Disparity Between Individual Influence And Collective Opportunity Cost

My second favorite liberal, John Quiggin, is still working on his book about opportunity cost...  Intellectual property: Extract from Economics in Two Lessons (expanded and amended).

Eventually he's going to finish his book.  Then what?  Then I'll buy it.  Unless the opportunity cost is too high.  Right?  I'm assuming that he's not going to charge an arm and a leg for his book.

Am I going to be the only person in the entire world to purchase Quiggin's book?  Probably not.  We can imagine a bunch of people buying Quiggin's book.  We can imagine them considering the available information, weighing the alternative uses of their money and deciding that the opportunity cost isn't too high.

When a bunch of people take money out of their own pocket... and put it into Quiggin's pocket... then the distribution of influence will shift accordingly.  A bunch of people voluntarily and willingly give up a little influence... and Quiggin gains the influence that they were willing to give up.  Consumers exchange their influence for Quiggin's book.  Quiggin exchanges his book (his time and energy) for consumers' influence.  

Does this make sense?  Quiggin spends a lot of time/energy producing something that lots of people positively value and, as a result, lots of people reward him accordingly.  His reward is more influence over society's limited resources.

Can you see the parity?  Quiggin's influence roughly reflects consumers' valuations of his productivity.  When their valuation of his productivity increases... so will his influence.  This parity isn't perfect because in reality one price does not fit all.  And we should certainly endeavor to figure out how to eliminate any disparity that exists.  Why?  Because it should be intuitive that the smaller the disparity... the larger the benefit.  Conversely, the larger the disparity... the smaller the benefit.

Given that I plan on buying Quiggin's book... clearly I approve of a liberal writing a book about opportunity cost.  But, it's kinda something that his book isn't going to be relevant to something as economically basic, and fundamentally important, as a bunch of people buying his book.

The fact is that it's impossible for liberals to really dig into the basic relationship between influence and opportunity cost.  What is Quiggin going to argue?  He's going to argue that there's nothing problematic about massive disparities?  Which would mean what?  He would either be arguing that his book, and all books, should be entirely free... or he would be arguing that everybody should have to spend far more money than they truly want to on all books.  Authors should either have far less, or far more, influence than they truly deserve.

If Quiggin acknowledges that it is problematic when disparities exist... then he would essentially be attacking the fundamental premise of democratically elected leaders.  Right now there's a massive disparity between Obama's influence and the collective's valuation of his productivity.  And the same will be true for the next president just like it was true of the previous president.

Here I am writing my gazillionth blog entry.  And I haven't been paid a penny!  Because... absolutely nobody in the world values my productivity at all?  Or... because of the free-rider problem?  Clearly because of the free-rider problem!   The free-rider problem is a problem, and only a problem, because it results in disparities between influence and (valuations of) productivity.  Right now, because of the free-rider problem, I have less influence than I truly deserve.  Mandatory contributions are only beneficial when they decrease, rather than increase, disparities.  But the only way that mandatory contributions can decrease disparities is when they incorporate everybody's valuations.

Everybody in the world has some influence.  The goal should be to structure society in such a way that everybody's influence perfectly reflects how much their productivity is worth to other people.  Nobody should have more, or less, influence than they truly deserve.

Modern Monetary Theory Is Moronic

Forum thread: MMT = Moronic Monetary Theory

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MMT is incredibly moronic.

Imagine that it's Trump versus Clinton. Let's say that Trump loses the election by 125 electoral votes. But what are electoral votes? They are simply electronic numbers... they aren't by any means real. Therefore... we could simply give Trump more electoral votes than Clinton and voila! Trump would be our next president! Yay for fiat votes! Yay for subverting the will of the people!!!

The point of voting is to figure out who should have more influence. And the incredibly obvious thing about influence is that it is mutually exclusive. This is painfully obvious. It's stupidly obvious. Influence is a zero-sum game? Yes... DUH.

Let's say that all the MMT members of this forum decide to dollar vote for me. We'll pretend that there are 10 MMT members and each one of them paypals me $1000 dollars. That's a lot of dollar votes! I would gain $10,000 dollars worth of influence. But, because influence is a zero-sum game... it was only possible for me to gain this influence because each one of these 10 members was willing to voluntarily give up a $1000 dollars worth of influence. My gain was their loss. Their loss was my gain. This is how influence works.

Now let's apply this incredibly obvious concept to our entire economy. But, let's keep it simple stupid and say that our entire economy only produces two goods...

