Scott Sumner VS Scott Alexander

I think this is both entirely true and entirely missing the point. The intuition behind meritocracy is this: if your life depends on a difficult surgery, would you prefer the hospital hire a surgeon who aced medical school, or a surgeon who had to complete remedial training to barely scrape by with a C-? If you prefer the former, you’re a meritocrat with respect to surgeons. Generalize a little, and you have the argument for being a meritocrat everywhere else. 

The Federal Reserve making good versus bad decisions can be the difference between an economic boom or a recession, and ten million workers getting raises or getting laid off. When you’ve got that much riding on a decision, you want the best decision-maker possible – that is, you want to choose the head of the Federal Reserve based on merit. - Scott Alexander, Targeting Meritocracy

But 12,000 humans is much better than 12. Two days after Lehman failed the FOMC met and refused to cut rates from 2%, seeing a roughly equal risk of recession and inflation. The markets were already seeing the oncoming disaster, and indeed the 5 year TIPS spread was only 1.23% on the day of the meeting. The markets aren't always right, but when events are moving very rapidly they will tend to outperform a committee of 12. In fairness, this "recognition lag" was not the biggest problem; two far bigger problems included a failure to "do whatever it takes" to "target the forecast." That is, the Fed should move aggressively enough so that their own internal forecast remained at the policy goal. And the second failure was not engaging in "level targeting", which would have helped stabilize asset prices in late 2008, and made the crisis less severe.  

Bernanke once said there is nothing magical about 2% inflation. Nor is there anything magical about 12 members on the FOMC. The wisdom of crowds literature suggests you want a large number of voters, with monetary incentives to "vote" wisely. So there are actually three approaches. The Friedman/Taylor "robot" approach. The Bernanke "wise bureaucrats" approach. And the market monetarist "wisdom of the crowds" approach. - Scott Sumner, Robots, committees, or markets?

If my life depended on a surgery, I'd prefer it to be performed by the best surgeon.  Then again, I'm pretty sure that more heads are better than less heads.  So what about the 12 best surgeons?  Would the 12,000 best surgeons be even better?  Or would it be a case of too many cooks spoiling the broth?

No two surgeons would perform the same exact surgery in the same exact way.  This is because no two surgeons are equally informed or experienced.  If we expanded the pool of surgeons then we'd end up with a bell curve.  The outliers would perform very different surgeries.  This shouldn't be too difficult to appreciate if you've ever watched a hospital show where two surgeons strongly disagreed on how to proceed.

Let's imagine that Frank, the best surgeon, is about to operate on me.  Where should he make the incision?  He hits the "pause" button and time stops for me.  Then he waits for 12,000 surgeons to provide their input on where the incision should be made.  They all have access to the streaming video.  Frank sees all their X's superimposed on my body.  Should he make an incision where the X's are the densest?  No.  The 12,000 surgeons aren't equally confident in their information/answer.  Therefore, each surgeon must be given the opportunity to put their money where their answer is.  The more money a surgeon spends on their answer, the more weight it will have.  This means that the more confident surgeons will have more influence.

What comes to mind is a ouija board.  Eh, perhaps it's not the best example to use in this context.  Anyways, instead of a planchette there's a scalpel.  The scalpel is guided by the spending decisions of 12,000 surgeons.  In other words, it's guided by the Invisible Hand.  The maximum possible amount of information and experience, weighted by confidence, would go into my surgery.  Or would it?

Why not let all the surgeons in the world participate?  Why not include all the nurses as well?  If the premise is that people who are more confident in their information are going to be willing to spend more money on their answers, then there's no reason to prevent anybody from participating in my surgery.

The best surgeon is certainly better than the second best surgeon.  But I'm pretty sure that the best surgeon is far inferior to the market.

Is the best decision-maker always the market?  Yes!  But in some cases the technology isn't advanced enough to overcome the logistical issues.

What if the Titanic had been a market?

Reply to thread: Semi-Socialist Corporations

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The Titanic was steered in the really wrong direction.  What percentage of the people aboard the Titanic were responsible for steering it?  I'm pretty sure that it was a really small percentage.  Certainly small enough that we can easily think of the Titanic as a dictatorship.  The problem with dictatorships, benevolent or otherwise, is that they completely ignore Linus's Law... "given enough eyeballs, all bugs are shallow".

But what if the Titanic had been a democracy?  Then everybody would have been able to vote on the ship's direction.  Everybody would have had an equal say in deciding whether or not to avoid the iceberg.

There's a problem with giving everybody an equal say though.  Imagine if you were on the Titanic and you were extremely certain that the Titanic would sink if it hit an iceberg.  Despite being extremely certain... your influence on the ship's direction would have been exactly the same as the influence of somebody who had absolutely no opinion on the matter.  Even if you were an expert on the matter of ships vs icebergs... even if you had written countless books on the topic... your say on the ship's direction would have been equal to the say of somebody who was entirely ignorant on the subject.  Even if you were willing to bet your life that you were right... your influence on the ship's direction would have been equal to the influence of somebody who wouldn't even have been willing to bet a penny that they were right.  This is the problem with the idea of "one person, one vote".

So if not dictatorships... or democracies... then... what?  Then markets.  Markets give people the opportunity to put their money where their information is.

Here's how my favorite living economist, Alex Tabarrok, put it...

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

If the Titanic had been a market, then people would have been able to use their bets/money to steer the ship.  This wouldn't have guaranteed that the Titanic would have avoided the iceberg... but it would have guaranteed that the ship's direction reflected everybody's information weighted according to their confidence in it.  Essentially... a much better informed decision would have been made.  This would have greatly decreased the chance that the Titanic would have hit the iceberg.

