May 22, 2017

'Short Attention Span' Does Not Equal 'Incompetence'

"Generally speaking, if you see a person who is a failure in life ignoring advice and eschewing knowledge, the best explanation for that situation is you are dealing with an incompetent person.

"But if you hear allegations of a short attention span in someone with a multi-decade history of successfully navigating complicated industries, be open to the possibility that the messenger is pushing useless information on an executive who is good at knowing what matters and what does not."

- Scott Adams, "The Short Attention Span President"

Drug Bans are Unconstitutional

"The Constitution does not give the federal government authority to regulate, much less ban, drugs.

"People who doubt this should ask themselves why it was necessary to amend the Constitution to allow the federal government to criminalize drinking alcohol but not necessary to amend the Constitution to criminalize drug use."

- Ron Paul, "Will the Trump Administration Overdose on Authoritarianism?"

May 20, 2017

Do Regulations Make Americans Poorer?

Is America's accumulating pile of regulations slowing down economic growth? According to a new study from the Mercatus Center at George Mason University, the answer is yes: Thanks to regulatory drag, the U.S. economy is $4 trillion smaller than it otherwise would have been ...

The Mercatus Center's new study refines the earlier work of two economists, John Dawson of Appalachian State University and John Seater of North Carolina State. In a 2013 Journal of Economic Growth article, Dawson and Seater constructed a regulatory burden index by tracking the growth in the number of pages in the Code of Federal Regulations since 1949. That number, they note, increased sixfold from 19,335 to 134,261 in 2005. (As of 2014, it had risen to 175,268.) The authors devised a pretty standard endogenous growth theory model and then inserted their regulatory burden index to calculate how federal regulations have affected economic growth.

Their astonishing conclusion: Annual output in 2005 was '28 percent of what it would have been had regulation remained at its 1949 level.' If not for the growth in the regulatory burden, gross domestic product would have been $53.9 trillion in 2011 instead of $15.1 trillion—a 2 percent annual reduction in economic growth cumulated over 56 years. Americans are significantly poorer due to federal regulations, without which 2011 U.S. per capita income would have been almost four times higher, at $168,000 instead of $48,000.

I have no idea if these numbers are accurate or if the study's conclusions are correct. Indeed, I see some potential flaws in the methodology I would want to investigate. However, this sort of thing needs to be calculated and considered.

It's easy to say regulations are necessary because without them, there would be much harm to citizens by greedy capitalists. (I agree.) But it's much harder to understand that regulations aren't cost-free. At some point -- who knows exactly where or when -- we are getting too much bad for too little good.

This is what we Libertarians call "the seen vs. the unseen." It's easy to see the smokestack that was made to stop smoking. It's not easy to see the town slowly descending into poverty.

May 16, 2017

Thaler's Mental Accounting Error

Behavioral-economics pioneer and University of Chicago Professor Richard Thaler recently retweeted a January 2015 op-ed he wrote for The New York Times titled, "It’s Time to Rethink the Charity Deduction."

Here's an excerpt:
Admittedly, the current tax treatment of charitable donations is not phrased as a subsidy, but that is just semantics. If someone in the 36 percent tax bracket gives $1,000 to charity and deducts it from his income tax, the donation costs him only $640. The government picks up the rest. That’s a subsidy. 
It would be reasonable to ask why the government should subsidize charitable contributions at all.
I'm generally a Thaler fan, but his statement is exactly wrong. It would not "be reasonable to ask why the government should subsidize charitable deductions" because it doesn't actually subsidize them. The government doesn't 'pick up' anything.

A "subsidy" is the government giving money to an individual or business. A "deduction" is the government not taking money from an individual or business. If someone in the 36% tax bracket gives $1,000 to charity, his contribution costs him $1,000 -- even if he deducts it from his taxable income on his tax forms. If he were unable to deduct it, he would also have to give the government $360. That is, his contribution would cost him $1,360.

It seems even a brilliant professor who pioneered an entire field can fall victim to the false premise that wealth derives from the state and is kept by individuals only at its discretion.

"Tax deductions, like tax exemptions and credits, allow people to keep more of their money in their pockets and out of the pockets of our greedy, profligate Uncle Sam," writes Libertarian author Lew Rockwell. "Only a statist who thinks the government is entitled to a percentage of every American’s income and that tax deductions deprive the government of its claim to that percentage could object to Americans holding on to more of their own money."

To be perfectly honest, though, I fall into this trap. I often find myself talking about business spending as being "subsidized" by the government. When I spend $100, I imagine I am only spending $65. But no, I actually spent the $100. Not having to pay the government an additional $35 on the income I used for expenses is not the same as the government splitting the bill with me -- even though the inevitably of paying taxes may make it seem that way.

