Thursday, May 29, 2014

The Ingenious Gentleman George Monbiot

In case you missed the reference...I'm saying that George Monbiot is Don Quixote.  This guy is really tilting at windmills...The Impossibility of Growth.  The same article was also published by the Guardian... It's simple. If we can't change our economic system, our number's up.

Quixote perceives that the giant problem that we should all attack is "carbon-fuelled expansion"...
On Friday, a few days after scientists announced that the collapse of the West Antarctic ice sheet is now inevitable(4), the Ecuadorean government decided that oil drilling would go ahead in the heart of the Yasuni national park(5). It had made an offer to other governments: if they gave it half the value of the oil in that part of the park, it would leave the stuff in the ground. You could see this as blackmail or you could see it as fair trade. Ecuador is poor, its oil deposits are rich: why, the government argued, should it leave them untouched without compensation when everyone else is drilling down to the inner circle of hell? It asked for $3.6bn and received $13m. The result is that Petroamazonas, a company with a colourful record of destruction and spills(6), will now enter one of the most biodiverse places on the planet, in which a hectare of rainforest is said to contain more species than exist in the entire continent of North America(7).
Of course Quixote is very mistaken.  The real giant problem is the fact that the $13 million that Ecuador received does not come even remotely close to accurately reflecting how much the world values its park.  Monbiot would know this if he had studied public finance.  Despite his glaring ignorance...Monbiot had no problem charging into the field of public finance anyways...which is exactly why he's Don Quixote.  

The world has a huge surplus of Quixotes just like him...which means that there's a massive shortage of classes on public finance.  Let me try and remedy this problem...  

In order to put limited resources to their most valuable uses...it's necessary to correctly determine how much society values the various possible uses.  The park in Ecuador is a perfect example of a limited resource.  Should it be developed...or should it be conserved?  Which use of the land does the world value most?  We already know how much the world values its development...$7.2 billion...so the challenge is to correctly determine how much the world values its conservation.

One way to find out would be to conduct a survey (contingent valuation).  We could go around and ask 7 billion people how much they value the park in Ecuador.  The problem with this technique is that people wouldn't have an incentive to accurately report their valuations.  If payment wasn't required...then they would have an incentive to over report their valuations.  If payment was required...then they would have an incentive to under report their valuations.

Our current system completely side-steps the preference revelation problem.  Citizens are simply coerced into contributing to the collective.  Elected representatives (impersonal shoppers) then determine the value of public goods for us.  The problem with this method is that public representatives can't possibly come even close to accurately gauging the true demand for public goods.  This is because people don't all demand the same things equally.  In other words...values are radically subjective...our diverse and varied preferences aren't all the same intensity.

Wake up!!  No snoozing in class!  This lesson is extremely important.  In order to increase the chances that you'll thoroughly understand this lesson...I'm going to hedge my bets and share other people's words on the topic.  If you don't want to be Don Quixote barking up the wrong tree...then it would behoove you to carefully read these passages.

First up is Cowen and Tabarrok...
Voting and other democratic procedures can help to produce information about the demand for public goods, but these processes are unlikely to work as well at providing the optimal amounts of public goods as do markets at providing the optimal amounts of private goods.  Thus, we have more confidence that the optimal amount of toothpaste is purchased every year ($2.3 billion worth in recent years) than the optimal amount of defense spending ($549 billion) or the optimal amount of asteroid deflection (close to $0).  In some cases, we could get too much of the public good with many people being forced riders and in other cases we could get too little of the public good. - Tyler Cowen, Alex Tabarrok, Modern Principles of Economics  
The supply of a good is considered optimal when it perfectly matches the demand for the good.  In our case...in order for the supply of conservation to be optimal...it has to perfectly match the demand for conservation.  But because governments do not know what the actual demand is for conservation...it's extremely unlikely that the supply of conservation will be even close to optimal.  

Rothbard does a very good job of fleshing out the details...
In the first place, how much of the deficient good should be supplied? What criterion can the State have for deciding the optimal amount and for gauging by how much the market provision of the service falls short? Even if free riders benefit from collective service X, in short, taxing them to pay for producing more will deprive them of unspecified amounts of private goods Y, Z, and so on. We know from their actions that these private consumers wish to continue to purchase private goods Y, Z, and so on, in various amounts. But where is their analogous demonstrated preference for the various collective goods? We know that a tax will deprive the free riders of various amounts of their cherished private goods, but we have no idea how much benefit they will acquire from the increased provision of the collective good; and so we have no warrant whatever for believing that the benefits will be greater than the imposed costs. The presumption should be quite the reverse. And what of those individuals who dislike the collective goods, pacifists who are morally outraged at defensive violence, environmentalists who worry over a dam destroying snail darters, and so on? In short, what of those persons who find other people's good their "bad?" Far from being free riders receiving external benefits, they are yoked to absorbing psychic harm from the supply of these goods. Taxing them to subsidize more defense, for example, will impose a further twofold injury on these hapless persons: once by taxing them, and second by supplying more of a hated service. - Murray Rothbard, The Myth of Neutral Taxation
This passage is especially relevant because Rothbard mentions the specific example of the snail darters.  You can read about the controversy on Wikipedia.  Do you think that the government chose the most valuable course of action?

Here's Rothbard's mentor, Mises, also on the topic of determining the value of conservation...
It can never obtain as a measure for the calculation of those value determining elements which stand outside the domain of exchange transactions. If, for example, a man were to calculate the profitability of erecting a waterworks, he would not be able to include in his calculation the beauty of the waterfall which the scheme might impair, except that he may pay attention to the diminution of tourist traffic or similar changes, which may be valued in terms of money. - Ludwig von Mises, The Nature of Economic Calculation
The problem, which should hopefully be very clear by now, is correctly determining the value of goods which "stand outside the domain of exchange transactions".  The solution is extremely simple...we just need to expand the "domain of exchange transactions"...
The economic approach stresses the fact that any expenditure always has an opportunity cost, i.e. a benefit that is sacrificed because money is used in a particular way.  For example, since biodiversity is threatened by many factors, but chiefly by changes in land use, measures of value denominated in monetary terms can be used to demonstrate the importance of biodiversity conservation relative to alternative uses of land.  In this way, a better balance between 'developmental' needs and conservation can be illustrated.  To date, that balance has tended to favour the conversion of land to industrial, residential and infrastructure use because biodiversity is not seen as having a significant market value.  Economic approaches to valuation can help to identify that potential market value, whilst a further stage in the process of conservation is to 'create markets' where currently none exist. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers
Currently, conservation is not correctly valued because its value is determined outside the market (consumers aren't free to valuate opportunity costs).  If we want conservation to be correctly valued...then it's imperative that we create a market in the public sector.  People would still have to pay the same amount of taxes...but they could spend their taxes on any country's public goods.  Taxpayers would be free to to choose whether they wanted to spend their own tax dollars on A. fighting the war on drugs or on B. conserving Ecuadorian biodiversity or on C. improving public healthcare or on D. some other public good.

