Comment on: If Socialists Understand the Free-Rider Problem, Then Why Are They Socialists?
******************************
Do your readers equally value your blog entries? Are your entries equally useful/beneficial/important? Do you think that you can accurately guess the demand for topics? If so, then markets wouldn't be so incredibly useful.
Right now, as far as I can tell, your blog isn't a market. Readers don't have the freedom to "donate vote" for your best entries. This means that you don't know the demand for topics, which means that your supply of topics is suboptimal.
Just like your blog isn't a market, and just like your products aren't equally useful, the same is true of unions. This means that unions don't know the demand for their products, which means that their supply of products is suboptimal.
In order to help socialists, and your readers, understand why the market is such an incredibly useful tool, you first have to actually understand this yourself. If you genuinely desire this understanding then turn your blog into a market. Give readers the freedom to use their donations to reveal their demand for your products. See if the supply noticeably improves.
So no, the problem isn't that socialists don't understand the free-rider problem. The problem is that libertarians don't understand how and why markets work. The market is the most useful tool, but libertarians fail to use it to improve their products.
Showing posts with label supply and demand. Show all posts
Showing posts with label supply and demand. Show all posts
Wednesday, July 4, 2018
Thursday, August 13, 2015
Maximizing Demand For Labor By Minimizing Barriers To Entry
Reply to: What Does America Really Want?
********************************************
********************************************
Average citizens are the real job creators, it’s high time we started to take responsibility and demand change.
Average citizens are not job creators. And that’s the problem. To be perfectly blunt, you are the reason why average citizens are not job creators.
In order for average citizens to become job creators… it has to be stupid easy and profitable to start a business and employ people. But nearly everything you support as a liberal makes it harder and less profitable to start a business. Basically, you firmly support the construction of high barriers to entry.
Because barriers to entry are so high, it’s nearly impossible for average citizens to test out their business ideas. Everybody has at least one business idea. Everybody is capable of finding room for improvement. But most of these improvements aren’t made because average citizens are daunted and thwarted by the high barriers to entry.
Now here’s the key part. High barriers to entry have logically detrimental consequences. These detrimental consequences are the very reason that you support constructing higher barriers to entry. But by supporting higher barriers to entry… you simply make the problem even worse. So we get stuck in a very vicious cycle.
The higher the barriers to entry… the fewer the employers. When the barriers to entry are high enough… there are far fewer employers. And when there are far fewer employers… there’s far less competition for labor. And when there’s far less competition for labor… labor will be poorly rewarded (beggars can’t be choosers). You think it’s a problem that labor is poorly rewarded… but unfortunately for everybody, you think that the solution is to make the barriers to entry even higher… which only makes the problem even worse.
Maximizing the demand for labor is truly the best way to help workers. But in order to maximize the demand for labor, the barriers to entry have to be minimized. Doing so will make it easier and more profitable for average citizens to become employers. Maximizing the quantity of employers will maximize the demand for labor.
When the competition for labor is maximized…then any worker that isn’t happy with their compensation or working conditions will easily be able to find a better opportunity. Or… they’ll easily be able to start their own profitable business… which will increase the supply of better opportunities (builderism).
Everybody substantially benefits when there’s an abundance of open doors. So please do everybody a favor and think things through. Regulations meant to protect and benefit workers might sound good… but is more red tape truly going to open more doors? The average citizen doesn’t have a law degree… so do you really want to make a law degree a necessary requirement for successfully starting a business and employing people?
Let me break it down for you. If it’s stupid easy for the average citizen to successfully start and operate a profitable business then there’s no point in minimum wages, unions and countless regulations meant to protect and benefit workers. Because if any worker isn’t happy enough… then they can simply and easily just start their own business.
So which one is it? Is it stupid easy to start a profitable business? Or… do we need the government to protect and benefit workers? Because it really can’t be both.
If you want to maintain that it’s necessary for the government to protect/benefit workers… then you’re admitting that it’s too difficult for the average citizen to start a profitable business. But how can any economy truly thrive when, as a result of government intervention, it’s too difficult for most people to start a profitable business? How can workers substantially benefit when there’s a scarcity of open doors? How can below average citizens substantially benefit when the demand for their labor is minimized by maximally high barriers to entry?
On the off-chance you’re actually interested in learning more…
Monday, July 27, 2015
Creating The Most Efficient Demand Net
Chris Chen shared this story... The Real Relationship Economy — Part II
My reply... If a market is missing, then make one!
Chen's reply...
My reply...
Hi, I’ll be happy to share some thoughts about market based solutions to facilitate compensation of “healthy relationships”.
Imagine that you're going fishing with a net. The problem is that the holes in your net are too large... and good sized fishes are swimming right through them. You'd capture a lot more fish if the holes in your net were a lot smaller.
This analogy doesn't work perfectly because, when you cast a net for fish, you don't want to capture the tiny fishes. But when you cast a net for demand, you do want to capture all the demand... even the tiny demands. A lot of little demands can really add up!
Creating markets where they are needed helps to minimize the holes in the fishing-for-demand net.
Let's say that you go to your local park and you spend the entire day picking up litter. Is there any demand for this particular activity? We can guess that most people who visit the park will prefer it if there's less litter. But, we don't know how much they prefer it. My term for this is demand opacity. The demand for a litter-free park is unclear. As a result, it's doubtful that the supply will be optimal (perfectly match the demand).
One way to help clarify the demand would be to create a website that facilitates the monetary communication/exchange between suppliers (people who pick up litter) and demanders (people who prefer litter-free places). You could enter the relevant litter-removal details (where, when, how long) and people could give you as little as a penny for your efforts. Again, a lot of little demands can really add up!
