Feedback For FEE.org

Reply to reply on The Good Intentions Fallacy Is Driving Support for Democratic Socialism by Barry Brownstein

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If FEE was doing a good job disseminating information/knowledge, then you would thoroughly understand and love Hayek's argument (against command economies) that knowledge is decentralized/dispersed. As a group, FEE's readers have FAR more knowledge, including economics knowledge, than FEE itself (leadership + staff) has. As a group, FEE's readers have read FAR more books, including economics books, than FEE itself has. As a group, FEE's readers have done FAR more jobs, lived in FAR more countries and had FAR more life experiences than FEE itself. As a group, FEE's readers have FAR more eyeballs, ears and most importantly... brains.... than FEE itself. Thanks to consumer choice, market economies utilize/harness FAR more collective intelligence and information than command economies do. This is why markets succeed while socialism fails. It's a fact that right now FEE is not a market system... it is a socialist system. Therefore, FEE is failing to do a good job educating everybody about economics.

If you need additional proof that FEE is failing to do a good job, then here it is... you don't appreciate the difference between cheap signals (ie voting) and costly signals (ie spending). The fact that lots of people voted for prohibition, for example, informs us that it was popular, but it does not at all even remotely reveal the demand for prohibition. Demand can only be revealed by each and every consumer reaching into their own pocket and putting their own money where their mouth is. What was the demand for prohibition? We don't know. Consumers were not given the opportunity to spend their own money on prohibition.

On Netflix... what is the demand for nature show? Netflix does not know. It knows how many votes nature shows receive, it knows how many hours people spend watching them, but it doesn't actually know the demand for them.

Think about a "free" lunch. Just because lots of people will vote for a "free" lunch doesn't reveal the demand for the meal. Just because lots of people will line up and eat a "free" lunch doesn't reveal the demand for the meal.

Here's what a liberal wrote...

Hoover, in Hawley’s words, allowed for the New Deal to emerge because of his “reluctance to recognize that the private sector was inherently incapable of meeting the demand for social services on its own.” - Mike Konczal, The Voluntarism Fantasy

How could he possibly know what the demand is for welfare? Voting for welfare doesn't reveal the demand for it and neither does using it. The demand for welfare can only be known by giving Konczal, and all the other liberals, the opportunity to put their own money where their mouths/hearts are. When liberals are given the opportunity to decide how they divide their own dollars between welfare, public education and public healthcare then, and only then, will the demand for welfare truly be known.

When FEE's readers are given the opportunity to decide how they divide their donated dollars between articles about the Invisible Hand and articles about other topics then, and only then, will the demand for articles about the Invisible Hand truly be known.

1. As a group FEE's readers have FAR more intelligence/information than FEE itself does. It's a basic fact that two heads are better than one.

2. In order to fully harness/utilize the collective intelligence/information of its readers, FEE needs to give each and every reader the opportunity to put their money where their mouth is. It's a basic fact that actions speak louder than words.

Voting With Donations

My comment on Bob Murphy's blog entry... For the Purposes of the Current Debate, I Don’t Think Hayek Supported a “Basic Income Guarantee”

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Three years ago on Medium the liberal economist James Kwak also made the case that Friedrich Hayek supported basic income.  I responded to his story with more or less your same point... that he was neglecting the context.

Now, three years later, for me the real issue is that Kwak doesn't understand what markets are good for.  Markets are incredibly useful because correctly guessing demand is incredibly difficult.  The crazy thing is that this critique of Kwak's understanding is also applicable to even the staunchest market defenders such as yourself.  This is easy enough to prove. 

Here you supplied a story about basic income.  But what would you guess is truly the demand for this topic?  Again, if correctly guessing demand was so easy, then markets wouldn't be so useful.  Your blog is not a market... therefore it's clear that you don't truly understand what markets are good for. 

Turning your blog into a market would be really easy.  Readers could simply "donation vote" (DV) for their favorite stories.  DV is most commonly associated with people using donations to decide who will kiss a pig, or get a pie in the face, or get dunked into a water tank.  Sometimes zoos use it to name a baby animal.  But DV is also used to rank/sort/order/prioritize all the non-profits in the world.  The Red Cross, for example, receives very many donation votes which is why it can use a very large portion of the world's limited resources. 

Right now FEE is searching for a new president.  How are the candidates going to be ranked?  They definitely aren't going to be ranked by DV.  Therefore, FEE doesn't truly understand what markets are good for.

Last year, much to my very pleasant surprise, the libertarian party (LP) used DV to choose its convention theme.  Unfortunately, the LP didn't also use DV to choose the convention location, date and speakers.  So just because an organization uses DV doesn't guarantee that it knows why the market is so useful.

The market is an incredibly useful tool.  On a daily basis we use this tool to help each other prioritize.  Yet, the LP has only once used this tool to improve its own priorities.  FEE has never used this tool to improve its priorities.  As a pro-market blogger you're in the same boat.  Strange as it might seem, right now I'm the only person preaching the benefits of DV.  Does this mean that I'm the only person in the world who truly understands what markets are good for?  I guess.  I'm the only person in this boat.  Either I'm in the wrong boat, or everybody else is.  I'd really hate to be in the wrong boat so please, if you think that I am, then I'm all ears.  Make the case that some producers, such as pro-market bloggers, should be exempt from receiving specific and substantial feedback from consumers.  Or make the case that cheap signals are just as credible as costly signals.

Scott Sumner VS Utopia

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

The wisdom of voters?  Is there such a thing?  Here's a list of books...

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

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

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

Am I wrong?

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.

Bryan Caplan VS Voting Alternatives

I finally got around to reading this blog entry by Bryan Caplan... Why I Don't Vote: The Honest Truth.  To be equally honest, I don't vote either.

Here's what Caplan wrote in his entry...

