Sunday, December 24, 2017

The cost of communicating the usefulness of things


Imagine if people had to perform 100 push-ups before they purchased anything. What impact would this have? It would greatly increase the cost of trade. In other words, it would greatly increase the cost of communicating the usefulness of things. People would far less frequently communicate the usefulness of things, so everybody would be far less informed about the usefulness of things, and everybody would make far less useful decisions. The result would be far less progress.

Walking upright is kinda like doing less pushups before trading.

Using horses is kinda like doing even less pushups before trading. The earliest native Americans didn’t have horses. Therefore… ?

Taxpayers are prevented from using their own tax dollars to signal the usefulness of goods supplied by the government. Therefore… ?

Life is synonymous with colonization. Colonization is nature’s mandate. Because, species that aren’t adequately diversified generally don’t stick around very long. The sooner people recognize the correlation between trade and progress, the faster we’ll colonize the stars.


This is relevant...

Alipay turned out to be so convenient that Liu began using it multiple times a day, starting first thing in the morning, when he ordered breakfast through a food delivery app. He realized that he could pay for parking through Alipay’s My Car feature, so he added his driver’s license and license plate numbers, as well as the engine number of his Audi. He started making his car insurance payments with the app. He booked doctors’ appointments there, skipping the chaotic lines for which Chinese hospitals are famous. He added friends in Alipay’s built-in social network. When Liu went on vacation with his fiancée (now his wife) to Thailand, they paid at restaurants and bought trinkets with Alipay. He stored whatever money was left over, which wasn’t much once the vacation and car were paid for, in an Alipay money market account. He could have paid his electricity, gas, and internet bills in Alipay’s City Service section. Like many young Chinese who had become enamored of the mobile payment services offered by Alipay and WeChat, Liu stopped bringing his wallet when he left the house. - Mara Hvistendah, Inside China's Vast New Experiment in Social Ranking 

Saturday, December 16, 2017

Spotlight On Max Sawicky

Most people love attention, me no less than anyone... - Max Sawicky

I just finished reading Henry Farrell's response to Sawicky's review of Brink Lindsey's and Steven M. Teles' new book The Captured Economy.  Since Sawicky loves attention, I figured that I'd give him some of mine.  Will he love it?


Dear Sawicky,

If you look above this blog entry you'll see a tab that says "Resources".  That page has a list of over 50 links to some of the most important articles, blog entries, scholarly papers and books about economics.  So far there is only one link to the website... Can We Criticize Foucault?

Have you read that article?  It's pretty great.  To be honest, I value it more than your own article...

Foucault article > your article

Which article do you value more?  Which jacobinmag article do you value most?  Does it matter? 

Personally, I think that people's valuations really matter.  So it's very troubling to me how many places there are where people aren't given the opportunity to share their valuations.  In other words, I'm troubled by all the places that aren't markets. 

Netflix, for example, is not a market.  Each month Netflix decides how to divide my $10 dollars among all its products.  This wouldn't be so problematic if Netflix was a mind-reader.  Or my best friend forever.  Or my lover.  Or my brother.  Or my mother.  But Netflix is none of these things.  It's just some company. 

Vons is also just some company.  But, unlike Netflix, Vons does give me the opportunity to decide for myself how I divide my money among all its products. 

What difference would it make if Netflix subscribers could decide for themselves how to divide their dollars?  I've already asked a few economists but they really didn't know.  How could they not know what difference the Invisible Hand would make? 

Do you know what difference the Invisible Hand would make?

The stage, and spotlight, they are all yours.  Please make good use of them. 


Friday, December 15, 2017


Dug through my Twitter page and found some tweets that I wanted to have more convenient access to. I tried to organize them a bit...

Tuesday, December 12, 2017

Public Finance In A Nutshell

Here's a reply I just posted on Medium...


“This sounds like you’ve read a lot of…”

Evidently you haven’t read or James Buchanan. Which means that you haven’t studied austrian economics or public finance.

The Nobel economist Paul Samuelson was not an austrian economist. He was a very orthodox economist who studied public finance and other subjects. Here’s what he wrote in a paper that was published in 1954…

But, and this is the point sensed by Wicksell but perhaps not fully appreciated by Lindahl, now it is in the selfish interest of each person to give false signals, to pretend to have less interest in a given collective consumption activity than he really has, etc. — Paul A. Samuelson, The Pure Theory of Public Expenditure

The premise here is that the optimal supply of public goods depends on people’s true signals. The supply of defense won’t be optimal if you pretend that it is less important to you than it truly is. However, the only reason that you’d have an incentive to be dishonest is if you had the option to spend your money on private goods rather than on public goods. If this option was eliminated, then your incentive to be dishonest would also be eliminated…

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

Imagine if Netflix gave you the opportunity to divide your subscription dollars however you wanted among all your favorite content. Would you have any incentive to be dishonest? Nope. This is simply because you wouldn’t have the option to spend your subscription dollars on things like food or clothes. Therefore, how you divided your limited dollars would accurately reflect your true preferences.

Paul Samuelson and James Buchanan were both Nobel economists. Samuelson was a liberal economist while Buchanan was a libertarian economist. Despite their ideological differences, they both agreed that the optimal supply of public goods depends on people’s true preferences for them.

Just like it would suboptimal for the private sector to supply meat if everybody was a vegetarian… it would be suboptimal for the public sector to supply war if everybody was a pacifist.

There you go, public finance in a nutshell. Any questions?