Be less trusting of intuitive arguments about social phenomena

We don't know anything about macroeconomics and we're trying really hard.

note: I think this applies much less or even not all in domains where you’re getting tight feedback on your models and have to take actions based on them which you’re then evaluated on. 

I think there’s a trend in the effective altruist and rationality communities to be quite trusting of arguments about how social phenomena work that have theoretical models that are intuitively appealing and have anecdotal evidence or non-systematic observational evidence to support them. The sorts of things I’m thinking about are:

• The evaporative cooling model of communities

• My friend’s argument that community builders shouldn’t talk to people less sharp than them because it’ll harm their epistemics

• Current EA community is selecting for uncritical people

• Asking people explicitly if they’re altruistic will just select for people who are good lairs (person doing selections for admittance to an EA thing)

• The toxoplasma of rage

• Max Tegmark’s model of nuclear war

• John Wentworth’s post on takeoff speeds

I think this is a really bad epistemology for thinking about social phenomena. 

Here are some examples of arguments I could make that we know are wrong but seem reasonable based on intuitive appealing arguments and observational evidence:

• Having a  minimum wage will decrease unemployment rates. Employers hire workers up until the point that the marginal revenue generated by each worker equals the marginal cost of hiring workers. If the wage workers have to be paid goes up then unemployment will go up because marginal productivity is diminishing in the number of workers. 

• Increasing interest rates will increase inflation. Firms set their prices as a cost plus a markup and so if their costs increase because the price of loans goes up then firms will increase prices which means that inflation goes up. My friend works as a handyman and he charges £150 for a day of work plus the price of materials. If the price of materials went up he’d charge more

• Letting people emigrate to rich countries from poor countries will increase crime in rich countries. The immigrants who are most likely to leave their home countries are those who have the least social ties and the worst employment outlooks in their home countries. This selects people who are more likely to be criminals because  criminals are likely to have bad job opportunities in their home countries and weak ties to their families. If we try and filter out criminals we end up selecting smart criminals who are good at hiding their misdeeds. If you look at areas with high crime rates they often have large foreign immigrant populations. 

• Cash transfers increase poverty, or at least are unlikely to reduce more than in-kind transfers or job training. We that people in low-income countries often spend a large fraction of their incomes on tobacco and alcohol products. By giving these people cash they have more money to spend on tobacco and alcohol meaning they’re more likely to suffer from addiction problems that keep them in poverty. We also know that poverty selects people who make poor financial decisions, so giving people cash gives people greater ability to take out bad loans because they have more collateral. 

• Opening up a country to immigration increases the unemployment of native-born workers. If there are more workers in a country then it becomes harder to find a job so unemployment goes up. 
   

• Building more houses increases house prices. The value of housing is driven by agglormation effects. When you build more housing agglomeration effects increase, increasing the value of the housing, thereby increasing house prices. House building also drives low-income people out of neighbourhoods. When you see new housing being built in big cities it’s often expensive flats that low-income people won’t be able to afford. Therefore if you don’t have restrictions on the ability to build housing low income people won’t be able to live in cities anymore. 

Many people find these arguments very intuitively appealing - it was the consensus opinion amongst economists until the 2000s that having a minimum wage did increase unemployment. But we know that all of these arguments are wrong. I think all of the arguments I listed as examples of intuitively appealing arguments made in the EA and rationality communities have much less evidence behind them that having a minimum wage. The evidence for minimum wage increasing prices was both theoretical - standard supply and demand, a very successful theory, says that this is what happens - and statistical - you can do regressions showing minimum wages are associated with unemployment. But it turned out to be wrong because social science is really hard and our intuitions are often wrong. 

I'm pretty sceptical of macroeconomic theory. I think we mostly don't understand how inflation works, DSGE models (the forefront of macroeconomic theory) mostly don't have very good predictive power, and we don't really understand how economic growth works for instance. So even if someone shows me a new macro paper that proposes some new theory and attempts to empirically verify it with both micro and macro data I'll shrug and eh probably wrong. 

This is a standard of evidence is way way higher than what’s used to evaluate a lot of the intuitive ideas that people have in EA, especially about community building. 

All the examples I gave of intuitively appealing ideas are probably (>80%) wrong and come from economics and all but one from microeconomics. This is in part because my training is as an economist and so economics examples are what come to mind. I think it’s probably also because it takes the rigour of modern microeconomics - large datasets with high-quality causal inference - to establish that we can be confident that ideas are wrong, and even so I have like 15% credence that any minimum wage meaningfully increases unemployment. 

My argument is that if we have these quite high levels of uncertainty even for the question of whether or not having a minimum wage increases unemployment, maybe the social science question which has had the most empirical firepower thrown at it, we should be way, way more sceptical of intuitive observational models of social phenomena we come up with.