Betting the House, not the Economy

Òscar Jordà, Moritz Schularick and Alan Taylor recently put out an interesting paper on the relationship between interest rates, the housing market and financial crises. It’s been reviewed very positively, for example here and here. They take advantage of the macroeconomic trilemma – countries with fixed exchange rates and open capital markets ‘import’ the monetary policy of other countries –  by treating these imported interest rates as exogenous, providing them with an independent random variable.

People seem to be interpreting it as saying that loose monetary policy causes financial instability through the transmission mechanism of a housing bubble.

To be fair, the opening line of the abstract does give that impression:

Is there a link between loose monetary conditions, credit growth, house price booms, and financial instability?

as does the first paragraph’s use of ‘thus’:

Do low interest rates cause households to lever up on mortgages and bid up house prices, thus increasing the risk of financial crisis?

So one could be forgiven for thinking their conclusion was basically

  • Loose Monetary Policy -> Mortgage & Housing Bubble -> Financial Instability

… Well, one could be forgiven for thinking that unless one was going to write about the article. If you were going to do that, you should actually read the article. Then you would realize they in fact show two separate things:

  • Loose Monetary Policy -> Lower Long-term interest rates + Mortgage & Housing Increases
    • (with reasonable p-values in general)



  • Mortgage & Housing Market Bubble -> Financial Instability
    • (with ok p-values, and some suspicion about how canonical their independent variable was)


Despite having a clever way of treating monetary policy as an independent variable, they never directly test

  • Loose Monetary Policy -> Financial Instability

even though this would be a major victory for the ‘low interest rates caused the bubble and crisis’ crowd.

Why not test this directly? The authors don’t say, but I suspect it’s because the test would fail to yield significant results. Absence of evidence of such a connection is evidence of its absence. And looking at the significance levels of the two results they did provide, I suspect that combining them would cease to be significant (unless their is another, parallel causal mechanism).

Which is a shame! Their independent variable looked really cool, as did their data set.

I think there’s an underlying theoretical reason to not expect it to work, however (quite apart from nothing ever working in macroeconomics. They rightly make much of their finding that exogenous low interest rates cause increases in housing prices. But this is not necessarily caused by increased demand ‘bidding up’ the value of housing in a bubble.

Rather, consider what sort of an asset housing is. Houses allow you to avoid paying rent in the future; their value is the capitalized value of avoided future rent. When interest rates are low, those future rent payments are discounted at a lower rate, so are more valuable: low interest rates increase the inherent value of housing. House prices rising when rates are low isn’t a bubble unless the interest rates themselves are a bubble; it’s rational cross-asset pricing. So we should expect exogenous falls in interest rates to increase house prices.

But wait there’s more!

Exogenous falls in interest rates probably mean rates are now too low (from a Taylor Rule perspective, or similar), or at least not-as-excessively-high as before. This will tend to increase inflation. And as home ownership represents a hedge against rent inflation, higher inflation yet again increases the value of home-ownership. So once again we have a non-bubble based reason to expect exogenous falls in interest rates to increase house prices.

So we have two reasons to think that low interest rates should cause non-bubble increases in house prices, and journal article that is mildly supportive of this thesis.

What Diversity can do, Design can do better.

People sometime argue that diversity in an organization is good because it improves the quality of ideas generated. Different backgrounds bring different perspectives, which provide different insights, whereas having many people with the same background causes partial redundancy.

This argument seems to be mainly made as a rationalization rather than as a true reason. It’s typically employed to support hiring more blacks, or less frequently more women and hispanics. But rarely do advocates explain exactly what new perspectives these people are meant to bring. Does one’s race give one a unique insight into how to write good code? If not, this argument seems pretty poor as a justification for discriminating in favor of blacks for programming jobs. Do women have special, vagina-based insights into maths or physics? If not, it doesn’t seem to work as a justification for discriminating in favor of women for STEM positions.

Indeed, if you actually wanted a diversity of opinions, you would probably just seek to hire that directly. Maybe your investment team should have majored in Economics, Physics, History and Statistics rather than Economics, Economics, Economics and Economics. Perhaps you should hire some social conservatives to your sociology department rather than actively and openly discriminating against them. Sometimes this strategy is employed – Corporate Boards do try to have people from a wide variety of backgrounds, both inside the company, different companies and even different industries. But I’ve never seen the pro-diversity crowd realize this purported benefit of racial diversity could be much more directly achieved.

Indeed, suppose different races did have different insights into programming. Then you would probably benefit from seeing each race represented. But while you might want some people from each race, there’s no reason to think you’d want them in the same fractions as appear in the overall population. At the moment having a racial breakdown significantly different from the US is enough to have you branded as un-diverse, but is there any reason to think the overall US has the optimal racial make-up for your company? Probably not. Indeed, as the racial make-up of the US is changing over time, even if your organization’s optimal make-up was fashionably diverse at the moment, it won’t be in the future, as the hispanic share increases and the white share decreases.

And if you were actually looking to take advantage of different racial perspectives and advantages, you wouldn’t have a corporate-wide quota or such. Instead, individual job openings would come with desired races attached. We would see a return to “No Blacks or Irish” notices on job postings, brought back at the auspices of political correctness.

