Methodology – Garrett M. Petersen

The Trolley Car Approach to Public Policy

Scott Alexander has an article at Slate Star Codex discussing the use of edge cases in moral philosophy:

There’s a tradition at least as old as Kant of investigating philosophical dilemmas by appealing to our intuitions about extreme cases. Kant, remember, proposed that it was always wrong to lie. A contemporary of his, Benjamin Constant, made the following objection: suppose a murderer is at the door and wants to know where your friend is so he can murder her. If you say nothing, the murderer will get angry and kill you; if you tell the truth he will find and kill your friend; if you lie, he will go on a wild goose chase and give you time to call the police. Lying doesn’t sound so immoral now, does it?

This is a great way of doing philosophy, but reading it, I realized I had heard it before. I’ve heard this sort of argument in the context of policy debates.

Here’s a particularly striking example (h/t to Jason Brennan):

Unlike the case of the door-to-door murderer, which is a deliberately fanciful way of examining a broader moral truth, this is a policy proposal made on the basis of a fanciful scenario. The argumentation goes like this:

In an unlikely scenario, economic system A would allow bad outcome X
Therefore, abolish A (and substitute it with another system, such as B)

There are a lot of errors packed into this line of thinking. What if bad outcome X happens under both systems? What if changing systems just substitutes bad outcome Y for X? What this fails to do is compare the relevant alternatives. Is the implicit claim that under socialism, nobody would ever starve? Millions of Soviet citizens beg to differ.

Here’s one I made in response:

The reasoning is essentially the same: I can think of an unlikely scenario in which a policy (illegal violence) would allow a terrible outcome to occur (the next Hitler). Is a future dictator walking around more fanciful than the scenario above? It’s hard to say.

In the first scenario, we have a person who can’t get the income to buy food, so his only recourse is to steal. This person can’t find a job despite the many opportunities present in a capitalist system. He can’t get charity or welfare (if it exists). And yet he is able-bodied and mentally sound enough to successfully break into a warehouse. Seems pretty unlikely. In the second, we have a young Hitler narrowly avoiding a sniper’s bullet.

Here are the questions we should ask ourselves: Would more people starve under capitalism or socialism? Would more people suffer violent deaths under legal random violence or under illegal random violence?

Under capitalism, assuming a pure free market with no welfare state and no private charity (!), people who didn’t have enough money would starve. However, capitalist incentives lead people to produce vast quantities of food and bring them to consumers at minimal cost. Where did you think the warehouses came from? If you can mow someone’s lawn for $5, you can buy five cans of beans, which will feed you for a few days in a stretch. If you can mow five lawns, you can eat much more than just beans.

Under socialism, the central authority needs to coordinate the entire production and distribution of food. This is no easy task. The Soviet Union suffered famines every decade or so. And even when there wasn’t a famine, store shelves wouldn’t have anything near the level of selection we enjoy under capitalism. Soviet officials were supposed to have fallen to their knees and wept upon entering ordinary American grocery stores. That Americans took for granted what their smartest planners spent half a century failing to achieve was a shocking revelation.

So do more people starve under capitalism or under socialism? Capitalism wins this one, unambiguously, in both theory and practice. Do more people die in a world where random shootings are legal? Clearly yes. And yet if we restrict our attention to a single fanciful scenario, we can come to the opposite conclusion. This is neither surprising nor relevant.

Applying the Argument to Socialized Medicine

The place where I find people are most prone to this sort of reasoning is medical care. “If Canada didn’t have socialized health care, people who got sick would get impoverished or die!” Well, no. Private insurance can insure people against idiosyncratic risks without socialization. “But what if some people don’t think to buy insurance and get sick?” Yes, that might happen. I could say that people should be responsible for managing their own lives, and buying health insurance is part of that. If that doesn’t satisfy you, I could say that loads of people feel just the way you do about people being ruined by illness, probably enough to crowd-fund treatments for such people without government intervention.

But if you must have a government solution, and it must yield absolute certainty that no uninsured person be ruined by an unexpected illness, then let the government create a bare-bones health insurance plan, the cost of which can be refunded to everyone who buys private insurance.

Socialization goes way beyond solving the “uninsured people might get sick and die” problem and creates a whole load of problems of its own. It involves the government haphazardly attempting to plan a whole industry, driving up costs through inefficiency and perverse incentives, and rationing care through wait lists.

When limes shot up in price last year, we had rationing. We rationed through prices. People who didn’t want to pay $2/lime didn’t buy limes. When a bunch of Canadians need to see specialists or get MRI scans (which is always), the rationing doesn’t happen through price but through waiting lists. We hear stories every day of people dying on wait lists or suffering from chronic pain for months awaiting surgery. These people would gladly have paid to get immediate treatment, and while their willingness to pay might mean bidding some medical resources away from others less willing to pay, it would also lead capitalist entrepreneurs to invest more resources in the medical sector. More medicine for all!

