Tuesday, December 18, 2012

Tax Choice on Facebook

I took the liberty of creating a page on facebook for tax choice.  If you like the idea of allowing taxpayers to choose where even just a small percentage of their taxes go...then hopefully you'll "like" the concept on facebook.

Monday, December 10, 2012

Can Economics Explain Human Sacrifice?

In my economic critique of peer progressivism...I started off by making the point that it's a huge mistake to underestimate the scope of economics.  Peter Leeson, in his recent paper on human sacrifice...Law, Economics, and Superstition: Human Sacrifice...concludes with the same point...
It's unnecessary and, I would argue, unhelpful, to approach the institutionalized purchase and ritual slaughter of innocent persons by abandoning rational choice theory. Not only does such abandonment leave one of history's  most well-known and intriguing institutions unexplained. It suggests that puzzling human behaviors and practices are beyond the power of economics to illuminate.
This outstanding conclusion, just on its own, makes his paper extremely praiseworthy.  The fact that relatively  few economists engage in economic imperialism helps explain why Leeson's theory of human sacrifice is so far off base.      

In his paper he argues that the Konds engaged in human sacrifice in order to signal to other tribes that they had spent their surplus wealth on purchasing humans to sacrifice.  The point of this signal was to decrease other tribes' incentive to conduct raids on the tribe that had given up its wealth.  Therefore, the tribe that conducted the sacrifice did so in order to protect its property.  

The correct economic explanation was shared in a comment on Mark Movsesian's's blog entry...If Only the Aztecs Had Known...
Mark, there IS an “economic” aspect to human sacrifice, in the sense that all appeasement religions are transactional. The society says to the god, “We’ll give you this, and in return you’ll give us that, or [more likely] you won’t do that.” It’s the logic of the protection rackett. - ChrisZ
This economic explanation is so "self-evident" that it gives incredible weight to Leeson's conclusion.  Economists should not be puzzled by ritualistic sacrifice.  That they are indicates that there is a huge gap in their understanding of economics.  In the beginning of his paper Leeson highlights this problem...
Even the economists who have mentioned human sacrifice take this view. One asserts that human sacrifice is "properly considered as noneconomic" and thus beyond the explanatory power of rational choice theory (Hunter, Teaf, and Hirschman 1957: 59). A more recent reference adduces human sacrifice in support of behavioralist doubts about the canonical rendition of "economic man" (Ainslie 2005: 816).
Here's more evidence of the problem...
Together, tradition- and command-run societies constitute the vast preponderance of all known, or inferred, social entities, but as I have tried to show, economics supplies no operational insight into their workings. - Robert L. Heilbroner, Putting economics in its place - Defining the Boundaries of Social Inquiry
In this blog entry I'll offer evidence that proves that economics has supplied, and continues to supply, operational insight into human behavior...specifically...ritualistic sacrifice.

In a nutshell...economics is the study of how humans overcome scarcity.  The goal is always abundance...of love, happiness, wealth, meaning, knowledge, prestige and so on.

A few months ago, over on the NationStates forum, I posted a thread on Prayer and Sacrifice.  In my post I shared this passage by Derrida...
Sacrifice will always be distinguished from the pure gift (if there is any). The sacrifice proposes an offering but only in the form of a destruction against which it exchanges, hopes for, or counts on a benefit, namely, a surplus-value or at least an amortization, a protection, and a security. - Jacques Derrida
...and this dialogue from John Holbo's book Reason and Persuasion...
S: You could have been much more concise, Euthyphro, if you wanted to, by answering the main part of my question. You're not exactly dying to teach me - that much is clear. You were just on the point of doing so, but you turned aside. If you had given the answer, I would already be well versed in holiness, thanks to you. But as it is, the lover of inquiry must chase after his beloved, wherever he may lead him. Once more then: what do you say that the holy is, or holiness? Don't you say it's a kind of science of sacrifice and prayer?
E: I do.
S: To sacrifice is to give a gift to the gods; to pray is to ask them for something?
E: Definitely, Socrates.
S: Then holiness must be a science of begging from the gods and giving to them, on this account.
E: You have grasped my meaning perfectly, Socrates.
S: That is because I want so badly to take in your wisdom that I concentrate my whole intellect upon it, lest a word of yours fall to the ground. But tell me, what is this service to the gods? You say it is to beg from them and give to them?
E: I do
S: And to ask correctly would be to ask them to give us the things we need?
E: What else?
S: And to give correctly is to give them in return what they need from us? For it would hardly represent skill in giving to offer a gift that is not needed in the least.
E: True, Socrates
S: Holiness will then be a sort of art for bartering between gods and men?
E: Bartering, yes - if you prefer to call it that.
...and the story from 1 Kings 18:  God caused a drought because people were worshiping Baal...Elijah challenged the priests of Baal to a competition...the people loved the idea...Baal's priests had technical difficulties...Elijah talked mad smack...
And it came to pass at noon, that Elijah mocked them, and said, Cry aloud: for he is a god; either he is talking, or he is pursuing, or he is in a journey, or peradventure he sleepeth, and must be awaked.
When Elijah offered his sacrifice and prayer...God's response left no room for doubt.

I thought I had shared enough evidence to prove that sacrifice is simply exchange between believers and their deities.  But evidently my evidence was not conclusive because here was the first reply...
I disagree that people sacrifice in a sort of psychological contract, quid pro quo.
Walter Burkert says we have a deep impulse (he says it is evolutionary) to sacrifice in order to allevaite anxiety, in particular, anxiety about the unknown. 
All over the world, primitive religions practice finger sacrifice (Stephen King had a creepy early book about this). It is almost universal. What could we hope to gain from chopping off a finger? Yet it apparently satisfies a deep inner need; perhaps it could even be related to cutting.
http://books.google.com/books/about/Cre ... jRg_3p1s4C
Also see Sir James Frazier.
What could somebody hope to gain from chopping off a finger?  If you want to know what somebody would hope to gain from a sacrifice...just listen to their prayers...
"Old-women's Grandson," ran the words of a Crow Indian's prayer to the Morning Star, "I give you this joint [of my finger], give me something good in exchange...I am poor, give me a good horse. I want to strike one of the enemy and I want to marry a good-natured woman. I want a tent of my own to live." "During the period of my visits to the Crow (1907-1916)," wrote Professor Lowie, to whom we owe the recording of this pitiful prayer, "I saw few old men with left hands intact." - Joseph Campbell, Primitive Mythology
What could the Kond hope to gain from sacrifice?  Just listen to their prayers...
The priests receive the heads of all the slaughtered animals. The remaining flesh, eggs, and everything else that has been brought are put together into a big pot and cooked before the hut. All partake of this cooked meat. Then the priest speaks to the Penu: "Look here, Mother, we have given you such a sumptuous, luxurious meal and celebrated a solemn observance; now please, graciously bless us all and bestow on us good and copious crops, prosperity and health. If you condescend to grant us our humble request, we assure you that we will prepare a grand feast next year again, otherwise we shall discontinue it for two or three years" - Frederick Volkomor Paul, The religion of the Kuvi-Konds, their customs and folk-lore
It's simple bartering between believers and their gods...which is what Socrates teased Euthyphro about.  Based on this example...we can see that ChrisZ's "protection racket" comparison doesn't quite hold up...given that the priest threatened to boycott the goddess if the terms of trade were not upheld.

