The four forces shaping ethical norms

There are four forces shaping the definition of ethical behavior. One is rational calculation. For example, a game theoretic calculation probably underpins the popularity of the Golden Rule — don’t do to others what you don’t want others to do to you. This calculation is the realization that the same things you can do to another, that other can do to you. Under circumstances where two or more sides have equal options to force things, it is better to impose standards that are optimal when everybody adheres by them.

The second force is the need for acceptance into a community. This means that what is moral is often defined by what benefits the community as a whole. Hence, ethical standards will be pushed in such a direction as to generate more benefits than costs overall for the community. This is why utilitarian arguments are powerful. A utilitarian measures an aggregate of community benefits. Evidently, acceptance within a community is not the only relevant psychological lever, so total net community benefit is far from being the only determinant of ethical behavior.

The third force is empathy. Empathy with the emotions of others leads one to want to minimize empathized suffering and maximize empathized happiness, unless the other is perceived as the enemy — in which case the optimization direction is reversed.

The fourth force is the need to systematize the world around us. A need to have systematic rules forces us to accept that certain generalizations of principles are reasonable. Without generalizations, moral rule-based reasoning would not be useful. Right and wrong would be lost in a myriad of particular cases with particular rules, which everyone would want to shift to their benefit. For an ethical standard to have meaning, it would have to hold in reasonably similar circumstances. In other words, it would have to be general. This inclination towards generalizations makes people recognize the rights of other ethnicities, races, the other gender, some rights for animals, etc.

Weak predictions of the next recession

With the DJIA at 25800 today, it does seem appropriate to think about the next recession. Whenever that hits, and whatever shape it will take, I venture that the next recession can be classified into two broad categories:

1. An inherently unstable mismatch between value and incentives, usually in decisions of consumption or investment in one particular area of the economy. The classic example is the last housing bubble. In such situations, overconsumption or overinvestment in one particular area of the economy ends abruptly and this leads to a pervasive feeling of uncertainty, which spreads out into non-affected sectors and further damages the economy.

2. Prolonged good times in the economy lead to loss of discipline. Business and practices which are not viable when subject to even the smallest economic shocks, or even a small drop in consumer confidence, accumulate. This decay is not necessarily restricted to a specific area of the economy. Usually, some meaningless event leads to a sense of economic uncertainty, which is magnified by the runaway failure of the said marginal businessses.

Any honest economist will admit that it is really hard to say anything specific. One needs to know many sides of the economy in detail to venture a reasonable guess. My best guess right now is that the recession will be in category 2 above. The confidence I have in this prediction is low.

Arguments against some causes for a future recession I heard mentioned:

A crash of Bitcoin will lead to a future recession: The crash of Bitcoin is expected by everyone. It can reduce disposable income for a large chunk of idiots invested in it, but the market cap of Bitcoin is not very high and it is spread around the world. Most of it is fake value created recently anyway. The actual money circulating through Bitcoin is a couple of orders of magnitude smaller than the market cap. One caveat: most mining happens in China, and China is already dealing with a lot of bad investment. Hopefully, this won’t tip them over.

Mass defaults on unsustainable student loans in the US will cause a future recession: Student loans are backed by the US government. Only a change in policy by the US government will lead to sudden changes in the behavior of loan takers and loan companies. This will happen, but likely not during a recession, and likely not anytime soon. Usually, people are more likely to go to school when the job market is weak, so a recession will only increase demand for such loans.

Unsustainable spending increases on healthcare in the US will reach a tipping point, causing a future recession:  The masive spending on healthcare in the US is, indeed, caused by a malfunctioning market with poor incentives for cost control. (Too many unnecessary procedures, Medicare and Medicaid costs determined based on regional averages — so can still inflate if only at a regionally even pace, etc.) Again, as with student loans, the problem is the policy. The behaviour will not change if the policy won’t. One possible issue is that healthcare policies will change as a result of a recession, but it is more likely that the spending will increase during a recession as a measure of protection for the economy.

Bitcoin prediction, made on Dec. 6th, 2017

Today Bitcoin has reached a price of about $13,000. Its evolution over the last year is ridiculous, having grown more than 1700%. Of course, my prediction is that the phenomenon is a classic bubble — not that this is some kind of ground breaking speculation. Everybody (The Economics, Sunday Times, etc.) says so.

coindesk-bpi-chartNevertheless, as a self-respecting economist, I want to make a prediction and test my accuracy. I predict that in exactly two years, on Dec. 6th, 2019, Bitcoin will be valued at less than $3000.

I have no good way to justify this number. I could have chosen a different future price just as well. I am taking into consideration that there is a small intrinsic value for holding a common cryptocurrency, but the innate deflationary aspect of Bitcoin makes me believe that it is not a good form of money, in the long term. The fact that the bubble will burst in two years is also hard to justify. It is very hard to mathematically model a bubble. By definition, its evolution depends on the irrationally optimistic or uninformed behaviour of many people, the rate at which they enter the market, the number of speculators, the intrinsic value of the asset, etc. My only two hints are that: 1) at the current market capitalisation of $220 billion, the value Bitcoin cannot be justified by its usefulness in transactions; and 2), that the peak of the well known dot-com and Nikei bubbles lasted for about two years.

