Economists don't have "physics envy"

I hear all the time that economists have "physics envy". This doesn't seem even remotely true. I'm not sure whether "physics envy" means that economists envy physicists, or that economists want to make physics-style theories, or that economists wish their theories worked as well as those of physicists. But none of these are true.

Reasons why economists don't have physics envy include:

1. Economists make a lot more money than physicists.

2. Economists are treated as experts on practically anything. An economist can talk about why hipsters have moustaches, and get taken seriously. An economist can talk about which restaurants are the best, and get taken seriously (Update: NO, I'm not saying Tyler's book is bad, I haven't even read it, so HUSH). An economist can talk about politics, marriage, popular music, sex, race, or sports and get taken as seriously as any expert in those fields. An economist can talk about how much progress physicists are likely to make, and get taken seriously. Physicists get taken seriously when they invent quantitative rules for things, but otherwise are treated as just one more tribe of crazy nerds with their heads in the aether.

3. Economic theorists, traditionally, have been free from the constraints of empirical validation. Econ didn't start out with any data to speak of, so it developed a culture where data wasn't the measure of a good theory. That culture has been slowly changing, as IT and statistics allow us to do much more empirics. The wild econ theorist is being slowly tamed, though they occasionally buck against their new constraints. But economics is still nowhere near as enslaved to empirics as physics is. Ed Witten, a brilliant physicist who invented superstring theory and won a Fields Medal, will probably never get a Nobel prize, since no one has yet figured out a way to test superstring theory. In econ, though, un-validated theories - even empirically unsuccessful theories - do sometimes get Nobel prizes, especially in macro.

4. Economists and physicists have totally different reasons for thinking their theories are beautiful. Physicists tend to appreciate the symmetry of their theories, or their connection to geometry. Economists tend to appreciate the fact that their theories can be derived from axioms of human behavior. Economists don't usually see themselves as a high-up floor on the tower of science that begins with math and progresses through physics to chem, then bio, then psych. They tend to see their own field as part of an entirely different tower, unsupported by the other sciences, built on the foundation of axioms - not empirical laws or derived properties - of human behavior.

(Note for physics/math people: what economists call "axioms" are what physicists call "postulates".)

5. Economics theories aren't really much like physics theories in the first place. In particular, the word "equilibrium" means totally different things in the two fields. In econ, the word "equilibrium" is incredibly general - it just means the solution of any system of equations in an economics model, really. A few economic equilibria are similar to equilibria in physics models, but not most. A lot of people outside econ don't seem to understand how economists use the word.


So economists don't have physics envy. But there is a related field that absolutely does have physics envy: Financial engineering.

Financial engineering doesn't use the axiomatic stuff econ uses - instead it fits curves, like applied math. Often, the math is very similar to that used by physicists, and this is why physicists often go into financial engineering. But financial engineering doesn't work nearly as well as physics, which definitely leads financial engineers to wish that it did work as well.

So if you want to tease anyone for having "physics envy," tease financial engineers, not economists. The only way economists are ever going to envy physicists is if they find out how much physicists...well, never mind.

"Signaling" isn't about signaling

Robin Hanson responds to my Bloomberg View post about signaling.

More generally I call a message “signaling” if it has these features:

1. It is not sent mainly via the literal meanings of words said.
2. It is not easily or soon verifiable.
3. It is mainly about the senders’ personal features, perhaps via association with groups.
4. It is about sender “quality” dimensions where more is better, so senders want others to believe quality is as high as possible, while others want to assess more accurately. Such qualities are not just unitary, but can include degrees of loyalty to particular allies.

Cheap talk cannot send a message like this; one cannot just say such a thing, one must show it. And since it cannot be verified, one must show it indirectly, via how such features make one more willing or able to do something. And since willingness and ability track costs, these are “costly” signals.

This seems to add a few arbitrary restrictions to the set of things we might try to describe with a Spence-style signaling model. That's perfectly OK (especially since I was complaining about the overuse of the term, not the underuse!). But I think it also makes things a bit more complex than they need to be.

