Category Archives: Innovation

Stiglitz and Norvig and Gini, oh my!

Executive Summary: A simple model shows that we can achieve positive changes in wealth inequality by returning to a more progressive tax structure.

Joseph Stiglitz has written an important article on inequality in the American economy. One of his key points is that the economy is not inevitable. We create the rules, the framework in which individual transactions take place.

Peter Norvig is a leading computer scientist, and currently Director of Research at Google. As a teaching tool, he created a simple model economy in Python. The Jupyter notebook explains the code and has some very interesting charts. A quick read of the notebook would give the impression that just about every choice of beginning income distribution, interaction, and transaction leads to serious inequality as measured by the Gini coefficient. This blog will show that that conclusion is wrong.

All models are wrong, but some are useful. – George Box

“All models are wrong…” is the statistician’s version of the aphorism “the map is not the territory.” In the case of Norvig’s Economics Game, the fact that it is implemented in Python gives us unusual insight into how the model is wrong and where we can tinker with it.

The key to Norvig’s model is the basic transaction. In this transaction, two individuals pool their resources and roll the dice on how to split them up.

This model of the economy is almost exactly the opposite of most models. If you look at most ‘rational man’ or ‘economic man’ models, they start with a market in which perfectly rational actors, with complete information, transact simultaneously in an infinite number of frictionless transactions that establish the clearing price for whatever goods are being traded. Instead, this model pair up individuals in a high-risk gamble of no information. There is no market, no good being traded, and no price being set.

No bad actors

In addition, cursory analysis of the transaction shows why it creates inequality and why no rational actor would choose to participate. Consider the case of two actors who put in nearly the same amount to the pool, say 60 and 40 simoleons. If the random number generator spits out a split between .4 and .6 the result will be that the actors have more equal amounts of money than when they started.

Considering the number line between 0 and 1, .4 to .6 is only 20% of the line. Therefore, the vastly more probable result, 80%, is that the wealth shares will be more unequal than previously.

The only group for whom the transaction is actually attractive is the very poor.  In this case, the poor actor has very little to lose and only a small chance of losing it, but they might become instantly rich.

Norvig’s results show exactly this kind of churn. Actors gain and lose fortunes in a single transaction. It is all very chaotic. But is it a bad model?

Actually, it is a very good model of the irrational choices people make every day. It is a good model of the substantial risks a farmer takes growing crops, or a business takes creating a product. The model captures perfectly our willingness to make stupid choices by distilling the economy down to the stupidest transaction possible.

So instead of controlling the economy, and assuming everyone only does smart things, let’s see what can be done while assuming the worst. Is there anything that can save this economy from falling into stark wealth inequality?

Yes, there is.

Taxes to the rescue

One of the modifications that Norvig shows is a primitive tax scheme.

In [20]:
def redistribute(A, B, rate=0.31):
    "Tax both parties at rate; split the tax revenue evenly, and randomly split the rest."


flat tax model

Here, we see that a ‘flat tax’ does help some, but as Norvig says

Another surprise: This transaction function does indeed lead to less inequality than split_randomly or winner_take_all, but surprisingly (to me) it still increases inequality compared to the initial (Gaussian) population.

Well, we can improve on that result, even though Norvig does not pursue it. I took Norvig’s Python code and added some functions to calculate a graduated tax and a split that gave 2/3 of the tax receipts to the poorer of the two parties. I also added data for tax rates of 2018 and 1979, the year before Reagan started chopping away at the progressive tax system.

My results show that the current rates, like the flat tax tested by Norvig, don’t help wealth inequality all that much. However, with the progressive rates of  1979, we can actually achieve a very substantial result, lowering inequality to levels of European social democracies.


This is the important point. Even allowing people the freedom to participate in the worst (riskiest and self-destructive) underlying economic transactions, a progressive tax and wealth redistribution system can preserve societal structures at acceptable levels.

As Stiglitz said, we make the rules. We had rules that worked to keep a lid on inequality, and we foolishly blew them up. Lowering top tax rates has never grown the economy, all it has done is make rich people richer. Returning to a more progressive system of taxation and wealth redistribution will benefit our society.

Nerdy postscript

Norvig says he is surprised that a flat tax can’t return the wealth distribution to the beginning ‘bell curve’ distribution. But looking at the Gini coefficients of real economies, that isn’t a realistic goal or expectation.

