Peter Beinart hates you:

The Iowa caucuses undermine a principle that both the Clintonites and the Deaniacs hold dear: democracy. In a primary, you can vote all day; voting takes a couple of minutes; your vote is secret; and if you can’t make it to the polls, you can vote absentee. To participate in the Iowa caucuses, by contrast, you must arrive exactly at 6:30 p.m., and there are no absentee ballots. (If you work the night shift, tough luck.) Once there, you must stay for several hours before publicly declaring which candidate you support. Not surprisingly, while more than 70 percent of registered Democrats participated in the New Hampshire primary in 2000 and 2004, a mere 10 to 20 percent participated in the Iowa caucuses.

Please explain to Ackerman and Fishkin how this is not only not a superior form of democracy, but is not democracy. The mind boggles.

Ahem! More people voting is not more democratic. The Greeks, inventors of democracy, didn’t let just anybody vote, now did they? You obviously need to be more motivated than average to participate in a caucus. And people who actually speak on behalf of candidates, sharing their reasons, and listening to others do likewise, are more likely to be well-informed than people who just shamble into the junior high gym and pull a lever. Beinart simply provides democracy-lovers reason to think all states should have caucuses just like the great state of Iowa.

Over at Cafe Hayek, George Mason economics chair and Cato adjunct scholar Don Boudreaux has come up with a wonderful thought experiment to illustrate just how absurdly inaccurate the government’s methods for calculating real wages are. Don looks at the Census Bureau report (from the depths of which the New York Times editorial page draws forth the blackest despair) and finds that real median family income has increased an unimpressive 31 percent in the 37 years from 1967 to 2004. In 1967 it was $35,379 (in 2004 dollars), and in 2004 it was $46,326.

Are we really only 31 percent–less the 1 percent a year–better off? Don’s thought experiment asks us to imagine that the incomes and years are swapped, and then see how we feel. Would you rather live in 1967 on $46,000 a year (the 2004 median), or in 2004 on $35,000 (the 1967 median).

Let’s take it up a notch. So, it’s 2004 and you make $35,000 (let’s pretend it’s individual, instead of family income). A gangly professor with crazy hair drives up in a time-traveling Delorean and offers you the 1967 equivalent of $46,000 (that’s a 31 percent raise!) if you’ll let him drop you off in 1967, where you’ll live for one year. You say, “Right on!” and take a lift to yesterday.

So now you’re in 1967 with about $8,500 in your pocket, and you’re ready to roll. Have you become wealthier?

Well, as Don notes, housing is smaller and more expensive. Central air conditioning, I should add, is a luxury. Your expensive and ridiculously large (but not the screen) TV gets three channels with fuzzy reception. No Deadwood (or the Wire, or Weeds, or Sports Center, or Project Runway, or Good Eats, etc.) for you! It’s a darn fine year for rock & roll, but you’d like to be able to listen to Dylan on your iPod (you used to download anything you wanted to listen to on demand) or in your car. Your car! It costs almost exactly the same as a 2004 car, but is less comfortable, has no auto anything, gets horrifying gas mileage, and is a death trap without a shoulder belt, airbags, or anti-lock brakes. It handles like a whale. You start to think your Jetta back in 2004 has rather more than an $11,000 edge on this bucket. That makes you a little depressed. Which is a problem, because your Prozac prescription ran out and there’s no recourse but a Freudian therapist who tells you your malaise has something to do with your mother. Trying to look on the bright side, you attempt to be grateful that you don’t need Cialis, or chemotheraphy. The food is terrible. You can’t get a cup of coffee that doesn’t taste like cardboard. The book stores seem to have nothing. A simple calculator costs about the same as your Blackberry. You lose a contact lens, and end up with Coke bottle “birth control” glasses. You want to go home.

The professor materializes again and tells you that he lied. Ha! You’re not staying for a year. You’re staying for the rest of your life. But he guarantees your salary each year will be that year’s inflation-adjusted equivalent of the salary that you have in the “stayed-in-2004″ timeline. (In 1973, you’ll get your 2010 wages, etc.) You start to cry (no Prozac!). The professor exclaims, “What’s the problem, kid? You’ll always be wealthier than you would have been. And besides, it’s a simpler time. People bowl together!”

You get the idea. Don has a bunch of great examples of things you can’t get in 1967, only some of which I stole.

How much would you have to be paid each year to agree to live the rest of your life from 1967 on? Maybe I’m weird, since my entire life would be different–and almost certainly worse–if it wasn’t for the Internet. (I almost certainly wouldn’t have most of my friends, my very cool job, and more.) There are so many things I rely upon that you couldn’t buy at any price in 1967 that it’s pretty hard to think of a number that’s high enough to compensate for the loss. Personally, I don’t care that much about improvements in TV picture quality, or even how comfortable, safe, and gadget-laden cars are now. It’s the things that just didn’t exist in 1967 that do it for me.

