Ships of Socialism in a Sea of Capitalism

My favorite liberal economist, John Quiggin, asks whether we would be better off without corporations.  My comment...

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According to Coase, more or less, corporations are ships of socialism in a sea of capitalism.  Why, exactly, would it be better to replace this form of central planning with a different form?  What, exactly, would public ownership fix?  

Would public ownership somehow improve steering?   Is Equinor steered by more voters than Exxon?  Personally I'm pretty sure that there's more than enough evidence, such as Boaty Mcboatface, that the more voters participating the lower the common denominator.  

Make a list of 100 random books and have different groups of people use voting to rank the books.  All else being equal, the trashiest book will be highest ranked by the largest group of people.  As Youtube proves, with democracy garbage quickly floats to the top... ie PewDiePie.  In order for cream to quickly float to the top, replace voting with donating.  

All corporations should be steered by donations.  Then corporations would be ships of capitalism in a sea of capitalism.  

Am I Imagining Things?

Back in 2012 the birth of civic crowdfunding tricked me into imagining that we were on the path to pragmatarianism.  Now there's a similar innovation that has me imagining the same thing.  Once burnt twice shy?  Or am I going to be like Charlie Brown who is forever tricked by Lucy?

There are two websites, both still in beta, where users can use their money to "grade" the content... Cent and Honest Cash.  I shared some relevant thoughts in a comment that I just posted on Simon de la Rouviere's website...

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You already know that Cent is doing something similar... "seeding"... but not sure if you know that so is Honest Cash. It is like Cent, but a lot newer, and closer to Medium in design. Check out my post... The Greatest Movie Ever? People could reply to it with their nomination, unless it has already been nominated, in that case they'd spend their money on it. My main point was that it would be very useful to be able to sort the replies/nominations by value.

For both Cent and Honest Cash it's possible for participants to spend money on ideas, but neither startup currently allows demand to drive their development. Well, neither website has a page that displays all the feature requests sorted by value... yet.

I think the following quote does a good job of summarizing the startup status quo...

"We are biased toward the democratic/republican side of the spectrum. That’s what we’re used to from civics classes. But the truth is that startups and founders lean toward the dictatorial side because that structure works better for startups. It is more tyrant than mob because it should be. In some sense, startups can’t be democracies because none are. None are because it doesn’t work. If you try to submit everything to voting processes when you’re trying to do something new, you end up with bad, lowest common denominator type results. ”— Peter Thiel, Girard in Silicon Valley

What's remarkable is that he doesn't even consider the possibility of a startup being steered by a market. He doesn't say that having a market at the helm would be good, or bad, or horrible, he just doesn't even mention it. Like, the thought didn't even cross his libertarian mind.

And now I'm a user on two startups where we can spend our money on any and all proposals for the startup. For example, the demand for autosaving drafts on Cent is $.75 cents. What's the demand for this feature on Youtube? I don't know. Nobody knows. Youtube might know how many users want this feature, but this would only reveal its popularity... not its value.

Basically this boils down to whether or not it's truly beneficial to see and know the demand for things. If it is, then... there goes the status quo. There goes democracy, dictatorships and committees. Right? If so, this is big. Really big. Impossibly big! And so far it seems like I'm the only one that sees this possibility, so I might just be crazy. What do you think?

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Now I'm thinking about Murray Rothbard fantasizing about a button that he could push to destroy the state.  He really hated the state.  Personally, I think the state is merely a symptom of economic ignorance.  If either or both websites cure the disease, then the state will be fixed. 

Is it sad that Rothbard won't be around to see the state fixed?  I'd like to travel back in time... "Hi Mr. Rothbard, I'm from the future and... uh, where are you going?"  It would be convenient if I could show him my cell phone or something. 

Seldon, a godlike AI in the future, will resurrect Rothbard by reverse engineering his mind using everything that he wrote, which is quite a bit.  Rothbard will be reborn full of hatred for the state?  Heh.  I'm guessing that Seldon will fill in a few blanks. 

On Robin Hanson's blog I had a debate with Nitronaut about uploading your mind.  He kept bringing up the point about consciousness not carrying over and I kept trying to explain that the only thing that mattered was the continuation of the mind. 

Anyways, hopefully Simon de la Rouviere will reply to my comment and share his perspective.  Two heads are better than one. 

Markets Should Be At The Helm

Citizinvestor bit the dust... Learning From the Civic Tech Graveyard.  I found that article because I subscribe to Google alerts for "civic crowdfunding".

Here's the feedback that I shared with the website...

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Hi,

I just finished reading your interesting article "LEARNING FROM THE CIVIC TECH GRAVEYARD" and wanted to share my thoughts. 

Here's a relevant quote from Peter Thiel...

"We are biased toward the democratic/republican side of the spectrum. That’s what we’re used to from civics classes. But the truth is that startups and founders lean toward the dictatorial side because that structure works better for startups. It is more tyrant than mob because it should be. In some sense, startups can’t be democracies because none are. None are because it doesn’t work. If you try to submit everything to voting processes when you’re trying to do something new, you end up with bad, lowest common denominator type results."

From his perspective, a dictator rather than a mob should be at the helm of a company.   But then what's the issue with a dictator being at the helm of an entire country?  It's not like any given individual is wiser when they are in charge of a company.   The difference is that it's easier for people to leave a company than it is to leave a country.   Abandoning a sinking company is easier than abandoning a sinking country. 

I agree with Thiel that democracy is worse than dictatorships for companies.   Yet... our country uses democracy to choose who should be at our country's helm.   The result is lowest common denominator leadership.   Basically, we end up with idiots at the helm. 

So Thiel considers dictatorships to be better than democracy for companies.... but there's one alternative that he didn't even consider... the market. 

After reading your article I was disappointed that there wasn't a comment section.   I like the topic so I enjoyed reading your thoughts on it, and would have also enjoyed reading other people's thoughts on the topic.  Obviously I would have also enjoyed the opportunity to publicly share my own thoughts with other people interested in the topic. 