Because no country has this essential information...they are all Quixotes.  Ecuador is charging ahead with the development of a biodiversity rich park despite the fact that the world might have derived far more value from its conservation.  If people don't have accurate information...then it's a given that they will end up wasting limited resources tilting at windmills.  This is exactly what happened to George Monbiot.  Because he's never studied public finance...he's wasting his resources attacking the really wrong target.  The problem definitely isn't "carbon-fuelled expansion"...it's the simple fact that we don't have the information that we need in order to correctly determine whether limited resources should be developed or conserved.

Monbiot has no idea that he himself has information that Ecuador must have in order for it to choose the most valuable course of action.  This essential information is Monbiot's own valuation.  How much of his own tax dollars would Monbiot actually allocate to the conservation of biodiversity in Ecuador?  If we want Ecuador to have this essential information, then we must upgrade our system of government so that Monbiot has the freedom to put his own taxes where his heart is.

With the current system, it's irrelevant how much Monbiot values biodiversity.  That's extremely absurd.  This degree of absurdity should blow your mind.  It should keep you up at night.  Nothing should scare you more.

Think about it...what if we had a system where it would be irrelevant how much Monbiot values food?  Do you think that this system would function properly?  Do you think that the optimal amount of land, labor and other limited resources would be used for the production of food despite the fact that the demand for food was unknown?   Would you predict that the system would result in a great leap forward?

Consider this passage by Krugman...
The immense Soviet efforts to mobilize economic resources were hardly news. Stalinist planners had moved millions of workers from farms to cities, pushed millions of women into the labor force and millions of men into longer hours, pursued massive programs of education, and above all plowed an ever-growing proportion of the country's industrial output back into the construction of new factories. - Paul Krugman, The Myth of Asia's Miracle
Why didn't the Soviet planners realize just how mind-blowingly absurd it was for them to shift massive amounts of resources in a valuation vacuum?  It was because they didn't read Adam Smith...
It is unjust that the whole society should contribute towards an expence of which the benefit is confined to a part of the society. - Adam Smith, Wealth of Nations
Does Monbiot truly benefit from the allocation of additional resources to the conservation of Ecuadorian biodiversity?  It's easy enough to find out.  All we have to do is give him the freedom to choose where his taxes go.  Maybe, when confronted with the alternative uses of his own tax dollars, he will decide that there are bigger fish to fry.  But maybe not.  It's entirely possible that he will be more than happy to put his own taxes where his mouth is.

As my faithful readers (all 11 of them) would know...this really isn't the first time that I've taught this class.  Here's a section from an entry...Visualizing And Evaluating The Public Goodness Threshold...that I posted back in February...

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For example, let's consider the Brazilian EPA's effort to conserve the Amazon rainforest.  Here's what the demand chart might look like if only Brazilians were free to give their taxes to their EPA...




What would happen to the demand chart if American citizens were also given the freedom to give their taxes to the Brazilian EPA?  It stands to reason that the demand would increase...




As each additional country gives its citizens the freedom to give their taxes to the Brazilian EPA, the accuracy of the demand chart increases...




If we look at the disparity in demand...then it's clear that massive amounts of value would be destroyed if we prevented taxpayers from shopping in the public sectors of other countries.  The Brazilian EPA would receive the wrong amount of funding...and as a result, rainforest that should have been conserved would be destroyed instead.

The amount of resources directed to the conservation of the Amazon rainforest should be determined by the amount of value the world derives from the Amazon rainforest.  And the only way we can know how much value the world truly derives from the Amazon rainforest would be to allow taxpayers to spend their taxes on any country's public goods.

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It's really sad to say that my prediction has come true regarding the destruction of rainforest that should have been conserved.  The very unfortunate fact of the matter is that my predictions will continue to come true unless people thoroughly understand why it's essential that we correctly determine the actual demand for public goods.  

For additional entries on the topic...

Tuesday, May 20, 2014

Heaven's Going To Burn Your Eyes

Alex Tabarrok responded to my previous post!  It's pretty wonderful that he took the time to do so.

My impression is that the large bulk of his response was allocated to highlighting the extent and the legitimacy of the non-price realm.  He concluded his entry by saying...
Economists often focus on the virtues of the price system but that should not blind us to the many virtues and many margins on which a free society operates.
Given that the main thrust of his response was to highlight the non-price realm...it seems likely that, by arguing for pricing individual cable channels, I gave the impression of being among the economists who focus too much on prices at the cost of failing to see/appreciate/understand the non-price realm.

It's a really funny dynamic though because my entire blog is dedicated to exploring and explaining how resources are efficiently allocated in the non-price realm.  It's my very favorite topic!  All of my 200+ blog entries have to do with tax choice...which would create a non-price (chip) market in the public sector.  Here are some of my blog entries where I even consider whether or not prices can be eliminated entirely...


But because I am arguing that it would be better if individual channels had prices...it's entirely understandable for Tabarrok to perceive that I'm just another free-market economist who is fixated on prices.  In reality though, as my blog attests, I find the non-price realm to be extremely fascinating.  So I strongly agree with Tabarrok's conclusion and would really love it if he could flesh out his thoughts on the topic.

He did mention the fact that firms are centrally planned...but I'm really not quite sure what relevance this has to the topic of whether cable should be unbundled.  Yes, firms make educated guesses regarding how to allocate the resources that they have...but markets work because consumers are the ultimate judges of how accurate the guesses of the "islands" are.  If an island is wasting too many of its resources...then consumers will stop dollar voting for it.  As a result, the island will sink into the ocean.  Because...dollar votes are the only thing keeping the island afloat.  Hmmm...maybe it's better as a metaphor than as an analogy.  What's a better analogy?

Capitalism and socialism both have firms making educated guesses...the difference is that with capitalism consumers are free to give their positive feedback (money) to the producers who have made the best guesses.  Consumer choice is a fail safe device.  It prevents too many resources from ending up in the wrong hands. We can think of the market as a 3V network...vet/validate/vouch.  Everybody can give everybody else feedback on how well they are using society's limited resources.  

With this in mind...let's take a look at Tabarrok's Sopranos scenario...
In 2002 should HBO have individually priced episodes of the Sopranos and sold them through AOL?  Individual pricing generates value but it also has costs. Tradeoffs are everywhere. And, to the crux of the issue, if a law had been passed in 2002 requiring HBO to sell The Sopranos on an episode by episode basis would that have resulted in better and more programming at lower prices?
In retrospect...with perfect hindsight...we know that the Sopranos was a huge hit.  But when the first episode aired...it was simply HBO's educated guess.  Like every single allocation, it was a gamble.  There was absolutely no guarantee that the show was going to be great or even good.  Uncertainty is the very reason why we need markets.  If somebody has a crystal ball...or they are omniscient...then markets are very undesirable.  If we can know for certain beforehand which endeavors are going to be winners...then it's a massive waste of scarce resources to hedge them on multiple bets.  But the reality is that nobody has a crystal ball...nobody is all-knowing.  Therefore, it's absolutely imperative that consumers have the ultimate say on how well producers are using society's limited resources.

