Saturday, May 13, 2017

The Pragmatarian Model For The Roosevelt Institute

Last month I pitched the pragmatarian model to the Roosevelt Institute...

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Xero: Your economic analysis is quite sophisticated. But I wonder about your basics. What are your thoughts on Adam Smith’s Invisible Hand? Overrated, underrated or adequately rated?

Eric Harris Bernstein: As an analogy of the general push and pull of market forces, I think it’s brilliant. As an a priori explanation of our reality, I find it highly unsatisfactory. Seems to work as a religion, though ;)
Overrated.

Xero: Why, exactly, do you find the Invisible Hand to be highly unsatisfactory as an a priori explanation of our reality?

Bernstein: Requires a longer answer than I can really give here, but in short:

As commonly conceived, the invisible hand theorem suggests that the market directs supply (and therefore price) to the societally desired level, where tastes are properly accounted for. It is suggested this occurs naturally, and that any policy interference only disrupts that exchange.

The problem with that idea is, in reality, no market can exist without rules and without behavior that violates or complicates those rules. At the very least, you need to have rules that prevent theft, extortion, etc. Furthermore, there are a lot of factors that influence how and where the hands moves, which economic theory neither accounts for nor considers. Information asymmetries, power dynamics, the influence of money of policy, are all factors that push the hand away from the actually optimal level.

So, although it’s an important thought experiment, the notion of a free market is a fallacy. Understanding that is the first step towards making policy that moves things in an optimal level.

For more on this, I think our report Rewriting the Rules is a great start.

Xero: As the Invisible Hand is commonly conceived? It’s commonly conceived to be primarily about selfishness. But this common perception really isn’t correct. The Invisible Hand is primarily about signals
It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. — Adam Smith, Wealth of Nations
People use their own money to signal the value of things. Therefore, the Invisible Hand helps us to avoid overlooking anything valuable.

However, there are certainly circumstances when people don’t use their money to signal the value of things. For example… Medium stories. But is this a failure of the Invisible Hand? No, it’s something that prevents the Invisible Hand from doing its job.

Let’s say that I somehow prevent you from doing your job at the Roosevelt Institute (RI). Clearly the RI isn’t going to reflect the work that you didn’t do. Imagine how absurd it would be for me to criticize the RI’s shortcomings that were the indirect result of me preventing you from doing your job. Imagine how absurd it would be for me to argue that you should be fired for failing to do your job. The true solution would simply be for me to allow you to do your job.

For Medium the solution is simply to give subscribers the option to spend their fees on their favorite stories. Since they are subscribing anyways, they might as well use their fees to signal the value of stories. As a result, the Invisible Hand would help us to avoid missing any valuable stories.

You linked me to Rewriting the Rules. I clicked the page and read it. You certainly brought that page to my attention. But, where is that link located on your homepage?

The space on your homepage is theoretically unlimited. But the space on your homepage isn’t equally valuable. Space at the top is more valuable than space at the bottom. It makes sense that links on your homepage should be allocated accordingly. The more valuable links should be at the top of the page. And they really shouldn’t require any horizontal scrolling… or waiting… to see them. Don’t make people scroll or wait to see the most valuable links.

The question then becomes… how do you determine the value of a link? There aren’t a lot of options…
  1. Invisible Hand (IH)
  2. Visible Hand (VH)
  3. Democratic Hand (DH)
Right now I’m pretty sure that you don’t use the DH to determine the value of links. Even if people could vote for the links… it would only reveal how popular they were. In no way, shape or form would it reveal their value. Value in all cases is a function of willingness to pay/spend/sacrifice.

You definitely don’t use the IH to determine the value of the links… which leaves the VH. The VH is better than the IH at determining the value of links?

Imagine if donors to the RI could use their donations to signal the value of the links. In this case the IH would determine the order (relative importance) of the links. You think that this order would be inferior to the order that is currently produced by the VH?

Check out the Cato homepage. The links on their homepage aren’t ordered by the IH either.
It’s no surprise that the RI prevents the IH from doing its job. But it’s certainly an incredibly ironic issue that Cato also prevents the IH from doing its job.

Recently I brought this to Cato’s attention… Jason Kuznicki VS Adam Smith. You, me and Kuznicki are pretty much having a mental ménage à trois. I sure do love intellectual intercourse.

I’ve equally informed you and Kuznicki about the point and purpose of the IH. But I’d be super surprised if the RI allowed the IH to do its job before Cato did. Pretty much the point and purpose of the RI is to prevent the IH from doing its job. It would be a monumental pivot for the RI to allow the IH to determine the order of links on your homepage.

I also just shared the point and purpose of the IH with the LearnLiberty organization. The link is actually on their homepage. Unfortunately, it’s not because of the IH.

As you might have noticed I’m not a big fan of putting all my eggs in one basket. My idea is now in the RI’s basket, and Cato’s basket and LearnLiberty’s basket, and the New Yorker’s basket and lots of other baskets. The point and purpose of the IH is super righteous so it’s only a matter of time before some organization realizes this.

It could be your organization… but it probably won’t be. Instead it will be some other organization and then another and then another… until there are enough organizations allowing the IH to do its job that your organization can no longer avoid the truth of the matter. But by then it will be too late for your organization. Nobody will care about the RI. Once everybody can clearly see the point and purpose of the IH… then there will no longer be any scope for the RI. There will no longer be any demand for any organizations that support any scope for the VH.

If I was in your shoes, then I’d try and come up with a really good spin for allowing the IH to do is job at the RI.

