How Good Are You At Assessing Evidence?

How good are people at receiving some information and assessing the probabilistic evidence instinctively?  I think people overestimate their ability, as this simple test probably will show.  

In front of you are two fields full of sheep.  Field A has 70 black sheep and 30 white sheep, and Field B has 70 white sheep and 30 black sheep, but you don't know which field is which. You're blindfolded and asked to go into one of the fields and lead 12 sheep out of the gate. You lead out 8 white sheep and 4 black sheep.  From which field is it likely that your selection came, A or B?  I'm guessing you said Field B. You're wise to say Field B, but here's the real question - what percentage of confidence would you say is justifiable in claiming Field B to be a wise estimate?

A) 10%

B) 25%

C) 40%

D) 65%

Remember what you chose.  Now here's another question.  Which of these cities has the distinction of being the world's most populated city?

A) London

B) New York

C) Paris

D) Madrid

Which did you choose?  If you have a good sense of the world populations you would have likely thought 'None of the above' (and your instinct would be right - the actual answer is Shanghai). 

Now returning to the first question - what is the actual answer for the justifiable percentage of confidence in claiming Field B to be a wise choice? - you should have said 'None of the above', because the answer is 98%.  Almost nobody would look at my sheep test and think instinctively that the probability would be that high.  

Here’s something else to consider.  I didn't invent this one - it's a selection task devised by psychologist Peter Wason, to show that people don't naturally think well when logical symbols are required. According to statistics over 90% of you will get this wrong.

You are shown a set of four cards placed on a table, which must conform to the rule "If  P then Q". That means that whenever there is a card with P on one side, the reverse side of the card must show Q. The visible faces of the cards show as follows:

CARD 1 - P

CARD 2 - not-P

CARD 3 - Q

CARD 4 - not-Q

Wason asks which card(s) must you definitely turn over in order to test the truth of the proposition that "If P then Q" holds? Have a think about it for a few seconds. 

If you're one of the 90+% you've probably reasoned that you need card 1 and card 3. You want to make sure that P has a Q on the other side, and equally you want to make sure that Q has a P on the other side.  But that's not right - the cards you need to choose are cards 1 and 4, because the rule is "If P then Q".  So indeed you need to check card 1 (P) to ensure there's a Q on the back, but you also need to check card 4 (not-Q) to ensure there is 'no' P on the back. If there is a P on the other side of card 4, then the rule "If P then Q" has been disobeyed.  Cards 2 and 3 don't need to be touched.

Now what's strange, Wason found, is that although people struggle in this task when using logical symbols, they don't when those symbols are changed to more familiar real life situations, despite the logical connection between facts being exactly the same. For example, if instead of "If P then Q" the rule used is "If you come into my pub and drink alcohol you must be 18 or over" people get that one right. The visible faces of the cards show as follows:

CARD 1 - Age 15

CARD 2 - Drinking coke

CARD 3 - Age 18

CARD 4 - Drinking vodka

When presented with the task in the social context of under age drinking, virtually nobody has any trouble choosing cards 1 and 4, even though the logical connection is exactly the same.

I think a lot of this apparent irrationality is down to the mental shortcuts people take.  At least, one would assume so, given that once things have been explained nobody doubts them any more. It's like Daniel Kahneman's now world famous bat and ball problem:

"A bat and ball cost a dollar and ten cents. The bat costs a dollar more than the ball. How much does the ball cost?"

Almost immediately many people go straight for '10 cents' instead of 'five cents'.

It might also be a case of low hanging fruit. I mean, here's one that's alarmingly obvious that surprisingly some people get wrong. Which of the following is the largest set:

A} The set that contains all words in which the third from last letter is 'i'.
B} The set that contains all words in which the last three letters are 'ing'.

It is obvious that A is the larger set, because set A contains all of set B, but yet not everyone sees it. I think it's because they can easily bring to mind words that end in 'ing' so they somehow fail to assess this correctly.

Here is a further puzzle that's really uncomplicated, but yet it leaves many people giving the wrong answer:

X is looking at Y, but Y is looking at Z. X is married but Z is unmarried. Is a married person looking at an unmarried person?

A} Yes
B} No
C} Cannot be determined

Many people answer C, but that’s not right – the answer is A.  Here’s why.  If Y is married then Y is the married person looking at the unmarried Z. If Y is unmarried then X is the married person looking at the unmarried Y. Either way, you know a married person is looking at an unmarried person.

Try some of these on your friends or work colleagues; you’ll be amazed how often they get their answers wrong.  You’ll also see them admit how obvious the answers were all along, once you’d told them.  I suppose that is the nature of riddles in life; in prospect they often seem tricky, but in retrospect they were obvious all along.  Not only are these puzzles fun – they inform us that we humans are perhaps not as rational and not as instinctively good at assessing probabilistic evidence as we might think.

Natural Selection or The Invisible Hand

Now we've had the funeral of Lady Thatcher, it seems appropriate to say that there has been two extreme reactions to Thatcher's death (and legacy).  Some largely unimaginative people (usually from the north of England) assert that her actions ruined their potential for industrial earnings; and some equally largely unimaginative people (usually from the south of England) have asserted that these economic changes in the eighties were necessary because industry and market economics undergoes a kind of Darwinian natural selection where businesses are driven by a kind of 'survival of the fittest' pattern.  I think both sets of individuals are looking at the situation in an unhelpful way that skews too heavily towards their own emotional, occupational, cultural and, in some cases, national biases. 

In market economics, Smith's 'invisible hand' states that competition brings about self-interest for the good of everyone, where prices near-perfectly match supply and demand.  Biological evolution has no mechanism comparable to this.  In natural selection, biological forms acquire traits that better enable them to adapt to specific environmental situations, which results in their improved evolvability due to the perpetuation of those beneficial traits in the generations that succeed them.

