If it would be beneficial to increase the minimum wage… then why not also decrease the price of movie tickets, popcorn and sodas?
If it would be beneficial to increase the minimum wage… then why not also force employers to hire more workers?
If preventing the exportation of jobs is beneficial… then why not also prevent the exportation of food?
If preventing the exportation of jobs is beneficial… then why not also prevent the importation of workers?
If preventing the importation of workers is beneficial… then why not also prevent people from having more than one child?
If preventing the importation of workers is beneficial… then why not also export the least productive American workers?
If preventing workers from accepting less than minimum wage is beneficial… then why not also prevent workers from giving their labor away for free? Isn’t “free” less than the minimum wage? Right now we’re giving our labor to Medium for $0.00 dollars an hour. Why not force Medium to pay Americans the minimum wage for their labor?
Anybody watched Madam Secretary on Netflix? In the episode "Whisper Of The Ax"... Stevie, the 20 year old daughter of the Secretary of State, decides that she'd like to volunteer full time for a good cause... microloans. The program is desperately understaffed and the only paid employee, Arthur, is very happy to have Stevie help out. At the end of her first day volunteering, Stevie and Arthur exchange some information...
Arthur: You're still here.
Stevie: Yes. Why wouldn't I be?
Arthur: Oh, my God! You think this is a paid internship.
Stevie: No, I don't.
Arthur: Because it so isn't.
Stevie: Yeah, I figured
Arthur: Okay, good. On the upside, that means your mother's budget cuts won't affect the position.
Stevie: You know who my mother is?
Arthur: I do. And I don't care. Unlike literally everybody else I've hired, you want to be here. That works in your favor.
Stevie: Great.
Arthur: Here's some paperwork you'll need to take to your school's career services office.
Stevie: Oh, um, I'm actually not in school, so
Arthur: Oh, the, uh, internship's only available for college credit.
Stevie: Like you said. I'm really happy to be here. I mean, I really like feeling useful
Arthur: No, we have to do it in conjunction with a university course. Otherwise asking people to work for no compensation is what the government likes to call slavery.
Stevie: Well can I, can I sign a waiver or something?
Arthur: No, it's nonnegotiable. It's part of the program's charter. I'm sorry.
Benefit is in the eye of the beholder. If it wasn't, then there wouldn't be any problem with the government determining whether personal relationships are adequately beneficial.
I remember way back in the day... when I was in the army infantry... my buddies and I would sit around discussing how easy it was for ugly army chicks to hook up with good looking army dudes. It wasn't because the ugly chicks were particularly charming... nope... it was simply because of supply and demand. I have no idea what the actual ratio was... but it sure seemed like there was at least 100 guys for every girl. Guys were a dime a dozen. And, as the saying goes, beggars can't be choosers. Ladies had the upper hand... they could quickly and easily replace guys on the slightest whim.
Can you imagine if Larry Summers had been there? "Hey! I have an idea! The army should make it harder for women to join!" Even the dumbest guy in the entire army would have instantly recognized just how massively moronic Summers' idea was.
Maybe the problem is formalism? Summers didn't join the army infantry right after high school. Instead, he went to some university... got a PhD... and now he uses so much technical jargon that regular folks aren't able to instantly recognize just how massively moronic his ideas are. I wouldn't be surprised if he was related to Paul Samuelson.
Eh, Samuelson did get the free-rider problem right. And it's not like we can get rid of technical jargon... "that one problem where people have an incentive to lie about how much they value things like national defense and it results in the wrong amount of defense being supplied." Well... since I'm here... if you get a chance I'd appreciate a second opinion on my argument that the free-rider problem is equally applicable to democracy.
Getting back on topic... Scott Sumner recently wrote this paragraph about employers having the upper hand...
Regardless of how you feel about monetary policy, it's clear that if employers feel they have a "captive audience" of workers, who are terrified of losing their jobs, it would be easier for the employer to crack the whip and drive the employees to work extremely hard. One advantage of a healthy job market is that workers have more power to negotiate pleasant working conditions.
To reinforce my comparison...
[Justice Anthony Kennedy] ignores the fact that polygamy imposes real costs, by reducing the number of marriageable women. Suppose a society contains 100 men and 100 women, but the five wealthiest men have a total of 50 wives. That leaves 95 men to compete for only 50 marriageable women. - Richard Posner, Supreme Court Breakfast Table
Heh... half the ladies be gold diggers? Posner's been listening to too much Kanye West. Anyways, if we did legalize polygamy... and Posner's estimate turned out to be correct... then Summers' bright idea would be to make it harder for American guys to marry foreign ladies. "Hey! Let's send all the foreign ladies to Mars!"
You say that Summers is a smart guy... but he wants to help workers by building up, rather than tearing down, barriers to entry. He wants there to be more workers and less employers. He prefers barrierism over builderism. How is that smart? Not only is it bad for workers... but it's also bad for consumers. It also increases instability/volatility. The economy has more eggs in fewer baskets.
