I just attended a day-long conference on the relationship between income inequality and social dysfunction.  The most interesting findings were from Martin Daly and his work on homicide.  

Essentially, Daly’s argument is that homicide rates are strongly related to Darwinistic, or what he calls “ecological and economic,” reasons.  He showed some very compelling data, which I’ll post if I can get the slides.


A summary of his findings:

Most killers are (young) males

Across countries, most killers are men.  These men tend to kill other men, especially unrelated men.  The main exceptions are countries where homicide is rare, the effect in these cases being that as male-on-male homicides decline, other types of homicides – which stay relatively constant – become more prominent.  Male-on-unrelated-male killings make up the great majority of homicides and are also the most variable component of the homicide rate.  Women, when they kill, do tend to kill other women, but relative to men, they are much less likely to commit homicides.

Daly believes that the reasons are tied to biology.  Historically, compared to women, men had a higher likelihood of dying childless, higher maximum fitness (and higher variability in fitness), and greater association between social rank and their ability to reproduce.  Together, this resulted in more same-sex competition and less deterrence by danger.

This argument is supported by the age graphs of men who kill unrelated men.  Across nations, they look nearly identical, sharp almost-vertical cliffs between the ages of 14 and 24 with steep drop-offs after that age and descending throughout the average male life.  Most killers are young males.

Men kill each other for competitive reasons

The most significant reason why men kill each other is social competition, in the form of a response to status challenge, rivalry over a women, or disrespect (“dissing”).  

The next most significant motive is material competition, in the form of robbery or business (e.g. drug) rivalry.

Risk factors for homicide

Daly believes that killers tend to be men who are so undeterred by danger that they’ll risk their lives in competitive contests.  In the words of Bob Dylan,“when you got nothin’, you got nothin’ to lose.”

Unemployment is a sizable risk factor for being the perpetrator of homicide.  Interestingly, unemployment is also a risk factor for being the victim of homicide, a possible explanation being that people tend to interact with others like them.  

Being unmarried is another risk factor.  That’s specifically not married, meaning that even if you’re in a serious relationship, you’re still in the risky pool.  The rate of homicide for men who become divorced and widowed returns to the unmarried rate.  

Generally, the more inequitable men’s access to “resources” (which apparently include child-bearing wives), the more dangerous disenfranchised men become.

A bit of math

Just in case you were wondering, inequality is calculated through the Gini coefficient of income inequality, which seems to be the gold standard for these things.  

The equation is as follows:

Gini coefficient of income inequality = Area 1 / (Area 1 + Area2)

Where:  the y-axis is the cumulative proportion of income from 0 to 1 and the x-axis is income units (households) arrayed from poorest to wealthiest.  The line of perfect equality would be the straight y = x line, meaning that every household’s income adds to the cumulative total some constant amount.  The sum total of the area of the triangle Area 1 + Area 2 is the denominator.  However, perfect equality never happening in the “wild,” the Lorenz curve represents the reality of the distribution.  The area between the line of perfect equality and the Lorenz curve becomes the numerator.

It's not income; it's income inequality

So you might be wondering, is it really an issue of inequality and status, or is it simply poverty and its ills at work?  (This is what I was thinking.)  

The data is quite compelling.  The number-one predictor of homicide rates across 50 US states is income inequality (with an r = 0.72, for those of you who care about these things).  Average income is not a predictor at all of homicide rates (r = -0.17).  [By the way, if you would like to avoid being the victim of homicide, don’t visit Louisiana and Mississippi.  Go to North Dakota instead... though death by boredom is probably not that much more fun.]

But isn’t there some correlation between poverty and inequality?  Aren’t poor states the most unequal?

There is some moderate correlation between poverty and inequality, but there's no reason it has to be so.  Daly, who happens to be Canadian, then looked at Canadian provinces, where the poor provinces are the most equitable and the rich provinces are the most inequitable.  Here, income inequality was still the main predictor of homicide rates (r = 0.82) across 10 provinces.  Income was not at all a good predictor of the homicide rate; in fact, the lowest income provinces had the least homicides, arguably because they are the most equal.