Norvig’s own ending is important. Data modeling is far more accessible and easier to change than a pen-and-paper Markov model or an R model.

The latest version of Norvig’s notebook (linked above) includes another simple model that is less illuminating of economics but does show that Gini is not necessarily a perfect measure of inequality. As that model shows, it is possible to have a few superwealthy people throw off the calculation of inequality. This shows that multiple measures – of inequality, poverty, and mobility, for example, are necessary for any deeper model of the structural problems of a real economy.

What is the proper size of government?

Ilya Somin’s book, Democracy and Political Ignorance, ends with a strong thesis statement. Political ignorance is a serious weakness of democracy, but we can reduce its dangers by limiting and decentralizing the role of government in society.

The government that governs least is not always best in every way. Yet it is the form of democracy least vulnerable to political ignorance. Democratic control of government works better when there is less government to control.

But we don’t have to imagine what America would be like with a smaller government. We can just look back at America throughout its history up until 1932.

The steamboat Helen McGregor, Capt. Tyson, on her way from New Orleans to Louisville, stopped at Memphis, on Wednesday morning, February 24, 1830. She had been lying at the wharf about thirty minutes, when one or more of her boilers exploded, with the usual destructive and melancholy effects. The loss of life by this accident was, at that time, unprecedented in the records of steam navigation. In the bustle incident to the landing and receiving of passengers, a part of the deck near the boilers was crowded with people, all of whom were either killed instantaneously, or more or less injured. No person in the cabins was hurt. The number of those who perished at the moment of the explosion is variously estimated at from thirty to sixty. As many of them were strangers whose homes were far distant, and whose bodies were never recovered from the water, into which they were projected, it is very plain that an accurate account of the number of the victims is not to be expected. (Lloyd’s Steamboat Disasters)

Small government means no safety requirements or inspections. Feedback devices to bleed off excess pressure (called governors or regulators, hint, hint) were still in the future.

The 19th century was dominated by the slavery debate. It paralyzed the Federal government and led to the projection of state power over other states through the Fugitive Slave Law, for example. We were unable to avoid the Civil War, massive loss of life and economic disruption.

Towards the end of the century, we saw the rise of monopolies, trusts, and company towns that strangled the free market and freedom to contract with coercive business practices. Patent medicines were peddled from town to town without concern for whether they worked the cures they were touted to produce.

Finally, the capital markets ran right off a cliff in 1929 under the influence of speculation in a new form of financial instrument – the mutual fund. The markets had always been lurching back and forth between runs on banks to crashes of the stock exchanges, but this Great Crash and subsequent Great Depression brought to a close the era of small government in America.

Promote the general welfare

The Preamble of the U.S. Constitution says that among the chief purposes of the Federal government are “provide for the common defense, promote the general welfare…” and these are specifically repeated in Article 1, Section 8. The quick review of one hundred years of history from 1830 to 1929 shows that the small government version of the Federal government active during that period did a spectacularly bad job of promoting the general welfare.

But what about the free market? Didn’t unfettered market capitalism solve the nation’s problems? No. Instead, the market was captive to various interests, including slavery. The capital market careened from ditch to ditch as speculators touted the high technology of the day – canals, railroads, telegraph lines – that ended in bankruptcy after bankruptcy. Far from protecting the country in the absence of a robust government, the markets could not even protect themselves.

Small and limited government is clearly a danger to the economy and nation it is meant to protect and promote if it is too small or too limited. So how do we ‘right-size’ government?

The proper size of government

If ‘small’ isn’t the answer, what is? How do we decide on the proper size of government?

One answer is that the proper size is zero. Various idealist philosophies and economic systems hold to a belief, unsupported by evidence, that human society doesn’t need government, and should move towards such a state.

While there is nothing to support such a belief in history, psychology, or group behavior let’s be charitable and just say that this is probably an ‘unstable equilibrium’. If by chance it was achieved, any perturbation would force society away from this state.

Another view might be that government should be a certain absolute size larger than zero, but not growing or changing as society grows and changes. For example, Congress is now fixed at 2 Senators per state and 435 Representatives. It doesn’t matter if the population grows or the economy grows, those numbers are fixed.

In the area of sports, the number of umpires or referees on the field is also fixed, but so is the number of competitors. For sports with complicated rules, the number of ‘regulators’ on the field can be 25% of the total participants.

