Breaking news! The Crooked Timber liberal economist John Quiggin* is writing the sequel to Henry Hazlitt's popular classic...Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics
Read all about it on Noah Smith's blog...here and here...
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Ken Houghton: John Quiggin - You're writing the sequel to Hazlitt? Will Costco/Amazon offer the two books as a box set?
John Quiggin: I hope so: Hazlitt is still selling well
James M. Buchanan: General-fund financing is analogous to a market situation where the individual is forced to purchase a bundle of goods, with the mix among the various components determined independently of his own preferences. The specific tie-in sale is similar to general-fund financing, that is, nonearmarking.
Derek Thompson: Every year, 100 million homes pay for a bundle of cable channels. Like any bundle, it's hard to see exactly what they are paying for. That is somewhat the point of bundling -- to disguise the true cost of the constituent items.
Bastiat: Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.
Xero: Why not create a market for public goods?
John Quiggin: Opportunity cost is what matters
Xero: Errr...was that a yes?
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*It's entirely possible that there are two John Quiggins and/or I am being pranked.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Monday, November 12, 2012
Friday, November 9, 2012
Libertarian Economics
Here's a list I compiled of important libertarian economic concepts. Feedback on this list would be appreciated. Do you know of any other passages which more effectively/efficiently convey any of these concepts? Are there any important concepts that I have not included?
Scarcity...
The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. - Thomas Sowell
Opportunity cost...
The concept of opportunity cost (or alternative cost) expresses the basic relationship between scarcity and choice. If no object or activity that is valued by anyone is scarce, all demands for all persons and in all periods can be satisfied. There is no need to choose among separately valued options; there is no need for social coordination processes that will effectively determine which demands have priority. In this fantasized setting without scarcity, there are no opportunities or alternatives that are missed, forgone, or sacrificed. - James M. Buchanan
Human action...
We call contentment or satisfaction that state of a human being which does not and cannot result in any action. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would have neither wishes nor desires; he would be perfectly happy. He would not act; he would simply live free from care. - Mises, The Prerequisites of Human Action
Demonstrated preference...
The concept of demonstrated preference is simply this: that actual choice reveals, or demonstrates, a man’s preferences; that is, that his preferences are deducible from what he has chosen in action. Thus, if a man chooses to spend an hour at a concert rather than a movie, we deduce that the former was preferred, or ranked higher on his value scale. Similarly, if a man spends five dollars on a shirt we deduce that he preferred purchasing the shirt to any other uses he could have found for the money. This concept of preference, rooted in real choices, forms the keystone of the logical structure of economic analysis, and particularly of utility and welfare analysis. - Rothbard, Toward a Reconstruction of Utility and Welfare Economics
Incentives matter...
Difficulties and hardships are often but an incentive to exertion: what is fatal to it, is the belief that it will not be suffered to produce its fruits. - J.S. Mill
The Invisible Hand...
The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. - Adam Smith
Fallibilism...
It follows, then, that a less centralized society has the advantage of a greater diversification of its performance across a larger number of preceptors. This is because diversification here dilutes the impact of the ability, or the lack thereof, of each preceptor on the aggregate societal performance. - Raaj K. Sah
The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. - Hayek
Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority. - Bastiat
Consequences of failure...
For this is the salient point: private organizations, whether for-profit or non-profit, perform or lose their customers or their donors. When a private entity fails to deliver on its promise, or actually causes harm, it is held liable for the failure and pays the damages. When government fails, it gets a bigger budget and even more power. - Mary L. G. Theroux
Supply and Demand...
The instruments of intervention became the tools with which to apply government knowledge. Resources were directed and allocated by the state, by political and bureaucratic decision making, rather than by the elemental forces of supply and demand - forces shaped by the knowledge of those in the marketplace. - Daniel Yergin, Joseph Stanislaw
Partial knowledge...
It must be remembered, besides, that even if a government were superior in intelligence and knowledge to any single individual in the nation, it must be inferior to all the individuals of the nation taken together. It can neither possess in itself, nor enlist in its service, more than a portion of the acquirements and capacities which the country contains, applicable to any given purpose. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy
The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world. - Hayek, The Use of Knowledge in Society
It is a world of change in which we live, and a world of uncertainty. We live only by knowing something about the future; while the problems of life, or of conduct at least, arise from the fact that we know so little. This is as true of business as of other spheres of activity. The essence of the situation is action according to opinion, of greater or less foundation and value, neither entire ignorance nor complete and perfect information, but partial knowledge. - Frank Knight, Risk, Uncertainty, and Profit
Other people's money...
