Another month, another rationality quotes thread. The rules are:

  • Please post all quotes separately, so that they can be upvoted or downvoted separately. (If they are strongly related, reply to your own comments. If strongly ordered, then go ahead and post them together.)
  • Do not quote yourself.
  • Do not quote from Less Wrong itself, HPMoR, Eliezer Yudkowsky, or Robin Hanson. If you'd like to revive an old quote from one of those sources, please do so here.
  • No more than 5 quotes per person per monthly thread, please.
  • Provide sufficient information (URL, title, date, page number, etc.) to enable a reader to find the place where you read the quote, or its original source if available. Do not quote with only a name.
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Even though there are no ways of knowing for sure, there are ways of knowing for pretty sure.

Daniel Handler (pen name Lemony Snicket)

There are also ways to fool yourself into being pretty sure.

“I’ve never been certain whether the moral of the Icarus story should only be, as is generally accepted, ‘don’t try to fly too high,’ or whether it might also be thought of as ‘forget the wax and feathers, and do a better job on the wings.”

Stanley Kubrick


I've never seen the Icarus story as a lesson about the limitations of humans. I see it as a lesson about the limitations of wax as an adhesive.

Randal Munroe

Maybe hubris means not knowing the capabilities of one's tools. Edit: I've just realized that in that sense, underestimating the capabilities of one's tools and refusing to try would also be a sin. If you believe that Fate itself is opposed to any attempt by men to fly, that's more arrogant a belief than thinking Fate is indifferent. I like this implication.

The simple view is that medicine exists to fight death and disease, and that is, of course, its most basic task. Death is the enemy. But the enemy has superior forces. Eventually, it wins. And in a war that you cannot win, you don't want a general who fights to the point of total annihilation. You don't want Custer. You want Robert E. Lee, someone who knows how to fight for territory that can be won and how to surrender it when it can't, someone who understands that the damage is greatest if all you do is battle to the bitter end.

Most often, these days, medicine seems to supply neither Custers nor Lees. We are increasingly the generals who march the soldiers onward, saying all the while, "You let me know when you want to stop." All-out treatment, we tell the incurably ill, is a train you can get off at any time--just say when. But for most patients and their families we are asking too much. They remain riven by doubt and fear and desperation; some are deluded by a fantasy of what medical science can achieve. Our responsibility, in medicine, is to deal with human beings as they are. People only die once. They have no experience to draw on. They need doctors and nurses who

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This is a great quote, but even moreso than Custers and Lees I feel like we need someone not so much on the front lines, but someone to win the whole war - maybe Lincoln, but my knowledge of the American Civil War is poor. Preventing death from most relevant causes (aging, infectious disease, etc.) seems within reach before the end of the century, as a conservative guess. Hastening winning that war means that society will no longer need so many generals, Lees, Custers or otherwise.
I don't think we'll prevent death from aging within the century. Normally I'd offer to bet you, but obviously that wouldn't work out in this case...

Don't trust any model that implies X is too low unless it's also capable of detecting when X would be too high


Hmmm... a Bayesian optimization model will detect high values for a target function while remaining ignorant of very low ones. So I shouldn't trust it?
Your optimizer, whether Bayesian or not, needs to be able to recognize a low point when it hits one, or else it can't optimize at all! If every point looks the same... (It may learn more about high points, but it must still learn about low points.)
That's not how Bayesian optimization works. Broadly, the idea is that we use Bayesian optimization when both calculating the value of the target function at a point and calculating its gradient are both expensive or infeasible. Thus, we instead choose points at which to sample the target function, and the samples train a Gaussian process model (or other nonparametric model of functions) that tells us what the function's surface looks like. In such a procedure, we obtain the best performance by sampling points where either the expected function value or the model's variance is particularly high. Thus, we choose points that we know are good, or points where we're very uncertain, but we never specifically search for low points. We'll probably encounter some when sampling points of great uncertainty, but we didn't specifically seek them out.
I think that the lifespan that humans can live to if they wish, given current medical and scientific knowledge, is too low.
I agree. The model I use to derive that involves looking at lots of dying people who don't want to die. If we had lots of people lying around saying "I wish I could die; why can't I die?" that same model would conclude the lifespan is too long.
I didn't say that lifespan is too low, I said that the lifespan that you can choose if you wish is too low. The existence of people who want to die is irrelevant to this.
I think Sister Y would disagree with the implication that there are few such people.
We actually do have people around who want to die. At the same time we still want to increase the lifespan that people can achieve if they want to do so.
I think the key word in the part of dspeyer's comment that you quoted is "lots".

“Pharmaceutical happiness isn’t actual happiness, John. It just feels like it for a while.”

