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.

Which Economic Nutshell Is Better?

It seems like I'm forever endeavoring to stuff economics into a better nutshell.  Here are two recent nutshells... the first is bigger and more technical while the second is smaller and more accessible.  Which one is better?

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Nutshell #1 (shared here)

Here's Adam Smith's Invisible Hand...

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, it's 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

Hayek argued that 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, who was a liberal, 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.  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 you spent on Linux would be a false signal because it would be less than your true valuation of it.  Your false signal on its own 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

Let me 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 expert economic discussion looks basically like this...

Adam Smith (1776): Consumers should have the freedom to spend their money to help rank goods.
Friedrich Hayek (1945): It's true, the market is the only way to utilize all the dispersed knowledge.
Paul Samuelson (1954): While the market does work for private goods, it fails for public goods.
James Buchanan (1963): Actually, earmarking would allow the market to also work for public goods.

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Nutshell #2 (shared here)


Right now, because of democracy, you assume that congress makes decisions that take my well-being into consideration. My well-being? In the private sector I have to spend so much time and energy going around using my money to inform producers what works for my well-being. I shop and shop and shop. For example, I go to the supermarket and buy some artichokes. In doing so I essentially tell Frank the farmer, "Hey buddy! Good job guy! You correctly guessed that my well-being depends on artichokes! Thanks! Good lookin' out! Here's some money! Keep up the good work!" His behavior benefits my well-being, so I have to use my cash to positively reinforce his beneficial behavior.

Now here you are with the assumption that congress somehow knows what works for my well-being despite the fact that I've never once in my life shopped in the public sector. I've never once decided to give any of my tax dollars to the EPA, NASA, the DMV or any other organization in the public sector. I've never once used my tax dollars to positively reinforce behavior that benefits my well-being. Yet, despite the fact that I've never once shopped in the public sector, congress knows what works for my well-being? Woah. This boggles my mind. It blows my mind. It puts my mind into a blender. Your assumption bears repeating with emphasis... congress knows what works for my well-being despite the fact that I've never once in my life shopped in the public sector. Your assumption is really that shopping is entirely unnecessary. If you truly believe that shopping is entirely unnecessary... then please... don't hide your insight under a bushel. Start a thread here, there and everywhere and say "Hey folks! Shopping is entirely unnecessary! It's a massive waste of everybody's limited time and energy to use our money to communicate what works for our well-being! All we need to do is infrequently vote! And occasionally write our representatives!"

Every democracy has been bundled together with a market. The market, not the democracy, is why these societies have been relatively successful. Societies always work better when we better understand each other's needs... and markets are far better at revealing our needs than democracies are. Our needs aren't simple things... they are incredible complex and dynamic. The idea that infrequently voting and occasionally writing our representatives can adequately reveal our needs is the most harmful idea that has ever existed. But it's not like I can show you all the additional prosperity we would currently be enjoying if it weren't for democracy.

However I can show you the difference between voting and spending. All we need to do is use voting and donating to rank prominent skeptics. Then you'll see the difference between voting and spending and decide for yourself which ranking better reflects your own need for skeptics.

The Invisible Hand

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

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

It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. — Adam Smith, Wealth of Nations

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

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

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

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

Spotlight On Max Sawicky

Most people love attention, me no less than anyone... - Max Sawicky

I just finished reading Henry Farrell's response to Sawicky's review of Brink Lindsey's and Steven M. Teles' new book The Captured Economy.  Since Sawicky loves attention, I figured that I'd give him some of mine.  Will he love it?

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Dear Sawicky,

If you look above this blog entry you'll see a tab that says "Resources".  That page has a list of over 50 links to some of the most important articles, blog entries, scholarly papers and books about economics.  So far there is only one link to the jacobinmag.com website... Can We Criticize Foucault?

Have you read that article?  It's pretty great.  To be honest, I value it more than your own article...

Foucault article > your article

Which article do you value more?  Which jacobinmag article do you value most?  Does it matter? 

Personally, I think that people's valuations really matter.  So it's very troubling to me how many places there are where people aren't given the opportunity to share their valuations.  In other words, I'm troubled by all the places that aren't markets. 

Netflix, for example, is not a market.  Each month Netflix decides how to divide my $10 dollars among all its products.  This wouldn't be so problematic if Netflix was a mind-reader.  Or my best friend forever.  Or my lover.  Or my brother.  Or my mother.  But Netflix is none of these things.  It's just some company. 

Vons is also just some company.  But, unlike Netflix, Vons does give me the opportunity to decide for myself how I divide my money among all its products. 

What difference would it make if Netflix subscribers could decide for themselves how to divide their dollars?  I've already asked a few economists but they really didn't know.  How could they not know what difference the Invisible Hand would make? 

Do you know what difference the Invisible Hand would make?

The stage, and spotlight, they are all yours.  Please make good use of them. 

Sincerely,
Xero

Dividing Attention Between Eric Schliesser And Jacob T. Levy

Comment on: On the role of Systematicity in an Impure Theory of a (Pluralistic) Liberalism worth Having by Eric Schliesser

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"taking into account the interests and aims of social actors"

From my perspective, this is the heart of the matter. It's necessary to take interests into account because 1. society's resources are limited and 2. uses are unequally valuable. For example, any time/attention that's allocated to your blog/book can't be allocated to other ones. And blogs/books are unequally valuable. In order to efficiently allocate limited time/attention among unlimited and unequally valuable blogs/books, it's necessary to determine/know the value of each blog/book.

My attention was allocated to this entry was because Levy tweeted it, Peter Boettke retweeted it and Smith is my favorite economist. A (re)tweet is essentially a vote. The problem with voting is that it doesn't signal the depth of interest. If we don't know how interesting/important things are, then resources will be inefficiently allocated. This is why in all cases, voting is far inferior to spending. Spending quantifies depth through a willingness to sacrifice.

If I want to read your book, I'll have to purchase it. I'll have to make a sacrifice. However, chances are slim that the amount of money that I spend on the book will accurately reflect/signal my true valuation of your book. If I spend the same amount of money to read Levy's book, it's doubtful that I'll value both books equally... even though I spent the same amount of money on them.

So the inherent challenge is understanding the difference between using money to...

