Saturday, September 10, 2016

When Nassim Taleb Is A Beautiful Fly On Every Wall

Feel free to use Medium to comment on this story... The Importance Of Accurate Feedback Loops


In a recent blog entry I had no problem admitting that the economist Paul Romer broke my intellectual heart when he didn't show any interest in solving this pretty puzzle.  *sigh*  Oh well.  It's time to move on and take another risk.  I'm in the mood for intellectual love.

What about Nassim Taleb?  A while back I really enjoyed his book The Black Swan.   Recently I discovered and enjoyed his stories on Medium.   In this story...  How To Legally Own Another Person.... guess what I found?  I found a very pretty puzzle!

After being rejected by Romer... I feel some... errr... performance anxiety as I sit here trying to figure out how I'm going to paint this puzzle for Taleb.  I fear that the puzzle that I paint won't be pretty enough for him to truly appreciate!  So I must dig deep and utilize as much of my crazy creativity as I can capture.

I know that Taleb appreciates a good story.  The problem is that I'm a terrible story teller.  Why am I so terrible at telling stories?  I don't know.  But I'm not going to let this "minor" detail stop me from telling Taleb a story.  Let's see... where to begin...

My story begins... in a hotel lobby.  Why a hotel lobby?  Because that's where I met Newt Gingrich once.  I had just graduated from high school and was about to ship off to Ft. Benning Georgia.  Another recruit and I were staying at some hotel in Los Angeles.  He recognized Gingrich in the lobby and decided that we should go over and shake his hand.  Up until then I had no idea who he was.  But I got to meet him anyways and he was nice enough.  Once or twice I've fantasized that, when I shook his hand, I had said something prescient like, "You're going to run for president one day.  When you first suspect that you might not win... your best bet is to argue that people should have the freedom to choose where their taxes go."

Actually, when I was stationed in Panama... I met another person who would run for president one day... Hillary Clinton.  I didn't meet her in a hotel lobby though.  Instead I met her in the middle of the jungle.  My platoon was doing some exercises and voila!  The first lady magically appeared!  And of course I've also fantasized about telling her the same thing... "You're going to run for president one day.  When you first suspect that you might not win... your best bet is to argue that people should have the freedom to choose where their taxes go."  Of course, in hindsight... it might not have been her best bet.

So I spot Nassim Taleb in some hotel lobby and go over to introduce myself.  When I shake his hand I don't say that he's going to run for president one day... but I do say that I have a couple of epic backstage passes.  When he asks what I mean I show him the passes.  For a second or two he's awed by their epicness.  I hand him one and he puts it on.

After I explain how epic the backstage passes are... Taleb can't help but be skeptical.  He's naturally inclined to doubt that they can even take us backstage to ancient Egypt.  But it's easy enough to dispel his doubts.  Voila!  There we are!  Ancient Egypt.

Exactly where, and when, are we in Egypt?  We're right where and when the decision was going to be made to build the Great Pyramid of Giza.  How many people were involved in the decision making process?  Probably not too many people.  But there they are in a large room.  They can't see us but, thanks to our epic passes, language isn't a problem.

Taleb would probably be kinda surprised.  Right?  I mean... one second he's in a modern hotel lobby... the next second he's in an ancient Egyptian room.  Would he think that I was an angel or something?  In any case, he'd probably be overwhelmed with the enormity and the unlikeliness and rarity of the experience and opportunity.  I wouldn't be surprised if he broke down and wept.  To be able to see a slice of life as it truly existed 1000s of years ago would be no small thing.

Eventually, Taleb would recover enough to become very interested in the discussion regarding whether or not to build the pyramid.  Maybe one Keynesian Egyptian economist would argue that building the pyramid would stimulate the economy.  Would Taleb agree?  Or would he sincerely believe that there were far more valuable uses of such a massive amount of Egypt's limited resources?  I definitely wouldn't be surprised if Taleb deeply appreciated Quiggin's Implied Rule of Economics.

After some discussion, the decision would be made to build the pyramid.  That's when I'd put on my epic glasses.  My glasses would be so epic because they would allow me to see inside Taleb's heart of hearts.  I'd be able to clearly see his true valuation of the decision to build the pyramid.

Alternatively, maybe the glasses would allow me to clearly translate all his outward changes into his exact valuation of the decision to build the pyramid.  I think squids might communicate with each other by changing their colors... right?  I like the idea of Taleb's skin changing colors and the color communicating his true valuation.  Although...he would be wearing clothes.  So maybe a colorful aura would work better.

He would be wearing clothes?  Well yeah.  But... let's take a second or two and think about the fundamentally important concept of preference revelation in a risque way.  Imagine that Taleb and I are people watching at a nude beach.  As naked people walk by... his valuation of them becomes... obvious.  No need for fancy glasses to figure out his true valuation.  Maybe in one funny/awkward scenario it would seem like he highly values lots of different people... but then it dawns on me that he actually highly values me!  Hah.  Like the old joke about the patient who says that he hurts here and here and here and the doctor tells him that his finger is broken.  In land navigation training we were taught to sling our riffle on our back so that the metal from the rifle wouldn't interfere with the compass.

Can we imagine a society that's based on nude beach economics?  No need to spend your cash to demonstrate the intensity of your preference for food, cars or anything else.  Although, perhaps it's not the easiest thing to imagine anybody getting excited about a toaster.  Unless it was a super sexy toaster.  The ladies wouldn't be able to buy things... because... the intensity of their preferences wouldn't be so obvious.  But they could certainly help sell things.  Or... not...

Perhaps I should clarify why Taleb couldn't simply just tell me his valuation of the decision to build the pyramid.  The technical term for this method of preference revelation is "stated preference" or "contingent valuation".  Nothing would prevent him from telling me that the Egyptians were making a good or bad decision on a scale from 0 to 10.  But the stated preference method isn't very reliable or accurate.  I'm not necessarily saying that Taleb would lie... but I'd much prefer to see, and know, at a glance, what his true valuation was.  With my epic glasses on I'd be able to clearly see that his actual willingness to pay (WTP) for the decision to build the pyramid was $5 dollars... or $500 dollars... or -$3000 dollars.  Chances are good that if you don't understand the concept of preference revelation and its associated challenges... then you probably didn't truly appreciate our scandalous foray into nude beach economics.

After I use my epic glasses to see Taleb's valuation of the decision to build the pyramid... I grab my notebook and jot it down.  I'm not exactly sure if he would ask me what I was jotting down... or why I had put my epic glasses on.  I'm guessing that he would probably want to wander around ancient Egypt for a bit.  After we had done so... then where and when would he want to go backstage next?  I'm sure that he'd have a long list.  The dinosaurs and their extinction... Socrates and his extinction... Jesus and his extinction.  The backstage pass aspect means that we're primarily interested in the decision making process.

For the dinosaurs... we can reasonably guess that there was no decision making process.... backstage or otherwise.  Well... I suppose that we could pretend that some super advanced aliens were responsible.  Oh man, what a trip it would be to be able to sit in on that decision making process.  But I'm guessing that even though we could understand their words (assuming that they even spoke)... perhaps their logic would be way beyond our reach.  However, I'd still be able to see Taleb's valuation of their decision to kill the dinosaurs.  Would it be positive or negative?

With Socrates... the logic of the discussion/debate definitely wouldn't be beyond our reach.  Taleb and I would be able to sit through the entire trial and, even though we'd certainly miss a few references... we'd get the gist of the arguments.  Also, the epic passes would allow us to hit the "pause" button so that Taleb and I could take as long as we wanted to take advantage of the fact that two heads are better than one.

Socrates' trial, as far as backstage decisions go, wasn't very backstage.  The decision making process was very open rather than very closed.  It's not like it was a closed courtroom with 12 jurors... there were 100s of jurors.  Lots of people participated in the process.  However, just like with our modern jury system, Socrates' fate was determined by stated preference (voting) rather than by demonstrated preference (WTP).   With my epic glasses not only would I be able to clearly see Taleb's valuation of the decision to kill Socrates... but I'd also be able to clearly see the crowd's valuation of the decision.  I'd lend my glasses to Taleb and he'd see the crowd's valuation of the decision as well.  After seeing the crowd's valuation... Taleb would definitely want to have his own pair of epic glasses.  No problem.  I'd have an extra pair just for him.

What about the trial of Jesus?  Well... personally, I'm not a Christian... I'm a Xeroist (this is a letter to Taleb and a prayer to Seldon).  I don't assume that Jesus was a real person... and even if he was a real person... I certainly wouldn't jump to the conclusion that he was the son of God.  But it would definitely be worth it to try and see if there actually was a trial.  If there was one... then, well, that would certainly be a trip to say the least.  Taleb and I could put on our epic glasses and clearly see the crowd's valuation of the crucifixion.

Where to next?  Hmmm.  I somehow developed a deep curiosity about the origins of the idea to use horses for transportation.  Horses in the Americas went extinct shortly after the arrival of humans.  Coincidence?  Probably... not.  For sure I'd want to go with Taleb to witness the decision making process to kill the last horses in the Americas.  Of course I don't think that any of the natives argued in favor of using the horses for transportation rather than for food.  There probably wasn't even a discussion or debate.  The natives were hungry so they made the decision to kill and eat the remaining horses.  That was that.   Taleb and I could put on our epic glasses to see the natives' valuation of the decision to kill and eat the last of the horses.  Then I could see Taleb's valuation of the local extinction of horses and he could see my valuation.

For the sake of comparison, Taleb and I could zoom over to Europe, or Asia, and witness a person, or group, making the decision to use horses for transportation.  We'd see everybody's valuation of that decision.

How different would the Americas have been if the natives had figured out that horses could be used for transportation? Horses greatly facilitate the allocation of people and other resources.  This means that horses would have greatly facilitated trade in the Americas.   Groups that were farther apart would have been able to more easily and frequently trade with each other.  Good ideas (broadly speaking to include products and services) would have spread farther and faster.  However, many of the gains from trade would have been lost as a result of warfare (a bad idea) being facilitated by horses as well. But, overall, I'm pretty sure that horses facilitating the allocation of resources would have greatly sped up the progress of the natives. They wouldn't have been able to make as much progress as the Europeans though. This is because the Europeans benefited from trading with a much larger group of very different people (ie the Silk Road).  Progress is a function of difference.  More difference means more progress.  But I think that the native Americans would have made sufficient progress that early contact between the two groups would have gone quite differently.  Of course there would still be the "minor" detail of smallpox.  But we can go out on a limb and pretend that, thanks to horses, wider trading among the native Americans would have resulted in less inbreeding and exposed them to a wider variety diseases which would have built up their resistance via natural selection.  Wider trading = greater antifragility?

According to my own rule... Xero's Rule... chances are pretty good that any aliens that visit us will be far more interested in trading than taking.  Obviously I don't think that my rule is wrong... but if it is wrong.... and 100 years from now we're visited by some rude mood aliens... then humanity's lack of adequate progress to prevent us from being easily dominated by the aliens could possibly be traced back to my failure to persuade people that pragmatarianism (facilitating trade/communication) is a good idea. Just like perhaps the native American's lack of adequate progress to prevent their domination by the Europeans could be traced back to none of them realizing that it was a good idea to use horses to facilitate trade/communication.

While on the theme of extinctions... there's one that's especially near and dear to my heart... Syncaris pasadenae.  It was Southern California's only native freshwater shrimp species.  For the longest time it happily frolicked in a stream that was located just a few minutes away from where I live.  Then some people made the decision to build the Rose Bowl on the shrimps' habitat.  I’m guessing that the Rose Bowl isn’t entirely responsible for the shrimps' extinction… but for all we know the shrimp would still be around if it wasn't for the Rose Bowl.  So I'd definitely like to witness the decision making process with Taleb.

How many people participated in the decision making process?  Did anybody stand up for the shrimp?  Did anybody stand up for the little guy?  Did the shrimp have an advocate?  Did anybody even mention the shrimp?  Taleb and I would be able to see everybody's valuation of the decision.  What would Taleb's valuation be?  Would it be positive or negative?  Could it be positive?  Does Taleb like or even love the Rose Bowl?  I sure don't.  If his valuation was negative... I'd be surprised if it could possibly be more negative than mine.  I'd look in my notebook to remind myself of what his valuation of Socrates' extinction was.  I'm guessing that it would be a lot more negative than his valuation of the shrimps' extinction.  And I'd ask him how he could possibly care more about the loss of one person than about the loss of an entire species.  Heh.  I'm sure that most people care about at least one person more than they care about one species.

Do we ever see the trolley problem with a family member on one track and an entire species on the other?  Your loved one... or mosquitoes?  A tough call?  Probably not.  Your loved one or dolphins?  Bye bye dolphins?  Or... bye bye cats?

Uber is starting to subject the streets to driverless cars.  Do driverless cars brake for cats?  Or dogs?  Can the cars even tell the difference?  For some reason I have the idea that, over the years, I've noticed less and less cat roadkill.  Maybe it's just my imagination.  Maybe I just grew up on a street that was tough on cats.  But I have to admit that I do find the idea of selection by cars to be very intriguing.  One time I tried searching for the topic.  I don't remember finding anything relevant for cats or dogs... but I did manage to find that there had been a relevant study about birds... Can Birds Evolve to Avoid Being Road Kill?   Birds?  It seems kinda logical that cars exert a lot more selection pressure on dogs and cats than on birds.  Because... birds can simply fly over the traffic!  Except for chickens and their incessant need to cross roads.  But I suppose that there are a lot of birds... and cars.  I wonder if this type of selection counts as artificial or natural.  Naturally artificial selection?  Artificially natural selection?  If cars actually are selecting for cats or dogs... then what traits are being favored?  The "look both ways before you cross the street" trait?  And how much pressure is being exerted on the population?  How much has the population evolved?

When, exactly, did Uber make the decision to transition to driverless cars?   Was the decision made during a board meeting?  If so, I wonder what would have happened if Taleb, without an epic backstage pass, had showed up for the meeting.  I'd be kinda surprised if they allowed him to attend the meeting.  I'd be even more surprised if they allowed him to vote.  In any case, of course I'd sure be interested to see Taleb's valuation of the decision.  So voila!  There we would be.... listening to the discussion... checking out the charts... and graphs... considering the numbers.  When the decision was made... I'd see Taleb's valuation of it.  Would it be positive or negative?

Recently I noticed that an employee of the The Economist, "Adam Smith", shared this story on Medium... We are anonymous.  I jumped at the chance to share this idea with him and his publication.  My idea is basically that people who subscribe to the The Economist should have the option to allocate their fees to the articles that most closely match their preferences.  It's the pragmatarian model.

How far up the chain of command did my idea go?  I don't know... but it would sure be easy for Taleb and I to find out.  Voila!  There we are!  Uh, where, exactly, are we?  In a board meeting?  Probably not.  Perhaps we're in some mid-level manager's office.  The manager reads my idea and... decides against it.  What would Taleb's valuation of the decision be?

Let's get meta.  I submit this story to Amazon Studios.  Because... it's definitely a movie and a television series that I'd want to watch!  Who reads my story?  Samantha?  In her green dress?  Does she make it to this paragraph?  Hah.  Nooo... probably not.  And my story goes into the garbage bin.  Little does she know that Taleb and I are standing in her office.  We are valuating the shit out of her decision.  Whose valuation is more negative... Taleb's or mine?

I'm not sure if the puzzle or moral of my story is obvious.  Here it is...

Where, when, why and how do Taleb's valuations matter?  Under which circumstances is it desirable to be ignorant of Taleb's valuations?  When, exactly, is it beneficial for Taleb's valuations to remain hidden?  What is the rule?  Is there a rule?  If not, do we need one?

Ok, I have confession to make.  I'm a... junkie.  And I'm going into severe withdrawals.  I'm not addicted to the typical drugs... my perfect drug is... quoting people.  This story is the longest thing that I've ever written without a bunch of quotes.  And it's killing me.  I can't take it anymore.  Here's why I was trying so hard to go cold turkey...

It is also naïve empiricism to provide, in support of some argument, series of eloquent confirmatory quotes by dead authorities. By searching, you can always find someone who made a well-sounding statement that confirms your point of view - and, on every topic, it is possible to find another thinker who said the exact opposite. Almost all of my non-Yogi Berra quotes are from people I disagree with. - Nassim Taleb, The Black Swan 
It is not a good habit to stuff one's text with quotations from prominent thinkers, except to make fun of them or provide a historical reference. They "make sense," but well-sounding maxims force themselves on our gullibility and do not always stand up to empirical tests. - Nassim Taleb, The Black Swan

Oh man it feels so good to share these quotes!!! I doubt heroin could possibly feel this good.  Why am I so addicted to quotes?  Maybe because I suffer from eloquence envy.  I sincerely doubt that Taleb knows what it's like to suffer from eloquence envy.  Maybe it's because I like to hedge my bets.  I try and convey a concept using my wacky words... and then I share how somebody else conveyed the same concept with their wonderful words.  When a concept is important enough... and you really want to increase the chances that people will understand it... then it sure seems logical and desirable to hedge your bets as much as possible.  Also, personally, I quite often like to hear things straight from the horse's mouth.

Just like how somebody with ED would be, uh, screwed in a nude beach economy... I'd sure be screwed in an eloquence economy.  I'd starve to death if I had to wax eloquently in order to demonstrate my preference for food.  I know a gazillion words but barely any of them are ever on the tip of my tongue when I need them to be.

Anyways, it's especially enjoyable to share quotes against quotes.  It's pretty much the definition of too much fun.

For all I know... Taleb, like Samantha in her green dress, stopped reading this story after the second paragraph.  Because... there was a severe shortage of eloquence.  But on the off chance that he's still reading... then I really hope that he rethinks his anti-quote policy.

Since I've already shared a couple quotes... the quote dam has been fatally damaged.  Here comes the flood...