This method of clarifying demand would have a few challenges...
1. verification
2. the free-rider problem
Neither challenge is insurmountable.
Verification can easily be accomplished with drones! Well... in the not-too-distant future at least. You'd have your personal drone buzzing around you documenting your litter removal efforts. Anybody on the website would be able to watch the live feed and, after you finished, the entire recording would also be available. Another method would be to wear a shirt that has the litter website and your username on it. Let's say that I'm having a picnic at the park and I see you picking up litter. I go to the website, look up your username... allocate $0.50 cents to your current activity ... and vouch for you... and/or add to your reputation.
Like I explained in my first reply to your story, the free-rider problem could be solved, more or less, by correlating contributions with advertising. If I own a sandwich shop that's adjacent to the park... and I'm looking to advertise my business and generate some goodwill... I can go to the litter website and make a contribution to people who have removed litter from the park. The larger my contribution... the higher up on the relevant pages (home, park, recipients) my contribution/name/business/website will be displayed. This will generate traffic to my website... which will help me make an informed decision regarding how much to contribute. Essentially, the litter-removal website will simultaneously function as an auction for advertising space.
Are there any other challenges? Probably... but certainly there aren't any that can't be overcome.
With this website, people would know the demand for litter removal. Well... past demand wouldn't perfectly predict future demand... but this is always true. Demand is never perfectly clear because nobody has a crystal ball. But when it comes to picking up litter, demand could certainly be a whole lot clearer. The clearer the demand, the more likely it is that the supply will be optimal. Making an informed decision requires adequate information.
Well... I mentioned past and future demand... so I might as well include present demand by giving a shout-out to Alex Tabarrok's assurance contracts. More recently... Assurance Contracts for Indie Films. Using our example, as a park becomes more and more littered... people could put more and more money into a pool. As the pool of money gets larger... the incentive increases for somebody to pick up the litter and collect the pool of money. Assurance contracts can certainly help clarify demand.
Picking up litter isn't the only...ummm...other-person-benefiting activity that can be done at a park. For example, this guy in Miami attached some orchids to trees at a local dog park. I think that most people who visit a park will prefer to see more, rather than less, flowers. And again, the fundamental question... how much do they prefer seeing more flowers at their local park? We don't know... but we should know.
Does it make sense to have a website for litter-removal and another website for flower-addition? Or does it make more sense to try and create an inclusive website? If an inclusive website is better... just how inclusive should it be?
On Facebook... people share all sorts of activities. What would happen if Facebook facilitated demand clarification? How much money do you allocate to your friend's engagement? How much money do you allocate to the subsequent marriage? How much money do you allocate to the wife's pregnancy and the birth of their child? How much money do you allocate to their couple's therapy? How much money do you allocate to their divorce?
I doubt that Facebook will clarify demand anytime soon. But I perceive the potential benefit of an equally inclusive website... but with "value" as well as "Like" buttons.
Perhaps the closest website is Patreon. However, its focus is a lot narrower than Facebook. Not that it couldn't be expanded though. Also, Patreon operates on the economically absurd premise that everything an artist creates is equally valuable. This economic absurdity screws both the suppliers and the demanders. The suppliers are screwed out of monetary feedback on specific creations... and the demanders are screwed out of the specific types of creations that they want more of. Demand is only partially clarified. It's better than complete demand opacity... but the holes in the net are still way too large.
So as far as models go... there's considerable potential for a Facebook type that doesn't just have a "Like" button... but also has coin buttons... penny, nickle, dime and quarter. This website would help answer the fundamentally important question of how much you like something. You like that your friend is engaged? Ok. But how much do you like it? You pressed the "Like" button... but are you also going to press the quarter button? If so, how many times are you going to press it? What is the intensity of your preference?
And when you added somebody as a friend... rather than seeing their updates sorted by time... you'd also want to be able to sort them by value. This way you could instantly see the most valuable thing that your new friend has done. Was it graduating from highschool? Or from college? Getting his PhD? Or getting a job at Google? Or getting married? Having a kid? Having a second kid? Having the seventh kid? Having a vasectomy? Finding God? Losing God? Becoming a democrat? Or a libertarian? Writing a book? Donating a kidney? Winning a Nobel Prize? Moving to mars?
It’s illegal to sell your kidney… but giving your kidney away could potentially be the single most profitable thing you do. Well… according to the crowd at least. See also: Tabarrok on Alvin Roth… The Hidden World of Matchmaking and Market Design.
Just in case it's not abundantly clear... the benefit of a market-based rather than a government-based solution is that the answer to "how much" is infinitely more accurate. If everybody has the same answer to "how much" then markets would be entirely pointless. But the fundamental fact of the matter is that we really don't all value everything equally. With markets... the supply accurately reflects this fundamental fact. We all get to decide on our own how much we value things. With governments, on the other hand, the complete absence of consumer choice guarantees that the supply will not accurately reflect the reality of our diverse preferences/circumstances. This disparity between supply and demand destroys value. The government supplies something good... which we all see... but always at the cost of something better... which we can't see. Just because we value X doesn’t mean that we’d be willing to give up Y.
With markets... who we are as people is taken into account. When we answer the fundamentally important question of "how much" we value something... our answer shifts the economy accordingly. When the government answers the question of "how much" for all of us... the economy shifts in less valuable directions. The government can't embody the immense variety of humanity. It can't even get close.
