Trading Thoughts With Koenfucius

In real life, when you meet somebody for the first time, it's rarely the case that the moment is persevered like a dragonfly in amber.   It's a different story on the internet.  For example, here's the very first time that I met Koenfucius.  I replied to his story and he replied to my reply.  That was the extent of our exchange.

Around a month or so later I replied to another story of his... Trading Values.  At the time, I didn't realize that he was the same guy that I had replied to a month before.  We ended up trading many many many thoughts about economics.  At some point I realized that I had previously replied to one of his stories.

What if I hadn't replied to the second story?  I would have missed out on so much valuable economic discussion.

Recently we've been trading thoughts in the comments section of this blog entry... A Penguin Introduces Henry Farrell To Ronald Coase.  Here's my reply to his most recent comment...

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I think that I remembered the problem with unbundling WTP and WTA. How do you ensure the accuracy/legitmacy of the WTA?  Russ Roberts can input that his WTA for Trump is a gazillion dollars. Tucker Carlson can input that his WTA for Clinton is $100 gazillion dollars.  Then what?

Consider an issue like abortion.  It either is, or isn't, legal. If WTP and WTA are unbundled, then what's to stop people from entering the maximum possible WTA? We can certainly limit the amount that everybody can enter to a million dollars.  But then everybody just puts a million dollars for their WTA. So it provides absolutely no useful/trustworthy/credible info.

When it comes to the legality of abortion, is it possible that there isn't a transaction that enhances welfare?  Nope.  Maximizing the welfare enhancement of the transaction depends on determining how much each side is willing to sacrifice.  The winning side will be the side that is willing to spend the most money, all of which will be given to the losing side.

No matter which system is used, it's a logical fact that one side is going to get its way.  Should it get its way for free?  This is the premise of voting.  But I'm pretty sure that this premise is fundamentally horrible and incredibly detrimental.  Everyone would immensely benefit if everyone could clearly see and know the cost of what they want.  Then, and only then, could they make adequately informed decisions about whether what they want is truly worth it.

Imagine that Elizabeth wants abortion to be illegal.  How badly does she want it?  Is she willing to sacrifice the opportunity to buy a pair of shoes, or a laptop, or a car, or a house?  What is she willing to exchange?

Markets work because they facilitate the comparison of value/importance/relevance.  Our desires greatly exceed our dollars so we have no choice but to prioritize.  This is how society’s limited resources are put to more, rather than less, valuable uses.  This is how we minimize the irrelevant uses of society’s limited resources.

I take it as a fact that people really don’t appreciate the comparison aspect of markets.  My proof is that so many places/spaces aren’t markets!  This means that people do not directly compare the value of so many different things, which means that so many of society's limited resources are irrelevantly used. 

You asked about how coasianism, specifically bundling WTP and WTA, would work when there are several presidential candidates.  In this case, I’m not sure if coasianism would be the best option.  Coincidentally, here’s what I recently posted on the Debate.org website…

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Thanks for responding to my argument. If you get a chance, check out the thread I posted in the economics forum.

My argument is that spending is always better than voting. Presidents should be chosen by spending rather than by voting. Here are three ways that this could be done...

1. coasian market design (CMD)
2. bee market design (BMD)
3. pragmatarian market design (PMD)

For CMD we will consider Clinton VS Trump. For a fixed amount of time, spenders would have the opportunity to spend as much money as they wanted on their preferred candidate. After the window of participation closed, the totals would be calculated and revealed. Whichever candidate had the biggest total would be the winner. Let's say that Trump was the winner. All the spenders for Clinton would receive a full refund. Plus, they'd proportionally receive all the money that had been spent for Trump. Unlike voting, CMD is a win-win situation. You either get your preferred candidate, or you get compensated.

BMD would be a better option if we wanted to choose the president from a larger list of candidates...

Bernie Sanders
Chris Christie
Darrell Castle
Donald Trump
Evan McMullin
Gary Johnson
Hillary Clinton
James Hedges
Jeb Bush
Jill Stein
Marco Rubio
Mimi Soltysik
Ted Cruz
Tom Hoefling
Rand Paul
Rocky De La Fuente

Spenders could use their donations to determine the best order of the candidates. Whichever candidate was at the top when the window of participation had closed would be the winner. The government would keep all the money. So BMD essentially kills two birds with one stone...

