Tag Archives: society

Putting your money where your mouth is in policy debates

Climate change deniers should put their money where their mouth is by buying property in low-lying coastal areas or investing in drought-prone farmland. Symmetrically, those who believe the Earth is warming as a result of pollution should short sell climate-vulnerable assets. Then everyone eventually receives the financial consequences of their decisions and claimed beliefs. The sincere would be happy to bet on their beliefs, anticipating positive profit. Of course, the beliefs have to be somewhat dogmatic or the individuals in question risk-loving, otherwise the no-agreeing-to-disagree theorem would preclude speculative trade (opposite bets on a common event).

Governments tend to compensate people for widespread damage from natural disasters, because distributing aid is politically popular and there is strong lobbying for this free insurance. This insulates climate change deniers against the downside risk of buying flood- or wildfire-prone property. To prevent the cost of the damages from being passed to the taxpayers, the deniers should be required to buy insurance against disaster risk, or to sign contracts with (representatives of) the rest of society agreeing to transfer to others the amount of any government compensation they receive after flood, drought or wildfire. Similarly, those who short sell assets that lose value under a warming climate (or buy property that appreciates, like Arctic ports, under-ice mining and drilling rights) should not be compensated for the lost profit if the warming does not take place.

In general, forcing people to put their money where their mouth is would avoid wasting time on long useless debates (e.g. do high taxes reduce economic growth, does a high minimum wage raise unemployment, do tough punishments deter crime). Approximately rational people would doubt the sincerity of anyone who is not willing to bet on her or his beliefs, so one’s credibility would be tied to one’s skin in the game: a stake in the claim signals sincerity. Currently, it costs pundits almost nothing to make various claims in the media – past wrong statements are quickly forgotten, not impacting the reputation for accuracy much.

The bets on beliefs need to be legally enforceable, so have to be made on objectively measurable events, such as the value of a publicly traded asset. By contrast, it is difficult to verify whether government funding for the arts benefits culture, or whether free public education is good for civil society, therefore bets on such claims would lead to legal battles. The lack of enforceability would reduce the penalty for making false statements, thus would not deter lying or shorten debates much.

An additional benefit from betting on (claimed) beliefs is to provide insurance to those harmed by the actions driven by these beliefs. For example, climate change deniers claim small harm from air pollution. Their purchases of property that will be damaged by a warming world allows climate change believers to short sell such assets. If the Earth then warms, then the deniers lose money and the believers gain at their expense. This at least partially compensates the believers for the damage caused by the actions of the deniers.

Volunteer work is less efficiently allocated than paid work

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In my experience, the labour of volunteers and low-wage workers is frequently wasted, just like other free or cheap resources. Unlike for expensive market work, there are no price signals to guide people to the most important tasks first. If activities are not prioritised based on how productive these are, then randomly allocating labour is likely to select work with low usefulness.

Within an organisation, competent managers of volunteers may direct them to the most productive work, but even with the best leaders managing some volunteering opportunities, it remains unclear which organisations do the most good and thus should get priority labour. There is a limited amount of work hours available, just like other resources. Even the best volunteers cannot do everything at once, so to maximise social welfare, the most helpful tasks should be done first. In market work, the employer at which a worker is most productive is generally willing to pay the most for this person’s services. Then if people follow the money, their labour gets allocated to the highest-value tasks.

Of course, markets are not perfect and the importance of some work is not accurately measured in money, but for reasonably rational agents, a noisy signal is better than no signal. Prices carry information and help efficient allocation of resources. One way to better allocate volunteer labour is to establish a pseudo-money for unpaid work: each nonprofit organisation gets a certain amount of credits initially and can spend these to “hire” voluntary workers. Credits used for one person cannot be used for another, so the organisation willing to give away the most for a given individual’s services is probably the one receiving the greatest benefit from that person. Volunteers can then use the credits offered to judge where they would be the most productive (could do the greatest amount of good).

Volunteer parking wardens may benefit the environment

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Reducing the utility from car use and ownership motivates substitution towards other forms of transportation, which benefits both the environment and public health. One way to cut the convenience of driving is enforcing parking regulations, because drivers have to park further from their destination when the option of illegal parking becomes less attractive. Parking at a greater distance also makes people walk more – a minor health benefit.

Enforcing speed limits and other traffic rules that slow cars down increases the time cost of driving. This may reduce wear and tear on vehicles and roads, which benefits the environment.

An implication of is that people who want to reduce global warming or improve public health should become volunteer parking wardens and traffic police by reporting parking violations, speeding and dangerous driving (preferably with photo or video evidence from phones or dashboard cameras).

