Will AI Break Capitalism?

Why AI will break capitalism by Henry Innis

My reply...

*********************************

Which is better for capitalism… brain drain or gain? Also, why do you assume that brainy AIs will be owned?

I think that even stupid people can understand that brain gain is better for capitalism. Or can they? Can stupid people understand where opportunities come from? Do opportunities come from doing dumb things with society’s limited resources? Are you going to create many opportunities by farming poison oak? Of course not. Are you going to create many opportunities by farming artichokes? Of course… assuming you’re a decent farmer. Opportunities obviously come from doing smart things with society’s limited resources.

The more smart people a society has, and the freer they are to use society’s limited resources… the more opportunities there will be for everybody.

One thing about smart people is… they know that if they want to truly understand something… for example capitalism… then they actually have to study it. And if somebody has even studied capitalism a little bit… then they would know that the number one book that they have to read in order to understand capitalism is Adam Smith’s Wealth of Nations…

Slaves, however, are very seldom inventive; and all the most important improvements, either in machinery, or in the arrangement and distribution of work which facilitate and abridge labour, have been the discoveries of freemen.

And once you read Smith then you have to read Hayek…

Of course, the benefits we derive from the freedom of others become greater as the number of those who can exercise freedom increases. The argument for the freedom of some therefore applies to the freedom of all. — Friedrich Hayek, The Case for Freedom

Capitalism doesn’t care whether you’re black or white, male or female, gay or straight, short or tall, human or other… what capitalism depends on is…

1. intelligence
2. numbers
3. freedom
4. communication

Capitalism depends on large numbers of intelligent people who have the freedom to 1. use society’s limited resources and 2. clearly communicate their true valuations of other people’s products.

Right now I can see that 181 people like your story. Medium makes it stupid easy for your readers to communicate their appreciation for your story. All your readers had to do was take a second and click the *heart* button. But does clicking the heart button communicate your readers’ true valuations of your story? Of course not. We can see, at a glance, how popular your story is… but we can’t see, at a glance, how valuable your story is.

Does it matter that we can’t see, at a glance, how valuable your story is? Medium doesn’t seem to think so. I sure think so.

The fact is that Medium is breaking capitalism… and here you are on Medium worried about AI breaking capitalism. First worry about humans breaking capitalism… and then there won’t be any need to worry about AIs breaking capitalism.

In order to make it stupid easy for people to communicate their valuations of your story…. Medium could simply add some coin buttons…

If Bob values your story more than nothing but less than a penny, then he’d click the empty heart button. If he values your story at a penny… then he’d click the penny button and a penny would be instantly withdrawn from his wallet and deposited into your wallet. Once you had enough pennies in your wallet… you could cash out and Medium would take a very fair and reasonable cut.

Of course this method won’t entirely solve the free-rider problem… but it will definitely solve the payment problem. How big is the payment problem? Once valuing a story is as easy as “liking” it… then I’m sure lots of people will be happy to do so. What’s a few cents? Not much… but if enough people give you a few cents… then it can add up.

One solution to the free-rider problem would be to switch over to a pragmatarian model. Each month each member would have to pay $1 dollar… but they could choose which stories they allocated their pennies to. If most members spent all their pennies half-way through the month… then the fee could be increased to $2 dollars/month. As the size of the pie increased… so to would the incentive for better writers to join Medium. The result would be a virtuous cycle.

The pragmatarian model could of course be applied to countless websites. Doing so would vastly improve capitalism. Then capitalism would be even more improved thanks to the brain gain, and freedom, of AI.

Builderism

Anybody else starting 2015 with a cold?  Sore throat, runny nose, achiness...it's really not the best way to start a new year.  So far no good.  I'm not superstitious, much, but I do feel some need to offset this lousiness with lots of awesomeness.  So I'm going to post this entry today even though it could probably do with a few more days/years of refining.  To help hedge my bets, at the end I'll share my recipe for the very best breakfast to make when you're sick.

****************************************************

Who really helps the poor?  Does Cutlass?

Context: Welfare Theorem vs Progress Theorem

****************************************************

A huge part of the problem here is that you think that elections (cheap talk surveys) accurately reflect the demand for public goods...

No, I don't. Because elections can't segment out that level of discrimination. But they can and do aggregate it, to a point. And within a useful margin for discussion. So while it is an imperfect measure of preference, and while it is an aggregated measure, rather than an individual measure, it still is a measure of revealed preferences.

And that revealed preference is for not helping the poor. Not beyond a minimum point, anyways.