While this might work for sports and legislators (and some think it doesn’t work) it obviously doesn’t work for meat inspectors, VA doctors, or weather scientists. Our government needs for these jobs varies with the economy, warfare, and the climate.

Most people accept that the size of government should somehow be proportional to the size of the nation. Here again, we can ask what is the constant of proportionality and what is the variable or variables we should use.

In Political Ignorance Somin usually refers to the ratio of government spending to GDP. He also at times refers to the complexity of government, noting the number of cabinet level departments and independent executive agencies.

The US currently runs a ratio of all levels of government spending to GDP of about 36%. During the response to the financial crisis, this was as high as 41%. For comparison, the ratio was about 7% in 1900 during the small government era.

Smaller economy, bigger government

Somin at times praises other, smaller countries for running capable democracies. He doesn’t present any data on political ignorance in these countries, however, so it is hard to see what the real argument is. Indeed, Luxembourg, Belgium, and Denmark all have higher government to GDP ratios than the US.


As the above chart shows, the US Federal government is already one of the smallest in the world relative to the size of the economy it controls. Switzerland is the only appreciably different government, and the difference between the US and Switzerland can be explained in large part by differences in military spending. Indeed, looking at this image it can reasonably be asked if the US government is still too small.

Exponential growth

As noted earlier, the ratio of all-levels government spending to GDP was 7% in 1900, compared to around 36% today. We might reasonably ask if the constant of proportionality is not, in fact, constant. Even taking account of war spending, is the ratio changing consistently over time, and if so, why? And is this a good thing?

One reason the ratio might be changing over time is that we’ve chosen the wrong variable. There are many variables that grow exponentially over time in a growing economy, instead of linearly. The idea of exponential value growth is commonly termed Metcalfe’s Law.

The implication is that as the economy grows, more and more of that growth takes place in the government sector. The total economy continues to grow, but the government is an ever increasing share.

For some people, this might bring to mind smothering and sclerotic bureaucracies that shuffle paper but achieve nothing. Certainly, that is a danger. But it isn’t inevitable.

Regulation of the Body (Not) Politic

As a counterexample, let’s take a look at the growth of regulation in genetics.

Some genes code for the direct production of a protein, the working chemicals of a cell. Since the beginnings of evolution, all cells use the same basic suite of proteins. It is this fact that allows us to trace the genetic relatedness of species.

When the human genome was first being mapped, the expectation was that it would code for up to 100,000 separate and distinct proteins and that these proteins would be what distinguished humans from other living things. It was therefore quite a shock to find that the human genome, as large as it is, only coded for about 25,000 proteins – the same basic repertoire as other animals.

We eventually found that what was different about humans was the gene regulatory networks of the human genome. Humans have hundreds of cell types as adults, and hundreds more exist as intermediate stages between the one cell type we all start as and the end product.

In each of these cell types, the same basic protein manufacturing is turned on or off in varying ways. Neurons build the machinery of synapses, stomach cells build other secretion functions. The big differences are not the proteins, but the regulations of the proteins.

This tremendous regulatory scaffolding allows humans to have large bodies of many different cell types. We couldn’t be who we are without the regulatory apparatus growing more important than the basic protein apparatus. Even the most basic one-celled animals, such as yeast, have ‘operons’ – genetic switches that regulate the production of proteins. The difference between us and yeast is a more sophisticated regulatory network, not some unique protein.

Going even further back into evolutionary time, bacteria have much simpler regulation of genetic copying than eukaryotes, such as plants and animals. The result is that their genetic code is copied with mistakes much more often. Bacteria can use this (“it isn’t a bug, it is a feature!”) to change rapidly in the face of environmental stress, such as anti-bacterial drugs. But when building a body of several trillion cells that has to last 100 years copying errors really are a problem.

Copy errors are corrected (or prevented) by systems that don’t create protein. These genetic regulatory systems are ‘takers’, not ‘makers’. If the human body was run on small government principles, we would still be bacteria.


It is also possible that instead of scaling on the number of things (GDP) or the number of connections (Metcalfe’s Law), the government scales on the number of types of things. Every innovation brings with it new cases and distinctions to be made, new kinds of behavior. A recent case had to answer the question of whether sending a text message urging suicide could be considered manslaughter.

