Without our cognitive "theory of mind" by which we are able to attribute mental states, intentions, etc. to others, our human level of social complexity would be impossible. But what is it we are really doing when we use our "theory of mind" to attribute mind to others? We are in fact theorizing that because I have a mind, others have minds. And therefore their mind will be like my mind. Their goals will be like my goals, their values will be my values, etc. And it is here, in overattributing oneself into others, that many of our cognitive failures emerge.
An important cognitive feature humans have is this tendency to "overattribute." This is important in our early evolution, because it is more important to make a mistake in the direction of too much than of too little, particularly when reading signs. If you see order, it is better to make the mistake of thinking that all order is made by an orderer than to make the mistake of failing to recognize that said order means there is an orderer -- who is likely to be close by. An orderer is potentially dangerous -- another tribe, for example. It's not that big a deal if you make a mistake of thinking even natural order means an orderer, but it is potentially fatal to fail to recognize when other people are around.
The same is true of theory of mind. We probably assume too much mind being present in many things without minds -- but that's less of a problem than failing to realize another person has a mind. However, this tendency to overattribute, when applied to theory of mind as believing others are like us, can create problems.
Perhaps an obvious error we commit is our tendency to homogenize. With theory of mind, not only do we assume others do have minds similar to our own, we assume they should. And by "similar," we often in fact think "the same." A difference between an other and oneself creates cognitive dissonance and mental discomfort. We can resolve this by either changing our ideas about others' minds, or by insisting others change to conform to our own model, or by dehumanizing the other.
The last case is why there is racism and sexism. Many consider differences in others as evidence of lack of mind. Lack of mind means the other is not human. One cannot truly be racist or sexist toward those one considers to be "human," by which one means, "like myself." Those who look the same, act the same, have highly similar beliefs, values, etc., and share the same culture are all "like myself," and are therefore properly human. Those who don't are suspect.
In the second case, there is acceptance that others have minds, but their minds are "wrong" because their actions, beliefs, values, etc. are different. From this we get the drive for conformity. People "should" think how we think, meaning we should try to get them to think as we think. In its healthy form, this is known as "education." In its unhealthy form, it is collectivism, socialism, re-education camps, censorship, etc. It is an insistence that my values are the only good and true values, and that my value rankings are the only good and true value rankings. This is what socialists, and especially Marxists, insist to be true. It is no coincidence that all communist countries engaged in re-education camps and censorship, and tried to get rid of those who would not conform. Again, in its healthy form, this is simply social living; in its unhealthy form, it is collectivism.
But there is a third possibility -- one which we are still learning to embrace. That third possibility is understanding that differences in the way others think is not an indication that they do not have a mind. It is simply an indication that different social conditions, cultures, etc. create different ways of thinking. However, there are also healthy and unhealthy versions of this. The purely pluralistic, postmodern version, which insists that there is nothing but difference, is the unhealthy version. In this, nobody can understand each other, with the result that the only way there can be peace is to have a single, dominant ideology. It is the individuality of constructivist rationality Hayek rightly criticized. However, there is a healthy version, which understands that humans are united in their cognition, but also demonstrate differences. We probably all do share the same values; we just rank them differently. We are social individuals, with different ways of doing things that can, nevertheless, be coordinated with the right institutions. And this can happen because, though we are all different, and though we differ in our values, we also share values and our basic cognitive features.
This suggests that it is our theory of mind that causes two different kinds of collectivist beliefs. But we hardly want to do away with our theory of mind! Of course, that's not even an option. What is an option is realizing that our tendency toward homogenization is a cognitive error. The answer is not to go to the extreme of unconnected heterogeneity, but rather to combine the two, to understand humans both have a basic nature and commonly-evolved mind, and that there can nevertheless arise differences in our thoughts and actions and, consequently, in our cultures and societies.
Sunday, September 30, 2012
Wednesday, September 26, 2012
Math, Complexity, Economy
In his 2010 paper "Some Epistemological Implications of Economic Complexity," Roger Koppl cites Fritz Machlup's (1978)
The situation in statement(1) is that of a "pure market." Such a "pure market" is calculable. One could easily use mathematical methods. But too many who use mathematical methods think that they can use these methods to plan or at the very least regulate the economy. But note that the emergence of a Big Player who can in fact use such math to adjust the economy to try to make it perform in this or that fashion creates a situation in which mathematical methods fail.