Here’s another thought experiment: Suppose you get a medical procedure with new technology that saves your life. It didn’t exist last year, but now it does. If you had been sick like this last year, you’d be gone. So, in a year, you went from a condition in which no amount of money would have been able to save you from death, to one in which a mere $10,000 buys you the ability to see your daughter’s wedding. How much wealthier did you become in the space of that year? Is it more than 31 percent?

[Cross-posted from Cato@Liberty]

Just in case you unaccountably fail to check Cato@Liberty daily, I had a post yesterday about Monday’s dreadful NYT piece on wages growth.

Kevin Drum attempts to answer my question about income inequality. He fails. He tries out a few hypotheses about the mechanism underlying ineuality in income growth and … he is unceremoniously dissected by Russ Roberts, a real economist. After flicking over each of Drum’s ideas, Russ says:

The real problem with these theories of inequality is that they fail to see that the income distribution is an emergent phenomenon rather than under someone’s nefarious control.

That’s part of what I was rather longwindedly getting at in my last inequality post. The statist liberal pundits seem to be so weak on microfoundations that they end up offering simply baffling Underpants Gnome explanations. Russ quotes this nice bit from Warren Meyer of Coyote Blog:

What’s bizarre about all of these statements is it treats wealth, and in this case specifically income growth, like a phenomena that is independent of individuals and their actions.  They treat income growth like it is a natural spring bubbling up from the ground, and a few piggy people have staked out places by the well and take all the water before the rest of us can get any.

The mysterious world of numinous unmoored macro forces that are somehow rigged to benefit just the rich is a world of magic and wonder. Good thing we don’t live there.  

It is shocking to discover just how much of the debate over politics and policy rests on semi-arbitrary government standards for measuring things. For example, if you believe the Consumer Price Index speaks with absolute authority, then you will believe obviously absurd things, like the idea that real wages have stagnated. Virginia Postrel has a nice short essay in Forbes [free reg. req.] on this aspect of the mismeasurement of economic progress. If Bureau of Labor Statistics true-believers are right, then

… you have to wonder who’s buying all those flat-screen TVs, serving precooked rotisserie chicken for dinner or organizing their closets with Elfa systems. “Anybody who thinks things are getting worse should go to Best Buy and notice the type of people who go to Best Buy,” says economist Robert J. Gordon of Northwestern University.

Gordon is the author of a much-cited study showing that from 1966 to 2001 real income kept up with productivity gains for only the top 10% of earners. What the pessimists who tout his study don’t say is that, while Gordon does find that inequality is increasing, he’s convinced that the picture of middle-class stagnation is false.

“The median person has had steadily improving standards of living,” he says. But real incomes have been understated. The problem lies in how the U.S. Bureau of Labor Statistics calculates the cost of living.

Similarly, the American Enterprise Institute’s Nicolas Eberstadt has a terrific essay on the bizarre and inaccurate method by which the government calculates the poverty rate in the new Policy Review. Eberstadt shows that the official poverty statistics often get things backwards, indicating that poverty is getting worse when it is in fact getting better according to a number of other noncontroversial measures of economic well-being:

The official poverty rate is incapable of representing what it was devised to portray: namely, a constant level of absolute need in American society. The biases and flaws in the poverty rate are so severe that it has depicted a great period of general improvements in living standards — three decades from 1973 onward — as a time of increasing prevalence of absolute poverty. We would discard a statistical measure that claimed life expectancy was falling during a time of ever-increasing longevity, or one that asserted our national finances were balanced in a period of rising budget deficits.

Journalists unfortunately tend to take government numbers as gospel, and therefore end up communicating to the public a badly distorted picture of the state of our economy and society. And far too often intellectually savvy commentators who ought to know better repair to government statistics as if they are pure data, untainted by systematic methodological bias. However, far from a neutral picture of empirical economic reality, we get a funhouse mirror. I don’t think there is any intentional bias in these measurement methods. But there sure is ideological resistance to replacing them with more empirically adequate measures. Things really are getting better all the time, but “reality-based” economic measures might get in the way of some people’s pet policies. And we can’t have that! I think we’ll eventually get better official methods for measuring real income and poverty, but not without a fight.

[cross-posted from Cato@Liberty]

Ezra tries to explain to me why “liberal” economists are worried about inequality as opposed to some people’s not having enough to lead a good life. Maybe it’s a good sociological explanation. I don’t know. But I’m afraid Ezra’s explanation vexes me. Here’s Ezra:

What concerns liberal economists is the relative apportionment of income. Inequality is something of a proxy for this. Take the so-called Krugman calculation which, in the early ’90s, showed that 70 percent of the post-1973 rise in incomes had gone to the wealthiest 1 percent. As he put it, “when incomes at the top of the scale are rising faster than the average, incomes farther down must correspondingly grow less rapidly than the average. In an arithmetic sense, we can say that most of the growth in productivity was “siphoned off” to high-income brackets, leaving little room for income growth lower down. “

What we’re worried about is what’s called the “inequality wedge.” The gap in incomes is so vast and the pool of money at the top so great that growth, which once would have rushed all the way down the income ladder (rising tides, all boats), isn’t making it down the distribution, instead clogging up at the top percent or two (rising tide, only yachts).