Mankind can hardly be too often reminded, that there was once a man named Socrates, between whom and the legal authorities and public opinion of his time, there took place a memorable collision. Born in an age and country abounding in individual greatness, this man has been handed down to us by those who best knew both him and the age, as the most virtuous man in it; while we know him as the head and prototype of all subsequent teachers of virtue, the source equally of the lofty inspiration of Plato and the judicious utilitarianism of Aristotle, "i maëstri di color che sanno," the two headsprings of ethical as of all other philosophy. This acknowledged master of all the eminent thinkers who have since lived—whose fame, still growing after more than two thousand years, all but outweighs the whole remainder of the names which make his native city illustrious—was put to death by his countrymen, after a judicial conviction, for impiety and immorality. Impiety, in denying the gods recognised by the State; indeed his accuser asserted (see the Apologia) that he believed in no gods at all. Immorality, in being, by his doctrines and instructions, a "corrupter of youth." Of these charges the tribunal, there is every ground for believing, honestly found him guilty, and condemned the man who probably of all then born had deserved best of mankind, to be put to death as a criminal. - J.S. Mill, On Liberty

What's Taleb's valuation of J.S. Mill?  What's Samantha's valuation of J.S. Mill?  How many of the stories that she reads have big fat quotes by J.S. Mill?  None of them?  Many of them?  Really?  But she doesn't value J.S. Mill so she throws them all in the garbage?  And so when I watch movies and shows and don't hear any big fat quotes from J.S. Mill then I'm forced to jump to the conclusion that I must be... so... fucking... exceptional in my so fucking high valuation of him.

Socrates wasn't killed by public valuation... he was killed by public opinion.  People were able to kill Socrates... for free.  They went home and thought, "Wow, today was a great day.  I got a really wonderful deal on the murder of Socrates!"

Voting is fine as long as it's not used to decide anything even remotely important.  A group of coworkers is trying to decide where to eat.  Should they vote on it?  Fine.  Ok.  They can knock themselves out.  But when it comes to anything and everything that's even vaguely important... then fuck voting.  Socrates' trial?  Fuck voting.  Both sides should have had no choice but to reach into their own pockets and use their own money to accurately communicate their true valuation of their preferred outcome.  If his haters had been willing to spend more money than his lovers... then his lovers would have gotten their money back... plus they would have gotten all the money spent by the haters.  The haters would have gone home and thought, "Damn, today wasn't such a great day.  I had no idea that people loved Socrates that much.  I really did not get a great deal on the murder of Socrates!"

Socrates' murder.... and the absence of J.S. Mill in popular culture... both have the same cause... latent valuations.  This is very closely tied to one of Taleb's favorite concepts...

Ralph Nader had a heuristic for war. He said that if you are going to vote for war, you should have a member of your family--a descendant, a son or grandson--on the draft. And then you can vote for war. - Nassim Taleb, Skin In The Game

When your vote has a direct and personal cost (sending a family member to war)... then it's not technically a vote.  The problem with a real vote is that it doesn't have a price tag.  Or, perhaps I should say that it does have a price tag but you can't see it.  And if you can't see the price tag... then you're not likely to make the most rational decision.

Stores wouldn't work so well if their items didn't have price tags.  We'd fill up our shopping carts... go home... and receive a bill shortly after.  Looking at the bill we'd realize that there were many items that we really wouldn't have put into our shopping carts if we had known their price.  So we'd have to gather up all the items that were not worth the cost, put them into the car and return to the store to try and get a refund.

But in the case of Nader's heuristic, you can clearly see the price tag.  The price tag is the life of your loved one.  So if you're willing to vote for war... then it means that you're willing to personally pay a very steep price.  You're willing to make a significant sacrifice.  You're willing to sacrifice a loved one to the God of War.

When voting requires skin in the game then it's not voting... it's spending.  And it's only through spending that people's true valuations can be revealed.  Well, unless you happen to have epic glasses.

The importance of skin in the game when it comes to war really isn't a new concept...

The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it, and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for.  - Adam Smith, Wealth of Nations

There's nothing inherently wrong with people shouting for war.  People should be free to make their opinions known.  It's informative to know people's opinions.  But the decision to go to war and/or continue a war really should not be based on people's opinions... it has to be based entirely on their valuations.  Then, and only then, will we avoid wasting massive amounts of society's limited resources on unnecessary wars.  Then, and only then, will we avoid massively violating Quiggin's Implied Rule of Economics.

Let's have some more J.S. Mill...

It is not too much to require that what the wisest of mankind, those who are best entitled to trust their own judgment, find necessary to warrant their relying on it, should be submitted to by that miscellaneous collection of a few wise and many foolish individuals, called the public. The most intolerant of churches, the Roman Catholic Church, even at the canonization of a saint, admits, and listens patiently to, a "devil's advocate." The holiest of men, it appears, cannot be admitted to posthumous honours, until all that the devil could say against him is known and weighed. If even the Newtonian philosophy were not permitted to be questioned, mankind could not feel as complete assurance of its truth as they now do. The beliefs which we have most warrant for, have no safeguard to rest on, but a standing invitation to the whole world to prove them unfounded. If the challenge is not accepted, or is accepted and the attempt fails, we are far enough from certainty still; but we have done the best that the existing state of human reason admits of; we have neglected nothing that could give the truth a chance of reaching us: if the lists are kept open, we may hope that if there be a better truth, it will be found when the human mind is capable of receiving it; and in the meantime we may rely on having attained such approach to truth, as is possible in our own day. This is the amount of certainty attainable by a fallible being, and this the sole way of attaining it. - J.S. Mill, On Liberty

Even the devil deserves to have an advocate?  What about my shrimps?!

I think it would probably have driven me literally insane for the epic backstage pass to give me the opportunity to see my shrimps happily frolicking in their blissful ignorance of their impending doom but not give me the opportunity to rescue enough of them to bring back... so that I could buy the Rose Bowl, demolish it, recreate the shrimp's habitat and reintroduce them into it.

Hey Samantha, you're probably not reading this... but here's another idea for an awesome show.  A genius guy secretly invents a time machine and uses it to rescue animals from extinction.  All extinct animals?  Naw, just the ones whose extinction can be blamed on humans.   It's not a secret that these animals are becoming unextinct... but it's a really big mystery how, exactly, it's happening.  There's some sexy scientist lady who is trying to solve the mystery.  Feel free to switch the gender roles... but there has to be at least one threesome.  And the threesome has to be both intellectual and sexual.

Right now I just finished rereading that Mill quote.  Man it's so good.  Everybody should be free to question the judgement of even the wisest men.  Nobody should be exempt from public scrutiny.  I've super questioned the judgement of the people who decided to build the Rose Bowl.  But doing so is the epitome of a day late and a dollar short.  Well... at least for that decision.  But how many decisions are currently being made to destroy other habitats?  How many decisions will negatively impact the habitat of California's only other species of freshwater shrimp?   Is it enough for people to have the freedom to simply question these decisions after they've already been made?  Is it enough for us to trust in God... and/or the Government?

How well has Newtonian philosophy held up?  I should know the answer given that I recently watched Cosmos on Netflix.  Have you seen it?  It's actually pretty great.  For those of you who don't have Netflix... or prefer reading... here's the entire transcript.  The star of the show is Neil deGrasse Tyson.  He's cool.  It looks like he's always kinda high... on science?

To be honest I started watching the show because I figured it would be nice to fall asleep to.  It really was nice to fall asleep to... but I found myself making the effort to watch the parts that I missed.  Most of the science is way outside my area of expertise but I did manage to spot one egregious error...

Orchids were among the first flowering species to appear on Earth.  And they're the most diverse.  Darwin was particularly fascinated by the comet orchid of Madagascar.  A flower whose pollen is hidden at the bottom of a very long thin spur. - Neil deGrasse Tyson, Cosmos

Did you spot the error?  The orchid in question is Angraecum sesquipedale and its pollen is definitely not hidden in the bottom of its spur.  Coincidentally my friend has a hybrid made from this species.  Here's a picture that I took of it...

Those long skinny green things sticking straight up are the spurs.  In this hybrid they stick up but with sesquipedale they stick down.  Another term for "spur" is "nectary"... meaning that's where the sweet nectar is located.

Every orchid sexual encounter is a ménage à trois— an orchid which wants to deliver its pollen to another orchid and a pollinator that is seduced into being their delivery boy. The hummingbird, of course, has no interest in this love tryst but is bribed with nectar into doing their reproductive work. - Carol Siegel, Orchids And Hummingbirds: Sex In The Fast Lane

Yeah, incentives matter.

The orchid's pollen is actually located pretty much in the center of the flower... right above the lip.  I attempted to cross pollinate my friend's orchid but the pollen didn't take.

Here it is straight from the horse's mouth...

I fear that the reader will be wearied, but I must say a few words on the Angraecum sesquipedale, of which the large six-rayed flowers, like stars formed of snow-white wax, have excited the admiration of travellers in Madagascar. A whip-like green nectary of astonishing length hangs down beneath the labellum. In several flowers sent me by Mr. Bateman I found the nectaries eleven and a half inches long, with only the lower inch and a half filled with very sweet nectar. What can be the use, it may be asked, of a nectary of such disproportional length? We shall, I think, see that the fertilisation of the plant depends on this length and on nectar being contained only within the lower and attenuated extremity. It is, however, surprising that any insect should be able to reach the nectar: our English sphinxes have probosces as long as their bodies: but in Madagascar there must be moths with probosces capable of extension to a length of between ten and eleven inches! - Charles Darwin, The Various Contrivances by which Orchids are Fertilised by Insects

So how did Tyson and his team make the mistake of thinking that the pollen is located at the bottom of the nectary?  Well... obviously because they forgot to invite me on their team.

Getting the birds and the bees wrong isn't the biggest mistake and I'm definitely not trying to make a mountain out of a molehill.  My point is that Linus's Law is a pretty great law... given enough eyeballs, all bugs are shallow.

Tyson's show is somewhat similar to my story.  In his show he has this ship that allows him to fly anywhere in space and time.  And we get to hear his thoughts on the different things.  Of course, unlike in my story, we don't get to see his valuations of these things.  Hmmm...

While I do think that my story is pretty wonderful because it would give me the opportunity to see Taleb's valuations... I'm sure that my story would be even more wonderful if I could also see Tyson's valuations.  Right?  Then we could compare their valuations.  Am I being greedy?  If so, then it's gotta be the good type of greedy.  I crave valuations like hummingbirds and moths crave nectar.  And... any excuse to have an intellectual threesome.

So Taleb and I go and find Tyson... in a hotel lobby?  We give him an epic backstage pass and an epic pair of glasses and off we go!  Uh, where and when would we go?  How about here...

Just when Halley may have begun to wonder if Newton was bluffing as Hooke had done earlier, a messenger arrived with an envelope from Newton.  Here are the opening pages of modern science with its all-embracing vision of nature universal laws of motion, gravity not just for the Earth, but for the cosmos.  Halley raced back to Cambridge.  "Mr. Newton, I beseech you to work all of this into a book as soon as possible.  I can assure you the Royal Society will publish it."  But there was one little problem.  "We are in agreement that Mr. Newton has produced a masterpiece.  However, I'm afraid the Royal Society has well, regrettably sales for The History of Fish have not lived up to our financial expectations."  It's an impressive book.  Extremely comprehensive.  Really.  It's filled with lavish illustrations of well, fish.  The disappointing sales led to a bigger problem.  The Royal Society pretty much blew its total annual budget on The History of Fish.  In fact, they were so strapped for cash, they had to pay poor Halley's salary with copies of their worst-selling book.  With no money to print Newton's Principia, the scientific revolution hung in the balance. - Neil deGrasse Tyson, Cosmos

Ok, in this case I shared the quote because I was lazy.  Errr... economical.  Why reinvent the wheel?

There we are...  Taleb, Tyson and I...  at the Royal Society.  The year is 1686 and of course Tyson is super tripping out.  Eventually he calms down and we all listen to the discussion regarding how the society should allocate its budget.  How many people control the society's budget?  Did they vote on the budget?  Maybe?

In the grand scheme of things... the Royal Society's poor decision might seem like... small fish.  But it's pretty wonderful to consider as far as our puzzle is concerned.  The society made the decision to spend their money printing so many copies of The History of Fish... but then the public made the decision to purchase barely any copies of the book.  Do you see how beautiful this puzzle is?

Maybe this will help...

Although employees are reliable by design, it remains that they cannot be trusted in making decisions, hard decisions, anything that entails serious tradeoffs. Nor can they face emergencies unless they are in the emergency business, say firefighters. As we [saw/will see] with the payoff function, the employee has a very simple objective function: fulfill the tasks that his or her supervisor deems necessary. - Nassim Taleb, How To Legally Own Another Person

The employees of the Royal Society didn't get to decide whether it was worth it for the society to publish the book... but the employees as consumers did get to decide whether it was worth it to purchase the book.

Of course I definitely do not suggest that the employees of the society should have been able to vote on the budget.  Again, fuck voting on anything that's even vaguely or remotely important.  But I'm pretty sure that a better decision would have been made if all the employees had been given the option/opportunity to use their cash to communicate their valuation of The History of Fish... before it was published.  We can imagine an outcome like so...

A. The History of Fish = $45
B. The History of Salamanders = $40
C. The History of Orchids = $400
D. None of the above = $2300

The employees would have asked themselves... "Is this a book that I, or anyone that I know, would truly want to buy?"  They would have answered the question with their own money.  They would have answered the question by their willingness to put their own skin in the game.

For me it seems logical that this system would have resulted in a better decision.  But why, exactly, would it have resulted in a better decision?  Compared to executive decision... or decision by committee.... the valuations of the employees would have more accurately reflected the valuations of the public.  Which of course leads us to this wonderful question... why would we want to limit the valuation process to the employees?  If the public is going to valuate the Royal Society's publishing decision after its made... then why not allow the public to valuate the possible options before the decision is made?  Who would benefit from the The Royal Society making a big mistake?  As the saying goes... a stitch in time saves nine.  An ounce of prevention is worth a pound of cure.

Let's say that the public did valuate the various publishing possibilities.  Would the Royal Society have been forced to publish the most valuable option?  Not necessarily.  But how could it possibly have hurt the society to know what the most valuable option actually was?  Wouldn't this information have allowed the society to make a far more informed decision?

Here we are 330 years later and Amazon is giving everybody the opportunity to "help choose the next Amazon Original Series with a quick survey".  Participation in the decision making process is extremely inclusive.  Everybody can participate.  However, it is a survey... so people are stating, rather than demonstrating, their preferences.  Again, fuck voting for anything even vaguely or remotely important.  Maybe Amazon needs to hire a few more economists?

You make a few phone calls and it turns out that it is easier to find an academic economist with common sense and ability to understand what’s going on than find another pilot, that is, an event of probability zero. - Nassim Taleb, How To Legally Own Another Person

Maybe the government needs to hire a few more economists?

Where to next?

Whatever the reason we first mustered the enormous resources required for the Apollo program, however mired it was in Cold War nationalism and the instruments of death, the inescapable recognition of the unity and fragility of the Earth is its clear and luminous dividend, the unexpected gift of Apollo.  A project conceived in deadly competition made us recognize our community. - Neil deGrasse Tyson, Cosmos

Tyson shared this quote...

I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the Earth. - John F. Kennedy, Special Message to the Congress on Urgent National Needs

It's worth expanding...

I believe we possess all the resources and talents necessary. But the facts of the matter are that we have never made the national decisions or marshaled the national resources required for such leadership. We have never specified long-range goals on an urgent time schedule, or managed our resources and our time so as to insure their fulfillment. ... First, I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth. ... Let it be clear-and this is a judgment which the Members of the Congress must finally make-let it be clear that I am asking the Congress and the country to accept a firm commitment to a new course of action, a course which will last for many years and carry very heavy costs: 531 million dollars in fiscal '62-an estimated seven to nine billion dollars additional over the next five years. ... I believe we should go to the moon. But I think every citizen of this country as well as the Members of the Congress should consider the matter carefully in making their judgment, to which we have given attention over many weeks and months, because it is a heavy burden, and there is no sense in agreeing or desiring that the United States take an affirmative position in outer space, unless we are prepared to do the work and bear the burdens to make it successful. If we are not, we should decide today and this year. ... This decision demands a major national commitment of scientific and technical manpower, materiel and facilities, and the possibility of their diversion from other important activities where they are already thinly spread. - John F. Kennedy, Special Message to the Congress on Urgent National Needs

The History of Fish... versus the Apollo program.  We can say that it was a mistake for the Royal Society to have allocated so much of its budget to The History of Fish.  Why can we say that it was a mistake?  Because relatively few people purchased the book.  Can we say that it was a mistake for the US government to have allocated so much of its budget to the Apollo program?  Well... it's not like people could have decided whether they purchased the program.  So we can't say that the Apollo program was a mistake like we can say that The History of Fish was a mistake.  Neither can we say that the Apollo program was a success like Newton's Principia was a success.  Admittedly I'm not sure how many copies of Principia were sold.

I have to note that it bugs me that the word "mistake" doesn't have a perfect opposite.  Same thing with the word "improve".  Talk about market failure.  

What's super wonderful about the example of The History of Fish is that we can see the opportunity cost... Principia.  We can see the alternative that was sacrificed.  Of course, thanks to Halley, it wasn't completely sacrificed otherwise we wouldn't be able to see it!  But we can imagine that it had been completely sacrificed.  We must imagine that it had been completely sacrificed.  Then we can appreciate the magnitude of the loss that humanity would have suffered.  Then we can appreciate the importance of public valuation.

So what about the Apollo program?  Did it have an opportunity cost?  Of course it did.  But can we see it?  Nope.

In his essay, "What We See and What We Don't See," Bastiat offered the following idea: we can see what governments do, and therefore sing their praises - but we do not see the alternative.  But there is an alternative;  it is less obvious and remains unseen.  - Nassim Taleb, The Black Swan

We can't see the opportunity cost of the Apollo program.  Can we imagine it?