When you combine Canada and US data, they fall into line -- though Canada generally has lower inequality and lower homicide rates, its worst provinces about on par with the best US states.

Culture doesn't seem to be a major factor

Some might ask, well, how about culture?  Some cultures are just generally more war-like, even barbaric.  You would expect to see a higher homicide rate there.  Haven’t cultural transmission dynamics broken the links between violence and the economic / ecological basis?

Well, let’s look at the notoriously gun-toting U.S. South and their “culture of honor”.

 Southerners tend to:

• Oppose gun control more
  
• Favor death penalty more
  
• Be more supportive of military spend
  
• Approve of corporal punishment more
  
• Be more lenient to wife-beaters
  
• Show more sympathy to pleas of “provocation”
  

[R. Nisbett & D. Cohen (1996), Culture of Honor]

You would perhaps expect homicides in the South to be greater than the North, due, at least in part, to culture.  However, when you plot the graph, “Southern” tendency to homicide actually becomes about income inequality (r = 0.725).  

Daly believes that behaviors of low-status individuals are adaptive and economic, not just pathological.  Cultures have a degree of inertia but they do change.  Younger generations will reject the attitudes and values of their elders if, and only if, it makes sense.  Homicide rates in the US, for instance, dropped 40 points (from 100) between 1990 and the present, far less than one generation.  Dramatic change can happen relatively fast.

Some counterarguments…and their counter-counters

Nisbett (whose conclusion was that higher homicides in the South was due to path-dependent culture transmission that continued after the initial conditions no longer existed) objected to the inclusion of both black and white men in Daly’s analysis.  After all, there was so much complexity due to past slavery, current race relations and disparate income levels.  However, when Daly restricted the analysis to white men, income inequality was still a strong predictor of homicides (r = 0.68), while income was not a predictor at all.

Another counterargument is that there has recently been a general upward monotonic trend in inequality in both the US and UK.  At the same time, homicide rates in both nations have been on the decline.  What gives?  

Daly suggests that this is due to a demographic shift away from young males in both these nations with the aging population.  As you might recall, killers tend to be young males.  After the Gini coefficient for income inequality, the proportion of 15-34 year old men in the population is the best explanation for the residual variance.  If you take a look at nations with higher income inequality, the decline in homicide rate due to changing demographics is not as steep as you would expect.  Inequality essentially puts brakes on the some of the benefits of the demographic shift.

This is direct contradiction with Steven Levitt, who dismisses demographics as one of the reasons behind the decline in crime and focuses on other factors, including and notoriously, abortion.  Daly suggested that a reduction in the number of young males should result in a more-than-linear drop in homicide rate.  If you do the thought experiment of imagining a city where people are roaming around like little Brownian particles, and two men of a certain age need to bump into each other to result in a homicide, you would expect if you removed a sizable number of young males that dyadic interactions would be reduced more than linearly with the number of men removed.

There also may be cohort effects, meaning that the generation into which you are born has an impact on your later success in life (on average).  For instance, studies have shown that large cohort size (such as the Boomer generation) affect the availability of work opportunity, the level of competitive intensity, and the general amount of adversity experienced by the average person within that cohort.  It is plausible that young males in recent times, who were born into a smaller and therefore less competitive cohort, would generally commit homicides less as a group – especially when you consider that men tend to commit homicides for competitive reasons.  In Japan, when you look at the total homicide data over age ranges, you would see the same peak for young males as other nations but a flatter, more gradual drop-off.  But when you look at specific generations, you see a much sharper effect in all cohorts but which is more pronounced and taller (i.e. more homicides) for older pre-WWII generations.  When you combine cohorts, the now older, more competitive cohorts create a deceptively flatter chart.  In general, cohort effects offer another explanation for the recent divergence in homicide rates and income inequality.

