Wednesday, January 7, 2015

What Would Tyler Cowen Do For A Klondike Bar?

Would Tyler Cowen do this for a Klondike Bar?  Does it really matter what Cowen would do for a Klondike Bar?  Does it really matter how much Cowen values a Klondike Bar?  Does it really matter how much Cowen values dessert?  Does it really matter how much Cowen values food?  Does it really matter how much Cowen values national defense?

How could these things not matter?  Perhaps Cowen's valuation of food matters but his valuation of defense does not?  Because...he needs to be a defense expert in order for his valuation of his own safety to matter?  Just like he needs to be a food expert in order for his valuation of his own hunger to matter?

Personally, I think Cowen's valuations do matter.  Not just some of them...but all of them.  If I didn't, then I wouldn't be such a big fan of the idea of allowing everybody to directly allocate their taxes.

What's surprising and very intriguing is that neither Cowen nor his co-blogger Alex Tabarrok agree with me.  They don't believe that all their valuations matter...just some of them.  Why do they have a valuation double standard (VDS)?  How important could individual valuation really be if it's only partially applicable?

In a few blog entries I've encouraged them to defend/explain/justify their VDS...


To his credit, Tabarrok did take the the time to respond.  Unfortunately, his response didn't really clear things up.

But a few days ago I was happy to discover that Cowen posted a blog entry that provided some tantalizing insight into his VDS...

My thoughts on quadratic voting and politics as education

The concept of quadratic voting was first brought to my attention last year in a comment on the tax choice FAQ page.  This was my reply to the comment...

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

Nope, hadn't seen it. Thanks for pointing it out. It's fun to pretend that they got the idea from this blog entry...Crooked Timber Liberals Do Not Advocate Selling Votes.

I just skimmed over the first search result...I'm not sure why 'quadratic'. It seems far more intuitive that the price of votes should be determined by the demand.

And it's a bit off to use quadratic voting or regular vote selling rather than tax choice when it comes to something like a public park.

For me vote selling would be relevant for things like gay marriage. If somebody is completely neutral on the topic...then they would simply sell their vote to the highest bidder.

The 'quadratic vote' people are on the right track though...the answers/outcomes are far more accurate when people are given the opportunity to put their own money where their mouths are (deep input).

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

If you get a chance you should really read that discussion on vote selling that I had with the liberal philosopher John Holbo.  The discussion was as wonderful as Holbo is.  Even though I tried, and failed, to effectively convey the importance of individual valuation...the discussion seemed quite productive nevertheless.

Now it's three years later and maybe this is the start of round two.  Except, not with Holbo but with Cowen.  It's normal to have to try and explain the importance of individual valuation to liberals...but it's somewhat surreal to have to try and explain the importance of individual valuation to an economist of Cowen's caliber.  I get the feeling that I might be missing something.

VDS aside, Cowen is a pretty cool guy.  Want definitive proof?  Here you go... he's a fan of Aphex Twin (musical artist) and Black Mirror (show on Netflix).

In the first episode of Black Mirror a very popular English princess is kidnapped.  The ransom demand is...unusual.  The prime minister has to decide what he is personally willing to do on live television in order to save the princess.  The entire episode is like an extremely twisted and very darkly humorous "What would you do for a Klondike Bar?" commercial.

Would you be surprised if the kidnapping was actually orchestrated by a fan of Keynesian economics?  I wouldn't be.  All criminals are Keynesian economists at heart.  Kidnapping princesses... breaking windows... crucifying liberals are all pretty good ways to stimulate the economy.  Not really though.  That's why all Keynesian economists are criminals.

Kidnapping princesses would hurt, rather than help, the economy.  Why?  Because we should intuitively grasp that there are more valuable things that could be done with princesses...

x = kidnapping princesses
y = parading princesses

If you agree that parading princesses is better than kidnapping princesses then you must agree that it's good for princess to be put to more valuable uses.  It logically follows that you must also agree that it's best for princesses to be put to their most valuable uses.  But in order for this to happen, people must be free to valuate the various possible uses of princesses.

