Better Communication, Better Markets

Reply to: The “Why” in Wage Segregation by Samuel Hammond

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It’s neat, and smart, that you juxtaposed the two things. But it doesn’t seem like you did an adequate job of making the case for subsidizing lower productivity workers. Why would we want to subsidize lower productivity workers? This paragraph seemed to be the extent of your case…

Rising premium on quality signals like educational attainment, polarizing wages, and lower social mobility / “Coming Apart” dynamics may therefore all be symptoms of the same phenomena. For better or worse, pooling equilibria promoted a degree of churn between rungs on the social ladder, and denied the ability of imperfect signals to sort one into a low wage destiny.

I’m pretty sure that Ezra Klein isn’t going to hire me as a writer. Which makes sense… I’m a pretty terrible writer. But if he did hire me… then I’d get paid more (certainly more than Medium pays me!)… and somehow I’d also become a better writer? A much better writer? If there was solid evidence that this was indeed the case then I think that Klein would act on it. Who doesn’t love a diamond in the rough?

However, your conclusion doesn’t seem to be that Klein really needs to open his eyes and see and appreciate and understand the enormity of my raw and untapped potential… your conclusion seems to be… universal basic income.

You give up on trying to persuade Klein of my incredibly latent value and instead reach into his pocket and put his money into my hand. Thanks? My writing skills would greatly improve? Voila!? I would shine on like the crazy diamond that I truly am?

Speaking of diamonds… I don’t think that I’ve been equally productive in every romantic relationship that I’ve ever been in. Just like I don’t think that all of my relationships have been equally healthy or beneficial. If it was possible, would it be desirable to mandate a minimum benefit for relationships? I don’t think it would be. You’d be giving people an incentive to stay in less productive relationships.

What if people could get the minimum benefit even if they weren’t in a relationship? It seems obvious that this would decrease their incentive to find and start productive relationships.

No two relationships are equally productive. This isn’t just true of romantic relationships…. this is true of all relationships. The minimum wage gives workers an incentive to stay in less productive relationships. And a basic income would decrease people’s incentive to find and start productive relationships.

A good relationship depends on good communication. People’s willingness to sacrifice is a super important form of communication. Actions speak louder than words. So it’s a problem when the government decreases the goodness of communication. Like most government “solutions”, universal income would make the problem even worse.

If you truly want to help people… then you should focus on improving the goodness of communication. Can we get rid of minimum wages? At this point in time it seems a bit outside our range of effectiveness. But what about here on Medium? What if there were some coin and dollar buttons below every story?

If you liked my story, despite how poorly it was written, you could clearly communicate your valuation of my content by clicking the 50 cent button. Fifty cents would be automatically withdrawn from your digital wallet and deposited into mine. The total value of my story would increase by 50 cents. When people searched for stories the default sorting would be by their value. It would be easy to find the most valuable stories. Once I had enough money in my wallet… I could cash out and Medium would take a very fair and reasonable cut.

Wouldn’t this system increase the goodness of communication? Of course! It would eliminate the payment problem. However, there would still be the free-rider problem. So what if, for example, Netflix allowed their subscribers to use their monthly fees to communicate their valuation of the content? A while back I sat down and figured out how I might allocate one month’s worth of fees…

1. Amelie: $1.50
2. Black Mirror: $0.25
3. Castaway on the Moon: $0.25
4. Rake: $1.25
5. Shaolin Soccer: $0.50
6. Sidewalls: $0.25
7. Snatch: $0.25
8. Spaced: $1.00
9. The League: $0.75
10. The Man From Earth: $4.00


Yeah, it was really hard. Talk about opportunity cost. But I had absolutely no incentive to understate my valuations. Doing so certainly wouldn’t have decreased my monthly payment.

Wouldn’t this system (the pragmatarian model) increase the goodness of communication? Wouldn’t consumers have better relationships with content creators?

Minimum wages decrease the goodness of communication. And so would a universal basic income. Decreasing the goodness of communication makes society worse. If we want to make society better… then we need to increase the goodness of communication.

Markets are all about the goodness of communication. Improving communication means improving markets. Better communication means better markets. Right now Medium is a pretty terrible market. We can’t use our cash to communicate our valuations of each others’ stories. Facilitating payments would make Medium a much better market. If the free-rider problem is a real problem, which it probably is, then switching over to the pragmatarian model would make Medium an even better market.

How many websites are really terrible markets? Is Vox a terrible market? Of course it is. I’m sure you’ve never used your cash to communicate your valuation of any of Klein’s stories. Klein is certainly a better writer than I am… but to the extent that I understand what makes markets better… I’m certainly a much better economist than he is. He’s a great writer and a terrible economist. I’m a terrible writer and a great economist. Sounds like a match made in heaven! But he never returns my phone calls. :(

And even with those websites that do put their content behind paywalls… can subscribers use their monthly payments to communicate their valuation of the content? Nope. So they are terrible markets as well.

The internet has a gazillion really terrible markets. If we vastly improved these markets by applying the pragmatarian model to them, then we would all clearly see that any perceived necessity of a universal basic income was the consequence of people’s failure to understand the importance of good communication. And people’s failure to understand the importance of good communication is the consequence of my terrible writing skills.

