Quantcast

Posts tagged with frames

Persuasion, Initiative, Freedom, Desire

  • @isomorphisms: Econ 101 leaves out persuasion. What fraction of business (/politics) is persuasion?
  • @isomorphisms: Of course that's only part of the problem with lacking a theory of where utility surfaces come from.
  • @isomorphisms: People choose careers, (spouses?), and clothes based on narratives someone else wrote. Whether it's the YC type "entrepreneur" narrative or Puma's "sleek" narrative, or sci-fi narratives of technological progress.
  • Where did economists themselves get the idea to become professors? Could it have been from 17 years of schooling???
  • @isomorphisms: It's rare for people to initiate their own dreams or be 100% originators of their goals or preferences.
  • @isomorphisms: Which presents a problem for the Edgeworth-box story of lonely individuals trading with each other.
  • @isomorphisms: But the story Don Draper told about Lucky Strikes is, I think, the same one as the fMRI Pepsi/Coke experiment. #neuromarketing
  • @isomorphisms: It's that ∄ difference between "lies" and "truth": perception is reality. It's that pleasure and preference themselves are malleable and being moulded by others all the time. (Or at least they're trying to mould it.) Even besides "marketing types" or essayists trying to influence your unconscious or conscious thoughts as their job, plenty of people reflexively enforce social norms and expectations without a strong desire or benefit
  • @isomorphisms: The story of Don Draper and the Lucky Strikes makes us individuals out not as free-willed inventors of ourselves, util-seekers and comandantes of our own pocketbooks--but as dull voids with no idea what to do with the incomprehensible freedom we enjoy in a society where incomes so far exceed subsistence.
  • @isomorphisms: It puts us as templates onto which meme-smiths paint their work, searching for 1 that will stick and replicate itself.
  • @isomorphisnms: It's somewhere in that spirit, I think, that persuasion in the workplace, in the store, on the TV, can be modelled. And without an effective theory of persuasion I don't see how economic theory can take an honest accounting of choice, preference, or "optimum".
  • Bike ride through streets named Brookside (nowhere near a brook), Ridgeview (not on a ridge), Westminster (none of their corpses will be entombed there). A tennis court on Buckminster Drive.
  • Ironically, this sign: "NO SOLICATIONS ON THE PREMISES". The real estate developers and bankers involved have already done all the selling, thank you. Now we need these people to obediently and consistently rise for work every day and pay OUR due, without YOU fingering their pockets as well.
  • Even "Alan Rickman Reads Proust", the suggestions of what to do with freedom--trips to India, faling madly in love, "On The Road" type life--aren't original ideas, those come from stories which we have no better idea than to live out.
  • But why point out the unoriginality of others when I have so much to draw on myself?
  • My first business was, literally, a copy of one I'd worked at in another locality. My dreams to become a quant? 100% seeded in the insinuations of my professors.
  • Or even my unclever insults above aimed at the ownership society. Did I invent those myself? No. Umpteen movies and stories and poems railing against suburban culture. Any surprise that Millennials want to walk to small shops whereas their parents preferred driving to the mall? Was it that something about cars and roads and shops changed? Or that a generation worth of artists told a nasty story that changed the demand functions.
  • This is depressing. I need a cigarette.




One must be very naïve or dishonest to imagine that men choose their beliefs independently of their situation.

Claude Levi-Strauss, Tristes Tropiques

(via hollovv, matryoshhka)




People think mathematicians are brilliant because they talk about things like C* algebras or B-splines or A-modules or D-branes or … really any combination of unexplained letter with abstract noun. (Extra points if the letter is Greek!)

But when I think of really genius ideas, I think of things like:

  • stairs. If stairs don’t exist, who is going to think “I need to invent stairs”?
  • alcoholic beverages. We trivialise that somebody must have just drank some rancid stuff and thought it was good.

    But no, people had invented sophisticated methods of getting particular tastes long before modern chemistry. When natural philosophers were still talking about phlogiston, Bordeaux already had fine wine down to a science.
  • rope
  • buckets, bowls, pots
  • handles on mugs
  • screws, bolts, nuts
  • ball bearings!
  • sponges with a scratchy pad … and how do they make those scratchy pads anyway?
  • mitred joins, moulding, wainscoting
  • sewing. I guess you notice pretty quickly when you sew stuff that many small stitches are super powerful, even with a thin thread. But who’s going to never have thought of the concept of a needle and thread before and suddenly think of it?
  • weaving. Warp, weft … have you seen these old tapestry machines? They’re the predecessor of the modern computer.
  • the invention of a chair. Again, suppose no chairs exist. Who is going to think of one and how?
  • toilets.

Let me go a little deeper into several of the brilliant things about modern toilets.