The "minor" detail is that I'm not exactly sure how people on a ship or in a company could use their money to steer.  Clearly employees can buy their company's stock if they are confident in their company's direction... and they can sell their stock if they aren't confident in their company's direction.  But I'm not quite sure how they could use their money to help steer their company in the most valuable direction.

Let's say that we're employees of this forum.  Somebody proposes that this forum display advertisements.  Displaying advertisements would take this "company" in a different direction.  How would we as employees use our cash to communicate our confidence-weighted information?  How could individuals be rewarded for gambling on the right direction and punished for gambling on the wrong direction?

If you prefer theorizing using a real world example...  "Traitorous eight".

Here's a relevant quote from Peter Thiel...

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

Economics, Evolution and Epiphytes

My recent post on my other blog contains quite a bit of explicit economic content... Herclivation (a theory that considers the possibility of facilitating the adaptive radiation of epiphytic orchids via translocation and/or hybridization).  And by "explicit" I mean that I debunk John Nash's theory that we all prefer blondes equally.

Is it possible for somebody to be fascinated by economics but bored by evolution or vice versa?  Do economists have a better grasp of evolution than biologists have of economics?  That would be a fun study.  Consider these two examples...

It is sufficient if all firms are slightly different so that in the new environmental situation those who have their fixed internal conditions closer to the new, but unknown, optimum position now have a greater probability of survival and growth.  They will grow relative to other firms and become the prevailing type, since survival conditions may push the observed characteristics of the set of survivors toward the unknowable optimum by either (1) repeated trials or (2) survival of more of those who happened to be near the optimum - determined ex post.  If these new conditions last "very long," the dominant firms will be different ones from those which prevailed or would have prevailed under other conditions. - Armen Alchian, Uncertainty, Evolution, and Economic Theory

Economists employ tools that can also be used to analyze the growth and body form of organisms in terms of evolution and ecology.  According to this approach, plants resemble factories because they also acquire raw materials, in this case CO2, water, light and essential ions, to fabricate value-added 'products', specifically progeny.  Like any enterprise using the same materials that other factories require to manufacture the same products, co-occurring plants compete.  Just how severely they interfere with one another depends in large part on the distinctness of the strategies used to obtain mutually required resources. - David Benzing,  Bromeliaceae: Profile of an Adaptive Radiation

These examples are kind of like different varieties of economic imperialism.  For an example of economic imperialism check out this blog entry...Can Economics Explain Human Sacrifice?

Is there a biological equivalent of economic imperialism?  Or maybe there aren't any biologists that have used the tools of biology to analyze topics in different fields?  I guess I wouldn't be surprised if biology and related fields weren't lucky enough to have their own version of Gary Becker.   Well...what about this...biological imperialism?  Does that count as an example of the biological equivalent of economic imperialism?

The stupid Wikipedia entry for economic imperialism doesn't even mention "opportunity cost"...

A corollary of maximization is that on the margin, there are always tradeoffs.  The notion that there is no free lunch is central to economics.  The simple, but crucial concept of opportunity cost lies behind much of the ability of economics to extend into other areas.  Sometimes the tradeoffs are subtle.  Prices and costs are not necessarily parameters that are observed in market data, but they affect behavior nonetheless.  Other social sciences do not place the same weight on explicit recognition of the tension between costs and benefits, which reduces the ability of these fields to grapple systematically with social phenomena.  Thinking about tradeoffs gives rise to related thoughts on substitutability.  Economists place emphasis on choice.  Things are not technologically determined.  This is true for consumers and producers alike.  There is no fixed number of jobs.  Firms can trade off between employing labor and capital and workers can choose between labor and leisure. - Edward Lazear, Economic Imperialism  

As I've mentioned before elsewhere, the opportunity cost of the minute size of the wind-disseminated orchid seeds is that they lack the nutrients that they need to germinate on their own.  They depend on certain types of fungus to supply them with adequate nutrients.  On one hand, there's no guarantee that the fungus is going to be present wherever the orchid seeds land.  But on the other hand, the seeds are so light that they can really "extend into other areas".  Evidently sacrificing the weight of nutrients for greater dispersal distance is not a bad trade-off for orchids...given that they are the most successful plant family.

I think, perhaps, generally speaking...the problem solvers (scientists, economists, etc.) who are able to borrow and effectively use tools from other fields will make a lot more progress than problem solvers who only use their own tools.

Crowdsourcing Linguistic Improvements

Calling all wordsmiths!  There's a new subreddit...Linvoid...dedicated to solving people's word problems.  

Here's how it works...

1. A "client" posts their word problem  
2. The crowd suggests better/new words
3. The crowd upvotes the best solutions
4. The winner gets a million dollars

I'm just kidding about the last one.  Too bad huh?

The conceptual foundation is that there's always room for improvement.  This is true whether we're talking about biology...or economics...or politics...or linguistics.

Let's take biology for example...specifically...orchids.  The orchid family is definitely my favorite plant family.  It's fascinating for several reasons...here are a few of them...

1. Orchids are the largest plant family.  There are around 30,000 different species.  
2. Orchids have more species of epiphytes than any other family.  In other words...most orchids grow on trees. 
3. A single seed pod can contain a million seeds.  That's a lot of seeds!  The seeds, which are like dust, are disseminated by the wind.  
4. In order to germinate...orchid seeds have developed a symbiotic relationship with microscopic fungus. 

Each seed is a unique combination of traits.  A unique combination of traits is a unique strategy.  So one orchid seed pod can contain a million different strategies.  This greatly increases the orchid's chances of success.