Of course I might be wrong! I might have fallen asleep in a few econ classes or zoned out while reading a few econ books. So if you think there are any details, minor or major, that I’m missing… please enlighten me!

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.

Human Inequality vs Political Equality

Reply to: Turning the Tables on the Inequality Alarmists

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Don Watkins! You’re more coherent than most… but you’re not coherent enough.

A good chunk of your story nicely illustrates human diversity. Unfortunately, your solution is political equality (one person one vote).

Your story is basically a non sequitur. Your conclusion (political equality) really doesn’t follow from your premise (human inequality).

You wrote…

If Robinson Crusoe and Friday are on an island, and Crusoe grows seven pumpkins and Friday grows three pumpkins, Crusoe hasn’t grabbed a bigger piece of (pumpkin?) pie.

Imagine if, rather than planting his pumpkin seeds, Friday had roasted and eaten them. Perhaps nobody would consider his behavior to be irrational… but I think most would agree that Friday had made a pretty big mistake. He failed to give up momentary pleasure for future benefit. As a result of his failure, he wouldn’t grow any pumpkins while Crusoe would grow seven pumpkins.

The disparity in income (pumpkins) between Crusoe and Friday would reflect the disparity in their foresight, prudence, resourcefulness, productivity, judgement and so on. For convenience sake we can lump all these character disparities under the label of “rationality”. The disparity in their income would reflect the disparity in their rationality.

In the private sector… because Crusoe would have a lot more income… he would have a lot more influence. But in the public sector… if we’re assuming one person one vote… then Crusoe and Friday would have the same exact amount of influence. Which is very problematic because Crusoe and Friday are not equally rational.

Friday would vote to roast and eat all the pumpkin seeds while Crusoe would vote to save and sow some of the pumpkin seeds. Of course they would need a tie breaker.

The correct solution is for their influence in the public sector to equal their influence in the private sector. Rationality is just as important for public goods as it is for private goods. We really don’t want Don Quixote to have just as much political influence as somebody who correctly perceives that the windmills are really not evil giants.

All the problems you listed… ie minimum wages… are not the result of political inequality… they are actually the result of political equality. It’s only natural for people to vote for whichever politicians promise the best free lunches. The problem is… there’s no such thing as a free lunch.

In order for rational people to have more influence in the public sector than irrational people…. taxpayers should have the freedom to choose where their taxes go (pragmatarianism). People with higher incomes make fewer mistakes and, as a result, have to pay more taxes. The influence that they earn should carry over to the public sector.

As wonderful as Ayn Rand was… she wasn’t economically coherent. All the problems of the world boil down to a shortage of economic coherence.

Celebrating Diversity Means Embracing Inequality

Reply to: One dollar equals one vote in the economy

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Great story! Dollar voting is a very important concept. The thing is though… the three areas you listed as needing a lot more improvement… energy, public transportation and welfare… are not primarily in the realm of dollar voting. They are primarily in the realm of ballot voting. This is because they are mainly public goods. Supplying public goods is the point of government.

The heart of the issue involves figuring out whether things improve faster with dollar voting or ballot voting.

Personally, I’ve never once dollar voted for sports in my life. Yet, my taxes have subsidized sports despite the fact that, from my perspective, there are far more important things in life.

Sports really aren’t a priority for me. But they are a priority for some people. People have different priorities because we are all different. We aren’t all equally productive, effective, responsible, perceptive, careful, intelligent, informed, competent, prudent, insightful, diligent, creative, talented, resourceful or rational.

Dollar voting reflects our inequality… ballot voting does not. We all have an unequal amount of dollar votes and an equal amount of ballot votes.

In the public sector it’s one person one vote. Each person has the same say in determining who are representatives are. And our representatives determine our country’s budget for public goods.

People will of course argue that it’s only fair that everybody be given the same amount of ballot votes. But I have yet to see a good, or even a bad, argument that fairness helps to improve public goods in any way.

Fairness doesn’t make everybody equally rational. And giving unequally rational people equal influence really isn’t the recipe for improving any goods… public or private.

If we want public goods to improve at the same rate as private goods… then we simply have to give taxpayers the freedom to choose where their taxes go (pragmatarianism).

It’s a fact that some people pay a lot more taxes than other people… which reflects the fact that some people receive a lot more dollar votes than other people… which reflects the fact that some people are better than other people at using society’s limited resources… which reflects the fact that we are all different.

Celebrating human diversity means embracing human inequality.

Deirdre McCloskey - Revealing The Unseen

A few days ago I posted this entry...  Superstar Theory: J.K. Rowling vs Elizabeth Warren.  In that entry I shared this picture...

The point of the picture was to try and figure out how to help convey the concept that if somebody becomes a superstar... then it's because they created a lot of value for other people.

The same day I posted that entry... there was some wonderful synchronicity because over at the EconLog blog... David Henderson shared this passage from Deirdre McCloskey...