1. Valuating
2. Fundraising

With PMD, people would use their tax dollars to determine the best order of the candidates. The candidates would keep all the tax dollars that had been allocated to them.

Your concern with replacing voting with spending is that bias exists in the world. Let's say that right now everybody is biased against robot candidates. In this case, no matter whether we used voting or spending, a robot candidate would not be elected. The next decade 90% of the citizens are biased against robot candidates. If voting was used, it's definitely going to be tyranny of the biased majority and the robot candidate will not be elected. If we used spending though, there's some chance that the robot candidate will be elected.

It took over 200 years to elect our first black president. We still haven't had a woman president, or an (openly) gay president, or an (openly) atheist president, or... it's a long list. I really don't think that voting in any way, shape or form helps to overcome detrimental biases held by the majority of the citizens. Spending, on the other hand, would facilitate the elimination of detrimental biases.

Think about backpacking. Before you go backpacking you have to decide whether things you want to take are worth the effort of carrying them. Sure, you'd love to take a big bottle of Tequila, but is it worth the effort of carrying it? Knowing, considering and comparing the carrying costs/benefits of different things allows you to make more rational decisions. In the absence of knowing, or paying, the carrying costs... it's impossible for your carrying decisions to be maximally rational.

Replacing voting with spending would allow everyone to consider and compare the actual costs of the things they want. Then, and only then, will people make maximally rational decisions.

"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

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Earlier this year the Libertarian Party (LP) used a BMD to choose its convention theme…

$6,327.00 - I"m That Libertarian!
$5,200.00 - Building Bridges, Not Walls
$1,620.00 - Pro Choice on Everything
$1,377.77 - Empowering the Individual
$395.00 - The Power of Principle
$150.00 - Future of Freedom
$135.00 - Life, Liberty and the Pursuit of Happiness
$105.00 - Rise of the Libertarians
$75.00 - Free Lives Matter
$42.00 - Be Me, Be Free
$17.76 - Make Taxation Theft Again
$15.42 - Taxation is Theft
$15.00 - Jazzed About Liberty
$15.00 - All of Your Freedoms, All of the Time
$5.00 - Am I Being Detained!
$5.00 - Liberty Here and Now

This system could work just as well for choosing presidents.  I wonder how much money the government would raise?

Classtopia’s Communication Department uses a BMD for blog entries.  So far it has raised $30 dollars. 

Next month, as you already know, my epiphyte society plans on using a BMD for show entries.

It would be quite excellent if a BMD was also used for forum threads!  Econhub provides an exceptionally good opportunity to do so.  Not sure how much you know about it, but it was recently created in order to compete the Economics Job Market Rumors (EJMR) forum out of existence.  I wrote about it here.

The response to Econhub has been underwhelming, to say the least.  So far there are only 17 members.  It would really suck to let a brand new economics forum go to waste.  So we should really put it to good use.

If we created a BMD for Econhub, then the donated money could be used to draw the public’s attention to a page that listed the most important threads.  Hopefully this would result in more people joining the forum and substantially participating in the prioritization process.

I shared this idea on Econhub but the owner hasn't responded to it yet.  It would be nice to have him on board but it isn't essential.  A Google sheet would be used to store the data, which could be displayed on a webpage of our choice.  This is the page that we'd promote with the donations.

Maybe I'm a bit biased, but it really doesn't sound so crazy to pool our money in order to promote the best economic ideas.

Building Better Classrooms And Countries

Forum reply: 4th Grade Nation State

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You know I actually did something like this (in the loosest sense of the term) in sixth grade when I was 11. My teacher would give us fake money when we did things like help out other students, assist the classroom chores, and of course do well on money assignments (extra credit that we got paid for instead of points for). Afterwards we could spend the money in the store of knickknacks etc. There were other lessons associated with it such as checkbook balancing and loan management, but that wasn't the main goal. The goal was to demonstrate to the students how a simple market works, a person's place in it, and how to manage your money.

Did we create an independent economy between students? No, but that was never was the goal. Did we waste our parents money or try to cheat the system? No, there was no point in doing that. But what we did do was create a simple market where the classroom employed and paid students for doing jobs for the classroom and the students purchased things from the classroom. Would you consider that "building" something? - Lost heros 

What your teacher did was better than nothing. But would I consider it "building" something? Not so much.