*********************************************
Out of curiosity... I searched Google for the title that I chose for this entry... Workers: Beggars or Choosers? Here's a snippet from one of the results...
Labour advocates say there are no publicly traded manufacturers in China that get this yet. Some will eventually figure it out. Until they do, companies like Yum! Brands Inc, which invests in employee development at its KFC and Pizza Hut fast-food restaurants, offer a better alternative. - Alexandra Harney, China's migrant workers: from beggars to choosers
This made me chuckle when I read it. Isn't it funny that labor advocates are the most qualified to run businesses... yet they rarely do so... which is why we need labor advocates!
Sanders supports redistribution because he wants to help the poor. A. Barton Hinkle, the author of the critique, responds that conceit (top down control) results in shortages.
The poor are definitely hurt by a shortage of food and other necessities... but we need to clarify how they are helped by a wider variety of beer for example...
While Boston Beer Co., Sierra Nevada Brewing Co. and other large craft brewers continue to gain market share, the number of small breweries including nanobreweries at the other end of the spectrum is exploding, providing adventurous offerings to a new generation of beer drinkers who increasingly place a premium on locally produced beer. - David Sharp, Beyond craft brews: Just like foodies, beer geeks go local
A wider variety of products doesn't perfectly correspond to a wider variety of employment options. But there's certainly quite a bit of correlation. And the greater the variety of employment... the greater the benefit to the poor.
It's easy to think of the poor as a homogeneous group of people... but they really aren't. They are all different. This means that they aren't all going to maximize their individual growth and reach their peak personal potential in the same exact type of environment. Therefore, it's imperative that we facilitate the creation of the maximum variety of environments.
Entrepreneurs create new environments. An entrepreneur who starts his own microbrewery creates an environment that isn't exactly the same as all the other environments. No two working environments are ever going to be exactly alike. We should encourage, rather than stifle, environmental differences.
J.S. Mill probably put it best...
If it were only that people have diversities of taste, that is reason enough for not attempting to shape them all after one model. But different persons also require different conditions for their spiritual development; and can no more exist healthily in the same moral, than all the variety of plants can in the same physical, atmosphere and climate. The same things which are helps to one person towards the cultivation of his higher nature, are hindrances to another. The same mode of life is a healthy excitement to one, keeping all his faculties of action and enjoyment in their best order, while to another it is a distracting burthen, which suspends or crushes all internal life. Such are the differences among human beings in their sources of pleasure, their susceptibilities of pain, and the operation on them of different physical and moral agencies, that unless there is a corresponding diversity in their modes of life, they neither obtain their fair share of happiness, nor grow up to the mental, moral, and aesthetic stature of which their nature is capable. - J.S. Mill, On Liberty
Here's another way of thinking about it...
Ecological Homogenization - Part of the problem for our native bees is our human desire for neatness and uniformity. Pretty lawns with no bare spots. Non-flowering grass, or pollen-less flowers. Paved spots where a sand bank or brush pile may have been before. All places where a native bee might have made her home or found a snack. - Gwen Pearson, You're Worrying About The Wrong Bees
Diversity of niches is just as important for the economy as it is for the environment. Maximizing niche variety maximizes the chances that diverse poor people will find spaces where they can thrive and make their unique contribution to humanity. Diversity also helps us hedge against failure.
Would Bernie Sanders help the poor truly thrive? Not a chance. His strategy is purely superficial. The cover of his book might look good but the content is considerable crap. There's absolutely no awareness or recognition or understanding of the true importance of diversity. Like all liberals he'll praise diversity without having a clue what it's good for. As a result, Sanders' plans won't eliminate the massive barriers to entry... instead, his plans will enlarge these barriers... which will decrease the variety of available niches... which will decrease the variety of employment options available to the poor. This will create a vicious cycle.
What happened? Did I just read, and accidentally enjoy, an advertisement? How did this happen? Oh yeah…it’s because you “conveniently” put the “Sponsored by Intel” part after, rather than before, the content. As a result of your sneakiness…. now I have to go take a shower and try and scrub off the feeling of being so used. Don’t you know I live in Southern California? And there’s a drought going on? How bad do you feel now?
I sense a conspiracy. Just the other day I watched PBS’s Silicon Valley documentary on Netflix. Maybe it was sponsored by Intel as well? I don’t know… I didn’t read the credits.
I just looked at my computer…. which is so old. At the bottom of the tower is a sticker that says “Intel Inside”. For some strange reason I feel like buying a new computer… that also has an “Intel Inside” sticker.
