Guy in the Hat

Coase Against Torture

I’m taking a course on data analysis, and the book contains the following quote from economist Ronald Coase: “If you torture the data long enough, Nature will confess.” The book makes it seem like Coase approves of this process, calling it a “lofty goal.”

As someone with a casual interest in economics, I didn’t think Coase, a theoretician, would have such a cheery opinion of purely statistical techniques. A quick trip to Wikipedia suggests that my class’ book has taken this quote out of context.

Gordon Tullock, fellow-travelling economist, uses the quote in a journal article while arguing against the use of “fancy models and fancy statistical significance,” citing his personal experience with Coase as authority: “I have heard him say this several times. So far as I know he has never published it.” Here is the relevant paragraph in full:

“More important, there is data torture. As Ronald Coase says, ‘if you torture the data long enough it will confess’. The young researcher, convinced he knows the truth will make changes in his specifications and very likely produce significant results. In some cases this is correct; his original specification was wrong and his new one is right. Nevertheless, this procedure reduces the significance of the significance test.”

Diogenes, Anarchist

A notion has been going around recently that many tribal customs may be a traditional means of avoiding domination by conquering states. This has a lot to do with a relatively recent book by James C. Scott, The Art of Not Being Governed, which deals specifically with Southeast Asia. He summarizes the argument nicely in the introduction:

“Today, they are seen from the valley kingdoms as ‘our living ancestors,’ ‘what we were like before we discovered wet-rice cultivation, Buddhism, and civilization.’ On the contrary, I argue that hill peoples are best understood as runaway, fugitive, maroon communities who have, over the course of two millennia, been fleeing the oppressions of state-making projects in the valleys—slavery, conscription, taxes, corvee labor, epidemics, and warfare. Most of the areas in which they reside may be aptly called shatter zones or zones of refuge.

Virtually everything about these people’s livelihoods, social organization, ideologies, and (more controversially) even their largely oral cultures, can be read as strategic positionings designed to keep the state at arm’s length. Their physical dispersion in rugged terrain, their mobility, their cropping practices, their kinship structure, their pliable ethnic identities, and their devotion to prophetic, millenarian leaders effectively serve to avoid incorporation into states and to prevent states from springing up among them.”

This idea is not new, and is certainly compatible with the old libertarian notion that states have historically emerged not through social contract, but through institutionalized slavery. Murray Rothbard, taking a break from his usual disdain for all things primitive, once speculated that Taoism might be a reaction to statism (pdf):

“I submit that while contemporary Taoists advocate retreat from the world as a matter of religious or ideological principle, it is very possible that Lao-tzu called for retreat not as a principle, but as the only strategy that in his despair seemed open to him. If it was hopeless to try to disentangle society from the oppressive coils of the State, then he perhaps assumed that the proper course was to counsel withdrawal from society and the world as the only way to escape State.”

I recently finished reading Ronald Dudley’s A History of Cynicism (which is free online), and I would be remiss, after pointing out my philosophical disagreements, not to celebrate Ur-Cynic Diogenes of Sinope by adding him to the canon of ancient primitivist anarchists. Diogenes lived just before the rise of Alexander the Great, and it was said that he wanted to be buried face down, in order to be righted once the topsy-turvy new order swept through Greece. This book gives the distinct impression that the mad world he was trying to avoid was one of state domination, and that his philosophical advice was a means of promoting self-reliance in an increasingly collectivized world. After all, who would want to conquer a city of Cynics who not only refuse to be governed by anything but practical philosophy, but have virtually nothing to steal?

The famous phrase “I am a citizen of the world” is often attributed to Diogenes, and apparently he didn’t mean that he loved all city-states equally:

“[A]s Tarn says, the phrase as used by Diogenes was one of negation, meaning, ‘I am not a citizen of any of your Greek cities.’”

After listing Diogenes’ rejections of almost every aspect of the contemporary city-state, Dudley notes:

“It is the extreme of individualism. To call it a political system at all is doubtless a contradiction, unless we are prepared to admit with Blake the possibility of a benevolent anarchy.”

Even the Cynical motto, “deface the currency,” commonly understood to mean “undermine false conventions in society,” has its origins in Diogenes’ personal experience with state hypocrisy. As the traditional story goes, Diogenes became a philosopher after he and his father were exiled for betraying their duties as protectors of the Sinopean currency. However, archaeological evidence puts this story in an new light. It is a familiar idea among libertarians that the printing of money by government fiat is neither economically nor morally distinguishable from counterfeiting. Either Diogenes or his father may have acted on this notion by putting out of circulation any false coinage, regardless of its origin:

“During the decade after 350 the credit of Sinope was being seriously undermined by the circulation of imitations of her currency, emanating notably from the satrap of Cappadocia. What action was taken to meet the situation is readily seen. Of the 55 coins with Aramaic legends 31 (or about 60 per cent.), of the 40 barbarian coins 8 (or 20 per cent.), have been defaced by a large chisel-stamp. This was done to put them out of circulation […]

The work must have been that of a high official at the Mint, it exactly coincides with what we are told about Diogenes’ father Hicesias. Hicesias, then, was a ‘sound money man’, he acted in the best interests of the State; why did he suffer imprisonment? […] of the good Sinopean coins, 2 out of 43 listed of the first issue, 10 out of 130 of the third issue have been so defaced. This was probably due to carelessness on the part of under officials, but it could easily be turned into a serious accusation against the Master of the Mint.” [emphasis added]

I don’t find the idea of Hicesias being chastized for a simple mistake very plausible. This ignores Diogenes’ cry of “deface the currency,” which obviously implies that there is something wrong with the currency of the day in the first place.

The Art of Inflation

Sun Tzu, observing but not necessarily understanding the correlation between an increase in the money supply and inflation:

“When soldiers are near, things sell dearly. When things sell dearly, wealth is exhausted. When wealth is exhausted, people are hard pressed by local taxes.”

Presumably, the locals have wages fixed by law or tradition, which leaves little money for taxes once soldiers paid from afar bid up prices.