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Daryl Jace dropped out of school in the seventh grade but that didn’t stop him from becoming a successful MTT pro, a Tournament Poker Edge instructor, and a lover of learning. We discuss his unconventional route to the top, his decision to keep his family in the US after Black Friday, his approach to coaching, and his concerns about educational institutions.
0:30 – hello & welcome
3:53 – more on the borgata scandal
14:21 – burning out of turn
25:51 – ethics: talking about other players at the table
35:02 – interview: daryl jace
Sundry thoughts:
1. I think it’s probably reasonable to expect the casino to take tournament chip set security as seriously as they take cash game / pit game chip security. My guess is that they do not currently do this (although I could be wrong. Tournament chips have monetary value to the players, but not the casino. So it’s not surprising they don’t focus security on them. That does not make it right.
2. There must be limits to what counts as legitimate meta-game at a poker table. Clearly, threats and other forms of intimidation are outside the game. Drawing clear lines is harder. One dimension of this that troubles me is that much of its borders on collusive behavior. We don’t tolerate people intellectually working together on a hand at a the table, nor do we allow betting patterns that are obviously the result of teamwork. It’s not obvious to me that meta-game table talk doesn’t run into some of the same concerns.
3. I consistently hear the claim that small site X or little-known site Y has weaker players or better action or whatever. I’m skeptical of all such claims. Unless the market is broken, it goes directly against fundamental theory. And the gambling market (for these such things) seems pretty mature and well-functioning. The weakest games should invariably draw the sharks and result in an equilibrium. My guess is that, most of the time, you are getting an apples to oranges comparison, and if that you actually held constant all the variables, a game at stakes X at small site Y at Z time of day is, on average and over a period of several weeks, no softer/less soft than the identical game on Pokerstars. I’m not saying anomalies don’t exist or that markets are perfect, but I am saying that they are ironed out quickly and also probably just as likely (per capita) to pop up at the major sites as some unknown small site. There’s probably a lot of confirmation bias at work here as well. Who remembers when the small, unknown site game was tough?
matt
(1) I think I agree with that.
(2) That’s all sensible–though it also seems to me that chatting a bit about the game you’re playing is expected / reasonable / conventional. It’s hard for me to see where various lines ought to be drawn. In the 40-80 mix at Bellagio it was pretty well (if tacitly) understood that among regulars a bit of mild discussion was just fine, but that when a live one was in the game it’s best to stick to sports / the weather. If memory serves.
(3) Agreed. I also think that people aren’t pricing in the utility of using better software, the increased access to / safety of one’s money, the greater diversity of games, the fun of playing tournaments with larger first prizes, etc.
I don’t really agree with you on #3 Matt. I think, for a variety of reasons. Hard to know where to even begin. But generally, irresponsible people put their money on sites not named PokerStars. or the more irresponsibly inclined. These people, again, on average, are less likely to be monsters, winning over 2M hands at 500nl or something.
Small fish in small ponds, big fish in big ponds, actually, I think applies. Liquidity on Stars is so far and away from escape velocity, yet many of the smaller sites fail to have games running 18 hours a day, much less 24.
Um your point about confirmation bias is a good one. I think when we have a segmented market, like USA versus ROW, you are going to have two silo’s in which different ecosystems can exist without much interaction. Small Euro sites definitely get tough quickly though, as you said, once the people who like moving money around to game select really well hear of it. I am not one of them but I know a few who are dedicated in that way, fulfilling your hypothesis.
Gareth: Your point about liquidity is important — that would be a “broken” market in some sense, which I agree could/does produce the alleged results.
But I think there are pretty severe limits to this. Once *you* (or *I*) find out second-hand about these great games, they should already be drying up. It’s not like we’d be the second person to find out about them.
The fact that you don’t move money around to take advantage of this is a strong signal that the actual overall EV edge is less than is often claimed, I think. Or, to turn it around, why don’t you chase this great action?
m
I’m not sure I really believe that the fact that Gareth doesn’t chase all the minor sites is really a strong signal. I think that there’s sufficient information asymmetry and risk and non-financial costs involved in jumping about to explain the situation. Ultimately if you devote yourself to finding soft spots on pedestrian poker then you’re in effect being paid a premium for, as Nate said, crappy software and HUD nightmares, and all the other things.
I am sure that most of the ‘pedestrian poker is really soft’ chat is mostly anecdotal, and that even if smaller sites are softer on average, the actual amount of money there to be won (how much the losing players are prepared to lose before giving up) is probably not that great that often even if it can be won fast – liquidity is a powerful and important factor. However, all that said, the glory days of poker were a powerful proof that occasional big market anomalies do come about and that if you stumble across one such you should devote yourself to filling your boots.