In other words, modeling pure markets with math gives us the hubris to believe we can use math to control the market, but in creating a position in which someone can control the market, the math is then necessarily going to fail to model the new condition of Market + Big Player. And what about statement(2)? Well, with statement(1), we have a "pure market," or, more accurately, a catallaxy statement. Statement(2) is a statement of Catalaxy + Technological Order. The addition of a second spontaneous order makes the process too complex for math.
And the Catallaxy never stands alone. It is always interacting with the Technology order, the Monetary order, etc. And if the order is mostly dominated by a Big Player (as is the case with the Monetary order), the interactions are even less calculable. Another way of putting this is to turn the statements above into the questions "If . . . will . . . ?" Then we can answer them as such:
(1) Yes
(2) Probably, but the nature of the change will be unknown until developed.
(3) It depends on the Authorities' knowledge, understanding, background, ideology, etc. We cannot know what they will do, even if we know what they did in the past under what we assume to be similar circumstances.
Note that even here the answers increase in complexity. And I greatly truncated (3). We thus have what seems to be a paradoxical situation. So long as we leave the economy alone, we can compute or calculate it; but if we try to use those computations/calculations to intervene in the economy, we can no longer compute or calculate it, meaning the early computations/calculations are no longer valid. Alas, such paradoxes are of the very nature of the world.
examples of statements exhibiting economic logic Statement(1): "If, because of an abundant crop, the output of wheat is much increased, the price of wheat will fall." Statement(2): "If, because of increased wage-rates and decreased interest rates, capital becomes relatively cheaper than labor, new labor-saving devices will be invented." Statement(3): "If, because of heavy withdrawals of foreign deposits, the banks are in danger of insolvency, the Central Bank Authorities will extend the necessary credit." (Machlup, 1978, p. 64)Koppl notes that
The first statement is more reliable than the second and the second is more reliable than the third.This is because, citing Machlup again,
causal relations such as stated in (2) and (3) are derived from types of human conduct of a lesser generality or anonymity. To make a statement about the actions of bank authorities (such as (3)) calls for reasoning in a stratum of behavior conceptions of much less anonymous types of actors. We have to know or imagine the acting persons much more intimately (Machlup, 1978, p. 68)Koppl relates this to his "Big Players" thesis. And I think he is right to do so. And he argues that this makes "literary methods" necessary in economics. And I think he is right to do so. But there is also something implied here that is not stated explicitly.
The situation in statement(1) is that of a "pure market." Such a "pure market" is calculable. One could easily use mathematical methods. But too many who use mathematical methods think that they can use these methods to plan or at the very least regulate the economy. But note that the emergence of a Big Player who can in fact use such math to adjust the economy to try to make it perform in this or that fashion creates a situation in which mathematical methods fail.
In other words, modeling pure markets with math gives us the hubris to believe we can use math to control the market, but in creating a position in which someone can control the market, the math is then necessarily going to fail to model the new condition of Market + Big Player. And what about statement(2)? Well, with statement(1), we have a "pure market," or, more accurately, a catallaxy statement. Statement(2) is a statement of Catalaxy + Technological Order. The addition of a second spontaneous order makes the process too complex for math.
And the Catallaxy never stands alone. It is always interacting with the Technology order, the Monetary order, etc. And if the order is mostly dominated by a Big Player (as is the case with the Monetary order), the interactions are even less calculable. Another way of putting this is to turn the statements above into the questions "If . . . will . . . ?" Then we can answer them as such:
(1) Yes
(2) Probably, but the nature of the change will be unknown until developed.
(3) It depends on the Authorities' knowledge, understanding, background, ideology, etc. We cannot know what they will do, even if we know what they did in the past under what we assume to be similar circumstances.
Note that even here the answers increase in complexity. And I greatly truncated (3). We thus have what seems to be a paradoxical situation. So long as we leave the economy alone, we can compute or calculate it; but if we try to use those computations/calculations to intervene in the economy, we can no longer compute or calculate it, meaning the early computations/calculations are no longer valid. Alas, such paradoxes are of the very nature of the world.