“Dear supporter, it is our firm belief at the RI that the IH is horrible hogwash. We’re willing to sacrifice the RI in order to save the world from the IH. The next time that you make a donation you’ll have the option to use your donation to signal the value of our content. The IH will determine the order of the links on our homepage. Everybody will be able to clearly see that the order of the links is complete chaos. This will definitively disprove the IH once and for all!”

This is just like me going back into time and trying to persuade Mao Zedong to allow the IH to do its job… but under the guise of disproving it. I have to laugh because it’s a pretty absurd picture… but then I have to cry because I can imagine the countless lives that would have been saved if Mao had allowed the IH to do its job.

Admittedly, it’s entirely possible that I’m wrong about the point and purpose of the IH. So if you think that I’m overlooking some valuable argument against the IH doing its job… then I’m all ears.

Lots of people like to object that people don’t value money equally. But if this objection has any merit… then why allow the IH to determine the order (relative importance) of the RI and Cato? Donations to both organizations could be combined and donors could elect representatives to decide how to divide the money between the two organizations. The VH, rather than the IH, would determine the order (relative importance) of the RI and Cato.

Of course nobody in their right mind would argue for allowing the VH to determine the order (relative importance) of the RI and Cato. Therefore… I take this to mean that it’s not a genuine objection that people don’t equally value money.

I’m going to share this story with your buddy Tim Worstall. He writes for Forbes and CapX. Plus he’s a senior fellow at the Adam Smith Institute (ASI). None of those organizations allow the IH to do its job. I guess it doesn’t get any more ironic, or tragic, than the ASI not allowing the IH to do its job. Maybe Worstall can help solve this problem. He sure writes better than I do.

Bernstein: I do think you are overlooking an argument and I think I already supplied it, but happy to restate: In reality, there never has been nor never could be an unencumbered invisible hand. This is not the fault of the invisible hand — the invisible hand is just a concept — it is simply a global reality that society (and markets) require rules and regulations to function. Otherwise people could steal instead of purchase, extort instead of work or innovate, etc.

So, for better or worse, we need to pick and write the rules that we are all going to live by, and in reality those rules affect the relative well-being of various groups. This is where organizations where Cato and the Roosevelt Institute come in, in hopes of influencing policy makers to make rules that we each respectively believe to be in someone’s best interest. (Ostensibly both groups believe they are lobbying for society’s best interest but I would argue Cato has a long history of putting forth proposals that only serve the interests of the very rich, however that is just my opinion).

I agree that market signals push prices in various directions and that this is mostly good, but you are ignoring the context in which that occurs. Not only did the signals occur within a lawful society that has certain implications, there are also many goods for which individuals are not expected to pay based on their own tastes; things like national security, police enforcement, and regulation of industry are funded out of tax revenues specifically because no one would pay for national security unless forced.

Furthermore, you have a lot of faith that if we opened every decision up to markets, we would all be a lot better off, but that assumes all market participants act in good faith and with complete information, and that there is no such thing as anti-competitive behavior, discrimination, or any other behaviors that might, as you say, prevent the invisible hand from functioning. This is not the reality we live in.

On that note, I would like to refer back to a word I used in my original post to Worstall. That word is tautology, and here is why I return to it: you define the invisible hand as the movement of signals in a completely unencumbered market where everything functions exactly as it should. Any time any individual, group, or circumstance gets in the way, you assert that this is not the invisible hand, and that if only it were, the outcome would be perfect. I agree that if you remove all barriers of anti-competitive practices, etc., market outcomes would be pretty good. I simply disagree that in the real world this reality could ever come to exist. This position is justified by basic political theorems which hold that at the very least we need rules that bar various forms of extortion and theft, and which provide for basic collective goods like defense. It is also supported by numerous instances throughout history and even recent American history of broad discrimination, which prevents people from participating in markets on equal terms. From this and much else it follows that we will never have a completely neutral unencumbered invisible hand, and that we should go about writing rules that allow markets to function in a setting that supports positive societal outcomes.

Markets are the essential floor on which society can stand but that floor must be supported by a foundation of equitable rules.

Xero: Please address the super specific example that I offered. Right now the links on the Roosevelt Institute (RI) homepage are not ordered by the Invisible Hand (IH). Should they be?

You can respond… “The links on the RI homepage should not be ordered by the IH because… X, Y and Z”.

Just in case you didn’t read the links that I shared with you, let me clarify my example.

Donors to the Libertarian Party were recently given the freedom to use their donations to signal which potential convention theme is the most valuable. Here are the top results…

$6,222 — I’m That Libertarian!
$5,200 — Building Bridges, Not Walls
$1,620 — Pro-Choice on Everything
$1,377 — Empowering the Individual
$395 — The Power of Principle

This order (relative importance) of the themes was determined by the IH. The list of themes was ordered by the IH.

The RI also has donors. Should they be able to use their donations to signal the value of the RI’s content (ie articles)? Should the IH determine the order (relative importance) of the links on the RI homepage?

Bernstein: Again, you are ignoring my analysis of the the invisible hand as it functions in the real world. I understand your point and have acknowledged it and responded substantively to the policy implications you are driving at. You have not done so with regard to my answers (for example, how do you fund government’s necessary functions without distorting market outcomes?). You are also imposing an oversimplified and condescending structure to the conversation. By doing this I think you are greatly detracting for the conversation’s value, but in the name of being a good sport, I will accept the rules you are imposting on this exchange and answer as you requested:

“The links on the RI homepage should not be ordered by the IH for several reasons. Here are a few:

1. Donors are not the only stakeholders in the Roosevelt Institute, and donations do not directly determine our priorities; allowing donations to order the links (I am taking links as a metaphor for institutional priorities overall) would imply that the staff and managers have no prerogative in interpreting our organizationals mission and making strategic decisions by prioritizing certain content. If we did that, we might very quickly become an entirely different organization. We are a nonprofit organization and our mission is not to earn the approval of people with money (if we were we would be an entirely different kind of organization, trust me) but to educate people on issues we think have important public policy implications. Donors’ interest might be driven by something else, so we have a considerable need to make decisions based on factors that are not donations. As an addendum, perhaps our nonprofit nature complicates your very clever metaphor. However, even if we were a for-profit news organization, we might see that we got the most dollars for stories about Jennifer Anniston’s love life, but we also might believe, for reasons not related to money, that it is important to cover and promote topics not related to celebrity gossip, so again — invisible hand not always the best arbiter of outcomes.

