Key in the cognition

07:13 pm - Why we're all doomed

Imagine a game with these rules:

1. the game lasts for a finite amount of time (T);
   
2. any player can choose to opt out at any time, which is equivalent to losing;
   
3. the number of possible winners (W) is a small fraction of the total number of players (P);
   
4. when the game ends, if the number of remaining players (R) is greater than the maximum possible number of winners, they all lose, but otherwise they all win.
   

Current Mood: pessimistic

07:37 am - The economics of population control

Last weekend I had occasion to speak with an interesting young man who left China several months ago to learn English in Canada. He told me many surprising things about the inner workings of China, although I'm not entirely sure how biased some of his views are. One things that caught my attention in particular was his revelation that, despite all we've heard about China's infamous one-child policy, he had a younger sister. Apparently families are now allowed to have a 2nd child if they pony up a substantial fee and the 2nd child is a girl.

That's fascinating because it reveals that the ostensibly communist government has actually been applying a strange sort of market system to birth-control. In some parts of the world, people lack the knowledge or means to control the number of offspring they produce. In most industrialized nations women have a high degree of control over the number and timing of their children; a free market of sorts. In China, anomalously, the state has a monopoly on the right to give birth, although "the first one is free". Regardless of the frightening impact this implies upon individual freedoms, they can make a reasonable case for resorting to such a measure given their alarming population growth. Of course, cultural artifacts ended up biasing parents in favour of male children to such a degree that China ended up with a huge imbalance (dozens of millions). The effects of this on society are hard to predict accurately but I imagine they are unpleasant.

To solve this problem, the state threw in a deal that tips the balance in favour of female children. Of course, if they simply left it at that, it would unleash a flood of 2nd children and their iron fisted approach to population control would be thwarted. Instead they cleverly employed a market-inspired control: price. This gives them pretty fine-grained, albeit chronologically impaired, throttle on the number of "extra" girls that society produces. They could have tried a queue or a lottery instead but this approach has the appealing side-effect of raising the state's revenue so it's hardly surprising that they opted for it.

Current Mood: weird

02:52 pm - A trip to the SF zoo triggers realizations about species endangerment

I helped lead a landscaping project at the SF zoo this morning. Some of the volunteers wore wading boots and extracted weeds from a pit filled with mud. Every single one of them ended up covered in some pretty strong-smelling mud by the end. But at one point I overheard one kid saying to another, "I thought this would be boring and we wouldn't get to do anything fun but pulling stuff out of mud is awesome!"

As a token of appreciation, the zoo let all of us have free access to the zoo for the day. While walking around the primate discovery centre, I was struck by the degree to which other primate species are endangered by human activity. Comparing the population size of humanity with those of other primates casts light on a perspective we don't usually consider. While there are several billion of us on the planet, many other primates number in the thousands. If we take scarcity into account, the life of any other primate would be orders of magnitude more valuable than that of a human being.

That's a hard stance to wrap my head around because we're naturally inclined to empathize with other members of our own species but, as I watched some of these other primates interacting with other, I realized that they exhibit the same complex emotions and social relationships that cause us to empathize with other humans (not unlike elephants). It made me suspect that the mental limitations that allow us to indirectly inflict suffering upon millions people in far-flung parts of the world are probably the same ones that allow us to steadfastly decimate the struggling populations of many other species.

Current Mood: tired

10:55 pm - Private healthcare done right

In order to volunteer with kids at the local writing centre, I needed to get a TB test. A quick search for the nearest place that would conduct such a test for me revealed the existence of what looked like an excellent example of private healthcare at its finest. Curious, I decided to pony up the $30 and find out how well they work in practise. They claim not to require appointments so I didn't make one and instead just dropped in on Sunday afternoon. Impressively, I did not have to wait in line; after adding my info to their database, a lab tech quickly took sat me down and injected something into my forearm before telling me to return in 2 days to have the test analyzed. When I returned today, another lab tech examined my arm briefly, declared that I did not have TB and then had me wait a few minutes while they wrote up a medical document attesting to this and had a doctor sign it.

My experience with unsubsidized decentralized healthcare got me thinking: what if the best approach to routine simple procedures is just to have people select any provider they want and pay per use? That would promote an efficient system and improve patient experience through the power of customer choice. Such a system wouldn't be a panacea; it wouldn't work for emergency situations where patients don't have the luxury of choice. But I can't think of any reason not to use it for everything else.

