Exceptions To Socialism's Shortcomings

Reply to reply: Is Economic Influence Mutually Exclusive?

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Do you want the government to supply donuts? Nope? Why not? Because you believe that impersonal shoppers (government planners (congresspeople)) would get the supply of donuts wrong. Why do you believe that impersonal shoppers would get the supply of donuts wrong? Because you believe that impersonal shoppers couldn't possibly know whether you want more or less donuts at any given time.

Do you want the government to supply defense?  Yup.  Why?  Because you believe that impersonal shoppers will get the supply of defense right.  Why do you believe that  impersonal shoppers will get the supply of defense right?  Because you believe that impersonal shoppers can know whether you want more or less defense at any given time.

Therefore... you believe that impersonal shoppers are partially omniscient.  They can't read your mind when it comes to donuts... but they can read your mind when it comes to defense.

Of course... donuts and defense are different types of goods.  Donuts are a private good while defense is a public good.  Therefore... you believe that impersonal shoppers can't read your mind when it comes to private goods... but they can read your mind when it comes to public goods.

Except... let me guess... as a libertarian you don't want the government to supply ALL public goods... do you?  The standard libertarian response for the proper scope of government is.... defense, courts and police.

Therefore... you believe that impersonal shoppers...

A. can't read your mind when it comes to private goods
B. can't read your mind when it comes to most public goods
C. can read your mind when it comes to defense, courts and police

Coincidentally, this tweet showed up in my feed today...

Humanity did not fall short of the ideals of socialism, socialism fell short of the demands of humanity. - @PeterBoettke

Humanity is never going to fully comprehend or grasp this rule as long as there are people such as yourself who believe that defense, police and courts are exceptions to this rule.

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

Fully Including And Using Brains

Reply to thread: Clarifying The Popularity Of Three Economic Rules

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Ad Nihilo,

1. You're not addressing my main argument. Either you know that you can't hit the target... or... you're not seeing the target. Just in case it's the latter...

I value X and Y but I value X more than Y...

X > Y

A. I vote for Y
B. Y happens to be implemented
C. Y uses resources
D. The resources that Y uses could have been used for X
E. Quiggin's Rule is broken
F. You agree that Quiggin's Rule should not be broken

2. A large chunk of your argument is relevant to anarcho-capitalism. I am not an anarcho-capitalist. I am a pragmatarian. Of course you're welcome to attack anarcho-capitalism in this thread! But please don't be under the impression that you're actually attacking my own view.

3. Yes, we pool our cognitive resources. I strongly agree with this concept. In fact, here's a slice of what I recently wrote in another thread...

Today I watched this excellent video on Youtube... Human Cognitive Evolution: How the Modern Mind Came into Being - Merlin Donald. He argues that humans form a distributed network. Our brains aren't literally linked together though. So in order for the network to process information... we each need to share our individual information. If we share inaccurate information, then the output will be inaccurate. This is the basic concept of garbage in, garbage out (GIGO).

Everybody would benefit from a network that's...

1. larger
2. more accurate
3. more efficient

"Homing in on the right solution" is inefficient and it's also inaccurate. It takes too long to access information that most likely doesn't come very close to people's valuations. Democracy is certainly efficient... but it's far less accurate than homing. Representation is a small, inefficient and inaccurate network. Removing any amount of brains from the network is extremely stupid. This is why slavery is also stupid. Unfortunately, this is not why we oppose slavery. We oppose slavery for moral reasons. In other words, we oppose slavery for the wrong reasons.

You're bored with the scenario of people selling shit to each other. You're more interested in the scenario of replacing voting with spending. From my perspective your interest is incoherent. This is because, from my perspective, both scenarios address the issue of improving the efficiency and accuracy of communication.

So I think that your incoherence stems from your failure to perceive commerce as communication. What we consume depends entirely on how and what we communicate to each other. Your analysis will become far more coherent if you manage to focus on the communication aspect.

I'm sure that you agree that slavery is stupid. But why, exactly, do you think it's stupid? As I explained, I think it's stupid because it removes brains from the network. The more brains that are removed from the network, the less powerful it is. By this same notion... the less fully a network utilizes the brains it contains, the less powerful it is.

As you pointed out... our society has different institutions. Here are three very different institutions...

A. democracy
B. representation
C. markets

These three institutions are very different. As such, they can not be equally good at...

1. including brains
2. utilizing brains

Democracy: good at including brains, bad at using them. In that same other thread I wrote...