This doesn’t mean that we need to get rid of government… it just means that we need to create a market in the public sector. This can be accomplished simply by allowing people to choose where their taxes go. Then each and every one of us can answer the fundamentally important questions of “how much” we value war, peace, the environment, justice, public education, public healthcare and so on.
Will we like all the answers equally? Of course not. But how can we hope to improve them when we don't even know what they are?
For all intents and purposes...we're still in the dark ages. Enlightenment depends on clarifying demand. When we can all easily and clearly communicate the intensity of our preferences to each other... the economy will shift in the most valuable directions. And, given the diversity of humanity, clarifying demand will maximize the variety of available opportunities. Any loss of opportunities that result from technological progress will be more than offset by the gain in opportunities that the same progress will create.
People are willing to pay for plenty of things. Each willingness-to-pay is a fish that it would behoove us to catch. Right now society's net has way too many holes and way too many fish are slipping right through them. This means that there are far less opportunities available. We can remedy this problem by creating markets wherever they are needed. For example, Medium could easily be turned into a market simply by adding coin buttons next to the "Recommend" button. Anybody who values a story could quickly and easily communicate this by clicking the penny, nickle, dime or quarter button. How many fishes will be caught? Who knows. But certainly more fishes than Medium is currently capturing! And more captured fish means more opportunities.
It's pretty easy to get into the demand clarity mindset. Anytime you value something, but it's not stupid easy to communicate your valuation, then you've identified where there's room for improvement. Once you've fully adopted this mindset... then you'll realize that society's demand net is full of very large holes. In economic terms, society's demand net is extremely inefficient. There's a plethora of opportunities that should exist, but do not, because countless willingness-to-pay fish are swimming through giant and gaping holes in the demand net. The sooner that we fix the net by creating markets where they are needed... the sooner that we maximize the benefit that we derive from humanity's most valuable resource... its diversity.
My reply... If a market is missing, then make one!
Chen's reply...
Thanks for the comments. As I mentioned, I really hated coming to the “government redistribution,” conclusion. Part of my premise is that society, at some point, will not have limited resources in terms of goods and services and I’m trying to anticipate how we respond to that situation. I love the idea of creating a market-based solution to value healthy relationships. Can you expand upon that idea?
My reply...
Hi, I’ll be happy to share some thoughts about market based solutions to facilitate compensation of “healthy relationships”.
Imagine that you're going fishing with a net. The problem is that the holes in your net are too large... and good sized fishes are swimming right through them. You'd capture a lot more fish if the holes in your net were a lot smaller.
This analogy doesn't work perfectly because, when you cast a net for fish, you don't want to capture the tiny fishes. But when you cast a net for demand, you do want to capture all the demand... even the tiny demands. A lot of little demands can really add up!
Creating markets where they are needed helps to minimize the holes in the fishing-for-demand net.
Let's say that you go to your local park and you spend the entire day picking up litter. Is there any demand for this particular activity? We can guess that most people who visit the park will prefer it if there's less litter. But, we don't know how much they prefer it. My term for this is demand opacity. The demand for a litter-free park is unclear. As a result, it's doubtful that the supply will be optimal (perfectly match the demand).
One way to help clarify the demand would be to create a website that facilitates the monetary communication/exchange between suppliers (people who pick up litter) and demanders (people who prefer litter-free places). You could enter the relevant litter-removal details (where, when, how long) and people could give you as little as a penny for your efforts. Again, a lot of little demands can really add up!
This method of clarifying demand would have a few challenges...
1. verification
2. the free-rider problem
Neither challenge is insurmountable.
Verification can easily be accomplished with drones! Well... in the not-too-distant future at least. You'd have your personal drone buzzing around you documenting your litter removal efforts. Anybody on the website would be able to watch the live feed and, after you finished, the entire recording would also be available. Another method would be to wear a shirt that has the litter website and your username on it. Let's say that I'm having a picnic at the park and I see you picking up litter. I go to the website, look up your username... allocate $0.50 cents to your current activity ... and vouch for you... and/or add to your reputation.
Like I explained in my first reply to your story, the free-rider problem could be solved, more or less, by correlating contributions with advertising. If I own a sandwich shop that's adjacent to the park... and I'm looking to advertise my business and generate some goodwill... I can go to the litter website and make a contribution to people who have removed litter from the park. The larger my contribution... the higher up on the relevant pages (home, park, recipients) my contribution/name/business/website will be displayed. This will generate traffic to my website... which will help me make an informed decision regarding how much to contribute. Essentially, the litter-removal website will simultaneously function as an auction for advertising space.
Are there any other challenges? Probably... but certainly there aren't any that can't be overcome.
With this website, people would know the demand for litter removal. Well... past demand wouldn't perfectly predict future demand... but this is always true. Demand is never perfectly clear because nobody has a crystal ball. But when it comes to picking up litter, demand could certainly be a whole lot clearer. The clearer the demand, the more likely it is that the supply will be optimal. Making an informed decision requires adequate information.
Well... I mentioned past and future demand... so I might as well include present demand by giving a shout-out to Alex Tabarrok's assurance contracts. More recently... Assurance Contracts for Indie Films. Using our example, as a park becomes more and more littered... people could put more and more money into a pool. As the pool of money gets larger... the incentive increases for somebody to pick up the litter and collect the pool of money. Assurance contracts can certainly help clarify demand.
Picking up litter isn't the only...ummm...other-person-benefiting activity that can be done at a park. For example, this guy in Miami attached some orchids to trees at a local dog park. I think that most people who visit a park will prefer to see more, rather than less, flowers. And again, the fundamental question... how much do they prefer seeing more flowers at their local park? We don't know... but we should know.