The economist William Nordhaus has calculated that the inventors and entrepreneurs nowadays earn in profit only 2 percent of the social value of their inventions. If you are Sam Walton the 2 percent gives you personally a great deal of money from introducing bar codes into stocking of supermarket shelves. But 98 percent at the cost of 2 percent is nonetheless a pretty good deal for the rest of us. The gain from macadamized roads or vulcanized rubber, then modern universities, structural concrete, and the airplane, has enriched even the poorest among us. - Deirdre McCloskey, Measured, unmeasured, mismeasured, and unjustified pessimism: a review essay of Thomas Piketty’s Capital in the twenty-first century"

In my picture... I made the benefit (hearts) the same size.  This passage helps drive the point home that the greater than sign ">" is really the correct answer.  Psy's benefit, which is visible, is a lot smaller than society's benefit, which is invisible.

Deirdre McCloskey, like any good economist, endeavors to reveal the unseen.  Here are a few more excellent passages from her...

You have to ask what the source of the inequality is. If the source is stealing from poor people, I’m against it. But if the source is, you got there first with an innovation that everyone wants to buy, so you get paid some crazy sum, you ought to be paid so much, don’t you think? - Deirdre McCloskey, Has Thomas Piketty met his match?

If bourgeois dignity and liberty are not on the whole embraced by public opinion, the enrichment of the poor doesn’t happen. You achieve through a doctrine of compelled charity the “santification of envy,” as the Christian economist the late Paul Heyne put it. The older suppliers win. Everyone else loses. You ask God to blind your neighbor. You work at your grandfather’s job in the field or factory instead of going to university. You stick with the old ideas. You remain contentedly—or not so contentedly—at $3 a day. The poor remain unspeakably poor. - Deirdre N. McCloskey, Bourgeois Dignity: Why Economics Can’t Explain the Modern World

On the topic of builderism...

Stopping people from taking terrible jobs – through prohibitions or protections or minimums, justified by the warm if mistaken feeling over one’s second cappuccino that one is thereby being generous to the poor – takes away from the poor what the poor themselves regard as a bettering option.  It’s theft from the poor of deals the poor want to make. - Deirdre McCloskey,  The Treasured Bourgeoisie

Yet even sweet ideas have consequences, and the poor are unintentionally damaged by the left wing’s belief in “wage slavery.” A choice to work for a wage at a terrible job (rather than, say, starve) is after all nothing like slavery. Slavery, pogroms, state compulsion enforced by the army make people worse off. Naturally. By contrast, the wages paid for work, even terrible work, make people better off—at any rate in their own opinion. They line up to work for the Nike shoe company in Cambodia. The people do not choose to be compelled by the army; but they choose to work. Stopping people from taking terrible jobs—with prohibitions or protections or minimum wages—takes away from what the people themselves regard as a bettering option, however nasty the work offered. Sweat shops in the New York garment trade, such as those in which the free-market economist Milton Friedman’s parents both worked all their lives, lead on to college-educated children and grandchildren. In the short run the sweat shops of New York were better than peddling on the street or digging for food in the city dump. And in the long run the acceptance of creative destruction relieved poverty. It has in fact been the only effective relief. Wage regulations and protection and other progressive legislation, contrary to their sweet (and self-satisfying) motives, have only preserved poverty, by preserving the old jobs. Innovation made the new jobs, and financed the new college graduates, and raised the tide. - Deirdre McCloskey,  Bourgeois Dignity: Why Economics Can’t Explain the Modern World

When a stable though tyrannical country like China or a turbulent though law-governed country like India started to revalue markets and innovation, and to give a partial liberty to commerce, the food and housing and education for the average person began doubling every 10 to 7 years. In a couple of generations China and India will have Hedda’s standard of living. They have already entered Collier’s Top 5½ Billions. An internal ethical change allowed it, beginning in northwestern Europe after 1700. - Deirdre McCloskey Bourgeois Dignity: Why Economics Can’t Explain the Modern World

It's really unreasonable to expect more from McCloskey... but I can't help but wonder how much more progress we'd make if she would help push for a pubmar.

Wealth Equality vs Consumer Sovereignty

If you haven't seen it yet, there's a viral video on wealth inequality on Youtube.  Max Borders, over at the Foundation for Economic Education, shared a response... Wealth Inequality: Predictably Irrational.

Here's the comment I posted followed by numerous passages on the subject of wealth distribution...


Imagine the exact same video but with the word "wealth" or "money" or "income" replaced with "skills" or "talent" or "ability". In a group of 100 people, a few people are going to be a couple standard deviations from the norm. They are going to be either really good looking or really ugly...really tall or really short...really intelligent or really stupid...really talented or really untalented.

The distribution of skills is essential to understanding the most important question: how should we use society's scarce resources?  No matter how you spin it...there's always going to be some people who are going to come up with far better answers. But unlike in the public sector, in the private sector each and every one of us has the freedom to dollar vote for the people who provide the best answers.

For example, imagine there's one kid who throws lemons at passing cars...and another kid who sets up a lemonade stand. They are both answering the question of how society's limited resources should be used.  The market works because we, the people, can use our own dollars to indicate which answer benefits us the most. The result is a distribution of resources that maximizes the amount of benefit we derive from society's limited resources.