Economies of Scale in Individual Labor Supply

Here are two stylized facts about labor economics:

  1. Utility is roughly logarithmic in income
  2. People who earn more per hour also work longer hours.

Together they present a puzzle – those higher income people are higher income primarily because they earn more dollars/hour, not because they work more hours. Yet if utility is logarithmic, there are diminishing returns to income, so we should expect people with higher hourly rates to work fewer hours.

Essentially, the first stylized fact suggests the income effect dominates, while the second suggests the substitution effect dominates.

One solution to this conundrum would be if the hourly rate changed with the number of hours worked. Maybe there are some jobs that simply cannot be done unless you put a huge amount of effort into them: you can’t be a part-time investment banker or corporate lawyer. If so, your productivity would increase dramatically with hours worked, so the demand curve for your labor would be upwards sloping. It’s a bit like a Giffen Good, except the causation goes

  • Higher Quantity -> More Valuable -> Higher Demand -> Higher Price

rather than

  • Higher Price -> More Valuable -> Higher Demand -> Higher Quantity

At the same time, every extra dollar is worth less and less to you, and each hour of leisure lost hurts more than the previous one, so you demand a higher hourly wage the more hours you work. So your supply curve is upwards sloping, roughly exponentially (to offset the logarithmic dollars->utility conversion)

When both supply and demand curves and upwards sloping, it is not clear there is a unique equilibrium – there could be multiple equilibria.

This could explain why we see such a difference between the incomes of

  1. The increasing number of people who do not work at all
  2. People who do ordinary jobs for around 40 hours a week
  3. Extremely high earning extremely hard working people

each group occupies a different one of these equilibria.


Blind Spots: Compartmentalizing

This is my contribution to the December blogging carnival on “blind spots”.

Summary: People frequently compartmentalize their beliefs, and avoid addressing the implications between them. Ordinarily, this is perhaps innocuous, but when the both ideas are highly morally important, their interaction is in turn important – many standard arguments on moral issues are dramatically undermined or otherwise effected by EA considerations, especially moral uncertainty.

A long time ago, Will wrote an article about how a key part of rationality was taking ideas seriously: fully exploring ideas, seeing all their consequences, and then acting upon them. This is something most of us do not do! I for one certainly have trouble.

Similarly, I think people selectively apply EA principles. People are very willing to apply them in some cases, but when those principles would cut at a core part of the person’s identity – like requiring them to dress appropriately so they seem less weird – people are much less willing to take those EA ideas to their logical conclusion.

Consider your personal views. I’ve certainly changed some of my opinions as a result of thinking about EA ideas. For example, my opinion of bednet distribution is now much higher than it once was. And I’ve learned a lot about how to think about some technical issues, like regression to the mean. Yet I realized that I had rarely done a full 180  – and I think this is true of many people:

  • Many think EA ideas argue for more foreign aid – but did anyone come to this conclusion who had previously been passionately anti-aid?
  • Many think EA ideas argue for vegetarianism – but did anyone come to this conclusion who had previously been passionately carnivorous?
  • Many think EA ideas argue against domestic causes – but did anyone come to this conclusion who had previously been a passionate nationalist?

Yet this is quite worrying. Given the power and scope of many EA ideas, it seems that they should lead to people changing their mind on issues were they had been previously very certain, and indeed emotionally involved. That they have not suggests we have been compartmentalizing.

Obviously we don’t need to apply EA principles to everything – we can probably continue to brush our teeth without need for much reflection. But we probably should apply them to issues with are seen as being very important: given the importance of the issues, any implications of EA ideas would probably be important implications.

Moral Uncertainty

In his PhD thesis, Will MacAskill argues that we should treat normative uncertainty in much the same way as ordinary positive uncertainty; we should assign credences (probabilities) to each theory, and then try to maximise the expected morality of our actions. He calls this idea ‘maximise expected choice-worthiness’, and if you’re into philosophy, I recommend reading the paper. As such, when deciding how to act we should give greater weight to the theories we consider more likely to be true, and also give more weight to theories that consider the issue to be of greater importance.

This is important because it means that a novel view does not have to be totally persuasive to demand our observance. Consider, for example, vegetarianism. Maybe you think there’s only a 10% chance that animal welfare is morally significant – you’re pretty sure they’re tasty for a reason. Yet if the consequences of eating meat are very bad in those 10% of cases (murder or torture, if the animal rights activists are correct), and the advantages are not very great in the other 90% (tasty, some nutritional advantages), we should not eat meat regardless. Taking into account the size of the issue at stake as well as probability of its being correct means paying more respect to ‘minority’ theories.

And this is more of an issue for EAs than for most people. Effective Altruism involves a group of novel moral premisses, like cosmopolitanism, the moral imperative for cost-effectiveness and the importance of the far future. Each of these imply that our decisions are in some way very important, so even if we assign them only a small credence, their plausibility implies radical revisions to our actions.

One issue that Will touches on in his thesis is the issue of whether fetuses morally count. In the same way that we have moral uncertainty as to whether animals, or people in the far future, count, so too we have moral uncertainty as to whether unborn children are morally significant. Yes, many people are confident they know the correct answer – but there many of these on each side of the issue. Given the degree of disagreement on the issue, among philosophers, politicians and the general public, it seems like the perfect example of an issue where moral uncertainty should be taken into account – indeed Will uses it as a canonical example.

