Notes from the PPE-Institute of around June 19, 2007

22 June 2007

These are notes useful for myself and others on things that came up in the PPE Institute in Arlington in the week of June 19, 2007.

Klein, Benjamin, and Leffler, Keith B. “The Role of Market Forces in Assuring Contractual Performance.” Journal of Political Economy 89 (August 1981): 615-41. If you don't have JSTOR, see the working paper version. Or, more simply, see my short version in the Reputation section of Chapter 5 of my game theory book.

Eric Rasmusen, Readings in Games and Information, Blackwell, 2001.

"Doing Business", the World Bank's website quantifying the business environment in lots of countries.

Hauser Moral Minds. book on primate pscyhology.

Franz De Waal .# Primates and Philosophers, How Morality Evolved, 2006. # Our Inner Ape. New York: Riverhead Books, 2005.

Everyone should read Chimpanzee Politics, by Van de Waal, his older book. It's case studies of alliance shifts, deception, and suchlike in a group of chimpanzees in a zoo. I haven't seen the new books.

Nietzsche: Hat man sein warum? des Lebens, so verträgt man sich fast mit jedem wie? - Der Mensch strebt nicht nach Glück; nur der Engländer thut das.

Man does not strive for pleasure; only the Englishman does. (Twilight of the Idols, "Maxims and Arrows," #12)

See: Examples of trying to translate Nietzsche's maxims.

Wikipedia says

Sergeant Major Daniel Joseph "Dan" Daly (November 11, 1873 – April 27, 1937) was a United States Marine and one of only 14 men (and two Marines) to receive the Medal of Honor twice for two separate acts of heroism. (The other such Marine was Major General Smedley Butler).

Dan Daly is well remembered for his famous cry during the Battle of Belleau Wood, when, besieged, outnumbered, outgunned, and pinned down, he led his men in attack, shouting, "Come on, you sons of bitches, do you want to live forever?"

Harry Lime: Don't be so gloomy. After all it's not that awful. Like the fella says, in Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland they had brotherly love - they had 500 years of democracy and peace, and what did that produce? The cuckoo clock.(From Orson Welles, The Third Man, as written here)

How does trade cause war? See Schumpeter on the borgeois self- destruction. Trading people get so meek that they can't defend themselves, and so tempt non- traders to invasion.

The Catholic Encyclopedia says:

"Another statute, of the first year of William and Mary, prohibited Catholics from residing within ten miles of London...

In 1700 an Act was passed which, Sir Erskine May observes, "cannot be read without astonishment". It incapacitated every Roman Catholic from inheriting or purchasing land, unless he abjured his religion upon oath...

Concerning this Act of William III Hallam remarks, "So unprovoked, so unjust a persecution is the disgrace of the Parliament that passed it." But he goes on to add, "The spirit of Liberty and tolerance was too strong for the tyranny of the law and this statute was not executed according to its purpose. The Catholic landholders neither renounced their religion nor abandoned their inheritance. The judges put such constructions upon the clause of forfeiture as eluded its efficiency." No doubt this is generally true. But as Charles Butler tells us in his "Historical Memoirs" (London, 1819-21), "in many instances the laws which deprived Catholics of their landed property were enforced." He adds that "in other respects they were subject to great vexation and contumely". They were a very small and very unpopular minority in an age when a common creed was regarded, in every European country, as the chief bond of civil polity and dissidents from it were more or less rigorously repressed. As a matter of fact, it is to a great English magistrate that we owe the ruling which placed an almost insuperable difficulty in the way of the tribe of informers. At the trial of the Rev. James Webb on the 25th of June, 1768, at Westminster, at the suit of a notorious common informer named Payne, Lord Mansfield told the jury that the defendant could not be condemned "unless there were sufficient proof of his ordination". Such proofs, of course, were not forthcoming. Lord Mansfield, as Charles Butler relates in his above-mentioned "Historical Memoirs", discountenanced the prosecution of Catholic priests and took care that the accused should have every advantage that the form of proceedings, or the letter or spirit of the law, could allow. And at that period the same temper animated English judges generally....

In this year, 1778, the first Catholic Relief Act was passed. It repealed the worst portions of the Statute of 1699 above mentioned, and set forth a new oath of allegiance which a Catholic could take without denying his religion.

Positive: Law and Economics does claim universality as a predictor. It does not always imply optimality, just a tendency. There is government failure, remember. People like to get stuff. They will make, or they will take. They will keep trying to take unless something stops them. They will take individually, or by using the government.

Normative: Surplus maximization is a good place to start. It is really a Veil of Ignorance, or a Golden Rule argument. If you don't know whether you will be a black or a white, a plaintiff or a defendant, you'll want rules which treat them equally.