From Cowen's blog entry on quadratic voting...
Simple vote trading won’t work, because buying a single vote is too cheap and thus a liquid buyer could accumulate too much political power.
Errr...am I missing something?  How does he know how much a single vote would cost?  If we're voting on whether princesses should parade around the world...how does Cowen know how much I'd be willing to sell my vote for?   How does he know how much I'd be willing to pay for additional votes?  I grasp that he knows the supply...what I don't grasp is how he could possibly know the demand.

Also, who bothers selling anything that's too cheap?  Most of us have a ton of items that we could, but do not, sell on ebay.  Why don't we?  For most items the opportunity cost of selling them greatly exceeds what we could get for them.  So the only people who would bother selling votes for cheap would be people who could really use the extra money...aka poor people.  What's the difference between 1. preventing poor people from selling their votes and 2. stealing from poor people?  There's absolutely no difference.  And it would be extremely conceited to presume to know with freedom-restricting-certainty that their vote, if cast properly, could improve their circumstances more than a Happy Meal would.  If anybody doubts this then they should really learn about builderism.
No single vote seller internalizes the threshold effect which arises when a vote buyer approaches the purchase of an operative majority.
I'm not quite sure what this means.
Paying the square of the number of votes purchased internalizes this externality by an externally imposed pricing rule, as is demonstrated by the authors. 
Let me try and break his argument down...

Premise 1. Too many people would sell their votes too cheaply
Premise 2. ????
Conclusion:  Pricing rule

The first premise strikes me as wrong so it seems unlikely that the conclusion really follows.  I don't know what Cowen would do for a Klondike bar just like he doesn't know how much I value my vote on parading princesses.
The authors give gay marriage as an example where a minority group with more intense preferences — to allow it — could buy up the votes to make it happen, paying quadratic prices along the way. - Cowen
Again, why should gays and mormons have to pay quadratic, rather than market, prices for votes?   If quadratic prices are truly better than market prices...then why not use them for Klondike Bars as well?
My reservation about this and other voting schemes (such as demand revelation mechanisms) is that our notions of formal efficiency are too narrow to make good judgments about political processes through social choice theory.  The actual goal is not to take current preferences and translate them into the the right outcomes in some Coasean or Arrovian sense.  Rather the goal is to encourage better and more reasonable preferences and also to shape a durable consensus for future belief in the polity. - Cowen
It's my birthday!  Thank you very much Tyler Cowen!  Now I have more of an inkling why he isn't the biggest fan of pragmatarianism (a demand revelation mechanism).

Let me see if I'm getting the gist of his reservation by applying it to Cowen himself...
The actual goal is not to take Cowen's preference for Klondike Bars and translate it into the right outcomes in some Coasean or Arrovian sense.  Rather the goal is to encourage Cowen to have better and more reasonable dessert preferences and also to shape a durable consensus for future belief in the polity.
Why would I encourage Cowen to have better and more reasonable dessert preferences if I don't have any idea how much he values Klondike Bars?  How could I say that Cowen's sweet tooth is in the wrong place if I don't actually know where it really is?

Let's consider the real world example that I used in this blog entry...The Ingenious Gentleman George Monbiot
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). - George Monbiot, The Impossibility of Growth
The global community only values Ecuador's pristine, incredibly biodiverse park to the tune of $13 million?  What's wrong with us?  What's wrong with me?  What's wrong with Cowen?  Clearly our hearts are in the wrong place.
The actual goal is not to take people preferences for conservation and translate them into the right outcomes in some Coasean or Arrovian sense.  Rather the goal is to encourage people to have better and more reasonable conservation preferences and also to shape a durable consensus for future belief in the polity.
Are we sure that the first goal isn't the right one?  Perhaps it would help if we consulted The Handbook of Biodiversity Valuation...
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
Create markets where none currently exist?  It sure sounds like the correct goal is to facilitate individual valuation.

It's pretty easy for Cowen to prevent me from enjoying his Klondike Bar.  All he has to do is not share any of it with me.  But the same wouldn't be true if Cowen contributed to conservation.  Sure he could prevent me from visiting his tract of rainforest...but he couldn't prevent me from benefiting from all the positive externalities associated with its existence.  So because of the free-rider problem, it's not unreasonable to argue that the private sector won't supply nearly enough conservation.  Therefore, conservation is a public good that should be largely supplied by the government.  But here's the problem.  I wasn't given the option to spend any of my taxes on the preservation of pristine Ecuadorian rainforest.  Was Cowen given this option?  Nope.  What about Tabarrok?  Nope.  Not a single taxpayer was given this option.  Given that taxpayers can't directly allocate their taxes, the fact of the matter is that we don't know what the demand for conservation truly is.  If we have no idea where society's heart truly is, then how can it be argued that, when it comes to conservation, society's heart is in the wrong place?