  1. First of all there are the two hinged things, which are stacked in the right order. First one being — not only so your butt doesn’t touch the bowl (because they could just make a bowl with a flat ring on top of it, not make it detachable)—but so anyone who pees from a height doesn’t have to splash onto where everyone sits.

    Second hinge controls the cover—which is a great idea because not only will stuff not fall into the toilet, but residual smells will be kept in. Let’s say your toilet is clogged, for instance. Then keeping the cover down is the best thing you can do for your comfort. By the way: without looking at your toilet, try to draw a diagram for how a series of hinges could control two separate toilet covers, and be bolted into the bowl.
  2. But the true genius is putting water in a bowl. Not only does it give you a way to evacuate the crap, but it reduces the smell.
    http://fc00.deviantart.net/fs45/f/2009/132/b/a/Smelly_Poop_by_gybbi94.jpg
    Smells, of course, are volatile particulate matter that are flung off into the air from your poop, and reach your nose. (Which means that every time you smell poop, poop is getting on your towel, toothbrush, …. I don’t understand why people put showers, toothbrushes, and baths in the same room as where they poop — I mean it’s convenient for plumbing, but I would rather have my poop be as far away from my toothbrush as possible. Well, until I can design and live in my dream house, I have one of those cheapo toothbrush covers.)
    http://titusdentistry.com/wp-content/uploads/2011/03/toothbrush2.jpg
    So how can we cover up an entire piece of poop — it could have lots of shapes, we don’t want to have to touch it, we want to cover all of it with no errors, and we want to compress the poop particles so that they don’t fly off the turd. WATER. Yes. Next time you go in a pit toilet or port-o-let at a concert or camping, hyperventilate before you go in, cover your nose, and wish that they had poured gallons of water into the bank before everyone pooped in it.

That’s leaving aside the efficient manufacture of commodes and the sewage system, which I’m sure are both marvels of their own. You think about something like New York City, it’s a human habitation of 6 million people, each taking maybe 5-10 dumps per week (well, in good times). That’s 30–60 million pieces of crap every week that nobody wants to see or smell ever again.

Dwelling Portably 1980-1989

Imagine you just dug a hole in the side of a hill, Hobbit-style, in a natural clearing. Suppose, too, that you’re close enough to a lake or stream that you can get water to your house easily. (Or it rains enough and you bought some huge rainbarrels.) Then what the crap are you planning to do with all of the crap you generate?! That’s a conundrum for ya.




@UnlearningEcon lamented the deviations-from-Pangloss framing of neoclassical economics. Normal economic theories take perfection (optimality) as a starting point and ask how real-world “market imperfections” differ from the putative abstract-free-market ideal. (That “the free market” is an abstract ideal can be verified by first going to an actual bazaar and then listening to the way pundits use the term “free market” or “private enterprise” as in versus “government”.)

If you’ve spent too much time with your head in a book rather than participating in actual commerce, it can be hard to even conceive of another frame.

 

Here’s an alternative theory, just as wrong and just as simple & parsimonious as the Panglossian-private-enterprise frame:

  • Every rich person has some business that’s making them rich.
  • No rich person will enter a contractual relationship that makes them poorer.
  • The only way for a poor person to obtain wealth is to perform a service for a rich person.
  • So the service must increase the efficiency of the rich person, add new customers, draw more sales from existing customers, or make the same work get done for lower cost.
  • Therefore, the rich always get richer. The poor may or may not get richer.

Of course, the real world deviates from this theoretical ideal in some respects.

  1. Ego projects. Sometimes a rich person wants to indulge in an ego project—like starting their own fashion label, “investing” in a “startup”, or retiring from business to write a blog or perfect the craft of 17th-century viola restoration.
  2. Bad, lying employees. Hiring managers sometimes make mistakes and hire someone who said they would make the operation more efficient, but actually costs more than they’re worth.
  3. Vacations and big houses. A few large purchases do transfer wealth from rich to poor for consumptive purposes. However, it can be shown that when a continuum of houses and vacations trade in continuous time, the real [def.] economic [def.] returns to hillbillies exchanged for house-building go to booze and marijuana with plim → 1.




One misconception I got from the academic theory of finance is that risk and reward go together. You take on more risk, you get more reward. This is formalised in CAPM theory as a higher expected return associated with a higher standard deviation of investment returns.

In reality, ∃ many stupid risks—mistakes, bad ideas, not doing your homework, believing people you shouldn’t believe, taking on a job without negotiating a floor for your own compensation first, or investing in a company that was bound to tank.

Recently, academics have undercut the premise that risk goes hand-in-hand with reward. Perhaps this pill is easier to swallow after seeing "dumb money in Düsseldorf" vacuum up synthetic CDO pyrite (AAA mortgage bonds) spun from BBB bonds—and then find out, publicly, along with the rest of investment Narnia, that the rewards were nowhere near commensurate with the risks.