Here's a prayer that I find especially endearing...
'Let our herds be so numerous that they cannot be housed; let children so abound that the care of them shall overcome their parents - as shall be seen by their burned hands; let our heads ever strike against brass pots innumerable hanging from our roofs; let the rats form their nests of shreds of scarlet cloth and silk; let all the kites in the country be seen in the trees of our village, from beasts being killed there every day.  We are ignorant of what it is good to ask for.  You know what is good for us.  Give it to us!' - Edward Burnett Tylor, Primitive culture
Does it somehow become "noneconomic" if humans are sacrificed instead of cattle?
Human sacrifice, after all, is only one alternative on a continuous line of substitutable sacrificial articles running from at one end betel nuts and palm wine, through eggs, chickens, goats, and pigs to water buffalo, to ultimately humans. The best way to demonstrate one's potency is to sacrifice the most valuable object or objects one can. If a state or leader is very potent, then presumably it or he can afford to sacrifice human heads when important projects are undertaken, such as opening fields or building temples. Of course, by doing so the state places itself in competition with local sovereignties. - R. H. Barnes, Construction Sacrifice, Kidnapping and Head-Hunting Rumors on Flores and Elsewhere in Indonesia
The economic term for this is "demonstrated preference".  What you are willing to sacrifice reveals how much you truly value something.  From Bryan Caplan's post...Rand on Totalitarian Motives...
"I don't know, however, whether I'd include blood in my methods."
"Why not?  Anyone can sacrifice his own life for an idea.  How many know the devotion that makes you capable of sacrificing other lives?"
She looked at him.  She said slowly, simply: "I've never thought of that.  Perhaps you're right."
In another post of his....The Banality of Leninism...he shares this passage from Crime and Punishment...
I maintain in my article that all...well, legislators and leaders of men, such as Lycurgus, Solon, Mahomet, Napoleon, and so on, were all without exception criminals, from the very fact that, making a new law, they transgressed the ancient one, handed down from their ancestors and held sacred by the people, and they did not stop short at bloodshed either, if that bloodshed -- often of innocent persons fighting bravely in defense of ancient law -- were of use to their cause. It's remarkable, in fact, that the majority, indeed, of these benefactors and leaders of humanity were guilty of terrible carnage. In short, I maintain that all great men or even men a little out of the common, that is to say capable of giving some new word, must from their very nature be criminals--more or less, of course.
...which complements this passage by Nietzsche...
But have you ever asked yourselves sufficiently how much the erection of every ideal on earth has cost? How much reality has had to be misunderstood and slandered, how many lies have had to be sanctified, how many consciences disturbed, how much "God" sacrificed every time? If a temple is to be erected a temple must be destroyed: that is the law - let anyone who can show me a case in which it is not fulfilled! 
Markets work because we have the freedom to give our offerings/sacrifice/money to any new temple that provides us with more blessings/benefit than older temples.  Because we all only have finite resources...the offerings we give to our new temples cannot also be given to our older temples.  So not only do we have the freedom to choose which new temples we help erect...each and every one of gets to choose exactly which temples we help destroy.  Given that we all want to maximize our blessings/benefit...we will choose to sacrifice the least beneficial temples.  This is how we make progress.  We give up something less valuable in exchange for something more valuable.  This is why free-trade leads to abundance.

Demonstrated preference, which is key to free-trade, is commonly expressed in the challenge to "put your money where your mouth is"...
Overall, I am for betting because I am against bullshit. Bullshit is polluting our discourse and drowning the facts. A bet costs the bullshitter more than the non-bullshitter so the willingness to bet signals honest belief. A bet is a tax on bullshit; and it is a just tax, tribute paid by the bullshitters to those with genuine knowledge. - Alex Tabarrok, A Bet is a Tax on Bullshit
Genuine knowledge is extremely important because economies are based on the garbage in, garbage out concept...
These extraordinarily complex micro-relationships are what we are really referring to when we speak of “the economy.” It is definitely not a single, simple process for producing a uniform, aggregate glop. Moreover, when we speak of “economic action,” we are referring to the choices that millions of diverse participants make in selecting one course of action and setting aside a possible alternative. Without choice, constrained by scarcity, no true economic action takes place. Thus, vulgar Keynesianism, which purports to be an economic model or at least a coherent framework of economic analysis, actually excludes the very possibility of genuine economic action, substituting for it a simple, mechanical conception, the intellectual equivalent of a baby toy. - Robert Higgs, Recession and Recovery 
Without each and every one of our valuations of the opportunity costs...without all our decentralized knowledge...the output will be bullshit.

