Ideas

Europe and American Politics

2009-11-20T23:09:00.001-08:00

In a recent discussion of E.U. legal issues, someone proposed a hypothetical—the U.S. joining the European Union. It occurred to me that reactions to that scenario provide an interesting slant on U.S. attitudes. To some, probably including a majority of those in the room, it sounds like a dream too good to be true. To others it sounds more like a nightmare.

It is one of the lines along which Americans divide. Many see western European societies as more civilized, humane, intelligent than ours. Others see them as conservative, sclerotic, boring—a warning of what we could, and shouldn't, become. Roughly speaking, it is the same line that divides us politically. I would guess that most in the first group voted for the Democratic candidate in the last few election and a majority in the second for the Republican. As Charles Murray wrote somewhere, we now know what Barack Obama is. He's a Swede.

It would be interesting to look at the same division from the other side. It is surely true now, as it has been true for a very long time, that many Europeans look on America as only half civilized, with much to learn from older and wiser cultures. It is surely also true that many see it as where things are happening. I remember a conversation with some English students some forty years ago; one, I believe a dental student, commented that all the new stuff in his field was coming out of America.

Reading Dick Francis, a very popular English novelist, it is pretty clear that he and his protagonists are in the second category, that they see America as almost literally a breath of fresh air. For a more ambiguous view, consider a book by Scottish science fiction novelist Ken MacLeod, set in the mid-21st century. His protagonist sees America as an immature, irresponsible, wasteful culture, insufficiently concerned with energy conservation and the like. But when, fleeing political difficulties at home, he escapes to America, he says that it feels as though he has spent his life living under a low roof and it has suddenly been lifted.

Wanted: Retro Servers

2009-11-19T11:38:00.001-08:00

Over the past few years, World of Warcraft has had two major expansions. Each raised the top limit on character level, added new areas to play in and new quests to do—targeted mainly at high level characters, since they were the ones who had already done most of the interesting stuff in the previous version of the game.

This raised a problem for a new player or a player with a new character. Before getting to the fun new stuff he had to spend a lot of time "leveling" his character to get him up to the necessary level. To solve that problem, the expansion modified the existing material, typically by making everything easier, reducing the cost in time and effort of getting a new character up to a reasonably high level.

The downside of that change was to lower the quality of the lower level material. Quests that used to provide an interesting and enjoyable challenge were now only a test of whether you had half an hour free to do them. Some players responded by persuading, or paying, higher level characters to walk their low level characters through the quest, cutting it from half an hour to fifteen minutes—and, incidentally, eliminating any point to doing the quest other than as a way of leveling the character.

Not everyone was happy with the changes; some players miss the challenges of the earlier versions. The obvious solution is for Blizzard to provide, in addition to its regular servers running the current version of the game, a few retro servers. A classic server would run the game as it existed prior to the first upgrade, a Burning Crusade server the game as it existed prior to the second upgrade. A player who wanted the fun of working through the early quests could create a character on one of the retro servers, a player who preferred the later could have a character there, and one who enjoyed both could have characters on both sorts of servers. A character from a retro server could, perhaps when he reached the maximum level, transfer to a less retro one. Transfers in the other direction would presumably not be permitted, since the new material and higher levels from the current version of the game would not fit well into the early versions.

Is anyone from Blizzard reading this post?

My Recent Lectures

2009-11-18T22:19:00.000-08:00

This year I have been recording my public lectures—when I remember—and webbing them. So if you want something to listen to while driving, or in the bath, feel free.

Alternatively, you could listen to the podcasts of my novel.

The Ambiguity of "Utility"

2009-11-16T12:19:00.000-08:00

The term plays an important role in both philosophy and economics. In philosophy, it is associated with Jeremy Bentham and utilitarianism; in that context utility means, roughly, happiness. In Bentham's view, one ought to act so as to maximize the total of human utility, misleadingly described as "the greatest good for the greatest number."

To an economist, on the other hand, your utility function describes not how you should act but how you will act. "The utility to me of consuming an apple is greater than that of consuming an orange" means that, given the choice, I will choose the former over the latter.

We expect people to choose what makes them happy (cynics and psychologists are welcome to leave the conversation at this point, if they feel left out). Hence we would expect at least a close correlation between utility in the economist's sense and utility in the philosopher's sense. That matters, because one of the things economists do, when they are not making a point of being objective, value-free scientists, is to draw conclusions about what people ought to do—for instance, that they ought to abolish tariffs and price controls. Those conclusions frequently depend on the assumption, stated or unstated, that maximizing utility in the economist's sense will also maximize it in the philosopher's sense. That point was probably clearer a little over a century ago when the economic arguments were being made by an economist, Alfred Marshall, who was a utilitarian and not afraid to make explicit the utilitarian foundations of his economic conclusions.

The concept of utility is, however, ambiguous in other and subtler ways. Imagine, for instance, that you are going to die six months from now. Is your utility greater if you have several months advanced warning, as cancer patients often do, or if your death comes as a complete surprise?

Spending several months knowing that you are about to die would be, for most of us, a very unpleasant experience. If utility is another word for happiness, imagined as a characteristic of what is going on inside your head, the second alternative is almost certainly preferable to the first.

But happiness, in that sense, is not all that matters to people. If one could somehow choose in advance whether, when and if you were in the situation described, it would be the first alternative or the second, many of us would choose the first. Many of us, after all, have things we would like to get done before dying—things to be said to children, wife, friends, perhaps enemies as well. Projects to be completed whose completion matters, if only to our sense of having lived a life worth living. Arrangements to be made for the future of those dear to us. A close friend, not all that long ago, spent a good deal of his last few months reducing to something more like order his crowded and cluttered house for the benefit of his wife and daughters.

For a different slant on the same problem, consider the experience machine, as hypothesized by Robert Nozick—or the real world equivalent in which I spend a good many hours a week, now that virtual reality is really here. Nozick's version provides you with the illusion of a life—the entire rest of your life, stretched out over the length of time it would actually occupy. The proprietor has somehow determined the life you are going to live and believably guarantees you a modest improvement, an illusory life in which things turn out marginally better, in a variety of dimensions, than they would have in the real thing. Assuming you believe him, do you accept the offer?

If the economist's utility and the philosopher's are the same, if choice is entirely about happiness, and if happiness is really a state of mind, then the answer is obviously "yes." For me and, I suspect, many other people, it is just as obviously "no." I don't merely want the illusion of accomplishing things, I want the reality.

Which is one reason why I don't spend all of my life in World of Warcraft.

Arbitrage, Comparative Advantage, and World of Warcraft

2009-11-16T10:31:00.001-08:00

Characters in World of Warcraft are in one of two factions, Horde or Alliance. The game is designed to make communication and trade difficult or impossible between characters of different factions.