Sadly, this makes almost zero sense to me, no doubt due to a Hayek-Buchanan-Nozick gestalt switch about “distribution” that I underwent years ago, forever crippling my ability to think like, well, the staff of the American Prospect.  Ezra’s picture seems mysterious to me. It looks as if, first, there is something called “the economy.” Then there is something called “growth,” which is the size of the economy getting bigger. And then there is a matter of how to divide or share this year’s slightly larger pool of wealth (a gigantic pile of doubloons in the basement of the Treasury?) through the ”apportionment” of income. I’m sorry, no.

What there is is an ongoing dynamic pattern of exchange, within and across national boundaries, that creates new wealth. For each exchange among the billions that create the overall pattern (labor for money, money for interest, money for capital goods, money for consumption goods, etc.) there is a surplus from exchange and a distribution of that surplus among the parties to the exchange. We can count what everybody within some semi-arbitrary geographic region gained or lost in money terms from all their exchanges between period one and period two. But there is no further question about distribution. That was all already settled when the exchanges were completed. If there was no worry for the interested parties about the distribution of the surplus of each exchange, then it is hard to see why there is a worry later about the aggregates. 

Here’s why I might worry about intra-national income inequality.

Nation-states aren’t completely arbitrary regions from an economic point of view because the policies of national jurisdictions change the relative price of various forms of exchange for the people living within those jurisdictions, and this partly (sometimes largely or completely) determines what particular exchanges will and won’t get made. If you see a lot more exchange, or a lot more complex exchanges, going on within a national jurisdiction, that probably has something to do with the rules that govern the jurisdiction. If certain jurisdictions include a lot of people involved in a lot of inter-jurisdiction exchanges, then that says something good about the rules there.

Now, the rules that help determine what exchanges will and won’t be made—policy, “institutions,” etc. — will have a definite effect on the relative size of incomes within the jurisdiction.

Let me say that I’m not going to say anything about the “distribution of income” here, because people too often equivocate between the statistical and disbursement senses of “distribution.”  Here’s how I think about it. Distribution is a matter between parties of an exchange, not between co-members of a political jurisdiction. Further, your money income in a period is the sum of your money distributional shares from all the exchanges closed in that period. It is a straightforward fallacy of composition to think of that sum as itself a distributional share. So, when we’re comparing incomes of co-members of a political jurisdiction I’ll say we’re talking about  the disposition, not the distribution, of incomes in that jurisdiction.  You are of course free to think about the distribution of income just as long as you promise to think of “distribution” in a strict statistical sense, and not as the “apportionment” of individual shares from some mysterious pooled ”national income,” since that is voodoo gibberish on par with “intelligent design.”

OK! A good example of how policy affects the disposition of incomes is the disemployment effect of a high minimum wage. People whose labor is worth less than the price floor will be excluded from exchanges of labor for money, and so will have very little money income at the end of the measured period. Or, to take another example, a big business-backed regulation or legal action that pushes smaller competitors out of the market, is generally meant to ensure that the big business will be party to a larger portion of the exchanges in that domain (and if they achieve monopoly-ish status, a larger take of the surplus), so that its owners and officers will have a bigger income than they would have had in a competitive environment.       

Now, it seems pretty likely that greater inequality in the rate of income growth (a different thing than income inequality per se) for people at the top and middle of the income scale might reflect a change in exchange opportunities and the distributional terms of those opportunities for people at different points of the scale. I am worried just in case this is a consequence of rules like price controls or anti-competitive regulation that create a pattern of exchange that is distorted compared to the pattern that would have emerged in the absence of such exchange-restricting rules.

Now, I don’t find it totally implausible that the decline of unions as an agent of political predation for a good chunk of the middle class has decreased the rents accruing to many middle class workers. But that’s good. And I don’t find it implausible that some corporations have become more efficient at gaming the regulatory and government contracting processes to increase their political rents. That’s bad. So a combination of that good thing and that bad thing could be part of the inequality story. But in that case, I’m not worried about the inequality per se; the justice or injustice of the rules generating that kind of inequality doesn’t flow from the inequality itself, but from interference or non-interference with the moral right to enter into voluntary exchanges with others on mutually acceptable terms.

If inequality in the rate of income growth is just a function of a change in the market value of capital, human or otherwise, then I can’t see the normative upshot. If the payoff to investment and education has gotten bigger, then that’s just a good incentive for people to get more education and save more. Now, if some people don’t have access to an adequate education (and the public school system ensures that many people—urban minorities especially—don’t), then they don’t have enough, and that worries me plenty. And if unwisely anticipated Social Security and Medicare benefits suppress savings, such that people are investing too little, and missing out on potential returns to capital, that would ensure that they have enough in retirement, then that’s a big problem with the jurisdictional rules of the game, and we ought to worry. But the issue just isn’t inequality.  

Well, that’s a mouthful.