The Darwinian model doesn't ideally apply to the invisible hand mechanism. What extremists have done is compared it to "arms races," where on occasions the encouragement of actions can cause harm to the group but also compromise the advantages for individuals.  This can happen when gains are relative and mutually offsetting - but this is rare in the Smithian model (in fact, if anything, the Smithian model suffers only by being too parsimonious for potential niches in the market).  What’s usually the case, as is with Thatcher’s critics, is that they have missed most of the costs, and mistaken the benefits for costs, by having too narrow a vision in supporting the parts of the economy that are not healthy (which coincidentally, always seem to be the particular industries in which they find themselves).  It's no use being emotionally affiliated to an industrial factory that's costing us money just because it happens to be one’s own, or because it happens to be based in one's own country.  That's as ill-conceived as preferring a car-crash on British roads to safe driving in China or India - the quality of the thing under consideration is important, not where it comes from. 

I explained in my last Blog why enhancing the global connectivity is good for all economies.  The argument that supports this is the same argument that supports why market economics on a global scale is more efficient than the Darwinian natural selection model for economics, and why Thatcher's critics have got it wrong - it is the efficiency of the relationship between prices, supply and demand.  It is foolish and impractical to favour bailing out and propping up industries in Britain, when Britain (and the rest of the world) can benefit more greatly (and has benefited more greatly) from the efficiency of the relationship between prices, supply and demand on a global scale.  As I explained in my last Blog, making good use of the efficiency of the relationship between prices, supply and demand on a global scale is the same as making good use of the efficiency of finding improved technology.  Whenever a Government departs from this mandate by trying to artificially improve industries on the basis that they happen to be 'our national industries' (as the Labour Government of the 1970's tried to do) it only succeeds in diminishing the extent to which opportunities to improve everyone's welfare exists.

What those protesting about loss of British industry don't seem to understand is that competitive markets is what brings about the allocation of resources with maximum efficiency.  There is no place for national identity in economics, because to insist so is to say that the different way to allocate resources is contingent on one's national identity, which is manifestly false.  Adam Smith showed in his seminal Wealth Of Nations that the different ways to allocate resources is only maximised to the best effect when competitive markets function freely (this has also been proven mathematically by Debreu and McKenzie). 

The key here is that there is 'supply'; there is 'demand' for that supply, and there are 'prices' that invoke near-maximum efficiency between the supplies and the demand.  There is not such a near-maximally efficient mechanism in natural selection.  In analogical terms, there is supply and demand in natural selection, and there are prices in natural selection - but there is no 'invisible hand' that maximises biological efficiency in the same way that it maximises global economic efficiency through prices that near-perfectly balance the weight of supply and demand, and the capacity to adapt to the continually changing environment. 

There may be plenty of reasons to criticise Mrs Thatcher – but claiming she ruined our industry is not one of them – because, in fact, the opposite is true; she helped enhance our economy in ways that seemed unlikely in 1979.  To criticise her for that is as foolish as criticising all the people driving safely in China and India because you happen to prefer car crashes in Britain.

On The Evolution Of The Eye

At a discussion group round a friend's house the other night a Christian friend of mine made a comment about the evolution of the eye, doubting whether such a complex and 'well-designed' organism could have arisen through natural selection.

It's true the eye is well designed (although it's far from perfect), and it's also true that eyesight is hugely beneficial to many creatures. But it's not true that that means evolution probably didn't produce it - in fact, it is because eyesight is so beneficial to so many creatures that evolution did bring about the design of eyes over time. Not only did eyesight evolve very slowly over millions of years in stages, the story of eyesight evolution started with something very primitive.

Studies of biology and taxonomy reveal a rich array of organisms alive today that demonstrate the intermediate stages of eyes. We can even sequence their DNA and see which genes give rise to those stages. For example, the first step is something like an amoeba which has a photosensitive area inside it that can detect light. Then evolution brings about a surface patch that improves further the detection of light. Then generations later we find that the surface patch is indented in a cup shape which allows the patch to crudely detect the direction from which the light is coming. So we’ve gone from detection to direction – that’s already an improvement for the organism. 

One can fairly easily imagine some kind of crude skin-form with the kind of accretive layering that could facilitate the emergence of a light-sensitive spot. All that would be needed would be a combination of pigmented cells with light-sensitivity ratcheted onto it, and the formation of translucent cells that could encase the pigmented cells and give the structure a degree of protection. It may well take a few hundred thousand generations for even a crude eye to evolve - but as long as we can conceive of the principle for functional improvement, we can imagine the steps required*. 

Translucent cells subject to mutations would have an index of refraction, because refraction is based on indices where the n of a substance (that is, the optical medium) defines how radiation (in this case, light), propagates through that medium. Once the cells underwent variations in size and density and became more cup-like we would find improved ability to facilitate dispersion, which means varying wavelengths and (in the higher forms) emergence of colour.  Mutations that improve the organism would survive due to evolution's ratchet mechanism, and further improvements would emerge. 

We know quite unequivocally how two light sensitive patches would have evolved, and how tiny improvements in the ability to detect light and then actually discern the movement of a predator or locate food would confer very strong advantages to the organism. 

Later on what’s then facilitated is a strong genetic tendency in the more developed organism for bilateral symmetry (a body divided into a left half and right half). Dividing the organism down the middle from front to back you will find that the two halves are a mirror image of each other on the outside (that’s two sets of legs, two feelers, two sets of fins or something of that kind) – and quite naturally, a pair of photoreceptors or cupped receptors – with this eventually leading to functioning eyes. 

But there is a bigger picture too that mustn't be missed. The eye is but one microcosmic example of the sublime beauty of God's creation through evolution. It truly is a remarkable narrative that every living thing, with such a rich multitude of shapes, sizes and colours - plants, trees, flowers, fruit, vegetables, insects, fish, dinosaurs, lizards, elephants, giraffes, hamsters, whales, sharks, chimpanzees, dogs, cats, lions, tigers and humans - all came about from a common ancestor, and then billions of years of time and adaption. Evolution really is a quite magnificent story of beauty.

* Not only has the eye evolved independently about 40 times - we now have the precise computational facilities to map out a trajectory for the evolution of the eye. This has been done numerous times - most notably by Dan Nilsson and Susanne Pelger, but on other occasions too.