“And if I take aspirin for a headache, my lack of headache isn’t actual lack of headache. It just feels like it for a while. I don’t see the relevance.”

From "Beyond the curtain", fiction by Jeffrey Wells.

A: I don't believe in love. It's just a bunch of chemical reactions. B: [kicks A in the balls] A: WHYYY??! B: I don't believe in pain. It's just a chemical reaction.

-- SMBC on explaining vs. explaining away.

'Happiness' is a vague term which refers to various prominent sensations and to a more general state, as vague and abstract as CEV (e.g. "Life, Liberty, and the pursuit of Happiness"). 'Headache', on the other hand, primarily refers to the sensation. If you take an aspirin for a headache, your head muscles don't stop clenching (or whatever else the cause is); it just feels like it for a while. A better pill would stop the clenching, and a better treatment still would make you aware of the physiological cause of the clenching and allow you to change it to your liking.

"It can scarcely be denied that the supreme goal of all theory is to make the irreducible basic elements as simple and as few as possible without having to surrender the adequate representation of a single datum of experience." -Einstein


"Our beliefs about ourselves and the world are built on each other in a Jenga-like fashion. My belief that Keynes said “When the facts change, I change my mind” was a block sitting at the apex. It supported nothing else, so I could easily pick it up and toss it without disturbing other blocks. But when Jean-Pierre makes a forecast in his specialty, that block is lower in the structure, sitting next to a block of self-perception, near the tower’s core. So it’s a lot harder to pull that block out without upsetting other blocks—which makes Jean-Pierre reluctant to tamper with it."

-Phillip Tetlock, Superforecasting


"The first step in changing someone’s mind is to know where that mind is."

-William Ury, Getting to Yes With Yourself

I don't understand this quote. Could someone explain it to me?
It's highly to related to another of my favorite quotes "Seek first to understand, then to be understood." It's saying that if you want to convince someone of your point of view, you have to do it from their current frame of reference, not yours.
That's an excellent way to take that quotation, but note that it's probably actually derived from a famous prayer ascribed to St Francis of Assisi in which it surely isn't referring to what one should to in order to convince someone else of something. (The prayer almost certainly has nothing much to do with St Francis, other than maybe being inspired by something written by one of his associates. But that's not important right now.)
The "Seek First to Understand" quote comes from Stephen Covey (7 Habits of Highly Effective People, Habit 4), who meant it in kind of a hybrid way that has to do with both the "give first" idea of St. Francis as well as the "Changing People's Minds" idea I mention above.

At root, our work suggests that creativity in science appears to be a nearly universal phenomenon of two extremes. At one extreme is conventionality and at the other is novelty. Curiously, notable advances in science appear most closely linked not with efforts along one boundary or the other but with efforts that reach toward both frontiers.

Mukherjee et. al, Atypical Combinations and Scientific Impact.

The terror that took Baru came from the deepest part of her soul. It was a terror particular to her, a fundamental concern—the apocalyptic possibility that the world simply did not permit plans, that it worked in chaotic and unmasterable ways, that one single stroke of fortune, one well-aimed bowshot by a man she had never met, could bring total disaster. The fear that the basic logic she used to negotiate the world was a lie.

Seth Dickinson, The Traitor Baru Cormorant, p. 292

The NTP Classic devs fell into investing increasing effort merely fighting the friction of their own limiting assumptions because they lacked something that Dave Mills had and I have and any systems architect necessarily must have – professional courage. It’s the same quality that a surgeon needs to cut into a patient – the confidence, bordering on arrogance, that you do have what it takes to go in and solve the problem even if there’s bound to be blood on the floor before you’re done.


It's good that most people don't have such arrogance, because it would be unjustified. Don't strive for confidence, strive for calibration. And demand it from your system architect as you would from your heart surgeon.
I think there's an underlying truth that most software engineers are too timid, perhaps because we're calibrated for working with materials where mistakes are more costly and harder to put right.

That language is an instrument of human reason, and not merely a medium for the expression of thought, is a truth generally admitted.

George Boole, Laws of Thought, ch. 2.