My honest answer begins with extreme disgust.  When I look at voters, I see human beings at their hysterical, innumerate worst.  

Here's what I wrote in my previous entry...

Everybody perceives that they see society.  But this perception is wrong.  We don't actually see society.  What we actually see is a reflection of society. All we can ever see is a reflection of society. This is because all we can ever know about what's really inside people depends entirely on what they choose to reveal.  People's projections create society's reflection.

There are two main methods for people to reveal/communicate/project their preferences...

1. stated preference = voting, surveys, polls, Facebook "Likes"
2. demonstrated preference = willingness to pay/spend/sacrifice

Do both these methods create an equally accurate reflection of society?  Of course not.  As Nassim Taleb would say... voting doesn't have skin in the game...

Ralph Nader had a heuristic for war. He said that if you are going to vote for war, you should have a member of your family--a descendant, a son or grandson--on the draft. And then you can vote for war. - Nassim Taleb, Skin In The Game

As Alex Tabarrok would say... voting doesn't have a tax on bullshit...

Overall, I am for betting because I am against bullshit. Bullshit is polluting our discourse and drowning the facts. A bet costs the bullshitter more than the non-bullshitter so the willingness to bet signals honest belief. A bet is a tax on bullshit; and it is a just tax, tribute paid by the bullshitters to those with genuine knowledge. - Alex Tabarrok, A Bet is a Tax on Bullshit

Anybody who knows anything about Bryan Caplan knows that he's willing to put his money where his mouth is.  This is how Caplan works.  This is really not how voting works.

Voting doesn't require skin in the game.  Voting doesn't have a tax on bullshit.  This means that the reflection that voting creates of society is bullshit.  Again, with emphasis.... the reflection that voting creates of society is bullshit.

Yet...

My honest answer begins with extreme disgust.  When I look at voters, I see human beings at their hysterical, innumerate worst.  

Don't you get the sense that Caplan is judging humanity by its opinions?  Doesn't it sure sound like he's judging the book by its cover?

Here's another economist doing the same thing...

Is it possible to make progress towards this inclusive state in the United States at the moment? I would’ve said yes 15 years ago, 10 years ago, 5 years ago, but today I do feel more pessimistic than ever about the United States and about the world. Of course, I’m not surprised that there is a huge amount of discontent among some segments of the voting public, and some of this is entangled with fear from and hatred against immigrants and minorities. But the extent of this hatred has been a shock to me. - Daron Acemoglu, Stop Crying About the Size of Government. Start Caring About Who Controls It.

And another economist who did the same thing...


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Historians are mistaken in explaining the rise of Nazism by referring to real or imaginary adversities and hardships of the German people. What made the Germans support almost unanimously the twenty-five points of the "unalterable" Hitler program was not some conditions which they deemed unsatisfactory, but their expectation that the execution of this program would remove their complaints and render them happier. They turned to Nazism because they lacked common sense and intelligence. They were not judicious enough to recognize in time the disasters that Nazism was bound to bring upon them.

The immense majority of the world's population is extremely poor when compared with the average standard of living of the capitalist nations. But this poverty does not explain their propensity to adopt the communist program. They are anti-capitalistic because they are blinded by envy, ignorant, and too dull to appreciate correctly the causes of their distress. There is but one means to improve their material conditions, namely, to convince them that only capitalism can render them more prosperous.  - Ludwig von Mises

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To argue that the Holocaust and WWII accurately reflected the German society is to pretend or assume that voting creates an accurate reflection of society.  Nothing could be further from the truth...

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

Mises didn't know better.  Daron Acemoglu doesn't know better.  Bryan Caplan doesn't know better?  That's not true.  Of course Caplan knows better.  Yet, I sure do get the sense that he somehow kinda forgets that the reflection of society that voting creates is bullshit.

We really shouldn't judge society by its bullshit reflection.

So that was one issue that I had with Caplan's entry.  Another issue that I had with his entry was that there was something super strangely absent...  a viable alternative to voting.  Are there any viable alternatives?

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

Is quadratic voting a viable alternative to regular voting?  A quick google search did not provide Caplan's answer to this really good question.  On the other hand, a quick google search does provide Cowen's answer to this really good question.   Is Caplan's answer the same as Cowen's?  I'd sure like to know.

Personally, I definitely think that quadratic voting is a lot better than regular voting.  With quadratic voting at least there's some skin in the game.  At least there's some tax on bullshit.  At least there's some reflection/communication/projection of preference intensity.  But I'd really love to hear Glen Weyl explain why he thinks that it's better than straight buying and selling votes.  I'd also love to hear him explain whether he thinks that quadratic voting is better than coasianism.

Is coasianism a viable alternative to voting?  Coasianism would replace voting with spending.  Participants would have a certain amount of time to spend as much money as they wanted on their preferred option.  Whichever option received the most money would be the most valuable option.  The "losing" side would get their money back.  Plus, they would get all the money spent by the "winning" side.  So coasianism is actually a win-win situation.  Participants would either get their preferred option... or they would get something that they value even more.  In order to prevent perverse participation... the "market" would be blind.  The totals would only be revealed after the "market" closed.  Would there still be speculators?  If so, then they would quickly learn a fundamentally important lesson the hard way...

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

As far as I know, coasianism is a recent invention.  So it makes sense that Caplan hasn't already analyzed it.  But will he analyze it now?  Will he compare coasianism to quadratic voting?  Will he compare them both to vote buying/selling?  Will he compare all three of them to regular voting?

Caplan has lots of kids.... I don't have any kids.  So he can correct me if I'm wrong... but if little kids are playing with something that they shouldn't be playing with... generally the best strategy isn't to directly take the item away from them.  The best strategy is to offer them a better item.  Perhaps in some cases this isn't the best strategy.  Like if they are playing with a loaded gun.