Without demand clarity, it's entirely possible that we could waste massive amounts of resources preaching to the choir.  If we want to avoid barking up the wrong tree, it would behoove us to first verify which tree the cat is in.  If we want to avoid massive missteps, it would behoove us to look first and leap second.  If we want to make informed decisions, it would behoove us to first obtain accurate information and then make our decisions.  If I want to avoid wasting Cowen's time (and my own) trying to convince him that he should love Klondike Bars and conservation, it would behoove me to first establish what his actual preferences are for these two things.  For all I know he loves them more than I do.
I would gladly have gay marriage legal throughout the United States.  But overall, like David Hume, I am more fearful of the intense preferences of minorities than not.  I do not wish to encourage such preferences, all things considered.  If minority groups know they have the possibility of buying up votes as a path to power, paying the quadratic price along the way, we are sending intense preference groups a message that they have a new way forward.  In the longer run I fear that will fray democracy by strengthening the hand of such groups, and boosting their recruiting and fundraising.  Was there any chance the authors would use the anti-abortion movement as their opening example? - Cowen
We don't want minorities with intense preferences to be able to buy larger megaphones?  Maybe the megaphones they have now are too large as it is?  If it would be beneficial to prevent them from increasing their volume to a level that accurately reflects the intensity of their preferences...maybe it would also be beneficial to decrease their volume?
But the peculiar evil of silencing the expression of an opinion is, that it is robbing the human race; posterity as well as the existing generation; those who dissent from the opinion, still more than those who hold it. If the opinion is right, they are deprived of the opportunity of exchanging error for truth: if wrong, they lose, what is almost as great a benefit, the clearer perception and livelier impression of truth, produced by its collision with error. - J.S. Mill, On Liberty
Imagine somebody saying, "We shouldn't allow women to vote because they would vote for the wrong things".  Or, "let's not allow kids to vote because they would vote for the wrong things".  We really don't truly "win" by preventing our opponents from disseminating their message.  We really don't "win" by preventing our opponents from trying to protect their interests.  We really don't "win" by burying their heads in the sand.  We really don't "win" by burying our heads in the sand.  In order to "win", the fundamentally important first step is to correctly identify the size and scope of the problem.  This can be accomplished by facilitating individual valuation.  If we fail to do this, then we will incorrectly prioritize problem solving efforts.
In any case the relevant question is what kinds of preference formation, and which kinds of groups, we should allow voting mechanisms to encourage.  Think of it as “politics as education.”  When it comes to that question, I don’t yet know if quadratic voting is a good idea, but I don’t see any particular reason why it should be. - Cowen
Quadratic voting is a good idea because it facilitates individual valuation.  Why is facilitating individual valuation a good idea?   This comes to mind...
As was noted in Chapter 3, expressions of malice and/or envy no less than expressions of altruism are cheaper in the voting booth than in the market.  A German voter who in 1933 cast a ballot for Hitler was able to indulge his antisemitic sentiments at much less cost than she would have borne by organizing a pogrom. - Geoffrey Brennan, Loren Lomasky, Democracy and Decision
By the way, during Germany’s Weimar Republic, Jews were only 1 percent of the German population, but they were 10 percent of the country’s doctors and dentists, 17 percent of its lawyers, and a large percentage of its scientific community. - Walter E. Williams, Diversity, Ignorance, and Stupidity
Voting, as it stands, is a cheap talk survey.  This means that the results are guaranteed to be bullshit. What's the best way to deal with bullshit?
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
In other words...
The usual touchstone, whether that which someone asserts is merely his persuasion -- or at least his subjective conviction, that is, his firm belief -- is betting. It often happens that someone propounds his views with such positive and uncompromising assurance that he seems to have entirely set aside all thought of possible error. A bet disconcerts him. Sometimes it turns out that he has a conviction which can be estimated at a value of one ducat, but not of ten. For he is very willing to venture one ducat, but when it is a question of ten he becomes aware, as he had not previously been, that it may very well be that he is in error. If, in a given case, we represent ourselves as staking the happiness of our whole life, the triumphant tone of our judgment is greatly abated; we become extremely diffident, and discover for the first time that our belief does not reach so far. Thus pragmatic belief always exists in some specific degree, which, according to differences in the interests at stake, may be large or may be small. - Immanuel Kant, The Critique of Pure Reason
If people aren't given the opportunity to put their own money where their mouths are, then it's garbage in, garbage out...
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. Still, the big surprise was that once one had taken the effects of these more or less measurable inputs into account, there was nothing left to explain. The most shocking thing about Soviet growth was its comprehensibility. - Paul Krugman, The Myth of Asia's Miracle
Just like with voting, command economies produce so much bullshit because the input is so much bullshit.  The input doesn't come close to accurately reflecting how much people value food (Klondike Bars), music (Aphex Twin), shows (Black Mirror) or defense.  Massive amounts of resources are allocated in a valuation vacuum.  If the input doesn't reflect people's values...then why should we expect people to value the output?