Does it make sense to have a website for litter-removal and another website for flower-addition? Or does it make more sense to try and create an inclusive website? If an inclusive website is better... just how inclusive should it be?
On Facebook... people share all sorts of activities. What would happen if Facebook facilitated demand clarification? How much money do you allocate to your friend's engagement? How much money do you allocate to the subsequent marriage? How much money do you allocate to the wife's pregnancy and the birth of their child? How much money do you allocate to their couple's therapy? How much money do you allocate to their divorce?
I doubt that Facebook will clarify demand anytime soon. But I perceive the potential benefit of an equally inclusive website... but with "value" as well as "Like" buttons.
Perhaps the closest website is Patreon. However, its focus is a lot narrower than Facebook. Not that it couldn't be expanded though. Also, Patreon operates on the economically absurd premise that everything an artist creates is equally valuable. This economic absurdity screws both the suppliers and the demanders. The suppliers are screwed out of monetary feedback on specific creations... and the demanders are screwed out of the specific types of creations that they want more of. Demand is only partially clarified. It's better than complete demand opacity... but the holes in the net are still way too large.
So as far as models go... there's considerable potential for a Facebook type that doesn't just have a "Like" button... but also has coin buttons... penny, nickle, dime and quarter. This website would help answer the fundamentally important question of how much you like something. You like that your friend is engaged? Ok. But how much do you like it? You pressed the "Like" button... but are you also going to press the quarter button? If so, how many times are you going to press it? What is the intensity of your preference?
And when you added somebody as a friend... rather than seeing their updates sorted by time... you'd also want to be able to sort them by value. This way you could instantly see the most valuable thing that your new friend has done. Was it graduating from highschool? Or from college? Getting his PhD? Or getting a job at Google? Or getting married? Having a kid? Having a second kid? Having the seventh kid? Having a vasectomy? Finding God? Losing God? Becoming a democrat? Or a libertarian? Writing a book? Donating a kidney? Winning a Nobel Prize? Moving to mars?
It’s illegal to sell your kidney… but giving your kidney away could potentially be the single most profitable thing you do. Well… according to the crowd at least. See also: Tabarrok on Alvin Roth… The Hidden World of Matchmaking and Market Design.
Just in case it's not abundantly clear... the benefit of a market-based rather than a government-based solution is that the answer to "how much" is infinitely more accurate. If everybody has the same answer to "how much" then markets would be entirely pointless. But the fundamental fact of the matter is that we really don't all value everything equally. With markets... the supply accurately reflects this fundamental fact. We all get to decide on our own how much we value things. With governments, on the other hand, the complete absence of consumer choice guarantees that the supply will not accurately reflect the reality of our diverse preferences/circumstances. This disparity between supply and demand destroys value. The government supplies something good... which we all see... but always at the cost of something better... which we can't see. Just because we value X doesn’t mean that we’d be willing to give up Y.
With markets... who we are as people is taken into account. When we answer the fundamentally important question of "how much" we value something... our answer shifts the economy accordingly. When the government answers the question of "how much" for all of us... the economy shifts in less valuable directions. The government can't embody the immense variety of humanity. It can't even get close.
This doesn’t mean that we need to get rid of government… it just means that we need to create a market in the public sector. This can be accomplished simply by allowing people to choose where their taxes go. Then each and every one of us can answer the fundamentally important questions of “how much” we value war, peace, the environment, justice, public education, public healthcare and so on.
Will we like all the answers equally? Of course not. But how can we hope to improve them when we don't even know what they are?
For all intents and purposes...we're still in the dark ages. Enlightenment depends on clarifying demand. When we can all easily and clearly communicate the intensity of our preferences to each other... the economy will shift in the most valuable directions. And, given the diversity of humanity, clarifying demand will maximize the variety of available opportunities. Any loss of opportunities that result from technological progress will be more than offset by the gain in opportunities that the same progress will create.
People are willing to pay for plenty of things. Each willingness-to-pay is a fish that it would behoove us to catch. Right now society's net has way too many holes and way too many fish are slipping right through them. This means that there are far less opportunities available. We can remedy this problem by creating markets wherever they are needed. For example, Medium could easily be turned into a market simply by adding coin buttons next to the "Recommend" button. Anybody who values a story could quickly and easily communicate this by clicking the penny, nickle, dime or quarter button. How many fishes will be caught? Who knows. But certainly more fishes than Medium is currently capturing! And more captured fish means more opportunities.
It's pretty easy to get into the demand clarity mindset. Anytime you value something, but it's not stupid easy to communicate your valuation, then you've identified where there's room for improvement. Once you've fully adopted this mindset... then you'll realize that society's demand net is full of very large holes. In economic terms, society's demand net is extremely inefficient. There's a plethora of opportunities that should exist, but do not, because countless willingness-to-pay fish are swimming through giant and gaping holes in the demand net. The sooner that we fix the net by creating markets where they are needed... the sooner that we maximize the benefit that we derive from humanity's most valuable resource... its diversity.
Sunday, February 16, 2014
Teaching Economics To Atheists
As usual I googled this blog entry's title before publishing and found this...
When I googled this blog entry's title using quotes...there weren't any results. This title is kinda silly. Given that a recent blog entry was titled..."Teaching Economics To Anarcho-capitalists"...it feels like I'm doing a series. What's next? "Teaching Economics To Ventriloquists" maybe?
