Life coasing

+ EXCLUSIVE + Extracts From Steven Levitt and Stephen Dubner’s new book “Life Coasing” + EXCLUSIVE +

Subtitled “How The Economic Way Of Thinking Can Justify Your Horrible Personality”, Life Coasing is a terrific return to form for Levitt and Dubner. These two authors have done more than anyone else to bring the economic way of thinking to the attention of popular culture. Freakonomics and Superfreakonomics were cultural phenomenons which hugely influenced a generation of horrible people. I am pleased to exclusively offer extracts from their latest book.

Inspired by the saga of the knee protector, this kindle single (pictured above) introduces the ideas of Ronald Coase, and how his idea of making small side payments can totally justify your horrible treatment of everyone around you. Going beyond Coase, who focused on policy, Levitt and Dubner show that through the total disregard for other’s feelings only arseholes have, they can enable more transactions by ignoring the feelings of others. It’s going to be huge in Silicon Valley, I assure you.

Without further ado, I have a few teasers to share with you:

“Chapter 1: How is reclining your seat like buying a newspaper?”

We were shocked to hear people were using knee protectors to prevent people reclining other people’s airplane seats. I’m sure you were outraged too. But how do you solve a problem like a reasonable person trying to remain comfortable in a hostile environment? Contrary to what your mother told you, the answer is to make the environment more hostile. Every person has a price, and although some people might pretend to be moral, what they actually mean is they are expensive.

Newspapers, remember them folks? They’re expensive, not only because you have to distribute a paper parcel (not even by drone), but you have to bundle up a variety of different news items together to someone who only wants part of it. Hence you pay for a lot of information you don’t want. Conversation around reclining seats if often a lot like this. People take forever to get to what you want: the price of their comfort.

[…]

So as you have seen already, the economic way of thinking is already proving incredibly useful in justifying your horrible personality. We’ve got you a more comfortable seat and you’ve learned something along the way, but we’ve passed over something which needs explaining.

“Chapter 2: What are transaction costs anyway?”

What is a transaction cost anyway? You’re probably unfamiliar with some transaction costs because arseholes have low transaction costs. A transaction cost is a way of describing the frictions people face in life contracting. You might be familiar with lawyers fees from copyright disputes over poorly conceptualized satires. That’s an enforcement cost. I wouldn’t bother about these. Nope.

There are other costs too, searching for something you want and getting the information you need to make an informed decision are important. Most important for this book are bargaining costs. These are the costs required to come to an acceptable agreement with the other party to the transaction, drawing up an appropriate contract and so on.

In Coase’s The Problem of Social Cost he explains how property rights can enable those who suffer the pollution of a nearby factory to negotiate with the owners. If people own the right to clean air then they can sell that right for the right price. Pretty neat huh? You don’t necessarily own a polluting factory (although I’m sure some of our entrepreneurial readers actually do.), but in a way your personalities are pollutants. But just like the answer to global warming is to pollute the air in a slightly different way, your terrible personality pollution is also the answer to your problems.

[…]

Because you have low bargaining costs, because you quite literally don’t care if people hate you, you can negotiate your way out of being an arsehole. One of the largest barriers to these transactions is hurting other people’s feelings. Luckily, if you’re reading this book you probably don’t care about people’s feelings. You can facilitate many more transactions. Your horrible personality really can make the world a better place. And isn’t that the wonder of the economic way of thinking.

“Chapter 3: Out of the mouth of babes”

[…]

The ultimate coasean bargain is the extraction of lunch money by school “bullies.” (H/T) Everyday, up and down the country, 11 year olds are rediscovering Coase’s seminal work. But instead of praising them we punish them. If children did not value the services of the bully (and what else is a bully but a proto-state, a stationary using bandit), they would not hand over their lunch money. The money involved is often low denomination and usually very small fees actually exchange hands.

We could work out the cost of bullying directly if we knew the wages of children, but sadly we do not. However, thanks to these coasean pioneers we can extrapolate from these bullying fees figures to come up with the reservation wages of children. From these we can imagine what transaction fees must be like for children and develop a rough cost of bullying (Perhaps Mr Piketty thinks the only way of collecting this data is to tax children!).

[…]

If bullying mattered, don’t you think the children would have sorted something out by now themselves? Because the reservation wage of children is so very low it can’t be transaction costs which prevent them successfully preventing bullying themselves, it really is just uneconomical to do so. The bully rent is too damn low. Remember to bring this up in the next PTA meeting when someone suggests another anti-bullying campaign. Your terrible personality (and that of your demonic spawn) really will save everyone time and money. Don’t wait for any other business just shout out at the beginning of the meeting. Remember, you’re keeping bargaining costs low.