While I'm on the topic, I'd like to discuss a problem that is much harder to solve: preventative healthcare. Unlike most other types of services, this one does not obviously benefit from a competitive marketplace. The reason is simple. In a competitive environment, clients are prone to switch providers over the course of their lives. Yet, the benefits of preventative healthcare are generally realized in the long term. Ergo, there is little incentive to worry about the long-term health of clients who are likely to switch to a competitor before any benefits of preventative maintenance are realized.

Update: A universal payment system (like that of Canada) would actually work better for promoting preventative healthcare. Since, no matter whom people choose to actually provide their healthcare, a single entity (the government) ends up paying for it, it is always in their best interest for people to look after their long-term health. As such, they have a strong incentive to offer convenient access to and promote the use of preventative healthcare. I can think of at least one example of this principle at work: free hep-B shots to all high-schoolers. The downside to a universal payment system is that there's less incentive for people themselves to look after their own health as they are protected from the financial consequences of unhealthy habits. Here's an idea for solving that: increase taxes on self-chosen unhealthy behaviour. That wouldn't penalize the poor but it would give everybody an immediate monetary incentive to live healthier lives and would stop subsidizing the burden imposed upon society by industries that promote poor health.

Current Mood: pensive

01:17 pm - Generalizing the commonalities between auctions and elections

It struck me today that an election isn't all that different from an auction so I tried to see how many commonalities I could factor out.

An election typically involves a number of entities who usually (but not necessarily) have an equal number of votes and a (usually smaller) number of candidates vying for a smaller number (frequently just one) of winning spots. The voters try to influence the outcome of the election by casting votes in favour of candidates and the candidate(s) with the most votes win(s).

An auction typically involves a number of entities who have varying quantities of resources (usually money) and a number of items (frequently just one) for which the entities iteratively place monotonically increasing competing bids until none of the bidders wishes to raise their standing bid. At that point, the available items are awarded to the highest bidders.

In both situations, there are a number of participants using scarce resources (votes or money) to determine the subset of competing options (candidates or buyers) that gets selected from the available pool. One potential difference is that votes are usually not reusable but money is.

Variants of the typical processes (e.g. Dutch auctions or instant runoff elections) may introduce other discrepancies into this generalization.

Current Mood: creative

09:03 pm - How globalism impedes political tough love

Jeremy Weinstein was at dinner tonight talking about the issues surrounding poverty in developing countries and political reform in Africa. He told us about his stint as an advisor to Liberia's recently elected President Ellen Johnson-Sirleaf. She wanted to electrify the capital city within 6 months to keep her campaign promise but was informed that the UN timeline was slated to have that accomplished in 18 months so she decided to forge ahead with a quick'n'dirty plan to jury-rig a power grid for the city during the interim period. She also wrangled to start building roads immediately instead of waiting for 2-3 years as the UN normally does.

Jeremy moved on to discuss how the revolutions that changed much of Europe from monarchies to republics are no longer feasible because the political systems that work well in industrialized countries aren't sustainable in poor ones and collapse before their economies have grown enough to support a liberal society. He argues (and I agree with him) that China's approach of building a strong economy before throwing open the doors of social freedoms is most viable in the long run. Furthermore, by continuing to give humanitarian aid to the destitute masses in countries run by totalitarian dictators (like Mugabe) we are inadvertently keeping his subjects just barely satisfied enough to prevent them from revolting against him.

A contentious position to be sure but it does sound like a reasonable one if you value future lives as much as existing ones.

Current Mood: contemplative

07:16 am - Why giving ignorant people the freedom to screw up is bad for society

I'd been thinking about putting this argument into words for several days now after discussing the issue with several people recently but this blog entry finally prompted me to actually do it.

adamspitz

Current Mood: determined

07:45 am - Wal-Mart: the high cost of low price

On Wednesday night the local Raging Grannies chapter screened a recent critical documentary about the world's largest retailer. The movie attacked Wal-Mart on several points; while some of these were certainly valid, others came across as purely emotional appeals with no sound reasoning behind them. Here is a breakdown of each accusation and my take on it.

[Disclaimer: I value freedom (defined as the ability to do whatever you want as long as it does not infringe upon the rights or freedoms of others) above happiness (defined as being satisfied with the way your life is progressing); if you invert the priority of these values then my arguments will not make much sense to you.]

