Still life

Cheryl Bernstein points out the ironies in the Environment Court's decision on the Cass landscape.

She writes:

In making his decision not to allow irrigation at Cass, the Environment Commissioner, Robert Nixon, noted that the proposal would not serve to change the actual landscape painted by Rita Angus. But he agreed that the painting had "powerful symbolism", and that the proposed land-use associated with irrigation could have a significant adverse visual impact on views from State Highway 73, around the area of the painting. Nixon cited the high landscape values of the area -- variously shared, historic and recognised "significant natural science, aesthetic, and Tangata Whenua landscape values" -- and declined the application to industrialise the landscape.

Art history 1: industrial irrigators 0, you might think. A rare decision. But it might equally be recognised that there is something of an irony to this. One of Angus's purposes in painting the burned-off vistas at Cass was, like many of the more progressive artists of her generation, to depict the effects of modernity and economic progress on the landscape. Speed, transportation, telecommunications, industry: all are present in Angus's modernist depiction of Cass. Her inclusion of telegraph poles and railway tracks reveals a landscape in the process of being altered -- made modern -- by its inhabitants.

... In citing Angus's painting as a factor in the decision not to allow industrial-scale irrigation in the Cass landscape, there is clearly a gentle irony in a work of art concerned with the effects of modernity stalling contemporary economic "progress".

It is too easy to veto others' uses of their own property; too many want to turn the country into a still life.

Maybe there was more merit to @LaraJeffery's tongue-in-cheek policy proposal than I thought when I first saw it.*

* Lara's tweet at the Australian Libertarian Society's conference this weekend came after discussion of Seasteading, a policy proposal that Australia encourage its elderly to retire at lower cost in the Philippines, discussion of drug legalisation, and frequent rambling interjections by grouchy older attendees. Her proposal consequently managed to touch all the bases.

Psychic mountain harms

Here's an alternative scenario for Steve Landsburg's thought experiment about psychic harms.

3. Let's suppose that a mountain that you, or I, or someone we love, or someone we care about from afar, is hovered over by a helicopter in a way that causes no direct physical harm to the mountain - no injury, no rockslides, and no disturbing of the snow atop the mountain's peak. (Note: according to the account I've read, the Department of Conservation was not even aware that someone had hovered over the mountain until they read about it on the Internet some months later.) Despite the lack of physical damage, some people are shocked, appalled and horrified at the thought that the mountain was treated in this way, and suffer deep trauma as a result. Ought the law discourage such acts of hovering? Should they be illegal?

The relevant legislation is here. Presumably one might hover over the mountain by seeking the appropriate concession from the Minister, but unauthorised hovering is a summary conviction offence carrying a maximum fine of $5000.

The psychic harms imposed by hovering are potentially large, unknowable, and easily overstated; the psychic benefits provided by hovering are potentially large, unknowable, and easily overstated. Solving for the correct solution using David Friedman's framework is left as an exercise for the student.

Living Free

Frances Woolley says we should ignore the aggregate indices of economic freedom and look instead to whether people experience freedom. She points to the World Values Survey question asking whether people think they have freedom of choice and control over the way their lives turn out.

The survey question asks:

V46.- Some people feel they have completely free choice and control over their lives, while other people feel that what they do has no real effect on what happens to them. Please use this scale where 1 means "none at all" and 10 means "a great deal" to indicate how much freedom of choice and control you feel you have over the way your life turns out.

Results? I've pulled them into a Google spreadsheet; I'm rather sure I don't believe the numbers. Colombia ranks about the highest on the table, with 52% giving an answer of 9 or 10. 42% of Mexicans give an answer of 10. If we rank by medians, here are some of the values (so long as I haven't messed up taking the median on ordinal data):

• Mexico: 9.2
• Colombia: 9.0
• New Zealand, Norway, Sweden, Argentina, Trinidad: 8.3
• USA, Canada, S. Africa, Australia, Brazil, Romania, Uruguay, Jordan, Andorra, Guatemala: 8.2
• China, Finland, Switzerland, Slovenia, Turkey, Ghana, 8.1
• Zambia, Malaysia: 7.0
• VietNam, Iran: 6.9
• Germany: 6.8
• Netherlands, Serbia 6.7
• Rwanda: 6.0
• Ethiopia, Mali, Hong Kong, Egypt: 5.9
• India: 5.5
• Burkina Faso, Iraq 5.0
• Morocco: 4.9

I can kinda understand having fairly nominally unfree countries right at the top if it's cheap to buy off the police: worst would then be the meddling countries that enforce things. But Iran beating Hong Kong? Finland matching China? 

