Author: Santi

Charter Cities and Genetic Algorithms

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My dear friend Mark Lutter has had me all riled up about charter cities for a few years now. I link to a new podcast from USFQ’s Aula Magna magazine on the subject that gives a very short introduction to the topic. After recording the podcast I returned to preping a class on genetic algorithms and got all riled up because I saw a connection between the two I hadn’t seen (clearly) before. Charter cities can be real life genetic algorithms for institutional innnovation.

Genetic algorithms are a form of machine learning that searches for solutions to problems by trying out a variety of solutions. As the name implies they are based on the evolutionary algorithm of diversity-selection-amplification to adapt solutions. In a genetic algorithm a population of of possible solutions to an optimization problem is instantiated and solutions with high fitness and reproduce (using cross over, mutation, and other genetic operators) to create new populations of solutions. over enough iterations genetic algorithms are goods ways to search for solutions whe the solution space is complex and poorly defined, which is probably what institutional space looks like.

Now imagine a country that is designed as a genetic algorithm and charter cities within the country as posible institutional solutions. The constitution of the central government is the overall framework of the genetic algorithm and the diversity of institutional arrangments at local government levels (i.e. different charters) are posible solutions.

Viewing charter cities in this light, the interesting question now turns to the rules of the central government and not necesarily to the rules implemented by the charters themselves.

A few of the questions that have begun to bother me follow. What country level rules lead to convergence, or at least continual adaptation to better institutional arrangments at the local level? What should the constriants be imposed on the charters for better, faster convergence and learning? Zoning and housing restrictions would be a clear impediment to convergence as they limit foot voting. If we view charter cities (and fiscal federalism) as an experiment to search for solutions to institutional arrangements for governance, can we use the criteria used by IRB boards as the minimum set of requirements that informa the central government constitution/framework where this experiment takes place?

The statistically diverse curriculum

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It’s important to present undergraduate students with a wide variety of view points. But in my view the diversity of viewpoints is a means, not an end in itself. At the very least, it’s a path to learning how to evaluate arguments, and broaden sensibilities in a very Oakshottian way.

It seems obvious to me (and perhaps I am mistaken) that curricula should be structured around considerations other than mere diversity. After all “fields” of scholarship have formed around the types of conversations that develop when scholars try to learn about some aspect of the universe. There is a structure to knowledge and how it is generated, if only because of the particular history of particular inquiries about the world.

Yet, somehow in every curriculum conversation I have been involved in, I get significant pushback from those that view diversity as an end itself. To put the matter to rest I present the statistically diverse curricula. For the liberal arts core, let’s randomly assign courses and readings to each student such that the average student has the maximally diverse curriculum. The average student will be well rounded. We can even draw courses and readings from some weighted distribution to avoid a bias stemming from viewpoints that have been the most dominant throughout history. I doubt this would satisfy, or even make sense, for those that defend diversity of viewpoints as an end in itself. If the statistically diverse curricula is a no go, then diversity of viewpoints as an end in itself should be a no go as well.

Spontaneous Emergence of Property Rights in the Classroom

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Last week I posted about Bart Wilson’s talk on his new book “The Property Species” and promised to share a class demonstration about the emergence of property rights in the classroom. But first let me tell you why I did this demonstration.

When I was a student I hated assignments that go through the motions of learning, but provide no learing. Building a paper maché volcano, while fun for some, teaches little about volcanic eruptions. Shaking and opening a soda bottle (pop?) is more instructive: it’s the fall in pressure as the bottle is opened that leads to the rapid release of the gas disolved in the liquid, the same thing happens to magma. And while being able to algebraically solve for the equilibrium price given supply and demand functions is a very necessary evil (to a point), it teaches little about the process of competition and price formation.