X/Apollo = Principia/Fish

Can you solve for X?

Maybe this will help...

The dream of becoming a citizen of the cosmos was born here, more than two millennia ago, in the city of Alexandria, named after and conceived by its dead conqueror, Alexander the Great.  The Ptolemys, the Greek kings who inherited the Egyptian portion of Alexander's empire, built this library and its associated research institution.  Rarely, if ever, before or since, has there been a government that was willing to spend so much of its gross national product on the acquisition of knowledge.  And it paid off.  Big time. - Neil deGrasse Tyson, Cosmos

All the money that the US government spent on the Apollo program could have been spent on the acquisition of knowledge.  Would it have paid off?  Big time?

It's worth it to really hedge my bets on this topic...

Katrina, the devastating hurricane that hit New Orleans in 2005, got plenty of politicizing politicians on television.  These legislators, moved by the images of devastation and the pictures of angry victims made homeless, made promises of "rebuilding."  It was so noble on their part to do something humanitarian, to rise above our abject selfishness.
Did they promise to do so with their own money?  No.  It was with public money.  Consider that such funds will be taken away from somewhere else, as in the saying "You take from Peter to give to Paul."  That somewhere else will be less mediatized.  It may be privately funded cancer research, or the next efforts to curb diabetes.  Few seem to pay attention to the victims of cancer lying lonely in a state of untelevised depression.  Not only do these cancer patients not vote (they will be dead by the next ballot), but they do not manifest themselves to our emotional system.  More of them die every day than were killed by Hurricane Katrina; they are the ones who need us the most - not just our financial help, but our attention and kindness.  And they may be the ones from whom the money will be taken - indirectly, perhaps even directly.  Money (public or private) taken away from research might be responsible for killing them - in a crime that may remain silent. - Nassim Taleb, The Black Swan

I suppose that the puzzle is, in a nutshell..... who should do we trust?

According to Taleb, we don't... or shouldn't... trust the employees of the Royal Society... we should trust their leaders instead.  Yet, it sure seems like we trust the public to judge the decisions of the Royal Society's leaders.  And who's the public?  The public is anybody and everybody.

On the other hand, we have the government.  We trust the public, more or less, to vote for the best leaders.  Personally, as I hope I've made it abundantly clear, I don't trust people voting for anything even vaguely or remotely important.  I trust spenders infinitely more than I trust voters.  Therefore, we should replace voting with spending.  We should also allow taxpayers to choose where their taxes go.  I have no problem with NASA announcing a plan to put a man on Mars if, and only if, it's entirely up to taxpayers to decide for themselves whether the plan is worth the opportunity cost.  Then, and only then, will we avoid massively violating Quiggin's Implied Rule of Economics.

Here are a few more relevant passages on the topic of strong leaders...


As his administration encountered difficulty with Congress, Roosevelt relied more and more on executive commissions, and on action based on the theory that the executive was the ‘steward’ of the public interest. Feeling that he, rather than Congress, voiced more accurately the popular will, he advocated direct as opposed to representative government. Unable to adjust to a Congress which rejected his gospel of efficiency, Roosevelt took his case to the ‘people.’ ... Roosevelt drew closer to a conception of the political organization of society wherein representative government would be minimized, and a strong leader [would rule] through vigorous purpose, efficiency, and technology - Samuel Hays, Conservation and the Gospel of Efficiency

The connection? In Yarvin’s view the government is just a corporation with some added layers of democratic pomp and circumstance. An effective government, like an effective corporation, needs a great CEO; an enlightened monarch; someone with vision, strength, and, importantly, the ability to delegate. “I can tell you exactly how decisions get made at Apple,” wrote Yarvin in a 2009 post. “First, Apple finds a man. Hires him, in fact. And having hired this man, it tells him: sir, this decision is yours.” - Samuel Hammond, Peter Thiel’s plan to become CEO of America

So, what I would say is, if you favor small government, you should favor small effective government. And you are never going to get the small government — because we have a really big government — you are never going to get the small government unless you have an effective government where a leader can come in and say, ‘Okay. This is what we’re going to do.’ And it actually happens. - Terry Moe, What’s Wrong with the Constitution?

However well balanced the general pattern of a nation's life ought to be, there must at particular times be certain disturbances of the balance at the expense of other less vital tasks. If we do not succeed in bringing the German army as rapidly as possible to the rank of premier army in the world...then Germany will be lost! - Adolf Hitler

This decision demands a major national commitment of scientific and technical manpower, materiel and facilities, and the possibility of their diversion from other important activities where they are already thinly spread. - John F. Kennedy


Were there any valuation disparities?   If so, how big were they?  Wouldn't you like to know?

Maybe it's just me but it really seems like there's a recurring theme in Tyson's show...


Gilgamesh was searching for immortality.  He looked everywhere, gained complete wisdom, uncovered what was hidden. - Neil deGrasse Tyson

Only a century following Thales' death, another genius came along.  And he, more than any other, was the first to discover the existence of the hidden universes that surround us.  Democritus of Abdera was a true scientist, a man with a passionate desire to know the cosmos and to have fun.
This is the man who once said, "a life without parties would be like an endless road without an end." - Neil deGrasse Tyson

No, Isaac, don't put the magnifying glass down! Something even more amazing is hidden in the light...  a code, a key to the cosmos.  Isaac Newton didn't miss much, but that one was a beaut.  He just walked right past the door to a hidden universe; a door that would not swing open again for another 150 years.  It would fall on another scientist, working in the year 1800, to stumble on a piece of evidence for the unseen worlds that surround us. - Neil deGrasse Tyson

Herschel was the first to detect this unseen presence lurking just below the red end of the spectrum.
That's why it came to be called "infrared." "Infra" is Latin for the word "below." It's invisible.  Our eyes are not sensitive to this kind of light, but our skin is-- we feel it as heat.  Now, that's a really big discovery. - Neil deGrasse Tyson

Sound waves are so beautiful to hear.  Imagine how beautiful they'd be to see.  For instance, infrared light the kind that William Herschel discovered.  Or X-ray light.  Or radio light.  Or in gamma-ray light.  These are not just different ways of seeing the same thing.  These other kinds of light reveal different objects and phenomena in the cosmos.  In gamma-ray light, for example, we can see mysterious explosions in distant galaxies that we would otherwise miss.  And in microwave light, we can see all the way back to the birth of the universe. We have only just opened our eyes. - Neil deGrasse Tyson

Confining our perception of nature to visible light is like listening to music in only one octave.  There are so many more.  They differ only in wavelength, but over a huge range. - Neil deGrasse Tyson

A telescope collects light from any spot in its field of view across the entire lens or mirror, an opening much larger than the camera obscura hole.  This is one of the first telescopes the one that Galileo looked through in 1609.  With it, he pulled aside the heavy curtain of night and began to discover the cosmos.  The lens made it possible for a telescope to have a much larger light-collecting area than our eyes have.  Big buckets catch more rain than small ones.  Modern telescopes have larger collecting areas, highly sensitive detectors, and they track the same object for hours at a time to accumulate as much of its light as possible.  Space-based telescopes such as the Hubble, have captured light from the most distant and ancient galaxies, giving us vastly clearer pictures of the cosmos. - Neil deGrasse Tyson

The force of the magnet twisted the light so that it could pass through the crystal.  So, what's the big deal? Faraday had demonstrated the existence of the physical reality that surrounds us, but which no one had ever been able to detect.  It was as dramatic a breakthrough as seeing the cosmos for the very first time through a telescope.  By showing that an electromagnetic force could manipulate light, Faraday had discovered a deeper unity of nature.  He had opened a door for Einstein and all the physicists who came after him to glimpse the interplay of hidden, primal forces in the universe. - Neil deGrasse Tyson, Cosmos

This tweaking of the equation changed Faraday's static field into waves that spread outward at the speed of light.  It wasn't long before we found a way to turn those waves into couriers for our messages.  Can you see me? Can you hear me? This is how.  This technology has transformed human civilization from a patchwork of cities, towns and villages into an intercommunicating organism... linking us at light speed... to each other... and to the cosmos. - Neil deGrasse Tyson

Vera Rubin had verified the existence of a new, much larger cosmos.  And just like the one we thought we knew, it was filled with mystery.  Dark matter is completely unobservable, except for its gravitational effect, which makes visible stars and galaxies move faster.  Its nature is another deep mystery.  Rubin had provided the evidence for an invisible universe nearly ten times more massive than the one we thought we knew.  It was as if we had been standing on the seashore at night, mistakenly believing that the froth on the waves was all there was to the ocean.  Vera Rubin looked at the stars and realized they were merely the foam on the waves, and that the greatest part of the ocean remained unknown. - Neil deGrasse Tyson

Too bad CO2 is an invisible gas.  Maybe if we could see it (car engine starts)... if our eyes were sensitive to CO2....  and perhaps there are such beings in the cosmos... if we could see all that carbon dioxide, then we would overcome the denial and grasp the magnitude of our impact on the atmosphere. - Neil deGrasse Tyson


Do you see the common thread?  Is it a coincidence that Bastiat's essay was about the Seen vs the Unseen?  Is it a coincidence that the founding father of modern economics helped us to see the Invisible Hand?

It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. - Adam Smith, Wealth of Nations 

In 2008, Lester Brown wrote this article... The ‘invisible hand’ is blind to climate externalities and the value of natural resources.  It's actually a pretty decent article.  Unfortunately, Brown doesn't at all grasp the significance of the fact that the Invisible Hand is in the private sector while climate/conservation are primarily in the public sector.  The Invisible Hand is not in the public sector.  The Visible Hand is in the public sector.  We have a mixed economy which means that we have a market economy in the private sector and a command economy (socialism) in the public sector.   So if conservation is undersupplied/underproduced, which is certainly a very reasonable thing to argue, then the Visible Hand is largely responsible/culpable.  And it's not like countries that were entirely command economies... such as China and the Soviet Union... failed with private goods but succeeded with public goods.  No economist in their right mind will tell you that China under Mao had optimal levels of healthcare, education and defense.  Command economies fail with all goods.  This is why it's very reasonable to argue that the Visible Hand is failing with conservation.  If we created a market in the public sector by allowing people to choose where their taxes go... then, and only then, would the Invisible Hand be in the public sector.  Then, and only then, would Brown be able to clearly see whether or not the Invisible Hand has any major blind spots.

Let's take another look at this...

Too bad CO2 is an invisible gas.  Maybe if we could see it (car engine starts)... if our eyes were sensitive to CO2....  and perhaps there are such beings in the cosmos... if we could see all that carbon dioxide, then we would overcome the denial and grasp the magnitude of our impact on the atmosphere. - Neil deGrasse Tyson

I thought it was worth it to grab some screenshots.  CO2 from a car's tailpipe...

CO2 from a plane...

CO2 in the aggregate...

Here's the relevant clip.  It's such a really cool illustration of being able to clearly see the unseen.  Would it be beneficial to be able to clearly see CO2?  It seems like it's related to the problem with price tags being hidden.  Clearly seeing CO2 would help us more fully appreciate the true cost of fossil fuel.  Brown made a similar point in his article.

In my story... Taleb, Tyson and I would be able to clearly see everybody's valuations.  Our epic glasses would reveal the unseen.  People's valuations would become visible.  Their valuations wouldn't be purple haze.... they would be dollar amounts.  We would be able to clearly see what people truly value.

There are no scientific or technological obstacles to protecting our world and the precious life that it supports.  It all depends on what we truly value and if we can summon the will to act. - Neil deGrasse Tyson, Cosmos

What do we truly value?  Tyson would find out when he put on the epic glasses.

Here's what he said about economic systems...

But what about civilizations that self-destruct? Our economic systems were formed when the planet and its air, rivers, oceans, lands, all seemed infinite.  They evolved long before we first saw the Earth as the tiny organism that it actually is.  They're all alike in one respect they're profit-driven, and therefore, focused on short-term gain.  The prevailing economic systems, no matter what their ideologies, have no built-in mechanisms for protecting our descendants of even 100 years from now, let alone, 100,000.  In one respect, we're ahead of the people of Ancient Mesopotamia.  Unlike them, we understand what's happening to our world.  For example, we're pumping greenhouse gasses into our atmosphere at a rate not seen on Earth for a million years.  And the scientific consensus is that we're destabilizing our climate.  Yet our civilization seems to be in the grip of denial; a kind of paralysis.  There's a disconnect between what we know and what we do.  Being able to adapt our behavior to challenges is as good a definition of intelligence as any I know.  If our greater intelligence is the hallmark of our species, then we should use it, as all other beings use their distinctive advantages to help ensure that their offspring prosper, and their heredity is passed on, and that the fabric of nature that sustains us is protected.- Neil deGrasse Tyson

On Amazon Prime there's a show called Mr. Robot.  It's about a hacker guy who is battling the epitome of an evil corporation.  If the premise sounds vaguely interesting then you might want to skip the following because it does have a small spoiler.

The hacker guy and his friend Angela both had a parent killed by toxic waste produced and spilled by the evil corporation.  After no small effort, Angela successfully manages to persuade one of the executives responsible, a white guy named Terry, to confess and describe the meeting when the decision was made...


Angela: Earlier, I asked you a question. You never answered it.
Terry: If I'm agreeing to testify in your case, then, yes, you know, I attended several meetings.
Angela: Tell me about the one when they decided to ignore the leak.
Terry: I'm not sure what you're asking.
Angela: What was the meeting like when you decided this?
Terry: I get it. You want to know, like, what was it like? Like, um, did we all have cigars and laugh hysterically as we signed the evil documents? Is that what you pictured? Well, I'm sorry, hon. See, the world doesn't work like that.
Angela: Tell me. Tell me how it works.
Terry: Uh, Jesus, um... all right, all right. Let's see. January, '93. Well, my secretary then was Elaine. So Elaine brought us a platter of shrimp cocktail to tide us to dinner, which pissed us off because we just had a platter at the holiday party. Jim opened the bar. Now Jim was a real piece of work. I mean, half pansy, half mafia. First sign of a tight decision, he'd be chain smoking down a river of scotch. Uh... you know, it rained. It rained. I remember that, yeah.
Angela: So... you were drunk, eating shrimp cocktail, and it was raining when you decided my mother would die? That's why. So people like you won't keep sitting in rooms together. Did any of it ever give you or anyone pause when you made those decisions?
Terry: Yeah. Yeah, sure. But, um... then you go home, and, uh, and you have dinner, you know, and you wake up the next morning.


If, thanks to our epic passes... Taleb, Tyson and I had been there during this meeting... what would their valuations of the decision have been?  What would the employees' valuation of the decision have been?  What would the public's valuation of the decision have been?

Just like with The History of Fish... the pretty puzzle is... why not allow the public to valuate the potential courses of action before a decision is made?

Let's take another look at Uber.  Taleb and Tyson are entirely free to decide for themselves whether or not they want to spend their money on Uber's driverless cars.  So why shouldn't Taleb, Tyson and the rest of the public have been free to valuate Uber's potential courses of action before the decision was made to begin the transition to driverless cars?

According to this article... Uber's goal is to replace 1,000,000 human drivers with robots.  That's a lot of people!  They are all going to lose their jobs as a result of Uber's big decision.  They are all going to be significantly affected by Uber's decision.

Let's try and imagine what would have happened if the public had been allowed to valuate Uber's potential courses of action before the big decision was made.  We'll keep it simple and say that there were only two courses of action...

A. go driverless
B. no driverless

Which course of action would have received the most money?  Would it help to put a time frame on the course of action?  Let's say that the course of action would last for one year.  After that year, the course of action could be reevaluated.

On the one hand, the drivers really wouldn't want to lose their jobs... and we can imagine that lots of people would be sympathetic to their predicament.  But on the other hand... lots of consumers would be happy to pay less money for transportation.  Everybody wants the closest thing to a free-ride.  I'm inclined to guess that the driverless course of action would have received the most money.  However, I can't necessarily say that I'd be surprised if it turned out that there was overwhelming sympathy and support for the drivers.  People losing their jobs is a more powerful narrative than people saving a few bucks.  Also, how much money would consumers truly be willing to spend in order to save money?  Would a consumer be willing to spend $10 dollars in order to save $100 dollars?

Uber definitely would not have been legally required to choose the most valuable course of action (as determined by the public).  But at least Uber would have known the public's valuations of the two courses of action.  Uber would have kept the money spent on whichever course of action it chose... and returned all the money spent on the course of action that it didn't choose.

Let's say that the "go driverless" option had received the most money and Uber chose this course of action.  Uber would have been rewarded for making a decision that it would have made anyways.  But with this system... Uber wouldn't be the evil corporation responsible for hurting a million people.  Well... in any case... it wouldn't be solely responsible.  It would share this responsibility with all the people who clearly and obviously supported and preferred the option to go driverless.  With the current system... if Uber's driverless plan does turn out to be profitable... then it's going to be because of the spending decisions of millions and millions of consumers.  The general public would be ultimately responsible for firing a million people.  But the public would have been even more responsible... and visibly so...  if it had also spent more money on the "go driverless" course of action.

The painfully clear visibility of public responsibility/culpability would be fundamentally important.  All the people who would lose their jobs would then appreciate... or at least fully understand... that Uber didn't just make the decision for its own benefit... it made the decision for the public's benefit.  The clearer and stronger Uber's public mandate, the harder it would be to villainize Uber.  Of course it would be a different story if the "no driverless" option had received more money than the "go driverless" option but Uber had still chosen the "go driverless" option.  The greater the disparity in funding between the two options... the stronger the case that Uber was not making a decision for the public's benefit.

