An Interpretation of McCloskey (2006)

The following essay is a version of what I read in the “Virtue Palaver” hosted by Prof. Daniel Klein on his YouTube channel.

Aristotle says that virtue is knowledge of the soul. Knowledge of virtue is knowledge about your proper role in both the polis and the cosmos. Virtue, in that sense, is a knowledge that is intensely practical. The goodness of a virtue is a meaningful goal that is self-motivating. We don’t need something external to justify virtue. Justice is a virtue. A direct understanding of virtue connects good conduct to the good of the whole. The utilitarian vision has spent a lot of computer time describing the contours of the good of the whole, but none motivating or clarifying good conduct. The deontological vision has spent a lot of time laying out the standards of good conduct, with the contributions to the good of the whole playing second fiddle. Without a reason beyond the rules to conduct yourself well, the thorough instructions fall flat. A virtue, when apprehended, describes both what you are if you contribute to the good of the whole and gives practical instructions on the proper conduct towards that end. Holding that something is virtuous motivates the pursuit of said virtue. 

Virtue ethics provide us with genuine knowledge, with something that is true in a practical sense. If ethics is practical knowledge, how can we afford ignoring it in economics, the science of practicality. In economic terms, knowledge of virtue is knowledge about the production function of you (which by construction you are trying to maximize). The knowledge that we’ve accumulated in economics itself might be thought of as a study in the virtue of prudence. When an economist aspires to positive over normative claims and to remain agnostic about morality, they usually are burying the lede, and covertly declare prudence the only meaningful moral lens.

In other spheres, we allow ourselves to declare chemical, biological, or psychological theories true as background to our economic models. Growth happened because scientists finally found the true theory that led to the steam engine and cotton gin. Again though I’ll say, if ethical knowledge is practical knowledge, why don’t we allow ourselves to presume ethical truths as a meaningful discovery of how to live better by our little men in the model? When Jim sympathizes with Mary, he discovers something real about the world that elevates his behavior. It changes the matrix in which his decisions are made. When a man discovers his place before God, how can that truth be less impactful than man’s discovery of the laws of mechanics? When we separate the positive from the normative we separate the common meaning between the true and the good. Pursuit of the true without attention to the good, or pursuit of the good without attention to the true, leaves us with neither Truth nor Goodness.

Mokyr (2016) holds that there are a number of theories one can hold about chemical or mechanical processes. They are theories about how we should interact with the physical environment. He also holds that a subset of these are true. He holds the institutional conditions in Europe, as well as some other factors that led us to holding the true theory. Consequently, there were more profound effects on the growth of industry in Britain and the Netherlands. Presumably, Mokyr believes that he agrees with his audience about which set of physical theories are true. With this shared agreement, his rhetoric proceeds reasonably.

McCloskey might be asking us to go a level deeper. McCloskey holds that there are a number of theories that one can hold about morality or ethics. They are theories about how we should approve and disapprove of one another’s conduct and how we should respond to each other’s behavior. She holds that a subset of these are true. She holds the institutional conditions in Europe, as well as some other factors that led us to holding the true theory. Consequently, there were more profound effects on the growth of industry in Britain and the Netherlands. McCloskey however has the added challenge that the truth of moral values might not be shared with the reader. The truth of these beliefs is not arbitrarily related to their practical import and conduct. I am not reducing the truth of the bourgeois virtues to their prudent consequences. 

If ethics can’t help us explain the world, then the ethics we have is not useful for this world. I don’t know how to begin addressing this problem, but I suspect that the answer comes from dwelling in the great mind of Adam Smith as Dr. Klein has spent so much effort helping us to do so. A complete economics pays attention to more virtues than prudence, heals the positive/normative division, and binds back together the Theory of Moral Sentiments with the Wealth of Nations.

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Philosophical Conceptions and Equilibrium Results

Imagine a strategy in an iterated prisoner’s dilemma game called “Pessimistic Tit-for-tat” (PTfT). It is functionally the same as normal Tit-for-tat. The player plays the same move that their opponent played last round. The only difference is that this player plays Defect in the first round instead of Cooperate. If both players play PTfT, they’ll receive the infinite series of (D,D) payoffs. The good news is, if I know that the other player will copy my moves, maintaining defection rarely holds as an equilibrium.

The question stands however, why wouldn’t they start with normal TfT? We might presume that a player who is pessimistic plays PTfT at the outset. They begin with the belief that the other player will play Always Defect (AD). If both players begin with the pessimistic mindset befitting the PTfT strategy then an infinite stream of both defecting is an equilibrium no matter what their discount rate is. Not only that, but given that the players cannot communicate in any way except through the strategies of the game, the stream of (D,D) that both players observe does not refute their initial pessimism. Little does either player know, but if they only took one small leap of faith and played C, just for the heck of it, a window of opportunity and the ability to communicate would open up that could lead both players into each other’s loving arms. 

Robert Hardin describes a similar thought experiment in his 2003 book Indeterminacy and Society. The supposedly unique equilibrium of a finitely repeated prisoner’s dilemma is (AD,AD). The trough equilibrium is due to the ability of both players to backwards induct and anticipate the final round of defection, unraveling any prior possible cooperation. Hardin proposes that in the first round, one player plays Cooperate. By making this simple sacrifice, one player has opened up the window of possibility and no longer given the game a strictly determinate outcome. Interestingly enough, this strategy was exactly what was played in a 100 period prisoner’s dilemma game played by Armen Alchian and John D. Williams as recorded in William Poundstone’s Prisoner’s Dilemma. For the remainder of the game the two economists used the two strategies as both a means of punishment and reward as well as a means of communication.

In his 1898 essay “Philosophical Conceptions and Practical Results”, William James attempts to clarify the pragmatic maxim with an example. 