There are four ways to spend money. You can spend your own money on yourself. When you do that, why you really watch out for what you're doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well then, I'm not so careful about the content of the present, but I'm very careful about the cost. Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm going to have a good lunch! Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it costs, and I'm not concerned about what I get. And that's government. And that's close to 40 percent of our national income. - Milton Friedman, The 4 Ways to Spend Money
Unintended consequences...
In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.
There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil. - Bastiat, The Seen vs the Unseen
Individual foresight...
The resource status of material objects is therefore always problematical and depends to some extent on foresight. An object constitutes wealth only if it is a source of an income stream. The value of the object to the owner, actual or potential, reflects at any moment its expected income-yielding capacity. This, in its turn, will depend on the uses to which the object can be turned. The mere ownership of objects, therefore, does not necessarily confer wealth; it is their successful use which confers it. Not ownership but use of resources is the source of income and wealth. An ice-cream factory in New York may mean wealth to its owner; the same ice-cream factory in Greenland would scarcely be a resource. - Lachmann, The Market Economy and the Distribution of Wealth
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. - Bastiat, Justice and Fraternity
There is no need to prove that each individual is the only competent judge of this most advantageous use of his lands and of his labor. He alone has the particular knowledge without which the most enlightened man could only argue blindly. He alone has an experience which is all the more reliable since it is limited to a single object. He learns by repeated trials, by his successes, by his losses, and he acquires a feeling for it which is much more ingenious than the theoretical knowledge of the indifferent observer because it is stimulated by want. - Turgot
Entrepreneurship...
Entrepreneurship is necessary in economic development, therefore, for the quite pedestrian purpose of ensuring a tendency towards the adoption of the socially advantageous long-term capital-using opportunities available. So far from being a kind of exogenous push given to the economy, entrepreneurial innovation is the grasping of opportunities that have somehow escaped notice. - Kirzner, Entrepreneurship & the Market Approach to Development
Heterogeneous activity...
So far as this is the case, it is evident that government, by excluding or even by superseding individual agency, either substitutes a less qualified instrumentality for one better qualified, or at any rate substitutes its own mode of accomplishing the work, for all the variety of modes which would be tried by a number of equally qualified persons aiming at the same end; a competition by many degrees more propitious to the progress of improvement than any uniformity of system. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy
Market redistribution...
These economic facts have certain social consequences. As the critics of the market economy nowadays prefer to take their stand on “social” grounds, it may be not inappropriate here to elucidate the true social results of the market process. We have already spoken of it as a leveling process. More aptly, we may now describe these results as an instance of what Pareto called “the circulation of elites.” Wealth is unlikely to stay for long in the same hands. It passes from hand to hand as unforeseen change confers value, now on this, now on that specific resource, engendering capital gains and losses. The owners of wealth, we might say with Schumpeter, are like the guests at a hotel or the passengers in a train: They are always there but are never for long the same people. - Lachmann, The Market Economy and the Distribution of Wealth
Creative destructionism...
As protected firms become less innovative, a country’s overall economic growth may suffer. This is because, as Schumpeter emphasized nearly a century ago, economic growth thrives on “creative destruction.” In a healthy economy, new firms constantly arise to challenge older, less-innovative behemoths. - Matthew Mitchell, The Pathology of Privilege: The Economic Consequences of Government Favoritism
The interests of consumers...
Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race. - Bastiat, Abundance and Scarcity
Dollar voting...
The capitalist society is a democracy in which every penny represents a ballot paper. - Mises
Foot voting...
The second broad principle is that government power must be dispersed. If government is to exercise power, better in the county than in the state, better in the state than in Washington. If I do not like what my local community does, be it in sewage disposal, or zoning, or schools, I can move to another local community, and though few may take this step, the mere possibility acts as a check. If I do not like what Washington imposes, I have few alternatives in this world of jealous nations. - Milton Friedman, Capitalism and Freedom
Moral value...
Only where we ourselves are responsible for our own interests and are free to sacrifice them has our decision moral value. We are neither entitled to be unselfish at someone else's expense nor is there any merit in being unselfish if we have no choice. The members of a society who in all respects are made to do the good thing have no title to praise. - Hayek
Scarcity...
The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. - Thomas Sowell
Opportunity cost...
The concept of opportunity cost (or alternative cost) expresses the basic relationship between scarcity and choice. If no object or activity that is valued by anyone is scarce, all demands for all persons and in all periods can be satisfied. There is no need to choose among separately valued options; there is no need for social coordination processes that will effectively determine which demands have priority. In this fantasized setting without scarcity, there are no opportunities or alternatives that are missed, forgone, or sacrificed. - James M. Buchanan
Human action...
We call contentment or satisfaction that state of a human being which does not and cannot result in any action. Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would have neither wishes nor desires; he would be perfectly happy. He would not act; he would simply live free from care. - Mises, The Prerequisites of Human Action
Demonstrated preference...