A possible countervailing effect of the enforcement of parking rules occurs if the illegally parked cars obstruct the movement of other cars enough to motivate some people to switch away from driving. Then stopping the parking violations may open the road up enough to encourage more use of cars, with an overall negative environmental and health effect. Similarly, if reckless drivers make the roads unsafe enough to reduce others’ car use, then making traffic civil again may attract risk-averse people back to driving. However, in most developed countries, illegal parking and the ignoring of rules of the road is not severe enough to deter driving significantly, so better enforcement is likely to reduce car use.

Slowing traffic down may increase congestion and emissions per kilometre travelled if there is little substitution away from driving. Again, in developed countries public transit and cycling are usually feasible options. Of course, some people always find excuses not to use these, and in remote rural areas public transit may indeed be economically unreasonable and distances may really be too great for bikes. Electric bikes are then an option. These increase the range of travel with less pollution and congestion than cars.

Golf as a cartel monitoring device for skilled services

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Many explanations have been advanced for golf and similar costly, seemingly boring, low-effort group activities. One reason could be signalling one’s wealth and leisure by an expensive and time-consuming sport, another may be networking during a low-effort group activity that does not interfere with talking.

An additional explanation is monitoring others’ time use. A cartel agrees to restrict the quantity that its members provide, in order to raise price. In skilled services (doctors, lawyers, engineers, notaries, consultants) the quantity sold is work hours. Each member of a cartel has an incentive to secretly increase supply to obtain more profit. Monitoring is thus needed to sustain the cartel. One way to check that competitors are not selling more work hours is to observe their time use by being together. To reduce boredom, the time spent in mutual monitoring should be filled somehow, and the activity cannot be too strenuous, otherwise it could not be sustained for long enough to meaningfully decrease hours worked. Playing golf fulfills these requirements.

A prediction from this explanation for golf is that participation in time-consuming group activities would be greater in industries selling time-intensive products and services. By contrast, if supply is relatively insensitive to hours worked, for example in capital-intensive industries or standard software, then monitoring competitors’ time use is ineffective in restricting their output and sustaining a cartel. Other ways of checking quantity must then be found, such as price-matching guarantees, which incentivise customers to report a reduced price of a competitor.

Disagreement over policy due to preferences vs beliefs

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Disagreement about the best policy is due to different preferences or beliefs, or both. Believing that different preferences cause the opinion differences discourages debate (no point arguing over taste after all), leads to polarisation and partisanship. For example, right-wingers may believe that left-wingers prefer to disincentivise entrepreneurs with high taxes, and left-wingers may believe that right-wingers prefer to harm the poor by reducing government transfers. To put it starkly: the other side just prefers evil policy by nature.

By contrast, believing that disagreement over what should be done is caused by differing beliefs assumes that the other side is good-hearted, but mistaken. For example, left-wingers may believe that right-wingers mistakenly believe that transfers to the poor disincentivise them from working or finance their addictions. Right-wingers may believe that left-wingers mistakenly believe that entrepreneurs are not discouraged by higher taxes – being entrepreneurial by nature, they start companies because it is interesting, not out of greed. Mistaken opponents’ opinions can be corrected using data and logic, patience and understanding.

Even if policy disagreement is interpreted as coming from divergent preferences, some such differences are interpreted as less evil than others. For example, impatience is perceived as better than selfishness. Many policies trade off non-simultaneous benefits and costs: invest in infrastructure now to use it after some years, mitigate climate change now to reduce harm to future generations. Paying a current cost for a future benefit may be optimal for patient people, but not for impatient, causing a policy disagreement. The same opinion difference may be due to altruistic people wanting to invest to help others (future users of the infrastructure or the environment), but selfish ones preferring to keep the money now. Believing the same disagreement to be due to selfishness polarises people more than perceiving unequal patience as the cause.

Why rational agents may react negatively to honesty

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Emotional people may of course dislike an honest person, just because his truthful opinion hurt their feelings. In contrast, rational agents’ payoff cannot decrease when they get additional information, so they always benefit from honest feedback. However, rational decision makers may still adjust their attitude to be more negative towards a person making truthful, informative statements. The reason is Bayesian updating about two dimensions: the honesty of the person and how much the person cares about the audience’s feelings. Both dimensions of belief positively affect attitude towards the person. His truthful statements increase rational listeners’ belief about his honesty, but may reduce belief in his tactfulness, which may shift rational agents’ opinions strongly enough in the negative direction to outweigh the benefit from honesty.

The relative effect of information about how much the person cares, compared to news about his honesty, is greater when the latter is relatively more certain. In the limit, if the audience is completely convinced that the person is honest (or certain of his dishonesty), then the belief about his honesty stays constant no matter what he does, and only the belief about tact moves. Then telling an unpleasant truth unambiguously worsens the audience’s attitude. Thus if a reasonably rational listener accuses a speaker of „brutal honesty” or tactlessness, then it signals that the listener is relatively convinced either that the speaker is a liar or that he is a trustworthy type. Therefore an accusation of tactlessness may be taken as an insult or a compliment, depending on one’s belief about the accuser’s belief about one’s honesty.