I think early in my career I just made all the rookie mistakes. I didnt have rakeback on Full Tilt (my main site early) until insanely late in the game. Thats 27% rake back every week I didnt even know existed for the longest time. I also didnt bonus whore, which a player with a 200 to 1500 roll should have been doing relentlessly. So I think actually laziness accounts for a great deal of my initial decision not to move money, so does ignorance.
Since then I have been on Stars. It has been strategic. Even part of volume gets me closer to either SuperNova or a higher SuperNova tier. Now that I am SN I get huge benefits on my play at Stars. I also was pressing last year quite hard for Team Online, a lot of my twitter-youtube- even thinking poker podcast activity was to some degree ulteriorly motivated — I am a bit more hermetic in a vaccuum. So yeah, I was perhaps sacrificing some immediate EV for the stability of PokerStars, the SuperNova program is a bit of a positive feedback loop, the more you invest in it, the more you get out of it. I know when I was traveling at times, I wasnt putting much work into my 6m cash game and I wasnt doing that well (and my roll wasnt anything to sniff at). And I kept afloat without enormous pressure because I just get such a sick price on cash bonuses in the Stars store.
Hmmm so I guess my argument would be that I saw opportunities relatively unique to me at Stars. They didnt come to fruition. But I also just dont have to stress about my money in my Stars account and if I was going to send anything somewhere else I would have to do a ton of due diligence, which would take out of my leisure time etc
That all makes total sense, and I think it points to what I believe Nate was asserting: that the games may be softer on smaller sites, but the risk-adjusted hourly is probably not that different.
Andrew’s ring tone sounds a lot like my motorcycle accident.
I love when you guys go off on conversations like you did in the last few minutes of this episode. I always feel like a fly on the wall listening to some stuff I would never have heard had it not been for poker. Ha, I cannot believe you guys let me be your friend.
Props to Daryl for challenging Nate on education and big props to Nate for shining in response. This is clearly one of his many wheelhouses. I got the image of Andrew enjoying the back and forth between Daryl and Nate as he does at a debate tournament. Both had great points. I call it a draw.
Thanks, Carlos!
Andrew also gets full marks for restraint re: education. In hindsight it’s somewhat embarrassing that I talked so much about a subject that Andrew knows more about, is better acquainted with, and has invested more of his life in (than I am/have).
Yeah, it was an interesting discussion. I’m only tangentially conversant with the US education system, but a lot of what was said applies to the uk, too. I am somewhat optimistic that education skills are becoming more recognised and valued relative to research right now, although as Nate said, it’s certainly starting from a fairly low position. That said, My experience is that with rare exceptions, most academics I know well are pretty committed to teaching as well as research.
However, on the whole I’m less concerned about undergraduate education than I am secondary school level, where the evils of over testing are at the heart of much that is wrong, I think, related to the social function of the system, rather than the development of individual potential.
Postgraduate education is also arguably a major mess, with the tenure system (which doesn’t quite exist in the uk) and reliance on adjunct teaching needing an overhaul. It is there that I think that you can make the best case that the teaching is geared towards making researchers where still only a fraction can possibly get jobs as academics.
My issue with school is on a more micro level. Every year, I was faced with 15-16 year old 8th graders who didn’t know multiplication facts. When a person repeats a grade multiple times and still doesn’t learn the material, there is clearly a problem big enough for everyone to get a slice of the blame. The education field has too many cute ideas to fix this and too few results.
It made me laugh that #1 and #2 on the pokerstove wish list were pretty much the most complex things imaginable. Starting a bit smaller, the first extra above simple straight equities that I think would be useful is the ability to see what a given preflop range looks like on a given flop texture – broken down into 15% top pair, 25% no pair, etc etc. It would be particularly useful for trying to think about the sort of ‘how much of my range do I need to continue with’ style thinking that you’ve been talking a bit about recently.
If I’m understanding correctly what you want, a whole bunch of existing software already has this capability. Flopzilla and PokerCruncher immediately come to mind, and I think you can do this in ProPokerTools as well.
Cool, thanks. I think you’re right about flopzilla, which I had seen, but as a mostly non player decided I couldn’t justify buying. I’ll check out the other two tools you mention.
Back to education, I believe Mark Twain said, “Don’t let your schooling interfere with your education.” Your guest gives candid feedback on the lack of engagement in many middle schools. He’s done a great job of pursuing his own education. Grist for the mill.
As for coffee and chocolate, don’t forget fair trade. Organic is good too, but fair trade is critical if you don’t want to support child slave labor. In those countries education can mean a lot.