 

Perhaps people who don't finish their antibiotics can feel less guilty:

Nobel Prize Laureate Kary Mullis says,
"When Alexander Fleming first discovered penicillin, his boss, Almoth Roth said bacteria would become resistant to it. It took longer than Roth thought, but it is happening...If you take penicillin, you excrete half of it. It goes down into the sewer in low, sub-clinical doses. It doesn't kill all the things in the sewer, but it definitely makes them start developing a resistance to penicillin. Most antibiotic resistance may not arise in our own bodies but elsewhere."
http://www.edge.org/documents/archive/edge315.html 

Two of Rupert Murdoch’s UK newspapers will be behind a paywall starting in June.  I don’t agree with everything that Jeff Jarvis has written on Murdoch (http://www.guardian.co.uk/commentisfree/2010/mar/26/rupert-murdoch-pathetic-paywall), least of all his description of the state of Murdoch’s “balls” (or lack thereof), but I’m in consensus with him that Murdoch doesn’t seem to fully grasp the economics of content on the web.

1.      General news content is cheap

This is especially true in the United Kingdom, where you can pick up a rag at the tube for free.  General news is widely duplicated and readily available through multiple Internet outlets.  

2.      People will still be willing to pay for content but only (and at the risk of sounding clichéd) high-quality content

I cannot stress the term high-quality enough.  It seems sometimes that the average newspaperman believes that he is producing high-quality content.  Not true.  High-quality is a portion of the Economist, the New Yorker, the Wall Street Journal, and the New York Times.  

Truly average news doesn’t always provide value for the attention it gets, much less any incremental fees.  Those papers will have to settle for the few advertising pennies they earn, the handful of paper subscriptions they’ll get from people over the age of 50, and any government subsidies they can wangle (I hope not).  Putting average content behind a paywall (ahem) is cutting your own throat.

3.      You don’t know what is high-quality until you read it – and by then it’s too late to charge for it

People will only pay for content when they believe that it will be high-quality.  The only way to ensure that is to have an established high-quality brand, of which there are truly very few (think the Economist), or to build such a brand by using “personalities” (think Paul Krugman) and/or giving away content.  

A content business model based solely on “personalities” is unlikely to be lucrative, however, since the personalities, as owners of the scarce resource, will capture most of the value.  Giving away content to build a brand has worked very well for niche content providers such as STRATFOR or John Mauldin, who keep selected content behind a paywall but give away a high proportion of their material.  Their examples point the way for owners of a differentiated “expertise” or specialized arena to sell efficiently what they know into the market for knowledge.  (This also opens up interesting possibilities for someone that can provide infrastructure for this growing tiny niche-content provider model.)  It is still not completely clear, however, whether the content giveaway model can be lucrative in the mass-market. 

4.      User interface – micropayments or distribution channel -  can help (but it’s not the endgame)

If you make it easy for people to pay, there will be more people who are willing to pay.  You show me a snippet that engages my interest and make it easy for me to pay a dime, perhaps I’ll pay that dime.  Easy is one-click, no login, no credit card number required, no visible third-party involved.  Easy is harder to do than it looks.  And you still have to engage my interest, which is getting harder to do with the flurry of socially mediated content coming my way.

Some newspapers with a credible brand will be able to take existing subscribers and move them onto a digital subscription on a Kindle-like device.  Even with a generous estimate of 2 million Kindles sold (http://digitalbookworld.com/2010/how-many-kindles-have-really-been-sold/), that’s still only 0.7% of the US population.  This is a stopgap, not a business model.     

5.      The old models are going to be defunct (duh)

Look at the data:
http://www.naa.org/TrendsandNumbers/Advertising-Expenditures.aspx 

In 2009, newspaper advertising revenues were at their lowest since 1995.  You can blame it on the recession, but they peaked in 2004 and have been sliding ever since.

As a share of U.S. media advertising expenditures, the slide looks even worse, though I would take this with a grain of salt (a lot has happened since 1949):
http://www.niemanlab.org/images/Share-of-market-4908.PNG  

Will all newspapers be dead?  No.  Is the model dying?  Look around at the dinosaur carcasses.

What’s left?  Yikes.  I hope a true re-imagining of the business model that takes into account the new economics and a return to quality “print” journalism.  We will see.

