prior probability

Buchanan versus Samuels, round 4

🇺🇸 Happy Independence Day! 🇺🇸 In my previous post, I explained why two great academic economists, James Buchanan and Warren Samuels, took an interest in Miller et al. v. Schoene (the cedar rust case). Simply put, this case illustrates a general problem in economics: the problem of harmful effects or negative externalities, when the activity of one firm creates spillover effects or imposes costs on third parties. But that said, why did they disagree so vehemently about how this old case was decided?

To appreciate the source of their disagreement, we must begin with Professor Samuels’s 1971 paper in the Journal of Law & Economics. (See Warren J. Samuels, Interrelations between Legal and Economic Processes, Journal of Law & Economics, Vol. 14, No. 2 (1971), pp. 435-450.) In that paper, Samuels (correctly, in my view) plays up “the ineluctable necessity of choice” whenever one party’s economic interests are harmed by another party’s conduct:

What Miller et al. v. Schoene illustrates first of all, indeed what the Court so clearly perceived, is the ineluctable necessity of choice on the part of government. The [legislature and the courts] had to make a choice as to which property owner was to be made not only formally secure but practically viable in his legal rights. The [Supreme] Court … had to make a judgment as to which owner would be visited with injury and which would be protected. (Samuels 1971, p. 438)

In other words, as the great Ronald Coase taught us long ago (see here or here, for example), the dispute between the owners of the red cedar trees and the owners of the apple orchids in Miller et al. v. Schoene is a “reciprocal” one for two reasons. First off, as Professor Samuels correctly notes in his 1971 paper, one of these two groups of owners is going to harmed no matter what action or inaction the State of Virginia takes or doesn’t take. Let me explain.

Recall that the law in dispute in Miller et al. v. Schoene was enacted to protect apple orchids from a plant disease known as cedar rust. Although cedar rust is harmless to most cedar trees, it can spread to apple orchids, cause the premature defoliation of apple trees, reduce their yield, and blemish their fruit. (See, for example, this summary by the U.S. Forest Service.) Now, imagine a world in which the State of Virginia does not enact the Cedar Rust Act. In that world, it is the owners of apple orchids who will be harmed, since they will be exposed to the risk of cedar rust if their orchids are located close enough to infected cedar trees. But at the same time, if the State of Virginia does enact a law like the Cedar Rust Act, it is the owners of red cedar trees who will be harmed, since they are exposed to risk of having to cut down their trees if their trees become infected with cedar rust. Either way, Professor Samuels’ main point is that one group or the other is going to be harmed.

(As an aside, the other reason why the dispute between the cedar tree owners and the apple growers is reciprocal is because either group of property owners could have taken pro-active steps to avoid the harm in the first place. Although Samuels omits this second reason from his paper, the simple truth is that the owners of the apple orchids could have cultivated a different type of fruit tree on their properties, one that is resistant to cedar rust, and likewise, the owners of the red cedar trees could have planted a different type of cedar tree on their properties, since not all cedar trees are susceptible to cedar rust. The Atlantic white cedar tree, for instance, is immune from cedar rust. Or in the alternative, fungicide sprays, if applied in a timely manner, are effective against cedar rust (see here), so either group could have applied fungicide treatments to their red cedars or to their apple orchids to reduce the risk of cedar rust.)

So, what is wrong with this Coasean picture of reciprocal harms? More specifically, what set James Buchanan off when he read Samuels’s 1971 paper, so much so that he wrote a strongly-worded reply paper? As it happens, Buchanan had a very good reason to object to Samuels’s analysis of the cedar rust case. I will explain why in my next post …

Buchanan versus Samuels, round 3

In my previous post, we outlined the case of Miller et al. v. Schoene (the red cedar tree rust case) in which the Supreme Court created a “police power” exception to the Takings Clause. Today, I will address a different question: why did two great academic economists, James Buchanan and Warren Samuels, take an interest in this old case but disagree over how it was decided?

