Light(er) Blogging Warning

Sorry, no post this week, and posting will generally be light for the next month and a bit.

65: Small Is Beautiful

Note: This post is the sixty-fifth in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

This week's post is on the book, 'Small is Beautiful', by E.F. Schumacher.

I'm not going to do a chapter by chapter summary of the book, since much of it has to do with questions of the scale of workplaces that only touch indirectly on the questions I'm looking into in this series. Instead I plan to highlight some of the comments throughout the book that show the sort of Guardian mindset that Schumacher has.

Although guardian-minded, Schumacher was also an economist so he was far from ignorant of the ways of the commercial mindset and there are many passages in the book that reflect his awareness of the differences between a commercial approach and a guardian approach. In some ways, he is like an anti-Veblen, keenly aware of both syndromes like Veblen was, but deeply hostile to the commercial mindset, whereas Veblen was deeply hostile to the Guardian mindset.

The most relevant passage to our inquiry is likely one on page 47 (of the Harper 1989 edition),

"The religion of economics has its own code of ethics, and the First Commandment is to behave 'economically'- in any case when you are producing, selling or buying. It is only when the bargain hunter has gone home and become a consumer that the First Commandment no longer applies: he is then encouraged to 'enjoy himself' in any way he pleases.

...

In the market place, for practical reasons, innumerable qualitative distinctions which are of vital importance for man and society are suppressed; they are not allowed to surface. Thus the reign of quantity celebrates its greatest triumphs in "The Market." Everything is equated with everything else. To equate things means to give them a price and thus to make them exchangeable. To the extent that economic thinking is based on the market, it takes the sacredness out of life, because there can be nothing sacred in something that has a price. Not surprisingly therefore, if economic thinking pervades the whole of society, even simple non-economic values like beauty, health or cleanliness can survive only if they prove to be 'economic.'"

Schumacher echoes Jane Jacobs a little bit further down in the same chapter when he say that,

"Economics operates legitimately and usefully within a 'given' framework which lies altogether outside the economic calculus. ... Every science is beneficial within its proper limits, but becomes evil and destructive as soon as it transgresses them."

How similar that is to Jacobs talking of the 'intractable corruption' that follows when commercial values are mixed with guardian values.

Later on, on page 272, Schumacher again tries to describe the commercial mindset,

"In this respect, the idea of private enterprise fits exactly into the idea of The Market, which, in an earlier chapter, I called 'the institutionalisation of individualism and non-responsibility.' Equally, it fits perfectly into the modern trend towards total quantification at the expense of the appreciation of qualitative differences."


Earlier on in the book (page 24), Schumacher provides an interesting discussion of a quote from Keynes during the depression,

"In 1930, during the world-wide economic depression, [Keynes] felt moved to speculate on the 'economic possibilities for our grandchildren' and concluded that the day might not be all that far off when everybody would be rich. We shall then, he said, 'once more value ends above means and prefer the good to the useful.'

'But beware!" he continued. 'The Time for all this is not yet. For at least another hundred years we must pretend to ourselves that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.'

...

There can be no doubt that the idea of personal enrichment has a very strong appeal to human nature. Keynes advised us that the time was not yet for a 'return to some of the most sure and certain principles of religion and traditional virtue - that avarice is a vice, that the exaction of usury is a misdemeanour, and the love of money is detestable.'

Economic progress, he counselled, is obtainable only if we employ those powerful human drives of selfishness, which religion and traditional wisdom universally call upon us to resist. The modern economy is propelled by a frenzy of greed and indulges in an orgy of envy and these are not accidental features but the very causes of its expansionist success."

Schumacher worries that there may be long term damage caused by this approach:

"If human vices such as greed and envy are systematically cultivated, the inevitable result is nothing less than a collapse of intelligence. A man driven by greed or envy loses the power of seeing things as they really are, of seeing things in their roundness and wholeness, and his very successes become failures. If whole societies become infected by these vices, they may indeed achieve astonishing things but they become increasingly incapable of solving the most elementary problems of everyday existence. The Gross National Product may rise rapidly: as measured by statisticians but not as experienced by actual people, who find themselves oppressed by increasing frustration, alienation, insecurity and so forth. After a while, even the Gross National Product refuses to rise any further, not because of scientific or technological failure, as expressed in various types of escapism on the part, not only of the oppressed and exploited, but even of highly privileged groups."

