Friday, September 6, 2013

Xero's Rule

... an increase in the power of the State ... does the greatest harm to mankind by destroying individuality which lies at the heart of all progress… - Gandhi
The public collectively is abundantly ready to impose, not only its generally narrow views of its interests, but its abstract opinions, and even its tastes, as laws binding upon individuals. And the present civilization tends so strongly to make the power of persons acting in masses the only substantial power in society, that there never was more necessity for surrounding individual independence of thought, speech, and conduct, with the most powerful defences, in order to maintain that originality of mind and individuality of character, which are the only source of any real progress, and of most of the qualities which make the human race much superior to any herd of animals. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy 
Xero's Rule: by the time a species has progressed to the point that they can travel to other inhabited planets...they would have discovered the positive correlation between trading and progress.

While it's entertaining/exciting/scary to watch movies with alien space invaders attacking our planet in order to take our resources...the concept has no basis in economic reality...

1. Scarcity is relevant no matter what solar system you're from
2. Progress depends on how scarce resources are used
3. Different perspectives can see different uses of the same resource
4. Therefore, the rate of progress depends on...

A. how much difference there is between people's perspectives (diversity)
B. how much freedom people have to apply their perspectives to their scarce resources

If a species has 100% freedom but no variation in perspectives...then they won't come up with different uses of their resources...which will result in a 0% rate of progress.  Same thing if a species has 0% freedom but incredible variation in perspectives.  Of course neither extreme is possible...but where a species falls on the spectrum will determine its rate of progress.

In all likelihood it would probably be relatively easy for an advanced alien civilization to enslave/kill/eat us and take our resources. They would then be able to use our resources in their own alien ways. But if they did take our resources then they would be greatly hindering their own progress.  This is because if they hadn't taken our resources...then us humans would have been able to apply our very different perspectives to our resources.  We would have come up with new and innovative uses that the aliens would have been able to benefit from...but wouldn't have thought of on their own.

The same concept is applicable to China. China could certainly try and invade our country and take our resources. And if they were successful...then they would temporarily benefit. They would have more resources...but they would still just be applying the same set of perspectives to them.  And having resources isn't nearly as important as what you do with them.  Therefore, China would be sacrificing the significantly greater benefit that they would have derived from all future American innovations.

Here's what John Stuart Mill wrote in 1869...
China—a nation of much talent, and, in some respects, even wisdom, owing to the rare good fortune of having been provided at an early period with a particularly good set of customs, the work, in some measure, of men to whom even the most enlightened European must accord, under certain limitations, the title of sages and philosophers. They are remarkable, too, in the excellence of their apparatus for impressing, as far as possible, the best wisdom they possess upon every mind in the community, and securing that those who have appropriated most of it shall occupy the posts of honour and power. Surely the people who did this have discovered the secret of human progressiveness, and must have kept themselves steadily at the head of the movement of the world. On the contrary, they have become stationary—have remained so for thousands of years; and if they are ever to be farther improved, it must be by foreigners. They have succeeded beyond all hope in what English philanthropists are so industriously working at—in making a people all alike, all governing their thoughts and conduct by the same maxims and rules; and these are the fruits. The modern rĂ©gime of public opinion is, in an unorganized form, what the Chinese educational and political systems are in an organized; and unless individuality shall be able successfully to assert itself against this yoke, Europe, notwithstanding its noble antecedents and its professed Christianity, will tend to become another China. - J.S. Mill, On Liberty
And here's what Mao Zedong wrote nearly a 100 years later...
Apart from their other characteristics, the outstanding thing about China's 600 million people is that they are "poor and blank". This may seem a bad thing, but in reality it is a good thing. Poverty gives rise to the desire for changes the desire for action and the desire for revolution. On a blank sheet of paper free from any mark, the freshest and most beautiful characters can be written; the freshest and most beautiful pictures can be painted. - Mao Zedong
Subjugation/taking greatly slows the rate of progress. This fatal conceit squanders the most valuable resource... individuality/uniqueness/originality. Therefore, the rate of progress is far greater if we rely on persuasion/trading.

Unfortunately, as a species, clearly we still are not aware of the positive correlation between trading and progress. The pattern is there...but most have yet to see it.  As more and more people start to see the pattern, there will be more recognition of the immense value of giving taxpayers the freedom to shop for themselves in the public sector.  The unique perspectives of millions of diverse people would be applied to public goods and the result would be infinitely beneficial.

If people aren't free to shop for themselves...then the specificity and ranking of their preferences and the uniqueness of their circumstances will not be input into the function which determines how society's scarce resources are used. As a result, the output will be the wrong quantities of an extremely narrow selection of poor quality products/services. Pseudo-demand, pseudo-supply.  Garbage in, garbage out.

