Tag: Incentives

Anti-War Sentiments & Institutions

Anti-War Sentiments & Institutions

Posted on by jabittan
Over time human beings have become more peaceful. In The Better Angels of Our Nature, Steven Pinker explains that much of the reduction of violence between humans has been influenced by the institutions we create to govern, organize, and structure our societies, relationships, and human to human interactions. Without institutions to help pacify humans, violence would be an easy and convenient solution to many of our problems.
 
 
Pinker uses anti-war sentiment to show how important institutions are in making people less violent. He writes, “to gain traction, antiwar sentiments have to infect many constituencies at the same time. And they have to be grounded in economic and political institutions, so that the war-averse outlook doesn’t depend on everyone’s deciding to become and stay virtuous.” We can praise virtuous monks, we can admire peaceful protestors, and we can hold conscientious war objectors in high regard, but if political and economic institutions do not align with peace, then anti-war sentiment won’t grow beyond these few groups. It is easy to say that humans should all be kind, peaceful, and considerate of others, but without the right institutions, virtues don’t matter much.
 
 
People don’t like admitting that their behaviors are driven by large structural and institutional factors. We like to imagine that we are good individuals and that our conscious choices and decisions are what drive our behaviors. We see ourselves as deserving of good things and criminals and deviants as deserving of bad things because of individual choices in life. When we think about the world becoming a less violent place (if we think about that at all) we imagine it is because we are part of a new breed of humans who are more civilized, smarter, less impulsive, and more valuing of human life. Some of that may be true, but if so, it is not something special about humans today but likely something about the institutions we have built which have changed us and our social worlds.
 
 
Pinker’s anti-war sentiment quote shows how that is true. It is hard for a population to become overwhelmingly peaceful and anti-war when their neighbor has invaded their country (as we see in Ukraine now). It is hard to favor peace when your own economy is a train wreck and invading your neighbor will give your economy a boost through natural resources (perhaps as we see with Russia). If violence is a quick and easy way to boost your economy and the institutions surrounding you don’t punish you for violence, then you have fewer incentives to be peaceful and anti-war. Institutions, incentives, and larger political and economic structural factors matter – often more than individual virtuosity.
Declines in Elite Violence

Declines in Elite Violence

Posted on by jabittan
Violence among the elites and upper classes isn’t something that never happens, but it is less common than violence within lower socioeconomic status groups. This feels obvious and not really worth calling out, unless you take a long view at human history and violence. Medieval Europe was a place of great violence inflicted by elites. Even the American South from the inception of chattel slavery on the continent to the Civil War was a region of violence inflicted by elites. It has not always been the case that in human societies the elites and highest socioeconomic status individuals were the least likely to use violence against other humans.
 
 
In his book The Better Angels of Our Nature, Steven Pinker writes, “The European decline of violence was spearheaded by a decline in elite violence. Today statistics from every Western country show that the overwhelming majority of homicides and other violent crimes are committed by people in the lowest socioeconomic classes.” Humanity has gotten more peaceful in part because violence among elites has fallen. We no longer live in a world with economic systems (in WEIRD countries) where feudal lords and slave owners can use violence to drive workers and manage their estates.
 
 
Pinker continues, “One obvious reason for the shift is that in medieval times, one achieved high status through the use of force.” Gang violence, black markets, and crime syndicates can be a pathway to riches today, but they are not the dominant ways or preferred ways to riches. They are risky, particularly because they operate outside of the state and the legal protections of the state. In medieval times, however, the state did not have the ability to prevent violence and illegal means of wealth creation in the ways the state can today. Similarly, slave owners could use violence to force and compel their workforce of subjugated humans. Violence was a necessary and even expected tool in wealth creation in the Antebellum South.
 