This is why I was reluctant to having my first Intro to Economics class write their own version of “I pencil”, quite a few years ago. Driving the point of how largely anonymous exchange and specialization, coordinated peacefully through property, prices, and profits and loss makes the modern world possible is very important. But how much can you really learn about this by watching and transcribing an episode of “How It’s Made”? For most students, not much at all. Partly in dread of reading and grading 80 versions of “I whiteboard marker”, or “I toothbrush”, and partly following my conscience I decided to throw in a twist.

The twist may seem evil and arbitrary at first. Students still had to choose a good and write their own version of “I _____” , but if two students wrote about the same good I would divide their grade by 2. If three students wrote about the same good I would divide their grade by 3 and so on. I did not give any additional prompts about how they should sort out potential conflicts or coordinate amongst themselves. These were just the rules of the assignment.

Without this seemingly arbitrary grading rule, goods to write about were not scarce. By changing the grading rules, goods to write about became scarce. While there are many more goods to write about than students, certain goods stand out in the mind, and extra effort must be devoted in thinking up a new good, and finding out if someone had already looked around their room and chosen the same good. Now students also had to coordinate amongst themselves or run the risk of a fairly severe penalty to their grade.

As expected, I have never had to enforce the the harsh grading penalties (anecdotal, I know). Students always find a way to coordinate and establish property rights over suddenly scarce goods. The point of the assignment was no longer about I pencil, but about the emergence of property rights and social coordination (and hopefully a little bit about I pencil as well). I didn’t act as a central authority that imposed and enforced property rights. I merely changed the incentives and constraints, hoping that the costs of coordinating and setting up agreements was smaller than the costs of not doing this.

When they turned in their assignment, we discussed how they had actually coordinated. Over the years I have seen multiple ingenious mechanisms. From class forums using the university platform, to a simple spreadsheet circulated amongst the students via email or WhatsApp. In the good old times before the pandemic they would sometimes meet after class and sort it out in person. Sometimes they created a common pool of goods and one of their classmates is chosen to distribute them among their peers. Leaders emerge to fill various roles from dispute resolution to registering claims. How this person is chosen also varies from class to class. Some students volunteer, others have it thrust upon themselves. The use of a homesteading rule is fairly common, first to choose gets the good in cases where there are multiple claims. In class we discuss why they use this rule, rather than last to choose gets the good, and the problems this alternative would entail.

I have only had one instance of a strong and contested dispute among “property owners”. That semester students had to not only write but present their work. Two groups (that semester “I _____” was a group assignment) wanted to do a good they thought would be amusing to present in class. I’ll leave it up to your imagination what good students in their late teens and early twenties might find to be amusing to present in class. The two groups of students underwent a rather complicated dispute resolution system with the rest of the class playing the role of arbiters of the multiple claims to the same good. Neither group wanted to budge, but one group ended up ceding the rights in the end.

What I like about this little classroom demonstration is that it makes it easier to teach the emergence of institutions as the products of human action but not human design. Order without design is a difficult concept to grasp, but maybe even more importantly it is a concept that is difficult to accept. But after this demonstration, not anymore, students experience the emergence of property rights. An added bonus is that in this case scarcity is clearly a product of the relation between their minds and how they relate to the world, not about objective quantities of goods.

Property rights emerge through their coordination but are not centrally imposed. They coordinate because a change in the environment turned a previously free good, the subject of their short “I ____” essay, into a scarce (economic) good. As you can probably tell Harold Demsetz is one of my favorite economists of all time. After the barrier of disbelief is breached, we can easily talk about the spontaneous emergence of money, cover a little about how property rights emerged in whaling on the high seas, and the spontaneous origin of law (very useful for future law students usually educated in the positivist tradition, as is the norm in Ecuador).

I later learned of the fish game (I am not an experimentalist). But, no disrespect intended, it seems a little contrived. I still like my assignment better. While the goldfish game teaches the tragedy of the commons, the “I _____” assignment teaches how the tragedy can be solved without a centralized authority by having students solve if for themselves and come to grips with the real limitations and problems they faced, albeit on a much smaller scale. I am still hoping for an experimentalist that thinks something serious can be made out of my little classroom demonstration.