Good discussion, gentlemen!
Pat–
Just FWIW, one (libertarian/conservative) economist’s view of fair trade:
“By splitting up the market, we are institutionalizing especially poor treatment for one class of workers. Furthermore the high profits from price discrimination imply that producers will be keen to continue such segregation rather than end it.
How about a genre called `Exploitation Coffee’? You pay less, and they promise to treat the workers especially poorly. That wording is a less effective marketing ploy, but that is what quality differentiation and indeed `fair trade’ boils down to.”
http://marginalrevolution.com/marginalrevolution/2005/12/who_benefits_fr.html
This was eye-opening to me. The whole (short) post is worth reading. Of course, there’s still the simple point that people care not just about the overall economic impact of what they do (e.g., buying/supporting fair trade) but about the local, direct consequences of their decisions. That said, this sort of argument made me stop going out of my way to buy “free trade” stuff.
Thanks as always for listening / commenting.
Hmmm, if the argument is that fair trade is ‘not enough’ , and might have unintended consequences, then fine, but the argument that fair trade might inadvertently prevent some magical progressive switch to decent wages for all strikes me as convenient hand waving of the worst kind.
Zizek is quite good on this, too (phrases I don’t imagine saying often for $200…) http://thesocietypages.org/socimages/2010/11/04/slavoj-zizek-on-the-problems-of-ethical-consumption/
Ian–
That’s not the argument. The (largely empirical!) question is: what happens when you split up a market? And the answer appears (often / usually?) to be: the bad part of the split gets worse. Disagree with that if you want, but that’s (part of) the argument. The point is just that promoting ‘Fair Trade’ coffee is functionally equivalent to promoting ‘Extra Exploitation’ coffee or whatever.
FWIW this is relevant to this thread in more ways than one–think about the tenure-track/adjunct differentiation in the academic job market.
Thanks for the Zizek link (I don’t often find myself reading him).
Yes Nate, I get that the central thrust is an item of orthodox economics (although I would not yet cede that that part of the argument couldn’t be subjected to scrutiny). But even accepting that point, then what are the consequences of it? Should we do nothing (a false dichotomy, fair trade or nothing) with the article’s suggestion that developmental optimism might ultimately solve things. Or should we not take it as a sign we need to find better solutions.? If you take that latter point as the conclusion, then marginal revolution and zizek are largely on the same page, I think.
Agreed that we ought to subject the various results of orthodox economics to scrutiny!
I also agree that we shouldn’t shrug our shoulders and accept the status quo. (Recall that you’re talking to someone who has simply opted out of the eating-factory-farmed-meat system!) Surely the right question to ask is what the better solutions might be. Right now I see the major competing options as (i) drinking status-quo coffee and (ii) not drinking coffee. I’d be grateful for any proposed option (iii).
And yes, the adjunct/tenure track problems I alluded to up the page are direct parallels (speaking as a fair trade coffee grower, so to speak).
It’s possible – likely in fact – that a lot of this is owing to my own economic ignorance, but on my reading that Cowen post is not very convincing. He asserts a lot with very little warrants given for his claims. If I understand correctly, he makes two main points:
1. Fair trade may forestall better solutions (Starbucks voluntarily and unilaterally driving an across-the-board revamp of the coffee market)
–
2. Fair trade -> market segregation -> price dispersion -> wage dispersion -> worse wages/conditions for non-fair trade workers.
I’m not familiar with the McDonald’s example nor the term “development optimism”, but (1) seems fanciful to me. To the extent that it happens, I would think it would be a response to consumer demand for fair trade coffee.
As for (2), I probably don’t grasp his argument fully, but it doesn’t seem obvious to me that lower profits for owners translate to lower wages for workers. I would think that prevailing wages in the region would drive wages and that if owners could get away with paying less they’d already be doing it. In other words, I wouldn’t think there would be room to slide down as a result of decreased profits.
That’s not to say that I’m strongly in favor of the whole Fair Trade movement, just that I didn’t think Cowen’s post is well-argued.
I don’t read the post as a sustained argument but rather as an antidote to wishful thinking from pro-fair-trade folks.
A key paragraph, as I read it: “It is well known that price discrimination can either raise or lower the average level of prices, but it does increase price dispersion. We can expect it to increase wage dispersion as well. It is harder to predict whether price discrimination will raise or lower wages at the bottom level of the scale.”
Of course, it’s a significant step from price dispersion -> wage dispersion, but IMO it makes sense and agrees with what I know of economics. And I imagine that Cowen is reporting it either as a well-established empirical result or something that makes a lot of sense in this specific situation.
