Policies We Should Be Talking About – in 500 Words or Less

What policies should be undertaken to improve society? I would hope that would also be the fundamental question of politics, but it often seems to take a backseat to “how do we obtain and hold political power?”

Nonetheless, I like to push back against that worldview, and I hope this blog has somewhat succeeded at doing so. Efficient Advocacy is a way to answer the question of what policies should be undertaken to improve society, while Artificial General Intelligence and Existential Risk analyzes why we might be concerned about extremely high impact, although unlikely, events. There’s also a good discussion of the various aspects to consider when choosing where to expend resources and effort: is the policy widely known or discussed, is it popular, do candidates take a position on this issue, should political processes themselves be reformed before the policy can be implemented?

This post is going to be the first in a recurring group of posts discussing various good policies. For the most part, these posts will discuss policies that are outside of the main political discourse, but ought to be discussed more. I’ll try and note why they may or may not be politically tolerable, but I’ll also try and keep each policy discussion very brief, to 500 words or fewer, with three policies in each post. I’m not ruling out that policies will repeat, but that will depend on the frequency of posts and how good the policies are. Many of these policies may be new or incomplete, but all discussions start somewhere.

Nominal GDP Futures Targeting

The Federal Reserve is the most important institution for macroeconomic stabilization policy. It is not particularly political, it can react quicker than Congress, and it controls the money supply for the most widely used currency in the world. The 1977 Federal Reserve Reform Act gave the Fed the goals of price stability and maximum employment in what is known as the “dual mandate”.  However, these particular goals are often at odds, which means the “correct” policy the Fed should be taking isn’t obvious.

The 90s saw the rise of the Taylor Rule, although Milton Friedman had argued for a rules-based policy regime long before this. The Taylor Rule isn’t an exact rule, but it is an attempt to codify monetary policy to stabilize prices, increasing the real interest rate in response to inflation, and thus targeting a specific inflation level.  Nominal GDP targeting, on the other hand, doesn’t target specific interest rates, but levels of spending in the economy. Scott Sumner, and others at the Mercatus Center have argued that the Taylor Rule is inferior to Nominal GDP targeting because the Taylor Rule relies on retrieving more information, specifically both inflation and the “gap” between real and potential economic output. It’s argued that Nominal GDP is much simpler to get data on in real time, allowing the Fed to apply monetary policy with better understanding of the economy’s current state.

Additionally, NGDP targeting can be enhanced with futures markets, allowing the Fed to have direct feedback from the market on the expected levels of NGDP growth. This helps to solve the Hayekian knowledge problem, by pulling as much data as possible into a single market price. NGDP is also beneficial in that it doesn’t target specific interest rates, just spending levels, so in a low-interest rate environment, like the 2008 recession, the Fed would have had a rule to help guide the level of quantitative easing, instead of just shooting in the dark and hoping it would work.

So what is the political status of this policy? Well it’s pretty technical and so I doubt any voters have or could be persuaded to have much of a view on this. That also means it doesn’t have much political opposition, although conservatives interested in monetary policy don’t love it. The actual legislation that would need to happen would probably revolve around the legalization of NGDP Futures markets, which would essentially be speculative gambling on government data collections. Luckily, from the Fed’s perspective, policy change requires no legal hurdles; the Taylor Rule is a self-imposed policy goal that could be exchanged for NGDP targeting as soon as Fed officials are convinced of its benefits.

To convince them, here is some further reading:

Social Security Identity Theft Reform

Social Security wasn’t meant to be a national ID program, but because it is the only national program everyone is guaranteed to be enrolled in, it has become the de facto national ID number. SSNs can’t be revoked easily like credit cards, they weren’t assigned randomly until 2011, and they are used for authentication despite being universally stored, subjecting them to serious security issues. Identity theft is thus a major problem.

The solution is to make SSNs a public/private key pair. For a 5 minute intro on Public Key Cryptography, check out my post on encrypted communication apps. The basics of SSNs wouldn’t need to change. This cryptography system would utilize a particular type of Public Key Cryptography called Elliptic Curve Cryptography; the only reason this detail is important is that in ECC, any number can be a private key (as opposed to only prime numbers) and keys can be relatively short and human memorizable. I would recommend new SSNs with at least 12 digits to make them harder to guess. SSNs don’t have a checksum digit, so I’d recommend adding that as well.

The technical details of how people would use this number to authenticate themselves would be with the application of the Elliptic Curve Digital Signature Algorithm. For an average person, all that needs to be known is that this algorithm is standardized, like sending a message to an e-mail address; any computer can send a message without it mattering what the message says, since “sending an email to an address” is something all computers know how to do. When a person has to prove who they are to a company or the government, instead of the organization checking their SSN against a database, the person will type in their private SSN, the computer will compute a digital signature, and that will be sent to the organization. The organization would compare the signature to the public key of the person to validate they are who they say they are.

How will they know the public keys? Unlike private keys, public keys can be published freely, so the Social Security Administration can maintain a public database of public keys without issue. Digital signatures can only be computed with private keys, which should be kept secret. The benefits arise because organizations can hold signatures in their databases instead of private keys. Stealing a signature in a data breach would do nothing; today losing SSNs is equivalent to losing your private keys. Problems that could arise involve lack of knowledge on the part of organizations, which could mistakenly store private keys instead of signatures. However, this is already the problem today, so things can only get better.

Potential political pitfalls involve people believing this would be a national ID number, even though SSNs already are, and that it’s difficult to update systems for better security.

Increase the Housing Stock in US Cities

This idea was taken from the Niskanen Center’s Wil Wilkinson, in his response for the single best policy to reduce inequality in the United States. Wealth inequality doesn’t concern me too much, but this policy would solve inequality by improving the options of those least well off, allowing them to move to high productivity cities where high paying jobs are. Wilkinson’s piece is already pretty short, so I’ll be quoting it a bit here.

Wages have barely budged in decades, yet housing costs have soared in the bigger cities in which most Americans live, because restrictive municipal zoning and land-use policy have prevented housing supply from keeping up with demand. When rent takes an ever-larger chunk of workers’ paychecks, savings and wealth accumulation rates go down.

Additionally, the restrictions on housing have caused massive losses in productivity. Chang-Tai Hsieh and Enrico Moretti suggest in this paper that the inability of labor to relocate to high productivity cities has significant effects on GDP growth rates, leading to pretty massive losses in potential productivity. Andrii Parkhomenko suggests that federal policy that incentivizes localities to deregulate housing supply would have a pretty sizeable impact on growth rates. Going back to Wilkinson, he details what this policy might be:
If I were king for a day, I would dangle a huge pot of federal infrastructure money in front of states, and then condition those delicious, fat federal grants on big cities in those states hitting growth targets for housing supply. If big cities fail to add new housing stock fast enough, they and the states they are in will lose many, many, many billions in federal funds for new and upgraded infrastructure.
So why isn’t this happening now? Wilkinson continues:
The political power of NIMBY-ism (“not in my back yard”) has made it nearly impossible to tackle rising housing costs, and the wealth inequality it produces, at the municipal level. But a federal lever can offset the self-seeking forces of NIMBY-ism by giving city and state governments a strong incentive to cut the red tape that keeps housing supply lagging so far behind demand.
I’m skeptical that it will be straightforward to get a federal bill like this passed, although it will probably be easier than in local municipalities. The potential benefits here are far too great to be ignored, but it’s disappointing housing policy isn’t a major issue for most voters today.

 

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Book Review: The Case Against Education

Most people believe education increases students’ skills, and thus, education is a way to improve your life and career through learning how to be an engineer or a… (checks most common majors) …business…person… psychologist. Bryan Caplan’s latest book disputes this claim, arguing instead that education, especially college and graduate degrees, but even high school, is largely signaling, and not skill building. What does this mean?

Caplan believes employers look at your college degree and GPA and see that you are smart, hard-working, and conform to social norms, and it is that information, not skills you have, which gets you hired (mostly). Prior to reading this book, I held views that higher education had some issues, and I was particularly suspicious of the increasing cost of a college education that has significantly outpaced inflation. With new technological breakthroughs that make teaching much easier, is it really that much more expensive to teach undergrads than it was 30 years ago?  With all the new amenities American colleges are adding (study abroad programs galore, student life funding, food, study rooms, etc), it seems like most of the money is not going to teaching, but shouldn’t a free market among colleges force them to compete on price?

The Case Against Education presents a solution to this puzzle, and much more that I had not considered. Signalling is about relative appearance. If the US and USSR both have ICBMs, no one will fire them out of fear of retaliation. But if one superpower develops submarine launched missiles, then there is a relative difference, and now the other must develop submarine launched missiles as well, or they risk being destroyed in a submarine first strike. Afterwards, the new equilibrium re-establishes a balanced peace, but both countries have wasted time and resources building submarines only to get back to the exact same situation. College is an academic arms race; if everyone could agree not to go to college, we’d be in the exact same place but without having to pay all that expensive tuition.

How can this be though? We know college raises people’s earnings, ergo shouldn’t the market fix this by finding better ways to figure out if prospective employees are worth hiring? Not really. College degrees give employers a “free” way to see which prospective applicants would be best to hire, paid for entirely by the applicants (or the government). Most jobs require pretty specialized skills that can only be learned on the job, so what employers are really looking for is intelligence and commitment. Having a good GPA (and getting into a good college) indicates not only intelligence but also the ability to work hard to achieve long term goals. This system is wonderful for employers, and they have no incentive to change their hiring practices to target non college grads who would probably be more productive with direct on the job training. Those hires are riskier on average as some hires will have been unable to enter college, rather than more interested in work. Employers essentially outsource job screening onto colleges at no cost to them. Colleges also have no incentive to fix the system of course, and the government funding that helps make the problem worse doesn’t respond to financial incentives, especially as education is pretty popular. Students can’t escape either as they are stuck in the arms race, and thus the problem persists.

We Don’t Learn Much From School

Nonetheless, the signalling case may not be intuitive. Most people know they learned things in school, after all, we all had tests on the material! I earned a pretty good GPA at my school, and I had to learn a bunch of stuff for it! The Case Against Education‘s second chapter addresses this quite aggressively, and the following few paragraphs are discussions arising from that chapter. First, it points out that a large fraction of what we learn in school isn’t very applicable to our jobs. I really enjoyed my social studies classes, and I certainly use some of the things I learned when writing this blog, but I do this as a hobby. In my actual employment, I have never needed the years of history, government, or economics classes I took. My counter is that Caplan just asserts some classes are worthless. He has some numbers to back up the particular claim that despite most American high schoolers being forced to learn a foreign language, very few actually speak anything other than English as an adult. There also don’t seem to be many useful careers in the social sciences outside academia. Maybe you need to study civics to get a job in government, although not for most basic bureaucracy desk jobs. I think some more concrete numbers would help his case, although I concede he’s probably right on most accounts.

