Tuesday, December 21, 2004

Choice vs. Determinism

As a Christian, one of the things that really puzzles me is God's omniscience. If God knows everything, then he knows what I'm about to say in the next sentence, even before I type it. If he knows what I'm going to type, do I really have any choice in typing it? If God knows with certainty what I'm going to type, then that thing is set, even before I punch the keys. On the other hand, if I have a choice, then what I type is not set. If it's not set then God can't know it.

This entire problem of choice and determinism manifests itself in Christianity through a couple of names: Calvinism and Armenianism. The Calvinists are the determinists. In their world view, God's sovereignty demands that he knows what we will choose before we even choose it. Which means that even the act of accepting God is a gift from God. In other words, God is the one who chooses who will and won't be saved. But if God knows who will and won't be saved, before we're even born, then this opens up the prospect that people are born who never are freely able to choose God.

I wouldn't call my self Armenian, because I don't fully understand what that means, but I can't call myself Cavlinist because the very proposition seems untenable to me. While scripture makes it abundantly clear that God is sovereign, I wonder what the full implications of that are. For example, in Job, God chooses not to exercise his sovereignty over Satan. Satan then turns around and "tests" (to put it mildly) Job. Does this mean that God was not omnipotent? Of course not! God's omnipotence includes his ability to decide when and when not to exercise his primary will. In exactly the same way, I believe that God's omniscience is a matter of his choice to exercise it.

God has a plan. He knows that plan will be fulfilled. He will make certain of it. But I think that when it comes to minute details of that plan, he chooses not to exercise his omniscience. He does this in order to create free will. God offers salvation through Christ to all, and we are all free to choose or reject it. If God knows in advance whether we'll accept it or not, then our path is already set, and our choice is not free - it's constrained by God's fore-knowledge of the outcome. But God, in his wisdom, can choose not to exercise that fore-knowledge and in doing so gives us free will. I don't see this as a knock on his omniscience. I see this as an incredible act of mercy to all people.

But, of course, this is just my simple minded take on the issue. I'm sure that there's at least half a million Christians who've I've deeply offended. For that I apologize. By saying this, I open it up to criticism, because I want to know God's truth. I am not trying to represent this as God's truth. Instead it's my best guess at the moment.

Sunday, December 19, 2004

The market for savings

In response to a blog entry by Arnold Kling, Boonton writes:
If you believe the market works & is usually smarter than its participants what makes you think your feelings about optimal savings are more valid than the actual market result?
I don't mean to speak for Arnold, but I want to respond based on my understandingof what Arnold has written in the past on the subject of savings. A market, all by itself, isn't the positive thing. In order for a market to be positive, it has to be a free market. Free markets provide surprising, sometimes counter-intuitive results. But those results are generally positive-sum -- the gains are more than the losses. In contrast, non-free markets produces results which are generally zero-sum (gains = losses) or negative-sum (losses are more than the gains).

I think Arnold's position is that the market for savings isn't free. The government keeps meddling with it through the style of taxation that we have. That style of taxation causes the market to react. What I think Arnold is complaining about is the style of taxation - the cause of the market reaction, not the market reaction.

The government taxes production (income, interest, capital gains) instead of taxing consumption. The market's reaction is to favor consumption over production. The relative comparison of tax between different forms of production (say income vs capital gains) is not nearly as important as the comparison of tax between production and consumption. The end result of this is that the non-free market for savings does not result in the most efficient savings mechanisms. This isn't the market's fault. It's the fault of those who interfere in the market. The fix isn't to complain about the "failure of the market". It's to complain about those who are meddling with the market.

The market reaction to favor consumption over production is bad, because as a society, production benefits everyone, whereas consumption takes away from everyone. That isn't to say that consumption is bad. Consumption is necessary. We need to eat. But consuming is zero-sum. When I eat a bagel, it's good for me, but bad for you because we both can't consume the exact same thing. Your loss = my gain. But production on the other hand makes all of us richer. The person who produces the bagel allows for at least one of us to eat. Over time, someone else figures out how to produce bagels better. Consequently, more people get fed for the same amount of effort. The free market for bagel production is positive-sum for everyone. This can be generalized: the free market for production of anything is positive-sum for everyone. The system of taxation that we have should reflect this. The market for production should be completely free.

The only alternative to taxing production, and still have a funded government, is to tax consumption. But consumption is already zero-sum. So long as the taxation on production
doesn't go overboard, it does not make the consumption market negative-sum.