Let's zoom out from the actual economics and consider again the scope of economics...
The concept of "exchange" continues to be a popular way of making sense of certain religious practices.  The recently edited Guide to the Study of Religion (2000) includes a chapter on "exchange."  Gregory Alles, the author of this chapter, characterizes sacrifice as one expression of exchange: "Exchange did provide one of the oldest theoretical models for understanding the widespread ritual of sacrifice: the notion that sacrifices are gifts given to the gods or ancestors in the hope of receiving a gift in return.  This perspective is often summed up in three Latin words: do et des, "I give [to you], so that you will give [to me].'" Exchange in religious contexts involves the transfer of not only material goods but also intangible goods, such as offspring, honor, deferred rewards in the afterlife, and so forth.  Exchange also reflects and constructs social relationships.  Religious exchange, therefore, includes but is not limited to an economic transfer of material goods. - Kathryn McClymond, Beyond Sacred Violence: A Comparative Study of Sacrifice
"Exchange" is the oldest theoretical model for understanding sacrifice.
Practically everywhere it is understood that communication with the divine should be through exchange, through mutual giving, which is reflected in the circulation of gifts within the community or hierarchy of Creation of the Sacred. - Walter Burkert, Creation of the Sacred: Tracks of Biology in Early Religions
"Mantiklos has dedicated me to the far-shooting god with the silver bow, from the tenth of his profit; you, Phoibos, give pleasing return." This plainly states that the relation between a god and his pious worshiper is an exchange of gifts. - Walter Burkert, Creation of the Sacred: Tracks of Biology in Early Religions
"All things are exchange (antamoibe) for fire, and fire for all things, as goods for gold and gold for goods," Heraclitus wrote explicitly referring to commerce as the paradigm of the cosmic order. - Walter Burkert, Creation of the Sacred: Tracks of Biology in Early Religions
The invention of the free market, of money, and of putting a price on the merchandise brings changes to the system. Whereas giving creates a bond between the persons who give and those who receive, money exchange is impersonal. Still, "exchange" remains the basic process, goods for money, or money for goods, on the basis of choice, of partnership, and, ideally, of bilateral profit. Even if state-controlled contributions are paid by taxes, the expectation remains that the citizen will get a return for what he is giving, be it privileges, prestige, or just personal safety. Even the prestigious gift has remained, sometimes called "sponsoring" in a more modern vein; it is a form of ceremonial waste not without the expectation of the "pleasant returns." - Walter Burkert, Creation of the Sacred: Tracks of Biology in Early Religions
What is not in doubt is that the conclusions Mauss draws in the ‘Essai sur le don’, and the kind of liberal society he advocates in its conclusion, are a world away from Bataille’s formulation of a general theory of the economy beyond the sphere of utility. In the few pages he devotes to sacrifice in this work, Mauss writes: ‘The relationship that exists between these contracts and exchanges among  humans and those between men and their gods throw light on a whole aspect of the theory of sacrifice’. As an explanatory principle, this is remarkably similar to Tylor’s analogy of ‘man’s dealings with man’, and comes to much the same conclusions. ‘The purpose of destruction by sacrifice’, Mauss goes on to say, ‘is precisely that it is an act of giving that is necessarily reciprocated’. - Simon Elmer, The Enigma of Sacrifice
The things which the worshipper really gives his gods are not the foods which he places upon the altars, nor the blood which he lets flow from his veins: it is his thought.  Nevertheless, it is true that there is an exchange of services, which are mutually demanded, between the divinity and its worshippers.  The rule do ut des, by which the principle of sacrifice has sometimes been defined, is not a late invention of utilitarian theorists: it only expresses in an explicit way the very mechanism of the sacrificial system and, more generally, of the whole positive cult.  So the circle pointed out by Smith is very real; but it contains nothing humiliating for the reason.  It comes from the fact that the sacred beings, though superior to men, can live only in the human consciousness. - Emile Durkheim, The Elementary Forms of the Religious Life
The mere fact of sacrifices to deities, from the lowest to the highest levels of culture, consisting to the extent of nine-tenths or more of gifts of food and sacred banquets, tells forcibly against the originality of the abnegation-theory.  If the primary motive had been to give up valuable property, we should find the sacrifice of weapons, garments, ornaments, as prevalent in the lower culture as in fact it is unusual.  Looking at the subject in a general view, to suppose men to have started by devoting to their deities what they considered practically useless to them, in order that they themselves might suffer a loss which none is to gain, is to undervalue the practical sense of savages, who are indeed apt to keep up old rights after their meaning has fallen away, but seldom introduce new ones without a rational motive.  In studying the religion of the lower races, men are found dealing with their gods in as practical and straightforward a way as with their neighbours, and where plain original purpose is found, it may well be accepted as sufficient explanation. - Edward Burnett Tylor, Primitive Culture
The benefits of religion for the majority have been primarily of the orders of kama, artha, and dharma. The cult has served as a magical device to assure an abundance of food and youngsters, power over enemies, and the linkage of the individual to the order of his society. It has served, that is to say, as a means to engage him in the desi, the local, ethnic context, and has supplied, in compensation, assurance of a continuance of the goods of kama, artha, and dharma beyond the grave. One's little offerings of finger-joints, pigs, sons and daughters, or even of oneself, seem to have meaning in a sort of mystical barter system; and one's peccadillos, missed by the police, can be counted on to eat from within, like rats, doing the work of the law. - Joseph Campbell, Primitive Mythology
Instances of this practice are reported to have occurred among the ancient Greeks and Phenicians.  In a grievous famine, after other great sacrifices, of oxen and of men, had proved unavailing, the Swedes offered up their own king Domaldi.  Chinese annals tell us that there was a great drought and famine for seven years after the accession of T'ang, the noble and pious man who had overthrown the dynasty of the Shang.  It was then suggested at last by some one that a human victim should be offered in sacrifice to Heaven, and prayer by made for rain, to which T'ang replied, "If a man must be the victim I will be he."  Up to quite recent times, the priests of Lower Bengal have, in seasons of scarcity, offered up children to Siva; in the years 1865 and 1866, for instance, recourse was had to such sacrifices in order to avert famine. - Edward Westermarck, The Origin and Development of the Moral Ideas
There is a productive activity, an exchange activity, and a distributive activity. In the first, something of value is taken for an end which requires its transformation, all productive activities being transformative. In the second, the transformed object is replaced, or held to be replaced, through a transaction - in this case what we might call a heavenly transaction - by another thing of another nature and greater worth. There is then a distributive activity : the replacement or countergood of higher worth is shared between those who sustained the original loss. - W. E. H. Stanner, On Aboriginal Religion: I. The Lineaments of Sacrifice
So let me see if I can get this straight.  We have noneconomists who see sacrifice as economics and economists who see sacrifice as noneconomics.  That's why it's significant progress for Leeson to see sacrifice as economics...even if his theory failed to reflect what noneconomists have known for ages.

