Monday, August 1, 2016

A Pretty Puzzle For Paul Romer

Not too long ago I gave Paul Romer the opportunity to be my new favorite living economist.  He didn't take the opportunity!  Either he's not interested in being my new favorite living economist... or he's playing hard to get.  I'm pretty sure that he's playing hard to get!  Heh.

So I did some more homework and learned that he's a big fan of charter cities...





Here's a pretty puzzle for Romer...

Samantha is an American taxpayer who truly loves biodiversity.  She learns that the EPA has a new policy that harms, rather than protects, biodiversity.  Should Samantha have the freedom to boycott the EPA?

This is a trick question!  Samantha already has the freedom to boycott the EPA.  All she has to do is move to Canada.  However, if she moves to Canada... she won't just be boycotting the EPA... she'll be boycotting her favorite restaurant, clothing boutique, used book store, botanical garden and a gazillion other organizations that she really enjoys and values.  Plus, she'll have to quit her job, pull her kids out of school, sell the house and say goodbye to lots of friends and family.  And then she'll have to learn Canadian!

So while Samantha does have the freedom to boycott the EPA... this freedom is extremely costly.  The puzzle is... what, exactly, is the economic benefit of making it so hard and costly for Samantha to boycott the EPA?  What, exactly, is the economic benefit of forcing Samantha to throw the baby out with the bath water?

This is my issue with charter cities.  And it's really not a new issue.  What would be new is if a proponent of charter cities actually addressed this issue.  So here I am giving Romer this wonderful opportunity!

To be clear, of course I strongly support people's freedom to move anywhere for any reason.  But it's an extremely blunt instrument.  It's monolithic rather than modular.  A modular system would give Samantha the freedom to only throw out the bath water.  She would simply shift her taxes from the EPA to NASA or some other government organization with more beneficial policies.  Rather than spend so much time and money to relocate herself and her family... she would just quickly and easily relocate her tax dollars.  The transaction/opportunity costs of communicating her preferences would be vanishingly small.  Making communication far less costly and far more accurate would be immensely beneficial.

By solely relying on the extremely blunt instrument of foot voting, cities have evolved at a glacial pace.  Cities would evolve at an infinitely faster pace if they were fully subjected to the powerful and precise force of taxpayer choice.  Less beneficial "traits" would quickly be identified and replaced with more beneficial "traits".

Anyways, I'm pretty sure that I'm right.  Of course I might be wrong.  If I'm wrong then I'd definitely appreciate knowing how and why I'm wrong!  If I'm right then I'd certainly hope that Paul Romer would help make the case for pragmatarian cities.  Then he'd definitely be my new favorite living economist!

2 comments:

  1. isn't the idea here that you can have two small cities, one based on pragmatarian rules (allocatable taxes) and one on regular rules (non-allocatable). The people then vote with their feet, the pragmatarian city does much better (I think it would anyway)

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    Replies
    1. Yeah... same concept applies to websites. Let's say that you're unhappy because Netflix has too many romantic comedies and not enough sci-fi. Your preference is like this...

      romcom < sci-fi

      You can use the star rating system to try and communicate this preference. But this wouldn't accurately communicate the intensity of your preference. And if you quit subscribing (vote with your feet)... Netflix wouldn't know exactly why.

      If we apply the pragmatarian model to Netflix... then each month you use your $10 fee to communicate the intensity of your preferences. You give all your fees to your favorite sci-fi and no fees to romcoms. Everybody uses their fees to communicate the intensity of their preferences. Then Netflix would know the most valuable proportion for romcom and sci-fi.

      So as far as communication is concerned...

      fees > feet

      I see you're a programmer. You should read my recent stories on Medium...

      The Goodness Of Communication

      Revolution Against Popularity

      ... let me know if you're interested in programming a pragmatarian website. If we can prove it's a good idea for website... then easier to sell model to a small town.

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