Epistemology & Education

For a couple of generations, what we as a country have basically understood to be true has been controlled by the television, which is to say, a handful of media companies. This was all at-least-tolerable until the FCC repealed the Fairness Doctrine in the 1980s and news organizations were under no instruction to provide competing viewpoints.

The democratization of media represented by fantastically easy web publishing of word and video marks a turn. The opportunity here is only present if Americans (all of Western culture, perhaps?) relearn how to evaluate information presented to them, a skill that seems to have been lost through the days of perceiving the television as a viable authority. According to a UCLA study, we are:

The researchers said that, compared to simple reading, the internet's wealth of choices required people to make decisions about what to click on in order to get the relevant information.

You could easily replace the word "relevant" with "accurate."

What this means is that our information intake might not be decided by questions like "Does that station lean conservative or liberal?" but moreso, "where did that reporter get his information?" To push progress along, some educational institutions are moving toward less emphasis on knowledge -- after all, most knowledge is available just on the other side of the Google -- and more emphasis on judgment and evaluation of evidence.

Coincidentally, while watching the debate last night, it occurred to me that one reason why Barack Obama has been considered a gifted speaker, and has been considered a winner by many in all three debates, is that he has held a job that puts him among limited company with past presidents: an educator.

As you've no doubt been told,

There's a mortgage/subprime/credit/stock crisis! Run! The US Treasury has indicated that seven hundred billion dollars will be available for investment banks, and is now planning on giving more in exchange for an equity stake.

You've probably been told that the banks need money because people took out loans they couldn't afford to buy houses that were too expensive. When we refer to a "bubble" it means that an asset is overvalued, and people are willing to pay more than a thing is actually worth. If one buys a house at the peak of a bubble, later discovers that they can't afford payment (or the interest rate, and thus the payment size, rises), they have to foreclose, the house defaults to the bank, and the bank thus owns an asset that is worth far less than the amount they were expecting to receive over time for it from the homebuyer. If you own a stake in any investment, you've probably seen your investment drop as a result of this realization: banks are discovering that what they own isn't worth what they thought it was.

You've probably been paying attention to all this.

However, in most cases, it's being framed as a "loss," as in, "I just lost several thousand dollars in my investments!" A better term might be "discovered to be fraudulent," as in, "I just discovered that several thousand dollars of my investments were fraudulent!" If we are to believe in free markets, then part of the belief is that an individual can choose to give their money to investment firms that make bad decisions, and that we are, to the extent of our investment, also morally culpable for the mistakes that they have made.

The problem is: the loss exists. When the government sends money in to foot the bill, then they bear the loss. They either make up the loss by raising taxes (we get the loss) or by... doing nothing and letting the sudden appearance of 700 billion cause massive inflation... and we thus receive the loss again.

If there's reason for government intervention at this point (at least, a government that generally believes in the free market), it would be to rescue businesses and individuals who rely on regular credit from the banks that are now short on capital to loan them. However, instead of sending the money as a bailout to banks, it might make more sense to offer such loans directly.

Thus far, most solutions have been discussing how to manage the problems that have arisen. Now that stocks are picking up (slowly, perhaps temporarily -- Paul Krugman reminds us that many foreclosed homes are still on the market), some people have taken a breath to discuss why this came about.

Why were people unable to afford the homes they thought they were?

Robert Reich discusses how Americans have lived beyond their means. Specifically, the living hasn't gone up, the means have gone down:

Since the year 2000, median family income has been dropping, adjusted for inflation. One of the main reasons the typical family has taken on more debt has been to maintain its living standards in the face of these declining real incomes.

It's not as if the typical family suddenly went on a spending binge --- buying yachts and fancy cars and taking ocean cruises. No, the typical family just tried to keep going as it had before. But with real incomes dropping, and the costs of necessities like gas, heating oil, food, health insurance, and even college tuitions all soaring, the only way to keep going as before was to borrow more. You might see this as a moral failure, but I think it's more accurate to view it as an ongoing struggle to stay afloat when the boat's sinking.

It is true that the average American has as much stuff as ever, and that if we paid the true cost of the creation and disposal of this stuff, we'd discover that it was not worth the cost. We'd discover that this contributes to an economist's view of standard-of-living, but a human being's view. But as Reich asserts, it's not the stuff as much as the necessities. One necessity in particular is health care:

About 30 percent of people said they filed for bankruptcy because of an illness or injury, even though most of them had health insurance when they first got sick.

When bills are too much to afford, which do you give up, your health, or your house?

Tax Ads

The linked article on consumption has a fantastic suggestion:

Kasser has more ideas: Limit – and tax – advertising, he says. To promote consumption, ads foster insecurity, he says. That hinders self-acceptance, which is another predictor of lasting well-being.

This has valid economic justification. Human attention can be considered a natural resource, if for no other reason that the supply of it is finite: there is nothing we can do create more time to devote our attention to things. This would mean that, like the supply of land or oil in the ground, the supply curve would be represented by a straight vertical line. The market for human attention (the advertising market) only gets inflated as the population increases, and as demand for our attention increases, which makes advertising a fantastically profitable industry: enough to fund tv, print, and online media outlets.

Only in a sense does the right person get paid for their attention: the community gets to experience the media for (nearly) free. Otherwise, the payment for our attention is being delivered to media companies. This too is parallel to the other common resources mentioned above: e.g., The value of an urban area is created by the community, though the rent for land is collected by those who own it, just as the value of media advertising is created by the community viewing it, despite the rent of our attention being collected by those who own the media. And likewise, not collecting that rent for the community has allowed ownership of both urban land and mass media to be consolidated.