John Green on human inability to instinctively appreciate large numbers and broad events:

My current number one goal in life is to someday be as excited about something as Cheez Doodles Guy is about Cheez Doodles. But its a weird facet of human brains that some thins cause that joyful excitement and others don't. Like today, the World Health Organisation announced that maternal death over the last twenty-five years has fallen 44% worldwide. This is amazing news (arguably even better news than discovering Cheez Doodles in Antarctica) and yet while I am enc

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Related quote from July's thread:
I already gave a reply which suggested three things are wrong with that. It's conveniently right there when anyone clocks on your link, but here's a repeat, and I'll add a fourth item: 1. We're not happy about the successful conclusion of World War II because it is distant in time, and that seems reasonable unless he's arguing that we should be happier about, say, the death of Genghis Khan. 2. He seems to imply that we should be happy at the end of World War II because the total benefits from winning the war are large. But people were also happy at the intermediate steps of winning the war and that happiness needs to be subtracted. In other words, if you're happy at the liberation of France, you can't be happy at the end of the war based on the entire benefit of winning the war, including the portion of that benefit that consists of France being liberated. That's double counting. 3. This argument would apply to bad news too. Among people who think Obama's Iran deal is likely to lead to Iran getting nuclear weapons, should they be a lot unhappier than they are? 4. The comparison invites the reader to think about the total benefits of the war, not the benefit to an individual reader. If you are happy about the end of the war based on the total benefits of winning the war, and everyone else is too, that's another form of double-counting Also, although it may come under #1, that reasoning indicates we should be a lot happier about the invention of fire or agriculture than about the end of World War II.
Happiness is not for appreciation of goodness of events, at least, that's not what evolution intended it to be for. It's for rewarding your actions to motivate you to do them as well as rewarding other people for their actions that are good for you. If neither you did anything to do it, neither you can pinpoint an actual person who did it and whose action you want to celebrate, it's no surprise that you do not feel happiness about that thing.

Ask the next question.

Theodore Sturgeon

Could you explain this quote?
You think you've understood a situation, but you might be missing something. Is there anything else worth considering? Sturgeon on the subject PDF in which Sturgeon discusses this at greater length
Thank you!

"What tit for tat lacks is a way of saying “Enough is enough.” It is too provocable, and not forgiving enough. And indeed, subsequent versions of Axelrod’s tournament, which allowed possibilities of mistakes and misperceptions, showed other, more generous strategies to be superior to tit for tat."

-Avanish Dixit, The Art of Strategy

Why the silent downvotes? If someone thinks the claims of the quote are inaccurate, let them expose the inaccuracies.

"Wisdom is not the same thing as information. Wisdom is information + experience + context, and only a human can do that. Wisdom is information you can actually use."

-Tucker Max, The Book in a Box Method

What implies that only a human can do that?
Well... Tucker Max does, in his quote. I think it's true in a narrow sense, if you take "can" as a statement about the present, not the future. But that's the least important part of the quote regardless.

The optimist fell ten stories, and at each window bar he shouted to the folks inside: 'Doing all right so far!'

Anonymous; quoted for instance in The Manager's Dilemma

"If you want to understand UFOs, reincarnation, and God, do not study UFOs, reincarnation, and God.
Study people."

Avatar, a character in Scott Adams' book, "God's Debris"


" Look forward and reason backward. Anticipate where your initial decisions will ultimately lead and use this information to calculate your best choice."

-Avanish Dixit, The Art of Strategy

I picked up the folders for the two courses required of every student at the school. Statistics and epidemiology. Epi—what?

In the first lecture, we ‘reviewed’ all the major study types. For example, in the case-control study you find a group of people with a disease, and then look for people who are much the same but without the disease. You compare the two groups to see if they have different risks. It’s a relatively cheap method, but it doesn’t tell you much about the order in which things happen. I can’t remember all the examples used in the lecture,

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Chronology is evidence of causality, but it's weak evidence. In this case, there are (at least) two problems. First, there could be some other factor (disruption of social network? increase in pro-inflamatory microbiota?) which causes both, but the sex is caused faster. Alternatively, it could be that depression causes low sex drive, but that kicks in immediately whereas it takes months to get a depression diagnosis. There are good ways to determine causality from observational data, but timing isn't one of them.
Hm? What Pisani is pointing out here is that of the 3 major causal patterns that a cross-sectional correlation can reflect, A->B, B->A and A<-C->B, a longitudinal correlation in which observations of A are followed by observations of B, will let you rule out 1 of the 3 patterns (B->A), reverse causation, which leaves either the hypothesized direct causation or confounding. This is much better evidence than just the cross-sectional approach, although I think confounding is much more likely in general so the boost is not as big as the trichotomy makes it sound.
Reverse causation is not ruled out because diagnosis can be delayed. It seems entirely plausible to me that it takes several months of worsening depression symptoms (during which time sex drive is effected) before a patient sees a psychiatrist. I suppose it's ruled out if we separate "depression" and "diagnosed with depression" into separate nodes, but that doesn't rule out anything interesting.

I come from a country that raises corn and cotton and cockleburs and Democrats, and frothy eloquence neither convinces nor satisfies me. I'm from Missouri. You've got to show me.

--Willard Duncan Vandiver

The world is all that is the case.