2. Our wealthiest donors could easily drown out the interests of large numbers of small donors (or important followers that do not donate). Since our mission is not simply money, but educational outreach in important issues, we would not want one or two large donors determining what every is most likely to see. A voting system might make more sense (and we do prioritize based on web hits, I believe), but even then, see #1. And on that note…

3. Donations could encourage bad or illegal work. Acknowledging for a second that the content of the website is endogenous to the donations we receive (meaning the more we receive donations in support of X, the more we look to publish more pieces like it), and assuming the staff has no prerogative to alter the priority of links and dedicatedly pursues more donations — which is pretty much the hypothetical you pose — then we can pretty quickly end up in some ethical dilemmas. For example, what if our donors are framing socialists (as many at Cato probably imagine) and push us continually towards work that is borderline defensible or outright dishonest but which, if true, supports their point? Eventually we might find ourselves publishing something like “New study shows poverty level at 99%” even if in reality it is at 10 or 20%. Without any sort of agency (and assuming we have created your libel-less libertarian utopia with no laws or rules to structure markets) then we would quickly be spewing indefensible garbage that damages society.

So no, I don’t think your system of prioritization is a good idea. Of course, on such a small scale would I object? No. But as soon as the question gets bigger it gets much more complicated (even within the context of a relatively small organization like the Roosevelt Institute).

Now that I humored you, I would love to hear how you respond to the broader societal challenge of monetizing every exchange and offering no rules or regulations to structure markets.

Xero: You don’t want your donors to use their donations to signal their demand for your specific content… because their priorities are wrong? When people go shopping for groceries… are their priorities wrong as well? If so, then why allow people to shop at all? Why allow people to decide whether they donate to the Roosevelt Institute (RI) or to Cato?

Do you see how quickly we got to the heart of the matter?

People donate to the RI because they are hungry for your content. But being all different, your donors don’t value all your content equally. They are hungrier for certain kinds of content. And you’re certain that they are hungrier for the wrong kinds of content.

And perhaps you see the RI as having a monopoly on relevant information. Kinda like the RI is the parent and the donors are very young children who are uninformed. Except this analogy doesn’t work because you’re not arguing that your donors are uninformed, you’re arguing that they are misinformed. They would demand the wrong kinds of content.

To be clear, it would be entirely optional for your donors to use their donations to signal their demand for your specific content. They would only choose this option if they have information which leads them to believe that some of your content is more valuable than other of your content.

By preventing donors from using their donations to signal the value of your content… you’re disregarding all the information that they have. How many people donate to the RI each year? 1000? 10,000? 100,000? Can you possibly comprehend how much information even 100 people have?

Admittedly, your donors aren’t experts like you. But they are all experts in some area. This is the consequence of the division of labor. I’m sure that your donors are doctors and professors and lawyers and teachers and plumbers and electricians and pilots and scientists and engineers and it’s probably a very long list. And it’s gotta be the case that your organization isn’t their only source of information.

What’s the total amount of articles that your donors read each day? How many podcasts do they listen to each day? How many hours of news do they listen to each day? How many books do they read each month? How many books do they write each year?

Your eager willingness to disregard all the information that your donors have in their heads is why you’re at RI instead of at Cato. Except, then again, even Cato doesn’t allow its donors to use their donations to signal the value of their specific content. Sadly, Cato is also willing to disregard all the information that its donors have.

Your mission at the RI is to inform people. But your donors are certainly already informed. Or else, why would they donate to the RI? And if you’re certain that your donors are misinformed then, well, clearly you’re failing at your mission. But how can you possibly succeed at your mission when you really don’t know which information your donors are missing?

Your real mission should be to inform people… and to be informed by people. It should be a two way street. Information should always be a matter of intercourse.

If your donors aren’t buying the “right” products (fruits and veggies)… then clearly you need to help them understand what it is, exactly, about these products that make them “right”. Conversely, if they are buying the “wrong” products (cigarettes and alcohol)… then clearly you need to help them understand what it is, exactly, about these products that make them “wrong”.

“Now that I humored you, I would love to hear how you respond to the broader societal challenge of monetizing every exchange and offering no rules or regulations to structure markets.”

Well… thanks to you humoring me, we’ve already got to the heart of the matter. So really there’s no need to address anything else if we can’t peacefully resolve the issue of your willingness to disregard all the information that your donors have in their heads.

But since you have been such a good sport then, at the risk of distracting you from the main issue, I will address some of your additional concerns.

I’m pretty sure that I never said that we don’t need rules. I’m pretty sure that I’m not an anarchist. I’m actually a pragmatarian. I believe that taxpayers should be free to choose where their taxes go.
If you have information that leads you to believe that drugs being illegal is a good and necessary and beneficial rule, then you’d have the freedom to spend your own tax dollars on the enforcement of this rule. The more money that taxpayers spend on the enforcement of this rule, the more it will be enforced.

So I have absolutely nothing against rules in general. What I want to know is just how valuable each and every rule truly is. I also want society’s limited resources to be allocated accordingly.