If episodes of the Sopranos had been sold individually...then what would have happened after the first few brave souls purchased the first episode?  With our perfect hindsight...it's reasonable to guess that the 3V network would have kicked in.  More and more consumers would have vetted/vouched/validated how HBO was using society's limited resources.  Cowen would have said, "Hey Tabarrok!  It's really worth it to buy the first episode of the Sopranos!  You really won't regret your decision!"  As more and more people purchased the first episode...HBO would have earned more and more money which would have given it more and more control over how society's limited resources were used.    

Would tightly tying results and rewards together have led to "better and more programming at lower prices"?  Tabarrok thinks that it wouldn't have.  But regarding the "better" part...it seems logical that HBO would want more, rather than less, money per episode.  So given that "better" would mean "more money"...HBO would have the strongest possible incentive to try and make each episode better than the last.  Regarding the "lower prices" part...this largely depends on the amount of competition.  High profits, all things being equal, will result in greater competition.  The higher the price of gold...the more prospectors there will be.  As the supply of successful shows increased...prices would have decreased.  My post on value signals covered this concept in more depth.

Let me hedge my bets by sharing what others have said on the topic...
The increase of demand, besides, though in the beginning it may sometimes raise the price of goods, never fails to lower it in the run. It encourages production, and thereby increases the competition of the producers, who, in order to undersell one another, have recourse to new divisions of labour and new improvements of art which might never otherwise have been thought of. The miserable effects of which the company complained were the cheapness of consumption and the encouragement given to production, precisely the two effects which it is the great business of political œconomy to promote. - Adam Smith, Wealth of Nations
Loss of personal wealth is a powerful dissuader, while profits are a powerful persuader to pay heed to other people’s preference. - Armen A. Alchian, Private Property and the Relative Cost of Tenure
The effectiveness of this trial-and-error method is analogous to the theory of biological evolution by natural selection, where economic actors are guided by profit-loss signals and “survival” is determined through market selection. Entrepreneurs who satisfy consumers’ demands at the lowest cost and highest quality earn positive profits, which signal socially desirable actions that allocate resources to their highest-valued uses. Entrepreneurs who do not do so, on the other hand, suffer monetary losses and are eventually eliminated via market selection (Alchian 1950). - Peter J. Boettke and Kyle W. O’Donnell, The Failed Appropriation of F. A. Hayek by Formalist Economics
Second, where residual claimancy and control rights are closely aligned, market competition provides a decentralized and relatively incorruptible disciplining mechanism that punishes the inept and rewards high performers.  Markets are a way of increasing what biologists call selective pressure: they have the effect of reducing the variance of performance and hence (under suitable conditions) increasing average performance. - Samuel Bowles, Microeconomics: Behavior, Institutions, and Evolution
The producer whose product turns out to have the combination of features that are closest to what the consumers really want may be no wiser than his competitors.  Yet he can grow rich while his competitors who guessed wrong go bankrupt.  But the larger result is that society as a whole gets more benefit from its limited resources by having them directed toward where those resources produce the kind of output that millions of people want, instead of producing things that they don't want. - Thomas Sowell, Basic Economics 4th Ed: A Common Sense Guide to the Economy
Unbundling cable would subject channels/shows to far greater selective pressure.  Given that carrot-wielding consumers would be the source of the selective pressure...how is it possible for unbundling cable not to greatly improve welfare?  Production mistakes...errors...inaccurate guesses would be identified sooner rather than later.  To steal Boettke's analogy...the market is really great at pulling weeds.  But if cable bundles 100s of channels together...and each channel is a bundle of shows...and each show is a bundle of episodes...then how can we ensure that the weeds are quickly pulled and the wonderful is well watered?  

When I cut the cord...I didn't just get rid of the weeds...I got rid of the entire garden.  Dendrobiums and dandelions alike were trashed.  It's really not a very precise feedback mechanism when there's no choice but to throw the baby out with the bath water.

This analogy is pretty good...
The management of a socialist community would be in a position like that of a ship captain who had to cross the ocean with the stars shrouded by a fog and without the aid of a compass or other equipment of nautical orientation. - Ludwig von Mises, Omnipotent Government
If cable fails to go in the right direction...then consumers should certainly have the option to abandon ship.  But what if a channel or a show fails to go in the right direction?  If it improves welfare to prevent consumers from exiting from channels and shows...then why doesn't it also improve welfare to prevent consumers from exiting from cable?

It kinda gives the impression that there's some concern that consumers are going to exit from something because it's too wonderful.  This probably is going to count as one of those instances where discretion is the greater part of valor...but a few months ago I started reading 50 Shades of Grey on my gf's Kindle.  Half way through I had to stop reading it.  Why?  Because it was too good.   It was so good that I had to put it down.

Should Kindle users be charged per page read?  Doing so would really cut into Thomas Piketty's profits.  Facilitating exit really isn't in the interests of producers.  I suppose that's the bottom line.  

But I am liking this whole "tai hao, shou bu liao" idea...something is just so wonderful that you just can't stand it.

Bob is in hell when he spots his old friend Dave.  Bob says to him, "woah, never thought I'd see you here!"  Dave replies, "Yeah, I couldn't take heaven anymore...it was just too wonderful."

If Tabarrok doesn't reply to this blog entry then whatever shall I think?  Of course I'm going to think that he exited from our debate because my words were so wonderful that they were burning his eyes...


Friday, May 16, 2014

Prices vs Chips

Alternative titles...

"The Tabarrok Paradox"

"In Which Our Hero Tabarrok Throws Opportunity Cost Out The Window"

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In the economics subreddit I saw a link to this NY Times article... Why Unbundling Cable Would Not Save You Money.  When I took a look at the comments on Reddit, I noticed that one of the comments included a link to this video on bundling by the economist Alex Tabarrok.

In the video Tabarrok explains, using diagrams and logic, why bundling cable is a good thing.  His logic doesn't jive though.  I planned on sharing my perspective in a comment, but my best laid plans were foiled...  "Comments on this entry are closed".

And that's the story of how I ended up here.  Pretty exciting stuff...huh?

Let's get down to business.

The flaw in Tabarrok's logic is that it completely ignores the necessity of determining what the actual demand is for the individual components in the bundle.  For example, when I subscribed to cable...Charter had no idea how much I valued the Discovery Channel.  Neither did the Discovery Channel.  But is my valuation relevant?  According to Tabarrok...it really isn't.  Uh, what?

How could the Discovery Channel and Charter and Tabarrok not care what the actual demand is for the Discovery Channel?  In the absence of consumer valuation...how could society's limited resources be put to their most valuable uses?