Tractatus Logico-Philosophicus, Ludwig Wittgenstein

I had totally forget about the Tractus! When I read the Tractus (yes...there was a time) I thought it was the most amazing thing ever. This was awhile I had very poor coping with both psychotic and OCD type symptoms so I remember reading sections of it over and over again, having all kinds of grandiose ideas and going on rants to strangers on the internet about things I was trying to understand, devoid of context... thinking the Vienna circle had figured it all out. Haha. I hope I can look back on today in the future and see a bit of a loon in me now too, a sign that I've matured. Then one day I decided to read a bit of Witties later works where he lost his former writing style. I couldn't get through it. I read reviews that said he denounced basically the entirety of the Tractus. In retrospect, the tractus really is amazing, from a certain perspective, but not from most of them... will be illuminating to discuss briefly an aspect of the biology and chemistry of yesterday, namely vitalism. Vitalism is the notion that living matter contains a vital principle which is absent from non-living entities, so that living matter obeys different laws from those that rule non-living matter. This is an old idea, and it is by no means ridiculous. This idea has led in chemistry to a distinction between organic and inorganic substances.


(strange that this very winding-road like insight follows from ... (read more)

Why is it not ridiculous? From skimming the source, he seems to be using a long discredited biological idea and applying it to intelligence because there's a vague resemblance if you squint at it. There's no clear reason to believe that vitalism would be any more possible, let alone plausible, with regards to intelligence as opposed to organic compounds.
It's not ridiculous because it's a concept that has been used to advance science. For many practical applications it makes sense to treat living entities different from non-living one's just as for many practical applications Newton's physics is useful. The fact that modern physics showed Newton's physics to be inaccurate doesn't make it ridiculous.
No, vitalism wasn't just a dead end, it was a wrong alley that too many people spent time wandering down. Vital theories were responsible for a lot of the quack ideas of medical history.
Quantum theories are responsible for a lot of the quack ideas too. I fear this isn't enough to make an idea ridiculous.
But quantum theory also makes correct predictions, and mainstream physics does not en masse advocate quackery. Vitalism never worked, and it lead the entire medical community to advocate actively harmful quackery for much of the 19th century.
As said above Vitalism worked in the sense that it suggest to treat organic and anorganic chemistry differently. Vitalism isn't a single idea. Aristoles get's labeled as a Vitalist but he didn't consider the vital force to be a prime element the way people in the 18th century did. He instead had the theory of the four bodily humors. Homeopathy that is supposed to strengthen the vital force is less harmful than draining blood from people during a cold as the four bodily humor theory predicted. If you say the theory of the existance of a vital force lead to harmful treatments and there treatments that you mean that aren't based on humorism?
By this line of reasoning almost all past theories can the discredited. People use a theory to make predictions and act on them. Only later do you learn the shortcomings. If you don't have empiricism you don't even have a tool to systematically notice your error. I think this is a fully general counter argument.
No, the important older theories lead to better theories. Newton's gravitational physics made correct predictions of limited precision, and Newton's laws lead to the development of Navier-Stokes, kinetic theories of gasses,etc. Even phlogiston lead to the discovery of oxygen and the modern understanding of oxidation. You don't have to be 100% right to make useful predictions. Vitalism, on the other hand, like astrology, didn't lead anywhere useful.
'long discredited' sounds like hindsight bias.
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For sentimental pacifism is, after all, but a return to the method of the jungle. It is in the jungle that emotionalism alone determines conduct, and wherever that is true no other than the law of the jungle is possible. For the emotion of hate is sure sooner or later to follow on the emotion of love, and then there is a spring for the throat.

Robert Millikan, "Science and modern life", The Atlantic Monthly, April 1928, Quoted in Understanding Poetry, 3rd edition, 1960.

To answer without thinking leads to many defeats.

  • Shi Ding'an

Tried to find original source, but beyond "in a poem" my English google fu turned up naught. I think its a good sentiment though. Folks go wrong less often by carefully coming to the wrong decision than they do by not stopping to think.

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"In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it." -GK Chesterton

This is my first time seeing this quote and it is a good one. Took me a minute to realize what he was saying. And I've been hanging out on this site for years. I can't stop you from saying or thinking I should have noticed the quote before, if that's the way your mind works. But in reality I am not unique and I am not an idiot and if I find something particularly useful here there is likely a significant minority of the rest of the readers who find it useful. Which is sort of consistent with the quote.
Posted before: December 2012 and February 2010 before that.