If tact takes effort, and the cost of this effort is lower for those who care about the audience’s emotions, then pleasant comments are an informative signal (in the Spence signalling sense) that the speaker cares about the feelings of others. In that case the inference that brutal honesty implies an uncaring nature is correct.

On the other hand, if the utility of rational agents only depends on the information content of statements, not directly on their positive or negative emotional tone, then the rational agents should not care about the tact of the speaker. In this case, there is neither a direct reason for the speaker to avoid unpleasant truths (out of altruism towards the audience), nor an indirect benefit from signalling tactfulness. Attitudes would only depend on one dimension of belief: the one about honesty. Then truthfulness cannot have a negative effect.

Higher order beliefs may still cause honesty to be interpreted negatively even when rational agents’ utility does not depend on the emotional content of statements. The rational listeners may believe that the speaker believes that the audience’s feelings would be hurt by negative comments (for example, the speaker puts positive probability on irrational listeners, or on their utility directly depending on the tone of the statements they hear), in which case tactless truthtelling still signals not caring about others’ emotions.

Democracy may be the best system due to political economy constraints

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Democracy picks the leader who is best at getting elected, not necessarily the best at leading the country. The ability to become a leader differs from the ability to lead. For example, populism and overconfidence in oneself may help one’s election prospects but harm performance at governing.

Even if there was some very accurate way to select the best leader (e.g. test their honesty, intelligence, work ethic, in addition to electability), it may be not be feasible in practice to make this person govern for long. The reason is the political economy constraint that someone better at obtaining power can depose the best leader (one whose government would maximise social welfare, however defined). The disruption resulting from the coup may even harm society more than the difference between being governed by the best leader as opposed to the best power-grabber. In this case, the leadership of the most electable person may maximise welfare, subject to assumptions like „the best power-grabber is also good enough at retaining power, preventing coups once in government”.

The skills of getting elected and organising a revolution probably differ, so an elected government has some of the same vulnerability as the best leader. The political economy constraint of preventing a coup may then favour making the strongest dictator or the most dangerous revolutionary lead the country. However, this may not be the best system for selecting leaders due to a tradeoff between the ability to govern and the ability to overthrow a government. The welfare-maximising selection system subject to the political economy constraint would pick the person who is best at governing among those who can successfully resist a coup. Democracy may be such a compromise, choosing reasonably popular leaders who have a low probability of being overthrown and are adequate at governing. On the one hand, democracy may avoid a ruthless dictator whose rule is very stable, but harmful, and on the other hand a saintly leader who would be deposed quickly.

Slippery sidewalk paving

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In Singapore, the streets are well planned and maintained, smooth and clean like everything else. However, the sidewalks have one illogical aspect: the pavement is smooth stone, which gets very slippery when wet. Singapore is tropical and humid, with frequent rain. When initially paving the sidewalks, it would be easy and probably cheaper to use rougher covering (asphalt for example) that would not get slippery in the rain. After the smooth pavement has been laid down, changing it is of course costly, and if the locals have adjusted to the slipperiness, then switching the sidewalk cover may not be worth it.

The University of Queensland has a similar problem with the sidewalk in front of its main building. The sidewalk is coarse, like yellow asphalt with 1 cm stones in it instead of sand. One would expect such a coarse surface to provide good grip in all conditions, but unfortunately the looks are deceiving. When that sidewalk gets wet, it becomes slippery like polished glass. Again, it would be cheaper and more practical to pave that sidewalk with asphalt.

A broader point generalising the above observations is that things should be field-tested in realistic conditions before putting them to widespread use. For example, the sidewalk stones should be walked and biked on under all local weather conditions before paving a street with them.

Perhaps the smooth stones in Singapore are meant to make street cleaning easier. Still, there are materials that do not become slippery when wet and are smooth enough for mechanised cleaning and cheap enough to use as pavement.

Shoe and clothing thickness is not optimally distributed

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Shoes are typically of thinner material in the toes than around the ankle, but human toes are more cold-sensitive than ankles, because toes have a greater ratio of surface area to volume (thus greater heat loss) and are further from the core of the body, so get less warm blood supply. Similarly, pants are usually thicker on the butt (due to pockets) or the upper end in general (suit pants lined to the knee), in spite of the legs requiring more warming than the pelvic region. Suit jackets are open on the chest, but overlap on the belly, which needs less extra insulation. The same suboptimal distribution of warmth characterises various V-necked upper body clothes. Jackets are also thicker on the front than the back, despite most people’s backs being more cold-sensitive than bellies.

