Self-serving Bias: Confusing Inputs & Outcomes Since 1967

This post was borne out of a small debate I recently got into online with a couple of people, which highlighted to me what I think is quite a common cognitive error.  I have no data to back up my view that this error is particularly prevalent, this is entirely conjecture based on personal experience.

The error is this:
Confusing outcomes with inputs.

Or perhaps it would be better thought of as:
Disregarding the process(es) used to take us from inputs to outcomes.

This came up in the context of discussing elections and election results.  Specifically, I had two people independently assert to me something along the lines of:

“At the last election, country X voted overwhelmingly for party Y.”

I challenged this statement as highly misleading*, on the basis that party Y, whilst winning an overwhelming majority of parliamentary seats, did not win an outright majority of votes, rather the party won only a plurality of votes.**

Party Y actually received slightly less than 50% of the votes cast in the election in question.

I suggested that it is far more accurate to categorise this level of support as a ‘pretty even split’ than as ‘overwhelming support’.

The response I got from both of my online adversaries was (paraphrasing):

“They won almost all of the seats.  I’d call that overwhelming.”

And:

“They received more than twice as many votes as the 2nd placed party.  And they received more votes than the 2nd, 3rd and 4th placed parties put together.  Looks pretty overwhelming to me.”

Both of these responses have two things in common:

The factual statements made in them are entirely accurate.
The factual statements made in them are entirely irrelevant.

Both of these people have completely missed my point.  They have both made the mistake of confusing outcomes with inputs, or of disregarding the process(es) used to take us from inputs to outcomes.

I do not disagree that winning almost all of the available seats in an election is rightfully considered an overwhelming victory for any party.

However, this is a very different thing from the party in question having ‘overwhelming support’ or the electorate ‘voting overwhelmingly for’ them.

“The electorate of Country X voted overwhelmingly for Party Y.” is a statement about the INPUT to the election.

“Party Y won an overwhelming victory, taking almost all of the seats in Country X’s Parliament.” is a statement about the OUTCOME of the election.

These statement are talking about two very different things.  It is entirely possible for either one of these statements to be true and the other false simultaneously.

Statements about INPUTS do not directly translate into equivalent statements about OUTCOMES and vice-versa.

The link between INPUTS and OUTCOMES are PROCESSES.  In this case, the process is the particular voting system used: how people cast their ballots, how votes are counted, how the electorate is divided into constituencies, etc.

It’s not possible to turn INPUTS into OUTCOMES without PROCESSES.  Similarly, it’s not possible to turn a statement about INPUTS into a statement about OUTCOMES (or vice-versa) without considering the particular PROCESS(ES) that took us from those INPUTS to those OUTCOMES.

As an example, if a political party wins 100% of the seats, without receiving any votes (e.g. in an absolute dictatorship), it is correct to say that such a party has overwhelming power or authority, but an error to say that it has overwhelming support.

The reverse is also true.  If a political party doesn’t win any seats, despite receiving 99% of the votes, due to extreme gerrymandering or a rigged election say, most people wouldn’t argue against the notion that such a party has overwhelming support, but it would be an error to say that it had won an overwhelming electoral victory.

These examples are extreme to illustrate my point.  In modern democracies, things are rarely so one-sided.  This is probably for the best.

I think in these cases this error is a manifestation of self-serving bias.  The people I was discussing this with were clearly supporters of Party Y.  They like to think – as do we all – that other people mostly see the World the way they do (or would, if only the ignorant fools were better informed) and are broadly supportive of the same things, that their ideas are popular and that ‘their team’ is ‘winning’.

This was illustrated when I brought up another vote on which one of my debating partners was on the ‘losing team’ by a relatively narrow margin.  They were unwilling to characterise this as ‘overwhelming opposition’ to their position.  The lack of symmetry is striking.  They are happy to characterise a mite under 50% support for their position as ‘overwhelming support’, but refuse to refer to 55% opposition to their position as ‘overwhelming opposition’.  The cognitive dissonance is immediately obvious to anyone not emotionally invested in their ‘team’.