Let's focus on what I think are the three key characteristics of signaling models:

1. The signal must be costly to send for all types.

2. Different types must have different costs to sending the signal.

3. If you take away the cost differential there will be a pooling equilibrium.

The first condition assures us that the asymmetric information imposes costs on the economy; without (1), the model just becomes a truth-telling mechanism. Without (1), you just say which type you are, pay 0 cost, and society knows you're telling the truth.

The second condition creates the separating equilibrium. It means that signaling "works", in terms of revealing people's true types.

The third condition is why you need signaling in the first place. The separating equilibrium isn't first-best (that's guaranteed by condition 1), but it's constrained-optimal. The pooling equilibrium - the thing you avoid by creating the cost differential in (2) - is even worse than the separating equilibrium.

Robin thinks that my example of the hipster moustache is signaling, and explains why:

Let’s distinguish three different kinds of messages I might send with my waxed moustache:  

1) “I have thick shiney (sic) hair.”... 

2) “Hipster is one of my interest areas.”...Technically, this is a “cheap talk” message. 

3) “I am especially devoted to the hipster ethos” or “I especially embody hipster ideals.” That is, I am especially willing to identify myself as a hipster, and my personal features are an especially high quality match to ideal hipster features, including having a creative and contrarian yet attractive and coherent personal style that fits with current hipster fashions. These messages are hard to verify, and the interests of observers and I conflict. While observers want to accurately rank me relative to others, I may want them to estimate me as having maximal devotion and quality. Since verification and cheap talk won’t work here, I have to show, not just say, my messages. 

To show my hipster devotion, I can choose an appearance that is sufficiently off-putting to many people’s work, home, church, etc. associates. By paying the cost of putting off possible associates, I show my devotion to hipsterism. To show my hipster features, I can pay to track hipster fashions and to continually search in the space of possible appearances for a combination that simultaneously reflects current fashions while being creative, coherent, and showing off my best personal features. Not being a hipster, I don’t know how exactly that works for them. But I do know, for example, that since lipstick and tight clothes make some bodies look better while making other bodies look worse, they are costly signals of the quality of lips and body shape. There must be similar factors for showing off hipster qualities.

#3 is why Robin thinks of hipster moustaches as "signaling."

I think it's obvious that hipster moustaches satisfy my condition 2 from above - hipsters definitely pay a lower cost for having hipster moustaches, for a variety of reasons (most importantly, they like the style more than others do).

But do they satisfy my condition 1? Do hipsters pay a net cost for their moustaches? Robin suggests that they do, because the moustaches are "off-putting" to people at work, church, etc. But I doubt that this is, in fact, true. Do hipsters look in the mirror and think "Dang, I wish I didn't have to grow this stupid moustache just to prove I'm a real hipster"? I doubt it. I bet they intrinsically enjoy having the moustaches. This is very different from the experience of someone who has to work hard to get some pointless credential just so he can get a job - i.e., the situation Spence originally suggested.

I also doubt that the moustaches are particularly off-putting to most of the people hipsters want to associate with. Sure, people in some Baptist church in Alabama would be put off if I walked in with a big ol' moustache. But I bet hipsters have no desire to actually go hang out in that Baptist church. Also, I bet they tend to have jobs with people who aren't offended or repulsed by hipster moustaches, because I bet they would really hate the kind of workplace environment where people are repulsed by moustaches. So the mere fact that some people are repulsed by hipster moustaches doesn't mean that hipsters actually pay a cost from that repulsion. In fact, offending those people may give hipsters pleasure.

