Dear Jag Bhalla

If you search ScientificAmerican.com for "invisible hand" you could learn that there's some guy named Jag Bhalla who is critical of the Invisible Hand.  I found his website and sent him an e-mail, which was when gmail immediately notified me that his e-mail address was broken.  So here we are.

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Karl Popper was so cool...

If I am standing quietly, without making any movement, then (according to the physiologists) my muscles are constantly at work, contracting and relaxing in an almost random fashion, but controlled, without my being aware of it, by error-elimination so that every little deviation from my posture is almost at once corrected. So I am kept standing, quietly, by more or less the same method by which an automatic pilot keeps an aircraft steadily on its course. — Karl Popper, Of Clouds and Clocks

But he wasn't nearly as cool as Adam Smith...

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

Contrary to popular belief, the Invisible Hand is not about self-interest, it's about people using their money to communicate what their interests are.  The supply is regulated by the spending signals of countless consumers.

In Friedrich Hayek's 1945 Nobel essay he reinforced the idea that markets are all about communication...

We must look at the price system as such a mechanism for communicating information if we want to understand its real function — a function which, of course, it fulfils less perfectly as prices grow more rigid. (Even when quoted prices have become quite rigid, however, the forces which would operate through changes in price still operate to a considerable extent through changes in the other terms of the contract.) The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more than is reflected in the price movement. — Friedrich Hayek, The Use of Knowledge in Society

Command economies fail because, in the absence of prices, they are unable to utilize all the relevant and necessary knowledge that is dispersed among all the consumers and producers.

In 1954 the Nobel economist Paul Samuelson critiqued Hayek's essay by pointing out that, because of the free-rider problem, prices don't work so well for public goods...

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 Samuelson, The Pure Theory of Public Expenditure

Samuelson's basic assumption was that the optimal supply of all goods is entirely dependent on honest signals.  Again, it's about using money to communicate your interests.  The problem with a good like Linux is that you can benefit from it without having to pay for it.  Let's say that your true valuation of Linux is $40 bucks.  If you only donate $20 dollars to it, you still can fully benefit from it, but you can take the $20 bucks that you saved and use it to buy a nice steak.  The amount that you spent on Linux would be a false signal because it would be less than your true valuation of it.  On its own, your false signal isn't so much of a problem... after all... you only cheated Linux out of $20 bucks.  The issue is when everybody else does the same thing.  When everybody's contribution to Linux is a lot less than their true valuation of it, then naturally it's going to be a lot lower quality than everybody truly wants it to be.  Also, there's going to be far fewer freely available alternatives to Linux than everybody truly wants.

To be clear, the only reason that consumers have the incentive to be dishonest about their true valuation of Linux (a public good) is because they have the option to spend their money on steak (a private good) instead.  If this option was eliminated, then so too would be the incentive to be dishonest.  This was the point that the Nobel economist James Buchanan made in 1963...

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'll hedge my bets by sharing how other people have explained the idea of individual earmarking...

One strand of this approach-initiated in Buchanan’s (1963) seminal paper-argues that the voter who might have approved a tax increase if it were earmarked for, say, environmental protection would oppose it under general fund financing because he or she may expect the increment to be allocated to an unfavored expenditure such as defense. Earmarked taxation then permits a more satisfactory expression of individual preferences. — Ranjit S. Teja, The Case for Earmarked Taxes

Individuals who have particularly negative feelings concerning a publicly provided good (e.g. Quakers on military expenditures, Prolifers on publicly funded abortions) have also at times suggested that they should be allowed to dissent by earmarking their taxes toward other public uses. — Marc Bilodeau, Tax-earmarking and separate school financing

Imagine if Netflix gave subscribers the opportunity to use their monthly fees to help rank the content.  Would subscribers have any incentive to be dishonest? Nope. This is simply because they would not have the option to spend their fees on things like food or clothes. Subscribers would not have the option to spend their fees outside of Netflix. Therefore, how subscribers earmarked their fees would honestly communicate their true valuations of the content.  The result would be the optimal supply of content.

The most relevant economic discussion looks basically like this...

Smith: Consumers should have the freedom to spend their money to help rank goods.
Hayek: It's true, the market is the only way to utilize all the dispersed knowledge.
Samuelson: While the market does work for private goods, it fails for public goods.
Buchanan: Actually, earmarking would allow the market to also work for public goods.

So what do you think?  Have I successfully changed your mind about the Invisible Hand?  Have I efficiently eliminated one of the biggest errors that you live by?  Have I fulfilled my moral obligation to economically educate and enlighten you?

To be clear, my own beliefs in the Invisible Hand can potentially be falsified.  If Netflix gives the Invisible Hand the opportunity to regulate the content, and it didn't noticeably improve, then this would falsify my belief in the Invisible Hand.

Science is, or should be, the most fertile common ground.

Unfortunately I doubt Netflix will conduct this experiment any time soon.  Here's a potential experiment that's much more accessible.  Imagine if a bunch of people rank the following books...

The Origin Of Species
Harry Potter and the Sorcerer’s Stone
The Handmaid’s Tale
A Tale of Two Cities
50 Shades of Grey
Principia
The Bible
War and Peace
12 Rules For Life
A Theory of Justice
The Cat in the Hat
The Wealth of Nations
The Hunger Games

First the participants would vote for all the books that match their preferences.  Then they would spend their own money to quantify just how closely these books match their preferences.

To be clear, the participants would not be buying the books.  They would simply have the opportunity to spend any amount of their own money in order to reveal the size of their love for each book.  All the money they spent would help crowdfund this experiment.

How differently would voting and spending rank the books?  My hypothesis is that voting would elevate the trash while spending would elevate the treasure.  If, however, voting ranked the Wealth of Nations higher than spending did, then this would falsify my hypothesis.

The relative effectiveness of the Invisible Hand can easily, relatively speaking, be compared to the alternative ranking systems.  The fact that these tests have not been conducted is the biggest error ever.  Let's combine our forces and eliminate this error.  Together we can demolish the massively detrimental disparity between where the world is, and where it should be.