1. ...purchase/acquire/get/buy the two books
2. ...help determine how to divide society's limited time/attention between the two books

The first does a far better job than voting at accomplishing the second. But if you can appreciate why this is, you'd also appreciate that there's considerable room for improvement. The correct (optimal/efficient) division of society's limited resources among unlimited and unequally valuable uses depends entirely on accurate value signals. So we need a way to help minimize consumer surplus.

Scott Sumner VS Scott Alexander

I think this is both entirely true and entirely missing the point. The intuition behind meritocracy is this: if your life depends on a difficult surgery, would you prefer the hospital hire a surgeon who aced medical school, or a surgeon who had to complete remedial training to barely scrape by with a C-? If you prefer the former, you’re a meritocrat with respect to surgeons. Generalize a little, and you have the argument for being a meritocrat everywhere else. 

The Federal Reserve making good versus bad decisions can be the difference between an economic boom or a recession, and ten million workers getting raises or getting laid off. When you’ve got that much riding on a decision, you want the best decision-maker possible – that is, you want to choose the head of the Federal Reserve based on merit. - Scott Alexander, Targeting Meritocracy

But 12,000 humans is much better than 12. Two days after Lehman failed the FOMC met and refused to cut rates from 2%, seeing a roughly equal risk of recession and inflation. The markets were already seeing the oncoming disaster, and indeed the 5 year TIPS spread was only 1.23% on the day of the meeting. The markets aren't always right, but when events are moving very rapidly they will tend to outperform a committee of 12. In fairness, this "recognition lag" was not the biggest problem; two far bigger problems included a failure to "do whatever it takes" to "target the forecast." That is, the Fed should move aggressively enough so that their own internal forecast remained at the policy goal. And the second failure was not engaging in "level targeting", which would have helped stabilize asset prices in late 2008, and made the crisis less severe.  

Bernanke once said there is nothing magical about 2% inflation. Nor is there anything magical about 12 members on the FOMC. The wisdom of crowds literature suggests you want a large number of voters, with monetary incentives to "vote" wisely. So there are actually three approaches. The Friedman/Taylor "robot" approach. The Bernanke "wise bureaucrats" approach. And the market monetarist "wisdom of the crowds" approach. - Scott Sumner, Robots, committees, or markets?

If my life depended on a surgery, I'd prefer it to be performed by the best surgeon.  Then again, I'm pretty sure that more heads are better than less heads.  So what about the 12 best surgeons?  Would the 12,000 best surgeons be even better?  Or would it be a case of too many cooks spoiling the broth?

No two surgeons would perform the same exact surgery in the same exact way.  This is because no two surgeons are equally informed or experienced.  If we expanded the pool of surgeons then we'd end up with a bell curve.  The outliers would perform very different surgeries.  This shouldn't be too difficult to appreciate if you've ever watched a hospital show where two surgeons strongly disagreed on how to proceed.

Let's imagine that Frank, the best surgeon, is about to operate on me.  Where should he make the incision?  He hits the "pause" button and time stops for me.  Then he waits for 12,000 surgeons to provide their input on where the incision should be made.  They all have access to the streaming video.  Frank sees all their X's superimposed on my body.  Should he make an incision where the X's are the densest?  No.  The 12,000 surgeons aren't equally confident in their information/answer.  Therefore, each surgeon must be given the opportunity to put their money where their answer is.  The more money a surgeon spends on their answer, the more weight it will have.  This means that the more confident surgeons will have more influence.

What comes to mind is a ouija board.  Eh, perhaps it's not the best example to use in this context.  Anyways, instead of a planchette there's a scalpel.  The scalpel is guided by the spending decisions of 12,000 surgeons.  In other words, it's guided by the Invisible Hand.  The maximum possible amount of information and experience, weighted by confidence, would go into my surgery.  Or would it?

Why not let all the surgeons in the world participate?  Why not include all the nurses as well?  If the premise is that people who are more confident in their information are going to be willing to spend more money on their answers, then there's no reason to prevent anybody from participating in my surgery.

The best surgeon is certainly better than the second best surgeon.  But I'm pretty sure that the best surgeon is far inferior to the market.

Is the best decision-maker always the market?  Yes!  But in some cases the technology isn't advanced enough to overcome the logistical issues.

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...

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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

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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.

Evonomics

Why are echo chambers problematic? Because they prevent us from facing views dissimilar to ours. As a result, we could be led to take falsehoods for truths, become more extreme in our views, and regard others as enemies or adversaries. Part of the value of the right of free speech is that it creates an environment in which our own views are constantly challenged. - Nicolás Maloberti, Echo Chambers and the Prevalence of Motivated Reasoning

Evonomics is designed to discourage engagement in non-lefty ideas and thinkers. https://t.co/3Rwz3w70Ri

— Joe Norman (@normonics) May 18, 2017

Avoiding facts inconvenient to our worldview isn’t just some passive, unconscious habit we engage in. We do it because we find these facts to be genuinely unpleasant. - Brian Resnick, “Motivated ignorance” is ruining our political discourse 

The whole strength and value, then, of human judgment, depending on the one property, that it can be set right when it is wrong, reliance can be placed on it only when the means of setting it right are kept constantly at hand. In the case of any person whose judgment is really deserving of confidence, how has it become so? Because he has kept his mind open to criticism of his opinions and conduct. Because it has been his practice to listen to all that could be said against him; to profit by as much of it as was just, and expound to himself, and upon occasion to others, the fallacy of what was fallacious. Because he has felt, that the only way in which a human being can make some approach to knowing the whole of a subject, is by hearing what can be said about it by persons of every variety of opinion, and studying all modes in which it can be looked at by every character of mind. No wise man ever acquired his wisdom in any mode but this; nor is it in the nature of human intellect to become wise in any other manner. The steady habit of correcting and completing his own opinion by collating it with those of others, so far from causing doubt and hesitation in carrying it into practice, is the only stable foundation for a just reliance on it: for, being cognisant of all that can, at least obviously, be said against him, and having taken up his position against all gainsayers—knowing that he has sought for objections and difficulties, instead of avoiding them, and has shut out no light which can be thrown upon the subject from any quarter—he has a right to think his judgment better than that of any person, or any multitude, who have not gone through a similar process. - John Stuart Mill, On Liberty

Why isn't Evonomics a market?  Why aren't donors encouraged to use their dollars to grade the relevance of the articles?

Compare Evonomics to this blog written by 4th graders... Classtopia.  In both cases...