I sympathise with Frances when she writes:

This is why I start fuming when people start talking about freedom. It's how people live their lives that matters, not abstract ideology.

But I still expect that the Human Freedom Index provides a better proxy for experienced freedom than the WVS measure. It's pretty easy to imagine someone agreeing that they have a great deal of control over their lives because they know what things to avoid doing if they don't want to have the police shoot them.

Another for the "As always, Ed Glaeser is right" file...

Ed Glaeser highlights one of the main advantages real universities have over online alternatives: it's where you're most likely to find your best possible spousal match.

However, my own finely tuned algebraic simulations of an optimal spousal-search model find that while college provides an ideal time to accumulate a large stock of good friends (prospective spouses), it is typically suboptimal to wed at age 21 because of preference uncertainty and the benefits of continuing to meet alternatives.

In my own life, which has always been based on a rigorous application of optimization methods, the equations dictated that I meet my future wife in line at a Princeton dining hall at age 17, but that we should not date for another 15 years and not wed until after our 15th reunion.

Patton’s phrase that “you will never again have this concentration of men who are worthy of you” has been interpreted as unpleasant elitism. Her critics are certainly right that neither Princeton nor Harvard has any particular monopoly on virtue or intellect. Another interpretation is that what she said could have applied to any tightly knit campus of full-time students.

The college experience is profoundly different from what comes before and after in life. It is when 19-year-olds have chance encounters in different settings that make it easy to befriend and evaluate others. And they have enough free time to follow relationships where they may lead. Few of us will ever again walk into a dining hall filled with 100 interesting members of the opposite sex of roughly the same age.

He worries about potential perceived elitism of Patton's phrasing, but he shouldn't be. So long as people roughly sort into the right colleges, then the statement is true regardless of whether you're at the world's top university or somewhere rather farther down the pecking order. The best partner you're likely ever to be able to afford, given your particular bundle of characteristics, is likely someone at your university.

This might not hold true at universities where a good proportion of students would do far better by instead enrolling at a trade school, but then again, if you're there, then "making bad choices" is part of your bundle of characteristics as well as part of the bundle of characteristics of your affordable partners. It might also fail to hold if you are enrolled in a graduate programme with a severe gender imbalance and you're not inclined to mix with students from other disciplines; in that case, dating and eventually marrying the friend of a classmate could be optimal.

...and while we're taking offence

Why so much outrage about Steven Landsburg's thought experiment, but so little about Jeff Ely's excellent prelim question? [note, I'm not at all outraged]

Jeff puts up a video from the wife-carrying competition, then asks:

The model:  At date 0 each of N husbands decides how fat his wife should be.  At date 1 they run a wife-carrying race, where the husband’s speed is given by some function f(s,w) where s is the strength of the husband, and w is the weight of his wife.  The function f is increasing in its first argument and decreasing in the second. The winner gets K times his wife’s weight in cash and beer.  Questions

1. If the husbands are symmetric what is the equilibrium distribution of wife weights?
2. Under what conditions on f does a stronger husband have a fatter wife?
3. Derive the comparative statics with respect to K.

The solution to the problem is left as an exercise for the reader. Or for Seamus, who may wish to put it on his exam in Econ 203.

Inelastic demand

Gorbachev's crackdown on alcoholism reduced heavy drinking in the former Soviet Union. He combined some measures directly targeting heavy drinkers with price increases and supply reductions. Bhattacharya and coauthors wrote:

The results suggest little evidence that our summary measure of campaign intensity operates either through differential supply shifts or through differential price increases. However, we are hesitant to draw conclusions given the limitations of the state vodka production and alcohol price index data noted earlier. We emphasize that this is an important area for further research.

I wasn't surprised that Bhattacharya wasn't able to find price effects on heavy drinking; I expected that the Soviet campaign's effectiveness came rather from bans on workplace drunkenness and mandatory treatment for alcoholism. Why? It's hard to target heavy drinkers with price measures.