The goal is to maximize our valuation of the world that we all live in.  In order for this to happen, more accurate valuations must be entered into the allocation equation.  Arguing that people's valuations are wrong, and shouldn't be entered into the equation, requires a time machine or omniscience or conceit.  We can't know what people are going to enter into the equation before they do so...and after they do so there's no guarantee that they will enter the same input again.  
Individuals do not act so as to maximize utilities described in independently existing functions. They confront genuine choices, and the sequence of decisions taken may be conceptualized, ex post (after the choices), in terms of "as if" functions that are maximized. But these "as if" functions are, themselves, generated in the choosing process, not separately from such process. - James M. Buchanan, Order Defined in the Process of its Emergence
How, then, are demand functions revealed? It would be disingenuous, to say the least, in an exercise whose object is to discover how demand is revealed, to assume that, ex ante, centers of power know the preferences of consuming households. We must then begin our analysis of the forces that motivate citizens to reveal their preferences by focusing on a fundamental information problem. I therefore assume that as a consequence of imperfect information concerning the preferences of citizens, centers of power will provide, except by accident, goods and services in quantities that will be either larger or smaller than the quantities desired by consuming households at the taxprices they confront, and I show that these departures from optimality inflict utility loses on these households. - Albert Breton, Competitive Governments: An Economic Theory of Politics and Public Finance
Under this condition the key difficulty of getting voters to reveal the relative intensities of their preferences for various public goods is virtually eliminated through the free exchange of votes in markets, and vote trading becomes a decentralized way for obtaining information on public goods, which is just as efficient as the private goods market is at obtaining information about consumer preferences. The omniscient benevolent dictator so frequently invoked in social welfare theory can be replaced by a system of decentralized markets. - Dennis C. Mueller, Geoffrey C. Philpotts, Jaroslav Vanek, The Social Gains From Exchanging Votes: A Simulation Approach
As those of you who have read Cowen's blog know, he's a real foodie.  Perhaps a faithful reader would do a  better job than a random person at ordering for Cowen at a restaurant?  I'm guessing though that most of the time Cowen orders for himself.  My theory is that there's absolutely no demand for impersonal shoppers.  Anybody who believes otherwise is more than welcome to put their money where their mouth is and start their own impersonal shopping service.

In order to help people better appreciate the importance of accurate valuation...the next time that anybody and everybody goes to a restaurant...here's a simple experiment for you to try.  Really lie to your waiter.  If you're a vegetarian, order a steak.  If you're allergic to peanuts, order kung pao chicken.  If you can't handle spice, order vindaloo extra spicy.  If you're dying of thirst, tell the waiter that you're fine.  You won't enjoy your meal...which means that you should enjoy the importance of accurate valuation.

I'm going to go out on a limb and predict that nobody is actually going to try this experiment.  Who would intentionally waste their hard-earned money on items that don't adequately match their preferences?  We all hate it when we accidentally order the wrong thing...which is why we often consult with others before we order.  If we couldn't choose what we ordered...then why would we waste our time consulting with others?