1. all the products are freely available
2. the homepage has a list of products sorted by their publication date

However, unlike Evonomics... Classtopia also has a list of products sorted by their relevance.

The relevance of Classtopia's products is determined by a market.  The market is currently pretty small. It consists of the students, their teacher and myself. But in theory the market could be as large as everybody in the world.  Everybody could use their money to grade the relevance of Classtopia's (home)work.

So why isn't Evonomics a market?  My theory is that whoever runs the website doesn't quite grasp what markets are good for.  If my theory is correct, then we should be skeptical of Evonomics' plan to become "The Next Evolution of Economics".

The point and purpose of markets is a topic that generates considerable disagreement.   In order for an examination of the topic to be productive, it must be built on common ground.  Here's something that we should all agree on...

Demystifying Greg Stevens

Comment on: Killing the myth that taxes are anti-democratic by Greg Stevens

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Round 2?  Andrew Sabl wrote a really thoughtful article... Liberalism Beyond Markets.   Unfortunately, he really didn't provide a coherent view of things.   Here's what I wrote in response...

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Laws are products that are outside the market.  Prohibition, for example, was a product that was created because enough people voted for it.  They voted for it because they valued it.  But of course they didn't equally value it.  The amount of money spent on this product was not determined by voters, or consumers, it was determined by government planners.

A = society's valuation of prohibition
B = the amount of money spent on prohibition
C = the difference between A and B

If Sabl wants to argue that C is insignificant, then he must believe that shopping is a massive waste of everybody's time and energy.  He should want the Invisible Hand (IH) to be entirely replaced by a combination of the Democratic Hand (DH) and the Visible Hand (VH).

If Sabl wants to argue that C is significant, but B is more socially beneficial than A, then he must believe that not only is shopping a massive waste of everybody's time and energy, but that the IH's division of resources is less socially beneficial than the DH+VH's division.

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His only response was that he probably wouldn't be able to find any intellectual common ground with me because I had referred to laws as "products".   Heh.  How convenient for him that semantics saved him from having to address my actual argument!

It might help to reframe the issue.  Netflix has around 100 million subscribers.  They give their money to Netflix and Netflix decides how to divide it between all the different types of content.   Deciding how to divide limited dollars among unlimited content is the prioritization process.  Do subscribers have the opportunity to participate in this process?  Yes...

1. They can unsubscribe if they don't like the content
2. They can vote for/against specific content
3. They can e-mail (and call?) Netflix

Netflix's current prioritization process results in the current division of dollars.

What if, rather than Netflix deciding how to divide subscribers' dollars among all the content, subscribers could decide how to divide their dollars themselves?  This very different prioritization process would result in a different division of dollars.

A = The division of dollars as determined by Netflix
B = The division of dollars as determined by subscribers
C = The difference between A and B

How significant is C?  If it's insignificant then what's the point of consumers ever deciding how to divide their limited dollars among unlimited products?  If it's significant, then which is more socially optimal... A or B?  If A is more socially optimal, then all markets should be replaced by DH+VH.

You believe that DH+VH is an effective way to divide society's limited resources among its unlimited wants.  But why do you believe that this system is more effective than the alternative?   Is your belief correct?  Are you interested in testing your belief?  Or do you wish to keep your political belief outside of science?

Right now Netflix and Hulu both use the same prioritization process... DH+VH.   What would happen if Hulu gave its subscribers the opportunity to divide their limited subscription dollars among its unlimited content?   What's your prediction?  How confident are you in your prediction?   How much would you be willing to bet on your prediction?   If you firmly believe that the IH is truly inferior to the DH+VH, then you should be willing to bet a lot of money that Hulu would lose a lot of money.

Alex Tabarrok, my favorite living economist, observed that a bet is a tax on bullshit.  So if somebody is unwilling to bet on their beliefs, then clearly they recognize that their beliefs are bullshit.  Same thing if they have no interest in coming up with a way to test their beliefs.   My belief is that no idea should be outside the market.  I believe that the IH, rather than the DH+VH, should determine the importance/relevance/value of each and every idea.  I'm very interested in testing this belief because I'm very uninterested in carrying around bullshit beliefs.

Demystifying Andrew Sabl

Andrew Sabl wrote this incredibly thoughtful article... Liberalism Beyond Markets.  It's unfortunate that it's so incredibly untrue.

That a system of laws need not contradict market values is of course orthodox Hayekianism, and that it furthers diverse individual purposes is also central to Lon Fuller’s similar account of law. But few Hayekians acknowledge what this means: that the Rule of Law, and not just the market, is an institution central to furthering our diverse ends.

Laws are products that are outside the market.  Prohibition, for example, was a product that was created because enough people voted for it.  They voted for it because they valued it.  But of course they didn't equally value it.  The amount of money spent on this product was not determined by voters, or consumers, it was determined by government planners.

A = society's valuation of prohibition
B = the amount of money spent on prohibition
C = the difference between A and B

If Sabl wants to argue that C is insignificant, then he must believe that shopping is a massive waste of everybody's time and energy.  He should want the Invisible Hand (IH) to be entirely replaced by a combination of the Democratic Hand (DH) and the Visible Hand (VH).

If Sabl wants to argue that C is significant, but B is more socially beneficial than A, then he must believe that not only is shopping a massive waste of everybody's time and energy, but that the IH's division of resources is less socially beneficial than the DH+VH's division.

There you go.  I just easily proved that what Sabl wrote is incredibly untrue.  I demystified Andrew Sabl.  Well... I handed him the cure.  Whether or not he takes it is another story.

Now what?  If he's still reading, maybe I should mention that I'm not a libertarian.  I'm a pragmatarian.  From my perspective, we should create a market in the public sector.  Taxpayers should have the opportunity to divide their limited tax dollars among the unlimited goods supplied by the government.  Rules would be inside, rather than outside, the market.

Rules would be subject to the same consumer selection pressure as clothes and computers.  The DoD and the EPA would be subject to the same consumer selection pressure as the NRA and the Red Cross.

Right now Netflix is in a market, but it is not a market.  Netflix as a whole is subject to consumer selection pressure, but its parts are not.  People can decide how they divide their limited dollars between Netflix and clothes, but if they do decide to allocate money to Netflix, they can't decide how they divide their subscription dollars between nature documentaries and sci-fi shows.

