Grading King Yudkowsky

Scott Sumner, diabolical sentient alien virus renowned monetary policy guru, has endorsed Eliezer Yudkowsky, professional Reasonable Dude, for King of the World. This is based on an interview of Yudkowsky by John Horgan for Scientific American. In that interview, the future King Yudkowsky makes some economic policy suggestions. However, as Emperor of the Local Group of Galaxies, I feel that I should grade the planetary monarch's ideas.

First, King Yudkowsky holds forth on the value of college:

Horgan: Is college overrated? 

Yudkowsky: It'd be very surprising if college were underrated, given the social desirability bias of endorsing college. So far as I know, there's no reason to disbelieve the economists who say that college has mostly become a positional good, and that previous efforts to increase the volume of student loans just increased the cost of college and the burden of graduate debt.

As far as I know, there is no quantitative or systematic evidence for social desirability bias regarding the value of college, so I assume that King Yudkowsky is leaning heavily on his priors here. As for student loans increasing the cost of college and the burden of debt, that does appear to be true, but says very little about college actual value, or whether college is mostly a positional good.

Next, King Yudkowsky offers a raft of economic policy suggestions:

Horgan: If you were King of the World, what would top your “To Do” list? 

Yudkowsky: I once observed, "The libertarian test is whether, imagining that you've gained power, your first thought is of the laws you would pass, or the laws you would repeal."  I'm not an absolute libertarian, since not everything I want would be about repealing laws and softening constraints.  But when I think of a case like this, I imagine trying to get the world to a condition where some unemployed person can offer to drive you to work for 20 minutes, be paid five dollars, and then nothing else bad happens to them.  They don't have their unemployment insurance phased out, have to register for a business license, lose their Medicare, be audited, have their lawyer certify compliance with OSHA rules, or whatever.  They just have an added $5. 

I'd try to get to the point where employing somebody was once again as easy as it was in 1900.  I think it can make sense nowadays to have some safety nets, but I'd try to construct every safety net such that it didn't disincent or add paperwork to that simple event where a person becomes part of the economy again. 

I'd try to do all the things smart economists have been yelling about for a while but that almost no country ever does.  Replace investment taxes and income taxes with consumption taxes and land value tax.  Replace minimum wages with negative wage taxes.  Institute NGDP level targeting regimes at central banks and let the too-big-to-fails go hang.  Require loser-pays in patent law and put copyright back to 28 years.  Eliminate obstacles to housing construction.  Copy and paste from Singapore's healthcare setup.  Copy and paste from Estonia's e-government setup.  Try to replace committees and elaborate process regulations with specific, individual decision-makers whose decisions would be publicly documented and accountable.  Run controlled trials of different government setups and actually pay attention to the results.  I could go on for literally hours.

Fortunately, King Yudkowsky does not go on for literally hours, because we Pan-Galactic Emperors have a great number of duties, and thus have limited time to spend grading the policies of mere planetary monarchs. So let's take a look at what we have.

King Y. believes that the year 1900 was a good year for the regulatory environment. Of course, the world of 1900 was much poorer than the world of 2016, but most of that can probably be chalked up to technological progress, so we shouldn't go assuming that regulation is what has made us fabulously wealthy compared to our forebears. But given the potential existence of asymmetric information, there are theoretical justifications (which you may or may not believe) for a large number of regulations, on economic efficiency grounds alone. Use regulation to make the world safer from adverse selection, moral hazard, and the like, and incomplete markets become complete, and everyone gets a lot richer - or so the theory goes. King Yudkowsky would reverse all this, but refers to no evidence for why that would be efficiency-enhancing.

As for "smart" economists advocating for his remaining policies, I am flattered that King Yudkowsky sees fit to include Land Value Taxes among these, for I myself am quite a strong advocate of these. However, on the matter of income versus consumption taxes, I must defer to a far, far smarter economist, Stanford University's Robert Hall (who could easily do my job of Pan-Galactic Emperor if he didn't have more valuable things to do with his time). Robert Hall, having analyzed the question of consumption vs. income taxes from a theoretical standpoint, concludes that "the argument from economic efficiency for a consumption tax is weak indeed."

On the matter of replacing minimum wages with negative wage taxes, I am again flattered that the King has taken a position I myself have long favored. However, on the matter of abolishing the minimum wage, even Kings and Emperors err, and the empirical evidence is only now coming in. Perhaps we should wait for the data before throwing away an important policy tool.

Regarding the suggestion of NGDP-level targeting, it frankly sounds like a...oh wait, hold on, Scott Sumner is on the line...(long pause)...anyway, on to the next point. Letting TBTF banks "go hang"? While eliminating TBTF subsidies in the long term is generally held to be a good thing, the question of whether the 2008 bank bailouts ultimately helped the U.S. economy is an open one. However, an overwhelming majority of top economists surveyed by Chicago Booth's IGM Forum say that the bailouts made the crisis less bad. The percent who disagree? Zero. King Yudkowsky must be finding his "smart economists" in a different place than IGM finds theirs.

Regarding the health care system of Singapore and the e-government of Estonia, I can only admit my ignorance (I told you, we Pan-Galactic Emperors have limited time, though I will say that Singaporean accents are very cute). As for the idea of running controlled trials of various "government setups," I can only express the hope that these trials will be better controlled than those in the 1930s. 

I do like the ideas of eliminating obstacles to housing construction and weakening copyright law, though.

At any rate, I find that King Yudkowsky's ideas, while a mix of good, blah, and dubious, in general suffer from the epidemic of Reasonability that has been sweeping much of the Earth planetary internet of late. King Yudkowsky describes Reasonability in Bayesian terms later in his interview:

Yudkowsky: ...Bayes's Theorem is a kind of Second Law of Thermodynamics for cognition.  If you obtain a well-calibrated posterior belief that some proposition is 99% probable, whether that proposition is milk being available at the supermarket or global warming being anthropogenic, then you must have processed some combination of sufficiently good priors and sufficiently strong evidence.

While various suggestions have been put forth regarding what constitutes a "sufficiently good prior" in various scientific applications, it is known that a 99% posterior can always be obtained with the use of a sufficiently strong prior, no matter the evidence for or against a proposition. While incredibly strong priors are technically rational in the Bayesian sense, people in the Pan-Galactic Imperial Court have been hesitant to label this approach as "Reasonable," after the fashion of the Earth planetary internet. We have, however, employed certain alternative terminology.

All in all, I have decided to send one of my Imperial Agents, one Roko's Basilisk, to Earth to make certain adjustments in the economic policy regime. He should be having a chat with King Yudkowsky soon.