 
What this demonstrates is that changing economic systems and structures changes levels of violence in human cultures among socioeconomic strata. When incentives existed to use violence to obtain wealth, then it was common for elites to use violence. When institutions and incentives shifted, elites became less violent. In the Untied States we view ourselves and our decisions, actions, and behaviors through a lens of individualism, often forgetting the larger institutions and incentives that push us to make certain decisions, take certain actions, and generally behave in certain ways. But what Pinker shows is that incentives matter, even for our elites, and that shifting incentives has been key in driving down violence at the highest level of our socioeconomic system.
Explaining Nazi Violence During a Time of Civilizing Processes

Explaining Nazi Violence During a Time of Civilizing Processes

Posted on by jabittan
In The Better Angels of Our Nature, Steven Pinker writes about German sociologist Norbert Elias and his theory of civilization. Over time, people became less impulsive, less disgusting, and more civilized, and this trend toward civilization among people corresponded with declines in violence between people. For Elias, a decline in violence was a result of increased civility among human beings.
 
 
But Elias was writing in the 1930s and 1940s in Germany, a country controlled by a political power that launched some of the greatest violence the world has ever seen. Elias had to explain how humans became more civil and less violent and how his own country managed to be so awful. Pinker writes, “he documented the persistence of a militaristic culture of honor among its elites, the breakdown of a state monopoly on violence with the rise of communist and fascist militias, and a resulting contraction of empathy for groups perceived  to be outsiders…” Pinker goes on to explain that homicide rates and other rates of violence did continue to decline in Nazi Germany while violence toward outsiders and the rest of the world spiked. Pinker affirms that violence and civility continued their inverse relationship through WWII despite German violence and aggression.
 
 
I find Pinker’s analysis of the explanations that Elias provides for why Nazi Germany could be so violent at a time of declining violence very interesting. Throughout the book Pinker supports the idea that a militaristic culture of honor can lead to increased violence. When people feel a need to protect their honor via force or equal punishment for slights against their honor, then violence can escalate. When the state loses its control on the use of violence and force, individual vigilantes and armed militias can become dangerously prominent. When people begin to dehumanize other groups and justify violence against them, then pockets of violence can easily erupt. These factors still promote violence in the world today.
 
 
Ahmaud Arbery was shot in Georgia, a state in the Southern United States where honor cultures have always persisted to a greater extent than elsewhere in the United States. Perhaps he was in a place he shouldn’t have been, perhaps he had stolen something in the past. But the violence inflicted upon him was a result of a culture of honor that has long persisted and encouraged a sense of vigilantism among Southern Whites. Across 2020 and 2021 in the United States the breakdown of the state monopoly on violence factored into a lot of violence and death. Armed militias killed Black Lives Matter protesters and stormed the Nation’s Capital. These groups certainly appeared to be in part fueled by a lack of empathy for people they perceived as different and other, as somehow wrong and less deserving than themselves. The diagnosis from Elias on why Nazi Germany became so violent seems to be echoed in the recent uptick of violence within the United States.
 
 
(Please note that I am not saying the United States today or in the last few years is Nazi Germany. I am simply identifying some factors that explained Nazi Germany violence and asking if they also explain some trends observed today in very different places, times, and settings.)
Deterrence Plus Good Lawful Alternatives

Deterrence Plus Good Lawful Alternatives

Posted on by jabittan
I will admit, when I was younger I used to pirate music. Even just a few years back I used to pirate unauthorized video streams online for sporting events I wanted to watch. If you don’t mind some questionable audio and video quality and if you don’t mind hunting around on some sketchy websites for links, then pirating media isn’t a huge challenge. However, I eventually decided that there were enough sufficiently easy to use legal alternatives for tv and music to stop pirating. I generally stream everything through either Spotify or Pandora for music and my Smart TV easily connects with streaming services really for what feels like a fair price.
 
 
The lesson from my example is that good lawful alternatives are an effective way to fight against illegal music and tv streaming and downloading. This is an idea that Steven Pinker briefly explores in his book The Better Angels of Our Nature when he writes, “it’s easier to deter people from crime if the lawful alternative is more appealing.”
 
