Friday, June 24, 2011

The Fear of Reason: In defense of rational argument

by Leon Wieseltier

New Republic
June 23, 2011

“I just want to point out,” declared the student at the far end of the seminar table, “that when Maimonides offers a proof of God’s existence, he is not saying that he has really proved it. What he’s saying is: This works for me, and if it works for you, great.” I was teaching a graduate seminar on The Guide of the Perplexed at a fine American university, and I was pleased to see my students warming to my insistence that the old masterpiece is still alive, and one of the most formidable obstacles ever erected against a thoughtless existence. We returned repeatedly to the question of what medievals can teach moderns about the indispensability of a worldview, and about the proper methods for justifying one. But the young man’s comment about the subjectivism of Maimonides’s proof—anyway the least interesting part of the book--startled me. It was so American and so wrong. After explaining why it was not just historically correct, but also philosophically respectable, to conclude from the text that its author really could have believed that a proof was possible, I proposed that we quit the twelfth century and put a little pressure on the talismanic words “and if it works for you, great.” I began a discussion of the shortcomings of pragmatism, which allowed me to launch into a withering—and of course intellectually devastating—analysis of the ideas of Richard Rorty and their poisonous impact upon thinking in America. My students offered surprisingly little resistance; but then they had signed up for a winter of rationalism and religion--this countercultural band was not ashamed of its interest in the idea of truth. Yet the Rortyan shrug was still there in the young man’s comment, and so I asked him for his opinion about reason. He said that it frightened him and discouraged him. The problem with reason, he explained, was that it claimed to settle matters once and for all, and that this was arrogant, and that it left him with nothing more to say. Rationalism made him feel excluded and late. I replied that he had it backward. It is not reason, but unreason, that shuts things down. You cannot argue against an emotion, but you can argue against an argument. That is why we were still contending with Maimonides, and why he was still contending with Aristotle. A reasoned discussion is always open and a reasoned intervention is always timely. Unreason is more arrogant, more impatient, more cruel, than reason. Since reason is general, it is inclusive. Reason, I said, is strict but fragile, forever hounded, forever distracted, the minority cause, provisional, fair, curious, fallible, public—not tyrannical but heroic, in its lonely insurrection against the happy and popular hegemony of passions and interests. I told my students about Maimonides’s life, the persecution, the tragedy, the depression, the paranoia, so that they would see the creatureliness of the rationalist, and honor his confidence in the mind as a human triumph. Reason is even poignant.


Why Free Trade Matters

by Jagdish Bhagwati

Project Syndicate

June 23, 2011

Contrary to what skeptics often assert, the case for free trade is robust. It extends not just to overall prosperity (or “aggregate GNP”), but also to distributional outcomes, which makes the free-trade argument morally compelling as well.

The link between trade openness and economic prosperity is strong and suggestive. For example, Arvind Panagariya of Columbia University divided developing countries into two groups: “miracle” countries that had annual per capita GDP growth rates of 3% or higher, and “debacle” countries that had negative or zero growth rates. Panagariya found commensurate corresponding growth rates of trade for both groups in the period 1961-1999.

Of course, it could be argued that GDP growth causes trade growth, rather than vice versa – that is, until one examines the countries in depth. Nor can one argue that trade growth has little to do with trade policy: while lower transport costs have increased trade volumes, so has steady reduction of trade barriers.

More compelling is the dramatic upturn in GDP growth rates in India and China after they turned strongly towards dismantling trade barriers in the late 1980’s and early 1990’s. In both countries, the decision to reverse protectionist policies was not the only reform undertaken, but it was an important component.

In the developed countries, too, trade liberalization, which started earlier in the postwar period, was accompanied by other forms of economic opening (for example, a return to currency convertibility), resulting in rapid GDP growth. Economic expansion was interrupted in the 1970’s and 1980’s, but the cause was the macroeconomic crises triggered by the success of the OPEC cartel and the ensuing deflationary policies pursued by then-Federal Reserve Chairman Paul Volcker.


Thursday, June 23, 2011

The Link Between House Prices and Divorce

Wall Street Journal
June 23, 2011

Declining house prices make it less likely that a homeowner will get divorced but more likely that a renter’s marriage will end, a new study finds—probably because a drop in equity traps unhappy couples in their house, while renters can find two affordable apartments.

There’s been anecdotal discussion of the effect of the housing bust on divorces—the authors of the new study cite this post, from’s The Juggle—but the article represents a first cut at studying the issue empirically.