I shared my public goodness survey in the usual places and didn't get much response. No real surprise there. Interestingly enough...nearly all the responses came from the atheistforums. Everybody who responded indicated that they really had no idea what I was going on about. Maybe people in other forums also had no clue...but for some reason only the atheists voiced their thoughts?
So here is my 3rd...or 4th...or 20th...attempt to teach economics to atheists...
***************************************************
I'm going to go with a somewhat ironic example. How many of you have ever attended a typical church service? When I was a little kid my mother forced me to go each week. One thing they do during the service is pass offering plates around. It's a container of sorts...and when it gets to you...you can choose exactly how much money you put in it.
Let's imagine that there's a church with a really small congregation and you're Dian Fossey's atheist grandson. Instead of studying gorillas in the mist...you're studying christians in the church. You hide in the rafters with your binoculars, notebook and bag of power bars. When it comes time for the offering plate to be passed around...you dutifully write down in your notebook exactly how much money each christian puts in the offering plate...
Digit - $0
Rafiki - $5
Uncle Bert - $35
Macho - $0
Icarus - $10
You do this for an entire year. At the end of the year...you add up how much money each christian contributed to their church...
Digit - $5
Macho - $5
Pancho - $5
Icarus - $10
Linus - $10
Obama - $12
Jerry - $15
Tom - $20
Rafiki - $25
Frank - $25
Pigpen - $25
Blink - $30
Joan - $30
Mary - $40
Frost - $45
Strongbad - $45
Carrie - $50
Pompom - $75
Stan - $80
Brittney - $200
Saya - $350
McLovin - $400
Twitch - $700
Butters - $800
Uncle Bert - $1000
In order to visualize the data...you create a graph...
There you go. You just visually represented the demand for that church.
What do you think the demand chart would look like for Joel Olsteen's church? His Lakewood Church is the largest church in America. Each week an average of 43,500 people attend. That's between the attendance of baseball games (30,514) and football games (67,604).
If I had to choose between attending a baseball game or a football game or a service at Olsteen's church...I'd definitely choose the service. That alone doesn't say much because most sporting events bore me to death. But a while back I accidentally channel surfed right into Olsteen's net. His delivery is so silky smooth. It's so seamless and seemingly so sincere. It doesn't matter if he's a fake...it would be like accusing Kevin Spacey of not truly being the character that he's portraying in a movie. It doesn't matter how big the disparity is between an actor and his character...a remarkable performance is still remarkable.
We know what the demand is for Olsteen, Spacey and sporting events....but we don't know what the demand is for public goods. This is a problem. Demand opacity is the most pressing problem we face as a society. But the solution is really simple. We just have to give taxpayers the freedom to choose where their taxes go. This will eliminate demand opacity.
One concern is that the wealthy will have too much influence. They will spend their taxes on public goods that screw the middle class and poor. This concern is ridiculous though because if a "public good" harms most of the public...then it really isn't a public good. A public good is something that is largely beneficial. And once people can shop for themselves in the public sector...then we'll clearly see the demand depth/breadth for each and every public good. Therefore, if a public good only benefits the wealthy...this will become readily apparent...and the public good would be removed from the public sector. The point of this survey is to determine where that "removal" threshold might be.
Have I helped clarify things? Or have I mucked things up even more?
Let me try and put it another way. Imagine that there's a huge city that's only populated by atheists. For whatever reason, there's not a theist in the city. Imagine if you went to the bank and asked for a loan to start a church. What do you think the loan officer would tell you? "Ah, how brilliant! You'll have a monopoly! I wonder why no one else has thought of it before!?" So the loan officer lends you a million dollars and you start your church. And of course nobody shows up. Why? Because there wouldn't be any demand for a church in a city of atheists. Errr...well...I guess theists could show up from other cities. Maybe the absence of churches explains the absence of theists...heh.
The point is...it would be a waste of society's limited resources to build something that there's no demand for. Just like it would be a waste of society's limited resources to start a war that there's no demand for. But that's exactly what happens with our current system. We substitute the actual demand for the guesses of 500 government planners (congresspeople). But if the guesses of 500 government planners are really that great then we wouldn't need markets.
Markets work because the guesses of entrepreneurs are tested against reality. Entrepreneurs that correctly guess the demand will make money. Failure to correctly guess the demand results in bankruptcy. Our job as consumers is to reward the entrepreneurs who correctly guess what our demands are. That's what shopping is all about. So if people can't shop for themselves in the public sector...then the guesses of government will not be tested against reality.
Yes, the guesses of congresspeople will be tested against elections...but voting doesn't reveal demand. Voting reveals opinions...not values...
1. Should we conserve the Amazon rainforest? Yes/No
2. How much would you like to donate to conserve the Amazon rainforest? _______
The first question reveals your opinion while the second question reveals your values/priorities/preferences. It's great to know the public's opinions...but it's infinitely more important to know the public's values. We can't put society's limited resources to their most valuable uses if we don't know what society truly values. Shopping reveals values which is exactly why it's imperative that we create a market in the public sector.
“I had a few friends in the same class that were angry with me and said I destroyed his freedom to religion, but in reality his actions were unconstitutional and were not related to economics at all,” she explained in her essay. “This was economics class, not Sunday school.”Sara Elizabeth Sheppard busted her economics professor for talking about religion during class. Hey Sara...pull up a chair. Or not.
When I googled this blog entry's title using quotes...there weren't any results. This title is kinda silly. Given that a recent blog entry was titled..."Teaching Economics To Anarcho-capitalists"...it feels like I'm doing a series. What's next? "Teaching Economics To Ventriloquists" maybe?
