More on Saving and Investment

This article is a much better exposition of some of the ideas I was trying to get at in my post titled Bad Investment.

Here's a related post by Eric Falkenstein that discusses how people and businesses behave when their performance on fundamental measures is not well correlated to their earnings.

I Don’t Know How I Lived Without It

A few years ago I bought an expensive (for my budget) vacuum cleaner. My choice can be justified in sort of rational terms. I was tired of vacuums that didn’t work well, and wanted some particular features that I felt sure would ease the chore of vacuuming. Making the work easier would translate into more frequent vacuuming, and a pleasanter and more hygienic home. I also felt sure that buying higher quality would result in a longer service life with fewer repairs.

But my real reason for deciding to spend more money and get a ‘nicer’ vacuum was different from any of that. It made me feel good to be able to buy a product that represented a sort of utilitarian luxury. I enjoyed that the vacuum was well-designed, and that its injection-molded parts fit well. And it was more powerful and more effective than my previous vacuum, and was generally easier to use. 

It wasn’t perfect. In fact there were things about it that were simply poorly thought out and didn’t work as intended, but I almost didn’t notice because I was so pleased to have purchased a quality vacuum. In retrospect I’m quite certain I could have gotten as much carpet-cleaning effectiveness, ease of use, and durability out of a cheaper machine.

The weird thing is that I don’t regret my decision at all. As a matter of fact I caught myself looking at newer, more expensive vacuums by the same manufacturer just the other day. I wanted to have the same experience of purchasing quality all over again.

We’re all familiar with the concept of conspicuous consumption and how people desire to signal their position in the tribe with cars, clothes, etc. But there is another kind of signaling that we do through our unseen consumption. These are the signals we send to ourselves that help us to feel that we are OK. Safe in our own hands.

The title of this post illustrates what it really means to us to be able to provide ourselves with luxuries. I feel so contented now with what I’ve been able to provide for myself that I don’t know how I lived without this feeling.

It is irrational, because I had the ability (and with it the security and the option) before I actually made the purchase. I should have already felt the benefit. And I did. I immensely enjoyed the process of shopping for my vacuum, even of looking for the best price possible. But I knew that if I decided against buying it that it would be because I couldn’t quite stretch that far, and that would tell me something about the limits of my resources, and my own exposure to the vagaries of chance.

Can’t we do better than that?

Hat tip to Eric Falkenstein for ideas about consumption and envy.

Heroes: Part II

Sexual reproduction is a curious evolutionary adaptation. It reshuffles the genes of the current generation, guaranteeing that the next generation is similar to, but distinct from, its parents. Why do this? If a particular set of genes has been successful, why not reuse them as they are, rather than risking passing on a worse combination?

The answer is flexibility. The environment (and, indeed, the competitive environment) is not static, so a static genetic mix will not serve for long. The ideal system is one that passes nearly all of the most successful traits to the next generation, with a very small percentage of novelty thrown in. The novel genes are an insurance policy against change.

Societies use this strategy as well.

Conventionalists are society's standard gene load out - the tried and the true. Even Romantic Conventionalists, who oppose the prevailing the culture, are part of the standard genetic material. Because they pull directly against the tide of the society they prevent accelerating groupthink. They anchor the society against drift.

Fundamentalists are the novel genetic material. Their commitment to their ideas, rather than to society itself, means that they are forever moving in a completely independent direction. Sometimes they can be a cancer, like the thinkers who produced eugenics. Sometimes they can provide the adaptation that takes the society in a new evolutionary direction, as did the men who dreamed of a purer democracy, without royalty. Most often they are interesting, but harmless, with no strong effect on anyone but themselves (let me again refer you to Eric Falkenstein's brilliant post on how unusual ideas are one of the penalties of being intelligent).

Heroes

Having heroes is a form of study. You can see it in the rooms of teenagers who have decorated their walls with posters of musicians, or other popular figures. The posters, quotes, and facts about the person of renown are used by the teenager to try to understand what it is in this person that has made him/her great. Teenagers emulate the behaviors, language, dress, political outlooks, etc. of their heroes because they are searching out the combination of qualities and actions that constitute greatness.