One clear drawback of this method is that it's far more time consuming than simply voting. Even if there was an app for it then it still wouldn't be as fast as people simply raising their hands. Not only is it more time consuming... but it requires more mental effort. Unless you're Buridan's ass... it shouldn't be too difficult to decide that you prefer to eat at The Dumpling Palace. It requires more brainpower to decide exactly how much you prefer to eat at The Dumpling Palace. It's one thing to determine your preference. It's another thing to determine the intensity of your preference.

Representation: incredibly terrible at including brains, bad at using them. Elizabeth Warren doesn't get to decide for herself how she spends her portion of the budget. Which means that her brainpower isn't fully utilized.

Markets: good at including brains, good at using them. On a daily basis, each and every individual makes difficult decisions about how to allocate their limited resources. These difficult decisions fully utilize their brainpower. These difficult decisions utilize all the information that's stored in their memories. These difficult decisions utilize all their hindsight, insight and foresight. These difficult decisions utilize all their processing power.

As a pragmatarian.... I have absolutely no desire to eliminate the public sector. My desire is for human brainpower to be fully applied to public goods like it's fully applied to private goods. This could be accomplished by creating a market in the public sector. People would simply choose where their taxes go.

However, the public sector is hardly the only space that's missing a market. Right now I'd definitely be willing to pay you a penny for your thoughts! But I definitely wouldn't be willing to pay you a million dollars for your thoughts! Narrowing it down to an exact amount would require brainpower.

You can certainly argue that we are better off not knowing how much I truly value your time and thoughts. But then you'd be arguing that we're better off when networks do not fully utilize their brains.

Companies also fail to fully utilize brainpower...

Russ Roberts: Let's talk about your 1937 paper, "The Nature of the Firm." You were trying to answer a question--an interesting question, remains a good question; it was a good question in 1937, it's still a good question, which is: If capitalism and markets and prices, the Hayekian system of communicating information via price signals, if it works so well, why do firms exist? Because firms are almost by definition top down rather than bottom up. They use command and control rather than purchases within the firm, although there are exceptions to that. Some firms do use price signals for their decision-making inside the firm. But many firms do not. Their decisions are made not by prices but by fiat, by decisions on the top. Now, you wrote that paper when you were very, very young, the first part of it, correct?
Ronald Coase: That's right. I wrote it while I was an undergraduate. It seems obvious to me. If you go into a firm and you say to someone: Why did you do this? He'd say: Because I was told to do it. He doesn't talk about pricing at all. Almost of all the things you do within a firm are not controlled directly by prices at all. Your boss tells you what to do and you do it.
Russ Roberts: How did you come to write that paper as an undergraduate.
Ronald Coase: Oh, I was interested in how firms actually operate, and if you start studying how firms actually operate you find that they are not concerned with prices directly at all. A person who is working in a firm does what he's told. That's the way it operates.
Russ Roberts: So, a firm is an island of socialism in a capitalist world.

Also...

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

A firm is a network of brains. It makes sense that firms can't be democracies. As I pointed out, democracies are good at including brains, but bad at using them. Firms can clearly be dictatorships. But even the wisest and most benevolent dictatorships can't fully utilize the brains they contain. If we accept the assumption that it's desirable for brains to be fully utilized... then the logical conclusion is that firms should be markets. A firm is a boat that should be steered by the spending decisions of the people in the boat.

4. I am familiar with David Graeber's work. Just like I'm already familiar with Mariana Mazzucato's work. Unfortunately, I don't have a link to prove that I am familiar with her work. But if you look on my blog you'll see that I link to the Crooked Timber blog. I consistently take the time and make the effort to learn and understand my opponents' arguments.

The only significant cost this will impose on you is the time cost it will take to actually read shit and get properly informed. But then wouldn't you rather argue things in ignorance on the internets with people who are even more ignorant than you? The latter is certainly much more entertaining :p - Ad Nihilo

In the OP of this thread, I said that Quiggin's Rule was named after the economist John Quiggin. Quiggin is a liberal economist. He's certainly properly informed so I would definitely prefer to argue with him. So here's what I wrote to him... The Inadequacy Of The Opportunity Cost Concept. And here's the extent of his response. It's... underwhelming. To say the least.

