People want to tell heroic stories about themselves and so rent seeking comes to be redefined as something heroic

From Alex Tabarrok.

"Late last year I responded to an excellent tweet storm from Ezra Klein by in effect saying he should read Mancur Olson’s The Rise and Decline of Nations. And you know what? He did! Ezra then kindly invited me on to his New York Times podcast to discuss public choice, liberalism, and the rise and decline of nations.

A few good quotes from me:

Japan has caught up to us in slowing down.

And

Let me put it in a way that progressives can understand, there is an inequality of voice and that inequality of voice also goes to the rich and the powerful and the people who can hire lawyers and the people who can use these so-called equitable institutions to their advantage—even the people in the marginalized communities have not benefited.

Ezra asked challenging questions and had lots of interesting things to say. I was especially struck by his argument that people want to tell heroic stories about themselves and so rent seeking comes to be redefined as something heroic. I think that’s an important insight which public choice scholars are likely to overlook–it becomes harder and harder to break out of a rent-seeking equilibrium not just because of transitional gains traps and the like but because the equilibrium comes to be seen as virtuous.

You also get to hear me rant about new hiring procedures at GMU and my HOA.

Ezra asks a good question about why developer interest groups don’t dominate the planning process.

We also talk about crypto and decentralized consensus as well as other topics.

Whether you call it state capacity libertarianism, creating the innovation nation, or supply side progressivism, I think this movement, which Ezra is leading from the left, is one of the most important movements today.

Podcast: Apple, Spotify, Google or wherever you get your podcasts. Transcript here."

See also Rent Seeking by David R. Henderson. Excerpt:

 

"Rent seeking” is one of the most important insights in the last fifty years of economics and, unfortunately, one of the most inappropriately labeled. Gordon Tullock originated the idea in 1967, and Anne Krueger introduced the label in 1974. The idea is simple but powerful. People are said to seek rents when they try to obtain benefits for themselves through the political arena. They typically do so by getting a subsidy for a good they produce or for being in a particular class of people, by getting a tariff on a good they produce, or by getting a special regulation that hampers their competitors. Elderly people, for example, often seek higher Social Security payments; steel producers often seek restrictions on imports of steel; and licensed electricians and doctors often lobby to keep regulations in place that restrict competition from unlicensed electricians or doctors."

Our fondness for narratives is driving us mad

We seem to be in a golden age of storytelling. Is it inhibiting rather than creating empathy?

By Jonathan Gottschall. Excerpts:

"Well-publicized studies have shown that empathy is a bit like a muscle: The more we flex that muscle by consuming fiction, the more it swells. Research conducted around the world has repeatedly found that merely watching television shows or listening to radio dramas featuring diverse protagonists reduces a variety of viewer prejudices with more power and durability than do more conventional approaches to prejudice reduction like diversity training. Moreover, in an age of furious polarization, a 2021 study in The Proceedings of the National Academy of Sciences shows that humble personal anecdotes can bridge fraught moral and political divides even when factual information can’t."

"The act of generating empathy can also produce empathy’s inverse: a kind of moral blindness to the humanity of whoever’s forced into the villain’s role. Fiction, as Fritz Breithaupt explains in his 2019 book “The Dark Sides of Empathy,” conjures not just empathy but “empathetic sadism,” which he defines as “the emotional and intellectual enjoyment that most people feel in situations of altruistic punishment” — for example, when the hero kills, captures, or humiliates the villain.

Empathetic sadism can spill over tragically from fiction to reality. A classic example is “Birth of a Nation,” the 1915 film that spread the mythology of the KKK. But its effects are most destructive in the narratives we label as nonfiction. Research in the emerging field of narrative psychology shows that people don’t come equipped with two narrative modes — one to cope with the neverlands of fiction and another to cope with the complexity of real life. Regardless of where stories sit on the fact-fiction continuum, they have a tendency to divide people into a moralistic trinary of heroes, villains, and victims."

"how can we tell stories that build empathy and connection while weakening their capacity to provoke divisive us-vs.-them thinking?

We need to move past any simple, naive intuition that storytelling must be a net good in human life. We have to recognize how our political narratives lure us into fantasies where “we” are good guys and “they” aren’t. These stories not only make us angry and judgy; they make us feel triumphantly virtuous for being so angry and judgy. It’s true that the most febrile narratives of wicked conspiracy, invented or elaborated by the most dangerously talented political storyteller in American history, are boiling up on the American right. But narratives on the left, for all the empathy they claim to champion, are also guilty of villainizing and thereby dehumanizing people on the other side."