If ignorance could randomly produce the same beneficial effects as information, economic activities would obviously be very different from what they are now. In the world in which we live, the assumption that ignorance may pay as well as information seems to be rather inappropriate to explain human action—not only in the economic field but in the other fields as well. - Bruno Leoni, Freedom and the Law

Legislation considered as a result of a collective decision by a group—even if consisting of all citizens concerned as in the direct democracies of ancient times or in some small democratic communities in medieval and modern times—appears to be a law-making process that is far from being identifiable with the market process. Only voters ranking in winning majorities (if for instance the voting rule is by majority) are comparable to people who operate on the market. Those people ranking in losing minorities are not comparable with even the weakest operators on the market, who at least under the divisibility of goods (which is the most frequent case) can always find something to choose and to get, provided that they pay its price. Legislation is a result of an all-or-none decision. Either you win and get exactly what you want, or you lose and get exactly nothing. Even worse, you get something that you do not want and you have to pay for it just as if you had wanted it. In this sense winners and losers in voting are like winners and losers in the field. Voting appears to be not so much a reproduction of the market operation as a symbolization of a battle in the field. If we consider it well, there is nothing “rational” in voting that can be compared with rationality in the market. - Bruno Leoni, Freedom and the Law

Presumably, individuals would prefer to pay less for virtually any good or service, since doing so rationally maximizes their utility from payment (Becker 1962). - Cait Lamberton, A Spoonful of Choice

Each taxpayer could be contributing to a community which would become more reflective of the kind of world in which he or she would like to live. Gaudeat Emptor! - Daniel J. Brown, The Case For Tax-Target Plans

To make more money in the private economy, you have to offer people something they want. If you do, you’ll attract customers; if you don’t, you may go out of business, or lose your job, or lose your investment. That keeps businesses on their toes, trying to find ways to better serve consumers. But bureaucrats don’t have customers. They don’t make more money by satisfying more consumers. Instead, they amass money and power by enlarging their agencies. - David Boaz, What Big Government Is All About

If past experience is any guide, the poor are not likely to get much that they do not pay for and may pay for things they do not get. The principal effect of such programs, on them as on everyone else, is to force them to pay for services that they would not buy willingly because they do not think them worth the price. This is called 'helping the poor'. - David Friedman, The Machinery of Freedom

Since voting is much more of an all-or-nothing thing than spending, such inequalities as do exist have much greater effects. This may explain why in our society, where the poor are also politically weak, they do far worse on things provided by the government, such as schooling and police protection, than on those sold privately, such as food and clothes. - David Friedman, The Machinery of Freedom

It might be objected here that even if productivity rises, the poor need not share in the gains that result from this. Mises's thinking followed an utterly different line: in his opinion, capitalism was primarily a system of "mass production for the masses" and the unhampered operation of this system would be to nearly everyone's advantage. Because of their large numbers, the less well off when acting as consumers control much of the economy by indicating through their dollar votes what they want. In brief, Mises's argument against redistribution is that it is not the best means to aid the poor. - David Gordon, Justice and Redistributive Taxation: James Buchanan versus Ludwig von Mises

Individuals express preferences about changes in the state of the world virtually every moment of the day. The medium through which they do this is the market place. A vote for something is revealed by the decision to purchase a good or service. A vote against, or an expression of indifference, is revealed by the absence of a decision to purchase. Thus the market place provides a very powerful indicator of preferences. Moreover, market-place preferences have two features of direct relevance to the process of economic valuation. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

First, the stronger the preference is for something the greater is the willingness to pay. Thus purchase decisions reflect willingness to pay (WTP) and WTP reflects intensity of preference. This is an important modification of the majority voting system in which all preferences count equally, however strongly or weakly they are held. - David Pearce, Dominic Moran, Dan Biller, Handbook of Biodiversity Valuation A Guide for Policy Makers

No one denies that contributors to private charities also fail to monitor those charities diligently and that those charities often fail to make the best possible use of the money they spend. But there is an important difference. If the word gets out that the American Red Cross, for example, is not making good use of donations, people can shift their contributions to other private charities that are doing a better job. We don’t have this option with FEMA. Instead of getting less money because of its poor performance, FEMA will almost surely get more, with the justification that more is needed to do a better job. - Dwight R. Lee, Mitigating Disaster: Abolish FEMA and Let Gas Prices Rise

Austrians believe that we get more solutions – and better, more creative solutions – if the energy, imagination, alertness and specialist knowledge of many individuals are engaged on the task. In economics, this is achieved through the process of competition, which gives diverse entrepreneurs the incentive to seek out new and better ways of enhancing value to consumers. By the same reasoning, our social and political problems may also be best solved if we give individuals the widest possible freedom to come up with a variety of creative responses, rather than hoping that a single collective approach will suffice. - Eamonn Butler, Austrian Economics

Mises described the market as a daily referendum on what should be produced and who should produce it. Every penny spent by consumers, in countless daily transactions, acts like a vote in a continual ballot, determining how much of each and every thing should be produced, and drawing production to where it is most highly valued. It is much more efficient than taking decisions through political elections, where people get to vote only every few years, and even then are voting for a package of disparate measures. In the market, every penny really does count, and it counts every day. - Eamonn Butler, Austrian Economics

