We have seen the algorithm and it is us.

The core assumption of economics is that people tend to do the thing that makes sense from their own perspective. Whatever utility function people are maximizing, it’s reasonable to assume (absent compelling arguments to the contrary) that a) they’re trying to get what they want, and b) they’re trying their best given what they know.

Which is to say: what people do is a function of their preferences and priors.

Politicians (and other marketers) know this; the political battle for hearts and minds is older than history. Where it gets timely is the role algorithms play in the Facebookification of politics.

The engineering decisions made by Facebook, Google, et al. shape the digital bubbles we form for ourselves. We’ve got access to infinite content online and it has to be sorted somehow. What we’ve been learning is that these decisions aren’t neutral because they implicitly decide how our priors will be updated.

This is a problem, but it’s not the root problem. Even worse, there’s no solution.

Consider one option: put you and me in charge of regulating social media algorithms. What will be the result? First we’ll have to find a way to avoid being corrupted by this power. Then we’ll have to figure out just what it is we’re doing. Then we’ll have to stay on top of all the people trying to game the system.

If we could perfectly regulate these algorithms we might do some genuine good. But we still won’t have eliminated the fundamental issue: free will.

Let’s think of this through an evolutionary lens. The algorithms that survive are those that are most consistent with users’ preferences (out of acceptable alternatives). Clickbait will (by definition) always have an edge. Confirmation bias isn’t going away any time soon. Thinking is hard and people don’t like it.

People will continue to chose news options they find compelling and trustworthy. Their preferences and priors are not the same as ours and they never will be. Highly educated people have been trying to make everyone else highly educated for generations and they haven’t succeeded yet.

A better approach is to quit this “Rock the Vote” nonsense and encourage more people to opt for benign neglect. Our problem isn’t that the algorithms make people into political hooligans, it’s that we keep trying to get them involved under the faulty assumption that people are unnaturally Vulcan-like. Yes, regular people ought to be sensible and civically engaged, but ought does not imply can.

Evidence-based policy needs theory

This imaginary scenario is based on an example from my paper with Baljinder Virk, Stella Mascarenhas-Keyes and Nancy Cartwright: ‘Randomized Controlled Trials: How Can We Know “What Works”?’ 

A research group of practically-minded military engineers are trying to work out how to effectively destroy enemy fortifications with a cannon. They are going to be operating in the field in varied circumstances so they want an approach that has as much general validity as possible. They understand the basic premise of pointing and firing the cannon in the direction of the fortifications. But they find that the cannon ball often fails to hit their targets. They have some idea that varying the vertical angle of the cannon seems to make a difference. So they decide to test fire the cannon in many different cases.

As rigorous empiricists, the research group runs many trial shots with the cannon raised, and also many control shots with the cannon in its ‘treatment as usual’ lower position. They find that raising the cannon often matters. In several of these trials, they find that raising the cannon produces a statistically significant increase in the number of balls that destroy the fortifications. Occasionally, they find the opposite: the control balls perform better than the treatment balls. Sometimes they find that both groups work, or don’t work, about the same. The results are inconsistent, but on average they find that raised cannons hit fortifications a little more often.

A physicist approaches the research group and explains that rather than just trying to vary the height the cannon is pointed in various contexts, she can estimate much more precisely where the cannon should be aimed using the principle of compound motion with some adjustment for wind and air resistance. All the research group need to do is specify the distance to the target and she can produce a trajectory that will hit it. The problem with the physicist’s explanation is that it includes reference to abstract concepts like parabolas, and trigonometric functions like sine and cosine. The research group want to know what works. Her theory does not say whether you should raise or lower the angle of the cannon as a matter of policy. The actual decision depends on the context. They want an answer about what to do, and they would prefer not to get caught up testing physics theories about ultimately unobservable entities while discovering the answer.

Eventually the research group write up their findings, concluding that firing the cannon pointed with a higher angle can be an effective ‘intervention’ but that whether it does or not depends a great deal on particular contexts. So they suggest that artillery officers will have to bear that in mind when trying to knock down fortifications in the field; but that they should definitely consider raising the cannon if they aren’t hitting the target. In the appendix, they mention the controversial theory of compound motion as a possible explanation for the wide variation in the effectiveness of the treatment effect that should, perhaps, be explored in future studies.