The Invisible Hand

Comment on Why New Economics Needs a New Invisible Hand by David Sloan Wilson

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It's true that Adam Smith only used the term "invisible hand" three times, but he often discussed the concept without using the term...

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

Samantha the bee discovers a huge patch of blooming Aloes. After collecting as much pollen/nectar as she can carry, she quickly flies back to the hive to report her discovery. The way that she transfers her information to the other bees is by dancing. She dances long and hard to express her estimate of the patch's high quality. This is not a cheap signal... it's a costly signal. It costs her many of her precious calories. Because she's willing to make such a big sacrifice, many of the onlooking bees decide that it's worth it to inspect the Aloe patch for themselves. When they return to the hive they confirm, via sacrifice, that the patch is very useful. But if too many bees end up visiting the patch, then it will be harder to find nectar/pollen, and when they return to the hive they will report a lower valuation of the patch. The is how and why the Invisible Hand works.

Evonomics supplies lots of articles... but they really aren't equally useful. Most of the articles about the Invisible Hand are pretty useless. This really shouldn't be a surprise... given that the supply of articles isn't regulated by the Invisible Hand.

The solution is really simple. When people make a donation to Evonomics... just give them the opportunity to "earmark" their money to the most useful articles. Create a page on the website where the articles are sorted by usefulness. People will logically read the most useful articles and it will be a virtuous cycle.

So no, the Invisible Hand isn't primarily about selfishness. It's primarily about communication. All else being equal, whichever group is better at communicating will win.

The Scope Of My Relevance?

Here's my reply to Adam Gurri's comment on my previous entry.

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Patients are sometimes hooked up to machines that monitor their vitals. Evidently this is information that doctors and nurses need in order to make better informed decisions.

We can imagine something similar at plant shows.  People would be given heart rate monitors to wear. Then it would be possible to see and know what effect each entry had on people's heart rates.  Exhibitors could use this information to make better informed decisions. The most boring plants would be replaced with more exciting plants.  Shows would quickly be so exciting that attendees over the age of 60 would have a 90% chance of suffering a heart attack.

At Aristotle's plant show nobody would run the risk of being excited to death.  Instead, everybody would run the risk of being bored to death.

Speaking of which, I'm halfway through "Economics and Hermeneutics". If I had been wearing a heart rate monitor, it would have shown a small hop at Lachmann's chapter. I really like Lachmann, and he seemed to like hermeneutics, but just when I thought something intellectually exciting was going to happen, the chapter ended.

So far the most exciting chapter has been Richard M. Ebeling's. He basically argued that, thanks to positivism, price theory is incredibly incomplete. This would explain why plant shows aren't judged by consumers.  Most economists have focused on models and math rather than endeavoring to thoroughly interpret spending/sacrificing. Ebeling made the point several times that it's about communication. Well yeah. That's the same point that I tried to make in my entry about commerce as communication.  People generally don’t make random sacrifices.  Usually sacrifices have meaning.

You want a small handful of experts at a show to use ribbons to inform everyone which entries are the best.  I want everyone to use dollars to inform everyone which entries are the best.

I'll keep reading the book.  I'm curious if there are any chapters that are more intellectually exciting than Ebeling's.

Your concern about tax choice is that tax dollars would be a mile wide and an inch deep?  I really don't see this in the non-profit sector. The Red Cross receives a LOT more money than the Epiphyte Society. Evidently disaster relief is more important to people than epiphytes growing on all the trees. People haven't gotten the memo that epiphytes can stop global warming.

In neither case is there a revenue threshold for provision.  If the Red Cross only receives $100 dollars a year, it can still supply some disaster relief.  If the Epiphyte Society only receives $10 dollars per year, it can still attach a couple Tillandsias to a tree.  Bridges have more of a threshold.  But even in this case it doesn’t make sense to produce an 8 lane bridge when all that’s truly demanded is a foot bridge.  This isn’t the Field of Dreams.  Just because you build it doesn’t mean that they will come.

I think it’s pretty simple.  Do we need to know what’s important to society?  Well yeah.  It’s the only way that you can see and compare society’s priorities to your own.  Say that you don’t allocate any of your tax dollars to defense.  Evidently it’s not even a small priority for you.  But you can clearly see that for society defense is a massive priority.  Society allocates an incredible amount of tax dollars to defense.  How do you explain the gigantic disparity between society’s priorities and your own?  Does society know something that you don’t?  Or is it the other way around?  If you have solid evidence that society is tilting at windmills, then your freedom to exit your own tax dollars from the defense absurdity is impossibly wonderful.  You share your solid evidence with Samantha, her freedom to exit her own dollars from the defense absurdity is impossibly wonderful. The enlightenment effect is impossibly wonderful.  The layers of this dark age would be quickly peeled away.

If we could directly allocate our taxes, doing so would be optional.  How many taxpayers would choose this option?  How many people would choose to exit their own tax dollars from the absurdity of impersonal shopping?  Only a few?  Many?

I might be wrong about tax choice.  I certainly haven’t had much success persuading people that I’m right.  So I’m going to test the theory out on a plant show.  Will it be beneficial for people to use their dollars to inform each other of the importance of the entries?  Do we need to know what’s important to the Epiphyte Society?  Well yeah.  Unless I’m wrong.

Here’s what I can’t wrap my mind around.  No sane economist will argue against my freedom to donate money to the Epiphyte Society.  Evidently I’m relevant enough to judge the relevance of the society itself.  So how could a sane economist turn around and argue that I’m not relevant enough to judge the relevance of the parts of the society?   Am I more likely to misjudge the parts than the whole?

I should be free to decide that Rothbard’s work, as a whole, is worth my sacrifice.  But I should not be free to decide that only a part of his work is worth my sacrifice?

Feedback shouldn’t be too specific?  I have to value every chapter in "Economics and Hermeneutics" equally?  I have to value every entry in a plant show equally?  Or, my valuations of the entries do not matter, but my valuation of the Epiphyte Society itself does matter?  I should be free to exit from the society but I shouldn’t be free to exit from parts of it?

