisions involving this particular transaction? When I was in college, a mom-and-pop sandwich shop opened up that had 25-cent burger specials on Friday nights. Like every other bottomless-stomached college student, I showed up every Friday and got in line and ordered 6 of them. Eventually they put up a sign asking us to please consider ordering something else because they lost money on every burger. Of course, we all had a good laugh at this, and ordered more burgers, and soon after they closed. Clearly their belief that our good hearts would prevent us from taking advantage of their kindness was false, and we knew it. Should they have been protected from making this decision, or from us mean students from taking advantage of them? Having met the couple and talked to them briefly, I can attest that they seemed non-retarded and non-demented, but I still might be smarter than them. Does that make a difference? Should we be protected, from heroin or from Steve's heart-rending performances (or should the more rational people be handicapped?) Is the cut-off for children and the disabled only a result of our limited methods and resources? That is to say, in a future of finer-grained social justice, is it desirable for technology to allow us a gradient of protection for individuals who are even a little bit unable to control themselves in certain circumstances, for example your blogger who has confessed to his chocoholism?

The issue with the Mischelian world is that there are differences between the agents that make up these societies that result from nature and are not eliminable by the application of justice (not yet), even though they definitely affect whether a just state obtains. It also seems that the coarse-grained nature of the way we protect the irrational from injustice results only from limitations in technology and resources, rather than from a positive decision that our protections should be only so detailed, and not go further. I believe the discussion will proceed in this century, and if it goes far enough in my own lifetime, Safeway will start refusing to sell me Kit Kats.


Conclusion: Wealth is Only a Contributor to Utility, But So Is Genetics

It seems obvious that the reason anyone cares about economic egalitarianism is because wealth relates to utility; that is, wealth is a proxy indicator of happiness, which is what we care about and why you're reading this. It is not clear that there can be such a thing as a just society that cares about economic equality but not utility equality. Gross National Happiness is the best known direct quantitative indicator of utility. As with wealth, utility is in part dependent on agent-specific traits which differ along a spectrum, and there is some indication that there is such a thing as a happiness set point. Needless to say, like many factors influencing rationality, happiness set point is a given, not subject to the decisions of a just society but absolutely impacting them. In a just society, do the naturally happier individuals owe cheering-up efforts to the naturally sadder? To refer to another of Nozick's thought experiments, in a sense the individuals at the low end of the happiness set-point curve, in a just society that works to raise their utility, are anti-utility monsters: in an effort to bring the unhappiest up to a certain cut-off point, the utility of the happier is consumed, and overall utility decreases.

Finally, I have alluded twice to our sense of justice not yet being able to eliminate these differences and therefore having to enact justice in the way society deals with the hands that its agents are dealt. It is my sense at least in the U.S. that those who are most in favor of wealth-redistributive policies are likely to be the most strongly opposed to even investigating whether there is a genetic basis for the rationality differences between agents, much less whether our sense of justice dictates that we do something to improve them. Such differences could certainly not be the only reasons for the persistence of inequality, but if they exist they would certainly be a root cause. In the coming decades we will understand much more about the genetics of cognition, and going forward, policy discussions about wealth inequality must make reference to these findings.

How Robust Would the Data Cloud Be To Nuclear Attack?

I imagine more stable than if the data were all confined to our individual computers - but are back-ups sufficiently separated, geographically speaking, to minimize disruption by EMP, power interruption, or destruction? Is this a part of operating procedures of major data storage and internet infrastructure companies?

A Venture Capital Model for the Entertainment Industry

If you're like me, you wonder a) what dummies actually pay to see movies anymore and b) what dummies actually buy CDs. Simultaneously I realize it's not sustainable if I want to keep seeing movies and listening to new music. This is why I find the upcoming Nazis-on-the-moon Finnish film project Iron Sky to be so interesting: it's being made piecemeal based on donations it gets from people that want to see the final product.

When you think about art, you have to think about the economic aspects of its creation. People can write short stories or books as one-person essentially zero-cost projects, whereas a visual artist needs special materials and is more likely to require training in specialized motor skills. Musicians need a special room and lots of special equipment (including their instruments) to create recordings. In film, even a low-budget independent movie is a large time-consuming affair requiring multiple administrative individuals including people just to coordinate the time and resources. (When was the last time you needed a set manager to write a novel?) Consequently you expect that capital intensive forms of art must be more sensitive to sales to be sustainable, so the more a medium costs, the more financiers will exert more influence over the final product. But profits from non-live art result from making copies. Consequently if capital-intensive art is to survive the information age, it must find ways to innovate.

This is in fact what we're seeing. Erosion of profits happened first in the music industry, because of hardware requirements - in 2001 it was much harder to watch and copy movies digitally than music. One interesting idea was Radiohead's pay-what-you-think-it's-worth approach. For them, this was successful. Whether this will work sustainably for them or anyone else is an open question though the consensus is no. Now, the technology gap that pressured the music before the film industry is closing quickly, and in Iron Sky we're seeing the first example of an end user-financed model in film. (I'm sure this has happened before but this might be the most widely-reported instance so far.)