Graphical quote of the day - The Periodic Table of Irrational Nonsense:

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While it has some amusing jokes in it, this isn't a rationality quote. This won't help anyone think better, doesn't clarify beliefs, doesn't offer insight into anything. It's only a way of laughing at the out-group, which is counterproductive even when they are wrong.
There's at least one element on that map where cochrane says it can produce positive medical effects. Can you spot it?
Is acupuncture on the list? Meditation? I see chakras, but you can have all the useful parts of meditation without chakras.
Acupuncture is on the list. I even thought about something different.
I'm pretty sure I've seen you say positive things about chiropractic before, so my guess is that that's what you have in mind. There's e.g. this from Cochrane, which is less than a ringing endorsement but can be described without actual dishonesty as "say[ing] it can produce positive medical effects". [EDITED to add: isn't "chiropractic" a horrible word? It surely ought to be "chiropractice" or "chiropraxis" depending on how pretentiously classicist one wants to be. Perhaps it's no worse than "physic" or "arithmetic", but it always feels wrong to me.]
There's a huge difference between grantic that a process has significant positive clinical effects and recommending the process. To the extend that the first is true, I don't think it makes sense to argue that chiropractic is bad pseudoscience. To recommend it you have to compare it's advantges and disadvantages to other forms of treatment and I don't claim that it regularly wins out when you do that.

I've said before that a "financial crisis" means, roughly, "that someone borrows money from someone else and can't pay it back, and it is socially or politically unacceptable that the people who loaned the money not get their money back." So the way to avoid financial crises is to clearly define the classes of people whom it is socially and politically acceptable not to pay back.