Wal-Mart is anticompetitive
The movie criticized Wal-Mart for anti-competitive behaviour, describing how it puts small retailers out of business by luring away their customers with unmatchably low prices because of it's effective monopsony in the wholesale market. What people don't seem to realize is that it only got tis big because it was undercutting the competition's prices from the very beginning by effectively utilizing technology to improve inventory control far beyond the status quo. Now that it's big they can exploit economies of scale to drive prices even lower but that hardly seems like sufficient reason to penalize them.

The movie also mentioned that it was unfair for Wal-Mart to receive subsidies from municipal governments to set up shop in their cities while locally run retailers could not get similar financial incentives. While there's no disputing the fact that this is unfair, it seems to me that the fault lies at least as much with the city councils as it does with Wal-Mart. I know that other large employers (e.g. auto plants) often extract such subsidies from municipalities in return for gracing the city with their presence and it makes about as much sense to me as federal subsidies to the global aerospace industry.

Wal-Mart is a bad employer
This claim had more facets to it than any of the others. The movie pointed out that a large number of Wal-Mart's "associates" were unable to afford health insurance and were therefore relying upon government-provided healthcare. This is certainly a bad situation but the problem is the US healthcare system and not Wal-Mart. Businesses do not have a legal obligation to provide their employees with free healthcare; they usually subsidize it heavily as an incentive to work there. However, since Wal-Mart has no problem attracting "associates", despite the lack of a good healthcare package, then it is only natural that they wouldn't take on additional financial burdens. Healthcare is about twice as expensive in the US as it is in Canada (which is why so many skilled manufacturing jobs moved to Canada) and there is a glut of supply in the unskilled labour market so Wal-Mart has only been doing what makes economic sense.

This glut in the unskilled labour market has lead to other issues as well. Wal-Mart has been pressuring its "associates" to put in unpaid overtime hours. Furthermore, it occasionally altered time-sheets to avoid having to pay overtime wages. Both of these are highly illegal and the company was eventually sued by those whom it had abused in this manner. It's a valid criticism but it has been dealt with in the standard manner and the company is unlikely to attempt such culpable maltreatment in the future if only to avoid another class-action lawsuit.

Wal-Mart was also sued for discriminating against female employees by keeping them out of the management ranks. Again, this was a very bad thing for them to have done but it is the sort of thing that happens in large organizations making them pay a financial penalty for this has undoubtedly provided the top brass with significant incentive to ensure that this does not happen again. Corporations learn from experience in much the same manner as people and it's only fair to give them a second chance here.

The movie claimed that Wal-Mart was "unamerican" for outsourcing production to 3rd-world countries like China. That argument makes no sense at all. It is not the responsibility of a business to employ people; that's just a convenient side-effect. A business exists to serve the customer. For a company that competes primarily on price, the customer is best served by lowering costs. There is no good reason for Wal-Mart (or any other company) to pay an American to do something that somebody in a different part of the world can do just as well for a fraction of the wages. That's just the harsh truth. Americans had better stop expecting jobs handed to them and start demonstrating that they're worth the high wages they demand.

The outsourcing was also criticized for exploiting people in poor countries by making them work under miserable conditions. What people here fail to realize is that these conditions are actually better than whatever they had to put up with before or they wouldn't be doing so. An example from the movie was a woman who gave up her life on the family farm working from dawn to midnight so she could work in a factory producing goods for Wal-Mart. She complained that Wal-Mart provided them with shoddy apartments to live in and would charge them for the apartments even if they chose to live elsewhere. That's a very skewed perspective! Wal-Mart was merely offering them free housing. Why should the company be expected to provide their workers with housing? They certainly don't do that in the US. "Charging them for the apartments" merely translates to paying them lower wages. Those workers have the right to quit any time they want; they stay because the alternative is even worse. This is no different from England during the industrial revolution; modernization is painful at the beginning. Why should China be any different from England just because it is modernizing later?

In the movie Wal-Mart was criticized for being strongly anti-union, to the extent of attempting to brainwash their employees into believing that the union would only take their money and give them nothing in return. I'm not surprised; unions can easily destroy a company. Unions are the solution to a glut in the labour market; by creating a monopoly on labour, they can force employers to provide higher wages and better working conditions. However, like any other monopoly, they can very easily be destructive; this happens when unions prevent companies from hiring the best people by vetoing their recruitment process. Creating an oligopoly and preventing collusion in the labour market would largely alleviate this problem without leaving the workers at the mercy of employers.