Philosophical wrap up… My view is that materially egalitarian liberalism is not really a form of liberalism at all. It is a socialist corruption of liberalism. Liberal egalitarianism properly concerns the equality of political power—none has a natural right to rule, and unequal political power requires special justification and special limitation. In terms of the material resources we command, liberalism is concerned that we are equal in the sense that everyone’s liberties have genuine value—are not “merely formal”—and this is a matter of people having enough to develop their capacities and to realize their meaningful ends. Property, rule of law, civil society, and free exchange in a well-functioning price system—backed up if necessary by minimal means-tested welfare and educational assistance—is the best way to make sure everyone has enough.  

So, I still don’t understand why welfare economists should worry about inequality, much less liberals.      

[Note: By the way, the Krugman quote Ezra provides is extra-mysterious. Yes, if somebody is above average, then somebody is below. Logic! But I am not familiar with this "siphoning" in an "arithmetic sense." Suppose height is growing fastest in the top 5% of the height distribution. Are those tall people "siphoning off" height-growth lower down the distribution? What is Krugman even trying to say? I don't know, but I suspect he is managing to confound different senses of "distribution" without even using the word.]

From the incomparable, self-satirizing Stirling Newberry:

Even today there are people arguing that Ayn Rand is a major “liberal” theorist, and fighting to preserve her holy memory on the internet. This from a philosophy that starts out from two questionable tautologies and worships getting cancer. No rhapsody anywhere in Rand’s books surpasses her paean to smoking.

I don’t know, if I’m going to question anything, it’s not going to be a logical truth! And of course, the worst thing about Rand is… what? Smoking! This guy is a master of the unedited non-sequitur brain dump. Does he give money to Josh Marshall or something?
[HT: Diana Hsieh.]

I was delighted to see two of my intellectual fixations—the taste for status and the taste for purity—bundled together in the New York Times.

The urge to achieve social distinction is evident worldwide, even among people for whom prominence is neither accessible nor desirable. In rural Hindu villages in India, for instance, widows are expected to be perpetual mourners, austere in their habits, appetites and dress; even so, they often jockey for position, said Richard A. Shweder, an anthropologist in the department of comparative human development at the University of Chicago.

“Many compete for who is most pure,” Dr. Shweder said. “They say, ‘I don’t eat fish, I don’t eat eggs, I don’t even walk into someone’s house who has eaten meat.’ It’s a natural kind of social comparison.”

Awesome. I have a longish essay forthcoming in the Center for Independent Studies’ Policy magazine about the politics of relative position and status competition. One of my main points is that there is an indefinite number of culturally mediated dimensions of status competition, and competition on some dimensions is beneficial or benign, making it impossible to draw determinate policy implications out of the simple fact that we’re motivated by status. Competition for purity among mourning windows strikes me as benign.

And I recently wrote a piece for Reason laying out why Democrats should stop listening to George Lakoff and start listening to Jonathan Haidt, who has done fascinating work on the psychology of purity and disgust, based in part on the work of Shweder.

I think status competition on moral dimensions can be a good thing, as long as the relavant moral emotions and principles are good. But I think it can also be distorting. I’d guess that some Islamist terrorism is motivated by status competition on Haidt’s ingroup and purity dimensions of moral emotion. But this also accounts in part for very successful church charity drives. The way innate dispositions are mediated by culture is almost the whole ballgame.

The topic du jour on the econ blogs is Krugman’s claim about the effect of politics on income inequality. Before I solve that problem for you in different mindblowing post, let me say that I don’t really understand why economists care about income inequality qua economists. I understand why they care about income: more money buys a more preferred consumption bundle, which, by definition (not mechanism) gives you more utility.

What leaps to mind is that economists must be impressed with diminishing marginal utility (DMU) arguments for redistribution. But this is not qua economist. Orthodox utility theory is not in the business of interpersonal utility comparison, so there is no language in which to say that overall utility has been increased by redistribution. There’s just one guy’s utility going down, another guy’s going down, and no way to say whether one compensates for the other. (This is one of the reason some economists are attracted to happiness research: they want a language in which to do principled interpersonal utility comparisons.) But, as I have noted in the past, when economists have anything interesting to say, it’s usually because they are applying what I like to call economic folk morality, which plays fast and loose with the various senses of utility. Economists qua amateur moral philosophers in my experience are very impressed with DMU justifications for redistribution.

But professional moral philosophers with high-level training in economics, such as David Schmidtz, are rather better at this kind of thing than economists who occasionally indulge their philosophical prejudices on blogs and in the NYT. Schmidtz shows that even assuming everyone has the same utility function, marginal utility diminishes smoothly, there are no incentive problems, and redistribution costs nothing, it still does not follow that utility must increase when inequality is reduced.   

Schmidtz notes that DMU is precisely why some dollars are not consumed, but invested. There is a point where an extra dollar will have a higher expected utility if allocated to production than consumption, and we need enough people at that point to have the kind of production that ensures that there is anything to redistribute. From Schmidtz’s Elements of Justice (which I highly recommend), where he discusses a simple example involving the redistribution of corn:

Precisely because of diminishing (that is, downward-sloping) marginal utility of consumption, production becomes a higher-valued use as wealth … rises.