With your organization's current system a dictator decides whether to facilitate comments.   Obviously your dictator has decided against comments.  What are the chances though that this is the best decision?  If the chances were good, then it wouldn't be an issue for countries to have dictators.   It stands to reason that an even poorer decision would be made by allowing everybody to vote for or against comments.   My best guess is that the best decision would be made by donations.   Whichever option received the most donations would be implemented. 

Every significant decision could, and should be, a fundraiser for your organization.   The market would steer your organization in the most valuable direction.   If not, then we shouldn't allow the market to steer the entire private sector. 

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.

James Buchanan Deserves More Attention

Here's my comment on Sam Staley's review of Nancy MacLean's book...

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Personally, I'm a huge fan of James Buchanan so I'm acutely aware of the amount of attention he typically receives. Naturally I feel like he never receives nearly enough attention. Thanks to MacLean's book, however, there was a noticeable spike in articles about Buchanan. So in this sense, which is pretty important, I do appreciate her book. I think her bad critique of Buchanan is a lot better than no critique. Of course I would have preferred a much better critique of him... but beggars can't be choosers.

Also, in MacLean's defense, she was 100% correct that Buchanan's work is an attack on democracy. Unfortunately, as a historian she didn't really appreciate or address his economic arguments.

Even Michael Munger didn't get it. On Twitter he vehemently denied that Buchanan's work is an attack on democracy. I replied...

Please quote exactly where Buchanan said...

A. The optimal supply of public goods does *not* depend on people's true preferences.

...or...

B. Voting is more effective than spending at revealing people's true preferences.

— Pragmatarian (@Pragmatarian) January 22, 2018

Munger did not respond. If he does happen to believe that voting is better than spending at revealing preferences then what, if anything, would falsify his belief?

Let's say that the Independent Institute used voting and donating to rank economists. If voting ranked Buchanan higher than donating did, then this would falsify my belief that spending is better than voting.

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A few months ago in this forum discussion I shared this passage by Buchanan...

Individuals do not act so as to maximize utilities described in independently existing functions. They confront genuine choices, and the sequence of decisions taken may be conceptualized, ex post (after the choices), in terms of "as if" functions that are maximized. But these "as if" functions are, themselves, generated in the choosing process, not separately from such process. If viewed in this perspective, there is no means by which even the most idealized omniscient designer could duplicate the results of voluntary interchange. The potential participants do not know until they enter the process what their own choices will be. From this it follows that it is logically impossible for an omniscient designer to know, unless, of course, we are to preclude individual freedom of will. - James M. Buchanan, Order Defined in the Process of its Emergence

Here's part of the response that I received...

You're using as a defense a quote from the single worst President in American history to justify as generalizable the very quote that I picked from you as a representation of your system's generalizable failure. It is fitting that someone whose legacy is synonymous with the rabid defense of arbitrary social structures based on the conflation of holding socioeconomic power with the capacity to exercise socioeconomic power is your preferred tipple.

What would James Buchanan, the economist, have been named if his parents had used the market to rank potential names? 

Scott Sumner VS Utopia

We also need to understand the different roles played by different people in society. The democratic system helps to prevent policy from getting too far out ahead of the public. The immediate implementation of Bryan's open borders proposal might lead to a backlash against immigration, whereas this sort of backlash is less likely from a more cautious proposal that advances through both houses and is signed by the President. The role of intellectuals is (and should be) very different from the role of policymakers. Broad policy goals (not details) should reflect the wisdom of voters, even if the average voter is not very smart. Intellectuals should try to shape public opinion (although they will always be less influential than filmmakers.) - Scott Sumner, How much idealism is ideal? 

The wisdom of voters?  Is there such a thing?  Here's a list of 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
A Theory of Justice
The Cat in the Hat
The Wealth of Nations
The Hunger Games

Imagine if this list was sorted by a bunch of college students. One group of students would use voting to rank the books while another group would use spending.  To be clear, the spenders wouldn’t be buying the books, they would simply be using their money to express and quantify their love for each book. All the money they spent would be used to crowdfund this experiment.

How differently would the voters and the spenders sort the books?  In theory, the voters would elevate the trash while the spenders would elevate the treasure. This would perfectly explain the exact problem with Google, Youtube, Netflix, Twitter, Reddit, Facebook, Medium and all the other sites where content is ranked by voting. Democracy is a major obstacle to the maximally beneficial evolution of society and its creations. Of course I might be wrong.

Am I wrong?

Surveys: Voting VS Spending

Which is a better way to rank options... voting or spending?  In other words, which is better... democracy or markets?

Poll: 73% support bill protecting undocumented "DREAMers." pic.twitter.com/5dMcivgcQG

— Fox News (@FoxNews) January 22, 2018

I felt compelled to tip! Have I been ‘nudged’ by Caffè Nero? #behavioralscience @rorysutherland pic.twitter.com/72Hy9IJJBc

— Chris Thurling (@ChrisThurling) January 11, 2018

It would be very helpful if you gave people the opportunity to use donations to help rank potential speakers. It would be a survey, but with spending instead of voting. https://t.co/idSS3I3awF Last year the @LPNational used this system to rank potential convention themes. pic.twitter.com/qbtZaEbqJQ

— Pragmatarian (@Pragmatarian) January 23, 2018

Scholarly papers are ranked by cheap signals (citations). Webpages are also ranked by cheap signals (links). Politicians/proposals/policies are also ranked by cheap signals (voting). Wouldn't it be a vastly bigger improvement to replace these cheap signals with costly signals?

— Pragmatarian (@Pragmatarian) January 30, 2018

Part of science is evidence. Do you have any evidence that voting is better than spending at measuring satisfaction? https://t.co/BlwKvfUv4c

— Pragmatarian (@Pragmatarian) February 1, 2018

Where's the proof that voting is better than spending at ranking politicians?

— Pragmatarian (@Pragmatarian) January 30, 2018

Who told you that voting is more useful than spending at measuring usefulness? https://t.co/BlwKvfUv4c

— Pragmatarian (@Pragmatarian) January 29, 2018

Recently I realized that democracy, capitalism and socialism are all about ranking options. Options are either ranked by voting, spending or committee. Do you think that scientists have ranked these three ranking systems?