Sure it's really reasonable to see see democracy as a loaded gun... but none of us who might perceive it as such are in a position to take it away from citizens.  And even if we were in such a position... would we really want to take advantage of our authority?

Watch "Milton Friedman on Libertarianism (Part 4 of 4)". The interviewer starts to ask him a hypothetical..."if you were dictator for a day" question and Friedman quickly interrupts him and says with great emphasis, "If we can't persuade the public that it's desirable to do these things, then we have no right to impose them even if we had the power to do it!"  Here's the extended version.

Part of the beauty of the free-market is that entrepreneurs, at least in theory, don't have the authority to directly take products away from citizens.  Entrepreneurs have no choice but to provide consumers with better products.  And it's entirely up to consumers to decide for themselves whether the new products are truly better than the old products.  In the multitude of consumers there is safety.

Liberals really don't see the beauty of builderism.  They see that working in a sweatshop is a terrible option but they really do not risk their own resources in order to provide the workers with better options.  Instead they endeavor to get sweatshops shut down.  They also vote for higher minimum wages, stricter regulations and more benefits for workers.  Liberals shoot workers in the feet by skyrocketing the barriers to entry... which makes it far less likely that entrepreneurs will provide workers and consumers with genuinely better options.

Some liberals are somewhat exceptional...

Each of us has a finite number of resources.  So where are you going to put your resources?  Where are you going to put your time and your money?  Are you going to put it into trying to elect somebody into this current system that's broken?  Or are you going to put that into building something? - Margaret Flowers

What's voting?  Voting is an idea.  All ideas are products.  So voting is a product.  And Caplan, probably more than anyone, knows and understands exactly what's wrong with this product.  He knows exactly where there's room for improvement.  And fortunately, in this case, nothing really prevents him from selling/creating a better product.  Ideas don't have artificial barriers to entry.  As far as voting is concerned, nothing technically prevents Caplan from engaging in builderism...

1. explaining why voting is bullshit
2. offering a better alternative

Hmmm... and I suppose that there is a decent amount of division of labor involved.  Specialization does increase productivity.  To use a volleyball analogy... one person sets the ball and another person spikes it.  Caplan sure has done a really wonderful job of setting the ball.  So isn't it unreasonable to expect him to spike it as well?

I don't think that I would have been able to invent coasianism without Coase or Caplan.  But it certainly can't be the case that I can spike the ball on my own.  Replacing voting with a better product will require a multitude of spikers.

In theory, Caplan should be especially interested in products that might be better than voting.  So it seems pretty logical that he would make the effort to review the alternatives to voting and use his considerable energy and expertise to help spike the best ones.

When it comes to Caplan and any given voting alternative... here are four courses of action...

1. He can explain why it's a good alternative
2. He can explain why it's a bad alternative
3. He can ask for explanations
4. He can ignore the alternative

Which course of action is the least beneficial?

Let's say that, thanks in no small part to Caplan, we do manage to creatively destroy voting.  As a result, society's reflection will be a lot less bullshit.  Will Caplan be happy with what he sees?  I'm guessing that he'll be happier... but it's doubtful that he'll be perfectly happy.  It's very likely that he'll spot some flaws.  But at least the flaws will be real.  So if he barks up a tree, the cat that he sees in the tree won't be a mirage cat.  What happens when Caplan and 300 million other citizens are far less likely to bark up the wrong trees?  Progress.  A lot more progress in a lot less time.

I'll finish by sharing some ideas about ideas....


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It is ideas that determine social trends that create or destroy social systems. Therefore, the right ideas, the right philosophy, should be advocated and spread. - Ayn Rand, Playboy Interview

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It turns out that most of our country is empty for a very good reason: people derive great value from concentrating together in urban areas. First, proximity reduces transportation costs, so producers benefit from being close to their suppliers and customers.  Second, more people living in one place means deeper and more diverse markets for both products and labor. With a large enough urban population, niche markets that appeal to only a small fraction of consumers become profitable to serve. Employers have a better pool of potential workers to draw from, while workers have greater choice in prospective employers.  And third, people living and working close to one another can take advantage of “information spillovers”: cities expand opportunities for exchanging ideas and information, thereby facilitating both innovation and the accumulation of human capital. - Brink Lindsey, Low-Hanging Fruit Guarded By Dragons

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Here is another critical point. Rarely does a new idea come into existence and cause just one change. Every change creates a new and different situation, potentially creating further opportunities to be taken advantage of by other alert and insightful individuals. In an open competitive system, there is no reason why the process of discovery and adaptation should ever come to an end state in which new insights can no longer be made and change is no longer possible. - David Glasner, In Praise of Israel Kirzner

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This process by which the new emerges is best understood in the intellectual sphere when the results are new ideas. It is the field in which most of us are aware at least of some of the individual steps of the process, where we necessarily know what is happening and thus generally recognize the necessity of freedom. Most scientists realize that we cannot plan the advance of knowledge, that in the voyage into the unknown — which is what research is— we are in great measure dependent on the vagaries of individual genius and of circumstance, and that scientific advance, like a new idea that will spring up in a single mind, will be the result of a combination of conceptions, habits, and circumstances brought to one person by society, the result as much of lucky accidents as of systematic effort. - Friedrich Hayek, The Case For Freedom

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The main lesson which the true liberal must learn from the success of the socialists is that it was their courage to be Utopian which gained them the support of the intellectuals and therefore an influence on public opinion which is daily making possible what only recently seemed utterly remote. Those who have concerned themselves exclusively with what seemed practicable in the existing state of opinion have constantly found that even this had rapidly become politically impossible as the result of changes in a public opinion which they have done nothing to guide. Unless we can make the philosophic foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our liveliest minds. But if we can regain that belief in the power of ideas which was the mark of liberalism at its best, the battle is not lost. The intellectual revival of liberalism is already underway in many parts of the world. Will it be in time? - Friedrich Hayek, The Intellectuals and Socialism