A = consumer selection pressure
B = no consumer selection pressure

It really can't be the case that A and B are equally effective at serving society's interests.  This fact should be blindingly obvious.

Humanity is a process of demystification.  This means that, just because we have an institution doesn't necessarily prove that it's beneficial.  The institution might be propped up by mysticism.  This was the case for making sacrifices to Gods.  Can you imagine the incredible amount of valuable resources that humanity wasted as a result of this pervasive mysticism?  Democracy is also propped up by mysticism.  Same thing for the government deciding how to divide tax dollars between environmental protection and space colonization.  Same thing for Netflix deciding how to divide subscription dollars between nature documentaries and sci-fi shows.  In all cases mysticism wastes humanity's limited resources.

Any single product (rule, belief, idea, institution, system) can be propped up by mysticism.  This is why markets accelerate demystification.

So Many Humanists, So Little Time

A humanist, Gary Saul Morson, and an economist, Morton Schapiro, recently collaborated to produce this book... Cents and Sensibility: What Economics Can Learn from the Humanities.  I read the first chapter and parts of the 7th chapter.

Economists can certainly learn a lot from humanists.  But economists can also learn a lot from psychologists, sociologists, biologists and many other "ists".   The issue is that economists, like all people, are constrained by time.  All the time spent learning from humanists is time that can't be spent learning from psychologists.

Let's take the economist David Henderson for example.  Like all of us, his time is limited but his desires are not.  Therefore, he has to prioritize.  He has to decide how to divide his limited time among his unlimited desires.

Henderson recently decided to allocate some his limited time to writing an entry about Cents and Sensibility (C&S).  Thanks to his decision, I learned of the book's existence.  The concept of cross-pollination matches my preferences so I decided to allocate some of my limited time to reading parts of C&S.  Doing so inspired me to allocate some of my limited time to writing an entry about it.

The authors of C&S appreciate the fact that time, and other resources, are limited...

To reject the idea of scarce resources is to reject reasonable thought altogether.

Right.  But is not rejecting this idea really the standard?  In order to answer this question it might help to allocate a minute of your limited time to watching this commercial...





We can imagine that all the people in this video are humanists.  The dog is Henderson the economist.  His mission is to select a humanist.  There are so many humanists to choose from... but he can't pick them all.  So how does he pick a humanist?

How does an economist pick a humanist?  How did Morton Schapiro pick Gary Saul Morson?  Did he randomly pick him from a pool that only consisted of white, older, male humanists from Northwestern University?  This university doesn't have a monopoly on humanists, does it have a monopoly on the best humanists?  Or did Schapiro pick Morson out of convenience?  Did Schapiro settle for Morson?

For sure an economist can learn something from every humanist.  Just like a humanist can learn something from every economist.  But...

1. Everybody's time is limited
2. Lessons aren't equally valuable

Therefore, if Henderson is going to pick a humanist, then he should pick the one with the most valuable lesson.  The question is... how can he spot this humanist?





If the loudest humanist also had the most valuable lesson then there wouldn't be an issue.  However, there's absolutely no correlation between loudness and value.

Morson and Schapiro are correct that economists should learn from humanists.  I doubt many economists would disagree with this.  But the real issue is how to connect economists with the best humanists.  This real issue is a purely economic problem.

The authors correctly recognize that Adam Smith is the "most important source of economic thought".  Unfortunately, they failed to use Smith's most important thought to solve the purely economic problem of connecting economists with the best humanists.

Smith's most important thought is the Invisible Hand (IH)...

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

In a market, people divide their limited dollars among their unlimited desires.  This prioritization process results in society's limited resources being optimally divided among its unlimited wants.

Most people don't understand what markets are good for.  For example, Netflix is in a market, but it is not a market.  There are around 100 million subscribers who don't have the opportunity to divide their limited fees among Netflix's unlimited content.  People think the system works fine, but how could it possibly work better than a market?  If it does truly work better than a market... then why should Netflix be in a market?

Imagine a Netflix that was a market but with academic papers.  Subscribers could freely read all the papers, but they'd have the opportunity to divide their limited fees among the unlimited papers.  This prioritization process would highlight the most valuable papers in each field, which would facilitate the most profitable cross-pollination.

Let's apply the IH to the pedigree scenario.  Henderson walks in and wants to pick a humanist to learn from.  Because his time is limited, he should choose the most valuable humanist.  Doing so depends on actually knowing the value of the humanists, which depends on readers dividing their limited dollars among the unlimited humanists.  The IH would guide Henderson to the most valuable humanist.

To some extent we already use this process.  Even though Schapiro is an economist I'm sure that he's heard of J.K. Rowling.  Even though Morson is a humanist I'm sure that he's heard of Tomas Piketty.  Piketty and Rowling both wrote bestsellers.  Lots of people used their limited dollars to say, "Pick her" and "Pick him".

Personally, I'm not going to buy C&S.  I'm not going to use my money to say, "Pick them".  It would be a completely different story if the authors had actually advocated using Smith's best idea to solve the problem of connecting economists to the best humanists.  Heck, even if they had attacked/criticized Smith's best idea I still would have purchased their book.  But they didn't even mention, notice, admit, or acknowledge its relevance to their objective.

The authors said, "To reject the idea of scarce resources is to reject reasonable thought altogether."  But they completely failed to see, or mention, the relevance of the IH.  Once you accept the idea of scarce resources, then you must also accept the necessity of choosing the best system for dividing society's limited resources among unlimited wants.  In order to efficiently divide society's limited resources, it's necessary to know the social value of the different wants.  Resources can't be efficiently allocated if we don't know the social value of things.

It might help the authors to see a small, but real life, example of the IH applied to scholarly products.  The students in my friend's 4th grade class have a blog... Classtopia.  On the homepage their products are sorted by the hand of time.  But on this page their products are sorted by the Invisible Hand.

Right now the IH is pretty small.  It consists of the students, their teacher and myself.  But in theory the IH could be as large as everybody in the world.

Schapiro is the president of Northwestern University (NU).  He could implement the same system for the entire university.  Students could put their papers online and donors could grade them with their dollars.  This system could supplement, rather than replace, traditional grading.  So each paper could potentially have two grades.  One would be given by the professor... the other would be given by the market.  Which grade would be more useful, credible, reliable, trustworthy and informative?