Matt Levine

Um, no. That is, to put it politely, a naive view of what a financial crisis is. I can express it less politely if need be.
The quote isn't supposed to define financial crisis. It's claiming that a financial crisis isn't called a crisis if the people who lose money are unpopular. Though I read the link and still don't know what people Matt's thinking of.
It sure looks like it's trying to. Unpopular? That's an even worse way to try to define a financial crisis.
When someone says "Something is called an X when it has properties P, Q, and R", they need not be endorsing the definition. They might simply be saying (with more or less cynical exaggeration) "This is how the term gets used in practice". Like when someone says that a language is a dialect with an army, or that a freedom fighter is a terrorist the speaker approves of. I paraphrase Mike Levine's comment, in its context, thus: "If you look at how politicians and newspapers and the like use the term 'financial crisis', you will find that the point at which those words start getting used is the point at which someone is owed money they aren't going to get, and the powers that be find it unacceptable for them not to get it. From this cynical perspective we can see what's going on with these proposed new rules about banks: the idea is to make it clearer what sorts of debt the government can be expected to make sure gets paid back, and crucially what sorts it can't, in the hope that future bank failures will be less likely to be classified as financial crises." I haven't looked at how the term "financial crisis" actually gets used carefully enough to know whether Matt Levine's description is defensible (as it stands, or as a deliberate overstatement for cynical effect). Perhaps it isn't. But the right criterion to judge it by isn't whether it offers a good definition of "financial crisis", but by whether it offers a good description of the (perhaps very bad) way in which that term actually gets used.
Yes, I got a whiff of the "when a prole loses everything no one cares, when a fat cat gets pinched it's a crisis" flavour in the quote, but didn't bring it up since it was just a whiff and nothing conclusive. I don't mind Matt Levine saying all these things in his column. But I don't see how it is a rationality quote and the smell of class struggle certainly doesn't help here.
Oh, I completely agree that it doesn't seem at all like a rationality quote.
The original source is more explicit: Puerto Rico's Slide
I know we kind of hate authority here, but the guy did work on wall street for a number of years, and has written his financial newsletter for years as well. I feel like the quotes I've made recently have been taken less charitably than is usual here. Anyway, with this particular claim, I think it's meant more as a simplistic view that gets at some truth versus something that's always true, in which case that might be naive (although you didn't provide any counterexamples).
That doesn't make him an authority on financial crises. It makes him a Wall St. M&A lawyer who went into journalism. Perhaps try with quotes that are more than "a simplistic view that gets at some truth"? I see no reason to be charitable to quotes, anyway. There is a very very large number of quotable sentences around and stringent curation is much better than loose, lest we drown in clever turns of phrase without much insight behind them.
I'm not really arguing for a different norm. I'm just noting that it seems the norms have changed. Also, you still haven't really justified your opposition to the claim. Even if you aren't going to be charitable, you should at least explain why you're rejecting it, in a more substantial critique than "naive".
I'm inclined to call it "not even wrong", but let's take an example. The Financial Crisis is the crisis of 2008. It started (the crisis itself, not the preshocks), notably, with a bankruptcy of Lehman Brothers which the Fed allowed to happen. This, by the way, was later deemed to have been a mistake and the TBTF -- Too Big To Fail -- monsters were born. The immediate danger during the September and October of 2008 was that the global payment network would freeze because of counterparty uncertainty and that the world finance would, essentially, collapse. That did not happen, but the effects on real economy were severe nevertheless -- consult any GDP graph for the relevant period. So let's apply Levine's definition. Who in 2008 were the borrowers and who were the lenders? It was deemed "socially or politically unacceptable" for which creditors to not get their money back? Is it a useful way to think about the situation?
AIG was the borrower (and separately Fannie and Freddie), banks were the lenders, it is absolutely useful to think about the situation in those terms. It highlights the conflict between our political intuition that insurance should be protected and financial speculation should not - some people thought AIG was doing one, some people thought the other. Likewise some people thought Freddie and Fannie were widows-and-orphans investments that the government should guarantee and some people thought they were private financial traders. Clarifying these things could have averted the crisis, it's absolutely a useful model.
I don't know about other quotes but I think this quote also would have gotten resistance years ago. Complex problem X can be simplified to Y and solved with populist solution Z is not a template that generally popular in the rationalist quote thread. Maybe you did post different quotes in the past?
He's mostly describing what's going on, not giving advice on what should be done. And the TLACs he's discussing are not populist. (This may be clearer in context.)
"clearly define the classes of people whom it is socially and politically acceptable not to pay back." sounds to me like a populist suggestion. To the extend that you quoted him out of context, that's still an issue with the quote.
I kind of expect someone disagreeing with a quote to at least look at the context. Do you think quoting the entire section would have gotten a better reaction?
I generally do think that quotes in this thread are supposed to be able to stand alone. Lumifer probably still would have objected.
I looked at the context -- the quote was made while Levine was talking about Puerto Rico. It still does not make sense. He might have meant it as a fancy way of saying that if nobody cares then nobody cares, but that's a trivial observation.
If this is a way to avoid financial crises, then we can prevent anything bad from ever happening by clearly defining "bad things" as "things that cannot happen."
The example given is explicitly labeling certain debt as "not expected to be paid back if there are troubles", so that someone who buys that knowingly accepts the risk. That's more substantive than just defining it away, although the catchy way in which it's worded might not give that away.
That will only work if you label all debt in that way, since you cannot have 100% certainty of any debt being paid back. And this means that there will be no real difference in the world except that people realize that debts are not always paid back, which they ought to realize anyway. It does not prevent anything bad from happening, just as my redefinition of "bad" does not.
And, of course, people do that. It's called a "credit rating" and there are a few large institutions which assign ratings to bonds. Pretty much all bonds traded in financial markets have credit ratings.