I’ve seen this play out a little more in private equity, where models of price paths are less influential than common sense, gut reactions, and balance-sheet research.

I don’t know as much about trading. But I’ve read between the lines on the EliteTrader forum and its cousins, and got the sense that, as academic papers that study the matter report: most day-traders lose money on expectation. Their trading capital approaches $0 faster than would be expected merely by the drag of trading fees on a statistical mean of zero profit.

 

Warren Buffett, the world’s best living investor, is in a business where risk and reward are inverted from the CAPM model. (He’s written about it plenty so I won’t repeat him.)

Steve Schwarzman, another of today’s most successful investors, says in this lecture that he focusses on figuring out every possible angle beforehand, not making any mistakes, controlling every risk and making sure he wins. I’ve read similar things in interviews where Mark Zuckerberg or Peter Thiel talk about “making their own luck”. A lot of questions and decisions go into running a business, and I find it entirely credible that getting that right increases the chances of success—that if an omniscient Arjuna were starting a company today, he would have a very high chance of success (again, what does “chance” mean? Where do the “possible worlds” come from?)

Insurance and reinsurance companies, though they may serve a social function, aren’t actually concerned with actuarially converting risk into reward. They’re interested in collecting as many large premia as possible for risks that will never harm their balance sheet. Why do you think they have three times as many claims adjusters as actuaries? Si guarda al fine.

Michael Price, one of the stars of The Vulture Investors, bought a loan to a bankrupt company for 47¢ on the dollar, covered 15¢ immediately with cash, plus 45¢ in bonds plus 23% of the post-bankruptcy company. He needed the bargaining skills and the capital to buy out other bondholders and negotiate a good rate for 

One last classic example: McDonald’s. Ray Kroc saw a huge return on investment but only took smart risks, doing less of the hard work and spending more time being successful. Mr. Kroc didn’t finish college with a bright-eyed hope to be the world’s greatest entrepreneur (cf. YCombinator). He sold Dixie cups for 17 years before he saw an opportunity—in a B2B space—with high returns and low costs. (Selling malt mixing machines back when malts were the profit centre for burger joints—a malt might cost as much as sandwich + fries, or even as much as sandwich+fries+coffee.) The malt mixer business was a classic play; it would earn 100% checkmarks from a Business 101 textbook. Only after Ray Kroc saw another opportunity related to the business he was in, did he buy up the MacDonald Brothers’ restaurant and multiply it out. Again, this is a textbook private-equity move: find a proven business where somebody has completely figured out how to make money hand over fist, such that the only other thing they need is more money. (Obviously this is very different from an entrepreneur with an idea who just wants some money or thinks their failing idea would be saved if only they had more money.) You provide the money and collect the multiplied profits, i.e. you take on the easy part of the problem, negotiate the terms so you get a huge return on solving it, and then you’ve done little work for great reward. That’s a “smart risk”, not a correlation of risk and reward.

 

We could probably go back and forth with examples of titanic companies. (Sure, Ted Turner threw massive sums into a money pit for over a decade before seeing TNT and its siblings become profitable.)

But still I think the overall message of risk~reward is wrong. There are smart risks, and there are dumb risks. Don’t expect that just because you did something risky, that the return will be good. Work smart, not hard. Cover your *rse and check yourself before you wreck yourself.




You may have heard that attitude is everything. Perhaps. How you view the world will definitely affect what you do.

But that’s just it: it is what you do that is important, not how you feel or how you present yourself to the world. Attitude, then, is only as good as the actions that it supports. And in many cases, the actions themselves affect the very attitude you have.

"Sonshi", summarising Sun Tzu’s Art of War

(Source: sonshi.com)




  • ideas of “pure reason" without emotion send us in the wrong direction
  • D. Hume & A. Smith didn’t take such an impoverished view of rationality
  • funny images of successful people with no purpose
  • stories of people with high “EQ” (emotional intelligence / people skills)
  • an excerpt from I Am A Strange Loop where Doug talks about the enduring feeling of oneness he felt with his late wife even after she died
  • a list of traits that constitute a fuller view of intelligence:
  1. ability to get inside other people’s heads
  2. ability to work well in groups
  3. living with ambiguity and uncertainty
  4. gist-making / quick-summary thinking / better “gut instincts”

—David Brooks




In 20th-century abstract mathematics, one builds up ideas and properties—not assuming anything except what one is told. You think 2+3=5? Well in my space that I just made up, e₂⊕e₃ = e₁, and 5 doesn’t even exist!

