Progress Daily

In new research, James Feyrer and Bruce Sacerdote (”Colonialism and Modern Income — Islands as Natural Experiments“) consider the effect the length of European colonization on the current standard of living of 80 tiny, isolated islands that have not previously been used in cross-country comparisons.

The longer one of the islands spent as a colony, the higher its present-day living standards and the lower its infant mortality rate. Each additional century of European colonization is associated with a 40% boost in income today and a reduction in infant mortality of 2.6 deaths per 1,000 births.

Before the Enlightenment, Europeans tended to view natives as savages who were better off dead than not baptized. After about 1700, however, attitudes began to change. When the authors divide the islands into those that were colonized in the centuries before 1700 and those that were colonized after, current island income is 64% higher per century for the post-Enlightenment group but only 11% higher per century for the pre-Enlightenment one. And the effects don’t appear to stem from the replacement of decimated low-income native populations with higher-income Europeans.

The authors also compare the experiences of separate Pacific islands with eight different colonizers. The islands that are best off, in terms of income growth, are the ones that were colonized by the US — as in Guam and Puerto Rico. Next best is time spent as a Dutch, British, or French colony. At the bottom are the countries colonized by the Spanish and especially the Portuguese.

“Master of the Island” by Joel Waldfogel

In the early days of the republic, the U.S. was more than 90% rural in its population. Today only 20% of Americans live in rural areas. Blue states consistently pay more in taxes than they take in federal assistance (the opposite is true for the red states) because large cities are tremendous engines of wealth creation.

“Real America” by Steven Berlin Johnson

A new study shows that, in richer countries, many more trees are springing up than are being felled.

Pekka Kauppi sought to identify exactly how much carbon is stored in the world’s forests. He analysed reports on the state of forests in 50 countries in 1990 and 2005 compiled by the UN Food and Agriculture Organisation. He also used information contained in national databases dating back hundreds of years.

Instead of merely estimating the area of forest in each part of the world (the traditional way of measuring forest cover), they took into account the volume of timber, the weight of the organic matter and the density of trees to calculate the carbon-capturing capacity of forests. In all the countries that have a GDP per head of $4,600 or more forests are recovering.

All major temperate and boreal forests are expanding.

India’s forests are no longer shrinking. In China the density of forest has fallen since 1949 in many parts of the country but the area of its forested land has steadily risen. The net result is an increase in the volume of China’s standing timber.

Urbanization decreases the likelihood of trees being felled for heating and building.

“Seeing the wood,” The Economist

Eswar Prasad, Ken Rogoff, Shang-Jin Wei and Ayhan Kose are offering another reappraisal of financial globalization (”Financial Globalization: A Reappraisal“).

Prasad and his colleagues reckon that the direct benefit of foreign capital — the extra money it provides — is “arguably” worth less than a number of indirect ones; namely a deeper financial system, better-run companies and a more disciplined macroeconomic policy.

Thanks to the first of these indirect benefits, open countries enjoy bigger, more liquid stockmarkets and a lower cost of equity. They also benefit from more sophisticated banking. Foreign lenders are often stronger and better run than their local rivals. They introduce new products and know-how and they give dissatisfied depositors somewhere else to take their custom, forcing local banks to improve.

However, overseas investors show little mercy to countries where public spending gets out of hand, the currency gets out of line, the banks are poorly supervised or companies rip off outside owners. Prasad thus lays out several “thresholds” that emerging economies should cross before they open up: A country’s financial system should be quite sophisticated, its companies fairly well run, and its macroeconomic policies reasonably disciplined.

Prasad’s checklist of “thresholds” echoes his catalogue of “indirect benefits”; the things financial globalization strengthens are also the things a country needs to have in place in order to benefit from it.

“Third thoughts on foreign capital,” The Economist

Daniel Gilbert has found that we overestimate the intensity and the duration of our emotional reactions to future events. On average, bad events prove less intense and more transient than test participants predict. Good events prove less intense and briefer as well.

One experiment of Gilbert’s had students in a photography class at Harvard choose two favorite pictures from among those they had just taken and then relinquish one to the teacher. Some students were told their choices were permanent; others were told they could exchange their prints after several days. As it turned out, those who had time to change their minds were less pleased with their decisions than those whose choices were irrevocable. This experiment challenges our common assumption that we would be happier with the option to change our minds when in fact we’re happier with closure.

Another study asked whether transit riders in Boston who narrowly missed their trains experienced the self-blame that people tend to predict they’ll feel in this situation. They did not. This experiment demonstrates that we tend to err in estimating our regret over missed opportunities.

And a paper waiting to be published, ‘’The Peculiar Longevity of Things Not So Bad,‘’ shows our failure to imagine how grievously irritations compromise our satisfaction. Our emotional defenses snap into action when it comes to significant problems, such as a divorce or a disease, but not for lesser problems.

Tim Wilson: ‘’We don’t realize how quickly we will adapt to a pleasurable event and make it the backdrop of our lives. When any event occurs to us, we make it ordinary. And through becoming ordinary, we lose our pleasure.'’