I knew I’d won the argument when I got a response to this point that began:

“Whatever…”


* Put aside for now the fact that a country, as a collective, has no agency or ‘will’ of it’s own and so cannot be said to vote for/against anything (unless the vote is unanimous, and even then there are caveats), as if the views and opinions and wishes of the entire populace were homogenous.  For our purposes here ‘Country X’ is convenient shorthand for ‘The electorate of Country X’.

** I’d go further than that and say that even if a party wins 50% + 1 votes, it’s still highly misleading to describe this as ‘overwhelming’ support.  However, reasonable people can and will disagree about exactly where to draw the line between what constitutes ‘overwhelming support’ and merely ‘support’.  Some people may draw that line at 66.7%, some at 75%, some maybe at 90%, or even higher.  However, something I do not think is at doubt is that the point at which something can be considered to have ‘overwhelming support’ is definitely somewhere north of 50% (i.e. at minimum has a majority behind it).

The Price of Steel in India

This is a follow up blog post to this one here, summarising some more thoughts I’ve had on Scott Alexander’s ‘The Price of Glee in China’ post and inspired by some of the discussion in the comments there.

I know this is a conversation from a month ago, so is now ancient history in blogging terms.  This is why I’m not a very good blogger.

There’s a comment in the middle of my post that I sort of regret making because it was poorly worded and it’s not really crucial to the point I was trying to make, but lots of people who are presumably sympathetic to protectionist arguments seem to have fixated on it.

The phrase in question is this one: “there is nothing economically or morally relevant about political boundaries”

I have to apologise for the extremely poor wording on my part here.  This phrase is not what I intended to say at all.  That was sloppy.  Sorry.

As pointed out by several other commenters on Scott’s post, politics does have a substantial effect on the economics of a country.  In the most obvious ways, politics and politicians influence tax (and subsidy) rates and hiring practices / regulations (e.g. occupational licensing, minimum wage laws, the EU working time directive, etc. etc.).  They also have a less direct influence through things such as health and education policy.

I don’t debate any of this.  If someone got the wrong end of the stick from my previous post, I can totally understand why and again can only apologise for my sloppy phrasing.

Anyway, this all detracts from the main point I was trying to make in response to Scott’s post.  So let me try to make that point again, hopefully in a clearer and more succinct way:

Scott summed up his argument as:

“If we were to actively try to keep the Indians from industrializing, that would be pretty awful. But that’s not the argument at hand here. The argument at hand is ‘are we morally required to sacrifice our own economy in order to help the Indians industrialize?”

My response to that is:

But that is the argument at hand here.

Put aside for the moment whether protectionist policies are generally a net positive or a net negative for the population (as a whole) of the country that enacts them.  Put aside also whether protectionist policies are, in general, even effective at bringing about their stated aims.  These are debates for another day.

Let’s assume, for the sake of argument, that tariffs imposed by the US Government on imports of Indian steel helps American steelworkers, with no offsetting cost to any other Americans whatsoever.  In other words, the tariffs are a net positive if we consider only the welfare of Americans.

The cost of this policy is paid entirely by Indian steel companies, who now find it more difficult to compete in the American market.

What is this policy if not an active intervention by the US Government which retards industry in India and harms the Indian economy?

Paul Krugman on Trade

Writing in 2016:

"But it’s also true that much of the elite defense of globalization is basically dishonest: false claims of inevitability, scare tactics (protectionism causes depressions!), vastly exaggerated claims for the benefits of trade liberalization and the costs of protection, hand-waving away the large distributional effects that are what standard models actually predict. I hope, by the way, that I haven’t done any of that; I think I’ve always been clear that the gains from globalization aren’t all that (here’s a back-of-the-envelope on the gains from hyperglobalization — only part of which can be attributed to policy — that is less than 5 percent of world GDP over a generation); and I think I’ve never assumed away the income distribution effects.
...
So the elite case for ever-freer trade is largely a scam, which voters probably sense even if they don’t know exactly what form it’s taking.
...
But it is fair to say that the case for more trade agreements — including TPP, which hasn’t happened yet — is very, very weak. And if a progressive makes it to the White House, she should devote no political capital whatsoever to such things."