Right now, with the current system, Uber is super beating Lyft.  Personally, if I was the economic adviser for Lyft... then I'd definitely suggest that they open up all their major decisions to public valuation.  I'd say, "Put the epic glasses on!  See the unseen!  Make informed decisions!  Allow the Invisible Hand to guide you!"  And I'd be pretty darn confident that Lyft would very quickly beat Uber.  I'd stake my personal reputation on it!  Heh.  Which doesn't necessarily say much.  But would my confidence be misplaced?  Would the public let Lyft down?  Would the public be a broken compass?   Would the public misguide Lyft?  Of course the public would misguide Lyft.  The public isn't perfect.  The issue is the degree to which the public would misguide Lyft.  I'm pretty sure that the degree would be a lot smaller than the degree to which Uber would misguide itself.   Lyft would make a lot less mistakes than Uber would.  And Lyft's mistakes would be a lot smaller than Uber's mistakes.


On the other hand, it is also a maxim of experience that in the multitude of counsellors there is wisdom; and that a man seldom judges right, even in his own concerns, still less in those of the public, when he makes habitual use of no knowledge but his own, or that of some single adviser. - J.S. Mill

It must be remembered, besides, that even if a government were superior in intelligence and knowledge to any single individual in the nation, it must be inferior to all the individuals of the nation taken together. It can neither possess in itself, nor enlist in its service, more than a portion of the acquirements and capacities which the country contains, applicable to any given purpose. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy

For Hayek, a true forecast is done organically by a system, not by fiat.  One single institution, say, the central planner, cannot aggregate knowledge; many important pieces of information will be missing.  But society as a whole will be able to integrate into its functioning these multiple pieces of information.  Society as a whole thinks outside the box.  Hayek attacked socialism and managed economies as a product of what I have called nerd knowledge, or Platonicity - owing to the growth of scientific knowledge, we overestimate our ability to understand the subtle changes that constitute the world, and what weight needs to be imparted to each such change.  He aptly called this "scientism." - Nassim Taleb, The Black Swan    

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 Hayek, The Use Of Knowledge In Society

This tweaking of the equation changed Faraday's static field into waves that spread outward at the speed of light.  It wasn't long before we found a way to turn those waves into couriers for our messages.  Can you see me? Can you hear me? This is how.  This technology has transformed human civilization from a patchwork of cities, towns and villages into an intercommunicating organism... linking us at light speed... to each other... and to the cosmos. - Neil deGrasse Tyson

Yes, change is the basic law of nature. But the changes wrought by the passage of time affects individuals and institutions in different ways. According to Darwin’s Origin of Species, it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself. Applying this theoretical concept to us as individuals, we can state that the civilization that is able to survive is the one that is able to adapt to the changing physical, social, political, moral, and spiritual environment in which it finds itself.  - Leon C. Megginson


In a nutshell...

1. Lyft opens up all major decisions to public valuation
2. The public uses its cash to communicate changes to Lyft
3. Lyft quickly adapts and adjusts to the changing environment

As opposed to...

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

If Lyft opened up its major decisions to public valuation... then everybody would be given the opportunity to use their cash to tell Lyft, "Here's the new optimum!  Please adapt and adjust accordingly!"  The public would have the freedom to use its cash to show Lyft the new optimum.  Would only Lyft be able to see the new optimum?  Of course not.  The public itself would be able to see the new optimum.  Which means that the public would use its cash to show itself the new optimum.  Which sounds... a bit off.  The logic isn't off though... the semantics are.  Let me try and correct the semantics...

Individual members of the public would use their cash to communicate their valuation of changes to their conditions/circumstances.  The aggregate of their valuations would be the new optimum.  All the individual members of the public would be able to clearly see and respond to the new optimum... which would of course change the optimum.  I suppose the technical term for this is "feedback loop"...

The signs leverage what’s called a feedback loop, a profoundly effective tool for changing behavior. The basic premise is simple. Provide people with information about their actions in real time (or something close to it), then give them an opportunity to change those actions, pushing them toward better behaviors. Action, information, reaction. It’s the operating principle behind a home thermostat, which fires the furnace to maintain a specific temperature, or the consumption display in a Toyota Prius, which tends to turn drivers into so-called hypermilers trying to wring every last mile from the gas tank. But the simplicity of feedback loops is deceptive. They are in fact powerful tools that can help people change bad behavior patterns, even those that seem intractable. Just as important, they can be used to encourage good habits, turning progress itself into a reward. In other words, feedback loops change human behavior. And thanks to an explosion of new technology, the opportunity to put them into action in nearly every part of our lives is quickly becoming a reality. - Thomas Goetz, Harnessing the Power of Feedback Loops

... also...

So feedback loops work. Why? Why does putting our own data in front of us somehow compel us to act? In part, it’s that feedback taps into something core to the human experience, even to our biological origins. Like any organism, humans are self-regulating creatures, with a multitude of systems working to achieve homeostasis. Evolution itself, after all, is a feedback loop, albeit one so elongated as to be imperceptible by an individual. Feedback loops are how we learn, whether we call it trial and error or course correction. In so many areas of life, we succeed when we have some sense of where we stand and some evaluation of our progress. Indeed, we tend to crave this sort of information; it’s something we viscerally want to know, good or bad. As Stanford’s Bandura put it, “People are proactive, aspiring organisms.” Feedback taps into those aspirations. - Thomas Goetz, Harnessing the Power of Feedback Loops

Recently Russ Roberts had a long talk with Michael Munger about slavery.  Here's their discussion on Medium.   It's a pretty great discussion.  We should definitely build on it.

So there’s all sorts of remarkably irrational things that the South did because they had to accept the logic of ‘Slaves can’t take care of themselves; that’s why we have slaves.’ That had mostly happened by 1825, 1828. It was unanimous after 1835. And let me just say briefly: the end on this was the postcard incident, where the American Abolition Society, AAS [American Anti-Slavery Society — Econlib Ed.], sent tens of thousands of postcards to the South advocating abolition. And before, in 1831, the Virginia legislature had held famous debates about whether slavery was okay: it was an open question; it was okay to talk about it. - Michael Munger

The North sent a bunch of postcards to the South that said, "Here's the new optimum!  Please adapt and adjust accordingly!"  The South got the message loud and clear... they adapted and adjusted accordingly... and there was no Civil War.  Right?  Nope.  Nope.  Nope.

It stands to reason that all the slave owners in the South didn't value slavery equally.  Let's say that Frank is a slave owner who is on the fence about the value of slavery.  So he has a big decision to make...

A. yes slavery
B. no slavery

Frank likes the part in the Bible about there being safety in the multitude of counselors... and he completely understands that a bet is a tax on bullshit...

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

.... so he decides to open up his big decision to public valuation.  Maybe he buys some ad space in some national papers?  Lots of people see his ad and many of them jump at the opportunity to use their cash to communicate their valuation of the changes to their circumstances and conditions.  Frank compares the totals... makes his decision... and returns the money to the people who preferred the course of action that he didn't take.  Lots of journalists cover the very novel event and everybody would be able to clearly see the new optimum.  Other slave owners who are also on the fence follow in Frank's footsteps.  Newspapers show how the optimum changes over time... people respond accordingly... and there is no Civil War.  Right?  Yup. Yup. Yup.

The true power of feedback loops is not to control people but to give them control. It’s like the difference between a speed trap and a speed feedback sign—one is a game of gotcha, the other is a gentle reminder of the rules of the road. The ideal feedback loop gives us an emotional connection to a rational goal. - Thomas Goetz, Harnessing the Power of Feedback Loops

When our country was founded... if everybody had been free to use their cash to help create the real rule regarding slavery... then everybody would have been able to clearly see the real rule and watch it change over time.  As a result of this accurate feedback loop, people would have quickly adjusted and adapted accordingly.  

Munger actually mentioned the possibility of paying slave owners to free their slaves...

So, the wolf by the ear had two parts. One is, economically, they didn’t think that their economic system could survive without big gangs of labor: first, tobacco and then cotton. The way that these things were farmed required big gangs of cheap labor. But, if they had said, ‘Okay, let’s suck it up; let’s have reparations’ — and all the original reparations proposals were not money for slaves, but money for slave owners. It was as if it was a Fifth Amendment taking. So, ‘Yes, we’ll give up our slaves, but you’ve got to pay us for them or otherwise it will bankrupt our whole society.’  - Michael Munger

It might sound iffy to pay slave owners to free their slaves... but we generally pay people to do the things that we want them to do.  Incentives matter.  However, the method that Munger mentioned sure sounds like a very blunt instrument.... monolithic rather than modular.  Also, he doesn't really perceive, or at least he doesn't mention, the incredibly immense value and importance of the informative/feedback aspect of the potential payment.

The act of paying for something isn't simply or solely about obtaining or acquiring the thing that you want... it's also significantly and substantially about revealing and communicating your valuation of the thing that you want.  Your valuation of the thing you want depends on how relatively scarce you perceive it to be.  The more relatively scarce you perceive the thing to be, the more money that you'll be willing to spend.  So when you spend your money, you reveal/transmit/broadcast the information regarding your perception of the thing's relative scarcity.  All trade is communication but not all communication is trade.

The Civil War was the unfortunate consequence of a national failure to communicate.  First each side tried communicating with their words.  When that failed... they resorted to communicating with their weapons.  The war only occurred because neither side tried communicating with their wallets.  

This tweaking of the equation changed Faraday's static field into waves that spread outward at the speed of light.  It wasn't long before we found a way to turn those waves into couriers for our messages.  Can you see me? Can you hear me? This is how.  This technology has transformed human civilization from a patchwork of cities, towns and villages into an intercommunicating organism... linking us at light speed... to each other... and to the cosmos. - Neil deGrasse Tyson

The Civil War was the organism intercommunicating.  But the type of intercommunication was all wrong.  The intercommunication should have been with cash rather than with cannons.

The idea of community being a single organism isn't a new one...

The principle that the multitude ought to be supreme rather than the few best is capable of a satisfactory explanation, and, though not free from difficulty, yet seems to contain an element of truth. For the many, of whom each individual is but an ordinary person, when they meet together may very likely be better than the few good, if regarded not individually but collectively, just as a feast to which many contribute is better than a dinner provided out of a single purse. For each individual among the many has a share of virtue and prudence, and when they meet together they become in a manner one man, who has many feet, and hands, and senses; that is a figure of their mind and disposition. Hence the many are better judges than a single man of music and poetry; for some understand one part, and some another, and among them, they understand the whole. There is a similar combination of qualities in good men, who differ from any individual of the many, as the beautiful are said to differ from those who are not beautiful, and works of art from realities, because in them the scattered elements are combined, although, if taken separately, the eye of one person or some other feature in another person would be fairer than in the picture. - Aristotle


For that which can foresee by the exercise of mind is by nature intended to be lord and master, and that which can with its body give effect to such foresight is a subject, and by nature a slave; hence master and slave have the same interest. Now nature has distinguished between the female and the slave. For she is not niggardly, like the smith who fashions the Delphian knife for many uses; she makes each thing for a single use, and every instrument is best made when intended for one and not for many uses. But among barbarians no distinction is made between women and slaves, because there is no natural ruler among them: they are a community of slaves, male and female. - Aristotle

... and...

…And it is clear that the rule of the soul over the body, and of the mind and the rational element over the passionate, is natural and expedient; whereas the equality of the two or the rule of the inferior is always hurtful. The same holds good of animals in relation to men; for tame animals have a better nature than wild, and all tame animals are better off when they are ruled by man; for then they are preserved. Again, the male is by nature superior, and the female inferior; and the one rules, and the other is ruled; this principle, of necessity, extends to all mankind. - Aristotle

.... and...

So, the Southerners needed a different way, so they were looking for the Aristotelian notion of slavery, which is that slaves are people who are either morally inferior or lack the judgment to make independent choices. They are like children or like horses. That means that you actually have a positive-good justification for enslaving them: if I have a thoroughbred horse or a fancy dog, it would be cruel of me to set it loose to let it run around, because it’s not capable of taking care of itself. I have obligations to take care of it. My ownership actually gives me obligations. - Michael Munger
... or ...

Funny thing about the Romans.  Even though they knew that contact with lead inevitably poisoned people, rendered them sterile and drove them mad, what metal did they use to make the pipes that carried the water through their legendary aqueducts? I'll give you a hint.  The word "plumbing" comes from the Latin word for lead, "plumbum." What metal did they use to line their famous baths? And how did they sweeten their wines when they were too sour? What did they use to line their vats and cooking pots? There are some historians who believe that the widespread use of lead was a major cause in the decline and fall of the Roman Empire.  Why did they continue to use lead long after they knew it was toxic? It was cheap, very malleable, easy to work with, and the ones who were exposed to it at its most lethal levels... the miners and workers who processed the lead... were considered expendable.  Their lives didn't matter.  They were slaves. - Neil deGrasse Tyson, Cosmos

Imagine a guy cutting off his hands, feet and tongue...  poking his eyes out... stabbing his ear drums... and bashing his skull with a rock until he was severely brain damaged.  Nevermind the logistics... it should be abundantly clear that this guy's actions would severely diminish his effectiveness as an organism.  Slavery, in much the same way, severely diminishes a civilization's effectiveness as an organism.  Slavery diminishes the organism's ability to see, hear, identify, understand and correctly valuate the various, numerous and highly dispersed changes to countless conditions and circumstances.  Doing so diminishes the quantity and quality of intercommunication... which diminishes the organism's ability to quickly evolve (adapt and adjust).  Slavery diminishes the organism's fitness by diminishing the organism's physical and mental capacity.  Slavery diminishes the organism.  Slavery diminishes us.

Slavery has been abolished though.... right?  But what is slavery?  Is it ownership of another person?  Or is it control of another person?  We can avoid political correctness and say that a husband owns his wife.  But if he doesn't restrict her freedom... does it matter whether or not she's owned?  Conversely we can say that a government doesn't own its citizens.  But if the government severely restricts the freedom of its citizens... does it matter whether or not the citizens are not owned?

Let's think of it as test question...

1. Which of the following diminishes our effectiveness?

A. war
B. genocide
C. socialism (command economies)
D. slavery
E. democracy
F. all of the above

The correct answer is F.  They all diminish input... except for democracy.  The problem with democracy is that the input is inaccurate.  The input is inaccurate because there's no skin in the game.  There's no personal sacrifice.  There's no tax on bullshit.  Inaccurate input prevents the organism from correctly adapting and adjusting to change.  Democracy essentially creates a faulty feedback loop.  Garbage in, garbage out.

Preventing people from directly allocating their taxes isn't slavery.... but just like slavery it does diminish the organism's effectiveness by drastically diminishing input.  When Uber makes big decisions without public valuation... it isn't slavery... but just like slavery it does diminish the organism's effectiveness by diminishing input.  And perhaps it's more technically correct to replace "diminishing input" with "failing to facilitate input".  The multitudes only provide safety when their counsel is solicited... and substantiated by sacrifice.  

Most people appreciate that slavery is morally wrong but they certainly don't understand why slavery is economically wrong.  If they did... then they'd clearly see the benefit of...

1. replacing voting with spending
2. opening up big corporate decisions to public valuation
3. allowing people to allocate their subscription fees (ie taxes)

What's the common element?  Dialoguing with dollars.  Communicating with cash.  Facilitating spending.  Skin in the game.  So I think that Taleb should strongly support and promote all three things.  These three things, and many other similar things based on the same premise, would greatly improve the effectiveness of the organism that we are all a part of.

Ok, so... what primarily inspired this intellectual love letter to Taleb is the fact that firms are command economies.  As Taleb wrote in his story, Ronald Coase provided the main justification for this fact in his paper... "The Nature of the Firm".  Coase basically argued that firms exist because they eliminate the high transactions costs of contracts.  Taleb nicely illustrated the concept of high transaction costs with a story about an owner of an airline being unable to rely on a contracted pilot.

For the most part, the fact that firms are command economies never seriously bugged me.  In a few blog entries I've written a few paragraphs about how it would be beneficial if firms were market economies.  But I've always felt that the government was a much bigger fish to fry.  Government organizations are not subject to consumer choice.  Firms are.  It's entirely up to each and every consumer to decide for themselves... with their own money... whether Uber's decision to go driverless was good or bad.  In the multitude of consumers there is safety.  We really don't have this same safety in the public sector.  We should... but we don't.

However, as my favorite living economist knows, I really crave coherence.  So even though I wasn't seriously bugged about firms being command economies... I was somewhat bugged.  Then I read Taleb's story and it did a really wonderful job of seriously bugging me about the nature of firms!  The prettiness of the puzzle was so pronounced!

So there you go... a bit of backstory.

Coase is all sorts of wonderful.  Well... he's not as wonderful as James Buchanan.... but Coase is pretty darn wonderful.  What makes Coase so wonderful is that he's our villain and our hero.  How cool is that?

Here's Coase being our villain...


Russ Roberts: Let's talk about your 1937 paper, "The Nature of the Firm." You were trying to answer a question--an interesting question, remains a good question; it was a good question in 1937, it's still a good question, which is: If capitalism and markets and prices, the Hayekian system of communicating information via price signals, if it works so well, why do firms exist? Because firms are almost by definition top down rather than bottom up. They use command and control rather than purchases within the firm, although there are exceptions to that. Some firms do use price signals for their decision-making inside the firm. But many firms do not. Their decisions are made not by prices but by fiat, by decisions on the top. Now, you wrote that paper when you were very, very young, the first part of it, correct?
Ronald Coase: That's right. I wrote it while I was an undergraduate. It seems obvious to me. If you go into a firm and you say to someone: Why did you do this? He'd say: Because I was told to do it. He doesn't talk about pricing at all. Almost of all the things you do within a firm are not controlled directly by prices at all. Your boss tells you what to do and you do it.
Russ Roberts: How did you come to write that paper as an undergraduate.
Ronald Coase: Oh, I was interested in how firms actually operate, and if you start studying how firms actually operate you find that they are not concerned with prices directly at all. A person who is working in a firm does what he's told. That's the way it operates.
Russ Roberts: So, a firm is an island of socialism in a capitalist world.