How To Split A Restaurant Bill

Who pays the restaurant bill?

If you have a meal with nine other people, then your consumption habits probably will depend on how the bill is paid.  If each person pays their share of the bill based on what they consume, then the chances are individuals won’t over consume.  A fairly reliable rule of thumb in economics is that when an individual is able to impose some of the consumption costs on others, he will over-consume relative to a level that is maximally efficient across society.  That’s another way of saying that people respond to incentives, and if there are no incentives against overconsumption, people will over consume.  If each person pays for their own meal, then there is an obvious economic incentive to not over consume.  At the other extreme, if a billionaire Arab tells you he’s going to pay for the entire cost of all your meals then that amounts to ten people’s potential willingness to over consume. 

But what about when the bill is split evenly between the ten people – will the average consumption per person be greater or less than when each person pays for their own meal?  I’m pretty certain that if this were researched you’d find increased consumption when the bill is split evenly.  Here’s why.  Suppose you’ve all finished your main meal, and as a group of ten you are now pondering whether to have a dessert, where all desserts are £4 each.  If you have a dessert, and you’re the only one, then that dessert has only cost you 40p, because the £4 is going to be added to the bill, and thus, divided evenly between ten of you.  If everyone else is going to pay 40p for your dessert then there is equally good incentive for them to have a dessert as well.  Naturally the more people that choose the dessert the higher the average cost.  If everyone joins you in having a dessert then each pays full price for their own dessert, because the sum of dessert expenditures rises to £40 (£4 x 10 people). 

Suppose that you valued the dessert at £2 worth of enjoyment – if you were only paying your own costs you would not have a £4 dessert, because its cost is double your benefit.  If you valued the dessert at £6 worth of enjoyment, you would have a £4 dessert, because its cost is only two thirds of your benefit.  When you’re the only one having a dessert (for 40p) your enjoyment exceeds the cost; when six of you have a dessert, your enjoyment no longer exceeds the cost (because you’re now each paying £2.40 for the share of desserts consumed).  

But now assume something different; you didn’t really want a dessert, but you thought that anything from 40p to £2.40 for a dessert would be too good a deal to resist, so you decided to have one.  Generally, artificially low prices encourage people to spend needlessly and consume wastefully – so artificially low dessert prices will encourage diners to consume wastefully.  This analysis is called a ‘marginal cost’ analysis, and it follows another reliable rule of thumb, which is that if a price is set below a marginal cost, people will over consume (or, in the case of services, over use); and if a price is set above a marginal cost people will under-consume (or, in the case of services, under-use).

Suppose now that instead of all the above restaurant situations, the billionaire Arab walks in to the premises and offers every diner a choice.  He gives each diner £25, which they can spend in the restaurant, but any leftover money they get to keep. This means that if Jill prefers to eat and drink moderately, and take home some of the leftover cash, she can; and if Rachel prefers to eat and drink excessively, and spend the full £25 in the restaurant, she also can.  

This is the kind of mandate that I imagine future governments will think is needed for reforming the public sector  

Finally, I’ll leave you with a tip for forecasting what the future will be like; it is based on what I like to call the ‘prescient wisdom of future ages’.

Prescient Wisdom of Future Ages

Whenever you think about reform or improvement to a system, here's a good way to approach it.  Try to consider how people in the future would do things, and try to emulate that now.  That is to say, in most cases people in the future will have developed the wisdom to rectify the mistakes and inefficiencies of those that preceded them.  That is a very succinct summary of our history of progression.  If you lived in pre-democratic times and you were the first to propound the idea that people might like to choose those who represent them, you'd have made a good contribution to humanity.  If you lived in a time when slavery was the norm, or when no one had considered things like foreign aid, or welfare, or the plight of racial discrimination, or equal opportunities for women, and you propounded wisdom to correct these aberrations, you'd have done your bit to help lift humanity onto its next level of progression.

Geography Is The Present Day Racism

A lot of people in the UK think that white people should be given UK jobs ahead of black people.  They complain when black people get jobs ahead of white people - and they get taken in by the false propaganda that exclaims black people coming into the country to work is bad for the economy (it isn't).  All that I just said is true, apart from two small details; I said 'white' instead of 'British' and 'black' instead of 'non-British'. I said it because, even today, many people who believe it is wrong to discriminate on the basis of race (a man made concept*) are surprisingly quite happy to discriminate on the basis of geography (another man-made concept). When we look back at some of the shameful acts and beliefs in history (such as stoning, witch-hunts, slavery), we are usually appalled that our ancestors behaved so reprehensibly, and with such ignorance.  Similarly, most of us are appalled at the relative recency of our homophobia and racism.  The underlying point is, I don't see why we should be less appalled at discriminating against someone based on their geography than discriminating against someone based on their race – both strike me as equally absurd, unkind and unjustified.   Furthermore, I feel fairly certain that future generations will have culturally evolved to find discrimination based on geography as reprehensible and ignorant as we of today find discrimination based on race. 

Despite the above, it is incredible how frequently people complain about 'migrants stealing our jobs', and how often they insist that 'British money should be spent in Britain'.  I don't see why a young, unskilled man from Newcastle or Liverpool or London with not much willingness to work should take precedence in the employment market over a young man from Poland or Nigeria who has the right skills, and is willing to work.  And I don't see why a family in Cambodia with not enough food and drinking water should be any less of a concern for us than a family in Newcastle or Liverpool or London living in impoverished conditions - in fact, it seems obvious to me that those in Cambodia (and other countries much poorer than ours) should be more of a concern, because they are the people in the world that need the most help. 

You may be the sort of person who thinks that £7 million of British taxpayers' money spent on a dual carriageway in Norfolk should take precedence over £7 million spent on digging wells to provide drinking water for dying people in Cambodia.  Your logic might be that British people are paying their taxes, so it should thus stand to reason that that money should be spent on British needs.  I don't think that's a good way to think, because if you recall Harsanyi's model, which tests these moral issues most honestly and prudently – his model would show that it's better to stop people dying than it is to improve their journey times on roads. 

