Friday, August 28, 2015

Modern philosophy makes no sense

Kevin Drum talks about the failings of modern philosophy, including its fascination with the trolley problem. He describes a common philosophical undertaking, taking an apparently reasonable position then attempting to apply it universally and consistently, then being shocked at the results and either using that shock to discredit the initial position or claiming that the shocking final result is a valid result. The trolley problem is popular precisely because it is so easy to generate apparently reasonable initial positions, then extrapolate from them.

Peter Singer's The Life You Can Save, whether its book, web site, or organizational form is an extended exercise in this process. He takes scenarios based on a drowning child, and extrapolates to teach us how we should respond to global poverty. And it's a deeply dishonest effort.

The trolley problem (and Singer's drowning child variation) are exercises not in moral philosophy, but in moral psychology. They investigate the boundaries of our moral sense, not in the realm of logic but in the realm of emotion. And it turns out that our emotional moral senses are complicated, even chaotic. Like public opinion surveys, the results you get from exercises like this depend a great deal on precise wording, the exact types of actions (or inactions) taken (or not). What they show is that our moral sense is weird, strange, and inconsistent, and that we don't really understand it.

What Singer does with this stew of inconsistent results is to pick a particular result that supports his conclusion, then extrapolate from it, ignoring and sometimes dismissing contradictory scenarios, as well as common patterns from the same sets of morality exercises.

For example, Singer tells the story of someone driving a luxury car that represents not just a current source of great personal joy, but his retirement savings, then asks whether the owner should direct a train away from a child to save the child's life, even at the expense of his own joy and future well-being. Unsurprisingly, most people think he should, and from that Singer concludes that we should all forgo all but the bare essentials to prevent avoidable deaths from poverty.

Yet if you change the story a bit, and ask questions like "Should someone mortgage their house to pay for life-saving treatment of a child who lives down the street?" you would get different answers.

In Singer's book, all his scenarios support his conclusions. Moreover, after noting that trolley problem thought experiments suggest that people view action and inaction differently (perhaps recognizing that in a finite life, we cannot do all things), he dismisses that general observation, consistent across a wide range of moral psychology scenarios, as irrelevant.

Unsurprisingly, while noting that poverty has decreased dramatically over the past five decades, both in real and relative terms, the book spends almost no time investigating that phenomenon, insisting instead that large increases in aid are the best answer going forward.

The biggest disappointment for me is that I agree with Prof. Singer that we should and could be doing far more, and yet I found the arguments in his book depressingly weak.

Saturday, February 28, 2015

Federal fund rate, median income, and core inflation.



Here, I've added a graph of core inflation to the previous graph. While the correlation between median income growth and the federal funds rates is not perfect, it's far stronger than the correlation between the federal funds rate and inflation. In 1994-95, for example, the FFR doubled, even though inflation (already at a near 10-year low), dropped slightly.

Friday, February 27, 2015

Federal Funds Rate vs Median Household Income

Sustained drops in median income seem to be the rule rather than the exception. Once median income starts to fall, the drop seems to gather momentum and be hard to arrest, at least with monetary policy. What starts the drops? Is it policy or a natural cycle?


Here we have a graph of the federal funds rate against median income. While the graphs are not completely synchronized, their shapes are largely similar. While median income rises, the Federal Funds Rate increases. When median income falls, the Federal Funds rate also falls. The exception to this pattern is 1995-1998, when the Fed allowed median income to rise without responded with interest rate increases. Perhaps not coincidentally, that was the longest period of sustained income growth covered by this data series.

Thursday, February 12, 2015

inequality increases, recession vs non-recession

Following up on that last post, depending on how you calculate it, the convergence between median family income and per capita GDP since 1984 occurs either completely or predominantly during the median income drops that surround recognized recessions.

Arithmetically, the difference between median family and per capita income dropped by $14,500 between 1984 and 2012. $14,500 of that change was associated with recessions.

Geometrically, per capita GDP increased 61% from '84 to '12. Median income increased by 8.1%. Between median income recessions, per capita income outpaced median income 43% to 30%, significant but not startling. During median income recessions, per capita income increased 12%. Median income dropped 17%.

By the way, I realize that per capita GDP and median household income measure slightly different things. Average household size, for example, decreased by about 7% over this time period, which would explain some of the difference in non-recession growth. There are, no doubt, other corrections to the baseline trends that explain some differences in growth rates without corresponding increases in inequality.