There is, however, a loophole—the neutral auction house. Goods can be put up by someone in one faction, bought by someone in the other. Two players can cheaply transfer goods between a horde character of one player and an alliance character of the other by offering the goods at a negligible buy-out price (the auction house charges a commission based on the price), with the timing such that as soon as one puts the goods up the other buys them. Ideally, it's done at four A.M., when nobody is likely to be watching the auction house for good deals.

My wife, who has characters in both factions (I don't), has observed that the prices of many goods are higher, at least on our server, on the Horde auction house than on the Alliance auction house. This suggests, to an economist, an obvious question. Given the loophole provided by the neutral auction house, why don't players engage in arbitrage? Buy goods Alliance side, transfer to Horde side, sell them. Doing that would drive up prices on one side, drive down prices on the other, resulting in roughly equal prices for both factions.

The answer is that although the neutral auction house provides an inexpensive way of getting goods from one side to the other, it does not provide an inexpensive way of getting money from one side to the other. Horde gold and Alliance gold are separate currencies; there is no mechanism that lets you inexpensively convert one into the other. It is no more surprising that prices Horde side in Horde gold are higher than prices Alliance side in Alliance gold than it is that prices in the U.S. in dollars are higher than prices in the U.K. in pounds.

Higher prices on one side do not, by themselves, provide an opportunity for a profitable exchange. What does provide such an opportunity is a difference in relative prices. If some goods are considerably more expensive on one side and others on the other, or even if some goods are considerably more expensive on one side and others about the same price, or even if some are much more expensive Horde side and some slightly more expensive Horde side, then trading goods for goods through the neutral auction house does provide the opportunity for profit—a fact that my wife and daughter long ago discovered and demonstrated.

A player who understands this, who sees that in order to profit from trade you need to exchange something relatively more expensive Horde side for something relatively more expensive Alliance side, has gone a long way towards intuiting the principle of comparative advantage and so towards seeing that most of what he reads about trade deficits and associated problems is nonsense. It makes no more sense to say "China can produce everything cheaper than the U.S., so U.S. producers can't compete" than it would to say "everything is cheaper alliance side, so how can Horde crafters compete?"

Putting it in terms of two different currencies oversimplifies the situation a little. There are at least two ways in which it is possible to transfer gold from one side to the other—at a cost. One is to use the neutral auction house, buying goods from your trading partner at an inflated price and paying the auction house's 15% commission. The other is to shift a character from one faction to another, for which Blizzard, when it permits it, charges $25. The character takes with him his possessions, including his gold. There is, however, a limit—even a top level character cannot bring more than 20,000 gold with him.

Suppose prices are 40% higher Horde side, which seems at least roughly the case for some goods on our server (Feathermoon). You buy 15,000 gold worth of goods from the Alliance side auction house, smuggle them across to the character of a Horde side friend through the neutral auction house, sell them for 21,000 gold, of which you get 20,000, with the extra going as a commission to the Horde auction house. One of you then gets a character transfer from Horde to Alliance, taking with him the 20,000 gold.

On net, you have turned 15,000 Alliance side gold into 20,000 Alliance side gold, at a cost of $25 plus a good deal of (hopefully entertaining) time and effort. The current gray market exchange rate of WoW gold for dollars makes one gold equal to about .7 cents, judging by ads spammed on my server. You have made 5,000 gold, worth about $35, at a cost of $25. Not a very profitable transaction—you would be better off using the neutral auction house, which would let you convert 20,000 Horde side gold into 17,000 Alliance side, paying 15% to the goblins in gold but leaving you with a clear profit of 2000 gold, worth about $14.

All of which suggests why arbitrage does not wipe out the Horde/Alliance price difference.

I looked for realspace equivalents to moving character and gold from one faction to the other and found one. When Germany was reunified, the government decided—in my view foolishly—to treat East German marks as equivalent to West German marks, despite the fact that, prior to that, one West German mark exchanged for substantially more than one East German mark. An enterprising German who correctly predicted that decision could have bought goods in West Germany, smuggled them into East Germany and sold them—no doubt at some risk, but I do not know how great a risk during the period just before unification—and then turned his East German money back into West German money at one to one when Germany unified. I do not know if anyone actually did so or not.

Some time back, I suggested that WoW had potential for teaching economics. This post is an attempt to support that claim.

Plumbing and indirect causation

2009-11-12T12:42:00.000-08:00

In both my price theory textbook (webbed) and Hidden Order, I point out that one cannot safely assume that changing one thing in a system leaves everything else unchanged; the context there is the effect of changing one element in a transaction, such as the price, the terms the good is sold at, or the quality of the good, on the other elements. In order to figure out what will happen, you need to understand the causal links. My four examples can be found in Chapter 2, under the subtitle "Four Wrong Answers."

I recently encountered another example of the same principle, in a rather different context. Our shower had been persistently dripping. After the tenth time my wife reminded me of the problem, I decided to do something about it. My conjecture was that the valve needed to be replaced, adjusted, or cleaned out, so I attempted to disassemble the mechanism to get at the valve.

I was unsuccessful in my attempt, but managed, in the process, to fix not only that problem, without knowing I was doing it, but two others as well.

How did I work that miracle? I succeeded in disassembling the shower head,and discovered that its filter was clogged. Cleaning that out was easy. I reassembled it, making a mental note that we still had to do something about the dripping. Had I thought more about it, I would have made a further mental note that while doing so, perhaps by hiring a plumber, we might also try to do something about the low water pressure and how long it took the shower to heat up.

If I had, I would have been wrong—because I had just fixed all three problems. With the filter cleaned, the water could get through the shower head, so the low water pressure problem disappeared. As I should have expected, but didn't, the problem of heating up the water disappeared too. With the water free to go through the pipe and shower head much faster than before, it took much less time to empty out the cold water in the hot water pipe, so instead of waiting for a minute or two to start taking a shower, it now took only ten or fifteen seconds.

The dripping stopped too. I conclude that it wasn't a problem with the valve at all. Presumably, the stopped up filter meant that the shower head filled up with water, and that was what was dripping.

A nice lesson in interconnected causation.

I had thought of using this as a lead-in to a discussion of what might go wrong with current health care reform, due to the interrelated causation of that much more complicated system, but I think I will leave that to a later post.

The Motorola Droid

2009-11-11T20:38:00.000-08:00

Friday I got a chance to play with the new Android phone at a local T-mobile store. For the most part, I like it. The one disappointment was the keyboard, which does not seem any better than the one on my G1. On the other hand, the D-pad on the Droid seems to work much better than the G1's tiny scroll ball.

I asked about tethering and was told that it would cost an extra $15/month. When I got home and looked for more information on the web, I got an unpleasant surprise. First, and less important, it's $30/month—less important because you can turn the service on and off, so pay for it only on days when you plan to use it, which for me would come to less than two months a year.

The serious problem is that the tethering option is to become available "early next year."