1. food (a private good)
2. defense (a public good)

The private sector produces food and the public sector produces defense. What would happen if we gave the defense producers more influence? Clearly this would mean that the food producers would have less influence. As a result, defense producers would be able to compete more of society's limited quantity of "Einsteins" away from food producers. More Einsteins solving defense related problems means less Einsteins solving food related problems. So we'd see more improvement/progress in the supply of defense and less improvement/progress in the supply of food.

If Forest Gump had been a real person then even he would have been able to understand this. His IQ was theoretically 75. Anybody who fails to understand how and why MMT is incredibly moronic must have an IQ that's lower than 75.

If you can understand how and why MMT would subvert the will of the people... then clearly your IQ is over 75. But is your IQ over 95? Let's find out.

In the private sector we all use our dollar votes to determine how influence should be distributed. And since your IQ is over 75... you understand that influence is a zero sum game. So what happens when, via democracy, we give people like Barak Obama and Elizabeth Warren more influence? It means that the people that we dollar voted for will have less influence.

If you can understand how and why democracy subverts the will of the people... then clearly your IQ is over 95.

Here are two ways that we can help prevent the will of the people from being subverted...

1. Replace voting with spending
2. Allow people to choose where their taxes go

Do markets put resources into the best hands?

Reply to replies: "senseless human greed"

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You're system is far worse than the current because at least a poor person's vote is equal to a rich person's and thus there's at least constant pressure to meet the demands of the majority of people who need the most protection and help for the common good. - Lynx_Fox

You seem to think that people only spend their money in ways that will give them the maximum benefit for it, when if anything the vast majority of the population has shown time and time again that they will gladly blow money on stupid shit that has no potential benefit for their lives. - Falconer360

In a representative democracy, we elect governmental representatives to make good decisions for the welfare of all citizens - not popular decisions, or decisions that best profit GM or Monsanto. - billvon

That's right. And those other things will often be mythology, superstitions, not-in-my-backyard syndrome, short-sightedness, incredulity, unsupported gullible "factoids" or other things rather than empirically-based scientific views with a whole view to the common good that should decide allocation by representatives. - Lynx_Fox

Let's try and use all of this to construct an individual for us to consider and study...

Chris gladly blows his money on stupid shit. He inherited $50,000 dollars from his rich uncle. Rather than spend it on college... he spent it on a corvette. When his grandfather died... he inherited $20,000. Rather than using this money to start a business... he donated all of it to Joel Osteen. Chris loves Christ almost as much as he loves cars. Except he never reads the Bible... or perhaps he missed the story about the prodigal (wasteful) son. Just like he missed the story about the talents. Just like he missed the story about the protestant work ethic.

It stands to reason that Chris's value judgements are extremely impaired. There's one very important exception to this rule... democracy! Even though Chris consistently spends his money on the wrong things... he consistently spends his votes on the right representatives. He doesn't choose representatives that are just as wasteful as he is. Neither does he choose representatives who promise to take money from the rich and give it to him. Instead, he chooses representatives who will steer the country in the most valuable directions.

Chris is the modern day equivalent of Dr. Jekyll and Mr. Hyde. In the private sector... he's Mr. Hyde. He makes horrible decisions. But in the public sector... he's Dr. Jekyll... his value judgements are impeccable!

This story is so far from credible that it's kinda funny. It would make for an entertainingly absurd movie.

Markets work because stupid decisions (aka mistakes) decrease your influence (over how society's limited resources are used). Because a decision can't be that stupid if it increases your influence/power/control (in the long run).

Is the decision to rob a bank a stupid decision? Most reasonable people would argue that it is. Chances are good that you'll be caught or killed. Ending up in jail or dead really decreases your influence. But what if somebody robs a bank and gets away with it? Then clearly their decision wasn't that stupid.

Is the decision to drop out of school a stupid decision? Most reasonable people would argue that it is. Dropping out of school will decrease your chances of getting a good job. There's plenty of evidence that education level and income are positively correlated. But what if somebody drops out of school and starts an extremely successful business? Then clearly their decision to drop out of school wasn't that stupid.

If the intelligence of decisions is not strongly correlated with income/influence... then why bother endeavoring to make intelligent decisions? Why not randomly decide whether you go to, or stay in, school? Why not randomly decide whether you use condoms? Why not randomly decide whether you use drugs? Why bother seriously considering and contemplating the consequences of your actions?

You guys really need to get your stories straight. If markets don't truly reward alertness, effort, productivity, responsibility, competence, diligence, research, resourcefulness, ingenuity, hindsight, insight and foresight.... then yeah, there's no point in giving taxpayers the freedom to choose where their taxes go. But if markets truly fail to put society's limited resources into the best hands... then there's really no point in giving anybody the freedom to choose anything. If this is how you truly perceive reality... then prove it by starting a thread where you share your version of reality with others.