I’m skeptical about (1) also, but I’m not sure you’re putting the point fairly. The example Cowen gives is McDonald’s demanding better treatment for cows and chickens. Of course I don’t think that the better treatment is enough, but this is surely an improvement that doesn’t require a total market overhaul.
Re: “they’d already be paying less if they could”–well, they’re paying what they’re paying in a less-dispersed market! Also, the relationship between profits (n.b. that decreased prices != decreased profits) and wages is well-studied and very complicated. I’m fairly sure that the prevailing view is not “workers get paid what they get paid and variations in profits affect capital holders solely.”
Not that your view is so simple, but I have a 3p meeting and have had to write this comment quickly.
I have econ on the brain these days–I’m reading Piketty’s book, partly because there aren’t very many economics crazes and I don’t want to miss the chance to be a part of this one.
(1) Both markets (low and high quality product) profits increase in the existence of the other product, so it is feasible that the product differentiation can hinder other potential market solutions.
(2) Wages aren’t really ever going to shift down, nominal wages are extremely rigid so what will likely happen as demand tapers off is they just lay off staff, but then the flip side is that these workers are (I am assuming) extremely productive relative to their wage that the actual effect on them will be negative. Lower profits don’t fall squarely on the owner, as the firm will reoptimize to the new conditions it finds itself in, what was once profit maximising may no longer be, that could include lowering production, selling intermediate goods that are excess to projected demand, or even leaving the market entirely.
I agree with Nates link in that Fair trade branding is really just product differentiation for perceived quality and as such is able to charge a higher price and have higher profit (considering the relatively low cost increase due to wages). Maximal differentiation between brands actually helps both Fair Trade and Unfair Trade Profit Margins however.
I don’t agree at all that wages will be lowered, but he is much more qualified to assert that so I am probably wrong on that front.
The other unintended effect of raising prices is that demand goes down, so less workers are employed.
Development Economics isn’t a focus of mine so I’m not entirely sure how much of what I said is correct, however I have some classmates who specialise in it and I will ask their opinions on it.
Thanks for these comments. I’d also be grateful to know what your classmates think of this issue.
Nate quotes Cowen:
And Nate writes:
I think this is a dreadful argument. Here is why: The presumption behind `Exploitation Coffee’ is that if you treat the workers extra-badly, then the price of coffee per pound will decrease, and you can pass on part of this savings to the consumer. The problem with this presumption is that this is not how market work: if it were possible to treat the workers worse and cut costs, then the market would have done this already: this is how capitalism works, because the objective of publicly-traded companies (and AFAIK all major coffee producers are corporations) is to maximize the share price and finances of the company.
We therefore see that the reason that the workers are not treated worse is that it will *increase* the price of coffee: either the poorly treated workers will quit, or they will go on strike, or revolt, or the government will step in, or any other such option. Regardless of the particularly, due to the way that corporations work we know that coffee workers are treated the absolute worst right now, in the sense that if you’d treat them any worse, the price of coffee would go up.
We now see why Cowen’s argument is not only wrong, but utterly cynical: If fair trade coffee would not exist, coffee workers would be treated in the worst way they could be treated in order to maximize the price: which Cowen’s camp is just fine with: they advocate this kind of behavior, perhaps because Ayn Rand said that this is the only ethical way to behave. And then when some people come and say that they’re **willing to pay more** in order for the coffee workers to be treated better (even Rand would sign off on this!), Cower tells them, under faulty manipulative logic, that by doing this they’ll make the treatment of some workers even worse!
You say that “this is not how markets work,” but there appears to be research suggesting that differentiating a product has effects that include price and wage differentiation. Do you simply deny that this research is accurate?
You say that “this is not how markets work,” but there appears to be research suggesting that differentiating a product has effects that include price and wage differentiation. Do you simply deny that this research is accurate?
I definitely agree that in general differentiating a product can have the effects you stated and others. But in this particular case we’re not taking about just any product, we’re talking about a very specific product, whose production is intensive and requires manual labor in 3rd world countries with scarce work regulation and labor laws. According to my theoretical understanding, in such a market, workers will be treated the absolute worst that they could be treated in order to minimize the cost of production. As long as that is true, I don’t see any way to claim that fair trade coffee does not improve the treatment of the workers producing it: they clearly cannot be treated worse, and the price differential provides an economic incentive to treating them at least marginally better.
