On reflective equilibrium

We should all be more Rawlsian, and not merely in the conventional sense.

To see what I mean, take this suggestion from Josh Hendrickson for a cost-minimizing legal system:

More specifically, when someone is accused committing a crime, they could be given the option to admit guilt and pay a fine, the magnitude of which depends on the severity of the crime. If the person is unwilling or unable to admit guilt and pay the fine, their prosecution is determined by a dice roll with the number of sides on the die inversely related to the severity of the crime. Some die might have six sides. Other die might have thousands of sides. (You don’t actually need to use dice. Just a random draw.) If the prosecutor rolls a 1, the perpetrator is sentenced to death. Otherwise, the perpetrator is set free.

Form one perspective, there's something to this: it saves on the cost of lawyers and prisons. But as Josh says:

Of course, when we look around at various modern legal systems, none of them look even remotely like the hypothetical system. What gives? Are modern legal systems just really bad at minimizing costs? Does the system just seem crazy because it is so different than our own? Or is this discussion missing something?

What Josh is doing here is moving towards what Rawls called a reflective equilibrium. This is the process whereby we go back and forth between high theory and our everyday judgments, revising either or both until they are consonant. As Rawls said:

It is obviously impossible to develop a substantive theory of justice founded solely on truth of logic and definition.

Instead, he said, logically-derived principles must be checked against facts - in his case, the facts being "our considered judgments in reflective equilibrium" - until we have a set of beliefs that hang together.

It's not just a theory of justice for which this is true. Rawls thinking applies more generally.

In financial markets, our beliefs are marked to market - in liquid ones with transparent prices, whether we like it or not. If you lose money then no matter how clever you are you have been wrong. This is one reason why I advise young people to work in financial markets. Doing so teaches you that your best ideas are often wrong and thus might imbue humility - a virtue lacking not just in Johnson's pigheaded idea that he knew more than the experts about long Covid but also in most of the contributors to the poshcuntstalkshitshows that pass for current affairs programming.

The same thing happens in science, when it is done properly. As Richard Feynman said:

It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.

Both cases require an exercise in Rawlsian reflective equilibrium. We must check both the facts (are the experimental results actually correct? Has the stock price fallen for a merely temporary reason?) and our beliefs (Were we wrong and if so why?) until we have better consonance between the two. That's just good Bayesian updating.

It's not just in the natural and social sciences that this should happen, though. It also happens in religious orders. Lorraine Daston describes how the many strict rules for Benedictine monks are tempered by the discretion of the abbot:

No precept is so rigid that it cannot be bent if the abbot judges that circumstances warrant an exception: it all depends.

In this way, an equilibrium is reached between the theory of the ideal religious community and the demands of everyday life. And, says Daston, the point holds more generally: rules must be tempered by discretion.

This is true in creative endevaours. The last of Orwell's rules for writing is: "Break any of these rules sooner than say anything outright barbarous." Writing is a process of reaching reflective equilibrium, going back and forth between rules of good writing (not necessarily Orwell's) and what sounds right.

The same's true in music. Charlie Parker advised: "First you learn the instrument, then you learn the music, then you forget all that shit and just play." But of course, you never really forget technique and scales. Instead they become part of your muscle memory; it's not good enough to have your brains only in your head. What you play is a reflective equilibrium, a consonance between instinct and technique or between the rules of harmony and your ears with each constraining and thus enhancing each other. Freedom, wrote Arnold Schoenberg "prospers best when under control."

You might think all this is trivially obvious. It's not. There are many instances of people ignoring this.

One of my favourites was when Steve Levitt and Stephen Dubner visited then-PM David Cameron to suggest reforming the NHS:

We suggested to Mr. Cameron that he consider a similar policy in a different arena. What if, for instance... everyone were allowed to go down to the car dealership whenever they wanted and pick out any new model, free of charge, and drive it home.”

Cameron, in a rare display of wisdom, showed them the door. What Levitt and Dubner failed to do was engage in reflective equilibrium, to ask: if the NHS is so theoretically absurd, why is it so popular and why so effective (before the Tories did their worst)? They didn't equilibriate between theory and big facts. They failed to see that theories of economics, just like theories of justice cannot be "founded solely on truth of logic and definition."

And that was not untypical of a lot of economics before the (arguable) "empirical turn". Many mainstream economists over-valued theory to the neglect of real world forces. They didn't ask: "this general equilibrium; is it in the room with you now?"

Not all departures from reflective equilibrium are merely absurd, though. They can be deadly. The Chilcott report said:

Senior decision‑makers – Ministers, Chiefs of Staff, senior officials – must have a flow of accurate and frank reporting...At times in Iraq, the bearers of bad tidings were not heard. On several occasions, decision‑makers visiting Iraq…found the situation on the ground to be much worse than had been reported to them.

There was not the back-and-forth between the theories of the government and the facts on the ground, and no equilibrium between the two.

That, though, was perhaps an isolated failure by Blair. Otherwise, he did achieve an equilibrium between his two big beliefs: the desire to get elected, and to be a socially democratic government. I'm not sure the same can be said of his epigones, who are pursuing "electability" to the denial of the facts of our widespread economic failure.