Besides having “Intel” inside my computer… I also have a database. Inside this database is a table that stores my quotes collection. There are over 3000 quotes. It helps that I use tags. For example, if I filter the tags by “orchid” there are four results…
Recall the strong path dependence of individual connectionist learning. The use of external memory systems helps ameliorate some of the effects of this path dependence by allowing achieved innovations (“redescriptions”) to be transmitted between individuals. This allows the collective construction of representational trajectories that crisscross individual cognizers and hence increase the chance of a good idea finding a viable niche for further development. This is, of course, an old idea. But it is one whose value cannot be fully appreciated except in the context of our increasing understanding of the boundedness and extreme path dependence of individual reason. — Andy Clark, Economic Reason: The Interplay of Individual Learning and External Structure
Heh, what? Did that hurt your brain? If not, then you must have a lot of intel inside. Go ahead and make a comic to illustrate this quote. Send the bill to Intel.
I think it means something about my quote database (an external memory system)… and… sharing (transmitting) ideas… among more people… increasing the chance of a “good idea finding a viable niche for further development”.
Here’s the next result…
It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. — Charles Darwin
Good ole Darwin. Hmmm… was Intel the most responsive to change? Or was it the most intelligent? Maybe it just got lucky?
Next result…
In the 60s at Fairchild everybody looks out there and says why are we sitting in the big city we should be out there panning for gold. Let’s go start our own chip company. Fairchild was like a seed pod and it just scattered new companies all over this valley. And that’s what really began what we think of as the modern Silicon Valley. — Michael Malone, Silicon Valley
Eureka! This is the quote that I was looking for!
Maybe you’re wondering why I choose the keyword “orchid”? A single orchid seed pod can contain around a million tiny seeds that are dispersed by the wind. Talk about hedging bets. Which is, in my estimation, a good part of the reason why the orchid family is one of the most successful families on the planet.
How would you illustrate a million seeds being dispersed by the wind? How much variation is there in distance traveled? How much variation is there in the goodness of the seeds/ideas? How much variation is there in cold/drought tolerance? How far do the apples fall from the tree?
Just in case you’re wondering… here’s the fourth result…
Market reasoning is deeply, essentially smarmy. We live, it insists, in a world that is optimized by the invisible hand. The conditions under which we live have been created by rational needs and preferences, producing an economicist Panglossianism: What thrives deserves to thrive, be it Nike or sprawl or the finance industry or Upworthy; what fails deserves to have failed.
We all live our lives, we’re told, on these terms. If people really wanted a better world — what you might foolishly regard as a better world — they would have it already. So what if you signed up to use Facebook as a social network, and Facebook changed the terms of service to reverse your privacy settings and mine your data? So what if you would rather see poor people housed than billionaires’ investment apartments blotting out the sun? Some people have gone ahead and made the reality they wanted. Immense fortunes have bloomed in Silicon Valley on the most ephemeral and stupid windborne seeds of concepts, friends funding friends, apps copying apps, and the winners proclaiming themselves the elite of the newest of meritocracies. What’s was wrong with you, that you didn’t get a piece of it?
Of course this is tyrannical. Of course this is false. Everyone is aware that market judgments are foolish and unfair. But what can you do about it? — Tom Scocca, On Smarm
w00t! I wonder if this guy has an “Intel Inside” sticker on his computer?
If I was a billionaire then I’d buy a million acres of land in Southern Texas and start an orchid reserve. I’d attach 100 million orchids to trees. If an average orchid has 10 seed pods per year… and each pod has a million seeds inside… then how many seeds would be dispersed each year? Errr… my maths aren’t too great. :( How long would it take for every tree in the US to be covered with orchids? Errr… which direction does the wind blow? What if the wind doesn’t blow north? Minor detail? How many people would I have to hire to manually carry the seeds north? Just like Johnny Appleseed…but different.
But I’m not a billionaire! Can I blame the market? What does that even entail? The market isn’t a sentient being… it’s just a bunch of people. Like me… but different.
A bunch of people haven’t put my ideas in their shopping carts. And nobody’s ever made a movie about J.S. Mill! He’s one of the most important thinkers ever… and there’s never been a movie about him!! Market failure!!! Where’s government intervention when you need it?
The government hasn’t made a movie about J.S. Mill… but it did put a man on the moon. And, as a result, we have Silicon Valley!
Here’s the best kept secret in the world. A better world happens when enough people truly understand the value of consumer choice. Then we’ll be able to choose where our taxes go. We won’t all choose the same… because we aren’t all the same. And that’s a good thing.
From where I’m sitting I can look out the window and see a crowd of ripe seed pods on the dozens of Tillandsia aeranthos growing on my tree. They are perfectly happy only getting watered, via drip, twice a week. And the hummingbirds are more than happy to pollinate the flowers. Happiness does grow on trees.
I was just kidding about the needing to shower part. I’m all about the charmercials. And the not showering. Oh man, I stink so good!
Like many American economists, I've learned macroeconomics from an American perspective. But America is a very unusual country. For instance, US RGDP growth has averaged about 3% for the past 120 years, if not more. Most business cycles are fairly small, partly reflecting the fact that our economy is well diversified. If Nevada is in recession, Massachusetts may be growing, or vice versa.