What's fascinating to me is that this is exactly the sort of odd human misjudgment Professor Thaler helped bring to the world's attention. It's of a piece with what he describes as flawed "mental accounting." A being of pure reason -- Thaler's "Econ" -- would never make the mistake of thinking his charitable giving or business spending involved contributions from the government. But a Human mentally puts a rough percentage of his own income into the government's account and then rejoices when he gets to take some money out of that account. He experiences the joy of a gain even though what has actually happened is that he has not lost.

In other words, Humans accept government confiscation as the natural order of things. Perhaps someone needs to re-introduce them to a third category of being: the Freeman.

May 14, 2017

Cialdini Explains Why Trump Won

In a recent interview for the Financial Times' Alphachat, social psychologist Robert Cialdini explains, from a persuasion perspective, why Donald Trump won the election of 2016.

Below is the key section. I've underlined the things that jumped out at me.
Alphachat: Okay, we’re in the final segment of our conversation. I want to talk a little bit more about something you brought up a second ago, which is the role of persuasion in politics, this is obviously a topic of such interest right now. Not just in your two books, where you do mention in a few cases ways in which persuasion can work in politics, but also in the past I think you’ve been reported to have advised certain candidates, and you’ve usually demurred from talking about your specific role in these elections, so I won’t press you too much on that.  
Let me just ask you in general: What you have learned about persuasion from your participation in, and your study of, the political process?
Cialdini: What I’ve learned is that, like the business community, the political establishment is now embracing behavioral science in making their choices about how to present their candidates, how the candidate should make their cases, and so on.  
I just spoke about Trump, and so I can describe a strategy that President Obama used in both of his campaigns, which was to be sure that when there were reports of how much money they had received in donations (they are required to do that every month, every quarter), that campaign didn’t just describe the amount of money that they received, they also described the number of contributors, the number of people who donated to the campaign.
The message was, look at all of the people who have decided that this guy is a legitimate candidate. Obama started this, he started doing this. Trump doubled down on it when, at his events, he would instruct the television cameras to turn around and look at the size of the crowd. The multitude was the message. The fact that many people were there – or many people were contributing, in the case of the Obama campaign – that was legitimizing for someone who was not a familiar face.  
For Obama, he was coming from a background that had never been part of presidential politics before, and Trump was coming from outside of politics, so they needed to legitimize themselves. And the way to do that was to use what we call social proof, evidence that if a lot of other people are doing this, or believing this, it’s probably valid.  
Alphachat: Was that your idea, by the way? Was that something you advised?  
Cialdini: No, I observed it though. 
Alphachat: There is something else connecting the political landscape with Pre-suasion, which is the role of the media. There is a famous quote that you include in the book, that the media tells people what to think about though not necessarily what to think (I'm paraphrasing the quote). And that connects directly to your thinking on what it means to capture somebody’s attention. Which means that now, because the media’s hold on attention is also competing with the ability of candidates to directly appeal to people through social media and other things, the landscape has become a little bit more complicated.  
But it also means that candidates can more directly elevate the importance of topics that maybe in the past would not have gotten through the media filter. Do you largely agree with that?  
Cialdini: I do, and I think that competition now is causing media representatives to see as acceptable forms of information that they wouldn't have seen as acceptable to present before. Information that is sensationalizing, for example, but not yet determined to be accurate.  
Because it’s not an information war, it’s an attention war. But the consequence of getting people to pay attention is this is one we talked about earlier – they then get to see that particular focal concept, or that idea, as more important than before. That’s troubling. 
Alphachat: Can you share with us some of the other points you made in your recent speaking on Trump?  
Cialdini: Well, I think one of the things that helps explain his election to the presidency is it was a change election. That is, in the last 100 years, every time a given political party has held the White House for two terms, they are 80% more likely to lose the next election. So it was a change election. And Donald Trump was a change candidate, whereas Hillary Clinton was a continuity candidate. So she had a lot going against her just structurally in the type of election that it was, the psychology of that election.  
The other thing that the media was complicit in, though, was to rise to the bait every time that Donald Trump did something outrageous, or scandalous, or unheard of. And that caused Donald Trump to get attention.  
He was a master of being able to bring attention to himself, which led to the perception of his importance. If we’re paying attention to something, it becomes more important in our minds than it was previously, and what he needed to do was to have this perception of his importance (as a candidate) rise to prominence.  
The other thing that paying attention does is to cause us to presume that if we’re paying attention to something, [then] it has causal properties. That is, typically we pay attention to the causes in our environment, those things that produce change. It makes sense, environmentally, that we would want to spend our time focusing primarily on the things that are causal, that create change.  
Well, if he can get attention brought to him by the media, he becomes seen as a causal agent to a greater extent. And in a change election, that’s exactly who’s going to win.  
Alphachat: Yes, one of my questions is, though, doesn’t that reflect a certain amount of instinctive talent on his part that he was able to get that kind of complicity from the media, or from other people who were projecting his message to the base of voters that he was seeking?  