And here's Coase being our hero


If we are to discuss the problem in terms of causation, both parties cause the damage. If we are to attain on optimum allocation of resources, it is therefore desirable that both parties should take the harmful effect (the nuisance) into account in deciding on their course of action. It is one of the beauties of a smoothly operating pricing system that, as has already been explained, the fall in the value of production due to the harmful effect would be a cost for both parties. - Ronald Coase

It is all a question of weighing up the gains that would accrue from eliminating these harmful effects against the gains that accrue from allowing them to continue. - Ronald Coase

The problem which we face in dealing with actions which have harmful effects is not simply one of restraining those responsible for them. What has to be decided is whether the gain from preventing the harm is greater than the loss which would be suffered elsewhere as a result of stopping the action which produces the harm. - Ronald Coase

Economists who study problems of the firm habitually use an opportunity cost approach and compare the receipts obtained from a given combination of factors with alternative business arrangements. It would seem desirable to use a similar approach when dealing with questions of economic policy and to compare the total product yielded by alternative social arrangements. In this article, the analysis has been confined, as is usual in this part of economics, to comparisons of the value of production, as measured by the market. But it is, of course, desirable that the choice between different social arrangements for the solution of economic problems should be carried out in broader terms than this and that the total effect of these arrangements in all spheres of life should be taken into account. - Ronald Coase


How loosely am I using the terms "villain" and "hero" to describe Coase?  Hmm... I'll let you be the judge of that.

What's so villainous about Coase's paper "The Nature of the Firm"?  It feels like it does a really good job of condoning command economies in general.  Right?  Like, if he hadn't provided such a reasonable and logical justification for command economies... then the case for command economies would have been flimsier.  Perhaps firms, and governments, would have been a lot more open to considering and experimenting with more market based solutions.  It's a gut feeling but, then again, Coase's paper sure is popular.  It's been cited more than 30,000 times!  By comparison, the most valuable paper, Buchanan's "The Economics of Earmarked Taxes", has been cited less than 300 times.

If I was far more eloquent then here's how I'd put it....

During the twentieth century, when freedom's philosopher Friedrich Hayek was promoting the understanding of individual liberty and economic freedom, his position was being inadvertently undermined by a description of the operation of capitalism offered by an otherwise fellow traveller, the Nobel prize winning economist Ronald Coase. - Ken Phillips, Beyond Master and Servant

What's so heroic about Coase's paper "The Problem of Social Cost"?  It contains the antidote!  And I suppose we wouldn't be too happy with a corporation that infected everybody with a disease and then sold us the antidote.  Unless... unless the corporation wasn't solely responsible for the disease and their antidote cured more than just the disease.  

Throughout this intellectual love letter I've argued that we should replace voting with spending.  What is it called when we replace voting with spending?  I really don't think it has a name!  So I took the liberty of calling it "coasianism".

Let's take another look at Socrates' trial.  Rather than the jurors voting for their preferred option... with coasianism they would have spent their own money on their preferred option.  Whichever option had received the most money would have been selected.  Not only would the losers have gotten their money back.... but they would have received all the money spent by the winners.  The money would have been proportionally distributed among the losers.  So the more money a loser spent, the more money he'd receive.

Maybe some arbitrary numbers would help.  Frank spent $700 dollars to save Socrates and his side spent a total of $20,000 dollars.  Unfortunately, the total spent to kill Socrates was $30,000 dollars.  Frank's side would lose.  So he'd get his money back and he'd also receive his proportion of the consolation money...

700/20,000 = x/30,000

x = 1050

Frank's valuation of Socrates was $700 dollars.  His side lost so he'd get his $700 dollars back and he'd also receive $1,050 dollars.  The amount he received was greater than his valuation of Socrates.

We already know that with voting... Socrates was killed.  The worst case scenario with coasianism is that Socrates would still have been killed... but his haters would have had to fairly compensate his lovers.

With voting the outcome is never mutually beneficial.  One side loses and one side wins.  Because we don't know either side's valuation... it's entirely possible that the outcome was a net loss (cost > benefit).   With coasianism, because the options are mutually exclusive, there's still a winning side and a losing side... but the outcome is mutually beneficial because it's entirely determined by each side's valuation of their preferred outcome.  The side with the highest valuation will win... which means that the outcome will always be a net gain (cost < benefit).

Perhaps the most important aspect though is the accuracy of the feedback loop.  Coasianism would have provided each individual with the opportunity to 1. communicate their love/hate for Socrates, 2. see the totals (the optimum) and 3. adjust their behavior accordingly.  With the method that was actually used... voting... each participant's vote helped to create a mirror that allowed the community to see itself.  But, because there wasn't any skin the game, the image that the community saw when it looked into the mirror really did not accurately reflect the true nature of the community.  The reflection was bullshit.  The faulty feedback resulted in faulty behavior.  But if voting had been replaced with spending... then the image that the community saw when it looked into the mirror would have been accurate.  The accurate feedback would have resulted in beneficial behavior.  If your hair needs to be combed... or doesn't need to be combed... then you want the mirror to provide this feedback.   You definitely don't want to waste your time combing your hair when it doesn't need to be combed... and you definitely don't want to not comb your hair when it does need to be combed.

My artistic style seems to be heavily influenced by... homestarrunner.  It's not my fault.  My favorite liberal, John Holbo, never returns my e-mails.

With the Uber example of people spending their money on their preferred course of action... the accurate feedback loop was there... but the trade between winners and losers was not there.  The losers got their money back but Uber kept the money that the winners spent.  I'd hardly object though if the money spent by the winners was given to the losers.

I should note that I'm not really happy using the terms "winners" and "losers" with regards to coasianism.  If you don't get your preferred option... and instead get something that you value even more... it's not really accurate to say that you lost.  Well... you did lose your preferred option but you gained something even more valuable.  Overall you came out ahead.  Which is the definition of a good trade.  Are there more accurate terms?  If not, it would be great if somebody could invent some.

Personally, I don't necessarily perceive coasianism as an auction with a bidding war.  I don't see it as a negotiation.  Instead, I see it as a blind, one shot deal.  The totals are tallied only after all the participants have spent their money.  I get the feeling that this would provide a more accurate feedback loop.  If people could see the running totals then their participation might be wrongly encouraged or discouraged.  If people can't see the running totals.... then some people still might try to game the system... but they would quickly learn that honesty was the most profitable strategy...

It is impossible for anyone, even if he be a statesman of genius, to weigh the whole community's utility and sacrifice against each other. - Knut Wicksell, A New Principle of Just Taxation

With coasianism... would we still have had prohibition?  If so, then the drinkers would have been more than fairly compensated.  If not, then the teetotalers would have been more than fairly compensated.  Again though, it's necessary to really appreciate the importance of the accurate feedback loop.  Each participant would have helped to create a mirror that would have allowed the entire world to clearly and accurately see exactly how much the US valued 1. drinking and 2. not drinking.  Everybody would have been able to use this accurate reflection to correctly adjust and adapt their behavior.  Each year that coasianism was used to valuate the issue, people would have been able to see the new optimum and identify whether or not there was a clear trend.

Yup, so that's coasianism.  And it seems pretty obvious that people who've read "The Problem of Social Cost" don't jump to the conclusion that we should replace voting with spending.  So Coase didn't explicitly argue for coasianism.  Would he have endorsed it though?  Of course we'll never know but his paper strongly suggests that he would have.  The problem with social cost is that we can't see it!   It's hidden!  We don't have epic glasses!  Coasianism would solve this problem by clearly revealing both the social cost and the social benefit.  With Uber we'd clearly see the social cost and benefit of driverless cars.

The economist Tyler Cowen recently wrote a relevant article... Computing the Social Value of Uber. (It's High.).  How was the social value of Uber computed?  I can tell you exactly how it was not computed.  It was not computed with coasianism.  A while back I asked Cowen whether his valuations matter.   He never answered the question.  Why didn't he?  He thought it was a stupid question?  He thought it was a smart question but he didn't have a smart answer?

Cowen concluded his article with this eloquent summary...

The real lesson here is an old one, namely that the fight between progress and protection never goes away. Progress is painful to some precisely because it is a big step forward for all the others.

That's a really terrible lesson.  An infinitely better lesson is that progress really doesn't have to be so painful.  Coasianism would give the "winners" the wonderful opportunity to fairly compensate the "losers".  In theory, Cowen should help teach everybody this infinitely better lesson.  Will he do so?  I really wouldn't bet on it.

Let's switch gears.  So... the concept of an accurate feedback loop has a bit of ... tension... that's worth addressing.  I've argued that accurate feedback loops would help people to beneficially adapt/adjust/alter their behavior.  It sure sounds a lot like peer pressure!  In some ways conforming is good... in other ways it's not so good.

With prohibition and voting the feedback loop informed people... but it also controlled people.  My issue with voting is that the information was wrong because it didn't accurately reflect the social cost and benefit.  And because the information was wrong... the control was wrong as well.

With prohibition and spending... the feedback loop still would have informed people... and it still would have controlled them.  But the information would be right because it would accurately reflect the social cost and benefit.  And because the information would be right... the control would be right as well.

With Socrates' trial and spending... the feedback loop would have accurately informed people of the true social cost and benefit.... but would it also have controlled them?  For sure we could say that Socrates would have been controlled if his haters had won.  Could we also reasonably say that the feedback loop would have controlled everybody else?  Well... the feedback loop would be pointless if we didn't expect that people would use the information to modify their behavior accordingly.

Prices facilitate a feedback loop...


The price system in a market economy guides economic activity so flawlessly that most people don’t appreciate its importance. Market prices transmit information about relative scarcity and then efficiently coordinate economic activity. The economic content of prices provides incentives that promote economic efficiency.

For example, when the OPEC cartel restricted the supply of oil in the 1970s, oil prices rose dramatically. The higher prices for oil and gasoline transmitted valuable information to both buyers and sellers. Consumers received a strong, clear message about the scarcity of oil by the higher prices at the pump and were forced to change their behavior dramatically. People reacted to the scarcity by driving less, carpooling more, taking public transportation, and buying smaller cars. Producers reacted to the higher price by increasing their efforts at exploration for more oil. In addition, higher oil prices gave producers an incentive to explore and develop alternative fuel and energy sources.

The information transmitted by higher oil prices provided the appropriate incentive structure to both buyers and sellers. Buyers increased their effort to conserve a now more precious resource and sellers increased their effort to find more of this now scarcer resource. - Mark Perry, Why Socialism Failed


Perry recently shared Thomas Sowell's description of how prices modify behavior... 'Price gouging' in Florida


In the wake of the hurricanes in Florida, the state’s attorney general has received thousands of complaints of “price gouging” by stores, hotels, and others charging far higher prices than usual during this emergency. Among the complaints in Florida is that hotels have raised their prices. One hotel whose rooms normally cost $40 a night now charged $109 a night and another hotel whose rooms likewise normally cost $40 a night now charged $160 a night.

Those who are long on indignation and short on economics may say that these hotels were now “charging all that the traffic will bear.” But they were probably charging all that the traffic would bear when such hotels were charging $40 a night.  The real question is: Why will the traffic bear more now? Obviously because supply and demand have both changed. Since both homes and hotels have been damaged or destroyed by the hurricanes, there are now more people seeking more rooms from fewer hotels.

What if prices were frozen where they were before all this happened?

Those who got to the hotel first would fill up the rooms and those who got there later would be out of luck. At higher prices, a family that might have rented one room for the parents and another for the children will now double up in just one room because of the “exorbitant” prices. That leaves another room for someone else.

Someone whose home was damaged, but not destroyed, may decide to stay home and make do in less than ideal conditions, rather than pay the higher prices at the local hotel. That too will leave another room for someone whose home was damaged worse or destroyed. In short, the new prices make as much economic sense under the new conditions as the old prices made under the old conditions.

It is essentially the same story when stores are selling ice, plywood, gasoline, or other things for prices that reflect today’s supply and demand, rather than yesterday’s supply and demand. Price controls will not cause new supplies to be rushed in nearly as fast as higher prices will. None of this is rocket science. But Justice Oliver Wendell Holmes said, “we need education in the obvious more than investigation of the obscure.”


Prices modifying behavior really isn't a new concept...

Suppose that in ordinary circumstances the trade in food were perfectly free, so that the price in one country could not habitually exceed that in any other by more than the cost of carriage, together with a moderate profit to the importer. A general scarcity ensues, affecting all countries, but in unequal degrees. If the price rose in one country more than in others, it would be a proof that in that country the scarcity was severest, and that by permitting food to go freely thither from any other country, it would be spared from a less urgent necessity to relieve a greater. When the interests, therefore, of all countries are considered, free exportation is desirable. To the exporting country considered separately, it may, at least on the particular occasion, be an inconvenience: but taking into account that the country which is now the giver will in some future season be the receiver, and the one that is benefited by the freedom, I cannot but think that even to the apprehension of food rioters it might be made apparent, that in such cases they should do to others what they would wish done to themselves. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy

Prices modify behavior... but prices reflect people's perception of relative scarcity.  So it's actually our perceptions of relative scarcity that modifies everyone's behavior.  If enough people perceive that food is relatively scarce, then it certainly makes sense for everybody to get the message and modify their behavior accordingly (conserve the available food and find/produce more food).  Prices, when they accurately reflect and communicate people's perceptions of relative scarcity, help to encourage the most beneficial behavior.

One of my biggest rules is that progress depends on difference.  All progress depends on people doing different things with society's limited resources.  But it's definitely not the case that each and every different use of society's limited resources will facilitate progress.  Spending allows us to communicate whether any given "difference" counts as progress.  Driverless cars sure are different!  But does this difference count as progress?  It's entirely up to each and every consumer to decide for themselves.  If we accept this basic rule that we should trust the value judgements of consumers... then the goal should be to ensure that their payments (allocations) accurately reflect/communicate their judgments (valuations).  Pragmatarianism and coasianism would help accomplish this.  Which means that the spending decisions of consumers would do a much better job of influencing the decisions of producers and other consumers.  Which is good... to a point?  It's good right up to the point that it reduces the difference that progress depends on.  How likely is it that we'd ever reach this point?

My Chinese friend is visiting from Washington.  The other day he picked me up in his fancy new ride and we went to have some dim sum.  I like some dim sum... but I definitely don't like all dim sum.  Chicken feet?  Seriously?  Talk about hard-times food.  After we finished eating he wanted to visit the "Out of the Closest" thrift shop that is a few blocks from my house.  I've lived in the area for nearly a decade and it was the first time that I had ever stepped foot inside that shop.  I'm really not interested in shopping for clothes.  When I went inside, I looked around and was happy to spot a few bookcases.  So while my friend made a beeline for the clothes... I made a beeline for the books.

The selection obviously wasn't that great.  I spent a few minutes judging the books by their covers... well... titles... and then went back to the section that was closest to my preferences.  The first book I took a look at was The End of the Free Market by Ian Bremmer.  In order to decide whether it might be worth it to purchase... I quickly flipped through the pages to look for and read.... the quotes!  Don't judge a book by its quotes?  Can you judge this story by its quotes?  It can't be the worst heuristic.  The quotes in Bremmer's book weren't bad... but I got the feeling that I wouldn't have gotten the bang for my buck.  In other words, I suspected that I'd be paying for things that I already know and understand.

The next book that I took a closer look at was The Social Contract by Robert Ardrey.  It had more quotes than Bremmer's book but only three of them were worth taking a photo of with my phone.  Here's one of them...

In the case of a social group-character, what is passed from parents to offspring is the mechanism, in each individual, to respond correctly in the interests of the community - not in their own individual interests - in every one of a wide range of social situations. 

Who's the author?  At first I thought it was V. C. Wynne-Edwards... but now I'm guessing that it's actually Ardrey's summary of Wynne-Edwards.  Here's another one...

In human society, "primitive" as well as "civilized," a similar instinctive reaction is very strongly developed. It is perhaps possible to distinguish three steps or gradations of rising intensity in the social-defense attitude of the crowd. The first is laughing at an individual who behaves in an abnormal way. This serves the function of forcing the individual back into normal, that is to say conventional behavior. The next and higher intensity reaction is withdrawal; the individual has made himself "impossible" and his companions ignore him. This, viewed from the aspect of biological significance, is a still stronger stimulus to the abnormal person to behave normally.  The highest intensity reaction is one of definite hostility, resulting in making the individual an outcast, and, in primitive societies, even of killing him. In my opinion it is of great importance for human sociology to recognize the instinctive basis of such reactions, and to study them comparatively in other social species. - Nikolaas Tinbergen

I'm guessing that's the right author.  Here's the third quote...

Those groups practicing the most advantageous customs will have an advantage in the constant struggle between adjacent groups over those that practice less advantageous customs. - Alexander Carr-Saunders

Coincidentally... From the comments, Joseph Henrich on group selection.  Ok, this exchange from the original post was too funny not to share...

Baphomet: It is perfectly possible to have group selection effects, i.e., selection in favor of traits that harm the individual but benefit the group, without the group being the unit of selection. Indeed, in all convincing group selection explanations the gene (or custom, or meme) is the unit of selection. I would give an example, but unfortunately this box is too small.
Scott Mauldin: You can click and drag the corner of the box to expand it. Also you can keep typing even if you get to the bottom of the box and it will make a scrollbar.
Too Late: "I would give an example, but unfortunately this box is too small." Yeah, right. “I have discovered a truly marvelous proof of this, which this margin is too narrow to contain.”
Fermat: Exactly. At least scribble something in the margin.
Anon: “margin”al revolution

Hehe.  Not only is it funny but it's relevant...