(Caplan also points out that some “useful” classes, like Math, aren’t necessarily that useful if you break them down; almost everyone takes Geometry, yet very few people need to reason about triangles in their everyday life.)

There’s also an excellent counterargument to the idea that knowledge might become useful later (e.g. “Latin might be helpful if I need to know meaning of an unknown word”). Hoarders make the same argument, “I might need this 17th water bottle someday!”. Education costs resources, and we shouldn’t be purposefully spending them on concepts that may never be useful to students.

Caplan also extensively evaluates whether students actually retain what they learn in school years later. The results are incredibly dismal. Even basic literacy and numeracy, which Caplan argues are the most practical skills we learn in school, are pretty awful when tested. Civics, Science, and foreign language skills were similarly terrible. It’s even suggested that 38% of American citizens would fail the citizenship exam.

The claim that school teaches you how to reason or how to think and analyze is also refuted. Moreover, as I would add, if that’s the main benefit of school, why not teach that directly instead of lots of classes based off of memorization? There may be some argument against the exact examples and studies Caplan uses; perhaps the ability to apply statistical knowledge in non-academic areas is slightly better than the book suggests, or perhaps a year of education raises your IQ slightly more than a few IQ points higher, but overall these themes are hard to overcome; students don’t retain much information from decades of education, they don’t become brilliant by being in school, and they don’t learn skills they eventually use on their jobs.

More Signalling Evidence

Other interesting observations by Caplan that impressed me were that top educational institutions give their classes away for free. You can watch many of the best lecturers online without paying anything, but you can literally walk into Duke or Harvard and watch lectures from professors. If schools were charging for the education, there would be barriers to getting into classrooms, but there aren’t, because that’s not why you pay to go to college; you pay for the degree. Also of note, in Chapter 3, Caplan analyzes whether some college degrees are useful in building skills while others are not, which might indicate that the “human capital story” could be true, just not true for every major. He points out that even if you are mismatched in your career from the major you studied in college, you often earn significantly more money than a high school graduate.

This is clear evidence for the signaling model, but time for a little bit of pushback. Caplan estimates signaling’s share at 80% of the value of education. However, this obviously changes with subject level. In the wheat-chaff section of Chapter 3 I was referring to in the last paragraph, the book states that engineers see a 20% decrease in earnings if an engineering degree holder works in a non-engineering field. But the entire premium of engineering is about 60% above HS graduates, adjusting for ability. This means a 20% drop in earnings brings us back down to 28% above HS grads. That means about 53% of engineers’ higher earnings are due to skills, since they lose half of their bonus above HS grads if they are working in a field without those skills. Not to mention there could be some skills engineers pick up that helps them in other areas, despite Caplan’s points otherwise. Of course, humanities majors are much worse for this case, since many of them see zero loss of earnings if they do not work in their field. Anthropology, liberal arts, sociology thus might be demonstrations of pure signalling. Interestingly, their college premiums are pretty close to engineers’ premiums if the engineers are working outside their field.

The point I make here isn’t that Caplan is necessarily wrong about 80%, but rather that I thought this particular discussion clarified where these numbers might be coming from and what the interaction is between my prior concept of “school teaches me useful skills” and this new concept of “school is mostly signalling”. In other words, these compensation numbers indicate that while there are some skills taught in school, large swaths of students are taking classes that do not teach many skills. Signalling may be argued as a reflection of “people study useless subjects”, rather than “school is inherently bad at transferring skills”, which may provoke outright dismissal by some readers.

Another counterpoint to Caplan is that Sheepskin Effects, the effects of graduation on earnings, may be a reflection of ability bias, rather than all signaling. This blog post discusses a possible method, where people who make it to 3 years of college and then drop out may be disproportionately people who could not complete the hardest classes, saved them for the final semesters, and then failed them, causing them not to graduate. Had they spread them out, perhaps they would have failed out earlier, dragging down first and second year benefits, while allowing third year benefits to rise.

The problem is that signalling would still make up a massive fraction of education, even if Sheepskin Effects are partially reflection of ability; Caplan doesn’t discuss professional schools, as they tend to be pretty good about teaching skills, but he also doesn’t mention that even for medical school, the vast majority of required undergraduate classes in the United States are not skill-building. Calculus, physics, and organic chemistry are not necessary for practicing medicine, yet they are still required.

The Case Against Education also discusses how you might calculate selfishly whether college or advanced degrees are worth pursuing. Caplan even includes helpful spreadsheets that you can manipulate yourself to calculate the returns to your own education.

On the other hand, the following chapter on social returns asks if perhaps there are positive externalities to education that might be helpful besides teaching people useful career skills. I found the section that it was hard to find nation-level benefits to economic growth surprising at first, but more realistic given slow US GDP growth despite higher and higher educational attainment.

There’s also a brief, but thought-provoking section in Chapter 6 regarding the impact of education on democracies and policies. Education correlates with higher political engagement, although whether that’s due to ability bias or actual impact of education is not dealt with. Instead, Caplan asserts that whether education’s impact on policy is good or bad “…the social value of participation hinges on the quality of participation”. This is a statement I strongly agree with, but I’m not sure most people would necessarily endorse. He rightly points out that the quality of participation is inseparable from the question of the quality of policy itself, which is way too big a topic for an education book. Nonetheless there is an implication that the general promotion of civic participation is not necessarily good for society, and I suspect such a notion is controversial.

Solutions

Finally, towards the end of the book, Caplan gets into his proposed solutions for the problem of signalling. The Case Against Education makes a strong argument that education doesn’t have great payoffs and wastes resources on relative signalling, and so Caplan suggests we reduce government subsidies for education. Notably, from a libertarian perspective at least, Caplan’s argument rests on the idea that the education free market itself wouldn’t be optimal, as signalling would actually cause an overconsumption of education over what is socially optimal. He actually has a section in Chapter 7 discussing if it would actually make sense to tax education. He makes the cursory libertarian argument that the government should leave people alone unless we know policy interventions will be highly successful. This is probably fair, but if we were to miraculously find ourselves in the position of having no government education subsidies, I suspect that some taxation of signalling heavy education might be socially ideal, if economically and politically untenable.

The book is also aware of how unpopular any calls to reduce education subsidies would be. Nonetheless, Caplan makes a good point that the proper response to poor education effects implies we should stop bad policy until we figure out better ones, not continue them while we debate alternatives. At the very least, college subsidies should be ended. Tuition will rise, but pushing more of the burden on students is what we want; education should only be undertaken from a social cost-benefit analysis if its benefits outweigh its costs. An excellent way to do this is to force individuals to undertake the costs, since they will be incentivized to go to college only if they can study something that will pay for it. This will negatively impact humanities enrollment, but right now much of humanities coursework is subsidized by the taxpayer and seems to be largely signalling. We should save the money.

The Case Against Education also makes the point that the poor are by far the hardest hit by credential inflation. Reducing government subsidies means the poor will have a much harder time getting to college, but it also means you should see a systemic decline in the necessity of college degrees for jobs that don’t need them.

Caplan also devotes a chapter to the benefits of vocational education, and getting young students (especially those who aren’t doing well in school) on the job experience as early as possible. I don’t have much to add, but it seems disturbingly obvious; if school doesn’t teach us much that we remember, and if there exist jobs that aren’t taught in school, but can be taught with work experience, we need to change the cultural aversion to vocational education ASAP. Additionally, I’ve been following many of my friends in medical school and, it’s incredible to me how vastly it differs from the requirements to enter medical school. Important parts of medical “school” is literally on the job apprenticing with actively working doctors, nurses, residents, etc. Meanwhile, med school undergrads spend 8 semesters learning things that are virtually useless in their planned vocation. It’s absolutely bizarre, although well explained by the signalling model.

Finally, I want to briefly discuss Caplan’s explanation for why no one else is talking about education with similar critiques. He places most of the blame on social desirability bias; basically, it’s unpopular and costs us socially if we critique popular views as incorrect. This story make some sense to me: calling for education cuts is often seen as heartless and evil, yet so are lots of calls to cut government spending, and there are plenty of libertarians and fiscal hawks that are ok with taking those views. I think a significant part of the puzzle arises from the fact that the signalling model is not widely known or understood. It’s also counterintuitive, since we have quite plausible explanations for many things signalling suggests, e.g., people with higher education get paid more because education imparts skills, no signalling model required.

Overall, this book was really interesting and has convinced me that signalling is a substantial fraction of the benefits of education. I feel like there was no definitive place where Caplan calculated exactly why he thought signalling should account for 80%, but doing some of my own calculations around education premiums for workers working inside and outside of fields where their degrees were focused, I can see how there is a chance signalling could indeed be as high as 80%. Nonetheless, even if the proportion is much lower, say only 40% or 30% that would be incredibly wasteful for a trillion dollar industry. After reading The Case Against Education, I feel that a significant cut to at least college education subisidies is probably warranted, and further research into the usefulness of education and the signalling model is vital.

 

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Weird Stateless Healthcare Solutions

Most developed countries have significant involvement in the healthcare market. I have written previously that it’s pretty clear down-sloping demand curves exist in healthcare, and thus we could realize efficiency gains in healthcare if a healthcare pricing system existed where patients could compare procedures and stand to benefit from getting them done for less money. This would not necessarily preclude government intervention. For example, Medicare could offer to pay its rate for various procedures directly to the patient who could then look at several hospitals, go to the one with the best deal and pocket the difference.

However, I’m going to explore a much more difficult thesis, that a completely free market in healthcare could exist outside of state intervention entirely. Nothing should be taken from the following to imply I think such a system is “good”. I have free market inclinations, and so I think some liberalization of healthcare markets would be good, but changes discussed in this post are highly radical. Any such scenario is unlikely in the future unless an unexpected event occurs, such as a global geopolitical destabilization never before seen, or a mass adoption of a cryptocurrency as the reserve currency, rendering taxes on transactions (and thus strong central states) obsolete. In other words, it seems unlikely a healthcare market with no state intervention would be something purposefully implemented. Nonetheless, I think this is an interesting thought experiment to consider, and it may help point us to where the market is least able to provide solutions and thus where government might be most helpful.

Supply Side

Most of this will be a discussion from the patient’s side, but first let’s discuss some of the implications of the supply side. With less government, there are going to be a lot fewer restrictions. That means licensing will still be important (and in fact medical licensing is largely done by non state groups), it just won’t be state enforced. Just for fun, this would be a great application of digital signatures in an area we don’t use them today. Your doctor’s office could have a simple sign indicating all the doctors in the office have been licensed by the governing medical agency, with an accompanying QR code encoding a digital signature from the licensing agency, signing the names of the doctors or something similar. You could then scan the QR code with your phone, using a generic app, or perhaps one you can download from the medical agency, and it would check the signature against the agency’s public key to ensure it was them who issued it. This is similar to how website security works today, just used in real life.