At first glance this doesn't seem unreasonable. We have around 50 states... and each state helps us hedge our bets... so as a country we're pretty safe.
But at second glance... each state is a collection of counties... and each county is a collection of businesses... so why should we be seeing any cycles?
Sumner is essentially arguing that the country is diversified... but the states are not...
1st tier (country) = diverse
2nd tier (state) = uniform
Nevada only supplies gambling... and Florida only supplies oranges. If there's a bad freeze in Florida... the entire economy is still ok because Nevada's gambling adequately offsets the loss of Florida's oranges.
Here's some confirmation...
If all the booms and busts of recent years have taught states anything, Muro said, it’s that it is dangerous to rely too much on one industry for economic growth—especially if that industry is as volatile as real estate or oil. After the last time oil prices crashed, in 1986, bringing the Texas economy down with them, the state government made a point to broaden its economy into other areas. In the wake of the recent recession, the governor’s office and others claimed that Texas has successfully expanded into industries outside of the oil sector—especially the kinds of newer, fast-growing ones, such as tech, that have made places like Silicon Valley so successful. The Internet scene in Austin was particularly celebrated. “Texas has made a concerted long-term effort to build a broadly diversified economy that allows job creators from a wide variety of sectors and industries to thrive here,” Lucy Nashed, a press secretary for Perry, told me. She said that “will allow the state economy to weather the inevitable ups and downs of the economic cycle better than less diversified economies.” But, Muro noted, “The question is, given what is happening in oil and gas, how far along has that diversification proceeded in Texas?” - Vauhini Vara, How California Bested Texas
Clearly it's possible for any entity... from individuals to states to countries to the world... to be inadequately diversified. Back to Sumner...
Other economies don't seem to adhere as closely to a stable trend line. Japan did very poorly in the 1940s, then raced ahead for decades, and has seen little growth since the early 1990s. Even smaller economies such as Latvia, Estonia, Iceland and Greece have seen spectacular booms followed by huge busts.
Ok. These smaller countries are inadequately diversified. Therefore, the solution should be to increase their diversification. Right? Well...
America would be able to support a public debt equal to 100% of GDP. But unlike Krugman, I believe the Greek situation in 2007 was "wildly irresponsible." Greece needed to run budget surpluses during the boom years, so that it would have the resources to do fiscal stimulus during a depression. Instead they ran a very large budget deficit during the boom period.
Eh? The solution isn't to increase diversification? The solution is fiscal stimulus? Here's more of the same...
I would certainly not believe a 10% over capacity estimate for the US economy in 2007, but I don't find it all that implausible for Greece. Suppose your economy is sucking in lots of foreign workers for a real estate boom. The boom ends and the foreign workers leave. Now your "natural rate of output" is lower, as you have less labor. The outflow of Mexican labor after 2007 was not enough to cause a big drop in the US natural rate, but in a smaller economy like Greece, or Nevada, or Dubai, that sort of shock to capacity output could be much more significant.
In the 1999-2000 boom the US government did run a budget surplus, and I believe Krugman supported that policy. He once suggested that President Bush made a mistake by cutting taxes and putting us back into a structural deficit. I'd argue the same applies to Greece (and Iceland, Estonia, etc.). Countries with those sorts of wild swings between boom and bust need to run surpluses during the good years. Because Greece did not do so, it is now forced to beg for loans from others. Its creditors know that it is unlikely to be able to repay those loans, and not surprisingly are reluctant to grant even more loans without some pretty strict conditions attached.
Sumner starts off his blog entry by saying that America doesn't have wild swings because we are adequately diversified. But here he's saying that countries with wild swings need fiscal stimulus.
I find it hard to believe that Sumner is under the impression that Greece is too small to diversify. Perhaps he's implicitly assuming that diversification isn't, for whatever reasons, tenable?
My hero is Deng Xiaoping... so I'm definitely a huge fan of practical/marginal improvements. Allowing taxpayers to allocate 1% of their taxes? Awesome! A tiny step in the right direction is still a step in the right direction.
Hedging, however, is based on the premise that steps can be in the wrong direction. Pragmatarianism is a step in the right direction because it increases the quantity of steps and directions.
There's a subtle but important distinction that needs to be made. The heart of the issue really isn't to increase diversification. People are already diverse. Sure we could be more diverse as a species... but the real issue is that our natural diversity is blocked by top down control of the economy... aka "conceit".
Here's what Adam Smith wrote over 200 years ago...