The concept of demonstrated preference is simply this: that actual choice reveals, or demonstrates, a man’s preferences; that is, that his preferences are deducible from what he has chosen in action. Thus, if a man chooses to spend an hour at a concert rather than a movie, we deduce that the former was preferred, or ranked higher on his value scale. Similarly, if a man spends five dollars on a shirt we deduce that he preferred purchasing the shirt to any other uses he could have found for the money. This concept of preference, rooted in real choices, forms the keystone of the logical structure of economic analysis, and particularly of utility and welfare analysis. - Rothbard, Toward a Reconstruction of Utility and Welfare Economics
Incentives matter...
Difficulties and hardships are often but an incentive to exertion: what is fatal to it, is the belief that it will not be suffered to produce its fruits. - J.S. Mill
The Invisible Hand...
The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. - Adam Smith
Fallibilism...
It follows, then, that a less centralized society has the advantage of a greater diversification of its performance across a larger number of preceptors. This is because diversification here dilutes the impact of the ability, or the lack thereof, of each preceptor on the aggregate societal performance. - Raaj K. Sah
The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. - Hayek
Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority. - Bastiat
Consequences of failure...
For this is the salient point: private organizations, whether for-profit or non-profit, perform or lose their customers or their donors. When a private entity fails to deliver on its promise, or actually causes harm, it is held liable for the failure and pays the damages. When government fails, it gets a bigger budget and even more power. - Mary L. G. Theroux
Supply and Demand...
The instruments of intervention became the tools with which to apply government knowledge. Resources were directed and allocated by the state, by political and bureaucratic decision making, rather than by the elemental forces of supply and demand - forces shaped by the knowledge of those in the marketplace. - Daniel Yergin, Joseph Stanislaw
Partial knowledge...
It must be remembered, besides, that even if a government were superior in intelligence and knowledge to any single individual in the nation, it must be inferior to all the individuals of the nation taken together. It can neither possess in itself, nor enlist in its service, more than a portion of the acquirements and capacities which the country contains, applicable to any given purpose. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy
The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world. - Hayek, The Use of Knowledge in Society
It is a world of change in which we live, and a world of uncertainty. We live only by knowing something about the future; while the problems of life, or of conduct at least, arise from the fact that we know so little. This is as true of business as of other spheres of activity. The essence of the situation is action according to opinion, of greater or less foundation and value, neither entire ignorance nor complete and perfect information, but partial knowledge. - Frank Knight, Risk, Uncertainty, and Profit
Other people's money...
There are four ways to spend money. You can spend your own money on yourself. When you do that, why you really watch out for what you're doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well then, I'm not so careful about the content of the present, but I'm very careful about the cost. Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm going to have a good lunch! Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it costs, and I'm not concerned about what I get. And that's government. And that's close to 40 percent of our national income. - Milton Friedman, The 4 Ways to Spend Money
Unintended consequences...
In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.
There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil. - Bastiat, The Seen vs the Unseen
Individual foresight...
The resource status of material objects is therefore always problematical and depends to some extent on foresight. An object constitutes wealth only if it is a source of an income stream. The value of the object to the owner, actual or potential, reflects at any moment its expected income-yielding capacity. This, in its turn, will depend on the uses to which the object can be turned. The mere ownership of objects, therefore, does not necessarily confer wealth; it is their successful use which confers it. Not ownership but use of resources is the source of income and wealth. An ice-cream factory in New York may mean wealth to its owner; the same ice-cream factory in Greenland would scarcely be a resource. - Lachmann, The Market Economy and the Distribution of Wealth
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. - Bastiat, Justice and Fraternity
There is no need to prove that each individual is the only competent judge of this most advantageous use of his lands and of his labor. He alone has the particular knowledge without which the most enlightened man could only argue blindly. He alone has an experience which is all the more reliable since it is limited to a single object. He learns by repeated trials, by his successes, by his losses, and he acquires a feeling for it which is much more ingenious than the theoretical knowledge of the indifferent observer because it is stimulated by want. - Turgot
Entrepreneurship...
Entrepreneurship is necessary in economic development, therefore, for the quite pedestrian purpose of ensuring a tendency towards the adoption of the socially advantageous long-term capital-using opportunities available. So far from being a kind of exogenous push given to the economy, entrepreneurial innovation is the grasping of opportunities that have somehow escaped notice. - Kirzner, Entrepreneurship & the Market Approach to Development
Heterogeneous activity...
So far as this is the case, it is evident that government, by excluding or even by superseding individual agency, either substitutes a less qualified instrumentality for one better qualified, or at any rate substitutes its own mode of accomplishing the work, for all the variety of modes which would be tried by a number of equally qualified persons aiming at the same end; a competition by many degrees more propitious to the progress of improvement than any uniformity of system. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy
Market redistribution...