Pragmatarianism can't be implemented if the positive correlation between shopping and progress is not clear to most...just like we won't be capable of traveling to other inhabited planets if the pattern is not clear to all.  Given that economic reality is not constrained by time/space... convergence is certain: an alien civilization won't be able to visit other inhabited planets before they've seen the pattern.      

What I've shared is basically a consequentialist argument against taking. Or conversely...a consequentialist argument for trading/liberty.  It should be clear that consequentialist arguments for liberty have far more substance than moral arguments for liberty.

The amount of benefit the future holds depends on you!  So please carefully read the following passages on heterogeneous activity...
Solutions to complex social problems require as many creative minds as possible — and this is precisely what the market delivers. - Donald J. Boudreaux
I’m not here to say that men are to blame for the [financial] crisis and what happened in my country [Iceland]. But I can tell you that in my country, much like on Wall Street and the city of London and elsewhere, men were at the helm of the game of the financial sector. That kind of lack of diversity and sameness leads to disastrous problems. - Halla Tomasdottir, Co-founder of Audur Capital 
Austrians believe that we get more solutions – and better, more creative solutions – if the energy, imagination, alertness and specialist knowledge of many individuals are engaged on the task. In economics, this is achieved through the process of competition, which gives diverse entrepreneurs the incentive to seek out new and better ways of enhancing value to consumers. By the same reasoning, our social and political problems may also be best solved if we give individuals the widest possible freedom to come up with a variety of creative responses, rather than hoping that a single collective approach will suffice. - Eamonn Butler, Austrian Economics
The generation to which we belong is now learning from experience what happens when man retreats from freedom to a coercive organization of their affairs.  Though they promise themselves a more abundant life, they must in practice renounce it; as the organizational direction increases, the variety of ends must give way to uniformity.  That is the nemesis of the planned society and the authoritarian principle in human affairs. - Walter Lippmann
Development happens thanks to problem-solving systems. To vastly oversimplify for illustrative purposes, the market is a decentralized (private) problem solving system with rich feedback and accountability. Democracy, civil liberties, free speech, protection of rights of dissidents and activists is a decentralized (public) problem solving system with (imperfect) feedback and accountability. Individual liberty in general fosters systems that allow many different individuals to use their particular local knowledge and expertise to attempt many different independent trials at solutions. When you have a large number of independent trials, the probability of solutions goes way up. - William Easterly, The Answer Is 42!  
So far as this is the case, it is evident that government, by excluding or even by superseding individual agency, either substitutes a less qualified instrumentality for one better qualified, or at any rate substitutes its own mode of accomplishing the work, for all the variety of modes which would be tried by a number of equally qualified persons aiming at the same end; a competition by many degrees more propitious to the progress of improvement than any uniformity of system. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy
It is not by wearing down into uniformity all that is individual in themselves, but by cultivating it and calling it forth, within the limits imposed by the rights and interests of others, that human beings become a noble and beautiful object of contemplation; and as the works partake the character of those who do them, by the same process human life also becomes rich, diversified, and animating, furnishing more abundant aliment to high thoughts and elevating feelings, and strengthening the tie which binds every individual to the race, by making the race infinitely better worth belonging to. In proportion to the development of his individuality, each person becomes more valuable to himself, and is therefore capable of being more valuable to others. There is a greater fulness of life about his own existence, and when there is more life in the units there is more in the mass which is composed of them. - J.S. Mill, On Liberty
Similarly, Niskanen attacked the monopoly power of public bureaucracies, school districts among them.  More recently, Coons and Sugarman have championed the case for parental freedom of choice, indicating that we should "substitute mutual respect as a ground of a social accord" and use freedom of choice to reduce the perils of uniformity. - Daniel J. Brown, The Case For Tax-Target Plans 
While declaring “Let the government handle it” comes across as a solution, it’s no such thing. Instead, it is merely a sign of a simple and baseless faith — a simple and baseless faith that people invested with power will not abuse that power; that political appointees possess or will find better answers than will millions of people pursuing solutions in their own ways, and staking their own resources and reputations on their efforts; that only those ‘solutions’ that are spelled out in statutes and regulations and that have officials paid to implement them are true solutions. - Donald J. Boudreaux
In 1956, economist Charles Tiebout (pronounced TEE-bow) asked: What is it about the private market that guarantees optimal provision of private goods that is missing in the case of public goods?  His insight was that the factors missing from the market for public goods were shopping and competition. - Jonathan Gruber, Public Finance and Public Policy

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