---

At first glance, the fact that Schumacher spends a lot of time talking about energy supplies and why they (oil in particular) are likely to run short seems a bit odd. What does the energy supply situation have to do with whether small is beautiful or whether big is better?

But one of the dividing lines between a guardian mindset and the commercial mindset concerns the question of limits. Guardians typically believe that limits exist whereas commercial folks believe that innovation will provide a way around any perceived limits. I believe that Schumacher intuitively grasped that the existence of a limit presents a fatal weakness in the commercial approach to things and therefore chose to highlight one of the most pressing limits that mankind was approaching in his time (the 60s and early 70s).

---

Even more than usual, I am only covering a small part of the ground Schumacher covers in his book. But reading 'Small is Beautiful' with Jane Jacobs 'Systems of Survival' in mind, the picture I get is of someone who sees the commercial mindset escaping its logical bounds and overrunning every aspect of society and who is looking for any way possible to put the commercial syndrome back to a more limited role. Of course, since Schumacher wrote 'Small is Beautiful' in 1973, it seems like the commercial syndrome mindset is stronger than ever.

Hoocoodanode?

Felix Salmon responds to a paper put out by some of the economists at the Federal Reserve banks in the U.S. that tries to whitewash their failure to see the housing bubble coming and do anything to prevent it from getting so large before it popped:

"Kristopher Gerardi, Christopher Foote, and Paul Willen, of various regional Federal Reserve banks, have a paper which looks at economic research on whether or not there was a housing bubble, and which concludes that “we do not currently have the ability to prevent a bubble from forming or the ability to identify a bubble in real time”. Yes, they admit, some smart and prescient economists did say, with complete accuracy, that there was a bubble. But! Other economists weren’t convinced! So, never mind, there’s nothing we can do."

Felix was one of many commenters that mocked this self-serving paper, but I only highlight his response for a throwaway comment he made at the bottom of his post,

"Housing bubbles are normally pretty obvious at the time: there’s one right now in Vancouver, for instance. You can see them in the rise of dozens of huge new glass-clad condo buildings; you can see them in massive price increases; you can see them when mortgage payments are significantly larger than the amount of money you could get renting out the place; and you can see them whenever people start making more money from selling their homes than they do from actually working. The only people who can’t see them, it seems, are economists, realtors, and bankers on Wall Street."

64. Stag Hunting & Correlation

Note: This post is the sixty-fourth in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

Note: This post is a continuation from last week's post on the Stag Hunt.

This week, I'm going to talk about the book, "The Stag Hunt and The Evolution of Social Structure," by Brian Skyrms.

Skyrms argues that the Stag Hunt is a better model of the challenge of human cooperation than the Stag Hunt. Whereas the Prisoner's Dilemma only has one equilibrium solution (everyone defects), the Stag Hunt has two possible equilibriums, everyone cooperates (hunts stag) or everyone defects (hunts hare). He argues that this better reflects the notion of a social contract which can either not exist (state of nature) or exist (society).

The primary theme of the book is Skyrms' argument that they key to achieving cooperation in the stag hunt is correlation. By correlation he means that those who are disposed to stag hunting (cooperation) must find a way to work together and avoid the hare hunters (defectors). This is a similar point to the one Axelrod made, but Skyrms goes into more detail. Note that, implicit in this argument is an assumption that there are two sort of people out there, stag hunters (cooperators) and hare hunters (defectors).

The first method of improving correlation that Skyrms looks at is location.

One of the interesting aspects of this book is the rich use that Skyrms makes of biological examples for how cooperation is far from a distinctly human characteristic. For example, his opening to the chapter on location,

"One strain of E Coli bacteria produces a poison , to which it is immune, that kills competing strains. It takes resources to produce the poison, and the strain that produces it pays a cost in reproduction for the privilege of killing competitors. If the poisoner strain evolved from a more peaceful strain of E Coli, how did it get started? A few mutant poisoners would cause little change to the average fitness of a large peaceful group ... If a few mutant poisoners are added to a well stirred culture of peaceful E Coli, the mutants are gradually eliminated.