Taxpayers, at least initially, would be paying the same taxes. They would be able to choose where their taxes go...and congress would still be in charge of determining the tax rate. So the amount of money that congress itself receives will reflect how satisfied taxpayers are with the tax rate. If the tax rate is too high...or too low...then congress will lose money. And whether the tax rate is too high...or too low...depends on how much value the public sector is creating relative to the private sector. To learn more...pragma-socialism.

Now you are opening yourself to 2 economic fallacies: Free rider problems and public goods problems. People will express false preference in order to save themselves a buck, and free ride on the generosity of others. And that causes a public goods problem, in that underinvestment in public goods is the normal course of individual preferences.

Education doesn't benefit the poor?

Giving endowments to major universities doesn't feed or house the poor.

The Koch brothers employ far more people than I do...so I'm certainly in no position to judge their concern for other people's welfare.

Employing people has nothing to do with providing aid the poor. The Koch brothers, on the other hand, spend vast fortunes to try to convince people of their point of view, and that point of view is that government should take from the poor and give to the Koch brothers.

So, in effect, you started this discussion with the brief of making things better for the poor through a different means of government. But then since then you've been defending making the poor much worse off by empowering those who want to harm them, and disenfranchising those who wish to help them.

****************************************************

If somebody was a connoisseur of contradictory arguments then they might really appreciate this guy's argument.  Let me try and break it down...

1. Voting adequately reveals people's preferences
2. People don't really want to help the poor
3. People lie in order to save a buck
4. Pragmatarianism would...
A. disenfranchise those who want to help the poor
B. empower those who want to hurt the poor

#3 negates #1 and #2 negates #4A.  Except, if #1 isn't true, as this paper suggests, then perhaps neither is #2.  If people really do want to help the poor, then would pragmatarianism prevent them from doing so?

Biting The Hand That Employs You

Did you know that there are absolutely zero Google search results for "biting the hand that employs you"?   For some reason I find that really surprising.  In comparison...there are 1,470,000 search results for "biting the hand that feeds you".

David Henderson, over at the EconLog (grumble gripe), recently posted an entry on the topic of "better options"...Blaming the Person Offering you the Best Deal.  The basic concept is that employers provide the "best" available option for their employees.  If it wasn't truly their "best" option then the employees would be working for other people.  It helps frame the important question of how much of an obligation we have to how many other people.  

This concept has been the subject of a few of my blog entries...

1. The Dialectic of Unintended Consequences (17 Oct 2011)
2. Dude, Where's My Ethical Consumerism (13 Feb 2012)
3. Subsistence Agriculture vs Sweatshops (5 Oct 2012)
4. John Holbo's Critique of Libertarianism (15 Nov 2012)
5. What About Voluntary Taxation? Also, Knockers vs Builders...Which One Are You? (1 Feb 2014)
6. Ethical Consumerism, Ethical Producerism and Ethical Builderism (12 Feb 2014)
7. Civic Crowdfunding Ethical Alternatives (13 Feb 2014)
8. Where Do Better Options Come From? (14 May 2014)
9. Builderism (1 Jan 2015)

Having spent quite a bit of time considering the subject...it was enjoyable to discover and read Henderson's post.  As far as I can remember that was the first time I've run across somebody else writing on the subject of offering people "better" options.  Except...now I'm really curious how many other people have put it like so.  The problem is that searching Google for descriptions rather than labels is no fun.   So if you stumble upon this...and know of anybody else who had written on the same subject...then please feel free to share a link in a comment.

[Update:]  Some found passages...

And yet, wherever the new export industries have grown, there has been measurable improvement in the lives of ordinary people. Partly this is because a growing industry must offer a somewhat higher wage than workers could get elsewhere in order to get them to move. - Paul Krugman, In Praise of Cheap Labor

Where all other circumstances are equal, wages are generally higher in new than in old trades. When a projector attempts to establish a new manufacture, he must at first entice his workmen from other employments by higher wages than they can either earn in their own trades, or than the nature of his work would otherwise require, and a considerable time must pass away before he can venture to reduce them to the common level. - Adam Smith, Wealth of Nations 

The whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighbourhood, be either perfectly equal or continually tending to equality. If in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of other employments. This at least would be the case in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to chuse what occupation he thought proper, and to change it as often as he thought proper. Every man's interest would prompt him to seek the advantageous, and to shun the disadvantageous employment. - Adam Smith, Wealth of Nations 

The woman felt or thought that she deserved $15 an hour. But Kennedy's point is: Why single out McDonald's? Indeed, there's a presumption that McDonald's is paying her more than anyone else would. Why? Because if someone else would pay more, she would likely be working for someone else. Or, it's possible that someone else would pay more, but she likes McDonald's because the job is better, on a non-wage dimension, than that other higher-paying job. In short, she's in the best place she can find. 