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Orthodoxy of any kind, any pretense that a system of ideas is final and must be unquestioningly accepted as a whole, is the one view which of necessity antagonizes all intellectuals, whatever their views on particular issues. Any system which judges men by the completeness of their conformity to a fixed set of opinions, by their "soundness" or the extent to which they can be relied upon to hold approved views on all points, deprives itself of a support without which no set of ideas can maintain its influence in modern society. The ability to criticize accepted views, to explore new vistas and to experience with new conceptions, provides the atmosphere without which the intellectual cannot breathe. A cause which offers no scope for these traits can have no support from him and is thereby doomed in any society which, like ours, rests on his services. - Friedrich Hayek, The Intellectuals and Socialism

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These intellectuals are the organs which modern society has developed for spreading knowledge and ideas, and it is their convictions and opinions which operate as the sieve through which all new conceptions must pass before they can reach the masses. - Friedrich Hayek, The Intellectuals and Socialism

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I have already referred to the differences between conservatism and liberalism in the purely intellectual field, but I must return to them because the characteristic conservative attitude here not only is a serious weakness of conservatism but tends to harm any cause which allies itself with it. Conservatives feel instinctively that it is new ideas more than anything else that cause change. But, from its point of view rightly, conservatism fears new ideas because it has no distinctive principles of its own to oppose them; and, by its distrust of theory and its lack of imagination concerning anything except that which experience has already proved, it deprives itself of the weapons needed in the struggle of ideas. Unlike liberalism, with its fundamental belief in the long-range power of ideas, conservatism is bound by the stock of ideas inherited at a given time. And since it does not really believe in the power of argument, its last resort is generally a claim to superior wisdom, based on some self-arrogated superior quality. - Friedrich Hayek, The Constitution of Liberty

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Every act of competitive entry is an entrepreneurial act; every entrepreneurial action is necessarily competitive (in the dynamic sense of the word). To compete is to act (or to be in a position to act) to offer buyers a more attractive deal, or to offer sellers a more attractive deal, than others are offering. To do so it is necessary to discover situations where incumbent market participants are offering less than the best possible deals, and to move to grasp the profits made possible by filling the gap so created by the incumbents. Such activity is strictly entrepreneurial. To act entrepreneurially is to enter a market with a new idea, with a better product, with a more attractive price, or with a new technique of production. Any such act necessarily competes with others. - Israel Kirzner, How Markets Work

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But unfamiliarity is a disadvantage which, when there is any real value to an idea, it only requires time to remove.  And in these days of discussion, and generally awakened interest in improvement, what formerly was the work of centuries, often requires only years. - J.S. Mill, Representative Government

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But I want to draw your attention to something more, to an aspect that allowed Professor Hayek to endure the lonely years, an aspect that may too readily be overlooked. Hayek’s position was made more tolerable by a few sources of external financial support, a few scattered persons with access to funds who recognized the value and importance of ideas. Hayek was given such support for his research, for The Constitution of Liberty, and for the beginnings of Law, Legislation and Liberty. He was supported indirectly, but importantly, via support of the Mt. Pelerin Society, the international society of market-oriented scholars and leaders, a society that was created and maintained almost single-handedly by Hayek. He was supported by lecture invitations to such as the old Volker Fund conferences, where he could try out his ideas, and where so many of my own generation first came to know both the man and these ideas. I cannot list all of those who supported Hayek in those lean years; I do not know who they were. I only know that they were an extremely small group of men and foundations, and I also know that the Realm-Earhart Foundations were almost unique in sticking to Hayek through the very worst of times.

I think we should draw some lessons from this experience. We should, I think, appreciate that ideas matter, and that financial support for the generation of ideas matters. Those who supported Professor Hayek in the lonely years were courageous in their expressions of confidence in the man and the ideas he represented. They were not demanding of him some immediate relevance to then-topical issues of policy; they were not demanding of him that he try to communicate his ideas to mass audiences; they were not demanding of him that he produce fancy numbers to test self-evident hypotheses. - James Buchanan, Notes on Hayek

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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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In a totalitarian State or in a field already made into a State monopoly, those dissatisfied with the institutions that they find can seek a remedy only by seeking to change the Government of the country. In a free society and a free field they have a different remedy; discontented individuals with new ideas can make a new institution to meet their needs. The field is open to experiment and success or failure; secession is the midwife of invention. - Lord Beveridge, Voluntary Action

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This is a reminder that one of my least-favorite sayings about politics is the idea that democracy is the worst form of government except for the alternatives. Not that I favor dictatorship, but this often seems to me to reflect a failure of imagination. There are lots of non-authoritarian modes of governance, including selecting people by lottery (like we do for juries), plebiscites, direct citizen input (as in this tax choice concept), along with different balances between elected officials, appointees, and civil servants. It’s important to actually think about the flaws in our current approach and whether better ideas exist. - Matthew Yglesias, Giving Taxpayers Choice Could Boost Satisfaction With Big Government And Boost Social Spending

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I was writing a simple teaching post, on ideas and increasing returns to scale, in micro and macro. I wrote down "Ideas are non-rival". Then I thought I had better explain what I meant by that. Then I thought about professors, who do research (thinking up new ideas), and teaching (communicating existing ideas to other people). Then I thought about how some professors like research but don't like teaching. Then I thought about this post.

Sure, two people can use the same idea (ideas are non-rival), but can't eat the same apple (apples are rival). But the second person can't use that idea unless the first person communicates that idea to the second person. The first has to teach it, and the second has to learn it, and teaching and learning are (sometimes) costly. The cost of communicating the idea to the second person might even be greater than the cost of the first person coming up with the new idea in the first place.  Sometimes it might be cheaper to reinvent the wheel than walk to the library. - Nick Rowe, Are ideas really non-rival?