If NU was a market, then it would be easy for everyone in the world to find and learn from the most valuable papers that it produces.  It would be hard to avoid, or ignore, or neglect the most valuable papers in the different fields.  If a paper promoting the IH was the most valuable economics paper, it would be hard for humanists to ignore it.  If a paper criticizing the IH was the most valuable humanities paper, it would be hard for economists to ignore it.

Should NU be a market?  Of course.  If we embrace the idea of scarce resources, then knowing the value of papers is the only way for people to efficiently divide their limited time among unlimited papers.

I sneezed while writing this entry.  The gray cat woke up and looked at me.  I said, "It was just a sneeze.  I'm not a mouse.  Go back to sleep."

Nobody benefits from the inefficient allocation of attention.  Was this blog entry an efficient allocation of my limited attention and time?  It matched my preferences but, then again, no man is an island.  Socially efficient allocations can only be facilitated by the market process.

The Pragmatarian Model For The Adam Smith Institute

Ben Southwood is the Head of Research at the Adam Smith Institute.  He recently shared a critique of public choice theory.  So he basically criticized my second favorite economist... James Buchanan.  The attention that Southwood has allocated to Buchanan is certainly better no attention.  However, I have to admit that the quality of the attention is rather disappointing... especially since it came from the Head of Research at an organization named after my favorite economist... Adam Smith.

In order to fully grasp the deficiency of Southwood's critique, it's necessary to fully grasp the most basic, fundamental and elementary economic problem...

Society's wants: unlimited
Society's resources: limited

From Buchanan...

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

A nation cannot survive with political institutions that do not face up squarely to the essential fact of scarcity: It is simply impossible to promise more to one person without reducing that which is promised to others. And it is not possible to increase consumption today, at least without an increase in saving, without having less consumption tomorrow. Scarcity is indeed a fact of life, and political institutions that do not confront this fact threaten the existence of a prosperous and free society. - James Buchanan, Richard Wagner, Democracy in Deficit: The Political Legacy of Lord Keynes

Understanding scarcity means understanding that society must prioritize.  Society's unlimited wants aren't equally relevant.  Some wants are more socially relevant than others.  The relevance of society's wants must be known in order for its limited resources to be efficiently allocated.  From 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

In a market, consumers decide how to divide their limited dollars among their unlimited desires.  This inclusive, substantial, and specific prioritization process optimally (efficiently) divides society's limited resources among its unlimited wants.

With this prioritization process in mind, let's consider the issue of public goods.  From Paul Samuelson's 1954 paper ...

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

The concern here isn't that people wrongly or incorrectly or inaccurately value public goods.  The concern is that, if people are asked how much they value national defense, for example, and they know that their answer will determine their payment, then they will have an incentive to pretend to value national defense less than they truly do.  Conversely, if people know that their answer will not determine their payment, then they will have an incentive to pretend to value national defense more than they truly do.  Both cases are problematic because they will result in society's limited resources being incorrectly divided.  In the first case too few resources will be allocated to defense.  In the second case too many resources will be allocated to defense.  Society really doesn't benefit from a shortage or a surplus of defense.

It's crucial to appreciate that false signals are a problem because they incorrectly divide society's limited resources.  It should be crystal clear that the correct division of resources depends on true signals.  The inherent challenge is that the truth of signals can only be known by the people themselves.

Therefore... what?  Samuelson immediately jumped to voting as the solution?  Nope.  In order to create a pretty model, he simply assumed omniscience on the part of government planners.

Buchanan was not a fan of assuming omniscience on anyone's part.  In 1963 he responded...

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

Let’s take Netflix for example…

Samuelson: The optimal quantity, quality and variety of movies depends on knowing the intensity of people’s preferences for movies. But if movies were freely available, and we asked people to report their valuation of specific movies, and they knew that their answer would determine their payment, then they would have an incentive to under-report their valuation. Therefore, we need Netflix. Subscribers will pay a fee, Netflix will “divine” their preferences and spend their fees accordingly.

Buchanan: Since Netflix subscribers are already paying fees, if they are given the option to earmark their fees to their favorite movies, they’d have absolutely no incentive to conceal their “true” preferences for movies.

Later on Buchanan put his criticism of the omniscience assumption like so...

What, then, does Barry mean (and others who make similar statements), when the order generated by market interaction is made comparable to that order which might emerge from an omniscient, designing single mind? If pushed on this question, economists would say that if the designer could somehow know the utility functions of all participants, along with the constraints, such a mind could, by fiat, duplicate precisely the results that would emerge from the process of market adjustment. By implication, individuals are presumed to carry around with them fully determined utility functions, and, in the market, they act always to maximize utilities subject to the constraints they confront. As I have noted elsewhere, however, in this presumed setting, there is no genuine choice behavior on the part of anyone. In this model of market process, the relative efficiency of institutional arrangements allowing for spontaneous adjustment stems solely from the informational aspects.

This emphasis is misleading. 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.

Public choice attacks the omniscience assumption.  Southwood probably doesn't believe that anybody is omniscient.  So then, what does he believe?  Does he believe, like Buchanan and Samuelson did, that the optimal division of resources depends on true signals?  If so, does Southwood also believe that true signals can be revealed/communicated/transmitted by voting?  Does he seriously believe that direct democracy can optimally divide society's limited resources among its unlimited wants?  Does he truly believe that shopping is a massive waste of everybody's limited time, energy and brainpower?

The fact of the matter is that the Adam Smith Institute (ASI) is not a market.  Donors aren't given the opportunity to divide their donations among the ASI's numerous products.  The order (relative importance) of the ASI's products/topics is not determined by the Invisible Hand (IH), and it's not determined by the Democratic Hand (DH)... so it must be determined by the Visible Hand (VH).

In the ASI's case, the debate isn't about compulsory versus voluntary contributions to public goods.  It's purely and simply a matter of which hand is better at dividing the ASI's limited resources.  My theory is that the IH would do the best job, by far, of dividing the ASI's resources.  So should I provide a strong and wonderful argument in favor of replacing the VH with the IH?  What's the alternative?  Southwood should provide a strong and wonderful argument against replacing the VH with the IH?

After I publish this entry, I'll try and bring it to Southwood's attention by using Twitter.  After all, Twitter is how his entry was brought to my attention.  Twitter divides our limited attention among unlimited articles.  But does it efficiently allocate our attention?

