Wednesday, July 5, 2017

Caplan Overrates Democracy

If China had been a democracy in 1945, then I believe that Mao Zedong would have been elected.  Bryan Caplan believes otherwise.  Therefore, we are going to bet.  Eh?

The one time that I'm super confident that Caplan is really wrong... it's something that we can't bet on.  Is it a coincidence?  It sure seems pretty "convenient".  Too convenient.

"Shucks, we don't have a time machine, guess we'll never know who is right!"

Is not having a time machine a good excuse?  In this case I suppose it is.  But I really want to eliminate it as an excuse.  I don't want it to be so convenient for anyone to easily avoid betting on their belief in democracy.

My options are....

1. Invent a time machine
2. Find a different case

Yeah, I'm going to choose the second option.  Coming up with an equivalent case depends on first considering what happened in China.

China was not a democracy when millions and millions of people starved to death (the Great Leap Forward).  Then again, it wasn't a mixed economy either.  It was a command economy.  In 1978 China gradually became a mixed economy.  Since then, millions of people have not starved to death.

If the absence of democracy is truly the real reason that millions starved to death, then how come millions are no longer starving to death in China?  How come obesity is now a major concern in China?

My belief is that countries prosper despite, rather than because of, democracy.  The real cause of prosperity is people's freedom to trade with each other.  Unfortunately, as democracy proves, most people believe otherwise.  Here's what Adam Smith wrote in 1776...

The ancient policy of Europe, instead of discountenancing this popular odium against a trade so beneficial to the public, seems, on the contrary, to have authorized and encouraged it. - Adam Smith, Wealth of Nations

Here's what Paul Samuelson wrote in 1989...

the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.

Caplan shared Samuelson's quote but there's no evidence that he shared Smith's quote.  However, there's no doubt that Caplan is well aware of anti-market bias.

Why has anti-market bias persisted for so long?  It's persisted for the same reason that pro-democracy bias has persisted.  It's challenging to create betting situations that will demonstrate which ideological beliefs are bullshit without also risking everybody's well-being.

"Hey Caplan, I'll bet you that America doesn't need to be a democracy.  Oooops.  I was wrong.  My belief was bullshit.  Here's $100 dollars.  Can I have that dog bone after you're done gnawing on it?"

So there's no hope?  We'll just have to wait for large-scale natural experiments to bet on?  Eventually we'll have so many natural experiments under our belt that the true cause of our prosperity will be painfully clear?

Actually there is hope.  We can use websites to safely test our beliefs.

Every economic system is about determining the order (relative importance) of things.  In the case of Caplan's blog... EconLog... the goal would be to correctly determine the order of blog entries.  Right now the entries are sorted chronologically.  Another page on the site could be created to display the entries sorted by their importance.

Here are some different systems for ordering the entries...

1. Dictatorship: the order of the entries would be determined by one person.
2. Direct democracy: the order of the entries would be determined by voters.
3. Republic: the order of the entries would be determined by an elected representative.
4. Market: the order of the entries would be determined by donations.

No two systems would order the entries in exactly the same way.  Therefore, no two systems would create the same amount of value.  Which system would create the most value?

Here's an example of a 4th grade blog that uses the market system... Classtopia.  On their homepage you can see the blog entries sorted chronologically.

In theory, EconLog could have a page for each system.  Then we could simultaneously compare the different systems.

I'm not exactly sure how we could bet on the outcome.  But we'd certainly have the opportunity to bet on our preferred system.  I'd be happy to spend some money to help Econlog establish the market system.  I'd love to see how many other people would be in the same boat as me.  Would Caplan be in the same boat?  Or would he be in a different boat?

We'd essentially have a market for systems.  So we'd actually see and know the demand for markets, republics, direct democracies, dictatorships and any other systems.  It would be a meta-market.  The market would determine the relative importance of systems.

Today I "voted" for this blog entry...

People feel little obligation to propose workable systems or practical alternatives to current practices because they can’t imagine what it would be like to get to decide those things. But the radical left actually can win, and it can win using the existing democratic systems we have now — if we commit to being an adult movement that’s dedicated to convincing others to join our cause in order to build a pragmatic and workable socialist system. - Freddie deBoer, What replaces rights and discourse?

It's wonderful that deBoer is challenging socialists to develop alternative systems.  But even if they perceive that the systems they develop are pragmatic and workable, it doesn't mean that they truly are.  The Great Leap Forward is proof that people can really misjudge the effectiveness of systems.


Voters, activists, and political leaders of the present day are in the position of medieval doctors. They hold simple, prescientific theories about the workings of society and the causes of social problems, from which they derive a variety of remedies-almost all of which prove either ineffectual or harmful. Society is a complex mechanism whose repair, if possible at all, would require a precise and detailed understanding of a kind that no one today possesses. Unsatisfying as it may seem, the wisest course for political agents is often simply to stop trying to solve society’s problems. — Michael Huemer, In Praise of Passivity

And since then, one of the central principles behind my philosophy has been “Don’t destroy all existing systems and hope a planet-sized ghost makes everything work out”. Systems are hard. Institutions are hard. If your goal is to replace the current systems with better ones, then destroying the current system is 1% of the work, and building the better ones is 99% of it. Throughout history, dozens of movements have doomed entire civilizations by focusing on the “destroying the current system” step and expecting the “build a better one” step to happen on its own. That never works. The best parts of conservativism are the ones that guard this insight and shout it at a world too prone to taking shortcuts. - Scott Alexander, SSC Endorses Clinton, Johnson, or Stein

Further progress requires recognising that America’s economy is an enormously complicated mechanism. As appealing as some more radical reforms can sound in the abstract — breaking up all the biggest banks or erecting prohibitively steep tariffs on imports — the economy is not an abstraction. It cannot simply be redesigned wholesale and put back together again without real consequences for real people. - Barak Obama, The way ahead


We need to test so many different systems in order to discover truly better systems.  But immediately doing so on a large-scale is clearly problematic.  Therefore, we must first test different systems on a smaller scale.  Websites provide us the perfect opportunity to do so.  Does Caplan see the benefit of doing so?  Is he willing to put his money where his preferred system is?

1 comment:

  1. I understand that it may seem Herculean to test many different systems on a large enough scale, but how will we know what will ultimately work. We have to be willing to make some amount of sacrifice for that greater good. In order to arrive at a better system then it is necessary to systematically eliminate systems that do not work. Small scale testing delays both the inevitable and progress.