To begin (sorry, Richard!), it’s easy to see why two economists would take an interest in a case like Miller et al. v. Schoene, for this case illustrates what Ronald Coase calls the problem of harmful effects or what mainstream economists call “negative externalities.” But why did they chose the cedar tree case (Miller et al. v. Schoene) specifically, and why did they clash over its outcome? To answer these questions, we must first turn to Samuels’s 1971 paper in the Journal of Law & Economics. (See Warren J. Samuels, Interrelations between Legal and Economic Processes, Journal of Law & Economics, Vol. 14, No. 2 (1971), pp. 435-450.) It was this paper that fired up Buchanan and led to their exchange, and in the introduction to his 1971 paper, Samuels provides several general reasons why he decided to write about the cedar tree rust case.

For starters, for Samuels Miller et al. v. Schoene has all “the constituent elements of most if not all legal-economic problems, cases, or situations.” (Samuels 1971, p. 435) The second, somewhat redundant, reason Samuels gives is that this case is “beautifully illustrative of the interrelations of legal and economic processes.” (Ibid. In fact, Samuels’s paper is titled “Interrelations between legal and economic processes.”) And the third reason Samuels chose to write about this case was because it “is not a case with which one can get readily emotionally or ideologically involved thereby adversely affecting one’s powers of perception and analysis ….” (Ibid., pp. 435-436)

In short, Professor Samuels consciously chose a boring case in order to explore the relationship between law and economics. Like Ronald Coase (the editor of the Journal of Law & Economics from 1964 to 1982), he was specifically interested in the problem of “harmful effects” or negative externalities. In my next post, I will revisit Samuels’ economic analysis of the cedar tree case and explain why Buchanan took exception to Samuels’ analysis.

Buchanan versus Samuels, round 2

I mentioned in my previous post that I would revisit the controversial case of Miller et al. v. Schoene, the case that sparked the legendary exchange between James Buchanan and Warren Samuels. (See Buchanan & Samuels, On some fundamental issues in political economy: an exchange of correspondence, Journal of Economic Issues, Vol. 9, No. 1 (1975), pp. 15-38.) In summary, this old case illustrates what Ronald Coase once called the problem of harmful effects in his much-cited social cost paper (see here) — or what mainstream economists refer to as negative externalities, i.e. when the activity of one firm creates spillover effects or imposes costs on third parties. For further reference, below I describe the parties to the case, the facts, the main legal issues, as well as the court’s holding and rationale:

Parties:

The plaintiffs (“Miller et al.“) were a group of landowners in Shenandoah County, Virginia, who were ordered by a government official representing the State of Virginia to cut down a large number of ornamental red cedar trees on their respective properties in Shenandoah County. The defendant, Fred P. Schoene, was the Virginia State Entomologist who had ordered the plaintiffs to cut down the red cedar trees on their land because those trees were infected with a plant disease (cedar rust) that could spread and harm neighboring apple orchards.

Facts:

The facts in this case were not in dispute. The State of Virginia had enacted a law in 1914 known as the Cedar Rust Act of Virginia. Here is how the Supreme Court of the United States described this law (emphasis added; ellipses in original):

The Virginia statute presents a comprehensive scheme for the condemnation and destruction of red cedar trees infected by cedar rust. By section 1 it is declared to be unlawful for any person to “own, plant or keep alive and standing” on his premises any red cedar tree which is or may be the source or “host plant” of the communicable plant disease known as cedar rust, and any such tree growing within a certain radius of any apple orchard is declared to be a public nuisance, subject to destruction. Section 2 makes it the duty of the state entomologist, “upon the request in writing of ten or more reputable freeholders of any county or magisterial district, to make a preliminary investigation of the locality … to ascertain if any cedar tree or trees … are the source of, harbor or constitute the host plant for the said disease … and constitute a menace to the health of any apple orchard in said locality, and that said cedar tree or trees exist within a radius of two miles of any apple orchard in said locality.” If affirmative findings are so made, he is required to direct the owner in writing to destroy the trees and, in his notice, to furnish a statement of the “fact found to exist whereby it is deemed necessary or proper to destroy” the trees and to call attention to the law under which it is proposed to destroy them. Section 5 authorizes the state entomologist to destroy the trees if the owner, after being notified, fails to do so. Section 7 furnishes a mode of appealing from the order of the entomologist to the circuit court of the county, which is authorized to “hear the objections” and “pass upon all questions involved,” the procedure followed in the present case.

The most important feature of this law, however, is what it did not do: it did not provide the owners of infected cedar trees any compensation for the value of their red cedar trees or for the decrease in the market value of their real properties caused by the destruction of their trees.