If we now turn to consider the immediate self-interest of the consumer, we shall find that it is in perfect harmony with the general interest, i.e., with what the well-being of mankind requires. When the buyer goes to the market, he wants to find it abundantly supplied. He wants the seasons to be propitious for all the crops; more and more wonderful inventions to bring a greater number of products and satisfactions within his reach; time and labor to be saved; distances to be wiped out; the spirit of peace and justice to permit lessening the burden of taxes; and tariff walls of every sort to fall. In all these respects, the immediate self-interest of the consumer follows a line parallel to that of the public interest. He may extend his secret wishes to fantastic or absurd lengths; yet they will not cease to be in conformity with the interests of his fellow man. He may wish that food and shelter, roof and hearth, education and morality, security and peace, strength and health, all be his without effort, without toil, and without limit, like the dust of the roads, the water of the stream, the air that surrounds us, and the sunlight that bathes us; and yet the realization of these wishes would in no way conflict with the good of society. - Frédéric Bastiat, Abundance and Scarcity

Men have a natural propensity to make the best bargain they can, when not prevented by an opposing force; that is, they like to obtain as much as they possibly can for their labour, whether the advantage is obtained from a foreign producer, or a skillful mechanical producer. - Frédéric Bastiat, That Which Is Seen, And That Which Is Not Seen

This is not all; if this doctrine is true, since all men think and invent, since all, from first to last, and at every moment of their existence, seek the cooperation of the powers of nature, and try to make the most of a little, by reducing either the work of their hands, or their expenses, so as to obtain the greatest possible amount of gratification with the smallest possible amount of labour, it must follow, as a matter of course, that the whole of mankind is rushing towards its decline, by the same mental aspiration towards progress, which torments each of its members. - Frédéric Bastiat, That Which Is Seen, And That Which Is Not Seen

Third, in an ideally competitive free enterprise system, only the most efficient firms survive; for example, if the level of a firm's costs were independent of output and varied from firm to firm, only the firm with the lowest costs would survive. - Gary S. Becker, The Economic Approach to Human Behavior

In the market place minorities have "representation" and the number of "votes" a person has is related to his "proportioned productivity," so the incentives to act wisely are greater here than in the political sector. Therefore, it is relatively easy for an efficient firm to survive since it need only gain the support of creditors and consumers who have a direct personal interest in making wise decisions. - Gary S. Becker, The Economic Approach to Human Behavior

While the market conduces to learning by concentrating the costs of mistakes on those who make them, politics diffuses costs and thereby encourages the perpetuation of ignorance. - Geoffrey Brennan, Loren Lomasky, Democracy and Decision

Le Grand suggests that where patients are dissatisfied with the quality of treatment they are getting, they have only a limited range of options available: they can switch to private provision if they can afford it; or they can complain, which depends upon the goodwill (or knightliness) of the person to whom they are complaining. However, a knavish doctor or manager may have no incentive to respond, and complaint, being based on voice, favours the ‘selfconfident and articulate middle classes’ (2007: 98). He then contrasts this with a world where choice and competition are the norm; patients who do not like the service they are receiving move instead to another provider ‘who can provide them with better service’, and if money follows the patient, ‘then the hospital or practice that provides the best service will gain resources; that which provides the inferior service will lose’. - Ian Greener and Martin Powell, The Other Le Grand? Evaluating the ‘Other Invisible Hand’ in Welfare Services in England

I answer, that whenever taxation diverts capital from one mode of employment to another, it annihilates the profits of all who are thrown out of employ by the change, and diminishes those of the rest of the community; for industry may be presumed to have chosen the most profitable channel. I will go further and say, that a forcible diversion of the current of production annihilates many additional sources of profit to industry. Besides, it makes a vast difference to the public prosperity, whether the individual or the state be the consumer. A thriving and lucrative branch of industry promotes the creation and accumulation of new capital; whereas, under the pressure of taxation, it ceases to be lucrative; capital diminishes gradually instead of increasing; wealth and production decline in consequence, and prosperity vanishes, leaving behind the pressure of unremitting taxation. Ricardo has endeavored to introduce the unbending maxims of geometrical demonstration; in the science of political economy, there is no method less worthy of reliance. - J.B. Say, A Treatise on Political Economy

Taxes upon transfer, besides the mischief of pressing upon capital, are a clog to the circulation of property. But, has the public any interest in its free circulation? So long as the object is in existence, is it not as well placed in one hand as in another? Certainly not. The public has a perpetual interest in the utmost possible freedom of its circulation; because by that means it is most likely to get into the hands of those, that can make the most of it. Why does one man sell his land? But because he thinks he can lay out the value to more advantage in some channel of productive industry. And why does another buy it? But because he wishes to invest a capital, that is lying idle, or less productively vested; or because he thinks it capable of improvement. The transfer tends to augment the national income, because it tends to augment the income of the two contracting parties. If they be deterred by the expenses of the transfer, those expenses will have prevented this probable increase of the national income. - J.B. Say, A Treatise on Political Economy

So likewise of the public consumption; consumption for the mere purpose of consumption, systematic profusion, the creation of an office, for the sole purpose of giving a salary, the destruction of an article, for the mere pleasure of paying for it, are acts of extravagance either in a government or an individual, in a small state or a large one, a republic or a monarchy. Nay, there is more criminality in public, than in private extravagance and profusion; inasmuch as the individual squanders only what belongs to him; but the government has nothing of its own to squander, being, in fact, a mere trustee of the public treasure. - J.B. Say, A Treatise on Political Economy

