Non sequitur of the month: "either-or" means "fifty-fifty"

Very frequently I experience an urge to write a post with no other purpose than to just mock some piece of extraordinary stupidity that I've encountered in the media. I try to fight that urge, as writing posts that do nothing but attack an easy target is kind of cheap. However, sometimes the temptation is just too strong. For one thing, shooting fish in the barrel can occasionally be fun. For another, psychologists tell me that it's unhealthy to suppress anger, and non sequiturs make me extremely angry. I take them very personally.

Therefore, in order to channel that anger, I decided to start a periodical feature called "Non Sequitur of the Month." In it, I'll try to present truly spectacular errors in reasoning. Fireworks of stupidity, if you will. And since pretty much any fallacy can in principle be stated as a non sequitur, I don't anticipate having trouble keeping things going.

First up is one Anna Cieślak, a journalist working for the second-largest Polish daily newspaper, Rzeczpospolita (title means "The Republic"). She has a blog, and on that blog, there's a post on unemployment. The very first two sentences of that post, in translation, read

From the micro point of view, i.e. from the point of view of an individual, it makes no practical difference whether the unemployment rate will climb to 12.5 or to 13.5 percent. You'll either get fired or you won't, and therefore your risk of becoming unemployed is 50 percent anyway.

Yes, you read that right. Apparently, the author believes that whenever the outcome variable is binary, it necessarily means that each alternative occurs with probability one-half. I should immediately start playing lottery; since I can either win the jackpot or not, it must mean that I have a fifty percent chance of winning.

This is truly a remarkable, monumental piece of stupidity. I believe the first entry in the Non Sequitur of the Month category may well turn into a non sequitur of the year.

You can be a Marxist and not even know it

Some (perhaps most) U.S. farmers hate welfare. But, almost all of them receive it (only theirs has a different name; it's called "farm subsidies"). So, are farmers who hate welfare being hypocritical?

The answer is no, they're not, and that's because they're Marxists. Of course, none of them would call themselves a Marxist, and I'm sure most of them hate Marxism at least as much as they hate welfare. But nonetheless, they are, in that they subscribe to Marxist theory of value through labor. Most farm subsidies require extremely hard work to qualify for and this, probably, is why farmers don't perceive subsidies as welfare.

Of course, this isn't really about farmers. The old Marxist error of confusing input with output is very widespread, and probably derives from deep-seated intuitions: how can it be possible for hard work to not have value? I've met tons of people, many of them raging conservatives, who were Marxists in this particular respect.

Don't play the lottery. And don't go to Harvard.

Every once in a while when I'm trying to persuade someone that from a monetary perspective it's irrational to buy lottery tickets, I hear the following response: But someone wins it. In this particular context, that response is a trivial mistake of not differentiating between conditional and unconditional probabilities: sure the probability of someone winning is close to one (not quite one but almost there), but what you should be concerned with is the conditional probability of that someone being you, which is, well, pretty close to zero.

Is the same mistake responsible for the popularity of the "American dream" (as in: surely, a story of "from rags to riches" will happen every once in a while, but what makes you think it'll happen to you)? And if so--is this mistake evolutionarily deliberate, in that if we knew the true odds, we'd all just stop trying?

I think the answer is yes and no, respectively. Yes, it is the same mistake; but the reasons we're making it are not uniform. We are able to recognize some conditional probability situations (i.e. poker hands or SAT problems) as such, while others (like the lottery or the American dream), we are not. Different context fools us into thinking those things are different in essence. Whereas if the mistake were evolutionarily selected for, we just wouldn't be able to deal with conditional probabilities at all, ever.

Tips and dirty looks

This happened to me many times: I buy a $1.50 cup of coffee in a coffee shop somewhere, put a quarter in a tip jar, and promptly get a dirty look that says, "Anything less than a buck, don't even bother."

Of course, tipping a dollar on a $1.50 purchase is ridiculous; a quarter is a fair tip, if you decide to leave any. I basically see two choices: you can either not tip at all and receive the same amount of dirty looks but save some money, or tip a dollar once every four purchases and zero three out of four times, thereby spending the same amount of money as if you were tipping fairly all the time but decreasing the number of dirty looks shot at you by one-fourth.

It's more or less about more or less health insurance

It takes an incredible amount of work to develop an intelligent opinion on a really complicated subject, which is why I don't have much of one on healthcare reform. But, I have links.

It's fairly clear what the problems are: 1) there are a lot of people who receive too little healthcare, mostly because they are un- or underinsured, and 2) aggregate healthcare costs are out of control; as of now annual costs consume almost 18% of GDP, which is far more than in any country in the world, and they are rising faster than inflation, so things are getting worse.

Naturally, if some people underconsume but costs are rising, it must mean that some other people overconsume. This much almost everyone agrees with. The problem is with determining exactly who it is that overconsumes the most. The main candidates are two: sick people or rich people.

The first possibility isn't really that sick people overconsume healthcare but rather that there are too many sick people relative to healthy people in the insurance pool. Every insurance system is a scheme in which people who don't need it subsidize those who do, but in the case of health insurance, too many of those who don't need it opt out altogether, so a shortage of subsidies drives up the costs (this is called "adverse selection"). The second possibility is that people who can afford health insurance buy it and then, since they don't have to worry about the cost of most services, they use those services without worrying how much of them they really need, again driving up the costs.

Which of these alternatives is true is an empirical question, and not an easy one to answer. But note that a lot depends on the answer in terms of what's to be done about the situation. If you believe that what's going on is adverse selection, you'll want more health insurance. Specifically, you'll want health insurance to be compulsory, so that the risk would be pooled more efficiently. But if you believe in the second alternative, you'll want less health insurance, and will want to institute more health savings accounts instead.

Here's an article making the case for possibility #1, and here's one for #2.