Issue:

Although the facts in this case (see above) were not in dispute, the law was. In brief, this case presented at least two legal issues. The main issue was whether Schoene’s order or the Cedar Rust Act itself constituted a “taking”. The other issue, which the Supreme Court decided to avoid, was whether the infected cedars constitute a common law nuisance.

Holding:

In a unanimous decision — an appalling and dangerous decision that deserves to live in infamy — the Supreme Court of the United States held that the State of Virginia had the constitutional authority to enact the Cedar Rust Act and to order the destruction of the infected cedar trees. In practical effect, the Supreme Court created a “police power” exception to the Constitution’s Takings Clause: when a State legislature enacts a law under the guise of protecting public health, public safety, or the general welfare (in other words, any time a State law is enacted!), that law is not a taking.

Rationale:

The Supreme Court invoked the doctrine of necessity in support of its decision:

On the evidence we may accept the conclusion of the Supreme Court of Appeals that the state was under the necessity of making a choice between the preservation of one class of property and that of the other wherever both existed in dangerous proximity. It would have been none the less a choice if, instead of enacting the present statute, the state, by doing nothing, had permitted serious injury to the apple orchards within its borders to go on unchecked. When forced to such a choice the state does not exceed its constitutional powers by deciding upon the destruction of one class of property in order to save another which, in the judgment of the legislature, is of greater value to the public. It will not do to say that the case is merely one of a conflict of two private interests and that the misfortune of apple growers may not be shifted to cedar owners by ordering the destruction of their property; for it is obvious that there may be, and that here there is, a preponderant public concern in the preservation of the one interest over the other.

In my next few posts, I will explain why Buchanan and Samuels took such a deep interest in this old case and pinpoint the underlying source of their disagreement over how this case was decided.

🇨🇦 Happy Canada Day! 🇨🇦 One of the most fascinating sessions at this year’s meeting of the History of Economics Society (HES) at the University of Richmond was the “Roundtable on the 50th anniversary of the Buchanan-Samuels Exchange.” (Their exchange was published in 1975 on pages 15-38 of Volume 9 of the Journal of Economic Issues.) During this roundtable, which took place yesterday (30 June) and featured my colleagues and friends Marianne Johnson (Wisconsin), M. Ali Khan (Johns Hopkins), David M. Levy (George Mason), Steven Medema (Duke), Gary Mongiovi (St. John’s), and Emily Skarbek (Brown), I learned that the wellspring of the original exchange between James Buchanan and Warren J. Samuels was an old law case: Miller et al. v. Schoene. I will revisit this controversial case and pinpoint the underlying source of Buchanan and Samuels’s disagreement over how the case was decided in my next few posts …

That is the title of my most recent work-in-progress (with Salim Rashid), which we are presenting today (30 June) at a joint session of the History of Economics Society and International Adam Smith Society at the University of Richmond. Below is our introduction:

What is the relationship between Adam Smith’s two great works, The Theory of Moral Sentiments and The Wealth of Nations? The so-called Das Adam Smith Problem refers to a possible internal contradiction between the invisible hand of The Wealth of Nations, where Adam Smith the political economist presents a descriptive theory of economics based on self-interest and self-regarding behavior, and the impartial spectator of The Theory of Moral Sentiments, where Smith the moral philosopher develops a normative, pro-social theory of ethics based on sympathy and other-regarding behavior. This supposed tension between ethics and economics–between Smith’s impartial spectator and his invisible hand–has generated an academic literature of Borgesian proportions, and scholars continue to debate whether the perennial Das Adam Smith Problem is really a genuine problem. This work, by contrast, will focus not on the relationship between Smith’s two great works but on the most salient open problems within each one.

This weekend (29 & 30 June), I will be presenting two of my co-authored works at a joint session of the History of Economics Society (HES) and International Adam Smith Society (IASS) at the University of Richmond. (See here and here.) In the meantime, below is some music I Shazamed recently during my visit to Boulder:

I have spent a lot of time this month reading and thinking about the following question: What impact overall will A.I. have on our critical thinking skills? In plain English, will A.I. makes us smarter and better informed citizens, or will A.I. make us dumber or more mentally lazy? Today, I want to conclude my series of blog posts on this big question with a procedural point. Specifically, who should have the burden of proof in this debate, the proponents of A.I. or the opponents? And secondly, how high should their burden be? Proof beyond a reasonable doubt? Clear and convincing evidence? Preponderance of the evidence? Probable cause? Or something else?