Power and Control

Politics is all about power and control...which is why we need checks and balances.

Frank Herbert -  "He who controls the spice, controls the universe!" - Dune

Pragmatarianism would transfer some control of taxes from congress to taxpayers.  The amount of control transfered would be determined by taxpayers themselves and would reflect their confidence in congress.  This check on the power of congress would have been supported by Herbert Spencer.

Herbert Spencer 

     When that "divinity" which "doth hedge a king," and which in our day has left a glamour around the body inheriting his power, has quite died away - when it begins to be seen clearly that, in a popularly-governed nation, the government is simply a committee of management; it will also be seen that this committee of management has no intrinsic authority. The inevitable conclusion will be that its authority is given by those appointing it; and has just such bounds as they choose to impose. Along with this will go the further conclusion that the laws it passes are not in themselves sacred; but that whatever sacredness they have, is entirely due to the ethical sanction - an ethical sanction which, as we find, is derivable from the laws of human life as carried on under social conditions. And there will come the corollary that when they have not this ethical sanction they have no sacredness, and may be rightly challenged.

     The function of Liberalism in the past was that of putting a limit to the powers of kings. The function of true Liberalism in the future will be that of putting a limit to the powers of Parliaments - Contemporary review, Volume 46

For a few weeks now a Marxist concept that I learned while studying International Development at UCLA has been on my mind but the word wasn't even on the tip of my tongue.  Surprisingly, I just remembered it..."comprador bourgeoisie".  Basically, they were well-connected, upper class, middlemen in developing countries.  A multinational corporation (MNC) would go into a developing country and deal with the local comprador bourgeoisie...who would help "facilitate" the MNC's exploitation of local resources.  The MNCs and the comprador bourgeoisie would get rich and very little, if any, money would trickle down to the proletariat.

Is it a bit much to think of congress as comprador bourgeoisie?  Perhaps...but, in a pragmatarian system, that would be up to each taxpayer to decide.  I kind of just wanted to write it down in case I forgot it again.

Another term that I struggled to remember was "moral hazard".  I'll just be lazy and grab this one from Wikipedia...

Moral hazard also arises in a principal-agent problem, where one party, called an agent, acts on behalf of another party, called the principal. The agent usually has more information about his or her actions or intentions than the principal does, because the principal usually cannot completely monitor the agent. The agent may have an incentive to act inappropriately (from the viewpoint of the principal) if the interests of the agent and the principal are not aligned.

It's straightforward to see that the interests of congress (the agent) and taxpayers (the principle) are not completely aligned.  The primary goal of politicians is to be (re)elected so their interests are strongly aligned with whoever will finance their campaign.

Guido Calabresi 

In a market regime, some are made richer and some made poorer; in a command structure, some have greater authority and some less. It is equally clear that, in an all-market regime, wealth constitutes authority, and that, in an all-command structure, authority results in wealth. Also true, but perhaps less plain, is the fact that in mixed systems like ours people will use their distributional advantage in one medium to overcome their distributional disadvantage in the other by 'altering' or 'corrupting' that other medium. The use of money to influence or 'corrupt' those in authority is easy enough to understand, whether through bribes or campaign contributions.- The Origins of Law and Economics: Essays by the Founding Fathers

This is also know as rent-seeking behavior...when special interest groups and big business attempt to influence congress.

Some decades before Herbert Spencer was worrying about how the power of parliament would be limited...Alexis de Tocqueville was worrying about tyranny of the majority.  

Alexis de Tocqueville

Again, it may be objected that the poor are never invested with the sole power of making the laws; but I reply, that wherever universal suffrage has been established the majority of the community unquestionably exercises the legislative authority; and if it be proved that the poor always constitute the majority, it may be added, with perfect truth, that in the countries in which they possess the elective franchise they possess the sole power of making laws. But it is certain that in all the nations of the world the greater number has always consisted of those persons who hold no property, or of those whose property is insufficient to exempt them from the necessity of working in order to procure an easy subsistence. Universal suffrage does therefore, in point of fact, invest the poor with the government of society. - Democracy in America

As I pointed out in my entry on taxpayers, taxpayers are better educated than the general public.  Therefore, pragmatarianism would help function as a check against any possible tyranny of the majority.

To review, pragmatarianism would...

1. help check the power of congress
2. help check tyranny of the majority
3. result in an optimal division of labor between the private and public sector
4. ensure that public goods would be produced with maximum efficiency
5. ensure levels of all public goods would accurately reflect society's values
6. provide greater freedom
7. allow taxpayers to joyfully contribute to public goods