I shared my public goodness survey in the usual places and didn't get much response. No real surprise there. Interestingly enough...nearly all the responses came from the atheistforums. Everybody who responded indicated that they really had no idea what I was going on about. Maybe people in other forums also had no clue...but for some reason only the atheists voiced their thoughts?
So here is my 3rd...or 4th...or 20th...attempt to teach economics to atheists...
***************************************************
I'm going to go with a somewhat ironic example. How many of you have ever attended a typical church service? When I was a little kid my mother forced me to go each week. One thing they do during the service is pass offering plates around. It's a container of sorts...and when it gets to you...you can choose exactly how much money you put in it.
Let's imagine that there's a church with a really small congregation and you're Dian Fossey's atheist grandson. Instead of studying gorillas in the mist...you're studying christians in the church. You hide in the rafters with your binoculars, notebook and bag of power bars. When it comes time for the offering plate to be passed around...you dutifully write down in your notebook exactly how much money each christian puts in the offering plate...
Digit - $0
Rafiki - $5
Uncle Bert - $35
Macho - $0
Icarus - $10
You do this for an entire year. At the end of the year...you add up how much money each christian contributed to their church...
Digit - $5
Macho - $5
Pancho - $5
Icarus - $10
Linus - $10
Obama - $12
Jerry - $15
Tom - $20
Rafiki - $25
Frank - $25
Pigpen - $25
Blink - $30
Joan - $30
Mary - $40
Frost - $45
Strongbad - $45
Carrie - $50
Pompom - $75
Stan - $80
Brittney - $200
Saya - $350
McLovin - $400
Twitch - $700
Butters - $800
Uncle Bert - $1000
In order to visualize the data...you create a graph...
There you go. You just visually represented the demand for that church.
What do you think the demand chart would look like for Joel Olsteen's church? His Lakewood Church is the largest church in America. Each week an average of 43,500 people attend. That's between the attendance of baseball games (30,514) and football games (67,604).
If I had to choose between attending a baseball game or a football game or a service at Olsteen's church...I'd definitely choose the service. That alone doesn't say much because most sporting events bore me to death. But a while back I accidentally channel surfed right into Olsteen's net. His delivery is so silky smooth. It's so seamless and seemingly so sincere. It doesn't matter if he's a fake...it would be like accusing Kevin Spacey of not truly being the character that he's portraying in a movie. It doesn't matter how big the disparity is between an actor and his character...a remarkable performance is still remarkable.
We know what the demand is for Olsteen, Spacey and sporting events....but we don't know what the demand is for public goods. This is a problem. Demand opacity is the most pressing problem we face as a society. But the solution is really simple. We just have to give taxpayers the freedom to choose where their taxes go. This will eliminate demand opacity.
One concern is that the wealthy will have too much influence. They will spend their taxes on public goods that screw the middle class and poor. This concern is ridiculous though because if a "public good" harms most of the public...then it really isn't a public good. A public good is something that is largely beneficial. And once people can shop for themselves in the public sector...then we'll clearly see the demand depth/breadth for each and every public good. Therefore, if a public good only benefits the wealthy...this will become readily apparent...and the public good would be removed from the public sector. The point of this survey is to determine where that "removal" threshold might be.
Have I helped clarify things? Or have I mucked things up even more?
Let me try and put it another way. Imagine that there's a huge city that's only populated by atheists. For whatever reason, there's not a theist in the city. Imagine if you went to the bank and asked for a loan to start a church. What do you think the loan officer would tell you? "Ah, how brilliant! You'll have a monopoly! I wonder why no one else has thought of it before!?" So the loan officer lends you a million dollars and you start your church. And of course nobody shows up. Why? Because there wouldn't be any demand for a church in a city of atheists. Errr...well...I guess theists could show up from other cities. Maybe the absence of churches explains the absence of theists...heh.
The point is...it would be a waste of society's limited resources to build something that there's no demand for. Just like it would be a waste of society's limited resources to start a war that there's no demand for. But that's exactly what happens with our current system. We substitute the actual demand for the guesses of 500 government planners (congresspeople). But if the guesses of 500 government planners are really that great then we wouldn't need markets.
Markets work because the guesses of entrepreneurs are tested against reality. Entrepreneurs that correctly guess the demand will make money. Failure to correctly guess the demand results in bankruptcy. Our job as consumers is to reward the entrepreneurs who correctly guess what our demands are. That's what shopping is all about. So if people can't shop for themselves in the public sector...then the guesses of government will not be tested against reality.
Yes, the guesses of congresspeople will be tested against elections...but voting doesn't reveal demand. Voting reveals opinions...not values...
1. Should we conserve the Amazon rainforest? Yes/No
2. How much would you like to donate to conserve the Amazon rainforest? _______
The first question reveals your opinion while the second question reveals your values/priorities/preferences. It's great to know the public's opinions...but it's infinitely more important to know the public's values. We can't put society's limited resources to their most valuable uses if we don't know what society truly values. Shopping reveals values which is exactly why it's imperative that we create a market in the public sector.
Friday, October 5, 2012
The Danger of Homogeneous Activity in the Public Sector
My response to PrometheeFeu from our discussion over on Daniel Kuehn's blog entry...A Quick Thought on Voting...
********************************
But surely there have to be some significant economic consequences for allowing 538 congresspeople to spend 1/4 of our nation's revenue? As far as I can tell it's the primary cause of recessions/depressions.