I could, of course, use third party software to tether without paying anything extra, as I currently do on my G1. When I asked T-Mobile's online technical support whether that was permitted, I was told that while they would not provide any support for tethering they didn't object to my doing it. Verizon, which seems to have a clearer idea than T-Mobile does of what tethering is, quite clearly and explicitly forbids it if you are not paying them for the privilege, something I confirmed over the phone with a (very helpful and well informed) representative.

So if I switch to Verizon now, I don't get to tether during trips over the next few months and can't be sure of being able to tether during my month long summer trip; in my experience, projected dates for high tech products and services not yet out mostly come down to "real soon now."

On the other hand, it does look like a very nice phone.

An Android Glitch

2009-11-11T20:29:00.000-08:00

On the whole, I'm reasonably happy with the Android OS, but there is one problem I have observed in two unrelated applications and so suspect is coming from the operating system.

One of the applications is DocsToGo, which provides, among other things, a word processor that can read and write MS Word documents. I call up a document, perhaps edit it a bit, then switch to doing other things with the phone. Eventually I go back—and get a message telling me that the program was shut down improperly and asking if I want to retrieve the document I was working on.

The other application is Divide and Conquer, a mildly entertaining game. I get to level seven, switch to doing something else with the phone. Eventually I go back—and discover that I am back at the beginning of the game.

I suspect I know what is happening. Android only keeps a small number of applications open at once. After I switch from one program and run several others, the first gets dropped—forcibly shut down. My guess is that the process doesn't involve actually waking up the program and telling it that it is about to be shut down, so there is no way the program can respond by saving its present state. From the standpoint of DocsToGo, it is as if the computer crashed while it was suspended.

Perhaps someone out there who knows more than I do about the Android internals can tell me if this guess is right, and if there is some way of programming around the problem. Also whether the problem still exists on Android 2.0.

Trust Online: A World of Warcraft Anecdote

2009-11-10T09:44:00.000-08:00

In World of Warcraft, some characters are, among other things, crafters, can produce useful objects such as pieces of armor that they or others can wear. To do so requires some level of skill, obtained by in-game activities, mostly crafting, and ingredients ("mats" for "materials"). At a high level, the required mats are very expensive in in-game money and the product is better—provides a greater improvement to the player wearing it—than most of what players can get in other ways.

A common arrangement is for the player who wants something made to provide the craftsman with the required mats plus a tip, an additional payment in in-game currency. The crafter makes the item and gives it back to his customer. The mechanics of exchanging goods involve each player showing what he is giving the other; the exchange happens when both approve. For ordinary trade, that provides automatic enforcement; if you don't put up what you offered in exchange for what I am offering, I don't click the relevant button and the trade does not happen. If, however, I hand over the necessary materials to a craftsman in order that he can make me something, there is nothing to keep him from walking off with them without giving me anything in exchange.

What started me thinking about this problem was my wife's account of a recent transaction . Her character is, among other things, a high level blacksmith with the recipe for a very high level piece of armor, one whose materials cost about 6000 gold. At current exchange rates—there is an active market trading WoW gold and other virtual goods for money, although Blizzard, the company that runs the game, tries to discourage the practice—that comes to forty or fifty dollars.

Someone looking for a crafter to make that item posted a query. I noticed it and referred him to my wife's character. He gave her the necessary materials plus some additional gold, she crafted his armor and gave it back to him. A satisfactory transaction for both parties.

So far as we know, she was a stranger to him. Why did he trust her? How did he know she wouldn't simply walk off with his materials, perhaps use them to make the same piece of armor for herself?

Part of the answer is that in order to be a high level crafter one must be a high level character, which normally means having spent hundreds or thousands of hours fighting monsters, going on quests, practicing one's craft. My wife's blacksmith is level 80, the highest level currently available in the game. If she cheated a customer, she risked a permanent black mark on her reputation. A single WoW server has a population in (I think) the tens of thousands, large enough to dilute but not eliminate reputational problems. I suspect that if the same transaction could be done by someone who had just created a new character and played him for a few hours, the level of trust would be much lower. The mechanism is the same one that explains why banks favor expensive buildings faced with marble and provides one explanation of why companies engage in expensive advertising campaigns—in each case, paying a sunk cost to make it clear to customers that it would be expensive for the firm to take their money and run.

There are possible substitutes for trust, but they are costly. The customer could, for example, offer to trade 6000 gold worth of materials for 6000 gold in one exchange, then give the gold back, along with the additional payment, in exchange for the armor. Doing it that way, however, would require the blacksmith to have that amount of in-game cash free for the purpose. In this case, at least, she didn't; she has not yet made the armor for herself because she cannot yet afford to do so. A customer who sets that requirement substantially reduces the number of potential transactions. That would be a serious problem for very high end crafting, where only a few crafters will have the necessary recipe. The customer also risks offending the person he wants to trade with by making his distrust obvious.

On one occasion, my wife noticed someone posting in search of a crafter with an additional requirement: "must be a member of a reputable guild." That is a way of improving the reputational mechanism, since guilds, in-game groups of characters who do things together, also have reputations. I am reminded of Adam Smith's argument in favor of a diversity of small religious groups—that they have an incentive to make sure their members behave well in order to keep up the group's reputation. But in World of Warcraft the practice is uncommon; my wife only remembers seeing one such post, and other people reacted negatively to it.

Trust mechanisms are not perfect—people do sometimes cheat. But I found it interesting that they work well enough so that the sort of transaction my wife's character engaged in, for an amount very large in in-game terms and significant even in dollar terms, is not uncommon.

Interesting Electoral Doings in Northern New York

2009-11-03T21:21:00.000-08:00

A Usenet post earlier this evening called my attention to an interesting congressional race in New York's 23rd district. The incumbent congressman in a solidly Republican district resigned to become secretary of the army. The Republican party nominated Dede Scozzafava, a relatively left wing candidate, at least by Republican standards. Conservative Republicans objected, and threw their support to Doug Hoffman, the candidate of New York's Conservative party. Saturday, Scozzafava responded to the loss of Republican support by withdrawing from the race and throwing her support to Bill Owens, the Democratic candidate. For a while the race between the Democrat and the Conservative was too close to call, but it now looks as though the Democrat has won.

What I find interesting is not the question of who is going to represent the district but of what the effect will be on Republican politics. The left wing of the Republican party will surely use it to argue that conservatives, by refusing to support centrist candidates, are destroying the party—and it seems like a reasonable argument.

But politics is not entirely about reasonable arguments. The candidate of one party is not supposed to throw her support to the candidate of the other, however much she prefers his policies to those of his opponent. Seen in a certain light, doing so makes her a traitor—not to the nation but to the party, although party loyalists may not draw such fine distinctions. I conjecture that the Republican right will try to use the incident to portray the Republican left as untrustworthy villains not deserving of a voice in party affairs.