A more absurd example of such a failure was the Truss-Kwarteng Budget. Their enthusiasm for tax cuts was not challenged by facts: what's the evidence that tax cuts boost growth? How long does it take for them to do so? Should we be loosening fiscal policy at a time when bond markets are worrying about inflation? Again, no back-and-forth, no equilibrium.

The Tories might have learned from that episode that they must occasionally test their beliefs against the evidence. But they haven't. Instead we saw at the party conference a further retreat from any notion of having to do so. There was talk of the need for change without asking why this was necessary after 13 years of Tory government, and utter gibberish about 15 minute cities and meat taxes.

It's easy to see why the Tories should avoid trying to reach a reflective equilibrium. For years, they've had no need to do so as the media has consistently accepted their fictions, from austerity to "£350m a week for the NHS". And what's more, if you've no ideas about reality, why not escape from it?

Which in one sense is unconservative. Edmund Burke anticipated Rawls' reflective equilibrium when he demanded that high theory meets empirical evidence:

I cannot stand forward, and give praise or blame to any thing which relates to human actions, and human concerns, on a simple view of the object, as it stands stripped of every relation, in all the nakedness and solitude of metaphysical abstraction. Circumstances (which with some gentlemen pass for nothing) give in reality to every political principle its distinguishing colour, and discriminating effect. The circumstances are what render every civil and political scheme beneficial or noxious to mankind.

Now, you might have noticed that my examples of good use of reflective equilibrium come from the arts and sciences (investing is applied social science) whilst examples of its non-use come mostly from politics. Which poses the question: why is it so easy for politicians (of all parties) to sometimes be "operating in purely imaginary worlds," to use Kenneth Boulding's phrase? What must change to enable politics to be more like fulfilling, progressive and successful disciplines? Few political partisans, however, care about such questions: all that matters to them is that their side wins. Which is part of the problem.

Comments

[ltr]

Steve Levitt and Stephen Dubner visited then-PM David Cameron to suggest reforming the NHS:

'We suggested to Mr. Cameron that he consider a similar policy in a different arena. What if, for instance... everyone were allowed to go down to the car dealership whenever they wanted and pick out any new model, free of charge, and drive it home.” '

Cameron, in a rare display of wisdom, showed them the door....

[ Brilliant illustration of the idiocy of libertarian economics. I love this entire essay. ]

[Blissex]

«the process whereby we go back and forth between high theory and our everyday judgments, revising either or both until they are consonant [...] why is it so easy for politicians (of all parties) to sometimes be "operating in purely imaginary worlds," to use Kenneth Boulding's phrase?»

I admire our blogger for his loyalty to the ideal of rule by philosopher-kings (ideally of course wykehamists, but other enlightened subgroups of the elite could do), who would carefully ponder/test their theories to see if they would be optimal in the real world, so finding optimal policies for "the national interest" instead of just for their sordid factional interests:

«Few political partisans, however, care about such questions: all that matters to them is that their side wins. Which is part of the problem.»

But I continue to regard politics as the continuation of war with other means, as a way to resolve at least in part conflicting interests without resorting to physical violence, so I reckon that what seems our blogger's favourite idea has at least these problem:

* It conflates the idea that politicians pursue partisan interests with the idea that they pursue them stupidly, by «sometimes be "operating in purely imaginary worlds,"», and sort of implying that if they did not act stupidly, they would end up being non-"partisans" and do the "national interest". If we look at the record for example the thatcherites have performed very well, far from stupidly, in advancing the interests of their "sponsors", for decades, even if here and there they have made mistakes, which are not simply proof of their «sometimes be "operating in purely imaginary worlds,"», but just of their occasional fallibility.

* It is a favourite point of right-wing propaganda in two opposite ways that are used at different times:
** Since all politicians are corrupted by partisan self-interest politics is irredeemably corrupt and thus the dominant elite has every right to be so too, "dog-eat-dog".
** That there are non-partisan sections of the elites who are disinterested problem-solvers ("technocrats", "experts") and agreed on what is feasible and fair (“There Is No Alternative”, “in the urgent need to remove rigidities and incorporate flexibility in capital, product and labour markets, we are all Thatcherites now”).

«What must change to enable politics to be more like fulfilling, progressive and successful disciplines?»

I spot here the beautiful assumption that the "technocratic" "experts" of those disciplines are fair and just wikehamists that pursue truth regardless of their own interests, instead of being often sordid careerists.

Regardless I reckon that a domain devoted to resolving (one way or another) conflicts of interests cannot be even remotely compared to those devoted to the study of nature and other subjects.

[Blissex]

«“We suggested to Mr. Cameron that he consider a similar policy in a different arena. What if, for instance... everyone were allowed to go down to the car dealership whenever they wanted and pick out any new model, free of charge, and drive it home.”»

Cameron, in a rare display of wisdom, showed them the door. What Levitt and Dubner failed to do was engage in reflective equilibrium, to ask: if the NHS is so theoretically absurd, why is it so popular and why so effective (before the Tories did their worst)?»