If it’s truly detrimental for people at a plant show to donate to specific entries, then why is it legal for people to donate to specific government agencies?  There’s no law against donating to NASA or the EPA.  Should there be?  Are people more likely to misjudge the parts than the whole?

Here I am alive.  Before, I didn’t exist, afterwards, I won’t, but for now, I do.  Some things in my life make a lot of sense… like Forever by Weekend Wolves.  I just gave it a thumbs up.  Other things make absolutely no sense… like impersonal shopping.  But there’s no thumbs down button for me to click.  I have so much feedback to give on all sorts of things... but in so many cases there’s no way to give it.  What I really want is a coherent story about where my relevance begins and ends.  Is that too much to ask for?  Is it unreasonable to ask for a relevance rule that makes sense?

My Well-Being Depends On Artichokes!

Reply to reply: No Such Thing As A Free Lunch

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Thus the government may fund things that a business would never fund because it increases the well being of a population, even though it may represent an opportunity cost or seem like it has little utility to the opposition. - Northern Light

You expect congress to make public goods choices with due consideration for my well-being. My well-being? In the private sector I have to spend so much time and energy going around informing producers what works for my well-being. I shop and shop and shop. For example, I go to the store and buy some artichokes. In doing so I tell Frank the farmer, "Hey! You correctly guessed that my well-being depends on artichokes! Thanks! Good lookin' out! Here's some money! Keep up the good work!"

Yet here you are telling me that congress can somehow know what works for my well-being despite the fact that I've never once in my life shopped in the public sector. It boggles my mind. It blows my mind. It bears repeating with emphasis... congress can know what works for my well-being despite the fact that I've never once in my life shopped in the public sector. If you think that this is really true... then please... don't hide your insight under a bushel. Start a thread here, there and everywhere and say "Hey folks! Shopping is entirely redundant! It's entirely unnecessary for us to spend so much of our limited time and energy using our cash to communicate what works for our well-being."

Then again, it pays to double check. E-mail your representative and ask them what works for your well-being. If they say general things like food and defense are you going to be super impressed? Are you super impressed when a fortune teller makes "divinations" that are so vague and general that they pretty much apply to everyone?

The market is based on the premise that producers really aren't mind-readers. So in order for the well-being of the population to truly increase, there has to be constant monetary communication between consumers and producers. You gotta use your hard-earned money to specify exactly what works for your well-being. You gotta use your money to advocate for yourself. Because nobody knows you better than you do.

You're Filling The Wrong Hole!!!

It is these needs which are essentially deficits in the organism, empty holes, so to speak, which must be filled up for health’s sake, and furthermore must be filled from without by human beings other than the subject, that I shall call deficits or deficiency needs for purposes of this exposition and to set them in contrast to another and very different kind of motivation. — Abraham Maslow, Toward a Psychology of Being

This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes. - Frédéric Bastiat, What Is Seen and What Is Not Seen

 Reply to: The Magnitude of Inequality by James Kwak

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Some people’s stories don’t receive any recommendations… other people’s stories receive 1000s of recommendations. That’s infinitely more recommendations. Why do you ignore the massive inequality that’s right under your nose?

Unlike the government, Medium is not way outside your range of effectiveness. You should have no problem persuading Medium to massively reduce recommendation inequality. When it does so, we’ll all be amazed and astounded by how much the stories improve as a result. Right? With such conclusive evidence, the government will no longer be way outside your range of effectiveness.

Fortunately for everybody, Medium is way outside my range of effectiveness. If it wasn’t, then we’d all have the option to allocate our pennies to our favorite stories. Oh man, can you imagine what would happen to penny inequality? For sure it would skyrocket. I wonder though if the most popular stories would also be the most valuable stories…

Seriously though, the primary purpose of paying for things is to reveal and communicate our perception of their relative scarcity. This should be pretty intuitive. If Medium facilitated micropayments then for sure you’d allocate more pennies to rarer stories.

It is these needs which are essentially deficits in the organism, empty holes, so to speak, which must be filled up for health’s sake, and furthermore must be filled from without by human beings other than the subject, that I shall call deficits or deficiency needs for purposes of this exposition and to set them in contrast to another and very different kind of motivation. — Abraham Maslow, Toward a Psychology of Being

We’d all use our pennies to communicate which stories fill our empty holes, so to speak. This fundamental feedback would logically alter everybody’s behavior. The result would be a feedback loop…

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

Economics is all about behavior optimization. Behavior can only be optimized when our payments accurately reflect our perception of relative scarcity…

allocation = valuation

Is labor an exception to this rule? Should we disregard people’s perception of labor’s relative scarcity? Should we pretend that it’s economically impossible for any given geographic area to ever have a labor surplus? It’s impossible for Seattle to ever have too many waiters? No matter what… Seattle will always have a shortage of waiters? No matter what… students in Seattle should drop out of school and become waiters? No matter what… waiters in Los Angeles and Houston should move to Seattle? But wouldn’t that mean that Seattle’s shortage of waiters is greater than the shortage of waiters in Los Angeles and Houston?

In ants, one such behaviour is the collective food search: ants initially explore at random. If they find food, they lay down pheromone trails on their way back to base which alters the behaviour of ants that subsequently set out to search for food: the trails attract ants to areas where food was previously located. — Jo Michell, The Fable of the Ants, or Why the Representative Agent is No Such Thing

Also…

Today’s Mandeville is the renowned biologist Thomas D. Seeley, who was part of a team which discovered that colonies of honey bees look for new pollen sources to harvest by sending out scouts who search for the most attractive places. When the scouts return to the hive, they perform complicated dances in front of their comrades. The duration and intensity of these dances vary: bees who have found more attractive sources of pollen dance longer and more excitedly to signal the value of their location. The other bees will fly to the locations that are signified as most attractive and then return and do their own dances if they concur. Eventually a consensus is reached, and the colony concentrates on the new food source. — Rory Sutherland and Glen Weyl, Humans are doing democracy wrong. Bees are doing it right

It seems pretty straightforward that there’s some sort of relationship between the accuracy of communication and the benefit of behavior.