Now on to economics...

When a great company, or even a great merchant, has twenty or thirty ships at sea, they may, as it were, insure one another. The premium saved upon them all, may more than compensate such losses as they are likely to meet with in the common course of chances. - Adam Smith, Wealth of Nations

Now on to space exploration...

Luckily, tens of thousands of pioneers wouldn't have to be housed all in one starship. Spreading people out among multiple ships also spreads out the risk. Modular ships could dock together for trade and social gatherings, but travel separately so that disaster for one wouldn't spell disaster for all, says Smith. 

When 10,000 people are housed in one starship, there's a potential for a giant catastrophe to wipe out almost everyone onboard. But when 10,000 people are spread out over five ships of 2000 apiece, the damage is limited. - Sarah Fecht, How Many People Does It Take to Colonize Another Star System?

Now on to political parties (religion)...

The interested and active zeal of religious teachers can be dangerous and troublesome only where there is either but one sect tolerated in the society, or where the whole of a large society is divided into two or three great sects; the teachers of each acting by concert, and under a regular discipline and subordination. But that zeal must be altogether innocent where the society is divided into two or three hundred, or perhaps into as many thousand small sects, of which no one could be considerable enough to disturb the public tranquility. - Adam Smith, Wealth of Nations

Now back to economics...

It is sufficient if all firms are slightly different so that in the new environmental situation those who have their fixed internal conditions closer to the new, but unknown, optimum position now have a greater probability of survival and growth.  They will grow relative to other firms and become the prevailing type, since survival conditions may push the observed characteristics of the set of survivors toward the unknowable optimum by either (1) repeated trials or (2) survival of more of those who happened to be near the optimum - determined ex post.  If these new conditions last "very long," the dominant firms will be different ones from those which prevailed or would have prevailed under other conditions. - Armen Alchian, Uncertainty, Evolution, and Economic Theory

Now back to orchids...

One would think that man could find enough variation in the orchid family, as it occurs in nature, to more than satiate his taste for variety.  Yet man's appetite for variety is never appeased.  He has produced over two times as many hybrids, in the past 100 years that he has been engaged in orchid breeding, as nature has created species in her eons of evolutionary effort. - Calaway H. Dodson, Robert J. Gillespie, The Botany of Orchids

Now back to economics...

More heads are occupied in inventing the most proper machinery for executing the work of each, and it is, therefore, more likely to be invented. - Adam Smith, Wealth of Nations

Do we need more varieties of orchids?  Do we need more varieties of words?

Should there be an orchid that can grow on trees in New York?  Should there be a word for organisms that can tolerate a wide range of temperatures?  We already have the latter..."eurythermal"...but not the former.

Is "eurythermal" better than "temperature tolerant"?   Is one word always better than two?  Is efficiency as important for linguistics as it is for epiphytes and economics?  Should we want to the most bang for our buck...the most magic for our moment...the most epiphany for our epiphyte...and the most wow for our word?

The more unique a term is...the more relevant the search results.  A perfect example is fhqwhgads.  On one hand...you really don't have to use quotes when you Google for fhqwhgads.  But on the other hand, good luck trying to remember how to spell it.  

It's easy enough to remember how to spell "hedge"...but a Google search will provide two very different results.  Adding the word "bets" will help eliminate shrubbery related results.

You can also search for the expression..."don't put all your eggs in one basket".  But simply searching for "eggs basket" will serve you a surplus of superfluous shrubbery.

Searching for "diversify" is probably the most efficient approach.  But is it possible to create a better word?  Is it possible to create a better orchid?  Of course!  There's always room for improvement.

Look around...do you see orchids growing on any trees?  Language has just as much room for improvement as the trees around you.  Now there's a place dedicated to finding and making linguistic improvements... Linvoid.  If we want to have a bounty of better words tomorrow...we'll have to throw a lot of words at today.  So start disseminating new words like an orchid disseminates seeds.

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Discussion on Reddit: Can orchids provide a new model for language? Space exploration says yes!

Can Economics Explain Human Sacrifice?

In my economic critique of peer progressivism...I started off by making the point that it's a huge mistake to underestimate the scope of economics.  Peter Leeson, in his recent paper on human sacrifice...Law, Economics, and Superstition: Human Sacrifice...concludes with the same point...

It's unnecessary and, I would argue, unhelpful, to approach the institutionalized purchase and ritual slaughter of innocent persons by abandoning rational choice theory. Not only does such abandonment leave one of history's  most well-known and intriguing institutions unexplained. It suggests that puzzling human behaviors and practices are beyond the power of economics to illuminate.

This outstanding conclusion, just on its own, makes his paper extremely praiseworthy.  The fact that relatively  few economists engage in economic imperialism helps explain why Leeson's theory of human sacrifice is so far off base.      

In his paper he argues that the Konds engaged in human sacrifice in order to signal to other tribes that they had spent their surplus wealth on purchasing humans to sacrifice.  The point of this signal was to decrease other tribes' incentive to conduct raids on the tribe that had given up its wealth.  Therefore, the tribe that conducted the sacrifice did so in order to protect its property.  

The correct economic explanation was shared in a comment on Mark Movsesian's's blog entry...If Only the Aztecs Had Known...

Mark, there IS an “economic” aspect to human sacrifice, in the sense that all appeasement religions are transactional. The society says to the god, “We’ll give you this, and in return you’ll give us that, or [more likely] you won’t do that.” It’s the logic of the protection rackett. - ChrisZ

This economic explanation is so "self-evident" that it gives incredible weight to Leeson's conclusion.  Economists should not be puzzled by ritualistic sacrifice.  That they are indicates that there is a huge gap in their understanding of economics.  In the beginning of his paper Leeson highlights this problem...