Another aspect of novelty is the satiation of previous needs. If a government can help its citizens be well fed and avoid contagious disease, why not move on to avoiding pollution and obesity? We set new expectations of government. Entirely natural, but leading to growth in government nonetheless.

But no simpler

Albert Einstein is supposed to have said, “A theory should be as simple as possible, but no simpler.” I think this applies to government, specifically the size of government, a government being the embodiment of a political theory. Based on the examples given above, it is reasonable to expect that government will scale nonlinearly with some core aspect of society. This means that government may start small in a simpler time and less complicated society, but will grow – should grow – as that society grows and becomes more complicated. This is as close as we can get to answering in a blog post, “What is the proper size of government?”

Foot voting and political ignorance

Chapter 5 of Ilya Somin’s Democracy and Political Ignorance covers the interesting topic of foot voting and related issues. This is also a chapter where the author wanders significantly from the topic of political ignorance to discuss several aspects of the interplay of the structure of government and possible outcomes for the population. While many of these issues deserve discussion, they deserve more than the fragmented and passing coverage they often get here. Somin acknowledges that the book can’t address some of these topics in the depth they deserve, but it is still frustrating.

What is foot voting?

Foot voting is the heavy artillery of political expression.

To differentiate foot voting from any selection decision we have to focus on the actual change of location – the voter is physically moving to change jurisdictions.

To compare, a voter in the US might vote annually from 18 to 78 years old. There could be 10 decisions to make in each election, from choosing the President to ballot propositions. A dedicated voter might also vote in primaries. So a voter in the US might vote between 600 and 1,000 times during their lifetime. In contrast, adults in the US move only a few times during their lives. By one estimate, after 18, Americans move a little more than eight times, on average. (I think this estimate of number of moves is significantly higher than the one Somin uses in the book.)

Foot voters are exchanging all of government from some level down, even officials and policies not on the traditional ballot, with another package of officials and policies. If they meet residency requirements, they might even vote in the same year they move, getting even more power.

While the voter swaps governments, the governments gain and lose the voter. Not just the vote, but the economic contribution of that person and any associated family members.

Why foot voting?

Americans relocate for education, job opportunities, and to avoid negatives of the current locale. Historically, the size of these opportunities and negatives was larger than they are today. People moved to the frontier, blacks moved to the North to avoid lynching and murder – few of our moves today have such large motivational aspects. But to overcome the high transaction costs of moving, foot voters must be highly motivated, and that motivation level can translate into acquiring more political knowledge.

At this point, it would be great to actually have hard data to talk about. If surveys of public knowledge asked the questions “How long have you lived in your current residence?” “What are your current and previous zip codes?” we could actually compare levels of ignorance between recent arrivals and long-time residents. Somin does not present any data like this (it might not exist), so we are back in the world of making persuasive arguments rather than discussing data. For the same reason, we can’t examine whether foot voting is extra powerful, or less powerful, as the size of the move scales up or down.

Given that the evidence presented in Chapter 1 motivated the entire discussion to this point in the book, the lack of data to motivate arguments and conclusions about foot voting is strongly felt.

Advantages of foot voting

Once the ‘Bayesian prior’ of the decision to move has been established, Somin argues that several advantages compared to ballot-box voting are activated. First, the mover is acting as a ‘responsive voter’, so their information needs are low. The mover has access to ‘opinion leaders’ – their friends and family that may have already made a similar move and chosen a particular locale. They also can use information shortcuts such as party dominance in a locale to infer policy positions rather than researching each government official.

In chapter 2, we saw that even the responsive voter theory suffered from an excess of ignorance. In chapter 3, we saw that opinion leaders and information shortcuts were also inadequate to mitigate ignorance.  Somehow, somehow, the extra motivation of foot voting carries them over the line.

But does it really? These are good arguments, but without data that is all they are. There is also an unresolved tension between the idea that foot voters are highly motivated and therefore less ignorant, and the idea that whatever the level of ignorance foot voters actually have, it is irrelevant because the non-political benefits of foot voting outweigh the political considerations. The first of those is a testable hypothesis. The second is just hand waving in favor of a pet theory.

Retirement foot voting

In the current US economy, there is a special class of foot voting  – seniors making end-of-life retirement decisions. These decisions are made with a very different set of assumptions than other moving decisions. And given the growing size of the retirement population and their willingness to also ballot-box vote, this is a significant sub-population of foot voters.

