Thoughts on economics and liberty

Category: Science

Whole Earth Discipline: An Ecopragmatist Manifesto

I chanced upon an interview with Stewart Brand, the author of the above book, in the Weekend Australian Magazine of Oct 30-31 2010, which, unfortunately, is not available online. 

The main thing to note here is that Stewart Brand was a fanatic eco-imperialist till he finally started looking at the facts. 

I still think he is confused because he supports the idea that mankind can cause problematic global warming. But leaving aside that aberration, he now supports nuclear energy, GM crops, and geo-engineering.

I've not read the book (nor can I read it in my present really bad! physical condition), but it is good to know that there are some eco-fanatics who are slowly coming round to the sensible views long advocated by critical thinkers like Julian Simon and, more generally, by the classical liberals, who have enormous faith in the ability of mankind to, through freedom, resolve any problem that they may possibly come across. 

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Environment and the free society

The scene on the left is from Mumbai, on the Arabian Sea. The scene on the right is from Barcelona. The images speak for themselves. 

Yet a myth is propounded by some Indian intellectuals that the environment is better maintained in socialist India than in free societies. Constantly carping about the West, Indians claim a position of moral superiority despite having one of the world’s worst records of corruption, killing of innocent people, poverty, and mismanagement of the environment. Even Indians who have widely travelled across the world will suddenly say: “But the West has damaged the environment.” 

In reality, free societies have a reasonably clean environment. Economic development based on freedom is compatible with a clean environment through the following process: First, the innovation which arises from freedom leads to industrial development along with increased pollution as natural resources are tapped and exploited. As awareness about pollution then develops, a regulatory framework of accountability is introduced in free societies to force polluters to clean up or face penalties. A strong enforcement mechanism and system of justice is a crucial part of this framework. Being rich helps as well, making it easier for free societies to clean the environment. These steps make alternative technologies profitable and viable, further reducing environmental damage.

As a result of these processes, polluting industries and agriculture have been cleaned up in the West, and rivers and lakes reclaimed, reverting most parts of the West to near-pristine environments. In comparison, India's regulatory framework is shoddy and almost totally ineffective. Not only have the Himalayan foothills been denuded and our wildlife destroyed, we are unable to maintain the Taj Mahal, and our cities stink. Good governance based on the principles of freedom is the key to a clean environment – but good governance is exactly what is missing in India!

(This is from my editorial in the Towards a Great India magazine, 15 September 2008) 


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Doctors can be replaced by computers, researchers and thinkers can’t.

I'm going to slow down my blogging for a few weeks till my eyes settle down. They are getting very tired and strained from intensive non-stop reading/writing the whole day. 

But continuing, for the moment, my discussion on critical thinking, here's an excellent snippet from a newspaper article (below, in purple) to illustrate the point I had made in that discussion about complex things vs. complicated things.

IBM's Watson a winner on quiz show intelligence test

"Someone on a tech-support line has to look at emails, reference manuals, web complaints and product databases," he said.

"How do you quickly get across all these disparate data sources where I don't really know how to query them?"

The idea would be to create a sort of digital Gregory House, without the personality problems, that would quickly cut through difficult differential diagnosis problems.

"Producing a differential diagnosis means getting information from textbooks, reference material, doctor's personal notes, web content and electronic medical record databases," Dr Ferrucci said.

"It's all over the place. If you want to consider all that, and in depth, in diagnosing a medical problem, you need to generate possible diagnoses, you need to gather evidence and score that evidence. In other words use algorithms to evaluate whether or not this abstract or journal paper really supports that diagnosis.

"It's exactly that kind of technology we are developing on DeepQA."

We see clearly through this newsreport that a doctor is essentially a smart receptionist or technical support. A doctor's is a SIMPLE task – of cataloguing, sorting, combining facts, etc. -multiplied 100s of times over. Therefore it is complicated, but not complex.  Even on such relatively simple tasks as diagnosis, doctors can go wrong. Indeed, they OFTEN go wrong, as I showed my previous blog post. Hence we need to conduct our own research to confirm their diagnosis (if time or capacity permits). In comparison, an airplane pilot's task is VERY simple. A pilot only has a FEW facts to verify and a few motor skills to master. A doctor needs to know a huge number of facts.

Pilots have ALREADY been replaced by computers (planes can now take off on their own, apart from flying on autopilot), and in the end will become almost totally redundant. Sooner or later, doctors (even surgeons) too will be replaced by computers (or robots) which will provide BETTER diagnoses (or surgery). I look forward to that day when life will become so much safer.

What is a complex task?

On the other hand,  producing the underlying research that generates the knowledge that doctors use is a complex task. It involves conducting extensive theoretical and empirical analysis of tens of relevant variables, seeking to isolate the impact of these variables. This kind of task even IBM's new computer simply can't do! That kind of task will always require a human mind.

A common doctor (even surgeon) WILL be ultimately replaced by a computer, but the researcher can NEVER be replaced by a computer, for the researcher must think about causes from scratch.