Wal-Mart pollutes
There is strong evidence that Wal-Mart's negligence has been responsible for polluting the environment on multiple occasions. Well, we have laws to deal with this. The penalties should be increased and the investigations intensified until companies have a strong incentive to ensure that they do not damage the environment. While this is certainly a failing on the part of Wal-Mart, what needs to be fixed is the environmental protection measures. This may have the effect of raising prices but I would hope that people value the natural environment enough to accept that as a consequence.

Wal-Mart is a bad community-member
Apparently Wal-Mart neglects to ensure that their parking lots are safe, despite the knowledge that they could significantly boost safety by having employees patrol these lots. Well, the last time I checked, the police were responsible for public safety. If people are willing to shop at Wal-Mart despite the safety concerns then there is no financial incentive for Wal-Mart to take on the job of policing their parking lots.

Finally, the movie lambasted the Wal-Mart shareholders for not donating enough to charity. While I can't imagine what they intend to do with all that wealth (even Bill Gates intends to give it to charities upon his demise), they're are certainly under no legal obligation to give it away.

Current Mood: uncomfortable

07:34 am - Peak oil?

Last night I attended a public lecture at Stanford about the end of oil. After a brief introduction to the conditions under which fossil fuels are formed, a pair of speakers took turns presenting opposing viewpoints. I took notes on my Crackberry. Here they are:

Doomsayer (Amos Nur):
Income vs oil use: all countries seem to use more oil as their standard of living improves.
Additional reserves only delay peak not tail of usage curve.
US oil use outstrips domestic consumption.
We will need other fuel sources.
After the mid-east, Canada and Venezuela have the most oil.
Oil wars are just skirmishes between oil producers and consumers.
China once thought it would be a net oil producer!

Capitalist (Steven Gorelick):
Malthus was wrong about food shortages.
Bell curve doesn't apply to chronological use.
Hubbert's curves were wrong.
We have been discovering new reserves faster than we can use them.
Sometimes domestic production drops when it is cheaper to import.
We have no idea how much oil we will be able to find in the future.
Price increases and new tech drive supply increases.
But increased supply drives prices down.
We also find alternatives that decrease usage.
We can increase GDP without a corresponding increase in oil use by being more efficient.
The world has been getting more GDP per oil barrel with time.
We are finding more oil and extraction is getting cheaper.
Under 5% of US energy needs are met by the Persian gulf!
World oil use per capita has been steady for 20 years.

We still need to worry about the pollution generated by burning fossil fuels though.

Current Mood: pessimistic

11:03 pm - Corruption

Watching The Constant Gardener tonight got me thinking about how multinationals exploit people in poor countries. Generally they bribe some government officials to turn a blind eye to their activities. That means the problem isn't just due to the corporations trying to boost their bottom line at any cost but due to the corrupt government officials as well. If these officials weren't betraying the public trust by allowing foreign commercial interests to screw over the people whom they are supposed to serve, then most of these problems would not exist. As a corollary, the continued prevalence of such corruption will prevent the suffering people from getting out of their miserable situation, regardless of how much foreign aid is sent to them.

What follows from this is that the problem must be dealt with by one of 2 ways: either the corruption must be quashed or the offending corporations must be taken to task in their home countries. Neither of those options is easy but failing to do at least one will allow the problem to remain unchecked. Throwing relief money at the suffering people will only serve to alleviate the situation slightly on a temporary basis, not to fix the broken system.

Current Mood: pensive

09:10 pm - The theory behind Live8

Last week I purchased one of those white wristbands in support of forgiving 3rd-world debt in the interests of fighting poverty. This week I learned how it all works. I shall now explain in plain English.

A long time ago the governments of modern industrial nations (like Canada) wanted to help ailing African nations out financially. What they should have done was to bankroll infrastructure development projects. But their citizens (that's us) didn't want to see their taxes being used to help other countries. So our governments mislead us slightly and said they were going to lend money to the Africa countries and we would be paid interest on these loans. That didn't sound so bad so we let them do it.

Unfortunately, most of this money was squandered on ethnic cleansing, quelling riots, fighting wars and other completely unproductive endeavours. By the end of it all, they were no better off than before they got the money, except now they have these loans on which they can't afford to pay interest. This makes them look like bad debtors so now nobody else will lend them money even when they do actually want to invest in infrastructure.

Of course, we're never going to see that money we gave them anyway, so we may as well write it off as a bad debt. This will clear their credit rating and allow them to take loans from private banks that will (hopefully) take rigourous measures to ensure that the money is not squandered again. This does not guarantee that they will progress but it does remove one of the obstacles in their way.

Current Mood: enthralled