You are extremely informed. Well... at least compared to other members of Nation States. And unlike Quiggin, your response is definitely not underwhelming. That being said, your response is nowhere near the target. You sure made a lot of shots... but none of them were even in the right direction. None of them came close to addressing my actual argument.

I'm pretty sure that Quiggin is informed enough to clearly see my target. But... I'm guessing he's also informed enough to know that he can't hit it. Therefore... he decided to simply share my target rather than attempt to hit it. Which is entirely understandable.

If you make the effort, I'm sure that you could see my target. But, to be completely honest, I'd be surprised if you could actually hit it given that Quiggin was smart enough to not even hazard a shot. Quiggin didn't link me to Graeber... but you did. Is it because Quiggin is not familiar with Graeber's work? Nope. Quiggin didn't link me to Mazzucato... but you did. Is it because Quiggin is not familiar with her work? Nope. Quiggin didn't link me to Kay... but you did. Is it because Quiggin is not familiar with Kay's work? Nope. Quiggin didn't link me to Piketty's work... and neither have you. Is it because Quiggin is not familiar with Piketty's work? Nope.

Quiggin didn't make these shots because he understands that none of them would come even close to the target.

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.

The Demand For Impersonal Shoppers

Reply to thread: Economic Ignorance

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It might help to read the short tax choice FAQ.

In a tax choice system, directly allocating your taxes would be optional.  If people didn't have the time or inclination to directly allocate their taxes then they could just give them to their impersonal shoppers (congresspeople).

What percentage of taxpayers would choose to give their taxes to their impersonal shoppers?  In other words, how much demand is there for impersonal shopping?

If there was any demand then wouldn't this service be available in the private sector?  Unless there's unmet demand that nobody has taken advantage of.  If you think this is the case then you should start your own impersonal shopping service.

How would it work?  Well...it would be just like the services offered by personal shoppers.  Except it wouldn't be personal...it would be impersonal.  Many different people would give you their money and you'd buy them all the same things.  If people weren't happy with the items then they could simply give their money to another impersonal shopping company.

I'm sure there has to be demand for this...right?  Because it would be fundamentally absurd to be using the public sector to supply this service to the entire country if there was absolutely no demand for it.  Wouldn't it be super crazy if it turned out that the only reason we vote for people to spend our tax dollars is because that's just the way it's always been done?

Around 1000 years ago some barons were fed up with kings spending "their" money on war after war...so they took the power of the purse from them.  And the kings only had the power of the purse in the first place because people believed that they had "divine authority".  Voila, here we are...allowing elected officials to spend our tax dollars.  And if we're not happy with their decisions then we can simply vote the bums out of office!    

It is easy to believe; doubting is more difficult. Experience and knowledge and thinking are necessary before we can doubt and question intelligently.  Tell a child that Santa Claus comes down the chimney or a savage that thunder is the anger of the gods and the child and the savage will accept your statements until they acquire sufficient knowledge to cause them to demur.  Millions in India passionately believe that the waters of the Ganges are holy, that snakes are deities in disguise, that it is as wrong to kill a cow as it is to kill a person - and, as for eating roast beef…that is no more to be thought of than cannibalism.  They accept these absurdities, not because they have been proved, but because the suggestion has been deeply embedded in their minds, and they have not the intelligence, the knowledge, the experience, necessary to question them.
We smile…the poor benighted creatures!  Yet you and I, if we examine the facts closely, will discover that the majority of our opinions, our most cherished beliefs, our creeds, the principles of conduct on which many of us base our very lives, are the result of suggestion, not reasoning…
Prejudiced, biased, and reiterated assertions, not logic, have formulated our beliefs. - Dale Carnegie, Public Speaking for Success

Who Are Your True Representatives?

Ever watch Tosh.O?  A while back he made this statement regarding politics..."The idea that any of these candidates represent my interests is absurd."  So who are Tosh's true representatives?

From my perspective, it seems pretty straightforward that whoever Tosh gives his money to are the people who represent his interests.  Because, it wouldn't make sense for Tosh to give his money to somebody who didn't represent any of his interests.  What does make sense though is that the more money he gives to somebody...the greater he values their representation.

With that in mind...what percentage of your income do you voluntarily give to politicians?  Honestly I've never voluntarily given any of my money to any politicians.  That's why it's a funny joke when Tosh pointed out how absurd it is to refer to politicians as representatives.  Yet, it's not funny when people who do not represent my interests get to spend my money.  But maybe it's my fault for not voting?  Or maybe the problem is that the power of voting is diminished by all the money in politics?

