Friday, June 14, 2019

Lessons in Counterintuition

1. A popular survey question purports to expose our innate irrationality. It goes like this: you can have 100,000 USD if your enemy or your ex-spouse gets 1 million USD. Apparently, most respondents declined the offer. 

But all one has to do is add more nuance to the scenario to get a different overall response, thereby exposing the original question as meaningless. Try this: you have non-dischargeable debt of 50,000 USD. You can have 55,000 USD if your enemy receives 550,000 USD. Answers to the second question will be more varied, indicating short-answer surveys don't offer enough nuance to justify their cost or relevance. 

When such deficient "research" is passed off as newsworthy, serious journalism has died in America, but I'm also worried about inattention to the sociology field. Medical advances, especially in neuroscience, are leading governments and academics to focus on psychology and pharmacology departments without the involvement of independent entities capable of institutional knowledge. Absent relevant and reliable anecdotal evidence, scientific researchers may spend taxpayer and other funds chasing chimeras. 

2. Speaking of a failure to appreciate nuance, people are worried about AI's ability to increase unemployment. 
One person believes AI may wipe out 47% of existing jobs in America,
an astoundingly specific number.
Yet, the AI problem may be even bigger than unemployment if the world's technological AI race gives existing leaders--not necessarily in power by merit--the potential to cement their advantage over others, snuffing out change from local sources. 
Roberto Unger's Free Trade Reimagined (2007).
Imagine a robot that can scan all local residents for weapons as well as criminal records. No longer would a rural recruit dropped in a foreign land need be in a position to kill unarmed civilians. No longer would a wary security guard at a private establishment need assume every patron a potential threat. 

But let's fast-forward to the future. The aforementioned technology has made it easier to invade and occupy different lands if only to prevent another competitor from doing the same. Thus, while such technology would make the weak and unarmed safer in the short-term, the long-term picture is unclear. Nevertheless, if modern history is any indication, one can imagine this technology leading to more occupation, then removal of armed resistance to foreign culture, and finally the supplanting of local culture, beliefs, and methods. In one fell swoop, the same AI technology that protected the weak and unarmed has now extinguished the capacity for the same residents to achieve Roberto M. Unger's "diversity" component--leading to perpetual dependency on a foreign power. 
From Unger's Free Trade Reimagined (2007). 
Unger discusses diversity in ways unlike any other economist or political thinker. In order for workers not to be left out as innovation and creative destruction are financed by larger players, he argues it is imperative that 1) local entities are able to innovate in their own ways, unconstrained by centralized norms (another way of saying local culture ought to be supported through "collective experimentation" rather than subservience to centralized market forces); and 2) all entities are able to disregard prior norms if doing so would improve conditions for both capital and labor. 
From Roberto Unger's Free Trade Reimagined (2007)
Unger's "economic diversity" is the characteristic most under threat with advanced AI--despite not a single politician articulating this potential problem apart from anti-trust concerns. 

3. More lessons in counter-intuition: Country A has an 80% poverty rate. Country B has a 50% poverty rate and a democratic political system. Without knowing more, which country has the better chance of avoiding societal cohesion problems in the next 50 years? 

You'd think it would be the country with less poverty, but America in 2019 proves that when at least half of a country is able to structure the tax code, government funding, and housing inflation in ways that benefit existing interest groups, anyone outside those groups is left behind not just relatively but absolutely. (For the economics wonks: I use these two terms informally, but Unger uses David Ricardo's comparative advantage vs. Adam Smith's absolute advantage as an overall framework, at the same time casting doubt on Ricardo's ideas due to their limited scope, i.e., trade between just two countries using just two popular products.) 

Where economic theory typically fails is its inability to properly incorporate the social costs of underinvestment, meaning over time, absent some mechanism--such as widespread and cost-effective public transportation, genuinely merit-based and affordable colleges, etc.--segregation occurs, cementing physical and abstract (e.g., communication) gaps and reducing opportunities for reconciliation. Worse, as existing winners gain more affluence, they begin to see others outside their increasingly closed-loop system as morally deficient, eventually rejecting public institutions as the costs of reconciliation increase exponentially every year effective solutions are not implemented. (American acceptance of exorbitantly expensive private K-12 schooling is one example of such a breakdown--as if even one K-12 school not properly educating future voters in a democratic system providing equal votes to each citizen is acceptable. As I've written before, "Generally, long-term costs of exclusion, even if unintentional, far exceed the costs of inclusion on the front end.")  

In contrast, a country with an 80% poverty rate cannot easily segregate the country excessively or irreversibly. Any national public works program must consider more rather than fewer residents by demographic default. Moreover, the cost of essential items such as housing cannot be inflated beyond a point of no return even with the assistance of the banking sector unless wages also rise among a greater percentage of the population. To sum up, it is better for individuals to be rich than to be poor, but not necessarily for countries. 

© Matthew Rafat (2019)

Bonus I: "Free trade will flourish when the rules of the world trading system are designed to reconcile openness and diversity, not to suppress diversity in the name of openness." -- Roberto M. Unger 

Bonus II: "Humanity can become more unified only by seeking to develop in different directions... [so as] to establish a machine for the creation of collective difference [that supports] alternatives by making the world safer for them." -- Roberto M. Unger 

Bonus III: continuing the third example above, one can see developing countries' biggest problem is not technological access, but corruption. Why? Because developed countries' need for more consumers, including ones willing to spend beyond their means, will lubricate technological transfers so as to establish platforms. A governor or president who chooses the wrong transportation company contract or who builds asphalt roads instead of Tokyo-style trains is a developing country's greatest threat to long-term success. 

Even if a developing country chooses well, only half of the battle has been decided--for example, if a train is chosen but goes over estimated costs, not only will the government lose taxpayers' money while further mortgaging its citizens' futures to foreign banks, it will also lose credibility, weakening its ability to govern and to regulate. 

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