“The question, is matter the producer of all things, or is a God there too? would, for example, offer a perfectly idle and insignificant alternative if the world were finished and no more of it to come. Many of us, most of us, I think, now feel as if a terrible coldness and deadness would come over the world were we forced to believe that no informing spirit or purpose had to do with it, but it merely accidentally had come. The actually experienced details of fact might be the same on either hypothesis, some sad, some joyous; some rational, some; odd and grotesque but without a God behind them, we think they would have something ghastly, they would tell no genuine story, there would be no speculation in those eyes that they do glare with. With the God, on the other hand, they would grow solid, warm, and altogether full of real significance. But I say that such an alternation of feelings, reasonable enough in a consciousness that is prospective, as ours now is, and whose world is partly yet to come, would be absolutely senseless and irrational in a purely retrospective consciousness summing up a world already past. For such a consciousness, no emotional interest could attach to the alternative. The problem would be purely intellectual; and if unaided matter could, with any scientific plausibility, be shown to cipher out the actual facts, then not the faintest shadow ought to cloud the mind, of regret for the God that by the same ciphering would prove needless and disappear from our belief.…Accordingly, in every genuine metaphysical debate some practical issue, however remote, is really involved. To realize this, revert with me to the question of materialism or theism; and place yourselves this time in the real world we live in, the world that has a future, that is yet uncompleted whilst we speak. In this unfinished world the alternative of materialism or theism? is intensely practical!”

William James “Philosophical Conceptions and Practical Results”

Now think back to the two pessimistic players. It appears that their pessimism leads them into a trap, and that in their debates about what theory more properly describes the past AD or PTfT, there will be endless pedantic debates. But when each player, iteratively choosing a strategy, must decide whether to remain in their pessimism to a predictable conclusion, or to take a momentary leap of faith, the question of what the other player is truly playing remains a lively and interesting question. So appears the game between man and the theories which he imposes upon his surroundings. As James notes, metaphysical debates remain live practical issues as long as there is a future to keep them alive.

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Coordination Games Are Not (Merely) Maximization Problems: Welfare Economics Reconsidered

Leeson (2019) compellingly demonstrates that the logic of maximization entails that every institution is efficient, where efficiency consists of a stable equilibrium in which gains from trade are exhausted. What he wants us to take away from this is not that we live in the best of all possible worlds (that may or may not be true) but rather to think, “So much the worse for efficiency.” Efficiency is not an operational concept in economics. I aim to rectify this problem.

The problem with efficiency is that an invocation of the idea with respect to institutions seems to commit the Nirvana fallacy (Demsetz 1981), which is another way of stating Leeson’s point. “Monopolistic markets are inefficient” — compared to what benchmark of efficiency? Perhaps a government could break-up the monopoly for a cost less than the deadweight loss of the monopoly’s existence, for a net efficiency gain. Then again, perhaps the government’s activity would be more costly. This is Demsetz’s (1964) point. Complicating the situation further, perhaps the dissolution of a monopoly does at present yield a net efficiency gain, but also precludes a future market shift that would have eliminated the monopoly at less cost, which means that, all things considered, antitrust action (or the repeal of rent-creating legislation) may generate a net efficiency loss. The same pattern of reasoning applies to all instances of market failure and of government failure: It is impossible to compare the relative costs and benefits of alternative institutional arrangements.

The problem can be made more precise. Allen (1991) gives us a working definition of transaction costs: the costs of defining and enforcing property rights. Perhaps we can attach a dollar value to the costs of enforcement — intuitively, the defensive output of locks on houses, police forces, and the like can be measured with some level of precision, as can the labor and capital costs required for their production. But what can possibly be meant by the costs of defining? What is the cost of defining a rule?

Let’s suppose this: the opportunity cost of defining a rule in one way is the value of defining the rule in the second-best way. Thus, the cost of defining a rule includes both alternative ways of defining the same rule and defining different rules entirely (sidestepping the ship-of-Theseus question, “Is it still the same rule?”). It is tempting to look at the costs of definition as an empirical question. This optimism is naive at best. We can’t identify the cost of a particular institutional arrangement because we can’t  know the set of possible outcomes that the institutional arrangement will generate, and we can’t know the set of possible outcomes for every alternative institutional arrangement. As Hayek points out, the value of liberty consists in the fact that liberty will generate outcomes that the designer of the system could not foresee (1960, 1991). It is a “fatal conceit” to imagine that we can envision every possible response to a given set of rules.

Thus the true opportunity cost of alternative rulesets must of necessity be indeterminate, where true cost is the one that rule-followers and rule-creators actually bear. The cost of definition is neither a theoretical nor an empirical question; it is an unanswerable one. But we might say instead that choosers face a given probability distribution of costs, or distribution of distributions, or that at the very least they have some conjecture or intuition (that need not match reality in the slightest) of the relative strengths and weaknesses of different rules. Economists like Leeson are inclined then to say that every institution is efficient. Given the logic of maximization, it follows that every institution is efficient: people maximize with respect to their information about benefits and costs of different institutions.

What I want to suggest is that there are cases of decision-making which cannot be properly described as maximizing. Sometimes people have no prior beliefs about the benefits and costs of an action, and yet, by the nature of the decision they confront, must act. It is in fact the action which creates conditions for belief, or perhaps taking action just is the formation of belief, but the action is not determined by some prior set of beliefs, information, or the like.

Consider the case of an aboriginal island nation, some sixty miles west of a mainland of which the islanders are ignorant. The indigenous peoples have an extremely low standard of living relative to the mainlanders. Both could benefit from exchange. Thus, in this status quo, there remain unexploited gains from trade. So it is tempting to call the situation inefficient. On the island, however, they do not have the technology to sail to the mainland; indeed, they may not know that the mainland exists. So, given that the islanders are doing the best they can with what they have, the situation is efficient. The ignorance of the mainland is just another component of the islanders’ budget constraint.