Writing in 1995:

"I believe that if the rhetoric that portrays international trade as a struggle continues to dominate the discourse, then policy debate will in the end be dominated by men like [James] Goldsmith, who are willing to take that rhetoric to its logical conclusion.  That is, trade will be treated as war, and the current system of relatively open world markets will disintegrate because nobody but a few professors believes in the ideology of free trade.

And that will be a shame, because for all their faults the professors are right.  The conflict among nations that so many policy intellectuals imagines prevails is an illusion; but it is an illusion that can destroy the reality of mutual gains from trade."

And in 1994:

"Most worrisome of all is the prospect that disguised protectionism will eventually give way to cruder, more open trade barriers.  For example, Robert Kuttner has long argued that all world trade should be run along the lines of the Multi-Fiber Agreement, which fixes market shares for textile and apparel. In effect, he wants the cartelization of all world markets.  Proposals like that are still outside the range of serious policy discussion, but when respectable voices lend credence to the wholly implausible idea that the Third World is responsible for the First World’s problems, they prepare the way for that kind of heavy-handed interference in world trade.

We are not talking about narrow economic issues.  If the West throws up barriers to imports out of a misguided belief that they will protect Western living standards, the effect could be to destroy the most promising aspect of today’s world economy: the beginning of widespread economic development, of hopes for a decent living standard for hundreds of millions, even billions, of human beings.  Economic growth in the Third World is an opportunity, not a threat; it is our fear of Third World success, not that success itself, that is the real danger to the world economy."

And these two from 1993:

"What is true in the Washington view, at least in broad terms, is the belief in the virtues of free markets and the evils of protectionism.  There are qualifications to that view, but they are minor compared with the essential correctness of this position."

"One of the most popular, enduring misconceptions of practical men is that countries are in competition with each other in the same way that companies in the same business are in competition.  Ricardo already knew better in 1817.  An introductory economics course should drive home to students the point that international trade is not about competition, it is about mutually beneficial exchange."


Emphasis added.

Hat tips to Don Boudreaux and Scott Alexander/Noah Smith for the quotes/links.

The Confused and Backwards Thinking of Protectionists

Scott Alexander’s latest post, about the link (or apparent lack thereof - the Easterlin Paradox) between wealth and happiness, on his Slate Star Codex blog is interesting and thought-provoking as always.  I recommend reading the whole thing.

Scott makes some good points and I find myself in complete agreement with his conclusion that:

“...I am forced to acknowledge that happiness research remains a very strange field whose conclusions make no sense to me and which tempt me to crazy beliefs and actions if I take them seriously.”

I do have one objection to his argument.  Specifically, it’s with the way he discusses free trade and protectionism in part II of his post.

Here’s Scott:

“Suppose that some free trade pact will increase US unemployment by 1%, but also accelerate the development of some undeveloped foreign country like India into hyper-speed. In twenty years, India’s GDP per capita will go from $1,500/year to $10,000/year. The only cost will be a million or so extra unemployed Americans, plus all that coal that the newly vibrant India is burning probably won’t be very good for the fight against global warming.

Part of me wants to argue that obviously we should sign the trade pact; as utilitarians we should agree with [Scott] Sumner that lifting 1.4 billion Chinese out of poverty was ‘the best thing that ever happened’ and so lifting 1.2 billion Indians out of poverty would be the second-best thing that ever happened, far more important than any possible risks. But if Easterlin is right, those Indians won’t be any happier, the utility gain will be nil, and all we will have done is worsened global warming and kicked a million Americans out of work for no reason (and they will definitely be unhappy).”