It always starts with a general feeling of malaise.  For someone who very rarely gets sick, there’s a tendency to bluster your way through it.  “I’m fine.”  “I never get sick.”  “I’m from pioneer stock.”  “I’m sure it’s nothing.”  “I'm pretending it’s not happening.” “I’ll suck it up.”  “Mommy.”

We all know what it’s like to get very sick.  It is a horrific condition.  How your whole world narrows in focus to this physical unwellness, and it throws into stark relief how little much else matters when your physical self is suffering.  When it happens, it’s a quick catapult off the mountain of Maslow’s Hierarchy to land face-down at its base, breathless and aching.  You go from pondering the social life of information to lying curled up in bed with your only wish just to be well.  We always take for granted the is-ness (health) when it’s been awhile since we’ve experienced the not-ness (not healthy).

Everyone who is not pathological wants to be well.  We share this very basic need because of our common humanity.  The corpus of human knowledge doesn’t always have the tools to make us well.  But sometimes it does.   When we see others suffering and have the tools to alleviate the suffering, we have to make a decision on whether we will use them.  What makes us human is our empathy for each other, especially when we know what it is like.  

As a nation with limited resources, it is a hard choice to take away from one person and give to another.  Or it should be a hard choice, one we don’t make lightly.  We said when this country was founded that every person was entitled to life, liberty and the pursuit of happiness.  Different political parties might put a different spin on the interpretation, but I think the founders intended this as assurance that no one would take away our birthright, not that we would depend on government and the kindness of others for these entitlements.  We are responsible for maintaining our birthright and no one else.  Our happiness and very lives are bound up in our free will, in our ability to find spaces and create, to shape the trajectory of our own lives, to choose.  Some people define poverty as the lack of choice.  

So let us not fool ourselves – every time we take away from one person and give to another, we steal options from individuals.  When we rob Peter to pay Paul, we shouldn’t forget that Peter gets hijacked.  There is a cost, a tradeoff.  This is not frivolous.  But if you do the thought experiment of closing your eyes and imagining a world with zero taxes, then 10% taxes, then 30% taxes, then 70% taxes, then 100% taxes – really, take that moment and ponder on the chaos of zero taxes and the enslavement of 100% taxes, and the relative miseries and enablements in-between – you’ll understand that the conversation is not about the extremes but about that tradeoff.  We forget this sometimes when we take a principled stance.

If nearly all people who get sick want to be well, if addressing sickness will cost an individual enormous amounts of money unexpectedly, if we as human beings have said that we must offer succor when we see others in a truly desperate state of suffering, then we need to come together and figure out how to share that risk.  We don’t always know who will get sick and how sick they will get.  This is at the heart of why we have government in the first place.  This is one of the millennia-old reasons why we are social creatures.  Risk-sharing is why we began to live in groups.

We need to make hard decisions about what we will pay for and what will be left to the private sector, but we have to go beyond as well.  Consider our creaky hulk of a health care system, a monster and a travesty.  Imagine how inconvenient and unpleasant the average health-care interaction is, compared to, say, a trip to the Apple store or a purchase on Amazon.  It burdens us all.  Health care, like education, is not simple but should be administratively simple.  We need to strip away all the barnacles that are not related to the business of providing the right care to the right patients in the right place in the least amount of time possible.  We’ve solved much harder administrative problems in other arenas, e.g. Amazon, Dell, Southwest, Li & Fung.  We have the foundational technology but we need to actually use it in the delivery of health care.  We need to carefully unravel the tangled web of regulation that inhibits innovation; offer transparent, credible and understandable information to patients; streamline and standardize the currently shoddy business of diagnosis; use expensive doctors for specialized activities (e.g. surgery, specialty, rare conditions); provide data and tools to compare quality of care across providers; provide toolkits to patients to manage their own care (from home, if possible); restructure payment around health rather than services; and establish public metrics for everyone.  