Those who think that central planning will promote economic progress are naive. When business enterprises get more funds from governments and less from consumers, they will spend more time trying to satisfy politicians and less time satisfying customers. Predictably, this reallocation of resources will lead to economic regression rather than prosperity. - James Gwartney and Richard Stroup, What Everyone Should Know About Economics and Prosperity

Individuals differ, one from another, in important and meaningful respects. They differ in physical strength, in courage, in imagination, in artistic skills and appreciation, in basic intelligence, in preferences, in attitudes toward others, in personal life-styles, in ability to deal socially with others, in Weltanschauung, in power to control others, and in command over nonhuman resources. No one can deny the elementary validity of this statement, which is of course amply supported by empirical evidence. We live in a society of individuals, not a society of equals. We can make little or no progress in analyzing the former as if it were the latter. - James M. Buchanan, The Limits of Liberty

Wal-Mart can’t charge more; if it does, its customers will go elsewhere. The same is true of Target and Costco. In a sense, Wal-Mart is the elected representative of tens of millions of hard-bargaining shoppers, and, like any representative, it serves only at their pleasure. - James Surowiecki, The Customer is King

First of all, the economy consists of buyers and sellers. You think about why we spend in the first place. We spend in order to produce satisfaction for buyers. We don't spend in order to help sellers. It's fine if we do help sellers, but we're trying to produce satisfaction. If the spending we engage in doesn't produce any satisfaction, then it's hardly a measure of well-being. I'm not against the spending. But whatever amount of spending we do, we should get as much satisfaction out of it as we possibly can. - Joel Waldfogel, Why We Shouldn't Give Christmas Gifts

First, if properly administered, it makes citizens aware of the costs of public services, both in general and to them personally. The opaqueness consequent on the pooling of revenue would be lifted. Information is an essential element to being an active and autonomous citizen, and hypothecation is a way of ensuring that a key part of that information is available. Second, it restricts the power of government relative to that of its citizens. Governments cannot simply do what they like with the tax revenues; instead, they have to allocate those resources in a pre-specified way. The balance of power between citizens and their government is shifted in the direction of citizens. - Julian Le Grand, Motivation, Agency, and Public Policy

The difference is that the socialist model of education is not designed to serve his interests, while the private enterprise model, which must compete for customers and their money, has no choice but to serve its customers' interests. The free-market model has its shortcomings, too, but in most cases a bad product or defective service is driven out of the marketplace by competition. Under a socialist model, there is no competition to drive out bad products and rotten services, which is why a visitor from 1929 would recognize your public schools but would be amazed by the cell phones they give away for free at your local mall. - Kevin D. Williamson, The Politically Incorrect Guide to Socialism

In a highly competitive marketplace, consumers make decisions for themselves and - most important - are forced to spend their own resources in accordance with those decisions. Under a socialist system, consumers of government-provided goods and services use the power of politics to consume at a higher level than they would if they had to pay the entire cost themselves. - Kevin D. Williamson, The Politically Incorrect Guide to Socialism

This process of redistribution of wealth is not prompted by a concatenation of hazards. Those who participate in it are not playing a game of chance, but a game of skill. This process, like all real dynamic processes, reflects the transmission of knowledge from mind to mind. It is possible only because some people have knowledge that others have not yet acquired, because knowledge of change and its implications spread gradually and unevenly throughout society. - Ludwig Lachmann, The Market Economy and the Distribution of Wealth

These economic facts have certain social consequences. As the critics of the market economy nowadays prefer to take their stand on "social" grounds, it may be not inappropriate here to elucidate the true social results of the market process. We have already spoken of it as a leveling process. More aptly, we may now describe these results as an instance of what Pareto called "the circulation of elites." Wealth is unlikely to stay for long in the same hands. It passes from hand to hand as unforeseen change confers value, now on this, now on that specific resource, engendering capital gains and losses. The owners of wealth, we might say with Schumpeter, are like the guests at a hotel or the passengers in a train: They are always there but are never for long the same people. - Ludwig M. Lachmann, The Market Economy and the Distribution of Wealth

The capitalist society is a democracy in which every penny represents a ballot paper. It is a democracy with an imperative and immediately revocable mandate to its deputies. It is a consumers' democracy. By themselves the producers, as such, are quite unable to order the direction of production. This is as true of the entrepreneur as of the worker; both must bow ultimately to the consumers' wishes. And it could not well be otherwise. People produce, not for the sake of production, but for the goods that may be consumed. As producer in an economy based on the division of labour, a man is merely the agent of the community and as such has to obey. Only as a consumer can he command. - Ludwig von Mises, Economic Democracy

In the terminology of anticapitalism the words selfish and unselfish are used to classify people from the point of view of a doctrine that considers equality of wealth and income as the only natural and fair state of social conditions, that brands those who own or earn more than the average as exploiters, and that condemns entrepreneurial activities as detrimental to the common weal. To be in business, to depend directly on the approval or disapproval of one’s actions by the consumers, to woo the patronage of the buyers, and to earn profit if one succeeds in satisfying them better than one’s competitors do is, from the point of view of officialdom’s ideology, selfish and shameful. Only those on the government’s payroll are rated as unselfish and noble. - Ludwig von Mises, Human Action