And one of the big issues leading to the financial crisis was that a lot of these ratings were wrong and a lot of AAA bonds defaulted.
I think there may be something to consider in the idea of having "Loans where society has promised to go to great lengths to enforce the will of the creditor, even if the debtor's reasons for nonpayment are convincingly sympathetic." and "Loans where society may forgive the debt, if the debtor offers a good reason to do so, even if the creditor disagrees with society's judgement on this issue." be legally distinct types of lending, such that the creditor and the debtor can negotiate on which type it will be without society retroactively altering the agreement. Creditors will of course prefer the first class of loan, but society as a whole would have a preference that many loans of the second type be available for personal emergencies.
Why wouldn't the market price these two types more or less efficiently meaning that the second type will have to charge a higher interest rate to compensate for the option of the politicians deciding not to pay the loan back?
It would? I don't quite follow the question. Yes, the second type of loan would invariably have a higher interest rate. Let's say there's two loans for 10000$ and that, regardless of the loan type there is a 0.1% chance that a debtor will have an accident. If the debtor is poor, they will be forced to choose between not making loan payments and (for example) losing a leg to gangrene. If the debtor is rich, they will can pay both their loan payments and medical bills at the same time. Loan A asks for 1000$ in total interest and has enforced payment which will prevent a poor debtor from paying their medical bills. Regardless, the creditor has priority in payment and receives their interest either way. Expected value to the bank: 1000$. Loan B asks for 1010$ in total interest, but has a hardship forgiveness clause. There is a 0.1% chance that the creditor will lose 10000$, but no chance of the debtor losing a leg. Expected value to the bank: 1000$. The bank is indifferent between the two loans, as both have the same expected return (lets ignore variance for now on the bank's part; we can assume they deal in a large enough volume of loans or charge slightly more interest to compensate). The poor debtor prefers Loan B, as 10$ is a small price to pay for protection against crippling disability. The rich debtor prefers Loan A, as they do not want to pay 10$ to avoid a negative result which they are already protected against. I don't see any particular social problems arising from this situation. Do you?
I have a feeling you're trying to reinvent the wheel. Bond insurance, as well as various forms of bond guarantees, exists and is used when it make sense. Junk bonds have a non-trivial risk of default (reflected in their yield), but are actively traded. Moreover, if you are talking about bespoke loans, their conditions are entirely determined by what's in the contract, so there is nothing preventing the borrower from negotiating some appropriate "hardship" clause. What do you want to make possible that is not possible now?
It's not about possible vs impossible. Its about industrial and social standards. If a private individual goes to a bank and asks to take out a loan, and then starts asking about the possibility of more forgiving terms in the case of a default, the bank suddenly becomes incredibly suspicious. Planning for unexpected emergencies is seen as admitting that you intend to default. As a result, banks largely don't let people negotiate for generous debtor protection clauses, or, when they do, they only agree after incredibly punitive interest rates are agreed to. As a result, private individuals by and large just don't ask for that sort of thing. It's Not Done. What I feel would be better is if creditors had a culture of less suspicion here. Debtor forgiveness clauses should be the default that a debtor opts out of with a bespoke loan exchange for a lowered interest rate rather than something they have to opt into if they're allowed the option at all. A debtor arranging their affairs such that a sudden injury does not financially cripple them should become the new norm, not an example of unusual prudence. Likewise, a debtor asking to take on that risk in exchange for a lower rate should be by seen creditors as dangerously recklessness rather than as confident and therefore trustworthy.
A poor person comes to the bank and wants a loan. The bank judges them a high risk, and either declines to offer the loan or offers it at a high rate of interest. No way of drawing up loan contracts differently can affect that basic relationship between the risk of a loan and its cost. Banks are not charities. They provide a service in return for a profit. As with any business, they must make a profit on whatever service they provide, at least on average, or they will cease providing that service. Even if the bank were set up as a non-profit organisation for the good of its customers rather than its shareholders, it still has to have a business model that breaks even. Selling £10 for £5 is not a business model. Laws and regulations that make a business sell £10 for £5 result in the business ceasing, or changing its form to avoid the laws. ETA: I think the causality works the other way round. You can't make up social rules and say "wouldn't it be nice if people behaved like this?" That's not to say that what we have at present is the only possibility, but one has to think about how an alternative would actually work, and not merely imagine happy faces.
FFS the bank makes a profit in every example provided. I don't want to say that you obviously didn't read the post, but I honestly can't see any way you would come to post this comment otherwise. Loans are a service. Loans with gentle defaults are a more desirable service. Those seeking loans would often purchase such services preferentially and at a profitable premium to the bank, if they were available or if asking for them were socially acceptable. Laws should be passed to encourage banks make such offers.
I don't see why this would be so. Consider the usual death spiral: the "gentle default" (GD) loans are more expensive than "normal" loans. This activates the self-selection bias -- people with good credit will take "normal" loans and people which expect that their probability of default is high will take the GD loans. This makes the population of GD borrowers skewed towards high default rates. To compensate for this, the bank raises the rates on GD loans. This, in turn, reinforces the self-selection and the GD borrowers population becomes even more skewed towards high default. Rinse & repeat, crash & burn. Besides, if you insist that this service would be profitable for the banks, why are they not offering it? The social conventions which prevent individuals from asking for these terms do not apply to banks -- if this idea were good, they would take the initiative and create such a product.
Because you have chosen imaginary numbers to produce that result. But however the loan is structured, the bank must get its return or it will decline the business. As Lumifer pointed out, you are proposing an insurance scheme against default. This is an existing structure, perhaps too much so. In the UK it is called Payment Protection Insurance. The problem with PPI is that it was sold under pressure to people who did not need it. The fallout from that has cost some banks billions, or rather, it has forced them to give back billions they should never have received. to the extent that a whole secondary form of dodgy business has sprung up to assist people in making claims for having been mis-sold these policies.