Tabarrok is basically arguing that we don't need accurate information in order to efficiently allocate resources.  Except, does he really believe that?  Let me consult my magic database...
The most valuable public goods are constantly changing, just as the most valuable private goods are constantly changing.  The signal provided by prices and mobility is therefore of great importance. - Alexander Tabarrok, Market Challenges and Government Failure
Huh.  Hmmm.  Is the Discovery Channel a private good?  Yes.  Is its value constantly changing?  Yes.  So...according to Tabarrok...it's of great importance that the Discovery Channel should have its own price.  But this sure wasn't what he said in his video.  Maybe I should shake my magic database again.  *shake shake*
Of course just because everyone can be made better off by taxation does not mean that everyone will be made better off. Some people want more national defense, some people want less, pacifists want none. So, taxation means that some people will be turned into forced riders, people who must contribute to the public good even though their benefits from the public good are low or even negative. Tyler Cowen, Alex Tabarrok Modern Principles of Economics 
Some people want more Discovery Channel, some people want less, rednecks want none.  I don't know if that last part is exactly true...but bundling cable certainly creates many forced riders.  If consumers aren't given the opportunity to opt out of individual channels...then how can we possibly know what the actual demand is for the Discovery Channel?

Perhaps I can settle things with another *shake* of my magic database...
Voting and other democratic procedures can help to produce information about the demand for public goods, but these processes are unlikely to work as well at providing the optimal amounts of public goods as do markets at providing the optimal amounts of private goods.  Thus, we have more confidence that the optimal amount of toothpaste is purchased every year ($2.3 billion worth in recent years) than the optimal amount of defense spending ($549 billion) or the optimal amount of asteroid deflection (close to $0).  In some cases, we could get too much of the public good with many people being forced riders and in other cases we could get too little of the public good. - Tyler Cowen, Alex Tabarrok, Modern Principles of Economics
Let's try a bit of substitution...
Voting and other democratic procedures can help to produce information about the demand for channels, but these processes are unlikely to work as well at providing the optimal amounts of channels as do markets at providing the optimal amounts of channels.  Thus, we have more confidence that the optimal amount of the Discovery Channel is purchased every year ($2.3 billion worth in recent years) than the optimal amount of Home Shopping Network ($549 billion) or the optimal amount of Epiphyte Channel (close to $0).  In some cases, we could get too much of the channel with many people being forced riders and in other cases we could get too little of the channel. 
Errr...well...that didn't work perfectly...but it worked pretty well.  Just in case though...let's go over it again...

The optimal amount of the Discovery Channel depends on the demand for the Discovery Channel.  If we don't know what the demand is for the Discovery Channel...then how can the supply possibly be optimal?

Basically, we can't say "hey man nice shot" if we don't know where the target is.  Demand is the target by which we measure the accuracy (efficiency/value) of the supply (how resources are used).  We can only say that there's too much or too little of the Discovery Channel if we know what the demand is.

It should be clear that determining demand is fundamentally essential.  So how do we go about doing this?  There are basically three methods.  Consumers can vote or they can spend or they can have their minds read by omniscient government planners.  As Tabarrok indirectly acknowledged in the passage above...the demand information provided by voting (democracy) is not nearly as accurate as the demand information provided by spending (market).  This is because actions (spending) speak louder than words (voting).   Spending is sacrifice...so it reveals values.  Talk, on the other hand, is cheap...so it only reveals opinions.  *shake shake*
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 
If we use people's opinions to determine demand...then the target will be wrong and resources will be diverted away from far more valuable uses.  This is why spending (deep input), rather than opinions, should be used to create value signals...




If we unbundled cable...then people would be able to share their deep input on the Discovery Channel.  Flowcilitating deep input would create a signal that would communicate to the world the amount of value that society assigns to... *looks at the Discovery Channel website*...shows like #BikerLive.  Remember what I said about rednecks and the Discovery Channel?  I take it back.

If it makes good economic sense to clarify the demand for individual channels...doesn't it also make good economic sense to clarify the demand for individual shows?  Of course.  The information would be even more accurate...which would result in even greater allocative efficiency.

Personally, I finally kicked cable to the curb.  I cut the cord!  Yes!  Now I subscribe to Netflix.  But even though Netflix is far superior in most regards...it's pretty much just like cable in the sense that there's no mechanism for me to communicate how much I value individual movies and shows.  Well...I did give Rake 5 stars.  Man oh man did that clarify demand.  I said that super sarcastically.

Of course I could buy the Rake DVD...that would certainly help clarify the demand.  But shouldn't Netflix give me the opportunity to put my subscription fees where my 5 stars are?  Each month I could take my $9 and divvy it up among the movies/shows that I truly value.  Netflix could then transfer the money (minus their cut) to the producers of those shows.  Why not?

Let's review...
  1. We want resources to be more efficiently allocated
  2. Allocative efficiency depends on accurate information
  3. Flowcilitating deep input provides more accurate information
Flowcilitating deep input?  For example...
  1. Allowing Netflix subscribers to dollar vote for the shows/movies that they value most
  2. Allowing cable subscribers to dollar vote for the channels/shows that they value most
  3. Crowd sponsored results
Let's dig a little deeper.  Here's a comment that I posted on Peter Boettke's blog entry... Quiz for the Austrian Economists Among Us...

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Using a specific example...let's say that the show Firefly was prematurely canceled. Resources were diverted away from the show even though there was sufficient demand. The problem was that the demand was "latent". It was only revealed after the show was canceled. Many people bought the DVD and campaigned on behalf of the show.

As I've argued before...(Hey Mungerfesto, Prices OR Consumer Sovereignty?)...price theory is too narrow. There are certainly situations where we can correctly determine Hayek's "solution" without using prices. The producers of Firefly could have clarified the demand by creating a crowdfunding campaign. This would have allowed each and every fan of the show to decide for themselves exactly how much they were personally willing to contribute/sacrifice in order to keep the show alive. There wouldn't have been one price...there would have been a continuum of "prices". People would have been paying vastly different amounts for the same exact product. It's the same thing with the non-profit sector.

Price theory, as it stands, is not a great prophylactic because it's got a giant hole in it. It doesn't account for the vast majority of situations where we sacrifice in order to try and keep something alive. A better theory would be something like "input theory"...or "positive feedback theory"...or some other better name. Maybe "flowcilitation theory"?

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If cable was unbundled...then individual channels would have their own prices.  But if Netflix was "unbundled"...then there wouldn't be any "prices".  The show Rake wouldn't have a set price.  Each and every Netflix subscriber could spend as much, or as little, as they wanted on the show.  We can call these customized contributions "chips".

If you think about it, this is really fascinating.  It's momentous that here we are at the beginning of the great "Prices vs Chips" debate.

As Tabarrok's bundling video so nicely illustrated...consumers can value the same product differently.  Let's take the Rake Season 1 DVD for example.  On Amazon, the price is $24.28.  Some people would be willing to pay more...while many others would be willing to pay less.  It's a given that far more consumers would buy the DVD if it only cost $1.  Because of this, the revenue generated by this DVD does not accurately reflect its value.  It doesn't show us the value to the right or to the left of the price.  Here's how I've "wonderfully" illustrated this...




As you can see...prices clearly do not convey the large bulk of a product's value to society.  So if prices stand in the way of more accurate information (which we need for allocative efficiency) ...then why don't we eliminate them?