People want socialized medicine because they don’t want anyone to ever die because they can’t afford treatment. And yet people dying because their treatment was excessively delayed don’t get much attention. It’s hard to understand why. I suppose the former would kill the poor, while the latter is an equal-opportunity killer?

Consequentialism without Cost-Benefit Analysis?

But this whole discussion is wrong-headed in that we haven’t established just how many people would die from each of these causes under each of these systems! When we’re doing moral philosophy, it doesn’t mater if our scenarios actually come to pass. The trolley-car problem can tell us something interesting about our moral intuitions regardless of how often I tie people to trolley car tracks and force you to choose whether to flip a switch to kill some and not others (man, that was a crazy weekend). But the hypothetical uninsured person dying for lack of treatment tells us precisely nothing about policy unless we know just how many people are dying. Is it comparable to the number of people killed by buckets? Or is it more like the number of people killed in car accidents?

Without knowing, we can’t do any sort of cost-benefit analysis. But the original arguments (against capitalism and for socialized medicine) were couched in consequentialist terms. Consequentialism without cost-benefit analysis is incoherence.

I can’t help myself, so here’s one last meme:

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Economics and the Cognitive Minefield

What sounds more difficult to you, figuring out supply and demand, or accurately measuring the Earth’s circumference? It must be supply and demand, because Eratosthenes figured out the other one two thousand years before anyone really managed any progress on that supply-and-demand stuff.

So now that we’ve established that supply and demand is much harder than accurately measuring the Earth’s circumference, we should ask ourselves why it is so. If you don’t know how Eratosthenes managed it, try thinking for a moment about how you might go about accurately measuring the Earth’s circumference with only the tools available in Ancient Egypt. Hint: you can compute the circumference of a sphere with the arc length and angle between two points.

Have you figured it out?

Eratosthenes heard that on the summer solstice, the sun shone to the bottom of a deep well in Syene, a town far to the south of Alexandria, implying that the Sun’s rays hit Syene vertically at noon of that day. He measured the shadow cast by a vertical pole in Alexandria at noon of the same day. This gave him the difference in angle between the Sun’s rays hitting Alexandria and the Sun’s rays hitting Syene. Knowing how far apart Alexandria and Syene were, he had everything he needed to calculate the Earth’s circumference. He estimated a circumference of 25,000 miles. The actual circumference is 24,902 miles.

This isn’t something your average high school student would come up with, but once you know the solution it’s easy to see how someone really putting his mind to it could figure it out. And indeed, pre-modern people from other cultures made similar calculations with similarly impressive results.

Asking the Right Questions

So why didn’t Eratosthenes or any of these other smart people figure out supply and demand some time on the weekend between measuring the Earth’s circumference and devising clever ways to find prime numbers? It’s not like they had to wait around for someone to invent a special microscope or something. As with Eratosthenes’ calculation of the Earth’s circumference, you can take a few basic observations and derive general and useful truths about markets and prices: People use means to achieve ends. Two people exchange when both expect to benefit from doing so. Individuals use subsequent units of the same good for progressively less urgent uses, so units diminish in value as more are acquired. Supply and demand follow surprisingly easily from these simple premises.

This doesn’t seem so hard that the Greeks couldn’t handle it, so that’s out as an explanation. And it’s not like it wouldn’t be useful information! Many peoples could have spared themselves unnecessary hardship by understanding basic economics. While the Earth’s circumference might have some use to seafarers, supply and demand is relevant to all aspects of life.

My preferred hypothesis is that people just failed to ask the right questions. The circumference of the Earth is a known unknown. Once you figure out that the Earth is (roughly) spherical, the next obvious question is, how big a sphere? But you could go to the market every day to buy and sell goods, and never ask yourself whether there was a deeper order to the movement of prices beyond the proximate causes you know well from your personal experience. What do you mean, why are fish $3? The fishmonger wrote $3 on the sign, so that’s what they cost. That greedy fishmonger!

The Tribal Mind

Humans are social creatures. We evolved in a tribal setting. Our brains are specialized to understanding the social environment to a degree that we aren’t even aware of. Take something as simple as noticing someone is sad. There might be a minute change in the position of the person’s facial muscles, a slight change in posture, a small adjustment in the tenor of her voice. But you don’t consciously notice these things and reason out the person’s sadness; your brain does all that in the background. And have you ever noticed how precise we are at knowing where someone’s eyes are looking? It’s like a superpower!

Our social intuitions seem to be hard-coded into our thinking, to the point where we apply them in situations where we know they don’t apply. Have you ever heard lightning and thought it sounded “angry?” And since we have this astounding, hard-coded apparatus for understanding the social world, nothing is more natural than to fall back on it in understanding economic phenomena. The problem is that our brains are hard-coded to understand a tribal setting of no more than a hundred people or so. In a hundred-person tribe, the trading that existed happened in extremely thin markets, with no more than a few buyers and sellers of any particular commodity. The people exchanging would know each other well, and the exchange would take place within the larger social structure of the tribe. Consequently, price would probably have more to do with one’s place in the status hierarchy of the tribe than with other considerations. If I catch a fish, I might trade it a low price to a high-status tribesman to gain favour.