Two further points occur to me. The first is that Scozzafava, by withdrawing from the race, may actually have helped, not hurt, Hoffman, since in a three way election the two of them would have split the Republican vote. The second is to wonder what the effects would have been, again on intraparty politics, if Hoffman had won. Conservatives could have offered it as evidence that they are the real strength of the Republican party—although not very good evidence, given that the 23rd is apparently an unusually conservative district. On the other hand, treachery that fails has less of a bite, rhetorically speaking, than treachery that succeeds, so that half of their argument might actually have been weakened by victory.

Heinlein, somewhere in Double Star, one of his better if less well known novels, has a character comment that politics is ugly in a variety of (named) ways—but it's the only game worth playing for grown ups. I can see his point.

Controlling Corporations: Stockholders vs Stakeholders

2009-11-03T09:17:00.000-08:00

In theory, private corporations are run for the benefit of their stockholders. Insofar as the theory is enforced in practice, it is through two different mechanisms. One is the fiduciary obligation of corporate directors, the fact that they are legally obliged to run the firm in the interest of its stockholders. How much effect that obligation has is not clear, given the obvious difficulties with having a court second guess the decisions of the firm. The second and more important mechanism is the fact that the board of directors, which has the power to hire and fire management, is itself elected by a vote of the stockholders. If holders of a majority of the shares are unhappy with how the corporation is being run, they can replace the existing board, and so the existing management, with people who will run it more nearly as they wish.

This mechanism, like democratic voting in the political arena, faces an obvious problem; the holder of a share of stock, like an individual voter, knows that his vote is very unlikely to change the outcome and so has little incentive to spend time and energy judging how well the firm is being run in order to exercise his voting power. But votes in the corporate context, unlike votes in the political context, are transferable; each is attached to a share of stock, and shares can be bought and sold. If a corporation is doing a sufficiently bad job of maximizing stockholder value, someone with the necessary assets and expertise can buy up lots of shares at a price reflecting the current performance of the corporation. Since owning lots of shares gives you lots of votes, he can then, perhaps in alliance with other large shareholders, vote out the board, replace management and, when it becomes clear to others that the firm is now doing better for its stockholders, sell his shares at a higher price and go looking for another badly run firm to buy stock in. Takeover bids generally get a bad press, possibly due to the efforts of incumbent managers who would prefer not to be replaced, but they provide people running corporations with an incentive not to deviate too far from doing what, in theory, they are supposed to do.

Some people—including a colleague of mine whose recent work inspired this essay—argue that the theory itself is wrong. Decisions made by a corporation affect not only the stockholders but other people as well, most obviously its customers and employees. Why not alter the legal rules in ways designed to give all "stakeholders," all people affected by the corporation's decisions, a voice—either by altering the legal rules to broaden the fiduciary obligation of directors or by changing the rules on how directors are chosen to give (at least) customers and employees some votes as well?

There are a number of problems with the argument; in this post I will focus on one of them.

Corporations are constrained in at least three different ways. Two of them are the legal obligations of the directors and the mechanisms for electing them. The third constraint is the market on which a corporation sells its outputs and buys its inputs. A customer who finds that the corporation is not serving his interests, that its products are more expensive or less desirable than those offered by competitors, does not have to intervene in the internal affairs of the corporation in order to solve the problem. He can simply stop buying what the corporation is selling. An employee who finds that the corporation is offering less money for a less attractive job than alternative employers can quit. Since the corporation requires customers to provide the money with which it pays dividends to its stockholders and salaries and bonuses to its management, and requires employees to produce the goods and services that it sells to those customers, it has a direct and immediate incentive to produce what customers want to buy and provide employment terms that employees are willing to accept.

Like most mechanisms, this one is imperfect. Customers are not perfectly informed about what they are getting or the alternatives, and some customers for some goods and services are to some degree locked in by previous choices. Having spent time and effort learning to use the hardware and software on which I am writing this, I would be willing to switch only if the quality went down quite a lot or the price up quite a lot, so the firms providing the hardware and software have some ability to benefit themselves at my expense without losing my business. Having accepted my current job, there would be significant costs to shifting to another—costs of learning my way around a different university, perhaps of moving to a different location. Hence my employer as well has some ability to benefit itself at my expense.

But my situation as customer and employee is very much better in this respect than my situation as a stockholder. It is true that, as a stockholder, I have the option of selling my shares of stock, which at first glance looks rather like my option as a consumer of not buying a product or as a worker of quitting a job. But the apparent similarity is an illusion.

If I choose not to spend twenty thousand dollars buying a car from Ford, Ford has one more unsold car and twenty thousand dollars less money. If I choose to sell twenty thousand dollars of Ford stock, on the other hand, the money I get is not coming at Ford's expense. Another investor has paid me the money and now owns the stock, leaving Ford itself unaffected. From the standpoint of the firm's incentives, it is as if, every time a customer wished to stop buying from a store, he was required to first find a new customer willing to take his place, or as if an employee could only quit if he provided a replacement willing to do the same job at the same pay.

The stockholder's view of the value of the stock directly affects the firm only if the firm wishes to raise capital by selling a new issue of stock. So far as existing stock is concerned, the shareholder is locked in, even if the fact is not immediately obvious. If the firm is being run in a way that fails to maximize stockholder value, he cannot escape that cost by selling his share, since the price he can sell it for will reflect the reduction in future profits and dividends, insofar as it can be estimated by other stockholders.

It follows that stockholders, unlike customers and employees, receive no direct protection from the market on which they deal with the firm. As a customer of Apple, I am to some limited degree locked in; I can switch to hardware and software from another firm, but only at a significant cost. The same is true of my situation as an employee of Santa Clara University. In both cases, I have born what are now sunk costs as a result of my initial decision to buy a product or accept a job. But as a stockholder in Apple, I am entirely locked in; all of my cost is sunk. If Steve Jobs announces tomorrow that he plans to run Apple entirely for the benefit of its employees and customers, never paying another dividend, the fact that I can respond by selling my stock provides me no protection.

It follows that the stockholder is dependent, very much more than the other stakeholders, on other mechanisms for controlling a firm to make it act in his interest. That is a strong argument in favor of the current mechanism for corporate control and the current legal rules defining the fiduciary obligation of the directors.

Indeed, it is an argument for more than that. It is an argument for strengthening stockholder control in order to provide more protection to the most vulnerable party in the network of relationships that makes up a corporation. One way of doing so would be by removing current legal barriers that make takeover bids more difficult, and so protect managers and directors from the consequences of serving their own interests at the expense of the stockholders whose interests they are supposed to be serving.

Long Tailed Schooling

2009-11-02T13:20:00.000-08:00

I graduated from high school in 1961; the school I went to was and is a top private school, the same one to which Barack Obama later sent his children. While I have no hard data, the impression I get from a variety of sources is that top schools today work their students harder, and cover more advanced material, than my school did.