— Pragmatarian (@Pragmatarian) January 24, 2018

Please quote exactly where Buchanan said...

A. The optimal supply of public goods does *not* depend on people's true preferences.

...or...

B. Voting is more effective than spending at revealing people's true preferences.

— Pragmatarian (@Pragmatarian) January 22, 2018

Which is a more useful measure of usefulness... voting or spending?

— Pragmatarian (@Pragmatarian) January 19, 2018

Do you have any evidence that voting is better than spending at measuring quality?

— Pragmatarian (@Pragmatarian) February 3, 2018

Do you have any evidence that voting (a cheap signal) is better than spending (a costly signal) at measuring usefulness?

— Pragmatarian (@Pragmatarian) February 3, 2018

What's truly insane is that democracy gives unequally irrational people equal influence.

— Pragmatarian (@Pragmatarian) February 4, 2018

Trading Thoughts With Koenfucius

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1. Valuating
2. Fundraising

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

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

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

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

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

"As was noted in Chapter 3, expressions of malice and/or envy no less than expressions of altruism are cheaper in the voting booth than in the market. A German voter who in 1933 cast a ballot for Hitler was able to indulge his antisemitic sentiments at much less cost than she would have borne by organizing a pogrom." - Loren Lomasky, Democracy and Decision

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

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

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

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

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

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

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

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

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

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

NPR

My letter to NPR

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

I just read "Readers Rankled By 'Democracy In Chains' Review" by Elizabeth Jensen.  It made me laugh.  Yes, it's progress to at least publicly consider and address the issue of whether a historian, rather than a novelist, should have reviewed Nancy MacLean's book.  But the fact of the matter is that the subject of the book is a Nobel economist's evaluation of democracy.  How can a historian possibly be qualified to effectively judge the validity of James Buchanan's economic arguments?  Of course this is the inherent problem with MacLean's book.

Since I'm here anyways, I might as well endeavor to explain the relevant economic concepts...

"NPR has made a push in the past year to review or interview the authors of all major nonfiction books that are published, and as close to publication date as possible."

Why just the major nonfiction books?  Why not the minor ones as well?  It's because NPR's resources are limited.  So it makes sense for NPR to allocate its limited resources to the more important books.  But it's also the case that the major books aren't equally important.  So then the real issue is... how, exactly, do you determine the importance of a book?

The NY Times maintains a list of the bestselling books.  Why should we care how many people have purchased a book?  Why does it matter how many people have been willing to pay for a book?  Would it be more effective to use voting (democracy) to determine the importance of books?  Or would it be more effective to vote for the representatives who vote to determine the importance of books?

One book that has never made the NY Times' list of bestsellers is The Wealth of Nations by Adam Smith.  Does this mean that it's less important than Thomas Piketty's book, which has made the list?  The issue is that, unlike Piketty's book... Smith's book is freely available.  This means that the two books are on an extremely unlevel playing field.

In order for NPR to optimally/efficiently divide its limited resources between these two books, it's necessary to correctly determine their importance.  Here are some possibilities...

1. Direct democracy.  NPR could give the public the opportunity to vote to determine the importance of the two books.

2. Representative democracy.  NPR could give the public the opportunity to vote for the representatives who will vote to determine the importance of the two books.

3. Charitable market.  NPR could give the public the opportunity to donate to NPR and earmark their donations to determine the importance of the two books.

Which system would most correctly determine the importance of the two books, which, in turn, would most efficiently divide NPRs limited resources between them?

This is what Buchanan worked on.  Well... unfortunately his work was entirely theoretical.  He never devised any experiments to test the effectiveness of these very different allocation systems.  But it's hard to blame him for failing to stand on his own shoulders.  Especially since these fundamental issues continue to be almost entirely overlooked/ignored by most economists.

We use representative democracy to allocate around a third of our country's limited resources.  Yet, this system has never been scientifically tested.  We all assume that it works, but there's absolutely no credible evidence that it works better than the alternatives would.  Historians can certainly explain how we ended up with this system, but they definitely can't prove or justify it.  For this we need economics/experiments/science.  We really don't need a novelist reviewing a book written by a historian criticizing an economist's work on public finance.

Let's say that NPR conducted an experiment to determine the importance of Smith's book and Piketty's book.  With direct democracy... historians and novelists would certainly have no problem voting for Piketty's book.  Neither would they have a problem voting for representatives who would vote for Piketty's book.  With the charitable market though, perhaps they'd have no problem donating and earmarking $5 dollars... or perhaps $20 dollars to Piketty's book.  But with larger amounts of money, they'd have to seriously confront the limits of their economic knowledge.  Would it be worth it for them to spend so much money on a subject outside their area of expertise?  For most it wouldn't be worth it.  So the charitable market would do by far the best job of filtering out public ignorance.  Which is pretty much the same thing as minimizing virtue signalling.  The outcome/results would embody/reflect public knowledge... which would logically help to eliminate public ignorance.  It would be a virtuous cycle.  If this system expanded to include all books, then the most valuable knowledge in each field would cross-pollinate all the different fields.

NPR can, and should be, the platform that we, the people, use to help bring the most valuable knowledge to each other's attention.

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

See also:

- Evonomics
- Public Finance For Andy Seal
- Show Me The Economic Case For Democracy
- The Pragmatarian Model For The NY Times

Target Rank

I really love Kung Fu Hustle.  In this scene, the main character doesn't want to fight an entire crowd.  He figures his chances of winning are much higher if he fights one-on-one.  Especially if he can choose a weak opponent.  The problem is that he initially underestimates every opponent that he picks.

This scene came to mind today after I read Sarah Skwire's article... MacLean Is Not Interested in a Fair Fight...

Several times a week, I go to my taekwondo school, put on a helmet, a chest protector, shin guards and arm guards, yell loudly, and spar with people who are half my age and sometimes twice my size.

