Daily Tao

The most remarkable thing about this ordoliberalization of Europe is how it replicates the same error often attributed to the Anglo-American economies: the insistence that all developing states follow their liberal instruction sheets to get rich, the so-called Washington Consensus approach to development that we shall discuss shortly. The basic objection made by late-developing states, such as the countries of East Asia, to the Washington Consensus/Anglo-American idea “liberalize and then growth follows” was twofold. First, this understanding mistakes the outcomes of growth, stable public finances, low inflation, cost competitiveness, and so on, for the causes of growth. Second, the liberal path to growth only makes sense if you are an early developer, since you have no competitors— pace the United Kingdom in the eighteenth century and the United States in the nineteenth century. Yet in the contemporary world, development is almost always state led. Germany was in many ways the first country to prove this very point during the catch-up with Britain. But then, like the United States and the United Kingdom, Germany forgot her uniqueness, in terms of both timing and context and in terms of how building the export-led ordo that made Germany rich was only possible precisely because other countries were not doing the same at the same time. Now Germany and the EC want everyone else in Europe to be more German: another fallacy of composition that cannot work. As Martin Wolf put it beautifully, “Is everybody supposed to run current account surpluses? If so, with whom—Martians? And if everybody does indeed try to run a savings surplus, what else can be the outcome but a permanent global depression?”  Germany was able to take the lead in Europe because German ideas have been at the heart of the EU and the euro since its inception. This is also why the Germans were able so successfully to turn the debate about the crisis their way—they were the only people who really believed what they were saying.

This was a longer and slightly more painful read for me back in the day, but I did enjoy reading it, especially as there was more talk about Greece’s economy and the austerity measures taken back then to reduce government expenditure and generate a current account surplus.

Related to the previous excerpt from Joe Studwell’s book, How Asia Works, this passage also reminds me of how western countries constantly tout liberalization of economies as the only path to growth. In that book, and from the real life examples of South Korea and China, the truth is much more nuanced and complicated than that.

Cause and effect are also often hard to determine. Was economic liberalization a result of economic growth, or was it a cause? I remember reading about both education levels and economic growth being correlated, but cause and effect is much harder to ascertain.

Back to the topic of austerity and surpluses, regardless of your stance on whether reducing a nation’s deficit is of importance, (Modern Monetary Theorists put less importance on this. I’ve got a upcoming post about it.), certainly forcing nations to cut down on their public spending during a time of crisis certainly puts a lot more stress and pressure on the average citizen of the country. It also becomes a moral decision, whether forcing austerity on a nation already in economic downturn can be fair on its citizens. Rationally, it also makes it harder to get to the path of recovery.

Daily Tao – Messy: The Power of Disorder to Transform Our Lives – 1

In 2014, some of the workers on London’s Underground system went on strike for two days. The strike closed 171 of the system’s 270 stations, leaving commuters scrambling to find alternative routes using buses, aboveground trains, or the stations that remained open. Many commuters in London use electronic fare cards that are valid on all forms of public transport, and after the strike, three economists examined data generated by those cards. The researchers were able to see that most people used a different route to get to work on the strike days, no doubt with some annoyance. But what was surprising is that when the strike was over, not everybody returned to their habitual commuting route. One in twenty of the commuters who had switched then stayed with the route that they had used during the strike; presumably, they had discovered that it was faster or cheaper or preferable in some other way to their old routine. We tend to think that commuters have their route to work honed to perfection; evidently not. A substantial minority promptly found an improvement to the journey they had been making for years. All they needed was an unexpected shock to force them to seek out something better.

Most of us tend to get into our routine, keeping to the same habits or course of action to deal with issues over time. Our mind forms this particular pattern, and we think that this is the best way to do things. Even as things change, it might take too much effort to constantly find new things to do. Like in this book, sometimes some form of disorder can benefit us. By throwing us off routine, we get to try things out in a different way that we might not have conceived of, which allows us to discover new and possibly better ways to do things.

Good note to always keep open minded to new things!