But even if I grant you that British taxpayers’ money should be spent on British things, that still doesn’t advance the argument that’s it is ok to discriminate in favour of British people in the employment market, because the taxpayers are not paying wages, employers are (at least they are in the majority of cases we are talking about), and employers are free to employ whoever they want.  A correlative point – and one which many do not get – is that if an employer has found 100 non-British workers who are willing to work for £3 per hour less than his 100 British workers, the nation is better off (as is the global economy), because before the non-British workers began to do the jobs, there were 100 potential workers each being overpaid by £3 per hour.  In a 40 hour week that amounts to a net overpayment of £12,000. 

Ok, I’d guess some people aren’t convinced that paying people £3 per hour less is a good thing.  That’s because they’re not thinking with a proper economic model – they’re probably thinking in emotive terms like ‘minimum wage’ and ‘cheap labour’, and they probably have it drummed into them that high wages means a good economy.  This is wrong on two counts; firstly, it is erroneous to think of a £3 per hour drop as being a net loss – it is no such thing.  It’s a loss if you only think of the cost and ignore the benefit, which amounts to saying, don’t just focus on the employee who is losing £3 per hour, focus too on the employer who just gained £3 per hour.  There is no net loss to the economy, because the employee’s loss is balanced out by the employer’s gain.  And in fact, those higher wage demands that are insisted upon to ‘protect British workers’, actually end up putting the prices of goods and services up even more for everyone else, which amounts to an overall net loss.

But there’s another reason; finding someone who will do the job for less is a good thing for the economy in a similar way to how improving technology is good for the economy (and in most cases it’s a good thing for the person doing the work too – because having accepted the lower wage job, one presumes he did so because the terms offered were an improvement on his situation prior to accepting it).  In fact, not only is finding someone who will do the job for less a good thing for the economy in a similar way to how improving technology is a good thing for the economy - they are more or less the same thing.  Here’s why. 

Suppose you have a car factory in Manchester, and on the staff team you have 3 innovative engineers; Tom, who designs a machine that assembles the engine valves 25% quicker than the current machine; Dick, who synthesises two compounds that vastly improves the engine oil’s ability to clean the engine; and Harry, whose newly constructed equipment can make seatbelt holders at £2.60 per item cheaper than the current equipment.  I think you’ll agree that those three advances have improved the car factory in Manchester.  And having agreed, it stands to reason that if you want to be consistent you are compelled to agree that finding cheaper ways to employ people is also good for the economy, because it’s the same thing.

When we outsource the work attached to call centres, medical data analysis, computer software design, electrical engineering, and so forth, we are doing something very similar to Tom, Dick and Harry’s improvements in the car factory in Manchester.  That’s the wisdom that it seems too many people miss; new business and trading links across the world are good for the world as a whole, just as new technological innovations are good for the world as a whole.  Hopefully in our lifetime we will get to live in a world in which we see the end of discrimination against total strangers because they happen to live in another humanly constructed geographical border.  Economics favours it, and so does human kindness and decency.

* Generally speaking, there is more genetic diversity between a man in Nigeria and a man in Kenya than there is between a man in Nigeria and a man in Belgium, Holland or Spain.  This alone shows the absurdity and man-made wickedness of racism.

If You Only Remember One Thing About Government Policies....

Government policies are always making headlines – and the current ones doing the rounds are the recent Conservative Budget, and attached to that, The NHS reforms and the radical shake up of the Welfare system.  Government policies are sold to the public as courses of action that endeavour to improve a certain situation for the country.  But anyone who knows what goes on behind the political scenes knows that Ministers cover up their inability to measure policies properly by cherry-picking a few sound-bytes that show the benefits of a policy, and then by presenting them to the electorate (through the media) as though they are unequivocal vehicles for good. 

Not only do many Ministers have a poor understanding of what makes a good or bad policy, they actually leave those policy presentations in the hands of eloquent civil servants, who can carefully write the policy for the Minister in words that overstate the benefits, and omit the costs.  In fact, if you’re really proficient at creating spin you can even make some of the costs sound like benefits.  That is how the Government machine of duplicity works.

I don’t say that all policies are bad – but that’s not the point.  A Government’s principal concern is to stay electable – and to stay electable they have to create a lot of distortions to hide A) their incompetence, and B) the fact that most problems in the country can’t be rectified by Government policy.

To be fair to any Government, neither A nor B is their fault.  They can’t help it if most problems in the country are beyond the Government policy power – and, in fact, one might add that too many of the electorate must share some blame for this, as they continually fall for the delusion that Government policy power makes any real difference, which as a consequence elicits in Ministers the need to appease this demand by claiming they can change things.  To put it into context; the extent to which I blame the electorate for the Government’s duplicity is similar to the extent to which I blame the voracious appetite of the tabloid readers for the kind of crap the tabloids produce.  It is a relationship of toxic co-dependency.

As for the Minsters’ incompetence, well, again, to be fair to them, it takes a lot of brains to work out good polices from bad, and tap into the zeitgeist and assess the best way forward in multiple areas – and I don’t see why anyone would expect a Minister to have the skills to do this.  Ministers aren’t in Government long, and often they come straight into their Ministerial department for only a brief amount of time, with no training, little life experience, and no expertise in the Ministerial area for which they are responsible.

Now, here’s the one thing about policy making you’d be advised to remember.  You cannot demonstrate that a course of action will improve a certain situation for the country by listing its benefits (which is basically what a Government’s policy announcement is).  Any MP can think up a policy that has benefits; but if you want to claim that that policy will improve a certain situation for the country, you have to argue that its benefits outweigh its costs (I’ve never seen an MP even acknowledge that this is the essential part, let alone make a case along those lines). 

Not only should you insist that an MP explains that he has thought through how the policy’s benefits outweigh its costs, you should insist he shows you that he actually knows what it means for a course of action to be a benefit in the first place.  Every policy ever created has multiple benefits in some areas and multiple costs in other areas.  If a policy is to be worth implementing, then not only must the benefits outweigh the costs - those benefits must be shown to reach the standard where the benefits are worth having over the costs.  By now your MP is probably looking at you with an expression of utter confusion – as you’ve probably already lost him. 