If bankers are restrained from issuing any circulating bank notes, or notes payable to the bearer, for less than a certain sum, and if they are subjected to the obligation of an immediate and unconditional payment of such bank notes as soon as presented, their trade may, with safety to the public, be rendered in all other respects perfectly free. The late multiplication of banking companies in both parts of the United Kingdom, an event by which many people have been much alarmed, instead of diminishing, increases the security of the public. It obliges all of them to be more circumspect in their conduct, and, by not extending their currency beyond its due proportion to their cash, to guard themselves against those malicious runs which the rivalship of so many competitors is always ready to bring upon them. It restrains the circulation of each particular company within a narrower circle, and reduces their circulating notes to a smaller number. By dividing the whole circulation into a greater number of parts, the failure of any one company, an accident which, in the course of things, must sometimes happen, becomes of less consequence to the public. This free competition, too, obliges all bankers to be more liberal in their dealings with their customers, lest their rivals should carry them away. In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so. - Adam Smith, Wealth of Nations
And here's what Jeffrey Friedman wrote a few years ago...
Clearly the regulators were predicting that steering banks’ leverage into highly rated MBS would be prudent. This prediction proved disastrously wrong, but the Recourse Rule heavily tilted the field toward banks that went along with the regulators’ prediction. Heterogeneous behavior among competing enterprises normally spreads society’s bets among the different predictions (about profit and loss) made by various capitalists. Thus, the herd mentality is a danger under capitalism, as under every other system. Yet regulation produces the equivalent of a herd mentality by force of law. The whole point of regulation is to homogenize capitalists’ behavior in a direction the regulators predict will be prudent or otherwise desirable. If the regulators are wrong, the result is a system-wide failure. “Systemic risk regulation” may be a contradiction in terms.
Neither capitalists nor regulators can use crystal balls to avoid making bad bets. That highly rated mortgage-backed securities would be prudent turned out to be a very bad bet. But we all suffered because this bet was imposed by financial regulators on the whole system. - Jeffrey Friedman, What Caused the Collapse?: An Exchange
... and here's what Joseph Stiglitz wrote...
Centralization is like putting all of one's eggs in one basket: just as we now recognize the greater advantages of portfolio diversification in allocating one's wealth, so, too, there are great advantages of diversification in allocating decision making powers. We need only dwell a few minutes on the evils wrought in this century as a result of the concentration of power in the hands of a few individuals. - Joseph Stiglitz, The Invisible Hand and Modern Welfare Economics
... compare it to what James Gwartney wrote...
A recent survey by the Federal Reserve Board indicated the wealthiest 2 percent of American households own 28 percent of the nation’s physical property. At first glance, this appears to be enormous power in the hands of a few people. However, reflection should cause one to question this view. This wealth, enormous as it is, is in the hands of 1.6 million households, representing diverse political, religious, ethnic, and personal interests. Unless it is used to provide services to others in exchange for income, the wealth of these property owners will shrink. Compare the power of these wealthy households with the power of 536 elected federal office holders. This latter group, comprising just .0000025 percent of our population, determines how one-quarter of our national output is allocated. They tax approximately one-fifth of our national income away from earners and allocate it to nonearners. They set the dollar value of the social security benefits received by thirty-six million Americans. The regulatory power under the jurisdiction of the 536 individuals holds a life or death grip on the economic health of literally millions of businesses. In contrast with private owners, members of Congress have the power to take property, a portion of your earnings for example, without your consent. One could go on and on, but the point is clear. When government ownership is substituted for private property, enormous power over the lives of others is bestowed upon a small handful of political figures. One of the major virtues of private property is its ability to check the excessive concentration of economic power in the hands of the few. Widespread ownership of property is the enemy of tyranny and abusive use of power. This proposition is just as true today as it was a couple of hundred years ago. - James Gwartney, Private Property, Freedom and the West
Back on the topic of frozen oranges...
Farming is inherently risky. Weather, insects and disease, over which you have limited control or none at all, can wipe you out. One of the ways farmers manage risk is to plant variety. Okay, powdery mildew got your strawberries, but the broccoli’s going gangbusters. For farmers, crops that are given guaranteed protection from both losses and price drops are lower-risk propositions. - Brian Stauffer, Farm bill: Why don’t taxpayers subsidize the foods that are better for us?
Back to Adam Smith...
When a great company, or even a great merchant, has twenty or thirty ships at sea, they may, as it were, insure one another. The premium saved upon them all, may more than compensate such losses as they are likely to meet with in the common course of chances. - Adam Smith, Wealth of Nations
Sumner is saying that fiscal stimulus is necessary because some countries aren't diversified. I'm saying that if fiscal stimulus is ever necessary... then the solution really isn't fiscal stimulus. The solution is to decrease government centralization/control. This will allow inherent diversity to naturally flourish... which will eternally eliminate the need for fiscal stimulus.
Pragmatarianism is the best way to decrease government centralization. Taxes will still be there... the difference is that a much greater diversity of people will choose where they go. Hedging bets is just as important in the public sector as it is in the private sector.
Individual foresight is the information that each person has regarding future events/circumstances/situations. This information determines how we allocate our resources. If we aren't free to allocate our resources then our individual foresight will be destroyed...useful information will be rendered useless.
My own individual foresight leads me to believe that we, as a society, will benefit from the creation of words that are dedicated to the communication of this concept. So I've allocated my limited resources accordingly...