Next: do hipster moustaches satisfy my condition 3 from above? Are there a bunch of wannabe hipsters who would love to pass themselves off as hipsters if they just didn't have to grow that damn moustache? I doubt it. What non-hipster wants to be a hipster? Maybe a few. Maybe there's some guy out there who really has a thing for hipster girls, and who thinks that they only date hipster guys (False, btw!). But I bet these wannabes are few enough in number that distinguishing themselves from the wannabes is not a huge concern for the hardcore hipsters. (I could be wrong; perhaps America gazes upon envy at the hipster community, bitterly wishing it could be part of the fun!)

Anyway, it's possible that hipster moustaches satisfy all 3 conditions of a true signaling model, but I doubt it. More likely it's just a truth-telling equilibrium.

It also seems likely that much of the fad for labeling non-signaling mechanisms "signaling" is just a nerdy way of insulting countercultures and subcultures. It's a fancy way of saying "Hey hippie, get a haircut!" - of attempting to enforce social conformity by accusing standouts of inauthenticity. But it doesn't really seem to get the economics right, except maybe in a few scattered situations.


(P.S. - If you want mathematical models of conformity, nonconformity, subcultures, hipsters, etc., I would recommend this or this.)

A quick history of 4chan and the rightists who killed it (guest post)

A lot of the cool funny internet stuff we know and love - LOLcats, Doge, etc. - came from a site called 4chan. But recently, 4chan has become a gathering place for online rightist movements like GamerGate and various racists. How did this come to pass?

This is a guest post by a 4chan user and Portland resident who goes by @animemoemoney on Twitter. He was also an early GamerGate supporter, and even organized one of the first real-life GamerGate meetups, before later repudiating the movement. Here, he tells the history of 4chan and the invasion of un-funny, uncreative anonymous rightists that eventually changed the nature of the site. 

________

Anonymous Rightists and Their Slow Resurgence on the Internet

At one time, the internet used to be a smaller place. Large social, content hosting websites like Facebook and Twitter now rival large countries in population size. It’s what people do on the internet—browse social media. It’s rare to be out in public and not see a person flip through their mobile device and maybe check their email. The internet is huge now and a ton of people use it.

Before there were advances in consumer electronics, and other forms of utility-increasing technological devices that allowed users easier access to the internet, there were enthusiast forums. Enthusiast forums are not like social media. They behave the same, but there was a far different community dynamic seen in forums of the past. Enthusiast forums are where gamers, anime watchers, or plain jokesters gathered to discuss their hobbies. An enthusiast was more likely to use a slower, now outdated version of the internet as well. 

Enthusiast forums still exist today, and they still have that handmade look of a website built by two-to-three people. The biggest differences between social media websites and enthusiast forums would be the culture and the board software. Instead of putting their real name and uploading a picture of their face, enthusiasts have taken a persona with a custom username and avatar. Enthusiasts loved to take a different persona because it made them anonymous on the internet, and thereby not be judged by their hobbies in real life.  Because of the anonymous nature of enthusiast forums, it meant users’ online behavior wasn’t judged either. 

When Christopher “Moot” Poole created 4chan, he sought to emulate the anonymous behavior of the Japanese website 2channel. Moot was a large browser of the website Something Awful, a web forum dedicated to making jokes and creating original content. Moot would bring Something Awful’s character to his soon to be popular website. He wanted 4chan to be more anonymous than the enthusiast forums of the past, by stripping away usernames and user accounts. 4chan was a great success, and was soon to represent everything Poole loved—anonymity, games, anime, and original content.  

Before 4chan, forums had a lot of rules. The board software would only allow you to do so much, such as make a thread or make a post, but there were also rules made by the moderation team. Users would be expected to obey the rules enforced by the moderation team if they didn't want to be suspended or banned. It was a particularly sad sight when a member of a community was banned forever due to racism, or trolling.  

Unlike forums before it, 4chan didn’t set (many) limits to what was considered acceptable on the website. Forums like Neogaf.com have a very strict expectation for rule following, and will ban you for subtle things like posting in an incorrect tone. The lax rules of 4chan attracted a lot of content producers, and people who loved to post without the fear of gaining a bad reputation, or being banned for behaving a certain way. On 4chan you can be banned for being off-topic, but not for making racist posts. 