This paradox is so strange though because the Bible, which is easily the most widely read book, is all about sacrifice for abundance sake.  In other words...the most widely read book of all time is a book on economics.  People who have read the bible many times over are noneconomist economists.

The beginning of the Bible...the Garden of Eden...and the end of the Bible...Heaven...are both characterized by abundance and the absence of sacrifice.  Everything in between is a lesson on how to sacrifice for abundance sake.

Recently I stumbled upon this webpage by The United Church of Christ... The Bible on stewardship: key passages.  It offers quite a few passages specifically dealing with  how to get the most bang for your buck.

One of the most well known stories from the Bible is the story of Abraham's willingness to sacrifice his son Issac.  The reward for his demonstrated preference was not small.  From Genesis 22:16-18...
16 And said, By myself have I sworn, saith the LORD, for because thou hast done this thing, and hast not withheld thy son, thine only son:
17 That in blessing I will bless thee, and in multiplying I will multiply thy seed as the stars of the heaven, and as the sand which is upon the sea shore; and thy seed shall possess the gate of his enemies;
18 And in thy seed shall all the nations of the earth be blessed; because thou hast obeyed my voice.
Derrida deconstructed Abraham's opportunity cost...
By preferring my work, simply by giving it my time, my attention, by preferring my activity as a citizen or as a professional philosopher, writing and speaking here in a public language, French in my case, I am perhaps fulfilling my duty. But I am sacrificing and betraying at every moment all my other obligations: my obligation to the other others whom I know or don’t know, the billions of my fellows (without mentioning the animals that are even more other others than my fellows), my fellows who are dying of starvation or sickness. I betray my fidelity or my obligations to other citizens, to those who don't speak my language and to whom I neither speak or respond, to each of those who listen or read, and to whom I neither respond nor address myself in the proper manner, that is, in a singular manner (this is for the so-called public space to which I sacrifice my so-called private space), thus also to those I love in private, my own, my family, my son, each of whom is the only son I sacrifice to the other, every one being sacrificed to every one else in this land of Moriah that is our habitat every second of every day.
Moriah is where Abraham took Issac to be sacrificed.

Towards the end of Leeson's paper...he relates how the Kond people were willing to replace the property protection offered by human sacrifice with the property protection offered by the British government.  I'm skeptical.  In general...it seems like most other historical accounts indicate that government intervention simply drove such practices underground.  That seems more logical because...why not hedge your bets?

That being said, the idea of the state replacing religion is definitely solid.
In short, persons are afraid to be free. As subsequent discussion will suggest, socialism, as a coherent ideology, has lost most of its appeal. But in a broader and more comprehensive historical perspective, during the course of two centuries, the state has replaced God as the father-mother of last resort, and persons will demand that this protectorate role be satisfied and amplified. -  James M. Buchanan, Afraid to be free: Dependency as desideratum
The reason the market works is because of choice, constant change, competition, churn...creative destructionism...all towards the maximization of the benefit that we derive from society's limited resources...
Capitalism [...] is by nature a form or method of economic change and not only never is but never can be stationary. [...] The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates. [...] The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation [...] that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. - Joseph Schumpeter,  Capitalism, Socialism and Democracy
The reason that the state does not work is because it's missing everything that makes the market work.  With the market...some people will invariably be harmed by the destructive aspect...they will lose their jobs because of modernization...but everybody benefits as a result of the creative aspect....limited resources being used more efficiently.  However, knowing that you could be the victim of random and unforeseen acts of destruction is a source of great anxiety.
Along with instability comes economic insecurity. Being constantly vulnerable to market forces beyond one’s control is a recipe for personal anxiety. It is not conducive to increasing productivity and investment in skills, which require a more long-term perspective. - Frank Stilwell, Oh, the morality: why ethics matters in economics
Whenever I feel as if I'm on a path toward certain doom, which happens every time I pay attention to the news, I like to imagine that some lonely genius will come up with a clever solution to save the world. Imagination is a wonderful thing. I don't have much control over the big realities, such as the economy, but I'm an expert at programming my own delusions. -   Scott Adams, How to Tax the Rich
Scott Adams doesn't seem to be aware of Nietzsche's rule.  Somebody coming up with a clever solution to save the world means that a temple must be destroyed.  The more clever the solution the greater the destruction.  Discovering a cure for war would put countless people out of work.

