Letter To Zhang Weiying

Here's the e-mail that I just sent to the pro-market economist Zhang Weiying...

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Subject: It doesn't matter if the cat is black or white...

Greetings from Southern California!

My name is Xero and I love economics and China very much.  Today I read this blog entry...

The Chinese Keynes vs. Hayek

Which led me to this article...

Plan v market

It's so wonderful to learn that such an important debate/discussion is happening in China!!!

Even though the debate is so important, based on my extensive studies, I think there's room for improvement.  

I love the free-market more than anyone but I have to acknowledge that Paul Samuelson is probably correct that the free-rider problem is a real problem.  Why buy the cow when you can get the milk for free?

So rather than trying to minimize the government, I think it's better to apply the Invisible Hand to the government.  This could be accomplished by allowing taxpayers to choose where their taxes go.  The modern economist who deserves the most credit for this idea is James Buchanan...

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

I call this idea "pragmatarianism" primarily because of Deng Xiaoping.  He is one of my biggest heroes.

After thinking about pragmatarianism for quite a while, I realized that taxpayers are basically "subscribers" and their taxes are essentially "fees".  The Economist also has subscribers and fees.  Would it be beneficial if The Economist allowed their subscribers to choose where their fees go?

One of the subscribers of The Economist left this comment on the article about your debate...

The Economist. Please continue following this debate. - AlecFahrin

How much of his fees would he be willing to spend on this article?  Does it matter?  How can The Economist efficiently allocate its resources if it doesn't know what its subscribers are willing to pay for specific articles?

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 

If you want to win the debate, then you have to show people the Invisible Hand.  All you have to do to show people the Invisible Hand is find a publication and persuade them to allow subscribers to choose which articles they spend their fees on.

I tried to persuade The Economist...

https://medium.com/@Amplify/adam-smith-5dc5ea5093f4#.dc59tp6od

https://medium.com/@Amplify/if-it-makes-sense-to-apply-the-invisible-hand-ih-to-your-articles-then-of-course-it-also-makes-e988377e17dd#.slflwi5ki

I also tried to persuade The Economist to use spending rather than voting to make decisions...

https://medium.com/@Amplify/my-idea-for-your-publication-is-to-apply-the-invisible-hand-ih-to-your-articles-and-comments-f6e6a2cabbbc#.we1owljsv

But The Economist is too big and I am too small so they probably aren't going to listen to me.

You are pretty big in China!  So it shouldn't be too difficult to find a publication to listen to you.  When they do so, the results will be clear to see.  And clearly seeing the results will allow people to clearly see the Invisible Hand.  And when people can clearly see the Invisible Hand... then you will win the debate.

"Results" are the best way to win a debate.  Actually, "results" are the only way to truly win a debate.

Please let me know if you have any questions!

Sincerely,
Xero
http://pragmatarianism.blogspot.com/

Markets: The Freedom To Reallocate Your Brainpower

Reply to reply: MMT = Moronic Monetary Theory

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So what????? we might not have enough defense to defend ourselves and we'd get killed! Do you understand that living is important? - James972

Of course I understand that living is important. You understand this as well. But what you don't understand is that our standard of living depends on how well our country utilizes all its brainpower.

Right now you think it's a good idea to prevent taxpayers from having the option to choose where their taxes go. This means that you think it's a good idea to prevent nearly all of our country's brainpower from being applied to public goods. You don't understand that blocking nearly all of our country's brainpower from the public sector is just as detrimental as it would be to block nearly all of our country's brainpower from the private sector.

Imagine that everybody on this forum was stranded on an island. Let's say that somehow you had the power to enslave all of us. If you did so, would your standard of living be better or worse? Of course it would be worse! Because by enslaving all of us you would essentially be wasting all of our brainpower. All of our significant activities would only reflect your brainpower. Our island society would only fully utilize one person's brain... your own. Maybe you would be fully utilizing our labor... but our brainpower, which is infinitely more valuable, would be entirely wasted. Our standard of living would reflect this.