The process doesn’t end with the teenage years.

It may be a false dichotomy, but it seems to me that heroes get evaluated either in terms of popular reaction to their exploits (either epic or romantic), or less commonly, against an objective set of criteria established only in the mind of the devotee.  The difference is significant. It tells us something, not about the hero, but about the person who is aspiring to heroism.

If my definition of heroism depends upon either embracing or bucking popular values, then I am a Conventionalist. I define myself entirely in relation to other people, and to the prevailing culture.

If my definition of heroism depends upon a set of principles and beliefs that I accept for their own sake, without dependence upon the opinion of my society, then I am a Fundamentalist. Ironically, many heroic figures may themselves be Fundamentalists, while gaining a vast following of Conventionalists who wish to emulate them.

It is my experience that there are very many more Conventionalists than Fundamentalists in the population, though it is not always easy to distinguish who is who.  Fundamentalists often possess values that are largely in harmony with their culture. Romantic Conventionalists take positions in opposition to the prevailing culture, and so may appear Fundamentalist, but actually are not, because they define themselves relative to the culture, not based on independent values or beliefs.

Eric Falkenstein relates intelligence to having unusual ideas. This is a related but distinct concept.

Sunday Links

California's budget problem results from the uncontrolled growth of government. However, help is on the way! Unfortunately it's coming in the form of a possibly illegal takings (Mother Jones and Cafe Hayek).

You may have already guessed that a rushed and kludgey repair job on the Bay Bridge caused the recent failure. This analysis suggests that guess is correct (Sci-experiments.com).

The University of Utah Genetic Science and Learning Center has created an excellent interactive graphic that helps explain the scale of small things. You'll want to show this one to your kids as you explain to them about germs or molecules (U of U).

The problem with economics is that it hasn't advanced far enough that it can make useful predictions. However, as Nassim Nicholas Taleb would point out, that's OK because there are still plenty of economists who are willing to go out on a limb and suggest untestable hypotheses to explain past events (Amazon.com and Bluematter).

The problem with socialism is that no one knows how much anything costs. Eric Falkenstein uses Amtrack as an example. Funny, but I keep hearing the same thing about health care (Falkenblog).

Soft vs Hard Science?

Eric Falkenstein has made some sweeping generalizations about scientists. It's always a bit of a puzzle to me when I hear these kinds of arguments. When I look at the world around me I see the application of science everywhere. If scientists don't have a special claim to truth, then either my DVD drive shouldn't work, or communism should.

OK, that needs some explanation. First, my DVD drive:

Einstein discovered the principle of Light Amplification by Simulated Emission of Radiation (LASER, of course) while working on another problem. A few decades later his work was demonstrated to be correct when the first functional laser was built. Einstein's claim to truth is irrefutable, as are the claims of subsequent scientists and engineers who gradually refined the understanding of the concept until my DVD drive could be mass produced and sold to me.

What about communism? Well, economics is something of a science, but it's not a terribly successful one. Communism is a failure precisely because economic principles are not well enough understood to construct powerful and useful technologies for planning and coordinating the efforts of millions of people. Economics doesn't have a LASER equivalent. But, even though economics has not produced a lot of useful or even agreed upon knowledge, there are still many economists who have a need to publish in order to move their careers along. I think this is at the heart of what Eric Falkenstein is criticizing.

But why attack scientists altogether? To my mind, there is a genuine distinction between the hard and soft sciences, and that distinction is most visible in the technologies that emerge, or fail to emerge, from the knowledge that various kinds of scientists produce. After all, the purpose behind science isn't only to gain understanding, but to gain useful understanding that can be applied to better our lot.There's no need to conflate physicists with economists when their relative accomplishments are so distinct.

Alas, Eric doesn't note the distinction, and instead slanders 'physical' scientists while levying accurate criticisms against economists and other 'social' scientists. Maybe he does this because he's not prepared to countenance the disparity.