These economic facts have certain social consequences. As the critics of the market economy nowadays prefer to take their stand on “social” grounds, it may be not inappropriate here to elucidate the true social results of the market process. We have already spoken of it as a leveling process. More aptly, we may now describe these results as an instance of what Pareto called “the circulation of elites.” Wealth is unlikely to stay for long in the same hands. It passes from hand to hand as unforeseen change confers value, now on this, now on that specific resource, engendering capital gains and losses. The owners of wealth, we might say with Schumpeter, are like the guests at a hotel or the passengers in a train: They are always there but are never for long the same people. - Lachmann, The Market Economy and the Distribution of Wealth
Creative destructionism...
As protected firms become less innovative, a country’s overall economic growth may suffer. This is because, as Schumpeter emphasized nearly a century ago, economic growth thrives on “creative destruction.” In a healthy economy, new firms constantly arise to challenge older, less-innovative behemoths. - Matthew Mitchell, The Pathology of Privilege: The Economic Consequences of Government Favoritism
The interests of consumers...
Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race. - Bastiat, Abundance and Scarcity
Dollar voting...
The capitalist society is a democracy in which every penny represents a ballot paper. - Mises
Foot voting...
The second broad principle is that government power must be dispersed. If government is to exercise power, better in the county than in the state, better in the state than in Washington. If I do not like what my local community does, be it in sewage disposal, or zoning, or schools, I can move to another local community, and though few may take this step, the mere possibility acts as a check. If I do not like what Washington imposes, I have few alternatives in this world of jealous nations. - Milton Friedman, Capitalism and Freedom
Moral value...
Only where we ourselves are responsible for our own interests and are free to sacrifice them has our decision moral value. We are neither entitled to be unselfish at someone else's expense nor is there any merit in being unselfish if we have no choice. The members of a society who in all respects are made to do the good thing have no title to praise. - Hayek
Saturday, March 24, 2012
Perspectives Matter - Backstory
The study of knowledge (epistemology) is pretty darn interesting. Here are a couple discussions which provide some recent background on my upcoming post (Perspectives Matter - Economics in One Lesson). The first discussion took place on a political forum...Libertarian Pudding Tastes Good!!!...and the second discussion took place on Gene Callahan's recent an entry on business cycles....Notes on a General Theory of the Social Cycle.
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Reiver
Not Amused
Companies change their plan with conditions, government try to force the condition to fit their plan.
Companies often reduce spending, and terminate products that are no longer viable. Government rarely reduces spending, and rarely only terminates program spending.
Over time, companies provide more value for the same, or less cost, or go out of business. The cost of government has little to do with it's value.
Reiver
Xerographica
It's only nonsensical if you're unfamiliar with the opportunity cost concept...
The visible hand is just as prone to error from distributed knowledge, with the price mechanism no longer directly used for allocative purposes. That ensures his comment was nonsensical. Note I'm not defending government planning at all (especially as government planning is not needed within socialism, except with the usual need to take into account market failure in social investments)
Xerographica
Reiver, the bottom line is that either your perspective matters...or it doesn't. For the intents and purposes of this discussion I'm defining "perspective" as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.
Does your perspective matter? If not, then I'll just spend all your money for you. Will you be able to complain about how I spend your money? Of course not. You know why? Because your perspective doesn't matter.
Xerographica
Maybe you missed my question. Here it is again...
Reiver, the bottom line is that either your perspective matters...or it doesn't. For the intents and purposes of this discussion I'm defining "perspective" as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.
Does your perspective matter? If not, then I'll just spend all your money for you. Will you be able to complain about how I spend your money? Of course not. You know why? Because you perspective doesn't matter.
So does your perspective matter? Is this a difficult question for you?
Reiver
The problem is that you have made economic comment that is certainly invalid. Clearly you also cannot (at least attempt to) suggest otherwise.
Xerographica
Why are you avoiding the question? Let me ask again. Does your perspective matter?
Reiver
If you want to improve your comments and achieve some validity? Certainly! So far I haven't seen a valid economic comment from you. Your attempt to reply with a reference to opportunity costs, for example, was laughable
Xerographica
So your perspective matters! But only in terms of me improving my comments and achieving some validity? Your perspective only matters in this ridiculously limited regard? You exist solely to improve my comments? Are you sure your perspective doesn't also matter in other areas as well?
Reiver
Your dodge really isn't imaginative or entertaining. Except for your petty attempt at advertising your blog, care to actually try to respond 'with economics'?
Xerographica
LOL...I'm asking you if your perspective matters. How did I define "perspective"? I defined it as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.
Economics, in case you missed it, is the study of scarcity. For some reason you believe that your perspective...your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge...has nothing to do with with study of scarcity.
*awkward*
Hmmm...maybe you should read my blog and then try again.