Obamerate (verb): to destroy a person's individual foresight
Obamertine (noun): anything used to obamerate people
Grammatical usage is the same as...
Decapitate (verb): to cut off a person's head
Guillotine (noun): a device used to decapitate people
Example usage of "obamerate"...
By shifting massive amounts of society's limited resources to the construction of the pyramids...the pharaohs obamerated the people. The consequence was that millions starved during famines because they could neither eat the pyramids nor trade them for food. If the people had not been obamerated...then massive amounts of valuable products would have been created and sold/traded for food during times of famine.
Some examples of obamertines: genocide, slavery, taxation, theft, concentration camps and minimum wages
Why Barack Obama? Barack Obama
The Recovery Act and subsequent jobs measures also contained a large number of provisions that were aimed at strengthening long-term growth. In designing the Act, the Administration believed that it was not just the quantity of the fiscal support that mattered, but the quality of it as well. In this sense, the Administration took to heart a lesson that has been pointed out by many but can be traced back as early as the 19th century to a French writer and politician named Frederic Bastiat. Bastiat (1848) wrote of a shopkeeper’s careless son who broke a window in the storefront. When a crowd of onlookers gathered to inspect the damage, Bastiat took objection to the discussion that ensued: “But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, ‘Stop there!’”
For this reason, the Recovery Act was designed not just to provide an immediate, short-term boost to the economy, but also to make investments that would enhance the economy’s productivity and overall capacity even after the direct spending authorized by the Act had phased out. The Act’s investments in expanding broadband infrastructure and laying the groundwork for high-speed rail, to take two examples, are a far cry from the broken window in Bastiat’s parable because they do so much more than simply restore things to how they once were. Rather, these types of investments will raise the economy’s potential output for years to come, from a rural school that can now offer its students and teachers high-speed Internet access, to a business that has a new option to transport its goods more quickly.
As shown in Table 8, the Recovery Act included $300 billion of these types of investments in areas such as clean energy, health information technology, roads, and worker skills and training. Figure 12 suggests that the timing of these investments was relatively more spread out than some of the Act's other measures, consistent with the longer-term focus of these projects. - White House, The Economic Impact Of The American Recovery and Reinvestment Act Five Years Later
Frederic Bastiat
But there is something else that is not seen. It is that the fifty millions spent by the state can no longer be spent as they would have been by the taxpayers. From all the benefits attributed to public spending we must deduct all the harm caused by preventing private spending—at least if we are not to go so far as to say that James Goodfellow would have done nothing with the five-franc pieces he had fairly earned and that the tax took away from him; an absurd assertion, for if he went to the trouble of earning them, it was because he hoped to have the satisfaction of using them. He would have had his garden fenced and can no longer do so; this is what is not seen. He would have had his field marled and can no longer do so: this is what is not seen. He would have added to his tools and can no longer do so: this is what is not seen. He would be better fed, better clothed; he would have had his sons better educated; he would have increased the dowry of his daughter, and he can no longer do so: this is what is not seen. He would have joined a mutual-aid society and can no longer do so: this is what is not seen. On the one hand, the satisfactions that have been taken away from him and the means of action that have been destroyed in his hands; on the other hand, the work of the ditch digger, the carpenter, the blacksmith, the tailor, and the schoolmaster of his village which he would have encouraged and which is now nonexistent: this is still what is not seen. - Frederic Bastiat, The Seen vs the Unseen
Bastiat championed the protection of individual foresight...
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.
Clearly the destruction of individual foresight was anathema to Bastiat...which is why it's extremely twisted for Obama to use Bastiat to try and support replacing individual foresight with governmental foresight. This alone is sufficient for Obama to symbolize the destruction of individual foresight.
Given how important individual foresight is...I sincerely hope that the use of these new words will catch on. As a reference point...
It's even worse than that. You're just covering benign ignorance; people who mean well but just don't have enough data to make the informed choice. You just barely touched on hostile ignorance. - Sdaeriji
If you allocate your resources without enough information to make an informed choice...are you going to gain resources or lose resources? You're making the criticism that taxpayers leap without looking...but it really does not follow. If you're an entrepreneur and you go to the bank for a loan to start a business...is the bank likely to lend you the money without asking any questions? Can you guess what sort of questions the loan officer might ask you? Do you think loan officers who loan without looking will keep their jobs for long?
There will be enough of a free rider problem with people who have good intentions just badly guess on how much everyone else is contributing to a given program without considering that there will be enough people who consciously choose to not care whether other programs get sufficient funding and just elect to contribute their entire amount to beaver mating call research or something to drastically effect department budgets. Local projects will be awash in over-funding as everyone cares more about fixing the old Main St. bridge rather than launching a new aircraft carrier. - Sdaeriji
Taxpayers are the people you voluntarily give your money to. Why do you voluntarily give your money to them? Is it completely random? Do you randomly distribute your money...and time? Are you randomly spending your time in this thread?