I think Scott’s thinking here is confused.  I don't mean to pick on Scott here, he’s not alone, I think this is an issue where many people's thinking is very confused.  For now, let’s put aside the question of whether or not raising people’s income can make them any happier or not; as this is not relevant to the point I wish to make here.

The way he words this is as if:

1. The US government has the option to take some action X (in this case signing a free trade pact).
2. Positive consequences of X are: a >6 fold increase in the material well being of over a billion people, who are mostly extremely poor by US standards, in just 20 years.  (Additional positive consequences not identified by Scott include some combination of reduced prices, improved quality, better selection and/or improved availability of certain goods and services to American consumers - and to other American producers not in the protected industries.)
3. Negative consequences of X are: 1 million people, who are mostly well off by global standards, lose their jobs and additional fossil fuels are burned, contributing to global warming.  (Note that most of these 1 million people will eventually find other work; some will take early retirement; some may set up businesses of their own.)

Should the government take action X?

I think this gets things backwards.  Here’s what I think is a more accurate way to look at this:

1. The US government has the option to take some action Y (in this case imposing tariffs, quotas and/or outright bans on US imports from India).
2. Positive consequences of Y are: 1 million people, who are mostly well off by global standards, can remain in their current jobs and don’t have to be forced to retrain, find other work, or be forced into early retirement.  Also, less fossil fuels will be burned, leading to less global warming.
3. Negative consequences of Y are: severely retarding the improvement in the material well being of over a billion people, who are mostly extremely poor by US standards.  Higher prices, worse quality, more limited selection and poorer availability of various goods and services to American consumers - and to other American producers not in the protected industries.

Should the government take action Y?

Some people will look at the above and ask what’s the difference?

The difference is free trade is what would happen anyway unless the government actively goes out of it’s way to prevent it from happening, if it didn’t erect barriers to trade between people who happen to live in different countries.  Free trade does not require a free trade pact to happen, it just requires that government doesn’t get in the way.

Here’s Scott again, later in the post:

“If we were to actively try to keep the Indians from industrializing, that would be pretty awful. But that’s not the argument at hand here. The argument at hand is ‘are we morally required to sacrifice our own economy in order to help the Indians industrialize?’”

I think many (most?) people would answer 'no' to the above question.  However I think this question is a red herring.  Even more than that, I think the quotation above perfectly highlights what is so confused about many people’s thinking on international trade, globalisation and protectionism.

What does the phrase "our own economy" mean?  It seems from the context and from common parlance that it means "the US economy".  However, it needs to be emphasized there is nothing economically or morally relevant about political boundaries.  Trade between someone in New York and someone in New Delhi is no different, in any economically or morally relevant way, than trade between someone in New York and someone in New Jersey.

Or, as one commentator, j r, put it:

“We don’t use these sorts of rationales to restrict trade between California and Utah or to stop a white American from going to a Chinese American dry cleaner.

What’s the basis for using the nation state as an intrinsically valid moral or ethical unit?”

It seems to me that the argument at hand really does revolve around actively trying to keep less developed countries from industrializing.  Consider the question: what is protectionism?  Protectionism is the active effort of government to prevent, limit or restrict trade across political boundaries.  No active efforts are required on the part of government to allow mutually beneficial free trade.  All this requires is that government doesn’t stop it from happening by erecting artificial barriers to trade.

Contrary to the implication of the question: “are we morally required to sacrifice our own economy in order to help the Indians industrialize?”, free trade does not involve any sacrifice.  It is what would naturally happen if governments and others were to refrain from butting into other people’s business.  Protectionism is an active attempt to retard the economies of the countries which it is directed against (not to mention the adverse unintended consequences on the economy of the country imposing the protectionist measures).

I would rephrase the argument at hand as: “can we morally justify sacrificing the Indian economy in order to help a minority of domestic producers?”