Even the economists who have mentioned human sacrifice take this view. One asserts that human sacrifice is "properly considered as noneconomic" and thus beyond the explanatory power of rational choice theory (Hunter, Teaf, and Hirschman 1957: 59). A more recent reference adduces human sacrifice in support of behavioralist doubts about the canonical rendition of "economic man" (Ainslie 2005: 816).

Here's more evidence of the problem...

Together, tradition- and command-run societies constitute the vast preponderance of all known, or inferred, social entities, but as I have tried to show, economics supplies no operational insight into their workings. - Robert L. Heilbroner, Putting economics in its place - Defining the Boundaries of Social Inquiry

In this blog entry I'll offer evidence that proves that economics has supplied, and continues to supply, operational insight into human behavior...specifically...ritualistic sacrifice.

In a nutshell...economics is the study of how humans overcome scarcity.  The goal is always abundance...of love, happiness, wealth, meaning, knowledge, prestige and so on.

A few months ago, over on the NationStates forum, I posted a thread on Prayer and Sacrifice.  In my post I shared this passage by Derrida...

Sacrifice will always be distinguished from the pure gift (if there is any). The sacrifice proposes an offering but only in the form of a destruction against which it exchanges, hopes for, or counts on a benefit, namely, a surplus-value or at least an amortization, a protection, and a security. - Jacques Derrida

...and this dialogue from John Holbo's book Reason and Persuasion...

S: You could have been much more concise, Euthyphro, if you wanted to, by answering the main part of my question. You're not exactly dying to teach me - that much is clear. You were just on the point of doing so, but you turned aside. If you had given the answer, I would already be well versed in holiness, thanks to you. But as it is, the lover of inquiry must chase after his beloved, wherever he may lead him. Once more then: what do you say that the holy is, or holiness? Don't you say it's a kind of science of sacrifice and prayer?
E: I do.
S: To sacrifice is to give a gift to the gods; to pray is to ask them for something?
E: Definitely, Socrates.
S: Then holiness must be a science of begging from the gods and giving to them, on this account.
E: You have grasped my meaning perfectly, Socrates.
S: That is because I want so badly to take in your wisdom that I concentrate my whole intellect upon it, lest a word of yours fall to the ground. But tell me, what is this service to the gods? You say it is to beg from them and give to them?
E: I do
S: And to ask correctly would be to ask them to give us the things we need?
E: What else?
S: And to give correctly is to give them in return what they need from us? For it would hardly represent skill in giving to offer a gift that is not needed in the least.
E: True, Socrates
S: Holiness will then be a sort of art for bartering between gods and men?
E: Bartering, yes - if you prefer to call it that.

...and the story from 1 Kings 18:  God caused a drought because people were worshiping Baal...Elijah challenged the priests of Baal to a competition...the people loved the idea...Baal's priests had technical difficulties...Elijah talked mad smack...

And it came to pass at noon, that Elijah mocked them, and said, Cry aloud: for he is a god; either he is talking, or he is pursuing, or he is in a journey, or peradventure he sleepeth, and must be awaked.

When Elijah offered his sacrifice and prayer...God's response left no room for doubt.

I thought I had shared enough evidence to prove that sacrifice is simply exchange between believers and their deities.  But evidently my evidence was not conclusive because here was the first reply...

I disagree that people sacrifice in a sort of psychological contract, quid pro quo.

Walter Burkert says we have a deep impulse (he says it is evolutionary) to sacrifice in order to allevaite anxiety, in particular, anxiety about the unknown. 

All over the world, primitive religions practice finger sacrifice (Stephen King had a creepy early book about this). It is almost universal. What could we hope to gain from chopping off a finger? Yet it apparently satisfies a deep inner need; perhaps it could even be related to cutting.

http://books.google.com/books/about/Cre ... jRg_3p1s4C

Also see Sir James Frazier.

What could somebody hope to gain from chopping off a finger?  If you want to know what somebody would hope to gain from a sacrifice...just listen to their prayers...

"Old-women's Grandson," ran the words of a Crow Indian's prayer to the Morning Star, "I give you this joint [of my finger], give me something good in exchange...I am poor, give me a good horse. I want to strike one of the enemy and I want to marry a good-natured woman. I want a tent of my own to live." "During the period of my visits to the Crow (1907-1916)," wrote Professor Lowie, to whom we owe the recording of this pitiful prayer, "I saw few old men with left hands intact." - Joseph Campbell, Primitive Mythology

What could the Kond hope to gain from sacrifice?  Just listen to their prayers...

The priests receive the heads of all the slaughtered animals. The remaining flesh, eggs, and everything else that has been brought are put together into a big pot and cooked before the hut. All partake of this cooked meat. Then the priest speaks to the Penu: "Look here, Mother, we have given you such a sumptuous, luxurious meal and celebrated a solemn observance; now please, graciously bless us all and bestow on us good and copious crops, prosperity and health. If you condescend to grant us our humble request, we assure you that we will prepare a grand feast next year again, otherwise we shall discontinue it for two or three years" - Frederick Volkomor Paul, The religion of the Kuvi-Konds, their customs and folk-lore

It's simple bartering between believers and their gods...which is what Socrates teased Euthyphro about.  Based on this example...we can see that ChrisZ's "protection racket" comparison doesn't quite hold up...given that the priest threatened to boycott the goddess if the terms of trade were not upheld.

Here's a prayer that I find especially endearing...