Bart Wilson on “The Property Species: Mine, Yours, and the Human Mind”

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As part of the spectacular lineup of seminars this semester at the USFQ School of Economics, we had the honor hosting the amazing Bart Wilson from Chapman University yesterday to present his book “The Property Species: Mine, Yours, and the Human Mind”. It was a very interesting talk and it definitely made me think differently about the traditional “bundle of rights” conception of property rights. One of the major perks of the switch to virtual conferences due to the pandemic, is having great international speakers (mostly US and UK based) present in our seminar.

The presentation made me rethink a small experiment (more a classroom demostration really) about the emergence of property rights I do with my intro students each semester. I can’t tell about the experiment just yet, just in case one of my students is reading this, because we are doing it in class today. You’ll have to wati until my next post.

You can watch the zoom presentation via Facebook Live (and like the USFQ School of Economics page in the process). Link: htps://www.facebook.com/watch/?v=626917664660173

Bullfighting with cars and economic development

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In Ecuador we bullfight with cars, literally. It’s not a game, its the name we give to the strategy we use when we cross the street. As in a bullfight, you stand on the edge of the curb, waiting for the car/bull to pass and then run behind the passing car to succesfully cross the street.

This is true no matter what the right of way legislation says (pedestrians have the right of way, de jure, in Ecuador as elsewhere), and as such is a very useful example to teach the difference between law and legistlation when talking about institutions. Although the actual phrase has fallen out of fashion lately, along with the falling popularity of bullfights (cue nostalgic music for dying traditions), the strategy remains as strong as ever.

Both pedestrians and drivers are familiar enough with the strategy that it is not uncommon to see pedestrians motioning angrily at the innocent driver that stops at a crosswalk, usually a foreigner, so that the car can pass and they can safely cross the street. Drivers speed up at crosswalks where people are waiting to cross, not in attempt to run them over, but as a courtesy, so as to get out of pedestrian’s way faster (at least many people I’ve talked to have shamefully confessed that is why they do this!). When a driver does stop at a crosswalk to give the people on the sidewalk the right of way there is a marked delay and drivers and pedestrians are incovenienced by the delay.

From conversations I have had with people from other developing nations, the strategy used by drivers and pedestrians to cross the street is nearly identical to bullfighting with cars we use in Ecuador. Although it’s not the best possible strategy for coordinating street crossing, it is an effective strategy that allows for social coordination since everyone knows that game that is being played. It is an institution of the developing world.

Moving to the US for my undergraduate degree, many years ago, I packed this institutional baggage along with me, which led me to be late for the first class of the semester. When I arrived at the crosswalk in front of a big red brick building in Boston’s suburbs, a car pulled up to the stop sign and stopped. My mind was lost thinking about what college in the US would be like, as I patiently waited at the edge of the curb for the car to pass so that I could bullfight the car to cross the street. A sudden honk of the horn startled me as I looked around to see an angry driver waving for me to cross the street. Partly because I was startled, but also because I was used to bullfighting with cars, instead of jumping out immediatly to cross, my feet began to do an akward one-step-forward one-step-back shuffle. It wasn’t until I made eye contact with the now exasperated driver, that I was confident enough I wouldn’t be run over to gathered my courage, break out of my developing-country meet developed-country shuffle, and finally cross the street.

Talking to a classmate from Central America later that day, he told me that he was all too familiar with what had happened to me, and with the one-step-forward one-step-back shuffle being discovered by tourists, immigrants, and foreing students all over the developing world. Many years later I have informally confirmed the shuffle still exists in conversations with students that have traveled abroad to the US and Europe.

When I tell this story in class, the question of how to switch to the obviously superior institutions of the US and Europe for street crossing, where pedestrians have the right of way, de jure and de facto always comes up. For institutional change to succeed without pedestrian bloodshed, the new institution would need to become common knowledge rather quickly. In more technical language, bullfighting with cars is the equilibrium now in the developing world, and we know a better equilibrium exists, but the path to the new equilibrium is difficult to traverse.