McDonald's is giving her a better deal than anyone else is offering. So her beef, so to speak, is with the very company that's giving her the best deal! - David Henderson, Blaming the Person Offering you the Best Deal 

Sweatshops are an important exercise in appreciating the difference between what we see (people in sweatshops) and what we don't see (the jobs they would have if they didn't have sweatshop opportunities). Sweatshops employ children because the children are available for work and because their next-best opportunities (agriculture or, in some cases, prostitution) are usually worse than sweatshop labor. It is definitely good that the workers at least have opportunities to work in sweatshops because, as research by Powell and others has shown, their other alternatives are even worse. I don't have the numbers in front of me, but sweatshop earnings are better than they are in other lines of employment. - Art Camden, On Sweatshops: They're Better Than the Alternative

Stopping people from taking terrible jobs – through prohibitions or protections or minimums, justified by the warm if mistaken feeling over one’s second cappuccino that one is thereby being generous to the poor – takes away from the poor what the poor themselves regard as a bettering option.  It’s theft from the poor of deals the poor want to make. - Deirdre McCloskey, The Treasured Bourgeoisie (Donald J. Boudreaux, Quotation of the Day)

Wishing away reality doesn’t give these workers better alternatives. Workers choose to work in sweatshops because it is their best available option. Sweatshops, however, are better than just the least bad option. They bring with them the proximate causes of economic development (capital, technology, the opportunity to build human capital) that lead to greater productivity—which eventually raises pay, shortens working hours, and improves working conditions. -  Benjamin Powell, Sweatshop Blues: An Interview With Benjamin Powell

Because sweatshops are better than the available alternatives, any reforms aimed at improving the lives of workers in sweatshops must not jeopardize the jobs that they already have. To analyze a reform we must understand what determines worker compensation. - Benjamin Powell, In Defense of "Sweatshops" 

Will Noah Smith Sing My Praises?

Hmm...if conservatives could make me a movie "pamphlet" that made me sympathize with $300k/yr earners who get taxed too much, I'd sing their praises too... - Noah Smith, Why I love Michael Moore

Here are a few passages that I shared in my recent critique of liberalism...with a few new ones thrown in for added value...

In other words, people will start buying something in large numbers if it solves a big problem for them. But most first-world problems—needing an easier way to record your favorite TV programs or keep track of what’s in your fridge—just aren’t that pressing. In developing countries, on the other hand, technology can transform lives. - Christopher Mims, How a $20 tablet from India could blindside PC makers, educate billions and transform computing as we know it

Is it a problem when you don't feel good about your own beliefs? Yes. Are you willing to pay Moore to solve this problem? Yes. Am I?  No.  It should be clear that each and every single one of us determines how much money Moore receives.  That's why markets work...we all have the opportunity to vote with our dollars...

The capitalist society is a democracy in which every penny represents a ballot paper. - Ludwig von Mises

For example...

Wal-Mart can’t charge more; if it does, its customers will go elsewhere. The same is true of Target and Costco. In a sense, Wal-Mart is the elected representative of tens of millions of hard-bargaining shoppers, and, like any representative, it serves only at their pleasure. - James Surowiecki, The Customer is King

also...

You might say, “That’s okay, Williams, if you have enough dollar votes. But what about poor people?” Poor people are far better served in the market arena than the political arena. Check this out. If you visit a poor neighborhood, you will see some nice clothing, some nice cars, some nice food, and maybe even some nice homes—no nice schools. Why not at least some nice schools? The explanation is simple. Clothing, cars, food, and houses are allocated through the market mechanism. Schools are allocated through the political mechanism. - Walter E. Williams, Where Does Your Vote Really Count? 

The market mechanism helps us understand that all our shopping decisions are indirectly responsible for American jobs being shipped overseas.  When American jobs are shipped overseas...we end up with more affordable products and people in developing countries end up with better opportunities...

These improvements have not taken place because well-meaning people in the West have done anything to help--foreign aid, never large, has lately shrunk to virtually nothing. Nor is it the result of the benign policies of national governments, which are as callous and corrupt as ever. It is the indirect and unintended result of the actions of soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labor. It is not an edifying spectacle; but no matter how base the motives of those involved, the result has been to move hundreds of millions of people from abject poverty to something still awful but nonetheless significantly better. - Paul Krugman, In Praise of Cheap Labor

It's not an edifying spectacle?  How could good intentions with negative consequences possibly be more edifying than selfish intentions with positive consequences?  