'Let our herds be so numerous that they cannot be housed; let children so abound that the care of them shall overcome their parents - as shall be seen by their burned hands; let our heads ever strike against brass pots innumerable hanging from our roofs; let the rats form their nests of shreds of scarlet cloth and silk; let all the kites in the country be seen in the trees of our village, from beasts being killed there every day.  We are ignorant of what it is good to ask for.  You know what is good for us.  Give it to us!' - Edward Burnett Tylor, Primitive culture

Does it somehow become "noneconomic" if humans are sacrificed instead of cattle?

Human sacrifice, after all, is only one alternative on a continuous line of substitutable sacrificial articles running from at one end betel nuts and palm wine, through eggs, chickens, goats, and pigs to water buffalo, to ultimately humans. The best way to demonstrate one's potency is to sacrifice the most valuable object or objects one can. If a state or leader is very potent, then presumably it or he can afford to sacrifice human heads when important projects are undertaken, such as opening fields or building temples. Of course, by doing so the state places itself in competition with local sovereignties. - R. H. Barnes, Construction Sacrifice, Kidnapping and Head-Hunting Rumors on Flores and Elsewhere in Indonesia

The economic term for this is "demonstrated preference".  What you are willing to sacrifice reveals how much you truly value something.  From Bryan Caplan's post...Rand on Totalitarian Motives...

"I don't know, however, whether I'd include blood in my methods."
"Why not?  Anyone can sacrifice his own life for an idea.  How many know the devotion that makes you capable of sacrificing other lives?"
She looked at him.  She said slowly, simply: "I've never thought of that.  Perhaps you're right."

In another post of his....The Banality of Leninism...he shares this passage from Crime and Punishment...

I maintain in my article that all...well, legislators and leaders of men, such as Lycurgus, Solon, Mahomet, Napoleon, and so on, were all without exception criminals, from the very fact that, making a new law, they transgressed the ancient one, handed down from their ancestors and held sacred by the people, and they did not stop short at bloodshed either, if that bloodshed -- often of innocent persons fighting bravely in defense of ancient law -- were of use to their cause. It's remarkable, in fact, that the majority, indeed, of these benefactors and leaders of humanity were guilty of terrible carnage. In short, I maintain that all great men or even men a little out of the common, that is to say capable of giving some new word, must from their very nature be criminals--more or less, of course.

...which complements this passage by Nietzsche...

But have you ever asked yourselves sufficiently how much the erection of every ideal on earth has cost? How much reality has had to be misunderstood and slandered, how many lies have had to be sanctified, how many consciences disturbed, how much "God" sacrificed every time? If a temple is to be erected a temple must be destroyed: that is the law - let anyone who can show me a case in which it is not fulfilled! 

Markets work because we have the freedom to give our offerings/sacrifice/money to any new temple that provides us with more blessings/benefit than older temples.  Because we all only have finite resources...the offerings we give to our new temples cannot also be given to our older temples.  So not only do we have the freedom to choose which new temples we help erect...each and every one of gets to choose exactly which temples we help destroy.  Given that we all want to maximize our blessings/benefit...we will choose to sacrifice the least beneficial temples.  This is how we make progress.  We give up something less valuable in exchange for something more valuable.  This is why free-trade leads to abundance.

Demonstrated preference, which is key to free-trade, is commonly expressed in the challenge to "put your money where your mouth is"...

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

Genuine knowledge is extremely important because economies are based on the garbage in, garbage out concept...

These extraordinarily complex micro-relationships are what we are really referring to when we speak of “the economy.” It is definitely not a single, simple process for producing a uniform, aggregate glop. Moreover, when we speak of “economic action,” we are referring to the choices that millions of diverse participants make in selecting one course of action and setting aside a possible alternative. Without choice, constrained by scarcity, no true economic action takes place. Thus, vulgar Keynesianism, which purports to be an economic model or at least a coherent framework of economic analysis, actually excludes the very possibility of genuine economic action, substituting for it a simple, mechanical conception, the intellectual equivalent of a baby toy. - Robert Higgs, Recession and Recovery 

Without each and every one of our valuations of the opportunity costs...without all our decentralized knowledge...the output will be bullshit.

Let's zoom out from the actual economics and consider again the scope of economics...

The concept of "exchange" continues to be a popular way of making sense of certain religious practices.  The recently edited Guide to the Study of Religion (2000) includes a chapter on "exchange."  Gregory Alles, the author of this chapter, characterizes sacrifice as one expression of exchange: "Exchange did provide one of the oldest theoretical models for understanding the widespread ritual of sacrifice: the notion that sacrifices are gifts given to the gods or ancestors in the hope of receiving a gift in return.  This perspective is often summed up in three Latin words: do et des, "I give [to you], so that you will give [to me].'" Exchange in religious contexts involves the transfer of not only material goods but also intangible goods, such as offspring, honor, deferred rewards in the afterlife, and so forth.  Exchange also reflects and constructs social relationships.  Religious exchange, therefore, includes but is not limited to an economic transfer of material goods. - Kathryn McClymond, Beyond Sacred Violence: A Comparative Study of Sacrifice

"Exchange" is the oldest theoretical model for understanding sacrifice.