But a thoughtful islander will recognize that he does not, properly speaking, know whether there is a mainland or not. He might surmise that there is the possibility of sailing to another place and finding another people with whom he can exchange, but the islander knows neither the costs of sailing nor the benefits. He may sail east and find the mainland, or he may sail west into oblivion. The costs of each journey are radically different and his decision must be arbitrary with respect to maximization. The same can be said for the costs of making a journey at all. The same can be said of the decision to invest in the production of seagoing watercraft in the first place. The same can be said of the decision to think about investing in the production of seagoing watercraft. The uncertainty with which the islander must operate precludes him from assessing opportunity cost. The benefits that the islander might receive from sailing are wholly unknowable prior to attempting a journey.

Whatever the islander decides to do, his decision is not maximizing. He is not optimizing a consumption bundle under constraints. He is not maximizing a risky consumption bundle with known probabilities of consumption under a risky constraint with known probabilities of various costs. Whether he chooses to sail or not, he is choosing to pursue an unknown consumption bundle with an unknown probability of acquisition against an unknown set of costs with unknown probabilities of bearing those costs (Knight 1921). 

A thoughtful reflector on a given rule may recognize that he does not know whether the rule is best, and yet, he still must choose to uphold or follow the rule, or change it or disregard it. His behavior is shaped by a choice he must make about the rule. A sufficiently self-conscious chooser must make this choice, in circumstances of great uncertainty, without respect to beliefs he has about the rule: he does not have enough belief to generate a decision. Nonetheless, the logic of the situation requires that a decision be made. A decision is made that is not entirely maximizing; maximization does not summarize the entirety of the decision making process.

To sum up so far, the logic of maximization commits us to seeing all institutions as efficient. However, because it is impossible to appreciate the opportunity cost of defining alternative rules, it is better to say that all institutions are of indeterminate efficiency. In other words, people are not (always) maximizers. We should still accept Leeson’s principal conclusion: Welfare economics is unscientific. This is not because all rules are the best we could have, nor merely because we cannot know, in principle, if given rules are the best we could have, but because this fact causes some people to confront a forced decision where they must make a genuine choice about what to believe.

Two questions naturally arise from the foregoing discussion. (1) If people are not always maximizers, how do they make decisions when not maximizing? And (2) obviously, we know some rules are better than others, e.g., socialism precludes the possibility of economic calculation (Mises 1920; Hayek 1936, 1945; Lavoie 1985a, 1985b) and so people under socialist regimes will be poorer than those under capitalist regimes, ceteris paribus. How do we capture this knowledge if not through the apparatus of efficiency?

The second is less existential and thus easier to answer. Leeson himself points the way. We need to cease speaking of relative efficiencies and substitute discussion of relative wealth. People living under socialism are poorer than those who are not. It may be too costly to remove those constraints, and thus, it may be the case that, were the costs of socialism and the costs of privatizing fully known, socialism is occasionally an efficient system. We can always say that, since the relative costs of socialism and of replacing socialism are never fully known, it is impossible to say whether socialism is efficient. However, we can know that people under socialism will be poorer than they would be in a broadly capitalist society if switching away from socialism were costless. Our desire to reform socialist countries is thus, in a sense, an informed act of faith – the economic analysis of socialism groundlessly assumes costless transition.

The assumption of costless transition is baked into every level of economic analysis. Consider minimum wages. Econ 101 graphs show us that a binding price floor generates a surplus, with a measurable triangle of deadweight loss. We are tempted to describe the situation as inefficient because we think we can see a clear relevant alternative: the equilibrium without minimum wage. But Leeson, Demsetz, Barzel, Stigler, Coase, and that whole gang of thoughtful critics of the Pigouvian tradition remind us that it is not by any means costless to repeal the minimum wage. Thus, we cannot say the institution is inefficient. But what we can say is that, if it were costless to repeal, repealing it would make people less poor.

Clearly something is right about the 101 presentation, even if it lacks nuance. What I want to suggest is that it is legitimate, on occasion, to falsely assume costlessness of transition. Economists can be guided by their moral judgments: We know it is not costless to repeal a minimum wage, but we know that if Congress just knew a little more economics and was composed of marginally less immoral people, they would repeal the price control (assuming the 101 depiction accurately captures reality). We assume costlessness for the purpose of demonstrating that, if we did not confront the costs of evil and ignorant people making our rules, we would be less poor. And we also slip in a bit of moral judgment in our estimation of greater poverty being, ceteris paribus, bad, and less good. The reason we use the supply and demand analysis is to persuade: to show others why it is that the world we live in is not as good as it could be. And it is that act of persuasion that can on occasion improve the world (or at least, increase our wealth).

It is not inefficiency that justifies intervention or its absence, but our moral judgment about why putative inefficiency is perceived. It may be the case that the putative inefficiency is not at all inefficient, when positive transaction costs are accounted for, like the mall parking lot in Demsetz (1964) or the pre-fur-trade Montagne lands in Demsetz (1967); it may be the case that the only reason transaction costs are positive is on account of the wickedness or ignorance of some people. Welfare economics must, as Coase (1960) explained, resolve into ethics and aesthetics.

This fact is not a demerit. In fact, it sheds light on the first question: If people are not maximizers, then what are they doing when they make decisions? They are, I suspect, relying on ethical and aesthetic criteria which guide their beliefs. And to the extent that they are relying on such criteria, they are not maximizing. The islander must make a decision whether to sail or not to sail. His decision is arbitrary with respect to his beliefs. But suppose he can choose to believe something. I am describing something rather like what William James lays out in The Will to Believe. The conventional economic analysis goes something like: beliefs/information inform decisions. What I have shown is that there are, plausibly, decisions that have to be made without the advantage of prior beliefs/information. I want to now suggest that the way James articulates the capacity for choice among beliefs is relevant to economic analysis.

James makes his argument about religion. Belief in God, so says James, is forced (for on his account there is no middle ground, no suspension of judgment, only belief and disbelief), live for some (meaning that there are some people who, for whatever reason, consider Deity to be a plausible metaphysic), and momentous (the decision carries a great deal of weight). Since evidence is incapable of demonstrating either the nature or (non)existence of God, yet people must still either believe or disbelieve in God, then they must make a choice – a choice about what to believe. It is not at all clear what governs this choice, but James suggests it is a person’s “passional nature”. In other words, people choose to believe in God because they want to live in a reality governed by God (where James gets controversial and interesting is in his view that this choice is utterly legitimate).