In summary, the burden of proof is a key feature of legal trials, for in order to secure a conviction in a criminal case or an award of money damages in a civil case, the moving party must produce sufficient evidence or proof that his allegations are true. (In the Anglo-American legal tradition, the burden is “proof beyond a reasonable doubt” in criminal cases, while the “preponderance of the evidence” standard is used in most civil cases.) This concept is also relevant to many areas of life beyond law, including the ongoing debates about A.I.

For my part, I agree with Tyler Cowen that the burden of proof should be on the opponents of A.I. (Professor Cowen, a proponent of A.I., had replied to one of my previous posts by email that the “Burden of proof [is] not on me!”) Why? Because we don’t want to hamper innovation and technical progress unless and until we have sufficient evidence that the harms of X innovation outweigh its benefits. In addition, the burden of proof should not only be on the opponents of innovation; I would further add that their burden should be a high one: “clear and convincing” proof.

I mentioned in passing in a previous post that the authors of a new study titled “Your Brain on ChatGPT” may have p-hacked or cherry-picked their results. It’s now time to take a closer look at this possibility. To begin (sorry, Richard!), I think it would be fair to say that the practice of p-hacking or data dredging — i.e. of manipulating or “massaging” one’s data in order to find a noteworthy result — has reached epidemic proportions in all of the so-called “social sciences”, even accounting research (see here, for example), and I have blogged about several variants of this problem many times before; see:

1. p-hacking primer (14 January 2017)
2. Cherry picking (31 March 2019)
3. Data dredging (1 April 2019)
4. Publication bias (3 April 3019)
5. Tentativew reply to Gow 2023 (17 October 2023)

Now, let’s turn to “Your Brain on ChatGPT” by Kosmyna, et al. (2025). In part 4 of this 19 June blog post, Ben Shindel makes a strong case why the results in this paper are most likely p-hacked. To the point, he explains that the Kosmyna study “tested virtually every possible qualitative and quantitative measure in order to determine statistical significance and evaluate interesting-looking findings” (emphasis omitted). Moreover, it is the centerpiece of the Kosmyna study — the EEG results — that is most suspect. To see why, check out this revealing methodological disclosure buried in pages 77-78 of the Kosmyna paper:

“For all the sessions [in our experiment] we calculated dDTF for all pairs of electrodes 32 × 32 = 1024 and ran repeated measures analysis of variance (rmANOVA) within the participant and between the participants within the groups. Due to complexity of the data and volume of the collected data we ran rmANOVA ≤ 1000 times each. To denote different levels of significance in figures and results, we adopted the following convention:

• p < 0.05 was considered statistically significant and is marked with a single asterisk (*)
• p < 0.01 with a double asterisk (**)
• p < 0.001 with a triple asterisk (***)”

But as Shindel correctly notes, the MIT Media Lab team was “bound to get tons of false positives” from their EEG results because this particular method will produce “perhaps tens of thousands of possible correlations to test for. Hundreds of these will meet their criteria for statistical significance by chance, probably even with FDR [False Discovery Rate] implemented.” For my part, as I disclosed when I began to consider the impact of A.I. models on critical thinking (see here), this is why I am still agnostic on this question.

This week, I have been attending the Inaugural Space and Spectrum Policy Conference at the law school of the University of Colorado Boulder (see here), of which I will have a lot to say soon. (Shout out to Phil Weiser, the former dean of Colorado Law and Founder of Silicon Flatirons, for hosting this excellent event.) In the meantime, however, I want to respond to several criticisms of “Your Brain on ChatGPT” (Kosmyna, et al., 2025), a new study that I had highlighted in one of my previous posts. One of the critiques directed at Kosmyna’s study is by the world’s greatest-living “information monster” Tyler Cowen (see here); the others are by the self-described “bullshit detector” Ben Shindel (here). Professor Cowen’s critique is the easiest to refute, so I will begin with him.