It is on complex matters that MOST people go wrong, even researchers and "experts". Eighty per cent of research is inadequate for the task it attempts, and its conclusions are mostly wrong or only  partially correct. 

On complex matters it is incumbent on us to NEVER agree to any research finding blindly but to ask questions. Lots of questions. Make up your own mind. Don't let go your sovereignty to any "expert".

Each of us is gifted with a HUMAN brain (a supercomputer!) equally or MORE powerful than what "experts" have. Let us not indulge in blind faith in "experts" who may be indulging in shoddy thinking, or even have lesser thinking capacity than us.

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Are we rational or irrational?

Below is an extract from the draft manuscript for DOF. I have mulled over various issues and arrived at the view that we are self-interested, hence rational. It might conflict many observations of reality, but it is a better assumption to make than one of human irrationality. I seek comments on this, should you have evidence either way. 

Which part of our brain predominates?

Despite enormous computational capacities of the human brain, its perceptual and cognitive capacity, and capacity for good judgement, is not unlimited. The higher brain does not always dominate in our actions. I’m not talking about simple things like optical illusions, but about serious ‘failures’ of judgement. The sciences of neuropsychology and neuroeconomics are at the frontier of such analysis. In their Nobel Prize winning studies, Kahneman and Tversky found that we can draw erroneous conclusions based on the different ways in which information is presented. These include the biases of anchoring, availability, framing and representativeness. Other biases include the base rate fallacy, conjunction fallacy, loss aversion, peak-end rule, preference reversal, status quo bias and fundamental attribution error. Thus, a recent study demonstrated that we make systemic errors in purchase decisions that are framed as special deals.[1] In addition, we easily slip into logical fallacies. Our mind doesn’t necessarily think as rationally as it could, once properly trained to spot errors of reasoning.
[For an excellent overview of these and other human biases, and to find why our decisions are often flawed, I suggest Jason Zweig’s book, Your Money & Your Brain (2007), and Nassim Nicholas Taleb’s at times very wrong but also at other times insightful books – Fooled by Randomness (2001) and The Black Swan (2007).]
Rephrasing some of the situations in a more natural or ‘intuitive’ manner has been shown to overcome at least some of them[2]. In other cases, it has been shown that such failures of rationality only occur under new circumstances. People arrive at the rational solution after a while and don’t repeat earlier mistakes. It is therefore not sufficient to use this information as a basis to argue that we are irrational. Indeed, the concept of rationality itself needs to be better understood.
The way we are designed, emotion sometimes triumphs reason. For instance, many of us don’t invest in shares even though over the long run it is almost certain that these will yield the highest return. We are afraid of the low probability of loss than excited about the pleasure we might feel with a gain. Loss aversion is the sinking feeling in our guts when we lose money, no matter how little. To avoid that feeling we take the seemingly irrational option of investing in bonds instead of shares. Rationality can’t be narrowly construed in terms of a simplistic equality of loss and gain. When the crunch comes and we are at the receiving end of loss, then all concepts of probabilities become irrelevant. The loss is uniquely ours and we, individually, suffer the consequences – consequences that can sometimes be fatal. In the evolutionary sense we are far better off by eliminating losses, before indulging in pipedreams. Of course, with good education in economics, we might agree to take carefully calculated risks. Rationality must work in tandem with emotion to yield the most satisfactory outcome for emotions are often rational in the evolutionary sense (which, arguably, is far more important than mere ‘logic’).
Our lower and mid-brain can, of course, in moments of extreme emotionality, lead us dangerously astray, even to suicide. We remain the only animal known to take its own life, albeit rarely. Miasmas that beset us include worries (real or imagined), self-consciousness, and stress. As a result, advocates of hatred have a gala time. Our rational mind is easily overpowered by fears. But that does not deny the self-interested rational underpinnings of our behaviour in most cases. I know that my ‘faith’ in reason is challenged everyday when I look around the world. But if we restrict the meaning of rationality to an attempt to be reasonable in achieving one’s self-interest, then almost all human behaviour is rational.
Note, too, that rationality does not require perfection. A demand that we must arrive at the right answer if we are ‘truly’ rational is like asking why don’t tennis games go on for ever, because in a perfect world no one should ever return the ball badly and anticipate the other player’s returns. Reason, or rationality, is not a guarantee of truth. We can reason wrongly – but that is still a kind of reason!
Our cerebellum undertakes fine-tuned movements by (unknown to us) making enormously complex mathematical calculations that would defeat all known computers. So also our behaviour is often driven by an underlying calculation or reason – at times a reason that is deliberately hidden from us by our brain. For instance, Gerd Gigerenzer believes that ‘love at first sight’ is a rational solution to the problem of finding a mate, by preventing us from undertaking a seemingly rational search for partners that often becomes counter-productive, and hence harm our evolutionary chances. A good example he gives is of Kepler who, in 1611, ‘after an arranged and unhappy first marriage, …began a methodical search for a second wife.’ He ‘‘investigated eleven possible replacements within two years. Friends urged him to marry candidate number four, a lady of high status and a tempting dowry, but he persisted with his investigation. Insulted, this suitable match rejected him for toying with her.’[3]