When I ask what students would do to change to this superior equilibrium, the most common first response is very economic in orientation. Increase monitoring and impose larger fines they say. But given the costs of these policies in an already poor and corrupt institutional environment, I doubt this is necesarily the path to superior institutions, for street crossing or anything else. This is especially true when we consider the relative cost effectiveness of changing this institution vs. other potential institutional investments in the developing world.

I also doubt that larger fines and increased monitoring are the main reasons that superior institutions for street crossing have emerged in the developed world. I have rarely seen police monitoring crosswalks (with the excpetion of school crossings) in the US and Europe, and while fear of punishment is definately an important influence, I don’t know how heavily the expectation of punishment weighs on the minds of drivers in developed countries.

Institutions are important for development but we know very little about how to change them. More thoughtfull students also suggest that a superior institutional arrangement could be reached by convincing people to change their perceived payoffs of playing different strategies. The hard and long process of social entrepreneurship, seems more effective and conducive to robust success.

Proxy Culture Wars 1

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When contentious cultural and political issue arise in the USA, foreign intellectual elites invariably align themselves along partisan lines that try to mimick those of the cultural center of the world, the USA. The incomplete, and often contradictory overlap between foreign social reality, and that of the USA never fails to offer interesting paradoxes.

The intelectual battles, fought on foreign intellectual soil, are part of what I will call the proxy culture wars. The resulting paradoxes tend to stiffle local debate on local issues (I will use local as in local to a foreigner, i.e. not in the USA) by locking the participants into paradoxical positions. While the situation is amusing it causes real problems when trying to reach consensus on local solutions to local problems, communicating across the local partisan divide, or even thinking clearly about local issues.

For example, with the nomination of Amy Coney Barrett to the Supreme Court of the USA, legal twitter in Latin America has exploded in support or condemnation of her nomination. Those on the local/foreign right express their admiration for originalist interpretations, while those on the left local/foreign begin reciting Dworkin and praise interpretations of a living constitution. The ensuing battle would be relatively harmless if commentary on the goings-on in the USA was all that was at stake. But this is seldom the case as the parties bring out full battle regalia and engage in terms of the underlying merits of these positions as if they were general positions, applicable to local reality. In the fog of war, the local conditions and the contentious issues in the USA get mixed together.

The paradox arises when the debate turns local. For example consider Ecuador, where the constitution adopted in 2008 largely reflected the policy preferences of the self described twenty first century socialist president Rafael Correa (local left, now conviceted for corruption to 8 years of prison). Do those on the local right really admire originalism as a judicial doctrine? Do those on the Ecuadorean right really wish local judges would faithfully apply our constitution with its 99 constitutionally protected rights? Mind you, these rights include a right to universal access to information and communication technologies (Art. 16), recreation, the practice of sports and free time (Art. 24), and permanent and secure access to heathy and nutricious food, preferibly produced locally and in correspondence to the diverse identities and cultural traditions (Art. 13). Interesting side note: as documented by the Comptarative Constitutions Project, Ecuador ranks #1 in number of codified constitutional rights. But the nature of these rights and the problems they bring about are topics for future posts.

Are those on the Ecuadorean left, oponents of originalism and supporters of a living constitution really arguing for a more expansive interpretations of these rights? For example when the fiscal reality of the Ecuadorean government makes it impossible for the government to guarantee one of the 99 rights codified in the constitution, do those on the left argue for an expansive interpretation? Do they really want an expansive interpretation so that the government is let off the hook when it fails to provide access to smart phone technology for all Ecuadoreans, because of unsustainable fiscal position?

Of course what is really going on is a great example of motivated reasoning. Conclusions are arrived at, and arguments follow to support those conclusions. The paradox arises as the arguments that support “things I would like in the USA” do not necesarily map well to “things I would like at home”. The lack of coherence between local reality and comentary on the affairs of the USA leads to paradoxical positions that muddy local debate, and lead to incoherence and sloppy thinking.