Maybe Skwire would choose to spar with Bruce Lee, but would she choose to fight him?  What about Goliath?  There wasn't a single solder in the Israelite army that chose to fight Goliath.  Everyone could clearly see that he was a beast.  His challenge went unanswered for 40 days.  Then a shepherd named David arrived at the camp to deliver some food.  He accepted Goliath's challenge and beat him.

Maybe every solider in the leftist army is too scared to fight James Buchanan.  If so, there are a few exceptions.  At the top of the list is Nancy MacLean.  But I'm pretty sure that she made the classic error of underestimating her opponent.  Evidently his Nobel prize didn't effectively signal his intellectual strength.

In my previous post, I shared how the Libertarian Party (LP) gave donors the opportunity to use their donations to rank potential convention themes...

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

Should FEE.org give donors the opportunity to use their donations to rank libertarian thinkers and their ideas?

The idea that taxation is theft seems to be pretty popular.  This is what we can see.  What we could not see was the true social importance of this idea.  Thanks to the LP, we can all now clearly see that this idea isn't very important to society.  How would it compare to the idea of the Invisible Hand?  Unfortunately, the LP didn't include it.

How many leftists have overestimated the social importance of the idea that taxation is theft?  Here's Matt Bruenig attacking this idea in 2012... Income taxes are voluntary.  This fight did not benefit either side.  It was an extremely stupid fight.  It was the equivalent of Don Quixote tilting at windmills.

Here's what Bruenig wrote in a 2015 blog entry...

Every time you attack libertarianism, libertarians respond by saying you haven’t actually attacked libertarianism. You’ve only attacked one libertarian or one perspective, but that’s not the right one to look at it. You are engaging in a straw man argument. And so on. It never ends. You can’t ever deliver a square blow against it because your description of it is never correct, no matter what you say. - Matt Bruenig, #NotAllLibertarians: An Illustration

In a comment I responded...

If you're going to go after Rothbard.... then it's probably a good idea to attack his strongest argument... Football Fans vs Nature Fans... rather than his weakest one. Because, if you don't attack his strongest argument... then it appears that you're incapable of doing so.

Here's a similar comment that I left on Noah Smith's 2012 blog entry...

Show me a single post where Quiggin, Krugman or any other liberal economist has shredded the opportunity cost concept. If they aren't shredding the opportunity cost concept...then they aren't shredding libertarian economics. If they aren't shredding libertarian economics...then what are they shredding? Their own straw men? How is that competent?

John Quiggin responded...

"If they aren't shredding the opportunity cost concept...then they aren't shredding libertarian economics"

You're obviously in the market for my book (in early draft) Economics in Two Lessons, which aims to cover a wide range of public policy issues in two points

1. Opportunity cost is what matters
2. Sometimes market prices reflect opportunity costs and sometimes they don't

If you regard Point 2 as being "libertarian economics", then we are on the same page.

In 2010 Quiggin wrote...

***********

Fourth, while I don’t see much, if any, benefit in engaging with actually existing conservatism, that doesn’t mean that we should ignore conservative, and libertarian, ideas. You don’t have to be an unqualified admirer of writers like Burke, Popper or Hayek to concede that they made valid criticisms of the progressive ideas of their day, and to seek a better way forward. Some examples of the kind of thing I have in mind

Popper’s critique of historicism. After thirty years in which teleological claims of inevitable triumph have been the stock in trade of Fukuyama and his epigones, the left should surely have been cured of such ideas, but their centrality is evident in the very use of terms like “progressive”. It’s important to recognise that beneficial change is not an automatic outcome of “progress”

Burke and his successors on the need for beneficial reform to be “organic”, in the sense that it reflects the actual historical evolution of particular societies, rather than being based on universal truths that are applicable in all times and places

Hayek on the impossibility of comprehensive planning. No planner can possess all relevant information or account for all possible contingencies. We need institutions that respond to local information and that are robust enough to cope with unconsidered possibilities. In some circumstances, but certainly not all, markets fit the bill. - John Quiggin, After the dead horses

***********

The multitude of thinkers on both sides have produced many ideas.  But all these ideas, and their producers, aren't equally important to society.  Their true social importance has to be determined and known in order to facilitate the most beneficial battles.

Correctly determining the social importance of thinkers and their ideas obviously must involve society.  This is because no planner, or committee, can have all the relevant information about the social importance of anything.  The larger the group, the more information it will have, and the closer it will get to determining the true social importance of ideas/individuals.

The question is... should social importance be determined by voting or spending?

Reddit is based entirely on voting.  We can go to the libertarian group and sort the ideas/individuals by votes.  My verdict is that lots of libertarians will vote for stupid things.  Why not?  It doesn't cost them anything to do so.  Bringing (opportunity) cost into the equation is the only way to maximize intelligence.  Libertarians will fully utilize their brains when, and only when, they are given the opportunity to divide their limited dollars among the unlimited libertarian ideas/individuals.

The market works because consumers decide how to divide their limited dollars among their unlimited desires.  The LP used the market to rank its potential convention themes.  The donors decided how to divide their limited dollars among the different themes.

FEE should give donors the opportunity to decide how to divide their limited dollars among the unlimited libertarians ideas/individuals.  How donors divide their dollars between Buchanan and Rothbard would signal how they want leftists to divide their forces between the two economists.  This would minimize the chances of unintentionally attacking strawmen.  We would all know the social importance of Rothbard and his ideas.  So if Bruenig attacked the least important idea, it's not like he could claim ignorance of importance.

In my blog entry about Evonomics I mentioned that leftists are the first to love the fact that Thomas Piketty's book was a bestseller.  They believe that this provides conclusive evidence that his ideas about inequality are very important to society.  So they might accept the validity of ideas/individuals being ranked by donors.

It's rather fascinating to compare the two ranking systems.  Both systems are markets... but they are different types of markets.  With the book market, the consumers are purchasing the book.  Doing so doesn't necessarily mean that they believe that its ideas are important.  But with the bee market, the consumers wouldn't purchase the book.  Instead, they'd spend their money to help determine the social importance of its ideas.  Doing so would obviously mean that they believe that the ideas are important.