Daily Tao – The Ten Types of Human – 1

We just cannot meaningfully extend the process beyond a certain point. Because for all our thousands of Facebook friends or Twitter followers, the effective limit of our social circle is 150 – what has come to be known as Dunbar’s Number (he is unaware of the precise origins of the term, but is quite content to adopt it). What can we deduce from all this? Thinking of others comes at a price. It has a cognitive cost. And that affects how we view and treat other people. Once we start worrying, caring, or just plain thinking of other people outside our family and familiar circles, we begin to load up our system. As Dunbar’s team conclude, this cognitive load ‘acts as a brake on our social ambitions’. It’s good to know this. It does not have to be viewed as a mordantly negative thing. It just is. It’s not that we don’t care. It’s just that in an important but critical sense we just cannot keep caring indefinitely. As Samantha Power poignantly puts it in her account of the historic failure to engage with genocide, we just can’t ‘wrap our minds around it’. We should stop beating ourselves up about this. Because there is a risk: our inability to care for the many, to act on a massive scale, can preclude us from engaging on a more modest but essentially achievable level – a human level. When we reach out to other human beings, we expose ourselves to pain.

A passage that I found interesting. In general, cognitive load affects our ability to control ourselves, to make decisions that benefit the long term over short-term gains, to be disciplined. This seems to be the general behavior that I have read in these books. Dias speaks about it from a social perspective though, where at some point if we give up on caring about the “many” whom are suffering die to the cognitive load, it might also affect our day-to-day dealings with those close to us.

It also reflects on why humans in general respond much more strongly to narratives than statistics about suffering. Studies have shown that humans are more more likely to donate with an emotional appeal than a logical approach. The suffering of 1 person is real and many of us are able to empathize. However, scale that problem ten-fold, hundred-fold and the scope of the problem seems too huge, such that many of us can’t process it and give up.

It also reminds me about how we should always focus on getting our own shit together, before we can worry about others. As this points out, worrying about others increases the cognitive load and probably affects your own ability to take care of yourself. Get oneself right, before worrying about and helping others.

Daily Tao – The Death of Expertise: The Campaign Against Established Knowledge and Why it Matters – 1

As a University College of London (UCL) study found, people don’t actually read the articles they encounter during a search on the Internet. Instead, they glance at the top line or the first few sentences and then move on. Internet users, the researchers noted, “are not reading online in the traditional sense; indeed, there are signs that new forms of ‘reading’ are emerging as users ‘power browse’ horizontally through titles, contents pages and abstracts going for quick wins. It almost seems that they go online to avoid reading in the traditional sense.” This is actually the opposite of reading, aimed not so much at learning but at winning arguments or confirming a preexisting belief. Children and younger people are especially vulnerable to this tendency. The UCL study suggested that this is because they “have unsophisticated mental maps of what the internet is, often failing to appreciate that it is a collection of networked resources from different providers,” and so they spend little time actually “evaluating information, either for relevance, accuracy or authority.” These youngsters “do not find library-sponsored resources intuitive and therefore prefer to use Google or Yahoo! instead,” because these services “offer a familiar, if simplistic solution, for their study needs.” Teachers and other experts are not immune from the same temptations. “Power browsing and viewing,” according to the study, “appear to be the norm for all. The popularity of abstracts among older researchers rather gives the game away.” “Society,” the UCL study’s authors conclude, “is dumbing down.”

One of the most concerning things to me, which is also a little ironic as I am sharing small fragments of what a book means in the form of passages. Each of us are capable of confirmation bias, and the internet as well as the increasing impatience that it has inculcated in many of us has led to many of us constantly searching the internet to support our beliefs. This is a concerning trend and it entrenches people’s viewpoints, hence increasing divisiveness and causing us to be more parochial in our mindsets.

To deal with it, I think many of us should actively seek to disconfirm our current viewpoints. While that may cause us to be tentative at times, this usually leads to more nuanced and better conclusions. Personally, I try to follow arguments from various perspectives, and try to understand the emotional aspects that may lead to me having a specific viewpoint. The desire to disconfirm my opinion also affects my book choices, as I try to read books that deal with various political or economic ideologies, to get a better rounded perspective on things.