“Conclusion”

[…]

Alongside internet atheism and men’s rights activism, the economic way of thinking is among the best ways of justifying your horrible personality. But until now these advantages have not been codified. I hope in this book, “Life Coasing: How The Economic Way Of Thinking Can Justify Your Horrible Personality”, we have explained how coasean bargains and the economic way of thinking can provide cover for your horrible personality.

Uber is hyper-capitalist? Welcome to capitalism, where have you been?

According to Salon, Uber is hyper-capitalist and must be stopped. Frankly I’m a bit annoyed with anything aggressive being labeled hyper-capitalist. Garment factory collapses in Bangladesh, that’s capitalist. The Triangle Shirtwaist Factory fire, that’s capitalist. Blowing up your fertiliser plant, that’s capitalist. Someone headhunting your employees? That’s hyper all of a sudden.

So SLOG, Uber’s recruitment drive, employs private contractors, disposable burner mobiles and fake identities to pick up lifts from Lyft, chat up their drivers. This results in some cancelled rides, but the purpose of the service is to pick up rides rapidly. A quick cancel ends in a quick new fare, the direct costs to Lyft are probably lower than other more common recruitment methods.

This isn’t hyper-capitalist, this is headhunting. If this was happening on LinkedIn to consultants nobody would bat an eyelid. The time taken out to interview and flirt with new potential employers isn’t seen as hyper-capitalist, just normal capitalist. I think there’s classism here too, that taxi drivers would be tricked into moving to Uber, but that consultants headhunted know what’s what.

Uber is also seen as hyper-capitalist because it’s subverting regulations. In Germany it’s just ignoring court rulings and running on venture capital. You mean….a capitalist firm…is ignoring regulations?! Colour me shocked. There are serious concerns about driver licensing and public safety, but none of this makes it hyper-capitalist. Just…normal.

Capture

Ailuropoda economicus

The Jury’s still out on whether humans respond to incentives, but it’s clear that some species do.

The world’s first live broadcast of a panda birth has been called off after experts said the “mother” involved may have been faking the pregnancy to receive better treatment.

Wu Kongju, an expert at the Chengdu Giant Panda Breeding Research Centre where Ai Hin is kept, explained that not all “fake” pregnancies among the animals are just down to hormonal changes.

“After showing prenatal signs, the ‘mothers-to-be’ are moved into single rooms with air conditioning and around-the-clock care,” Wu told Xinhua. “They also receive more buns, fruits and bamboo, so some clever pandas have used this to their advantage to improve their quality of life.”

Photo taken by Kevin Dooley, used under Creative Commons license.

Do addicts need help…

…or do narcissists need mocking?

IN my last year on Wall Street my bonus was $3.6 million — and I was angry because it wasn’t big enough. I was 30 years old, had no children to raise, no debts to pay, no philanthropic goal in mind. I wanted more money for exactly the same reason an alcoholic needs another drink: I was addicted.

Our Galtian Overlords ladies and gentlemen… And oh it gets better…

The first year was really hard. I went through what I can only describe as withdrawal — waking up at nights panicked about running out of money, scouring the headlines to see which of my old co-workers had gotten promoted. Over time it got easier — I started to realize that I had enough money, and if I needed to make more, I could. But my wealth addiction still hasn’t gone completely away. Sometimes I still buy lottery tickets.

What bizarre behaviour, worrying about money and occasionally gambling, I’m sure none of my readers could possibly sympathise.

.@Give_Directly to 1,300 Poor Households in Kenya

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Give Directly are my favourite charity and they should be yours too. They give money to poor people. Not just any poor people, but really poor people in East Africa. There’s a minimum of bureaucracy and they are innovating new ways to remove the bureaucracy which currently exists. It is simplicity itself, and it works. And you can donate this month and double your donation.

Supporting Give Directly gives you the warm glow of helping the most needy people imaginable, but more importantly it also gives you the warm glow of having your ideological predispositions confirmed. If you’re anything like me you just can’t beat it. Donate and you too can bask in the heroin-like glow of confirmation bias.

They regularly audit and they get amazing results. Business and agricultural income increased 28% of the average grant size, implying a 28% annual rate of return. With a doubled donation you’ll be getting a 128% rate of return. Plus mental health improves, crime and conflict doesn’t change, it doesn’t cause localised price inflation and it reduces domestic violence and increases female empowerment.