Reiver
You're not going to impress me with reference to ECon 101 textbooks. Let's see if we can coax you towards economic comment, just for the crack:
The socialist calculation debate has effectively been won. Rather than referring to the theoretical reproduction of neoclassical perfect competition, we can refer to the use of market socialism and how- with a more stable market supported by the defence of property rights (including the worker right to receive the value of their labour)- it actually reduces the need for economic planning
Try and critique the comment. Don't go back to the insipid dodging!
Xerographica
Insipid dodging? My "insipid dodging" definitively proved that you don't know the first thing about economics. You can't even answer the question of whether your perspective matters. If people's perspectives do not matter then what's the point of discussing scarcity? One use of a limited resource would be as good as any.
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The economist Gene Callahan recently posted an entry on business cycles....Notes on a General Theory of the Social Cycle. So I posted a comment on how how perspectives matter...but Callahan totally misunderstood me. I took full responsibility and tried again. Here was his response...
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It boils down to hedging our bets. We all make mistakes…aka fallibilism…therefore…we shouldn’t put all our eggs in one basket. Let’s evaluate this on three levels...
As we established…the efficient use of limited resources depends entirely on our perspectives. Does congress have any idea what your perspective is on how they should spend your taxes? Does it matter that they do not? What difference does it make that 538 congresspeople have no idea what 150 million people’s unique perspectives are?
People think that voting reveals their perspectives. Nothing could be further from the truth. The only way to reveal somebody’s perspective is to allow them to make decisions with their own, individual time/money. This is exactly why taxpayers should be able to choose which government organizations receive their own, individual taxes. This would allow them to integrate their unique perspectives…which would lead to the efficient allocation of public funds…which would reduce…if not eliminate…widespread failures.
Of course…I could be wrong! The thing is though...this very concept is based on the idea of fallibilism…
Callahan responded that I was trolling and bothersome. He also said that pragmatarianism is my "pet peeve". It's my "pet peeve" that the perspectives of 150 million taxpayers do not matter in the public sector? That's one way of putting it. Why isn't it his pet peeve as well? Why isn't it every economist's pet peeve? Does it matter that your perspective has no direct influence on the distribution of public funds? Is it possible for a committee of 538 people to efficiently allocate a huge chunk of our nation's resources? Am I tilting at windmills here...or are economists ignoring the neon pink bull wreaking havoc in our china shop?
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Reiver
Why isn't socialism a viable concept? Because it's impossible for a king...or a committee...to determine the optimal level of funding for an organization.This doesn't make sense. Economic planning is the norm in all viable economic paradigms. Capitalism is certainly reliant on it, with the invisible hand often deliberately avoided.
Not Amused
Companies change their plan with conditions, government try to force the condition to fit their plan.
Companies often reduce spending, and terminate products that are no longer viable. Government rarely reduces spending, and rarely only terminates program spending.
Over time, companies provide more value for the same, or less cost, or go out of business. The cost of government has little to do with it's value.
Reiver
Companies change their plan with conditionsBut they actively avoid the market. The visible hand is just as prone to error from distributed knowledge, with the price mechanism no longer directly used for allocative purposes. That ensures his comment was nonsensical. Note I'm not defending government planning at all (especially as government planning is not needed within socialism, except with the usual need to take into account market failure in social investments)
Xerographica
It's only nonsensical if you're unfamiliar with the opportunity cost concept...
Opportunity cost is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice". The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently. Thus, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure or any other benefit that provides utility should also be considered opportunity costs. - Wikipedia
To familiarize yourself with this concept take a look at the following...
If a pragmatarian system were implemented...would you guess that the scope of government would narrow or broaden? In other words...would the result be anarcho-capitalism, pragma-socialism or somewhere in between?
Reiver
It's only nonsensical if you're unfamiliar with the opportunity cost concept...Opportunity costs ensure a distinction between economics and accountancy. It doesn't provide any counter to my comment. Try again:
The visible hand is just as prone to error from distributed knowledge, with the price mechanism no longer directly used for allocative purposes. That ensures his comment was nonsensical. Note I'm not defending government planning at all (especially as government planning is not needed within socialism, except with the usual need to take into account market failure in social investments)
To familiarize yourself with this concept take a look at the following...I'm not interested in your petty advertising of your blog. Defend your argument with something that makes sense!
Xerographica
Reiver, the bottom line is that either your perspective matters...or it doesn't. For the intents and purposes of this discussion I'm defining "perspective" as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.
Does your perspective matter? If not, then I'll just spend all your money for you. Will you be able to complain about how I spend your money? Of course not. You know why? Because your perspective doesn't matter.
Xerographica
Maybe you missed my question. Here it is again...
