A thing I’m thinking about (inspired by Doughnut Economics): In the US, we think of money as being made by the Treasury Department. We worry, rightly, about increasing the money supply arbitrarily by just printing more. Unbounded monetary creation has inflationary tendencies. (Whether or not we currently strike the right balance is irrelevant to the rest of this discussion.)

Banks cannot create money, officially at least. However, they can issue loans in excess of the reserves they hold, so they kind of can create money. I don’t have the data to compute it, but the financial crisis of 2008 supports a claim that this system has created excess financial resources beyond the official money that backs it.

This money can only be used for certain types of spending. Three major things this loan money is spent on are houses, financial assets, and college loans. (Another major, interestingly different category is business loans.) Housing, the stock market, and college cost are all areas where we see constant growth that exceeds general inflation. In the first two, we’ve framed that as a good thing indicating economic health. However, all three share the same underlying mechanism of relying on the excess loan based money supply as an input into their growth.

I’m not drawing any particular conclusion here. Maybe these things are good for our economy overall. I have my suspicions that they are more short term extractive growth than long term value producing growth, but that’s my hunch.

Rather, my purpose here is to illustrate that policy and mechanisms make a substantial difference in outcomes. I don’t know if our economic situation would look better or worse if, for example, all loans had to be backed by currency held by the issuing institution. However, it would certainly look different in interesting and impactful ways.

Maybe some folks here will find something useful in this (slightly edited) message I sent to my team.

We’re one month into the new year. We had a break. And for many of us–me included–things still feel blah.

Maybe we’re used to coming back to work more refreshed after the break. Maybe, despite our acknowledgment that a digit change isn’t magic, we didn’t expect things to keep being so hard after the new year.

And even with the vaccines rolling out–or perhaps, especially with the vaccines rolling out–we can see that the road back to a world where we can get together is not going to be short. We miss seeing our coworkers. Even more, we miss our friends and our families.

This is hard. A near year of chronic background stress is a challenge for all of us, more so for some of us depending on our personal circumstances.

So, I want to let you know that I’m thinking of all of you. Please continue to take care of yourselves. And if you ever want to talk about anything, work related or not, please let me know. I am here for you.

Be well.

In Understanding the Process of Economic Change Douglas North observed that governments are less efficient than markets at solving problems because the problems that are left for the government to solve are the ones that the market cannot solve efficiently. Or, to put it another way, governments are less efficient than markets because of the nature of the problems each is asked to solve, not the inherent nature of governments vs markets.

The implication here is that government may well be the most efficient mechanism for solving the sort of problems left for governments to solve—at least at the time that the government took on the solution. Markets, presumably, would solve them no more efficiently. Similarly, governments are less efficient at solving the sorts of problems that markets are good at solving.

What are some factors that make markets or government better fit for a problem? I don’t have an exhaustive list, but two factors mentioned in the book are transaction cost and alignment of incentives.

When transaction costs can be fully internalized into the price, the market is likely to be more efficient than a centralized solution imposed by the government. However, if costs are not fully internalized then a centralized solution can be more efficient. However, those are not the only two options. A hybrid option is that the government uses its authority to force the internalization of cost. This is the idea between markets in various emissions.

Incentive alignment is harder to describe concisely. Problems that are well suited to the market are those whose incentives are aligned to the rules of the market. That means that markets tend to work well when the main factors you care about can be included in the price. However, price cannot capture all of the incentives that we might want to consider. When non-price translatable incentives contribute a non-trivial share of the value of some action, then market mechanisms are likely to be ineffective.

As a concrete and timely example, the market would be a terrible way to set policy for distribution of covid-19 vaccines. That would magnify the disparities we already see in covid-19 deaths because it would favor folks who are already less likely to die from the disease. However, markets may well be an effective mechanism for setting up the actual distribution network, with more vaccination capacity allocated to those organizations that demonstrate an ability to more effectively deliver the vaccines to people according to the schedule that the state and national governments determined. As this article discusses, in West Virginia a public-private partnership is getting effective results—and a different public-private partnership with CVS and Walgreens is not doing as well.

However, we should not assume that this flow is static or only goes one direction. Some solutions taken on by the government may be better taken on by the market. When this is because the government chooses to not solve the problem—whether or not the government could theoretically solve it more efficiently—then it is easy to see that the market should solve the problem instead. When we talk compare efficient solutions, we only include those which are actually available.