But when the same experiment is performed on agar plates rather than in a well-stirred solution, the poisoners can invade and eventually take over the population. ... I won't tell the full story here, but I hope that I have told enough to illustrate the importance of spatial structure, location, and local interaction for evolutionary dynamics."

It requires energy to move matter from one place to another, so all else equal, people (and animals) don't move more than they have to. If people who are willing to cooperate rather than defect (stag hunters) are clustered rather than dispersed at random, then they will tend to have more interactions with each other - interactions where their cooperative behaviour will pay off. This is pretty much common sense - You can imagine that a group of, say, rebel soldiers is more dangerous if they are all located in one area than if they are thinly scattered across a country - but it's still interesting to see some of the underlying theory that explains why a cluster of like-minded people (or bacteria) can be so effective.

Skyrms' approach throughout the book is to run simulations where he takes a set of agents and lets them interact over time, playing either Stag Hunt or some other game against each other. There are different dynamics allowing the situation to change over time. Sometimes Skyrms has people choose a strategy which will be the best response to the sort of person they expect to encounter (if they expect a hare hunter, they will hunt hare too, and the same for stag hunting). Other times Skyrms has people choose to imitate the strategy of those around them that are performing the best.

In running simulations to test the influence of location on the spread (or demise) of cooperative behaviour in a population, Skyrms tried one-dimensional setups (everybody is in a line) and two dimensional setups (people interact on a grid) and also tried both a 'best response' type of strategy evolution and a 'imitate the best' type of strategy evolution. What he found was that the two dimensional model and the 'imitate the best' approach had the most favourable outcomes for cooperation (Stag Hunting).

But in general, the effect of taking into consideration location (having people interact with their neighbours), rather than just assuming that people interact randomly with each other was that simulations with location as a factor were more favourable to the evolution of cooperation. Note that is consistent with Axelrod's findings as well.


The second method of improving correlation between cooperators that Skyrms looks at is signalling (which we discussed a few posts back).

He describes how a myxobacteria known as Myxococcis xanthus engage in coordinated attacks on larger microbial prey, by making use of quorum signalling - a signal that tells the bacteria when there are enough of them gathered in one place to launch a successful attack. As Skyrms notes, "Myxococcis xanthus has solved the problem of the Stag Hunt."

On the topic of signalling, Skyrms explains how situations where the provision of a signal can lead to mutual benefit result in quick convergence to a mutually recognized set of signals - even when there is no communication between parties (other than the signals) and there aren't any initial cues to suggest what each signal might mean to either side.

Even in cases where there are parties that might benefit from sending out a false signal, and it does not cost anything to send out a false signal (what game theorists call 'cheap talk') the possibility of sending signals can still lead to more cooperative outcomes than might be achieved if signals weren't available to be used.


The third method of correlating cooperative behaviour that Skyrms looks at is through allowing the structure of interaction itself to change. If we let people choose for themselves who to interact with, then stag hunters will typically quickly learn to interact with other stag hunters. Allowing this sort of self-selection is a powerful tool that allows the cooperators to self-select into a club whose members benefit much more than any of the hare hunters that are excluded.

Skyrms concludes by summarizing the results of the various simulations that make up most of the book, and what they tell us about how stag hunting (cooperation) can arise in a population of hare hunters (defectors) over time (given that interactions between people follow a stag hunt type model),

"Over time there is some low level of experimentation with Stag Hunting. Eventually a small group of Stag Hunters comes to interact largely or exclusively with each other. This can come to pass through pure chance and the passage of time in a situation of interaction with neighbors. Or it can happen more rapidly when stag hunters find each other by means of fast interaction dynamics. The small group of stag hunters prospers and can spread by reproduction or by imitation. This process is facilitated if reproduction or imitation neighborhoods are larger than interaction neighborhoods. As a local culture of stag hunting spreads, it can even maintain itself in the unfavorable environment of a large random-mixing population by the device of signalling."