Reiver, the bottom line is that either your perspective matters...or it doesn't. For the intents and purposes of this discussion I'm defining "perspective" as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.
Does your perspective matter? If not, then I'll just spend all your money for you. Will you be able to complain about how I spend your money? Of course not. You know why? Because you perspective doesn't matter.
So does your perspective matter? Is this a difficult question for you?
Reiver
The problem is that you have made economic comment that is certainly invalid. Clearly you also cannot (at least attempt to) suggest otherwise.
Xerographica
Why are you avoiding the question? Let me ask again. Does your perspective matter?
Reiver
If you want to improve your comments and achieve some validity? Certainly! So far I haven't seen a valid economic comment from you. Your attempt to reply with a reference to opportunity costs, for example, was laughable
Xerographica
So your perspective matters! But only in terms of me improving my comments and achieving some validity? Your perspective only matters in this ridiculously limited regard? You exist solely to improve my comments? Are you sure your perspective doesn't also matter in other areas as well?
Reiver
Your dodge really isn't imaginative or entertaining. Except for your petty attempt at advertising your blog, care to actually try to respond 'with economics'?
Xerographica
LOL...I'm asking you if your perspective matters. How did I define "perspective"? I defined it as all your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge.
Economics, in case you missed it, is the study of scarcity. For some reason you believe that your perspective...your values, desires, wants, needs, concerns, fears, hopes, dreams, tastes, preferences, priorities and partial knowledge...has nothing to do with with study of scarcity.
*awkward*
Hmmm...maybe you should read my blog and then try again.
Reiver
You're not going to impress me with reference to ECon 101 textbooks. Let's see if we can coax you towards economic comment, just for the crack:
The socialist calculation debate has effectively been won. Rather than referring to the theoretical reproduction of neoclassical perfect competition, we can refer to the use of market socialism and how- with a more stable market supported by the defence of property rights (including the worker right to receive the value of their labour)- it actually reduces the need for economic planning
Try and critique the comment. Don't go back to the insipid dodging!
Xerographica
Insipid dodging? My "insipid dodging" definitively proved that you don't know the first thing about economics. You can't even answer the question of whether your perspective matters. If people's perspectives do not matter then what's the point of discussing scarcity? One use of a limited resource would be as good as any.
*******************************************
The economist Gene Callahan recently posted an entry on business cycles....Notes on a General Theory of the Social Cycle. So I posted a comment on how how perspectives matter...but Callahan totally misunderstood me. I took full responsibility and tried again. Here was his response...
@xerographica: “The problem is that I’m the only one seriously advocating that taxpayers be allowed to directly allocate their taxes.”
That’s cool and all, but i don’t see what it has to do with creating a general theory of social cycles.Shucks. Here was my third attempt...with a bit more polishing...
*******************************************
It boils down to hedging our bets. We all make mistakes…aka fallibilism…therefore…we shouldn’t put all our eggs in one basket. Let’s evaluate this on three levels...
- Epic Fail = Socialism resulted in epic fails because all the eggs were in one basket. One committee controlled an entire nation’s resources.
- Substantial Fail = Mixed economies like our own result in depressions and recessions because we allow a committee (538 congresspeople) to control the distribution of 150 million people’s taxes. In other words…we have way too many eggs in one basket. For example, a tax rate of 25% means that 538 congresspeople control around one quarter of our nation’s resources.
- Micro Fail = If I gamble my home on a business idea that doesn't pan out…then I'll lose my home...but this won't have any impact on my neighbors’ homes.
As we established…the efficient use of limited resources depends entirely on our perspectives. Does congress have any idea what your perspective is on how they should spend your taxes? Does it matter that they do not? What difference does it make that 538 congresspeople have no idea what 150 million people’s unique perspectives are?
People think that voting reveals their perspectives. Nothing could be further from the truth. The only way to reveal somebody’s perspective is to allow them to make decisions with their own, individual time/money. This is exactly why taxpayers should be able to choose which government organizations receive their own, individual taxes. This would allow them to integrate their unique perspectives…which would lead to the efficient allocation of public funds…which would reduce…if not eliminate…widespread failures.
Of course…I could be wrong! The thing is though...this very concept is based on the idea of fallibilism…
It follows, then, that a less centralized society has the advantage of a greater diversification of its performance across a larger number of preceptors. This is because diversification here dilutes the impact of the ability, or the lack thereof, of each preceptor on the aggregate societal performance. – Raaj K. Sah, Fallibility in Human Organizations and Political Systems*******************************************
Callahan responded that I was trolling and bothersome. He also said that pragmatarianism is my "pet peeve". It's my "pet peeve" that the perspectives of 150 million taxpayers do not matter in the public sector? That's one way of putting it. Why isn't it his pet peeve as well? Why isn't it every economist's pet peeve? Does it matter that your perspective has no direct influence on the distribution of public funds? Is it possible for a committee of 538 people to efficiently allocate a huge chunk of our nation's resources? Am I tilting at windmills here...or are economists ignoring the neon pink bull wreaking havoc in our china shop?