 
Pinker was not writing about illegal media downloads, rather violent crime in Medieval Europe, but the idea still holds. In my example, tv contracts with cable or satellite that cost well over $100/month for channels I wasn’t going to watch wasn’t wasn’t a good legal alternative for me to watch the sports and occasional cooking shows that I wanted to see. The process for getting services started was cumbersome and the contracts locked me for long terms of service with guaranteed rate increases. Illegal streaming was more appealing even if it had some risk and poor overall quality. In terms of music, my options used to be paying $1 for a song or $10 for an album for a legal download versus illegally downloading songs. It wasn’t that I couldn’t afford the music (or the tv contract for that matter) but rather that it wasn’t optimal for how I wanted to consume media. Music streaming services now offer a better service for a reasonable price, and I no longer download music illegally. Good legal alternatives changed the incentive structure and ultimately changed my behavior.
 
 
But this doesn’t mean that deterrence is unnecessary. Good deterrence can be paired with good lawful alternatives to further shape people’s behaviors in desired directions. A close example to my media piracy and subsequent changes to legal alternatives comes from the world of gaming. Video games can be illegally uploaded online and played on computers or home consoles without an individual purchasing the game. Video game companies have gotten creative with how they combat piracy. Some developers build their games in a way that allows the game to recognize if it has been stolen or is being played on a computer rather than the console it was intended for. In some instances, developers will allow players to reach a set point in the game before preventing further play. This gives the illegal players a chance to experience the game and hopefully want to purchase it to play it all the way through. Rather than making extreme efforts to combat the piracy, these developers accept that some piracy will happen, but rely on providing a good enough product and legal alternative model to obtaining the game to reduce the total amount and overall impact of piracy. They pair reasonable forms of deterrence with good legal alternatives.
 
 
This idea is interesting because when we think about crime in the United States at least, our primary response tends to be punishment and deterrence. We don’t often seem to think much about legal alternatives and barriers to legal alternatives. We don’t think reasonably about the trade-offs for escalating deterrence versus accepting some negative behavior and making the most of it like video game companies. Costs, incentive structures, and barriers (like red tape) can make illegal activity more appealing, but we don’t always recognize that. This was true in my illegal music and tv streaming and downloading and Pinker argues it has been true at various points of human history with respect to violence. One explanation that Pinker offers for why humans have become less violent is because we have developed better legal alternatives to obtaining things that humans want and desire. Violence is no longer a great way to ensure you have resources and status. Less violent ways of obtaining such things are now good alternatives through institutional and societal design. This is an important lesson to learn and think about when we are trying to shape people’s behaviors and deter criminal activity. Tough on crime sounds great, but deterrence needs to be paired with good legal alternatives.
 
 
An Offense Against the State

An Offense Against The State

Posted on by jabittan
Who is harmed by a homicide? Certainly the individual who loses their life is harmed, but who else? Any family that is connected to the individual or depends on them is harmed, but beyond that, one can argue that the entire society to which the individual lived is harmed. If you take this broader view, then it makes sense that the crime of homicide could be an offense against the state, and not just an offense against a single individual or their close family.
 
 
In The Better Angels of Our Nature, Steven Pinker thinks about what this shift in perspective regarding the crime of homicide means for violence between and amongst human beings. He writes, “for centuries the legal system had treated homicide as a tort: in lieu of vengeance, the victim’s family would demand a payment from the killer’s family… . King Henry I redefined homicide as an offense against the state and its metonym, the crown.” When murder shifted from an offense against an individual or their family to an offense against the state, the potential rewards from murder dissipated. A single family could only do so much to seek retribution from a murder. And if the killer was big enough, strong enough, and influential enough in the local community, there was no chance that the family could ever seek justice. Murder was a path to riches, to status, and to power when it was only a crime against a single family or person.
 