This is an uncharitable caricature of contemporary evidence-based policy (for a more aggressive one see ‘Parachute use to prevent death and major trauma related to gravitational challenge: systematic review of randomised controlled trials’). Metallurgy has well-understood, repeatedly confirmed theories that command consensus among scientists and engineers. The military have no problem learning and applying this theory. Social policy, by contrast, has no theories that come close to that level of consistency. Given the lack of theoretical consensus, it might seem more reasonable to test out practical interventions instead and try to generalize from empirical discoveries. The point of this example is that without theory empirical researchers struggle to make any serious progress even with comparatively simple problems. The fact that theorizing is difficult or controversial in a particular domain does not make it any less essential a part of the research enterprise.

***

Also relevant: Dylan Wiliam’s quip from this video (around 9:25): ‘a statistician knows that someone with one foot in a bucket of freezing water and the other foot in a bucket of boiling water is not, on average, comfortable.’

Pete Boettke’s discussion of economic theory as an essential lens through which one looks to make the world clearer.

The promise and peril of blockchain distributed governance

neoliberalthoughtcollective

I was very fortunate to learn that my essay ‘Markets for rules‘ has won the Mont Pelerin Society’s 2018 Hayek essay competition for young scholars (one of the perks of academia is being defined as young well until your 30s). I am now looking forward to presenting at MPS’s famous conference, originally organised by F.A. Hayek to build the post-war intellectual case for liberalism.

The essay is an attempt to explain the governance possibilities of blockchain technology through the lens of new institutional economics and more specifically private governance. Blockchains allow people to develop rules that can then enforced autonomously by the participants that use them without further central direction. This could allow communities to rely more on common rules and less on formal coercive authorities to achieve widespread social cooperation. I am cautiously optimistic about the technology (it could also turn into a dystopian nightmare) though not any particular currently existing blockchain.

Here is the abstract: Classical liberals seek the paradoxical: government powerful enough to protect individuals from preying off each other, but limited enough to prevent it becoming a fierce predator itself. The emergence of blockchain technology heralds a potential revolution in our collective capacity to implement limited government. Blockchains offer a more secure and transparent way of implementing rules while permitting individual choice between rulesets that can co-exist at the same time and place. What this could ultimately mean is that a great deal of what we have traditionally conceived to be governance might be disintermediated from the territorially defined monopolistic coercive authorities that classically define states.

Is NoL discriminating against Trojan fans?

I should, as all good academics should, be writing. Instead I’m using my Saturday afternoon to settle an academic wager. Click here if you wish to help do so.

Image result for trojan usc beaten

For over a year now I’ve been obsessed with figuring out why studies find that non-whites are discriminated against in the labor market and in political representation. It isn’t that I don’t believe that elites indulge themselves in discrimination. I think that the marketplace places a cost to discrimination but that some people have a sufficiently high willingness to pay to discriminate.

What I have difficulty believing is that people decide to discriminate on something as mundane as responding to resumes. Imagine that you work for human resources in Notes On Liberty Inc. Your job is to screen resumes and, if someone meets the bare requirements they get considered for recruitment. Regardless of whether they are recruited to the company or not, you don’t actually have to interact with this individual. You work a 9-5 shift and are based remotely somewhere in westwood. Why should you care if NoL Inc hires someone you personally dislike (say a Trojan fan), if you never interact with them?

One possibility, related to existence value for those versed in the environmental econ literature, is that the very idea of a Trojan fan being employed causes you distress. It doesn’t matter that you never actually interact with them. This distress is high enough that you are willing to both actively reduce their likelihood of being employed by NoL Inc and to increase the likelihood that your boss will fire you for unethical behavior.

Another possibility is that you, the human resource manager, aren’t discriminating against Trojan fans at all. It is possible that the algorithm that receives resumes from Trojan fans, for some reason, flags them as spam and filters them away before any human being gets involved. Maybe the algorithm mis-interprets the USC Trojan logo as an actual Trojan virus. Likewise is that possible that ethnically non-white names (e.g. Jamal, Xochitl) are flagged by resume algorithms as likely spam due to their relative weirdness.

If you’re willing to help me test this possibility, please click here.

Serey: a Cambodian blockchain-based social media platform inspired by Friedrich Hayek’s theory of dispersed knowledge

www.serey.io

Serey is a new Social Media platform that specifically targets the Cambodian market. The country that saw nearly a quarter of the population decimated during the civil war of the 60’s and 70’s, the Khmer rouge regime, and the subsequent famine, has gone through rapid economic developments in the past two decades due to its friendliness to free markets. Accompanying this development is the adoption of new information technologies. One such technology is blockchain.

The team behind Serey has now created a blockchain-based social media platform called Serey. It rewards content creators, such as writers, for their creativity. The platform now has 400-500 users who all contribute by writing content ranging from short fictional stories to history, philosophy, and technology. Users can post any content they want. There is no central authority that can censor the posts in any way. The system is based on a democratic voting system in which every user can vote on articles. Dependent on the votes, the content creators are rewarded with the platform’s native cryptocurrency called Serey coin (SRY).