Daily Tao – Nudge: Improving Decisions About Health, Wealth, and Happiness – 1

The false assumption is that almost all people, almost all of the time, make choices that are in their best interest or at the very least are better than the choices that would be made by someone else. We claim that this assumption is false—indeed, obviously false. In fact, we do not think that anyone believes it on reflection. Suppose that a chess novice were to play against an experienced player. Predictably, the novice would lose precisely because he made inferior choices—choices that could easily be improved by some helpful hints. In many areas, ordinary consumers are novices, interacting in a world inhabited by experienced professionals trying to sell them things.

This is one of the interesting premises in Richard Thaler’s book that opens up many moral questions of whether we should be taking active action in manipulating people to make decisions that are perceived to be good for them. Nudge, in general, is about the design of choices and how seemingly miniscule factors can have a significant effect on the choices of people. For instance, we could try to dissuade people from taking sugary food products by putting them in supermarket shelves that hard to see or reach. In many instances, such a seemingly small choice can lead to significant results without the consumers being aware of it.

The passage above relates more towards our life experiences. For many of us, we only buy perhaps a house once or twice in our lifetimes. Other things, like weddings or vehicles are also things that we tend to only make a purchase a handful of times in our lives. Essentially, we are novices, trying to read the salesmen who are trying to extract every dollar out from us, and are extremely experienced in doing so. This then serves as a justification for a “nudge policy”, where the government takes an active role in trying to protect the consumers. That also explains why government regulation can be helpful, and new sources like internet reviews/ratings and forums have helped give most of us “novice” consumers some more information.

Of course the question that goes is how much is too much? What are the areas of our lives that we are comfortable with letting the government decide? From where I live in Singapore, I feel that there are many aspects of our polices that “guides” us towards certain paths and choices. This is exemplified by the public housing scheme. I feel like many local couples center their future plans around a house purchase (BTO), a scheme that lets people get a completely new flat and maximizes their asset value. This is due to the extremely attractive incentives and schemes to “nudge” people into taking up public housing. And while one can’t argue with the results (80% of locals live in public housing), it also reduces the attractiveness of alternate paths. Some might even say it is stifling and overly paternalistic.

Interestingly, Thaler proposes a form of “libertarian paternalism” towards the end of his book. It is a concept where government can try to influence our decisions through the framing of choices, but that the people also have the freedom to ultimately choose what they want. As things tend to be with such ideology, the devil is always in the details. How one might feel comfortable living in such a government would always depend on the specific policies.

Daily Tao -Reality Is Broken: Why Games Make Us Better and How They Can Change the World 1

he wondered, then why did real life so infrequently resemble a game? Csíkszentmihályi argued that the failure of schools, offices, factories, and other everyday environments to provide flow was a serious moral issue, one of the most urgent problems facing humanity. Why should we needlessly spend the majority of our lives in boredom and anxiety, when games point to a clear and better alternative? “If we continue to ignore what makes us happy,” he wrote, “we shall actively help perpetuate the dehumanizing forces which are gaining momentum day by day.” The solution seemed obvious to Csíkszentmihályi: create more happiness by structuring real work like game work. Games teach us how to create opportunities for freely chosen, challenging work that keeps us at the limits of our abilities, and those lessons can be transferred to real life. Our most pressing problems—depression, helplessness, social alienation, and the sense that nothing we do truly matters—could be effectively addressed by integrating more gameful work into our everyday lives. It wouldn’t be easy, he admitted. But if we failed to at least try to create more flow, we risked losing entire generations to depression and despair

Flow is best achieved when we engages tasks with a sense of autonomy, where tasks are challenging enough but not too difficult such that it induces stress and anxiety. Nevertheless, most of the tasks that we engage in our school and work life seldom lead to any form of satisfaction in itself. That might be one of the challenges of life itself, as unlike games, life does not proportionally reward hard work with rewards. In a game, positive feedback is highly observable and you can complete milestones, tasks and achieve points unlike in real life.