From Leeson's paper...
Despite its primitivity, Kond agriculture was capable of "resulting in no small share of rural affluence" (C.R. 1846a: 49). The extent to which a Kond community enjoyed such affluence depended on "the capricious climate" most notably local weather and animal activity, which varied across communities from year to year (van den Bosch 2007: 203).  The fortune of a good season produced comparative bounty for lucky communities. The misfortune of a bad season produced comparative deprivation for unlucky ones.
As a result of the anxiety caused by instability, people cling to the state like people cling to religion like children cling to their parents.
One mutah, for example, "promise[d] to relinquish from henceforth the rite of human sacrifice" on the condition "That they shall be received into the immediate protection of the Government, and shall always obtain justice from it". Another similarly agreed "to relinquish the rite of sacrifice 'upon the condition of their receiving protection and peace and justice from the Government'". Soon other communities "spontaneously proffered to relinquish the sacrifice mainly on the condition of obtaining protection and justice, and actually pledged themselves accordingly".
Did they really relinquish the rite of sacrifice?  No...because the state, just like any other deity, requires payment in exchange for the promise of stability...
It may help to see this point if we think of a modern phenomenon which can be compared with child sacrifice, that of war.[...]  But once it had broken out (or even a little bit earlier) it became a "religious" phenomenon.  The state, the nation, national honor, became the idols, and both sides voluntarily sacrificed their children to these idols.  [...]  The fact that, in the case of child sacrifice, the father kills the child directly while, in the case of war, both sides have an arrangement to kill each other's children makes little difference. - Erich Fromm, The Anatomy of Human Destructiveness
So do you put yourself in God's hands...or the state's hands?
"It can be reasoned that if one believes God determines worldly affairs, then there is little reason for individuals to participate in civic events," study leader Robyn Driskell and her colleagues write in the June issue of the journal Social Science Quarterly. "God is taking care of things." - Jeanna Bryner, Non-voters: It's all in God's hands
Unlike with the Konds, for the "developed" nations...the transition of going from god's hands to the state's hands wasn't so abrupt...
On the whole, then, we seem to be justified in inferring that in many parts of the world the king is the lineal successor of the old magician or medicine-man. When once a special class of sorcerers has been segregated from the community and entrusted by it with the discharge of duties on which the public safety and welfare are believed to depend, these men gradually rise to wealth and power, till their leaders blossom out into sacred kings. - James George Frazer, The Golden Bough
So the idea of a separation between church and state is meaningless from the economic perspective.  Here in the United States we have two prominent religions...Conservatism and Liberalism.  Both compete for believers and both promise abundance...
A canon attributed to St. Patrick enumerates among the blessings that attend the reign of a just king “fine weather, calm seas, crops abundant, and trees laden with fruit.” On the other hand, dearth, dryness of cows, blight of fruit, and scarcity of corn were regarded as infallible proofs that the reigning king was bad. - James George Frazer, The Golden Bough
Walter Burkert used the term "nonobvious causality" for when it wasn't exactly clear how a sacrifice would produce abundance.  Given that the Democrats and Republicans have been going back and forth for the past 100 years...it seems self-evident that we're dealing with nonobvious causality.
Jules: This was Divine Intervention! You know what "divine intervention" is?
Vincent: Yeah, I think so. That means God came down from Heaven and stopped the bullets.
Jules: Yeah, man, that's what it means. That's exactly what it means! God came down from Heaven and stopped the bullets.
Vincent: I think we should be going now.
Jules: Don't do that! Don't you fucking do that! Don't blow this shit off! What just happened was a fucking miracle!
Vincent: Chill the fuck out, Jules, this shit happens.
Jules: Wrong! Wrong, this shit doesn't just happen.
Vincent: Do you wanna continue this theological discussion in the car, or at the jailhouse with the cops?
Jules: We should be fuckin' dead now, my friend! We just witnessed a miracle, and I want you to fucking acknowledge it!
Vincent: Okay man, it was a miracle, can we leave now?
More nonobvious causality...
   "I want to stay," said Twoflower.  "I think ceremonies like this hark back to a primitive simplicity which - "
   "Yes, yes," said Rincewind, "but they're going to sacrifice her, if you must know."
   Twoflower looked at him in astonishment.
   "What, kill her?"
    "Yes."
    "Why?"
    "Don't ask me.  To make crops grow or the moon rise or something.  Or maybe they're just keen on killing people.  That's religion for you." - Terry Pratchett, The Light Fantastic
Even more...
The idea that U.S. leaders should just “hand over” basic facets of government like regulation and a legal system to God is a stark abdication of all responsibility as a public servant that could have very real, very serious consequences for Americans. As Salon’s Justin Elliott notes, Perry responded to a historic drought in Texas by calling for three days of prayer for rain in April. “How did that work out? The AP reported June 29: ‘Drought-stricking Texas declared natural disaster area.” - Tanya Somanader, Rick Perry Wants To Leave Government ‘In God’s Hands,’ Says ‘God, You’re Gonna Have To Fix This’
When Arnold Kling posted a blog entry with the title...I Doubt the Business Model...he was conveying that the causality was nonobvious.

As a pragmatarian...I advocate that taxpayers should have the freedom to choose where their taxes go.  From my perspective...the causality between pragmatarianism and abundance is obvious.  For most people though...the causality is nonobvious.  For example...here's David Friedman doubting the business model...
I don't think that letting taxpayers allocate their taxes among options provided by the government solves the fundamental problems of government. - David Friedman
Yet...here's David Boaz considering the business model...
In the private sector, the voluntary sector of the economy, we know that something is "well worth the money" if people are willing to spend their own money on it. In government, politicians work to separate the payment of taxes from the receipt of specific services. We're not asked "will you pay $100 right now for farm subsidies and $4000 for Medicaid and $1600 for the wars in Iraq and Afghanistan and $130 for a new presidential helicopter and ... ?"
If we did get such a question, we might well decide that lots of government programs were not "well worth the money" to the people who would be paying the money. - David Boaz, Well Worth the Money
Pragmatarianism would put taxpayers in a position to doubt the business model.  They would be able to doubt that farm subsidies are worth $100 and doubt that Medicaid is worth $4000 and doubt that the wars in Iraq and Afghanistan are worth $1600 and doubt that a new presidential helicopter is worth $130.

So how would giving taxpayers the freedom to doubt the business model not solve the fundamental problems of government?

Paying taxes is for the common good...but the common best is giving people the freedom to doubt the business model.  If David Friedman doubts that taxes are truly necessary...then he would have the freedom to doubt the IRS's business model by not giving any of his taxes to the IRS.  Giving him, and millions and millions of other taxpayers, the freedom to choose how their taxes are spent truly would solve the fundamental problems of government.
But progress is made by finding non-obvious uses for what we have; otherwise we are left in stagnation.- Zachary Gochenour, Progress or Poverty: The Economics of Land and Discovery

Sunday, December 9, 2012

Biting The Hand That Employs You

Did you know that there are absolutely zero Google search results for "biting the hand that employs you"?   For some reason I find that really surprising.  In comparison...there are 1,470,000 search results for "biting the hand that feeds you".

David Henderson, over at the EconLog (grumble gripe), recently posted an entry on the topic of "better options"...Blaming the Person Offering you the Best Deal.  The basic concept is that employers provide the "best" available option for their employees.  If it wasn't truly their "best" option then the employees would be working for other people.  It helps frame the important question of how much of an obligation we have to how many other people.  

This concept has been the subject of a few of my blog entries...
  1. The Dialectic of Unintended Consequences (17 Oct 2011)
  2. Dude, Where's My Ethical Consumerism (13 Feb 2012)
  3. Subsistence Agriculture vs Sweatshops (5 Oct 2012)
  4. John Holbo's Critique of Libertarianism (15 Nov 2012)
  5. What About Voluntary Taxation? Also, Knockers vs Builders...Which One Are You? (1 Feb 2014)
  6. Ethical Consumerism, Ethical Producerism and Ethical Builderism (12 Feb 2014)
  7. Civic Crowdfunding Ethical Alternatives (13 Feb 2014)
  8. Where Do Better Options Come From? (14 May 2014)
  9. Builderism (1 Jan 2015)
Having spent quite a bit of time considering the subject...it was enjoyable to discover and read Henderson's post.  As far as I can remember that was the first time I've run across somebody else writing on the subject of offering people "better" options.  Except...now I'm really curious how many other people have put it like so.  The problem is that searching Google for descriptions rather than labels is no fun.   So if you stumble upon this...and know of anybody else who had written on the same subject...then please feel free to share a link in a comment.

