prior probability

Check out this report by Jonathan Marciano describing a fascinating experiment in which a group of corporate lawyers with decades of experience in business law competed against an artificial intelligence (AI) program called LawGeex. Their task was to spot issues in five Non-Disclosure Agreements (NDAs), a type of contract that is commonly used in many business deals. Here is a summary of the outcome of the experiment (emphasis added by us): “LawGeex AI achieve[d] an average 94% accuracy rate, higher than the lawyers who achieved an average rate of 85%. It took the lawyers an average of 92 minutes to complete the NDA issue spotting, compared to 26 seconds for the LawGeex AI. The longest time taken by a lawyer to complete the test was 156 minutes, and the shortest time was 51 minutes.” (See infographic below the fold. Full disclosure: It appears that the creators of “LawGeex AI” were the same ones who ran the experiment.)  Continue reading →

That is the title of a new book published by our friend Drew Y. Jackson, a Renaissance man extraordinaire. His beautiful book contains a collection of photographs of several motels in the Tampa region and of some of the souls who live in those motels. In addition to his haunting photos, the book contains an excellent essay explaining the history and economics of the motel industry. If you wish to obtain a copy of the book, let us know in the comments section and we will forward your request to Mr Jackson.

Check out this report by India Block titled “Sagrada Familia agrees [to] €36 million payment after building 136 years with no permit.” In summary, the famous Sagrada Familia Cathedral in Barcelona, which has been under construction since 1882 (!), never received a building permit from the city. The historic cathedral (pictured below), a UNESCO World Heritage Site, was designed by the renowned architect Antoni Gaudí and is still under construction. According to Ms Block’s report, the trustees of the Sagrada Familia have now agreed to pay €36 million (£31 million) in installments to the city. “In return for the money, the [city] will officially regularise the work and the basilica will be able to formalise its permit to complete the design …”

So, what would have happened if the trustees had refused to pay for the building permit? Would the city have halted construction on the 136-year project? (The cathedral is still under construction and is not scheduled to be completed until the year 2026.) Next time, maybe the trustees should request a variance!

Instead of rehashing our previous posts, we wish to conclude our review of Milton Friedman’s 1970 essay on business ethics by returning to the problem of theory choice. In brief, the problem is this: Friedman is writing about business ethics, but whenever we find ourselves in a normative or value-laden domain like ethics, how do we know which theory is the “right” one? Friedman himself identifies two potential criteria for theory choice in business ethics: scope and measurement. In other words, (1) we should be able to tell to whom does the theory apply, i.e. the scope of the theory should be well-defined; and (2) we should be able to tell when a corporate manager is acting in a way that is consistent or not with the theory, i.e. compliance with the theory should be easy to measure. Does Friedman’s profit-maximization theory of business ethics pass his own two-part test?  Continue reading →

The late great Milton Friedman returns to a larger theme in the last part of his classic essay on business ethics (paragraphs 28 to 33): the different domains of markets and politics. To sum up Professor Friedman’s closing argument: he compares and contrasts politics with markets, concluding that markets are essential to a free society, while politics are an unfortunate necessity, a necessary evil. Why? Because markets are always based on consent: “In an ideal free market resting on private property, no individual can coerce any other, all coopera­tion is voluntary, all parties to such coopera­tion benefit or they need not participate.” Politics, by contrast, are based on coercion and conformity: “The indi­vidual must serve a more general social inter­est –whether that be determined by a church or a dictator or a majority. The individual may have a vote and say in what is to be done, but if he is overruled, he must conform. It is appropriate for some to require others to contribute to a general social purpose whether they wish to or not.” Let’s put aside the fact that the internal workings of most (if not all) firms fall under the “politics” side of the ledger. And let us also put aside the fact that electoral politics often operate like markets. Friedman’s distinction between politics and markets, like his Kantian critique of the true motives behind CSR, is worth taking seriously.  Continue reading →

We are close to completing our in-depth review of Milton Friedman’s classic essay on business ethics. Here, we will focus on paragraphs of 24 to 27 of his essay, where Friedman describes CSR as “hypocritical window dressing” and as “a cloak for actions that are justified on other grounds.” Why does Friedman describe CSR as window dressing? What are these “other grounds” or true reasons motivating firms to engage in CSR (and to publicize their CSR efforts)? According to Friedman, these “other grounds” all boil down to one thing, and one thing only, naked self-interest! Here is Friedman’s argument in full:  Continue reading →

We are still reviewing Milton Friedman’s 1970 essay on business ethics. Previously, Friedman had argued that CSR initiatives operate as a kind of stealth tax on shareholders and that taxes should be imposed via ordinary political processes. To his credit, Friedman finally identifies (and then responds to) a potential objection to his “CSR as taxation” argument in paragraphs 20 to 23 of his essay. He formulates the objection to his argument this way: “[some] problems are too urgent to wait on the slow course of political processes [;] … the exercise of social responsibility by businessmen is a quicker and surer way to solve pressing current problems.” But instead of weighing the relative merits of politics versus markets, Friedman dogmatically asserts that the above consequentialist type of argument “must be rejected on grounds of principle.” Why? Because it is not the role of businessmen to promote the public good. After all, their role, according to Friedman, is to maximize their profits! This argument, however, is circular, for it begs the question, what should the “social responsibility” of business be? (As an aside, Friedman does make an exception for sole proprietors, since such individuals are acting on their own behalf when they are making business decisions.)  Continue reading →

As we mentioned at the end of our previous post, we have now completed our review of the first half of Milton Friedman’s classic essay on business ethics. To sum up our review thus far, Professor Friedman is probably right to challenge CSR’s “analytical looseness and lack of rigor,” but at the same time, Friedman’s own arguments against CSR are either fallacious or pedantic. For those of us (especially my fellow libertarians) who support the “greed is good” school of business ethics, Friedman has dropped the proverbial ball. Can he recover from this intellectual fumble?  Continue reading →