Consider the case of a pregnant women Sarah, wondering whether it is morally permissible to abort her child1. The alternative course of action she is considering is putting the child up for adoption. In accordance with the level of social and philosophical debate on the issue, she is uncertain as to whether aborting the fetus is morally permissible. If it’s morally permissible, it’s merely permissible – it’s not obligatory. She follows the example from Normative Uncertainty and constructs the following table

abortion table 1

In the best case scenario, abortion has nothing to recommend it, as adoption is also permissible. In the worst case, abortion is actually impermissible, whereas adoption is permissible. As such, adoption dominates abortion.

However, Sarah might not consider this representation as adequate. In particular, she thinks that now is not the best time to have a child, and would prefer to avoid it.2 She has made plans which are inconsistent with being pregnant, and prefers not to give birth at the current time. So she amends the table to take into account these preferences.

abortion table 2

Now adoption no longer strictly dominates abortion, because she prefers abortion to adoption in the scenario where it is morally permissible. As such, she considers her credence: she considers the pro-choice arguments slightly more persuasive than the pro-life ones: she assigns a 70% credence to abortion being morally permissible, but only a 30% chance to its being morally impermissible.

Looking at the table with these numbers in mind, intuitively it seems that again it’s not worth the risk of abortion: a 70% chance of saving oneself inconvenience and temporary discomfort is not sufficient to justify a 30% chance of committing murder. But Sarah’s unsatisfied with this unscientific comparison: it doesn’t seem to have much of a theoretical basis, and she distrusts appeals to intuitions in cases like this. What is more, Sarah is something of a utilitarian; she doesn’t really believe in something being impermissible.

Fortunately, there’s a standard tool for making inter-personal welfare comparisons: QALYs. We can convert the previous table into QALYs, with the moral uncertainty now being expressed as uncertainty as to whether saving fetuses generates QALYs. If it does, then it generates a lot; supposing she’s at the end of her first trimester, if she doesn’t abort the baby it has a 98% chance of surviving to birth, at which point its life expectancy is 78.7 in the US, for 78.126 QALYs. This calculation assumes assigns no QALYs to the fetus’s 6 months of existence between now and birth. If fetuses are not worthy of ethical consideration, then it accounts for 0 QALYs.

We also need to assign QALYs to Sarah. For an upper bound, being pregnant is probably not much worse than having both your legs amputated without medication, which is 0.494 QALYs, so lets conservatively say 0.494 QALYs. She has an expected 6 months of pregnancy remaining, so we divide by 2 to get 0.247 QALYs. Women’s Health Magazine gives the odds of maternal death during childbirth at 0.03% for 2013; we’ll round up to 0.05% to take into account risk of non-death injury. Women at 25 have a remaining life expectancy of around 58 years, so thats 0.05%*58= 0.029 QALYs. In total that gives us an estimate of 0.276 QALYs. If the baby doesn’t survive to birth, however, some of these costs will not be incurred, so the truth is probably slightly lower than this. All in all a 0.276 QALYs seems like a reasonably conservative figure.

Obviously you could refine these numbers a lot (for example, years of old age are likely to be at lower quality of life, there are some medical risks to the mother from aborting a fetus, etc.) but they’re plausibly in the right ballpark. They would also change if we used inherent temporal discounting, but probably we shouldn’t.

.abortion table 3

We can then take into account her moral uncertainty directly, and calculate the expected QALYs of each action:

  • If she aborts the fetus, our expected QALYs are 70%x0 + 30%*(-78.126) = -23.138
  • If she carries the baby to term and puts it up for adoption, our expected QALYs are 70%*(-0.247) + 30%*(-0.247) = -0.247

Which again suggests that the moral thing to do is to not abort the baby. Indeed, the life expectancy is so long at birth that it quite easily dominates the calculation: Sarah would have to be extremely confident in rejecting the value of the fetus to justify aborting it. So, mindful of overconfidence bias, she decides to carry the child to term.

Indeed, we can show just how confident in the lack of moral significance of the fetuses one would have to be to justify aborting one. Here is a sensitivity table, showing credence in moral significance of fetuses on the y axis, and the direct QALY cost of pregnancy on the x axis for a wide range of possible values. The direct QALY cost of pregnancy is obviously bounded above by its limited duration. As is immediately apparent, one has to be very confident in fetuses lacking moral significance, and pregnancy has to be very bad, before aborting a fetus becomes even slightly QALY-positive. For moderate values, it is extremely QALY-negative.

abortion table 4

Other EA concepts and their applications to this issue

Of course, moral uncertainty is not the only EA principle that could have bearing on the issue, and given that the theme of this blogging carnival, and this post, is things we’re overlooking, it would be remiss not to give at least a broad overview of some of the others. Here, I don’t intend to judge how persuasive any given argument is – as we discussed above, this is a debate that has been going without settlement for thousands of years – but merely to show the ways that common EA arguments affect the plausibility of the different arguments. This is a section about the directionality of EA concerns, not on the overall magnitudes.

