Friday, June 9, 2017

Demystifying Greg Stevens

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


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


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

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

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

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


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

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

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

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

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

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

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

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

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

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

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