Lacking long-term data including both demographics and housing prices, the researchers combined two data sets: the Bureau of Census’s Current Population Survey, from 1991 to 2010, and Federal Housing Finance Agency figures for house prices in more than 150 metropolitan areas.

The researchers used educational status as a proxy for renters and homeowners (since many more college grads than high-school dropouts are homeowners: 80% versus 58%). The focus was on people ages 25 to 79 who had ever been married. Looking at high-school dropouts, over the full period, the proportion who were divorced was 14.6%. That figure would rise to 17.58% if housing prices dropped 10%, the researchers calculated, after looking at historical patterns.


Read the Paper

Tuesday, June 14, 2011

Yuan a Kidney?

by Sally Satel


June 13, 2011

China's record on organ trafficking is by now a well-known international horror story. The vast majority of organs transplanted each year in Chinese hospitals are taken from executed criminals—and allegedly from political detainees, such as members of the the Falun Gong; charges that are currently under investigation by the U.N. Human Rights Council and Amnesty International. Now, paradoxically, China is proposing forward-thinking transplant policies; commendable laws that, if properly carried out, challenge the status quo and major international health organizations.

China's black market is why paying patients—citizens as well as foreigners—can get a new kidney or liver in a matter of days or weeks. Such lightning speed is unheard of in countries without black markets in organs; in countries that rely solely on altruistic giving, the wait for a deceased-donor organ is years long. In major cities in the United States, for example, it is not unusual for patients on dialysis to wait eight or 10 years before a kidney becomes available—a wait that only about half can survive.

Last winter, a 26-year-old migrant worker from Hunan made headlines in the Chinese press because he wanted to sell a kidney to pay off gambling debts. A black-market broker promised him 40,000 yuan (about $6,000), but at the last minute the migrant worker got cold feet. According to the man's story, the broker then took him to a small hospital and bound him to an operating table, where a nurse sedated him and surgeons removed his left kidney. Authorities are now investigating, but China's thriving kidney trade makes accounts like these sound quite plausible.

In 2007, China began licensing transplant centers in an effort to raise standards of practice and regulate performance. Only 163 of the more than 600 centers qualified and are now authorized to perform transplants, the vice minister of health Huang Jiefu, told the Lancet in an article published earlier this month. Huang, who is regarded as uncommonly open about his aversion to using prisoners as the major source of transplantable organs, still acknowledges that the market is far from moribund. Indeed, the same Lancet article notes that transplant specialists in the United States and Europe say they still occasionally see patients who report having purchased their transplants in China.


Monday, June 13, 2011

Living With Mistakes

by David Brooks

New York Times
June 13, 2011

Some of the blogs I follow—Marginal Revolution, Ezra Klein—have given ample attention to Tim Harford’s new book, Adapt: Why Success Always Starts with Failure. So I solipsistically assumed that everybody must be aware of it. But then I happened to glance at this book’s Amazon ranking, which as I write is down on the wrong side of 1,500. This is an outrage, people! For the good of the world, a bigger slice of humanity should be aware of its contents.

So I’m doing my bit to publicize it. (I don’t know Harford in any way, shape or form.)

Harford starts out with the premise that the world is a very complicated and difficult place. At the dawn of the automobile industry roughly 2,000 car companies sprang into being. Less than 1 percent of them survived. Even if you make it to the top, it is very hard to stay there. The historian Leslie Hannah identified the ten largest American companies in 1912. None of those companies ranked in the top 100 companies by 1990.

Harford’s basic lesson is you have to design your life to make effective use of failures. You have to design systems of trial and error, or to use a natural word, evolution. Most successful enterprises are built through a process of groping and adaptation, not planning.


To Curb Malpractice Costs, Judges Jump In Early

New York Times
June 12, 2011

In Justice Douglas E. McKeon’s fluorescent-lighted chambers in the Bronx, a new way of handling medical malpractice suits was on full, and sometimes gruesome, display. Around a polished wood table, lawyers haggled over the price for a lost nose ($300,000) and the missing tip of a finger ($50,000).

The discussion was like some kind of malpractice bazaar, with lawyers blurting out terrible facts and big numbers.

“Our offer of $500,000 is more than we’ve ever had on a dead baby case,” said Margaret Sherman, a lawyer for the New York City Health and Hospitals Corporation, which runs 11 public hospitals.