Practically everywhere it is understood that communication with the divine should be through exchange, through mutual giving, which is reflected in the circulation of gifts within the community or hierarchy of Creation of the Sacred. - Walter Burkert, Creation of the Sacred: Tracks of Biology in Early Religions

"Mantiklos has dedicated me to the far-shooting god with the silver bow, from the tenth of his profit; you, Phoibos, give pleasing return." This plainly states that the relation between a god and his pious worshiper is an exchange of gifts. - Walter Burkert, Creation of the Sacred: Tracks of Biology in Early Religions

"All things are exchange (antamoibe) for fire, and fire for all things, as goods for gold and gold for goods," Heraclitus wrote explicitly referring to commerce as the paradigm of the cosmic order. - Walter Burkert, Creation of the Sacred: Tracks of Biology in Early Religions

The invention of the free market, of money, and of putting a price on the merchandise brings changes to the system. Whereas giving creates a bond between the persons who give and those who receive, money exchange is impersonal. Still, "exchange" remains the basic process, goods for money, or money for goods, on the basis of choice, of partnership, and, ideally, of bilateral profit. Even if state-controlled contributions are paid by taxes, the expectation remains that the citizen will get a return for what he is giving, be it privileges, prestige, or just personal safety. Even the prestigious gift has remained, sometimes called "sponsoring" in a more modern vein; it is a form of ceremonial waste not without the expectation of the "pleasant returns." - Walter Burkert, Creation of the Sacred: Tracks of Biology in Early Religions

What is not in doubt is that the conclusions Mauss draws in the ‘Essai sur le don’, and the kind of liberal society he advocates in its conclusion, are a world away from Bataille’s formulation of a general theory of the economy beyond the sphere of utility. In the few pages he devotes to sacrifice in this work, Mauss writes: ‘The relationship that exists between these contracts and exchanges among  humans and those between men and their gods throw light on a whole aspect of the theory of sacrifice’. As an explanatory principle, this is remarkably similar to Tylor’s analogy of ‘man’s dealings with man’, and comes to much the same conclusions. ‘The purpose of destruction by sacrifice’, Mauss goes on to say, ‘is precisely that it is an act of giving that is necessarily reciprocated’. - Simon Elmer, The Enigma of Sacrifice

The things which the worshipper really gives his gods are not the foods which he places upon the altars, nor the blood which he lets flow from his veins: it is his thought.  Nevertheless, it is true that there is an exchange of services, which are mutually demanded, between the divinity and its worshippers.  The rule do ut des, by which the principle of sacrifice has sometimes been defined, is not a late invention of utilitarian theorists: it only expresses in an explicit way the very mechanism of the sacrificial system and, more generally, of the whole positive cult.  So the circle pointed out by Smith is very real; but it contains nothing humiliating for the reason.  It comes from the fact that the sacred beings, though superior to men, can live only in the human consciousness. - Emile Durkheim, The Elementary Forms of the Religious Life

The mere fact of sacrifices to deities, from the lowest to the highest levels of culture, consisting to the extent of nine-tenths or more of gifts of food and sacred banquets, tells forcibly against the originality of the abnegation-theory.  If the primary motive had been to give up valuable property, we should find the sacrifice of weapons, garments, ornaments, as prevalent in the lower culture as in fact it is unusual.  Looking at the subject in a general view, to suppose men to have started by devoting to their deities what they considered practically useless to them, in order that they themselves might suffer a loss which none is to gain, is to undervalue the practical sense of savages, who are indeed apt to keep up old rights after their meaning has fallen away, but seldom introduce new ones without a rational motive.  In studying the religion of the lower races, men are found dealing with their gods in as practical and straightforward a way as with their neighbours, and where plain original purpose is found, it may well be accepted as sufficient explanation. - Edward Burnett Tylor, Primitive Culture

The benefits of religion for the majority have been primarily of the orders of kama, artha, and dharma. The cult has served as a magical device to assure an abundance of food and youngsters, power over enemies, and the linkage of the individual to the order of his society. It has served, that is to say, as a means to engage him in the desi, the local, ethnic context, and has supplied, in compensation, assurance of a continuance of the goods of kama, artha, and dharma beyond the grave. One's little offerings of finger-joints, pigs, sons and daughters, or even of oneself, seem to have meaning in a sort of mystical barter system; and one's peccadillos, missed by the police, can be counted on to eat from within, like rats, doing the work of the law. - Joseph Campbell, Primitive Mythology

Instances of this practice are reported to have occurred among the ancient Greeks and Phenicians.  In a grievous famine, after other great sacrifices, of oxen and of men, had proved unavailing, the Swedes offered up their own king Domaldi.  Chinese annals tell us that there was a great drought and famine for seven years after the accession of T'ang, the noble and pious man who had overthrown the dynasty of the Shang.  It was then suggested at last by some one that a human victim should be offered in sacrifice to Heaven, and prayer by made for rain, to which T'ang replied, "If a man must be the victim I will be he."  Up to quite recent times, the priests of Lower Bengal have, in seasons of scarcity, offered up children to Siva; in the years 1865 and 1866, for instance, recourse was had to such sacrifices in order to avert famine. - Edward Westermarck, The Origin and Development of the Moral Ideas

There is a productive activity, an exchange activity, and a distributive activity. In the first, something of value is taken for an end which requires its transformation, all productive activities being transformative. In the second, the transformed object is replaced, or held to be replaced, through a transaction - in this case what we might call a heavenly transaction - by another thing of another nature and greater worth. There is then a distributive activity : the replacement or countergood of higher worth is shared between those who sustained the original loss. - W. E. H. Stanner, On Aboriginal Religion: I. The Lineaments of Sacrifice

So let me see if I can get this straight.  We have noneconomists who see sacrifice as economics and economists who see sacrifice as noneconomics.  That's why it's significant progress for Leeson to see sacrifice as economics...even if his theory failed to reflect what noneconomists have known for ages.