If economics is really the study of the allocation of scarce resources it should be way more focused on time and attention

— Tim Wu (@superwuster) June 2, 2017

From Adam Smith's perspective, the efficient division of limited resources depends on people dividing their limited dollars among their unlimited desires.  Attention is certainly a limited resource.  Yet, members of Twitter don't use their dollars to allocate each other's limited attention.  Twitter is not based on Smith's perspective.  Neither is the ASI.  Donors don't use their dollars to allocate each other's limited attention.

We shouldn't be surprised that Twitter is not based on Smith's perspective... but the ASI?  What hope can we have for Twitter, and the rest of the world, when even the Adam Smith Institute isn't based on Adam Smith's perspective?

Smith's perspective is either wrong or right.  Or, perhaps, somehow it's right for clothes, computers and cars... but it's wrong for articles, papers, posts and tweets.  I'll certainly admit that articles and clothes are different types of goods.  But even though articles are digital goods, and frequently public goods, their creation still requires the use of society's limited resources.  All the time that I spend writing about this topic is time that I can't also spend writing about other topics.  How should I divide my limited time among unlimited topics?  Should you answer this question with your dollars (Smith's perspective)?  Or should you answer this question with experts/leaders/committees/dictators (ASI's perspective)?  Or should you answer this question with cheap-talk (Twitter's perspective)?

Consider this blog written by 4th graders... Classtopia.  The entries on the homepage are sorted by the hand of time.  But the entries on this page are sorted by the Invisible Hand.

The IH is currently pretty small. It consists of the students, their teacher and myself. But in theory the IH could be as large as everybody in the world.  Everybody could use their money to grade the relevance of Classtopia's (home)work.  If every school was a market, then the IH would guide each and every student to their personally and socially optimal occupation.  If it makes sense for the IH to guide students... shouldn't it also guide prisoners?

Prison labor is dangerously close to a new form of American slavery. Fight it by paying inmates minimum wage: https://t.co/Wn3ZIYY3HE

— Noah Smith (@Noahpinion) June 2, 2017

My challenge to Southwood, and anybody else who reads this, is to come up with a coherent economic story.  Start with a solid foundation of scarcity and then construct a sound economic argument for inconsistently, or consistently, applying Smith's perspective.

I suppose that I should acknowledge that Smith himself didn't apply the IH to public goods, articles, tweets, Netflix shows or homework.  He didn't stand on his own shoulders.  Well... actually... he certainly recognized the importance of replacing Twitter's perspective with his own...

The people feeling, during the continuance of the war, the complete burden of it, would soon grow weary of it, and government, in order to humour them, would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. - Adam Smith, Wealth of Nations 

Compare Adam Smith's solution to Noah Smith's solutions...

But as I see it, some kind of concentration is needed. Informational anarchy is always ruled by the Shouting Class, so the only way to curb the Shouters' power is to end the anarchy. Maybe social media platforms themselves will become the new quality filters. Maybe algorithmic blocking will use robots to shut down the Shouters. Maybe people will just stop using Twitter, and stop joining political argument groups on Facebook. Maybe everyone will make their profiles more private, and learn to unfollow people who engage in callout culture. - Noah Smith, The Shouting Class

Noah Smith didn't even mention Adam Smith's solution.  Why is that?

There's nothing inherently wrong with shouting.  The problem is when the crowd doesn't have the easy opportunity to put its money where its mouth is.

It should definitely be easy for people to point and shout "Watch out for that ________ !!!"   But the number of exclamation points that they are willing to use should be given far less credence than the number of their own dollars that they are willing to spend.  Admittedly, if you're walking down the street and somebody points and shouts "Watch out for that piano!!!" then perhaps you shouldn't wait for the shouter to put their money where their mouth is.  But this is a purely technical issue.  In all cases, tying shouts and spending together is the only way to maximize rational choice.

Noah Smith, Ben Southwood and I are planning to go backpacking.  Noah is going to carry everything but all three of us will vote on what to take.  Southwood and I might as well vote/shout for some luxuries.  It's not like we will have to directly pay the price of our decisions.  Our costs will be completely covered by Noah.  He's going to be our beast of burden.

Buchanan thoroughly understood the incredible importance of creating a solid bridge between choice and cost...

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Historically, legislative bodies, through which the preferences of individual citizens are most directly represented, have exercised more control over revenue or tax decisions than they have over expenditure decisions. In part this asymmetry has its origin in the development of democratic political institutions out of monarchial institutions. Representative bodies, parliaments, first achieved the power to restrict the tax-gathering privileges of the kings. Before taxes could be levied on the people, representative bodies were given the right to grant their approval. No consideration was given to the spending side of the account because public expenses were assumed to benefit primarily the royal court, at least in the early days of constitutional monarchy. Taxes were viewed as necessary charges on the people, but they were not really conceived as any part of an "exchange" process from which the people secured public benefits. It was out of this conception of the fiscal process that both the modern institutions and the modern theory of public finance developed. - James Buchanan The Bridge Between Tax and Expenditure in the Fiscal Decision Process

The emerging of modern democratic states dramatically modified the setting for the fiscal process, but only recently has attention been paid to the necessity of revising age-old norms. As royal courts came to be replaced by executives, and monarchies by republics, taxes continued to be viewed as necessary to sustain the expenses of “government,” with the burden of these taxes to be minimized to the maximum extent possible. Surprisingly little recognition has been given, even yet, to the idea that taxes must, in the final analysis, be considered as the “costs” of those public goods and services which provide benefits to the same people who pay taxes. - James Buchanan, The Bridge Between Tax and Expenditure in the Fiscal Decision Process

A second analytical principle emerged more than a century after Smith’s Wealth of Nations, and it was not explicitly incorporated into the norms for policy. But it may have been implicitly recognized. It is important because it reinforces the classical principles from a different and essentially political or public-choice perspective. In 1896, Knut Wicksell noted that an individual could make an informed, rational assessment of various proposals for public expenditure only if he were confronted with a tax bill at the same time. Moreover, to facilitate such comparison, Wicksell suggested that the total costs of any proposed expenditure program should be apportioned among the individual members of the political community. These were among the institutional features that he thought necessary to make reasonably efficient fiscal decisions in a democracy. Effective democratic government requires institutional arrangements that force citizens to take account of the costs of government as well as the benefits, and to do so simultaneously. The Wicksellian emphasis was on making political decisions more efficient, on ensuring that costs be properly weighed against benefits. A norm of balancing the fiscal decision or choice process, if not a formal balancing of the budget, emerges directly from the Wicksellian analysis. - James Buchanan, Richard Wagner Democracy in Deficit: The Political Legacy of Lord Keynes