In this book, Mcgoinal asserts that what we need to do is to insert more aspects of games into our real life environments. Workplace can create environments where employees have more autonomy, where feedback for their effort is apparent and where milestones and achievements can be better appreciated. The fact that some people choose to engage in gaming speaks to a “hunger” for something more. In games, people can feel their actions matter, like they have “saved the world”, like their actions mean something in the world. We should always try to drive and create that element for “meaning and value” into our work place.

As individuals, we can also insert gamification elements into our own life. We could also choose to engage in some hands-on work where results can be observed. For ourselves, we have to also learn to create situations and challenges which induces our own “flow”.

Daily Tao – Behave: The Biology of Humans at Our Best and Worst – 3

Of course, this is not a uniform effect of religion; Norenzayan distinguishes between private and communal religiosity in surveying support for suicide bombers among Palestinians.17 In a refutation of “Islam = terrorism” idiocy, people’s personal religiosity (as assessed by how often they prayed) didn’t predict support for terrorism. However, frequently attending services at a mosque did. The author then polled Indian Hindus, Russian Orthodox adherents, Israeli Jews, Indonesian Muslims, British Protestants, and Mexican Catholics as to whether they’d die for their religion and whether people of other religions caused the world’s troubles. In all cases frequent attendance of religious services, but not frequent prayer, predicted those views. It’s not religiosity that stokes intergroup hostility; it’s being surrounded by coreligionists who affirm parochial identity, commitment, and shared loves and hatreds. This is hugely important.

An interesting quote I found that reflects much about human nature and why we tend to get into conflicts. Humans are capable of altruism towards members of their own group, but this same trend also reflects itself as people whom develop a group identity also tend to engage in conflict against other groups. People tend to find reasons to identify with themselves within a group.

Sapolsky also talks about intergroup hostility. As groups of people get into contact with each other, it provides a way to reduce the tension and build stronger bonds. However, contact can also elevate hostility. Getting groups to interact with each other can be a double-edged sword.

If you ever notice clique forming over at your workplace, or felt like a it is your clique at work against the rest of the company, it can also be a result of the above behaviour. Empathy is crucial as we should not only extend it to our friends and close one, but to those beyond our social group as well. It is only through taking a wider view that we can avoid unnecessary conflict. In some ways, the increasing divisiveness of the political landscape can be a good example of this.

Daily Tao – Behave: The Biology of Humans at Our Best and Worst – 2

This is precisely the case. The time pressure of snap judgments is a version of increased cognitive load. Likewise, people become more conservative when tired, in pain or distracted with a cognitive task, or when blood alcohol levels rise. Recall from chapter 3 that willpower takes metabolic power, thanks to the glucose demands of the frontal cortex. This was the finding that when people are hungry, they become less generous in economic games. A real-world example of this is startling (see graph on previous page)—in a study of more than 1,100 judicial rulings, prisoners were granted parole at about a 60 percent rate when judges had recently eaten, and at essentially a 0 percent rate just before judges ate (note also the overall decline over the course of a tiring day). Justice may be blind, but she’s sure sensitive to her stomach gurgling.

Thou shall not judge when one is hungry.

Being in stress, hunger or any other form of distress does take away from our ability to make good decisions. It is also another reason as to why people whom are in financial distress also tend to not to make the best decisions possible. It is something we should definitely take not of.

On another note, the anecdote above really does show the randomness of outcomes that we have, and that it is inherently impossible to truly achieve equality of opportunity in the world that we live in. While it is an ideal that we might want to achieve, the randomness of life affects outcomes in ways we can never plan for.

Personally, I’ve found that it is way easier to accept the cards that one is dealt with when you internalize the concept that fairness in outcomes don’t exist. Outcomes happens from actions and random chance. Concerning oneself with whether you or someone “deserves this” tends to only lead to more stress. Rather, one should simply accept the situation are in and guess the best course of action that we can take. That seems to be the best way to be sane in a random world.