Other things worth mentioning on the supply side is that certificates of need, which today prevent hospitals from being built unless the government allows it (yes this is really a thing), would optimally not be an issue. Additionally, with price pressure from individuals actually interested in price, medical providers would have to compete on price, meaning they would need to offer good services at competitive cost to gain an edge in the market, something they don’t do now. This is an extension of my previous post that downward sloping demand curves exist in medicine. Since they do, and if prices existed, costs would be driven down because patients prefer to spend less money if they can.

Individual Annual Insurance

We’ll now start with an average adult buying healthcare. This is going to be closest in distance to arguments about healthcare today, so the ideas I’m going to suggest aren’t too radical, and you may have even heard them before. In a free market, an average person can probably buy a lot of their procedures, consultations, and check-ups on the market. Perhaps they will buy catastrophic insurance coverage in case something large happens.

Individual insurance could take several forms. It could include catastrophic care, more comprehensive coverage, or perhaps something closer to the HMO model, where you pay a network of healthcare providers a fixed amount for a fully managed healthcare service. There are interesting questions regarding how the market would deal with insurance pools. One is how it would deal with healthy patients who do not buy insurance, an issue Obamacare is seeing today, and a related problem of where insurers could just reject patients with pre-existing conditions. I’m going to get to that in the next section.

What is worth thinking about, and about which I remain uncertain, would be to what extent civil society insurance groups would spring up. Right now, people often get their insurance through their employer, but I suspect many people would gladly take more cash from their employer in our hypothetical free market system, and then buy insurance themselves. They could buy it individually, but perhaps they would join a pool, not necessarily through their employer, but perhaps through other civil society groups, such as church groups, unions, political groups, etc.  I imagine tablet wielding Libertarian Party recruiters offering membership benefits of joining the party insurance pool, as long as you promise to keep up with the libertarian reading list. These pools might be able to buy healthcare in bulk from specific providers, which might be cheaper, but that again separates patients from the price system, which is what is causing so much difficulty in the first place. The one clear benefit is that you could switch insurance purchasers much easier than you could through a job.

This is one possible equilibrium for annual healthcare markets, but it doesn’t take into account long term factors outside of a single year. Let’s explore that.

Individual Multi-Year Approaches

Suppose you buy catastrophic insurance on the market for a single year. There is a significant issue you could run into, namely a catastrophic injury or a diagnosis of a chronic illness. Now, when you return to buy insurance for the next year, the free market I’ve been bragging about creates an incentive for the insurance company to charge you much more or refuse to cover you. Not to worry, there’s a market solution here: you were just under-insured.

What is needed is a long term insurance policy that offers as a reward the option to buy insurance for years at a given rate, rather than actual coverage. This is a re-insurance market. This could be purchased early on and last for years, more similar to life insurance than health insurance.

Re-insurance is also a useful policy for allowing healthy people who don’t want to bother with insurance the ability to buy into the market. Today, many younger people aren’t joining Obamacare exchanges because they feel the coverage is too high for what they want to pay. Re-insurance could offer them the ability to buy insurance later if needed, but skip the higher premiums for now as long as they’re ok with no coverage. On the other hand, perhaps this wouldn’t be needed as they could purchase lower coverage insurance plans more appropriate to their risk level.

The question insurance is solving generally is how best to spread risk. The way we are looking to spread risk today is through involvement of more people. The long-term re-insurance solution mentioned here applies the principle of spreading risk over longer periods of time. Government’s approach is theoretically to spread risk across time and people, just unfortunately under the management of a sprawling organization that doesn’t have an incentive to manage it well. The interaction between risk spreading between time and people will be difficult to predict in a free market. Individuals won’t just be allowed to join an insurance pool opportunistically, as that would punish the people who paid in over the long term. Perhaps non-monetary trades would exist to allow opportunistic joiners (e.g. Mormons allow you to join their insurance pool if you convert, and yes this is creepy), although they can be hard to enforce. Other options might include packaging (your dues cover several services including insurance, but perhaps also advertising for the group or funding a rec center), or paying in over several years before being allowed access to the insurance pool.

One could also imagine a different strategy for charities, such as health NGOs that instead of offering only free primary care to the needy, they also buy transferable re-insurance options. When someone comes in with an infection, they can provide free care, but when someone comes in with a chronic illness, the charity can transfer one of their re-insurance options which would allow the patient to buy affordable coverage for the long term.

It’s also worth noting that while annual insurance policies in this regime don’t really have an incentive to get you to go for preventative healthcare (since if your doctor finds something, they have to pay for it, while you might switch to a different provider next year), long term re-insurance plans would actually pay you to obtain preventative care to catch something early since they are on the hook for long term costs if you wait.

So far, a patient actually has a lot of choices in this hypothetical system; they should be able to compare and measure different procedures and providers for various healthcare services; these providers could have different licensing regimes, and be less supply restricted resulting in lower costs. Competition on price should also drive down costs and drive up patient benefits. Unexpected expenses that are still too expensive could be covered by insurance policies purchased by patients. Various levels of coverage could be offered, including long-term re-insurance options to buy coverage at a set price. These could be combined with insurance pools to spread risk further both among different people and longer periods of time.

Insurance Information and Genetics

While patients want to spread risk, insurers don’t face the same incentives. They will get as much information as they can about a patient in this hypothetical world to charge them for risky behaviors. We could, of course, go back another layer and talk about “hobby insurance” or something like that; motorcyclists have higher health insurance premiums or something, so when people are young and don’t know what activities they will engage in later, they buy some insurance that covers them if they get into a dangerous hobby. However, this doesn’t work that well, as these risks are much more agent-driven than others; people can know they want to get into mountain-climbing or motorcycles, so they may buy the “hobby insurance” knowing they are going to do dangerous hobbies, which immediately provides a payoff. There are some ways around this; maybe you can only get coverage for several years in the future if you are still doing that hobby, and you take the full risk now.

Overall this isn’t very satisfactory, and that’s because we are thinking about this backwards. Setting aside things we can’t control, like genetics, engaging in dangerous hobbies voluntarily seems like something we would want to respond to incentives. After all, we are restricting this by definition to things the patient can control. The analogy is that the state wants us to be healthier especially if the state is covering our medical bills. But when the state haphazardly tries to promote healthy things or safe driving, it feels quite coercive and frustrating. The insurance solution is to just charge people more for risky behaviors. Sidestepping the libertarian-Marxist debate about coercion, this outcome doesn’t seem that bad from a consequentialist perspective. Motorcyclists get injured, which costs resources in our health system, even this free market health system we are describing. If fewer people did dangerous activities, there would be fewer resources needed to fix their medical problems, which means those could be used elsewhere.

This type of thinking seems much more unfair if we expand it to include other things such as being overweight, or being sexually active. In today’s world, it seems likely insurance companies would consider being sexually active to increase risk or health costs, not to mention likely cost discrimination against gay men. I’m not sure there is a good solution to this. There will also be debates between insurers and customers on what counts as “controllable”. We can hope that the market will efficiently figure out what can be insured against (things that are not controllable), and offer insurance accordingly. This will most certainly be unsatisfactory to people caught in the system without as much coverage as they would like.

On the topic of things you definitely can’t control, genetic factors affect health, and it seems in this unregulated environment, customers will be forced to take genetic tests in order to be offered coverage. Of course, what is needed here is a form of “genetic insurance”. But when exactly would you buy that? Your genes are part of you already! There is no time you can buy insurance to avoid risk of a state that you’re already in. Well, it turns out there is still a good time to buy it, and that’s before you’re conceived. Parents can purchase “genetic insurance” for future children. In all likelihood, it would probably be combined with long-term chronic health insurance as well, as chronic problems could arise because of genetics. There may be different approaches to this, as you’d want the insurer holding the other end of the policy to be able to pay out potentially many decades into the future.

Finally, the pre-conception insurance piece would probably include pregnancy related complications as well. Or perhaps that will remain the domain of the health coverage of the mother. Exactly where it falls though is important for understanding the incentives which can be quite disturbing; since parents are looking to gain coverage for various genetic problems, insurance companies may calculate that it’s cheaper to pay for abortions of fetuses that are diagnosed with very expensive genetic problems. Pregnancies themselves can cause lots of complications though, so perhaps companies won’t want to have women go through lots of pregnancies. However, this depends on whether the same company is covering the mother and the child. If they don’t have the correctly aligned incentive, they could offer discounts to mothers who put their lives at risk. In an efficient market, the mother’s insurance company would compensate them for not doing that, so it would work out. Of course, markets are never as efficient as we would like.

Conclusion

I’ve constructed a complex series of possible insurance schemes, however I suspect an individual could roll most of them into a single long term life/health/genetic insurance policy initiated as early as possible, preferably by their parents before they’re even conceived. There’s a chance this approach will be too risk inclusive, and it will end up being a re-insurance scheme, but that’s really up to the market to decide. The main point is that insurance schemes can be constructed to properly shift risk around and avoid catastrophic and unplanned health issues. There are some lingering risks about how best to utilize risk pools or how to deal with insurance companies that go bankrupt, but generally speaking, there seems to be a framework for a free market solution to exist.

Nonetheless, the ability of insurance companies to use every possible way to gather information about you means that there will be a real “tax” on freedom to live our lives the way we want. I suspect from a consequentialist perspective, there is a lot to gain here, like people having financial incentives to exercise more, drink less, do fewer drugs (since drug laws probably won’t be enforce). On the other hand, from a libertarian ideal, having to pay for more expensive insurance because you drink a lot or have lots of sex seems patently unfree. Yet, this seems better in many ways than how government might deal with risky behaviors: bans, massive public relations campaigns that might not work, or simply doing nothing and letting the problem build. Social solutions, like public shaming for risky or different hobbies also seems fairly aggressive and unfree. Perhaps this is an acceptable middle ground where risk averse people are compensated by risk takers through the method of insurance.

There are serious issues though. The most obvious is that many people would have trouble buying insurance, especially if anything needs to be paid ahead of time, or all at once. In response, many would probably forego insurance altogether. This would result in poorer health outcomes and more expensive costs in the long run. The solution here, if the state were available, would be something like government transfer payments, or health credits.

Another issue is that people are poor planners. If cultural norms were changed such that everyone purchased some insurance plan when having children, that would probably help the situation. With today’s technology, they probably wouldn’t even need to do it prior to conception because genetic data on fetuses in the womb is scarce apart from diagnosing trisomies (like Down Syndrome). Of course, this stateless healthcare system would only come about through serious upheaval as mentioned in the intro.  The “correct” social norms surrounding this new insurance model may not properly take hold, as tons of social norms will be overthrown.  Even though it would probably help fix other issues we see today like mothers who can’t afford pre-natal care (since long term insurance companies would be heavily invested in making sure the pregnancy goes well), hoping social norms are correct seems optimistic.