Feel free to set aside the philosophy of religion, but keep the Jamesian framework. The islander confronts a forced, live, momentous decision, for which evidence is incapable of discrimination. What governs his choice? Perhaps it is some kind of ethical or aesthetic judgment about what kind of world would be a good one to live in.

Economists have a model that captures and explains some kinds of non-maximizing behavior: the coordination game. In the coordination game, there are obvious mistakes to be avoided (left-right and vice versa) but there are two equilibria where the payoff is equal, and thus between which the players should be perfectly indifferent. Is the player’s decision thus completely arbitrary? Perhaps in the pure case, but certainly not in most identifiable real-world cases of coordination games.

Focal points (Schelling 1960) often arise as a result of the use of ethical and aesthetic heuristics. Focal points guide players to an equilibrium neither deterministically nor randomly. They are not deterministic since they arise on account of mutual expectations, and expectations about another’s expectations about one’s own expectations about another’s expectations about one’s own expectations (etc.) cannot, ultimately, be determined by decision-theory. That is, the set of mutual expectations that generates a Schelling point is not a linearly defined relationship of cause and effect, but is instead a spiral process without clear beginning. It is of course possible that people hold expectations deterministically on account of some physico-chemical or divine subordination of their psyche, but that possibility is irrelevant. The important fact is that an individual’s expectations about expectations about expectations (ad infinitum) is not determined by a strictly rational decision-making process.

And yet focal points are clearly non-arbitrary, and people can and do coordinate around them. They are not arbitrary for two reasons. First, they are apparently constrained by the possibility of discoordination: Left-Right and vice versa cannot be focal points. Another way of putting the idea is that not every point can be focal. From the outset, the hard constraint on focal points is that they only occur at equilibria. Second, they are constrained by ethical and aesthetic judgments. The clock at Grand Central Terminal at 12 noon is not the meeting place because it satisfies our preferences uniquely (other places and times satisfy our preferences equally well) nor because it is the place of highest probability of meeting (it is meaningless to speak of probabilities, since expectations of others’ behavior cannot have a probability attached to them on account of their circularity), but because the clock at Grand Central at noon has a kind of aesthetic significance that lends itself to coordination. Maybe that significance can be explained — but not in terms of maximization.

In other words, coordination games are not maximization problems. And yet, coordination games can be solved for Nash equilibria, in the real world, in such a way that behavior is not arbitrary. In general, I think institutions are (often, or at least sometimes) solutions to coordination games, and not the product of maximization. This means that institutions are of indeterminate efficiency: They are better than disequilibrium, but there might be an alternative point around which we could coordinate which would be just as good, or even better (Assurance), or better for some but worse for others (Battle of the Sexes).

The foregoing discussion does not and should not be taken to imply that I believe maximization is a useless apparatus. On the contrary, much behavior does seem to be maximizing. Even the creation of some institutions, like property rights in the Demsetz story, seem to be the result of maximizing behavior. However, not all behavior is maximizing, and those institutions which are the product of coordination games and not of maximization cannot be said to be efficient. Maximization implies efficiency; some behavior is maximizing; some institutions are thus efficient. However, some behavior is not maximizing but coordinating; some institutions are thus of indeterminate efficiency.

Recall the above discussion of minimum wage laws. Are they efficient? Suppose that American society has coordinated around minimum wages being a good solution to poverty — everyone expects everyone to be better off with a higher minimum wage. The efficiency of the law, strictly speaking, is indeterminate, since no one here is maximizing (there might be an equally appealing putative solution to poverty that is, for whatever reason, not focal). Efficiency analysis is nonetheless useful in illuminating our moral commitments and the moral state of the world. We may show by means of an efficiency analysis that, relative to other states of the world where people are less ignorant and politicians are less motivated to distribute rents, the minimum wage makes workers poorer. The key feature of this analysis that makes it acceptable is the fact that the appeal to efficiency does not assume costlessness of transition, but rather illustrates that the transition would be good to make if it were costless. In doing so, it highlights what the costs of transition are: the ignorance and immorality of the people who are coordinating. Thus, aesthetic and moral judgments are essential for guiding all non-maximizing behavior — including that of the welfare economist.

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Three Things I Learned in the First Year of an Economics PhD

1. Mathematics is a language.

Because of the circles I’ve grown up in, I’ve developed a violent kneejerk reaction against mathematical models. I am cautiously becoming more comfortable with math-y models, the more I study both economics and mathematics. Though it’s true that mathematical models can obfuscate the phenomenology of “choice”, when you understand the meaning of the models, the translations are much simpler. When you understand how to speak in mathematics, it’s much easier to read these models. A mathematical model is not the source of our insights, but they can be a useful way to communicate our insights. Mathematics should be judged the same way that we judge an AI translation program. If I can translate a sentence from English to Greek and back to English without loss of meaning, then I am satisfied with the accuracy of the program. Still, don’t let mathematical models scare you into believing them by their elegance, but to judge them you need to speak the language. You wouldn’t want someone critiquing your verbal model if they didn’t speak English, would you?

2. Questions can be more powerful than answers.

Once you give yourself a set of axioms, it’s not too difficult to find the fullness of their implications. Given a philosophical revolution, give or take a few centuries before that paradigm is dead, no matter how much “progress” it lead to. Once you find yourself in one of these paradigms it takes a special kind of attention, to find the foundations and subvert them. The set of axioms or assumptions that you choose is an art, and for those who want a “final, objective, authoritative” science, that’s hard to admit. If you can ask a meaningful and interesting question within an existing scientific framework, you can keep the wisdom of older thinkers while opening up a new frontier for discovery. In an academic career (especially early on), such questions should be your quarry.