I've previously cited Wagenaar's metastudy showing that heavy drinkers are only about 60% as responsive to prices as are moderate drinkers. Jon Nelson adds to this literature looking in particular at the differential price responsiveness of heavy and moderate drinkers. He concludes that Wagenaar was too optimistic about the degree to which heavy drinkers respond to price measures. After an extensive literature review, Nelson concludes:

The review found only two of nineteen empirical studies where there was a significant and substantial price/tax response by heavy-drinking adults (ages > 26 years), and even these two studies present mixed results. On the other hand, many studies show that moderate-drinking adults have significant and substantial price/tax elasticities, including both studies for Australia (Brynes et al., 2012; Harris et al., 2006) and several of the US studies. The review of cirrhosis mortality found only two of nine studies obtained significant negative price/tax effects, but prices in these studies might be proxies for other (omitted) alcohol policies or drinking sentiment generally. The other cirrhosis studies contain mixed results or are sensitive to econometric specifications. Several limitations of the studies should be kept in mind, which also provide a basis for future research in this area.

...
In summary, a review of two sets of related studies casts doubt on public policies that rely extensively on price controls or higher alcohol taxes as a means to reduce abusive drinking by adults, adverse health outcomes, and related social costs. The price/tax elasticity for heavy drinkers appears to approach zero in most instances. This result is robust across countries, time periods, drinking measures, and model specifications. Improvements in price data in empirical studies might remove some uncertainty associated with this evidence. 

Nelson cites one new piece the I'd missed: Ayyagari et al, newly out in Health Economics. They used finite mixture models on individual-level data on heavy drinking incidence from the HRS (older adults, large sample) and found that their dataset effectively consisted of two groups of people. The largest group didn't drink very much, averaging 0.13 drinks per day, but was very responsive to prices. The smaller group averaged 1.86 drinks per day and really didn't seem to vary consumption with prices. The neat trick in Ayyagari et al is that when they pooled the two groups, they got about the same estimate that everybody tends to get: aggregate elasticity of around -0.4. Studies that pool results from heavy and moderate drinkers make a bit of a hash of things if we're trying to assess whether price measures curb the harms from heavy drinking. They conclude:

There is growing political support for increased alcohol taxes; however, we are cautious about predicting welfare gains to alcohol tax hikes with regard to older individuals.25 Revenue may be raised at the cost of welfare loss for many older individuals but with little reduction in externalities. Heavier drinkers are more likely to impose negative externalities than the lighter drinkers. However, our results indicate that the heavier drinking group is insensitive to price; thus, higher taxes would be unlikely to reduce negative externalities for older drinkers.26 In contrast, for the largest group of individuals, composed of moderate-to-low drinkers, the higher tax will reduce their alcohol consumption, resulting in a utility loss and loss of potential health benefits of alcohol (Thun et al., 199727), yet it is unlikely to reduce externalities.

Especially sensitive to price increases were lower income moderate drinkers.

At least Gorbachev had some idea that curbing harms from heavy drinking required something other than price and supply controls, though I do not endorse his methods.

Be very wary of policy recommendations that cite aggregate effects of prices on quantities consumed when harms are non-linear in consumption and when the heaviest consumers are least responsive to price measures.

Thought experiments and taking offence

I love Brad DeLong's academic work. He's way smarter than me and, more importantly, clearly works much much harder than I do. And he tackles interesting questions. But every time I check his blog, I get an awful "Everyone in the world is evil or stupid or both except Brad and a few of his friends" vibe.

I'd not been there for a while, but switching to The Old Reader (for now) from Google Reader messed up my RSS habits. And so, there I was, looking at Brad DeLong saying that Steven Landsburg is the stupidest man alive and that "the University of Rochester has a big problem" - presumably Landsburg's continued employment there.

What was the cause? A piece at Gawker taking great offence at a thought experiment Landsburg proposed. I'll link Gawker at the end so you're not tempted to read it before reading the original Landsburg piece.

In grad school, we had a lot of fun with thought experiments of this sort. The classic one is Nozick's experience machine. Step into the machine and you'll experience a simulated life much better than the one you'd otherwise live; moreover, you'll never remember that you're actually in the machine. If you stay out of the machine, there has to be something that matters more to you than experienced utility. 