In some such insidious form there is at present a strong tendency to this narrow theory of life, and to the pinched and hidebound type of human character which it patronizes. Many persons, no doubt, sincerely think that human beings thus cramped and dwarfed, are as their Maker designed them to be; just as many have thought that trees are a much finer thing when clipped into pollards, or cut out into figures of animals, than as nature made them. But if it be any part of religion to believe that man was made by a good Being, it is more consistent with that faith to believe, that this Being gave all human faculties that they might be cultivated and unfolded, not rooted out and consumed, and that he takes delight in every nearer approach made by his creatures to the ideal conception embodied in them, every increase in any of their capabilities of comprehension, of action, or of enjoyment. - J.S. Mill

Persons of genius, it is true, are, and are always likely to be, a small minority; but in order to have them, it is necessary to preserve the soil in which they grow. Genius can only breathe freely in an atmosphere of freedom.  Persons of genius are, ex vi termini, more individual than any other people—less capable, consequently, of fitting themselves, without hurtful compression, into any of the small number of moulds which society provides in order to save its members the trouble of forming their own character. If from timidity they consent to be forced into one of these moulds, and to let all that part of themselves which cannot expand under the pressure remain unexpanded, society will be little the better for their genius. If they are of a strong character, and break their fetters, they become a mark for the society which has not succeeded in reducing them to commonplace, to point at with solemn warning as "wild," "erratic," and the like; much as if one should complain of the Niagara river for not flowing smoothly between its banks like a Dutch canal. - J.S. Mill

Speaking of comments and space constraints, or the lack thereof, this intellectual love letter is a comment on Taleb's story on Medium... How To Legally Own Another Person.  But it's not literally going to be a comment on his story because if you look under Taleb's story it says... "The author has chosen not to show responses on this story. You can still respond by clicking the response bubble."  Personally, I'd sure like to be able to easily find and read the responses to his story.  And of course I'd sure like it if other people could easily find and read my response to his story.  I get the feeling that Taleb is throwing me out with the bath water!  If he did choose to show responses to his story, then he could easily determine which responses to his story were visible simply by recommending them.  If he didn't recommend my response, then it would be hidden.  But anybody who wanted to read the hidden responses could easily do so by clicking on the link that says "Show all related stories".  In other words, Medium gives Taleb a really easy tool to curate comments.  Of course it's obviously not the best tool!!!  What would the best tool be?  Skin in the game.

Each month we'd have to pay $1 dollar.... but we could choose which stories we allocate our pennies to.  If Taleb valued my response/story at 3 cents, then he could click the coin buttons and 3 pennies would be automatically withdrawn from his digital wallet and deposited into my own.  The value of my response would automatically increase by 3 cents.  The responses to his story would be sorted by their value.  So the very first response would be the most valuable response.  If I ended up with lots of pennies in my wallet then I could transfer any amount to my paypal account and Medium would take a very reasonable cut.  Of course I would also be able to valuate my own story.  If I allocated 25 cents to my own story then a quarter would be withdrawn from my wallet and deposited into Medium's wallet.  This is the pragmatarian model.  It's all about skin in the game... communicating with our cash.

I didn't end up buying Ardrey's book... but... while leaving the shop I wondered if I should have.  Later on when I searched for one of the quotes in the book... voila!  There was the PDF of the book... The Social Contract.  Why buy the cow when you can get the milk for free?  And the accuracy of the feedback loop goes... boink.  It's not my fault that neither Amazon Kindle Unlimited nor Scribd have implemented the pragmatarian model.  It's not my fault that people don't understand the importance of accurate feedback loops.  Well...

Can we imagine a group that never laughed at members that behaved abnormally?  All the feedback would be positive?  No matter what a member did... they would be praised rather than criticized.  Sounds like a paradise for deviants.  But we can reasonably suspect that this paradise would be rather ephemeral.  The multitude of counselors only provides safety when brutal honesty is the best policy.

Here's a poem by Stephen Crane...

I saw a man pursuing the horizon;
Round and round they sped.
I was disturbed at this;
I accosted the man.
"It is futile," I said,
"You can never — "

"You lie," he cried,
And ran on.

It sure makes sense for us to have the freedom to valuate each other's behavior... but doing so will logically modify each other's behavior, at least to some extent.  The concern is whether this behavior modification might possibly diminish the difference that progress depends on.

You know what sounds good?  A Mill sandwich...


If it were only that people have diversities of taste, that is reason enough for not attempting to shape them all after one model. But different persons also require different conditions for their spiritual development; and can no more exist healthily in the same moral, than all the variety of plants can in the same physical, atmosphere and climate. The same things which are helps to one person towards the cultivation of his higher nature, are hindrances to another. The same mode of life is a healthy excitement to one, keeping all his faculties of action and enjoyment in their best order, while to another it is a distracting burthen, which suspends or crushes all internal life. Such are the differences among human beings in their sources of pleasure, their susceptibilities of pain, and the operation on them of different physical and moral agencies, that unless there is a corresponding diversity in their modes of life, they neither obtain their fair share of happiness, nor grow up to the mental, moral, and aesthetic stature of which their nature is capable. - J.S. Mill, On Liberty

Even in the case of cultivated land, a man whom, though only one among millions, the law permits to hold thousands of acres as his single share, is not entitled to think that all this is given to him to use and abuse, and deal with as if it concerned nobody but himself. The rents or profits which he can obtain from it are at his sole disposal; but with regard to the land, in everything which he does with it, and in everything which he abstains from doing, he is morally bound, and should whenever the case admits be legally compelled, to make his interest and pleasure consistent with the public good. The species at large still retains, of its original claim to the soil of the planet which it inhabits, as much as is compatible with the purposes for which it has parted with the remainder. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy

The question is, whether there would be any asylum left for individuality of character; whether public opinion would not be a tyrannical yoke; whether the absolute dependence of each on all, and surveillance of each by all, would not grind all down into a tame uniformity of thoughts, feelings, and actions. This is already one of the glaring evils of the existing state of society, notwithstanding a much greater diversity of education and pursuits, and a much less absolute dependence of the individual on the mass, than would exist in the Communistic régime. No society in which eccentricity is a matter of reproach, can be in a wholesome state. It is yet to be ascertained whether the Communistic scheme would be consistent with that multiform development of human nature, those manifold unlikenesses, that diversity of tastes and talents, and variety of intellectual points of view, which not only form a great part of the interest of human life, but by bringing intellects into stimulating collision, and by presenting to each innumerable notions that he would not have conceived of himself, are the mainspring of mental and moral progression. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy


Was that sandwich tasty?

bread = importance of divergence
meat = importance of convergence

Let's say that Frank is really different.  Unlike everybody else... he's enthralled with poison oak.  When he inherits thousands of acres of cultivated land, he immediately replaces all the crops with poison oak.  The poison oak doesn't benefit anybody else but Frank.  He's using a lot of society's limited resources solely for his own benefit.  It sure sounds like a problem.  The problem is smaller the less land that Frank uses solely for his own benefit.  The problem is larger the more land that Frank uses solely for his own benefit.

The problem of Frank using society's limited resources solely for his own benefit is minimized by the fact that people are going to pay a lot less money for useless crops than for useful crops.  People are going to spend a lot less money on useless behavior than on useful behavior.  This fact prevents Frank from competing additional land away from more valuable uses.  Frank is restrained by the feedback loop.  Frank is restrained by the Invisible Hand.

Let's consider this restraint from the perspective of a real-life musician...


Make The Music You Want To Make

Musicians make compromises all the time. Sometimes it’s about timing: you want to put something out, and you can’t afford to wait, so you settle- you keep a take that could have been better, you scratch a song that needs a few more sessions to come together. Sometimes it’s about the sound: a record label wants to market you a particular way, a track needs to be “radio friendly” to get airplay. Sometimes it’s just about resources: recording and producing music, even with all the advances in digital technology, is a laborious, expensive process. For some players, there’s also the trade-off between taking gigs that might pay better but be musically unfulfilling (think wedding band or corporate events) versus pursuing a musical vision that might not have a ready-made market. And, of course, there’s that most precious of all resources, time, which is often given over in huge amounts to the aforementioned day job.

Basic income removes the immediacy of financial pressures, and frees up a lot of time. Does that mean we won’t have choices to make? No, of course not. There are always choices, and there are always constraints, and even if we get basic income that won’t turn time itself into a limitless resource. But it changes the balance of the decision. - Anthony Moser, Royalties Are Bullshit: A Musician’s Case For Universal Basic Income


On the one hand, progress depends on difference... but on the other hand, serving others depends on incentives.

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. - Adam Smith, Wealth of Nations

Incentives matter because most people would agree that being served is better than serving.  The only reason that we serve is to be served.  So if lots of people lose the incentive to serve each other then the logical consequence would be that everyone would suffer.  If only a few people "defect"... then it's not a huge problem.  If only a few people free-ride... then it's not a huge problem.  In order to avoid huge problems, we really need incentives to serve each other.

Yet, again, progress does depend on difference.  If we maximize difference then we maximize progress.

The challenge is being able to fully appreciate human diversity.  Because humans are so incredibly diverse... it means that demand is incredibly diverse.  The problem with our current system is that the vast bulk of this demand is hidden.  We can't clearly see people's valuations.  Latent valuations means latent opportunities.

Right now our economy is like a desert.  There are relatively few niches.  If we could clearly see everybody's valuations... then our economy would be transformed into a jungle.  There would be an incredible abundance of niches.  This would minimize the chances that a truly valuable difference would fail to find a small, but supportive, market.

Let me hedge my bets by putting it differently.  With the current system, because we can't clearly see people's valuations... it's like trying to catch butterflies using a net with holes that are too large.  If we could clearly see people's valuations... then the holes in the net would be so small that only microscopic butterflies would be able to fly through them.

Here's some more Adam Smith...

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it.  - Adam Smith, Wealth of Nations
It is of importance that the landlord should be encouraged to cultivate a part of his own land. His capital is generally greater than that of the tenant, and with less skill he can frequently raise a greater produce. The landlord can afford to try experiments, and is generally disposed to do so. His unsuccessful experiments occasion only a moderate loss to himself. His successful ones contribute to the improvement and better cultivation of the whole country. — Adam Smith, Wealth of Nations

The Royal Society's unsuccessful experiment, The History of Fish, was only a moderate loss?  If it hadn't been for Halley, the loss would have been Newton's Principia.  That would not have been a moderate loss... it would have been a massive loss.

A failed experiment means that somebody barked up the wrong tree.  But with the current system... because valuation is largely latent... the wrong tree will sometimes actually be the right tree.  Many unpopular shows will be canceled because nobody could see how valuable they truly were.  Many unpopular bands will break up because nobody could see how valuable they truly were.  Many unpopular writers will quit writing because they couldn't clearly see how valuable their work truly was.  Many people will be dissuaded from pursuing valuable paths because they couldn't clearly see just how valuable they truly were.  Coasianism and pragmatarianism are both revolutions against popularity.  Our society is being strangled by superficiality.  It's not because most people are shallow... it's simply because we can't see how valuable things truly are.

Let's get back to that quote by Adam Smith and replace "landlord" with "government"...

The government can afford to try experiments, and is generally disposed to do so.  Its unsuccessful experiments occasion only a moderate loss to itself. Its successful ones contribute to the improvement and better cultivation of the whole country. 

Yes, the government can afford to try experiments and is disposed to do so.  But its unsuccessful experiments do not occasion only a moderate loss to itself.  The government is a command economy... if its successful experiments more than made up for its unsuccessful experiments... then this would be true of command economies in general.  But nobody in their right mind argues that the government should spend all our money.  Nobody in their right mind fully trusts the government.  We don't trust the government to experiment with donuts... yet we do trust the government to experiment with defense.

Like I said before, I trust consumers to decide for themselves whether or not an experiment has been successful.  And, when valuation isn't latent, only microscopic butterflies will be able to escape from the net.  Yet...


If at first the idea is not absurd, then there is no hope for it. - Albert Einstein

Perhaps any sufficiently advanced logic is indistinguishable from stupidity. - Alex Tabarrok

Those who are different and successful "become" innovators, while those who fail "become" reckless violators of tried-and-true rules. - Armen Alchian

Throughout the centuries there were men who took first steps down new roads armed with nothing but their own vision. Their goals differed, but they all had this in common: that the step was first, the road new, the vision unborrowed, and the response they received—hatred. The great creators—the thinkers, the artists, the scientists, the inventors—stood alone against the men of their time. Every great new thought was opposed. Every great new invention was denounced. The first motor was considered foolish. The airplane was considered impossible. The power loom was considered vicious. Anesthesia was considered sinful. But the men of unborrowed vision went ahead. They fought, they suffered and they paid. But they won. - Ayn Rand

I don’t acknowledge or recognize such a concept as a “mainstream of thought.” That might be appropriate to a dictatorship, to a collectivist society in which thought is controlled and in which there exists a collective mainstream—of slogans, not of thought. There is no such thing in America. There never was. However, I have heard that expression used for the purpose of barring from public communication any innovator, any nonconformist, anyone who has anything original to offer. I am an innovator. This is a term of distinction, a term of honor, rather than something to hide or apologize for. Anyone who has new or valuable ideas to offer stands outside the intellectual status quo. But the status quo is not a stream, let alone a “mainstream.” It is a stagnant swamp. It is the innovators who carry mankind forward. - Ayn Rand

Contumely always falls upon those who break through some custom or convention. Such men, in fact, are called criminals. Everyone who overthrows an existing law is, at the start, regarded as a wicked man. Long afterward, when it is found that this law was bad and so cannot be re-established, the epithet is changed. All history treats almost exclusively of wicked men who, in the course of time, have come to be looked upon as good men. All progress is the result of successful crimes. - Friedrich Nietzsche

But have you ever asked yourselves sufficiently how much the erection of every ideal on earth has cost? How much reality has had to be misunderstood and slandered, how many lies have had to be sanctified, how many consciences disturbed, how much "God" sacrificed every time? If a temple is to be erected a temple must be destroyed: that is the law - let anyone who can show me a case in which it is not fulfilled! - Friedrich Nietzsche

To be independent of public opinion is the first formal condition of achieving anything great. - G.W.F.Hegel

All great truths begin as blasphemies. - George Bernard Shaw

It’s time-consuming to do something original; it requires bad manners, or at least a lack of automatic deference for received wisdom; - George Scialabba

I insist thus emphatically on the importance of genius, and the necessity of allowing it to unfold itself freely both in thought and in practice, being well aware that no one will deny the position in theory, but knowing also that almost every one, in reality, is totally indifferent to it. People think genius a fine thing if it enables a man to write an exciting poem, or paint a picture. But in its true sense, that of originality in thought and action, though no one says that it is not a thing to be admired, nearly all, at heart, think that they can do very well without it. Unhappily this is too natural to be wondered at. Originality is the one thing which unoriginal minds cannot feel the use of. They cannot see what it is to do for them: how should they? If they could see what it would do for them, it would not be originality. The first service which originality has to render them, is that of opening their eyes: which being once fully done, they would have a chance of being themselves original. Meanwhile, recollecting that nothing was ever yet done which some one was not the first to do, and that all good things which exist are the fruits of originality, let them be modest enough to believe that there is something still left for it to accomplish, and assure themselves that they are more in need of originality, the less they are conscious of the want. - J.S. Mill

Yet nothing is more certain than that improvement in human affairs is wholly the work of the uncontented characters; and, moreover, that it is much easier for an active mind to acquire the virtues of patience, than for a passive one to assume those of energy. - J.S. Mill

The genuine innovator-entrepreneur who seeks to challenge, to stir up the dishwater of the orthodoxy, must expect to counter resistance at every stage. At best, he and his fellow [heretics] can hope to find academic settings that are temporarily congenial to their efforts, settings that encourage those who dare to be different. - James Buchanan

Entrepreneurs are innovators who use a process of challenging the status quo of existing products and services and setting up new ones. - Joseph Schumpeter

It is different with the pioneers of new ways of thinking and new modes of art and literature. The pathbreaker who disdains the applause he may get from the crowd of his contemporaries does not depend on his own age’s ideas. He is free to say with Schiller’s Marquis Posa: “This century is not ripe for my ideas; I live as a citizen of centuries to come.” The genius’ work too is embedded in the sequence of historical events, is conditioned by the achievements of preceding generations, and is merely a chapter in the evolution of ideas. But it adds something new and unheard of to the treasure of thoughts and may in this sense be called creative. The genuine history of mankind is the history of ideas. It is ideas that distinguish man from all other beings. Ideas engender social institutions, political changes, technological methods of production, and all that is called economic conditions. And in searching for their origin we inevitably come to a point at which all that can be asserted is that a man had an idea. Whether the name of this man is known or not is of secondary importance. - Ludwig von Mises

It is often asserted that the poor man's failure in the competition of the market is caused by his lack of education. Equality of opportunity, it is said, could be provided only by making education at every level accessible to all. There prevails today the tendency to reduce all differences among various peoples to their education and to deny the existence of inborn inequalities in intellect, will power, and character. It is not generally realized that education can never be more than indoctrination with theories and ideas already developed. Education, whatever benefits it may confer, is transmission of traditional doctrines and valuations; it is by necessity conservative. It produces imitation and routine, not improvement and progress. Innovators and creative geniuses cannot be reared in schools. They are precisely the men who defy what the school has taught them. - Ludwig von Mises

In the political sphere, there is no means for an individual or a small group of individuals to disobey the will of the majority. But in the intellectual field private property makes rebellion possible. The rebel has to pay a price for his independence; there are in this universe no prizes that can be won without sacrifices. But if a man is willing to pay the price, he is free to deviate from the ruling orthodoxy or neo-orthodoxy. What would conditions have been in the socialist commonwealth for heretics like Kierkegaard, Schopenauer, Veblen, or Freud? For Monet, Courbet, Walt Whitman, Rilke, or Kafka? In all ages, pioneers of new ways of thinking and acting could work only because private property made contempt of the majority’s ways possible. Only a few of these separatists were themselves economically independent enough to defy the government into the opinions of the majority. But they found in the climate of the free economy among the public people prepared to aid and support them. What would Marx have done without his patron, the manufacturer Friedrich Engels? - Ludwig von Mises

In the market economy the realization of technological innovations does not require anything more than the cognizance of their reasonableness by one or a few enlightened spirits. No dullness and clumsiness on the part of the masses can stop the pioneers of improvement. There is no need for them to win the approval of inert people beforehand. They are free to embark upon their projects even if everyone else laughs at them. Later, when the new, better, and cheaper products appear on the market, these scoffers will scramble for them. However dull a man may be, he knows how to tell the difference between a cheaper shoe and a more expensive one, and to appreciate the usefulness of new products.  - Ludwig von Mises

The usual narrative is that society should be organized to cater to and reward the people who play by the rules. Things should be as easy as possible for them. But perhaps we should focus more on the people who don’t play by the rules. Maybe they are, in some key way, the most important. Maybe we should let them off the hook. - Peter Thiel

Those who are able to see beyond the shadows and lies of their culture will never be understood let alone believed, by the masses. - Plato


Maybe it helps to imagine a seed.  It falls on the ground and needs enough warmth, water, nutrients and light to germinate and grow.  Let's say that the seed manages to germinate and starts to grow.  If the seedling is especially different... then lots of people won't understand it... so they'll oppose it.  Maybe they'll even try and kill it.  Or they'll try and deprive it of food, water and light.  This is a problem because progress depends on difference.  But if the public's true valuation was clearly seen ... then we can reasonably predict that, because demand is so incredibly diverse, that the seedling would receive more nutrients, water and light than it would if the public's true valuation was unseen.  The seedling would grow, bloom and bear fruit.  Then its true worth could be determined.