There are practical, everyday reasons that I wish we had a tax system that stopped penalizing production. The first result is that taxing consumption would encourage savings. Free markets invariably create job churn. For example, in my bagel production example above, the guy who figures out how to make more bagels for less cost results in a job loss for the first bagel producer. If the first bagel producer had sufficient savings, this wouldn't matter to him because he could draw down on that savings while he learned some new way to be productive. This applies generally: If we all had sufficient savings to be able to survive the job churn that markets invariably create, we wouldn't be so concerned about the impact of a bunch of things that are positive-sum yet cause loads of irrational fear, e.g. outsourcing and immigration. I think it would also impact our view of social security, minimum wages and medicare. We'd see them for what they are instead of what they're not.

I'd like for us to be able to see all of the following for what they really are:
  • outsourcing = increased productivity
  • immigration = willing workers interested in starting at the bottom and working their way up
  • minimum wage = job destruction w/out corresponding increased productivity
  • social security = ongoing government debt that must be eventually paid through some form of taxation
  • medicare = wealth redistribution
The key to this, I think, is to modify our taxation system to encourage savings. Then we might be more willing to accept some of these things (outsourcing and immigration) and reject others (social security, medicare and minimum wage) and choose things that will actually provide the benefits those things purport to provide.

Wednesday, December 15, 2004

Competition as a discovery procedure

Econlog has an interesting little blog entry. It talks about how the US wireless scene, while appearing to be chaotic and disorganized, produces an unexpected result: we're on the verge of producing the best wireless solution available anywhere in the world, despite the disdain from Europe back when we were far behind their wireless solutions.

Basically, what happened is that our system, while appearing chaotic and disorganized produced a wealth of different solutions. None of which worked together. This drew the disdain from our European friends. But it's turning out that the wealth of products resulted in competition and now the offerings that we have are surpassing the rest of the world.

The conclusion? Competition is better than central planning at producing the best products and services. Of course, this result is really only unexpected by those who tout central planning.

I recently had another argument with a different co-worker. He was also in favor of central planning. In this particular case, the coworker was arguing that it was the job of our technology department to identify a single solution for a particular problem. I asked the question of why we had to standardize on that one solution to the exclusion of others? The answer was that we were trying to reduce costs in order to meet cost cutting requirements that our CEO put forth. And delivering a standard set of solutions (for everything) is the way that we reduce that cost.

Of course, if you don't measure all of the costs then you can produce a result that appears to cut costs. Putting in a single solution appears to take less time and effort than putting in multiple solutions. But when you have multiple solutions, the business can pick which ever one (or more) works best for them. Also, if you're built to support multiple solutions, it's not very hard to allow the business to make a recommendation on a new solution that you hadn't considered. Of course, this can get expensive. But what's not being measured when you throw out all those other solutions in favor of the single solution is the opportunity cost. What opportunities are we missing because the single solution we've chosen doesn't allow the business to function in the way they need to?

In other words, if we standardized on X, does that prevent us from selling to Y because X doesn't support Y? How much money did losing that opportunity cost us? I don't know. But neither does my colleague. The only way picking a single solution works is if we can accurately predict with a high degree of reliability all of the requirements that this solution will need to meet during it's lifetime. When has that happened ever? My colleague is betting that his single solution will meet most (if not all) of the future requirements. I'm betting that there's tons of stuff out there that he and I can't think of, and by standardizing on X, we lose those opportunities.

I would even go further and argue that this is an application of one of the most basic principles of economics: the law of supply and demand. By limiting the supply of available solutions, you increase the demand for those solutions. It may not be the best solution, but it's all that the business has, so it's what the business will use. The fact that there are no competitive forces to enable a line of business to go get some other solution, means that they're stuck with the solution that's there, even if it's not the best solution for them. The price of such a solution will never go down. Decreased supply => increased demand => higher prices.

On the other hand, if you create a ton of solutions, the line of business can make a decision between cost of the solution and the benefits it provides. Whatever happens, the cost goes down. If they pick the expensive solution because it offers a better benefit, it's because they decided not to pay the opportunity cost. This results in lower overall cost. If they pick the lower priced solution, they haven't incurred the opportunity cost - they're still doing the thing they wanted to do - AND they're paying less. This results in lower overall cost. Increased supply => decreased demand => competition => lower prices.

If you want to lower the cost, you have to increase the supply of solutions and let competition choose the winner.

I wish I could do a better job of communicating this to my colleagues.