Concepts are added in incrementally, like

  • ‖A‖ means the “size” of A. size exists
  • ‖A − B‖ means the “distance” between A and B. plus exists & negative exists; or, comparison exists
    image 
  • (If zero exists, we could say the size of A = the distance between A and 0: ‖ A − 0 ‖ = ‖A‖.)
    image 
  • ⟨ A | B ⟩ means A “times” B. times exists
  • arccos ⟨A|B⟩ ‖A‖⁻¹ ‖B‖⁻¹ inverses exist. times exists. so angle exists
  • topology adds in neighbourhood relationships—not necessarily in a way that you can infer size or distance (∵¬□∃ metric), but so that you could talk about paths or connectedness
  • order or ranking — is it a total order? a transitive order? a partial order? a lattice? Order is subordinate to size, to distance, and to linearity.
  • dimensionality — a set containing { ‘a’, ‘b’, the moon, 12, the vector (0 1 1 0 1)∈ℝ⁵, my cat’s hairball } doesn’t inherently have dimensions to it — so structured sets like ℝ² are supposed to explain how their universe breaks down
  • linearitypossibly the scariest word in mathematics class? I’ve tried and will continue to try to explain it elsewhere, but “linear” is an extremely-restrictive-but-not-that-restrictive-because-so-many-things-are-linear-once-you-allow-calculus-and-maps-across-domains-for-example-fourier-transforms property. Linearity presumes monotonicity (order preservation), size, and a kind of “constancy” that tells you if 2 went to 4, then 13 is going to go to 26. Or “the 26 of the present land”.

Someone GPL’ed this nice (but not comprehensive) chart of two paths through the theory space—starting with a pair (thing, operation) [“magma”—sweet name, right?] and gradually adding more and more axioms until you get to a group.

image

Mathematical words obtain everyday meaning—sometimes unexpected meaning—in applications. For example

  • "angle" might mean "correlation" — the angle between two pulse-trains would be their correlation; and in recommendation engines the matrix “cosine distance” is a basic measure of similarity
  • "multiplication" — well what if you want to multiply two functions together? You could convolve them. Convolution doesn’t seem very much at all the same action as 3×8 = three groups of eight. Neither do Photoshop blends seem like multiplication, but some of them are.
  • "size" — well maybe I mean "how well the business did" on a slew of different metrics — in which case, are there 20 different conceptions of "size"? I guess so.

Could you multiply two trees together? Could you define the angle between two natural numbers? The angle between two business models? Sure. If you know what you’re doing and why, you might even come up with a conclusion that makes sense. It all depends on (a) your ingenuity, (b) domain knowledge of the real-life situation, and (c) mathematical vocabulary.

Sometimes there is more than one interpretation that works with a given set. For example, {0,1} × {0,1} → {0,1} might be joined to operations that define “logical AND" and "logical OR”, or it might be interpreted just as on/off. Or it might be interpreted as the story of unrequited love.

 

All of that preface is meant to dislodge any notions you might have that ℝ² is somehow a “default” or “standard” paradigm. Sometimes number×number is an appropriate metaphor and sometimes not.

For example in the movie Rogue Trader, Nick Leeson’s boss is portrayed talking about “synergy” and “the information curve”. “Nick has positioned himself right there on the information curve!” It’s a parody and nobody seems to know quite what “the information curve” is (what’s on the axes? why is it curved?) but because Nick appears to be earning 70% of Barings’ profits, nobody questions the information curve.

Your typical crappy airport “business advice” books—Thomas Friedman kind of crap—will throw around 2-D charts that make no sense as well. Please leave some pics in the comments if you know what I’m talking about and examples come to mind. Here are a few dubious 2-D metaphors:

image

image

The “political compass” labels reduce the complexity of the world in particular ways that suit the rhetorical aims of these libertarian authors. For example projecting totalitarianism and populism into the same neighbourhood when one could just as well project them onto opposite ends of some other spectrum.

Here are some dubious scales—where either order, linearity, or 1-dimensionality is suspect.

This chart additionally uses way too many significant figures. How is it you gauge "total novelty in the universe" again?
image

image

(Remember: {"heroic", ”pragmatic”, ”circumspect”, ”brazen”} also comprises or belongs to a scale—in the ggplot sense of the word as well as other senses.)

image

Wow! You mean that losses are bad and earnings are good? That is some insightful business insight.

image



image

Crappy reductions needn’t be 2-D. The MBTI is a crappy reduction of personality in 4-D. And here are some in 1-D and other-D:

image
image

I like how step 5 leads to step 2. This should be a list rather than a flow.

Bloom's taxonomy is unjustified, both the projections and the order

Order, 1-dimensionality questionable.
image

Again, a list. This one has a heading. Apparently headings deserve 4 connecting wires whereas list items only deserve 3?
image
image

This is just a list of things. There is no “center” or “flow” or “order” or “cycle” relationship. Maybe “give them” and “get them” could have used a two-way arrow between them.

image

8-D and I just do not understand what these axis labels mean.
image
image

I actually spent hours finding the worst graphics evar. Not gonna tell you my google keywords though.