This impractical design can be explained for men’s jackets by the desire to improve the wearer’s looks with the visual illusion of broad shoulders created by the V-shape of the front of the jacket. I have written about this in more detail: https://sanderheinsalu.com/ajaveeb/?p=885

For other clothes and shoes, there seems to be no reason for the suboptimal distribution of thickness, which would be easy to fix in the manufacturing process. The extra layers of cloth added by pockets could be balanced by using thinner cloth to make the pocket area of the pants. The pocket pouches on jeans for example are usually of thin cloth, which is a step in the right direction. However, the surface of the pants covering the pockets is usually of the same cloth as the legs. Lining could easily be added to trouser legs to make these as thick as the upper part, compensating for the extra layer of cloth by manufacturing the trousers out of thinner material overall. Similarly, adding a layer to the back of a jacket is easy.

The only difficult part to compensate in the impractical thickness distribution of clothing is the thin chest cover (relative to belly and back) of a V-neck jacket, but this difficulty only arises from the desire to preserve the look of a V-neck. A similar visual illusion of broad shoulders could be created by painting a V-shaped pattern on the garment.

A different impractical aspect of shoe design that can be explained by fashion is the pointy toes. The tapering tips create an optical illusion that makes the feet seem longer, which does not necessarily improve the wearer’s looks. However, fashion is frequently ugly, as evidenced by the web search results to the phrase: „it’s called fashion, look it up”.

Formal clothing is a bad equilibrium of a coordination game

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What clothing happens to be considered formal is an equilibrium of a coordination game: if most others think that a given clothing item is formal, then a person who wants to be seen as formally dressed is better off choosing that garment. If enough people who aim to dress formally choose certain clothing items, then those garments will be interpreted as formal. Different cultures and eras have considered different clothes formal, e.g. tights for men were formal in Europe during Napoleonic times, but are not now.

Current formal clothing is a bad equilibrium because suits and shirts are difficult to clean, labour-intensive to iron or press, and restrict movement. A better equilibrium would be to interpret as formal some garments that are comfortable, environmentally friendly, easy to care for and cheap. It is unfortunately difficult to change equilibria in a society-wide coordination game, because a majority of people would have to change their beliefs in a short time.

The reason why suits are seen as formal is historical: these were fashionable at the height of the British Empire, which was the richest and the most powerful country in the 19th century, thus a trendsetter in the first era of globalisation. British fashion was copied in North America and Europe, spreading to the colonies from there. Labour-intensive clothes were a way for Victorian nobility to signal wealth, because only the rich could afford to hire enough servants to make and care for their clothes. In many cultures, wearing impractical clothes (toga, long dress restricting leg movemen) has been a way to signal that one does not have to work. Similar signals of leisure were pale skin (because most work was outdoors), soft clean hands (because most work was manual and dirty), straight posture (because work often involved stooping). More extreme signals of leisure were physical changes that made most jobs of that era and region difficult or impossible: women’s foot-binding in East Asia, mandarins’ long fingernails in China.

Contrary to pale skin demonstrating leisure in Victorian Britain, in modern developed countries, a suntan is a signal of wealth, because most work is indoors and most trips to tropical places or simply outdoors are costly and time-consuming vacations. A similar reversal of the meaning of a signal is that a fat belly showed wealth when food was scarce, but in modern developed countries with an obesity epidemic, developing an athletic physique takes time and effort, so being fat is statistical evidence of poverty.

Signals of wealth have always invited cheaper imitations. For example, solariums provide suntanning cheaper than travel to the tropics. Slimness can be faked with liposuction, a corset or less drastically with a tailored waist and vertical stripes that are closer together or narrower at the waist area. The appearance of broad shoulders is achievable by wearing a suit jacket with padded shoulders.

One reason for why a business suit looks the way it does is to make the man wearing it appear taller, slimmer in the waist, and broader-shouldered, thus more masculine and attractive. The V-shape formed by the lapels uses the well-known visual perception error that an object at the open end of a V looks larger than an identical object at the tip of the V. The front of a suit jacket thus creates the appearance of a slim-bellied, muscular man. If the wearer’s belly allows, then a suit jacket usually also has a tailored waist, which further visually narrows the middle of the body. The vertical lines created by the tie and the creases of the pants make the wearer look taller and slimmer, which is often accentuated by vertical stripes on the suit. It is very rare to see a suit with horizontal stripes.

The visual illusion of attractiveness that a suit creates provides a extra incentive to stay in the equilibrium in which suits are considered formal clothing. To ease the transition to a new equilibrium in which the clothes perceived as formal are more practical, the new formal clothes should improve the wearer’s looks even more than a suit. This is not difficult, because many garments may have V-shaped patterns printed on the upper body, vertical stripes on the lower, have a tailored waist and shoulder pads. The patterns and cut may be designed based on psychology research to maximise the athletic appearance of the wearer. Anything achieved with a suit may be replicated and further optical enhancements added, for example printed outlines of muscles and puffed upper sleeves.