And then there's the problem with active indifference. There will be a not-insubstantial amount of people who simply forget or refuse to designate how their taxes should be spent. Assuming the government will still take their money, there will have to be decisions made about how to allocate those funds.
Because, realistically, they will. People who owe on their tax filings wait until April 15 to file so they can hold onto the money as long as possible. Why wouldn't everyone do that in your scenario? - Sdaeriji
Congress would still be there. If you didn't want to shop for yourself then you could just give your money to congress. Why would anybody take the time and make the effort to shop for themselves? It would have to be worth it for them to do so.
If you have a personal shopper in the private sector...then how "wrong" would your personal shopper's spending decisions have to be before you decided it was more beneficial to shop for yourself?
It would really really really behoove us to figure out how many taxpayers would take the time and make the effort to shop for themselves in the public sector. If congresspeople are spending our taxes close enough to our preferences...then most people will not see the benefit of bothering to shop for themselves. If many or most people do see the benefit of bothering to shop for themselves then it stands to reason that congresspeople are not spending our taxes close enough to our preferences. That's a problem...unless you believe that the spending decisions of congresspeople are far superior to our own. If that's what you believe then you should strongly advocate for the elimination of all markets.
There is literally no way an intelligent person could consider this idea for more than a few minutes and conclude it is a good idea. - Sdaeriji
Hah, I had to add this one to the tax choice facebook page.
Is it about intelligence?
Can somebody be intelligent and not appreciate the implications of fallibilism? It's one thing to put all of your eggs in one basket...but it's another thing entirely to force society to put all of its eggs in one basket.
Let's build a pyramid? That's putting a lot of eggs in one basket. When there's a famine...you can't trade a pyramid for food.
Centralism is folly...it's hubris...it's conceit...perhaps there's some degree of intelligence. But there's not enough intelligence to realize the value of not destroying the individual foresight of so many other people who also strongly desire prosperity.
I'm one of the very few people on this forum who clearly sees the prosperity that pragmatarianism would create. Maybe my vision is wrong...but you have to have a high degree of conceit to force me to allocate my resources to your vision rather than to my own. You have to be really certain that I'm wrong. But what if I'm right?
Can you really be that intelligent if you fail to grasp the stupidity of absolute certainty? Like Noah in the bible...I have enough certainty to board my own boat...but I don't have enough certainty to force you to join me. It's really not intelligence if you force me to board your boat.
Just like it's really not intelligent to tie all the kids together for an Easter Egg hunt. It might seem intelligent if you know exactly where the Easter Eggs are. But in life nobody can know exactly where the Easter Eggs are located. That's why we cover more ground and find more Easter Eggs when the kids are free to go in their own directions. When you tie all the kids together...or limit the amount of kids that can look for Easter Eggs...then you decrease the chances of finding Easter Eggs and you increase the damage should one of them step on a landmine.
How much intelligence does it take to realize just how limited your perspective truly is?
If we can't persuade the public that it's desirable to do these things, then we have no right to impose them even if we had the power to do it. - Milton Friedman, Milton Friedman on Libertarianism
On the one hand, I regard the basic human value that underlies my own beliefs as tolerance, based on humility. I have no right to coerce someone else because I cannot be sure that I am right and he is wrong. - Milton Friedman, Milton Friedman on Libertarianism and Humility
There is a basic philosophical explanation, which begins with the fact that the number of possible theories of any given phenomenon is enormous, if not infinite. Of these, all but one are false. So given just the information that T is a theory, the probability that T is correct is approximately zero. However, naive thinkers have often failed to realize this, because the theories that a typical human being can think of to explain a given phenomenon (and that will seem plausible to that person) are typically very few in number. It is not that we consider the truth and reject it; in the overwhelming majority of cases, when we first start thinking about how to explain some phenomenon, the truth is not even among the options considered. The ancient Greeks, for example, did not reject quantum mechanics; they just did not and could not have considered it. - Michael Huemer, In Praise of Passivity
The government, by engaging in coercive taxation...steals the resources from a myriad of different visions...and allocates them to a far smaller quantity of visions. It's conceit. It's a recipe for failure.
Pragmatarianism would allow so many different people to shape the government to reflect what's common to, but absent from, their visions.
Like a bunch of people have different recipes in mind. Even though the recipes are all different...there's some overlap in required ingredients. What are the required ingredients that are not adequately supplied by the private sector? It's easy enough to find out...and it would behoove us to find out. Because the vast majority of the dishes that we find so delicious are not our own creations. We will immensely benefit when so many other people can use their tax dollars to indicate what the government needs to supply more of.
As shown in Table 8, the Recovery Act included $300 billion of these types of investments in areas such as clean energy, health information technology, roads, and worker skills and training. Figure 12 suggests that the timing of these investments was relatively more spread out than some of the Act's other measures, consistent with the longer-term focus of these projects. - White House, The Economic Impact Of The American Recovery and Reinvestment Act Five Years Later
Are these truly the ingredients that are most commonly missing from most recipes? If so, then like I've said so many times before, then we really do not need a market. We just need the government, in all its superior wisdom, to supply the dishes that will provide us with the most nourishment.