They’ve also begun using community-based targeting: in a subset of villages, they got the community to help them categorize households by poverty level. Wherever there’s cost and bureaucracy they’re looking for ways to remove it. Wherever there is local knowledge they’re looking to use it. So far:

  • Most people think housing materials are the best indicator of poverty — reaffirming the criteria we already use. Furniture and source of income were also popular.
  • People generally agree on how to apply the housing criteria. When we asked communities to categorize each household as “rich” or “poor”, they agreed in 9 out of 10 cases.
  • Engaging local leaders in the process can help, but also raises a risk that they will ask for “compensation” for tasks they are supposed to do for free.

Honestly, if you’re not supporting this charity (I think this would particularly suit Jackart, Chris and Frances) I don’t know what’s wrong with you. Oh, and they have no marketing budget, so yes, you will have to put up with regular half press release, half begging letter posts here, essentially, forever. Or until we end poverty. So its up to you really.

Will Half The UK Be Obese Before 2050? Are The Press Credulous Nincompoops?

No. Yes. For fucks sake, what is wrong with the media? Lots, I suppose, but I’ll concentrate on their innumeracy and credulousness for now. I will also cover their prejudice and scientific illiteracy. Which is a lot to do in under 1000 words, but when you’ve such densely packed stupidity as our Obesity Crisis Bleughly etc. you can really go to town.

First, a little history lesson: in 2007 a report commissioned by the government stupidly predicted that if people continued getting obeser at the same rate by 2015 36% of males and 28% of females would be obese. By 2050, 60% of males and 50% of females would be obese. By the end of the century everyone would be obese and robots would need adamantium reinforcements to maneuver the nation’s vast bulk. A nightmare scenario, I’m sure you’ll agree. Here’s the chart:

British fat

Yesterday, the National Obesity Forum stupidly updated that stupid extrapolation. Rather than half of Britain becoming obese by 2050 they believe this will happen much sooner and that we need to something about this. Especially for the children. It’s always for the children (or the women). Their report helpfully recommends negging on fat people, bullying children who don’t like PE and the creation of government sinecures for ex-Forum busybodies. 

To come up with their dread warning, they’ve used an extra five years of data from the UK to update the projection above. It’s a projection not a prediction because of the data they leave out. If they included data from the US their scaremongering would fail and these busybodies might have to get real jobs: America’s stopped fattening. We don’t need to hypothesise about how fat we could get, we know. None, none more fat.

America fat

Something that can’t go on forever, won’t. That’s a simple thought, but scaremongers know when you’re scared you don’t think. Waistlines can’t expand forever. Eventually a population has to stop getting fatter and now we now know when this happens. America, the land where everything’s big, is no longer the land where everything’s getting bigger. When a third of a society get obese obesity levels off.

Predicting that half of Britain will become obese, when we’ve recently discovered the obesity event horizon should earn you derision. Instead it gets you wall to wall coverage. Incapable of crunching the numbers, the press report as fact a ludicrous projection using incomplete data and biased methods. I don’t want you to confuse my anger with surprise, this is par for the course. Innumeracy and credulousness covered, let’s talk about the press’s prejudice and scientific illiteracy.

Being fat is unhealthy right? Wrong. Okay, not fat, but being obese is bad, right? Wrong. Dead wrong, in fact. And I have a meta-study to prove it.

final_cochrane_logoThe words “I have a meta-study” should inspire joy or dread, depending on your position. A meta-study is a study of studies and they’re incredibly useful. You can read more halfway down this old post on how they save lives and reveal truths that might otherwise be hidden.

We’ve been looking at obesity for a very long time, and lots of individual studies have been done, but each has its own problems and each has its own margin of error. Collating several studies allowed researchers to look at 3 million subjects, from 12 countries, and use only the best data to assess the effects of weight gain on health.

The results might surprise you. They found that people with a Body Mass Index of 18.5-25, the “healthy” people, have higher mortality risk than every group of people up to BMIs of 35. The obese were less likely to die than the “healthy” people and the overweight people were significantly less likely to die than the “healthy” people.

Pick a random 5’4″ woman weighing 8 stone (remember to say hello). She has a higher mortality risk than a 14 stone woman of the same height (say hello to her too). You might be incredulous, you might even be angry: but I have a meta-study.