[Update:]  Some found passages...
And yet, wherever the new export industries have grown, there has been measurable improvement in the lives of ordinary people. Partly this is because a growing industry must offer a somewhat higher wage than workers could get elsewhere in order to get them to move. - Paul Krugman, In Praise of Cheap Labor
Where all other circumstances are equal, wages are generally higher in new than in old trades. When a projector attempts to establish a new manufacture, he must at first entice his workmen from other employments by higher wages than they can either earn in their own trades, or than the nature of his work would otherwise require, and a considerable time must pass away before he can venture to reduce them to the common level. - Adam Smith, Wealth of Nations 
The whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighbourhood, be either perfectly equal or continually tending to equality. If in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of other employments. This at least would be the case in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to chuse what occupation he thought proper, and to change it as often as he thought proper. Every man's interest would prompt him to seek the advantageous, and to shun the disadvantageous employment. - Adam Smith, Wealth of Nations 
The woman felt or thought that she deserved $15 an hour. But Kennedy's point is: Why single out McDonald's? Indeed, there's a presumption that McDonald's is paying her more than anyone else would. Why? Because if someone else would pay more, she would likely be working for someone else. Or, it's possible that someone else would pay more, but she likes McDonald's because the job is better, on a non-wage dimension, than that other higher-paying job. In short, she's in the best place she can find. 
McDonald's is giving her a better deal than anyone else is offering. So her beef, so to speak, is with the very company that's giving her the best deal! - David Henderson, Blaming the Person Offering you the Best Deal 
Sweatshops are an important exercise in appreciating the difference between what we see (people in sweatshops) and what we don't see (the jobs they would have if they didn't have sweatshop opportunities). Sweatshops employ children because the children are available for work and because their next-best opportunities (agriculture or, in some cases, prostitution) are usually worse than sweatshop labor. It is definitely good that the workers at least have opportunities to work in sweatshops because, as research by Powell and others has shown, their other alternatives are even worse. I don't have the numbers in front of me, but sweatshop earnings are better than they are in other lines of employment. - Art Camden, On Sweatshops: They're Better Than the Alternative
Stopping people from taking terrible jobs – through prohibitions or protections or minimums, justified by the warm if mistaken feeling over one’s second cappuccino that one is thereby being generous to the poor – takes away from the poor what the poor themselves regard as a bettering option.  It’s theft from the poor of deals the poor want to make. - Deirdre McCloskey, The Treasured Bourgeoisie (Donald J. Boudreaux, Quotation of the Day)
Wishing away reality doesn’t give these workers better alternatives. Workers choose to work in sweatshops because it is their best available option. Sweatshops, however, are better than just the least bad option. They bring with them the proximate causes of economic development (capital, technology, the opportunity to build human capital) that lead to greater productivity—which eventually raises pay, shortens working hours, and improves working conditions. -  Benjamin Powell, Sweatshop Blues: An Interview With Benjamin Powell
Because sweatshops are better than the available alternatives, any reforms aimed at improving the lives of workers in sweatshops must not jeopardize the jobs that they already have. To analyze a reform we must understand what determines worker compensation. - Benjamin Powell, In Defense of "Sweatshops" 

Sunday, December 2, 2012

Civic Crowdfunding - Encouraging Participation

Sacrifice will always be distinguished from the pure gift (if there is any). The sacrifice proposes an offering but only in the form of a destruction against which it exchanges, hopes for, or counts on a benefit, namely, a surplus-value or at least an amortization, a protection, and a security. - Jacques Derrida
In my post on civic crowdfunding...I shed a few tears because I can't take any credit for setting us on the path to pragmatarianism.  In my last post...which was on peer progressivism...I shared this passage by  Steven Johnson...
If you look at Wikipedia for instance...it's extraordinary that it works. It's extraordinary that so many people are willing to contribute to this thing without even the kind of social prestige of some of these systems really doesn't exist in Wikipedia in the sense that it is very hard to get credit. It's very hard to kind of approach somebody and say, "hey, these three sentences in that Charles Dickens entry I wrote a couple years ago". That doesn't get you a free drink in the bar. But somehow it works...this miraculous thing keeps happening.
In my post...I shared the economic concepts which explain this "miracle"...but now I'd like to offer an insight that challenges the assumption that a system of credit does not exist.

Recently I created a stub for a popular business adage...the customer is king.  As you can see...another editor nominated it for deletion.  In the discussion on whether or not it should be deleted...the following exchange took place...
Sue Rangell:  Delete.  Wikipedia is not the urban dictionary. I have a feeling that someone is literally going through the urban dictionary and creating wikipedia pages to boost their creation count. I wish there was a speedy delete tag that we could use for these.
Xerographica: You mean we get credit for every page we create? Where can I go to see how many pages that somebody has created? How many pages have I created?
WWGB: https://tools.wmflabs.org/xtools/pages/index.php?user=Xerographica
Xerographica: Woah, you have way more credit than I do! *runs over to browse the urban dictionary* 
If you click on that link you can see a list of all the pages that I can take credit for having created.  Personally...while I didn't know for certain that such a tool existed...I strongly suspected that it did exist.  My suspicion turned out to be correct...and we can surmise that all the seasoned editors of Wikipedia know of its existence.  Therefore...a system of prestige does exist...but it's usually hidden behind the scenes.

When it comes to encouraging participation in civic crowdfunding...it seems fairly intuitive that we would want a well developed and highly visible system of prestige.  Hopefully it should go without saying that people should have the option to make anonymous donations...but the standard operating procedure should be to give credit where credit is due.  

In his post...No Tax Increase Without Recompense...Miles Kimball referred to an earlier post of his...Scott Adams’s Finest Hour: How to Tax the Rich...where he discussed Scott Adam's post How to Tax the Rich.