When Nassim Taleb Is A Beautiful Fly On Every Wall

Feel free to use Medium to comment on this story... The Importance Of Accurate Feedback Loops

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In a recent blog entry I had no problem admitting that the economist Paul Romer broke my intellectual heart when he didn't show any interest in solving this pretty puzzle.  *sigh*  Oh well.  It's time to move on and take another risk.  I'm in the mood for intellectual love.

What about Nassim Taleb?  A while back I really enjoyed his book The Black Swan.   Recently I discovered and enjoyed his stories on Medium.   In this story...  How To Legally Own Another Person.... guess what I found?  I found a very pretty puzzle!

After being rejected by Romer... I feel some... errr... performance anxiety as I sit here trying to figure out how I'm going to paint this puzzle for Taleb.  I fear that the puzzle that I paint won't be pretty enough for him to truly appreciate!  So I must dig deep and utilize as much of my crazy creativity as I can capture.

I know that Taleb appreciates a good story.  The problem is that I'm a terrible story teller.  Why am I so terrible at telling stories?  I don't know.  But I'm not going to let this "minor" detail stop me from telling Taleb a story.  Let's see... where to begin...

The Economics Of Being Considerate

Be considerate.  We all know what it means to "be considerate".  Being considerate is a good thing.  Being inconsiderate is a bad thing.  It's a pretty simple and straightforward rule.  But what are the economics of this rule?

In my previous entry I asked Bryan Caplan whether it's desirable or inevitable that robots will become slaves.  I shared some super solid economic arguments against slavery and for freedom.  My bottom line was that a lot more progress would be made if robots were different and free.  Caplan replied with...

.@Pragmatarian @paulmromer Not "inevitable," just very likely when self-interested humans are creating robots to serve themselves.

— Bryan Caplan (@bryan_caplan) July 28, 2016

This sounds familiar.  Yesterday I clicked on this...

One of those critiques of me I don't even know if I disagree with: https://t.co/APhZy3ZHsI @slatestarcodex

— Bryan Caplan (@bryan_caplan) July 27, 2016

Like most, if not all, of Scott Alexander's blog entries it was lengthy but mostly interesting.  Here's the part that was relevant...

Things get even worse when you remember that cultures are multi-agent games and each agent pursuing its own self-interest might be a disaster for the whole. Pollution is a good example of this; if the best car is very polluting, and one car worth of pollution is minimal but many cars’ worth of pollution is toxic, then absent good coordination mechanisms everyone will choose the best car even though everyone would prefer a world where nobody (including them) had the best car. I may have written about this before. - Scott Alexander, How The West Was Won

Self-interested individuals would choose robot slaves even though this would result in far less progress.  This contradicts 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 

Alexander linked to another one of his entries...  Meditations on Moloch.  Here are the relevant parts...

As a thought experiment, let’s consider aquaculture (fish farming) in a lake. Imagine a lake with a thousand identical fish farms owned by a thousand competing companies. Each fish farm earns a profit of $1000/month. For a while, all is well.

But each fish farm produces waste, which fouls the water in the lake. Let’s say each fish farm produces enough pollution to lower productivity in the lake by $1/month.

A thousand fish farms produce enough waste to lower productivity by $1000/month, meaning none of the fish farms are making any money. Capitalism to the rescue: someone invents a complex filtering system that removes waste products. It costs $300/month to operate. All fish farms voluntarily install it, the pollution ends, and the fish farms are now making a profit of $700/month – still a respectable sum.

But one farmer (let’s call him Steve) gets tired of spending the money to operate his filter. Now one fish farm worth of waste is polluting the lake, lowering productivity by $1. Steve earns $999 profit, and everyone else earns $699 profit.

Everyone else sees Steve is much more profitable than they are, because he’s not spending the maintenance costs on his filter. They disconnect their filters too.

Once four hundred people disconnect their filters, Steve is earning $600/month – less than he would be if he and everyone else had kept their filters on! And the poor virtuous filter users are only making $300. Steve goes around to everyone, saying “Wait! We all need to make a voluntary pact to use filters! Otherwise, everyone’s productivity goes down.”

Everyone agrees with him, and they all sign the Filter Pact, except one person who is sort of a jerk. Let’s call him Mike. Now everyone is back using filters again, except Mike. Mike earns $999/month, and everyone else earns $699/month. Slowly, people start thinking they too should be getting big bucks like Mike, and disconnect their filter for $300 extra profit…

A self-interested person never has any incentive to use a filter. A self-interested person has some incentive to sign a pact to make everyone use a filter, but in many cases has a stronger incentive to wait for everyone else to sign such a pact but opt out himself. This can lead to an undesirable equilibrium in which no one will sign such a pact.

And...

But it’s important to remember exactly how fragile this beneficial equilibrium is.

Suppose the coffee plantations discover a toxic pesticide that will increase their yield but make their customers sick. But their customers don’t know about the pesticide, and the government hasn’t caught up to regulating it yet. Now there’s a tiny uncoupling between “selling to Americans” and “satisfying Americans’ values”, and so of course Americans’ values get thrown under the bus.

Or suppose that there’s a baby boom in Ethiopia and suddenly there are five workers competing for each job. Now the company can afford to lower wages and implement cruel working conditions down to whatever the physical limits are. As soon as there’s an uncoupling between “getting Ethiopians to work here” and “satisfying Ethiopian values”, it doesn’t look too good for Ethiopian values either.

Or suppose someone invents a robot that can pick coffee better and cheaper than a human. The company fires all its laborers and throws them onto the street to die. As soon as the utility of the Ethiopians is no longer necessary for profit, all pressure to maintain it disappears.