Tuesday, September 25, 2012
Evolutionary Psychology to Spontaneous Orders
There are two papers by Douglas Kenrick, et al that lay out what I would consider to be foundational work in bridging evolutionary psychology and spontaneous order theory. They investigate several ways cultural differences can emerge, but this is broadly applicable to the emergence of spontaneous orders, and would be a good way to investigate how different versions of the same kinds of orders could emerge. There is no reason one could not run these models with all our instincts. We have, according to E. O. Wilson (actually, George P. Murdock, whom Wilson is quoting), identified at least sixty-seven cultural universals so far:
One could run these models with each instinct and/or with combinations of instincts. Given enough computing power, it should not be entirely impossible to run combinations that would give rise to groups with features similar to actual cultures that have actually existed or exist. At the very least, it would be interesting to run some simulations to see what kinds of markets and other recognized spontaneous orders might emerge. This might also suggest other orders are spontaneous orders -- or could be.
age-grading, athletic sports, bodily adornment, calendar, cleanliness training, community organization, cooking, cooperative labor, cosmology, courtship, dancing, decorative art, divination, division of labor, dream interpretation, education, eschatology, ethics, ethno-botany, etiquette, faith healing, family feasting, fire-making, folklore, food taboos, funeral rites, games, gestures, gift-giving, government, greetings, hair styles, hospitality, housing, hygiene, incest taboos, inheritance rules, joking, kin groups, kinship nomenclature, language, law, luck superstitions, magic, marriage, mealtimes, medicine, obstetrics, penal sanctions, personal names, population policy, postnatal care, pregnancy usages, property rights, propitiation of supernatural beings, puberty customs, religious ritual, residence rules, sexual restrictions, soul concepts, status differentiation, surgery, tool-making, trade, visiting, weather control, and weaving. (Wilson, OHN, 160)Each of these, in various forms, can be found in every culture, throughout history. My guess is there are many more than just these. In Natural Classicism, Frederick Turner adds combat, gifts, mime, friendship, lying, love, storytelling, murder taboos, and poetic meter to the list of sixty-seven. And in The Culture of Hope, and in Beauty, he gives a list of what he calls neurocharms (208-210), many of which could also be considered cultural universals, since they are found in every human culture. Many of these, such as narrative, selecting, classification, musical meter, tempo, rhythm, tone, melody, harmony, and pattern recognition can be found in other animals, including chimpanzees, gibbons, and birds. Others, such as giving meaning to certain color combinations, divination, hypothesis, metaphysical synthesis, collecting, metaphor, syntactical organization, gymnastics, the martial arts, mapping, the capacity for geometry and ideography, poetic meter, cuisine, and massage (which would be a development of mammalian and primate grooming rituals, which humans also engage in, as any couple can tell you), are uniquely human.
One could run these models with each instinct and/or with combinations of instincts. Given enough computing power, it should not be entirely impossible to run combinations that would give rise to groups with features similar to actual cultures that have actually existed or exist. At the very least, it would be interesting to run some simulations to see what kinds of markets and other recognized spontaneous orders might emerge. This might also suggest other orders are spontaneous orders -- or could be.
Tuesday, September 11, 2012
Austrian Theory and Historical and Empirical Analysis
This month's Cato Unbound is a bit "inside baseball" among Austrians and post-Austrians on Austrian economics and empirical analysis. Steve Horwitz starts things off with an argument that Austrian economists are in fact more empirical, because they consider more factors to be important for what contributes to the features of the economy than do other schools. At least among the Hayekian scholars I mostly associate with, there is little question this is true. Hayek said you can't be a good economist without being an interdisciplinary scholar, and I (and Horwitz) concur.
George Selgin gives a very clear rebuttal -- so clear that it seems clear where the problems are in his analysis. To some degree, there is little one can argue with in regards to what he says about economics analysis and about how many (let's say, half) Austrian economists do economics. However, I think he is missing the real critique of historical and empirical analysis.
Let us consider the minimum wage. If you look at the historical/empirical evidence, you will see that most of the time in the United States after the federal government raised the minimum wage, unemployment went down. Conclusion based on history and empiricism alone: raising the minimum wage causes unemployment to decrease. However, economic theory says increasing the minimum wage causes unemployment to go up. This clearly contradicts the empirics.
Or does it?
The problem is that we are dealing with a complex system. In a complex system, there is not a simple cause-and-effect relation. Whether or not there is a minimum wage, and whether or not one raises it if there is one, will affect unemployment -- but it is hardly the only factor affecting unemployment. If there are other factors acting in the economy to decrease unemployment more than the increase in minimum wage would increase it, you will of course see unemployment go down.