I should disclaim that I don’t know the specific literature on this topic, so I guess maybe I’m missing some very specific details in this class of market. But I noticed that even Cower doesn’t try to claim definitely that eliminating fair trade coffee is likely improve the conditions of coffee workers. All he has to offer is a bunch of weasel words. He says that ” It is possible that if only a single kind of coffee can be sold, the market would opt for the more expensive coffee, involving better treatment of all workers. Even if you don’t expect this today, it might happen in a few years’ time.” (Emphasis mine.) He goes on and on with the weasel words. All I can say is that I haven’t seen one convincing arguments for why fair trade coffee is bad for coffee workers, even just in the long run, and I neither have I seen any convincing refutation of the obvious arguments that explain why fair trade coffee is good for these workers. I’ll be interesting to see any convincing arguments for this view.
Sorry but I really don’t agree with all of the assertions you are making here,
“If fair trade coffee would not exist, coffee workers would be treated in the worst way they could be treated in order to maximize the price”
This ignores the strategic element of price setting, quality differentiation can be shown to be increase profits for both firms that are low profits and those that are high profits, both firms profits are actually increasing in separation, the linear city model is the most basic model that shows the strategic advantage product differentiation. there is also the general vertical differentiation model that shows that given fairly relaxed assumptions (coffee consumers consume one or the other of the products, and that the demand is sufficient that lower quality products capture the whole market, which is reasonable given existence of both.) that firms choose to differentiate maximally according to quality even with similar cost structure (or with asymmetric cost structures).
“And then when some people come and say that they’re **willing to pay more** in order for the coffee workers to be treated better (even Rand would sign off on this!), Cower tells them, under faulty manipulative logic, that by doing this they’ll make the treatment of some workers even worse!”
again, both fair trade and non fair trade coffee producer profits increases in the existence of the other, fair trade coffees profits would fall if non fair trade products no longer existed and vice versa, it is therefore perfectly rational that these incentives could end up preventing across the board increases in worker conditions/wages. Both types of firms profit are increasing in the difference in product quality, so it is perfectly reasonable that low quality workers could end up in worse conditions than they would be in in the absence of fair trade products in order to lower price below what would be set in a non differentiated market.
duggs,
I think we have some radical misunderstanding. I think I understand what you wrote about price setting and differentiation, but I don’t see how this relates to workers’ wages. I’m claiming that workers’ wages are a function of how much the corporation has to pay them (i.e. some effective minimum wage below which production actually starts to drop or government steps in, etc). And I’m claiming that, therefore, worker’s wages are not at all a function of the price at which consumers but the coffee. Therefore, almost any argument that depends on the price at which consumers buy the coffee seem totally irrelevant to this discussion.
Specifically, I see how quality differentiation increases profits for the firms, but I don’t see what this has to do with the workers’ wages and working conditions.
It *is* possible that product differentiation might cause some workers to lose their jobs (or create new jobs): I wasn’t claiming anything about this. But I do claim that the wages of those workers that actually are employed does not depend on the price at which the product is sold to consumers in a capitalistic corporate-controlled market.
Mobius–
Am I right that a key premise in your argument is that there’s no room for workers to be treated worse than they are before/without ‘fair trade’ coffee? That’s a very strong assumption and I don’t think there are many conditions under which it holds, even when employers don’t care at all about the well-being of their employees.
I’m certainly not saying you’re wrong, FWIW. Economics is complicated.
Yes, that’s basically what I’m claiming, with some minor (but conceptually important) caveats. I don’t think this is such a strong assumption. After all, if workers could be paid less, then wouldn’t the corporation pay them less?
My caveat is that you need to properly define what it means to “be able to treat a worker worse”. For example, suppose that paying the workers 5% lower wages would be totally fine 99% of the time, but will cause the factory to burn in a riot 1% of the time. In this case, it might not make economic sense to take that risk because it would be -EV. So I’m including in “the ability to pay the worker less” all of these factors that cause loss of productivity. Including the risk of riots, other loss of productivity, fines due to government regulation, and the rest.
Under this caveat, I think that it’s pretty obvious that third-world unskilled workers are paid the minimum possible. Is it not obvious? I’d love to see any examples to the contrary: I’d honestly be surprised to see even one example where a global corporation pays its workers more than the minimum needed.
(Note that the case of, say, Adidas, is covered by my caveat: Adidas stopped production in sweatshops because it was uneconomical to continue: if it paid the workers any less than it does not, people would avoid buying its products.)
Great episode, Daryl is a pretty interesting guy. For anyone looking to watch his videos on TPE i recommend his exploiting tendencies series.
Thanks for this tip! Recently started watching his videos and enjoyed what I’ve seen. Looking forward to that.
Really enjoyed the episode, for many of the same reasons as Carlos.
I think this blog is very high quality but it is greatly improved by the comments of Matt Glassman.