At the same time, my impression—based in part on hard data, but data that is now about fifteen years out of data—is that the average quality of American K-12 schooling had declined since then. A little googling found data on SAT scores from 1967-2004, adjusted to allow for renorming; over that period the average verbal score fell by thirty-five points, the math rose by two points. Of course, some of that might reflect changes over time in how many students took the test.

This suggests an interesting question: Is the dispersion of quality of K-12 schooling increasing? Are the best schools getting better (or more numerous) and the worst worse (or more numerous)? Do any of my readers know of data supporting or contradicting that conjecture?

It's relevant, among other things, to the ongoing issue of the dispersion of income, apparently increasing. Quite a long time ago the authors of The Bell Curve expressed concern that one result of an increasingly meritocratic society was an increase in assortive mating, increased correlation between innate ability and status, hence an increased division between social groups. In the old days, they argued, the students who went to Harvard and the students who went to Podunk U. differed a lot in parental income and status, not so much in innate ability. As the system got better at identifying kids who were poor but smart and offering them scholarships to Harvard, an opportunity to become doctors, lawyers, or professors, it increased the odds that high status people would not only believe they were smarter than those lower down but be right—with potentially unattractive social consequences.

If they were correct, it would not be surprising if the K-12 schools, public and private, that serve the upper end of the income and status distribution were getting better while the schools serving the lower end were getting worse—as measured by the quality of schooling provided, itself in large part a function of the characteristics of the students being schooled.

I should probably add, at a tangent to this, a note of skepticism that working students harder, one of the points I mentioned at the beginning of this, results in getting them better educated. Some years back, I attended a reunion of my high school at which members of the current staff took the opportunity to tell the alumni what a good job the school was now doing. One of their central points was the amount of the students' time being consumed.

My suspicion was that what I was hearing was "The Devil Finds Work for Idle Hands" theory of education. Keep the kids busy enough and they won't have time to do drugs or get pregnant.

I doubt it works. It might just result in eating up time they could have used to educate themselves. Reading science fiction, arguing politics, playing board games, even playing D&D or World of Warcraft are, I suspect, more educational than homework given for the purpose of keeping kids busy.

Wanted: Technological Revolutions

2009-10-28T15:56:00.000-07:00

My seminar on "Legal Issues of the 21st Century" deals with technological revolutions that might happen and the legal issues those revolutions would raise. After teaching it for some years, I turned it into a book. I am teaching it again this spring and am in search of new material, new revolutions. I have one idea, am looking for more.

The one idea is the possibility of non-human animals with roughly human level abilities, including some way of communicating with humans. It is at least arguable that some species already have adequate intelligence and lack only a common language. That is the claim implicit in some highly publicized—and controversial—past work teaching sign language to non-human primates. The people who worked with Koko, for instance, a female gorilla, estimated her IQ at 75-90 and claimed she understood 2000 words and had a working vocabulary of over 1000 signs. Other possible candidates are cetaceans, especially dolphins, and, surprisingly enough, grey parrots. I am suspicious of such claims, since the primate experiments got a lot of attention quite a long time ago; if the results were as good as claimed, we should have seen a lot more evidence by now. But I could be wrong.

If suitable animals do not yet exist, perhaps we could get them via genetic engineering, a popular theme in science fiction. Or we might learn enough about the functioning of the brain to be able to improve the brains of other species (and our own, which raises another set of issues), perhaps by the use of suitable drugs. Whatever the mechanism, the existence of animals able to communicate with us on a more or less human level would raise many interesting questions, including lots of legal issues.

While I welcome comments on this idea, that is not the main reason for this post. What I am looking for are some more revolutions. What technological developments not already covered in Future Imperfect might revolutionize our world over the next thirty years or so?

Android Update

2009-10-28T15:38:00.000-07:00

As regular readers know, I have long been in search of the perfect pda/phone/web browser. The latest Android phone, the Motorola Droid, officially announced today, may bring that goal a little closer. The screen is substantially larger than the screen on my G1, the keyboard is said to be a little better. The phone is not due to go on sale until November 6th, so until then I will have to be satisfied with pictures.

While gathering information on the Droid, I looked a little more carefully at the question of support for an external bluetooth keyboard, one of the features that my G1 lacks. Apparently the Droid will lack it too, at least for a while. Connecting such a keyboard requires the appropriate bluetooth profile, software telling the phone how to interpret the information coming in from the keyboard. Such a profile does not yet exist as part of the Android software, although developers appear to be working on the problem.

While on the subject of smartphones, I have an idea for a software product that, so far as I know, does not now exist—smartphone OCR. Use the camera on your phone to photograph a page of text, have software on the phone or, if the phone's processing power is insufficient, somewhere out on the net, turn the picture into text.

Did Carl Sagan Libel Christiaan Huygens?

2009-09-22T11:41:00.000-07:00

"Consider the curious argument by which he deduced the existence on Jupiter of hemp. Galileo had observed four moons traveling around Jupiter. Huygens asked a question of a kind few astronomers would ask today: Why is it that Jupiter has four moons? Well, why does the earth have one moon? Our moon’s function, Huygens reasoned, apart from providing a little light at night and raising the tides, is to aid mariners in navigation. If Jupiter has four moons, there must be as many mariners on that planet. Mariners imply boats; boats imply sails; sails imply ropes. And ropes imply hemp. I sometimes wonder how many of our own prized scientific arguments will appear equally foolish from the vantage of three centuries." (From a Scientific American article by Carl Sagan)

I came across a reference to this claim in an online conversation and got curious enough to google for it. All of the references I found were suspiciously similar, suggesting that they all were based on the same source. I eventually concluded that the source was Sagan. None of them provided any evidence for the story in anything Huygens had written.

So I want looking and found a webbed translation of Cosmotheoros, a treatise on matters astronomical written by Huygens late in his life. It's an interesting work, combining what appears to be an accurate account of astronomical knowledge of the time with lengthy speculations about possible inhabitants of other planets. Huygens, living more than a century before Darwin, takes it for granted that living creatures are the result of divine design and, logically enough, tries to figure out whether and how a benevolent God would have populated other planets. That seems a bit odd to the modern reader, but the author makes it clear that what he is offering is speculation. There are lots of references to Jupiter and one to hemp, but nothing that even comes close to supporting Sagan's story.

Huygens writes, with reference to Jupiter and Saturn:

"This Position of the Moons, in respect of their Planets, must occasion great many very pretty, wonderful sights to their Inhabitants, if they have any: which is very doubtful, but may for the present be suppos'd."

Which does not sound like a statement from someone with the view of the subject that Sagan attributes to Huygens.

I see three possibilities:

1. I have somehow missed, in Cosmotheoros, the passage on which Sagan bases his story. I think that very unlikely; I haven't read the whole treatise, but it is webbed with a search engine.

2. Sagan is accurately reporting something Huygens wrote elsewhere, perhaps a theory he had rejected by the time he wrote the treatise.