3. Game theory has near limitless potential, especially for new institutional economics.

Before you comment, remember this is after my *first* year, not my second year. I will have a different, more humble opinion by then. I have become totally smitten with the style of institutional analysis that Greif promotes in his 2005 book, and in a number of his papers. From my brief skimming, he characterizes all institutions as a confluence of elements that people recognize and remember. Historically, this has been called a “spirit of the age” or zeitgeist. The narrowest that Greif defines institutions is as a regularity of behavior that everyone recognizes, and sees as external to them. The institution is an irreducible pattern that’s actualized by many different rituals of recognition and remembrance. Which is basically what a spirit is. There are multiple Nash equilibria that can be actualized, it’s not deterministic which ones are present. Economics is a set of tools for testing “plot holes” in the real world. Every story that you can tell about the world has to “make sense” in economic terms. But the “economic variables” constraints etc don’t dictate which story takes place. Many models include expectations, beliefs, interpretive frames without a good investigation of those terms and with a casual inclusion of their relevance. I want to get into that. It sounds fascinating.

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The Marriage Model of Economic History

There are two simplistic ways to do economic history. The first is the muddy, materialistic, and miserly (plus Marxist) approach. The second is the airy, heavenly, and idealistic approach. I want to propose a third. 

In the first, all the dependent variables are functions of material incentives. Why did the Industrial Revolution happen? Because property rights were secured, and long-term capital investments became worthwhile. Why is church attendance going down? Cable-TV has provided an ample substitute on Sunday mornings. Why did some Communist revolutions succeed and others fail? The successes occurred when the material interests of enough classes aligned. The basic tools of supply and demand explain the earthquakes and avalanches of human society, in all its peaks and valleys. (Figure 1)

The second approach can’t be expressed as a function, or if it can, it’s non-continuous and non-differentiable. Think of a Dirac-delta function. Why did the Industrial Revolution happen? The heroes of the Enlightenment wrote great tracts on liberty unleashing the spirit of human creativity and flourishing. Why is church attendance going down? The same spirit of Enlightenment has shown the old gods to be obstacles to human advancement. Why did some Communist revolutions succeed and others fail? Because some failed to properly enliven the proletariat with ideas, rhetoric, and revolutionary spirit. Supply and demand may have its place, but the primary agents of change are exogenous ideas. Ideas fall like manna from heaven. They’re a free lunch and we all get a slice. (Figure 2)

Both of these are caricatures, and I don’t believe any serious economist believes them in totum. The materialistic approach runs counter to the lived experience of being a human. Most people are motivated in business, love, and war by ideas. But the idealistic approach also runs counter to life on a material planet. Just as many people are motivated by money, pleasure, and navel-gazing self-interest. Most of life is shoving your meat bag around the planet as efficiently as you can. There’s a tension between both styles of explanation. I want to propose a third approach that hopefully incorporates the insights of both. 

What is the primary actor in biological evolution? Is it the mutations of the DNA, or is it the shape of the environment? Well, the environment, after all, is what “naturally selects”, but without mutations there would be no gas for evolution to get going. One could contend that as long as mutations occur, the environment is actually the final decider waiting for the one mutation that will survive, but why do we have to presume that there is only one potential mutation that the environment will select for? Suppose there are three possible mutations that we can evolve into (A, B, and C). If the environment tells us that B will not survive, then it is still up to the randomness of mutations to decide whether we go for A or C. If the environment selects against people that are five-foot tall, we may evolve into either four-foot tall or six-foot tall creatures. From that point on, the mutations that were chosen in the past create the new environment that selects for future mutations. There are two independent operations, the source that chooses mutations and the choice that selects for them. But when put into action over time, the environment selects the mutations that survive, and the mutations that survive create the environment. This understanding of evolution as a guide to human history is primarily motivated by William James’ essay “Great Men and their Environment”.

How many counterfactual histories depend on questions about individuals? What if Hitler had gone to art school? What if Columbus hadn’t gotten the funding for his voyage? What if Mary told Gabriel no? Individual human lives, ideas, and the spirit that they infuse the world with are like novel mutations on the human soul. But the society of incentives and interests that they’re born into remains ever-powerful. Wycliffe’s reformation didn’t work, but Luther’s did. The Reds beat the Whites on the battlefield and determined the 20th century for Russia. Sometimes the commodities market does matter more than the marketplace for ideas.

Of course, there has to be a seed, but the seed cannot fall on rocky soil or thorny soil or pre-trod path. And after the crops are grown, they’re going to determine which fields are plowed next. But what came first, the seed or the soil? The answer to me is in John 1, but that’s a bit too much to go into right now.

Also:

Beliefs and Institutions. A chicken and an egg problem or are they two sides of the same coin? When somebody says that they are Catholic, does this mean that they are part of an institution or that they hold a set of beliefs? Jesus was the meeting place of heaven and earth, “The Word made flesh”. Institutions are “beliefs made flesh”. Institutions aren’t just necessary for the proliferation of beliefs, they are also the product of beliefs themselves.

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How Elastic are Churches to a Pandemic?

There are two main ways that churches can adapt to Covid-19 regulations: changes in service structure and change in service times. Change in service structure can take many forms: Doing church online, having church outside, or having church with people in their cars. Churches alter service times by limiting the number of attendees who can come to a service and encouraging people to attend less popular services.

Churches can generally be divided into two categories: liturgical and non-liturgical. Major liturgical churches include Orthodox, Catholic, High Church Anglican, and some Lutheran denominations. They are characterized by structured services, rituals, and pre-written prayers and creeds. They also typically have an episcopal polity ( not to be confused with the American Epicopal church), which consists of bishops, priests, and deacons. Liturgical churches usually play traditional music. It is common for liturgical churches to have a variety of services throughout the week; some are full services like Divine Liturgies or Masses, and others are shorter vespers (evening prayer) or matins (morning prayer) services. On the other hand, non-liturgical churches will typically have less structured services, spontaneous prayer, and a variety of church governance systems. It is common for non-liturgical churches to only meet on Sunday mornings, although some will also have Sunday night and/or Wednesday night services. Their music is more likely to be contemporary.