I enjoyed the discussion of Fair Trade shopping. There are many more reasons to doubt the efficacy of Fair Trade shopping than the simple point raised by Cowen and suggested by Nate. In theory, if Fair Trade did benefit workers, other employers would mimic it in order to remain competitive for labor (and remain in business). Empirically, it appears these higher prices benefit retailers and marketers (in mostly western, developed nations) but not laborers. I say this as one with a free-market bias. I could be wrong.
To Ian’s point, I offer two suggestions. First, join team Nitcast. Purchase cheap coffee and donate your savings toward effective charitable organizations. You’ll likely have a greater impact for the contingent you hope to aid. Second, embrace the labor/capital dynamic. Farmers in the U.S. used to be dirt poor, subsistence laborers. Today they are well compensated and often wealthy. The reason is capital. You can earn pennies per day picking food by hand, dollars per day picking with basic tools, … up to hundreds per hour picking with sophisticated tractors. Cocoa laborers can experience the same dramatic rise in their value, but only with access to capital. That takes functioning government and markets. In other words, it takes a political solution.
I’m thoroughly flattered by this comment. Thank you.
Kept waiting to hear the word “signalling” appear in the education discussion (Daryl did mention prestige, which is kind of close). I guess when your favorite tool is a hammer, you start looking for nails everywhere (or something).
Cool episode.
Plus 1.
Great recent discussion on the value of college (and some education in general) where Bryan Caplan describes and defends the signalling theory on EconTalk with Russ Roberts. Google it.
Another important point about Daryl’s valid criticisms of education (and other criticisms) is that many of these problems are localized, not generalized. The recent news about the improving national graduation rate included data on how it happened. Turns out a majority of dropouts were produced by a small number of schools (something like 12%). Part of the ridiculous No Child Left Behind which seems to have worked, is that it flipped the traditional funding model. In the past, failing schools were given more money to try to improve them. In the recent decade, failing schools have been defunded and closed, and the dropout rate has been lowered. There has been way too much inequality in the schools with very urban and very rural schools being of poor quality and producing lots of dropouts.
Indeed, I listened to Bryan Caplan on EconTalk. I’m a pretty regular EconTalk listener, but I especially sweat Bryan Caplan. Perhaps the most articulate and through champion of the signalling-model-of-education and open borders out there.
Also, I feel like I’ve read so much about (mostly against) Piketty’s theses on econ blogs that it’d be wasteful to slog through the entire 600 pages. Or maybe I could relearn how to read faster than a 6 year old. Either way.
That’s interesting. I certainly read plenty of Caplan, but I often find his reasoning sloppy. He’s not one of my ten favorite economist bloggers.
I certainly don’t agree with most of Piketty’s conclusions, but there’s so much discussion around the book from people I like to read. Usually in this situation I “read the book through its reviews” because life is short, but in this case I thought I’d actually read it so that I could understand the issues as well as possible. This is also a special situation because I don’t know anything about macroeconomics and I’m viewing this as a chance to introduce myself to the subject a bit more.
I’ve held a whole lot of political views in my life, but I’ve never thought that there was something wrong with inequality *qua inequality*. There’s something bad about people starving, people exploiting each other, and so on, but I simply don’t feel the pull of the idea that the bare fact of income or capital inequality is bad. Sometimes it’s easiest to give a book a fair shake if you either really feel its author’s basic intuitions or if you really don’t. This is the latter sort of book, and I’m very happy I decided to invest time in it. Lots of useful research (some of which is questionable, but I’m happy so much systematic work was done even to serve as a target).
I’d love to see some examples of Caplan’s sloppy reasoning. As someone who has done little in the way of thoroughly reasoning through economic and/or philosophical arguments, I’m pretty likely to miss his missteps. Add to that a tendency to feel many of Caplan’s basic intuitions and I probably give him even more than a fair shake. So make like Abraham and smash my idols already!
FWIW I share your intuition that inequality qua inequality isn’t bad. Oh, and I doubt I even have 10 economists whom I read regularly. Maybe it’s time to grind speed reading exercises?
Hmm.
Well, here I think he’s taking a really uncharitable view of his opponents’ positions that leaves him mostly reciting his view instead of really engaging with anything:
http://econlog.econlib.org/archives/2011/03/an_urgent_defen.html
I leave a (not perfectly articulate) comment on the post below. Rereading it now I notice that Caplan seems not to even be discussing the view he claims to be discussing, because he isn’t talking about “negligible probabilities” of error/deviation:
http://econlog.econlib.org/archives/2010/06/escape_from_the.html
I’m of course not saying that Caplan doesn’t do good work or that his blogging isn’t valuable. I’m just saying that it’s been a while since I was surprised by being disappointed at his writing. (Does it work like this for you, too? A couple times you say “hmm, that’s not up to his usual standard.” Then a couple more times you say “gee, maybe he’s a bit quick to hit the ‘post’ button.” Then after a while you say “OK, this guy just isn’t a consistently careful thinker.”)