If we want to increase education...then we should facilitate, rather than block, individual valuation.
This greater complexity of political choice is compounded by an inability to gain from any investment in knowledge. In a market setting, a person can gain by storing food during the boom periods; it is a simple task to profit directly from knowledge. In a political setting, however, even if a person has acquired knowledge about the more complex question of "why," there is no way that he can profit from his knowledge because a change in policy will take place only after a majority of people have come to the same conclusion. Consequently, it is rational to be considerably more ignorant about general policy matters than about matters of market choice. - James M. Buchanan, The Theory of Public Choice: II
When we facilitate individual valuation, not only is there greater incentive to seek information, but there's also greater incentive to share information.  If you have the freedom to mistakenly trade your vote for a Happy Meal...then this freedom of yours would motivate others to try and persuade you that your vote is worth more than a Happy Meal.

With the current system, many of our leaders regularly and strongly emphasize the importance of voting.  But how can any issue possibly be that important when our vote, which is theoretically instrumental in helping to determine the outcome, has absolutely no monetary value?  How could a vote be valuable and worthless at the same time?  It's a paradox.  Maybe not unlike this one...
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
What would it mean if a vote on a certain issue was worth less than a Happy Meal?  What would it mean if a vote on another issue was worth more than a really nice steak dinner?  How could this information regarding society's true preferences/priorities not be important?  How can we make informed decisions without this information?  How can we correctly identify where there's the greatest room for improvement?  How can society's limited resources be put to their most valuable uses if we don't know which uses society values most?

I just had the vaguest recollection that Cowen might have actually blogged about vote trading a while ago.  A quick search verified that he had... Should we let people sell votes?
Say society has a 9999 people.  The marginal private value of a (political) vote is almost zero, except for its feel-good benefit (see also Gelman on altruistic motives to motivate voting).  Yet the total value of 5000 votes — a winning tally — is the size of the largest wealth transfer that the winner could impose on everyone else.  The result will mimic a model of self-interested voting but with only one self-interested voter — the owner of the purchased votes — having a say.  And that winner will be the conscience-less (non-liquidity-constrained) person who has the most to gain from buying up votes and getting things his way. - Tyler Cowen, Should we let people sell votes?
Truth be told, I can't honestly say that I have a good grasp of what's going on here...but Mr. Burns, from the Simpsons, comes to mind.  Mr. Burns was definitely "non-liquidity-constrained" (aka "rich") and evil.  If we imagine Springfield with a population of 9,999...then, with a vote-trading system, Mr. Burns could easily buy enough votes to become mayor...right?  Well...except, if Mr. Burns was running for mayor and he needed 5,000 votes to win...and everybody knew he was filthy rich and evil...then how much would, say...Apu Nahasapeemapetilon, the owner of the Kwik-E-Mart, sell his vote for?  Would Lisa really need to try very hard to persuade him not to sell his vote?  Of course Homer would sell his vote for a Happy Meal.

If the Koch brothers knocked on your door and offered to buy your vote...would your knowledge of the depth of their pockets influence how much you'd be willing to accept for your vote?

The problem with using a relatively small number such as 9,999 is that, if Mr. Burns somehow ruins Springfield, it wouldn't be impossible for people to vote with their feet and move to the next town.  But if Cowen uses larger numbers of voters, as there would be if Mr. Burns was running for governor or president, then it stands to reason that there would be an increase in the number of deep pockets that were strongly opposed to Mr. Burns being elected.  As far as Homer Simpson is concerned, it would be a matter of which side offered him a Happy Meal first.

But would Mr. Burns really ruin Springfield?  Ok, maybe probably.  What about the Koch brothers though?  As profit-seekers wouldn't they strive to improve their town in order to prevent their customers (aka residents) from foot voting and taking their wallets with them to other towns?
A business with red ink on the bottom line knows that this cannot continue indefinitely, and that they have no choice but to change whatever they are doing that produces that red ink, for which there is little tolerance even in the short run, and which will be fatal to the whole enterprise in the long run.  In short, financial losses are not merely informational feedback but consequential feedback which cannot be ignored, dismissed or spun rhetorically through verbal virtuosity. - Thomas Sowell, Intellectuals and Society
I get more than a hint of something like this...
America should be more like Disneyland and to do that we need to develop institutions that allow more infrastructure to built by the private sector. Most ambitiously we need more cities as hotels, more proprietary cities. - Alex Tabarrok, How to make America more like Disneyland
I have no real problem with proprietary cities...but of course I'd love if it Tabarrok could contrast and compare them to pragmatarian cities.  Foot voting should always be an option of last resort while tax voting should be the first resort.  With foot voting you effectively boycott all the goods, both public and private, within the geographical region that you move away from.  But boycotting all the goods in one area is the equivalent of throwing the baby out with the bath water.  With tax voting you could shift your tax dollars away from the public goods that you value less...to those that you value more.