Again, who should we trust?  Should we trust consumers?


Within the shop and factory the owner— or in the corporations, the representative of the shareholders, the president—is the boss. But this mastership is merely apparent and conditional. It is subject to the supremacy of the consumers. The consumer is king, is the real boss, and the manufacturer is done for if he does not outstrip his competitors in best serving consumers. - Ludwig von Mises

The entrepreneur in a capitalist society depends upon the market and upon the consumers. He has to obey the orders which the consumers transmit to him by their buying or failure to buy, and the mandate with which they have charged him can be revoked at any hour. Every entrepreneur and every owner of means of production must daily justify his social function through subservience to the wants of the consumers. - Ludwig von Mises

The entrepreneurial function, the striving of entrepreneurs after profits, is the driving power in the market economy. Profit and loss are the devices by means of which the consumers exercise their supremacy on the market. The behavior of the consumers makes profits and losses appear and thereby shifts ownership of the means of production from the hands of the less efficient into those of the more efficient. It makes a man the more influential in the direction of business activities the better he succeeds in serving the consumers. In the absence of profit and loss the entrepreneurs would not know what the most urgent needs of the consumers are. If some entrepreneurs were to guess it, they would lack the means to adjust production accordingly. - Ludwig von Mises


Or perhaps we shouldn't trust consumers?


Historians are mistaken in explaining the rise of Nazism by referring to real or imaginary adversities and hardships of the German people. What made the Germans support almost unanimously the twenty-five points of the "unalterable" Hitler program was not some conditions which they deemed unsatisfactory, but their expectation that the execution of this program would remove their complaints and render them happier. They turned to Nazism because they lacked common sense and intelligence. They were not judicious enough to recognize in time the disasters that Nazism was bound to bring upon them.

The immense majority of the world's population is extremely poor when compared with the average standard of living of the capitalist nations. But this poverty does not explain their propensity to adopt the communist program. They are anti-capitalistic because they are blinded by envy, ignorant, and too dull to appreciate correctly the causes of their distress. There is but one means to improve their material conditions, namely, to convince them that only capitalism can render them more prosperous.  - Ludwig von Mises


Or maybe we should trust consumers?


Liberty, says the Bolshevist, is a bourgeois prejudice. The common man does not have any ideas of his own, he does not write books, does not hatch heresies, and does not invent new methods of production. He just wants to enjoy life. He has no use for the class interests of the intellectuals who make a living as professional dissenters and innovators.

This is certainly the most arrogant disdain of the plain citizen ever devised. There is no need to argue this point. For the question is not whether or not the common man can himself take advantage of the liberty to think, to speak, and to write books. The question is whether or not the sluggish routinist profits from the freedom granted to those who eclipse him in intelligence and will power. The common man may look with indifference and even contempt upon the dealings of better people. But he is delighted to enjoy all the benefits which the endeavors of the innovators put at his disposal. He has no comprehension of what in his eyes is merely inane hair-splitting. But as soon as these thoughts and theories are utilized by enterprising businessmen for satisfying some of his latent wishes, he hurries to acquire the new products. The common man is without doubt the main beneficiary of all the accomplishments of modern science and technology. - Ludwig von Mises


Mises was probably the number one proponent of consumer sovereignty.  But it really seems like he went back and forth between trusting and distrusting consumers.  Perhaps the problem was that he assumed, to some degree, that opinions moderately reflect and communicate valuations.  I didn't come across very many passages of his on the topic of stated versus demonstrated preference.  Actually, I think that this is the only passage on the topic that I found...

Neither is value in words and doctrines.  It is reflected in human conduct.  It is not what a man or groups of men say about value that counts, but how they act.  The oratory of moralists and the pompousness of party programs are significant as such.  But they influence the course of human events only as far as they really determine the actions of men.  - Ludwig von Mises

To argue that the Holocaust and WWII accurately reflected the true valuations of the German people is to pretend that Hitler somehow wore epic glasses and allocated Germany's resources accordingly.  In order to pretend that Hitler wore epic glasses we'd have to assume that he appreciated the benefit of doing so.  We might as well assume that Hitler read, understood and appreciated Adam Smith...

The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it, and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for.  - Adam Smith, Wealth of Nations

We might as well assume that Hitler truly understood the necessity of skin in the game...

Ralph Nader had a heuristic for war. He said that if you are going to vote for war, you should have a member of your family--a descendant, a son or grandson--on the draft. And then you can vote for war. - Nassim Taleb, Skin In The Game
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. - Loren Lomasky, Democracy and Decision

It's been argued that you can't derive an ought from an is.  Well you certainly can't derive a valuation from an opinion.  Yet...

Is it possible to make progress towards this inclusive state in the United States at the moment? I would’ve said yes 15 years ago, 10 years ago, 5 years ago, but today I do feel more pessimistic than ever about the United States and about the world. Of course, I’m not surprised that there is a huge amount of discontent among some segments of the voting public, and some of this is entangled with fear from and hatred against immigrants and minorities. But the extent of this hatred has been a shock to me. - Daron Acemoglu Stop Crying About the Size of Government. Start Caring About Who Controls It.

We can't correctly judge a book by its cover but we can correctly judge a society by its opinions?  If we can correctly judge a society by its opinions then what's the scope of spending?  What's the scope of skin in the game?  What's the scope of economics?  What's the scope of government?

Mises was a libertarian....

Liberalism differs radically from anarchism. It has nothing in common with the absurd illusions of the anarchists. We must emphasize this point because etatists sometimes try to discover a similarity. Liberalism is not so foolish as to aim at the abolition of the state. Liberals fully recognize that no social coöperation and no civilization could exist without some amount of compulsion and coercion. It is the task of government to protect the social system against the attacks of those who plan actions detrimental to its maintenance and operation. -  Ludwig von Mises, Omnipotent Government

He believed that the proper scope of government was limited to defense, courts and police.  This belief depended on the assumption that democracy was at least somewhat effective at accurately revealing people's preferences.  Yet...

People can consume only what has been produced. The great problem of our age is precisely this: Who should determine what is to be produced and consumed, the people or the state, the consumers themselves or a paternal government? If one decides in favor of the consumers, one chooses the market economy. If one decides in favor of the government, one chooses socialism. There is no third solution. The determination of the purpose for which each unit of the various factors of production is to be employed cannot be divided. - Ludwig Von Mises, Inequality of Wealth and Incomes

The biggest obstacle to libertarianism is... libertarianism.  It simultaneously attacks and condones command economies.  By definition, libertarianism can never get its story straight.  Mises' number one disciple was far more coherent/consistent...


One of the most absurd procedures based on a constancy assumption has been the attempt to arrive at a consumer’s preference scale . . . Through quizzing him by questionnaires.  In vacuo, a few consumers are questioned at length on which abstract bundle of hypothetical commodities they would prefer to another abstract bundle, etc. Not only does this suffer from the constancy error, no assurance can be attached to the mere questioning of people. Not only will a person’s valuations differ when talking about them than when he is actually choosing, but there is also no guarantee that he is telling the truth. - Murray Rothbard

Individual valuation is the keystone of economic theory. - Murray Rothbard

The concept of demonstrated preference is simply this: that actual choice reveals, or demonstrates, a man’s preferences; that is, that his preferences are deducible from what he has chosen in action. Thus, if a man chooses to spend an hour at a concert rather than a movie, we deduce that the former was preferred, or ranked higher on his value scale. Similarly, if a man spends five dollars on a shirt we deduce that he preferred purchasing the shirt to any other uses he could have found for the money. This concept of preference, rooted in real choices, forms the keystone of the logical structure of economic analysis, and particularly of utility and welfare analysis. - Murray Rothbard

The crucial point is that when consumers spend, they benefit, because the expenditures are voluntary. The consumers buy product X because they decide that, for whatever reason, it would benefit them to buy that product rather than use the money on some other product or save or add to their cash balances. They give up money for product X because they expect to prefer that product to whatever they could have done with the money elsewhere; their preference reflects a judgment of relative benefit from that, as compared to another, purchase. In my own terms, spending choices by consumers demonstrate their preference for one, as compared to another, way of using their money. - Murray Rothbard

Since "benefits" are subjective, we cannot measure anyone's benefit on the market either, but we can conclude, from a person's voluntary purchase, that his (expected) benefit was greater than the value to him of the money given up in exchange. If I buy a newspaper for 25 cents, we can conclude that my expected benefit is greater than a quarter. But since taxes are compulsory and not voluntary, we can conclude nothing about the alleged benefits that are paid for with them. Suppose, in analogy, that I am forced at gunpoint to contribute 25 cents for a newspaper and that that newspaper is then forcibly hurled at my door. We would be able to conclude nothing about my alleged benefit from the newspaper. Not only might I be willing to pay no more than 5 cents for the paper, or even nothing on some days, I might positively detest the newspaper and would demand payment to accept it. From the fact of coercion there is no way of telling. Except that we can conclude that many people are not getting 25 cents' worth from the paper or indeed are positively suffering from this coerced "exchange."   Otherwise, why the need to exercise coercion? Which is all that we can conclude about the "benefits" of taxation. - Murray Rothbard

We have no idea how much the taxpayers would value these services, if indeed they valued them at all. For example, suppose that the government levies a tax of X dollars on A, B, C, and so on, for police protection—for protection, that is, against irregular, competing looters and not against itself. The fact that A is forced to pay $1,000 is no indication that $1,000 in any sense gauges the value to A of police protection. It is possible that he values it very little, and would value it less if he could turn to competing defense agencies. Moreover, A may be a pacifist; so he may consider the State's police protection a net harm rather than a benefit. But one thing we do know: If these payments to government were voluntary, we can be sure that they would be substantially less than present total tax revenue. - Murray Rothbard

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


Rothbard correctly understood that the fundamental problem with government is the systemic scarcity of demonstrated preference.  Unfortunately, he didn't realize that this fundamental problem could be easily solved...

Under most real-world taxing institutions, the tax price per unit at which collective goods are made available to the individual will depend, at least to some degree, on his own behavior. This element is not, however, important under the major tax institutions such as the personal income tax, the general sales tax, or the real property tax. With such structures, the individual may, by changing his private behavior, modify the tax base (and thus the tax price per unit of collective goods he utilizes), but he need not have any incentive to conceal his "true" preferences for public goods. - James M. Buchanan, The Economics of Earmarked Taxes 

Rothbard never considered the possibility of people using their taxes to demonstrate their preferences.  Just like the prehistoric native Americans never considered the possibility of using horses to facilitate trade (the demonstration of preference).  So the conclusion that Rothbard jumped to was that the government should be abolished.  He barked up the wrong tree for the right reason.  Right diagnosis (exclusive valuation), wrong prescription (euthanasia).  

Mises never fully grasped the importance of clearly seeing people's valuations.  But he appreciated that the market is a feedback loop... 

Each individual, in buying or not buying and in selling or not selling, contributes his share to the formation of the market prices. But the larger the market is, the smaller is the weight of each individuals contribution. Thus the structure of market prices appears to the individual as a datum to which he must adjust his own conduct. - Ludwig von Mises

And he did grasp, at least partially, the importance of the feedback loop being accurate...

If profits were to be curtailed for the benefit of those whom a change in the data has injured, the adjustment of supply to demand would not be improved but impaired. If one were to prevent doctors from occasionally earning high fees, one would not increase but rather decrease the number of those choosing the medical profession. - Ludwig von Mises

Recently I ran across this...

In ants, one such behaviour is the collective food search: ants initially explore at random. If they find food, they lay down pheromone trails on their way back to base which alters the behaviour of ants that subsequently set out to search for food: the trails attract ants to areas where food was previously located. It turns out that this simple rules-based system produces a highly efficient colony-level algorithm for locating the shortest paths to food supplies. - Jo Michell, The Fable of the Ants, or Why the Representative Agent is No Such Thing

In this case it's pretty easy to appreciate the importance of an accurate feedback loop.

In all cases humans are going to behave.  Their behavior will depend on their 1. freedom and 2. information.  Freedom without accurate information is a waste.  Life would suck because everybody would spend all their time and energy barking up the wrong trees.  So the accuracy of the information is crucial.   However, there can't be accurate information without freedom.  People need the freedom to use their cash to accurately communicate their perceptions of relative scarcity...

allocation = valuation

Pragmatarianism and coasianism would facilitate accurate allocations which would greatly improve the accuracy of the feedback loop.  Because humans are so incredibly diverse... an accurate feedback loop will maximize the development of difference.  More difference will mean more progress.

Here are some passages worth chewing on...


Individual decision making is closely connected to creativity not because all choices are excellent, but because they constitute a broad field out of which the best responses can emerge. If we wished to establish a connection to Darwinian ideas, we could say that the wide spectrum of decisions is similar to the field of the spontaneous variations of living things from which the pressure of natural selection preserves only the most apt. Without such experimental structures and behaviours, responses remain stagnant and life sinks under the weight of institutionalised routine. Freedom multiplies actions and ideas, some of which turn out to be brilliant and others fundamentally flawed. The important fact, however, is that few if any of them could have occurred under conditions of enforced conformity. To leave people alone with their projects is to permit - even to encourage - the exercise of private imaginations. - John Lachs, Meddling. On the Virtue of Leaving Others Alone

The point here is not, as utilitarians may hasten to say, that if the project or attitude is that central to his life, then to abandon it will be very disagreeable to him and great loss of utility will be involved.  I have already argued... that it is not like that; on the contrary, once he is prepared to look at it like that, the argument in any serious case is over anyway.  The point is that he is identified with his actions as flowing from projects or attitudes which in some cases he takes seriously at the deepest level, as what his life is about (or, in some cases, this section of his life - seriousness is not necessarily the same as persistence).  It is absurd to demand of such a man, when the sums come in from the utility network which the projects of others have in part determined, that he should just step aside from his own project and decision and acknowledge the decision which utilitarian calculation requires. It is to alienate him in a real sense from his actions and the source of his action in his own convictions. It is to make him into a channel between the input of everyone's projects, including his own, and an output of optimific decision; but this is to neglect the extent to which his actions and his decisions have to be seen as the actions and decisions which flow from the projects and attitudes with which he is most closely identified. It is thus, in the most literal sense, an attack on his integrity. - Bernard Williams, Against Utilitarianism

I have suggested a different model and metaphor. The world is not a single machine. It is a complex, interactive ecology in which diversity -- biological, personal, cultural and religious -- is of the essence. Any proposed reduction of that diversity through the many forms of fundamentalism that exist today -- market, scientific or religious -- would result in a diminution of the rich texture of our shared life, a potentially disastrous narrowing of the horizons of possibility. Nature, and humanly constructed societies, economies and polities, are systems of ordered complexity. That is what makes them creative and unpredictable. Any attempt to impose on them an artificial uniformity in the name of a single culture or faith, represents a tragic misunderstanding of what it takes for a system to flourish. Because we are different, we each have something unique to contribute, and every contribution counts. A primordial instinct going back to humanity's tribal past makes us see difference as a threat. That instinct is massively dysfunctional in an age in which our several destinies are interlinked. Oddly enough, it is the market -- the least overtly spiritual of concepts -- that delivers a profoundly spiritual message: that it is through exchange that difference becomes a blessing, not a curse. When difference leads to war, both sides lose. When it leads to mutual enrichment, both sides gain. - Rabbi Jonathan Sacks, The Dignity of Difference




The balance between spontaneity and control varies, then, as the health of the psyche and the health of the world vary. Pure spontaneity is not long possible because we live in a world which runs by its own, non-psychic laws. It is possible in dreams, fantasies, love, imagination, sex, the first stages of creativity, artistic work, intellectual play, free association, etc. Pure control is not permanently possible, for then the psyche dies. Education must be directed then both toward cultivation of controls and cultivation of spontaneity and expression. In our culture and at this point in history, it is necessary to redress the balance in favor of spontaneity, the ability to be expressive, passive, unwilled, trusting in processes other than will and control, unpremeditated, creative, etc. But it must be recognized that there have been and will be other cultures and other areas in which the balance was or will be in the other direction.