Sunday, March 11, 2012
The Economics of Threesomes
Disclaimer: In case you somehow missed the title of this post...this is a discussion on the "The Economics of Threesomes". If you think it's TMI when your friends talk about sex then perhaps you might want to read something else instead....like perhaps this post on the world's cutest economists.
For as long as I can remember I've been a huge fan of hypothetical situations. My favorite hypothetical situation is...what would happen if taxpayers could choose which government organizations received their taxes? After posing this hypothetical situation to enough people I started to notice a pattern. People's concerns revealed their values. Liberals were concerned that welfare programs wouldn't receive enough money and conservatives were concerned that national defense wouldn't receive enough money. In other words...their concerns revealed how they themselves would allocate their taxes.
Tax choice = revealing preferences = efficient allocation of resources
The idea of revealing preferences is associated with two economic concepts...opportunity costs and partial knowledge. Rather than selecting the extremely boring examples typically used to help illustrate these concepts...I figured I'd try using my second favorite hypothetical situation...the hypothetical threesome.
Let's say that you're at a bar with your best friend forever (bff). All of a sudden the celebrity that you find most attractive walks in and sits next to you. You manage to casually strike up a conversation and after a few drinks the celebrity asks if the two of you would be interested in a threesome. Do you accept the offer? Would your bff accept the offer?
Yesterday I posed this situation to my girlfriend (Rose) and her relatively new bff (Sally). It was pretty darn entertaining. It was especially entertaining because Sally is a lesbian...and she protests a bit too much that she's not attracted to my gf. She is, however, extremely attracted to Stevie Nicks. My gf's celebrity of choice was Joseph Gordon-Levitt.
Chances are really good that most people would not want to share their celebrity of choice with even their best friend...and Rose and Sally were certainly not the exceptions to this rule. So on one hand...they really wanted to sleep with their celebrity of choice...and on the other hand...they really didn't want to have a threesome. Therefore, they were presented with a difficult opportunity cost decision.
Given that Rose is straight...she made it clear that she really would not want to have a threesome with Sally and Stevie Nicks. Given that Sally is a lesbian...and swears that she is not attracted to Rose...she made it clear that she really would not want to have a threesome with Rose and Joseph Gordon-Levitt. Yet...after a lot of hilariously awkward/uncomfortable dialogue...they both agreed that they would accept either offer should the opportunities present themselves in the future. Like I told them, it's a good thing that they figured this stuff out now, rather than in some bathroom bar. Because...you never know how long a window of opportunity will stay open for.
If you decide to pose this hypothetical threesome situation to your bff...or to any bffs that you know...please feel free to reply with all the details of your discussion. Personally, when I posed this situation to my bff...he said that there's no way he'd ever have a threesome with me and my celebrity of choice...Jennifer Connelly. It's not that he doesn't find Jennifer Connelly attractive...he says it's just because he wouldn't feel comfortable having a threesome with another guy. The problem for him is...this provides me with the perfect opportunity to encourage him to come out of the closet. There's just no way any straight guy can "win" an argument against this threesome. For example, I asked him whether he pays more attention to the guy or the girl when he's watching porn. From there he's got nowhere to go. So it's a double whammy. He fails the straight test and he fails the ultimate friendship test. But he's put up with me for this long...so I guess that's really the only test that matters. Then again, I think it would be considered justifiable brocide if his squeamishness did actually cost me the opportunity to sleep with Jennifer Connelly.
Hmmm...how can I tie the threesome hypothetical back to the tax choice hypothetical? Well...given that I'm discussing threesomes...would it be totally inappropriate for me to bring Sandra Fluke into the discussion? Maybe? Naw...it's just too perfect to pass up.
The testimony that Fluke offered to congress is a perfect example of the partial knowledge concept. It's also a perfect example of how people do not understand the opportunity cost concept. As I pointed out in my post on prioritizing public goods...Fluke argued that she shouldn't be forced to decide between quality education and quality healthcare. Not only should she be forced to decide between those two public goods...but all taxpayers should be forced to decide whether they spend their taxes on public education or public healthcare.
It's pretty easy to understand partial knowledge and opportunity cost on an individual basis...the challenge is that it's extremely difficult to comprehend the value of these concepts on a national basis. What are the public goods preferences of our entire nation? Nobody can truly know that answer...all you can know is that you don't want your taxes wasted on things that you do not value. You're probably exceptional in a lot of ways...but this isn't one of them. The question then becomes...can you bring yourself to tolerate, if not respect, other people's values?