3. Sagan's story is false. Either he is deliberately lying for the sake of telling an entertaining story about how foolish people were in the past or he never bothered to check something he misremembered or got from someone else.

I favor alternative 3, but perhaps one of my readers can provide evidence for one of the others. If the story is based on something Huygens wrote I suspect, after looking through Cosmotheoros, that Sagan is misrepresenting a speculation as a claim.

Facts Don't Speak For Themselves

2009-09-22T11:31:00.000-07:00

Suppose, optimistically, that a year from now the current recession is currently over, the economy more or less returned to normal. There are two opposite ways in which recent events can be, and will be, interpreted:

1. The U.S. faced the risk of another Great Depression and was saved from it only by the prompt and courageous action of the Obama admnistration, in the form of stimulus and bailouts.

2. The U.S. was going into a recession, as from time to time it does. The Obama administration used exaggerated rhetoric to misrepresent it as an impending catastrophe in order to justify an extraordinary increase in government spending financed by enormous deficits. The money was mostly spent on the sorts of things politicians like to spend money on. The combined effect of rhetoric and policy made the recession more serious than it would otherwise have been but it still ended, perhaps a little later than it otherwise would have.

Both versions are, I think, consistent with the casual evidence available to most voters. Is there any basis, other than preexisting political preferences, by which voters can choose between them?

Arctic Sea Ice: Latest Figures

2009-09-17T10:31:00.000-07:00

Regular readers of this blog will remember a series of posts (the three links are to three different posts) a few months back dealing with the question of whether NASA/JPL was lying when they claimed on a JPL web page that:

"The latest Arctic sea ice data from NASA and the National Snow and Ice Data Center show that the decade-long trend of shrinking sea ice cover is continuing."

I argued at the time that the latest data actually showed the shrinking to have reversed, although there was no way of knowing if that was more than a temporary deviation. The discussion got me into a correspondence first with someone at NASA who turned out to be a publicity person not a scientist, then with a scientist at NSDIC. It also resulted in a lot of comments on this blog.

Out of curiousity, I checked back today on the NSDIC web page, and found:

"The 2009 minimum is the third-lowest recorded since 1979, 580,000 square kilometers (220,000 square miles) above 2008 and 970,000 square kilometers (370,000 square miles) above the record low in 2007."

Or in other words, the extent of arctic sea ice has been increasing for the last two years, contrary to the claim I quoted above. The NSDIC puts the result in a way that emphasizes the fact that it is still below its long term level and obscures the fact that, for the past two years, arctic sea ice extent has been going up, not down. But at least they tell the truth about the facts.

To avoid irrelevant comments, I am not arguing for or against claims that the greater extent doesn't really count because it is thinner ice or that all the evidence taken together still supports long term shrinking of arctic sea ice. My claim is simply that the quote above, which is still up on the JPL web page, is false. When people lie to me about the evidence for their conclusions, offering other evidence that their conclusions are still true is not an adequate defense.

For Your Own Good

2009-09-15T23:03:00.000-07:00

An Australian navy ship has intercepted a boat carrying nearly 60 suspected asylum seekers - the fourth such incident in less than two weeks.

"Situations around the world mean that large numbers of displaced persons are looking for settlement in wealthy, developed nations like Australia and can be targeted by, and fall prey to, people-smugglers," Australian Home Minister Brendan O'Connor said." (Recent news story)

From the standpoint of the asylum seekers, O'Connor and the Australian navy are the enemy. The "people smugglers" are the ones on their side, the people who, for a price, are trying to get them into Australia. O'Connor is trying to keep them out. In an attempt to obscure that fact, he describes the situation as the immigrants "falling prey to" the people smugglers.

I am reminded of President Clinton's explanation that the reason he was having the U.S. coastguard turn back people trying to escape from Haiti to the U.S. was for their own good, the crossing being a dangerous one. That was the point at which I decided that, whatever his qualifications as a President, Clinton was a pretty poor excuse for a human being. Stopping desperate people from escaping from their particular hell may, under some circumstances, be excusable. Pretending that you are doing it for their good is not.

If only there had been enough more of those wicked people smugglers in the late thirties for desperate emigrants to fall prey too, it might have been only five million.

International Health Care Comparisons: The WHO Numbers

2009-09-12T12:02:00.001-07:00

In the course of the healthcare debate, supporters of change along the lines proposed by the administration have called attention to a World Health Organization study ranking the health care systems of 192 nations. A common claim is that the U.S., despite spending more per capita than any other country, still ranks only 37, behind most developed countries.

That version of the claim is at best misleading. There is a measure, "Overall Health System Performance," on which the U.S. ranks 37. But it is a measure that takes expenditure into account, downrating the U.S. precisely because it spends so much. The rank is 37 not in spite of the level of expenditure but because of it.

There is another measure, "Overall Goal Attainment," which does not take account of expenditure; on that the U.S. ranks 15, still behind a fair number of other countries but not nearly as many. So a more accurate claim would be that the U.S. ranks 15 despite its large expenditures.

Even that is misleading, however, because if one actually read the notes explaining how the numbers are calculated it turns out that "Goal Attainment" is based on five different characteristics of a health care system, only one of which is an (imperfect) measure of how much health care the system provides.

That one, "Health level," is average life expectancy, adjusted to make a disabled year count for less than a healthy year. It is an imperfect measure because life expectancy depends not only on health care but on lifestyle variables such as smoking or obesity and on factors such as the death rate from murders and traffic accidents. And even to the extent that it depends on health, health is not entirely a matter of health care; some environments are more unhealthy than others.

A second variable, responsiveness, measures how good people in each country think their health care system is, as determined by questionaires. On that one, interestingly enough, the U.S. comes in first—a fact that ought to worry the President. If Americans think the current system works better than any existing alternative, as they apparently do, they may not look favorably on changes to it.

The other variables all have to do with distribution. "Health distribution" purports to measure how unequal the distribution of health care in each country is. The authors wanted to use distribution of life expectancy but didn't have the data to do it. Instead they used a measure, never clearly explained, of the distribution of infant survival, apparently of how many infants die at what point in their first five years. Even for that, the relevant data existed for only a minority of countries; for the rest the report substituted an estimate based on variables such as poverty level.

"Responsiveness distribution" was calculated from questionaires and apparently designed to measure the degree to which respondents believed that various groups in their country were disadvantaged with regard to health care.

Finally, we have "fairness in financial contribution," defined as how nearly health costs are distributed in proportion to income minus the cost of food. That measure is obviously biased in favor of state run health care plans, since in order for both health care and its cost to be distributed in the way the authors of the report want there has to be a sizable redistribution of cost from poorer families getting health care to richer families paying for it.

My conclusion is that the numbers produced by the report are very nearly useless for purposes other than propaganda, since they do not provide much information on how good the health care systems of different countries are at delivering health care.