The patients were not there, but the lawyers and Justice McKeon — who has better-than-average medical knowledge — were. Cajoling, flattering and arguing, Justice McKeon, of State Supreme Court, worked to bring about settlements long before the cases moved toward trials.

The approach, known as judge-directed negotiation, is seen by the Obama administration as offering states a way to curb liability expenses that have sharply increased health care costs nationally. Getting judges involved earlier, more often and much more actively in pushing for settlements, is its crucial ingredient — evident in the recent session watched by this reporter, one of many that are usually not attended by the public.

New York officials say the program bypasses years of court battles, limiting legal costs while providing injured patients with compensation that is likely to be less than a jury would award but can be paid out years earlier, without lengthy appeals.


Friday, June 10, 2011

Sealed with a kiss: How the mafia makes a deal

June 10, 2011

The long and passionate kiss between the two young men continued for several seconds, as onlookers gawped and photographers snapped incessantly. Their lips finally parted when police officers yanked one man away and shoved him into a waiting police car.

Uninhibited public shows of affection between men are seldom seen in Italy. But these two weren't lovers. And the show they put on outside Naples police headquarters on Wednesday evening was something rarer still – a full kiss on the lips between Camorra mobsters as a powerful sign, made very public, that the bonds of the crime syndicate would remain strong and the arrested man would remain silent. Experts say that this particular mob tradition has never previously been filmed or photographed.

The young mobster under arrest, Daniele D'Agnese, 27, a senior figure in the notorious Scissionisti clan of the Camorra, locked lips with not one but two younger male associates in front of press cameras and crowds. La Stampa newspaper said the kisses were a message telling the pair that they would not be left to fend for themselves.

"It was a sign to the weaker members of the group telling them, 'We'll continue to be a group; we'll command the same territory and whatever happens, you won't be abandoned'," it said. The kiss may also have been a sign to rival clans that Scissionisti bonds remained strong.


Tuesday, June 7, 2011

Once-in-a-lifetime lunch

by Amy Braverman Puma

University of Chicago Magazine

May-June 2011

I took a spot in the back of the Quad Club solarium, leaving room for A-list guests closer to the luncheon's honoree, Nobel Prize–winning economist Ronald Coase. Still, in the end pretty much everyone who’d come to celebrate Coase’s 100th birthday was A-list, and my out-of-the-way table filled with notables including economist Allen Sanderson, University provost Thomas Rosenbaum, and, sneaking in just after the salad was served, 2007 Nobelist Roger Myerson.

Myerson was still pulling in his chair when economist and New York Times columnist Casey Mulligan shot him a question: “Roger, do you think we should be in Libya?” It took Myerson only a moment to collect his thoughts and respond that, from his perspective, Arab-League and UN approval for the no-fly zone made it a justifiable intervention.

Meanwhile, Sanderson was delighted to be sitting next to Rosenbaum, he told the physicist, because he had a burning question—about the physics of kids’ soccer. “At my granddaughter’s games,” Sanderson said, “whenever the goalie gets the ball, she throws it. Wouldn’t kicking be better?” Yes, Rosenbaum agreed: legs are stronger than arms, so kicking, although less accurate, would get the ball farther down the field.

Ten minutes before the luncheon was scheduled to end, I worried aloud that perhaps no one would speak and I’d have nothing to write about Coase. Myerson generously launched into stories about the Law School professor emeritus, who had turned 100 this past December but whose University celebration had been postponed until late March because it had been too cold for him to venture out. Myerson recalled how, after a 2001 dinner to honor then-incoming University President Don Randel, everyone had left but the Myersons and the Coases, who stayed and talked awhile. On the Myersons' way home, they agreed that, should they live into their 90s, they hoped to be as sharp and interesting as the Coases.

Soon economist Gary Becker, AM’53, PhD’55, a Nobel Prize-winner himself, did get up to speak. He told the room how Coase had been born in England, attended the London School of Economics, and later came to the United States, first to the East Coast but in 1964 settling at the University of Chicago Law School. “It was the first law school, to my knowledge, that had an economist teaching full time,” Becker said. Law School professor Aaron Director had started the Journal of Law and Economics in 1958, and after Director retired in 1965, Coase “really made it into a major and influential journal.” Becker noted that when he first met Coase in 1970, Coase “didn’t say a lot, but I began to realize that every time he did say something, it was really profound.”