The harder case is when capabilities and constraints change in a way affects the efficiency with which a problem can be solved. A problem that was once most efficiently solved by the government may now be more efficiently solved by the market. A problem that was once solved most efficiently solved by the market may now be more efficiently solved by government.

These cases are the most challenging because organizations, once given a power, tend to be reluctant to give up that power. The more monopolistic the organization that holds the problem solving power is, the more resistant it will be to change. This means that in markets where a player has disproportionate power shifting problem solving power will be harder—whether that shift is within the market to another player or to a government. Even harder is when something should shift from the government back to the market. Since the government generally puts the force of law behind its monopolies, even motivated new solution providers can be stopped from getting a foothold.

So the interesting debate is not government versus markets, but rather which problems are suited for which problem solving mechanism. This is not a tradeoff we should discuss once but one which we should be reevaluating regularly as the landscape of capabilities and constraints evolves. Sometimes, the best approach may be a hybrid solution where we utilize a public-private partnership to divide the problem we are trying to solve into parts that are best handled by the market and those which, due to externalized transaction costs or incentive alignment, are better solved by the government.

Often, a debate is not only about which conclusions about a topic are correct. It is as much, or more, about defining the topic itself.

Yet we are rarely able to pin down definitions precisely—sometimes not even vaguely . We can learn something from postmodernism here. While I don’t personally consider postmodernism a philosophically healthy place to stay, it’s an important place to pass through. The critical heart of postmodernist theory, in my view, is that the observer is an unavoidable part of their view of reality. Thus, the idea of an objective, rationalistic reality is untenable. (I like this article’s discussion of postmodernism.)

This idea leads to observation that human categorizations of the world are socially constructed. Social construction includes everything from contentious-to-define categories such as those around race and gender or seemingly-mundane categorizations such as eggplants. Social constructionism can quickly lead down the path to believing that subjectivity is all that there is. And if everything, even the definition of an eggplant, is subjective, who is to say that there is any such thing as an eggplant?

This is where the idea of nebulosity comes in handy. It provides a way for us to balance the idea that the complexity of reality destroys our ability to have a purely objective rationalistic account of reality with the observation that there is a something out there which provides the ground truth for our observations.

Nebulosity means cloud-like, without a fixed boundary.

When does a cloud stop being a cloud? We can provide various definitions based on observable properties of the cloud, but whether or not that definition is correct depends on the context in which the definition is used. If we are defining a cloud for the purpose of weather prediction we may use different criteria than if we care about finding shapes in the clouds on a lazy summer day.

One important thing to realize about nebulosity is that it is not just uncertainty. Uncertainty is a statement about one’s knowledge of the world. Nebulosity points to the idea that the fuzzy boundaries are part of the world itself, not just our perception of the world.

Why is this idea useful, especially with respect to definitional debates? Nebulosity helps us understand that while definitions are constructed and malleable, they are not arbitrary. The subjectivity comes in deciding where within the fuzzy, nebulous boundaries we draw the categorical line.

The idea of nebulosity also help us understand why some definitions are harder to pin down than others. To go back to the examples above, gender and race may consist nearly completely of fuzzy boundary. Eggplants have nebulosity (e.g., do you care culinarily or botanically?), but there is greater consensus on what is in vs out.

The practical upshot of this is that we should always think about definitions within a context and with a specific purpose. Definitions are not (generally) arbitrary, but they are dependent on how they will be used.

(By the way, eggplants were not chosen at random. The ideas in this post owe a lot to David Chapman’s in-progress works In the Cells of the Eggplant and Meaningness (which is where the nebulosity link above came from). Despite their incomplete state, I recommend both for encouraging some interesting thought explorations.)

In The Expectations of Morality, Gregory F. Mellema develops the idea of moral expectations. (I didn’t think the book was great, but the idea was key ideas were interesting.)

There are things which we are morally expected to do (or not do) which we are not morally obliged to do. The book does not do a good job of saying what is meant by moral obligation. The working definition I extracted is that if one fails to fulfill moral obligations then one is guilty and deserving of punishment (morally, although not necessarily legally). If one fails to fulfill a non-obligatory moral expectation, one is blameworthy and deserving of some degree of censure, not punishment. That said, in my working model, these concepts form a spectrum that spans from the merely disappointing to the outright guilty.

