Saturday, November 14, 2015

Integrating vs Disintegrating Information

Reply to reply: Thanks for commenting


Debating “perfect information” is like debating “heaven”. If heaven exists… then…

It took you more than half a year to respond to my response. Why? I have absolutely no idea. I’m not omniscient. I only have a microscopic clue about your preferences and circumstances. All I know is that responding to my response was on your “to do” list… and it was very very very far down on your list. How many other activities were higher on your “to do” list? How many activities have you engaged in since I responded to your story? Can I argue that your priorities are wrong? Can I argue that responding to my response should have been at the top of your “to do” list? 

Some economists like to assume omniscience for the sake of their models. But omniscience is so far removed from reality that it’s not even funny. It’s sad that so many people think that “perfect information” is relevant to anything relevant. 

What markets do is they integrate the maximum amount of information. What not-markets do is the opposite… they disintegrate the maximum amount of information. 

The government is currently a not-market. It disintegrates the maximum amount of information. People don’t appreciate this because they can’t see the impossibly massive amount of information that’s being disintegrated. If I had overridden your own priorities and placed “responding to my response” at the top of your “to do” list then how many people would know what information was disintegrated? 

It’s a given that markets “fail”. They fail for lack of information. Which is why it’s so absurd to jump to the “government” conclusion… given that the government, as it’s currently structured, disintegrates information. 

With private goods people have the incentive to supply information about their preferences/circumstances. The same isn’t necessarily true of public goods. So it’s not unreasonable to coerce people to contribute to public goods… but it’s extremely counterproductive to override people’s public goods preferences/circumstances by preventing them from choosing for themselves which public goods their taxes are spent on. It’s as if people exist for public goods and not the other way around. 

When it comes to organs… are they a private or public good? Right now I’m free to give my kidney away… but I’m not free to sell my kidney. I’m not free to sell my kidney because society, as a whole, does not appreciate/understand the value of knowing/integrating my preferences/circumstances. So it’s kinda hard to say that any organ shortage is the result of market failure. 

Opting in vs opting out with regards to organ donation is failing to see the forest for the trees. With opting out as the default there might be a larger supply of organs… but we still haven’t integrated people’s preferences/circumstances concerning their organs. So we have a distorted sense of reality… and our decisions are going to be less than optimal as a result. 

On Facebook you can post that you gave your kidney away… and I suppose that you might receive quite a few thumbs up. What if people could also give you a quarters up? Or a dollars up? Would any of your friends and family voluntarily give you any money because you gave your kidney away? Would it be strange to receive a total of $100 or $200 or $500 dollars because you gave your kidney away? 

Incentives and information both matter. If we want people to behave in maximally beneficial ways then we have to accurately communicate how much we benefit from their behavior. 

Nobody’s omniscient. This is just as true for public goods as it is for private goods. 

Friday, November 6, 2015

Amazon vs America

Reply to: Damn Right Amazon Runs a Fucking Deficit and So Should America


The public sector. The public sector. The public SECTOR. The public SECTOR. The public SECTOR. The fucking public SECTOR. The mother fucking public SECTOR.

You: Hey, there are some companies, in the private SECTOR, and they run a deficit. They borrow a ton of money! Look how well they are doing! Therefore, let’s run the entire public SECTOR just like how some individual companies in the private SECTOR are run. 

It’s ok for companies to borrow lots of money. Because… if some companies make stupid spending decisions then we, the consumers, give our money to whichever companies are making smart spending decisions. We can choose not to give our money to Amazon. We have the freedom to spend our money elsewhere. It’s entirely up to each and every one of us to decide entirely for ourselves whether or not Amazon is making too many mistakes. Consumer choice is what keeps Amazon on its toes. Our freedom of choice is what Amazon thinks about when deciding how they should spend the money that they earned and borrowed. 

Borrowing in the private sector is ok because of consumer sovereignty. You know what you’re left with when you take away consumer sovereignty? Whatever your left with IS NOT a market. You’re left with a not-market. 

Not-markets have different feedback mechanisms. Like voting. The government wants to borrow a shit ton of money and spend it on an unnecessary war. Then what? Then we, the voters, have to use our votes to try and replace whichever numskulls are in charge borrowing/spending a shit ton of money. 

In the public sector we infrequently use votes to try and replace the leaders who are making terrible spending decisions. In the private sector we frequently move our money to whichever leaders are making the best spending decisions. 

This isn’t a subtle distinction. But here you are completely ignoring this distinction and, as a result, you come to a completely moronic conclusion. 

Here I am giving you feedback. It’s negative feedback. You wrote a shit story. Lots of other people also gave you feedback. But they gave you positive feedback by *hearting* your story. If Medium facilitated micropayments… then how much money would those people have given you? You don’t know. You’re not mother fucking omniscient. 

The point of markets is to clarify demand. People are free to spend their own hard-earned money and when they do so it reveals the truth of their preferences and priorities. Not-markets do not clarify… they obscure… which is why they invariably waste massive amounts of society’s limited resources. Which is why it’s massively moronic for the government to run a deficit. And why it’s fundamentally important that people be free to choose which government organizations they give their taxes to (pragmatarianism FAQ).

Let me try and put my main point in a nutshell… 

In order for deficit spending to work as well for America (one country) as it does for Amazon (one company)… leaving America would have to be as easy as leaving Amazon. Leaving America and moving to Canada would have to be as easy as moving your money from Amazon to Barnes and Noble. 

With Amazon we have easy exit. With America we do not. Therefore, deficit spending for America is incredibly stupid. When consumers can’t easily boycott mistakes in the public SECTOR… then we want the public SECTOR to be as small as possible.