 

And, not to be critical all the time, here’s a 2-D metaphor that does work:

image


 

Stagepiece one: undermine the conceit that ℝ² is a default. Stagepiece two: cruddy graphics from various domains that force a metaphor that doesn’t really work. And now, the main act.

Today, I want to take aim at a highly suspect 2-D chart from the world of psychology:  the affect × intensity description of feelings.

image

image
image
image
image
image

image

Right away when I look at this, it seems like an overly limiting and not internally valid picture of emotional range. Like so many taxonomies, it gets deeply under my skin in a way that I can’t explain, except to shout: Bad theory! Bad theory!  I mean — how does it make sense to say

  1. that each of these states is a point, as opposed to a spray or splotch or something else
  2. that this precise “point” is the same for all individuals
  3. "delighted" is slightly to the left of "happy" but happy is directly above "pleased"
  4. that “sleepy” is to the right of “tired” instead of the other way around
  5. that tired and sleepy are the same distance from each other as “pleased” and “glad”
  6. WTF is “droopy”? It sounds like a word to be applied to a plant, not a person. I also don’t think it qualifies as an emotion. "Droopy" sounds like a word Good Housekeeping would use to shame a 1950’s American married woman for not being perky! happy! sexy! listening! rubbing his feet! when her husband returns home from work.
  7. Are “sleepy” and “tense” actually moods or emotions? They sound like physical states.
  8. All of these emotions are near the perimeter, but some are closer to the origin than others
  9. sad minus gloomy = satisfied minus calm
??? because all of those are implicit in the drawings.

Remember what I was outlining at first. In abstract mathematics and in deciding the shape of a theory, we shouldn’t assume anything that doesn’t have to be assumed to explain the results.

I could attack the valence-intensity model in at least two ways.

  1. First would be to exclaim “But you didn’t justify any of that stuff! Linearity? Dimensionality? Order? You skipped it all! Where’s the justification?”
  2. Second, perhaps a little stronger than merely asking for backup, would be to point out flaws. For example if I could find a counterexample showing that emotional states don’t have magnitude, can’t be added, don’t break down on dimensions, or aren’t linear across dimensions.
The easiest critique of type [2] I could think of is to question the existence of a “zero-point” emotion. It might be possible to have low-or-zero activation of an emotion on the intensity axis, but on the valence axis? Could I have high intensity of zero valence? What about high intensity in the negative direction at zero valence? It doesn’t make sense.

I came up with a list—several years ago—of different feelings which all could contend for “emotional zero”.

  • neither happy nor sad
  • neutral
  • feel blank
  • both happy and sad (bittersweet)
  • not sure
  • ambivalent
  • "I feel nothing"
  • kinda sort
  • middling

That’s just feelings we have the words for. There are lots of nameless emotions (or emotional superpositions) that could contend for the neutral canvas — the origin from which all other emotions are measured.

The fact that so many clearly distinct feelings all contend for the “origin” made me think there is, in fact, no origin. But making the space affine (removing zero) doesn’t fix the problems I had begun to notice with the circumplex view of the emotional spectrum. I think we just have to think of the range of emotions as a totally different kind of space. I don’t know its topology; I do believe there should be some “activation level” (like a scalar) at least sometimes; I do believe that superpositions are possible.

http://isomorphismes.tumblr.com/post/6559201759/graph-tradeoffs-design-pattern

http://isomorphismes.tumblr.com/post/4840897988/logic-emotion




@portereduardo and I were discussing redistributive taxation on twitter the other day.

Mr Porter wrote a piece in the NY Times about hyper-taxing the tippy top margin of American income to reduce the US’ yearly government deficit. Economists Pikkety & Saez (famous for assembling a widely-quoted data set about top incomes) estimate that $400 billion per year could be raised by putting the US’ top marginal rate back to 80%—about ten times as much as I thought could be raised, that’s actually a significant chunk of the yearly (spending − revenue) deficit.

 

Mr Porter used the diminishing-marginal-utility argument for redistribution: poor people value money more than rich people. (It’s been said that exponential increases in money only beget linear improvements in happiness.)

If you believe that rich Americans should give money to poor Americans, surely it follows that Americans in general should give most of their money (at least their earnings above a certain level) to the poorest in the world—people like the Aboubakars. 
The Aboubakar family of Breidjing Camp in Chad.Food expenditure for one week: 685 CFA Francs or $1.23
Nothing speaks to me like this photo series. The families and their food.
This famous photo of the Aboubakars (taken in 2006 I believe) inspired me to eat more legumes and beans over the past few years. I figured—if 6 of them can get by on ~ $1/week, I can definitely lower my expenses by working what’s in those bags into my diet — crowding out the rich, expensive food (meats, pâté, cheese, hummus, butter, pre-made stuff).
Always fighting the hedonic treadmill. Thanks, Aboubakars (and Peter Menzel).
RELATED: Global Rich List, Angus Maddison’s History of the World Economy, Hans Rosling’s 2010 TED talk

According to the World Bank, the world’s yearly output is worth $63 trillion, and there are 6.8 billion people on Earth. That means an income per person of about $9250. Let’s pretend that it were possible to just “take that money and put it over there” — let’s imagine that people worked every day just as they do now, got their paychecks, and when they did so the various world governments had shuffled all of everyone’s monies around so that the weekly amount was $177.88. What would the world look like then?