Note: Production’s tendency to be more desirable relative to consumption is a general consequence of consumption’s DMU, and not an artifact of an odd example. The general conclusion: If a community does not have people out that far on their utility curves, so that they have nothing better to do with marginal units of corn than to plant them, the community faces economic stagnation at best.

Therefore, unequivocal utilitarian support for egalitarian redistribution is not to be found in the idea that consumption has DMU. This result in no way depends on questioning the premises of the DMU argument. On the contrary, it is grounded in DMU. A society that takes Joe Rich’s second unit [of corn] and gives it to Jane Poor is taking that unit away from somebody who, by his own lights, has nothing better to do than plant it and giving it to someone who, by her lights, does have something better to do with it. That sounds good, but in the process, the society takes seed corn out of production and diverts it to current consumption, thereby cannibalizing itself.

There is much more to Schmidtz’s argument, and I encourage you to check it out. Like Schmidtz and like a bad socialist, I am cold on material equality, and, like a good liberal, warm on material sufficiency. What matter is that people have enough to realize the ends that make our lives worth having. If a system that encourages those who already have enough to invest their extra in production is more likely than a heavily redistributive system to provide  everyone with enough, then a highly materially unequal society may best serve liberal ideals.

Whether we should be morally worried about inequality depends on its sources. But then the real worry is the source of inequality, not inequality per se (though the resulting inequality may exacerbate or consolidate the original injustice.) If inequality is based in predation, then the moral worry is predation. In a system like ours rife with corporate welfare, some people do get rich off political predation. (I can see K St. from where I’m sitting!) I don’t know how many of the top 1% (that both includes Krugman and makes him insane with indignation) got there through rent-seeking. Maybe a lot, but certainly not all the software millionaires, and all those entertainment and sports stars. Anyway, as I’ve mentioned before, redoubling our efforts Krugman-style to take more money from the rich through the political system is mostly an effective way of providing the rich with an incentive to put more money into the political system to prevent having even more taken. It is in principle possible for the people with the least leverage and weakest incentive to bend the political system to their will,  just as it is in principle possible for a dog to catch its tail. The only option for separating money and political power is to reduce the desirability of political power by reducing its scope and effectiveness. My guess is that constraints on government power, such that the rich would have less incentive to try and dominate it, would lead to more people having enough, but perhaps even greater inequality.   

Bryan Caplan on Gilbert…

“Money itself doesn’t make you happy,” [Harvard psychology professor Daniel] Gilbert says. “What can make you happy is what you do with it. There’s a lot of data that suggests experiences are better than durable goods.”

I’m baffled. Don’t many durables provide a flow of experiences? A nice T.V. is the obvious example; a fine stereo system’s another. My CD collection is my pride and joy - whenever I worry about being robbed over vacation, my first thought is the sorrow of seeing my CD shelves empty.

I don’t share Arnold’s methodological aversion to happiness research, but this sounds like a very hasty generalization.

Two points. (1) Market egalitarianism. Qualitiative differences between cheap and expensive consumer goods is almost nil. There is almost no experiential difference between a cheap TV and a “nice” TV. If Deadwood is good on a $2000 plasma screen on HBO, it’s 98% as good on your sister’s giveaway used 19″, a $35 DVD player, and Netflix. The extra expenditure buys almost nothing in terms of the quality of experience. Same with the music. For $4.95 a month, I can get I’m guessing 75% of of Bryan’s CD collection on Yahoo. Capitalism makes money worth much less when it comes to manufactured non-positional goods. (2) Adaptation. The mind is a novelty whore — a change detector. Consciousness loses its grip on the added quality of a premium picture, sound system, etc., very fast. The cheap, almost perfect substitute for an expensive stereo is a cheap stereo. The cheap substitute for an exquisite meal at the best restaurant in Paris is… what? IHOP in Arlington? A great memory and a great story is an ongoing flow of positive experience. Gilbert is right.

An article in yesterday’s Wall Street Journal (sub. req.) discusses the emerging, more nuanced, happiness research orthodoxy on money and happiness: money doesn’t make people happier, though people with more money say they’re happier. We say we’re happier when we have more money, because, upon reflection, it seems satisfying to be higher-status. But having more money doesn’t actually make you feel better when you’re not reflecting on it.

What happens when high-income earners aren’t contemplating their position in the financial pecking order? Consider a June 30 article in Science magazine by Daniel Kahneman, Alan Krueger, Norbert Schwarz, Arthur Stone and Prof. Schkade.

The five professors analyzed data for 374 workers who were asked every 25 minutes during the workday about the intensity of various feelings. Those with higher incomes didn’t report being any happier, but they were more likely to say they were anxious or angry.

The five professors also studied government data detailing how folks divvy up their waking hours. They found that people with higher incomes tend to spend more time working, commuting and engaging in obligatory nonwork activities, such as maintaining their homes. All of these are associated with lower happiness.

“People who are richer aren’t having a better time,” Prof. Schkade concludes. “But if you ask them about their lives, they report being a little more satisfied” than those who are less affluent.