Tyler Cowen liked to ask a variant on it in our Economics & Philosophy class: World B is identical to World A, as far as you are ever able to observe, but in World B, your wife has been cheating on you for years and you never ever knew it, nor will you ever know it. The worlds are identical except for the unknown-to-you fact of your wife's infidelity. Are you worse off in World B? If so, clearly state exactly how, and make that consistent with other things you believe about utility. 

So, what was Landsburg's offensive thought experiment? Recall that the rules of thought experiment club are that you don't add in auxiliary assumptions but stick to what's stated in the thought experiment. Landsburg asked a series of three questions, then wanted to know why our answers to 1 and 2 might differ from our answer to 3. Here they are.

Farnsworth McCrankypants just hates the idea that someone, somewhere might be looking at pornography. It’s not that he thinks porn causes bad behavior; it’s just the idea of other people’s viewing habits that causes him deep psychic distress. Ought Farnsworth’s preferences be weighed in the balance when we make public policy? In other words, is the psychic harm to Farnsworth an argument for discouraging pornography through, say, taxation or regulation?

That's scenario 1. Most economists just ignore that psychic harm - the world's essentially impossible to evaluate when we add this kind of thing in. Further, Farnsworth could pay other people not to watch pornography if he really cared about it that much. But we could assume that away to stick within the proper confines of the thought experiment: say transactions costs prevent it. Is pyschic harm of this sort admissible in the utilitarian calculus? Here's scenario 2:

Granola McMustardseed just hates the idea that someone, somewhere might be altering the natural state of a wilderness area. It’s not that Granola ever plans to visit that area or to derive any other direct benefits from it; it’s just the idea of wilderness desecration that causes her deep psychic distress. Ought Granola’s preferences be weighed in the balance when we make public policy? In other words, is the psychic harm to Granola an argument for discouraging, say, oil drilling in Alaska, either through taxes or regulation?

Actually, policy does weigh Granola's concerns. It's counted as existence value over and above option value or use value. Sound analyses don't put much weight on it, but it does sometimes count. If I get existence value from thinking heroic Randian thoughts about oil derricks and man's mastery of nature, that gets ignored in the cost-benefit analysis for some reason. But, again, all these kinds of pyschic distress are treated pretty dismissively in economics. And now the third and controversial question:

Let’s suppose that you, or I, or someone we love, or someone we care about from afar, is raped while unconscious in a way that causes no direct physical harm — no injury, no pregnancy, no disease transmission. (Note: The Steubenville rape victim, according to all the accounts I’ve read, was not even aware that she’d been sexually assaulted until she learned about it from the Internet some days later.) Despite the lack of physical damage, we are shocked, appalled and horrified at the thought of being treated in this way, and suffer deep trauma as a result. Ought the law discourage such acts of rape? Should they be illegal?

If we take this as a parallel thought experiment, the only trauma here allowable is the psychic distress, which we otherwise typically ignore.

It is a hard question and so a good one. All our intuitions tell us to condemn the third scenario while dismissing the psychic harms in the first two. But if we stick within the confines of the thought experiment, it's hard to distinguish the cases. We can say the psychic harm is worse in the third case, and it would be in the real world, but it's not hard to have a thought experiment Granola McMustardseed who gets more psychic harm from oil drilling than from being in Scenario 3. Or a Scenario 3 victim who never learns that it happened - a case pretty close to Cowen's World A vs World B.

I don't have any great answer other than that when we step away from the thought experiment and into the real world, a rule allowing Scenario 3 that imposes psychic harm no greater than that imposed in Scenarios 1 & 2 would also necessarily allow much much greater harm because we cannot set rules only allowing Scenario 3. But that's a cop-out, because even if we could do it in the real world, I'd still want it banned - in the same way that I think I'm worse off in Cowen's World B and that I wouldn't want to step into Nozick's machine. My maximand isn't just experienced utility.

Meanwhile, Gawker turns it into a story about how Landsburg thinks rape is OK and DeLong signs onto their interpretation. The contrast between the quality of comments at Landsburg's post and DeLong's is interesting too... Landsburg's commenters wrestle with a difficult thought experiment; DeLong's want Landsburg fired.