63. The Stag Hunt

Note: This post is the sixty-third in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

Just a short post this week, more of an intro to next week's post than anything else. I covered most of this ground back here, but I wanted to formally include it in the series on ethics.

We've talked a lot here about the Prisoner's Dilemma, but another type of interaction / game that comes up when talking about ethics is the 'Stag Hunt.'

Wikipedia summarizes the Stag Hunt as follows:

"In game theory, the stag hunt is a game which describes a conflict between safety and social cooperation. Other names for it or its variants include "assurance game", "coordination game", and "trust dilemma". Jean-Jacques Rousseau described a situation in which two individuals go out on a hunt. Each can individually choose to hunt a stag or hunt a hare. Each player must choose an action without knowing the choice of the other. If an individual hunts a stag, he must have the cooperation of his partner in order to succeed. An individual can get a hare by himself, but a hare is worth less than a stag. This is taken to be an important analogy for social cooperation.

The stag hunt differs from the Prisoner's Dilemma in that there are two Nash equilibria: when both players cooperate and both players defect. In the Prisoners Dilemma, however, despite the fact that both players cooperating is Pareto efficient, the only Nash equilibrium is when both players choose to defect."

Here's an example:

                                        Adam
                              Stag                    Hare
Eve          Stag:      [2,2]                 [0,1]
                 Hare :     [1,0]                [1,1]

Unlike in the Prisoner's Dilemma where Adam's best choice would be to defect (hunt Hare) no matter what Eve does, in this case, Adam's response depends on what Eve is doing. If Eve is cooperating (hunting Stag) then it makes sense for Adam to hunt stag (cooperate as well). If Eve isn't going to cooperate, then Adam shouldn't cooperate either.

You can see how this dynamic sets up the two equilibiria that Wikipedia mentioned:

1) A 'good' equilibrium where hunters catch deer, the most valuable game animal in the forest. Because the deer is elusive, catching it requires cooperation between the hunters.

2) A 'bad' equilibrium where the hunters don't cooperate, and are not able to catch the deer so they catch rabbits instead, which can be caught without cooperation, but are not as tasty and meaty as deer. Mmm, venison.

In the 'bad' equilibrium, the hunters know they could do better by working together to catch a deer, but because nobody can act on his own (you can't catch the deer without help) and because they can't be sure that if they go to hunt deer that others will help, it is safer to just catch rabbits, rather than going off by yourself to catch the deer, having nobody help you and ending up with nothing.


The description of the Stag Hunt - where you should cooperate if the other person does and defect if they do - may also sound reminiscent of the Tit for Tat strategy that performed so well in the repeated Prisoner's Dilemma tournaments that Robert Axelrod described in 'The Evolution of Cooperation'. This isn't a coincidence - having a Prisoner's Dilemma repeat over time and having the participants switch to defection if the other player defects, transforms the payouts from A Prisoner's Dilemma into the payouts from a Stag Hunt.

Basically, what happens is that the gain a person gets from betraying the other player in the first Prisoner's Dilemma is more than offset by the losses that follow because the other player is never again willing to cooperate with you. Taking this potential future loss into consideration, it becomes in your best interest to cooperate now - if you expect the other player to cooperate.

This last part is the rub with the Stag Hunt, and you can see why it is also sometimes known as the 'Assurance Game' - if you could only assure the other player that you were going to cooperate (maybe by signing a contract, shaking hands, or by maintaining a high seller rating on ebay, etc.) then it would be in their interest to also cooperate.

In a way, the Stag Hunt is like a stepping stone on the road from the hopeless one-time Prisoner's Dilemma style interaction, to an outcome of mutually beneficial cooperation.

It's not just the possibility of the Prisoner's Dilemma repeating that can transform the interaction into a Stag Hunt, a moral principle that places merit on being 'nice' in the sense that Axelrod used it - starting off by cooperating with people, and only stopping cooperation if the other player betrays you first - could also change the payoffs in the Prisoner's Dilemma so that they resemble the Stag Hunt instead.

More on the Stag Hunt next week.