Think about the hypothesis that implies. When a merchant sells at a low price, we think he is doing something nice for us to gain our favour. He makes us feel esteemed and we raise his status in return. When a merchant charges a high price, we see him as brashly acting beyond his social status. This is consistent with the common complaint against “greedy” merchants, I think. When there’s an oil shock, we attribute malice to gas station owners for circumstances beyond their control. Obviously, our ancient ancestors never faced an oil shock.

A big stumbling block for early science was to get past the tendency to anthropomorphize the natural world. Since economists study man, there’s no problem with attributing human qualities to our subjects. The problem is with using social connotations that apply within the tribe or small group, but don’t apply to a large, impersonal marketplace with millions of participants. In the marketplace, pricing decisions don’t reflect tribal status games but supply and demand. Price movements are not driven by greed, which is always present, but by changing conditions affecting the market. Many economic errors are driven by this sort of thinking.

As Paul Rubin put it in his study of “folk economics,”

Naïve people or those untrained in economics think of prices as allocating wealth but not as influencing allocation of resources or production of goods and services. In folk economics, the amount of a good traded—whether in aggregate or by each
individual—is fixed and independent of price. Moreover, each individual is concerned with the distribution of wealth and income (with particular but not exclusive attention to his/her own wealth), not with any efficiency gains from economic activity. (p. 157)

The Politicization of Positive Problems

The biggest modern stumbling block to economic understanding is that people learn about politics before they learn about economics. As Eliezer Yudkowsky put it on Less Wrong, politics is the mind-killer:

People go funny in the head when talking about politics. The evolutionary reasons for this are so obvious as to be worth belaboring: In the ancestral environment, politics was a matter of life and death. And sex, and wealth, and allies, and reputation… When, today, you get into an argument about whether “we” ought to raise the minimum wage, you’re executing adaptations for an ancestral environment where being on the wrong side of the argument could get you killed. Being on the right side of the argument could let you kill your hated rival!

…

Politics is an extension of war by other means. Arguments are soldiers. Once you know which side you’re on, you must support all arguments of that side, and attack all arguments that appear to favor the enemy side; otherwise it’s like stabbing your soldiers in the back—providing aid and comfort to the enemy. People who would be level-headed about evenhandedly weighing all sides of an issue in their professional life as scientists, can suddenly turn into slogan-chanting zombies when there’s a Blue or Green position on an issue.

I have experienced multiple instances of giving the standard, econ 101 answer to a question of fact, only to be told that I am spewing vile right-wing propaganda. As someone who is not right-wing commenting on a basic issue in a field I have a graduate degree in, this is alarming. Alarming, but not surprising.

Economics and politics are intertwined. Even value-free statements about economics have political implications. Ideally, people would live the first twenty years of their lives in a politics-free environment where they would learn economics as a value-free and apolitical science. Then they could form political beliefs informed by sound economics rather than forming economic beliefs based on the political inclinations they developed as uninformed teenagers. (Of course, this politics-free bubble would be prohibitively costly to build and maintain.)

A libertarian sociology PhD student (the only one I know to exist) said to me that when you go around a sociology department saying you like markets, people think you hate gay people. I laughed, but he was only partly joking.

What I think is happening here, and in my interactions on twitter and elsewhere, is that people hear you speak the language of the hated Red tribe and see you as an enemy. As soon as that happens, there’s little you can say to persuade them. I can’t find it now, but there was an obscure political scientist whose blog I stumbled across during the student walkout from Greg Mankiw’s microeconomics class. The post burned itself into my memory in a way that only something profoundly annoying can. The author entered his first microeconomics class and was horrified by what he found: that minimum wages caused unemployment, rent controls made housing more scarce, and high taxes caused people to work less. Horrified by this doctrinaire right-wing discipline, he dropped the class and never set foot in an economics classroom again.

The blog post went on to detail how he (allegedly) learned a whole lot of economics through independent reading. This person decided all his policy positions before age 18 and has spent the rest of his life learning how to defend them in ever-more elaborate ways, acquiring degrees along the way. If he ever becomes famous enough to deserve a biography, it should be called Confirmation Bias. I doubt he’s atypical.

Conclusion

Economics isn’t hard because it’s technically difficult. Many of the most valuable insights are easily logically derived from basic principles, and seem unremarkable and even obvious once explained. The hardest thing about economics is navigating the cognitive minefield in which it lives. One needs to overcome an array of cognitive biases to even grapple with the technical problems of economics. One misstep and *BOOM* you slip into error. To understand economics, you must detach your thinking from both your social intuitions and your political affiliations. Even for the best of us, that is a difficult task.

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