In brief, Professor Cowen concedes that ChatGPT and other large language models reduce our levels of “cognitive engagement” (i.e. makes us dumber). His critique, however, consists of a conjecture or counterfactual: ChatGPT will be good for our brains overall because using ChatGPT to complete mundane tasks frees up a lot of time and time and mental energy to engage in other activities, and many of those other other activities that we can now engage in will require even higher levels of “cognitive engagement” or critical thinking! To illustrate his critique, Professor Cowen provides the following example:

It took me a lot of “cognitive load” … to memorize all [the] state capitals in grade school, but I am not convinced it made me smarter or even significantly better informed. I would rather have spent the time reading an intelligent book or solving a math puzzle. Yet those memorizations, according to the standards of this new MIT paper, would qualify as an effective form of cognitive engagement.

Alas, Cowen’s counterfactual, though logically sound, is based on pure speculation, since he provides no evidence one way or another about user behavior. Instead, he simply assumes that ChatGPT users will now use all the mental energy they have saved from relying on ChatGPT to engage in new high-level critical-thinking activities, but for all we know, the opposite could also be true: we could use up all that free time doom-scrolling our social media feeds or watching TV!

More ironically, Professor Cowen commits the fallacy of “mood affiliation”! As Cowen himself has explained (see here), a person commits this fallacy when he lets his mood or mental attitude dictate his beliefs and justifications. Cowen is a self-described “A.I. optimist” (see here, for example), and that is probably why the best argument he can make against the Kosmyna paper is built on such a shaky foundation: he is grasping at counterfactual straws in order to maintain his pro-A.I. priors!

For his part, “bullshit detector” Ben Shindel presents several additional criticisms of Kosmyna’s study, and these criticisms will be much harder to refute. I will turn to them in my next post …

In a previous post, I mentioned a new paper by my colleague and friend John A. List (University of Chicago) titled “Enhancing Critical Thinking Skill Formation: Getting Fast Thinkers to Slow Down”, available here. Now that I have read this work, allow me to highlight some contributions Professor List makes to the critical thinking literature:

1. Multiplicity of critical thinking definitions — Professor List begins his paper with this provocative statement: “I asked 30 people to define critical thinking. I received 25 different answers.”
2. Critical thinking as “connecting the dots” — List describes critical thinking as “connecting the dots” and he also identifies two ways these metaphorical dots can be connected: “Connecting the dots with empiricism: developing and assimilating empirical evidence and updating of one’s beliefs” and “Connecting the dots with abstract thought: putting the puzzle together with conceptual reasoning; thought experiments”
3. Critical thinking as “slow thinking” — He then compares and contrasts so-called “slow” and “fast” thinking (see table below) and associates critical thinking with slow thinking. List writes, “… applying heuristics (‘fast thinking’) works well enough in most cases, making more effortful ‘slow thinking’ not worth it. The economic and psychological roots of this idea go back decades, and Kahneman scribed of its import in his 2011 popular book Thinking Fast and Slow. The unfortunate aspect of this human tendency is that in many cases cognitive biases creep into decisionmaking, so if we are not able to habitually think slowly, we will find it difficult to [engage in critical thinking].” (Postscript: For reference, here is a PDF of Kahneman’s influential book.)

Last but not least, Professor List describes “six basic tenets” of slow thinking/critical thinking on page 9 of his paper as follows:

1. state, explain, and clarify the question(s)
2. think through the question(s) from multiple points of view, expressing their own priors using logical thinking
3. gather, organize, assimilate information and data
4. identify assumptions, shortcomings, and implications of the data generation process
5. update priors, both their own priors and consider how other’s views might change
6. explain and apply what they learn, connecting what they just learned to other economic
   concepts, learnings from another course, and/or their everyday life

For my part, I just want to add that Professor List’s set of “six basic tenets” looks a lot like my more simple Humean/Bayesian approach to critical thinking: careful evaluation and scrutiny of the available evidence, followed by periodic “updating” of one’s priors as new evidence becomes available. But that said, I really like how List breaks down both parts of my Humean/Bayesian approach into smaller components or steps. Now, with respect to the Generative A.I., however, the $64 question is this: do large language models like ChatGPT help us develop good questions, gather evidence, or update our priors, or do these models end up having the opposite effect? Alas, your guess is as good as mine!