FWIW this is also relevant to the podcast in other ways: I think that Caplan’s work would be a whole lot better if he had been a better student of philosophy / the humanities at some point in his life.
Two small points:
(i) I’m generally skeptical of people who devote lots of their intellectual lives to making the same points over and over. I’m actually not sure how much Caplan fits into this camp, but I he sure does seem to spend a lot of time reciting points about open borders and drug decriminalization. Of course advocates have to spend time advocating, and again I might be overestimating how much time Caplan spends doing this–but still. This is one pretty reliable way to distinguish talking heads from careful thinkers.
(ii) Caplan often reminds me of a very bright undergrad. Quick in argument, good factual knowledge of a given domain. I wouldn’t want to bet against him in a debate. But insufficiently metarational, too happy to win the argument, too happy to think that his work is done once he’s won the argument. Again, my own sense of him could be wrong, largely because I haven’t read him consistently for the last two years or so.
Nate,
Your later points seem more correct than your first criticism of Capln (sloppy thinking). His books are broader than his blogging. He is probably best described as a sociologist. Most of his books are reviews of the meta research by sociologists and economists. This is my concern with him. These areas are about human behavior, not math. I am not sure empirical research in these fields meets the standards of scientific research. Lots of surveys and reports based on poorly designed data aggregates (GDP, income, etc).
Still, on areas where he has put in some theoretical or philosophical time, like signaling in education, he seems very impressive to me.
There are blogs that lose my attention after a while, but it works differently for me. I wouldn’t say that I get progressively disappointed by the quality of a blogger’s writing or reasoning. Hell, I’ve never taken a formal econ course so I’m never even a lock to even understand a given econ blog post, let alone criticize its reasoning. The writing can be bad (up to a point) as long as the idea is good. It’s more like I get progressively disappointed by the topics a blogger chooses to write about. It happened with Al Roth’s blog, but I might give it another shot now that he’s writing about the college admissions market. It was happening with Robin Hanson too (my eyes insta-glaze over for em society articles), but his last few posts have been more up my alley. If I’m being honest with myself, I think I read these blogs out of habit and hedonism which gives me heaps of critical blind spots.
Anyway, after trying to read those two posts with a more critical eye, I agree that they’re toward the left end of the Caplan blog post quality bell curve. The first one he all but admits that he’s engaging in the mood affiliation fallacy. Tyler’s giving him a major case of the FEELS. Also, the last line kinda borders on catty; the concept of otherwise serious econ profs being engaging in some sort of cat fight makes me giggle. Again, reading for hedonism.
As for the second post, I agree with Caplan that this theorem seems like make-work for game theorists. I’m not really sure how the existence of this type of equilibrium in a certain type of game _explains_ the policy/life recommendations he makes (even though I agree with those, but for different reasons; I think a moral intuitionist could come up with better ways to make a normative claim about crime and punishment without having to resort to game theory). More like this equilibrium _inspires_ those recommendations. Like reading about Kitty Genovese might inspire me to bluff more in multiway pots, it doesn’t explain why it’s right or wrong.
Agree with piefarmer that Caplan is at his best in the subjects where he’s really focused of late (open-borders and signalling model of education).
RE Piketty –
Imagine a world where there’s one very, very rich person and everyone else is at a bare subsistence level of wealth/income. I suspect we all think that is undesirable? It also must be terribly unstable!
Imagine another world where everyone has equal income and wealth. I think that’s bad as well because there is insufficient incentive to excel.
So, there’s probably a happy medium somewhere between. Where is it? Who knows?
But, when we already have highly concentrated wealth (from a historical perspective) AND inter-generational returns to capital outstrip taxes and inflation then we are headed more towards world #1 where wealth is concentrating in fewer hands. From poker we all understand that small edges compound over time. 8)
First order morality aside – this is an increasingly unstable situation. Social order will only brook so much inequality (see French Revolution, etc.)
Two other things I forgot from is episode:
1) Nate’s comments about electric kettles. I think that due to our tea drinking in the uk, the idea of not having an electric kettle in the kitchen is pretty much unthinkable and almost always has been, as far as I’m aware, to the extent that I only discovered comparatively recently that this wasn’t a universal phenomenon.