Finally, the takeaways are that insurance is a pretty powerful tool, and where government could perhaps be most useful is in fixing income problems so that those with few means can participate in the market. The system described here is radical, and probably not something anyone but the most radical libertarians would choose to move society towards. At the same time, it also shows that there is room for significant improvements in insurance incentives even while keeping the high amount of government involvement in the healthcare market today.

 

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Rawls and Consequentialism

I.

Are things getting better?

The Cato Institute’s HumanProgress.org promotes the wonders of the modern world as a general cheerleader of liberal capitalist democracy. It highlights that the Human Development Index is up around the world over the last 30 years, and worker earnings can purchase higher quality and cheaper goods than they could 40 years ago. However, not everything is peachy. Inequality is up, US labor force participation is down, and healthcare and education spending have increased faster than inflation for some time now. Technological breakthroughs seem to be about how best to spy on you to sell you targeted advertising instead of flying cars. I favor the idea that things have indeed gotten better, but perhaps it’s not as straightforward as I would like.

Let’s revisit an idea I wrote about two years ago.

John Rawls proposed the Veil of Ignorance as a thought experiment to help imagine a just society derived from first principles. Designing a world, people should imagine themselves having no knowledge of their natural abilities or social standing. In order for society to be just, it must be one that everyone would agree to behind this veil of ignorance (this is a big simplification, you can read more here).

Robert Nozick famously responded to Rawls’ A Theory of Justice, with Anarchy, State, and Utopia, and part of his critique of Rawls was that even a society that fit Rawls’ criteria of “just” would quickly become less equal since people do have unequal natural talents. Voluntary transactions between citizens would quickly reward those with natural abilities for in-demand skills, and thus society would quickly fail to meet Rawls’ “just” criteria despite starting from a state of justice and undergoing nothing but voluntary transactions.

Of course, I’m more interested in policy than political philosophy today. I should be clear that Rawls wrote this as a philosophy thought experiment, not a political goal, but that hasn’t stopped it from being used to encourage certain policy outcomes; economist Dan Ariely polled people, asking them to create a wealth distribution for a society they would willingly enter in a random place, and they overwhelmingly chose extremely equal societies.

There are a few fronts I’d like to push back on this. The first is that those polled severely underestimated the current level of inequality. This means they imagine society should be more equal than what they think it is, meaning they believe society is flawed today and perhaps could be fixed. Yet the problem is much “worse” than they imagine, and they didn’t seem aware today. Perhaps people overestimate the impact of wealth inequality on their lives. In fact there is some debate among economists on the extent to which inequality impacts economic growth (although most agree severely lopsided wealth disparities in developing nations indicate poor economic institutions and thus poor growth). Secondly, average people don’t have a great understanding of economic principles; a recent survey found only 57% of Americans thought free trade was good for the country, and this was one of the highest percentages ever recorded. This is despite the fact that economists overwhelmingly believe free trade benefits all societies. Thus, even if people did know the extent to which this was a problem, it’s unlikely they could provide a great argument balancing trade offs inherent in economic policy calculations.

The final, and most important point is that it would take significant policy interventions, economic and otherwise, to change the layout of society to match that which Rawls’ derives from first principles, and certainly which people surveyed want. These interventions could not be undertaken without massively changing the incentives for people in society. If high earnings are taxed at a massive rate, people may be significantly less interested in being productive, or they may choose to start businesses in other countries where productivity is not as punished by the tax system. Additionally, public choice theory tells us that government having control over a larger budget will become the target of rent-seeking and special interests who will prevent the more philosophical policy goals of redistribution from being carried out. American policy today is somewhat re-distributive. Transfer payments make up a vast amount of the federal budget, yet with annual budget deficits hovering around $1 trillion, there doesn’t seem much political will to increase taxes.

Given the political and economic realities we face, it’s worth investigating what options really appear in front of us. As I wrote two years ago, we can hijack an aspect of the veil of ignorance to actually promote an unequal society. Placing yourself behind the veil of ignorance, would you rather be in the more equal society of 1968 America or the more unequal society of 2018 America? In 2018 you have more expensive healthcare, it’s true, but you also have significantly more treatments available to you. You have more food choices generally, and certainly more healthy food choices for cheap. You have incredible communications and entertainment improvements for extraordinarily cheap. A gallon of gasoline costs almost the same in inflation adjusted dollars from 1975, yet it gets you several times as many miles in cars that are safer, more comfortable, and more reliable.

II.

So it does seem intuitively that things are better despite today’s society being arguable less fulfilling of Rawlsian justice. If society is improving in ways that  Rawls’ political philosophy can’t capture, we should be careful about referring back to it as justification for policy. Nonetheless, Rawls did ultimately endorse specific economic institutions, and did so 30 years after his original publication in his revised book, Justice as Fairness: A Restatement.

Rawls rejected utilitarian approaches to political philosophy, believing that his system would be rationally selected over utilitarian ideas, yet even if rational actors would choose a Rawlsian setup of society, we have no way to get from here to there in the real world. Government is subject to political pressures and it cannot carry out idealized philosophical implementations. Thus, it’s true that we could propose policies that might create a better society, perhaps even one that better approximates a “liberal political conception of justice” as Rawls states it. Yet those policies have to be grounded in the political reality of our world, and there may be tradeoffs.

Modern political philosophy, and Rawls in particular, seems to be ungrounded from real world political policies. Chris Freiman, author of Unequivocal Justice, agrees. Rawls’ chosen economic systems have never worked. Does democratic socialism exist? If it does, is Venezuela the height of liberalism? If it doesn’t, then maybe we should stick with working on welfare state capitalism, while political philosophy goes back to the drawing board with the knowledge that governments are subject to biases and interest group politics. Rawls’ other endorsement, “property owning democracies”, is an economic system that I had never heard of before, but again doesn’t seem to exist, and I’m not sure it has even been tried. Freiman goes further, pointing out that if a perfect state could exist, we wouldn’t need the state at all, as people would just voluntarily give their extra wealth to create the perfect society. The assumption that is the basis for needing a state to redistribute is the same assumption that shows why states cannot redistribute wealth perfectly.

I enjoy speculating about fundamental changes in society. But there’s something deeply fatalistic about creating an entire political philosophy, defining liberalism and the ultimate way to craft the good society, and then declaring that the only method of realizing it is through political and economic systems that have been abject failures, or, in the best arguable case, have never existed. This is not an argument for libertarian economic policy or a libertarian society.  That would tend to run into the exact same problem. Instead, this is a fundamental argument for a consequentialist philosophy. At the very least, idealized utopian fantasizing cannot be used to justify real world policy goals unless it’s built upon real world assumptions. Consequentialism is an excellent way to ground philosophy in the real world. This is also an argument for humility. There are very few economists who suggest state control of the economy would work without issues. It feels obvious that Rawls would have known this, so perhaps this is simply the best you can do with a current political philosophy knowledge, and perhaps technology will make these types of societies easier to achieve in the future.

Again though, this concedes that Rawls’ philosophy is only useful if it is completely separated from the real world. At the nicest, that seems risky to spend all your efforts on a philosophy that rests on fundamental assumptions of idealized government that is widely known to be false. Consequentialism focuses our work and discussion on the real world and demands empirical data to support policies.

Finally, don’t take this essay as a end-all critique of Rawlsian Contractarian Liberalism; instead, take it as a first step approach to why consequentialist utilitarianism is a helpful philosophy in policy discussion.

Narrow Your Gun Debates

This is an update from my post two years ago, since gun debates are in the news again and have yet to be narrowed.

My position on most issues leans towards the ability of individuals to operate without restrictions and thus on firearms, I’m open to robust gun ownership, but I wrote this post to explore the issue more thoroughly. I’m by no means a gun purist, to the dismay of many more intense libertarians I know. If there were more stringent regulations on firearms purchases, changing those laws would not be among my policy priorities.

Nonetheless, many people do feel strongly about gun ownership in the United States, and I wonder if this is a position where efficient advocacy could help us understand whether those feelings are warranted. Unfortunately, gun ownership and gun control are complex issues with many different parts. Continue reading Narrow Your Gun Debates

Free Market Arguments from National Security

Libertarians are not fans of wars or government spending, often for overlapping reasons. Consequently, libertarians often remain uninterested in foreign policy, writing off the entire area of study as something not worth engaging in. Given the current administration has found a way to be both not interested in global affairs (“America First“), while also highly anti-market and pro-government spending (especially defense spending), I believe there might be an alternative that both retains a small government approach to the economy, as well as an important role for American leadership in the world.

The overarching theme here is that China is a rising power, whose outlook is distinct from that of the U.S. and the liberal world order generally. We might have expected China to continue its trajectory towards a freer economy and perhaps even a freer political ideology even 10 years ago, but no longer. Economic reforms touted by Xi Jinping have not materialized, and in fact the Chinese Communist Party and the state have strengthened their hold on the economy and the role of state owned enterprises within it. The Chinese state has maintained a highly nationalistic ideology; American foreign policy has created plenty of messes, but has also done some good in promoting free trade and at least stated goals democracy and respect for human rights. China is looking to offer an alternative to the current American-dominated world, and it is likely one that is worse for the world. American policymakers need to do better. Here are ways they could do so.

Institute Fiscal Discipline

The first point is that any potential policy that looks to achieve American goals vs Chinese goals will cost money. The U.S. government had a deficit of $665 billion last year. This year it will probably exceed $1 trillion. Entitlement spending will cost money, military R&D will cost money, cybersecurity will cost money, projecting power near China will cost money. Yet, we have passed a massive tax cut with no way to pay for it. From a libertarian perspective, unfunded tax cuts could be argued either way; they reduce the tax burden on citizens, but they crowd out investment, don’t actually change the amount of government interference in the economy, and they could lead to higher taxes later on. But from a national security perspective, this fiscal policy is terrifyingly irresponsible.

I find it uninteresting who owns the national debt. Much has been made of the fact that the Chinese government owns large portions of our debt. So what? They will receive future interest payments, but the federal government received cash from outside the U.S. economy it could spend immediately.  That kept interest rates low in the U.S. while Chinese savings and taxes were taken by the U.S. government and used to pay for Medicare, Social Security, and the War in Iraq. This is just a trade and doesn’t even seem like a great investment from China’s perspective. China could dump its American debt holdings onto the market, pushing up interest rates in the U.S., but by flooding the market, they’d also be selling the debt at a discount, writing off the losses. Moreover, China only owns a bit over a trillion dollars of debt, compared to the national debt’s total size of almost $21 trillion.