Tuesday, December 14, 2004

Economics of spam

Like the Angry Economist, I've never seen anyone who requires money as a demotivator for spammers. But that doesn't mean that other "costs" have not been used. Challenge/response is a solution with many different implementations. I use one called TMDA.

It would not take much modification in order to get the challenge to include a paypal payment and incorporate that into the confirmation process. But I'm not going to do that. Right now, I'm imposing other costs that, to me, seem to be the right price. In order to get into my mailbox you must meet any of the following "costs":
  1. your email address must already be known to me, or
  2. you must have a working email address and respond to my challenges, or
  3. you must be replying to an email that I sent you within 7 days of my sending it.
So it's not true that people aren't imposing costs on unknown emailers. And those costs are very effective at stopping spam. Those costs just aren't money.

For what it's worth, there is a group of people who revile C/R email systems. They say things like: "If I ever get an email challenge from someone, I will never respond to it, and then that person will never get any email from me." I've always argued with those people that it's their loss. They're the ones who wanted to send me the email in the first place, so they're the one's who (in effect) censor themselves.

However, the fact that I'm not willing to charge money to unknown users suggests to me that I'm not willing to lose email from those users. My behavior, as opposed to my statements, may in fact indicate that I do actually want to get email from them, and I do lose something.

Or maybe an alternative explanation is that I think monetary costs are too high for the "customer base" that I actually want to serve. And since that cost is effectively filtering out the customer base I don't want to serve, I've got my price set correctly.

Thursday, December 09, 2004

Old Friend

I'm in Boston for two days in training for a piece of technology that isn't complicated enough to merit a training class. Had I known before I took this trip that this technology is as simple as it is, I would have saved my training budget for something else.

But being here, I remembered that an old friend from high school had moved here several years ago. After a quick google and a round of phone tag, he was in his car headed to pick me up next to a T station. I was doubly pleased with this because the people that I'm here with had ambitions for the evening which held absolutely no interest to me.

It was really enjoyable to catch up with my old friend. Our high school social situation was such that we could ignore our differences and take part in a friendship of convenience. We were both misfits in one way or another and misery loves company. After 17 years of sparse contact with each other, formerly small differences seemed much larger. Examples: He's runs a tiny little book publishing shop and gets paid somewhere around 25% of his brain power. I'm a technology geek who gets paid about 200% of mine. I'm fairly conservative. He looks like he's pretty liberal (although the specific topic didn't actually come up -- I'm just guessing). He's a literature guy. He reads things that express meaning and beauty. I'm a technology guy. I read stuff that describes function.

And despite the ostensive differences, I told him about my desire to write a book. He gave me some recommendations on how to get started. He asked me a few questions about technology, and I gave him a few opinions on those topics. I only got to spend a few hours with him, but I think I was reminded that there was some common thing that he and I shared in high school that allowed me (and maybe him) to ignore our differences. Long before the night was over, I didn't care about the differences anymore. I was just glad to get a chance to hang out with him and find out what's happened to him in the last 17 years.

He gave me four books that his shop has published: 3 poetry and 1 novel. He's done this kind of thing before. I'll probably start the novel and then quit as soon as it gets overly mired in symbolism, as seems to happen in all of the stuff he gives me. I doubt very seriously that I'll enjoy the poetry books. I need stuff explained to me, and (as far as I can tell) the point of poetry is to express stuff that really can't be explained.

I suspect he knows that I won't read the books. I don't think I've ever once talked about any of the other books that he's given me. And I pretty much knew when I took this set that I'd make an effort only to eventually give up. But that isn't the point. He offered them, and I took them. It was an act meant to keep the doors open even though we're different. I hope it never stops.

Sunday, December 05, 2004

I'm a publisher?

According to The Dallas News, if I write a blog entry, I'm a publisher, subject to libel. I guess this makes some degree of sense since this really isn't a private site. Anyone can read it if they want to. And I can't say something blatantly false which might impugn someone else's reputation. But this still strikes me as ... well wrong.

The things I write here, while published, are my opinions. And sure they could be wrong. I'm not saying that I'm perfect. But if they are wrong, and they negatively impact someone else's reputation, does that mean I'm not allowed to express that opinion?

I'm not sure what I think of this because on the one hand folks should be accountable for what they say. But on the other hand, sometimes you say things just to get feedback from someone else in order to improve your thoughts on the matter.

Or perhaps I don't fully understand what constitutes "libel".