In Transit

The merge from the turnpike was murder, but it's never a cinch
It was Friday at five, and no one was giving an inch
They squeezed and the edged and they glared
Half them clearly impaired by rage or exhaustion
The rest were just touchy as hell

Somewhere near Paterson everything slowed to a crawl
The all-news station was thanking someone for the call
It's a van from St. Agnes's choir
There's a nun out there changing a tire
By the time they got by her, tempers were out of control

So they all hit the gas in a dash for position
Bobbing and weaving and flashing their highbeams
Flipping the bird and screaming obscenities
A well-insured horde hell-bent on Saturday

And so they continued, west-bound into the sun
Law and decorum constraining nary a one
By then it was devil-may-care
Not one even vaguely aware
That they had come all the way to the Delaware Water Gap

How had it happened? They had all missed their exits
How had it happened? Was it some kind of vortex?
In they all went, bumper to bumper
Faster and faster, no sign of a trooper
In they all went, like sheep to the slaughter
Bankers and carpenters, doctors and lawyers
And in they all went, families in minivans
Ashcroft republicans, weekend militiamen
They followed the river, and rounded the bend
Between Minsi and Tammany and into their destiny
Lying in ambush right there before them
The angry old sun right on the horizon

Sister Maria tightened the bolts of the spare
She said a quick prayer and put the old van into gear
Thank God that the traffic was light
If she hurried she might not be late
For that evening’s performance at the state penitentiary

She entered the common room and there was her choir
Altos and baritones, basses and tenors
Car thieves and crack dealers, mobsters and murderers
Husbands and sons, fathers and brothers
And so it began in glorious harmony
Softly and Tenderly – calling for you and me
With the interstate whining way off in the distance
And the sun going down through the bars of the prison
They poured out their souls, they poured out their memories
They poured out their hopes for what’s left of eternity
To sister Maria – her soul like a prism
For the light of forgiveness on all of their faces

Lyrics from the song 'Transit' by Richard Shindell



I added 'Human Transit', the 'Professional blog of public transit planning consultant Jarrett Walker' to the blogroll. His most recent post, on why transit maps/signs/info should provide clear indications of which routes are more important than others - in the same way that a road map does - is a good example of why I added it in. Such an obvious point once it's made, but so unusual of someone to notice and make the point.

62. The Evolution of Cooperation (part 2 of 2)

Note: This post is the sixty-second in a series about government and commercial ethics. Click here for the full listing of the series. The first post in the series has more detail on the book 'Systems of Survival' by Jane Jacobs which inspired this series.

This post is a continuation of last week's post which began discussing The Evolution of Cooperation by Robert Axelrod and covered the first 6 chapters.

In chapter 7 Axelrod provides advice for how people should act if they are in a position where, rather than accepting that they are in a Prisoner's Dilemma and trying to choose the best action based on their situation, they can try to change the situation.

Axelrod notes that while in most cases people will want to influence the situation to encourage cooperation, there are some cases (such as when businesses collude, or in the original Prisoner's Dilemma when the interrogator was trying to get the Prisoners to rat on each other) where the goal will be to discourage cooperation.

So the following advice is for encouraging cooperation in the Prisoner's Dilemma - if you want to discourage cooperation, do the opposite.

1. Enlarge the shadow of the future.

What this means is that interactions between people should be structured so that the same people meet repeatedly rather than meeting a different person every time. It might also mean setting things up so that interactions are more frequent and spaced closer together in time. Basically any change that increases the potential risk of suffering retaliation if you choose to defect rather than cooperate with someone.

2. Change the payoffs

The bigger the payoff for defecting, the greater the temptation to do so. So reducing the payoff from defection or increasing the payoff from cooperation makes cooperation more likely. For example, the potential of an audit, helps encourage people to do their taxes accurately

3. Teach people to care about each other

This is really just another way to change the payoffs. If you care for the other person's wellbeing as much as your own, than their can never really be a Prisoner's Dilemma. And every increase in empathy reduces the element of dilemma in the situation.

4. Teach reciprocity

If people turn the other cheek and forgive each other 490 times or more, then this just allows people who exploit the suckers to prosper. If people repay kindness with kindness but also defection with defection, then this will help keep down the population of defectors and exploiters.