In evolutionary terms, if we think of geographical units (towns, cities, states and countries) as organisms, then pragmatarianism would greatly speed up the rate of natural selection.  This is because the selective pressure would be incredibly more precise.  Any specific traits (ie policies, regulations, public goods, etc) that decreased fitness would be quickly weeded out while specific traits that increased fitness would be quickly adapted by other organisms.  As a result of this precise selective pressure, geographical units would improve at a much faster rate.  With foot voting, on the other hand, given that all traits both good and bad are selected against when people move, the selective pressure is incredibly imprecise...which results in improvements being made at a glacial rate.

Basically, foot voting is monolithic while tax voting is modular.  Tax voting, as such, would provide a much more precise mechanism for communicating the intensity of people's preferences.

Markets work because they facilitate communication.  The freedom to buy and sell conveys the incredible diversity of all our unique circumstances, values and preferences.  This information is aggregated into prices...which influence and inform all our decisions.
We must look at the price system as such a mechanism for communicating information if we want to understand its real function—a function which, of course, it fulfils less perfectly as prices grow more rigid. (Even when quoted prices have become quite rigid, however, the forces which would operate through changes in price still operate to a considerable extent through changes in the other terms of the contract.) The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more than is reflected in the price movement. - Friedrich A. Hayek, The Use of Knowledge in Society
The expansion of markets, which is essentially the same thing as facilitating individual valuation, improves communication, better informs our decisions and produces much greater prosperity.

As most of you already know, bees perform a dance to communicate to other bees the important details of food sources that they've discovered on their forays outside the hive.  But do you know how they convey that they've discovered a particularly good source of food?  They do so by dancing more vigorously.  Do you think it would be a good idea for bees to limit how vigorously they can dance?

Just like bees, humans also want greater abundance.  If some people believe that they've discovered a particularly good source of abundance...then the price of votes on the issue should accurately communicate to the rest of society the intensity of this group's preferences.  If other groups disagree with the potential value of the discovery...then the intensity of their disagreement would also be conveyed by the subsequent increase in the competition for, and price of, votes.  In effect, the price of votes would help communicate how important an issue is to society.  This information would help us prioritize our diligence...
If anyone insisted on deliberating with maximum scrupulousness every one of the economic acts he undertakes every day, if he insisted on rendering a judgment of value throughout to the last detail concerning the most trifling good that he has to deal with by way of receipt or expenditure, by utilization or consumption, such a person would be too much occupied with reckoning and deliberating to call his life his own. The correct maxim and the one which would be observed in economic life is "Be no more accurate than it pays to be." In really important things, be really exact; in moderately important things be moderately exact; in the myriad trifles of everyday economic life, just make the roughest sort of valuation. - Eugen Böhm-Bawerk, Capital and Interest
I'll modify it a bit...
If your vote is worth more than a laptop, be really exact; if your vote is worth a really nice steak dinner be moderately exact; if your vote isn't even worth a Happy Meal...then just make the roughest sort of valuation.
It's fundamentally absurd to distort value signals and then complain that people are uninformed or misinformed or unconcerned about important issues...




"Importance" is a function of sacrifice.  If people aren't free to sacrifice and give up their wealth in order to communicate the intensity of their preferences...then how can we know what's truly important to society?

I'll geek out a bit and quote Paul Atreides from Dune..."he who can destroy a thing, controls a thing".  In theory I'm supposed to own my vote.  But if I can't trade it for a Happy Meal or sell it for even a penny... then this means that I can't destroy it...which means that I don't really control it.  If I don't control my vote, then how can I possibly be the real owner?  And without real ownership...how can there be any real responsibility?