Deirdre McCloskey read Piketty's book.  She might have purchased it.  If she did, her purchase clearly doesn't count as an endorsement of his ideas.  She strongly disagrees with his ideas.  This means that she wouldn't make a donation to help improve their social standing.

So as far as determining the true social importance of ideas/individuals... the bee market would be far more trustworthy than the book market.

I suppose "bee market" probably isn't the best term.  I'm not referring to the buying and selling of bees.  The context should have made that obvious.  But without the proper context, the term "bee market" might cause a bit of confusion.  Then again, just how much discussion is there about the buying and selling of bees anyways?

Just in case you haven't read my post about Evonomics, I use the term "bee market" because bees spend their precious calories in order to signal the importance/profitability/value/relevance of flower patches.  The longer and harder a bee dances, the more calories it burns, the more important the flower patch.  The bees don't buy a valuable flower patch.  They spend their calories to help direct more attention to it.  It's essentially crowdfunded advertising.

The efficient allocation of society's attention depends on knowing the social importance of things.  Right now we don't really know the true social importance of Buchanan and his ideas.  We know that he produced many books and even more papers.  We know that he won a Nobel prize.  But we certainly have no idea how society would divide its donations between all the Nobel prize winners.  Therefore, we don't know the true social importance of Buchanan and his ideas.

From my perspective, MacLean made quite a few mistakes.  But her target choice was not one of them.  Buchanan is an intellectual beast.  Right now it's pretty much her versus him.  It's a one-on-one fight.  Should it be?  I don't think so.  I think it should be a many-on-one fight.  All the liberals in the world should attack Buchanan.  It's a numbers game.  The more liberals that attack him, the greater the chances that the modern day equivalent of a shepherd will use the intellectual equivalent of a slingshot to defeat him.

However, it's entirely possible that my perspective is wrong.  Maybe I'm overestimating Buchanan's importance.  This is why it's so important to correctly determine his social importance.  FEE should give libertarians the opportunity to do so.  Will Quiggin want to participate?  Well I'm not sure if he'd want to donate to FEE.  What's the left equivalent of FEE?  Jacobin?

To be honest, I don't necessarily see Jacobin creating a market anytime soon.  I'd guess that Crooked Timber would do so way before Jacobin.  I was actually rather surprised by what Henry Farrell and Steven Teles wrote about MacLean.  My impression of Farrell is him being way more leftist.  Perhaps he was really balanced by Teles?

The LP already created a market to rank some ideas.  It was an ephemeral market... but I think it's a given that other libertarian organizations will start to create bee markets.  Hopefully they'll do so sooner rather than later.  When they do so, pro-market resources will be far more efficiently allocated.  Leftists will finally appreciate what markets are good for.  Then again, it's entirely possible that I'm overestimating the importance of markets.

Why Does Quadratic Voting Excite Miles Kimball?

Research continues on these issues. Quadratic voting is quite exciting.

— Miles Kimball (@mileskimball) July 14, 2017

In yesterday's blog entry I endeavored to encourage Miles Kimball and Robin Hanson to supply a coherent economic story.  Today I learned that Kimball is a fan of quadratic voting (QV).

The first time that I heard of QV was three years ago when memesteading.com asked me about it.  Here was my response...

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

Nope, hadn't seen it. Thanks for pointing it out. It's fun to pretend that they got the idea from this blog entry...Crooked Timber Liberals Do Not Advocate Selling Votes.

I just skimmed over the first search result...I'm not sure why 'quadratic'. It seems far more intuitive that the price of votes should be determined by the demand.

And it's a bit off to use quadratic voting or regular vote selling rather than tax choice when it comes to something like a public park.

For me vote selling would be relevant for things like gay marriage. If somebody is completely neutral on the topic...then they would simply sell their vote to the highest bidder.

The 'quadratic vote' people are on the right track though...the answers/outcomes are far more accurate when people are given the opportunity to put their own money where their mouths are (deep input).

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

Since then I've read quite a bit about QV, but I still have the same issues.  Perhaps Kimball can address them.

Why quadratic?  Here's an explanation...

Simple vote trading won’t work, because buying a single vote is too cheap and thus a liquid buyer could accumulate too much political power. - Tyler Cowen, My thoughts on quadratic voting and politics as education

Let's take prostitution for example.  I think it should be legal, Kimball disagrees.  I offer to buy his vote.  Should we assume that he will sell it too cheap?  Why in the world would we assume this?  Why would we assume that he only weakly cares about prostitution being illegal?  The very point and purpose of a vote market would be to figure out the (opportunity) cost of a vote, yet Cowen's argument against the vote market is that a vote will be too cheap.  Ouch, my brain.

What would count as "cheap" anyways?  A penny sure is cheap, but what about a quarter, or a dollar?  We'll say that Kimball decides to sell his vote for a quarter.  From my perspective, I suppose this would be pretty cheap.  Well, unless I was trying to buy a million votes for a quarter each.

If Kimball was willing to sell his vote for a quarter, then this would provide some evidence that he didn't strongly care about prostitution being illegal.  Or, maybe he was super broke and could really use the quarter more than he could use the vote.  In either case, what essentially occurred is that he exchanged some power in the public sector for some power in the private sector.  I did the opposite.  I gave up some influence in the private sector in order to gain some influence in the public sector.  To be clear, it's entirely possible that Kimball will use the quarter that I gave him to buy a vote on an issue that he cares more strongly about.

With all of this in mind, what's the point of the quadratic aspect?  What's the benefit of making it progressively more costly to buy additional votes?

If we eliminate the quadratic aspect, then the next question is, why do votes need to be involved?  Kimball and I essentially made a mutually beneficial trade.  But we really didn't need a vote to be part of the trade.

Here's how it would work without votes.  Participants would have a window of opportunity to spend as much of their money as they wanted on their preferred outcome.  After the window of opportunity closed, the totals would be calculated and revealed.  Whichever side had spent the most money would get their preferred outcome.  Not only would the other side receive a complete refund, but they would also proportionally receive all the money spent by the winning side.  It would be a mutually beneficial trade.  Votes are clearly unnecessary.  This is coasianism.

