Posts

Comments

Comment by fuego on Against boots theory · 2020-09-15T18:34:37.471Z · score: 1 (1 votes) · LW · GW

I think that Siderea's section 2 is actually very important. While it is possible that the monetary costs of the boots are structured such that buying good boots once is a better use of money than buying cheap ones every year, it is certainly the case that the time-costs of avoiding that big upfront expenditure are huge. The same is true for many of your examples. Being money-poor forces you to work up to your constraints on other dimensions (time, stress, etc) to survive without money -- which in turn prevents you from using slack in those dimensions to stop being poor.

I will commend your notice of financial products being cheaper for the rich. This is, I think underrated as a source of inequality. It takes $3k to invest in the top tier of vanguard funds. It takes $1mil to become an accredited investor (possibly changing?). This incentivizes more savings behavior by the wealthy, it is literally cheaper/better. Those incentives can create a self reinforcing system. This is probably why we see lots of people giving advice along the lines of "fight every inch for the first $100k of net worth" (see e.g. charlie munger rule).

Comment by fuego on Comparative advantage and when to blow up your island · 2020-09-15T17:58:50.426Z · score: 1 (1 votes) · LW · GW

I think the reason the second fact gets less attention has to do with the focus rapidly shifting to markets and prices as the mechanism by which the exchange rate is set, rather than 1-on-1 negotiation.

Not to say that the second fact is irrelevant. OPs examples of relevance of fact 1 include things like household chore splits between partners, as well as career choice -- applications where fact 2 is clearly very relevant.

But in econ 101, there is a lot of ground to cover. comparative advantage is a natural jumping off point for supply & demand Qs which are pretty much required content, whereas negotiation, game theory, bilateral decisions are usually treated as somewhat supplementary.

Comment by fuego on [deleted post] 2020-08-03T18:13:46.517Z

Really well written and thought out.

Indeed, if both Alice and Omega know that Alice's decision-making will tell her to use the 1-boxer strategy, then Alice will know she will gain $1M

and

In both cases, her counterfactual optimization urged her to be a 2-boxer

feel like the crux to me.

If Alice was such a person to listen to the counterfactual optimization, then both Alice and Omega would not know she would 1box. There is a contradiction being buried in there.

Comment by fuego on Six economics misconceptions of mine which I've resolved over the last few years · 2020-07-29T15:48:31.090Z · score: 1 (1 votes) · LW · GW

Excellent post. I have a small complaint on the Coase section though. Quoting for reference:

Suppose that, in a particular case, the pollution does $100,000 a year worth of damage and can be eliminated at a cost of only $80,000 a year (from here on, all costs are per year). Further assume that the cost of shifting all of the land down wind to a new use unaffected by the pollution—growing timber instead of renting out summer resorts, say—is only $50,000. If we impose an emission fee of a hundred thousand dollars a year, the steel mill stops polluting and the damage is eliminated—at a cost of $80,000. If we impose no emission fee the mill keeps polluting, the owners of the land stop advertising for tenants and plant trees instead, and the problem is again solved—at a cost of $50,000. In this case the result without Pigouvian taxes is efficient—the problem is eliminated at the lowest possible cost—and the result with Pigouvian taxes in inefficient.

With the numbers laid out, (and presuming the mill is more than $100k profitable), I agree that the "efficient" outcome is for the resort to convert to timber. However, the result with Pigouvian taxes is still efficient. This is because Friedman arrives at the wrong equilibrium result with taxes. It is possible this is because he has structured his taxes incorrectly -- they aren't properly taxing damages, but rather an intermediary which can cause damages.

I think the result that Coase would advocate is that in the presence of a tax on damages, the mill pays the resort owner $50k+1 to convert to timber. At that point, the damages are $0, and no Pigouvian tax is paid. This is central to Coase's realization. Conditional on the pre-existing endowments, we should arrive at the min-cost solution -- the question is who bears the cost. In this case, imposing a Pigouvian tax transfers the burden from the resort owner to the mill owner.

Comment by fuego on Swiss Political System: More than You ever Wanted to Know (I.) · 2020-07-21T18:27:01.881Z · score: 1 (1 votes) · LW · GW

I believe not. The point was that even if a referenda gains a majority of 1% of the population, it is still a successful referenda. Thus 0.51% when turnout is 1% is adequate to change law.

Comment by fuego on Conflict vs. mistake in non-zero-sum games · 2020-05-21T14:32:21.998Z · score: 1 (1 votes) · LW · GW

This. I think Mistake theorists would frequently question whether the game is actually zero-sum. This divergence in opinions about the nature of the game feels important to me.

Comment by fuego on The EMH Aten't Dead · 2020-05-20T14:19:40.103Z · score: 1 (1 votes) · LW · GW

I think the reason not to worry too much about the passive revolution is that as long as there are money-making opportunities from active trading -- people will be incentivized to do it. The end state "everyone is passive -- there is no price signal" is not one we can reach from where we are, and it is not a stable equilibrium. If we ever did cross over into "too few hedge funds", there would such a strong incentive for more, that I don't think it would last long. But perhaps I misunderstand this critique.

Comment by fuego on The EMH Aten't Dead · 2020-05-19T14:48:19.461Z · score: 1 (1 votes) · LW · GW

Really excellent discussion of the EMH. Love your description of it as some kind of demon-god creature.

I'll jump in on a minor point.

"And yet, and yet…even when criminals have advance access to earnings reports, they still don’t do all that well, which is evidence for the very strongest form of the EMH (the one that no-one, including me, believes can possibly be true)."

This might instead be evidence that there is a lot more insider trading than we think -- making it so that those we know of were competing for gains against other insider traders.

Comment by fuego on 162 benefits of coronavirus · 2020-05-17T20:43:55.772Z · score: 1 (1 votes) · LW · GW

Could certainly go either way. I was trying to emphasize that the productivity loss has an externality associated with it though. I wholeheartedly agree that individuals may be better off -- they are optimizing, but with more information. At most, their predictions about locational preferences have changed but reality hasn't (outside the next couple of years at least). But if that reduces aggregate productivity growth, people alive in 100 years may be suffering -- their utility isn't being accounted for by individual decisions.

A secondary effect, which I failed to mention I thought you should add (I don't think you have it) -- is that I suspect people will move closer to family. I've been comfortably living a 12 hour drive from any family for 5 years now -- and I was happy to fly to see them frequently -- but flight is not a robust transport method -- and going forwards I'll be thinking about locales within more like 4 hours of them.

Whether that is good or bad, I don't know. Closer family bonds, which are good for many reasons. but the models around people moving towards work involve largish productivity growth again.

Comment by fuego on 162 benefits of coronavirus · 2020-05-15T18:37:39.976Z · score: 3 (2 votes) · LW · GW

De-urbanization is something you list several times as being important and beneficial. I don't think I agree.

In the short term at least de-urbanization is diametrically opposed to __climate progress__ -- and that may be true in the medium to long term. See for instance, stats about NYC

In the long term, urban areas have been highly productive historically -- and while it is possible that tele-everything can undermine that effect, I doubt it can fully counter the productivity benefits of cities. Insofar as productivity has been critical for human welfare over longer time spans, I worry that reducing productivity by deurbanizing could have long term consequences. I suppose you could have a complicated model where partial telework allows some de-urbanizing of work, which lowers urban prices, which allows greater concentration/productivity? But at minimum it isn't __obvious__ to me that this is a benefit.

More broadly though -- I really like your list and the general thesis. Good writeup too.