China could have put that capital directly into infrastructure investment or education or buying off communist party officials to implement more complete market reforms or even malaria nets in sub-Saharan Africa! But instead they bought low yield American government bonds. Seems like a waste of capital in my opinion. Had China not purchased that debt, the federal government still would have issued it, but interest rates would have been higher. On the other hand, the fact that the treasury owes some of this debt to other entities in the government isn’t super comforting. Those government agencies need the cash too; if they aren’t paid, they won’t be functioning, and their employees won’t be working.

No matter who owns our debt, increases in interest payments, whether through interest rate rises or increases in the underlying total debt will make accomplishing any policy goals, including foreign policy, that much more difficult.

Stop Military Counter-Terrorist Interventions

Predictable point of any libertarian foreign policy critique? Yes, but it’s unfortunately unavoidable. The cost of the Iraq and Afghanistan Wars are hard to calculate exactly. Direct appropriations costs were over $1 trillion, but the Afghanistan War remains ongoing (are you sick of winning?). Long term costs including veterans benefits will probably be more than double the direct costs.

The U.S. has a long history of Middle East interventions, and they just don’t have much to show. There are still almost no democracies, Libya, Syria, and Yemen are still divided states living under various governments, Iraq has been suffering under a war with the Islamic State which has cost a hundred thousand lives and displaced millions. The Iranian nuclear deal prevented a theocratic autocracy from obtaining a nuclear weapon, which was said to be only a couple years away.  This would be one of the only bright spots in U.S. policy in the Middle East, yet the President has threatened to tear up the deal.

If China is to be the focus of an American foreign policy, we can no longer afford to sink resources into fighting small terrorist groups that kill 10 times fewer Americans per year than police officers. And despite Trump’s so-called “America First” approach, we are most certainly still wasting resources in the Middle East. The President has carried out operations in Syria, Iraq, Yemen, Afghanistan, Pakistan, Somalia, and Libya. There are also U.S. forces apparently in Niger, Chad, and Cameroon. Perhaps it’s too late, and China’s expanding influence means the U.S. has to maintain a military presence in developing countries around the world to offer an alternative, but it would have been nice to save those expenditures in the intervening 30 years between the end of the Soviet Cold War and the ratcheting up of whatever this new one is. As it is now, these interventions have left American foreign policy broke.

Reform the Military Budget

As (grudgingly) stated earlier, we will need to fund the Department of Defense if our goal is to geopolitically confront China. Nonetheless, the DoD budget needs serious reform, and perhaps should be torn down and rebuilt from the ground up. The Government Accountability Office (the best government office) has never been able to audit the DoD in over 20 years (see page 3). In 2010, Congress told the DoD it had seven years to get its act together and finances in order. It missed the deadline. This year, the Department will allegedly finally undergo an audit, the report to be released November 15. This is, of course, a step in the right direction, but we need so much more.

The procurement system in the DoD is a complete mess.  The F-35 fighter is way behind schedule and already $400 billion in. Last year, Lockheed Martin produced 66 planes. This exposé from 2014 is deeply disturbing. When the military isn’t pouring money into contractors who are making out like bandits, or paying for tanks it no longer wants nor needs, or blowing up perfectly usable munitions because it can’t keep track of what is needed and where it should go, it dumps its extra assets, including leaving thousands of humvees in Iraq that were eventually captured by the Islamic State.

This military budget needs a reckoning and I’m unsure Trump is up to the task.

Promote Free Trade

China is jumping off the free market ride, and the U.S. needs to pick up the slack. The best way to expand the benefits of markets is to expand markets themselves through trade. More to the point of this post, countries that have a stake in global trade and free movement of goods are much more likely to have economic goals and values that align with the U.S. and its allies. During the Cold War, there was a strong alternative to capitalism and trade, and while most countries didn’t have a “choice”, many countries did exist outside of the free trade liberal market order pushed by the West. After the fall of the Soviet Union, that alternative largely dried up. Today, if you want to have a successful, rich country, freer trade and openness to foreign investment are vital steps to take.

China is much more open to trade and markets than the Soviet Union ever was. Nevertheless, any policies or goals where their motivations are less market oriented and more nationalistic would be exactly where they would differ with that of western values/free trade/liberal markets. This is evident in their extensive protection of Chinese industries and even in non-tariff barriers such as the Great Firewall. To the extent that China seeks to offer an alternative to the United States’ world order, they support protectionism and oppose free trade.

This means increasing trade and integration into the global economy of an allied (or possibly allied) country is the national security interest of the United States. A hypothetical Cuba that was highly integrated into the U.S. economy would be much less likely to be flirting (metaphorically I think) with Chinese dignitaries. The Trans-Pacific Partnership played exactly this geopolitical role, integrating Pacific countries’ economies with the U.S. and its allies, while leaving China on the outside. Yet Trump declared that we should leave the TPP as soon as he entered office, effectively siding against American national security and promoting China’s geopolitical goals.

Tying U.S. policy to free trade and global markets is powerful. It’s very difficult for a country to become rich and successful without at least selling their products on the global market. Access to the global market is thus in every country’s national interest. If U.S. policy is to have open trade, then the American economy will be highly integrated into the global market, meaning it is in the national interest of other countries to gain access to the American market. U.S. trade policy has been to offer access to the American market as part of bilateral and multi-lateral free trade agreements, thus offering foreign countries’ national interest goals if they conform with American goals of free trade and free markets. Integration with the U.S. economically necessitates geopolitical alignment with the U.S. That’s why it’s not just obviously economically stupid to oppose free trade (like crazy stupid), it’s against American national interests.

Allow More Immigration

All of these points have been critiques of the current administration. Some of these might also be critiques of conservative positions generally, but that will depend on to what extent current Republican positions are defined by historical conservative positions or by Donald Trump. This final point may still be the most difficult for conservatives to hear.

As a matter of national security, the U.S. needs more immigrants.

Immigrants are more entrepreneurial. Immigrants are less likely to commit crimes. Economists widely agree that high skilled immigration would benefit the average American, and tend to believe that even low skilled immigration would benefit the average American (although they are more split on the second). If we are concerned about the political effect of immigrants, we should take Rush Limbaugh’s (fairly progressive) approach and allow immigrants to work and live in the U.S., but not vote for a long period of time. Perhaps that’s more politically difficult than I imagine, but it seems like a good compromise from a national security perspective (and voting is sort of worthless anyway). That’s also not the only solution; if today’s political climate means only highly skilled labor can be let in, then at least that should be done. This administration has instead made the H-1B visa process more arduous. Trump’s immigration allies in the Senate have also introduced a bill to reduce legal immigration, including high skilled immigrants.

Immigration is an important engine for economic growth, an engine that nationalistic Chinese policies will have a hard time replicating. America is better able to absorb and benefit from immigration than any nation on Earth; it should apply this strength.

The final point relates back to deficits; entitlement spending is projected to continue to grow and consume the federal budget. The ratio of workers to retirees is dropping. Immigration can help change that tide, keeping our working age population growing, when fewer Americans are entering the workforce, often because families are just having fewer children. It won’t be enough, entitlement reform is important as well, but immigration is tool that must be utilized.

Conclusion

I don’t know how much of a danger China really poses to the U.S. Xi Jinping’s recent power grab is a bad omen though, and a large highly nationalistic protectionist country led by a dictator is certainly worth keeping an eye on. But if Sino-American relations get worse in the next decade, U.S. policy is in a poor position to adapt. Trump has claimed to want to confront China, yet his policies are actively harming our national security.

 

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Book Review: Starship Troopers

I normally put my fiction book reviews on my personal blog, but after finishing Starship Troopers, I realized it fit the theme over here pretty well.  Additionally, because Robert Heinlein’s novel ended up being more thought provoking than plot driven, this post will resemble a discussion more than a review.

For starters, Starship Troopers doesn’t contain that much action anyway. Much of it takes place in flashbacks, especially involving protagonist Johnny Rico’s History and Moral Philosophy class in high school, his training camp, and eventually his time at officer candidate school. I would recommend it, as it’s a monumental book in war-based science fiction, but also the philosophy it interjects is probing. The novel does suffer slightly from what I’ll call the cliche-origin problem; reading it you may be disappointed at how unoriginal some of the future combat is, until you realize the only reason you’re so familiar with the concept of a “space marine” is because this 1959 book sculpted the concept, spawning the common sci-fi trope known today.

There’s actually an interesting gap between the book’s legacy and its content: Starship Troopers is a foundational book for futuristic warfare, yet action sequences and the technology of the future isn’t really the main thrust of the novel. Its influence is seen in classics like Ender’s Game, but the idea of soldiers in mechanized suits shows up in almost every single sci-fi war movie or videogame: for example Halo, Edge of Tomorrow, Starcraft. In some sense, Starship Troopers is interesting because it actually takes seriously the concept of space warfare and explores it. Yet the book only spends some time on action, with a heavy concentration on philosophy of warfare and training. Clearly Heinlein thought that the discussion of warfare, army psychology, training, and the relationship of society to the military was worth discussing, yet that aspect of the book is where I’d like to challenge it the most.

The question is how literally to read Starship Troopers. The book is vitally important to the genre because of its literal discussion of space wars, yet it’s undeniable that the book is a not-so-thinly-veiled critique of American policy in the Cold War against the communist threat. If we take that the book is a metaphor for how a society should organize itself for survival, does its message hold up?

Writing in 1959, the world was only a few years removed from the deadliest conflict in human history, and the U.S. was locked in an existential struggle with the Soviet Union, that many reasonable people believed would eventually lead to war, with nuclear weapons ensuring it would be a very deadly and costly one. Given the time, the apparent inexorable march of history towards deadlier and deadlier wars would have seemed obvious. The spread of communism to Eastern Europe, East Asia, and Southeast Asia had put huge swaths of the world population under communist rule. The U.S. faced existential threats, and given that reality, Heinlein created a novel where humanity faced an existential threat.

Starship Troopers is often critiqued as glorifying militarism, perhaps even fascism. I’m not sure that’s entirely accurate. Heinlein doesn’t really demonstrate that war is glorious or even good. Rico advances quickly through the ranks mostly because so many people are getting killed around him. It’s not that he wants to be a hero, but he’s forced to do a horrific and terrifying job because humanity is literally depending on the military for survival.

There’s a striking quote towards the beginning of the book from Rico’s History and Moral Philosophy teacher:

Anyone who clings to the historically untrue and thoroughly immoral doctrine that violence never settles anything I would advise to conjure up the ghosts of Napoleon Bonaparte and the Duke of Wellington and let them debate it. The ghost of Hitler could referee and the jury might well be the Dodo, the Great Auk, and the Passenger Pigeon. Violence, naked force, has settled more issues in history than has any other factor, and the contrary opinion is wishful thinking at its worst. Breeds that forget this basic truth have always paid for it with their lives and their freedoms.“

The main problem I see with the book (and the thesis stated in the quote) is that communism wasn’t defeated by the grit and determination of infantrymen; it turned out that naked force wasn’t the only way to deal with a struggle of superpowers. The U.S. military went to Vietnam, where men fought and died in the thousands, or, in the case of Vietnamese civilians, hundreds of thousands. Yet that was a pretty colossal loss in the fight against communism. On the other hand, Nixon’s trip to China is generally seen as a big success, fundamentally changing China’s role in the Cold War, and leveraging Russia into negotiating arms limitations. In fact, seen from the perspective of the 1950s, the success of liberal capitalism and democracy over communism with so little conflict has to be one of the most incredible events of the past 60 years.