If society doesn’t think that the rule against jaywalking is very important, then there really shouldn’t be a cop on every corner enforcing this rule. The opportunity cost would be too high.

Therefore, the amount of resources allocated to any endeavor should reflect how strongly society cares about it. In other words, supply should reflect demand. In other words, society’s limited resources should be efficiently allocated.

To be clear, there’s a difference between an “efficient” allocation of resources and a “correct” allocation of resources. An allocation can be efficient without being correct.

Right now you don’t allocate any of your time and brains to promoting pragmatarianism. Because… pragmatarianism doesn’t match your preferences. This allocation is efficient… but obviously I don’t think it’s correct. Voila! Here I am endeavoring to correctly inform you. I’m supplying you with important information that you’re obviously missing.

If we created a market in the public sector then, unlike in the for-profit sector, it really wouldn’t be one-price-fits-all (OPFA). As a result, the signals would be more accurate. The supply in the public sector would more closely match the demand than the supply in the private sector. People would get more bang for their buck in the public sector. Therefore, people would want to spend more and more money in the public sector. The tax rate would go up, the public sector would expand and the private sector would shrink. Eventually the tax rate would be 100% and there wouldn’t be any private sector.
You would never have to buy oranges. Oranges would be free for everyone. If you ever felt that there weren’t enough oranges, then you’d use your tax dollars to signal this.

Admittedly, it isn’t the easiest thing to imagine a 100% tax rate with a market in the public sector. But I do know that more accurate signals result in a more relevant supply. I also know that people always want the supply to be more relevant. Everybody wants to be as happy as a kid in a candy store. Therefore, it’s pretty reasonable to conclude that creating a market in the public sector will increase the tax rate.

But it’s not like we need to immediately create a market in the public sector. Taxpayers are essentially subscribers. Netflix also has subscribers. So does Medium. The government really isn’t the only organization with subscribers. Lots of other organizations also have subscribers. They can give their subscribers the option to use their fees to signal the value of specific content. Then we’ll see if the organizations and their subscribers benefit from commerce as communication. I’m pretty sure that more communication is better than less communication… but I could be wrong.

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See also: 

Monday, May 8, 2017

The Pragmatarian Model For The LA Times

Today I submitted the following idea to the LA Times...

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My friend has helped her 4th grade class to become a country...

http://classtopia.blogspot.com/

Recently a page was created to highlight their best blog entries...

http://classtopia.blogspot.com/p/blog-page_22.html

The value of the entries is determined by civic crowdfunding.  Right now the crowd is pretty small.  It consists of the students, their teacher and myself.  But in theory the crowd could be as large as everyone in the world.  Everyone could use their donated dollars to help "grade" the students' work.   If the students are going to do a lot of work anyways, then they might as well do the most relevant work.  Can you imagine if all the students in the world used their time, energy, creativity and brainpower to solve the most relevant problems?

This idea is just as relevant to newspapers.  Actually knowing the relevance/value of your stories would allow you to far better serve your readers.

Does this idea seem far-fetched?  It shouldn’t.  Grocery stores allow consumers to substantially and specifically participate in the prioritization process.   You have the wonderful and incredibly important opportunity to use your dollars to "grade" the relevance/value of the products that are available at your local grocery store.  

This last Friday the Helpful Honda folks gave a really high "grade" to Classtopia by donating 24 chromebooks.  Fox 11 was there to cover the event...

https://youtu.be/q5cPSsIvHRE

It was a pretty great overview.  But the idea definitely merits wider coverage and deeper analysis.  Either grocery stores are doing it wrong... or newspapers and schools are doing it wrong.  Which is it?  It would behoove us to figure out the correct answer sooner rather than later.

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See also: 

Saturday, April 29, 2017

Organizations That Are Less Accommodating

Here's an e-mail that I just sent to http://www.moralmarkets.org/

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Greetings,

I recently searched Google for "what markets are good for" and found this post...

http://blog.acton.org/archives/93307-what-good-markets-are-good-for.html

That post linked me to your website.  Please compare your homepage to this page...

http://classtopia.blogspot.com/p/blog-page_22.html

Both pages contain numerous links... but the difference is that the order (relative importance) of the links on their page is determined by the Invisible Hand (IH).

Why aren't the links on your page ordered by the IH?  Why is your website the rule rather than the exception?

http://www.learnliberty.org/
https://fee.org/
https://www.cato.org/
https://www.adamsmith.org/
http://www.heritage.org/
https://mises.org/
https://liberty.me/
http://oll.libertyfund.org/
http://reason.org/
http://reason.com/

All of these organizations preach about markets, but none of them is a market.  They all supply countless products but they don't give their donors/subscribers the freedom to determine the order of the products.

If you truly want to understand markets, then allow donors to determine the order your products.   Give your donors the freedom to specifically and substantially participate in the prioritization process.  The experience of your organization practicing what it preaches will accurately inform your preaching.

Here's my theory.  Actually knowing the value of your products will make it easier to supply more valuable products.  As the value of your products increases so will donations.  Earning more money will empower you to compete more resources away from less beneficial organizations.  It will be a virtuous cycle of value creation.  Sooner rather than later everybody will finally understand what markets are good for.

Consider this passage from Deirdre McCloskey's book... "The Applied Theory Of Price"

Geoffrey Hellman wrote for the New Yorker magazine for a long time and had incessant quarrels with its editor, Harold Ross, about how little Ross paid a man of Hellman’s seniority. Ross insisted that he paid what each piece of writing was worth: 
“You say that you have been here eighteen years and are not treated better than a good writer a couple of years out of college would be, so far as pay for individual articles is concerned… My firm viewpoint is that we ought to pay what a piece is worth, regardless of age, race, color, creed, financial status or any other consideration. I don’t know how, in an enterprise of this sort, one in my position can take into consideration anything beyond the actual value of the things.”