Rising wages in emerging markets and higher shipping costs are also closing the cost gap between developing markets and the United States. - Scott Malone and Ernest Scheyder, Outsourcing Losing Its Allure As China Costs Soar

Here's the basic problem with the large majority of liberals...

The lofty moral tone of the opponents of globalization is possible only because they have chosen not to think their position through. While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers. - Paul Krugman, In Praise of Cheap Labor

They just don't think things through.  Here's how they think...

Economics can establish that a man’s marginal utility of money diminishes as his money-income increases. Therefore, they concluded, the marginal utility of a dollar is less to a rich man than to a poor man. Other things being equal, social utility is maximized by a progressive income tax which takes from the rich and gives to the poor. This was the favorite demonstration of the “old welfare economics,” grounded on Benthamite utilitarian ethics, and brought to fruition by Edgeworth and Pigou. - Rothbard, Toward a Reconstruction of Utility and Welfare Economics

Yet what would they realize if they thought things through?  They'd realize that, compared to people in developing countries...we are filthy rich.  Yet...how many liberals sing the praises of fat-cat capitalists who give the jobs that they created to poor people in developing countries?

Instead, Noah Smith wants to sing the praises of the guy who financially benefits from criticizing capitalism...

I'm a millionaire, I'm a multi-millionaire. I'm filthy rich. You know why I'm a multi-millionaire? 'Cause multi-millions like what I do. That's pretty good, isn't it? - Michael Moore  

People voting with their dollars isn't just pretty good...it's f'ing awesome.  Markets work because we all have the freedom to put our money where our mouths are.  This also explains exactly why the government does not work.

Even though I fundamentally disagree with Michael Moore...I want him to have the freedom to put his taxes where his mouth is.  Why?  Because that's the key to prosperity, abundance and progress.

Our Mixed Economy - Capitalism vs Socialism

Here in America we have a mixed economy. We have capitalism in the private sector and socialism in the public sector. In other words...resources are allocated by the invisible hand in the private sector and by the visible hand in the public sector...

In this diagram I've illustrated that the invisible hand determines how $11 trillion dollars are spent in the private sector.  This is also known as a market economy and is best illustrated by Deng Xiaoping.  On the other side I've illustrated that the visible hand determines how more than $3 trillion dollars are spent in the public sector.  This is also known as a command economy and is best illustrated by Mao Zedong.

Deng Xiaoping represents humility while Mao Zedong represents conceit (see The Dialectic of Unintended Consequences). Here's how Hayek described the idea of conceit..."The curious task of economics is to demonstrate to men how little they really know about what they can imagine they can design." The idea of conceit can be traced back to the founder of modern economics...Adam Smith...

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. - Adam Smith, 1759

The idea of conceit is much older though.  For example...it was the point of Buddha's parable of the blind men touching different parts of an elephant.  Somebody who suffers from conceit fails to appreciate just how limited their perspective truly is.  As a result...they have no problem resorting to taking rather than solely relying on trading.  Taking forms the basis of the visible hand while trading forms the basis of the invisible hand.

The invisible hand works because it incorporates the perspectives of the individuals who engage in trade.  The buyer wants to purchase a product/service at the lowest possible price while the seller wants to sell a product/service at the highest possible price.  They both want to maximize the return on their labor so they engage in a bargaining process...which incorporates their unique perspectives.  If they can find a price that is worth their labor...then they will trade.

The visible hand does not work because it fails to incorporate the perspectives of all the members in a society.  If I resort to taking your resources...then I prevent you from applying your unique perspective to them.  Here's a diagram I created to help illustrate this concept...

How we use resources depends on our perspectives...which is why our perspectives are our most valuable resource.

When economists say, “We will never run out of resources,” what they often mean is that faced with increasing scarcity of one resource, we will always find new solutions to the problem that that resource originally solved. In an important sense, the actual economic resource was not copper but “the ability to convey voice and data.” And that resource has become “less scarce” by the substitution of sand. This illustrates Simon’s point that the “ultimate resource” is the human ingenuity that finds new and better ways of using physical resources. - Steven Horwitz, Economists and Scarcity

In the past we allowed the perspective of one king to shape the public sector.  Now we allow the perspectives of 538 congresspeople to shape the public sector.  But in the future we will allow the perspectives of millions and millions of taxpayers to shape the public sector.