Given what actually happened in history, is Starship Troopers‘ message worth hearing? Did Heinlein have a realistic outlook on war and how societies can confront existential threats, or was his thinking bound and backwards-looking, stuck in the era of conventional war that the nuclear age had made obsolete? This is a hard question to answer. On the one hand, doomsayers of the early 50s predicting conflict were obviously empirically wrong. On the other, we came very close to nuclear conflict several times in the Cold War, and it’s possible we just got lucky. Conflicts have become less deadly and less common since the end of World War II. This could be a trend that continues, in which case, Heinlein’s book looks pretty dumb. Or, this somewhat conflict free time period could be a brief historical blip when America’s hegemonic power established a nice liberal world order for a few decades, which then collapsed in dramatic fashion, plunging the world into some pretty awful conflict later on. In that case, perhaps Heinlein’s worldview would prove true in the general case, if not for the exact conflict in which the book was written.

Thus, I would argue Starship Troopers, while establishing a foundational aspect of science fiction, puts forth a philosophy that has not been validated by the empirical experiences of our world. That may change, and the extent to which the reader believes conflict is inevitable is a vital factor in determining their appreciation of Heinlein’s novel.

Artificial General Intelligence and Existential Risk

The purpose of this post is to discuss existential risk, and why artificial intelligence is a relatively important aspect of existential risk to consider. There are other essays about the dangers of artificial intelligence that I will link to throughout and at the end of this post. This essay is a different approach that perhaps will appeal to someone who has not seriously considered artificial general intelligence as an issue requiring civilization’s attention. At the very least, I’d like to signal that it should be more socially acceptable to discuss this problem.

First is the section on how I approached thinking about existential risk. My train of thought is a follow up to Efficient Advocacy. Also worth reading: Electoral Reform Fantasies.

Background

Political fights, especially culture war battles that President Trump seems so fond of, are loud, obnoxious, and tend to overshadow more impactful policy debates. For example, abortion debates are pretty common, highly discussed political issues, but there have been almost no major policy changes since the Supreme Court’s decision 40 years ago.  The number of abortions in the US has declined since the 1980s, but it seems uncorrelated with any political movements or electoral victories. If there aren’t meaningful differences from different political outcomes, and if political effort, labor, and capital is limited, these debates seem to distract from other areas that could impact more people. Trump seems especially good at finding meaningless conflicts to divide people, like NFL players’ actions during the national anthem or tweeting about Lavar Ball’s son being arrested in China.

Theorizing about how to combat this problem, I started making a list of what might be impactful-but-popular (or at least not unpopular) policies that would make up an idealized congressional agenda: nominal GDP futures markets, ending federal prohibition of marijuana, upgrading Social Security Numbers to be more secure, reforming bail. However, there is a big difference between “not unpopular”, “popular”, and “prioritized”. I’m pretty sure nominal GDP futures markets would have a pretty positive effect on Federal Reserve policy, and I can’t think of any political opposition to it, but almost no one is talking about it. Marijuana legalization is pretty popular across most voters, but it’s not a priority, especially for this congress. So what do you focus on? Educating more people about nominal GDP futures markets so they know such a solution exists? Convincing more people to prioritize marijuana legalization?

The nagging problem is that effective altruist groups like GiveWell have taken a research based approach to identify at what the best ways are to use our money and time to improve the world. For example, the cost of distributing anti-mosquito bed nets is extremely low, resulting in an average life saved from malaria at a cost in the thousands of dollars. The result is that we now know our actions have a significant opportunity cost; if a few thousand dollars worth of work or donations doesn’t obviously have as good an impact as literally saving someone’s life, we need a really good argument as to why we should do that activity as opposed to contributing to GiveWell’s top charities.

One way to make a case as to why there are other things worth spending money on besides GiveWell’s top charities, is to take a long term outlook, trying to effect a large change that would impact a large amount of people in the future.  For example, improving institutions in various developing countries would help those populations become richer. Another approach would be to improve the global economy, which would both allow for more investment in technology as well as push investment into developing countries looking for returns. Certainly long term approaches are more risky compared to direct impact charities that improve outcomes as soon as possible, but long term approaches can’t be abandoned either.

Existential Risk

So what about the extreme long term? What about existential risk? This blog’s philosophy takes consequentialism as a founding principle, and if you’re interested in the preceding questions of what policies are the most helpful, and where we should focus our efforts, you’ve already accepted that we should be concerned about the effects of our actions. The worst possible event, from a utilitarian perspective would be the extinction of the human race, as it would not just kill all the humans alive today (making it worse than a catastrophe that only kills half the humans), but also ends the potential descendants of all of humanity, possibly trillions of beings. If we have any concern for the the outcomes of our civilization, we must investigate sources of existential risk. Another way to state this is: assume it’s the year 2300, and humans no longer exist in the universe. What is the most likely cause of our destruction?

Wikipedia actually has a very good article on Global Catastrophic Risk, which is a broad category encompassing things that could seriously harm humanity on a global scale. Existential risks are a strict subset of those events, which could end humanity’s existence permanently. Wikipedia splits them up into natural and anthropogenic. First, let’s review the non-anthropogenic risks (natural climate change, megatsunamis, asteroid impacts, cosmic events, volcanism, extraterrestrial invasion, global pandemic) and see whether they qualify as existential.

Natural climate change and megatsunamis do not appear to be existential in nature. A megatsunami would be terrible for everyone living around the affected ocean, but humans on the other side of the earth would appear to be fine. Humans can also live in a variety of climates, so natural climate change would likely be slow enough for some humans to adapt, even if such an event causes increased geopolitical tensions.

Previous asteroid impacts have had very devastating impacts on Earth, notably the Cretaceous-Paleocene extinction event some 66 million years ago. This is a clear existential risk, but you need a pretty large asteroid to hit Earth, which is unusual. Larger asteroids can also be more easily identified from further away, giving humanity more time to do something (push it off path, blow it up, etc). The chances here are thus pretty low.

Other cosmic events are also low probability. Gamma-ray bursts are pretty devastating, but they’d have to be close-by (with a few hundred light-years at least) as well as aimed directly at Earth. Neither of these is likely within the next million years.

Volcanism is also something that has the potential to be pretty bad, perhaps existential level (see Toba Catastrophe Theory), but it is also pretty rare.

An alien invasion could easily destroy all of humanity. Any species with the capability to travel across interstellar space with military ambitions would mean they are extremely technologically superior. However, we don’t see any evidence of a galactic alien civilization (see Fermi Paradox 1 & 2 and The Great Filter). Additionally, solving this problem seems somewhat intractable; on a cosmic timescale, an alien civilization that arose before our own would likely have preceded us by millennia, meaning the technology gap between us and them would be hopelessly and permanently large.

A global pandemic seems pretty bad, certainly much more likely than anything else we’ve covered in the short term. This is also exacerbated by human actions creating a more interconnected globe. However, it is counterbalanced by the fact that no previous pandemic has ever been 100% lethal, and that modern medicine is much better than it was during the Black Plague. This is a big risk, but it may not be existential. Definitely on our shortlist of things-to-worry-about though.

Let’s talk about anthropogenic risks next: nuclear war, conventional war, anthropogenic climate change, agricultural crises, mineral exhaustion, artificial intelligence, nanotechnology, biotechnology.

A common worry is nuclear war. A massive nuclear exchange seems somewhat unlikely today, even if a regional disagreement in the Korean peninsula goes poorly in the worst possible way. It’s not common knowledge, but the “nuclear winter” scenario is still somewhat controversial, and I remain unconvinced that it poses a serious existential threat, although clearly a nuclear exchange would kill millions. Conventional war is also out as it seems strictly less dangerous than a nuclear war.

For similar reasons to nuclear winter, I’m not quite worried about global warming on purely existential terms. Global warming may be very expensive, it may cause widespread weather, climate, and ecological problems, but I don’t believe humanity will be entirely wiped out. I am open to corrections on this.

Agricultural crises and mineral exhaustion seem pretty catastrophic-but-not-existential as well. These would result in economic crises, but by definition, economic crises need humans to exist; if there are fewer humans, it seems that an agricultural crisis would no longer be an issue.

The remaining issues are largely technological in nature: artificial intelligence, biotechnology, nanotechnology, or technical experiments going wrong (like if the first nuclear test set the atmosphere on fire). These all seem fairly concerning.

Technological Existential Risk

Concern arises because technological progress means the likelihood that we will have these technologies grows over time, and, once they exist, we would expect their cost to decrease. Additionally, unlike other topics listed here, these could wipe out humanity permanently. For example, a bioengineered virus could be far more deadly than what would naturally occur, possibly resulting in a zero survival rate. The cost of DNA technology has steadily dropped, and so over time, we might expect the number of organizations or people who have the knowledge and funding to engineer deadly pathogens to increase. The more people who have this ability, the more likely that someone makes a mistake and releases a deadly virus that kills everyone. An additional issue is that it is quite likely that military research teams are right now researching bioweapons like an engineered pathogen. Incentives leading to the research of dangerous weapons like this are unlikely to change, even as DNA engineering improves, meaning the risk of this threat should grow over time.

Nanotechnology also has the potential to end all life on the planet, especially under a so-called “grey goo” scenario, where nanobots transform all the matter on Earth. This has a lot of similarities to a engineered pathogen, except the odds of any human developing some immunity no longer matter, and additionally all non-human life, indeed, all matter on Earth is also forfeit, not just the humans. Like biotechnology threats, we don’t have this technology yet, but it is an active area of research. We would also expect this risk to grow over time.

Artificial General Intelligence

Finally, artificial general intelligence contains some similar issues to the others: as technology advances, we have a higher chance of creating it; the more people who can create it, the more dangerous it is; once it is created, it could be deadly.

This post isn’t a thesis on why AI is or isn’t going to kill all humans. We made an assumption that we were looking exclusively at existential risk in the near future of humanity. Given that assumption, our question is why will AI be more likely to end humanity than anything else? Nonetheless, there are lingering questions as to whether AI is an actual “real” threat to humanity, or just an unrealistic sci-fi trope. I will outline three basic objections to AI being dangerous with three basic counterarguments.