One person (the editor) determined what the products (articles) were worth.  One person can certainly know how much an article is worth to him... but unless he's a mind-reader he really can't "divine" how much an article is worth to me.

Does it matter how much an article is worth to me?  Does it matter how relevant my idea is to your reality?

Your organization uses its resources.  But its resources are actually society's resources.  All resources are society's resources.  Society's resources are limited.  So if you want to use more of society's resources, then give society the wonderful and beautiful and precious opportunity to supply your organization with specific and substantial feedback on how you are using its limited resources.  If you allow society to substantially participate then I'm guessing that society will be happy to empower you to take resources away from organizations that don't allow society to substantially participate.

Let me conclude with this rather racy but really relevant passage...

Creating a fulfilling relationship with a cold, silent piece of silicone takes such imaginative effort that sex dolls will always be a minority taste. But a relationship with a robot that moves and speaks, with artificial intelligence so it can talk to you and learn what you want it to be and do, is a far more marketable proposition. - Jenny Kleeman, The race to build the world’s first sex robot 

It's far more marketable to be really responsive to the priorities of your supporters.

Please let me know if you have any questions or concerns.

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I really wasn't happy with this sentence...

If you allow society to substantially participate then I'm guessing that society will be happy to empower you to take resources away from organizations that don't allow society to substantially participate.

Ughh.  After I sent the e-mail I found the right word...

If you allow society to substantially participate then I'm guessing that it will be happy to empower you to take resources away from organizations that are far less accommodating.  

Accommodating!!!  

My life can be defined in terms of my consistent failure to find the right words.  The right words are incredibly elusive.  So when I do manage to find one then it feels like some sort of small but significant victory.  Honestly it's the main reason that I'm publicly sharing this e-mail.  Now bring on the accolades and the parades!  Accommodate the heck out of me!!!

Sunday, April 23, 2017

The Prioritization Process

My reply to David Eil's reply...

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If Medium gives subscribers the option to spend their fees on the most relevant stories, and each month you spend on average $4 dollars on economics stories and $1 dollar on cat stories, then it would be reasonably to conclude that, in your little corner of the world, economics stories are more relevant than cat stories. If on average I spend $4 dollars on economics stories and $1 dollar on epiphyte stories, then it would be reasonably to conclude that, in my little corner of the world, economics stories are more relevant than epiphyte stories.

Thanks to our spending decisions, you and I would be far better informed about what’s more or less relevant in each other’s little corner of the world. Except, all the subscribers would be using their fees to signal which types of stories are more or less relevant in their little corners of the world. So we’d all be far better informed what’s more or less relevant in all our little corners of the world. Knowing the actual value of stories would help everybody make far better informed reading and writing decisions.

When everybody makes far better informed reading and writing decisions, then this will quickly and vastly improve the variety and quality of choices on the menu. The choices on the menu would be far more relevant to all our different realities. As a result, we’d all be as happy as a kid in a candy store.

Here’s Samuelson’s passage again…

But, and this is the point sensed by Wicksell but perhaps not fully appreciated by Lindahl, now it is in the selfish interest of each person to give false signals, to pretend to have less interest in a given collective consumption activity than he really has, etc. — Paul Samuelson, The Pure Theory of Public Expenditure

Yeah, this is about economics. But it is also about communication… and the problem with transmitting inaccurate information. It’s about the problem with fake news. If the amount of money that we spend on economics stories inaccurately communicates our demand for them, then of course the supply of economics stories will be suboptimal. For sure we’d prefer it if the supply of economics stories was optimal, therefore our communication should be accurate.

Just like with Medium, Netflix does not give subscribers the option to spend their fees on the most relevant content. Subscribers are not given the opportunity to substantially participate in the prioritization process. I don’t have the opportunity to use my fees to accurately communicate just how relevant economics shows are. As far as I know, there’s only one economics show on Netflix and it’s tragically terrible. Needless to say, I’m really not as happy as a kid in a candy store.

You can’t prevent everybody from substantially participating in the prioritization process and expect the supply of products to accurately reflect everybody’s priorities.

First we prioritize how we spend our limited money and then, and only then, will the supply of products accurately reflect our priorities.

I’m interested in knowing what your priorities are. You should be interested in knowing what my priorities are. We should all be interested in knowing what each other’s priorities are. We should all be interested in having the most accurate treasure maps.

Coercion And Consequences

Comments on: Finding Liberty Between Vulnerability and Coercion by Adam Gurri

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Xero: The products at the grocery store aren’t equally relevant to my reality. Fortunately, I get to pick and choose which products I spend my money on. I have the chance to use my money to let the store know which products are the most important to me. The store offers me, and everyone else, the opportunity to substantially participate in the prioritization process. In other words, the store is a market.

The products (shows/movies) on Netflix aren’t equally relevant to my reality. Unfortunately, I don’t get to pick and choose which products I spend my fees on. I don’t have the chance to use my money to let Netflix know which products are the most important to me. Netflix does not offer me, or anyone else, the opportunity to substantially participate in the prioritization process. Netflix is not a market.

Coercion can be defined as preventing people from substantially participating in the prioritization process. With this definition, the government really does not have a monopoly on coercion. Netflix also engages in coercion.

However, the fact of the matter is that hardly anybody wants Netflix to be a market. So the real issue isn’t “delicately balancing” anything. The real issue is figuring out the rules of coercion. When is it beneficial to disregard how relevant things are to people’s reality? When is it beneficial to prevent people from substantially participating in the prioritization process? When does coercion truly make the world a better place for everyone?