I think many (most?) people would answer 'no' to the above question.  However, our political system often produces outcomes that would appear to suggest an affirmative answer to this question.  I think this is largely a result of the confused thinking about these issues.  Many people’s intuition causes them to get this issue precisely backwards.

A Modest Proposal from Tim Harford

"let's just abolish the Budget"

As he explains:

"Would the country’s economic policy really be harmed if the chancellor set out his fiscal direction at the beginning of the parliament and left it unchanged unless extraordinary circumstances intervened?
We should abolish 100 per cent of Autumn Statements and 80 per cent of Budgets — that’s a fiscal rule that I could really get behind."

Here, here.

Good Interview with Dame Judith Hackitt on the IChemE Blog

Published last week, but I'm still catching up with my regular blogs after getting back from holiday on Sunday.

Some excerpts:

"[Interviewer:] Now you’re moving to become Chair of the EEF, what are your plans while [you're] there?  I took a sample size of 12 EEF customers and only one had a female CEO.  Is that on your agenda as Chair?

[JH:] I honestly don’t think that it’s front and centre of my mind.  What matters to me is not about gender equality, it’s about diversity.  And I think there is a real danger in playing on this ‘what we need is more women on boards’ debate.  It’s not.  What we need is boards to recognise how important it is to have diversity of thinking.  That is what will make them more robust, more resilient – and we need that more than ever in the challenging times we live in right now.  If you recognise that need for diversity of thinking, the rest will follow.  Women will become more numerous, along with other men who think and act differently from the stereotype that currently populates those boards."

"[Interviewer:] What else would you like to address in your new role at EEF?

[JH:] If you ask most people what manufacturing in the UK is about right now there is a perception that there used to be a manufacturing industry, and it’s now gone.  That’s so far from the truth it’s unbelievable.

The truth is we have some amazing new and exciting manufacturing industries out there.  The innovation that is going on is incredible.  I’m also on the board for the High Value Manufacturing Catapult and some of the things that come out of that is amazing in terms of new products and innovative processes."

Reblog: The Open Borders Manifesto

I repost here a copy of the open borders manifesto, which I first shared on this blog one year ago today, on Open Borders Day, 16 March 2015.

This seems especially pertinent now that the UK Government are moving to introduce, in April of this year, the spectacularly illiberal measure of imposing a minimum earnings threshold of £35,000 pa* for non-EU citizens wishing to live and work in the UK.**

"Freedom of movement is a basic liberty that governments should respect and protect unless justified by extenuating circumstances. This extends to movement across international boundaries.

International law and many domestic laws already recognise the right of any individual to leave his or her country. This right may only be circumscribed in extreme circumstances, where threats to public safety or order are imminent. We believe international and domestic law should similarly extend such protections to individuals seeking to enter another country. Although there may be times when governments should treat foreign nationals differently from domestic citizens, freedom of movement and residence are fundamental rights that should only be circumscribed when the situation absolutely warrants. 

The border enforcement status quo is both morally unconscionable and economically destructive. Border controls predominantly restrict the movement of people who bear no ill intentions. Most of the people legally barred from moving across international borders today are fleeing persecution or poverty, desire a better job or home, or simply want to see the city lights.

The border status quo bars ordinary people from pursuing the life and opportunity they desire, not because they lack merit or because they pose a danger to others. Billions of people are legally barred from realising their full potential and ambitions purely on the basis of an accident of birth: where they were born. This is both a drain on the economic and innovative potential of human societies across the world, and indefensible in any order that recognises the moral worth and dignity of every human being. 

We seek legal and policy reforms that will reduce and eventually remove these bars to movement for billions of ordinary people around the world. The economic toll of the modern restrictive border regime is vast, the human toll incalculable. To end this, we do not need a philosopher’s utopia or a world government. As citizens and human beings, we only demand accountability from our own governments for the senseless immigration laws that they enact in our name. Border controls should be minimised to only the extent required to protect public health and security. International borders should be open for all to cross, in both directions."