Let's consider a small, real-life, example of coasianism.  The students in my friend's 4th grade class needed to decide who should be in charge of their Justice Department.  Rather than decide by voting, they decided by spending.  Each student wrote three things on a piece of paper...

1. Their name
2. Their willingness to pay (WTP)
3. Their preferred candidate

After they had all turned in their papers, the teacher wrote the WTPs on the board...

Christopher was the winner, despite the fact that he was only preferred by one student... himself.  Here's a picture of his piggy bank...

Christopher decided that it would be worth it to give up his $4 dollars in order to be in charge of the Justice Department.  Of course he couldn't know beforehand how much money the other students were willing to pay for the other candidates.  For all he knew, he might have lost.  In that case, he would have been compensated.  He won instead which meant that he compensated all the other students.  Christopher essentially made a mutually beneficial trade with nearly 30 other students.

It should be crystal clear that votes really do not need to be part of the trade.  All that matters is that participants have the incentive to use their own money to honestly reveal the true intensity of their preferences.

Quick summary about QV.  Is the quadratic needed?  Nope.  Is the voting needed?  Nope.  All that's needed is the participants deciding how much of their own money they are willing to pay for the things they want.

QV is a hybrid made from democracy and markets.  It's definitely far superior to pure democracy, but its democratic traits make it far inferior to pure markets.

A coasian market should be used to determine whether prostitution should be legal or illegal for a year.  If the coasian market determines that it's more beneficial for prostitution to be illegal for a year, then a buchanian market should be used to determine how much money should be allocated to enforcing the law against prostitution.  The buchanian market would simply involve each and every taxpayer having the option to decide how many of their own tax dollars to allocate to the enforcement of the law.

That's public finance in a very simple and straightforward nutshell.

After I tweeted yesterday's blog entry to Kimball, he replied with the following...

I am doing a lot of ranking of the sacred. Take a look at this column, & much more on the way in our research: https://t.co/EM9FWz31ux

— Miles Kimball (@mileskimball) July 14, 2017

He gave people the opportunity to rank over 100 things according to their desirability.  Here was my reply...

In a market, people use their limited dollars to rank their unlimited desires. Would this method incorrectly rank the sacred? #SkinInGame

— Pragmatarian (@Pragmatarian) July 14, 2017

He didn't reply to this tweet, but he did reply to another one...

Xero: It would be revolutionary if cheap-talk surveys were remotely effective at measuring well-being. http://pragmatarianism.blogspot.com/2017/03/my-well-being-depends-on-artichokes.html @mileskimball
Kimball: In our approach, it isn't cheap talk. Local incentive compatibility: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3760035/
Xero: If not cheap-talk then the options can and should be sorted by the amount of money that was actually spent on them. http://classtopia.blogspot.com/p/blog-page_22.html
Kimball: You need a budget constraint, but it doesn't have to be money. Quadratic budget constraint with voting power has good properties.
Kimball: See paper here https://link.springer.com/article/10.1007/s11127-017-0414-3
and video of my talk:
https://bfi.uchicago.edu/video/quadratic-voting-application-normalized-gradient-addition-mechanism

I wasn't willing to spend $40 dollars to read the paper, but I was willing to spend an hour watching the video.  I might be mistaken but it seems like he used QV to order the list of over 100 items.  However, real money wasn't used, tokens were used instead.

Let's consider a real-life example of a different way to order a list.  Earlier this year the Libertarian Party wanted to choose a theme for their convention.  Here a list of the potential themes...

All of Your Freedoms, All of the Time
Am I Being Detained!
Be Me, Be Free
Building Bridges, Not Walls
Empowering the Individual
Free Lives Matter
Future of Freedom
I’m That Libertarian!
Jazzed About Liberty
Liberty Here and Now
Life, Liberty and the Pursuit of Happiness
Make Taxation Theft Again
Pro Choice on Everything
Rise of the Libertarians
Taxation is Theft
The Power of Principle

Rather than choose their convention theme by using a cheap-talk survey, the Libertarian Party decided to use a skin-in-game survey...

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

The "sacred" was ordered by sacrifice.  We can clearly see the disparity in sanctity.

It's reasonable to guess that the free-rider problem affected the results.  But if this problem had been solved, would "Taxation is Theft" have moved to the top of the list?  I suppose it's logical that skin-in-game surveys will be biased against free-riders.

Why didn't Kimball use a skin-in-game survey to rank the items on his list?  As far as I know, he's never even publicly considered a skin-in-game survey.  Neither has any other economist.  But Kimball and quite a few others have certainly considered QV.

Maybe QV solves problems that I'm overlooking.  But the fact that economists haven't even publicly acknowledged skin-in-game surveys, makes it seem highly probable that they are the ones overlooking the obvious.

Correctly Determining Importance: Miles Kimball vs Robin Hanson

Imagine a two lane road with a mountain on one side and a cliff on the other. There are two cars on the road that are driving towards each other.  In the right lane robot Rob is driving Miles Kimball while in the left lane robot Rachel is driving Robin Hanson. Both economists are asleep. Just before the two cars are about to pass each other, a boulder suddenly lands in Kimball's lane. For the sake of the scenario, we'll pretend that he'll be killed if Rob tries to stop the car before it hits the boulder.  Kimball will also be killed if the car does hit the boulder.  Both economists will be killed if Rob swerves to avoid the boulder.  Kimball will only survive if Rachel swerves Hanson's car into the boulder, or off the cliff. In any case, at least one of the economists is going to die.  It stands to reason that the least important economist should die.

The creators of Rachel and Rob had realized that such situations were possible.  They decided that the total importance of passengers in a vehicle should be calculated as soon as the passengers entered the vehicle.  This would allow for more time to process more information in order to more correctly calculate importance.  So each and every vehicle on the road has a rank.  It isn't just used in life or death situations, it's also used to determine right of way.  Lower ranked vehicles automatically get out of the way of higher ranked vehicles.  As a result, more highly ranked vehicles more quickly reach their destinations.