So, under this system, how will media be made, news be reported, etc? One possible solution: in recognition of every citizen's creative impulse, give everyone a tax rebate. Depending on your tax bracket, this could be enough to be a dividend check. Given that technology has driven overhead for media outlets to become almost negligible, citizen driven media and entertainment could become more likely as well.

A Few Notes

A Freakonomics Quorum on the future of suburbia was posted recently, featuring James Howard Kunstler at the top. An interesting note from his response is reagrding an upcoming urbanization prediction:

One popular current fantasy I hear often is that apartment towers are the “greenest” mode of human habitation. On the contrary, we will discover that the skyscraper is an obsolete building type, and that cities overburdened with them will suffer a huge liability — Manhattan and Chicago being the primary examples. Cities composed mostly of suburban-type fabric — Houston, Atlanta, Orlando, et al — will also depreciate sharply.

I'm not sure what, exactly, the concern is here, though I've also not read his books. I do recall, however, that before the days of elevators, most buildings reached a maximum height of about 7 floors. I'd be hard pressed to believe that running an elevator was the major concern, but perhaps I'm underestimating the energy used. Though, it would also make sense urban areas will need to be more dense than the recent half-century of suburban expansion, but not so dense that they cannot be supported by nearby agriculture.

Colin Beavan also wrote briefly about how "consuming fewer planetary resources may, instead of making us deprived, make us happier." Further:

Americans are now twice as rich as they were in 1950, but no happier... psychologists are advocating that policymakers use indicators other than the Gross National Product (GNP) to make decisions. What’s the purpose of an economy, they ask, if not to enhance the well-being of its citizenry

Freakonomics has recently had some excellent posts on the relationship of happiness to income. Much of the research indicates that, when viewed worldwide, there is a stronger relationship, perhaps because in many nations doubling your per capita income is the difference between poverty and subsistence.

Previous research has indicated that once you reach a level of income at which you are not concerned about meeting day-to-day needs, your happiness level is not as closely related to your income (though relative income is still important: i.e., "are you as wealthy as your friends?") Again, the data is, as Justin Wolfers says, "not so clear cut." In fact, in Belgium, it appears that more money makes you less satisfied with life.

More Pressure

After a lot of this tire air pressure debate, I wondered who among us have actually, as a result, checked the pressure on their car's tires. I, embarrassingly, had not until today.

A tad more background regarding the numbers we're going for: Csaba Csere, Editor of Car and Driver Magazine, reluctantly entered the debate only to contribute his expertise on tire pressure. He said that, yes, it is agreed that if all four of your car's tires are 10 PSI underinflated, you would gain about 3-4% of your mileage by properly inflating them. This would mean that, for a nation to gain 3-4% reduction of oil use just by inflating your tires, every car in the nation would have to have every tire underinflated by 10 PSI. Csere was doubtful this was the case, though it might be feasible that all cars in America are underinflated by an average of 10 PSI. Unfortunately, no empirical data here.

My car's tires require a pressure of 44 PSI. When I checked today, They were each at about 30-35 PSI. I could just be unusually negligent, but in my defense I've been biking more than I drive lately. Coincidentally, my bicycle, which requires 125 PSI, also had each of its tires deflated by about 10 PSI (a level of deflation that's actually kind of normal for tires of that pressure over about a week's time, which was the last I checked my bike). If you're concerned, all mentioned tires are now up to par.

Whether we're talking about ANWR drilling (3% of consumption according to Csere, though I haven't found that number duplicated anywhere) Offshore drilling (1% of consumption) or properly inflated tires (up to 3% of consumption) it's clear we're not talking about actual energy-independence solutions (which was, at the time, Obama's point, quote: "...we could save all the oil they're talking about getting off drilling, if everybody was just inflating their tires, and getting regular tune-ups. You could actually save just as much.").

Also worth note: the reason why most of these projections use 2030 as a benchmark year is that models predict that production would peak around then (ANWR in 2028, for example), which means that once we hit that 3% mark, were we to begin drilling in ANWR, production would decline rather than maintain that level.

More worth note: Mankiw posts today regarding Obama's justification for oil-company-windfall-profits-tax, quote: "That would be a logically coherent story, but not an empirically plausible one." My personal opinion is that I've yet to hear even a "logically coherent story" from his opponent, though I'm of course disappointed that we as voters have to settle for logical coherence and not empirical plausibility.

Why taxing the sale beats taxing the profit from sale.

Mankiw explains why a tax at the pump would work better than taxing windfall profits and subsidizing hybrids. The whole policy plan proposed by Obama seems to be a Rube-Goldberg-style invention to avoid saying we will tax your gas purchases, while attempting to accomplish the same larger goals such as discouraging petrol use (in the hybrid subsidy) through eating into oil company profits (via the windfall tax) when you'd easily accomplish both via a tax at the pump. At least, however, the larger goal is there, opposed to a larger goal of, say, more petrol use or ignoring the problem.

Also, when Obama was in Cleveland Tuesday, he was heckled for not starting with the pledge of allegiance at the beginning of the "town hall meeting." Obama, clearly bemused, tells him "You want to lead the pledge of allegiance? Go ahead."

At the end, the man is asked, "did someone say we're going to say the pledge of allegiance at some point?" and the man, John Quinn, clearly admits, "No!" and so no one is sure why he presumed it would happen.

A Brief FAQ

from Robert Reich.