Let’s walk through how churches in my life have responded to Covid-19 regulations. The Orthodox church that I attend has done very little to change how the service is conducted, and have mostly adapted by using an online registration system to limit services to 50% capacity and encouraging attendees to go to less popular service times. Attendees who are excluded by capacity limits for Sunday services use other non-Sunday services as substitutes, so demand increases for non-Sunday services. Some alterations to how the services are conducted have been made: icons and the priest’s robe cannot be kissed, people must maintain social distance (4 cubits) while in the church, and people have to bring a health form with them. I learned from talking with friends that local Lutheran and Catholic churches are also doing in person services regulated by online sign-ups. Larger churches like St. Nicholas Orthodox1 in DC and St. Leo the Great Catholic Church2 in Fairfax are also maintaining indoor service and reducing capacity, so it appears that this method of regulatory compliance is quite common and regardless of size, although some churches, like St. Leo the Great Catholic Church2, are not using an online registration system and simply exclude attendees once capacity has been reached.

As for non-liturgical churches, a Southern Baptist church I occasionally visit has moved their service outside in order to comply with Covid-19 regulations without requiring sign-ups or adding services. A non-denominational church in my area has had drive in services. I have also seen some of my non-denominational friends on Facebook posted about taking communion at home. 

The differences in the responses between liturgical and non-liturgical churches should be expected given the differences between their values. Liturgical churches’ more structured services and the spiritual value they assign to the structure makes their service structure inelastic to relative to costs incurred by exogenous shocks like Covid-19. On the other hand, since non-liturgical churches generally do not have a rigid style of service and assign relatively lower spiritual significance to their style of service, they should be elastic to changes in service style. 

Moreover, because liturgical churches have more than just Sunday morning services, demand for Sunday morning services is relatively elastic given the easy availability of substitutes, where the substitutes for Sunday services are the already existing non-Sunday services. Furthermore, since attendees of liturgical churches are used to attending non-Sunday services, they see new non-Sunday services as less costly. However, given that non-liturgical churches often do not have any other services other than their Sunday morning service, the cost of adding new service times will be high and demand will be inelastic. 

The cost of adding new service times will likely be higher for non-liturgical churches because their services typically have higher fixed costs associated with them. The contemporary music commonly played at non-liturgical churches usually requires a multi-person worship team, and A/V team to set up and run sound and powerpoints for the worship and sermon. I believe this is true by and large, but I am unsure of the magnitude of its effect on church leaders.

Non-liturgical attendants are likely to have a more inelastic demand for non-Sunday services. Non-liturgical church attendees very rarely have non-Sunday services, so there is likely a culture that has developed to be resistant to going to church on days other than Sunday. Going to non-Sunday services will feel more foriegn to non-liturgical church attendees; furthermore, they will probably have schedules that do not include free time for church services for days other than Sunday.

The higher fixed costs of non-liturgical church services and the more inelastic demand for non-Sunday services does not mean that it unthinkable for non-liturgical churches to add services to adapt to Covid-19 regulation. This point will become more important as we head into winter. The costs of doing services outdoors will increase as the temperature drops, so if regulations do not change, then some non-liturgical churches who have been conducting outdoor services may transition to conducting services indoors and increase the number of services they offer.  

Given that liturgical churches are inelastic to changes in service structure and elastic to expansions in services, we should expect to see liturgical churches conducting their services in a manner similar to how they were running them before the Covid-19 outbreak, and that they will be complying with new government regulation by limiting the number of attendees to maintain social distancing and encouraging people to attend services that are less popular. In the same way, non-liturgical churches are expected to alter their service structure as their primary means of complying with Covid-19 regulation since they are elastic to service structure change and inelastic to modifying or expanding their service time. 

Liturgical churches’ values have made them reluctant to alter how their services are conducted, so they typically comply with Covid-19 regulations by limiting service capacity and encouraging attendees to go to less popular services. On the other hand, many non-liturgical churches have not had to limit capacity for their services because their values allow them to innovate with their service structure. Innovation and flexibility are generally seen as positive traits in the commercial world, but that is not necessarily the case for the religious world. Churches claim to profess an ancient faith, so making changes to what churches believe or how they worship should be viewed with suspicion. As we have seen, different values and beliefs held by various churches lead to significant differences to how they respond to changes to the environment they exist in.

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Recording

Many of you may know that since approximately September 2019, I’ve been recording conversations with people.

I’ve got a couple basic policies to ensure security.

  1. I don’t share the audio with anyone who wasn’t there. 
    1. Even in that case they don’t get the file, they’re just allowed to listen with me.
  2. I will shut it off if it’s absolutely necessary or if someone really doesn’t trust me.
    1. Legality and necessity are not the same thing.
  3. The only other person that I’ll ever share with is my wife.
    1. Girls should consider this before marrying someone other than me, unless they are also marrying their husband for access to his conversation recordings.

So more importantly, why do I do this?

For as long as I can remember, I’ve liked remembering things. Good things, bad things whatever. But my memory often fails me, or things get lost in the gaps. Most people use pictures to store memories, but pictures usually creep me out. Why are recordings the answer?

  1. Pictures are fine, but they are easy to lie in. Most people, even if they’re having an awful time, can smile for five seconds. It’s hard to lie about having a good time over 6 hours of conversation.
  2. We’ve all heard the expression “Would you like to be seen with so and so.” This could have a positive or negative connotation. You don’t want to be seen with an undesirable, and you do want to be seen with a desirable. But again, like with pictures, being seen together is easy to lie with. Rather, we should be asking ourselves, “Would you like to be heard with so and so?” Ask yourself whether your interaction with this other person reflects well on your character, this is true for desirables and undesirables.
  3. When listening to yourself in a recording you gain two things:
    1. A good way of catching ideas that you had in a moment that you lost soon after, that you perhaps said but didn’t have the time to write down.
    2. A moderately impartial perspective on yourself. You may actually be able to see and judge yourself as another person. The interests and passions you feel at the time are not clouding your judgement. Also, the fact that you are listening to a conversation without the impetus to speak gives your mind more free space to actually listen. Hopefully, this habit can be carried over to actual conversation.