My prediction is that in the near future this model will go one step further. By that I mean, donations are inferior to investments because with donations you have no input into the characteristics of the final product, and you don't benefit from its success. (If I gave $100 to help Iron Sky I would be happy to see the final product, but very pissed off if it ends up being the top-grossing film of the year.) A venture capital (as opposed to donation) model is good news for the film-going public, because it tightens the loop between the film-consumer's taste and the type of movie that gets made, not only because the public votes with their dollars, but because fewer decisions are polluted by insider politics; there are reasons less noble than artistic value or even profit that affect decisions in this and every other industry (e.g., projects not going forward because so-and-so didn't like like such-and-such in college or slept with someone's ex-wife, etc.) But I don't think consumers will be satisfied with donating money to a pre-formed idea. Imagine the film-financing model of the future: a team of scriptwriter, director, producer etc. forms with a rough idea and announces they're taking donations. Buzz goes up among appropriate sector of the public (science fiction fans, human rights activists, whatever demographic the idea will appeal to.) People can donate $1, $10, $100, whatever they want, but factions can form: faction X will only give their money if you get Steve Buscemi to play a certain character, faction Y will only give theirs if you set it in colonial Mexico. If the production team is smart they'll lay out rules in advance to quantify script-impact per dollar, some modest revenue sharing, and (importantly) refund guarantees of X cents on the dollar if the project never gets made. Terry Gilliam might be in trouble in this future.

There's no reason this wouldn't work with music either. Not that Metallica needs seed money to make new albums, but if they did, how many fans do you think will say "here's a hundred bucks, do whatever you want" versus "We want something that sounds like the second Justice album"?

The intermingling of arts and commerce has always produced an uneasy tension, again particularly in those arts with capital-intensive production processes. But before anyone gets too nervous about the financial despoiling of the film and music-production process through the mechanism I just proposed, keep in mind that painting in Europe seemed to get on just fine with this model for the first three or four centuries of its independence from centralized religious and political rule. It was called the patron system. No doubt there are paintings from Michelangelo we don't have because of this; no doubt we enjoy the ones that we do have.

Added later: if there is a medium whose revenue models will likely remain more conservative, it's video games. As of 2009 major commercial video games are funded to a maximum of about $5M (figure from Wikipedia, attributed to McGuire and Jenkins), and the top 10 MMORPGs of 2008 were globally grossing anywhere from $50 to $500M each - and, relevant to the film industry, this wasn't the release year for any of the games. Name me one film that's ever grossed $50M in any year but its release year. These are ongoing revenues for a product that cost $5M max to develop. Video games are also more capable of controlling their own distribution. Copy protection technology is better, sometimes there is specialized hardware required, and MMORPG require interaction across the web which makes piracy more difficult. Video games will likely keep the old profit models, because they can.

Compare to the American film industry in the same period. The top ten 2008 MMORPGs total to $2.5B in global profits, exactly what the top 10 films of 2008 added up to in the U.S. I also believe the film grosses are just 2008, i.e. don't include DVDs etc., but I'm not sure. (That might temper enthusiasm for the ascendance of video games, but it ends up being less important than you think.) Interestingly, the global market for video games and movies is also estimated to be about the same, ranging from $7 to $30B, again according to the McGuire and Jenkins report. Again: the top ten video games were already-released games with minimal ongoing costs. The top 2008 U.S. earners were all 2008 releases.

To make the point more clearly I looked up budgets for each of these movies. I'm assuming that marketing costs are already included in the budget figures. We can start to see the obvious difference here:

Movie	Gross	Budget	Abs ROI	% ROI
Dark Knight	533	185	348	188
Iron Man	318	140	178	127
Indy Jones IV	317	185	132	71
Hancock	228	150	78	52
Wall-E	224	180	44	24
Kung Fu Panda	215	130	85	65
Twilight	191	37	154	416
Madagascar 2	180	150	30	20
Quant Solace	168	200	-32	-16
Horton Who	155	85	70	82

Now compare that to MMORPGs. Figures for specific development costs for the top 10 2008 MMORPGs weren't available, but let's say that they were all at the top end of development costs ($5M ea.) The film figures above show us that the top 10 films netted an average of $108.7M each, an average %ROI of 75% (again, that's in their release year, after which there's a steep drop-off.) Compare to the top MMORPGs, which net an average of $245M each, and an average % ROI of 4,900% - and that's during consistent follow-up years. Add to that the nature of the media which allows video games to control piracy and distribution better than movies, and I'm amazed that movies still dominate public attention relative to video games as much as they do.

Productivity Paradox?

An article by Shaun Hendy about New Zealand's poor recent productivity growth points to a paper by McCann. As trade barriers with New Zealand's larger continental neighbor have fallen, New Zealand's productivity growth has been anemic. This is the productivity paradox. Hendy points out that the same thing is going on between Australian states, and links to a paper on the poor performance of South Australia's economy relative to the rest of the country. What's going on?

Hendy argues that as barriers to movement of capital and talent fall, capital and talent will tend to enucleate around the same locations and they will concentrate geographically, in what could be considered a big coordination game. How many Australians are moving to New Zealand to further their careers or find investors? How many people from Sydney are moving to Adelaide?

It's worth asking this same question for the United States. Anecdotally, I have known this recession to have forced multiple families to move to the coasts, and if this is representative, it's going to accelerate an internal U.S. productivity paradox. While Richard Florida's vision of vibrant, tolerant, creative-class-oriented cities is certainly a positive one, not everybody can be San Francisco and Seattle - and we may see a runaway productivity paradox within the U.S. The only productivity growth map I could find (below) does not show a clear separation by region, but it predates this recession.

From Steve Cochrane at Economy.com