Defining power

During the course of a recent online discussion, David Friedman raised the question of how to define “patriarchy” in particular and “power” more generally.

I gave the following answer which I’m sharing with you in order to elicit broader commentary (ideally from people who actually know something about social choice theory):

Conceptually, defining “power” should be straightforward.

Borrowing from standard social choice terminology, under any Social Welfare Function, which maps from the set of all preference profiles (list of policy preference rankings, one for every member of the society) to a unique social preference ranking, if my preferences correlate more with the social preferences than yours (where correlation is defined in an appropriate way), I am more powerful.

In a dictatorship, the correlation is 1 if I’m the dictator.

In a democracy, the correlation is high if I’m the median voter, low if I’m a member of the political fringe.

Patriarchy is then a system in which men’s policy preferences are more highly correlated with the social preferences than women’s.

David raised the following problem with my definition:

Suppose one percent of the population prefer outcome A to outcome B, ninety-nine percent the other way around. The social preference function, in situations where it has to choose between the two, chooses A two percent of the time.

The group of people who prefer B have more power than the group who prefer A, but does it make sense to say that an individual member of the group has more power? Might it make more sense to use a definition in which the question is not whether the social choice function correlates with my preferences but whether a change in my preferences produces a change in the social choice function in the same direction?

I think that’s a very good point. So here is my updated definition of power:

If changes in A’s preference ranking are more highly correlated with changes in the social preference ranking than changes in B’s preference ranking are, A is more powerful than B.

Is this how people in social choice have always defined power? If not, is there a deep problem with this definition which didn’t occur to me?

America vs. Europe: some personal observations

I’ve spent a lot of time in the US in recent years, and will spend much more time there next year. I get asked a lot about the differences between living in America and in Europe, which caused me to compile a list of the differences that I found most striking. Some of them may be clichés, others may be more surprising. All of them are true, I believe, but my confidence in their truth is not uniform. I have discussed many them with friends and colleagues on both sides of the Atlantic, and found them controversial to varying degrees. Some of these differences have an obvious explanation, others seem hard to understand or even puzzling. I’m looking for economic explanations of these differences and might blog about that in the future. Comments are highly welcome!

An obvious caveat: My observations are biased due to the fact that I’ve only seen parts of America (California, part of the Northwest, part of the Midwest, and New England), and only parts of Europe (Central Europe, part of Scandinavia, part of France and England). One should realize that large cultural, political and economic differences exist both within the US and Europe, so all the statements below refer to averages with wide confidence bands around them.

Economic life:

  1. Prices are normally stated net of sales taxes. (high confidence, uncontroversial)
  2. Tips are higher and more common. (high confidence, uncontroversial)
  3. Tap water is much more heavily chlorinated. (high confidence, uncontroversial)
  4. Air-conditioning is vastly more common both in private homes and offices. (high confidence, uncontroversial)
  5. The average quality of houses is much lower. (high confidence, somewhat controversial)
  6. The proportion of people living in single-family houses as opposed to apartment buildings is much higher. (medium confidence, uncontroversial)
  7. The price of gasoline is about 50% lower. (high confidence, uncontroversial)
  8. There are both more cars per person and cars are much bigger on average. (medium confidence, uncontroversial)
  9. Automatic cars are vastly more common. (high confidence, uncontroversial)
  10. The price of necessities (food, clothing, personal hygiene) is lower, but not much, and the quality is generally lower. (low confidence, highly controversial)
  11. Food is bought and sold in much larger quantities. For instance, the smallest available bottle size for milk is usually half a gallon (about 1.9 liters). (high confidence, uncontroversial)
  12. Extreme obesity is vastly more common. (high confidence, uncontroversial)
  13. The quality of infrastructure (roads, railways, electricity grid) is lower. (medium confidence, somewhat controversial)
  14. Roads are more often built in strictly rectangular patterns, both in cities and on the countryside. (high confidence, uncontroversial)

Social life:

  1. Racial diversity is immensely higher, especially in urban areas, but also in rural areas. (high confidence, uncontroversial)
  2. So is religious diversity. (high confidence, uncontroversial)
  3. Religion plays a more central part of public life, including in politics (high confidence, uncontroversial)
  4. Interest in family history and genealogy is much higher. (high confidence, uncontroversial)
  5. Bodily contact between people in everyday interactions is much less frequent and more often regarded as inappropriate. (medium confidence, somewhat controversial)
  6. Conversations are much less formal both in professional and private contexts. (medium confidence, uncontroversial)
  7. Small talk is a much more important part of everyday life both in professional and private contexts. (high confidence, uncontroversial)
  8. Adolescents and young adults seem to be more mature both in terms of physical appearance and character development. (low confidence, highly controversial)
  9. Elderly people seem to be more familiar with, and more adept at, using new technology as well as social media. (high confidence, somewhat controversial)
  10. Knowledge about foreign countries (geography, history, politics) is generally much poorer. (high confidence, highly controversial)
  11. Patriotism is more wide-spread, more frequently expressed and more strongly felt. (high confidence, somewhat controversial)

Political life:

  1. There are more elected (as opposed to appointed) public officials and elections occur at higher frequencies. (high confidence, uncontroversial)
  2. Personal political opinions are more frequently expressed in public. For instance, pumper stickers with political messages are a much more common sight. (medium confidence, somewhat controversial)
  3. Political polarization is more profound. (medium confidence, somewhat controversial)
  4. There are more prohibition and warning signs on the streets as well as in public and private buildings and facilities. (low confidence, highly controversial)
  5. There are more local political initiatives  such as petitions, awareness campaigns, fund raising events etc. (medium confidence, somewhat controversial)

A perfect prediction (self-congratulation)

Three years ago, Christoph Zwick and I wrote a paper about the sustainability of Austria’s public debt. Under our preferred model, we forecasted the debt-to-GDP ratio, which at the time stood at slightly over 80 percent, to recede towards 60 percent within the next decade. We concluded that the long-run probability distribution of Austrian public debt given current data indicated no cause for alarm. How good was our projection?

Well, the new Austrian minister of finance just held his budget speech, in which he announced a zero budget deficit in the coming years. Assuming the government follows through on this plans, this would indeed bring down the debt-to-GDP ratio to 62 percent, exactly as our main projection predicted.

Here is the finance ministry’s proposed budget path:

Bildschirmfoto 2018-03-21 um 09.00.09

And here our main projection from the paper (note that the initial debt level is slightly lower due to different definitions of public debt; the dark and light blue areas indicate the 75 and 95 percent probability bands around the median, which is in black):

Bildschirmfoto 2018-03-21 um 08.54.12

Ladies and Gentlemen, this is what a perfection prediction looks like.


Me, myself and economics: Political Conscience

I have already mentioned that it is rather deceptive to discuss economic issues as if they were completely independent from normative judges. Several instruments and analyses regularly applied by economists strongly resort to assumptions and thereby beliefs and opinions. Several outcomes and issues discussed in economics strongly depend on the underlying set of institutions and thereby on the politicians responsible for them.

This is not a critique. My critique is rather reserved for those guys who try to exploit the relinquished political conscience of an economist in favour of an accusation – restate it and belie it as it would be something bad. Some probably do it intentionally and fully aware of their formal mistake. They accuse us of a normative bias because they know that others, less educated with regard to this issue, will follow their lead: tabooing political statements as if they would jar with the objectivity of science. The true intention, though, may be rather contrary directed. Instead of protecting science from political dependency the ulterior motive may be to protect certain political conditions from scientific discussion. The best to keep people from questioning a given set of institutions seems to be preventing critical thoughts about it in the first place.

If I, for example, once again dare to question the actual distribution of wealth and property rights, there is a high chance for an accusation that my request is politically motivated. The accusation may be right or wrong. Anyway, it bears no surplus for the scientific discussion. If economic outcomes depend on property rights, and property rights are determined by politically passed laws, any discussion of economic outcomes is logically linked to politics. Supressing the discussion thereby is not less politically motivated than forcing it. If there is a political dimension anyway, keeping quiet about it may serve an individual strategy but not consistency or even objectivity.

Do not get me wrong! I do not request that every discussion of an economic outcome should turn into a political discussion. All I want to state is that especially progressive economists will not be able to spare it all the time. The moment they request a change in economic settings or behaviour, there is a high chance that they implicitly demand political action. This does not imply political dependency for the one who states the request. It is the economic sphere that depends on the political sphere, not necessarily the economist who realizes and communicates this fact.

To this effect, do not evaluate our work over our explicit or implicit political requests only. Rather control for the assumptions we state in our models and analysis. Verify which interdependencies are incorporated and which are neglected. Check whether you can share our beliefs and follow our derivations. But do not render a technical or professional judgement based on our political conscience. If you want to judge economists with regard to political conscience, start with those who do not have one or try to hide it, because they seemingly did not get what economics is about.