Not really people

One of the most important arguments for the permissibility of abortion is that fetuses are in some important sense ‘not really people’. In many ways this argument resembles the anti-animal rights argument that animals are also ‘not really people’. We already covered above the way that considerations of moral uncertainty undermine both these arguments, but it’s also noteworthy that in general it seems that the two views are mutually supporting (or mutually undermining, if both are false). Animal-rights advocates often appeal to the idea of an ‘expanding circle’ of moral concern. I’m skeptical of such an argument, but it seems clear that the larger your sphere, the more likely fetuses are to end up on the inside. The fact that, in the US at least, animal activists tend to be pro-abortion seems to be more of a historical accident than anything else. We could imagine alternative-universe political coalitions, where a “Defend the Weak; They’re morally valuable too” party faced off against a “Exploit the Weak; They just don’t count” party. In general, to the extent that EAs care about animal suffering (even insect suffering ), EAs should tend to be concerned about the welfare of the unborn.

Not people yet

A slightly different common argument is that while fetuses will eventually be people, they’re not people yet. Since they’re not people right now, we don’t have to pay any attention to their rights or welfare right now. Indeed, many people make short sighted decisions that implicitly assign very little value to the futures of people currently alive, or even to their own futures – through self-destructive drug habits, or simply failing to save for retirement. If we don’t assign much value to our own futures, it seems very sensible to disregard the futures of those not even born. And even if people who disregarded their own futures were simply negligent, we might still be concerned about things like the non-identity problem.

Yet it seems that EAs are almost uniquely unsuited to this response. EAs do tend to care explicitly about future generations. We put considerable resources into investigating how to help them, whether through addressing climate change or existential risks. And yet these people have far less of a claim to current personhood than fetuses, who at least have current physical form, even if it is diminutive. So again to the extent that EAs care about future welfare, EAs should tend to be concerned about the welfare of the unborn.


Another important EA idea is that of replaceability. Typically this arises in contexts of career choice, but there is a different application here. The QALYs associated with aborted children might not be so bad if the mother will go on to have another child instead. If she does, the net QALY loss is much lower than the gross QALY loss. Of course, the benefits of aborting the fetus are equivalently much smaller – if she has a child later on instead, she will have to bear the costs of pregnancy eventually anyway. This resembles concerns that maybe saving children in Africa doesn’t make much difference, because their parents adjust their subsequent fertility.

The plausibility behind this idea comes from the idea that, at least in the US, most families have a certain ideal number of children in mind, and basically achieve this goal. As such, missing an opportunity to have an early child simply results in having another later on.

If this were fully true, utilitarians might decide that abortion actually has no QALY impact at all – all it does is change the timing of events. On the other hand, fertility declines with age, so many couples planning to have a replacement child later may be unable to do so. Also, some people do not have ideal family size plans.

Additionally, this does not really seem to hold when the alternative is adoption; presumably a woman putting a child up for adoption does not consider it as part of her family, so her future childbearing would be unaffected. This argument might hold if raising the child yourself was the only alternative, but given that adoption services are available, it does not seem to go through.


Sometimes people argue for the permissibility of abortion through autonomy arguments. “It is my body”, such an argument would go, “therefore I may do whatever I want with it.” To a certain extent this argument is addressed by pointing out that one’s bodily rights presumably do not extent to killing others, so if the anti-abortion side are correct, or even have a non-trivial probability of being correct, autonomy would be insufficient. It seems that if the autonomy argument is to work, it must be because a different argument has established the non-personhood of fetuses – in which case the autonomy argument is redundant. Yet even putting this aside, this argument is less appealing to EAs than to non-EAs, because EAs often hold a distinctly non-libertarian account of personal ethics. We believe it is actually good to help people (and avoid hurting them), and perhaps that it is bad to avoid doing so. And many EAs are utilitarians, for whom helping/not-hurting is not merely laud-worthy but actually compulsory. EAs are generally not very impressed with Ayn Rand style autonomy arguments for rejecting charity, so again EAs should tend to be unsympathetic to autonomy arguments for the permissibility of abortion.

Indeed, some EAs even think we should be legally obliged to act in good ways, whether through laws against factory farming or tax-funded foreign aid.


An argument often used on the opposite side  – that is, an argument used to oppose abortion, is that abortion is murder, and murder is simply always wrong. Whether because God commanded it or Kant derived it, we should place the utmost importance of never murdering. I’m not sure that any EA principle directly pulls against this, but nonetheless most EAs are consequentialists, who believe that all values can be compared. If aborting one child would save a million others, most EAs would probably endorse the abortion. So I think this is one case where a common EA view pulls in favor of the permissibility of abortion.

I didn’t ask for this

Another argument often used for the permissibility of abortion is that the situation is in some sense unfair. If one did not intend to become pregnant – perhaps even took precautions to avoid becoming so – but nonetheless ends up pregnant, you’re in some way not responsible for becoming pregnant. And since you’re not responsible for it you have no obligations concerning it – so may permissible abort the fetus.

However, once again this runs counter to a major strand of EA thought. Most of us did not ask to be born in rich countries, or to be intelligent, or hardworking. Perhaps it was simply luck. Yet being in such a position nonetheless means we have certain opportunities and obligations. Specifically, we have the opportunity to use of wealth to significantly aid those less fortunate than ourselves in the developing world, and many EAs would agree the obligation. So EAs seem to reject the general idea that not intending a situation relieves one of the responsibilities of that situation.

