Thursday, May 26, 2016

Disparity Between Individual Influence And Collective Opportunity Cost

My second favorite liberal, John Quiggin, is still working on his book about opportunity cost...  Intellectual property: Extract from Economics in Two Lessons (expanded and amended).

Eventually he's going to finish his book.  Then what?  Then I'll buy it.  Unless the opportunity cost is too high.  Right?  I'm assuming that he's not going to charge an arm and a leg for his book.

Am I going to be the only person in the entire world to purchase Quiggin's book?  Probably not.  We can imagine a bunch of people buying Quiggin's book.  We can imagine them considering the available information, weighing the alternative uses of their money and deciding that the opportunity cost isn't too high.

When a bunch of people take money out of their own pocket... and put it into Quiggin's pocket... then the distribution of influence will shift accordingly.  A bunch of people voluntarily and willingly give up a little influence... and Quiggin gains the influence that they were willing to give up.  Consumers exchange their influence for Quiggin's book.  Quiggin exchanges his book (his time and energy) for consumers' influence.  

Does this make sense?  Quiggin spends a lot of time/energy producing something that lots of people positively value and, as a result, lots of people reward him accordingly.  His reward is more influence over society's limited resources.

Can you see the parity?  Quiggin's influence roughly reflects consumers' valuations of his productivity.  When their valuation of his productivity increases... so will his influence.  This parity isn't perfect because in reality one price does not fit all.  And we should certainly endeavor to figure out how to eliminate any disparity that exists.  Why?  Because it should be intuitive that the smaller the disparity... the larger the benefit.  Conversely, the larger the disparity... the smaller the benefit.

Given that I plan on buying Quiggin's book... clearly I approve of a liberal writing a book about opportunity cost.  But, it's kinda something that his book isn't going to be relevant to something as economically basic, and fundamentally important, as a bunch of people buying his book.

The fact is that it's impossible for liberals to really dig into the basic relationship between influence and opportunity cost.  What is Quiggin going to argue?  He's going to argue that there's nothing problematic about massive disparities?  Which would mean what?  He would either be arguing that his book, and all books, should be entirely free... or he would be arguing that everybody should have to spend far more money than they truly want to on all books.  Authors should either have far less, or far more, influence than they truly deserve.

If Quiggin acknowledges that it is problematic when disparities exist... then he would essentially be attacking the fundamental premise of democratically elected leaders.  Right now there's a massive disparity between Obama's influence and the collective's valuation of his productivity.  And the same will be true for the next president just like it was true of the previous president.

Here I am writing my gazillionth blog entry.  And I haven't been paid a penny!  Because... absolutely nobody in the world values my productivity at all?  Or... because of the free-rider problem?  Clearly because of the free-rider problem!   The free-rider problem is a problem, and only a problem, because it results in disparities between influence and (valuations of) productivity.  Right now, because of the free-rider problem, I have less influence than I truly deserve.  Mandatory contributions are only beneficial when they decrease, rather than increase, disparities.  But the only way that mandatory contributions can decrease disparities is when they incorporate everybody's valuations.

Everybody in the world has some influence.  The goal should be to structure society in such a way that everybody's influence perfectly reflects how much their productivity is worth to other people.  Nobody should have more, or less, influence than they truly deserve.

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