It’s obvious that the recently passed health care reform is far from perfect.  We have a ways to go to get from here to there.  But where we were going was unsustainable and law-making has always been a shaky zig-zag of a walk.  At least we are moving.  Unfortunately, human beings tend to respond only to constraints and we are now facing constraints of gargantuan proportions.

http://www.simoleonsense.com/miguel-barbosa-interviews-james-montier-part-1-value-investing-tools-techniques-for-intelligent-investing/

Some highlights:

Risk is not the same as volatility
"The idea that the risk of an investment, or indeed, a portfolio of investments can be reduced to a single number is utter madness. In essence, the problem with risk management is that is assumes that volatility equals risk. Nothing could be further from the truth. Volatility creates opportunity."

Reverse-engineer DCF to check implied growth rates
"This effectively takes the market price, and backs out the growth that would be required to justify the current price. I can then compare that implied growth against a historical distribution of all company growth rates over time and see whether there is any chance of that growth actually being achieved... I tend to use a three stage model, I use the analyst inputs for the first three years, and a trend GDP related growth rate for the terminal years, and then imply what the market implies for the middle period of growth.

For instance, at the moment the mining sector implies 12% growth p.a. each and every year for the next two decades! That is a cyclical sector with an implied growth rate double a generous estimate of nominal GDP growth. Cyclicals masquerading as growth stocks rarely end well for investors."

Think of risk as a trinity
"I don’t think of risk as a number, but rather as a permanent impairment of capital (as Ben Graham put it). Now that permanent impairment can be generated by three potential sources (which aren’t mutually exclusive). Firstly, there is valuation risk – you can simply overpay for an asset. Secondly, there is fundamental or business risk – something goes wrong with the underlying economics of the asset. Thirdly, financing risk or leverage (which no matter how hard you try can’t make a bad investment good, but can make a good investment bad)."

Process is important
"Process is the one aspect of investing that we can control. Yet all too often we focus on outcomes rather than process. Yet ironically, the best way of getting good outcomes is to follow a sound process. The research shows that holding people accountable for outcomes tends to lead to suboptimal performance, generally because they spend all their time worrying about the things they can’t control. I’d advise a far better approach to assess people on the criteria of adherence to process."

Here's his stock screen
"The stock must be cheap (with an earnings yield at least twice the AAA boind yield), it must be returning cash to shareholders (with a dividend yield of at least 2/3rds of the AAA bond yield), and it must have limited leverage (with total debt less than 2/3rds of tangible book value). I added one extra criterion, a Graham and Dodd PE (current price over a 10 year moving average of earnings) of less than 16x times. I added this is to prevent us from buying cyclicals which had enjoyed a short sharp run up in earnings, but didn’t have sustainable earnings power."

Short-sellers act as our conscience
"Short sellers are amongst the most fundamental investors you’ll come across. They understand the ins and outs of a business better than just about everyone else. They are highly skilled at figuring out poor economics when they see if. They act as acting police, helping to uncover fraud – something that the regulators used to do (a very long time ago). My own work on short selling has focused on a number of areas. In general, shorts tend to come into a couple of categories: bad businesses (i.e. poor economics), bad accounting (obvious), bad management (the guys at the top haven’t got a clue). In addition I often look for several traits, such as expensive, unrealistic growth expectations, too much debt, and poor capital discipline (i.e. needless and tangential M&A).

I also created a measure called the C-score (C is for cheating or cooking the books). It aims to look for the quantitative red flags which often accompany bad accounting:
1. A growing difference between net income and cash flow from operations.
2. Day sales outstanding is increasing.
3. Growing days sales of inventory
4. Increasing other current assets to revenues.
5. Declines in depreciation relative to gross property plant and equipment.
6. High total asset growth."

Managers can be sociopaths
"There is some intriguing work arguing that many managers share a lot of traits with psychopaths (minus the violent tendencies). The checklist I use is...essentially a screen for narcissism, I’m trying to weed out those who are so caught up in their own self importance that they wouldn’t see a problem coming even if [it bit] them on the ass."

I've been reading an Matt Ridley's enlightening The Origins of Virtue, in which there's a long discussion on the logic of cooperation.  For years now, I've thought that the Tit-for-Tat strategy from Robert Axelrod's tournament represented the best strategy.  Essentially Tit-for-Tat is:  you begin by cooperating but are quick to retaliate if the other person defects, and then you revert back to cooperating.  