This is an amusingly stupid argument: their claim was not that it is "theoretically absurd", but that it was working all too well for "scroungers": of course a system would be popular if really were like a “car dealership whenever they wanted and pick out any new model, free of charge, and drive it home”, and it would be effective too at delivering more cars to people.

What Levitt, Dubner and our blogger (pretend?) to fail to see is that there are "unpleasant goods", like having surgery for a stroke or a cavity, which are quite unlike "pleasant goods" like a better car.

It is a classic trope of (usually deliberately malicious) right-wing propaganda: "scroungers" are depicted as getting such a thrill from being unemployed, sick, old, homeless, hungry, that they want such thrills to be paid for by those who are employed, healthy, young, propertied, sated. It is like a similar argument for insurance: "scroungers" enjoy it when their houses burn down or their cars are wrecked in accidents, and therefore risk pooling as in fire or accident insurance is a bad idea.

The main point is that "unpleasant goods" are "consumed" as little as possible, that the NHS etc. are insurances against adverse events, not suppliers of "pleasant goods" that some people, want to consume as much as possible, such as better, news car models.

The "mark to reality" bit seems to me the vice-versa: that there is a small minority of hypocondriacs as there is a (less) small minority of insurance fraudsters, who think they like or benefit from what for others are "adverse events", so there must be some mechanism to reduce that.

[Mike]

Your post very much coincides with these quotes from Einstein:

Education is what remains after one has forgotten what one has learned in school.

Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning.

The only source of knowledge is experience.

The only thing that interferes with my learning is my education.

[Blissex]

«A more absurd example of such a failure was the Truss-Kwarteng Budget. Their enthusiasm for tax cuts was not challenged by facts: what's the evidence that tax cuts boost growth? How long does it take for them to do so? Should we be loosening fiscal policy at a time when bond markets are worrying about inflation? Again, no back-and-forth, no equilibrium.»

Our blogger seems to me to be continuing to be loyal to the parliamentary convention that good faith cannot be questioned, so one has to take propaganda as authentic beliefs.

My impression is that whatever they say for some interest groups tax cuts are good in themselves, whatever their effects on growth, and bankrupting final salary pensions is also something that at least should not be an issue, or even desirable.

«Should we be loosening fiscal policy at a time when bond markets are worrying about inflation?»

But "inflation" is really just a policy to make wages more "competitive" in real terms, and is supposed to revert to under 2% "soon".

After all in China inflation is negative or nugatory, and most of the manufactures we buy are from China, and most of the foodstuff and materials we buy are from the same exporters that sell to China, and UK wages are not exactly booming, so it it is difficult to argue that it is either supply-driven or wage-driven "inflation".

[ltr]

Notice that real earnings in 2023 in the UK are just about where they were in 2007:

https://fred.stlouisfed.org/graph/?g=1abU9

January 30, 2018

Real Weekly Earnings for United Kingdom, 1980-2023

(Indexed to 1980)

[ltr]

Also, UK investment has been remarkably low as a share of GDP since 2007. Tax cutting has not seemed to spur investment.

https://www.imf.org/en/Publications/WEO/weo-database/2023/October/weo-report?c=112,&s=NGDP_RPCH,PPPGDP,PPPPC,NID_NGDP,NGSD_NGDP,PCPIPCH,GGXWDG_NGDP,BCA_NGDPD,&sy=2017&ey=2022&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1

[Blissex]

«UK investment has been remarkably low as a share of GDP since 2007.»

Been here before: investment in the UK has been booming, just not investment in unprofitable activities like industry; far more profitable ones like trading property deeds have attracted enormous flows of investments, including from abroad. Property deeds have been a big export.

«Tax cutting has not seemed to spur investment»

Considering that for so many people the tax rate on property deed gains is zero, while earned incomes from industry is taxes, I guess investment in property deeds has been driven by rationality.

https://books.google.de/books?id=Oo25BwAAQBAJ
Davis Landes, "The Wealth and poverty of nation", 1999
“The annals of competition show entire national branches dragging and withering -- not this and that enterprise, but the whole industry. Sometimes, having learned their lesson, the last members of the branch move away, generally to cheaper labor; that is smart, but also easy, and evidence more of rationality than enterprise. And sometimes, as in Britain and Holland earlier, entrepreneurs retire to a life of interest, dividends, rents, and ease.”

[rsm]

Can I agree with Blissex for a change?

May I also point out that Feynman's statement would support epicycles over the contemporaneous heliocentric theory of Aristarchus, because predicted parallax motion of the stars was not observed due to blunt measurements?

[rsm]

Also, is anyone else reminded of the Flatland problem?

"Only yesterday, when the Chief Circle (in other words our High Priest) came to inspect the State Prison and paid me his seventh annual visit, and when for the seventh time he put me the question, ‘Was I any better?’ I tried to prove to him that he was ‘high,’ as well as long and broad, although he did not know it. But what was his reply? ‘You say I am “high”; measure my “high-ness” and I will believe you.’ What could I do? How could I meet his challenge? I was crushed; and he left the room triumphant."