It seems unlikely, however, that those trends are related to economic cycles. It's hard to believe that average family sizes dropped 8% from 2007 to 2012, or that benefits increased about 15% from 1999-2004 to compensate for the drop in median income. And to the extent that those trends explain the baseline, non-recession convergence of the curves, it only further emphasizes the role of recessions in increasing inequality.

It hasn't always been this way. Prior to 1980, per capita GDP and median household income tracked one another very closely.


more fun with graphs

Median incomes decline before a recession, and continue to decline after the recession is over. What about per capita incomes?



Average incomes drop less steeply, for a shorter time.

It appears, in fact, that the median income drops surrounding recessions account for much of the rise in income inequality over the past thirty years. During full recovery periods (where median income is rising), the curves in the graph track fairly well. During recessions (broadly defined), the curves diverge.

Wednesday, February 11, 2015

median income drops presage recessions

For the last three recessions, median income started dropping prior to the official recession and continued to drop long after the recession officially ended. In the 1990 recession, median incomes dropped for four years. In the 2001 recession, they dropped for five. Around 2009, they dropped for six.

The fascinating thing, to me anyway, is that median incomes dropped prior to the recessions, that from the perspective of the median family, the recession started years before being recognized by official statistics. Subject to the normal caveats about correlation, causality, and small sample sizes, you might even say that median family income drops are reliable indicators of future recessions.
It's also interesting that while many are wondering why it's taken so long for incomes to recover, the time till income recovery doesn't look all that different from the previous recessions. The biggest difference isn't the length of time till income recovery started, but the amount of income lost. In addition, the severity of the initial income drop was associated with a shorter time gap between the income peak and the recession itself. By the time we hit a recession in 2001, incomes had already been falling for two years.

Saturday, July 13, 2013

The role of experts

Prof. Krugman has been writing a lot lately about the "puzzling" fact that those who were wrong about what the economy needed and how it would respond have neither been held to account for their inaccuracies, or felt any need to acknowledge their errors. I don't understand his confusion. Experts and pundits are never faulted or punished for being wrong, only for being disloyal. This is as true of economic policy as it was about war. It is true in every political environment, whether in public or within private organizations.

Rick Santelli's job at CNBC wasn't to be right. It was to provide arguments and rationalizations for CNBC's viewers. It was to give depth to the views those viewers already held, to give them more sophisticated arguments to advance the views they would have advanced, anyway. He did that job well, probably because he held very similar views himself. His performance wasn't cynical. He used his intelligence as most of us do, most of the time, to make arguments in support of our convictions. His convictions aligned with his audience. He was a reliable ally.

Pundits and experts don't lose their jobs or their standing for being wrong. They never have and never will. They lose their jobs for failing to provide support for their political allies. Writers at the National Review will never lose their jobs for expressing a conservative view, no matter how wrong they are proven over time. They will never hold their jobs by expressing a liberal view, no matter how right that view turns out to be. They need to be clever enough to make their readers more committed to the program, they need to be witty enough to be memorable. Accuracy is completely irrelevant.

Perhaps Krugman reacts more strongly to this phenomenon within economics because the lack of responsiveness to the real world is taking place within his own field, because he feels that the failure of economists to lose status for behaving like other experts puts the field into disrepute, weakening the claim of economics to be a science. I fear there is nothing to be done, however. Economics is and always will be the study of wealth and its creation. Its recommendations will always affect the fortunes of the powerful, and the powerful will always find those with the ability to make arguments on their behalf.

Tuesday, June 11, 2013

First, they came for the terrorists...

It turns out we've been building massive surveillance engines and stuffing them with phone data, social media conversations, search terms, and who knows what else. And it turns out that we're so afraid of terrorists that we think this is a good idea, even though the 9/11 attack killed less than a quarter of the number of homicides in any year from 2000 to 2010. And maybe it's even stopped an attack or two, in which case it's saved some lives.

If saving lives is the criterion for whether we should do this, however, I wonder why we'd stop there. Why wouldn't we use the same approach domestically? If we found people whose profiles suggested future murders, why wouldn't we go through their lives and contacts and find ways to get them off the streets? Wouldn't that be the responsible, prudent thing to do?