The rank of Kimball's vehicle is 245.  The rank of Hanson's vehicle is 275.  Based on their relative ranking, Kimball should die and Hanson should not.  But the decision isn't automatically made.  There's still some time before a decision has to be made.  It's not much time, but the robots take advantage of it to acquire and process even more information.

Rob and Rachel are surprised to discover that they are both carrying an economist.  They decide to read everything that the two economists have written that is available online.  It's a lot of information but the two robots process all of it in a fraction of a second.  Given that they are ranking the economists, the two robots are especially interested in the parts where the economists themselves have discussed ranking.

Here's the most relevant thing that Hanson has written about ranking...

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

Consider four possible acts:

Eating Twinkies
Watching Gilligan’s Island
Fighting cancer
Working for racial justice

Now consider pairwise comparisons of value between these acts. You might say which you prefer, or which matters more, or is more important or admirable.

It seems to me that we don’t mind ranking #1 vs #2. We might think the exercise silly, but we’d still be comfortable expressing an opinion. It also seems to me that we don’t mind puffing up our chest and intoning very seriously that either of #3,4 are more noble and admirable than either of #1,2, and looking sadly down on those who might say otherwise. But if asked to rank #3 vs #4, we are much less comfortable. In this case we could be seen as saying something against an act many find important and admirable. That isn’t the sort of thing we like to be quoted on. We don’t like to speak against the sacred.

Because of this, we end up sharing less info about relative rankings among the acts we most admire. Which, alas, are the acts most valuable to rank. We learn what others think of the relative ranking of silly tv shows and minor foods, but not about our most important choices. Silly humans.

I’m fond of this classic question pair: “What is the most important research question in your discipline?” followed by “Why aren’t you working on it?” - Robin Hanson, Ranking The Sacred

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

Rob and Rachel really appreciate Hanson's perspective on the importance of ranking the sacred.  After all, the two robots are ranking the lives of the two economists.  So Rachel increases Hanson's rank from 275 to 277.  

The two robots don't find any blog entries that Kimball has written specifically about ranking.  But they do find a couple relevant Twitter exchanges.  Here's the first...

Xero: #Sense8 can be freely copied, but it cost $9 million/episode to create. So scarcity really does not go out window. https://t.co/yDUXWSJQu0 

Kimball: I agree

Xero: You agree that #Netflix subscribers should have the opportunity to divide their limited subscription dollars among the unlimited content?

Kimball: It would be great for them to have more of a way for them to signal *which* content was most valuable to them.

Xero: Do you also agree that @CatoInstitute donors should have the opportunity to divide their donated dollars among the content?

Kimball: I assume they do already have effective ways of communicating which things they are more eager to support.

Xero: Donors decide how to divide their dollars between @ASI and @mises. Is there a better way to signal the relevance of these two organizations?

The robots think it's incredible that Kimball seemed to really support the idea of Netflix subscribers using their subscription dollars to rank the content.  But they wonder whether he truly does support the idea... given that he doesn't think that Cato donors should use their donated dollars to rank the content.  

Here's the second Twitter exchange...

Kimball: New post: "Does the Journal System Distort Scientific Research?" @noahpinion https://blog.supplysideliberal.com/post/2017/7/11/does-the-journal-system-distort-scientific-research 

Xero: Academic work isn't judged by markets, except for their books (ie MacLean). It would be great if you could solve this puzzle in future post.

Kimball: Markets are not perfect either. It is good to have multiple different judgments.

Xero: The optimal division of resources depends on the correct ranking of products. Voting more correctly ranks papers than spending could? Proof?

Rob and Rachel didn't vote or spend to rank Kimball and Hanson.  Instead, the robots initially calculated the rank of the economists by considering and properly weighing different factors (age, health, income, number of children, etc).  Now the robots are adjusting the ranking by seeing and comparing what the economists themselves have written about ranking.

It's not necessarily clear to the robots exactly how the economists would want to be ranked.  Hanson clearly believes that it's important to rank even sacred things, but he doesn't mention whether they should be ranked by committees, democracies or markets.  It's not clear how Kimball feels about ranking the sacred, but he believes that markets are only sometimes good for ranking things.  Perhaps he believes they are good for ranking Netflix content and books, but not so good for ranking Cato content or other scholarly content.  But what's his rule?  Does he even have one?  

Let's tweak the scenario by replacing one of the economists with myself.  Both the robots read this blog entry.  Here's what I want them to know.

More heads are better than less heads.  In the multitude of counselors there is safety.  Given enough eyeballs, all bugs and Easter eggs are shallow.  

The robots can notify all the robots in the world that an important decision needs to be made.  They certainly could vote on their preferred outcome...

A. I don't wake up

B. The economist doesn't wake up

The problem with voting can be seen when we compare it to spending.  

Here's how spending would work.  Each participant would spend as much money as they wanted on their preferred outcome. After the window of participation had closed, the side that was willing to spend the most money would get their preferred outcome. The other side would get a refund. Plus, they'd receive all the money that the winning side had spent. It would be proportionally divided. With this coasian trade, the winners would compensate the losers. 

With spending, each and every participant decides how much money they are willing to spend on their preferred outcome.  They can spend as little as a penny, or they can spend all their money.  Willingness to pay certainly depends on the participant's ability to pay, but it also depends on their information.  The better a participant's information, the greater their willingness to pay, and the greater their influence on the outcome.

With voting, all the participants have equal influence, despite the fact that they have unequal information.  It's extremely detrimental for unequally informed individuals to have equal influence.

It should be clear that the importance of deciding between the economist and myself can only be determined by spending.  The spending wouldn't be coasian though.  It would just be regular spending.  Rob and Rachel would spend their money to rank the decision that needed to be made.  The more money they spent on it, the greater its rank/importance, and the greater the number of robots that would be competed away from other endeavors.  These other robots could also spend their money to rank the decision... which would in turn recruit more robots.  

With this two market system, spending would determine the optimal number of heads to make the decision, and they would make it by spending their own money.

Right now most vehicles aren't driven by robots.  So it's a perfect time for Kimball and Hanson to clarify their positions on correctly determining importance.  