We engage in two types of voting...literal and figurative.  Literal voting is conducted with ballots while figurative voting is conducted with dollars.  How often do you engage in each type of voting?  Personally, every day I engage in figurative voting...I give my money...the product of my labor...to the people who represent my interests.  This is why taxpayers are our true representatives.  

Yet, even though we all figuratively vote for taxpayers on a daily basis...and even though we voluntarily give them considerably more of our money than we voluntarily give to congresspeople...it's extremely difficult to persuade people that our true representatives should have the freedom to choose which government organizations they give their taxes to.  This problem boils down to failing to understand economics.

Figurative voting involves sacrifice...while literal voting does not.  When you spend your money on one thing...you can't spend that money on another thing...

By contrast, if a consumer wants a new TV set and a new washing machine and he can afford only one of these without drawing on his savings (which he dislikes), he is in a cross-road situation. He must deliberate until he arrives at a decision as to which course of action he prefers. Thus, while we have reason to assume that preference functions for alternative uses of private funds (including the savings alternative) have some firmness and consistency, our findings raise doubt whether the corresponding concept of a preference function for alternative fiscal policies is fruitful. - Eva Mueller, Public Attitudes Toward Fiscal Programs

Figurative voting requires that you decide between a new TV and a new washing machine.  Literal voting does not require that you spend any money.  You can simply indicate on a ballot that you support the candidate that promises you both a new TV and a new washing machine.  That's why figurative voting holds infinitely more weight than literal voting.  Figurative voting reveals your actual priorities and all our priorities determine how resources are used.  That's how economics works.  If you take our true priorities out of the picture...then resources will be misallocated...which leads to recessions and/or depressions.

Let's go back to your cross-road situation.  What happens if you choose to spend your money on a TV?  Then you would be figuratively voting for all the taxpayers who produced/supplied that TV.  For simplicity sake we'll refer to all of them as Mr. TV.  You would be indicating with your hard earned money that Mr. TV represents a portion of your interests.  In a pragmatarian system, Mr. TV would then take a portion of his income and choose which government organizations he gave his taxes to.

Which government organizations would he give his taxes to?  He'd give his taxes to whichever government organizations represent his interests...just like you give your money to whichever private organizations represent your interests.  It stands to reason though...that Mr. TV would be motivated to give his taxes to whichever government organizations help him represent your interest.  This is because your interest is his livelihood.  For example, if he doesn't give any of his taxes to repairing the roads...then you won't be able to drive to his store to purchase his TV.

So the next time you spend your money...please try and understand that you are figuratively voting for your true representatives.  If you value your interests...then you will support giving your true representatives the freedom to use their taxes to better serve your interests.  Nobody knows your interests better than they do.

Consequentialist Arguments Against Children's Suffrage

What's going on here?  Campaign anonymity rule thrown out

Xerographica: You don't support allowing children to vote because they are incompetent?
megaprogman: If my boys could vote, they would vote for darth vader (I just asked them). If my daughter could vote, it would be for a disney princess.
Xerographica: Are you saying that if kids could vote then we would end up with either darth vader or a disney princess as our president?
What if...?: It becomes a possibility.
megaprogman: Not likely since they are not real people, the votes would just be voided.

Not likely?  Heh.

If you ask enough adults why kids shouldn't be allowed to vote...then you'll understand what Churchill meant when he said that the best argument against democracy is a 5 minute conversation with your average voter.  Well...unless you happen to be an average voter yourself.  In that case, then you'll think that the average voter's arguments against kids voting merely confirm your own arguments against kids voting.

Would there be any ridiculous consequences of allowing children to vote?  Not if you understand the concept of tyranny of the majority.  What's a ridiculous consequence anyways?  How about prohibition?   Was that a ridiculous consequence?  Was that a good reason why women shouldn't have been allowed to vote?

Xerographica: You don't support allowing women to vote because they are incompetent?
megaprogman: If my wife could vote, she would vote for alcohol to be illegal (I just asked her)
Xerographica: Are you saying that if women could vote then we would end up with prohibition?
What if...?: It becomes a possibility.
megaprogman: Not likely since they are not real people, the votes would just be voided.

That people believe there's a problem with allowing kids to vote...clearly indicates that there is not.

In related news...check out my arguments against personal shoppers for public goods...What's Wrong With a Representative Democracy?  What do you think?  Are my arguments so good or no good?