Or suppose that there is some important value that is neither a value of the employees or the customers. Maybe the coffee plantations are on the habitat of a rare tropical bird that environmentalist groups want to protect. Maybe they’re on the ancestral burial ground of a tribe different from the one the plantation is employing, and they want it respected in some way. Maybe coffee growing contributes to global warming somehow. As long as it’s not a value that will prevent the average American from buying from them or the average Ethiopian from working for them, under the bus it goes.

And...

As technological advance increases, the rare confluence will come to an end. New opportunities to throw values under the bus for increased competitiveness will arise. New ways of copying agents to increase the population will soak up our excess resources and resurrect Malthus’ unquiet spirit. Capitalism and democracy, previously our protectors, will figure out ways to route around their inconvenient dependence on human values. And our coordination power will not be nearly up to the task, assuming something much more powerful than all of us combined doesn’t show up and crush our combined efforts with a wave of its paw.

Alexander refers to these problems as "multi-agent traps".  Multi-agent traps result in values being thrown under the bus.

There's one fundamentally key aspect of these multi-agent traps that Alexander completely fails to acknowledge/address...

There are multitudes with an interest in peace, but they have no lobby to match those of the 'special interests' that may on occasion have an interest in war. - Mancur Olson, The Logic of Collective Action 

In terms of robots... there are multitudes with an interest in progress, but they have no lobby to match those of the 'special interests' that would have an interest in robot slavery.  But even if there was a lobby for peace/progress... it's a given that the lobby would be underfunded.  Why?  Because peace and progress are public goods.  This means that they are subject to the free-rider problem.

Let's run through the various multi-agent traps and give the agents the opportunity to use their taxes to clearly communicate the intensity/value of their preferences for public goods.

In the pollution scenario... all the agents prefer clean air.  Just how much do they value clean air?  Their valuations would be revealed by their tax allocations.

In the fishing scenario... all the agents prefer a clean lake.  Just how much do they value a clean lake?  Their valuations would be revealed by their tax allocations.

In the first plantation scenario... the owners can boost their productivity at the cost of making their customers sick.  If consumers truly prefer their food to be thoroughly and regularly tested then they would allocate their taxes accordingly.

In the second plantation scenario... wages go down as the supply of labor goes up.  Well...

The fact itself, of causing the existence of a human being, is one of the most responsible actions in the range of human life. To undertake this responsibility — to bestow a life which may be either a curse or a blessing — unless the being on whom it is to be bestowed will have at least the ordinary chances of a desirable existence, is a crime against that being. And in a country either over-peopled or threatened with being so, to produce children, beyond a very small number, with the effect of reducing the reward of labour by their competition, is a serious offence against all who live by the remuneration of their labour. — J.S. Mill, On Liberty

If people truly prefer a certain minimum and universal welfare then they would allocate their taxes accordingly.  To this end taxpayers should be free to shop in any country's public sector.  This would create a global market for public goods.

In the third plantation scenario wages are eliminated because workers are replaced with robots.  If people truly prefer that everybody should have plenty of employment opportunities then they would allocate their taxes accordingly.

In the fourth plantation scenario the plantation is disturbing an endangered bird.  If environmentalists truly prefer to conserve the bird's habitat then they would allocate their taxes accordingly.

In the fifth plantation scenario the owners want to expand their plantation onto tribal burial grounds.  If the global community prefers to conserve the burial grounds then they would allocate their taxes accordingly.

In the sixth plantation scenario the plantation somehow contributes to global warming.  If people truly want to minimize global warming then they would allocate their taxes accordingly.

In the robot scenario... slavery is an obstacle to progress.  If people truly value progress then they would allocate their taxes accordingly.

People allocating their taxes accordingly doesn't guarantee that their values will not be thrown under the bus.  It simply guarantees that the greatest values will not be thrown under the bus.  It guarantees that the outcome will be most advantageous to society as a whole.

Being considerate depends on knowing society's valuations of the different options.  If society's valuations of the options are unknown then it's very unlikely that the most valuable option will be chosen.  It's inadequate to simply say that development should be halted because some environmentalists value some endangered bird.  It's necessary to know how much the environmentalists value the endangered bird.  In the absence of knowing the values of both options...

1. conservation
2. development

... it's unlikely that the correct option will be chosen.

Ok, so multi-agent traps are the logical but detrimental consequence of the fact that private goods and public goods are on unequal footing.  Private goods and public goods can be put on equal footing by making it just as easy, and rewarding, for agents to "buy" public goods as it is for them to buy private goods.  This can be accomplished simply by allowing people to choose where their taxes go.  We would have a market for public goods just like we have a market for private goods.

So what about robots?  Well... I think that any moderately worthwhile robot will be able to effectively communicate with humans.   It shouldn't take five minutes to discern that robot "Lassie" is trying to tell us that Tommy is drowning in the river.  Speaking is better than barking.

Speaking isn't the only form of communication.  Another form of communication is spending.  And it's a really important form of communication.  It's how we inform each other of our valuations.  It will be super beneficial if robots are free to spend their money.  Then humans and robots will know each others' valuations.   Knowing each others' valuations will allow us to be far more considerate of each other's valuations.  And if it's beneficial to be far more considerate of each others' valuations of private goods... then the same will also be true of public goods.  When everybody's valuations are far more accessible, everybody's decisions will be far more valuable.

Scott Alexander believes that beneficial equilibriums are fragile.  Well... are they fragile... or rare?  Given that private goods and public goods are on unequal footing... I believe that beneficial equilibriums are the exception rather than the rule.  I think that most equilibriums would change for the better if public goods were no longer hobbled by our current system.

Let's put this differently.  Most people understand that socialism fails.  But unfortunately most people really don't understand that socialism doesn't just fail with private goods... it also fails with public goods.  If people understood this then they would understand the problem with having a mixed economy.  So because our system is a mixed economy... and socialism fails just as much with public goods as it does with private goods... it's a given that public goods are inefficiently allocated.  Which means that private goods are also inefficiently allocated.  Therefore, if we put public goods on equal footing with private goods there would be a beneficial adjustment of most, if not all, equilibriums.  We'd have far more peace, progress and prosperity.