By understanding that the minimum wage increases unemployment, you can understand that without the minimum wage, unemployment would have gone down even more than it would have. Could a regression analysis help us understand how much a particular increase in the minimum wage would increase unemployment? Well, that would require that you include all the factors contributing to employment. But how can you do that? Here are a few of the things that will contribute to employment levels:
But even if there were nothing but measurable factors, you would have to make sure you are including all the factors involved -- and the ways in which they interact -- to do the analysis. What we are faced with is an incomputable problem. You might be able to discover general trends, but I doubt you would ever be able to say that if we raise the minimum wage from $6.00 to 7.15 per hour you would necessarily get an X% increase in unemployment.
What you can know is that an increase in the minimum wage will price out low-skilled workers. It can do so in a variety of ways. It may be cheaper to automate; it may be cheaper to hire one skilled worker rather than three unskilled workers; it may be cheaper to relocate to a place with a lower minimum wage; etc. The minimum wage may also drive some businesses out of business. Which of these will occur? In what ratios? What will the resulting effects be?
One resulting effect may be that, over time, as the minimum wage continues to go up, low-skill jobs are run out of a region, meaning nothing but high-skill, high-wage jobs are available such that a subsequent increase in the minimum wage will have absolutely no effect on unemployment. When, if ever, will this stage be reached? What conditions would have to exist for it to be reached at all?
So where does this leave us? It leaves us with Mises' praxeology. We have to understand the underlying principles of human action to understand what is happening in the economy. If we look at the historical and empirical data, we are seeing the surface results of an underlying set of complex actors engaging in complex interactions, reacting to complex factors.
Actually, it leaves us with both praxeology and contemporary computer modeling. But even the models have to have complex actors acting as humans would act. Which brings us right back to . . . praxeology. The models, too, only show us what will result over time -- the emergent patterns, or surface results. The computers can only run the underlying complex interactions, not make them transparent to the humans trying to understand the results.
And even with computer models, you have to make sure you have all the relevant parameters. One can never tell what was the relevant parameter in a historical situation that made this downturn better or worse than the last one. Most of the time, we think we know that this or that factor was relevant, but too often we are looking at surface issues and missing the underlying issues. We stop the cause-and-effect chain too soon, and have no real idea what caused the current conditions to be as they are or were.
A good example the Great Recession. What caused it? If you were to rely only on what mainstream economists and the news media have been saying, it is the fault of the mortgage companies who created the bundles with the toxic mortgages in them. But that is in fact pretty far down the road from the primary causes -- some of which are the factors explained by ABCT. Most people fail to see that it was government policy, government regulations, and cronyism that caused the Great Recession -- because few follow the causal chain far enough. Austrians do.
And few understand the complexities involved. How many economists consider entrepreneurship and innovation and technology to be "external shocks" to the economy? But such an attitude is the height of absurdity. Economic growth is caused by the above mentioned external shocks. Which means understanding the causes of economic growth is outside mainstream economics. Which is absurd. Interdisciplinary economists -- which include almost all the Austrian economists I know -- understand that there are a lot of complex factors at work. And the understand that economic analysis is at best incomplete unless you include all of these factors, that most of the things that "shock" the economy are not really external to it, but are necessarily part of the economy. This means economic analysis is necessarily extremely complex. And the more complex a phenomenon is, the less it is able to be reduced to mathematical analysis. Especially, as Hayek observed, if it is more complex than the entities studying it.
Finally, Julian Baggini and Lawrence Krauss debate some of these same issues in a somewhat different context. Are all questions that are "answerable" necessarily "empirical"? I think this is the real debate.
George Selgin gives a very clear rebuttal -- so clear that it seems clear where the problems are in his analysis. To some degree, there is little one can argue with in regards to what he says about economics analysis and about how many (let's say, half) Austrian economists do economics. However, I think he is missing the real critique of historical and empirical analysis.
Let us consider the minimum wage. If you look at the historical/empirical evidence, you will see that most of the time in the United States after the federal government raised the minimum wage, unemployment went down. Conclusion based on history and empiricism alone: raising the minimum wage causes unemployment to decrease. However, economic theory says increasing the minimum wage causes unemployment to go up. This clearly contradicts the empirics.
Or does it?