The praiseworthy is that which goes above and beyond what is expected. This is also called the supererogatory.

The book does not discuss where moral expectations come from and what makes something obligatory or merely expected. My working hypothesis is that they come from the social contract.

Aside: I’m using the social contract here in the broad sense of the implicit understanding between individuals that allows society to function. It includes explicit rules, including laws, but consists mostly of norms or, in other words, expectations.

Unfulfilled moral obligations violate the social contract. Society, at large, has agreed it has the right impose negative consequences for not fulfilling an obligation.

Unfulfilled moral expectations do not violate the social contract. They weaken it. No negative consequences are due, but some level of disappointment or condemnation is in order.

Going above and beyond that which is required to fulfill an expectation or obligation enriches the social contract. If this leads to a sustained pattern of behavior, it can create a positive sum situation which persistently enriches the social contract. (Which, in turn, may turn today’s “above and beyond” into tomorrow’s expectations.)

Explicitly grounding moral expectations and obligations in the social dynamics of groups removes the Platonic idealization of morality. It places it in messy and contextual reality of human relationships. For those who look for a morality that is universal and unchanging, this may feel unsatisfying. However, after having sat with ideas like this for awhile, I the idea of morality as an emergent property of group dynamics to be empowering rather than limiting. (See Nonzero for an interesting development of this idea as part of a larger thesis; Wright’s The Moral Animal, which I haven’t read, goes into the moral angle more deeply.)

Cultural appropriation is a topic I come back to regularly. Not all examples of cultural borrowing constitute cultural appropriation. Yet there are some examples of cultural borrowing that are offensive to members of the culture borrowed from.

One lens we can use to think about cultural appropriation is that of boundary maintenance. All groups have a boundary. The boundary may be hard and clear: employment is a group membership that is documented and legally constrained. The boundary may be soft and fuzzy: membership in the Jane Austen fandom requires merely a certain self defined amount of interest in Jane Austen and her works. Most boundaries fall somewhere between.

If a particular element of a culture is part of the boundary maintenance mechanism, then taking on that element as an outsider can be seen as cultural appropriation. Taking on boundary maintaining elements can cause harm. (Note: I am not claiming this is the only type of cultural appropriation.)

It can lead to the incorrect impression that one is a member of a group. Whether or not this is harmful depends on how strictly the group defines its boundaries. Pretending to be part of a reasonably coherent group can harm its reputation . Pretending to like an author will likely just result in confusion. However, it is important to realize that falsely pretending to be a member of a group can be legitimately considered harmful by members of the group.

The second harm is that it can harm the group’s structural integrity by weakening its boundary. This is the sort of harm that comes, for example, from culturally demeaning Halloween costumes. By taking cultural markers of pride and identity and making them frivolous, the group loses access to some of the elements that define them as a group.

The second, in my opinion, is the more harmful aspect of cultural appropriation. When cultural appropriation weakens the sense of connection within a group, then it is harming the ties that create community and strengthen society.

Note that weakening groups via appropriation is a technique activists sometimes use intentionally. For example, gay men hijacked the #ProudBoys hashtag used by a white supremacist group of the same name. Since not all groups create community and strengthen society, it is valid to try to dissolve such groups, and appropriation is a tool in the activist’s toolbox. However, it’s worth acknowledging that such uses are indeed an instance of cultural appropriation.

“Sunlight is the best disinfectant.”

When bad behavior goes unchecked, it will grow and fester in secret. By exposing bad behavior, the system will be forced to clean it up.

This is part of how high trust systems maintain cooperation. As discussed, for example, in Eric D. Beinhocker’s The Origin of Wealth, in high trust societies, the general expectation that people will behave in trustworthy ways leads to people making more cooperative choices. Since people are not perfect, a high trust society also punishes those who violate cooperative norms. In these cases, exposure—sunlight—is a key factor in maintaining trust.

However, it does not follow from this that any and all exposure is good. Another observation from The Origin of Wealth is that when individuals perceive themselves as being in a low trust society, they will avoid cooperative actions. This becomes a feedback loop. The perception of being in a low trust society can lead to the reality of being in a low trust society.