Becker discussed Coase’s “four most important papers,” including his 1937 article “The Nature of the Firm" and 1960’s “The Problem of Social Cost,” which was cited when Coase won the 1991 Nobel. When that paper, about bargaining, social costs, and efficiency, was published, Becker said, “I read it, and it seemed revolutionary. I called [George] Stigler [PhD’38] and said, ‘This seems like an important paper.’ George said, ‘Yes, but a lot of people around here don’t think it’s correct.’ I read it again. It seemed correct to me. I assigned it to my class.” The paper laid out what’s now known as the Coase Theorem (although so many people misinterpret it that there's an academic paper on whether economists teach it correctly).

“He’s still working,” said Becker, noting that Coase has coauthored a book coming out later this year, How China Became Capitalist (Palgrave Macmillan).

After a tasty chicken meal, Sanderson remarked that we were having “an intimate lunch with four Nobel Prize winners.” Along with Coase, Becker, and Myerson, 1995 laureate and Chicago professor Bob Lucas, AB’59, PhD’64, was also at the lunch. Intimate indeed: afterward I felt like I knew some of them myself.


Read "The Nature of the Firm"

Read "The Problem of Social Cost"

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1991

Friday, June 3, 2011

Rational After All: Toward an Improved Theory of Rationality in Economics

by Yulie Foka-Kavalieraki and Aristides N. Hatzis

Revue de Philosophie Economique
Vol. 12, No. 1, June 2011

In this paper we critically review the literature on rational choice theory (RCT) and the critical approaches to it. We will present a concise description of the theory as defended by Gary Becker, Richard Posner and James Coleman (as well as others) at the University of Chicago from the mid-1970s to the early 1990s, we will discuss its epistemological assumptions and predictions and we will also examine the most important arguments against it. We will give our main emphasis on the critique coming from behavioral economics and we will try to see if humans’ supposed cognitive constraints lead to a failure of rationality or if they constitute rational responses to the scarcity of information, time and energy. In our discussion we will use findings from experimental economics and the sciences of the brain, especially evolutionary psychology and neuroeconomics. Our intention is to present an improved theory of rational choice that, informed from the above discussion, will be descriptively more accurate but without losing its predicting power. Moreover, we will conclude by trying to answer the most important related policy question: when rationality seems to fail, does this necessarily imply that agents should be paternalistically protected against themselves? We will briefly defend the thesis that, in the long-run, it is much better for them and the society at large for the individual decision makers to be let alone to develop rational responses to their cognitive constraints.

Keywords: Rational Choice Theory, Behavioral Economics, Evolutionary Psychology, Rationality, Cognition, Paternalism

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On ‘Jeopardy!’ Women Take Fewer Risks vs. Men

June 2, 2011

A study of contestant behavior on the popular game show “Jeopardy!” suggests women tend to hedge their bets when facing male opponents.

The answer is: It’s a game show that provides surprising clues about sex, social rules and risk-taking.

And the question is: What is Jeopardy!?

Two Swedish researchers, writing in the journal Economics Letters, report an intriguing pattern of behavior by contestants on the popular quiz program. Women, it seems, take fewer risks when their Jeopardy! opponents are men.

Gabriella Sjogren Lindquist and Jenny Save-Soderbergh of the Swedish Institute for Social Research looked at 206 episodes of Jeopardy!, focusing on those moments when one of the three contestants must decide how much to wage on a Daily Double.

For those unfamiliar with the Jeopardy!, Daily Doubles pop up at random during the course of play. Rather than wagering a set amount on whether they will know the answer to a question (the show’s usual format), contestants are given the opportunity to bet as much or as little as they like, up to the amount of money they have accumulated to that point.

The researchers tallied the results of 615 Daily Doubles, featuring 251 male and 65 female contestants. (The same contestant can play several Daily Doubles during the course of the show, and still more if he or she wins and returns the next day.)

The researchers found “no systemic gender differences in performance,” either on the Daily Double questions or the final scores. But they also determined that “male players are more likely to give the correct answer when competing against males only.” Perhaps man-to-man competition, which played a vital role in our evolutionary past, sharpens the male mind.

Most intriguingly, the researchers found females “apply a more conservative wagering strategy” when their two opponents are both male. Compared to instances when they’re up against two women, or a man and a woman, “Women wager 25 percent less of their accumulated score on average” when they’re competing against two men.

“Men do not display this behavior,” they add.


Read the Paper