For as long as I can remember I've been a huge fan of hypothetical situations. My favorite hypothetical situation is...what would happen if taxpayers could choose which government organizations received their taxes? After posing this hypothetical situation to enough people I started to notice a pattern. People's concerns revealed their values. Liberals were concerned that welfare programs wouldn't receive enough money and conservatives were concerned that national defense wouldn't receive enough money. In other words...their concerns revealed how they themselves would allocate their taxes.
Tax choice = revealing preferences = efficient allocation of resources
The idea of revealing preferences is associated with two economic concepts...opportunity costs and partial knowledge. Rather than selecting the extremely boring examples typically used to help illustrate these concepts...I figured I'd try using my second favorite hypothetical situation...the hypothetical threesome.
Let's say that you're at a bar with your best friend forever (bff). All of a sudden the celebrity that you find most attractive walks in and sits next to you. You manage to casually strike up a conversation and after a few drinks the celebrity asks if the two of you would be interested in a threesome. Do you accept the offer? Would your bff accept the offer?
Yesterday I posed this situation to my girlfriend (Rose) and her relatively new bff (Sally). It was pretty darn entertaining. It was especially entertaining because Sally is a lesbian...and she protests a bit too much that she's not attracted to my gf. She is, however, extremely attracted to Stevie Nicks. My gf's celebrity of choice was Joseph Gordon-Levitt.
Chances are really good that most people would not want to share their celebrity of choice with even their best friend...and Rose and Sally were certainly not the exceptions to this rule. So on one hand...they really wanted to sleep with their celebrity of choice...and on the other hand...they really didn't want to have a threesome. Therefore, they were presented with a difficult opportunity cost decision.
Opportunity cost is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice". The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently. Thus, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure or any other benefit that provides utility should also be considered opportunity costs. - WikipediaIn order for Rose and Sally to make their opportunity cost decisions, they first had to figure out a few things. Which brings us to our second economic concept...partial knowledge.
The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world. - Friedrich Hayek, The Use of Knowledge in SocietyPartial knowledge basically means that everybody has some information but nobody has all the information. When I posed this hypothetical situation to my gf and her bff...all the discussion that followed represented an exchange of partial knowledge.
Given that Rose is straight...she made it clear that she really would not want to have a threesome with Sally and Stevie Nicks. Given that Sally is a lesbian...and swears that she is not attracted to Rose...she made it clear that she really would not want to have a threesome with Rose and Joseph Gordon-Levitt. Yet...after a lot of hilariously awkward/uncomfortable dialogue...they both agreed that they would accept either offer should the opportunities present themselves in the future. Like I told them, it's a good thing that they figured this stuff out now, rather than in some bathroom bar. Because...you never know how long a window of opportunity will stay open for.
If you decide to pose this hypothetical threesome situation to your bff...or to any bffs that you know...please feel free to reply with all the details of your discussion. Personally, when I posed this situation to my bff...he said that there's no way he'd ever have a threesome with me and my celebrity of choice...Jennifer Connelly. It's not that he doesn't find Jennifer Connelly attractive...he says it's just because he wouldn't feel comfortable having a threesome with another guy. The problem for him is...this provides me with the perfect opportunity to encourage him to come out of the closet. There's just no way any straight guy can "win" an argument against this threesome. For example, I asked him whether he pays more attention to the guy or the girl when he's watching porn. From there he's got nowhere to go. So it's a double whammy. He fails the straight test and he fails the ultimate friendship test. But he's put up with me for this long...so I guess that's really the only test that matters. Then again, I think it would be considered justifiable brocide if his squeamishness did actually cost me the opportunity to sleep with Jennifer Connelly.
Hmmm...how can I tie the threesome hypothetical back to the tax choice hypothetical? Well...given that I'm discussing threesomes...would it be totally inappropriate for me to bring Sandra Fluke into the discussion? Maybe? Naw...it's just too perfect to pass up.
The testimony that Fluke offered to congress is a perfect example of the partial knowledge concept. It's also a perfect example of how people do not understand the opportunity cost concept. As I pointed out in my post on prioritizing public goods...Fluke argued that she shouldn't be forced to decide between quality education and quality healthcare. Not only should she be forced to decide between those two public goods...but all taxpayers should be forced to decide whether they spend their taxes on public education or public healthcare.
It's pretty easy to understand partial knowledge and opportunity cost on an individual basis...the challenge is that it's extremely difficult to comprehend the value of these concepts on a national basis. What are the public goods preferences of our entire nation? Nobody can truly know that answer...all you can know is that you don't want your taxes wasted on things that you do not value. You're probably exceptional in a lot of ways...but this isn't one of them. The question then becomes...can you bring yourself to tolerate, if not respect, other people's values?
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