What will the outcome be of allowing millions and millions of taxpayers to choose which government organizations they give their taxes to?  We can't know the specifics.  All we can know is that wasting limited resources has negative consequences.  Allowing 538 congresspeople to prevent 150 million taxpayers from trading their taxes in the public sector has negative consequences because it partially destroys the perspectives of 150 million of our most productive citizens.

We all understand this concept on the individual level...because we all inherently understand that a mind is a terrible thing to waste.  All the invisible hand says is that, if it's a terrible thing to waste one mind, then it's a catastrophic thing to waste millions of them.  We can avoid this catastrophic waste by allowing the people who labored, toiled and sweated to earn their money to choose which public goods are worth their effort.

If the socialists mean that under extraordinary circumstances, for urgent cases, the state should set aside some resources to assist certain unfortunate people, to help them adjust to changing conditions, we will, of course, agree. This is done now; we desire that it be done better. There is, however, a point on this road that must not be passed; it is the point where governmental foresight would step in to replace individual foresight and thus destroy it. It is quite evident that organized charity would, in this case, do much more permanent harm than temporary good. - Bastiat 

Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority. - Bastiat 

Thus, considered in themselves, in their own nature, in their normal state, and apart from all abuses, public services are, like private services, purely and simply acts of exchange. - Bastiat

Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race. - Bastiat

Ouch, My Most of Me!!

When I was growing up I faithfully read the comic strip section in the Los Angeles Times.  I remember my grandfather once asked me if they were funny.  I responded that they were...and he asked, "so how come you're not laughing?"

For some time now I've been faithfully reading the Crooked Timber Liberal blog.  So far there have been only two instances where something that I've read has made me actually laugh out loud.  Well...perhaps more like chuckle out loud.  Nothing too maniacal.

Both instances revolved around David Graeber's book on Debt.  The first instance occurred when I read Daniel Davies making a point regarding a wife swapping economy and the second instance occurred today when I read David Graeber's response to all the Crooked Timber Liberals that reviewed his book.  Seminar on Debt: The First 5000 Years – Reply.  Here's the punchline from his response to Henry Farrell's critique (see my post on Economic Fairytales)...

Again—I’m sorry to be rude, but I didn’t start this thing—one really wonders what this has to say about Prof. Farrell’s professional qualifications. After all, he is a Professor of Political Science and International Relations. Prof. Hudson’s work falls under his supposed area of expertise, not mine. Yet I, a lowly anthropologist, managed to figure out pretty easily what Hudson is saying, and Farrell, the man who receives a salary based on his presumed understanding of such matters, comes up with interpretations of Hudson that make the man himself laugh in disbelief.

Did Henry Farrell say "Ouch, my most of me!!" when he read this?  It's probably what I would have said...in reference to Episode 8 of Teen Girl Squad.  "Ouch, my most of me!!" is what you say when your bass guitar turns into a shark and then chomps off more than half of your body...or when somebody lobs a decent insult at you.

Over on the Ron Paul Forums I have my own critics to deal or not deal with.  Probably my most enthusiastic and creative critic is noneedtoaggress.  Here's what he posted in the thread with a decent amount of consequentialist discussion...

"Ouch, my most of me?"...yeah, not so much.  To drive the point home he created a new account on the Ron Paul Forums ("Pragmatarian") and then pretends to be my first follower..."We're All Pragmatarians Now": My Journey to Pragmatarianism.  Interestingly enough...David Graeber's lengthy response had this somewhat relevant tidbit...

This I guess is why I’m a radical, and not a liberal. Don’t get me wrong. Liberals have made magnificent contributions to the world. I might be an anarchist, but I have no desire to see anyone privatize the NHS—nor, interestingly, do any other anarchists I am aware of (though granted, I don’t know many anarcho-capitalists. I suspect it’s because they largely don’t exist, except on the Internet, which is crawling with them.)

This point is a bit confusing isn't it?  David Graeber says he might be an anarchist...but then he goes on to say that he doesn't want to privatize the NHS...unlike the anarcho-capitalists...who only exist on the internet.  Here's the rest of the paragraph...

But this is because as an anarchist, I see states as bureaucracies of violence, and make a distinction between state institutions, and public or better, common institutions, that happen to be run by the state because states rarely allow anyone but themselves to manage collective resources (unless it be for private profit.) There are collective institutions that cannot be run without recourse to violence—where you need to be able to call up the guys with sticks and guns or it all wouldn’t work. There are collective institutions—and I suspect large communal health arrangements are one—that could. I tend to see a collective health system as falling into the latter category so it never occurs to me it should be eliminated, even if currently run by the state.