 
The state, however, had more power, resources, and authority than any local individual. There may have been some individuals with extreme power and the ability to get away with murder, but shifting homicide to an offense against the state reduced the number of individuals who could kill without regard for consequences. Murder, for most, no longer existed as a good pathway toward greater riches. Shifting the offense shifted incentives and encouraged greater civility, reducing violence. The state, and its justice system, created an institution to reduce violence where previous institutions encouraged violence.
The Incentives Around Low-Market Housing

The Incentives Around Low-Market Housing

Posted on by jabittan
Low income renters face a lot of challenges in terms of maintaining stable housing. For those with low incomes, affordable rental units are hard to find, and the competition for such units means that any error or slip-up on the part of the renter could land them on the streets with no where else to go.
In Evicted Matthew Desmond writes, “the high demand for the cheapest housing told landlords that for every family in a unit there were scores behind them ready to take their place. In such an environment, the incentive to lower the rent, forgive a late payment, or spruce up your property was extremely low.” A lack of affordable housing and high competition among low income renters means the incentives for landlords are not in favor of the renters. Landlords know they can boot out a tenant who has young children that cause problems, or a tenant who misses a couple of rent payments, or a tenant who complains too much about problems with the property and quickly find a replacement. There are no incentives to have a nicer property to attract new tenants. There is no incentive to work with a tenant who was just laid off or had unexpected medical bills to repay late rent.
This puts low income renters in dangerous places. They cannot pass up low rent opportunities at units that are in bad condition, because if they pass, someone else will take it and they will be without a place to live. Low income renters cannot afford to have a child break a window, because they may be more likely to be kicked out of the unit than to have the window repaired timely. Additionally, they are unlikely to get a break if they hit an unlucky spell with work or health that prevents them from making rent. In many ways, the incentives around low-income housing lead to unhealthy and exploitative relationships between the poor and their landlords. Throughout Evicted Desmond explores these relationships and the real psychological costs that this reality creates for low income renters.
Markets and Environmentalism - A Call for Better Incentives

Markets and Environmentalism – A Call for Better Incentives

Posted on by jabittan
Earlier I wrote that climate change and environmental concerns seemed to be too large of a problem to be left to nudges. Toward the end of Nudge, Cass Sunstein and Richard Thaler acknowledge the reality that nudges alone cannot tackle climate change, but they still encourage actions that follow the spirit of nudges, or at least learn from the psychology that makes nudges effective. Incentives play a huge role in behavior, and  need to be considered when governments approach businesses in an effort to redress the harms of climate change. Markets and environmentalism cannot be separated if we are to have a sustainable climate. Better incentives need to be implemented within markets to adjust for environmental needs.

 

The authors acknowledge market failures related to climate change by writing, “when the air or the water is too dirty, the standard analysis says that it is because polluters impose externalities (that is, harms) on those who breath or drink. Even libertarians tend to agree that when externalities are present, markets alone do not achieve the best outcome.” Pollutants are common externalities, as are traffic congestion and decimated wildlife populations. The cost of negative externalities is squarely on the shoulders of the individuals in the market, either the consumer or the producer. Governments are necessary to deal with these externalities and prevent them from harming innocent bystanders.

 

Additionally, regarding market failures and climate change, the authors continue, “When people are not in a position to make voluntary agreements, most libertarians tend to agree that government might have to intervene.” Most libertarians agree that labor contracts should be voluntary, with an employer reserving the right to hire anyone, and laborers reserving the right to walk away if their wages or working conditions are unfair. In reality, many people would starve if they walked away from a job, or at least face serious challenges, so voluntary agreements are not always possible. Within the climate change arena, many people cannot simply chose to travel to work by more fuel efficient methods, many people cannot afford the switch to solar power, and many other potential solutions are similarly unavailable, meaning people and businesses are often stuck, involuntarily, with polluting norms for travel, work, and heating or cooling their homes and offices. Markets alone don’t provide the impetus to change the status quo to reflect the reality of climate change.