There's a ton of great ideas in those posts that civic crowdfunding organizations can utilize to help encourage people to contribute to public projects.  

My suggestion is to allow contributors to share a link of their choice.  Consider these successfully funded projects...


Out of those three...Spacehive has the best format because it displays the top funders, sorted by contributions, right next to the project.  Neighbor.ly is not as effective because you have to click on a tab in order to see the funders...plus...it doesn't display how much each funder contributed.  The least effective is Citizinvestor because it doesn't even show who helped fund the project.

Neighbor.ly and Citizinvestor should follow Spacehive's lead and display the top funders on the landing page.   But rather than only linking to each funder's profile page...each funder should have the option to display a link to any webpage of their choice.

For example...if I contributed to a project then I'd have the option to include a link.  Perhaps I'd choose to share a link to my blog.  That would allow me to track exactly how many visitors were being referred to me by that specific project.  Business owners would be able to share links to their businesses and non-profits would be able to share links to their non-profits.

This would help add value for the contributors.  Not only would they be contributing to a good cause but they would also be receiving "free" publicity for other projects that they wanted to help support.

The more money that somebody contributes...the higher up they'd be displayed on the list...and the more exposure their own projects would receive.  So in essence...each public project would function as a publicity auction where contributors could bid against each other for the top slots.

Would this idea also work for tax choice?  Sure...I don't see why not.  If you gave your taxes to the Environmental Protection Agency...then I don't see why you shouldn't have the option to include a link to a webpage of your choice.

Saturday, December 1, 2012

An Economic Critique of Peer Progressivism


In my last entry I mentioned that I had created Wikipedia stubs for civic crowdfunding and for several prominent organizations in this field.  Immediately after creating the stubs I e-mailed the links to the four organizations and encouraged each one to flesh out their entry.  I also included my two cents on the general topic.

So far only Bryan Boyer, from Brickstarter, has responded to my e-mail.  He chose to give me his own two cents...I chose to reply with two more cents...and in his most recent reply he recommended that I read Steven Johnson's new book....Future Perfect.  Boyer also threw in a link to an excellent discussion that  Johnson and other experts had on the topic of peer progressivism...Has Politics Gone Peer 2 Peer?

Does the ongoing exchange between Boyer and myself fall within the realm of economics?  Definitely!  It's a perfect example of free-trade.  It's the market at work.  We're exchanging our time and partial knowledge with each other.  Yet...for most people...if there aren't price tags attached...or money changing hands...or greedy fat-cat capitalists exploiting everybody and anybody for profit...then the behavior is perceived to fall outside the realm of economics.  What happens when people fail to understand how all behavior can be understood in terms of the universal desire for "gain" to be greater than "loss"?  They unintentionally support conclusions, solutions, recommendations that greatly decrease society's total welfare.    

What's kind of funny is that when Boyer suggested that I read Steven Johnson's book...the name didn't ring any bells.  It wasn't until I did a google search for "peer progressivism" did I realize that, only a few days earlier, I'd read and even commented on an article specifically on Johnson's argument...Peer Progressivism vs. Network Libertarianism.

I'm not sure whether I will purchase Johnson's book...but I might because I really enjoyed the discussion on whether politics has gone peer 2 peer.  What follows is my economic analysis of that discussion.

One example that was used to illustrate the power of the internet...was how the "crowd" completely destroyed the SOPA Act.  This was put in terms of a "button" that's extremely powerful.  The "natural rights" anarcho-capitalist Murray Rothbard fantasized over a button that he could push in order to destroy the state in one fell swoop.  Who decides what's baby and what's bath water?  One person...a small group...the crowd?

Johnson, much like Margaret Flowers, wants to figure out how the button can be used for good.

Here's Flowers brainstorming...
Each of us has a finite number of resources.  So where are you going to put your resources?  Where are you going to put your time and your money?  Are you going to put it into trying to elect somebody into this current system that's broken?  Or are you going to put that into building something? - Margaret Flowers
Here's Johnson brainstorming...
If we can figure out a comparable thing that was an actual project whether it was legislation or something else.  I think there was an argument that Larry's made very persuasively over the last couple of years about campaign finance reform being potentially a great place to start.  
Is campaign finance reform really a great place to start?  Johnson immediately goes on to show his support for participatory budgeting.
I think that's one place where the local story is really important.  I mean I talk in the book about participatory budgeting when you have local communities coming together and saying here are the priorities in my neighborhood and the tax payer dollars get to fund those priorities.  The great thing about that system is that they see things get built.  They have their council meeting and they say, "we need a new sewer line extension here" and then six months later the sewer line extension is there.    
Economies don't function on the basis of merely "saying" what your priorities are.  You can't go to the grocery store, fill your cart up with groceries...and then proceed to tell the cashier that you'll be paying for your groceries with words.  You can, however, write your words down in a book and then allow others to choose whether purchasing your book is a priority for them.  If they perceive that they'll "profit" from exchanging their money for your book...then they will choose to do so.

Merely saying that you want a new sewer line is stating your preference...while spending some portion of your finite resources on a new sewer line is demonstrating your preference.

In How Economists Think...the consequentialist, anarcho-capitalist, economist David Friedman put it like so...
Economics Joke #l: Two economists walked past a Porsche showroom. One of them pointed at a shiny car in the window and said, "I want that." "Obviously not," the other replied.
This opportunity cost concept is conveyed using these two common expressions..."actions speak louder than words"...and "put your money where your mouth is".
Overall, I am for betting because I am against bullshit. Bullshit is polluting our discourse and drowning the facts. A bet costs the bullshitter more than the non-bullshitter so the willingness to bet signals honest belief. A bet is a tax on bullshit; and it is a just tax, tribute paid by the bullshitters to those with genuine knowledge. - Alex Tabarrok, A Bet is a Tax on Bullshit
Economies work on the garbage in, garbage out concept.  If the input is bullshit then the output will be bullshit.  That's why participatory budgeting is bullshit.   Political voting is perfectly fine for many things...but when it comes to determining how finite resources should be used...then it's extremely important that we solely rely on dollar voting.

The typical response from the "left" is to point out that dollar voting is very unfair because wealth is not evenly distributed.  This was the whole point of the Occupy Movement...the idea of the 1% controlling the 99%.  But as Paul Krugman would say...it's simply a problem of liberals not thinking things through.