Gurri: Coercion is making someone do something against their consent. Netflix certainly does not coerce anyone.

Xero: Netflix certainly doesn’t force me to subscribe. But if I choose to subscribe… does this mean that I necessarily consent to Netflix spending my money on products made by Michael Moore?

The government doesn’t force me to stay in the US. I certainly have the freedom to move to Canada. If I choose to remain in the US and pay taxes…. does this mean that I necessarily consent to the government spending my money on the drug war? If the government asked me… “Hey guy, do you consent to having your tax dollars spent on the drug war?”… my answer would be… “F no!!!”

The government and Netflix don’t care how relevant their specific products are to my reality. But I don’t choose to exit from their services because the alternatives sure aren’t any better. Also, in the case of the government, exit certainly isn’t cheap or easy…

Yes, you can change citizenship, but it takes years of paperwork, many thousands of dollars, and requires a total uprooting of yourself and all your work/family/friend connections. It’s a herculean labor even for those for whom it goes smoothly, and the hard experiences of so many immigrants demonstrates how exercising that choice rarely generates a smooth passage thereafter. So we live caught between that rock and the hard place of living under a government that may have nothing to do with how we want to live or be governed. – Ada Palmer, The Dystopian Question and Minorities of One

Preventing people from substantially participating in the prioritization process has a serious consequence. The consequence is a big disparity between the world we live in and the world that we want to live in.

Gurri: When you give Netflix your money, your consent no longer enters into how they use it.

When you do not give the US your money, they fine you or send you to jail. That’s coercion. If you don’t pay Netflix, they just cancel your service. The parallel simply doesn’t hold.

Xero: When you do not give the US your money, they fine you or send you to jail… because you’re using goods (roads, defense, etc) that you aren’t paying for. You’d be punished for stealing. Same thing if you somehow used Netflix without paying for it. I don’t know if anybody has necessarily gone to jail for stealing cable but some people have certainly been caught and punished for doing so.

So the parallel does hold. And again, whether we’re talking about Netflix or the government, the actual and real issue is that the products are not equally relevant to your reality. Is it beneficial when the money that you earn is spent on products that aren’t at all relevant to your reality? Is it beneficial when you’re prevented from substantially participating in the prioritization process?

Whether we’re talking about Netflix or the government… ideally you should be as happy as a kid in a candy store. There should be a gazillion products that are extremely relevant to your reality. But this ideal won’t be realized if you can’t pick and choose which products you spend your money on.

Basically, it’s less than useless to talk about coercion without considering the tangible consequences of coercion. Just like it’s less than useless to talk about theft without considering the tangible consequences of theft.

Gurri: Well I agree with your conclusion, but as usual you took a highly eccentric path to get there, hahaha.

Saturday, April 15, 2017

Markets Are The Most Exciting Thing Ever!!!!!!!!!

Some discussion in: Netflix And Virtue Signalling

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The money wouldn't necessarily be given to the content producers anyway - it would go to the people who own the IP. Netflix can't change that. Even if it did and even if we assume people didn't just lazily dump the fee into the first thing they see because they get to access everything anyway, money spent wouldn't necessarily reflect demand. - Conscentia

It feels like you're focusing on the word "demand" rather than on the "money spent" part. For me it's significant and meaningful and important and useful to know how much money people are willing to spend on things. It's convenient to use the word "demand" to refer to the amount of money that people are willing to spend on things. But we can also use the letter "X" or the word "fhqwhgads" or "zeitgeist" or any other combination of letters you want. I'm less interested in the word than in the concept. So it would be great if you focused on the concept.

Spending money is a sacrifice. The more money that is spent, the bigger the sacrifice. Since spending money is a sacrifice... generally people don't randomly spend their money. They didn't exchange their limited time and effort for money just so that they can flush it down the toilet.

It's easy to prove this... all I have to do is ask for your money. Of course you're going to want to know why you should give me any money. So in order to persuade you to give me your money, I'd have to provide you with some information. You'd compare the information that I gave you with all the information that you have and then decide whether or not to give me money. If you decided not to give me any money, well, in theory I could endeavor to provide you with different and better information. And again you'd compare this new information with all your information in order to decide whether to give me money.

This process of persuasion involves lots of brainpower being used and lots of information being shared, considered and compared. So it's significant and meaningful and important to know how much money individuals and groups of individuals are willing to spend.

Distributing the fee to the content does not guarantee that more such content will be made. Fans of Star Trek TNG could regularly dump their whole fee into the show but it's not going to be renewed for another season regardless. The show has long been finished. Netflix isn't Patreon. The money doesn't go to fund content. As such there is no sense is spending the fee into order to voice demand, and I'd expect user behaviour to reflect this.  - Conscentia

I was disappointed that Person of Interest was canceled...

As CBS’s chairman, president, and CEO Leslie Moonves told The Hollywood Reporter recently, the company “broke even” on Person of Interest last year, but because Warner Bros., not CBS, profits from the show’s back end (DVD sales, foreign rights, streaming, syndication), it was literally not worth it to renew the show. - Kate Aurthur, “Person Of Interest” And The Mysteries Of Cancellation

It was canceled despite the fact that nobody knew how much money that I was willing to spend on the show. And I suppose this could potentially sound egocentric. So let me zoom out. It was canceled despite the fact that nobody knew how much money that any subscribers were willing to spend on the show. This fact makes me acutely feel like I'm living in the stone ages. Where I have to go around trying to convince people that fire and wheels are useful. I'm extremely grateful that I live in an era where I don't have to try and convince anybody that fire and wheels are useful... but I'm also extremely disappointed that I live in an era where I do have to try and convince everybody that it's useful to know how much money people are willing to spend on things.