Is a policy with 10 benefits in areas A,B, and C, and 6 costs in D,E,F and G more preferable that a policy with 4 benefits in areas A,B,C,D,E and F, and 12 costs in G and H.  How do you know, when you don’t know the full impact of any individual A-H ramifications?  Is a policy that delivers £2 billion to the poorer families at the expense of £5 billion tax increases for high and middle earners good for the country as a whole?  If so, why?  And if not, how much would the £2 billion need to increase, or perhaps the £5 billion need to fall, to make it a policy where the benefits outweigh its costs? 

A farmer who wants to know if a chicken is good for providing eggs can only find out by calibrating that chicken’s output relative to other chickens.  He can’t find out by comparing it to how much milk his cow provides.  That kind of understanding is what makes a skilled policy maker, and why I’d rather have much larger constituencies, many fewer MPs, and a much higher calibre of intellectualism in my candidates.  An MP who sells the nation a policy by only listing its benefits is merely playing the spin game – and sadly, we see far too much of this.

Probability, And The Search For Love

How’s your life, generally? The reason I ask is that I get the feeling humans have a habit of overestimating the value and quality of important things in life. I think this is especially true when lots of options are on the table, and people only choose infrequently. If you only buy one book per year, then you've chosen that particular book over all the other available options, so I would guess that you've overestimated the quality of that book, and that you'll probably enjoy it less than you thought. If you buy and read three books per week, you'll find lots of disappointing books but lots of pleasant surprises too - so the chances of overestimating the quality of one book diminishes. 

If you only had one holiday abroad last year, the chances are you overestimated the quality of that holiday. You had thousands of possible locations, and you chose that particular one, which, again, means it is likely the destination you opted for after weighing up all the possible destinations is the one you most overestimated.  Conversely, if you went on a one week holiday every fortnight, you'd find your general overestimations would lessen.  

Continuing that logic, and in reference to the last Blog on Iraq, I assume that those who were most keen to mobilise our troops in Iraq were those who most overestimated the success we'd have. We don't invade many countries, so when it comes to the ones we do invade it's likely that we've done so because we've underestimated the number or lives that would be lost, inflated our chances of success, and overestimated the net value our invasion would bring.

How does this kind of analysis reward us in considering the search for a beloved? Well, assuming that the beloved you’ve chosen came about after proper consideration of many alternatives, it is likely to be the case that you chose him or her because you thought they would bring to your life the qualities and values you were hoping to have. So, the chances are that for many people their relationships are not living up to their expectations. Following the same logic as above, if you chose one person to be your beloved amongst many alternatives, the chances are your beloved is the one in whom you’ve put the highest hopes, which probably means he or she is the person in your life that you’ve most overestimated.

Of course, that doesn’t always apply – some people get together with low hopes and end up being pleasantly surprised, while some settle for less than their optimum choice because of low confidence or impatience, and others decide that the payoff of a relationship is worth cutting short the lengthier search for their ideal partner.

But generally, I fancy that big expectations tend to dwarf how those expectations play out in reality – and logic would follow that this is true of relationships. It’s important to understand what is being said here – this doesn’t mean they are bad, or that they are not worth having, or that they are not often wonderful, or even that you’re consciously aware of how those expectations are dwarfed - after all, we humans are good at suppressing the overall disappointments and making the best out of our life situations. What’s being said is merely that most people overestimate more than they realise.

So, in the knowledge of the tendency to overestimate, how best should single people search for a beloved? First, we must recognise that finding love is a matter of probability. When you were single, or if you are single, and hoping to settle down, you have, in theory, the option of every single person of the opposite sex out there. You want to know at which point in the dating game you should settle down, how you know who the best one with whom to settle down is, and how many people you will need to date to increase your chances of finding a really good beloved.

Here’s another way of asking the question; say you’ve got plenty of money, and you’ve had a Mercedes for the past seven years and you found it to be reliable and good to drive. Should you buy a newer Mercedes or should you try other cars? That all depends on a variety of things; how many times you plan to have new cars, whether you want to stick to what you know is good and reliable or whether you want to try other cars. You may buy a BMW or a Lexus and find you regret not sticking with the Mercedes, but then again you may find that the BMW is better all round and that you wish you’d have tried it sooner.

The car analogy is a good illustration for intrinsic choice and preference, but it is only a one way illustration, because car buyers care a lot more about the car enjoyment than sellers do – sellers largely only care about whether you’ve paid for the car. Given that relationships are a two-way thing, a better analogy would be to consider a landlord and tenant.  A tenant wants to find the optimum place to rent, and the landlord wants to find the best person to whom he can rent his property.  I think this is a good analogy for the probabilistic nature of finding a beloved.

Suppose you are looking to rent a place to live in the centre of London as you begin a new job. Your criteria for the optimum place is as follows; the most decent property available, as close to the centre as possible, in the nicest area, and within your price range. In looking for that place, you know you have no chance of viewing all the available properties in London, so you are shown around a few, and at some point after assessing what is available you are going to have to decide. You know that in deciding the chances are you haven’t got the best property in that sample space.  Had you have kept looking for longer it is likely that a more preferable property would come up. That would be a potential benefit, but all risks have potential costs too – and you may end up regretting not taking the place that initially met much of your criteria.

So, at the end of the search, in finding a place you like that meets your needs, you want to sign all the paperwork to ensure that your living arrangements are legally bound in a contract. Now, of course, the landlord has a stake too – he owns the property, he’s advertised it, shown a few people around, and he wants to ensure he gets the best and most reliable tenant. He also knows that you probably are not the best tenant in the sample space, but he too has to weigh up costs and benefits. If he takes a liking to you, he may well decide to enter into a landlord/tenant contract with you, rather than see it sit empty for weeks, or risk renting it to greasy Gary who plays in a rock band, has lots of parties, and might wreck the place.