A poor person comes to LW and wants to post a laborious article. LW judges them a high risk, and either declines to post the article or offers it at a high rate of 2 Karma points. PS: Sorry to misuse your comment; it was the most recent one. ;)
Well, moral hazard is a thing. Besides, the borrower always has the option of bankruptcy. You're talking about the situation when the debtor thinks he might not pay back the loan and not declare bankruptcy, right? I don't see why the bank should be sympathetic. I also have trouble imagining the situation you're describing. Banks rarely lend money outright to individuals without any protection. The great majority of loans involve collateral -- a house (in the case of a mortgage), a car (in the case of an auto loan), securities (in the case of the margin loan at the broker), etc. And in practice, if you default, the bank gets the collateral and that's the end of it. Given this, what kind of "debtor forgiveness clauses" do you have in mind and what protections against abuse will be there?
An example might be an auto loan with a clause that allows a debtor who is rendered unable to pay through no fault of their own (as judged by a court or other agreed upon mediator, for example) does not lose their car (the collateral) despite not being able to pay. And to compensate the bank for this low probability but high impact loss, they pay slightly higher interest rates.
So, this is basically mandatory partial insurance on loans? Economically this means (assuming your proposal is revenue-neutral for banks) forced wealth transfer from borrowers who were able to pay off the loans to borrowers who were not able to. I don't think it's a terribad idea which will doom the Western civilization, but I don't think it's much good, either. You're effectively setting up a "bankruptcy lite" regime where you still have to go to court and show that you're destitute ("unable to pay", so presumably you have no cash and nothing in your bank accounts), but if the court decides it was not your fault, you get to keep some of your assets. Meh. You'll also get a bunch of unintended consequences, as usual. Off the top of my head here are two: * If there is a significant chance the loan will be forgiven if the debtor has no money, banks will start to take credit scores seriously. People with a healthy bank account will be given loans, people who live paycheck to paycheck will be denied loans or charged exorbitant rates. There is no right to credit, and no right to low rates either. Make it too easy to default on a loan and the banks will react by just not giving loans to people likely to default. * Specifically with respect to auto loans, if there is a chance you won't be able to get your collateral (the car) back, the banks will have incentives to find other ways to finance. For example, you can structure a lease with an option to buy at the end to be much like a car loan: make the monthly payments larger, make the residual value smaller, and it's quite similar. But the crucial difference is that you can always repossess the leased car. Therefore under your proposed regime, leases will become more frequent.
I read them less as proposing it should be mandatory and more as proposing it should be opt-out. In a perfectly efficient market the latter would make no difference compared to opt-in, and in the real world it would move some trivial inconveniences around.
To quote from RichardKennaway's comment
googles "Payment Protection Insurance" and educates self
The US might have a system where something like that happens but Europe generally doesn't. You don't need two types on lending in this case. You just need laws about enforcing loans that are written in the public interest as they are written in a country like Germany and not laws that are written by banking lobbyists.
This proposal is equivalent to just having society never forgive debts. If society doesn't ever forgive debts, you can still do the equivalent to case 2 by simply writing a normal contract and adding a clause saying that the debt is cancelled under these conditions, then listing the same conditions that would cause society to cancel it under your proposal. So we've already had this. It didn't work well.
Nope, the second type is just a bond with an embedded option to not pay if you can convince the politicians you shouldn't. I expect it to be very expensive :-/ As to never forgive debts, well, there is a reason for bankruptcy laws. Blood out of stone, and all that.
I do not think it would actually be the same in practice, due to coordination problems. To make an analogy, consider unions: In theory, unions are unnecessary because the collective bargaining unions exist of facilitate can be undertaken without a formal structure. In practice, people will simply refuse to strike unless they have a strong, formal assurance that their fellow workers will follow through with their part of the strike. The same sort of situation exists for a hypothetical hardship forgiveness clause in a loan - creditors have every incentive to use their disproportionate negotiation position to deny all such clauses and debtors are in no position to boycott the creditors in response giving a lack of credibly coordinated collective action. By making hardship forgiveness a standardized aspect of some classes of loans, you establish a Schelling point in loan negotiations - "I will not agree to any loan without the standard protections against unexpected hardships financially ruining me" - and frame the issue in the minds of consumers such that they are explicitly thinking of a generous default clause as a protection to them (which it is) and a lack of such a clause as a salient risk to their future finances (which it is). tl;dr: It is currently possible to demand generous debt forgiveness clauses when asking for a loan, but creditors will not concede your demands if you do. Giving such clauses social and legal sanction and framing loans without such clauses as being very risky would encourage customers to negotiate collectively for such clauses where they would otherwise not do so.
If you do that you might end up simply shifting the bad thing that happens from being "someone doesn't get paid back" to "someone doesn't get a loan who needed one."

"In theory, there is no difference between theory and practice. In practice, there is."

Often attributed to Yogi Berra, but research done at Snopes casts doubt on this.

I thought of this quote when I read E. Yudkowsky's essay on The Map and the Territory.

Duplicate, although with the Yogi Berra attribution.

Science is the belief in the ignorance of experts.

Richard Feynman, What is science?

This is a dupe.

Met's manager Terry Collins made the controversial decision to pitch Matt Harvey instead of Jeurys Familia in the ninth inning of the final game of the 2015 MLB world series. After Harvey walked the first batter, Collins again faced the decision of whether to bring in Familia or let Harvey continue pitching:

"If you're going to let him just face one guy, you shouldn't have sent him out there," Collins said about the decision not to lift Harvey after the leadoff walk.

Classic sunk cost fallacy.

Or a recognition that one guy is not a statistically significant sample.


There is no chaos in the world, only complexity.

"Believe what you believe, but note that what you believe is not reality."