"by stripping away the caricatured villains from our political narratives and embracing the principle of moral ambiguity, we can make our stories of reality not only as empathetic and socially productive as great fiction but perhaps even as true."

Inside and Outside Perspectives on Institutions: An Economic Theory of the Noble Lie

By Cameron Harwick. From The Journal of Contextual Economics.

"Abstract

If there exist no incentive or selective mechanisms that make cooperation in large groups incentive-compatible under realistic circumstances, functional social institutions will require subjective preferences to diverge from objective payoffs – a “noble lie.” This implies the existence of irreducible and irreconcilable “inside” and “outside” perspectives on social institutions; that is, between foundationalist and functionalist approaches, both of which have a long pedigree in political economy. The conflict between the two, and the inability in practice to dispense with either, has a number of surprising implications for human organizations, including the impossibility of algorithmic governance, the necessity of discretionary rule enforcement in the breach, and the difficulty of an ethical economics of institutions.

Leeson and Suarez argue that “some superstitions, and perhaps many, support self-governing arrangements. The relationship between such scientifically false beliefs and private institutions is symbiotic and socially productive” (2015, 48). This paper stakes out a stronger claim: that something like superstition is essential for any governance arrangement, self- or otherwise.

Specifically, we argue that human social structure both requires and maintains a systematic divergence between subjective preferences and objective payoffs, in a way that usually (though in principle does not necessarily) entails “scientifically false beliefs” for at least a subset of agents. We will refer to the basis of such preferences from the perspective of those holding them as an “inside perspective,” as opposed to a functionalist-evolutionary explanation of their existence, which we will call an “outside perspective.” Drawing on the theory of cooperation, we then show that the two perspectives are in principle irreconcilable, discussing some implications of that fact for political economy and the prospects of social organization."

Cameron Harwick did a good Twitter thread on this. Click here to read it.

I asked Dr. Harwick "Is the Noble Lie like myths or mythology?"

He said "Definitely includes that, among other things."

Impostor scams succeed mainly because of the ability to tell a convincing story

See The Age-Old Secrets of Modern Scams: From medieval forgers to online Elon Musk impersonators, con artists tell stories their victims want to hear by Ariel Sabar. Mr. Sabar is a journalist and the author of “Veritas: A Harvard Professor, a Con Man and the Gospel of Jesus’s Wife,” recently published by Doubleday. Excerpts:

"From the headlines last month, you’d have thought it was a hack for the ages. Scammers infiltrated the Twitter accounts of public figures like Barack Obama, Elon Musk and Kim Kardashian West, then tweeted an offer too good to be true: Send bitcoin and get paid back double. When a 17-year-old from Tampa, Fla., was charged on July 31 with orchestrating the scheme, prosecutors called him the “mastermind” of a “massive fraud…designed to steal money from regular Americans.”

But if the aim was to trick the celebrities’ millions of social media followers out of piles of money, it was something of a flop. The alleged culprits made off with an estimated $118,000, a pittance compared with a similar but less-noticed scam in June in which hackers impersonating Mr. Musk on YouTube took victims for as much as $464,000."

"impostor scams succeed less because of technical skill—like breaking into a high-profile account or imitating an artist’s brush strokes—than because of the ability to tell a convincing story, to plant a lie in an otherwise true tale.

The Twitter hackers got inside the accounts of famous people whose influence they sought to exploit, but posted generic messages that sounded a lot like one another and not particularly like the account holders. In the YouTube scam, on the other hand, channels disguised with the SpaceX logo played real video of Musk speaking at a conference. Framing the footage were captions about a “Special Event” that tied the video to the thrilling launches, days earlier, of SpaceX’s Crew Dragon and Falcon 9 spacecraft.

The videos were live-streamed, as if Musk’s 2-for-1 bitcoin giveaway were unspooling in real time to viewers lucky enough to tune in. A linked website with “SpaceX” in its URL quelled doubt with a thoughtful-sounding message: “We understand the financial uncertainty that some people may be facing right now. SpaceX is here to offer all the help that we can.” Tucked into the alphanumeric bitcoin addresses where victims were asked to send money were the words “Musk” and “Space.” 

Key to this immersive tale was its bogus protagonist. More than any other CEO, Mr. Musk, a tech-world sage with a reputation as an unpredictable iconoclast, seemed like someone who might well give cryptocurrency to strangers for his own inscrutable reasons. “If this was Bill Gates, I would’ve just scrolled past it,” a savvy internet user who nearly fell for the YouTube fraud told the online investigations website Bellingcat."