 

What follows is my own speculation about what the world would be like at $9000 parity. A lot of this logic actually requires not-quite-parity because no-one would be swayed by a salary offer of $150,000 over $100,000 if they’re going to keep exactly $9,000 of it either way. So in order for market forces to allocate labour to the places where it’s currently going and thus keep production stable, you would need to do something more akin to:

  • taxing every dollar earned over $5,000/year at a 90% rate
  • (After all, if you live in a tent and all you eat is oatmeal, vegetables, legumes, and vitamins/salt, $96/week is far beyond what’s necessary to stay alive. And who are you that you should get foie gras and Mario Kart, when others eat rice gruel?)
  • taxing every dollar earned over $50,000 at a 99% rate,
  • taxing every dollar earned over $500,000 at a 99.9% rate,
  • and so on,
  • with everyone guaranteed at least $1,500/year and those making less than $9,000/yr getting their wages supplemented by a negative earned-income tax.
  • Phew.

Thus a law professor making $250,000 would keep $200,000×1% + $50,000×10%+$5,000 = $11,000, a hefty 22% above the average and a supernal 633% above the lowest earning minimum for non-workers. More than enough to represent status symbols that would motivate him/her to keep teaching the law to young people, right?

Plus, if the world output were fungible, we would have $9000 per person, not per working person. So the usual dynamics of unemployment, childhood, and retirement would take place. The income of working people might be more like $18,000 or more and then split back down depending how many dependents they had — respecting the bar that the same number of people need to keep working the same number of hours at the current jobs in order for world production to stay constant.

 

But, it’s easier to talk about if we said everyone just gets $9,000/year even. Here are my speculations about what that world would be like:

Things that would not exist if everybody’s incomes were equal:

  • High Fashion — The world would be a drabber place.
  • Sotheby’s — No Rothko pieces auctioning for millions.
  • Expensive houses — Obviously, this is where most of rich people’s money goes right now. One could certainly do time-shares on an expensive place, though — or pack a lot of people into one expensive house. The prices of houses would have to drop as well due to falling demand.
  • Disney World — The capital costs can only be sustained by a steady flow of traffic spending between $2,000 and $20,000 per week at Disney World. However you could still go to Knoebels and ride the Red Baron once for a buck (4% of your daily nut). You would have to pay $40 entrance fee ($45 now at Holiday World!) which would mean forgoing two days’ worth of income (though still paying for rent and food on those days). I think we <link> would still have amusement parks and rides, since Americans weren’t so rich when Coney Island was built.
  • Dubai — Obviously.
  • A variety of restaurants — unless prices dropped dramatically due to the redistribution, people couldn’t eat out like contemporary New Yorkers do. A sandwich from Jimmy John’s costs $5.50, $8.83 if you get soda and chips. That’s 34% of your daily nut, not counting rent/utilities. And the San Francisco “yuppie food stamp” ($20 bill gets you lunch) would amount to 79% of your daily costs — surely putting you over the limit for the day once necessities are paid.