Caplan Overrates Democracy

If China had been a democracy in 1945, then I believe that Mao Zedong would have been elected.  Bryan Caplan believes otherwise.  Therefore, we are going to bet.  Eh?

The one time that I'm super confident that Caplan is really wrong... it's something that we can't bet on.  Is it a coincidence?  It sure seems pretty "convenient".  Too convenient.

"Shucks, we don't have a time machine, guess we'll never know who is right!"

Is not having a time machine a good excuse?  In this case I suppose it is.  But I really want to eliminate it as an excuse.  I don't want it to be so convenient for anyone to easily avoid betting on their belief in democracy.

My options are....

1. Invent a time machine
2. Find a different case

Yeah, I'm going to choose the second option.  Coming up with an equivalent case depends on first considering what happened in China.

China was not a democracy when millions and millions of people starved to death (the Great Leap Forward).  Then again, it wasn't a mixed economy either.  It was a command economy.  In 1978 China gradually became a mixed economy.  Since then, millions of people have not starved to death.

If the absence of democracy is truly the real reason that millions starved to death, then how come millions are no longer starving to death in China?  How come obesity is now a major concern in China?

My belief is that countries prosper despite, rather than because of, democracy.  The real cause of prosperity is people's freedom to trade with each other.  Unfortunately, as democracy proves, most people believe otherwise.  Here's what Adam Smith wrote in 1776...

The ancient policy of Europe, instead of discountenancing this popular odium against a trade so beneficial to the public, seems, on the contrary, to have authorized and encouraged it. - Adam Smith, Wealth of Nations

Here's what Paul Samuelson wrote in 1989...

the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.

Caplan shared Samuelson's quote but there's no evidence that he shared Smith's quote.  However, there's no doubt that Caplan is well aware of anti-market bias.

Why has anti-market bias persisted for so long?  It's persisted for the same reason that pro-democracy bias has persisted.  It's challenging to create betting situations that will demonstrate which ideological beliefs are bullshit without also risking everybody's well-being.

"Hey Caplan, I'll bet you that America doesn't need to be a democracy.  Oooops.  I was wrong.  My belief was bullshit.  Here's $100 dollars.  Can I have that dog bone after you're done gnawing on it?"

So there's no hope?  We'll just have to wait for large-scale natural experiments to bet on?  Eventually we'll have so many natural experiments under our belt that the true cause of our prosperity will be painfully clear?

Actually there is hope.  We can use websites to safely test our beliefs.

Every economic system is about determining the order (relative importance) of things.  In the case of Caplan's blog... EconLog... the goal would be to correctly determine the order of blog entries.  Right now the entries are sorted chronologically.  Another page on the site could be created to display the entries sorted by their importance.

Here are some different systems for ordering the entries...

1. Dictatorship: the order of the entries would be determined by one person.
2. Direct democracy: the order of the entries would be determined by voters.
3. Republic: the order of the entries would be determined by an elected representative.
4. Market: the order of the entries would be determined by donations.

No two systems would order the entries in exactly the same way.  Therefore, no two systems would create the same amount of value.  Which system would create the most value?

Here's an example of a 4th grade blog that uses the market system... Classtopia.  On their homepage you can see the blog entries sorted chronologically.

In theory, EconLog could have a page for each system.  Then we could simultaneously compare the different systems.

I'm not exactly sure how we could bet on the outcome.  But we'd certainly have the opportunity to bet on our preferred system.  I'd be happy to spend some money to help Econlog establish the market system.  I'd love to see how many other people would be in the same boat as me.  Would Caplan be in the same boat?  Or would he be in a different boat?

We'd essentially have a market for systems.  So we'd actually see and know the demand for markets, republics, direct democracies, dictatorships and any other systems.  It would be a meta-market.  The market would determine the relative importance of systems.

Today I "voted" for this blog entry...

People feel little obligation to propose workable systems or practical alternatives to current practices because they can’t imagine what it would be like to get to decide those things. But the radical left actually can win, and it can win using the existing democratic systems we have now — if we commit to being an adult movement that’s dedicated to convincing others to join our cause in order to build a pragmatic and workable socialist system. - Freddie deBoer, What replaces rights and discourse?

It's wonderful that deBoer is challenging socialists to develop alternative systems.  But even if they perceive that the systems they develop are pragmatic and workable, it doesn't mean that they truly are.  The Great Leap Forward is proof that people can really misjudge the effectiveness of systems.

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Voters, activists, and political leaders of the present day are in the position of medieval doctors. They hold simple, prescientific theories about the workings of society and the causes of social problems, from which they derive a variety of remedies-almost all of which prove either ineffectual or harmful. Society is a complex mechanism whose repair, if possible at all, would require a precise and detailed understanding of a kind that no one today possesses. Unsatisfying as it may seem, the wisest course for political agents is often simply to stop trying to solve society’s problems. — Michael Huemer, In Praise of Passivity

And since then, one of the central principles behind my philosophy has been “Don’t destroy all existing systems and hope a planet-sized ghost makes everything work out”. Systems are hard. Institutions are hard. If your goal is to replace the current systems with better ones, then destroying the current system is 1% of the work, and building the better ones is 99% of it. Throughout history, dozens of movements have doomed entire civilizations by focusing on the “destroying the current system” step and expecting the “build a better one” step to happen on its own. That never works. The best parts of conservativism are the ones that guard this insight and shout it at a world too prone to taking shortcuts. - Scott Alexander, SSC Endorses Clinton, Johnson, or Stein

Further progress requires recognising that America’s economy is an enormously complicated mechanism. As appealing as some more radical reforms can sound in the abstract — breaking up all the biggest banks or erecting prohibitively steep tariffs on imports — the economy is not an abstraction. It cannot simply be redesigned wholesale and put back together again without real consequences for real people. - Barak Obama, The way ahead

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We need to test so many different systems in order to discover truly better systems.  But immediately doing so on a large-scale is clearly problematic.  Therefore, we must first test different systems on a smaller scale.  Websites provide us the perfect opportunity to do so.  Does Caplan see the benefit of doing so?  Is he willing to put his money where his preferred system is?