There probably was never a moment were racism couldn’t be found on 4chan, but the trend of making racist posts shifted drastically from being an ironic, edgy joke to a very serious habit for a percentage of the posters. It started mostly with the news board “/n/,“ which was deleted for being too packed with race discussion. While it used to be a great place to discuss economics and politics, the board was slowly consumed by people trying to “red-pill” [i.e., convert to rightism] as many people as possible. These “red-pill” posters probably were channers, but they were a vocal minority at that time. After /n/ was deleted, posters didn’t know where to take their race discussion. They went to the firearms board, the anime board, and the video games board but were unwelcome there.

Later on, Moot decided to remake the news board as /new/, and the same process reoccurred. Some people would make threads linking to news articles, and it would be followed by a couple posters presenting the racial truth behind the story; they’d post race statistics, homicide  statistics, and ACT score graphs. Though predictable, these posters where still channers…and therefore jokesters and trolls, so there would be fun discussion even if the content was offensive. 

As time went on, /new/ got more and more radical. The free speech board attracted radicals from all over the internet. But most prominent of the radicals were the hateful plain-text rightists that would soon to dominate. Every thread was filled with racial discussion by that time. The hateful plain-text rightists did not seem to be channers—their posting style was different, they wouldn’t use images, and they wouldn’t recognize the channer language. When a hateful plain-text rightist would be called a “newfag” for example, he would claim he was very against homosexuality. Because of these plain-text hateful rightists, those who didn’t post images or news, the discussion on /new/ became very, very far right. 

Moot would soon delete /new/, probably for the same reason he deleted /n/. An opportunistic man who went by SaveTheInternet would create a website for /new/’s old user base to post at.  That website would be called 4chon, and it was basically just the /new/ forum, with some other boards for community support. People did make news threads at this forum, but it was crowded out with race discussion, conspiracy theory culture, and a very confused love for the Mises Institute. Unfortunately, the chan culture seemed to leave these posters, and they would become hateful plain-text rightists themselves. Anime posting was soon discouraged, and much of what made a 4channer in the past would be considered “degenerate.” It was very sad to watch channers take in the judgmental attitude of a mysterious group of anonymous rightist invaders and use it to dissolve their own culture. . . which is what made their image-board so special.

Moot recreated the news board as the /pol/ “Politically Incorrect” board, making it the third board where rightists gathered on 4chan. In /pol/, you weren’t expected to have to post news, just whatever politically incorrect ideas that you had at the time. This new board would slowly kill alternative boards like 4chon, which relied heavily on defected 4chan posters. Moot would claim in his 7 hour departure Q&A that creating sites like 4chon, based solely on hatred of other people or other internet forums, “didn’t really create a lot of great content.” The activity of /pol/ would soon rival the activity of the anime forum. In the word-of-mouth between posters, there was a joke that /pol/ was a containment board and just a place to keep anonymous plain-text rightist posters off of the other 4chan boards. 

Despite most of the rightist discussion being limited on /pol/, there was a website-wide rightening of 4chan culture. Memes were mostly critical of different races, and even the most progressive parts of 4chan would bemoan the identity politics of Tumblr. When dislike of identity politics reached its height, the video games forum would launch an anti-left politics movement called GamerGate to demand a reform in game journalism ethics. While GamerGate started off as a very diverse, vocal opponent to what they saw was unethical journalism (before it was debunked), many of the anonymous /pol/ rightists would take advantage of its anti-left character by creating sock-puppets. Unfortunately, activities like GamerGate would prove to be too much, and cause Moot to step down from 4chan’s admin position. 

Today it is hard to find a 4chan user that doesn’t have an attachment to far right politics. By being anonymous, rightists took advantage of their lack of identity to spread a hateful world-view. Some 4channers bought the right wing philosophy completely, others accept only some of it. Many only spread the rightist memes as a joke.