From my perspective, you’re never going to make the feedback loop more accurate by disregarding/overruling/overriding/ignoring/diminishing people’s true perceptions of relative scarcity. Of course I might be wrong.

FYI…. I did notice your scarcity. Even though we fundamentally disagree I really don’t think that your absence improved Medium. For sure you’re a liberal… but at least you’ve done some homework. You’ve read at least some Hayek. Like I’ve read at least some Samuelson.

So I’ll definitely appreciate your thoughts on the topic of disregarding people’s perception of relative scarcity. Please ignore my snark/sarcasm and do your best to try and persuade me that I’m barking up the wrong tree! My life is way too short to spend barking up the wrong tree!

[Update Feb 3, 2018]

Saw this tweet and it reminded me of the Maslow quote...

Genius Optical Illusions To Promote Pet Adoption pic.twitter.com/NXHqXesRsR

— The Human Experience (@thehumanxp) February 2, 2018

[Update 3 March 2020]

Snippet of lyrics from Little Girl (With Blue Eyes) by Pulp...

Little girl (with blue eyes)
There's a hole in your heart
And one between your legs
You've never had to wonder
Which one he's going to fill
In spite of what he said

Better Communication, Better Markets

Reply to: The “Why” in Wage Segregation by Samuel Hammond

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It’s neat, and smart, that you juxtaposed the two things. But it doesn’t seem like you did an adequate job of making the case for subsidizing lower productivity workers. Why would we want to subsidize lower productivity workers? This paragraph seemed to be the extent of your case…

Rising premium on quality signals like educational attainment, polarizing wages, and lower social mobility / “Coming Apart” dynamics may therefore all be symptoms of the same phenomena. For better or worse, pooling equilibria promoted a degree of churn between rungs on the social ladder, and denied the ability of imperfect signals to sort one into a low wage destiny.

I’m pretty sure that Ezra Klein isn’t going to hire me as a writer. Which makes sense… I’m a pretty terrible writer. But if he did hire me… then I’d get paid more (certainly more than Medium pays me!)… and somehow I’d also become a better writer? A much better writer? If there was solid evidence that this was indeed the case then I think that Klein would act on it. Who doesn’t love a diamond in the rough?

However, your conclusion doesn’t seem to be that Klein really needs to open his eyes and see and appreciate and understand the enormity of my raw and untapped potential… your conclusion seems to be… universal basic income.

You give up on trying to persuade Klein of my incredibly latent value and instead reach into his pocket and put his money into my hand. Thanks? My writing skills would greatly improve? Voila!? I would shine on like the crazy diamond that I truly am?

Speaking of diamonds… I don’t think that I’ve been equally productive in every romantic relationship that I’ve ever been in. Just like I don’t think that all of my relationships have been equally healthy or beneficial. If it was possible, would it be desirable to mandate a minimum benefit for relationships? I don’t think it would be. You’d be giving people an incentive to stay in less productive relationships.

What if people could get the minimum benefit even if they weren’t in a relationship? It seems obvious that this would decrease their incentive to find and start productive relationships.

No two relationships are equally productive. This isn’t just true of romantic relationships…. this is true of all relationships. The minimum wage gives workers an incentive to stay in less productive relationships. And a basic income would decrease people’s incentive to find and start productive relationships.

A good relationship depends on good communication. People’s willingness to sacrifice is a super important form of communication. Actions speak louder than words. So it’s a problem when the government decreases the goodness of communication. Like most government “solutions”, universal income would make the problem even worse.

If you truly want to help people… then you should focus on improving the goodness of communication. Can we get rid of minimum wages? At this point in time it seems a bit outside our range of effectiveness. But what about here on Medium? What if there were some coin and dollar buttons below every story?

If you liked my story, despite how poorly it was written, you could clearly communicate your valuation of my content by clicking the 50 cent button. Fifty cents would be automatically withdrawn from your digital wallet and deposited into mine. The total value of my story would increase by 50 cents. When people searched for stories the default sorting would be by their value. It would be easy to find the most valuable stories. Once I had enough money in my wallet… I could cash out and Medium would take a very fair and reasonable cut.

Wouldn’t this system increase the goodness of communication? Of course! It would eliminate the payment problem. However, there would still be the free-rider problem. So what if, for example, Netflix allowed their subscribers to use their monthly fees to communicate their valuation of the content? A while back I sat down and figured out how I might allocate one month’s worth of fees…

1. Amelie: $1.50
2. Black Mirror: $0.25
3. Castaway on the Moon: $0.25
4. Rake: $1.25
5. Shaolin Soccer: $0.50
6. Sidewalls: $0.25
7. Snatch: $0.25
8. Spaced: $1.00
9. The League: $0.75
10. The Man From Earth: $4.00


Yeah, it was really hard. Talk about opportunity cost. But I had absolutely no incentive to understate my valuations. Doing so certainly wouldn’t have decreased my monthly payment.

Wouldn’t this system (the pragmatarian model) increase the goodness of communication? Wouldn’t consumers have better relationships with content creators?

Minimum wages decrease the goodness of communication. And so would a universal basic income. Decreasing the goodness of communication makes society worse. If we want to make society better… then we need to increase the goodness of communication.

Markets are all about the goodness of communication. Improving communication means improving markets. Better communication means better markets. Right now Medium is a pretty terrible market. We can’t use our cash to communicate our valuations of each others’ stories. Facilitating payments would make Medium a much better market. If the free-rider problem is a real problem, which it probably is, then switching over to the pragmatarian model would make Medium an even better market.

How many websites are really terrible markets? Is Vox a terrible market? Of course it is. I’m sure you’ve never used your cash to communicate your valuation of any of Klein’s stories. Klein is certainly a better writer than I am… but to the extent that I understand what makes markets better… I’m certainly a much better economist than he is. He’s a great writer and a terrible economist. I’m a terrible writer and a great economist. Sounds like a match made in heaven! But he never returns my phone calls. :(

And even with those websites that do put their content behind paywalls… can subscribers use their monthly payments to communicate their valuation of the content? Nope. So they are terrible markets as well.