Understanding the dollar voting concept means understanding that it's the 100% who determines exactly how society's resources are distributed.  It's me deciding whether I should purchase Johnson's book...and it's Johnson deciding whether he should reply to my e-mail.  Is there rhyme and reason to our behavior?  Well...yeah...we all want the most bang for our buck.  If you want an artichoke ..then you'll want two for the price of one.  If you want to save a starving child...then you'll want to save two for the price of saving one.  That's why it would be unfair to disregard all our demonstrated preferences.  But to just use the word "unfair" really doesn't do justice to the inevitable...but unseen...loss of massive amounts of prosperity, progress and abundance.

People can engage in participatory budgeting and consider it progress when they take one step forward...but what they can't see are the 10 steps forward that they sacrificed as a result of disregarding the garbage in, garbage out rule of economics.

Johnson understands so many of the fundamentals...but falls short on individiual valuation...
But, I think most of us agree that by diversifying and decentralizing that process and not just allowing a small tiny slice of the population to have a voice that in the end, more interesting ideas will surface and richer perspectives and solutions to problems will surface
When we shop...we generally do not care whether our spending decisions consolidate or disperse wealth...we just care about results.  Wikipedia and Amazon both produce results and we could care less that one is non-profit while the other has concentrated massive amounts of wealth in Jeff Bezos' wallet.
If you look at Wikipedia for instance...it's extraordinary that it works. It's extraordinary that so many people are willing to contribute to this thing without even the kind of social prestige of some of these systems really doesn't exist in Wikipedia in the sense that it is very hard to get credit. It's very hard to kind of approach somebody and say, "hey, these three sentences in that Charles Dickens entry I wrote a couple years ago". That doesn't get you a free drink in the bar. But somehow it works...this miraculous thing keeps happening.
It's really not that "miraculous".  It's based on a solid understanding of libertarian economics.  Specifically...Mises' human action...
We call contentment or satisfaction that state of a human being which does not and cannot result in any action. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would have neither wishes nor desires; he would be perfectly happy. He would not act; he would simply live free from care. - Mises, The Prerequisites of Human Action
...and Hayek's essay on partial knowledge.  From the Wikipedia entry on Jimmy Wales...
Wales cites Austrian School economist Friedrich von Hayek's essay "The Use of Knowledge in Society", which he read as an undergraduate, as "central" to his thinking about "how to manage the Wikipedia project".  Hayek argued that information is decentralized – that each individual only knows a small fraction of what is known collectively – and that as a result, decisions are best made by those with local knowledge rather than by a central authority.
Johnson goes on to say this...
So the whole idea of creating a stub of an entry that says, "there isn't an entry here for this...but there should be."  Everyone is kind of empowered to come along and say "hey we don't have something here but this is a blank spot in the map that needs to be filled".  Turns out to be a really interesting kind of signaling mechanism in a network.  The world is filled with people who might be at spotting blank spots on the map...but not necessarily filling them and to give them a role to inspire people.  
...also..
Thinking about that...there's an easy analogy between the Wikipedia stub and the local community where you can say, "ok, I'm good at planting the flag here and saying that this problem needs to be fixed but I'm not the one to fix it."   
...and later on...
The assumption is Democracy has become more or less synonymous with representative democracy.  And so we assume that when we mean democracy it means we vote every year, ever two years, every four years and then people go off and they make the decisions for us.  And that is not how Linux is made...right.  That's not open source software.  Wikipedia isn't a bunch of people elected to be the elites of writing encyclopedia entries...it's that everybody gets to write a little bit of the entry.
This is all great stuff...but Johnson doesn't seem to see the economics of people choosing exactly how much of their limited time they sacrifice to Wikipedia.  If he did then perhaps he'd see the economic problem with participatory budgeting.  Crowdfunding doesn't have that same problem.  The only real difference between Kickstarter and Wikipedia is that people contribute their money to the first one and their time to the second one.  In both cases they choose exactly how much of their limited resources they contribute to the "stubs" that could potentially provide the maximum return on their investment.

What Johnson gets really right is the value of diverse behavior ...
It is right to say that the internet is a force for good because what the internet and really software enables...you know Larry wrote about [?] code many years ago...is it enables basically this layer of experimentation right...this layer of creativity where it's so much easier to kind of build twenty different variations on collaborative editing of a document.  One of them turns out to be Wikipedia.  Or Kickstarter...the number of crowdfunding experiments that are out there right now probably numbers in the 1000s right. And every individual one is kind of tinkering with the model in different ways.  So we have this space...we have this kind of playground where we can try everything.
I added that passage to the stub I created for heterogeneous activity.

Lawrence Lessig's democracy vouchers...which Johnson believes should be the button that the crowd pushes to reform campaign financing...provides a perfect overview of the economic problems with peer progressivism....
If we could implement the government policy necessary to support it...the idea of democracy vouchers is exactly like the idea of spreading the vote.  So that one way to diagnosis the problem with American democracy today is that we've concentrated the funding of elections in the tiniest fraction of the 1%.  Just like in the 18th century we concentrated the voting in elections in the tiniest fraction of white male property owners.  We had 200 years of spreading the voting power out...while we concentrated the funding power.  If we could redistribute the funding power so that all of us had vouchers that we gave to people in a bottom up like way...that is the dynamic for empowering this peer like politics but it requires getting over the hurdle that makes me pessimistic which is how do you ever mass the power together to displace the current structure of funding given how enormously profitable that structure of funding is for those who sustain it. - Lawrence Lessig 
Political voting is simply stating a preference...which is exactly why we should all support children's suffrage.  Let the little bastards vote.  But redistributing funding power would disregard the contributions of the crowd.  Markets work because people only engage in trade when they perceive that they will benefit from doing so.  If the exchange does turn out to be mutually beneficial...then they will continue to trade with each other.  Therefore, the current distribution of resources makes sense because we all only trade when doing so makes sense to each and every one of us.  That's why it's nonsensical...and extremely counterproductive...to advocate redistribution.

The solution...the button that we should all push...is civic crowdfunding.  Let's make it as easy and rewarding as possible for people to donate to public projects.  After enough time has passed...then we can take the training wheels off and allow taxpayers to directly allocate their taxes.

See also: Civic Crowdfunding - Encouraging Participation