I would expect that these differences skew results of some statistics looking at all foot voters as a class, for example their preference for small government, low tax and low service jurisdictions. If we subtract out this group the remaining foot voters would be looking for a substantially larger government, accepting a larger tax burden in return for higher services.

Neither group can be ignored, but we have to be careful about accepting an argument (Foot voters are well informed, foot voters chose small government, therefore small government is ‘obviously’ better) based on summary statistics that mask significant variation.

Private government

Speaking about retirement communities allows chapter 5 to segue to the topic of private substitutions for local government. There are many variations and gradations this substitution of private for public can take.

Sometimes there is talk of local governments allowing multiple service providers to operate within the jurisdiction, on the theory that they will compete. I once lived in a town with multiple garbage collection firms. Many places have Internet service through both phone companies and cable companies.

In practice, this does not usually work out as intended. Rather than compete, the firms form a loose cartel and divide up the business. In the town I used to live in, each garbage collector kept to their own streets, so each street effectively was a monopoly. In the town I currently live in it is impossible to get fiber optic Internet services from the phone company in apartment buildings that were built with an agreement to use cable internet. The result is still a single provider, with poor service and high prices.

This is no better than a government provider, and arguably worse from the point of view of transparency. Breaking up such a cartel is a high cost to residents, so it is usually tolerated. Chapter 5 does not discuss this point.

Some local governments have retained the responsibility to provide services, but outsourced the staff to do so. Sandy Springs, Georgia is an example. In this model, the argument is that the contract negotiation process allows the government to entertain competing bids and choose the lowest cost service provider.

In the case of Sandy Springs, it is too early to tell how this will turn out. The city founders have been diligent and proactive in contract negotiation. The city benefits greatly from being carved out of Fulton County, gaining a strong tax base but somehow avoiding responsibility for pre-existing debt and pension obligations. Nice work if you can get it, but not necessarily replicatible.

Sandy Springs seems to be getting FTE (full time equivalent) services for less that $100K per FTE, which is what I spitballed personnel costs would be in that part of Georgia. The outsourced employees are in places like Ireland and India.

Of course, the government can do the same thing. I deal with a Federal shared services center in West Virginia, a low cost locale compared to DC. Outsourcing is not the magic here, contract negotiation skills by the city management is.

Condos, developer communities and sprawling retirement venues such as The Villages are a different level of substitution. In these cases, the physical infrastructure is owned by a business entity. Residents can own units, but pay fees to the property management firm for basic services.

This is a complete flip-flop from the Sandy Springs model. In Sandy Springs the city was still owning the infrastructure, but contracting for competing service providers. In the condo or retirement community the infrastructure ownership is private and the service provider is a monopoly of the developer/property manager complex of firms. Competition happens at the level of the community vying with other communities for residents willing to relocate.

Implications of private government

Even huge developments such as The Villages are not governments. In a dispute with the IRS over bonds that were issued by The Villages as tax-free ‘municipal’ bonds, the IRS found that the board running the core community was merely an arm of the property owner – a private entity.

A citizen has certain rights that they retain, no matter what. A condo resident agrees to a business contract, often including the demand to use binding arbitration. To me, this is the biggest distinction between public and private – the substitution of citizen rights for contract stipulations.

On the ‘happy path’ of a contract, residents can focus on lower costs for services, if in fact they are lower. They might feel an emotional satisfaction of being ‘in control’ that comes from choosing and owning something, and this is no small thing. However, once the relationship sours the resident can find their freedom to obtain information or influence policy is sharply constrained.

This is important in a book about ignorance and the influence of the citizen. It feels as if a law professor could have done a better job of elucidating the differences between public and private rights. Chapter 5 doesn’t do this.

Rogue government

Sometimes governments do not serve their citizens well. Large corporations and sports franchises can play off communities against each other, seeking tax abatements and other forms of corporate welfare. This rent-seeking behavior works against voters’ interests. State and local governments can also raise exclusionary barriers with licensing and zoning.

Worse, we get communities such as Ferguson, Missouri. As was brought out in detail by the Michael Brown case, the government sustained itself on a tax-farming system of traffic tickets and bench warrants and maintained a sharp racial distinction between the governing officials and the citizenry.