The necessity of relating decisions on public expenditures explicitly to decisions on taxes through the political process, and of assigning a definite revenue category to each single expenditure was stressed by Wicksell in his classic statement of the individualistic theory of public finance (see Knut Wicksell, "A New Principle of Just Taxation," in Classics in the Theory of P'ublic Finance, ed. 1R. A. Musgrave and A. T. Peacock [London: International Economic Association, 1958], pp. 72-118, but esp. p. 94. The original Wicksell work is Finanztileorietisclie Uizlersuchlungen [Jena: Gustav Fischer, 1896]). - James Buchanan, The Economics of Earmarked Taxes

The most sophisticated contribution was made by Knut Wicksell in 1896.  He explicitly identified the fundamental methodological error in the then-orthodox approach, and he combined positive criticism with normative suggestions for reforms.  Wicksell recognized the necessity of bridging the two sides of the fiscal account, and he noted the indeterminacy of any proposed principles that were limited to tax-side considerations. - James Buchanan, Public Finance and Public Choice

In addition to the uncertainty factor, which can be readily understood to limit the range of rational calculus, the single individual loses the sense of decision-making responsibility that is inherent in private choice. Secure in the knowledge that, regardless of his own action, social or collective decisions affecting him will be made, the individual is offered a greater opportunity either to abstain altogether from making a positive choice or to choose without having considered the alternatives carefully. In a real sense, private action forces the individual to exercise his freedom by making choices compulsory. These choices will not be made for him. The consumer who refrains from entering the market place will starve unless he hires a professional shopper. Moreover, once having been forced to make choices, he is likely to be somewhat more rational in evaluating the alternatives before him. - Gordon Tullock, James Buchanan, Individuality Rationality in Social Choice

The introduction of the debt alternative to taxation makes the bridge between cost and benefit more difficult for the individual to construct. - James Buchanan, "Fiscal Policy" and Fiscal Choice

Institutionally, earmarking provides a means of compartmentalizing fiscal decisions.  The individual citizen, as voter-taxpayer-beneficiary, is enabled to participate, separately, either directly or through his legislative representative, in the several public expenditure decisions that may arise. He may, through this device, "vote" independently on the funds to be devoted to schools, to sanitation, and so on, given the specified revenue sources. Only in this manner can he make "private" choices on the basis of some reasonably accurate comparison of the costs and the benefits of the specific public services, one at the time.  By contrast, general-fund budgeting, or non-earmarking, allows the citizen to "vote" only on the aggregate outlay for the predetermined "bundles" of public services, as this choice is presented to him by the budgetary authorities. - James Buchanan, The Economics of Earmarked Taxes

Conceptually, an "ideal" institutional arrangement might be that of allowing individuals to "pay for" governmental goods and services in a manner analogous to that which they have found most convenient for financing consumer durables. The quarterly payments of tax on declarations of income above or outside withholding probably tend, on balance, to promote "logical" response to the income tax structure. It is the absence of any conscious sense of transfer, the absence of any monthly or quarterly bill, that represents the questionable feature of withholding, and one that may tend to create a Puviani-type illusion.  - James Buchanan, Public Finance in Democratic Process: Fiscal Institutions and Individual Choice

Only one of these questions seems relatively easy to answer. If the individual can make separate fiscal choices for each public-goods program, which a structure of earmarked taxes conceptually allows him to do, directly or indirectly, he is informed as to the alternatives that he confronts, at least to the extent that the payment institutions allow, and subject, of course, to all of the qualifications noted in previous analysis. The uncertainty that he faces is clearly less than that which is present in the comparable decision on a “bundle” of public goods or services, with the mix among the separate components in the bundle to be determined in a separate decision process or through the auspices of a delegated budget-making authority. If this mix is not announced in advance to the voter-taxpayer, he must try to predict the outcome of another decision process, in which he may or may not participate, a process that need not exist at all in the more straightforward earmarking model where all revenue sources are specifically dedicated. - James Buchanan, Public Finance in Democratic Process: Fiscal Institutions and Individual Choice

In a balanced-budget context, a decision to spend publicly implies a decision to tax, and a decision to tax implies a decision to spend. Only if the actual institutions of fiscal choice are organized in such a way that this basic truism is reflected in the alternatives confronting the individual participant can these uncertainties be minimized. Much of the modern criticism of the United States Congress is directed at its failure to allow simultaneous consideration of expenditure and tax decisions. - James Buchanan, The Bridge Between Tax and Expenditure in the Fiscal Decision Process

Nevertheless, the fact remains that such choice embodies a direct correspondence between private cost and private benefit, the characteristic that is stressed here, and the one that is absent, in varying degree, from individual choice in collective decision processes.  This central feature of market choice, rather than any implied assumption of rationality, makes individual behavior in organized markets useful as a benchmark from which we begin to assess collective choice institutions. - James Buchanan, Public Finance in Democratic Process

Similar behavior can be predicted on the spending side of the account. If the individual citizen were asked, in mid-1963, his opinions on proposed expansions in the federal space program, he could, roughly and in some fashion, measure benefits in terms of sport, national prestige, adventure, technological fallout, etc. But what were the costs? He would not have translated the costs of the space program into increased taxes. And for a very simple reason: the individual knew that he would not have to pay such taxes. The predictable result of a democratic choice process is the generation of budget deficits when borrowing is available as an alternative to taxation unless deficit creation is not somehow restrained by constitutional limitations. - James Buchanan, Public Finance in Democratic Process: Fiscal Institutions and Individual Choice

The Clay committee has at last discovered the fiscal version of Aladdin's wonderful lamp, and that henceforth all governmental “good things” such as super-super highways may come to us without our having to bear either the burden of taxation of the sufferings of conscience over increasing national debt. - James Buchanan, Painless Pavements: Highways by High Finance

Good things come at a cost, whether they be provided by the government or the grocery store. - James Buchanan, Painless Pavements: Highways by High Finance

The apparent splitting of the fiscal process into two parts was shown to produce potential gaps between preferred spending on public goods and services and preferred levels of taxation. Until and unless these gaps are eliminated, budget deficits tend to emerge from democratic decision processes. - James Buchanan, "Fiscal Policy" and Fiscal Choice