But the reality was so clearly pointed out so long ago...
What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. - Adam Smith, The Wealth of Nations
Folly...presumption...conceit...hubris...these are the things you embrace when you oppose pragmatarianism.
You're capable of correcting your mistakes...and so is society. Hopefully it will happen sooner rather than later.
There is exactly one search result for "Split Preference Disorder". LordChibiVampire is the first person to openly acknowledge that they suffer from this condition. The symptoms don't quite match but that's a minor detail. The point is that LordChibiVampire is a extremely brave person to be the very first person to talk about this condition that afflicts nearly all of us.
We go shopping together in a giant store that sells both public goods and private goods. I'm actually doing all the shopping...you're just there for moral support.
I have my shopping cart. First thing I put in is garlic. Because...garlic really matches my preferences. Next thing I reach for is some environmental protection...but before I can put it in the shopping cart you trip me and put it back on the shelf. The next thing I put in my shopping cart is Warpaint (the band). Well...not the actual band (I wish) but their CD. For some reason you don't trip me. Moving along I go to grab some public education and find myself sprawled out on the ground. You tripped me again! And you put the item back on the shelf and put a bunch of drug war in my cart instead.
Ok, I think I see what's going on here. For some reason you believe that my preferences really suck when it comes to public goods. Why just public goods though?
It doesn't make a lick of sense. Not even a little bit.
If society, as a whole, derives more value when 500 congresspeople override our preferences for public goods...then the same has to be true when it comes to private goods. The thing is...we know that this really isn't true when it comes to private goods. So you've got this intense cognitive dissonance going on.
Unless everybody who isn't a congressperson suffers from split preference disorder? LOL The public preference side of our brain has lousy lousy lousy value judgement while the private preference side of our brain has excellent value judgement? That's just so...sad/funny. Is there a cure? Is it contagious?
You grasp a few concepts but completely fail to see how they fit into any sort of big picture. You've got a micrograsp of economics.
The market works because we can give people positive feedback when they use society's limited resources to create things that we value. We go around giving our money to people who do valuable things with society's limited resources. If somebody does nonsensical things with society's limited resources...then we don't give them any positive feedback. Why? Because we don't trust their value judgement.
Let's think of it from a religious angle...buying/spending is sacrificing...and producers are gods. You're saying that we'd worship the wrong gods in the public sector but we worship the right gods in the private sector? I can discern when a private god is giving me blessings...but I can't discern when a public god is giving me blessings?
Why would we ever want to worship the wrong gods? If Warpaint is a false god...then I don't want to worship and make sacrifices to them.
What's a false god? A false god is a god that gives you nothing in exchange for your sacrifice. A false god is a shyster...a thief...a false god will simply rip you off. A false god says "No blessings for you!"
Somehow, in your world...we have enough value judgement to elect the right public gods...but we don't have enough value judgement to choose which public gods we make our sacrifices to? How can the first decision require less value judgment than the second? We're intelligent enough to choose our gods but not intelligent enough to know which ones we should make sacrifices to?
First, economics is all about individuals. That is because economics is all about choice. We can’t have everything, so we have to choose which things are most important to us: would we prefer a new car, for example, or a summer holiday? To go out with friends, or to relax at home? Invariably, we have to give up one thing (an amount of money or time and effort, say) to get another (such as a new pair of shoes or a tidy garden). These are economic decisions – even when no money is involved. They are questions of how we juggle scarce resources (cars, holidays, company, leisure, money, time, effort) to best satisfy our many wants. They are what economics is all about. - Eamonn Butler, Austrian Economics
That entire PDF is worth reading if you're genuinely interested in learning about Austrian economics. It also touches on heterogeneous activity. Heterogeneous activity is obviously the opposite of homogeneous activity. Homogeneous activity is where you tie all the kids together and then send them to go find the Easter Eggs. It's a centralized, top down approach. It's saying "public infrastructure is a SURE investment! We don't need to create a market in the public sector because I know exactly where the Easter Eggs are. I wear a large electric purple turban that makes me omniscient!"
Because of the coercive nature of government activity, two additional results come forth. First, by voluntarily purchasing an item on the market, an individual demonstrates that he values the item more than the money price. But in paying taxes, he makes no such demonstration. The government does not know, as a business does, the value individuals place on its activity. Since government cannot obtain the information and incentive by demonstrated preferences of individuals, they cannot efficiently serve individuals. - Jeffrey Herbener, Austrian Methodology: The Preferred Tax Type
Austrians acknowledged that it's a problem that we don't know what the demand is for public goods. You and your electric purple turban wearing posse think otherwise. Please take your turban off. It really doesn't make you omniscient...it just fills you up with hubris.