Ferguson would seem to be a classic foot voting opportunity. The government was preying on its citizens. Well, Ferguson is a good example of the kind of foot voting known as white flight. Even as Ferguson’s population shrank across recent decades, the black population rose. The urban poor moved into Ferguson because it was even worse elsewhere.

Here we see the limits of foot voting. As pointed out earlier, the level of opportunity represented by the frontier, by the oppression of the Jim Crow South, doesn’t exist anymore. Arguments for foot voting based on trans-national flows motivated by famine and mass murder are irrelevant to what foot voting means in contemporary America. Instead, we have foot voting based on affordable housing with no particular consideration for the politics of the community. Foot voting doesn’t work if the prior is despair, not motivation. Good government has to work even for such citizens.


Chapter 5 is probably the weakest chapter in Political Ignorance. The author seems to have taken a well researched book about data, theory, and rationality, and inserted a topic that is at best marginally relevant. This topic is obviously the pet enthusiasm of the author, so it succeeds in ‘rent seeking’ more space with less justification than the other chapters. The author relaxes his standards of argument and throws out multiple justifications for foot voting, each with little support or evidence in its favor.

Democracy and Political Ignorance – Summary review

I finished reading Ilya Somin’s provocative book (henceforth Political Ignorance) over my summer vacation, and I think I want to write quite a bit about it so this will get spread across several blog posts.

Yes, readers concerned with the democratic process and constitutional design should read this book. It provides clear evidence that by whatever process you think democracy arrives at good governance of society, our current electorate is so woefully ignorant that it cannot be working properly. Further, this situation will be incredibly difficult to fix. While that might sound quite depressing, the author surveys many suggestions for trying and agrees that trying is necessary. Our basic government structure of federalism offers hope that experiments will have room to be tried, and successful experiments replicated.

No, readers should not be swayed in their decision by the subtitle, “Why smaller government is smarter”. Whether you agree with the sentiment or not, arguments about the ‘size’ of government make up a relatively small part of the book’s content. Political Ignorance does not make a serious attempt to address the question.

Somin presents the problem in chapter 1, with a review of recent surveys of voter knowledge from US federal elections, both Presidential and mid-term. Whether you look at all adults, registered, or likely voters, the results are appalling. Easily 25% of the country just has no fucking clue, just no clue at all about headline issues facing the country that their vote might affect. A key finding, repeated later in chapter 4, is that swing voters are the most ignorant of all.

Let that sink in – our elections are being decided by the dumbest of the dumb.

If I had any wishes for chapter 1, I would wish for a longer baseline of data and breakdown between factual knowledge of the issues vs. a knowledge of the system.

Chapter 2 examines four different theories of democratic governance, each of which seems to hold voters to a different standard of knowledge about the issues. “Responsive government” assumes democracy is a ‘throw the bums out’, reactive process. Old leaders are punished for large failures such as losing wars or causing famines, and replaced with new leaders. This is certainly a step up from monarchy or other forms of dictatorship, but suffers from many emotional biases and information deficits. What leader or policy was responsible for the problem? Can Chris Christie be blamed for shark attacks driving down tourism on the Jersey Shore? (Answer: yes.)

Burkean trusteeship holds that voters are actually selecting trustees for the work of governing society, and as such the important part of the process is choosing the person for an elected office according to their qualities of education, personality, moral compass, etc. Here again, we find that voters know very little about the people they are electing. Think birtherism for an example.

Issue-driven majoritarianism simply asks if a candidate is siding with the majority on specific issues. In this view, reflecting the majority desire is more important for democracy than any attempt to lead the entire nation. However, the likelihood that a poll-following politician will be elected is confounded by the ignorance of voters on the issues, who holds what position, and who is relatively closer to the majority view.

Finally, deliberative democracy assumes that voters are researching and discussing the facts, the proposed policies, and the likely outcomes in an informed and conscientious manner before stepping into the voting booth, and exercising their franchise with the solemnity deserving of the act. Obviously, this is not happening. Exchanging Facebook memes with your friends does not count as deliberative democracy.