What does Serey stand for? 

The name of the platform, Serey (សេរី in Khmer), is derived from the Khmer word seripheap (សេរីភាព) which stands for liberty or freedom. The platform is built on the philosophy of liberty and is inspired by Friedrich Hayek’s theory of dispersed knowledge. Realizing that every individual knows just a fraction of what is collectively known and that our collective knowledge is therefore decentralized, Serey is looking to encourage the sharing of the unique information that individuals possess through the Serey platform. It wants to create an open platform where everyone is free to enter, to exercise their creativity without fear of being coerced into silence or conformity, and to engage in thoughtful, civilized discussions.

There was no such online platform in Cambodia yet. Cambodia, at this moment, also doesn’t have a culture of reading and writing. Serey is aiming to transform this so there is also an educational component to it.

We need to learn to dance with our feet, with ideas, with words, and, need I add that one must also be able to dance with the pen?

The mission statement of Serey is as follows:

“Rewarding self-expression and creativity.”

Why is Serey run on a blockchain?

The Serey blockchain allows the storage of content – actually only the actual text of the article and no pictures or videos to keep block sizes minimal – in a distributed manner. Anything written on Serey is stored on a blockchain that is shared among many other servers, called witnesses, that run an exact copy of the blockchain. This makes all content tamper-proof and censorship nearly impossible. This is in line with Serey’s belief that everyone should have the right to free expression.

In addition, a blockchain serves the people’s right to keep the fruits of their labour. Serey cannot take away any of its users Serey coins. All earnings are rightfully theirs and they can spend it in any way they want.

What are the features of Serey?

Serey is principally a fork of Steemit – another social media platform on the blockchain – and therefore essentially makes use of the Graphene technology that also powers Steemit and Bitshares. However, whereas Steemit is trying to create a one-size-fit-all approach with their platform, Serey is entirely dedicated to the people of Cambodia. They believe that regional differences require different user interfaces and functionalities that match the people’s cultural makeup and level of sophistication with blockchain technology.

Compared to Steemit, Serey has a different layout, a market place section, a Khmer language option, an free advertisement section, and a simplified reward system.

The Serey Decentralized Exchange is currently under development and will offer an English and Khmer language option.

In addition, the Serey Decentralized Exchange is currently being built in cooperation with developers close to Steemit and Bitshares. It will be a full-fledged decentralized exchange that is accessible by anyone, anywhere in the world. Users will then be able to trade Serey coins (SRY) among 15-20 other cryptocurrencies such as Bitcoin, Ethereum, Dash, Bitshares etc.

Other features that Serey users can look forward to in the next six months are an online betting system, improvements of the market place section, an integrated chat feature similar to that of Messenger, and a mobile app.

If you are interested in Serey, please feel free to visit the website and to register for free. Most articles are written in Khmer, but English articles are welcome as well.

Eye Candy: Computer games, worldwide

NOL map computer games.png
Click here to zoom

These are the most-owned games on Steam, a digital distribution platform (wiki). This was fascinating to me for a bunch of different reasons. You can come up with your own, I’m sure. Here are the wikis for the games:

I have played none of these games…

Life expectancy at birth is not a predictor of health care efficiency…

This is going to be a short post to argue that pundits (and some economists) need to stop quoting life expectancy figures to argue for/against a particular health care system. This belief is best exemplified in a recent paper in the Journal of the American Medical Association where Papanicolas et al. (2018)  point out that the United States “spent nearly twice as much as 10 high-income countries (…) and performed less well on many population health outcomes”. While the authors make good points about administrative costs, they point out that the US has a low level of life expectancy.

Sure, that is actually true – but Americans tend to die in greater proportions from homicides, drug overdoses and car accidents (Americans drive more than Europeans) than in other rich countries. While these factors of mortality are tragic (except car accidents since Americans seem to prefer the benefits of mobility to the safety of not driving), they are in no way related to the efficiency of health care provision. How much of a deal are these in explaining differences with other industrialized countries? A pretty big deal.  For example, these three factors alone account for 64% of the male life expectancy gap between Austria and the United States (see table reproduced below). For women, 26% of the gap between Austria and the United States is explained by these three factors.

The study I cite here only includes three factors. If you add in other factors like drownings among youths (Americans tend to have more drownings than several industrialized countries) which is a result of the fact that Americans are richer and can afford pools (while Europeans tend not to), then you keep explaining away the difference.  This is not to say that American health care is great. However, this says that American health care is not as bad as life expectancy outcomes suggest.

Mortality