2) Andrew’s comment about poker snowy and multiway pots. Am I right that there’s no guaranteed Nash equilibrium in non-HU pots? I’m starting to get a strong sense of déjà vu, so maybe I’ve already said this previously, but I recall Aaron Brown (author of The Poker Face of Wall Street, and potentially a great podcast guest, I think) saying that multiway pots were analytically the most interesting thing to him. I suppose maybe Ike as a HU specialist is
less interested in them than preflop flatting, but I guess they might be another analytical dragon to be slain, for similar reasons (complexity) to flatting deep preflop. Anyway, given that, it doesn’t surprise me that snowy might be more erratic in multiway situations, possibly because we all are.
Ian–
I think you’re right about multiway pots. I’m very much not an expert on this, but I think that you lose a lot of theorems and techniques when you don’t have Nash equilibria, so the various dragons remain very much unslain.
One issue here is that analytical work gets harder; another issue is that analytical results diminish somewhat in relevance compared to what the human brain can do over the felt in these situations. Of course I’m all about combining analytical work with on-the-fly reads and psychology and so on, but in multiway pots there are so many little tendencies and events that can completely change a situation that I have a hard time thinking, e.g., of how I would go about writing software to help me in these situations.
Anyhow. These are largely questions for people who know more math (and poker) than I do. Thanks as always for the comments.
Yes, I think it’s a pretty solid sign of what draws me to poker that I’m more interested in musing about the theoretical implications of this sort of thing than I am interested in ‘good enough’ on the felt heuristics.
If memory serves, someone commented on this blog blowing my limited game theoretic knowledge out of the water after assumed there would always be a nash equilibrium, and stated that with multiple agents nash equilibria is not assured, and if there were 2 or more mixed strategy equilibria (which any nash would be in poker) then there would be infinitely possible mixtures of these.
I guess Mobius’s last post hit the depth limit for direct replies.
There’s at least one sort of case where workers don’t get paid the minimum possible: when quality would go down to a suboptimal level if they did. I take it that this is one of the mechanisms underlying the model Cowen and others suggest. Splitting the market causes the quality of the worse product to go down. I think there are many examples of this (if better restaurants didn’t exist, the worst restaurants would improve and thereby probably pay their staffs more). See Duggs’ post for actual elaboration of this point.
More generally, it’s not generally true that employees get paid “minimally” in the sense of “minimal” you describe. I take it that it’s a very difficult empirical question how profits get divided between capital-holders and workers (indeed I’m slogging through a 700-page book largely concerned with that question now). I imagine that coffee markets for a lot of reasons involve very low rates of employees capturing firm profits. But your argument proves too much–as far as I can tell, it would entail *mutatis mutandis* that you and I are both paid “mimimally” in the sense you describe (so that no movement to consume high-quality products in our industries could lower our salaries, because they’re already minimal).
All I’m trying to do here is articulate where I don’t understand your argument–I’m really really not an economist. Also, I’m hoping that Duggs finds time to ask some of his colleagues…
Mob I’ll quickly reply here, I can see what you are trying to say, but i do think the argument about the lack of relationship between profitably/price and wages is a pretty extreme one. What you are advocating is basically a wage floor, but surely that is more applicable to western countries which mostly all have legally enforceable minimum wages. You can argue that the bargaining power is disproportionately moved to the wage setter from the worker due to a lack of competition in the job market, but to state it is zero seems extreme to me.
More over we can model this scenario in a two stage game where 2 firms signal quality to the market (in this case according to how they set worker conditions) before setting prices, it can be shown that as they are strategic compliments low quality firm will set conditions lower than they would in the absence of differentiation. i.e. the low quality firm would create a better product in a vacuums, or in this case treat its workers worse. I haven’t taken any in depth courses on wage setting models so unfortunately I’m not the most knowledgable person to debate this with you.
Nate, sorry I will ask people about it, It is just currently the middle of exams so I haven’t seen any of them lately. Hopefully should see some of them in the next few days.
sorry about the very late response, I did ask around but then got sidetracked by exams, one friend of mine who focuses on developmental economics and informal market sectors was very very sceptical, not just for the issues i raised, but also because of the verification costs issue. in short the high cost of verifying worker conditions makes it very difficult to give sufficient incentives for companies not to claim fair trade without actually meeting the standards. another issue he raised was that the lack of a single standard actually hurts worker standards in the fair trade companies, as the verifiers of different standards are competing to claim that market they actually lower the requirements in order to undercut the market, so the standard of worker conditions required is driven lower and lower, furthermore the standards costs decrease, and attractiveness increases in lower/less stringent verification processes, which again lowers the actual gains from it. given all of this he was very sceptical that fair trade was actually welfare increasing overall. again he is only a masters student like me, so there could easily be holes in either of our arguments.
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