We should all instinctively appreciate that if Amazon allowed consumers to pay whatever they wanted for the Rake DVD...then sales would skyrocket but revenue would plummet.  This is the preference revelation problem.  Given the opportunity, it's logical for consumers to pay far less than their true valuation of the DVD.  Why is their behavior logical?  Because consumers are utility maximizers.  Paying less than they valued the DVD would free up their money to spend on other things.  While this would increase their individual utility...the foreseeable side effect is that the DVD would be undersupplied...which would represent a net loss of total utility.  So it would seem that we are stuck with prices.  Unless...?

Unless...?  Unless the cost is a foregone conclusion.  With Netflix, subscribers are already paying $9 a month...so if they were given the opportunity to allocate their $9, then they wouldn't be able to save any money by undervaluing Rake.  This means that their chips would accurately reflect their valuations.  We wouldn't just see a slice of the demand curve...we would see the entire thing.  Therefore, chips would convey far more accurate information than prices would.

The public sector is just like Netflix.  Taxes, like subscription fees, are a foregone conclusion.  So if taxpayers could choose where their taxes go...then they would have every incentive to honestly convey their values.

Hmmm...I guess the great "Prices vs Chips" debate probably isn't going to be that great.  There's really not much to debate.  As long as the cost is a foregone conclusion, chips will provide far more accurate information than prices can.  This means that chips will result in far greater allocative efficiency.

Here's the grand overview...

  1. Socialism fails because consumers aren't given the opportunity to tell any truth.
  2. Capitalism succeeds because consumers are given the opportunity to tell some truth.
  3. Pragmatarianism would be even more successful because consumers would be incentivized to tell the whole truth.
What do you think?  

What's going on with Tabarrok?  He's sending mixed messages right?  Is it because he's confused by the fact that the marginal cost of channels is zero?  The marginal cost of providing the Discovery Channel is zero...therefore there's no need to determine its priority?  Opportunity cost goes out the window?
The concept of opportunity cost (or alternative cost) expresses the basic relationship between scarcity and choice. If no object or activity that is valued by anyone is scarce, all demands for all persons and in all periods can be satisfied. There is no need to choose among separately valued options; there is no need for social coordination processes that will effectively determine which demands have priority. In this fantasized setting without scarcity, there are no opportunities or alternatives that are missed, forgone, or sacrificed. - James M. Buchanan

Should the Discovery Channel be able to use more or less of society's scarce resources?  How can the answer possibly be correct if consumers aren't given the opportunity to spend their money on this channel?  Yes, they can go to the online store and purchase a bunch of products.  Doing so will increase the channel's influence over how society's limited resources are used.  But no matter how many alternative sources of deep input the Discovery Channel has...the fact of the matter is that its cable revenue doesn't reflect the valuations of cable subscribers.

Just because the marginal cost of providing the Discovery Channel is zero...doesn't mean that the opportunity cost of the Discovery Channel organization is zero.

I want to know how much society values what the Discovery Channel organization is doing with society's limited resources.  It's hard for me to imagine that Tabarrok perceives this information to be inconsequential.  Yet, he doesn't think it's necessary to unbundle cable.  This is the Tabarrok Paradox.  *shake shake*
This, of course, is just the diamond-water “paradox”–why are diamonds, mere baubles, so expensive while water, a necessity of life, is so cheap?–the paradox was solved over a hundred years ago by…wait for it…can you guess?….the marginal revolution. Water is cheap and its value low because the supply of water is so large that the marginal value of water is driven down close to zero. Diamonds are expensive because the limited market supply keeps the price and marginal value high. Not much of a paradox. Note that, contra Graeber, there is nothing special about labor in this regard or “our society.” 
Moreover, it’s good that prices are determined on the margin. We would be very much the poorer, if all useful goods were expensive and only useless goods were cheap. - Alex Tabarrok, BS Jobs and BS Economics
Yeah, I'm pretty sure he doesn't perceive any benefit to unbundling cable because he's too distracted by the fact that the marginal cost of providing the Discovery Channel is zero.  I definitely appreciate that the marginal cost of the channel is zero...but the fact remains that we still need to figure out how much influence the Discovery Channel, as an organization, should have over how society's limited resources are used.  This means that consumers must be able to decide whether or not it's worth it to pay for the Discovery Channel.  In order for this to happen...cable has to be unbundled.

A World Without Prices or Profit

I posted this a while back as a forum thread.  I thought I also created a blog entry for it...but I guess I didn't.  Figured I'd create a blog entry for it because it's relevant to the blog entry that I'm going to post next.

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Are prices or profit really necessary? For fun let's try and imagine a world without either.

If you wanted bread, you could go to your local bakery and select the quantity of bread that matched your preferences. You wouldn't have to pay for it...but the employees of the bakery would have the final say on your selection. They would approve or decline your selection when they were scanning your items for inventory purposes.

If you were happy with the experience and wanted to give the bakery positive feedback...then you could go to their website and make a contribution of any amount. Their website would display exactly how much positive feedback (revenue) they received.

When bakeries ordered flour from the same supplier...the supplier would use each bakery's revenue to help determine how to divvy up the flour. More revenue means more flour. Same thing with the wheat farmer. He would look at how much positive feedback the suppliers had received in order to determine how best to allocate his wheat.

Would you have an incentive to work hard? Let's say that you worked in a bakery. If you failed to work hard...if you did not improve on your recipes...if you wasted your flour...if you took really long lunch breaks...if you were rude to the customers...then your bakery would lose revenue and competing bakeries would gain revenue. If your bakery lost revenue then your boss wouldn't be able to give you as much positive feedback.

If you received less positive feedback...then you would have less influence over how society's limited resources were used. You wouldn't be able to give your favorite bands...favorite authors...favorite restaurants...as much positive feedback as you felt they deserved. Plus, your living accommodations and transportation wouldn't be as nice.

So would it work? No prices...or profit...but you'd still have the freedom to give positive feedback to those who were using society's limited resources for your benefit. And the amount of influence you had would depend on how much positive feedback other people gave you.

Wednesday, May 14, 2014

Where Do Better Options Come From?

Reply to reply: Contrary to popular and academic belief, Adam Smith did not accept inequality as a necessary trade-off for a more prosperous economy

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I made my point.  And my point was painfully obvious.  Yet here you are wondering what my point is.  How can I make my point obvious enough for even you to understand?  Can I accomplish the impossible?  Only one way to find out.

We both want people to have better options.  Every person's gravestone should be able to say, "I was as happy as a kid in a candy store".  Life should be full of options that perfectly match your preferences...aka heaven.

In order to create heaven on earth...you have to understand where better options come from.  The owner of a candy store doesn't just *snap* his fingers and better candies magically appear.  He doesn't just go pick better candies from a candy tree.  There's a distinct and logical process that occurs.

The key to this process is consumer choice.  If kids can't choose which candies match their preferences... then candy producers won't know what the preferences of kids are.  If producers don't know what the preferences of kids are...then candies won't match kids' preferences.  So in the absence of consumer choice, kids would be sad in candy stores because the options really wouldn't match their preferences.  Life would be less like heaven and more like hell.

Right now you're so far in left field that you don't realize that the point of production really isn't to ensure that workers in candy factories are happy oompa loompas.  The objective really isn't to make oompa loompas happier...it's to make kids happier.