Wilson and Gilbert and others have shown that we’re generally unable to recognize that we adapt to new circumstances and therefore fail to incorporate this fact into our decisions.

A large body of research on well-being seems to suggest that wealth above middle-class comfort makes little difference to our happiness. And having children does nothing to improve well-being — and it drives marital satisfaction dramatically down. We often yearn for a roomy, isolated home (a thing we easily adapt to), when, in fact, it will probably compromise our happiness by distancing us from neighbors. (Social interaction and friendships have been shown to give lasting pleasure.)

In a recent experiment, George Loewenstein tried to find out how likely people might be to dance alone to Rick James’s ‘’Super Freak'’ in front of a large audience. Many agreed to do so for a certain amount of money a week in advance, only to renege when the day came to take the stage. This gets at the fundamental difference between how we behave in ‘’hot'’ states (those of anxiety, courage, fear, drug craving, sexual excitation and the like) and ‘’cold'’ states of rational calm. We cannot seem to predict how we will behave in a hot state when we are in a cold state.

Data from tests in which volunteers are asked how they would behave in various ‘’heat of the moment'’ situations — whether they would have sex with a minor, for instance, or act forcefully with a partner who asks them to stop — have consistently shown that different states of arousal can alter answers by astonishing margins. ‘’These kinds of states have the ability to change us so profoundly that we’re more different from ourselves in different states than we are from another person,'’ Loewenstein says.

Loewenstein has done a great deal of work showing that nonpatients overestimate the displeasure of living with the loss of a limb, for instance, or paraplegia.

“The Futile Pursuit of Happiness” by Jon Gertner

The cost of information storage is now approaching a billionth of a cent per byte.

This is the world of peta (numbers of the magnitude 10 to the 15th power, a million billion): petabytes, petaops, petaflops.

Google rules a total database of hundreds of petabytes, swelled every 24 hours by terabytes of Gmails, MySpace pages, videos – each day’s growth larger than the whole Web of a decade ago.

There are about two dozen Google data centers, with 450,000 constituent servers, according to the lowest estimate.

The extended Googleplex comprises an estimated 200 petabytes of hard disk storage – enough to copy the entire Net dozens of times – and four petabytes of RAM. To handle the current load of 100 million queries a day, its collective input-output bandwidth must be in the neighborhood of 3 petabits per second.

In 1991, a 100-megabyte drive cost $500, and a 50-megahertz Intel 486 processor cost about the same. In 2006, $500 buys a 750-gigabyte drive or a 3-gigahertz processor. Over 15 years, that’s an advance of 7,500 times for the hard drive and 60 times for the processor.

In the last decade, the speed of the Internet’s backbone traffic has accelerated from 45 Mbps to roughly a terabit per second. That’s a rise of more than 20,000 times.

Even bigger shocks are coming: the avalanche of digital video will be measured in exabytes (10 to the 18th power, or 1,000 petabytes).

“The Information Factories” by George Gilder

With each passing year the unpredictability of film revenue is supported by more and more academic research.

But if picking films is like randomly tossing darts, why do some people hit the bull’s-eye more often than others? Because even random events occur in clusters and streaks.

Imagine this game: We line up 20,000 moviegoers who, one by one, flip a coin. If the coin lands heads, they see “X-Men”; if the coin lands tails, it’s “The Da Vinci Code.” Since the coin has an equal chance of coming up either way, you might think that in this experimental box-office war each film should be in the lead about 10,000 times. But the most probable number of lead changes is zero, and it is 88 times more probable that one of the two films will lead through all 20,000 customers than that each film leads 10,000 times.

The fairness of fortune is expressed not in alternations of the lead but in the symmetry of probabilities: Each film is equally likely to be the one that grabs and keeps the lead.

Even in situations like this, in which we know there is no “reason” that the coin flips should favor one film over the other, psychologists have shown that the temptation to concoct imagined reasons to account for skewed data and other patterns is often overwhelming.

One of the questions Daniel Kahneman liked to put to his subjects concerned the sequences in a coin toss. For instance, in a toss of seven coins, which of the following head-tail combinations is more likely to occur, HHHHTTT or HTHTTHT? Most people erroneously believe that the first sequence is less likely than the second, but the two sequences — and all other sequences of seven heads and tails — are equally probable.

Sociologists noticed, while observing gamblers in Las Vegas, that dice players act as if tossing the dice is a game of skill. They throw them softly if they want low numbers, or hard for high ones.

Ellen J. Langer and Jane Roth recruited Yale undergraduate psychology majors to watch an experimenter flip a coin 30 times. One by one, the subjects watched the coin flips and tried to guess how the coins would land. They found that, although the students were surely aware that a coin toss is a random event, those who experienced the early winning streaks developed an irrational attitude of confidence that they were “good” at intuiting the coin toss. 40% said their results would improve with practice; 25% even reported that, if in the future they were distracted during the test, their performance would suffer.

And most of the students assessed themselves as being better than their counterparts.

“Meet Hollywood’s Latest Genius,” by Leonard Mlodinow

The sight of a group of men standing round watching another man work on his car is familiar in cultures throughout the world. It is also an example of what seems to be a primal human interaction — the mutual direction of gaze.