In fairness, I should add that I don't have any proposal for doing a much better job of comparing international health care systems, given the data limitations when trying to look at 192 different countries. Ideally, one would want a value added measure, something like the difference between actual life expectancy in a country and what life expectancy would be if there were no health care system at all. But I don't see any practical way of generating such numbers. One could simply use life expectancy, but that has the problems I have already described. One can try to look at particular outcomes heavily dependent on health care; the U.S. apparently does very well measured by cancer survival rates. But neither approach really tells you what you want to know.

Obama Supports Vouchers

2009-09-12T11:55:00.000-07:00

for healthcare.

At least, that's how I interpret the descriptions I have seen of his current plan, although I gather any interpretation is pretty uncertain at this point. He appears to be proposing:

1. That everyone be required to have health insurance.

2. That low income consumers get their health insurance subsidized.

3. That there be a "public option" that is not subsidized.

Combine those, and it looks as though low income consumers are getting a voucher that they can spend on either private or public health insurance. That's almost precisely the plan that Obama rejected for schooling when he decided to cancel the D.C. voucher experiment. The only differences are that, in the schooling case, there was still a net subsidy to the "public plan," since the amount of the voucher was less than the per pupil expenditure in the public schools, and that in the health plan, some consumers will be paying part of the cost of the public plan with their own money.

Dreaming as Virtual Reality

2009-09-07T12:11:00.000-07:00

In the chapter on virtual reality in my Future Imperfect I suggested that if we could crack the dreaming problem, figure out how dreaming works, we could create a much richer form of virtual reality, sending sensory signals to the brain instead of merely beaming photons at the eyes and sound waves at the ears. Implicit in this idea is the assumption that dreaming really is a rich form of virtual reality, creating a full illusion of real sensations.

I woke up from dreams several times last night and tried to remember what they were like. It is hard to be certain, since my dream memories fade rapidly, but I do not think they were full sense VR or anything close. I remember only one color from any of them, and it was wrong, a more intense version of the color of what I was dreaming about. My overall impression was that dreaming is more like reading a book than like watching a movie, that in the dream you know certain things are happening but you are not actually seeing, hearing, feeling those things in the way you would if they were happening in real life.

Is this consistent with other people's observations? Anyone aware of research into the nature of dreaming along these general lines?

Implications of a Doomed Dollar

2009-09-05T09:58:00.000-07:00

My friend Jeff Hummel has been arguing for some time that the U.S. is eventually going to default on its debt. Central to his argument is the fact that an increase in the perceived risk of default increases the risk premium the U.S. has to pay to lenders. Since the debt is large (and rapidly getting larger) an increase in the interest rate the U.S. has to pay results in significantly increased budgetary problems, which results in an increased risk of default, which results in a further increase in the risk premium—a positive feedback mechanism. I do not know if his prediction is correct, nor do I know whether, if it is, default would be via repudiation or inflation, but it is at least an interesting argument.

I was reminded of it recently when I received an Email from The Motley Fools, investment advisers who for some reason have me on their mailing list. The title is "Read This Because the Dollar is Doomed." The authors argue that the U.S. trade deficit, the U.S. budget deficit, and the willingness of the U.S. to pay for things by printing money all threaten the dollar. They conclude that "This should be worrisome news if you earn a dollar-based salary, keep a dollar-based bank account, or invest in dollar-denominated U.S. stocks and bonds. Why? Because as the dollar declines in value, so too will all of your earnings, savings, and investments. And that's scary stuff." They argue that the solution is to invest in "stocks that do business in other currencies ... and specifically in currencies that you suspect will rise against the dollar over time."

It is possible that the dollar is doomed, but their explanation and advice confuse two different issues—price levels and exchange rates. Inflation due to too much money creation is a problem if you have assets whose value is fixed in dollars, such as T-bills. But it isn't a problem for assets whose value is merely measured in dollars, such as U.S. stocks. If all prices double, the price of Apple computers doubles too, as does the value of Apple stock. Some companies will do better in an inflation than others, in part because some companies have assets or liabilities whose dollar value is fixed. But that has nothing to do with whether the company's stock is dollar denominated.

Nor does it have anything to do with whether the company does business in other currencies. If the value of the dollar drops and the value of the Euro doesn't, then the dollar value of a company that does business in Euros will go up. But so will the dollar value of a company that does business in dollars. The Euros the company is earning exchange for more dollars than they used to, but those dollars are worth less.

There is, however, a different sense in which the dollar might be doomed, with different implications for investors.

Suppose the U.S. price level stays the same but the exchange rate between dollars and other currencies falls. A dollar will still buy the same goods and services in the U.S. as before, but not as many Euros or Yen or Rupees.

Why might that happen? The market exchange rate between the Euro and the dollar is the price at which the number of dollars that people want to sell for Euros equals the number that other people want to buy. One reason to trade Euros for dollars is in order to buy goods in the U.S. and ship them back to Europe, and similarly in the other direction. If that is all that is happening the exchange rate ought to reflect the purchasing power of the currencies, with some complications due to the fact that not all goods and services play a role in international trade.

Another reason a European might want dollars, however, is in order to buy T-bills—more generally, in order to buy U.S. capital assets. If the U.S. is running a large budget deficit, as it is, and if much of that money is being borrowed from foreigners, as it is, then a lot of dollars are being bought in order to lend them to the U.S. government. That additional demand bids up the price of the dollar in exchange markets. The capital inflow appears in the statistics as a trade deficit, since some of the foreign goods the U.S. is importing are being exchanged for capital assets which remain in the U.S. rather than for export goods that don't.

Suppose foreigners decide that lending money to the U.S. government is no longer prudent. That part of the demand for dollars vanishes. The price of the dollar measured in Euros or Rupees falls. Some of the foreigners who have lent money to the U.S. decide it was a mistake, cash in their T-Bills for dollars, and trade those dollars for Euros or Rupees. That increases the supply of dollars on the foreign exchange market, driving the dollar down even farther. The Motley Fool isn't entirely clear about which sort of decline of the dollar he is talking about but one could, with a little effort, take his references to the trade deficit and the budget deficit as suggesting some mechanism along these lines.

What are the implications if the dollar maintains its value domestically but falls in its exchange rate? Americans who hold assets with fixed dollar values are unaffected, except to the extent that they want foreign currency, perhaps for a Paris vacation. Americans who hold stock in foreign companies, or in U.S. companies whose income is largely in foreign currencies, benefit, since their stock is now worth more dollars. The losers this time are foreigners who made the mistake of holding U.S. assets.

It is, perhaps, unreasonable to expect investment advisers to not only understand economics but to explain it correctly to their customers. On the other hand, since which part of their advice one ought to follow depends on what sort of doom the dollar is facing, it would be nice if they at least tried.

Concerning Intuitions of Immortality

2009-08-27T12:25:00.000-07:00

On the face of it, dead is dead. Yet many people, perhaps a majority both now and in the past, don't believe it. Why?