 

The next post will dive deeper into the incentives and solutions to these problems, but it is clear that markets alone will not direct society toward a climate change solution. The danger of climate change is a long-term danger, where the costs are not experienced in the immediate moment but are instead experienced years and decades later. However, the costs of making adjustments to limit climate change are experienced up front. Upgrading infrastructure, investing in electric and solar technology, and living in more economically friendly ways present immediate costs that nudges cannot overcome. Nevertheless, we can consider the ways in which nudges work and build on those principles to begin to make changes. We can start to better align incentives to limit externalities, and we can preserve choice structures as we move forward with investments and innovation to help us meet the needs of the climate crisis. Government will play a big role and can learns a lot from the psychology of nudges to help address the challenges we face.
The Specter of Rationing Care

The Specter of Rationing Care

Posted on by jabittan
American’s fear having to wait for anything. We want to order things from the comfort of our own home and have them delivered in two days. We don’t want to wait behind more than three people in line at the grocery store, and we don’t want to wait for medical care (to be honest these are all examples from my own life – not picking on anyone who isn’t like me here). Our fear of waiting is used as a reason against universal health coverage. We are told about Canadians who cross to the United States to have surgeries that they would have to wait several months to have in Canada. We are told that we won’t be able to schedule an immediate primary care appointment if more people were to have access to health care. And we are told that the high costs of medical care stop unnecessary care from happening, preventing us from having to wait to see a doctor.

 

However, these fears of waiting and the specter of rationing care presented to us in these scenarios is overblown. It is true that some Canadians chose to get care in the United States for elective procedures, but presenting that fact to us in isolation is misleading and done in bad faith. The reality of our waiting for care is much more complex. Dave Chase does a good job of explaining it in his book The Opioid Crisis Wake-Up Call, “People often raise the specter of rationing care. In reality, it’s overuse (i.e., unnecessary and potentially harmful care) that leads to reduced access by squandering enormous financial resources that would be better used for individuals who actually need care and can’t get it.”

 

We act as though our healthcare system is following good market incentives to find a good balance between wait times and receiving the right care. But we often fail to acknowledge that our healthcare system isn’t performing like an ideal market, and that it often pushes people to too much of the wrong type of care. Chase details this in his book with unnecessary back surgeries. Those who have a legitimate need for a back surgery might have to wait, because primary care providers get a bonus when they refer patients to orthopedic surgeons who are paid to operate. The right path for a patient might be physical therapy, but the money for the providers is in the surgery.

 

We should not raise the specter of rationing care when we are so wasteful with the care we provide through our current system. We waste a lot of money when we don’t have a concern about rationing care, and when we reward providers for doing more surgeries, prescribing more pills, and offering more treatment, even if the efficacy isn’t proven. In his book, Chase doesn’t advocate for a universal coverage system with healthcare covered by the federal government, but he does show how employers today can do more to ensure their patients get more of the good care (the effective PT and preventative check-ups) for free. This reduces the demand on the expensive and unproven treatments later on, and actually reduces the demand on the system for services that we are afraid of rationing.
Pay and Chase

Pay and Chase

Posted on by jabittan
If you were working to set up a healthcare plan for your employers, you would want to make sure that payments by the insurance plan were quick so that your employees were not constantly bombarded by letters and phone calls from doctors offices asking when they would be paid by the insurance plan. You also would want the plan to have a system in place for catching fraudulent claims or errors in charges from hospitals and doctors offices. Both of these desires are reasonable, but in the real world, they have created a system of perverse incentives that Dave Chase calls “Pay and Chase” in his book The Opioid Crisis Wake-Up Call. Here is how Chase describes it in his book:

 

“Another fee opportunity is so-called pay and chase programs, in which the insurance carrier doing your claims administration gets paid 30-40 percent for recovering fraudulent or duplicative claims. Thus, there is a perverse incentive to tacitly allow fraudulent and duplicative claims to be paid, get paid as the plan administrator, then get paid a second time for recovering the originally paid claim.”