The first objection is that AI itself will not be dangerous because it will be too stupid. Related points are that AI is too hard to create, or we can just unplug it if it has differing values from us. Counterarguments are that experts disagree on exactly when we can create human-level AI, but most agree that it’s plausible in the next hundred or couple hundred years (AI Timelines). It’s also true that we’ve seen improvements in AI ability to solve more general and more complex problems over time; AlphaZero learned how to play both Go and Chess better than any human without changes in its base code, YouTube uses algorithms to determine what content to recommend and what content to remove ads from, scanning through thousands of hours of video content every minute, Google’s Pixel phone can create software based portrait photos via machine learning rather than needing multiple lenses. We should expect this trend to continue, just like with other technologies.

However, the difference between other technological global risks and AI is that the machine learning optimization algorithms could eventually be applied to machine learning itself. This is the concept of an “intelligence explosion”, where an AI uses its intelligence to design and create successively better versions of itself. Thus, it’s not just that an organization might make a dangerous technological breakthrough, like an engineered virus, but that once the breakthrough occurs, the AI would rapidly become uncontrollable and vastly more intelligent than us. The intelligence analogy being that a mouse isn’t just less smart than a human, it literally doesn’t comprehend that its environment can be so manipulated by humans that entire species depend on the actions of humans (i.e. conservation, rules about overhunting) for their own survival.

Another objection is that if an AI is actually as intelligent as we fear it could be, it wouldn’t make “stupid” mistakes like destroying all of humanity or consuming the planet’s resources, because that wouldn’t count as “intelligent”. The counterpoint is the Orthogonality Thesis. This simply states that an AI can have any goal. Intelligence and goals are orthogonal and independent. Moreover, an AI’s goal does not have to explicitly target humans as bad (e.g. “kill all the humans”) to cause us harm. For example, a goal to calculate all the digits of pi or solve the Riemann Hypothesis might require as much computing power as possible. As part of achieving this goal, a superintelligence would determine that it must manufacture computing equipment and maximize energy to its computation equipment. Humans use energy and are made of matter, so as a way to achieve its goal, it would likely exterminate humanity, and convert all matter it could into computation equipment. Due to its superintelligence, it would accomplish this.

A final objection is that despite experts believing human level AI will happen in the next 100 years, if not sooner, there is nothing to be done about it today or that it is a waste of time to work on this problem now. This is also known as the “worrying about overpopulation on Mars” objection, comparing the worry about AI to something that is several scientific advancements away.  Scott Alexander has an entire blog post on this subject, which I recommend checking out. The basic summary is that AI advancement and AI alignment research are somewhat independent. And we really need to learn how to properly align AI values before we get human level AI.

We have a lot of theoretical philosophy that we need to figure out how to impart to a computer. Things like how humans actually make decisions, or how to value different moral tradeoffs. This could be extraordinarily complicated, as an extremely smart optimization algorithm could misinterpret almost everything we say if it did not already share our values for human life, health, and general brain state. Computer scientists set out to teach computers how to understand natural human language some 60 years ago, and we still haven’t quite nailed it. If imparting philosophical truths is similarly difficult, there is plenty of work to be done today.

Artificial intelligence could advance rapidly from human level to greater than human very quickly; the best human Go player lost to an AI (AlphaGo) in 2016, and a year later, AlphaGo lost to a new version, AlphaGo Zero, 100 games to none. It would thus not be surprising if a general intelligence achieved superhuman status a year after achieving human-comparable status, or sooner. There’s no fire alarm for artificial general intelligence. We need to be working on these problems as soon as possible.

I’d argue then, that of all scenarios listed here, a misaligned AI is the most likely to actually destroy all of humanity as a result of the Orthogonality Thesis. I also think that unlike many of the other scenarios listed here, human level AI will exist sometime soon, compared to the timescale of asteroids and vulcanism (see AI Timelines, estimates are highly variable, anywhere from 10 to 200 years). There is also a wealth of work to be done surrounding AI value alignment. Correctly aligning future AI with goals compatible with human values is thus one of the most important challenges facing our civilization within the next hundred years or so, and probably the most important existential threat we face.

The good news is that there are some places doing this work, notably the Machine Intelligence Research Institute, OpenAI, and the Future of Humanity Institute. The bad news is that despite the importance of this issue, there is very little in the way of conversations, money, or advocacy. AI Safety research is hard to calculate in total, as some research is likely done by private software companies, but is optimistically on the order of tens of millions of dollars a year. By comparison, the U.S. Transportation Security Administration, which failed to find 95% of test weapons in a recent audit, costs $7.5 billion a year.

Further Reading

I have focused this essay on trying to convey the mindset of thinking about existential risk generally and why AI is specifically worrying in this context. I’ve also tried to keep it short. The following are further resources on the specifics of why Artificial General Intelligence is worth worrying about in a broader context, arranged by length. If you felt my piece did not go in depth enough on whether AI itself is worth being concerned about, I would urge you to read one of the more in depth essays here which focus on that question directly.

 

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Book Review: The Libertarian Mind

The full title of this book is The Libertarian Mind: A Manifesto for Freedom, written by David Boaz, Executive Vice President at the Cato Institute. This is actually the second edition of Libertarianism: A Primer, published in the late 90s by Boaz.

So why did I read an introductory book on libertarianism? Well, it had been a while since I’d really looked at a libertarian book, especially critically. As discussed in What is Postlibertarianism? v2.0, I’ve strayed a bit from a libertarian absolutist, and that post in an attempt to carve out a space independent from both the Right and Left, but also perhaps libertarianism itself. It seemed this might be a good time to revisit some of the basics to see if I had forgotten what had made libertarianism so appealing in the first place. David Boaz’s introduction to the political philosophy seems to be a good way to do that.

Intro and Libertarian History

The book is a solid introduction to libertarianism. Boaz discusses important libertarian talking points like the fact that the two-party political system in the US doesn’t necessarily hold all the answers. He also does a fair job tracing the history of liberalism in political philosophy, culminating in modern libertarian thinkers. That’s one of the better chapters of the book, and similarly, perhaps the most useful segment is Boaz’s recommended reading list on various libertarian topics, located in the final pages. There are literally hundreds of libertarian readings and authors mentioned, and I plan on adding a few to my future reading list.

I have never been as familiar with the pedigree of American conservatives and American progressives, and I would be curious to see what their similar reading lists or genealogy would look like.  Libertarianism included routes through Locke, Mill, Mises, Friedman, Nozick and many more. It was clearest here that while I may not agree entirely with the label of “libertarian” today, there is a broader liberal tradition, wide and powerful in scope, and it is squarely within that tradition that I find myself. 

Obviously then, I had broad strokes of agreement with this book in many areas, but I wanted to point out a few areas that I thought did a good job of applying libertarian critiques or approaches.

Positives

Boaz talks a lot about rights and rights-based approaches, which I’m not quite as excited about as I used to be (see Rules and Heuristics). Nonetheless, he makes a strong case for the consequentialist benefits of property rights: they reduce the amount of issues that must be political. Application of property rights settles disputes, allowing individuals to make choices about who they interact with and how. Alternatively, if the state is dictating policy, e.g. education policy, all education is determined by politics. Political losses then have greater effect on individual lives, since it’s often harder to opt-out of state policies you dislike.

Relatedly, the chapter on pluralism and tolerance was excellent. Also well stated was the chapter on the rule of law. This is a nebulous concept, and I think Boaz does a good job discussing the many aspects, including constitutional law, the importance of judicial activism (would have been surprising to me 8 years ago) to protect individuals from government, general warrants, regulatory loopholes for specific companies, and overcriminalization. Each of these are fairly disparate parts of law, but they are all important breaches of a uniform rule of law, and contribute to delegitimatize the state and democracy. 

The chapter on public choice theory resonated, and I especially liked the terminology of a “package deal” to refer to political candidates, and how that could be so limiting. And as you would expect from a libertarian, the discussion of free markets, price theory, opportunity costs, and free trade were pretty straightforward. One highlight included the importance of entrepreneurial profits and the value of entrepreneurs seeing value missing in the economy, taking risks, and profiting by fulfilling needs. Another was the argument that the “balance of trade” wasn’t a useful measure since it doesn’t acknowledge that by definition, goods are traded by individuals. Individuals benefit from trade because they wouldn’t take part in it otherwise. Trade balances don’t take into account international supply chains routed all over the world, simplifying imports to two countries, when value added can come from dozens.

Negatives

Now for things that didn’t quite work. The book acknowledges the fact that several of the founding fathers were slave owners. Nonetheless, since the book doesn’t spend much time on anything, it only lends a couple pages to the issue of slavery. That isn’t going to convince anyone from the social justice movement.  This is a recurring issue. Many times I did object to a point the book brought up, but there’s no time for any in-depth discussion, so most of the time I remained unconvinced.

For example, in the rule of law chapter, Boaz attacks the concept of unaccountable bureaucracy, demonstrating how bureaucratic rules can be authoritarian with no accountability. Nonetheless, elitist independent agencies could make more sense than democratic Congressional loudmouths; the alternative to bureaucracy isn’t necessarily that the government doesn’t perform that job, but that it is left to unrestrained democratic pressures. 

The book also spends some time arguing not just that welfare is expensive, but that it’s actively harmful. I’m not sure how much I agree, but welfare for the poor never seems like it should be the first priority of spending cuts; the top federal budget items are Medicare, Social Security, and Defense spending. I actually thought the discussion of mutual aid societies was intriguing although I’m not sure how well they’d work now. It was one of the better answers I’d heard of for the critique that bad things will happen if we get rid of the welfare state. Another related point: the book doesn’t state what a “good” tax level would be, just that we have high taxes now. It’s not wrong, but I found it a bit of a cop-out.

Finally, the book isn’t too concerned about inequality, like you’d expect. However, the claim was that innovative markets would constantly challenge and undermine those at the top, with new products and markets catapulting new successful entrepreneurs at the expense of the old. Again, this could be true, but there wasn’t enough time to really dig into it; certainly the Forbes top 400 richest people in the world would constantly change as markets shift over time, but would the richest 1% really be in much danger? Is it ok if they are not? Libertarians would probably also argue that market innovation and technological progress are more important than inequality (a poor person in 2018 has much more material wealth than a rich person in 1968), but are there political risks to allowing for large inequality? The book doesn’t have time to answer these critiques.

For my takeaways: the book did a bit better than I expected on pointing out that I still generally agree with the bulk of classical liberalism/libertarianism, and my critiques are more like policy tweaks than philosophical deal-breakers. However, it’s only an introductory book, and due to my knowledge in these areas, specific issues I have with libertarian orthodoxy weren’t well addressed, nor was they really meant to be.  I will definitely be looking at the extensive “For Further Reading” list for some libertarian writings on specific topics I’m concerned about. I would also state that this is a pretty good introductory book if you want 350+ pages from a representative libertarian. If you have already studied a lot of libertarian thought, I doubt you’ll find too much new here.