    I predict (or should I say, counterfactualdict) that some people would still choose to make a living by serving food to others—they would probably serve the same two or three foods to everyone all day (perhaps varying the amount per person but less choice)—the economy of scale coming through not having to cook several times or manage different ingredients. I used to go to a place in Dublin run by Hari Krishnas, I’m thinking it would be something like that — or like the comedores of Latin America—you can have eggs, beans, and tortilla made any of 5 different ways—con café; pero crema, no tenemos.
  • Universities. Currently, US universities mostly get money from two places: tuition, and research grants. Adults believe so strongly in the value of education that they will postpone consumption for 10-20 years and lump all of that savings into payments to professors and administrators over a 4-year period. But there’s no way somebody earning $177.88/week is going to pay $80,000/year to send anyone to NYU. However professors would ostensibly be willing to share their knowledge for the same money everyone else is making—so what would the total result be?
  • Cars. How are you going to afford insurance and a car on $770/month? Perhaps it could be done but I think people would just bike / walk / take the bus. Horses might even make a comeback as transportation for normal people. (But rich countries already have the pavement infrastructure so I think people would bike there.) Then again, people might still use motors to get around but much cheaper vehicles, maybe smaller motors or old old cars (think Cuba). After all we still have the human and factory capital to make automotive vehicles, and we still have a lot of cars about. Although our V8 technology is much better than the 2-stroke technology.
  • Banks. Well, they would change, wouldn’t they? If all of their customers made $9e3 / year, it seems their business would have to be very different.
  • Orthodontia. Too high of capital costs. Smile, everyone’s teeth are fugly now.
  • Insurance. Once you start accumulating a lot of stuff while continuing to make buckets of income, what does it make sense to do? Protect your stuff. If the top incomes were hacked off, there would be much less demand for property insurance—after all, we wouldn’t be driving expensive cars or living in expensive homes anymore.
  • Pharma research. At least the business model would have to change. I don’t know exactly what medicines / procedures / medical devices are purchased exclusively by the wealthy, but if the customer base was wider and shallower, that has to make a difference.
  • Medical care. Again I don’t know what exactly would change, but medical care would be quite different for the same reasons.
  • Whole Foods. If everyone were living on $9000/year, then here are some of the ways food consumption might change. Out-of-season fruit might be a luxury; pre-packaged food (not frozen peas but like sun-dried tomato hummus) … Right now OECD grocers waste produce that doesn’t look perfect; I predict consumers would buy tomatoes with bruises and such.
  • Jetskis. As fun as these things are, they have to go. They’re rich boy toys. I guess you could trade used jetskis since they’ve already been produced—but I can’t imagine the continuance of demand for such a luxury item. Then again —maybe you could 
  • Overtime. I believe the business world would slow down if the opportunities became less lumpy—if consumers were more homogeneous, business might be more of a “steady flow” — like a factory. Also, the opportunity cost of leisure would go down so people would be less inclined to work overtime.
  • Classical music. Symphonies have been the provenance of the wealthy since Mozart’s time; just look at who’s sponsoring your local lyric opera today, chances are an élite financial firm’s name is among the biggest donors. Not only does the demand depend on wealth, but the supply does as well. Tanglewood and Julliard don’t come cheap, so we don’t get Nina Simone anymore.
  • "I’m so broke; let’s go to a cheap bar." Maybe I’m being a little wishful. 

Things that could still exist if everybody’s incomes were equal:

  • Billion-dollar fighter jets. Don’t forget that after you earn $100,000 and give $91,000 to the government for redistribution to the poorest, the government still gets to take another $3000 for the purposes of running the government! Maybe the size-of-government would be relatively smaller in a world at parity, but wouldn’t the likelihood of war be greater? We needs dem fighter jets to keep de peace.
  • Research grants. Again, the government still gets to take yet more of your earnings after the redistribution. So they could fund cancer research and so on. The cost of labour in the U.S. might go down quite a lot given the post-tax redistribution, meaning the research would be more labour-intensive and less capital-intensive — so maybe more grants for theorists and fewer experimental machines built?
  • Doctors. Cuban doctors already give up most of their earnings because they’re from a communist country. That didn’t stop them from wanting to be doctores. A Cuban doctor saved my life one time.
  • Two-income households. Sure, all the jobs at Subway and Starbucks will have disappeared, but with companies trying to adjust to 3 billion new customers there will be 
  • Plumbing, showers — You can currently get this for fairly cheap.
  • Apartment buildings — Shared housing is the easiest way to make rent go down. I expect extended families would move in together, or there would be a lot more Craigslist ads and living in even more cramped quarters in a big city where mostly yuppies live. Landlords would essentially be f*$ked over by parity, but isn’t it their fault for trying to siphon money out of the wealthiest instead of serving the poorer customers for a business?
  • Colourful clothing. People figured out dyes hundreds and thousands of years ago. It stands to reason that there was enough demand then, when we <link> were so much poorer, for colour, so there would be demand for it now.
  • Computers. Do you know how cheap an old computer is? Very. Forget One Laptop Per Child, you can find enough parts at a charity shop to get yourself running Puppy Linux on $177/week.
  • Trains? I’m not sure how goods would be moved from point to point in a world at parity. Both trains and lorries can be pretty efficient ways of moving goods from point A to point B; in this Uniform Factory Society I’m imagining I’d guess the returns to providing plain goods at lower cost would exceed the returns to imagining more stylish <link substance of style> or imaginative goods. Trains have been around for quite a long time so that’s an argument that they would still be affordable 
  • Sports. Sure, you wouldn’t have athletes making $20 million per contract, but people played sports long before that happened.
  • Beer. People invented beer long ago, when we were much poorer. Thank heavens we don’t have to give that up. 
  • Lumpy pools of wealth. Just because you equalise individual incomes, doesn’t mean that people still can’t choose to combine their savings and earnings together. People could still aggregate their savings in mutual funds and pick an investment manager to decide which of the new factories churning out staples (or the service companies delivering the staples, or the research companies figuring out how to configure the production resources) was going to grow the fastest and generate the most profits. If the capital gains tax were also 90%, people could still increase their wealth by investing in such a mutual fund. From the investment manager’s perspective, the AUM game would no longer be about convincing a few rich-o’s to invest (although I only said I would tax income, not existing wealth…so I’m contradicting myself here) but more like a high street bank’s problem: get tens of millions of people to open a savings account with you.
  • Envy. This is another question I posed on twitter (@leighblue responded). Does the quantity of envy adjust to relative circumstances? If not, then people would be demonstrably happier if incomes were equalised. If envy quantities do adjust, though, then I would feel as much envy about that law professor’s $11,000 after redistribution as I currently do about her $250,000.
  • Careers. What would you do if money didn’t matter? We would find out the answer to this question very quickly. What effect would it have on the macroeconomy, other than fewer corporate litigators?
  • Cabbage. Of course money, but I also mean literal cabbage. I think cabbage, beans, legumes, barley, potatoes, and other cheap-yet-nutritive foods would make a comeback — whether people cooked at home or ate at a comedor. I also predict vegetarianism would rise as the steak-eaters noticed vegetarian families having more of everything else. (Or maybe Americans would return to “meat one day a week”.)