In the normal development of the healthy child, it is now believed that, much of the time, if he is given a really free choice, he will choose what is good for his growth. This he does because it tastes good, feels good, gives pleasure or delight. This implies that he “knows” better than anyone else what is good for him. A permissive regime means not that adults gratify his needs directly but make it possible for him to gratify his needs, and make his own choices, i.e., let him be. It is necessary in order for children to grow well that adults have enough trust in them and in the natural processes of growth, i.e., not interfere too much, not make them grow, or force them into predetermined designs, but rather let them grow and help them grow in a Taoistic rather than an authoritarian way.

(Though this statement sounds simple, it is in actuality misinterpreted extraordinarily. Taoistic let-be and respect for the child is actually quite difficult for most people, who tend to interpret it to mean total permissiveness, indulgence and overprotection, giving him things, arranging pleasure activities for him, protecting him against all dangers, forbidding risk-taking. Love without respect is quite different from love with respect for the child's own inner signals.)  - Abraham Maslow, Toward a Psychology of Being


We really want people to have the freedom to bark up trees... but at the same time we really don't want people barking up the wrong trees.  Whether or not a tree is wrong or right should ultimately be up to consumers to decide.  But since it's ultimately up to consumers to decide... it seems reasonable and desirable to clearly see their true valuations.  Yet...

For a typical dollar spent by consumers on UberX, they receive $1.60 worth of gain.  That’s an unusually high amount of “consumer surplus,” as it is called by economists. - Tyler Cowen, Computing the Social Value of Uber. (It's High.)


The fireworks example illustrates the "free-rider" problem. Even if the fireworks show is worth ten dollars to each person, no one will pay ten dollars to the entrepreneur. Each person will seek to "free-ride" by allowing others to pay for the show, and then watch for free from his or her backyard. If the free-rider problem cannot be solved, valuable goods and services, ones that people want and otherwise would be willing to pay for, will remain unproduced. - Tyler Cowen, Public Goods and Externalities

Do you see the issue?  If not, then maybe this will help...

The only alternative to a market price is a controlled or fixed price which always transmits misleading information about relative scarcity. Inappropriate behavior results from a controlled price because false information has been transmitted by an artificial, non-market price. - Mark Perry, Why Socialism Failed

When Frank gets a "deal" (aka consumer surplus)... it means that his payment transmitted misleading information about relative scarcity...

allocation < valuation

If Frank gets a deal on an Uber ride... it means that his payment transmitted misleading information about the relative scarcity of transportation.  If Frank gets a deal on a fireworks show... it means that his payment transmitted misleading information about the relatively scarcity of fireworks shows.

If our goal is to optimize behavior, then we should be consistently and clearly critical of any and all information that paints an inaccurate picture of economic conditions.  But does Cowen consider consumer surplus to be a problem?  Nope.  Does Cowen consider free-riders to be a problem?  Yup.  What about Perry?

Perry has been creating lots of venn diagrams to illustrate intellectual inconsistency.  I'll follow in his footsteps...

Any economist who believes that free-riders are a real problem but consumer surplus is not.... really does not have a strong need for intellectual consistency.

So how can we eliminate false information concerning relative scarcity?  Clearly we have to eliminate the one-price-fits-all (OPFA) approach.  One price really does not fit all.  Everybody's different.  We all value things differently.  OPFA effectively hides the bulk of our different valuations.  This logically and detrimentally paints an inaccurate picture of economic conditions.  As a result, behavior is less beneficial than it should be.

What do we replace OPFA with?  Well... I've shared a few ideas.... coasianism and pragmatarianism.  Maybe they aren't perfect solutions.  There's always room for improvement.  But in order to understand whether an economic solution is truly an improvement.... it's fundamentally necessary to recognize and understand and appreciate the importance of being able to clearly see the public's true valuations.

Hopefully you're dreaming of the day when Nassim Taleb is a beautiful fly on every wall.  Can you even imagine it?  Ok, obviously he can't be a beautiful fly on every wall.  But if he should be a beautiful fly on some wall... then what's the rule?   We can easily say that he shouldn't have access to walls in irrelevant rooms.  But who's going to decide whether or not a room is irrelevant to Taleb?  Taleb is the only one who can truly know whether or not a room is irrelevant.  Clearly he can't determine whether or not a room is irrelevant if he's denied access to it.

Of course it's not like we need a literal rule.  We don't need to make it illegal for Lyft to prevent Taleb from being a beautiful fly on their walls.  Why don't we need to make it illegal?  Because we can reasonably predict that the market will naturally weed out firms that fail to recognize the value of brain gain.

If Lyft allows Taleb to be a beautiful fly on their walls... then Lyft will benefit from brain gain.  If Lyft also allows Tyson to be a beautiful fly on their walls... then Lyft will benefit from even more brain gain.  Same thing if Lyft allows Eric Raymond to be a beautiful fly on their walls...

The history of Unix should have prepared us for what we're learning from Linux (and what I've verified experimentally on a smaller scale by deliberately copying Linus's methods [EGCS]). That is, while coding remains an essentially solitary activity, the really great hacks come from harnessing the attention and brainpower of entire communities. The developer who uses only his or her own brain in a closed project is going to fall behind the developer who knows how to create an open, evolutionary context in which feedback exploring the design space, code contributions, bug-spotting, and other improvements come from hundreds (perhaps thousands) of people. - Eric Steven Raymond, The Cathedral and the Bazaar     

Does Taleb appreciate the benefit of "harnessing the attention and brainpower of entire communities"?  Well... maybe not adequately.  Does Raymond appreciate the importance of skin in the game?  No, he definitely does not.  He doesn't appreciate that brainpower can only be fully harnessed when there's skin in the game.  Most people don't appreciate this.

There are only a handful of political neuroscience studies using MRI that have examined differences between liberals and conservatives, but the existing work does suggest that there are both structural and functional brain differences between these groups. - Ingrid Haas, Could neuroscience explain what Trump voters are thinking?

Would an MRI prove that that there are fundamental brain utilization differences between voting and spending?  Do we really need a study to prove that deciding to "Like" a cause on Facebook requires far less brainpower than deciding how much money to donate to the same cause?  Do we really need a bunch of empirical evidence to prove that opinions are far less cognitively demanding than valuations?

Raymond knows that it's beneficial to harness the brainpower of entire communities and Taleb knows that skin in the game is the only way that brainpower can be fully harnessed.  We get the correct answer by combining Taleb and Raymond... and maybe a few others.  In all cases we get the correct answers by standing on each other's shoulders.  If the logistics are tricky to imagine then just think of the blind men and the elephant.  They were unable to see the unseen because their brains were not fully networked.  If their brains had been fully networked then the truth would have been revealed.


But this is precisely what the great artist does. He is able to bring together clashing colors, forms that fight each other, dissonances of all kinds, into a unity. And this is also what the great theorist does when he puts puzzling and inconsistent facts together so that we can see that they really belong together. And so also for the great statesman, the great therapist, the great philosopher, the great parent, the great inventor. They are all integrators, able to bring separates and even opposites together into unity.

We speak here of the ability to integrate and of the play back and forth between integration within the person, and his ability to integrate whatever it is he is doing in the world. To the extent that creativeness is constructive, synthesizing, unifying, and integrative, to that extent does it depend in part on the inner integration of the person.

In trying to figure out why all this was so, it seemed to me that much of it could be traced back to the relative absence of fear in my subjects. They were certainly less enculturated; that is, they seemed to be less afraid of what other people would say or demand or laugh at. They had less need of other people and therefore, depending on them less, could be less afraid of them and less hostile against them. Perhaps more important, however, was their lack of fear of their own insides, of their own impulses, emotions, thoughts. They were more self-accepting than the average. This approval and acceptance of their deeper selves then made it more possible to perceive bravely the real nature of the world and also made their behavior more spontaneous (less controlled, less inhibited, less planned, less "willed" and designed). They were less afraid of their own thoughts even when they were "nutty" or silly or crazy. They were less afraid of being laughed at or of being disapproved of. They could let themselves be flooded by emotion. In contrast, average and neurotic people wall off fear, much that lies within themselves. They control, they inhibit, they repress, and they suppress. They disapprove of their deeper selves and expect that others do, too.  - Abraham Maslow, Toward a Psychology of Being




While many of the researchers I spoke to are optimistic that theorists will someday unlock the suitcase and discover a single, unifying set of principles or laws that govern machine (and, perhaps, human) learning, akin to Newton’s Principia, others warn that there is little reason to expect this. Massimo Pigliucci, a professor of philosophy at City University of New York, cautions that “understanding” in the natural sciences—and, by extension, in artificial intelligence—might be what Ludwig Wittgenstein, anticipating Minsky, called a “cluster concept,” one which could admit many, partly distinct, definitions. If “understanding” in this field does come, he says, it could be of the sort found not in physics, but evolutionary biology. Rather than Principia, he says, we might expect Origin of the Species. - Aaron M. Bornstein, Is Artificial Intelligence Permanently Inscrutable?

Economics likes to think of itself as a science, and too often its practitioners have attempted to uncover its “laws,” as if they were modern Isaac Newtons uncovering the laws of motion. But many of the laws of economics are far more like the rules of a game than like the laws of nature. Some of the rules represent what appear to be fundamental constraints — the availability of resources, say, or the absorptive capacity of the environment, or even the behavioral patterns of human nature — while others are arbitrary and subject to change, such as tax policy, government entitlements, and minimum wage requirements. - Tim O'Reilly, Why The Game of Business Needs to Change Its Rules

There are a handful of older folks at places like University of Chicago who remain steadfast believers in rational actors operating in a perfectly efficient market. And they were at the very center of the field in the 1980s. But they are, for the most part, irrelevant these days.

But the field is very different these days. Nobody thinks it’s a science. Nobody thinks they are uncovering immutable laws. The hot work, right now, is understanding rules-of-the-game, cultural assumptions, political power, empirical data, etc. This general approach of putting practice ahead of theory has moved from a small and far-left (and far-right) sideshow to the main event throughout the discipline. - Adam Davidson

But I wouldn’t say that life obeys economic rules. First of all, there are no inviolable economic “rules”, only habits, since they are simply human constructions and have no fundamental physical basis. Second, if it appears that nature follows economic principles, I would say it’s actually the reverse. - Jonathan Foley

Underlying structures exist, they are limited and fixed in number, and they can be combined to create virtually infinite diversity and complexity.  If it is true in physics, and true in biochemistry—and we know now that it is—it is perfectly plausible in human social interaction.  - Alan Fiske


Economics isn't a science?  Really?  I'm not a mad scientist?  I'm just... mad?

Look what else O'Reilly wrote...

I suspect that over time, driver wages will need to increase at some rate that is independent of the simple supply and demand curves that characterize Uber’s algorithm today. Even if there are enough drivers, the quality of drivers deeply influences the customer experience. - Tim O'Reilly, Why The Game of Business Needs to Change Its Rules
... also...

Many simplistic apologists for the capitalist system celebrate disruption and assume that while messy, it will all work out for the best if we just let “the invisible hand” do its work. This is true, if we correctly understand the invisible hand. - Tim O'Reilly, Why The Game of Business Needs to Change Its Rules

Does O'Reilly correctly understand the Invisible Hand?

It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. - Adam Smith, Wealth of Nations 

Nooooooo... O'Reilly really does not correctly understand the Invisible Hand.  He thinks that we can arbitrarily change prices and doing so will magically improve economic conditions.  O'Reilly really does not understand that we have to actually know what the economic conditions truly are before we can endeavor to actually improve them.

Right now the Invisible Hand is a feedback loop that works.  But it would work so much better if we were completely honest with it.  The more honestly that our allocations reflect and communicate our perceptions of scarcity... the more beneficially that everybody will behave.  Honesty, as far as economics is concerned, truly is the best policy.

To be fair, Adam Smith himself did not consider extending the Invisible Hand to the government, corporations or democracy.  He did not dream of the day when Nassim Taleb would be a beautiful fly on every wall.  Ok, maybe not every wall.

It's true that we really do not need a literal rule that would force Lyft to allow Taleb to be a beautiful fly on their walls.  But we really do need to fully uncover and expertly articulate the economic rule if we want to successfully persuade any organizations to experiment with opening up their big decisions to public valuation.

For sure Taleb could do a far better job than I have at fully uncovering and expertly articulating the economic rule of honesty.  Unfortunately, I really don't have epic passes or glasses for Taleb.  All I have to offer him is this crazy intellectual love letter.  If he wants, we can have beautiful brainchildren together.  Heh.

If Taleb doesn't want to help solve this pretty puzzle... well... then I'll add him to the same list that Paul Romer, Noah Smith and a "few" others are on.  It's the list of people who have no strong need for intellectual consistency/coherence.  It's also the list of people who have no interest in being truly great theorists.  It's also the list of people who've broken my intellectual heart.  

There surely is more beneath the surface of society than meets the eye.

Once upon a time, Honnold tells me, he would have been afraid—his word, not mine—to have psychologists and scientists looking at his brain, probing his behavior, surveying his personality. “I’ve always preferred not to look inside the sausage,” he says. “Like, if it works, it works. Why ask questions about it? But now I feel like I’ve sort of stepped past that.” - J.B. MacKinnon, The Strange Brain of the World’s Greatest Solo Climber

Nuclear attack, marauding refugees, avian flu, communists in broom closets, White-tailed many things we fear.  Scary scary women we fear.  So many things we fear...including, sometimes, the truth.  There is, is there not, ladies and gentlemen of the jury, so much we can learn about ourselves if we have the integrity, the courage, to stand up and not only tell the truth, but to listen to it.  It has a distinctive ring to it the truth. A purifying timbre that will not be silenced, even by the monotonous drone of governments and corporations.   Joshua  Floyd has reminded us that the truth exists and defines itself as a function of who we are. It may be ugly, it may be unwelcome, it may be the very last thing we wish to confront, but the only way that we can confront it, is to know it, to embrace it. The only way we can move onward, is to know that which is manifest about ourselves. - Cleaver Greene, Rake


Many of the problems that have plagued writers in this area, as they attempted to define and delimit motivation, are a consequence of the exclusive demand for behavioral, externally observable criteria. The original criterion of motivation and the one that is still used by all human beings except behavioral psychologists is the subjective one. I am motivated when I feel desire or want or yearning, or wish or lack. No objectively observable state has yet been found that correlates decently with these subjective reports, i.e., no good behavioral definition of motivation has yet been found.

Now of course we ought to keep on seeking for objective correlates or indicators of subjective states. On the day when we discover such a public and external indicator of pleasure or of anxiety or of desire, psychology will have jumped forward by a century. But until we find it we ought not make believe that we have. Nor ought we neglect the subjective data that we do have. It is unfortunate that we cannot ask a rat to give subjective reports. Fortunately, however, we can ask the human being, and there is no reason in the world why we should refrain from doing so until we have a better source of data.

It is these needs which are essentially deficits in the organism, empty holes, so to speak, which must be filled up for health's sake, and furthermore must be filled from without by human beings other than the subject, that I shall call deficits or deficiency needs for purposes of this exposition and to set them in contrast to another and very different kind of motivation.

It would not occur to anyone to question the statement that we "need" iodine or vitamin C. I remind you that the evidence that we "need" love is of exactly the same type. - Abraham Maslow, Toward a Psychology of Being


Coordinate with this “acceptance” of the self, of fate, of one's call, is the conclusion that the main path to health and self-fulfillment for the masses is via basic need gratification rather than via frustration. This contrasts with the suppressive regime, the mistrust, the control, the policing that is necessarily implied by the belief in basic, instinctive evil in the human depths. Intrauterine life is completely gratifying and non-frustrating and it is now generally accepted that the first year or so of life had better also be primarily gratifying and non-frustrating. Asceticism, self-denial, deliberate rejection of the demands of the organism, at least in the West, tend to produce a diminished, stunted or crippled organism, and even in the East, bring self-actualization to only a very few, exceptionally strong individuals.

This statement is also often misunderstood. Basic need gratification is too often taken to mean objects, things, possessions, money, clothes, automobiles and the like. But these do not in themselves gratify the basic needs which, after the bodily needs are taken care of, are for (1) protection, safety, security, (2) belongingness, as in a family, a community, a clan, a gang, friendship, affection, love, (3) respect, esteem, approval, dignity, self-respect and (4) freedom for the fullest development of one's talent and capacities, actualization of the self. This seems simple enough and yet few people anywhere in the world seem able to assimilate its meaning. Because the lowest and most urgent needs are material, for example food, shelter, clothes, etc. they tend to generalize this to a chiefly materialistic psychology of motivation, forgetting that there are higher, non-material needs as well which are also “basic.”   - Abraham Maslow, Toward a Psychology of Being


Another crucial aspect of healthy growth of selfhood and full-humanness is dropping away the techniques used by the child, in his weakness and smallness for adapting himself to the strong, large, all-powerful, omniscient, godlike adults. He must replace these with the techniques of being strong and independent and of being a parent himself. This involves especially giving up the child's desperate wish for the exclusive, total love of his parents while learning to love others. He must learn to gratify his own needs and wishes, rather than the needs of his parents, and he must learn to gratify them himself, rather than depending upon the parents to do this for him. He must give up being good out of fear and in order to keep their love, and must be good because he wishes to be. He must discover his own conscience and give up his internalized parents as a sole ethical guide. He must become responsible rather than dependent, and hopefully must become able to enjoy this responsibility. All these techniques by which weakness adapts itself to strength are necessary for the child but immature and stunting in the adult. He must replace fear with courage.

From this point of view, a society or a culture can be either growth-fostering or growth-inhibiting. The sources of growth and of humanness are essentially within the human person and are not created or invented by society, which can only help or hinder the development of humanness, just as a gardener can help or hinder the growth of a rosebush, but cannot determine that it shall be an oak tree. This is true even though we know that a culture is a sine qua non for the actualization of humanness itself, e.g., language, abstract thought, ability to love; but these exist as potentialities in human germ plasm prior to culture. -  Abraham Maslow, Toward a Psychology of Being

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