Originally from http://openborders.info/open-borders-manifesto/

Happy Open Borders Day!  Spread the word.


* £35,000 pa is way above (~35%) the median income in the UK, which according to the ONS was £496 pw in December 2015, which equates to £25,802 pa.  The government claims that the £35,000 figure was arrived at because it was the median pay of the UK population in skilled jobs which qualified for Tier 2 ("graduate level") at the time of the Migration Advisory Committee’s consultation in 2011.

** Note there are exceptions to this rule.  The new restriction only applies to a certain group of immigrants, specifically those working in what the government defines as "graduate level" jobs.  There are other exceptions in specific circumstances also.

See also here: https://petition.parliament.uk/petitions/118060

Dentopia

The following image has recently been circulating on my social media (I don't think it's new, but it's the first I've come across it):

I have a few problems with the message conveyed here, basically everything stated above is incorrect or misleading in some way:

1. There is no such thing as "free" healthcare or "free" college.  In order for someone to receive healthcare or college education, someone else must provide said healthcare or college education.  And someone: either the recipient, the provider, or some other 3rd party (e.g. the taxpayer) must pay for said healthcare or education.
2. There is no legally stipulated minimum wage in Denmark.
3. The average Danish worker works 27.6 hours per week.  This compares to 26.4 in Germany, 28.3 in France, 32.3 in the UK, 34.4 in the US, and an OECD average of 34.0 hours per week.*
4. Whilst Denmark does tend to score very highly on most attempts at measuring 'happiness' between various countries.  'Happiness' is a vague, poorly-defined and ambiguous concept that by it's nature is subjective and not easily measurable.  Attempts to quantify 'happiness' rely on self-reported assessments and are prone to all of the usual potential pitfalls and problems of, say political surveys, and are uncertain at best or potentially completely misleading at worst.

Here's my attempt at a more accurate "be like Denmark" message:

"This is Denmark.
Denmark has one of the World's most free labour markets.
Denmark has no legally stipulated minimum wage.
Denmark is amongst the most free countries in the World, both economically and in terms of civil liberties.
Be like Denmark."

* All figures from the OECD for 2014 from here.  Figures reported by the OECD are average annual hours worked.  Approximate weekly figures presented here calculated by dividing the OECD annual figures by 52 (i.e. figures presented here will take into account part-time work, annual leave, etc.).

Quotation of the Day

Is from Adam Smith's 'Theory of Moral Sentiments', Part I, Section III, Chapter III: Of the corruption of our moral sentiments, which is occasioned by this disposition to admire the rich and the great, and to despise or neglect persons of poor and mean condition:

"To deserve, to acquire, and to enjoy the respect and admiration of mankind, are the great objects of ambition and emulation.  Two different roads are presented to us, equally leading to the attainment of this so much desired object; the one, by the study of wisdom and the practice of virtue; the other, by the acquisition of wealth and greatness.  Two different characters are presented to our emulation; the one, of proud ambition and ostentatious avidity; the other, of humble modesty and equitable justice.  Two different models, two different pictures, are held out to us, according to which we may fashion our own character and behaviour; the one more gaudy and glittering in its colouring; the other more correct and more exquisitely beautiful in its outline: the one forcing itself upon the notice of every wandering eye; the other, attracting the attention of scarce any body but the most studious and careful observer.  They are the wise and the virtuous chiefly, a select, though, I am afraid, but a small party, who are the real and steady admirers of wisdom and virtue.  The great mob of mankind are the admirers and worshippers, and, what may seem more extraordinary, most frequently the disinterested admirers and worshippers, of wealth and greatness."

Quotation of the Day

Is from Adam Smith's 'Theory of Moral Sentiments', Part I, Section I, Chapter 1: Of Sympathy

"How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it."