Maybe you want to argue that you can make kids happier by making oompa loompas happier?  If so...then why bother trying to convince Wonka that he's making a mistake by not paying his oompa loompas enough money?  If somebody refuses to pick up a gold nugget...are you going to stand there and argue with them?  If you're so certain that it's not fool's gold then you should have no problem making the effort to pick it up yourself.

If it's truly gold...then picking it up would not only give kids a better option...it would also give workers a better option.  How awesome is that?  You can become wealthy by giving people better options.  Of course, if it's not truly gold...then picking it up would be very costly.  Maybe you used your home as collateral for your business loan?  If so, then you'd lose your home.  As a knocker (liberal) you're not willing to take that risk.  So when the earth takes any steps closer to heaven...it's not because of knockers...it's despite them.

Monday, May 12, 2014

Unbundling Government - Easter Egg Hunt Contest

Over at r/InvisibleHand there's a contest to find and share the very best passages/quotes on the topic of bundles...Unbundling Government. The "(un)bundling" concept is important because it can be used to help people understand the case for free markets.

The contest will run for two weeks. Whoever has shared the most upvoted Easter Egg after two weeks time will win the opportunity to have any reasonable post stickied in r/InvisibleHand for one week. The post can be about any topic you wish...it doesn't have to be about economics...and you can include links to any (reasonable) pages.

Feel free to let me know if you have any questions. Happy hunting!

Saturday, May 10, 2014

Chanidget - Prospering Because/Despite Socialism

When Obama took a dump on Bastiat...I registered my disgust by coining the term "obamerate".  The next person in line for my disgust registration is the economist Ha-Joon Chang.  You can read the relevant article here... Economics Is A Political Argument.

Imagine you're walking around your neighborhood and you see Usain Bolt running pretty fast.  As he zips by, you realize that he's carrying a fat Korean midget on his back.  Would you think that Bolt is running fast because of, or despite, the midget?   If you think he's running fast because of the midget...then you're a chanidget.

My post in Bad Economics..."there is no economic theory that actually says that you shouldn’t have slavery" - Ha-Joon Chang

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Let's change the emphasis in the quote...

So there is no economic theory that actually says that you shouldn’t have slavery or child labour because all these are political, ethical judgments. - Ha-Joon Chang

  1. Adam Smith shared a theory that actually says that you shouldn't have slavery.  T/F
  2. His theory wasn't political.  T/F
  3. His theory wasn't ethical.  T/F
  4. His theory was economic.  T/F
  5. Therefore, HJC is clearly mistaken that all arguments against slavery are political, ethical judgements.  T/F

Adam Smith's arguments against slavery are clearly, blatantly and obviously independent of any political/ethical judgements.

The context bears the interpretation that HJC hasn't even heard of Adam Smith...
So I challenge my students to tell me one economic theory, Neo-Classical or Marxist or whatever, that can explain Singapore’s success. There is no such theory because Singaporean reality combines extreme elements of capitalism and socialism.
Really HJC?  No such theory?
The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations. - Adam Smith
This frugality and good conduct, however, is upon most occasions, it appears from experience, sufficient to compensate, not only the private prodigality and misconduct of individuals, but the public extravagance of government. The uniform, constant, and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things towards improvement, in spite both of the extravagance of government and of the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigour to the constitution, in spite, not only of the disease, but of the absurd prescriptions of the doctor. - Adam Smith
But though the profusion of government must, undoubtedly, have retarded the natural progress of England towards wealth and improvement, it has not been able to stop it. - Adam Smith, Wealth Of Nations
As the strongest bodies only can live and enjoy health under an unwholesome regimen, so the nations only that in every sort of industry have the greatest natural and acquired advantages can subsist and prosper under such taxes. Holland is the country in Europe in which they abound most, and which from peculiar circumstances continues to prosper, not by means of them, as has been most absurdly supposed, but in spite of them. - Adam Smith
The crown of Spain, by its share of the gold and silver, derived some revenue from its colonies from the moment of their first establishment. It was a revenue, too, of a nature to excite in human avidity the most extravagant expectations of still greater riches. The Spanish colonies, therefore, from the moment of their first establishment, attracted very much the attention of their mother country, while those of the other European nations were for a long time in a great measure neglected. The former did not, perhaps, thrive the better in consequence of this attention; nor the latter the worse in consequence of this neglect. - Adam Smith
The plenty and cheapness of good land are such powerful causes of prosperity that the very worst government is scarce capable of checking altogether the efficacy of their operation. - Adam Smith
Mr. Quesnai, who was himself a physician, and a very speculative physician, seems to have entertained a notion of the same kind concerning the political body, and to have imagined that it would thrive and prosper only under a certain precise regimen, the exact regimen of perfect liberty and perfect justice. He seems not to have considered that, in the political body, the natural effort which every man is continually making to better his own condition is a principle of preservation capable of preventing and correcting, in many respects, the bad effects of a political œconomy, in some degree, both partial and oppressive. Such a political œconomy, though it no doubt retards more or less, is not always capable of stopping altogether the natural progress of a nation towards wealth and prosperity, and still less of making it go backwards. If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered. - Adam Smith

It's one thing to say that Adam Smith was an idiot...and another thing entirely to pretend as if Adam Smith's theories don't even exist.

Personally I think Paul Samuelson was an idiot...but I'd have to be an even bigger idiot than he was to try and pretend as if his theories don't even exist.

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What do you think about the runner/midget analogy?  I suppose it's not very politically correct to use the word "midget" anymore.  But what are the chances that a "little person" will read this blog entry?  What are the chances that the word "chanidget" will catch on?  Hmmm...I wonder if wordsmiths are usually surprised when one of their words gets adopted.  Maybe some wordsmiths suffer from coinage hubris?  Not me, I would be extremely surprised if Steve Horwitz ever used the word "chanidget".

To be honest, I kinda have a midget fetish.  Within the past year I saw some pretty great films with midgets...
  • An Insignificant Harvey
  • The Station Agent
  • In Bruges
And I really love some of the surreal Jackass scenes with Wee Man.  One of my favorites is this bar fight.    The onlookers have such priceless expressions.

I think the world would be a much more wonder.ful place if more people went home and said, "honey, you're really not going to believe what I saw today..."

Getting back on topic...I stole the runner analogy from happyjuggler0 (Mingardi on Hayek)

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Imagine a marathon runner with 200 pounds of rocks in a backpack. He may have trouble putting one foot in front of the other, let alone running, and let alone actually finishing the marathon.

Now imagine he takes 100 pounds of rocks out of his backpack, leaving him with *only* 100 pounds of rocks left on his back. He then tries to resume running, and accelerates at a rapid pace compared to his previous pace.

He still has 100 pounds too much on his back. If he shed those extra 100 pounds of rocks left on his back, he would increase his pace even more. He would then have a fighting chance at eventually making it to that 26.2 mile point that many other less-burdened marathon runners reached a long time ago.

This is why China has boomed despite too much central planning. It started at a near zero pace, and then the government started taking burdens off of the backs of Chinese entrepreneurs and foreign investors, and therefore its pace accelerated dramatically.

