Thursday, November 17, 2016

Efficiently Allocating Brainpower

Response to: Craigslist, Wikipedia, and the Abundance Economy by Quincy Larson

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Your grasp of programming is a LOT better than your grasp of economics! I’m the opposite. My grasp of economics is a LOT better than my grasp of programming. It’s a double coincidence of wants!

Imagine that an ant stumbles upon a giant, delicious cookie. The ant will certainly be thrilled that she made such a valuable discovery. Of course she can’t carry the entire cookie back to the colony. Instead, she willingly spends/sacrifices a considerable amount of her limited and precious calories in order to create a very strong pheromone trail all the way back to the colony. Ants at the colony will be able to easily and quickly discern that, based on the strength of her pheromone trail, it will be really worth it for them to choose her trail. Many of them will do so and the chances will be really good that they will be able to grab the cookie before a crow does.

I don’t even know if crows eat cookies.

The problem with your grasp of economics is that you see spending/sacrificing as buying.

NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO.

The point of spending/sacrificing is communicating. It’s how we communicate to others where there’s something of value. It’s how we bring valuable/important things to other people’s attention. It’s how we beneficially alter/change/modify each other’s behavior.

The gold rush was only a rush because so many people were willing to spend so much of their money on gold. Consumers’ willingness to pay such a high price for gold quickly and significantly altered the behavior of many producers.

So imagine society as a bunch of brains. What should be done with all these brains? How should they be used? How should they be allocated?

The gold rush significantly altered the allocation of society’s brains. Consumers said, “We’d truly LOVE to have more gold! We’ve proved this by our willingness to spend/sacrifice so much money!” Producers got the message loud and clear… and there was a significant change in the allocation of society’s brains. A lot more brainpower was used to try and solve the gold shortage problem.

Dr. Salk gave the polio vaccine away. That’s true. People paid barely any money for the vaccine. That’s also true. Everyone’s life is better off as a direct result of this massive free lunch? Nope. Nope. Nope.

If the amount of money that people spent on the vaccine accurately communicated their true valuation of the vaccine… then we can reasonably guess that there would have been a massive rush to cure other deadly diseases. And cancer would have been cured a long time ago.

Well… I can’t know what, exactly, would have been the result of allocating a massive amount of brainpower to curing deadly diseases.

It’s easy to see what does exist… it’s really hard to see what would have existed if people truly understood the free-rider problem (sacrifice < valuation).

I’m guessing that you aren’t aware that Wikipedia is loosely based on Friedrich Hayek’s essay? Sure, of course knowledge is dispersed… but the “minor” detail that Wales missed is the relationship between knowledge and prices. Wikipedia has a lot of brainpower. But this brainpower really isn’t being efficiently allocated because the editors really don’t know how much their edits are truly worth to other people.

The solution is simple. Let’s take Medium for example. We’d all pay a very reasonable $1/month but we’d be entirely free to choose which stories we spend our pennies on. People’s sacrifices would accurately communicate their valuations and Medium’s brainpower would be efficiently allocated.

This solution is the pragmatarian model. The Nobel economist James Buchanan deserves most of the credit for this model.

With your grasp of programming and my grasp of economics we can create something awesome. Let me know if you’re interested!

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