Some more caveats. It’s arguable that economic growth could be faster in a world of parity. After all, there would be another 3 billion customers to serve—and those people would no longer be wasting their time walking firewood from the hilltop down to the stove.

It’s also arguable that economic output would be cut into 1/10th or worse. Perhaps the great economic efficiency we experience in the world today is directly dependent on the prices of labour being able to vary from $1/day to $100,000/day. You can see in a few of my examples above (e.g., the university) that very radical changes would have to take place — perhaps so radical that people wouldn’t continue doing their current jobs. And where would we be without corporate litigation firms that charge $800/hour?

Firms would all be competing to serve a more uniform group of customers, so production that otherwise went into expensive goods (real estate development in Aspen) would just go into continuing to improve the lives of everyone—like engineering a super-cost-efficient factory and distribution system that has a thousand times the scale advantages that the biggest past monopoly ever had.

Anything else you think I’m missing? A gross, lumpy price deflation as the world adjusts to parity? Massive unemployment or entrepreneurship or single-firm dominance as firms that produce staples suddenly have a lot more orders and firms that produce finery are shuttered? Would typical corporate profits go up or down? Operating costs?

The idea of redistribution is not a new one, if you know of some excellent scholarly discussions of the issue please link to them in the comments and excerpt a quote or two.

One last caveat: I’ve always lived in a capitalist country, so I don’t any personal experience with government-equalised incomes. Anybody who grew up or lived and worked in a communist country, I’d love to get your 2p.




[An] IQ test … only measures how good of an IQ tester you are.

1) Believe [it] or not, you can improve IQ test score by PRACTICE. See for yourself. It is no more than a computer game which some people may show great playing ability at first but eventually most of people can excel with lots of playing time. There was a time when some people believed Tetris can be a good measure of how good one’s brain is.

2) [The] IQ test was NOT created to evaluate [an] adult’s brain capability. Researchers devised the test to see if they can discover children with learning disabilities. That means [a] low score is the only meaningful [outcome]. The test was designed to estimate if the children are behind or advanced to their own peers. In other words, it only shows one has a brain as good as normal adults with perfect score.

3) Despite these facts, IQ test can sometimes distinguish smart/less smart people in certain areas. However, so can other measurements (e.g. education, family background, living environment). The issue here is how accurate the measurement is in evaluation of brain functionality. Basically, you will have to measure how fast and efficiently your neurons are working along with density of neurons. Even then, this measurement may have nothing to do in judging one is a genius or not.

4) Nobody’s brain is infinite and [neither] is genius’ brain. One can maximize the productivity in a certain area by eliminating the need of wasting the brain in other areas and solely focus on one area, say mathematics. You can brag about how much you know and fast you can solve a problem; however, developing a new idea is limited to still to the areas you are familiar with. Unlike 1600s, there is too much to know and understand to master the entire area of mathematics or a piece of area in mathematics.

5) Speaking of understanding, how do you accelerate the speed of understanding? As prof. Tao pointed [out], one should have enough knowledge to process the reasoning. As you know more about the field, your brain can eliminate the things that are irrelevant to the subject and also relate to the ones you already know; thus, works more efficiently. For instance, study the strategies in chess, then, you would be able to beat normal people in most of times in chess game. No matter how genius…an individual is, s/he cannot beat out an expert in understanding the subject without proper training or learning depending on the difficulty of subjects.

Still, the illusion of genius is fun to enjoy in a similar way to we want to admire an excellent individual in each area. I think it is no different than praising a sports star.

Sungwook Moon

(Source: terrytao.wordpress.com)