People, more than any other primate, depend on their fellow humans to figure out where to direct their attention. Previous research has shown that human children are much more willing than chimpanzees to co-operate with a human adult in manipulating objects — for example, taking it in turns to drop a ball down a chute. And when the children do, they spend a lot more time looking at the face of the adult, monitoring where that person is looking.

Humans also have scleras — the white part of the eye surrounding the iris — that are much bigger and brighter than the scleras of other primates. In fact, most other primates have scleras that are so dark that they camouflage which way the eyes are looking.

Researchers at the Max Planck Institute for Evolutionary Anthropology compared adult chimpanzees, gorillas and bonobos with human children of a year or 18 months in age. In the experiment, a human adult first attracted the attention of the non-human ape or the human child, and then looked up at the ceiling. The experimenter moved only his eyes, moved his head and his eyes, or moved his head and kept his eyes closed. In later versions of the experiment he also turned around so that only the back of his head was visible and then either moved his head up or stayed still.

Both the non-human apes and the human children tended to look where they thought the experimenter was looking. But the non-human apes paid the most attention to where the experimenter’s head was pointing, in particular, looking up when the head was pointed up, no matter what the eyes were doing. Human children, on the other hand, paid the most attention to the eyes, and were relatively indifferent to where the head was pointed.

If human interactions were primarily competitive, it would be advantageous to camouflage eye movements, as other apes seem to have done. Instead, people have evolved to make it easy for others to see where they are looking. The advantages of co-operation seem to have outweighed those of competition.

“Eyeing up the collaboration” by The Economist

Imperial institutions may determine prosperity, but the reverse may also be true. The trick is to find some third factor that is securely linked to institutions, but entirely unconnected to economic success. Such factors are called “instrumental variables.”

In a recent study of 80 islands, all but one of which eventually fell under the imperial yoke, James Feyrer and Bruce Sacerdote argue that winds and currents dictated which islands were colonized when. The early colonialists went where their sails took them; only after steamships became the norm in the 19th century could they travel against the wind.

As a result, some islands were colonized early, some late, for reasons that had much to do with meteorology, and rather little to do with any other intrinsic attractions the islands might offer. The accessible islands, which lay on natural sailing routes, have prospered relative to the others, in part due to the longer period these islands spent under colonial rule. A century as a colony is worth a 40% increase in today’s GDP, the authors argue.

This striking result disguises a more disturbing fact: on many islands the original population was decimated by European contact. For example, after the Spanish colonised Puerto Rico in 1505, the native population fell from 60,000 to 1,500 within 30 years. Colonized islands may have prospered, but the original islanders did not.

Lakshmi Iyer points out that the British did not wrest direct control of India all at once. From 1848 to 1856, for example, the governor-general pursued a “doctrine of lapse,” taking charge of states whenever the native ruler died without an heir. These states came under British rule as a result of patrilineal misfortune, not economic potential. Ms Iyer shows that such areas had fewer schools, clinics and roads as a result of British rule. The effects lingered into the 1980s.

“Winds of change,” by The Economist

Imagine that you are sitting next to a complete stranger who has been given $20 to share between the two of you. He must choose how much to keep for himself and how much to give to you.

He can be as selfish or as generous as he likes, with one proviso: if you refuse his offer, neither of you gets any money at all.

This is the “ultimatum game.”

If the sum is less than $5, four out of five of us tell the selfish so-and-so to get lost. We get so angry at his deliberate unfairness that we are prepared to incur a cost to ourselves to punish him.

Ernst Fehr and Daria Knoch used a technique called transcranial magnetic stimulation to tire out and thus temporarily suppress a part of the brain called the dorsolateral prefrontal cortex (DLPFC). Functional magnetic resonance imaging scans show that this is particularly active when people play the ultimatum game.

When the right DLPFC is shut down, the way they play starts to change. When given a low offer, they still feel it is deeply unfair. But, instead of rejecting it as they usually would, their selfish, ultra-rational side wins out over their emotional reaction against the other player’s meanness. They accept any amount of cash, however small.

The implication is not that the DLPFC is generating a sense of injustice — that was still there even when the region was knocked out. Rather, it seems to be more like an executive decision-maker, balancing the claims of emotion and reason.

Our decisions seem not to be determined mainly by reason, but by a continuous battle between two sides of our psyches that are rooted in different mental circuits.

One of these is rational, controlled by the cortex — the cauliflower-like outer section of the brain where reasoning takes place, which is uniquely developed in humans. The other is emotional, governed by the limbic system — the deeper-lying brain structures such as the amygdala that are much closer in character to the brains of other mammals.

The DLPFC does not develop fully until early adulthood, offering a possible explanation for adolescent selfishness.

Colin Camerer explains that if we always accepted low offers for the sake of tiny gains, we would rapidly get a reputation as a soft touch. By acting apparently against our interests, we do better in the long run: “Emotion is nature’s way of letting people know that if you’re treated badly you’ll do something about it.”

“Why say no to free money? It’s neuro-economics, stupid” by Mark Henderson