As Axelrod says, "What accounts for Tit-for-tat's robust success is its combination of being nice, retaliatory, forgiving and clear.  Its niceness prevents it from getting into unnecessary trouble.  Its retaliation discourages the other side from persisting whenever defection is tried.  Its forgiveness helps restore mutual cooperation.  And its clarity makes it intelligible to the other player, thereby eliciting long-term cooperation."

In a world with a mix of strategies and at least a few people playing Tit-for-Tat, Tit-for-Tat will always beat the consistently evil.  It is also worthy to note that Tit-for-Tat only makes sense in a series of games, and that in a single game, it fails against "nasty" strategies.  Given that we happen to live in a world with a time dimension, though, this seems to be a somewhat academic point.

The dark side of Tit-for-Tat, as Ridley notes in his book, is that if two players operating under Tit-for-Tat meet each other, and one of them accidentally defects, then a continuous series of mutual recriminations begins from which there is no escape.  This is how blood feuds start and why they never end.  So Tit-for-Tat was discovered to be not evolutionarily stable.

Martin Nowak designed a new tournament where nothing was certain and everything was statistically driven, including 'random' mistakes and tactics.  The system could 'learn,' evolving over time.  In this world, a new strategy prevailed called Generous-Tit-for-Tat.  Generous will randomly forgive single mistakes one-third of the time.  To forgive all single defections (called Tit-for-Two-Tats) is to invite exploitation, but to do it randomly broke cycles of recrimination.  So Generous could beat Tit-for-Tat - but Novak then discovered that Generous could be beat by nicer strategies, but then these strategies could be beat by the perfectly cooperative strategy, which in turn could be beat by the perfectly nasty strategy.  So this was not evolutionarily stable either.

Eventually, Karl Sigmund and Martin Nowak came upon the Pavlov strategy, which essentially meant that when the player wins, he continues behaving the same; when the player loses, he shifts tactics.  It's also called the Win-Stay, Lose-Shift.  Essentially, you don't change until something is wrong.  Pavlov builds cooperation, tends to punish when partners defect, and then forgives.  But it also screws naive suckers by defecting (and winning) consistently.  So 'it creates a cooperative world, but doesn't allow that world to decay into a too-trusting Utopia where free-riders can flourish.'  In a learning world, Pavlov is evolutionarily stable.

It makes me wonder about what lessons there are to be learned here about the stability of different political systems.  Communism's principles are close to the 'perfectly cooperative' strategy.  But it is beat easily by an invasion of the 'perfectly nasty' strategy of tyranny.  If you agree that capitalism is like the Tit-for-Tat strategy, then it can be highly effective but is dominated by more cooperative strategies.  Ridley implies, however, that Tit-for-Tat, by doing a effective job of punishing, demolishes nasty strategies and clears the way for nicer (but not naive) strategies to dominate.  So basically, you should be as nice as you can possibly be without inhibiting feedback and learning.

"Thanks for your interest in our work. Your idea about environmental alteration of dopamine function by early life trauma is very interesting. While we know that both genes and environment both play a strong – and interacting — role in predisposing antisocial behavior, very little is known about how genes and environment affect the brain to bring about psychopathy. There is some work in animals suggesting that stressful events occurring early in life affect the dopamine system, but its not yet known if these effects meaningfully relate to actual human behavioral disorders. This is a question that’s being actively pursued in our and others labs, so hopefully we’ll have some insight in the future! 

Thanks very much for your question.

Best,
Josh"

I've lately become interested in sociopathy.  A strange interest you might say.  For a long time now, though, I've been noodling over the quality of empathy.  We are biologically wired for it with von Economo mirror neurons in our brain, which are the basis for emotional imagination (http://www.smithsonianmag.com/science-nature/The-Social-Brain.html).  These neurons allow us to learn from the experiences from others, literally feeling what they feel (or what we think they feel).  To be able to get the lessons without making the mistakes is a huge evolutionary advantage.  From a business standpoint, empathy with your customers helps you sell better, and empathy with your employees makes you a better manager.  Many belief systems have a Golden Rule-like dictum - "Do unto others as you would have them do unto you."  Philosophically, I believe that empathy is the basis of our humanity.  In a sense, I wasn't born human, I became human.  Or more accurately, I am always becoming human.