What does that have to do with exposing bad behavior? At any given time in a high trust society, there is uncooperative behavior going on. Under usual conditions the system can easily survive these shocks. Bad behavior is punished and everyone else continues to cooperate.

Now imagine a world where every infraction is publicized for all to see. (We might call that world The Internet.) All of a sudden, people see uncooperative, low trust actions happening ALL. THE. TIME. This environment, which is actually behaving as a functional high cooperation environment starts to feel like a low trust, low cooperation environment. And because people act based on the norms they see around them, more people will start acting as if they are in a low cooperation environment, creating a feedback loop of decreasing trust.

This means that, contrary to what one might think, widely publicizing bad behavior in a high trust environment (rather than just punishing it locally) can turn it into a low trust environment. The change is not caused by the uncooperative acts—remember, the system is designed to absorb a low enough rate of those. The blame goes to the publication of those acts.

Sunlight is the best disinfectant, but only as long as people are unwilling to have their actions exposed to the light. Overexposure normalizes uncooperative behavior, leading it to multiply.

Note: Rob Hansen, the host of the original conversation below (but not the person making the objection, posted a thoughtful response to this on his blog.

Over on Facebook, someone objected to the idea that social media twists people into something they’re not.

At one level, the answer is simple: it doesn’t. But on another level, it twists us profoundly.

The statement is true is so far as social media cannot really make us into something we are not.

What is can do, however, is amplify that which is already inside of us. And by our very human nature we have within us the capacity to do great harm to each other.

People are responsible for who they are, but people are also deeply sensitive to incentive structures. The ethically questionable Stanford prison experiment is the canonical example of how social incentives can easy bring out the darkness that is inside of us. Alternately, the person who is nice in private but willing to laugh at you in public with the pressure of peer opinion is a trope of high school life, both real and fictional.

What we have in most social media is an environment which incentivizes the worst of everyone. While many may avoid actually becoming distorted they will still be influenced by their environment. To use another metaphor, you can hangout with drug using, alcoholic, violent criminals without becoming one yourself but you’ll be a much better version of yourself in a more gracious environment.

If you want a really long answer to how social media actually modifies our behavior, I recommend reading Status as a Service by Eugene Wei. The gist of it is that linking status to a certain type of action (which varies by service) encourages people to engage in more and more of that type of action. On many social networks, what earns status is anger, hyperbole, and lack of empathy. It’s better to cleverly own your opponents for a quick jolt of emotion than it is to learn something from someone you don’t understand.

And thus the downward spiral feeds on itself.

Most people want to change in some way, but how do we understand who we currently are?

One popular approach is the life narrative. We look back on our whole lives, from childhood up to the present moment, and search for the threads that we believe define who we are. We search for salient memories and interpret the past through our current selves and desires.

A quick caveat. I think the life narrative approach often over emphasizes the impact of one’s childhood. They may assume that childhood influences are the most important in your life. They may assume that childhood influences are inescapable. I don’t believe either of these things are true. Post-childhood experiences can be extremely influential—I say as someone who has lost both parents and a child as an adult. I also do not believe that childhood experiences are inescapable. Childhood trauma should not be ignored, but it need not define one’s life.

That caveat aside, I do think there is value to generate whole life narratives. However, a narrative on its own can easily become a just-so story—an untestable narrative which is accepted because it sounds compelling.

A second popular approach to self-understanding is to assess ourselves in the present moment. We love assessments! Most people have take a personality test like the Big Five personality assessment or the more popular Myers Briggs. Many of us enjoy BuzzFeed assessments matching us to Hogwarts houses or Disney characters even though we think they’re kind of silly. Behavioral tools such as 360 assessments can give us a broader picture of how others see us.

These assessments vary widely in quality. The common thread is that they assess who we are based on our current beliefs and behaviors. They may include some questions about our past, but they do not try to explain our present in terms of our past. This is both their strength and their weakness. The strength is that high quality assessments are reasonably objective. Their weakness is that they take each of us as a single point in time when really we are each a dynamic system influenced by our past.

The real power comes when we merge these two. Look at what assessments tell us about our present self. What seems good? What seems bad? What seems self evident? What seems surprising? Now, look at your narrative history and connect up the past and the present. Are there parts of our past we should celebrate for making us who we want to be? Are there parts that create stumbling blocks? Having this holistic understanding helps us find a path forward that is more likely to lead to success.