The problem is that we are dealing with a complex system. In a complex system, there is not a simple cause-and-effect relation. Whether or not there is a minimum wage, and whether or not one raises it if there is one, will affect unemployment -- but it is hardly the only factor affecting unemployment. If there are other factors acting in the economy to decrease unemployment more than the increase in minimum wage would increase it, you will of course see unemployment go down.
By understanding that the minimum wage increases unemployment, you can understand that without the minimum wage, unemployment would have gone down even more than it would have. Could a regression analysis help us understand how much a particular increase in the minimum wage would increase unemployment? Well, that would require that you include all the factors contributing to employment. But how can you do that? Here are a few of the things that will contribute to employment levels:
- the property rights regime
- the institutional composition of the economy
- trade regulations
- economic regulations and enforcement
- immigration regluations and enforcement
- features of the black market for banned or regulated goods
- rate of innovation and entrepreneurship
- demographics
- general racial/ethnic attitudes of society at large
- child labor laws -- whether or not they exist, and their features if they do exist
- tax policy and changes
- monetary policy and changes
But even if there were nothing but measurable factors, you would have to make sure you are including all the factors involved -- and the ways in which they interact -- to do the analysis. What we are faced with is an incomputable problem. You might be able to discover general trends, but I doubt you would ever be able to say that if we raise the minimum wage from $6.00 to 7.15 per hour you would necessarily get an X% increase in unemployment.
What you can know is that an increase in the minimum wage will price out low-skilled workers. It can do so in a variety of ways. It may be cheaper to automate; it may be cheaper to hire one skilled worker rather than three unskilled workers; it may be cheaper to relocate to a place with a lower minimum wage; etc. The minimum wage may also drive some businesses out of business. Which of these will occur? In what ratios? What will the resulting effects be?
One resulting effect may be that, over time, as the minimum wage continues to go up, low-skill jobs are run out of a region, meaning nothing but high-skill, high-wage jobs are available such that a subsequent increase in the minimum wage will have absolutely no effect on unemployment. When, if ever, will this stage be reached? What conditions would have to exist for it to be reached at all?
So where does this leave us? It leaves us with Mises' praxeology. We have to understand the underlying principles of human action to understand what is happening in the economy. If we look at the historical and empirical data, we are seeing the surface results of an underlying set of complex actors engaging in complex interactions, reacting to complex factors.
Actually, it leaves us with both praxeology and contemporary computer modeling. But even the models have to have complex actors acting as humans would act. Which brings us right back to . . . praxeology. The models, too, only show us what will result over time -- the emergent patterns, or surface results. The computers can only run the underlying complex interactions, not make them transparent to the humans trying to understand the results.
And even with computer models, you have to make sure you have all the relevant parameters. One can never tell what was the relevant parameter in a historical situation that made this downturn better or worse than the last one. Most of the time, we think we know that this or that factor was relevant, but too often we are looking at surface issues and missing the underlying issues. We stop the cause-and-effect chain too soon, and have no real idea what caused the current conditions to be as they are or were.
A good example the Great Recession. What caused it? If you were to rely only on what mainstream economists and the news media have been saying, it is the fault of the mortgage companies who created the bundles with the toxic mortgages in them. But that is in fact pretty far down the road from the primary causes -- some of which are the factors explained by ABCT. Most people fail to see that it was government policy, government regulations, and cronyism that caused the Great Recession -- because few follow the causal chain far enough. Austrians do.
And few understand the complexities involved. How many economists consider entrepreneurship and innovation and technology to be "external shocks" to the economy? But such an attitude is the height of absurdity. Economic growth is caused by the above mentioned external shocks. Which means understanding the causes of economic growth is outside mainstream economics. Which is absurd. Interdisciplinary economists -- which include almost all the Austrian economists I know -- understand that there are a lot of complex factors at work. And the understand that economic analysis is at best incomplete unless you include all of these factors, that most of the things that "shock" the economy are not really external to it, but are necessarily part of the economy. This means economic analysis is necessarily extremely complex. And the more complex a phenomenon is, the less it is able to be reduced to mathematical analysis. Especially, as Hayek observed, if it is more complex than the entities studying it.
Finally, Julian Baggini and Lawrence Krauss debate some of these same issues in a somewhat different context. Are all questions that are "answerable" necessarily "empirical"? I think this is the real debate.
Wednesday, September 05, 2012
My People Page at the EDGE Center
My EDGE Center People Page is now up. I need to get them a better picture. Unless someone with some mad photoshop skills can clean it up and email it to me.
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