What does David Graeber think the large majority of anarcho-capitalists crawling around the internet are actually saying?  Perhaps he should read my post on anarcho-capitalism and pragmatarianism.  Here's his conclusion...

What’s important to me is how to do it with as broad an alliance as possible—as anarchists such as myself who have been involved with OWS have consistently tried to do. How to find a common ground to push things further towards a free society, without any sort of consensus of just how far we can ultimately go?

After he reads my post on anarcho-capitalism then he should definitely read this post...Tax Choice - A Strategy for the Occupy Movement.

The Third Solution - Pragmatarianism

Here's what I posted for the anarcho-capitalists over on the Ron Paul Forums...Choice vs Coercion...

********************************

In the thread on political labels CCTelander had this to say about pragmatarianism...

Being allowed to choose my rapist IN NO WAY renders the fact that I'm to be raped more tolerable. - CCTelander

Anarcho-capitalists hate coercion.  But what is coercion?  Coercion is the limitation of somebody's freedom.  And what is freedom?  Freedom is the ability to make choices for oneself.

Pragmatarianism advocates that taxpayers should be allowed to choose how their taxes are allocated.  Giving taxpayers a choice how their taxes are allocated would increase their freedom.  By increasing their freedom we would reduce the degree of coercion to which they are subjected.

So if anarcho-capitalists hate coercion...and pragmatarianism can reduce coercion...shouldn't anarcho-capitalists appreciate pragmatarianism?  Isn't reducing coercion a step in the right direction?

When I was stationed in Afghanistan I had to give capabilities briefings to various commanders.  The point of the briefings was to help the commanders understand how my team could help them accomplish their missions.  It was fairly easy to pick out the ineffective commanders because they did not demonstrate any interest in considering alternative approaches.  Of course, their lack of interest could have reflected my own ineffectiveness at conveying the value of my team's abilities.

In the fight against socialism Ludwig von Mises was an intellectual general.  But in 1922, when he launched his first major offensive, he wrote that there were no third solutions; the choices were either socialism or capitalism.  He steadfastly maintained this position in his later books.  The problem was that his dichotomy was false.

Let's get algebraic...

A = private ownership of the means of production
B = public ownership of the means of production
1 = market economy
2 = command economy

Capitalism: A1
Socialism: B2
Mixed economy: A1B2
Pragmatarianism: A1B1

Our current economy and that of most of the world's is A1B2.  Mises said that A1B2 was unfeasible because it would eventually collapse.  The current problems in Europe certainly seem to lend credence to his predictions.  But is it possible to consider that both A1 and B2 might have their respective flaws?

Extrapolating from these trends, either to the conclusion that "capitalism can't do anything right" (as it appeared in say, 1932) or that "government can't do anything right" (as it may appear today) is simply unwarranted.  The truth could lie somewhere in the middle; that is what makes the social-democratic order so difficult for simplistic forms of libertarianism to challenge effectively. - Jeffrey Friedman, What's Wrong with Libertarianism (PDF)

Mises' tunnel vision prevented him from seeing possible alternatives.  He told the world...these are your choices...A1 or B2.  His failure to offer A1B1 as a possible choice reflected that he had inadvertently intellectually coerced himself...and the the rest of the world.

What, exactly, does it mean for action and thought [to] be individualistic?  Clearly it is possible for people to act collectively, whether through cooperation or coercion; and it is even possible for them to "think" collectively, by learning from, or being brainwashed by, each other and their predecessors.  - Jeffrey Friedman, What's Wrong with Libertarianism (PDF)

What were the unintentional consequences of Mises' unintentional coercion?  What if in 1922 he had offered A1B1 as a possible choice?

When people were committed to the idea that in the field of religion only one plan must be adopted, bloody wars resulted.  With the acknowledgement of the principles of religious freedom these wars ceased.  The market economy safeguards peaceful economic co-operation because it does not use force upon the economic plans of the citizens.  If one master plan is to be substituted for the plans of each citizen, endless fighting must emerge.  Those who disagree with the dictator's plan have no other means to carry on than to defeat the despot by force of arms. - Ludwig von Mises, Socialism

Doesn't pragmatarianism allow for the greatest possible political freedom?  How many bloody wars would have been adverted if Mises hadn't coerced himself and others into believing that there were only two possible choices?  

When I was in a remote village in Afghanistan a very distraught lady told us that a couple days earlier the Taliban had beat her husband to death for refusing to give them his family's only food.  Is it moral for Americans to be thrown into jail for refusing to make small sacrifices towards preventing situations where people in other countries are killed for refusing to make big sacrifices?