"The motives of con artists are as various as those of their victims. But whether the come-on is biblical or bitcoin, the best of them gild their stories with details drawn from the real world—to blind us to the one crucial detail that isn’t."

Entrepreneurial Visions as Rhetorical History: A Diegetic Narrative Model of Stakeholder Enrollment

From Academy of Management Review. By Roy Suddaby, Trevor Israelsen, J. Robert Mitchell and Dominic S.K. Lim.

Abstract

"Research suggests that entrepreneurs persuade stakeholders to engage in risky projects in an uncertain future through visions, compelling narratives of the future. A unique challenge for entrepreneurs, however, is how entrepreneurs can construct a narrative that unites stakeholders with different perceptions of the degree of risk or uncertainty posed by the future. We address this question with a diegetic narrative model of stakeholder enrollment. Our primary argument is that to reduce variation in how potential stakeholders view the future, a story must embed a vision of the future in a coherent and collectively held narrative of the past. We introduce rhetorical history as the primary construct through which this occurs. We demonstrate how successful visions employ historical tropes at the intradiegetic level to appeal to individual perceptions of risk or uncertainty and how those historical tropes are combined into meta-narratives or myths drawn from the collective memory of a community to create broad, extradiegetic appeal to all stakeholders regardless of their temporal orientation. Finally we describe three categories of historical reasoning – teleological, presentism, and retro-futurism – that act as bridging mechanisms between past, present and future that provides stakeholders with an enhance sense of agency in the future."  

Trevor Israelsen did a good Twitter thread on this. Click here to read it.

Financiers use rituals & symbols to reinforce their social ties and worldview and share a creation myth

See Anthro-Vision’ Review: How to Take the Blinders Off by Tunku Varadarajan of The WSJ.

He reviews the book Anthro-Vision: A New Way To See In Business And Life by Gillian Tett. Excerpts:   

"Ms. Tett’s doctoral research, conducted in 1990 in a remote valley in Soviet-era Tajikistan, had focused on Tajik wedding rituals, as well as on the friction between Communism and Islam in that erstwhile backwater of the U.S.S.R. Fifteen years later, at a European Securitization Forum in Nice, France, she observed that the assembled financiers—“ranks of chino- and pastel-shirt-clad men”—were using rituals and symbols to “reinforce their social ties and worldview.” In Tajikistan, this bonding had occurred with a complex cycle of wedding ceremonies, dancing and gifts of embroidered cushions. In Nice, the bankers were swapping business cards, rounds of alcohol and jokes while engaging in “communal golf tours” and watching PowerPoint presentations.  

In both cases, Ms. Tett writes, the rituals and symbols were part of a “shared cognitive map,” one designed by biases and assumptions held in common. For all their globe-trotting and polyglot panache, the financiers were no less insular than Tajik matrons. They were, she says, a close-knit tribe “with little external scrutiny” who “could not see whether their creations were spinning out of control”—which they were, as the financial collapse of 2008 was to confirm. Because they shared such a strong “creation myth” about the benefits of novel instruments—such as collateralized debt obligations and other financial confections that brought markets crashing down—they needed someone in their midst who could see the “blind spots” they could not see for themselves."

Are false beliefs necessary for people’s well-being?

There is a new book out called "USEFUL DELUSIONS: The Power and Paradox of the Self-Deceiving Brain" by Shankar Vedantam and Bill Mesler.  Click here to read the review from The New York Times.

"Should we always advocate for truth? History tells us false beliefs can be dangerous, leading to genocide, racism and attacks on democracy. However, they can also bring harmony and help us thrive. Consider the health benefits of placebos or the comfort of religion. It is not the veracity, but the consequence, of a belief that makes it good or bad, Vedantam and Mesler argue. “Life, like evolution and natural selection, ultimately doesn’t care about what’s true. It cares about what works.” And if you believe in science you must acknowledge the overwhelming evidence that false beliefs are necessary for people’s well-being, as they often help reduce anxiety and increase motivation. “You can’t go around thinking of yourself as a breathing piece of defecating meat. It gets in the way of happy hour.”

Accepting that people’s beliefs depend less on evidence than on their hopes, emotions and tribal affiliations is vital for addressing global threats such as climate change. Persuading people to act requires us to go along with how the brain works, rather than working against it. Fighting irrational beliefs with numbers and graphs alone is ineffective. Instead, we must fulfill people’s desires and need for belonging. True to their thesis, Vedantam and Mesler pepper hard data with compelling stories to make their case. Vedantam’s empathy and intuitive understanding of human nature, which shine on his popular “Hidden Brain” podcast, come through in “Useful Delusions.”"