Try it. Record a conversation, and listen back to it later. It’s very fun. Trust me.

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Liberty, Stability, and Action: James, Lewis, Hayek, and Tolkien

https://www.reddit.com/r/lotr/comments/agiwpa/a_different_1988_lotr_chess_set_w_chessboard_i/

One of my walking routes on campus is through the Music and Theater Building bridge that borders College Hall. It’s a spot for either econ students or music students, and lucky me this time got to see my good pal Hayden Busby. Hayden was sitting with a friend of his, Luke Ratcliffe. Luke and I have a lot in common. We both are half-Armenian, we both visited the homeland this summer, and have unorthodox (and ironically heterodoxical orthodox) theological views. Oh, and we both listen to progressive metal. It was a wonderful friend meet friend moment that happens all too rarely. And I had another one a couple of nights ago in my mind when I realized that C.S. Lewis and F.A. Hayek have an eerily similar conception of freedom.

William James had a famous articulation of the relationship between God and Man as a chess-game. 

“Suppose two men before a chessboard, the one a novice, the other an expert player of the game. The expert intends to beat. But he cannot foresee exactly what any one actual move of his adversary may be. He knows, however, all the possible moves of the latter; and he knows in advance how to meet each of them by a move of his own which leads in the direction of victory. And the victory infallibly arrives, after no matter how devious a course, in the one predestined form of check-mate to the novice’s king. Let now the novice stand for us finite free agents, and the expert for the infinite mind in which the universe lies.”

(James 1896, 180.) 

In this case, God’s power is not diminished and free-will is allowed. The novice player has free will in its moves, but can never defeat the master. This model has a double practical punch. First, it places God in time. He will be making moves in the future that we cannot yet foresee. Second, it gives meaning to each individual move that we make in the here and now. Though, we know who wins the game, our moves now are a part of that tapestry.

The power of this metaphor transferred over to C.S. Lewis. In the second chapter of The Problem of Pain, Lewis is addressing the technical issues of God’s Omnipotence. A standard objection to the Augustinian theodicy (that God has granted us free will thus resolving the problem of evil) is that even if we freely choose evil, God ought to intervene repeatedly to correct all of our errors. 

“We can, perhaps, conceive of a world in which God corrected the results of this abuse of free will by His creatures at every moment: so that a wooden beam became soft as grass when it was used as a weapon, and the air refused to obey me if I attempted to set up in it the soundwaves that carry lies or insults. But such a world would be one in which wrong actions were impossible, for the cerebral matter which we use in thinking would refuse its task when we attempted to frame them. All matter in the neighborhood would be liable to undergo unpredictable alterations.”

(Lewis 1944, 24-25)

If God was to take this course, we would actually lack the freedom he wants to give us. Omnipotence means that God can do anything but impossibilities are not even things in the first place. If the arena of my free action is entirely controlled, I was in fact never free. Free will is not a mere attribute of a soul, but rather a by-product of the interaction between a being and its environment.

Miracles, however, do happen and are an important part of the Christian faith.

“That God can and does, on occasions, modify the behavior of matter and produce what we call miracles, is part of the Christian faith; but the very conception of a common, and therefore stable, world, demands that these occasions should be extremely rare. In a game of chess you can make certain arbitrary concessions to your opponent, which stand to the ordinary rules of the game as miracles stand to the laws of nature. You can deprive yourself of a castle, or allow the other man sometimes to take back a move made inadvertently. But if you conceded everything that at any moment happened to suit him – if all his moves were revocable and if all your pieces disappeared wherever their position on the board was not to his liking-then you could not have a game at all. So it is with the life of souls in a world: fixed laws, consequences unfolding by causal necessity, the whole natural order, are at once limits within which their common life is confined and also the sole condition under which any life is possible. Try to exclude the possibility of suffering which the order of nature and the existence of free wills involve, and you will find that you have excluded life itself.

(Lewis 1944, 25)

Lewis invokes the same metaphor of a chessboard to get his point across. God can make exceptions to his own rules and preserve the stable environment for free action, but he can’t go all the way.

The Constitution of Liberty (1960) is Hayek’s first comprehensive shot at articulating his political vision. He is not talking about a mystical document, but rather asking “What constitutes Liberty?” It’s very difficult for him to articulate directly what Liberty is. Most of the book is a description of the institutional conditions of liberty. Liberty, simply put for Hayek, is the absence of coercion. He then goes to great lengths to show what coercion is. Coercion (though he squirms on his own definition) is when one person’s will absolutely dominates another. When one man’s mind is made into the tool of another’s. Hayek curiously finds like Lewis that control of the environment is tantamount to control of the other’s actions.

“By ‘coercion’ we mean such control of the environment or circumstances of a person by another that, in order to avoid greater evil, he is forced to act not according to a coherent plan of his own but to serve the ends of another…Free action, in which a person pursues his own aims by the means indicated by his own knowledge, must be based on data which cannot be shaped by the will of another. It presupposes the existence of a known sphere in which the circumstances cannot be so shaped by another person as to leave one only that choice prescribed by the other.”

(Hayek 1960, 71)

In more political language, one may have freedom of thought, and freedom of desire, but if they have no freedom of property, their previous freedoms are meaningless. Whoever controls the means controls the actual ends. As Hayek took lengths to point out in The Road to Serfdom, one cannot be liberal in their politics, but be socialist in their economics.

Unfortunately, coercion is sometimes necessary to prevent coercion. To preserve a sphere of freedom, the defensive coercion must be institutionalized in rules which are generally fixed and announced beforehand. The realm of government action may include coercion, but it must be in a fixed rule. Thus, the executors of government power have little control over its actual scope.

“Coercion according to known rules, which is generally the result of circumstances in which the person to be coerced has placed himself, then becomes an instrument assisting the individuals in the pursuit of their own ends and not a means to be used for the ends of others.”