 

Insurance companies administering health insurance don’t actually have an incentive to create tools to proactively stop fraud. They actually benefit when there is fraud, because they get a bonus when they spot the fraud and recoup the already paid fraudulent amount. As an employer partnered with the insurance company, you might be happy that claims are paid quickly so that your employees don’t have negative interactions with doctors about payment, but the way that many plans currently operate, you will end up paying a lot more overall when your plan pays for fraudulent claims and billing errors. You will pay for the fraud itself, and if you get any money back, it won’t be for the full amount that your claim administrator originally paid in the fraud or error – they will keep a cut.

 

Chase continues, “Many of the fraud prevention tools used by claims administrators are laughably outdated and weak compared to what they are up against. Modern payment integrity solutions can stop fraud and duplicate claims, but aren’t being used by most self-insured companies’ claims administrators.”

 

Poor incentives and confusing systems have allowed this to occur. This is one example of how the systems around healthcare in the United States are not aligned with what we would all agree should be the number one focus: improving the health of Americans. Employers don’t want their employees to be angry, and plan administrators want to maximize profits. In the end, we all pay more as fraudsters find ways to get past the outdated fraud prevention systems of insurance companies and as those companies turn around and charge fees for catching the fraud and payment errors they didn’t prevent in the first place.

Seeing Yourself With A Little Distance

Posted on by jabittan
In his book The Ego is the Enemy, author Ryan Holiday writes  the following, “You must practice seeing yourself with a little distance, cultivating the ability to get out of your own head. Detachment is a sort of natural ego antidote. It’s easy to be emotionally invested and infatuated with your own work. Any and every narcissist can do that. What is rare is not raw talent, skill, or even confidence, but humility, diligence, and self-awareness.”

 

In this quote, Holiday is encouraging us to focus on our work and goals in a way that is not flashy and that does not seek praise. He is encouraging us to practice the skill of doing good and meaningful work, even if we are not immediately recognized for what we do. Often, the important work that must be done isn’t sexy and isn’t visible to the people we want to impress. We won’t always be immediately rewarded with a trophy or a bonus for the work that needs to be done, but if we are the one to put in the extra effort and effectively and efficiently do a good job, we can find our way to success.

 

The flip side, and what Holiday is urging us to avoid, is doing work only when people are watching. He encourages us to recognize and work against the expectation that we will be noticed and recognized for our work, because the public recognition is not the most important piece of what we do. If we only put forward hard work and extra effort when we know our effort will be visible and publicly rewarded, then our effort in is not actually about the work, but instead about the praise and status that comes looking impressive. We may like the praise and incentives do matter for human beings, but if we are trying to approach the world rationally and make a difference, then we should recognize that this approach to life and work likely won’t guide us toward making the biggest impact possible.

 

When I was a child, one of the chores I always hated was vacuuming. When I would actually do what my parents had told me and vacuum, I intentionally leave the vacuum out because I knew that my mother would then have to acknowledge that I had vacuumed. I would be sure to get a “thank you for vacuuming, now can you please put the vacuum away?” but if I did my work completely and put the machine back in the closet when I finished, I risked getting no notice from my mother for having completed my chore. This is the childish mindset that Holiday is encouraging us to get away from when it comes to doing important work in our life. We should strive to be successful in life because it will mean that we are making a difference in the world or can obtain further resources to allow us to do more through charity and meaningful good deeds. What we should avoid is working hard to try to improve our status and to have more ego inflating fun trips and toys to try to set us apart from others. Focusing on the first goal will ultimately take us further and lead to better quality work and engagement with the world than the second ego inflating goal. Only performing and doing our best work when we can be praised for it will lead us to situations where we fail to cultivate habits of hard work and focus, and will drive us to positions where we are not working for ourselves and for the good of humanity, but for our ego and to make showy purchases to impress other people that we likely don’t even care much about.