Those familiar with dynamic programming know that finding a solution to the simple ‘parking problem’ (namely, deciding whether to park in the first empty spot or to move on and look for a spot closer to one’s destination) can quickly become mathematically intractable. The problem of marriage is effectively a two-sided parking problem, with both sides searching for a match (place to park), and with significantly greater uncertainty in the relevant parameters (including strategic gaming). Even the rational solution might turn out – once we have done the maths – to be to decide within the first three or four marriage opportunities. Either way, humans tend to marry within the first few partners they investigate, with ‘a third of Americans born even as recently as the 1960s and early 1970s’ marrying their first partner[4].
In particular, it can be supra-rational to ‘fall in love’ and deliberately block so-called rational thinking, which can only create doubt. We might never even know that we have blocked all other options off! The fact is that if we were purely rational we could never marry, beset by permanent doubt. Hence we would never reproduce. Therefore, [o]ften what looks like a reasoning error from a purely logical perspective turns out to be a highly intelligent social judgment in the real world’[5]. Supra-rational decisions (like falling in love) are whole-body-mind rational methods to enhance survival. Often our ‘gut feelings themselves have a rationale based on reasons’[6]. Unconscious reasoning (implicit rationality) is often at the heart of rapid-fire gut feeling.
Consider another rational fact – that time has value. Teenagers know that the fun they are having won’t come back again, so they ignore calls to forego this fun. That doesn’t mean they are irrational: just that they prefer a bird in hand to two birds in the bush. Indeed, once time is taken into account, the implicit rationality of many of our decisions becomes even more evident – particularly when we account also for our (hidden) personal knowledge of our local circumstances. Since deliberate rational thought takes time, it is not suitable for most day-to-day decisions. People rationally take imperfect decisions on minor matters. Our mid-brain also ‘observes’ many things subliminally – things that do not register on our conscious brain: hence we are using whole-body ‘knowledge’ when we decide on most matters.
By now a large stream of literature, including the seminal work of Gary Becker, demonstrates that major aspects of individual behaviour can be best explained by assuming self-interested rationality, even though, on the surface, no such rationality might be evident. The behaviour of drug addicts, criminals (and even animals in some cases) has been shown to abide by the predictions of rationality. Standard economic models therefore continue to provide great value. [An excellent discussion is provided in David M. Kreps’s introduction to his 1990 A Course in Microeconomic Theory.] Models of rational choice are always aware of their limitations – that they do not perfectly predict human behaviour. Those who have convincingly demonstrated the predominance of rationality include: Steven Levitt and Stephen J. Dubner’s [Freakonomics (2005) and SuperFreakonomics (2009)] and Tim Hartford [The Logic of Life (2008)].
The standard rational choice model therefore remains the best way to investigate human behaviour. Taleb is wrong when he says that: ‘Legions of empirical psychologists of the heuristics and biases school have shown that the model of rational behaviour under uncertainty is not just grossly inaccurate but plain wrong as a description of reality’.[7] He is wrong because rational choice models are an approximation of what human behaviour if likely to be. Rationality is not a claim on perfection but of self-interested optimisation subject to one’s local circumstance. A decision that is perfect and accurate in retrospect (and for ever after!) is not the standard of human rationality. I therefore assume in this book that despite the complexity of the human brain and its limitations, humans are predominantly rational and strategic.
            Noting that, we must also acknowledge that our brain is a two-edged sword. With the motivational engine of emotion but an imperfect ability to think and plan, we are led to heroic deeds and great poetry, or, at times, to terrible crime. Chimpanzees can’t inflict the harm that humans can inflict with atom bombs, but so also they can’t build skyscrapers or write sonnets. Without emotion, all the romance, drama, poetry, art and ‘colour’ will drain out of our lives, making us an insipid and boring package. But we remain capable of justifying everything.[8] We are a unique entity, with potential both for good and for evil. Political principles must recognise and build on this confounding complexity of the human situation. 

[1]The Impact of Price Frames on Consumer Decision Making”, Office of Fair Trading, UK May 2010 []

[2]Pinker, Steven, How the Mind Works, London: Penguin Books, 1999, p.343-348.

[3] Gigerenzer, Gerd, Gut Feelings, London: Penguin, 2007, p.58.

[4] Gigerenzer, Gerd, Gut Feelings, London: Penguin, 2007, p.54.

[5] Gigerenzer, Gerd, Gut Feelings, London: Penguin, 2007, p.103.

[6] Gigerenzer, Gerd, Gut Feelings, London: Penguin, 2007, p.192.

[7] Taleb, Nassim Nicholas, The Black Swan, London: Penguin Books, 2007, p.185.

[8] In this category would be the ‘extreme rationality’-based thinking attributable to Hegel, Nietzsche, Heidegger: the kind of thinking which ultimately created Hitler. Evil does not believe it is evil. Sometimes evil does not even agree that there are values.

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