(Hayek 1960, 72)

I hope the similarity is not lost. Government, like God, has the power to manipulate the environment, though in a much more limited sense. In both cases, God to man and government to citizen, individuals are only free if the rules instituted above are generally untampered with. They are “fixed and announced beforehand”. The actor’s free constructions can only be erected on stable ground. The expectation that a certain zone will not be tampered with is an important facet of the willingness to build anything out of it in the first place. 

Hayek stresses in his first chapter, that he is not speaking about metaphysical but simply personal liberty. I’d like to push against him on this. The Bible can be read as a social story between God and his creation. If we are in a relationship with a personal God, then metaphysical liberty is just a form of personal liberty that Hayek articulates. Both God and government, if they are to offer us freedom (which God does and government can), establish the rules by which they operate and only rarely deviate. Churches must operate in the same way so that parishioners are not the theological slaves of their priests. There’s a lot more to unpack here in church history and economics of religion that I hope to work on in the future.

Appendix: Tolkien’s Theodicy

In the 2nd chapter of the Quenta Silmarillion titled Of Aulë and Yavanna, we find a wonderful example of the chess-playing God at work. Eru had created the world, and the Valar (the pantheon of archangels/gods) were hard at work preparing it for the coming of the Firstborn Children of Illúvatar, the elves. Aulë, Valar of stone, became impatient with the dumbness of the world, and he made the first dwarves and hid them under a mountain. Eru, in a very Garden of Eden fashion, sees under the mountain and rebukes Aulë for his impatience. The elves are the intended firstborn, and the dwarves are a deviation from Eru’s plan. Eru commands Aule to destroy his own creation with his hammer, but at the last moment stays his hand (in a very Abraham and Isaac fashion). 

Eru, though displeased with Aulë’s disobedience, sees that the dwarves are good handiwork and permits Aulë to keep them as long as they stay asleep until the elves awaken. Yavanna, Aulë’s wife and Valaress of Arda’s flora and fauna, become worried at the prospect of the dwarves. Dwarves, when they awaken will have no affinity for the trees, but they will need lumber for their mining operations. To counter this propensity in the dwarves, Yavanna creates the ents as shepherds of the trees. 

Neither the dwarves, nor the ents, were necessarily part of Eru’s design, but he allows his creation the ability to go in that direction. Regardless, every fixed element of his plan still goes as follows. The elves are still his firstborn children to experience the world, and the rest of Arda’s history unfolds despite several new tensions that arise.

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The Angel of Scarcity

So He Drove Man Out by Stephen Gjertson

21 The Lord God made garments of skin for Adam and his wife and clothed them.22 And the Lord God said, “The man has now become like one of us, knowing good and evil. He must not be allowed to reach out his hand and take also from the tree of life and eat, and live forever.” 23 So the Lord God banished him from the Garden of Eden to work the ground from which he had been taken. 24 After he drove the man out, he placed on the east side of the Garden of Eden cherubim and a flaming sword flashing back and forth to guard the way to the tree of life.

Genesis 3:21-24; NIV

Consider three sets of plans or projects (p) that we can pursue in this life.

T= Those that are technologically possible.

E= Those that are economically feasible.

M= Those that are morally enriching.

These need a bit of clarification. T describes the set of plans that you imagine can be built given the limitations of natural law. These plans violate no general natural principle such as Newton’s Laws. We slowly refine our knowledge of which projects reside in this set as we grow in scientific knowledge. E contains the set of plans that if undergone would come to full fruition. We refine our knowledge of the particulars of time and place for the relevant resources over time. While T is about general rules, E is about particular circumstances. Is this within my current budget constraint? M contains the subset of plans that if pursued and if they come into their maturity are looked on with approval by the Divine, Most High, and Impartial Spectator.

As Peter Boettke likes to say, Property, Prices, and Profit & Loss, the constellation of guiding stars that guide those under the system of free enterprise will sort out the economically feasible plans from the merely technologically possible ones. A socialist planner can have general technical knowledge but not particular economic knowledge sans prices. E is a subset of T.

But I am curious about M. First, what is the relationship between M and T? If T and M are subsets of one another they are equal. Everything we can do, we should do. This would be meaningless. Morals are tools to guide our hearts, heads, and hands. If all is permitted, morals aren’t at all. Our morals must be derived in such a way to guide and making them equivalent to the possible doesn’t point anywhere. This logic also applies to the question of whether or not T is a subset of M. God, being merciful and loving, assures us that there is no p in M that is not in T. M is a subset of T.

Now, what is the relationship between M and E? The same logic above applies to whether or not E and M are equivalent or whether or not E is a subset of M. Again, if E and M are disjoint, we are doomed and God withdraws his loving hand. Now, we have another option. E and M are both subsets of T, but could they not be subsets of one another and not disjoint?

I will show that M is a subset of E with a proof by contradiction. Assume that E and M are subsets of T and that E and M are not disjoint. Also, assume that elements now exist in these three sets: M and ~E, M and E, ~M and E. Hold it right there, cowgirl. The existence of p such that p is in M and not in E is a contradiction with Axiom GE3:24. What is that you ask? Oh, why the truth of Genesis 3:24. God appointing the angel to guard Eden is evidence that he disapproves of attempts to do the infeasible. The Angel of Scarcity mandates that man toil for his food. Attempts to get to Eden, where beauty is plenty, but work is unnecessary are attempts to get around the mandate. Thus elements still exist in both M and E, and some exist not in M but still in E. M is a subset of E.

Prudence is a virtue. Prudence is the act of sorting out what is and is not in E. There is no honor in doing things you can’t, even if in your God approves in your imagination. Striving for goals that are in M and not in E is not love at all but shallow romance.

Edit: From Pascal’s Pensee No.431: We cannot conceive Adam’s state of glory, or the nature of his sin, or the way it has been transmitted to us. These are things which took place in a state of nature quite different from our own and which pass our present understanding. Knowing all this does not help us to escape. All that it is important for us to know is that we are wretched, corrupt, separated from God but redeemed by Christ’ and that is what is wonderfully proved to us on earth.

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