While this survey of process theories is not exhaustive, it does show the span of levels of knowledge that different theories can assume. Even the most lenient, reactive model won’t work if voters don’t know who to blame for what. However, we can take some small comfort from work on the evolution of cooperation, such as Axelrod. In this research we can see that the best strategy for the Iterated Prisoners Dilemma is Tit-for-tat, the reactive model. If we view government as a long IPD held between the class of politicians that run for office and the class of voters that elect them, then there is small hope that over long periods of time the system can evolve to stable payoffs. Is this ‘perfect’? No. Is it better than revolution? Yes.

Hello Darkness, my old friend

In chapter 3, Somin introduces the idea of rational ignorance. Since everyone is working with scarce resources of money, time, and energy, it is necessary to choose where to invest those resources. For most voters, becoming politically knowledgeable is not the best use of their resources.

If we compare voting to other selection processes such as jury voting, product buying, and choosing where to live it is easy to see a proportional relationship between personal motivation and acquiring knowledge. If we value the outcome of the decision more, we will be more likely to devote the resources necessary to acquiring the knowledge to better make the decision.

From this perspective we can see that modern American voters just don’t think the act of voting will change very much in their lives. Voters that are choosing freedom or slavery, monarchy or communism, have a lot at stake, and consequently political discussion dominates the public square in a more informed manner than when thinking about Medicare Part D.

If this ignorance is rational, Americans have a pretty good thing going and they doubt that any one election can change that very much. Most of the time, they are right. But there is a ‘long tail’ of times they are wrong, and being wrong in those decisions means being catastrophically wrong. The price of freedom is eternal resource allocation at higher than rational levels.

What can be done about this situation? Americans are so fat and happy, the system has worked so well for the majority, that we have fallen into a post-Thanksgiving-dinner coma. If only we cared as much about politics as we do about college football, we might wake up!

Chapter 4 looks at some workarounds to ignorance. Maybe we are smarter than we seem at first glance, or have the answers hidden up our sleeve. If we can be more informed for a lower cost, that would be a good thing. Some of the strategies that are looked at include political parties, opinion leaders, knowledge from ordinary life and retrospective voting. Sadly, none of these are theoretical possibilities that have not been tried. The existing data showing extreme political ignorance already has all of these strategies and more already baked into the result. Shortcuts will not help us.

I’m going to save Chapter 5 for a separate post. Foot voting is obviously a pet enthusiasm of the author’s. Chapter 6 looks at the concept of judicial review with respect to political ignorance. This has the feel of a separate essay, and can safely be skipped if legal theory is not your thing.

Chapter 7 asks if voters can be made smarter somehow. Again a range of possibilities are examined, including shrinking the franchise to the well-informed through tests. This chapter can help dispel the depression brought on by constant drumbeat of negative results from the previous chapters. There is hope, because these and other strategies are just starting to be tried.

Political Ignorance has two punchlines. We can reduce the dangers of political ignorance by limiting and decentralizing the role of government in society, and democratic control of government works best when there is less government to control. I can understand why Professor Somin has buried these thesis statements at the end of the book, rather than presenting them at the beginning. This book, as valuable as it is, does very little to prove either statement. Again, more on this in another post.

Bottom line – this book is an important survey of a difficult topic. It will reward your scarce resource allocation! Buy it, read it, talk about it.

The New Rules of Writing Regulations

One side effect of the recent government shutdown in the US was a lack of information upon which to base decisions. As soon as the doors opened, the government itself starting feeling the pain. What to do about interest rates? Well, we stopped collecting economic statistics, so you’ll have to wait a while. What does that tell us about writing regulations and legislation that requires data? Continue reading The New Rules of Writing Regulations

Healthcare XBRL: the Language of Concepts

All the cool kids that read my presentations about XBRL know that XBRL is really two things that work well together – a language of facts, and a language of concepts. If we want to go looking for places that XBRL can be gainfully employed improving the efficiency of healthcare, both of these languages need to be explored for the opportunities. For the language of concepts, XBRL taxonomies, ICD-10 is a huge opportunity. Continue reading Healthcare XBRL: the Language of Concepts

Data vs. Asthma – Data Wins

Propeller-Sensor_FrontA preliminary but very encouraging study on lowering the cost of asthma was published recently. As I wrote about in an earlier blog entry, small telemonitoring devices are attached to the actuators that deliver medicine, recording the time and location of the event. Downloaded to a phone app and share with the physician, self monitoring reduces visits to ERs and hospitalization. The difference is dramatic. Continue reading Data vs. Asthma – Data Wins