The internet has a gazillion really terrible markets. If we vastly improved these markets by applying the pragmatarian model to them, then we would all clearly see that any perceived necessity of a universal basic income was the consequence of people’s failure to understand the importance of good communication. And people’s failure to understand the importance of good communication is the consequence of my terrible writing skills.

Of course I might be wrong! I might have fallen asleep in a few econ classes or zoned out while reading a few econ books. So if you think there are any details, minor or major, that I’m missing… please enlighten me!

Alex Tabarrok VS Paul Romer

Alex Tabarrok is my favorite living economist for two main reasons...

1. Coherence
2. Responsiveness

What do I mean by "coherence"?   I mean getting the economic story straight.  Compared to other economists... Tabarrok's economic story has a lot less contradictions.  By "responsiveness" I mean that he's taken the time and made the effort to publicly address at least some of my arguments.

Of course I'm greedy though.  I wish that Tabarrok was far more coherent and responsive.   I wish that he was perfectly coherent and responsive. So rather than simply settle, I've remained open-minded about the possibility of finding another economist who more closely matches my preferences.

Right now I'm kinda excited because I just "found" a candidate with lots of potential... Paul Romer.  Perhaps the first time I remember hearing his name was during the "mathiness" debate.   The debate was a bit interesting... but not interesting enough for me to take the time and make the effort to read Romer.  Just recently I learned that he had been selected to be the World Bank chief economist.  Eh, kinda less interesting than the mathiness debate.  Today I saw this tweet..

Does development policy need more randomized trials, or fewer? https://t.co/3FTtcKkwrJ

— Noah Smith (@Noahpinion) July 18, 2016

Did I read it?  Nope.  Scrolling down my Twitter feed I saw this other tweet...

For more on non-rival goods, look next at this: https://t.co/5sFghUUuk6
https://t.co/H2XV2YZAKw

— Paul Romer (@paulmromer) July 18, 2016

Did I read it?  Yup!  I enjoyed reading it and immediately read and enjoyed other of his blog entries.  Here's what I've read so far...

1. Nonrival Goods After 25 Years
2. Human Capital and Knowledge
3. Clear Writing Produces Clearer Thoughts
4. Economic Growth
5. Science Really Works: A Prize for A Careful Optimist
6. Speeding-up and Missed Opportunities: Evidence
7. Speeding Up: Theory
8. Where has all the excludability gone?

Romer definitely has lots of potential to be more coherent than Tabarrok.  I'll go ahead and give Romer the opportunity.  Let's start here...

If there is no legal protection that prevents copying of books, then A is nonexcludable. Having something like copyright protection for books might or might not be a good thing. - Paul Romer, Human Capital and Knowledge

A while back a Crooked Timber liberal, Scott McLemee, tackled this issue... Karlo Marx and Fredrich Engels / Came to the checkout at the 7-11.  Basically, the website "marxists.org" had been slapped for freely disseminating copyrighted material.  McLemee made the case for freely sharing the material.  What made me chuckle was that he cited the "mises.org" website...

About the time the Marxist Internet Archive announced that it would be taking down all the MECW material, Corey and I both, by coincidence, were availing ourselves of radically under-priced materials from the enemy’s publishing apparatus. He’d received an order containing dirt-cheap copies of Bastiat from the Liberty Fund, while a day earlier I had downloaded free digital editions of the major Austrian School books on theory of value and the socialist-calculation debate from the Mises Institute website. There’s more to neoliberal hegemony than loss-leader pricing, but as ideological combatants those people know what they’re doing.

Haha.  It was worth a blog entry... Don't Hide Marx Under A Bushel.  In that blog entry I had too much fun... but I wasn't very coherent.  Around a year later my economic story was far more coherent... In Which Our Anarchist Hero Jeffrey Tucker Proves The Point Of Taxation.  And recently I managed to put this coherence in a large nutshell... when everybody's valuations are far more accessible, everybody's decisions will be far more valuable.

Like I said earlier, I enjoyed reading Romer's blog entries.  And he will know this if he reads this blog entry.  My words can effectively communicate my preferences... but they cannot effectively communicate the intensity of my preferences.  Intensity of preference can only be effectively communicated by willingness to pay/spend/sacrifice.  When somebody tells you, "a penny for your thoughts"... they aren't literally offering to buy your thoughts for a penny.  But does it really matter how much they value your thoughts?

Let's consider the thoughts of my favorite economist...

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 

Romer's time is valuable... and limited.  Clearly it's desirable for him to not have his time wasted.  How can he avoid a faulty distribution of his time?  He has to know the value of the different possible allocations of his time.  He's not a mind-reader though.  He can only know the value of the different possible allocations of his time when consumers communicate their valuations of his time.

I'm guessing that the World Bank will pay Romer for his time.  And clearly I have not paid him for his time... and I'm guessing that I'm not the only person in this boat.  Otherwise the free-rider problem wouldn't be a real problem.  So it's a given that there will be a faulty distribution of Romer's time.  His time will be inefficiently allocated.

Here was my attempt to make the concept of value signals as accessible as possible...

Batman's limited and valuable time should be put to the most valuable uses.  Einstein's limited and valuable time should have been put to the most valuable uses.  Romer's limited and valuable time should be put to the most valuable uses.  All our limited and valuable time should be put to the most valuable uses.  All resources should be put to their most valuable uses.

Adam Smith is my favorite economist because he did the best job, by far, of illuminating the concept of value signals.  But he wasn't very coherent because he failed to apply the concept to public goods.  Well... he didn't completely fail...

Public services are never better performed than when their reward comes only in consequence of their being performed, and is proportioned to the diligence employed in performing them. - Adam Smith, Wealth of Nations

Hayek shed even more light on value signals...

We must look at the price system as such a mechanism for communicating information if we want to understand its real function—a function which, of course, it fulfils less perfectly as prices grow more rigid. (Even when quoted prices have become quite rigid, however, the forces which would operate through changes in price still operate to a considerable extent through changes in the other terms of the contract.) The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more than is reflected in the price movement. - Friedrich Hayek, The Use of Knowledge in Society

But just like Adam Smith, Hayek largely failed to come up with a coherent economic story.  Same with Mises...