The parallels should be evident; the search for a beloved is like this – you are looking for a contract of romance with someone – a tacit contract in which you invest yourself into the life and future of a beloved, and he or she, you. Like the landlord and tenant, you both know that your prospective beloved is probably not the best person you could ever meet – there are others out there who will give you more chemistry, pleasure, mental stimulation, laughs, fulfilment, security and happiness. But you may never meet them – and in holding on in the hope of meeting that ‘ideal‘ person you might strike gold, or you might end up wishing you’d taken up the offer of Peter or Jenny with whom you went on those few dates. Moreover, those who look for the maximally good partner (sometimes called ‘the ideal husband/wife) may be setting themselves up for disappointment. A maximally good partner for you is likely to be a maximally good partner for many others too, so you might have to work hard to keep yourself happy and secure in such a relationship.

You may also suspect that the contemporary age seems like it presents different challenges to the past. The causes behind the vast number of modern day break-ups and levels of compatibility are diverse and complex – and too lengthy for this Blog post. But the fact that contemporary people in the UK treat it more probabilistically is, I think, a contributory factor. Here’s a simple picture; a man is in the probability game searching for a beloved. He thinks he has a world full of girls from which to choose – so he tends to opt for the best-looking, funniest, smartest, nicest girl he thinks he can get. His search space is all about probability and diminishing returns. If these are the main goals he has then there can rarely be much security (particularly in this country’s post-cultural revolution paradigm) because he may well find a new best-looking, funniest, smartest, nicest girl – one who trumps the last one (this applies to the girl in her search too). But the laws of probability suggest even when they are in a relationship that throughout anyone’s life they will continually meet people who score more highly on their proprietary rating system – so the probability of the relationship surviving diminishes – hence the perennial insecurities one sees all over the place.

I can tell you one thing for certain; even when you do commit yourself to one beloved, you are going to continually meet other people who are better looking, wittier, more intelligent, kinder, more generous hearted and more emotionally astute than your partner. But if one adopts the grass is greener approach then it is going to be a lot tougher, because you will continually be making comparisons and coming home discontent.  This is a prescription for uncertainty and discontentment – and I think one of the big battles humans face is in learning to treasure the intrinsic rewards in isolation from the allure of outside temptations. To constantly imagine better alternatives will do you no good, because every step of your life will show you better alternatives somewhere outside of your relationship. 

There is, though, you’ll recall, something about love that puts it on a step above searching for a place to rent. However long you live in the place of your choice, you will never get so emotionally attached to a property that other, better properties should not be embraced. That is to say, a better property doesn’t stop being better just because you happen to be in a contract situation whereby you’re renting one to which you are less suited or less likely to be happy. Love, on the other hand, when it is the real thing, is different, because you can, and are expected to, get so emotionally attached to a beloved that other, intrinsically more suitable partners, are not embraced romantically.

This is the power of love, and the ability it has to unite two people against a backdrop of other (many better) alternatives. What stops those alternatives seeming like genuine alternatives is that feeling love for a beloved is a more powerful presence in one’s life than any rational justifications towards alternatives. In love, we find that better isn’t a more attractive alternative – better is the love currently being enjoyed against the alternatives. That’s probably what Pascal had in mind when he said – “The heart has its reasons, of which reason knows nothing”. He was, after all, a mathematician, and consequently very proficient at understanding probability.



Iraq Ten Years On; Success or Failure?

It is ten years since the Iraq war began - and as you’d expect, we’ve heard lots this week from political and social commentators arguing for and against the success of the war.  Add to that the fact that we’re still stuck in a quagmire in Afghanistan, and facing lots more unrest in the Middle East, and in parts of Africa, and in North Korea too, and you’ll see the question of success or failure regarding our military mobilisation looms large.

The issue largely boils down to two questions; were the Government members’ intentions wise in the first place, and was what they did a success?  I’ve seen just about everyone asking those questions, but I’ve seen no one come up with what I think are the right answers.

In the case of Iraq, the answer to the question of success is, we just don’t know yet.  Lots of people argue for and against, but the reality is, it’s just far too early to tell.  The reason being; the variables are so diverse and complex that it’s going to take a notable pendulum shift for the outcome to be revealed, and we haven’t had that yet.  There have been big changes in Iraq – but those changes have made things better for many of its citizens and worse for many others.  That’s why when you hear from people who actually live in Iraq (people who have lived there throughout the entire passage of time), you’ll find they are divided in opinion, with a great many more feeling unsure. 

I personally think that with the benefit of longer term considerations and the luxury of lengthier retrospective analysis we will begin to see that the removal of the sadistic dictator Saddam Hussein was one of the catalysts for improvement for the Iraqi citizens– but only more time will give a real indication of this.  It might be the case that the people who most benefit from the invasion haven’t even been born yet –but that is how history must be viewed.  Viewing it any other way is usually (although not always) hasty and frivolous, because when it comes to the planting of fruit trees, at the national level most epoch-changing events take a long time for the fruit to be visible.

Now, regarding the question of whether the Government members’ intentions were wise in the first place – from what I can gather from the continuous rhetoric of Bush and Blair, and more recently, David Cameron, I’d say no, they were misjudged.  The reason for their misjudgement appears to me to rest on not understanding how to achieve their aims – which have always been civil liberty for the citizens under the priority of democracy.  What they should have focused on is economic freedom – that is a much more reliable tool for emancipation. 

Now liberty and democracy are nice things to have – but compared to economic freedom they fall short when it comes to helping people out of quagmires.  India is the world’s largest democracy, and there are plenty of civil liberties there, but it is stricken with some of the worst poverty in the world.  Honk Kong’s institutions are much less democratic than those of India, but it is one of the world’s wealthiest and most prosperous countries.  Singapore is politically repressive when compared to some of the freer democracies, but it is more economically prosperous than many of them.  So a nation’s civil liberty and democracy aren’t always good indicators.

When the likes of Bush, Blair and Cameron talk about ‘nation building’ they only seem to mean things like “Giving the citizens of Iraq and Afghanistan the ability to vote”.  I’d like to think differently of them, but whenever I see them talking of the success of Iraq, they usually measure it by the fact that its citizens are now voting in free elections.  This success won’t last long if that is the only true measure, because free elections in quagmires are only likely to disenchant once the novelty wears off.  However, free elections in countries with economic freedom are elections worth having. 