On the individual level you will experience a severe recession/depression if you gamble your home on a failed business idea...right? You misallocated a significant portion of your limited resources. That's why most entrepreneurs pitch their ideas to venture capitalists. And what do venture capitalists do? They hedge their "bets". Every decision to spend your money/time is a gamble...which is why VCs don't put all their eggs in one basket. They spread their capital over numerous start-ups. If they are good at picking winners then they'll increase their capital. But they certainly don't ultimately determine whether a start-up is a winner or loser...we do. We use our wallets to indicate whether a VC's allocation was a misallocation or a profitable allocation.
If heterogeneous activity makes sense on a smaller scale...then it should make even more sense on a larger scale. And every single socialist experiment provides empirical evidence that this is the case. If heterogeneous activity makes sense for a small amount of resources...and it makes sense for an entire nation's resources...then please explain why it doesn't indicate that there's a clear and present danger to allowing 538 congresspeople to allocate 1/4 of our nation's revenue among government organizations. It would be one thing if taxpayers were able to choose exactly which congressperson they gave their taxes to...and that congressperson would have sole discretion how they spent "their" taxes in the public sector...but all 538 congresspeople have to agree on how 1/4 of our nation's revenue is spent. Spending activity doesn't get more homogeneous than that.
If there truly are winners in the public sector...which we can only guess at...then the tax allocation decisions of 150 million taxpayers who all want more for less will reveal exactly who the winners are. These public sector winners will help offset any possible shortage of private sector winners. This will help hedge our bets against recessions/depressions. If, on the other hand, it turns out that there are very few winners in the public sector...and assuming the losers fail to adapt...then the scope of government will shrink...the tax rate will decrease accordingly...and resources will be freed-up for winners in the private sector.
Giving people the freedom to choose how they spend their money guarantees heterogeneous activity because we have extremely diverse interests, values, tastes, preferences, concerns, hopes and dreams. Our diversity is our greatest strength...which is why failing to apply this fundamental fact to the public sector is our Achilles Heel.
********************************
Scenario 1, I send money to the EPA. Scenario 2, I do not send money to the EPA. What is different between the two scenarios? Nothing of consequence.Scenario 1, you buy asparagus. Scenario 2, you do not buy asparagus. What is different between the two scenarios? Nothing of consequence. Nothing of consequence? Somebody prevented you from buying asparagus...and you would consider it to be inconsequential? I thought you liked asparagus? What if they did the same thing to me and everybody else who wanted to buy asparagus? The little consequences would add up to the big consequence that the demand for asparagus would not determine the supply of asparagus. Therefore, there would be a significant disparity between supply and demand.
My whole tax bill could not pay an extra secretary at the EPA, much less significant regulatory activity.Just like your entire income could not pay for a new field of asparagus. Or maybe it could? Could you really eat that much asparagus though? What about the opportunity cost?
So your scheme suffers from the same weakness as voting: your incentive is not to reveal your policy preferences.But here's what you wrote earlier.
If a socialist came to me and argued that my purchases don't count because my single purchase can't possibly affect the price level, I would not respond that I have a duty to keep markets working. I would point out that I wanted chicken and asparagus for dinner and that's why I went to buy them and that's why my true preferences were aggregated.Why would buying asparagus and chicken be any different from donating to the Red Cross or the World Wildlife Fund or paying taxes to the EPA or the Dept of Education? You either want more of those things...or you don't. The supply of those things is either determined by demand...or it isn't. If it isn't determined by demand...then clearly there's going to be a disparity between supply and demand which represents a misallocation of scarce resources. We'd be getting too much of one thing and not enough of another. Without consumer's opportunity cost decisions the allocation would not even be close to being Pareto Optimal.
I support giving tax-payers having the freedom to choose which government organizations they give their taxes to because it is more morally correct and it would make me feel good to not send money to certain programs.We currently allow 538 congresspeople to spend 1/4 of our nation's revenue which comes out to roughly $3.5 trillion dollars...yet you support applying market principles to the public sector for moral reasons? Well...it's kinda hard to complain when most people don't support the idea for any reasons.
But surely there have to be some significant economic consequences for allowing 538 congresspeople to spend 1/4 of our nation's revenue? As far as I can tell it's the primary cause of recessions/depressions.
On the individual level you will experience a severe recession/depression if you gamble your home on a failed business idea...right? You misallocated a significant portion of your limited resources. That's why most entrepreneurs pitch their ideas to venture capitalists. And what do venture capitalists do? They hedge their "bets". Every decision to spend your money/time is a gamble...which is why VCs don't put all their eggs in one basket. They spread their capital over numerous start-ups. If they are good at picking winners then they'll increase their capital. But they certainly don't ultimately determine whether a start-up is a winner or loser...we do. We use our wallets to indicate whether a VC's allocation was a misallocation or a profitable allocation.
If heterogeneous activity makes sense on a smaller scale...then it should make even more sense on a larger scale. And every single socialist experiment provides empirical evidence that this is the case. If heterogeneous activity makes sense for a small amount of resources...and it makes sense for an entire nation's resources...then please explain why it doesn't indicate that there's a clear and present danger to allowing 538 congresspeople to allocate 1/4 of our nation's revenue among government organizations. It would be one thing if taxpayers were able to choose exactly which congressperson they gave their taxes to...and that congressperson would have sole discretion how they spent "their" taxes in the public sector...but all 538 congresspeople have to agree on how 1/4 of our nation's revenue is spent. Spending activity doesn't get more homogeneous than that.