The management of a socialist community would be in a position like that of a ship captain who had to cross the ocean with the stars shrouded by a fog and without the aid of a compass or other equipment of nautical orientation. - Ludwig von Mises, Omnipotent Government

Knut Wicksell's story was more coherent...

It is impossible for anyone, even if he be a statesman of genius, to weigh the whole community's utility and sacrifice against each other.  - Knut Wicksell, A New Principle of Just Taxation

Out of all the economists... Buchanan's story has been the most coherent...

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

So far Tabarrok seems content to simply sit on Buchanan's shoulders.   Does Romer want to stand on Buchanan's shoulders?

Here's a great passage from Romer...

To understand how persistent growth, even accelerating growth is possible, it helps to step back and ask where growth comes from. At the most basic level, an economy grows whenever people take resources and rearrange them in a way that makes them more valuable. A useful metaphor for rearrangement as value creation comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. Human history teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes produce fewer unpleasant side effects and generate more economic value per unit of raw material. - Paul Romer, Economic Growth

This is so true!!!  Progress is a function of difference.  Sexual reproduction is all about difference and voila!  Here we are!

Romer goes on to do a wonderful job of emphasizing how much room there is for more difference...

Once you get to 10 elements, there are more recipes than seconds since the big bang created the universe. As you keep going, it becomes obvious that there have been too few people on earth and too little time since we showed up, for us to have tried more than a minuscule fraction of the all the possibilities.

Further down in the same entry he applies the combination concept to developing countries...

For developing countries, the priority is to find a way to make use of the tested strategies that richer countries have already used to have a higher standard of living. One of the biggest meta-ideas of modern life is to let people live together in dense urban agglomerations. A second is to allow market forces to guide most of the detailed decisions these people make about who they interact with each other. Together, the city and the market let large groups of people cooperate by discovering new ideas, sharing them, and learning from each other. The benefits can show up as a new design for a coffee cup or wages for a worker that grow with experience acquired in jobs with a sequence of employers. People living in a large city cooperate with residents there and through many forms of exchange, with residents in other cities too. Cities connect us all together. China’s growth reflects is rapid embrace of these two big meta-ideas, the market and the city.

In Romer's blog entry... Speeding Up: Theory... he continued doing an excellent job of tying combinations and communication together...

We are lucky to in a physical world characterized by combinatorial explosion and to be creatures with an evolved capacity for communicating with each other.

Romer concludes with...

In parallel, we also discovered some meta-ideas that enhance the rate of communication across large distances and over time–written language, printing, and digital communication. Like cities, these are meta-ideas, ideas about how to produce and distribute ideas. They interact with population size to enhance the scale effects and convert them from local effects into global effects. 

It would be better to describe this as “the more you know, the better it is to have lots of other people around, not just nearby, but anywhere on earth.” 

In a following entry (Where has all the excludability gone?) Romer really seems to perceive the need for coherence...

Shouldn’t diffusion, every bit as much as innovation, depend on real things that real people do? Can’t economists come up with a theory of diffusion that does not have to invoke some mysterious form of action at a distance implied by these transmissions through the aether?  And shouldn’t prices and incentives be part of the story? Don’t they encourage real people to do more or less of the real things that real people do? Isn’t this what economics is all about, explaining behavior with incentives not assumptions? 

Like I said, Romer has lots of potential to be more coherent than Tabarrok.

Does a coherent story have blogs behind paywalls and books protected by copyright?  I sincerely doubt that these two methods will maximize the accuracy of value signals.  This is because one price really does not fit all.  Values are entirely subjective.  Different people have different valuations.

In various blog entries I've discussed different ideas for facilitating more accurate value signals.  Of course the main idea of this blog is to allow people to choose where their taxes go.

One recent idea would be to start a twitter trend of people tweeting the number of pennies that they've paid for other people's thoughts...

I just spent 1000 pennies on these thoughts by Paul Romer... https://t.co/5sFghUUuk6 #NoFreeRides

Hashtag "NoFreeRides"?  I'm certain that there's a better hashtag.  #DemandClarity  #ShowMeTheValue  #TrueLove #ActionsSpeakLouderThanWords  #ValueSignals

Anyways, I feel like I've done an adequate job of giving Romer the opportunity to come up with a coherent story.  If he publicly takes this opportunity and responds with an adequately coherent story... then there's a good chance that he might become my new favorite living economist.  Would Tabarrok be really sad if he was no longer my favorite living economist?  Heh.  I wish.  I wish that he would try and publicly compete with Romer in terms of coherence.  I wish there was at least some debate about the need for coherence.

What are the chances though that Romer will publicly share a coherent story?  I'd love it if he did so but I'm not holding my breath.  A  coherent story would involve people choosing where their taxes go.  Pragmatarianism would be a very unorthodox story to be told by the chief economist of the World Bank.  It's a tragedy that coherence is so unorthodox.  What a sad world that we live in.

Does Greg Stevens Have An Issue With Trading?

Comment on: Democracy 2.0: technology can improve how we elect leaders by Greg Stevens

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The thing is, "importance" can only be accurately measured by personal sacrifice.   In other words... preference intensity is a function of willingness to pay (WTP).   So from my perspective... the only way to "fix" voting is to replace it with spending.

Ideally it would be a "blind" and one shot deal.  Let's take prohibition for example and keep it simple with only two participants... you and I.  You're for prohibition and I'm against.  After we both finish spending our money on our preferred options... the results would be revealed...

Your WTP: $120
My WTP: $20

You won!   Prohibition would be enforced.  Since I lost I would get my $20 dollars back.  Plus, I would get your $120 dollars as well!  And it's not a shabby consolation prize.... given that I would have been willing to accept a minimum of $21 dollars.

Let's throw Jeffery into the mix on my side...

Your WTP: $120
My WTP: $20
His WTP: $10

You would still win but now the consolation prize would be proportionally distributed between Jeffrey and myself.   I would get 2/3rds ($80) and Jeffrey would get 1/3rd ($40).