Cialdini: Right. It was that people were much too focused on the content of what he was saying compared to the fact that attention was being brought to him by this outrageous content, and the side effect of that attention was to make him seem important, and to make him seem a causal agent, which is exactly what a candidate wants, if there’s doubt about his or her role in the election.  
Alphachat: One last question on Trump. And this might take a bit of a wind up, so I’ll ask the question then I’ll give you a lot of room to answer it.  
One of your biggest admirers, the writer and cartoonist Scott Adams, spotted early on that Trump used a combination of persuasion tactics that were very impressive and that a lot of the other candidates just didn’t seem able to deploy.  
Here’s a few examples. One is that he speaks in very visual terms, so when he labelled some of the other candidates, his competitors, things like Crooked Hillary or Liddle Marco or Low Energy Jeb, these were all things that you could sort of imagine in visual, physical terms. And they tended to stick, they were what Adams called “linguistic kill shots."  
Another tactic was that he’s very repetitive, and in a previous podcast episode the journalist Joe Weisenthal brought up one of Trump’s speeches where he kept repeating that he was a leader, and things like “I like to lead,” “leading is what I do,” “people are led by me”… in such a way that a lot of pundits would read a transcript of the speech and think, this just looks ridiculous. But in fact most people who were listening to the speeches don’t process them that way. For them, that kind of repetition might work. Again, it just kind of sticks. They hear it a few times and then they keep the association [of Trump and leadership] in their minds.  
Another thing Trump did was what Adams calls pacing and leading, where he takes a very extreme position – for instance on immigration, as when he said he’s going to deport all undocumented people – so that later on he has credibility with his base of voters when he takes a more moderate position.  
And a final one – there’s dozens of these – but a final one is the idea of getting people to think past the sale. So when he says that he’s going to get Mexico to pay for the wall, and then his opponents say, “well that’s ridiculous, they’ll never pay for the wall,” essentially what’s happened is that they’ve granted one of the premises of what he said, which is that there’s going to be a wall in the first place. It’s a way of getting them there. There’s a lot more examples, but I guess my question is, both in general and specific terms, do you agree with this idea that Trump is a “master persuader,” as Scott Adams likes to say, that he has a unique skill set when it comes to persuading people, at least in the political context?  
Cialdini: I do, and I think it comes from a long history as a dealmaker, as a business person who has been successful, but also as an entertainer. And an entertainer on television, not somebody who writes or somebody who is a speaker or an orator or something like that. No, this guy is very visual.  
So in visual presentations it is the imagery, and in television especially those images are constantly sweeping past us. We don’t really get time to stop the frame and think about what was said there. We’re onto the next set of images, the next frame, and that stream of imagery is the sort of thing that allows people to make presentations based on appearances as opposed to the content of what they’re saying. And he was always very self assured, very confident, always dressed in the classic business person attire and so on, a lot of certainty associated with what he was saying. And so those impressions, I think, were the kinds of things that he had mastered, and that proved to be very effective in this particular kind of campaign – again, when people were looking for change, and wanted to be assured that this was somebody who was going to steer them in a good direction if that change was going to be afoot.  
Alphachat: We’re just about out of time, but I’ve got one last question. In one of his final interviews, on a podcast with David Axelrod before he left office, President Obama said this – I'm just going to read the quote and then ask for your reaction to it – the quote is: “We’ve got to figure out, how do we show people and communicate in a way that is visceral and makes an emotional connection as opposed to just the facts, because the facts are all in dispute these days.”  
Cialdini: So my comment on that would be the way to do it – if you believe that, and I see there is some validity to it – you do it with images.  
People don’t counter-argue stories. They don’t counter-argue imagery. They counter-argue statements, they counter-argue contentions or assertions or arguments. So if you want to be successful in a post-fact world, you do it by presenting accounts, narratives, stories and images and metaphors. Now, if you’re going to be ethical in that regard, you make sure that those accounts, stories, metaphors and so on reflect the facts. You still have to know the facts, but the idea that the facts are going to carry the day is na├»ve.  
Alphachat: This is a quick follow-on question – I said the last one was my last question, but this is, I promise, my last question, because I know we’ve got to go. What is an example of a potent metaphor that is ethical and fits the facts and that you believe could be persuasive [in the political context]?  
Cialdini: What I always prefer is to try to go to some example that has evidence to support it.  
There was a study done at Stanford University in which people were exposed to a news account of a rash of crime in their community. And half of them had the crime wave described as a “rampaging beast” that needed to be stopped. The other half had it described as a “rampaging virus” that needed to be stopped.  
Those people who saw the account described as a beast then came politically to support capture-and-cage approaches to crime – that is, increased police presence and prosecution and jailing of criminals, because that’s what you do for a beast.  
Those who saw the crime described as a virus came to support education programs and neighborhood enhancements and jobs programs, because what you do with a virus is you remove the conditions that produce it in the first place.  
So that’s the kind of way in which it’s possible – if indeed there is evidence that the way to reduce crime is by reducing the conditions that make it grow, then that’s the metaphor we should use – rather than that it is a rampaging beast, it’s virus-like, and that allows the story to be told in a way that comports with the facts.