prior probability

I am reblogging this recent post “Redhill Close SIT Estate Walks into History” from one of my favorite specialty blogs, Remember Singapore:

By October 2023, a large part of Redhill Close estate has been bulldozed, with only a couple of blocks left standing. Another old Singapore …

Redhill Close SIT Estate Walks Into History

Check out this devastating critique of the so-called “effective altruism” movement (or EA, for short) by Sophie McBain (@SEMcBain), a writer for the New Statesmen who interviewed many EA leaders, including Larissa Hesketh-Rowe, the CEO of the Centre for Effective Altruism from May of 2018 to February of 2019, i.e. before the downfall of EA’s prime pecuniary benefactor, Sam Bankman-Fried. Below is an extended excerpt from Ms McBain’s excellent essay, describing how so many effective altruists fell down a money-grubbing slippery slope of their own making:

… Hesketh-Rowe told me that “once the community got more money, there were more discussions of, ‘Well, if you can save time by spending money, maybe you should. Maybe you should take a taxi instead of taking the bus or the train. Get a nicer desk, spend more to move closer to work – if it’s going to make you more productive.’” It wasn’t a unique business philosophy, but how did it fit with EA’s principles? “The line of reasoning isn’t completely wrong, but that’s what makes it risky,” said Hesketh-Rowe. “You need strong character, a good culture and leadership to navigate it, otherwise it’s too easy to accidently drift in the direction of corruption.”

This is how the movement that once agonised over the benefits of distributing $1 de-worming pills to African children ended up owning two large estates: the $3.5m Chateau Hostačov in the Czech Republic, purchased in 2022 by the small EA-affiliated European Summer Program on Rationality with a donation from Bankman-Fried’s FTX Foundation; and Wytham Abbey, a 15th-century manor house near Oxford, bought for £15m to host EA retreats and conferences. Wytham Abbey, which is undergoing restoration, was purchased by the Effective Ventures Foundation (the UK umbrella group for EA) using a £17m grant from Open Philanthropy (the US EA foundation set up by Moskovitz and Tuna).

On the EA forum, several people have questioned the “optics” of this purchase: “You’ve underestimated the damage this will do to the EA brand,” wrote one in late 2022. “The hummus and baguettes signal earnestness. Abbey signals scam.”

For what it’s worth, I presented my own classical liberal critique of these obnoxious elite do-gooders in a previous post, which I am reblogging below.

The order of co-authors on an academic article or scientific paper are most often arranged either alphabetically or by the amount of their respective contributions to the paper. (See here, for example.) Why not instead arrange co-authors randomly or, better yet, by each author’s degree of belief in the results of the paper? As it happens, this latter option is what Andy Clark and David Chalmers chose for their “Extended Mind” paper, which was published in the journal Analysis, 58:1 (Jan., 1998), pp. 7-19.

What really caused the extinction of the dinosaurs? (Alternative caption: Big Bang #2)

Among economists and lawyers, the moral hazard problem or MHP has become a textbook illustration of what the late great philosopher of science and language Thomas S. Kuhn once referred to (somewhat enigmatically) as a disciplinary matrix, exemplar, or paradigm, i.e. a concrete “puzzle-solution” employed as a prototypical model or archetypal example by most members of an entire discipline or field. (See, e.g., Kuhn, The Structure of Scientific Revolutions, p. 11.) But what exactly is a “moral hazard”?

For its part, Wikipedia defines this term as “a situation where an economic actor has an incentive to increase its exposure to risk because it does not bear the full costs of that risk.” Alas, this standard definition begs three key questions: (1) what are “costs” and “risks”?; (2) what are the reasons why an agent may want to avoid internalizing the costs of such risks?; and (3) which of those reasons, if any, are morally justified? Enter my colleagues David Rowell and Luke B. Connelly, who wrote a history of the term moral hazard (see also here for an ungated version). Below is a summary of their work:

This article traces the origins of the term “moral hazard” by going back in time to consider the earliest known developments of insurance as well as touching on a range of literatures as diverse as the theological and probability literatures and, latterly, the economics literature. Not surprisingly, we find that the concept of moral hazard developed with insurance markets. More importantly, we also show that the use of the term in the early insurance industry literature was ambiguous and, viewed from the vantage point of the modern economist, was used to describe not only moral hazard—as that term is understood by economists—but also the distinct phenomenon of adverse selection.

However the term is defined, aren’t government bailouts a classic example of the moral hazard problem? Also, what other examples of MHP, if any, keep you awake at night?

Have you made your “ofrenda” yet? More details here, via Ayana Archie (NPR).

Is bitcoin a bubble? This excellent paper by Peter Garber, which was published in the Journal of Political Economy (JPE) way back in 1989, has made me adjust my bitcoin priors. In brief, I used to believe bitcoin was just a fad (see here and here, for example), but now Garber’s work has made me rethink whether the very concept of a “bubble” is a coherent or meaningful one. That said, even if bitcoin were not a bubble, that still leaves two other possibilities: either the bitcoin blockchain began as a prank or practical joke or it’s an outright scam or Ponzi scheme. Change my mind!

Postscript: Professor Garber’s work has passed the test of time (see here, for example), but I seriously doubt whether the same will be said of most of the formal and technical “blackboard economics” papers being published today. In fact, if I were editor of the JPE, I would henceforth banish all equations to the appendices.