So is the invisible hand defective?  Do markets fail?  It's easy to blame recessions, depressions and multi-agent traps on self-interest.  For a good example of this just watch the documentary Boom Bust Boom on Netflix.  Here's a screenshot...

Blaming these problems on self-interest is like dropping a boulder onto a busy freeway and then blaming the resulting pileup on people's natural desire to avoid hitting the boulder.  It's eternally frustrating because the boulder is so obviously the problem but so few people admit or acknowledge that it's the problem.  Anyways, I'm sure that there's a much better metaphor.  The point is that the invisible hand needs a level playing field.  Public goods need to be on the same level as private goods.  Markets have to be structured in such a way that there is just as much incentive for people to spend their money on public goods as there is for people to spend their money on private goods.  When markets are structured accordingly, self-interest will align with society-interest.

Does Greg Stevens Have An Issue With Trading?

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

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

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

Your WTP: $120
My WTP: $20

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

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

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

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

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

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


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

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

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

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

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

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


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Follow up comment...


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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

Helping the poor without breaking QIRE

Reply to reply: Dağhan Carlos E. Akkar

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Your goal is to help the poor. Which is a really wonderful and important goal! But you’re trying to help poor people by breaking Quiggin’s Implied Rule of Economics (QIRE)…

QIRE: society’s limited resources should be put to more, rather than less, valuable uses

When consumers spend their hard-earned money… they endeavor to spend their money on the most valuable options. This means doing their homework and shopping around. It doesn’t mean buying the first thing that they find.

So after doing lots of homework and lots of shopping around… lots of consumers decide to give lots of money to Bob. Evidently lots of consumers highly value how he is using society’s limited resources. Evidently they want him to be able to use even more of society’s limited resources. Evidently they want him to have even more influence over society’s limited resources. Evidently they want him to have even more power and control over how society’s limited resources are used.

Then what? Then you come along and decide that too many consumers gave too much money to Bob. So you… in your infinite wisdom… decide to override their spending decisions. Not fully override…. but partially override.

You don’t fully subvert the will of the people… you partially subvert the will of the people. As if their judgement is impaired… but not entirely impaired.

What do you with all the money that you take from all these consumers? Clearly you don’t give it to Bob. That would be strange. Do you give it back to these consumers? That would also be strange. Instead… you give it to poor people.

You give it to poor people… because… why? Because… you highly value how they are using society’s limited resources? Do you really though? In this scenario you really are not giving them your own hard-earned money. You’re giving them other people’s hard-earned money.

Maybe you’re under the impression that these consumers highly value how poor people are using society’s limited resources? So then you need to explain why these consumers chose to give their money to Bob rather than to poor people. You need to explain why you can’t simply persuade these consumers to give more of their hard-earned money to poor people. You need to explain why you have to rely on partially overriding their spending decisions.

In other words… you need to explain why it’s a good idea to break Quiggin’s Implied Rule of Economics (QIRE).

I’m pretty sure that you can’t explain why it’s a good idea to break QIRE. Nobody benefits, the poor least of all, when society’s limited resources are put to less valuable uses.

Fortunately for everybody, you can achieve your worthy goal of helping the poor without breaking QIRE.

The poor are poor because they are not doing valuable things with society’s limited resources. In some cases it’s because they are dumb. But I’m pretty sure that these cases are the exception rather than the rule. If you want to argue that these cases are the rule… then we can toss your argument for basic income into the garbage.

In order to help lift the poor out of poverty… you simply need to help them do more valuable things with society’s limited resources. This can be accomplished by making everybody’s valuations more accessible.

Right now, when I scroll up, here’s what I see…

“Most popular Medium stories tagged Inequality”

Medium, in all its wonderful wisdom, wants to show me three popular stories on the topic of inequality. It’s really easy to tell just how popular these stories are. The first story has 289 hearts… the second story has 131 hearts… and the third story has 90 hearts.

This is the seen. What’s the unseen? The unseen is how valuable these stories are. Medium makes it stupid easy to “like” a story… but it’s not nearly as easy to valuate a story. Medium doesn’t make it stupid easy for readers to give their pennies, nickles, dimes, quarters or dollars to their favorite stories.

What would happen if valuing a story was as easy as liking it? People’s valuations would be more accessible. The treasure map would become more accurate. This would help everybody, but especially the poor, use society’s limited resources in more valuable ways.

If Medium, Twitter, Facebook, Youtube, Flickr, Reddit, Quora and a gazillion other websites endeavored to make people’s valuations more accessible… then the treasure map would become far more accurate…. and everybody’s decisions would be far more valuable.

Let me try and make this concept as accessible as possible. Think about an Easter Egg hunt. A little kid picks up an old white piece of dog shit. You would probably tell the kid, “Hey little dude! That’s not an Easter Egg! This is an Easter Egg! See the difference?”

Here you are reading this story of mine. Do you think it’s an old white piece of dog shit? Or do you think it’s an Easter Egg? If you think it’s an Easter Egg… just how much do you value it? I’m not a mind reader. Nobody’s a mind reader. We can only know your valuation of this story if you communicate your valuation to us. And, as the saying goes… actions speak louder than words (Tabarrok’s Rule).

We will truly eliminate poverty when everybody does a much better job of making their valuations far more accessible.

The Democratic Definition Of "Love"

Comment on: Sovereignty Is Not Property by Adam Gurri

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I'm happy that your website is back. Free-riders are a always a problem because producers are never mind-readers. True or false?

I don't spend very much time worrying about the immigration debate. Maybe I'm undervaluing it though.

One time you told me this... "The point is that thinking about alternatives is not all, or even most, of what love is about."