Consider how much better off your life is because you live in an era where everybody knows that fire and wheels are useful. Now double or triple or quadruple that amount of betterness to try and appreciate how much better off your life would be if you lived in an era where everybody knows that it's essential to know how much money people are willing to spend on things.

Admittedly I have absolutely no idea how much money everybody would be willing to spend on Person of Interest... so of course I can't guarantee that, if ignorance (of willingness to pay) had been eliminated, the show would have been continued rather than canceled. But I can guarantee that the deciders, whoever they were, would have made a far more informed decision.

The world will be infinitely better off when everybody makes far more informed decisions.

No. That the one rich guy spent 6000 times more does not mean the demand is 6000 times greater. It just means he can afford to spend more. Even if he does want it more, so what? That one rich guy is still just one guy. - Conscentia

Let's imagine that people could choose where their taxes go. Some people want to go to war with Canada. The shape of the demand looks like this...




What would you say about the shape of the demand? I'd say that it's certainly tall enough... but it's way too skinny. Too few people are truly willing to pay for war with Canada. Sure, these few people are willing to pay a lot... but that really doesn't overrule the fact that there aren't nearly enough of them to justify this particular use of their tax dollars. So the DoD would use the money for other things besides invading Canada.

Using technical terms I'd say that the breadth of the demand is insufficient. The shape is too skinny. The fatter (wider) it is... the greater the justification for using those tax dollars to attack Canada.

In terms of the public sector, being concerned with the shape of the demand makes sense because the point of taxes really isn't to spend them on things that only a relatively few people are going to benefit from. We really don't want rich people to be able to spend their taxes on private golf courses or private yachts or private airports. We want everybody, rich or poor, to spend their taxes on things that lots of people are going to benefit from. Maybe like healthcare?




The shape isn't super tall... but it's pretty fat. There's definitely more than enough demand breadth to justify these tax dollars being spent on healthcare. Although perhaps it's not quite correct to compare something more general (healthcare) with something more specific (war with Canada). It would probably be more correct to compare war with Canada to cancer research. We can reasonably guess that the demand for the latter would be far broader than the demand for the former.

In any case, it certainly makes sense to consider the shape of the demand when we're talking about tax dollars. The thing is, we really weren't talking about tax dollars. We really weren't talking about the public sector. We were talking about donors to the Libertarian Party using their donations to signal the value of the potential convention themes. Yet, you definitely thought that the shape of demand was very relevant!

If the entire point of the public sector is to have a space where it's unacceptable for money to be spent on things that will only benefit a few people... then it's gotta be the case that the entire point of the private sector is to have a space where it is entirely acceptable for money to be spent on things that will only benefit a few people.

If one person alone wants to spend enough money to choose the theme for the Libertarian Party convention... then that's entirely acceptable. If one person alone wants to spend enough money to prevent Person of Interest from being canceled... then that's entirely awesome. If one person alone wanted to spend enough money to pay for the Statue of Liberty's pedestal... then that also would have been entirely awesome.

Willingness to pay reflects ability to pay, and as such is not a measure of demand. One cannot be willing to pay money one doesn't have, regardless of whether one wants something. - Conscentia

If somebody is completely broke then clearly we can't know how much money they'd be willing to spend on defense, healthcare, Person of Interest, the Statue of Liberty's pedestal, food, clothes, computers or anything else. Homeless people don't have much or any money... this is certainly true. But does this really mean that we can't know the demand for anything? Does it really mean that it's irrelevant how much money people are willing to spend on things? Markets should be entirely discarded and replaced with... voting? I'm sure that this is not what you're suggesting... yet you're bringing up ability to pay as if it would somehow only be relevant to donors to the Libertarian Party using their donations to signal the value of potential convention themes. Actually, the ability to pay (or the lack thereof) is relevant to all markets. So if you're arguing that it invalidates the spending info for one market... then your argument has to be applicable to all markets.

If we prevent people from using their money to help determine the value of things... then things will be incorrectly valued. When things are incorrectly valued, things will be incorrectly used. When things are incorrectly used, people will be worse off. Therefore, the degree and extent to which people are currently worse off... reflects the degree and extent to which we prevent people from using their money to help determine the value of things.

Right now you believe that the products at your grocery store are going to be correctly continued or discontinued because shoppers are allowed to use their money to help determine the value of the products.

Yet you also believe that the shows on Netflix are going to be correctly continued or canceled despite the fact that subscribers aren't allowed to use their money to help determine the value of the shows.

And of course you don't believe that Netflix can read the minds of its subscribers. Instead, you believe that subscribers already provide enough information for Netflix to make adequately informed decisions. But even Netflix acknowledges that ratings are less trustworthy than viewing habits. Except, how can viewing habits be more trustworthy than spending decisions? And it's not like Netflix can compare the two sets of information. It doesn't even see the point in having the information about spending. And there isn't a single subscriber who is interested in providing this information. Except for me. And one of my friends. I suppose there might be a few more people out there who would see the point of using their fees to inform Netflix. In any case we certainly aren't the rule.

The idea of using our money to inform each other sounds so simple and solid. We already do use our money to inform each other. We subscribe to Netflix. This informs everyone that we value Netflix's content more than we value the alternative uses of our money...

Netflix's content > alternative uses

We clearly and obviously empower Netflix to compete society's limited resources away from less valuable alternative uses. Yay!!!!!

There's one very basic premise here: we don't equally value Netflix and the alternatives. Except, this is just as true for Netflix's content! Nobody equally values Netflix's content.