Infanticide is okay too

A frequent argument against the permissibility of aborting fetuses is by analogy to infanticide. In general it is hard to produce a coherent criteria that permits the killing of babies before birth but forbids it after birth. For most people, this is a reasonably compelling objection: murdering innocent babies is clearly evil! Yet some EAs actually endorse infanticide. If you were one of those people, this particular argument would have little sway over you.

Moral Universalism

A common implicit premise in many moral discussion is that the same moral principles apply to everyone. When Sarah did her QALY calculation, she counted the baby’s QALYs as equally important to her own in the scenario where they counted at all. Similarly, both sides of the debate assume that whatever the answer is, it will apply fairly broadly. Perhaps permissibility varies by age of the fetus – maybe ending when viability hits – but the same answer will apply to rich and poor, Christian and Jew, etc.

This is something some EAs might reject. Yes, saving the baby produces many more QALYs than Sarah loses through the pregnancy, and that would be the end of the story if Sarah were simply an ordinary person. But Sarah is an EA, and so has a much higher opportunity cost for her time. Becoming pregnant will undermine her career as an investment banker, the argument would go, which in turn prevents her from donating to AMF and saving a great many lives. Because of this, Sarah is in a special position – it is permissible for her, but it would not be permissible for someone who wasn’t saving many lives a year.

I think this is a pretty repugnant attitude in general, and a particularly objectionable instance of it, but I include it here for completeness.

May we discuss this?

Now we’ve considered these arguments, it appears that applying general EA principles to the issue in general tends to make abortion look less morally permissible, though there were one or two exceptions. But there is also a second order issue that we should perhaps address – is it permissible to discuss this issue at all?

Nothing to do with you

A frequently seen argument on this issue is to claim that the speaker has no right to opine on the issue. If it doesn’t personally affect you, you cannot discuss it – especially if you’re privileged. As many (a majority?) of EAs are male, and of the women many are not pregnant, this would curtail dramatically the ability of EAs to discuss abortion. This is not so much an argument on one side or other of the issue as an argument for silence.

Leaving aside the inherent virtues and vices of this argument, it is not very suitable for EAs. Because EAs have many many opinions on topics that don’t directly affect them:

  • EAs have opinions on disease in Africa, yet most have never been to Africa, and never will
  • EAs have opinions on (non-human) animal suffering, yet most are not non-human animals
  • EAs have opinions on the far future, yet live in the present

Indeed, EAs seem more qualified to comment on abortion – as we all were once fetuses, and many of us will become fetuses. If taken seriously this argument would call foul on virtually ever EA activity! And this is no idle fantasy – there are certainly some people who think that Westerns cannot usefully contribute to solving African poverty.

Too controversial

We can safely say this is a somewhat controversial issue. Perhaps it is too controversial – maybe it is bad for the movement to discuss. One might accept the arguments above – that EA principles generally undermine the traditional reasons for thinking abortion is morally permissible – yet think we should not talk about it. The controversy might divide the community and undermine trust. Perhaps it might deter newcomers. I’m somewhat sympathetic to this argument – I take the virtue of silence seriously, though eventually my boyfriend persuaded me it was worth publishing.

Note that the controversial nature is evidence against abortion’s moral permissibility, due to moral uncertainty.

However, the EA movement is no stranger to controversy.

  • There is a semi-official EA position on immigration, which is about as controversial as abortion in the US at the moment, and the EA position is such an extreme position that essentially no mainstream politicians hold it.
  • There is a semi-official EA position on vegetarianism, which is pretty controversial too, as it involves implying that the majority of Americans are complicit in murder every day.

Not worthy of discussion

Finally, another objection to discussing this is it simply it’s an EA idea. There are many disagreements in the world, yet there is no need for an EA view on each. Conflict between the Lilliputians and Blefuscudians notwithstanding, there is no need for an EA perspective on which end of the egg to break first. And we should be especially careful of heated, emotional topics with less avenue to pull the rope sideways. As such, even though the object-level arguments given above are correct, we should simply decline to discuss it.

However, it seems that if abortion is a moral issue, it is a very large one. In the same way that the sheer number of QALYs lost makes abortion worse than adoption even if our credence in fetuses having moral significance was very low, the large number of abortions occurring each year make the issue as a whole of high significance. In 2011 there were over 1 million babies were aborted in the US. I’ve seen a wide range of global estimates, including around 10 million to over 40 million. By contrast, the WHO estimates there are fewer than 1 million malaria deaths worldwide each year. Abortion deaths also cause a higher loss of QALYs due to the young age at which they occur. On the other hand, we should discount them for the uncertainty that they are morally significant. And perhaps there is an even larger closely related moral issue. The size of the issue is not the only factor in estimating the cost-effectiveness of interventions, but it is the most easily estimable. On the other hand, I have little idea how many dollars of donations it takes to save a fetus – it seems like an excellent example of some low-hanging fruit research.


People frequently compartmentalize their beliefs, and avoid addressing the implications between them. Ordinarily, this is perhaps innocuous, but when the both ideas are highly morally important, their interaction is in turn important. In this post we the implications of common EA beliefs on the permissibility of abortion. Taking into account moral uncertainty makes aborting a fetus seem far less permissible, as the high counterfactual life expectancy of the baby tends to dominate other factors. Many other EA views are also significant to the issue, making various standard arguments on each side less plausible.