You would essentially be paying Jeffrey and myself to not drink alcohol for an entire year.   You would get our abstinence and we would get your money.    The outcome would be mutually beneficial.  If it wasn't, then next year we'd adjust our WTPs accordingly.

So replacing voting with spending would facilitate trading.   It would really be no different than you paying Jeffrey and I to pull your weeds or paint your house.  Which means that if you have an issue with this proposal... you have an issue with trading.   Personally, I'm pretty sure we're better off with more, rather than less, trading.  This is because trading is a form of communication.   So is voting.... but trading is an infinitely more accurate form of communication.   More accurate communication allows society members to more quickly adjust/adapt to rapidly changing circumstances/conditions.


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Follow up comment...


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Let's keep it simple stupid again and imagine a two good economy.  The private sector produces food and the public sector produces defense.   In the private sector you decide that you want more food... so you spend your money accordingly.   But then you vote for more defense.   Except, more defense means less food.    

In this scenario.... does it matter how much, or how little, money you have?  Nope.   What matters is that voting makes it extremely likely that you're going to inadvertently shoot yourself in the foot.   If we reasonably assume that you truly wanted more food... then by voting for more defense you inadvertently subverted your own will.  

Of course, in a two good scenario you really wouldn't spend more money on food and then turn around and vote for more defense.  This is because it would be a no-brainer that more defense would mean less food.   Everybody would clearly see the trade-off between defense and food.  Everybody would clearly see that allocating more land to defense would mean allocating less land to farming.  Everybody would clearly understand that more "Einsteins" solving defense related problems would mean less "Einsteins" solving food related problems.    Everybody would clearly see defense and food competing for limited resources.  This clarity would guarantee that nobody would inadvertently subvert their own will.

Our economy produces a lot more than two goods.   But adding more goods to both sides (sectors) of the equation really doesn't eliminate the fact that there are always trade-offs.   It just guarantees that voters will not be able to clearly see these trade-offs... which guarantees that voters will regularly and inadvertently subvert their own will.

No country is ever going to truly thrive when all of its citizens regularly shoot their own feet.

So if you're rich and I'm poor... it's not about you having more political sway than I would have.  It's about ensuring that neither of us inadvertently overrides our own spending decisions.


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Follow up comment...


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PropA = replace voting with spending (yes/no issues)
PropB = give people the option to directly allocate their taxes (more/less issues)

Deciding whether prohibition should be enforced is a yes/no issue. So we would use PropA to decide it. If proponents spend more than opponents... then PropB would be used to decide how much money should be spent on prohibition.

With both proposals, the more money you have.... the more potential influence you'll have. The influence is only "potential" because, even if you have a billion dollars, it doesn't guarantee that you'll care one way or another about prohibition.

In your simple scenario... the two billionaires agreed on (and equally valued) every issue and the eight poor people agreed on every issue. Was this the case with prohibition? Or with marijuana? Or with gay marriage? Or even with the tax rate?

Here's kinda how I see your concern...

Gates: Hey Epi, I'll pay you $100,000 to quit drinking alcohol for a year!
Me: Wow! Why? Wait, never mind... it's a deal!
You: Woah woah woah. I forbid this trade!
Gates and me: Why?
You: Because Gates is so rich and you're so poor!
Me: So... he shouldn't be allowed to give me some of his money?

Let's compare it to the current system...

Majority: Hey Epi, we aren't going to even pay you one penny to quit drinking alcohol for a year!
Me: So you're going to screw me without even buying me a cheap dinner first?
Majority: Yup
Me: That sucks
You: Not really. It's only fair that the majority gets what it wants without having to pay for it. It's only fair that they screw you without compensating you at all. Our country thrives because of, rather than despite, tyranny of the majority.

Let's say that Gates offered to buy my old sneakers for $100,000 dollars. Would you forbid this trade from taking place because Gates is so much richer than I am? Let's say that Gates offers me $10 million dollars to sleep with him. Would you also forbid this trade for the same reason? Because... you don't want me to be exploited?

So the next time you're about to buy a computer, or buy a coffee from Starbucks, or buy anything on Amazon.... you would want me to forbid you from doing so? Because you, and the country, would be better off if you could only trade with people who have the same amount of money as you?

The challenge is to come up with a coherent story. My attempt at a coherent story is that trade facilitates accurate communication.... and accurate communication allows societies to rapidly adapt to constantly changing conditions/circumstances.

We both agree that progress depends on difference. Well... we both agree that this is true as far as evolution is concerned. But I perceive that this is also true as far as societies are concerned. Difference is expressed through trade. Blocking trade blocks difference.... which blocks progress.

If you and I had the option to choose where our taxes go... would we put the same exact public goods in our "shopping carts"? No, of course not. This is simply because we are different people. And I'm pretty sure that this difference is the source of all progress.


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Follow up comment...


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Right now alcohol is legal.  It's legal for people to make, sell and buy alcohol.   But let's say that mothers against drunk driving somehow managed to convince lots of people that alcohol should be illegal.

With the current system... it would be put to a vote.  People would go to voting booths and cast a vote either for, or against, prohibition.   The votes would be counted and whichever side received the most votes would win.   If the mothers against drunk driving won... then alcohol would be illegal.  Everybody who wanted to drink alcohol would be screwed.  They would be forced to do something that they didn't want to do... and they would receive absolutely NO compensation for their inconvenience.

With PropA.... people wouldn't go to voting booths.... they would go to spending booths.  They would spend their WTP on alcohol being legal or legal for one year.    Do you drink alcohol?  I do.  But I don't drink it very often... maybe once a month.  How much benefit do I derive from alcohol in one year?   It's hard to say.  Maybe $100 dollars?   So this would be my WTP.  This is how much I would spend for alcohol to remain legal.  How much would you honestly spend?