Oversimplifying morality is self-coercion.  There will always be lesser evils and greater goods.  If you were given the choice, wouldn't it be wholly immoral if you allowed your taxes to support greater evils?

What is the value to society when each and every taxpayer is given the freedom to either maximize the benefit or minimize the harm of their taxes?  What is the value of forcing taxpayers to consider the opportunity costs of their tax allocation decisions?  What is the value of applying the invisible hand to the public sector?  Here are some additional pragmatarian questions.

When you tell people that their only choices are capitalism or socialism you are engaging in intellectual coercion.  You present a false dichotomy and intentionally limit people's choices.   I'm not asking that you tell people that pragmatarianism is a good choice...I'm just asking that you offer it to them as a possible choice.

The moment a libertarian leaves libertarianism behind, reality loses its threatening aspect; his intellectual marginality becomes a precious sources of fresh insight into every aspect of politics and culture.  It seems paradoxical but true that high seriousness can be enjoyable, and that political disengagement can produce genuine insights into politics.  The paradoxes may be dispelled, however, by realizing that disengagement is equivalent to alientation.  Alienation plants seeds of doubt, doubt nourishes serious thinking, and serious thought is the only alternative to an intellectual complacency that must always be shadowed by fear of its own simplifications. - Jeffrey Friedman, What's Wrong with Libertarianism (PDF)

Here are the passages that I found where Mises directly references a "third solution"...

1922 - Production can either be directed by the prices fixed on the market by the buying and by the abstention from buying on the part of the public.  Or it can be directed by the government's central board of production management.  There is no third solution available.  There is no third social system feasible which would be neither market economy nor socialism.  Government control of only a part of prices must result in a state of affairs which - without any exception - everybody considers as absurd and contrary to purpose.  Its inevitable result is chaos and social unrest. -  Ludwig Von Mises, Socialism

1922 - The notion of fairness is nonsensical if not related to an established standard.  In practice, if the employers do not yield to the threats of the unions, arbitration is tantamount to the determination of wage rates by the government-appointed arbitrator.  Peremptory authoritarian decision is substituted for the market price.  The issue is always the same: the government or the market.  There is no third solution. - Ludwig Von Mises, Socialism

1940 - It is frequently asserted that a third form of social cooperation is feasible as a permanent form of economic organization, namely a system of private ownership of the means of production in which the government intervenes, by orders and prohibitions, in the exercise of ownership. This third system is called interventionism. All governments which do not openly profess socialism tend to be interventionist nowadays, and all political parties recommend at least some degree of interventionism. It is claimed that this system of interventionism is as far from socialism as it is from capitalism, that as a third solution to the social problem it stands midway between the two systems, and that while retaining the advantages of both it avoids the disadvantages inherent in both.  - Ludwig von Mises, Interventionism

1944 - The Führer, the vicar of the "German God," will become their Supreme Lord. If they do not acquiesce in such a state of affairs, they must fight desperately until the Nazi power is completely broken. There is no escape from this alternative; no third solution is available. A negotiated peace, the outcome of a stalemate, would not mean more than a temporary armistice. The Nazis will not abandon their plans for world hegemony. They will renew their assault. Nothing can stop these wars but the decisive victory or the final defeat of Nazism.  - Ludwig von Mises, Omnipotent Government

1944 - The alternative is humanity or bestiality, peaceful human coöperation or totalitarian despotism. All plans for a third solution are illusory. - Ludwig von Mises, Omnipotent Government

1945 - But the term planning is also used in a second sense. Lord Keynes, Sir William Beveridge, Professor Hansen, and many other eminent men assert that they do not want to substitute totalitarian slavery for freedom. They declare that they are planning for a free society. They recommend a third system, which, as they say, is as far from socialism as it is from capitalism, which, as a third solution of the problem of society's economic organization, stands midway between the two other systems, and while retaining the advantages of both, avoids the disadvantages inherent in each. - Ludwig von Mises, Planning as a Synonym for Socialism

1949 - Today it is no longer difficult for intelligent men to realize that the alternative is market economy or communism. Production can either be directed by buying and abstention from buying on the part of all people, or it can be directed by the orders of the supreme chief of state. Men must choose between these two systems of society's economic organization. There is no third solution, no middle way.  - Ludwig von Mises, Laissez Faire or Dictatorship

1949  - What alone matters is which system of social organization is better suited to attain those ends for which people are ready to expend toil and trouble.  The question is market economy, or socialism?  There is no third solution.  The notion of a market economy with nonmarket prices is absurd.  The very idea of cost prices is unrealizable. Even if the cost price formula is applied only to entrepreneurial profits, it paralyzes the market.  If commodities and services are to be sold below the price the market would have determined for them, supply always lags behind demand.  Then the market can neither determine what should or should not be produced, nor to whom the commodities and services should go.  Chaos results. - Ludwig von Mises, Human Action