  1. There doesn’t seem to be any neutral language one can use here, so I’m just going to switch back and forth between ‘fetus’ and ‘child’ or ‘baby’ in a vain attempt at terminological neutrality. 
  2. I chose this reason because it is the most frequently cited main motivation for aborting a fetus according to the Guttmacher Institute. 

Accruing Gas Mileage

The other day I made the (probably unwise) decision to criticize someone for their driving. In my defense, they were spectacularly awful.

I pointed out two things:

  1. They were being dangerous, both to us and to others
  2. They were wasting gas by alternately flooring the accelerator and then breaking sharply in quick succession

Mentioning the latter was probably a mistake, as it allowed him to focus on this more minor sin and ignore the danger to life and property he was creating. But enough about my mistakes – what’s interesting was his.

He argued that being gas-inefficient didn’t matter, because he had a full tank.

Obviously this is nonsense – by using gas inefficiently now, he was hastening the need to re-fill the tank. A life-long strategy of doing so would substantially increase his lifelong gas expenditures, and as acausal decision theory teaches us, in choosing once we choose eternally.

But it also made me appreciate accruals accounting more.

Accruals Accounting involves recognizing costs and revenues when the economic activity to which they correspond occur – not when the cash is paid out. So if my company sells you a widget in 2014, but you only pay me in 2015, I record the revenue this year. Similarly, if I invest in some equipment this year but use it over the next few years, I will record the cost (as depreciation) over the next few years.

You might wonder about what would happen if sell you a widget but you never pay me. Surely I shouldn’t have recorded it as revenue if I never actually get the benefit? It shouldn’t count as profit if it’s driving me to bankruptcy! Excellent point – the answer is that at some point, when I realize you’ll never pay me, I have to ‘write it off’ – take a loss to cancel out the revenue I counted earlier.

Accruals Accounting has advantages and disadvantages. In particular, the company does need to produce cash at some point – Accruals Accounting can be abused if management make overly-optimistic assumptions about how likely they are to be paid.

But it’s a good way of analyzing cases like gasoline consumption. Assuming you will eventually use all the gasoline in the tank (you won’t have to write it off) the real time when you incur gasoline expense is not when you pump it, but when you use it. The time to save gasoline is when you’re driving – by coasting more, accelerating gently or perhaps even walking instead – not at the pump. Good driving technique represents a real savings, which accrual accounting recognizes – only filling up half way is a false economy.

Against Double-Counting Virtue: the Many Faces of Value

At times I fear that the highlight of my blogging career will be pointing out minor errors in Scott’s otherwise excellent posts. But his quality is so high that this is probably a commendable achievement anyway – or so I reassure myself. Anyway, now I’m back from the Midwest and have internet again, I can continue this sacred quest.

Recently, Scott wrote a post about how charity is a better mechanism than political activism for discharging any positive moral obligations we might have. As an aside, he points out that it’s credible that he actually has no such obligations, as his net impact on the world is positive anyway:

The marginal cost of my existence on the poor and suffering of the world is zero. In fact, it’s probably positive. My economic activity consists mostly of treating patients, buying products, and paying taxes. The first treats the poor’s illnesses, the second creates jobs, and the third pays for government assistance programs.

However, while I agree that ordinary productive members of society plausibly do not have such obligations, this argument involves double-counting. He basically does two positive things:

  1. Treating patients in his job (imagine Scott does surgery)
  2. Buying things (say bread)

(We’ll ignore the bit about taxes.1)

Now consider Scottlynn, the farmer. She figures her net impact is positive as well. She basically does two things:

  1. Growing corn and turning it into bread
  2. Buying things (say surgery)

Yet now we have the same activities appearing in two people’s lists!  Scott considers both his buying from, and selling to, Scottlynn as his positive impact. Yet Scottlynn counts those exact same transactions as part of her positive impact!

This is because (ignoring for the moment the inherent dignity that comes from productive work) Scottlynn doesn’t really value being employed per say – she values it because it gets her money, which she can then use to buy surgery. Buy surgery… from Scott. He shouldn’t count his purchases as part of his positive impact; the only reason it’s good is because it will later on allow her to buy the other thing he counted as positive impact! To avoid double-counting, he needs to pick one or the other. This is similar to how we have multiple ways of measuring GDP – the production method, the income method and the expenditure method – but we can’t mix them together.

The money/price system serves three purposes; it rations scarce resources, it signals which need to be produced more, and it incentives their production. But it is only a means to an end; ultimately, what matters is the goods and services that are produced, and that they go to those who want them.

Some macroeconomic theories do suggest that there might be times when simply spending money is a good thing; for example, if you have cyclical under-utilization of resources due to sticky prices. But it is unclear if that’s actually ever really an issue; other equally plausible theories of macroeconomics say it’s not. And even if the Neo-Keynesians are right, their theory implies that sometimes (when you have cyclical over-utilization of resources) simply spending money is a bad thing! Over the long run the economy operates at above and below capacity roughly as often, so these two effects will cancel out.

I’m sure there are other positive non-charity things Scott does. For example, he’s probably pleasant to his coworkers, and he creates a lot of value through his blog. But buying stuff isn’t one of them.