Under the assumption that public output enters positively into the utility functions of citizens, the expenditure by itself will secure support for the politician. The taxes, however, will reduce the disposable income of citizens, thereby affecting them negatively and reducing support for the politician. In a plurality electoral system, for given preferences and fixed tax institutions, the budget will be expanded so long as a majority would prefer the public service to the private goods they would have to sacrifice via taxation. - James Buchanan, Richard Wagner Democracy in Deficit: The Political Legacy of Lord Keynes

The restoration of the balanced-budget rule will serve only to allow for a somewhat more conscious and careful weighting of benefits and costs. The rule will have the effect of bringing the real costs of public outlays to the awareness of decision makers; it will tend to dispel the illusory “something for nothing” aspects of fiscal choice. - James Buchanan, Richard Wagner Democracy in Deficit: The Political Legacy of Lord Keynes

Randall Bartlett makes the same point, only he uses a visual rather than an auditory metaphor. In his framework, some tax forms have higher visibility than others. Starting with perfect visibility, taxes can be arrayed in descending order of visibility. In both his analysis and ours, changes in the institutional format for extracting revenues will influence citizen perceptions of the cost of government. See Randall Bartlett, Economic Foundations of Political Power (New York: Free Press, 1973), pp. 92-95. - James Buchanan, Richard Wagner, Democracy in Deficit: The Political Legacy of Lord Keynes

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Fully appreciating the necessity of bridging the gap between choice and cost depends entirely on fully appreciating the significance of scarcity.  Society's limited resources have to be divided between its unlimited wants.  In order to maximize the rationality, relevance, efficiency, benefit, value of the division, fiscal illusion must be minimized.  The only way to minimize fiscal illusion is for people to personally pay, and directly feel, the full and true cost of their choices.  Then, and only then, will society's limited resources be efficiently allocated. 

If people want a war, whether on drugs, terror or poverty, then they should definitely have the option to shout for these things... but they should not have the opportunity to pay for these things by reaching into other people's pockets.  They should only have the opportunity to reach into their own pockets.  Then, and only then, when they directly confront, consider, compare and calculate the (opportunity) costs of their own money, can they possibly make rational decisions regarding the true relevance/importance/necessity/urgency of the war.  When people only have the opportunity to reach into their own pockets then, and only then, will society's limited resources be optimally divided.  

A few years ago Robert Kuttner wonderfully wrote this article... Karl Polanyi Explains It All...

Yet Marx, for all of his stubbornly apt insights about capitalism, is an unreliable guide to its remediation. Polanyi, with the benefit of nearly a century’s worth more evidence, has a surer sense of how markets interact with society. 

Polanyi stood on Marx's shoulders.  Buchanan stood on Smith's shoulders.  Whose shoulders does Southwood want to stand on?  Whose shoulders does the ASI want to stand on?

My belief is that I'm correctly interpreting and understanding Smith and Buchanan.  But it's entirely possible that my belief is mistaken.  For example, Peter Boettke has studied Smith and Buchanan far more than I have.  And we certainly agree on some fundamentals...

I wonder how much progress could be made in political economy if the best and the brightest among economists, such as Raj Chetty, would take seriously the admonition of Hayek, Buchanan, and Elinor Ostrom that the assumptions of omniscience and benevolence must be rejected if we are going to make progress and develop a robust theory of political economy. - Peter Boettke, AEA Richard T. Ely Lecture --- Raj Chetty, "Behavioral Economics and Public Policy"

Yet, he's never argued that Netflix should be a market.  He's never endeavored to explain why the IH, rather than the VH, should determine the order (relative importance) of Netflix's content.  Boettke and I both agree that it's beneficial that Netflix is in a market, but he doesn't seem to perceive the benefit of Netflix being a market.  However, it's not like he has argued against Netflix being a market.  He has not argued that it would be detrimental for around 100 million subscribers to divide their limited fees among the unlimited shows and movies on Netflix.

How much would the content change if 100 million people could decide for themselves how their money is spent?  The amount of money spent would be exactly the same.  But it would be divided differently among the content.  How different would the division be?

A. The VH's division
B. The IH's division
C. The difference between A and B

Would Boettke seriously argue that C would be insignificant?  If he did, then wouldn't this entirely undermine his argument against socialism?  If planners can adequately figure out the movie preferences of 100 million people... then what, exactly, prevents planners from adequately figuring out the food preferences of 1 billion people?

Buchanan stood on Smith's shoulders by arguing that the IH should extend to the public sector.  I endeavor to stand on Buchanan's shoulders by arguing that the IH should also extend to Netflix, the ASI, the Roosevelt Institute, the Cato Institute, the Los Angeles Times, The New York Times and countless other organizations that should be, but are not, markets.  If Boettke is sure that I'm barking up the wrong tree, then of course I'd want him to share his perspective.  Same thing if he's sure that I'm barking up the right tree.  Same thing if he's unsure.

Boettke and I both agree that...

1. society's limited resources have to be divided among its unlimited wants
2. the omniscience assumption has to be destroyed
3. people's valuations of things must be known

When I assemble these three puzzle pieces they reveal a megareal world with markets everywhere.  Boettke has the same three pieces... so how could they reveal a different world?  Is he assembling the pieces differently?  Does he have additional puzzle pieces?

In this post I've endeavored to share, and elaborate on, the puzzle pieces that are entirely absent from Southwood's critique of public choice.  His critique doesn't reflect the relevance of the fact that Buchanan's public choice is solidly founded on the reality of scarcity.  As a result of Southwood's oversight, he is under the impression that "public choice doesn’t explain much at all."  Actually, public choice explains a lot.  But in order to fully appreciate the immensity of what public choice explains, it's entirely necessary to fully grasp the most elementary economic problem.  You first have to know and understand what the problem is before you can effectively evaluate a potential solution.

But it's entirely possible that my interpretation and understanding is incorrect.  My understanding of Smith has certainly influenced my understanding of Buchanan.  So I encourage Southwood to contact Boettke and ask for his perspective on the topic.  Ideally we should all put our heads together and figure out what markets are good for.

From my perspective, there's more than enough evidence that proves what markets are good for.  But since there's so much disagreement about the topic, it seems clear that we need more evidence.  The ASI becoming a market would provide additional evidence to help us figure out what markets are good for.