If it is in the jurisdiction of the government to decide whether or not definite conditions of the economy justify its intervention, no sphere of operation is left to the market. Then it is no longer the consumers who ultimately determine what should be produced, in what quantity, of what quality, by whom, where, and how but it is the government. For as soon as the outcome brought about by the operation of the unhampered market differs from what the authorities consider "socially" desirable, the government interferes. That means the market is free as long as it does precisely what the government wants it to do…. Thus the doctrine and the practice. Of interventionism ultimately tend to abandon what originally distinguished them from outright socialism and to adopt entirely the principles of totalitarian all-round planning. - Ludwig von Mises, Human Action

The unsurpassed efficiency of capitalism never before manifested itself in a more beneficial way than in this age of heinous anticapitalism. While governments, political parties, and labor unions are sabotaging all business operations, the spirit of enterprise still succeeds in increasing the quantity and improving the quality of products and in rendering them more easily accessible to the consumers. In the countries that have not yet entirely abandoned the capitalistic system the common man enjoys today a standard of living for which the princes and nabobs of ages gone by would have envied him. A short time ago the demagogues blamed capitalism for the poverty of the masses. Today they rather blame capitalism for the “affluence” that it bestows upon the common man - Ludwig von Mises, Human Action

The consumers are not prepared to satisfy anybody’s pretensions, presumptions, and self-conceit. They want to be served in the cheapest way. - Ludwig von Mises, Human Action

For this is the salient point: private organizations, whether for-profit or non-profit, perform or lose their customers or their donors. When a private entity fails to deliver on its promise, or actually causes harm, it is held liable for the failure and pays the damages. When government fails, it gets a bigger budget and even more power. - Mary L. G. Theroux, Public and Private Responses to Katrina

Consumers calculate over the entire range of available public goods - some for which they have zero demand and others for which they have varying positive demand - whether the taxes they pay are worth the utility they enjoy from the public goods. If consumers determine that the taxes are not worth it, most do not exit from the system. Rather, they agitate and form coalitions. Because their wants are increasingly differentiated, they choose private or club-based rather than collective provision for some goods, then resent taxes to finance the provision of goods they are never likely to consume - Meghnad Desai, Providing Global Public Goods

I'm a millionaire, I'm a multi-millionaire. I'm filthy rich. You know why I'm a multi-millionaire? 'Cause multi-millions like what I do. That's pretty good, isn't it? - Michael Moore

General motors cannot get a dollar out of your pocket unless you voluntarily pay it over. The government can, and that's the fundamental difference. (30:00) - Milton Friedman, What is Greed?

The government should not help to save Chrysler, of course not. This is a private enterprise system. It's often described as a profit system but that's a misleading label. It's a profit and loss system. And the loss part is even more important than the profit because it's what gets rid of badly managed, poorly operated companies. When Chrysler loses money...it's got to do something. When Amtrak loses money it goes to congress and gets a bigger appropriation. [...] It's the stockholders of Exxon who ultimately are buying it. If they don't like what Exxon is doing with their money, they have a perfectly good alternative...they can sell the stock. And as the stock went down, if the stockholders didn't like it, they would pay somebody to change the policy which Exxon is following. We have a far greater degree of control over what Exxon does than we have over what a lot of our government corporations do. - Milton Friedman, What is Greed?

The economic miracle that has been the United States was not produced by socialized enterprises, by government-union-industry cartels or by centralized economic planning. It was produced by private enterprises in a profit-and-loss system. And losses were at least as important in weeding out failures, as profits in fostering successes. Let government succor failures, and we shall be headed for stagnation and decline. - Milton Friedman

I don't know whether Marx ever said waste is theft from the working class, but he should have. - Patricia Hewitt

Today it is demand that determines supply, and private enterprise is always on the alert to meet it. - Paul Leroy Beaulieu, Collectivism: A Study of Some of the Leading Social Questions of the Day

Economists who take up public finance have to face it at the outset. And instinctively they look for a particular kind of answer: the answer which treats "the public sector" as in some sense an extension of the "the private sector". The expenditure and revenue activities of Governments, like those of private enterprises, ought to be an expression of the preference of the sovereign consumer. Government services are to be assimilated to sales over the counter. Taxes must be prices with a difference. The "benefit principle", to draw on the traditional language of public finance, should be the economist's key. - R.C. Tress, Classics in the Theory of Public Finance: A Review

Most of the people who receive high incomes earned them in free markets by providing something of value to people free to buy or not to buy. - Richard B. McKenzie, Bound to Be Free

The poor can be better off by having the wealth unevenly distributed than by having a much lower quantity of wealth equally distributed. - Richard B. McKenzie, Bound to Be Free

Fifth, people's abilities to produce differ. Those with greater abilities tend to have higher incomes, by definition. Again, we should remember that trades in free markets tend to benefit both parties to the trades. People with lower abilities tend to benefit from others' greater abilities. Would the disadvantaged of the country be better or worse off if, for some reason, the gifted disappeared? On average, the disadvantaged would be worse off. - Richard B. McKenzie, Bound to Be Free

In the market an individual needs to only convince a few to back his idea financially; but in the socialist state, it will be required to gain the approval of the entire planning agency to direct a portion of "the society's" resources in a new manner. This same reluctance to change and innovate would result in the demise of the market principle that it is demand that determines the allocation of resources. - Richard M. Ebeling, Economic Calculation Under Socialism