Why do you perceive that the citizens of Classtopia are wasting their parents' money? You said that the students in your class purchased things "from" their classroom. But in Classtopia... the students are purchasing things "for" their classroom. Well... so far only labor has been purchased... but when the Garden Dept, for example, buys a plant... then it's going to be "for" their classroom... and/or the school. It's the difference between private goods and public goods.

Yesterday Michelle came over and picked up my collection of unused postcards and foreign currency. This week each of her 30 students will receive 22 foreign coins, around 4 foreign bills and around a dozen postcards. I put the items in 60 zip lock bags.

Of course the students are going to be given the opportunity to trade with each other. Not just trade though... but also buy, sell and share.

From my perspective, a market is obviously beneficial because the students aren't going to equally value their Christmas gifts. Some students might prefer the postcards while others might prefer the currency. Maybe most students will prefer the currency?

Michelle is going to ask the students what they can trade their gifts for. I'm hoping that one of the students will respond with "quotes". Then hopefully... while they are trading quotes for currency/postcards... they'll realize that they can trade copies of their quotes with each other.

When Michelle and I talked yesterday she guessed that perhaps the issue is that the kids have been indoctrinated against trading. Kids are known for making really bad trades... so their parents and teachers admonish them against making any trades. Sure, lots of kids don't know the real-world value of most things. When the kids are trading/buying/selling the postcards and coins... they aren't going to know their real-world value. Well... to be clear... I don't really know their real-world value. Except for the French Francs and the 100 yuan bills. Michelle told me that the Francs are obsolete but I wanted to know whether the metal itself had any value. I kinda gave up after a few searches. As far as the 100 yuan bill... I believe it's worth around $14 dollars. There were at least a couple of them in the collection.

Anybody who exchanges a 100 yuan bill for a Franc will probably be making a mistake. And I say "probably" because I can't know how much the student might value the coin itself.

Over Christmas break the students with the currency will have the project of using Google Sheets to inventory their collection. One of the columns will be for the currency's dollar value. So the students will need to do some research.

Generally it's a good idea to figure out something's market value before you decide to trade it. But I'm pretty sure that it's a good idea to allow the kids to make some bad trades in order to learn from their relatively small mistakes.

Building a better classroom means that you're making improvements that can benefit the next batch of students. If this year's Garden Dept buys a Tillandsia ionantha and attaches it to a tree in the school... then it can benefit the next batch of kids. Same thing if the Book Dept buys A Wrinkle in Time and adds it to the classroom library.

Sure... improvements can be made just by the students contributing their time... but that's certainly not how most countries work. Most countries have taxes. Of course, there aren't any countries that allow their citizens to choose where their taxes go. Nearly everybody takes our current system for granted. But I certainly do not. I've thoroughly researched our system and have found absolutely no logical/rational (ie economic) explanation for allowing a small group of people to spend everybody's taxes.

So... Classtopia. You have 30 citizens each using their pennies to say, "I've found some room for improvement and my penny is proof that the improvement should be made".

Can America learn anything from Classtopia? Imagine citizens using their dollars to say, "I've found some room for improvement and my tax dollar is proof that the improvement should be made".

Well...

A. Americans don't truly know where there's room for improvement

Or...

B. Voting is an adequate method for Americans to communicate where improvement is most needed

I'm pretty sure that neither of those is the right answer. Ideally, sooner rather than later, some of you will apply America's current system to some classrooms. The 30 students will elect one student who gets to decide how all their tax pennies are spent. And then we'll see! We'll see which system is better at improving classrooms. We'll see which system is better at building more beneficial classrooms.

Classtopia Book Valuations

Which children's books are the most valuable?  The only real way to find out is to facilitate crowd sponsored results (CSR).  When the citizens of Classtopia give their taxes to their Book Dept... they will be able to use their tax pennies to communicate their valuations of their favorite books.

Here's the list as of 6 Dec 2016...

This is a very new project so nearly all the books/valuations were submitted by Michelle and myself.  We ended up giving around $13 dollars to the Book Dept.  So far only one student, Laila, has contributed to this list.  I believe she put 20 pennies on Charlotte's Web.

How will this list evolve over time?  It will be very fascinating to find out!  I will be using this blog entry to share updates.