This paradox is so strange though because the Bible, which is easily the most widely read book, is all about sacrifice for abundance sake.  In other words...the most widely read book of all time is a book on economics.  People who have read the bible many times over are noneconomist economists.

The beginning of the Bible...the Garden of Eden...and the end of the Bible...Heaven...are both characterized by abundance and the absence of sacrifice.  Everything in between is a lesson on how to sacrifice for abundance sake.

Recently I stumbled upon this webpage by The United Church of Christ... The Bible on stewardship: key passages.  It offers quite a few passages specifically dealing with  how to get the most bang for your buck.

One of the most well known stories from the Bible is the story of Abraham's willingness to sacrifice his son Issac.  The reward for his demonstrated preference was not small.  From Genesis 22:16-18...

16 And said, By myself have I sworn, saith the LORD, for because thou hast done this thing, and hast not withheld thy son, thine only son:
17 That in blessing I will bless thee, and in multiplying I will multiply thy seed as the stars of the heaven, and as the sand which is upon the sea shore; and thy seed shall possess the gate of his enemies;
18 And in thy seed shall all the nations of the earth be blessed; because thou hast obeyed my voice.

Derrida deconstructed Abraham's opportunity cost...

By preferring my work, simply by giving it my time, my attention, by preferring my activity as a citizen or as a professional philosopher, writing and speaking here in a public language, French in my case, I am perhaps fulfilling my duty. But I am sacrificing and betraying at every moment all my other obligations: my obligation to the other others whom I know or don’t know, the billions of my fellows (without mentioning the animals that are even more other others than my fellows), my fellows who are dying of starvation or sickness. I betray my fidelity or my obligations to other citizens, to those who don't speak my language and to whom I neither speak or respond, to each of those who listen or read, and to whom I neither respond nor address myself in the proper manner, that is, in a singular manner (this is for the so-called public space to which I sacrifice my so-called private space), thus also to those I love in private, my own, my family, my son, each of whom is the only son I sacrifice to the other, every one being sacrificed to every one else in this land of Moriah that is our habitat every second of every day.

Moriah is where Abraham took Issac to be sacrificed.

Towards the end of Leeson's paper...he relates how the Kond people were willing to replace the property protection offered by human sacrifice with the property protection offered by the British government.  I'm skeptical.  In general...it seems like most other historical accounts indicate that government intervention simply drove such practices underground.  That seems more logical because...why not hedge your bets?

That being said, the idea of the state replacing religion is definitely solid.

In short, persons are afraid to be free. As subsequent discussion will suggest, socialism, as a coherent ideology, has lost most of its appeal. But in a broader and more comprehensive historical perspective, during the course of two centuries, the state has replaced God as the father-mother of last resort, and persons will demand that this protectorate role be satisfied and amplified. -  James M. Buchanan, Afraid to be free: Dependency as desideratum

The reason the market works is because of choice, constant change, competition, churn...creative destructionism...all towards the maximization of the benefit that we derive from society's limited resources...

Capitalism [...] is by nature a form or method of economic change and not only never is but never can be stationary. [...] The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates. [...] The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation [...] that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. - Joseph Schumpeter,  Capitalism, Socialism and Democracy

The reason that the state does not work is because it's missing everything that makes the market work.  With the market...some people will invariably be harmed by the destructive aspect...they will lose their jobs because of modernization...but everybody benefits as a result of the creative aspect....limited resources being used more efficiently.  However, knowing that you could be the victim of random and unforeseen acts of destruction is a source of great anxiety.

Along with instability comes economic insecurity. Being constantly vulnerable to market forces beyond one’s control is a recipe for personal anxiety. It is not conducive to increasing productivity and investment in skills, which require a more long-term perspective. - Frank Stilwell, Oh, the morality: why ethics matters in economics

Whenever I feel as if I'm on a path toward certain doom, which happens every time I pay attention to the news, I like to imagine that some lonely genius will come up with a clever solution to save the world. Imagination is a wonderful thing. I don't have much control over the big realities, such as the economy, but I'm an expert at programming my own delusions. -   Scott Adams, How to Tax the Rich

Scott Adams doesn't seem to be aware of Nietzsche's rule.  Somebody coming up with a clever solution to save the world means that a temple must be destroyed.  The more clever the solution the greater the destruction.  Discovering a cure for war would put countless people out of work.

From Leeson's paper...

Despite its primitivity, Kond agriculture was capable of "resulting in no small share of rural affluence" (C.R. 1846a: 49). The extent to which a Kond community enjoyed such affluence depended on "the capricious climate" most notably local weather and animal activity, which varied across communities from year to year (van den Bosch 2007: 203).  The fortune of a good season produced comparative bounty for lucky communities. The misfortune of a bad season produced comparative deprivation for unlucky ones.

As a result of the anxiety caused by instability, people cling to the state like people cling to religion like children cling to their parents.

One mutah, for example, "promise[d] to relinquish from henceforth the rite of human sacrifice" on the condition "That they shall be received into the immediate protection of the Government, and shall always obtain justice from it". Another similarly agreed "to relinquish the rite of sacrifice 'upon the condition of their receiving protection and peace and justice from the Government'". Soon other communities "spontaneously proffered to relinquish the sacrifice mainly on the condition of obtaining protection and justice, and actually pledged themselves accordingly".

Did they really relinquish the rite of sacrifice?  No...because the state, just like any other deity, requires payment in exchange for the promise of stability...