Of course you object to slavery. But you object to it for moral reasons rather than for economic reasons. If you actually understood why slavery is economically stupid then you would understand why it's also economically stupid to prevent people from having the option to directly allocate their taxes.

I'm guessing that you support democracy. But are you seriously under the impression that voting fully utilizes everybody's brainpower? Do you think it takes just as much brainpower for you to decide who to vote for as it would take for you to decide how to spend your tax dollars?

To be clear... you can't utilize more than 100% of your brainpower. If you had the option to directly allocate your taxes... obviously you wouldn't be required to use 200% of your brainpower. You would simply have the option to decide how you wanted to allocate your brainpower between the private sector and the public sector. If you didn't want to allocate any of your brainpower to the public sector... then you would simply continue to allow congress to spend 100% of your taxes for you. If nobody chose the option to directly allocate any of their taxes... then the public sector wouldn't gain any brainpower.

Perhaps the closest real world situation occurred in 1978. This is when Deng Xiaoping began to gradually give foreigners the option to shop in China. Prior to 1978... nobody, not even the Chinese, had the option to shop in China. Right now, thanks to Deng Xiaoping, you have the option to shop in China's private sector. Right now you have the freedom to decide how you want to allocate your brainpower between our private sector and their private sector. We all have this same freedom. Do you think we benefit from having this freedom? I sure think so. Even though I don't allocate much, if any, of my own brainpower to shopping in China... my standard of living has definitely improved as a result of all the people who have allocated significant amounts of their brainpower to shopping in China.

Here we are allocating our brainpower to this forum. Are we better off as a result of having this option to do so? I sure think so.

The thing is... this website...

1. doesn't have a market
2. isn't a market

This website doesn't have a market because you don't have the option to spend your money on the threads and posts that you value. In other words, this website doesn't have a market because it doesn't facilitate micropayments. Should this website facilitate micropayments? Yes? No? Right now you don't have the option to spend your money on your preferred answer. Therefore, this website is not a market.

This website would be infinitely better if it had a market and it was a market. Why? Because it would be infinitely better at utilizing all our brainpower. But it's not entirely problematic that this website doesn't have a market and it isn't a market. Because, as soon as somebody does create a website that has a market and/or is a market... then we are entirely free to leave this website and participate on the website that does a better job of utilizing the brainpower of all its members.

The fact that this website is in a market means that we are entirely free to reallocate our brainpower as soon as we deem it beneficial to do so.   If you understand the benefit of people being free to reallocate their brainpower... then you should be able to understand the benefit of giving people the option to reallocate their brainpower to the public sector.

China Please Read This Before Canada

Comment on: Quartz article: Is China going to be #1?

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Will China be the first country to truly understand that demand can't accurately be determined without a market? Maybe? Probably not though.

The Canadian government has mandated cable unbundling. They'll probably unbundle themselves next. It will be embarrassing when Canada spanks us because they allow their citizens to pick and choose which public goods they spend their taxes on.

Of course I'll blame you. Why? Because you never wrote a single post about the significance of the opportunity cost concept! You're like the poster boy for why physics majors should never become economists.

Naw, it's not your fault. Watch...

Step 1: Opportunity cost
Step 2: ?
Step 3: Efficient allocation of resources

There's no economic term for step 2. That's probably not your fault. Is it my fault? I guess. Why? Because I studied International Development Studies. I studied why China got beat by the Asian Tigers. I learned why all the efforts of "developed" countries to help developing countries failed so miserably.

Resources can't be efficiently allocated if they aren't allowed to freely flow in the most valuable directions. And the value of any given direction can't be determined without knowing the true values of citizens. And true value can only be determined when each and every individual has the freedom to decide between having their cake and eating it (opportunity cost).

I honestly hope that China reads this before Canada does.