While it is true that political freedom and per capita income are closely linked, we’ve seen above that it is not true in all cases – and even in the high end cases, the economic freedom is much more of a prominent factor than political freedom. When you live in a country with free trade, healthy imports/exports, high employment, sensible and equitable Government spending, the repeal of artificial price controls, more moderate marginal tax rates, and monetary policy stability, you find you usually have a nation with a good legal system, cultural plurality, reasonably proficient welfare systems (these things are usually only reasonably proficient), lower tariffs, human rights, property rights, family rights, freer citizens, and a greater sense of care and regard for your global community. 

The fact is that very little the West has done in Iraq and Afghanistan has made this scenario conducive.  At best they have helped nudge in more democratic systems which may or may not last, but which hopefully will in the future lead to the things I mentioned.  Sadly, they’ve taken a slow route by getting their priorities wrong.  Their ‘nation-building’ ideology was misjudged; they should have worked out how to nudge in economy-building rather than nation-building (where nation-building = democracy building), because the only way to build a nation properly is to have its citizens economically free and prosperous.  In almost all cases, citizens with an economically free and prosperous country to uphold won’t need military intervention from the outside, because they will care enough about, and have enough invested in, that country to work very hard to see to it that individual rights, equal opportunities, jurisprudence, civil law and order, cultural and religious plurality, and democratic feeling will prevail. 

The Potentially Unsolvable Enigma of Life & Love

What is life?

I wrote a thought experiment a while back, which still gives me cause to ponder sometimes. Think of the notion of removing atoms one by one in the physical world, and imagine we have a method of physically doing so with ultimate computational precision and high speed capacity.

If I reduce bit by bit a plane or a car or a microwave to a random aggregation of atoms and then reassemble them exactly as they were, then I would have a fully working plane or a car or a microwave, because neither of these systems is biologically alive. But if I did the same to an insect, a bird or a human (at several trillion atoms at a time), there would come a point when its being 'alive' would cease.

If I reassembled those atoms exactly as they were I would never reconstitute life, because once a thing dies it cannot be brought back to life. At least that is our current understanding of biological systems. But do we believe this only because of our limitations in reassembling the atomic or sub-atomic structure back to full constitution?

In other words, if, when a young bird died by hitting a tree, I had the apparatus to reassemble its structure into the exact atomic form before it flew into the tree, would it be alive as it was before? I think the idea of life as being explicable in terms of matter, information and computation is interesting, because it leads to the question of whether it can be reconstituted with the ability to reassemble matter, or whether there is some law in nature that would preclude this.

What is love?

I also had a similar thought about love in a book on love I work on from time to time.  In the distant future when technology is much more advanced than now - suppose neuroscientists John and Jill work together for 20 years as friends, and in that time they completely map the neuroscientific definitions of love after studying hundreds of couples in love.  At the end of this, with regard to brain states that map feelings and emotions, they find 'love' is entirely reducible to physical neuroscientific descriptions. 

John and Jill have dedicated their lives to this work, and as a consequence, they have never been in love themselves.  Now if one day John and Jill experience a series of events which culminate in their falling in love with each other, they will have experienced something other than the aforementioned feelings and emotions reducible to physical neuroscientific descriptions. 

John and Jill have a complete scientific definition of love in the physical sense, but having now fallen in love with each other they have now experienced something new about love, which causes us to question whether love is more than the physical, as they already have a complete physical description.  Could that suggest that, if what they are experiencing is not amenable to the same physical neuroscientific activity as before, this means love isn't entirely reducible to the physical?  

I'm not sure, but I suspect it doesn't undermine the physical - I would think it simply means that love is still physical, but that the distinction between the conceptual first person perspective is a different (and much more intractable) object of study than the third person physical neuroscientific descriptions that define love from the perspective of the neurological observer, rather than the person experiencing the love.  In other words, when John maps love in his studies of other couples, he is mapping a complete third person physiological description, but not a first personal conceptual description, which is an entirely different lens of physical perspective.

When falling in love on that special day, John may experience some kind of inner 'circuit board of experience' sensation, where lights that had never lit up before, suddenly do so with new connectivity - which makes sense, given that friendship is the natural precursor to love (something he had for 20 years with Jill). 

But on top of that, there is further intractability, because love from the first person perspective isn't a singular fait accompli 'circuit board of experience' sensation - it is a journey of discovery with a beloved over time, in which each learns and grows with the other, and where each conflates that learning and growth with the newness of fresh experiences, changing social climates, and the evolving intellects, emotional wisdom and knowledge of each party.

This suggests that even John and Jill's initial completely mapped physical neuroscientific description of third person love is incomplete, as love is dynamically evolving, not statically reducible to any present tense conjunctions.  So I conclude that love probably is entirely physical, it's just that the 'entirely physical' nature of anything mental is a hugely intractable object of study, not just because there is empirical discontinuity between the first person concepts and the third person neuroscientific mapping, but also because the mind is on the whole probably too complex to reveal all its topographical secrets. 

A Brilliant Twist On The Blame Game

Every now and then you'll hear an idea that’s so brilliant, succinct and logical you'll wish you'd have thought of it yourself.  Brilliant ideas like the one I’m now going to tell you about are somewhat paradoxical, because their brilliance usually amounts to an observation that can greatly enrich and inform a large number of people, yet on the other hand one wonders why such an idea wasn’t more obvious before.  The idea I want to tell you about is one I learned in my teens when I was studying economics; it’s called the Coase theorem – and it was conceived by Nobel Prize winner Ronald Coase in 1960.  It is an observation about what economists call ‘externalities’, which are instances of costs imposed on others in an involuntary manner. 