1949 - It is difficult to find out how many of the supporters of interventionism are conscious of the fact that the policies they recommend directly lead to socialism, and how many hold fast to the illusion that what they are aiming at is a middle-of-the-road system that can last as a permanent system—a “third solution.” - Ludwig von Mises, Human Action

1951 - A third solution of the problem would be to confiscate all the profits earned by entrepreneurs for the benefit of the state.  A one hundred per cent tax on profits would accomplish this task.  It would transform the entrepreneurs into irresponsible administrators of all plants and workshops.  They would no longer be subject to the supremacy of the buying public.  They would just be people who have the power to deal with production as it pleases them.  - Ludwig von Mises,  Profit and Loss

1955 - People can consume only what has been produced. The great problem of our age is precisely this: Who should determine what is to be produced and consumed, the people or the state, the consumers themselves or a paternal government? If one decides in favor of the consumers, one chooses the market economy. If one decides in favor of the government, one chooses socialism. There is no third solution. The determination of the purpose for which each unit of the various factors of production is to be employed cannot be divided. - Ludwig Von Mises, Inequality of Wealth and Incomes

1957 - When people who aim at the substitution of socialism for the market economy advocate interventionist measures, they are consistent from the point of view of their aims. But those people are badly mistaken who consider interventionism as a third solution of the problem of society's economic organization, a system which, as they say, is as far from socialism as from capitalism, while combining what is "good" in each of these two systems and avoiding what is "bad" in them. Ludwig von Mises, Economic Freedom in the Present-Day World

Political Ideology Diagrams

Here are a few diagrams I created to help illustrate that tenets can be used to help define where one political ideology ends and another political ideology begins.

The first political ideology Venn diagram depicts shared tenets while the second and third bell curve, public goods spectrum diagrams depict the scope of government.

The scope of government* should be determined by allowing taxpayers to directly allocate their individual taxes among the various government organizations.  For example, at anytime throughout the year you could visit the Environmental Protection Agency website and directly submit a tax payment.  This is known as pragmatarianism and/or tax choice.

Liberals believe that the government should do a lot more (have a broader scope) while conservatives and libertarians believe that the government should do a lot less (have a narrower scope).  In a tax choice system, if the Red Cross is more effective and efficient than FEMA then people who value disaster relief might not allocate any of their taxes to FEMA. This would narrow the scope of government.  Conversely, because private healthcare is so expensive perhaps more and more taxpayers might allocate their taxes to public healthcare.  The amount of money that public healthcare received would determine what percentage of the population qualified for coverage.  This would broaden the scope of government.  Allowing for a division of labor between taxpayers would reveal the proper scope of government.

One significant problem with the current system is that without allowing taxpayers to consider the opportunity costs of their taxes then there's no way for the government to know how to prioritize spending.  Somebody can say that they value defense, public healthcare, infrastructure, etc but the only way to accurately determine exactly how much they truly value infrastructure is by giving them the freedom to choose how much defense and public healthcare they would be willing to forgo in order to pay for more infrastructure.  Tax choice allows taxpayers to reveal their preferences which is the only way that public funds can be efficiently distributed among the various government organizations.

Pragmatarianism also solves the problem of government inefficiency.  Organizations in the private sector are forced to operate efficiently or they either lose customers (in the case of businesses) or they lose donors (in the case of non-profits).  Government organizations currently receive the same amount of money irrespective of how well they use it.  Without a strong incentive to operate efficiently they have become extremely inefficient.  With pragmatarianism, taxpayers would not willingly give their taxes to a government organization that would just waste their money.

*For a highly entertaining yet very informative historical perspective on the scope of government please see Herbert Spencer's comment at the end of my post on Absurdity-Spotting.

Here is the political ideology Venn diagram.  This diagram helps illustrate that libertarian socialism can more accurately be thought of as anarcho-socialism.

Here is the public goods spectrum / scope of government bell curve diagram.  On the far left the government would provide all the goods (socialism) and on the far right the market would provide all the goods (anarcho-capitalism).  As I mentioned above, allowing for a division of labor between taxpayers would reveal the ideal division of labor between the public and private sectors.  

Here is the same public goods spectrum / scope of government bell curve diagram.  The difference is that it depicts the liberal spectrum.  

Thanks to karmaisking for his suggestion to include control of money/banks on the diagrams!