It may help to see this point if we think of a modern phenomenon which can be compared with child sacrifice, that of war.[...]  But once it had broken out (or even a little bit earlier) it became a "religious" phenomenon.  The state, the nation, national honor, became the idols, and both sides voluntarily sacrificed their children to these idols.  [...]  The fact that, in the case of child sacrifice, the father kills the child directly while, in the case of war, both sides have an arrangement to kill each other's children makes little difference. - Erich Fromm, The Anatomy of Human Destructiveness

So do you put yourself in God's hands...or the state's hands?

"It can be reasoned that if one believes God determines worldly affairs, then there is little reason for individuals to participate in civic events," study leader Robyn Driskell and her colleagues write in the June issue of the journal Social Science Quarterly. "God is taking care of things." - Jeanna Bryner, Non-voters: It's all in God's hands

Unlike with the Konds, for the "developed" nations...the transition of going from god's hands to the state's hands wasn't so abrupt...

On the whole, then, we seem to be justified in inferring that in many parts of the world the king is the lineal successor of the old magician or medicine-man. When once a special class of sorcerers has been segregated from the community and entrusted by it with the discharge of duties on which the public safety and welfare are believed to depend, these men gradually rise to wealth and power, till their leaders blossom out into sacred kings. - James George Frazer, The Golden Bough

So the idea of a separation between church and state is meaningless from the economic perspective.  Here in the United States we have two prominent religions...Conservatism and Liberalism.  Both compete for believers and both promise abundance...

A canon attributed to St. Patrick enumerates among the blessings that attend the reign of a just king “fine weather, calm seas, crops abundant, and trees laden with fruit.” On the other hand, dearth, dryness of cows, blight of fruit, and scarcity of corn were regarded as infallible proofs that the reigning king was bad. - James George Frazer, The Golden Bough

Walter Burkert used the term "nonobvious causality" for when it wasn't exactly clear how a sacrifice would produce abundance.  Given that the Democrats and Republicans have been going back and forth for the past 100 years...it seems self-evident that we're dealing with nonobvious causality.

Jules: This was Divine Intervention! You know what "divine intervention" is?
Vincent: Yeah, I think so. That means God came down from Heaven and stopped the bullets.
Jules: Yeah, man, that's what it means. That's exactly what it means! God came down from Heaven and stopped the bullets.
Vincent: I think we should be going now.
Jules: Don't do that! Don't you fucking do that! Don't blow this shit off! What just happened was a fucking miracle!
Vincent: Chill the fuck out, Jules, this shit happens.
Jules: Wrong! Wrong, this shit doesn't just happen.
Vincent: Do you wanna continue this theological discussion in the car, or at the jailhouse with the cops?
Jules: We should be fuckin' dead now, my friend! We just witnessed a miracle, and I want you to fucking acknowledge it!
Vincent: Okay man, it was a miracle, can we leave now?

More nonobvious causality...

   "I want to stay," said Twoflower.  "I think ceremonies like this hark back to a primitive simplicity which - "
   "Yes, yes," said Rincewind, "but they're going to sacrifice her, if you must know."
   Twoflower looked at him in astonishment.
   "What, kill her?"
    "Yes."
    "Why?"
    "Don't ask me.  To make crops grow or the moon rise or something.  Or maybe they're just keen on killing people.  That's religion for you." - Terry Pratchett, The Light Fantastic

Even more...

The idea that U.S. leaders should just “hand over” basic facets of government like regulation and a legal system to God is a stark abdication of all responsibility as a public servant that could have very real, very serious consequences for Americans. As Salon’s Justin Elliott notes, Perry responded to a historic drought in Texas by calling for three days of prayer for rain in April. “How did that work out? The AP reported June 29: ‘Drought-stricking Texas declared natural disaster area.” - Tanya Somanader, Rick Perry Wants To Leave Government ‘In God’s Hands,’ Says ‘God, You’re Gonna Have To Fix This’

When Arnold Kling posted a blog entry with the title...I Doubt the Business Model...he was conveying that the causality was nonobvious.

As a pragmatarian...I advocate that taxpayers should have the freedom to choose where their taxes go.  From my perspective...the causality between pragmatarianism and abundance is obvious.  For most people though...the causality is nonobvious.  For example...here's David Friedman doubting the business model...

I don't think that letting taxpayers allocate their taxes among options provided by the government solves the fundamental problems of government. - David Friedman

Yet...here's David Boaz considering the business model...

In the private sector, the voluntary sector of the economy, we know that something is "well worth the money" if people are willing to spend their own money on it. In government, politicians work to separate the payment of taxes from the receipt of specific services. We're not asked "will you pay $100 right now for farm subsidies and $4000 for Medicaid and $1600 for the wars in Iraq and Afghanistan and $130 for a new presidential helicopter and ... ?"

If we did get such a question, we might well decide that lots of government programs were not "well worth the money" to the people who would be paying the money. - David Boaz, Well Worth the Money

Pragmatarianism would put taxpayers in a position to doubt the business model.  They would be able to doubt that farm subsidies are worth $100 and doubt that Medicaid is worth $4000 and doubt that the wars in Iraq and Afghanistan are worth $1600 and doubt that a new presidential helicopter is worth $130.

So how would giving taxpayers the freedom to doubt the business model not solve the fundamental problems of government?

Paying taxes is for the common good...but the common best is giving people the freedom to doubt the business model.  If David Friedman doubts that taxes are truly necessary...then he would have the freedom to doubt the IRS's business model by not giving any of his taxes to the IRS.  Giving him, and millions and millions of other taxpayers, the freedom to choose how their taxes are spent truly would solve the fundamental problems of government.

But progress is made by finding non-obvious uses for what we have; otherwise we are left in stagnation.- Zachary Gochenour, Progress or Poverty: The Economics of Land and Discovery