Here’s a typical example – factories used to escape the costs of their own pollution until they began to feel those costs via liability rules, punitive taxes and fines.  The law works this way too – by incentives.  If you cause £100 worth of damage (or the societal equivalent thereof) then you pay £100 worth of restitution (sometimes more, sometimes less), either with a fine, or community service, or a prison sentence.  If a crime that causes society £25 worth of damage suddenly had a punishment worth £1 million (say a life sentence in prison) you’d see a drastic reduction in £25 crimes.  That is the nature of incentives. 

Externalities are based on incentives too, as was most famously written about by English economist Arthur Cecil Pigou with his standard textbook examples of nineteenth century trains that threw off sparks that frequently ignited the crops on neighbouring farms, and of rabbits that would frequently eat the neighbouring lettuce farmers’ goods.  Quite naturally, or so Pigou (and just about everyone else) thought, the railroad owners and farmers with rabbits had to feel the effects of their actions, so recompense was owed to the farmers with the ignited crops and the diminished lettuce supplies.  However, things change when the Coase theorem is brought to bear on the situation.  This is what Ronald Coase theorised:

"Where there are complete competitive markets with no transactions costs, an efficient set of inputs and outputs to and from production-optimal distribution will be selected, regardless of how property rights are divided."

In other words, the Coase theorem asserts that when rights are involved, parties naturally gravitate toward the most efficient and mutually beneficial outcome, with no prior blame or discrimination being automatically assumed.  This dramatically changes the situations above, because Coase was smart enough to enquire as to why the railroad owners and farmers with rabbits were the ones causing inconvenience – why not the farmers with the ignited crops and the diminished lettuce supplies?  When you think about it, it’s obvious; if your trains set fire to my crops then you have imposed a cost on me, but at the same time I have imposed a cost on you by having my crops near your railroad (which may be in the optimal location for transporting commuters from A to B).  Moreover, I may very well use the train myself.  Your rabbits are annoying me by eating my lettuce, but equally my lettuce is annoying you because it is causing your rabbits to eat them, which incurs the cost you are forced to pay me as compensation.  Your nearby power plant burns fossil fuels and pollutes the air I breathe, but you shouldn’t bear all the pollution costs because you supply electricity to many of the places whose products I buy. 

This logic by Coase is so brilliant and simple you’d think it would have been obvious long ago – but it astounded economists of the sixties with its simplicity and scope for wider insight.  Remember Coase isn’t looking to play the blame game; he is looking for an efficient set of inputs and outputs, regardless of how property rights are divided.  In the case of the railroad and the fires he is looking for a solution that benefits both, not who should reimburse who.  If the farmer plants his crops at an optimal distance from the railtrack then both may enjoy the most efficient outcome.  The town has crops and train journeys, and no one is paying financial restitution or looking for ways to sue.  Similarly the rabbit farmer can keep his rabbits in cages or secure ring-fences, the lettuce farmer could grow other things the rabbits won’t eat, or they could split the costs and build an impenetrable fence between their farms. 

How did so many economists and people in litigation miss the simple elegance of the Coase theorem for so long?  I suspect it was because people are perennially too quick to play the blame game – if something happens it must be someone’s fault.  The railroad/crops example shows a new way of looking at the situation; yes, if there were no railroad tracks there would be no crop fires, but equally if there were no crops that were so close to the tracks there would be no crop fires either.  Apply that brilliant twist to the blame game to your everyday social interactions and the chances are you’ll begin to see the world through a new lens.

Ed Miliband: Incompetent & Honest or Clever & Dishonest?

Sometimes I just sit open-mouthed at what political groups come out with - the ideas are so bad that one must conclude that either they are hopelessly incompetent, dreadfully dishonest, or a bit of both.  Some of what we've seen recently can only lead me to believe that they don't have much of a clue about economics, or that they do know their stuff, but they think the general public is utterly clueless about these issues.  Or maybe, just maybe, Ed Miliband has worked out a way to be clever with this one, particularly when one considers that the issue up for discussion here was one of the key factors in Labour doing so poorly in the last election. 

Ed Miliband's 10p proposal is among the many examples of flawed thinking - it is one of those policies that treats the tax system as though it is one singular part, rather than a complex whole (Denis Healey and Gordon Brown anyone?).  Almost any blanket tax initiative is going to be costly somewhere, because in a nation of varying work situations, while some will benefit, others won’t so much.  It’s a bit like a doctor giving everyone viagra in a population where only some people are impotent.  That’s ok if everyone has enough, but when those that need it are short because those that have it needlessly take up supplies, it shows the doctor’s idea to be impotent (pun intended).

Here’s why the viagra analogy is telling; many people on low incomes are not particularly poor – a significant proportion of them are part of a two-income team, with them being the low earner behind a relatively high earner.  Thus it is much more prudent to increase the benefits of the single income low earners, and not simply reinstall a blanket 10p lower rate of income tax, because many ‘beneficiaries’ are having money that the poorer people need more. . 

This is basic GCSE economics – so don’t you think it’s odd that Labour is trying to grab the attention with this obviously ineffectual policy?  I can think of three reasons why Mr Miliband might be trying this:

1) Ed Miliband hasn’t given enough thought to how taxes operate best

2) Ed Miliband has given thought to how taxes operate best, but thinks the lower earning voters are economically illiterate enough to believe they are being targeted favourably

3) Ed Miliband realises that in reinstating something Gordon Brown abolished, he might be able to symbolically distance himself from the much criticised Labour Government that held office for so long in recent years, and brand his current party as being more in touch with the old leftist brands of yesteryear.

None of these seem commendable – but then again, despite deserving the opprobrium of the masses (which is what I hope will happen), one might argue that Ed Miliband is only doing what opposition leaders have to do these days to win elections; criticise the current Government and make their policies seem flawed; announce headline-grabbing policies that sound progressive to those looking for an economic carrot; and distance their party from the legacy of the past failures.  If he genuinely thinks he’s got a good tax policy here, then I suspect he’s probably being incompetent and honest.  If he knows he hasn’t then he’s probably being clever and dishonest.  Were he to increase the benefits of the single income low earners, ditch blanket tax proposals, and employ an intelligent case by case analysis that ensures tax breaks go to those that need it most - he would be doing something both clever and honest.