If there truly are winners in the public sector...which we can only guess at...then the tax allocation decisions of 150 million taxpayers who all want more for less will reveal exactly who the winners are. These public sector winners will help offset any possible shortage of private sector winners. This will help hedge our bets against recessions/depressions. If, on the other hand, it turns out that there are very few winners in the public sector...and assuming the losers fail to adapt...then the scope of government will shrink...the tax rate will decrease accordingly...and resources will be freed-up for winners in the private sector.
Giving people the freedom to choose how they spend their money guarantees heterogeneous activity because we have extremely diverse interests, values, tastes, preferences, concerns, hopes and dreams. Our diversity is our greatest strength...which is why failing to apply this fundamental fact to the public sector is our Achilles Heel.
Tuesday, October 2, 2012
The Government Succesfully Supplies Boogers
A close friend of mine picks her nose a lot. One time, when I was giving her a hard time about it, she claimed that she suffered from an actual condition...the overproduction of boogers. I was skeptical...to say the least.
More and more I'm convinced that liberals truly and honestly believe that the government very successfully supplies boogers. This allows them to claim that the government succeeds where the market fails...and also helps to explain their reluctance to allow taxpayers to choose which government organizations they give their taxes to. Because they must understand that taxpayers would certainly boycott the government out of existence if boogers were the only thing that it supplied.
Do you catch my drift? You can't say that government supplies things that people actually value, want and need...and then turn around and argue that taxpayers would not choose to spend their taxes on things that they actually value, want and need. Taxes wouldn't be voluntary...taxpayers would have to spend their taxes anyways...so why wouldn't they choose to spend their taxes on public goods that they value? It just doesn't follow.
Neither the private sector nor the public sector has a monopoly on failure. But who cares if the market fails at supplying things that nobody really wants more of? Nobody cares that the market fails at supplying more boogers. Is that what the public sector is truly there for? To successfully supply things that nobody really wants more of?
That's why I love pragmatarianism. Nothing more effectively forces liberals to supply non sequiturs. Eh, well...I guess that's more like a positive externality. I love pragmatarianism because I love the thought of the government actually supplying things that taxpayers would choose to sacrifice a portion of their lives for. Because as Henry David Thoreau said, "The price of anything is the amount of life you exchange for it."
We don't have a scarcity of boogers...and people have absolutely no use for boogers...so why would people choose to exchange a portion of their lives for more boogers? They obviously wouldn't. So what would they choose to exchange a portion of their lives for? Would they be willing to exchange a portion of their lives for more public education...more public healthcare...more national defense...more public transportation...more environmental protection? Who knows...but what I do know for certain is that we all want more for less.
If you don't want more for less then please paypal me $100 and I'll paypal you $1 in return. Hah...that would show me. But the fact that we all want more for less helps us understand why producers are motivated to do more with less. Doing more with less is known as "resourcefulness". Being resourceful is how we overcome scarcity. But overcoming scarcity only has any value...merit...meaning...when you're providing an abundance of something that other people would choose to exchange a portion of their lives for.
Do we want the government to use our lives to provide an abundance of things that we don't actually value? Hell no. Absofuckinglutely not. Our lives are too short for that nonsense. If you want an abundance of the things you actually value...then you'll allow taxpayers to choose more for less in the public sector. This will strongly motivate government organizations to do more with less. Therefore, we'll end up with more public goods for less taxes.
More and more I'm convinced that liberals truly and honestly believe that the government very successfully supplies boogers. This allows them to claim that the government succeeds where the market fails...and also helps to explain their reluctance to allow taxpayers to choose which government organizations they give their taxes to. Because they must understand that taxpayers would certainly boycott the government out of existence if boogers were the only thing that it supplied.
Do you catch my drift? You can't say that government supplies things that people actually value, want and need...and then turn around and argue that taxpayers would not choose to spend their taxes on things that they actually value, want and need. Taxes wouldn't be voluntary...taxpayers would have to spend their taxes anyways...so why wouldn't they choose to spend their taxes on public goods that they value? It just doesn't follow.
Neither the private sector nor the public sector has a monopoly on failure. But who cares if the market fails at supplying things that nobody really wants more of? Nobody cares that the market fails at supplying more boogers. Is that what the public sector is truly there for? To successfully supply things that nobody really wants more of?
That's why I love pragmatarianism. Nothing more effectively forces liberals to supply non sequiturs. Eh, well...I guess that's more like a positive externality. I love pragmatarianism because I love the thought of the government actually supplying things that taxpayers would choose to sacrifice a portion of their lives for. Because as Henry David Thoreau said, "The price of anything is the amount of life you exchange for it."
We don't have a scarcity of boogers...and people have absolutely no use for boogers...so why would people choose to exchange a portion of their lives for more boogers? They obviously wouldn't. So what would they choose to exchange a portion of their lives for? Would they be willing to exchange a portion of their lives for more public education...more public healthcare...more national defense...more public transportation...more environmental protection? Who knows...but what I do know for certain is that we all want more for less.
If you don't want more for less then please paypal me $100 and I'll paypal you $1 in return. Hah...that would show me. But the fact that we all want more for less helps us understand why producers are motivated to do more with less. Doing more with less is known as "resourcefulness". Being resourceful is how we overcome scarcity. But overcoming scarcity only has any value...merit...meaning...when you're providing an abundance of something that other people would choose to exchange a portion of their lives for.
Do we want the government to use our lives to provide an abundance of things that we don't actually value? Hell no. Absofuckinglutely not. Our lives are too short for that nonsense. If you want an abundance of the things you actually value...then you'll allow taxpayers to choose more for less in the public sector. This will strongly motivate government organizations to do more with less. Therefore, we'll end up with more public goods for less taxes.
Subscribe to:
Posts (Atom)