An old insight


Worrying about how you present yourself when you talk can make you act weird. Some people draw from this the incorrect conclusion that the best way to act is to stop worrying about the impression you make. Since that worry is the result of you caring about making that good impression, the next advice is to suggest not caring. You can always tell when a teenager tries to be cool in the way he makes a point of being completely uninterested in appropriate behavior.

The flaw in that advice is evident. It doesn’t take much unpleasantness to alienate the people that don’t know you. In fact, the correct solution to awkward social behavior is confidence in the appropriateness of your social skills, so that you can spend your conversation time worrying about the conversation and not about whether you look cool or not.

An easy way to understand this is to think about your brain as a computer. A computer has limited processing power, and programs running at the same time will hinder each other. When you interact socially, and worry at the same time about how it goes, you’re doing two things at the same time, probably poorly. This however doesn’t mean that you should never think about what good social behavior is. Whatever your personality or preferences, there are better or worse ways to be who you want to be. The goal is to teach yourself the right behavior, rather than to always monitor yourself, and the best way to do that is by habit or by internal guidelines. Once you internalize the habits and rules of behavior you desire, you can concentrate on the act, and you will be relaxed, betraying the confidence in your own behavior.

It is also easy to understand why, paradoxically, less intelligent individuals can be more socially intelligent. If there is no competing activity in their brains, it is easier to focus fully on the task at hand and let the instinct run freely. Usually, average behavior is typically the expected behavior, since social judgement is mostly the dislike of the weird, the punishment of negative deviations from the average, rather than some absolute measure of social value.

Good and Evil

What is being good? The best answer I can find is “abnegation.” Evil is then “egregious selfishness.” Most human behavior is somewhere near the minor selfish, which is close to neutral, but on the evil side. I don’t mean to define away goodness, as some thinkers do when they argue that doing something for others at a cost to you is, somehow, also selfish because it satisfies an internal desire to be altruistic. If that was the case, it would be merely a matter of the definition of good. As far as I’m concerned, doing good because one is programmed to be good also counts. Aren’t we all “programmed” one way or another?

What we argue to be goodness in our day to day lives is, most of the time, simply good practice in our society. “Don’t hurt people, don’t steal, don’t be inconsiderate, be nice to people, etc.” — these are proper behaviors for propitious relationships with our peers. In politics, favoring peace, individual rights, instituting social programs, etc., are all forms of successful political organization. Pushing them as third parties is often self-serving. Peaceful habits prevent us to learn how to be egregiously self-serving, but not always. We also have a capacity to deduce from practice, and enforce, generic rules of behavior towards other people, and we stick to these arbitrary lines in the sand for our safety mostly. It is true we also have sympathy, and people will occasionally act in self-sacrificing ways towards family, friends, people whose plight has impressed their empathic selves. However, it is exceedingly rare that these will be major sacrifices.

It is sad to conclude that the best approximation of human behavior is selfishness, somewhat mitigated by experience passed down and education, by the relative abundance in our times, and by the fact that our peaceful societies prevent the learning of even more selfish ways.

The purpose of all effort is social standing – part 1

The purpose of all effort by almost all individuals in all but the least developed countries on earth is social standing. Of course, a junkie struggling for his next fix is not going for social standing, but situations like this are few and far between. Rather than theorize, I think it’s better to list ways in which people “compete” for acceptance, status, respect or greatness.

1. Money. People feel an incredibly strong need to earn money to support what they feel is an essential level of lifestyle, that they either got accustomed to, or that they consider to be the level below which only “inferior” individuals will occupy. The obvious fact that 99% of the people that live, or ever lived, made due with much less doesn’t make an impression on them. In other words, it matters how things are now, that is, it matters what other people have now. Having less than that is considered putting oneself in a position that requires less respect. Without saying it in so many words, or thinking it even, we all look down on people that have less than what we struggle to have. Continue reading

Thinking and acting

It is well known that there is acting without thinking. That is, there is acting with too little planning, because all actions require some thoughts. But I also think there is something like acting with too much thinking.

The limitation of actions is that their effectiveness is extremely variable, although the effort is virtually the same. Whatever your plan is, you basically walk, talk, and move things around. The limitations of thinking are complexity and, most of all, lack of information. There are obviously goals more suited to careful planning than most, so choosing the right attitude seems important to me. Personally, I have a problem with procrastination that I believe is connected to my desire for careful analysis and perfect planning. I don’t feel comfortable just “winging it,” but when I believe I have a great plan, or that I understand something really well, then I get excited about putting that plan into action.

Continue reading