Under the market system individuals possess free rein within the constraints of their income to choose and demand whichever products they desire. Since, it was the provision of desired commodities that was the source of the seller's own income, self-interest was harnessed to the satisfaction of consumer demand. - Richard M. Ebeling, Economic Calculation Under Socialism

Second, where residual claimancy and control rights are closely aligned, market competition provides a decentralized and relatively incorruptible disciplining mechanism that punishes the inept and rewards high performers. Markets are a way of increasing what biologists call selective pressure: they have the effect of reducing the variance of performance and hence (under suitable conditions) increasing average performance. - Samuel Bowles, Microeconomics: Behavior, Institutions, and Evolution

Led by groundbreaking philanthropists like Bill and Melinda Gates, this new class of givers is taking its cue from the efficiency of the markets, plowing money into the brightest ideas and withdrawing it from the weakest initiatives. - Simon Hobbs, Executive Vision - Philanthropy

There is a case for saying that there are certain kinds of spending which are more efficient when carried out by government... because of the economies of scale that government posses. However, this is almost always outweighed (and I would argue in fact always outweighed) by the huge inefficiency costs that come with the less productive public management and the fact that public provision does not face the profit and loss incentives which lead private providers to constantly look to improve the quality of their service and cut out waste and unnecessary costs. - Stephen Davies, How Government Crowds Out Private Investment

Politics and the markets are both ways of getting people to respond to other people’s desires. Consumers deciding which goods to spend their money on have often been analogized to voters deciding which candidates to elect to public office. However the two processes are profoundly different. Not only do individuals invest very different amounts of time and thought in making economic vs. political decisions, those are inherently different in themselves. Voters decide whether to vote for one candidate or another but they decide how much of what kinds of food, clothing, shelter, etc. to purchase. In short, political decisions tend to be categorical, while economic decisions tend to be incremental. - Thomas Sowell, Applied Economics

The producer whose product turns out to have the combination of features that are closest to what the consumers really want may be no wiser than his competitors. Yet he can grow rich while his competitors who guessed wrong go bankrupt. But the larger result is that society as a whole gets more benefit from its limited resources by having them directed toward where those resources produce the kind of output that millions of people want, instead of producing things that they don't want. - Thomas Sowell, Basic Economics 4th Ed: A Common Sense Guide to the Economy

The fundamental difference between decision-makers in the market and decision-makers in government is that the former are subject to continuous and consequential feedback which can force them to adjust to what others prefer and are willing to pay for, while those who make decisions in the political arena face no such inescapable feedback to force them to adjust to the reality of other people’s desires and preferences. - Thomas Sowell, Intellectuals and Society

Taking an alternative point of view, however, we see a whole set of public goods that people are forced to consume, whether they like them or not, and this gives rise to the problem of the "forced rider," When the consumer can choose to consume the good or not, no problem arises, since no consumer will choose voluntarily to consume an item which reduces individual well-being. - Todd Sandler, William Loehr, Jon T. Cauley, The political economy of public goods and international cooperation

The title of merit is an action which is useful to another; and whenever there is not question of moral merit (with God), but of physical merit (with man), its value is determined according to the usefulness of the action performed for the benefit of our fellow men or society - always supposing, of course, that the action is free and imputable to the subject. - Victor Cathrein, Socialism: Its Theoretical Basis and Practical Application

If the necessary production would be impossible in the state of socialism, progress would be much more impossible. That private industry based on private property is conducive to progress is a fact which in our days is palpable. What wondrous progress has been made within the last century! We need only recall the invention of steamboats, railroads, telegraphs, telephones, phonographs, and all the recent results achieved in the field of electro-dynamics. Almost every day brings unexpected improvements; for every one is bound by his own interest to make himself useful to his neighbor and, if possible, to outdo his competitors. Therefore every one is bent on inventing more comfortable, useful, cheaper appliances. He who offers the best and most useful commodities at the lowest price finally takes the lead in the race of competition. - Victor Cathrein, Socialism: Its Theoretical Basis and Practical Application

You might say, “That’s okay, Williams, if you have enough dollar votes. But what about poor people?” Poor people are far better served in the market arena than the political arena. Check this out. If you visit a poor neighborhood, you will see some nice clothing, some nice cars, some nice food, and maybe even some nice homes—no nice schools. Why not at least some nice schools? The explanation is simple. Clothing, cars, food, and houses are allocated through the market mechanism. Schools are allocated through the political mechanism. - Walter E. Williams, Where Does Your Vote Really Count?

To satisfy our wants to the utmost with the least effort - to procure the greatest amount of what is desirable at the expense of the least that is undesirable - in other words, to maximize pleasure, is the problem of economics. - William Stanley Jevons, The Theory of Political Economy

A further potential advantage of this initiative is that it can generate useful information. Policymakers will learn what taxpayers support most enthusiastically. After all, the way people spend money is a meaningful indication of what they value – in ways, more meaningful than how they answer opinion polls. Taxpayers obviously will gravitate to different programs. If our political process is functioning properly, the budget should track, at least in a rough way, the distribution of preferences among taxpayers. If it does not, then that is information our legislators should have. It also should be disclosed, so the media and voters will have this information as well. - Yair Listokin and David Schizer, I Like to Pay Taxes: Lessons of Philanthropy for Tax and Spending Policy