  1. We’ll assume Scott works for the private sector, and otherwise ignore the government, though if you thought the government was very evil, or taxes very immoral this might change the conclusion. 

2014 charity choice: The Machine Intelligence Research Institute

This year, I’m donating to MIRI. Here’s a quick summary of the classic argument:

Even ignoring the risk of UFAI, I think that FAI may be one best ways of preventing run-away value drift from destroying all value in the future.

Market-Implied Population Growth Forecasts

Scott Sumner has written a huge amount about how an NGDP futures market would be an excellent thing. It would give the Fed something to target and allow us to easily get market-implied estimates of the effects of various events on the broader economy, including policy changes. And it looks like he might be successful.

The problem with suggests for various such markets in general is that there simply isn’t enough interest in trading them. The oil futures market exists because there are many private actors who wish to hedge their oil exposure; this is not the case for GDP. There just aren’t enough people interested in trading them.

What could change this is if the government (or someone else, I guess) decided to issue debt linked to GDP. Investors are always interested in pricing debt securities. You don’t need the possibility of hedging for the trading to create value – it can create value through time-value-of-money arbitrage, just like for equity and debt. This is after-all how we ended up with the TIPS market, and the extremely helpful market-implied inflation expectations (breakevens) it produces.

It seems like it should actually be quite attractive for the government to issue GDP-linked securities. Fixed-rate debt puts governments in a levered position, reliant on future growth to be able to fund themselves. When growth stalls, difficulty in repaying the debt is added to all their other problems. But GDP-linked debt would not have this problem; repayments would be highest when growth and thus ability to repay was highest, and lowest during times of recession.

None of this so far has been particularly new. Here is the new idea: population-linked bonds. The government would issue bonds whose coupons and face value were determined by the population of the country at time of repayment.

This would be attractive to the government, because it would help to match their revenues with expenses – periods of high population growth are likely to (ultimately) cause economic growth, and economic growth will encourage immigration. Conversely, low or negative population growth, which as Japan has seen ultimately lead to very poor economic growth, would be accompanied by low debt repayments, as would recessions which reduced immigration. If you wanted you could limit it to “working age population” or similar.

And this would be useful for forecasting as well – it would give us market-implied forecasts of population growth, which is a key assumption for planning many things, like the required capacity for infrastructure projects.

Population-linked-debt would also allow for the forecasting of some really unusual things. For example, suppose a terrible disease broke out in your country – the reaction of this debt would give you an estimate of the death toll. Or suppose two countries both had population-linked-debt. Looking at the co-movements, especially when changes were being announced to laws about immigration, would give you a prediction of future migration between the two countries. Pro-natalist policies could be judged against their impact on such bonds.

One disadvantage is it would reduce the government’s incentive to increase population growth. Similarly, GDP-linked bonds reduces the government’s incentive to encourage GDP-growth. Life is good, so this effect would be bad. This downside would scale with the volume of such population-linked-debt issued. The epistemic advantages of getting market-implied forecasts, on the other hand, only require a market large enough for liquidity. So we could avoid this by limiting the issuance volume. There are liquid markets for equities with market caps of less than a billion, so a few billion dollars worth of issuance a year should be plenty. On the other hand, this solution sounds dangerously like assuming a miracle – there’s little reason to think the government would choose to limit issuance to a level which didn’t distort their incentives.

How not to reform the insurance industry

Browsing the comments on Scott’s blog recently, I came across an interesting suggestion for reforming the insurance industry.

If I were declared supreme fascist dictator of the world (which would be GOOD for the world), I’d decree that insurance companies had some specific fixed amount of time to investigate a client and return the premiums not consumed by that investigation. After that, unless they could prove deliberate fraud they were on the hook for their contract.

– William O. B’Livion

However, this is probably a pretty bad idea.

At the moment insurance companies only need to investigate clients who make a claim. If enacted, this would require insurance companies to investigate at length everyone who took out a policy.  As such, investigation costs would be much higher, requiring higher premiums for everyone.

Additionally, at the moment there is an implicit punishment for attempting to cheat an insurance company: you pay the premiums, but then don’t get the payout, so the premiums paid act like a fine for your attempted fraud. If insurance companies had to investigate at the very beginning instead, people would have more incentive to try to defraud insurance companies, as there would be less cost. As such, both fraud and anti-fraud costs would rise, both of which require an increase in premiums for everyone.

Finally, at the moment these foregone premiums go to the insurance company. As the insurance market is pretty competitive, this money ultimately results in lower premiums for honest customers. Requiring insurance companies to investigate immediately would take away this cross-subsidy and again raise premiums for everyone.

So it turns out that, like most such suggestions involving restricting people’s ability to freely sign contracts without any clear market failure identified, the proposal is a bad idea. Perhaps this might be a popular policy, if people somehow ignore the costs, or assume they’re being paid by evil corporations. Indeed, this might even be popular with incumbent insurance companies, if the high upfront costs of investigation it would require act as a barrier to entry and protect them from competition. As usual, ultimately the consumer pays. But it’s interesting how, in exploring why it’s a bad idea, we come to appreciate more the virtues of the current system.