It seems to me that what they mostly showed is that it is not easy to make money, which is not surprising. It is also not surprising that people who went through the trouble of making money are generally glad they did. For the life of me, I can’t get much out of this study other than that working to make more money can be stressful and the astoundingly obvious fact that a backrub, or whatever, won’t feel better just because the terms of your labor contract provide a higher than average salary.

Kahneman, et al., however, insist on attributing the higher than average SWB  for wealthy people to a “focusing illusion,” which makes no sense. That life satisfaction judgments do not track the temporal integration of Kahneman’s “moment utilities” is not evidence that there is some kind of illusion. It is just evidence that satisfaction judgments are value laden, and people value things other than utility.

Suppose there is a big marathon going on. There is a guy running the marathon, and there is a guy sitting in a bar drinking beer and watching it on TV. You sample their experience over the course of the event. It turns out that the guy running the marathon is experiencing high levels of stress, near-exhaustion, searing pain, etc. The guy drinking beer feels pretty good. It’s air conditioned, and he’s got a bit of a buzz on. Now, the marathoner wins the race. You ask him how he feels about his life that day: ”Fantastic! It’s the best day of my life!” And you ask the guy who spent three hours drinking beer: “OK, I guess. I really should have been doing yardwork. Good race, though.” The runner does not only not subtract the pain of the race from the pleasure of winning, the pain, and his triumph over it, increases his sense of satisfaction. Because, naturally, his satisfaction judgment is based on values other than pleasure and pain, such as self-command, perserverence, drive, and winning. Is he undergoing a “focusing illusion”? Asburd. The problem is Kahneman’s value theory.

I’ve made this point a number of times, but apparently I’m not tired of making it, because I’m about to make it again. One of the tenets of Objectivism is that adherence to the principles of Objectivism is a necessary condition for true happiness and maximum longevity. I am completely confident that this is false. So I am also willing to bet that Mormons, for example, are on average both happier (measured according to any standard method) and longer lived than Objectivists.

Any takers? How much you wanna bet?

I anticipate that some will object that happiness measurement techniques are unreliable. Fair enough! But I worry some Objectivists will insist on defining happiness a bit circularly. Rand said happiness is “the successful state of life… that state of consciousness which proceeds from the achievement of one’s values.” I like it. Elsewhere we get “noncontradictory joy,” by which she means guilt-free joy. Anyway, how can we tell we’re there? By noticing that we’re in that joyfully guilt-free state of consciouness. It seems like if you were in it, you’d know it. That sure sounds to me like something strong enough to show up on surveys or experience sampling diaries. Still, I think Mormons will report feeling better. The trick is that happiness, by definition, comes from achieving one’s (objective) values, and objective values are the necessary conditions for life (”man qua man”). Reason, the capacity of non-contradictory identification, is our primary instrument of survival and happiness, and faith is the abdication of reason. Mormons believe, well, lots of weird things, by faith, totally at odds with reality. So whatever state of consciousness Mormons are achieving, it can’t really be happiness, now can it, since it violates allegedly practically mandatory values. 

But you’d think the “philosophy for living on Earth” would buy you some extra longevity, so it’s hard to see how you would explain away Mormon dominance in life-span, if such a thing were shown to be true. (And I’ll bet you it is!) Since one man’s modus ponens is another’s modus tollens, we might infer from the fact that adherence to some belief system leads to the longest, happiest lives, together with the premise that reason is our capacity of non-contradictory identification  aimed at survival and flourishing, to the conclusion that the most life-promoting belief system must be endorsed by reason. So if Mormons really are happier and longer-lived, should Objectivists become Mormons? Or should they rather acknowledge that reason isn’t necessarily for survival and happiness, but worth caring about all the same, and believing in Kolob or whatever isn’t worth it, even it would make you happier and add a couple years. 

Don’t miss the new Cato Unbound featuring this morning’s lead essay by Richard Rodriguez.

Americans have tended to abrogate to economists the question of the costs and the benefits of illegal immigration. But, surely, beyond how much Betsy Ross is willing to pay for a head of lettuce, there is the question of morality, there is the question of Mexico. How much of Mexico are we willing to take within our borders? I believe the question might better be asked of a theologian, than an economist.

Rodriguez is no theologian, but he gives it a shot. Watch out for Victor Davis Hanson’s reply Wednesday. He’s not thrilled with Rodriguez.

Amusing little smart-ass essay by Bertrand Russell illuminating the genius of Carlyle, Nietzsche, and Lawrence…

Ignore fact and reason, live entirely in the world of your own fantastic and myth-producing passions; do this whole-heartedly and with conviction, and you will become one of the prophets of your age.

Aaron Haspel has the best mea culpa I’ve seen about being on the wrong side of the war. I especially liked this bit:

There was also a certain haste to blame America in the anti-war arguments that bothered me. I have no desire to discourage self-criticism, least of all in this post. But even Jim Henley, who among the long-time opponents of the war most closely resembles a responsible adult, has not exactly emphasized the horrors of a culture that treats suicide bombers like rock stars and stones homosexuals to death. These very horrors, ironically, undercut the case of the warbloggers, who harp on them. Surely the least likely people to successfully impose your political ideas on are those whose core values are utterly alien to your own. You end up just killing them instead.