 

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2018 Predictions

Untestable knowledgeable cannot be scientific.  To avoid the problems of retroactively placing events into your narrative of the world, predictions must be laid out before events happen. If you try to use your model of the world to create testable predictions, those predictions can be proven right or wrong, and you can actually learn something. Incorrect predictions can help update our models.

This is, of course, the basis for the scientific method, and generally increasing our understanding of the world. Making predictions is also important for making us more humble; we don’t know everything and so putting our beliefs to the test requires us to reduce our certainty until we’ve researched a subject before making baseless claims.  Confidence levels are an important part of predictions, as they force us to think in the context of value and betting: a 90% confidence level means I would take a $100 bet that required me to put up anything less that $90. Moreover, it’s not just a good idea to make predictions to help increase your knowledge; people who have opinions but refuse to predict things with accompanying confidence levels, and therefore refuse to subject their theories to scrutiny and testability, must be classified as more fraudulent and intellectually dishonest.

Before I take a look at how I did this past year, and see if my calibration levels were correct, I should look at some hard fork predictions I made in July:

  1. There will be a Bitcoin Cash block mined before 12 AM August 2, US Eastern time: 80%
  2. The price of Bitcoin Cash at 12 AM August 2, US Eastern time will be <10% of Bitcoin’s price: 70%
  3. The price of Bitcoin Cash on August 5 will be < 10% of Bitcoin’s price: 90%
  4. The price of Bitcoin Cash on September 1 will be < 10% of Bitcoin’s price: 90%
  5. The value of all transactions of Bitcoin Cash around September 1 (maybe averaged over a week?) will be < 10% of the value of all transactions in Bitcoin: 95%

I did not predict that Bitcoin Cash would have long term staying power. In retrospect, I should have had more confidence that it would be similar to Ethereum Classic, which has remained for over a year now.

Now for predictions made at the beginning of the year:

World Events

  1. Trump Approval Rating end of June <50% (Reuters or Gallup): 60%
  2. Trump Approval Rating end of year <50% (Reuters or Gallup): 80%
  3. Trump Approval Rating end of year <45% (Reuters or Gallup): 60%
  4. Trump 2017 Average Approval Rating (Gallup) <50%: 70% (reference)
  5. ISIS to still exist as a fighting force in Palmyra, Mosul, or Al-Raqqah: 60%
  6. ISIS to kill < 100 Americans: 80%
  7. US will not get involved in any new major war with death toll of > 100 US soldiers: 60%
  8. No terrorist attack in the USA will kill > 100 people: 90% (reference)
  9. France will not vote to leave to the EU: 80%
  10. The UK will trigger Article 50 this year: 70% (reference)
  11. The UK will not fully leave the EU this year: 99%
  12. No country will leave the Euro (adopt another currency as their national currency): 80%
  13. S&P 500 2017 >10% growth: 60%
  14. S&P 500 will be between 2000 and 2850: 80% (80% confidence interval)
  15. Unemployment rate December 2017 < 6% : 70%
  16. WTI Crude Oil price > $60 : 70%
  17. Price of Bitcoin > $750: 60%
  18. Price of Bitcoin < $1000: 50%
  19. Price of Bitcoin < $2000: 80%
  20. There will not be another cryptocurrency with market cap above $1B: 80%
  21. There will not be another cryptocurrency with market cap above $500M: 50%
  22. Sentient General AI will not be created this year: 99%
  23. Self-driving cars will not be available this year for general purchase: 90%
  24. Self-driving cars will not be available this year to purchase / legally operate for < $100k: 99%
  25. I will not be able to buy trips on self-driving cars from Uber/Lyft in a location I am living: 80%
  26. I will not be able to buy a trip on a self-driving car from Uber/Lyft without a backup employee in the car anywhere in the US: 90%
  27. Humans will not land on moon by end of 2017: 95%
  28. SpaceX will bring humans to low earth orbit: 50%
  29. SpaceX successfully launches a reused rocket: 60%
  30. No SpaceX rockets explode without launching their payload to orbit: 60%
  31. Actual wall on Mexican border not built: 99%
  32. Some increased spending on immigration through expanding CBP, ICE, or the border fence: 80%
  33. Corporate Tax Rate will be cut to 20% or below: 50% (it was 21%)
  34. Obamacare (at least mandate, community pricing, pre-existing conditions) not reversed: 80%
  35. Budget deficit will increase: 90% (Not if you go by National Debt increase January to January)
  36. Increase in spending or action on Drug War (e.g. raiding marijuana dispensaries, increased spending on DEA, etc): 70% (hard to say: Rohrbacher Amendment, FY2018 DoJ changes)
  37. Some tariffs raised: 90% (reference)
  38. The US will not significantly change its relationship to NAFTA: 60%
  39. Federal government institutes some interference with state level legal marijuana: 60%
  40. At least one instance where the executive branch violates a citable civil liberties court case: 70% (I made this too broad as I can cite Berger v New York and the NSA violates it every day)
  41. Trump administration does not file a lawsuit against any news organization for defamation: 60%
  42. Trump not impeached (also no Trump resignation): 95%

Postlibertarian

  1. Postlibertarian.com to have >15 more blog posts by July 1, 2017: 80%
  2. Postlibertarian.com to have >30 blog posts by end of year: 70%
  3. Postlibertarian.com to have fewer hits than last year (no election): 60%
  4. Postlibertarian Twitter account to have <300 followers: 90%
  5. Postlibertarian Twitter account to have >270 followers: 60%
  6. Postlibertarian Subreddit to have <100 subscribers: 90%

I missed all the ones I marked as 50% confident, but I’ve realized this category conveys no mathematical information. I could have also listed the predictions as simultaneously saying that there was a 50% chance the exact opposite of the statement occurred, so actually, I got exactly half of them right, and I will always get exactly half of them right. This makes the category completely useless, and so I have decided to avoid posting any predictions of exactly 50% accuracy for next year.

In the other categories:

  • Of items I marked as 60% confident, 10 were correct out of 13.
  • Of items I marked as 70% confident, 5 were correct out of 7.
  • Of items I marked as 80% confident, 9 were correct out of 12.
  • Of items I marked as 90% confident, 7 were correct out of 9.
  • Of items I marked as 95% confident, 2 were correct out of 3.
  • Of items I marked as 99% confident, 4 were correct out of 4.

This may not look great, but is better than last year. Additionally, the big problem is the 95% predictions, which was severely hurt by my poor decision to make predictions about the Bitcoin hard fork, an event which hadn’t really happened before. Ignoring those predictions made in July would change my scores to:

  • Of items I marked as 60% confident, 10 were correct out of 13.
  • Of items I marked as 70% confident, 4 were correct out of 6.
  • Of items I marked as 80% confident, 8 were correct out of 11.
  • Of items I marked as 90% confident, 6 were correct out of 7.
  • Of items I marked as 95% confident, 2 were correct out of 2.
  • Of items I marked as 99% confident, 4 were correct out of 4.

That’s actually remarkably well, with perhaps some 60% predictions that needed more confidence. Moreover, it’s clear I had no business making predictions about Bitcoin with such high confidence, nor did anyone this year. I will definitely be dialing back my confidence levels in Bitcoin price predictions next year, and I’ve focused a bit more of whether Drivechain will be adopted.

Predictions for 2018:

World Events

  1. Trump Approval Rating end of year <50% (Gallup): 95%
  2. Trump Approval Rating end of year <45% (Gallup): 90%
  3. Trump Approval Rating end of year < 40% (Gallup): 80%
  4. US will not get involved in any new major war with death toll of > 100 US soldiers: 60%
  5. No single terrorist attack in the USA will kill > 100 people: 95%
  6. The UK will not fully leave the EU this year: 99%
  7. No country will leave the Euro (adopt another currency as their national currency): 80%
  8. North Korea will still be controlled by the Kim dynasty: 95%
  9. North Korea will conduct a nuclear test this year: 70%
  10. North Korea will conduct a missile test this year: 95%
  11. Yemeni civil war will still be happening: 70%
  12. S&P 500 2018 >10% growth: 60%
  13. S&P 500 will be between 2500 and 3200: 80% (80% confidence interval)
  14. Unemployment rate December 2018 < 6%: 80%
  15. Unemployment rate December 2018 < 5%: 60%
  16. WTI Crude Oil price up by 10%: 60%
  17. Price of Bitcoin > $10,000: 70%
  18. Price of Bitcoin < $30,000: 60%
  19. Price of Bitcoin < $100,000: 70%
  20. Lightning Network available (I can complete a transaction on LN): 80%
  21. Drivechain development “complete”: 70%
  22. Drivechain opcodes not soft-forked into Bitcoin: 70%
  23. No drivechains soft-forked into existence: 95%
  24. US government does not make Bitcoin ownership or exchange illegal: 90%
  25. Self-driving cars will not be available this year for general purchase: 95%
  26. Self-driving cars will not be available this year to purchase / legally operate for < $100k: 99%
  27. I will not be able to buy trips on self-driving cars from Uber/Lyft in a location I am living: 95%
  28. I will not be able to buy a trip on a self-driving car from Uber/Lyft without a backup employee in the car anywhere in the US: 90%
  29. Humans will not be in lunar orbit in 2018: 95%
  30. SpaceX Falcon Heavy rocket will attempt to launch this year (can fail on launch): 95%
  31. SpaceX will not bring humans to low earth orbit: 60%
  32. No SpaceX rockets explode without launching their payload to orbit: 60%
  33. Mexican government does not pay for wall: 99%
  34. Border wall construction not complete by end of 2018: 99%
  35. Some increased spending on immigration through expanding CBP, ICE, or the border fence: 80%
  36. No full year US government budget will be passed (only several months spending): 90%
  37. US National Debt to increase by more than 2017 increase (~$500B): 70%
  38. Increase in spending or action on Drug War (e.g. raiding marijuana dispensaries, increased spending on DEA, etc): 70%
  39. Some tariffs raised: 90%
  40. The US will not significantly change its relationship to NAFTA: 70%
  41. Federal government institutes some interference with state level legal marijuana: 70%
  42. Trump administration does not file a lawsuit against any news organization for defamation: 90%
  43. Mexican government does not pay for wall 99%
  44. Trump not removed from office (also no Trump resignation): 95%
  45. Democrats do not win control of Senate: 60%
  46. Democrats win control of House: 60%

Postlibertarian

  1. postlibertarian.com to have 10 new posts by July 1, 2018: 80%
  2. postlibertarian.com to have 20 new posts this year: 80%
  3. Postlibertarian to have more hits than last year: 70%

 

*I modified prediction #31 on January 24th from 70% positive to 60% negative. This feels early enough that I can still call it a prediction, and I’m not sure why I was so confident in December when I wrote these.

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