Pareto optimality is really the place to start. I want to sell a kidney to someone else. He wants to buy it. Why do you, as social planner, want to stop it? You shouldn't say it's just displeasing to you, because in your role as social planner, you're not supposed to just be using your power to advance your own interests, satisfying your own emotional needs.

Or use the example of Buyer offering Seller $10,000 for Seller's brain--- which will kill Seller. Seller is happy with the deal. Why stop him?

Kaplow and Shavell's book argues in detail that if you have a morality which adds something to wealth maximization--- say, a side constraint requiring fairness of some kind-- then you will end up having to accept Pareto- inefficient situations-- situations where you could make everybody better off by ignoring your fairness constraint.

Suppose that a Pakistani family wants to kill a raped daughter. If I offered the family $100,000, would they "sell" her to me, allowing me to take her out of the country? If I did that, and I could then require her to pay me back $200,000 from wages she will earn as a hotel maid, then it is inefficient for her to be killed. Probably I cannot force her to pay me the $200,000 though (she could declare bankruptcy first), so I will not buy her, and we will end up with inefficiency. The market failure is that the government will not enforce the contract.

There may also be government failure. Surplus maximization does not always work out in the world. Theft occurs, for example, which reduces surplus directly and via offensive and defensive expenditures and via its disincentive for surplus- creating work. Government laws can also be theft. Rather than stealing something directly, a group of people lobbies the government for a law that does, sending the tax collector backed by the police and army to take away someone else's money and give it to them. So if a law seems inefficient, surplus- reducing, we should look for government failure--- some voters being uninformed or disenfranchised, for example.

Re Chris Bonneau: Think Kuhn. It takes a theory to kill a theory. Where are the answers that are better than Surplus Maximization?

In Bangladesh in the past, what could a woman do with her time to increase her happiness? Have more children. Working on the half-acre your family owns won't help much-- the husband already can pick all the weeds. And what would you buy even if you could earn some money? But suppose now she has the alternative of working in a textile factory and using the money to buy a TV. She might prefer TV to kids, as better entertainment with less effort. (If her husband is telling her what to do, so her preferences don't count, the same argument holds, so long as he too values both children and TV, but TV more.)

For Jacob Levy: You're right that a lot of moral philosophy is to persuade other people to change their preferences. That's compatible with Surplus Maximization. You're trying to tell them that the morality they have is a "low quality product", and they're being fooled. This is a bit like trying to convince somebody that they should not like listening to Britney Spears music. You can do it maybe, but it's tricky. I don't think I could succeed. It is similar to the project of convincing someone that they should be a Christian instead of a Moslem.

So, with the Pakistani honor killing, you have to convince relatives that they should not want to kill their raped daughter. One way might be to persuade them that if that custom is ended, they will all become so much richer that they'll be better off. This is like just offering them cash to stop. I doubt that would work, actually, for reasonable amounts of money--- people don't sell their honor cheaply.

Or, you might ask them why they have those preferences, and you'd probably find out that they don't want to be shamed. Then you could question why they care so much about what other people think, and appeal to their pride. Maybe you could argue that if there was a general end to the custom, then there would be much less or maybe no shame to having a raped daughter in your household. (this would be arguing a game theory/externalities problem--- that everyone would be better off they all ended the custom, but anybody who breaks with it unilaterally is hurt.)

A lifeboat will hold 5 people without sinking in the next storm (an inevitable one), but 6 are in it. All will die unless one is thrown out.

1. Should law and morals allow one person to voluntarily and unilaterally jump overboard and die?

2. Should they be allowed to agree unanimously to draw straws and use a gun to kill one person? (kill, because after he finds he has the short straw he changes his mind)

3. Suppose we know they would all have agreed, but they don't actually have the discussion. Instead, one of them, a very honest person, draws a straw for each of them. If he had the short straw, he would have killed himself, but he is lucky and Sam has the short straw. He then shoots Sam with the gun and they thrown Sam overboard. Is that OK?

4. Suppose they have a discussion, and they and we know that everyone *would* agree to the scheme if it was a choice between all 6 drawing straws and all of them dying. Sam, however, says: "I won't agree. I know that even if I hold out, the other 5 of you will do a 5-straw scheme and one of you will go overboard and the rest of us will be saved. So I'm opting out." Is it OK to include him in the straw scheme anyway, against his will?

5. Suppose that they have a discussion and Sam sincerely says he is opting out because even if his opting out would sink the boat, he doesn't want to have any chance of being thrown overboard now instead of dying in 30 minutes when the storm hits. And in fact if he doesn't agree, the resulting bickering will prevent even a 5-straw scheme. Is it OK to include him in the straw scheme anyway, against his will?

The PPE Institute page is at http://rasmusen.org/special/ppe-institute.