The below table isn’t very layman friendly, but click through to the paper, or read this op-ed, if you don’t believe me. I’m not saying you should gain weight, or lose weight, I’m saying that weight is a particularly poor indicator of health and that you should care about your weight a lot less. Especially care less about other people’s weight.

m_jrv120009t2

Not only are predictions of a looming obesity crisis based on nonsense maths, they’re based on nonsense science and reported by a nonsense press. The press are incapable of holding people with a shiny pdf and a slick press release to account. Because of this its all too easy for people to be bullied and for public health (physical and mental) to suffer.

Policy Bullshit Bingo: Robert Rubin in the @FT edition

I wanted an early night. But Nooooooo. Robert Rubin had to publish something stupid and now I’ve had to stay up to mock it. Scheduled to land at 9am. I hope you’re all feeling bitter this morning.

Debates persist in the US and eurozone about growth and job creation versus fiscal discipline. This false choice diverts fiscal focus away from a balanced approach that could achieve both imperatives.

Yes, it’s a false choice and that is why literally nobody on earth is proposing it.

The US recovery remains slow by historical standards – even if recent signs of improvement are borne out. One reason is that our unsound fiscal trajectory undermines business confidence, and thus job creation, by creating uncertainty about future policy and exacerbating concerns about the will of Congress to govern. Business leaders frequently cite our fiscal outlook as a deterrent to hiring and investment.

Actually, in the US policy uncertainty has come from Republic malfeasance in the legislature. It has nothing to do with fiscal policy.

A sound fiscal trajectory is also a prerequisite for interest rates conducive to growth.

Interest rates are zero, and are low a long way out. I don’t think its the 1990s anymore Mr Rubin. Although your glasses are!

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Continued unsound fiscal conditions will almost surely destabilise markets at some future point.

Oh, it will “will almost surely destabilise markets at some future point”? That’s a concrete foundation on which to make policy decisions…

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Recent reductions in deficit projections do not change the basic structural picture – except that healthcare cost increases are slowing – and are partly based on sequestration, a terrible policy that already looks too onerous to stick.

Policy successes which address exactly what I worry about do not count. For no specific reason.

In the eurozone, the threat is more immediate. Bond markets in troubled countries were in dire conditions until the European Central Bank’s famous – and as yet unimplemented – 2012 promise to do “whatever it takes”.

The promise was the action. You want to bet against the ECB? No? Then it worked, the plan was implemented.

The right criterion for action, however, is not the absence of alternatives, but an assessment of costs and benefits.

This sentence stands apart as a magnificent example of self-parody.

In the US, there are widely posed questions about the benefits of QE3, but the risks are significant. One is that central bank action will reduce market pressure on political leaders to act.

You read that right. The danger is this policy might work. Then people won’t listen to Robert Rubin’s terrible advice. Never waste a good crisis eh Robert?

Yet waiting too long to tighten heightens the risk of inflation at some point. The Fed’s dramatic expansion of bank reserves could feed excessive credit growth. Along with the possible erosion of Fed credibility on inflation, that could also feed inflationary expectations.

If they are feed inflationary expectations nobody is doing much about it. The TIPS spreads on US debt doesn’t show anything. You can lend money to the US government and get a nominal return guaranteed, or an inflation protected return guaranteed. The difference tells you a lot about expected inflation. If inflation was coming you could sell one and buy the other. But that hasn’t happened. Look at expected inflation from 5 year bonds:

fredgraph (1)

Such a regime should be enacted now to stabilise, or preferably reduce, the ratio of debt-to-gross domestic product over 10 years, and protect discretionary spending. Implementation, designed in ways difficult to undo, should be deferred for a limited period to allow for recovery. Fiscal discipline could provide room for reasonable stimulus to create jobs. The partially cancelled sequestration should be fully rescinded to eliminate its fiscal drag. Fiscal funding should come largely from revenue increases and beginning the entitlement reforms necessary for long-term sustainability – as President Barack Obama has proposed.

I WANT A PONY.

Structural deficit reduction would address growing deficits in the decades beyond the next 10 years. The eurozone, too, should reject false choices. Instead, it should strike the right balance between fiscal discipline to win market and business confidence, and macroeconomic room for growth.

Unconventional monetary policy and stimulus can be part of a successful economic programme for a period of time. But they are no substitute for fiscal discipline, public investment and structural reform.

Welcome to your policy elite, they’ve literally learned nothing in the last 15 years. They’ve especially learned nothing in the last 5.