The obvious explanation for the belief in life after death is wishful thinking. I don't want to believe I am going to die. I don't want to believe that those dear to me are going to die. I don't want to believe that those dear to me who have died are really dead. With enough effort, and help from those around me, I can convince myself not to.

While this may be part of the explanation, I don’t think it is the whole story.

My main reason is introspection, most recently of my feelings about my mother, who died just over a week ago. She was in her late nineties. Her one serious complaint about her life was that, after more than sixty years of a happy marriage, she had not died when my father did. I miss her, and for my sake I would rather she were still alive. But not for her sake.

It is easy for me to believe that she died. It is not so easy to believe that she is dead, that a person I have known all my life no longer exists anywhere in the world, that if I knock at the back door of the apartment where she spent her last few years she will not be there to let me in. Ever. I feel much the same way about other people I have known who are no longer alive. A dream where my father's death did not happen, was somehow a mistake, feels in some sense more believable than the real world where it did happen.

The explanation of my feelings, I think, lies in an important feature of the human mind. In order to function in the world, we need a model, a picture of what surrounds us. Deducing such a picture on the basis of sensory data alone is surprisingly hard, as A.I. researchers discovered when they tried to create machines that could do it. The data coming in from my retina is a pattern of colored dots; no part of it is labelled "cup sitting on my desk," "bunch of keys," or "mouse." To get from that to a model of the world around me requires a lot of image processing and a lot of additional information.

Some of that information comes from past sensory data. But much of it, I believe, is hard wired, the product of many millions of years of evolution. The image processing software built into my brain knows quite a lot about the characteristics of the world I am looking at. That knowledge lets it eliminate most of the conceivable explanations of what appears in my visual field, leaving, usually, the explanation that describes what I am seeing more or less correctly.

One of the things it knows is continuity, persistence. If an object is sitting on my desk, the odds are overwhelmingly high that, a second later, the same object, or at least a very similar object, will be in the same place or very close. I don't need to reanalyze the visual data on every scan. That is why soap bubbles seem magical, counterintuitive. They break the rules.

Other human beings are among the most important features of the our world. Also among the most distinctive. It is easy to confuse one cup for another, one house for another, one tree for another. It is hard to imagine knowing someone well, encountering him, talking with him, and not recognizing him, or misidentifying one person you know well as another.

Applying the rule that works for almost everything else to this salient class of distinct objects, it is obvious that a human being I have once known cannot vanish, hence that, while personality may change over time and inessential features such as clothing or body may change or even disappear, the person himself must still exist. Somewhere.

It is not an argument, still less a proof. My best guess is that dead really is dead, that the person is software running on the hardware of the brain and when the hardware stops functioning the person ceases to exists. It is, however, an explanation of why I find it hard to entirely believe in death.

And, perhaps, of why so many other people feel the same way.

An Extraordinary Story

2009-07-06T15:01:00.001-07:00

On one of the Usenet groups I sometimes read, someone posted an account of her life as child and parent that I found both impressive and moving. Here it is.

Does Climate Catastrophe Pass the Giggle Test?

2009-07-05T08:59:00.001-07:00

The argument for doing drastic things to prevent global warming has two parts. The first has to do with climate change, with reasons to think that the earth is getting warmer and that the reason is human action, in particular the production of CO2. The second has to do with consequences of climate change for humans.

Most of the criticism I have seen, in comments to this blog and elsewhere, has to do with the first half, with critics arguing that the evidence for global warming, or at least the evidence it is caused by humans and will continue if humans do not mend their ways, is weak. I don not know enough to be sure that those criticisms are wrong; pretty clearly climate is a very complicated and not terribly well understood subject. But my best guess, from watching the debate, is that the first half of the argument is correct, that global climate is warming and that human action is at least an important part of the cause.

What I find unconvincing is the second half of the argument. More precisely, I find unconvincing the claim that climate change on the scale suggested by the results of the IPCC models would have catastrophic consequences for humans. Obviously one can imagine climate change large enough and fast enough to be a very serious problem—a rapid end of the current interglacial, for example. And if, as I believe is the case, climate is not very well understood, one cannot absolutely rule out such changes.

But most of the argument is put in terms not of what might conceivably happen but of what we have good reason to expect to happen, and I think the outer bound of that is provided by the IPCC models. They suggest a temperature increase of about two degrees centigrade over the next hundred years, resulting in a sea level rise of about a foot and a half. What I find implausible is the claim that changes on that scale at that speed would be catastrophic—sufficiently so to justify very expensive measures now to prevent them.

Human beings, after all, currently live, work, grow food in a much wider range of climates than that. Glancing over a U.S. climate map, it looks as though all of the places I have lived are within an hour or two drive of other places with an average temperature at least two degrees centigrade higher. If people can currently live, work, grow crops over a temperature range of much more than two degrees, it is hard to imagine any reason why most of them couldn't continue to do so, about as easily, if average temperature shifted up by that amount—especially if they had a century to adjust to the change. That observation raises the question with which I titled this post: Does climate change catastrophe pass the giggle test? Is the claim that climate change of that scale would have catastrophic consequences one that any reasonable person could take seriously?

I can only see two ways of defending such a claim. The first is some argument to show that present arrangements are, due to divine intervention or some alternative mechanism, optimal, so that any deviation, even a small one, can be expected to make things worse. The second, and less wildly implausible, is the observation that people have adapted their activities—the sort of houses they live in, the varieties of crops they grow—to current conditions. Put in economic terms, we have sunk costs in our present way of doing things. Even if the planet has not been optimized for us, we have optimized our activities for the planet, with the details depending in part on the local climate. Hence any change in either direction can be expected to be a worsening, making our present way of doing things less well adapted to the new conditions.

That would be a persuasive argument if we were talking about a substantial change occurring over five or ten years. But we aren't. We are talking about a not very large change occurring over a century. In the course of a century, most existing houses will be replaced. If temperatures are rising, they will be replaced with houses designed for a (slightly) warmer climate. If sea levels are rising, they will be replaced, in low lying coastal areas, with houses a little farther inland. Over a century, farmers will change at least the varieties they are growing, very possibly the kind of crop, multiple times, in response to the development of new crop varieties, shifting demand, and similar changes. If temperatures are rising, they will gradually shift to crops adapted to a (slightly) warmer climate.

Climate aside, we do not live in a static world—consider the changes that have occurred over the past century. The shifts we can expect to occur due to technological progress alone, even without allowing for political and demograpic shifts, are much larger than the shifts required to deal with climate change on the scale I am discussing.

My conclusion is that this version of climate catastrophe, at least, does not pass the giggle test. There may be other versions, based on more pessimistic predictions of climate change, that do. But the claim that we now have good reason to expect climate change on a scale that will produce not merely problems for some but catastrophe for many is one that no reasonable person should take seriously.