My initial tepidness about opposing the war was based in a thoroughgoing horror of viciously antiliberal Islamic culture, and I worried deeply about the fact that many anti-war types seemed not to share my horror. But Aaron’s incredibly important last point was one of the clinchers for me. I had the idea that maybe the war could do something to undermine Islamic religious authoritarianism, and if it was going to have that effect, that would be a strong reason in its favor. But reflection lead me to see that the depth of the problem is precisely what would make the attempt to swiftly impose liberal democracy an almost certain bloody failure. That’s what I had in mind, here:

A moral infrastructure is something neither Bechtel nor the CPA has the power to provide. Canals and constitutions are all for naught if Iraqis don’t develop norms that enable the emergence of a complex market and the benign administration of the state. If — whether because of religious conviction, political ideology, tribal affiliation or whatever — they don’t believe these are norms worth having, then they won’t have them. And despite our best intentions, our efforts there will fail.

[...]

How do you build, or grow, a moral infrastructure? That’s what we need to understand. Sadly — and let’s hope not tragically — we still don’t.

Well, it has turned out tragically.

I find most of the responses to Tyler’s provocative “libertarian vice” post very stimulating, but I find the prevailing defensiveness pretty disappointing. This is 1/2 Tyler’s fault for making it sound like the vice—assuming that government quality is fixed and low—is essential to libertarianism, which it isn’t. Indeed, a quite widespread understanding of Rand-Rothbard-Nozick rights libertarianism doesn’t even require the premise that voluntary price-coordinated action is generally more effective than state coercion. Rights are normatively binding deontic restrictions whose authority and force does not wait on the outcome of an empirical comparison of the consequences of alternative institutional arrangements. (I think this is view incorrect, both in fact, and as a reading of everyone but maybe Rothbard; the point is that this is the catechism of High Church axiom of non-coercion libertarianism.)  

It is, however, 1/2 the commentators fault for not directly conceding that the libertarian vice is indeed a widespread libertarian vice. Alex and Glen: You protest too much! It is exceedingly similar to, if not the same thing as, what I call the “fallacy of asymmetric idealization.” Libertarians are in fact very often guilty of assuming counterfactually ideal markets and counterfactually non-ideal governments. And faith-in-government liberals commit the opposite vice. To argue, correctly I think, that empirical comparative analysis shows us that actually existing market institutions tend to perform better than actually existing government institutions in achieving liberal aims does nothing to establish that libertarians aren’t often guilty of Tyler’s vice, or my fallacy. Indeed, as long as you don’t read Tyler uncharitably as making a silly definitional claim about libertarianism, I don’t see how what he is saying is even contrarian, as opposed to a perfectly good observation.

If nothing else, Tyler’s post is cagey piece of strategic rhetoric that signals to egalitarian liberals a good faith willingness to actually having a debate without pointlessly pulling out ideological trump cards and declaring victory, and a related commitment to non-utopian policy—to endorsing the best option in the politically feasible set. I read Tyler as saying that he considers it inappropriate to assume a priori that market alternatives to government will always be better than government, or to assume  a priori that a policy to improve the effectiveness of some government function will not be the best feasible alternative. If some politically infeasible market reform is “better” in the abstract, that is often simply irrelevant. I think this is certainly correct.

Of course, each policy decision alters what is politically possible in the future, which can present very complex choices. Suppose policies A and B are politically feasible. Policy C is not. A is “better government” and is best in the short run. But C is “legalizing a market in whatever it is A produces” which is best in the long run. A severely reduces the probability of getting to C. B significantly increases the probability of getting to C, but by no means guarantees it, and at the cost of short-term consequences worse than A. So, should we choose A or B? It depends on what you think the expected value of A and C conditional on B are.

If you think the value of C relative to A is huge, you’ll endorse B, even if it increases the probability of C only by a very small amount. I think the debate between statist liberals and market liberals is often a debate over the relative benefits of A and C. If you’re the sort of libertarian who endorses B no matter how big the gains from A, and no matter how small the probability of C, then you’re guilty of the vice. I’ve met more than a few libertarians who will not only endorse B for the purpose of very slightly increasing the the low probablity of C, but on the basis of a truly fantastic conception of a possible path from B all the way through the alphabet to N, libertarian nirvana. But by the time you get only a few steps into the future, the probability is basically zero, in which case supporting B on the prospect of its leading to N is surely a form of addlepated utopianism. If you deny that this happens, then we have been going to different libertarian conferences.

Of course, matters of feasibility are just stupefyingly complex. The infeasibility of certain market reforms are often in large part a function of the ignorance or dogmatism of statist liberals. The probability of getting from here to there is a matter of all sorts of endogenous variables. Indeed, it may be that by signaling good faith in the way you are intend to compare market and government institutions–by saying that you think better government can sometimes be the best feasible choice–you are more likely to get into a conversation that slightly lessens the ignorance and weakens the dogmatism of statist liberals, thereby making is slightly more likely that better government is not the best feasible choice. The strength of this signal is surely amplified by visibly aggravating your libertarian comrades. So, good job Tyler! Sorry I can’t help by scolding you!