When government becomes less burdensome, good things happen to economic prosperity.

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It was really hard to find that comment again.  I couldn't remember any of the terms to search for.  The only thing that came to mind was a ball and chain.

If you try and find this blog entry a year from now...which keyword are you going to be more likely to remember..."rocks" or "midget"?  My guess is "midget".  The image of the world's fastest man, a Jamaican, running with a fat Korean midget on his back will probably linger longer than the image of a marathon runner carrying 200 pounds of rocks in his backpack.

If we had crowd sponsored results...then I would be able to tag the econlib entry with the keyword "chanidget".

Just like the rest of the words that I've created..."chanidget" is pretty terrible.  Anybody is more than welcome to come up with a better word.  There's always room for improvement.  But as terrible as the word is...at least it meets the google alert standard.  Right now there are zero search results for "chanidget".  When I post this entry there will be exactly one.  So 100% of the search results will be entirely relevant to the question of whether countries prosper despite or because of their governments.

If a concept is important...then you really don't want it to be buried under a mountain of irrelevant search results.  The "exit" concept is a perfect example.  It should really be retagged because barely any of the search results are relevant.

Here's another page that I would tag with the word "chanidget"...
To use an analogy, if Michael Phelps were thrown into a pool of water with his hands tied and his legs shackled with a weighted ball, he would still be the world's best swimmer, even if he sank.  He would simply be prevented from swimming.  The problem is not swimmer failure, but the rope and shackle with weighted ball that prevent him from making the very movements required to swim effectively.  If government interventions distort information and provide perverse incentives, and in this situation economic actors make mistakes, the market is not leading them astray; the government interventions have discouraged the market's participants from weeding out error. - Peter Boettke, What Happened to "Efficient Markets"? 
Can you imagine Phelps trying to swim with a fat Korean midget on his back?

Which image would linger longer...the Phelps image or the Bolt image?

Hmmm...who would win an aquathlon (swim then run)...Phelps or Bolt?  Dang, now I'd really like to know the answer.  Can somebody please arrange the race?  Thanks.

I'm sure by now you're wondering how pragmatarianism would fit into the picture.  Or maybe the suspense already killed you.  If so, I'm sorry about that.

Clearly tax choice would give the midget powerful wings.  Bolt would be just like the god Mercury...except the wings wouldn't be on his shoes and helmet...they would be on the midget on his back.  

I literally just LOL'd trying to visualize it.  There I'd be walking around the neighborhood...mentally attaching epiphytes to naked trees...when all of a sudden...a Jamaican flashes by...but it wasn't Red Bull that gave him wings...it was the fat Korean midget on his back.

It would be like seeing my first shooting star...times a thousand.  It would seem, if only for a brief but brilliant and magical moment, that anything was truly possible.

If you need some help visualizing...check out this short video of Carl Lewis running on water and on the Statue of Liberty.  It's especially wonderful because the music is by Aphex Twin.

When you watch the video...just imagine that Lewis has a fat Korean midget on his back...and that the midget has wings.  What kind of wings?  Dragonfly?  Hummingbird?  Falcon?  Probably dragonfly.

Would this be a good commercial for pragmatarianism?  I think most people would be like "WTF???"  Heh.

Let's review...

  • Libertarianism: put the fat ass midget on a diet   
  • Anarcho-capitalism: get rid of the midget
  • Liberalism: the midget is too skinny
  • Pragmatarianism: give the midget wings

Give the midget wings!  

    Wednesday, May 7, 2014

    Banned From Bad Philosophy

    Post in Bad Philosophy subreddit: Pragmatarianism

    ***********************************************

    One of my blog entries ended up here...which I discovered via my blog's traffic statistics.

    So some of you have already had a taste of my philosophy.  How about a full serving?  Will it give you indigestion?  Maybe it will give you those cramps from holding in your farts?  Like when you're on a plane...or on a first date.

    Imagine Earth's first date with aliens.  My philosophy predicts that the aliens wouldn't date rape us.  I call shenanigans when I watch movies where the aliens enslave/eat us and steal our resources.

    The fact of the matter is that organisms don't crawl from the muck one day and build an intergalactic cruiser the next.  Progress occurs when better uses of limited resources are discovered.  And the rate of progress depends on the degree of deviation from the norm.  The less uniformity in thought/action...the faster the rate of progress.

    The simplest way to think about it is an Easter Egg hunt.  If you tied all the kids together...they would cover less ground...which means that less Easter Eggs would be found.  Plus, tying them all together increases the amount of harm done if one of them accidentally steps on a landmine.  If every member of a species lives near a volcano...then the entire species could be wiped out if the volcano erupts.

    In order to maximize the rate of progress...a species has to hedge its bets by diversifying both its location and its actions.  This is a universal truth...it's not just particular to our planet.

    The more progress a species makes...the more likely it is to discover this universal truth.  In other words, more enlightenment makes it more likely that the source of enlightenment will be seen.  By the time a species is capable of building an intergalactic cruiser it would be impossible for them to have failed to make this discovery about discovery.

    Here on Earth...taxpayers can't choose where their taxes go.  People aren't free to decide which government organizations they trade with.  Our diversity of perspectives is the source of our progress...yet we fail to apply it to the public sector.  So as a society we still aren't sufficiently enlightened.  We still don't see the problem with blocking deep input.  Society shoots itself in the foot which greatly hinders progress.

    What do you think?  Is pragmatarianism bad philosophy?  Does it give you indigestion?  Am I in the right place?

    ***********************************************

    This post resulted in my banishment.

    Given that I was banned from bad philosophy...does it mean that pragmatarianism is good philosophy?  Or maybe it's not bad enough?  Perhaps I should have tried harder to make it badder.  Sometimes I wonder if intentionally bad is the new good.  Actually the large bulk of wondering occurred after I watched Sharknado.
     
    My post only received 5 comments.  None of them were very substantial.  For some reason this leads me to doubt the group's value judgements regarding philosophy.

    Monday, May 5, 2014

    Retag Important Concepts - The Google Alerts Standard

    Self post in the Dark Enlightenment subreddit: A Little Bit Racist

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    There didn't use to be a specific word for when somebody or something is a little bit racist...but now there is..."rayshist".  If this new word catches on...do you think it could impact society in a noticeable way?

    Right now we say...

    "Bob is a little bit racist"

    In the future we might say...

    "Bob is rayshist"

    Clearly it's a bit more efficient...but I wonder if perhaps the adoption of this specific word might change the race dialogue.  Could it possibly encourage more honest discussion?  Maybe people would be slightly more inclined to acknowledge that they are a little bit racist?  Maybe we'll discover that most people are rayshist?  Maybe political correctness would lose some ground?  Maybe society's reflection would become more accurate?

    Just how important are words anyways?  A while back I had the idea of allowing people to choose where their taxes go.  But when I googled using a description of the concept...I didn't find any relevant results.  So I took the liberty of giving the concept a unique label... "pragmatarianism".  The label hasn't caught on yet...but at least all the search results are relevant.

