Saturday, January 16, 2010

RMB Book Review

Freaky Externalities

Steven D. Levitt and Stephen J. Dubner, Super Freakonomics, Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance, Harper Collins Publishers, Toronto, 2009

One of the most stimulating books I have read in a long time is "Super Freakonomics," the sequel to Freakonomics, by Levitt and Dubner. This book actually has a solution to global warming, cooked up by Bill Gates and his braino buddies. Unfortunately, as the authors point out, there is no body with the authority to take on the responsibility of cooling off the poles in the simple, cheap way that they propose.

Gates' think tank has also come up with a way to prevent hurricanes, and a rather strange explanation of the economics of prostitution. The most interesting part of the book for a student of the Baha'i principles like me is their explanation of the term "externality." An externality is an outside factor that changes the rules of the game. It can be good or bad but in practice it usually is bad.

Their favorite example in this and their earlier book of a good externality is the LoJack anti-theft device for cars. This is unlike earlier gadgets for this purpose. For example, if you put a visible steering wheel anti-theft mechanism like the "the Bar," thieves see that your vehicle is harder to steal. So they walk on to the next car without such a device. A good for you translates into a negative externality for everybody else.

The LoJack is different. It is a hidden radio transmitter that a car owner activates it goes missing. It silently notifies the authorities exactly where it is. The GPS signal it emits leads police exactly to where it is, which in the case of a stolen car is usually being dismantled in a chop shop for its expensive parts. The police shut the chop shop down. Countermeasure have proven ineffective. For a while thieves thought of parking the stolen car in a parking lot for a few days until the heat blew over. Popo got smart too, held off until the car had moved to the chop shop, at which point they shut it down. As a result, thieves had a disincentive to steal any car at all, since any one of them might be LowJacked. The result is an overall good for all drivers. A positive externality.

"For every additional percentage point of cars that have LoJack in a given city, overall thefts fell by as much as 20 percent. Since a thief cannot tell which cars have LoJack, he is less willing to take a chance on any car. LoJack is relatively expensive, about $700, which means it isn't all that popular, installed in fewer than 2 percent of cars. Even so, those cars create a rare and wonderful thing -- a positive externality -- for all the drivers who are too cheap to buy LoJack, because it protects their cars too.

"That's right, not all externalities are negative. Good public schools create positive externalities because we all benefit from a society of well educated people. (They also drive up property values.) Fruit farmers and beekeepers create positive externalities for each other; the trees provide free pollen for the bees and the bees pollinate the fruit trees, also at no charge. That is why beekeepers and fruit farmers often set up shop next to each other." (Super Freakonomics, p. 175)

Now there are fewer thieves, fewer car theft operations. Of course, it is possible that car thieves have moved on to stealing other things, making this positive externality a negative one for other things. But the book ignores that.

When I read that I suddenly realized that religion is a positive externality. As Baha'u'llah says,

"Religion is verily the chief instrument for the establishment of order in the world and tranquility among its peoples." (Tablets 63-4)

If Baha'u'llah had a more academic frame of mind, He might have called religion the Most Great Positive Externality.

Not that this was unknown before Baha'u'llah came along. That is why the state does not tax religious property and donations. It is understood that there are great benefits to all from a religious mind-set on the part of as many people as possible.

It is in everybody interest for a religious group to live up to its high ideals. If a faith group walks the walk as well as talking the talk, crime is reduced, the suicide rate goes down, mortality is improved, the poor are supported, and on and on. Baha'u'llah also pointed out that it is a positive externality that parents everywhere can contribute to, and from which parents benefit.

"It is the bounden duty of parents to rear their children to be staunch in faith, the reason being that a child who removeth himself from the religion of God will not act in such a way as to win the good pleasure of his parents and his Lord. For every praiseworthy deed is born out of the light of religion, and lacking this supreme bestowal the child will not turn away from any evil, nor will he draw nigh unto any good." (Baha'u'llah, Tablet translated from the Persian, Compilation on Baha'i Education, UHJ Research Dept., Baha'i World Center, August 1976, in Compilation of Compilations, #563, vol. I, p. 248)

No matter what you may say about a specific doctrine, no matter how nonsensical and risible their beliefs may seem to outsiders, everybody benefits if their actions are pious and altruistic.

What turns religion from a positive to a negative externality is when faith groups start to fight with one another.

It is the same as a marketplace. Every shopper benefits from legitimate competition among stallholders. If one merchant wants to sell better food for a lower price, we are all happier. Indeed, the entire market benefits from excellence. It can even attract shoppers from competing suppliers, such as supermarkets and big box stores. There is a benefit from advertising too, in moderation. If one stallholder proclaims himself better than all others, even if he strays a little from the truth, we all still tend to benefit from such confidence.

However, if they start carrying it too far, everything changes. If one marketer poisons the food of a competitor, or maligns his merchandise, such extreme behaviour instantly nullifies all the good that competitiveness has done. It not only harms clients but also damages the entire membership of the market. Indeed, illegitimate competition taints the whole food services industry.

The same is true of religion. It is something to think about on World Religion Day, which happens tomorrow.

"Consider whether there exists anywhere in creation a principle mightier in every sense than religion, or whether any conceivable power is more pervasive than the various Divine Faiths, or whether any agency can bring about real love and fellowship and union among all peoples as can belief in an almighty and all-knowing God, or whether except for the laws of God there has been any evidence of an instrumentality for educating all mankind in every phase of righteousness.

"Those qualities which the philosophers attained when they had reached the very heights of their wisdom, those noble human attributes which characterized them at the peak of their perfection, would be exemplified by the believers as soon as they accepted the Faith."(Abdu'l-Baha, Secret of Divine Civilization, 83-84)


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