Sociopaths have an extremely low level of empathy by definition, far on the end of the scale.  Not all sociopaths are serial murderers.  They do tend to be manipulative, however, seeing other people as part of a system to be optimized.  Some, however, do become psychopaths.  According to one study (which I can't find right now but will link to if I can dig it up), psychopathic behavior is driven by both genetic predisposition to sociopathy and environmental factors such as childhood abuse.  From what I can recall, the paper said that genetic or environmental factors alone don't explain psychopathic behavior in the data - psychopathic behavior requires the combination of the two.

Then I saw this article:

http://futurity.org/top-stories/psychopaths-brains-seek-rewards-at-all-costs/

Excerpt:  "We found that a hyper-reactive dopamine reward system may be the foundation for some of the most problematic behaviors associated with psychopathy, such as violent crime, recidivism, and substance abuse.”

According to this article, it seems that the wiring of the dopamine system can be modified through environmental factors, such as substance abuse.  It made me think:  Is it possible that the dopamine system of psychopaths has been altered by a consistent pattern of abuse or trauma, that, when combined with genetic factors result in psychopathic behavior?  Perhaps the body is responding to abuse or trauma by increasing the amount of dopamine, as a survival tactic.

I don't know the answer but I sent an email to Joshua Buckholtz, who did the research.  Will post if he responds.

There’s a term used in philosophy and social psychology - “positivist” - which, according to Wikipedia, is a perspective which “holds that the only authentic knowledge is that which is based on sense experience and positive verification.”  This perspective is obviously aligned with the principles of science and has held sway throughout the twentieth century.

Today positivism is considered in the halls of social science as narrow, limited and really a bit antiquated.  So I find myself and my modes of thinking a bit antiquated, since I can’t manage to subscribe to deconstructionism, postmodernism and the host of other –isms that have taken over.  I understand their impetus but not their usefulness.

And I wonder whether it is time for a new perspective, one that can encompass the vast amount of uncertainty we face, in a “real” as well as emotional, psychological and social sense, while being of use in navigating the world and our lives.

I think of this in the context of externalities, or referring back to Wikipedia, spillovers of an economic transaction that have “an impact on a party that is not directly involved in the transaction.”  I had a pretty good foundational education in mainstream “freshwater” economics, one based on theory and models and which would be considered quite positivist.  In mainstream economics, externalities tend to be a side topic that is often assumed away as minor or localized.  Nowadays, however, externalities seem – well, important.  If you look at some of the arenas where the United States is failing miserably relative to socialized nations, i.e. non-university education, health care, environmental issues, these all have sizable externalities.  Socialized systems have made implicit decisions about what negative externalities are untenable and instituted a policy net of seemingly minor moral hazards.  When negative externalities become so large as to be untenable, such as the systemic failure of the financial system, then we institute moral hazard in the form of bailouts.  And then we try to install a morass of regulation to mitigate the moral hazard we’ve created, likely triggering - in a host of ways we’ve yet to discover – the Law of Unintended Consequences.

The intertwining of the global financial system is perhaps just an example and a metaphor for an even larger trend towards interconnection and increasing externalities.  After all, as we live more closely in urban mega-cities and interact more regularly over the internet and web-enabled mobile devices, it makes sense that both positive and negative externalities – that is, the impact of transactions on parties outside those transactions – would increase.  In this world, the price mechanism fails more often.  Our models fail more often.  In this world of increasing uncertainty, where positive verification isn’t to be had, the positivist view seems less useful.  This is important - once externalities gets to a certain level, it seems inevitable that our society will try to gain greater control of its constituents, to avoid inflicting the social cost of negative externalities or incent behavior which results in positive externalities.  This points to a trend towards greater regulation and loss of individual liberty.

Unless – we can think of a new way of looking at things, a mechanism to complement the price mechanism when it fails.  Some have suggested a reputation mechanism, though we haven’t attained the level of connectedness and transparency to make this efficacious.  We should perhaps start thinking about this though…