    From my perspective, language can improve/evolve at a faster rate if we encourage and facilitate the creation of new words.  With this in mind...I created a new subreddit...Linvoid.  

    As you can see...I've submitted some of the words that I've more or less created/commandeered.  Are the words that I created terrible?  Sure...why not.  Are you all going to laugh at me because I invented some lame new words?  Go ahead!  It's ok...I really don't mind or care.  Feel free to downvote any of the words that you really don't want anybody ever using.  

    The point is...I'm not going to let the fear of failure stop me from throwing new words out there.  Hopefully some of you have the same attitude.

    If you're crazy/creative...then I highly encourage you to come up with a new word for "Cathedral".  Right now it's a needle in a search haystack.  If it truly is an important concept...then why do you want to force people to swim through an ocean of irrelevant results?  Shouldn't you want all the relevant search results to be extremely easy to find?  If so, then you have to give Cathedral a unique tag.

    Are there other NRx concepts that are important enough to warrant a unique tag?  What about "exit"?  Here are the search results.  What percentage of them are relevant?  Maybe 1%?  Do you think it makes a difference that it's a needle in a haystack?

    Google has a neat tool called Google Alerts.  You can sign up to receive an e-mail whenever there's a new search result for a term that you're interested in.  Clearly you wouldn't be able to create a Google Alert for "Cathedral" or "exit"...you'd be swamped with irrelevant results.

    There's a bit of irony there.  Do you see it?  The Cathedral is the problem because...?  Why was it again?  Something to do with hiding or suppressing the truth?  Errr...except...it's really not the Cathedral's fault that the truth will not be televised.  The Cathedral really didn't give itself a label that would Google Alert people to irrelevant results.  That was your camp.  You're shooting yourself in the foot and complaining that the race is rigged.  You're putting a bushel over your own candle and complaining that it's dark.

    It's disambiguation time.  Come up with some unique words.  Channel your inner wordsmith.  

    Saturday, May 3, 2014

    Crowdsourcing Linguistic Improvements

    Calling all wordsmiths!  There's a new subreddit...Linvoid...dedicated to solving people's word problems.  

    Here's how it works...

    1. A "client" posts their word problem  
    2. The crowd suggests better/new words
    3. The crowd upvotes the best solutions
    4. The winner gets a million dollars

    I'm just kidding about the last one.  Too bad huh?

    The conceptual foundation is that there's always room for improvement.  This is true whether we're talking about biology...or economics...or politics...or linguistics.

    Let's take biology for example...specifically...orchids.  The orchid family is definitely my favorite plant family.  It's fascinating for several reasons...here are a few of them...

    1. Orchids are the largest plant family.  There are around 30,000 different species.  
    2. Orchids have more species of epiphytes than any other family.  In other words...most orchids grow on trees
    3. A single seed pod can contain a million seeds.  That's a lot of seeds!  The seeds, which are like dust, are disseminated by the wind.  
    4. In order to germinate...orchid seeds have developed a symbiotic relationship with microscopic fungus

    Each seed is a unique combination of traits.  A unique combination of traits is a unique strategy.  So one orchid seed pod can contain a million different strategies.  This greatly increases the orchid's chances of success.

    Now on to economics...
    When a great company, or even a great merchant, has twenty or thirty ships at sea, they may, as it were, insure one another. The premium saved upon them all, may more than compensate such losses as they are likely to meet with in the common course of chances. - Adam Smith, Wealth of Nations
    Now on to space exploration...
    Luckily, tens of thousands of pioneers wouldn't have to be housed all in one starship. Spreading people out among multiple ships also spreads out the risk. Modular ships could dock together for trade and social gatherings, but travel separately so that disaster for one wouldn't spell disaster for all, says Smith. 
    When 10,000 people are housed in one starship, there's a potential for a giant catastrophe to wipe out almost everyone onboard. But when 10,000 people are spread out over five ships of 2000 apiece, the damage is limited. - Sarah Fecht, How Many People Does It Take to Colonize Another Star System?
    Now on to political parties (religion)...
    The interested and active zeal of religious teachers can be dangerous and troublesome only where there is either but one sect tolerated in the society, or where the whole of a large society is divided into two or three great sects; the teachers of each acting by concert, and under a regular discipline and subordination. But that zeal must be altogether innocent where the society is divided into two or three hundred, or perhaps into as many thousand small sects, of which no one could be considerable enough to disturb the public tranquility. - Adam Smith, Wealth of Nations
    Now back to economics...
    It is sufficient if all firms are slightly different so that in the new environmental situation those who have their fixed internal conditions closer to the new, but unknown, optimum position now have a greater probability of survival and growth.  They will grow relative to other firms and become the prevailing type, since survival conditions may push the observed characteristics of the set of survivors toward the unknowable optimum by either (1) repeated trials or (2) survival of more of those who happened to be near the optimum - determined ex post.  If these new conditions last "very long," the dominant firms will be different ones from those which prevailed or would have prevailed under other conditions. - Armen Alchian, Uncertainty, Evolution, and Economic Theory
    Now back to orchids...
    One would think that man could find enough variation in the orchid family, as it occurs in nature, to more than satiate his taste for variety.  Yet man's appetite for variety is never appeased.  He has produced over two times as many hybrids, in the past 100 years that he has been engaged in orchid breeding, as nature has created species in her eons of evolutionary effort. - Calaway H. Dodson, Robert J. Gillespie, The Botany of Orchids
    Now back to economics...
    More heads are occupied in inventing the most proper machinery for executing the work of each, and it is, therefore, more likely to be invented. - Adam Smith, Wealth of Nations
    Do we need more varieties of orchids?  Do we need more varieties of words?

    Should there be an orchid that can grow on trees in New York?  Should there be a word for organisms that can tolerate a wide range of temperatures?  We already have the latter..."eurythermal"...but not the former.

    Is "eurythermal" better than "temperature tolerant"?   Is one word always better than two?  Is efficiency as important for linguistics as it is for epiphytes and economics?  Should we want to the most bang for our buck...the most magic for our moment...the most epiphany for our epiphyte...and the most wow for our word?

    The more unique a term is...the more relevant the search results.  A perfect example is fhqwhgads.  On one hand...you really don't have to use quotes when you Google for fhqwhgads.  But on the other hand, good luck trying to remember how to spell it.  

    It's easy enough to remember how to spell "hedge"...but a Google search will provide two very different results.  Adding the word "bets" will help eliminate shrubbery related results.

    You can also search for the expression..."don't put all your eggs in one basket".  But simply searching for "eggs basket" will serve you a surplus of superfluous shrubbery.

    Searching for "diversify" is probably the most efficient approach.  But is it possible to create a better word?  Is it possible to create a better orchid?  Of course!  There's always room for improvement.

    Look around...do you see orchids growing on any trees?  Language has just as much room for improvement as the trees around you.  Now there's a place dedicated to finding and making linguistic improvements... Linvoid.  If we want to have a bounty of better words tomorrow...we'll have to throw a lot of words at today.  So start disseminating new words like an orchid disseminates seeds.

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    Discussion on Reddit: Can orchids provide a new model for language? Space exploration says yes!