5. Improve recognition abilities

If you don't recognize the person who defected on you last time around, you won't be able to exact your revenge this time around. If you can tell ahead of time whether someone looks like a cooperator or a defector then you can be much better off rather than going in blind.


In Chapter 8, Axelrod looks at some ways in which a basic scenario of
randomly occurring interactions can be modified.
4 different types of 'structure' are considered.

1) Stereotyping - stereotyping means that you judge people based on some easily obesrvable characteristic such as the colour of their skin. Axelrod points out that these sorts of stereotypes can be self-reinforcing. If a blue person expects to be poorly treated by a green person (and vice-versa) then they have no reason to cooperate and will defect against each other. This defective behaviour then reinforces the notion that those blue/green people never cooperate. While this has negative consequences for everyone in that opportunities for cooperation are missed, it also has particularly negative consequences for whichever stereotyped group is in the minority since they will face a lack of cooperation from a majority of the population.

2) Reputations - Axelrod points out that it is good to have a reputation as a bully (someone who will respond to any defection with a very heavy retaliation) since that will scare people into cooperating with you. The hazards of establishing this sort of reputation is that you must pass up opportunities to engage in cooperative behaviour with people by forgiving them for their past transgression. And if more than one person is trying to establish a reputation as a bully, this can lead to a long series of defections until one gets the upper hand.

3) Government - The government needs to design the payoff structure such that most of the citizens will comply on their own. Punishment is generally reserved for setting an example of the few people who do defect and reassuring people that other people are getting away with breaking the laws. Once enough people began to ignore a particular law, because they don't respect the legitimacy of the law and the punishment/reward payoffs aren't set correctly, then enforcing compliance becomes extremely difficult because the cost is simply too high to physically coerce a large percentage of the population and the law tends to break down (see Prohibition, War on Drugs, Marijuana).

4) Territory - Axelrom segues from talking about government to talking about territory by noting that, 'an interesting characteristic of governments that has not yet been taken into account is that they are based upon specific territories.'

Axelrod develops a formal territorial model in which each participant in the situation has four neighbours, one to the North, South, East and West. Each round, a participant plays a repeated Prisoner's Dilemma against the four neighbours and is assigned a score based on their combined result against their four neighbours. Then for the next round, if a participant finds that one of their neighbours did better than they did, they switch to using their neighbours strategy. In this way, successful strategies can spread throughout the population.

Axelrod finds that in the territorial model, it is at least as hard (or harder) for a new strategy to invade a population using a given strategy (as compared to a mode where people meet randomly). If a strategy is stable (resistant to invasion by other strategies) in a population that mixes randomly, it will be stable as well in a population that is organized territorially.

Another finding was that in a territorial model, where people imitate their best neighbour, strategies that do really well in some situations and poorly in others tend to do better than they would in a model where people mix randomly. The territorial nature of the model means that you end up with a greater diversity of strategies in certain areas, and this allows the inconsistent strategy to thrive and convert its neighbours in the areas where conditions are suitable, while dying away rapidly where conditions are unsuitable.


Chapter 9 is a conclusion which basically just recaps everything that has
come before.

The quick summary of Axelrod's results is that, cooperation based on reciprocation (e.g. tit for tat style behaviour) can get started and can thrive in a wide variety of environments and that it withstand attempted 'invasions' by uncooperative strategies. Furthermore, the people doing the cooperating don't have to be friends, they don't have to possess foresight and they don't have to be rational. These characteristics might help, but they are not necessary as shown by the evolution of cooperation between enemy soldiers on the front in WWI, cooperation between bacteria and so on. Furthermore, neither altruistic behaviour nor a central authority is required to maintain cooperation (at least in Axelrod's model where people still retain the capacity to retaliate after someone has defected against them).
Axelrod notes that Prisoner's Dilemma situations ...

As always, there is far more to the book, then I covered here. The Evolution of Cooperation is noteworthy for the clear prose of the author and the thorough take on one particular type of interaction, the repeated Prisoner's Dilemma with two participants. I recommend anyone interested enough in the topic to have made it to the end of this post, should read it for themselves (if they haven't already).