How Asia Works, Joe Studwell

Along with macro-economic stability, the IMF and the World Bank have consistently pressed the virtues of private enterprise, and the privatisation of state enterprises. In developed countries, there is considerable evidence that private firms tend to be more cost-efficient than public ones. 233 But in the learning phase of development, the public–private ownership distinction is framed differently, that is, in terms of what kind of company is able to absorb knowledge and make technological progress. When the state’s regulatory capacity is weak, it is sometimes easier for governments to pursue industrialisation objectives via state firms. Japan, Korea, Taiwan and China all made rapid technical progress using state-owned companies, particularly at an early stage; China is today making greater use of state firms than any successful developing nation before it. This does not prove that state ownership is superior to private. It merely demonstrates that it is not such an important consideration as developing countries have been told. In failed, autarkic socialist states like the Soviet Union, and India and China in their pre-reform incarnations, the absence of export discipline and competition were the real developmental culprits, not who owned firms’ equity.

Something really interesting that I found from this book from Joe Studwell. Above all, I think what the key point of this book, and what this passage highlights, is that free markets and liberalization of markets is not the magical solution that developing economies need to industrialize and develop.

In his book, Studwell even goes on to show that other other countries in South East Asia that whom have, based on conventional wisdom, deregulated their financial markets but were still unable to capture the growth that countries like Japan, Korea and China have.

The idea that a country needed to just open their country up to free trade, investments and let the markets develop never seemed to make sense to me, especially from my own personal experience in Singapore. The Singapore government took an extremely active approach in buying up and controlling land/property, most of the economy is driven by state-owned enterprises and the government takes a super active approach in developing industries and shifting our economic focus. This would never make sense to economists that promotes free markets and privatization.  The “inefficiencies” of the state managing these corporations would never make sense! But in our case, it helped us develop into a first world country economically and it seemed to make sense.

To me, the dichotomy between the left and right approach to economics just distracts us from being guided by first principles. When faced with different situations, we should always keep an open mind and do what what makes sense based on the individual facts.

Matt Ridley, The evolution of everything: How New Ideas Emerge

The foremost anthropologists of cultural evolution, Joe Henrich, Rob Boyd and Pete Richerson, have argued in an influential paper called ‘The Puzzle of Monogamous Marriage’ that the spread of monogamy in the modern world can best be explained by its beneficial effects on society. That is to say, not that clever men sat around a table and decided upon a policy of monogamy in order to bring peace and cohesion, but more likely that it was a case of cultural evolution by Darwinian means. Societies that chose ‘normative monogamy’, or an insistence upon sex within exclusive marriage, tended to tame their young men, improve social cohesion, balance the sex ratio, reduce the crime rate, and encourage men to work rather than fight. This made such societies more productive and less destructive, so they tended to expand at the expense of other societies. That, the three anthropologists think, explains the triumph of monogamy, which reaches its apogee in the perfect nuclear family of 1950s America, with Dad going out to work and Mom at home cleaning, cooking and looking after the kids.

I really found the above passage from this book really interesting. It talks about how “monogamy” as a concept could have evolved and societies that practiced could have been a result of evolution. In general, Ridley takes a rather pessimistic view to central planning and speaks a lot about how the best things are result of decentralized, bottom-up evolution.

I don’t disagree with his general sentiment. After all, many top-down approaches tend to allow for perverse incentives, and sometimes do not have the flexibility to deal with issues on the ground. Many well intended approaches, from either top management or from the government can lead to inefficiencies and solutions that outright do not make sense at a lower level. Evolution does make sense.

Taking it too far and leaving everything to a decentralized approach may also lead to sub-optimal outcomes. Economies such as South Korea and Singapore have benefited from government intervention in its development that have led them to be the modern first-world countries that we see them today.

A lot comes down to wisdom, and being able to adapt to feedback from the “bottom”. Taking a dogmatic approach to things only keeps you close-minded.