Let he who is without Science Denial cast the first stone

The Washington Post recently ran an article on how political affiliation and level of religious belief affect support for, or suspicion of, the scientific consensus on various subjects. In it they refer to research by Dale Kahan to argue/imply that opposition to science is primarily driven by conservative ideology.

For example, they have these three very attractive charts, showing that the difference between people of high and low religiosity is small compared to the difference between conservatives and liberals when it comes to global warming,




and Stem Cell research:

However, as so often happens, their article on causes of political bias ends up displaying some pretty impressive political bias. Unsurprisingly, this bias tends to be flattering towards those who share their political beliefs, and damning of those who don’t.

Firstly, look at those charts again. When looking at on the left-right axis, your eye is naturally drawn to compare the two extremes – to compare the most right wing to the most left wing (especially as the line is monotonic). You note the large difference in height between the leftmost data points and the rightmost, compare it to the relatively small difference between the high and low religiosity lines. The former difference is bigger than the latter difference, so political opinions must be more important than religious ones.

… or so the chart leads us to believe. However, this is hugely deceptive. As you can see, there are 5 tick marks on the horizontal axis, the measure was created from questions using 5 and 7 options, and there are a very large number of little vertical lines. This means they’re using a relatively fine measure of political ideology: they differentiate moderate conservatives from ordinary conservatives from highly conservative people. By doing this, they increase how extreme the extremes are, which increases that vertical difference our eye is naturally drawn to. With religion, however, they only admit of two categories, high and low. Perhaps if they had disambiguated more, so the categories ranged from “More religious than the Hasidim” to “More atheist than Dawkins”, we would have seen more spread between those two lines. As it is, the charts suppress these differences, reducing the apparent effect of religiosity.

That’s not the only problem with the article. The climate change and evolution questions seem pretty good, but the stem cell question does not show what they think it does.

“All in all, do you favor or oppose federal funding for embryonic stem cell research”

Now, in general opposing research for science does seem like prima facie evidence that you’re in some sense anti-science. But not here! There are two other factors at play which conflate the issue.

The first is that this is as much a moral issue as a scientific one. Thinking that stem cell research is immoral doesn’t necessarily mean you disagree with any of the scientific findings, due to the is-ought gap. In the same way that opposing nazi research on cancer (which used a variety of immoral techniques) doesn’t mean you think their conclusions were factually wrong, you can think stem cell research is morally wrong but the conclusions factually correct. Or, to use a clarifying contemporary example, suppose the question instead asked,

“All in all, do you favor or oppose federal funding for methods of treating homosexuality”

My intuition, which I suspect you share, is that the line would slope in the opposite direction – lefties would be more opposed than righties. This isn’t necessarily be because they are anti-science – maybe they simply think we are better off not knowing how to treat homosexuality, or better off not even thinking about the possibility. This moral belief doesn’t, however, mean they disagree with conservatives and scientists on any factual issue.

But there is another, even bigger, problem with this question. It doesn’t just ask about the morality of stem cell research – it asks about federal funding for that research. Conservatives are well known for opposing federal funding of things in general. Yet this research suggests that consistently applying the conservative rule “oppose federal funding of things in general” is suddenly evidence of being anti-science. You would be branded anti-science by this question even if your thought process was

“I think the federal government is very bad at research – it will be inefficiently run, overly politicized, and poorly directed – so I don’t want it to mess up stem cell research. Stem cell research is far too useful and exciting to trust to the government.”

Yet surely such a person should be considered pro-science, not anti-science!

Indeed, it seems that overlooking this issue, and conflating opposition to the state with opposition to science, is a clear sign of political bias on the part of the author. They choose a question which almost by design proved conservatives were anti-science, not by actually measuring the truth, but by simply re-defining opposition to science to include the political opinions they oppose. David Friedman once wrote about something similar – a study which, while claiming to prove that right-wing people were authoritarians, really just defined authoritarianism as ‘respects right-wing authorities’.

Ok, so their choice of data visualization technique was perhaps misleading, and the stem cell funding question was awful. But the other two questions look pretty solid, right?

Perhaps not. It’s well known – or at least widely believed – that conservatives disproportionately disbelieve in evolution and global warming. So if you wanted to prove that conservatives were anti-science, you’d pick those two questions, confident that your prejudices would be confirmed.

Yet there is much more to science than evolution and global warming. There many issues where there’s a scientific consensus at least as strong as that on global warming, yet some people still disagree. For example,

  1. Astrology is nonsense
  2. Lasers are **not** condensed sound waves
  3. The earth orbits the sun

In fact, I would say that science is far more unequivocal on these issues than on global warming – probably around as certain as that evolution is true.

Yet on all these issues, Republicans are more likely to hold the scientific view that Democrats. And there are many more similar examples. If I wanted to make the same charts, but make Democrats look bad, I could easily “prove” that Democrats are morons who believe the sun orbits the earth.

The Washington Post article does contains a homage to data:

But why opine on all this an un-grounded way — we need data.

Unfortunately we need more than data – we also need rigorous statistical techniques.

It would be unfair to blame the original researcher. In his article, he also includes a chart on nuclear power, where conservatives have the more scientific view. Mysteriously, the chart that was flattering to conservatives doesn’t make it into the Washington Post article. Ironically, it turns out the Washington Post article was right – politics really is the mindkiller. It’s just hard to spot when you’re the one getting killed.