Let's say that the people who supported prohibition spent more money than the people who opposed prohibition.   What would happen?   I'd definitely get my $100 dollars back.  Plus, I would also receive my compensation.  My compensation would be proportioned according to the amount that I spent.   If my $100 dollars was 0.00001% of the total spent against prohibition... then my compensation would be 0.00001% of the total spent for prohibition.     If the other side spent $500 million... then my compensation would be $500 dollars.

So alcohol would be illegal... and I would still be thrown in jail and/or fined if I got caught selling, or buying or making it.  BUT, at least with this system I would be COMPENSATED for the inconvenience of having to sacrifice alcohol for one year.  I would receive $500 dollars for something that is only worth $100 dollars to me.   With the current system... there's absolutely no compensation.

Right now I would be fined/jailed if I got caught with marijuana and/or prostitutes.  Why?  Because the majority feels it's their duty to impose their morals on me.   But it doesn't even cost them a dime to do so.   With PropA... it would be an entirely different story.   Maybe, when confronted with the opportunity costs of their morals, they would decide that they had more valuable things to spend their own money on.   If not, then at least they would put their money where their morals are.   All this money would end up in the pockets of people who had different morals.

As I've tried to explain... the underlying goal here is clarity.   Prostitution is currently illegal... so I guess that the majority opposes it.   But I don't know HOW MUCH they oppose it.   Just like I don't know HOW MUCH my side supports the legality of prostitution.   PropA would facilitate a nationwide trade.  This trade would clarify the issue.  Each side would know just how important the issue was to the other side.   Our differences would be made crystal clear.    This essential information would allow everybody to make infinitely more informed decisions.

When everybody's valuations are far more accessible... then everybody's decisions will be far more valuable.

Right now my valuation of your blog entries is NOT accessible.  I sure did enjoy your blog entry on evolution.   It was great!   Just telling you this though isn't the same thing as giving you my money to communicate my valuation of your blog entry.   I haven't given you any money for that blog entry.    Does this make me a free-rider?   Not in this case!  In this case I haven't given you any money for that blog entry because your blog doesn't facilitate micropayments.   So this is an example of the forced-free-rider problem.

If your blog facilitated micropayments... then valuing your entries was as easy as "liking" them.  As a result, all your readers' valuations would be far more accessible.  This means that you, and everybody else, would be able to make far more valuable decisions.

Same concept if you and others could valuate the comments on your blog entries.

This concept is the idea of not underestimating the fact that nobody is a mind-reader.


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Follow up comment...


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I’m glad that you were willing to spend more time thinking about it!

I haven’t run across this specific idea before… but I don’t want to take credit for it because it’s entirely possible that someone else has already developed it.

Perhaps the credit for the general idea should be given to Ronald Coase. Here are some excerpts from his paper… “The Problem of Social Cost”…

“If we are to discuss the problem in terms of causation, both parties cause the damage. If we are to attain on optimum allocation of resources, it is therefore desirable that both parties should take the harmful effect (the nuisance) into account in deciding on their course of action. It is one of the beauties of a smoothly operating pricing system that, as has already been explained, the fall in the value of production due to the harmful effect would be a cost for both parties.”

“It is all a question of weighing up the gains that would accrue from eliminating these harmful effects against the gains that accrue from allowing them to continue.”

“The problem which we face in dealing with actions which have harmful effects is not simply one of restraining those responsible for them. What has to be decided is whether the gain from preventing the harm is greater than the loss which would be suffered elsewhere as a result of stopping the action which produces the harm.”

“Economists who study problems of the firm habitually use an opportunity cost approach and compare the receipts obtained from a given combination of factors with alternative business arrangements. It would seem desirable to use a similar approach when dealing with questions of economic policy and to compare the total product yielded by alternative social arrangements. In this article, the analysis has been confined, as is usual in this part of economics, to comparisons of the value of production, as measured by the market. But it is, of course, desirable that the choice between different social arrangements for the solution of economic problems should be carried out in broader terms than this and that the total effect of these arrangements in all spheres of life should be taken into account.”

Vote selling/buying is a related concept. A different variety of this concept has recently been proposed and discussed… “quadratic voting”.

Sacrifice As Communication

Reply to story: Network leadership by Esko Kilpi

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What about sacrifice as communication? Your story doesn’t even acknowledge this major form of communication. Why is that? 

Maybe you think that sacrifice is a stupid way to communicate? If so, then it would be nice if you could share your thinking. 

Maybe you think that sacrifice is sometimes a stupid way to communicate… but othertimes it’s a smart way to communicate? If so, then it would be nice if you could share your rule.

Hayek certainly thought that sacrifice was a pretty smart way to communicate…

We must look at the price system as such a mechanism for communicating information if we want to understand its real function — a function which, of course, it fulfils less perfectly as prices grow more rigid. (Even when quoted prices have become quite rigid, however, the forces which would operate through changes in price still operate to a considerable extent through changes in the other terms of the contract.) The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more than is reflected in the price movement. — Friedrich Hayek, The Use Of Knowledge In Society

About adjusting/adapting to changes…

Yes, change is the basic law of nature. But the changes wrought by the passage of time affects individuals and institutions in different ways. According to Darwin’s Origin of Species, it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself. Applying this theoretical concept to us as individuals, we can state that the civilization that is able to survive is the one that is able to adapt to the changing physical, social, political, moral, and spiritual environment in which it finds itself. — Leon C. Megginson

Quickly adjusting/adapting to constantly changing circumstances/conditions depends on accurate and efficient communication. Your story is about individuals in a network communicating with each other. And it’s really amazing that you didn’t even acknowledge sacrifice as communication.

My thoughts, on the subject of sacrifice, in a nutshell…

When everybody’s valuations are far more accessible… then everybody’s decisions will be far more valuable.

With this in mind, if you write a substantial story about sacrifice as communication then I would be willing to paypal you $5 dollars. Does this seem like a small sacrifice? Well… how does it compare to what your other readers are willing to pay you for your stories? Maybe you don’t know how much your readers are willing to sacrifice for your stories? Maybe it doesn’t matter how much they are willing to sacrifice for your stories? 

See also:

• Fully Including And Using Brains
• The Economics of Law and Order
• Popular Versus Valuable