I didn't reply... but I can't remember why. I'm an atheist but I grew up reading the bible... a lot. When I was a little kid I didn't understand why God rejected Cain's sacrifice. Now I understand that Cain's willingness to pay (WTP) was inadequate. Abel was willing to make a much larger sacrifice.

Later on in the Old Testament we saw the same theme when Abraham was willing to sacrifice his only son Isaac. And also in the New Testament... "For God so loved the world, that he gave his only begotten Son." As opposed to... "For God so loved the world, that he voted for it." I don't think that Christianity would have spread so far so fast with the democratic definition of "love".

We're definitely not mind-readers so it sure makes sense that God used his WTP to clearly communicate his love for us. But...... God also required us to use our WTP to clearly communicate our love for him. As if God isn't a mind-reader? Solomon seemed to believe otherwise, "for thou, even thou only, knowest the hearts of all the children of men."

You seemed to argue that this... "Should anyone who wants be allowed into your home?"... is not a valid argument because of democracy. Does this mean that it would suddenly become a valid argument if we did happen to replace voting with spending?

Recently I made a fun argument on a forum full of liberals. I argued that, because of the free-rider problem, everybody should be forced to spend X% of their income on digital goods. But... we would be able to choose which digital goods we spent our "daxes" on. How cool would it be to have a "digital sector"? For sure I would spend some of my daxes on your website! Yet, as the poll demonstrates, the idea was really unpopular. It was a fun argument though because every argument that the liberals made against a digital sector was equally applicable to the public sector. It was magical. Voila! All of a sudden a bunch of liberals were deeply concerned with the forced-rider problem. But I'm pretty sure that I wouldn't spend my daxes on digital goods that I didn't value... would you?


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Comment on Keynesianism in Democracy by Jason Briggeman

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Neither this entry nor your entry on bullshit in economics textbooks...

https://sweettalkconversation.com/2016/03/09/on-bullshit-in-economics-textbooks/

... includes any acknowledgement of "Tabarrok's Rule": actions speak louder than words.  Your solution to bullshit in economic textbooks was.... ironically... a cheap-talk survey.

In this entry you're considering Buchanan and Wagner... which is wonderful.  But you're not quite acknowledging or appreciating "Buchanan's Rule": using a resource one way means sacrificing the other ways that it could also be used.

Because of Buchanan's Rule... we need Tabarrok's rule in order to ensure that we don't massively violate "Quiggin's Rule": society's limited resources should be put to more, rather than less, valuable uses.

The logical, but extremely detrimental, consequence of massively violating Quiggin's Rule is the major misallocation of society's limited resources.  Keynesianism tries to solve recessions/depressions by violating Quiggin's Rule even more.

If you're interested in learning more...

http://forum.nationstates.net/viewtopic.php?f=20&t=369166

Popular vs Valuable

Reply to story: VotoSocial.org: towards an e-voting system that people can trust

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You’re working on some technology that will help us figure out which option is more popular. While you’re at it… why not also develop some technology that will help us figure out which option is more valuable?

Should we choose the more popular option? Or should we choose the more valuable option?

I’m pretty sure that we should choose the more valuable option.

If you you need a bit more explanation… then maybe this will help… 

Batman vs Hitler

It’s an interesting idea, the problem that I see with value is that is too subjective, I don’t see an objective way to weight value. - Jorge Garcia

You would simply make it stupid easy and fast for people to spend their bitcoins/dollars on X or Y. If people spent more money on X… then…

X > Y

For example… 10 coworkers are trying to decide what kind of restaurant to go to after work…

X = Chinese
Y = Italian

With voting… people would simply raise their hands to indicate whether they prefer X or Y….

X = 6 votes
Y = 4 votes

The advantage of voting is that it’s stupid easy and fast. The disadvantage of voting is that it doesn’t communicate the intensity of people’s preferences.

In order to solve this problem you would develop the technology to make it stupid easy and fast for people to communicate the intensity of their preferences. The coworkers would open your app and spend their money on the option that they valued most. Maybe the results would look like this…

X = $4 dollars
Y = $8 dollars

Chinese is the more popular option but Italian is the more valuable option. In fact, Italian is twice as valuable as Chinese. This means that $4 dollars worth of value would be destroyed if the coworkers went to a Chinese restaurant rather than to an Italian restaurant.

Of course this can’t simply be hypothetical spending. The money actually has to be spent or else people would just enter bogus numbers.

In my example with the coworkers… the losers would get their $4 dollars back… and they would also get $8 dollars. The $8 dollars would not be evenly distributed among the losers… it would be proportionally distributed. For example… if Bob spent $2 dollars on X… this would be 50% of the total amount spent on X. Therefore… Bob would get his $2 dollars back… plus he would also get 50% of the $8 dollars… which would be $4 dollars.

Essentially… when Bob spent $2 dollars on X… he was basically saying… “I prefer to eat at a Chinese restaurant. But… for $2 dollars I wouldn’t mind eating at an Italian restaurant.”

As it turned out, Bob was more than fairly compensated to eat at an Italian restaurant. He obviously can’t complain that the compensation wasn’t fair! After all, he’s the one who decided what was fair in the first place!

In order for this to work fast… it’s gotta be a one shot deal. Everybody can only submit one valuation. When the last person submits their valuation… the results are displayed and the money is transferred accordingly.

Here’s the basic concept in a nutshell: When everybody’s valuations are far more accessible, everybody’s decisions will be far more valuable.

To be clear… given that I have to explain all of this… this really isn’t an obvious concept! I honestly really wish that it was an obvious concept. Then everybody would already be free to choose where their taxes go. Unfortunately, tax choice only has 83 likes on Facebook. So this concept is painfully non-obvious. Therefore… if you get filthy rich developing this type of app…. then I’m going to expect fair compensation! I think that 25% of the profit is pretty fair. :D The same goes for anybody else who happens to read this.