Facilitating individual valuation by 1. creating a market for votes and 2. creating a market in the public sector would...

  • increase the accuracy of communication
  • eliminate rational ignorance
  • promote better informed decisions
  • foster greater public/civic responsibility
  • improve prioritization of society's limited resources

If one accepts the premise that individual valuation is important...then there are a few logical implications.  One such implication is that there shouldn't be any geographical limits to vote trading or tax choice.  People all over the world should be able to trade and cast votes on who should become the next president of the United States.  And people in the United States should be able to spend their taxes on any country's public goods.  There's nothing to gain, and plenty to lose, by arbitrarily restricting who people can and cannot trade with.  Here are a few relevant blog entries...


No two people care equally about any issue.  Yet, we are all given one vote on every issue.  We can easily correct the inefficient allocation of votes simply by creating a market for votes.

Sure, some people are going to profit from their freedom to trade votes.  But what's a profit anyways?  It's a reward for spotting and correcting allocation errors (discrepancies/inefficiencies).  The larger the error that's corrected, the larger the reward.

The alternative?  "Shhhhh...democracy will end if people discover what their votes are really worth."  Ignorance is bliss?  Ignorance doesn't work so well for cancer...regardless of whether it's spreading through a body or a society.

Looking over this blog entry it seems like my case has improved quite a bit compared to the one I made three years ago.  But how does my case for individual valuation compare to cases against individual valuation?  I might be a bit biased, but I think that my case is stronger.  Then again, it's not like there are very many rigorous cases against individual valuation out there...which is unsettling given the amount of individual valuation that's blocked by our system.  It's a fundamentally important topic so hopefully Cowen, Tabarrok or other economists will decide it's worth it to make a strong case in support of a VDS.  Assuming, of course, that I haven't managed to change their minds.

The topic of vote trading isn't the easiest thing to find via a Google search...but here's what I've found so far...

























************************************************
Bueller's Basement

This blog entry's already over...but you're still here and so am I.  *awkward*   Well...since you're here...I suppose I could share a small random thought that I just had.  It's kinda fun.  Vote trading, children's suffrage and pragmatarianism would all make life more interesting.  While I think this is true, it really hasn't been my prime motivation for promoting these causes.  In fact, this is really the first time that it dawned on me that they would make life more interesting.  But what if it had been my prime motivation?  What if I'd been simply scrounging around for solid justifications to try and make life more interesting?

With my other cause, epiphytes on trees, I've always been aware that a large part of my motivation has been to make life more interesting.  If you're walking down the street and every tree is an entire botanical garden... then, if you enjoy nature, it takes a lot longer to walk anywhere.  There's more to observe, inspect, consider, appreciate and photograph.  There's more reason to linger longer.  Epiphytes improve the value to space ratio.  Life is more interesting with more life.  

So with epiphytes, the goal of making life more interesting has certainly been a significant motivation.  But with my economic causes, it hasn't been.  And now that I think about it, it seems somewhat less reasonable as an argument for them.  Let's allow people to directly allocate their taxes because it would make life more interesting?  It sounds a bit odd.  Let's allow people to directly allocate their taxes because it would make life better?  Doesn't sound odd at all.

What would the measures of interestingness even be?  For epiphytes... you'd add up all the minutes of lingering and all the photographs that were taken as a direct result of the epiphytes on trees.  For pragmatarianism... you'd add up all the minutes of discussion and pages of writing that were created as a direct result of people being able to directly allocate their taxes.   We could imagine strangers at parties talking at length about how taxes should be allocated.  Would the weather, as a topic, have facilitated as much discussion?  You'd have a good excuse to strike up a conversation with the attractive lady sitting next to you on the plane..."Pardon me, would you happen to have any good allocation recommendations?"  Of course she would.  Everybody would have at least a few recommendations that they would be more than happy to share with others.  Neighbors would compare notes on which government organizations had the greatest needs.  If one neighbor made a particularly convincing argument then he'd be rewarded by the other neighbor whipping out his cell phone, navigating to the website and making a sizable payment.  All these connections, discussions, exchanges...civic content...would be the measure of how much more interesting life had become as the result of pragmatarianism.

For me personally, I suppose that the word "dynamic" would work just as well as the word "interesting".

No comments:

Post a Comment