My first thought upon hearing about the foiled plot to blow up airplanes was: good! My second thought: why are we spending hundreds of billions of dollars, massive manpower, and valuable intelligence resources in Iraq when we should be rooting out this crap instead? My third thought was: “mass murder on an unimaginable scale”? Bullshit.

Auschwitz is mass murder on an unimaginable scale. A dozen jam-packed airliners adds up to a few thousand people. As horrifying as that is, I’m afraid I can imagine it. Andrew Samwick has the same thought, and, better yet, the numbers.

Despite the gigantic quagmire of a distraction in Iraq, we’re clearly winning the war on terror. Of course, it is not in the interests of the political class, or of glory-hungry security officials to provide us with a realistic sense of the risk. Steven Johnson has it right, and quotes this bit of John Mueller’s great essay in Regulation:

…it would seem to be reasonable for those in charge of our safety to inform the public about how many airliners would have to crash before flying becomes as dangerous as driving the same distance in an automobile. It turns out that someone has made that calculation: University of Michigan transportation researchers Michael Sivak and Michael Flannagan, in an article last year in American Scientist, wrote that they determined there would have to be one set of September 11 crashes a month for the risks to balance out. More generally, they calculate that an American’s chance of being killed in one nonstop airline flight is about one in 13 million (even taking the September 11 crashes into account). To reach that same level of risk when driving on America’s safest roads — rural interstate highways — one would have to travel a mere 11.2 miles.

Take away all the TSA foolishness, and I’m still safer in a plane than driving to Alexandria. Sure, murder is different from accidental deaths, and we’ve got to take active measures to try to stop these kinds of plots. But the response has to be rationally proportionate to the objective risk. I’m afraid we’re unecessarily allowing ourselves to be freaked out of our liberties.

Liquids are piped directly into my home, to my horror. My refrigerator is full of them. Thank God I am miles and miles from the ocean.

My recent blogging efforts have been directed to Cato@Liberty. Here’s one from yesterday on the right of exit versus political predation, and here’s one from Tuesday on pluralism and school choice.

And keep eye an out for the new Cato Unbound next Monday. Essayist Richard Rodriguez will kick things off with a meditation on “Mexicans in America,” our topic for August. Victor Davis Hanson is first in line to reply. Should be good.

Willis Carrier, Mr. Air Conditioner Inventor, we salute you!

Wow. I sure wouldn’t have predicted back in the days of MDOP that Jimbo and Larry would get profiles in the the Atlantic for their contributions to the cataloguing of human knowledge. Actually, I wouldn’t have predicted when I was involved in the early stages of Nupedia (I have an unfinished article on “the paradox of analysis” laying around somewhere) that Wikipedia would become some kind of elemental force of nature. So you never know!

Tyler writes of Nozick’s most famous thought experiment:

Is the experience machine example so compelling as a refutation of hedonism? I think it puts pleasure squarely on the map as one value which matters and which is even undervalued in many circumstances. Many of us are too reluctant to step into the machine rather than too ready. Isn’t our general tendency to overvalue the illusion of control?

Surely it is not meant to rule out pleasure as “one value which matters.” Hedonism is the view that pleasure is the only value that matters. The experience machine is pretty compelling in making us feel the force of competing values. Control is one. I imagine Tyler meant to say we overvalue control, which is often (always?) an illusion. But sometimes it’s not. In any case, a sense of control and self-efficacy gives us pleasure, which is one reason why we are hesitant to relinquish control, but not the only reason.

That’s not quite what the experience machine is about anyway. It’s not about hedonism or control: it’s about subjectivism about value broadly. The value of many things don’t require them to be experienced. They are valuable because of what they are and they way they relate to our lives. That relation is sometime experiential, but sometimes it isn’t. In many cases we think of pleasure as a response to a value; it’s how the value registers, but isn’t the value itself. Nozick is drawing that out, together with the fact that we often see the real relationship between value and its experience as a value in its own right.

Don’t marginalist arguments require a common currency? I think Nozick’s argument is that there isn’t one here. How good must an illusory life seem in order to compensate for the cost of actually losing all values that are not seemings. Nozick’s plausible intuition is that the currencies generally aren’t tradeable. Tyler is right that this is wrong. If in fact the circumstances of your life are such that it is hardly worth living, or your demise is imminent anyway, such that expected future value approaches zero, the pleasures of illusory experience may make life objectively better for you by being, at least, subjectively good.

I agree that pleasure is undervalued in some circumstances. It is also overvalued in some circumstances. Like every other value. Isaiah Berlin and Aristotle helps us a great deal more than silly monists like Bentham. Values are values. The trick is how to correctly balance them in the context of a lifeplan without recourse to a mythical common currency, or a stable and predictable exchange rate between values. The ideal balance is not the one that gives you the most pleasure; it is the one the gives you the best life. What that is is your problem, and is not answered for you by any theory. Good luck! Now, a phronimos would know at what moment to step into the experience machine. But if you are not a phronimos, his reasons are not yours.