Wednesday, September 30, 2009

Freedom, progress and anarchy

Hayek wrote on 1960

"If there were omniscient men, if we could know not only all that affects the attainment of our present wishes but also our future wants and desires, there would be little case for liberty. And, in turn, liberty of the individual would, of course, make complete foresight impossible. Liberty is essential to leave room for the unforeseeable and unpredictable; we want it because we have learned to expect from it the opportunity of realizing many of our aims. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it."

And

“Interaction of individuals possessing different views is what constitutes the life of thoght. The growth of reason is based on the existence of such differences. Its results cannot be predicted that we cannot know which views will assists this growth and which will not. To plan and organise progress is a contradiction in terms. Individualism is an attitude of humility before this social process and of tolerance to other opinions and is the exact opposite of that intellectual hubris which demands comprehensive direction of the social process.”

It is easy to say, let institutions grow by themselves, society will make them grow up. But is clear that liberty by itself may bring us to progress but also to chaos. Look at Somalia, no institution is growing but terrorism and no progress at all. Is an utterly anarchy. I guess liberty, anarchy and progress are sides of the same coin.

Monday, September 14, 2009

Justice

On 3rd of September Will Wilkinson wrote a comment about last Amartya Sen book. Specifically he wrote about an experiment on justice (book's subject) described on the book.

The experiment was: [ you have one flute and three children who want it. One child wants the flute because she knows how to play it, the second one wants it because he is poor and doesn't have toys, and the third one says she made the flute, so she should get it. Who do you give it to?]

The point Wilkinson makes is "The correct answer is: It all depends on how “you” ended up with the flute!"

And is true. Why did you get that flute? did you produce it? then is yours, do what you want. If not, it depends on from whom have you stolen it? just give it back.

Is not a problem of justice but a problem of property rights. We don't know if it's better to give it to who it may get a bigger return or who has less is difficult to weight it. The first could suposse on latter periods to have a bigger output to be shared and then a bigger portion to be given to the poor boy.

Hume wrote: "No one can doubt, that the convention for the distinction of property, and for the stability of possession, is of all circumstances the most necessary to the establishment of human society, and that after the agreement for the fixing and observing of this rule, there remains little or nothing to be done towards settling a perfect harmony and concord."

But even then, even if we know who is the owner of that flute, we should not leave somebody whitout flutes (read food). And even less if it's about children because equal opportunities.
So it all depends on common values and probably on income. A second flute is better redistributed by property rigths.

A forever dichotomy about equality and incentives.

Best explained on : http://www.willwilkinson.net/flybottle/2009/09/03/the-tragic-flute/

Thursday, September 3, 2009

Causation vs. Correlation

Almost all economists understand the difference between correlation and causation. The first means that two or more variables follow the same path. The second means that one variable affect the other. The main problem here is how to identify if its causation or just correlation.

Not long ago, The New York Times economic blog (Economix Blog) show a graph with the positive relation between childs’ school results and parents’ income. It was quickly been the object of a lot of criticism. What the graph was showing was a mere correlation and not causation. Greg Mankiw said:
“This graph is a good example of omitted variable bias, a statistical issue discussed in Chapter 2 of my favorite textbook. The key omitted variable here is parents’ IQ. Smart parents make more money and pass those good genes on to their offspring.
Suppose we were to graph average SAT scores by the number of bathrooms a student has in his or her family home. That curve would also likely slope upward. (After all, people with more money buy larger homes with more bathrooms.) But it would be a mistake to conclude that installing an extra toilet raises yours kids’ SAT scores.
It would be interesting to see the above graph reproduced for adopted children only. I bet that the curve would be a lot flatter.”
Bathroom example is quite illustrative. So, it seems that if you win a lottery prize your children won’t get better marks.
But as I said identify causation is very tricky and Mankiw has assumed something not so sure. A book entitled Intelligence and How to Get It: Why Schools and Cultures Count , has relevant information:
“On average, the biological children of high-SES [socioeconomic status] parents had IQs that were 12 points higher than those of low-SES parents, regardless of whether they were raised by high-SES or low-SES parents…
The crucial finding is that children adopted by high-SES parents had IQs that averaged 12 points higher than those adopted by low-SES parents- and this was true whether the biological mothers of the children were of low or high SES.”
So again it seems that the relation is as The New York Times said…

In fact, the most probably thing is that parents’ gens and child environment both affect child result in a complex manner. As Chesterton said in Heretics: “The obvious truth is that the moment any matter has passed through the human mind it is finally and for ever spoilt for all purposes of science.”

You will find a better explanation of this childs’ marks debate on http://www.economistsdoitwithmodels.com/.