If we could spend our fees on our favorite content, then this would inform Netflix that we value our favorite content more than we value the alternative uses of our fees...

favorite content > alternative content

We would clearly and obviously empower the producers of our favorite content to compete society's limited resources away from the producers of less valuable content. Yay!!!!!!!!! Yay?

People get excited about finding a $100 dollar bill on the sidewalk...and graduating... and getting engaged... and having a baby... and getting a promotion... and writing a bestseller... and winning the lottery. Yes, these things and many more are very reasonable justifications for excitement. But in the grand scheme of things.... all of these things are subordinate to empowering more beneficial producers to compete society's limited resources away from less beneficial producers. Therefore, nothing should excite us more than markets. We should be the most excited about markets because they facilitate the most excitement. If Netflix was a market... then we'd be able to use our fees to inform everyone how excited we are about our favorite shows. Netflix and other producers would be able to use this information to supply even more exciting shows. Yay!!!!!!!!!

Improving Each Other's Treasure Maps

Some discussion in: Netflix And Virtue Signalling

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UnAnon
: Don't confuse poor Xero with the concept of nuance.
XeroFuck Nuance
UnAnon: Going by how I've responded to your threads in the past, dear, do you think I'm interested enough to read thirteen pages?
...
UnAnon: I think the most offending bit about Xero's dozens upon dozens of threads is that he seems to honestly believe his forum posts are genuinely worth my money.
Xero: My threads are pretty worthless if this is your conclusion.

What I actually honestly believe is that our behavior improves when we actually know what things are worth. In this video a street vendor is selling original art by Banksy. Except, the vendor doesn't inform people that it's original art by Banksy. And the price of the artwork is far less than the market value.

Most people have no clue what the artwork is really worth. Their behavior reflects this. If most people did know what the artwork is truly worth, all the artwork would be quickly sold.

It's the closest thing you'll see to people walking past $100 dollars bills just sitting in the middle of the sidewalk.

Imagine the equivalent scenario with some hunters and gatherers. Of course they are hungry... yet they simply walk past plants that are loaded with perfectly ripe squash. They don't know the value of the squash so their behavior is detrimental. Ignorance in this case is not bliss. Their ignorance decreases their chances of survival. Each member of the tribe has a treasure map... .. but squash is not on any of them.

Fortunately for humanity, some individual did discover that squash is nutritious and delicious. How did others learn of the value of squash? How was everyone's detrimental ignorance eliminated? How did squash end up on everyone's treasure map? Everyone's treasure map was improved because squash was something that people were willing to trade for. If you see me trading my tool for some squash... then if you know the value of my tool... then you'll figure out that I believe that the squash is even more valuable than my tool...

tool < squash

Right now we don't know how much a thread is actually worth. As a result, we all consistently overlook valuable threads. We all regularly walk past $1 dollar bills and $5 dollar bills and $20 dollars bills and even $100 dollars bills that are just sitting in the middle of the sidewalk. Our treasure maps are very incomplete so we all fail to regularly obtain and gain and utilize valuable information and knowledge that's just sitting there. Our behavior is detrimental because we don't know what a thread is worth. Our detrimental ignorance isn't eliminated. This is simply because we fail to use our money to inform each other how beneficial a thread is. We fail to put valuable threads on each other's treasure maps.

We buy squash but we don't buy threads. Because... threads are abundant and free. Why spend money on something that you can have for free? You should do so... if it will improve the behavior of the members of your tribe. If a thread has some knowledge and information that you think the members of your tribe should have and use, then it's in your best interest to use your money to bring it to their attention.

I am a member of your tribe. Every member of this forum is a member of your tribe. Our tribe is called NationStates. Our tribe will truly and thoroughly thrive when each and every member behaves as beneficially as possible. Behaving as beneficially as possible depends on having and utilizing the most important knowledge. In order for each and every member to have and use the most important knowledge, we have to use our money to bring the most important knowledge to each other's attention. We have to use our money to improve each other's treasure maps.

In the upper left hand corner of my screen it says, "NationStates by Max Barry author of LEXICON". Have you read Lexicon? I sure haven't. The founder of our tribe wrote a book that I haven't read. I wonder how many members of our tribe have read it.

Obviously Barry successfully brought his book to my attention. And for sure I can figure out what it costs to buy his book. But even if it was free it doesn't necessarily mean that I'd take the time to read it. This is simply because I don't know what the book is truly worth. Cost and worth really aren't the same thing.

But let's say that you did take the time to read Barry's book and you did really enjoy it. If you created a thread that explained why members of our tribe should read our founder's book, and lots of members used their donations to bring your thread to my attention... then the more valuable your thread, the greater my motivation to would read Lexicon.

How many books are there anyways? How many articles are on the internet? How many videos are on Youtube? We really don't have the time to read and watch everything. It's a very important fact that our tribe, as a group, can read and watch far more than any single member of the tribe can. Our tribe, as a group, has far more eyeballs than any single member of the tribe. Our tribe, as a group, has far more ears than any single member of the tribe. Most importantly... our tribe, as a group, has far more brains than any single member of the tribe. In order to fully utilize our collective brain... we need to use our money to improve each other's treasure maps. When each and every member of our tribe has and uses the tribe's most valuable knowledge and information... then we'll be the smartest and most powerful and most influential tribe on the internet. We will win the internet. At least until other tribes figure out the "secret" to our success.

But if it's beneficial for each and every member of the NS tribe to use our money to improve each other's treasure maps... then imagine how beneficial it will be when each and every member of the human race uses their money to improve each other's treasure maps. Then we'll be the smartest and most powerful and most influential species in the universe. We will win the universe.